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The Art of Objections at Trial: A Success Story

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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This story is good. It corroborates my articles on the needed skills to go to trial. Evan Rosen describes in brief what he did. It would be nice if he would expand on why these objections were right and how much more he could have said if he was challenged by opposing counsel. But it also shows another important thing.

While the Courts have yet to rule or express opinions on their doubts about the bogus loans, notes and mortgages, bogus bonds and bogus foreclosures, we are seeing a radical shift in their rulings at trial and an increasing shift in Discovery. Rulings against the Plaintiff foreclosing party are becoming increasingly common. Discovery is being allowed and many cases are thrown off the rocket docket and into general civil litigation. And a properly framed objection to evidence is taken seriously and frequently sustained leaving the foreclosing party with nothing.

These developments are especially important because many suits are being filed for deficiency judgments on foreclosures that were wrongful in the first place. 110 such actions were filed in Palm Beach County in the last month. Interestingly, the foreclosing party is NOT going back to the same Court in the same suit that was the foreclosure. They are filing separate actions. The Banks are afraid of providing a forum for the homeowner to challenge the assumptions that resulted in the foreclosure. Their fear is based in reality. The same Judges that were rubber stamping foreclosures are slowly changing their rulings as described by Rosen.

Trial practice is an art. There is no such thing as perfection. The trial lawyer must constantly make calculations as to what objections to raise and how to stick to his or her narrative of the case. Rosen here took control of the narrative by laying the foundation that the witness was legally incompetent to testify on the most important elements of the case filed for foreclosure. His objections flowed from that foundation. He threaded his case based upon feedback from the Judge. And he took a calculated risk when it came time for cross examination.

The lesson here is that there is a time to object and a time not to object regardless of whether you have grounds. There is a time to cross examine and there is a time to take the risk and close the case based upon the insufficiency of the Plaintiff’s case. The objective is to win. And this case described by Evan Rosen describes procedures that are far outside the knowledge of any pro se litigant. Trial practice is like surgery. Nobody should do it without specialized training, license and experience.

http://4closurefraud.org/2014/08/20/total-annihilation-of-a-bank-lawyer-and-their-witness-another-trial-win-for-the-law-offices-of-evan-m-rosen-p-a/

Analyst creates a new index — a Bullsh-it to Cash Ratio— Listen to the Neil Garfield Show

About those bank settlements

What good does it do for any homeowner?

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So we have yet another settlement — this time with Bank of America. $17 Billion, except that it isn’t $17 Billion and it doesn’t do anything that wasn’t going to happen anyway. And to add insult to injury, the MBS investors are going to pay for most of it. It sounds like a big settlement because, after all, who has $17 Billion? But it is just another nick in the side of an industry that effectively owns the wheels of government. As U.S. Senator Dick Durben  famously said “The Banks Own This Place.”

How will these settlements effect you, how will they effect cases in litigation. It is difficult to say, but there is a growing danger that Judges and lawyers will assume that the trouble is behind us. Certainly that is what is what stock analysts  are saying who are continually rallying investors to buy BOA stock. Whether those “analysts” are being paid to say that is not widely known. The reason why investors should reconsider those recommendations for buying BOA stock is that at the end of the day, it is highly probable that the truth will be known.
The plain truth is that BOA and other institutions, some now splattered on the windshield, engaged in a sustain pattern of conduct in which trillions of dollars were siphoned out of the economy  of the U.S. and the economies of other countries around the world. The ultimate potential liability of BOA alone is probably in excess of $3 Trillion — an amount that will likely not be recovered.
While we have not been allowed to introduce these settlements in court as corroboration for our narrative about the real facts of the case, I would not be surprised to hear counsel fro the Bank say that we are past that problem because we settled with the U.S. government. Don’t believe it. You have rights and these settlements are merely evidence, whether admissible or not, that the money was stolen, title was stolen and and the foreclosures were done despite the fact that foreclosures were against the the interest of all real parties in interest and only rewarded intermediaries who were not, in reality, authorized to collect, much less enforce the fake loan documents naming lenders who never completed the loan transaction.
See http://www.nakedcapitalism.com/2014/08/high-bullshit-to-cash-ratio-in-17-billion-bank-of-america-deal.html
Listen to Neil Garfield tonight and ask questions.

 

IF YOU MISSED IT: Go to blog radio link and click on the Neil Garfield Show — past shows include—-

News abounds as we hear of purchases of loans and bonds. Some of these are repurchases. Some are in litigation, like $1.1 Billion worth in suit brought by Trustees against the broker dealer Merrill Lynch, which was purchased by Bank of America. What do these purchases mean for people in litigation. If the loan was repurchased or all the loan claims were settled, does the trust still exist? Did it ever exist? Was it ever funded? Did it ever own the loans? Why are lawyers unwilling to make representations that the Trust is a holder in due course? Wouldn’t that settle everything? And what is the significance of the $3 trillion in bonds purchased by the Federal Reserve, mostly mortgage backed bonds? This and more tonight with questions and answers:

Adding the list of questions I posted last week (see below), I put these questions ahead of all others:

