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.

http://archives.financialservices.house.gov/media/file/hearings/111/testimony_-_fiorillo_4.14.10.pdf

http://www.nationalmortgagenews.com/news/regulation/government-mbs-settlements-leave-private-bondholders-unsettled-1042165-1.html?utm_campaign=daily%20briefing-jul%2018%202014&utm_medium=email&utm_source=newsletter&ET=nationalmortgage%3Ae2837381%3A560364a%3A&st=email

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

 

 

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.

Relevance: THE FORECLOSER HAS NO RIGHT TO BE IN COURT WITHOUT THE SECURITIZATION DOCUMENTS AND RECORDS

 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.

Premise:

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.

 

Argument:
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.

 

Evidence:
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.

 

THE FORECLOSER HAS NO RIGHT TO BE IN COURT WITHOUT THE SECURITIZATION DOCUMENTS:

 

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, http://www.Livinglies.me

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.”

http://livinglies.wordpress.com/2013/09/13/victory-for-homeowners-received-title-and-7-figure-monetary-damages-for-wrongful-foreclosure/

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

THEY ARE ADMITTING THEY DIDN’T PAY FOR THE LOAN

THIS CORROBORATES THE ALLEGATION THAT THE TRUST WAS UNFUNDED

IF THE TRUST WAS UNFUNDED IT COULD NOT HAVE ORIGINATED OR ACQUIRED THE LOAN

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.”

http://butlerlibertylaw.com/foreclosure-fraud/

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

AMGAR

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 neilfgarfield@hotmail.com. 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.

Fannie and Freddie Slammed by Massachusetts AG

Martha Coakley gets it. Read her letter. Being a politician she does not say that the abstract fear of strategic defaults on all loans across the board is absurd. Well, actually she does say it. Principal reductions and ending patently illegal policies preventing homeowners from buying back their own property at auction are at the center of the solution to the foreclosure mess along with one more thing: things will change when we get the answer to the question IF THESE POLICIES HURT LENDERS, INVESTORS AND BORROWERS, WHY WOULD ANYONE LISTEN TO A THIRD PARTY WHO BENEFITS?

fhfa-letter-051414

As the new head of the Federal Agency administrating Fannie and Freddie, Watts, replacing DeMarco, signals a major change in policy and regulations. The question is whether he means it. There is no doubt at the White House that the economy will continue to be dragged down by foreclosures. Their answer to the problem lies in modifications with “principal reductions” and loosening some standards for lending and securitization.

While the modification policies should be changed, this isn’t enough. Modification has been used as a tool of Wall Street to lure unwary borrowers into the illusion of immediate relief only to be faced with terms that are worse than the borrowers had before when underwriting was virtually nonexistent — albeit with some fees and other “skin in the game” restrictions that could slow up some of the continuing securitization fraud.

The issue is still the same and the fear is still there — will the entire system collapse if we stop putting the full brunt of the foreclosure mess on the backs of unsophisticated homeowners who were induced to buy loan products that were filled with false pretenses, false assumptions and nonexistent review, verification and other underwriting procedures.

At this point, considering the rampant appraisal fraud, homeowners should be given an opportunity to regain equity and have some skin in the game — as opposed to the all or nothing proposition they are fighting in court with complete strangers to their transactions 000 alleged by parties relying on evidentiary presumptions rather than real facts of each transaction.

In 2007 I proposed amnesty for everyone and that everyone share in the the losses from civil and perhaps criminal fraud caused by the banks taking money from investors and applying it to loans that were guaranteed to fail and then scaring government into thinking that the world would end if they were called on this predatory and illegal practice on the basis of being too big too fail.

Too big to fail is a myth. First, the banks can’t collapse because they are cash rich off shore. Trillions were siphoned out of pension funds, taxpayers and insurers and guarantors taking so much money that the federal reserve had to engage in various schemes of direct and disguised quantitative easing (like buying mortgage bonds that were worthless at 100% of par value). The losses claimed by the banks were also fictional.

At this point everyone at the levers of power knows the truth. The trusts were never funded and the trusts never acquired the loans. This places the investors in the position of being undifferentiated and unattached creditors for loans they funded but were never  given proper documentation in the form of notes payable tot he investors and mortgages pledging collateral to the investors, leaving them as unsecured creditors.

But now the government is committed financially to a policy of continuing fraud started by the banks which is the same thing that is happening in court. The issue is not whether a deadbeat homeowner will get a free house (that is a choice presented by the banks in a false set of presumptions). despite the dire straits of investors in worthless and fraudulent mortgage bonds, homeowners are mostly willing to offer new notes and new mortgages that reflect economic reality. No, those deadbeats are nothing of the sort. They are hard working, play by the rules people who simply want a fair deal and they are willing to shoulder the loss forced on them by the banks.

Want to test it out? Call us about our AMGAR project — 7 years in the making — in which we call the bluff of the banks. It takes money, but the investors are starting to line up to help, and the homeowners with independent assets to offer the money rather than the foreclosure are racking up wins in case after case. Watch the banks back peddle as they reject the money in favor of their much needed foreclosure judgment and sale so they can report the loan was a bust — and therefore the money the banks received in servicer payments to the investors, insurance tot he banks, guarantees and other proceed from other obligors won’t need to be paid back.

