Bank Witness May Have Thrown Freddie Mac And The Hedge Funds “Under The Bus”
For several years I have been investigating cases involving bulk sales of non-performing loans (“NPL’S”) by Freddie Mac to private investors such as “Lone Star Funds” and its entities like “LSF9 Master Participation Trust.” Caliber Home Loans often acts as the servicer for these entities and typically is the party fabricating the assignments and other documents to obtain judgments and carryout foreclosures. Here’s an article from “Housingwire” detailing some of Freddie’s sales to LSF9 Mortgage Holdings:
So, what exactly are these private “vulture investors” buying from Freddie Mac? Let me start by pointing out that I have yet to see any assignments or endorsed notes to or from Freddie Mac in these bulk sales transactions. Why? Because according to PNC Bank witness “Dorothy Thomas” in the case PNC Bank, N.A. v. West, 2014-Ohio-161 (See: PNC Reply – PNC v West – OH & Decision – PNC Bank v West – Ohio),
“Freddie Mac ordinarily does not take notes and mortgages related to loans it purchases from originators by assignment and therefore does not ordinarily enforce delinquent loans through foreclosure.”
And, “With respect to the Newman’s loan, all of the above holds true – Freddie Mac invested in their loan, received the right to receive income from the loan, kept PNC as the servicer of the loan, did not take the Note and Mortgage by assignment, and left the Note and Mortgage in PNC’s hands.”
Its never been a secret that Freddie Mac’s business policy is to remain stealth in any chain of title if possible, and to rely on the servicers to keep its presence a secret in foreclosure proceedings. In fact, this PNC case which was overturned against PNC, involved the Defendant’s assertion that PNC was concealing Freddie Mac’s interest in the loan. Freddie Mac’s business policy appears to rely upon nothing more than handshakes with the originators and servicers. Here is some verbiage from a “Freddie Mac – Mortgage Participation Certificates” disclosure (See: Freddie Mac – Mortgage Participation Certificates):
Freddie Mac
Mortgage Participation Certificates
Freddie Mac issues and guarantees Mortgage Participation Certificates, or “PCs.” PCs are securities that represent undivided beneficial ownership interests in, and receive payments from, pools of one- to four family residential mortgages that are held in trust for investors.
Tax Status and Securities Law Exemptions
The PCs are not tax-exempt. Because of applicable securities law exemptions, we have not registered the PCs with any federal or state securities commission. No securities commission has reviewed this Offering Circular.
We also make available on our internet website certain pool- and loan-level information regarding each of the Mortgages backing our PCs based on information furnished to us by the sellers and servicers of the Mortgages. We may not have independently verified information furnished to us by sellers and servicers regarding the Mortgages backing our PCs and make no representations or warranties concerning the accuracy or completeness of that information.
So, let’s get this straight. Freddie Mac invests in the loans but does not take assignments of the security instruments or physical possession of the notes. Freddie sells unregistered PC’s backed by these mortgages and notes to investors when it has never received the notes and mortgages, nor independently verified the information. It’s nice to see that such a large financial institution can still operate on the “Honor System.”
Though Freddie Mac’s policies appear utterly stupid and nonsensical, it has created an environment that is utterly conducive for fraud. For years I have been pointing out the myriad of title defects in loans involving Freddie Mac, and have sought an explanation as to how this “government sponsored entity” could conduct large “Bulk-Note” sales of non-performing loans when (1) they aren’t in title, (2) they lack physical possession of the notes and mortgages, and (3) they have never independently verified anything they claim to have purchased? Here’s what PNC’s witness had to say about this,
[“u]ntil Freddie Mac goes through the process of obtaining and recording an assignment from PNC and taking physical possession of the Note and Mortgage from PNC, it cannot sell to any other party the right to collect payments from the Newmans or enforce their loan obligations through foreclosure. Freddie Mac can sell to a third party only what it currently has, which, with respect to the Newmans’ loan is the right to receive (1) payments actually collected from the Newmans and (2) proceeds of any foreclosure sale.”
So, unless Freddie obtains and records an assignment and takes physical possession of the note (which it rarely ever does), the only rights it can sell to any “vulture investor” hedge fund such as LSF9 Mortgage Holdings is (1) payments collected from the borrowers and (2) proceeds of any foreclosure sale. It’s clear these investors are not purchasing any revenue streams from the borrowers on these non-performing loans. So the only thing left is the proceeds from the sale of the foreclosed property. This is what they are after, and this is what is making them rich!
This business model has an enormous problem however, as PNC Bank’s own witness may have just thrown Freddie Mac and all of these hedge fund vultures under the bus. Based on my investigations involving Caliber Home Loans, LSF9 Master Participation Trust, and many others, no assignments and endorsements of the notes being sold by Freddie Mac exist anywhere in the chains of title to the loans in these NPL purchases. What this means per the banks own testimony is, Freddie Mac cannot sell to any other party the right to collect payments from the borrowers or enforce their loan obligations through foreclosure!
Bill Paatalo – Private Investigator – OR PSID# 49411
BP Investigative Agency, LLC
406-446-9818
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