By Sydney Sullivan
In May 2017, US Secretary of Treasury, Steve Mnuchin, confirmed GSE Sweeps May Have Funded Obamacare. The meaning of this significant confirmation went virtually unnoticed by homeowners, their attorneys, and lawmakers for several reasons. The top of the list is the mainstream media suppression.
No matter what side of the political aisle you stand on, if you are a homeowner in or facing foreclosure – or if you lost your home since 2008, or are an investor in the Government Sponsored Enterprises (GSE), Fannie and the Treasury likely played a role in modifications, TPP and foreclosures unbeknownst to you or the courts.
What this means to homeowners is that the concealment of Fannie may have cost them the right to a modification or a trial payment period that was pulled out because Fannie was pulling the strings when Fannie was hidden and not made a “real party in interest” in a foreclosure lawsuit or non-judicial foreclosure.
In an interview on Fox Business News this morning (at about 3:41), U.S. Treasury Secretary Steven Mnuchin confirmed to host Maria Bartiromo stunning reports that officials from the last Administration used the windfall from the Net Worth Sweep of Fannie Mae and Freddie Mac’s profits for “other parts of the government, while they kept taxpayers at risk.”
“People didn’t even know money was being taken from Fannie & Freddie,” said Maria Bartiromo. It appears the bulk of the “money” is derived from [wrongful] foreclosure funds – another issue not openly discussed because it also appears Fannie & Freddie were made exempt from the Freedom of Information Act (FOIA). Who gets to see the breakdown of GSE income?
Wrongful foreclosures have been the backbone of Fannie & Freddie’s FHFA Conservatorship survival – and the life support system for Obamacare. The HERA Act makes it nearly impossible for homeowners and investors to sue; and, exemption of FOIA suppresses evidence. The only way to stop the “Sweeps” (or rather enable the current administration to order them stopped), is to REPEAL & REPLACE Obamacare.
The national debt is so out of control, that healthcare has to be supplemented from somewhere, and as long as millions of Americans don’t know that their homes are propping up a failed system – who is going to complain? BTW – universal healthcare would be an astronomical burden on the debt and certainly the GSE Sweeps would never be stopped.
While former President Obama instituted GSE Net Sweeps in 2012, Fannie (the primary culprit) has been hidden by design in foreclosure proceedings since and/or before 2008. Once under Conservatorship, the Treasury (under Obama) made Fannie the “financial agent for the United States.” If you want to see if your servicer participated in the Treasury Making Home Affordable program link HERE for contracts.
WHY IS THE CONCEALMENT OF FANNIE & FREDDIE IMPORTANT?
Hawaii’s foreclosure defense attorneys have successfully argued that in a foreclosure lawsuit, the “real party in interest must assert its own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties. Valley Forge Christian Coll. v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 474 (1982). The Real-Party-in-Interest-Doctrine is reified by Rule 17 and Rule 19 of the Federal Rules of Civil Procedure (“FRCP”) and by Rule 17 and Rule 19 of the Hawaii Rules of Civil Procedure (“HRCP”) which are discussed infra.” The prudential standing doctrine has been a concern for courts in the modern foreclosure crises is known as the Real-Party-in-Interest-Doctrine.
In Reyes-Toledo the Court decided: “Because “standing relates to the invocation of
the court’s jurisdiction, it is not surprising that standing must be present at the commencement of the case.” Reyes-Toledo, at *5. A plaintiff who does not have standing to enforce the note that has been defaulted on also does not have standing to
foreclose on the mortgaged property.”
But what nobody has known, or been able to piece together, is that even before the Treasury took over the mortgages and the GSEs in September 2008 – Fannie had its own set of guidelines it used, even though it may have usurped laws. In the Fannie’s May 23, 2008 Announcement, Note Holder Status for Legal Proceedings Conducted in the Servicer’s Name
Servicing Guide, Part I, Chapter 2, Section 202.06, Note Holder Status for Legal Proceedings Conducted in the Servicer’s Name
Fannie Mae is at all times the owner of the mortgage note, whether the note is in Fannie Mae’s portfolio or whether owned as trustee, for example, as trustee for an MBS trust. In addition, Fannie Mae at all times has possession of and is the holder of the mortgage note, except in the limited circumstances expressly described below. Fannie Mae may have direct possession of the note or a custodian may have custody of the note. If Fannie Mae possesses the note through a document custodian, the document custodian has custody of the note for Fannie Mae’s exclusive use and benefit. [emphasis added]
Civil Procedure Rules 17 & 19 have been in place long before Fannie decided to usurp them.
