Servicer Advances: More Smoke and Mirrors

Several people are issuing statements about servicer advances, now that they are known. They fall into the category of payments made to the creditor-investors, which means that the creditor on the original loan, or its successor is getting paid regardless of whether the borrower has paid or not. The Steinberger decision in Arizona and other decisions around the country clearly state that if the creditor has been paid, the amount of the payment must be deducted from the amount allegedly owed by the “borrower” (even if the the borrower doesn’t know the identity of the creditor).

The significance of servicer advances has not escaped Judges and lawyers. If the payment has been made and continues to be made, how can anyone declare a default on the part of the creditor? They can’t. And if the payment has been made, then the notice of default, the end of month statements, the notice of acceleration and the amount demanded in foreclosure are all wrong by definition. The tricky part is that the banks are once again lying to everyone about this.

One writer opined either innocently or at the behest of the banks that the servicers were incentivized to modify the loans to get out of the requirement of making servicer advances. He ignores the fact that the provision in the pooling and servicing agreement is voluntary. And he ignores the fact that even if there is a claim for having made the payment instead of the borrower, it is the servicer’s claim not the lender’s claim. That means the servicer must bring a claim for contribution or unjust enrichment or some other legal theory in its own name. But they can’t because they didn’t really advance the money. Anyone who has experience with modification knows that the servicers make it very difficult even to apply for a modification.

Once again the propaganda is presumed to be true. What the author is missing is that there is no incentive for the Servicer to agree to make the payments in the first place. And they don’t. You can call them Servicer advances but that does not mean the money came from the Servicer. The prospectus clearly states that a reserve pool will be established. Usually they ignore the existence of the REMIC trust on this provision like they do with everything else. The broker dealer (investment banker) is always the one party who directly or indirectly is in complete control over the funds of investors.
Like the loan closing the source of funds is concealed. The Servicer issues a distribution report with disclaimers as to authenticity, accuracy etc. That report gets to the investor probably through an investment bank. The actual payment of money comes from the reserve pool made out of investor’s funds. The prospectus says that the investor can be paid out of his own funds. And that is exactly what they do. If the Servicer was actually taking its own money to make payments under the category of Servicer advances, the author would be correct.
The Servicer is incentivized by two factors — its allegiance to the broker dealer and the receipt of fees. They get paid for everything they do, including their role of deception as to Servicer advances.
When you are dealing with smoke and mirrors, look away from the mirror and walk through the smoke. There, in all its glory, is the truth. The only reason Servicer advances are phrased as voluntary is because the broker dealer wants to make the payments every month in order to convince the fund manager that they should buy more mortgage bonds. They want to be able to stop when the house of cards falls down.

The Confusion Over Consideration: If they didn’t pay for it, they have nothing against the property

There have been multiple questions directed at me over the issue of consideration arising from presumptions made about a note and mortgage that appear to be facially valid. Those presumptions are rebuttable and indeed in many cases would be rebutted by the actual facts. That is why asserting the right defenses is so important to set the foundation for discovery.

The cases thrown at me usually relate to adequacy of consideration. Some relate wrongly to Article 3 as to enforcement of the note. I agree that enforcement of the note is easier than enforcement of the mortgage. But that is the point. If they really want the property even a questionable holder of the note might be able to get a civil judgment and that judgment might result in a lien against the property and it might even be foreclosed if the property is not homestead. That is how we protect creditors and property owners. To enforce the mortgage, the claim must be much stronger — it must be filed by a party who actually has the risk of loss because they paid for it.

One case just sent to me is a 2000 case 4th DCA in Florida. Ahmad v Cobb. 762 So 2d 944. The quote I lifted out of that case which was presented to me as though it contradicted my position is the most revealing:

“First, there is no doubt that Ahmad, as the assignee of the Resolution Trust Corporation, owned the rights to the Cobb Corner, Inc. note and mortgage and to the guarantees securing those obligations. He obtained a partial

[762 So.2d 947]

summary judgment which fixed the validity, priority and extent of his debt. Any questions as to the adequacy of the consideration he paid were settled in that ruling.

That is your answer. The time to contest consideration is best done before judgment when you don’t need to prove fraud by clear and convincing evidence. We are also not challenging adequacy of consideration — except that if it recites $10 and other value consideration for a $500,000 loan it casts doubt as to whether the third leg of the stool is actually present — offer, acceptance and consideration. People tend to forget that this is essentially contract law and the contract for loan is no exception to the laws of contract.

We are challenging whether there was any consideration at all because I already know there was none. There couldn’t be. The consideration flowed directly from the investors to the borrower. That is the line of sight of the debt, in most cases.

The closing agent mistakenly or intentionally applied funds from a third party who was not disclosed on the settlement documents. Without receiving any money from the “originator”, the closing agent proceeded to get the signature from the borrower promising to pay the originator when it was a third party who gave the closing agent the funds. If this was a “warehouse loan” in which the originator was borrowing the money with a risk of loss and the liability to pay it back then the originator is a proper party and any assignments from the originator would be valid — if they were supported by consideration. Some loans do fit that criteria but most do not.

I repeat that this is not an attempt to get out of the debt altogether. It is an attack on the note and mortgage because the actual terms of repayment were either never agreed between the investors and the borrowers or are as set forth in the PSA and NOT the note and mortgage.

If the third party (source of funds) is NOT in privity with the originator (which is the structure we are dealing with because the broker dealers wanted to shield themselves from liability for violating fair lending laws) then the closing agent should have obtained instructions from the source of funds as to the application of funds wired into escrow. Anyone who didn’t would be an idiot. But most of them, under that definition would qualify. The closing agent would also be wrong to have demanded the signature of the borrower on documents that (a) did not reveal the source of funds and (b) did not contain all the terms of repayment, as recited in the PSA.

The foreclosure crowd is saying the PSA is irrelevant — but only when it suits them. They are saying that the PSA gives them the authority to proceed with foreclosure but that the terms of the PSA are not relevant. That is crazy, but up until now judges have been buying it because they have not been presented with the fact pattern and legal argument that we are asserting.

In summary, we are saying there was NO CONSIDERATION. We are not attacking adequacy of consideration. I am saying there was no actual transaction between the originator and the borrower and there was no actual transaction between the assignor, indorsor, and the assignee or indorsee. Article 9 of the UCC is clear.

The terms of enforcement of a note govern a looser interpretation of when negotiable paper can be enforced. But the terms of a mortgage cannot be enforced by anyone unless they obtain it for value. Value is consideration. We are saying there wasn’t any consideration. Any decision to the contrary is wrong and can be contested with contrary decisions that are all correct and can be found not only in the public records but in treatises.

And this is absolutely necessary. In a mortgage foreclosure or even attachment, the party seeking the forfeiture must show that this forfeiture is necessary to secure repayment of a debt. It must also show that without this forfeiture, it will suffer a loss. In so doing they establish grounds not only for the foreclosure judgment but also for the foreclosure sale.

As pointed out in the above case, the creditor is the one who submits a creditor’s bid by definition. If the party bringing the action cannot satisfy the elements of a creditor in real money terms, then they are not permitted to bid anything other than cash. Allowing a party who did not acquire the mortgage rights for value would enable strangers to the transaction to acquire property for free, except the costs of litigation. Thus the “free house” argument is specious. It is a distraction from the real facts as to who is getting a free house.

Glaski Court refuses to “depublish” decision, two judges recuse themselves.

Corroborating what I have been saying for years on this blog, the Supreme Court of the state of California is reasserting its position that if entity ABC wants to collect on a debt in California, then that particular entity must own the debt. This is basic common sense and simply follows article 9 of the Uniform Commercial Code. If a court were to adopt the position of the banks, then a new industry would be born, to wit: spying on people to determine whether or not they are behind on any payment to anyone and then beating the real creditor to court, filing a complaint and getting a judgment without the real creditor even knowing about it. The Supreme Court of the state of California obviously understands this.

This is not really complicated although the words used are complicated. If you find out that your neighbor is behind in payments on their credit cards, it is obvious that you cannot serve your neighbor and collect. You don’t own the debt because you never loaned any money and because you never purchased the debt. If you are allowed to sue and collect on the credit card debt, you and the court would be committing a fraud on the actual creditor. This is why it is absurd for lawyers or judges to say “what difference does it make who they owe the debt to?  They stopped making payments and they are clearly in default.”  Any lawyer or judge makes that statement is wrong. It lacks the foundation of the factual determinations required to establish the existence of the debt, the current balance of the debt after deductions for all payments received from all parties on this account, and the ownership of the debt.

In the first year of law school, we learned that the note is not the debt.  The note is evidence of the debt and the terms of repayment but it is not a substitute for the actual transaction documents. Those transaction documents would have to include proof of transfer of consideration, which in this case would mean wire transfer receipts and wire transfer instructions. The banks don’t want to show the court this because it will show that the originator in most cases never made any loan at all and was merely serving as a sham nominee for an undisclosed lender. The banks are attempting to use this confusion to make themselves real parties in interest when in fact they were never more than intermediaries. And as intermediaries that misused their positions of trust to misrepresent and create fraudulent “mortgage bond” transactions with investors that led to fraudulent loans being made to borrowers.

The banks diverted or stole money from investors on several different levels through multiple channels of conduit sham entities that they called “bankruptcy remote vehicles.” The argument of “too big to fail” is now being rejected by the courts. That is a policy argument for the legislative branch of government. While the bank succeeded in scaring the executive and legislative branches into believing the risk of “too big to fail” most of the people in the legislative and executive branches of government on the federal and state level no longer subscribe to this myth.

There are dozens of other courts on the trial and appellate level across the country that are also grasping this issue. The position of the banks, which is been rejected by Congress and the state legislatures for good reason, would mean  the end of negotiable paper. The banks are desperate because they know they are not the owner of the debt, they are not the creditor, they have no authority to represent the creditor, and their actions are contrary to the interests of the creditor. They are pushing millions of homeowners into foreclosure, or luring them into an apparent default and foreclosure with false promises of modification and settlement.

The reason is simple. Without a foreclosure sale at auction, the banks are exposed to an enormous liability for all the money they collected on the alleged defaulted loans. The amount of the liability is vastly in excess of the entire principal of the loans, which is why I say that the major banks are publishing financial statements that are based on fictitious assets and fictitious income. Nobody can ignore the fact that the broker-dealers (investment banks) are getting sued by investors, insurers, counterparties on credit default swaps, government agencies who have already paid for alleged “losses”, and government agencies that have paid on guarantees for mortgages that did not conform to the required industry-standard underwriting practice.

This latest decision in which the Glaski court, at the request of the banks, revisited its prior decision and then reaffirmed it as a law of the land in the state of California, is evidence that the courts are turning the corner in favor of the real creditors and the real debtors. The recusal by two judges on the California Supreme Court is interesting but at this point there are no conclusions that can be drawn from that.