  1. If the party on the note and mortgage is NOT REALLY the lender, why should they be allowed to have their name on the note or mortgage, why are those documents distributed instead of returned to the borrower because he signed in anticipation of receiving a loan from the party disclosed, as per Federal and state law. Hint: think of your loan as a used car. Where is the contract (offer, acceptance and consideration).
  2. If the party receiving an assignment from the false payee on the note does NOT pay for it, why are we treating the assignment as a cure for documents that were worthless in the first place. Hint: Paper Chase — the more paper you throw at a worthless transaction the more real it appears in the eyes of others.
  3. If the party receiving the assignment from the false payee has no relationship with the real lender, and neither does the false payee on the note, why are we allowing their successors to force people out of their homes on a debt the “bank” never owned? Hint: POLITICS: What is the position of the Federal reserve that has now purchased trillions of dollars of the “mortgage bonds” from banks who never owned the bonds that were issued by REMIC trusts that never received the proceeds of sale of the bonds.
  4. If the lenders (investors) are receiving payments from settlements with the institutions that created this mess, why is the balance owed by the borrower the same after the settlement, when the lender’s balance has been reduced? Hint: Arithmetic. John owes Sally 5 bananas. Hank gives Sally 3 bananas and says this is for John. How many bananas does John owe Sally now?
  5. And for extra credit: are the broker dealers who said they were brokering and underwriting the issuance of mortgage bonds from REMIC trusts guilty of anything when they don’t give the proceeds from the sale of the bonds to the Trusts that issued those bonds? What is the effect on the contractual relationship between the lenders and the borrowers? Hint: VANISHING MONEY replaced by volumes of paper — the same at both ends of the transaction, to wit: the borrower and the investor/lender.

1. What is a holder in due course? When can an HDC enforce a note even when there are problems with the original loan? What does it mean to be a purchaser for value, in good faith, without notice of borrower’s defenses?

2. What is a holder and how is that different from a holder with rights to enforce? What does it mean to be a holder subject to all the maker’s defenses including lack of consideration (i.e. no loan from the Payee).

3. What is a possessor of a note?

4. What is a bailee of a note?

5. If the note cannot be enforced, can the mortgage still be foreclosed? It seems that many people don’t know the answer to this question.

6. The question confronting us is FORECLOSURE (ENFORCEMENT) OF A MORTGAGE. If the status of a holder of a note is in Article III of the UCC, why are we even discussing “holder” when enforcement of mortgages is governed by Article IV of the UCC?

7. Does the question of “holder” or holder in due course or any of that even apply in the original loan transaction? Hint: NO.

8. Homework assignment: Google “Infinite rehypothecation”

What’s the difference? See Matt Weidner’s Blog:

http://mattweidnerlaw.com/bombshell-the-secret-lawsuit-has-finally-been-revealed-your-mortgage-documents-are-fake-and-your-foreclosure-is-a-fraud/

For more information call 954-495-9867 or 520-405-1688.

 

Confronting the Ridicule of Counsel for the Bank

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

See also these articles:

The Right to Foreclose & the UCC

Weinstein Article NJ Law Journal

SearchforNegotiability Ronald Mann (1)

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If you file a claim or affirmative defenses along with your answer denying everything, you will often be met with a motion to strike the affirmative defenses or claim. The reason is simple, once the court agrees that the matters you alleged in your pleading are in issue, you are automatically entitled to discovery on those issues. And that is why I continue to say that the more aggressive you are in the beginning of litigation the more likely you are to get win or get a settlement early in the process. Pleading lack of consideration raises the issue of what happened with the money? Once that is in issue, your discovery questions and requests can be directed at that. Once the foreclosers are forced to open up their books and records, my experience is that they will fold. They generally don’t have a cancelled check or wire transfer receipt from anyone in their “chain.”

Here is what was submitted in one case in opposition to the motion to strike the affirmative defenses of the homeowner:

 

  1. Counsel for the Plaintiff wants this court to ignore the defenses of the Defendants on the basis that the theory of the case advanced by said defendants is “Absurd.”
  2. Defendants agree that there are patent absurdities and unexplained mysteries in this case.
  3. Plaintiff has alleged that it is a “holder” and has not alleged that it is a “holder in due course.” And it has not alleged the source of its authority to claim “rights to enforce.” By definition this means they admit that Plaintiff is not a purchaser for value, in good faith without knowledge of the Borrower’s defenses.
  4. If Plaintiff (or anyone whom Plaintiff represents) actually purchased the loan for value, in good faith and without knowledge of the borrower’s defenses, they would say so. That would make them a Holder in Due Course. Florida statutes protect the Holder in Due Course allocating the risk of signing documents without receiving consideration to the borrower. It would end the debate — eliminating nearly all of the borrower’s defenses by definition. So where is a holder in due course in this court proceeding?
  5. Defendants concede that anyone who signs a document assumes the risk of liability (even if they didn’t get the loan) that it might be used as a negotiable commercial instrument (cash equivalent) and that if an innocent buyer of the loan documents who was acting in good faith without the knowledge of the borrower’s defenses acquires such loan documents those documents can be enforced and that the borrower is limited in potential remedies to pursue satisfaction from the loan originators, mortgage broker etc.
  6. But Plaintiff is not alleging it is an innocent buyer. It is not even disclosing for whom the  the loan documents are being enforced. By trick of logic, Plaintiff wants this court to “assume” or “presume” that some actual creditor or owner of the loan has given the Plaintiff the right to enforce. But Plaintiff is not providing any allegation or proof, despite numerous requests as detailed in the affirmative defenses, as to the identity of the real creditor nor any facts or documents that how show the “real creditor” is imbued with the status of holder in due course,, creditor or “owner” of the loan.
  7. Instead they allege status of “holder” without any clarity of how they acquired the loan documents nor the basis of their authority to enforce the loan documents.
  8. Counsel for the Plaintiff wants to be treated as a holder in due course where the defenses of the homeowner are ignored regardless of whether they have merit. Counsel is attempting to elevate the status of the Plaintiff to treatment as a holder in due course, while the only allegation is the the Plaintiff is a “holder.”
  9. Being a holder does not automatically entitle anyone to enforce a document. If it were otherwise any delivery service would be able to stop by the courthouse and file a lawsuit on the papers they are carrying. A “holder” must have “rights to enforce.” And these rights come from the actual owner of the loan, whom they refuse to disclose.
  10. The “absurd” conclusion that there was no consideration at the “closing” of the “loan” arises from the the perfectly logical progression of reasoning stemming from the lack of consideration at every step in the chain, upon which Plaintiff relies. If there does exist a transaction in which the loan was (a) funded by the designated lender and (b) transferred for value at each step of the “assignment” process, then it is impossible for SOMEONE not to be a holder in due course. But the Plaintiff refuses to disclose in its pleading the identity of the holder in due course or anyone else designated as the creditor or owner of the loan.
  11. If the Plaintiff wants this court to enforce the loan documents, by its own pleadings it does so as a mere “holder.” That means that Plaintiff is subject to the defenses of the borrower arising from the closing. Plaintiff stands in no better shoes than the “originator” of the loan whom Defendants allege was not the actual lender.
  12. If the Plaintiff wants this court to to enforce the loan documents, it must prove that it has the actual loan documents, and it must prove that it has the right to enforce those documents not by presumption but with facts. And Defendants are permitted to raise the issue of consideration and inquire in discovery as to the reality of the transaction at the time of the loan.
  13. If Plaintiff wishes to state that it has the right to enforce the loan documents, even though it is a mere holder, then it must have been given those rights to enforce from the actual creditor. That is a step that Plaintiff seeks to avoid for reasons that will be flushed out in discovery and at trial. Defendants take the position that the their is no real creditor or real owner of the loan in any sense of the words, in the entire chain of “ownership” relied upon by the Plaintiff. If that is untrue, then Plaintiff can simply provide proof of payment at each step of the original transaction and each step in which there was an alleged transfer.
  14. Plaintiff is attempting to rely upon presumptions which would lead to a conclusion that is contrary to the actual facts.
  15. The presumptions upon which Plaintiff intends to rely, as is obvious from their complaint, would lead the court to conclude that there was consideration at the “closing” and each “transfer” of the loan. Such presumptions are rebuttable for the precise reason that they exist for the sake of expediency. Ordinarily, before the era of “securitization” such presumptions reflected the actual facts. In this case, they do not.
  16. Defendants need not prove their case at this stage of litigation. They have raised bona fide issues. If the issues raised as defenses are completely devoid of any basis, then the court has remedies available. Defendants have requested proof of payment to support the closing documents and each “transfer” of the loan. Such requests are found in the fact pattern described in the affirmative defenses. Plaintiff refuses to show such proof, betting on this Court’s need for an expeditious result.
  17. The defensive pleading of the Defendants are sound and sustainable, as pled, because they must be taken as true for purposes of the hearing on the Plaintiff’s Motion to Strike.

