Time Running Out on Foreclosure Renters

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

Editor’s Comment: It would sound like a joke if it were not so real. First you oversell mortgages, throwing underwriting standards overboard, then comes the inevitable foreclosure and eviction of the homeowner — but not the tenant who WAS protected under Federal law but is no longer going to receive that protection. Millions of people are going to be seeking rental accommodations.

The result? rental prices will go up creating a new tax on those who rent, and housing starts will increase. Think about it, we build a bunch of houses, sell them as exorbitant rates knowing we are going to get thrown back in our lap, we create blighted abandoned neighborhoods and towns and subdivisions, and the solution selected is not to find a way to put people in homes that are unoccupied but to build more houses.

Policy makers like new construction because of the impact on jobs. Investors like renting because they get higher and higher rental income on their properties. But the essential problem of homelessness will remain because the rents will be priced outside the capability of the prospective renters.

Wouldn’t it be a better idea to keep the homes occupied, to prevent blighted neighborhoods where the cities bulldoze the homes away because the banks walked away from their responsibility as “owners?” Wouldn’t it be a better idea to keep getting tax revenue from these homes? Wouldn’t it be better for utilities and local businesses to have the people occupying these homes pay their bills and revive a stagnant economy and unemployment?

Of course we could start with extending the rights of tenants to stay in homes legally rented to them by the homeowners. But amongst the millions soon to be displaced are those homeowners who occupy their homes, who put earnest money into the deal and more money to fix up and furnish the place. Most of them had no idea that the amount demanded in the notice of default, in the foreclosure and in the auction was simply a wild guess without taking into account the money received from insurance, credit default swaps and federal bailouts.

Most had no idea that the party foreclosing on them had not invested one dime into the funding or purchase of their loan. These people were every much a victim of fraud as the investors who bought bogus mortgage bonds. We know the remedy for fraud but in this country it has a twist. If you are big enough and you commit fraud you to keep the money and property obtained through illegal or criminal means. But if you are the little guy then you get prosecuted for numbers on an application form that you never saw, much less filled out until closing along with a 3 inch stack of papers to initial and sign.

PRACTICE HINT: WHETHER YOU ARE REPRESENTING THE HOMEOWNER OR THE RENTER THERE ARE VIABLE, WINNABLE DEFENSES THROUGH DENY AND DISCOVER. WITH RENTERS THE DEFENSE WILL BE RAISED THAT A RENTER CANNOT CHALLENGE TITLE.

But the only reason why the party seeking eviction (forcible detainer) has standing is that title changed. The allegation of a change in title is an essential part of their pleading.

You should argue that if they bring up title then you have the right and obligation to defend it by showing that the title that was recorded was procured through fraudulent means.

The renter still owes the money to the homeowner. The response should be a counterclaim or interpleader in which the homeowner and the “new” owner fight it out over who gets the rent money. Otherwise the renter could be twice liable for the same rent if the unit owner prevails in overturning the foreclosure.

Renters At Risk In Foreclosure Crisis Rely On Short-Term Federal Law

Renters Foreclosure Crisis

A group of homeless people sit around the fire at their homeless encampment near the Mississippi River on Feb. 23, 2012, in St. Louis. (AP Photo/Tom Gannam)

A key law that has prevented millions of low-income tenants from becoming homeless is set to expire at the end of the 113th Congress, kicking off what experts warn could be a new wave of evictions.

Homelessness is up 16 percent among families in major cities since the beginning of the foreclosure crisis, according to a report from the U.S. Conference of Mayors, and the number of renters affected by foreclosure has tripled in the past three years.

While public attention has centered on homeowners, research shows rental properties constitute an estimated 20 percent of all foreclosures, and 40 percent of families facing foreclosure-related evictions are renters. Those numbers translate into millions of Americans at risk of homelessness, many of them children.

What stands between many of those children and the streets is a little-known federal law that, barring congressional intervention, will expire in 2014.

In 2009, the Protecting Tenants at Foreclosure Act (PTFA) granted renters the right to stay in their homes until the end of their lease or, if they have no lease, for a minimum of 90 days. Without that guarantee, renters are dependent on a patchwork system of state and local protections that range from quite good — in California and Connecticut, for instance — to completely inadequate.

“States have not stepped up to ensure protections within their jurisdictions,” said Tristia Bauman, a housing attorney at the National Law Center on Homelessness & Poverty. “And so the PTFA is still the best protection available and we want to make sure that it lasts beyond 2014.”

Bauman is the primary author of the law center’s new report, “Eviction (Without) Notice,” that warns the homelessness problem for renters will only continue to worsen. The total number of renters has increased by 5.1 million nationally since 2000. In 2010, renters made up the majority of households in several of our nation’s most populous cities, and their numbers are expected to grow.

“This report shows how important PTFA’s protections are and the need to make them permanent,” said Maria Foscarinis, executive director of the National Law Center on Homelessness & Poverty in a statement. “But it also shows that, because many people are not aware of the law and oversight is limited, PTFA rights are often violated — leaving families across the country out on the street.”

A survey of 156 renters, many of them unaware of their rights under federal law, found the failure of new owners to determine the occupancy status of residents in foreclosed properties to be among the top PTFA violations cited by respondents.

“We found that new owners may make no effort to determine if the property is occupied,” said Bauman. “The tenant is left in a position where they may not know their properties have changed hands until they come home and their door is locked.”

A survey of 227 legal rights advocates cited lack of communication from new owners (85.9 percent); illegal, misleading or inaccurate written notices (68.1 percent); and harassment from real estate agents, law firms or bank representatives (61.1 percent) as top problems.

Pointing to these violations of the PTFA and the ongoing risk of homelessness as a result of the foreclosure crisis, Bauman said, “All of this speaks to the need for this law to continue to be a protection.”

1.5 Million Seniors Foreclosed — Most Illegally

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

Editor’s Comment and Analysis: As I predicted (along with many others), the foreclosure scam is reaching further and further to all segments of the population. With more than half of all homeowners under 40 being “underwater” and the release of information showing that widows are being hit hardest, the statistics showing 1.5 million foreclosures on people over 50 are hardly surprising. But they don’t tell the whole human story of grief, confusion and disbelief that the banks would engage in large-scale fraud.

It is ironic that many of the millions who were hit with foreclosure were the same people who joined the public outcry against mortgage relief because they were playing by the rules, making their payments, and also losing money. They failed to educate themselves and their naive belief that the debts were legitimate and the borrowers were deadbeats led the public, the media, and those who pull the levers of power in Federal and State government to conclude that the debts were legitimate and the market simply went sour.

To call these debts legitimate in the face of absolutely incontrovertible facts regarding appraisal fraud, forgery, robo-signing, and lies told in in court is akin to drawing the distinction between rape and legitimate rape. You can argue all you want about what a woman should look for to “detect” a possible criminal and and argue circumstances when she “asked for it” but rape is rape.

And you can argue all you want about how homeowners should have read a pile of papers 6 inches thick to determine what was really going to happen to their lives if they signed those papers and that they should have investigated who was behind the easy money, but in the end they were the victims, just like many investors were the victims.

And until we agree that the money the banks received should have been allocated to the investors on whose behalf they received the money we won’t know the amount of the debt of the homeowner, if any, that is remaining. Allowing foreclosures to start, foreclosure “sales” to be conducted, foreclosure deeds to be issued “for cash received” when they accepted a credit bid from a non-creditor, and then allowing evictions was and remains wrong.

In fact, while I have not seen a study analyzing this, I’ll bet you will find that the same people who were foreclosed were on pensions paid by managed funds that bought the bogus mortgage bonds that enabled the mortgage meltdown in the first place.

So the same people were both losers in investing in mortgages and then losers when their own money was used against them in deals that were impossible to be viable.

The tragic irony here is that most borrowers still don’t get it. They also think the debts are legitimate and that any claims of fraud or predatory loan practices are just ways of delaying the inevitable foreclosure and eviction.

Precious few homeowners have any idea that they have legitimate defenses and remedies that would lead to a mortgage-free house or a modification that uses fair market value as a basis for the loan balance and applies the payments received by creditors from insurance, credit default swaps and federal bailouts.

In what I have called Deny and Discover, lawyers following this blog or who have arrived at the same conclusions on their own are winning case after case. Mark Stopa published an article about 14 cases in Florida in which 14 different judges entered summary final judgment FOR THE BORROWER!

As the banks plant articles warning against strategic defaults, ultimately, there is no debtor’s prison in this country and they can’t do a thing about it. And widows, pensioners and others who are on fixed incomes and facing rising medical and living expenses are forced into default. This mess will take decades to clear up unless government does its job of governing and applying the same set of rules to everyone. If you commit fraud, you owe restitution and you are punished either civilly or criminally.

The Banks, Rushing To Foreclose So They Can Sit On Vacant Homes

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Editor’s Comment:

Author: 

These damn judges here in Florida, they really need to wake up, start working harder and grant more foreclosures more quickly.  Hurry up already, and stop whining about budget cuts and staff positions cut, and who cares that the entire state court system is funded by less than one percent of the state budget, and shut up about case loads that have tripled to 3,000 or more cases per judge and frazzled judicial assistant.  Just grant those damn foreclosure judgments….after all, everyone knows the economy cannot recover until these damn slacking judges push through this foreclosure backlog….right?

Oh wait a minute, there’s apparently a bit of a fly in this ointment.  You see, apparently the banks are cancelling foreclosure sales just as quickly as our good judges are able to sign those damn Final Judgments of Foreclosure…yup…apparently, now wait just a dadgummed minute.

You mean to tell me our elected circuit court judges are busy throwing families out into the streets just so the banks can amass ever larger portfolios of vacant and abandoned properties that they are apparently not responsible for taking care of?

Well shut my mouth!  You don’t say?  Really!  No way?  Do you mean to tell me we can’t blame all this on our under-funded judges and this ain’t the fault of those damn ethically-challenged foreclosure defense attorneys what with all their delay tactics and pesky rules and those absurd arguments about THE LAW…blah, blah, blah.

When exactly will this nation wake up and start directing appropriate anger and rage at the real evil that’s hard at work, everyday all across this sleeping nation?

From the Tampa Times:

It’s an oft-repeated pattern.

In the last 12 months, lenders have canceled auctions on 4,204 properties in Pinellas and Hillsborough counties. Sales have been canceled two, three, even nine times on some homes.

In many cases, banks delay seizures to avoid having to pay maintenance bills or homeowner association fees. Meanwhile, neighbors fend off vandals and thieves and worry about property values falling because of the deteriorating houses.

The repeated cancellations burden the court system.

“These never seem to go away,” said Thomas McGrady, chief judge of the Pinellas-Pasco County Circuit. “It’s a nuisance.”

Mortgage Rates in U.S. Decline to Record Lows With 30-Year Loan at 3.84%

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Editor’s Comment:

It appears as though Bloomberg has joined the media club tacit agreement to ignore housing and more particularly Investment Banking or relegate them to just another statistic. The possibilities of a deep, long recession created by the Banks using consumer debt are avoiđed and ignored regardless of the writer or projection based upon reliable indexes.

Why is it that Bloomberg News refuses to tell us the news? The facts are that median income has been flat for more than 30 years. The financial sector convinced the government to allow banks to replace income with consumer debt. The crescendo was reached in the housing market where the Case/Schiller index shows a flash spike in prices of homes while the values of homes remained constant. The culprit is always the same — the lure of lower payments with the result being the oppressive amount of debt burden that can no longer be avoided or ignored. The median consumer has neither the cash nor credit to buy.

Each year we hear predictions of a recovery in the housing market, or that green shoots are appearing. We congratulate ourselves on avoiding the abyss. But the predictions and the congratulations are either premature or they will forever be wrong.

The financial sector is allowed to play in our economy for only one reason— to provide capital to satisfy the needs of business for innovation, growth and operations. Instead, we find ourselves with bloated TBTF myths, the capital drained from our middle and lower classes that would be spent supporting an economy of production and service. That money has been acquired and maintained by the financal sector giants, notwithstanding the reports of layoffs.

From any perspective other than one driven by ideology one must admit that the economy has undergone a change in its foundation — and that these changes are ephemeral and cannot be sustained. With GDP now reliant on figures from the financial sector which for the longest time hovered around 16%, our “economy” would be 50% LESS without the financial sector reporting bloated revenues and profits just as they contributed to the false spike in prices of homes. Bloated incomes inflated the stampede of workers to Wall Street.

Investigative reporting shows that the tier 2 yield spread premium imposed by the investment bankers — taking huge amounts of investment capital and converting the capital into service “income” — forced a structure that could not work, was guaranteed not to work and which ultimately did fail with the TBTF banks reaping profits while the rest of the economy suffered.

The current economic structure is equally unsustainable with income and wealth inequality reaching disturbing levels. What happens when you wake up and realize that the real economy of production of goods and service is actually, according to your own figures, worth 1/3 less than what we are reporting as GDP. How will we explain increasing profits reported by the TBTF banks? where did that money come from? Is it real or is it just what we want to hear want to believe and are afraid to face?


People Have Answers, Will Anyone Listen?

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Editor’s Comment: 

Thanks to Home Preservation Network for alerting us to John Griffith’s Statement before the Congressional Progressive Caucus U.S. House of Representatives.  See his statement below.  

People who know the systemic flaws caused by Wall Street are getting closer to the microphone. The Banks are hoping it is too late — but I don’t think we are even close to the point where the blame shifts solidly to their illegal activities. The testimony is clear, well-balanced, and based on facts. 

On the high costs of foreclosure John Griffith proves the point that there is an “invisible hand” pushing homes into foreclosure when they should be settled modified under HAMP. There can be no doubt nor any need for interpretation — even the smiliest analysis shows that investors would be better off accepting modification proposals to a huge degree. Yet most people, especially those that fail to add tacit procuration language in their proposal and who fail to include an economic analysis, submit proposals that provide proceeds to investors that are at least 50% higher than the projected return from foreclosure. And that is the most liberal estimate. Think about all those tens of thousands of homes being bull-dozed. What return did the investor get on those?

That is why we now include a HAMP analysis in support of proposals as part of our forensic analysis. We were given the idea by Martin Andelman (Mandelman Matters). When we performed the analysis the results were startling and clearly showed, as some judges around the country have pointed out, that the HAMP loan modification proposals were NOT considered. In those cases where the burden if proof was placed on the pretender lender, it was clear that they never had any intention other than foreclosure. Upon findings like that, the cases settled just like every case where the pretender loses the battle on discovery.

Despite clear predictions of increased strategic defaults based upon data that shows that strategic defaults are increasing at an exponential level, the Bank narrative is that if they let homeowners modify mortgages, it will hurt the Market and encourage more deadbeats to do the same. The risk of strategic defaults comes not from people delinquent in their payments but from businesspeople who look at the principal due, see no hope that the value of the home will rise substantially for decades, and see that the home is worth less than half the mortgage claimed. No reasonable business person would maintain the status quo. 

The case for principal reductions (corrections) is made clear by the one simple fact that the homes are not worth and never were worth the value of the used in true loans. The failure of the financial industry to perform simple, long-standing underwriting duties — like verifying the value of the collateral created a risk for the “lenders” (whoever they are) that did not exist and was present without any input from the borrower who was relying on the same appraisals that the Banks intentionally cooked up so they could move the money and earn their fees.

