Archive | May, 2009

Exponential Usury On Wall Street

24 May

By Edward W. Miller, MD

Thou hast taken usury and increase, and thou hast greedily gained of thy neighbors by extortion, and thou hast forgotten me saith the Lord.” – Ezekiel 22:12 (King James Version)

And Jesus entered the temple of God and drove out all who sold and bought in the temple and turned the tables of the money changers and the seats of those who sold pigeons. He said to them, ‘It is written, ‘My house show be called a house of prayer’; but you make it a den of robbers.'” -Matthew 21: 12

AS for our economy, the ongoing failure of millions of “sub-prime” mortgages with 9 million threatened foreclosures across the country, the increasing reported lack of “affordable housing”, along with a consumer debt of $2.52 trillion, and a major economic recession stretching across the industrial world comes as no surprise to those who have watched Congress, again and again surrender to Wall Street lobbying over the past half century. The first major slide downhill took place on June 23rd, 1947, when a newly elected Republican Congress passed the Taft-Hartley Act over president Truman’s veto. The results of this assault on American labor appeared gradually over the years. Beginning in 1972, statistics show that wages were already falling below the costs of living for the American middle class.

The present huge pyramid of debt, both public and private was made possible by the weakening of labor’s political input plus thirty years of Congress’ relentless deregulation of our financial markets, culminating, during the Clinton Administration, in the 1999 repeal of the Glass-Steagall Act, which Act had prohibited banks from dealing in high-risk securities. In effect, Washington supposed regulators had become passive enablers to Wall Street’s financial binge drinkers.

As columnist Robert Scheer pointed out (March 12th SF Chronicle): “The Clinton-backed Gramm-Leach-Baily Act of 1999 called the “Financial Services Modernization Act,” permitted banks, stock brokers, and insurance companies to merge and was exacerbated by Bush’s appointment of rapacious corporate foxes to watch the corporate hen house.” They will take care of their own…Their action was made possible only by the federal government’s using our tax dollars to pick up the bad debt of the banks.”

usury and the table funded loan

24 May

The California Usury Law and the Non-Exempt Lender
With the proliferation of exemptions from the California Usury Law, it is surprising to find lenders who are not exempt. However, they still exist. And they still take the risk of unintentionally making an interest-free loan, with limited possibility of acceleration, and with all free or under-priced warrants, equity kickers or other consideration for the loan being voided. A recent case underscores the risk of not having an exemption.
In WRI Opportunity Loans II LLC v. Cooper, 2007 DJDAR 12930 (Aug. 23, 2007), the lender made a loan to the borrower who planned to build residential townhouses and condominiums in West Hollywood. The loan was guaranteed by the two principals of the borrower. In addition to the regular interest on the loan (a spread over Bank of America’s reference rate), the loan documents entitled the lender to receive additional interest according to a fixed schedule if other “contingencies” were to occur. For instance, the lender was to receive a percentage of the sales price of any units sold and was also to receive a specified sum in case the project was not completed. The borrower filed for bankruptcy, and the lender sued the guarantors. The guarantors responded with the defense of usury.
Because the guarantors were individuals, the usury exemption under California Corporations Code Section 25118 was not available. Also, the lender was not a licensed lender in California and did not have available one of the many exemptions from the California Usury Law applicable to various categories of licensed lenders. Hence, the lender first tried to shoehorn itself into the “interest contingency rule” under California common law. Under that rule, interest that exceeds the legal maximum is not usurious when its payment is “subject to a contingency so that the lender’s profit is wholly or partially put in hazard,” provided “the parties are contracting in good faith and without intent to avoid the statute against usury.” Under this common law rule, the non-contingent part of the interest must be materially less than the amount of interest that could have been charged at the highest permissible rate.
Unfortunately for the lender, the “contingencies” in the Cooper case were not true contingencies. No matter what happened to the project, except in some unlikely scenarios, the lender was entitled to an amount of additional interest that would have put the lender over the usury limit.
The lender then tried to shoehorn itself into the statutory exemption for shared appreciation loans under California Civil Code Sections 1917 through 1917.006. That statute permits additional interest to be collected, regardless of the usury law, from “a share of (1) the appreciation in the value of the security property, (2) rents and profits attributable to the subject property, or (3) both.” However, that is not how this lender’s additional interest was calculated, and the court found that the statutory exemption for shared appreciation loans was not applicable.
Finally, the lender argued that guarantors had waived the usury defense through the broad suretyship waivers in the guaranty. The court held that, because the usury law voided the interest provision, the suretyship waivers did not apply to the usury defense.
Moral
Investment or private equity funds that lend money frequently overlook or downplay the need for appropriate licenses and usury exemptions. The Cooper case underscores the continuing need to observe the restrictions imposed upon lenders by the usury law. While many lenders rely upon the transactional exemption in California Corporations Code Section 25118, that exemption is not applicable if any of the borrowers or guarantors is an individual, a revocable trust having one or more individuals as trustors, or a partnership in which, at the time of issuance of the debt, one or more individuals are general partners.

