The Banks: Consideration is Irrelevant, Really? Then so is payment!

The issue is what are the elements of the loan contract? Who are the parties? And who can enforce it?

I would agree that an overpayment at closing from the source of funds is rare. What is not rare and in fact common is that the wire transfer instructions that accompany the wire transfer receipt often instructs the closing agent to refund any overpayment to the party who wired the money — not the originator. This leads to questions. If it is a true warehouse lender, such instructions could be explained without affecting the validity of the note or mortgage.

In truth, the procedures used usually prevent the originator from ever touching the flow of funds. Wall Street banks were afraid of fraud — that if the originators could touch the money, they might have faked a number of closings and taken the money. In short, the investment banks were afraid that the originators would not use the money the way it was intended. So instead of doing that, they created relationships by having the originators sign Assignment and Assumption agreements before they started lending. This agreement says the loan belongs to an “aggregator” that is merely a controlled entity of the broker dealer. But the money doesn’t come from either the originator or the aggregator. Thus they have an agreement that controls the loan closings but no consideration for that either.
But this is a lot like the insurance payments, proceeds of credit default swaps etc. The contracts almost always specifically waive subrogation or any other right of action against the borrowers or any other enforcement of the notes or mortgages. It has been presumed that these contracts were for the mitigation of losses and that is true. But they are payable to the broker dealers and not the trust or trust beneficiaries. The investment banks committed fraud when they represented to the insurers, FDIC, Fannie, Freddie and CDS counterparties that they had an insurable interest. Those parties presumed that the investment banks were creating these hedge products for the benefit of the owner of the mortgage bonds or the owner of the loans. But it was paid to the investment banks. That is why all those parties are claiming losses that resulted from fraud — all of which have resulted in settlements (except the Countrywide verdict for fraud).
The similarity is this: in both the closing with borrowers and the closings with investors the same fraud occurred. When dealing with the closing agent they interposed their nominee in the closing which resulted in no note and no mortgage in favor of the investors or the trust. Whether the closing agent is liable is another issue. The point is that the money came from a third party which was a controlled entity of the broker dealer. Thus the investor gets a promise from a trust that is not funded while their money is used to pay fees, create the illusion of trading profits for the broker dealer and funding mortgages.
The wire transfer is not a wire transfer from the originator, nor from the bank at which the originator maintains any account. The wire transfer instructions and the wire transfer receipt fail to identify the actual source of funds and fail to refer to the originator as a real party. If they did, there would not be a problem for the banks to enforce the note and mortgage. If they did, the banks would simply show the transaction record and there would be nothing to fight about.
The only occasion in which the banks appeared to be willing to provide adequate documentation for consideration appears to be in a merger or acquisition with the party that was named as the mortgagee in the mortgage document or the beneficiary in the deed of trust. And all the other transactions, the banks say that consideration is irrelevant or they quote the law that says that courts cannot question the adequacy of consideration. They are dodging the issue. We are not saying that consideration was not adequate; what we are saying is that there was no consideration at all. The banks are fighting this issue  because when it comes out that there really was no consideration the entire house of cards could fall.
 The issue is counterintuitive because everyone knows that there was money on the closing table. Unless the issue is argued and presented with clarity, it will appear to the judge that you are trying to say that there was no money on the closing table. And when a judge hears that, or thinks that he heard that, he or she will not take you seriously. There are three parts to every contract —  offer, acceptance, and consideration. A few courts have started to deal with this question. In the context of foreclosure litigation all three elements are in question. If the lenders are investors who believed that their money was being put into a trust that they were beneficiaries of a trust, they are unaware of the fact that their money is being offered to borrowers on terms that are contrary to their instructions. And the loan is not made on behalf of the investors or the trust. It is made on behalf of some sham entity controlled by the broker dealer. Sometimes the origination is made by an actual bank that is acting in the capacity of a sham lender. Either way the money came from the investors.
So the issue is not whether there was money on the table but rather whether there was a meeting of the minds between the investors and lenders in the homeowners as borrowers. The lender documents (trust documents) reveal far different terms of repayment than the borrower documents. Each of them signed on to a deal that actually didn’t exist because neither of them had agreed to the same terms.
 The fact that money was on the table at the time of the alleged closing of the loan can only mean that the homeowner owed money to repay the source of the money. This duty to repay arises by operation of law and extends from the homeowner to the investor despite the lack of any documentation that explicitly states that. The result is false documentation in which the homeowner was induced to sign under the mistaken belief that the payee on the note and the mortgagee on the mortgage was the source of funds.
If you receive funds from John Smith and the note and mortgage are drafted for the benefit of Nancy Jones as “lender” would that bother you? What would you do as closing agent? Why?

Is Donald Duck Your Lender?

 

I was asked a question a few days ago that runs to the heart of the problem for the banks in enforcing false claims for foreclosure and false claims of losses that should really allocated to the investors so that the investor would get the benefits of those loss mitigation payments. This is the guts of the complaints by insurers, investors, guarantors et al against the investment banks — that there was fraud, not breach of contract, because the investment bank never intended to follow the plan of securitization set forth in the prospectus and pooling and servicing agreement. The question asked of me only reached the issue of whether borrowers could claim credit for third party payments to the creditor. But the answer, as you will see, branches much further out than the scope of the question.

If you look at Steinberger in Arizona and recent case decisions in other jurisdictions you will see that if third party payments are received by the creditor, they must be taken into account — meaning the account receivable on their books is reduced by the amount of the payment received. If the account receivable is reduced then it is axiomatic that the account payable from the borrower is correspondingly reduced. Each debt must be taken on its own terms. So if the reduction was caused by a payment from a third party, it is possible that the third party might have a claim against the borrower for having made the payment — but that doesn’t change the fact that the payment was made and received and that the debt to the trust or trust beneficiaries has been reduced or even eliminated.

The Court rejected the argument that the borrower was not an intended third party beneficiary in favor of finding that the creditor could only be paid once on the debt. I am finding that most trial judges agree that if loss-sharing payments were made, including servicer advances (which actually come from the broker dealer to cover up the poor condition of the portfolio), the account is reduced as to that creditor. The court further went on to agree that the “servicer” or whoever made the payment might have an action for unjust enrichment against the borrower — but that is a not a cause of action that is part of the foreclosure or the mortgage. The payment, whether considered volunteer or otherwise, is credited to the account receivable of the creditor and the borrower’s liability is corresponding reduced. In the case of servicer payments, if the creditor’s account is showing the account current because it received the payment that was due, then the creditor cannot claim a default.

A new “loan” is created when a volunteer or contractual payment is received by the creditor trust or trust beneficiaries. This loan arises by operation of law because it is presumed that the payment was not a gift. Thus the party who made that payment probably has a cause of action against the borrower for unjust enrichment, or perhaps contribution, but that claim is decidedly unsecured by a mortgage or deed of trust.

You have to think about the whole default thing the way the actual events played out. The creditor is the trust or the group of trust beneficiaries. They are owed payments as per the prospectus and pooling and servicing agreements. If those payments are current there is no default on the books of creditor. If the balance has been reduced by loss- sharing or insurance payment, the balance due and the accrued interest are correspondingly reduced. And THAT means the notice of default and notice of sale and acceleration are all wrong in terms of the figures they are using. The insurmountable problem that is slowly being recognized by the courts is that the default, from the perspective of the creditor trust or trust beneficiaries is a default under a contract between the trust beneficiaries and the trust.

This is the essential legal problem that the broker dealers (investment banks) caused when they interposed themselves as owners instead of what they were supposed to be — intermediaries, depositories, and agents of the investors (trust beneficiaries). The default of the borrower is irrelevant to whether the trust beneficiaries have suffered a loss due to default in payment from the trust. The borrower never promised that he or she or they would make payment to the trust or the trust beneficiaries — and that is the fundamental flaw in the actual mortgage process that prevailed for more than a dozen years. There would be no flaw if the investment banks had not committed fraud and instead of protecting investors, they diverted the money, ownership of the note and ownership of the mortgage or deed of trust to their own controlled vehicles. If the plan had been followed, the trusts and trust beneficiaries would have direct rights to collect from borrowers and foreclose on their property.

If the investment banks had not intended to divert the money, income, notes and mortgages or deeds of trust from the creditor trust or trust beneficiaries, then there would have no allegations of fraud from the investors, insurers and government guarantee agencies.

If the investment banks had done what was represented in the prospectus and pooling and servicing agreements, then the borrower would have known that the loan was being originated for or on behalf of the trust or beneficiaries and so would the rest of the world have known that. The note and mortgage would have shown, at origination, that the loan was payable to the trust and the mortgage or deed of trust was for the benefit of the trust or trust beneficiaries, as required by TILA and all the compensation earned by people associated with the origination of the loan would have had to have been disclosed (or returned to the borrower for failure to disclose). That would have connected the source of the loan — the trust or trust beneficiaries — to the receipt of the funds (the homeowner borrowers).

Instead, the investment banks hit on a nominee strawman plan where the disclosures were not made and where they could claim that (1) the investment bank was the owner of the debt and (2) the note and mortgage or deed of trust were executed for the benefit of a nominee strawman for the investment bank, who then claimed an insurable interest as owner of the debt. As owner of the debt, the investment banks received loss sharing payments from the FDIC. As agents for the investors those payments should have been applied to the balance owed the investors with a corresponding reduction in the balance due from the borrower —- if the payments were actually made and received and were not hypothetical or speculative. The investment banks did the same thing with the bonds, collecting payments from insurers, counterparties to credit default swaps, and guarantees from government sponsored entities.

When I say nominee or strawman I do not merely mean MERS which would have been entirely unnecessary unless the investment banks had intended to defraud the investors. What I am saying is that even the “lender” for whom MERS was the “nominee” falls into the same trapdoor. That lender was also merely a nominee which means that, as I said 7 years ago, they might just as well have made out the note and mortgage to Donald Duck, a fictitious character.

Since no actual lender was named in the note and mortgage and the terms of repayment were actually far different than what was stated on the borrower’s promissory note (i.e., the terms of the mortgage bond were the ONLY terms applicable to the plan of repayment to the creditor investors), the loan contract (or quasi loan contract, depending upon which jurisdiction you are in) was never completed. Hence the mortgage and note should never have been accepted into the file by the closing agent, much less recorded.

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George W. Mantor Runs for Public Office on “No More Dirty Deeds”

Mantor for Assessor/Recorder/Clerk of San Diego County

Editor’s note: I don’t actually know Mantor so I cannot endorse him personally — but I DO endorse the idea of people running for office on actual issues instead of buzz words and media bullets.

Mantor is aiming straight for his issue by running for the Recorder’s Position. I think his aim is right and he seems to get the nub of some very important issues in the piece I received from him. I’d be interested in feedback on this campaign and if it is favorable, I might give a little juice to his campaign on the blog and my radio show.

His concern is my concern: that within a few years, we will all discover that most of us have defective title, even if we didn’t know there was a loan subject to claims of securitization in our title chain. This is not a phenomenon that affects one transaction at a time. It affects every transaction that took place after the last valid loan closing on every property. It doesn’t matter if it was subject to judicial or non-judicial sale because real property is not to be settled by damages but rather by actual title.

Many investors are buying up property believing they have eliminated the risk of loss by purchasing property either at or after the auction sale of the property. They might not be correct in that assumption. It depends upon the depth and breadth of the fraud. Right now, it seems very deep and very wide.

Here is one quote from Mantor that got my attention:

Despite the fact that everyone knows, despite the fact that they signed consent decrees promising not to steal homes, they go right on doing it.

Where is law enforcement, the Attorneys General, the regulators? They all know but they only prosecute the least significant offenders.

Foreclosures spiked 57% in California last month. How many of those were illegal? Most, if not all.

An audit of San Francisco County revealed one or more irregularities in 99% of the subject loans. In 84% of the loans, there appear to be one or more clear violations of law.

Fortune examined the foreclosures filed in two New York counties (Westchester and the Bronx) between 2006 and 2010.  There were130 cases where the Bank of New York was foreclosing on behalf of a Countrywide mortgage-backed security.  In 104 of those cases, the loan was originally made by Countrywide; the other 26 were made by other banks and sold to Countrywide for securitization.

None of the 104 Countrywide loans were endorsed by Countrywide – they included only the original borrower’s signature.  Two-thirds of the loans made by other banks also lacked bank endorsements.  The other third were endorsed either directly on the note or on an allonge, or a rider, accompanying the note.

No_More_Dirty_Deeds

BeforeYou Open Your Mouth Or Write Anything Down, Know What You Are Talking About

EDITOR’S NOTE: By popular demand I am writing a new workbook that is up to date on the theories and practices of real estate loans, documentation, securitizations and effective enforcement and foreclosure of the collateral (real property — i.e., the house). The book will be finished around the end of January. If you want to purchase an advance subscription to an advance copy we can give you a discount off the price of $599. You will receive the final edit drafts of each section as completed. And your comments might be included in the final text with attribution. This is an excerpt from what I have done so far ( the references to “boxes” is a reference to artwork that has not yet been completed but the meaning is clear enough from the words):

[Note: I did borrow some phrases and cites from Judge Jennifer Bailey's Bench Book for Judges in Dade County. But things have changed substantially since she wrote that guide and my book is intended to update the various treatises, books and articles on the subject of mortgage related litigation in the era of securitization]

 

INTRODUCTION

 

The massive volume of foreclosures and real estate closings have resulted in a failure of the judicial system — both Judges and Attorneys to scrutinize the transactions and foreclosures and other enforcement actions for compliance with basic contract law. This starts with whether there is an actual loan at the base of the tree of assignments, endorsements, powers of attorney etc. If the party at the base of the tree did not in fact make any loan and was not possessed of any actual or apparent authority to represent the party who DID make the loan, then the instruments executed in favor of the originator are void, not voidable. This is simply because the loan contract like any contract requires offer, acceptance and consideration. Lacking any meeting of the minds and/or consideration, there was no contract regardless of what one of the parties signed.

 

The interesting issue at the start of our investigation is how to define the loan contract. Is it a contract that arises by operation of statutory or common law? Is it a contract that arises by execution of instruments? What if the borrower executes an instruments that acknowledges receipt of money he never received from the party he thought was giving him the money? Is it possible for the written instruments to create a conflict between the presumptions at law arising from written, properly executed instruments and the real facts that gave rise to a contract that was created by operation of law?

 

These questions come up because there is no actual written loan contract. The borrower and lender do not come together and sign a contract for loan. The contract is implied from the documents and actions contemporaneously occurring at or around the time of the loan “closing.” It appears to be a case of first impression that the borrower is induced to sign documents in favor of someone who, at the end of the day, does NOT give him the loan. This never was a defect before the era of claims of securitization. Now it is central to the issue of establishing the identity and rights of a creditor and debtor and whether the debt is secured or unsecured.

 

Even where the loan contract is solid, the same legal and factual problems arise at the time of the alleged acquisition of the loan where assignments lack consideration because, like the above origination, an undisclosed third party was the actual source of funds.

 

 

 

Definitions:

 

 

 

1)   Debt: in the context of loans, the amount of money due from the borrower to the lender. This may include successors to the lender. In a simple mortgage loan the amount of money due, the identity of the borrower and the identity of the lender are clear. In cases where the mortgage loan is subject to claims of assignments, transfers, sales or securitization by either the borrower or the party claiming to be the lender or the successor to the lender, there are questions of fact and law that must be determined by the court based on the method by which the money advanced to or on behalf of the borrower that leads to a finding by the court of the identity of the party who advanced the money for the origination of the debt or for the acquisition of the debt.

 

a)    In all cases the debt arises by operation of law at the moment that the borrower receives the advance of money from a lender regardless of the method utilized and regardless of the validity of any instruments that were executed by either the borrower or the lender.

 

i)     The acceptance of the money by the borrower raises a strong presumption that the advance of money in the context of the situation was not a gift.

 

ii)    In simple loans the legal instruments that were executed by the borrower at the loan closing are presumptively supported by consideration as expressed in the note or mortgage and a valid contract presumptively exists such that the court can enforce the note and the mortgage.

 

b)   The factual circumstances and any written instruments that were executed by the parties as part of a loan contract govern terms of repayment of the debt.

 

c)    Enforcement of the repayment obligation of the borrower requires either a lawsuit on the loan of money or a lawsuit on a promissory note.

 

i)     If the lawsuit is on the loan of money plaintiff must state the ultimate facts upon which relief could be granted including the factual circumstances of the loan and the fact that the loan was made. In Florida — F.R.C.P. 1.110 (b), Form 1.936

 

ii)    The lawsuit is on a note plaintiff must state the ultimate facts upon which relief could be granted including that the plaintiff owns and holds the note, that Defendant owes the Plaintiff money, and state the amount of money that is owed. In Florida — F.R.C.P. 1.110 (b), Form 1.934

 

(1)Where the Plaintiff alleges it is a party by virtue of a sale, assignment, transfer or endorsement of the note, Plaintiffs frequently fail to allege the required elements in which case the Court should dismiss the complaint — unless the Defendant has already admitted the debt, the note, the mortgage, and the default.

