WHY DOES THE FRB SELL THE SAME RESIDENTIAL MORTGAGE-BACKED SECURITIES TO THE CREATORS OF THESE TOXIC MORTGAGES AFTER THEY'VE BEEN FORCED TO PURCHASE THESE ASSETS TO BAIL THEM OUT? AT PENNIES ON THE DOLLAR? THE FRB IS REWARDING BAD BUSINESS.

Details in New York: Devil is in the Foreclosure

Posted on August 16, 2011 by Neil Garfield

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Submitted by “One Observer”

o Why would a non-performing loan be transferred into a Trust nearly 16 months AFTER the Trust’s closing date?
o How many other mortgages were not deposited in accordance to this Trust’s Pooling & Servicing Agreement?
o And if it contained non performing loans, why weren’t the investors notified and paid a higher interest rate?

In a letter to the New York State Attorney General Hon Eric Schneiderman, a consumer who is caught in the irrationality of the NY Foreclosure Courts, pleads for an investigation into yet another example of blatant securitization fraud.

• Merrill Lynch Banker ‘sells’ the ARM refinance mortgage as a cash flow enhancement product to estranged spouse. Estranged spouse decides to be sole signor on Mortgage and Note. Mortgage closes on November 1, 2004.

• Through information later obtained, this mortgage was securitized into the MERRILL LYNCH MORTGAGE INVESTORS TRUST SERIES MLCC 2004-G Pass-Through Certificates, CIK 1312848 under SEC file number 333-112231-36.

• This Trust had a closing of December 29, 2004 pursuant to its Pooling and Servicing Agreement.

• As of April 1, 2006, estranged spouse stops sending mortgage payments.

• In October 2006 an officer of the servicer PHH, Marc J Hinkle, assigns the Mortgage from MLCC (the ‘Depositor’ in the Trust) to Wells Fargo Bank, N.A., as Trustee (Trustee of what? It didn’t say).

• This begs the questions:

o Why would a non-performing loan be transferred into a Trust nearly 16 months AFTER the Trust’s closing date?

o How many other mortgages were not deposited in accordance to this Trust’s Pooling & Servicing Agreement?
o And if it contained non performing loans, why weren’t the investors notified and paid a higher interest rate?

• Sometime in late 2006, the firm Shapiro & DiCaro filed an Order of Reference to foreclose on this mortgage. Fortunately, some NY Judges ‘get it’ and the presiding Judge dismisses the motion as Plaintiffs do not submit evidence of standing and specifically had not submitted the requested Trust Agreement. One can speculate that if the Judge saw the closing date of the Trust Agreement, the Judge too would question why the mortgage was assigned AFTER it was in default and AFTER the Trust’s closing date by which all mortgages had to be transferred.

• Plaintiffs file an Appeal in 2007

• Plaintiffs withdraw the Appeal in 2008

• Plaintiffs file another Summons and Compliant in early 2008, that’s nearly two years after the first date of default.

• Suddenly, Plaintiffs motion to dismiss their complaint and it is dismissed.

• A second mortgage assignment is filed in June 2008, that is 3.5 years after the closing date of the Trust AND essentially assigning a non performing loan into a Trust whose very Pooling & Servicing Agreement disallowed such transfers as the mortgages were pooled into 2 Senior tranches. Adherence to the PSA determines whether there was a transfer effected or not because under NY trust law (which governs most PSAs), a transfer not in compliance with a trust’s documents is void.

Again, the questions raised are:

o Why did a non performing loan get transferred into a Trust belonging to an almost bankrupt holding company, Merrill Lynch? In June 2008, Merrill Lynch’s widely publicized financial problems due to the losses from its RMBS business led to the subsequent acquisition of ML by Bank of America.

o Was this untransferred and non performing loan and its losses, and I speculate many others due to the reason in the point above, included in Merrill’s calculation of operational losses and the adequate Basel and regulatory capital reserves set aside and reported?

o This assignment is from Wells Fargo Bank, NA, as Trustee to the securitized Trust. The assignment was again done by Marc J Hinkle, an officer of PHH, not the Trustee. There was no Power of Attorney attached to the assignment. So an agent assigns the ownership interest as agent for the owner before the owner is actually established established? Cart before the horse ?

• A THIRD foreclosure complaint is filed in mid 2008. The presiding Judge agrees with Shapiro, DiCaro & Barak’s reply to one of the Defendants’ Motions which stated that the many securitization issues raised above were not relevant to the Foreclosure Court proceeding. Consumer is dumbfounded by this decision–ie Plaintiff is not a ‘Person’, therefore, the means by which Plaintiff can claim standing has to be reviewed.

Again, this is just one mortgage marred with irregularities but it begs the question of how many others may have been fraudulently transferred into this and other toxic Trusts and whose investors knew nothing about this endemic toxicity?

The consumer is in communication with the SEC, the OCC and the NY AG’s Office,

Indeed, ‘unsophisticated consumers’ in foreclosure proceedings are not the foreclosuregate principals, it is the investors who are demanding answers and visibility into the lack of transparency these transactions were performed under.

