2008-10-09ml-implode.com

Note: ML-Implode's existence is once again threatened by the costs of legal defense. Free speech isn't free; please do consider helping us out.

For immediate release.

Opposition To Injunction and Temporary Restraining Order Filed

On October 7, 2008, the Mortgage Lender Implode-O-Meter (ml-implode.com) filed a Memo of Opposition in response to pre-litigation motions by plaintiffs to enjoin the Implode-O-Meter and restrain publication of materials critical of the Grant America Program.

The suit was filed by plaintiffs Global Direct Sales, LLC, and (principals) Christopher Russell and Ryan Hill, and (collaborators) the Penobscot Indian Tribe, on September 19, 2008 in Maryland Federal Court, and the motion for injunction and Temporary Restraining Order (TRO) was filed September 26th.

The suit concerns an investigative article written by analyst Krista Railey, posted on ml-implode.com in its final form on September 15, 2008. The article was critical of the Global Direct Sales scheme, which effectively attains 100% financing -- insured by the FHA -- by making use of an Indian tribe ("sovereign nation") as an intermediary. This arrangement has allowed bans and restrictions on FHA insured seller-funded down payment programs to be circumvented.

Railey's article pointed out that the IRS has called similar seller-funded down-payment systems "scams," and Forbes has called them (with specific reference to Russell's activities) a "racket." Seller-financed FHA lending was completely banned (beginning October 1, 2008) by H.R. 3221, signed into law July 30th, 2008. This ban covers the Grant America system involving Indian Nations. However the tug-of-war continues, e.g., with H.R. 6694 (under legislative consideration) proposing to roll back the ban, subject to credit score and pricing "controls."

As argued in the Implode-O-Meter's Opposition Memo and Railey's Declaration, all points in the article on the Grant America/Penobscot program are well supported by the evidence, including reports, rulings, and statements from government agencies and courts.

The Implode-O-Meter believes that removal of the article and a ban of further discussion of the Grant America Program would be unlawful suppression of free speech. In this case such suppression would be particularly egregious because of the public interest and legislative aspects of the controversy (the public -- that is, taxpayers -- ultimately insure the Grant America Program mortgages).

The Implode-O-Meter argues that such an injunction and prior restraint in fact constitutes a frivolous filing, and violation of Federal court rules.

The Implode-O-Meter also points out that the filing by Russell (et al) contains many other major defects including: ambiguously making reference to a draft of the article which was only briefly posted, failing to point out specifically which remaining statements are defamatory, and failing to demonstrate actual malice in the posting.

The Implode-O-Meter believes that the suit, given the nature of the tactics involved, is meant to intimidate us and raise the costs of our legal defense against an opponent that has made millions engaging in unsound lending activities. The plaintiffs' clearly are willing to resort to "any means necessary" to see us relent and remove an article which is distasteful (and perhaps existentially threatening) to them, and go silent on the issue of the Grant America/Penobscot program and related activities of the principals.

Given the above points, the Mortgage Lender Implode-O-Meter anticipates a speedy denial of the injunction and restraining order. A full copy of the article is available online here.

Relevant documents:



Comments:

michaelblomquist at 14:06 2008-10-09 said:
Time to rally the troops, especially those in Maryland.

Fraud, deception and entitlements created this crisis and more of the same should NOT be tolerated.

As of October 1, 2008 the FHA did away with the seller assisted programs because the program was a huge failure. Unless borrowers had skin in the game they walked; in addition if you can't save 3% for a downpayment how will you be able to handle any unforeseen expenses.

Why are GLOBAL DIRECT SALES, LLC, PENOBSCOT, INDIAN NATION, CHRISTOPHER RUSSELL and RYAN HILL still advertising such a program on October 9, 2008?

http://www.pinfha.org/Programs.html Ironically the third cause of action complains of unfair business practices, but continuing to advertise seller assisted down payments are unfair business practices. Potential borrowers will be captured and directed to the Plaintiff's business affiliates. Can you say bait and switch?

Call, fax, email representative Donna Edwards (Maryland Rep) http://donnaedwards.house.gov/contact.shtml and demand she restrains the Plaintiff for false and deceptive advertising.

Congresswoman Donna Edwards (301) 773-4094 9200 Basil Court Suite 221 Largo, MD 20774

Washington, DC (202) 225-8699 Fax: (202) 225-8714 Email: 4mddistrict@mail.house.gov

You should also contact the following an make sure to include the link http://www.pinfha.org/Programs.html 1)HUD http://www.hud.gov/offices/hsg/sfh/fharesourcectr.cfm (800) 225-5342 hud@custhelp.com

2)FTC http://www.ftc.gov/ftc/contact.shtm Report Violations * Online: Use our secure complaint form. * Phone: Call our toll-free Do Not Call helpline: 1-888-382-1222; TTY: 1-866-290-4236 Permalink

Aristotle at 22:32 2008-10-09 said:
Whenever I read pleadings, I always look at them to see if they are easy to read and understand.

The pleadings for the Defendants pass the readability test.

Now, all of us will just wait and see if they work.