This opens the door in the state of California for people to regain title to their property or damages for the loss of title. It also serves to open the door to discovery of the actual money trail in order to trace real transactions as opposed to fictitious ones based upon fabricated documentation which often contain forgery, backdating, and are signed by people without authority or people claiming authority through a fictitious power of attorney.

Glaski Court Reaffirms Law of the Land In California: If you don’t own the debt, you cannot collect on it.

Foreclosure Defense: Notes on Practice

I went to a hearing a few days ago and discovered to my surprise a Judge, in a remote section of Florida, who was fully conversant in the rules of procedure, due process and the laws of evidence. It would be improper for me to name him as I am currently counsel of record in an active case before him. The first thing that caught my attention was that in a case before me the Judge reserved ruling on an uncontested motion for summary judgment, to give himself time to review the paperwork and make sure that the paperwork was all in order. That is old style court practice.

In the 1970′s through the 1990′s that is what judges did to make sure the lawyer for the Bank had done his job properly — and that was before routine questions relating to who made the loan, whether the loan was properly originated, whether the loan was properly sold, whether the balance due was properly stated and whether there was an actual creditor who was present in court — someone who fulfilled Florida laws on the description of a creditor who could submit on credit bid at the auction.

The Judge also mentioned that he had presided over three bench trials the day before, two of which he had given judgment to the borrower because the Plaintiff had been unable to make its case. This bespeaks an understanding, knowledge, acceptance and execution of the procedural requirement of establishing a prima facie case thus shifting the burden of proof to the Defendant. And contrary to current practice in many courts, this Judge does not view his role as rubber stamping Foreclosures.

This Judge wants to see the things we have been pointing out on this blog: that if you are the Plaintiff you must prove your case according to the rules. First you must have a witness that actually knows something instead of merely reading off of a computer or a computer report. You must establish a proper foundation rather than an illusion by merely giving the appearance of proffering testimony from an incompetent witness with no knowledge of their own whose employment description consists of testifying in court. And your chain of evidence must be complete before you can be recognized as having established a prima facie case.

In the case in which I appeared the Plaintiff had filed a foreclosure against two homeowners, husband and wife, who then pro se fended off the Plaintiff with materials mostly from this blog and from other sources. But they were at the point where being a lawyer counts, knowing the content and timing of objections, filing motions to strike, motions in limine, responding to 11 th hour motions for protective order etc.

In this case their exists a legitimate question over whether the loan was subject to securitization. Originated in 1996 the loan date goes to the beginning of the era of securitization and this one didn’t have MERS, which I argue is evidence per se of securitization because there is no reason for MERS if your intent is not securitization. But 2 days after the alleged closing the loan was transferred to a player in the world of securitization. Thus the first argument is that this was obviously a table funded loan. Hence the question of where the money came from at the alleged closing table.

Adding to the above, the notice letter to the borrowers of default, acceleration and the right to reinstate suggests that the then “holder” was, in their own words “either a Servicer or lender.” So the very first piece of evidence in the file raises the issue of securitization since the party who sent the notice was not the transferee mentioned above two days after the alleged closing.

Thus questions about the origination and transfers of the loan were appropriately asked in discovery. The Judge was on the fence. Could one slip of the pen open up a whole area of discovery even with the table funded loan allegation?

But in the halls of the foreclosure mills, they had decided to file standardized pretrial statements disclosing witnesses and exhibits. So they filed a motion for protective order as to the discovery, refusing to answer the Discovery, and filed a statement that identified the witness they would use at trial 19 days later as “a corporate representative.” That is no disclosure of a witness and is subject to a motion in limine to block the introduction of any witness. The witness disclosure also attached a list of possible witnesses —37 of them, which I argued is worse than no disclosure and the Judge agreed.

Then in their list of exhibits that they will present at trial they refer to powers of attorney, pooling and servicing agreement, investors, servicer’s, sub-servicers, and all the other parties and documents used in creating the illusion of securitization.

I argued that if they filed a pretrial statement referring to all the parts of securitization of a mortgage loan, then the issues surrounding that are properly the subject of inquiry in discovery and that the 11 th hour filing of a sweeping motion for protective order and failure to respond to any discovery was in bad faith entitling us to sanctions and granting our two motions in limine. The judge agreed but removed the problem by setting the trial for February, and setting forth a schedule of deadlines and hearings a few days after the deadlines so both sides could develop their cases. The ruling was in my opinion entirely proper, even if it denied the motions in limine since he was giving both sides more time to develop their cases.

The moment the hearing ended, opposing counsel approached and was asking about settlement. I countered with a demand that his client immediately show us the chain of actual money starting with origination. He said that wouldn’t be a problem because this was definitely not a securitized loan. I told him I actually knew the parties involved and that most probably this was amongst the first group of securitized loans. I also told him that he would most likely fail in getting the proof of payment at closing, and proof of payment in each of the alleged transfers of the loan.

We’ll see what happens next but I would guess that there will be a lot of wrestling over discovery and more motions in limine. But this time I have a Judge who no matter his personal views that are most likely very conservative, will dispassionately call balls and strikes the way a judge is supposed to do it.

Banks Won’t Take the Money: Insist on Foreclosure Even When Payment in Full is Tendered

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We have seen a number of cases in which the bank is refusing to cooperate with a sale that would pay off the mortgage completely, as demanded, and at least one other case where the homeowner deeded the property without any agreement to the foreclosing party on the assumption that the foreclosing party had a right to foreclose, enforce the note or mortgage. There is a reason for that. They don’t want the money, they don’t even want the house — what they desperately need is a foreclosure judgment because that caps the liability on that loan to repay insurers and CDS counterparties, the Federal Reserve and many other parties who paid in full over and over again for the bonds of the REMIC trust that claimed to have ownership of the loan.

This should and does alert judges that something is amiss and some of their basic assumptions are at least questionable.

I strongly suggest we all read the Renuart article carefully as it contains many elements of what we seek to prove and could be used as an attachment to a memorandum of law. She does not go into the issue of their being actual consideration in the actual transactions because she is unfamiliar with Wall Street practices. But she does make clear that in order for the sale of a note to occur or even the creation of a note, there must be consideration flowing from the payee on the note to the maker. In the absence of that consideration, the note is non-negotiable. Thus it is relevant in discovery to ask for the the proof of the the first transaction in which the note and mortgage were created as well as the following alleged transactions in which it is “presumed” that the loan was sold because of an endorsement or assignment or allonge. To put it simply, if they didn’t pay for it, then it didn’t happen no matter what the instrument or endorsement says.

The facts are that in many if not most cases the origination of the loan, the execution of the note and mortgage and the settlement documents were all created and recorded under the presumption that the payee on the note was the source of consideration. It was easy to make that mistake. The originator was the one stated throughout the disclosure and settlement documents. And of course the money DID appear at the closing. But it did not appear because of anything that the originator did except pretend to be a lender and get paid for its acting service. Lastly, the mistake was easy to make, because even if the loan was known or suspected to be securitized, one would assume that the assignment and assumption agreement for funding would have been between the originator or aggregator (in the predatory loan practice of table funding) and the Trust for the asset pool. Instead it was between the originator and an aggregator who also contributed no consideration or value to the transaction. The REMIC trust is absent from the agreement and so is the ivnestor, the borrower, the isnurers and the counterparties to credit default swaps (CDS).

If the loan had been properly securitized, the investors’ money would have funded the REMIC trust, the Trust would have purchased the loan by giving money, and the assignment to the trust would have been timely (contemporaneous) with the creation of the trust and the sale of the the loan — or the Trust would simply have been named as the payee and secured party. Instead naked nominees and disinterested intermediaries were used in order to divert the promised debt from the investors who paid for it and to divert the promised collateral from the investors who counted on it. The servicer who brings the foreclosure action in its own name, the beneficiary who is self proclaimed and changes the trustee on deeds of trust does so without any foundation in law or fact. None of them meet the statutory standards of a creditor who could submit a credit bid. If the action is not brought by or on behalf of the creditor there is no jurisdiction.

Add to that the mistake made by the courts as to the accounting, and you have a more complete picture of the transactions. The Banks and servicers do not want to reveal the money trail because none exists. The money advanced by investors was the source of funds for the origination and acquisition of residential mortgage loans. But by substituting parties in origination and transfers, just as they substitute parties in non-judicial states without authority to do so, the intermediaries made themselves appear as principals. This presumption falls apart completely when they ordered to show consideration for the origination of the loan and consideration for each transfer of the loan on which they rely.

The objection to this analysis is that this might give the homeowner a windfall. The answer is that yes, a windfall might occur to homeowners who contest the mortgage or who defend foreclosure. But the overwhelming number of homeowners are not seeking a free house with no debt. They would be more than happy to execute new, valid documentation in place of the fatally defective old documentation. But they are only willing to do so with the actual creditor. And they are only willing to do so on the actual balance of their loan after all credits, debits and offsets. This requires discovery or disclosure of the receipt by the intermediaries of money while they were pretending to be lenders or owners of the debt on which they had contributed no value or consideration. Thus the investor’s agents received insurance, CDS and other moneys including sales to the Federal reserve of Bonds that were issued in street name to the name of the investment bankers, but which were purchased by investors and belonged to them under every theory of law one could apply.

Hence the receipt  of that money, which is still sitting with the investment banks, must be credited for purposes of determining the balance of the account receivable, because the money was paid with the express written waiver of any remedy against the borrower homeowners. Hence the payment reduces the account receivable. Those payments were made, like any insurance contract, as a result of payment of a premium. The premium was paid from the moneys held by the investment bank on behalf of the investors who advanced all the funds that were used in this scheme.

If the effect of these transactions was to satisfy the account payable to the investors several times over then the least the borrower should gain is extinguishing the debt and the most, as per the terms of the false note which really can’t be used for enforcement by either side, would be receipt of the over payment. The investor lenders are making claims based upon various theories and settling their claims against the investment banks for their misbehavior. The result is that the investors are satisfied, the investment bank is still keeping a large portion of illicit gains and the borrower is being foreclosed even though the account receivable has been closed.

As long as the intermediary banks continue to pull the wool over the eyes of most observers and act as though they are owners of the debt or that they have some mysterious right to enforce the debt on behalf of an unnamed creditor, and get judgment in the name of the intermediary bank thus robbing the investors, they will continue to interfere with investors and borrowers getting together to settle up. Perhaps the reason is that the debt on all $13 trillion of mortgages, whether in default or not, has been extinguished by payment, and that the banks will be left staring into the angry eyes of investors who finally got the whole picture.

READ CAREFULLY! UNEASY INTERSECTIONS: THE RIGHT TO FORECLOSE AND THE UCC by Elizabeth Renuart, Associate Professor of Law, Albany Law School — Google it or pick it off of Facebook



Amongst the cases I review and manage, the question was raised by one of the homeowners as to why I insisted on holding both the originator and subsequent intermediaries in the alleged securitization chain and/or table-funded loan where both the party alleging having (1) the capacity to sue see SEC Corroborates Livinglies Position on Third Party Payment While Texas BKR Judge Disallows Assignments After Cut-Off Date, (2) the standing to sue and/or the authority to initiate foreclosures and (3) financial injury where they allege sale or assignment of the note. The reason is simple from a tactical and legal point of view. I wish to close out their options to keep moving the goal posts.

