Welcome to the Machine, Video Introduction
By Daniel Edstrom
DTC Systems, Inc.
Economics 101 and Elizabeth Warren
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Tag: REO
Wells Fargo Does It Again – This Time Investors Take a Hit
Wells Fargo Does It Again – This Time Investors Take a Hit
By Daniel Edstrom
DTC Systems, Inc.
Since Wells Fargo Bank has been around since the Gold Rush days and are such a large lender and securitizer, you would think that they would have state of the art systems handling the servicing of loans. Especially in light of the huge rush to securitize anything and everything in the last 10 years. But apparently the meltdown has moved them beyond what their systems are capable of. This is probably especialy true given that banks are for the most part not lending much anymore (very limited number of new loans), but the number of loans in default, foreclosure, bankruptcy and REO status has skyrocketed. Pushing through so many foreclosures and processing so many advances and distributions is weighing down on their systems and infrastructure. In their latest March statements to certificateholders (investors who purchased certificates from securitized trusts), Wells Fargo (usually as a Master Servicer or Servicer) is giving investors this disclosure on the first page of the reports:
NOTE: Wells Fargo Bank, N.A. is processing an extraordinary expense charge related to the analysis, creation, and implementation of new and enhanced systems and processes necessitated by significant and unanticipated changes in industry and market conditions.
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Realized Losses in Securitization
Realized Losses in Securitization
By Daniel Edstrom
DTC Systems, Inc.
It is of interest to note that no loss is calculated in securitized transactions until the
loan is liquidated. It is also of value to note that usually the principal and interest is advanced until the loan is liquidated (as I saw in a case where it was stated by Deutsche Bank National Trust Company in an answer to discovery). So principal and interest payments are made by the servicers and/or trustees, and no loss is actually realized until after the house is foreclosed upon and sold to a 3rd party. So what came first, the default or the loss? No default occurs until the loan is liquidated, which doesn’t occur until after the foreclosure sale. This means the homes are sold while the loans are current. I would venture to say that nearly ALL foreclosures in at least the last 10 years on homes with securitized transactions, have been fraudulent and invalid. This is because the paperwork used to foreclose is VOID. Not voidable, but VOID.
Take a look at these definitions from the Argent Securities Inc. 2003-W6 Trust:
State Principal Balance
As to any mortgage loan or manufactured housing contract, the principal balance of the mortgage loan or manufactured housing contract as of the cut-off date, after application of all scheduled principal payments due on or before the cut-off date, whether or not received, reduced by all amounts, including advances by the master servicer, allocable to principal that are distributed to securityholders on or before the date of determination, and as further reduced to the extent that any realized loss thereon has been, or had it not been covered by a form of credit support, would have been, allocated to one or more classes of securities on or before the determination date.
Advance
As to any Mortgage Loan or REO Property, any advance made by the Master Servicer or a successor Master Servicer in respect of any Distribution Date representing the aggregate of all payments of principal and interest, net of the Servicing Fee, that were due during the related Due Period on the Mortgage Loans and that were delinquent on the related Determination Date, plus certain amounts representing assumed payments not covered by any current net income on the Mortgaged Properties acquired by foreclosure or deed in lieu of foreclosure as determined pursuant to Section 4.03.
Determination Date
With respect to each Distribution Date, the 10th day of the calendar month in which such Distribution Date occurs or, if such 10th day is not a Business Day, the Business Day immediately preceding such 10th day.
Financial Control Fraud
Financial Control Fraud
By Jim Macklin
Secure Document Research
When a person or persons who own or oversee the operations of a seemingly legitimate business or Governmental Agency uses that business or agency as a “weapon”, it is known as a control fraud. The term was coined by UMKC Professor William Black (The Best Way To Rob A Bank Is To Own One, Black, 2005). The “weapon of choice” in a financial control fraud is accounting. More losses occur in financial control frauds than any other form of property crimes …combined!
In the early stages of our most recent financial crisis, the FBI had correctly identified the presence of the type of fraud, yet, the Bush administration failed to effect any real consequences, and so the fraud was swept under the rugs of the administrations’ offices. De-regulation and the advent of hyper-bonuses helped to encourage the practices of the ratings agencies, hedge fund managers, and CEO’s of the Wall Street elite, while the AAA rated “junk bonds” went out for sale with a frenzied push for more paper. Never before, in the history of Wall Street, had a AAA rated bond gone into a default. Remember, these ratings agencies hadn’t even bothered to sample the veracity or viability of the loan files upon which these ratings were issued. This is a control fraud in its’ simplest and purest form, with all of the key players indemnified against losses through trust agreements. This is the smoking gun.