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See MidFirst Bank v Haynes 893 F.Supp. 1304 (1994)

It is always interesting to see how Federal Judges in particular take a closer look at a case when the stakes are higher. Here we have 17 properties. And instead of leading with the usual recitation about the origination of the loans, this Federal Court in Oklahoma introduces the premise of the case with an acknowledgement that loans involving Government Sponsored Entities (Ginny, Fannie, Freddie, et al) are financed not by the GSE but by the sale of mortgage backed securities. The GSE serves in one of two capacities: guarantor and/or Master trustee of a REMIC trust. Those who allow the bank to stonewall them with the assumption that the buck stops with the GSE are neither getting it right nor presenting it right.

This court was not presented with the anomaly that that the money from investors never made it into the trust and neither did the loans (because there was no money to pay for the loans). That is a line of attack that is difficult to get traction on even now. Many decisions are coming out of all sorts of courts in which the court is unconvinced that the player pretending to be the lender, holder or servicer or trustee has any right to be making such claims and fails to meet its burden of proof (prima facie case).

“This action involves a dispute regarding the ownership of, and right to proceeds payable under, seventeen mortgage notes originally executed in favor of defendant C.W. Haynes & Company, Inc. (“Haynes”) as mortgagee. The mortgage notes were secured by mortgages on the mortgagors’ residences, all of which are located in South Carolina. Haynes sold the mortgage notes to Inland Mortgage Company (“Inland”) who thereafter placed the mortgage notes in a “pool” of mortgage loans backing a security to be issued by Inland and guaranteed by the Government National Mortgage Association (“GNMA”) under its mortgage backed securities program.”

Without paying Haynes for the mortgage loans, [e.s.] on October 25, 1990, Inland placed the mortgage loans in a pool of mortgages to obtain a Government National Mortgage Association (“GNMA”) mortgage-backed security. On that same day, Inland sent the mortgage documents (indorsed in blank) to Bank of America, the document custodian, who then examined the documents and certified to GNMA that they complied with GNMA regulations. Included in the documents was an executed original Form HUD-11711B signed by an Inland officer certifying to GNMA that:

‘No mortgage in the referenced pool or loan package is now subject to any security agreement between the issuer and any creditor, and upon the release (delivery) of securities backed by the pool or loan package, only GNMA will have any ownership interest, other than nominal title, in and to the pooled mortgages.'”

[In exchange for a fee] “Inland and GNMA entered into a Guaranty Agreement which specified that it became effective on November 1, 1990, the “issue date” for the security [e.s.]. Pursuant to the Guaranty Agreement, Inland transferred and assigned to GNMA all of its right, title, and interest in and to the mortgages backing the security, effective on the date of the delivery of the GNMA guaranteed security. In return, GNMA guaranteed the timely payment of the principal and interest set forth in the security to be issued under the Guaranty Agreement.”

The Court goes into a more exhaustive analysis of the business records exception to the hearsay rule than we normally see when there is one under-resourced homeowner against a trillion dollar bank or its nominee:

“…the date on which the security was delivered by GNMA is of significance in determining whether GNMA qualifies as a holder in due course of the mortgage notes. [e.s.] For this reason, before the court may properly address the substantive legal issues presented, it is necessary to decide a threshold evidentiary issue. Haynes argues that the records of Participants Trust Company (“PTC”) (which establish the actual delivery date of the security as November 9, 1990), are inadmissible hearsay. Haynes asserts that the records of PTC are replications of information sent to it by Chemical Bank.

Federal Rule of Evidence 803(6) provides an exception to the hearsay rule for the following:

‘A … record, or data compilation, in any form, of acts, events … made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the … record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.'”

The Court decided in favor of admission of the computer reports. And you might see this case cited in briefs filed by attorneys fro the banks. But if you read the decision carefully you might find there is more in this case for your position than the other side. The records, simply stated, are subject to the test of reliability and credibility. If the corporate representative of the party who was introducing the records was shown to have an economic interest in the outcome of the case and a history of bad behavior, the court might have decided otherwise. Importantly, the Court starts with the fact that there was a contractual relationship between the company offering the evidence and the prior parties.

In the case of most individual foreclosure actions, the “party” who is offering the records is someone new to the scene who had nothing to do with the prior events in which the loan was originated, or how the loan documents and payments were transferred, processed and eventually enforced. What is happening in these cases is that the banks are taking advantage of the law relied upon by this federal Judge to get in documents that would otherwise would NOT be admissible because the actual parties involved have conflicting stories. (This is comparable to non-judicial states in which the non judicial process is manipulated to get a foreclosure sale that would never be allowed if the party had filed a judicial foreclosure. The “substituted” parties are not subject to questioning nor discovery without the borrower filing an action for Temporary restraining Order in which the burden is on the borrower to prove his theory of the case by first denying allegations that have never been made.)