“Teaser” Payments: Trick or Treat?

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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In the final analysis, I think a reverse amortization loan is a way of hiding the true amount of the debt. —- Neil F Garfield, livinglies.me

As an introduction, let me remind you that the viability and affordability of the loan, the loan to value ratios and all the other facts and ratios and computations are the responsibility of the lender, who must faithfully disclose the results to the borrower. It is a myth that these bad loans were in any way related to the bad intent of borrowers.

I have been examining and analyzing loans that are referred to as “reverse amortization loans”. They are, in every case, “teaser payments” that trap homeowners into a deal that guarantees they will not keep their home — even if it has been in their family for generations. And they are loans, in my opinion, that contain secret balloon payments. Nothing in this article should be construed as abandoning the fact that the “lender” never actually made the loan, nor that the actual lenders (investors) would never have approved the loan. The point of this article is that the borrower would not have approved the deal either if they had been informed of the real nature of the sham loan (even if it was real).

Teaser payments are neither illegal nor unfair (if they don’t involve reverse amortization). They have been used all over the world with great success. The deal is that they pay a lower payment before they get to the real payment. Nothing is owed on the lower interest or even lower escrow that results from such a loan product devised and prepared for signature by the Banks or agents for the Banks.

And remember again that when I refer to the Banks, I am talking about intermediary banks that in the “securitization” era were not making loans but were approving paperwork that nobody in their right might would have have approved under any interpretation of national underwriting standards. These banks diverted money and title from the actual transaction in which money from strangers and title of the homeowners was diverted from the real transaction — giving a problem to both. This left “investors” without an investment and the borrowers with corrupt title.

In my opinion the way the teaser payment option was handled in the era of securitization, the borrower ended up with an unaffordable loan with terms that he or she would not have approved and which no bank was permitted to approve under State and Federal lending laws. The result was a hidden balloon and hidden payments of principal and interest payments far higher than the apparent interest rate on the face of the note. In most cases, the requirement that the documents and good faith estimate were never provided to the borrower, to make sure that the sophisticated borrower would not have an opportunity to think about it.

In one case that is representative of many others I have seen, the interest rate was stated as 8.75%, but that was not true. The principal was fixed at $700,000, but that wasn’t true either. The principal was definitely going higher each month for about 26 months, at which point, the principal would have been 115% of the original principal on the note. THAT is because each teaser payment of a fraction of the amount due for interest alone, was being added to the principal due. That is reverse amortization. But that is only part of the story.

When the principal has risen to 115% of the stated principal due in the closing documents, the loan reverts from a teaser payment — promised for several years — to a full amortized payments. So the original teaser payments was $2300 per month, while the amount added to principal was around $3000 PER MONTH. Thus after her first payment, the borrower owed $703,000. While the note and disclosure documents referred to a teaser payment that would continue for five years, that was impossible — because deep in the riders to the note there was a provision that stated the teaser payment would stop when the accrued payment exceed 115% of the original principal stated on the promissory note.

With the original principal at $700,000, the interest due was around $5100 per month on the original principal. 115% of $700,000 is $805,000, which represents a hidden increase of principal built into the payment schedule. That is an increase of $105,000 for as long as it takes with the hidden accrued interest computed in the background and not disclosed to the borrower before, during or after the “loan closing.” For a loan requiring “20% down payment” this is lost money. The 20% vanishes at the loan closing while the borrower thinks they have equity in their property. They don’t — even if property prices had been maintained.