 

(2)The burden of pleading and proving the required elements is on the Plaintiff and cannot be shifted to the defendant without violating the constitutional requirements of due process.

 

(3)Requiring the Defendant to raise a required but missing element of a defective complaint filed by a Plaintiff would require the Defendant to raise the missing element and then deny it as an attempt at stating an affirmative defense that raises no issue other than an element that was required to be in the complaint of the Plaintiff. This is reversible error in that it improperly shifts the burden of pleading onto the Defendant and requires the Defendant to prove facts mostly in the sole control of the Defendant and which would establish standing to bring the action.

 

d)   In those cases where the loan is subject to claims of assignments, transfers, sales or securitization by either party the court must decide on a case-by-case basis whether the legal consideration for the loan (i.e., the advance of money from lender to borrower or for the benefit of the borrower) supports the debt described in the legal instruments that were executed by the borrower at the loan closing.

 

i)     If the Court finds that the legal instruments that were executed by the borrower at the loan closing are not supported by consideration, then the debt simply exists by operation of law and is not secured.

 

(1)Such a finding could only be based on the court determining that the lender described in the legal instruments is a different party than the party who actually loaned the money.

 

(2)Warehouse lending arrangements may be sufficient for the court to determine that the named payee on the note or the identified lender supplied consideration. The court must determine whether the warehouse lender was an actual lender or a strawman, nominee or conduit.

 

ii)    If the court finds that the legal instruments that were executed by the borrower at the loan closing are supported by consideration, then a valid contract may be found to exist that the court can enforce.

 

2)   Mortgage: a contract in which a borrower agrees that the lender may sell the real property (as described in the mortgage) for the purposes of satisfying a debt described in a promissory note that is described in the mortgage contract. It must be a written instrument securing the payment of money or advances made to or on behalf of the borrower. A lien to secure payment of assessments for condominiums, cooperatives and homeowner association is treated as a mortgage contract, pursuant to the enabling documents. See state statutes. For example, F.S. 702.09, Fla. Stat. (2010)

 

a)    a mortgage, if properly perfected, creates a specific lien against the property and is not a conveyance of legal title or of the right of possession to the real property described in the mortgage contract. See state statutes. For example section 697.02, Fla. Stat. (2010), Fla. Nat’l Bank v brown, 47 So 2d 748 (1949).

 

b)   Mortgagee: the party to home the real property is pledged as collateral against the debt described in the note. Mortgagee is presumptively the party named in the mortgage contract. With the advent of MERS and other situations where there is an assignment of the mortgage (expressly or by operation of law) the named mortgagee might be a strawman or nominee for a party described as the lender. In such cases there is an issue of fact as to perfection of the mortgage contract and therefore the mortgage encumbrance resulting from the recording of the mortgage contract. See state statutes. For example F.S. 721.82(6), Fla. Stat. (2010).

 

i)     In Florida the term mortgagee refers to the lender, the secured party or the holder of the mortgage lien. There are several questions of fact and law that the court must determine in order to define and apply these terms.

 

c)    Mortgagor

 

d)   Lender: the party who loaned money to the borrower. If the lender was identified in the mortgage contract by name then the mortgage contract is most likely enforceable.

 

i)     If the lender described in the mortgage contract is a strawman, nominee or conduit then there is an issue of fact as to whether any party could claim to be a secured party under the mortgage contract. Under such circumstances the mortgage contract must be treated as naming no identified secured party. Whether this results in a finding that the mortgage contract is not complete, not perfected or not enforceable is a question of fact that is decided on a case-by-case basis.

 

e)    No right to jury trial exists for enforcement of provisions of the mortgage. However, a right to jury trial exists if timely demanded provided that the foreclosing party seeks judgment on the note or the loan, to wit: financial damages for financial injury suffered by the Plaintiff.

 

i)     Bifurcation of the trial for damages and trial for enforcement of the mortgage contract may be necessary if the basis for the enforcement of the mortgage is non-payment of the note. Any properly raised affirmative defenses relating to setoff or enforceability of the note would be raised in the case for damages.

 

ii)    In that case the trial on the breach of the note would first be needed to render a verdict on the default and then a trial on enforcement of the mortgage would be held before the court without a jury.  Any properly raised defense relating to fees and other costs assessed in enforcement of the mortgage contract.

 

iii)  A question of fact and law must be decided by the court in actions in which the plaintiff merely seeks to enforce the mortgage by virtue of an alleged default by the plaintiff but does not seek monetary damages. Florida Form 1.944 (Foreclosure Complaint) is not specific as to whether it is allowing for a single trial without jury.

 

(1)Since foreclosures are actions in equity, no jury trial is required, but it can be allowed. Since actions for damages require jury trial if properly demanded, it would appear that this issue was not considered when the Florida Form was created.

 

iv)  The requirement that the Plaintiff must own the loan is a requirement that the Plaintiff is not acting in a representative capacity unless it brings the action on behalf of a principal that is disclosed and alleges and attaches to the complaint an instrument that confers upon Plaintiff its authority to do so.

 

v)    Owning the loan means, as set forth in Article 9 of the UCC that the Plaintiff paid for it in money or other consideration that was equivalent to money. The same thing holds true under Article 3 of the UCC for enforcement of the note if the Plaintiff seeks the exalted status of Holder in Due Course which requires payment PLUS no knowledge of defenses all of which must be alleged and proven by the Plaintiff. [1]

 

3)   Note: a written instrument describing the terms of repayment or terms of payment to the payee or a legal successor in interest. In mortgage loans the payor is often described as the borrower. This instrument is usually described in the mortgage contract as the basis for the forced sale of the property. The note is part of a contract for loan of money. It is often considered the total contract. The loan contract is not complete without the loan of money from the payee on the note. If the lender was identified in the note by name then the note is most likely enforceable.

 


[1] In non-judicial states where the power of sale is recognized as a contractual right, the issue is less clear as to the alignment of parties, claims and defenses. In actions to contest substitution of trustees, notices of sale, notices of default etc. it is the borrower who must bring the lawsuit and in some states they must do so within a very short time frame. Check applicable state statutes. The confusion stems from the fact that the Borrower is actually denying the allegations that would have been made if the alleged beneficiary under the deed of trust had filed a judicial complaint. The trustee on the deed of trust probably should file an action in interpleader if a proper objection is raised but this does not appear to be occurring in practice. This leaves the borrower as the Plaintiff and requiring allegations that would, in judicial states, be either denials or affirmative defenses. Temporary restraining orders are granted but usually only on a showing that the Plaintiff has a likelihood of  prevailing — a requirement not imposed on Plaintiffs in judicial states where the lender or “owner” must file the complaint.

 

Federal Judge Slams Wells Fargo for Violation of Debt Collector’s Act in Florida

 

EDITOR’S NOTE: this is why I am encouraging attorneys to take cases involving foreclosure, even if the foreclosure itself is problematic. The FDCPA federal counterpart essentially states the same rules. These cases allow for damages and recovery of attorney fees that might aid in the cost of protracted litigation by a pretender lender. Most of my clients are receiving these contacts even after they have expressly told the caller that they are represented by counsel and even that there is a lawsuit pending. I would add that there is clearly a question as to whether the offer of modification is an admission against interest that the loan is in default and that therefore the current “default” is waived.

Danielle Kelley of our firm Garfield, Kelley and White has been writing about this for some time. She firmly believes, and I agree with her, that the time has come to file these actions. I would suggest that a debt validation letter be sent under the FDCPA and that the “borrower” obtain a title and securitization report as well, in order to shore up the potential setoffs and counterclaims against the pretender lender. But the good part of this law is that even if the caller is in fact the true lender or creditor, they must follow the rules — or pay the penalty.

2013 U.S. Dist. LEXIS 172716, *


ANDREW CONKLIN, Plaintiff, v. WELLS FARGO BANK, N.A., Defendant.

Case No. 6:13-cv-1246-Orl-37KRS

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA, ORLANDO DIVISION

2013 U.S. Dist. LEXIS 172716

December 8, 2013, Decided
December 9, 2013, Filed 

CORE TERMS: collection, mortgage, debt-collection, phone, cell, collect a debt, telephone, solicitations, exemption, consumer, foreclosure, landline, factual allegations, security interest, express consent, prerecorded, foreclose, servicer, exempt, foreclosure action, emergency calls, business relationship, cellular phones, telephone-solicitation, categorically, communicate, pre-suit, exempted, notice

COUNSEL:  [*1] For Andrew Conklin, Plaintiff: Richard S. Shuster, LEAD ATTORNEY, Shuster & Saben, LLC, Satellite Beach, FL.

For Wells Fargo Bank, N.A., a foreign corporation, Defendant: Aaron S. Weiss, LEAD ATTORNEY, Carlton Fields, PA, Miami, FL; April Y. Walker, LEAD ATTORNEY, Carlton Fields, PA, Orlando, FL; Michael Keith Winston, LEAD ATTORNEY, Carlton Fields, PA – West Palm Beach, West Palm Beach, FL.

JUDGES: ROY B. DALTON, JR., United States District Judge.

OPINION BY: ROY B. DALTON, JR.

OPINION

ORDER

This cause is before the Court on the following:

1. Plaintiff’s Complaint (Doc. 2), filed August 15, 2013;

2. Defendant Wells Fargo’s  Click for Enhanced Coverage Linking SearchesMotion to Dismiss Plaintiff Andrew Conklin’s Complaint and Supporting Legal Memorandum (Doc. 12), filed August 28, 2013; and

3. Plaintiff Andrew Conklin’s Response to Motion to Dismiss (Doc. 18), filed September 23, 2013.

Upon consideration, the Court finds that Defendant’s motion is due to be denied.

BACKGROUND

Defendant is the loan servicer on Plaintiff’s mortgage. (Doc. 2, ¶ 4.) In 2010, Defendant sued Plaintiff to foreclose on his house. (Doc. 18, p. 1.) Defendant allegedly continued to communicate about the foreclosure directly to Plaintiff after he was represented by counsel; this led Plaintiff  [*2] to file a previous Florida Consumer Collection Practices Act (“FCCPA”) claim against Defendant. (Id. at 1-2.) That case later settled. (Id. at 2.)

Then, earlier this year, Defendant allegedly resumed calling Plaintiff’s cell phone. (Doc. 2, ¶¶ 16-18.) After one of the calls, Defendant left a voicemail stating: “This is . . . your mortgage servicer, calling in regards to your mortgage. . . . This is an attempt to collect a debt . . . .” (Id. ¶ 16.) Plaintiff accordingly filed this suit in state court, alleging that Defendant has violated the FCCPA and the Telephone Consumer Protection Act (“TCPA”). (Id. ¶¶ 10-26.) Defendant removed the case to this Court on the basis of federal-question jurisdiction. (Doc. 1.)

Defendant now moves to dismiss the Complaint, arguing that it fails to state either an FCCPA or a TCPA claim. 1 (Doc. 12.) Plaintiff opposes. (Doc. 18.) This matter is ripe for the Court’s adjudication.

FOOTNOTES

1 Defendant also argues that Plaintiff failed to give pre-suit notice, which was allegedly required by Plaintiff’s mortgage. (Doc. 12, pp. 2-4.) First, this suit is about the calls, not the mortgage; thus, the mortgage is not “central” to the Complaint, and the Court declines to consider  [*3] it at the motion-to-dismiss stage. See Day v. Taylor, 400 F.3d 1272, 1276 (11th Cir. 2005). Second, the Court is skeptical that a contractual requirement of pre-suit notice to allow the other party an opportunity to cure a breach is applicable to this action, which is not on the contract itself. Nevertheless, because the Court declines to consider this argument now, it will not preclude Defendant from raising it at a later point.

STANDARDS

A plaintiff must plead “a short and plain statement of the claim.” Fed. R. Civ. P. 8(a)(2). On a motion to dismiss, the Court limits its consideration to “the well-pleaded factual allegations.” La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004). The factual allegations in the complaint must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). In making this plausibility determination, the Court must accept the factual allegations as true; however, this “tenet . . . is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). A pleading that offers mere “labels and conclusions” is therefore insufficient. Twombly, 550 U.S. at 555.

DISCUSSION

I. FCCPA

The  [*4] FCCPA provides that “[i]n collecting consumer debts, no person shall . . . [c]ommunicate with a debtor if the person knows that the debtor is represented by an attorney with respect to such debt . . . .” Fla. Stat. § 559.72(18). Defendant argues that Plaintiff has failed to state an FCCPA claim because: (1) enforcing a security instrument does not amount to debt collection within the meaning of the FCCPA; (2) Plaintiff has not alleged that Defendant was attempting to collect a debt; and (3) Plaintiff has not alleged that Defendant “communicated” with him within the meaning of the FCCPA. (Doc. 12, pp. 4-6.) The Court disagrees.

It is true that “a mortgage foreclosure action itself” does not qualify as debt collection under the FCCPA. Trent v. Mortg. Elec. Registration Sys., Inc., 618 F. Supp. 2d 1356, 1360-61 (M.D. Fla. 2007) (Corrigan, J.) (noting that Fair Debt Collection Practices Act (“FDCPA”) case law applies to FCCPA cases); see also Warren v. Countrywide Home Loans, Inc., 342 F. App’x 458, 460 (11th Cir. 2009) (“[F]oreclosing on a security interest is not debt collection activity [for the purposes of § 1692g of the FDCPA].”). However, the action at issue here is not the invocation  [*5] of “legal process to foreclose,” see Trent, 618 F. Supp. 2d at 1361, but rather debt collection calls made outside that judicial process. It is not as if these calls were made to notify Plaintiff of the foreclosure action or to attempt to comply with the statute. Cf. Diaz v. Fla. Default Law Grp., P.L., No. 3:09-cv-524-J-32MCR, 2011 U.S. Dist. LEXIS 68541, 2011 WL 2456049, at *4 (M.D. Fla. Jan. 3, 2011) (Corrigan, J.) (“The timing of the filing of the foreclosure complaints [just weeks before the communications] confirms that defendant was not using the [alleged debt collection] letters in an attempt to collect the debt outside the foreclosure process.”). Rather, the calls were made years into the underlying foreclosure action, and after Plaintiff previously filed an FCCPA claim for this very same behavior, in an explicit attempt to collect a debt. (Doc. 2, ¶ 16 (“This is . . . your mortgage servicer, calling in regards to your mortgage. . . . This is an attempt to collect a debt . . . .”).) To try to claim now that these calls were made in an attempt to foreclose the security interest rather than to collect a debt is simply disingenuous. See Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1217 (11th Cir. 2012)  [*6] (holding that a letter explicitly stating that the defendant was attempting to collect a debt plainly constituted debt-collection activity, and noting that “[t]he fact that the letter and documents relate to the enforcement of a security interest does not prevent them from also relating to the collection of a debt”). To give credence to that argument would be to give carte blanche to any holder of secured debts to harass consumers in the process of foreclosure, and as the U.S. Court of Appeals for the Eleventh Circuit aptly noted, “That can’t be right. It isn’t.” Id. at 1218.

Plaintiff has alleged that Defendant bypassed his lawyer and called him directly to discuss payment on his mortgage and to attempt to collect a debt. (Doc. 2, ¶¶ 16-18.) This is precisely the kind of behavior that the FCCPA was designed to prevent. The Court therefore finds that Plaintiff has sufficiently stated an FCCPA claim, and Defendant’s motion is due to be denied on that ground.

II. TCPA

The TCPA prohibits making any call using an autodialer to any cell phone, except for emergency calls or calls where the called party has given prior consent. 47 U.S.C. § 227(b)(1)(A)(iii). Defendant argues that all debt-collection  [*7] calls, including those made to cell phones, are categorically exempt from the TCPA. (Doc. 12, p. 7.) However, the case on which Defendant relies for that proposition, Meadows v. Franklin Collection Serv., Inc., 414 F. App’x 230 (11th Cir. 2011), is distinguishable from the one at bar.

In Meadows, the plaintiff was suing under two provisions of the TCPA which are inapplicable here: § 227(b)(1)(B), regarding landlines, 2 and § 227(c)(5), regarding telephone solicitations. 3 Id. at 235-36. Neither of those provisions apply in this case, as Plaintiff is suing under § 227(b)(1)(A)(iii), regarding cell phones. (See Doc. 2, ¶ 21.) Though Meadows does broadly state that “the FCC has determined that all debt-collection circumstances are excluded from the TCPA’s coverage,” that statement is dicta and is also qualified by the narrow holding of the case, which was specifically based on the landline and telephone-solicitation provisions. 414 F. App’x at 235.

FOOTNOTES

2 The court held that the defendant did not violate the landline provision because it had an existing business relationship with the intended recipient of the call and the call was made for a commercial, non-solicitation purpose—both explicit  [*8] exemptions from that provision of the TCPA. Meadows, 414 F. App’x at 235 (citing In re Rules & Regulations Implementing Tel. Consumer Prot. Act of 1991, 7 FCC Rcd. 8752, 8773 (Oct. 16, 1992) (“[P]rerecorded debt collection calls would be exempt from the prohibitions on such calls to residences as: (1) calls from a party with whom the consumer has an established business relationship, and (2) commercial calls which do not adversely affect privacy rights and which do not transmit an unsolicited advertisement.” (emphasis added)).