Many people are suggesting paths forward. Those that are serious and not just positioning in an election year, recognize that the station becomes more muddled each day, the false foreclosures on fatally defective documents must stop, but that the buying and selling and refinancing of properties presents still more problems and risks. In the end the solution must hold the perpetrators to account and deliver relief to homeowners who have an opportunity to maintain possession and ownership of their homes and who may have the right to recapture fraudulently foreclosed homes with illegal evictions. The homes have been stolen. It is time to catch the thief, return the purse and seize the property of the thief to recapture ill-gotten gains.

Statement of John Griffith Policy Analyst Center for American Progress Action Fund

Before

The Congressional Progressive Caucus U.S. House of Representatives

Hearing On

Turning the Tide: Preventing More Foreclosures and Holding Wrong-Doers Accountable

Good afternoon Co-Chairman Grijalva, Co-Chairman Ellison, and members of the caucus. I am John Griffith, an Economic Policy Analyst at the Center for American Progress Action Fund, where my work focuses on housing policy.

It is an honor to be here today to discuss ways to soften the blow of the ongoing foreclosure crisis. It’s clear that lenders, investors, and policymakers—particularly the government-controlled mortgage giants Fannie Mae and Freddie Mac—must do all they can to avoid another wave of costly and economy-crushing foreclosures. Today I will discuss why principal reduction—lowering the amount the borrower actually owes on a loan in exchange for a higher likelihood of repayment—is a critical tool in that effort.

Specifically, I will discuss the following:

1      First, the high cost of foreclosure. Foreclosure is typically the worst outcome for every party involved, since it results in extraordinarily high costs to borrowers, lenders, and investors, not to mention the carry-on effects for the surrounding community.

2      Second, the economic case for principal reduction. Research shows that equity is an important predictor of default. Since principal reduction is the only way to permanently improve a struggling borrower’s equity position, it is often the most effective way to help a deeply underwater borrower avoid foreclosure.

3      Third, the business case for Fannie and Freddie to embrace principal reduction. By refusing to offer write-downs on the loans they own or guarantee, Fannie, Freddie, and their regulator, the Federal Housing Finance Agency, or FHFA, are significantly lagging behind the private sector. And FHFA’s own analysis shows that it can be a money-saver: Principal reductions would save the enterprises about $10 billion compared to doing nothing, and $1.7 billion compared to alternative foreclosure mitigation tools, according to data released earlier this month.

4      Fourth, a possible path forward. In a recent report my former colleague Jordan Eizenga and I propose a principal-reduction pilot at Fannie and Freddie that focuses on deeply underwater borrowers facing long-term economic hardships. The pilot would include special rules to maximize returns to Fannie, Freddie, and the taxpayers supporting them without creating skewed incentives for borrowers.

Fifth, a bit of perspective. To adequately meet the challenge before us, any principal-reduction initiative must be part of a multipronged

To read John Griffith’s entire testimony go to: http://www.americanprogressaction.org/issues/2012/04/pdf/griffith_testimony.pdf


Guest Writer Shares Info on Fraud in CA Foreclosure Cases

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Editor’s Comment: The following information was submitted to the blog by a law firm.  We do not know this law firm.  We are simply passing along information that may be of interest to Californians.  As always, please do your research.

From counsel for Consumer Rights Defenders for our loyal followers, you may be interested in this California information which is not meant to be legal advise, just some information that is public knowledge. Call if you need foreclosure help at 818.453.3585 ask for Steve or Sara.   Ms. Stephens Esq7777@aol.com

___________

Elements of fraud cause of action: A plaintiff seeking a remedy based upon fraud must allege and prove all of the following basic elements:

· Defendant’s false representation or concealment of a ‘material’ fact (see Rest.2d Torts | 538(2)(a); Engalla v. Permanente Med. Group, Inc. (1997) 15 Cal.4th 951, 977, 64 Cal.Rptr.2d 843, 859–misrepresentation deemed ‘material’ if ‘a reasonable (person) would attach importance to its existence or nonexistence in determining his choice of action in the transaction’);

· Defendant made the representation with knowledge of its falsity or without sufficient knowledge of the subject to warrant a representation;

· The representation was made with the intent to induce plaintiff (or a class to which plaintiff belonged) to act upon it (see Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 869, 76 Cal.Rptr.3d 325, 333–fraud by false representations means intent to induce ‘reliance’; fraud by concealment involves intent to induce ‘conduct’);

· Plaintiff entered into the contract in ‘justifiable reliance’ upon the representation (see Ostayan v. Serrano Reconveyance Co. (2000) 77 Cal.App.4th 1411, 1419, 92 Cal.Rptr.2d 577, 583–P’s admission of no reliance on a representation made by D precludes cause of action for intentional or negligent misrepresentation); and

· As a result of reliance upon the false representation, plaintiff has suffered damages. [Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, 44 Cal.Rptr.2d 352, 359; see Manderville v. PCG & S Group, Inc. (2007) 146 Cal.App.4th 1486, 1498, 55 Cal.Rptr.3d 59, 68; and Auerbach v. Great Western Bank (1999) 74 Cal.App.4th 1172, 1184, 88 Cal.Rptr.2d 718, 727--'Deception without resulting loss is not actionable fraud' (¶ 11:357.1)]

(1) [11:354.1] Particularized pleading required: A fraud cause of action must be pleaded with particularity; i.e., every element of the cause of action must be alleged factually and specifically in full. [Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, 197 Cal.Rptr. 783, 795; see Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73, 269 Cal.Rptr. 337, 345--complaint must plead facts showing 'how, when, where, to whom, and by what means the representations were tendered'; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268-1269, 258 Cal.Rptr. 787, 790--fraud complaint deficient if it neither shows cause and effect relationship between alleged fraud and damages sought nor alleges definite amount of damages suffered]

Lawyers Take Note: Wells Fargo Slammed With $3.1 Million Punitive Damages on One Wrongful Foreclosure

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GARFIELD PROPOSES NATIONAL LAW FIRM FOR COUNTER-ATTACK

Editor’s Comment: 

The most perplexing part of this mortgage mess has been the unwillingness of the legal community to take on the Banks. Besides the intimidation factor the primary source of resistance has been the lack of confidence that any money could be made, ESPECIALLY on contingency. If you were the lawyer in the case reported below, you would be getting a check for fees alone of over $1.2 million on a single case. And as this article and hundreds of others have reported, based upon objective surveys, most of the 5 million homes lost since 2007 were wrongful foreclosures.

So the inventory for lawyers is 5 million homes plus the next 5 million everyone is expecting. Let’s due some simple arithmetic: if 4 million homes were wrongfully foreclosed and the punitive damages were $1 million per house the total take would be $4 Billion with contingency fees at $1.6 Billion. If each house carried $200,000 in compensatory damages, then the total would be increased by $800 Million with Lawyers taking home $320 Million. These figures exceed personal injury and malpractice awards. Why is the legal profession ignoring this opportunity to do something right and make a fortune at the same time?

Right now I’m a little under the weather (open heart surgery) but that hasn’t stopped my associates from rolling out a plan for a national anti-foreclosure firm. I’m only doing this because nobody else will. If you have had a home wrongfully foreclosed or suspect that your current foreclosure is wrongful, write to NeilFGarfield@hotmail.com (remember the “F”) and ask for help. Lawyers and victims of wrongful foreclosures should be able to pool their resources to attack the massive foreclosure attack with a massive anti-foreclosure attack.

Wells Fargo Slapped With $3.1 Million Fine For ‘Reprehensible’ Handling Of One Mortgage

Ben Hallman

A federal judge who has fiercely criticized how big banks service home loans is fed up with Wells Fargo.

In a scathing opinion issued last week, Elizabeth Magner, a federal bankruptcy judge in the Eastern District of Louisiana, characterized as “highly reprehensible” Wells Fargo’s behavior over more than five years of litigation with a single homeowner and ordered the bank to pay the New Orleans man a whopping $3.1 million in punitive damages, one of the biggest fines ever for mortgage servicing misconduct.

“Wells Fargo has taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed,” Magner writes. “But perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods.”

The opinion reflects Magner’s disgust with tactics that Wells Fargo used to fight the case — and perhaps frustration with an appeals court ruling in a separate, but similar case, that overturned her order that would have forced Wells Fargo to audit and provide a full accounting for more than 400 home loans in her jurisdiction.

As The Huffington Post previously reported in a story co-published with The Center for Public Integrity, sources familiar with the preliminary findings said that the bank made costly accounting errors in the administration of practically all of those loans.

In an emailed statement, Tom Goyda, a Wells Fargo spokesman said: “The ruling handed down by the court in an individual bankruptcy case covers allegations going back more than six years and ignores significant changes in servicing practices that have occurred since that time. We believe that there are numerous factual and legal problems with the opinion and are reviewing our options regarding an appropriate legal response.”

Goyda said that an appeal of the ruling is “one option” the bank is considering.

Despite widespread reports that the banks and other companies that service home loans engaged in a range of misconduct — from ordering unnecessary property inspections to misapplying payments in a way that can lead to wrongful foreclosure — few judges have had the time, ability or inclination to do the kind of forensic analysis necessary to uncover wrongdoing in individual cases. For a non-accountant, reading a loan history is like interpreting hieroglyphics without a Rosetta Stone, and banks are often reluctant to turn them over in the first place.

The exceptions have tended to come in federal bankruptcy courts, where justices typically have more time to dig into loan accounts, and are much more likely to have the financial expertise necessary to do so. In an earlier interview, Magner said that she analyzed the loan files of more than 20 borrowers in her court and found mistakes in every instance.

“These are loans of working-class people who bought homes they could afford and whose loans were not administered correctly from an accounting perspective,” she said. “I think that these types of problems occur in almost every [defaulted] loan in the country.”

The current case involves Michael Jones of New Orleans. In a 2007 decision, Magner ruled that Wells Fargo improperly charged Jones more than $24,000 in fees, owing to a fundamental problem in the automated methodology the bank used to account for his loan payments.

After Jones fell into default, Magner ruled, the bank improperly applied his mortgage payments to interest and fees that had accrued instead of to principal, as required by his servicing contract. This triggered a waterfall of additional fees and interest that consumer lawyers call “rolling default.” Later, after Jones applied for bankruptcy, the bank continued to misapply payments, according to Magner’s opinion.

In the most recent opinion, Magner describes Wells Fargo’s litigation tactics, which involved filing dozens of briefs, motions and other filings that slowed down the proceedings to a snail’s pace, as “particularly vexing.” The tactics suggest that any other borrower who might wish to contest a fee or charge would find a legal challenge to the bank simply too burdensome.

And yet, Magner writes, it is only through litigation that the abuses can be uncovered. Calling Wells Fargo’s conduct “clandestine,” Magner wrote that the bank refused to communicate with Jones even as it was misdirecting payments for improper purposes.

“Only through litigation was this practice discovered,” Magner writes. “Wells Fargo admitted to the same practices for all other loans in bankruptcy or default. As a result, it is unlikely that most debtors will be able to discern problems with their accounts without extensive discovery.”

Magner wrote that the bank still refuses to come clean with homeowners about mistakes it made in the accounting of home loans. This is particularly troublesome in her district, where more than 80 percent of the borrowers who file for bankruptcy have incomes of less than $40,000, and consequently are often unable to hire the kind of legal firepower necessary to counter Wells Fargo’s army of lawyers.

“[W]hen exposed, [Wells Fargo] revealed its true corporate character by denying any obligation to correct its past transgressions and mounting a legal assault ensure it never had to,” Magner wrote.

Occupy Wall Street Groups Protest Foreclosure, Try To Halt Evictions

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Occupy Wall Street Foreclosures

Monique White of North Minneapolis has been hosting weekend barbecues for friends and family for years. On Sunday, her usual guest list of friends and neighbors expanded to include protesters from the local spinoff of the Occupy Wall Street movement. They’d come to try and stop the bank from throwing White out of her house.

“These people are here to support me — and not only me, just to let other people know and be aware of what’s going on,” White said.

What’s going on is American homeowners are still slogging through the aftermath of a recession caused by the near-collapse of the financial sector in 2008. Since then, bailed-out banks have allegedly treated struggling homeowners so badly that state and federal law enforcement agencies are negotiating a multi-billion dollar settlement, and federal bank regulators have offered to check for wrongdoing in any foreclosure that happened in 2009 or 2010.

Occupy Wall Street kicked off in September to protest economic injustice, and now in at least three American cities, Occupy protesters are using the stories of local residents losing their homes to dramatize and protest the ongoing foreclosure crisis. In each case, Occupy-affiliated protesters have pitched their tents on the lawns where they don’t want to see local sheriff’s deputies pile the belongings of an evicted family.

On Sunday evening, 15 or so protesters came to Elizabeth Sommerer’s home in Cleveland. They’d heard via Twitter that Sommerer, a mother of two, would be evicted on Tuesday.

“We’d been talking for a few weeks about ways to draw attention to what’s going on with the foreclosure crisis,” said protester Chris Soboleski, a 29-year-old web developer from Painesville, Ohio.

Sommerer’s home went into foreclosure in 2009, Cuyahoga County records show. Her husband postponed the sheriff’s sale by filing for bankruptcy. But they couldn’t keep up with their Chapter 13 payments, and then, Sommerers said, she and her husband split up. Fannie Mae, the government-sponsored mortgage company, bought the property in August.

Soboleski and other Occupy protesters helped Sommerer connect with her local representative on the Cleveland City Council, Brian Cummins, whose staff helped her get to court on Monday to file a request to postpone the eviction for 30 days. Her request was granted, court records show.

“I think it was a huge day for the movement,” said Cummins, a member of the Green Party. “This is really great because it got them out in the community and in touch with someone in a very real life situation.”

“They stand up for the little guy,” Sommerer said of the protesters in a video uploaded to YouTube on Monday. (Soboleski said Sommerer did not want to do another interview about her situation after already providing details to local reporters. Independent attempts to reach her were unsuccessful.) “This is Main Street. Wall Street can take care of itself. Main Street needs everybody.”

Sommerer said she’s looking for work and a nearby place to live so her kids don’t have to change schools. She’d be happy to rent her former home from Fannie Mae if possible. “I was not raised to be a freeloader. I don’t want to be a freeloader. I will pay my way. I just need time to put it together,” she said in the video.

“Even if you do have to foreclose on someone, you can do it with a certain amount of compassion and humanity,” Soboleski said. “There’s a certain amount to be said for rules, but on the other hand we all want to live in a society where humanity matters more than bureaucracy.”

Not all of the Occupy actions have been successful. In Snellville, Ga., protesters failed to prevent the eviction of the Rorey family, who told the Gwinnett Daily Post they fell victim to a scam artist who promised them lower monthly payments in 2010. The difficulty of obtaining loan modifications since the collapse of the housing bubble has made it easy for scam artists to prey on desperate homeowners, who have been susceptible to claims that a hired “expert” knows secrets to obtaining loan mods they don’t.

Fannie Mae, which has owned the property since last year, said it works to prevent foreclosures.

“We have a Mortgage Help Center in Atlanta where homeowners can meet with a trusted housing counselor to discuss their mortgage situation and options to avoid foreclosure,” a Fannie Mae spokeswoman said in a statement. “Unfortunately, the homeowner did not seek assistance from our Help Center.”

Occupy protesters in Minneapolis hope they’ll have better luck with Monique White. Thirty or so protesters have been camping in her living room and kitchen, with some spilling out onto her lawn, since November 8.

“I’ve never had this many people in my house before. It gets kind of overwhelming sometimes,” White said. All the same, she added, “I appreciate everything that they’ve done for me.”

