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Editor’s Comment: In my many conversations with both attorneys and pro se litigants they frequently express intense frustration about those invisible relationships and entities that permeate the entire mortgage model starting in the 1990′s and continuing to the present day, every day court is in session.
I think they are right. This article takes it as given, whether the courts wish to recognize it or not, that the parties at the closing table with the homeowner were all fiduciaries and included all those who were getting fees paid out of the closing proceeds — in other words paid out either the homeowner’s hapless down payment (worthless the moment it was tendered) or the proceeds of a loan (undocumented as to the source of the loan and documented falsely as to the creditor and the terms of repayment.
This article also takes it as a given, whether the courts are ready to recognize it or not, that the parties at the closing table with the investors who were the source of funds pooled or not were all fiduciaries and included all those who were getting fees paid out of the closing proceeds — in other words paid out either the hopeless plunge into an abyss with no loans purchased or funded until long after the money was in “escrow” with the investment banker in exchange for a completely worthless mortgage backed security without any mortgages backing the security.
But the interesting fact is that while some of the parties were known to the investor, and some of the parties were known to the homeowners, the investor did not know the parties at the closing table with the homeowner; and the borrower did not know the parties at the closing table with the investor.
In point of fact, the borrower did not even know there was a table or an investor or a table funded loan until long after closing, if ever. Remember that for years MERS, the servicers and others brought foreclosures that are still final (but subject to challenge) while they vigorously denied the very existence of a pool or any investors.
While this is interesting from the perspective of Reg Z that states that a pattern of table-funded loans is to be regarded as “predatory” per se, which the courts have refused to enforce or even recognize, I have a larger target — all the participants in the securitization chain, each of whom actually claims to have been some sort of escrow agent giving rise to a fiduciary relationship per se — meaning that the cause of action is simple and cannot be barred by the economic loss rule because they had no contract with the homeowners and probably had no contracts with the investors.
Again, I warn about the magic bullet. there isn’t one. But this one comes close because by including these fiduciaries by name from your combo title and securitization report and by description where the fake securitization was dubbed “private label” they are all brought into the courtroom and they are all subject to a simple action for accounting which can be amended later to allege damages, or if you think you have enough information already, state your damages.
Based upon my research of the fiduciary relationship there are no limits anywhere if the action is not based upon a direct contract, and some states and culled that down to a “no limit’ doctrine (see Florida cases) except in product liability or similar cases.
The allegation is simply that the homeowner bought a loan product that was known to be defective, poorly documented, if at all, and subject to a shell game (MERS) in which the homeowner would never know the identity of the chosen creditor until the homeowner was maneuvered into foreclosure. There are several potential channels of damages that can be alleged.
Lawyers are encouraged to do about 30 minutes of research into fiduciary liability in your state and match up the elements of the cause of action for breach of fiduciary duty with the securitization documents that either has already been admitted or that has been discovered.
Go through the PSA and look at it from the point of view of assumed agency and escrowing or holding documents, receivables, notes, money and mortgages. Each one of those is low hanging fruit for a breach of fiduciary duty lawsuit.
And of course any party specifically named as a “trustee” whether a trust exists or not raises the issue of trust duties which are fiduciary as well, whether it is the trustee of a “pool” or the trustee on the deed of trust (or more likely the alleged substitution trustee on the DOT).
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: | appraisal fraud, attorney general, auction fraud, closing table, DocX Indictment, fiduciary duty, fiduciary relationship, foreclosure fraud, FORECLOSURE SETTLEMENT, foreclosures, forgery, housing market, housing prices, investors, MERS, mortgage fruad, mortgages, PSA, Reg Z, Robo-Signing, settlement, strategic default, Substitution of Trustee, trustee