Trial Objections in Foreclosures

 

NOTE: This post is for attorneys only. Pro se litigants even if they are highly sophisticated are not likely to be able to apply the content of this article without knowledge and experience in trial law. Nothing in this article should be construed as an acceptable substitute for consultation with a licensed knowledgeable trial lawyer.

If you need help with objections, then you probably need our litigation support, so please call my office at 850-765-1236.

It is of course impossible for me to predict how the Plaintiff will attempt to present their case. The main rule is that objections are better raised prematurely than late. The earliest time the objection can be raised it should be raised. In these cases the primary objections are lack of foundation and hearsay.

As to lack of foundation, the real issue is whether the witness is really competent to testify. The rules, as you know, consist of four elements — oath, personal perception, independent recall, and the ability to communicate. The corporate representative should be nailed on lack of personal knowledge — if they had nothing to do with the closing, the funding of the loan, the execution of the documents, delivery of the note, delivery of the mortgage etc., or processing of payments or even the production of the reports or the program that presents the data from which the report populates the information the bank is attempting to present. Generally they fail on any personal knowledge.
The only thing that could enable them to be there is whether they can testify using hearsay, which is generally barred from evidence. If that is all they have, then the witness is not competent to testify. The objection should be made at the moment the attorney has elicited from the witness the necessary admissions to establish the lack of personal perception, personal knowledge.
On hearsay, their information is usually obtained from what they were told by others and what is on the computers of the forecloser like BofA which based on the transcript from cases run on at least 2 server systems and probably a third, if you include BAC/Countrywide. All of such testimony and any documents printed off the computers are hearsay and therefore are barred — unless the bank can establish that the information is credible because it satisfies the elements of an exception to hearsay. The only exception to hearsay that usually comes up is the business records exception. Any other testimony about what others told the witness is hearsay and is still barred.
The business records exception can only be satisfied if they satisfy the elements of the exception. First the point needs to be made that these records are from a party to litigation and are therefore subject to closer scrutiny because they would be motivated to change their documents to be self serving. If you have any documentation to show that they omitted payments received in their demand or that there are other financial anomalies already known it could be used to bolster your argument as an example of how they have manipulated the documents and created or fabricated “reports” strictly for trial and therefore are not regular business records created at the or close to the time of an event or payment.
The business records exception requires the records custodian, first and foremost. Since the bank never brings their records custodian to court, they are now two steps removed from credibility — the first being that they are not some uninterested third party and the second that they are not even bringing their records custodian to court to state under oath that the report being presented is simply a printout of regular business records kept by bank of America.
So the exception to business records under which they will attempt to get the testimony of their witness in will be that the witness has personal knowledge of the record keeping at Bank of America and this is where lawyers are winning their cases and barring the evidence from coming in. Because the witnesses are most often professional witnesses who actually know nothing about anything and frequently have reviewed the file minutes before they entered the courtroom.
The usual way the evidence gets in is by counsel for the homeowner failing to object. That is because failure to object allows the evidence in and once in it generally can’t be removed. It is considered credible simply because the opposing side didn’t object.
TRAPDOOR: Waking up at the end of a long stream of questions that are all objectionable for lack of foundation (showing that the witness has any personal knowledge related to the question) or because of hearsay, the objection will then be denied as late. So the objection must be raised with each question before the witness answers, and if the witness answers anyway, the response should be subject to a motion to strike.
THE USUAL SCENARIO: The lawyer will ask or the witness will say they are “familiar” with the practices for record keeping. That is insufficient. On voir dire, you could establish that the witness has no knowledge and nothing to recall and that their intention is to testify what the documents in front of him say. That is “hearsay on hearsay.” That establishes, if you object, that the witness is not competent to testify.
The bottom line is that the witness must be able to establish that they personally know that the records and everything on them are true. In order for the records to be admitted there must be a foundation where the witness says they actually know that the printouts being submitted are the same as what is on the BofA computers and what is on the BofA computers was put there in the regular course of business and not just in preparation for trial. And they must testify that these records are permanent and not subject to change. If they are subject to change by anyone with access they lack credibility because they may have been changed for the express purpose of proving a point in trial rather than a mere reflection of regular business transactions.
There is plenty of law nationwide on these subjects. Personal knowledge, “familiarity with the records,” and testifying about what the records say are all resolved in favor of the objector. The witness cannot read from or testify from memory of what the records say. The witness must know that the facts shown in those records are true. This they usually cannot do.

The Truth Keeps Coming: When Will Courts Become Believers?

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The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Comments and Practice Suggestions: On the heels of AG Eric Holder’s shocking admission that he withheld prosecution of the banks and their executives because of the perceived risk to the economy, we have confirmation and new data showing the incredible arrogance of the investment banks in breaking the law, deceiving clients and everyone around them, and covering it up with fabricated, forged paperwork. And they continue to do so because they perceive themselves as untouchable.

Practitioners should be wary of leading with defenses fueled by deceptions in the paperwork and instead rely first on the money trail. Once the money trail is established, each part of it can be described as part of a single transaction between the investors and the homeowners in which all other parties are intermediaries. Then and only then do you go to the documentation proffered by the opposition and show the obvious discrepancies between the named parties on the documents of record and the actual parties to the transaction, between the express repayment provisions of the promissory note and the express repayment provisions of the bond sold to investors.

Practitioners should make sure they are up to speed on the latest news in the public domain and the latest developments in lawsuits between the investment banks, investors and guarantors like the FHA who have rejected loans as not conforming to the requirements of the securitization documents and are demanding payment from Chase and others for lying about the loans in order to receive 100 cents on the dollar while the actual loss was incurred by the investors and the government sponsored guarantors.

Another case of the banks getting the money to cover losses they never had because at all times they were mostly dealing with third party money in funding or purchasing mortgages. It was never their own money at risk.

