Monday, November 22, 2010

The Fraud at Bank of America Keeps on Coming
Countrywide Held on to Notes it Should Have Transferred.

According to an article in American Banker (subscription required, so I'm linking to Max Gardner's blog entry discussing it), a Countrywide Finance employee testified that Countrywide (since taken over by Bank of America) would routinely hold on to mortgage backed notes that were supposed to have been transferred in loan securitizations. In my post of November 16, I talked about how proper transfer of the note is crucial in a foreclosure case. If the borrower pays somebody other than the holder of the note, the borrower may be liable to pay twice. This danger is compounded in mortgage securitizations. Unless the notes (endorsed in blank) are transferred to the trustee of the mortgage security, the same loans could be bundled into multiples of mortgage securities. It doesn't take a genius to figure out that if this practice is widespread, confidence in mortgage securities could plummet.

It's clear to me that the corporate culture of dishonesty that permeated Countrywide has infected Bank of America to the core. It's time for Bank of America to be placed under receivership. Interestingly, the loan in question in this case was subject to a lost note affidavit in a previous proceeding. All of a sudden the note showed up again. That brings us to our marginally relevant video of the day, Baby, Now that I've Found You (I can't let you go) by the Foundations. What I found is interesting about this song is that almost everybody is familiar with the Foundations' other hit, Build Me Up Buttercup, and they forget about this song even though this was a top 10 hit in the US. I guess we'll have to wait for There's Something About Mary II.

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