This is reply to a question which has been posed to us recently by several readers through email and at least one comment. We have advised demanding the alleged lender (the one suing you in foreclosure or who has scheduled the sale) allow you to inspect and provide you copies of original documents so they can prove their standing or authority to proceed — or you can assert they have no standing, no authority because they don’t have the supporting documentation, they don’t own the loan anymore, and they have no written authority to proceed along with bona fide original documentation showing the assignment.  If they do not respond or admit they don’t have the documents, the case is over, you win they lose.

By the way, they are definitely NOT going to want to show you or anyone else that assignment. It has things in it that they don’t want public. 

But what if they come back with something — just not what you asked for, like an affidavit that says the original was lost? The answer is that an affidavit which does not contain an explanation for what happened to the original and does not attach a copy of the original with a person who REALLY knows, signing the affidavit that the copy is indeed a copy of the original, it is worth nothing. You win, they lose.

An affidavit without those components is simply an admission that they don’t have it. Case over.

The explanation must be plausible and be signed by someone who REALLY knows. If such an affidavit is sent in, in all probability is signed by someone who was presented with it along with the instruction “sign this or be fired.”

• So you want to ask by interrogatory
• or bluff them with a request for admissions 
• (or take their deposition), along with a subpoena duces tecum that demands they bring with them all the original loan documents — if they have some of them, they better have a very convincing explanation of what happened tot he rest besides “we can’t find it)
• that establishes that the person who signed it didn’t work for the lender at the time of the loan closing, and/or 
• had nothing to do with the loan closing, and/or 
• never saw the alleged original, and/or if they did see it, 
• whether they are taking the blame for losing it on themselves with again, a plausible explanation.
• whether they have been disciplined or if any change in policy was published for the company at the time of the alleged discovery of the “lost document.”

Without a copy of the original, nothing matters. They don’t have it and it is extremely unlikely that will succeed in proving the “lost document” since these documents are copied all over the place. If the copy doesn’t have your signature on it, it isn’t the original. The copy you have probably doesn’t have your signature on it either. Thus they can’t prove it with their records or even yours.

TIME TO WAKE UP. EVEN IF YOU ARE NOT IN DEFAULT THE MORTGAGE MELTDOWN IS GOING TO HURT YOU UNLESS YOU ACT NOW. GET INVOLVED! THERE IS NO “MIDDLE GROUND”

Most projections put the number at over 20 million homes, which means that over 95% of the people negatively impacted by the mortgage meltdown either didn’t purchase or refinance their homes or if they did are not in default and think this situation will pass them by — after all “I’M NOT BEHIND IN MY PAYMENTS. I’M FINE!” No you are not!!! 

If this mess is not cleared up by aggressive government intervention you will permanently lose equity in your house, see your real estate taxes soar, and watch as inflation eats up that comfortable margin you think you have in income. 

Bernanke is no give-away liberal. He wants this because it is absolutely necessary and at that only a partial step. 

Write your congressmen and senators. We cannot afford stick our heads in the sand on this one on some ideological grounds protecting taxpayer bailouts or whatever. It doesn’t matter whether or not the mortgage meltdown started with borrowers being stupid or Wall Street being greedy. It happened. And now it’s a train wreck headed your way.

Anatomy of a Fight

Over Mortgage Bill

By JOSEPH SCHUMAN

THE WALL STREET JOURNAL ONLINE

A surge of partisanship has placed in jeopardy a bill aimed at helping homeowners who are at risk of foreclosure. But the political resonance of the issue could prompt the measure’s Republican critics and Democratic backers to find middle ground.

The bill would try to lower risks for both the lender and the borrower, by offering government-backed insurance to lenders willing to reduce the principal for loans made to some people who owe more on the property than the home is now worth. It passed through the House Financial Services Committee with 10 Republicans joining Chairman Barney Frank and the panel’s other Democrats. But after President Bush yesterday came out and threatened to veto the bill, Republicans threw up legislative roadblocks to keep the measure from the House floor, as the New York Times reports. Mr. Bush says the bill would “reward speculators and lenders” without making a big dent in the country’s mortgage and housing-market crisis. Moreover, Republicans argue, it means taxpayers could be stuck with bad loans newly insured by the Federal Housing Administration. But the issue is more complicated than that.

Wall Street Journal columnist David Wessel boils down the debate to a question of whether Washington should push the lenders to help Americans whose home values sank below the size of their mortgages “even if it may cost taxpayers some money,” with the White House saying “No!” and Mr. Frank, quietly backed by Federal Reserve Chairman Ben Bernanke, saying “Yes!” Citing research from Economy.com, Mr. Wessel puts the number of families with such “underwater” mortgages at about four million, and notes that number is predicted to reach around 12 million by early next year. While many of those families will keep paying their mortgages, “many won’t, and are at risk of losing their homes,” he says. Since “no one in Washington wants to help the ’speculators’” who bought homes as investments, and most there agree people who bought houses they can’t afford are probably beyond aid, “the debate revolves around the ‘preventable foreclosures,’” he adds.

And no one, from the homeowners to the lenders to the politicians and economists like Mr. Bernanke, wants to let “preventable foreclosures” go unprevented. The bill, while crafted to exclude people who don’t need the help or wouldn’t benefit, “could allow some homeowners to get a deal they don’t deserve; that’s the unfortunate byproduct of any rescue,” Mr. Wessel notes. But the Treasury and Fed, he argues, “surrendered the let-the-market-work-it-out high ground when they agreed to risk nearly $30 billion of taxpayer money to shield Bear Stearns, its creditors and counterparties from losses.” Democratic legislators yesterday were mentioning the Bear Stearns bailout again and again.

The housing downturn is an economic problem with as much political resonance as gas prices, and if no relief is provided, it could be a poignant issue ahead of November’s elections. Even as Mr. Bush was threatening a veto yesterday, Keith Hennessey, director of the White House National Economic Council, was saying the differences between congressional Democrats and the administration aren’t “insurmountable,” the Journal reports, adding that this leaves the door open for an eventual deal.

TILA RIGHT OF RESCISSION and CONSEQUENCES

TRUTH IN LENDING

FEDERAL CIVIL COURT, FEDERAL BANKRUPTCY, STATE COURT INFORMATION

I have been inundated with TILA questions. So I went out hunting to see if anyone had already written about it in terms that a lay person might be able to understand. What I found is shown below. I believe it to be generally correct and the citations are good citations of law. See this site for the entire write-up. It should give most lay people an idea on how to handle this and it will be valuable to your lawyer if he/she is not totally familiar with the TILA context. http://www.rcxloan.com/Civil_Action__BK__Motion_14.htm. As always, we are available to answer questions and direct you to the proper people to get expert help and advice.

