Wells Fargo Wrongful Foreclosure Kills Elderly Homeowner?

see 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/

“The administrator of the estate of Larry Delassus sued Wells Fargo, Wachovia Bank, First American Corp. and others in Superior Court, for wrongful death, elder abuse, breach of contract and other charges.

Delassus died at 62 of heart disease after Wells Fargo mistakenly held him liable for his neighbor’s property taxes, doubled his mortgage payments, declared his loan in default and sold his Hermosa Beach condominium, according to the complaint.”

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

Editor’s Comment and Analysis: There are two reasons why I continue this blog and my return to the practice of law despite my commitment to retirement. The general reason is that I wish to contribute as much as I can to the development of the body of law that can be applied to large-scale economic fraud that threatens the fabric of our society. The specific reason for my involvement is exemplified in this story which results in the unfortunate death of a 62-year-old man. I have not reported it before, but I have been the recipient of several messages from people whose life has been ruined by economic distress and who then proceeded to take their own lives.  In some cases I was successful in intervening. But in most cases I was unable to do anything before they had already committed suicide.

It is my opinion that the current economic problems, and mortgage and foreclosure problems in particular, stem from an attitude that pervades corporate and government circles, to wit: that the individual citizen is irrelevant and that damage to any individual is also irrelevant and unimportant. If you view the 5 million foreclosures that have already been supposedly completed as merely a collection of irrelevant and unimportant citizens and their families then the policies of the banks on Wall Street and the politicians who are unduly influenced by those banks, becomes perfectly logical and acceptable.

I start with the premise that each individual is both relevant and important regardless of their economic status or their political status. In my opinion that is the premise of the Declaration of Independence and the United States Constitution. The wrongful foreclosure by strangers to the transaction is not only illegal and probably unconstitutional, it is fundamentally wrong in that it is founded on the arrogance of the ruling class. Our country is supposed to be a nation of laws not a nation of a ruling class.

If you start with the premise that the Wall Street banks want and need as many foreclosures as possible to complete transactions in which they received the benefit of insurance proceeds and proceeds of head products like credit default swaps, then you can see that these “mistakes”  are in actuality intentional acts intended to drive out legitimate homeowners from their homes. These actions are performed without any concern for the legality of their actions, the total lack of merit of their claims, or the morality and ethics that we should be able to see in economic institutions that have been deemed too big to fail.

The motive behind these foreclosures and the so-called mistakes is really very simple, to wit: the banks have nothing to lose by receiving with the foreclosure but they had everything to lose by not proceeding with the foreclosure. The problem is not a lack of due diligence. The problem is an intentional avoidance of due diligence and the ability to employ the tactic of plausible deniability. Mistakes do happen. But in the past when the bank was notified that the error had occurred they would promptly rectify the situation. Now the banks ignore such notifications because any large-scale trend in settling, modifying or resolving mortgage issues such that the loan becomes classified as “performing” will result in claims by insurers and claims from counterparties in credit default swaps that the payments based upon the failure of the mortgage bonds due to mortgage defaults was fraudulently reported and therefore should be paid back to the insurer or counterparty.

In most cases the amount of money paid through various channels to the Wall Street banks was a vast multiple of the actual underlying loans they claimed were in asset pools. The truth is the asset pools probably never existed, in most cases were never funded, and thus were incapable of making a purchase of a bundle of loans without any resources to do so. These banks claim that they were and are authorized agents of the investors (pension funds) who thought they were buying mortgage bonds issued by the asset pools but in reality were merely making a deposit at the investment bank. The same banks claim that they were not and are not the authorized agents of the investors with respect to the receipt of insurance proceeds and proceeds from hedge product’s life credit default swaps. And they are getting away with it.

They are getting away with it because of the complexity of the money trail and the paper trail. This can be greatly simplified by attorneys representing homeowners immediately demanding proof of payment and proof of loss (the essential elements of proof of ownership) at the origination, assignment, endorsement or other method of acquisition of loans. In both judicial and nonjudicial states it is quite obvious that the party seeking to invoke  foreclosure proceedings avoids the third rail of basic rules and laws of contract, to wit: that the transactions which they allege occurred did not in fact occur and that there was no payment, no loss and no risk of loss to any of the parties that are said to be in the securitization chain. The securitization chain exists only as an illusion created by paperwork.

The parties who handled the money as intermediaries between the lenders and the borrowers do not appear anywhere in the paperwork allegedly supporting the existence of the securitization chain. Instead of naming the investors as the owner and payee on the note and mortgage, these intermediaries diverted the ownership of the note to controlled entities that use their apparent ownership to trade in bonds, derivatives, and hedge products as though the capital of the investment bank was at risk in the origination or acquisition of the loans and as though the capital of the investment bank was at risk in the issuance of what can only be called bogus mortgage bonds.

