DUAL Tracking: The Game of “Chicken”

In their quest for a windfall they have given the homeowners a path to justice — one where the notice of default, notice of sale, notice of acceleration notice of right to reinstate and redemption rights are all screwed up (i.e., wrong and invalid). With 80%+ of the losses already paid, the loans could have been modified down to nothing or nearly nothing compared with the original balance showed on the note, whether the note was fabricated or not. The problem is not whether the remedy exists. The problem is whether the lawyers and litigants have the guts to pursue it.” Neil Garfield, http://www.Livinglies.me

OneWest was formed over a weekend by several wealthy investors who paid virtually nothing for billions of dollars in what were claimed as “portfolio” loans owned by IndyMac which went bankrupt and into FDIC receivership in September, 2008. The agreement specified that the FDIC would pay 80% of the losses incurred on the loans. The first problem is that it said it would pay OneWest the 80%.

The second problem is that One West maintained their claim for the full amount against homeowners even though they had already submitted the claims and collected — many times more than once, from our analysis. That payment was not subject to repayment, subrogation or anything else that we can find, so the “creditor” or “agent” of the creditor has been paid on that account, but the balance has not been reduced.

In their quest for a windfall they have given the homeowners a path to justice — one where the notice of default, notice of sale, notice of acceleration notice of right to reinstate and redemption rights are all screwed up (i.e., wrong and invalid). With 80%+ of the losses already paid, the loans could have been modified down to nothing or nearly nothing compared with the original balance showed on the note, whether the note was fabricated or not.

The real problem is that most lawyers are not presenting their cases with the confidence of knowing that whatever the position of their opposition, it is probably a misstatement of the truth — the opposing lawyers in most cases don’t even know that they are making false statements and representations. Practically every foreclosure trial or hearing begins with the words “This is a simple foreclosure, your honor.” Nothing could be further from the truth.

Patrick Giunta, Esq. is co-counsel on several cases we are litigating in South Florida. One of them is a qui tam action against OneWest for false claims to the government. He has again brought to my attention the case decided in California (where almost everyone says it is hopeless) in which the homeowner stuck to their guns instead of accepting various offers of settlement. The reason we bring it to your attention again is that it demonstrates the fact that if you know you are right and you have the Judge on your side just for the raw elements of pleading or discovery, the confidence of the opposition is shattered even if they put on a good show of appearing otherwise.

My article from September 13, 2013 explains the scenario from the California case. Our current case goes even further alleging that OneWest intentionally misrepresented losses to the FDIC and the Federal Home Loan Housing Agency (and probably other private and public institutions) in order to collect multiple times on nonexistent losses. But it also dove-tails with the California case because they were steering homeowners into “modification” programs by the old trick “You have to be 90 days behind before you can be considered for modification.”

And by the way that trick phrase is not only untrue (designed to keep the modification “in house”) but also potentially criminal and illegal, because for one thing HAMP does not require delinquency in loans for modification. It gets worse. Most of the loans submitted for modification were in fact subject to claims of securitization and the authority of OneWest is questionable at best. The 90 day delinquency trick is wrong. It also constitutes the unauthorized practice of law. If a lawyer says it or anyone from his or her office under instructions from the lawyer, it might be grounds for a bar grievance. Practicing law without a license is an actual felony in many states subject to imprisonment, fine or both.

Virtually all servicers have trained their employees on how to say that without it appearing to be advice — but the homeowner hears it just the way the servicer wants them to hear it — I must go into default if I want the modification. THUS THE DEFAULT IS PROCURED INTENTIONALLY BY THE SERVICER WHICH IS INTENTIONAL INTERFERENCE WITH THE CONTRACT, IF IT EXISTS, BETWEEN THE BORROWER AND THE TRUST.That is an intentional tort enabling the Plaintiff Homeowner to allege damages far beyond economic damages and to even ask for punitive damages, exemplary damages or treble damages under statutory authority, sometimes including the cost of attorneys fees and costs.

The problem is that no modification is offered even if the homeowner makes trial payments on an “approved” modification. Worse yet, those payments are also frequently missed when the servicer or “creditor” issues a statement, report or notice. Or the modification actually raises the payments and makes it more impossible for the loan to work — which brings the servicer to the point they want: foreclosure to collect or keep the money they received on that loan, directly or indirectly, and which they never reported to the court, the borrower or anyone else.

The OneWest situation is only symptomatic of the rest of the “industry.” Virtually all servicers play the same games. These intermediaries and their co-venturers are collecting over and over again from loss sharing agreements, insurance, credit default swaps, and guarantees and other hedges, over and over again. They report it to nobody. And neither the Justice department or even our new CFPB seem to have any interest in the one factor that would bring down the number of foreclosures to nearly zero — giving credit where credit is due.

Practice Hint: For the bold and creative I would argue that that the entire profit earned from using the name of the homeowner to sell bonds,and profit from loss sharing and loss mitigation techniques should be disgorged to the borrower, whose note specifies how the payments are to be applied. One lawyer in Phoenix refers to this as my most obnoxious theory. I bet. It would disgorge all the money the banks made by declaring non existent losses.

If the “creditor” has received money directly or through payment to their agent, then the balance of the receivable is reduced — and in the simplest bookkeeping class we know that the corresponding payable from the borrower is also lost. The intermediaries could get to keep their ill-gotten claims on multiple reports of the same nonexistent loss, with a correction of the principal balance due from the borrower.

Instead they would rather get hit for a seven figure verdict or a six figure settlement when one out of a thousand gets up the nerve to really challenge them. The numbers all balance out in favor of Wall Street — as long as Wall Street keeps winning the game of “chicken.”


For further information please call 520-405-1688 or 954-494-6000. Consults available to homeowners’ attorneys, to wit: homeowners can attend only if they have a licensed attorney on the conference call. Workbooks on General Foreclosure Litigation, Evidence and Expert Witnesses are also available.

Why Are We having So Much Trouble Connecting the Dots?

Matt Weidner reports that he went to court on a case where IndyMAc was the plaintiff. IndyMac was one of the first banks to collapse. It was found that they owned virtually zero mortgages and had “securitized” the rest which is to say they never loaned the money or got paid off by a successor. Now the servicing rights on IndyMac have been sold. So when the time came for trial he finds the lawyer fighting with his own witness. It seems that she would not say she worked for IndyMac because she didn’t. That meant there was no corporate representative present to testify for the plaintiff. case over? Not according to what we have seen where IndyMac foreclosures continue to be rubber stamped by Judges who do not understand the gravity of the situation.

The precedent being set is for anyone who knows about a default to race to the courthouse with a complaint to foreclose after fabricated a notice of default and asserting themselves as the successor to whoever the borrower was paying. The borrower doesn’t know the difference and generally doesn’t care because they mistakenly think they are screwed no matter what. So the pretender lender that was collecting takes it time partly because they are simply collecting fees on “non-performing” loans. Meanwhile our creative criminal goes in and alleges that he is the holder of a lost note, submits affidavits, but of course stays away from the essential allegation that there ever was a transaction between himself and the borrower. These days Judges don’t seem to require that.

Judgment is entered for our creative criminal and he becomes by court order, the creditor who can submit a credit bid at auction. He makes the non-cash bid at the auction and presto he just got himself a free house which he sells at discount on the open market. He only needs to do a few of those before he vanishes with a few million dollars. In fact, we have learned that such “foreclosures” are going on now sometimes creatively named such that it looks like the name of a bank. That is why I have been saying for 7 years that  the foreclosures, if they are allowed to proceed, will eventually create chaos in the marketplace.

You might ask why the banks don’t raise a big stink about this practice. The answer is that there are only a few such scams going on at the moment. And the banks are relying on the loopholes created in pleading practice to get their own foreclosures through the same way as our criminal because they really don’t own the loan or even the servicing rights. Yup! That is called a syllogism: if the creative criminal is a criminal for doing what he did, then the bank or anyone else who engages in the same behavior is also a criminal.

And that is why the justice department and regulators are ramping up their investigations and charges, getting ready to indict the bankers who thought they were untouchable. If you read the reports of securities analysts, you will see three types of authors — those who obviously have drunk the Kool-Aide and believe Bank of America and Chase hinting the stock is a good buy, those who are paid to plant pretty articles about the banks, and supposedly declining foreclosures and increasing housing prices, and those who have looked at the jury conviction of Countrywide, looked at the pace of settlements, and looked at the announcements that there are many more investigations and charges to be resolved, and who have seen the probability of indictments, and they conclude that BOA is soon going to be on the chopping block for sale in pieces and the same will happen with Chase, Citi and maybe even Wells.

While the media is not paying attention to the impending doom of the mega banks, the market is discounting the stock and the book value of these companies is dropping like a stone because real investment analysts under stand that much of what is being carried on the books as assets, is really worthless garbage. Charges of fraud are announced practically everyday, saying that the banks defrauded investors, defrauded Fannie and Freddie, and defrauded each other, as well as insurance companies and counterparties on credit default swaps. In other words it is pretty well settled that the sale of mortgage bonds was a sweeping fraudulent scheme and that the word PONZI scheme is accurate, not some conspiracy theory as I was treated back in 2007-2010.

So now that we know that there was complete fraud at one end of the stick (where the funding for the origination and acquisition of mortgages took place), the question is why is anyone looking at foreclosures as inevitable or proper or even possible. It is the same stick. If one end is burning then it is quite likely that the other end will be burning soon and that is exactly what I predict for the coming months.

Having been in court multiple times over the last month representing clients seeking to retain their homes it is readily apparent that the Judges are changing their minds about whether the foreclosure is inevitable or that collection by these creative criminals is wise or legal — i.e., whether the enire exercise involves an arrogant willingness to commit perjury. Since the mortgages were part of the scheme and the part where the lender appeared with the money is covered in fraud, it is certainly reasonable to assume that the the fraudulent schemes included the origination and transfer of mortgage paper. And that is exactly the case.

If it wasn’t the case there never would have been fraud at the top because the investors would be on the note and mortgage and some some nominee of the broker dealer (“BANK”) or they would have been on a recorded assignment closed out within 90 days of the start of the REMIC trust, which would have been funded by money from investors paid to the investment bank (broker dealer) who then forwarded the net proceeds tot he Trust. None of that ever happened, though, which is how the fraud was enabled.

Practice Hint: I like to demonstrate by drawing a large “V” where the bottom is the closing agent, the left side is the money trail and the right side is the paper trail — and showing that they never meet. That means the paper trail is a fictional story about transactions that never occurred. The money trail is actual facts and data showing actual transactions where money exchanged hands but there was no documentation. The “Trust” was never funded with money or assets, so the money went straight down the left side from the investors at the top of the left side to the closing agent, who applied the investors money to close a transaction that was documented as though the originator had loaned the money. The same reasoning applies to transfers and assignments.

The core of the cases filed by the banks is that the Note is prima facie evidence that a transaction occurred. It is entitled to a presumption of validity. But where the borrower denies the transaction ever occurred, and files the right discovery to get evidence of the wire transfers and canceled checks, the banks go wild because they know their entire case will not only fall apart but subject them to prosecution.

Which brings us to Marshall Watson, who seeks to be licensed again to practice law, and David Stern who is about to be disbarred forever. The good news is that they were disciplined for fabrication and forgery of documents. The bad news is that the inquiry stopped there and nobody ever asked why it was necessary to fabricate or forge documents.

FRAUD! In Foreclosure Court Indymac/Onewest Doesn’t Own Notes and Mortgages, But “They” Continue To Foreclose Anyway

-Suspended Ft. Lauderdale foreclosure mill head seeks return

Florida Bar referee calls for ex-foreclosure king’s disbarment

The Truth Keeps Coming: When Will Courts Become Believers?

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 (East Coast) and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

JPM: The Washington Mutual Story

Bear Stearns, JPMorgan Chase, and Maiden Lane LLC

Mistakenly Released Documents Reveal Goldman Sachs Screwed IPO Clients

Walls Continue to CLose in On Banks in Courts Once Hostile to Borrower Defenses

McDonald v OneWest

This case should be read more than once

When I started writing about legal defenses to foreclosures that appeared patently fraudulent to me, I thought it might only take a few months for things to catch on. About the timing I have been consistently wrong. About the substance I have been consistently right.

Here again, the party seeking foreclosure not only failed in its current effort to do so, but was ordered to pay $25,000 within 7 days for forcing the homeowner’s attorney to fight tooth and nail for items that were or should have been at their fingertips, they had no reason to withhold, and should have been anxious to supply if the foreclosure was real.

The only potential error I see in the homeowner’s case is that  there appears to be an admission that Indy Mac was indeed the party who was the source of the loan — a fact which is nearly universally presumed and virtually always wrong in today’s foreclosures. Not knowing the actual facts of the case I can only speculate that this was an oversight, but it is possible that it wasn’t an oversight and that Indy Mac did in fact make the loan, booked it as a loan receivable, and then sold it into the secondary market for securitization.

There are several very important issues discussed rationally and without bias in this very well-written decision:

  1. Dates DO Matter: If the authorization to sign something is received after the signature is executed it isn’t any good. Lying about it and then fabricating documents to cover up the first lie are grounds for sanctions.
  2. Allegations of holder status are no substitute for facts and evidence. The supposed right to request it is not the same as holding, possessing or owning the note. Execution and recording of substitution of trustee, notice of default, notice of sale are all void if the party stated as the holder is not the holder.
  3. Ownership counts, which means that in order to submit a credit bid at a foreclosure action, the books and records of all the  relevant parties must be open to inspection and review to determine what balance, if any, exists, on the records of the owner of the debt — i.e., the party who would actually lose money if the loan was not paid, and the amount of the principal and accrued interest due, if any, after deductions for all receipts.
  4. Agency either exists or it doesn’t. And the paramount element of agency is control by the principal of the agent. There is, however, contractual obligations that come into play here. So if the investment bank received payments to mitigate damages on loans it either did so as agent for the investor or because they were contractually bound to do so as a vendor thus reducing the balance due on the bond. Either way, the balance due is reduced as to that creditor. It might be shifted to the party who paid who in turn might have a right of contribution unless they waived that right (which the insurance companies and CDS counterparts did in fact waive), but either way the new debt is no secured unless there was a purchase of the loan.
  5. Rules of Civil Procedure do matter and are “not optional.” If discovery requests, qualified written requests, debt validation letters are sent, answers are expected and due. The fact that the QWR is long does not mean it is invalid.
  6. Damages are possible, but you need to plead and prove them and that pretty much goes to whether these parties ever had any right to collect any money or enforce any note or any debt or enforce any mortgage against the homeowner. If the answer is yes, that if they get their act together, they can foreclose, there will likely be no damages. If the answer is no, which more likely than not is the case in current foreclosures, then damages properly pleaded and proven are easily sustained.
  7. Discovery is not a toy. The answer or the production is due.
  8. Hearsay is inadmissible and the business records exception, as stated by dozens of courts before this one, where the witness or declarant testifed for  “defendants chose to offer up what can only be described as a “Rule 30(b)(6) declarant” who regurgitated information provided by other sources” then we are taking hearsay and turning it into  evidence without any personal knowledge or testing of the truth of the matter asserted.
  9. Judges are not stupid. They know a lie when they hear it. But what happens after that depends upon the trial experience and knowledge of the lawyer. Don’t expect the Judge to go into orbit and give you everything just because he found that the other side lied. You still have a case to prove.