The Court’s reliance on its perception of the fact pattern in this case led it to the conclusion that the records should be admitted. In mot cases I would argue that the the absence of the actual records custodian, the absence of proof as to how the records were created and maintained, the interest of the witness (a professional witness with no job description other than testifying), the interest of the company for whom he or she is testifying (contractually distancing the servicer from the true facts of origination, transfer and fictitious sales of the debt) all contribute to a conclusion that such records should not be permitted as evidence; BUT if you don’t do it in discovery and move to block the evidence in limine you are not likely to get any traction, even if the Judge thinks you MIGHT be right that the records are neither reliable nor credible.

Chemical Bank and PTC have a contractual arrangement whereby Chemical Bank provides PTC with the data shown on the transaction journal which is input for PTC by Chemical Bank’s employees. Mr. Celifarco with PTC testified that PTC’s computer records were based entirely on the records of Chemical Bank and that he did not know how Chemical Bank’s computer records were produced. Mr. Celifarco’s deposition reveals that PTC relies on the data in the ordinary course of its business, that the record was made at or near the time of the transaction, that the record was transmitted by a person with knowledge, and that it is the regular practice of PTC to make these records.

Mid-First argues that the transaction journal meets the requirements of Rule 803(6) regardless of whether it was prepared by a PTC employee or a Chemical Bank employee. Business records of an entity are admissible even though another entity made the records, and the rule does not require an employee of the entity that prepared the record to lay the foundation. United States v. Childs,5 F.3d 1328, 1333 (9th Cir.1993) (“Exhibits can be admitted as business records of an entity, even when that entity was not the maker of those records, so long as the other requirements of Rule 803(6) are met and the circumstances indicate the records are trustworthy.”), cert. denied, ___ U.S. ___, 114 S.Ct. 1385, 128 L.Ed.2d 60

[893 F.Supp. 1311]

(1994); United States v. Jakobetz,955 F.2d 786, 801 (2d Cir.1992) (“Even if the document is originally created by another entity, its creator need not testify when the document has been incorporated into the business records of the testifying entity.”); Saks Int’l, Inc. v. M/V “Export Champion”,817 F.2d 1011, 1013-14 (2d Cir.1987) (“Documents may properly be admitted under this Rule as business records even though they are the records of a business entity other than one of the parties, and even though the foundation for their receipt is laid by a witness who is not an employee of the entity that owns and prepared them.” (citations omitted)); Mississippi River Grain Elevator, Inc. v. Bartlett & Co.,659 F.2d 1314, 1319 (5th Cir.1981) (Rule 803(6) does not require the documents be prepared by the testifying business. (citing United States v. Veytia-Bravo,603 F.2d 1187, 1191-92 (5th Cir.1979), cert. denied, 444 U.S. 1024, 100 S.Ct. 686, 62 L.Ed.2d 658 (1980))).

Moreover, Rule 803(6) does not require the testifying witness to have personally participated in the creation of the document or to know who actually recorded the information. United States v. Keplinger,776 F.2d 678, 693 (7th Cir.1985). “Obviously, such a requirement would eviscerate the business records exception, since no document could be admitted unless the preparer (and possibly others involved in the information-gathering process) personally testified as to its creation.” Keplinger, 776 F.2d at 694. Rather, the business records exception requires the witness to be familiar with the record keeping system. Id.; see also United States v. Hathaway,798 F.2d 902, 906 (6th Cir.1986). The phrase “other qualified witness” should be broadly interpreted. 4 JACK B. WEINSTEIN & MARGARET A. BERGER, WEINSTEIN’S EVIDENCE ¶ 803(6)[2], at 803-196 to – 198 (1994).

Haynes further argues that computer records require additional foundation for admission such as evidence regarding the original source of the computer program used to produce the records and procedures for input control. In support of its position, Haynes cites United States v. Russo,480 F.2d 1228 (6th Cir.1973) and United States v. Scholle,553 F.2d 1109 (8th Cir.1977). Haynes’ reliance on these cases is misplaced. In Russo the court recognized that the business records exception should be liberally construed to avoid the former archaic practice of requiring authentication by the preparer of the record. Russo, 480 F.2d at 1240. In discussing computer printouts, the court noted that modern businesses rely largely upon computers to store large quantities of information, and such information is admissible so long as it is trustworthy and reliable. Id. at 1239-40.”

Lastly the Court  takes up the HDC argument, in which Haynes argued that the HDC doctrine should no longer be applied — a position that lies at the base of all foreclosing parties where their are claims of securitization. Article 3 UCC governs who and how a party can enforce a note. The source of authority can only come from the owner of the debt. Through an authentic instrument of authorization any party may become a holder with rights of enforcement if they get that right from the owner of the debt. The owner of the debt is supposed to be a Holder in Due Course (HDC). If you look at the elements of any Pooling and Servicing Agreement it is impossible to conclude otherwise.  But the investment banks made certain that the actual words (Holder in Due Course”) were never used. Nevertheless the requirements in the PSA spell out exactly what Article 3, UCC provides for a holder in due course. And the investment banks that excluded the term “HDC” did so precisely because they knew they were going to defraud the investors (see yesterday’s post).

