Foreclosures Slow as Document Flaws Emerge and BOA/BAC Halts Foreclosures

Mr. Maher Soliman is an industry insider and successful non agency mortgage lending and banking professional legitimate insider and hands on expert witness otherwise referred to by peers as a creditable whistle blower.


EXPERIENCE DATING BACK TO 1984 AND SUBPRIME LENDING

Upon graduation trained under John Anderson "TOPA thrift" and was an officer of Bel Air Savings in wholesale and secondary over 8 years. (See UCLA graduate school John Anderson School of management).


EXPERIENCE:

* Selling to SEARS, FORD and Textron, later Continental grain and Cargill Company.
* A CFO and general ledger accountant with as BS in business and pending completion of graduate work for CPA.
* Over 2002-3 workingwith billionaire corporate raider Carl Icahn for sub prime venutre fund (Ex chairman TWA, World Com, GM hostile bid and Marvel).
* Soliman brought to market one of first ever private label security registrations for a non agency MBS MBO offering.
* Five years with various law firms (counsel for Gareeb Pham Los Angeles) on staff.
* Participated as member of management to bring to market REIT under filing of SCA CAIT I, II

Personally sold closed loan assets in bulk totaling $ 25 million in whole loans originations as an aggregator; Hired as CFO and managing Director of Mortgage Guarantee. There was overseeing buying and selling to CitiFinancial Group, Aurora, Bear Sterns, GMAC and BAC; almost all the majors.

ACHIEVEMENTS:

* Director of NLS mortgage Loan Servicing / Warehosuing lending including CitiFinancial Group Warehouse Lending Division


* Hired as Interim Trustee for K Platinum SF CA acting as interim receiver brought in criminal action by DOJ and FBI investigation, (expert’s testimony reconstructing the general ledger);
* personally called to testify before the Grand Jury in People vs. Pinnfold USA, largest lender fraud in California history.
* Other cases include TriStar USA /Consulted Defense post AARP matter brought by the FTC against

First Alliance / Lehman. February 19, 2003

Monte Morin
Times Staff Writer
The long-awaited legal battle between embittered customers of First Alliance Corp. and Lehman Bros., the Wall Street firm that bankrolled the now-defunct Irvine lender, got underway in earnest Tuesday as lawyers traded charges about First Alliance's business practices -- and how much Lehman knew about them. In opening arguments of what is expected to be a three-month trial in federal court in Santa Ana, attorneys for Lehman rebutted charges that First Alliance, with Lehman's backing, had operated a loan "sweatshop" that preyed on the elderly and other vulnerable homeowners, pressuring them to refinance mortgages and hitting them with exorbitant fees


OTHER CAREER ACCOMPLISHMENTS

Testified: Graupner Vs SPS, Wells Fargo VP
National Sales Manager for CFG Mortgage Aggregators, Los Angeles California
VP /Solicitor for Commercial lending transactions under Chairman Steven Gold Center Financial Group Century City California
Executive VP / CFO for PWL Warehouse Lending group later sold to National Cities Bank

Now the lenders embrace the REPO

Ask the Expert: Foreclosure...
By M.Soliman

We continue to conduct foreclosureinfosearch (LOL) into how lenders legitimize their actions versus uncovering the fraud. What I have seen or attest to know, so shall I witness and that is what I publish.

• A chain of title after the fact show the foreclosing parties Deutsche Bank as the buyer and the foreclosed party as the seller on the date of the alleged auction.

• In trial a major lenders counsel questions a broker on the witness stand for 30 minutes before being asked to sit down by the presiding judge. The Homeowner as Plaintiff won.

• Upon testifying being asked by how the court can be certain the lender was not ripped off.

• A trustee’s sale where a county crier comes out and calls out the property address and asks for bids and while bids are made the person runs back into his office and locks the door.

• Seeing a borrowers transfer the lenders interest out of the lenders name and the court refusing to allow a lender to transfer title back to itself.

A loan sold by the lender, a member bank, is conditioned by repurchase, precedent to these offers. It’s a fact the practices and procedures in foreclosure are tainted and deceptive where one can determine the lenders actions are wrongful and act against the consumers and investors best interest.

