What is Evidence or Proof of the Existence of the REAL Loan?

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It is a complicated answer. The following is NOT a comprehensive answer which would the length of a treatise.

In loan transactions there usually is no actual written contract that says the creditor will loan money and the debtor will pay it back. So common law and statutory law must make certain assumptions about the loan contract — which still must exist in order for the note or mortgage to be enforced. This is till basic contract law — the elements of which are offer, acceptance and consideration each to the other. The stumbling block for most judges is that the presence of money at the table is automatically construed as consideration for the contract that is sought to be enforced.

In olden times there was no problem in using this heuristic approach to loan contracts, because nobody thought of some third party funding the loan WITHOUT a note and mortgage made out in favor of the actual creditor. But Wall Street found a way to do it and conceal it.

The actual debt — i.e., the duty to pay — arises by operation of law when the debtor receives the money. It is presumed to be a loan and not a gift. The paperwork is intended to provide disclosures and terms and evidence upon which both parties can rely. In this context before Wall Street saw the vulnerability, there was no problem in using the words “debt”, “note”, “mortgage” and “loan” interchangeably — because they all essentially meant the same thing.

The genius of the Wall Street scheme is that their lawyers saw the possibilities in this informal system. The borrower could not claim lack of consideration when he received the money and thus the debt was presumed. And with enough layers of deception, non-disclosure and outright lies, neither the borrower nor even the closing agent actually realized that the money was coming from Party A but the paperwork was directed to Party B. Nobody realized that there was a debt created by operation of law PLUS another debt that might be presumed by virtue of signing a note and mortgage. Obviously the borrower was kept in the dark that for every $1 of “loan” he was exposing himself to $2 in liability.

If the creditor named as payee and mortgagee was not the source of the funds then there is no underlying debt. The rules of evidence are designed to help the court get tot eh truth of the matter asserted. The truth is that the holder of the paper is NOT the party who was the creditor at “closing.” The closing was fictitious. It really is that simple. And it is the reason for the snowstorm of fabricated, forged and robosigned documents to cover up the essential fact that there is not one shred of consideration in the origination or transfer of many loans.

Each assignment, endorsement, power of attorney or other document purporting to transfer control or ownership over the loan documents is corroboration of the lack of consideration. Working backwards from the Trust or whoever is claiming the right to enforce, you will see that they are alleging “holder” status but they fail to identify and prove their right to enforce on behalf of the holder in due course or owner of the debt (i.e., the creditor).

Close examination of the PSA shows that they never planned to have the Trust actually acquire the loans — because of the lack of any language showing how payment is being made to acquire the loans within the cutoff period. THAT was the point. By doing that the broker dealers were able to divert the proceeds of sale of Mortgage Backed Securities to their own use. And when you look at their pleading they never state they are a holder in due course. Why not? If they did, there would be no allowable defenses from the borrower. But if they alleged that they would need to come forward with evidence that the Trust purchased the debt for value, in good faith and without knowledge of the borrower’s defenses — elements present in every PSA but never named as “holder in due course.”

Since the good faith and lack of knowledge of borrower’s defenses is probably not in hot dispute, that leaves only one element — payment. The logical question is why would the assignor or endorser transfer a valuable debt without payment? The only reasonable conclusion is that there is no underlying debt — there is paper but the power of that paper is at very best highly speculative. “Underlying debt” means that the alleged borrower does not owe any money to the party named as payee on the note.
Traveling down the line, seeking for evidence of payment, you don’t find it. Even the originator does not get “paid” for the loan but assigns or endorses the paperwork anyway. No reasonable business explanation can be found for this free transfer of the paper except that the participants knew full well that the paper was worthless. And THAT in turn is presumptive proof that there was a lack of consideration for the paperwork — meaning that the debt was owed to an outside party who was never in privity with the “originator.”
If someone has possession of a note, it is an original and it complies with local statutes as to form and content, the note is accepted as evidence of the debt, and the terms of repayment. The person who signed the note is at risk of a judgment against him only if he defaults or the note falls into the hands of a holder indue course. Of course if the note IS evidence of a loan that WAS funded by the named payee, that is a different story. But looking a little further up the line, you will eventually find that one or more alleged transfers of the paperwork did not involve payment. And the reason is the same as the above. In the end, the money came from illegal diversion of investor funds that were intended to be deposited with a REMIC Trust.