White fell behind on her payments in 2009. The following February, as she was trying to get a loan modification from U.S. Bank, she said, budget cuts cost her her job counseling at-risk kids for a non-profit. “That’s when everything started spiraling out.”

The Occupy protesters say U.S. Bank should cut White some slack.

“They just had record profits this quarter, and the CEO of US Bank, Richard Davis, just doubled his salary to $19 million,” said Nick Espinosa, 25. “So what we’re talking about with a family like Monique’s is pennies to them.”

Government-backed mortgage company Freddie Mac bought her house as a foreclosure in January, and U.S. Bank said what happens is now up to Freddie. Freddie Mac said White’s eviction has already been postponed and that the company was considering her for a program that would allow her to rent the property.

White said she has been working a part-time job at a liquor store and is desperately looking for new work.

“Basically what I’m looking for is for U.S. Bank to rewrite my loans in order for me to stay in my home and make it affordable for me,” White said. “I’m not asking for a handout. All I’m asking is for time or for Freddie Mac or U.S. Bank, whoever owns the house or is trying to take the house, to come to the table.”

 

MASS SUPREME COURT CLARIFIES: YOU CAN’T SELL WHAT YOU DON’T OWN — MISSING HOMEOWNER WINS CASE WITHOUT KNOWING IT

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WRONGFUL FORECLOSURE IS NOT THE FOUNDATION FOR TITLE

PROSPECTS FOR TITLE PROBLEMS ACROSS THE NATION ARE MUSHROOMING

EDITOR’S NOTE: Likening the claims of the bank and the person who received a “quitclaim” deed to a Brooklyn Bridge transaction, the Court simply stated the most basic law: you can’t sell what you don’t own. But the reasoning of this Supreme Court decision, citing cases from long ago that are as valid to day as when they first decided, also goes directly to the issue of whether title can be challenged in an eviction arising from a foreclosure case.

The rule that a tenant cannot challenge the title of his landlord in an eviction case makes sense — if it is a landlord tenant case. But foreclosure cases are not landlord tenant cases. The fallacy of applying the rule to foreclosure cases is obvious and just as simple as the Massachusetts Supreme Court decision itself.

In a landlord-tenant case the allegation is that the defendant is a tenant under a lease and that they didn’t pay their rent under the lease terms. To allow title challenges that frankly are not really relevant would be to clog the courts with unnecessary litigation and stretch out the time a tenant  could stay without paying rent. Thus the rule that says you can’t raise defects in title in an eviction action between landlord and tenant. The allegation is made that by the Landlord that he is the Landlord, that the defendant is a tenant and that there is a lease, with the payment due of $x dollars per month  or per week and that the tenant did not pay — which has caused the landlord damage and therefore they need the possession of the property back so they can receive rent again to pay the mortgage, maintenance etc.

Foreclosure cases are much different. Here the allegation is that the Plaintiff is the owner, not a landlord as in the landlord-tenant case. Further, the allegation is that the occupant was the owner and isn’t anymore. The allegation MUST be that the change occurred as a result of a foreclosure that was duly prosecuted and in which there was a proper sale in which the Plaintiff obtained title and in which the rights to ownership and thus possession by the homeowner were foreclosed.

In civil procedure EVERYWHERE what is alleged is presumed to be true only in a motion to dismiss. If the allegations are denied, then there must be evidence from the plaintiff proving their allegations. In this case in Massachusetts as is the case in thousands of other instances, the evidence clearly shows that US bank was not the mortgagee when it initiated foreclosure.

Therefore US BANK could not foreclose. But it did anyway. And because they received a deed, they say that is enough. But a homeowner need only deny the allegations of the foreclosure and the sale and force the Plaintiff to prove it obtained real title in proper form and substance. Here is where US Bank fails and therefore the case was dismissed (in this case not an eviction, but a suit to quiet title against a homeowner who cannot be found).

If the allegation supporting the eviction action is faulty and cannot be proven, then the occupant wins. Those are the rules. If you make an allegation you must prove it with real evidence — not with presumptions that would allow people to sell the Brooklyn Bridge 100 times and make claims of presumption of title.

SEE 10.18.2011 Mass Sup Ct Bevi;aqua

Nemo Dat Trumps Bona Fide Purchaser

posted by Adam Levitin

The Massachusetts Supreme Judicial Court just handed down a second
major mortgage foreclosure ruling, Bevilacqua v. Rodriguez.  The case
was an Ibanez follow-up dealing with the rights of a purchaser at an
invalid foreclosure sale. I thought this was a no brainer case and
said so in an amicus brief co-authored with some of the Credit Slips
crew. As the trial court noted, the foreclosure sale purchaser has to
lose otherwise I could actually sell you the Brooklyn Bridge or some
other property I don’t own.

What was cool about this case from an academic perspective was that it
pitted two heavyweight, Latin-inscribed principles of commercial law
against each other:  the nemo dat quod non habet principle (you can’t
give what you don’t have) and the bona fide purchaser principle (one
who takes in good faith for value and without notice of defect will
get legal protection against claims). While these are both venerable
principles of commercial law, there should have been no question that
nemo dat prevails. It is arguably the foundational principle of
commercial law:  the most one party can transfer to another are the
rights it has.
We have one critical carve-out to that principle, the
holder-in-due-course doctrine, but the holder-in-due-course is much
like the bona fide purchaser:  it only applies if you take in good
faith and without notice of defect. And if you’re buying at a
non-judicial foreclosure sale, you’ve got notice of possible defect
(and one might argue about good faith). It’s a little like the problem
of finding a bargain when shopping–if it’s too good of a deal, it
could be a fraudulent transfer.

And so the Massachusetts Supreme Judicial Court held.  If the
foreclosure was done improperly, the foreclosing party didn’t have
title to the property and thus couldn’t transfer title to the
purchaser. The court didn’t dismiss the suit with prejudice, so Mr.
Bevilacqua could get the property–if the foreclosure is done right in
the first place, but that means starting over again.

A lot of people think that the ruling in Bevilacqua will kill the REO
market. I doubt it. It might make it a bit harder to get title
insurance, but the title insurers have to keep issuing titles because
they need the cash flow. If there’s a widespread problem, they’re
already insolvent, so why not keep on doing business? There’s no tort
of deepening insolvency (at least in Delaware).

As with Ibanez, the Supreme Judicial Court merely upheld very sensible
principles that shouldn’t be controversial:  you need to be the
mortgagee to foreclose and you can’t sell what you can’t deliver.
What’s kind of astounding is that the banks have had the chutzpah to
challenge these basic principles of commercial law, as if centuries of
commercial law jurisprudence should suddenly bend to their
convenience. This is the same sort of arrogance that engendered the
creation of MERS and the Article 9 mortgage transfer process.

There’s a third case awaiting decision from the Massachusetts Supreme
Judicial Court, Eaton v. Fannie Mae, which deals with the question of
whether a “naked mortgagee”–a mortgagee that isn’t the
noteholder–can foreclose. I filed an amicus arguing no way no how,
but we’ll see how the court rules.

UTAH ATTORNEY SUCCEEDS IN GETTING REMOVAL TO FEDERAL CT REMANDED BACK TO STATE CT CONVERTING NON-JUDICIAL TO JUDICAL FORECLOSURE

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LAWYER OVERCOMES PRESUMPTION OF VALIDITY OF TRUSTEE DEED IN UTAH

 EDITOR’S NOTE: BOA and Recontrust, their puppet “substitute trustee” have stumbled into a quagmire and attorney John Christian Barlow has seized the opportunity to shine a light on the illegal foreclosures by BOA and Reconstrust. This might have national implications. 
BOA and Recontrust made all the way through the usual fake auction and some underling signed a Trustee Deed. Under State Law the Trustee is presumed valid, which is to say, properly procured. But Barlow attacked the validity of the sale in the eviction action where BOA sought to obtain possession. As in other cases he recently started fighting, he attacked the validity of the sale. By raising serious issues concerning the auction, “sale” and the pattern of conduct, Barlow succeeded in overcoming the presumption of the validity of the Trustee Deed.
This left BOA with a naked deed that needs to be authenticated and validated by the Utah State Court. BOA and Reconstruct actually stumbled twice by invoking their “right” to Remove the case to Federal Court where the Judges have been friendlier to banks. Tearing apart the arguments one by one, the Federal Judge said that Recontrust and BOA had argued themselves into a corner thus depriving the Federal Court of jurisdiction since this was obviously a matter to be heard in state court, as to whether the eviction could proceed.
The written opinion of the Federal Judge alerted the State Judge to inconsistencies in the positions argued by BOA and Reconstrust. So the whole case now is going to be heard judicially as to whether the eviction is proper — a  finding that is entirely dependent upon whether the Trustee’s Deed will stand up to scrutiny and be sustained — or if the Trustee’s Deed is removed or expunged from the title records because of the various illegal actions with which we are all now too familiar.
Once the Trustee Deed is discredited  (it is already put in doubt by Attorney Barlow and the findings of the Federal Judge), title reverts back to the homeowner and they get to stay in their home and they can negotiate with the real creditor in good faith.
Utah law is not the same, but is similar to many other states. Check with a lawyer before you assume anything or do anything. But the fact remains that removal to state court can be challenged (Motion for remand) and the non-judicial sale can be converted into a judicial foreclosure proceeding — something no banks wants because they must allege and prove things that are simply not true. That it was done in an eviction proceeding is all the more impressive but it is also logical that it occur there because it is not until after the pretender has committed itself in writing to each and every act that they can no longer play musical chairs or musical documents to give the Judge “what he wants.”

(Salt Lake City, UT) – St. George attorney John Christian Barlow, representing homeowners who have lost their home to the Bank of America’s (NYSE: “BAC”) foreclosure machine ReconTrust, may have finally achieved a measure of success in the battle of Utah homeowners against ReconTrust’s illegal foreclosures.

Federal Judge Clark Waddoups Thursday returned to Utah Fifth District Court in St. George a case in which ReconTrust was named as a third-party in the complaint claiming immunity under the National Bank Act in an unlawful detainer action. (ORDER and MEMORANDUM DECISION)

LAWYERS TAKE NOTE! COURTS ARE ALLOWING TITLE QUESTIONS IN EVICTIONS

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“The mere fact that the pretenders are avoiding trials at all costs is proof unto itself that they do not have the goods, they do not have title, they are not the creditor and they are merely sneaking into the system to fill the void created by the the real creditors (investor/lenders) who want no part of the foreclosure process nor any need to defend against predatory, deceptive or illegal lending practices. ” — Neil Garfield

OREGON COURT DENIES EVICTION: SHOULD HAVE BEEN A QUIET TITLE LAWSUIT

EDITOR’S NOTE: The eviction laws were mostly designed for landlord tenant situations. Once again, pretender lenders are using questionable practices using laws that don’t apply to the cases they are bringing. But ever since Judge Shack in New York and Judge Boyco in Ohio started questioning whether the homeowners were actually getting their day in court, the courts have been shifting away from the old rules.

The old rules basically prevent a tenant from questioning the title of his landlord as a defense to an eviction. The reason is obvious. You sign a lease with someone, pay them for a while and then stop paying — the issue of who has title title is  basically irrelevant. You have a  contract (lease) either oral or written, you breached it, and so the summary procedure for eviction makes it easier on landlords to get tenants out and begin renting the apartment, condo or house. The only real defense is payment and some issues like retaliatory eviction for reporting health problems, and similar landlord tenant issues. You see these laws in Arizona, Florida and every other state I’ve looked at.

Along comes massive foreclosures and instead of having a contract with the landlord you have a claim by someone you never heard of, with paperwork you’ve never seen, much of it unrecorded, and claiming default without being the creditor or even establishing that they represent the creditor. So in non-judicial states for example, this is the first time you have seen, met or had any day in court and you are told that you are in a court of limited jurisdiction and that if you want to raise issues regarding fraudulent or wrongful foreclosure you need to do it in another court. In the meanwhile, the court is going to evict you no matter how much proof you have that the party doing the evicting obtained title illegally and may never have obtained title.

As I have been saying for 4 years, eviction is not a remedy to anyone claiming to have a right to possession of a foreclosed home unless there has been an opportunity to examine all the claims of the pretender lenders to actual ownership of the obligation and the possession of the proper paperwork. Even in judicial states this is not working right because the foreclosures are considered clerical by judges and many of them don’t believe, or at least didn’t believe until recently, that the banks would be so arrogant and stupid as to make claims on mortgages that were never perfected as liens and never transferred to them or anyone else.

So here we have an Oregon judge that spots the issue and simply states that this is not an eviction, it is a quiet title issue and if you want possession you need to prove title. If you want to prove title, considering the defects that are apparent and alleged by the homeowner then you need to file a quiet title action. This is the same as I have been saying for years. If they really had the goods and they really could prove that US Bank, or BOA was going to lose money because of the alleged default on the obligation, then all they needed to do was go to trial on a few dozen of these cases and the issues raised by homeowners would go away. Instead the issues are growing in volume and sincerity.

The mere fact that the pretenders are avoiding trials at all costs is proof unto itself that they do not have the goods, they do not have title, they are not the creditor and they are merely sneaking into the system to fill the void created by the the real creditors (investor/lenders) who want no part of the foreclosure process nor any need to defend against predatory, deceptive or illegal lending practices.

Categorized | STOP FORECLOSURE FRAUD

Court rulings complicate evictions for lenders in Oregon

Court rulings complicate evictions for lenders in Oregon

“Those issues give credence to Defendan’t argument that this case is better brought as one to quiet title and then for ejectment.”

OregonLive-

Another Oregon woman successfully halted a post-foreclosure eviction after a judge in Hood River found the bank could not prove it held title to the home.

Sara Michelotti’s victory over Wells Fargo late last week carries no weight in other Oregon courts, attorneys say. But it illustrates a growing problem for banks  — if the loans’s ownership history isn’t recorded properly, foreclosed homeowners might be able to fight even an eviction.

“There’s this real uncertainty from county to county about what that eviction process is going to look like for the lender,” said Brian Cox, a real estate attorney in Eugene who represented Wells Fargo.

Michelotti’s case revolved around a subprime mortgage lender, Option One Mortgage Corp., that went out of business during the housing crisis. Circuit Court Judge Paul Crowley ruled that it was not clear when or how Option One transferred Michelotti’s mortgage to American Home Mortgage Servicing Inc., which foreclosed on her home and later sold it to Wells Fargo.

UNPUBLISHED AZ APPELLATE DECISION ON IMPROPER SERVICE VOIDS FORCIBLE DETAINER

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SEE FHLM V TIETJEN LACK OF PROPER SERVICE OF PROCESS CV20100212

Before you start thinking that this decision is of little consequence, consider this: First Magnus cases are riddled with service problems just as most of the cases are filled with fabrications, forgeries and misrepresentations. This Court might reconsider its decision to make this case unavailable to be cited as precedent when it starts seeing more of these appeals. I know of one case where the Judge actually threatened to cuff the party and wait for service in court.

But read the case carefully because it is correct as to its reasoning. You can easily waive service of process by asking for anything other than dismissal for lack of jurisdiction. The converse mistake is also being made where once the Judge has ruled, the homeowner fails to assert defenses for fear of it being construed as a waiver of the original objection to service. Once the Judge rules, all defenses should be raised.

