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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“FREE HOUSE” in NJ Bankruptcy Court

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

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

This case is notable for several reasons:

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

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

Here are some interesting excerpts:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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THE NEWS IN REVIEW

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

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

Ocwen down 6.7% as Wells servicing deal officially nixed

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

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

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

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

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

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Banks continue to violate bankruptcy laws and orders of discharge:

DISCHARGE? WHAT DISCHARGE?

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

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

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South Florida at Top of Foreclosure Crisis Again

Zombie Foreclosures Zooming in Raleigh North Carolina

Cities Require Bond before Foreclosure in Effort to Stem Zombies

Wrongful foreclosure leads to wrongful deficiency collection

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

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

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

Who Can Sign a Lost Note Affidavit? What Happens When It Is “Found?”

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Let’s start with the study that planted the seed of doubt as to the validity of the debt, note, mortgage and foreclosure and whether any of those “securitized debt” foreclosures should have been allowed to even get to first base. Katherine Ann Porter, when she was a professor in Iowa (2007) did a seminal study of “lost” documents and found that at least 40% of ALL notes were lost as a result of intentional destruction or negligence. You can find her study on this blog.

The issue with “lost notes” is actually simple. If the note is lost then the court and the borrower are entitled to an explanation of the the full story behind the loss of the note, why it was intentionally destroyed and whose negligence caused the loss of the note. And the reason is also simple. If the Court and the borrower are not fully satisfied that the whole story has been told, then neither one can determine whether the party claiming rights to collect or enforce the note actually has those rights.

This is the question posed to me by a knowledgeable person involved in the challenge to the validity of the debt, note, mortgage and foreclosure:

Who is finding the Note?  Can a servicer execute a Lost Note Affidavit as a holder?  Non holder in possession?

It took me a while to get to the obvious point of the above defense.  It is intended in the event that party A loses the Note and files a LNA [Lost Note Affidavit}, that the Issuer, does not have to pay party B even if he appears with a blank endorsed note, unless B can prove holder in due course (virtually impossible these days, esp in foreclosure cases).

This is critical.  The foreclosing party, through a series of mergers and successions, files a case as successor by merger to ABC.  Can’t locate note, so it files a LNA, stating ABC lost the Note.  Note is found, but the foreclosing party says, oops, was in a custodial file for which we were the servicer for XYZ.   While the foreclosing party has the note, it cannot unring the fact it got the Note from XYZ after ABC lost it.

Good questions. He understands that the requirements as expressly stated in the law (UCC, State law etc.) are quite stringent. You cannot re-establish a lost note with a copy of it unless you can prove that you had it and that you were the person entitled to enforce it (known as PETE). You also cannot re-establish the note unless you can prove that the note was lost or destroyed under circumstances where it is far more likely than not that the original won’t show up later in the hands of someone else claiming PETE status. So there should be a heavy burden placed on any party seeking to foreclose or even just to collect on a “lost note.” But courts have steamrolled over this obvious problem requiring something on the order of “probable cause” rather than actual proof. While there is some evidence the judiciary is turning the corner against the banks, the great majority of cases fly over these issues either because of presumptions by the bench or because the “borrower” fails to raise it — and fails to make appropriate motions in limine and raise objections in trial.

But the person who posed this question drills down deeper into the real factual issues. He wants to know details. We all know that it is easier to allege that you destroyed it accidentally or even intentionally than to allege the loss of the note. A witness from the party asserting PETE can say, truthfully or not, “I destroyed it.” Proving that he didn’t and that the copy is fabricated is very difficult for a homeowner with limited resources. If the allegation and the testimony is that the note was lost, we get into the question of what, when where, how and why. But in a lost note situation most states require some sort of indemnification from the party asserting PETE status or holder in due course status. That is also a problem. I remember rejecting the offer of indemnification from Taylor, Bean and Whitaker after I reviewed their financial statements. It was obvious they were going broke and they did. And the officers went to jail for criminal acts.

So the first question is exactly when was the “original” note last seen and by whom? In whose possession was it when it was allegedly lost? How was it lost? Who has direct personal information on the location of the original and the timing and method of loss? And what happens when the note is “found?” We know that original documents are being fabricated by advanced technology such that even the borrower doesn’t realize he is not being shown the original (that is why I suggest denying that they are the holder of the note, denying they are PETE, denying they are holder in due course etc.)

