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.

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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

 

Quiet Title Claims Explained

see also http://livinglies.wordpress.com/2013/04/29/hawaii-federal-district-court-applies-rules-of-evidence-bonymellon-us-bank-jp-morgan-chase-failed-to-prove-sale-of-note/
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: If you are thinking that with all the publicity surrounding the obvious fatal defects in the millions of foreclosures already completed, quiet title should be unnecessary, you are probably right. The fact is that the real world is more complicated and as Elizabeth Warren and several dozen bloggers and journalists have pointed out the average of $300 per homeowner being paid to settle the matter is not just inadequate it is stupid. No amount of money will actually cure the current title corruption on record in all 50 states due to practice of allowing complete strangers to the transaction to self-anoint themselves as creditors, foreclose on property and submit a credit bid at auction when they were not owed any money and there was no credit relationship between the homeowner and the bidder.

Quiet Title is an effective tool but it is not a silver bullet. It is about what is contained in the county records. If someone accidentally (or on purpose) records a lien against your property and they refuse to retract it, then you are forced to file an action with the Court that says I own the property and my title is clouded by documents that were recorded as liens against my title.

Those liens are not lawful, and they should be declared null and void or at a minimum the court should issue a declaratory statement based upon facts of the case that sets forth the stakeholders in the property and the nature of their claim.

In order to claim the latter, you would need to state that while the lien is unlawful, the party named on the lien, or the party claiming to hold the right to the lien, refuses to cooperate with clearing title or to explain the nature of their claim. Thus the homeowner is left with a lien which is unlawful and a claimant who insists that it is lawful. The homeowner is in doubt as to his rights and therefore asks the Court to quiet title or declare the rights of the parties.

In filing quiet title claims the mistake most often made is that it is being used defensively instead of offensively. The complaint that fails merely attacks the right of some pretender lender to foreclose. That is not a quiet title action. That is a denial of the debt, note, mortgage, default, notice etc.

And the Courts regularly and correctly dismiss such claims as quiet title claims. You can’t quiet tile because someone does not have a right to foreclose. You can only quiet title if you can assert and prove to the Court that the items on record do not apply to you or  your property and therefore should be removed.

AND you can’t get through a motion to dismiss a declaratory action if you don’t state that you are in doubt and give cogent reasons why you are in doubt. If you state that the other side has no right to do anything and end it there, you are using quiet title defensively rather than offensively in a declaratory action.

Stating that the pretender lender has no right to foreclose is not grounds for a declaratory action either. If you make a short plain statement of FACTS (not conclusions of law) upon which the relief sought could be granted you survive a motion to dismiss. If you only state the conclusions of law, you lose the motion to dismiss.

In such a declaratory action you must state that you have doubts because the pretender lender has taken the position and issued statements, letters or demands indicating they are the owner of the lien but you have evidence from expert analyses from title and securitization experts that they are not the owner of the line and they never were.

Remember in securitized transactions you would need to name the original named payee on the note and the secured party(ies) and state that they never should have recorded the lien because they did not perform as required by the agreement (i.e., they didn’t loan you money) and/or because they received loss mitigation payments in excess of the amount due. If you want to get more elaborate, you can say that they now claim to have nothing to do with the loan and refuse to apply loss mitigation payments to the loan even though they were received.

The problem in Florida is that such claims may be interpreted by the Clerk as claims relating to land and title which requires the ungodly amount of $1900 in filing fees alone, which I personally think is an unconscionable and unconstitutional denial of access to the court to all except people with a lot of money.

So you might want to go with slander of title seeking money damages or failure to refund over-payments received from sale or mitigation payments relating to your loan. That COULD be the basis of a claim in which the property is already sold at auction, short-sale, or resale. If the pretender lender received the payoff or the property illegally and then fraudulently executed a satisfaction of mortgage even though they were never the lender nor the purchaser of the loan, then you, as the owner of the property are probably entitled to that money plus interest and probably attorney fees.

PRACTICE NOTE: Strategically it seems like it is tough going if you attack the title under correct but unpalatable causes of action (i.e. actions that the judicial system already has decided they don’t like the outcome — a free house to the homeowner). So the other way of skinning the cat is to file actions for damages and that I think is the future of mortgage litigation. The basic action is simple breach of contract (the agreement to enter into the loan transaction and/or the note).

Filing suit for damages AFTER the sale gives you playing field without moving goal posts and allows fairly simple straightforward causes of action which many attorneys will soon realize they can take strictly on contingency or mostly on contingency. The net result may well be either the tender of money and/or the tender of the property back to the homeowner or former homeowner in lieu of payment for damages.It also opens the door to the possibility of punitive, treble, or exemplary damages or some combination of those.

At my firm we are looking hard at closings where the pretender lender took the money and ran on a short-sale or resale. It is clear-cut. They either had a right to the money or they didn’t. IF they didn’t have the right to execute the satisfaction of mortgage or if they fraudulently diverted the money to their own benefit in lieu of the creditor from whom they did receive authority, then you still have a right to refund of the money that unjustly enriched the pretender lender.  The money goes to the former owner/seller and to nobody else. If there is a claimant that wishes to step forward to attack the award, then we will deal with it, but based upon my information such claims will not be made.

