Livinglies’s Weblog

Most of my experience is in judicial sale states where the foreclosure is a lawsuit started by the lender. In those cases, when you challenge the Lender or mortgage service provider on its authroity to bring the action and counterclaim on violations of Truth in Lending, fraud etc, you are the counterclaimant.

In states where they use “Trustee” deeds, (a practice which I think waives due process rights that are not waivable) the lender merely gives some kind of notice to the Trustee and the Trustee posts the notice of sale. ANY CHALLENGE YOU WISH TO REGISTER REQUIRES YOU TO START THE JUDICIAL PROCESS AND SO YOU ARE CALLED THE CLAIMANT OR PETITIONER OR PLAINTIFF.

Your best first challenge is to demand copies of documents through a request to produce or whatever it is called in your local jurisdiction. The clerk of the court will assist you my giving you the form or a copy of some request to produce recently filed. 

• You want to demand a copy of that notice because you want to know who sent it, what they said, and whether the information came from yet another third party, which it probably did. 
• So then you want a copy of the documents showing that whoever gave notice to the alleged lender (who is probably not the lender anymore because of some sale or assignment that did not identify your mortgage and note).
• You also want copies of whatever documents they are relying upon, along with copies of any documents showing transfer of the mortgage and note, or assignment of the mortgage servicing rights. In many cases these documents do not exist. In that case, you win they lose and there is no foreclosure. 
• The burden is on THEM to show they own the mortgage and note and how they came to be the owner.
• In states that follow the non-judicial sale practice, as soon as the notice of sale is posted the burden shifts to you the borrower to file something to stop the foreclosure. 
• Remember, if you are asked, that violations of Truth in Lending are NOT waivable. They can’t tell you it is too late to file the claim. 
• If asked what you are trying to accomplish it is this: 

1. vacate the foreclosure sale notice as invalid 
2. challenge authority of Trustee to commence foreclosure sale 
3. challenge authority of whoever reported to Trustee that payments had not been made 
4. assert violations of TILA, RESPA, RICO and trade regulations
5. challenge validity of sale/transfer of mortgage rights to investors 
6. counterclaim or claim against the Trustee, lender and whoever the real party in interest is — the one who actually asserts ownership of the mortgage and note 
7. stop the foreclosure 
8. stop the sale 
9. get copies of the documents given to the Trustee who then started the non-judicial foreclosure sale 
10. get refunds, damages and fees

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We received the following plea for help. I have changed the name to protect privacy. But both the plea and the answer are applicable to many people, which is why we are publishing the Garfield Handbooks. I will shortly publish a way for you to down load the books and forms and purchase the book on line or in hard copy. 

“hello my name is John Smith i am currently in chapter 13 bankruptcy countrywide has currently forclosed on my property the bank brought it back and is currently moving to evict me i beleive there were bogus fees and my atorney did not want to argue the issue , my payments went from $1900 to $2800 to $3850 within 18months adjusted twice please send me info so i can fight back”

First thing you need to do is calm down because allowing yourself to be overtaken by anxiety will lead to bad judgment, unclear thoughts and strategies that could make your situation worse.

Second thing is it would be nice if you would order the Garfield Handbook for Borrowers in the Mortgage Meltdown Crisis by sending a money order for $19.95 payable to General Transfer Corporation and address it to Neil F. Garfield, 4980 S Alma School Rd., A-2, Suite 124, Chandler, Az 85248. I will send you via email the  current manuscript and give you free updates for 60 days. If you want it in hard copy, send $29.95 including shipping and handling. Whether you do or don’t buy the book (which helps defray the costs of servicing the thousands of people stuck in your position), I will help you as much as I can right here and right now. 