In the confusion of those issues, the homeowner usually fails to realize that this is just another lie. But in discovery, if you are awake to the issue, you can either learn the facts (or deal with the inevitable objections to discovery). And then the lawyer for the homeowner should graph out the allegations and testimony as best as possible. The questioner is dead right — if the party NOW claiming PETE status or HDC status received the “found” original note but received it from someone other than the party who “lost” it, there is no chain upon which the foreclosing party can rely. In simple language, what they are attempting to do is fly over the gap between when the note was lost and destroyed and the time that the current claimant took possession of the paper. And once again I say that the real proof is the real money trail. If the underlying transactions exist, then there will be some correspondence, agreements and a payment of money that will reveal the true transfer.

And again I say, that if you are attacking the paper you need to be extremely careful not to give the impression that the borrower is attempting to get out of a legitimate debt. The position is that there is no legitimate debt IN THIS CHAIN. The debt lies outside the chain. The true debt is owed to whoever supplied the money that was received at the loan closing, regardless of what paperwork was signed. Failure to prove the original loan transaction should be fatal to the action on the note or the mortgage (except if the foreclosing party can prove the status of a holder in due course). The fact that the paperwork was signed only creates a potential second liability that does not benefit the party whose money was used for the loan.

The foreclosure is a thinly disguised adventure in greed — where the perpetrators of the false foreclosure, use fabricated, robo-signed paper without ANY loan at the base of the paper trail and without any payments made by any of the parties for possession or enforcement of the paper. They are essentially stealing the house, the proceeds, and the money that was used to fund the “loan” all to the detriment of the real parties in interest, to wit: the investors who were tricked into directly lending the money to borrowers  and the homeowners who were tricked into signing paperwork that created a second liability for the same loan.

Articles of Deception: PSA and Reynaldo Reyes Affidavit for Deutsch Bank as Trustee

WITHOUT CONFUSION AND OBFUSCATION, COMBINED WITH STONEWALLING, THERE WOULD BE NO FORECLOSURE OF ANY DEBT SUBJECT TO CLAIMS OF SECURITIZATION —- NEIL GARFIELD, WWW.LIVINGLIES.ME

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

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Hat tip to Carol Molloy who sent me the affidavit

See Reynaldo Reyes Affidavit New Jersey Union County 2010 CCF11162014

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Reynaldo Reyes, AVP of Deutsch Bank said to a borrower, in a taped interview, that the whole scheme was “counter-intuitive.” In plain language that means that nothing is what it appears to be. And THAT in turn means that disclosures” were deceptive or “counter-intuitive.” And THAT means that the disclosures at closing were also “counter-intuitive” or deceptive. Reyes in a sworn affidavit drafted many times and edited by various top level attorneys for the banks has submitted an affidavit on behalf of Deutsch Bank but which will be used by Banks to try to legitimize their deceptive tactics. Again, to put it simply, they were lying to everyone — investors, borrowers, regulators, law enforcement, Congress, and the President.

Witness the following paragraph from Reyes’ affidavit. Here he says in the affidavit in Paragraph 1, that the Trustees serve the Trust. But then he takes it all back by saying that the Servicers perform all the functions of administering the loans — not on behalf of the Trustee, but rather on behalf of the Trust. THAT can only mean that the named Trustee, is not the Trustee. It means that the power of administering the Trust assets is with the servicers. Does that mean the servicers should be sued for wrongful foreclosures? Then why is the Trust named or the Trustee named?

So the beginning of the PSA, which designates a Trustee, is merely window dressing to give the impression that Deutsch Bank is the Trustee with all the powers of a Trustee, when in fact, the servicer is the one who performs most or all of the functions of a Trustee. But they do so giving the impression that they must go back to the Trustee or the “investor” when in fact they assert the power to do everything. In their circular reasoning, they could say to the court that they must get approval from the investor and then leave the court room. Then they speak for the investors, according to the servicers. So now they come back to the homeowner or homeowner’s counsel and say the application for modification or settlement has been declined. Whether that assertion turns out to be true after analysis in court is another story.

