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BAP Panel Raises the Stakes Against Deutsch et al — Secured Status May be Challenged

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ALERT FOR BANKRUPTCY LAWYERS — SECURED STATUS OF ALLEGED CREDITOR IS NOT TO BE ASSUMED

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I have long held and advocated three points:

  1. The filing of false claims in the nonjudicial process of a majority of states should not result in success where the same false claims could never be proven in judicial process. Nonjudicial process was meant as an administrative remedy to foreclosures that were NOT in dispute. Any application of nonjudicial schemes that allows false claims to succeed where they would fail in a judicial action is unconstitutional.
  2. The filing of a bankruptcy petition that shows property to be encumbered by virtue of a deed of trust is admitting a false representation made by a stranger to the transaction. The petition for bankruptcy relief should be filed showing that the property is not encumbered and the adversary or collateral proceeding to nullify the mortgage and the note should accompany each filing where the note and mortgage are subject to claims of securitization or a “new” beneficiary.
  3. The vast majority of decisions against borrowers result from voluntary or involuntary waiver, ignorance and failure to plead or object on the basis of false claims based on false documentation. The issue is not the signature (although that probably is false too); rather it is (a) the actual transaction which is missing and the (b) false documentation of a (i) fictitious transaction and (ii) fictitious transfers of fictitious (and non-fictitious) transactions. The result is often that the homeowner has admitted to the false assertion of being a borrower in relation to the party making the claim, admitting the secured status of the “creditor”, admitting that they are a creditor, admitting that they received a loan from within the chain claimed by the “creditor”, admitting the default, admitting the validity of the note and admitting the validity of the mortgage or deed of trust — thus leaving both the trial and appellate courts with no choice but to rule against the homeowner. Thus procedurally a false claim becomes “true” for purposes of that case.

see 11/24/14 Decision: MEMORANDUM-_-ANTON-ANDREW-RIVERA-DENISE-ANN-RIVERA-Appellants-v.-DEUTSCHE-BANK-NATIONAL-TRUST-COMPANY-Trustee-of-Certificate-Holders-of-the-WAMU-Mortgage-Pass-Through-Certificate-Series-2005-AR6

This decision is breath-taking. What the Panel has done here is fire a warning shot over the bow of the California Supreme Court with respect to the APPLICATION of the non-judicial process. AND it takes dead aim at those who make false claims on false debts in both nonjudicial and judicial process. Amongst the insiders it is well known that your chances on appeal to the BAP are less than 15% whereas an appeal to the District Judge, often ignored as an option, has at least a 50% prospect for success.

So the fact that this decision comes from the BAP Panel which normally rubber stamps decisions of bankruptcy judges is all the more compelling. One word of caution that is not discussed here is the the matter of jurisdiction. I am not so sure the bankruptcy judge had jurisdiction to consider the matters raised in the adversary proceeding. I think there is a possibility that jurisdiction would be present before the District Court Judge, but not the Bankruptcy Judge.

From one of my anonymous sources within a significant government agency I received the following:

This case is going to be a cornucopia of decision material for BK courts nationwide (and others), it directly tackles all the issues regarding standing and assignment (But based on Non-J foreclosure, and this is California of course……) it tackles Glaski and Glaski loses, BUT notes dichotomy on secured creditor status….this case could have been even more , but leave to amend was forfeited by borrower inaction—– it is part huge win, part huge loss as it relates to Glaski, BUT IT IS DIRECTLY APPLICABLE TO CHASE/WAMU CASES……….Note in full case how court refers to transfer of “some of WAMU’s assets”, tacitly inferring that the court WILL NOT second guess what was and was not transferred………… i.e, foreclosing party needs to prove this!!

AFFIRMED- NO SECURED PARTY STATUS FOR BK PROVEN 

Even though Siliga, Jenkins and Debrunner may preclude the

Riveras from attacking DBNTC’s foreclosure proceedings by arguing

that Chase’s assignment of the deed of trust was a nullity in

light of the absence of a valid transfer of the underlying debt,

we know of no law precluding the Riveras from challenging DBNTC’s assertion of secured status for purposes of the Riveras’ bankruptcy case. Nor did the bankruptcy court cite to any such law.

We acknowledge that our analysis promotes the existence of two different sets of legal standards – one applicable in nonjudicial foreclosure proceedings and a markedly different one for use in ascertaining creditors’ rights in bankruptcy cases.

But we did not create these divergent standards. The California legislature and the California courts did. We are not the first to point out the divergence of these standards. See CAL. REAL EST., at § 10:41 (noting that the requirements under California law for an effective assignment of a real-estate-secured obligation may differ depending on whether or not the dispute over the assignment arises in a challenge to nonjudicial foreclosure proceedings).
We must accept the truth of the Riveras’ well-pled
allegations indicating that the Hutchinson endorsement on the
note was a sham and, more generally, that neither DBNTC nor Chase
ever obtained any valid interest in the Riveras’ note or the loan
repayment rights evidenced by that note. We also must
acknowledge that at least part of the Riveras’ adversary
proceeding was devoted to challenging DBNTC’s standing to file
its proof of claim and to challenging DBNTC’s assertion of
secured status for purposes of the Riveras’ bankruptcy case. As
a result of these allegations and acknowledgments, we cannot
reconcile our legal analysis, set forth above, with the
bankruptcy court’s rulings on the Riveras’ second amended
complaint. The bankruptcy court did not distinguish between the
Riveras’ claims for relief that at least in part implicated the
parties’ respective rights in the Riveras’ bankruptcy case from
those claims for relief that only implicated the parties’
respective rights in DBNTC’s nonjudicial foreclosure proceedings.

THEY REJECT GLASKI-

Here, we note that the California Supreme Court recently

granted review from an intermediate appellate court decision
following Jenkins and rejecting Glaski. Yvanova v. New Century
Mortg. Corp., 226 Cal.App.4th 495 (2014), review granted &
opinion de-published, 331 P.3d 1275 (Cal. Aug 27, 2014). Thus,
we eventually will learn how the California Supreme Court views
this issue. Even so, we are tasked with deciding the case before
us, and Ninth Circuit precedent suggests that we should decide
the case now, based on our prediction, rather than wait for the
California Supreme Court to rule. See Hemmings, 285 F.3d at
1203; Lewis v. Telephone Employees Credit Union, 87 F.3d 1537,
1545 (9th Cir. 1996). Because we have no convincing reason to
doubt that the California Supreme Court will follow the weight of
authority among California’s intermediate appellate courts, we
will follow them as well and hold that the Riveras lack standing
to challenge the assignment of their deed of trust based on an
alleged violation of a pooling and servicing agreement to which
they were not a party.