Merrill Lynch is a vertically integrated firm and has a private label agreement with PHH since about 1997. ML created the mortgages (PHH created them under the MLCC name), underwrote the securitization, sold the bonds and resold them time and time again. In 2008 AIG held several toxic MLMI bonds and was bailed out by the FRB in what was called the Maiden Lane portfolios. Interestingly enough, in the example above, one of the bonds is part of Maiden Lane II. When the FRB auctioned these non-agency RMBS in April-June 2011, guess who bought the largest chunk? It’s Merrill Lynch all over again, along with JPM Chase. Guess it’s hard to resist the bargain they themselves created.

It’s getting more challenging for firms like Shapiro, DiCaro & Barak and the rest of the Shapiro mill to cover up their and their client’s ‘unclean hands’. Investors are demanding answers and it is the recent lawsuits like to AIG vs BoA on Monday Aug 8th and the Allstate vs BoA back in March that continue to pressure regulators to uncover and publicize these fraudulent transactions.

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I'M ADDING JUDGE JEFFREY ARLEN SPINNER TO "THE JUDGES I LOVE" LIST

Low-Key Judge Raises the Roof With Foreclosure Rulings

Among his rulings: canceling a $292,500 mortgage because of what the judge called 'unconscionable, vexatious and opprobrious' conduct by the bank during mandatory loan-modification negotiations

Mark Fass All Articles

New York Law Journal

July 19, 2010

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At first blush, Suffolk County Acting Supreme Court Justice Jeffrey Arlen Spinner seems an unlikely figure to strike fear in attorneys.

The 50-year-old judge is physically unimposing, speaks in soft, measured tones and is unfailingly polite. He habitually refers to the attorneys who appear before him as "nice," "reasonable" and even "wonderful" people.

But the 12-year veteran of the Suffolk bench has also issued three foreclosure decisions over the past eight months that have made him the darling of the tabloids and the Internet for, as the New York Post put it, sticking it to "ruthless bankers."

First, in November, the judge canceled a $292,500 mortgage because of what he called IndyMac Bank's "unconscionable, vexatious and opprobrious" conduct during mandatory loan-modification negotiations (IndyMac Bank v. Yano-Horoski, 2005-17926).

In March, he ordered Wells Fargo to pay a homeowner $155,000 for entering his house without his permission and changing the locks (Wells Fargo v. Tyson, 2007-28042).

And then in April, the judge ordered Emigrant Mortgage to pay a couple $100,000 as damages for what he said was an "unconscionable, unreasonable [and] overreaching" mortgage agreement. (Emigrant Mortgage Co. v. Corcione, 2009-28917).

Those three decisions have gotten the attention of not only the press and hopeful homeowners, but also of banks and their attorneys.

One sign that the banks now tread carefully in Spinner's Riverhead courtroom is the number of veteran bank attorneys who appear at the mandatory settlement conferences.

On a recent Tuesday morning, Jonathan Ullman, a Syosset attorney who has represented banks for more than 19 years, was among the half-dozen lawyers who had come to conferences being held in the aisles, the hallway or nearby offices.

Now that Spinner has gained the lenders' attention, Ullman said, banks no longer entrust cases before him to junior associates: The possibility of losing, and losing big, has become too real.

"The banks are scared to death of Judge Spinner," Ullman said. "If you go to the rest of the parts, you won't see anything like this."

RISING TIDE OF FORECLOSURES

Over the last five years, the annual number of foreclosure filings in New York state has more than doubled, from 22,350 in 2005 to 46,673 last year. More cases were filed in the first five months of 2010 than in all of 2005.

In Justice Spinner's county, the increase has been even steeper, to 7,536 filings last year from only 2,016 in 2005. And the county had recorded 4,144 foreclosure filings as of May 24 (See County-by-County Foreclosure Numbers for 2010 as of May 24 and 2009).

As that tide has risen, several Supreme Court judges have developed reputations for discarding the rubber stamp to which many banks had become accustomed.

Brooklyn's Justice Arthur Schack is known for rejecting foreclosure petitions because of shoddy or questionable paperwork by the mortgagees.

Justice Timothy J. Walker of Buffalo recently dismissed a foreclosure action after Wells Fargo insisted on including an adjustable-rate clause in its loan modification, despite the widespread criticism of adjustable rates and the judge's previous order requiring the bank to offer a loan without such a clause. (Wells Fargo v. Hughes, 2010-20081).

And in Suffolk County, which is home to 1/14 of the state's population but one-sixth of its new foreclosures, Spinner has gained a small measure of celebrity within the ever-expanding foreclosure community.

The judge's decisions have been covered everywhere from Reuters ("Hero of the day: Jeffrey Spinner") to the blog 4closureFraud ("Another NY Style beat down") to London's Daily Mail ("Couple's £370,000 mortgage wiped out by judge angry at bank's 'repulsive' behaviour").

As the presiding judge of the Residential Mortgage Foreclosure Conference Part for the past 18 months, Spinner has overseen Suffolk County's efforts to process the onslaught of foreclosures by implementing new court procedures and managing the mandatory settlement negotiations for subprime mortgages.