“Haynes argues that UCC Article Three should not apply in this case because the rationale underlying the good faith purchaser for value concept (embodied in Article Three as holder in due course) no longer applies in modern day transactions. Haynes contends that this protection is unnecessary in modern day transactions because a merchant can “require the strictest accounting from the person from whom he is receiving the instrument.” (Haynes Memorandum at 24.) However, Article Three of the UCC controls transfers of negotiable instruments, and the mortgage notes are clearly negotiable. If UCC Article Three should not apply in this case and the holder in due course doctrine is no longer warranted, then any abolishment of that body of law should come from the legislature, not the court.”

HuffPost Reveals Secret Internal Documents Showing Fraudulent Intent by Bank CEO’s

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And now the real facts are coming out as people start worrying about going to jail for perjury and violations of Federal and State laws, rules and regulations. This isn’t just a leak. To quote from the movie “Absence of Malice” — “the last time we had a leak like this, Noah built himself a boat.” This article by Richard Eskow lays out the true facts which are in actuality only the tip of this iceberg.

The important thing about all this is that lawyers should remember that MERS is simply emblematic of the behavior of the banks, to wit: while some loan documents have MERS from the beginning, nearly all of the claims of securitization involve some form of parallel database system to hide the real parties in interest. Chase Bank, for example, stopped using MERS and started using its own system, modeled on MERS. Other banks simply relied upon a more informal method of transferring loan documents around “like a whiskey bottle at a frat party” for no reason other than to present a confused claim of ownership and balance of the debt — resulting in an apparently successful reliance on the predisposition of courts to look only at when the borrower stopped paying and ignoring the authorization of the party claiming rights to enforce collection and enforcement.

In addition, I have found evidence in a number of cases where the MERS system was used AFTER a loan closing in which MERS was never mentioned. Because of the publicity, the tracks leading to MERS were “erased”, but the practice continued in one form or another.

What has escaped the Courts until recently is that the convoluted actions undertaken by banks are part of a larger plan to defraud the Courts themselves, the borrowers and government agencies AND the initial fraud on investors, insurers (except apparently AIG, who obviously appears to be part of the scheme through its ownership of MERS).

By ruling for the Banks the Courts have become complicit in the larger fraud that resulted in millions of wrongful foreclosures and trillions of dollars that were taken from investors and intentionally misdirected away from REMIC trusts and put to use funding loans directly. The Courts are putting their stamp of approval on fraudulent conversion of investor money and fraudulent conversion of money and title that should have gone to the REMIC trusts.

If the concept of securitization had been followed, if the documents were not drafted as “fraud friendly” (see below) and if the actions of the banks were not fraudulent from beginning to end, many loans would never have been made, most loans would have been properly underwritten, and nearly all closings would have contained full disclosures protecting both the lender investors and the borrowers. Further, the industry standards of workouts (modifications) would have resulted in modifications that would have been economically viable; and the loans themselves would have been approved based upon the economic reality of honest appraisals in which price and value were roughly even with each other.

“These documents, which include training materials, PowerPoint presentations, and videos, suggest that the industry made a conscious attempt to bypass local jurisdictions and automate processes — in what can best be described as a fraud-friendly way.”

“Documents obtained from an industry-wide venture reveal that the nation’s leading mortgage lenders colluded to create a false-front company, driven by a back-end database, specifically for the purpose of bypassing local jurisdictions’ taxes and filing requirements. These banks were later to hire low-paid temp workers specifically to process foreclosures (JPMorgan Chase called them the “Burger King kids”).”

“MERS’ backers created something called “MOM” — MERS as Original Mortgagee — ensuring that the bank which originated the loan would never be a matter of public record.”

“…”innovative financial instruments,” many of which were falsely certified as “AAA” grade by ratings firms before being fraudulently misrepresented and sold to unwary investors.”

“…each bank was able to enter into foreclosure and other legal processes without disclosing its own identity or the fact that the ownership and administration of a loan had changed hands. Bank or servicing company employees had two jobs: their real ones, and their make-believe one as “officers” of MERS.” [Editor's Note: "Pretender Lenders"]

“By pretending to hold the loan, MERS is able to file papers on behalf of whoever is holding the title today — or may hold it tomorrow. Changes in ownership are invisible to the courts and recorders of deeds. It’s a false [claim] which bypasses centuries of legal protections and property holders’ rights.”