BUT……… THEY DO SUCCEED ON SECURED STATUS

Even though the Riveras’ first claim for relief principally

relies on their allegations regarding the assignment’s violation
of the pooling and servicing agreement, their first claim for
relief also explicitly incorporates their allegations challenging
DBNTC’s proof of claim and disputing the validity of the
Hutchinson endorsement. Those allegations, when combined with
what is set forth in the first claim for relief, are sufficient
on their face to state a claim that DBNTC does not hold a valid
lien against the Riveras’ property because the underlying debt
never was validly transferred to DBNTC. See In re Leisure Time
Sports, Inc., 194 B.R. at 861 (citing Kelly v. Upshaw, 39 Cal.2d
179 (1952) and stating that “a purported assignment of a mortgage
without an assignment of the debt which it secured was a legal
nullity.”).
While the Riveras cannot pursue their first claim for relief
for purposes of directly challenging DBNTC’s pending nonjudicial
foreclosure proceedings, Debrunner, 204 Cal.App.4th at 440-42,
the first claim for relief states a cognizable legal theory to
the extent it is aimed at determining DBNTC’s rights, if any, as
a creditor who has filed a proof of secured claim in the Riveras’
bankruptcy case.

TILA CLAIM UPHELD!—–

Fifth Claim for Relief – for violation of the Federal Truth In Lending Act, 15 U.S.C. § 1641(g)

The Riveras’ TILA Claim alleged, quite simply, that they did
not receive from DBNTC, at the time of Chase’s assignment of the
deed of trust to DBNTC, the notice of change of ownership
required by 15 U.S.C. § 1641(g)(1). That section provides:
In addition to other disclosures required by this
subchapter, not later than 30 days after the date on
which a mortgage loan is sold or otherwise transferred
or assigned to a third party, the creditor that is the
new owner or assignee of the debt shall notify the
borrower in writing of such transfer, including–

(A) the identity, address, telephone number of the new

creditor;

(B) the date of transfer;

 

(C) how to reach an agent or party having authority to

act on behalf of the new creditor;

(D) the location of the place where transfer of

ownership of the debt is recorded; and

(E) any other relevant information regarding the new

creditor.

The bankruptcy court did not explain why it considered this claim as lacking in merit. It refers to the fact that the
Riveras had actual knowledge of the change in ownership within
months of the recordation of the trust deed assignment. But the
bankruptcy court did not explain how or why this actual knowledge
would excuse noncompliance with the requirements of the statute.
Generally, the consumer protections contained in the statute
are liberally interpreted, and creditors must strictly comply
with TILA’s requirements. See McDonald v. Checks–N–Advance, Inc.
(In re Ferrell), 539 F.3d 1186, 1189 (9th Cir. 2008). On its
face, 15 U.S.C. § 1640(a)(2)(A)(iv) imposes upon the assignee of
a deed of trust who violates 15 U.S.C. § 1641(g)(1) statutory
damages of “not less than $400 or greater than $4,000.”
While the Riveras’ TILA claim did not state a plausible
claim for actual damages, it did state a plausible claim for
statutory damages. Consequently, the bankruptcy court erred when
it dismissed the Riveras’ TILA claim.

LAST, THEY GOT REAR ENDED FOR NOT SEEKING LEAVE TO AMEND

Here, however, the Riveras did not argue in either the bankruptcy court or in their opening appeal brief that the court should have granted them leave to amend. Having not raised the issue in either place, we may consider it forfeited. See Golden v. Chicago Title Ins. Co. (In re Choo), 273 B.R. 608, 613 (9th Cir. BAP 2002).

Even if we were to consider the issue, we note that the

bankruptcy court gave the Riveras two chances to amend their
complaint to state viable claims for relief, examined the claims
they presented on three occasions and found them legally
deficient each time. Moreover, the Riveras have not provided us
with all of the record materials that would have permitted us a
full view of the analyses and explanations the bankruptcy court
offered them when it reviewed the Riveras’ original complaint and
their first amended complaint. Under these circumstances, we
will not second-guess the bankruptcy court’s decision to deny
leave to amend. See generally In re Nordeen, 495 B.R. at 489-90
(examining multiple opportunities given to the plaintiffs to
amend their complaint and the bankruptcy court’s efforts to
explain to them the deficiencies in their claims, and ultimately
determining that the court did not abuse its discretion in
denying the plaintiffs leave to amend their second amended
complaint).

Extinguishment of Mortgage Lien by HOA/Condo

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D.C. Court of Appeals Extinguishes Lender’s Mortgage Lien Following Lien Foreclosure

Article by Roger D. Winston and Joseph E. Lubinski

Brought to my attention by Charlie Lincoln and Charles Koppa, forensic analyst

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For unknown reasons I cannot upload the email that was sent to me by Charles Koppa which enclosed the email from Lincoln who I presume was quoting from an article by Winston and Lubinski.

In many states, including Florida, the statutes protect homeowner associations and condominium associations from foreclosure abuse by the banks. The usual method of protection is to give the Association lien for unpaid assessments priority over any claim by any party asserting rights arising from a lien encumbering the property pursuant to a recorded mortgage.

This protection was put in place as a result of banks delaying foreclosure so they would not have to pay for the association assessments, taxes, maintenance and insurance. I have previously written about this over the years. Apparently attorneys for homeowner associations and condominium associations have realized that they can protect their clients. Where the assessments have not been paid pursuant to a declaration of condominium or a declaration of restrictions the Association can file a lien with the county recorder’s office. Upon proper notice, the Association can file a foreclosure action naming not only the unit owner, but also other lien holders including parties claiming rights under a mortgage.