The primary question is why would Fannie hide itself from “real party in interest” position? One plausible answer is DEBT. Nobody seems to know exactly how much debt the GSEs accumulated. By failing to participate in [wrongful] foreclosure actions the debts don’t stick for the purpose of calculation – that Fannie had it in the first place. Who does this scheme financially affect? The taxpayers, homeowners, and investors.
Over the years, the courts have rejected Fannie’s the notion that an action could be brought in the name of a servicer. See In re Viencek, 273 B.R. 354, 357-59 (Bankr. N.D.N.Y. 2002) (requiring that servicing agent amend a proof of claim to identify the owner of the claim), In re Kang Jin Hwang, 396 B.R. 757 at 767, (Bankr. C.D. Cal. 2008) (finding that servicer was not the real party in interest), Bank of New York v Silverberg, 86 AD3d 274, 280 [2d Dept 2011], (“The foreclosure of a mortgage cannot be pursued by one who has no demonstrated right to the debt.”).
What brought this to light was Manhattan U.S. Attorney Preet Bharara’s February 24, 2012, a civil fraud action by the United States against Defendants Bank of America Corporation and Bank of America N.A. (“BANA”), Countrywide Financial Corporation (“CFC”), Countrywide Bank, FSB (“Countrywide Bank”), and Countrywide Home Loans, Inc., and Rebecca Mairone (“Mairone”) U.S. District Court Southern District of New York, CIVIL DOCKET FOR CASE #: 1:12-cv-01422-JSR to recover damages and penalties arising from a scheme to defraud Fannie and Freddie in connection with Countrywide’s residential “Hustle” mortgage lending business. The Department of Justice (“DOJ”) action sought to recover civil penalties under the Financial Institutions Reform, Recovery, and Enforcement Act, 12 U.S.C. § 1833a (“FIRREA”). At the same time, a motion to seal all the documents was granted – so you wouldn’t have known about it back then. The jury ruled in favor of the DOJ.
The case went to appeal until May 2016, but in the meantime, BofA settled for $16.65 BILLION!
Bharara’s case alone isn’t enough to connect the dots. Even though BofA settled, the appeal was on the $1.27 billion penalty which a federal appeals three-judge panel overturned because they felt the DOJ failed to establish “intent” of the banks to defraud the GSEs. Understanding how that might happen is easier if you backtrack and read Dec. 16, 2011 — When the Securities and Exchange Commission charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.
Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission’s litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies’ current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.
Non-Prosecution Agreements December 13, 2011
COMPLAINTS alleged:
“1. This action arises out of a series of materially false and misleading public disclosures by the Federal National Mortgage Association (“Fannie Mae” or the “Company”) and certain of its former senior executives concerning the Company’s exposure to subprime mortgage and reduced documentation Alt-A loans. Eager to promote the impression that Fannie Mae had limited exposure to· subprime and Alt-A loans during a period of heightened investor interest in the credit risks associated with these loans, Fannie Mae and its executives misled investors into believing that the Company had far less exposure to these riskier mortgages than in fact existed.
1. This action arises out of a series of materially false and misleading public disclosures by the Federal Home Loan Mortgage Corporation (“Freddie Mac” or the “Company”) and certain of its senior executives relating to the exposure of Freddie Mac’s largest business segment – Single Family Guarantee – to subprime mortgage loans.” December 14, 2011.
Fannie had instituted the relaxed underwriting program before 2006, now known as Expanded Approval (“EA”). [1] This allowed subprime lenders like New Century, IndyMac and Countrywide’s “hustle” to sell riskier loans to Fannie. The Securities and Exchange Commission (SEC) Complaint against the GSE’s executives was filed on December 16, 2011, states in ¶¶ 4-5:
“Fannie Mae did not tell investors that in calculating the Company’s exposure to subprime loans reported in this filing, Fannie Mae again did not include at least $43 billion of EA loans, included loans from only fifteen loan originators of the approximately 210 lenders listed on the HUD Subprime Lender list, and did not even have the capacity to track whether loans were originated by a subprime division of a large lender” (emphasis added), SEC Complaint, ¶7).