“If borrowers want to challenge the legality of a foreclosure action, they are entirely dependent on MERS itself to provide that information.”

And we have previously reported how honest and decent employees of the Pretender Lenders (on the loans) and Pretender Menders (on the servicing and modification recognized the problem and were greatly concerned that the scheme was in violation of laws governing lending and servicing. We know of 9 attorneys who quit their jobs rather assistant the drafting of documents that were, in the words of this article “fraud friendly.”

Exchanges drawn from the online “MERS Forum” in 2010 showed that homeowners and bank employees alike were troubled by this. Consumer advocate Nye Lavalle began raising questions about the legality of MERS on this forum more than a decade ago. Even bank employees were concerned. Someone who worked for a bank or its designee wrote the following (copied here verbatim, including errors):

(SUBJECT) Lost Note Affidavits & Beneficial Interests [from 2003]

I was recently told that the manner in which our firm was filing foreclosure actions in FLA was problematic in that MERS was claiming to hold the note and be the only beneficial party with an interest in restablishing the note, when we all know that servicers, investors and the GSEs hold the interests and the payments eventually go to them.

Also, my research of MERS info and procedures shows that MERS never holds any docs including the note and does not have any beneficial interest in the note. Can we be in violation of any applicable laws or putting ourselves indivudally or as a company for claims by borrowers claiming that MERS is not the owner or holder in due course for the loan? I’m troubled by this. Can you help?


The response from MERS Corporate Counsel, in its entirely, was as follows: “Please contact us directly to discuss your concerns. Thank you.”

Yves Smith is also mentioned in the article as having details of the MERS defeat in Pennsylvania.

But the takeaway from this article is that the media starting to investigate what will turn out to be the biggest corruption scandal in human history. We will have to wait for the media to catch up with our facts and ask the central question: Where did the money go?


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There is a battle going on in the media. On the one hand the banks are flooding virtually all outlets with stories about how the foreclosure crisis is behind us and how the stocks of the mega banks are a great investment. So why are we continuing to see “Settlements” and fines and sanctions on the increase, along with whistle blower settlements that are drawing out the people who even now continue to remain anonymous even as they continue to feed essential information to law enforcement and bank regulators? The latest is an award of $14 million from the SEC for assistance with an undisclosed case against an undisclosed bank.

Despite the “good news” stories we see how delinquencies and foreclosures are being reported by more reliable sources as increasing for the first time in a while, plus the fact that banks are selling off deficiency judgments to debt collectors, thus refreshing the nightmare of foreclosure fraud committed by the banks. Borrowers are still being thrown under the bus in order to prop up an ailing economy — ailing only because the wealth of average households was siphoned off in just a few years and will continue for the unforeseeable future.

Then there is the issue of the stock prices of the banks and the index stocks generally. Flooding the marketplace with stories about how strong the banks are, how the economy is improving — while the more accurate reports that the economy is stagnating (see Schiller’s latest projections), how it will continue to stagnate, how Europe is turning downright gloomy, and the banks are teetering on a myth, to wit: that their balance sheets are solid. But the balance sheets are not solid.

Two essential tricks are being allowed by the SEC and bank regulators. First they are allowing banks to report ownership of bonds that are actually owned by investors — and that the bonds are worth 100 cents on the dollar. This changes Tier 3 Assets (assets valued by management) to Tier 1 Assets or Tier 2 Assets (reference to a liquid market price because of the purchases by the Federal Reserve at 100 cents on the dollar. Under auditing and reporting rules this is all legal despite the fact that the bonds are (a) not owned by the banks and (b) are worthless because they were issued by REMIC Trusts that never received the proceeds of sale of the MBS.

Second, the banks are being allowed to launder their own ill gotten profits through their “proprietary trading” desks. I didn’t see the purchases by the Federal reserve coming because I naively thought the government would not be complicit in this massive fraud upon the American people. But I did predict as far back as 2007 that the earnings reports of the banks.

If you are pursued for deficiency I think there are numerous defenses that can be raised. This development, based upon the arrogance of the banks, might be the exact vehicle homeowners, students and other borrowers are looking for. While the collectors will assert that the case is over and a judgment was rendered, borrowers have an opportunity to raise several issues including “show me the money!” If the whole thing can exposed as a fraudulent effort to collect money that was owed to a party who didn’t even know they were being cheated (investors in REMICs) both the delinquency and the foreclosure might be eviscerated.

We also see a strong uptick on the number of homes that are cleaned out when there was no hint of foreclosure. Why are these “mistakes” happening? The answer is simple — the banks have created the illusion of “Chinese walls that often bleed over into reality. They have three or more computer systems that draw on different indexes and database applications that function outside of the purview of the custodian of records — which is why the no certificate, affidavit or testimony of a records custodian is EVER offered in litigation. The records custodians simply don’t know and have plausible deniability as to the actual conduct of the bank that employs them.