MY ANSWER TO OUR READER’S QUESTIONS:

1. TILA Rescission is self enforcing. It automatically extinguishes the lien and the liability. The time for rescission does not run until you actually knew the full scope of the violation. That is tantamount to it never running out. 
2. YOU CAN ASSERT AND SHOULD ASSERT TILA VIOLATIONS IF YOU CAN BEFORE YOU ARE IN FORECLOSURE OR EVEN IF YOU ARE CURRENT IN YOUR PAYMENTS. 
3. Judge is required to look for authority himself if you are representing yourself without a lawyer (pro se). This provision in effect makes the Judge your lawyer and your Judge. Pretty good combination for you. 
4. Judge has no discretion to deny damages, refunds etc to Borrower once a violation of TILA, no matter how small, is discovered.
5. TILA Rescission is NOT barred before during or after other proceedings unless those other proceedings specifically mention rescission as an issue to be tried.
6. Federal Action for injunction against the players to require them to file documents canceling the documents of record and providing judgment for damages and refunds is probably the best action since that is what is contemplated.
7. If in bankruptcy, it should be pled in an adversary proceeding. But if the bankruptcy is  primarily related to the foreclosure the better practice would be to file in the same Federal Court, Civil Division, a complaint for violation of TILA rescission.
8. A Quiet TItle Action in State Court would probably also be a good idea before, during or after the Federal action. It clears up any doubt whatsoever about the status of title or the lender’s lien or encumbrances. 
9. THIS IS INFORMATION YOU NEED BECAUSE THE LATEST LENDER STRATEGY SEEMS TO BE FOR THE LENDER TO IGNORE THE RESCISSION NOTICE. THE LENDER IS BETTING YOU WON’T KNOW WHAT TO DO. 
10. Suggestion: If you are in Court and you have opted or are ordered to settlement, try to get a paragraph in the mediation order that requires all decision-makers to be present, whether they are parties or not. This would include the holders of securities who are the ultimate owners of the mortgage. (You may get a pleasant surprise. We have reports that the lenders sometimes can’t trace them down, in which case, the foreclosure action or sale is dismissed and you have no mortgage).

TILA & Res Judicata

(Analogous to Mr. Pierre R. Augustin, Pro Se’s situation since he had never litigated fully or raised any TILA claims affirmatively or defensively) – 

A rescission action may not be barred by prior or subsequent TIL litigation which did not involve rescission (Smith v. Wells Fargo Credit Corp., 713 F. Supp.  354 (D. Ariz. 1989) (state court action involving, inter alia TIL disclosure violations did not bar a subsequent action based on rescission notice violations in conjunction with same transaction which were not alleged or litigated in prior action) (See also In re Laubach, 77 B.R. 483 (Bankr. E.D. Pa. 1987) (doctrine of merger bars raising state and federal law claims arising from a transaction on which a previous successful federal TILA action was based; merger does not bar, however, rescission-based on the same transaction)).

IX.  Timely Notified Lenders/Attorneys of TILA Right of Rescission

Mr. Pierre R. Augustin, Pro Se filed a copy of the notice of rescission letter (See Exhibit 5) in the bankruptcy court notifying the attorneys representing DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance as well as having certified receipt return of proof of delivery to the Lawyers including are proof of notification according to the Official Staff Commentary, 226.2(a)(22)-2 as authorizing service on attorney.  

The Truth-in-Lending law empower Mr. Pierre R. Augustin, Pro Se to exercise his right in writing by notifying creditors of his cancellation by mail to rescind the mortgage loan transactions per (Reg. Z §§ 226.15(a)(2), 226.23(a)(2), Official Staff Commentary § 226.23(a)(2)-1) and 15 U.S.C. § 1635(b).

 Equitable Tolling
The filing of Bankruptcy tolls or extends the rescission time as Mr. Pierre R. Augustin, Pro Se had filed for bankruptcy on September 26, 2005 and obtained a discharge on September 26, 2006. 

Also, the principle of equitable tolling does apply to TILA 3 years period of rescission since despite due diligence, Mr. Pierre R. Augustin, Pro Se could not have reasonably discovered the concealed fact of TILA violations in-depth and explicitly until September 17, 2006 at about 5 a.m. in reading the Truth-in-Lending book by the National Consumer Law Center.

The equitable tolling principles are to be read into every federal statute of limitations unless Congress expressly provides to the contrary in clear and ambiguous language, (See Rotella v. Wood, 528 U.S. 549, 560-61, 120 S. Ct. 1075, 145 L. Ed. 2d 1047 (2000)). Since TILA does not evidence a contrary Congressional intent, its statute of limitations must be read to be subject to equitable tolling, particularly since the act is to be construed liberally in favor of consumers.

 Security Interest is Void
The statute and regulation specify that the security interest, promissory note or lien arising by operation of law on the property becomes automatically void. (15 U.S.C. § 1635(b); Reg. Z §§ 226.15(d)(1), 226.23(d)(1). 

As noted by the Official Staff Commentary, the creditor’s interest in the property is “automatically negated regardless of its status and whether or not it was recorded or perfected.” (Official Staff Commentary §§ 226.15(d)(1)-1, 226.23(d)(1)-1.).  

Also, the security interest is void and of no legal effect irrespective of whether the creditor makes any affirmative response to the notice. Also, strict construction of Regulation Z would dictate that the voiding be considered absolute and not subject to judicial modification. 

This requires DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance to submit canceling documents creating the security interest and filing release or termination statements in the public record. (Official Staff Commentary §§ 226.15(d)(2)-3, 226.23(d)(2)-3.)

 Extended Right of Rescission
The statute and Regulation Z make it clear that, if Mr. Pierre R. Augustin, Pro Se has the extended right and chooses to exercise it, the security interest and obligation to pay charges are automatically voided. (Cf. Semar v. Platte Valley Fed. Sav. & Loan Ass’n, 791 F.2d 699, 704-05 (9th Cir. 1986) (courts do not have equitable discretion to alter substantive provisions of TILA, so cases on equitable modification are irrelevant). 

The statute, section 1635(b) states: “When an obligor exercises his right to cancel…, any security interest given by the obligor… becomes void upon such rescission”. Also, it is clear from the statutory language that the court’s modification authority extends only to the procedures specified by section 1625(b).

The voiding of the security interest is not a procedure, in the sense of a step to be followed or an action to be taken. 

The statute makes no distinction between the right to rescind in three day or extended in three years for federal and four years under Mass. TILA, as neither cases nor statute give courts equitable discretion to alter TILA’s substantive provisions. 

Since the rescission process was intended to be self-enforcing, failure to comply with the rescission obligations subjects DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance to potential liability.

XIII.  Non-Compliance

Non-compliance is a violation of the act which gives rise to a claim for actual and statutory damages under 15 USC 1640. TIL rescission does not only cancel a security interest in the property but it also cancels any liability for the Mr. Pierre R. Augustin, Pro Se to pay finance and other charges, including accrued interest, points, broker fees, closing costs and that the lender must refund to Mr. Pierre R. Augustin, Pro Se all finance charges and fees paid.

In case DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance do not respond to this default letter, Mr. Pierre R. Augustin, Pro Se has the option of enforcing the rescission right in the federal, bankruptcy or state court (See S. Rep. No. 368, 96th Cong. 2 Sess. 28 at 32 reprinted in 1980 U.S.C.A.N. 236, 268 (“The bill also makes explicit that a consumer may institute suit under section 130 [15 U.S.C., 1640] to enforce the right of rescission and recover costs and attorney fees”).  

TIL rescission does not only cancel a security interest in the property but it also cancels any liability for Mr. Pierre R. Augustin, Pro Se to pay finance and other charges, including accrued interest, points, broker fees, closing costs and the lender must refund to Mr. Pierre R. Augustin, Pro Se all finance charges and fees paid.  

Thus, DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance are obligated to return those charges to Mr. Pierre R. Augustin, Pro Se (Pulphus v. Sullivan, 2003 WL 1964333, at *17 (N.D. Apr. 28, 2003) (citing lender’s duty to return consumer’s money as reason for allowing rescission of refinanced loan); McIntosh v. Irwing Union Bank & Trust Co., 215 F.R.D. 26 (D. Mass. 2003) (citing borrower’s right to be reimbursed for prepayment penalty as reason for allowing rescission of paid-off loan).

