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(added June 10, 2011 –excerpt from http://t.co/AxGdvTt )

by Gregory M. Lemelson

Is it ethical for the American homeowner whose mortgage has been securitized to default, even If they are not financially distressed? First, consider it is unlikely that marketable, fee simple, insurable title can be obtained as a result of fulfilling the obligations of the related promissory note.  On the contrary the titles to some 60 million homes in America are badly clouded. Secondly, encouraging investment in an asset class that has been artificially inflated, then deliberately destroying the price of the asset, as part of a separate profit making scheme is unethical, and any agreement based on this type of fraud is grounds to consider the original debt instrument used in the agreement null and void.  Fortunately these grounds are unnecessary, as increasingly US courts are ruling that these mortgages are already invalid for numerous other reasons. On November 12th, 2010 we published our article “Tattoos, Pyramid Schemes and Social Justice” in which we advocated that homeowners consider suspending their mortgage payments.  In the article we enumerated reasons why we felt this action is both ethical and prudent.   On January 11th, 2011 we published our articles “Ibanez– Denying the Antecedent, Suppressing the Evidence and one big fat Red Herring” which outlined the legal realities of securitized mortgages, and the impact of the landmark Ibanez decision on homeowners, particularly in Massachusetts.  We affirmed our conviction that Massachusetts homeowners with securitized mortgages might want to consider suspending their mortgage payment, and place instead their funds into an escrow account. Both articles were widely published and read, and in both cases we received also some negative feedback, although strangely, only from foreclosure defence attorneys.  Their sentiment was universal “we would never advise a client to stop paying their mortgage” – we marvelled.  When challenged on this point, or presented with the evidence, none could provide any reasoning for this advice that they would so confidently given their clients, nor could they identify a fallacy in the arguments we had made, or a fact we had misrepresented. Perhaps they recognized the intrinsic problem in responding simply “because that is what people do, and we should take it for granted that because people do it, it is correct.”  Such inductive reasoning at the corporate level can not be defended as anything more than “group think“. In such a case, we suspect fear, shame and guilt are more powerful drivers than reason. Further, such thinking serves only to exaggerate the anxiety that stems from the perceived consequences of default.  This is not a coincidence, or something which is “hard-wired” into the human person.  These are emotional controls that have been cultivated over many decades that encourage borrowers and in particular homeowners (those in possession of real property), to follow unnatural social norms, even at the expense of critical thinking and reason.  Thus the context in which such financial obligations exist go almost entirely unexamined. Financial and ethical considerations in which default is not only feasable but perhaps even a moral imperative are ignored.  In sharp contrast are the standards lenders within the same culture abide in their quest to maximize profits.  Needless to say, this asymmetrical ethic, leads to the possibility of abuse, and widespread economic injustice.  In our society, it is now the case that debtors, and in particular home owners are akin to indentured servants.  The severity of the condition is directly and inversely proportionate to the misdeeds of the financial system which gave rise to it. Ultimately we were forced to conclude, that those who possess too much fear and too little confidence are acting in fact on the basis of emotion, even though the prospective outcome is not what they would otherwise choose.  A spirited response in reason is what is necessary to ensure that such emotions do not distort rational thought and overcome it. We hope the above articles, along with the following serves as a practical, financial, and above all ethical framework for understanding the risks involved in continuing to make mortgage payments on securitized loans and their derivatives in light of what is known today about the serious defects in chain of title, and the abuses that took place by many in the securitization process. We do not make such suggestions lightly. A catastrophe of “epic proportions” Despite our concern over the seriousness of the advice given, we never wavered in our conviction that we were “right”, even if unpopular. On May 25th, 2011 a report was released based on a Massachusetts investigation that identified fraudulent documents clouding the titles to Massachusetts properties.  The report cited the example of homeowners who were already in some stage of default for financial reasons, and discussed the issue of fraudulent conveyances as a result of perjury.  It would be an error to present this information only as a means to stave off foreclosure for those who no longer have choices.  Perjury is the fruit of a system built on many layers of fraud that diseased the entire securitization process.  However, the important aspect of the report was not the examples of those who are financially distressed, but rather, (and correctly) the implications to those who are neither in foreclosure, nor financially distressed. Although it took only 8 words to say what took us just about 6,000 in our last article to say, and although it came about 7 months after our initial article, the unmistakable words “…the ownership of your house is in question” finally had emerged in main stream media. The problem is hardly unique to Massachusetts. We also hope that the foreclosure defence attorney’s (or more importantly their clients) who so strongly criticized our thinking on the matter, will listen to the words of John O’Brien, Register, Southern Essex District Registry of Deeds – his proclamation does not leave much room for interpretation; “This is a catastrophe of epic proportions.” The report is limited in scope as it cites only one example of a name used (namely “Linda Green”) to commit perjury and cloud thousands of titles to Massachusetts homes. However, there exists far more names other than “Linda Green” which have been used to commit perjury – the math is not difficult. Nonetheless, the report barely touches the tip of the proverbial Iceberg, for the issue of perjury pales in comparison to the fundamental and irreparable harm done in the securitization process, which universally affects securitized mortgages nationwide – a fact that will be increasingly revealed. For example a review of what has been said on the Ibanez matter makes any investigation into mere perjury wholly unnecessary. In the November 2010 article we wrote: “Americans have a duty to ask critical questions about the operations of their financial institutions, and if evidence has been presented that a deal was made, but not everyone was playing by the rules, than those deals need to be looked at again. It is not good enough any longer to say, if it doesn’t affect“me” than, I’m not getting involved. We have a duty to one another as Americans, and more importantly as human beings, to care about truth and justice. What’s more, apathy, so long as we are not affected, is a short lived consolation. Ultimately, this crisis will affect everyone …”

