Is it a REPORT or a Business Record? Listen to the Neil Garfield Show Tonight

Is the assignment a report the bank prepared for trial or an actual business record?

Is the payment history a report prepared for trial or an actual business record?

Click in or phone in at The Neil Garfield Show

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

The difference is huge. A report generated for use at trial is NOT a business record that qualifies as an exception to the hearsay rule. Any such report must be  denied admission as evidence in the court record. It is hearsay. And it is not credible because it was prepared by a party with a stake in the outcome.  And a witness testifying that he saw the business records and verified that the report is accurate has not established the foundation for introduction of the report because it is in itself hearsay on hearsay. The best evidence of the records are the actual business records, and if they are in electronic form there are several steps required to get those records into evidence.

Where the forecloser abandons documents because they cannot substantiate them, they should no longer be entitled to any presumption on any document as to authenticity or validity because they have already established that they are not credible. In the case of an assignment it is essentially a report of what has happened — which is that there was a transaction. The transaction for an assignment of a loan consists of consideration paid, endorsement of the loan documents and delivery.

How does the Bank try to get around this? By attempting to introduce other documents that refer to the fictitious transaction.

In the foreclosure wars, the Banks are succeeding because they are getting judges to agree that presumptions prevail over the actual facts. If the actual facts show that no transaction exists supporting the execution of an assignment, the burden of the borrower to prove affirmative defenses is satisfied.

But more than that, the failure to establish the existence of an actual loan transaction pursuant to a valid loan contract and the failure to establish the existence of an actual transaction in which the loan was purchased means that the prima facie case has NOT been established contrary to many rulings from the bench — caused by pro se litigants or inexperienced lawyers failing to raise questions about the admissibility of documents and attacking the credibility of the the documents and the attempts to create the illusion of a proper foundation.

Remember that the records custodian of an entity with no stake in the outcome is usually not found in any foreclosure proceeding. Testimony or certification of the records by a real records custodian from an entity that has no stake in the outcome of litigation is the real deal. Anything other than that loses credibility as they slide down from credibility to just plain lying.

Listen tonight and ask questions.



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

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

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

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

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

3. What is a possessor of a note?

4. What is a bailee of a note?

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

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

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

8. Homework assignment: Google “Infinite rehypothecation”

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

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


How “Standing” Is Causing the Longest Economic Recovery Since the Great Depression



HOW? It is simple: since the perpetrators ignored the REMIC trust, didn’t fund them and never intended to actually have the REMIC trusts own the loans, the investors can go directly to homeowners or through their own servicers to settle and modify mortgages. This would leave the investors with claims against the investment banks for the balance of the losses, plus punitive damages, interest and court costs. It is the same logic as piercing the corporate veil — if you pay your grocery bills using the account of your limited liability corporation, the corporate entity is ignored.

Vasquez v Saxon (Arizona supreme Court) revisited

Assume the following facts for purposes of analogy and analysis:

  1. John Jones is a Scammer, previously found to have operated outside the law several times. He conceives of yet another PONZI scheme, but with the help of lawyers he has obscured the true nature of his next scheme. He creates a convoluted scheme that ultimately was never understood by regulators.
  2. The first part of his scheme is to offer shares in a company where the money will be held in trust. The money will be disbursed based upon standards that are promised to incoming investors.
  3. The new company will issue the shares based upon the receipt of money from investors who are buying those shares.
  4. Jones approaches Jason Smartguy, who manages a pension fund for 3,000 employees of ABC Company, a Fortune 500 company.
  5. Jason Smartguy manages the pension funds under strict restrictions. A pension fund is a “stable managed fund” whose investments must be at the lowest risk possible and whose purpose is capital preservation.
  6. John Jones promises Jason Smartguy that the new company will invest in assets that are valuable and stable, and that these investments will pay a return on investment higher than what Jason Smartguy is getting for the pension fund under his management. Jason likes the idea because it gives him employment security and probably bonuses for increasing the rate of return on the funds managed for the pension fund.
  7. The lawyers for John Jones have concealed the PONZI nature of the scheme (paying back investors with their own money and with money from new investors) by disclosing the existing of a reserve fund — consisting entirely of money from Jason Smartguy.
  8. Jason advances $100 Million to John Jones who says he is acting as a broker between the new Company (the one issuing the shares) and the Pension fund managed by Jason Smartguy.
  9. The new Company never receives the money. Instead the money is placed in accounts controlled by people who have no relationship with the new Company.
  10. The new Company never receives title or any documentation showing they own shares of the money pool now controlled by John Jones when it should be controlled by the new Company.
  11. John Jones uses the money to bet against the new Company, insurance on the value of the shares of the new Company, and the proceeds of other convoluted transactions — mostly based on the assumption that John Jones owns the money in the pool and based entirely on the assumption that any assets of the pool therefore belong to John Jones — not the new Company as promised.
  12. John Jones also uses the money to buy assets, so everything looks right as long as you don’t get too close.
  13. The assets Jones buys are designed to look good on paper but are pure trash — which is why John Jones bet against the pool and shares in the pool.
  14. Everyone is fooled. The investors get monthly statements from John Jones along with a check showing that the investment is working just as was planned. They don’t know that the money they are receiving comes entirely from the reserve pool and the meager actual returns from the assets. The insurance company believes that Jones is the owner of the money and the assets purchased with money from the pool created by Jason Smartguy’s advance from the pension fund.
  15. John Jones goes further. He pretends to own the shares of the new Company that actually belong to the pension fund managed by Jason Smartguy. He insures those shares naming himself as the insurance beneficiary and naming himself as the receiver of proceeds from his bets that the shares in the new Company would crash, just as he planned.
  16. While the assets are proving as worthless as John Jones had planned, Jason Smartguy receives payments to the pension fund exactly as outlined in the Prospectus and the Operating Agreement for the New Company. Unknown to Jason, the assets are increasingly proving worthless, as a whole and the income is declining. So Jason buys more shares in the new Company, thus providing Jason with a larger “reserve” fund and more “assets” to bet against and more “shares’ to bet against.
  17. John Jones sets out to “acquire” assets that will fail, so his bets will pay off. He buys assets whose value is low (and getting worse) and he creates fictitious transactions in which it appears as though the new Company has bought the assets at a much higher price than their value. The “sales” to the Company are a sham. The Company has no money because Jason Smartguy’s pension money never was made to the new Company in exchange for the new Company issuing shares of the company to Jason’s pension fund.
  18. The difference between the real value of the assets and the price “sold” to the pool is huge. In some cases it is 2-3 times the actual value of the asset. John Jones treats these sales as “proprietary trading profits” for John Jones,when in fact it is an immediate loss to Jason’s pension fund. The shares of the new Company are worthless because it never received any money nor title to any assets. John Jones as “broker” took all the money and assets.
  19. Meanwhile John Jones continues to pay Jason’s pension fund along with distribution reports showing the assets are in great shape and the income is just fine. In reality the assets are virtually worthless and the income is declining just as John Jones planned. John Jones is taking money hand over fist and calling it his own. His bets on the whole thing crashing are paying off handsomely and he is not reporting to Jason how much he is making by taking Jason’s managed money and calling part of it proprietary profits.
  20. The beauty of John Jones PONZI scheme is in the BIG LIE told not only to Jason Smartguy but also to Henry Homebody, who owns a home in Tucson Arizona. Henry is easier to sell on a stupid scheme than Jason Smartguy because Jason requires proof of independent appraisals (ratings), proof of insurance and various other aspects of the investment. Henry Homebody trusts the “lenders” and considers them to be banks, some with reputations and brands that go back 150 years.
  21. Henry Homebody’s house has been in the family for 6 generations and is fully paid off. He pays only insurance and taxes. Unknown to him, he is a special target for scammers like Merendon Mining, whose operators are now in jail. Merendon got homeowners with unencumbered houses to “invest” in a mirage (gold shares) thus putting the fantastic equity in their homes to work. Henry is flown to Canada, wined and dined, and has a very good time, just before he agrees to take out a loan using his family home as collateral, which will provide an income to him of $16,000 over month (which is about ten times his current income).
  22. Henry is approved for a loan equal to twice the value of the property and in which the mortgage broker (now on the run from the law) used projected income from the speculative investment in Merendon mining. This act by the mortgage broker was illegal but worth the risk because the broker was part of the Merendon Mining scam. (look up Merendon Mining and First Magnus Funding).
  23. Henry makes Payments on the mortgage principal, interest, taxes and insurance (all higher because of the false appraisal that was used for the property). He is able to do this because some of the money from the “loan” was given to him and he was able to make payments until the magnificent returns started to come in from his Merendon Mining shares. But those shares were worded in such a way that they were not exactly the ownership of gold that Henry thought he was getting. In fact, it was another pool with options on gold. And of course the money never materialized and neither did the gold. (Note 1996-2014: more than 50% of all loans were “refi’s” in which the home was fully paid or nearly so).
  24. Henry’s lender turned out to be a party pretending to lend him money, using MERS as a nominee for trading purposes, and naming the originator as lender when in fact they were also just a nominee.
  25. Henry’s mortgage and note recite terms that are impossible to meet unless Merendon Mining pays off.
  26. Henry believes at closing that First Magnus was the lender and that some entity called MERS is hanging in the background. Nobody explains anything to him about the lender or MERS. And of course he was told not to get an attorney because nothing can be changed anyway.
  27. Henry did not know that John Jones had spread out Jason’s money into several entities and then used Jason’s money to fund the origination of Henry’s loan.
  28. Jason does not know that the note and mortgage were never executed in the name of the pension fund or the new Company that was supposed to own the loan as an asset.
  29. Eventually the truth starts coming out, the market crashes and prices of homes return to actual value. Merendon Mining is of course a bankrupt entity as is First Magnus, whose operator appears to be on the run.
  30. Henry can’t make the payments after the extra money they gave him runs out. He has $2 million in loans and the “guaranteed” investment in Merendon Mining has left him penniless.
  31. John Jones fabricates and forges dozens of documents to piece together a narrative wherein an “independent” company would claim ownership of Henry’s loan despite the complete absence of any real transactions between any of the companies because the loan was fully funded using Jason Smartguy’s pension money.
  32. Henry knows nothing about the scam John Jones pulled on Jason Smartguy and certainly doesn’t know that the new Company was involved in his loan (because it wasn’t). Henry doesn’t understand that First Magnus and MERS never loaned him any money and that he never owed them money. And Henry knows nothing about John Jones, whose name appears on nothing.
  33. John Jones, the PONZI operator goes about the business of finishing the deal and making sure that the multiple people who bought into Henry’s loan (without knowing of the other sales and bets placed by John Jones) don’t start asking for refunds.
  34. John Jones MUST get a foreclosure or there will be auditing and reporting requirements that most everyone will overlook as long as this looks like just another loan gone bad. His PONZI scheme will be revealed if the true facts become known so he makes sure that nobody sees the actual money trail except him. He might go to jail if the truth is discovered.
  35. The lawyers for John Jones have told him that even fabricated, forged, non-authentic, falsely signed, and falsely notarized documents carry a presumption of validity. Thus the lawyers and Jones concocted a PONZI scheme that would most likely succeed because even the borrower, Henry, still thinks he owes money to First Magnus or its “successors”, whose identity he doesn’t really care about because he knows he took the loan. He doesn’t know that First Magnus and several other entities were involved in collecting fees and making profits the moment he signed the papers, and possibly before.
  36. Meanwhile Jason Smartguy, manager of the pension fund is starting to get disturbing reports about the assets that were purchased. Jason still doesn’t know that the money he gave John Jones never went into the New Company, that the Company never engaged in any transactions, and that John Jones was claiming “losses” that were really Jason’s losses (the pension fund).
  37. John Jones was collecting money from multiple sources without any of them knowing about each other and that he had no losses, he had only profits, and even got the government to lend him more money so he wouldn’t go out of business which might ruin the economy.
  38. Most of all John Jones never made a loan to Henry Homeowner; but that didn’t stop him from saying he did make the loan, and that the paperwork between John Jones and Jason Smartguy’s pension fund was irrelevant — the borrower got a loan and stopped paying. Thus judicial or non judicial process was available to sell the home that had been in Henry’s family for 6 generations.
  39. But the weakness in John Smith’s PONZI scheme is that his entire strategy is based upon presumptions of validity of his false documentation. If courts start applying normal rules and require Jones to disclose the money trail, he is cooked. There can be no foreclosure if a non-creditor initiates it by simply declaring that they are the creditor and that they have rights to enforce the debt — when the only proof of that is that Jason Smartguy, manager of the pension fund, has not yet put the pieces together and demanded ownership of the loan, settled the cases with modifications and went after John Jones for the balance of the money that was skimmed off the deal.
  40. And since Henry’s house is in Tucson, Az, he is subject to non-judicial foreclosure and he is in big trouble. He has no reason to believe the “servicer” is unauthorized, that the debt that is subject to correspondence and monthly statements does not exist, nor that the mortgage or deed of trust was void for lack of consideration — none of the “lenders” at closing ever loaned him a dime. The money came from Jason but Henry didn’t, and possibly still doesn’t know it.
  41. John Jones files a document called “Substitution of Trustee.” In this false document Jones declares that one of his many entities is the “new beneficiary” (mortgagee). Jones holds his breath. If Henry objects to the substitution of trustee he might have to reveal that the new trustee is not independent, it is a company controlled by John Jones.
  42. John Jones has made himself the new trustee. If the substitution of trustee is nullified in a court proceeding, NOTHING can be done by John Jones or his controlled companies.
  43. If the old trustee realizes that they have received no information on the validity of the claim and might still be the trustee, they might file an “interpleader” action in which they say they have received competing claims, demand attorney fees and costs along with their true statement that as the trustee named on the deed of trust, they have no stake in the outcome.
  44. If that happens Jones is cooked, broiled and boiled. He would be required to allege and prove that the “new beneficiary” is in fact the creditor in the transaction by succession, purchase or otherwise. he can’t because it was Jason who gave the money, it was Jason who was supposed to get evidence of ownership of the loan, and it is Jason who should be deciding between foreclosure (which John Jones MUST have to escape enormous civil and criminal liability).
  45. Jones doesn’t file documents for recording unless and until the case goes into foreclosure. That is because he continuing to trade and make claims of losses on “bad loans.”
  46. In fact, just to be on the safe side, he doesn’t file the fabricated, forged perjurious assignment of the loan at all if nobody makes him. He only files the assignment when he absolutely must do so, because he knows each filing is false and potentially proof of identity theft from the pension fund and from the homeowner.
  47. So it often happens that despite laws in each state requiring the filing of any transfer of an interest in real property for recording, Jones files the assignment when there is the least probability and least likelihood that the PONZI scheme will be revealed. Jones knows the mortgage is void and should never have been recorded, as a matter of law.
  48. Henry brings suit against Jones seeking justice and relief. But he really doesn’t know enough to get traction in court. Jones filed the assignment after the notice of default, after the notice of sale, and after the notice of substitution of trustee.
  49. The Judge who knows nothing about the presence of Jason, who still does not know this is going on, rules for Jones saying that it is irrelevant when the assignment was recorded because it is still a valid assignment between the parties to the assignment.
  50. Jason knows nothing about how the money from his pension fund was handled.
  51. Jason knows nothing about how each foreclosure seals the doom and affirms the illegal windfall to intermediaries who were always playing with OPM (other people’s money).
  52. The Court doesn’t know that that the assignment was just on paper, that there was no business reason for it to be executed, that there was no purchase of the loan from Jason’s pension fund, to whom the actual loan was payable. Thus the Judge sees this as much ado about nothing.
  53. Starting from the premise that Henry owed the money anyway, that there were no real defenses, and that since nobody else was making a claim it was obvious that Jones was the creditor, the Arizona Supreme Court says that anyone can can foreclose on an undated, backdated fabricated assignment forged and robo-signed with no real transaction; and they can execute a substitution of trustee even if they are complete strangers to the loan transaction and once they file that, they can foreclose on property that was never used as collateral for the real loan.