Toward that end, the Wall Street banks have successfully barred contact and cooperation between the actual lenders and the actual borrowers. These banks have successfully directed the attention of the courts to the fabricated paperwork of the assignments, endorsements and securitization chain. The fact that these documents contain unreliable hearsay statements about transactions that never occurred has escaped the attention and consideration of the judiciary, most lawyers, and in fact most borrowers.

It is this sleight-of-hand that has thrown off policymakers as well as the judiciary and litigants. The fact that money appeared at the time of the alleged loan closing is deemed sufficient to prove that the designated lender on the closing papers was in fact the source of the loan; but they were not the source of the funds for the loan and as the layers of paperwork were added there were no funds at all in the apparent transfer of ownership of the loan that was originated by a strawman with an undisclosed principal, thus qualifying the loan as predatory per se according to the federal truth in lending act.

The fact that the borrower in many cases ceased making payments is deemed sufficient to justify the issuance of a notice of default, a notice of sale and the actual foreclosure of the home and eviction of the homeowner. The question of whether or not any payment was due as escaped the system almost entirely.

Even if the  borrower makes all the payments demanded, the banks will nonetheless seek foreclosure to justify the receipt of insurance and credit default swap proceeds. So they manufacture excuses like failure to pay taxes, failure to pay  insurance premiums, abandonment, failure to maintain or anything else they can think of that will justify the foreclosure and a demand for money that far exceeds  any loss and without giving the borrower an opportunity to avoid foreclosure by either curing the problem for pointing out that there was no problem at all.

As I have pointed out before, the entire mortgage system was turned on its head. If you turn it back to right side up then you will see that the receipt of money by the intermediary banks is an overpayment on both the bond issued to the investor (or the debt owed to the investor) and the promissory note that was executed by the borrower on the false premise that there had been full disclosure of all parties, intermediaries and their compensation as required by the federal truth in lending act, federal reserve regulations and many state laws involving deceptive lending.

Wells Fargo will no doubt defend the action of the estate of the dead man with allegations of a pre-existing condition which would have resulted in his death in all events. The problem they have in this particular case is that the causation of the death is a little easier to prove when the death occurs in the courtroom based upon false claims, false collections, and probably a duty to refund excess payments received from insurers and counterparties to credit default swaps.

The cost of the largest economic crime in human history is very human indeed.

 

Elderly Man Allegedly Dies in Court Fighting Wells Fargo ‘Wrongful’ Foreclosure
http://www.alternet.org/economy/elderly-man-allegedly-dies-court-fighting-wells-fargo-wrongful-foreclosure

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

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

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

Editor’s Analysis and Comment: If you want to know where all the money went during the mortgage madness of the last decade and the probable duplication of that behavior with all forms of consumer debt, the first clues have been emerging. First and foremost I would suggest the so-called bull market reflecting an economic resurgence that appears to have no basis in reality. Putting hundred of billions of dollars into the stock market is an obvious place to store ill-gotten gains.

But there is also the question of liquidity which means the Wall Street bankers had to “park” their money somewhere into depository accounts. Some analysts have suggested that the bankers deposited money in places where the sheer volume of money deposited would give bankers strategic control over finance in those countries.

The consequences to American finance is fairly well known here. But most Americans have been somewhat aloof to the extreme problems suffered by Spain, Greece, Italy and Cyprus. Italy and Cyprus have turned to confiscating savings on a progressive basis.  This could be a “fee” imposed by those countries for giving aid and comfort to the pirates of Wall Street.

So far the only country to stick with the rule of law is Iceland where some of the worst problems emerged early — before bankers could solidify political support in that country, like they have done around the world. Iceland didn’t bailout bankers, they jailed them. Iceland didn’t adopt austerity to make the problems worse, it used all its resources to stimulate the economy.

And Iceland looked at the reality of a the need for a thriving middle class. So they reduced household debt and forced banks to take the hit — some 25% or more being sliced off of mortgages and other consumer debt. Iceland was not acting out of ideology, but rather practicality.

The result is that Iceland is the shining light on the hill that we thought was ours. Iceland has real growth in gross domestic product, decreasing unemployment to acceptable levels, and banks that despite the hit they took, are also prospering.

From my perspective, I look at the situation from the perspective of a former investment banker who was in on conversations decades ago where Wall Street titans played the idea of cornering the market on money. They succeeded. But Iceland has shown that the controls emanating from Wall Street in directing legislation, executive action and judicial decisions can be broken.

It is my opinion that part or all of trillions dollars in off balance sheet transactions that were allowed over the last 15 years represents money that was literally stolen from investors who bought what they thought were bonds issued by a legitimate entity that owned loans to consumers some of which secured in the form of residential mortgage loans.

Actual evidence from the ground shows that the money from investors was skimmed by Wall Street to the tune of around $2.6 trillion, which served as the baseline for a PONZI scheme in which Wall Street bankers claimed ownership of debt in which they were neither creditor nor lender in any sense of the word. While it is difficult to actually pin down the amount stolen from the fake securitization chain (in addition to the tier 2 yield spread premium) that brought down investors and borrowers alike, it is obvious that many of these banks also used invested money from managed funds as gambling money that paid off handsomely as they received 100 cents on the dollar on losses suffered by others.