XIV.  Sources of Law in Truth in Lending Cases

“These include TILA itself, the Federal Reserve Board’s Regulation Z which implements the Act, the Official Staff Commentary on Regulation Z, and case law.  Except where Congress has explicitly relieved lenders of liability for noncompliance, it is a strict liability statute.  (Truth-In-Lending, 5^th Edition, National Consumer Law Center, 1.4.2.3.2, page 11)

XV.  Synopsis of How Rescission Works

The process starts with the consumer’s notice to the creditor that he or she is rescinding the transaction.  As the bare bones nature of the FRB model notice demonstrates, it is not necessary to explain why the consumer is canceling.  The FRB Model Notice simply says: “I WISH TO CANCEL,” followed by a signature and date line (Arnold v. W.D.L. Invs., Inc., 703 F.2d 848, 850 (5^th cir. 1983) (clear intention of TILA and Reg. Z is to make sure that the creditor gets notice of the consumer’s intention to rescind)). 

The statute and Regulation Z states that if creditor disputes the consumer’s right to rescind, it should file a declaratory judgment action within the twenty days after receiving the rescission notice, before its deadline to return the consumer’s money or property and record the termination of its security interest (15 USC 1625(b)).  Once the lender receives the notice, the statute and Regulation Z mandate 3 steps to be followed. 

XVI. Step One of Rescission

First, by operation of law, the security interest and promissory note automatically becomes void and the consumer is relieved of any obligation to pay any finance or other charges (15 USC 1635(b); Reg. Z-226.15(d)(1),226.23(d)(1).  .  See Official Staff Commentary § 226.23(d)(2)-1. (See Willis v. Friedman, Clearinghouse No. 54,564 (Md. Ct. Spec. App. May 2, 2002) (Once the right to rescind is exercised, the security interest in the Mr. Pierre R. Augustin’s property becomes void ab initio).  

Thus, the security interest is void and of no legal effect irrespective of whether the creditor makes any affirmative response to the notice. (See Family Financial Services v. Spencer, 677 A.2d 479 (Conn. App. 1996) (all that is required is notification of the intent to rescind, and the agreement is automatically rescinded).

It is clear from the statutory language that the court’s modification authority extends only to the procedures specified by section 1635(b).  The voiding of the security interest is not a procedure, in the sense of a step to be followed or an action to be taken.  

The statute makes no distinction between the right to rescind in 3-day or extended as neither cases nor statute give courts equitable discretion to alter TILA’s substantive provisions.  Also, after the security interest is voided, secured creditor becomes unsecured. (See Exhibit #6)

XVII. Step Two of Rescission

Second, since Mr. Pierre R. Augustin has legally rescinded the loans transaction, the mortgage holders (DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance) must return any money, including that which may have been passed on to a third party, such as a broker or an appraiser and to take any action necessary to reflect the termination of the security interest within 20 calendar days of receiving the rescission notice which has expired.  

The creditor’s other task is to take any necessary or appropriate action to reflect the fact that the security interest was automatically terminated by the rescission within 20 days of the creditor’s receipt of the rescission notice (15 USC 1635(b); Reg. Z-226.15(d)(2),226.23(d)(2).

XIII. Step Three of Rescission 

Mr. Pierre R. Augustin is prepared to discuss a tender obligation, should it arise, and satisfactory ways in which to meet this obligation.  The termination of the security interest is required before tendering and step 1 and 2 have to be respected by DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance

XIV. Conclusion

I am requesting an itemized statement of my payment record to DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance.    When Mr. Pierre R. Augustin rescinds within the context of a bankruptcy, courts have held that the rescission effectively voids the security interest, rendering the debt, if any, unsecured (See Exhibit #6).  (See in re Perkins, 106 B.R. 863, 874 (Bankr. E.D.Pa. 1989); In re Brown, 134 B.R. 134 (Bankr. E.D.Pa. 1991); In re Moore, 117 B.R. 135 (Bankr.E.D. Pa. 1990)). 

Once the court finds a violation such as not responding to the TILA rescission letter, no matter how technical, it has no discretion with respect to liability (in re Wright, supra. At 708; In re Porter v. Mid-Penn Consumer Discount Co., 961 F,2d 1066, 1078 (3d. Cir. 1992); Smith v. Fidelity Consumer Discount Co., Supra. At 898.  Any misgivings creditors may have about the technical nature of the requirements should be addressed to Congress or the Federal Reserve Board, not the courts. 

Since DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance have not cancelled the security interest and return all monies paid by Mr. Pierre R. Augustin within the 20 days of receipt of the letter of rescission of September 21, 2006, the lenders named above are responsible for actual and statutory damages pursuant to 15 U.S.C. § 1640(a).

Once again, please send me a copy of my payment history and other document showing the loan disbursements, loan charges and payment made.  Also, DanversBank, Ameriquest Mortgage, Commonwealth Land Title Insurance Company, New Century Mortgage and Chase Home Finance are to take any necessary or appropriate action to reflect the fact that the security interest was automatically terminated by the rescission (15 USC 1635(b); Reg. Z-226.15(d)(2),226.23(d)(2).  This requires canceling documents creating the security interest and filing release or termination statements in the public record of FREE and CLEAR TITLE to Mr. Pierre R. Augustin.  Thank you (TTTLMG).

May GOD Bless America, 

Pierre Richard Augustin, Pro Se, MPA, MBA

28 Cedar Street, Lowell, MA 01852

Tel: 617-202-8069

TILA Pleading 

Under the Federal Rules of Civil Procedures, it may be sufficient to plead that the TILA has been violated. (Fed.R. Civ. P. 8(a)).  

Specific violations do not necessarily have to be alleged with particularity (Brown v. Mortgagestar, 194 F. Supp. 2d 473 (S.D. W. Va. 2002) (notice pleading is all that is required in TILA case);

Herrara v. North & Kimball Group, Inc., 2002 WL 253019 (N.D. Ill. Feb.. 20, 2002) (notice pleading sufficient; response to motion to dismiss can supplement complaint by alleging facts re specific documents assigned); 

Staley v. Americorp. Credit Corp., 164 F. Supp. 2d 578 (D. Md. 2001) (Mr. Pierre R. Augustin, 

Pro Se need not specify specific statute or regulations that entitle him to relief; court will examine complaint for relief on any possible legal theory); 

Hill v. GFC Loan Co., 2000 U.S. Dist. Lexis 4345 (N.D. Ill. Feb. 15, 2000).  

The consumer’s complaint need not plead an error exceeded the applicable tolerance, since this is an affirmative defense (Inge v. Rock Fin. Corp., 281 F.3d 613 (6th cir. 2002)).  

In page 2 (See Exhibit 1) of Mr. Pierre R. Augustin, Pro Se’s civil complaint, he stated that TILA was in of the Jurisdiction of all the claims against the creditors or defendants in that civil action.  

At #6 of page 14 (See Exhibit 2) of civil complaint, Mr. Pierre R. Augustin, Pro Se explicitly stated that the New Century Mortgage Note which is now assigned to Chase is in violation of TILA and Regulation Z claims.  

In page 17 of the civil complaint, Mr. Pierre R. Augustin, Pro Se did mention rescission and statutory damages (See Exhibit 3). 