Here is the answer I wrote to the customer, whose property is located in a judicial state. This particular person is being pro-active — always a wise choice — in that he has been making his payments, was told to to stop making payments if he wanted a modification which he did initially and then changed his mind and reinstated, and remains convinced he was the victim of various forms of fraud and crimes including false Appraisals of the supposedly fair market value of the property at the time of the loan closing or the alleged loan closing. His goal is not a free house. His goal is to pursue any rights you might have for modification or settlement of his claims with respect to the illusion of a loan closing and the office of a closing agent. As any reader of this blog knows, it is my opinion that any such loan closing was in fact an illusion and that all the parties participating in that illusion were paid actors pretending to be something they were not —  less creating plausible deniability for any of the improper actions of the intermediaries at the “loan closing.”

There is a reason why I insist on continuing the joinder of those two defendants. Embrace wants to be dismissed out with prejudice because it says that sold the loan to Wells. I want to say that they didn’t sell the loan to Wells.  If I prevail on that point then Wells Fargo is out as a plaintiff in any foreclosure they might file, and potentially out as a servicer since they might not be able to show any authority.  If that is the case then they owe you an accounting for all of the money they collected from you and a statement of what they did with the money that they collected from you. You might well have a cause of action against Wells Fargo for taking money under false pretenses.

 If I don’t Prevail on that point and somehow they are able to show that Wells Fargo paid for the loan and owns the loan by virtue of that payment, then Embrace is still a proper party in the action because they are the owner of record of a mortgage based on a note that was never funded by Embrace.  The issue here is whether or not the mortgage was transferred with the debt and that issue is tied closely with the issue of securitization, which both of them deny. I believe that I will be able to show that the loan is subject to claims of securitization on behalf of a loan pool that may never have existed or which might not exist now.  and if I am able to show that the loan pool was never funded and therefore could never have paid for the loan then the apparent authority of both defendants is eviscerated.

  Either way, I don’t want to let either of them out of the litigation quite yet.  If we prevail on the question of whether or not there was an actual sale and the sale was authorized (see my blog article from yesterday) then Embrace is the only party left on record in the recording office. At that point I would drill down on them to see whether or not they can show that they fulfill their part of the bargain with you, to wit: that you sign a note and they give you adequate disclosure under the law and they fund a loan to you. It is my position that they did not give adequate disclosure and that they did not fund a loan to you even if the loan was not securitized. The best they can say is that this was a table funded loan which is according to Reg Z of the Federal Reserve a predatory loan  per se if it was part of a pattern of conduct.

 Given the statistics and information we have about both defendants it is my opinion that the chances are 96% that the loan was allegedly sold into the secondary market where it is the subject of a potential claim from an asset pool. The problem I wish to reveal here is that the entire chain of ownership collapses on itself. The other problem that I want to addressed is who actually received the money that you pay every month and what did they do with it (who did they pay).  the strategy here is to show that regardless of whether or not a claim of securitization exists, there were co-obligors (Wells Fargo),  insurance payments and proceeds of credit default swaps and multiple resales all of which should be applied against the amount owed to the real creditor, whoever that might be, thus reducing the loan receivable.

 If I can tie the loan receivable to one which derives its value from the alleged loan made to you, even if the originator paid for it, then there is a strong argument for agency and allocation of receipts under which the payment of monthly payments and the receipt of insurance proceeds and the proceeds from other obligors (including but not limited to counterparties on credit default swaps) were received and kept, like in the Credit Suisse case. 

From that point forward it is a simple accounting task to allocate third-party receipts of insurance and hedge money to the benefit of the investors whether they received it or not. The auditing standards under the rules of the financial accounting standards Board would require a further analysis and allocation of the money received —  specifically the reduction of the loan receivable or bond receivable held by the investors (directly if the REMIC trust was ignored or indirectly if the agents for the trust purchased insurance and hedge products, the proceeds of which should have been credited to the investors.

 If the investors are the real creditors than the amount that they are entitled to have repaid to them does not exceed the amount they advanced. It practically goes without saying that if the money advanced from investors was based on their reasonable belief that they were acquiring title to the loans funded by the money advanced by the investors, they should recover part or all of their investment to the extent that the other players (see the SEC order against Credit Suisse) paid for insurance and hedge products using the money of the investors and kept the proceeds for themselves —-  thus explaining rising reports of profits in the banks who are supposedly merely intermediaries in the conduct of commerce which was in sharp decline.

 In the end, under a series of unjust enrichment and other common-law actions, as well as the requirements of statute and the terms of the promissory note executed by the borrower, all money received in that manner should reduce the principal balance due from the borrower because the creditor has already been paid either directly or indirectly through its agents who were either authorized or possessed of apparent authority.

In fact , the great likelihood is that the banks received substantial overpayments amounting to multiples of the original principal amount of the loan.  According to both law and the terms of the proposed agreement between the borrower and the apparent lender, subject to the terms of the documents themselves as well as state and federal law, the borrower is entitled to recover all such undisclosed payments and receipts which are defined under the truth in lending act as “compensation.”

 Thus while the creditors not entitled to any more recovery than the amount advanced under an alleged loan, the borrower is entitled to full recovery of all money paid in connection with or related to the loan received by the borrower, regardless of the original source of the loan and any agreements between the intermediaries in the alleged securitization chain that do not have the signature of the borrower on them. The reason is public policy. While securitization was not considered in the original passage of laws  it was the overreaching by banks to the disadvantage of consumers and borrowers that was sought to be discouraged by penalties that would be so great as to prevent the practice altogether.

 Usually it is money that is taken under false pretenses and the illusion of securitization claims is no exception. But in the case of the borrower it is the signature of the borrower that was obtained under the false pretenses that  the party obtaining the borrower’s signature. The consideration was the money advanced by an unrelated party tot he transaction (investor) who thought their money was first going through a REMIC trust that would give them certain tax advantages.



 Garfield, Gwaltney, Kelley & White

4832 Kerry Forest Parkway, Suite B

Tallahassee, Florida 32309

(850) 765-1236

Unrhetorical Questions — Money, Lies and Accounting Records: Gander and Goose

Why are our courts routinely accepting allegations and documents from foreclosing banks that they would summarily throw out if the same allegations and documents came from borrowers?

 How can possession of an ALLONGE construed as ownership

of the debt without any other evidence being presented?

Why is the standard definition of “Allonge” ignored?



 I recently received a question from an old friend of mine who was a solicitor in Canada and who is frustrated with our court system that continues to assume the validity of loans that have already been thoroughly discredited. He has attempted on numerous occasions to get information through a qualified written request or a debt validation letter and has attempted to verify the authority of any party to whom he would address a request for modification of his loan in Florida. While chatting with him online I realized that this information might be of some value to attorneys and borrowers. The principal point of this article is the old expression “what is good for the goose is good for the gander.” For those of you who are unfamiliar with the old expression it means that there should be equality of treatment, all other things being equal. In mortgage litigation is apparent that when an allegation is made or a proffer is made through counsel rather than the introduction of evidence, the courts continue to function from both a misconception and  misapplication of the Rules of Court and the rules of evidence.

 When the case involves one institution against another, the same arguments that are summarily  rejected when they are advanced by a borrower are given considerable traction because the argument was advanced by a financial institution or financial player that identifies itself as a financial institution. In fact, a review of most cases reveals a much heavier burden on the party defending against the loss of their homestead than the party seeking to take it —  which is a complete reversal of the way our justice system is supposed to work.  The burden of proof in both judicial and nonjudicial states is constitutionally required to be on the party seeking affirmative relief and not on the party defending against it.

In the nonjudicial states, in my opinion, the courts are violating this basic constitutional requirement on a regular basis under circumstances where the party announcing a right to enforce a dubious deed of trust, collection on a dubious note, and therefore having the right to sell the property without judicial intervention despite the inability of the foreclosing entity to produce any evidence that it owns the debt, note, mortgage rights,  or even demonstrate a financial interest in the outcome of the foreclosure sale; to make matters worse the courts are allowing trustees on deeds of trust to be appointed or substituted even though they have a direct or indirect financial relationship with the alleged lender.

These trustees are accepting “credit bids” without any due diligence as to whether or not the party making the offer of the credit bid at auction is in fact the creditor who may submit such a credit bid according to the statutes governing involuntary auctions within that state.  In nonjudicial states the burden is put on the borrower to “make a case” and thus obtain a temporary restraining order preventing the sale of the property. This is absurd. These statutes governing nonjudicial sales were created at a time when the lender was easily identified, the borrower was easily identified, the chain of title was easily demonstrated, and the chain of money was also easily demonstrated. Today in the world of falsely securitized loans, the courts have maintain a ministerial attitude despite the fact that 96% of all loans are subject to competing claims by false creditors. The borrower is forced to defend against allegations that were never made but are presumed in a court of law. If anything is a violation of the due process requirements of the United States Constitution and the Constitution of most of the individual states of the union, this must be it.

 In the judicial states,  the problem is even more egregious because the same presumptions and assumptions are being used against borrowers as in the nonjudicial states. Thus in addition to being an unconstitutional application of an otherwise valid law, the judicial states are violating their own rules of civil procedure mandated by the Supreme Court of each such state (or to be more specific where the highest court is not called the Supreme Court, we could say the highest court in the state).  This is why I have strongly suggested for years that an action in mandamus be brought directly to the highest court in each state alleging that the laws and rules, as applied, violate constitutional standards and any natural sense of fairness.

 Here is the question posed by my Canadian friend:

(1)  The documents are phony documents (copies) produced by Ben Ezra Katz. It will cost me several thousand dollars to have a document expert evaluate the documents and then testify if they find them to be copies. At the beginning of this case, The Plaintiff’s attorney (Ben Ezra Katz associate) told the court (I do have a transcript) that they has found the ORIGINAL documents (note, mortgage, etc.) and that they had couriered the ORIGINAL documents to the clerk of Court. They did a Notice of Filing which on its’ face states ORIGINAL documents. I can not afford a document expert, however the AG in S. Florida has an open investigation into this case. Would I be out of line in requesting that they include this case per-se as part of their investigation and accordingly make a determination as to if or if not the subject documents which are on file with the clerk of court are originals or copies ??
(2)  The only nexus that Wells Fargo produces to establish themselves as a real party in interest is a hand filled out allonge (copy attached). Please note that the signer only signs as “assistant secretary” without further specifics. On the basis of what they provide it is virtually impossible to depose this person to determine if she actually did or did not sign this document, and if so what is her authority to do so.  I want to launch some sort of discovery that seeks to discover what else the Plaintiff has which would support the alleged allonge. Things such as any contracts, copies of any consideration, what was the consideration, who authorized the transaction, etc.  Do you have any suggestions in this regard. I bounced this off my attorney and I am not sure that we are on the same page. He wants to go to trial and have the proven phony documents as the main thrust. I agree with that, however I also would feel far better if we were able to cut them off at the knees as to standing such as the alleged allonge is part of the phony documents, and there are no documents that the Plaintiff can produce to support not only its’ authenticity, but its’ legitimate legal function. I do not like to have all of my eggs in one basket.