The hidden increase of $105,000 happens a lot sooner than you think. It is called “reverse amortization” for a reason. But the unsophisticated borrower, this computation is unknown and impossible to run. In the first month the interest rate of 8.875% is now applied against a “principal” due of $703,000. This raises the hidden interest due from around $3000 per month to $3025. Each month the hidden accrued interest being added to “principal” rises by $25 per month. At the end of the first year, the payment due and unpaid principal is rising by $3300 per month. At the end of the second year it is more than $3600 per month. And at the end of the third year, if you get that far the actual computation makes the accrued interest (and therefore the principal due) rise by over $4,000 per month.

Using the above figures which are rounded and “smoothed” for purposes of this article (they are actually higher), principal has gone up by around $20,000 in the first year, $56,000 in the second year, and $76,000 in the third year. So by the end of the third year, the principal due has changed from the original $700,000 to over $850,000. But this passes the threshold of $105,000 beyond which interest will no longer accrue and will be payable in full. And THAT means that during the third year, the payment changes from $2300 to the full interest payment of $5900 per month plus amortized principal plus taxes plus insurance. Hence the payment has changed to over $6500 per month plus taxes and insurance.

For a household that qualified for the $2300 payment, the rise in payment means a guaranteed loss of their home if the loan was real and the documents were enforceable. This is a hidden balloon. The company calling itself the “lender” or “servicer” is obviously not going to get many payments at the new rate. So you call up and they tell you that in order to get a loan modification, which was probably promised to you at your original “loan closing” you must be three months behind in your payments.

Relieved that you don’t need to pay an amount you can’t pay anyway, and afraid you are going to lose everything if you don’t follow the advice of the “customer service representative, you stop paying and find yourself looking at a notice of default. The company tells you don’t worry you are in process for modification when i fact they are preparing to foreclose. There are probably a few million families that have been through this process of “lost paperwork” redoing it several times, “incomplete” etc. only to be told that you don’t “qualify” or the “investor has turned down your offer (which is a lie because the investor has not even seen your file much less considered any offer for modification).

Next comes the notice of acceleration either in a letter or in a lawsuit for foreclosure and suddenly the borrower knows they are screwed but feels it is their own fault. They feel ashamed and they feel like a deadbeat but they really don’t understand how they got to this point. THAT is the hidden balloon — an acceleration in about 26 months that is virtually guaranteed. The entire balance becomes due which of course you cannot pay. If you could have paid the full balance you would not have have taken a loan. You never had a chance. But that is only the first balloon payment that is not revealed to the borrower at his or her “loan closing.”

The second one comes at the end of 36 months. And that is because the computation of the amortized payment has been based upon the original principal and the original interest rate, both of which has changed. So even if you made it to 36 months, you would be told that you will be in foreclosure unless you pay the unpaid principal balance as the “bank” has computed it, which will probably be around $50,000-$70,000.

Florida law requires balloon payments to be disclosed in very prominent fashion. In these cases it not only was not disclosed, it was hidden from the borrower.

It is unfair and illegal to force this idiotic loan upon either the investor whose money was used to fund it without their knowledge or consent, or the borrower who obviously would not have signed a loan that he or she had no chance of paying. This is why forensic reviewers are necessary and expert witnesses are necessary. But for those of you who are entering into trial without benefit of forensic reviews and experts, you can still do this computation yourself and see what happens. Or any accountant can compute the final figures for you.

It is simple and simply wrong. And while you are at it, ask any lender of any kind anywhere if they put THEIR OWN MONEY at risk making a loan like that. Notice that I have not even bothered to mentioned the inflated appraisal.

FYI. Failure to Disclose in capital letters with the statutory language in Florida extends the maturity date indefinitely untinl interest and principal are paid in full. For Florida law see

Florida Balloon Payments

But in addition, the failure to disclose this also violates the Federal Truth in Lending Act. And the failure to provide a good faith estimate three days prior to closing is also a violation — all leading to rescission. The 9th Circuit, which had said that rescission requires tender or ability to tender the money back, reversed itself and said that is no longer necessary. But there is a three day right of rescission and a three year statute of limitations on rescission. In my opinion, both time limits would probably be applied BUT I also think that the legislation can be used defensively as corroboration for your argument that the borrower had no way of knowing what he or she was signing. AND the hidden nature of the balloon payments can arguably be said to be a scheme to trick the borrower, which MIGHT extend the running of the statute.

See Reg Z in full, but here is the part that I think is important:

(e) Prohibition on steering.

Prohibits a loan originator from “steering” a consumer to a lender offering less favorable terms in order to increase the loan originator’s compensation.

Provides a safe harbor to facilitate compliance. The safe harbor is met if the consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and the loan options presented to the consumer include:

  • (A) the loan with the lowest interest rate for which the consumer qualifies;
  • (B) the loan with the lowest total dollar amount for origination points or fees, and discount points, and
  • (C) the loan with the lowest rate for which the consumer qualifies for a loan without negative amortization, a prepayment penalty, interest-only payments, a balloon payment in the first 7 years of the life of the loan, a demand feature, shared equity, or shared appreciation; or, in the case of a reverse mortgage, a loan without a prepayment penalty, or shared equity or shared appreciation.

To be within the safe harbor, the loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business. The loan originator can present fewer than three loans and satisfy the safe harbor, if the loan(s) presented to the consumer otherwise meet the criteria in the rule.

The loan originator must have a good faith belief that the options presented to the consumer are loans for which the consumer likely qualifies. For each type of transaction, if the originator presents to the consumer more than three loans, the originator must highlight the loans that satisfy the criteria specified in the rule.

< Back to Regulation Z

 

Loan Without Money

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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If you went to the loan closing, signed the papers and then gave them to the closing agent and then the “lender” didn’t fund the loan, what would you do? If you ask an attorney he or she would probably demand the return of the closing papers. If the mortgage got recorded the attorney would threaten a variety of consequences unless the filing with the county recorder was nullified (because it can never be physically removed).

