Home › Forums › General › EHTrust/EHT Topics and Creative Real Estate Financing › Chase Bank is requesting to see a settlement offer!
December 18, 2011 at 4:48 am #6875
I am a trust co-beneficiary with a patient and well prepared homeowner on a property in Santa Maria, California. The trust was created about a year ago with the express purpose of offering the homeowner’s alleged lender, Chase Bank, an Equity Share in our trust in exchange for a revised monthly payment and perhaps a reduction on the principal balance of the loan amount.
Chase showed no interest in the Equity Share offer. Months passed with no progress. The decision was made to secure a Mortgage Securitization Report to determine if Chase (the alleged lender now turned loan servicer) was a real party of interest. Based on the evidence within the report, we surmised that there is enough information in the pooling and servicing agreement to believe that Chase may not be a real party of interest.
We advised Chase of our opinion regarding the report and gave them a second opportunity to enter our Equity Share Trust and there was neither an acceptance nor a refusal. I wrote them a follow up letter and advised them that because of their failure to answer our invitation to share equity, we deemed it was necessary to challenge their standing as a real party of interest through a Quiet Title Action. I did however, extend one last equity share proposal to Chase.
Today, after many months, I finally received a letter from Chase asking us to send them a settlement proposal. (Incidentally, Chase apologized for not giving the kind of service that was acceptable to the homeowner!) This is a major milestone. Our intent now is to follow through with the filing of a quiet title action to let Chase know that we are prepared to litigate if necessary.
We are hoping our strategy will compel Chase to accept a settlement in lieu of litigation with little to no resistance. In fact, we hope to extol the virtues of a mutually beneficial equity share with the expectation that they will be the first of many banks to embrace this method of settlement and actively promote equity sharing over their current short sale, foreclosure and bank owned property portfolio techniques. If successful, the homeowner will receive acceptable terms and I will allow Chase to acquire my asset, a beneficiary interest in the equity share trust for an agreed sum.
I will redact the Chase response and post it as a follow up to this message. Many months have passed with little to report but patience has proven to be a virtue. With a gentle push (quiet title lawsuit), I believe we are now heading in a more promising direction!December 18, 2011 at 5:47 pm #34010
Dave, this is great news and looks to be leading to a successful transaction.
I’d be interested to know:
Was this a Notice of Default or foreclosure case?
How was the Mortgage Securitization Report and Trust funded?
Were monthly mortgage payments continued by the homeowner as an RB?
Or, have the payments been placed in an escrow with notification to Chase?
Are you or have you filed the Quiet Title action Pro se?
ThanksDecember 19, 2011 at 3:31 pm #34011
My goal is certainly to help create a reliable protocol for this process and get to the point of institutionalizing equity sharing trusts between homeowners, lenders, investors and housing professionals everywhere to enjoy. I want to hold off answering questions about specific details until I can organize a meeting with my friends Bill Gatten, Scott Moyes and Bob Pless. Meanwhile, we are beta testing all of this in a controlled environment through NARS OCS (see Scott if you want in).
I am very hopeful about the prospects of introducing a new Wall Street commodity (a Beneficiary Interest in a Trust or BIT) to compete against a mortgage. But it will take some time and careful planning, and speaking to the right people is a smart thing to do. With the participation and input of seasoned vets, we will all have the best chance for success.December 20, 2011 at 6:45 pm #34012
The HOPES concept appears to be a great solution. I understand and agree that the administrative process requires careful thought and time, plus several minds thinking about it to assure it will work as intended.
Here are a few points I’ve considered without clear answers as yet.
My first concern, and it always has been, is we must figure a way for the producer to get paid quickly, and fairly. This has been a real problem with all these deferred programs.
As an alternative, Shared Appreciation Mortgages already exist and it seems reasonable to me that the lenders can adopt this approach – some I believe have already considered it.
My perception is that the HOPES primary target is a homeowner who is in some sort of financial difficulty and who is looking primarily for lower payments.
It applies of course also, to those of us underwater but who are able to make their current mortgage payments, however these folks are viewed a lot differently by the lenders – that is they still have a decent credit score and the loan is a performing one. Thus, there is no real or very little incentive by the lender to participate in any equity share arrangement. Come hell or high water most of these homeowners will keep making those payments because they have been conditioned to do so. The homeowner has to become delinquent to get the lenders attention, in my opinion.
If we view the underwater situation, that is the loan amount exceeding the current market less closing costs, this situation was created by the financial services industry with the complete cooperation of the pretender lenders, so one can fairly conclude, it is they who caused the problem. Most homeowners were simply trying to purchase a home and were caught up in the lender frenzy and rapid price appreciation, only to see it all collapse around them. My point here is the moral responsibility rests primarily upon the lenders and as such they should not benefit at the direct cost to the homeowner. See my earlier posting on that topic.December 21, 2011 at 12:52 am #34013
Most homeowners were simply trying to purchase a home and were caught up in the lender frenzy and rapid price appreciation, only to see it all collapse around them. My point here is the moral responsibility rests primarily upon the lenders and as such they should not benefit at the direct cost to the homeowner. See my earlier posting on that topic.
Morality v. Money
We have a dilemma wherein I believe a Bill Gatten style EHT Equity Share may be the only effective and least painful cure. Let me explain.