 And here is my response:

 You are most probably correct in your assessment of the situation. If they lied to the court and filed phony documents you should file motion for contempt. You should also file a motion for involuntary dismissal based on the fact that they have had plenty of time to either come up with the original documents or alleged facts to establish lost documents. The affidavit that must accompany the allegation of lost documents must be very specific as to the content of the documents and the path of the documents and it must the identify the person or records from which the allegations of fact are drawn. They must be able to state with certainty when they last had the original documents if they ever did have the original documents. If they didn’t ever have the original documents then an affidavit from them is meaningless. They have to establish the last party had physical custody of the original documents and establish the reason why they are missing. If they can’t do those things then their foreclosure should be dismissed. The more vague they are in explaining what happened to the original documentation the more likely it is that somebody else has the original documentation and may sue you again for recovery. So whatever it is that they allege should result in your motion to strike and motion to dismiss with prejudice. As far as the attorney general’s office you are correct that they ought to cooperate with you fully but probably incorrect in your assumption that they will do so.

I think you should make a point about the allonge being filled out by hand as being an obviously late in the game maneuver. You can also make a point about the “assistant Sec.” since that is not a real position in a corporation. Something as valuable as a note would be reviewed by a real official of the Corporation who would be able to answer questions as to how the note came into the possession of the bank (through interrogatories or requests for admission) and  what was paid and to whom for the possession and rights to the note, when that occurred and where the records are that show the payment and how Wells Fargo actually came into possession of the note or the rights to collect on the note. As you are probably aware the predecessor that is alleged to have originated the note or alleged to have had possession of the note must account for whether they provided the consideration for the note and what they did with it after the closing. If they say they provided consideration than they should have records showing a payment to the closing agent and if they received consideration from Wells Fargo they should have those records as well.

But the likelihood is that neither Option One nor Wells Fargo ever funded this mortgage which means that the note and mortgage lack consideration and neither one of them has any right to collect or foreclose.   In fact, since they are taking the position that the loan was not securitized and therefore that no securitization documents are relevant,  neither of them can take the position that they are representing the real party in interest as an authorized agent for the real lender.  And the reason you are seeing lawsuits especially by Wells Fargo in which it names itself as the foreclosing party is that the bank knows that Iit ignored and routinely violated essential and material provisions of the securitization documents including the prospectus and pooling and servicing agreement upon which investors relied when they gave money to an investment banker.

In that case, since you seek to modify the loan transaction and determine whether or not it is now or is potentially subject to  a valid mortgage, you should seek to enforce a request for information concerning the exact path of the money that was used to fund the mortgage. And you should request any documentation or records showing any guarantee, payment, right to payment, or anything else that would establish a loan to you where actual money exchanged hands between the declared lender and yourself. The likelihood is that the money was in a co-mingled account somewhere —  possibly Wells Fargo —  which came from investors whose names should have been on the closing and the closing documents.  Those investors are the actual creditors. Or at least they were the actual creditors at the time that the loan money showed up at the alleged “loan closing.” Since then, hundreds of settlements and lawsuits were resolved based upon the bank tacitly acknowledging that it took the money and used it for different purposes than those disclosed in the prospectus and pooling and servicing agreement. These settlements avoid the embarrassing proof problems of any institution since they not only ignored the securitization documents, more importantly, they chose to ignore all of the basic industry standards for the underwriting of a real estate loan because the parties who appeared to be underwriting the loan and funding the loan had absolutely no risk of loss and only had the incentive to close deals in exchange for sharing pornographic amounts of money that were identified as proprietary trading profits or fees.

And the reason why this is so important is that the mortgage lien could never be perfected in the absence of the legitimate creditor who had advanced actual money to the borrower or on behalf of the borrower. This basic truth undermines the industry and government claims about the $13 trillion in loans that still are alleged to exist (despite multiple payments from third parties in multiple resales, insurance contracts and contracts for credit default swaps). The abundant evidence in the public domain as well as the specific factual evidence in each case negates any allegation of ultimate facts upon which relief could be granted, to wit: the money came from third-party investors who are the only real creditors. The fact that the money went through intermediaries is no more important or relevant than the fact that you are a depository bank is intended to honor checks drawn on your account provided you have the funds available. The inescapable conclusion is that the investors were tricked into making unsecured loans to homeowners and that the entire foreclosure scandal that has consumed our nation for years is based on completely false premises.

Your attorney could pose the question to the court in a way that would make it difficult for the court to rule against you. If the lender had agreed to make a loan provided you put up the property being financed PLUS additional collateral in the form of ownership of a valid mortgage on another piece of property,  would the court accept a handwritten allonge from you as the only evidence of ownership or the right to enforce the other mortgage? I think it is clear that neither the banks nor the court would accept the hand written instrument as sufficient evidence of ownership and right to collect payment if you presented the same instruments that they are presenting to the court.

PRACTICE HINT: In fact, you could ask the bank for their policy in connection with accepting its mortgages on other property as collateral for a business loan or for a loan on existing property or the closing on a new piece of property being acquired by the borrower. You could drill down on that policy by asking for the identification of the individual or committee that would decide whether or not a handwritten allonge would be sufficient or would satisfy them that they had  adequate collateral in the form of a mortgage on the first property and the pledge of a mortgage on a second piece of property.

The answer is self-evident. No bank or other lending institution or lending entity would loan money on the basis of a dubious self-serving allonge.  There would be no deal. If you sued them for not making the loan after the bank issued a letter of commitment (which by the way you should ask for both in relation to your own case and in relation to the template used by the bank in connection with the issuance of a letter of commitment), the bank would clearly prevail on the basis that you provided insufficient documentation to establish the additional collateral (your interest in the mortgage on another piece of property).

The bank’s position that it would not loan money on such a flimsy assertion of additional collateral would be both correct from the point of view of banking practice and sustained by any court has lacking sufficient documentation to establish ownership and the right to enforce. Your question to the court should be “if justice is blind, what difference does it make which side is using an unsupportable position?”

HSBC Hit with Foreclosure Suit; FHA’s $115 Billion Loss Scenario; Return of the Synthetic CDO?
Massachusetts foreclosures decline 79% as local laws stall the process
Money from thin air? If the bank does not create currency or money then where does the money come from? Answer investor deposits into what they thought was an account for a REMIC trust. And if the money came from investors then the banks were intermediaries whether they took money on deposit, or they were the underwriter and seller of mortgage bonds issued from non existent entities, backed by non existent loans. And any money received by the banks should have been for benefit of the investors or the REMIC trust if the DID deposit the money into a trust or fiduciary account.Dan Kervick: Do Banks Create Money from Thin Air?



Veto Clock Ticking on Florida Foreclosure Bill HB 87

DISCOVERY TIP: Has anyone asked for a received the actual agreement between the party designated as “lender” and MERS? Please send to

Questions for interrogatory and request to produce, possible request for admissions:

(1) If we accept the proffer from opposing counsel that the transaction (i.e, the loan) was done for the express purpose of fulfilling an obligation to investors for backing mortgage bonds through a REMIC asset pool, then why was MERS necessary?

(2) Why wasn’t The asset pool disclosed to the borrower?

(3) Why wasn’t the asset pool made the payee on the promissory note at origination of the loan?

(4) Why wasn’t the asset pool shown on a recorded assignment immediately after closing as the new payee and secured party?

(5) What was the business purpose of using MERS?

(6) Was the lender the source of funding on the loan or was it too just another nominee?

(7) Is there any identified real party in interest on the note and mortgage as the creditor?

(8) If there is no real party in interest on the note and mortgage, then how can the mortgage be considered perfected when nobody has notice of who they can go to for a satisfaction or release or rescission of the mortgage?

(9) In which document and what provision are the parties at the loan “closing” empowered to identify a party other than the source of funds as the payee and secured party?

(10) Who were the parties to the loan? — (a) the borrower and the source of funds or (b) the borrower and the holder of paper documenting a transaction that is incomplete (the payee and secured party never fulfilled their obligation to fund the loan)?

(11)If the servicer’s scope of employment, authority or apparent authority was limited to tracking the payments of the borrower only, and did not include accounting for the creditor, then how does the servicer know what is contained in the creditor’s accounting records? — Since the creditor in any loan subject to claims of securitization received a bond whose indenture provided repayment terms different than those terms signed by the borrower to another party entirely, how can any finding of money damages be determined by any court without a full accounting for all transactions relating to the loan?

(12) What is the identity of the party who was injured by the refusal of the borrower to make any further payments? To what extent were they injured? Are they qualified to submit a “credit bid” or must they pay cash for the property at auction? If they are not qualified to submit a credit bid then (see below) then under what legal theory should they be permitted to foreclose or for that matter seek any collection? Are these intermediary parties violating the FDCPA because they are neither the creditor nor the agent of the creditor and yet demanding payment for themselves?


FLORIDA 5th DCA: To establish standing to foreclose, Plaintiff must show that it acquired the right to enforce the note before it filed suit to foreclose. Important: the right to enforce the note means either they were the injured party or they represent the injured party. An assignment from a party who is proffered to be the injured party must be established with proper foundation from a competent witness.

GREEN V CHASE 4-5-2013


FLORIDA 4TH DCA: DATES MATTER: While the note introduced had a blank endorsement (note conflict with PSA, which is supposedly source of authority to represent creditor: note may not be endorsed in blank and in fact must be endorsed and assigned in recordable form and recorded where the law allows or requires it) and was sufficient [under normal rules governing commercial transactions --- except if the parties agree otherwise which they certainly did in the PSA) to prove ownership by appellee, who possessed the note, nothing in the record (e.s) shows that the note was endorsed prior to filing of the complaint (or if you want to use this decision by analogy prior to initiation of the notice of default and notice of sale in non-judicial states). The endorsement did not cotnain a date, nor did the affidavit filed in support of the motion for summary judgment contain any sworn statement that the note was owned by the Plaintiff on the date that the suit was filed. [PRACTICE TIP: THEY DON'T WANT TO GIVE A DATE BECAUSE THAT WILL LEAD TO YOU ASKING FOR DETAILS OF THE TRANSACTION, PROOF OF PAYMENT, THE ASSIGNMENT AND WHETHER THE TRANSACTION CONFORMED TO THE PSA, NONE OF WHICH WILL BE PRODUCED. But  considering past behavior it is highly probable that they will fabricate documents that ALMOST give you a copy of the canceled check or wire transfer receipt but don't quite get them to the finish line. Being aggressive on this point will clearly  put them on the defensive].