The difference between the scheme used by Wall Street this time is that bankers not only used “other people’s money” —this time they had the hubris to steal or “borrow” the losses they caused — long enough to get the benefit of federal bailout, insurance and hedge products like credit default swaps. Only after the bankers received bailouts and insurance did they push the losses onto investors who were forced to accept non-performing loans long after the 90 day window allowed under the REMIC statutes.

And that is why attorneys defending Foreclosures and other claims for consumer debt, including student loan debt, must first focus on the actual footprints in the sand. The footprints are the actual monetary transactions where real money flowed from one party to another. Leading with the money trail in your allegations, discovery and proof keeps the focus on simple reality. By identifying the real transactions, parties, timing and subject moment lawyers can use the emerging story as the blueprint to measure against the fabricated origination and transfer documents that refer to non-existent transactions.

The problem I hear all too often from clients of practitioners is that the lawyer accepts the production of the note as absolute proof of the debt. Not so. (see below). If you will remember your first year in law school an enforceable contract must have offer, acceptance and consideration and it must not violate public policy. So a contract to kill someone is not enforceable.

Debt arises only if some transaction in which real money or value is exchanged. Without that, no amount of paperwork can make it real. The note is not the debt ( it is evidence of the debt which can be rebutted). The mortgage is not the note (it is a contract to enforce the note, if the note is valid). And the TILA disclosures required make sure that consumers know who they are dealing with. In fact TILA says that any pattern of conduct in which the real lender is hidden is “predatory per se”) and it has a name — table funded loan. This leads to treble damages, attorneys fees and costs recoverable by the borrower and counsel for the borrower.

And a contract to “repay” money is not enforceable if the money was never loaned. That is where “consideration” comes in. And a an alleged contract in the lender agreed to one set of terms (the mortgage bond) and the borrower agreed to another set of terms (the promissory note) is no contract at all because there was no offer an acceptance of the same terms.

And a contract or policy that is sure to fail and result in the borrower losing his life savings and all the money put in as payments, furniture is legally unconscionable and therefore against public policy. Thus most of the consumer debt over the last 20 years has fallen into these categories of unenforceable debt.

The problem has been the inability of consumers and their lawyers to present a clear picture of what happened. That picture starts with footprints in the sand — the actual events in which money actually exchanged hands, the answer to the identity of the parties to each of those transactions and the reason they did it, which would be the terms agreed on by both parties.

If you ask me for a $100 loan and I say sure just sign this note, what happens if I don’t give you the loan? And suppose you went somewhere else to get your loan since I reneged on the deal. Could I sue you on the note? Yes. Could I win the suit? Not if you denied you ever got the money from me. Can I use the real loan as evidence that you did get the money? Yes. Can I win the case relying on the loan from another party? No because the fact that you received a loan from someone else does not support the claim on the note, for which there was no consideration.

It is the latter point that the Courts are starting to grapple with. The assumption that the underlying transaction described in the note and mortgage was real, is rightfully coming under attack. The real transactions, unsupported by note or mortgage or disclosures required under the Truth in Lending Act, cannot be the square peg jammed into the round hole. The transaction described in the note, mortgage, transfers, and disclosures was never supported by any transaction in which money exchanged hands. And it was not properly disclosed or documented so that there could be a meeting of the minds for a binding contract.

KEEP THIS IN MIND: (DISCOVERY HINTS) The simple blueprint against which you cast your fact pattern, is that if the securitization scheme was real and not a PONZI scheme, the investors’ money would have gone into a trust account for the REMIC trust. The REMIC trust would have a record of the transaction wherein a deduction of money from that account funded your loan. And the payee on the note (and the secured party on the mortgage) would be the REMIC trust. There is no reason to have it any other way unless you are a thief trying to skim or steal money. If Wall Street had played it straight underwriting standards would have been maintained and when the day came that investors didn’t want to buy any more mortgage bonds, the financial world would not have been on the verge of extinction. Much of the losses to investors would have covered by the insurance and credit default swaps that the banks took even though they never had any loss or risk of loss. There never would have been any reason to use nominees like MERS or originators.

The entire scheme boils down to this: can you borrow the realities of a transaction in which you were not a party and treat it, legally in court, as your own? So far the courts have missed this question and the result has been an unequivocal and misguided “yes.” Relentless of pursuit of the truth and insistence on following the rule of law, will produce a very different result. And maybe America will use the shining example of Iceland as a model rather than letting bankers control our governmental processes.

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

Banking Shaping American Minds

“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.” — Paul Volcker, former Fed Chairman, 2009

“We have allowed the borrower to get raped and then we have gone to the rapist for a course on sex education. Thus the investors (pension funds who will announce reductions in vested pensions) and the homeowners have been screwed on such a grand scale that the entire economy of our country and indeed the world have been turned upside down.” — Neil F Garfield, livinglies.me 2012

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

Editor’s Comment: The article below is very much like my own recent article on privatized prisons and the inversion of critical thinking in favor of allowing economic crimes to have a special revered status in our society. Kim highlights the rampage allowed to continue to this day in which Banks are ravaging our society and supporting anything that will confuse us or indoctrinate us to accept outright theft from our society, our purses, and our lives.

