By Greg Hunter’s USAWatchdog.com (revised)
With all the attention stories such as WikiLeaks and Irish bailout have gotten the last few days, a bombshell judgment against Bank of America in a New Jersey foreclosure case has been overlooked. The judgment happened 2 weeks ago in a case involving the home of John T. Kemp. His original mortgage company was Countrywide, but B of A bought Countrywide a few years back and, in turn, also acquired servicing rights to Kemp’s mortgage. U.S. Bankruptcy Judge Judith Wizmur rejected a claim by Bank of America to foreclose on Kemp’s home. According to a Bloomberg story yesterday, “Bank of America had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked.” According to one witness, this was a common practice. The Bloomberg story goes on to say, “Linda DeMartini, a team leader in the company’s mortgage- litigation management division, said during a U.S. Bankruptcy Court hearing in Camden last year that it was routine for the lender to keep mortgage promissory notes even after loans were bundled by the thousands into bonds and sold to investors, according to a transcript. Contracts for such securitizations usually require the documents to be transferred to the trustee for mortgage bondholders. Following the decision, the bank disavowed the statements by DeMartini, whom it had flown in from California to testify” (Click here to read the entire Bloomberg story.)
This is an earth shaking setback, not only for B of A, but for all banks involved in mortgage-backed securities. The Promissory Note is the actual proof the bank owns the home. No “note” means no proof of ownership. You must possess the original Promissory Note for ownership to be valid. I wrote about this enormous mortgage mess in an October post called “The 6 Trillion Dollar Problem.” I said, “The lack of the Promissory Note is the biggest of all the problems in this chain of chicanery. Here’s why. A Promissory Note is a financial instrument. It is in the same family as a Federal Reserve Note. For example, if you copied a $100 bill and then tried to spend that copy in a store, because you lost the original, is it still money?–Of course not. You need the original financial instrument (in this case a $100 Federal Reserve Note) to make a legal transaction in a store. The same is true for a Promissory Note. You need the original note to legally complete a foreclosure. A counterfeit or copy of a Promissory Note is not a financial instrument, just like a counterfeit or copy of a $100 bill is not a financial instrument!”
No Promissory Note means banks like B of A sold un-backed securities instead of mortgage-backed securities. This is not a simple case of sloppy paperwork as the mainstream media would like you to believe. The evidence suggests it is layer upon layer of widespread criminal activity. Here’s the way I explained it in a post called “The Perfect No-Prosecution Crime.” In October, I wrote, “There was “rampant” mortgage fraud in the loan application process according to the FBI as far back as 2004. (Click here to see one of many stories of the FBI warning of mortgage fraud.) There was real estate document malfeasance when the original Promissory Notes and loan documents were “lost.” The Promissory Notes were required to create tens of thousands of mortgage-backed securities (MBS). No “note,” no security. No security means the special IRS tax status for the MBS were improperly obtained. Because there were no documents, the rating agencies fraudulently made up triple “A” ratings for the securities. When the whole mess blew up, big banks hired foreclosure mill law firms to create forged documents. That phony paperwork was and is being used to wrongfully remove homeowners from their property. That is foreclosure fraud.”
The Bloomberg story also said,“The Kemp case is also being examined by lawyers for investors in mortgage-backed securities. Owners of the bonds have been cooperating in an effort to force sellers to take back loans, saying they were misled about their quality. The Wizmur ruling may give investors an additional opportunity to push for mortgage buybacks on grounds that the bonds weren’t created in keeping with securitization contracts.”
Mortgage-backed securities have to meet what is called “contractual representation and warranties.” That basically means the MBS are required to be free of fraud and be exactly what the seller says they are. Do you think mortgage-backed securities are free of fraud? Do you think these securities are the triple-A rated risk free investment the big Wall Street banks claim?—NO WAY! The banks are going to be forced to buy back all the toxic mortgage junk they sold.
That is the least they can do because, so far, there has not been a single prosecution of a high ranking mortgage lender or Wall Street banker. That is outrageous because this will surely go down as the biggest financial white-collar crime rip-off in history.