Washington J Lasnik Order Regarding MSJS

Curious and Shocking Failure to Follow the Law: BofA, Chase and OneWest

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Announcement: Based upon current information and direct interviews with participants I have come to three broad conclusions:

  1. Bank of America never acquired any loans from Countrywide.
  2. Chase never acquired any loans from Washington Mutual
  3. OneWest never acquired the Indy Mac loans but instead entered into a loss sharing arrangement wherein the FDIC would absorb 80% of the loss and OneWest would receive the proceeds from foreclosure.

BofA never merged with BAC home Loans and the entity created to merge with Countrywide was Red Oak Merger Corp. which like the REMIC trusts was completely ignored. Neither Countrywide, red Oak BAC nor Bank of America ever paid one cent to acquire the loan balances. Hence the paperwork showing “for value received” is a lie.

Chase Bank acquired the banking operations of WAMU for  consideration that is expressly stated as zero. No assignment of WAMU loans exist, according to the FDIC receiver for WAMU. In most cases neither  WAMU nor  Chase ever spent one nickle funding or acquiring loans.

OneWest was capitalized with less than $2 billion and even that is not confirmed inasmuch as there doesn’t seem to be any transaction in which money was moved into a OneWest bank account. Like the above, neither Indy Mac nor One West ever paid for the loans.

All of that means is that they are not injured parties if the borrower doesn’t pay nor are they responsible parties if the investor is not paid. Their claim of agency just doesn’t cut it. For purposes of collecting insurance and proceeds from credit default swaps and federal bailouts, they claim ownership and then after payment, they claim agency so they can chase the foreclosure too, in addition to being paid several times over. But for purposes of sharing in the bounty of betting against the same mortgage bonds as they were selling to the investors the banks consider that proprietary trading and insist on the investors (lenders) taking the loss.

Practice hint: dig deeper and follow the money trail and don’t think that the note is part of the money trail. It isn’t. Only a cancelled check or wire transfer receipt, or ACH confirmation or check 21 confirmation would be proof of ownership (proof of payment) and proof of loss (entitling them to submit a credit bid at the auction of the property). Stick with this strategy and you won’t be sorry. The failure to come up with evidence of an actual injury to an actual party is deadly not only on the facts but for jurisdictional purses of standing.

The banks have cleverly steered the conversation in court to why they should not be required to produce the actual records of actual transactions affecting the loan or the loan pool claiming an interest in the pool. They only want the  court to look at the note and mortgage and the fabricated “allonges”, endorsements, transfers, sales, assignments, all of which are evidence and carry certain presumptions. But he story told by those documents turns out to be a fiary tale when you look at where and when money exchanged hands and between what parties.

The banks are avoiding the obvious: that they claim a REMIC trust exists and was funded (both of which are probably untrue), and that the REMIC trust acquired the loan by buying it (without any evidence of a money exchange) backdated to when the loan was “closed” [note it is our position that none of these loans were closed, since they have yet to be completed].

If the Trust DID own the loan, then what effect does a fabricated assignment have from the originator, aggregator or anyone else other than the trust? The pretender lenders can’t have it both ways. They can’t say they transferred the loan into the trust in 2006 and then claim that an assignment in 2011 from Countrywide to Bank of America conveyed anything.

What’s the Next Step? Consult with Neil Garfield


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

Editor’s Comment: Among the unsung culprits in the false securitization scheme were the developers who conspired to raise prices to unconscionably high levels and the Wall Street funding that loaned the money for construction of new residential palaces. The reason the developer did it was once again, no risk and all profit, knowing that no matter how high the price, the appraisal would be approved. And the reason why IndyMac and other fronts for Wall Street’s tsunami of money did it was the same, no risk and all profit.

So what we have going on is that a few bankers are being thrown under the bus to take the blame for “isolated”instances of malfeasance. Their defense bespeaks of the widespread nature of this crime and how it created its own context of right and wrong. Many of them are saying they were following industry standards. Here’s the rub: they are right. The problem is that the new industry standards were illegal, fraudulent and disgraceful.

So here we have three IndyMac executives — out of thousands of people who did the exact same thing they did — accused of approving unworkable loans that were never repaid because in every Ponzi scheme the result is the same: when people stop putting in new money, the scheme collapses.

The question is not why these three are being charged in a civil action. The real questions are why are they not being charged with criminal fraud, and why thousands of other individuals who engaged in identical behavior are not being charged both civilly and criminally.

Then we have an interesting question: if it was improper for these three IndyMac execs to approve bad loans to developers, why are there no charges pending for approving bad loans and misleading homeowners?

DOJ keeps saying that they did not accumulate enough evidence to prove a criminal case, which as we all know, must be proven beyond a reasonable doubt. But I say the DOJ simply went for the low-hanging fruit, intimidated by the complexity of securitization. But if they take two steps back and get their heads out of the thickets, they will see a simple Ponzi scheme that can be prosecuted easily.

Other than a criminal environment, what bank or other organization would set bonuses based upon the number of loans or the amount of money they moved? In the real world where right and wrong are inserted into the equation, bonuses, salary and employment is based upon the perception of management that an individual is contributing to a profit center. Here the bank is said to have “lost money” much of which was off set by insurance, Federal bailout and gigantic fees paid tot he bank for pretending to be a lender when they were not.

Criminal larges are way overdue against both the corporate mega banks and the titans who ran them, right down the line to anyone who had enough knowledge to realize the acts they were committing were wrong. But the money was too damn good — getting paid 4-10 times usual compensation was enough for them to keep their mouths shut — but not in all cases. Some people did quit or blow whistles. They are buried in the mounds of documents and statements taken by law enforcement all over the country.

It is not the lack of evidence that keeps the prosecutions, even the civil ones, from becoming a wave, it is the will of the people charged  with law enforcement decisions whose opinions were guided by political pressures. The Obama administration owes a better explanation of what is happening in the housing market and how it can be fixed. Without taking economists seriously on the importance of housing and prosecuting those who break the rules, the economy will continue to drag.

Japan just announced they had an annual GDP decline of 3.5%. Remember when we afraid japan’s money would take over the world? Their shrinking economy is due to the fact that they ideologically stuck to their guns and refused to stimulate the economy, protect their currency, and reign in the big money people. All they needed was a philosophy that the common man doesn’t matter. Hopefully our election which broke in favor of the democrats because of demographics, will teach a lesson — that without the success and hopes and good prospects for the common person entering the workforce, the economy can stall for decades.

FDIC seeks damages from three former IndyMac executives

Trial begins on a civil lawsuit that accuses them of negligence in approving loans that developers and home builders never repaid.

By E. Scott Reckard, Los Angeles Times

When the Federal Deposit Insurance Corp. seized Pasadena housing lender IndyMac Bank four years ago, the scene resembled the grim bank failures of the 1930s.

Panicked depositors, seeking to reclaim their money, lined up outside branches of the big savings and loan, whose collapse under the weight of soured mortgage and construction loans helped usher in the financial crisis and biggest economic downturn since the Great Depression.

As those memories fade, the government’s effort to reclaim losses stemming from the financial debacle grinds on, with one IndyMac case winding up this week before a federal jury in Los Angeles.

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The civil lawsuit seeks damages from three former IndyMac executives, accusing them of negligence in approving 23 loans that developers and home builders never repaid, costing the bank almost $170 million.

The executives approved ill-advised loans because they earned bonuses for beefing up lending to developers and builders, said Patrick J. Richard, a lawyer representing the FDIC.

“They violated their duties to the bank,” Richard said in his opening statement to the jury Tuesday. “They violated standards of safe and reasonable banking.”

The bankers deny wrongdoing, contending that they made solid business decisions, which at the time were well-considered and approved by regulators and higher-ups at IndyMac.

“This case,” defense attorney Damian J. Martinez said in his opening statement Wednesday, “is about the government evaluating these loans with 20/20 hindsight after the greatest recession we’ve had since the Depression in the 1930s.”

The defendants — Scott Van Dellen, Richard Koon and Kenneth Shellem — ran IndyMac’s Homebuilder Division, a sideline to the thrift’s main business of residential mortgage lending. Court filings show the FDIC settled its case against a fourth former executive at the builder operation, William Rothman, by agreeing to a $4.75-million settlement to be paid by IndyMac’s insurance companies.

The trial, playing out before U.S. District Judge Dale S. Fischer, highlights how federal authorities — often stymied at bringing criminal cases against major players in the financial crisis — have pursued civil damages on a number of fronts.

One high-profile example involved the Securities and Exchange Commission‘s investigation of Countrywide Financial Corp. of Calabasas. The SEC exacted a $67.5-million settlement from former Chief Executive Angelo Mozilo, who ran Countrywide as it expanded to become the nation’s largest purveyor of subprime and other high-risk mortgages.

A Justice Department probe of Mozilo had found too little evidence to support a criminal prosecution. Admitting no wrongdoing, Mozilo paid $22.5 million of the SEC settlement himself, with corporate insurance policies covering most of the balance.

On another front, federal and state prosecutors have filed a series of civil lawsuits accusing major home lenders including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and JPMorgan Chase & Co. of fraud and recklessness that cost taxpayers and investors billions of dollars.

Taking a different approach, the FDIC suits aim to recover losses in its insurance fund, which compensates depositors when banks fail. The agency says it has authorized lawsuits against 665 insiders at 80 institutions seized during the recent crisis, with 33 suits already filed.

The IndyMac case now going to trial, filed in July 2010, was the first of those suits.

Recoveries typically are modest compared with the losses.

IndyMac’s failure cost the federal insurance fund more than $13 billion, the largest loss among the 463 banks that have failed since 2008. But the FDIC is seeking only $170 million in the suit that has gone to trial in L.A., plus $600 million in a separate suit against former IndyMac Chief Executive Michael Perry.

(Perry contends that the pending lawsuit, accusing him of negligently allowing $10 billion in dicey mortgages to pile up on IndyMac’s books, is without merit.)

The FDIC is proceeding with the IndyMac case despite a setback in its efforts to collect from IndyMac’s insurance. U.S. District Judge Gary Klausen ruled July 2 that IndyMac officer and director insurance policies at the time of its failure cannot be used to cover any damages the agency wins against former bank insiders.

An appeal of that ruling is before the U.S. 9th Circuit Court of Appeals. If the ruling stands, the FDIC could only try to recover damages by attaching the defendants’ personal assets.

The IndyMac defendants’ earnings were modest by the standards of executives running large financial firms, such as Mozilo, whose take during the housing bubble has been estimated at nearly $470 million. But their compensation — in the $500,000 annual range for Koon and Shellem and well over $1 million for Van Dellen, who headed the Homebuilder Division — merited note by the FDIC.

Richard, the lawyer making the FDIC’s opening statement, noted that Van Dellen had rejected a suggestion by Perry in July 2006, as cracks appeared in the housing markets, that IndyMac take a cautious approach in its lending to home builders.

Van Dellen replied in an email that “now is the time to pounce,” Richard told the jury. “So what was his motivation? His bonus for 2006 production was 4 1/2 times his base salary — $914,000 — tied to production” of more builder loans.



ADmit and Lose: Another Unnecesary Loss for Borrower

Editor’s Analysis: How simple do I need to make this. If you admit the debt and that it was due and you didn’t pay it, everything else is window dressing for “gimme a break.” The 11th Circuit Court of Appeals had no choice but to rule against the borrower and to affirm the lower court’s ruling.
The facts stated by the court included the fact that the homeowner had refinanced by “entering into a transaction with IndyMac.” How does the Court know that transaction occurred? Because that is what the borrower said and that is the end of the discussion.
If the borrower said that there was no completed transaction with IndyMac, that any signed documents were the product of fraudulent concealment of the real lender, leaving the borrower with no real lender to hold accountable for compliance with TILA and state lending laws, and not even a lender that was authorized to issue a satisfaction of mortgage, then the Court would not have said that the borrower entered into a transaction with IndyMac. Instead it would have said that the facts were in dispute as to whether the Plaintiff’s loan was the result of a transaction with IndyMac or some other entity.
The court also recites that Plaintiff failed to make a payment due. Where did they get that fact? From the borrower’s tacit or explicit admission. If the Plaintiff said that there was no payment due and that just because an instrument calls for a payment is not ipso facto proof that the payment is due. It might have been paid by someone else or it might not have been due at all because there never was a deal between Plaintiff and IndyMac and its successors.
After dealing with those admissions, the court basically concluded that the other errors, fabrications and even forgeries of the banks and servicers were not particularly important. What was the harm. The borrower’s right to due process doesn’t mean that he can admit the debt, admit the default, admit the collateral, admit the note and then say he should nonetheless win.
You must remember that due process does not mean the same thing as “justice.” It means an opportunity to be heard. And this Plaintiff was heard to complain about illegal activity of the foreclosing party on a debt that the Plaintiff admitted was owed and secured by the house and on which he hadn’t paid.
Once again, the Court recites that its opinion is based upon the facts as plead.
SUMMARY of Case: Link Below for Full Opinion

Milani v. One West Bank FSB, Case No. 11-15378 (11th Cir. October 17, 2012) (unpublished) (per curiam).

