Marc Dann moved to protect the borrowers and got a special paragraph in the loan sale document when New Century attempted to do the same thing American Home is doing, selling of assets without any liabilities. On American Home Mortgage Docket #12 stated clearly the sale intentions of American Home Mortgage to sell assets free and clear of any liabilities. When this was filed and Paula Rush read it, she was horrified at the language. After repeated calls to the Trustee and petitioning the court a special paragraph was added to the sale agreement, and 363(o) which protects borrowers rights. Docket #1060. The inference one should draw is absent of Ms. Rush’s intervention this protection would not have been added. The trustee was not doing his job.

"Ellington joins a growing contingent of hedge funds, buyout firms, Wall Street banks and other investors that have tried to scoop up loans and other assets of subprime lenders on the cheap."

"You're hoping obviously that you'll be able to cure the defects of the loans. You might be able to modify the terms with borrowers."

(YEAH RIGHT) By September, borrowers were petitioning Carrington and Ellington Management about bad treatment. Did anyone follow up to see if they even attempted to work with borrowers, or if they just took profits by foreclosing and collecting MI insurance.

The hedge funds are targeting delinquent or poorly written loans, a market JMP Securities LLC analyst Steve DeLaney says may double this year to $150 billion as a record number of borrowers fall behind on payments. Bad bets on mortgages have discouraged bankers from bidding, leaving industry veterans like Vranos to snap up home loans for as little as 30 cents on the dollar.

``There are times in the past when I wouldn't have gone up against a Wall Street firm,'' said Tim Campbell, a managing partner at Steel Mountain Capital Management LLC, the Lakewood, Colorado-based buyer of delinquent loans that's backed by hedge fund Silver Point Capital LP. Now, in the market for distressed loans, ``all is fair. I'll get some and they'll get some.''

Bear Stearns also began liquidating at least $3.8 billion of holdings in one of its own hedge funds because of money- losing bets on subprime bonds.

``There are still ways for us to make money in this,'' said Thomas Marano, head of mortgages at Bear Stearns, pointing to opportunities for loan financings and securitizations where both securities firms and hedge funds can profit. ``I kind of like having them here, because I always have the option to partner with them.''

``As soon as there's an opportunity, people like ourselves will find ways to take advantage,'' said Mani Sadeghi, managing partner of New York-based Equifin Capital Partners, a private- equity firm that invests in financial-services companies.

Equifin teamed with New York-based hedge fund Och-Ziff Capital Management in January to invest $125 million in mortgages and related assets. They also bought a home-loan billing and collections unit from San Diego-based Accredited Home Lenders Holding Co.

Hedge funds are mostly private and unregulated pools of capital where managers can buy or sell any assets, participating substantially in the profits of the money invested.

New York-based Fortress Investment Group LLC's Newcastle Investment Corp. bought $1.3 billion of loans this year from an undisclosed seller. Earlier this month, Chicago-based Citadel Investment Group LLC acquired Brea, California-based ResMae Mortgage Corp. through a bankruptcy auction after bidding 98.5 cents on the dollar for the company's remaining $160 million of loans.

Sometimes loans can't be salvaged. Franklin Credit Management Corp., a New York-based company specializing in distressed-mortgage investing, posted a first-quarter loss of $1.95 million, citing higher-than-expected default rates on loans bought in 2004 and lower-than-anticipated values on foreclosed properties.

Wringing returns from bad loans may get tougher as two dozen state lawmakers consider more than 70 bills to protect homeowners, according to an analysis of data provided by the National Conference of State Legislatures in Washington.

``Most people will tell you there's no such thing as a bad loan, just a bad price,'' said Thomas McCarthy, co-head of loan sales at Carlton Group Ltd., a New York-based real estate investment-banking firm.

Some hedge fund managers learned the trade by sorting through the $500 billion of loans sold by the government-backed Resolution Trust Corp. in the early 1990s as part of the bailout of failed U.S. thrifts.

Douglas Goodman, one of Sadeghi's Equifin partners, is a former First Boston Corp. investment banker who once invested in loans purchased from RTC.

``Some got lucky and some were better than others,'' said Alexandria, Virginia-based consultant Bert Ely, who wrote a paper comparing the RTC era with the Great Depression. ``Those who made a lot of money talked about it and those who didn't probably kept their mouths shut.''

 For now, bids from hedge funds may be helping Wall Street by preventing a deeper swoon, said Steve Moyer, a director at Santa Monica, California-based Tennenbaum Capital Partners LLC, which has about $7 billion under management.