While this case is NOT some great victory for homeowners across the state of Arizona nor anywhere else, it is another incremental step of the court system in scrutinizing the actions of the supposed lenders. It also reveals some pique by the appellate judges about the cavalier attitude of trial judges towards homeowners in ignoring the express public policy of the State of Arizona that foreclosures are a bad thing for the state as well as the homeowners. The legislature passed that language, not some wild-eyed blogger. Look it up.

 

GHOSTS ON THE ATTACK: US BANK, JP MORGAN CALWESTERN PLAY DOWN AND DIRTY

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“So The mortgage originator, the mortgage aggregator, the obligation, the lien are all dead, bankrupt and discharged nice and legal, but here is a homeowner who is being forced out of her home anyway, having per possession seized in record time and fighting for her life because these are the only two assets she has. It can only happen if the Judge lets it happen. Why would a fair and impartial judge get it so wrong?”

EDITOR’S COMMENT: I was about to write a story of a horrible injustice, beyond the normal. It is about a woman who has been raked over the coals by the banks over and over again. And then I ran across this story from Mandelman Matters and found that he already wrote the story, with many of the same characters. So I’ll shorten mine and let Mandelman do the rest.

The game that emerges from watching these cases is that the foreclosers and evictors (not necessarily the same entities) work with speed to make sure that the homeowner has no time to recover or meet the bid at the bogus auction of the property where nobody pays anything but the property is deeded anyway by a “trustee’ who is not a trustee and is simply there to facilitate stealing the property.

The idea of the Bank stealing the home when the payments have been made is finally getting some traction. In his case below, the family had paid the payments themselves and had never been late. But the the Bank took the home anyway and the State of California let them do it. Why? In the case I was going to write about, the creditors were also paid (investors were being paid on time by the servicer), so no default existed there either.

In BOTH CASES the creditor was not involved and had no interest in the foreclosure. The simple description is that the Bank wanted the house and they knew they could get it because even though they were lying they knew that anyone who heard both sides would believe the Bank because who wants to listen to a deadbeat borrower?

Everyone should be interested in these stories because these are homeowners who lost their homes to JPMorgan and US Bank, who now have theoretically legally title to a home that they did not buy, that they did not finance, and that they did not pay for or advance any money to the homeowner in any way. YOU COULD BE NEXT!

In the US Bank case, they were careful to try to beat out the Judge in two cases in state court and one case in Federal Bankruptcy court. They quickly, under the radar acquired the writ of restitution before it was allowed to be issued, served that Wednesday and then appeared on Saturday with a moving truck to get her things out of the house — but not before having locked her pet in the house and refused to do anything about it. The Gila County sheriff actually went out on a Saturday with the moving truck, pulling extra duty to get her out as fast as humanly possible. Why? And why were they laughing the whole time — I mean literally, not figuratively?

Ask the Sheriff Gila County to serve something or do something and it could takes weeks or months, with their backlog of work to get to it. How did it happen in 2 days? This Sheriff, and its agent Bradshaw Enterprises (the owner of which says he is being evicted but for reasons that are obvious has not been evicted (he now works for CalWestern and US Bank). I can only conclude from conversations with people in the Sheriffs office is that they were, at the very least, in “close contact” with US Bank or its attorneys or agents. They didn’t care if they trespassed on neighboring property because THEY were law enforcement. Who you gonna call? GHOST BUSTERS?

US Bank and CalWestern play the system like a violin committing crimes with straight faces and with attorneys who are perfectly willing to advance arguments and proffer evidence that they know are false.

In the case I intended to write about we have the substitution of trustee faked and forged, the verified complaint for eviction faked and forged and the auction on which US Bank relies for title is based upon a string of documents from a bankrupt company, First Magnus, who was discharged long before the “assignees” and substitutions were ever executed — all without listing the homeowner’s loan on their schedules (or any other loan, since they were just  a nominee sham operator pretending to be the lender). They used the signature of Pamela Campbell whose robo-signed signature appears on 2 dozen documents in Maricopa County alone and probably thousands of other documents.

But wait, there’s more. The homeowner listed US Bank and others in her own bankruptcy, showed them as unsecured and they filed nothing — not even a proof of claim.The obligation was discharged — as well it should. Why? Because the homeowner was the victim of securities scam in which First Magnus was the operator who convinced her to mortgage two fully paid homes for a very safe investment — buying gold. As she found out, buying gold is very safe because ti always has a value and always can be liquidated with very little fuss or muss. But if you don’t get the gold as thousands of Americans found out in the Merendon mining scam, then it is fraud.

So she was defrauded in the first instance by getting her to sign up for a mortgage for the sole purpose of getting an investment that will help her live, defrauded again because the papers used all nominees —- MERS and First Magnus — but the homeowner always gets stuck using their real name and their real life.

Well with everyone out of the way, suddenly Chevy Chase enters the picture long after IT was defunct and resolved being one of the first banks to collapse in the mortgage meltdown. But here it is supposedly executing papers giving US Bank, who appears nowhere on the title of anything, to enter the picture. Litigation with Chevy Chase Bank is on appeal — but requires this homeowner to post nearly $60k in supersedeas bond.

SO the homeowner I am assisting is dealing with multiple ghosts and no judge seems to get it.

  • Chevy Chase is dead, but they are treated as alive in this case.
  • First Magnus is dead and even filed schedules showing non-ownership of loans, never owned the loans and was discharged in bankruptcy in Tucson with only an assignment of servicing rights because that is all they had. Yet here is First Magnus having its name used by Pamela Campbell in a faked, forged instrument.
  • The obligation and note were discharged in the homeowner’s OWN bankruptcy.
  • Yet here she is fighting with US Bank as though there were an obligation, as though US Bank owned it and as though CalWestern was the real trustee in the deed of trust which has long since been eviscerated and probably was never perfected. Somehow this all adds up to eviction, displacement and seizure of property by the only people we are sure have absolutely nothing to lose because they never invested one dime in the deal.

So The mortgage originator, the mortgage aggregator, the obligation, the lien are all dead, bankrupt and discharged nice and legal, but here is a homeowner who is being forced out of her home, having per possession seized in record time and fighting for her life because these are the only two assets she has.

Now here is the kicker: the home they seized, along with its contents lies on a piece of land without any ingress or egress. The movers had to trespass on neighboring property to move the stuff out. There is no water, but the judge nevertheless found that the rental value of the property was nearly $1,000 per month (Judge Gary V Scales). This was done with the only evidence in front of the Judge being my affidavit stating the property was essentially unusable and estimating the value of the rental to be a couple of hundred dollars for those who are not feint of heart and willing to haul water and sanitation to the property.

Homeowner Suffers Horrific Injustice at the Hands of JPMorgan Chase

For over two years I’ve had a front row seat for the foreclosure crisis, the by-product of our government’s complete mishandling of the worst economic downturn in seventy years.

During that time I’ve been exposed to some pretty horrific things… people living in their cars with a child sleeping in the trunk… the eviction of an 89 year-old couple… I’ve gotten to know what that fear sounds like and feels like… the fear of losing one’s home while the country talks about you as being nothing more than an “irresponsible borrower,” someone who never should have bought your home in the first place, even though you may have lived in it for 30 years.

What I saw this past week, however, was something new for me… I’d heard of things like this happening before, written about them, even.  But, I had never seen anything like it, up close and personal.

As a warning… this story is not for the squeamish.  If you’re pregnant, or have heart disease, or just want to go on pretending that your country is still a place of which you’re proud… it’s better that you click off now… because this one isn’t going to make you laugh.

An Anaheim couple with an eight year-old daughter has lost their home… that would be one way of phrasing it.  Another way to describe what happened would be to say that JPMorgan Chase, an outfit that I now see clearly is significantly worse than any crime family… has thus far been permitted by the courts and the laws in California to STEAL an Anaheim couple’s home.

Why do I say that Chase stole it?  Well, there are lots of reasons, but I think the one that tops my list would have to be, because they never missed or were late on a payment… in every single month that JPMorgan Chase told the couple to make a payment… they paid the exact amount they were told to pay… on time and as agreed… never missed even one… never were late, not even once.

“We trusted the bank,” the Mom says, “like idiots.”

The husband in this family worked for the City of Placentia in Southern California for some 27 years.  The wife and mother has her own small business.  Their adorable eight year-old daughter, whose life is about to be inalterably changed at the hand of JPMorgan Chase, goes to school near by and loves her home.  Her parents haven’t told her anything about this yet, and I pray to God they never have to… that JPMorgan Chase comes forward and stops this egregious wrong that they have let happen… that they have created.

I can barely tell this story… I can’t imagine it ever happening to me… I can’t imagine it ever happening to anyone in this country… a place I used to proudly think of as my country.  Not so much anymore though.

The husband in this family became ill a few years ago… advanced diabetes… his kidneys have failed, he’s on dialysis… heart disease… he’s spent time on a respirator while hospitalized.

Yet, they’ve made it through everything, this family, through all of that and more… stayed together… raised a daughter… found ways to laugh and play together… they must love each other very much.

They had bought their 2-bedroom home in August of 2006… as it turns out… terrible timing… but who knew that the bankers, who had leveraged themselves 40-100 to one, were about to blame homeowners for their defrauding of the investment community, bankrupting the global financial system, and destroying the credit markets?  Bernanke didn’t know… Paulson didn’t know… personally, I think that lets this couple off the hook about the whole should-have-known thing.

So, for three years they made their payments without fail.  And maybe if it would have just been the economy or just the medical bills, they would have made it through this… but both was too much, and they received a Notice of Default in July of 2009.

They applied to JPMorgan Chase for a loan modification, and Chase granted them a trial modification in February of 2010.  Chase told them to pay $869 for three months, and entered them into another program in May, telling them to make monthly payments of $1358.

They paid every month, on time every time… by cashier’s check, as required by Chase.  The trial modification paperwork said something to the effect of:

“If all payments are payments are made as agreed, we will reevaluate you to determine if we can offer you a permanent modification.”

“We trusted the bank,” the Mom says, “like idiots.”

In August, they received a Notice of Sale.  They called Chase… and imagine their relief when they were told not to worry one bit about that notice.  Apparently, it was just the fault of Chase’s stupid computer system that just spits things like that out without anyone telling it to do so.  False alarm, what a relief.

So, they paid their September payment… and paid their October payment… and it was around October 10th when they received another Notice of Sale.  Again, they called Chase, perhaps a little less nervous than the last time the same thing had happened… and wouldn’t you know it… another false alarm… it was that darn computer system again.  Nothing to worry about, Chase told them… just keep those payments coming.

Oh, but while we’ve got you on the phone, we need you to send in some current paycheck stubs and other miscellaneous pieces of information, which they did… and then did again… you know the standard operating procedures for servicers by now I’m sure.

I know, it’s not Chase’s fault… they’ve reportedly been having trouble hiring minimum wage people for the last three years.  Or was it the investor’s who won’t let them modify?  I can never remember which lie was Chase’s favorite… Bank of America was having the phone problems… Wells couldn’t stop their employees from losing stuff over and over… Yep, Chase was the can’t-hire-anyone-and-investors-won’t-modify, I’m almost positive.

Right around the third week of October, they come home to find a notice of sale pinned to their front door.  Oh my God… they called Chase again.  “Oh, just ignore it once again,” Chase lied.  “You don’t have to worry about that, silly, you’re under consideration for a loan modification, why would we sell your house?”

A few more days and another notice on the door… Chase back on the phone… but this time everything was different… Chase said they were selling their home in ONE HOUR.  To stop the sale, they would need to get down to the courthouse with about twenty-five grand… in 55 minutes, 50… 45… 40…

I suppose we needed another vacant home in Anaheim in a hurry, because predictably, the home went back to Fannie Mae at the Trustee Sale.  Gone, in the blink of an eye… sold October 21, 2010… just 21 days after they had made their October payment.  Chase had told them not to worry… it was just the computer system… no one would sell their home.

And now it was gone.

“We trusted the bank,” the Mom says, “like idiots.”

The father has a hospital bed in the living room, he requires special care… their daughter… in school close by… eight years old… is that second or third grade?

The couple pleaded with Chase that day on the phone, I can only imagine what that felt like for them on that day.  Here’s what the mom said to me:

We’re not people who simply decided to skip out on our mortgage. We did everything as upright and by the book as we were instructed to do by Chase yet we still lost our home. On the day they took back the property, I called Chase pleading for an alternative to this. Their reply to me was “I suggest you find a new place to live.”

The Unlawful Detainer or UD hearing was the next indignity the couple would suffer… and I haven’t been able to stop thinking about this next part all week.

With the medical bills they were receiving, and the uncertainty about the future, they didn’t feel they could afford a lawyer for the Unlawful Detainer trial. As the date for the UD neared, the husband was still in the hospital; he would be released roughly 48 hours before he would have to be in court.

They found an attorney who would help them and she called the opposing counsel, a lawyer from one of those scum-of-the-earth foreclosure mills that have no doubt been making untold millions intimidating homeowners, already scared to death and almost always without counsel, McCarthy & Holthus. They look like rich young men who don’t care at all about what the banks are doing to their neighbors… well, maybe not their neighbors… they probably live in some zillion-dollar beach pad.

(Hey fellas… looking forward to seeing you on Google!  If you’ve been spending money on SEO trying to rank up at the top, I’ve got outstanding news… I’m going to put you right up there.  May not be exactly what you had in mind, but then I don’t give a rat’s ass what’s in your under-developed minds.)

The couple’s lawyer asked the McCarthy & Holthus lawyer if there could be a continuance as the husband would be only a day or two out of the hospital…. they said they’d check with Fannie Mae… then said that Fannie said no.  I guess Fannie Mae, a bankrupt and tax-payer owned mortgage company really wanted another empty condo in Anaheim.

The lawyer asked, what if the couple comes in and asks the judge for a continuance, would McCarthy & Holthus object?  No, she was told, they would not object “vigorously.”  So, the couple went to the UD expecting to ask the judge for a continuance, she pushing him in his wheelchair.

As soon as they walked in, another  McCarthy & Malthus lawyer, Kevin Mello was walking towards them.  As he approached, the couple overheard Kevin say to another, “I’m so sick of all these sob stories.”

Oh, no he didn’t… Oh, yes he did.

(And boy oh boy, is Kevin going to regret saying that… LOL… Yoohoo, Kevy, baby… you hang in the courthouse right near my house… do you know how lucky you’re aren’t?  I’m actually making a documentary about the foreclosure crisis, and hadn’t yet cast the shithead.  How lucky is that?)

Mello asked the couple when they could be out of their home.  They said that they would need six weeks.  Mello made a call and said they could have 30 days.  The husband asked to talk to the judge, but our guy Kevin said, “Why, the judge has no authority… he’ll tell you to be out in 4 days… the bank has all the authority.”

Does it now, Kevin?  The bank?  Fannie Mae?  The scandal-ridden, morally and financially bankrupt, already absorbed into the federal government, Fannie Mae?

Kevin had some papers he said that the couple needed to sign.  They said no, they didn’t want to sign anything.  Kevin said they had no choice… either sign or be out in four days.  He put the documents in front of them… they couldn’t move his hospital bed in 4 days… they signed.  Stipulated to a judgment and waved future claims.

When they appeared before the judge, he said that they should be GRATEFUL that the bank gave them 30 days.

When the couple tried to relay the story of the loan modification con job and Chase lying and then the stealing of the home… well, they didn’t use those terms, I did, but someone has to, right?  Because that’s what happened, and I don’t give a damn what other factors are involved, that’s what happened, sure as shootin’.