Plaintiff Borrower failed to state sufficient facts to support claims for wrongful foreclosure, quiet title or fraud. Nor could Plaintiff maintain an action for declaratory judgment because the events had already occurred causing the material rights to accrue.
Procedural context:
An action was commenced in state court, then removed to federal court in the Northern District of Georgia. The District Court granted motions to dismiss by the Defendants on several grounds and determined that amendment of the complaint would be futile. On review, the Court of Appeals affirms the District Court.
Plaintiff refinanced debt secured by his home in 2005. In his complaint, Plaintiff alleged that he had defaulted on the loan, that the security deed he signed was assigned through the defendants and that one of the defendants had initiated foreclosure against his home. Plaintiff did not present sufficient factual allegations to state a claim for wrongful foreclosure – duty, breach, cause, or damages. Nor could Plaintiff prevail on his action for quiet title because he stated in his complaint that he had signed over legal title in the security deed but no facts that the assignee’s title was fatally defective. His claim for fraud was not supported by factual allegations identifying with particularity the materially false representation nor valid grounds for concealing material information. Declaratory judgment was unavailable because Plaintiff had already defaulted on the note. Finally, Plaintiff failed to provide a factual or legal basis for his argument that foreclosure was improper because the defendants “separated the pertinent note and security deed in the process of engaging in the ‘illegal scheme of securitization of residential mortgages’ — leaving the note unsecured and the security deed unenforceable — and because certain of the assignments of the pertinent security deed were fraudulent or ‘doctored’”.

Marcus, Wilson and Edmonson, Circuit Judges.


MERS: No Agency with Undisclosed Rotating “Principals”


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Predictions of bank failures from 2008

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Editor’s Comment:  

Some people have challenged our assertion that our predictions have been right on the money. The excerpted part of the first Workbook published was presented the first week of September 2008 after completing our analysis in August 2008.

The capital of the bank is its net worth. All regulations regarding banks watch the capital of banks carefully so that they are lending to a point where they are endangering their ability to honor the deposits or investments made by consumers and businesses. Here is how Wall Street “fell” and how we predicted it accurately.

There are three types of capital.

Level one is what the asset is obviously worth on the open market by looking at a publicly known and trusted exchange like the New York Stock exchange etc. Level two are assets that are combinations of level one assets. So if you had a soup can as an asset, you would be able to tell what it was worth by looking at the commodity markets to determine the value of carrots, celery etc. Level 3 assets cannot be valued by independent means. They are assets that re valued by management in any way they deem fit. They normally are extremely low in financial institutions because financial institutions don’t typically buy or create or acquire assets that have no independently verified value. They stick with known values that can be verified. That is what was so different starting in the 1990′s.

This says it all I think. Brad and I poured over the financial statements of the largest financial institutions and found to our shock and horror and level 3 or tier 3 assets were at levels unheard of in the history of banking. Usually hovering around 5%-15% of capital (at which point they were considered risky), we found dozens above 15% and this list that shows that level 3 assets were MORE than all (100%) of the capital the bank or financial institution claimed to have. The entire financial world had been turned upside down. Some other people were writing books about the impending collapse of the stock markets etc., but they were largely ignored.

On the day that Brad and I gave our first seminar In Santa Monica the largest mortgage lender on the West Coast, IndyMac was taken over by the FDIC. We decided to publish our findings that day predicting that it was not just the lending companies that were fronting for Wall Street that would fall. It was Wall Street itself.

Brad made a list of the worst offenders to the institution that had more level 3 assets than all their capital combined (100%), which means that they were doomed to imminent failure. Here is the slide in which he showed his analysis. Since we were concerned with the fate of homeowners and not investors in the markets, we did not elaborate other than to say that these banks would fail within 6 months. We were wrong. They all failed within 6 weeks of publication of our predictions. The slide and related slides were left out of revisions tot he Workbook #1 because it was an event that had already happened and we were, again, concerned with what we could do to help homeowners in distress, not banks in distress.

Predictions of Bank Failures 2008





Thank you for the inspiration

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Editor’s Comment:  

We get many letters thanking us for our efforts to set things straight. And as I embark on escalating those efforts I found this letter especially timely and uplifting. While many of our readers write in with their successes, the distinguishing feature of this thank you letter was despite losses, so far in the courts. I think the next major push should be with administrative agencies regulating the banks where there are procedures for review and the possibility of administrative hearings to consider the quest for truth.

I have followed your blog semi-religiously for several years now.  I started long before I filed a RICO suit against IndyMac/MERS in Federal District Court in Seattle (May 2011).  So for certain my complaint was laced as best I could with the very arguments which you have been espousing and refining over the years.  Of course my Complaint was dismissed (not unexpected since, after all, I am a pro se know-nothing in the eyes of the “justice system”).  I appealed to the Ninth Circuit case No. 11-358626, got evicted in the interim and now await a decision from the Appeals Court.  I am telling you this not as a plea for assistance or pity but as a thank you for your tenacity in trying to set things straight.

Until the bubble burst in 2008, I was a self-employed homebuilder for the previous 35 years. Prior to that, I had obtained a 2 year associates degree in Tampa (1975). Dealing with an unconscionable truth has different impacts on different people. For me (and I am only 3 years or so younger than yourself), the impact prompted me to return to college at the University of Washington at the branch campus in Bothell.  This town is nearby to my former home which I still own but from which I was exiled.  Soon after my exile I became intrigued by a new degree program offered by UWB called “Law, Economics and Public Policy”.  I wondered if it was what it appeared to be and if my college credits from 37 years ago would transfer, well, yes and yes.  I am midway through my second quarter now.  Doing great.  The class sizes are quite small, usually 25 or less, so in-class discussions are encouraged and frequent.   This quarter, the book “The Big Short” was a required reading for one class.  Having already read that book 2 years ago, I’m sure you can imagine what sort of flavor that a fellow of my background and attitude might bring to the table in a room full of clueless kids who could easily pass as my grandchildren.

I know you’ve had some recent health issue which I hope are behind you.  I don’t have the time (or patience, quite frankly) to engage in the blogging which follows your every post, including your most recent one regarding the familiar theme of corrupted titles and Canadian neophytes.  On this Friday evening, I just wanted to wish you well and thank you for your inspiration.  The next generation must not be denied the truth.  I’ll keep talking to the kids (and the professors, some half my age) at UWB.  In a classroom environment, none of them can hide from me.  So yes, thanks once again.  We hear you and by proxy, they hear you too.

Best regards,

Name redacted for privacy







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EDITOR’S COMMENT: On the IndyMac portfolio alone, they made billions while the investors and homeowners got crammed down with double-talk about where the money went. I have been saying for years that there is far more money to be made by banks, servicers, Wall Street insiders and investors by foreclosing than by modifying.

Despite hundreds of thousands of applications where the offer from the borrower was far better than the apparent results from foreclosure, they were turned down without a single thought. Why? Because the FDIC is paying off the losses and there is the nub of the question: When will the Federal Government stop encouraging foreclosures when the entire country is in crisis because of the foreclosures?

This FDIC-Sponsored Scheme Lets Loss-Share Lenders Get Rich Off Foreclosure

Mike “Mish” Shedlock

Mike “Mish” Shedlock Mish is an investment advisor at Sitka Pacific Capital. He writes the widely read Mish’s Global Economic Trend Analysis.

A couple of readers asked me to comment on the Sun Sentinel article Are loss-share lenders gouging us?

November 27, 2011

In the wake of the recent real-estate meltdown, the borrower of a nonperforming loan called his lender with promising news: “I have a buyer looking to make an all-cash offer for my Florida property. Will you meet with us tomorrow?” The lender’s answer: “No.”

Disturbingly, this implausible response is not uncharacteristic of lenders who exploit FDIC loss-share agreements by seeking to foreclose on nonperforming loans, even when prudent business judgment calls for short sale or loan modification solutions. By perverting the terms and spirit of loss-share agreements, these lenders are reaping windfalls while prolonging the foreclosure crisis, depressing real-estate values and sticking taxpayers with the bill.

FDIC Sponsored Fraud

Rather than comment directly, I asked Patrick Pulatie at LFI Analytics to chime in. Pulatie writes ….

I wrote an article about IndyMac and the Shared Loss Agreement (SLA) two years ago, before I quit working with most homeowners. Essentially, here is what is going on.

Shared Loss Agreements were executed by the FDIC with the banks that took over failed institutions. Some had the terms that the author describes. Others did not have the same terms, and were much more restrictive. The author is referring to the Shared Loss Agreements similar to OneWest Bank/IndyMac, which I wrote about.

The SLA for OneWest Bank worked in the following manner:

• It only applied to the Portfolio Loans being purchased. It did not apply to servicing rights. 1st Mortgage Loans were purchased for 70% of the original balance. Second Mortgage Loans were purchased at a much lower rate, at 55% or lower at times. I shall only mention First’s from here on out, but Seconds apply as well.

IndyMac had a large portfolio of Neg Am loans, so the 70% purchase price of individual loans might be “lower” if the loan had accrued a Neg Am balance above the original loan amount. If there were a large number of 30 year fully amortized loans, then there might be a greater than 70% purchase price. There is no way to break down the proportion of each.

• The first 20% of losses on the “Total Portfolio” purchase would be absorbed by OneWest Bank. There would be no reimbursement on those losses.

• The next 10% of losses, up to 30%, are reimbursed at 80%. So to begin to make claims, the 20% level must be reached.

• From 30% on, the reimbursement rate is 95%. But the 30% loss level must be reached before the 95% can be claimed.

• The total purchase of Portfolio loans was approximately $12.5 billion, so a 20% loss would be $2.5 billion before claims could begin.

• If every single loan (first mortgage) had defaulted on the first day of purchase, and after reimbursement, the agreement, every $.70 spent would have resulted in $.745 being returned. Not bad! But that is not all.

Most of the loans were not in default. Therefore, interest would continue to be earned until the loan refinanced, or defaulted, so they were making a profit, and as their filings have shown, they made very good profits on these loans.

As you can see, it is always in the best interests of OneWest Bank to foreclose on defaulted properties. The sooner that the 20% loss is reached, then the quicker that they can make claims for reimbursement.

Has OneWest Bank reached the 20% threshold? That has not been announced. However, it has been 2.75 years since the Shared Loss Agreement went into effect in March 09. One would think that the 20% level has been reached.

In Feb 2010, a person I know claimed to have seen the paperwork on one loan showing that reimbursement had occurred on that loan. I did not see the paperwork, but since this person did the Good Bank/Bad Bank scenario for the FDIC in the early 90′s, I have to accept that he knew what he was looking at.

Who Benefits: George Soros, Michael Dell, John Paulson

Pulatie referred to an article he wrote on December 1, 2009: Anatomy of a Government-Abetted Fraud: Why Indymac/OneWest Always Forecloses

OneWest Bank and its Sweetheart Deal

OneWest Bank was created on Mar 19, 2009 from the assets of Indymac Bank. It was created solely for the purpose of absorbing Indymac Bank. The principle owners of OneWest Bank include Michael Dell and George Soros. (George was a major supporter of Barack Obama and is also notorious for knocking the UK out of the Euro Exchange Rate Mechanism in 1992 by shorting the Pound).

When OneWest took over Indymac, the FDIC and OneWest executed a “Shared-Loss Agreement” covering the sale. This Agreement covered the terms of what the FDIC would reimburse OneWest for any losses from foreclosure on a property. It is at this point that the details get very confusing, so I shall try to simplify the terms. Some of the major details are:

  • OneWest would purchase all first mortgages at 70% of the current balance
  • OneWest would purchase Line of Equity Loans at 58% of the current balance.
  • In the event of foreclosure, the FDIC would cover from 80%-95% of losses, using the original loan amount, and not the current balance.

How does this translate to the “Real World”? Let us take a hypothetical situation. A homeowner has just lost his home in default. OneWest sells the property. Here are the details of the transaction:

  • The original loan amount was $500,000. Missed payments and other foreclosure costs bring the amount up to $550,000. At 70%, OneWest bought the loan for $385,000
  • The home is located in Stockton, CA, so its current value is likely about $185,000 and OneWest sells the home for that amount. Total loss for OneWest is $200,000. But this is not how FDIC determines the loss.
  • ‘FDIC takes the $500,000 and subtracts the $185,000 Purchase Price. Total loss according to the FDIC is $315,000. If the FDIC is covering “ONLY” 80% of the loss, then the FDIC would reimburse OneWest to the tune of $252,000.
  • Add the $252,000 to the Purchase Price of $185,000, and you have One West recovering $437,000 for an “investment” of $385,000. Therefore, OneWest makes $52,000 in additional income above the actual Purchase Price loan amount after the FDIC reimbursement.

At this point, it becomes readily apparent why OneWest Bank has no intention of conducting loan modifications. Any modification means that OneWest would lose out on all this additional profit.

Meet IndyMac’s New Owners

Flashback March 20, 2009: IndyMac Bank’s new name: OneWest Bank

The sale of IndyMac Federal Bank was concluded Thursday, and the new owners wasted no time in ditching its tainted name. Starting today, IndyMac is OneWest Bank.

The Pasadena bank’s new owners, organized under OneWest Bank Group, bought the bank’s $20.7 billion in loans and other assets for $16 billion. That includes $9 billion in financing from the Federal Deposit Insurance Corp. and the Federal Home Loan Bank.The ownership group is led by Steven Mnuchin of Dune Capital Management in New York. The bank’s investors include J. Christopher Flowers, who has specialized in distressed bank purchases, and hedge fund operators George Soros and John Paulson.

Check out the last line and primary lie in the above article:

The management team has been working with the FDIC on a loan modification program to attempt to keep people in their homes.

OneWest bank profit: $1.6 billion

On February 20, 2010, the Los Angeles Times reported OneWest bank profit: $1.6 billion

The billionaires’ club of private financiers who took over the remains of IndyMac Bank from the Federal Deposit Insurance Corp. turned a profit of $1.57 billion last year on the failed mortgage lender — more than they invested less than a year ago.

Yet under the sale agreement, the federal deposit insurance fund still could lose nearly $11 billion on bad loans that the Pasadena institution made before it was sold last March and renamed OneWest Bank.