The challenge I believe is reverse engineering and our findings point to an opaque or non transparent condition affecting beneficiary’s recovery as a failsafe that has emerged from late 1999. My views stem from efforts by the mortgage REIT’s over the years. It’s all about a curious set of maneuvering over time involving interesting interpretations on the repurchase requirements. Known also as a Repo it is whereupon the financial instrument makes one more trip back to the original transferee

In 1985 the subprime market was dominated by Sears, Textron and Ford. It was a time when the GSE minimum was $ 128,500 (believe it or not). I'm not a CPA or a Tax attorney but have worked side by side in writing these private placements. They do not work! Tax attorneys I have worked with are the basis for my claims and offer the best effort to attack a wrongful foreclosure. In banking and in securitization, from a lending perspective, you learn the following golden rule –“if you err or cause mistake (borrower loan) you risk being removed from the collateral”.

None the less, why are loans sold in to a registration are fast to identify MERS which removes the lender from the collateral?

While at Mortgage Guarantee, I served as a CFO and Director, and I recall the monthly grind of aggregating aged subprime receivables into larger pools for sale to investors. We transferred the assets and servicing to various capital markets participants still around today. From 1997 through 2002 I witnessed firsthand various minor and overlooked practices I deemed deceptive and non complaint procedures for conducting business in instances of a default. It was at a time MERS was being introduced and when things were done to ensure quality control solely for delivery purposes. Risk management only seeks to avoid the repurchase requirements subsequent t selling your pools. Q/C was for selling assets and for avoiding the REPO in those instances of delinquency and default.

Now the lenders embrace the REPO, have you noticed? In offering advice I often tell attorneys to isolate the failure to execute a REPO provision for loans alleged to be sold. I continue to challenge and cite a REPO in a true sale contract where it allows the lender and seller to come back and foreclose. In a Repo, “parties” alleged to have control of the assets precedent to foreclosure but verifiably only regain possession subsequent to the liquidation by trustee or sheriff’s sale.

So who brought the foreclosure?

In order to explain the FSP, the court must decipher certain published rules found under FAS 140. The rules set forth in FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities contain the criteria that restrict "sale accounting" on transferred financial assets.

After serving five years as a CFO and director for Mortgage Guarantee I left and began to move towards work as an analyst and consultant. My concerns were as follows:

Sale accounting" on transferred financial assets is especially problematic to lenders when there is a concurrent purchase agreement. Repurchase agreements” (repos) are subject to "loan accounting" instead of sale accounting. Sale accounting for this exercise is a prohibition against any foreclosure brought by the lender. When referring to a Repurchase agreements” (repos) and "loan accounting" we determine where lenders may foreclose but upon suffering the consequences of recognition.

The markets in my opinion were pushed beyond capacity and headed towards a flattening out and retraction. None the less, my focus was on trying to understand the likelihood for triggering “recognition. It is where an entity as a party to a transfer was relieved of all of its debts or liabilities owed for the money it uses to fund or purchase loans. If the loan production is unencumbered by any debt the assets can be contributed into a new business segment called a Special Purpose Entity or Trust Fund.

I know and witnessed firsthand the "blank assignments" “blank endorsements” and rationale for circumventing the Purchase and Sale requirements at a borrowers expense. According to one of the leading accounting authorities (someone I come to rely on for verifying GAAP accounting violations) on rules set forth under GAAP ad FASB “…the difference in accounting treatments is as follows:

Assets a removed off the balance sheet under a sale or in accounting. By comparison, under loan accounting, the asset stays on the balance sheet, so the credit offset to recognition of the proceeds is to debt. So most significantly, sale accounting is off-balance sheeting financing, and loan accounting is on-balance sheet financing.

Lenders are faced with the problem of making good on the cash flow they promised the purchaser of the loans, the investors. Investors look to the lender and not the loans themselves to be repaid. So the lenders recourse is actually a short fall for the cash flow they pay and do not receive from a delinquent borrower. In 1997 and 2007 I was employed by law firms as a sector business consultant who was intimate with the sub-prime markets and whole loan delivery apparatus. The cost of securitizing is advanced by Wall Street partners, who buddy up with banks under a structured finance arrangement. That cost to bring a registration to fruition is a lucrative income producing segment of the investment banking world.