And if played properly, the tax revenue due from the banks for violations of the REMIC provisions, part of which will fall on investors who fail to make their case against the broker dealers who sold them that mortgage crap, will more than offset the lack of revenue on Federal and State levels. All they need to do is give up on too big to fail and give up on thinking that killing the middle class is a good idea because the burden must fall somewhere. In fraud, the burden falls on the perpetrators not the victims although it is rare that restitution ever equals the loss. Virtually every foreclosure is merely the court’s complicity in the continuing fraud.

Remember the playbook of the bank attorneys into undermine your confidence until the very last second when they submit their voluntary dismissal in court. Call their bluff, offer the money based upon YOUR terms or the terms of an investor who is willing to make the commitment. Your terms require proof of ownership and proof of balance after credits for third party payments. you will find they don’t own the loan and the balance of the loan has already been paid down or paid off entirely.

Don’t just file motions to enforce discovery. File motions with affidavits from forensic analysts that explain why you need what you are asking for. You’ll get the order. And as soon as you get the order, the offers of settlement will start pouring in.

For information and further assistance please call 520-405-1688 or 954-495-9867. We provide help and guidance to professionals that know foreclosure defense, foreclosure offense, modifications, short-sales, Hardest Hit Funds and other Federal, State and private programs. Remember to ask about AMGAR. It is time to strike back. Let the other side start feeling the pain.

see http://www.nytimes.com/2014/05/14/business/Melvin-Watt-shifts-course-on-fannie-mae-and-freddie-mac.html?ref=business&_r=0

 

Hooker Case Flirts With Reality – 9th Circuit

SEE AMICUS BRIEF AT END OF ARTICLE

It is interesting to watch the evolution of thought in the Courts. But it is also infuriating. They treat false claims of securitization as a novel issue; but in fact, there is nothing novel about Ponzi Schemes, and other types of fraud. Yet the Court continue to ponder the issue, probably wondering how they could possibly explain their prior decisions, the millions of foreclosures that have already occurred, and the 15 million people who were ejected from homes and lifestyles, jobs, and even lives (murder-suicides).

This is not rocket science despite the layers upon layers of paper that Wall Street throws at the issue. The simple facts and law governing loans, and secured loans in particular, need only be applied as they were written and interpreted for centuries.

If I loan you money, you must pay it back. If I don’t loan you money then I have no reason to demand you pay it “back” because I never loaned you money in the first instance. If I purchase a real loan for real money, then you owe the money to me. If I don’t purchase the loan, then I have no right to your money.

If some other person gives the loan you were looking for then that is a matter between you and them — not you and me. Whether I race to the courthouse or not, I cannot collect, get a judgment or foreclose unless you fail to contest it. The only way I could ever obtain a judgment against you on a false claim is if you don’t answer it. That isn’t because it is right that I should have a judgment against you and for me, it is just because the rules work that way. But even after that you still have some options to set aside the judgment or action on the alleged debt that doesn’t really exist.

Possessing an assignment from a party who never owned the loan has never been considered as conferring some right on the assignee. And Faulty, notes, mortgages, indorsements and assignments have very clear laws and precedent. The defective ones are thrown out. Why? Because the object is to identify REAL transactions in which real value exchanged hands. And because the object is to ignore documentation that REFERS to a transaction that never took place.

It is one thing to have an executed note or some other testimony of proffered evidence of a loan, and another to show the Court the actual canceled check in which you advanced the money. One document talks about the transaction while the other IS the transaction. It is the difference between talking the talk and walking the walk. Talking about Paris doesn’t get you there.

You might have received a loan from someone at closing but the odds are that you didn’t get it from the Payee on the note, the mortgagee on the mortgage, the nominee, the beneficiary on the deed of trust or any of the other parties that were disclosed.

Finally the Courts are asking about the reality that Judge Shack in New York and Judge Boyco in Ohio were talking about 6 years ago, which was picked up by a number of Judges that were suddenly rotated out of the position to hear foreclosure cases. Politics frequently trumps the law, at least for a while. And politics is all about money. And if it is about money, then the banks are the obvious place to look.

I commend to your reading, the short Hooker Case (Link below) and the Amicus Brief (link below) submitted by laymen for your review and study. While not exactly what we would like to see both provide compelling evidence of a movement on the bench toward reality and away from the smoke and mirrors of the largest economic crime in human history.

The implications for both pleading and discovery are, I believe, self evident. HINT: I have it on good authority that the IRS form mentioned in the Amicus Brief is feared by Wall Street as the lynchpin of their position: once pulled the whole thing falls apart as it becomes obvious that the “trusts” neither received funds from the investors nor did they receive loans from the aggregators. That Amicus Brief also contains the only valid diagram of the actual practice of securitization in existence (other than the ones I have drawn in seminars). Notice how different it is from the diagrams of securitization that trace the wording of the securitization documents. it is the simple difference between truth (what happened) and fiction (what they say happened and why you shouldn’t be allowed to ask what really happened).