3 The court held that the defendant did not violate the telephone-solicitation provision because the calls made were debt collections, not telephone solicitations. Meadows, 414 F. App’x at 236. The court rightly noted that the FCC has determined that debt-collection calls are “not subject to the TCPA’s separate restrictions on telephone solicitations.Id. (citation and internal quotation marks omitted) (emphasis added).

Further, this Court must read that statement in Meadows in conjunction with the FCC ruling on which it relies, which provides that “prior express consent [in debt-collection calls made to cell phones] is deemed to be granted only if the wireless  [*9] number was provided by the consumer to the creditor, and that such number was provided during the transaction that resulted in the debt owed.” In re Rules & Regulations Implementing Tel. Consumer Prot. Act of 1991, Request of ACA Int’l for Clarification & Declaratory Ruling, 23 FCC Rcd. 559, 564-65 (Dec. 28, 2007) (FCC Ruling). This ruling clarifies that not all debt-collection calls to cell phones are categorically exempted from the TCPA—unlike the broad exemptions for landline debt-collection calls and telephone solicitations, which are based on the content of the call itself. See id. at 561-62 (“[P]rerecorded debt collection calls are exempted from Section 227(b)(1)(B) of the TCPA which prohibits prerecorded or artificial voice messages to residences.”), 565 (“[C]alls solely for the purpose of debt collection are not telephone solicitations . . . . Therefore, calls regarding debt collection . . . are not subject to the TCPA’s separate restrictions on ‘telephone solicitations.’”). Rather, with regard to cell phones, a debt collector must show that the debtor provided the number during the debt transaction; only then will a debt-collection call fall under the consent exception in  [*10] the cell-phone provision. See Gager v. Dell Fin. Servs., LLC, 727 F.3d 265, 273 (3d Cir. 2013) (“The only exemptions in the TCPA that apply to cellular phones are for emergency calls and calls made with prior express consent. Unlike the exemptions that apply exclusively to residential lines, there is no . . . debt collection exemption that applies to autodialed calls made to cellular phones. Thus, the content-based exemptions invoked by [the defendant] are inapposite.”).

In sum, debt-collection calls to cell phones are only exempt from the TCPA if the debtor had prior express consent, in the form of a number provided by the debtor during the transaction giving rise to that debt. See FCC Ruling, 23 FCC Rcd. at 564-65. As Plaintiff has pled that he did not give consent or alternatively revoked consent (Doc. 2, ¶¶ 22-23), he has adequately stated a TCPA claim, and Defendant’s motion is due to be denied on that ground. It will be Defendant’s task to prove consent at the summary-judgment stage. See FCC Ruling, 23 FCC Rcd. at 565 (putting the burden on the caller to show consent); see, e.g., Osorio v. State Farm Bank, F.S.B., 859 F. Supp. 2d 1326, 1330-31 (S.D. Fla. 2012) (reviewing the issue  [*11] of consent and revocation on summary judgment).

CONCLUSION

Accordingly, it is hereby ORDERED AND ADJUDGED that Defendant Wells Fargo’s  Click for Enhanced Coverage Linking SearchesMotion to Dismiss Plaintiff Andrew Conklin’s Complaint and Supporting Legal Memorandum (Doc. 12) is DENIED.

DONE AND ORDERED in Chambers in Orlando, Florida, on December 8, 2013.

/s/ Roy B. Dalton Jr.

ROY B. DALTON JR.

United States District Judge

 

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

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

 How can possession of an ALLONGE construed as ownership

of the debt without any other evidence being presented?

Why is the standard definition of “Allonge” ignored?

IF THE COURT IS USING THE TERMS OF “ALLONGE”, “ASSIGNMENT”AND “ENDORSEMENT” INTERCHANGEABLY, WHY DOES ALL THE LITERATURE ON LEGAL DEFINITION AND ELEMENTS SAY OTHERWISE? ARE WE MAKING A NEW UCC?

WHY ARE COURTS ALLOWING ENDORSEMENTS (SHOULD BE SPELLED “INDORSEMENT”) IN BLANK TO TRANSFER THE LOAN WHEN THE BASIS OF THE PROPONENT’S AUTHORITY TO FORECLOSE IS A DOCUMENT THAT FORBIDS ACCEPTANCE OF  ENDORSEMENTS IN BLANK?

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

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

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

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

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

 Here is the question posed by my Canadian friend:

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

 And here is my response:

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

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

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

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

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

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

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

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

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

HSBC Hit with Foreclosure Suit; FHA’s $115 Billion Loss Scenario; Return of the Synthetic CDO?
http://www.americanbanker.com/bankthink/hsbc-hit-with-foreclosure-suit-fhas-115-billion-dollar-loss-scenario-1059622-1.html
Massachusetts foreclosures decline 79% as local laws stall the process
http://www.housingwire.com/news/2013/06/05/massachusetts-foreclosures-decline-79-local-laws-stall-process
———————————————–
Money from thin air? If the bank does not create currency or money then where does the money come from? Answer investor deposits into what they thought was an account for a REMIC trust. And if the money came from investors then the banks were intermediaries whether they took money on deposit, or they were the underwriter and seller of mortgage bonds issued from non existent entities, backed by non existent loans. And any money received by the banks should have been for benefit of the investors or the REMIC trust if the DID deposit the money into a trust or fiduciary account.Dan Kervick: Do Banks Create Money from Thin Air?
http://www.nakedcapitalism.com/2013/06/dan-kervick-do-banks-create-money-from-thin-air.html

STRATEGY: FORECLOSURE BY PRETENDER LENDER FOLLOWED BY BORROWER’S ACTION FOR DAMAGES

OCC: 13 Questions to Answer Before Foreclosure and Eviction

13 Questions Before You Can Foreclose

foreclosure_standards_42013 — this one works for sure

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

SEE ALSO: http://WWW.LIVINGLIES-STORE.COM

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 PROVIDE ACTIVE LITIGATION SUPPORT to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

EDITOR’S ANALYSIS AND PRACTICE TIPS FOR LAWYERS: One of the things that I noticed about the cases which I have followed or which have been reported to me anecdotally is that the borrower or borrower’s attorney invokes defenses and counterclaims that makes the case far more complex than the judge is willing to hear.

If you really want to win on the trial court level or make a good record for a successful appeal, the legal and factual argument needs to be simplified. I have previously made a big point about how a judge has very little choice but to allow the foreclosure to proceed once the elements of a foreclosure have been admitted by the borrower or borrower’s attorney. All the other issues are really the basis of a lawsuit in which the causes of action seek the remedy of monetary damages.

Foreclosure is an equitable remedy which calls for less judgment on the part of the judge that it does for him or her to perform a ministerial act. The mistake that is being made by most attorneys (and perhaps I added to the confusion unintentionally) is that  they have failed to distinguish between the equitable and legal remedies. This calls for some careful action by the lawyer or else he or she will be open to a later argument of collateral estoppel or res judicata.

In the nonjudicial states the equitable remedy of foreclosure is made even more ministerial and less subject to challenge based upon the merits of the claim of the pretender lender to collect payments from the borrower and to foreclose when the borrower ceases to make payments. The fact that the system was not set up by the legislature to accommodate or regulate wrongful foreclosures by non-creditors is not a basis for asking a judge to rewrite the law.

In Massachusetts this issue was highlighted in the Eaton case. Before that case Massachusetts specifically allowed the equitable remedy of foreclosure merely upon allegation and proof that the foreclosing party possessed the mortgage document under circumstances where there was at least probable cause to believe that the foreclosing party had the right to enforce it and use it.

In the Eaton case the court was careful to state that the ruling applied only prospectively and not retroactively. In that case they attempted to deal with the issue of whether an actual debt existed,  whether a creditor debtor relationship existed between the foreclosing party and the homeowner, whether the note and mortgage were valid, and whether a foreclosure could go forward without any showing that the foreclosing party was a creditor or even had possession of the note. The court decided that ownership of the note was essential to allowing the foreclosure to proceed.

Based upon the huge volume of statistical and anecdotal evidence there can be little doubt that most of the foreclosures and foreclosure sales have been illegally conducted and wrongful. That doesn’t mean they are void. The purpose of the statutes as they are written is to enhance  liquidity and certainty in the marketplace; thus they allow almost every type of foreclosure to proceed through the conclusion of those proceedings as set forth in the statutes, with the added presumption that if malfeasance lay at the core of the foreclosure proceeding, the borrower would have an adequate remedy at law, to wit: a lawsuit for compensatory damages, punitive damages and exemplary damages.

Of course we all know that an action for damages is not an adequate remedy for somebody who has been evicted from their own home. But the problem is that before the securitization scam, the idea that anyone would attempt to foreclose on a mortgage without being a creditor and having no relationship to a creditor and without having a single cent invested in either the origination or acquisition of the loan would have been regarded as pure fantasy. From that standpoint the legislation makes sense. If you feel you are fighting an uphill battle, look at it from the point of view of the legislature and the banks that were making conventional loans and you can easily see why the law facilitated the mortgage foreclosure process.

When I was first interviewing law professors and judges back in 2007 and 2008 the unanimous opinion was that it would be very difficult to stop the foreclosures from proceeding but very easy to win an action after the foreclosure seeking monetary damages. The interesting thing here is that these people instantly understood that the lawsuit would have alternative counts. Either the pretender lender had an actual interest in the loan as evidenced by the note and mortgage or they didn’t.

If they did have an interest in the loan then the causes of action would be based on breach of contract and perhaps unjust enrichment along with statutory violations taken from federal and state law. There could also be an action for wrongful foreclosure that is recognized to exist in the common law and appears to be more of an action in tort than contract.

If they didn’t have an interest in the loan then there would be no action in contract since you would be alleging a lack of privity and defects in the disclosure documents, and closing documents including but not limited to the note and mortgage. It appears to me that this action would be based mostly on intentional interference in the contractual relations of another and both statutory and common law fraud in the inducement and fraud in the execution. Statutory actions brought under the truth in lending act might be sufficient to state a cause of action for treble damages, interest, costs of the action and recovery of attorney’s fees.

The point raised by the law professors and other experts with whom I consulted was that the goalpost would constantly be moved as the borrower attempted to stop the foreclosure and sale from going forward. Once completed, however, the actions of the pretender lender are essentially engraved in stone.

The action for damages should of course be accompanied by a demand for jury trial. The liability portion of the trial should be relatively simple involving simple arithmetic and a logical progression of claimed ownership of the loan. The last defensive strategy of the banks is going to be based on circular logic, to wit: that there is no damage because the foreclosure sale was valid and that the sale must be considered valid because it is already done; and if it is already done the deed issued upon foreclosure sale at the alleged auction is presumptively valid. In other words “what we did was valid because we did it.”

In my opinion there is big money in these lawsuits for damages and lawyers are encouraged to do the research and analysis. My firm is taking these cases on contingency where the right elements are present. So far everyone who has done their own research and analysis has arrived at the same conclusion expressed in this article. But there is a huge trapdoor that litigators must avoid.

Just like a petition for bankruptcy creates an administrative proceeding before a bankruptcy judge which is not the same as a civil litigation proceeding which would be filed in front of the federal district judge, a litigator in a foreclosure action must be careful to narrow the issues such that the foreclosure proceedings do not include allegations and proof directed against the pretender lender for not being the creditor and not having any authority to represent a creditor.

In judicial states this would mean a motion to dismiss or motion to strike any allegation that might lead to a final judgment in which the court finds a debt owed  to the pretender lender from the homeowner.

The point must be made that the preoccupation of the judge with the payments from the borrower should mean that “payments” are at issue. If payments are at issue than the payments made and received by the pretender lender and its predecessors or successors must be given equal time in a court of law — not just payments made and received by the alleged borrower.

Strategically the litigator should point out that the foreclosure process is essentially an administrative process involving ministerial duties by the judge. It should be argued that if the judge wants to allow the foreclosure to proceed and to allow the sale at auction to proceed, that is one issue.

But if the judge wants to enter a judgment based upon a debt, and a note and mortgage which supposedly describe the debt and the repayment terms, and based upon alleged ownership of the debt —  then the party intending to foreclose must allege injury which means that they too are required to produce evidence of payment and evidence of loss. The only acceptable evidence for that would be a canceled check, wire transfer receipt or other actual document generated by a third-party showing the actual movement of money.

Thus the judge should be guided towards a judgment that he or she already wants to enter, to wit: allow the foreclosure to proceed. In the lawsuit filed by the borrower after the foreclosure sale a different judge will probably hear the case. If presented skillfully, the judge may react warmly to the opportunity of getting another case off of their docket.

Critics say Michigan foreclosure bills seek to ‘get people out of their homes quicker’
http://www.mlive.com/politics/index.ssf/2013/05/critics_say_michigan_foreclosu.html

Keeping The ‘Recovery’ Dream Alive; 3 Big Banks Halt Foreclosures In May
http://www.zerohedge.com/news/2013-05-28/keeping-recovery-dream-alive-3-big-banks-halt-foreclosures-may

Banks Snap Up Foreclosure Aid Meant for Borrowers
http://www.hispanicbusiness.com/2013/5/28/banks_snap_up_foreclosure_aid_meant.htm

Activist homeowners take foreclosure fight to the DOJ
http://www.housingwire.com/fastnews/2013/05/28/activist-homeowners-take-foreclosure-fight-doj

Regulators probing banks for faulty debt collection practices
http://www.washingtonpost.com/business/economy/regulators-probing-banks-for-faulty-debt-collection-practices/2013/05/28/9f40bca2-bbd0-11e2-89c9-3be8095fe767_story.html

 

Fannie and Freddie Ignore Homeowners in Detroit

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

SEE ALSO: http://WWW.LIVINGLIES-STORE.COM

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

————————————-

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

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

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

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

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

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

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

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

http://www.huffingtonpost.com/2013/05/18/detroit-foreclosure-hearing-fannie-mae-freddie-mac_n_3293854.html

Fed Pours Huge Sums Into Foreign Bank Coffers
http://www.ritholtz.com/blog/2013/05/fed-pours-huge-sums-into-foreign-bank-coffers/

Nearly half of all US homeowners with a mortgage still ‘underwater’ in Q1
http://www.inman.com/2013/05/22/nearly-half-of-all-us-homeowners-with-a-mortgage-still-underwater-in-q1/

Foreclosure Victims Protesting Wall Street Impunity Outside DOJ Arrested, Tasered
http://www.truth-out.org/news/item/16527-victims-of-foreclosure-arrested-tasered-protesting-wall-street-impunity-outside-doj

Foreclosure Fraud Failures Come To A Head In Justice Dept. Protest
http://jdeanicite.typepad.com/i_cite/2013/05/foreclosure-fraud-failures-come-to-a-head-in-justice-dept-protest.html

Bank of America Zombie Foreclosure Protest (VIDEO)
http://4closurefraud.org/2013/05/22/bank-of-america-zombie-foreclosure-protest-video/

This is what it looks like when foreclosure fighters demand Wall Street criminals be prosecuted
http://www.youtube.com/watch?v=zvwaFJdr13Q

Chasing The Shadow Of Money
http://zerohedge.blogspot.ca/2009/05/chasing-shadow-of-money.html

“Conversion” of the Note to a Bond Leaves Confusion in the Courts

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

SEE ALSO: http://WWW.LIVINGLIES-STORE.COM

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.

Brent Bentrim, a regular contributor to the dialogue, posed a question.

I am having some trouble following this.  The note cannot be converted any more than when a stock is purchased by a mutual fund (trust) it becomes a mutual fund share.

You’re close and I understand where you seem to be going…ie, the loans were serviced not based on the note and closing documents, but on the PSA.  What I do not understand is the assumption that the note was converted.  From a security standpoint, it cannot.

You are right. When I say it was “converted” I mean in the lay sense rather a legal one. Of course it cannot be converted without the borrower signing. That is the point. But the treatment of the debt was as if it had been converted and that is where the problem lies for the Courts — hence the diametrically opposed appellate decisions in GA and MA. Once you have pinned down the opposing side to say they are relying on the PSA for their authority to bring the foreclosure action, and relying on the “assignment” without value, the issue shifts —- because the PSA and prospectus have vastly different terms for repayment of interest and principal than the note signed by the borrower.There are also different parties. The investor gets a bond from a special purpose vehicle under the assumption that the money deposited with the investment bank goes to the SPV and the SPV then buys the mortgage or funds the origination. In that scenario the payee on the note would either be the SPV or the originator. But it can’t be the originator if the originator did not fulfill its part of the bargain by funding the loan. And there is no disclosure as to the presence of other parties in the securitization chain much less the compensation they received contrary to Federal Law. (TILA).

Under the terms of the PSA and prospectus the expectation of the investor was that the investment was insured and hedged. That is one of the places where there is a break in the chain — the insurance is not made payable to either the SPV or the investors. Instead it is paid to the investment bank that merely created the entities and served as a depository institution or intermediary for the funds. The investment bank takes the position that such money is payable to them as profit in proprietary trading, which is ridiculous. They cannot take the position that they are agents of the creditor for purposes of foreclosure and then take the position that they were not agents of the investors when the money came in from insurance and credit default swaps.