Some hedge funds may be willing to outbid investment banks for mortgages because they plan to increase profit by bundling repaired loans into securities themselves, a direct challenge to firms like Bear Stearns and Lehman. Hedge funds are already asking bond ratings services about the procedure, said Dan Tegen, a Standard & Poor's analyst who rates scratch-and-dent securities.

``We're actually seeing a lot more smaller parties interested in doing one, maybe two deals a year,'' Tegen said. ``There's going to be more competition coming into this product.''

Transactions backed by scratch-and-dent loans climbed to 40 last year from nine in 2002, according to data compiled by Fitch Ratings. Securities firms began making money by pooling those mortgages into bonds early in this decade, once they figured out how to mix them with enough better-performing mortgages to make investors comfortable with the risk, said Michele Patterson, a New York-based analyst for Fitch.

The biggest underwriters of such bonds include Bear Stearns, Lehman and Morgan Stanley. Others are Calabasas, California-based Countrywide, the biggest U.S. mortgage lender, and C-Bass, a New York-based joint venture of mortgage-insurers MGIC Investment Corp. and Radian Group Inc.

``These are big boys and they're going to defend themselves as best they can,'' said Brad Hintz, an analyst in New York at Sanford C. Bernstein & Co.

Wall Street firms including New York-based Merrill Lynch & Co. and Morgan Stanley spent at least $2.5 billion last year buying home lenders to assure a supply of mortgages to package into bonds. Securities firms got about $27.4 billion worldwide in revenue last year from underwriting, trading and holding bonds backed by mortgages and other assets, according to a June 4 report by Kian Abouhossein, a London-based analyst at JPMorgan Chase & Co.

 Debt Collection

``In this latest wave, these are opportunistic purchasers,'' buying mortgage lenders and collections businesses for little or no premium, said Jeff Levine of Washington-based Milestone Advisors LLC, which advises mortgage companies on mergers and acquisitions.

When Ellington bought loans from Fremont General Corp. in April, it also signed a letter of intent to buy the subprime lender's residential-mortgage business, including employees responsible for collecting on the loans. Terms weren't disclosed.

.Peeking Inside

Having employees to oversee mortgage collections makes it easier for owners of the loans to decide whether to delay a foreclosure for homeowners who might be able to resume payments. Servicers also may get more intimate knowledge of the property values underlying individual loans.

Hedge funds also may find themselves ensnared in the patchwork of federal and state regulations governing mortgage lending, especially on loans that may have been touched by fraud, said Louis Pizante, CEO of Irvine, California-based Mavent Inc., which offers an automated system that checks loans to see if they comply with lending laws.

 Mortgage Insurance and Credit Default Swaps– Profits in Foreclosure

Most people would say when asked, my loan is not insured. I don’t pay PMI little did they know, it was. Heavily insured with mortgage insurance, credit default swaps, and multiple credit enhancements. The lenders in the criminally brilliant plan insured the loans they knew were bad risk to begin with. So when the anticipated implosion came and the borrower buckled under the onerous terms, no problem, they were covered. The caveat, the insurers are now catching on to the deceptions and realizing they were duped too. Some are refusing to pay claims. They say the fraud in loan originations excuses them from paying claims. So it seems that lenders were committing insurance fraud. They created loans they knew would go bad, insured them heavily and then wanted to collect on the insurance. Let the games begin.

We all know how the dog and pony show is progressing nicely, however just like the previous dog and pony feel good show where everyone kept saying the mess was contained, this show is quickly turning into a horror show. Rich oil investors are buying into our biggest banks. The foreclosure crisis is epidemic. The fed is pumping 41 billion into the economy. Countrywide is borrowing 50 billion from the Fed’s GSE. How long will everyone buy that lenders are working with borrowers? The feel good PR is everywhere. EMC has the Mod Squad, Senator Dodd has his Statement of Principles, and heavyweights like Wells Fargo and Countrywide assure everyone they are helping borrowers. The dog and pony show is about desperation to save face with their own investors, hiding and not disclosing the exposure to MBS. Upper level investors like Bank of America, Wells Fargo, Citigroup, and Deutsche Bank who are heavily invested in American Home Mortgage. No one wants to come clean. I laugh when I read everyday another lender, bank, or Wall Street firm, finally reveals they will take big write-downs. Not one Lender who went under gave any advance notice of the impending doom. Even funnier, on the way out they all borrowed millions and billions, and someone lent it to them. American Home, just months before bankruptcy raised over 90 million dollars in a stock offering. Now Fannie Mae is offering a 500 million dollar stock offering and people will buy into it, proving " the greater fool theory is alive and well."