And, even though I’ve been covering the inconceivable tragedy that is the foreclosure crisis, after learning of what happened to this this couple, I couldn’t help but wonder how or why this could possibly happen… and no one cared… in this country… and no one cared.  Because I know I’ve been hard on the servicers, and deservedly so, but is it really possible that they are actually inherently evil… are they literally lying to everyone and intentionally try to sabotage the nation?  How could that be true?  It couldn’t, right?

And something occurred to me, something that I had not previously considered.  And maybe it’s important to consider.

Prior to the last three to four years tops, foreclosures were a very different animal than what we have going on today, but I’m starting to think that maybe a lot of people don’t know that.  You see, prior to this crisis, foreclosures were exceedingly rare.  When someone got into financial trouble they either sold their home, or borrowed against it to get through the storm.  But this housing market was pushed off a cliff, the credit markets froze almost overnight, prices fell through the floor and fast.  People losing homes today bear no resemblance to the foreclosures of the last 50 years… no resemblance whatsoever.

So, maybe our entire system, including the inadequate and fraudulent documentation, and the incredibly uncaring and incompetent treatment of the homeowners involved… maybe it’s happening because we haven’t stopped to realize that although today we have foreclosures and years ago we had foreclosures… they really shouldn’t be called the same thing because they’re not the same thing.  In fact, they’re so different they shouldn’t share the same moniker.

Maybe we should call today’s foreclosures, fraudclosures… I mean, like all the time… like as in someone call Webster’s.  Maybe if our society understood the substantive nature of the distinction, things would improve… no?  I think maybe  yes.  Like, do the bankers think that today we’re just having more of the same foreclosures we had years ago… same thing… just more of them?  Because that’s not the case.

Because in the days before this crisis, you’d never modify a loan… the person who went into foreclosure wasn’t a person that anyone would ever consider modifying a loan for, because by the time they went into foreclosure there was no hope for anything but repossession and after that, of course, liquidation was a certainty.  That’s not a description of today’s situation.

Look, what happened to this couple… is it not the kind of thing that you might expect to happen in some totalitarian regime?

So, why is that okay with even one single American?  We treat criminals better than this.  But today’s homeowners aren’t losing homes for the same reasons as before, they’re not deadbeats, they’re victims.  And something has to be done to change this, because as sure as I’m sitting here, what’s happening is going to end badly and I fear, violently.  People are going to get hurt… I don’t know how, when or where… but no way does this just keep going and everyone’s okay.

Chase’s conduct was so offensive that a highly experienced trial attorney agreed to take their case.

A complaint will be filed on Tuesday in Orange County Superior court seeking compensatory and punitive damages.


The couple’s lawyer would later ask a McCarthy Holthus lawyer about the apparent preference for coercion and intimidation, and she basically replied by saying, “Hey, look… I’m not their lawyer, I’m the bank’s lawyer.  If they wanted a lawyer they should have had their own.”  My words, not hers… but that’s what she was saying.

No, I’m sorry McCarthy Holthus… on that point you’re entirely wrong.  I mean, everyone know you don’t need to pay a lawyer when you’re applying for a loan modification… just ask the California State Bar, the Attorney General’s office… President Obama… come on… everyone knows that.

Mandelman out.

Should Borrower File Eviction Against Bank?

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EDITOR’S COMMENT: I was talking with an expert in landlord tenant law and I received an interesting suggestion. The case involved someone who has just been served with a writ of restitution where the owner had to peaceably leave her home — or it wouldn’t be so peaceful. The suggestion was that the owner file a forcible detainer action of her own against the current party that evicted her and accuse them of trespass as well. If she has proof, and in this case she does, that the documents were forged (even the verified complaint for eviction was forged) then there were many false parties and false documents.

So I squeezed my source a little more and the following is the line of reasoning he was suggesting that we follow from a fact standpoint. The names and details are redacted except for the pretenders. Comments anyone?

  1. Petitioner’s primary residence has just been served with a writ of restitution requiring her to vacate the premises.
  2. Petitioner is the legal owner of the property.
  3. Petitioner cooperated with law enforcement, but states affirmatively that she has proof that the verified complaint filed by US Bank for the forcible detainer from her primary residence was a forged document with a false notary.
  4. Further, Petitioner now has in her possession proof that the documents by which US Bank claims to be the creditor were also forged, fabricated and misrepresented to the court intentionally and with willful disregard for the consequences or the truth.
  5. Petitioner asserts that US Bank used trickery and falsehood to falsely represent facts to the Court that it knew were untrue.
  6. The Substitution of Trustee was a false, forged and fabricated document that was misrepresented by US BANK and their counsel as being authentic.
  7. Using the false Substitution of trustee, US BANK caused a false, fabricated notice of default, despite payments being made under contract to the creditors.
  8. Using the false Notice of Default, US Bank caused a false Notice of Sale to be issued despite the fact that it was neither the beneficiary nor the lender, nor a successor thereto by any means, nor had US Bank ever parted with anything of value that would constitute consideration or an interest in Petitioner’s obligation to creditors.
  9. Using the false Notice of Sale and the false substitute of trustee, a false auction was held by the false substitute trustee, where the false substitute trustee represented US Bank as the false creditor and the false trustee “Accepted” a non-existent bid (US Bank was not present at the false auction) in which the false substitute trustee issued a deed upon “foreclosure” without receiving any consideration of any kind.
  10. The false substitute trustee was at all times under the direct control and instructions of US BANK. US Bank had in substance substituted itself as the false trustee using the CalWestern entity.
  11. Using the fraudulently created and fraudulently obtained deed from the false substitute trustee US Bank initiated an FED action against the Petitioner.
  12. Using the false, forged, fabricated and unauthorized documentation described above, and using the rules of eviction to its advantage, US Bank obtained a Judgment for Eviction and Restitution of the premises against the Petitioner.
  13. Using the fraudulently obtained Judgment for Restitution and Eviction, US Bank filed the required documents for a writ of restitution to issue.
  14. Petitioner is now legally evicted from a home that she legally owns since the deeds used by US Bank were wild deeds, unauthorized and not in the chain of title.
  15. Petitioner demands possession of her home.
  16. The actions of US Bank constitute slander of title, trespass, and have caused severe emotional distress to the Petitioner.
  17. To allow US Bank to continue on this march of theft would make this court a co-venturer in a gross miscarriage of justice.

Possible Counter-Attack in Unlawful Detainer (Eviction) in Fraudulent Foreclosure Cases

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factual issues for Unlawful Detainer case NFG 7-15-11

Various states have two levels of  jurisdiction that make it difficult to raise the proper issues in eviction even if there has been no preceding judicial action or if the preceding judicial action has been predicated on fraudulent evidence proffered and accepted by the court.

I ended up working on the issue and it turns out that the “summary proceedings” do not preclude a trial and do not even preclude the need for a jury trial — both of which the pretenders wish to avoid at all costs. Courts are split on this but most of them are coming around tot he view that the mere presence in court of the attorney for the “title holder” is not sufficient for a writ of possession unless of course the homeowner doesn’t show up or doesn’t object.

There is also a split between the content of statutes and the content of the rules of procedure. One is passed by the legislature which is of dubious validity and the other by the Supreme Court of the State which of course is the body (under the separation of powers required by the constitution) that sets procedure in the courts. Most agree that that the situation is not nearly as cut and dry as the Banks would like you to believe.

They say that the usual oral motion for “Judgment on the Pleadings” or “entry of the Order requested” is to be treated as though it were a motion for summary judgment. That means that the motion cannot be granted and there must be a trial unless there are no material factual issues in dispute.

Virtually all courts agree that a motion for summary judgment should rarely be granted. The only time it is affirmed on appeal is if the other side doesn’t show up, fails to object or does not present any issue, even a denial, of factual issues alleged by the party seeking affirmative relief. Toward that end I have complied a list of issues that are present in these securitized robo-signed loans that would lead to trial and thus gain a tactical and real advantage over the pretender lender even though they thought they had already won (special thanks to pro se litigant Darrell Blomberg in Phoenix for his excellent work and analysis of the trustee sale — I used his work extensively in preparing this):

Plaintiff alleges it is the owner of the property by virtue of a sale conducted by a substitute trustee in which it submitted a credit bid that was accepted by the substitute trustee, and where the substitute  trustee issued a trustee deed upon sale.

  1. Defendant denies Plaintiff is or ever was the owner of the Property. Defendant affirmatively asserts that the documents proffered and actions of the parties are in fact part of a criminal joint venture in which Defendant was the victim.[1]
  2. Defendant denies that the plaintiff and/or its agents have ever disclosed the true beneficiary (creditor entitled to offer a credit bid in the auction of foreclosed property) on any document or in any other media, oral or written in violation of Arizona Statutes. [2]
  3. Defendant denies the validity of the deed of trust because of the absence of a beneficiary causing a fatal defect in the instrument. [3]
  4. Defendant denies Plaintiff has any legal right to possession.
  5. Defendant denies that a substitute trustee was ever appointed by any person or entity authorized to do so.[4]

[1] A.R.S. § 39-161, states, “A person who acknowledges, certifies, notarizes, procures or offers to be filed, registered or recorded in a public office in this state an instrument he knows to be false or forged, which, if genuine, could be filed, registered or recorded under any law of this state or the United States, or in compliance with established procedure is guilty of a class 6 felony.”

[2] A.R.S. § 33-404(B) states, “… a grantor who holds title to the property as a trustee, whether or not such capacity is identified on the document through which title was acquired, shall also disclose the names and addresses of the beneficiaries for whom the grantor held title to the property AND…”  Additionally, CAL-WESTERN RECONVEYANCE CORPORATION was never appointed as a trustee by an authentic and authorized party, it has neither capacity to effectuate said transaction nor any protections under Title 33, Chapter 6.1 for its egregious actions.  As the beneficiary was not disclosed on the Trustee’s Deed Upon Sale and the alleged trustee operated without authority, the instrument is void and of no force and effect.

[3] MERS (Mortgage Electronic Registration Systems, Inc.) is designated as the “Beneficiary” in the Deed of Trust.  For MERS to be a “Beneficiary” is a factual impossibility.  MERS states on its own homepage, www.MERSinc.org, “MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked.”  MERS is strictly a process with a database; it cannot meet the statutory definition (A.R.S. § 33-801) of a “Beneficiary.”  A process is merely a methodology and a database is a compilation of information and it cannot be a “Beneficiary” as it cannot receive payments nor can it ever hold title to an instrument pertaining to real property or the real property itself.  The process elaborating how “mortgage ownership and servicing rights are originated, sold and tracked” does not create statutory status as a Beneficiary.  The Beneficiary cited in the Notice of Trustee’s Sale never received an authorization from an original Beneficiary as there never was a statutorily compliant Beneficiary in the Deed of Trust.  Since there was never a Beneficiary established in the Deed of Trust, the Deed of Trust is void and of no force and effect.  The indicated Beneficiary has no authorization to initiate a “power of sale” against the property. It is possible that a mortgage could be construed to exist, but that would require judicial foreclosure instead of non-judicial private sale.

[4] A valid Substitution of Trustee has never been made by a beneficiary with authority to appoint a successor trustee pursuant to A.R.S. § 33-804 (B) which states, “The beneficiary may at any time remove a trustee for any reason or cause and appoint a successor trustee, and such appointment shall constitute a substitution of trustee.”  The recorded Substitution of Trustee fails to meet the requirements of A.R.S. § 33-804 (D) in that no document has ever been acknowledged that substitutes or appoints a trustee by an authorized Beneficiary or its agent.  A.R.S. § 33-420 (C), states, “A document purporting to create an interest in, or a lien or encumbrance against, real property not authorized by statute, judgment or other specific legal authority is presumed to be groundless and invalid.”  A valid Substitution of Trustee to CAL-WESTERN RECONVEYANCE CORPORATION has never been made in accord with any contractual provision, Arizona statute or court action.  Therefore, the Notice of Trustee’s Sale is void as the cited Trustee has never been authorized to exercise a “power of sale” against the property.

  1. Defendant denies that the original trustee ever resigned or was replaced.
  2. Defendant denies that any substitute trustee ever became the successor to the original trustee.
  3. Defendant denies that any consideration was ever tendered at the auction of the property.
  4. Defendant denies that the Trustee’s deed upon sale was in fact a valid deed or the result of a valid sale.[1]
  5. Defendant denies that a bona fide sale took place in which the property was sold for value.
  6. Defendant denies that a bona fide sale took place in accordance with strict adherence to Arizona statutes.[2]
  7. Defendant denies that U.S. Bank acquired title to the subject property in any capacity, trustee or otherwise.[3]
  8. Defendant denies that Plaintiff has, in good faith or otherwise, ever acquired the right to sell the subject property or seek possession thereof.

[1] The Trustors named in the Notice of Trustee’s Sale are not the same as the original Trustors named in the Deed of Trust.  If you were to exercise a power of sale, as you have, for this property, you have forever caused a defect in the chain of title to the real property.

[2] A.R.S. § 33-808 (A) (3), states that the property shall be posted with a copy of the Notice of Trustee’s Sale.  The property has never been posted with a copy of the Notice of Trustee’s Sale.

A.R.S. § 33-808 (A) (4), states that there shall be published a written notice of the Notice of Trustee’s Sale.   No proof exists that such publishing took place in a “Newspaper of General Circulation” as required.

[3] The Trustee’s Deed Upon Sale indicates that the property was “sold” to US BANK NATIONAL ASSOCOCIATION AS TRUSTEE RELATING TO CHEVY CHASE FUNDING LLC MORTGAGE BACKEDCERTIFICATES SERIES 2006-04 by trustee CAL-WESTERN RECONVEYANCE CORPORATION on behalf of “Beneficiary” MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. (as cited in the Notice of Trustee’s Sale) on 2010-05-10 for the amount of $91,947.15.  This is impossibility as no funds have ever been tendered pursuant to this transaction.  Since the grantee acquired the property for no value as described in A.R.S. § 33-404(F) it does not enjoy an exemption from disclosing the beneficiary as required by A.R.S. § 33-404(B).  A.R.S. § 33-404(B) states, “… a grantor who holds title to the property as a trustee, whether or not such capacity is identified on the document through which title was acquired, shall also disclose the names and addresses of the beneficiaries for whom the grantor held title to the property AND…”  Additionally, CAL-WESTERN RECONVEYANCE CORPORATION was never appointed as a trustee by an authentic and authorized party, it has neither capacity to effectuate said transaction nor any protections under Title 33, Chapter 6.1 for its egregious actions.  As the beneficiary was not disclosed on the Trustee’s Deed Upon Sale and the alleged trustee operated without authority, the instrument is void and of no force and effect.

  1. Defendant denies that Defendant ever agreed to the sale of the property by Cal Western, Chevy Chase et al except in accordance with the terms of the deed of trust.
  2. Defendant denies that MERS was legally and factually qualified to be a beneficiary under the Deed of Trust.
  3. Defendant denies that Chevy Chase was in fact the lender or creditor when the  loan was originated.
  4. Defendant denies that the Deed of Trust, Promissory note and other closing documents accurately memorialized the closing of the loan between Defendant and John Does 1-100 who are now known to be unidentified investors who advanced money to Chevy Chase which acted as a mortgage broker.
  5. Defendant denies that the obligation is secured.
  6. Defendant denies that the obligation was in fact securitized but admits that the money trail shows that the party treated the loan as securitized without Defendant’s knowledge or consent.
  7. Defendant denies that MERS ever executed any document in connection with the subject property.
  8. Defendant denies that Cal Western was ever legally in the chain of title as per the title registry in county records, in that the use of Cal Western was a self serving unauthorized act committed under pretense of being a creditor.
  9. Defendant denies that Cal Western was ever substituted for the original trustee.

