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Foreclosure is….The Federal Government Stealing From Private Individuals…(not just homeowners)

WeidnerLaw Foreclosure Defense and Bankruptcy Blog
Foreclosure is….The Federal Government Stealing From Private Individuals…(not just homeowners)

Foreclosure is….The Federal Government Stealing From Private Individuals…(not just homeowners)
July 7, 2014
by Matthew D. Weidner, Esq.
Foreclosure Defense Florida
No Comment

As the State of Florida continues moving headlong through the Great Foreclosure Purge of 2014, no one can explain exactly why Florida’s courts have turned 180 degrees against citizens and tilt now, unquestionably towards granting judgments for banks.

The standard refrain from courts is,

“The legislature told us to CLEAR THE FORECLOSURE DOCKET!”

(and so that’s what we’re doing)

Except this is not at all what the legislature told the courts to do. In fact, the one substantive piece of legislation, HB87 told the courts exactly the opposite….in the form of increased pleading and disclosure requirements. But undeniably, the courts have accepted and are executing the mandate to CLEAR THE FORECLOSURE DOCKET! But to what end? Why are courts across this state clearing the cases and far more importantly what becomes of all those homes that are subject to foreclosure sales? No one asks these questions….much less answers them. But here’s a start.

“The Banks” don’t care about foreclosure….”The Banks” and “The Servicers” are merely debt collectors hired by the real owners of the mortgages, propped up and sent into court to do the dirty work of throwing families out into the street. So who really does own the mortgages? In something like 70% of residential cases its Fannie and Freddie, those government enterprises that are given all the protection of government enforcement with all the profit driving incentives of private corporations. Fannie and Freddie are like the Mafia, with the FBI and Justice Department running protection.

Nowhere is the corruption and collusion between government and Wall Street more prominently on display than in the world of foreclosures. Down here at the community level we suffer the end product of government and banks colluding to manipulate markets and eviscerate the due process and legal rights of individuals. Families are foreclosed and the homes are either left vacant or they are sold off to investors? Either way, communities….and individuals…. ultimately suffer.

Case in point…a real specific example…in nearly all foreclosure cases now we can negotiate out a waiver of deficiency…..but this is not the case in Fannie and Freddie loans. Why? I’ve long suspected that the reason lies with accounting fraud and what Fannie and Freddie are reporting to their various stakeholders about their assets. Simply, even though Fannie/Freddie have completed 100,000 foreclosures in Florida and even though we all know they will never collect any deficiencies related to those cases, as long as they do not provide a formal waiver of deficiency, they can continue to tell their stakeholders the full balance of the loans are assets.

THE FEDERAL GOVERNMENT, RUNNING A PROTECTION RACKET FOR FANNIE AND FREDDIE

Litigating a case in which Fannie and Freddie are the real party in interest is in fact much different than litigating any other case. We’ve known that for many years and it’s even worse these days. It’s terribly ironic that a citizen has a much better chance of negotiating out a deficiency waiver when dealing with a private servicer like Bayview or Ocwen than they do when trying to negotiate with Fannie or Freddie….two entities that are assets owned, in part, by that very citizen by virtue of the Fannie/Freddie conservatorship?

But now here’s where the conspiracy gets even more confounding. Fannie and Freddie are not just government run stoodges, these were private corporations into which private individuals invested billions of their own dollars….and now those private investors are being stiffed. A private party or institutional investor that believed in US housing could buy shares of Fannie/Freddie just like they could buy shares of Apple. And just like any other share of stock, they were entitled to returns on those investments….except that Fannie/Freddie became not like any other corporation when the feds came in and put them into conservatorship. When US housing crashed the feds came in, seized Fannie Freddie and rewrote the rules for private investors….the feds just wiped out the rights of these private investors entirely.

PERRY CAPITAL V. FANNIE AND FREDDIE- THE LAWSUIT THAT LAYS IT BARE

One of the most important lawsuits in foreclosure world is Perry v. Fannie/Freddie. It details how the feds have come in and wiped away clean all private property rights….eliminated the ownership and benefits of stock ownership in these trusted institutions. The suit describes how the feds just swooped in and declared,

“No more dividends or returns for you!”

Just like the soup Nazi from Seinfeld. That’s what the entire lawsuit is about….”The Swipe”, as the fed policy has been come to be know now, based on the fact that the feds come in and swipe away any profits or returns that would be due to these private investors. Here’s how it works:

The Third Amendment enriches the federal government through a self-dealing
pact, and destroys tens of billions of value in the Companies’ preferred stock that is, as a result of
the PSPAs, now junior to the Government Preferred Stock (the “Private Sector Preferred
Stock”). The Third Amendment also destroys value in the Companies’ publicly held common
stock. Fannie Mae and Freddie Mac sold the Private Sector Preferred Stock to private investors
such as community banks and insurance companies before it sold the Government Preferred
Stock to Treasury. Community banks, for example, invested large amounts in the Private Sector
Preferred Stock in no small part because their regulators—which considered such investments to
be low-risk—required banks to hold significantly lower reserves to back up investments in the
Private Sector Preferred Stock, as compared to other investments

and here:



At the time of the Third Amendment, the liquidation preference for the
Government Preferred Stock was approximately $189 billion, with approximately $117 billion
attributable to Fannie Mae and $72 billion attributable to Freddie Mac. According to the
Companies’ financial statements, at the time of the Third Amendment, they had each paid
dividends to Treasury equal to approximately 28% of the liquidation preference of their
respective outstanding Government Preferred Stock (more than $25 billion by Fannie Mae and
more than $20 billion by Freddie Mac).

Fannie Mae is a federally chartered private stockholder-owned corporation
organized and existing under the Federal National Mortgage Act, created to provide
supplemental liquidity to the mortgage market. Freddie Mac is a federally chartered private
stockholder-owned corporation organized and existing under the Federal Home Loan
Corporation Act, created to stabilize the nation’s residential mortgage market and expand
opportunities for homeownership and affordable rental housing. Both Fannie Mae and Freddie
Mac are Government-Sponsored Enterprises, private corporations created by Congress with the
goal of increasing liquidity in the mortgage market. The Companies endeavor to fulfill their
goals by, among other things, purchasing mortgages originated by private banks, and bundling
the mortgages into mortgage-related securities that can be sold to investors. By creating this
secondary mortgage market, Fannie Mae and Freddie Mac increase liquidity for private banks,
allowing them to make additional loans to individuals to purchase homes.
31. Notwithstanding their government pedigree, as of 2007, Fannie Mae and Freddie
Mac were owned by private shareholders. Before 2007, the Companies were consistently
Case 1:13-cv-01025-RCL Document 1 Filed 07/07/13 Page 13 of 3414

profitable. In fact, Fannie Mae had not reported a full-year loss since 1985, and Freddie Mac had
not reported a loss since 1989.
32. In 2007, however, the nation’s mortgage market began a precipitous decline as a
faltering economy led to an increasing number of delinquent and defaulted mortgages. This
decline had a particularly severe effect on the market’s confidence in the financial health of
Fannie Mae and Freddie Mac.

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