Mr. O’Brien goes on to say of Massachusetts homeowners who have not necessarily defaulted on their mortgages, but whose mortgage documents have been perjured:

“They may not be able to sell their home, and they may not be able to refinance their home.  And                  that is a major, major problem.”

Here is another excerpt taken from the November article: “It has been made to appear as if those who have fallen on hard times are a matter of “incidental” inequalities in an otherwise procedurally just system. However, it is precisely the opposite which is true. Our financial institutions have created deliberate inequalities, through the use of procedurally unjust systems.” Marie McDonnell, a Forensic Mortgage Analyst provided the following comments in the same May report . . . **ENTIRE article @ http://www.amvona.com/blog/economics/14031-on-the-ethics-of-mortgage-loan-default.html

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1/12/11 *see this important link>> Consumers Should Take More Active Roles Concerning Mortgage and Foreclosure Frauds

AND see:  Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers

=============================================================================              revisions below were made on 1/10/11 Reference: “Emerging Battleground on Mortgage Abuses: Foreclosure  Mills” (After I was repeated inexplicably unable to submit my comment on nakedcapitalism, I decided to create this post, and elaborate on the vast topic of FORECLOSURE FRAUD.) Among the things stated in the very well-written OpEd by Yves Smith was this:

I’ve said that the efforts to clean up mortgage abuses will not have gone far enough until we see some foreclosure mill attorneys disbarred, and better yet fined and/or put in jail. And that is harder than it ought to be.

One of the frustrating issues in trying to rein in fraud is the way that essential accessories, namely, accounting firms and law firms, are close to beyond the reach of the law. For instance, if a law firm clearly permitted perjury or engaged in document fabrication that led someone to have their house foreclosed upon when they were actually current on their mortgage, the wronged homeowner could not sue the law firm. It could only sue the party that was the plaintiff in the suit (presumably a trust). Perversely, the only parties to a transaction that can sue banks and accountants are their clients, even when those firms were integral actors in scams. As we described in ECONNED:

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