More News:

Error Claims Cast Doubt on Bank of America Foreclosures in Bay Area
http://www.nbcbayarea.com/investigations/series/mortgage-mess/Error-Claims-Cast-Doubt-on-Bank-of-America-Foreclosures-in-Bay-Area-204764581.html

Number of homes entering foreclosure plunges in California
http://www.latimes.com/business/la-fi-foreclosure-report-20130424,0,6017958.story

Politics: While Wronged Homeowners Got $300 Apiece in Foreclosure Settlement, Consultants Who Helped Protect Banks Got $2 Billion
http://m.rollingstone.com/?seenSplash=1&redirurl=/politics/blogs/taibblog/while-wronged-homeowners-got-300-apiece-in-foreclosure-settlement-consultants-who-helped-protect-banks-got-2-billion-20130426

Minnesota Supreme Court Affirms That Foreclosing Parties Must Record Mortgage Assignments Prior To Initiating Foreclosure By Advertisement
http://www.jdsupra.com/legalnews/minnesota-supreme-court-affirms-that-for-50369/

Presenting: The Housing Bubble 2.0
http://www.zerohedge.com/news/2013-04-29/presenting-housing-bubble-20

 

Inflated Appraisals as Assumption of Risk and Joint Venture with the Pretender Lender

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Editor’s Comment:  

The allegation of an intentionally inflated appraisal of the property supports many claims, defenses, affirmative defenses and positions. A property that is appraised at $300,000 was usually coming in at precisely $20,000 more than the target value used for the contract for purchase or the commitment for funding a refi. The appraiser was selected, directly or indirectly by the so-called lender whom I have dubbed the “pretender lender,” so named because the borrower is deceived into thinking that he/she is entering into a financial transaction with one party — the one named on the promissory note as payee or named as the mortgagee, beneficiary or lender on the mortgage or deed of trust. In fact, however, the financial transaction took place between the  borrower and an undisclosed party while the paperwork revealed no such dichotomy in violation of federal and state lending laws).

But in addition to the documents smelling like 3 day-old fish based upon the failure of the documents to describe an actual financial transaction between the pretender lender and the borrower, the terms of the loan are different than the ones stated in the note and mortgage.

The pretender lender is merely an originator whose name is “rented” for the purpose of creating a bankruptcy remote vehicle (so-named by the banking industry) that could commit every violation of lending laws under the sun. When the homeowner seeks redress he/she finds himself confronting a non-existent entity that was never legally formed, and/or a bankrupt entity, or a dissolved entity that in any event never supplied the credit or cash for the transaction recited in the mortgage documents.

The inflated appraisal is performed by appraisers with the full knowledge that they are doing the equivalent of appraising a car’s value as being 40% above the retail sticker on the showroom  floor.  Industry standard appraisals withstand the test of time. A reasonable period of time for an appraisal to stand on its own legs is expressed in years not months. In most cases the homeowner  quickly found out in days, weeks or at most months, that the fair market value of the property was at least vastly over-stated in order to make the loan as large as possible, and, as we have seen, the inflation of the appraisal ranged from 30% to 75% in those areas that were targeted by Wall Street — with the worst offenses occurring in areas of low financial sophistication or people with language issues because they had recently moved to the U.S.

The appraiser is selected by the lender and, as stated by the 8,000 appraisers who signed petitions in protest in 2005, threatened with no employment if they didn’t come back with an appraisal at least $20,000 over the target contract price (the contract being given to them, which is a violation in itself of industry standards. Many appraisers refused and went to work only for small banks who were making loans with their own money and credit. The pretender lenders were not worried about risk of loss because the originator whose name was loaned to the Wall Street bank for a price above rubies, was not using its own money and credit. In fact, the originator usually had not money or credit, with some notable exceptions where a major institution originated the loan, but was not bankruptcy remote (thinly capitalized). None the less they were not the source of funds, not using their own money or credit and thus assumed no risk of loss for the “decline” in the value of the property after closing —a decline precipitated by the free market providing a value range that is in line with median income.

This article is meant to provoke discussion amongst both bankruptcy lawyers and civil litigators as to whether a known inflated value places part of the risk of loss on all loans, not just those that went into default. By inserting a false value into the equation, the borrower reasonably relied upon the appraiser as supposedly confirmed by the “lender” under OCC regulations. That risk can be quantified — i.e., an appraisal at $300,000 for property worth only $200,000 created an immediate risk of loss not assumed by the borrower but rather assumed by the lender named in the documents.

Thus when the loss is realized in the conventional sense, it should  be “realized” in the accounting sense and applied against the lender, thus reducing the allowable claim to the value of the property. This isn’t lien-stripping. This is contract law and assumption of risk. The borrower did not come up with the appriser or the appraisal. It was the lender and under industry standards the appraisal was presumed to be confirmed through due diligence by the lender. In the old days, the bank officers would go out and visit the property a few times and check on the work done by the apprisers. Some form of that due diligence is required under current regulations (see OCC regulations) and industry standards.