A modification or forbearance plan is seen as appropriate assistance provided under state and federal promises of mandatory relief assistance. However, parties cannot modify, adjust, offer relief and or negotiate anything for a loan the lender has sold.”

Now ask yourself, the following when you make you defense or pursue and action against the lender?

• Who are you suing, or who is committing the unlawful acts?

• If the cost to securitize costs the amount of a first year’s cash flow, from what do the investors get paid?

• What does a bonefide sale have to do with your rights to a meaningful workout?

• Why do I subscribe to the theory “leave securitization” alone, and don’t go there in your defense?

• How are the offers for a workout subject to tortious interference with the actual facts and right to recourse?

Not sure? Tough situation to be in!

One concern I have is the timing issuing requiring the bank to stand behind is obligations not only to the investors who purchase collateralized stock but also for the cost of bringing the registration to market. What ensues in a downturn market is the lender riding out the statutory term for honoring its recourse provisions. This is evident with a lenders willingness to provide borrowers time upon which a forbearance agreement is replaced by pure avoidance.

The lender seems to just go way for a period of time while mortgage interest accrues further against borrowers waiting for a resolution. Prepayment speed in mortgage-backed securities is the estimated rate at which mortgage borrowers will pay off the mortgages that underlie an MBS. The equivalent of the coupon on a mortgage-backed security is a percentage of the interest and principal paid on the mortgages backing the security. A risk associated with mortgage-backed securities is that too many homeowners will pay off their mortgages with too much prepayment speed, depriving the holders of the MBS from future coupon payments.

Repurchasing costs are often times prohibitive upon a consumer defaulting. The REPO provides a lender the right to repurchase and at a cost that diminishes over time. Therefore time is often in the sellers favor and to a consumers disadvantage under the registrations Buy sell repurchase requirements. Your ability to contemplate a realistic and intelligent solution including deed in lieu is circumvented by a scheme to reduce the lenders liability to the purchaser of the subject loan.

In attempting to circumvent the best efforts of investors and/or regulators of financial institutions, accounting for a loan as debt is adverse compared to sale accounting which is required to survive consumer debtor litigation. Lenders therefore, even upon their demise, are willing to construct an 'arrangement' that can slip and slide under rule SFAS 140's solely for appearing to comply with sale accounting.

M.Soliman
Expert.witness@live.com

Foreclosure Accounting Rules Changes

Q—when a loan becomes delinquent or defaults, the servicer typically attempts to restructure or “work out” the loan in lieu of foreclosing on the collateral. Is the discretion permitted a servicer to work out a loan consistent with the limited powers permitted a qualifying SPE?
A—Yes. A servicer may have discretion in restructuring or working out a loanas long as that discretion is significantly limited and the parameters of thatdiscretion are fully described in the legal documents that established thequalifying SPE or that created the beneficial interests in the transferred assets.

However, the servicer may not initiate new lending to the borrower through thequalifying SPE as a result of the workout. (Refer to paragraph 185 of

Statement 140.) Examples of activities that are not new lending are:

• Payments made by a servicer after a debtor fails to pay them (for
example, to pay delinquent property taxes, to ensure required property
and casualty insurance coverage is maintained, and so forth) that are
contemplated in the lending agreement prior to its transfer to the
qualifying SPE.

• Advances of funds by servicers (whether required or discretionary) tofacilitate timely payments to the beneficial interest holders, after whichthe servicer has a priority right to recoup its advances from future cashinflows. That activity does not represent new lending activity to theborrower because it does not increase the indebtedness of the borrower.

• Extension of further credit by a transferor in a credit card securitizationor revolving-period securitization and the subsequent transfer of theresulting loan by the transferor to qualifying SPE, pursuant to agreements129 in the legal documents that established the qualifying SPE. That is not anew lending activity by a qualifying SPE because the loan is originated by the transferor, not through the qualifying SPE. [Added 9/01.]