[1] See ¶¶ 3-5: SEC Complaint v. Fannie Mae Executives, 11 CIV 9202, filed Dec. 16, 2011. Also found on SEC website located and last viewed on 4/3/17 at: https://www.sec.gov/news/press/2011/2011-267.htm
Relaxing the underwriting software program, Fannie’s 1003 loan application, allowed mortgage brokers and loan officers to manipulate the figures until they got an approval. It also appears Fannie was complicit, which would explain why the federal judges ruled that the DOJ had not proven intent. Of course, this is based on plausible circumstance because too many of the real documents are still sealed further damaging the American taxpayers, American homeowners, and GSE investors.
Now that you have some of the histories – what difference does it make?
Taking the time to read the DOJ and SEC complaints, we find a compelling argument as Fannie stated: “Fannie Mae at all times has possession of and is the holder of the mortgage note.” Fannie is the real party in interest, which is also obvious after discovering the Treasury has taken over the alleged “toxic assets.” And after reviewing several hundred cases, where Fannie magically appeared after the sale to take possession of the property, or in the middle of a costly foreclosure battle – Yes, it appears Fannie has been intentionally and fraudulently concealed and thus, participated in wrongful foreclosures.
Moreover, in several wrongful foreclosure cases – if not all, Fannie’s concealment and the banks’ deception through intrinsic and extrinsic fraud, and blatant misrepresentation damaged the homeowners, added to their unnecessary emotional stress and health-related issues, when they could have qualified for various federally sponsored programs available them; and even now, that could have helped them save their homes.
Neil Barofsky, a former New York Prosecutor and SIGTARP (Special Inspector General for TARP) describes in his 2012 book BAILOUT, in Chapter 8, Foaming the Runway
“One particularly pernicious type of abuse was that servicers would direct borrowers who were current on their mortgages to start skipping payments, telling them that they would allow them to qualify for a HAMP modification. The servicers thereby racked up more late fees, and meanwhile many of the borrowers might have been entitled to participate in HAMP even if they had never missed a payment. Those led to some of the most heartbreaking cases. Homeowners who might have been able to ride out the crisis instead ended up in long trial modifications, after which the servicers would deny them a permanent modification and then send them an enormous “deficiency” bill.”
“Making matters worse,” Mr. Barofsky continues, “Treasury all but paved the way for outright fraud by ignoring my recommendations that it kick off HAMP with a broad nationwide television and radio advertising campaign that would educate homeowners about program details and warn them of the dangers of program-related fraud.”
It appears from Fannie’s own servicing guidelines, it’s not just the servicers – it is Fannie, even under modifications:
“… Lender accepted and deposited. At that point, Lender’s “investor” (Fannie Mae or Freddie Mac), which was not a party to the contracts, instructed Lender to “pull the plug on” (or “not accept”) the modification. Then, after accepting two additional modified payments, Lender accelerated the mortgage, gave Borrower an opportunity to cure based on the original mortgage, not the modification.” Kuehlman v. Bank of Am., N.A., 177 So.3d 1282, 1283 (Fla. 5th DCA 2015), quoting from Nowlin v. Nationstar Mortg., LLC, 193 So.3d 1043 (2016).
Time is running out, so are the statute of limitations. There are several plays on the field. Since 2008 and under Obama, 50 million+ homeowner families (2.5 ppl per HouseHold / foreclosures, short sales, deed in lieu & walk aways = 150 million people impacted) have been pummeled while the banks, Treasury and Fannie have run amok. If the Sweeps are ever going to stop and the GSEs are to get back to a morally driven business model – like before MERS, then it’s apparent the biggest dependent on WRONGFUL FORECLOSURES – Obamacare – has to be REPEALED.
If you let them just “FIX” Obamacare, you are hedging your bets and it’s likely the foreclosure funded Sweeps will continue. The only way the business model functions is by liquidating property in foreclosures, for a long time, without reinstating Glass-Steagall.
We need to press President Trump to take the morally high ground, stop the quarterly Net Sweeps and let the GSEs privatize.It’s a chance – but you can use rule of law against a private company and apparently you can’t against a government agency.