The latest time that the loss attributable to the inflated appraisal should be applied is at the time the loan is subject to foreclosure. At that time, I would argue, the amount demanded in wrong and therefore an illegal impediment to reinstatement, redemption, settlement or modification. Since the borrower was the victim of the new standards for underwriting mortgages without any announcements of new standards, the borrower can hardly be held responsible for the inflated appraisal regardless of what they did with the money from the loan and regardless of the source of funding (the real party who transacted business with the borrower where money exchanged hands).

The terms of repayment are changed by the inflated appraisal. Since the inflation of the value of the property was not only known but caused by the pretender lender, the transaction converts from a standard mortgage deal to a joint venture in which if the property value continues to go up, the lender gets its money but if the property value goes down, the lender has assumed the risk of loss to the extent that the value of the property declined — or at least that portion of the decline attributable to the inflated appraisal.

This supports fraud accusations, slander of title and a variety of other causes of action. But just a importantly it makes the pretender lender a partner of the borrower and raises an issue of fact that must be resolved by the court before allowing any foreclosure to proceed or before any attempt can be made to modify the mortgage under HAMP or redeem the property under state law. The successor lenders in the securitization chain are alleging in one form or another that the amount due is strictly computed from the amount stated on the note. But in fact, the co-obligor in the securitization chain is the pretender lender who assumed part of the risk of the loss. Any notice default or attempt to foreclose in which an inflated appraisal was part of the original transaction, regardless of the identity of the real lender, is plainly  wrong or even a misrepresentation to the borrower and the court. hence the notice provisions in all states, judicial or non-judicial, are violated in virtually all foreclosures.

But wait there is more. Foreclosures already completed can be more easily overturned by these allegations with the assistance of an honest appraiser. And for those foreclosures, whether overturned or not, the borrower can seek contribution from the co-obligor(s) pretender lender or those who used the originator as a vehicle to shield them against predatory lending claims. In our example above, this would mean that the homeowner might have a clear cause of action against the  pretender lender and its successors for the $100,000 loss in value. It would also pull the rug out from “credit bids” based upon documentation allegedly from the originating lender. If the credit bid lieu of cash was higher than the amount due, this created a barrier for others to bid cash on the property making the loan paid in full and the excess proceeds payable to the borrower.

By denying that the pretender lender used an honest appraisal and  denying that the borrower is the only obligor, and denying the debt to at least to the extent of the inflation of the appraisal the borrower puts in issue a material fact in dispute and the amount of the bifurcation of risk of loss between the borrower and the amount to be attributed to the originating lender opens the hallowed doors of discovery. affirmatively alleging that the appraisal was inflated puts the burden on the borrower, so it should be avoided if possible.


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TITLE COMPANIES REFUSE TO ISSUE POLICIES ON SECURITIZED MORTGAGES

REPUBLIC TITLE ANNOUNCEMENT: The Company will not insure title to any property which has been foreclosed by Ally Financial, Ally Bank or GMAC until further notice.

This follows a series of similar announcements over the past year from smaller title companies who, recognizing the enormous liability that the banks were attempting to shift to them, simply refused to issue the policies either issuing a “letter of declination” or issuing a policy that includes EXCEPTIONS for any claim arising out of the mortgage, the securitization of the mortgage, or the perfection of the lien.

We have reports now from people who have gone to the trouble of going to title companies and asking for a title commitment so that they would know whether they could sell or refinance their home. The title agents are flatly refusing (letter of declination) or issuing a commitment to get the fee from the homeowner WITH exceptions for the securitized mortgages. Of course what this means is what I have been saying for three years — title is either clouded or fatally defective.

And THAT means that there are facts supporting a claim to quiet title and remove the mortgage or deed of trust from the property, or even remove the trustee or clerk’s deed if the property was “sold” at auction. It also means that the claims for wrongful foreclosure, slander of title, predatory lending, violations of TILA, RESPA, HOEPA etc., are coming up to the front burner. If people make their claims and the lawyers do their job, the great theft of wealth from the middle class can be partially reversed, saving both the housing market and the economy.

YOU MAY BE ENTITLED TO CASH PAYMENT FOR WRONGFUL FORECLOSURE — Coming to a Billboard Near YOU

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EDITOR’S NOTE: Well it has finally happened. Three years ago I couldn’t get a single lawyer anywhere to consider this line of work. I predicted that this area of expertise in their practice would dwarf anything they were currently doing including personal injury and malpractice. I even tried to guarantee fees to lawyers and they wouldn’t take it. Now there are hundreds, if not thousands of lawyers who are either practicing in this field or are about to take the plunge. The early adopters who attended my workshops and read my materials, workbooks and bought the DVD’s are making some serious money and have positioned themselves perfectly ahead of the crowd.

Congratulations, everyone, it was the readers who made this happen. Without your support I would not have been able to reach the many thousands of homeowners and lawyers and government officials whoa re now turning the corner in their understanding of this mess and their willingness to do something about it.

