Fla 1st DCA Turns the Corner: Deutsch Crashes and Burns and No Retrial

THIS is what I have been talking about for 7 years. The general consensus has thrown in the towel — just as appellate courts are turning up the heat. The appeals courts don’t like what they see on the trial level. They don’t like what they see in terms of behavior of banks who file cases and keep them lingering for many years. And they don’t like the use of presumptions when the facts are different. In this case the Appellate Court didn’t just say Deutsch loses. They decline to allow the case to be retried for exactly the reason I have said repeatedly — once they have had their chance, the banks should not be allowed a second bite of the apple.

More importantly this illustrates how the Plaintiffs have no right to bring foreclosure actions. The only way they get away with it is by applying “presumptions” that are contrary to the actual facts that rebut those presumptions. In this case the trial court applied exactly those presumptions causing the burden of proof to be shifted to the borrower. The appellate court correctly stated that the prima facie case of the Plaintiff did not exist. No proof was required from the Defendants. The appellate court ordered the case to be involuntarily dismissed with prejudice.

Not all cases present the same fact patterns. This does not close things out for all foreclosures, but it provides a guide to how lawyers should argue the cases starting at the beginning of their engagement in the case.



Opinion filed October 14, 2014.
An appeal from the Circuit Court for Duval County.
A. C. Soud, Jr., Judge.
Austin T. Brown of Parker & DuFresne, P.A., Jacksonville, for Appellant.
Jeffrey S. York and N. Mark New, II of McGlinchey Stafford, Jacksonville and Latoya O. Fairclough, Choice Legal Group, P.A., Fort Lauderdale, for Appellee

Finally, Deutsche Bank’s Exhibit 5 was submitted as a “payment history” for the debt at issue. The computer-generated pages indicate preparation by SPS for some pages and Washington Mutual Bank for other. Counsel for Appellants objected to the lack of foundation to admit this hearsay document into evidence and noted that Mr. Benefield was not a records custodian for SPS or any of the previous loan servicers. See §§ 90.801, 90.803(6), Fla. Stat. The court overruled the objection without discussion and the document was admitted into evidence.

It is well-settled that:

A plaintiff who is not the original lender may establish standing to foreclose a mortgage loan by submitting a note with a blank or special endorsement, an assignment of the note, or an affidavit otherwise proving the plaintiff’s status as the holder of the note. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012).

But standing must be established as of the time of filing the foreclosure complaint.  Focht v. Wells Fargo Bank, N.A.

 124 So. 3d 308, 310 (Fla. 2d DCA 2013) (footnote omitted). Even if exhibits 1, 3, 4 and 5—admitted by the trial court—had
been relevant, properly authenticated, and qualified for the business records exception to the hearsay rule, see Hunter v. Aurora Loan Services, LLC, 137 So. 3d 570 (Fla. 1st DCA 2014), none of Deutsche Bank’s exhibits qualifies as an indorsement from Long Beach Mortgage to Deutsche Bank, an assignment from Long Beach Mortgage to Deutsche Bank, or an affidavit otherwise proving the plaintiff’s standing to bring the foreclosure action on the note and mortgage at issue as a matter of law. Likewise, the record contains no assertion or proof by Deutsche Bank of its standing under any means identified in section 673.3011, Florida Statutes. See Mazine v. M & I Bank, 67 So. 3d 1129, 1130 (Fla. 1st DCA 2011). Absent evidence of the plaintiff’s standing, the final judgment must be reversed.