Even under the actual money trail scenario the same holds true — they were acting as agents of the principal, albeit violating the terms of the “lender” agreement with the investors. Here is where another break occurred. Instead of funding the SPV, the investment bank held all investor money in a commingled undifferentiated mega account and the SPV never even had any account or signatory on any account in which money was placed.

Hence the SPV cannot be said to have purchased the loan because it lacked the funding to do it. The banks want to say that when they funded the origination or acquisition of the loan they were doing so under the PSA and prospectus. But that would only be true if they were following the provisions and terms of those instruments, which they were not. The banks funded the acquisition of loans directly with investor money instead of through the SPV, hence the tax exempt claims of the SPV’s are false and the tax effects on the investors could be far different — especially when you consider the fact that the mega suspense account in the investment bank had funds from many other investors who also thought they were investing in many different SPVs.

The reality of the money trail scenario is that the SPV can’t be the owner of the note or the owner of the mortgage because there simply was no transaction in which money or other consideration changed hands between the SPV and any other party. The same holds true for all the parties is the false securitization trail — no money was involved in the assignments. Thus it was not a commercial transaction creating a negotiable instrument.

In both scenarios the debt was created merely by the receipt of money that is presumed not to be gift. The question is whether the note, the bond or both should be used to re-structure the loan and determine the amount of interest, principal, if any that is left to pay.

The further question is if the originator did not loan any money, how can the recording of a mortgage have been proper to secure a debt that did not exist in favor of the secured party named on the mortgage or deed of trust?
And if the lender is determined by the actual money trail then the lenders consist of a group of investors, all of whom had money deposited in the account from which the acquisition of the loan was funded. And despite investment bank claims to the contrary, there is no evidence that there was any attempt to actually segregate funds based upon the PSA and prospectus. So the pool of investors consists of all investors in all SPVs rather just one — a factor that changes the income and tax status of each investor because now they are in a common law general partnership.

Thus the “conversion” language I have used, is merely shorthand to describe a far more complex process in which the written instruments were ignored, more written instruments were fabricated based upon nonexistent transactions, and no documentation was provided to the investors who were the real lenders. That leaves a common law debt that is undocumented by any promissory note or any secured interest in the property because the recorded mortgage or deed of trust was filed under false pretenses and hence was never perfected.

The conversion factor comes back in when you think about what a Judge might be able to do with this. Having none of the documentation naming and protecting the investors to document or secure the loan, the Judge must enter judgment either for the whole amount due, if any (after deductions for insurance and credit default swap proceeds) or in some payment plan.

If the Judge refers to the flawed documentation, he or she must consider the interests and expectation s of both the lender (investors) and the borrower, which means by definition that he must refer back to the prospectus and PSA as well as the promissory note.
The interesting thing about all this is that homeowners are of course willing to sign new mortgages that reflect the economic reality of the value of their homes, and the principal balance due, as well as money that continued to be paid to the creditor by the same same servicer that declared the default (and was therefore curing the default with each payment to the creditor).
The only question left is where did the money come from that was paid to the creditor after the homeowner stopped making payments and does that further complicate the matter by adding parties who might have an unsecured right of contribution against the borrower for money  advanced advanced by an intermediary sub servicer thereby converting the debt (or that part that was paid by the subservicer from funds other than the borrower) from any claim to being secured to a potential unsecured right of contribution from the borrower.
To that extent the servicer should admit that it is suing on its behalf for the unsecured portion of the loan on which it advanced payments, and for the secured portion they claim is due to other parties. They obviously don’t want to do that because it would focus attention on the actual accounting, posting and bookkeeping for actual transfers or payments of money. The focus on reality could be devastating to the banks and reveal liabilities and reduction of claimed assets on their balance sheets that would cause them to be broken up. They are counting on the fact that not too many people will understand enough of what is contained in this post. So far it seems to be working for them.Remember that as to the insurance and credit default swaps there are express waivers of subrogation or any right to seek collection from the borrowers in the mortgages. The issue arises because the bonds were insured and thus the underlying mortgage payments were insured — a fact that played out in the real world where payments continued being made to creditors who were advancing money for “investment” in bogus mortgage bonds. This leaves only the equitable powers of the court to fashion a remedy, perhaps by agreement between the parties by which the lenders are made parties to the action and the borrowers are of course parties to the action but he servicers are left out of the mix because they have an interest in continuing the farce rather than seeing it settled, because they are receiving fees and picking up property for free (credit bids from non-creditors).

This is precisely the point that the courts are missing. By looking at the paperwork first and disregarding the actual money trail they are going down a rabbit hole neatly prepared for them by the banks. If there was no commercial transaction then the UCC doesn’t apply and neither do any presumptions of ownership, right to enforce etc.

The question of “ownership” of the note and mortgage are a distraction from the fact that neither the note or the mortgage tells the whole story of the transaction. The actions of the participants and the real movement of money governs every transaction.

Whether the courts will recognize the conversion factor or something similar remains to be seen. But it is obvious that the confusion in the courts relates directly to their ignorance of the the fact that the actual money transaction is not brought to their attention or they are ignoring it out of pure confusion as to what law to apply.

Now UCC Me, Now You Don’t: The Massachusetts Supreme Judicial Court Ignores the UCC in Requiring Unity of Note and Mortgage for Foreclosure in Eaton v. Fannie Mae
http://4closurefraud.org/2013/05/20/now-ucc-me-now-you-dont-the-massachusetts-supreme-judicial-court-ignores-the-ucc-in-requiring-unity-of-note-and-mortgage-for-foreclosure-in-eaton-v-fannie-mae/

High court rules in favor of bank in Suwanee foreclosure case
http://www.gwinnettdailypost.com/news/2013/may/20/high-court-rules-in-favor-of-bank-in-suwanee/

Wells Fargo slows foreclosure sales, BofA not so much
http://www.bizjournals.com/orlando/morning_call/2013/05/wells-fargo-slows-foreclosure-sales.html

LAWYER BONANZA!: Wells Fargo Foreclosing on Homeowner Who Made all Payments and Paid Extra

WELLS FARGO MAKES HUGE ERROR ADMITTING LACK OF POWER TO BIND CREDITOR TO MODIFICATIONS OR SETTLEMENTS

The simple truth is that the banks are not nearly as interested in the property as they are in the foreclosure. It is the foreclosure sale that creates the illusion of a stamp of approval from the state government that the entire securitization scheme was valid and it creates the reality of a presumption of the validity of the deed issued at the so-called auction of the property upon submission of  false credit bid from a non-creditor who is a stranger (not in privity) to the transaction alleged. — Neil F Garfield, livinglies.me

see also http://livinglies.wordpress.com/2013/05/16/estoppel-when-the-bank-tells-you-to-stop-making-payments/

Editor’s Comment and Analysis: Wells Fargo is foreclosing on a man who has made his payments early and made extra payments to pay down the principal allegedly due on his mortgage. In response to media questions as to their authority to foreclose, the response was curious and very revealing. Wells Fargo said that the reason was that the securitization documents contain restrictions and prohibitions that prevent modifications of mortgage.

The fact that Wells Fargo offered a particular payment plan and the homeowner accepted it together with the fact that the homeowner made the required payments and even added extra payments, all of which was accepted by Wells Fargo and cashed  doesn’t seem to bother Wells Fargo but it probably will bother a judge who sees both the doctrine of estoppel and a simple contract in which Wells Fargo had the apparent authority to make the offer, accept the payments, and bind the actual creditors (whoever they might be).

It also corroborates our continuing opinion that when Wells Fargo and similar banks received insurance and creditable swap payments, they should have been applied to the receivable account of the investors which in turn would have resulted by definition in a reduction of the amount owed. The reduction in the amount owed would obviously decrease the amount payable by the borrower. If we follow the terms of the only contract that was signed by the borrower then any overpayments to the creditor beyond account receivable held by the creditor would be due and payable to the borrower. It is a violation of the spirit and content of the federal bailout to allow the banks to keep the money that is so desperately needed by the investors who supplied the money and the homeowners whose loans were paid in whole or in part by insurance and credit default swaps.

The reason I am interested in this particular case and the reason why I think it is of ultimate importance to understand the significance of the Wells Fargo response to the media is that it corroborates the facts and theories presented here and elsewhere that the original promissory note vanished and was replaced by a mortgage bond, the terms of which were vastly different than the terms of the promissory note signed by the homeowner.

Wells Fargo seeks to impose the terms, provisions, conditions and restrictions of the securitization documents onto the buyer without realizing that they have admitted that the original promissory note signed by the homeowner and therefore the original mortgage lien or deed of trust were never presented to the actual lenders for acceptance or approval of the loan.

CONVERSION OF PROMISSORY NOTE TO MORTGAGE BOND WITHOUT NOTICE

In fact, Wells Fargo has now admitted that the terms of the loan are governed strictly by the securitization documents. How they intend to enforce securitization documents whose existence was actively hidden from the borrower is going to be an interesting question.  If the position of the banks were to be accepted, then any creditor could change the essential terms of the debt or the essential terms of repayment without notice or consent from the borrower despite the absence of any reference to such power in the documents presented to the borrower for the borrower’s signature.

 But one thing is certain, to wit: the closing documents presented to the borrower  were incomplete and failed to disclose both the real parties in table funded loans (making the loans predatory per se as per TILA and Reg Z) and the existence and compensation of intermediaries, the disclosure of which is absolutely mandatory under federal law. Each borrower who was deprived of knowledge of multiple other parties and intermediaries and their compensation has a clear right of action for recovery of all undisclosed fees, interest, payments, attorney fees and probably treble damages.

This case also clearly shows that despite the representations by counsel and “witnesses” Wells Fargo has now admitted the basic fact behind its pattern of conduct wherein they claim to be the authorized sub servicer fully empowered by the real creditors and then claim to have no responsibility or powers with respect to the loan or the real creditors (which appears to include the Federal Reserve if their purchase of mortgage bonds had any substance).

Wells Fargo, US Bank, Bank of New York and of course Bank of America have all been sanctioned with substantial fines of up to seven figures so far in individual cases where they clearly took inconsistent positions and the judge found them to be in contempt of court because of the lies they told and levied those sanctions on both the attorneys and the banks.

It was only a matter of time before this entire false foreclosure mess blew up in the face of the banks. You can be sure that Wells Fargo will attempt to bury this case by paying off the homeowner and any other people that have been involved who could blow the whistle on their illegal, fraudulent and probably criminal behavior.

This is not the end of the game for Wells Fargo or any other bank, but it is one more concrete step toward revealing basic truth behind the mortgage mess, to it: the Wall Street banks stole the money from the investors, stole the ownership of the loans from the “trusts” and have been stealing houses despite the absence of any monetary or other consideration in the origination or acquisition of any loan. This absence of consideration removes the paperwork offered by the banks from the category of a negotiable instrument. None of the presumptions applicable to negotiable instruments apply.

Once again I emphasize that in practice lawyers should immediately take control of the narrative and the case by showing that the party seeking foreclosure possesses no records of any actual or real transaction in which money exchanged hands. This means, in my opinion, that the allegations of investors in lawsuits against the investment banks on Wall Street are true, to wit: they were entitled to an forcible notes and enforceable mortgages but they didn’t get it. That is an admission in the public record by the real parties in interest that the notes and mortgages are fabricated because they referred to commercial transactions that never occurred.

Going back to my original articles when I started this blog in 2007, the solution to the current mortgage mess which includes the corruption of title records across the country is that the intermediaries should be cut out of the process of modification and settlement. A different agency should be given the power to match up investors and borrowers and facilitate the execution of new promissory notes new mortgages or deeds of trust that are in fact enforceable but based in reality as to both the value of the property and the viability of the loan. It is the intermediaries including the Wall Street banks, sub servicers, Master servicers, and so-called trustees that are abusing the court process and clogging the court calendars with false claims. Get rid of them and you get rid of the problem.

http://4closurefraud.org/2013/05/16/wells-fargo-forecloses-on-florida-man-who-paid-on-time-early/

What Obama Still Has Wrong and Why the Recession Will Drag On for years

It is encouraging that Obama is the police trying to get the housing and foreclosure situation resolved. But he is starting from a premise that is faulty just as Florida and other states are passing legislation from a similar premise, to wit: that the blame for title corruption, litigation and the court that is clogging the system, and the housing market, together with the bogus mortgage bonds that were issued by nonexistent unfunded special purpose vehicles (“trusts”) is somehow the fault of borrowers.

In his weekly Saturday address, Obama made reference to reckless behavior without specifying that the reckless behavior was that of the banks.  The pervasive and insidious assumption is that 30 million borrowers woke up one morning and decided to enter into a conspiracy that would destroy the countries economy and financial system.  If anything is obvious it is that only the Wall Street banks had the capacity and sophistication as well as the motive and opportunity to ruin the lives of millions of people, corrupt a title system that had been working perfectly for centuries, and control the governmental response using the influence they had acquired through lobbyists and direct financial contributions.

The reason that is so important is not just that the bankers probably belong in jail just like they ended up going to prison in the savings-and-loan crisis of the 1980s;  the real reason it is important to start with the premise that the banks on Wall Street created a fraudulent Ponzi scheme that has not yet been addressed. Neither the economy nor the corrupted title system in our country can enjoy any serious correction without at least considering the idea that the entire bogus plan  of false securitization was premeditated and clearly intentional.

This is not to say that there was no fraud on the part of any of the borrowers. But it is quite obvious from news reports that any prosecutions for mortgage fraud have been directed at borrowers who merely used the same techniques, procedures, tactics and fabricated documents that the banks used when they caused the loans to be originated and caused the worthless paper from the “loan closing” to be assigned, sold, insured and hedged as though the loans were the property of the Wall Street banks who in fact had merely used the deposits of unsuspecting investors. Even a appraisal fraud is being prosecuted against small individual investors who merely followed the directions of the thinly capitalized” originator” and mortgage broker. The reason those loans went through was not because of the fraudulent intent of the actors who were prosecuted but because of the fraudulent intent of the Wall Street banks and their affiliates whose business plan called for the origination of loans in unsustainable amounts and the diversion  of the documents that were supposed to protect the investors whose money was used for the origination or acquisition of loans.

If the securitization of debt had been real, there would’ve been no need for MERS, or  any private system that was used in reality to track transactions that were a complete sham. The Wall Street banks made sure that they used the money of third parties and created “paper closings” in favor of entities, “originators”, and even banks who pretended to underwrite the loans but who never had any risk of loss and in fact in most cases never showed any bookkeeping or accounting entries reflecting the creation of a loan receivable. The amount of “money” in the shadow banking system of insurance, collateralized debt obligations, credit default swaps and other exotic instruments is now said to exceed one quadrillion dollars. It is universally accepted, and I agree, that this amount is geometrically larger than any real money in the system, with estimates of real value varying from $25 trillion-$70 trillion.

My point here is simply that the Wall Street banks entered into a relationship with investors wherein the investors were principles of the Wall Street banks were agents. Regardless of how many layers the Wall Street banks used in terms of the use of subsidiaries and affiliates, their actions were subject to the expectations of the investors and the written promises to those investors, all of which were breached nearly all of the time by the Wall Street banks. Hence their trading in the defect of loans and unenforceable paper created at the “paper closings” produced a volume of “trading profits” which were in reality the proceeds of transactions that should have been used to reimburse the investors.

Once you accept the notion that the above scenario is true, the legal question of whether or not a monthly payment is due or in fact whether any payment is due from the borrower becomes the front and Center question in all action seeking to collect or foreclose on consumer debt including but not limited to alleged “mortgages”.

PRACTICE note:  this is why you want to issue a subpoena or other discovery device that forces the party seeking foreclosure or collection to produce a live witness and documents that shows that there is an actual risk of loss by virtue of an actual transaction on a specific date for a specific amount of money which was paid by the party seeking foreclosure to another party who actually on the loan by virtue of another actual transaction on another specific date for a specific amount of money that was paid by check, wire transfer, ACH, or check 21. All the information that I have indicates that none of those transactions actually occurred, no money ever exchanged hands, and that the assignments and endorsements reflect transactions that were a sham —  including but not limited to the so-called “origination” or assignment or any other form of acquisition of the loan.  This is important not only on the issue of standing and subject matter jurisdiction in which there is no injured party, but on the issue of identifying a party who could conceivably submit a credit bid at the time of the auction of the foreclosed property. In judicial states the final judgment of foreclosure identifies the amount of the judgment awarded without there having been any actual  trial or hearing in which evidence is heard on the actual payment, proof of loss, and the dates and amounts in which money  exchanged hands.  this entitles the foreclosing party to submit a credit bid when in fact they never had paid any money toward the origination or acquisition of the loan. Thus it is important to bring the issue up very early by way of subpoena to show that the party seeking foreclosure lacks standing, and has filed an action for which there is no substantive jurisdiction, nor any remedy without  a financial injury.