The article below from Streitfeld sounds like it was written by me. No attribution though. No matter. The message is out. The foreclosures were and are wrongful, illegal, immoral and the opposite of any notion we have of justice. They were dressed up to look right and they got way with it for years because so many homeowners simply gave up convinced they had only to blame themselves for getting into a raw deal. Those homeowners who gave up were wrong and now they will find themselves approached by lawyers who will promise them return of the house they lost or damages for the wrongful foreclosure. When you left, you thought your loan had not been paid and that the notice you received was legitimate. You were wrong on both counts. The loan had been paid, there were other people who had signed up for liability along with you to justify the price on steroids that was sold to your lender (investor).

For those who are just catching up, here it is in a nutshell: Borrower signs a note to ABC Corp., which says it is the lender but isn’t. So you start right away with the wrong party named on the note and mortgage (deed of trust) PLUS the use of a meaningless nominee on the mortgage (deed of trust) which completely invalidates the documents and clouds the title. Meanwhile the lender gets a mortgage bond NOT SIGNED BY THE BORROWER. The bond says that this new “entity” (which usually they never bothered to actually form) will pay them from “receivables.” The receivables include but ARE NOT LIMITED TO the payments from the borrower who accepted funding of a loan. These other parties are there to justify the fact that the loan was sold at a huge premium to the lender without disclosure to either the borrower or the lender. (The tier 2 Yield Spread Premium that raises some really juicy causes of action under TILA, RESPA and the 10b-5 actions, including treble damages, attorney fees and restitution).

And and by the way for the more sophisticated lawyers, now would be the time to sharpen up your defense skills and your knowledge of administrative laws. Hundreds of thousands of disciplinary actions are going to filed against the professionally licensed people who attended the borrower’s “closing” and who attended the closing with the “lender.” With their livelihood at stake, their current arrogance will morph into abject fear. Here is your line when you quote them fees: “Remember that rainy day you were saving up for? Well, it’s raining!” Many lawyers and homeowners are going to realize that they have easy pickings when they bring administrative grievances in quasi criminal proceedings (don’t threaten it, that’s a crime, just do it) which results in restitution funded by the professional liability insurer. careful about the way you word the grievance. Don’t go overboard or else the insurance carrier will deny coverage based upon the allegation of an intentional act. You want to allege gross negligence.

EVERYBODY in the securitization structure gets paid premium money to keep their mouth shut and money changes hands faster than one of those street guys who moves shells or cards around on a table. Yes everyone gets paid — except the borrower who never got the benefit of his the bargain he signed up for — a home worth whatever they said it was worth at closing. It wasn’t worth that and it will never be worth that and everyone except the borrower knew it with the possible exception of some lenders who didn’t care because the other people who the borrower knew nothing about, had “guaranteed” the value of the lender’s investment and minimized the risk to the level of “cash equivalent” AAA-rated.

The securitization “partners” did not dot their “i’s” nor cross their “t’s.” And that is what the article below is about. But they failed to do that for a reason. They didn’t care about the documents because they never had any intention of using them anyway. It was all a scam cleverly disguised as a legitimate part of the home mortgage industry. It was instead a Ponzi scheme without any of the attributes of real appraisals, real underwriting reviews and committees and decisions. They bought the signature of the borrowers by promising the moon and they sold the apparent existence of signature (which in many cases) did not even exist) to Lenders by promising the stars.

And now, like it wasn’t news three years ago when we first brought it up, suddenly mainstream media is picking up the possibility that  the foreclosures were all fraudulent also. The pretender lenders were intentionally and knowingly misrepresenting themselves as lenders in order to grab property that didn’t belong to them and to which they had no rights — to the detriment of both the borrowers and the lenders. And some judges, government officials and even lawyers appear to be surprised by that, are you?

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GMAC’s Errors Leave Foreclosures in Question

By DAVID STREITFELD

The recent admission by a major mortgage lender that it had filed dubious foreclosure documents is likely to fuel a furor against hasty foreclosures, which have prompted complaints nationwide since housing prices collapsed.

Lawyers for distressed homeowners and law enforcement officials in several states on Friday seized on revelations by GMAC Mortgage, the country’s fourth-largest home loan lender, that it had violated legal rules in its rush to file many foreclosures as quickly as possible.

Attorneys general in Iowa and North Carolina said they were beginning separate investigations of the lender, and the attorney general in California directed the company to suspend all foreclosures in that state until it “proves that it’s following the letter of the law.”

The federal government, which became the majority owner of GMAC after supplying $17 billion to prevent the lender’s failure, said Friday that it had told the company to clean up its act.

Florida lawyers representing borrowers in default said they would start filing motions as early as next week to have hundreds of foreclosure actions dismissed.

While GMAC is the first big lender to publicly acknowledge that its practices might have been improper, defense lawyers and consumer advocates have long argued that numerous lenders have used inaccurate or incomplete documents to remove delinquent owners from their houses.