President Signs Mortgage Bills

20 May

Carrie Bay | 05.20.09

President Barack Obama signed two housing bills into law on Wednesday afternoon – one that provides additional foreclosure relief and a second that targets mortgage fraud and other criminal activity related to federal assistance programs. The Helping Families Save Their Home Act will make vital changes to the Hope for Homeowners (H4H) program to encourage servicers to employ the plan as a means to help underwater homeowners under the administration’s Making Home Affordable program.

The bill also includes a servicer safe haven to provide lenders with liability protections from investors for the mortgage modifications they make. It provides for an additional $130 million to fund foreclosure prevention efforts, such as counseling and education, and establishes foreclosure protections for renters. In addition, the new law more than triples the FDIC’s line of credit with the Treasury to $100 billion – a measure intended to rebuild the agency’s depleted insurance fund while keeping lenders’ depository insurance fees at a minimum.

The act also permanently raises the insurance cap on individual bank accounts from $100,000 to $250,000.

The Fraud Enforcement and Recovery Act (FERA) grants new resources to help fight financial fraud and address the rapid rise in mortgage and foreclosure rescue scams. The legislation provides nearly $500 million for the investigation and prosecution of such criminal activity – a move that John A. Courson, president and CEO of the Mortgage Bankers Association (MBA) called “imperative in protecting vulnerable consumers as well as protecting the integrity of our housing finance system.” Of the funds provided under FERA, the majority will be allocated to the hiring of fraud prosecutors and investigators at the Justice Department and to increasing the number of Federal Bureau of Investigation (FBI) agents devoted to mortgage fraud.

The money will also be used to expand the staff of the U.S. Attorney’s office and the Justice Department’s criminal, civil, and tax divisions. In addition, the legislation, for the first time, expands federal fraud statutes to also apply to independent mortgage companies and mortgage brokers that are not regulated or insured by the government.

Using the countrywide complaint in your own case

9 May

Using the countrywide complaint in your own casecounrtrywidelanderscomplaintand countrywidelanders and word versionsCountrywide attorney general Complaint Form and templetsCountrywide Complaint Form

