Mortgage Crisis 101 by Prof. John Campbell

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Campbell soupWhile the foreclosure crisis might sound to some like duck soup, Professor John E. Campbell from the University of Denver Sturm College of Law has taken the time to dissect the issues in his Mortgage Crisis in a Nutshell video explaining precisely what has happened to homeowners and searching for the reasons why.

Prof. Campbell explains what has happened in the traditional sense and how Mortgage Electronic Registration Systems, Inc. participated in part of the scheme. He also discusses how and why the homeowners were not intentionally at fault.

In this one-hour video, Attorney John E. Campbell explains the main aspects of the mortgage crisis that has devastated the U.S. housing market and the economy. Watch the video and then let’s discuss securitization in a little more detail below.

This video was produced by John Campbell and Erich Vieth, who are both attorneys in St. Louis, Missouri. A substantial part of their law practice concerns issues pertaining to mortgage fraud and unlawful foreclosures. They have filed numerous individual and class action lawsuits on behalf of behalf of homeowners.

This video is divided into the following sections:

I. The Big Picture and its Many Parts (:55)
II. Banks Flood the Market with Subprime Mortgages (3:54)

  • III.   Banks, Securitize their Mortgages (10:05)
  • IV.  Banks Cry for a Bailout (13:57)
  • V.  Wall Street Malfeasance (16:54)
  • VI.  Foreclosures, Robo-Signing, Trustees and Conflicts of Interest (18:20)
  • VII.  MERS (“Mortgage Electronic Registration System) (33:45)
  • VIII. The Mortgage System Used to Work (43:42)
  • IX.   Credits and Further Readings (52:43)

It is their intent to offer a video for both lawyers and non-lawyers that presents an overall picture of an area of law that has, especially over the past decade, become intimidating in its complexity. More than all of us even realize…

groucho-kirilIf you follow DeadlyClear you know that the banking industry has patented every aspect of this mortgage fiasco – taking it away from the traditional lending into a “new” invention. The patents are filed in the USTPO as if to make this appear more legitimate.

Reading the patents, however, allows for a retrospective examination into the new terminology blended in among the traditional mortgage loan forms without definition. For example, if you want to know the purpose of Mortgage Electronic Registration Systems, Inc. (which the banks never thought you’d access) search the USTPO – but do it on Google Patents because the search is more accessible (Click here).

Now don’t laugh when you read the name of one of the securitization patents filed in 1999 and published in 2004: Method and system for facilitating opportunistic transactions using auto-probes. (Click here for PDF).  An attorney commented it sounded like vaginal examination equipment (maybe that was on purpose). This patent has been referenced in other patents by such esteemed patent inventors as Fannie Mae, Bank of America, Goldman Sachs, Morgan Stanley, HOME Mortgage Card… just to name a few.

A descriptive passage from the patent states:

“Loans sold on the secondary markets are often bundled and securitized. Securitization is the repackaging of
non-negotiable securities [mortgage loans] into negotiable securities [certificates] (e.g., issuing securities [certificates] against future cash flows such as mortgage backed securities).” [Emphasis and clarification added]

NonNegotiable_mediaIt appears that the intention of mortgage-backed securitization was to make the homeowner loans static or passive instruments which would make the notes, for example, relatively “non-negotiable” (as noted above) because they could no longer be sold or traded if they were assigned to a REMIC (tax shelter) trust.

That makes sense – but the homeowners didn’t bargain for a “non-negotiable instrument” just like they didn’t explicitly agree to electronic transfer (UETA) of their mortgage loan documents. Homeowners were still under the impression they were dealing with a traditional mortgage loan – Oh Ha! Guess what – surprise!  Welcome to the new world of mortgage lending through fraud and deceit.

Since the notes were stripped into pieces and could no longer be thrown on a poker table and treated as negotiable while they were in a REMIC trust, the banks had figured a way to make these passive non-negotiable instruments negotiable – by using the “auto-probe” patent. Voila! The securities that the banks issued against the future revenue stream of the notes are called “certificates” which are negotiable and can be traded while the original mortgage loan note is supposed to be safely housed in a vault or with a custodian until the loan is paid off or refinanced.

The auto-probe patent states:

“Buying and selling of mortgage notes takes place on the secondary mortgage market among sophisticated investors such as commercial banks, insurance companies, governmental agencies, savings and loans institutions, Wall Street firms and other high volume mortgagees. Unlike the primary mortgage market, secondary market investors do not necessarily service loans purchased and they do not collect monies owed directly from the borrowers.”

to-the-moon-aliceLet’s just say this – the homeowners had no idea that they were dealing with the “secondary” market as opposed to the traditional primary market and they certainly didn’t know that the process may have materially altered their note while it was in securitization. They just knew that it has been damn hard to get a modification – like going to the moon, right Alice?!

If Prof. Campbell’s video inspires you learn more about the mortgage industry, including bank misconduct, securitization and foreclosures, you are invited to explore the websites of these three excellent organizations:

Center for Responsible Lending http://www.responsiblelending.org/(start with the “Mortgage Lending” tab on the home page.