A recent decision by the District of Columbia Court of Appeals, the associations assessment lien was deemed senior to mortgages and deeds of trust “to the extent of the common expense assessments based on the periodic budget adopted by the unit owners Association which would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce the lien.”

The case is Chase Plaza condominium Association v  J.P. Morgan Chase Bank. The Court of Appeals reversed the trial court stating that the foreclosure of the Association’s Lane extinguished the alleged lenders mortgage lien. “The court based its decision on common-law principles of lean priority and the absence of a clear intent in the associations governing documents to subordinate the associations assessment lien as against mortgages and deeds of trust.”

This decision will no doubt have significant impact on litigation between associations and alleged lenders. It is also an opportunity to distinguish between the proof presented by the Association at trial (or summary judgment) and the proof presented by the alleged lender.

The Association will bring in its bookkeeper or management agent who will be the party who keeps the books for the Association and will be able to testify as to all details concerning payments received from anyone, how they were posted, and what balance is due using simple arithmetic.

In cases where the loan is subject to claims of securitization the alleged lender will be relying upon layers of presumptions and assumptions rather than proof. This will highlight the essential defects and fraudulent nature of claims to collect, enforce or foreclose on mortgages that should be nullified or on assignments that are void.

This presents some interesting opportunities for both associations and unit owners who are having trouble with their lender. There does not appear to be any prohibition against the Association entering into any agreement with the unit owner who is delinquent in his or her assessments. The Association could extinguish the mortgage lien and then rent or sell the unit to the original unit owner. This would avoid another housing unit becoming a statistic in zombie foreclosures. It would also avoid many foreclosures that would otherwise be filed by alleged lenders.

The authors note that “for lenders the decision complicates loan enforcement strategies on current loans and may require modification to underwriting requirements and loan document escrow provisions in the future. In addition, this interpretation may result in new secondary mortgage agency requirements for condominium documents to require waivers, notices and/or opportunities for lenders to cure.”

The protection offered by legislatures of each state that has passed similar legislation is therefore expected to come under challenge by the banks, whose abuse went to the protection of associations in the first place. It will be interesting to see what happens.

Business Records Exception — The Loophole That Needs Closing

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see AppellateOpinion Holt v Calchas 4th DCA decision

The clear assumption in this case is that Wells Fargo had stepped into the shoes of the lender and that if Wells Fargo did not win or if its surrogate did not win, it was assumed that the homeowner would be getting a free house, a free ride and a windfall at the expense of Wells Fargo Bank. Despite years of articles and treatises written on the subject, the courts have still not caught up with the basic fact that both the lenders and borrowers were victims of an illegal and fraudulent scheme. At the very least, the court owes it to our society and to all parties involved in foreclosure litigation, to enforce the laws that already exist —  especially the rules concerning the burden of proof in a foreclosure action.

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The Holt decision is a curious case. There are a number of unique factors that occurred in the trial court and again in the appellate court. The first judge recused herself shortly into the trial and was replaced by a senior judge. There is no transcript of the proceedings prior to the point where the senior judge took over. At the same time the homeowners attorney was also replaced. So my first question is how anyone could have reached any decision. In the absence of the transcript of the proceedings leading up to the recusal of the original judge I find it troublesome that either the judge or the attorney for the homeowner could come to a decision or develop any trial strategy or theory of the case for the defense of this foreclosure case.

The second thing that I have trouble with is that the homeowner filed the appeal based on three different theories, to wit:

(1) the proffered promissory note, mortgage, and assignment of mortgage should not have been admitted into evidence—  an argument that the appellate court rejects;

(2)  the homeowner’s motion to dismiss should have been granted for failure to prove compliance with paragraph 22 [default, reinstatement and acceleration] of the mortgage —  with which the appellate court agreed. Since the appellate court agreed with this point and reversed the trial court it would seem that the case should have been dismissed, but instead the 4th District Court of Appeal chose to remand the case for further proceedings thus giving a second bite of the apple to the party who was claiming the right to foreclose —  despite the finding that the trial was over and on appeal and the foreclosing party had failed to make its case. If the homeowner had failed to prove its defenses, would the appellate court have issued legal advice to the homeowner and remanded for another bite at the apple?

(3)  the payment history should not have been admitted into evidence over the hearsay objection raised by the homeowner. The court goes into great lengths essentially tying itself into knots over this one, but eventually sides with the homeowner. Instead of ordering the entry of judgment for the homeowner, the court remanded the action for further proceedings in which the foreclosing party, having received legal advice from the District Court of Appeal, is now permitted to retry the case to fill in the blanks that the appellate court had pointed out with great specificity and particularity.

While I agree with much of the reasoning that is stated in this appellate decision, I still find it very troublesome that there remains an assumption and perhaps even a bias in favor of the foreclosing party. This is directly contrary to the rules of court, common law, and statutory law. The party bringing a claim for affirmative relief (like foreclosure) must bear the burden of proving every element required in their cause of action. This is not a motion to dismiss where every allegation is taken as true. At trial, it is the opposite — there is no case for the homeowner to defend unless the foreclosing party establishes all elements of its right to foreclose. If they fail to do so, the other side wins. In the interest of justice as well as finality courts do not easily allow either side to have another trial unless there are exceptional circumstances.

(In non-judicial states, this is particularly perplexing — the homeowner is required to sue for a TRO (temporary restraining order). In actuality the homeowner probably should have sued immediately upon the notice of the purported “substitution of trustee.” But the point is that the homeowner is required to prove a negative as the non-judicial statutes are construed. What SHOULD happen is that if the homeowner sues for the TRO and objects to the notices filed, challenges the standing of the “new” beneficiary on the deed of trust, and otherwise denies the elements of a foreclosure action, then the parties should be realigned with the new beneficiary required to plead and prove its standing, ownership and ability to prove the default and the balance owed.)

The next thing I find potentially troublesome is that the tactic of inserting a new entity as plaintiff or as servicer in order to shield the actual perpetrator was clearly employed in this case, although it seems not to have been mentioned in the trial court or on appeal. In this case an entity called Consumer Solutions 3 LLC was substituted for Wells Fargo. Then Wells Fargo was substituted for Consumer Solutions. This is a game of three card monte in which everyone loses except for the dealer — Wells Fargo.

