Professor Wray’s Anatomy of Mortgage Fraud

Anatomy of Mortgage Fraud Part I-MERS Smoking Gun

Anatomy of Mortgage Fraud Part II:  The Mother of All Frauds

Wray proposes solutions:

There is a community of interests that can bring together the securities holders (including PIMCO and the NYFed) and the defrauded homeowners to stop the illegal foreclosures. The best thing for the investors is to demonstrate that the securities are fraudulent because the underlying mortgages did not meet the representations and because the notes were not legally transferred. The best thing for the homeowners is to demonstrate that because the notes were not legally transferred, no one has standing to foreclose. While they might still owe money on their mortgages, no one can take their homes away from them. That provides the proper incentive to force banks to modify the mortgages.

Further, and somewhat ironically, leaving homeowners in their homes is best for the banksters at the level of the economy as a whole. Since the securities investors will be able to force the banksters to take back the securities, the loss minimizing solution for banks is to stop the foreclosures that are depressing real estate prices. That can then buy time to modify the mortgages to ensure homeowners can stay in the homes and service their debt. Instead, the banks are pushing for Congress to retroactively legalize the frauds they perpetrated against counties, borrowers, and investors. As always, Wall Street wants someone else to pay for its crimes — and is willing to destroy the property rights that are fundamental to a system based on private property in order to protect CEO compensation on Wall Street.

Here is the alternative solution President Obama needs to consider.

  • An immediate moratorium on foreclosures of any mortgages that are, or ever were, registered at MERS;
  • Declare all outstanding fraudulent securities null and void, require securitizing banks to make restitution to investors, and sue the banks for restitution of the back taxes owed by REMICs;
  • If this makes the banks insolvent, begin to resolve them, shutting them down;
  • Prohibit Fannie and Freddie and any chartered bank from dealing with MERS, which is an organization formed to perpetrate fraud;
  • Investigate MERS for fraudulent activity, require restitution of all county recording fees that were evaded, and punish the guilty;
  • Formulate a policy to help homeowners who have been victims of lender fraud, with a goal of reducing mortgage payments to something they can afford; and
  • Let Congress know he will veto any legislation that legalizes the fraud perpetrated by MERS, by mortgage servicers, and by originating and securitizing banks.

These actions will help to restore the rule of law, while punishing the guilty. And stopping (illegal) foreclosures will reduce the pressure on real estate prices. By itself this will not put the US on the road to recovery, but it is certainly a step in the right direction.

In the final part of this series I will conclude with an assessment of the role that self-supervision by Wall Street played — and continues to play — in propagating this crisis, with MERS as the prime example of the folly of the delusion that the interests of banksters coincide in any manner with the public interest.


One thought on “Professor Wray’s Anatomy of Mortgage Fraud

  1. My AZ private investigat­ion firm (Arizona Undercover Private Investigat­ions, Inc.) has been investigat­ing suspected wrongful foreclosur­es for the last year in AZ.
    We discovered a few weeks ago that ReconTrust Company, N.A., a wholly owned Bank subsidiary of Bank of America, which BAC used to foreclose on thousands of homeowners in the Western States in last several years did have Express Authority to handle foreclosur­es the Feds until July 1, 2010….se­e as follows:
    Good Hunting. Bob Wilson, President

    Recontrust Company, N.A. did not have lawful authority to act as an
    “appointed­” trustee to foreclose under Trustee’s Deeds of Trust until July 1, 2010 when the Comptrolle­r of the Currency approved them for that purpose. The Federally Approved Articles and Amended Articles of Associatio­n of Recontrust Company, N.A. from 2006 until of July 1, 2010, does not authorize foreclosur­e actions and notices by ReconTrust Company, N. A. and would have been ultra vires in nature and would have been unlawful and null and void.

    In corporate law, ultra vires describes acts attempted by a corporatio­n that are beyond the scope of powers granted by the corporatio­n’ articles of incorporat­ion or in the laws authorizin­g a corporatio­n’s formation, or similar founding documents. Acts attempted by a corporatio­n that are beyond the scope of its charter are void. See: Hal D. Hicks v. Midwest Transit, Inc., (7th Cir. 2007) 479 F.3d 46


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