4th DCA Cromarty v Wells Fargo 4-17-2013

2d DCA: IS THE TRANSACTION GOVERNED BY THE UCC PROVISIONS EVEN IF THE PARTIES HAVE AGREED OTHERWISE? This is the nub of the issue in the Stone case (link below). We think that the courts are confused i applying ordinary rules from the UCC regarding the negotiation of commercial instruments and certainly we understand why — the UCC is the basis upon which we can conducted trusted business transaction and maintain liquidity in the marketplace. But if the party attempting to foreclose derives its powers from the Prospectus, PSA,or purchase and Assumption Agreement, then they cannot invoke the powers in those instruments on the one hand and disregard the provisions that prohibit blank endorsements of loans of dubious quality without an assignment that can only be accepted by the supposed creditor if it complies with the assignment provisions of the agreement under which the foreclosing party is claiming to have authority to enforce the note and mortgage. And this is precisely the risk and consequences of a lawyer not understanding claims of securitization and the reality of what the UCC means when it says things like “unless otherwise agreed” and “for value.” Without raising those issues on the record, the homeowner was doomed:

Stone v BankUnited May 3 2013

OCC: 13 Questions to Answer Before Foreclosure and Eviction

13 Questions Before You Can Foreclose

foreclosure_standards_42013 — this one works for sure

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.


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.

Fannie and Freddie Ignore Homeowners in Detroit

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.


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 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.


In the upside down world of the foreclosure of mortgages that are neither in default nor owned by the parties initiating foreclosure, and where applications for modification are submitted that clearly exceed federal standards for approval (and are denied)  and should come as no surprise that the government sponsored entities, Fannie and Freddie, canceled their appearance at a Metro Detroit foreclosure hearing which they had scheduled.

These are essentially federal agencies. Their first duty is to serve the country and its citizens. But they canceled their appearance because of pending litigation against them. Here was an opportunity for them to understand the impact of foreclosure on families, businesses, investors and the government. Here was an opportunity for them to utilize information provided to them by people on the ground to fashion remedies that are appropriate and legal.

This is all part of state and federal government policy to sweep the mortgage tragedies under the rug. Despite the fact that we know that most of the foreclosures that have already been deemed completed were in fact illegal, we have had millions of “auction sales” in which strangers to the transaction were awarded title to the house without ever having made a single payment of any amount of money to originate or acquire the loan that was allegedly in default but which was fatally defective and certainly not in default  despite the illusions created by Wall Street banks.

I am leading the charge on this one. It is my intention to file suit against the Wall Street banks who have accepted monthly payments, short sale payments, and full payments on loans that were subject to claims of securitization. In fact, my law firm is offering to represent homeowners who lost or sold their homes on a contingency fee, as long as only economic damages are sought. It is my goal to show payments to the sub servicer or anyone else in the false securitization chain should never have been made and were never due. It is my opinion that these payments are owed back to the homeowner in all events, together with interest, costs of the court action, and attorney fees where those are provided by statute or contract.  Each case will be evaluated as to viability utilizing this strategy.

If Bank of America or any other bank responds to an estoppel letter for payoff or short sale without knowing or showing that they have paid for the origination or acquisition of the loan, then they have no business providing the estoppel information or approving or denying a request for a short sale. Their acceptance of the money at closing and their execution of a satisfaction of mortgage or release and reconveyance is a sham. In the absence of any other creditor demanding payment and showing that they are in fact a true creditor (having paid actual money for the origination or acquisition of the loan), proceeds of all such closings should, in my opinion, go to the homeowner. If the bank got the money, it is my opinion that the bank should be sued for recovery of the entire proceeds of the closing.

Each of those closings described above represents a gift to the banks and a horror show for the homeowner and many attorneys for homeowners. The spin machine for the banks has created the illusion that homeowners are seeking a free home when in fact it is the banks that are seeking and getting free money and free homes. In auction sales where the banks are submitting a credit bid, they do not qualify as a creditor who can submit a credit bid. But the credit bid is accepted anyway and the bank gets the house for free despite the fact that the bank has no status as a creditor or even the authorized representative of a creditor.

Fannie and Freddie are colluding with the banks and the federal reserve  to maintain the illusion that the notes and mortgages are in proper form, were properly executed, and contain true representations concerning the real parties in interest. Many theories have been advanced as to why the Federal Reserve and other agencies are colluding with the banks. I think the reason is because many layers of policies are based upon the false assumption that the origination of the loans complied with existing laws, rules and regulations. The federal reserve and other federal agencies would look pretty stupid if they had paid or advanced trillions of dollars for worthless notes and mortgages and worthless mortgage bonds.

It is highly probable that the reason why the real lenders (investors) have not pursued loss mitigation with homeowners directly is that they know the note and mortgage is unenforceable and they have said so in their lawsuits against the investment banks that sold them the bogus mortgage bonds. What they don’t fully appreciate is the fact that most homeowners would willingly give them a valid mortgage and note based upon the reality of the current market. But the intermediaries (servicers) are doing everything possible to prevent modification or successful mediation of claims; which of course results from those intermediaries falsely claiming to be owners of loans that were funded by investors and falsely claiming losses on those loans that were paid by insurance and credit defaults swaps. Those intermediaries are the leading Wall Street banks in this mortgage mess. As long as we include them in the process of resolving the mortgage meltdown, the problems will be compounded rather than cured.

Fed Pours Huge Sums Into Foreign Bank Coffers

Nearly half of all US homeowners with a mortgage still ‘underwater’ in Q1

Foreclosure Victims Protesting Wall Street Impunity Outside DOJ Arrested, Tasered

Foreclosure Fraud Failures Come To A Head In Justice Dept. Protest

Bank of America Zombie Foreclosure Protest (VIDEO)

This is what it looks like when foreclosure fighters demand Wall Street criminals be prosecuted

Chasing The Shadow Of Money

OCC: 13 Questions to Answer Before Foreclosure and Eviction

13 Questions Before You Can Foreclose

foreclosure_standards_42013 — this one works for sure

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.


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 Note: Some banks are slowing foreclosures and evictions. The reason is that the OCC issued a directive or letter of guidance that lays out in brief simplistic language what a party must do before they can foreclose. There can be little doubt that none of the banks are in compliance with this directive although Bank of America is clearly taking the position that they are in compliance or that it doesn’t matter whether they are in compliance or not.

In April the OCC, responding to pressure from virtually everyone, issued a guidance letter to financial institutions who are part of the foreclosure process. While not a rule a regulation, it is an interpretation of the Agency’s own rules and regulation and therefore, in my opinion, is both persuasive and authoritative.

These 13 questions published by OCC should be used defensively if you suspect violation and they are rightfully the subject of discovery. Use the wording from the letter rather than your own — since the attorneys for the banks will pounce on any nuance that appears to be different than this guidance issued to the banks.

The first question relates to whether there is a real default and what steps the foreclosing party has taken to assure itself and the court that the default is real. Remember that the fact that the borrower stopped paying is not a default if no payment was due. And there is no default if it is cured by payment from ANYONE after the declaration of default. Thus when the subservicer continues making payments to the “Creditor” the borrower’s default is cured although a new liability could arise (unsecured) as a result of the sub servicer making those payments without receiving payment from the borrower.

The point here is the money. Either there is a balance or there is not. Either the balance is as stated by the forecloser or it is not. Either there is money due from the borrower to the servicer and the real creditor or there is not. This takes an accounting that goes much further than merely a printout of the borrower’s payment history.

It takes an in depth accounting to determine where the money came from continue the payments when the borrower was not making payments. It takes an in depth accounting to determine if the creditor still exists or whether there is an successor. And it takes an in depth accounting to determine how much money was received from insurance and credit default swaps that should have been applied properly thus reducing both the loan receivable and loan payable.

This means getting all the information from the “trustee” of the REMIC, copies of the trust account and distribution reports, copies of canceled checks and wire transfer receipts to determine payment, risk of loss and the reality of whether there was a loss.

It also means getting the same information from the investment banker who did the underwriting of the bogus mortgage bonds, the Master Servicer, and anyone else in the securitization chain that might have disbursed or received funds in connection with the subject loan or the asset pool claiming an interest in the subject loan, or the owners of mortgage bonds issued by that asset pool.

If the OCC wants it then you should want it for your clients. Get the answers and don’t assume that because the borrower stopped making payments that any default occurred or that it wasn’t cured. Then go on to the other questions with the same careful analysis.


Foreclosure Bid Rigging at Its Worst: Tiffany and Bosco Reportedly Worst Offender

Challenging the Foreclosure Auction Process

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
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.

see also

Editor’s Analysis: The piece below is a report from our best investigator doing some work in Arizona. If you want to hire him, just contact us and we will put you in touch with him. The emphasis is added by me.

The report speaks for itself, but there clearly is something wrong with the operation of a system that allows for bidding without proof of loss, without paying the $10,000 required as earnest money and without any transparency.

The auctioneer, selected by the substituted trustee who was substituted usually by a fabricated document claiming false authority and forged by someone who may never have existed, is clearly the paid underling of the banks that ordered the foreclosure with perks offered at the end of the auction process for those who want the house in question.

Despite numerous law-breaking allegations and even proof of violations of the notary laws and recording laws, Tiffany and Bosco continue to practice without any impediment. You can thank the DOJ and AG Holder along with the Obama administration for establishing a climate where crime and moral hazard run rampant.

More importantly, while the bids and value of the notes are manipulated to be in conformance with what is reported to Wall Street investors (as pointed out by Charles Koppa), they still have no jumped the hurdle of having a non-creditor bid at the auction and are essentially hoping that the passage time will overcome any claim that they should have paid cash. It is for this and other reasons that we believe that both the substitute trustee and auctioneer, individually and as representative of the company that sent them to the auction have exposure to liability and if the right fact pattern emerges from all this, they should be sued and prosecuted.

Fundamentally the strings are being pulled by Wall Street banks who are so far successfully avoiding trillions of dollars in liabilities for paying cash on bids made on their behalf but for which there was no consideration in the form of the debt or the cash required by statute.

In my opinion those banks are extremely vulnerable to this challenge and the piercing of the corporate veils and ladders and layering will be relatively easy. There is gold in these hills for both evicted homeowners and lawyers who represent them. The pot can be measured in the trillions of dollars.


Hi Neil,
I have digitally recorded, at the request of a client, FIVE Tiffany & Bosco trustee sales from beginning to end.  My declarations regarding these trustee sales are now part of the record in a BK Adversary Proceeding.

I can state categorically the creditor is never at the auction.

THIS is how it goes at T&B [Tiffany and Bosco].  T&B has an auction list on their web site.  You can print it out on their web site and take it to the auction.

The auctioneer enters the room, sits down, and proceeds to read at LIGHT SPEED the list of properties scheduled for that auction.  All he calls is the T&B internal auction number and the street address.  If a bidder is interested, he yells PULL.  The auctioneer proceeds with the list with a variable number of trustee sales having had a PULL yelled.  The auctioneer then leaves the room and the bidders talk amongst themselves.