The issue has broad consequences for the millions of buyers of foreclosed homes, some of whom might not have clear title to their bargain property. And it may offer unforeseen opportunities for those who were evicted.

“You know those billboards that lawyers put up seeking divorcing or bankrupt clients?” asked Greg Clark, a Florida real estate lawyer. “It’s only a matter of time until they start putting up signs that say, ‘You might be entitled to cash payment for wrongful foreclosure.’ ”

The furor has already begun in Florida, which is one of the 23 states where foreclosures must be approved by courts. Nearly half a million foreclosures are in the Florida courts, overwhelming the system.

J. Thomas McGrady, chief judge in the foreclosure hotbed of St. Petersburg, said the problems went far beyond GMAC. Four major law firms doing foreclosures for lenders are under investigation by the Florida attorney general.

“Some of what the lenders are submitting in court is incompetent, some is just sloppy,” said Judge McGrady of the Sixth Judicial Circuit in Clearwater, Fla. “And somewhere in there could be a fraudulent element.”

In many cases, the defaulting homeowners do not hire lawyers, making problems generated by the lenders hard to detect.

“Documents are submitted, and there’s no one to really contest whether it is accurate or not,” the judge said. “We have an affidavit that says it is, so we rely on that. But then later we may find out that someone lost their home when they shouldn’t have. We don’t like that.”

GMAC, which is based in Detroit and is now a subsidiary of Ally Financial, first put the spotlight on its procedures when it told real estate agents and brokers last week that it was immediately and indefinitely stopping all evictions and sales of foreclosed property in the states — generally on the East Coast and in the Midwest — where foreclosures must be approved by courts.

That was a highly unusual move. So was the lender’s simultaneous withdrawal of important affidavits in pending cases. The affidavits were sworn statements by GMAC officials that they had personal knowledge of the foreclosure documents.

The company played down its actions, saying the defects in its foreclosure filings were “technical.” It has declined to say how many cases might be affected.

A GMAC spokeswoman also declined to say Friday whether the company would stop foreclosures in California as the attorney general, Jerry Brown, demanded. Foreclosures in California are not judicial.

GMAC’s vague explanations have been little comfort to some states.

“We cannot allow companies to systematically flout the rules of civil procedure,” said one of Iowa’s assistant attorneys general, Patrick Madigan. “They’re either going to have to hire more people or the foreclosure process is going to have to slow down.”

GMAC began as the auto financing arm of General Motors. During the housing boom, it made a heavy bet on subprime borrowers, giving loans to many people who could not afford a house.

“We have discussed the current situation with GMAC and expect them to take prompt action to correct any errors,” said Mark Paustenbach, a spokesman for the Treasury Department.

GMAC appears to have been forced to reveal its problems in the wake of several depositions given by Jeffrey Stephan, the team leader of the document execution unit in the lender’s Fort Washington, Pa., offices.

Mr. Stephan, 41, said in one deposition that he signed as many as 10,000 affidavits and other foreclosure documents a month; in another he said it was 6,000 to 8,000.

The affidavits state that Mr. Stephan, in his capacity as limited signing officer for GMAC, had examined “all books, records and documents” involved in the foreclosure and that he had “personal knowledge” of the relevant facts.

In the depositions, Mr. Stephan said he did not do this.

In a June deposition, a lawyer representing a foreclosed household put it directly: “So other than the due date and the balances due, is it correct that you do not know whether any other part of the affidavit that you sign is true?”

“That could be correct,” Mr. Stephan replied.

Mr. Stephan also said in depositions that his signature had not been notarized when he wrote it, but only later, or even the next day.

GMAC said Mr. Stephan was not available for an interview. The lender said its “failures” did not “reflect any disrespect for our courts or the judicial processes.”

Margery Golant, a Boca Raton, Fla., foreclosure defense lawyer, said GMAC “has cracked open the door.”

“Judges used to look at us strangely when we tried to tell them all these major financial institutions are lying,” said Ms. Golant, a former associate general counsel for the lender Ocwen Financial.

Her assistants were reviewing all of the law firm’s cases Friday to see whether GMAC had been involved. “Lawyers all over Florida and I’m sure all over the country are drafting pleadings,” she said. “We’ll file motions for sanctions and motions to dismiss the case for fraud on the court.”

For homeowners in foreclosure, the admissions by GMAC are bringing hope for resolution.

One such homeowner is John Turner, a commercial airline pilot based near Detroit. Three years ago he bought a Florida condo, thinking he would move down there with a girlfriend. The relationship fizzled, his finances dwindled, and the place went into foreclosure.

GMAC called several times a week, seeking its $195,000. Mr. Turner says he tried to meet the lender halfway but failed. Last week it put his case in limbo by withdrawing the affidavit.

“We should be able to come to an agreement that’s beneficial to both of us,” Mr. Turner said. “I feel like I’m due something.”

GMAC HALTS FORECLOSURES ADMITTING FALSE AFFIDAVITS

SERVICES YOU NEED

From testimony in a Chase case, same as dozens of others I have seen —-

Q. So if you didn’t review any books, records, and documents or computerized records, how is it that you had personal knowledge of all the matters contained therein?

