Foreclosure Defense Myths That People Want To Keep Believing Thanks To Pretender Savior Neil Garfield
I am constantly debunking a plethora of foreclosure defense myths from potential clients. Finance bloggers like myself have written over the past decade that these bizarre and inaccurate claims don’t work. Yet, they seem to persist thanks to pretender savior Neil Garfield and his Living Lies website.
Garfield likes to make distressed homeowners think they can play Ben Matlock and walk away with a debt-free house. Garfield Groupies have mostly delusional entitled suburbanites who think they are entitled to a free house. They are trying to figure out an angle to make it happen. Then blame their lender or “Corrupt judges when it doesn’t happen.
Your chances of scoring a free house are 1:150 if you are following the gobbledegook from Neil Garfield’s Living Lies website. Garfield has no experience in mortgage lending nor is he a “Wall Street Insider” like he claims. Finance journalists on Wall Street hadn’t heard of him until he began peddling miracles with his version of Brother Love’s Traveling Salvation Show.
Yes, he is a lawyer. However, prior to jumping on the foreclosure bandwagon, Garfield was a single practitioner doing wills and trusts for little old ladies in the Florida panhandle. He was not the Wall Street insider he claims.
Both of these guys have had their theories laughed at and debunked by courts across the United States. Yet, I still get phone calls from people believing their horse shit.
7 Debunked Mortgage Foreclosure Myths That Won’t Die Thanks To Garfield Groupies
Myth #1: Mortgages are sliced up. Then put into separate tranches
Loans NEVER in multiple tranches. Loans are NEVER in tranches. NEVER nor are they sold to other investors. See Myth 2.
Myth #2: Mortgages are broken into pieces. Then sold to multiple investors
This myth always baffled me. What made even baffling was that people were so ignorant of basic stocks and bonds that they actually believed it. Mortgage loans are not sliced up like lunch meat. Then sold at a deli by the pound.
Mortgage-Backed Securities Trusts buy pools of mortgage loans. They then sell or pre-sell bonds to investors to invest in the MBS Trust. The bond investors make their money by the interest dividends on the performance of the mortgage loans in the pool. It works similar to when you buy stock in a company.
Myth #3: Mortgages are sold to multiple trusts
Securitized loans are only found in one trust. The question of whether the loan was transferred to the trust legally is a different one. The homeowner’s mortgage payment on any given loan is only going into one trust.
People posting blogs on Living Lies and other websites about loans floating around from trust to trust are nonsense. The blog says someone looked it up and found duplicate loans in multiple trusts. This is the result of some ignorant homeowners with no knowledge of mortgage lending. Then doing research hoping to score a free house.
What they found were preliminary loan schedules for different securitizations. However, that’s neither unusual nor is it a problem. Preliminary loan schedules are only used to show a representative example of the types of loans that will be in the trust when it closes.
The person should have checked the closing loan schedules on the trusts, not the preliminary ones. The closing loan schedules would have found NO DUPLICATES.
Myth #4: Investor Mortgage Insurance & Securitization Deficiencies
The Garfield Groupies still promote this wacky myth. The argument claims that investors of a securitized mortgage were paid off by the insurance they have on their investment. Therefore, the homeowner no longer owes the money they borrowed with the mortgage. This is 100% false. State and federal courts across the United States ruled this claim is hogwash for two reasons.
The homeowner signed an acknowledgment document known as a RESPA disclosure. This disclosure allows the holder of the debt to sell the note and mortgage. The disclosure also allows the servicer to sell their servicing rights.
Once the loan transfers, the homeowner is no longer a party to what goes on between the seller and the buyer of the mortgage debt. Federal and state courts have ruled repeatedly deficiencies in securitization can not be used as an affirmative defense. Any problems with securitization are between the seller and the buyer of the note. In other words, the homeowner is not a party in that part of the transaction.
This same logic also applies to homeowners who want to use securitization deficiencies as an affirmative defense. So don’t waste thousands of dollars on securitization reviews from companies like CFLA.
Myth #5: Mortgage Insurance Paid Off My Loan
There’s no insurance that pays off your loan when you default on it except FHA loans. PMI or MIP insurance only covers any deficiencies incurred by the lender. So, if you owe $150,000 on your mortgage and the house sells post-foreclosure for $120,000, the lender would get $30,000 to cover the deficiency.
The insurance mortgage activists and Garfield Groupies refer to are only available on conventional loans (Fannie and Freddie) and it would only cover 8-30% of the “equity slice” or downpayment made by the borrower. So, if you put 20% down, and it’s a Fannie loan, then there MIGHT have been insurance that would have paid 8-30% of the 20%.
However, as Martin Andelman has pointed out in his blog multiple times, “even that doesn’t matter because the mono-line insurers (AMBAC, Radian, etc.) all went bankrupt and defaulted on their claims. And no loan level insurance was available on sub-prime or ALT-A loans.”
Myth #6 Credit Default Swaps Paid Off My Mortgage. So I Don’t Have To Pay It
Self-proclaimed Wall Street Insider Neil Garfield started this foreclosure defense myth. Garfield groupies and people with no knowledge of the financial system spread this myth. Credit default swaps NEVER pay off loans that default. Those that bought CDS did very well, but they didn’t own the loans in the corresponding bonds.
This also applies to the FDIC’s loss-sharing program.
The FDIC’s loss-sharing agreements only apply to PORTFOLIO loans and NOT to securitized loans. Lenders only get reimbursed when the home is sold as an REO and SOLD.
The FDIC never paid off the loan. No matter what Garfield or idiot lawyer Jeff Barnes claims.
Myth #7 Servicer Advances Paid My Loan
Servicer advances are amounts advanced to trusts to cover payments on loans that default pursuant to the terms of the Pooling & Servicing Agreements. The amounts are an “ADVANCE” not a payment.
Servicer advances have NOTHING to do with you owing your mortgage payments. It also doesn’t mean that you’re not in default.
The mortgage servicer only gets repaid when the loan begins performing again. Mortgage servicers are also only paid when the home is liquidated as an REO from the proceeds from the sale. The purpose of servicer advances is to stabilize the trust’s cash flow to protect the bottom tranches.
THOSE ARE ALL FACTS. PERIOD. They are absolutely correct and if anyone tells you otherwise, contact me. I’ll get on a conference call immediately and straighten whoever it is out. Assuming they’ll actually get on the call which they won’t.