Weekly Address: Growing the Housing Market and Supporting our Homeowners
http://www.whitehouse.gov/blog/2013/05/11/weekly-address-growing-housing-market-and-supporting-our-homeowners

Hawaii Federal District Court Applies Rules of Evidence: BONY/Mellon, US Bank, JP Morgan Chase Failed to Prove Sale of Note

This quiet title claim against U.S. Bank and BONY (collectively, “Defendants”) is based on the assertion that Defendants have no interest in the Plaintiffs’ mortgage loan, yet have nonetheless sought to foreclose on the subject property.

Currently before the court is Defendants’ Motion for Summary Judgment, arguing that Plaintiffs’ quiet title claim fails because there is no genuine issue of material fact that Plaintiffs’ loan was sold into a public security managed by BONY, and Plaintiffs cannot tender the loan proceeds. Based on the following, the court finds that because Defendants have not established that the mortgage loans were sold into a public security involving Defendants, the court DENIES Defendants’ Motion for Summary Judgment.

Editor’s Note: We will be commenting on this case for the rest of the week in addition to bringing you other news. Suffice it to say that the Court corroborates the essential premises of this blog, to wit:

  1. Quiet title claims should not be dismissed. They should be heard and decided based upon the facts admitted into evidence.
  2. Presumptions are not to be used in lieu of evidence where the opposing party has denied the underlying facts and the conclusion expressed in the presumption. In other words, a presumption cannot be used to lead to a result that is contrary to the facts.
  3. Being a “holder” is a a conclusion of law created by certain presumptions. It is not a plain statement of ultimate facts. If a party wishes to assert holder or holder in due course status they must plead and prove the facts supporting that legal conclusion.
  4. A sale of the note does not occur without proof under simple contract doctrine. There must be an offer, acceptance and consideration. Without the consideration there is no sale and any presumption arising out of the allegation that a party is a holder or that the loan was sold fails on its face.
  5. Self serving letters announcing authority to represent investors are insufficient in establishing a foundation for testimony or other proof that the actor was indeed authorized. A competent witness must provide the factual testimony to provide a foundation for introduction of a binding legal document showing authority and even then the opposing party may challenge the execution or creation of such instruments.
  6. [Tactical conclusion: opposing motion for summary judgment should be filed with an affidavit alleging the necessary facts when the pretender lender files its motion for summary judgment. If the pretender's affidavit is struck down and/or their motion for summary judgment is denied, they have probably created a procedural void where the Judge has no choice but to grant summary judgment to homeowner.]
  7. “When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587.” See case below
  8. “a plaintiff asserting a quiet title claim must establish his superior title by showing the strength of his title as opposed to merely attacking the title of the defendant.” {Tactical: by admitting the note, mortgage. debt and default, and then attacking the title chain of the foreclosing party you have NOT established the elements for quiet title. THAT is why we have been pounding on the strategy that makes sense: DENY and DISCOVER: Lawyers take note. Just because you think you know what is going on doesn’t mean you do. Advice given under the presumption that the debt is genuine when that is in fact a mistake of the homeowner which you are compounding with your advice. Why assume the debt, note , mortgage and default are genuine when you really don’t know? Why would you admit that?}
  9. It is both wise and necessary to deny the debt, note, mortgage, and default as to the party attempting to foreclose. Don’t try to prove your case in your pleading. Each additional “explanatory” allegation paints you into a corner. Pleading requires a short plain statement of ultimate facts upon which relief could be legally granted.
  10. A denial of signature on a document that is indisputably signed will be considered frivolous. [However an allegation that the document is not an original and/or that the signature was procured by fraud or mistake is not frivolous. Coupled with allegation that the named lender did not loan the money at all and that in fact the homeowner never received any money from the lender named on the note, you establish that the deal was sign the note and we'll give you money. You signed the note, but they didn't give you the money. Therefore those documents may not be used against you. ]

MELVIN KEAKAKU AMINA and DONNA MAE AMINA, Husband and Wife, Plaintiffs,
v.
THE BANK OF NEW YORK MELLON, FKA THE BANK OF NEW YORK; U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR J.P. MORGAN MORTGAGE ACQUISITION TRUST 2006-WMC2, ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-WMC2 Defendants.
Civil No. 11-00714 JMS/BMK.

United States District Court, D. Hawaii.
ORDER DENYING DEFENDANTS THE BANK OF NEW YORK MELLON, FKA THE BANK OF NEW YORK AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR J.P. MORGAN MORTGAGE ACQUISITION TRUST 2006-WMC2, ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-WMC2′S MOTION FOR SUMMARY JUDGMENT
J. MICHAEL SEABRIGHT, District Judge.
I. INTRODUCTION

This is Plaintiffs Melvin Keakaku Amina and Donna Mae Amina’s (“Plaintiffs”) second action filed in this court concerning a mortgage transaction and alleged subsequent threatened foreclosure of real property located at 2304 Metcalf Street #2, Honolulu, Hawaii 96822 (the “subject property”). Late in Plaintiffs’ first action, Amina et al. v. WMC Mortgage Corp. et al., Civ. No. 10-00165 JMS-KSC (“Plaintiffs’ First Action”), Plaintiffs sought to substitute The Bank of New York Mellon, FKA the Bank of New York (“BONY”) on the basis that one of the defendants’ counsel asserted that BONY owned the mortgage loans. After the court denied Plaintiffs’ motion to substitute, Plaintiffs brought this action alleging a single claim to quiet title against BONY. Plaintiffs have since filed a Verified Second Amended Complaint (“SAC”), adding as a Defendant U.S. Bank National Association, as Trustee for J.P. Morgan Mortgage Acquisition Trust 2006-WMC2, Asset Backed Pass-through Certificates, Series 2006-WMC2 (“U.S. Bank”). This quiet title claim against U.S. Bank and BONY (collectively, “Defendants”) is based on the assertion that Defendants have no interest in the Plaintiffs’ mortgage loan, yet have nonetheless sought to foreclose on the subject property.

Currently before the court is Defendants’ Motion for Summary Judgment, arguing that Plaintiffs’ quiet title claim fails because there is no genuine issue of material fact that Plaintiffs’ loan was sold into a public security managed by BONY, and Plaintiffs cannot tender the loan proceeds. Based on the following, the court finds that because Defendants have not established that the mortgage loans were sold into a public security involving Defendants, the court DENIES Defendants’ Motion for Summary Judgment.

II. BACKGROUND

A. Factual Background
Plaintiffs own the subject property. See Doc. No. 60, SAC ¶ 17. On February 24, 2006, Plaintiffs obtained two mortgage loans from WMC Mortgage Corp. (“WMC”) — one for $880,000, and another for $220,000, both secured by the subject property.See Doc. Nos. 68-6-68-8, Defs.’ Exs. E-G.[1]

In Plaintiffs’ First Action, it was undisputed that WMC no longer held the mortgage loans. Defendants assert that the mortgage loans were sold into a public security managed by BONY, and that Chase is the servicer of the loan and is authorized by the security to handle any concerns on BONY’s behalf. See Doc. No. 68, Defs.’ Concise Statement of Facts (“CSF”) ¶ 7. Defendants further assert that the Pooling and Service Agreement (“PSA”) dated June 1, 2006 (of which Plaintiffs’ mortgage loan is allegedly a part) grants Chase the authority to institute foreclosure proceedings. Id. ¶ 8.

In a February 3, 2010 letter, Chase informed Plaintiffs that they are in default on their mortgage and that failure to cure default will result in Chase commencing foreclosure proceedings. Doc. No. 68-13, Defs.’ Ex. L. Plaintiffs also received a March 2, 2011 letter from Chase stating that the mortgage loan “was sold to a public security managed by [BONY] and may include a number of investors. As the servicer of your loan, Chase is authorized by the security to handle any related concerns on their behalf.” Doc. No. 68-11, Defs.’ Ex. J.

On October 19, 2012, Derek Wong of RCO Hawaii, L.L.L.C., attorney for U.S. Bank, submitted a proof of claim in case number 12-00079 in the U.S. Bankruptcy Court, District of Hawaii, involving Melvin Amina. Doc. No. 68-14, Defs.’ Ex. M.

Plaintiffs stopped making payments on the mortgage loans in late 2008 or 2009, have not paid off the loans, and cannot tender all of the amounts due under the mortgage loans. See Doc. No. 68-5, Defs.’ Ex. D at 48, 49, 55-60; Doc. No. 68-6, Defs.’ Ex. E at 29-32.

>B. Procedural Background
>Plaintiffs filed this action against BONY on November 28, 2011, filed their First Amended Complaint on June 5, 2012, and filed their SAC adding U.S. Bank as a Defendant on October 19, 2012.

On December 13, 2012, Defendants filed their Motion for Summary Judgment. Plaintiffs filed an Opposition on February 28, 2013, and Defendants filed a Reply on March 4, 2013. A hearing was held on March 4, 2013.
At the March 4, 2013 hearing, the court raised the fact that Defendants failed to present any evidence establishing ownership of the mortgage loan. Upon Defendants’ request, the court granted Defendants additional time to file a supplemental brief.[2] On April 1, 2013, Defendants filed their supplemental brief, stating that they were unable to gather evidence establishing ownership of the mortgage loan within the time allotted. Doc. No. 93.

III. STANDARD OF REVIEW

Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The burden initially lies with the moving party to show that there is no genuine issue of material fact. See Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323). If the moving party carries its burden, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forwards with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal quotation signals omitted).

An issue is `genuine’ only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is `material’ only if it could affect the outcome of the suit under the governing law.” In re Barboza,545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587.

IV. DISCUSSION

As the court previously explained in its August 9, 2012 Order Denying BONY’s Motion to Dismiss Verified Amended Complaint, see Amina v. Bank of New York Mellon,2012 WL 3283513 (D. Haw. Aug. 9, 2012), a plaintiff asserting a quiet title claim must establish his superior title by showing the strength of his title as opposed to merely attacking the title of the defendant. This axiom applies in the numerous cases in which this court has dismissed quiet title claims that are based on allegations that a mortgagee cannot foreclose where it has not established that it holds the note, or because securitization of the mortgage loan was defective. In such cases, this court has held that to maintain a quiet title claim against a mortgagee, a borrower must establish his superior title by alleging an ability to tender the loan proceeds.[3]

This action differs from these other quiet title actions brought by mortgagors seeking to stave off foreclosure by the mortgagee. As alleged in Plaintiffs’ pleadings, this is not a case where Plaintiffs assert that Defendants’ mortgagee status is invalid (for example, because the mortgage loan was securitized, Defendants do not hold the note, or MERS lacked authority to assign the mortgage loans). See id. at *5. Rather, Plaintiffs assert that Defendants are not mortgagees whatsoever and that there is no record evidence of any assignment of the mortgage loan to Defendants.[4] See Doc. No. 58, SAC ¶¶ 1-4, 6, 13-1 — 13-3.

In support of their Motion for Summary Judgment, Defendants assert that Plaintiffs’ mortgage loan was sold into a public security which is managed by BONY and which U.S. Bank is the trustee. To establish this fact, Defendants cite to the March 2, 2011 letter from Chase to Plaintiffs asserting that “[y]our loan was sold to a public security managed by The Bank of New York and may include a number of investors. As the servicer of your loan, Chase is authorized to handle any related concerns on their behalf.” See Doc. No. 68-11, Defs.’ Ex. J. Defendants also present the PSA naming U.S. Bank as trustee. See Doc. No. 68-12, Defs.’ Ex. J. Contrary to Defendants’ argument, the letter does not establish that Plaintiffs’ mortgage loan was sold into a public security, much less a public security managed by BONY and for which U.S. Bank is the trustee. Nor does the PSA establish that it governs Plaintiffs’ mortgage loans. As a result, Defendants have failed to carry their initial burden on summary judgment of showing that there is no genuine issue of material fact that Defendants may foreclose on the subject property. Indeed, Defendants admit as much in their Supplemental Brief — they concede that they were unable to present evidence that Defendants have an interest in the mortgage loans by the supplemental briefing deadline. See Doc. No. 93.

Defendants also argue that Plaintiffs’ claim fails as to BONY because BONY never claimed an interest in the subject property on its own behalf. Rather, the March 2, 2011 letter provides that BONY is only managing the security. See Doc. No. 67-1, Defs.’ Mot. at 21. At this time, the court rejects this argument — the March 2, 2011 letter does not identify who owns the public security into which the mortgage loan was allegedly sold, and BONY is the only entity identified as responsible for the public security. As a result, Plaintiffs’ quiet title claim against BONY is not unsubstantiated.

V. CONCLUSION

Based on the above, the court DENIES Defendants’ Motion for Summary Judgment.

IT IS SO ORDERED.

[1] In their Opposition, Plaintiffs object to Defendants’ exhibits on the basis that the sponsoring declarant lacks and/or fails to establish the basis of personal knowledge of the exhibits. See Doc. No. 80, Pls.’ Opp’n at 3-4. Because Defendants have failed to carry their burden on summary judgment regardless of the admissibility of their exhibits, the court need not resolve these objections.

Plaintiffs also apparently dispute whether they signed the mortgage loans. See Doc. No. 80, Pls.’ Opp’n at 7-8. This objection appears to be wholly frivolous — Plaintiffs have previously admitted that they took out the mortgage loans. The court need not, however, engage Plaintiffs’ new assertions to determine the Motion for Summary Judgment.

[2] On March 22, 2013, Plaintiffs filed an “Objection to [87] Order Allowing Defendants to File Supplemental Brief for their Motion for Summary Judgment.” Doc. No. 90. In light of Defendants’ Supplemental Brief stating that they were unable to provide evidence at this time and this Order, the court DEEMS MOOT this Objection.

[3] See, e.g., Fed Nat’l Mortg. Ass’n v. Kamakau, 2012 WL 622169, at *9 (D. Haw. Feb. 23, 2012);Lindsey v. Meridias Cap., Inc., 2012 WL 488282, at *9 (D. Haw. Feb. 14, 2012)Menashe v. Bank of N.Y., ___ F. Supp. 2d ___, 2012 WL 397437, at *19 (D. Haw. Feb. 6, 2012)Teaupa v. U.S. Nat’l Bank N.A., 836 F. Supp. 2d 1083, 1103 (D. Haw. 2011)Abubo v. Bank of N.Y. Mellon, 2011 WL 6011787, at *5 (D. Haw. Nov. 30, 2011)Long v. Deutsche Bank Nat’l Tr. Co., 2011 WL 5079586, at *11 (D. Haw. Oct. 24, 2011).

[4] Although the SAC also includes some allegations asserting that the mortgage loan could not be part of the PSA given its closing date, Doc. No. 60, SAC ¶ 13-4, and that MERS could not legally assign the mortgage loans, id. ¶ 13-9, the overall thrust of Plaintiffs’ claims appears to be that Defendants are not the mortgagees (as opposed to that Defendants’ mortgagee status is defective). Indeed, Plaintiffs agreed with the court’s characterization of their claim that they are asserting that Defendants “have no more interest in this mortgage than some guy off the street does.” See Doc. No. 88, Tr. at 9-10. Because Defendants fail to establish a basis for their right to foreclose, the court does not address the viability of Plaintiffs’ claims if and when Defendants establish mortgagee status.

Banks Throw $20 Billion at Securitized Debt Market to Avoid Markdowns

Bloomberg Reports that the big banks are borrowing big time money using money market funds as source money for financing repurchase agreements. This stirs the obvious conclusion that the mortgage bonds — and hence the claim on underlying loans — are in constant movement making the proof problems in foreclosure proceedings difficult at best.

The underlying theme is that there is tremendous pressure to make good on the mortgage bonds that never actually existed issued by REMIC trusts that were never actually funded who made claims on loans that never actually existed. All that is why I say you should argue away from the presumption and keep the burden of persuasion or burden of proof on the party who has exclusive access to the actual proof of payment and proof of loss.

The banks are still claiming assets on their balance sheet that are either without value of any kind or something close to zero. If I was wrong about this, the banks would be flooding all the courts with proof of payment (canceled check, wire transfer receipt etc) and the contest with borrowers would be over.

Instead they argue for the presumption that attaches to the “holder” and mislead the court into thinking that possession is the same as being the holder. It isn’t. The holder is someone who acquired the instrument “for value.” By denying the holder status and contesting whether there was any consideration for the endorsement or assignment of the loan, you are putting them in position to force them to come clean and show that there was NO consideration, NO money paid, and hence they are not holders in any sense of the word.

If you research the law in your state you will find that the prima facie case required from the would-be forecloser depends factually upon whether they are an injured party. If they didn’t pay anything for the origination or transfer of the loan, they can’t be an injured party. They must also show that their injury stems from the breach of the borrower and the breach of some intermediary. That is where the repurchase agreements and financing for all those purchases comes into the picture.

So far the banks have been largely successful in using bootstrap reasoning that a possessor is a holder and a holder is therefore a holder in due course by operation of the presumptions arising from the Uniform Commercial Code. And since normally a presumption shifts the burden to the other side (the borrower in this case) to come up with legally admissible evidence that the facts do not support the presumption, the borrower or borrower’s counsel sits there in the courtroom stumped.