10. Defendant denies that Cal Western ever received tender of (1) the alleged note from Defendant or (2) cash in exchange for the issuance of a deed or (3) any other consideration for the issuance of a deed in that Cal Western was a willing and intentional partner in a fraudulent joint venture with Chevy Chase et al to issue fraudulent notices of default, fraudulent notices of sale, and conduct fraudulent auctions in which deeds were issued without sale.

11. Defendant denies that Cal Western had any authority to sell Defendant’s property.

12. Defendant denies that Cal Western had any authority to issue a deed to anyone for the subject property.

13. Defendant affirmatively states that the original deed

14. Defendant affirmatively states that the documents upon which Plaintiff relies are forged fabricated instruments without authority or consent from the parties named in those instruments all of which were produced in a process now well-known nationally as robo-signing, in which clerical people with no knowledge or authority relating to any of the transactions or status of files, execute documents as instructed on behalf of people they have never met who purport to have authority to sign documents on behalf of entities with whom neither the robo-signer nor the person named have any authority.

15. Defendant affirmatively asserts that the deed executed by Cal Western was neither a trustee deed nor a valid deed of any kind and transferred no rights, title or interest to the subject property.

23. Defendant affirmatively asserts that the Cal Western deed was a Wild Deed in accordance with industry standards governing the examination of title and the issuance of title insurance, to wit: Cal Western was outside of the chain of title as per the title registry except for fabricated, forged instruments that were created as part of a fraudulent scheme.

24. Defendant affirmatively states that Plaintiff and its agents, servants and employees, each of whom was fully aware of the fraudulent nature of the present claim for possession and title is liable for each proffer and each document  relied upon in furtherance of their fraudulent scheme. The amount of liability is $5,000 or treble damages for each such act.[1]


[1] A.R.S. § 33-420 (A), states, “A person purporting to claim an interest in, or a lien or encumbrance against, real property, who causes a document asserting such claim to be recorded in the office of the county recorder, knowing or having reason to know that the document is forged, groundless, contains a material misstatement or false claim or is otherwise invalid is liable to the owner or beneficial title holder of the real property for the sum of not less than five thousand dollars, or for treble the actual damages caused by the recording, whichever is greater, and reasonable attorney fees and costs of the action.”

Part III of Gardner and Shepherd: Notes and Assignments

Your Client’s Securitized Mortgage: A Basic Roadmap PART 3: Dealing with Notes and Assignments [2009-11-19]

Your Client’s Securitized Mortgage: A Basic Roadmap
By O. Max Gardner, III and Richard D. Shepherd

Part 3: Dealing with Notes and Assignments

There are two basic documents involved in a residential mortgage loan: the promissory note and the mortgage (or deed of trust). For brevity’s sake these are referred to simply as the Note and the Mortgage.

A Note is: a contract to repay borrowed money. It is a negotiable instrument governed by Article 3 of the Uniform Commercial Code (UCC). The Note, by itself, is an unsecured debt. Notes are personal property. Notes are negotiated by endorsement or by transfer and delivery as provided for by the UCC. Notes are separate legal documents from the real estate instruments that secure the loans evidenced by the Notes by liens on real property.

A Mortgage is: a lien on, and an interest in, real estate. It is a security agreement. It creates a lien on the real estate as collateral for a debt, but it does not create the debt itself. The rights created by a Mortgage are classified as real property and these instruments are governed by local real estate law in each jurisdiction. The UCC has nothing to do with the creation, drafting, recording or assignment of these real estate instruments.
A Note can only be transferred by: an “Endorsement” if the Note is payable to a particular party; or by transfer of possession of the Note, if the Note is endorsed “in blank.” Endorsements must be written or stamped on the face of the Note or on a piece of paper physically attached to the Note (the Allonge). See UCC §3-210 through §3-205. The UCC does not recognize an Assignment as a valid means of transferring a Note such that the transferee becomes a “holder”, which is what the owners of securitized mortgage notes universally claim to be.

In most states, an Allonge cannot be used to endorse a note if there is sufficient room at the “foot of the note” for such endorsements. The “foot of the note” refers to the space immediately below the signatures of the borrowers. Also, if an Allonge is properly used, then it must describe the terms of the note and most importantly must be “permanently affixed” to the Note. Most jurisdictions hold that “staples” and “tape” do not constitute a “permanent” attachment. And, the Master Document Custodial Agreement may specify when an Allonge can be used and how it must be attached to the original Note.

Mortgage rights can only be transferred by: an Assignment recorded in the local land records. Mortgage rights are “estates in land” and therefore governed by the state’s real property laws. These vary from state to state but in general Mortgage rights can only be transferred by a recorded instrument (the Assignment) in order to be effective against third parties without notice.

In discussions of exactly what documents are required to transfer a “mortgage loan” confusion often arises between Notes versus Mortgages and the respective documents necessary to accomplish transfers of each. The issue often arises from the standpoint of proof: Has Party A proven that a transfer has occurred to it from Party B? Does Party A need to have an Assignment? The answer often depends on exactly what Party A is trying to prove.

Scenario 1: Party A is trying to prove that the Trustee “owns the loan.” Here the likely questions are, did the transaction steps actually occur as required by the PSA and as represented in the Prospectus Supplement, and are the Trustee’s ownership rights subject to challenge in a bankruptcy case?

The answers lie in the UCC and in documents such as:

  • the MLPSA’s;
  • conveyancing rules of the PSA (normally Section 2.01);
  • transfer and delivery receipts (look for these to be described in the “Conditions to Closing” or similarly named section of MLPSA’s and the PSA);
  • funds transfer records (canceled checks, wire transfers, etc);
  • compliance and exception reports provided by the Custodian pursuant to the Master Document Custodial Agreement; and
  • the “true sale” legal opinions.

Some of these documents may or may not be available on the SEC’s EDGAR system; some may be obtainable only through discovery in litigation. The primary inquiry is whether or not the documents, money and records that were required to have been produced and change hands actually do so as required, and at the times required, by the terms of the transaction documents.

Another question sometimes asked when examining the “validity” of a securitization (or in other words, the rights of a securitization Trustee versus a bankruptcy trustee) is, must the Note be endorsed to the Trustee at the time of the securitization? Here are some points to consider:

  • Frequently the only endorsement on the Note is from the Securitizer-Sponsor “in blank” and the only Assignment that exists, pre-foreclosure, is from the Securitizer-Sponsor “in blank” (in other words, the name of the transferee is not inserted in the instrument and this space is blank).
  • The concept widely accepted in the securitization world (the issuers and ratings agencies, and the law firms advising them) is that this form of documentation was sufficient for a valid and unbroken chain of transfers of the Notes and assignments of the Mortgages as long as everything was done consistently with the terms of the securitization documents. This article is not intended to validate or defend either this concept or this practice, nor is it intended to represent in any way that the terms of the securitization documents were actually followed to the letter in every real-world case. In fact, and unfortunately for the certificate holders and the securitized mortgage markets, there are many instances in many reported cases where these mandatory rules of the securitization documents have not been followed but in fact, completely ignored.
  • Often shortly before foreclosure (or in some cases afterwards) a mortgage assignment is produced from the Originator to the Trustee years after the Trust has closed out for the receipt of all mortgage loans. Such assignments are inconsistent with the mandatory conveyancing rules of the Trust Documents and are also inconsistent with the special tax rules that apply to these special trust structures. Most state law requires the chain of title not to include any mortgage assignments in blank, but assignments from A to B to C to D. Under most state statutes, an assignment in blank would be deemed an “incomplete real estate instrument.” Even more frequent than A to D assignments are MERS to D assignments, which suffer from the same transfer problems noted herein plus what is commonly referred to as the “MERS problem.”

Scenario 2: Party B seeks to prove standing to foreclose or to appear in court with the rights of a secured creditor under the Bankruptcy Code. OK, granted the UCC (§3-301) does provide that a negotiable instrument can be enforced either by “(i) the holder of the instrument, or (ii) a non-holder in possession of the instrument who has the rights of a holder.”

  • Servicers and foreclosure counsel have been known to contend that this is the end of the story and that the servicer can therefore do anything that the holder of the Note could do, anywhere, anytime.
  • The Fannie Mae and Freddie Mac Guides contain many sections that appear to lend superficial support to this contention and frequently will be cited by Servicers and foreclosure counsel as though the Guides have the force of law, which of course they do not.
  • There are many serious problems with this legal position, as recognized by an increasing number of reported court decisions.

Authors’ General Conclusions and Observations:

  • Servicers and foreclosure firms are either wrong, or at least not being cautious, if they attempt to foreclose, or appear in court, without having a valid pre-complaint or pre-motion Assignment of the Mortgage. Yet at the same time, Servicers and note holders place themselves at risk of preference and avoidable transfer issues in bankruptcy cases if, for example, endorsements and Assignments that they rely upon to support claims to secured status occur or are recorded after or soon before bankruptcy filing.
  • In addition any Servicer, Lender, or Securitization Trustee is either wrong, or at least not being cautious, if it ever: (1) claims in any communications to a consumer or to the Court in a judicial proceeding that it is the Note holder unless they are, at the relevant point in time, actually the holder and owner of the Note as determined under UCC law; or (2) undertakes to enforce rights under a Mortgage without having and recording a valid Assignment.
  • The UCC deals only with enforcing the Note. Enforcing the Mortgage on the other hand is governed by the state’s real property and foreclosure laws, which generally contain crucial provisions regarding actions required to be taken by the “note holder” or “beneficiary.” State law may or may not authorize particular actions to be taken by servicers or agents of the holder of the Note.
  • For the Servicer to have “the rights of the holder” under the UCC it must be acting in accordance with its contract. For example, if the Servicer claims to have possession of the Note, did it follow the procedures contained in the “Release of Documents” section of the Custodial Agreement in obtaining possession? Does the Servicer really have “constitutional” standing under either Federal or State law to enforce the Note even if it is a “holder” if it does not have any “pecuniary” or economic interest in the Note? In short, the concept of constitutional standing involves some injury in fact and it is hard to see how a mere “place-holder” or “Nominee” could ever over-come such a hurdle unless it actually owned the Note or some real interest in the same.
  • The Servicer should have the burden of explaining the legal reasons supporting its standing and authority to act. Sometimes Servicers have difficulty maintaining a consistent story in this regard. Is the Servicer claiming to be the actual holder, or the holder and the owner, or merely an authorized agent of the true holder? If it is claiming some agency, what proof does it have to support such a claim? What proof is required? Sometimes this is just academic legal hair-splitting but many times it involves serious issues of fact. For example, what if the attorney for the Servicer asserts to the court that his or her client actually owns the Note, but the Fannie Mae website reports that Fannie is the owner? What if the MERS website reports that the Plaintiff is just the “Servicer?” What if the pre-complaint correspondence to the borrower names some entirely different party as the holder and indicated that the current plaintiff is only the Servicer?
  • Finally, the Servicer always has an obligation to be factually accurate in borrower communications and legal proceedings, and to supervise employees and vendors and attorneys to assure that Note endorsements, Assignments of Mortgage, and affidavits are executed by persons with valid corporate authority, and not falsified nor offered for any improper purpose.

The focus of the default servicing industry must move from “how fast we can get things done” to “how honestly and accurately can we be in presenting the proper documentation to the courts and to the borrowers”. Judicial proceedings are not like NASCAR races where the fastest lawyer always wins. Judicial proceedings are all about finding the truth no matter how long it takes and regardless of the time and difficulties involved.

November 14, 2009

Richard D. Shepherd

The Law Office of Richard Shepherd

Troy, Virginia (W.D.VA)

richard@CentralVaLaw.com

www.CentralVaLaw.com

O. Max Gardner III

Gardner & Gardner PLLC

BOA FUNDS MORTGAGE ON STOLEN HOUSE AND BLAMES BORROWER — FIRST AMERICAN TITLE DENIES LIABILITY

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SEE VIDEO: HOW COULD THE TITLE COMPANY AND BOA CLOSE ON A LOAN WHERE THE BUYER DID NOT GET TITLE?

At first blush this story seems like a standard scam story and an unfortunate couple who bought the house, spent money on upgrades, paid all their mortgage payments and are now told they are faced with eviction from a home this is not theirs. But where is the title insurance protection that should be present? It is exactly where I told you it would be. The title companies, this one is First American, are denying coverage. The thief in this case is not a securitization party but the effect is the same. BOA is telling the couple that if they don’t pay the mortgage their credit will be ruined.

So they have a mortgage without a house. How is that possible? I’ll tell you how. The old owner abandoned the house allowing a scam artist to pretend to be the owner because the old owner was not around and didn’t care. Hmmmm. Wait that sounds familiar.

In the securitized mortgages, the investor has abandoned their claim against the “borrowers” and they are suing the investment bankers instead. That creates the same void as this scam. Only in “securitized” loans the scam artist that pretends to own the loan is a bank or some “bankruptcy-remote entity” that was created to serve the bank. Did you even wonder why the Banks went to all the trouble of inserting “bankruptcy remote” straw-men at loan closings? I think it is because they knew from the start this was eventually going to blow up and collapse.

The title company didn’t give a damn as long as they got their fee for the closing so they never did the work they were supposed to do. BOA didn’t care because they were not using their own money or had changed their habits because they usually don’t use their own money or credit. So these people got screwed by the title company and the “lender” who by the way does not have a perfected lien on the property (just like the “securitized” crap they sold to borrowers and investors).

Isn’t this interesting? Now BOA must figure out a way to resolve this without conceding that if the documentation was not in the chain of title as recorded in the title registry, there is no mortgage and thus nothing to foreclose. If this goes to court, BOA has a real problem, doesn’t it. They want to say that the borrower still owes them the money that was in fact funded AND they want to have a lien, but they can’t so they can’t foreclose. Thus this is exactly the same as ALL securitized loans.

The defects in the chain of title and the obvious shell game of names is not merely a technicality — it is the bedrock of a stable marketplace where if you buy something you should be getting clear title to it. The title company now says they are not liable for misrepresenting title. That the contract for insurance merely represents the risks they were willing to take and that if there was fraud in the title chain they are not liable. So what we have here is that no matter how many precautions the buyer-borrower takes he can still get screwed by the big guys. This isn’t caveat emptor (buyer beware) this is buyer be screwed.

And THAT is why the corrupted title mess extending to more than 80 million real estate transactions involving residential swellings cannot be solved — the players don’t want to solve it.

TITLE CRISIS: EVEN IF YOU PAID CASH FOR YOUR HOME, TITLE STILL IN DOUBT — and you could be “underwater”

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“The number of underwater mortgages is vastly understated by this revelation. Practically every residential real estate transaction in the last 10+ years had a supposedly securitized debt instrument somewhere in the factual chain — which misdirected the funds to satisfy the mortgage and misdirected the parties entitled to execute a satisfaction or reconveyance. In a nutshell, that means most houses have multiple encumbrances in their chain of title that would put them underwater several times over, even if they paid cash.” — Neil F Garfield 6-17-11

“The bottom line is that even if you are adamantly opposed to challenging the banks on the securitization mess, you are nonetheless in the fight if you own property that was ever touched by a supposedly securitized mortgage. If you still own that house, or think you do, you probably have one or more unsatisfied mortgages that you didn’t know about. The title companies have already decided as a matter of policy they are going to deny these claims, claim fraud, and force claimants to sue them. Small wonder, the liability could be in excess of $20 trillion dollars depending upon how the damages are calculated. The insurance companies are only worth pennies on that dollar.” — Neil Garfield 6-17-11

PROPERTY LAWYERS QUESTION TITLE CHAIN GOING BACK 15 YEARS

“satisfied” Loans still exist on record and may be enforceable

The worried callers who contact me now include a number of homeowners and lawyers who wanted nothing to do with the foreclosure battle. They are dealing with homes that were paid for in cash or which the homeowner is current on payments. Looking at the title chain they see numerous breaks caused by satisfactions or re-conveyances executed by names that are out of the chain of title. Talking to title companies, they are getting anything from vague answers to a direct “no.”