Because there are hundreds of John Jones characters in this tragedy, the entire marketplace has been decimated. The middle class is permanently stalled because their only net worth has been stolen from them The borrowers would gladly execute a real mortgage for real value with real terms that make sense 95% of the time, but they need to do it with the owner of the debt — the pension fund. The pension fund the borrower need to be closely aligned on the premise that the loans can be modified for better terms that forced sales, the housing market could recover, and money would start flowing back to the middle class who drives 70% of our consumer based economy.

They are all wrong and are opening the door for more PONZI schemes and even better ways to steal money and get away with it. The Arizona Supreme Court in Vasquez as well as all other decisions from the trial bench, appellate courts, regulators and law enforcement are all wrong. The burden of proof in due process is on the party seeking affirmative relief. Anyone who wants the death penalty equivalent in civil litigation (forfeiture of homestead), should be required to prove beyond all reasonable doubt or by clear and convincing evidence that the mortgage was valid and should have been recorded.

If they didn’t make the loan they had no right to record the mortgage or do anything with the note or mortgage except give it back to the borrower for destruction. If they didn’t make disclosure of the real nature of the loan and all the profits that would arise from the borrower signing an application and the loan documents, those profits are due back to the borrower.

Each time the assumption is made that there are no valid defenses for the borrower, we are cheating investors and screwing the homeowners. And as for the windfall proposition we know who gets it — the John Jones PONZI operating banks that started all of this. Exactly how can this lead anyway other than a continued drag on our economy?

Vasquez v saxon Az S Ct CV110091CQ

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

Investors Are Starting to Understand How They Are Being Screwed — Just Like Borrowers

Hat Tip to Dan Edstrom in Northern California, our senior securitization analyst for finding this report.

Investors Have Had Enough!!

“If Citibank wants to settle with the Justice Department and [Attorney General] Eric Holder, that’s fine. Just please don’t settle with investors’ money. Because that’s whose money it is,” Fiorillo says. “It’s not Citibank’s money. I’ve said it 100 times and I will continue to say it. I am now leading a louder and louder chorus with people who have had enough of this.”

See Links Below

I know this stuff isn’t easy, but managers of pension funds and hedge funds and other such mutual or discretionary funds should have realized that the Banks were “settling” claims against the Banks with investor money. And if they dig deeper they will find two things:

1. That the Trusts were unfunded, the loans were not secured and the appraisals and terms were manipulated to close rather than to assure payment as promised to the investors.

2. That underneath this mess, the banks actual profits offset their claimed losses 100:1 — THAT money belongs to the investors as well — or it is owed back to borrowers as undisclosed and fraudulent proceeds of fake transactions. (See TILA and RESPA). In this case it should be accompanied by treble damages, interest, return of all payments, and disgorgement of all undisclosed profits arising out of each “closing.” These things WILL happen, but only when investors and borrowers join hands directly and compare notes.

For the first time major players representing the investors in the Great Mortgage Bond Sting are speaking loudly and uncensored. They don’t like losing money and they don’t like settlements in which investor money is used to pay the fines and penalties. They DO like modifications which are preferable to costly foreclosures but that is not good for servicers and lawyers who DO want foreclosures.

And under all of this is a simple fact — nearly all the borrowers would sign a real mortgage or deed of trust that did not involve fraud or fabricated documents. Investors are just starting to realize that the borrowers have been fighting a battle that inures to the benefit of investors — pointing out that the servicing companies and trustees and lawyers are all acting under fictitious powers from fabricated documents that exclude the best interest of either the investors or the borrowers.

After sounding like a broken record for 7 years it seemed that nobody would listen to me — at times — but persistence is my strongest suit. Those loans are NOT enforceable just as has been consistently alleged in the investor lawsuits and the suits brought by insurers, government agencies, law enforcement, and counterparties to hedge contracts. The Banks never owned the loans  but they pretended to own them as long as they could make money pretending to own them. The Banks never owned the Bonds, but that hasn’t stopped them from selling $3 TRILLION in bonds to the Federal reserve.

And because arrogance that succeeds breeds escalating behavior of the worst kind, the Banks who committed atrocities in the financial world are settling — using the money that investors gave them for a return on their investments so they could continue to pay pension benefits to pensioners.

Maybe it will be sooner rather than later when the obvious solution is finally adopted. When investors and borrowers find a different way of getting together — rather than through servicers who are aiming to screw both sides in foreclosures that are wrongful fraudulent, illegal and immoral. The only winner in foreclosures are the intermediaries. The real parties in interest both come out losers.

Chase Slammed By CA Appellate Panel: Bank committed fraud in order to show ownership

Housing Wire, Ben Lane (see link to article below): “Bank committed fraud in order to show ownership.”

We are entering the 6th inning of the game started by Wall Street when it created the smoke and mirrors game based upon false claims of successors and securitization. As lawyers actually do the work investigating and researching, they are getting results that come closer and closer to the reality that the whole thing was a sham.

For each Appellate decision, like this one, there are hundreds of rulings from Trial courts in which Orders were entered finding for the borrower and against the “lender” — simply because the pretender lender was identified as trying to foreclose on property to enforce a debt that was owed to somebody else. Either Judgment was entered for the borrower or, in thousands of cases, discovery orders were entered in which the pretender had to open its books, along with its co-venturers, to show the money trail, which almost never matches up with the paper trial submitted to the court.

But the problem remains that most Judges are still stuck on moving the burden of proof onto the borrower instead of the party seeking foreclosure. The lawyers say it doesn’t matter what the borrower is saying about the paper trail or the money trail or the so-called securitization of the loan.

It doesn’t matter, according to them, if the act of foreclosure itself is an act in furtherance of a fraudulent scheme that started when mortgage bonds were sold to investors and that the money was used in ways the investors could not have imagined. It doesn’t matter that the pretender lenders are taking money from the the real creditors, along with assets that should have collateralized the investment of the real lenders, and taking the homes of borrowers from them despite their entitlement to credits and opportunities to modify under law.

It doesn’t matter that the “lender” broke the law when they made the loan, broke the law when they transferred the the paperwork, and broke the law when they created paperwork that was NOT the outcome of any real transaction.

Attorneys for the banks are actually arguing that it doesn’t matter where the money came from. All that matters, according to them is that money was received by the borrower. The fact that it didn’t come from the lender identified in the closing documents is irrelevant. The consideration is present because the lender promised the loan, and even though they never made the loan or funded it, the lender managed to get somebody’s money on the closing table. That is consideration, according to them.

The danger of this argument, often readily accepted by trial judges, is that it opens the door to the moral hazard we see playing out in virtually all foreclosures. One attorney actually said that if our “theory” was right, then the whole foreclosure docket would be cleared, as though that would be a bad thing. Here’s our theory: “Follow the Law.” In other words stop the servicers and other intermediaries from pushing cases into foreclosure to the detriment of BOTH the creditor and the lender.

This is not one case involving moral turpitude by one Bank. Chase Bank has been involved in a pattern of behavior of falsifying facts and documents from the beginning in a coordinated effort with all the foreclosure players, to force as many foreclosures as possible, dual tracking innocent homeowners, luring them into default with false statements about how they needed to be 90 days behind to be considered for modification, and falsely claiming that the money on the loan was owed to the forecloser — or some unnamed creditor which gave them the right to enforce.

It is still counter-intuitive for most people in the system to confront the truth and believe it. These loans were mostly created pursuant to prior Assignment and Assumption Agreements that called for violations of Federal and State laws. Those agreements were void, as being against public law and public policy, and so were the acts emanating from those agreements. And the perjury, fabrication, robo-signing and unauthorized execution of false documents are the rule, not the exception. Why? Because it is a cover-up.

If banks (as the middlemen they are supposed to be) really did what the securitization documents said they should do, they wouldn’t need false documents, false facts, and false testimony. If the foreclosures were genuine they would not need to rely on false presumptions about holders, holders with rights to enforce and ignore differences and conflicts with holders in due course.

Falsification of facts and documents for closing of loans, collection of payments, and enforcement of false notes and mortgages, is now the rule. What are we going to do about it. Chase Bank didn’t do this by “accident.” It as intentional. Why would they ever need to do that if the loans were genuine, enforceable and being enforced by the real creditors?

For further information call 954-494-6000 or 520-405-1688.

Lawyers in Nonjudicial States Should File Constitutional Challenge

I have been receiving increasingly urgent and frustrated messages from lawyers in nonjudicial cases. They are dismayed that the most basic components of proof are not required from “new” trustees on deeds of trust and “new” beneficiaries on the deed of trust, all self proclaimed and presumed valid even if the borrower denies it. Here is my answer:

I think what is missing is a plan for presentation. AND a decision about whether to go to Federal or State Court, or the California Supreme Court or even directly to the 9th Circuit if that is possible. Your case is really against the whole state of California (or whichever state the property is located) for violation of equal protection — debtors whose loans were mortgaged are treated differently from other debtors potentially including the debtors whose cars were mortgaged. Debtors who are subject to non judicial process are not given the same rights and procedures for debtors who are sued in judicial foreclosures. The normal process is if you want to allege a debt that requires a judicial judgment to enforce it, you are required to sue. That is why the decisions in and out of nonjudicial states say that due process requirements must be strictly construed. But in contested nonjudicial foreclosures, it is so loosely construed that complete strangers to the loan transaction can win the house. (See San Francisco study, Baltimore study etc.).
The argument that it is an agreement is cute but not right. Yes it is an agreement and anyone can contract with terms they agree to. But the exception is whether the contract violates law or public policy. Any agreement that violates public policy or to violate state or federal law is void. All Deeds of trust are arguably unconstitutional. But what will fly is a challenge to the nonjudicial scheme as to those cases where the borrower has made the proceeding a contested proceeding by denial of the essential elements of the nonjudicial procedure.

The “agreement” exists ONLY because of a statutory scheme that allows it and the only reason that statutory scheme exists is because of the original presumption behind such a scheme. If the foreclosure is truly uncontested, then it is hard to argue that the due process rights of the homeowner have been diminished. Thus repossession or forced sale at “auction” (another issue to be considered) might be the most expeditious way of handling it without clogging the courts.

But if the homeowner contests all aspects (including that he is a debtor and that the beneficiary is in fact the creditor) — the substitution of trustee, the naming of the beneficiary, the notice of default, the notice of sale etc. THEN the question becomes whether the “contract” (deed of trust) is valid and in particular whether the statutes allowing non judicial foreclosure are being APPLIED in an unconstitutional manner.

A non-creditor stranger who wins this procedure is allowed to place a “credit bid” at “auction” (which are really not conducted as public auctions) gets title to the property spending only the money required to pay for costs of filing.