In taking over IndyMac’s assets, the investor group, led by Steven Mnuchin of Dune Capital Management, put up $1.55 billion to revitalize the bank. Other investors included hedge-fund operators George Soros and John Paulson, bank buyout expert J. Christopher Flowers and computer mogul Michael S. Dell.

OneWest’s financial results were filed with regulators Friday. Regulators and the investors declined to comment on the profit.

As much as $11 billion is set to go straight into the hands of the desperately needy: George Soros, John Paulson, Michael Dell, and Christopher Flowers. The regulators and the investors parasites declined to comment.

Boycott Dell

If you are thinking about buying a new computer, and you are considering Dell, you may wish to reconsider.

Mike “Mish” Shedlock
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“the Court will not participate in a process where OneWest increases its profits by disobeying the rules of this Court and by providing the Court with erroneous information


EDITOR’S COMMENT: We’ve been watching this for years. If one document doesn’t work, the pretender comes up with another “original” document. They are all fake, fabricated and forged. People have been asking us since 2007, “If what you are saying why are the Judges going along with it? Why are they not levying sanctions, referring the lawyers to the Bar for discipline and referring the banks to the justice system for criminal prosecution?” The simple answer is that the Judges didn’t believe it. They were stuck in the mental trap of believing that the banks would never intentionally do something in court that amounted to perjury, subornation of perjury and fraud. The Judges could not get their heads wrapped around the idea that the banks were in the process of a fraudulent land grab. It just didn’t make sense to them. It seemed far more likely to them, from their prior experience with foreclosures, that the process was largely clerical, that no bank would foreclose if there wasn’t a good reason and it couldn’t be worked out.

In California this attitude was particularly evident but in other states, Neil Garfield and Living lies was cited as the problem because we were filling the media with false statements of law and fact. Fast forward to the present and you see an increasing number of judges getting increasingly bold in switching their position on the banks and allowing for the possibility, even the probability that the homeowners win and the pretenders lose because they are pretenders, interlopers in a process meant to satisfy the requirements of judicial economy but which was being used (nonjudicial) to get around the basic requirements of black letter law and due process requirements contained in every state constitution and the United States Constitution.

Lawyers saw the references to me and my blog and the derisive wording about me, and they got scared that if they argued the same points they too would be the subject of derision, lose credibility with the court, and lose cases. And in fact, they were losing more cases than they were winning because even if they used the material on this blog, even if they got the COMBO title and securitization search, report and analysis that lays out everything chapter and verse, they were still losing — as a direct consequence of (a) Judges prejudging the cases and (b) the lawyers and litigants failing to object immediately as the first words were coming out of the mouths of the lawyers for the pretenders and failing to object to the first documents proffered. Most of all they were losing because they failed to deny the default, deny the right right of the forecloser to be initiating any collection or foreclosure proceeding, and deny that the originating papers were representative of the actual cash transaction that took place.

If you don’t object to an allegation, you are admitting it. If you don’t object to a document, it comes in as “evidence.” And the reason the lawyers were not objecting was that they had the same mindset as the Judges. How could they deny a default when they knew that the homeowner had not made payments on the note and mortgage that was attached as copies to the pleadings of the pretenders? If you don’t make the payments, you’re in default, right? WRONG! A default occurs only if the creditor fails to receive payment, not when the borrower decides to not make the payment. A default exists only if there is a gap in payments that are due, not payments that are shown on a piece of paper. If the payments were made anyway by a third party, there is no default and none can be declared.

And the declarer of the default must be someone who has an interest in the obligation. And the default must reference the obligation which normally is on the loan documents signed at closing but in the case of table funded loans that are enmeshed in a false securitization scheme, those documents do NOT set forth the terms or the parties involved in the transaction — so they can’t be used. If the loan documents at the so-called “closing” can’t be used we are left with an undocumented transaction between the homeowner, who is not known to the investor-lender, and the investors lender who is not known to the homeowner-borrower. They each got a separate set of documents including terms, conditions guarantees, cross collateralization, insurance and other third party payments (from servicers who keep paying in order to collect higher fees for “non-performing” loans. So in terms of documents there was no deal, and if the truth was told to both real parties in interest there wouldn’t have been a deal.

Nonetheless an obligation arose between the homeowner-borrower and the investor lender because the homeowner-borrower received the benefit of funding from the investor-lender, albeit under false pretenses including appraisal fraud at the loan level and ratings fraud at the investment level. The transaction is both undocumented and unsecured. And the obligation is subject to offset from a menu of affirmative defenses, rescission remedies, and counterclaims from the homeowners borrower. The property is now worth a small fraction of what was represented at the loan level closing and the investment level closing. So the investors are ignoring any remedies against homeowners because they don’t want to get tied up in litigation in which their net recovery is negative — i.e., they owe more to the homeowner than the homeowner owes on the obligation.

Enter the pretenders who figure that if the investors don’t want to go after the homes, then the banks will and who will challenge the banks since they appear to be the lenders in these transactions, even if they are not. Their defects in documentation and the facts (they were not included in the money trail of the loan transaction) were glossed over by lawyers and judges and even the media. Now, the Judges are taking a closer look and finding that not only do these pretenders lack standing, not only are they not the real parties in interest, but that that they and their lawyers are probably guilty of intentional fraud on the court and in this case, as well as others across the country, the Judge is ordering sanctions and fines.


IN RE ARIZMENDI | CA Bank. Court Denies Stay, Order to Show Cause “Contempt, Sanctions, (2) ONEWEST Notes; 1 Endorsed, 1 Unendorsed” “MERS Assignment”

In re: Jessie M. Arizmendi, Debtor.
OneWest Bank FSB, its assignees and/or successors, Moving Party,
Jessie M. Arizmendi, Debtor; Thomas H. Billingslea, Chapter 13 Trustee; and Indymac Mortgage Services, Junior Lien, Respondents.

Bk. No. 09-19263-PB13, RS No. CNR-2.

United States Bankruptcy Court, S.D. California.

May 26, 2011.

Not for Publication


LAURA S. TAYLOR, Bankruptcy Judge


Additional Briefing.

At the trial, the Court carefully considered the demeanor of the various witnesses and the testimony provided. In connection with the trial, the Court also reviewed all other evidence and argument appropriately before the Court. Notwithstanding, however, significant questions continued, and the Court required additional briefing in connection with several issues as outlined in the Order Setting Briefing Schedule, Outlining Preliminary Determinations, and Establishing Procedures for Final Resolution of Issues (Dkt. No. 56) (the “Briefing Order”).

OneWest’s post-trial documents provided the analysis and argument required by the Briefing Order. But, these documents also contained factual assertions inconsistent with the OneWest Declaration and the Claim. OneWest now provided a standing argument based on a new version of the Note (the “Endorsed Note”).[3] The Endorsed Note attached an allonge dated July 24, 2007 evidencing a transfer from Original Lender to “IndyMac Bank, FSB” and bore an endorsement in blank from IndyMac Bank F.S.B. OneWest argued in connection therewith that it had enforcement rights under the Endorsed Note as a holder notwithstanding the admittedly accurate testimony at trial indicating that OneWest is a servicer for Freddie Mac and not the secured creditor. The OneWest post-trial memorandum also references a separate agreement with Freddie Mac, but fails to further evidence or discuss this agreement. The OneWest post-trial memorandum, finally, bases a standing argument on physical possession of the Endorsed Note and OneWest’s alleged status as a trust deed beneficiary based on the Assignment.


But, there are key assumptions that the Court must make in order for this set of facts to withstand scrutiny. And they are that OneWest, in fact, holds the Endorsed Note and held the Endorsed Note at all appropriate points in time. Frankly, the Court is not willing to make such assumptions at this time. OneWest attached the Unendorsed Note to both its Proof of Claim and the Declaration. The Declaration stated under penalty of perjury, that the Unendorsed Note was a true and accurate copy of the Note held by OneWest. The Proof of Claim implicitly stated the same and OneWest, of course, is obligated to provide only accurate information in connection with its Proof of Claim. The problem is that the Unendorsed Note does not bear the endorsement or attach the allonge found on the Endorsed Note, a document produced only after trial and the close of evidence. One West, thus, leaves the Court with the quandary of guessing which promissory note OneWest holds, whether and when One West held the Endorsed Note, and what the explanation is for the failure to provide the Endorsed Note prior to the close of evidence.[10]

A further evidentiary anomaly arises on account of the Assignment; MERS executed this document as a nominee for the Original Lender. But the allonge to the Endorsed Note makes clear that the Original Lender assigned its interests in the Note more than three years prior to execution of the Assignment. And rights under the Trust Deed follow the Note. Polhemas v. Trainer, 30 Cal. 686, 688 (1866). Thus, MERS’ purported assignment of the Trust Deed and the related note as nominee for the Original Lender and without a reference to either IndyMac Bank, FSB or Freddie Mac appears designed to disguise rather than to illuminate the facts.

And finally, even if OneWest’s second post-trial discussion of standing and submission of evidence were accurate, one thing remains clear: OneWest failed to tell the true and complete story in the OneWest Declaration and in the Claim.

The Court is concerned, as a result, that OneWest does not hold the Endorsed Note. But, perhaps more significantly, the Court is concerned that OneWest has determined that business expediency and cost containment are more important than complete candor with the courts. On these points, Ms. Arizmendi has a right to be heard, and the Court has a right to explanation.

Further, this is not the first time that OneWest has provided less than complete information in the Southern District of California. See “Memorandum Decision Re Motion to Vacate Clerk’s Entry of Default and Motion to Dismiss Complaint; Order to Show Cause for Contempt of Court”, docket no. 39, Adv. Pro. 10-90308-MM (In re Doble; Bk. Case No. 10-11296) (Defendants, including OneWest, were neither candid nor credible in explaining failure to respond timely to complaint and submitted multiple and different notes as “true and correct”); “Order to Show Cause Why OneWest Bank, FSB and Its Attorneys Law Offices of Randall Miller and Christopher Hoo Should Not Appear Before the Court to Explain Why They Should Not Be Held in Contempt or Sanctioned”, docket no. 47, In re Carter, Bk. Case No. 10-10257-MM13 (among other things OneWest provides inconsistent evidence as to its servicer status); and “Order After Hearing to Show Cause Why Indymac Mortgage Services; OneWest Bank, FSB; Randall S. Miller & Associates, P.C.; Christopher J. Hoo; Barrett Daffin Frappier Treder & Weiss, LLP; and Darlene C. Vigil Should Not Appear Before the Court to Explain Why They Should Not Be Held in Contempt or Sanctioned”, docket no. 47, In re Telebrico, Bk. No. 10-07643-LA13 (Court concerned that OneWest provided evidence that was either intentionally or recklessly false).

The curious thing about these cases is that OneWest likely would prevail in each of them if it completely and candidly explained the basis for its motion and its standing in connection therewith. Undoubtedly, however, doing so is more costly than using a form declaration that is not customized as to the facts on a case by case basis and that is signed by an uninformed declarant. OneWest perhaps assumes that it really does not matter if the Court provides relief based on erroneous information. But, OneWest should remember an earlier theme in this decision and that is that the law is the law, rules are rules, and both must be obeyed. And, when it becomes clear that OneWest did not obey the rules, the Court can and, indeed, must act.

In short, the Court will not participate in a process where OneWest increases its profits by disobeying the rules of this Court and by providing the Court with erroneous information. The Court, thus, will take two steps. First, the Court will deny the Stay Motion without prejudice based first on the evidentiary problems that make it impossible for the Court to determine that OneWest is properly before the Court and that render evidence critical to OneWest’s prima facie case unreliable and second based on the Court’s inherent authority to regulate and control proceedings. Next, the Court hereafter will issue an order to show cause why One West should not be held in contempt and/or otherwise sanctioned. In connection therewith, the Court will consider a compensatory sanction to include a recovery of any costs Ms. Arizmendi would not have incurred but for OneWest’s improper actions. The compensatory sanction, frankly, could be quite limited. But, the Court also believes that a coercive sanction may well be appropriate. Given the orders to show cause that pre-date the one this Court will issue, it appears that the Court must create an economic disincentive for OneWest that will counter balance the economic benefit of a lack of complete candor. Further detail on the Court’s sanctions considerations will be set forth in the order to show cause and will not be further discussed here.

The Court finally notes that the order to show cause will issue only as to OneWest and possibly as to MERS. OneWest uses a variety of law firms. The Court was in a position to observe the demeanor of the lawyers handling this matter when the witness stated that OneWest was a mere servicer. The Court concludes based on this observation that they were unaware of this fact and unaware that OneWest supplied questionable documentary evidence. And frankly, there is nothing to be gained in pursuing the individual attorneys who must regularly appear in front of this Court. OneWest can simply change counsel and then be less than candid with a new set of attorneys.[11] The Court is interested in modifying OneWest’s behavior at an entity level, and any coercive sanction will be designed to achieve the same.


Based on the foregoing, the Stay Motion is denied without prejudice to the right of OneWest to refile a stay relief motion. In so doing, OneWest must provide declaratory evidence that explains when and how it obtained physical possession of the Endorsed Note and/or Unendorsed Note and that otherwise provides case specific evidence of standing given its servicer status.




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27 official signing positions, employed by law firm but still no sanctions because pretender dismissed before court could act

Editor’s Comment: Note Judge Mark Polen’s dissent. He is the only one on the court willing to look through the proceedings to the heart of the administration of justice, citing his predecessor, Judge Farmer, who came to the same conclusion. The court concedes that IndyMac and the the lawyers were engaged in a fraudulent scheme but says that because they didn’t get far enough to obtain any relief, the homeowner can’t do anything about it. This puts the homeowner in the ridiculous position of being required to wait for an adverse decision against himself before he can attack the pretender lender for perpetrating a fraud on the court. Is this Court serious?

For pretender lenders they have a clear path — use fraud to get to foreclosure unless you get caught, in which case, dismiss the action and say “no harm, no foul.” The 4th DCA is inviting more fraud on the court while at the same time, missing an opportunity to stop illegal foreclosures and the corruption of Florida’s title registry. They blew it. And the question they asked (certified) to the Supreme Court) while technically correct should have been accompanied by a certified question that addresses the substance of fraudulent foreclosures, and their effect on the the State and County in which the property is located. Right now, the 4th DCA’s opinion is that these houses are fair game unless (1) the pretender actually wins some hearing and (2) the homeowners contests the foreclosure. That cannot be right as it leads to uncertainty in the marketplace and a loss of confidence in the title registry.