If you were then contacted by a mysterious stranger who said forget the loan papers, I’ll loan you the money, you might have accepted. This mysterious person sends the money to the closing agent who disperses it to the Seller of the property or pay off the prior mortgage etc.

Now imagine that the first “lender” ( the one who DIDN’T make the loan) has “assigned” the documents you executed to another party who also didn’t loan any money to you and who didn’t pay for the assignment because they knew full well that the loan papers were worthless. And the “lender” designated on the note and mortgage doesn’t ask for money because they know they didn’t loan a dime to you. But they gladly accept fees for “acting” as though they were the lender and renting their name out to be used as “lender.”

And finally imagine that the assignee of the worthless documentation you executed again assigns and endorses the note and mortgage to still another party, like a REMIC Trust. What did the REMIC Trust get? Nothing, right? Not so fast.

If this last transfer of the “loan” PAPERS (described as “documents” to make them sound more important) was purchased for value in good faith without knowledge of your defense that you never received the loan, you might still be liable on that note you executed even though you never received the loan. Yes you owe the holder in due course in addition to owing the money to the mystery stranger who wired the money to the closing agent. The Trust COULD enforce the loan or at least try to do so and it would be legal because they would be a HOLDER IN DUE COURSE (HDC). An HDC can enforce free from borrower’s defenses. That is the risk of signing documents and letting them get out of your hands before you receive what you expected as part of the deal.

Why then is there no evidence or allegation by any forecloser in the securitization schemes that they have HDC status? I represented hundreds of banks, lenders, and associations in foreclosures. If anyone was holding the paper as an HDC that is what I would have said in the pleading and then I would have proven it. end of story. The borrower might have a lawsuit against the third parties who tricked him but the HDC still has a good chance of prevailing despite grievous violations of lending laws and procedures at closing — including lack of consideration (they didn’t fund the loan for which you executed the closing documents).

The ILLUSION of a loan closing has been created because both “loan” scenarios in fact occurred AT THE SAME TIME at most “loan” closings. Two different deals — one where you didn’t get the money and the other where you did. One where you signed the closing documents but didn’t get the loan and the other where you signed nothing and got the money from the loan.  In other words, you signed documents, you delivered them to the closing agent and they were delivered and recorded. But the “lender” didn’t give you any money. Ground zero for the confusion and illusion is the receipt of money by the closing agent fro the mysterious stranger instead of the party in whose favor you executed the note and mortgage.

And here is the good news. The banks know full well they can’t win if they allege they have HDC status or even that the Trust has HDC status. So they allege that they are “holders” or they allege they are “holders with rights to enforce.” More often than not they simply allege either that they are simply a “holder” or that they have the “rights to enforce.” They let the court make the rest of the assumptions and essentially treated as though the party foreclosing on you had HDC status. That is ground zero for judicial error.

The Trust never issued payment to the assignor of the loan because the assignor didn’t ask for any money except for fees in “acting” its part in the scheme. The assignments and endorsements, the more powers of attorney, the higher the stack of paper. And the higher the stack of paper the more it looks like the the loan MUST be valid and enforceable, that you did stop paying on it, and that therefore you MUST be in default.

Meanwhile the mysterious stranger is getting paid by the people who entered into an agreement — a pooling and servicing agreement — under which the investors get paid from the Trust, Trustee or Master Servicer that issued bonds to the mysterious stranger. The terms of payment are very different than the terms of your note but that doesn’t matter because they never loaned you money anyway. The real basis of the ability of the servicer and trustee to see to it that you receive your expected payment is the ability of these brokers, conduits and sham corporate entities and trusts to get their hands on your money, and the money of investors in the Trust.

Why did the mysterious stranger send money for you? Was it a gift? Of course not. But without documentation the mysterious has exactly one legal right — to demand payment at any time for the entire balance of the loan plus reasonable interest. No foreclosure, because there is no mortgage. No acceleration necessary because you already owe the entire amount. Your homestead property is NOT at risk in Florida and many other states, because the mysterious stranger has no mortgage recorded. And the full balance of the loan to the mysterious stranger is completely dischargeable in a chapter 7 bankruptcy or can be reduced substantially in a Chapter 13 or chapter 11 Bankruptcy.

Why did the mysterious stranger make the loan? Because the stranger was tricked by the same people who tricked you — under several layers of complicated relationships such that it is difficult to pin the blame on anyone. But this isn’t about blame. It is about money. Either they made a loan or they didn’t. And the answer is that nobody in their chain of “title” to the loan PAPERS ever paid one dime to loan you money or buy your loan. They are hiding that from both investors and you.

The mysterious stranger gave a broker money because he thought the broker was the intermediary between the mysterious stranger and a REMIC Trust that was issuing a semi-public offering of Mortgage Banked Securities (MBS). The stranger thinks he is an investor buying securities when in fact he has just opened the door for the broker to use his money in anyway the broker wanted, including lining the broker’s own pocket with the principal that should have loaned on good solid viable loans. The illusion is enhanced by the broker when the broker makes certain that the mysterious stranger is addressed as an “investor” or “trust beneficiary” of the REMIC trust.

The mysterious stranger who made the actual lender is tricked into believing that he has purchased a fractional ownership of thousands of mortgages including yours. That what the Prospectus and PSA seem to be saying. In reality the money that the mysterious stranger gave to the broker, stayed with the broker and that satisfied the feeding frenzy of sharks circulating around each dump of money from mysterious strangers.

“Bonuses” that were incomprehensible to the rest of the world were lavished upon the people who actually made this trick work. The  bonuses came from “profits” that were declared by the brokers from some incredibly lucky “trades” that never existed in which the Trust “bought” the loans at a price far higher than the principal balance of the loans, including yours.