As long as they are going back to trial, it would seem that the homeowner would be well served to do some investigations into the parties, and to determine what transactions if any had actually occurred. If there were no transactions, which I think is the case, then any paperwork generated from those fictitious transactions would be completely worthless, lacking in any foundation and could never be enforced against anybody —  with the possible exception of a holder in due course.

 BUSINESS  RECORDS EXCEPTION:

I am continually frustrated by the fact that most people simply do not consider the elements of the business records exception to the hearsay rule within the context of why the hearsay rule exists. By its very nature hearsay tends to be untrustworthy, untested and usually self-serving. That is why the rule exists. It bars any document or testimony offered to prove the truth of the matter asserted unless the person who spoke or wrote the words is present in court to be cross examined as to their personal knowledge, whether they had an interest in creating one appearance or another,  or whether the entire statement could be impeached.

Instead most people on all sides of foreclosure litigation seem to think that the business record should be admitted into evidence unless there is a compelling reason to the contrary. This is incorrect. And if you just scratched the surface of any of these claims you will find that the party who is seeking to introduce these hearsay statements into evidence has a vested interest in the outcome of the case and absolutely no direct knowledge of any of the facts of the case.

Like Chase Bank does with SPS, Wells Fargo has inserted this entity that is essentially run by a hedge fund (Cargill) to prevent any employee or contract party from testifying on behalf of Wells Fargo, because Wells Fargo knows that it has already been sanctioned millions of dollars for telling lies in court.

So instead they have somebody else come in to tell the lies, and that witness is trying to say that they are familiar with the record-keeping of their own company which includes the record-keeping of the previous company, Wells Fargo. Consumer Solutions is a shame shell that never did anything but rent its name for foreclosures while its parent, Cargill, received compensation  (a piece of the pie) for doing nothing.

This obvious ploy has worked for nearly a decade but is coming under increasing scrutiny — with Judges musing out loud about the shuffling of “servicers” and “lenders” and creditors. In an effort to stifle any real challenge to foreclosures courts have often held that the securitization documents are “irrelevant.”

So the courts take jurisdiction over the action and the parties by virtue of claims of securitization, authority allegedly granted by a pooling and servicing agreement, and ownership “proven” merely by claiming it on the basis of self-serving fabricated documents not subject to scrutiny, and a default and balance that excludes the payments received by the creditors from servicer advances and other third party payments paid without right of subrogation.

Then the courts limit discovery, overrule objections and allow the party initiating foreclosure to “prove” its case by using dubious legal “presumptions” instead of facts, most of which were denied by the homeowner.

And now that the Wall Street banks perceive a risk in having real people with real knowledge testify, because they might admit or testify to things that might hurt them, they insert a complete stranger to the process and double down on “business record exception” to get paperwork into evidence, much of which is completely fabricated and nearly all of which contains errors in computation by exclusion of (a) the fact that the creditors were paid every payment despite the declaration of default by the “servicer” and (b) deducting those payments from the original debt owed to those investors who advanced funds for the origination or acquisition of “loans.”

In the Holt decision the 4th DCA declares that the assignment was properly allowed into evidence because it was a “verbal act” and not offered to prove the truth of the matter asserted. Once in evidence however, the contents were taken as true shifting the burden of proof to the homeowner who was stone walled in discovery. The homeowner in many cases is not allowed to compel the production of evidence of payment or consideration for the assignment — without which the assignment is merely an empty document conferring no rights greater than the assignor had at the time of the alleged “assignment”. Most often the assignor did not require payment for the simple reason that they too had no money in the deal.

PAYMENT  HISTORY HEARSAY OBJECTION

The court inserts Florida Statute 90.803(6)(a), which is part of the evidence code, providing for exceptions to the hearsay rule for business records. In that statute is the general wording for the types of records that might qualify for the exception. But the court completely ignores the last words of that statute — “unless the sources of information or other circumstances show lack of trustworthiness.” (e.s.)

The question is why should we trust a servicer or its “professional witness”? The witness is there and was often hired for the sole purpose of testifying in foreclosure trials. If they lose, they risk their jobs. The “servicer” whether they are designated in the PSA or have been slipped in as another layer of obfuscation, has an interest that is in conflict with the the actual creditors — recovery of “servicer advances” (which were paid from funds provided by the Master Servicer — often the underwriter and seller of mortgage bonds to investors) and to make more money because they are allowed to collect a vast amount of “fees” for enforcement of a “non-performing” loan.

The fact is that the servicer advances negates the default and might give rise to a new cause of action for unjust enrichment against the homeowner but that claim would not be secured. This in turn leads to the unnatural conclusion of aggravating the the alleged damages by forced sale of the property as opposed to modification and reformation of the loan documents to (a) name the true creditor and (b) use the true balance owed to the creditors.

Thus both the specific witness and the company he or she represents have a vested interest in seeing to it that the foreclosure results in a forced sale for their own benefit and contrary to creditors who have no notice of the pending action. At the very least, this certainly raises the question of trustworthiness. Add to that the fraudulent servicing practices, the lies told during the “modification” process, and I would argue that the source and circumstances raise a presumption that the testimony and business records not trustworthy.

Quoting Florida Statute 90.803(6)(a) the court goes not to set forth the elements of the business records exception — the issue being that ALL elements must be met, not just some or even most of them:

  1. The record was made at or near the time of the event [so in many cases where SPS was inserted as the “servicer” when in fact it was merely an enforcer without knowledge of prior events, it is impossible for the records of SPS  to contain entries that were made at or near the time of any relevant event].
  2.  the record was made by or from information transmitted by a person with knowledge [ if the court permitted proper discovery, voir dire, and cross examination is doubtful that any witness would be able to testify that the record was made by a particular person who had actual knowledge]
  3.  the record was kept in the ordinary course of a regularly conducted business activity [ while it might be true that the actual servicer could claim that it’s records were in the ordinary course of a regularly conducted business activity, it is not true where the witness is a representative of a “new” servicer for plaintiff —  neither of whom were processing any data concerning the loan from the moment of origination through the date that the foreclosure was filed]
  4.  that the record was a regular practice of that business to make such a record [ here is where the courts are in my opinion making a singular error —  by accepting proof of only the fourth element required for the business records exception, trial court and appellate courts are ignoring the other elements and therefore allowing untrustworthy documents into evidence.  “While it is not necessary to call the individual who prepared a document, the witness to open a document is being offered must be able to show each of the requirements for establishing a proper foundation.” Hunter v  or Aurora loan services LLC, 137 S 3d 570 (Fla 1st DCA 2014).