If a party engages in fraud  on the court — which is to say — intentionally submits false pleadings and exhibits — that party MUST be subject to sanctions upon discovery of the fraud, whether they were partially successful thus far or not. To decide otherwise literally invites fraud upon the court, since so many of these foreclosures, most of which are fraudulent, are being rubber stamped because of the lack of a contested position by the homeowner. Every time that happens, the title system is corrupted, uncertainty is  forced into the marketplace where houses are bought and sold, and blatant contempt of court is rewarded.

Christina Bandysays:

January Term 2011


No. 4D10-378
[February 2, 2011]
The defendant in a mortgage foreclosure action filed by BNY Mellon appeals a trial court’s denial of his motion under Florida Rule of Civil Procedure 1.540(b) to vacate a voluntary dismissal. The notice was filed after the defendant moved for sanctions against the plaintiff for filing what he alleged was a fraudulent assignment of mortgage. Because the notice of voluntary dismissal was filed prior to the plaintiff obtaining any affirmative relief from the court, we affirm the trial court’s order.

BNY Mellon commenced an action to foreclose a mortgage against the defendant. The mortgage attached to the complaint specified another entity, Silver State Financial Systems, as lender and still another, Mortgage Electronic Registration Systems, as mortgagee. The complaint alleged that BNY Mellon owned and held the note and mortgage by assignment, but failed to attach a copy of any document of assignment. At the same time, it alleged the original promissory note itself had been “lost, destroyed or stolen.” The complaint was silent as to whether the note had ever been negotiated and transferred to BNY Mellon in the manner provided by law.1

The defendant initially sought dismissal for failure to state a cause of action, arguing that in light of the claim of a lost instrument, the absence of an 1 See § 673.2011(2), Fla. Stat. (2010) (if instrument is payable to an identified person “negotiation requires transfer of possession of the instrument” and endorsement by holder).

Assignment of mortgage was a critical omission. BNY Mellon responded by amending the complaint only to attach a new unrecorded assignment, which happened to be dated just before the original pleading was filed.

In response to this amendment, defendant moved for sanctions. He alleged that the newly produced document of assignment was false and had been fraudulently made; pointing to the fact that the person executing the assignment was employed by the attorney representing the mortgagee, and the commission date on notary stamp showed that the document could not have been notarized on the date in the document. The defendant argued that the plaintiff was attempting fraud on the court and that the court should consider appropriate sanctions, s u c h as dismissal of the action with prejudice. Concurrent with the filing of this motion, the defendant scheduled depositions of the person who signed the assignment, the notary, and the witnesses named on the document — all employees of Florida counsel for BNY Mellon — for the following day. Before the scheduled depositions, BNY Mellon filed a notice of voluntary dismissal of the action.

Five months later, BNY Mellon refiled an identical action to foreclose the same mortgage. The new complaint no longer claimed the note was lost and attached a new assignment of mortgage dated after the voluntary dismissal. In the original, dismissed action, the defendant filed a motion under rule 1.540(b), seeking to strike the voluntary dismissal in the original action on the grounds of fraud o n the court and for a dismissal of the newly filed action as a consequent sanction, requesting an evidentiary hearing. The trial court denied the motion without an evidentiary hearing, essentially holding that, because the previous action had been voluntarily dismissed under rule 1.420, the court lacked jurisdiction and had no authority to consider any relief under rule 1.540(b).

We affirm the trial court’s refusal to strike the notice of voluntary dismissal. Neither rule 1.540(b) nor the common law exceptions to that rule allow a defendant to set aside the plaintiff’s notice of voluntary dismissal where the plaintiff has not obtained any affirmative relief before dismissal.

Rule 1.420(a) permits a plaintiff to dismiss an action without order of the court “at any time” before a motion for summary judgment is heard or before retirement of the jury or submission to the court if the matter is tried non-jury. “Our courts have consistently construed this rule as meaning that, at any time before a hearing o n a motion for summary judgment, a party seeking affirmative relief has nearly an absolute right to dismiss his entire action once, without a court order, by serving a notice of dismissal.” Ormond Beach Assocs. Ltd. v. Citation Mortg., Ltd., 835 So. 2d 292, 295 (Fla. 5th DCA 2002); see also Meyer v. Contemporary Broadcasting Co., 207 So. 2d 325, 327 (Fla. 4th DCA1968). The courts have carved out narrow exceptions to this entitlement:

The only recognized common law exception to the broad scope of this rule is in circumstances where the defendant demonstrates serious prejudice, s u c h as where he is entitled to receive affirmative relief or a hearing and disposition of the case on the merits, has acquired some substantial rights in the cause, or where dismissal is nequitable. See Romar Int’l, Inc. v. JimRathman Chevrolet/Cadillac, Inc., 420 So. 2d 346 (Fla. 5th DCA 1982); Visoly v. Bodek, 602 So. 2d 979 (Fla. 3d DCA 1992).

Ormond, 835 So. 2d at 295. In Visoly, the court granted a motion to strike the complaint as a sham. Finding that rule 1.150(a) operated much like a motion for summary judgment, the court concluded that the plaintiff could not voluntarily dismiss his complaint pursuant to rule 1.420(a) where the trial court had granted the motion to strike, which was equivalent to the granting of a motion for summary judgment.
The most applicable common law exception to the right to a voluntary dismissal was applied in Select Builders of Florida, Inc. v. Wong, 367 So. 2d 1089 (Fla. 3d DCA 1979). There, the court affirmed the trial court’s striking of a notice of voluntary dismissal where the plaintiff sought to perpetrate a fraud by the filing of the notice of voluntary dismissal. Select Builders had filed suit to expunge an injunction against a condominium developer, granted in Federal Court in Illinois, and improperly filed in the public records of Dade County.

The trial court issued an order expunging the document and enjoining the filing of any other like documents without domesticating the judgment in Florida. Later, it was discovered that Select Builders had perpetrated a fraud upon the court in obtaining the order expunging the document. The trial court vacated its prior order, and the Apelles moved for sanctions and fees. The court also ordered Select Builders to take steps to preserve the status quo and to make payment of monies it received in connection with the sale of some of the property subject to the injunction to a third party. Select Builders then filed a notice of voluntary dismissal, which the trial court struck to retain Jurisdiction over the case.

The appellate court affirmed, concluding that the court correctly retained jurisdiction to prevent a fraud on the court. “The plaintiff had obtained the affirmative relief it sought, its actions in the cause in the trial court may have been fraudulent on the court and it certainly was within its inherent power (as an equity court) to protect its integrity.” Id. at 1091. The court distinguished other cases in which the plaintiff’s right to take a voluntary dismissal was deemed absolute: “First, the plaintiff in the cited cases had not received affirmative relief from an equity court and, secondly, no question of fraud on the court was involved.” Id.

In Select Builders the plaintiff obtained affirmative relief by the granting of the suspect injunction, and it had obtained such relief by fraud. Comparing the facts of Select Builders to this case, we find that the BNY Mellon had not obtained any type of affirmative relief. Even if the assignment of mortgage was “fraudulent” in that it was not executed by the proper party, it did not result in any relief in favor of BNY Mellon. Select Builders is thus distinguishable from the present case. In Bevan v. D’Alessandro, 395 So. 2d 1285, 1286 (Fla. 2d DCA 1981), the court likewise distinguished Select Builders on the grounds that the “plaintiff had received affirmative relief to which he was not entitled and sought to avoid correction of the trial court’s error by taking a voluntary dismissal.” No such circumstance is present in this case.

The appellant argues that rule 1.540(b) also provides a method to seek relief from a notice of voluntary dismissal. We disagree that the defendant/appellant may utilize that rule where the defendant has not been adversely affected by the voluntary dismissal. Rule 1.540(b) allows a court to relieve a party from a “final judgment, decree, order, or proceeding” based upon any of five grounds set out in the rule: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud or other misconduct of an adverse party; (4) that the judgment or decree is void; or (5) that the judgment or decree has been satisfied or released. A notice of voluntary dismissal constitutes a “proceeding” within the meaning of the rule. See Miller v. Fortune Ins. Co., 484 So. 2d 1221, 1224 (Fla. 1986). Therefore, the rule may be invoked, even though for all other purposes the trial court has lost jurisdiction over the cause. Id. Indeed, in Shampaine Industries, Inc. v. South Broward Hospital District, 411 So. 2d 364, 368 (Fla. 4th DCA 1982), approved by the supreme court in Miller, we held: “Rule 1.540(b) may be used to afford relief to all litigants who can demonstrate the existence of the grounds set out in the Rule.”

The rule, however, is limited to relieving a party of a judgment, order or proceeding. “Relieve” means “[t]o ease or alleviate (pain, distress, anxiety, need, etc.) . . . to ease (a person) of any burden, wrong, or oppression, as by legal means.” The Random House Dictionary of the English Language 1212 (1967). A defendant may obtain such relief” when a plaintiff has obtained a ruling that has adversely impacted the defendant. Here, the defendant has not been adversely impacted by a ruling of the court. The fact that a defendant may have incurred attorney’s fees and costs is not an adverse impact recognized as meriting relief. See Serv. Experts, L L C v. Northside Air Conditioning & Elec. Serv. Inc., 2010 WL 4628567 (Fla. 2d DCA 2010). Therefore, because the defendant has not suffered an adverse ruling or impact from the notice of voluntary dismissal, he is not entitled to seek relief pursuant to the rule.

The dissent is certainly correct that a court possesses the authority to protect judicial integrity in the litigation process. However, the cases cited in support of a court exercising such authority all involved the court granting a motion for involuntary dismissal where the plaintiff had engaged in deceitful conduct during a still pending case. See Ramey v. Haverty Furn. Co., 993 So. 2d 1014, 1020 (Fla. 2d DCA 2008); McKnight v. Evancheck, 907 So. 2d 699, 700 (Fla. 4th DCA 2005); Morgan v. Campbell, 816 So. 2d 251, 253 (Fla. 2d DCA 2002). In each of those proceedings, the defendant moved for the sanction of dismissal of an ongoing proceeding based upon “fraud on the court.” That term has been described as follows:

A “fraud on the court” occurs where it can be demonstrated, clearly and convincingly, that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system’s ability impartially to adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party’s claim or defense.

Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1118 (1st Cir. 1989). Dismissal is a remedy to be used only in the most extreme cases, as “[g]enerally speaking …allegations of inconsistency, nondisclosure, and even falseness, are best resolved by allowing the parties to bring them to the jury’s attention through cross examination or impeachment, rather than by dismissal of the entire action.” Granados v. Zehr, 979 So. 2d 1155, 1158 (Fla. 5th DCA 2008) (emphasis added).

Here, we do not view it as an appropriate exercise of the inherent authority of the court to reopen a case voluntarily dismissed by the plaintiff simply to exercise that authority to dismiss it, albeit with prejudice. Only in those circumstances where the defendant has been seriously prejudiced, as noted in Romar International, should the court exercise its inherent authority to strike a notice of voluntary dismissal. The defendant in this case does not allege any prejudice to him as a result of the plaintiff’s voluntary dismissal of its first lawsuit. Indeed, he may have benefitted by forestalling the foreclosure.

The appropriate procedure is to follow Rule 1.420. Upon the voluntary dismissal, Pino would be entitled to his costs and possibly his attorney’s fees. See Fleet Servs. Corp. v. Reise, 857 So. 2d 273 (Fla. 2d DCA 2003). The court can require payment as a precondition to the second suit. See Fla. R. Civ. P. 1.420(d). Moreover, a referral of the appellee’s attorney for a violation of the Code of Professional Responsibility for filing the complaint with the alleged false affidavit is in order. We conclude that this is a question of great public importance, as many, many mortgage foreclosures appear tainted with suspect documents. The defendant has requested a denial of the equitable right to foreclose the mortgage at all. If this is an available remedy as a sanction after a voluntary dismissal, it may dramatically affect the mortgage foreclosure crisis in this State. Accordingly we certify the following question to the Florida Supreme Court as of great public importance:



JJ., concur.
HAZOURI, J., recused.
POLEN, J., dissents with opinion.
POLEN, J., dissenting.2

Rule 1.420(a)(1) allows a plaintiff to voluntarily dismiss a case simply by serving a notice at any time before trial or hearing on summary judgment. Initially in Randle-Eastern Ambulance Service v. Vasta, 360 So. 2d 68 (Fla. 1978), the court held that such a dismissal took the case out of the power of the court for all purposes, explaining:

“The right to dismiss one’s own lawsuit during the course of trial is guaranteed by Rule 1.420(a), endowing a plaintiff with unilateral authority to block action favorable to a defendant which the trial judge might be disposed to approve. The effect is to remove completely from the court’s consideration the power to enter a n order, equivalent in all respects to a deprivation of ‘jurisdiction’. If the trial judge loses the ability to exercise judicial discretion or to adjudicate the cause in any way, it follows that he has no jurisdiction to reinstate a dismissed proceeding. The policy reasons for this consequence support its apparent rigidity.”

2 This dissent was actually written by Judge Gary M. Farmer, who retired from this court December 31, 2010. As Judge Farmer can no longer participate in this matter, and since I concurred with his proposed dissent, I now adopt in total his writing. Although I thoroughly agree with this dissent, I want the record to reflect that the words are those of Judge Farmer.
360 So. 2d at 69. But later in Miller v. Fortune Insurance Co., 484 So. 2d 1221(Fla. 1986), the court retreated from its statement in Randle-Eastern Ambulance about the “remov[ing the cause] completely from the court’s consideration the power to enter an order.” Instead the Miller court specified a n exception in rule 1.540(b) to the complete loss of jurisdiction from a voluntary dismissal:

“A trial judge is deprived of jurisdiction, not by the manner in which the proceeding is terminated, but by the sheer finality of the act, whether judgments, decree, order or stipulation, which concludes litigation. Once the litigation is terminated and the time for appeal has run, that action is concluded for all time. There is one exception to this absolute finality, and this is rule 1.540, which gives the court jurisdiction to relieve a party from the act of finality in a narrow range of circumstances.” [e.s.]