It is this lack of critical thinking that has made it so difficult for homeowners to get credit on loan balances that are already paid down by parties who expressly waived any right to collect from the borrower. It is the reason Judges are so reluctant to allow homeowner relief because they perceive the fight as one in which the homeowners are only expressing buyer’s remorse on an otherwise valid transaction.

It is the reason why lawyers are reluctant to deny the debt, deny the balance, deny that a payment was due, deny the default, deny the note as evidence of any debt, deny the validity of the mortgage and counter with actions to nullify the instruments signed by confused and befuddled borrowers assured by the banks that they were making a safe and viable investment.

In most civil cases Plaintiff sues Defendant and Defendant denies most of the allegations — forcing the Plaintiff to prove its case. Not so in foreclosure defense. Lawyers, afraid of looking foolish because they have not researched the matter, refuse to deny the falsity of the allegations in mortgage foreclosure complaint, notice of default and notice of sale. Lawyers are afraid to attack sales despite decisions by Supreme Courts of many states, on the grounds that the sale was rigged, the bidder was a non-creditor submitting a credit bid, and the fact that the forecloser never had any privity with the homeowner, never spent a dime funding any mortgage and never spent a dime funding the purchase of a mortgage.

The quote from the independent analysis of the records in San Francisco County concluded that a high percentage of foreclosures were initiated and completed by entities that were complete “strangers to the transaction.” Why this is ignored by members of the judiciary, the media and government agencies is a question of power and politics. Why it MUST be utilized to save millions more from the sting of foreclosure is the reason I keep writing, the reason I consult with dozens of lawyers across the country and why I have moved back to Florida where I am taking on cases.

As a result of the perception of the inevitability of the foreclosure most court actions are decided in favor of the forecloser because of the presumption that the transaction was valid, the default is real, and that no forgery or fabrication of documents changes those facts. The forgeries and fabrications and robo-signed documents are bad things but the “fact” remains in everyone’s mind that the ultimate foreclosure will proceed. That “fact” has been reinforced by inappropriate admissions from the alleged borrower, who never received a nickle from the loan originator or any assignee.

The lawyers are admitting all the elements necessary for a foreclosure and then moving on to attack the paperwork. Theoretically they are right in attacking assignments and endorsements that are falsified, but if they have already admitted all the basic elements for a foreclosure to proceed, then the foreclosure WILL proceed and if they have any real damages they can sue for monetary relief.

But under the current perception carefully orchestrated by the banks, there are no damages because the debt was real, the borrower admitted it, the payments were due, the borrower failed to make the payments, and the mortgage is a valid lien on the property securing a note which is false on its face but which is accepted as true.

Even the borrowers are not seeing the truth because the people with the real information on the ones that are foreclosing on them. So borrowers, knowing they received a loan, do not question where the loan came from and whether the protections required by the truth in lending statute, RESPA and other federal and state lending laws were violated. We have allowed the borrower to get raped and then we have gone to the rapist for a course on sex education. Thus the investors (pension funds who will announce reductions in vested pensions) and the homeowners have been screwed on such a grand scale that the entire economy of our country and indeed the world have been turned upside down.

Deny and Discover is getting traction across the country, with a focus on the actual money trail — which is the trail of real transactions in which there was an offer, acceptance and consideration between the relevant parties. More and more lawyers are trying it out and surprising themselves with the results. Slowly they are starting to realize that neither the origination of the, loan as set forth in the settlement documents at closing nor the assignments and endorsements were real.

The debt described in the note does not exist and never did. Neither was it the same deal that the lender/investors meant to offer through their investment bankers.

The note and the bond have decidedly different terms of repayment. The payment of insurance and credit de fault swaps to the banks was a crime unto itself — a diversion of money that was intended to protect the investors. The balances owed to those investors would have been correspondingly reduced. The balances owed from the borrowers should be correspondingly reduced by payment received by the only real creditor.

Thus millions of homeowners have walked away from homes they owned on the false representation that the balance owed on their homes was more than they could pay. And the messengers of doom were the banks, depriving investors of money due to them and depriving the borrower of the real facts about their loan balances. Lawyers with only a passing familiarity have either told borrowers that they have no real case against the banks or they take a retainer on a case they know they are going to lose because they will admit things that they don’t realize are false. And Judges hearing the admissions, have no choice but to let the foreclosure proceed.

But that doesn’t mean you can’t come back and overturn it, get damages for wrongful foreclosure, and this is where lawyers have turned bad lawyering into bad business. There is a fortune to be made out there pursuing justice for homeowners. And the case far from the complexity brought to the table by the banks is actually quite simple. Like any other civil case or even criminal case, stop admitting facts that you don’t know are are true and which are in actuality false.