If the signer of the note denies that the transaction was complete — i.e., there was no consideration and therefore there is no enforceable contract, then the burden switches back to the “holder” of the note to step into the shoes of the original lender to prove that the loan actually occurred, the original lender was the creditor and the signer was the debtor.

What a Week of Decisions! Listen to the Neil Garfield Show Tonight

Click in to tune in at The Neil Garfield Show

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

The losers this week? Anyone with a business record they want to introduce into evidence. The winners might just be any homeowner who has been victimized by foreclosure. Maybe the banks have had their 15 minutes. Maybe time is up.

These are just some of the Wall Street entities that took a beating in the last ten days:

  • Deutsch bank
  • OneWest
  • Ocwen
  • Bank of New York Mellon
  • US Bank
  • and thousands of trusts that sold mortgage backed securities but never received the proceeds of the sale.

Listen tonight as the corner turns on the banks and the courts go from being perplexed to being angry.

Fla 1st DCA and Attorney Tom Ice Speak Their Minds

see http://www.dailybusinessreview.com/id=1202674539162/Foreclosure-Reversal-Issued-in-Case-With-RoboWitness

The article is worth reading and Tom’s comments are right on point. One thing pointed out in the middle fo the article leads to me believe that the courts are also fed up with banks failing to prosecute cases that they say are “standard foreclosures.” The opinion states that the case should have been dismissed years ago for lac of prosecution. This might give judges pause when they blame the homeowner for the delays. The case belongs to the party who filed it. I have several cases that are 5-6 years old. I filed motions to dismiss for failure to prosecute and the court denied it because the opposing attorney filed a few papers that did nothing to advance the cause. On appeal, it might be worth raising this issue, especially in the Florida 1st DCA.

The importance of these decisions cannot be overstated. The appellate courts are looking beyond the “facially valid” paperwork and insisting that the evidence be trustworthy and credible. Those points should be emphasized in argument before the court.

Identity Theft By the Banks: A New Cause of Action?

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The inevitable conclusion, in my opinion, is that where the investment banks have set up a structure where the real lender is deprived of the evidence (i.e., the promissory note) of the loan (which they didn’t want) and the borrower is deprived of information and good faith in a table funded loan with multiple layers of conduits, is that the identity of both the investors and the borrowers is being systematically stolen, misused and causing losses and financial damage to both sets of victims. That is precisely what TILA and Reg Z are aiming at when they describe such loans as “predatory per se.” Isn’t that unclean hands per se?
The usual charges of identity theft are against individuals who poach identities and then use it get credit, cash or goods and services using the name and credit reputation of the victim. The penalties in civil and criminal law are pretty severe. But when you look at the “securitization” farce or “securitization fail” as Adam Levitin puts it, you can see that the banks are the perpetrators and the investors and borrowers are victims.
The banks used the identities of the borrowers to trade, profit, get credit, insurance proceeds, loss sharing payments, and proceeds from guarantees and hedge products all to the the eventual detriment of the debtors and real creditors. If the transactions were above board, the borrower would know the identity of the lender. The borrower would have a choice as to whether to do business with that lender. The borrower would also have an opportunity to see how many layers of fees were actually involved in all the conduits that were being used without permission from either the investors who put up the money and without permission, consent or knowledge by the alleged borrower.
There is plenty of good law to use that covers this and it might get traction now that the courts are wondering if any of this crap is real. From the start, the identity of the borrower was stolen or converted to the use of parties who had no actual privity with the borrower or rights to claim anything in the alleged loan transaction. By not making the actual loan and then engaging in a pattern of behavior in which the “loan” was said to be represented on the note and mortgage, then selling that paper, insuring it, getting guarantees on it etc, they were using the paper in ways that were never contemplated by the borrower who had no notice because this was a table funded loan (predatory per se) to begin with. Because that revenue was obtained without permission of either the borrower or the investor, it might well be that the borrower is entitled to bring a claim for those “profits”.
The identity of the real source of funds was withheld by using several layers of conduits. But the money, indisputably, came from the investors who bought bonds in an IPO offering from a REMIC Trust. What the investors didn’t know (and probably still don’t know) is that their money was diverted from the REMIC trust directly to closing tables around the country. As the creditor the investors were entitled to be named as payee on the note — but more importantly, they were entitled to not have their money used for that loan. The money from investors were obtained under false pretenses. If the money had been deposited into an account of the “Trustee” for teh REMIC Trust, the investment banks could not have creaed the alleged “proprietary trading profits” that theya re claiming now and which accounts for them declaring dividends even while they pay billions in fines and penalties for their misbehavior.