Three “deals” are now under close scrutiny by the government and by knowledgeable foreclosure defense lawyers. For years, Chase, OneWest and BofA have taken the position that they somehow became the owner of mortgage loans because they acquired a combo of WAMU and Bear Stearns (Chase), IndyMac (OneWest), and a combo of Countrywide and Merrill Lynch (BofA).

None of it was ever true. The deals are wrapped in secrecy and even sealed documents but the truth is coming out anyway and is plain to see on some records in the public domain as can be easily seen on the FDIC site under the Freedom of Information Act “library.”

The naked truth is that the “acquiring” firms have very complex deals on those mortgage loans that the acquiring firm chooses to assert ownership or authority. It is  a pick and choose type of scenario which is neither backed up by documentation nor consideration.

We have previously reported that the actual person who served as FDIC receiver in the WAMU case reported to me that there was no assignment of loans from WAMU, from the WAMU bankruptcy estate, or the FDIC. “if you are looking for an assignment of those loans, you are not going to find it because there was no assignment.” The same person had “accidentally” signed an affidavit that Chase used widely across the country stating that Chase was the owner of the loans by operation of law, which is the position that Chase took in litigation over wrongful foreclosures. Chase and the receiver now take the position that their prior position was unsupportable. So what happens to all those foreclosures where the assertions of Chase were presumed true?

Now Chase wants to disavow their assumption of all liabilities regarding WAMU and Bear Stearns because it sees what I see — huge liabilities emerging from those “portfolios” of foreclosed properties that were foreclosed and sold at auction to non-creditors who submitted credit bids.

You might also remember that we reported that in the Purchase and Assumption Agreement with the FDIC, wherein Chase was acquiring certain operations of WAMU, not including the loans, the consideration was expressly stated as zero and that the bid price from Chase happened to be a little lower than their share of the tax refund to WAMU, making the deal a “negative consideration” deal — i.e., Chase was being paid to acquire the depository assets of WAMU. Residential loans were not the only receivables on the books of WAMU and the FDIC receiver said that no accounting was ever done to figure out what was being sold to Chase.

Each of the deals above was complicated by the creation of entities (Maiden Lane LLCs) to create an “off balance sheet” liability for the toxic loans and bonds that had been traded around as if they were real.

Nobody ever thought to check whether the notes and mortgages recorded the correct facts in their content as to the cash transaction between the borrower and the originator. They didn’t, which is why the investors and the FDIC both now assert that not only were the loans not subject to underwriting rules compatible with industry standards, but that the documents themselves were not capable of enforcement because the wrong payee is named with different terms of repayment to the investors than what those lenders thought they were buying.

In other words, the investors and the the government sponsored guarantee organizations are both asserting the same theory, cause of action and facts that borrowers are asserting when they defend the foreclosure. This has been misinterpreted as an attempt by borrowers to get a free house. In point of fact, most borrowers simply don’t want to lose their homes and most of them are willing to enter into modifications and settlements with proceeds far superior to what the investor gets on foreclosure.

Borrowers admit receiving money, but not from the originator or any of the participants in what turned out to be a false chain of securitization which existed only on paper. The Borrowers had no knowledge nor even access to the knowledge that they were actually entering into a loan transaction with a stranger to the documents presented at the loan “closing.” This pattern of table funded loans is branded by the Truth in Lending Act and Reg Z as “predatory per se.” The coincidence of the money being received by the closing date was a reasonable basis for assuming that the originator was not play-acting, but rather actually acting as lender and underwriter of the loan, which they were certainly not.

The deals cut by Chase, OneWest and BofA are models of confusion and shared losses with the FDIC and other investors who participated in the Maiden Lane excursion. The actual creditor is definitely not Chase, OneWest nor BofA. Bank of America formed two corporations that merely served as distractions — Red Oak Merger Corp and BAC Home Loans and abandoned both after several foreclosures were successfully concluded by BAC, which owned nothing.

As we have previously shown, if the mortgage securitization scheme had been a real financial tool to reduce risk and increase lending, the REMIC trust would have ended up on the note and mortgage, on record in the office of the County Recorder. There would have been no need to establish MERS or any other private database in which trades were made and “trading profits” were booked in order to siphon off a large chunk of the money advanced by investors.

The transferring of paper does not create a transaction wherein a loan is proven or established in law or in fact. There must be an actual transaction in which money exchanged hands. In most cases (nearly all) the actual transaction in which money exchanged hands was between the borrower and an undisclosed third party entity.

This third party entity was inserted by the investment bankers so that the investment bank could claim ownership (when legally the loans already were owned by the investors) and an insurable interest in the loans and bonds that were supposedly backed by the loans. This way the banks could assert their right to proceeds of sale, insurance, and credit default swaps leaving their investor clients out in the cold and denying the borrowers the right to claim a reduction in the liability for their loan.

In litigation, every effort should be made to force the opposition to prove that the investor money was deposited into the a trust account for the REMIC trust and that the REMIC trust actually paid for the loans. Actually what you will be doing is forcing an accounting that shows that the REMIC was never funded and was never the buyer of the loans. Hence nobody in the false securitization chain had any ownership of the debt leading to the inevitable conclusion that for them the note was unenforceable and the mortgage was a nullity for lack of consideration and a lack of a meeting of the minds.

Once you get to the accounting from the Trustee of the Trust, the Master Servicer and the subservicer, you will uncover trades that involve representations of the investment bank that they owned the loans and in fact the mortgage bonds which were clearly pre-sold to investors before the first application for loan was ever received.

Thus persistent borrowers who litigate for the actual truth will track the money and then show that the cash transactions differ from the documented transactions and that the documented transactions lacked consideration. The only way out for the banks is to claim that they embraced this convoluted route as agents for the investors, but then that still means that money received in federal bailouts, insurance and credit default swaps would reduce the receivable of the actual creditors (investors) and thus reduce the amount payable by the actual borrowers (homeowners).