And why would the banks oppose the Smart programs offered by charitable institutions and the more aggressive AMGAR program started by livinglies? In both cases they get paid all they are going to get paid from the property sale. In the Smart programs around the country, the association buys the property at auction or from the “REO” inventory. Then they sell it back to the homeowner under reasonable mortgage terms, and sell off the mortgage in the secondary market. In AMGAR, the offer is made to pay the entire amount claimed as due — if the bank can prove payment, ownership and balance. WHY ARE THE BANKS OPPOSING METHODS TO PAY THEM IN FULL?

And then there is the period in which homeowners have a right of redemption. It seems there are several options available to homeowners even if they flat out lose — they can still sell the house, pay off the fraudulent judgment and pocket the profits.


Here are some of the other news stories to give you context:

The Forbes article takes issue with Robert Schiller’s chilling assessment of our economic prospects. The problem is he is a Nobel prize winner who studies this day in and day out while the editor’s of Forbes are only aware of the surface data. Schiller is right and as he predicted along with dozens of others (including myself) the cause is the crisis in household debt which is driven mostly by “mortgage” debt. The Federal Reserve, at least until Yellen became Chairman, has been more interested in propping up the banks even if it is based upon several layers of outright lies. Household wealth has vanished and the debt crisis is flowing over the top. AND now the banks have the temerity to pursue delinquency judgments — again using their time-honored technique of distancing themselves from remote entities that are simply debt collectors.

Why Deutsch Lost So Badly — Because They Should: Neil Garfield Show Tonight 6pm

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There are several important things about the decision from the first District Court of Appeal in Florida filed on October 14, 2014. Some of them have already been discussed in recent articles on this blog. But I think the most important thing that this case clearly illustrates is that while a lender can win a foreclosure case, a pretender lender cannot win and doesn’t belong in court. One layer down from that is the real key to justice for homeowners, to wit: the assumption that the homeowner received a loan from the originator is generally wrong. If it was right, each transfer, endorsement or assignment would be as a result of the transaction in which the loan documents were purchased for value in good faith and without knowledge of the borrower’s defenses. That would mean that the end of the chain claimed by the foreclosing party would be a holder in due course. And that would mean that all of the suits in foreclosure would consist of either the original lender, who actually made the loan, or a successor who actually paid to acquire it. There wouldn’t be any valid defenses other than payment.

The Deutsche case shows that there are essential flaws in the alleged securitization process.  These flaws consist of violation of New York State law, the provisions of the pooling and servicing agreement, and the reasonable expectations of the investors who thought that their money was going into a REMIC trust. This also includes the intentional withholding and nondisclosure of other parties who are involved in the alleged origination of the loan and who were paid fees to act as though they were participants in a standard mortgage transaction. This act is what the Deutsche case highlights. Court found that pretending to be a lender is not the same as being a lender. The tone of the decision in the case a significant degree of displeasure with both the banks and their attorneys.

The actions and non-actions by Deutsche before and during the lawsuit clearly illustrate the fact that securitization was a myth. Adam Levitin calls it “securitization fail” which is a generous assessment of what was done with the investor money and how borrowers were lured into deals that were catastrophes waiting to happen —  to the benefit of the underwriting banks that were creating trades using money that belonged to the investors, bonds that belong to the investors, and false notes and mortgages referring to a debt that never existed. This is the part that is most difficult for both borrowers and their attorneys. They know that money was at the closing table. What they don’t is whose money appeared at closing. It was of course the money of investors that was illegally diverted it from the trust that issued the mortgage-backed securities.

We will discuss the Deutsche case other things tonight along with questions and answers on our radio show.

Center for Public Integrity Seeking Emails Between Florida Judges


This is why I think that the bell ringers of each state should collaborate and not just compete. Tom Ice is one of those bell ringer lawyers who is constantly looking for new ways, out of the box, that will produce the truth about the due process allegedly afforded borrowers in the court. All of us who have been to court know the same thing: that the due process is an illusion on the rocket dockets with senior retired Judges whose payroll is funded by the banks.

Going into any courtroom anywhere in the state and you hear the same phrases used by the sitting Judge. It is as though they were all getting scripts from the same source. In fact any experienced lawyer would tell you that where the wording is the same amongst a number of different people on the same subject, that alone is evidence of a common source, whether disclosed or not.

So Tom Ice is working with the Center for Public Integrity to get the emails between the Judges — and any other public information  guaranteed under the Sunshine Law. Except that they are encountering considerable resistance that only adds to the suspicion that foreclosure cases are decided long before any evidence is heard. Government agencies who have the information are keeping the emails and other records where the sun doesn’t shine.