The Holt Court then goes on to analyze several cases:

  1. Yisrael v State 993 So 2d 952, 956 (FLA 2008) — a Florida Supreme Court decision quoting the elements of the business records exception. see sc07-1030
  2. Glarum v LaSalle Bank, N.A. 83 So 3d (Fla 4th DCA 2011) — where the witness was unable to lay the proper foundation for the business records exception  because the witness testified that he “did not know who, how, or when the data entries were made into [ the previous mortgage holders’] system and he could not stated the records were made in the regular course of business.” ( My only objection to this is the wording that was used. The predecessors in the document chain are referred to as “mortgage holders” —  indicating an assumption which is probably not true). see Glarum v. LaSalle
  3. Weisenberg v Deutsch Bank N.A. 89 So 3d 1111 (FLA 4th DCA 2012) — Where the court held that “the deposition excerpts show that [the witness] knew how the data was produced and her testimony demonstrated that she was familiar with the bank’s record-keeping system and had knowledge about data is uploaded into the system.” (My problem with the Weisenberg decision is that the word “familiar” is used generically so that the witness is allowed to testify about the business records — without any personal knowledge about the trustworthiness of the data in those records — again with the apparent assumption that the foreclosing party SHOULD win and the second assumption being that the homeowner should not be allowed to take advantage of hairsplitting technicalities to get a free house.  In fact it is the servicer that is taking advantage of such technicalities by getting business records into evidence without verification that those are all the business records. For example, the question I often ask is who did the servicer pay after receiving payment from the borrower or anyone else? The records don’t show that — thus how can the court determine the balance on the creditor’s books and records? The underlying false assumption here is that the servicer records ARE the creditor’s records even though the creditors have not even been identified.)
  4. WAMCO v Integrated Electronic Environments 903 So 2d 230 (Fla 2d DCA 2005) —  Where another appellate court held that “a document which contains the amount of money owed on the loan was admissible under the business records exception even where the testimony as to the amount owed was based on information from a bank that previously held the loan.” (I think this decision was at least partially wrong. The witness testified that it was part of his duties to oversee the collection of loans that the bank urges and the initial members he used his calculations were provided by the previous bank.  In my opinion the court properly concluded that the witness to testify —  that he should have been limited to the business records of the company that employed him. Witness knew nothing about the previous bank practices and did not employ any verification processes. see 2D04-2717
  5. Hunter v Aurora Loan Services 137 So 3d 570 (Fla 1st DCA 2014) — where the witness was incompetent to testify and could not lay a proper foundation for the business records exception and in which the HOLT Court quotes from the Hunter decision with obvious approval:  “At trial, a witness who works for the current note holder, but never worked for the initial note holder, attempted to lay the foundation for the introduction of records pertaining to prior ownership and transfer of the note and mortgage as business records. The witness testified that based on his dealings with the original note holder, the original note holders business practice regarding the transfer of ownership of loans was standard across the industry. He could not testify, based on personal knowledge, who generated the information. He also testified, in general fashion and without any specifics, that some of the documents sought to be introduced were generated by a computer program used across the industry  and that records custodian for the loan servicer was the person who usually it puts the information obtained in the documents. The trial court admitted the documents into evidence.” see hunter-v-aurora-loan-servs-llc

The most interesting quote from the Hunter decision is “absent such personal knowledge, the witness was unable to substantiate when the records were made, whether the information they contain derived from a person with knowledge, whether the original note holder regularly make such records, or indeed, whether the records belong to the original note holder in the first place. The testimony about standard mortgage industry practice only arguably established that such records are generated and kept in the ordinary course of mortgage loan servicing.” 

Now that you have won your “free “house, what happens next?

For further information please call 954-495-9867 or 520-405-1688. We provide litigation support in all 50 states.

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On an upbeat note, we are getting more and more communication from homeowners who have won their cases outright and not subject to confidentiality agreements. Fortunately these happy homeowners have realized that the fight is not yet over but that they are obviously in control of the narrative. A word of caution about the case cited in yesterday’s article where the Judge granted a “free house” to a homeowner. The New Jersey bankruptcy case is potentially persuasive but legal authority that the Judge in your case must obey.

Banks have gone to great lengths in framing the narrative on these mortgages and these foreclosures. Almost everywhere you hear the phrase “free house.” Of course nobody really knows what anyone means by that phrase. “free houses” are a myth, just like the trusts, the assignments and the “holders” of the note and mortgage. Preventing the mortgagee from enforcement does NOT give a free house to anyone, regardless of the circumstances. It is a rare circumstance that the buyer of the new house does not expend thousands of dollars or tens of thousands of dollars or even hundreds of thousands of dollars on the house that they think they now own.

I know thousands perhaps millions put a down payment into a house thinking that their payment was equity they would retrieve when the house was sold or refinanced. A typical case I have witnessed is a home purchased for $500,000 with $100,000 down payment —- 20% of the purchase price based upon appraisals that wildly speculative and untrue.

Then the house gets sold in a short sale for $300,000. If that homeowner had fought the bank and the bank was found not to be the owner of the mortgage or note or debt and the mortgage was found to be unenforceable or even void, did that homeowner get the house for free. $100k down, plus $50k in improvements, furnishings etc. The homeowner is out $150,000 no matter what happens and that is not free. There is no such thing as a free house and there never was. But mortgages and notes are sometimes ab initio (from the start), unenforceable or void and in today’s market most of them fall somewhere in that category.

And there is an area of confusion between property law, bankruptcy law and contract law. Which brings us to the case decided in New Jersey by a bankruptcy court judge. It is the case of Washington versus specialized loan servicing and the Bank of New York Mellon as trustee for the certificate holders of an allegedly asset-backed trust.