Hooker v Northwest Trustee Services 11-35534

Wells-Fargo-v-Erobobo-Amicus-Brief_1-14

For information on lawyers, litigation assistance (to lawyers), how to research applicable laws, litigation, modification, short-sale, Hardest Hit Funds, and other Federal, State and private programs call 520-405-1688 or 954-495-9867. Ask about AMGAR our latest program for assistance to homeowners.

Weidner: Perjury is Acceptable Practice

I am a fan of Matt Weidner. Like a breath of fresh air he understands the full implications of the false claims of securitization, the fraudulent foreclosures, the fraudulent reporting by banks to regulatory agencies and the false statements of financial condition they report to the SEC. Best of all he has maintained his sense of outrage at the banks, at the regulators, at law enforcement and the courts.

If you read his article, you can see why he is so angry. We know as lawyers what SHOULD be required in litigation. The fact that basic standards not being met in foreclosure litigation is a present problem for everyone who is involved or affected by the title and money issues; but it is also a future problem for all of us in the decisions, opinions and actions by the courts using a presumption that in the end it doesn’t make any difference how many ways the banks lied, cheated and stole money and title, the homeowner should be the one to bear the full burden of the problem.

This is why I am seriously entertaining a lawsuit in Federal court against the State of Florida for creating a new and wholly dysfunctional standard for the introduction of evidence and the burden of proof in foreclosure cases versus all other civil cases.

Weidner Takes Court System to Task

National Honesty Day? America’s Book of Lies

Today is National Honesty Day. While it should be a celebration of how honest we have been the other 364 days of the year, it is rather a day of reflection on how dishonest we have been. Perhaps today could be a day in which we say we will at least be honest today about everything we say or do. But that isn’t likely. Today I focus on the economy and the housing crisis. Yes despite the corruption of financial journalism in which we are told of improvements, our economy — led by the housing markets — is still sputtering. It will continue to do so until we confront the truth about housing, and in particular foreclosures. Tennessee, Virginia and other states continue to lead the way in a downward spiral leading to the lowest rate of home ownership since the 1990′s with no bottom in sight.

Here are a few of the many articles pointing out the reality of our situation contrasted with the absence of articles in financial journalism directed at outright corruption on Wall Street where the players continue to pursue illicit, fraudulent and harmful schemes against our society performing acts that can and do get jail time for anyone else who plays that game.

It isn’t just that they escaping jail time. The jailing of bankers would take a couple of thousand people off the street that would otherwise be doing harm to us.

The main point is that we know they are doing the wrong thing in foreclosing on property they don’t own using “balances” the borrower doesn’t owe; we know they effectively stole the money from the investors who thought they were buying mortgage bonds, we know they effectively stole the title protection and documents that should have been executed in favor of the real source of funds, we know they received multiple payments from third parties and we know they are getting twin benefits from foreclosures that (a) should not be legally allowed and (b) only compound the damages to investors and homeowners.

The bottom line: Until we address wrongful foreclosures, the housing market, which has always led the economy, will continue to sputter, flatline or crash again. Transferring wealth from the middle class to the banks is a recipe for disaster whether it is legal or illegal. In this case it plainly illegal in most cases.

And despite the planted articles paid for by the banks, we still have over 700,000 foreclosures to go in the next year and over 9,000,000 homeowners who are so deep underwater that their situation is a clear and present danger of “strategic default” on claims that are both untrue and unfair.

Here is a sampling of corroborative evidence for my conclusions:

Senator Elizabeth Warren’s Candid Take on the Foreclosure Crisis

There it was: The Treasury foreclosure program was intended to foam the runway to protect against a crash landing by the banks. Millions of people were getting tossed out on the street, but the secretary of the Treasury believed the government’s most important job was to provide a soft landing for the tender fannies of the banks.”

Lynn Symoniak is Thwarted by Government as She Pursues Other Banks for the Same Thing She Proved Before

Government prosecutors who relied on a Florida whistleblower’s evidence to win foreclosure fraud settlements with major banks two years ago are declining to help her pursue identical claims against a second set of large financial institutions.

Lynn Szymoniak first found proof that millions of American foreclosures were based on faulty and falsified documents while fighting her own foreclosure. Her three-year legal fight helped uncover the fact that banks were “robosigning” documents — hiring people to forge signatures and backdate legal paperwork the firms needed in order to foreclose on people’s homes — as a routine practice. Court papers that were unsealed last summer show that the fraudulent practices Szymoniak discovered affect trillions of dollars worth of mortgages.

More than 700,000 Foreclosures Expected Over Next Year

How Bank Watchdogs Killed Our Last Chance At Justice For Foreclosure Victims

The results are in. The award for the sorriest chapter of the great American foreclosure crisis goes to the Independent Foreclosure Review, a billion-dollar sinkhole that produced nothing but heartache for aggrieved homeowners, and a big black eye for regulators.

