Banks Have Been Pursuing Policy of Driving Homeowners Into Foreclosure

For assistance or information regarding your loan or foreclosure, collection attempts and other notices of delinquency, default or demands for payments, Attorneys and Borrowers may call 954-495-9867 or 520-405-1688. We provide expert witness consultation, testimony, reports and litigation support with a complete team that will produce memoranda, discovery and motions as well as preparation for trial, motions in limine, suggested voir dire and direct examination and cross examination questions.

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It comes as a surprise to nobody that Banks have been steering borrowers into default, foreclosures and judgments, and now they are arrogant enough to seek deficiency judgments where there was NO LOSS on the part of the party claiming to be the creditor. The FCPB, engineered by Elizabeth Warren is doing more than other agency to address this practice. Investigators at that agency know and understand that it all begins with lies. Now they are taking action see http://realtormag.realtor.org/daily-news/2014/09/30/bank-accused-driving-borrowers-foreclosure

Also listen to NPR Story: AIG Lawsuit Presents Different Versions Of 2008 Bailout

Here are the lies:

  1. Borrowers are contacted by a stranger who demands payment, gives notice of delinquency, notice of default and/or offer of modification. The stranger to the transaction (see San Francisco study) is assumed by the borrower to be legally authorized to represent itself as the servicer or trustee for the creditors. They are not.
  2. The balance claimed by the stranger (pretender lender) is usually wrong by a wide margin and may not even exist. The claim is presented as the balance due as shown on the books of the servicer and not the creditor. The two are vastly different — starting with the fact that under the terms of the Pooling and servicing agreement the creditors (investors) are paid (a) in a different amount than the the alleged “terms” of the loan as shown on the promissory note (which is probably invalid and void) (b) the investors are frequently showing NO DEFAULT because they are continuing to receive scheduled payments and (c) the balance is not calculated by offset for third party payments received on behalf of the creditors by the broker dealers (investment banks).
  3. The mortgage encumbrance is probably void and subject to nullification because no owner of the debt is secured by it.
    1. Hence any attempt at “foreclosure” on the “mortgage” is a false claim.
    2. And no attempt to collect on the note can be successful because no owner of the debt is named as the payee.
  4. The ownership of the debt is being intentionally withheld so that it becomes obtuse, giving the opportunity for the pretender or stranger to claim that it is irrelevant how the debt is apportioned — a completely worthless legal argument that is nonetheless attractive to judges on the bench.
  5. The delinquency probably does not exist.
  6. The default probably does not exist.
  7. The balance probably does not exist.
  8. The real loan is probably undocumented. This is the difficult one for people to get their minds around. The existence of paperwork, the execution of the paperwork by the borrower, the appearance of money at closing to payoff old loans or pay for a new house is indisputable. The argument is not just that the pretender lender never made the loan as originator — more importantly it is that the actual lenders were never mentioned at closing which is “predatory per se” (Reg Z) and instantly creates double potential liability for the loan — (1) one to the actual lenders (investors) whose money was used to fund the origination or acquisition of the loan and then potentially to the holder of the paperwork that was released to an undisclosed third party who also did not fund the loan (except as a conduit for investor funds). NOTE: This is NOT warehouse funding which WOULD make the originator the Lender if there was any liability or risk of loss IN REALITY.
    1. Therefore the note is NOT evidence of the debt, even if it contains some terms for “repayment” albeit not to the lenders but to a disinterested third party.
    2. The mortgage is probably void since it secures the NOTE, not the debt. The note is is made payable to a party who had nothing to do with the funding of the loan. But the debt, by operation of law, arises when the borrower receives the proceeds or benefits of the loan from the undisclosed investors who are equally clueless that their money went to the closing table instead of the REMIC Trust.
    3. Assignments and endorsements of defective paper are lies in most cases. They refer to a monetary transaction that never occurred, which is why the banks fight like hell to avoid having to show consideration of the loan, assignment or endorsement. The assignment, endorsement or “transfer” of the loan through a power of attorney or any other documents are hearsay instruments that imply that a transaction took place. Just ask them and you will see they will not because they cannot produce proof of payment and delivery at any time, much less within the cutoff period for the REMIC Trust to do “business” (origination or acquisition of loans). Thus the underlying presumed transaction does not actually exist. Banks are using certain evidential presumptions in lieu of the truth.
    4. The servicer is mostly unauthroized to act as servicer for the LOAN even though they might be the authorized servicer for the TRUST. They have no power to service, enforce or otherwise act on the loan UNLESS THE LOAN IS IN THE TRUST, which is the sole reason and basis for them calling themselves “servicers.”
        1. Offers of modification are designed to get the borrower to stop paying thus creating an apparent default under the paperwork executed by the borrower at the alleged “Closing.”
        2. The note and mortgage are subject to borrower’s defenses for any violations at closing. But the banks were smart enough to wait out prosecution of even filed foreclosure actions until the statute of limitations has apparently run out on borrower’s claims and defenses. Failure of consideration is not a defense on which the statute of limitations runs.
        3. But if the paperwork executed by the borrower ends up in the hands of a party who legitimately paid for the paper, in good faith without knowledge of borrower’s defenses and received delivery of the paperwork, is a holder in due course and therefore NOT subject to most borrower defenses and the holder is presumed to have a higher protection from risk than the borrower, who now has double liability.
        4. The servicer thus has no right to collect incentive (HAMP) payments nor fees, because they are not the legal representative of the creditors.
        5. The servicer has no right to enter into settlement agreements, modification agreements, nor to execute a “release and satisfaction of mortgage”. If you are REFINANCING, GET THE NOTE BACK MARKED PAID IN FULL — ESPECIALLY IF THERE IS A “WAIVER OF DEFICIENCY” (which is also void because the servicer had no authority to execute such a document.
        6. Since the servicer advances were remitted but not paid by the alleged servicer the “servicer” actually has no claim — which is why they don’t make one.
        7. The statement that the offer of modification or settlement was sent or communicated to investors is false. In most cases the servicers say that they asked, but they ever did and the offer is turned down even though the investors would get as much an 10 times the proceeds reportedly received on liquidation of the property. The servicer is not authorized under the Trust documents to act on behalf of the creditors because the Trust never acquired the loan during its 90 window of operating a business.
      1. THE CLAIM THEREFORE IS FOR THE UNSECURED FALSE SERVICER AND NOT FOR THE OWNERS OF THE DEBT, who are also unsecured. They are looking to “recover” servicer advances which in fact are split between the servicer and the broker dealer who in most cases in the MASTER SERVICER.
    5. The absence of claims that the Trust is a holder in due course is an admission that the Trust did not pay for the loan nor receive it. The other elements of good faith and knowledge of the borrower’s defenses do not appear to apply.
      1. By simple logic — if the Trust is not the owner of the debt (they didn’t pay for it), the servicer is not the owner of the debt (they didn’t pay for it), the trustee is not the owner of the debt (they didn’t pay for it) and one of those entities received delivery during the 90 day cutoff period after which no business can be conducted by the REMIC Trust, then it follows that the only owner of the DEBT are the investors. And ownership of the paper, while true, is not enough to collect unless the claimant is a holder in due course — something which they steadfastly avoid.
      2. Hence the mortgage is void because it does not secure anyone unless someone acquires the paperwork as a holder in due course. Unless the owner of the debt is present and properly represented in court the action should be dismissed.