I would suggest that Tom Ice be given any help that he needs or asks for and that the chief bell ringers of the state (you know who you are) contact Tom and offer support, which I am doing right here on this post. My feeling is that there is an action lurking here that could be brought in Federal Court against the state of Florida for systematically depriving homeowners of due process and treating them differently than other debtors. I think the action could be broadened to state that the banks are favored from the first instant not because of experience but because the Judges are under pressure to clear the cases off the calendar and because they have been told the way to do that is to enter rulings and judgments against borrowers.

Judges could just as easily have been told to require that the foreclosing party have everything lined up before they set foot in court. Plenty of local rules have done that with certain types of cases. Had they done so, experience shows, the foreclosure “backlog” would have vanished because the foreclosing parties cannot prove ownership, balance or default — unless they treated as though they were holders in due course without ever having alleged that and without ever having to prove that they purchased for value in good faith and without knowledge of borrower’s defenses. If those elements are not ALL there, then the foreclosing party probably has unclean hands by definition — which accounts for why they filed cases and then sat on them while the statute of limitations appeared to run out on TILA claims and deceptive loan practices. The judicial system, instead of dismissing for lack of prosecution allowed these cases to fester until at least some of the borrower’s claims could be considered arguably barred by the statute of limitations.

And it is all because the banks “own the place.” It is bank money fueling the judicial system and it is bank owned politicians who are either not enforcing the laws or making up new laws that are clearly prejudicial to the interests of borrowers. If they really owned the debt, note and mortgage they wouldn’t need to wait. If they really don’t own the debt, note and mortgage then they shouldn’t be allowed to force a family out of their home on the supposition that someone somewhere is owed the money and must have suffered a default because the borrower stopped paying and that someone must have an interest in the note and mortgage that can be enforced. Since we don’t have any evidence we will just presume all that to be true.

This is clearly a case of the old West where they decide whose guilty, and then have a mock trial before they hang him — something they do simply because it takes time to build the scaffold for the hanging. Everybody feels good about “justice,” even though justice was never served. Here is my challenge: make the banks prove ownership,balance and default not with hearsay documents that ABOUT the underlying transactions but with actual evidence that the underlying transactions truly exist. If they had it, they would have produced it.

When you ask for it they say we are not entitled to it. Why not? Remember that presumptions at trial are irrelevant in discovery, where the borrower is absolutely entitled to ask questions about the underlying transactions and demand that the transaction documents be produced so the borrower can rebut the presumptions that would be used at trial. Failure to allow discovery on these issues closes off any hope for most borrowers to get the information from the only source that has it. It is circular reasoning to think that the presumption at trial is a bar to interrogatories or a Request to Produce before trial.

Fla 1st DCA Turns the Corner: Deutsch Crashes and Burns and No Retrial

THIS is what I have been talking about for 7 years. The general consensus has thrown in the towel — just as appellate courts are turning up the heat. The appeals courts don’t like what they see on the trial level. They don’t like what they see in terms of behavior of banks who file cases and keep them lingering for many years. And they don’t like the use of presumptions when the facts are different. In this case the Appellate Court didn’t just say Deutsch loses. They decline to allow the case to be retried for exactly the reason I have said repeatedly — once they have had their chance, the banks should not be allowed a second bite of the apple.

More importantly this illustrates how the Plaintiffs have no right to bring foreclosure actions. The only way they get away with it is by applying “presumptions” that are contrary to the actual facts that rebut those presumptions. In this case the trial court applied exactly those presumptions causing the burden of proof to be shifted to the borrower. The appellate court correctly stated that the prima facie case of the Plaintiff did not exist. No proof was required from the Defendants. The appellate court ordered the case to be involuntarily dismissed with prejudice.

Not all cases present the same fact patterns. This does not close things out for all foreclosures, but it provides a guide to how lawyers should argue the cases starting at the beginning of their engagement in the case.


Opinion filed October 14, 2014.
An appeal from the Circuit Court for Duval County.
A. C. Soud, Jr., Judge.
Austin T. Brown of Parker & DuFresne, P.A., Jacksonville, for Appellant.
Jeffrey S. York and N. Mark New, II of McGlinchey Stafford, Jacksonville and Latoya O. Fairclough, Choice Legal Group, P.A., Fort Lauderdale, for Appellee

Finally, Deutsche Bank’s Exhibit 5 was submitted as a “payment history” for the debt at issue. The computer-generated pages indicate preparation by SPS for some pages and Washington Mutual Bank for other. Counsel for Appellants objected to the lack of foundation to admit this hearsay document into evidence and noted that Mr. Benefield was not a records custodian for SPS or any of the previous loan servicers. See §§ 90.801, 90.803(6), Fla. Stat. The court overruled the objection without discussion and the document was admitted into evidence.

It is well-settled that:

A plaintiff who is not the original lender may establish standing to foreclose a mortgage loan by submitting a note with a blank or special endorsement, an assignment of the note, or an affidavit otherwise proving the plaintiff’s status as the holder of the note. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012).