The auctioneer then returns with a stack of files, that match the sales that had a yell of PULL.  The other homes on the list are never brought up again.  I have checked the recorders web site and every one of the homes which never got passed the PULL stage had a trustee deed which T&B stated that an auction occurred and the property was sold for cash or, protanto, via a credit bid (which never happened, I have it on tape).

Now, regarding the sales prefaced with PULL.  The auctioneer then starts reading a long trustee disclaimer at rapid speech.  He then calls a property, starts that T&B as trustee for the lender, opens the bid with XXXXXX amount, whatever is listed on the form.  Anyone who wants to bid can not do so but has to have first handed the auctioneer a $ 10,000.00 check.  The auction continues until the last bid is received.  I have checked these properties and the Trustee Deed does match the final amount bid.

HOWEVER, I do not recall, ever, an auction where the sale amount was MORE than the declared amount of the original note (that number is in the sales list).  And I believe I know why.  The Arizona excess funds statute says there are excess funds, only, when the sale amount is HIGHER than the declared value of the original note on the Notice of Trustee Sale.  Therefore, whatever made up amount is on the Trustee Notice controls whether or not there are excess funds.

So, to avoid having excess funds, all a lender has to be is gerrymander the note about, enter whatever credit bid they want, and certainly low enough to encourage a sale, and voila, not a dime back to homeowners, even if they have received payment on the note from credit default swaps, etc.

Finally, the creditor is never there at the sale.  At least in the case of T&B, the creditor has their bid PLACED by the AUCTIONEER when a file is PULLED, or, the credit bid is never even mentioned for properties that are not PULLED!

As an aside, during some auctions, when nearly everyone has left, a couple of bidders would linger behind and when alone with only the auctioneer and ME looking like I am packing to go, the bidders ask for a LATE PULL.  Of course my recorder is still running.  The auctioneer goes and gets the late PULL property files.  He calls an auction and in these case, there is only one bidder who offers ONE DOLLAR above the credit amount bid by T&B on behalf of the lender.  You can draw a conclusion from these collusive late events that is probably entirely accurate.  AND, I have them on tape.

IF you would like a copy of the videos to see for yourself, just ask.


Banks Could Owe Trillions on Fake Rigged Credit Bids

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
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 Analysis of Auctions of Foreclosed Properties: Nobody thinks about it because it basically never happened. The laws of each state whose statutes I have looked at including the provisions of most promissory notes are clear — if the creditor receives a payment in excess of the amount due, the excess must be paid to the borrower.

We all know how keen I am on applying that that precept to the receipt of insurance, credit default swaps, guarantees and Federal bailouts, but there is a much simpler aspect to this that can be pled in the alternative when one is attacking the foreclosure sale. Remember that in most states alternative pleading is allowed and even encouraged. So your alternative pleading in this case would be that the foreclosure was wrongful OR, if it wasn’t wrongful then the borrower is entitled to money. How? Why?

If the Judge won’t let you come in through the front door, you find another door or point of entry. In this case, the strategy I am proposing puts the issue  right on the table and could even be limited to this one cause of action. It would be breach o contract and perhaps a second count for breach of statutory duty, nullification of instrument (the deed in foreclosure). What you are looking for is damages.

The allegations supporting the cause of action for damages would be that the creditor never alleged pr proved the amount they lost or misrepresented the amount they lost. We are talking money here, not notes, mortgages, assignments and indorsements. Money is the key to the evil that was perpetrated and money is what will bring the perpetrators into a perp walk even if the government is reluctant to do so.

If the non-creditor bids $350,000 for the property based upon the  Foreclosure Judgment or the papers filed with the “substitute trustee” (why is there ALWAYS a substitute trustee?), then the amount due on the bid is $350,000.

If your allegation is that the “creditor” never had a loss, never showed proof of payment , proof of loss or any actual transaction in which money exchanged hands from the “creditor” to any other party to acquire or fund the origination of the loan, then there is no loss. Yet the non-creditor paid nothing because it submitted a credit bid which if you look at your state statutes you will see is near impossible for them to offer and certainly should not be accepted in lieu of cash. The statutes say the bidder must pay for the bid, especially if they have already received the deed on foreclosure (which you have pled alternatively should be nullified). Paying the bid means payment in cash.

So the court is faced with a conundrum. On the one hand it ignored your prior arguments of lack of standing, lack of injured party, but on the other hand the Judge has before him or her a perfectly valid complaint that cannot be dismissed on its face on the basis of res judicata or collateral estoppel because the cause of action arose AFTER final judgment. If the Judge does the right thing, then he wil deny any motion to dismiss from the other side and then allow discovery.

Once you get into discovery the only issue is whether the “creditor” was indeed a creditor and if so how much they actually “lost” by the alleged breach of the promissory note by the borrower. They can only prove their side of the case by showing that money exchanged hands and that the money came from their pocket, not someone else’s pocket.

This discovery will also lead to the question of what was reported to investors, how the proceeds of insurance and credit default swaps were applied, all of which reduce the amount due from the borrower because they reduce the amount payable to the “creditor.”

Assuming the “creditor” is unable to account for the application of proceeds of insurance and credit default swaps, and assuming that they are unable to show a canceled check or wire transfer receipt and wire transfer instructions, then the amount of their injury is zero or perhaps even less than zero if they received fees and compensation from the yield spread premium, the insurance, and the guarantees and hedges like credit default swaps.

The auctioneer has a duty to collect the money and distribute it according to statute. If the “Creditor” submitted any bid, you have just proved that they were owed nothing and therefore their bid should have been paid in cash. The Court must them either nullify the sale or, if enough time has gone by, the probabilities rise that the “creditor” will be forced to pay for the bid. The amount paid is an “overpayment” for the actual loss. Under statute and the note, such overpayment are due back to the borrower.

This is an easy case, like personal injury only less paperwork, for lawyers to take on contingency and make a ton of money for themselves and their clients. With standard contingency if the bidder is forced to make a payment in the amount of the bid, then your fee in the above example would be over $100,000.

If the Court nullifies the foreclosure, the next step is quieting title perhaps in the same order, and you get paid by a note from the client with collateral — namely the house upon which there are no longer any encumbrances. That note can be negotiated into the secondary market the way the banks should have done in the first place.

The next step would obviously be the abuse of process, wrongful foreclosure and slander of title just to name a few causes of action that can be prosecuted against the “creditor” and its successors or assigns, seeking damages, treble damages, punitive damages and exemplary damages.

The moral of the story is that the banks can fake the story about the money in the loan documents, the assignments and indorsements. But they can’t fake the money transaction for which their are footprints at the banks, account processors for the banks, Federal reserve and network exchanges where the money is routed when paid. They will argue that they already proved their case with the note. But the note proves the DEBT not the LOSS.

Illinois Takes A Step in the Right Direction

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
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 Comment: Illinois has taken a step forward but they are still plagued by the wrong assumption — that the courts are dealing with a legitimate debt. There is no debt if it is paid and in many cases the original debt has been paid down or paid off by  third party mitigation payments from insurance and credit default swaps.

Remember the note raises the presumption of the existence of the debt which is rebuttable. It does not prove the loss. Without proof of loss there is no foreclosure or any other lawsuit for that matter. The party seeking relief must show they have been or will be injured in some way to get money damages, equitable relief (like foreclosure) or anything else. Without injury they don’t belong in court, which is why we have a jurisdictional rule regarding standing. No injury=no standing.

So the bad point about the new rules is that the forecloser must prove the debt, but it doesn’t specifically say they must plead or prove the loss. The problem with that is production of the note (whether the the real note or something that looks like the real note) raises the presumption of the debt. It also causes Judges to assume that the loss is self-evident — i.e., if someone has the note it is presumed that they paid for it and will suffer a loss of their expectancy of payment under the terms of the note.

If you don’t demand to see the canceled check or the wire transfer receipt and wire transfer instructions or other forms of actual payment of money (where it can be seen that money actually exchanged hands) then there is no consideration, the paper is not negotiable, the UCC doesn’t apply and the party seeking to foreclose has no standing because they have not been injured by the borrower, even if the borrower didn’t make any payments. At the root of this mess is a scheme of illusions created by the banks. Demand reality and you will get traction.

But there are also some good points about the new rules. The one requiring counseling for the homeowners would be good if the counselors knew what they were talking about and understood the perfectly valid defenses available to homeowners who got swindled into signing papers in favor of a company that never made a loan to them. From what I have seen, the counselors don’t have any idea about such things and it is merely a debt counseling session about getting your life in order, which is a good thing, but not what you can do about having your life turned upside down by an illegal foreclosure.

The part I like is the burden placed on foreclosers that would show that a modification is not possible. This is simple: if the results of foreclosure are that the net proceeds are substantially less than what the homeowner is offering, then the loan  can be modified. Demand should be made for the methodology and the person who calculated the modification for the forecloser and their authority to do so. And demand should be made for what contact they had with the “creditor.” Then you contact the creditor and find out (a) if they are the creditor (b) whether they were contacted and (c) how they feel about getting $150,000 from the homeowner rather than $50,000 from foreclosure.

As for the modification part, the banks are going to fake it just like they fake everything else. Be ready with an expert declaration that shows that the modification offered is far better than foreclosure, and that this is evidence of the fact that the servicer never even “Considered” the modification, which is violation of HAMP and HARP.

Right of Redemption: Going After the Money Trail

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
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 Comment and Analysis: Most people and lawyers I talk to think there is no life after sale of the property. This is not the case in my opinion and I encourage lawyers to start getting up to speed on the causes of actions and remedies that are available for attacking a foreclosure judgment and separately the foreclosure sale or “auction.”

Of course we know that a cause of action for wrongful foreclosure, slander of title and quiet title, to name a few, are available to attack the foreclosure judgment or the final order in non-judicial states that allows the foreclosure sale to go through. There is also the semi-final order from the bankruptcy court which lifts the stay to allow for the foreclosure wherein the court frequently inserts that the movant is the owner of the loan. (When a different entity than the movant initiates the foreclosure and bids in the property as a creditor without getting leave of court to amend judgment or the motion to lift stay there are some very weighty issues raised that have been covered in earlier posts).

And as pointed out by one reader, the “opportunity to Cure” is another attack that is available before Judgment if you properly challenge the amount demanded. Proof of loss and Proof of Payment is NOT the note and Mortgage. It is a showing that the a party actually paid value for the debt and stands to lose money (economic loss) if it isn’t paid by the homeowner. If they can’t prove the loss, the court has one of two options, one of which is ridiculous: (1) it can order the foreclosure and prohibit the initiator of the foreclosure from submitting a credit bid (they must pay cash at auction) or (2) it can dismiss the foreclosure with prejudice because no injured party is present which is jurisdictional — i.e., STANDING.

In Florida and many other states (pro se litigants: check with local licensed counsel to make sure you know what the procedure is and what is available) there is both a statutory and equitable right of redemption. In some states the sale can be attacked during the redemption period because the consideration was faked or insufficient.