AND THAT IS THE REASON FOR THE LOST, DESTROYED, FABRICATED LOAN AND TRANSFER DOCUMENTS. THE BANKS ARE CREATING THE APPEARANCE OF NEGLIGENCE THAT OVERRIDES THE TRUTH — IT WAS FRAUD. The only reason you would destroy a cash equivalent document is because you told someone it promised payment of $100, when in fact it promised only $60. The Banks can’t reveal the real money trail without revealing their vulnerability to criminal prosecution.

Of course the problem was that the broker didn’t loan you any money and either did the trust, the trustee, the servicer or any of the conduits or other intermediaries. And so none of them were entitled to have or do anything with the PAPER that had your signature on them — which contained one key term that they didn’t want anyone to see — the principal balance stated on the note.

If the mysterious stranger found out that for every dollar he paid the broker for a mortgage bond, only 60% was being used for loans, then the mysterious stranger would stop giving the broker money and would have demanded the return of all funds. But the mysterious strangers who in reality had given naked undocumented demand loans to homeowners had no idea that anything was wrong because the payments they were receiving were exactly what they expected.

So when the “borrower” is asked “did you get the loan.” His answer is “which one are you asking about?” Because no loan was ever made, directly or indirectly by the “lender” on the note and mortgage. Did you stop paying? Of course, why should I pay someone who I thought was my lender but isn’t.

All of that is the exact reason why the investor “mysterious stranger” lawsuits have all been settled for hundreds of billions of dollars. But in the end this is about the mysterious stranger and the lender designated on the note and mortgage. The fact that either way the mysterious stranger’s money was to be used for loans is not the point under our system of law. If anyone wants to enforce commercial paper based upon a loan that was never made, they lose if they are merely a “holder,” and “holder” status is all that the foreclosers have ever alleged. Their “right to enforce”comes from cyberspace rather than the owner of the loan. The owner of the loan, is in the final analysis a mysterious stranger to any of their PAPER.

The solution to our economic crisis that simply won;t end until this wrong is addressed is to stop rewarding bad behavior and let the mysterious strangers and the borrowers meet each other in the market place. Under threat of a demand loan due in full right now, nearly all homeowners would execute enforceable, clean notes and mortgages in favor of the mysterious strangers and then they could BOTH sue the intermediaries that corrupted the title and investments of the “mysterious strangers.”

Presented correctly by counsel for the homeowner, the men and women sitting on the bench will accept the truth as long as you exercise your rights to object to the use of presumptions instead of facts and demand your right to receive discovery that would disprove all the presumptions upon which the brokers and their nominees rely. Stop admitting things you know nothing about. Presume that there is a shady reason why the foreclosing party never asserts itself as an HDC. That is your clue to the truth.

 

Nuclear Questions and Logic in Foreclosure Litigation

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

I had the honor of receiving a response from Gary Dubin who is pursuing a writ of certiorari to the Hawaii Supreme Court. I had expressed my view that equal protection more aptly describes the situation than mere denial of due process. He responded that due process is hard enough to push through and that equal protection is even harder. I agree and so his strategy might be correct, but I still wonder if the bullet might be loaded into a lawsuit in Federal court suing the state for systematic deprivation of due process to a class of Defendants in civil litigation, based upon the faulty premise that the loans subject to litigation are real. Here is what I wrote to Gary Dubin:

I know the difficulty of arguing equal protection but I believe that the due process argument based upon the note alone leaves room for the court to decide against you. Either way, you have a tough road ahead of you. At this point, the Courts are faced with the fact that they approved millions of foreclosures based upon the thought in the mind of every jurist that the loan is real and the borrower stopped paying. 15 million people were dislocated. Deciding the other way now would be acknowledging an error of monumental proportions.
That said, it would be very interesting to see a brief asking the question about why the “creditor” never alleges it is a holder in due course. That would solve everything for the banks — so why don’t they do it? It would bar the signatory on the note and probably the mortgage from raising most defenses.The corollary question is if they are a holder, from whom did they get the right to enforce? And the last question is that if the securitization IN PRACTICE was real and valid, then the Trust was the end of the line and could not possibly have been merely a holder unless they are willing to concede they did not act in good faith or purchased the loan WITH knowledge of the borrower’s defenses; that leaves “for value” as the only issue in play raising the question “how could the trust be merely holder” and if it is a holder how could a holder give rights to enforce to a third party without notice to the actual owner (HDC)?

Logically (and confirmed by me through “anonymous”interviews with actual traders involved in this scheme) it MUST be true that the Trust never purchased the loan. And the ONLY reason that could be true is if the Trust didn’t have the money. After all, the Trust was created for the sole purpose of buying loans. If the Trust didn’t buy the loan then it follows that the assignor or endorser received no payment; that would mean they had no interest in the loan because otherwise they would have insisted on payment. If they didn’t insist on payment, they did not pay for it either. And if they didn’t pay the originator for the loan, it must be because of a prior agreement (assignment and assumption) that governed the closing with the borrower. Hence the table funded loan resulted in no claim for payment in order to “transfer” the loan. If the originator didn’t get paid for the loan, then it obviously wasn’t entitled to it. It isn’t reasonable to assume otherwise.
So if the originator (“lender”) did not receive payment it must result from the fact that they never made the loan. If they did make the loan then they would have insisted on receiving payment. That leaves us with money on the table from an unknown undisclosed source, clearly in violation of Federal and state lending laws. AND THAT is what leads us back to the top of the food chain where the Trust received no investor money and therefore could not purchase the loans and therefore was not the owner of the loans but is claiming “holder” status. The investors were clearly unaware and may still be unaware that their “trust” and their trust shares are worthless. The bonds were thus issued by an unfunded trust that received neither money nor loans.
So if the Trust was unfunded but it was still investor money that was used to fund the loan, that would explain the absence of any monetary transactions (except fees and profits) relating to the loan origination and transfers. And THAT leads back to the question of law and equity that every court is dodging — if the borrower received an undocumented loan from investors, what rights are created for those who intervene in the transaction and make claims of default and rights to foreclose? Which leads to the final nuclear question: Are the courts inadvertently creating equitable mortgages in favor of investors or their designee when the original transaction was fatally flawed and in violation of all known lending and closing standards?