We decline to remand the case for the presentation of additional evidence because “appellate courts do not generally provide parties with an opportunity to retry their case upon a failure of proof.” Morton’s of Chicago, Inc. v. Lira, 48 So. 3d 76, 80 (Fla. 1st DCA 2010). Deutsche Bank filed its complaint in 2008 and hadmore than five years until the eventual trial to produce competent evidence to prove its right to enforce the note at the time the suit was filed and prove the amount of the indebtedness. When Deutsche Bank finally tried its case in mid-2013, it relied upon a note secured by a mortgage payable to the order of the original lender, a specific indorsement transferring the debt to an entity other than Deutsche Bank, a single witness employed by the latest in a succession of “loan servicers,” and upon unauthenticated, largely unexplained papers it advanced as proof of its standing. This failure of proof after ample opportunity is no reason to provide Deutsche Bank with a second opportunity to prove its case on remand. See Wolkoff v. American Home Mortg. Servicing, Inc., ___ So. 3d ___, 39 Fla. L. Weekly D1159, 2014 WL 2378662 (Fla. 2d DCA May 30, 2014); Correa v. U. S. Bank, N.A., 118 So. 3d 952, 956 (Fla. 2d DCA 2013).

The final judgment of foreclosure is reversed due to the insufficiency of the evidence to support the judgment. This case is remanded for the entry of an order of involuntary dismissal of the action.


Breakdown of the Robo Signing “Scandal” Settlement —- Another Elephant in the Living Room

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.


See http://www.marketwatch.com/story/us-breaks-down-93-bln-robo-signing-settlement-2013-02-28

The story is about how the settlements are broken down. But the significance of the story is that the government is not taking the next logical step.

The settlement with ten of the banks was first announced on Jan. 7 and separate settlements with HSBC US:HBC   and two other banks came later in the month.

At issue are deficient practices on mortgage servicing and processing, improper fees, wrongful denial of modification, and the robo-signing scandal — the practice of assigning bank employees to rapidly approve numerous foreclosures with only cursory glances at the glut of paperwork to determine if all the documents are in order.

The articles breaks down the payment of fines, which from prior reports appears to be levied against the investors by the banks who committed the wrongful acts. If the practices were DEFICIENT or IMPROPER or WRONGFUL, why is there not also a breakdown of what exactly was done and why it matters.

If the Banks are paying fines for actions leading up the foreclosure then why is the foreclosure being treated as presumptively valid?

Why are we treating the note and mortgage as presumptively valid because they are “facially” valid when we know for a fact that improper, wrongful and predatory practices were used at the closing?

How do we know that ANYONE in the “foreclosing chain” has any economic interest in the outcome — except for recovery of “servicer advances” and barring liability for refunds and repurchases for the bankers that created pandemic title problems and gross fraud against the investors, the borrowers and others.


Our government is complicit in the continuing fraud on investors, borrowers, taxpayers, and the States who had to scramble to “process” (code for expedite foreclosure) an unprecedented wave of foreclosures. The economy, the pressure on state judiciaries, and the pressure on state and Federal economies, would ALL believed if the following was actually implemented. I would point out that many of these suggestions or guidelines have been enacted in some states, resulting in a huge drop in the number of foreclosures.