Coalition sues lenders

9 May

Coalition Sues lenders

They are to give options to foreclosure 2923.5

9 May
(a) (1) A mortgagee, trustee, beneficiary, or authorized
agent may not file a notice of default pursuant to Section 2924 until
30 days after contact is made as required by paragraph (2) or 30
days after satisfying the due diligence requirements as described in
subdivision (g).
   (2) A mortgagee, beneficiary, or authorized agent shall contact
the borrower in person (and this does not mean agent for the foreclosure company) or by telephone in order to assess the
borrower's financial situation and explore options for the borrower
to avoid foreclosure. During the initial contact, the mortgagee,
beneficiary, or authorized agent shall advise the borrower that he or
she has the right to request a subsequent meeting and, if requested,
the mortgagee, beneficiary, or authorized agent shall schedule the
meeting to occur within 14 days. The assessment of the borrower's
financial situation and discussion of options may occur during the
first contact, or at the subsequent meeting scheduled for that
purpose. In either case, the borrower shall be provided the toll-free
telephone number made available by the United States Department of
Housing and Urban Development (HUD) to find a HUD-certified housing
counseling agency. Any meeting may occur telephonically.
   (b) A notice of default filed pursuant to Section 2924 shall
include a declaration from the mortgagee, beneficiary, or authorized
agent that it has contacted the borrower, tried with due diligence to
contact the borrower as required by this section, or the borrower
has surrendered the property to the mortgagee, trustee, beneficiary,
or authorized agent.
   (c) If a mortgagee, trustee, beneficiary, or authorized agent had
already filed the notice of default prior to the enactment of this
section and did not subsequently file a notice of rescission, then
the mortgagee, trustee, beneficiary, or authorized agent shall, as
part of the notice of sale filed pursuant to Section 2924f, include a
declaration that either:
   (1) States that the borrower was contacted to assess the borrower'
s financial situation and to explore options for the borrower to
avoid foreclosure.
   (2) Lists the efforts made, if any, to contact the borrower in the
event no contact was made.
   (d) A mortgagee's, beneficiary's, or authorized agent's loss
mitigation personnel may participate by telephone during any contact
required by this section.
   (e) For purposes of this section, a "borrower" shall include a
mortgagor or trustor.
   (f) A borrower may designate a HUD-certified housing counseling
agency, attorney, or other advisor to discuss with the mortgagee,
beneficiary, or authorized agent, on the borrower's behalf, options
for the borrower to avoid foreclosure. That contact made at the
direction of the borrower shall satisfy the contact requirements of
paragraph (2) of subdivision (a). Any loan modification or workout
plan offered at the meeting by the mortgagee, beneficiary, or
authorized agent is subject to approval by the borrower.
   (g) A notice of default may be filed pursuant to Section 2924 when
a mortgagee, beneficiary, or authorized agent has not contacted a
borrower as required by paragraph (2) of subdivision (a) provided
that the failure to contact the borrower occurred despite the due
diligence of the mortgagee, beneficiary, or authorized agent. For
purposes of this section, "due diligence" shall require and mean all
of the following:
   (1) A mortgagee, beneficiary, or authorized agent shall first
attempt to contact a borrower by sending a first-class letter that
includes the toll-free telephone number made available by HUD to find
a HUD-certified housing counseling agency.
   (2) (A) After the letter has been sent, the mortgagee,
beneficiary, or authorized agent shall attempt to contact the
borrower by telephone at least three times at different hours and on
different days.  Telephone calls shall be made to the primary
telephone number on file.
   (B) A mortgagee, beneficiary, or authorized agent may attempt to
contact a borrower using an automated system to dial borrowers,
provided that, if the telephone call is answered, the call is
connected to a live representative of the mortgagee, beneficiary, or
authorized agent.
   (C) A mortgagee, beneficiary, or authorized agent satisfies the
telephone contact requirements of this paragraph if it determines,
after attempting contact pursuant to this paragraph, that the
borrower's primary telephone number and secondary telephone number or
numbers on file, if any, have been disconnected.
   (3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgagee, beneficiary, or authorized agent shall then send a
certified letter, with return receipt requested.
   (4) The mortgagee, beneficiary, or authorized agent shall provide
a means for the borrower to contact it in a timely manner, including
a toll-free telephone number that will provide access to a live
representative during business hours.
   (5) The mortgagee, beneficiary, or authorized agent has posted a
prominent link on the homepage of its Internet Web site, if any, to
the following information:
   (A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
   (B) A list of financial documents borrowers should collect and be
prepared to present to the mortgagee, beneficiary, or authorized
agent when discussing options for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgagee, beneficiary,
or authorized agent.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
   (h) Subdivisions (a), (c), and (g) shall not apply if any of the
following occurs:
   (1) The borrower has surrendered the property as evidenced by
either a letter confirming the surrender or delivery of the keys to
the property to the mortgagee, trustee, beneficiary, or authorized
agent.
   (2) The borrower has contracted with an organization, person, or
entity whose primary business is advising people who have decided to
leave their homes on how to extend the foreclosure process and avoid
their contractual obligations to mortgagees or beneficiaries.
   (3) The borrower has filed for bankruptcy, and the proceedings
have not been finalized.
   (i) This section shall apply only to loans made from January 1,
2003, to December 31, 2007, inclusive, that are secured by
residential real property and are for owner-occupied residences. For
purposes of this subdivision, "owner-occupied" means that the
residence is the principal residence of the borrower.
  (j) This section shall remain in effect only until January 1, 2013,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2013, deletes or extends that da

Here is our latest winning Mod

8 May

Tim McCandless – Dodder 5 8 09

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