Further research, however, will show that if the facts needed to prove the presumption to be unsupported by facts are in the sole care, custody and control of the claiming party, you are entitled to conduct discovery and that means they must come up with the actual cancelled check, wire transfer receipt, wire transfer instructions etc. The would-be forecloser cannot block discovery by asserting the presumption arising from their own self-serving allegation of holder status.

In this case the presumption arising from the allegation that the would-be forecloser is a “holder” is defeated by mere denial because it is ONLY the would-be forecloser that has access to the the actual proof of payment and proof of loss. I remind you again that the debt is not the note and the note is not the mortgage. They are all separate issues.

This is becoming painfully obvious as reports are coming in from across the country indicating that courts at all levels and legislatures are under intense pressure to find a loophole through which the mega banks can escape the truth, to wit: that they are holding worthless paper and that the only transaction that ever actually occurred was the one between the investors and the borrowers without either  of those parties in interest being aware of the slight of hand pulled by the banks. The banks diverted the money invested by pension funds from the REMIC trusts into their own pockets. The banks diverted the documents that would have solidified the interest of the investors in those loans to themselves.

And let there be no mistake that the banks planned the whole thing out ahead of time. The only reason why MERS and other private label title databases were necessary was to hide the fact that the banks were trading the investments made by pension funds as if they were their own. Otherwise there would have been no reason to have anyone’s name on the note or mortgage other than the asset pool designated as a REMIC trust.

These exotic instruments are being tested by the marketplace and they are failing miserably. So the banks are throwing tens of billions of dollars to refinance the repurchase of the derivatives that were worthless in the first place. It’s worth it to them to retain the trillions of dollars they are claiming as assets that are unsupported by any actual monetary transactions. AND THAT is why in the final analysis, after they have beaten you to a pulp in court, if you are still standing, you get some amazing offers of settlement that actually are still fractions of a cent on the dollar.

Banking giants lead repo funding of securitized debt
http://www.housingwire.com/fastnews/2013/04/16/banking-giants-lead-repo-funding-securitized-debt

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

Challenging the Foreclosure Auction Process

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

see also http://livinglies.wordpress.com/2013/04/04/banks-could-owe-trillions-on-fake-rigged-credit-bids/

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

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

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

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

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

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

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

—————————————————

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

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

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

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

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

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

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

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

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

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

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

 

Banks Could Owe Trillions on Fake Rigged Credit Bids

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

Editor’s Analysis of Auctions of Foreclosed Properties: Nobody thinks about it because it basically never happened. The laws of each state whose statutes I have looked at including the provisions of most promissory notes are clear — if the creditor receives a payment in excess of the amount due, the excess must be paid to the borrower.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Illinois Takes A Step in the Right Direction

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

Editor’s Comment: Illinois has taken a step forward but they are still plagued by the wrong assumption — that the courts are dealing with a legitimate debt. There is no debt if it is paid and in many cases the original debt has been paid down or paid off by  third party mitigation payments from insurance and credit default swaps.

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

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

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

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

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

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

Bill Butler, Esq. In Minnesota Nails It!

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

Editor’s Comment: Like a breath of fresh air, I received Bill’s email and I encourage anyone in Minnesota to seek him out. He totally gets it , explains it, and understands it. Here is the beginning of the attached article:

BEWARE: USING THE FOUR-LETTER WORD “NOTE” IN MINNESOTA FEDERAL DISTRICT COURT MAY COST YOU $337,603.08

The Butler Liberty Law firm has commenced 27 lawsuits involving 197 plaintiffs challenging the mortgage foreclosure rights of the October 2008 Bailout Banks holding “securitized” mortgages. The plaintiffs’ claims in all of these cases is based on a “quiet title” cause of action.

Quiet title law allows a person in possession of real property (or a person asserting a title interest in vacant property) to bring suit against someone claiming a lien or other interest in real property. A successful quiet title action results in a court “quieting” title to the real property; that is, resolving the claims and interests of the parties and removing and/or voiding any invalid liens or claims.

In 1995 I tried and won the only case I am aware of that resulted in the voiding of two securitized mortgages. In that case, First National Bank of Elk River v. Independent Mortgage Services, 1996 WL 229236 (Minn. Ct. App. No. DX-95- 1919) (FNBER v. IMS), I represented a bank against a mortgage loan securitizer who was claiming rights in a mortgage without having possession of the homeowner’s promissory note and without having ever advanced any funds to the homeowner. As indicated in the decision above, my bank client won the battle of the putative mortgagees because my client was able to produce the original promissory notes with endorsements that clearly indicated that the defendant securitizer and pretender mortgagee had no right, title or interest in the notes.

A note is a promise to pay. A mortgage is security for that promise to pay. No note = no mortgage. The rubber meets the road reality of FNBER v. IMS clearly illustrates this ancient legal principle.

BEWARE Article by Bill Butler

Prommis Holdings LLC Files for Bankruptcy Protection

I have not followed Prommis Holdings closely but I can recall that some people have sent in reports that Prommis was the named creditor in some foreclosure proceedings. The reason I am posting this is because the bankruptcy filings including the statement of affairs will probably give some important clues to the real money story on those mortgages where Prommis was involved. I’m sure you will not find the loan receivables account that are mysteriously absent from virtually all such filings and FDIC resolutions.

And remember that when the petition for bankruptcy is filed it must include a look-back period during which any assignments or transfers must be disclosed. So there is a very narrow window in which the petitioner could even claim ownership of the loan with or without any fabricated evidence.

US Trustees in bankruptcy are making a mistake when they do not pay attention to alleged assignments executed AFTER the petition was filed and sometimes AFTER the plan is confirmed or the company is liquidated. Such an assignment would indicate that either the petitioner lied about its assets or was committing fraud in executing the assignment — particularly without the US Trustee’s consent and joinder.

The Courts are making the same mistake if they accept such an assignment that does not have US Trustees consent and joinder, besides the usual mistake of not recognizing that the petitioner never had a stake in the loan to begin with. The same logic applies to receivership created by court order, the FDIC or any other “estate” created.

That would indicate, as I have been saying all along, that the origination and transfer paperwork is nothing more than paper and tells the story of fictitious transactions, to wit: that someone “bought” the loan. Upon examination of the money trail and demanding wire transfer receipts or canceled checks it is doubtful that you find any consideration paid for any transfer and in most cases you won’t find any consideration for even the origination of the loan.

Think of it this way: if you were the investor who advanced money to the underwriter (investment bank) who then sent the investor’s funds down to a closing agent to pay for the loan, whose name would you want to be on the note and mortgage? Who is the creditor? YOU! But that isn’t what happened and there is nothing the banks can do and no amount of paperwork can cover up the fact that there was consideration transferred exactly once in the origination and transfer of the loans — when the investors put up the money which the investment bank acting as intermediary sent to the closing agent.

The fact that the closing documents and transfer documents do not show the investors as the creditors is incompatible with the realities of the money trail. Thus the documents were fabricated and any signature procured by the parties from the alleged borrower was procured by fraud and deceit — causing an immediate cloud on title.

At the end of the day, the intermediaries must answer one simple question: why didn’t you put the investors’ name or the trust name on the note and mortgage or a “valid” assignment when the loan was made and within the 90 day window prescribed by the REMIC statutes of the Internal Revenue Code and the Pooling and Servicing Agreement? Nobody would want or allow someone else’s name on the note or mortgage that they funded. So why did it happen? The answer must be that the intermediaries were all breaching every conceivable duty to the investors and the borrowers in their quest for higher profits by claiming the loans to be owned by the intermediaries, most of whom were not even handling the money as a conduit.

By creating the illusion of ownership, these intermediaries diverted insurance mitigation payments from investors and diverted credit default swap mitigation payments from the investors. These intermediaries owe the investors AND the borrowers the money they took as undisclosed compensation that was unjustly diverted, with the risk of loss being left solely on the investors and the borrowers.

That is an account payable to the investor which means that the accounts receivables they have are off-set and should be off-set by actual payment of those fees. If they fail to get that money it is not any fault of the borrower. The off-set to the receivables from the borrowers caused by the receivables from the intermediaries for loss mitigation payments reduces the balance due from the borrower by simple arithmetic. No “forgiveness” is necessary. And THAT is why it is so important to focus almost exclusively on the actual trail of money — who paid what to whom and when and how much.

And all of that means that the notice of default, notice of sale, foreclosure lawsuit, and demand for payments are all wrong. This is not just a technical issue — it runs to the heart of the false securitization scheme that covered over the PONZI scheme cooked up on Wall Street. The consensus on this has been skewed by the failure of the Justice department to act; but Holder explained that saying that it was a conscious decision not to prosecute because of the damaging effects on the economy if the country’s main banks were all found guilty of criminal fraud.

You can’t do anything about the Holder’s decision to prosecute but that doesn’t mean that the facts, strategy and logic presented here cannot be used to gain traction. Just keep your eye on the ball and start with the money trail and show what documents SHOULD have been produced and what they SHOULD have said and then compare it with what WAS produced and you’ll have defeated the foreclosure. This is done through discovery and the presumptions that arise when a party refuses to comply. They are not going to admit anytime soon that what I have said in this article is true. But the Judges are not stupid. If you show a clear path to the Judge that supports your discovery demands, coupled with your denial of all essential elements of the foreclosure, and you persist relentlessly, you are going to get traction.

W VA Court Says Directions to Stop Making Payments and Refusing to Apply Payments is Breach of Contract

BANK OF AMERICA TAKES ANOTHER HIT:
BANKS MISLEAD BORROWERS WHEN THEY INSTRUCT THEM TO STOP MAKING PAYMENTS AND REFUSE PAYMENTS
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 Note: We’ve all heard it a million times. “The bank told me to stop making payments in order to get modification or other relief.” It was a blatant lie and it was intended to get the borrower in so deep they couldn’t get out, leading inevitably to foreclosure.

Why would the “bank” want foreclosure? Because they took far more money from investors than they used to fund loans. If the deal fails and dissolves into foreclosure the investors are less likely to probe deeply into the transaction to find out what really happened. The fact is that the banks were all skimming off the top taking as much as 50% f the money from investors and sticking it in their own pockets, using it to gamble and keeping the proceeds of gambling.

If the banks really went the usual route of workouts, deed in lieu, modifications and other relief to borrowers, there would be an accounting night mare for them as eventually the auditing the firms would pick up on the fact that the investment banks were taking far more money than was actually intended to be used for investing in mortgages.

They covered it up by creating the illusion of a mortgage closing in which the named payee on the note and security instrument were neither lenders nor creditors and eventually they assigned the loan to a REMIC trust that had neither received the loan nor paid for it.

In this case the Court takes the bank to task for both lying to the borrower about how much better off they would be if they stopped making payments, thus creating a default or exacerbating it, and the refusal of the bank to accept payments from the borrower. It is a simple breach of contract action and the Court finds that there is merit to the claim, allowing the borrower to prove their case in court.

Another way of looking at this is that if everyone had paid off their mortgages in full, there would still be around $3 trillion owed to the investors representing the tier 2 yield spread premium that the banks skimmed off the top plus the unconscionable fees and costs charged to the accounts.  Where did that money go? See the previous post

This well-reasoned well written opinion discusses the case in depth and represents a treasure trove of potential causes of action and credibility to borrowers’ defenses to foreclosure claims.

 

2013 U.S. Dist. LEXIS 35320, * MOTION TO DISMISS DENIED

JASON RANSON, Plaintiff, v. BANK OF AMERICA, N.A., Defendant.
CIVIL ACTION NO. 3:12-5616
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA, HUNTINGTON DIVISION
2013 U.S. Dist. LEXIS 35320

March 14, 2013, Decided
March 14, 2013, Filed 

CORE TERMS:modification, foreclosure, borrower, citations omitted, mitigation, misrepresentation, servicer, consumer, lender, cause of action, contractual, guaranteed, mortgage, estoppel, contract claim, default, special relationship, reinstatement, collection, quotation, breached, notice, factual allegations, breach of contract, force and effect, indebtedness, thereunder, foreclose, veteran’s, manual

COUNSEL: [*1] For Jason Ranson, Plaintiff: Daniel F. Hedges 1, Jennifer S. Wagner, LEAD ATTORNEYS, MOUNTAIN STATE JUSTICE, INC., Charleston, WV.

For Bank of America, N.A., Defendant: Carrie Goodwin Fenwick, Victoria L. Wilson, LEAD ATTORNEYS, GOODWIN & GOODWIN, Charleston, WV.

JUDGES: ROBERT C. CHAMBERS, CHIEF UNITED STATES DISTRICT JUDGE.

OPINION BY: ROBERT C. CHAMBERS

OPINION

MEMORANDUM OPINION AND ORDER

Pending before the Court is a Motion to Dismiss by Defendant Bank of America, N.A. (BANA). ECF No. 4. Plaintiff Jason Ranson opposes the motion. For the following reasons, the Court DENIES, in part, and GRANTS, in part, Defendant’s motion.

I.

FACTUAL AND PROCEDURAL HISTORY

On September 19, 2012, Defendant removed this action from the Circuit Court of Putnam County based upon diversity of jurisdiction. See 28 U.S.C. §§ 1332 and 1441. In his Complaint, Plaintiff asserts that he took out a mortgagewith Countrywide Home Loans, Inc. to purchase a house in 2007. The loan was originated pursuant to the Department of Veterans Affairs (VA) Home Loan Guaranty Program. Plaintiff alleges the loan “contained a contractual guarantee by the . . . (VA), which requires—as incorporated into the contract—that Defendant comply with regulations and [*2] laws governing VA guaranteed loans, including those regulations governing Defendant’s actions in the event of the borrower’s default” as he was, and continues to be, on active duty with the United States Army. Compl. at ¶5, in part. Defendant is the current servicer and holder of the loan.

In 2009, Plaintiff became two months behind on the loan. Plaintiff asserts that Defendant informed him he was eligible for a loan modification and requested he submit certain documentation to have the modification finalized. Plaintiff claims that Defendant also told him to stop making any payments as they would interfere with the finalization process. Plaintiff states he had the means to make the two delinquent payments at that time or he could have sought refinancing or taken other actions to save his house and credit. However, he relied upon Defendant’s statements and stopped making payments, pending its assurance that he was eligible for a modification. In fact, Plaintiff states that Defendant returned his last payment without applying it to his account.

Over the next several months, Plaintiff asserts he repeatedly submitted the documentation requested by Defendant for the modification process. [*3] Plaintiff also contacted Defendant on a weekly basis for updates. Plaintiff claims he was assured by Defendant it would not foreclose, and Defendant discouraged him from calling by stating it would delay finalization of the modification. Approximately eight months after the process began, Plaintiff contends that Defendant informed him the loan would not be modified because VA loans do not qualify for assistance. According to Plaintiff, Defendant nevertheless requested that he submit documentation for another modification. Plaintiff states he complied with the request but, approximately six months later, Defendant again told him the modification was denied because he had a VA loan. Defendant further told him he should vacate the property because it was going to foreclose. Plaintiff asserts he asked Defendant if he could short sell the house, but Defendant said no and stated the only way he could save his house would be by full reinstatement. As fourteen months had passed since he was told to stop making payments, Plaintiff states that he could not afford to pay the full amount owed.

As a result of these alleged activities, Plaintiff filed this action, alleging five counts of action. [*4] Count I is for breach of contract, Count II is for negligence, Count III is for fraud, Count IV is for estoppel, and Count V is for illegal debt collection. Defendant now moves to dismiss each of the counts.

II.

STANDARD OF REVIEW

In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the United States Supreme Court disavowed the “no set of facts” language found in Conley v. Gibson, 355 U.S. 41 (1957), which was long used to evaluate complaints subject to 12(b)(6) motions. 550 U.S. at 563. In its place, courts must now look for “plausibility” in the complaint. This standard requires a plaintiff to set forth the “grounds” for an “entitle[ment] to relief” that is more than mere “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555(internal quotation marks and citations omitted). Accepting the factual allegations in the complaint as true (even when doubtful), the allegations “must be enough to raise a right to relief above the speculative level . . . .” Id. (citations omitted). If the allegations in the complaint, assuming their truth, do “not raise a claim of entitlement to relief, this basic deficiency should . . .be exposed [*5] at the point of minimum expenditure of time and money by the parties and the court.” Id. at 558 (internal quotation marks and citations omitted).

In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court explained the requirements of Rule 8 and the “plausibility standard” in more detail. In Iqbal, the Supreme Court reiterated that Rule 8 does not demand “detailed factual allegations[.]” 556 U.S. at 678(internal quotation marks and citations omitted). However, a mere “unadorned, the-defendant-unlawfully-

harmed-me accusation” is insufficient. Id. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570). Facial plausibility exists when a claim contains “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted). The Supreme Court continued by explaining that, although factual allegations in a complaint must be accepted as true for purposes of a motion to dismiss, this tenet does not apply to legal conclusions. Id. “Threadbare recitals of the elements [*6] of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citation omitted). Whether a plausible claim is stated in a complaint requires a court to conduct a context-specific analysis, drawing upon the court’s own judicial experience and common sense. Id. at 679. If the court finds from its analysis that “the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]‘-’that the pleader is entitled to relief.’” Id. (quoting, in part, Fed. R. Civ. P. 8(a)(2)). The Supreme Court further articulated that “a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id.