Specifically, under normal circumstances, if the Trustee on the deed of trust was to receive a notice from the borrower that everything he has received from the wrong beneficiary has incorrect information and that the loan is not in default — the Trustee would ordinarily be required to file an interpleader action. The interpleader would say that he has a duty to both parties and there is a contested matter. The trustee asks for fees and costs because they have no vested interest in the outcome. Then the parties file pleadings about why they should get their way. But this doesn’t happen in practice. And the truth is, if the borrower is right, the substitution of trustee is invalid and the old trustee is still the trustee on the deed of trust. With that on record, how can anyone actually get clear title?

The problem in non-judicial states is that in practice (and in particular in the context of a contested loan which is subject to claims of successors or securitization) the self-declared beneficiary is not required to file substantive pleadings asking for specific relief. This would require the “beneficiary” to state that they are a beneficiary and to plead facts in support of that, attaching various exhibits, and that the loan is in default, and then they would be required to prove it. This would give them a prima facie case to prove. And the borrower would be required to answer the complaint of the beneficiary, file affirmative defenses and counterclaims. That is the very essence of due process in civil action and it should be strictly construed in foreclosures which consists of a forfeiture of the homestead — the virtual equivalent of the death penalty in civil litigation.

But in practice, the State of California doesn’t do any of that. In fact, they do the reverse. If a homeowner wishes to contest the substitution of trustee et al, the homeowner must file a complaint for TRO. And because they are the complainant, they are treated as having the burden of pleading and proof. This statutory scheme was conceived before multiple claims of successors and securitization were known. In practice it needs to be corrected by the courts until the legislature closes the loopholes that make the nonjudicial procedure unconstitutional in practice in certain types of cases.

This flips the rules of civil procedure and evidence on its head. In practice borrowers are not only required to plead that they deny the substitution of trustee et al was valid but to prove it — thus reversing the procedure that would be required in a judicial foreclosure, which is a second equal protection argument. Why are borrowers with other secured collateral (autos, e.g.) treated differently from borrowers with homes as collateral? Why are mortgagors treated differently in proceedings arising from non judicial process than in judicial process?

So the current practice requires the borrower to deny allegations that have not been filed and then prove that their denial is valid. That makes no sense and is an obvious denial of due process. The way the process works in practice is a stranger to any transaction with the borrower says “You owe me money” and then the borrower has the burden of saying “No I don’t” and then the defendant has the burden of pleading and proving that he doesn’t owe the money when he doesn’t know what the stranger is talking about. The only way the borrower can prevail on meritorious claims and defenses is by proving a negative. This is the opposite of due process.

This is why I have said since early 2008, that an action needs to be brought directly to the California Supreme Court or in Federal court or perhaps a special action to the 9th Circuit in which the application of the non judicial statutory scheme is challenged for those cases where the borrower denies the rights of substitution of trustee, denies the status of the self appointed new beneficiary and denies the default, denies the loan, etc. If the question is put to the court I feel confident that the decision will be in favor of borrowers. But any attempt to declare the non judicial scheme unconstitutional as a whole will fail.

Tampa Trial Judge Rules for Borrower Where Correct Objections Were Made

Patrick Giunta, Esq. brought this case to my attention.

Here is a case between the famed Florida Default Law Group, who reached distinction amidst accusations of fabricated documents, and an ordinary borrower represented by a St. Peterburg trial lawyer, John R. Cappa, who apparently knows the timing and content of the right objections. The result was involuntary dismissal against the foreclosing party.

The basis of the ruling was that the default had never been proven, the Plaintiff never offered proof of “rights to enforce” and tangentially the business records were not qualified as an exception to the hearsay rule. The witness admitted he knew nothing about the payment history of the borrower and was relying on the reports in front of him — something that is hearsay on hearsay. If anything corroborates my insistence on denying everything that is deniable, this case does exactly that. If the borrower admitted the default, admitted the note, admitted the mortgage, all that would be off bounds at trial because they would be facts NOT in issue.

In this case, like so many others the Plaintiff offered the letter giving notice of default BEFORE the FOUNDATION was established that there was in fact a default. I might add that non-payment is not a default if the actual creditor received payments anyway (servicer advances etc.), which is why I make a big deal about identifying the party who is the creditor — the person or entity that is actually owed the money. So the objections are relevance, foundation and hearsay.

Note that the Plaintiff failed to introduce proof of the right to enforce, even if they had THE note or any note. This has been the subject of numerous articles on this website. Being a holder means you can file suit, but without proving you are a holder with rights to enforce, you lose. And the way to prove that you have the rights to enforce is to provide some sort of written instrument that specifically says you have the right to enforce. It is the only logical ruling. Otherwise anyone could steal a note and enforce it without ever committing perjury.

While there are other objections that I think could have been raised, Cappa was confident enough in his position that he narrowed his attack onto issues that the Judge was required to follow. The Judge was confident that an appellate court would affirm his decision.

Take a look at the transcript and see if you don’t agree that there is something to be learned here. Forcing the Plaintiff to actually prove their case frequently results in judgment for the borrower. The reason is simple where you have originators who admit they actually did the loan on behalf of others and there are questions as to who was the servicer and when. Most importantly, there is a quote here in which Cappa says “just because they sent a default letter doesn’t mean that a default occurred” He’s right. It only means they sent the letter. The truth of the matter asserted (default) is hearsay. And being “familiar with a report allegedly gleaned from business records doesn’t mean you can testify that the payments were processed properly nor that you have any personal knowledge of the record keeping procedures that were used — even with 20+ years experience in the business.

Trial PHH Mortgage v. Parish


It Was the Banks That Falsified Loan Documents

I know it doesn’t make sense. Why would a lender falsify documents in order to make a loan? I had a case in which a major regional bank had their loan representatives falsify loan documents by having the borrower certify that there were houses on his two vacant lots. The bank swore up and down that they were never involved in securitization.

When the client refused to make such a false statement — the bank did the loan anyway AS THOUGH THE NONEXISTENT HOMES WERE ON THE VACANT LOTS. Thus they loaned money out on a loan that was guaranteed to lose money unless the borrower simply paid up despite the obvious loss. The borrower’s error was in doing business with what were obviously unsavory characters. True enough. But he was dealing with the regional bank in his area that had the finest reputation in banking.

He figured they knew what they were doing. And he was right, they did know what they were doing. What he didn’t know is that they were doing it to him! And they were doing it to him in furtherance of a larger fraudulent scheme in which investors were systematically defrauded.

When I took the client’s history all I had to hear was this little vignette and I knew (a) the bank was involved in securitization and (b) this loan was securitized BEFORE the closing and even before any application for loan was solicited or accepted by the bank. The client balked at first, not believing that a bank would openly declare its non-involvement with Wall Street when the truth would so easily be known.

But the truth is not easily known — especially when the bank is involved in “private label” trusts in which there are no filing with the SEC or other agencies.

The real question is why would the bank ask the borrower to certify the existence of two homes that were never built? Why would they want to increase their risk by giving a loan on vacant land that supposedly had improvements? Or to put it bluntly, Why would a bank try to cheat itself?

The answer is that no bank, no lender, no investor would ever try to cheat themselves. The whole purpose of our marketplace is to allow market conditions to correct inefficiencies and moral hazards. So if the bank was cheating or lying, the only rational conclusion is not that they were lying to themselves, but rather lying to someone else. They were increasing the risk of non repayment and decreasing the probability that the loan would ever succeed, while maximizing the potential for economic loss to the lender. Why would anyone do that?

The answer is simple. These were not “overly exuberant” loans, misjudgments or “risky” behavior situations. The ONLY reason or bank or any lender or investor would engage in such behavior is that it was in their self interest to do it. And the only way it could be in their self interest to do it is that they were (a) not lending the money and (b) had no risk of of loss on any of these loans. There is no other conclusion that makes any sense. The bank was being paid to crank out loans that looked valid and viable on their face, but in fact the loans were neither valid nor viable.

Why would anyone pay a bank or other “originator” to pump out bad loans? The answer is simple again. They would pay the originator because they were being paid to solicit originators who would do this and then aggregate over-priced, non-viable loans into bundles where the top layer contained apparently good loans on credit-worthy individuals. And who would pay these aggregators? The CDO manager for the broker dealers that sold toxic waste mortgage bonds to unwitting investors. As for the risk of loss they created an empty unfunded trust entity upon whom they would dump defaulted loans after the 90 day cutoff period and contrary to the terms of the trust.

So it would LOOK LIKE there was a real lending entity that had approved, directly or indirectly, of the the “underwriting” of a loan. But there was no underwriting because there was no need for underwriting because the originators and aggregators never had a risk of loss and neither was the CDO manager of the broker dealer exposed to any risk, nor the broker dealer itself that did the underwriting and selling of the mortgage bonds.

Reynaldo Reyes states that “it is all very counter-intuitive.” That is code for “it was all a lie.” But we keep treating the securitization infrastructure as real. In the 2011 article (see below) in Huffpost, the Federal Reserve cited Wells Fargo for such behavior — and then the Federal Reserve started buying the toxic waste mortgage bonds at the rate of some $60 billion PER MONTH, which is to say that approximately $3 Trillion of toxic waste mortgage bonds have been purchased by the Federal Reserve from the Banks. The Banks settled with investors, insurers, guarantors, loss sharing agencies, and hedge counterparties for pennies on the dollar, but so far those settlements total nearly $1 Trillion, which is a lot of pennies.

Meanwhile in court, lawyers are neither receiving nor delivering the correct message in court. They seek a magic bullet that will end the litigation in their favor which immediately puts them in a classification of lawyers who lose foreclosure defense cases. The bottom line: the lawyers who win understand at least most of what is written in this article, have drawn their own conclusions, and are merciless during discovery and/or at trial. Then the opposition files a notice of voluntary dismissal or judgment is entered for the homeowner “borrower.” Right now, these losses are acceptable to banks who are still playing with other people’s money. If lawyers did their homeowner and litigated these cases aggressively, the bank’s illusion of securitization would end. And THAT means most foreclosures would end or never be started.

Wells Fargo Illegally Pushed Borrowers into SubPrime Mortgages

Quiet Title and Statute of Limitations

In the search for a magic bullet, many pro se litigants and even attorneys have ended up perplexed by laws and rules regarding an action to Quiet Title (frequently misspelled by pro se litigants as “Quite Title”). The purpose of this article is to add some context to the discussion and some reasons for my conclusion — that as more decisions emerge the action for Quiet Title will fade unless the mortgage of record is first nullified or canceled.

For context, let’s remember that the purpose of recording documents in the Public Records is to give certainty and notice to the world of transactions that can be recorded. If courts were to issue decisions to quiet title on recorded documents that are facially valid, the result would be chaos — nobody would know if they were really getting permanent title and title insurance companies would, for obvious business reasons, refuse to issue a title commitment or policy unless EVERYONE brought a quiet title action after every transaction and received a court order, suitable for recording that stated the rights of the stakeholders. This is precisely what the recording statutes are meant to avoid.

Now to the issue of the statute of limitations. Some states hold that even if there is an act of acceleration, the statute of limitations only applies to the monthly payments that were due during the statutory period that are now time-barred. Florida does not appear to be one of those states, and despite some decisions to the contrary, it doesn’t look to me like Florida will become one of them. In Florida it is generally accepted that the statute of limitations time bars any action after 5 years to collect a debt. You should check your state statutes because each state is different and don’t make any decisions without consulting a qualified attorney licensed in the jurisdiction in which your property is located.

So the thinking has gone in the direction of merely stating that the claim is time-barred if there was an acceleration of the debt, and five years as passed. But the Romero v SunTrust decision (see below) from last year, raises the real issues. While the Bank had no right to bring a claim on the note, and presumably had no right to bring an action on the mortgage, the mortgage remains on record. Alleging that the statute of limitations bars any action on the note or mortgage does not invalidate the mortgage. If it is facially valid and properly recorded, it is there in the County records for all to see.

So the question arises “What happens at a subsequent closing on the sale of the property or refinance, and the Mortgagee (or party claiming to be the successor of the mortgagee) refuses to execute a satisfaction of mortgage without receiving payment?” Is THAT a claim that is time-barred? The answer is I don’t know, but I suspect that the refusal to execute a satisfaction of mortgage is an act that is separate from bringing an action to collect on a time-barred debt.

I suspect that an action for equitable relief demanding a Court order to force the Bank into executing a satisfaction of mortgage would fail. That is essentially the same as asking the Court to issue a quiet title order stating that the mortgage is invalid — a precedent that raises numerous hazards in the marketplace. Essentially you are saying that you did have the debt, the bank is time barred from enforcing it, so you want the mortgage nullified or canceled. Several Courts have issued ruling consistent with this ruling so I don’t want to give the impression that what I am saying is the general rule — what I am saying is that I think my theory of the action will become the general rule.

My theory, supported by case law in other states, is that you must have grounds to attack the validity of the instrument and win your case before you can then ask for a decision on Quiet Title. Fortunately, in the context of loans and title subject to claims of securitization, such an attack is eminently possible and likely to succeed on an increasing basis. But in order to do so, one must be very conversant in the claims of securitization generally and especially knowledgeable as to claims of succession or securitization in your specific case. Alleging that this particular defendant has been repeatedly found in court to lack the indicia of ownership or authority to enforce a note and mortgage may not do you any good. You are still left with the question of what to do with a facially valid mortgage encumbrance recorded against the property. If the person you sued doesn’t own it, who does?