In every case I know of, where the lawyer has followed Deny and Discover and presented it in a reasonable way to the Judge, the orders requiring discovery and proof have resulted in nearly instant “confidential” settlements. Some lawyers and waking up and making millions of dollars helping thousands of homeowners —- why not join the crowd?

Banks Stealing Wealth and the Minds of Our Children

by JS Kim

In the past several years, people worldwide are slowly beginning to shed the web of deceit woven by the banking elite and learning that many topics that were mocked by the mainstream media as conspiracy theories of the tin-foil hat community have now been proven to be true beyond a shadow of a doubt. First there was the myth that bankers were upstanding members of the community that contributed positively to society. Then in 2009, one of their own, Paul Volcker, in a rare momentary lapse of sanity, stated “I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.” He then followed up this declaration by stating that the most positive contribution bankers had produced for society in the past 20 years was the ATM machine. Of course since that time, we have learned that Wachovia Bank laundered $378,400,000,000 of drug cartel money, HSBC Bank failed to monitor £38,000,000,000,000 of money with potentially dirty criminal ties, United Bank of Switzerland illegally manipulated LIBOR interest rates on a regular basis for purposes of profiteering, and though they have yet to be prosecuted, JP Morgan bank, Goldman Sachs bank, & ScotiaMocatta bank are all regularly accused of manipulating gold and silver prices on nearly a daily basis by many veteran gold and silver traders.

http://www.zerohedge.com/contributed/2013-01-03/banking-elite-are-not-only-stealing-our-wealth-they-are-also-stealing-our-min

9th Circuit Circular Logic: Medrano v Flagstar

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

Editor’s Note: If a Court wants to come to a certain conclusion, it will, regardless of how it must twist the law or facts. In this case, the Court found that a letter that challenges the terms of the loan or the current loan receivable is not a qualified written request under RESPA.

The reasoning of the court is that a challenge or question about the real balance and real creditor and real terms of the deal is not related to servicing of the loan and therefore the requirement of an answer to a QWR is not required.

The Court should reconsider its ruling. Servicing of a loan account assumes that there is a loan account that the presumed subservicer has received authorization to service. The borrower gets notice often from companies they never heard of but they assume that the servicing function is properly authorized.

The “servicer” is used too generally as a term, which is part of the problem. The fact that there is a Master Servicer with information on ALL the transactions affecting the alleged loan receivable from inception to the present is completely overlooked by most litigants, trial judges an appellate courts.

The “servicer” they refer to is actually the subservicer whose authority could only come from appointment by the Master Servicer. But the Master Servicer could only have such power to appoint the subservicer if the loan was properly “securitized” meaning the original loan was properly documented with the right payee and the lien rights alleged in the recorded mortgage existed.

If the party asserts itself as the “Servicer” it is asserting its appointment by the Master Servicer who also has other information on the money trial. It should be required to answer a QWR and based upon current law, should be required to answer on behalf of all parties including the Master Servicer and the “trustee” of the loan pool claiming rights to the loan. If there are problems with the transfer of the loan compounding problems with origination of the loan, the borrower has a right to know that and the QWR is the appropriate vehicle for that.

The servicer cannot perform its duties unless it has the or can produce the necessary information about the identity of the real creditor, the transactions by which that party became a creditor and proof of payment or funding of the original loan and proof of payment for the assignments of the loan, along with an explanation of why the “Trustee” for the pool was not named in the original transaction or in a recorded assignment immediately after the “closing” of the loan transaction.

The 9th Circuit, ignoring the realities of the industry has chosen to accept the conclusion that the “servicer” is only the subservicer and that information requested in a QWR can only be required from the subservicer without any duty to provide the data that corroborates the monthly statement of principal and interest due. The new rule from the Federal Consumer Financial Board stating that all parties are subject to the Federal lending laws underscores and codifies industry practice and common sense.

The Court is ignoring the reality that the lender is the investor (pension funds etc.) and the borrower is the homeowner, and that all others are intermediaries subject to TILA, RESPA, Reg Z etc. The servicer appointed by the Master Servicer is a subservicer who can only provide a snapshot of a small slice of the financial transactions related to the subject loan and the pool claiming to own the loan.

They are avoiding the clear premise of the single transaction doctrine. If the investors did not advance money there would have been no loan. If the borrower had not accepted a loan, there would have been no loan. That is the essence of the single transaction doctrine.

Now they are opening the door to breaking down single transactions into component parts that can change the contractual terms by which the lenders loaned money and the borrower borrowed money.

It is the same as if you wrote a check to a store for payment of a TV or groceries and the intermediary banks and the financial data processors suddenly claimed that they each were part of the transaction and there had ownership rights to the TV or groceries. It is absurd. But if the question is one of payment they are ALL required to show their records of the transaction. This includes in our case the investment banker who is the one directing all movements of money and documents.