COLUMBUS DAY: LESSON IN HUMILITY

COLUMBUS DAY: LESSON IN HUMILITY

Columbus Day is a lesson about how much we can get wrong and still stick with it not only for generations, but for centuries. It is illustrative of the unraveling of the truth in the economic crisis that has been with us since securitization boiled over in 2007 — starting a unprecedented number of foreclosures, evictions, increased homelessness, and displacing, thus far, more than 5% (15,000,000 people) of the entire population of this country and millions more in other countries. Like many events in our history, we see a general consensus forming around assumptions and presumptions that are wrong but regarded as axiomatically right.

The “discovery” by “Columbus” did lead to historical changes in power and evolving history, Colonization and the distribution of wealth, as well as numerous wars. So chronologically it is important as a milestone event that our human species made important by their subsequent actions. But the facts upon which the story or myth of Columbus are mostly wrong — the product of myths promulgated by various interested parties. The same is true for the mortgage crisis, the crisis in student debt and household debt generally.

First of all — Columbus was not his name. In Italian it is Cristoforo Columbo. And there is a question about whether he actually hailed from Italy (Genoa) or Portugal, where his name is different than the first two names mentioned. More importantly the expedition was a Spanish expedition not Italian, and not Portuguese.

Second, he didn’t discover the Americas. He found the Caribbean Islands and called the inhabitants, “Indio” for Indian in English. So our entire history of “wild “Indians” is wrongly named as well as wrong in content. The Indians were so named, he said, because these were “Indian” Spice Islands in the East, not the West.

In addition he refused to admit and even disclaimed that he had discovered a new continent. The historical anomaly seems to be traced to a “history” written in the early 1800’s filled with incorrect facts.

Yet he is credited with discovery of the new continent which (a) was not true and (b) was denied by the “explorer” himself. This did not stop history books and teaching in schools all the myths about the discovery of the Americas, which incidentally is named for Amerigo Vespucci — who IS the explorer who found the American continent a few years after the Columbus trip. Vespucci, by the way WAS ITALIAN, so Italians still have reasons to celebrate their history with respect to the “discovery” of the Americas.

Third, Columbus did not “prove” the earth was flat. By 1492, most scholars completely agreed with Copernicus’ theory that the Earth was spherical and had a circumference of 25,000 miles — not the much smaller estimate of Columbus who thus completely missed the calculations of where he was heading and where he ended up. THAT did not stop textbooks and thousands of other books from taking it as nearly scripture that Columbus was the person to discover the America’s, was an expert navigator, and who made some giant contribution to science.

And fourth, in the arrogance of people in power, EVERYONE completely ignores the elephant in the living room — that the “indigenous people” of the Americas were obviously here thousands of years before Europeans crossed “the pond.” They were here before the rest of us and had discovered the continents, colonized them, created empires and had advanced the sciences and other areas of knowledge. Many concepts in our U.S. Constitution are based in part on on well crafted rules governing the “nations” of indigenous people.

So we basically got just about everything wrong about the 1492 voyage of the Nina, the Pinto and the Santa Maria. And that is what we are doing about our economy, banking, finance, and consumerism. But the axioms, legal presumptions, and other “truths” about the economy, about finance and in particular about the alleged securitization of debt while assumed to be true — are not any closer to the truth than the truth about our own political and geographical history, which, if accurate, would include the “indigenous people” who were here thousands of years before Europeans “found” the continents.