The foreclosure review was supposed to uncover abuses in how the mortgage industry coped with the epic wave of foreclosures that swept the U.S. in the aftermath of the housing crash. In a deal with the Office of the Comptroller of the Currency and the Federal Reserve, more than a dozen companies, including major banks, agreed to hire independent auditors to comb through loan files, identify errors and award just compensation to people who’d been abused in the foreclosure process.

But in January 2013, amid mounting evidence that the entire process was compromised by bank interference and government mismanagement, regulators abruptly shut the program down. They replaced it with a nearly $10 billion legal settlement that satisfied almost no one. Borrowers received paltry payouts, with sums determined by the very banks they accused of making their lives hell.

Investigation Stalled and Diverted as to Bank Fraud Against Investors and Homeowners

The Government Accountability Office released the results of its study of the Independent Foreclosure Review, conducted by the Office of the Comptroller of the Currency and the Federal Reserve in 2011 and 2012, and the results show that the foreclosure process is lacking in oversight and transparency.

According to the GAO review, which can be read in full here, the OCC and Fed signed consent orders with 16 mortgage servicers in 2011 and 2012 that required the servicers to hire consultants to review foreclosure files for efforts and remediate harm to borrowers.

In 2013, regulators amended the consent orders for all but one servicer, ending the file reviews and requiring servicers to provide $3.9 billion in cash payments to about 4.4 million borrowers and $6 billion in foreclosure prevention actions, such as loan modifications. The list of impacted mortgage servicers can be found here, as well as any updates. It should be noted that the entire process faced controversy before, as critics called the IFR cumbersome and costly.

Banks Profit from Suicides of Their Officers and Employees

After a recent rash of mysterious apparent suicides shook the financial world, researchers are scrambling to find answers about what really is the reason behind these multiple deaths. Some observers have now come to a rather shocking conclusion.

Wall Street on Parade bloggers Pam and Russ Martens wrote this week that something seems awry regarding the bank-owned life insurance (BOLI) policies held by JPMorgan Chase.

Four of the biggest banks on Wall Street combined hold over $680 billion in BOLI policies, the bloggers reported, but JPMorgan held around $17.9 billion in BOLI assets at the end of last year to Citigroup’s comparably meager $8.8 billion.

Government Cover-Up to Protect the Banks and Screw Homeowners and Investors

A new government report suggests that errors made by banks and their agents during foreclosures might have been significantly higher than was previously believed when regulators halted a national review of the banks’ mortgage servicing operations.

When banking regulators decided to end the independent foreclosure review last year, most banks had not completed the examinations of their mortgage modification and foreclosure practices.

At the time, the regulators — the Office of the Comptroller of the Currency and the Federal Reserve — found that lengthy reviews by bank-hired consultants were delaying compensation getting to borrowers who had suffered through improper modifications and other problems.

But the decision to cut short the review left regulators with limited information about actual harm to borrowers when they negotiated a $10 billion settlement as part of agreements with 15 banks, according to a draft of a report by the Government Accountability Office reviewed by The New York Times.

The report shows, for example, that an unidentified bank had an error rate of about 24 percent. This bank had completed far more reviews of borrowers’ files than a group of 11 banks involved the deal, suggesting that if other banks had looked over more of their records, additional errors might have been discovered.

Wrongful Foreclosure Rate at least 24%: Wrongful or Fraudulent?

The report shows, for example, that an unidentified bank had an error rate of about 24 percent. This bank had completed far more reviews of borrowers’ files than a group of 11 banks involved the deal, suggesting that if other banks had looked over more of their records, additional errors might have been discovered.

http://www.marketpulse.com/20140430/u-s-housing-recovery-struggles/

http://www.csmonitor.com/Business/Latest-News-Wires/2014/0429/Home-buying-loses-allure-ownership-rate-lowest-since-1995

http://www.opednews.com/articles/It-s-Good–no–Great-to-by-William-K-Black–Bank-Failure_Bank-Failures_Bankers_Banking-140430-322.html

[DISHONEST EUPHEMISMS: The context of this WSJ story is the broader series of betrayals of homeowners by the regulators and prosecutors led initially by Treasury Secretary Timothy Geithner and his infamous “foam the runways” comment in which he admitted and urged that programs “sold” as benefitting distressed homeowners be used instead to aid the banks (more precisely, the bank CEOs) whose frauds caused the crisis.  The WSJ article deals with one of the several settlements with the banks that “service” home mortgages and foreclose on them.  Private attorneys first obtained the evidence that the servicers were engaged in massive foreclosure fraud involving knowingly filing hundreds of thousands of false affidavits under (non) penalty of perjury.  As a senior former AUSA said publicly at the INET conference a few weeks ago about these cases — they were slam dunk prosecutions.  But you know what happened; no senior banker or bank was prosecuted.  No banker was sued civilly by the government.  No banker had to pay back his bonus that he “earned” through fraud.