The filing of this lawsuit illustrates the need for the next Congress to pass an Anti-SLAPP statute like California currently has. Permalink

Dollar_guy at 01:11 2008-10-10 said:
Time to rally the troops, especially those in Maryland.

Fraud, deception and entitlements created this crisis and more of the same should NOT be tolerated.

As of October 1, 2008 the FHA did away with the seller assisted programs because the program was a huge failure. Unless borrowers had skin in the game they walked; in addition if you can't save 3% for a downpayment how will you be able to handle any unforeseen expenses.

Why are GLOBAL DIRECT SALES, LLC, PENOBSCOT, INDIAN NATION, CHRISTOPHER RUSSELL and RYAN HILL still advertising such a program on October 9, 2008?

http://www.pinfha.org/Programs.html Ironically the third cause of action complains of unfair business practices, but continuing to advertise seller assisted down payments are unfair business practices. Potential borrowers will be captured and directed to the Plaintiff's business affiliates. Can you say bait and switch?

Call, fax, email representative Donna Edwards (Maryland Rep) http://donnaedwards.house.gov/contact.shtml and demand she restrains the Plaintiff for false and deceptive advertising.

Congresswoman Donna Edwards (301) 773-4094 9200 Basil Court Suite 221 Largo, MD 20774

Washington, DC (202) 225-8699 Fax: (202) 225-8714 Email: 4mddistrict@mail.house.gov

You should also contact the following an make sure to include the link http://www.pinfha.org/Programs.html 1)HUD http://www.hud.gov/offices/hsg/sfh/fharesourcectr.cfm (800) 225-5342 hud@custhelp.com

2)FTC http://www.ftc.gov/ftc/contact.shtm Report Violations * Online: Use our secure complaint form. * Phone: Call our toll-free Do Not Call helpline: 1-888-382-1222; TTY: 1-866-290-4236

I just e-mailed....... Permalink
FHABob at 14:31 2008-10-10 said:
Downpayment assistance programs are still allowed by FHA. It's seller funded programs that are not permitted. So a state funded program (Arizona's Housing Dept's DPA gives up to 10% towards the down, for instance) and progams administered by Indian Tribes or other qualifying entities are just fine.

As for the lawsuit mentioned here, I think that congress will bring back seller funded DPA's very soon. The deal has already been made between the House Dems (who understand how losing SFDPA's hurts minority applicants hardest) and HUD (who lost risk based MIP premiums as part of the reform act). It's just a matter of getting the bill passed. The current crisis has left little time for this matter, but it will get done and either Bush or Obama will sign it. Permalink

poorprocessor at 21:46 2008-10-10 said:
Since Nehemiah has even given up..

Is Nehemiah Funding Gifts After October 1st?

The passage of H.R. 3221 eliminates privately-funded downpayment assistance for millions of working class American's as of October 1, 2008. However, per the specific language of the law, Nehemiah is lawfully able to continue funding DPA gifts for FHA loans where the borrower was credit approved per FHA guidelines on or before September 30, 2008.

Nehemiah will require that the lender certifies that the borrower was credit approved per FHA guidelines on or before September 30, 2008. Nehemiah will continue to fund certified gifts through November 28, 2008, at which time The Nehemiah Program will cease operations.

For gift funds requests with closing/funding dates after September 30, 2008, the FHA lender must certify to Nehemiah that mortgagor credit approval, in accordance with all applicable FHA requirements, was granted by that lender before October 1, and that such credit approval is and will remain in effect through closing.

http://www.getdownpayment.com/updates/

I think not... Permalink

E.S. at 13:02 2008-12-31 said:
Hey Michael Blomquist- Get off of your soapbox- and get your info straight. While defaults and EPD's hurt the industry and had a mild imnpact on the overall economy- credit default swaps is what sank the ship. I don't have time to use monosylabic (look it up dummy) words to explain how and why it occured- but at least stop playing the "subprime, alt-a lenders caused this" card. It's as contrived as your hack email. This site has done a lot of damage to banks, and right or wrong, it will be a target. Free speech forever- but more importantly Mike- intelligent thought first. Oh- one last thing- know what caused this mess? The American public trying to keep up with the neighbors. If you're buying a 900k home and making only 80k in reality- you're an idiot and you deserve what happens to you. If you're buying a 1.5 mil home on a pay option and your mortgage payment is only 4k a month- do some due diligence and figure out that your paying a neg am. Buyer beware! Do you really think Mike that everyone in foreclosure is the victim of a scam or fraud? Are you really that naive and dumb? I'm thinking yes- but suprise me. PS- feel free to make fun of my spelling, etc- I had to type this fast since I have a crazy busy job that pays me the money I made as a subprime AE in 05.