After years of avoiding the right strategies, lawyers are coming around to the idea that in order to be truly successful in an action to remove the mortgage encumbrance, you need to have an allege facts to support the claim that the mortgage deed (or Deed of Trust) was invalid in the first instance or that it could not be enforced even if the statute of limitations was not applicable. THEN alleging the statute of limitations is a good idea as corroboration for your logic that the mortgage is invalid because it is unenforceable and without merit in all instances.

There are two such attacks that are promising:

1. Attack the initial closing as lacking consideration or giving rise to common law or statutory rescission. If statutory rescission applies, the law states that the encumbrance is terminated by operation of law. (TILA). The allegation that the opposing bank is a “holder” (according to them) is insufficient to bar your attack on the initial closing. The problem of course is that the banks regularly confuse judges into applying the rules of a holder in due course when the Bank itself makes no such assertion. Hence, being able to remind or educate the judge on the differences between holders, holders with rights to enforce and holder in due course is essential and must be presented with clarity. If you don’t understand the differences you are not prepared for the hearing.

2. Attack the subsequent acquisition of the “loan”, debt, note and/or mortgage also as being a sham lacking in consideration AND of course in violation of the PSA. The point to remember here is that the “assignment” or “endorsement” (almost always fabricated, forged or unauthorized) is only an OFFER in which case the Trustee of the REMIC trust must accept the offer and then pay for it. In fact most PSA’s require a letter of opinion from counsel for the Trust indicating that no negative tax impact will result on the Trust’s REMIC status. Three things we know to be true in most cases: (a) the Trustee never accepted the transfer and (b) The trust never paid for the loan and (c) a loan already declared in default is not susceptible to acceptance by the trust. Keep in mind that most trusts are governed by New York Law which says that such transactions are void, not voidable.

So let us assume that you have a receptive Judge who agrees that the transfer to the trust never occurred or even that the original loan documents lack consideration from the named Payee on the note (and of course the named Mortgagee/beneficiary under the Mortgage). In my opinion you are still only half way to home base. No home run yet, although I think the law will evolve where that IS sufficient to remove the mortgage encumbrance.

So now what? You have still sued parties whom you have proven have no interest in the mortgage. The question is whether you have eliminated the possibility of ANY party (who has no notice of the action) having an interest in the debt, note or mortgage. And many judges will reply that you have put on a pretty good case but you still have not identified the creditor — an odd twist on the defensive actions in foreclosure cases.

My opinion is that you need to allege a fact pattern, where appropriate, that states that Wall Street investors advanced the money to the borrower without knowing that their money was not going through the trust. Hence a direct relationship arose by operation of law between the borrower, as debtor and the investors as creditors. Those investors are creditors not as Trust beneficiaries but rather personally, because the money never went through the trust. The allegation is that they were cheated by intervening fraudulent behavior or negligent behavior on the part of the broker dealer who sold them the securities of an empty REMIC Trust that never received the proceeds of sale of the REMIC RMBS.

At this point you can properly argue that  the investors were entitled to a note and mortgage by virtue of the securitization documents that were used to fraudulently induce them to part with their money. The allegation should be that they didn’t get it and that putting the name of sham “nominees” did not accrue to the benefit of the investors but rather inured to the benefit of intermediaries who were not lending money in your transaction.

Either way, you say that as to the debt between the mortgagor homeowner and whoever else might be making a claim, the initial mortgage encumbrance is now and/or has always been invalid and unenforceable because they recite facts based upon a non-existent transaction, that the mortgage has been split from the note, that the note has been split from the debt, and through no fault of the homeowner, there is no note or mortgage inuring to the benefit of the actual creditors. The cherry on top is that there is no such thing as an equitable mortgage — for the same reasons that courts are reluctant to grant quiet title actions — it would cause chaos in the market place and raise uncertainty that the recording statutes are intended to avoid.

See Romero v SunTrust Statute of Limitations 9-3-2013

See also “a new and different breach” Singleton v Greymar Fla S Ct 882 So2d 1004 9-15-2004

And on collateral estoppel Kaan v Wells fargo Bank NA Case 13-80828-CIV 11-5-13

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

Are you a candidate for Florida’s Hardest Hit Fund relief for Foreclosure Victims? See Florida Hardest Hit Fund



Moving to Strike The “Witness” and Their “Business Records”

The general practice of the servicers and trustees is to disclose a list of as many as 35 possible witnesses so that the Defendant homeowner cannot possibly perform due diligence investigation, deposition etc. The Judges got wise to this and agreed that disclosing 35 witnesses, 34 of whom you do not intend to call, is the same as no disclosure at all. So now the banks are filing a disclosure of one witness a couple of days before trial. In my opinion the attorney should move to strike the disclosure both as late (ordinarily the trial order requires such disclosure at least 45 days before trial), and as admission that they were playing games when they previously disclosed 35 witnesses. Attorneys vary on how to attack this through motions to strike, motions in limine, motions for continuance and even filing a motion for summary judgment on the eave of trial.
The filing of a disclosure that they only intend to use one witness (who may or may not have been listed on the original list of 35)  is also an admission that their previous witness list disclosing 30+ witnesses was the equivalent of no disclosure at all. It also gives no information on who, where, what she is or does. or how to contact her. It does not even name her employer or capacity. Is she a corporate representative? It doesn’t say so. If she is just a fact witness and not put forward as corporate representative then they have no foundation for introduction of business records as exception to the hearsay rule.
Tracking one case in which the usual shell game of Plaintiffs and servicers has taken place, the witness that was suddenly disclosed 2 days before trial appears to be an employee of SPS, which ordinarily replaces Chase as servicer.

In one case, she is not a records custodian for US Bank, SPS, Chase or the investors. So she must explain in detail how she knows that the records they seek to introduce are “normal business records, kept in the ordinary course of business made at or near the time of each event.” How does she know that and more importantly how COULD she know that as to US Bank, the Trust, the trust beneficiaries who are the creditors (according to them), SPS and Chase who was previously the servicer.

The bullet point here is that the “records” she will seek to introduce are not a printout of the records at all. They are a REPORT in which data populates the report. She doesn’t know where the raw data is. The report was produced by the witness by simply pushing buttons on her computer. She didn’t have access tot he raw data, and she certainly did not have access to ALL of the records because she won’t have the the cancelled checks, wire transfers, or ANY information on distributions to creditors, without which she cannot testify as to the status of the account with the creditors (investors or trust) because the servicer only deals with the borrower.

ATTORNEYS NEED THE LATEST STATE AND FEDERAL LAW ON BUSINESS RECORDS EXCEPTION TO HEARSAY. THE RECORDS ARE HEARSAY AND THE REPORT PREPARED FOR TRIAL IS EXCLUDED BECAUSE IT IS INHERENTLY SELF SERVING AND NOT CREDIBLE. THE REPORT IS HEARSAY (REPORTING) ON HEARSAY (THE BUSINESS RECORDS). The Court is allowed to admit the documents as an exception to the hearsay rule ONLY if the business records exception is proffered and proven, with the burden entirely on the proponent of such evidence.

She can testify — maybe — as to the dealings between SPS and the borrower but not the receipts by the creditor from remittances or distributions by the servicer to the creditors (she has no access to that information), and certainly not the amounts received by the creditors in settlements, insurance, servicer advances, credit default swaps, and government assistance that was received by or on behalf of the creditor and that cured any “default” as described by the Trust instrument (PSA) . Therefore her testimony is incomplete even if accepted. She might testify as to the dealings with the borrower, but she cannot testify as to the receipt of servicer advances and other payments which is the REAL reason for the foreclosure.

It is becoming increasingly clear that these foreclosures are strictly for the benefit of the intermediaries and not the creditor investors. They are attempting to ride the coattails of the creditors so that their claim for refunds and cutoff of liability for refunds to third parties, can be cutoff. None of those things have anything to do with the investors who have been paid by servicer payments advanced regardless of whether the borrower was paying or not.

They want to say the trust or trust beneficiaries are the creditors and that therefore the foreclosure should proceed, but the truth is the creditors are not showing any default, have been paid, sometimes in full. The intermediaries are cloaking their independent claims against the borrower (independent from the mortgage debt) as though they are claims of the creditors, which they are not.

If the creditors are not here to say they are suffering a default as a result of non payment by the borrower there is no reason for the court to assume that such a default exists. That is part of the prima facie case of the party claiming the right to foreclose, despite the absence of a default recorded by the creditor. Having some new servicer come in with a professional witness who really knows nothing about how and where records are kept and can offer no personal knowledge of how and where those records are kept and who does that fails to offer personal perceptions and memory of those perceptions required for a competent witness in any case.

Thus the hearsay REPORTS prepared for trial fail for two reasons, — they are hearsay and they were prepared especially for trial. And they are excluded under the hearsay rule for another reason — the reports on hearsay reports on the raw data which is also hearsay unless that the raw data is shown and described as records that qualify under the business records exception.

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

How the Banks Literally “Made” Money Out of Nothing

For the last few weeks I have been harping on the concepts of holder in due course, holder with rights of enforcement, and holder. They are all different. The challenge in court is to get them treated as different in Court as they are in the statutes.

The Banks knew through their attorneys that the worst paper in the world could be turned into real value if they could dress up junk paper and sell it to an unsuspecting innocent third party. They did it with junk bonds, and then they did it again when they created a strategy of creating junk bonds that looked like investment grade securities, got the Triple A rating from the agencies and even got them insured as though they were the highest quality and lowest risk investment — thus enabling stable managed funds to buy them despite restrictions on what such fund managers could buy as investments for their pension fund, retirement fund etc.

The reason they were able to do it is that regardless of the defective nature of the loan closing, including the lack of any loan of money by the “lender”, the law protects and presumes the validity of the paper, subject to defenses of the borrower that might defeat that value. The one exception that the Banks saw as an opportunity to commit fraud and get away with it is if they could manage to sell the unenforceable mortgage documents to an innocent third party who was acting in good faith, paid real value for the loan, and knew nothing about the predatory nature of the loans, lack of consideration, and other defenses of the borrower, then the paper, no matter how bad, could still be enforced against the person who signed it. It doesn’t matter if there was a real contract, or if the transaction violated Federal and state laws or anything else like that.

Such an innocent third party is called a holder in due course. And the reason, like it or not, is that the legislatures around the country and the Federal statutes, favor the free flow of “negotiable instruments” if they qualify as negotiable instruments. If you sign a note in exchange for a loan you never received (and especially if you didn’t realize you didn’t received a loan from someone other than the “lender”) you are taking a risk that the loan documents will be enforced against you successfully even though you could have defeated the original lender easily.

The normal process, which the Banks knew because they invented the process, was for a “closing” to take place in which the loan documents, settlements statements, note, mortgage and other papers are signed by the borrower, and then the loan is funded usually after final review by the underwriters at the lender. But in the mortgage meltdown there was no real underwriting but there was someone called an aggregator (e.g. Countrywide, ABn AMRO et al) who was approving loans that qualified to be approved for sale into investment pools. And in the mortgage meltdown you signed papers but never received a loan of actual money from the party in whose favor you signed the papers. They were unenforceable, illegal and possibly criminal, but those signed papers existed.

All the Banks had to do was to claim temporary ownership over the loans and they were able to sell the “innocent” pension fund managers on buying bonds whose value was derived from these worthless loan papers. If they didn’t know what was going on, they had no knowledge of the borrower’s defenses. If they were not getting kickbacks for buying the bonds, they were proceeding in good faith. That is the classic definition of a Holder in Due Course who can enforce the loan documents despite any real defenses the the homeowner might possess. The homeowner is the maker of the note and should have had a lawyer at closing who would insist on seeing the wire transfer receipt and wire transfer instructions to the escrow agent.

No lawyer worth his salt would allow his client to sign papers, nor would he allow the escrow agent to retain such signed papers, much less record them, if he knew or suspected that the documents signed by his client were going to create a problem later. The delivery of the note to a party who had NOT made the loan created two debts — one to the source of the loan money which arises by operation of law, and the other to whoever ended up with the paper even though there was a complete lack of consideration at closing and no money exchanged hands in the assignment or transfer of the loan, debt, note or mortgage.

Since the paperwork went into the equivalent of a food processor, the banks were able to change various data points on each loan, and create sales and disguised sales over and over again on the same loan, the same loan pool, the same mortgage bonds, the same tranche, or the same hedges. Now they even the the technology to deliver  what appears to be an “original” note to as many people as they want. Indeed we have seen court cases where both foreclosing parties tendered the “original” note to the court as part of the foreclosure process, as is required in Florida.

Thus borrowers are stuck arguing that it is not the debt that cannot be enforced, it is the paper. The actual debt was never documented making it appear as though the allegation of 4th party funding seem ludicrous — until you ask for the wire transfer receipt and instructions, until you ask for the way the participating parties booked the transaction on their own financial statements, and until you ask for the date, amount and people involved in the transfer or assignment of the worthless paper. The reason why clerical people were allowed to sign away note and mortgages that appeared to be worth billions and trillions of dollars, is that what they were signing was toxic waste — worse than unenforceable it carried huge liabilities to both the borrower and all the people who were scammed into buying the same worthless paper over and over again.

The reason the records custodian of the Bank or servicer doesn’t come into court or at least certify the “business records” as an exception to hearsay as permitted under Florida statutes and the laws of other states, is that no records custodian is going to risk perjury. The records custodian knows the documents were faked, never delivered, and not in the possession of the foreclosing party. So they get a professional witness who testifies he or she is “familiar with the record keeping” at one servicer, but upon voir dire and cross examination they know nothing in their personal knowledge and are therefore only giving voice to what is contained on the reports he brought to trial — classic hearsay to be excluded from evidence every time.