This case is far from a cure all that will fix all other foreclosures. I doubt the Judge had jurisdiction to declare the mortgage void. And therein lies a potential problem for the homeowner that won here. The homeowner might lose on appeal or still have a problem even if the bank’s appeal is turned down.

I will point out again that Bank of New York Mellon represents itself as trustee for the certificate holders and old minutes any representation for the trust itself. One might conclude that the trust does not exist and that the certificate holders who obviously are the investors are the real parties in interest as I have repeatedly stated for more than seven years.
And by the way, NJ does not have a homestead exemption, so the debt, which is real and if it can be computed after giving credit for all payments to the creditors from all sources, is still owed and the homestead can still be foreclosed based upon a money judgment. So a free house is just not the right term to describe any of this.

I don’t think the judge realized that the investors were being directly represented by Bank of New York Mellon and that the reference to the bank as a trustee was merely a self-serving statement by the bank in order to block any inquiry into the identity of the certificate holders who were the obvious real parties in interest. In the months and years to come the distinction which I am drawing here will become increasingly important in court rooms across the country.

The bankruptcy judge carefully analyzed the statute of limitations and concluded that there was no way that the loan could be enforced and that therefore the claim in bankruptcy was void. The judge that he didn’t like to give anyone a free house but that was what he had to do in this case in New Jersey.

The foreclosure case in the state court was dismissed for lack of prosecution without prejudice. The effect of that dismissal was one of the things that was in dispute that the bankruptcy judge decided. The bad news is that I am not so sure this decision will be upheld if it is appealed. But even if it is upheld I’m not so sure that the homeowner actually received the free house that the judge expressly said was being given to him by the judges decision. Bankruptcy Judges are known to have an inflated view of their jurisdictional authority. The District Court Judge above him in the same courthouse might have been able to declare the mortgage void, but I doubt if a bankruptcy judge has that authority. But the decision to prevent enforcement of the mortgage in the bankruptcy proceeding and the decision to cause the alleged creditor to be unsecured instead of secured (which is what I have been advocating for 7 years) is probably valid.

The judge decided that both the note and mortgage were unenforceable. He also decided that because they were unenforceable that Bank of New York Mellon did not have a secured claim for purposes of the bankruptcy proceeding. The judge went further than that by stating that the underlying lien is deemed void pursuant to 11 USC 506(a)(1) and (d). So for purposes of that bankruptcy proceeding court made a determination that Bank of New York Mellon did not have secured status. The Court also seemed to accept the agreement of both size that Bank of New York Mellon or a specialized loan servicing had the original note and mortgage.

The Question I have is the same question that Is being asked in many circles today. When all is said and done the mortgage still is present in the county records — it was recorded so it still exists in the county records of the County recorder in the jurisdiction in which the property is located. My question is whether in the absence of a court order stating that the mortgage is void or nullified, and in the absence of the recording of such an order at the county recorders office, will this homeowner be legally correct in assuming that the mortgage will not affect his title and that no payment will be required at the time the homeowner seeks to sell or refinance the property.

It may seem like splitting hairs and maybe It is. But I think there’s a difference between a lien that is in the county records and therefore encumbers the title answer the question of the enforceability of the lean. When you pull up the title chain by hand or by computer, the mortgage will be there. Would you buy that property without getting rid of that mortgage? Would you lend money on that property? In this case the Bankruptcy judge has decided for purposes of the bankruptcy proceeding that the secured status of Bank of New York Mellon did not exist.

I question whether that decision automatically means that the mortgage was in fact nullified or void unless the County recorder accepts the court order for recording and the recorded order is interpreted as nullification unemployed mortgage document. And THAT basically means you need to file a quiet title action, which bring you back to attacking the initial loan transaction ab initio (from the beginning). Unless you can say that the note and mortgage should never have been released from the closing table, much less recorded, I think there is a potential problem lurking in the shadows. The homeowner might be prevented from selling or refinancing the home without the AMGAR program or something like it.

Otherwise what it comes time to sell or refinance the property, the homeowner may find that he still must deal with either paying off somebody claiming to own the mortgage or the homeowner is required to file a quiet title action to resolve the question. Of course the longer the homeowner waits before taking any action to sell or refinance the property, more likely it is that the homeowner will in fact end up with the property unencumbered by the mortgage. My point is that I don’t think that question has been answered and I don’t think that the answer will be consistent across the country.

It is my opinion that nullification of the mortgage as a void instrument that never should’ve been released much less recorded is first required for the Court can consider of cause of action to quiet title in favor of the homeowner and specifically against the encumbrance filed in the county records as a mortgage. I would also Council caution on applying this bankruptcy case to other cases in the State judicial system even in New Jersey.

But I would also say that the distaste of people sitting on the bench for hey results that benefits the homeowner signals bias for which there is no proper foundation. There is no question that these loans, debts, notes, mortgages, assignments and transfers. collection modification and foreclosures are all clouded in obscure schemes created by the banks and not the borrowers. 50 million borrowers did not wake up one morning and meet in some stadium with the idea of defrauding the banks and the federal government and insurers, guarantors and investors. But a handful of Wall Street titans who had become accustomed to their power, did in fact arrogantly pursue a scheme that did defraud borrowers, investors, insurance companies and the U.S. government.

To say that nobody can file a foreclosure is not to say that the debt cannot be enforced. There are causes of action based solely on common law or the note. If a real creditor could step forward showing a real advance of funds, they would probably prevail in at least establishing that the debt is owed from the homeowner and possibly get a money judgment. In states that have little or no homestead exemption the lien can be recorded, attaches the chain of title for the house and can be foreclosed as a judgment lien. But of course that would require the party seeking to enforce the debt to show that they actually advanced the money as a creditor. And THAT is the problem for the banks. If they had that evidence there would be no argument over the enforceability of the alleged loan documents that I call worthless.

They would have produced it long ago if the notes and mortgages were valid documents. They didn’t, they can’t, and that is why Elizabeth Warren is absolutely right in demanding that the principal balance of the debt be corrected downward. And it is stink and no crime for a Judge to apply the law evenly and allow the chips to fall where they may. If that means nobody gets to enforce the mortgage it doesn’t mean the homeowner received a free house.