CLINTON — MCCAIN FORECLOSURE FREEZE GETS COLD SHOULDER BUT SOUNDS GOOD

Well here is a version (SEE ARTICLE BELOW) of what we have been pushing for months —- changing the terms of the mortgages so that the homeowner can stay in the house and the mortgage can be modified, sold or recast for capital accounting. This is a lot more sophisticated than the “mortgage freeze” proposed by Clinton and McCain and it is working already so we can’t dispute the success.

• The problem with a “mortgage foreclosure freeze” is that it is a sound bite that doesn’t really mean anything — like the gas tax holiday. It doesn’t address any of the problems but it gives rise to the illusion that the homeonwer is getting some relief.
• The problem for Obama is that he sounds like he is against providing relief because he understands the nuances of how to get that relief — without pandering for votes. People don’t like nuance and don’t have the time for complex answers. So they vote against themselves based on sound bites, hoping gas prices will go down (they won’t) and that their house will be saved by just doing one thing like a freeze on foreclosures that lasts ninety days (that won’t work either).

There is no Clinton-McCain plan for relief because no order, legislation or rule is pending that will freeze anything and nothing is pending. Hillary and John are just blathering. They haven’t ACTUALLY proposed the plan by introducing a bill on the Senate floor. The plan of these pandering politicians is get elected (the people be damned): the method is to make use of time-honored sound bites that consist of misleading statements and outright lies. The truth is that neither McCain nor Clinton has a clue about gas prices or mortgages.

Although this trading of mortgage obligations is obviously providing some relief, it doesn’t address the root cause of the mortgage meltdown. And much as I don’t care for the people or their methods who perpetrated this fraud on the world, there is no REAL solution unless some value is restored to the balance sheet of financial institutions and investors who purchased the collateralized mortgage obligations. Thus combining attributes of this plan with a more comprehensive plan to restore the capital reserves of financial institutions and investors would be preferable.

vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv

HOUSING

Investors move in to save broken mortgages

By E. Scott Reckard
Los Angeles Times Staff Writer

May 1, 2008

Jared Lanning, struggling to pay a home loan on which he owed more than his house was worth, was thinking he might just let the lender take back the property. Then he got a call one evening from an Orange County investor who had bought his mortgage.

“I want out of your loan,” said the investor, Evan Gentry, chief executive of G8 Capital of Ladera Ranch, who offered to lower the balance and the interest rate.

Lanning, a crane operator in Englewood, Colo., was skeptical. A phone pitch, after all, had led to his getting the unaffordable loan in the first place. But Gentry was legit: He helped Lanning get a new Federal Housing Administration-insured mortgage — with a $12,000 lower balance. Gentry also paid $5,000 in closing costs for the new loan. Lanning’s new monthly payment is $200 less than before.

Investors — including big fish like former Countrywide Financial Corp. President Stanford Kurland as well as smaller fry like Gentry — are buying loans on the cheap from lenders who want them off their books. By paying less than face value for the mortgages, the new holders can modify loan terms, including shrinking the amount owed, and still make money.

With some economists projecting 2 million foreclosures this year, legislators and regulators are hoping to encourage wide use of this model. They want lenders and investors in mortgage bonds to mark down what borrowers owe and then provide them with lower-cost loans. It’s a tricky business: No one wants to be seen as bailing out speculative buyers or imprudent lenders, but they also don’t want mass foreclosures to devastate neighborhoods and the economy.

The Federal Deposit Insurance Corp. described the problem Wednesday as “a self-reinforcing cycle of default, foreclosure, home price declines and mortgage credit contraction, the likes of which we have not experienced since the 1930s.” The agency is proposing that the government lend $50 billion to 1 million borrowers to help them replace unaffordable loans.

Sub-prime mortgages with interest rates ratcheting higher have proved less of a problem than once feared, because interest rates overall have dropped. But a “toxic combination” of falling home prices and borrowers who can’t afford even the initial low rates on adjustable loans is now the issue, FDIC Chairwoman Sheila C. Bair said in an interview this week.

“Many more borrowers are under water,” she said. “And many more are just walking away.”

Many people bought homes with nothing-down loans at the peak of the housing boom — 29% of all buyers in 2007 made no down payments, Treasury Secretary Henry S. Paulson Jr. said recently. Others have sucked all their equity out of their properties with refinancings.

According to Moody’s Economy.com, some 8.8 million Americans — more than 10% of all homeowners — owe more than their houses are worth, although a Mortgage Bankers Assn. economist contended the figure was lower, perhaps 8%. In any case, there is wide agreement that many of those troubled borrowers have proved surprisingly ready to abandon their properties, even when lenders offer to modify their loan terms as they were encouraged to do by the Bush administration.

“We are working with borrowers to keep them in their homes, but a lot of them really don’t want to stay,” said Babette Heimbuch, chairwoman of FirstFed Financial Corp. of Los Angeles, a savings and loan operator that specialized in adjustable-rate mortgages, including many that were made without full documentation of borrowers’ incomes.

FirstFed has about $6.3 billion in loans on its books. It said that $667 million of that balance, more than 10%, was delinquent or in foreclosure as of March 31, up from just $46 million a year earlier. FirstFed said Wednesday that it lost $69.8 million, or $5.11 a share, during the first quarter this year compared with a profit of $8.4 million, or 61 cents, a year earlier. It set aside $150.3 million for loan losses during the quarter, up from $3.8 million during the first quarter of 2007.

Because FirstFed kept most of its loans on its books rather than selling them, it should have been easier for the company to work with borrowers to modify the loans. Heimbuch said FirstFed forecloses only after analyzing 10 other options to offer the borrower, including lowering the interest rate; changing to a five-year, fixed-rate loan requiring payment of interest only; and writing down the loan balance.

Still, she said, up to 50% of borrowers who miss payments don’t respond to letters and repeated telephone calls to see if something can be worked out.

Some customers had acquired second mortgages and couldn’t make new arrangements with the other lender, she said. “I think some know they told us the wrong income and are afraid to come clean, though we would still work with them . . . to keep them in their homes if possible.”

For struggling borrowers, it’s a big mistake not to return such calls these days, said Gus A. Altazurra, a veteran mortgage executive who recently raised $10 million from private investors to buy and modify loans for which homeowners are still making payments.

“They’re probably going to help you, given the current situation,” said Altazurra, whose Irvine-based Vertical Fund Group has been negotiating with lenders of all sizes to buy loans. He said “a flood” of mortgages went up for sale in April after lenders closed their books on a horrendous first quarter.

Altazurra, who has paid as little as 31 cents on the dollar for some loans, said the terms of some mortgages made at the peak of the boom were hard to believe. One loan he bought from a Texas bank was to a borrower with a very low credit score — 484 — who refinanced and cashed out 100% of the equity in the property, he said.

Gentry, the other Orange County loan buyer, said he had obtained commitments from investors to provide $100 million in capital for workouts on loans that have stopped paying, current loans that can no longer be sold and foreclosed properties. He has bought nearly $50 million in mortgages and property so far.

Gentry purchased Lanning’s loan in a pool of mortgages from a San Diego lender that was going out of business. He said that on average his private venture was paying 70 cents to 80 cents on the dollar for loans like Lanning’s that were still current, and “less if the loans are nonperforming.”

Lanning had no home equity left — and thus had little incentive to keep sacrificing to make payments — before he got the smaller, cheaper FHA loan. Now his outlook has changed.

“We can’t do anything frivolous now,” he said. “But if we do it right, we have enough. That other loan was just pushing us over the top.”