484 So. 2d at 1223. Miller explicitly held that “that Rule 1.540(b) may be used to afford relief to all litigants who can demonstrate the existence of the grounds set out under the rule.”3 In this case, defendant contends that the court had authority here to consider his motion for relief on the merits because he asserted a specific basis authorized by rule 1.540(b).

Rule 1.540(b)(3) provides:

“On motion and upon such terms as are just, the court may relieve a party … from a final judgment, decree, order, or proceeding for …fraud (whether … intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party.” [e.s.]

In Select Builders of Florida v. Wong, 367 So. 2d 1089 (Fla. 3d DCA 1979), the
Third District agreed that rule 1.540(b) affords a basis to strike a notice of voluntary dismissal filed to avoid sanctions for relief from the dismissal on account of fraudulent conduct. In explaining its decision, the court noted that in that instance “plaintiff had obtained the affirmative relief it sought, its actions in the cause in the trial court may have been fraudulent on the court and it certainly was within its inherent power (as an equity court) to protect its integrity.” 367 So. 2d at 1091. I do not read Select Builders to explicitly hold that “affirmative relief” is required to establish grounds under rule 1.540(b) for 3 484 So.2d at 1224 (citing Shampaine Indus. v. S. Broward Hosp. Dist., 411 So. 2d 364 (Fla. 4th DCA 1982)). Relief from a voluntary dismissal done to prevent examination into an attempted fraud on the court.4

In U.S. Porcelain, Inc. v. Breton, 502 So. 2d 1379 (Fla. 4th DCA 1987), we tacitly recognized the Select Builders exception but found it inapplicable where “[t]here are no findings nor conclusions in this case of fraud, deception, irregularities, nor any misleading of the court.” 502 So. 2d at 1380. Our agreement with the holding in Select Builders evinces no attempt to narrow the exception to traditional common law fraud, indeed adding as other forms of fraudulent conduct “deception, irregularities, []or any misleading of the court.” [e.s.]

The fact that the fraud exception applied in Select Builders is now commonly recognized as valid under Miller v Fortune Insurance is seen in the following exposition on the subject from the standard Florida legal encyclopedia:

“In exercising its inherent power to protect its integrity, the trial court is authorized to reinstate a matter and retains jurisdiction over the cause, in order to prevent a fraud on the court, where it appears the plaintiff has perpetrated fraud upon the court to obtain a voluntary dismissal. The original jurisdiction over the dismissed cause first acquired continues for the purpose of entertaining and deciding all appropriate proceedings brought to reopen the case, either by means of an independent equity suit directed against the fraudulently induced order or judgment to have it set aside or by means of a direct motion filed in the case itself praying that the order of dismissal be vacated and the cause returned to the docket of pending cases.”

1 FLA.JUR.2D, Actions § 231 (citing Select Builders); see also Roger A. Silver, The Inherent Power Of The Florida Courts, 39 U. MIAMI L. REV. 257, 287 (1985) (“Florida courts have…inherent power…to strike a voluntary dismissal” (citing Select Builders)); Henry P. Trawick Jr., TRAWICK’S FLORIDA PRACTICE & PROCEDURE § 21:2 (citing Select Builders); 25 TRIAL ADVOCATE QUARTERLY 22, 23 (discussing Select Builders). All the texts base the court’s authority to grant relief on the inherent power of the judges to protect the integrity of the court system in the litigation process.

In opposing defendant’s motion for relief under rule 1.540(b), BNY Mellon relies on Bevan v. D’Alessandro, 395 So. 2d 1285 (Fla. 2d DCA 1981). There the court recognized the fraud exception to the voluntary dismissal rule but held it inapplicable where plaintiff did not obtain any relief and the act of filing

See also Romar Int’l v. Jim Rathman Chevrolet/Cadillac, Inc., 420 So. 2d 346, 347 (Fla. 5th DCA 1982) (recognizing “narrow exception exists where a fraud on the court is attempted [e.s.] by the filing of the voluntary dismissal”).

The voluntary dismissal did not actually rise to the level of a fraud on the court.5 BNY Mellon argued that, similarly, it had obtained no relief or benefit at that point in the action from the filing of the revised assignment. In denying defendant’s motion for relief under rule 1.540(b), the trial judge appeared to rely heavily on Bevan and that argument of BNY Mellon. Curiously neither Bevan nor BNY Mellon makes any attempt to argue why, as a matter of simple jurisprudence, courts should b e precluded from scrutinizing the use of a voluntary dismissal after a n unsuccessful attempt to deceive, mislead or defraud a court by producing and filing spurious documents and instruments on which to base a claim in suit.

It is apparent to me that BNY Mellon actually did achieve some benefit by its dismissal. In voluntarily dismissing the case at that point, it thereby avoided the scheduled depositions of the persons who might have direct knowledge of an attempted fraud on the court. In fact, it is fair to conclude that the only purpose in dismissing was to shelter its agents from having to testify about the questionable documents. It continued to use the voluntary dismissal to stop the trial court from inquiring into the matter, arguing the absence of jurisdiction to do so. To the extent that Miller v Fortune Insurance can be read to require, as a precondition to relief under rule 1.540(b) from a voluntary dismissal, that the false document benefited the filer in some way, we conclude that any necessary benefit has been shown in this case.

Nor do I find the recent decision in Service Experts LLC v. Northside Air Conditioning & Electric Services, 2010 WL 4628567 (Fla. 2d DCA Nov. 17, 2010), apposite to the issue in this case. There, plaintiff filed a voluntary dismissal of the action “after almost two years of litigation, after [defendants] served offers of judgment, after the close of discovery and after [defendants] moved for summary judgment.” 2010 WL 4628567 at *1. Defendants moved under rule 1.4206 to strike the voluntary dismissal, arguing that earlier in the case plaintiff had filed “fraudulent affidavits.” The trial court did not determine whether a fraud on the court had occurred. Instead it found that defendants had satisfied the common law exception to rule 1.420 allowing for voluntary dismissals by showing they “acquired substantive rights in the outcome of [the] matter by the filing of the motion for summary judgment, by making offers of judgment and by setting forth convincing allegations of fraud, all of which would be lost if the dismissal without prejudice were allowed to stand.” 2010 5 We note that Bevan was decided several years before the supreme court decided Miller v. Fortune Insurance.

6 Defendants said that their motion to strike the notice of voluntary dismissal was not made under rule 1.540 because that rule applies to final judgments, decrees, orders, or proceedings, and the voluntary dismissal they sought to set aside was not a final judgment, decree, or order. The Second District agreed with that “procedural assessment.”

WL 4628567 at *1. Accordingly, it gave the parties the option of going to trial or scheduling an evidentiary hearing on whether there had actually been any fraud on the court. Plaintiff thereupon appealed that order on the grounds that it infringed its right of voluntary dismissal. Because Service Experts is obviously based solely on rule 1.420, rather than on a showing of fraud for relief under rule 1.540(b), it is not dispositive of the issue presented in this case.

But, in any event, I disagree with Select Builders, Bevan and Service Experts to the extent of any holding that affirmative relief or even some other benefit is necessary for relief from a voluntary dismissal filed after an attempted fraud on the court has been appropriately raised. Nothing in the logic of Miller v.Fortune Insurance allowing rule 1.540(b) to b e used to avoid a voluntary dismissal on the grounds of fraud requires that such fraud must actually achieve its purpose. The purpose served by punishing a fraud on a court does not lie in an indispensable precondition of detrimental reliance — i.e., in
successfully deceiving a court into an outcome directly resulting from fraud — but in the mere effort itself to try to use false and fraudulent evidence in a court proceeding.7 As with criminal law, where the failed attempt itself is an offense punished by law,8 the power of courts to grant relief from presenting false or fraudulent evidence and imposing sanctions is not confined solely to instances when fraud directly results in an unjust, erroneous judgment.

Indeed there are a number of reported decisions by Florida courts imposing sanctions on a party presenting false or fraudulent evidence without any affirmative relief or a final determination on the merits. See, e.g., Ramey v.Haverty Furn. Co., 993 So. 2d 1014, 1019 (Fla. 2d DCA 2008) (upholding sanction of dismissal for misrepresentations in discovery about prior medical treatment “directly related to the central issue in the case”); McKnight v.Evancheck, 907 So. 2d 699, 700 (Fla. 4th DCA 2005) (affirming dismissal for 7 See Lance v. Wade, 457 So. 2d 1008, 1011 (Fla. 1984) (common law fraud requires showing that defendant deliberately and knowingly made false representation actually causing detrimental reliance by the plaintiff); see also Palmas y Bambu, S.A. v. E.I. DuPont de Nemours & Co., 881 So. 2d 565, 573 (Fla. 3d DCA 2004) (when fraudulent misrepresentation is alleged direct causation can be proved only by establishing detrimental reliance).

8 See § 777.04(1), Fla. Stat. (2010) (criminalizing and punishing attempts to commit an offense prohibited by law even though the accused fails in the perpetration or is intercepted or prevented in the execution thereof); see also § 817.54 Fla. Stat. (2010) (Third degree felony to — with intent to defraud — “obtain [] the signature of any person to any mortgage, mortgage note, promissory note or other instrument evidencing a debt by color or aid of fraudulent or false representation or pretenses, or obtain[] the signature of any person to a mortgage, mortgage note, promissory note, or other instrument evidencing a debt, the false making whereof would be punishable as forgery”).

Fraud on the court where trial court found plaintiff “lied about his extensive medical history, which had a direct bearing on his claim for damages”); Morgan v. Campbell, 816 So. 2d 251, 253 (Fla. 2d DCA 2002) (false testimony in discovery “directly related to the central issue in the case”). We are hard pressed to distinguish in substance the imposition of sanctions in those cases from the one at hand.

One federal appellate decision makes the point well. In Aoude v. Mobil Oil Corp., 892 F.2d 1115 (1st Cir.1989), the plaintiff filed a complaint based upon a bogus contract and attached that bogus document to its complaint. When the defendant became aware of the falsity of the contract sued upon, it moved to dismiss the case for the attempted fraud on court. The trial court granted the motion. When plaintiff later refilled its claim and attached the real contract, defendant again moved to dismiss, arguing that the dismissal of the first case barred the claim permanently. The trial court again granted the motion. The court of appeals affirmed both holdings. In an appeal plaintiff argued that the attempted fraud arising from the use of the bogus agreement had no effect ultimately on defendant’s ability to litigate the case or on the court’s ability to make a just decision on the merits. The court rejected the argument on appeal that the attempt to defraud the court had failed and thus could escape punishment, responding:

“The failure of a party’s corrupt plan does not immunize the defrauder from the consequences of his misconduct. When [plaintiff] concocted the agreement, and thereafter when he and his counsel annexed it to the complaint, they plainly thought it material. That being so, ‘[t]hey are in no position now to dispute its effectiveness.’ ” 892 F.2d at 1120.

So, too, BNY Mellon’s attempt to allege and file the assignment of the mortgage was undeniably based on a belief in the necessity for — and the materiality of — a valid assignment of mortgage. Defendant’s colorable showing of possible fraud in the making and filing of the assignment led to the scheduling of the depositions of those involved in making the document and the notice of depositions led directly to the voluntary dismissal to avoid such scrutiny for an attempted fraud. As Aoude forcefully makes clear, a party should not escape responsibility and appropriate sanctions for unsuccessfully attempting to defraud a court by purposefully evading the issue through a voluntary dismissal.

This issue is one of unusual prominence and importance. Recently, the Supreme Court promulgated changes to a rule of procedure made necessary by the current wave of mortgage foreclosure litigation. See In re Amendments to Rules of Civil Procedure, 44 So. 3d 555 (Fla. 2010). In approving one amendment, the court pointedly explained:

“[R]ule 1.110(b) is amended to require verification of mortgage foreclosure complaints involving residential real property. The primary purposes of this amendment are (1) to provide incentive for the plaintiff to appropriately investigate and verify its ownership of the note or right to enforce the note and ensure that the allegations in the complaint are accurate; (2) to conserve judicial resources that are currently being wasted o n inappropriately pleaded ‘lost note’ counts a n d inconsistent allegations; (3) to prevent the wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note; and (4) to give trial courts greater authority to sanction plaintiffs who make false allegations.” [e.s.]

44 So. 3d at 556. I think this rule change adds significant authority for the court system to take appropriate action when there has been, as here, a colorable showing of false or fraudulent evidence. We read this rule change as an important refutation of BNY Mellon’s lack of jurisdiction argument to avoid dealing with the issue founded on inapt procedural arcana.

Decision-making in our courts depends on genuine, reliable evidence. The system cannot tolerate even an attempted use of fraudulent documents and false evidence in our courts. The judicial branch long ago recognized its responsibility to deal with, and punish, the attempted use of false and fraudulent evidence. When such an attempt has been colorably raised by a party, courts must be most vigilant to address the issue and pursue it to a resolution.

I would hold that the trial judge had the jurisdiction and authority to consider the motion under rule 1.540(b) on its merits and — should the court find that a party filed a false and fraudulent document in support of its claim — to take appropriate action, including (without limitation) the striking of a voluntary dismissal filed in aid of such conduct.
* * *
Appeal of a non-final order from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Meenu Sasser, Judge; L.T. Case No. 50 2008 CA 031691 XXXXMB.

Enrique Nieves III and Chris T. Immel of Ice Legal, P.A., West Palm Beach, for appellant.

Nancy M. Wallace, Katherine E. Giddings and William P. Heller of Akerman
Senterfitt, Tallahassee and Fort Lauderdale, for appellee.
Not final until disposition of timely filed motion for rehearing.


I did not realize an IMPORTANT part of the Agreement ‘definitions’ of participants did not get copied into the posting and are related to your question.

IndyMac Bancorp Inc. (Registrant)
Closely Related (4):
•Indymac Capital Trust I – SEC# 1157668 6/10/04
•Indymac Capital Trust II – SEC# 115670 6/30/06
•Indymac Capital Trust III – SEC# 1157671 – 6/30/06
•Indymac Capital Trust IV – SEC# 1157669 6/30/06
Formerly Assigned On
Indymac Mortgage Holdings Inc. 6/2/98
Inmc Mortgage Holdings Inc 8/13/97
CWM Mortgage Holdings Inc 10/25/94
Countrywide Mortgage Investments Inc/DE
7/3/92: Address: 888 East Walnut Street
Pasadena, California 91101-7211 U.S.A.