Like the robo-signors and “assistant secretaries”, “signing officer,” (and other made up names) these people who serve as professional witnesses at trial have no actual access to any of the raw data contained in any record keeping system. They don’t know what came in, they don’t know what went out, they don’t know who paid any money into the pool because there are so many channels of money being paid on these loans (directly or indirectly), they don’t even know if the servicer paid the creditors the amount that was due under the creditors’ part of the loan contract — the prospectus and PSA.

In fact, there is no production of any information to show that the REMIC trust was ever funded with the investor’s money. If there was such evidence, we never would have seen forgery, fabrication and robo-signing. It wouldn’t have been necessary. These witnesses might suspect they are lying, but since they don’t know for sure they feel insulated from prosecutions for perjury. But those witnesses are the first people to be thrown under the bus if somehow the truth comes out.

Thus the banks literally created money out of thin air by taking worthless, fraudulently obtained paper (junk) and then treating it at some point as though it was negotiable paper that was sold to an Innocent holder in due course. Under the law if they claimed status as Holder in Due Course (or confused a court into believing that is what they were alleging), the paper suddenly was enforceable even though the borrowers’ defenses were absolute.

BUT THAT TRANSACTION NEVER OCCURRED EITHER. Numbers don’t lie. If you take $100 million from an investor and put it on the closing tables for the origination or acquisition of loans, then you can’t ALSO put the money in the REMIC trust. Thus the unfunded trust has no money to transaction ANY business. But once again, in the illusion of securitization, it looks real to judges, lawyers and even borrowers who feel guilty that fighting the bank is breaking some moral code.

Amazingly, it is the victims who feel guilty and shamed and who are willing to pay even more money to intermediary banks whose fees and profits passed unconscionable 10 years ago. I’m not sure what word would apply as we look at the point of unconscionability in our rear view mirror.

And they sold it over and over again. The reason why there was no underwriting standards applied was that it didn’t matter whether the borrower paid or not. What mattered is that the Banks were able to sell the junk paper multiple times. Getting 100 cents on the dollar for an investment you never made is very lucrative — especially when you do it over and over again on each loan. It sure beats getting 5%. The reason the servicer made advances was that they were not using their own money to make payments to the investors. It is the perfect game. A PONZI scheme where the investors continue to get paid because the reserve fund and incoming investors are contributing to that reserve fund, such that the servicer has access to transmit funds to the investors as though the trust owned the loan and the loans were all performing. Yet as “servicers” they declared a default because the borrower had stopped paying (sometimes even if the borrower was paying).

And the Banks sprung into action claiming that the failure of the borrower to make a payment is the only thing that mattered. The Courts bought it, despite the proffer of proof or the demand for discovery to show that the creditor — the investors — were actually showing a default. I didn’t make this up. This is what the investors are alleging each time they present a claim or file suit for fraud against the broker dealer who did the underwriting on the mortgage bonds issued by the REMIC trust who should have received the money from the sale of the bonds. In all cases the investors, insurers, government guarantors, and other parties have alleged the same thing — fraud and mismanagement of funds.

The settlements of fines and buy backs and damages to this growing list of claimants on Wall Street is growing close to $1,000,000,000,000 (one trillion dollars). In all the cases where I have submitted an expert witness declaration or have given testimony the argument was not whether what I was saying was right, but were there ways they could block my testimony. They never offered a competing declaration or any expert who would contradict me in over 7 years in thousands of cases. They have never offered an explanation of how I am wrong.

The Banks knew that if they could fool the fund managers into buying junk bonds because they looked like they were high rated bonds, they could convince Judges, lawyers and even borrowers that their case was hopeless because the foreclosing party would be treated as a Holder in Due Course — even if they never said it — and even if they were the holders of junk paper subject to all of the borrower’s defenses. So far they have pillaged our economy with 6 million foreclosures displacing 15 million  families on loans that were paid in full long before the origination or acquisition of the loan.

And here is their problem: if they start filing suit against homeowners for the money advanced on behalf of the homeowners (in order to keep the investments coming), then they will be admitting that most foreclosures are being filed for the sake of the intermediaries without any tangible benefit to the investors who put up the money in the first place. The result is like an old ribald joke, the Wolf of wall Street screws the investors, screws the borrowers, screws the third party obligors (including the government) takes the pot of gold and leaves. Only to add insult to injury they claimed non existent losses that were actually suffered by the investors who trusted the banks when the junk mortgage bonds were sold. And they were paid again.


 Courts and lawyers are continually ignoring the obvious. By zeroing in on the NOTE, they are ignoring the documents that allow the person in possession of the note to be in court. That results in elimination of critical elements of a prima facie case in which the Defendant borrower lacks the superior knowledge and resources of the Plaintiff and its co-venturers that would show the truth about his loan ownership and balance.


Chronologically the document trail starts with the securitization documents. Without the securitization documents there is no privity or nexus between the borrowers and the lenders. Neither one of them signed the deal that the other signed. Without the Assignment and Assumption Agreement, the Prospectus and the Pooling And Servicing Agreement, the trust does not exist, the servicer has no powers, the trustee has no powers, and there is no right of representation or agency between any of those parties as it relates to either the lender investors or the homeowner borrowers.


The Assignment and Assumption Agreement between the originator and the aggregator sets forth all the rules and actions preceding, during and after the loan”closing”, including the underwriting by parties other than the originator and the ownership of the loan by parties other than the originator. It is a contract to violate public policy, the Federal Truth in Lending Law prohibiting table funded loans designed to withhold disclosure, and usually state deceptive and predatory lending statutes.


The Assignment and Assumption Agreement was an agreement to commit illegal acts that were in fact committed and which strictly governed the conduct of the originator, the closing agent, the document processing, the delivery of documents, the due diligence, the underwriting, the approval by parties other than the originator and the risk of loss on parties other than the originator. The Assignment and Assumption Agreement is essential to the Court’s knowledge of the intent and reality of the closing, intentionally withheld from the borrower at closing. It cannot be anything other than relevant in any action sought to enforce the documents produced at a loan closing that was conducted in strict adherence to the illegal Assignment and Assumption Agreement.


The other closing is with the investors who were accepting a proposed transaction to lend money for the origination or acquisition of loans through a trust. Those documents and records (Prospectus, Pooling and Servicing Agreement, Distribution reports, etc) provide for the creation and governance of the trust, the appointment of a trustee and the powers of the trustee, and the appointment and the powers of the Master Servicer and subservicers. Those documents also provide for there requirements of reporting and record keeping, including the physical location and custody of actual loan documents. Without those documents, there is no power or authority for the trustee, the trust, the Master Servicer, the subservicer, the Depository, the Securities Administrator the purchase of insurance, credit default swap trading, funding the origination or acquisition of loans, or collection and enforcement of loan documents. without those documents the Court cannot know what records should be kept and thus what records need to be produced to show the status of the obligation in the books and records of the creditor — regardless of whether the loan was actually securitized or just claimed to be securitized.


Procedure and UCC
In Judicial States, the Plaintiff is bringing suit alleging a default by the Defendant on a promissory note and for enforcement of a mortgage. The name of the payee on the note is different from the name of the Plaintiff in the lawsuit. The name of the mortgagee is different from the the name of the Plaintiff. The suit is bought by (a) a trustee on behalf of the holders of securities that make the holders of those securities (Mortgage Bonds) in a NY Trust (b) the “servicer” on behalf of the trust or the holders or (c) a company that alleges it is a holder or a holder with rights to enforce. None of them assert they are holders in due course which means they concede that the Plaintiff did not buy the loan in good faith without knowledge of the borrowers defenses. They assert they are holder in which case they are subject to all of the borrowers defense — which procedurally means the issues concerning the initial loan and any subsequent transfers can be in issue if the preemptive facts are denied and appropriate affirmative defenses and counterclaims are filed. These defenses are waived at trial if an objection is not timely raised.


In Non-Judicial States, the name of the “new” beneficiary is different from the name of the payee on the promissory note and the name of the beneficiary on the Deed of Trust. The “new beneficiary” files a “Substitution of Trustee”, the Trustee sends a notice of default, notice of sale and notice of acceleration based upon “representations” from the “new beneficiary.” This process allows a stranger to the transaction to assert its position outside of a court of law that it is the new beneficiary and even allows the new beneficiary to name a company as the “new trustee” in the Notice of Substitution of Trustee. The foreclosure is initiated by the new trustee on the deed of trust on behalf of (a) a trustee on behalf of the holders of securities that make the holders of those securities (Mortgage Bonds) in a NY Trust (b) the “servicer” on behalf of the trust or the holders or (c) a company that alleges it is a holder or a holder with rights to enforce. None of them assert they are holders in due course which means they concede that the Plaintiff did not buy the loan in good faith without knowledge of the borrowers defenses. They assert they are holder in which case they are subject to all of the borrowers defense — which procedurally means the issues concerning the initial loan and any subsequent transfers can be in issue if the preemptive facts are denied and appropriate affirmative defenses and counterclaims are filed. These defenses are waived at trial if an objection is not timely raised. In these cases it is the burden of the borrower to timely file a motion for Temporary Injunction to stop the trustee’s sale of the property.


By failing to assert with clarity the identity of the creditor on whose behalf they are “holding” the note and mortgage (or deed of trust) and failing to assert the presence of the actual creditor (holder in due course) the parties initiating foreclosure have (a) failed to assert the essential elements to enforce a note and mortgage and (b) have failed to establish a prima facie case in which the burden should shift to the borrowers to defend. The present practice of challenging the defenses first is improper and contrary to the requirements of due process and the rules of civil procedure. If the Plaintiff in Judicial states or beneficiary in non-judicial states is unable to sustain their burden of proof for a prima facie case, then Judgment should be entered for the alleged borrower.


Virtually all loans initiated or originated or acquired between 1996 and the present are subject to claims of securitization, which is the first reason why the securitization documents are relevant and must be introduced as evidence along with proof of compliance with those documents because they are almost all governed by New York State law governing common law trusts. Any act not permitted by the trust instrument (Pooling and Servicing Agreement) is void, which means for purposes of the case narrative, the act or event never occurred.

If the Plaintiff or beneficiary is alleging that it is a holder and not alleging it is a holder in due course then there is a 96% probability that the creditor is either a trust or a group of investors who paid money to a broker dealer in an IPO where securities were issued by the trust and the investors money should have been paid to the trust. In all events, the assertion of “holder” status instead of “Holder in Due Course” means by definition that one of two things is true: (1) there is no holder in due course or (2) there is a Holder in Due Course and the party initiating the foreclosure and collection proceedings is asserting authority to represent the holder in due course. In all events, the representation of holder rather than holder in due course is an admission that the party initiating the foreclosure proceeding is there in a representative capacity.




If the proceeding is brought by a named trust, then the existence of the trust, the authority of the trust, the manner in which the trust may acquire assets, and the authority of the servicer, Master servicer, trustee of the trust, depository, securities administrator and others all derive from the trust instrument. If there is a claim of securitization and the provisions of the securitization documents were not followed then in virtually all foreclosure cases the wrong parties are initiating the foreclosures — because the money of the investors went direct to the origination and purchase of loans rather than through the SPV Trust which for tax purposes was designed to be a REMIC pass through trust.


If the foreclosing party identifies itself as a servicer and as a holder it is admitting that it is there in a representative capacity. Their prima facie case therefore includes the documents and events in which acquired the right to represent the actual creditor. Those are only the securitization documents.


If the foreclosing party identifies itself as a holder but does not mention that it is a servicer, the same rules apply — the right to be there is a representative capacity must derive from some written instrument, which in virtually cases is the Pooling and Servicing Agreement.


Representations that the loan is a portfolio loan not subject to securitization are generally untrue. In a true portfolio loan the UCC would not apply but the rules governing a holder in due course can be used as guidance for the alleged transaction. The “lender” must show that it actually funded the loan, in good faith (in accordance with the requirements of Federal and State law governing lending) and without knowledge of the borrower’s defenses. They would be able to show their underwriting committee notes, reports and correspondence, the verification of the loan, the property value, the ability of the borrower to repay and all other national standards for underwriting and appraisals. These are only absent when there is no risk of loss on the alleged loan, because if the borrower doesn’t pay, the money was never destined to be received by the originator anyway.


In addition, the Prospectus offering to the investors combined with the Pooling and Servicing Agreement constitute the “indenture” describing the manner in which the investment will be returned to the investors, including interest, insurance proceeds, proceeds of credit default swaps, government and non government guarantees, etc. This specifies the duties and records that must be kept, where they must be kept and how the investors will receive distributions from the servicer. Proof of the balance shown by investors is the only relevant proof of a dealt and the principal balance due, applicable interest due, etc. The provisions of the contract between the creditors and the trust govern the amount and manner of distributions to the creditor. Thus it is only be reference to the creditors’ records that a prima facie case for default and the right to accelerate can be made. The servicer records do not include third party payments but do include servicer advances. If records of servicer advances are not shown in court, and the provision for servicer advances is in the prospectus and/or pooling and servicing agreement, then the Court is unable to know the balance and whether any default occurred as a result of the borrower ceasing to make payments to the servicer.