But of course if we were tell the story as it really happened, that would include the barbarity and accidents that occurred that decimated the tribes, villages and cities in the Americas. It would require taking responsibility for the deaths of tens of millions of people who were either massacred by European armies or killed by bacteria, viruses and fungi that arrived for free on the boats of European settlers. The concept of bathing without clothing had not yet occurred to the Europeans, so they carried many bugs — and immunities built up over time. The “indigenous” people bathed regularly and thoroughly and so were not presented with plagues and other decimating illnesses until the Europeans brought those death diseases to the shores of the America’s. Without developing immunity to these diseases, the people who were here for so many thousands of years, fell ill and died — entire villages disappearing in a matter of days. Some of this was intentional — who gave blankets to the “Indians” in trade, that were known to carry disease. It was easier to kill them by poison than by battle.

That means any responsible history of the Americas would mention the 1492 trip as pivotal from a political point of view but only a small part of the entire history of the American continents. It would require starting at the beginning when there were no people here and then progress through the first explorers to reach here, colonize and grow societies for thousands of years — in contrast with a few hundred years of European involvement. That would put things in perspective.

While comparisons cannot be exact, the above “history” illustrates history repeating itself with the tens of millions of current Americans who essentially lost their lifestyle through loss of homes, jobs and savings caused by Banks who were allowed to corner the market on money.

  • The securitization of debt is not a fact.

  • The mortgage and security instruments were not valid.

  • The foreclosures were mostly wrongful, even as a daily increase in foreclosure judgments raises the total by as much as 20,000 per day nationwide.

  • Borrowers don’t owe what is claimed.

  • Borrowers don’t owe even what they think they owe.

  • Borrowers are not credited with payments made by them or on their behalf.

  • The creditors (investors) were screwed out of what they expected — a note and mortgage sitting in REMIC Trust.

  • Practically none of the claimants in any foreclosure action have any right, justification or excuse for making claims on the borrowers whose lives they are ruining.

  • The presumptions used in court are causing most cases to arrive at the wrong conclusion and pushing the burden of proof or burden of persuasion over to the borrower who has the least knowledge about what happened.

  • The owners of the debt were the investors— not the REMIC Trusts, not the pretender lenders, nor anyone else.

  • There are no governing documents because the REMIC Trusts were never funded nor did they acquire the loan documents, nor did they receive the loan documents — the submissions to the court notwithstanding (fabricated and robo-signed).

  • There are no loan documents because the actual lenders never received any note or mortgage that was executed by the borrower.

  • Most of the loans are undocumented, unsecured loans that have been paid off multiple times. Foreclosure simply does not apply.

  • Both investors and the borrowers were tricked into becoming lenders and borrowers in deals that were not never disclosed to either of them.

  • The documents at closing were improper and invalid.

  • Closing agents committed error by receiving money from one source and using documents that were made out in favor of an unrelated party — but they were tricked into it by the Wall Street Banks who will be more than happy to throw the closing agents under the bus — except that this might have a negative impact on their plans to rev up another mortgage crisis.

Which brings to me to the final observation, that government and media got it all wrong just like we did with the various discoverers of the American continents. By assuming that the “primary dealers” (i.e., mega banks who had siphoned off most the liquidity in most world economies) were essential to the continued functioning of the financial system, they gave free money to the people who caused the problem and are already in the process of doing it again. The code words too big to fail was scary as hell, but wrong. There are and have been for controls in government agencies, and more than 7,000 private institutions who could have easily taken up the opportunities and responsibilities to our society and its financial system. Since these things tend to escalate, we might be longing for the simpler days of 2007-2009 when the stock market declined into the 5,000 range, and NASDAQ declined to under 2,000.

Basing policy and court decisions on a lie is never good. It encourages moral hazard and it destroys the citizens’ respect for government institutions that are increasingly seen as puppets of the Banks, who should be broken up like various utilities and other entities in our history. In the meantime we continue to live with our “living lies.”

Foreclosure News in Review

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PRETENDER MENDERS: GOVERNMENT IGNORES THE ELEPHANT IN THE LIVING ROOM — DOW HEADED FOR 8,000?

Starting with the Clinton and Bush administration and continued by the Obama administration (see below), the public, the media, the financial analysts, economists and regulators are uniformly ignoring the obvious pointed out originally by Roubini, myself and many others (Simon Johnson, Yves Smith et al). We are pretending the fix the economy, not actually doing it. The fundamental weakness of world economies is that the banks caused a drastic reduction in household wealth through credit cards and mortgages. Credit was used to replace a living wage. That is a going out of business strategy. The economies in Europe are stalling already and our own stock market has started down a slippery path. The prediction in the above-linked article seems more likely than the blitzkrieg of planted articles from pundits for Bank of America, and other banks pushing their common stock as a great investment. The purpose of that blitzkrieg of news is simple — the more people with a vested interest in those banks, the more pressure against real regulation, real enforcement and real correct.

As the facts emerge, there were no actual financial transactions within the chain of documents relied upon by foreclosing parties. That cannot change. So the foreclosures are simply part of a larger fraudulent scheme. If the government regulators and the Federal reserve would tell the truth that they definitely know is the truth, the the mortgages would all be recognized as completely void and the notes would not only be void but subject to civil and potentially criminal charges of fraud. Most importantly it would eliminate foreclosures, for the most part, and allow borrowers to get together with their real (even if reluctant) lenders and settle up with new mortgages., This would restore at least some of house hold wealth and end the policy of making the little guy bear the burden of this gross error in regulation and this gross fraudulent scheme of non-securitization of mortgage debt, student debt, auto loan debt, credit card debt and other consumer debt.