The unwillingness of the Department of Justice to enforce long standing laws regarding fraud and deceit, identity theft and other crimes, tends to create an atmosphere of impunity a round the banks and a presumption that the borrowers are merely technical objections of a certain number of documents not having all their T’s crossed and I’s dotted.

From a public policy perspective, one would have to concede that protecting the banks did nothing for liquidity in the marketplace and nothing for the credit markets in particular. Holder’s position, which I guess is also Obama’s position, is that it is better to allow average Americans to sink into poverty than to hold the banks and bankers accountable for their white collar crimes.

Legally, if the prosecutions ensued and the cases were proven, restitution would be ordered based not on some back-room deal but on approval of the Court. Restitution would clawback much of the capital of the mega banks who are holding that money by virtue of illegal transactions. And restitution would provide the only stimulus to the economy that would be fundamentally sound. Investors and borrowers would both share in the recovery of at least part of the wealth lost to the banks during the mortgage maelstrom.

I have no doubt that the same defects will appear in auto loans, student loans and other forms of consumer loans especially including credit card loans. The real objection of the banks is that after all this effort of stealing the money and the homes they might be forced to give it all back. The banks perceive that as a “loss.” I perceive it as simple justice applied every day in the courtrooms of America.

JPM: The Washington Mutual Story
http://www.ritholtz.com/blog/2013/03/jpm-wamu/

Bear Stearns, JPMorgan Chase, and Maiden Lane LLC
http://www.federalreserve.gov/newsevents/reform_bearstearns.htm

Mistakenly Released Documents Reveal Goldman Sachs Screwed IPO Clients
http://news.firedoglake.com/2013/03/12/mistakenly-released-documents-reveal-goldman-sachs-screwed-ipo-clients/

MERSCORP Shell Game Attacked by Kentucky Attorney General Jack Conway

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

EDITOR’S NOTES AND COMMENTS: My congratulations to Kentucky Attorney General Jack Conway and his staff. They nailed one of the key issues that cut revenues on transfers of interests in real property AND they nailed one of the key issues in perfecting the mortgage lien.

As we all know now MERSCORP has been playing a shell game with multiple corporate identities, the purpose of which, as explained in Conway’s complaint, was to add mud to the waters already polluted by predatory loan practices and outright fraud in the appraisal and identification of the lender. This of course is in addition to the very gnarly issue of using a nominee that explicitly disclaims any interest in the property or loan.

The use of MERS, just like the use of fabricated, forged, robo-signed documents doesn’t necessarily wipe out the debt. The debt is created when the borrower accepts the money, regardless of what the paperwork says — unless the state’s usury laws penalize the lender by eliminating the debt entirely and adding treble damages.

But the use of a nominee that has no interest in the loan or the property creates a problem in the perfection of the mortgage lien. The use of TWO nominees doubles the problem. It eliminates the most basic disclosure required by Federal and state lending laws — who is the creditor?

By intentionally naming the originator as the lender when it was merely a nominee and by using MERS, as nominee to have the rights under the security interest, the Banks created layers of bankruptcy remote protection as they intended, as well as the moral hazard of stealing or “borrowing” the loan to create fictitious transactions in which the bank kept part of the money intended for mortgage funding. Since the mortgage or deed of trust contains no stakeholders other than the homeowner and the note fails to name any actual creditor with a loan receivable account, the mortgage lien is fatally defective rendering the loan unsecured.

When you take into consideration that the funding of the loan came from a source unrelated (stranger tot he transaction) then the debt doesn’t exist either — as it relates to any of the parties named at the “closing” of the mortgage loan. So you end up with no debt, no note, and no mortgage. You also end up with a debt that is undocumented wherein the homeowner is the debtor and the source of funds is the creditor — in a transaction that neither of them knew took place and neither of them had agreed.

The lender/investors were expecting to participate in a REMIC trust which was routinely ignored as the money was diverted by the banks to their own pockets before they made increasingly toxic over-priced loans on over-valued property. The borrower ended up in limbo with no place to go to settle, modify or even litigate their loan, mortgage or foreclosure. This is not the statutory scheme in any state and Conway in Kentucky spotted it. Besides the usual “dark side” rhetoric, the plan as executed by the banks creates fatal uncertainty that cannot be cured as to who owns the loan or the lien or the debt, note or mortgage. The answer clearly does not lie in the documents presented to the borrower.

Now Conway has added the hidden issue of the MERS shell game. Confirming what we have been saying for years, the Banks, using the MERS model, have made it nearly impossible for ANY borrower to know the identity of the actual lender/creditor before during and even one day after the “closing” of the loan (which I have postulated may never have been completed because the money didn’t come from MERS nor the other nominee identified as the “lender”).

The Banks are trying to run the clock on the statute of limitations with these settlements, like the the last one in which Bank of America would have owed tens of millions of dollars had the review process continued, and instead they cancelled the program with a minor settlement in which homeowners will get some pocket change while BofA walks off with the a mouthful of ill-gotten gains.

The plain truth is that in most cases BofA never paid a dime for the funding or purchase of the loan. That is called lack of consideration and in order for the rules of negotiable paper to apply, there must be transfer for value. There was no value, there was no cancelled check and there was no wire transfer receipt in which BofA was the lender or acquirer of the loan. Now add this ingredient: more than 50% of the REMIC trusts BofA says it “represents no longer exist, having been long since dissolved and settled.

The same holds true  for US Bank, Mellon, Chase, Deutsch and others. Applying basic black letter law, the only possible conclusion here is that the mortgages cannot be foreclosed, the notes cannot be enforced, the debt can be collected ONLY upon proof of payment and proof of loss. This is how it always was, for obvious reasons, and this is what we should re turn to, providing a degree of certainty to the marketplace that does not and will never exist without the massive correction in title corruption and the wrongful foreclosures conducted by what the reviewers in the San Francisco audit called “strangers to the transaction.”