It isn’t coming. Practicality is being trumped by ideology and politics. Help will not arrive in time to help you. You must help yourself. Whether you have a lawyer to help or not, you need to aggressively defend, refuse to cooperate and demand judicial fairness. If you all pile into the court system, the court system will not have the personnel or infrastructure to accommodate you. You force the hand of the judges, clerks and other members of the judicial system to come up with procedures that give you your day in court. You are entitled to be heard in a court of law and they cannot and will not take that away from you. 

It doesn’t matter whether you have a sub-prime mortgage, a standard mortgage, purchased a new home or purchased an existing home. Prices, terms and mortgages were unfairly and fraudulently inflated.  

Even if the nay-sayers were right that it was your own fault for not being educated enough, not being sophisticated enough, being too trustful, and that you should have known better, you will be doing a disservice to yourself, your family, your neighborhood, state and your country by rolling over and letting them take your house. 

The simple fact is that more than 20 million homeowners are going to be subject to severe consequences as a result of the stagflation, recession and depression that is already underway. That means more than 60 million people are going to be negatively impacted by an economy that was torpedoed by industries that were supposed to be properly regulated and were not. 

Write a letter, file a motion and go down to the courthouse and ask the clerk for any file that has a contested foreclosure in it. Copy the motions, copy the discovery requests, and add to them as you see fit. Get copies of discovery from other case files. get friendly with the clerks and enlist their aid.

Find out the rules about serving discovery requests and motions and follow them. When the lender stonewalls the discovery, file Motions to Compel and motions for Contempt.  Make this your second job if you have another one. 

In discovery make sure you get copies of all internal emails, documents, and presentations made to third parties who were prospectively going to purchase or re-market the risk element of the loan. 

Get a hold of the business plan outlined internally on how this plan would work. Find references or emails to appraisers, mortgage brokers, real estate brokers, developers, etc. and include them in your suit if you can. 

Have someone competent audit your mortgage to see if there are differences between disclosures and the actual amounts they charged you. There are usually differences that will put the lender on the defensive. 

Find out the names and contact information of those who were decision-makers (file interrogatories asking for this information) and get every document they have and take their deposition to see what they knew about your deal and others like your deal. Ask them what their instructions were on approving loans. Ask them if they had any personal doubts about the rapidly rising prices of housing. 

File a counterclaim for fraud. Google it up and you’ll find many examples. File a counterclaim for rescission. File a claim for breach of fiduciary duty (lenders have that duty to borrowers). Make it expensive and embarrassing for the lender to foreclose. It is never too late. File an appeal if you can. 

File an emergency petition in Federal Court alleging denial of due process, violation of your civil rights through improper application of state action. Foreclosure may be an appropriate remedy in normal circumstances but not where you were knowingly and intentionally tricked into a deal where you reasonably relied upon the misrepresentations of a group of conspirators giving you the misleading impression, upon which you relied, that the property was worth what you were paying for it and that the mortgage had been reviewed by experts who concluded that your financial circumstances were such that you could pay for it. 

You tried and failed because of factors well-known to the lenders who were selling off the risk to unsuspecting investors and therefore did not care whether you defaulted or not. 

The lenders were motivated strictly by greed without any sense of or actual accountability. They enlisted the tacit and overt agreements in conspiracy with appraisers, mortgage brokers, developers, closing agents and others who all contributed their part in misleading you into a deal that was false, misleading, damaging to your finances, damaging to your health, and damaging to your financial reputation, FICO score etc. 

Their behavior fulfills the requirements of racketeering, fraud, and crimes against local, state and federal government. You are entitled to damages and you are entitled to equitable relief. You not only lost everything you put into that house at closing, you lost the value of the improvements, furnishings, landscaping and appliances you added after closing. 

You are entitled to the benefit of the bargain, to wit: you were promised a house that you could afford and that was worth what you paid for it. The proper remedy is NOT for you to move out and the lender to take over the investment. The proper remedy is for the lender to adjust the mortgage, pay you damages and give you the payment schedule that you could afford. 

Go to your local property appraiser’s office and file forms to get your house deceased in appraised value. It will reduce your taxes and serve as proof of the true value of your house. Fight for the lowest level you can get. Use auction values in your neighborhood and short sales.  

If you want to settle the claim with the lender, get help. But here are some talking points for you. There are others, but this will get you started.

1. Reduction of mortgage note to 80% of current fair market value. Use an arbitrary formula we have come up with in the GTC|Honors program: Take the original purchase price and reduce it 25%.

2. Adjustment of payment to Fed Funds rate plus 1% fixed 30 year amortization

3. Allow lender to participate in increased fair market value at the time of refinance or sale to recover the downward adjustment of the principal on the mortgage note. I would suggest that they get 25% of the increase in value starting with the date of your settlement and ending with 30 days prior to the refinance or sale. If the value increases to an amount higher than the original purchase price, then let the lender participate at a rate of 75% of the increase over the original purchase price up to the amount of the adjustment they agreed to in the settlement without interest accruing on the adjustment. 

4. Get a moratorium on payments for 3-6 months so you can get on your feet again. But you’ll still have to pay for taxes and insurance. 

5. Delete the PMI provision if you have one and if you want to. Don’t delete it if you can afford it.

6. Insert a 60 day grace period for payments under the new plan.

7. Both parties agree to general release of all other claims.

8. No additional financial disclosure required. This is not anew loan. This is the loan you should have received when they first agreed to give you financing. 

9. If you can’t stay in the house because of inability to make even minimum payments, get some payment for damages.

10. In all cases get a letter from the lender that says you are are not and never were in default that you can send into the credit reporting agencies. 

And make sure you keep track of your attorney fees, costs and expenses and get a payment for that from the lender even if you compromise and add it to the back end of the mortgage (tacked on without interest accruing).

Bankruptcy IS an option but it should be avoided if possible. A lot of the rules are stacked against you now after the recent changes. But in bankruptcy you can file an adversary proceeding that will bring up the same issues and you could get favorable treatment. bankruptcy judges are usually quite sophisticated and very sympathetic to those seeking relief. Litigation in federal Court is more complex than state court litigation. Make sure you get help.

It is as though everyone has their head stuck in the ground, which is the most polite way of putting it.

Look at the figures coming out — even PRIME borrowers are going delinquent. Lenders are struggling to regain capital requirements for lending, The Federal Reserve is essentially having no effect on the downslide, retail spending is at a forty (40) year low, and the U.S. dollar has never been worth less than it is now. Housing prices are trending lower for at least another 15% drop and inflation is on the way up each month. Real unemployment and underemployment is at an all time high, and regardless of employment status at least 2/3 of the country’s citizens can’t make it on their current standard of living. All of these indicators are still trending down in a reverse hockey stick if you want to graph it.

My point is not just that the sky is falling, my point is that this crisis must be treated as seriously as it presents itself.

Extreme measures must be put in place NOW to mitigate or prevent tens of millions of American citizens from being displaced from their homes, jobs, and way of life.

The entire foreclosure scheme must be frozen. All debt must be restructured to a level that borrowers can pay with money left over to buy consumer goods. That includes subprime, prime and all other debt. Failing loans must be restored to a status that provides relief to financial insitutions seeking to comply with capital requirements for lending. The holders of CDOs must be given some of the relief to restore some measure of confidence in the U.S. financial markets, and the players who sold these securities should be given immunity if necessary in exhange for their complete cooperation in achieving these objectives.