The debt is due, after all adjustments, and it could be enforced by other means — unless the truth is that the borrowers ARE off the hook because the original debt, upon which all other debts deals rely as their foundation, has already been paid off. Then the homeowner doesn’t owe the money on the original debt and if somebody wants to make a case against the homeowner for recovery of what they actually lost then let them bring that action. Otherwise too bad. If the original debt is paid off through any third party payment (i.e., if the certificate holders have received payment in full directly or indirectly on their investment), then there should be no possibility of a mortgage foreclosure because that is the only debt that is allegedly secured by a mortgage. Other parties who have been lurking in the shadows would have to come into the limelight and allege and prove their case including the allegation that they are losing money as a result of these complex and obscure transactions.

The banks started this and they should suffer the consequences. There is plenty of blame to go around. To have homeowners pay the full price for the bank’s misbehavior, for the servicer’s fraud, and the Wall Street bank’s greedy method of siphoning the life out of our economy is just plain wrong. Even if we want to treat the loan documents as real, the consequences should be spread around and not on banks who are reporting higher and higher profits from aggressive release of reserves that comes from money they stole from investors —- a fact that is now dawning upon securities analysts as they downgraded Wells Fargo and other banks.

“FREE HOUSE” in NJ Bankruptcy Court

For further information and assistance please call 954-495-9867 and 520-405-1688. We will be covering this decision on the Neil Garfield show tonight.

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Click in to tune in at The Neil Garfield Show

Or call in at (347) 850-1260, 6pm Eastern Thursdays

see http://stopforeclosurefraud.com/2014/11/18/in-re-washington-bankr-court-d-new-jersey-morris-county-homeowner-gets-a-free-house/

also see Senator Elizabeth Warren Ramping Up Attack: When Will “Principal reduction” become a reality?

This case is notable for several reasons:

  1. The Judge expresses outright that it is general judicial bias that homeowner should not prevail in foreclosure litigation.
  2. Nevertheless this Judge trashes the the claim of SPS (Specialized Loan Services) and BONY (Bank of New York) Mellon leaving the homeowner with what the Judge calls a free house.
  3. The Judge concludes that the mortgage was unenforceable and that the note was unenforceable after a careful examination of the statute of limitations under New Jersey law.
  4. The Judge concludes that the mortgage is void, not just unenforceable, thus clearing title.

While we can be pleased with the result, some of the reasoning might not withstand an appeal, if the foreclosers take the risk of filing one.

Here are some interesting excerpts:

“No one gets a free house.” This Court and others have uttered that admonition since the early days of the mortgage crisis, where homeowners have sought relief under a myriad of state and federal consumer protection statutes and the Bankruptcy Code. Yet, with a proper measure of disquiet and chagrin, the Court now must retreat from this position, as Gordon A. Washington (“the Debtor”) has presented a convincing argument for entitlement to such relief. So, with figurative hand holding the nose, the Court, for the reasons set forth below, will grant Debtor’s motion for summary judgment.
The Defendants accelerated the maturity date of the loan to the June 1, 2007 default date, as acknowledged in the Assignment (dkt. 7, Exhibit L).[10] Moreover, neither the Debtor nor the Defendants have taken any measures under the note or mortgage, or under the Fair Foreclosure Act, to de-accelerate the debt, and the Defendants have further failed to file a foreclosure complaint within 6 years of the accelerated maturity date as required by N.J.S.A. § 2A:50-56.1(a). Accordingly, the Defendants are now time-barred from filing a foreclosure complaint and from obtaining a final judgment of foreclosure.

11 U.S.C. § 502(b)(1) (emphasis added). 11 U.S.C. § 506 controls the allowance of secured claims and provides that, if the claim underlying the lien is disallowed, then the lien is void:

(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless [conditions not relevant here exist].
As explained above, by application of N.J.S.A. § 2A:50-56.1(a) and (c), the Defendants are time-barred under New Jersey state law from enforcing either the note or the accelerated mortgage. As a result, Defendants’ proof of claim 7 must be disallowed under 11 U.S.C. § 502(b)(1) as unenforceable against the Debtor or against Debtor’s property under applicable state law. Having determined that Defendants do not have an allowed secured claim, the underlying lien is deemed void pursuant to 11 U.S.C. §§ 506(a)(1) and (d).[11]
In light of Defendants’ acceleration of the maturity date of the underlying debt as of June 1, 2007, and because neither Debtor nor Defendants took any action under either the mortgage instruments, or the Fair Foreclosure Act, to de-accelerate the maturity date, Defendants’ right to file a foreclosure complaint expired 6 years after the June 1, 2007 acceleration date under N.J.S.A. § 2A:50-56.1(a). Given that Defendants’ putative secured claim is unenforceable under 11 U.S.C. § 502(b)(1), by applicable New Jersey statute, their mortgage lien is void under 11 U.S.C. § 506(d), and the Debtor retains the property, free of any claim of the Defendants. Debtor is to submit a form of judgment. The Court will proceed to gargle in an effort to remove the lingering bad taste.
11] In as much as the Court finds that the Defendants are time-barred from enforcing the note or the mortgage, it is not necessary to address Debtor’s arguments that Defendants lack standing to enforce the note and mortgage based on alleged defects in the Assignment or the alleged impact of a Settlement Agreement.

Robo-signing plus Robo-witnesses: Layers of Lies, Perjury

For Further information please call 954-495-9867 or 520-405-1688

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Servicers and banks were caught falsifying loan documents and transfers of debts, notes, mortgages and foreclosures. Settlements, penalties, fines and consent orders were entered against the perpetrators who had institutionalized practices that clearly violated laws, rules and regulations. For reasons yet to be explained none of those settlements, and little if any money from payment of fines worked to the benefit of the borrowers who were stuck with loan products in which the required disclosure (TILA and Reg Z) was absent. In fact, under the Assignment and Assumption Agreement present in most securitization schemes (but which is still largely ignored) the perpetrators enter into contracts that call for illegal, unfair and improper behavior.

The first major crack in the case for foreclosure came as a few people, including myself, starting in 2007 began to see a pattern. When we asked for documentation of the original loan or documentation of transfers, we would get it if the alleged loan was in litigation. When we asked for the same documentation on alleged loans where the unsuspecting borrower was paying the wrong party under terms that were unenforceable we received nothing.