A. Well, I have personal knowledge that my staff has personal knowledge. That is our process.

KEEP IN MIND that these admitted facts now are the same facts treated with incredulity and derision from the bench and opposing counsel. The Judges were wrong. The foreclosures were wrong. Now what? How will homeowners and counsel be treated in court now? Will the Judge still think the homeowner is trying to get out of a legitimate debt or will the Courts start to allow these cases to heard on their MERITS instead of improper PRESUMPTIONS? Will the courts start following rules of evidence or will they continue to give the “benefit of the doubt” (i.e., and improper presumption) to the foreclosure mill that fabricated documents with false affidavits?

The tide is turning from defending borrowers to prosecuting damage claims for slander of title, fraud, appraisal fraud, and criminal prosecutions by state, local and federal law enforcement. GMAC is only the first of the pretender lenders to admit the false representations contained in pleadings and affidavits. The methods used to to obtain foreclosure sales were common throughout the industry. The law firms and fabrication mills will provide precious little cover for the culprits whose interests they served. AND now that millions of homes were foreclosed, their position is set and fixed — they can no longer “fix” the problem by manipulating the documents.

The bottom line is that GMAC mortgagors who “lost” their homes still own them, as I have repeatedly opined on these pages. The damages are obvious and the punitive damages available are virtually inevitable. Maybe Judges will change their minds about applying TILA and RESPA, both of which amply cover this situation. Maybe those teeth in those statutes do NOT lead to windfall gains for homeowners but only set things right.

These people can move back into their homes in my opinion and even taken possession from those who allegedly purchased them, since the title was based upon a fatal defect in the chain. Whether these people will end up owing any money and whether they might still be subject to foreclosure from SOMEBODY is not yet known, but we know that GMAC-sponsored foreclosures are now admitted to be defective. There is no reason to suppose that GMAC was any different from any of the other pretender lenders who initiated foreclosure sales either on false pleading or false instructions using the power of sale in non-judicial states.

Those hundreds of millions of dollars earned by the foreclosure mills, those tens of billions of wealth stolen from homeowner are all up for grabs as lawyers start to circle the kill, having discovered that there is more money here than any personal injury or malpractice suit and that anyone can do it with the right information on title and securitization.

With subpoenas coming in from law enforcement agencies around the country, GMAC is the first to crumble, aware that the choice was to either take a massive commercial hit for damages or face criminal charges. Finger pointing will start in earnest as the big boys claim plausible deniability in a scheme they hatched and directed. The little guys will flip on them like pancakes as they testify under oath about the instructions they received which they knew were contrary to law and the rules governing their licenses and charters. Real Estate Brokers, licensed appraisers, licensed mortgage mortgage brokers, notaries, witnesses, title agents and their collective title and liability insurance carriers will soon discover that their licenses, livelihood and reputations are not only at risk but almost certainly headed for a major hit.

There can be no doubt that all GMAC cases will be affected by this action although GMAC has thus far limited the instruction to judicial states. In non-judicial states, most of the foreclosures were done without affidavits because they were uncontested. GMAC will now find small comfort that they didn’t use affidavits but merely false instructions to “Trustees” whose status was acquired through the filing of “Substitution of Trustee” documents executed by the same folks who falsified the affidavits in the judicial states. But the fact is that GMAC was not the creditor and obtained title through a “credit bid.” THEY CAN’T FIX THIS! Thus the transfer of title was void, in my opinion, or certainly voidable.

The denial that the affidavit contained false information is patently false — and, as usual, not under oath (see below). GMAC takes the position that the affidavits were “inadvertently” signed (tens of thousands of them) by persons without knowledge of their truth or falsity and that the action is taken only to assure that the mortgage holder is actually known. So the fight isn’t over and don’t kid yourself. They are not all going to roll over and play dead. Just take this as another large step toward the ultimate remedy — reinstatement of people in their homes, damage awards to people who were defrauded, and thus restoration of hundreds of billions of dollars of wealth back into the economic sector where money is spent and the economy actually works for people who don’t trade false papers at the expense of pensioners and homeowners around the world.

September 20, 2010

GMAC Halts Foreclosures in 23 States for Review

By DAVID STREITFELD

GMAC Mortgage, one of the country’s largest and most troubled home lenders, said on Monday that it was imposing a moratorium on many of its foreclosures as it tried to ensure they were done correctly.

The lender, which specialized in subprime loans during the boom, when it was owned by General Motors, declined in an e-mail to specify how many loans would be affected or the “potential issue” it had identified with them.

GMAC said the suspension might be a few weeks or might last until the end of the year.

States where the moratorium is being carried out include New York, Connecticut, New Jersey, Illinois, Florida and 18 others, mostly on the East Coast and in the Midwest. All of the affected states are so-called judicial foreclosure states, where courts control the interactions of defaulting homeowners and their lenders.