 

 

Use of Factual Findings of Servicer Advances

It is important that the content of the report dealing withservicer advances be argued strenuously.Servicer advances have been received by the creditor, thus reducing the amount the creditor is expecting to be paid. Hence there should be reduction in the amount that is due from the borrower — to the extent thatactual payments have been received by that creditor on this account whether the borrower was the source of those payments or not.The servicer has agreed to make the payments to the creditor regardless of whether the Borrower paid or not and has continued to make payments apparently right up through the present. The Title and Securitization report says that.

Hence there could have been no default. The acceleration was a breach of contract, the amount due for reinstatement was wrong, the amount due in the Notice of Default was wrong, and the amount due as claimed in the lawsuit is wrong. simply stated, there is no basis for a foreclosure lawsuit or even a suit on the note.

The servicer is trying to convert a hypothetical claim against the borrower fro advancing payments into a claim by the creditor. It is masking the fact that the creditor has been paid and that the servicer wants to recover the amounts advanced in lieu of payments from the borrower.

That would, at best, be an action for unjust enrichment, if they were able to prove the elements and it would not be secured by the mortgage.

The mortgage only secures indebtedness on the note — not to a claim outside of the note where a third party either as volunteer or intermeddler made the payments. The note is evidence of a debt owed by borrower (debtor) to the creditor. The creditor is the Trust according to their own pleadings.

Hence the creditor is not alleged to have a default on its books and records because it has been paid. The mortgage only secures THAT debt to THAT creditor. If it were otherwise, off record transactions would cloud the title on  virtually every mortgage loan creating uncertainty in the marketplace where no lender would make loans because they could never be sure whether some off record activity had occurred and that the payoff of the previous “lender” had included the money due to the secured party. Such a subsequent lender might inadvertently be placing itself in a  position of liability to the borrower for an overpayment to the creditor.

I provide litigation assistance and expert witnesses with real credentials who will corroborate this in expert declarations, affidavits and live testimony, if the facts match what is stated above. call 954-495-9867 or 520-405-1688.

 

Fatal Flaws in the Origination of Loans and Assignments

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.
There are two fatal flaws in the origination of the loan and in the origination of the assignment of the loan.

As I see it …

The REAL Transaction is between the investors, as an unnamed group, and the borrower(s). This is taken from the single transaction rule and step transaction doctrine that is used extensively in Tax Law. Since the REMIC trust is a tax creature, it seems all the more appropriate to use existing federal tax law decisions to decide the substance of these transactions.

If the money from the investors was actually channeled through the REMIC trust, through a bank account over which the Trustee for the REMIC trust had control, and if the Trustee had issued payment for the loan, and if that happened within the cutoff period, then if the loan was assigned during the cutoff period, and if the delivery of the documents called for in the PSA occurred within the cutoff period, then the transaction would be real and the paperwork would be real EXCEPT THAT

Where the originator of the loan was neither legally the lender nor legally a representative of the source of funds for the transaction, then by simple rules of contract, the originator was incapable of executing any transfer documents for the note or mortgage (deed of trust in nonjudicial states).

If the originator of the loan was not the lender, not the creditor, not a party who could legally execute a satisfaction of the mortgage and a cancellation of the note then who was?

Our answer is nobody, which I know is “counter-intuitive” — a euphemism for crazy conspiracy theorist. But here is why I know that the REMIC trust was never involved in the transaction and that the originator was never the source of funds except in those cases where securitization was never involved (less than 2% of all loans made, whether still existing or “satisfied” or “foreclosed”).

The broker dealer never intended for the REMIC trust to actually own the mortgage loans and caused the REMIC trust to issue mortgage bonds containing an indenture for repayment and ownership of the underlying loans. But there were never any underlying loans (except for some trusts created in the 1990′s). The prospectus said plainly that the excel spreadsheet attached to the prospectus contained loan information that would be replaced by the real loans once they were acquired. This is a practice on Wall Street called selling forward. In all other marketplaces, it is called fraud. But like short-selling, it is permissible on Wall Street.

The broker dealer never intended the investors to actually own the bonds either. Those were issued in street name nominee, non objecting status/ The broker dealer could report to the investor that the investor was the actual or equitable owner of the bonds in an end of month statement when in fact the promises in the Pooling and Servicing Agreement as to insurance, credit default swaps, overcollateralization (a violation of the terms of the promissory note executed by residential borrowers), cross collateralization (also a violation of the borrower’s note), guarantees, servicer advances and trust or trustee advances would all be payable, at the discretion of the broker dealer, to the broker dealer and perhaps never reported or paid to the “trust beneficiaries” who were in fact merely defrauded investors. The only reason the servicer advances were paid to the investors was to lull them into a false sense of security and to encourage them to buy still more of these empty (less than junk) bonds.

By re-creating the notes signed by residential borrowers as various different instruments, and there being no limit on the number of times it could be insured or subject to receiving the proceeds of credit default swaps, (and with the broker dealer being the Master Servicer with SOLE discretion as to whether to declare a credit event that was binding on the insurer, counter-party etc), the broker dealers were able to sell the loans multiple times and sell the bonds multiple times. The leverage at Bear Stearns stacked up to 42 times the actual transaction — for which the return was infinite because the Bear used investor money to do the deal.