It is ONLY be restoration of a vibrant middle class that our economy and the world economic marketplace can avoid the coming and recurring disaster. This is a matter of justice, not relief. See also Complete absence of mortgage and foreclosures are the largest component of our problems

What happens to restitution and why is the government ignoring the obvious benefits from restitution? NY Times

So a trader no longer needs to be subject to a requirement of restitution because he has already entered into civil agreement to restore creditors who bought bogus mortgage bonds that were issued by REMIC Trusts that were never funded by any cash or any assets. Since the “securitization fail” originated as a fraudulent scheme by the world’s major banks, and restitution is the primary remedy to defrauded victims, it follows that restitution should be the principal focus of enforcement actions, civil suits and criminal prosecutions. Meanwhile some restitution is occurring, just like this case.

The question is, assuming the investors who were in fact the creditors, how are the proceeds of settlement posted in accounting for the recovery of potential losses? If, as is obviously the case, the payments reduce the losses of the investors, then why are those settlements not credited to the books of account of those creditors and why isn’t that a matter subject to discovery of what the “Trust” or “Trust beneficiaries” are showing as “balance due” and what effect does that have on the existence of a default — especially where servicer advances are involved, which appears to be most cases.

The courts are wrong. Those judges that rule that the accounting and posting on the actual creditors’ books and records are irrelevant are succumbing to political and economic pressure (Follow Tom Ice on this issue) instead of calling balls and strikes like they are supposed to do. If third party payments are at least includable in discovery and probably admissible at trial, then the amount that the creditor is allowed to expect would be reduced. In accounting there is nothing more black letter that a reduction in the debt affects both the debtor and the creditor. So a principal reduction would occur by simple application of justice and arithmetic — not some bleeding heart prayer for “relief.”

Why the economy can;t budge — consumers are not participating in greater productivity caused by consumers as workers

Simple facts: our economy is driven by, or was driven by 70% consumer spending. Like it or not that is the case and it is a resilient element of U.S. Economics. Since 1964 workers wages have been essentially stagnant — despite huge gains in productivity that was given ONLY to management and shareholders. I know this is an unpopular position and I have some misgivings about it myself. But the fact remains that when unions were strong EVERYONE was getting paid better and single income households were successful with even some padding in savings account.

By substituting credit for a proper wage commensurate with merit (productivity), the country has moved most of the population in the direction of poverty, burdened by debt that should have been wages and savings.

But the big shock that is not over is the sudden elimination of household wealth and the sudden dominance of the banks in the economy, world politics and our national politics. Proper and appropriate sharing of the losses imposed solely on borrowers in a mean spirited “rocket docket” is not the answer. (see above) The expediting of foreclosures is founded on a completely wrong premise — that the debts, notes and mortgages are, for the most part, valid. They are not valid as to the parties who seek to enforce them for their own benefit at the expense and detriment to both the creditors (investors) and borrowers.

GDP of the United States is now composed of a virtually dead heat between financial “services” and all the rest of real economic activity (making things and doing services). This means that trading paper based upon the other 50% of real economic activity has tripled from 16% to nearly 48%. That means our real economic activity is composed, comparing apples to apples, of about 1/3 false paper. A revision of GDP to 2/3 of current reports would cause a lot of trouble. But it is the truth and it opens the door to making real corrections.

The Basic Premise of the Bailout, TARP, Bond Purchases was Wrong

Now that Bernanke, Geithner, Paulson and others are being forced to testify, it is apparent that they had no idea what they were really doing because they were proceeding on false information (from the banks) and false premises (from the banks). Most revealing is that both Paulson and Bernanke were relying upon Geithner while he was President of the NY Fed. Everyone was essentially asleep at the wheel. Greenspan, former Federal Reserve chairman, admits he was mistaken in believing that while his staff of 100 PhD’s didn’t understand the securitization scheme, market forces would mysteriously cause a correction. Perhaps that would have been painfully true if market forces had been allowed to continue — resulting in the failure of most of the major banks.

The wrong premise was the TBTF assumption — the fall of AIG or the banks would have plunged into a worldwide depression. That would only have been true if government didn’t simply step in, seize bank assets around the world, and provide restitution to the victims — pension funds, homeowners, insurers, guarantors, et al. We already know that size is no guarantee of safety (Lehman, AIG, Bear Stearns et al). There are over 7,000 community banks and credit unions, some with more than $10 billion on deposit, that could easily pick up where bank of America left off before its own crash. Banking is marketing and electronic data processing. All  banks, right down to the smallest bank in America, have access to the exact same IT backbone for transfer of funds, deposits and loans. Iceland showed us the way and we ignored it. They sent the bad bankers to jail and reduced household debt by more than 25%. They quickly recovered from the “failed” banks and things are running quire smoothly.

JDSUPRA.COM: What good is the statute of limitations if it never ends?

A word of caution. In the context of a quiet title action my conclusion is that it should not be available just because the statute of limitations has run on enforcement of the note. But it remains on the public records as a lien. The idea proposed by me, initially, and others later that a quiet title action was the right path is probably wrong. documents in the public records may not be eliminated without showing that they never should have been recorded in the first place. Thus the mortgage or assignment of record remains unless we prove that those documents were void and therefore should not have been recorded.

That said, I hope the Supreme Court of Florida makes the distinction between the context of quiet title, where I agree that it should not easy to eliminate matters in the public record, and the statute of limitations, where parties should not be permitted to bring repeated actions on the same debt, note and mortgage after they have lost. Both positions cause uncertainty in the marketplace — if quiet title becomes easy to allege due to statute of limitations and statute of limitations becomes  harder to raise because despite choosing the acceleration option, and despite existing Florida law and precedent, the court decides that the the foreclosing party is estopped by res judicata, collateral estoppel and the statute of limitations.