Florida Statute 45.0315 allows for redemption at the amount set forth in the final judgment. The common law equitable right of redemption in Florida has a short window — 10 days — in which you can challenge the sale based on the violation of court ordered procedures (which opens the door to wrongful foreclosure by a non-creditor), bid rigging, unfair practices which are loosely defined, or anything else that leads to a determination of a deficiency.

The deficiency is in Florida a judgment which the bank can pursue after the sale based upon the difference between the amount of the judgment and the amount of the sale which of course the bank fully controls and the cases are replete with references to the obvious fact that the sale price is more often than not governed by an arbitrary decision of the lender.In non-judicial states the deficiency is waived but there could be and usually are tax consequences arising from the “forgiven principal and interest” that cannot be offset by the loss taken on the house.

Some people, at my suggestion are starting funds in which the homeowner is given the means to exercise the right of redemption on one condition: that the forecloser prove loss and prove payment so the new lender can be assured that there are no claims on or off record.

This is leading to some interesting settlements and high profit margin for those people with money who can put up the full amount of the judgment but end up not laying out any money or very little and getting a mortgage from the homeowner that is valid and enforceable and in an amount far less than the original debt — when the pretender lender fails to produce evidence of loss (canceled check, wire transfer receipt etc.).

Frankly I am looking for investors and a manager who can handle that business which is very lucrative. An off shoot of the same idea is to buy the HOA’s lien, and foreclose on it, which is cheaper and messier. Either way the homeowner gets to stay in the home, creditors are paid what theyshould be paid, and the equity in the home is restored.

Procedurally, lawyers should pay close attention to the time limits lest they miss it and commit malpractice. A homeowner can come back at a foreclosure defense attorney alleging that the redemption period was not used properly. My suggestion is that immediately after sale the motion is filed to have the court set the proper amount of redemption based upon evidence of actual loss. You might be met with res judicata arguments or collateral estoppel, because you should have challenged the forecloser to prove their loss before judgment, but I think the period of redemption raises the issue again, or at least does so within the scope of reasonable argument.

It might well be that the pretender lender, now faced with a final judgment they procured, or a final order they procured will be estopped from maintaining the shell game they were able to conduct before judgment and finally pinned down to show that XYZ Bank actually has a receipt showing they paid for the loan either at origination or in a transfer.

At the risk of repeating myself, if you lead with an attack on the documents you are tacitly admitting that the underlying monetary transaction was real. If you lead with an attack on the monetary transactions (the money trail) then the deficiencies in the documents are abundantly clear. The documents should reflect the realities of the monetary transactions. If they don’t, the documents are either invalid or at least lose most of their credibility and all of their presumptions.

Think it through, do the research and don’t do anything until you are satisfied that what I am saying here applies to whatever case you are working on. In the end, you will most likely come tot he same conclusion I did — denial of the debt, note, mortgage and default is not only proper, it is the only truthful thing to do.

In discovery you will prove that the debt did not arise from any transaction between the borrower and the forecloser or any predecessor or successor. The documents, which point to the pretender, are therefore invalid as naming the wrong (and usually a strawman) party as payee and secured party. Add to that the conversion of the promissory note to a mortgage backed bond where the repayment terms offered the lender are different than the repayment terms offered the buyer, and you have a pretty strong argument to set the pretender back on its heels and draw some blood.

Bank of America is desperately trying to rid itself of these mortgages and mortgage bonds almost at any cost or price. They understand that every mortgage carries a potential huge liability. Taking my previous (see yesterday’s post) article, there could be a zero balance owed to the “creditor” after offset for mitigation payments, and the fabrication and forgery of documents, together with general application of TILA provisions might entitle you to recover treble damages plus attorneys fees and costs. In a wrongful foreclosure action the money really piles up, especially where the homeowner was evicted.

And it all can start in motions directed at setting the correct amount of the redemption.

Below is the oddly worded Florida Statutory right of redemption. remember, if you are not an attorney licensed in the state in which the property is located, you are far more likely to make procedural mistakes than the pretender lender and lose a case you might otherwise win. Advice, counsel and preferably representation by competent counsel is in my opinion an absolute requirement. If local counsel disagrees with the application of these principles to the situation presented his or her opinion should be taken as authoritative rather than this blog which is meant to be only informative.

45.0315 Right of redemption.—At any time before the later of the filing of a certificate of sale by the clerk of the court or the time specified in the judgment, order, or decree of foreclosure, the mortgagor or the holder of any subordinate interest may cure the mortgagor’s indebtedness and prevent a foreclosure sale by paying the amount of moneys specified in the judgment, order, or decree of foreclosure, or if no judgment, order, or decree of foreclosure has been rendered, by tendering the performance due under the security agreement, including any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney’s fees of the creditor. Otherwise, there is no right of redemption.

Ron Ryan Takes to the Next Level, Taking the Offensive

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).

Ron Ryan , Esq. lives and works in Tucson, Az. He has been working, analyzing and writing and representing people whoa re the victims of this huge scam which the banks and media call securitization that never actually happened. He practices almost exclusively in bankruptcy and while he understood the basic elements of what was happening he struggled to put it into wording and allegations that the Court would be hard-pressed to ignore.

I think he succeeded in these two pleadings, and I suggest that you read them carefully. While he admits that a “loan” existed he takes apart the origination, assignment and securitization piece by piece leaving US Bank naked in the wind.

I congratulate him on a job well done.




With All the Settlements, What is Owed on Principal?


The complexity and shroud of mystery surrounding claims of securitizations, assignments etc can be simplified if you just look at the money. This is why I have forensic auditors who chase this information down. Call living lies customer service 520-405-1688 if you can’t find an adequate analyst of your own who REALLY dig in.

  1. What money was paid to whom? When? How? Who is a witness that can authenticate and verify the documents used (ACH, Wire transfer, check) the documents used for money transfer?
  2. If the creditor already settled with the investment bank, then is the claim for collection or foreclosure on the mortgage still viable?
  3. How was the settlement allocated as to the investor-lenders?
  4. If the investor-lenders received all or part of the money from the investment bank, how much is owed by the homeowner and to whom?
  5. To whom was money paid? Who received the actual payments from borrowers, co-obligors, insurance, credit default swaps, federal bailouts and civil settlements? How much of this money was received as agent for the investor-lenders (creditors)?

There are lots of questions but they can all be answered with arithmetic. If investor bought a bogus mortgage bond for $100 million and received $50 million in settlement, then they are either owed still $50 million or they settled the claim and if you contact them, they will say they have no interest in pursuing the matter any further. So why the foreclosure? And if there is a foreclosure, who gets the money? Who is the “creditor that submits a “credit bid.?”

People don’t like talking about the free house syndrome, but SOMEONE IS GETTING A FREE HOUSE one way or the other — either the banks or the homeowner.

One thing I am sure about is that there is a claim that can be firmly supported by the presence of a settlement or proceeds from co-obligors (insurers, CDS counterparties etc.). Either the amount due is wrong, eliminated or at least subject to a proper accounting. This would negate the issues of foreclosure, at least for a while, in the notice of default and initiation of foreclosure based upon the assertion that the creditor has been identified as beneficiary or mortgagee and the amount due is as stated. The amount due is probably NOT as stated and the creditor identified might not even have a dog in the race anymore.

Judges get angry at borrowers for bringing this up. I think lawyers should have the guts to stand up to such judges and say your anger is misplaced. Don’t shoot the messenger! The borrower didn’t create this mess, it was the financial industry and this loan was not even originated using standard rules of underwriting and document preparation.

MERS: No Agency with Undisclosed Rotating “Principals”


The Stunning clarity of the decision rendered by the Washington Supreme Court, sitting En Banc, corroborates the statements I have made on this blog and under oath that they might just as well have put the name “Donald Duck” in as the mortgagee or beneficiary.

The argument, previously successful, has been that even if the entity MERS had nothing to do with financial transaction and even if they didn’t know about the transaction because the “knowledge” was all contained on a database that nobody at MERS checked for authenticity or veracity, the instrument was still valid. This coupled with a “public policy”argument that if the courts were to rule otherwise none of the MERS “mortgages” would be valid thus making the creditor unsecured.

The Washington Supreme court rejected that argument and further added that if such was the result, then it was through no fault of the borrower. SO now we have a situation where the law in the State of Washington is that MERS beneficiary instruments do not establish a perfected lien and therefore there is no opportunity to foreclose using either non-judicial or judicial means. A word of caution here is that this applies right now as law only in that state but that it closely follows the Landmark decision in Kansas Supreme Court. But the decision is extremely persuasive and reinvigorates the fight over whether the loans were secured loans or unsecured — especially powerful in bankruptcy courts.

It should be noted that the Washington Supreme Court has wider application than might appear at first blush. This is because the question was certified not from a state judge but from a federal court. Thus in Federal Courts, the decision might be all the more persuasive that MERS, which never had anything to do with the financial transaction, never handled a dime of the money going in or out of the loan receivable account, and never had any person with personal knowledge who could identify and verify that there was a disclosed principal for whom they were acting should be identified as a non-stakeholder with bare (naked) title recited in a fatally defective instrument.

This does not mean the obligation vanishes. It just means that they can’t foreclose through non-judicial foreclosure and probably can’t foreclose even through judicial means unless they accompany it with a request that the court reconstruct the mortgage — in which case they would need to allege and prove that the disclosed parties were the sources of funds for the origination of the loans, which in most cases, they were not.

The actual parties who were the source of funds either still exist or have been settled or traded out into new investment vehicles. This is why putting intense pressure to move the discovery along is so powerful. You are demanding what they should have had when they started the foreclosure timeline with a defective notice of default signed by a person who had no idea what the loan receivable account looked like or even the identity of the party or entity that had the loan booked as a loan receivable.

You’ll remember that MERS issued a proclamation to everyone that nobody should use its name in foreclosures in 2011. But that doesn’t address the underlying fatal defect of the MERS business model and the instruments that recite MERS as the mortgagee or beneficiary.

Th reasoning behind the rejection of the “Agency” argument is also very important. The court states that “While we have no reason to doubt that the lendersand their assigns control MERS, agency requires a specific principal that is accountable for the acts of its agent. If MERS is an agent, its principals in the two cases before us remain unidentified.12 MERS attempts to sidestep this portion of traditional agency law by pointing to the language in the deeds of trust that describe MERS as “acting solely as a nominee for Lender and Lender’s successors and assigns.” Doc. 131-2, at 2 (Bain deed of trust); Doc. 9-1, at 3 (Selkowitz deed of trust.); e.g., Resp. Br. of MERS at 30 (Bain). But MERS offers no authority for the implicit proposition that the lender’s nomination of MERS as a nominee rises to an agency relationship with successor noteholders.13 MERS fails to identify the entities that control and are accountable for its actions. It has not established that it is an agent for a lawful principal.” Hat tip again to Yves Smith on picking up on that before I did.