Hence we know from direct evidence in the public domain that this was the plan for the “claim” of securitization — which is to say that there never was any securitization of any of the loans. The REMIC Trust was ignored, thus the PSA, servicer rights, etc. were all nonbinding, making all of them volunteers earning considerable money, undisclosed to the investors who would have been furious to see how their money was being used and the borrowers who didn’t see the train wreck coming even from 24 inches from the closing documents.

Before the first loan application was received (and obviously before the first “closing” occurred) the money had been taken from investors for the expressed purpose of funding loans through the REMIC Trust. The originator in all cases was subject to an assignment and assumption agreement which made the loan the property and liability of the counter-party to the A&A BEFORE the money was given to the borrower or paid out on behalf of the borrower. Without the investor, there would have been no loan. without the borrower, there would have been no investment (but there would still be an investor left holding the bag having advanced money for mortgage bonds issued by a REMIC trust that had no assets, and no income to pay the bonds off).

The closing agent never “noticed” that the funds did not come from the actual originator. Since the amount was right, the money went into the closing agent’s escrow account and was then applied by the escrow agent to fund the loan to the borrower. But the rules were that the originator was not allowed to touch or handle or process the money or any overpayment.

Wire transfer instructions specified that any overage was to be returned to the sender who was neither the originator nor any party in privity with the originator. This was intended to prevent moral hazard (theft, of the same type the banks themselves were committing) and to create a layer of bankruptcy remote, liability remote originators whose sins could only be visited upon the aggregators, and CDO conduits constructed by CDO managers in the broker dealers IF the proponent of a claim could pierce a dozen fire walls of corporate veils.

NOW to answer your question, if the REMIC trust was ignored, and was a sham used to steal money from pension funds, but the money of the pension fund landed on the “closing table,” then who should have been named on the note and mortgage (deed of trust beneficiary in non-judicial states)? Obviously the investor(s) should have been protected with a note and mortgage made out in their name or in the name of their entity. It wasn’t.

And the originator was intentionally isolated from privity with the source of funds. That means to me, and I assume you agree, that the investor(s) should have been on the note as payee, the investor(s) should have been on the mortgage as mortgagees (or beneficiaries under the deed of trust) but INSTEAD a stranger to the transaction with no money in the deal allowed their name to be rented as though they were the actual lender.

In turn it was this third party stranger nominee straw-man who supposedly executed assignments, endorsements, and other instruments of power or transfer (sometimes long after they went out of business) on a note and mortgage over which they had no right to control and in which they had no interest and for which they could suffer no loss.

Thus the paperwork that should have been used was never created, executed or delivered. The paperwork that that was created referred to a transaction between the named parties that never occurred. No state allows equitable mortgages, nor should they. But even if that theory was somehow employed here, it would be in favor of the individual investors who actually suffered the loss rather than the foreclosing entity who bears no risk of loss on the loan given to the borrower at closing. They might have other claims against numerous parties including the borrower, but those claims are unliquidated and unsecured.

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.

Why any court would allow the conduits and bookkeepers to take over the show to the obvious detriment and damage to the real parties in interest is a question that only legal historians will be able to answer.

Wells Fargo Manual Serves as Basis for Deeper Discovery

Every lawyer defending Foreclosures has heard the same thing from the bench just before a ruling in favor of the pretender lender — the homeowner did not meet its burden of proof and therefore judgment is entered in favor of the “bank.” The fact that the pretender lender is a bank makes the judge more comfortable with his assumption that the loan is real, the default is real, the financial injury to the pretender lender is presumed, and that the family should be kicked out of their home me because they stopped paying on “the loan.”

More and more Judges are now questioning the assumption of viability of the forecloser’s position and are now entertaining the issue of whether the loan exists as an enforceable contract act and whether it has been already paid off or sold to third parties leaving the currently foreclosing party with a patently false claim.

Those of us who have been analyzing these “securitized” mortgages recognize the situation for what it is — a magic trick in a smoke and mirrors environment using the holographic image of an empty paper bag. The reasons Wells Fargo fought the introduction of its manual into Federal Court is simple — it is an open door in discovery that will most likely lead to definite proof that the money trail does not support the paper trail. That means the actual transactions were different than the events shown on the fabricated assignments, endorsements, allonges and other instruments of transfer.

But it also opens the door to the initial transaction in which “the loan” was created. It turns out that in most cases there were two transactions at the “origination” of each loan. One of those “transactions” is what we are all looking at — an apparently closed loop of offer, acceptance and consideration with most of the required disclosures under TILA.

So, as we shall see, there was a fake loan and a real loan. The fake one was fully and overly documented, whereas the real one is sparsely documented consisting of wire transfer receipt, wire transfer instructions and perhaps some correspondence. Neither was ever delivered to the fake lender or the real lender which is part of the problem that the Wells Fargo manual was intended to address. Discovery should proceed with the other banks where you find similar manuals.

This is the one everybody has their eye on, while the real transaction takes place right under the eye of the borrower who doesn’t catch the magic trick. So the fake transaction is the subject of a note where the lender is identified as such. Then the “lender” and perhaps some other strawman like MERS is also identified. MERS doesn’t make any claims to ownership of the loan (in fact it disclaims any such ownership on its website). The question is whether the “originator” was also a strawman, even if it was a commercial bank whose business included making loans.