So the identity theft allegation is one of the core causes of action that ought to be looked at carefully. If successful it busts open the paper cocoon that the banks are hiding within. The paper is not worth the ink on it because it is all based upon stolen money, stolen identity, and forged, fabricated documents being hidden by a pattern of conduct in creating loans that had to fail and wrongful foreclosures, without notice to the investors, that multiple possible settlements and modifications might have mitigated the loss or eliminated it entirely. Taken as a whole, it is highly likely that the percentage of wrongful foreclosures over the past 7 years is around 94%. Out of more than 6 million foreclosures (and another 5-6 million to come) only 360,000 (estimated) would be valid.

This theft of household wealth has resulted in an economy that is and will continue to be struggling for equilibrium until the housing and mortgage issue is addressed in accordance with the true facts and existing applicable law. But judges first must dispel any bias about deadbeat borrowers trying to get out of a legitimate loan or debt. There is no legitimate loan and as to the people who are seeking to enforce the debt, there is no debt. The owners of the debt don’t know they own it because they are still laboring under the misapprehension that the money and the loans were funneled through the REMIC Trust. it wasn’t.

The government has been complicit in this scheme, afraid that if they cut the big banks off at the knees that the primary credit markets will collapse. That can be ameliorated using the existing infrastructure,but perhaps modifying the roles of the Federal Reserve and other agencies that are quasi public and quasi private. Any other approach means that we are transferring regulatory power over the banks, finance and the economy in general to the banks who caused the problem in the first place.

Information, Resources and Help with Your Loan Strategy – Serving Over 9,900,000 Visitors

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MISSION STATEMENT: I believe that the mortgage crisis has produced manifest evil and injustice in our society. I believe our recovery will never reach the majority of struggling Americans until we restore equal protection for all citizens and especially borrowers in our debt-ridden society. LivingLies is the vehicle for a collaborative movement to provide homeowners with sufficient resources to combat bloated banks who are flooding the political market with money. We provide thousands of pages of free forms, articles and discussion of statutes, case precedent and policy on this site. And we provide paid services, books and products that enable us to maintain an infrastructure to provide a voice to the victims of Wall Street corruption.

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Ocwen Engaged in Pattern of Conduct Backdating Default Letters and Other Documents

See Palm Beach Post

Bank bombshell! Backdated foreclosure letters may have harmed thousands 

  •  2  0  4  23

By Kim Miller

house moneyOcwen Financial Corp. was accused this week by New York’s chief financial officer of backdating “potentially hundreds of thousands” of letters to borrowers that likely “caused them significant harm.”

The Tuesday letter from Superintendent of New York’s Department of Financial Services says the letters denied mortgage loan modifications and were dated more than 30 days prior to the date that Ocwen mailed the letter.

Ocwen has an office in West Palm Beach where it was formerly headquartered. It is now based in Atlanta.

“These borrowers were given 30 days from the date of the denial letter to appeal that denial, but those 30 days had already elapsed by the time they received the backdated letter,” Lawsky wrote. “In other cases, Ocwen’s systems show that borrowers facing foreclosure received letters with a date by which to cure their default and avoid foreclosure _ and the cure date was months prior to receipt of the letter.”

Ocwen, which  is under investigation by the New York Department of Financial Services, said in a statement to Forbes that the letters were the result of “software errors in our correspondence systems,” and that 281 out of 283 borrowers who received letters with incorrect dates remain Ocwen borrowers.

“We are continuing to review the rest of the cases,” Ocwen told Forbes in a statement. “We believe that we have resolved the letter dating issues that have been identified to date, and we continue our investigation as to whether there are additional letter dating issues that need to be resolved.”

But Lawsky’s stern letter said that when his investigators found a backdated letter and confronted Ocwen with the information, they were told it was an isolated incident from 2012 that affected 6,100 letters. Ocwen said it fixed the problem in May of this year.

“Each of these representations turned out to be false,” Lawsky wrote.