This issue is not “who gets the bailout”, the issue is how do we get all the players back in equilibrium. The issue is NOT who is to blame. The issue is who is needed to fix the situation. The answer is everyone.  

Fundamentally there are a number of obvious regulatory, monetary, legislative and enforcement issues that need to be visited and corrected. But let’s get serious. These corrections will fix nothing in the current crisis. The “stimulus package” represents a tiny fraction of a tiny percent of the crisis we are in. We need bold actions now not by candidates who will hold public office in the future but by those with the power and authority to do it. We need leadership by people of courage who are willing to take risks to stem the incoming tide of inflation, foreclosures, bankruptcies, delinquencies, bank failures, business failures and the further decline of the U.S. dollar.

We the People: Fighting Back

At first the U.S. Constitution was written without the Bill of Rights — 10 Amendments that spelled out the specifics of what the founders were looking for when they established the Republic for which we stand. When you read the whole Constitution, which isn’t long, and the Bill of Rights, which isn’t long either, you see something that isn’t in our social studies. There are FOUR sources of power, checks and balances, not three as everyone keeps saying.

The U.S. Constitution provides for three of them and hints at the fourth. It provides for the Executive Branch, the Legislative Branch, and the Judicial Branch.  Anyone with a passing knowledge of our system of government probably knows that.

But the Constitution starts out with “We the people” indicating, as Thomas Jefferson did, that all government, including the three branches established by the Constitution, derive their power from consent of the governed (the people) and are subject to the power of the people to change it. You might argue that this was a declaration delegating the power of the people to the three branches of government created.

The Bill of RIghts clears up any miscalculation by providing in the 9th Amendment, that all powers not reserved to the Federal Government and the States reside in the people. It also spells out many powers that are NOT allowed to either the Federal or State governments, including freedom of speech, a free press, freedom of assembly, freedom to petition to redress grievances, freedom to keep and bear arms, the right to equal protection, the prohibition of taking life, liberty or property without due process of law and many others.  

So it is not surprising that people are awakening to their power and exercising it as they defend their home, their lives and their property from predatory practices of financial institutions. Foreclosure and repossession are not the only options. People are refusing to go along with the regular business as usual and finding tiny slip-ups the predators made when they had the victims sign documents that were guaranteed to put them in debt for the rest of their lives. 

Make allegations of violations of truth in lending, claim rescission, fraud, treble damages, RICO conspiracy, Securities Fraud,  illegal kickbacks to mortgage brokers etc. Make the creditors work like they never had to work before. Make it sound like a class action. Get help.

I have a publication coming out in 45 days called Garfield’s Handbook for Borrowers in the Mortgage Meltdown including many defense strategies and the forms you can photocopy and send in without a lawyer. The Courts are duty bound to help you if you don’t have a lawyer. If you do get a lawyer, show him the book. If you want an advance copy of the manuscript, contact me at ngarfield@msn.com. The retail price is $19.95, but the pre-publication price is only $24.95. I can send it to you via email or you can order it in hard copy for $24.95 plus $6.00 shipping and handling. And if you want other people joining you in this crusade, it would behoove you to make sure they buy a copy rather than pirate it from you. It is going to take money to set up an infrastructure to get everyone the help they need.

Bankruptcy, state and federal judges are getting the message too. But we all know that nothing effective will come from the executive branch until a few months after the next President is sworn in (January 20, 2009). By then things will have fallen into hell and a hand bag. We also know that the legislative branch won’t be able to do anything meaningful, if they ever do, until new congress convenes after January 1, 2009. And Judges while sympathetic, need something to hang their hat on to justify equitable relief that stops mortgage contracts, notes, loans documents, and other transactions from running their course. 

In short they need you to stand up and say NO!

Start with sending form letters to all your creditors including credit cards, claiming that they have been overcharging you on fees, interest and minimum payments and that you contest the balance due.  Put the burden on them. If you live in a state like Arizona (A “trust deed state”) go down to the clerk’s office and get the forms necessary to contest the filing of the notice of foreclosure and eviction. If you get an order of eviction, don’t leave. They must still go to court and get an order to get you out.

Even after the order is entered, the only way they can get you out is if the sheriff send deputies to take you and your stuff out. If enough of you do this (and the number is already growing) neither the Court nor the Sheriffs will have the manpower to deal with the crisis and neither will they politcially want to be part of that problem. Give them the excuse and they will slow down or even back away.

If you have a choice between paying credit cards, or hospitable bills and paying your mortgage, then pay your mortgage but don’t give up on the attack against these creditors — all of them. The credit card companies generally don’t even sue and even if they do, they can’t take your house. Only the mortgage lender can do that. 

If you have a choice between paying your home equity line of credit and the first mortgage, pay the first mortgage.  If your equity has disappeared or turned negative, the LOC lender will have no choice but to make some deal with you.

Speaking of deals — approach the lenders from a position of strength. Get some help from people are aggressive advocates, whether they are financial advisers, lawyers, or accountants and go after them.  I have a website under construction at GTC-Consulting-Financial-Workout.bizsitepro.com.

Present them with a proposal that minimizes or eliminates the write-off and keeps your payments within bounds that you can afford. The lender and the investors that took the risk off the lender’s hands, will be in a position where they don’t have to write-off huge sums of money that will depreciate the value of their publicly traded stocks. Each deal they save represents $ millions to them in their stock price (and potential liability far in excess of the loan or investment itself). The leverage is on your side now. If these predators don’t cooperate now, they risk jail.

When you make the deal, do NOT accept an increasing mortgage balance. You don’t need to despite their demands that you do.  If the lender forgives part of the mortgage balance it is no longer a tax event to you. No taxes are do from you. The best deal will look something like this:

1. Make certain, in writing, that the mortgage lender agrees to file any report necessary to repair or preserve your credit score. 

2. Mortgage balance is no more than the amount you originally borrowed, less any principal payments made.

3. Future payments are what you can presently afford, so long as you can cover the utilities, taxes, insurance, and maintenance of the house (a vacant house is a tremendous liability to the financial institutions after foreclosure) and something toward the loan even if it doesn’t cover the minimum payment for interest. 

4. A seven year minimum period during which there will be no change of payments, no threat of foreclosure, no threat of eviction as long as you make the minimum payments described above.

5. In the event of refinancing the house within the seven year period, you owe them only what you originally borrowed less any principal payments paid to them, and they waive all costs and accept the cost of any recording, points, fees or other expenses on the refinancing. 

6. In the event of sale of the house, you get everything up to the original purchase price of the house. After that you share with the Financial institution, 50-50 up to 20% over the original price. After that it is all yours.

7. Do NOT accept any payment or amendment that mentions inflation or any index that is tied to inflation. This provision alone will kill you financially.

8. The more trouble you cause, the better the message will travel up the line through the mortgage broker, the lender, the investment banker and the investor that they have liability here, and they could lose not only the loan, but be paying damages as well.

9. Get together in groups. Find other people in the same situations. It does not have to be identical. Get in touch with your state’s attorney general, who is probably already taking action against the perpetrators of this massive fraud. Get in touch with any one or more of the attorneys who have so far filed more than 40 class action suits against the lenders, the investment bankers, the rating companies that said these were triple AAA securities and the retail securities brokerage houses. 

10. DO NOT GIVE UP. People high up in Federal, State and Local government understand full well that unless this monster is stopped in its tracks, the economy could actually fail and the dollar, once king in the international markets, could be worthless. 