If the Court leaves this decision in its current form it is challenging the law of unintended consequences where no transaction is safe from claims by third party intermediaries. Even if Flagstar had no authority to service the account, which is likely, they were acting with apparent authority and must be considered an intermediary servicer for purposes of RESPA and a QWR.

PRACTICE TIP: When writing a QWR be more explicit about the connections between your questions, your suspicion of error as to amount due, payments due etc. Show that the amount being used as a balance due is incorrect or might be incorrect based upon your findings of fact. Challenge the right of the “servicer” to be the servicer and ask them who appointed them to that position.

9th Circuit Medrano v Flagstar on Qualified Written Request

The Truth About TILA

What’s the Next Step? Consult with Neil Garfield

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

“Victims can receive up to $125,000 in cash or, in some cases, get their homes back. But the review has already been marred by evidence that the banks themselves play a major role in identifying the victims of their own abuses, raising the question of whether the review is compromised by a central conflict of interest.”

Editor’s Comment and Analysis: There have been so many questions and misconceptions about TILA that I thought it would be a good thing to summarize some aspects of it, how it is used in forensic examination and the limitations of TILA. Note that the absence of a prohibition in TILA or the apparent expiration of TILA does not block common law actions based upon the same facts and some states have more liberal statutes of limitations. TILA is a federal law called the Truth in Lending Act. It’s principal purpose according to all accounts and seminars given on the subject is to provide the borrower with a clear choice of lenders with whom he/she wants to do business and clear terms for comparison of terms offered by each lender. It is also designed to smoke out undisclosed parties who are receiving compensation and it has real teeth in clawing back such undisclosed compensation.

Undisclosed compensation is very broadly defined in TILA so it is fairly easy to apply to anyone who made money resulting from the purported loan transaction, and the clawback might include treble damages, attorneys fees and other relief. Note that rescission does NOT mean you must offer up the house (“give it back”) to the lender. The lender, if there was one, gave you money not a house. rescission is a reversal of that transaction which means you must tender (according to the 9th Circuit) money in exchange for cancellation of the transaction. If you follow the rules, a TILA rescission eliminates the note and mortgage by operation of law, so while you have the right to demand and sue for return of the note as paid and satisfaction of the mortgage (release and reconveyance in some states). Unless the “lender” files a Declaratory action (lawsuit) within 20 days of your demand for rescission, the security is gone and can be eliminated in bankruptcy.

Use of the rescission remedy can be employed in bankruptcy actions as well where the Judge has wide discretion as to what constitutes “tender” (including a payment plan). Some Judges have interpreted the statute as it si written which does not require tender. The 9th Circuit disagrees.

As to the statute of limitations, it simply does not apply if the “lender” has intentionally mislead the borrower, committed fraud or otherwise withheld information that is deemed fundamental to the disclosures required by TILA. This is the most common error committed by borrowers and their attorneys. In most cases the table funded loan is “predatory per se” and gives you a leg up on the allegation of fraud or misrepresentation at closing.

Fraud may be fraud in the inducement (they told you that even though your payments would reset to an amount higher than your household income has ever been, you would be refinanced, get even more money and be able to fund the payments through additional equity in the house).

Fraud may be in the execution where you signed papers that you didn’t realize was not the deal you were offered or which contained provisions that were just plain wrong. If you thought that you were getting a loan from BNC and the loan was in fact funded by another entity unrelated and undisclosed, then your legal obligation to repay the money naturally goes back to the the third party. But the presence of the third party indicates a table funded loan, which is predatory per se; and the terms of repayment are different from what was offered or what was agreed to by the lender acting through the investment banker that was creating (but not necessarily using) REMICs or trusts. In plain words the mortgage bond and the prospectus, PSA and other securitization are at substantial variance from what was put on the note, including the name of the payee on the note and the name put on the security instrument (Mortgage or deed of trust).

The office of the controller has published a series of papers describing the meaning and intent of TILA and to whom it applies, even pre Dodd-Frank.

For example, it describes “Conditions Under Which Loan Originators Are Regulated as Loan Underwriters.” Thus the use of a strawman is expressly referred to in the OCC papers (see below) and there are specific indicia of whether an entity is in fact a loan underwriter, which is the basis for my continual statement that a loan originator is not a lender (pretender lender) and the very presence of a loan originator on the paperwork is a violation of TILA tolling any state of limitations.

If the loan originator is not a bank or savings and loan or credit union, then the highest probability is that the name on the note and the name on the mortgage is wrong. They didn’t loan the money. Your signature was procured by both fraud in the inducement and fraud in the execution, because it was predicated upon that payee giving a loan of money. “Arranging” the loan from a third party doesn’t count as being a lender. It counts as being a licensed broker or the more vague term of loan “originator.” The arguments of the banks and servicers to the contrary are completely wrong and bogus.If they were right, for purposes of collection and foreclosure that the origination documents were enforceable then that would mean that there would be a window immediately following closing where you could not actually rescind or even pay off the obligation because the originator has no right, justification,, power or excuse to execute a release and reconveyance. The loan already belonged to someone else and the paperwork was defective, which is why investors are suing the investment bankers alleging principally that they were victims of fraud: they were lied to about what was in the REMIC, lied to about what was going into the REMIC, and then even the claimed paperwork on defaulted and other loans were not properly assigned because they never started with the actual owner of the obligation.