JDSUPRA.COM: Association Lien Superior to 1st Mortgage

As I predicted years ago and have repeated from time to time, one strategy that is absent is collaboration between the homeowner and the association whose lien is superior to the 1st Mortgage which can be foreclosed out of existence. This was another area of concentration in my prior practice of law. We provide litigation support to attorneys. We will not make any attempt nor accept direct engagement of associations. But I can show you how to use this to advantage of our law firm, your client’s interests and avoid an empty abandoned dwelling unit.

What a surprise?!? Servicers are steering unsophisticated and emotionally challenged borrowers into foreclosure

by string them along in modifications. This is something many judges are upset about. They don’t like it. More motions to compel mediation (with a real decider) or to enforce a settlement that has already been approved (and then the NEXT servicer says they are not bound by the prior agreement.

What happened to those “lost notes?”

Prior commitments prevent me hosting the radio show tonight. To our Jewish friends, we celebrate the festival of sukhot.

But as an introduction to topics coming up on this blog, we ask some questions about so-called “lost” notes. We have been hearing reports that the banks are admitting what Katherine Ann Porter told us 7 years ago — they regularly shredded the original note. Why would you shred the equivalent of cash unless you were hiding something and doing something wrong?

By institutionalizing the practice of shredding they diminished expectations of seeing the original. This is what enabled the banks to see the same loan papers (without the debt) to multiple third parties. “Losing the note” was the means to an end— getting $10 for every dollar of actual debt.

Where was the note?
Describe the people and process of recovering it!
Who lost it?
Who found it?
Where was it?
How was it found?

Motion to Compel Discovery: General Template I am Using

Having seen the usual short version of a motion to compel, I have determined that a great deal more must be said in order to convince the trial judge and preserve your issues on appeal. Remember you must set down their objections for hearing IN ADDITION TO a hearing on your motion to compel.

To assist practitioners I am offering my own template, which ALWAYS requires editing because the facts in each case are different. THIS IS WHY THE FOLLOWING FORM SHOULD NOT BE USED BY ANY PRO SE LITIGANT WITHOUT CONSULTING WITH A LICENSED ATTORNEY IN YOUR JURISDICTION. Where it describes a party, put in the actual name.