Remove politics and personal hate from the equation. Realize that over 150 million people have been negatively affected and duped over the past 8 years. Investors did not intend for this immoral behavior to occur. These are real people, real issues and mass destruction of their lives and of our land titles.
President Trump ain’t going to do nothing …..
I hope for the sake of America, the American Dream, the 72+ million “Mortgage Electronic Registration Systems, Inc. scheme” scammed homeowners that you’re wrong.
Have you ever hard of Intentional Thinking by Dale East? What is Intentional Thinking?
You can pass on the link to this short video clip to Judge Wesley. With my compliments, of course.
Obama is no longer the president. Why won’t Steven Mnuchin, Mel Watt and Jeff Sessions release documents requested by plaintiffs in numerous cases against the government? What are they hiding?
By the way, since conservatorship the US government has been running Fannie & Freddie. Before that, US Congress drafted their charters and dictated the guidelines for their operations.
It is doubtful Congress (as a whole) was shrewd enough to dictate the corruption in the guidelines. The guidelines have usurped the Rule of Law for years. Evil really began in the 1990s when Fannie, Freddie, and NationsBanc (aka BofA) colluded to construct a bogus national land registry called Mortgage Electronic Registration Systems, Inc. They probably thought it would be easier to ask for forgiveness, rather than permission.
If Mortgage Electronic Registration Systems, Inc. is bogus, isn’t it time to close them down?
Thank you, excellent points! Also, I wonder why Mnuchin does not discuss the opportunities this opened up for him to make millions in buying up these wrongful foreclosures? I guess he isn’t excited about talking about how he got his nickname of “Foreclosure King” buying up the failing IndyMac and turning it in to OneWest, one of the largest foreclosure machines in the business?
Putting the pieces together, foreclosure was the very essence of the business model. Foreclosure creates the liquidity necessary to attract the pension funds investments. Pension and retirement funds can only invest in liquid (easily cashed out investments) and Triple A rated bonds. MERS, the brainchild of Fannie/Freddie, only kicks in when the homeowner defaults and allows the servicer to fabricates the Assignment of Mortgage, so the REMIC trust or servicer can foreclose.
When the pension funds sued the banks, they’re claims included: inflated appraisals, over-rated bonds, and relaxed underwriting guidelines. Even if they knew Fannie had instituted the EA program, they couldn’t sue the GSEs because the GSEs were under conservatorship in the FHFA, a federal agency under the HERA Act. Plus, it appears the pension fund investors/agents/managers had tons of disclosure regarding the scheme, including the rehypothecation – where the homeowners and union pension fund members had zero. That’s why so many pension fund lawsuits failed.
When US Sen. Schumer (NY-Dem) started the IndyMac rumor, it was likely his pals, George Soros, Mnuchin & Dell wanted a bank and were waiting in the wings. The mortgage scheme was evident to anyone with clout on Wall Street. No way they bought into a mortgage bank with the intention to save homeowners.
awesome post – the shell game on steroids… question is whether the american people will remember they are in charge or keep thinking their elected representative are some sort of “royalty” to which they must “beg”
This is not the whole story. There’s more. Look at #fanniegate on Twitter. Shocking theft!
USA’s federal government is indeed a large part of the corrupt, convoluted problem… especially since the Federal Reserve Bank and IRS scams were set up in 1913, when Uncle Sam was hijacked and Uncle Scam became his replacement… our leaders and national institutions have become lapdogs for the the global elite oligarchy and their central banks and multinational corporations 😦
What the average computer illiterate Congressional member doesn’t understand is that the entire fraudulent scheme is executed through USPTO SOFTWARE PATENTS. Hundreds of patents exist for the purpose and intent of corruption. Fannie & Freddie had no reason to ever claim “fraud” – not only because they were complicit, but because their software patents alleged to have extraordinary fraud detection designed to catch mortgage brokers, investment bankers, borrowers, anyone touching the loan. Either Fannie & Freddie lied to the USPTO to get the patent or they intentionally turned off (relaxed) the fraud detection. More likely the latter. In any case, if the government were smart, they’d confiscate the patents.
More than likely, if the government / US Senators have their way to dispose of FnF their big donor banks will be in first place to “buy” the intellectual properties. While millions of Americans will find their mutual funds and 401k holding GSE shares die on the vine.
Reblogged this on California freelance paralegal.
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