This is contrary to the position taken by U.S. Bank and Deutsch Bank and BONY Mellon in foreclosure cases where they sue for foreclosure in their own name as Trustee for the REMIC Trust. It also accounts for why they sometimes sue as Trustees for the certificate holders, and sometimes even get away with saying they are trustees only for the certificates delivered to the investors. This of course makes no sense, since they are neither holding nor asserting ownership over the certificates.

Paragraph 7: No entity services loans on behalf of the trustees. The trustees and the loan services that are appointed by the the PSA’s each perform their designated functions on behalf of the trusts. In other words, loan servicers to service mortgage loans that have been pooled and sold into a securitization trust are performing services on behalf of the trusts, not on behalf of the trustees.

Then we get to Paragraph 10 which admits that the Trustee has neither any accounts nor any information or business records of its own. According to this paragraph 10, the Trustee receives loan level data from the servicers “to facilitate certain payments to bondholders.” But wait here comes the language that takes all THAT away: “However, for a number of trusts” [unspecified, but probably all of them] “a party other than the Trustee handles those payments responsibilities.” And then the rest is taken away by his statement that “With respect to the Trusts for which the Trustees serve as a Trustee but not as securities administrators, the Trustee do not receive loan level data.”

Get it? Just like the PSA, Reyes’ affidavit says one thing and then takes it all away in the next breath. The fact is that in virtually no case is the Trustee the securities administrator. And that, Reyes, says means that the Trustee neither gets loan level data, nor does it make payments to the bondholders. “Other parties” perform those functions. Who? The servicer who is according to Reyes the party with the actual powers of the Trustee. So why is Deutsch claiming to be a Trustee.

The answer is very simple — MONEY. The sellers of mortgage bonds pay Deutsch to rent their name to underwriters to make it appear as though an independent fiduciary is handling the money, the purchase or origination of loans, and the enforcement or modification of loans. This is meant to deceive the investors into a false sense of complacency. The same is true for borrowers, although at this point “complacency” would hardly be the word.

Everyone believed the wording at the beginning of the PSA and practically nobody read the PSA from end to end to see that the beginning was sales material and the end was a hodgepodge of obfuscation to make it difficult if not impossible to determine the identity of the players or what they were doing. This analysis can certainly NOT be done without reference to the underlying transaction in which we see who actually sent money to originate the loans, from whom they received the money etc.

The fact is that that while most people think the Trusts acquired the loans by sale of the loans into the trust, the evidence shows that practically none of them were sold to the Trust. The only logical conclusion from the facts at hand is that the investors’ money was pooled in an entirely different scheme while hiding behind claims of securitization.

The investors money was used directly, without their knowledge or consent, to fund origination of loans like the toxic Pick a Pay, reverse amortization, payment increase cap (usually 7.5%) that results in what appears to be affordable payments, but also results in uncontrolled liability.

A $139,000 loan that I recently analyzed, indicates the eventual liability could be nearly $4 million — all at the end of 30 years of payments, resulting in an undisclosed hidden balloon payment in the 13th payment and every payment thereafter which thanks to the miracles of compounding interest and an adjustable rate that could go as high as over 12% APR process an obligation that looks affordable but is infinitely not affordable. The interest alone on the new principal (original balance + deferred interest on negative amortization loan) could exceed $24,000 per month on a $139,000 loan.

Then you get to paragraph 11: Here the affidavit produces more obfuscation by referring to the Master Servicer who might (or might not) be responsible for performing any duties. But in the PSA you see the ultimate authority for virtually everything lies with the Master Servicer, who also turns out to be the the underwriter and seller of mortgage bonds. And since we now know that the Trustee had neither trust accounts nor any control or responsibility for the accounts, THAT makes it impossible for the Trustee to have received any proceeds from the sale of bonds issued by the Trust.

Since a Trust cannot operate except through the Trustee by law (see New York law and the law of your state for more information) it is an inevitable conclusion that there were no accounts established for the Trust in the manner expected by the investors who bought the mortgage bonds. And since there was no money in the Trust, the Trust could not have originate or purchased any loan documents, regardless of whether or not there was in fact an underlying loan transaction at the base of the chain relied upon by these parties when they foreclose.