  1. COMES NOW the Defendants by and through their undersigned attorney and moves this court to enter an order denying the Plaintiffs’ objections to discovery and compelling complete responses with respect to Defendants’ Interrogatories, Request for Production and Interrogatories and Request for Admission and as grounds therefor say as follows:
  2. This is a foreclosure case in which the Plaintiffs have alleged that a trustee is the party representing a REMIC Trust which in turn allegedly represents undisclosed creditors (Investors) with respect to a debt for which a promissory note is alleged to be evidence of the Defendant’s indebtedness. The promissory note was alleged to be lost when the case was initially filed. Now the Plaintiff says it has recovered the note and has filed what it calls the “original” note and mortgage with this Court.
  3. Published in academic surveys and testimony of multiple banks, including the banks involved in the alleged chain of documents relied upon by the Plaintiff in this case, and the alleged originator of the subject loan and the alleged servicer for the subject loan, shows that the industry practice was to shred the notes without certification, allege lost note, and then if the case is defended, they suddenly come up with what they allege to be the original.
  4. Defendants must be permitted to inquire into this issue inasmuch if the original note was destroyed or lost, the subsequent events and circumstances surround the destruction , loss or transfer of the note is essential to arriving at the truth in connection with Plaintiff’s claim for foreclosure and Defendants answer and affirmative defenses. The current  servicer and the former servicer or Master Servicer, are the ONLY source of information about these matters.
  5. The “servicer” has changed multiple times and Plaintiffs have changed without amendment to the complaint. This shows movement of rights or ownership that corroborates Defendants theory that this is a loan that is securitized or subject to claims of securitization where the result they seek is a Judgement that produces a violation of the Internal revenue Code and forcing a loss on investors who have no notice of these proceedings.
  6. Hence there might be an indispensable party missing from these proceedings.
  7. Plaintiff alleges it is the holder and does not allege that it a holder in due course, but the name of the holder in due course or “owner” of the loan remains undisclosed along with the source of authority to assert rights to enforce.
  8. Defendant’s theory of the case is that the “creditor” consists of a group of investors whose money was loaned in the name of an originator,  the alleged originator claimed to be the “lender” which Defendants denies.
  9. Defendant further asserts that the subject loan involved solely the Defendants and the investors and was undocumented and is therefor unsecured.
  10. Defendant further asserts that the subject loan is subject to claims of securitization and multiple claims of ownership.
  11. As corroboration for Defendants’ theory of the case, Defendant cites the allegation that the Plaintiff is a holder but did not allege its representative capacity, the source of its authority nor the identity of the actual owner of the loan, thus preventing a proper defense as well as any attempt to modify the loan in accordance with any Federal or State program.
  12. Based upon investigation by the Defendants, undersigned counsel believes the REMIC Trust that has NOT received payments (and that alleged “trust beneficiaries” have received payments) is neither the holder with rights to enforce nor the owner of the debt. The investors own the debt but were denied the promised protections of a note and mortgage in favor of the the investors as the source of money for origination and acquisition of loans.
  13. Defendants theory of the case is that the Trust was ignored, to wit: that the trust did not buy the subject loan, did not receive delivery as set forth in the trust document, and that the “endorsement” and “assignment” were false documents that were unsupported by any real transaction in which value was paid for acquisition of the debt or the note.
  14. Only the Defendants have the actual documentation to show the money trail, if any, in which the source of funds of the “lender” is disclosed and the transaction in which the note and mortgage were purchased for value.
  15. The note is alleged to be secured by a mortgage executed by the Defendants.
The Plaintiffs have not alleged a loan to the Defendant by the Plaintiff or anyone else in their alleged chain of “title” to the loan or loan documents.
  16. Defendants have denied the Plaintiffs’ allegations.
  17. Defendants challenge the alleged default, ownership of the debt and loan documents and the balance alleged in the complaint, and affirmatively defend with payment by way of servicer advances received by the trust beneficiaries from the servicer.
  18. Defendants also are inquiring as to the authority of the Plaintiff and possibly ______ Bank, who is not named in the Trust instrument (Pooling and Servicing Agreement) as the Trustee. If that Bank is not the Trustee then the trust has not received proper notice of an action that directly affects their economic interests as the only real party in interest.
  19. Defendants are entitled to pursue discovery for anything that might lead to the discovery of admissible evidence.
  20. Defendants point out to the court that the suit is brought as a holder and not a holder in due course. Hence all defenses of the borrower may be raised as though the trust was the originator of the loan.
  21. Even as “holder” Plaintiffs fail to allege and object to any information as to the basis of their claim or rights to enforce a claim on the alleged note and alleged mortgage.
 If the Plaintiff is merely a holder and not a holder in due course then the question becomes whether there was ANY transaction in which the Trust paid for the loan or if the trust or servicer is acting in a representative capacity for an undisclosed creditor.
  22. Or, if the reason that the Plaintiff is not alleging status as holder in due course, the other two reasons are potentially that the trust was not acting in good faith or that the trust had knowledge of the borrower’s defenses.
  23. Defendants investigation has led it to believe that at no time through the present have the loan documents ever been delivered to the trust or any other creditor or its appointed agent (Depositor) as expressly set forth in the trust instrument. Defendants have a right to know when such delivery occurred, if ever and to inquire as to the circumstances of such delivery or non delivery.
  24. These are all issues that Defendants are entitled to pursue.
  25. If the Trust owns the loan, as alleged, then it must have done so according to the terms of the trust instrument which is governed by New York State and potentially Delaware State law — both of which declare transactions outside the scope of authority of the Trustee to be void, not voidable.
  26. In order for the trust to have ever acquired an interest in the loan, the transaction must have occurred with the Trustee’s acknowledgement and consent.
  27. Defendants seek documents showing the actual money trail and the actual document trail — not  just documents the Plaintiffs wish to use at trial. 
Defendants seek documents that Defendants can use at trial to prove their theory of the case.
  28. As for the balance, Plaintiffs object to the Defendants getting confirmation that “servicer advance payments” were made to the trust beneficiaries and that all distributions required to be made to the “creditor” have been made. If such payments were made and the creditor(s) is or was, at the time of the declaration of default, not showing a default because the creditor had been paid in full, it is a matter of argument as to whether such payments negate the default and whether the payments gave rise to a different cause of action by the servicer against the Defendants for unjust enrichment that would not be secured by the mortgage unless this court is going to cut pieces off the security instrument and declare equitable part ownership of the mortgage in favor of the servicer or other third party payor.
  29. Defendants have a right to know the balance actually due to the creditor on account of the alleged property loan apart from any claims of the servicer or other third party who may have made payments that were in fact received by or on behalf of the creditor(s).
  30. In other words, if the creditor is showing a different balance due, why is that? If the creditor is not or was not showing a default, why is that?
  31. Or if their books started showing a default, when was that? The records offered thus far, show transactions (payments) between the alleged borrower under the note, but do NOT show the payments to the creditor(s). How can the payments to the creditors be irrelevant? If they received payment they had no default. If they didn’t receive payment then there is a default. But the question remains as to whether the default was under the PSA, the note or both.
  32. It appears that the Plaintiff wants to have this court assume that the records of the servicer are the records of the creditor, but this is not the case. The creditor(s) are paid in accordance with the terms of the Pooling and Servicing Agreement and are not equal to the payments made by the borrowers. Defendants theory of the case is that neither the Plaintiff nor any trust nor any predecessor in interest ever participated in loaning money to the Defendants. If that is the case, it is something that could lead to the discovery of admissible evidence.
  33. Plaintiff is apparently attempting to have this court adopt a standard for discovery that would state that if the items requested might not be admissible in Court, then the the Defendants cannot be entitled to discovery as to such items. In fact, the standard for discovery is to prevent the necessity of long “investigation” at trial and pursue anything that MIGHT lead to the discovery of admissible evidence.

WHEREFORE, Defendants pray that this court enter an order denying each and every objection raised by the Plaintiff with respect to discovery, compelling the Plaintiff to respond and that the Court award attorney fees and costs as sanctions for obstructive behavior on the part of the Plaintiff.

Who Are the Creditors?

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Since the distributions are made to the alleged trust beneficiaries by the alleged servicers, it is clear that both the conduct and the documents establish the investors as the creditors. The payments are not made into a trust account and the Trustee is neither the payor of the distributions nor is the Trustee in any way authorized or accountable for the distributions. The trust is merely a temporary conduit with no business purpose other than the purchase or origination of loans. In order to prevent the distributions of principal from being treated as ordinary income to the Trust, the REMIC statute allows the Trust to do its business for a period of 90 days after which business operations are effectively closed.

The business is supposed to be financed through the “IPO” sale of mortgage bonds that also convey an undivided interest in the “business” which is the trust. The business consists of purchasing or originating loans within the 90 day window. 90 days is not a lot of time to acquire $2 billion in loans. So it needs to be set up before the start date which is the filing of the required papers with the IRS and SEC and regulatory authorities. This business is not a licensed bank or lender. It has no source of funds other than the IPO issuance of the bonds. Thus the business consists simply of using the proceeds of the IPO for buying or originating loans. Since the Trust and the investors are protected from poor or illegal lending practices, the Trust never directly originates loans. Otherwise the Trust would appear on the original note and mortgage and disclosure documents.