But standing must be established as of the time of filing the foreclosure complaint.  Focht v. Wells Fargo Bank, N.A.

 124 So. 3d 308, 310 (Fla. 2d DCA 2013) (footnote omitted). Even if exhibits 1, 3, 4 and 5—admitted by the trial court—had
been relevant, properly authenticated, and qualified for the business records exception to the hearsay rule, see Hunter v. Aurora Loan Services, LLC, 137 So. 3d 570 (Fla. 1st DCA 2014), none of Deutsche Bank’s exhibits qualifies as an indorsement from Long Beach Mortgage to Deutsche Bank, an assignment from Long Beach Mortgage to Deutsche Bank, or an affidavit otherwise proving the plaintiff’s standing to bring the foreclosure action on the note and mortgage at issue as a matter of law. Likewise, the record contains no assertion or proof by Deutsche Bank of its standing under any means identified in section 673.3011, Florida Statutes. See Mazine v. M & I Bank, 67 So. 3d 1129, 1130 (Fla. 1st DCA 2011). Absent evidence of the plaintiff’s standing, the final judgment must be reversed.

We decline to remand the case for the presentation of additional evidence because “appellate courts do not generally provide parties with an opportunity to retry their case upon a failure of proof.” Morton’s of Chicago, Inc. v. Lira, 48 So. 3d 76, 80 (Fla. 1st DCA 2010). Deutsche Bank filed its complaint in 2008 and hadmore than five years until the eventual trial to produce competent evidence to prove its right to enforce the note at the time the suit was filed and prove the amount of the indebtedness. When Deutsche Bank finally tried its case in mid-2013, it relied upon a note secured by a mortgage payable to the order of the original lender, a specific indorsement transferring the debt to an entity other than Deutsche Bank, a single witness employed by the latest in a succession of “loan servicers,” and upon unauthenticated, largely unexplained papers it advanced as proof of its standing. This failure of proof after ample opportunity is no reason to provide Deutsche Bank with a second opportunity to prove its case on remand. See Wolkoff v. American Home Mortg. Servicing, Inc., ___ So. 3d ___, 39 Fla. L. Weekly D1159, 2014 WL 2378662 (Fla. 2d DCA May 30, 2014); Correa v. U. S. Bank, N.A., 118 So. 3d 952, 956 (Fla. 2d DCA 2013).

The final judgment of foreclosure is reversed due to the insufficiency of the evidence to support the judgment. This case is remanded for the entry of an order of involuntary dismissal of the action.


Breakdown of the Robo Signing “Scandal” Settlement —- Another Elephant in the Living Room

For assistance or information regarding your loan or foreclosure, collection attempts and other notices of delinquency, default or demands for payments, Attorneys and Borrowers may call 954-495-9867 or 520-405-1688. We provide expert witness consultation, testimony, reports and litigation support with a complete team that will produce memoranda, discovery and motions as well as preparation for trial, motions in limine, suggested voir dire and direct examination and cross examination questions.



The story is about how the settlements are broken down. But the significance of the story is that the government is not taking the next logical step.

The settlement with ten of the banks was first announced on Jan. 7 and separate settlements with HSBC US:HBC   and two other banks came later in the month.

At issue are deficient practices on mortgage servicing and processing, improper fees, wrongful denial of modification, and the robo-signing scandal — the practice of assigning bank employees to rapidly approve numerous foreclosures with only cursory glances at the glut of paperwork to determine if all the documents are in order.

The articles breaks down the payment of fines, which from prior reports appears to be levied against the investors by the banks who committed the wrongful acts. If the practices were DEFICIENT or IMPROPER or WRONGFUL, why is there not also a breakdown of what exactly was done and why it matters.

If the Banks are paying fines for actions leading up the foreclosure then why is the foreclosure being treated as presumptively valid?

Why are we treating the note and mortgage as presumptively valid because they are “facially” valid when we know for a fact that improper, wrongful and predatory practices were used at the closing?

How do we know that ANYONE in the “foreclosing chain” has any economic interest in the outcome — except for recovery of “servicer advances” and barring liability for refunds and repurchases for the bankers that created pandemic title problems and gross fraud against the investors, the borrowers and others.


Our government is complicit in the continuing fraud on investors, borrowers, taxpayers, and the States who had to scramble to “process” (code for expedite foreclosure) an unprecedented wave of foreclosures. The economy, the pressure on state judiciaries, and the pressure on state and Federal economies, would ALL believed if the following was actually implemented. I would point out that many of these suggestions or guidelines have been enacted in some states, resulting in a huge drop in the number of foreclosures.