The conclusion was obvious and unanimous. We all determined that the documents did not exist until foreclosure litigation commenced. The documents, we concluded, were being fabricated using advanced technology that made the documents appear facially valid. By appearing facially valid the banks and servicers claimed that certain legal presumptions applied and pushed through more than 6 million foreclosures displacing more than 15 million people from the home, their lives and their prospects.

Eventually somebody other than myself gave it the name “robo-signing” but it involved much more than merely having a person without any knowledge at all paid a virtual minimum wage, signing documents that were fabricated out of thin air. Thus, according to the San Francisco study, at least 65% of all foreclosures were conducted by parties who were “strangers to the transaction.” Other studies and testimony by the Clerk of recording Offices have concluded that property titles have been twisted beyond repair. Foreclosures only add to the title problems that were created the moment the loan documents were delivered and recorded.

Robo-signing is still present. First by legacy there are hundreds of thousands of cases going through the foreclosure process that the banks and servicers sat on in which the robo-signing documents, essentially forgeries, are the “basis” of their actions. Second robo-signing is still going on, sometimes with a live person and sometimes using advanced technology equipment producing “original” notes that borrowers mistakenly identify as the note they signed at closing.

Now we have a development that is being called “robo-witnessing” (see link below). And you have something called the “boarding process” in which self serving statements are made by an enforcer who was slipped in between the actual claimed servicer and the time of trial. These witnesses know absolutely nothing. Thus they cannot make embarrassing admissions. Their sole scope of employment is to testify and their sole training is about testifying. SPS for example trains people by teaching them how to testify at trial and how to testify at deposition. In most cases they have no experience with the business operations of the “new servicer”, which has never processed a single payment from the borrower or to the creditor.

While most judges have been allowing this bogus testimony from witnesses who know nothing about the loan, nothing about the transfers of the debt, nothing about the alleged default, nothing about the balance due, nothing about servicer advances etc., the trend is that judges are pushing back against this attempted proffer of evidence. As one Judge said, “there is no reason why you have not called a witness from Chase who was the alleged servicer for the loan. Instead you chose to call a witness from SPS who purports to be a servicer but who never performed any task in relation to processing this loan and therefore neither the witness nor the company itself was competent to testify about facts that occurred long before they were appointed for the sole purpose of enforcement with no other discernible reason for their presence. The “boarding process” is merely a self serving review that probably incorporates prior robo-signing and other mistakes and violations of law.”

Practice note: I strongly suggest that you investigate the witness before trial using private investigators, Google and whatever other means you have at your disposal. These cases are coming around to be fact driven, requiring private investigators more than law-driven where the argument is over the application of law. In fact disputes, borrowers are coming out on top in litigation. Where the argument is over the application of law, the banks and servicers seem to still be the clear winner.

see http://www.salon.com/2014/11/18/an_ongoing_criminal_enterprise_why_americas_housing_disaster_is_back_and_wreaking_terror/

also see http://www.npr.org/2014/11/18/364131391/firm-accused-of-illegal-practices-that-push-families-into-foreclosure

Zombies, Banks Ignoring BKR Laws, S Florida Leading Foreclosures, Robo-verification, Housing Worsens

For further information or assistance please call 954-495-9867 or 520-405-1688

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THE NEWS IN REVIEW

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Ocwen still accused and investigated for illegally leading people into foreclosure, loses deal with Wells Fargo

see firm-accused-of-illegal-practices-that-push-families-into-foreclosure

Ocwen down 6.7% as Wells servicing deal officially nixed

  • Ocwen Financial’s (NYSE:OCN) agreement to buy the MSRs on $39B UPB of mortgages from Wells Fargo (NYSE:WFC) was originally announced in January to the great excitement of Ocwen investors. Shortly after, however, Ben Lawsky held up the deal as his office examined the servicing practices at Ocwen, and its relationships with the Altisource companies.
  • The two today announce a mutual decision to cancel the deal. For Wells, the cancellation won’t be material to its financial results.
  • Source: Press release
  • Ocwen is down 6.7% premarket.

Read more at Seeking Alpha:
http://seekingalpha.com/currents/post/2127575?source=ipadportfolioapp_email

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Robo-Verifier Lona Hunt Admits, Twice, to Not Reading Foreclosure Complaint Before Signing Under Penalty of Perjury Full Transcript of Robo Verifier

Robo-signing continues unabated by settlements, fines, penalties and threats — NY Times

http://www.alternet.org/hard-times-usa/what-economic-recovery-more-american-kids-are-homeless-ever-5-worst-states-child

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Banks continue to violate bankruptcy laws and orders of discharge:

DISCHARGE? WHAT DISCHARGE?

  • Real sweethearts if you believe the reports, the likes of JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Synchrony Financial (NYSE:SYF) are being investigated by the Feds for still going after borrowers after their debt has been legally discharged in a bankruptcy.
  • Paying little attention to such court-ordered discharges, the banks reportedly are keeping the debt alive on credit reports, more or less attempting to force borrowers to pay on bills which they no longer owe.
  • The issue, say sources, is the way banks report to credit agencies. Once a debt is voided through bankruptcy, creditors must update credit reports showing that debt is cleared. Banks, however, routinely fail to do so, instead leaving notations of “past due” or “charged off.” A clerical mistake would be one thing, but, according to a number of bankruptcy judges,, banks refuse to make corrections unless the borrower pays.
  • The banks contend they are complying with all federal laws in their collection and sale of debt. Class-action suits have also been filed and the banks are trying to have them thrown out, arguing its third-party debt buyers who are in control.

http://seekingalpha.com/currents/post/2124395?source=ipadportfolioapp_email

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South Florida at Top of Foreclosure Crisis Again

Zombie Foreclosures Zooming in Raleigh North Carolina

Cities Require Bond before Foreclosure in Effort to Stem Zombies

Wrongful foreclosure leads to wrongful deficiency collection

the-impact-of-missed-payments-and-foreclosures-on-credit-scores

http://www.housingwire.com/blogs/1-rewired/post/32061-rising-foreclosure-activity-validates-housing-market-getting-worse

for-some-states-foreclosure-crisis-is-far-from-over

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