  1. A party seeking foreclosure must file with the claim in both judicial and non-judicial states, copies of actual transfers of money in the chain relied upon by the foreclosing party. This would be in the form of wire transfer receipts, ACH confirmations and canceled checks.
  2. A party seeking foreclosure should clearly state by affidavit the identity of the party owning the debt (not the note or mortgage).
  3. A party seeking foreclosure should clearly state their claim as a holder, a holder with rights to enforce or a holder in due course.
    1. If the party states that is only a holder, it should not be permitted to foreclose.
    2. If it swears in affidavit form that it is a holder with rights to enforce the note, then it should show all documents that specifically grant the right to enforce, the party on whose behalf the note is being enforced, and proof of ownership of the debt by the party named as the party granting the right to enforce.
    3. If it swears status as a holder in due course, then it must show satisfaction of the four elements that form the basis of its prima facie case:
      1. Purchase for value
      2. Delivery of Note and history of deliveries
      3. Acting in good faith
      4. Without knowledge of borrower’s defenses
    4. If no holder in due course is named, then enforcement of the mortgage should not be permitted.
    5. If the owner of the debt is different than the party holding the note, then the enforcement of the mortgage should not be permitted — unless a nexus is alleged and attached to the lawsuit as an exhibit and as an exhibit in non judicial actions when a substitution of trustee is filed, when a notice of default is sent, and when a notice of sale is set.
  4. The party seeking foreclosure must show a chain of actual financial transactions with actual proof of payment starting with the loan and continuing with each alleged transfer of the debt, the note or the mortgage.
  5. Courts must be prohibited in foreclosure cases from using presumptions that conflict with the known context along with conflict in the credibility of the party proffering evidence. The “facially valid” presumption should either be eliminated in these cases or discovery should automatically include proof as outlined above that the “facially valid” documents speak the truth as to the underlying transactions.
  6. Discovery requests should be presumed allowable if it relates to ownership, balance, or default. Objections or refusal to answer should result in sanctions against the foreclosing party and if the party persists in stonewalling it should result in involuntary dismissal of the foreclosure or sale.
  7. Any claim in any venue for any purpose that a party other than the lender designated on the mortgage and note must be accompanied by a sword detailed history (with exhibits of actual transactions and agreements) of the chain of money, the chain of ownership of the  debt, the note and the mortgage and the existence of a default.
  8. If servicer advances were paid to the creditors, the sworn statement must explain in a sworn statement with exhibits the amount of such payments and the basis for declaring a default on the part of the creditor.
  9. If the servicer is pursuing foreclosure because it is the only way it can present a claim for “recovery” of servicer advances, then it must submit a sworn statement with exhibits, that shows each distribution to the creditors, and that shows what bank account the money came from and the owner of the bank account.
    1. The servicer must explain whether it is “Secured” by the mortgage that is sought to be enforced.
      1. If it is not secured by the mortgage, then it must bring a separate action against the borrower. If the only claim is the servicer advances, then the foreclosure must be involuntarily dismissed.
  10. No records shall be admitted in court proceedings or acceptable in non court proceedings as business records qualifying as an exception from the hearsay rule without an affidavit from the actual records custodian of the entity for whom the records are being proffered and an affidavit from a person with actual personal knowledge as to how those records were prepared, the methods of processing data, and whether the records consists of verified data or if they rely upon assumptions, and if so, a detailed list of those assumptions.
    1. Persons hired to be professional “witnesses” with no other connection to the entity that employs them should be deemed as legally incompetent to testify.
  11. The burden of proof on conditions precedent to bringing the action shall at all times be on the party seeking foreclosure. This includes the existence of ownership, balance, and the presence of a claimed default on behalf of the owner of the debt. This conforms with existing law where the party seeking affirmative relief must provide all information related to the subject matter in dispute where the party is sole party with access to those records and witnesses.
  12. If a transaction is void under the governing law of any State, it cannot be admitted into evidence. If such a transaction is relied upon by the party seeking foreclosure in proving the debt, the note or the mortgage or any transfer then the action for foreclosure must be dismissed with prejudice.
    1. The transfer documents and the governing documents of the party claimed to be the owner of the debt, note or mortgage are relevant and must be offered in evidence upon the testimony of a witness who has personal knowledge of such documents including but not limited to the Pooling and Servicing Agreement of a REMIC Trust, if any, the Prospectus, the distribution reports to investors, assignment, endorsement or other evidence that explains the transfer of the debt.
    2. In cases where the debt, the note or the mortgage is subject to claims of “Securitization” the party relying upon such narrative shall be required to prove that the debt, note and mortgage was acquired by the REMIC the Trust and remains in the sole ownership, care, custody or control of the party claimed to be the owner of the debt, the ntoe and the mortgage.

The above is not the law of any specific states, most of which ignore the precepts outlined above. Consultation with licensed attorneys is required before any part of this article is used to make any decision or take any action in contesting the debt, the note or the mortgage.

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.


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 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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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.


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