National Consumer Law Center. http://www.nclc.org/

National Association of Consumer Advocates. http://www.nclc.org/

Wikipedia also offers many articles to get you started, including the following:

http://en.wikipedia.org/wiki/Mortgage…
http://en.wikipedia.org/wiki/Mortgage…
http://en.wikipedia.org/wiki/Recorder…
http://en.wikipedia.org/wiki/Trust_de…
http://en.wikipedia.org/wiki/Foreclosure
http://en.wikipedia.org/wiki/Mortgage…
http://en.wikipedia.org/wiki/Mers

For an especially good explanation of MERS (“Mortgage Electronic Registration Systems, Inc.”), see “Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory,” (2011) by Law Professor Christopher Peterson and ShellGame-MERS by Robert Janes.

Thank you Deontos and Deb – and the foreclosure defense team for their research and assistance.

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Whether or not you are represented by an attorney understanding the legal system is an asset.  The more you learn, the less likely you are to be taken advantage of or scammed.  Knowledge is power!

9 thoughts on “Mortgage Crisis 101 by Prof. John Campbell”

  1. Where John Campbell got it wrong is in talking about foreclosures. He forgets that Obama came out with his Making Homes Affordable program and told the American public NOT to refinance but to get a modification. Some people who WEREN’T EVEN BEHIND ON THEIR MORTGAGE applied for a modifiction, if approved they made those payments, then the modification stopped after 6 months and they were told they needed to fall behind in payments and be in default to get the mod continued. When they DID THAT ACCORDING TO INSTRUCTIONS FROM THE BANK, the bank came and tacked a Notice of Default on the home, WITH THE WRONG AMOUNT stated in the Notice of Default, IGNORNING ALL OF THE PAYMENTS that were made in the modification, so in essense creating a huge accounting error, but never correcting or verifying it and continuing with the foreclosure, claming the homeowner owes them a certain amount that is NEVER CORRECT and IS NEVER VERIFIED.

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    • hello ,
      Please see stayinyourhomecitywide on facebook. These payments disappeared because as we are now learning about the new technology the Government has it gets even worse. This technology was used upon the homeowners diverting calls , gang stalking and damage to the home , orchestrated car accidents which is attempted murder. The payments was not going to the intended party. The payments are being routed to another bank which is why they have been saying the homeowners is behind a year. You and I both know a servicer is not going to allow you to miss that many payments. New trick is also 1099 IRS , falsifying these documents as well. Ne game is unemployment , everything is networked and wellsfargo employees are running an operating the unemployment division . Will request that you sign a release for of personal property and medical records. Outragious ! Real estate brokers , agents are now working in these offices,

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  4. Pingback: The Wall Street Scam: Securitization Is Illegal | All About Money Making !

  5. They are currently placing your loan into a trust the trust s held by Consus Group – Armstrong and Teasdale,. Your payments are being diverted to Wellsfargo. You are paying rent only because these payments will disappear. They will go unaccounted for. A new sec number is given , the payments are diverted to the trust and not applied to your loan. It is the perfect criminal behavior and crime. The foreclosure is a pretenders court foreclosure .You now have fannie mea selling the home for 10.00 immediately after the so called foreclosure. You will receive a tax document from both one the servicer that claimed to foreclose the other from JPMorgan chase claiming you still owe on the home and you have taxes and forced placed insurance , and payments. No this is crazy and simply fraud. This is the new agreement with the irs THAT IS HAPPENING. It never happened and they then decide to sell the home for 10.00 to a friend of a Politician , BUT WHERE IS WELLSFARGO? If you were taking payments where is the new servicing rights ? We are in a state of deception and fraud awith a network of Political fraud

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  6. Thank you so much for the video. I have been battling Bank of America since 2008 and have documentation of every fraudulent attempt they have made to take my home. When things became really blatant, I began having THE ENVEOLOPES and every page of the letters I received from BOA notarized before I opened them–my favorite was the ‘time sensitive’ Reinstatement offer allowing me to pay $50k in unsubstantiated fees, fines and penalties. The document was dated September 1, 2011, the offer would be null and void on September 15, 2011 AND THE POST MARK ON THE ENVELOPE WAS OCTOBER 2, 2011!! Eleven months after their letter acknowledging receipt of my Qualified Written Request for the NPV used to deny my modification–after they accepted 26 MHA/HAMP modified payments made on time–I received the NPV verifiying that 8 of the 13 inputs were WRONG, including my income. The letter had a number to call to dispute any potential errors in the NPV, but when I called, my ‘Servicer’ said I had to dispute potential errors ‘within 30 days of the date the NPV calculation was run’. When I told her it took BOA 11 months to respond to my QWR and send the NPV for me to check, she said, “Well, there is nothing I can do about it–you did not contact us within the 30 day requirement”……I have spent thousands of dollars (I couldn’t afford) on attorney fees to file a counter claim, which is nothing compared to being terrorized every day for FOUR YEARS. I have been locked out of my mortgage account since August 2011 and my 827 fico score dropped over 200 points. It’s all smoke and mirrors. I have researched all of this for years and still have no idea how to defend myself in court or what I need to do to prove breach of contract, fraud, abuse, misrepresentation, spoillation of evidence…blah blah blah. I would love a video on where to go from here. This has been gut-wrenching and obscene and their blatant fraud and arrogance makes me physically sick. Doesn’t any of this count as ‘damages’?

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