Since the real estate collapse began, lawyers for homeowners have sparred with lenders in those states. The lawyers say that in many cases, the lenders are not in possession of the original promissory note, which is necessary for a foreclosure.

GMAC, which has been the recipient of billions of dollars of government aid, declined to provide any details or answer questions, but its actions suggest that it is concerned about potential liability in evicting families and selling houses to which it does not have clear title.

The lender said it was also reviewing completed foreclosures where the same unnamed procedure might have been used.

Matthew Weidner, a real estate lawyer in St. Petersburg, Fla., said he interpreted the lender’s actions as saying, “We have real liability here.”

Mr. Weidner said he recently received notices from the opposing counsel in two GMAC foreclosure cases that it was withdrawing an affidavit. In both cases, the document was signed by a GMAC executive who said in a deposition last year that he had routinely signed thousands of affidavits without verifying the mortgage holder.

“The Florida rules of civil procedure are explicit,” Mr. Weidner said. “If you enter an affidavit, it must be based on personal knowledge.”

The law firm seeking to withdraw the affidavits is Florida Default Law Group, which is based in Tampa. Ronald R. Wolfe, a vice president at the firm, did not return calls. The firm is under investigation by the State of Florida, according to the attorney general’s Web site.

Real estate agents who work with GMAC to sell foreclosed properties were told to halt their activities late last week. The moratorium was first reported by Bloomberg News on Monday. Bloomberg said it had obtained a company memorandum dated Friday in which GMAC Mortgage instructed brokers to immediately stop evictions, cash-for-key transactions and sales.

Nerissa Spannos, a Fort Lauderdale agent, said GMAC represents about half of her business — 15 houses at the moment in various stages of foreclosure.

“It’s all coming to a halt,” she said. “I have so many nice listings and now I can’t sell them.”

The lender’s action, she said, was unprecedented in her experience. “Every once in a while you get a message saying, ‘Take this house off the market. We have to re-foreclose.’ But this is so much bigger,” she said.

Ally Says GMAC Mortgage Mishandled Affidavits on Foreclosures

By Dakin Campbell and Lorraine Woellert – Sep 21, 2010

Ally Financial Inc., whose GMAC Mortgage unit halted evictions in 23 states amid allegations of mishandled affidavits, said its filings contained no false claims about home loans.

The “defect” in affidavits used to support evictions was “technical” and was discovered by the company, Gina Proia, an Ally spokeswoman, said in an e-mailed statement. Employees submitted affidavits containing information they didn’t personally know was true and sometimes signed without a notary present, according to the statement. Most cases will be resolved in the next few weeks and those that can’t be fixed will “require court intervention,” Proia said.

“The entire situation is unfortunate and regrettable and GMAC Mortgage is diligently working to resolve the situation,” Proia said. “There was never any intent on the part of GMAC Mortgage to bypass court rules or procedures. Nor do these failures reflect any disrespect for our courts or the judicial processes.”

State officials are investigating allegations of fraudulent foreclosures at the nation’s largest home lenders and loan servicers. Lawyers defending mortgage borrowers have accused GMAC and other lenders of foreclosing on homeowners without verifying that they own the loans. In foreclosure cases, companies commonly file affidavits to start court proceedings.

“All the banks are the same, GMAC is the only one who’s gotten caught,” said Patricia Parker, an attorney at Jacksonville, Florida-based law firm, Parker & DuFresne. “This could be huge.”

No Misstatements

Aside from signing the affidavits without knowledge or a notary, “the sum and substance of the affidavits and all content were factually accurate,” Proia wrote in the e-mail. “Our internal review has revealed no evidence of any factual misstatements or inaccuracies concerning the details typically contained in these affidavits such as the loan balance, its delinquency, and the accuracy of the note and mortgage on the underlying transaction.”

Affidavits are statements written and sworn to in the presence of someone authorized to administer an oath, such as a notary public.

GMAC told brokers and agents to halt evictions tied to foreclosures on homeowners in 23 states including Florida, Connecticut and New York and said it may have to take “corrective action” on other foreclosures, according to a Sept. 17 memo. Foreclosures won’t be suspended and will continue with “no interruption,” Proia said in a statement yesterday.

10,000 a Week

In December 2009, a GMAC Mortgage employee said in a deposition that his team of 13 people signed “a round number of 10,000” affidavits and other foreclosure documents a month without verifying their accuracy. The employee said he relied on law firms sending him the affidavits to verify their accuracy instead of checking them with GMAC’s records as required. The affidavits were then used to complete the process of repossessing homes and evicting residents.

Florida Attorney General William McCollum is investigating three law firms that represent loan servicers in foreclosures, and are alleged to have submitted fraudulent documents to the courts, according to an Aug. 10 statement. The firms handled about 80 percent of foreclosure cases in the state, according to a letter from Representative Alan Grayson, a Florida Democrat.

“It appears that the actions we have taken and the attention we’ve paid to this issue could have had some impact on the actions that GMAC took today, but we can’t take full credit,” Ryan Wiggins, a spokeswoman for McCollum, said yesterday in a telephone interview.