Thus the theory put forward by banks and servicers and other parties in the foreclosure scheme that the origination documents are enforceable falls flat on its face. Those documents, taken on their face were never supported by actual consideration from the named parties. If the investment banks weren’t playing around with investment money deposited with them by managed investment funds, the name of the REMIC or group of investors would be on the origination documents.

In the case where the originator is a bank, one must look more closely at the transaction to see if they ever booked the loan as a loan receivable or if they booked the transaction as a fee for services to the investment bank. This is true even where mega banks appear to be the originators but were not the underwriters of the loan.

If you are looking for the characteristics of a loan underwriter, versus a loan originator the OCC paper provides a list. In the case of banks the presence of some of these characteristics may be irrelevant in the subject transaction if they treated the “securitized” loan differently through different departments than their normal underwriting process. There such a bank would appear to be a loan underwriter, but when you scratch the surface, you can easily see how the bank was merely posing as the lender and was no better than the small-cap originators that sprung up across the country who were used to provide the mega banks with cover and claims to plausible deniability as to the existence of malfeasance at the so-called closing:

1. Risk Management Officers in Senior Management: In the case of small cap originators it would be rare to find anyone that even had the title much less acted like a risk management officer. In the case of banks, the presence in the bank of such an officer does not mean that he or she was involved in the transaction. They probably were not.
2. Verification of employment: There are resources on the internet that enable the bank to check the likelihood of employment, as well as the usual checking for pay stubs and calling the employer. In a matter of moments they can tell you if a person who cleans homes for a living is likely to have an income of $15,000 per month. Common sense plays a part in this as well. This was entirely omitted in most loans as shown by operation “hustle” and other similar named projects emphasized that to retain employment and get out-sized bonuses far above previous salaries the originator employee must close the loan, no matter what — which led to changing the applications to say whatever they needed to say, often without the borrower even knowing about the changes or told “not to worry about it” even though the information was wrong.
3. Employment conforms to income stated. See above. I have seen cases where a massage therapist making $500 per month was given a seven figure loan based upon projected income from speculative investment that turned out to be a scam. She lost two fully paid for homes in that scam. If normal underwriting standards had been employed she would not have been approved for the loan, the scam would never have damaged her and she would still be a wealthy woman.
4. Verification of value of collateral. Note that this is a responsibility of the lender, not the borrower. Quite the reverse, the borrower is relying reasonably that the appraisal was right because the bank verified it. In fact, the appraiser was paid extra and given explicit instructions to arrive at an appraised value above the amount required, usually by $20,000. By enlarging the apparent value of the collateral, the originators were able to satisfy the insatiable demand from Wall Street for either more loans or more money loaned on property. In 1996 when they ran out of borrowers, they simply took the existing population of borrowers and over-appraised their homes in refinancing that took place sometimes within 3 months of the last loan at 20% or more increase in the appraisal. That was plainly against industry standards for appraisals and obvious to anyone with common sense that the value could never have been verified. If you look at companies like Quicken Loans you will see on some settlements that they were not content to get overpaid for originating bad loans, they even took a piece of the appraisal fee.
5. Verification of LTV ratios. Once the appraisals were falsified it was easy to make the loan look good. LTV often showed as 20% equity when in fact the value, as could be seen in some cases weeks after the closing was 20% or more lower than the the amount loaned. Many buyers immediately lost their down payment as soon as they thought the deal was complete (it wasn’t really complete as explained above). Because of the false appraisal, at the moment of closing their down payment was devalued to zero and they owed more money than the home was actually worth in real fair market value terms. Normal industry practice is to have a committee that goes through each loan verifying LTV because it is the only real protection in the event of default. In most cases involving loans later subject to claims of securitization, the committee did not exist or did not review the loan, the verification never happened and the only thing the originator was interested in was closing the loan because the compensation of the originator and their own salary and bonuses were based purely on the number or amount of “closed” loans.
6. Verification of credit-worthiness of buyers. This is an area where many games were played. Besides the verification process described above, the originator was able to receive a yield spread premium that was not disclosed to the borrower and the investment bank that “sold” the loan was able to obtain an even larger yield spread premium that was not disclosed to the borrower. It is these fees that I believe are subject to clawback under TILA and RESPA. In the Deny and Discover strategy that I have been pushing, once the order is entered requiring the forecloser to produce the entire accounting from all parties associated with the loan, the foreclosure collapses and a settlement is reached. This can often be accomplished in a less adversarial action in Chapter 11.
7. Verification of income and/or viability of loan for the life of the loan. This has a huge impact on the GFE (Good faith estimate) especially in adjustable rate mortgages (ARMs) and negative amortization mortgage loans (teaser rates). Plainly stated the question is whether the borrower would qualify for the loan based upon current income for when the loan resets. If the answer is no, which it usually is, then the life of the loan is a fabricated figure. Instead of it being a 30 year loan, the loan becomes much shorter reduced to the moment of reset of the payments, and all the costs and points charged for the loan must be amortized over the REAL LIFE of the loan. In such cases the “lender” is required to return all the interest, principal and other payments and other compensation received from all parties, possibly with treble damages and attorney fees. It’s pretty easy to prove as well. Most people think they can’t use this provision because of misstatements on the application. The obligation to verify the statements on the application is on the underwriter not the customer. And the law was written that way to cover just such a situation as this. If you paid 3 points to close and it was added to your loan or you paid in cash those points would substantially raise your effective APR or even stated interest rate if the loan life was reduced to two years. In many cases it would rise the level of usury, where state law provides for that.
8. Vendor management: This is where even before Dodd-Frank you could catch them in the basket of allegations. The true management of the vendors lay not with the originator but with the investment banker who was selling mortgage bonds. This alone verified that the party on the note and named on the mortgage was an originator (strawman) and not an underwriter. And the accounting that everyone asks for should include a demand for an accounting from the investment banker and its affiliates who acted as Master Servicer, Trustee of a “pool,” etc.
9. Compliance programs and audits: Nonexistent in originators and the presence of such procedures and employees is not proof that they were part of the process. Discovery will reveal that they were taken out of the loop on loans that were later claimed to be subject to claims of securitization.
10. Effective Communication Systems and Controls: The only communication used was email or uploading of flat files to a server operated or controlled by the investment banker, containing bare bones facts about he loan, absent copies of any of the loan closing documents. This is how the investment bankers were able to claim ownership of the loans for purposes of foreclosure, bailouts, insurance, and credit default swaps when the real loss was incurred by the investors and the homeowners.
11. Document Management: I need not elaborate, after the robo-signing, surrogate-signing, fabrication and forgeries that are well documented and even institutionalized as custom and practice in the industry. The documents were lost, destroyed, altered, fabricated and re-fabricated, forged in vain attempts to make them conform to the transaction that is alleged in foreclosures, but which never occurred. The borrowers and their lawyers are often fooled by this trick. They know the money was received, so their assumption was that the originator gave them the loan. This was not the case, In nearly all cases the loan was table funded — i.e., funded by an undisclosed principal access to whom was prohibited and withheld by the servicer, the originator and everyone else. AND remember that under Dodd-Frank the time limits for response to a RESPA 6 (QWR) inquiry have been reduced to 5 days and 30 days from 20 days and 60 days respectively.
    