SEC CIK # 6035 Savings Institutions, Federally Chartered
SEC 8/7/08
6798 Real Estate Investment Trusts
SEC 2/12/01

Jurisdiction: Delaware, U.S.A.
IRS: 95-3983415

“CMI” shall refer to Countrywide Mortgage Investments, Inc.

“MLGSI” shall refer to Merrill Lynch Government Securities Inc.

“MLMCI” shall refer to Merrill Lynch Mortgage Capital Inc.

“PMI” shall refer to PMI Mortgage Insurance Co.

“Qualified Insurer” shall refer to GEMICO, PMI or UGI.

“UGI” shall refer to United Guaranty Insurance Company.

“VA” shall refer to the Department of Veterans Affairs.

“Agency” shall refer to GNMA, FNMA or FHLMC, as the case may be.

•Government National Mortgage Association (“GNMA”)

•Federal National Mortgage Association (“FNMA”)

•Federal Home Loan Mortgage Corporation (“FHLMC”)

Nonconforming mortgage loans are loans which do not qualify for purchase by the Federal Home Loan Mortgage Corporation (“FHLMC”) or the Federal National Mortgage Association (“FNMA”) or for inclusion in a loan guarantee program sponsored by above referenced agencies.

Nonconforming mortgage loans generally consist of jumbo mortgage loans or loans which are not originated in accordance with other agency criteria

Agency Security” shall refer to a GNMA Security, a FNMA Security or a FHLMC Security.

“Approvals” shall refer to the approvals of FHLMC, FNMA and GNMA described in Paragraph 13(c)(ii) of these Supplemental Terms.

“Bank” shall refer to The First National Bank of Chicago.

“Business Day” shall mean any day excluding Saturday, Sunday and any day on which banks located in the States of New York or California are authorized or permitted to close for business. All references to “business day” in
the Master Repurchase Agreement shall be deemed to be references to
Business Day.

“MLMCI’s Margin Amount” shall have the meaning set forth in the Master
Repurchase Agreement except that the percentage referred to therein for
each Transaction shall be specified in the related Confirmation/Funding

“Cash Purchase Price” shall refer the cash price, and to the corresponding
cash proceeds, to be paid by an Agency, under its cash purchase program,
for Mortgage Loans sold by a Qualified Originator that are the subject of a

“Closing Agent” shall refer to a title company, closing attorney or other
agent that disburses funds on behalf of a Qualified Originator in
connection with the origination of a Mortgage Loan; each such title
company, closing attorney or other agent must be acceptable to MLMCI in its
sole discretion.

“Collateral Submission Summary” shall refer to the Collateral Submission
Summary substantially in the form attached as an exhibit to the Custody

“Commitment/Certificate of Insurance” shall refer to the
Commitment/Certificate of Insurance issued by a Qualified Insurer with
respect to each Mortgage Loan and held by the Custodian pursuant to the
Custody Agreement.

“Commitment Number” shall mean the commitment number provided by a
Qualified Originator to CMI, and communicated by CMI to the Custodian, with
respect to a Mortgage Loan indicating that such Mortgage Loan has either
been designated (i) to be included in a pool of Agency Mortgage Loans
backing an Agency Security, (ii) for sale to an Agency under an Agency
purchase program or (iii) to be included in a pool of Non-Agency Mortgage
Loans to be sold to a Trade Investor.

“Confirmation/Funding Request” shall have the meaning of “Confirmation” as
set forth in the Master Repurchase Agreement but shall be substantially in
the form attached hereto as Exhibit B, in the case of Agency Mortgage Loans
intended to back an Agency Security, Exhibit C in the case of Non-Agency
Mortgage Loans and Exhibit D in the case of Agency Mortgage Loans that are
not intended to back an Agency Security.

“Custody Agreement” shall refer to the Custody Agreement, dated as of
October 1, 1993, by and among MLMCI, CMI, the Bank and the Custodian named
therein, as the same may be modified and amended from time to time.

“Custodian” shall refer to the custodian named in the Custody Agreement.

10K 12/31/93 Indymac Bancorp Inc. Filed 3/29/94 SEC File 1-08972 Accession Number 898430-94-223

Jurisdiction DE, 95-3983415 IRS ID#
Exchange where registered:
New York Stock Exchange
Commission File# 1-8972
Countrywide Mortgage Investments, Inc. (“CMI” or the “Company”) was incorporated
in the State of Maryland on July 16, 1985 and reincorporated in the State of
Delaware on March 6, 1987. The Company has elected to be taxed as a real estate
investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended
(the “Code”).

Exhibit 3.1


Countrywide Mortgage Investments, Inc. has caused this certificate to be signed by Angelo R. Mozilo, its President, and Sandor E.
Samuels, its Secretary, this 11th day of December, 1993

“Kelly Absher” has been a Signatory for/with the following 9 Registrants:
• Indymac Bancorp Inc [ formerly Indymac Mortgage Holdings Inc ]
• Select Notes Trust LT 2004-1
• Structured Obligations Corp
• Structured Obligations Corp Long Term Cert Ser 2003 3
• Structured Obligations Corp Long Term Certs Ser 2003-4
• Structured Obligations Corp Long Term Certs Ser 2003-5
• Structured Obligations Corp Select Notes Trust Lt Ser 2003-1
• Structured Obligations Corp Select Notes Trust Lt Ser 2003-2
• Structured Obligations Corp Trust Sprint Capital Cer 2002-1

Registrant: Select Notes Trust LT 2004-1
1 Closely Related:

93 SEC Filings (from 6/8/04 to 3/24/11)

10K 12/31/93 Indymac Bancorp Inc. Filed 3/29/94 SEC File 1-08972 Accession Number 898430-94-223



NCNB CORPORATION (1073757) as of 12/31/1985
#1 *NCNB Corporation 1073757 Charlotte NC a Bank Holding Co (“BHC”)

Institution History for

On 7/5/1999 Nations Bank, N.A. was renamed to
Bank of America, National Association
101 South Tryon Street,
Charlotte NC.

To find the relationships one must look in multiple locations.


This does not include the foreign loan trusts of the foreign organizations that our loans were placed inside of.


Foreign organizations have to have a domicle in USA to do business over our financial exchanges, but the USA does not require disclosure of ‘sharehowlers’ ‘investors’ ‘owners’ ‘private family trusts’ who take control of the ‘loans’ into private portfolios outside of our financial markets.

To see the financial relationships of the foreign organizations acquisitions of ‘American’ financial institutions, one must review the http://www.ffiec.gov


Cross Reference info on Huffington.


Corporate Name: IndyMac Venture, LLC
Address: 888 East Walnut Street
City,State,Zip: Pasadena, CA 91101
Toll Free Number: (800) 669-2300
Direct Number: (626) 535-5555
Fax Number: (626) 535-7854
Primary Contact: Sandy Schneider
Website: http://www.owb.com

Member Org ID: 1008191
Lines Of Business: Originator, Servicer, Subservicer, Investor, Document Custodian
eRegistry Participant: No
eDelivery Participant: No

Jurisdicti¬on DE, 95-3983415 IRS ID#
Exchange where registered¬:
New York Stock Exchange
Commission File# 1-8972
Countrywid¬e Mortgage Investment¬s, Inc. (“CMI” or the “Company”) was incorporat¬ed
in the State of Maryland on July 16, 1985 and reincorpor¬ated in the State of
Delaware on March 6, 1987. The Company has elected to be taxed as a real estate
investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended
(the “Code”).

Exhibit 3.1


Countrywid¬e Mortgage Investment¬s, Inc. has caused this certificat¬e to be signed by Angelo R. Mozilo, its President, and Sandor E.
Samuels, its Secretary, this 11th day of December, 1993

Indymac Bancorp Inc • ‘S-3′
CMO Collateralized Mortgage Obligation

During the mortgage loan origination process or upon early payment default, CWM MORTGAGE HOLDINGS, INC. (“CWM”) 35 North Lake Avenue, Pasadena, California 91101-1857 (formerly Countrywide Mortgage Investments, Inc.) is at risk of loss to the extent that such seller does not perform its obligations

CWM acts as master servicer with respect to the mortgage loans it sells.
Master Servicing includes collecting loan payments from servicers of loans and remitting loan payments, less master servicing fees and other fees, to a trustee for each series of mortgage-backed securities master serviced.

Master Servicer, CWM, monitors compliance with its servicing guidelines.

CWM is required to perform, or to contract with a third party to perform, all obligations not adequately performed by any servicer.

CWM Master Servicing as of 9/30/1994:
27,084 loans $6.3 billion outstanding principal balance

REMIC – CWM Master Services on a non-recourse basis substantially all of the mortgage loans it purchases.

Each series of mortgage-backed securities is typically fully payable from the mortgage assets underlying such series, and the recourse of investors is limited to those assets and any credit enhancement features, such as insurance.

Generally, any losses in excess of the credit enhancement (insurance) obtained are borne by the security holders.

Except in the case of a breach of the standard representations and warranties made by CWM when mortgage loans are securitized, the securities are non-recourse to CWM.

Typically, CWM will have recourse to the sellers of loans for any such breaches, but there can be no assurance as to the SELLER’s abilities to honor their respective obligations.

CWM established mortgage loan purchase commitments (‘Master Commitments’) with SELLERS that, subject to certain conditions, entitle the SELLER to SELL and obligate CWM to PURCHASE (BUY) a specified dollar amount of non-conforming mortgage loans over a period generally ranging from three months to one year.

Master Commitment specify whether a SELLER may sell loans to CWM on a mandatory, best efforts or optional basis, or a combination thereof.

Master Commitments do not obligate CWM to purchase loans at a specific price, but rather provide the seller with a future outlet for the sale of its originated loans based on CWM quoted prices at time of PURCHASE (BUY).

Master Commitments specify types of mortgage loans seller is entitled to sell to CWM and generally range from $5Million to $1Billion in aggregate committed principal amount.

The provisions of CWM Seller/Servicer Guide are incorporated in each Master Commitment.

Provisions may be modified by negotiations between the parties.
Individualized Master Commitment options available to SELLERS which include alternative pricing structures.

To obtain a Master Commitment, each SELLER is generally expected to pay a non-refundable upfront or non-delivery fee, or both, to CWM.

9/30/1994, CWM had outstanding Master Commitments with 100 SELLERS to purchase mortgage loans in the aggregate principal amount of appox. $9.3 Billion over periods ranging from 3 months to one year, of which $2.4 Billion had been purchased or committed to be purchased pursuant to …
(pick up at page 16) http://www.secinfo.com/dsvRa.b8u.htm?Find=securitized#17thPage

1994 Subsidiaries of
CWM Mortgage Holdings, Inc.





Exhibit 21.1 2007-2008 Subsidiaries of


IndyMac Intermediate Holdings, Inc. Delaware Direct

IndyMac Bank, F.S.B. Federally Chartered Indirect

Financial Freedom Senior Funding Corporation Delaware Indirect

IndyMac Retained Delaware Indirect

Substantially all of the CWM assets are pledged to secure the repayment of Collateralized Mortgage Obligations, reverse purchase agreements and other borrowings.

Anticipated substantially all of the mortgage loans CWM acquires in the future will also be pledged to secure borrowings pending securitization or sale or as part of their long-term financing.

Cash flows received by CWM from its investments that have not yet been distributed, pledged or used to acquire mortgage loans or other investments may be the only unpledged assets available to unsecured creditors and stockholders in the event of liquidation of CWM.

In purchasing mortgage loans and issuing mortgage-backed securities, the
Company competes with established mortgage conduit programs, investment banking firms, savings and loan associations, banks, FNMA, FHLMC, the Government National Mortgage Association (‘GNMA’), mortgage bankers, insurance companies, other lenders and other entities purchasing mortgage assets. Certain changes currently taking place in the mortgage industry, including technological initiatives promoted by FNMA and FHLMC which could give such entities direct access to mortgage borrowers, may have an adverse impact upon current sellers to the Company’s mortgage conduit operations.

Mortgage backed security is a type of derivative security, the cash flow on which is derived from payments on an underlying pool of mortgage loans.

Subordinated securities refers to mortgage-backed securities that are rated below AAA by S&P) …

Securities retained in connection with its issuance of mortgage-backed securities in the form of REMIC’s

Securities purchased in third party transactions.

CWM uses proceeds from, among other things,

Reverse purchase agreements to meet its working capital needs.

CWM reverse purchase arrangements are subject to collateral maintenance agreements whereby the Company, in effect, may borrow a specified percentage of the market value of the mortgage loans and mortgage-backed securities which are the subject of the arrangements.

Market value generally determined by the LENDER.

If market value of the collateral declines (as will be the case if interest rates increase), additional collateral is required to secure such borrowings.

If the required amount of collateral is increased, CWM ability to raise funds through subsequent similar arrangement may be diminished.

If CWM fails to post such additional collateral, the LENDER may terminate such arrangement, accelerate CWM obligations and sell or retain the existing collateral in order to satisfy CWM debt.

CWM as implemented a hedging strategy for the portion of its mortgage portfolio held for sale which to some extent may mitigate the effects of adverse market movement.

Currently CWM does not have committed financing facilities available for the portion of its warehouse lending program pursuant to which CWM may make loans that are secured by SERVICING rights, SERVICING sales receivables and FORECLOSURE and REPURCHASE MORTGAGE LOANS, nor does CWM have committed financing facilities available for its newly organized CLP’s.


Although the Company believes that its relationships with
CCI and
provide significant benefits to its various operations, CWM is subject
to potential conflicts of interest arising from its relationship with its
manager, CAMC, and CAMC’s affiliates.

CAMC, through its affiliation with CFC,
has interests that conflict with those of CWM in fulfilling many of its

Although CWM generally purchases (BUYER) mortgage loans on a servicing
retained basis (where the seller retains the servicing rights) and

CFC purchases (BUYER)mortgage loans on a servicing released basis
(where the buyer acquires the servicing rights),
CWM may from time to time compete with CFC for the
purchase of mortgage loans in those cases where sellers are evaluating servicing
retained as well as servicing released sales options.

