Bank of America’s New Third Party Authorization

Saturday, March 24th, 2012 | Uncategorized | No Comments

First, allow me to congratulate Bank of America executives on providing a new acronym for themselves: BANA, which fully stands for Bank of America National Association. The remainder of this reading is best done while listening to Madonna sing “Material Girl” (convenient YouTube link is http://www.youtube.com/watch?v=R0FXPqYpt0g).

As Madonna is beginning to go into her pop hit, allow me to express my condolences to the title companies and escrow agents across America that have been completely omitted by BANA from this form. Apparently you are either not allowed to have access to information regarding short sales, you don’t need it, or you are deemed to be completely immaterial to the short-sale process and closings. The complete omission of escrow agents and title companies from this latest BANA Third Party Authorization is most curious.

Page 1 of this two-page authorization is benign. It is, however, worthy of noting that now the homeowner is deemed to be the one responsible for selecting the authorized representative.

When we move to page 2, however, it gets interesting. I will do my best not to comment upon the poor grammar used in the very long run-on sentence. Instead, I want to focus on the one key word that was undefined but means everything. By now, Madonna will have said it multiple times if you are listening to the song: “MATERIAL”.

Unfortunately, we are now beginning to go down a rabbit hole with BANA as to what do they mean by “material”? Material in the present sense, or material six months after the deal closes when someone says, “Well, if I would have known then what I have learned now, I would have done something differently!”

When you read that language, you will see that BANA wants to create and impose a duty not to omit or conceal, or to fail to disclose, on the authorized representative. Did you notice that the duty runs unilaterally rather than reciprocally? Yes, BANA still has the right to lie to you about whether they have really received the documents. BANA still has the right to lie to you about the results of the BPO. Now you see why I wanted you to listen to Madonna’s “Material Girl” to distract you from the enraging bias, attitude and arrogance displayed by BANA.

We then turn to the very difficult matter of what a reasonable person believes is a material fact regarding one of these complicated transactions known as a short sale. In case you are wondering, reasonable people can disagree over what is reasonable. Therefore, reasonable people could disagree over what is a material fact. Given the unilateral nature and poor quality of thought put into this Third Party Authorization, I would be hesitant to execute this Third Party Authorization and return it to BANA without including in it your definition of what you believe to be a material fact. The absence of a definition of “material” opens a relativistic “rabbit hole”.

Allow me to suggest to you what a material fact is. A material fact is one that would cause a reasonable person to reconsider their willingness to participate in the transaction or to go forward and consummate the transaction. Allow me to give you an example of an obvious material fact that an authorized representative would be under a duty to disclose. If the authorized representative is aware of the fact that the property could or will be resold to a different buyer who has already indicated an interest in paying $40,000 more than what is being offered in the short sale, that is a material fact of which BANA would want to be told. An example of an immaterial fact would be when someone doing their home inspection realizes that the trim is painted in antique white rather than in white semi-gloss.

Bottom line summary: If a beginning real estate investor plans to buy a short-sale property and signs the Third Party Authorization as the authorized representative so that they can negotiate their own short sale, they now are at a competitive disadvantage, because everything that they know that makes this an attractive deal to them, they must now disclose to BANA.

Oh, be careful authorized representative what you know,

Oh, be careful authorized representative what you see,

Oh, be careful authorized representative what you hear,
For what you know, see and hear must be disclosed to big, bad BANA!

Can you Say Quiet Title? Read these excerpts and come to your own conclusion.

Sunday, February 26th, 2012 | Uncategorized | No Comments

United States Bankruptcy Judge Robert Grossman has ruled that MERS’s business practices are unlawful. He explicitly acknowledged that this ruling sets a precedent that has far-reaching implications for half of the mortgages in this country. MERS is dead. The banks are in big trouble. And all foreclosures should be stopped immediately while the legislative branch comes up with a solution.
Judge Grossman rejected MERS’s arguments, saying that mere membership in MERS does not provide “agency” rights to MERS, and agreeing with the Supreme Court of Kansas that ruled “The parties appear to have defined the word [nominee] in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time.”

He went on to disparage MERS’s claim that since in legal theory the “mortgage follows the note”, the Court should overlook the fact that MERS separated them. He stopped just short of saying that by separating them, MERS has irretrievably destroyed the clear chain of title, although he hinted that a future ruling could come to that conclusion:
“MERS argues that notes and mortgages processed through the MERS System are never “separated” because beneficial ownership of the notes and mortgages are always held by the same entity. The Court will not address that issue in this Decision, but leaves open the issue as to whether mortgages processed through the MERS system are properly perfected and valid liens. See Carpenter v. Longan, 83 U.S. at 274 (finding that an assignment of the mortgage without the note is a nullity); Landmark Nat’l Bank v. Kesler, 216 P.3d 158, 166-67 (Kan. 2009) (”[I]n the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable”).”
http://www.huffingtonpost.com/l-randall-wray/new-yorks-us-bankruptcy-c_b_824167.html

Why Freddie Mac Has Misled Others About Short Payoff Fraud

Wednesday, February 15th, 2012 | Uncategorized | 2 Comments

Since April of 2010 we’ve heard Freddie Mac publicly attacking private real estate investors who want to buy and resell short sale and REO properties as engaging in “fraud.” Yet, these claims lacked a legal citation or authority.
They have repeated this lie so much that it is accepted as “true” by many in the residential real estate industry, especially real estate agents receiving “risk management” training — even some law enforcement and regulatory personnel who SHOULD know better have been duped by the constant repetition.
Now we can see why Freddie Mac has made these unfounded claims. It was in their own financial best interest. A well written expose was published today in Roll Call. It is reprinted with permission.
End Freddie Mac Policies Against the Private Market

By John Grant
Special to Roll Call
Feb. 15, 2012, Midnight

The recent revelation that Freddie Mac’s business unit has bet billions that home loan modifications would fail is shocking even to the most devout critics of the failed, taxpayer-funded entity. The transactions, known as “inverse floaters,” are not illegal. But rigging the housing market to ensure the investments deliver a profit might be.