III.

DISCUSSION

A.

Breach of Contract

In Count I, Plaintiff alleges that the Deed of Trust and the VA Guaranteed Loan and Assumption Policy Rider provide that “Defendant’s rights upon the borrower’s default are limited by Title 38 of the United States Code and any regulations issued thereunder.” [*7] Compl., at ¶22. According to Plaintiff, the contract also provides that Defendant must apply all payments to his account. Plaintiff asserts Defendant breached the contract by (1) discouraging him from making payments, (2) returning his payments, (3) allowing the accumulation of arrears until it was impossible for him to reinstate the loan, (4) initiating foreclosure and failing to grant a modification after assuring him it would be granted, and (5) “failing to comply with VA regulations and guidance requiring, inter alia, that the Defendants [sic] consider Plaintiff for a variety [of] loss mitigation options, and provide notice of such rejection(s) in writing, prior to foreclosure.” Id. at ¶24(d).

To avoid dismissal of a breach of contract claim under Rule 12(b)(6), West Virginia law requires: “the existence of a valid, enforceable contract; that the plaintiff has performed under the contract; that the defendant has breached or violated its duties or obligations under the contract; and that the plaintiff has been injured as a result.” Executive Risk Indem., Inc. v. Charleston Area Med. Ctr., Inc., 681 F. Supp.2d 694, 714 (S.D. W. Va. 2009) (citations omitted). For a claim of breach [*8] of contract to be sufficient, “a plaintiff must allege in his complaint ‘the breach on which the plaintiffs found their action . . . [and] the facts and circumstances which entitle them to damages.’” Id. In this case, Defendant argues Plaintiff has failed to sufficiently allege a breach of contract because he has not specified what specific VA regulations purportedly were violated and, in any event, the regulations only require the foreclosure be conducted in accordance to West Virginia law. As Defendant maintains it complied with the West Virginia law, Defendant asserts it has not breached the contract.

Plaintiff does not dispute that neither the contracts nor West Virginia law require a loan modification. However, Plaintiff argues that the VA has promulgated regulations to limit foreclosures of loans it has guaranteed and Defendant did not comply with those requirements. Plaintiff quotes from the VA Guaranteed Loan and Assumption Policy Rider, which provides, in part:

If the indebtedness secured hereby be guaranteed or insured under Title 38, United States Code, such Title and Regulations issued thereunder and in effect on the date hereof shall govern the rights, duties and liabilities [*9] of Borrower and Lender. Any provisions of the Security Instrument or other instruments executed in connection with said indebtedness which are inconsistent with said Title or Regulations, including, but not limited to, the provision for payment of any sum in connection with prepayment of the secured indebtedness and the provision that the Lender may accelerate payment of the secured indebtedness pursuant to Covenant 18 of the Security Instrument, are hereby amended or negated to the extent necessary to confirm such instruments to said Title or Regulations.

VA Guar. Loan and Assumption Policy Rider, at 2, ECF No. 4-1, at 15. Specifically, Plaintiff cites 38 U.S.C. § 36.4350(f), (g), and (h), which requires, inter alia, Defendant to send Plaintiff a letter outlining his loss mitigation options after he fell behind on his payments and, under certain circumstances, have a face-to-face meeting with Plaintiff. Likewise, 38 C.F.R. § 36.4319 provides incentives to servicers to engage in loss mitigation options in lieu of foreclosure, and 38 C.F.R. § 36.4315expressly allows a loan modification under certain circumstances if it is in veteran’s and the Government’s best interest. Plaintiff also [*10] cites a Servicer Guide for VA guaranteed loans, which contains similar loss mitigation considerations. 1 Plaintiff states that all these requirements are incorporated into the contract, and Defendant violated the contract by stating he could not receive a loan modification because he had a VA loan; by telling him to stop making payments rather than placing him on a repayment plan; by not timely evaluating the loan and considering him for loss mitigation and, instead, placing him in foreclosure; and by refusing to allow Plaintiff to apply for a compromise sale because Defendant had started foreclosure. Moreover, Plaintiff asserts Defendant violated his right to reinstate and failed to exercise its discretion in good faith by refusing his payment; telling him to stop making payments; informing he was qualified for loan modification, and then denying the modification; providing him conflicting, inconsistent, and inaccurate information about his account; refusing to consider a short sale; and never providing him a written explanation of why loss mitigation was denied.

FOOTNOTES

1 U.S. Dept. of Veterans Affairs, VA Servicer Guide 6 (July 2009), available at http:www.benefits.va.gov/homeloans/docs/va_servicer_guide.pdf.

Defendant [*11] responds by asserting that the VA regulations and the handbook are permissive in nature, not mandatory, and the VA Servicer Guide is not binding. See VA Servicer Guide, at 4 (“This manual does not change or supersede any regulation or law affecting the VA Home Loan Program. If there appears to be a discrepancy, please refer to the related regulation or law.”); see also 38 C.F.R. § 36.4315(c)(stating “[t]his section does not create a right of a borrower to have a loan modified, but simply authorizes the loan holder to modify a loan in certain situations without the prior approval of the Secretary” 38 U.S.C. § 36.4315(c)). Thus, Defendant argues they establish no affirmative duty for it to act. In support of its position, Defendant cites several older cases which held certain regulations issued by the VA and other governmental agencies do not have the force and effect of law. 2

FOOTNOTES

2 See First Family Mortg. Corp. of Fl. v. Earnest, 851 F.2d 843, 844-45 (6th Cir. 1988)(finding that mortgagors could not state a cause of action based on VA publications against the VA for allegedly failing to monitor lender servicing of VA-backed loans); Bright v. Nimmo, 756 F.2d 1513, 1516 (11th Cir. 1985) [*12] (rejecting the plaintiff’s argument that he has an implied cause of action against the VA or lender based upon the VA’s manual and guidelines); United States v. Harvey, 659 F.2d 62, 65 (5th Cir. 1981)(finding that the VA manual did not have the force and effect of law by itself and it was not incorporated into the promissory notes or deeds to support a contract claim); Gatter v. Cleland, 512 F. Supp. 207, 212 (E.D. Pa. 1981)(holding “that the decision to implement a formal refunding program is one that squarely falls within the committed to agency discretion exception [of the VA] and is not subject to judicial review” (footnote omitted)); and Pueblo Neighborhood Health Ctrs., Inc. v. U.S. Dep’t of Health and Human Serv., 720 F.2d 622, 625 (10th Cir. 1983)(finding a pamphlet issued by the Department of Health and Human Services, referred to as a Grant Application Manual, was not the product of formal rule-making and did not have the force and effect of law).

However, upon review of those cases, the Court finds that they generally involve situations in which the plaintiffs were attempting to assert a cause of action based upon the regulation itself, rather than as a breach of contract [*13] claim. An action based on a contract involves a much different legal theory than one based solely on enforcement of a regulation apart from a contractual duty. Indeed, Plaintiff cites a number of comparable mortgagecases in which courts permitted homeowners to pursue claims against lenders based upon regulations issued by the Federal Housing Authority (FHA) where it was alleged that the parties contractually agreed to comply with those regulations. As explained by the Court in Mullins v. GMAC Mortg., LLC, No. 1:09-cv-00704, 2011 WL 1298777, **2-3 (S.D. W. Va. Mar. 31, 2011), plaintiffs, who allege a straightforward breach of contact claim, “are not, as defendants would have the court believe, suing to enforce HUD regulations under some vague and likely non-existent cause of action allowing a member of the public to take upon himself the role of regulatory enforcer. These two theories of recovery are distinct and unrelated,” and the Court held the plaintiffs could proceed on their express breach of contract claim. 2011 WL 1298777, *3. 3Upon review, this Court is persuaded that the same reasoning controls here. Therefore, the Court will not dismiss Plaintiff’s contract claim based [*14] upon Defendant’s argument that the regulations and handbook do not have full force and effect of law because Plaintiff has alleged the contract incorporates the limitations set by the regulations. See Compl., at ¶22 (“The contract provides that Defendant’s rights upon the borrower’s default are limited by Title 38 of the United States Code and any regulations issued thereunder.”).

FOOTNOTES

3 See also Kersey v. PHH Mortg. Corp., 682 F. Supp.2d 588, 596-97 (E.D. Va. 2010), vacated on other grounds, 2010 WL 3222262 (E.D. Va. Aug. 13, 2010) (finding, in part, that the plaintiff sufficiently alleged a claim that the defendant breached an FHA regulation which was incorporated in a Deed of Trust); Sinclair v. Donovan, Nos. 1:11-CV-00010, 1:11-CV-00079, 2011 WL 5326093, *8 (S.D. Ohio Nov. 4, 2011) (“find[ing] that the HUD-FHA regulations concerning loss mitigation are enforceable terms of the mortgagecontract between the parties and that Plaintiffs cannot be denied the benefit of these provisions by virtue of the fact of simple default”); and Baker v. Countrywide Home Loans, Inc., 3:08-CV-0916-B, 2009 WL 1810336, **5-6 (N.D. Tex. June 24, 2009) (stating that a “failure to comply with the [HUD] regulations [*15] made part of the parties’ agreement may give rise to liability on a contact theory because the parties incorporated the terms into their contact”).

Defendant further argues, however, that some of the regulations cited by Plaintiff are irrelevant to this case because, for instance, a face-to-face meeting with a borrower is required only under certain circumstances which do not exist in this case. See 38 C.F.R. § 36.4350(g)(iii). In addition, Defendant asserts that, in any event, it did not breach the contract because it had no duty to engage in loss mitigation and it otherwise complied with the contract’s terms. The Court finds, however, that whether or not Defendant violated any of the terms of the contract is a matter best resolved after discovery. Therefore, at this point, the Court finds that Plaintiff has sufficiently alleged a breach of contract claim and, accordingly, DENIES Defendant’s motion to dismiss the claim. 4

FOOTNOTES

4Plaintiff obviously disagrees with Defendant’s argument and filed a “Notice of Additional Authority” disputing Defendant’s position that the VA regulations require holders to evaluate borrowers for loss mitigation. Plaintiff cites the Veterans Benefits Administration, [*16] Revised VA Making Home Affordable Program, Circular 26-10-6 (May 24, 2010), which states, in part: “Before considering HAMP-style modifications, servicers must first evaluate defaulted mortgages for traditional loss mitigation actions cited in Title 38, Code of Federal Regulations, section 36.4819 (38 CFR § 36.4819); i.e., repayment plans, special forbearances, and traditional loan modifications. . . . If none of the traditional home retention loss mitigation options provide an affordable payment, the servicer must evaluate the loan for a HAMP-style modification prior to deciding that the default is insoluble and exploring alternatives to foreclosure.” (Available at http://www.benefits.va.gov/HOMELOANS/circulars/26_10_6.pdf).

B.

Negligence and Fraud

Defendant next argues that Plaintiff’s claim for negligence and fraud in Counts II and III, respectively, are duplicative of his illegal debt collection claim in Count V under the West Virginia Consumer Credit Protection Act (WVCCPA) and cannot survive because Plaintiff fails to allege Defendant owed him a special duty beyond the normal borrower-servicer relationship. Therefore, Defendant asserts Counts II and III should be dismissed.

In Bailey [*17] v. Branch Banking & Trust Co., Civ. Act. No. 3:10-0969, 2011 WL 2517253 (S.D. W. Va. June 23, 2011), this Court held that the West Virginia Supreme Court in Casillas v. Tuscarora Land Co., 412 S.E.2d 792 (W. Va. 1991), made it clear a plaintiff can pursue claims under the WVCCPA and common law at the same time. 2011 WL 2517253, *3. The Court reasoned that “[i]t would be contrary to both the legislative intent of the WVCCPA and the whole crux of Casillas if the Court were to preclude consumers from bringing actions for violations of the WVCCPA and common law merely because the claims are based upon similar facts.” Id. The Court found that “[n]either the WVCCPA nor Casillasmakes a consumer choose between the two options. A consumer clearly can choose to pursue both avenues provided “separate” claims are set forth in a complaint.” Id.

However, under West Virginia law, a plaintiff “cannot maintain an action in tort for an alleged breach of a contractual duty.” Lockhart v. Airco Heating & Cooling, 567 S.E.2d 619, 624 (W. Va. 2002)(footnote omitted). Rather, “[t]ort liability of the parties to a contract arises from the breach of some positive legal duty imposed by law because of the relationship [*18] of the parties, rather than a mere omission to perform a contract obligation.” Id. (emphasis added). Whether a “special relationship” exists between the parties beyond their contractual obligations is “determined largely by the extent to which the particular plaintiff is affected differently from society in general.” Aikens v. Debow, 541 S.E.2d 576, 589 (W. Va. 2000). “In the lender-borrower context, courts consider whether the lender has created such a ‘special relationship’ by performing services not normally provided by lender to a borrower.” Warden v. PHH Mortgage Corp., No. 3:10-cv-00075, 2010 WL 3720128, at *9 (N.D. W. Va. Sept. 16. 2010 (citing Glascock v. City Nat’l Bank of W. Va., 576 S.E.2d 540, 545-56 (W. Va. 2002) (other citation omitted)).

Here, Plaintiff’s negligence claim is quite simple. He alleges that, where “Defendant engaged in significant communications and activities with Plaintiff[] and the loan, Defendant owed a duty to Plaintiff to provide him with accurate information about his loan account and its obligations and rights thereunder.” Compl., at ¶27. Next, Plaintiff asserts “Defendant[] breached that duty by instructing Plaintiff not to make payments, advising [*19] Plaintiff that he would receive a loan modification, and then instead allowing arrears to accrue for months and ultimately denying Plaintiff[] assistance and pursuing foreclosure.” Id. at ¶28. Upon review of these allegations, the Court finds Plaintiff has failed to allege any positive legal duty beyond Defendant’s purported contractual obligations. There is nothing about these allegations that creates a “special relationship” between the parties. Indeed, a duty to provide accurate loan information is a normal service in a lender-borrower relationship.

In support of their claim Plaintiff relies, inter alia, on Glasock v. City National Bank of West Virginia, 576 S.E.540 (W. Va. 2002), where the West Virginia Supreme Court found that a special relationship existed between a lender and the borrowers. In Glascock, the bank maintained oversight and was significantly involved in the construction of the borrowers’ house. The bank possessed information that there were substantial problems with the house, but it failed to reveal those problems to the borrowers. 576 S.E.2d at 545. The West Virginia Supreme Court found that the bank’s significant involvement in the construction created a special [*20] relationship between the parties which carried “with it a duty to disclose any information that would be critical to the integrity of the construction project.” Id. at 546 (footnote omitted).

To the contrary, Plaintiff’s negligence claim in this case rests merely on the fact Defendant had a duty to provide him accurate information about the loan and failed to do so. Plaintiff has failed to sufficiently allege any facts which support a special relationship between the parties as existed in Glascock. Therefore, the Court GRANTS Defendant’s motion to dismiss Plaintiff’s negligence claim in Count II.

Turning next to Plaintiff’s fraud claim, Defendant argues the claim must be dismissed because it fails to meet the heightened pleading standard found in Rule 9(b) of the Federal Rules of Civil Procedure. Rule 9(b)provides that, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Under this heightened pleading standard, a plaintiff is required to “at a minimum, describe the time, place, and contents of the false [*21] representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008) (quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999))(internal quotation marks omitted). In other words, the plaintiffs must describe the “‘who, what, when, where, and how’ of the alleged fraud.” Id. (quoting U.S. ex rel. Willard v. Humana Health Plan of Texas Inc., 336 F.3d 375, 384 (5th Cir. 2003) (other citation omitted)).

In his Complaint, Plaintiff alleges that he had trouble making his mortgage payments around 2009. Compl, at ¶6. When he was approximately two months behind on his payments, Defendant informed him that he qualified for a loan modification, but he needed to complete the necessary paperwork to have it finalized. Id. at ¶7(a). “At this time,” Defendant also informed Plaintiff not to make any more payments until the modification was finalized. Id. at ¶7(b). About eight months later, Defendant told Plaintiff that he did not qualify for a modification, but Defendant instructed him to submit documentation for another modification. Id. at [*22] ¶13. After approximately six more months passed, Plaintiff was notified again that he was being denied assistance. Id. at ¶14. Plaintiff further alleges that, before May of 2012, Defendant never gave him “a written decision on his loan modification applications or any explanation for why he had denied him for assistance, other than its statements by telephone that he did not qualify for assistance because he had a VA loan.” Id. at ¶18.

In addition to these alleged facts, Plaintiff specifically states in his cause of action for fraud that “[i]n or around 2009,” Defendant told him to stop making payments and it would modify his loan rather than pursue foreclosure. Id. at ¶31. Plaintiff asserts these “representations were false and material,” and they were made knowingly, recklessly, and/or intentionally. Id. at ¶¶32-33. Plaintiff further claims he detrimentally relied upon these misrepresentations by stopping his payments and not attempting reinstatement, after which Defendant sought foreclosure. Id. at ¶¶34-35.