Yet as I have discussed in recent weeks, the money from the “trust beneficiaries” (actually just investors) WAS used to originate loans despite documents and agreements to the contrary. In those documents the investor money was contractually intended to be used to buy mortgage bonds issued by the REMIC Trust. Since the Trusts are NOT claiming to be holders in due course or the owners of the debt, it may be presumed that the Trusts did NOT purchase the loans. And the only reason for them doing that would be that the Trusts did not have the money to buy loans which in turn means that the broker dealers who “sold” mortgage bonds misdirected the money from investors from the Trust to origination and acquisition of loans that ultimately ended up under the control of the broker dealer (investment bank) instead of the Trust.

The problem is that the banks that were originating or buying loans for the Trust didn’t want the risk of the loans and frankly didn’t have the money to fund the purchase or origination of what turned out to be more than 80 million loans. So they used the investor money directly instead of waiting for it to be processed through the trust.

The distribution payments came from the Servicer directly to the investors and not through the Trust, which is not allowed to conduct business after the 90 day cutoff. It was only a small leap to ignore the trust at the beginning — I.e. During the business period (90 days). On paper they pretended that the Trust was involved in the origination and acquisition of loans. But in fact the Trust entities were completely ignored. This is what Adam Levitin called “securitization fail.” Others call it fraud, pure and simple, and that any further action enforcing the documents that refer to fictitious transactions is an attempt at making the courts an instrument for furthering the fraud and protecting the perpetrator from liability, civil and criminal.

And that brings us to the subject of servicer advances. Several people  have commented that the “servicer” who advanced the funds has a right to recover the amounts advanced. If that is true, they ask, then isn’t the “recovery” of those advances a debit to the creditors (investors)? And doesn’t that mean that the claimed default exists? Why should the borrower get the benefit of those advances when the borrower stops paying?

These are great questions. Here is my explanation for why I keep insisting that the default does not exist.

First let’s look at the actual facts and logistics. The servicer is making distribution payments to the investors despite the fact that the borrower has stopped paying on the alleged loan. So on its face, the investors are not experiencing a default and they are not agreeing to pay back the servicer.

The servicer is empowered by vague wording in the Pooling and Servicing Agreement to stop paying the advances when in its sole discretion it determines that the amounts are not recoverable. But it doesn’t say recoverable from whom. It is clear they have no right of action against the creditor/investors. And they have no right to foreclosure proceeds unless there is a foreclosure sale and liquidation of the property to a third party purchaser for value. This means that in the absence of a foreclosure the creditors are happy because they have been paid and the borrower is happy because he isn’t making payments, but the servicer is “loaning” the payments to the borrower without any contracts, agreements or any documents bearing the signature of the borrower. The upshot is that the foreclosure is then in substance an action by the servicer against the borrower claiming to be secured by a mortgage but which in fact is SUPPOSEDLY owned by the Trust or Trust beneficiaries (depending upon which appellate decision or trial court decision you look at).

But these questions are academic because the investors are not the owners of the loan documents. They are the owners of the debt because their money was used directly, not through the Trust, to acquire the debt, without benefit of acquiring the note and mortgage. This can be seen in the stone wall we all hit when we ask for the documents in discovery that would show that the transaction occurred as stated on the note and mortgage or assignment or endorsement.

Thus the amount received by the investors from the “servicers” was in fact not received under contract, because the parties all ignored the existence of the trust entity. It was a voluntary payment received from an inter-meddler who lacked any power or authorization to service or process the loan, the loan payments, or the distributions to investors except by conduct. Ignoring the Trust entity has its consequences. You cannot pick up one end of the stick without picking up the other.

So the claim of the “servicer” is in actuality an action in equity or at law for recovery AGAINST THE BORROWER WITHOUT DOCUMENTATION OF ANY KIND BEARING THE BORROWER’S SIGNATURE. That is because the loans were originated as table funded loans which are “predatory per se” according to Reg Z. Speaking with any mortgage originator they will eventually either refuse to answer or tell you outright that the purpose of the table funded loan was to conceal from the borrower the parties with whom the borrower was actually doing business.

The only reason the “servicer” is claiming and getting the proceeds from foreclosure sales is that the real creditors and the Trust that issued Bonds (but didn’t get paid for them) is that the investors and the Trust are not informed. And according to the contract (PSA, Prospectus etc.) that they don’t know has been ignored, neither the investors nor the Trust or Trustee is allowed to make inquiry. They basically must take what they get and shut up. But they didn’t shut up when they got an inkling of what happened. They sued for FRAUD, not just breach of contract. And they received huge payoffs in settlements (at least some of them did) which were NOT allocated against the amount due to those investors and therefore did not reduce the amount due from the borrower.

Thus the argument about recovery is wrong because there really is no such claim against the investors. There is the possibility of a claim against the borrower for unjust enrichment or similar action, but that is a separate action that arose when the payment was made and was not subject to any agreement that was signed by the borrower. It is a different claim that is not secured by the mortgage or note, even if the  loan documents were valid.

Lastly I should state why I have put the “servicer”in quotes. They are not the servicer if they derive their “authority” from the PSA. They could only be the “servicer” if the Trust acquired the loans. In that case they PSA would affect the servicing of the actual loan. But if the money did not come from the Trust in any manner, shape or form, then the Trust entity has been ignored. Accordingly they are neither the servicer nor do they have any powers, rights, claims or obligations under the PSA.