“Ocwen finally admitted in a memorandum Sept. 10, 2014, that the backdating issue may not be isolated and that the changes to Ocwen’s systems in May 2014 did not fully resolve the problem,” Lawsky said.

Federal Judge Sustains 8 Count Complaint Against US Bank, OneWest, Ocwen

For Further information, assistance and services please call 954-495-9867 or 520-405-1688. We continue to advise borrowers to seek advice and consultation from a lawyer licensed in the jurisdiction in which the property is located. These issues are too complex and subject to procedural rules with which the average layman is wholly unaware. Our litigation support team can assist lawyers but NOT pro se litigants directly. This widens the choice various lawyers who might be selected by the homeowner in their home jurisdiction. We can provide full range expert witness consultations without a lawyer on the phone, but when the questions turn to substantive and procedural law, a lawyer must be on the line for us to answer those questions.


Kudos to Beth Findsen, Esq. in Scottsdale who continues to be one of all time favorite lawyers. Besides having a fine legal mind and an effective demeanor in court, she is easily one of the best legal writers I have ever encountered.

Hat tip to Ken McLeod for bringing this decision to my attention within minutes of its release. Ken is our lead investigator for the livinglies team and has proven invaluable in providing information that could not otherwise be obtained about people, places and events.


See 62-Order Denying MTD Buffington Behrens

One of the interesting things about the history of these mortgages and foreclosures is that back when the tidal wave of foreclosures began the banks were denying there was any trust involved in the transactions. Now they claim that their right to appear in court as representative of the owner of the debt or the holder in due course is derived from the Trust instrument (Pooling and Servicing Agreement) of a Trust! But back in 2007-2009, they were busy denying that a Trust existed.

  • As I have been stating for months now, the courts are turning the corner. They don’t like what they see on the “lender” side.
  • First they questioned why the modifications were so random. Judges know that most foreclosures are worked out in a settlement because the bank wants nothing to do with the property if they have a viable borrower who needs a little help.
  • Then they questioned why the original documents were nowhere to be found. Where were they? Without the original documents in court, there was obviously SOMEBODY holding them and using them to either make a claim or sell them to another party. Then they questioned why the servicer was constantly changing — causing a proof problem because the new servicer was put in AFTER the default (sometimes by years) and obviously knew nothing except what records they IMPORTED (hearsay) from another servicer.
  • Then they questioned substitutions of Plaintiffs in judicial actions without amendment to the complaint. No allegation or exhibit was offered to explain the substitution.
  • Then they questioned the relevance of the Pooling and servicing agreement until the banks conceded that whatever right they had to enforce the note or mortgage had to come from a REMIC Trust via the Pooling and Servicing Agreement.
  • Then they questioned whether the Trust actually bought the loan, which DOES  make the PSA irrelevant, but also means that none of the parties on the “bank” side had any right to be substituting Trustees on deeds of trust nor issuing notices of default, notices of sale or filing foreclosures.
  • And now they are coming to grips with the notion that the entire mortgage premise is a scam and so are the foreclosures, to wit: by not alleging they are holders in due course, the foreclosing entities are admitting either unclean hands (which bars success in a court of equity enforcing the mortgage) or they are admitting their was no purchase of the loan for value.

Some Borrowers seek to become proactive and filed suit to clear up the questions of title,. and the identity of their creditor (something that should have been disclosed in what was table funded loan that is predatory per se — REG Z). Many of these law suits were dismissed under the theory that there was no pending controversy — but that finding was based on the court bias that the loan documents were real, not faked.

Now comes the first case to address the issue of fake documents, fake notes, fake mortgages and fake foreclosures on the Federal level. In a carefully worded opinion a Federal Trial judge has analyzed the entire context of the loans, the documents and the money trail and concluded that the borrower has stated a cause of action for money damages and equitable relief against some of the top players, already in trouble on other fronts, for gaming the system without having any financial interest in the debts, notes, mortgages, deeds of trust or anything else — all under cover of the investors’ reasonable belief that they were prohibited from getting notice or even asking about the status of any loan or the loan portfolio in its entirety.