In addition to being a bet against homeowners and the Obama administration’s litany of struggling programs designed to save homeowners and Freddie, the inverse floaters are a bet against the private housing market. The bets fail not only if loan modifications work, but also if private buyers purchase Freddie’s inventory of distressed property. And here’s where Freddie has a problem.

For more than a year, Freddie Mac has adopted numerous policies designed to prevent the private purchase of toxic assets and forced servicers to enforce these policies. Demands for unreasonable offers on short sales, delays in processing short sales, affidavits preventing resale of their properties after being rehabbed and deed restrictions on real-estate-owned properties restricting resale price are among the myriad obstacles private buyers face in trying to buy Freddie’s inventory.

Besides delaying the unwinding of the troubled entity, several of these policies may in fact be illegal. Restricting the ability of private buyers to resell their properties and attempting to dictate resale value constitute unreasonable restraint on alienation. In plain English, once Freddie sells one of its toxic assets, it has no standing in future transactions related to the property.

Freddie has attempted to justify these policies through a taxpayer-funded media campaign arguing that the act of buying, rehabbing and reselling a property constitutes a crime and is inherently an act of fraud. Both Freddie and Fannie Mae have worked with enforcement officials to convince them of this lie. To the embarrassment of these enforcement officials, Freddie left out one important detail: Every time it stopped a short sale, Freddie made money.

Congress has known of Freddie’s anti-private-market agenda and done nothing to challenge it.

Homebuyers who take the risk to buy Freddie’s toxic inventory and turn its mistakes into quality homes deserve better. These entrepreneurs are the job creators; their sweat rebuilds struggling communities, generates local and state tax revenues and increases home prices in the areas most affected by the housing crash. For their contributions, they have been criminalized by an entity that has lost and continues to lose billions of taxpayer dollars and has essentially made a bet against a housing recovery.

The inverse floater transactions are the smoking gun evidence of what is really going on inside Freddie Mac. Freddie’s policies toward purchasers of its distressed assets have been nothing more than a business decision cloaked in feigned and false concerns over fraud and taxpayer interests. Their multibillion-dollar bet makes that crystal clear.

Since placement in conservatorship, Freddie Mac has made fools of many: enforcement officials on a snipe hunt for “fraud” perpetrated by people who are simply rebuilding our communities; the Obama administration, which rolled out program after program while all along Freddie bet against those programs; Congress, which surrendered its oversight to the Federal Housing Finance Agency; and the FHFA, which believes a new program designed to sell Freddie’s assets to hedge fund managers will actually bring in more revenue than selling to local investors.

But most of all, Freddie has made fools of American homeowners.

Anyone who works in finance knows that the real test for what an investor thinks, what an investor believes, is found by watching where that investor puts its money. Freddie Mac’s policies have denied distressed homeowners the right to vacate their homes without a foreclosure. And its investment vehicle has found a way to profit from the misfortune of others.

Solutions to this are simple, but they take political courage.

Congress and the Obama administration must work together to end all the anti-private-market policies in place at Freddie. This will allow for an orderly, organic and fair unwinding of the failed institution.

To the extent that government programs are working, keep them in place to help homeowners. But let there be no doubt that recovery and rebuilding American communities means private investment and local boots on the ground. That is a prescription for recovery no one should bet against.

John Grant represents the Distressed Property Coalition, a group of private residential real estate investors in Washington, D.C.

25 Billion is NOT Enough!!

Friday, February 10th, 2012 | Uncategorized | 2 Comments

Recent news stories report that the long awaited multi state AG settlement with at least 4 foreclosing lenders is near completion. The settlement includes money for homeowner that were illegally foreclosed upon with fraudulent documents. It breaks down to 2,000 per homeowner. Is 2000 really representative of the loss that these defaulted borrowers sustained? What value do you place on your supposed right of due process? What value do you give to a fair and uncorrupted legal proceeding? What value is assigned to the property rights that each owner has?

Rather than make it just about money how about making it about the integrity of the legal system? What value would judges place on only receiving good evidence uncorrupted by greed or dishonesty? What value would litigants assign to the right and duty of all parties in a legal action to only offer evidence that is authentic and truly admissible?

The fraud and scandal of the robo signing crises gives all of us pause. Is the blindfolded lady holding the Scales of Justices not able to see what really happens when the legal system is tricked on a massive scale by the submission of false evidence?
So far not a single person has been prosecuted for perjury, why not? The damage done to the best legal system this world has ever seen will continue long after the 25 billion; which is partly real money and partly “credits” that banks are supposed to give to certain borrowers, is long spent and gone.