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After doing a lot of research and analysis on the subject to foreclosure auctions and credit bids I have arrived at several conclusions. The result is that I believe there are multiple causes of action against the “Substitute Trustee” (often with forged fabricated documents and the original trustee whose passive stance allowed the wrongful foreclosures to occur. There may well be an action in mandamus against the recording offices that maintain property records showing the mistaken title to the REO property and potentially a federal action for deprivation of civil rights in the event the state court grants relief.
Let’s start with the original trustee on a Deed of Trust. According to the legislative history of using the “power of sale” the Trustee on the deed of trust is inserted to replace the court, so that the due process rights of the homeowners could be protected. Until the 1990’s the trustee, in the event of impairment of the collateral or non-payment of the loan, would receive an instruction from the lender to sell the home according to the power of sale included in the deed of trust. The Trustee, acting exactly the same as a court would review the papers.
Seeing that the lender was the payee on the note, the lender was the beneficiary under the deed of trust, and receiving adequate assurances that the note was still payable to the lender, but the borrower had been unable or unwilling to make the scheduled payments, the Trustee was perfectly safe in issuing the required notice of default or the notice of sale. The foreclosure process would be considered launched and the borrower in Arizona for example, would have up until the day before the scheduled sale to file a Motion for Temporary Injunction, citing reasons why the sale should not proceed. Normally any defect in legal description or any allegation of payments being improperly implied would get the borrower some time, and a hearing as to whether there was any truth to the allegations. Thus the Judge would have issued a Temporary restraining order and conducted a hearing on the merits to determine if the temporary injunction should become permanent.
Assuming the Court found no merit to the borrower’s allegations, the Judge would then issue an order permitting the lender and trustee to go forward with the sale of the property. And this is where the rubber meets the road.
Up until the 1990’s the date and time of the auction would be set and while there might be communication between the lender and the trustee prior to the auction the property was sold only at the time, date and place posted on the notice of sale as required by local statutes. If the lender was $100,000, they were allowed to bid $100,000. If they wanted to bid more than $100,000 then they needed to pay cash to the trustee. If anyone other than the lender wished to bid, they could only pay in cash. A Trustee’s deed upon foreclosure is issued to the highest bidder and the deed from the trustee carries a heavy presumption of validity. The foreclosure shown in the chain of title would be no cloud, defect or question of marketability of title. Any third party purchasing the property from the bank or lender was and could be assured that title was clear and that the title insurance was real, viable, enforceable and effective. In other words the new buyer could have maximum confidence that title was clear and that he owned the property as a result of the lender’s sale to the new buyer.
The sale cannot be private. Yet today, virtually all original trustees are fired and a new or “substitute trustee” is named in place of the old trustee because of the right of the beneficiary to change trustees any time they want. But we have seen that the substitutions of trustee are virtually all robo-signed, fabricated, forged and fraudulent documents which means that the original trustee is or should be considered the trustee under the deed of trust. The acts of the “substitute trustee” are therefore void and constitute a private sale — exacerbated by the fact that most “substituted trustees” are either owned directly by the new party claiming to be the lender or beneficiary or operated by a consortium of banks and servicers who answer only to the party claiming to be the new lender or beneficiary.
Thus neither the original trustee on the deed of trust nor the substitute trustee perform any review or due diligence to match up the lender shown on the promissory note, the beneficiary shown on the deed of trust, and the new parties claiming to be lenders, creditors and servicers pursuant to documents that were never disclosed much less signed by the borrower.
The key role of the trustee has been inverted by the illegal substitution of trustee and the acts and process that followed. If this practice is allowed by state court, then the appropriate action would be a civil rights action against the state allowing the power of sale to be used without confirmation of the parties, the amount due, and the identity of the creditor, the lender, and the beneficiary.
In theory the power of sale does not violate the due process requirement of a fair hearing before the property can be taken because there are provisions allowing the borrower to object and a Trustee who acts as General master to at least confirm the bear essentials of a valid foreclosure. BUT IN THE ABSENCE OF SUCH REVIEW, THE BORROWER’S OBJECTIONS ARE OBVIATED AND THE PROPERTY IS TAKEN WITHOUT A FAIR HEARING ON THE MERITS. As applied in this case any statute allowing the power sale would be unconstitutional if it removed the Trustee and inserted the mortgagee or beneficiary.