See Louisville Morning Call here

See Bloomberg Article here

Chorus of Whistles as the Blowers Get Ignored or Shutdown

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editors Comment and Analysis: Chorus of whistles around the country and indeed around the world is going over the administration’s handling of the wrongful foreclosure claims and the outright bullying, intimidation and lying that lies at both the root of the false securitization scheme for residential mortgages and the false foreclosure review process supposedly designed to correct the problem. The plain truth, as pointed out in the article below and the Huffington Post, is that the reviews were never intended to work.

Take a step back for perspective. The news is being carefully managed by Wall Street just as Congress is being carefully manipulated by Wall Street. But for the inquiring mind, the data is right there in front of everyone and is being ignored at the peril of the future of the real estate industry which depends upon certainty that the title intended in the transaction is actually conveyed without undisclosed or “unknown” liabilities. The title companies are greasing the rails with their
“Guarantee of Title” but that doesn’t fix the corrupted title records.

We know that every study done shows collectively that

  1. Strangers to the transaction dominate the foreclosure activity — i.e.,  entities that are not injured or even involved with eh funding of the original loan or the payment of the price of the loan on assignment, endorsement or transfer of the alleged loan.
  2. In virtually ALL cases of securitization, regardless of whether the securitization started at the origination of the loan, or later, the use of nominees rather than actual parties was the rule, and the documents misrepresent both the parties and terms of repayment.
  3. The Banks are slowly prolonging the process to be able to assert the statute of limitations on criminal or civil prosecution but that wouldn’t protect them if law enforcement would dig deeper and find that there was nothing but fraud at the origination and all the way up the “Securitization” chain — all of which transactions were unsupported by consideration.
  4. We know the Banks know that they are exposed to awesome liability equaling the whole of the mortgage market from 1996 to the present. If that were not true they would be announcing settlements every day where some bank is paying hundreds of millions or billions or tens of billions of dollars “without admitting liability.”
  5. We know that in ALL foreclosures where a loan was claimed to be securitized or even where it was hidden tactically (like Chase does), the “credit bid” at auction was not submitted by an injured party. Thus the party who submitted the credit bid was not a creditor and everyone of those foreclosures — millions of them — can be and should be overturned.
  6. We know that at origination the money came from a controlled entity not of the originator but of the aggregator. The originator was not permitted to touch the money nor did the originator ever have any risk of loss. Hence the originator was a nominee with no more rights or powers than MERS. The borrower was left with the fact that he was dealing with unknown parties whose “underwriting process” was designed to get the deal done and allow the originator to proceed.
  7. We know that without the approval from the aggregator, the originator would not have announced approval of the loan. At no time did the Borrower know that they were actually dealing with Countrywide or other aggregators and that the money was coming through an entity (credit warehouse) set up by Countrywide for the origination of loans, with the caveat being that the money for funding would NOT go through the hands of the originator.
  8. We know that the mortgage liens were not perfected.
  9. We know that the note describes a transaction that never occurred — wherein the originator loaned money to the borrower. (No consideration) and that the originator never had any risk of loss.
  10. We know that the actual transaction was from an aggregate fund in which investments from multiple investors in what the investors thought were discreet accounts for each REMIC trust but where the Trust was ignored just as the requirements of state law or ignored by using nominees without disclosure of the principal on the note, mortgage or deed of trust.
  11. We know the losses on the bogus mortgage bonds were taken by the injured parties — the investors (pension funds) who put up the money.
  12. We know that the investment bank, aggregator and Master Servicer were in control of all transactions and that the subservicers were nominees for the Master Servicer whose name is kept out of litigation.
  13. We know the despite the loss hitting the investors because it was after all their money that funded this PONZI scheme, it was the banks who were allowed to take the insurance, proceeds of credit default swaps and federal bailouts leaving the investors twisting in the wind.
  14. We know that the investment bank, Master Servicer and aggregators were in privity, owed duties and were agents of the investors when they received the insurance and bailout money.
  15. We know that the banks kept the money from insurance and bailouts instead of paying the investors and reducing the balance due to the investors.

We know all these things, and much more, with whistle-blowers stepping up every day. The day of reckoning is coming and the announcement of BofA about another hidden earnings hit is only 2-3% of the actual number as shown on their own statements and probably more like 1/10 % of their real liability.

The term “Zombie” is being used to describe many features of our financial landscape. Truth be told it ought to be used to describe our entire financial system. If the actual corrections were made in accordance with existing law and existing equitable doctrines applied in hundreds of millions of other individual cases, we would be working on plans to wind down the mega banks, wind down household debt, falsified by the banks, and wind down the efforts to derail appropriate lawsuits by real injured parties.

The more you understand about what REALLY happened, the more you will see the opportunity for relief. I can report to you that I am receiving daily reports of multiple cases in which the borrower is winning motions. Even a year ago that was unthinkable.

The Judges are starting to catch on and some lawyers are realizing that this is just like any other case — their client is subject to enforcement of an alleged debt or foreclosure action and their answer is to deny the allegations, the documents and make them prove up their status as injured party on a perfected mortgage lien securing the promises on a valid note for a debt created by actual payment of the named party to the borrower.

The assumption by Judges and lawyers that there wouldn’t be a foreclosure if the facts didn’t support it is going down fast. Judges are realizing that title is being corrupted by bad presentations made by pro se litigants and many lawyers in which they admit the essential elements of the foreclosure and then try to get relief. Deny and Discover covers that. Deny anything you can deny as long as you have no reason to believe it to be true beyond a reasonable doubt. Let them, force them to prove their case. They can’t. If you press discovery you will be able to show that to be true.  File counter motions for summary judgment with your own affidavits and attack the affidavits of the other side in support of their motions.