And the court even went further than that on the issue of modification that I have been pounding on for so long — how can you submit a request for modification with a proposal unless you know the identity of the secured party and the identity of any party or stakeholder who is unsecured? Hoe can anyone settle or modify a claim without knowing the identity of the claimant or the actual status of the claim as affected by payments of co-obligors? “While not before us, we note that this is the nub of this and similar litigation and has caused great concern about possible errors in foreclosures, misrepresentation, and fraud. Under the MERS system, questions of authority and accountability arise, and determining who has authority to negotiate loan modifications and who is accountable for misrepresentation and fraud becomes extraordinarily difficult.”

BUT WAIT! THERE IS MORE! The famed Deutsch bank acting as trustee ruse is also exposed by the court, leaving doubt ( a question of material fact that is in dispute) as to the identity and character of the creditor and the status of the loan. Without those nobody can state with personal knowledge that the principal due is now this figure or that and that the following fees apply. The Supreme Court in the footnotes takes this on too, although it wasn’t argued (but will be in the future I can assure you): “It appears Deutsche Bank is acting as trustee of a trust that contains Bain’s note, along with many others, though the record does not establish what trust this might be.”

The Court also is not shy. It also takes on the notion that the borrower is not entitled to know the identity of the creditor or principal and that the borrower only has a right to know the identity of the servicer. This of course is patently absurd argument. If it were true anyone could assert they were the servicer and you could not look behind that assertion to determine its veracity.

“MERS insists that borrowers need only know the identity of the servicers of their loans. However, there is considerable reason to believe that servicers will not or are not in a position to negotiate loan modifications or respond to similar requests. See generally Diane E. Thompson, Foreclosing Modifications: How Servicer Incentives Discourage Loan Modifications, 86 Wash. L. Rev. 755 (2011); Dale A. Whitman, How Negotiability Has Fouled Up the Secondary Mortgage Market, and What To Do About It, 37 Pepp. L. Rev. 737, 757-58 (2010). Lack of transparency causes other problems. See generally U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 941 N.E.2d 40 (2011) (noting difficulties in tracing ownership of the note).”

And lastly, about making the rules up as you along, and moving the goal posts around, the Court challenges the argument and rejects the MERS position that the parties are free to contract as they choose despite any statutory language. Specifically the question what is what is the definition of a beneficiary. In Washington as in other states, the definitions of the Act apply to all transactions described and there is no room for anyone to change the law by contract. “Despite its ubiquity, we have found no case—and MERS draws our attention to none—where this common statutory phrase has been read to mean that the parties can alter statutory provisions by contract, as opposed to the act itself suggesting a different definition might be appropriate for a specific statutory provision.”

And again corroborating my work and manuals on the livinglies store. the Court finally addresses for the first time that I am aware, the essential reason why all this is so important. It is the auction itself and the acceptance of the credit bid from a non-creditor. Besides the challenges as to whether the substitution of trustee and instructions to trustee are valid, nobody can claim title suddenly born as a result of a “transfer” or assignment” or other document from MERS, an entity that had specifically claimed any interest in the obligation. The Court concludes that you either have the proof of being the actual creditor to whom the obligation is owed, in which case you can submit a credit bid if it is properly secured, or you must pay cash.

“Other portions of the deed of trust act bolster the conclusion that the legislature meant to define “beneficiary” to mean the actual holder of the promissory note or other debt instrument. In the same 1998 bill that defined “beneficiary” for the first time, the legislature amended RCW 61.24.070 (which had previously forbidden the trustee alone from bidding at a trustee sale) to provide:
(1) The trustee may not bid at the trustee’s sale. Any other person, including the beneficiary, may bid at the trustee’s sale.
(2) The trustee shall, at the request of the beneficiary, credit toward the beneficiary’s bid all or any part of the monetary obligations secured by the deed of trust. If the beneficiary is the purchaser, any amount bid by the beneficiary in excess of the amount so credited shall
Bain (Kristin), et al. v. Mortg. Elec. Registration Sys., et al., No. 86206-1
be paid to the trustee in the form of cash, certified check, cashier’s check, money order, or funds received by verified electronic transfer, or any combination thereof. If the purchaser is not the beneficiary, the entire bid shall be paid to the trustee in the form of cash, certified check, cashier’s check, money order, or funds received by verified electronic transfer, or any combination thereof. Laws of 1998, ch. 295, § 9, codified as RCW 61.24.070. As Bain notes, this provision makes little sense if the beneficiary does not hold the note.”

Thus this court has now left open the possibility of challenging wrongful foreclosures both in equity and at law for damages (slander of title etc.) It would be hard to believe that Washington State Attorneys won’t pounce on this opportunity to do some good for their clients and themselves.

Bankers Using Foreclosure Judges to Force Investors into Bad Deals

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“Foreclosure judges don’t realize that they are entering orders and judgments on cases that are not in front of them or in which they have any jurisdiction. Foreclosure Judges are forcing bad loans down the throat of investors when the investor signed an agreement (PSA and prospectus) excluding that from happening. The problem is that most lawyers and pro se litigants don’t know enough to make that argument. The investor bought exclusively “good” loans. Foreclosure judges are shoving bad loans down their throats without notice or an opportunity to be heard. This is a classic case of necessary and indispensable parties being ignored.”

— Neil F Garfield,

Editor’s Comment:  About three times per week, something occurs to me about what is going on here and then I figure it out or get the information from someone else. The layers of the onion are endless. But this one is a showstopper. When I started blogging in October 2007 I thought the issue of necessary and indispensable parties John Does 1-1000 and Jane Roes 1-100 were important enough that it would slow if not stop foreclosures. The Does are the pension funds and other investors who thought that they were buying mortgage bonds and the Roes were the dozens of intermediaries in the securitization chain.

Of course we know that the Does never got their bond in most cases, and even if they did they received it issued from a “REMIC” vehicle that wasn’t a REMIC and which did not have any money or bonds before, during or after the transaction. Instead of following the requirements of the Prospectus and Pooling and Servicing Agreement, the investment banker ignored the securitization documents (i.e., the agreement that induced the investor to advance the funds on a forward sale — i.e., sale of something the investment bank didn’t have yet). The money went from the investor into a Superfund escrow account. It is unclear as to whether the gigantic fees were taken out before or after the money went into the Superfund (my guess is that it was before). But one thing is clear — the partnership with other investors far larger than anything disclosed to the investors because the escrow account was from all investors and not for investors in each REMIC, which existed only in the imagination of the CDO manager at the investment bank that cooked this up.

We now know that in all but a scant few cases, the loan was (1) not documented properly in that it identified not the REMIC or the investor as the lender and creditor, but rather a naked straw-man that was a thinly capitalized or bankruptcy remote relationship and (2) the loan that was described in the documentation that the homeowner signed never occurred. The third thing, and the one I wish to elaborate on today, is that even if the note and mortgage were valid (i.e., referred to any actual transaction in which money exchanged hands between the parties to the agreements and documents that borrower signed) they never made it into the “pools” a/k/a REMICs, a/k/a Special Purpose Vehicle (SPV), a/k/a/ Trust (of which there were none according to my research).

The fact that the loan never made it into the pool is what caused all the robo-signing, fabrication of documents, fraudulent documents, forgeries, misrepresentations and corruption of both the title system and the court system. Because if the loan never made it into the pool, the investment banker and all the intermediaries that were used were depending upon a transaction that never took place at the level of the investor, to wit: the loan was not in the pool, the originator didn’t lend the money and therefore was not the lender, and the “mortgage” or “Deed of trust” was useless because it was the tail of a tiger that did not exist — an enforceable note. This left the pools empty and the loan from the Superfund of thousands of investors who thought they were in separate REMICS (b) subject to nothing more than a huge general partnership agreement.

But that left the note and mortgage unenforceable because it should have (a) disclosed the lender and (b) disclosed the terms of the loan known to the lender and the terms of the loan known to the borrower. They didn’t match. The answer was that those loans HAD to be in those pools and Judges HAD to be convinced that this was the case, so we ended up with all those assignments, allonges, endorsements, forgeries, improper notarizations etc. Most Judges were astute enough to understand that the documents were fabricated. But they felt that since the loan was valid, the note was real, the mortgage was enforceable, the issues of where the loan was amounted to internal bookkeeping and they were not about to deliver to borrowers a “free house.”  In a nutshell, most Judges feel that they are not going to let the borrower off scott free just because a document was created or executed improperly.

What Judges did not realize is that they were adjudicating the rights of persons who were not in the room, not in the building, and in fact did not even know the city in which these proceedings were being prosecuted much less the fact that the proceedings even existed. The entry of an order presuming or stating that the loan was in fact in the pool was the Judge’s stamp of approval on a major breach of the Prospectus and pooling and servicing agreement. It forced bad loans down the throat of the investors when their agreement with the investment banker was quite the contrary. In the agreements the cut-off was 90 days after closing and required a fully performing mortgage that was originated utilizing industry standards for due diligence and underwriting. None of those things happened. And each time a Judge enters an order in favor of for example U.S. Bank, as trustee for JP Morgan Chase Bank Trust 1234, the Judge is adjudicating the essential deal between the investor and the investment banker, forcing the investor to accept bad loans at the wrong time.

Forcing the investors to accept bad loans into their pools, probably to the exclusion of the good loans, created a pot of s–t instead of a pot of gold. It isn’t that the investor was not owed money from the investment banker and that the money from the investment banker was supposed to come from borrowers. It is that the pool of actual money sidestepped the REMIC document structure and created a huge general partnership, the governance of which is unknown.

By sidestepping the securitization document structure and the agreements, terms, conditions and provisions therein, the investment banker was able, for his own purposes, to claim ownership of the loans for as long as it took to buy insurance making the investment banker the insured and payee. But the fact is that the investment banker was at all times in an agent/fiduciary relationship with the investor and ALL the proceeds of ALL insurance, Credit Default Swaps, guarantees, and credit enhancements were required to be applied FIRST to the obligation to the investor. In turn the investor, as the real creditor, would have reduced the amount due from the borrower on each residential loan. This means that the accounting from the Master Servicer is essential to knowing the actual amount due, if any, under the original transaction between the borrower and the investors.

Maybe “management” would now be construed as a committee of “trustees” for the REMICs each of whom was given the right to manage at the beginning of the PSA and prospectus and then saw it taken away as one reads further and further into the securitization documents. But regardless of who or what controls the management of the pool or general partnership (majority of partners is my guess) they must be disclosed and they must be represented in each and every foreclosure and Trustees on deeds of trust are creating huge liability for themselves by accepting assignments of bad loans after the cut-off date as evidence of ownership fo the loan. The REMIC lacked the authority to accept the bad loan and it lacked the authority to accept a loan that was assigned after the cutoff date.

Based upon the above, if this isn’t a case where necessary and indispensable parties is the key issue, I do not know of one — and I won the book award in procedure when I was in law school besides practicing trial law for over 30 years.






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