More than 80 million transactions occurred in the last 10+ years in which a loan was the subject of a securitization claim and in which some member of the securitization team received the money to satisfy the mortgage, and executed a satisfaction of mortgage or reconveyance. The more they drill down, seeking answers that would lead to corrective instruments which ordinarily would correct clouds or defects on title, the more worried they get: they don’t know who to ask for the corrective instrument and even if they do know or think they know, they are not getting any cooperation.

We are seeing a huge number of cases in which the recipient of the pay-off is not to be found in the title chain, a third party executed a satisfaction of mortgage, but no assignments, or no valid assignments can be found on record or off record. Since we know that no transfer documents were prepared or executed unless a matter went into litigation and the Judge demanded compliance with the requirements of evidence and law, these “satisfactions” and “reconveyances” have no probative weight and must be considered the same as wild deeds.

That means when people refinanced their homes, bought a new home, sold their home, exchanged homes or whatever — their assumption that the old mortgage was extinguished on record is very much mistaken. Buyer and seller alike, homeowner and refi “lender” alike are in serious trouble here. The Correction is usually to get the signature of the real lender of record. Bu many of these lenders cannot be found and in court, there are no facts to plead that would have the court change anything — the money for the satisfaction or reconveyance went to a party other than the lender of record.

So the circle of fabricated and forged documents is about to get exponentially larger. The worst case scenario is where the lender can be found but refuses to execute a corrective instrument because they didn’t get paid. The mere revelation of that fact will cast a well-deserved shadow over the entire banking industry that carries “mortgages” as assets on their balance sheets.

The bottom line is that even if you are adamantly opposed to challenging the banks on the securitization mess, you are nonetheless in the fight if you own property that was ever touched by a supposedly securitized mortgage. If you still own that house, or think you do, you probably have one or more unsatisfied mortgages that you didn’t know about. The title companies have already decided as a matter of policy they are going to deny these claims, claim fraud, and force claimants to sue them. Small wonder, the liability could be in excess of $20 trillion dollars depending upon how the damages are calculated. The title insurance companies are only worth pennies on that dollar.

The number of underwater mortgages is vastly understated by this revelation. Practically every residential real estate transaction in the last 10+ years had a supposedly securitized debt instrument somewhere in the factual chain — which misdirected the funds to satisfy the mortgage and misdirected the parties entitled to execute a satisfaction or reconveyance. In a nutshell, that means most houses have multiple encumbrances in their chain of title that would put them underwater several times over, even if they paid cash.

Michigan Court Relies on New York Trust Theory, Rules Loan Never Made it to Trust

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LIVINGLIES VALIDATED IN 4TH STATE IN AS MANY DAYS

EDITOR’S NOTE: In plain language the “securitization” of loans at least with respect to residential mortgage loans is a myth, an illusion, A LIE. It is one of many lies about these mortgages and we are living it as though it was real, which is why this blog is entitled LIVINGLIES. If the loans never made it to the trust, there was no transfer and thus there was no securitization, which means that the investors bought empty mortgage bonds with no value and no prospects for value.

This fact does NOT invalidate the obligation, however. But the fact that securitization was faked doesn’t validate the obligation either. Nor does it create a valid perfected lien against a home. That is a lie too, but for different reasons. In most instances there is no money due to anyone (except to the investors from the investment bankers) because the obligation that would been created was contemporaneously transferred to third parties who paid it. The fact that it was paid to the agents of the investors rather than the trusts or the investors themselves does not remove the fact that the obligation is paid in full and therefore not due, much less capable of being in default.

Where the article misses a key point is in its knee-jerk reaction to the accusation of free house to the borrower. If that is the collateral benefit arising out of Wall Street misconduct, so be it.

The real issue here is not whether there is going to be a free house awarded, but to whom it will be awarded. There is no reason that interlopers (pretenders) should be allowed to get the collateral benefit of a free house, having defrauded all the real parties in interest. It stands to reason that the victims of the fraud should get the collateral benefit. If that means they get a little more than they are entitled to spending upon how you look at it, this seems far more preferable than proceeding in the business as usual manner of only letting collateral benefits flow toward big business and big banks. Every once in a while, if the banks screw up enough and step on enough rakes, the little guy should get the benefits if that is the way the cards fall.

The article below from Naked Capitalism attributes the original idea that securitization was always a myth to others. It happened here first and for a long time was ignored. Now everyone is adopting it as their own idea. That is good news for homeowners. Yet it is only fair that after nearly 4 years of work to get the message out, that credit be given here that the new decisions in the last week are the result of, and in some instances quotes from the expert declarations written and signed by me. 

Michigan Court Relies on New York Trust Theory, Rules Loan Never Made it to Trust

A June 6 trial court decision in Michigan, Hendricks v. US Bank, has not gotten the attention it warrants because to the extent it has been noticed, it has been depicted as invalidating an effort to effect a note (the borrower IOU) transfer via MERS. While that was one of the grounds for a ruling favorable to the borrower, the court also considered and gave a thumbs’ up to what we call the New York trust theory. That has far more significance, as readers will see shortly (hat tip to Foreclosure Fraud for this sighting).

This legal argument, which so far has been tested in a very few cases (primarily in Alabama, since it was perfected by Alabama attorney Nick Wooten) was the basis of a favorable ruling in Alabama trial court. The reason it bears watching is that if the New York trust theory continues to be validated in court, it has devastating consequences for most post 2004 vintage residential mortgage backed securities. it has been the subject of a long-running argument among legal experts, with the Congressional Oversight Panel, Adam Levitin, as well as consumer lawyers like respected bankruptcy attorney Max Gardner on one side, and securitization industry incumbents like the American Securitization Forum and SNR Denton.

The bare bones outline of the argument is that the trusts, the legal vehicle that holds the mortgage loan, in virtually all securitizations, elected New York law as the governing law for the trust. New York law is well established and very rigid. A trust can act ONLY as stipulated; any deviation is a “void act” and has no legal force.

But the problem is that the notes appeared not to have gotten to the trust. As we wrote earlier:

…. there is substantial evidence that in many cases, the notes were not conveyed to the trust as stipulated. As we have discussed, the pooling and servicing agreement, which governs who does what when in a mortgage securitization, requires the note (the borrower IOU) to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title. The minimum conveyance chain in recent vintage transactions is A (originator) => B (sponsor) => C (depositor) => D (trust).

The proper conveyance of the note is crucial, since the mortgage, which is the lien, is a mere accessory to the note and can be enforced only by the proper note holder (the legalese is “real party of interest”). The investors in the mortgage securitization relied upon certifications by the trustee for the trust at and post closing that the trust did indeed have the assets that the investors were told it possessed.

The pooling and servicing agreement also provided that the transfers had to take place by a particular cutoff date, which was typically no later than 90 days after the closing of the deal. That means notes cannot be transferred in at a later date.

The ruling is very clear that the note never made it to the trust:

Note that the judge rules that someone can foreclose, but it’s not the trust, it’s the original lender. But that is unacceptable to the mortgage industrial complex. They cannot afford to admit they defrauded investors, which is what a foreclosure in the name of the original lender amounts to.

So when people complain about borrowers getting free houses, they act as if it’s the borrower’s fault. That’s the wrong place to assign blame. No one is saying the borrower does not owe somebody money. And the borrowers aren’t seeking a free house; they usually came to this juncture because they thought their records had overcharges in them or they thought they were a good candidate for a mod but could not get the servicer to consider their case. It’s the originators and packagers who put themselves in the situation of not being able to enforce the debt, not the borrower.

The apparent widespread abandonment of the practice of crossing the ts and dotting the is potentially devastating. If the failure to convey notes properly is as widespread as we have been told by various observers (and Abigail Field’s sample confirms), the mortgage industry has a monstrous problem on its hands. As the Michigan ruling suggests, at a minimum, notes not transferred properly are actually owned by someone earlier in the securitization chain. But no one wants to admit that; it means the investors were lied to and hold paper that does not have clear legal rights to foreclose and that originatorrs, servicers and trustees have committed massive securities fraud. And in a worse case scenario, if no notes were transferred to the trust by closing, there is a contract formation failure.

This is the sword of Damocles hanging over the bond markets. The incumbents, bizarrely, seem intent on pretending it does not exist rather than trying to do something to alleviate the damage.

I’m including the full ruling below since it’s short and readable and I know some readers enjoy court filings.

Hendricks v. US Bank, June 6, 2011

Special Servicing Agreement: DENIES ANY INTEREST IN INVESTMENT VEHICLES OR MORTGAGES

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FROM MARY COCHRANE: MANY THANKS FOR YOUR EXCELLENT WORK

Do you know what ‘xxx’ your loan is inside of? Do you know who really is in court as Plaintiff? Did you get a name affidavit signed?

Read Special Servicing Agreement.

Special Servicer “REO Broker’ c/o Special Servicer ‘Corporation as Lender’ of real Servicer (Note Holder in Due Course) as Lender (real lender) holding unsecured note transaction between seller and purchaser ‘registered in an electronic database’ is all MERS is.

Securities & Exchange Commission’s Regulation of Asset-Backed Securities: … function such as Master Servicer, administrator, primary Servicer, Special Servicer, affiliated Servicer and unaffiliated Servicer. The SEC noted there is …
http://www.mortgagebankers.org/files/…/WhitePaper-_Final_REGAB.pdf – Similar

PDF] MEMORANDUM The company is one of the nation’s largest commercial loan servicers with over $294 billion in outstanding balances. As special servicer …www.sec.gov/comments/s7-08-10/s70810-195.pdf

Investment Company Act of 1940 — Section 3(c)(5)(C )
Capital Trust, Inc
February 3, 2009
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
Our Ref. No. 2007-121113
File No. 132-3

In your letter, dated January 29, 2009, you request that we concur with your view that certain subordinate participations in commercial real estate first mortgage loans, as described below, that are held by Capital Trust, Inc., a public company incorporated in the state of Maryland that has elected treatment as a real estate investment trust for federal tax law purposes (the “Company”), would be considered qualifying interests, as defined below, for purposes of the exclusion from the definition of investment company in Section 3(c)(5)(C) of the Investment Company Act of 1940 (“Act”).

Facts
You state that the Company engages primarily in commercial real estate financing by originating and purchasing commercial real estate debt and related instruments for its own accounts as well as the accounts of investment vehicles that the Company manages. You state that among the types of investments the Company makes are investments in A/B commercial mortgage loan financing arrangements (“A/B financings”). You explain that in an A/B financing, the principal balance of a single commercial mortgage loan is divided between two or more mortgage lenders as a means of spreading the credit risk associated with the mortgage loan between the lenders. You state that unlike a mortgage loan participation where each loan participant has a pari passu interest in the mortgage loan, an A/B financing is a senior/subordinated structure. The senior participation, called the “A-Note,” has priority over the junior participation, called the “B-Note,” with respect to the allocation of payments made on the mortgage loan.1 You explain that all periodic payments made by the borrower on the underlying mortgage loan are allocated first to the A-Note holder, as senior lender, in accordance with the terms of the A/B financing and then to the B-Note holder, as junior lender. Similarly, you explain that in the event of a default on the mortgage loan, all collections or recoveries on the loan are allocated first to the A-Note holder until the A-Note holder has been fully paid before any payments are made to the B-Note holder. You further state that any losses incurred with respect to the loan are allocated first to the B-Note holder and then to the A-Note holder. You state that the loan is fully secured by a mortgage on the underlying commercial property and the value of the underlying commercial property at the time of the A/B financing always exceeds the combined principal balance of the B-Note and the A-Note.

You state that in the typical A/B financing in which the Company invests, a lender enters into a mortgage arrangement with a borrower and then participates the mortgage loan to form an A/B financing structure. The lender, who holds legal title to the mortgage loan and is listed as the lender of record, retains the A-Note but sells the B-Note to the Company. You state that the Company as B-Note holder obtains the right to receive from the A-Note holder the Company’s proportionate share of the interest and the principal payments made on the mortgage loan by the borrower at the time such payments are made, and the Company’s returns on its B-Note investment are based on the principal and interest payments made by the borrower.

You state that in some A/B financings, the B-Note holder’s participation interest is evidenced by a separate note issued by the borrower to the B-Note holder and which is directly secured by the mortgage.2 You explain that in these types of A/B financings, the Company as B-Note holder is in contractual privity with the borrower with respect to the underlying mortgage loan and thus payment on the B-Note should not be affected in the event of the bankruptcy of the A-Note holder.3 You state that in other A/B financings in which the Company invests, the B-Note holder holds a participating beneficial ownership interest in the mortgage loan and mortgage loan proceeds. The participation interest, however, is not evidenced by a separate note from the borrower and thus the Company as B-Note holder is not in contractual privity with the borrower.4 You note that the Company arguably could have difficulty obtaining payment in the event that the A-Note holder files for bankruptcy.5 You state that, with the exception of the bankruptcy issue, the two types of A/B financings are similar in all other material respects.

You state that the Company as B-Note holder enters into an agreement with the A-Note holder that sets forth the rights and obligations of the parties (“Agreement”). You explain that under the Agreement, the A-Note holder is afforded the sole and exclusive authority to administer and service the mortgage loan so long as the mortgage loan is a performing loan. The Agreement, however, provides the Company as B-Note holder with approval rights with respect to any decisions relating to material modifications to the loan agreements, or in connection with any material decisions pertaining to the administration and servicing of the mortgage loan.

You state that the Agreement also grants the Company as B-Note holder the right to control the administration and servicing of the loan in the event that the loan becomes a non-performing loan (“control rights”).6 You state that these control rights include the right to appoint a special servicer to manage the resolution of the non-performing loan, including any proposed foreclosure or workout of the loan.7 You state that the Company generally will have the right to advise, direct, or approve certain actions to be taken by the special servicer, including those with respect to any modification or forgiveness of principal or interest in connection with the defaulted loan, any proposed foreclosure of the mortgage loan or acquisition of the underlying property by deed-in-lieu of foreclosure or any proposed sale of a defaulted mortgage loan. You state that the special servicer is generally obligated to follow the Company’s decisions unless the special servicer believes that doing so would violate any applicable law or provisions of any agreement applicable to the financing arrangement. In addition, you state that the special servicer is subject to the limitations prescribed by a “servicing standard,” which requires the special servicer to act in the best interests of both the A-Note holder and the Company as B-Note holder and in a commercially reasonable manner. The Company, however, for any reason has the right to terminate and replace the special servicer.

You also state that the Company as B-Note holder has the right to receive written notice with respect to the performance of the mortgage loan and all reasonably requested information in connection with the exercise of the B-Note holder’s rights. You further state that the Company also has the right to cure any monetary and non-monetary defaults on the mortgage loan. Finally, you state that the Company may purchase the A-Note at a price of par plus interest in the event that the loan becomes non-performing.