Back to basics. The loan closing is described by most courts as a quasi contract because there is no written loan contract prior to the “closing.” But it must be interpreted under Federal and State lending and contract laws because there is no other viable classification for an alleged loan transaction.

The basics of a loan contract, like any other contract, are offer, acceptance and consideration. Federal and state law are also inserted into the inferred loan contract by operation of law. So the basic contractual question is whether there was an offer, whether there was acceptance and whether there was consideration. If any of those things are absent, there is no contract— or to be more specific there is no enforceable contract.

And that applies to mortgages more than anything because it is universally accepted that there is no such thing as an “equitable mortgage.” The short reason is that title and regular commerce would be forever undermined — no buyer would buy, except at a high discount, anything where it might turn out he wasn’t getting the title she or he expected.

So the loan contract must be real, and it must be in writing because the statute of frauds and other state laws require that any interest in land must be conveyed by a written instrument — and recorded in the Public Records (but the recording requirements are frequently a rabbit hole down which homeowners go at their peril).

This is where the magic trick begins and where Wells Fargo and the other major banks are holding their collective breath. The offer is communicated through a mortgage broker or”originator” and consists of the offer of the originator to loan a certain sum of money, in exchange for the promise by the borrower to repay it under certain terms.

It is inferred that the originator is making the offer on its own behalf but this is not the case. The truth is that investors have already advanced the money that will be used in the loan. So the offer is coming not from a “lender” but rather from a nominee or agent. The transaction at best is identified under RegZ and TILA as a table funded loan which is not only illegal, it is by definition “predatory.”

What is an”offer” to loan somebody else’s money? The answer is nothing unless the other party has consented to that loan or has executed a document that gives the “originator” a written authorization that is recordable and recorded. Where do we find such authorization? Theoretically one might refer to the Pooling and Servicing Agreement — but the problem is that any violation of the PSA results in a void transaction by operation of New York law, which is the governing law of most PSA’s.

Were the investors or the Trustee of the REMIC trust advised of the terms of the loan transaction proposed by the originator. No, and there is no way the originator can even fabricate that without disclosing the names of the investors, the trustee, and specific person at the “trustee” etc. So the question becomes whether the investors or trust beneficiaries conveyed written authority to enter into a transaction in which a loan was originated or acquired. In virtually all cases the answer is no.

One of the simpler reasons is that the investors money was never used to fund the trust, so the investors lost their tax benefit from using a REMIC trust in direct violation of their contract or quasi contract with the broker dealer who “sold mortgage bonds” allegedly issued by the empty, unfunded trust.

Another more complicated reason is that the loans probably do not and could never qualify as a minimum risk investment as the law requires for management of “Stable funds.” Those are fund units managed under strict restrictions because they hold pension money and other types of liabilities where capital preservation is far more important than growth or even income.

And the third aspect is the presence in virtually all cases of an Assignment and Assumption Agreement (see Neil Garfield on YouTube) BEFORE THE FIRST BOND IS SOLD AND BEFORE THE FIRST APPLICATION FOR LOAN IS RECEIVED.

Analysis of the loan transaction will show that for the fly-by-night originators who have long since vanished, they had no right or ability to even touch the money at closing, which was coming in reform a third party source with whom they had no relationship — which is why the Wall Street lawyers consider them both bankruptcy remote and liability remote (I.e., anything wrong at closing won’t be ascribed to either the broker dealer, or the investors (or their empty unfunded trust). Countrywide is a larger example of this.

All the sub entities of Countrywide and Lehman (Aurora, BNC etc.) are also examples despite their appearance as “institutions” they were merely sham entities operating as strawmen — nominees without authority to do anything and who never touched the closing money except for receipt of fees which in part were paid as set forth in the borrower’s closing documents, and in part paid without disclosure (another TILA violation) through a labyrinth of entities.

Thus the only reasonable conclusion is that there never was a complete offer with all material terms disclosed. No offer=no contract=no enforcement=no foreclosure is possible, although it is possible for a civil judgment to be obtained against the borrower if a real party in interest could allege and prove financial injury. It also means that the documents signed by the borrower neither disclosed the real terms or real parties, which means they were procured through false representations — the very same allegation the investors are making against the broker dealers (investment banks).

In the case of actual banks, like Wells Fargo, it is more counterintuitive than the fly by night “originators.” But discovery, deep inside the operations of the bank will show that the underwriting standards for portfolio loans in which the bank had a risk of loss were different than the underwriting standards for “securitized” loans. In fact they were run and processed on entirely different platforms. The repurchase agreement being discussed in the literature on structured finance actually results from the fictitious sale of the loan rather than the underwriting at origination.

When the borrower signed the closing document he or she was executing an acceptance of a deal that was only part of the complete offer, which contained numerous restrictions that would have insured to the benefit of both the borrower and the lender, which turns out to be the group of investors who gave their money to a broker dealer (investment bank). If you want to split hairs, it is possible that the “closing documents” were an offer from the borrower that was never accepted by anyone who could perform under the terms of the quasi contract.