 THE GAME OF HIDE AND SEEK - True owner of the Note and Master Servicers

Who does own the note? It’s called if you don’t know, you can’t pin the rap on me. It’s the master servicer who is the fiduciary and has a contractual obligation to the trust and all that invest in it. Securitized trust have a Master Servicer, an Indenture Trustee, and a Securities Administrator. So who owns the note? Maybe the originator still owns the note? Does the big pie called the trust own the note? The note that has been sliced and diced into little bits and scattered throughout the pie? Can a pie own your loan? Apparently no one in particular may own your loan, and considering the liabilities of the hot potato loans, maybe no one wants to claim ownership, that is until it’s time to foreclose and steal the property. It seems, as was just revealed in an OHIO court, the originator may still own the loan. Actually I have proof of this with American Home Mortgage. They actually still own the mortgages and failed to transfer them to the trust. They only pledged the cash flow or payments from the loans. So what does that mean? They screwed the investors in the trust too. They own nothing? Sad but true, they committed securities fraud and foreclosure fraud on the court.

Then the lenders and investors face the pesky problem of the Federal government threatening to mandate loan modifications or worse halt all foreclosures. Then another problem keeps them up at night, all those lawsuits and potential for lawsuits. All these fraudulent bad loans carry an extended three year right of rescission, and the potential for mounds of damages, including the very worrisome "punitives." If you were a lender in this climate would you want to face a jury in the town or city you just destroyed with foreclosures. Better yet as the Plaintiff’s lawyer lays out all the laws which the lender broke, the jury will be thinking, hey that happened to me too. The fraud in origination’s was rampant. The banks and Wall Street firms try to hide the stress they’re under, but assignee liability rings in their heads. Considering all of this, and the latest tool available to borrowers against lenders, demand to know the true owners of the notes and the master servicer, it is all about to implode. The incestuous relationships between ALL the banks and lenders, the complex financing structures are about to take them all down.

Lehman Brothers is held liable for "aiding and abetting fraud" in the loans they underwrote for FAMCO.

A Federal Judge gives summary judgement in a Class Action to the Andrews saying Chevy Chase Bank will have to rescind all their Pay Option Arms.

Securities Class actions filed against American Home Mortgage and underwriter Citibank for a stock offering just months before bankruptcy. Deloitte and Touche approved the books.

Government settles claims for $800,000 with American Home under False Claims Act for attempting to collect insurance on government insured loans that were illegally represented.

TRIAD loan insurer refuses to pay claims on American Home loans they say were fraudulently underwritten. Bank of America refused to pay a credit default swap citing the same reason.

This nightmare is orchestrated by a growing number of well-known, corrupt and ruthless mortgage servicers who manufacture defaults on performing loans to then flood the account with illegal fees strategically designed to STEAL the borrower's equity -- and ultimately the property. In addition, the borrower's credit is destroyed to prevent them from refinancing with another lender. When the property owner runs out of resources to fight back, their property is then stolen. Investigations verify this scheme is deliberate, and as one attorney put it: 'criminally brilliant. This illegal business model disregards the law and even gets the legal system to help out.

The biggest investment most Americans will make is now the target of one of the country's largest financial scams and labeled: "The Perfect Crime." When fully exposed, this will make Enron look like a parking ticket.

How ironic the bottomfeeder who stepped into the Enron atrocity, Wilbur Ross, has now decided he will step in to the American Home Mortgage mess. He seems to have an affinity for companies who are inherently based on Fraud. Enron sent shock waves through the investment community. Right now we are seeing the tremors on Wall Street and the Tsunami is brewing. The biggest investment firms and Banks in the country have a larger stake in this mess then they are revealing. The stability of the value of our homes will affect the economy as a whole. Foreclosed and bankrupt people will not be paying taxes and any of their credit card debt. These families will need all kinds of social services. They have been ruined financially. Retirement accounts were risked as millions of baby boomers reach retirement age and the SS system is already stressed. Seniors are losing their homes and will enter nursing homes earlier and depend on Medicare to pay as they will be broke. When all the fallout is realized, everyone will be shocked, that is except me.

President Bush makes this statement.

It is time to reaffirm the basic principles and rules that make capitalism work truthful books and honest people, and well-enforced laws against fraud and corruption. President George W. Bush, July 9, 2002 "As we establish with ever increasing certainty the prospect that corporate criminals will lose both their fortunes and their liberty, we will have gone a long way to restoring the integrity of the market and the confidence of the nation."

Did Albert Gonzales restore this so-called integrity?

Just for the record I think he should read what he wrote. Walk the walk and not talk the talk.

Bush appointed Roland Arnall as Ambassador to the Netherlands while the justice department was investigating his company, Ameriquest for predatory lending. At the same time Ameriquest agreed to a huge fine and to reform it's practices the founder and CEO was being rewarded as an Ambassador. ABSURD. Then consider President Bush's statement. So many individual cases are still pending they have all been consolidated to one Federal Judge Aspen in Illinois.