In addition, CWM relies upon CAMC
(which has entered into a subcontract with CFC to provide
certain management services to CWM) for the day-to-day operation of its

Currently, CWM has no employees and relies upon CAMC and its
employees to conduct CWM business including its mortgage conduit,
warehouse lending and construction lending operations.

In conducting its operations, CWM may utilize
CFC as a resource for:
loan servicing, personnel administration and loan production.

No assurance can be given that the Company’s relationships with CAMC and its affiliates will continue indefinitely.

The failure or inability of CAMC to provide the services required of it under
the management agreement (or of CFC to perform its obligations under its
subcontract with CAMC) or any other agreements or arrangements with CWM
could have a material adverse effect on CWM’s business. In addition, as
sole holder of all outstanding voting stock of INMC, CFC has the right to elect all
directors of INMC.

Such directors elect the INMC officers and determine the dividend policy of INMC.


submitted by Barbara







COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.” (Editor’s Note: Notice that the investors are referred to as lenders, hence the term “pretender lender” as to all others pretending to be lenders.)

“The investors also said that when borrowers tried to pay off or otherwise resolve defaulted loans, Compass/Silar refused to negotiate. In other cases when Compass/Silar urged the investors to modify troubled mortgages, the servicer reaped undisclosed fees in the deals.

The jury affirmed every claim the plaintiffs had brought against Compass/Silar, including conspiracy, as well as breach of contract, of fiduciary duty, and of good faith and fair dealing. The jury found improper actions by Compass/Silar on eight loans.”


EDITOR’S ANALYSIS: For those slow learners out there practicing law, this might get your attention. The compensatory damages were $79,000. Punitive damages: $5,100,000. If the lawyers were on contingency, they just made over $2 million.

Besides the obvious importance of this case for investors and what is about to happen, you’ll notice that all the things we have been saying about the borrowers were alleged and proven against the servicer with respect to the investors. Thus you can understand why I have been saying that the interests of the investors and the interests of the borrowers are very similar and the factual basis of their claims are the same. The jury said GUILTY on breach of contract, of fiduciary duty, and of good faith and fair dealing. Sound familiar?

Borrowers take hope. The investors are doing some of your work for you. So is the SEC now and the attorney generals of all 50 states. But you have to take a stand if you want to play in this high stakes game. You can’t just wait for lightening to strike. Nobody is going to come knocking on the door handing you the deed to a home you thought you already lost and moved out of or satisfaction of mortgage or a check. It’s time for ALL homeowners who EVER had a loan (especially if originated after 1999) to go back to their paperwork and have it examined for potential claims. There’s probably gold in those mounds of paper.


Opening the Bag of Mortgage Tricks


ALL the revelations this year about dubious practices in the mortgage servicing arena — think robo-signers and forged signatures — have rightly raised borrowers’ fears that companies handling their loans may not be operating on the up and up.

But borrowers aren’t the only ones concerned about potential mischief. Investors who hold mortgage securities are increasingly worried that servicers may be putting their interests ahead of those who own the loans.

A servicer might, for example, deny a loan modification to a borrower because it also owns a second mortgage on the same property and doesn’t want to write down that asset, as required in a modification. Levying outsize default fees is another tactic — the fees typically go to the servicer, not the lender, but they can still propel a property into foreclosure more quickly. And foreclosures aren’t a good outcome for investors.

Last week, a jury in federal district court in Reno, Nev., awarded a group of 50 mortgage investors $5.1 million in punitive damages against defendants in a loan servicing case. Although the numbers in the case aren’t large, its facts are fascinating. Indeed, the case exposed some of the tricks of the servicers’ trade.

The case is also notable because the main defendant, Silar Advisors, was one of the institutions that struck a deal in 2009 with the Federal Deposit Insurance Corporation to buy the assets of a notorious failed bank, IndyMac. Of the $5.1 million in damages awarded in the case, Silar must pay $3 million.

John W. Bickel II, a co-founder of Bickel & Brewer in Dallas, represented the investors in the case. Because he represents an additional 1,450 investors whose loans were serviced by Silar, he said more suits like this one would follow soon.

Loan servicers act as intermediaries between borrowers and their lenders, collecting monthly payments and real estate taxes and forwarding them to the appropriate parties. As long as borrowers meet their payments, such operations typically run smoothly.

Defaults and foreclosures, however, complicate servicers’ duties. As the Silar matter shows, borrower difficulties also open the door to improprieties.

Because loan servicers operate behind the scenes, it’s hard for investors who own these mortgages to monitor fee-gouging. In addition, the servicing contracts make it difficult to fire administrators — under a typical arrangement, investors holding at least 51 percent of the loans must agree on termination.

In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.

Troubles for investors in the Silar matter began back in 2006 when the USA Commercial Mortgage Company went bankrupt. Founded in 1989, the company had underwritten and serviced short-term commercial real estate loans. It sold them to private investors, typically older people who hoped to live off the income generated by the loans. At the time of its bankruptcy, USA Commercial serviced 115 loans worth almost $1 billion.

After the company collapsed, a small firm called Compass Partners bought the servicing rights to these assets for $8 million. A short time later, Silar Advisors, a company overseen by Robert Leeds, a former Goldman Sachs executive, got involved by financing Compass. Compass/Silar began servicing the loans for the investors.

Almost immediately, the plaintiffs in the suit contended, Compass/Silar started siphoning off money owed to investors holding the loans. Among the servicer’s tactics, the plaintiffs said, were improperly charging default interest, late fees and loan origination fees that reduced amounts due to investors.

The investors also said that when borrowers tried to pay off or otherwise resolve defaulted loans, Compass/Silar refused to negotiate. In other cases when Compass/Silar urged the investors to modify troubled mortgages, the servicer reaped undisclosed fees in the deals.

THE jury affirmed every claim the plaintiffs had brought against Compass/Silar, including conspiracy, as well as breach of contract, of fiduciary duty, and of good faith and fair dealing. The jury found improper actions by Compass/Silar on eight loans.

A Silar spokesman said the firm was pleased that the jury awarded only $79,000 in compensatory damages to the plaintiffs but was disappointed by the punitive-damages assessment. “The jurors are to be commended for their careful consideration of the facts in a very lengthy trial,” the spokesman said. He declined to comment as to whether Silar was currently servicing any loans.

One loan history, on a defaulted asset known as Standard Property, indicates what these investors were up against with their servicer.

In March 2007, immediately after Compass/Silar took over administration of the investors’ loans, the Standard Property mortgage had a principal value of $9.64 million. The borrower wanted to repay the loan at that time, but instead of directing it to pay principal and the accrued interest to the holder of the loan, as required by the servicing agreement, Compass/Silar arranged for the borrower to refund only the principal.

At the same time, court papers show, Compass/Silar quietly took in almost $860,000 in late fees, default interest and other costs from the Standard Property borrower. This ran afoul of the servicing agreement governing the Standard Property mortgage. The agreement stated that such fees could go to the servicer only after investors had been paid principal and accrued interest on a loan.

“No one really knows what is in the black box known as loan servicing, and most investors don’t even think of their servicer taking advantage of them,” Mr. Bickel said in an interview. “There’s not a lot of transparency, and I think this case is going to bring to the forefront the potential for abuse.”

It is obvious that we are in the litigation stage of the financial debacle of 2008. That usually means shining the light on dark corners and watching what scurries away. The view may not be pretty, but at least in this case, investors got some recompense in addition to an education.

IndyMac-OneWest-Deutsch bank: 30 seconds per document

OneWest Bank employee: ‘Not more than 30 seconds’ to sign each foreclosure document

The recent announcements by J.P. Morgan Chase and Ally Financial that they were freezing some foreclosures because of paperwork irregularities raises a key question: How many more mortgage companies employed “robo-signers?”

In a sworn deposition in July, Erica Johnson-Seck, an Austin, Tex.,-based vice president for bankruptcy and foreclosure for OneWest Bank, said she and her team of seven others sign 6,000 documents a week or about 24,000 a month without reading all of them.

Johnson-Seck estimated that she spends 30 seconds to sign every document.
She explained that while she does not check everything, she does check some information, “which is why I said 30 seconds instead of two seconds.”

In the past, the company had a quality control process that required signatories to check 100 percent of the debts and any figures for loans and bankruptcy, Johnson-Seck said. But the error rate was low, so now they only check about 10 percent of the documents.

She said OneWest Bank’s “outsourcing vendor,” Lender Processing Services, “checks the documents completely.”

A subsidiary of Lender Processing Services is the subject of a criminal investigation by the U.S. attorney’s office in the middle district of Florida. LPS has acknowledged problems with its foreclosure paperwork, saying there was an error in how the company handled notarization.

Johnson-Seck also said in the deposition that she had signing authority for Deutsche Bank, Bank of New York and U.S. Bank, among others.

A spokesman for the company did not immediately have a comment.



Three cases that show we are on the right track.
Indymac is a bad group that is going down further.





Well you have to give credit to Sheila Baer> She gets it. Here she is going after the IndyMac executives for making loans to developers that they knew would not be repaid. It is the first time that an important agency has recognized the link between the malfeasance of the originating lenders, the securitization intermediaries and the developers.

It is central to the issue of appraisal fraud. Anyone who moved into a new development knows that the developer was raising prices like crazy to create a a sense of urgency on the part of borrowers. Those prices from the developers were used an excuse to inflate the appraisals ona continual basis, so that a house of exactly the same model and features would be appraised one month for $350,000 and then a month later for $375,000 or more.

The developers knew they could do this because they knew the “lender” would approve it. It was a classic dysfunctional dance in which everyone was lying to everyone else. And everyone, except the borrower and the investor-lender knew it. Thus suits against the developer, especially those with mortgage offices on premises, can be expected to rise by both private actions and public actions from regulatory agencies and law enforcement. It was fraud.

Posted on July 13, 2010 by Foreclosureblues

FDIC sues four former IndyMac executives
The agency accuses the managers of the defunct bank’s Homebuilder
Division of acting negligently by granting loans to developers who
were unlikely to repay the debts.
By E. Scott Reckard, Los Angeles Times

July 14, 2010

Launching a new offensive against leaders of failed financial
institutions, federal regulators are accusing four former executives
of Pasadena’s defunct IndyMac Bank of granting loans to developers and
home builders who were unlikely to repay the debts.

The lawsuit by the Federal Deposit Insurance Corp. alleges that the
IndyMac executives acted negligently and seeks $300 million in

It is the first suit of its kind brought by the FDIC in connection
with the spate of more than 250 bank failures that began in 2008.
Regulators said it wouldn’t be the last.

“Clearly we’ll have more of these cases,” said Rick Osterman, the
deputy general counsel who oversees litigation at the agency.

The FDIC has sent letters warning hundreds of top managers and
directors at failed banks — and the insurers who provided them with
liability coverage — of possible civil lawsuits, Osterman said. The
letters go out early in investigations of failed banks, he added, to
ensure that the insurers will later provide coverage even if the
policy expires.

The four defendants in the FDIC lending negligence case, who operated
the Homebuilder Division at IndyMac, collectively approved 64 loans
that are described in the 309-page lawsuit.

They are:

•Scott Van Dellen, the division’s president and chief executive during
six years ending in its seizure;

•Richard Koon, its chief lending officer for five years ending in July 2006;

•Kenneth Shellem, its chief credit officer for five years ending in
November 2006;

•William Rothman, its chief lending officer during the two years
before the seizure.

Through their attorneys, they vigorously denied the allegations.

“The FDIC has unfairly selected four hard-working executives of a
small division of the bank … to blame for the failure of IndyMac,”
said defense attorney Kirby Behre, who represents Shellem and Koon.
“We intend to show that these loans were done at all times with a
great deal of care and prudence.”

Defense attorney Michael Fitzgerald, who represents Van Dellen and
Rothman, said no one at the company or its regulators foresaw the
severity of the housing crash before it struck, and that IndyMac was
one of the first construction lenders to pull back when trouble struck
the industry in 2007.

Fitzgerald added that the FDIC thought Van Dellen trustworthy enough
that it kept him on to run the division after the bank was seized.

The suit naming the IndyMac executives was filed this month in federal
court in Los Angeles, two years after the July 2008 failure of the
Pasadena savings and loan. The bank is now operated under new
ownership as OneWest Bank.

IndyMac, principally a maker of adjustable-rate mortgages, was among a
series of high-profile bank failures early in the financial crisis
that were blamed on defaults on high-risk home loans and the
securities linked to them.

But the majority of failures since then have been at banks hammered by
losses on commercial real estate, particularly loans to residential
developers and builders — and IndyMac had a sideline in that business
as well through its Homebuilder Division.

The suit alleges that IndyMac’s compensation policies prompted the
home-building division to increase lending to developers and builders
with little regard for the quality of the loans.

“HBD’s management pushed to grow loan production despite their
awareness that a significant downturn in the market was imminent and
despite warnings from IndyMac’s upper management about the likelihood
of a market decline,” the FDIC said in its complaint.

An investigation of IndyMac’s residential mortgage lending practices
could lead to another civil suit, potentially naming higher-up
executives, attorneys involved in the case said.

Separately, a criminal grand jury investigation into the actions of
IndyMac executives continues, according to a knowledgeable federal
official who was not authorized to publicly discuss the investigation.

The bank, known mostly for providing home loans without requiring
proof of income from borrowers, had operated its builder-loan division
since 1994.

The lawsuit said IndyMac had about $900 million in land acquisition,
development and construction loans on its books when the bank
collapsed. Losses on the portfolio are expected to total $500 million
— minus whatever the FDIC can recover through litigation.

The FDIC’s Osterman said the government recovered about $5.1 billion
from former bank and thrift executives and their outside professional
advisors after the last major financial crisis devastated the savings
and loan industry in the 1980s. Most of the money came from insurers
that had written policies covering bank directors and officers against
negligence or other misdeeds.

Because the warnings of possible lawsuits are mailed out during the
early stages of investigations, it’s frequently decided later that the
cases aren’t strong enough to bring or aren’t likely to be
cost-effective and so are dropped, Osterman said.

FDIC spokesman David Barr said the agency generally had three years
from the date of a failure to file civil cases.


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