Among the facts salient to the Judges decision were the following:

  1. Borrowers never received a signed modification agreement from the “lender” which was required for the modification to take effect. They were then relentlessly dual tracked where the objective was a foreclosure sale and to collect money under a modification agreement that was not in effect according to the foreclosing party. [This practice of luring vulnerable borrowers into questionable modification agreements and taking payments that are never allocated to the loan is widespread. Many judges have entered orders enforcing the modification agreement despite the lack of execution by the alleged servicer or the alleged representative of the holder in due course or owner of the debt.]
  2.  The representative of the servicer told the borrower not to worry about the notices of default and notices of sale because they were just automatically generated from a computer system that did not reflect the trial. Plan under which they were making payments and under which the payments were accepted.
  3.  The borrowers were coerced into a second modification agreement that contained terms that was significantly worse than the prior agreement reached between the parties.
  4.  One West was erroneously identified as the beneficiary under the deed of trust despite the fact that it had gained no interest in the deed of trust from the original beneficiary “because there was none to give.” In this case the deed of trust contain the wrong property description.
  5.  The plaintiff in this case is alleging that one West had no right to file a substitution of trustee under the deed of trust because one West was not a beneficiary or mortgagee.  [By attacking the substitution of trustee, the plaintiff was thereby attacking everything else that followed as "fruit of the poison tree."]
  6. Plaintiff alleged that a 4D of trust was recorded to correct the legal description. Plaintiffs claim that a new legal description was attached to the original deed of trust and it was really recorded without their knowledge or consent. Plaintiffs claim that their signatures from the original deed of trust were left on the rate recorded trust without their permission to make it appear as though the reason recorded trust was properly signed.  [This is a trick that is being used in virtually every foreclosure action across the country. By attaching apparently facially valid documents to other invalid documents parties attempting to enforce foreclosure are intentionally misleading the courts, the borrowers, bank regulators, government sponsored entities that have issued guarantees of the loan, government entities that have entered into loss sharing agreements with a party claiming losses on loans they don't own, and law enforcement.]
  7. The defendant’s conceded at the preliminary injunction hearing or judge both that they were unaware of any Arizona statutory or case law that permits unilateral modification and re-recording of a deed of trust or mortgage for the purpose of correcting a legal description or anything else, as was done in this case. [This is exactly what is happening with most promissory notes and mortgages throughout the country. They attach what they call an “allonge” without the knowledge, consent to the signature of the borrower. These instruments purport to contain endorsements or assignments. But in order to be truly effective they would either be required to be on the face of the note or prove that there was no room on the face of the note and therefore the need to attach an additional page. But these “Allonges”  are intended to be considered part of the note and therefore subject to the signature of the borrower. But at the time the borrower executed the note, the so-called “allonge” did not exist.

Most of the statutes cited in this decision have their counterparts in most of the states. Thus while this decision is not authoritative, the analysis is extremely persuasive and should be used by those defending foreclosures or taking a proactive stance to remove fake documents that were procured by fraud or behavior that is described as predatory per se.

I invite everyone to read the entire case. The salient points of this decision are as follows:

  1. Count 1  of the plaintiffs complaint alleging negligence per se against the defendants was sustained.
  2. Count 2  For negligent performance of undertaking under the “good Samaritan doctrine” was sustained.
  3. Count 3  Alleging false documents was sustained.  This count also contained allegations of forgery
  4. Count 4  alleging payment, discharge and satisfaction was sustained. The court quoted from the Steinberger decision [also in Arizona] and said it “if it is true that the FDIC has already reimbursed OneWest,”  then OneWest was not  entitled to recover the same money again, although there could be an action against the borrower by a third party who has made such payments. But that action would not be based upon a liquidated amount nor would it be secured by a mortgage or deed of trust.
  5. Count 5  Alleging breach of contract was sustained as an alternative basis for liability of the defendants.
  6. Count 6  also alleging breach of contract relating to the first loan modification agreement was sustained.
  7. Count 7  Alleging fraud against all of the defendants was dismissed. [But this can be brought back again later upon a showing to the judge of facts that have produced in discovery or investigation during the progress of the case.]
  8. Count 8  alleging trespass to real property was sustained. None of the defendants have the right to enter upon the property while plaintiff was still the owner of the property.
  9. Count 9  Alleging violation of the fair debt collection practices act (FDCPA) was sustained. And the court specifically ruled against the proposition that mortgage servicers are not debt collectors under the FDCPA.

All these claims were brought in Arizona and other states previously but they were summarily swept aside before the judges started to suspect that the entire context of the mortgages, notes, debts and foreclosure were lacking credibility.


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