Then Reyes gets to the meat of why he submitted the affidavit. BONY Mellon did the same thing by a lawsuit and so have hundreds of investors, insurers, guarantors, holders of loss mitigation hedge contracts, whose cases have been quietly settled. Reyes states that “the Trustee would not be in the best position to address further inquiries by the Court concerning any possible ‘irregularity in the handling of foreclosure proceedings.’” So to put it simply, Reyes is disclaiming any role in foreclosures and trying to distance Deutsch bank from wrongful foreclosures [i.e. most or nearly all of them] despite its APPARENT AUTHORITY.

Examination of the PSA reveals deep within its pages, prohibitions and restrictions against either the Trustee or the bond purchasers (“trust beneficiaries”) from knowing or even inquiring about anything involving the business of the trust, which we already know never existed because the trust never received its IPO (bond sale) money. This is why servicers assert control over the settlement and modification process. This is why they say the investor declined the modification or settlement because they never contacted the investor or the trust or the Trustee.

The truth is that the servicers assert, in the final analysis, the right to speak for the investors even thought they have a patent CONFLICT OF INTEREST RESULTING FROM SERVICER ADVANCES. A true servicer would be required to mitigate the damages and minimize the losses. Servicers have no interest in doing that because they can make a ton of money for having advanced the principal and interest payment to the creditors from an account that contained the investors money and that would count, as stated in the PSA, as payment in full to the creditor — so the creditor could not declare a default against the servicer.

And THAT is why these foreclosures are pushed through, among other reasons, [avoiding workouts, modifications and settlements] to wit: the foreclosures proceed even though the creditors (investors) are being paid right through the date of foreclosure. The reason is the banks want to “recover” those “advances” (paid from money stolen from the investors) not from the borrower and not from the creditors, who have already been paid, but through a claim against the final liquidation of the property to a third party “innocent” purchaser. BY controlling the foreclosure process, the servicer gets paid a lot of money and protects the banks against claims for refunds and damages arising out of the improper loan practices, loan processing by the servicer, and wrongful foreclosures.

So far the servicers have fooled the courts into thinking that their claim to recover servicer advances is somehow secured. It isn’t. In order to do that the court would be required to issue a declaratory judgment specifying the breakup of the mortgage lien on a continual basis for each servicer advance or find that the total advanced by the servicer from the underwriter’s controlled slush fund, is subject to an equitable mortgage lien. Equitable liens are not accepted in virtually any court because ti would require the buyer of property to make exhaustive investigation into matters that a re not contained on the face of the note or mortgage.

PRACTICE NOTE FOR LAWYERS:

You might want to get the court to take judicial notice of the affidavit and just to be on the safe side get a certified copy of it. You might want to file a motion for involuntary dismissal based upon the affidavit of Reyes who was THE person in charge of the trustee “program.” Think also about a subpoena for Reyes to appear at trial, if there is one.

Reyes is saying that only the servicer can enforce. And he is saying that when the servicer acts, it does so for trust NOT THE TRUSTEE. So the Trustee, according to him is not a proper party to bring the action. The inference corroborates what I have been saying all along. It is that the investors are the real parties in interest and the servicer is acting in a representative capacity — IF IT IS THE TRUSTEE NAMED IN THE TRUST INSTRUMENT (THE PSA).

Post Mortum on 2010 “Bad” Decision in Florida

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

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See CitiBank v Delassio 756 F Supp 2d 1361 2010

This case is often cited by servicers and banks to enforce a note and/or mortgage. Lots of people regarded this decision as “bad” because it approved the foreclosure. The natural impulse is to run from this decision and try to cite others that conflict with it. But this decision was correct AND it provides a blueprint for making your defense successful. The Judge correctly analyzed the law and the facts and found that the homeowner had not proven anything or objected to anything that would prevent Citi from proving its prima facie case and had not proven anything or objected to anything that would have supported any of the homeowner’s defenses.

So I thought I would take this case, as I have done before, and examine it for clues on how the same Judge would have decided the case differently. Used properly this might enable the homeowner to cite to this case in support of a motion to dismiss, motion for summary judgment or to attack the prima facie case of the party initiating foreclosure. There are also plenty of clues as to proving an affirmative defense in which the final result will be that the mortgage is void or unenforceable and perhaps the note as well, leaving the debt, which arises by operation of law and is owed to the party who physically gave the borrower the money.

