Foreclosure News in Review

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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.

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

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.”).

CFPB Finds Kickbacks in Force-Placed Insurance

Looks like the Obama administration is finally drilling down to real facts and has stopped taking their information from the banks, which they have obviously found to be false.

Like the faked mortgage loans, it all comes down to dirty tricks, kickbacks and “screw the consumer” mentality.

Forced placed insurance served two purposes — (1) the Servicers got paid to do it and (2) it further enabled false claims for false amounts such that it was impossible for the borrower to reinstate any loan. This enabled their primary goal of sending as many borrowers into the torture chambers of foreclosures on the rocket docket.

The only thing they got wrong is that they continue to call them lenders. These were intermediaries who falsely claimed the loans as their own and caused closing agents to apply stolen funds to a loan closing in which a non-lender was named as lender.

Foreclosure News Roundup

As a result of an unexpected scheduling conflict tonight’s show is postponed until next Thursday.

The news over the last week has been largely good. While many judges are still entering judgments against borrowers by rote, the truth about securitization is oozing out of the court system. A Tax court found that the investors were not secured creditors against the home and could not foreclose. That means that any claim “on behalf of the certificate holders” is false and perhaps void.

The CFPB is starting to ban servicers from accepting new loans to service until they can prove they cleaned up their act — especially with respect to modifications. A California court wrote that they were on the verge of finding that the modification process is a sham. That means that there are potential claims for damages, which have reached as high as $39 million thus far and that means that lawyers are starting to take notice of the pot of gold on contingency cases.

Wells Fargo and Bank of America in particular are taking hits practically every day leading them to file last minute voluntary dismissals. While this might cost as much as $100,000 in attorney fees to homeowner’s counsel it avoids a judgment for the homeowner, which preserves their gaming of the system and the investors and insurers and the government — most particularly the Federal Reserve who paid 100 cents on the dollar for worthless mortgage bonds — issued by REMIC Trusts whose assets consisted of derivatives or whose assets consisted of nothing at all. The fee awards are leading some attorneys to take cases entirely on contingency — just for the fee award.

We are on the verge in my cases and others I have been following of getting court orders for the response to discovery that includes the money trail. Thus for cases in which a nonexistent entity is named on the note and mortgage, it is plain as day that there is a high probability that although their name was used on the note and mortgage, no money funding the loan can be attributed to any entity using the name of the “lender” hence the term “pretender lender”.

There are many findings that there is a lack of continuity between the claims of the foreclosing party and the actual authority of the Plaintiff to be in court. Slowly the Courts are pushing the banks back, step by step. If the loan never made it into the Trust, as seems to be true on most cases, then the servicer might be the servicer for the trust but lacks any authority to claim representative authority for processing loan payments or enforcing the loan documents. So it might be the servicer for the trust, but NOT the loan, which is not in the Trust.

The case finding that the holder must control the note is particularly interesting because Wells Fargo used all the usual tricks and presumptions only to find that it still lost. This is because of the line of cases dating back centuries regarding commercial paper. A courier has no right to enforce the note even though he has it in his possession. But he can still file a case and even survive a motion to dismiss. Summary Judgment would be entered against the courier (along with some free bracelets and free room and board provided by the state or Federal government) because while the courier has the possession, he could not prove he had the “right to enforce.” Like the servicers and Trustees, he could allege that he was the possessor of the note and therefore presumed to be the holder. But that is not enough. He must allege and prove that he has the right to enforce — or that he is the holder in due course (or owner) of the debt and note. CONTROL therefore becomes the key byword out of that decision and it is supported by cases dating back many decades.

Yet opposing counsel for the banks still insist that they can rely on  documents that talk about the transaction in which the loan was transferred but insist that they have no obligation to show the actual purchase of the loan. This is absent from their allegations and they say it is not necessary for their prima facie case. But the courts are starting to peek under the hood and they are starting to reject the bank’s assertion that the demand for proof of the payment in the alleged purchase of the loan is not discoverable because it won’t lead to information that might be admissible evidence that the presumption relied upon by the bank has been rebutted.

Lawyers framing their arguments in that fashion are finding more friendly responses from the court. What could possibly be the harm in finding out if the presumed transaction actually took place? And if it didn’t take place then why was the endorsement placed on the note and mortgage with an assignment as well?

So what the bank lawyers are finding is that they cannot pick up one end of the stick without picking up the other. If they are going to rely upon legal presumptions about the transaction for which they are submitting evidence (e.g. the note) then they must respond to discovery that seeks information to rebut those presumptions. The day of treating the presumptions as irrefutable is essentially over. The courts are catching up. Legal presumptions force the burden of proof onto the other party. But they do not eliminate the defenses. Hence demanding discovery relating to facts that would rebut the presumption is entirely correct and it would be error of the trial court to prevent the homeowner from seeking facts that are entirely within the care, custody and control of the foreclosing party.

If there is an original note then it is not unreasonable to trace the chain of possession of that note. Nor is it unreasonable to ask for proof that there was consideration for the loan in the first instance. And even if the borrower received money, that doesn’t automatically mean they received that money from the party whose name appears on the note and mortgage. And that matters because the enforcement of the note and mortgage by anyone other than the owner of the debt or the holder in due course or a holder with rights to enforce requires false representations and presumptions in court.

It also negates the authority of “servicers” who claim authority for representing the REMIC Trust when in fact their relationship with the trust is irrelevant because the debt and loan papers were never actually transferred into the trust. None of the people in the chain relied upon by the forecloser ever had legal control over the debt because they used investor money, contrary to their agreement with the investors, to fund the loans or acquisition of the loans. They cannot ignore the Trust in the actual transactions and then prevail in the case based upon the presumption that the Trust owns the loan.

And as we have seen in the tax cases published on this blog, the investors are NOT secured by the mortgage nor do they have any control over the note or mortgage. But they remain the owner of the debt because their money was sued to fund the origination or acquisition. And since the real control over the note and mortgage was never transferred to the Trust or the Trustee on behalf of the Trust, it cannot be said that the Trust, the Trustee or the servicer has any legal authority to do anything with respect to the loan even though there exists a pattern of behavior based upon false representations of authority.

The only negative factor looming on the horizon is the fact that the money for the hiring of extra retired judges is about to be cutoff and the pressure is on to terminate these cases any way the judge can do it — which usually means ruling against the borrower. This is a clear denial of due process and probably grounds to assert systemic bias which several attorneys in Florida and across the country are pursuing. The big problem is that this “extra money” is coming largely from the banks themselves who in effect are paying the salaries of the retired judges. This raises the possibility of individual bias. It might be time to voir dire the judge regarding the source of payment for his salary. The fact that it comes from state coffers is not sufficient if in fact the money is traceable to the banks themselves and the judge knows that.


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