  1. A party seeking foreclosure must file with the claim in both judicial and non-judicial states, copies of actual transfers of money in the chain relied upon by the foreclosing party. This would be in the form of wire transfer receipts, ACH confirmations and canceled checks.
  2. A party seeking foreclosure should clearly state by affidavit the identity of the party owning the debt (not the note or mortgage).
  3. A party seeking foreclosure should clearly state their claim as a holder, a holder with rights to enforce or a holder in due course.
    1. If the party states that is only a holder, it should not be permitted to foreclose.
    2. If it swears in affidavit form that it is a holder with rights to enforce the note, then it should show all documents that specifically grant the right to enforce, the party on whose behalf the note is being enforced, and proof of ownership of the debt by the party named as the party granting the right to enforce.
    3. If it swears status as a holder in due course, then it must show satisfaction of the four elements that form the basis of its prima facie case:
      1. Purchase for value
      2. Delivery of Note and history of deliveries
      3. Acting in good faith
      4. Without knowledge of borrower’s defenses
    4. If no holder in due course is named, then enforcement of the mortgage should not be permitted.
    5. If the owner of the debt is different than the party holding the note, then the enforcement of the mortgage should not be permitted — unless a nexus is alleged and attached to the lawsuit as an exhibit and as an exhibit in non judicial actions when a substitution of trustee is filed, when a notice of default is sent, and when a notice of sale is set.
  4. The party seeking foreclosure must show a chain of actual financial transactions with actual proof of payment starting with the loan and continuing with each alleged transfer of the debt, the note or the mortgage.
  5. Courts must be prohibited in foreclosure cases from using presumptions that conflict with the known context along with conflict in the credibility of the party proffering evidence. The “facially valid” presumption should either be eliminated in these cases or discovery should automatically include proof as outlined above that the “facially valid” documents speak the truth as to the underlying transactions.
  6. Discovery requests should be presumed allowable if it relates to ownership, balance, or default. Objections or refusal to answer should result in sanctions against the foreclosing party and if the party persists in stonewalling it should result in involuntary dismissal of the foreclosure or sale.
  7. Any claim in any venue for any purpose that a party other than the lender designated on the mortgage and note must be accompanied by a sword detailed history (with exhibits of actual transactions and agreements) of the chain of money, the chain of ownership of the  debt, the note and the mortgage and the existence of a default.
  8. If servicer advances were paid to the creditors, the sworn statement must explain in a sworn statement with exhibits the amount of such payments and the basis for declaring a default on the part of the creditor.
  9. If the servicer is pursuing foreclosure because it is the only way it can present a claim for “recovery” of servicer advances, then it must submit a sworn statement with exhibits, that shows each distribution to the creditors, and that shows what bank account the money came from and the owner of the bank account.
    1. The servicer must explain whether it is “Secured” by the mortgage that is sought to be enforced.
      1. If it is not secured by the mortgage, then it must bring a separate action against the borrower. If the only claim is the servicer advances, then the foreclosure must be involuntarily dismissed.
  10. No records shall be admitted in court proceedings or acceptable in non court proceedings as business records qualifying as an exception from the hearsay rule without an affidavit from the actual records custodian of the entity for whom the records are being proffered and an affidavit from a person with actual personal knowledge as to how those records were prepared, the methods of processing data, and whether the records consists of verified data or if they rely upon assumptions, and if so, a detailed list of those assumptions.
    1. Persons hired to be professional “witnesses” with no other connection to the entity that employs them should be deemed as legally incompetent to testify.
  11. The burden of proof on conditions precedent to bringing the action shall at all times be on the party seeking foreclosure. This includes the existence of ownership, balance, and the presence of a claimed default on behalf of the owner of the debt. This conforms with existing law where the party seeking affirmative relief must provide all information related to the subject matter in dispute where the party is sole party with access to those records and witnesses.
  12. If a transaction is void under the governing law of any State, it cannot be admitted into evidence. If such a transaction is relied upon by the party seeking foreclosure in proving the debt, the note or the mortgage or any transfer then the action for foreclosure must be dismissed with prejudice.
    1. The transfer documents and the governing documents of the party claimed to be the owner of the debt, note or mortgage are relevant and must be offered in evidence upon the testimony of a witness who has personal knowledge of such documents including but not limited to the Pooling and Servicing Agreement of a REMIC Trust, if any, the Prospectus, the distribution reports to investors, assignment, endorsement or other evidence that explains the transfer of the debt.
    2. In cases where the debt, the note or the mortgage is subject to claims of “Securitization” the party relying upon such narrative shall be required to prove that the debt, note and mortgage was acquired by the REMIC the Trust and remains in the sole ownership, care, custody or control of the party claimed to be the owner of the debt, the ntoe and the mortgage.

The above is not the law of any specific states, most of which ignore the precepts outlined above. Consultation with licensed attorneys is required before any part of this article is used to make any decision or take any action in contesting the debt, the note or the mortgage.


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