More Whistleblower Leaks on Foreclosure Settlement Show Both Suppression of Evidence and Gross Incompetence

No wonder the Fed and the OCC snubbed a request by Darryl Issa and Elijah Cummings to review the foreclosure fraud settlement before it was finalized early last week. What had leaked out while the Potemkin borrower reviews were underway showed them to be a sham, as we detailed at length in an earlier post. But even so, what actually took place was even worse than hardened cynics had imagined.

We are going to be reporting on this story in detail, since we are conducting an in-depth investigation. But this initial report by Huffington Post gives a window on a good deal of the dubious practices that took place during the foreclosure reviews. I strongly suggest you read the piece in full; there is a lot of nasty stuff on view.

There are some issues that are highlighted in the piece, others that are implication that get somewhat lost in the considerable detail. The first, as stressed by Sheila Bair and other observers, is that the reviews were never designed to succeed. This is something we and others pointed out; this was all an exercise in show. The OCC had entered into these consent orders in the first place with the aim of derailing the 50 state attorney general settlement negotiations. This was all intended to be diversionary, but to make it look like it had some teeth, borrowers who were foreclosed on in 2009 and 2010 who thought they were harmed were allowed to request a review. If harm was found, they could get as much as $15,000 plus their home back if they had suffered a wrongful foreclosure, or if they home had already been sold, $125,000 plus any equity in the home. Needless to say, the forms were written at the second grade college level, making them hard to answer. A whistleblower for Wells Fargo reported that of 10,000 letters, harm was found in none because the responses were interpreted in such a way as to deny harm (for instance, if the borrower did not provide dates of certain incidents, those details were omitted from the assessment).

But the results were even worse than that, hard as it is to believe. For instance, even though the OCC stipulated that the banks hire supposedly independent reviewers, they were firmly in control of the process. From the article, describing the process at Bank of America, where a regulatory advisory firm Promontory was supposed to be in charge:

Bank of America contractors were reviewing Bank of America loans at a Bank of America facility under the management of full-time Bank of America employees. They were reporting those results to Promontory, the outside independent consultant, whose employees started their reviews based on what Bank of America contractors had concluded.

As the auditor, Promontory had authority to overrule any conclusion drawn by a Bank of America contractor. Promontory has defended its work as independent from influence by Bank of America. But the Bank of America contractors said it was clear to them that what they noted during their reviews was integral to the process. They continued to do substantive, evaluative review work until a few months ago, they said, when they were told that their job going forward was simply to dig up documents for Promontory.

Of course, Promontory protests that it was in charge. It is hard to take that seriously when no one from Promontory was on premises. And the proof is that the Bank of America staff suppressed the provision of information:

Another contract employee recounted the time he noted in a file that he couldn’t find vital documents, such as notice supposedly sent to a homeowner that a foreclosure was pending. “Change your answer,” he said he was told on several occasions by his manager.

Second is that the OCC was changing the goalposts as the reviews were underway. But was that due to OCC waffling or pushback by the consultants acting in the interest of the banks to derail the process by making the results inconsistent over time? If you do the first month of reviews under one set of rules and then get significant changes in month two, that implies you have to revise or redo the work in month one. That serves the consultants just fine, their bills explode. And the banks get to bitch that the reviews are costing too much, which gives them (and the OCC) a pretext for shutting them down, which is prefect, since they were all intended to be a PR rather than a substantive exercise from the outset.

Consider this section:

From the the consultants’ point of view, it was the government regulators who had some explaining to do. First there was the constant change in guidance, throughout at least the first eight months of the process, as to what they wanted the auditors to do and how they wanted them to do it, they said. The back-and-forth was so constant, one of the consultants involved with the process said that specific guidelines for determining if a mortgage borrower had been harmed by certain kinds of foreclosure fraud still weren’t in place as late as November 2012.

Huh? Tell me how hard it is to determine harm. If a borrower was charged fees not permitted by statue or the loan documents, there was harm. If the fees were in excess of costs (not permitted) there was harm. If the fees were applied in the wrong order, there was harm. If a borrower was put into a mod, made the payments as required in the mod agreement, but they weren’t applied properly and they were foreclosed on despite following bank instructions, there was harm. Honestly, there are relatively few cases where there is ambiguity unless you are actively trying to throw a wrench in the process, and it is not hard to surmise that is exactly what was happening. That is not to say there might not have been ambiguity on the OCC side, but it is not hard to surmise that this was contractor/bank looking to create outs, not any real underlying problem of understanding harm v. not harm.

It looks that some of the costly process changes were also due to the consultants being caught out as being in cahoots with their clients rather than operating independently:

The role of the Bank of America contract employees did not change to simply doing support work for Promontory until near the end of last year. That happened after ProPublica reported that Promontory’s employees were checking over Bank of America’s work, rather than conducting a fully independent review.

Finally, the article mentions (but does not dwell on) the fact that there was considerable evidence of borrower harm:

The reviewer said she found some kind of bogus fee in every file she looked at, ranging from a few dollars to a few thousand dollars. Another who looked for errors that violated state statutes estimated that 30 to 40 percent of loan files contained mistakes.

One reviewer who provided a comment that we elevated into a post was far more specific:

…in one case I reviewed the borrower paid approximately 25K to reinstate his mortgage. Then he began to make his mortgage payments as agreed. Each time he made a payment the payment was sent back stating he had to be current for the bank to accept a payment. He made three payments and each time the response was the same. Each time he wrote and called stating he had sent in the $25K to reinstate the loan and had the canceled check to prove it. After several months the bank realized that they had put the 25K in the wrong account. At that time that notified him that they were crediting his account, but because of the delay in receiving the reinstatement funds into the proper account he owed them more interest on the monies, late fees for the payments that had been returned and not credited and he was again in default for failing to continue making his payment. The bank foreclosed when he refused to pay additional interest and late fees for the banks error. I was told that I shouldn’t show that as harm because he did quit making his payments. I refused to do that.

There was another instance when there was no evidence that the bank had properly published the notice of sale in the newspaper as required by law. The argument the bank made when it was listed as harm to the borrower was “here is the foreclosure sale deed, obviously we followed proper procedure, and you should change your answer as to harm.”