11. FORGET ABOUT BLAME: Everyone in this scheme must be saved. You are all to blame to some extent from borrower through investor. We don’t have time for blame or prosecutions or investigations. We need remedies. Everyone is going to be affected by this. Some people will make a lot of money on the decline of the dollar. Some already have. But most people are going to be caught with their pants down and not realize until it is too late that they have been stripped of what they thought was their wealth. 

We keep seeing bits and pieces in the media instead of the entire picture. Let’s trace the average mortgage meltdown event:

1. It is 2003. Builder Stan Plans Construction project, goes to 1st National Lender and is surprised to learn that the lender is very flexible. It turns out that the bigger the loan, the more the Lender makes and the lower the risk to the builder who is table to take down money from the loans that largely replenish his investment in the property. This is because Wall Street in its ever increasing creativity is experimenting with moving risk now and not just money through the use of derivatives.
2. Builder submits projections that are very rosy. In many cases, he gets the message to make the picture rosier.  This by the way is called fraud and collusion. The Lender tells him to beef up his projections because the Lender wants to increase the loan to include operating expenses and any other expenses that could reasonably pass the giggle test as being associated with building a project. 
3. The Lender, knowing that it has pre-sold the loan risk or has a ready buyer for the loan risk, doesn’t care anymore about the success of the project. This is the overall dangerous movement away from J Pierpont Morgan’s admonition that risk is a matter of character. Risk has now been converted to abstract numbers unrelated to any particular project and based upon averages that include figures from other real estate projects that bear little similarity to the one at hand. 
4. The Lender is the intermediator between the ultimate source of the amount loaned and the borrower. The Lender is in substance a fee-based operation in which lenders while appearing to loan their own money are in fact merely acting as a conduit. 
5. This is very much like the traditional role of banks — taking deposits from those who want their money protected in a bank and then lending it out in some proportion that allows the bank to keep enough money on hand to meet expected demands for cash. Except that here the Lender is not taking any deposits. But then again it isn’t left with the risk of the loan either so its depositors or capital holders are not at risk, at least for very long — unless it is found that the Lender was a willing, knowing participant, in the creation of fraudulent data for the express purposes of making the figures look appealing (i.e., less appearance of risk than actual risk) to prospective buyers.
6. The reason for this little conspiracy is a conspiracy not unlike the junk bond scandal, but at least they were then called junk bonds which more or less put everyone on notice that they could be worthless  or at the very least were risky. 
7. Investment Banking arms of major brokerage and depository financial institutions put together packages of derivatives called collateralized debt obligations (CDOs) which is an obscure way of saying you are purchasing a note or a bond that is “backed” by a mortgage on land and improved property. Sounds fairly secure, until you go back to the beginning of the story where the value of the land, the projected income, the value of the end product were all grossly overstated with the complete knowledge of everyone but you. 
8. Then the Investment Banking houses obtained ratings for these obligations and even had a class of CDOs that were rated Aaa. Partly in order to convince other institutions to buy these high-rated debt securities with a risk assessment of practically zero, and partly because they were sucking on their own own exhaust, the investment banking houses actually retained portions of these “investments” in their portfolios giving the appearance of a growing amount of portfolio investments that the investment banking house had itself created. This is sort of like printing your own currency. IN fact it IS the creation of money, free money, that made everyone crazy. 
9. Despite the actual high risk of the investment which is known to al everyone, and because they were able to buy investment ratings on these CDOs the managers of mutual funds, pension funds, retail brokerage and other financial institutions around the world were convinced to take on these “investments” to make their portfolios (and thus the manager’s performance rating) LOOK good, even though the disparity between the high rate of return and the “low” risk was apparent and put it simple terms, didn’t make sense — like the adage, if it looks to good to be true, it is.
10. The average Joe Investor who has money in mutual funds, pension funds, retirements accounts, and other holdings, is for the most part not even dimly aware that these transactions have taken place. He has only to look at the newspaper and glowing reports from his fund managers to “know” that his money is safe and growing, just the way it was supposed to be. 
11. Joe Investor is driving along the road, and as it happens, he sees a sign for anew development of residential and commercial buildings exactly where his wife said she wanted to live. It turns out that the builder is none other than the builder who started this ball rolling, and who is in debt up to his eye-balls despite the appearance of being a solid long standing member of the development community and having his shares traded on a national stock exchange.
12. Joe and his wife find just the right house and then are presented with the final price of the house with all the extra’s, options, non-standard options, and custom features they have ordered. What started out as a $275,000 house is not $575,000, when you include the Lot premium for the fantastic view of hawks flying over manmade waters with mountains in the background. 
13. Joe knows he can’t afford the house just like the builder knows that if the project doesn’t sell out quickly, he and any buyer who gave him a deposit will be screwed. Of course the builder won’t be completely screwed because even without the first sale, he will have taken down loan money for general and administrative overhead including his own salary.
14. The salesman refers Joe and his Wife to either an on-site mortgage broker or someone else with whom the builder has a “relationship.” Joe is assured that through flexible financing, if he qualifies, he will be able to afford the house.
15. Joe and his wife are presented by the mortgage broker with a variety of alternatives and they choose the easiest one that will enable them to buy this house. They put no money down or a very small down payment, get a monthly payment that is even lower than what they are now paying on a house that has apparently increased in value (because of “market” conditions), and they figure they are actually coming out ahead because they are getting more equity out of their old house than anything they thought they could get, and they get a brand new house just where they want it. 
16. Because Joe’s actual income is lower than what is needed to justify the loan, the wife is told to say she in self-employed and making enough money to pick up the difference. This is also fraud, but since everyone knows about it doesn’t really seem like fraud. The lender and builder claim plausible deniability, knowing full well that Joe might very well not pay his mortgage payment a few months or years down the line because the mortgage terms will change in ways that were explained but not understood by Joe and his wife. 
17. 17. It turns out, in this case, that Joe and Mary, his wife have signed papers for a $575,000 mortgage, when you include the home equity second mortgage, and that the terms are very easy on Joe and Mary — at first. They start out with only a $1450 monthly payment which is accomplished by starting the loans out at a very low mortgage rate, partial payment of the interest which is added to the mortgage loan,  and an increase in the rate and the payment starting in 2 years. And it increases quickly after that because first, the interest rate must come up to what is normal and second, the “lender” is not going to lend them money to pay the interest forever. 
18. Joe and Mary move in and using their savings and credit cards and the equity of their prior home, they manage to complete the house which came with bare bones fixtures, no window treatments, no landscaping etc. They are now maxed out on credit card debt, acquiring more credit cards, and their savings are depleted to zero. 
19. They don’t have to worry though because prices are going up so fast that they have $300,000 in equity in the new house, or so it appears. They know they can get a larger home equity line if they need it or sell the house at a tidy profit. 
20. Suddenly 2 years have passed and the payment starts rising sharply, particularly on the home equity line of credit that was essential for closing. They are now being presented with a payment of $4,000 per month, which exceeds the actual income of Joe and Mary. 
21. Joe and Mary default on mortgage and the house is sold to the Lender at auction. All the investment they made in additions to the house after closing are lost. 
22. The Lender has assigned the servicing of the mortgage to another company and is now completely out of the picture for intents and purposes. The house sits there unoccupied, perhaps vandalized and declining in value to a point far below the total mortgage. The home equity line was wiped out by the foreclosure of the first mortgage. The actual loss of that goes back through the pipeline to the investment banks, retail brokerage, managed funds and direct investments by individuals. As it turns out Joe’s retirement account was invested heavily in CDOs and is now virtually worthless — zero as to the mortgages that were home equity lines that have now been wiped out and down some 30% on the first mortgage line that was granted.
23. At the moment, Joe has not fully absorbed the fact that his retirement is in jeopardy but he is getting an uneasy feeling.
24. What has happened is that that all of Joe’s hard earned savings, investment and retirement accounts have been wiped out by converting them from investments to fees to middlemen. Joe has lent money to himself without knowing it and crated a feeding frenzy where his safety and well-being were dead last on everyone’s list. 

