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5 out of 5 CFLA South African Securitization Audits suggest the banks have been, well, less than honest

news.acts.co.za | December 2, 2015

Securitization audits have only been available in South Africa for a few months, but what they are revealing is fascinating. Five out of five audits so far conducted by Virtual Velocity, the company that is offering this service, appear to show that all of the mortgage loans examined have travelled across the ocean to Asia, sometimes being sold multiple times.

That’s a hit rate of 100%. Based on the banks’ own published figures for securitization, one would have expected one or two out of five to have been securitised – but all five?

Upwards of 100 audits are now underway, involving loans issued by all of South Africa’s major banks.

“What these audits suggest is that the biggest heist in South African history was pulled off under our noses,” says Ash Davenport (pictured left), who was the first South African to request a securitization audit on his mortgage loan, after he took out a R3 million loan with Standard Bank and put up his Eastern Cape ostrich farm as security. Davenport’s loan now appears to be owned by a bank in Taiwan.

The latest audit involving a property in the Western Cape, also bonded to Standard Bank, appears to show a similar pattern. An affidavit supplied by Michael Carrigan, the US-based securitization auditor acting for Virtual Velocity, says the loan – like Davenport’s – now appears to reside in Taipei, the capital of Taiwan.

The affidavit goes on to say: “China Development Industrial Bank may have at least partially offset the risks and losses of investor certificate holder ownership through the use of credit default swaps (that acts similarly to insurance whereby shortfalls in targeted cash flows are reimbursed subject to contractual provisions by the swap provider).”

In other words, any default by the original borrowers is covered by the China Development Bank.

This was despite the banks claiming to the borrowers and the courts that they had not securitised the loans.

Carrigan further explains what happens when a mortgage is separated from the promissory note (which is the loan agreement where the purchaser agrees to repay the bank):

“By statute, assignment of the mortgage carries with it the assignment of the debt. . . Indeed, in the event that a mortgage loan somehow separates interests of the note and the Mortgage, with the Mortgage lying with some independent entity, the mortgage may become unenforceable. The practical effect of splitting the Mortgage from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the Mortgage is the agent of the holder of the note. Without the agency relationship, the person holding only the trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the Mortgage.”

Davenport says the discovery that all five audits so far concluded show securitization appears to be happening on a far wider scale than was previously imaged is a major breakthrough. “We need to step up the pressure on the banks and get justice for the tens of thousands of South Africans whose homes and possessions have been illegally taken from them,” he says.

Anyone who has had their house or car taken away from them by the banks and has tried to argue the securitization defence in front of the courts have got precisely nowhere for the simple reason that the courts and the banks demand that the victim provide proof. This is impossible to do where the bank has hidden the evidence. “Now we can provide the proof,” says Davenport.

Davenport and Virtual Velocity are now launching a crowd funding campaign to broaden the sample size of the audits and provide securitization audits for those who cannot afford them. With this information to hand, the plan is to bring a massive class action suit against the banks within the next few months.

Davenport says the legal team is now in place and will only take on cases that have a better than 50% chance of winning. “We are not here to waste time with weak cases. We intend to win and bring justice for the tens of thousands of South Africans who have been dispossessed and lied to by the banks,” says Davenport.

Those who participate financially in the crowd funding campaign will receive 50% of the proceeds (after costs) of any settlement with the banks arising from the coming court case. The remaining 50% will go to the successful litigants whose mortgage bonds have been proven to have been securitised through the audit process.

“We want thousands of people to back this campaign for justice. Our legal team believe we have a good chance of winning, so those who back us stand to get something back, and it could be substantial, but they could also get nothing. We want people to support this campaign out of a sense of social justice, not financial return,” says Davenport.


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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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