So we clearly have a problem with the first two components of an enforceable contract — offer and acceptance.

The final component is consideration which is to say that someone actually parted with money to fund the loan. And low and behold this is the first time our boots fall on solid ground — albeit nowhere near the loan described in the loan documentation. There was indeed money sent to the closing agent. Who sent it? Not the originator, not the nominees, not the trust because it was never funded, and not the investors because they had already funded their “purchase” of the “mortgage bonds” by delivering money to the broker dealer. We can’t say nobody sent it, because that is plainly untrue. Where did the money come from? Did the closing agent err in applying money from an unknown party to the closing of the loan?

It came from a controlled account (superfund) spread out over multiple entities that were NOT identified by a particular REMIC Trust. There was a reason for that, but that is for another article. Whether it was American Broker’s Conduit, a fictitious name sometimes registered, sometimes not, or Wells Fargo itself, the name of the entity was being “rented” for purposes of closing just as it is being rented for purposes of foreclosure.

Therefore the consideration did not come from any party at closing and the inevitable conclusion is that no enforceable contract was created at closing. This does not mean the borrower doesn’t owe the money. It just means that nobody should be able to foreclose on a void mortgage and it is doubtful that anyone could obtain judgment on a promissory note with some many defects. But there are other actions, such as unjust enrichment, which have been discussed in recent cases. It is foreclosure that is legally impossible under the true scenario as I see it and as others see it now. My position has not changed in 7 years. The only thing that has changed is the way I say it.

So the issue of the Wells Fargo and its fabrication manual is that discovery will lead to deeper and deeper secrets that will undermine not only the entire foreclosure infrastructure, but also the financial statements that support ever growing stock prices for the major banks.

The Step Transaction and Single Transaction Doctrine

Jim Macklin and Dan Edstrom did a great job of packing a great deal of information into 28 minutes of talk time on the Neil Garfield Show last night. I am taking a couple of weeks off the show to do some common follow-up procedures to my heart surgery two years ago. Jim Macklin stepped in and did a great job of getting information into the hands of lawyers and other listeners in what turned out to be a mini-seminar on how to apply Federal tax law to the issue of ownership of the the loan. It should be heard more than once to get all the nuances they presented.

Their point was that all the binding commitments were in place before the mortgage bonds were sold and before any loans were even considered for approval. The bottom line is that the customary practice in the finance industry was to sell forward — i.e., sell the bonds based upon loans that either did not exist or had not yet been acquired by the REMIC trusts. THEN they went out originating loans and acquiring loans.

As we have previously discussed here and elsewhere, the trusts and the trustee never even had a bank account through which the “pass through” assets and income would be funneled to investors. But that only adds fuel to the fire that Edstrom and Macklin were talking about. From a federal tax law perspective, which should pre-empt any state interpretation, the loans belonged to the investors from the start — not the trusts.

The trusts could only be used as a representative entity in litigation if they were funded with the investors’ money. Our research strongly supports the conclusion that no such funding took place. In fact, our research indicates the funding of the trust with the investors money was impossible because no trust accounts were ever created.

Thus you have the “straight line” that goes from the investors to the borrower. This goes directly to the issue of standing. Because once it is established that the consideration for the only real single transaction flowed from the investors to the borrower, no transaction between intermediaries were true.

They were false transactions supported by fabricated documents with no payment of consideration. Article 9 of the UCC completely supports this interpretation along with decisions interpreting federal tax law as to the real parties in interest. As a result the issue of standing is resolved — only the investors have standing to collect on the loans for which borrowers concede they received the money or the benefit.

The assignments shown in court are between intermediary parties who had no actual transaction with no actual payment or consideration because the payment or consideration had already passed through binding commitments set up by the so-called securitization scheme. By not funding the trusts, the broker dealers were free to use the money as they wished and they did.

They broke every rule in the underwriting book because they were traveling under a different set of rules than the investors or the borrowers thought. Because they had promised to make the payments due under the trust document — the pooling and servicing agreement — and because their binding commitments to make the payments for principal, interest, taxes and insurance already existed prior to the sale the mortgage bonds and prior to the loan to the borrower (see servicer advances, trust advances etc.).

As a result, the investors who should have been on the notes and mortgages were deprived of the documentation they were promised in the PSA. In plain language the mortgage documents and the bond documentation were pure fabrications without any underlying transaction between the parties to those transactions. No transaction between the investor and the trust. And no transaction between the “lender” on the note and mortgage and the borrower.

Hence the allegation of investors in their claims against the broker dealers that the note and mortgage is unenforceable to the detriment of the investors, who are left with common law claims for recovery of damages without any security instrument to protect them. hence the claim that borrowers are being sued by intermediaries who were strangers to the ACTUAL transaction with REAL consideration and terms to which both lender and borrower were bound. The terms agreed by the lenders were vastly different than the terms disclosed to borrowers. There was no meeting of the minds.

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