Mr Cooper Group Inc (COOP)

[tularay]

Fellow WAMUERS, I need help understanding something. Based on the below 'Loans' excerpt from a 'source file', how can WAMU be insolvent or bankrupt based on a bank run and supposed mortgage loan collapse if they followed the same mortgage loan/lending practices as everyone else and therefore LOST nothing when the borrower was unable to repay the mortgage loan?

In other words, ALL OF THE WAMU mortgages produced NO LOSS to WAMU because they never offered equitable consideration for the loan (just like any other bank). How much does that add up to? Would this help our cause or would this only be useful during a trial, or would it be detrimental?
http://www.bizjournals.com/seattle/blog/2010/11/wamu-must-return-foreclosed-home.html

‘Loans’
A deposit created through lending is a debt that has to be paid on demand of the depositor, just the same as the debt arising from a customer's deposit of checks or currency in the bank. Of course they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. – Federal Reserve Bank, Chicago, Modern Money Mechanics, p. 6

When you entered into a loan contract with a bank, you signed a note or contract promising to pay back the bank and you agreed to provide collateral which the bank could seize if you did not repay the loan. This contract supposedly qualified you to receive the bank’s money. The bank either sells or hypothecates your promissory note before you sign the final papers relative to the ‘loan’. In essence the bank is receiving the proceeds of the sale or hypothecation of your note before it purchases or accepts your note as a loan to itself.

Banks are prohibited from lending their ‘own money’ from their own assets, or from other depositors. So from where did the $$$ come? The contract we signed (our promissory note) was converted into a ‘negotiable instrument’ by the bank and became an asset on the bank’s accounting books. According to the UCC 1-201(24) and 3-104, it was our signature on the note which made it $$$.

Our promissory note (‘money’) was taken, recorded as an asset of the bank, and sold by the bank for cash without ‘equal valuable consideration’ given to us for our note. The bank gave us a deposit slip as a receipt for the money we gave them, just as the bank would normally provide when we make a deposit to the bank. It then created an account at the bank which would contain this $$$ which we just created. A check on this account was issued with our signature and this account is the source of funds behind the cheque which we received as a ‘loan’.

The bank risked none of its own assets in the so-called ‘loan’ to us; rather it used our note to pay the seller, in order to raise an asset for itself, and also used the face value of our note as ‘principal’ which it claims it ‘lent’ us and against which it charged interest. Consideration on the part of the bank is non-existent so the bank has nothing to lose. It can not possibly sustain a loss. Since consideration is essential to an enforceable contract and the note was obtained from us via fraud, the entire transaction/ contract is fraudulent.

In the Ashley case of 1988, fraud on the part of the bank was proven because the defendant revealed, “the banks told me they had ‘money’ to lend and they didn’t.” Mortgage contracts are written in such a way to appear as if the bank lent us funds before they received our promissory note/ mortgage contract so that the bank can use it as a receipt which they can sell. The contract reads, “For a loan I have received...”, but, you haven’t received it yet. So in fact, we signed and gave the mortgage contract/note to the bank prior to their giving us the funds. So, the application for the loan created the funds (it has our signature on it) and the note (with our signature) covered the funds to ‘repay’ the loan. Again, constructive fraud.