The Logic of Wall Street “Securitization:” The transaction that never existed

For more information on foreclosure offense and defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

The logic of Wall Street schemes is simple: Create the trusts but don’t use them. Lie to everyone and assure everyone that Trusts were used to “securitize” loans. The strategy is so successful and the lie is so big and has been going on for so long, that most people believe it.

You see it in the decisions of the appellate courts who render opinions like the recent 3rd district in California which expresses the premise that the borrower was loaned money by the originator. Once you start with THAT premise, the outcome is no surprise. But start with reverse premise — that the borrower was NOT loaned money BY THE ORIGINATOR and you end up with a very different result.

We could assume that Wall Street is reckless in lending money. They can afford to be reckless because they are using investor money. And, so the story goes, the boys on Wall Street got a little wild with loans that they would never have approved for themselves.

Without risk of any loss, Wall Street investment banks make money regardless of whether the loan succeeds or goes into default.

But Wall Street is not content with earning fees. The basic credo is a question: “How can we make YOUR money OUR money.” And they have successfully devised and followed that goal for many years. As one insider told me in an interview that must remain anonymous, “It is like a magic trick. You create a trust and everyone is looking at the trust and everyone is looking at transactions affecting the trust, when in fact all the action is occurring off record, off the books and away from scrutiny by investors, trustees, rating agencies, insurers, borrowers, and of course, the courts.” 

So the question becomes “what happens to investor money after it is received by the investment bank?” If the money passes from the bank account of the managed fund (pension) fund to the bank account of the investment bank that sold bonds issued by a Trust then the Trust would receive the money. It didn’t.

The Trust would then issue funds for the origination or acquisition of loans. In return it would get the loan documents and they would be placed with the Depositor or Depository — pretty much the way ordinary loans are done. It didn’t. Instead we had millions of loan documents lost or destroyed and then re-created for litigation purposes. Why would an entire industry have engaged in that behavior? Was it really a “volume” problem where there was too much paper or was it something more sinister?

The problem is that the investment bank that acts as broker in selling the bonds is in control of the loans and investments of the Trusts. Since the fees of the investment bank are based on the existence of transactions in which the Trust issues money in exchange for investment certificates, the Wall Street bank is incentivized to make that Trust money move regardless of the quality of the investment. And since the Trust has no say in the actual underwriting decision to originate or acquire the loan, the investment bank is the only one in charge. That leaves the fox guarding the hen house.

But that doesn’t satisfy Wall Street either. They realized that they can create “proprietary profits” for the investment banks by creating a yield spread premium. A yield spread premium is the difference in value between two different loans to the same party for the same transaction — one is the honest one and the other is fictitious.

At closing the borrower is steered into the fictitious one which is far more risky and expensive than the one the borrower is actually qualified to receive.

At the investor level the “trust” is ordered to take loans that are far less valuable than they appear. This means that the Trust buys the investment bonds or shares that the investment bank has created with nobody checking the quality or ownership of the investment. The Pooling and Servicing Agreement contains provisions that effectively bars the Trustee or the investors from knowing or even inquiring about these transactions. Look at any PSA and you will see it.

The bottom line is that the worse the loan terms for the borrower and the more likely it is that the loan will fail, the lower the value of the loan. But if it is sold as though it was an ordinary conventional loan at 5%, then the price, charged for a crappy loan is much higher than its true value. Same scenario as the inflated appraisals of real property and homes. 

So the investment bank inserts itself as the Seller of the loan to the trust. At their proprietary trading desk the investment bank sells its ownership interest in the loan to the trust for the higher “value” because the investment bank is making the decisions on what loans the trust will buy. Meanwhile they have created loans that are worth far less and even have principal due on the “notes” that is far less than what the trust is forced to “pay.”

Checking with informed sources, it is evident that those proprietary transactions were fictitious and allowed the investment banks to report huge “profits” while everyone else was losing their shirts trading bonds, equities and anything else. The transaction at the proprietary trading desk of the investment bank was fictitious because the trust did not issue any payment to the investment bank, who never formally owned the loan in the first place.

You don’t see investment banks anywhere in the chain of title whether you review public records or even MERS. So you have the investment bank selling a loan they don’t own to a trust that never paid for it. The entire transaction is recorded but does not exist.

In the case of a 15% $300,000 loan to a “borrower”, it is “SOLD” as a 5% conventional loan giving the investment bank a reason to declare that it made a profit on a “proprietary trade.” How much profit? Figure it out — on the back of a napkin you can see how the investment banks “sold” the $300,000 loan but “received” $900,000 from the Trust leaving the investors with an instant $600,000 loss and the probability of losing the rest of the $300,000 as well. This is exactly opposite to the provisions of the Prospectus and PSA.

Upon examination, my sources tell me, the money to cover that declared “trading” profit does exist at the investment bank. That is because the investment bank took the money from investors, never funded the trust, and pocketed the $600,000 in advance of the “proprietary trade, which they could cause to be recorded and reported at any time, since the investment bank was in total control.

Enter moral hazard.

The only incentive that the investment bank to stay honest is to report good results so the managed funds buy more bonds. But that does not protect investors. The investment bank creates a classic PONZI scheme in which it uses investor money to make the monthly payments on the bonds or shares and reports that “all is well.” The report disclaims reliability, credibility and authenticity. Wells Fargo has an especially strong disclaimer on the distribution report to investors. The disclaimers were ignored as “boiler plate” by fund managers who made the investment on behalf of the their pensioners or mutual fund shareholders.

