US and global pension plans, savings plans, and retirement funds face chronic funding shortfalls that are disastrous for their members. Fraud that was central to the sale of 'toxic loan securities' in 2008 is worse, and continues to lay ruin to investors, small borrowers, small businesses, and communities across America.

CMBS, one of the toxic securities, are Commercial Mortgage Backed Securities, a $1.7 trillion market related to the better-known residential mortgage backed securities, RMBS. Yes THOSE RMBS responsible for the Wells Fargo massive fine last week. CMBS loan sale fraud works pretty much the same way, lenders lie about credit information to increase the loan amount, sell the for profit; and then hide losses by misreporting, often until the loan maturity in 10 years.

Banks (and non banks) regularly sell loans secured by commercial real estate assets to CMBS trusts established by themselves. Of course the loan sale fraud is blatantly ignored and misreported by servicers (that include the bank). They do this to create a valuable option for the servicer/bank to foreclose on borrowers assets, and pass any costs and the increased losses to investors.

In 2015 Wells Fargo established the $1.16 billion - Wells Fargo Commercial Mortgage 2015-C28 CMBS trust, or just WFCM 2015 C28, and sold 55% of the loans worth over $640 million into it. Then they became the servicer for all $1.16 billion loans and play five other other enabling roles, so they can share in profits with the other loan sellers/lenders that they enable. 

Investors in the WFCM 2015 C28 are already taking losses but can't readily communicate, much less identify each other in the opaque and insular wholesale debt capital markets. Loan sale fraud is being openly conducted and investors, regulators, rating agencies and the market seem powerless or unwilling to stop it. More updates on that later.

Flatiron Hotel Loan
The iconic status of the $22.5 million Flatiron Hotel shows how widespread misreporting is; how its executed in plain sight, even well-reported and documented. The loan was sold with a faulty appraisal that increased the debt load and therefore potential losses, faulty accounts, and non-disclosed credit issues about the borrower, summarized here.

Wells Fargo (now as the servicer) is openly colluding with Rialto the loan seller, to hide the fraud and to give Midland, the other servicer, an option to foreclose on the asset. The lenders, servicers, trustee, rating agencies, and their lawyers pretend the loan sale is valid and continue to ignore the fraud; the servicer continues to misreport and blame poor performance on a minor flood in the property in 2016; and the borrower continues to be victimized in public.

Bankruptcy has become the only option for the borrower to protect themselves and avoid personal liabilities, otherwise they lose their business and/or real estate. Investors will take any losses despite the fraudulent loan sale. 

The strategy is repeated across the US on thousands of underwater commercial real estate assets, wreaking havoc on small communities like Jasper Alabama, causing many billions of losses to mostly smaller borrowers and businesses and investors alike. State and local courts where assets are foreclosed are overwhelmed. They lack resources and are unfamiliar with complex CMBS contracts governed under New York law. Two documents can approach 2000 pages! Article here. Adding insult to injury, servicers' legal costs are paid by endless, unsupervised funding from investors. 

Coliseum Center Loan
A good example of how smaller businesses are gamed is the $10 million Coliseum Center loan where servicers are reporting almost 40% losses to investors, while hiding extensive damage and disrepair to the asset so unreported insurance claims can be collected. This borrower has little hope against the servicers' perverse interests and expert CMBS lawyers. He's seen his business destroyed and reputation attacked through these predatory and fraudulent servicing tactics.

There are many more examples of small businesses and borrowers across the US being openly victimized like this. Partially complete buildings sold as completed, half occupied buildings sold as fully occupied, environmental damage hidden, appraisals inflated, unreported insurance proceeds and others. All is enabled by insular arrangements, lax regulations, self-reporting and deception by the banks and servicers, and through faulty court interpretations wrangled by banks lawyers. More on this later.

CMBS, RMBS, and other structured debt products sold in the capital markets desperately need transparency to protect retirees, pensioners, and borrowers from predatory lending tactics. We aim to go directly to borrowers to overcome the misinformation and its disastrous effects. More about me and how we're using transparency here.

Our Solution - A Shared Legal Defense Fund
My partners are established CMBS players with successful track records that share my passion. We've helped numerous borrowers to individually combat predatory lenders and have $ billions of fraudulent, distressed loan sale and servicing files. Our information is directly from borrowers, overcoming the rampant misinformation. 

Funds collected are used for litigation against lenders and servicers. If we reach our $25,000 lower goal, 100% of it goes defend the Coliseum Center. Any funds collected towards the stretch supports multiple, selected borrowers' legal costs.

We are calling out especially to exposed small and medium sized commercial real estate borrowers, and we'll pay for your valuable information. See how in this brief announcement of our CMBS Shared Intelligence Fund and on my website.

We've aimed high in our goal to quickly gain traction and publicity. The legal defense budget to defend the Coliseum Center is about $1.5 million! 

Help us give borrowers and investors a voice to protect global and US investors wealth from bank fraud! Thank you for your support and for sharing! We'll keep you posted with some crazy loans and updates in the coming days!