The boy who would soon be named Jeffrey Arlen Spinner was born inside of a 76th Street apartment, on the Upper East Side of Manhattan, in 1959. Six days later he was adopted by a Long Island couple, hand surgeon Morton Spinner and his wife, Paula, an elementary school teacher. The Spinners had two more boys, and the family moved to Connecticut when Jeffrey was 12.

After graduating from Ithaca College in 1981 and the Touro Law Center in 1987, the future judge built his mortgage expertise, as he put it in a recent interview, "from the ground up" -- by working at a series of small Long Island and Connecticut law firms as, of all things, a bank attorney.

"That's where the jobs became available at that time," Justice Spinner said. "It wasn't a conscious choice."

He handled 40 closings a week, doing title searches the old-fashioned way: going from clerk's office to clerk's office and pulling the records.

His wife, Alyse Auerbach Spinner, gave birth to the first of the couple's three daughters, now ages 14 to 21, in 1989. She now serves as the administrator of the Jacob's Light Foundation, a charity that provides "necessities and comforts from home" to soldiers overseas.

A registered Conservative, the judge was appointed to Suffolk County District Court in January 1998, elected to the County Court in November 1998 and assigned to the Supreme Court in January 2006.

After the Legislature established mandatory settlement conferences for subprime loans in 2008, Suffolk County's Administrative Judge H. Patrick Leis appointed Justice Spinner to preside over the county's new foreclosure conference part. A second judge, Family Court Judge Patrick Sweeney, was later added to the part to help manage the backlog.

After the Legislature last year required good-faith settlement conferences in all foreclosure actions, the Suffolk County case load -- about 250 new cases per week -- has become too vast for one or two judges to handle. Spinner is now one of 32 judges hearing foreclosure cases, though he still has about 1,100 subprime conferences remaining on his calendar.

MANDATORY CONFERENCES

Justice Spinner sets aside each Tuesday for settlement negotiations. Dozens of homeowners meet with bank attorneys to hand over documents or discuss modifications. The judge personally intervenes in only the few that appear to be at an impasse.

"In this part we don't do things on a one-size-fits-all basis," the judge said. "Each person has a different need. If I can tailor something where both sides give a little bit and both sides take a little bit, everyone comes out a little less unhappy. Everything we do here is about compromise."

On a recent Tuesday, the cases that required the judge's attention included one that seemed to have been resolved.

The judge sat down at a table in an otherwise empty office across the hall from his chambers with a court reporter, a pro se Port Jefferson homeowner, and the bank's attorney, Henry DiStefano from the Office of Steven J. Baum -- a firm that handles so many foreclosures that Spinner reserves one Tuesday each month for its settlement conferences.

"Let's start with a personal matter," the judge said. "How did your husband's surgery turn out? Is he OK?"

The parties had agreed to a so-called short sale only to have the buyer withdraw at the closing out of concerns regarding the bank named on the payoff letter, the type of procedural breakdown that never happened back in the judge's day pulling title records by hand.

Hearsay problems notwithstanding, Spinner encouraged the homeowner to play a voicemail from the buyer's title company over her cell phone's speakerphone. (The judge told the court reporter that she need not record the number of new messages in the woman's inbox.)

After much discussion, DiStefano agreed to ask his client to produce a new letter and the judge ordered the title company to either accept the new letter or appear in his court to explain why it would not.

"If they won't [accept it], they're coming in to see me," the judge said. "I won't take no for an answer."

Spinner may speak in maxims -- "These folks come in as people, and I'm here to serve the people" -- but his three best-known decisions are rooted in legal philosophy: The Supreme Court's status as a court of equity vests it with the right and the responsibility to award damages in order to punish the defendant or deter others.

"[T]his Court is persuaded that Judge Benjamin Cardozo was most assuredly correct in stating that 'The whole body of principles, whether of law or of equity, bearing on the case, becomes the reservoir drawn upon by the court in enlightening its judgment,'" Spinner wrote in Emigrant, quoting the 1925 decision Susquehannah Steamship Co. v. A.O. Andersen & Co., 239 N.Y. 289.

Emigrant has filed a notice of appeal, as well as a motion to rehear and reargue.

Touro Law Center Professor Leif Rubinstein, who heads the school's mortgage and foreclosure clinic, said, "The thing I'm teaching in my class is how [Justice Spinner] is taking the equity arguments and how he's using them in all of his decisions. The Court of Appeals acknowledged that the Supreme Court is a court of equity as well as a court of law. There haven't been many decisions citing that."

Rubinstein predicted that the legal bases of the three decisions will be upheld on appeal (Wells Fargo has also filed a notice of appeal), though the size of the awards may be remanded for reassessment.

Spinner says that although the foreclosure filings continue to overwhelm the system -- they presently constitute about 50 percent of the case load in Suffolk Supreme Court's civil term -- the conferences are proving to be a benefit for both sides.

"I can't speak for the other parts, but I've found in my part they've been successful. If nothing else, it brings people together and gets them talking," Spinner said. "Banks didn't want to be bothered with it. Now that's changed, because I think the whole economic climate has changed."

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