Third thing you should do is consult a lawyer that is local and knows the ropes. After reading this email a lawyer might be willing to help you without a retainer because of the possibility of getting paid by Countrywide or even in a class action. The lawyer should consider joining one of the many class action lawsuits that have been filed. Make sure you join one that is for borrowers and not for investors in CDOs. If you must proceed on your own, here are some tips that other people are doing:

1. Contact the Office of the Attorney General of your State. Do the same in your county and your city. You might find that an investigation is already underway against Countrywide and lenders in general in this massive fraud — and they might even intervene for you. You are a victim and not a bad guy, so don’t get put off by anyone telling you that you should have known better when you signed the documents. Remember, the largest criminal investigation in the history of economic fraud is currently underway in many states and there is plenty of talk behind the scenes about what to do for people like you. 
2. Contact the Judge’s office in the bankruptcy case and file a copy of whatever you send to the Judge with the clerk of the bankruptcy court. Use letter sized paper, double-spaced with numbered paragraphs. Make sure you send copies of whatever you have sent to the Judge to the Trustee to whom you were supposed to make your payments. Do not expect the Trustee to intervene for you. Adversarial proceedings are expensive and unless you can offer to pay up front, the Trustee is in all probability not going to help you.
3. You might want to ask for a conversion to Chapter 11, which is available for individuals and which allows for certain “cram down” features that are more likely to get you relief that you might get in Chapter 13 or Chapter 7. But the filing fee in Chapter 11 cases is very high. You might want to get  request leave of court to spread the payment out over time. 
4. If the bankruptcy court won’t hear you then try everything below in the State Court in your jurisdiction. The clerk of the court will generally be helpful. 
5. Generally a good time to contact the Judge in person is on a Friday afternoon when the Judge dispenses advise and punishment to lawyers who screwed up in his court that week. At that time you can present your papers (if the Judge lets you) and literally plead with the Judge to help you. 
6. The Judge on the other hand is seeing a geometric increase in these cases and most bankruptcy judges are (a) not pleased with the change in bankruptcy laws passed by congress and (b) don’t like these foreclosures based upon crazy payment re-sets and (c) would offer some relief as long as they were not inventing law, just enforcing and deciding it. So don’t get crazy with your demands, because the Judge will probably not be receptive to what you have to say. 
7. Be respectful and not argumentative withe the Judge. You can show your emotion but make absolutely certain it does not come across that you are angry or ready to fight with the Judge. That can lead to handcuffs and spending a night behind bars to cool off.
8. Do not assume the Judge knows anything about your case (in terms of who you are, where you live, when this case started, when you bought, or what happened when you bought — these are all things you must say in writing, and if you given the chance, out loud in court); but by all means you can assume that the Judge knows the law — better than you do and better than 99% of the attorneys that appear before him or her. In fact, appearing pro se (without counsel) might put you at an advantage because the Judge is likely to use his own knowledge or her own knowledge, to your advantage.
9. Do not assume the Judge is against you if he/she asks you questions or says things that seem to favor the other side. A Judge is supposed to be objective, not automatically in your favor because of your good looks or the severity of the penalty you are experiencing. 
10. Be very scrupulous in obeying all time limits and all other instructions of the court. Don’t think you can play fast and loose with ANYTHING. Bankruptcy Court is Federal Court and Federal Court is a lot tighter on rules than you usually find in State Courts. 
11. Ask the Judge on paper and orally if you get the chance, for a stay or temporary injunction, preventing Countrywide from enforcing the mortgage, filing eviction, or getting an order that would allow  or order law enforcement to come to your house and literally remove you. Do not remove yourself. You might be surprised how long it can take before a sheriff does the eviction. They don’t like this situation anymore than you do, and they are aware of the criminal investigations going on against Countrywide and other lenders.
12. Ask the Judge to allow you to file an “Adversary Proceeding”. You will get instructions in the local rules from either the Judge or his clerk. 
13. Tell the Judge in your paperwork and orally, if you get the chance that you want to challenge the mortgage and the note in that they were not computed properly, that the adjustments were not computed in accordance with law, that the amount demanded from you is wrong (too high) and that you have been defrauded by Countrywide and other co-conspirators) on all of the following grounds:
14. Fraud in the inducement: Countrywide entered into a conspiracy to defraud you and millions of other people to believe that you could, with their help, afford a house that you otherwise believed you could never pay for. You were presented with terms you were led to believe you could afford, but the entire arrangement amounted to bait and switch because the terms being enforced against you now are the not the same terms you started off with. They inflated the price of the home, enlisted an appraiser to verify the value, enlisted a mortgage broker to guide you into a mortgage you could not afford, intentionally distracted you from disclosures that might have alerted you to problems with the mortgage terms and note, and then led you to believe that you had been approved by a financial institution with far superior  information, and upon whom you reasonably relied to verify the value of the home, the reasonableness of the terms of the mortgage, and the lack of any need for an attorney. [Needless to say, if anything here does not apply to you don’t say it]. As a result, you went to a closing where you presented with a pile of papers that you did not understand but which were explained to you by a title agent that was enlisted to tell you the terms of the mortgage and note in such a manner that you would be distracted from understanding that you could not possibly pay for the house, that the house might not be worth what you were paying for, and that the mortgage terms only benefitted the co-conspirators, none of whom assumed any risk in the transaction because they sold the risk to third party investors who were similarly lied to and defrauded. As a result you have been deprived of living arrangements that you could have afforded but which are no longer available, you have spent money improving and furnishing a house that you cannot afford if the price and mortgage terms are maintained, and are faced with the expense and costs of moving, including the threat of literally moving out onto the street and becoming one of the hundreds of thousands of homeless persons displaced by this massive fraud.
15. Fraud in the execution: You were led to believe by the co-conspirators and third parties that you were signing papers that were the same as what you were originally told by the developer, who probably received a rebate on the yield spread premium, the mortgage broker who also received a rebate, the title agent who received a high closing fee, and the appraiser who also received a fee in excess of the amount that the marketplace would have awarded if the transaction had not been fraudulent. 
16. Rescission — only if they can give you back everything they took from you.
17. Usury: The net effect of this scheme was to acquire title to property and sell it at prices that would allow the lender to secure a return that would otherwise be in violation of usury laws.
18. RICO racketeering: This was an interstate scheme involving co-conspirators from many states and perhaps other countries as well. The scheme violates criminal statutes and cicll statutes. Accordingly the case should referred for criminal prosecution and you are entitled to treble damages and attorney fees.
19. TIL (Truth in Lending): The co-conspirators intentionally misled you by distracting you from the real terms of the transaction and as a result violated local, state and federal truth in lending laws.
20. Discovery: The Clerk might help you with this. You want to file requests for Production, requests for Admission, Interrogatories, and a demand for access to the main and ancillary computers containing emails, correspondence and policies of Countrywide for dealing with your case and cases like yours. Get access to emails, correspondence etc. dating back before the loan and relating to the creation of the loan product the borrower eventually was sold. Same for what they know of the other players — developer/seller, mortgage broker, appraiser, relations with investment bankers showing they knew they would not be carrying he risk of the loan ( shows they had not interest other than closing the deal without concern as to whether the deal went bad for borrower or lender). Get screen shots of websites and see if you have copies of web pages that were printed during the loan and sales process. Check for differences. If someone has been fired at the lender for the events leading up to the CDO and mortgage meltdown, get their deposition. Demand copies of drafts of documentation before it was presented to the borrower along with any emails or inter-office memos. Find out if anyone has consulted counsel for criminal exposure, employment litigation, or civil exposure. You can’t get the content of the conversation but you can get the answer to that question if you phrase it right
21. See my other posts on livinglies.wordpress.com for more allegations that might be applicable.

Neil F. Garfield, Esq.

ngarfield@msn.com<mailto:ngarfield@msn.com>

This is not a solicitation for legal services nor legal advice in your particular situation. I do not know what jurisdiction you live in, I have not interviewed you, you have not retained me, and I am not your lawyer. These matters are complex and generally require the services of competent legal counsel experienced in bankruptcy, foreclosures and lender liability. You should consult with local counsel before doing anything. The information contained in this email is general information that may or may not apply to your situation. 

This transmission may be protected by attorney client privilege and attorney work product privilege if it contains legal advice or opinions, and it contains information that are private, trade secrets, protected by non-disclosure and non-circumvention agreements between the parties and is therefore confidential and privileged. It may also be for the sole purpose of compromise and settlement only if it contains an offer and may not be used in any judicial or quasi-judicial or administrative proceeding without the express written consent of the sender. 

We the People: Fighting Back

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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