COCHRANE: “TEMPORARY LENDER”
OR “PRETENDER LENDER?”
AGENCIES PLAYING WITH WORDS
Posted on April 19, 2011 by Neil Garfield
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EDITOR’S NOTE: Mary is right and points out potential danger signs in these moves by the government agencies. They are leaving room for new terms and possible acknowledgment and validation of the use of originating lenders who are not lenders at all. “Temporary lenders” is used as a substitute for pretender lender. Either they were the lender or they were not.
It would be potentially acceptable to start a category of “temporary lender” if the securitizations were done right, if the disclosures were made, and if the the borrower really understood what was going on. The same thing holds true for investors who were putting up pension money for what they thought were ordinary residential mortgage loans without bells and whistles and misdirection. But that isn’t what happened. The pretender lender (“temporary lender”) is nothing more than a straw-man to hide the true lender and to hide the feeding frenzy on fees that sometimes vastly exceeded the entire loan Principal.
No doubt the use of the word “temporary lender” was a negotiated term. We must be vigilant in holding their feet to the fire. In nearly all cases, the party named on the disclosure statements, the note and mortgage or deed of trust as the “lender” was nothing more than an unlicensed mortgage broker even if their name was, say, Wells Fargo. They were not funding the loan — the money had already been secured by advance sales to investors (under the legal practice of selling forward where you can sell something you don’t have yet).
The failure of to disclose the real lender is a violation unto itself leading to various remedies and consequences — especially as to perfection of the lien, and providing the context for a transaction with clear title. But the intentional act of FALSELY stating the name of the Lender without any reference to disclosing a principal or under ordinary principal agent rules, and the failure to provide either the real lender or the borrower with the documents (some of which should have been recorded in the title registry in the country recording office) creates a fatal defect in perfecting a lien to the point where the note is a nullity and the mortgage or deed of trust is nothing more than a wild deed. Any subsequent foreclosure sale in which a deed is used on a credit bid would similarly be a wild deed subject to either being ignored as void or voidable by judicial action.
This is what results in the real transaction between the borrower and the real lender being undocumented and the the recorded documentation being false and even fraudulent. The only conclusion possible under law, in my opinion, would be that the note is unenforceable for the simplest of reasons, and that the mortgage is an invalid unenforceable document.
The consequences of this is that the “assets” being reported on the books of the mega banks are simply vapor, which they already were because of the lack of proper documentation even if the original mortgage was valid. The consequence of that is that those banks are going to either need more capital — trillions of dollars — or they will need to be resolved and sold off into pieces to the hundreds of hungry medium and small bankers who have been healthy all along.
In plain language, putting ANY value on the shares of those mega banks is at best speculative and at worst simply foolish.
submitted by Mary Cochrane
Critics, including Democratic lawmakers in Congress, say the order is too lenient on the lenders.
House Democrats introduced legislation Wednesday that would require lenders to perform a series of steps, including an appeals process, before starting foreclosures.
Looked up ‘LENDER’ because I’m confused.
Mortgage document uses term LENDER.
The Mortgage document during default event comes alive when Wells Fargo Bank NA LENDER is not the
‘Temporary Lender’ Definition on Investopedia:
A mortgage lender that sells the loans it originates into the secondary market shortyly after closing.
What Does Temporary Lender Mean?
A mortgage lender that sells the loans it originates into the secondary market shortly after closing, as opposed to holding the loans in portfolio.
Most lenders are temporary lenders.
These lenders have a few options when selling loans.
Security dealers may be willing to purchase the loans for the purposes of securitizing the assets for resale to investors.
Other lenders may buy the debt and hold it in their portfolios.
The temporary lender may also sell its loans into its own trust, as part of a securitization process.
Temporary lenders make money in three primary ways.
First, they charge fees to the borrower.
Second, they originate loans at interest rates above par value which allows them to sell the loans into the secondary market for a premium price
(the loan is worth more in the secondary market than the actual principal balance of the loan because of the above par interest rate).
Third, depending upon the slope of the yield curve, they earn a warehouse spread for the time in which they are the holder of record of the loan
(the interest rate on the loan is higher than the interest rate at which the lender borrows money to fund the loan – this spread is earned until the loan is sold into the secondary market).
http://www.investopedia.com/terms/t/temporary_lender.asp
David Starkey, on April 19, 2011 at 4:06 am said:
The truth doesn’t really set you free. The purchase of my families home was subject to all the violations that have been outlined above and on Neils blog for 3 years. But that really does not matter. They intend to auction off my house tomorrow. I would be in jail for doing what they have done but they just get a home that has been paid for many times over. I’ll tell you later about my “lawyer”.
Virginia, on April 19, 2011 at 2:39 am said:
I search for a logical result, an answer – something to make sense of the foreclosure kayos. All actions lead to one point. Either Fannie or the banks end up with almost all the foreclosed loans – Socialism? The homeless begin to mount. No $$ available to make new loans to buy the empty homes because the banks wrote more mortgages than they have assets to carry. The banks fail – and the gov’t takes over the bank(s) holding the properties… The gov’t ends up owning all the properties belonging to the states – that maybe might want to secede from the “union”… BofA is failing and no one is talking about the week-long loss down from 13.48 a week ago to 12.42 (over -11.60% DROP in a month) with drastic drops daily and a line in Chinatown on the street last week by Chinese drawing out funds…
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