  1. LACK OF JURISDICTION — VOID MORTGAGE AND VOID NOTE: The first issue is that for reasons unknown, the borrower failed to bring up the fact that the “lender” did not legally exist in Florida and further failed to object to the finding that AHMSI and  American Brokers Conduit were “one in the same [sic]“. In fact, I wonder if the case could not still be overturned on the basis of lack of jurisdiction and perhaps even that the mortgage was void, thus depriving the court of both in rem jurisdiction and in personam jurisdiction. Perhaps the homeowner did not authorize investigation into the parties. But had he done so he would have found that American Brokers Conduit (the “lender”) did not exist in law or in fact. Any claim that ABC was the alter ego or Trade Name of AHMSI was not explored in the opinion. And as to AHMSI, what difference does it make if they were supposedly the true lender under Florida law? The note and mortgage were both defective and the disclosures were deficient in failing to identify the actual party, which, as we shall see below, would have changed the view of the case entirely.
  2. POOLING AND SERVICING AGREEMENT: The title of the case involves U.S. Bank “as indenture trustee.” By stating that without explanation the homeowner ought to be able to inquire about the indenture, where it exists, and ask for a copy. That would be the Pooling and Servicing Agreement, which makes all arguments about the irrelevance of the PSA moot. Failure to raise the question of where the trustee derived its powers, where the servicer derived its powers, and where the terms and provisions can be found for the duties of the servicer or trustee essentially waives the issue of securitization (false or not). By raising the issue appropriately the homeowner can then inquire as to whether the trust actually owns the debt or is a holder in due course. The holding by the judge in this case that the Trust was a holder in due course was wrong —but not wrong on the facts and admissions by both sides in this case. Hence the decision was inevitable even though the real facts did not support the conclusion. The accepted facts of the case were contrary to the actual facts.
  3. FDCPA CLAIMS: The homeowner settled with AHMSI regarding fair debt collection practices. This might have been a mistake and might have been the reason that the Judge regarded AHMSI and American Brokers Conduit as the same thing. The settlement probably was worded in a way that prevented the homeowner from raising the authority of ABC to assign anything, much less record a mortgage or transfer a note that it could not have funded because it never existed — at least in Florida. I have several cases where the lender is very concerned about the FDCPA claims and needs a settlement. They obviously know that there is danger in those hills and that should be exploited by borrowers when challenging the debt, note, mortgage or foreclosure.
  4. TILA AND RESPA DISCLOSURES: Amongst the agreed facts, the court found that the borrower closed the loan with ABC, and based upon the only issues raised by the borrower, found that the disclosures were proper, and that any discrepancies worked to the borrower’s advantage and therefore did not constitute a violation of the Truth in Lending Act (TILA) or the Real Estate Settlement Procedures Act (RESPA). Hence there was no right to rescind either under the 3 day rule or the 3 year rule. Despite the fact that the borrower announced rescission within the 3 years, the court properly found against the borrower. Citi by filing the foreclosure suit, was in substantial compliance with the requirement that it timely file a declaratory action regarding the right to rescind. So if the court had found that there was no closing because ABC did not exist and that the disclosures were inadequate because the borrower raised the issues of disclosing the lender (and avoiding the predatory per se finding by Reg Z), then the same Judge who entered this order probably would have said the rescission right was at least in play and might well have decided, as per the express terms of TILA, that the mortgage was nullified by operation of law by the announcement of rescission. [Note: This issue is currently being considered by the U.S. Supreme Court]
  5. RESCISSION: This in turn leads to the question: if ABC didn’t exist and therefore didn’t actually loan any money then who did? The only thing we can agree on, up to a point ( but that is the subject of another article), is that the borrower did get money and that the receipt of the money is presumed, by operation of law to create a debt in which the borrower is the debtor and the source of funds is the creditor. The failure to disclose a table funded loan or worse, a naked nominee or conduit providing funds from investors who didn’t know how their money was being used, is a material violation of the disclosure requirements in TILA. That is why Reg Z underscores the importance of that disclosure by saying that failure to do so constitutes conduct that is “predatory per se.” And you can prove that by citing to this same case. Hence the rescission would have or at least could have been found to have been complete and the mortgage nullified, thus paving the way for the borrower to get alternative financing,  quiet title or other other remedies.