28C. [Deleted 6/09 because Statement 140, as amended by Statement 166, removes the concept of a qualifying special-purpose entity.]

Q—Is the decision to initiate foreclosure activities a servicing activity or adisposal of a loan?

A—It is a servicing activity. Foreclosure is a means by which the servicerattempts to collect principal and interest due on a loan. It is not a loan disposal.

A servicer may have discretion in determining when to initiate foreclosure

proceedings as long as that discretion is significantly limited and the parametersof that discretion are fully described in the legal documents that established thequalifying SPE or that created the beneficial interests in the transferred assets.

[Added 9/01.]

28D. [Deleted 6/09 because Statement 140, as amended by Statement 166, removesthe concept of a qualifying special-purpose entity.]

Q—May a servicer of assets held by a qualifying SPE have some discretion in
managing and disposing of foreclosed assets?

A—Yes. A servicer may have discretion to dispose of foreclosed assets that ittemporarily holds (as long as that discretion is significantly limited and theparameters of that discretion are fully described in the legal documents thatestablished the qualifying SPE or that created the beneficial interests in thetransferred assets).However, certain activities that could be undertaken by a servicer managingforeclosed assets are inconsistent with the discretion permitted a qualifying SPEbecause they are inconsistent with the provisions of paragraphs 35 and 37 of
Statement 140. Judgment needs to be applied to determine whether a specific
activity is inconsistent with those provisions.

29. [Deleted 6/09 because Statement 140, as amended by Statement 166, removes theconcept of a qualifying special-purpose entity.]

Q—Can an SPE that is permitted to hold title to nonfinancial assets temporarily asa result of foreclosing on financial assets be considered qualifying?130

A—Yes. Holding servicing rights to financial assets that it holds is a permittedactivity for qualifying SPEs under paragraph 35(c)(5) (as interpreted by paragraph

41). Paragraph 61 indicates that servicing includes executing foreclosure ifnecessary. Therefore, an SPE that holds title to nonfinancial assets temporarily asa result of executing foreclosure on financial assets in connection with servicingcan be considered qualifying. [Refer to Question 28A.] [Revised 9/01.]

Limits on What a Qualifying SPE May Hold30. [Deleted 6/09 because Statement 140, as amended by Statement 166, removes the concept of a qualifying special-purpose entity.]

Q—Can an SPE that holds an investment accounted for under the equity method
be qualifying?

A—Generally not. Entities account for an investment in accordance with theequitymethod if they have the ability to exercise significant influence over thatinvestment as described by paragraph 17 of APB Opinion No. 18, The EquityMethod of Accounting for Investments in Common Stock. Qualifying SPEs arelimited to holding passive investments in financial assets. Paragraph 39 ofStatement 140 notes that “investments are not passive if through them . . . the SPE

or any related entity . . . is able to exercise control or significant influence . . .”However, that limitation does not apply to certain investmentsthat are accounted for (for example, under EITF Topic No. D-46, “Accounting forLimited Partnership Investments”) in accordance with the equity method, eventhough the investor does not have the ability to exercise significant influence.Refer to Question 41.

Unilateral Rights Held by the Transferor Q—Credit card securitizations often include a “removal-of-accounts” provision

(ROAP) that permits the seller, under certain conditions and with trustee approval,to withdraw receivables from the pool of securitized receivables.
Does a transferor’s right to remove receivables from a credit card securitization precludeaccounting for a transfer as a sale?

A—It depends on the rights that the transferor has under the ROAP. A ROAP thatdoes not allow the transferor to unilaterally reclaim specific financial assets fromthe qualifying SPE transferee, as described in paragraphs 35(d)(3), 51−50–54, and87, and 88, do not preclude sale accounting. Paragraphs 86 and 88 provides131examples of ROAPs that would allow the transferor to unilaterally reclaim specifictransferred financial assets and preclude sale accounting under paragraph 9(c).

Refer to Question 49. [Revised 6/09.]

By Maher Soliman
Expert.witness@live.com




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