In short, it is the prospectus and pooling and servicing agreement that provide the framework for determining whether the creditors got paid as per their expectations pursuant to their contract with the Trust. It is only by reference to these documents that the distribution reports to the investors can be used as partial evidence of the existence of a default or “credit event.” Representations that the borrower did not pay the servicer are not conclusive as to the existence of a default. Only the records of the creditor, who by virtue of its relationships with multiple co-obligors, can establish that payments due were paid to the creditor. Servicer records are relevant as to whether the servicer received payments, but not relevant as to whether the creditor received those payments directly or indirectly. The servicer and creditors’ records establish servicer advance payments, which if made, nullify the creditor default. The creditors’ records establish the amount of principal or interest due after deductions from receipt of third party payments (insurance, credit default swaps, guarantees, loss sharing etc.).

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



Do you need an expert witness in foreclosures?

Possibly not. There are many procedural hurdles that Judges are now beginning to enforce that were being avoided before. But generally, the lawyers, fact witnesses and the judge don’t know anything about what was going on with this loan or that transaction.

Why does there need to be an expert? In the context of securitized loans or loans subject to claims of securitization the terms, methods and flow of money and documents is extremely complex, beyond the scope of knowledge of an ordinary person, and beyond the scope of knowledge of an ordinary Judge. The simple answer is that the note and mortgage are unenforceable and therefore the foreclosure is a sham. The secondary answer is that under the actual facts, the homeowner owes a debt and some investors are due payment, but they are due payment from not only the borrower, but also the servicer, the insurer, and the counterparties on credit default swaps.
Both the ownership and the balance are what is at stake here — resulting in either a money judgment for the creditor (the real one, if they step forward or even have notice of the proceedings) or a foreclosure for a sham party if the facts are ignored.
The terms alone, as per the glossary and table of contents of the main securitization documents,require translation into lay language with an explanation of how they are used. In the context of the world of Wall Street, the actual workings of this scheme were andremain “counter-intuitive” andrequire explanation from a person who has a deep understanding of the securities markets, and how theobjectives of the intermediaries conflict with theobjectives of the real persons in interest.In an ordinary stock transfer, the real parties are the buyer and the seller. In the case of mortgage loans generated by an intentionally obscure system, the real parties are the investor creditors as lenders and the homeowner as buyer. But the way the system was used the banks were able to pose themselves as the real parties in interest on both ends.

Most Judges demonstrate their lack of knowledge by asking the question “What difference does it make whether the loan was securitized or not?” or “What difference does it make whether the loan was subject to claims of securitization?” or worse ruling that the securitization documents are irrelevant when the only only way anyone could state a claim is by virtue of documents in the securitization chain like the PSA, the Prospectus, the Pooling and Servicing agreement and the Assignment and Assumption Agreement that governs the borrower’s “transaction.”

The job of the expert is to answer the question about what difference it makes to the burden of proof, the evidence, and of course the outcome. The difference is that in the way  most cases are framed is that the securitization never really happened. So the investors got nothing for their money except an empty promise from an empty trust and the borrowers were lured into a deal where they knew nothing about the identity of the lender nor the terms and compensation of people who received that compensation by virtue of the claimed origination of the loan or claimed acquisition of the loan. In most cases foreclosure is contrary to the interests of both the lender and the borrower.

But it is very much in the interests of the intermediaries who shouldn’t have that choice. The borrower certainly didn’t agree to that because the information regarding securitization and table funded loans, aggregators and Trusts was intentionally withheld at closing and frequently withheld even at the time of the acquisition of an existing loan.

The most basic answer to the questions posed is that the contract for loan, which must exist as a premise for getting a note and mortgage signed, is completely absent in many cases and most probably in this case. It is disguised sometimes because the originator is a lending institution. But my discovery in other cases of dual tracking underwriting shows that they treated loans intended for securitization entirely different than the loans they were making for their own portfolio. As you can see the thrust of all underwriting and due diligence is on the underwriter (who is usually also the Master Servicer, controlling everything), neither of whom was disclosed at closing and both of whom received huge amounts of fees and profits that were not disclosed. Under TILA these undisclosed profits are at the very least a set-off against the amounts  alleged to be due.

The most basic problem is that people forget about the loan contract, which never exists as a single document in which the “lender” makes representations and warranties regarding its ability as a lender and the borrower does the same. They agree that the lender will loan money and that the homeowner will borrow it. They become debtor and creditor. And the terms of the contract are spelled out in this imaginary contract which arises by operation of law instead of the usual way of writing it out. But the contract must nevertheless exist or the note and mortgage are unenforceable. As previously noted in these articles all contracts require offer, acceptance and consideration.

While the attack on consideration is the easiest target, it is also true that the lender and the borrower agreed to different terms that were never disclosed to either one. In the absence of an executed contract, the note and mortgage should have been returned to the homeowner and there would have been no funding of the loan. The fact that the closing agent chose to take money from an undisclosed fourth party investor or a known undisclosed party acting as a conduit aggregator, does not mean that the “lender” named on the note and mortgage made the loan and therefore does not mean there was consideration.

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

DUAL Tracking: The Game of “Chicken”

In their quest for a windfall they have given the homeowners a path to justice — one where the notice of default, notice of sale, notice of acceleration notice of right to reinstate and redemption rights are all screwed up (i.e., wrong and invalid). With 80%+ of the losses already paid, the loans could have been modified down to nothing or nearly nothing compared with the original balance showed on the note, whether the note was fabricated or not. The problem is not whether the remedy exists. The problem is whether the lawyers and litigants have the guts to pursue it.” Neil Garfield,

OneWest was formed over a weekend by several wealthy investors who paid virtually nothing for billions of dollars in what were claimed as “portfolio” loans owned by IndyMac which went bankrupt and into FDIC receivership in September, 2008. The agreement specified that the FDIC would pay 80% of the losses incurred on the loans. The first problem is that it said it would pay OneWest the 80%.

The second problem is that One West maintained their claim for the full amount against homeowners even though they had already submitted the claims and collected — many times more than once, from our analysis. That payment was not subject to repayment, subrogation or anything else that we can find, so the “creditor” or “agent” of the creditor has been paid on that account, but the balance has not been reduced.

In their quest for a windfall they have given the homeowners a path to justice — one where the notice of default, notice of sale, notice of acceleration notice of right to reinstate and redemption rights are all screwed up (i.e., wrong and invalid). With 80%+ of the losses already paid, the loans could have been modified down to nothing or nearly nothing compared with the original balance showed on the note, whether the note was fabricated or not.

The real problem is that most lawyers are not presenting their cases with the confidence of knowing that whatever the position of their opposition, it is probably a misstatement of the truth — the opposing lawyers in most cases don’t even know that they are making false statements and representations. Practically every foreclosure trial or hearing begins with the words “This is a simple foreclosure, your honor.” Nothing could be further from the truth.

Patrick Giunta, Esq. is co-counsel on several cases we are litigating in South Florida. One of them is a qui tam action against OneWest for false claims to the government. He has again brought to my attention the case decided in California (where almost everyone says it is hopeless) in which the homeowner stuck to their guns instead of accepting various offers of settlement. The reason we bring it to your attention again is that it demonstrates the fact that if you know you are right and you have the Judge on your side just for the raw elements of pleading or discovery, the confidence of the opposition is shattered even if they put on a good show of appearing otherwise.

My article from September 13, 2013 explains the scenario from the California case. Our current case goes even further alleging that OneWest intentionally misrepresented losses to the FDIC and the Federal Home Loan Housing Agency (and probably other private and public institutions) in order to collect multiple times on nonexistent losses. But it also dove-tails with the California case because they were steering homeowners into “modification” programs by the old trick “You have to be 90 days behind before you can be considered for modification.”

And by the way that trick phrase is not only untrue (designed to keep the modification “in house”) but also potentially criminal and illegal, because for one thing HAMP does not require delinquency in loans for modification. It gets worse. Most of the loans submitted for modification were in fact subject to claims of securitization and the authority of OneWest is questionable at best. The 90 day delinquency trick is wrong. It also constitutes the unauthorized practice of law. If a lawyer says it or anyone from his or her office under instructions from the lawyer, it might be grounds for a bar grievance. Practicing law without a license is an actual felony in many states subject to imprisonment, fine or both.

Virtually all servicers have trained their employees on how to say that without it appearing to be advice — but the homeowner hears it just the way the servicer wants them to hear it — I must go into default if I want the modification. THUS THE DEFAULT IS PROCURED INTENTIONALLY BY THE SERVICER WHICH IS INTENTIONAL INTERFERENCE WITH THE CONTRACT, IF IT EXISTS, BETWEEN THE BORROWER AND THE TRUST.That is an intentional tort enabling the Plaintiff Homeowner to allege damages far beyond economic damages and to even ask for punitive damages, exemplary damages or treble damages under statutory authority, sometimes including the cost of attorneys fees and costs.

The problem is that no modification is offered even if the homeowner makes trial payments on an “approved” modification. Worse yet, those payments are also frequently missed when the servicer or “creditor” issues a statement, report or notice. Or the modification actually raises the payments and makes it more impossible for the loan to work — which brings the servicer to the point they want: foreclosure to collect or keep the money they received on that loan, directly or indirectly, and which they never reported to the court, the borrower or anyone else.

The OneWest situation is only symptomatic of the rest of the “industry.” Virtually all servicers play the same games. These intermediaries and their co-venturers are collecting over and over again from loss sharing agreements, insurance, credit default swaps, and guarantees and other hedges, over and over again. They report it to nobody. And neither the Justice department or even our new CFPB seem to have any interest in the one factor that would bring down the number of foreclosures to nearly zero — giving credit where credit is due.

Practice Hint: For the bold and creative I would argue that that the entire profit earned from using the name of the homeowner to sell bonds,and profit from loss sharing and loss mitigation techniques should be disgorged to the borrower, whose note specifies how the payments are to be applied. One lawyer in Phoenix refers to this as my most obnoxious theory. I bet. It would disgorge all the money the banks made by declaring non existent losses.

If the “creditor” has received money directly or through payment to their agent, then the balance of the receivable is reduced — and in the simplest bookkeeping class we know that the corresponding payable from the borrower is also lost. The intermediaries could get to keep their ill-gotten claims on multiple reports of the same nonexistent loss, with a correction of the principal balance due from the borrower.

Instead they would rather get hit for a seven figure verdict or a six figure settlement when one out of a thousand gets up the nerve to really challenge them. The numbers all balance out in favor of Wall Street — as long as Wall Street keeps winning the game of “chicken.”

For further information please call 520-405-1688 or 954-494-6000. Consults available to homeowners’ attorneys, to wit: homeowners can attend only if they have a licensed attorney on the conference call. Workbooks on General Foreclosure Litigation, Evidence and Expert Witnesses are also available.

Why Is the PSA Relevant?

Many judges in foreclosure actions continue to rule that the securitization documents are irrelevant. This would be a correct ruling in the event that there were no securitization documents. Otherwise, the securitization documents are nothing but relevant.

There are three scenarios in which the securitization documents are relevant:

  1.  The party claiming to be a trustee of a trust is claiming to have the rights of collection and foreclosure.
  2.  The party claiming to be the servicer  for a trust is claiming to have the rights of collection and foreclosure.
  3.  The party claiming to be the holder with rights to enforce is claiming to have rights of collection and foreclosure. If the party claims to be a holder in due course, the inquiry ends there and the borrower is stuck with bringing claims against the intermediaries, being stripped of his right to raise defenses he/she could otherwise have made against the originator, aggregator or other parties.

The securitization scheme can be summarized as follows:

  1.  Assignment and Assumption agreement:  This governs procedures for the closing. This is an agreement between the apparent originator of the loan and an undisclosed third-party aggregator. This agreement exists before the first application for loan is received by the originator, and before the alleged “closing.” It governs the behavior of the originator as well as the rights and obligations of the originator. Specifically it states that the originator has no rights to the whatsoever. The aggregator is used as a conduit for the delivery of funds to the closing table at which the borrower is deceived into thinking that he received a loan from the originator when in fact the funds were wired by the aggregator on behalf of an unknown fourth party. The unknown fourth party is a broker-dealer acting as a conduit for the actual lenders. The actual lenders are investors who believe that they were buying mortgage bonds issued by a REMIC trust, which in turn would be using the money raised from the offering of the bonds for the purpose of originating or acquiring residential loans. Hence the assignment and assumption agreement is highly relevant because it dictates the manner in which the closing takes place. And it demonstrates that the loan was a table funded loan in a pattern of conduct that is indisputably “predatory per se.” It also demonstrates the fact that there was no consideration between originator and the borrower. And it demonstrates that there was no privity between the aggregator and the borrower. As the closing agent procured the signature of the borrower on false pretenses. Interviews with document processors for both originators closing agents now show that they would not participate in such a closing where the identity of the actual lender was intentionally withheld.
  2.  The pooling and servicing agreement: This governs the procedures for collection, disbursement and enforcement. This is the document that specifies the authority of the trustee, the servicer, the sub servicers, the documents that should be held by the servicer, the servicer advance payments, and the formulas under which the lenders would be paid. Without this document, none of the parties currently bring foreclosure actions would have any right to be in court. Without this document trustee cannot show its authority to represent the trust or the trust beneficiaries. Without this document servicer cannot show that it performed in accordance with the requirements of a contract, or that it was in privity with the actual lenders,  or that it had any right of enforcement, or that it computed correctly the amount of payment required from the borrower and the amount of payment required to be made to the lenders. It also specifies the types of third party payments that are made from insurance, swaps and other guarantors or co-obligors.
  3. Of specific importance is the common provision for servicer advances, in which the creditors are receiving payments in full despite the declaration of default by the servicer.  In fact, the declaration of default by the servicer is actually an attempt to recover money that was voluntarily paid to the creditor. It is not correctly seen as a declaration of default nor any right to demand reinstatement nor any right to accelerate because the creditor is not showing any default. It is a disguised attempt to assert a claim for unjust enrichment because the servicer made payments on behalf of the borrower, voluntarily, to the creditor that are not recoverable from the creditor. Usually they make this payment by the 25th of each month. Hence any prior delinquency is cured each month and eliminates the possibility of a default with respect to the creditor on the residential loan.