FHABob- right on man- you're a smart cat- I'm being for real. Permalink

Do_the_math at 14:21 2009-01-14 said:
Hey Michael Blomquist- Get off of your soapbox- and get your info straight. While defaults and EPD's hurt the industry and had a mild imnpact on the overall economy- credit default swaps is what sank the ship. I don't have time to use monosylabic (look it up dummy) words to explain how and why it occured- but at least stop playing the "subprime, alt-a lenders caused this" card. It's as contrived as your hack email. This site has done a lot of damage to banks, and right or wrong, it will be a target. Free speech forever- but more importantly Mike- intelligent thought first. Oh- one last thing- know what caused this mess? The American public trying to keep up with the neighbors. If you're buying a 900k home and making only 80k in reality- you're an idiot and you deserve what happens to you. If you're buying a 1.5 mil home on a pay option and your mortgage payment is only 4k a month- do some due diligence and figure out that your paying a neg am. Buyer beware! Do you really think Mike that everyone in foreclosure is the victim of a scam or fraud? Are you really that naive and dumb? I'm thinking yes- but suprise me. PS- feel free to make fun of my spelling, etc- I had to type this fast since I have a crazy busy job that pays me the money I made as a subprime AE in 05.

FHABob- right on man- you're a smart cat- I'm being for real.

Talk about being on a soap box. There are a lot a reasons for the economic unraveling- much of which is employment related- however, there is no doubt that the financial institutions and political corruption are the root of the problem.

Basically any loan program that does not employ sound underwriting criteria or engages in high risk lending is subprime. A FHA loan with a seller funded down payment, large increase to payment without a demonstrated ability to save, high debt ratio, no residual income test, little to no reserves, and no skin in the game and layering of multiple risks is akin to a subprime loan- even if the credit score is in the high 700.

Seller funded DPA is abusive because it circumvents FHA guidelines that prohibit sellers from providing the funds for the down payment. It promotes laundering of down payments from the seller and adds to the fees and costs as SFDPA grants are not free. Consider that loans involving SFDPA have a higher delinquency and EPD rate which absolutely has a negative impact on both the economy and social fabric of the communities that are impacted.

While SFDPA proponents cite a negative impact to minorities from loss of SFDPAs, the proposals for risk based MI under H.R. 6694 would create a barrier for the socioeconomically challenged and minorities that are typically not favored by credit scoring. The credit score requirements could serve as a barrier for borrowers who do not play the "credit game" even when they save their own down payment. According to the infamous Brill report, H.R. 6694 could displace 48% of the borrowers utilizing SFDPA according to their data sampling. I wonder how many of these borrowers were minorities?

While you say that this site has done a lot of damage to banks, you fail to mention the damage that banks did to the economy and country as a whole. The fact that this site calls the banks out on irresponsible lending practices that threaten the solvency our country is the very point of why free speech needs to be protected.

Fact: the lending industry created programs that did not require verification of borrower capacity.

Fact: the lending industry created 100% programs that did not require employment, asset, or income verification.

Fact: the industry generated programs that were more interested in credit scores than borrowers ability to pay.

Fact: the industry has stretched debt ratios into the 50's and 60's.

Fact: the industry generated AVM and other statistical valuation models and waived actual appraisals on several programs including 100% CLTV purchase loans.

Fact: the industry promoted programs that were extremely risky and difficult for consumers to understand and mass-marketed these programs to inappropriate borrowers while offering brokers and loan officers ridiculous incentives.

Fact: the failure of these programs should not have been a surprise to anyone regardless of the ninja math that was used to skew statistics to justify reliance on credit scores rather than common sense underwriting guidelines.

Fact: numerous banks and institutions have failed as a result of their own irresponsible programs and not due to the behavior of consumers as you would like to think.

If a lending institution gives someone who is only making $80k $900k to purchase a home (on a non recourse loan), exactly who is stupid here?

If an institution lends 1.5 mil and only requires a $4000k payment, exactly who is being stupid?

While I will agree that not every borrower is a victim of scam and fraud, I will say that the citizens of the United States are all victims of scam and fraud at the hands of unscrupulous institutions.

There has been limitless fraud and abuse. Arranging a loan which the borrower does not have the resources to repay for the sake of making a buck is abusive.

In the immortal words of Trojan: Fight On, MichaelBlomquist! Permalink

rocketrob at 18:18 2009-02-17 said:
ES: What sank the ship was the fact that the banks could have said "NO" to millions of loans... get YOUR facts straight.

Michael Blomquist, you are a TRUE American hero! Permalink

michaelblomquist at 19:21 2009-02-17 said:
I don't know about being a hero, but I do know there were millions of scum bags that took advantage of their positions to self enrich. Millions who should be disgorged and indicted.

Why on earth so many have not been convicted for their crimes of rampant fraud is beyond me? Inflating a borrowers income with or without their knowledge is no different than doctoring income documents.

Creating a scheme whereby millions could do this with NO over-sight is a complete failure of our government. The more time progresses with no meaningful arrests continues to illustrates the governments' complicity.

E.S. I agree the CDS, CDOs and other derivatives are the real problems, but they were/are derivatives based on home loans. It is well established that at the foundation of the crisis were/are fraudulent loans. Without the promise of huge income streams from mortgages this could have NEVER happened.

E.S. If you find comfort in believing the problem was so big that all of your fraudulent originations did not have an impact on the crisis; go find out where your clients are now. Permalink

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