Yes it is true that you didn’t read the fine print. But how much would you have understood in the mountain of paperwork you signed. I am NOT an attorney licensed to practice in Arizona which gives me some leeway in what I can say and do for you. On the other hand I am an Attorney licensed to practice in Florida, in Federal Courts, Federal Trial Bar, and Federal bankruptcy Bar. So it isn’t like I don’t know what I am talking about. I am 60 years old and would be retired except for one thing — I am outraged at what happened to the two million (minimum) other people who will fall victim to foreclosure and eviction if you don’t fight back.

Not only were you suckered into signing papers you didn’t understand, not only did you invest every last nickel you had in furnishing the house, but you were double slammed if you own any securities of any mutual fund, financial institution or company that bought the “CDO” (collateralized debt obligation) that your signature was used as proof of security. Bet you didn’t know that. In other words through the investments of you and your neighbors and friends and relatives you were twice suckered into creating “free money” which enabled investment banks, lenders, mortgage brokers and even real estate brokers, and mortgage servicing companies are all making money even now! They basically got you, as a group, to lend money to yourselves and then charged for the privilege of doing it.

And they are still making money on your mortgage even though you are not paying anything. You see they are hitting your account even now just to drive by and make sure the house is occupied and for dozens of other fees you know nothing about — fees they know you will never pay as borrower but they are sticking it to the person (like you or your neighbor that has a 401k, Roth IRA, pension or other investment) who pout up the money in the first place. Despite the declining home values there is still value to these homes, and these middlemen are going to clean out the pockets of both the homeowner/borrower and the investors before they give up a nickel.

Stop the raping of the middle class by these predators. I worry not only about you but about my children and grandchildren. So I want you to fight back, with or without my help. And I want you to do it through COLLECTIVE ACTION. Make your comment here. It is merely and expression of support to everyone who has fallen into this predicament through the actions of unscrupulous predators from Wall Street and beyond.

There are proven methods (referred to by Donald Trump on Larry King Live) by which you can recover or prevent the stealing of your home through “legal” means and to maintain the one investment you made in good faith without knowing you were the victim of a huge worldwide scam in which more than $3.5 trillion dollars was generated and kept in the pocket of a select few at the top of the monetary food chain. This is going to be a political battle as well as a legal one. There is no guarantee of success and there is no free ride.

We can game the system too by a variety of means including the slogan “just say no!”. Make them go all the way to get you out. The Sheriff charges them for that. Make it as expensive for them to process these foreclosures as possible and make each case unique. Stop them from mass producing the foreclosure suits, the auctions and the evictions using intimidation and slight of hand (same way they got you  into this mess) to get you to cooperate through despair and giving up the last rights you have. You have more power than you think!

Consider that it is you who should be outraged, that nobody is going to help you unless you help yourself, and that through individual and collective action, anything is possible no matter what the law currently says. The sheriff only has a few people who can deal with the eviction process. We can make that very difficult for them and more expensive for the lenders. State Senators and Legislators want to be re-elected. Nothing is going to hit harder than this house of cards falling on our cities.

Get mad and get even.

I read the Declaration of Independence and the U.S. Constitution with much the same interest and devotion as I do the Torah. It is true that much in history as recorded in our myths, stories and laws is based upon one or more perceptions of one or more mere mortals. Yet they are not irrelevant. Whether we are looking at Genesis, or the story of George Washington chopping down the cherry tree, these things have penetrated our consciousness, they affect our perceptions and we make decisions about our behavior based upon what we perceive as truth within the context of our own stories and myths.

And yet, despite the differences amongst us, there are common notions of right and wrong, of good and bad. This is what Thomas Jefferson told us when he wrote of unalienable rights and natural law. The Declaration and the U.S. Constitution are in the final analysis the creation of a few people, but the powers of the people, the naturals laws that govern their lives, are the inner knowledge, whether expressed or not, of all people.

Our country cherishes freedom, liberty, and protection of life, and property with “due process of law.” Yet as the base nature of those with ambitions greater than their fellow human beings take over, government sometimes becomes an instrument of those who have power and wealth and who seek to serve themselves rather than their society. This is inevitable. The correction is with natural law as expressed in the Declaration of Independence, the preamble to the Constitution (all powers derive from “We the people”), and ninth amendment to the Constitution which reserves those rights to the people — not to the states nor even the Federal government. The 5th and 14th Amendment go even further to assure protection of our basic unalienable rights providing for due process and equal protection of the laws.

It is therefore the right, indeed the duty, of people to correct their government when it errs and hurts the society as a whole, and to remove either the people appointed or elected to positions of power, or to remove the powers themselves to restore law and order.

We are faced with a series of events that affect our basic existence, in which our government has been the instrument of monied interests and has acted against the interests of its citizens or refused to act in the interest of its citizens, giving special privilege to some (violating equal opportunity and protection under the laws) and denying the rights of people to their own homes, safe food, and access to substances and protocols that would save the lives of our children, our grandchildren and even ourselves. This government even refuses to protect our borders from invasion, which under any interpretation could only be called treason under man-made law.

We have reached that point in human events, where the people who are the sole source of all power in our country can and should make the corrections necessary to save people from the threat of losing their homes due to unscrupulous use of derivative securities (collateralized debt obligations, which threaten our viability as nation in the world commerce), to save people from eating poisonous food, and to grant everyone access to the American dream of health, prosperity and happiness. It is our duty under God and under our man-made laws.

Resist the normal legal process of foreclosure, refuse to play by the rules created by those who are no more than predators and whose agents continue to make money off of the misfortune of those whoa re threatened with losing their property and refuse to leave when called upon to do so. Overload the “system” with the two million people expected to be foreclosed and refuse to leave the homes you purchased in good faith and force the correction by using your unalienable right to vote, to remove people from power who misuse it, and remove powers from government that were never intended to be used as a source of tyranny against the great majority of Americans. 

As in the Torah, appoint inspectors of food and food processing or actually present and protect us from poison and protect livestock from inhumane treatment. No tainted food should be allowed to enter any household, any state or even the country. Merchants who sell such food should be branded as outcasts. 

What person with any sense of right and wrong would deny a person the right the live because they don’t have the money to pay for medical services? The reason that medical care costs more in this country than  other countries, is because we let it happen. 

Profit and purpose have been reversed. We, the people, need to make a correction. It isn’t that we can’t afford it. We already pay for it. The costs and savings should b reallocated fairly, equally over society, not into the hands of the insurance companies who control the amounts that get paid and the treatment that will be available, the pharmaceutical companies that control the medicines that are available and the prices of those medicines, and the providers of medical services who have left the traditional philosophy of “first do no harm” and entered the world of playing with people’s lives as though they were toys. 

If we find our outrage,if we lose our despair and see the world and our lives as capable of improvement, then we will prevail and the world will be right again, with each succeeding generation looking forward to a better future, with greater justice, fairness and quality of life.