Research or consultation with any expert in property and/or constitutional law would result in unanimous corroboration of what has been described above. submitted in the wrong order to the wrong parties. The problem with the auction is the same as the problem with securitization — in most cases it doesn’t legally or actually exist. It doesn’t legally exist because the wrong documents were submitted to the wrong party. It doesn’t actually exist because the transaction never took place (no money or property actually changed hands) regardless of what is recited on any of the fabricated documents, forged under a robo-signing or “surrogate signing” process after the documentation was fabricated out of thin air and then recorded — now with the full knowledge and cooperation of county recorders whose offices have been cheated out of millions of dollars in filing fees.
So here are the problems.
- The use of a faulty, forged, defective, forged substitution of trustee, recorded or not, means that there was no legal substitution. In most cases this cannot be cured because the loan originators named on the origination papers are long gone, which is why the banks and servicers started the illegal document fabrication mills. In my opinion, the original trustee should be sued for damages and sued for an entry of a mandatory injunction requiring the original trustee to assume the duties of the trustee, which would include voiding all transactions and documents performed in the name of the substitute trustee.
- The use of a faulty, forged, defective, forged substitution of trustee, recorded or not, means that there was no legal substitution. In most cases this cannot be cured because the loan originators named on the origination papers are long gone, which is why the banks and servicers started the illegal document fabrication mills. In my opinion, the substitute trustee should be sued for damages and sued for an entry of a prohibitive injunction requiring the substituted trustee to stop any and all actions undertaken by them as Trustees under the deed of Trust and a mandatory injunction requiring the substituted trustee to file disclaimers in the records of all such foreclosures and chain of title appearing in the title registry of the recording office which would include voiding all transactions and documents performed in the name of the substitute trustee. An action naming the the title registrar might be required to comply with the court’s order.
- Even if the substitute trustee was real or joined with the original trustee the actual facts and behavior at and before the auction are wrongful, illegal and potentially criminal. In most cases trustees show up at the auction with a statement that they have already received a credit bid from the “lender” in excess of the value of the property, thus eliminating any competition and since the arrangement was made before the scheduled time of the auction it constitutes a private sale.
- But the most egregious defect in the auction comes from the exercise of common sense which is shown under the law and statutes. All such auctions must be a sale to the highest bidder or else the borrower is potentially still liable or possibly entitled to excess proceeds once the accounting is done. Since the actual bidder is not an actual creditor, the logical interpretation would require either that the sale never legally took place or that the borrower is entitled to the proceeds or outcome of the sale which would be the home or the value of the home.
- However there is no such accounting and despite the laws that clearly state the terms upon which one may submit a bid, these statutory requirements are routinely ignored. Without any proof or even submission to the trustee, substituted or otherwise, a stranger to the borrower’s transaction is allowed to buy the property not for cash, but for the value or amount due under the borrower’s obligation. In other words, your Aunt Sally can go to the auction and submit papers to the trustee that are totally false and then submit a “credit bid” on any property that the trustee calls for auction and where the bank, servicer or their attorney fails to show or otherwise create an appearance.
- Aunt Sally could become rich very quickly buying property without cash and the use of a little elbow grease creating false documentation. If the trustee received the papers from someone looking like a lawyer and sounding like they were an authorized agent or representative, they probably would get away with it — simply because the substitute trustees are all low paid clerks ordered by the pretender lenders to question nothing. What is one more pretender lender, more or less in a sea of fraudulent documents? What stops the average Joe from gaming the system in the same way the banks and servicers are gaming the system?
Nothing in this article should be construed as legal advice with respect to your property or any other property. Before taking any actions at any auctions or any other legal proceeding you should consult the services of legal counsel who is licensed in the jurisdiction in which the property is located.
For more information on auctions and credit bids, especially under the laws of the state of California, please see —-> foreclosure_bidding strategies
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