Analysis
Section 3(c)(5)(C) of the Act
Section 3(a)(1) of the Act, in relevant part, defines an investment company as any issuer that is, or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of Government securities and cash) on an unconsolidated basis.8 Section 3(c)(5)(C) of the Act, in relevant part, provides an exclusion from the definition of investment company for any issuer that is “primarily engaged in … purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” We previously have taken the position that an issuer may not rely on the exclusion provided by Section 3(c)(5)(C) unless at least 55% of its assets consist of “mortgages and other liens on and interests in real estate” (called “qualifying interests”) and the remaining 45% of its assets consist primarily of real estate-type interests.9 To meet the 45% real estate-type interests test, an issuer must invest at least 25% of its total assets in real estate-type interests (subject to reduction to the extent that the issuer invests more than 55% of its total assets in qualifying interests) and may invest no more than 20% of its total assets in miscellaneous investments.10

We generally take the position that a qualifying interest is an asset that represents an actual interest in real estate or is a loan or lien fully secured by real estate. Thus, for example, we have not objected if an issuer treats as qualifying interests, among other things, fee interests in real estate,11 mortgage loans fully secured by real property,12 notes secured by a pool of whole mortgage loans,13 second mortgages secured by real property,14 and leasehold interests secured solely by real property.15 We also take the position that an asset that can be viewed as being the functional equivalent of, and provide its holder with the same economic experience as, a direct investment in real estate or in a loan or lien fully secured by real estate, may be considered to be a qualifying interest for purposes of Section 3(c)(5)(C).16

We take the position, however, that an asset is not a qualifying interest for purposes of Section 3(c)(5)(C) if it is an interest in the nature of a security in another person engaged in the real estate business.17 For this reason, we generally take the position that an issuer that is engaged primarily in purchasing or otherwise acquiring participations or fractionalized interests in individual or pooled mortgages or deeds of trust is not entitled to rely on Section 3(c)(5)(C).18 We have, however, taken the position that an issuer that holds mortgage participation interests may nevertheless rely on Section 3(c)(5)(C) if the mortgage participation interests have attributes that would classify them as being interests in real estate rather than as being interests in the nature of a security in another person engaged in the real estate business. For example, in several instances we have taken the position that a trust that held participation interests in construction period mortgage loans acquired from mortgage lenders may rely on Section 3(c)(5)(C).19 We explained that each mortgage participation interest held by the trust was an interest in real estate because the participation interest was in a mortgage loan that was fully secured by real property and the trustee had the right by itself to foreclose on the mortgage securing the loan in the event of default.20

B-Notes as Qualifying Interests
You argue that the B-Notes that you describe in your letter should be considered to be qualifying interests for purposes of Section 3(c)(5)(C). You argue that each B-Note has attributes that, when taken together, would allow it to be classified as an interest in real estate rather than an interest in the nature of a security issued by a person that is engaged in the real estate business (i.e., the A-Note holder), notwithstanding that the B-Note holder does not have the right by itself to foreclose on the mortgage loan, which was a condition to the granting of relief in prior letters.21

In support of your position, you argue first that a B-Note is a participation interest in a mortgage loan that is fully secured by real property, and is not a loan extended to the A-Note holder. You state that the B-Note is not an interest in the A-Note holder with payment depending on the profits generated by the A-Note holder’s operations. Rather, you explain that payment on the B-Note is based on the interest and principal payments made by the borrower on the underlying mortgage loan.22 As such, you state that the Company invests in a B-Note only after performing the same type of due diligence and credit underwriting procedures that it would perform if it were underwriting the entire mortgage loan.23 You state that the A-Note holder does not guarantee payment of the B-Note holder’s share of interest and principal payments received from the borrower on the underlying mortgage loan.24 Accordingly, you argue that the B-Note holder looks to the borrower for payment on its B-Note and not to the A-Note holder.

You also state that the Company as B-Note holder has rights with respect to the administration and servicing of the mortgage loan that further suggest that the B-Note is an interest in real estate. Although the A-Note holder has the exclusive authority to administer and service the mortgage loan as long as the loan is a performing loan, you represent that the Company as B-Note holder has approval rights in connection with any material decisions pertaining to the administration and servicing of the loan, including decisions relating to leasing and budget requests from the borrower. You also represent that the B-Note holder has approval rights with respect to any material modification to the loan agreements.

Finally, you argue that that the Company as B-Note holder has effective control over the remedies relating to the enforcement of the mortgage loan, including ultimate control of the foreclosure process, in the event that the loan becomes non-performing. You state that the Company has such rights notwithstanding the fact that the Company does not have the unilateral right to foreclose on the mortgage loan, or that the special servicer is required to act in the best interests of both the A-Note holder and the B-Note holder under the special servicing standard. In particular, you represent that the Company as B-Note holder has the right to select the special servicer, and often appoints its wholly owned subsidiary to act in that role. You state that in the event that the mortgage loan becomes non-performing, the Company is able to pursue the remedies it desires by advising, directing or approving the actions of the special servicer. If the Company is dissatisfied with the remedy selected by the special servicer, you represent that the Company may: (1) terminate and replace the special servicer at any time with or without cause; (2) cure the default so that the mortgage loan is no longer non-performing; or (3) purchase the A-Note at par plus accrued interest, thereby acquiring the entire mortgage loan.

Conclusion
Based on the facts and representations in your letter, we agree that the B-Notes which you describe in your letter are interests in real estate and not interests in the nature of a security in another person engaged in the real estate business.25 In taking this position we note in particular your representations that: (1) a B-Note is a participation interest in a mortgage loan that is fully secured by real property; (2) the Company as B-Note holder has the right to receive its proportionate share of the interest and the principal payments made on the mortgage loan by the borrower, and that the Company’s returns on the B-Note are based on such payments;26 (3) the Company invests in B-Notes only after performing the same type of due diligence and credit underwriting procedures that it would perform if it were underwriting the underlying mortgage loan; (4) the Company as B-Note holder has approval rights in connection with any material decisions pertaining to the administration and servicing of the loan and with respect to any material modification to the loan agreements; and (5) in the event that the loan becomes non-performing, the Company as B-Note holder has effective control over the remedies relating to the enforcement of the mortgage loan, including ultimate control of the foreclosure process, by having the right to: (a) appoint the special servicer to manage the resolution of the loan; (b) advise, direct or approve the actions of the special servicer; (c) terminate the special servicer at any time with or without cause; (d) cure the default so that the mortgage loan is no longer non-performing; and (e) purchase the A-Note at par plus accrued interest, thereby acquiring the entire mortgage loan.27

We therefore concur with your view that the B-Notes described in your letter may be considered qualifying interests for purposes of the exclusion from the definition of investment company provided by Section 3(c)(5)(C). Please note that our views are based upon the facts and representations contained in your letter and that any different facts or representations may require a different conclusion.

Rochelle Kauffman Plesset
Senior Counsel

Endnotes

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1 You state that when a commercial mortgage loan is divided into more than two participations, the participation may be designated as an A-Note, a B-1 Note, a B-2 Note, a B-3 Note, etc. For purposes of this letter, in cases in which there are more than two participations, the term “B-Note” is used to refer to the most junior participation.

2 You explain, however, that the B-Note is different from a second mortgage loan because the B-Note represents a participation interest in a single mortgage loan, whereas a second mortgage loan represents the issuance and administration of a separate loan. You also explain that the separate note issued by the borrower evidences a participation in a mortgage loan and not an interest in a whole, unparticipated mortgage loan held by a single mortgagee.

3 You explain that since a B-Note evidenced by a separate note is an actual note conveying to the B-Note holder a portion of the mortgage that is secured by the recorded mortgage, the B-Note holder’s right to receive its share of the interest and principal payments made by the borrower on the underlying mortgage loan should not be part of the A-Note holder’s estate in the event that the A-Note holder becomes bankrupt.

4 You state that in these cases the original lending transaction already may have been structured as a single note mortgage financing at the time the Company is given the opportunity to acquire a participating interest in the mortgage loan. You explain that it would be difficult to later provide for the issuance of two separate notes because it would require that the borrower and the mortgage lender modify the documentation of the original lending transaction.

5 You suggest that in the event of the A-Note holder’s bankruptcy, the status of the B-Note holder is unclear under the United States Bankruptcy Code if the B-Note holder does not hold a separate note. You explain that it is possible that in such an event, the B-Note holder could be treated as an unsecured creditor of the A-Note holder, notwithstanding your view that the B-Note holder is holding a participation interest in a mortgage loan and not a loan from the A-Note holder. See infra notes 22, 24.

6 You state that the B-Note holder may exercise its control rights under the terms of the Agreement either directly or indirectly by appointing a third party (called an operating advisor) to administer its rights. You also state that generally the B-Note holder retains these control rights only so long as its position in the mortgage loan is deemed to have “value,” based upon an appraisal. You state that the B-Note has “value,” for this purpose, if the initial principal amount of the B-Note (adjusted for prepayments, debt write-downs and appraisal reduction amounts applied to the B-Note) exceeds 25% of the initial principal amount of the B-Note (adjusted for prepayments). You state that an “appraisal reduction amount,” for this purpose, generally is the amount by which the full outstanding mortgage indebtedness exceeds 90% of the appraised value of the underlying real property. If the appraisal indicates that the B-Note does not have “value,” the B-Note holder’s control rights are forfeited to the A-Note holder.

7 You state that the Company’s wholly owned subsidiary, CT Investment Management Co., often serves as special servicer for many of the Company’s real estate debt financing investments.

8 Section 3(a)(2) defines “investment securities” to include all securities except (A) Government securities, (B) securities issued by employees’ securities companies, and (C) securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Act.

9 See, e.g., Citytrust, SEC Staff No-Action Letter (Dec. 19, 1990); Greenwich Capital Acceptance Inc., SEC Staff No-Action Letter (Aug. 8, 1991).

10 See, e.g., id.

11 See, e.g., United Bankers, SEC Staff No-Action Letter (Mar. 23, 1988).

12 See, e.g., United States Property Investment N.V., SEC Staff No-Action Letter (May 1, 1989).

13 See, e.g., Premier Mortgage Corp., SEC Staff No-Action Letter (Mar. 14, 1983).

14 See, e.g., Prudential Mortgage Bankers & Investment Corp., SEC Staff No-Action Letter (Dec. 4, 1977); The State Street Mortgage Co., SEC Staff No-Action Letter (July 17, 1986).

15 See, e.g., Health Facility Credit Corp., SEC Staff No-Action Letter (Feb. 6, 1985).

16 See Capital Trust Inc., SEC Staff No-Action Letter (May 24, 2007) (a Tier 1 mezzanine loan under certain conditions may be considered to be a qualifying interest where the loan can be viewed as being the functional equivalent of, and provide its holder with the same economic experience as, a second mortgage which is a qualifying interest for purposes of Section 3(c)(5)(C)).

17 See, e.g., The Realex Capital, SEC Staff No-Action Letter (Mar. 19, 1984) (Section 3(c)(5)(C) is not available to an issuer that invests solely in limited partnership interests in an underlying limited partnership that would own and operate a building).

18 MGIC Mortgage Corp., SEC Staff No-Action Letters (Oct. 6, 1972 and Aug. 1, 1974).

19 See Northwestern Ohio Building and Construction Trades Foundation, SEC Staff No-Action Letter (Apr. 20, 1984); Baton Rouge Building and Construction Industry Foundation, SEC Staff No-Action Letter (Aug. 31, 1984); Dayton Area Building and Construction, SEC Staff No-Action Letter (May 7, 1987).

20 Id. We have also granted no-action relief to an issuer that acquired whole mortgage loans or pools of whole mortgage loans and then sold participation interests in such assets. Relief was conditioned on the issuer retaining a continuing percentage ownership interest of at least 10% in each of the whole mortgage loans or pools of mortgage loans which it had fractionalized; the issuer alone was the formal record owner; and the issuer throughout the life of the participation had complete supervisory responsibility with respect to the servicing of the mortgage loans and had sole discretion regarding the enforcement of collections and the institution and prosecution of foreclosure or similar proceedings in the event of default. We stated that these conditions were intended to ensure that the issuer would “have a substantial continuing ownership interest in … [the underlying whole mortgages and pools of such mortgages] and [the] unrestricted control over the enforcement of the lien and other matters with respect to such mortgage loans so that the interest retained by the [issuer] would be an interest in real estate within the meaning of Section 3(c)(5)(C) of the Act rather than an interest in the nature of a security in another person engaged in the real estate business.” MGIC Mortgage Corp., SEC Staff No-Action Letter (Aug. 1, 1974).

21 See, e.g., id.

22 You suggest, however, that in the event that the A-Note holder becomes bankrupt and the B-Note holder is treated as an unsecured creditor of the A-Note holder, the B-Note holder may not receive its full payment on the B-Note notwithstanding the fact that the borrower has been making full and timely payments on the underlying mortgage loan. See supra note 5. You state that in the event that this will occur, the B-Note will no longer be considered an interest in real estate and thus will no longer be treated as a qualifying interest for purposes of Section 3(c)(5)(C).

23 You explain that, like the procedures for investing in whole mortgages, the procedures that the Company performs prior to investing in B-Notes include hands-on analysis of the underlying collateral for the loan, market analysis, tenant analysis, financial analysis, visits to the property, borrower background checks, and lease and contract review. You also note that the Company performs its own independent analysis and does not rely on the A-Note holder’s analysis or conclusion on the creditworthiness of the mortgage loan borrower.

24 In addition, you state that the following additional factors indicate that the B-Note is a mortgage loan participation interest and not a loan extended to the A-Note holder: (1) there is no difference in term to maturity contained in the B-Note and the underlying mortgage loan; (2) the total payments made by the borrower on the underlying mortgage loan do not exceed the aggregate payments made on the A-Note and the B-Note; and (3) there is no difference in scheduled payment terms between the borrower and the A-Note holder, and between the A-Note holder and the Company, except for the priority in the allocation of interest and principal payments granted to the A-Note holder by virtue of its position as senior participant. Furthermore, you state that, although there is a difference in the interest rate due on the underlying mortgage loan and the B-Note, the difference is due to the legitimate risk premium that the B-Note holder receives on assuming first loss. You state that your view that the B-Notes described in your letter are true participations and not loans extended to the A-Note holder is based on an evaluation of the factors that the courts have considered in similar cases. See, e.g., In re Churchill Mortgage Investment Corp., 233 B.R. 61 (Bankr. S.D.N.Y. 1999); In re Sprint Mortgage Bankers Corp., 164 B.R. 224 (Bankr. E.D.N.Y. 1994).

25 You have not asked for, and we are not expressing, a view on whether an A-Note, as you describe in your letter, is a qualifying interest for purposes of Section 3(c)(5)(C) notwithstanding the fact that, as you represent, the B-Note holder has effective control over the remedies relating to the enforcement of the mortgage loan, including ultimate control of the foreclosure process, in the event that the loan becomes non-performing.

26 See supra note 22.

27 As indicated above, while the right to foreclose is an important attribute to consider when determining whether an asset should be considered a qualifying interest, we believe that, in addition to this attribute, other attributes of an asset need also be considered when making such a determination. We note, however, that at this time we are not withdrawing any previous no-action positions that have not addressed this point.

Incoming Letter

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The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/investment/noaction/2009/capitaltrust020309-3c5c.htm

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