Former Deputy Attorney General Thompson, explaining the goal of the President's Corporate Fraud Task Force. "Home ownership is one of our most cherished dreams, and I will not tolerate City Mortgage* or any other fraudulent operation exploiting those aspirations for dishonest gain." - Texas Attorney General Greg Abbott (*no affiliation to Plano-based City Mortgage Group, Citibank or CitiMortgage)

I applaud Texas Attorney General Greg Abbott for going after this company, but Texas has some of the worst laws in the Nation for foreclosure. They can foreclose in as little as 27 days with no right of redemption. For the record CitiMortgage and Citibank has been in trouble too.

FEDERAL RESERVE HOEPA MEETING

At the Federal Reserve Board HOEPA meeting in June, I attempt to communicate the financial markets are in serious trouble. I’m dismissed as an alarmist and just weeks later the implosion of two Bear Stearns hedge funds are the beginning of the crisis.

Pacing all day and ready to scream as panelist rehash tired old themes, finally in the afternoon session, I get my 3 minutes to speak. I look Federal Reserve Board Governor Randall Kroszner in the eye and ask this question, Do you get paid $19,794 for a few hours work? He looked a little confused, hesitated for a moment and then replied, uh no. Ms. Rush then said, that’s what my broker earned for putting me in a bad loan. The look on his face was priceless. Totally bewildered. Totally clueless. This was the price tag on my head and how I ended up in a predatory loan.

It was six lawyers in court, and another firm who did background review of everything, a few paralegals, against two borrowers, pro se. Lawyers who make anywhere from $250 to $700 an hour, backed up by full staffs to prepare for the hearing. The US Trustee, had filed a motion in support of our Motions and the Debtor’s weren’t taking any chances. They flew in witnesses from the American Home Mortgage Servicing unit. Before the hearing they complied with the request to provide disclosure of documents, a key request. They had hoped this would appease us to go away. But important information was still missing. The true owner of the note. They refused to provide it. Even after I presented Judge Sontchi with the TILA regulation 1641(f) assignee liability which states clearly that the servicer must give this information, the Debtor’s attorney’s declined and actually told the judge they did not have to comply.

It’s not over as the FTC is investigating Ms. Rush complaint for noncompliance. So they think they won, but actually they only dug a deeper hole by not complying and testifying to their noncompliance in a Federal Court. And by lying under oath, to a Federal Judge. Ms. Rush didn’t expect to get the Consumer Privacy Ombudsman, or a Trustee or Examiner, and as expected the Judge sided with the Debtors. However I’m proud of what I did accomplish. It’s all on the record. Now if any breaches of consumer information happen ( bound to happen) the Court and the Trustee will be held liable for not taking this issue seriously. Now the non compliance under 1641f) is on the record. Now a special paragraph was added to a sale agreement enforcing 363(o) consumer protections that were added to the BACPA in 2005. Now, the trustee and the Judge know someone is watching what’s going on.

I found reading the bankruptcy code, the trustee in his capacity can sue and be sued. Information I gathered in the court hearing is proving to be powerful to understand the structure of the securitized trust and the mortgage insurance on those trusts. As far as the Trustee or Examiner, the Judge did deny it without prejudice so it can be revisited which I’m sure it will be by the FBI when they figure out the abuses were systemic. I’m trying to show borrowers they can come forward and assert rights. I’m researching and working with reporters who are investigating all the LLC’s and non-debtor SPE American Home and the principals operated under. I’m sharing research and information with top people in various Washington agencies, Senators, Congressman, lawyers at the Federal Reserve Board, HUD, Fannie Mae, mortgage and pool insurers, Attorney Generals, and lawyers across the country.

The same court, and the same Trustee, allowed New Century to sell off all of their loans for less than 30 cents on the dollar, free and clear of liabilities to Ellington Management, who then turned around and enforced and foreclosed for 100 cents on the dollar. These loans also may have had 30% or more of insurance attached. No way I was allowing that to happen with American Home. So on docket #1060 after the original APA was filed in Docket #12, the trustee finally insisted the 363(o) protective paragraph was added. The really sad part is the Debtor’s attorney at my hearing on Oct. 31, actually stated they usually beat the Trustee to the punch and add the protections needed for borrowers. What a blatant lie. From docket #12 to docket #1060 no one was adding that to any sale agreement. It was only after a very heated phone call to the Trustee that it magically appeared. And the Debtors attorney fought against even an ombudsman saying it would cost too much money and it was not necessary. The trustee had it all covered. There is one trustee and an army of attorney’s on the other side. How can any trustee keep up and cover everything.