‘Committed Fraud’

In August, Florida Circuit Court Judge Jean Johnson blocked a Jacksonville foreclosure brought by Washington Mutual Bank N.A. and JPMorgan Chase Bank, which had purchased the failed bank’s assets, and Shapiro & Fishman, the companies’ law firm. Documents eventually showed that the mortgage on the house was in fact owned by Washington-based Fannie Mae.

WaMu and the law firm “committed fraud on this court,” Johnson wrote. JPMorgan had presented a document prepared by Shapiro showing the mortgage was sold directly to WaMu in April 2008.

Tom Ice, founding partner of Ice Legal PA in Royal Palm Beach, Florida, said a fourth law firm representing GMAC in recent weeks has begun withdrawing affidavits signed by the GMAC employee.

“The banks are sitting up and taking notice that they can’t use falsified documents in the courtroom,” Ice said. “There may be others doing the same thing. They’re going to come back and say, ‘We’d better withdraw these,’” Ice said in a telephone interview.

Alejandra Arroyave, a lawyer with Lapin & Leichtling, a law firm in Coral Gables, Florida, who represented the employee at his December 2009 deposition, didn’t respond to a request for comment. A phone call to the employee wasn’t returned.

Mortgage Market

GMAC ranked fourth among U.S. home-loan originators in the first six months of this year, with $26 billion of mortgages, according to Inside Mortgage Finance, an industry newsletter. Wells Fargo & Co. ranked first, with $160 billion, and Citigroup Inc. was fifth, with $25 billion.

Iowa Assistant Attorney General Patrick Madigan said the implications of Ally’s internal review and the GMAC employee’s deposition could be “enormous.”

“It would call into question whether other servicers have engaged in similar practices,” Madigan said in a telephone interview. “It would be a major disruption to the foreclosure pipeline.”

To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Lorraine Woellert in Washington at lwoellert@bloomberg.net.

Padget v OneWest – IndyMac Provides some insight into RESPA remedies

The Ocwen Court provided an example for clarity: “Suppose an S & L signs a mortgage agreement with a homeowner that specifies annual interest rate of 6 percent and a year later bills the homeowner at a rate of 10 percent and when the homeowner refuses to pay institutes foreclosure proceedings. It would be surprising for a federal regulation to forbid the homeowner’s state to give the homeowner a defense based on the mortgagee’s breach of contract.” Ocwen, 491 F.3d at 643-44.

Padget-One west bank dba Indymac

Editor’s Note: The assumption was made that One West owned the loan when it was clearly securitized. One West used the fact that Plaintiff admitted that One West was the owner of the loan and therefore undermined Plaintiff’s case against One West as a debt collector which requires the actor to be collecting for the benefit of a third party.

This is where the rubber meets the road. either you are going to master the nuance introduced by securitization or you are going to let the other side have a field day with misrepresentations that you have admitted are true.

PADGETT, Plaintiff,
v.
ONEWEST BANK, FSB, d/b/a INDYMAC

Civil Action No. 3:10-CV-08
United States District Court, Northern District of West Virginia, Martinsburg

parties filed an Agreed Order in the bankruptcy court resolving IndyMac’s motion to lift the automatic stay. (Id. at ¶ 14). Pursuant to this Agreed Order, the plaintiff’s mortgage was deemed current as of May 1, 2008, and the one payment for which the plaintiff was in arrears was added onto the end of the mortgage. (Id. at ¶¶ 15-
16). The first payment due under the Agreed Order was due in May 2008. (Id. at ¶ 17). The plaintiff made the May 2008 payment in a timely fashion and has made his monthly mortgage payment each month after May 2008, up to and including the date of the filing of the plaintiff’s First Amended Complaint. (Id. at ¶¶ 18-19).

In March 2009, Defendant OneWest Bank, F.S.B. (“OneWest”) purchased IndyMac, whereupon IndyMac Mortgage Services (“IndyMac MS”) became a division of OneWest. (Id. at ¶¶ 20-21). On July 16, 2009, OneWest, doing business as IndyMac MS, sent the plaintiff a letter claiming he was one month behind on his payments. (Id. at ¶ 22). In response, on July 28, 2009, the plaintiff wrote to OneWest, enclosing a copy of the Agreed Order from his bankruptcy proceeding and requesting that OneWest supply him with documentation that he nevertheless remained one month behind. (Id. at
¶¶ 24-26). Again, on August 3, 2009, and September 16, 2009, IndyMac MS sent letters to the plaintiff alleging he was behind on his mortgage payments. (Id. at ¶¶ 28-29).

OneWest continues to assess monthly late fees against his account and has informed credit reporting agencies that the plaintiff’s mortgage is delinquent, though plaintiff alleges he is current on his monthly mortgage payments.

OneWest argued that all of the plaintiff’s claims for relief were preempted by the Home Owners’ Loan Act of 1933, 12 U.S.C. § 1461, et seq. (“HOLA”). (Id. at 4).

Motion to Dismiss denied in part and granted in part. Motion to Strike denied. Plaintiff was allowed to proceed.

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