In considering these allegations, the Court is mindful of the fact it should be hesitant “to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant [*23] has been made aware of the particular circumstances for which she will have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts.” Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999). Here, the Court finds that Plaintiff adequately alerts Defendant as to “the time, place, and contents of the false representation[.]” U.S. ex rel. Wilson, 525 F.3d at 379(internal quotation marks and citation omitted). Plaintiff clearly alleges the fraudulent activity consisted of Defendant instructing him to stop making payments and assuring him he would receive a loan modification instead of foreclosure. He also asserts the representations were made over the telephone and occurred in 2009, when his payments were two months in arrears, and before Defendant returned his payment. In addition, Plaintiff states that he continued to call Defendant approximately once a week and was assured that it would not proceed with foreclosure. Compl., at ¶12(a), (b), and (c). Given this information, Defendant should be able to prepare its defense based upon the allegations made. In addition, the allegations provide enough information that [*24] Defendant also should be able to identify and review its customer service notes, call logs, account records, and any phone recordings it may have during the specified time period. Thus, the Court DENIES Defendant’s motion to dismiss Plaintiff’s claim for fraud.

C.

Estoppel

Defendant further argues that Plaintiff’s claim in Count IV for estoppel must be dismissed. To maintain a claim for estoppel in West Virginia, a plaintiff must show:

[(1)] a false representation or a concealment of material facts; [(2)] it must have been made with knowledge, actual or constructive of the facts; [(3)] the party to whom it was made must have been without knowledge or the means of knowledge of the real facts; [(4)] it must have been made with the intention that it should be acted on; and [(5)] the party to whom it was made must have relied on or acted on it to his prejudice.

Syl. Pt. 3, Folio v. City of Clarksburg, 655 S.E.2d 143 (W. Va. 2007) (quoting Syl. Pt. 6, Stuart v. Lake Washington Realty Corp., 92 S.E.2d 891 (W. Va. 1956)). Defendant asserts Plaintiff had actual knowledge via correspondence it sent to Plaintiff that he was not guaranteed loan assistance and loan assistance would not impact Defendant’s [*25] right to foreclose. Defendant attached the correspondence to its Motion to Dismiss as Exhibit D. In addition, Defendant argues that Plaintiff admits to missing two payments before the alleged misrepresentations occurred so he cannot state he relied upon those alleged misrepresentations in failing to make his payments.

“[W]hen a defendant attaches a document to its motion to dismiss, ‘a court may consider it in determining whether to dismiss the complaint [if] it was integral to and explicitly relied on in the complaint and [if] the plaintiffs do not challenge its authenticity.’ ” Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004) (quoting Phillips v. LCI Int’l, Inc., 190 F.3d 609, 618 (4th Cir. 1999)). In this case, Plaintiff asserts that, “at this point there is no evidence that the letter was actually sent to or received by Plaintiff, nor has Plaintiff had the opportunity to present mailings, call logs, or testimony supporting his claim.” Pl.’s Res. in Opp. to Def.’s Mot. to Dis., ECF No. 7, at 16. 5Therefore, the Court will not consider the letter. Likewise, the Court finds no merit to the argument that Plaintiff’s admission that he was two months [*26] behind on his loan extinguishes his estoppel claim. It is clear from the Complaint that Plaintiff’s claim is that he relied upon the alleged misrepresentations after he was two months delinquent. Accordingly, the Court DENIES Defendant’s motion to dismiss the estoppel claim.

FOOTNOTES

5In addition, the Court notes that the letter appears undated and Defendant sometimes refers to it as a 2009 letter and sometimes as a 2010 letter. At the top right-hand side of the letter, there is a statement providing: “Please complete, sign and return all the enclosed documents by December 5, 2009.” Exhibit D, ECF No. 4-4, at 1.

D.

WVCCPA

Finally, Defendant asserts Plaintiff’s claim under the WVCCPA in Count V must be dismissed because it fails to meet the requirements of Rules 8(a)(2) of the Federal Rules of Civil Procedure. Rule 8(a)(2)provides that “[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief[.]” Fed. R. Civ. P. 8(a)(2). Defendant argues that Plaintiff fails to meet this requirement because he merely pled a legal conclusion that Defendant engaged in illegal debt collection and he does not plead sufficient [*27] factual content to support that conclusion. In addition, Defendant states it had a contractual right to return Plaintiff’s partial payment so returning the payment cannot support a WVCCPA claim.

Plaintiff, however, argues that his claims under the WVCCPA are based on three grounds. First, Plaintiff asserts Defendant used fraudulent, deceptive, or misleading representations to collect the debt or get information about him, in violation of West Virginia Code § 46A-2-127. 6 Second, he claims that Defendant used unfair or unconscionable means to collect the debt, in violation of West Virginia Code § 46A-2-128. 7 Third, Plaintiff contends that Defendant’s refusal to apply payments to his account violated West Virginia Code § 46A-2-115. Plaintiff then argues that the first two claims are sufficiently supported in opposition to a motion to dismiss based upon his allegations that (1) Defendant told him he qualified for loan modification and would receive one if he completed the requested financial information; (2) Defendant told him to stop making payments because it would interfere with the modification process, but in reality it increased the likelihood of foreclosure; (3) Defendant assured [*28] Plaintiff it would not foreclose on his home during the time the loan modification application was being processed; (4) Defendant ultimately represented it could not modify the loan because it was a VA loan; and (5) Defendant would not consider a short sale of the house and, instead, proceeded with foreclosure. Plaintiff argues that each of these misrepresentations made by Defendant were intended to collect financial information about him through the modification process or collect the debt via foreclosure. He also states the delay and improper refusal of payments greatly increased the amount he was in arrears, which allowed Defendant to attempt to collect the debt through foreclosure.

FOOTNOTES

6Section 127 provides, in part: “No debt collector shall use any fraudulent, deceptive or misleading representation or means to collect or attempt to collect claims or to obtain information concerning consumers.” W. Va. Code § 46A-2-127, in part.

7Section 128 states, in part: “No debt collector shall use unfair or unconscionable means to collect or attempt to collect any claim.” W. Va. Code §46A-2-128, in part.

Upon consideration of these allegations, the Court finds they are sufficient to state a claim [*29] under the WVCCPA. As stated by the Honorable Thomas E. Johnston stated in Koontz v. Wells Fargo, N.A., Civ. Act. No. 2:10-cv-00864, 2011 WL 1297519 (S.D. W. Va. Mar. 31, 2011), West Virginia “§ 46A-2-127applies to both ‘misrepresentations made in collecting a debt’ and ‘misrepresentations . . . [made] when obtaining information on a customer.’” 2011 WL 1297519, at *6. Therefore, allegations that a financial institution misrepresented to the borrower that it would reconsider a loan modification and, thereby, obtained additional financial information from the borrower, are sufficient to state a claim. Id. Likewise, the Court finds the allegations are sufficient to state a claim that Defendant used “unfair or unconscionable means to collect or attempt to collect any claim” pursuant to West Virginia Code §46A-2-128, in part. Cf. Wilson v. Draper v. Goldberg, P.L.L.C., 443 F.3d 373, 376 (4th Cir. 2006)(stating “Defendants’ actions surrounding the foreclosure proceeding were attempts to collect that debt” under the Fair Debt Collection Practices Act (citations omitted)). 8

FOOTNOTES

8 Defendant asserts that a debt collection does not give rise to a claim under the WVCCPA. Citing Spoor v. PHH Mortgage [*30] Corp., Civ. Act. No. 5:10CV42, 2011 WL 883666 (N.D. W. Va. Mar. 11, 2011). The Court has reviewed Spoorand finds that it primarily focused only on the plaintiff’s request for a loan modification with respect to her WVCCPA claims. The district court in Spoor stated that the defendant’s consideration of the request is not an attempt to collect a debt. 2011 WL 883666, at *7. In the present case, however, the allegations Plaintiff argues supports his claim extend beyond a mere “request” for a modification. Moreover, the Court finds that, to the extent Spoor is contrary to the reasoning in Wilson and Koontz, the Court declines to apply it to this case.

With respect to Plaintiff’s third claim that Defendant illegally returned his payment pursuant to West Virginia Code § 46A-2-115(c), this provision states:

All amounts paid to a creditor arising out of any consumer credit sale or consumer loan shall be credited upon receipt against payments due: Provided, That amounts received and applied during a cure period will not result in a duty to provide a new notice of right to cure; and provided further that partial amounts received during the reinstatement period set forth in subsection (b) of this [*31] section do not create an automatic duty to reinstate and may be returned by the creditor. Defaultcharges shall be accounted for separately; those set forth in subsection (b) arising during such a reinstatement period may be added to principal.

W. Va. Code § 46A-2-115(c). Plaintiff argues that § 46A-2-115(b)defines the reinstatement period as the time “beginning with the trustee notice of foreclosure and ending prior to foreclosure sale,” and he made clear it clear in his Complaint that Defendant returned his payment prior to the requesting a trustee notice of the foreclosure sale. See Compl., at ¶¶7 & 10. Defendant responds by stating that it was within its contractual right to refuse the payment. However, West Virginia Code § 46A-1-107makes it clear that, “[e]xcept as otherwise provided in this chapter, a consumer may not waive or agree to forego rights or benefits under this chapter or under article two-a, chapter forty-six of this code.” W. Va. Code 46A-1-107. Therefore, upon review, the Court finds that Plaintiff’s claim is sufficient to survive a motion to dismiss. Thus, for the foregoing reasons, the Court DENIES Defendant’s motion to dismiss Count V for alleged violations [*32] of the WVCCPA.

V.

CONCLUSION

Accordingly, for the foregoing reasons, the Court DENIES Defendant’s Motion to Dismiss Plaintiff’s claims for breach of contract, fraud, estoppel, and violations of the WVCCPA. However, the Court GRANTS Defendant’s Motion to Dismiss Plaintiff’s negligence claim.

The Court DIRECTS the Clerk to send a copy of this Memorandum Opinion and Order to all counsel of record and any unrepresented parties.

ENTER: March 14, 2013

/s/ Robert C. Chambers

ROBERT C. CHAMBERS, CHIEF JUDGE

Follow the Money Trail: It’s the blueprint for your case

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.
Editor’s Analysis and Comment: If you want to know where all the money went during the mortgage madness of the last decade and the probable duplication of that behavior with all forms of consumer debt, the first clues have been emerging. First and foremost I would suggest the so-called bull market reflecting an economic resurgence that appears to have no basis in reality. Putting hundred of billions of dollars into the stock market is an obvious place to store ill-gotten gains.
But there is also the question of liquidity which means the Wall Street bankers had to “park” their money somewhere into depository accounts. Some analysts have suggested that the bankers deposited money in places where the sheer volume of money deposited would give bankers strategic control over finance in those countries.
The consequences to American finance is fairly well known here. But most Americans have been somewhat aloof to the extreme problems suffered by Spain, Greece, Italy and Cyprus. Italy and Cyprus have turned to confiscating savings on a progressive basis.  This could be a “fee” imposed by those countries for giving aid and comfort to the pirates of Wall Street.
So far the only country to stick with the rule of law is Iceland where some of the worst problems emerged early — before bankers could solidify political support in that country, like they have done around the world. Iceland didn’t bailout bankers, they jailed them. Iceland didn’t adopt austerity to make the problems worse, it used all its resources to stimulate the economy.
And Iceland looked at the reality of a the need for a thriving middle class. So they reduced household debt and forced banks to take the hit — some 25% or more being sliced off of mortgages and other consumer debt. Iceland was not acting out of ideology, but rather practicality.
The result is that Iceland is the shining light on the hill that we thought was ours. Iceland has real growth in gross domestic product, decreasing unemployment to acceptable levels, and banks that despite the hit they took, are also prospering.
From my perspective, I look at the situation from the perspective of a former investment banker who was in on conversations decades ago where Wall Street titans played the idea of cornering the market on money. They succeeded. But Iceland has shown that the controls emanating from Wall Street in directing legislation, executive action and judicial decisions can be broken.
It is my opinion that part or all of trillions dollars in off balance sheet transactions that were allowed over the last 15 years represents money that was literally stolen from investors who bought what they thought were bonds issued by a legitimate entity that owned loans to consumers some of which secured in the form of residential mortgage loans.
Actual evidence from the ground shows that the money from investors was skimmed by Wall Street to the tune of around $2.6 trillion, which served as the baseline for a PONZI scheme in which Wall Street bankers claimed ownership of debt in which they were neither creditor nor lender in any sense of the word. While it is difficult to actually pin down the amount stolen from the fake securitization chain (in addition to the tier 2 yield spread premium) that brought down investors and borrowers alike, it is obvious that many of these banks also used invested money from managed funds as gambling money that paid off handsomely as they received 100 cents on the dollar on losses suffered by others.
The difference between the scheme used by Wall Street this time is that bankers not only used “other people’s money” —this time they had the hubris to steal or “borrow” the losses they caused — long enough to get the benefit of federal bailout, insurance and hedge products like credit default swaps. Only after the bankers received bailouts and insurance did they push the losses onto investors who were forced to accept non-performing loans long after the 90 day window allowed under the REMIC statutes.
And that is why attorneys defending Foreclosures and other claims for consumer debt, including student loan debt, must first focus on the actual footprints in the sand. The footprints are the actual monetary transactions where real money flowed from one party to another. Leading with the money trail in your allegations, discovery and proof keeps the focus on simple reality. By identifying the real transactions, parties, timing and subject moment lawyers can use the emerging story as the blueprint to measure against the fabricated origination and transfer documents that refer to non-existent transactions.
The problem I hear all too often from clients of practitioners is that the lawyer accepts the production of the note as absolute proof of the debt. Not so. (see below). If you will remember your first year in law school an enforceable contract must have offer, acceptance and consideration and it must not violate public policy. So a contract to kill someone is not enforceable.
Debt arises only if some transaction in which real money or value is exchanged. Without that, no amount of paperwork can make it real. The note is not the debt ( it is evidence of the debt which can be rebutted). The mortgage is not the note (it is a contract to enforce the note, if the note is valid). And the TILA disclosures required make sure that consumers know who they are dealing with. In fact TILA says that any pattern of conduct in which the real lender is hidden is “predatory per se”) and it has a name — table funded loan. This leads to treble damages, attorneys fees and costs recoverable by the borrower and counsel for the borrower.
And a contract to “repay” money is not enforceable if the money was never loaned. That is where “consideration” comes in. And a an alleged contract in the lender agreed to one set of terms (the mortgage bond) and the borrower agreed to another set of terms (the promissory note) is no contract at all because there was no offer an acceptance of the same terms.
And a contract or policy that is sure to fail and result in the borrower losing his life savings and all the money put in as payments, furniture is legally unconscionable and therefore against public policy. Thus most of the consumer debt over the last 20 years has fallen into these categories of unenforceable debt.
The problem has been the inability of consumers and their lawyers to present a clear picture of what happened. That picture starts with footprints in the sand — the actual events in which money actually exchanged hands, the answer to the identity of the parties to each of those transactions and the reason they did it, which would be the terms agreed on by both parties.
If you ask me for a $100 loan and I say sure just sign this note, what happens if I don’t give you the loan? And suppose you went somewhere else to get your loan since I reneged on the deal. Could I sue you on the note? Yes. Could I win the suit? Not if you denied you ever got the money from me. Can I use the real loan as evidence that you did get the money? Yes. Can I win the case relying on the loan from another party? No because the fact that you received a loan from someone else does not support the claim on the note, for which there was no consideration.
It is the latter point that the Courts are starting to grapple with. The assumption that the underlying transaction described in the note and mortgage was real, is rightfully coming under attack. The real transactions, unsupported by note or mortgage or disclosures required under the Truth in Lending Act, cannot be the square peg jammed into the round hole. The transaction described in the note, mortgage, transfers, and disclosures was never supported by any transaction in which money exchanged hands. And it was not properly disclosed or documented so that there could be a meeting of the minds for a binding contract.
KEEP THIS IN MIND: (DISCOVERY HINTS) The simple blueprint against which you cast your fact pattern, is that if the securitization scheme was real and not a PONZI scheme, the investors’ money would have gone into a trust account for the REMIC trust. The REMIC trust would have a record of the transaction wherein a deduction of money from that account funded your loan. And the payee on the note (and the secured party on the mortgage) would be the REMIC trust. There is no reason to have it any other way unless you are a thief trying to skim or steal money. If Wall Street had played it straight underwriting standards would have been maintained and when the day came that investors didn’t want to buy any more mortgage bonds, the financial world would not have been on the verge of extinction. Much of the losses to investors would have covered by the insurance and credit default swaps that the banks took even though they never had any loss or risk of loss. There never would have been any reason to use nominees like MERS or originators.
The entire scheme boils down to this: can you borrow the realities of a transaction in which you were not a party and treat it, legally in court, as your own? So far the courts have missed this question and the result has been an unequivocal and misguided “yes.” Relentless of pursuit of the truth and insistence on following the rule of law, will produce a very different result. And maybe America will use the shining example of Iceland as a model rather than letting bankers control our governmental processes.

Banking Chief Calls For 15% Looting of Italians’ Savings
http://www.infowars.com/banking-chief-calls-for-15-looting-of-italians-savings/

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