But the other reason comes from my sources on Wall Street. The service did not and could not have made the “servicer advances.” Another bit of smoke and mirrors from this whole false securitization scheme. The “servicer advances” were advances made by the broker dealer who “sold” (in a false sale) mortgage bonds. The brokers advanced money to an account in which the servicer had access to make distributions along with a distribution report. The distribution reports clearly disclaim any authenticity of the figures used, the status of the loans, the trust or the portfolio of loans (non-existent) as a whole. More smoke and mirrors. So contrary to popular belief the servicer advances were not made by the servicers except as a conduit.

Think about it. Why would you offer to keep the books on a thousand loans and agree to make payments even if the borrowers didn’t pay? There is no reasonable fee for loan processing or payment processing that would compensate the servicer for making those advances. There is no rational business reason for the advance. The reason they agreed to issue the distribution report along with money that was actually under the control of the broker dealer is that they were being given an opportunity, like sharks in a feeding frenzy, to participate in the liquidation proceeds after foreclosure — but only if the loan actually went into foreclosure, which is why most loan modifications are ignored or fail.

Who had a reason to advance money to the creditors even if there was no payment by the borrower? The broker dealer, who wanted to pacify the investors who thought they owned bonds issued by a REMIC Trust that they thought had paid for and owned the loans as holder in due course on their behalf. But it wasn’t just pacification. It was marketing and sales. As long as investors thought the investments were paying off as expected, they would buy more bonds. In the end that is what all this was about — selling more and more bonds, skimming a chunk out of the money advanced by investors — and then setting up loans that had to fail, and if by some reason they didn’t they made sure that the tranche that reportedly owned the loan also was liable for defaults in toxic waste mortgages “approved” for consumers who had no idea what they were signing.

So how do you prove this happened in one particular loan and one particular trust and one particular servicer etc.? You don’t. You announce your theory of the case and demand discovery in which you have wide latitude in what questions you can ask and what documents you can demand — much wider than what will be allowed as areas of inquiry in trial. It is obvious and compelling that asked for proof of the underlying authority, underlying transaction or anything else that is real, your opposition can’t come up with it. Their case falls apart because they don’t own or control the debt, the loan or any of the loan documents.

Federal 6th Circuit in Ohio Court Slaps Down BOA — Homeowner DOES have standing to challenge title and therefore challenge validity of transactions that purport to Transfer the debt, note or mortgage.

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see Opinion+File+Stamped+9.29.14 Slorp v Lerner, Sampson et al

This decision reflects the changing judicial climate in which the courts are taking a closer look at these transactions. They don’t like what they are seeing and in this case, the appellate court practically recommended a RICO action.

The essence of this case is that it enables homeowner, EVEN IF THERE WAS AN ALLEGED DEFAULT, to file defenses or an action for damages and challenge based upon the allegation that the assignment was false. And THAT in layman terms, means that the assignment is just piece of paper that purports to be evidence of a transaction in which the debt, note and mortgage were transferred. If no such transaction exists, then the assignment is void, even if it is recorded, thus opening the door for nullification of the mortgage or at least the assignment.

Hence discovery directed at the actual transaction in which money was paid and delivery of the debt, note and mortgage followed, should now be allowed.

CAUTION: THIS ISSUE MIGHT BE DECIDED LARGELY ON PROCEDURAL GROUNDS WHEN USED AS A DEFENSE. If you have not asked for the documents, correspondence etc. as to the underlying transaction for the loan, the “assignment” or the endorsement, then you will have nothing to impeach the witness or the assignment as an exhibit.

While this is a Federal District case from Ohio, it should be used as very persuasive authority for the reasoning and analysis that the Sixth Circuit Court of Appeals applied. It also highlights why pro se litigants should at least consult with licensed attorneys as to strategy and tactics.

These the important excerpts in my opinion:

“We remand the case to the district court with instructions to permit Slorp to amend his complaint to add a RICO claim.

“Slorp does not attribute his injuries to the false assignment of his mortgage; rather, he attributes his injuries to the improper foreclosure litigation. According to the complaint, Bank of America (through LSR) filed a foreclosure action against Slorp despite its lack of interest in the mortgage; the defendants misled the trial court by fraudulently misrepresenting Bank of America’s interest in the suit; and Slorp incurred damages when he was compelled to defend his interests. If Bank of America had no right to file the foreclosure action, it makes no difference whether Slorp previously had defaulted on his mortgage.2

“The district court in Livonia Properties stated that an individual “who is not a party to an assignment lacks standing to challenge that assignment,” and our Livonia Properties opinion quoted and endorsed that general statement, perhaps inartfully. 399 F. App’x at 102. But we quickly limited the scope of that rule, clarifying that a non-party homeowner may challenge the validity of an assignment to establish the assignee’s lack of title, among other defects. Id. (citing 6A C.J.S. Assignments § 132); see also Carmack v. Bank of N.Y. Mellon, 534 F. App’x 508, 511– 12 (6th Cir. 2013) (“Livonia’s statement on standing should not be read broadly to preclude all borrowers from challenging the validity of mortgage assignments under Michigan law.”). Thus a non-party homeowner may challenge a putative assignment’s validity on the basis that it was not effective to pass legal title to the putative assignee. See Conlin v. Mortg. Elec. Registration Sys., 714 F.3d 355, 361 (6th Cir. 2013); Livonia Props., 399 F. App’x at 102; see also Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 353–54 (1st Cir. 2013); 6A C.J.S. Assignments § 132 (“The debtor may also question a plaintiff’s lack of title or the right to sue.”).

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