All the fund managers needed to know was that they were getting paid — but they did not realize that a significant part of the payment came from their own investment dollars advanced to the investment bank, as broker for the purchase of trust bonds or shares.

So the investment bank makes much less money on good investments for the trust than on really bad investments. In fact they have the  incentive to make certain the loan fails. Not only do they get the yield spread premium described above, the investment bank, is trading on inside information in which only the investment bank knows the truth. It places bets against the viability of the loan and bets further against the value of the mortgage bonds, and buys contracts for insurance, betting that the value of the bond will fall in a “credit event” without the necessity of an actual default.

SO IF THE INVESTMENT BANK DID NOT GIVE THE TRUST THE MONEY FROM INVESTORS, WHERE DID THE INVESTORS’ MONEY GO?

That is the trillion dollar question. And THIS is where the Courts have it completely wrong. Either we are a nation of laws or a nation governed by the financial industry. The banks bet on themselves, and so far, they were right to do so.

The money given to the investment banks was spread out over a long list of intermediaries owned or controlled by the investment bank. AND then SOME of it was spread out funding loans to borrowers. But the investment bank obviously could not name itself on the note and mortgage. That would have revealed that the tax advantages of a REMIC trust were nonexistent because the trust was not involved in the transaction.

So an elaborate, complicated, circuitous route was chosen for the “approval” of loans for origination or acquisition. First you have a nominee, which is often MERS plus a “lender” who was also a nominee even though they were called lender. The “lender” was subject to an assignment and assumption agreement that prohibited the “lender” from exercising any control over the closing on the loan that was being “originated.” In short, they were being paid to pretend to be a lender — hence the term pretender lender. 

The closing agent, whose fee depends upon actually closing, and the mortgage broker, whose fee depends upon actually closing, and the title company, whose fee depends upon the actual closing, have no interest in protecting the borrower from what is about to transpire.

The closing agent gets money from any one of a variety of sources OTHER THAN THE “LENDER.” The closing agent applies those funds to the closing as though the “Lender” made the loan. As stated by one mortgage document specialist for a large “originator”, “We knew that table funded loans were predatory and illegal, but we didn’t take that seriously. And the borrowers didn’t know who the lender was — that was the point. We used table funded loans to conceal the actual lender.”

Those funds came from the investors, although the money did not come through the trust. It came from the investment bank which was acting in the capacity, as they tell it, as a depository bank — which is why the Federal government allowed them to become commercial banks able to act as depositories. And every effort was made to prevent any evidence as to whose money was actually involved in the loan. Since it was the investor money that was used to originate or acquire the loan, it should have been the investors who were named as owner of the loan and recorded as such in the public records.

If you look at the PSA, it requires funding of the trust, of course. But it also requires that its acquisition of loans contain all the elements of a holder in due course, thus barring any claims from borrowers about irregularities at the closing, violations of state and federal law, etc. In summary the only defenses a borrower could raise against a holder in due course is that they paid or that they never signed the note. So a person who pays money in good faith without knowledge of the borrower’s defenses is pretty well protected. In litigation with borrowers, borrowers would be told they must sue the intermediaries that caused the problems with their loans.

The fact that no foreclosure of a loan subject to “claims of securitization” alleges HDC (holder in due course) status is very substantial corroboration that the Trust did not pay for the loan in good faith without knowledge of the borrower’s defenses.

The banks have been betting on a lot of things and winning every bet. In court they are betting that they will be treated as holders in due course and not as simply holders either with or without any right to enforce where they might be required to prove the actual loan of money from the originator, or the payment of money for an assignment and endorsement. And THAT is why the appellate court is assuming that the loan actually occurred — you, know, the loan that is underlying the execution of the note and mortgage, because the borrower didn’t know the truth.

The factual problem is that the presumptions and assumptions relied upon by the courts are in direct conflict with the real facts. The legal problem is that starting with the original loan, many cases, and always with the assignment of loan, is that somewhere in the chain (and probably at more than one point in the “chain”) there is no underlying transaction for the paper upon which the bankers rely in foreclosure.

Some OTHER transaction occurred, which is why the note is evidence of a loan that does not exist between the “lender” and the “borrower” and why the assignment is evidence of a transaction that does not exist between the assignor and assignee. The mistake being made is basic law: the courts are confusing “evidence” of a transaction with the transaction itself. In so doing they are escalating the status of the forecloser from a mere holder to a holder in due course without any actual claim or allegation of HDC status. Once that is done, the borrower is doomed.

The doom should fall on the investment bank and all the intermediaries that participated in this scheme. They left the investors with no coverage — the investors money was used in ways that were expressly prohibited by the offering, the PSA, and even the rules governing investments by stable managed funds whose risk is required to be extremely low in any investment. The investors are the involuntary lenders with no note and no mortgage.

The good news is that nearly all borrowers would be happy to execute a note and mortgage to investors who actually funded their loan or even a trust that was identified by the investors to represent them. The terms would be based upon current economic reality and would thus mitigate the damages to both the investor lenders and the borrowers. The balance, as we have already seen, lies in lawsuits for damages against the investment banks and their intermediaries demanding refunds, damages and even punitive damages. Those lawsuits are being brought by investors, borrowers, insurers, and guarantors and in some cases by counterparties to credit default swaps.

Without the execution of a real note and real mortgage, the foreclosures are fatally defective. So the bad news is that as long as the courts assume and then presume and then enter judgment for the foreclosing party, the Judge is inadvertently sealing a greater loss applied against the investor lender, removing the tax advantages of a REMIC trust, and creating another bar to liability and accountability of the investment bank who effectively has been lying and cheating its way through the system — using legal “presumptions” that are directly contrary to the facts.

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