It is argued by the banks and accepted by many judges that mere possession of the note sufficient to enforce it in the amount demanded by the servicer. This is wrong. The amount demanded by the servicer and does not take into account the actual payments received by the actual creditor. Accordingly the computation of interest and principal is incorrect. This can only be shown by reference to the securitization documents, including the assignment and assumption agreement, the pooling and servicing agreement, the prospectus and supplements to the PSA and Prospectus.

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

Why Are Trusts Alleging Holder Status and Not Holder in Due Course?




In situations where the alleged REMIC Trust is the party initiating foreclosure, you will find in most instances that they are alleging that they are the holder. The fact that they are not alleging that they are the holder in due course raises some interesting questions. First, it is an admission that they did not pay for the loan for value in good faith and without notice of borrower’s defenses.

This in turn leads us to the PSA where you can see for yourself that only good loans properly underwritten can be included in the trust based upon the procedures for transfer and payment that are set forth or implied in the trust instrument (the PSA). Remember that the ONLY reason the party is appearing in court as the foreclosing entity is by virtue of the Pooling and Servicing Agreement (PSA). Their ONLY authority, as a “holder with rights to enforce” derives from the trust instrument (PSA). So any argument that the PSA is irrelevant is nonsense — it should be an exhibit in court or else the foreclosure should be dismissed. If they want to argue to the contrary, they must reveal the creditor and reveal the alternative authority to enforce apart from the trust instrument. If it has anything to do with the trust or trust beneficiaries however, the document (Power of Attorney) derives its power from the trust instrument as well (PSA).

The way the Banks tell it, an assignment dated not only after the cutoff date, but after the alleged declared default of the loan forces investors to accept that which they specifically excluded in the  trust instrument (PSA) — a bad loan that violates the REMIC provisions of the Internal Revenue Code subject them to adverse tax consequences and economic losses that were NOT built into the deal. How can a state judge in Florida or any other state order or enter judgment that forces a bad loan on investors who specifically called fro a cutoff of any new loans in the pool years before the foreclosure? If the loan was already declared in default. how can the trust beneficiaries be forced to accept a bad loan?

At the very least these John Does must be given notice and since the servicer knows who they are (because they have been paying them) they should give notice to the investors that their rights may be significantly impacted by a court decision in which the servicer or trustee of the REMIC trust is taking a position adverse to the interests of the trust beneficiaries and in violation of the trust indenture.

Since the requirements of the PSA always provide for circumstances that are identical to the definition of a holder in due course, why is the allegation that they are just a holder? The answer is plain: in order to establish that they are a holder in due course their proof would be limited to the fact that they paid for the loan, in good faith and without knowledge of borrower’s defenses. That proof would insulate the trust and trust beneficiaries from borrower’s defenses by definition (see Article 3, UCC). The allegation of only being a holder, exposes the trust and trust beneficiaries to defenses that were intended to be barred by virtue of being holders in due course of each and every loan. Thus this too is an allegation contrary or adverse to the interests of the trust and the trust beneficiaries. Again without notice to the trust beneficiaries that the trustee or at least lawyers for the trustee are taking positions adverse to the interests of the investors and the trust.

What difference does it make? It makes a difference because of money which is after all what this case is supposed to be about. The investors’ money either went into the REMIC trust or it didn’t. If it did, then the trust is the right vehicle for the transaction although most PSA’s say the trust cannot bring the foreclosure action. But if it didn’t go into the REMIC trust account, and the trust was ignored in the origination and/or acquisition of the, loan then the borrower is even more entitled to know what payments the investors (f/k/a/ trust beneficiaries) have received. If there have been settlements, then how much of the original debt is left? If there were servicer payments, was there ever a default and how much of the original debt is left? If there were third party payments to the creditors then how much of the original debt is left?

What seems to be an elusive concept for judges, lawyers and even borrowers is that their debt was paid by someone else. That is what happens when you have fraudulent transactions and the perpetrators get caught. In this case, there was plenty of money available to private settle more than $1 Trillion in claims of fraud from investors and fines that are steadily increasing into the tens of billions of dollars. Because the intermediary banks had essentially stolen the identity of the lenders and the borrowers, they made claims and got paid as though they were the lenders. Now they are using the proceeds of what were disguised sales of the same loan multiple times to settle with investors and settle only with those borrowers who present a credible threat. In the end the banks are wiling to pay trillions because they got illegally trillions more.

The big question is when it will occur to enough enough judges, lawyers and borrowers that they are entitled to offset for those payments that were actually received or on behalf of the actual creditors. It isn’t a difficult computation. Thus the notice of default, the notice of the right to reinstatement, the end of month statements, and the acceleration letter all state the wrong amounts and are fatally defective. They are misrepresentations that are part of a string of misrepresentations starting with the lies told to the managers of stable managed funds who purchased, and kept on purchasing mortgage bonds issued by an apparent REMIC trust whose terms were being routinely ignored.

Thus it is not RELIEF that the borrower is asking, it is JUSTICE. The creditor is only entitled to get paid once on each debt. The creditors are the investors or trust beneficiaries. The demands made on borrowers for the last 7 years have actually been demands from the intermediaries for payment of fees, commissions and advances made or earned by them, according to their story. They are not claims on the mortgage loan, which was either paid down or paid off without disclosure to the borrower. Had the pay down or payoff been recorded and applied, virtually all of the loans that were improperly foreclosed by strangers to the original transaction (no privity) would have been avoided because the amount of the payment could have been dropped easily under HAMP. As stated repeatedly on these pages, this is not a gift of principal REDUCTION. It is justice applying a principal CORRECTION due to payment received — the ultimate defense under any lawsuit for financial damages.

For more information please call 954-495-9867.

9th Circuit (Federal) Allows Quiet Title and Damages for Wrongful Filing of False Documents

Hat Tip to Beth Findsen who is a good friend and a great lawyer in Scottsdale, Az and who provided this case to me this morning. I always recommend her in Arizona because her writing is spectacular and her courtroom experience invaluable.

This case needs to be analyzed further. Robert Hager (CONGRATULATIONS TO HAGER IN RENO, NV) et al has succeeded in getting at least a partial and significant victory over the MERS system, and voiding robosigned documents as being forged per se. I disagree that a note and mortgage, once split, can be reunified by mere execution of an instrument. They are avoiding the issue just like the “lost note” issue. The rules of evidence and pleading have always required great factual specificity on the path of transactions leading up to the point where the note was lost or transferred. This Court dodged that bullet for now. Without evidence of the trail of ownership, the money trail and the document trail all the way through the system, such a finding leaves us in the dark. The case does show what I have been saying all along — the importance of pleading and admitting to NOTHING. By not specifically stating that there was no default, the court concluded that Plaintiffs had failed to establish the elements of wrongful foreclosure and left open the entire question about whether such a cause of action even exists.

But the more basic issue us whether the homeowner can sue for quiet title and damages for slander of his title by the use and filing of patently false documentation in Court, in the County records etc. The answer is a resounding YES and will be sustained should the banks try to move this up the ladder to the U.S. Supreme Court. This opinion changes again my earlier comments. First I said you could quiet title, then I said you first needed to nullify title (the mortgage) before you could even file a quiet title action. Now I revert to my prior position based upon the holding and sound reasoning behind this court decision. One caveat: you must plead facts for nullification, cancellation of the instrument on the grounds that it is void before you can get to your cause of action on quiet title and damages for slander of the homeowner’s title. My conclusion is that they may be and perhaps should be in the same lawsuit. This decision makes clear the damage wrought by use of the MERS system. It is strong persuasive authority in other jurisdictions and now the law for all courts within the 9th Circuit’s jurisdiction.

Here are some of the significant quotes.

Writing in 2011, the MDL Court dismissed Count I on four grounds. None of these grounds provides an appropriate basis for dismissal. We recognize that at the time of its decision, the MDL Court had plausible arguments under Arizona law in support of three of these grounds. But decisions by Arizona courts after 2011 have made clear that the MDL Court was incorrect in relying on them.
First, the MDL Court concluded that § 33-420 does not apply to the specific documents that the CAC alleges to be false. However, in Stauffer v. U.S. Bank National Ass’n, 308 P.3d 1173, 1175 (Ariz. Ct. App. 2013), the Arizona Court of Appeals held that a § 33-420(A) damages claim is available in a case in which plaintiffs alleged as false documents “a Notice of Trustee Sale, a Notice of Substitution of Trustee, and an Assignment of a Deed of Trust.” These are precisely the documents that the CAC alleges to be false.
[Statute of Limitations:] at least one case has suggested that a § 33-420(B) claim asserts a continuous wrong that is not subject to any statute of limitations as long as the cloud to title remains. State v. Mabery Ranch, Co., 165 P.3d 211, 227 (Ariz. Ct. App. 2007).
Third, the MDL Court held that appellants lacked standing to sue under § 33-420 on the ground that, even if the documents were false, appellants were still obligated to repay their loans. In the view of the MDL Court, because appellants were in default they suffered no concrete and particularized injury. However, on virtually identical allegations, the Arizona Court of Appeals held to the contrary in Stauffer. The plaintiffs in Stauffer were defaulting residential homeowners who brought suit for damages under § 33-420(A) and to clear title under § 33-420(B). One of the grounds on which the documents were alleged to be false was that “the same person executed the Notice of Trustee Sale and the Notice of Breach, but because the signatures did not look the same, the signature of the Notice of Trustee Sale was possibly forged.” Stauffer, 308 P.3d at 1175 n.2.
“Appellees argue that the Stauffers do not have standing because the Recorded Documents have not caused them any injury, they have not disputed their own default, and the Property has not been sold pursuant to the Recorded Documents. The purpose of A.R.S. § 33-420 is to “protect property owners from actions clouding title to their property.” We find that the recording of false or fraudulent documents that assert an interest in a property may cloud the property’s title; in this case, the Stauffers, as owners of the Property, have alleged that they have suffered a distinct and palpable injury as a result of those clouds on their Property’s title.” [Stauffer at 1179]
The Court of Appeals not only held that the Stauffers had standing based on their “distinct and palpable injury.” It also held that they had stated claims under §§ 33-420(A) and (B). The court held that because the “Recorded Documents assert[ed] an interest in the Property,” the trial court had improperly dismissed the Stauffers’ damages claim under § 33-420(A). Id. at 1178. It then held that because the Stauffers had properly brought an action for damages under § 33-420(A), they could join an action to clear title of the allegedly false documents under § 33-420(B). The court wrote:
“The third sentence in subsection B states that an owner “may bring a separate special action to clear title to the real property or join such action with an action for damages as described in this section.” A.R.S. § 33-420.B. Therefore, we find that an action to clear title of a false or fraudulent document that asserts an interest in real property may be joined with an action for damages under § 33-420.A.”
Fourth, the MDL Court held that appellants had not pleaded their robosigning claims with sufficient particularity to satisfy Federal Rule of Civil Procedure 8(a). We disagree. Section 33-420 characterizes as false, and therefore actionable, a document that is “forged, groundless, contains a material misstatement or false claim or is otherwise invalid.” Ariz. Rev. Stat. §§ 33-420(A), (B) (emphasis added). The CAC alleges that the documents at issue are invalid because they are “robosigned (forged).” The CAC specifically identifies numerous allegedly forged documents. For example, the CAC alleges that notice of the trustee’s sale of the property of Thomas and Laurie Bilyea was “notarized in blank prior to being signed on behalf of Michael A. Bosco, and the party that is represented to have signed the document, Michael A. Bosco, did not sign the document, and the party that did sign the document had no personal knowledge of any of the facts set forth in the notice.” Further, the CAC alleges that the document substituting a trustee under the deed of trust for the property of Nicholas DeBaggis “was notarized in blank prior to being signed on behalf of U.S. Bank National Association, and the party that is represented to have signed the document, Mark S. Bosco, did not sign the document.” Still further, the CAC also alleges that Jim Montes, who purportedly signed the substitution of trustee for the property of Milan Stejic had, on the same day, “signed and recorded, with differing signatures, numerous Substitutions of Trustee in the Maricopa County Recorder’s Office . . . . Many of the signatures appear visibly different than one another.” These and similar allegations in the CAC “plausibly suggest an entitlement to relief,” Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009), and provide the defendants fair notice as to the nature of appellants’ claims against them, Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
We therefore reverse the MDL Court’s dismissal of Count I.
[Importance of Pleading NO DEFAULT:] The Nevada Supreme Court stated in Collins v. Union Federal Savings & Loan Ass’n, 662 P.2d 610 (Nev. 1983):
An action for the tort of wrongful foreclosure will lie if the trustor or mortgagor can establish that at the time the power of sale was exercised or the foreclosure occurred, no breach of condition or failure of performance existed on the mortgagor’s or trustor’s part which would have authorized the foreclosure or exercise of the power of sale. Therefore, the material issue of fact in a wrongful foreclosure claim is whether the trustor was in default when the power of sale was exercised…. Because none of the appellants has shown a lack of default, tender, or an excuse from the tender requirement, appellants’ wrongful foreclosure claims cannot succeed. We therefore affirm the MDL Court’s of Count II.
[Questionable conclusion on “reunification of note and mortgage”:] the Nevada Supreme Court decided Edelstein v. Bank of New York Mellon, 286 P.3d 249 (Nev. 2012). Edelstein makes clear that MERS does have the authority, for purposes of § 107.080, to make valid assignments of the deed of trust to a successor beneficiary in order to reunify the deed of trust and the note. The court wrote:
Designating MERS as the beneficiary does . . . effectively “split” the note and the deed of trust at inception because . . . an entity separate from the original note holder . . . is listed as the beneficiary (MERS). . . . However, this split at the inception of the loan is not irreparable or fatal. . . . [W]hile entitlement to enforce both the deed of trust and the promissory note is required to foreclose, nothing requires those documents to be unified from the point of inception of the loan. . . . MERS, as a valid beneficiary, may assign its beneficial interest in the deed of trust to the holder of the note, at which time the documents are reunified.
We therefore affirm the MDL Court’s dismissal of Count III.