Often there is no evidence of a borrower being sent a proper notice of intent to accelerate the mortgage. When these issues are noted in a file we are told to ignore them and transfer those files to a “special team” set up to handle that kind of situation. You choose whatever meaning you like for that scenario.

To add insult to injury, the settlement fiasco was shut down abruptly without the OCC and the Fed coming with a method for compensating borrowers. So the records have been left in chaos. That pretty much guarantees that any payments will be token amounts spread across large number of borrowers, which insures that borrowers that suffered serious damage, such as the case cited above, where the bank effectively extorted an extra $25,000 from a borrower before foreclosing on him, will get a token payment, at most $8,000 but more likely around $2,000. Oh, and you can be sure that the banks will want a release from private claims as a condition of accepting payment. $2,000 for a release of liability is a screaming deal, and it was almost certainly the main objective of this exercise from the outset. Nicely played indeed.

Read more at http://www.nakedcapitalism.com/2013/01/more-whistleblower-leaks-on-foreclosure-settlement-show-both-suppression-of-evidence-and-gross-incompetence.html#m7aM5FACevivJMRf.99

U.S. Attorney Continues to Prosecute Despite Settlements

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Note: Preet Bharara, the U.S. Attorney for the Southern District of New York. He is unfazed by the tangle of “settlements” and will not let up on prosecuting Bank of America for fraud. He gets it and is methodically working his way through the maze set up by the mega banks.

BofA settled a civil claim that it had lied when they “sold” mortgages advertised as meeting government standards. We all know by now that the loans “lacked documentation and underwriting.” But what is still to come out is WHY they lacked documentation and WHY the loans lacked underwriting.

The documentation was absent simply to hide the fact that the bank was pretending to have ownership or an insurable interest in the loans and mortgage bonds. The true transaction was between the investor/lenders and the homeowner/borrowers. BofA stole or misused the identities of both the lender and the borrowers so that it could sell the loans many times under guise of exotic derivative instruments called mortgage backed bonds.

If fully documented, the lender would have shown up as the investors, which is as it should have been. BofA never put up a dime for the funding or acquisition of any of the loans. Its claim of ownership and an insurable interest was a blatant lie, inasmuch as they actually had no risk of loss, which is why there was no underwriting standards applied either.

I would suggest you track the pleadings of this U.S. Attorney and pick up some pointers along the way. He is definitely on the right track. As for now, the focus is on the bad mortgage bonds, bad loans, and lack of documentation up at the lender level.

Once that veil is penetrated it will be revealed that the borrower was defrauded using the same misdirected documentation using appraisal fraud as the principal leverage point.

But the real stuff is going to hit the fan as more and more people realize that this standard practice in the industry allegedly to “protect” the investors, invalidated the chain of title and there has been no effort to correct the problem. When it is revealed that the investors were cheated out of their money by a use of proceeds that crosses the borders of fraud, and that the terms of the bonds were never intended to be satisfied, just as the terms of the loan were never meant to be satisfied or secured, then we will have justice peeking its head out over the mess.

In the end, legally, there will be privity or a relationship only between the investor/lenders and the borrowers and that there transaction was supposed to be documented and recorded. Instead the banks documented and recorded a different transaction in which the intermediaries looked like the principals and were therefore able to do “proprietary trading” in which they took investor money from one pocket and put it into another.

That is what opened the door to huge “profits” (actually theft proceeds) on the way up and on the way down. These banks are now buying the same houses from themselves (using another affiliate entity) and then reporting the results to the investors so they can write off the loss. They are going to be the largest landowners in history as a result of this PONZI scheme.

The investors were duped into thinking that all the intermediary entities were being used to protect them from liability from claims of deceptive and predatory lending practices. In actuality the investors were already protected because their agents committed intentional acts of malfeasance and crimes that were specifically prohibited in the documents and other representations the investors received.

Just like the Too Big to Fail Myth, the investors are operating under the myth that if they assert themselves as lenders, they are going to get sued. That too is untrue. If they assert themselves as lenders, then they are going to show proof of payment, something the megabanks can’t do because they used investor money instead of their own.

If the investors assert themselves as lenders they will see that money is missing from the investment pools and that in fact the investment pools were never funded at all. They will realize that they have a legitimate claim for repayment of loans, and a legitimate claim for civil or criminal theft against the banks who intentionally diverted the documentation and the money from the investors and from the borrowers.

That will leave the investors and borrowers with (1) an obligation that is mostly undocumented and (2) unsecured. But the borrowers are more than happy to allow a mortgage if it reflects fair market value. This is what will give the investors far more than the current process in which the banks have a stranglehold on the mortgage modification process (for mortgages that are invalid from the start).

If you pierce through the veil of PR and utter nonsense flowing out of the banks and their planted articles in every periodical around the country, you will find your lender and you will find out the balance due because both of you (homeowner and investor) are going to want to know what happened to all the insurance money, credit default swaps and Federal bailouts that were promised, paid, but not delivered.

Because the mega banks were mere intermediaries pretending to be lenders the entire current scenario is going to turn upside down. Ultimately, the insurance, CDS and bailouts were in fact bailouts of the homeowners and investors. When they are applied correctly according to common sense and the contracts that were executed, practically none of the mortgages will have the balance demanded by the intermediary banks who claim but do not own the mortgages or rights to foreclose. Thus practically no foreclosure was correct by any standard, no credit bid was valid at auction, and no eviction was legal.

As these facts are revealed and accepted by a critical mass of people, the Too Big to Fail Myth will be put to the test. The nonexistent assets on their balance sheets will be reduced to zero. What will really happen is simply that the mega banks will collapse inward and the thousands of other banks that are unfairly under the thumb of the bank oligarchy will be able to pick up the pieces that are left and return to normal banking, with normal profits and normal bonuses.