  6. PREDATORY LOANS: It is unclear what exactly went on at the trial level  with regards to an obviously “trick” loan that fails to disclose its hidden terms in a way that the borrower would any possibility of understanding. The only thing the borrower knew or understood is that he was getting a low interest loan. No reasonable person would sign a loan in which they understood that the interest rate was only good for one month. If you want to win on this point ,though, you need more than the testimony of the borrower. You  need a mortgage broker or other professional that would testify that the loan was unworkable from the start, doomed to failure and was illegally funded from investor funds, and illegally sold to the borrower under false pretenses. THAT is how you prove unclean hands which would prevent enforcement of the mortgage.
  7. UCC: There is an interesting juxtaposition in the “Legal Analysis” of the opinion. The court finds that the Trust was a holder in due course. And this case can be cited for the elements of being a holder in due course. I would encourage foreclosure defense lawyers to do so because you can start out by saying in this case in which the Federal District Court found against the borrower, the elements of the status of holder in due course are summarized. If you go down to the end of the first paragraph in the legal analysis the quote about payment opens the door for your attack against the holder in due course status. Did the Trust prove or show that it PAID for the note and mortgage without knowledge of borrower’s defenses, without knowledge that it was already in default, and in good faith, and did the Trust get delivery (which according to the pleadings, they did not because the note was initially “lost”). Hence the same court that stated that the trust was an HIDC finds that PAYMENT “goes to the heart of the agreement”. If the trust cannot show it paid anything, then two questions arise, to wit: why not? and why did the endorser or assignor of the “loan” transfer or purport to transfer the loan documents to the trust without receiving any payment? If you follow that logic down the line you will corroborate your argument that ABC gave no money to the borrower and that was why ABC never received any money for the transfer of the paper, which now is visible as being entirely worthless, fraudulent and false.
  8. ENDORSEMENT OR ASSIGNMENT IN SECURITIZATION SCHEME: The court correctly states that under the UCC a transferee of negotiable paper can get the right to enforce the paper either by endorsement or assignment. Because the issue was apparently not raised, the court failed to address the issue of whether the enforcement could succeed at trial (as opposed to the pleading stage) if the identity of the creditor is not disclosed. The question at trial or deposition should be, if the witness is from the servicer entity, and assuming the current servicer entity had anything to do with processing payments from the borrower and to the creditor, “who did you pay?” What the court failed to deal with (presumably because the homeowner did not bring it up) is that the party claiming rights (the trustee for the trust) must show that the loan actually went into the trust because it was paid for and properly delivered. If no objection is raised, then the court can correctly presume that those elements are present. If a proper objection is made then the Plaintiff should be required and often is required now to prove the elements of a holder in due course. In cases where my team has been directly involved in litigation the opposing lawyer tried to wriggle out of this problem by declaring that the trust is not a holder in due course and that therefore they had no requirement to prove those elements. They are essentially hoping that the court won’t know the difference between a holder and holder in due course. A mere holder must establish that it has the rights to enforce on behalf of a party who actually owns the debt by identifying that party and identifying the instrument by which the “holder” was given authority to enforce. In the case of a trust that is impossible because by all accounts the trust is the final resting stop of the claims of securitization of loans. So you end up with an empty trust, in which neither the servicer nor the trustee have any legal rights to do anything with the debt created by the borrower when he accepted the money at “closing.” He still owes a debt, and if the opposition would comply with discovery requests we would know the identity of the party to whom he owes the debt. But one thing is for certain, he cannot ALSO owe a second debt created by signature on a note and mortgage made out in favor of a party who loaned him any money. The key to this is emphasizing that a holder must prove the loan in its claimed chain. But the loan will probably be presumed to exist within the chain if the borrower fails to object and raise the issues.
  9. DELIVERY: There is considerable confusion in the case as to the issue of delivery apparently because neither party made an issue about it. The court concludes that Citi got delivery of the loan documents (versus the lost note account that was later abandoned) but fails to show how that delivery constitutes delivery to the trust when the PSA obviously contains strict provisions as to delivery and New York law governing the trust requires any transaction outside the authority stated in the trust to be void.
  10. ECONOMIC WASTE: This decision stands for the proposition that economic waste is a proper affirmative defense, but unless you actually prove it with reliable, credible testimony about facts and documents, merely alleging an affirmative defense and hoping that somehow the opposition will stumble into an admission, is not a very good strategy.
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