Here is the full opinion:

Opinion on MDL

For further information or assistance, please call 520-405-1688 on the West Coast and 954-495-9867 on the East Coast.

Another Short Treatise on Securitization

Patrick Giunta brought this article to my attention. He practices in South Florida and I co-counsel cases with him. Although there are some errors in facts and I have some differences of opinion with the writer, I think the article is a MUST-READ for anyone effected by “securitization” — especially foreclosure defense attorneys. If nothing else there is corroboration of what I have said all along. The entire thing is the emperor’s new clothes — see article I wrote about 7 years ago. If you don’t understand that, then you don’t know how to cross examine the “corporate representative” at trial.

The following is an excerpt from the article, and the link to the entire article is below:

“A serious problem with modern securitization is that it destroys “privity.” Privity of contract is the traditional notion that there are two parties to a contract and that only a party to the contract can enforce or renegotiate that contract. Put simply, if A and B have a contract, C cannot enforce B’s rights against A (unless A expressly agrees or C otherwise shows a lawful agency relationship with B). The frustration for Joe is that he cannot find the other party to his transaction. When Joe talks to his “bank” (really his Servicer) and tries to renegotiate his loan, his bank tells him that a mysterious “investor” will not approve. He can’t do this because they don’t exist, have been paid or don’t have the authority to negotiate Joe’s loan.

“Joe’s ultimate “investor” is the Fed, as evidenced by the trillion of MBSs on its balance sheet. Although Fannie/Freddie purportedly now “own” 80 percent of all U.S. “mortgage loans,” Fannie/Freddie are really just the Fed’s repo agents. Joe has no privity relationship with Fannie/Freddie. Fannie, Freddie and the Fed know this. So they are using the Bailout Banks to frontrun the process – the Bailout Bank (who also have no cognizable connection to the note and therefore no privity relationship with Joe) conducts a fraudulent foreclosure by creating a “record title” right to foreclose and, when the fraudulent process is over, hands the bag of stolen loot (Joe’s home) to Fannie and Freddie.”

Fannie and Freddie Don’t Own Your Loan

The problem with the site whose link appears below is that it is not authoritative. But we can treat it as though it was authoritative. The principal point is that even where Fannie and Freddie have “purchased” a loan it was for the express purpose of resale into the secondary market the trusts. In most cases Fannie and Freddie served as master trustees, which means that the usual trustee arrangement applied to the underlying trusts in what they call the “secondary market.”
If they followed the usual plan, the banks committed fraud — they took the money but never gave it to the trust. And they issued bonds to themselves as street name nominee for investors (but in actuality as though they had themselves funded the trust) , with which the loans were passed on to Fannie or Freddie and then they”purchased” the loans (without consideration) but the bonds were worthless because the trust that issued them never got any money to do ANY deal.
In short Fannie and Freddie are nominees or conduits with no real interest in the loans  EVER. The fact that they are almost ALWAYS guarantors in situations where the loan was processed by them (there are many instances in which Frannie and Freddie closing forms are used but the loan was never sent to Freddie or Fannie),

So in one case for example the statement that Fannie was the investor from the start is only an indication that Fannie was a conduit for investment dollars collected from the secondary market as a result of sale or resale of the loans, of the bonds or both. There is no scenario under which Fannie and Freddie remain the “investor.”

Is the loan look-up site the real thing? Sort of.
Yes it is legitimate and the client should have already given their social security number or at least the last 4 digits. But remember just because it is listed on the website of Fannie or Freddie does not actually mean that they own the loan. It only means that they have guaranteed the loan or the mortgage bond that was issued  by a trust whose trust beneficiaries advanced money for the origination or acquisition of the loan.
There are circumstances under which Fannie and Freddie buy loans using cash or mortgage bonds for which they are the master trustee of a trust. But they don’t ever keep them. So the listing on the site is not dispositive of exactly what the status of the loan is, the ownership of the loan or the loan balance. In fact it doesn’t even establish the loan existence. A witness from Fannie or Freddie should be interviewed as to the status of this particular loan and whether or not the agency is acting as the master trustee, guarantor or some combination of the two. The other possibility is that they actually own it by virtue of an actual purchase some of which transactions did occur between 2008 and 2009.

Death and Misdemeanors

Ghost of notary comes back from death and notarizes thousands of documents. Read all about it —

Dead Notary Signs After Death

Besides the obvious fact that the notarization is defective there is a deeper question of why anyone would need to falsify documents if the loans were real. One can imagine a case or two where someone crosses the line between legal and illegal. But why would there be hundreds of thousands, perhaps millions of cases in which documents and signatures were falsified?

Remember we are talking banks here, not a sandwich shop. These people invented documentation to protect themselves and create currency out of thin air by trading in commercial paper. They never had to fake it before, so why now?

My answer is because there are no transactions to support their paperwork. The only existing transactions that actually took place would support paperwork that would have looked and said a lot of different things — vastly different from the paperwork that is being used for recording, foreclosing, satisfying, refinancing, and approving short-sales.

How different? Different people, different entities and different terms for repayment. You can’t get any more different than that.

Meanwhile people forget that these apparent crimes not only go unpunished, but also are exacerbated by the actual occurrence of death and illness caused by stress from a wrongful foreclosure. The effects of TSD and PTSD is setting in on a huge portion of our population.

Foreclosures Drive Up Suicide Rates


After years of writing about the AMGAR program, people are finally asking about this program. So here is a summary of the program. As usual I caution you against using my articles as the final word on any subject. Before you make any decisions about your loans, whether you are in foreclosure, collection or otherwise you should seek competent legal counsel who is licensed in the jurisdiction in which the collateral is located. Also for those who think they would invest in such a program, you should seek both legal advice and consult with a person qualified and licensed as a financial adviser. And for full disclosure, this plan does include an equity provision and fees to the livinglies team.

The AMGAR program was first developed by me when I was living in Arizona where, after the 2008-2009 crash, the state was facing a $3 Billion deficit. The Chairman of the Arizona House Judiciary Committee invited me to testify about possible solutions to the foreclosure crisis, which at that time was just ramping up. So I developed a program that I called the Arizona Mortgage Guarantee and Resolution plan, which was dubbed “AMGAR.” Now the acronym stands for American Mortgage Guarantee and Resolution program. In Arizona it was mostly a governmental program with some private enterprise components.

For a while it looked as though Arizona would adopt the program and pass the necessary legislation to do it. All departments of the legislative and executive branches of government had examined it carefully and concluded that I was right both as to its premises and its results.

The objective was to tax and fine the various entities that were “trading” in loans improperly, illegally and failing to report it as taxable income, as well as failing to pay the fees associated with filing such transfers in the County records of each county.

The State would essentially call the bluff of the banks, which was already obvious in 2008 — they did not appear to have any ownership interest in the loans upon which they initiated foreclosures.

Thus the State and private investors would offer to pay off the mortgage at the amount demanded if the foreclosing party could prove ownership and the balance (it was already known that the banks had received a lot of money from both public and private sources that reduced the loss and thus should have reduced the balances owed to investors, which in turn reduces the balance owed from borrowers).

The offer to pay off the the money claimed due by the forecloser was on behalf of the homeowner who would enter into an agreement with AMGAR for a new, real, valid mortgage at fair market value with industry standard terms instead of the exotic mortgages that borrowers were lured into signing when they understood practically nothing about the loan. The State would levy a tax or enforce existing taxes against the participants in the alleged securitization plan for the trading they had been doing. The State would foreclose on the tax liens thus opening the door to settlements that would reduce the amount expended on paying off the old loan.

The AMGAR program would receive a mortgage and note equal to what was actually paid out to the foreclosing parties, which was presumed to be discounted sharply because of their inability to prove ownership and balance. Hence the state would receive a valid note and mortgage for every penny they paid and it would receive the taxes and fees that were due and unpaid, and then sell these clean mortgages into the secondary market place. Both the legislative and executive branches of Arizona government — all relevant departments — concluded that the plan would erase the $3 Billion Arizona deficit and put a virtual halt on foreclosures that had already turned new developments into ghost towns.

But the plan went dark when certain influential Republicans in the state apparently received the word from the banks to kill the program.

Not to be deterred from what I considered to be a bold, innovative program aimed at the truth about the hundreds of thousands of wrongful foreclosures, I embarked on a persistent plan of to raise interest and capital to put the program into use. This time the offer to payoff the old loan would come from (1) homeowners who could afford to make the offer and (2) investors who were willing to assume the apparent risk of paying $700,000 as a payoff, only to receive a mortgage and note equal to a much lower fair market value. But the new plan had a kicker for investors to assume that risk.

The plan worked for the few people who were homeowners, in foreclosure and who had the resources to make the offer. Unlike the buyback issue raised by Martha Coakley last week, the plan avoided any possible rule prohibiting the homeowner from getting the house back and in fact employed existing laws permitting the borrower to pay off the loan rather than suffer the loss of the property.

The offer specifies what constitutes proof for purposes of the offer and thus avoids varying interpretations by judges who might think one presumption or another carries the day for the banks. This plan requires actual transactional proof of payments for the origination and acquisition of the loan, and actual disclosure of the loss mitigation payments received by or on behalf of the creditors (investors).

As expected, the banks tried to say that they didn’t have to accept the money. They wanted the foreclosure. But nobody bought that argument. The myth that the bank was “reclaiming” the property was just that — a myth. The bank never owned the property. It was interesting watching the bank back peddle on producing proof that it MUST have had if it brought foreclosure proceedings. But they didn’t have it because it didn’t exist.

Banks claimed to have loaned money to the homeowner and thus were entitled to payment first, or failing that, THEN foreclosure. And what has resulted is an array of confidential settlements in which I cannot reveal the contents without putting the homeowner in danger of losing their home. Suffice it to say they were satisfied.

The reason I am writing about this again is that the latest development is a series of investors have approached me with a request for development of a plan that would put AMGAR into effect. They are looking for profit so that is what I am giving them in the new plan. This has not yet been launched but there are several iterations of the plan that may be offered through one or more entities. You might say this plan is published for comment although we are already processing candidates for which the plan would be used.

If I am right, along with everyone else who says the mortgages, assignments, transactions are all fake with no canceled checks, wire transfer receipts or anything else showing that they funded the origination or acquisition of the loan, then it follows that at the very least the mortgage is an unenforceable document even if it is recorded.

If things go according to plan, then the bank will be forced to either put up or shut up in court — either providing the reasonable proof required by the commitment or offer or suffer a dismissal or judgment for the homeowner. It would not be up to the Judge to state what proof was required. Instead the Judge would only be called upon to determine that the bank had failed to properly respond — giving information they should have had all along. The debt might theoretically exist payable to SOMEONE, but it wouldn’t be secured debt and therefore not subject to foreclosure. The mortgage encumbrance in the public records could then be removed by a court order. Title would be cleared.

Investors would be taking what appears to be a giant risk but obviously perception of the risk is declining.   If the bank comes up with verifiable proof of ownership and balance (according to the terms of the offer or commitment), then the investor pays the bank and gets back a note and mortgage for much less. If the bank loses and the mortgage encumbrance is removed as a result of the assumption of that risk, then the investor gets a fee — 30% of the original loan balance expressed in a new mortgage and note at market rates over 30 years.

So the payoff is quite large to the investors if their assumptions are correct. If they are incorrect they lose all the expenses advanced for the homeowner, all the expenses of selection and potentially the money they put in escrow or the court registry to show proof that the offer is real.

We are currently vetting potential candidates for this program both from the homeowner side and the investor side. This type of investment while potentially lucrative, poses a large risk of loss. People should not invest in such a program unless they do not rely on the money invested for their income or lifestyle. They should be qualified investors as specified by SEC rules even if the SEC rules don’t apply. No money will be accepted and no homeowner will be signed up for the program until we have concluded all registrations necessary for launching the program.

Homeowners who want to be considered as candidates for this program should acquire a title and securitization report, plus a review by our staff, including myself.

You should have a title and securitization report anyway, in my opinion. If you already have one then send it to If you don’t have such a report but would like to obtain one call 954-495-9867 or 520-405-1688 to order the report and review. If you already know someone who does this work, then call them, but a review by a qualified person with a financial background is important as well as a review by a qualified, licensed attorney.


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