First, I agree that Wall Street and associates colluded to commit fraud with mortgage securitization. This is a given. The victim is the homeowner regardless of whether or not they truly qualified or whether they are current with payments or in default. Wall Street and their henchmen used teaser loans to lure their prey by the millions, but the fine print on the loan had a reset provision built in that would take a homeowner’s starting interest rate from 4% up to 16% within a few years. A sure recipe for default. So, why would Wall Street want the consumer to fail? Money. Since they have no morals, only a taste for money, they then encouraged soon to be duped companies like AIG to put Credit Default Swaps on the market as a “hedge” against their Mortgage Backed Securities (MBS’ with AAA ratings mind you). Wall Street then opened their own little casino and the house bet against the very loans they created by purchasing CDS’. It gets worse. Why bet once against a bad loan when you can bet 30 times against that same loan (30 CDS’ on one house)?
When the homeowner’s loans went into default as planned by Wall Street, these crooks’ CDS insurance policies were redeemed in full, but not once; 30 times the loan amount! How’s that for a safe bet? This is how Wall Street execs got billions of dollars in bonuses. When AIG’s money ran dry and pushed them on the brink of death, (they never suspected that AAA bonds would ever collapse like they did), the Fed told Congress to approve the infamous bailout of AIG and institutional banks because they were too big to fail, right? I simplified this a bit for the purposes of illustration, but you get my point. Fraud heaped upon fraud. So, where does the Equity Sharing Trust come in and why does a Shared Appreciation Mortgage fail? I’ll tell you.
A SAM is based on the premise that the lender is a true party of interest and dictates terms to the homeowner much like a loan mod. In most cases it actually sounds good to the homeowner and they would feel foolish rejecting a SAM. The lender is certainly quick to change the docs to avoid future prosecution if the homeowner ever investigates and discovers fraud. But even if the SAM works for both parties, it lacks a very important ingredient; the ability to monetize residential real estate on Wall Street as a security instrument. A SAM is still a mortgage and it is now proven to be impossible to make mortgages work on Wall Street as securities. You saw what happened when they tried that with Mortgage Backed Securities. This has always been Wall Street’s unfulfilled dream of dreams; somehow turning residential realty into personalty and selling it on the open market. An Equity Sharing Trust solves that while giving home occupants continued control of the physical asset.
An Equity Sharing Trust or EST(EHT between a homeowner and lender) combined with a Calculated Share Assignment or CSA could be the glue that holds everything together as we all try to salvage real estate and our economy. Here’s what I mean. When a homeowner and a pretender lender agree to an EST, what they are really creating is a NARS Equity Holding Trust with a CSA. They transfer actual legal and equitable title in realty to a trustee. This then creates a Beneficiary Interest in a Trust (BIT). This is personalty backed by realty. A SAM can’t do this. As I said, it’s still a mortgage, so it will have lesser value. Understand, that the CSA is designed to be an algorythmic formula for indexing the value of BITs to the penny in the Commodities and Exchange market. A BIT, in my opinion, would instantly become the security of choice globally because of its value due to the continual demand for safe and affordable occupancy.
Now, for all of this to become a reality, a couple of cataclysmic events have to occur. First, the Credit Default Swap has to go the way of the dinosaur. This is already happening little by little. The government is slowly informing the banks that they can no longer cover the obligations owed by companies like AIG. The American taxpayer is weary of footing the bill. They are trying to wean Wall Street off of easy money. The banks are arguing that they will not be able to pay their investors which will have a ripple down effect. What they really mean is that they will be vulnerable to getting sued by those that they defrauded. So the dinosaurs are eating each other into extinction (litigation). Watch for more high stakes players go into bankruptcy in the coming months. Economists say that if this feeding frenzy continues, America and its economy will collapse and send the world into hyperinflation (depression). This is probably true. However, if real estate ownership can be stabilized, this will begin the recovery process. Everything is tied to real estate. But banks haven’t quite figured out how to make equity sharing work or haven’t yet recognized its value in today’s market. They are still somehow sold on mortgages.
Second, the banks have to be forced into submission until they are able to see the merits of something like equity sharing. Unlike a SAM, HOPES, for instance, requires the homeowner to challenge pretender lender status as a true party of interest with a mortgage securitization investigation preparatory to a suit to quiet title. But a HOPES homeowner also offers an Equity Share in lieu of litigation. Now the bank has to decide whether they want to consider an equity share proposal or a lawsuit. If the bank rejects equity sharing and were to go to court and lose at trial for quiet title and again in appeal, they would allow the floodgates of litigation hell to gape open. So what are their options if things get to that point? Settlement. Immediate settlement. It wouldn’t take very long before considering equity sharing as the first option. Eventually,this could become a mere practicality. After that, when their BIT’s start performing, a full transformation toward Equity Sharing Trusts (EHT”s) has begun.
Is this a stretch? Perhaps. But what are the alternatives? ……………………………. I thought so.
(Note: I know there will be those that cannot justify under any circumstances, negotiating with the enemy, much less rewarding them for their notorious acts. I feel your pain. But I must error in favor of being pragmatic. Litigation is painful, long and expensive. And very few professionals know how to litigate quiet title and securitization fraud effectively. So, in dealing with the banks, how would you take them into custody; with a swat team or a hostage negotiator? I choose the latter….at least for now.)
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