Allowing the mega bank to retain the money they stole is like throwing a steak to a dog. Now that they have a taste of unlawful profits driving their profitability upward, they will only want more. Our job is to make sure they don’t get it. The Obama administration was surprised by the quick recovery by the banks. The truth, as it will be revealed in the coming months and years, is that there was no bank recovery because there were no bank losses. THAT is why the banks grew while the rest of the economy tanked.

Theoretically it is impossible for the bank profits to go up while the stock market and the economy is going down the drain. Their profits are supposed to come from being intermediaries in commerce, not principals.

Thus the higher the commercial activity, the better it is for the banks. But here, the relationship was twisted. The banks sucked the money out of the economy in “off balance sheet” transactions, secreted the money around the world, and are now able to report higher and higher profits every year simply because that is the way that they can repatriate their ill-gotten gains. By doing that they drive up the apparent value of their stocks and their stockholders are happy. What the stockholders do not realize is that this is a powder keg that will, at some point, implode. Yes, Warren Buffet is wrong.

See the story and Links Here

Despite a settlement with an alleged victim, U.S. District Attorney Preet Bharara will continue to prosecute Bank of America for selling allegedly fraudulent loans to Fannie Mae and other government-sponsored enterprises, his office told the Charlotte Business Journal.

Bharara, U.S. attorney in the Southern District of New York, charged BofA with fraud in a $1 billion federal lawsuit in October. He alleged in court documents that BofA had sold government agencies such as Fannie Mae billions of dollars in mortgages that were advertised as meeting government standards. However, the suit contends the loans actually lacked proper documentation and underwriting.

UTAH AG “Midnight Pardon”! Settles BofA Case and Joins Firm Representing BofA

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

In classic style, The revolving door between regulators, law enforcement and the Banks just keeps turning. The money is too good for the people to turn down, and it isn’t illegal to prosecute Bank of America, get into a winning position that will cost the Bank billions and give tens of thousands of homeowners relief they deserve, and then enter into a settlement agreement with BofA for pennies on the dollar and leaving homeowners in the dust. And it’s all because the Utah AG is stepping down from his official position and taking a position in a the private sector with a law firm that regularly represents Bank of America.

But maybe it it IS illegal if someone takes a closer look. If the new position is a bribe, the AG should be prosecuted criminally, removed from office now and disbarred.

“Just days before leaving office, Attorney General Mark Shurtleff has reversed the state’s position and personally signed on to a settlement in a foreclosure lawsuit that Bank of America appeared to be losing.

The practical effect of Shurtleff’s move, according to an attorney who filed the lawsuit, is to weaken Utah’s ability to enforce state law. It also weakens the state’s position in other lawsuits challenging foreclosures carried out by ReconTrust Co., Bank of America’s foreclosure arm, Abraham Bates said.”

“U.S. District Judge Bruce Jenkins, who presides over the case, issued a strong ruling in favor of the homeowners’ and the state’s position. The assistant attorneys general conducting the state’s case hoped to keep it alive for a final ruling by Jenkins before a likely appeal to the 10th Circuit Court of Appeals for a definitive decision that would guide other similar lawsuits.”

Midnight Pardon for Bank of America

Hat Tip to Home Equity Theft Reporter

 

Who’s on First?

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s comment: In a classic Abbott and Costello routine (look it up for those who are too young) the banks are playing “who’s on First” and winning because of the dizzying pace with which they move the goalpost.

I wrote the following comments (see below) on a case I was assisting in which Quicken Loans  purportedly originated the loan but immediately informed the borrower to start paying Countrywide. Countrywide in turn disappeared into what now appears as RED OAK MERGER CORP and the borrower was told to start making the payments to BAC. BAC claimed ownership of the loan until they didn’t at which point they admitted that the loan belonged to some REMIC trust. The REMIC trust turned out not to exist and was never funded.

Then Bank of America informed the borrower that it was BofA that owned the loan despite all evidence and admissions to the contrary. Then BAC disappeared and a little drilling gave up the name Red Oak Merger Corporation which was planned to be the entity that would take over Countrywide. But apparently, like the REMICS, it was set up but never used.

Now the borrower is seeking a short-sale. BofA has performed its usual circus of “errors”in which it loses or purges files for important sounding reasons but which have not one grain of truth. During this time the borrower has lost sales because BofA tried to pawn off the loan servicing to another entity which produced conflicting notices to the borrower that the loan had been transferred for servicing and that the loan had NOT been transferred for servicing.

The borrower has property that is easily salable. BofA came back with a counter-offer for the short-sale. The HUD counselor located in Phoenix and who is extremely savvy about these loans and the legalities of the false moves by the banks finally asked “Who’s on First” by asking who was making decisions and what guidelines they were using.

BofA responded that the trustee BNY Mellon was the only one with that information. So the HUD counselor asked the same questions to BNY Mellon as trustee or the supposedly fully funded trust that included the borrower’s loan. BNY Mellon responded with the same answer Reynaldo Reyes at Deutsch Bank did — we are the trustee in name only.  All decisions regarding short-sales, modification and foreclosure are made by “the servicer.” Of course they didn’t distinguish between the subservicer and the Master Servicer.

The question asked of me was whether this was meaningless double talk and my answer is that it is very meaningful doubletalk providing admissions that the real loan is undocumented, unsecured and leaves the investors (pension funds) holding the bag, while the investment banks were rolling in a redaction of 1/3 of the world’s wealth. Borrowers don’t matter because they are deadbeats anyway and don’t deserve discussion.

Here is my response to the information we had at hand:

How could it be the responsibility of the servicer unless it was the servicer that was acting not as a bookkeeping and collection agent but as the trustee for the investors? If BNY Mellon claims to be the trustee then by definition (look it up) they ARE the investors and they would be the only ones who had the power to make the decision. If they are saying (just like DeutschBank does) that the servicer  makes the decisions then they are saying that  they have delegated(?) the trustee function to the subservicer (usually just referred to as the “servicer”). So like Reynaldo Reyes at Deutsch bank admitted, he is not a trustee for anything and the whole thing is, as he put it, very “Counter-intuitive.”

None of this makes sense until you consider the possibility that nobody ever started a trust, a trust account or gave any powers to a trustee, established beneficiaries of the trust or funded the trust. It makes perfect sense if you consider the alternative: that the investment banks sold bogus mortgage bonds to investors pretending that REMIC trusts were funded and issued the bonds. Read carefully: they are attempting avoid criminal liability and civil liability for the insurance, Federal bailouts and hedge proceeds the banks received on behalf of the investors but which they never reported much less paid the investors. The amount is in the trillions.

By telling you that the trustee has no power they are telling you that the trustee is not a trustee. By telling you that the power to make decisions is in the hands of the servicer, the correct question is which servicer? — the subservicer who dealt only with the borrower or the Master Servicer that dealt with ALL transactions directly or indirectly on behalf of the investment bank that did the selling and underwriting of the bogus mortgage bonds? Assuming either one actually has that power, the next question is how the “servicer” was appointed the manager and why, since they already had a trustee? The answer is what they are avoiding, so far successfully, but which at the end of the day will come out:

NO REMIC trust was used and none of the parties with whom we are dealing ever spent one penny of their own money, capital or deposits (if they were a depository institution) on funding or buying a loan. The true money trail generally looks like this: Investor—> Investment banker- who sold the bonds–> aggregator or intermediary affiliate of investment banker—> closing agent —> payoff seller and prior mortgage (probably paying a non-creditor in exchange for a fabricated release of lien and satisfaction of note which is never given back to borrower marked “PAID).”

The important thing is not who is in the money trail but who is not in the money trail. If you track the wire transfer receipts and wire transfer instructions and are able to track any compensation after closing that was not disclosed but nonetheless paid to undisclosed parties you will NOT find the loan originator whose name, as nominee (but they never said so) was used as the lender and the possessor of the loan receivable.

That is, you won’t find the originator as a funding source but you will find the originator as a paid servicer for the undisclosed aggregator in an illegal and predatory pattern of table-funded loans. In Discovery: PRACTICE TIP: Demand copies of the bookkeeping records that shows that the originator booked the transaction with the borrower as a loan receivable.

You will find that most of the loans were not booked at all on the balance sheet of the originator which means that their own records contain an admission against interest, to wit: that they were not the lender because they did not add the loan receivable to their assets, nor a reserve for bad debt to their liabilities, because they had not funded the loan and were not exposed to any risk of loss. The originator, especially those originators without any financial charter as a depository institution, was merely a paid nominee to ACT as though it was the lender and take the blame if there were findings in court that the closing was illegal or irregular. But there again the originator has no risk because of the corporate veil which shields the operators of the nominee pretender lender leaving the borrower with an empty shell possibly declaring bankruptcy like First Magnus or Century.

The money came from the investors through the investment banker through the aggregator in which the investors’ money was used to create the appearance of an asset consisting of only part of the investor’s money and then sold back to the investor “pool” which turns out not to exist because it was neither funded nor were the conditions of the pool ever followed.  This sale was booked by the investment banker as a “trading profit.” In other words, they took the money of the investor into one pocket and while transferring it from pocket to pocket took out their trading profit on transactions that were a complete illusion.

The documents use the nominee originator (like Quicken Loans) for the note to create “evidence” of an obligation that does not exist because Quicken Loans and its aggregator never funded the loan or the purchase of the loan — but that didn’t stop them from selling the loan several times, insuring it for the benefit of the investment banker and aggregator, and getting paid Federal bailout money and proceeds from credit default swaps all without deducting the amount promised as repayment to the investor, which is why the investors are suing.

The investors are saying there was a false closing based upon no underwriting standards and a fake bond based upon the backing of a mortgage and note that didn’t exist or was never enforceable.

When you boil it all down there was nobody at closing on the lender side. The named payee was a nominee for an undisclosed party and the named secured party was the nominee of an undisclosed party and the consideration came neither from the nominee nor the undisclosed principal. This is what leaves investors holding the bag.

The foreclosures are a grand scheme of cover-up for what was a simple PONZI scheme whose survival depended not upon borrower payments on legitimate loans but rather on the sale of more bogus mortgage bonds. There were no funded REMIC trusts, there were no active trustees, and the job of managing the flood of money fell to the Master Servicer who instructed the subservicer and all other parties what to do with their new found wealth.

The investors are saying they are left with a pile of money owed to them, documented by fake bonds, and no documentation on what was actually done with their money.

That leaves them in a position where they can NEVER claim that the loan money they advanced (and which was commingled beyond recognition) was never secured with a perfected lien or mortgage. The foreclosures that have taken place are based upon an illusion of a transaction that was never consummated — namely that the named payee on the note would loan the borrower money. They didn’t loan the money so the transaction lacks consideration.

Lacking consideration they have nonetheless fabricated, used, executed and recorded papers procured under false pretenses and they are taking the position in court that the borrower may not inquire as to the internal workings of the scheme that defrauded him  and which the investors  (Pension funds) corroborated with their lawsuits.

If you went to the originator and asked to payoff or rescind they would have had to go to the investment banker or aggregator to find out what to do instead of simply following the federal statute (TILA) and returning the documents in exchange for the money. By contract the originator agrees and the wire transfer instructions the originator agrees, just like MERS, to not take, claim or keep any money from the transaction.

PRACTICE TIP: Getting the cancelled check of the borrower to see who cashed the check in which account owned by which party might be helpful in determining the truth about the so-called closing. A good question to ask in discovery is how the”servicer” accounted for each payment it received or disbursed and what notes or notations were used. Then the next question to the subservicer, Master Servicer and investment banker is to whom did you disburse money and why?

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