12. Submission of periodic information to appropriate regulatory agencies that regulate Banks or lenders: If the originator did not report to a regulatory agency, then it wasn’t a lender. If it did report to regulatory agencies the question is whether they ever included in any of their reports information about your loan. In most cases, the information about your loan was either omitted or falsified.
13. Compliance with anti-fraud provisions on Federal and State levels: This characteristic would be laughable if wasn’t for the horrible toll taken upon millions of homeowners and tens of millions of people who suffered  unemployment, reduced employment and loss of their retirement funds.
14. In house audits to assess exposure for financial loss through litigation, fraud, theft, loss business and wasted capital from failed strategic initiatives: The simple answer is that such audits were and remain virtually non-existent. Even the so-called foreclosure review process is breaking all the rules. But it wouldn’t hurt to ask, in discovery, for a copy of the plan of the audit and the results. The fact is that most banks involved in the PONZI scheme that was called “Securitization” are still not reporting accurately, still reporting non-existing or overvalued assets and still not reporting liabilities in litigation that are even close to reality.

See the rest of the OCC Paper:

TILA Summary Part 1 11-13-12

TILA Appendix Worksheets 11-13-12

TILA worksheets -2 — 11-13-12

Tenant Protection OCC 11-13-12

RESPA and Worksheets 11-13-12

Appraisal Fraud and Facts: Essential to Securitization Scam

The REMICS are mirror images of the NINJA loans — no income, no assets, no job

the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors

Editor’s Notes: Our economy and the economic structure in other countries is stuck because of the false appraisal reports that supported funding of at least $13 trillion (U.S. only) of loans that were so complex that the Chairman of the Federal Reserve, Alan Greenspan didn’t understand them nor his staff of more than 100 PhDs. They were intentionally opaque because complexity is the way you get the other side of the “deal” (the buyer) to accept your explanation of the transaction. It also is designed to avoid criminal penalties even when the scheme unravels. Getting a Judge or Jury to understand what really happened is a challenge that has been insurmountable in both civil and criminal cases and investigations.

As stated in the 2005 petition to Congress from 8,000 appraisers who did not want to “play ball” with the banks, the appraisers were faced with a choice: either they submit appraisal reports $20,000 higher than contract and earn more money for each appraisal and earn  more money through volume, OR they won’t work at all.

Developers, mortgage brokers, and the “originators” (sales organization that pretended to be the lender), sellers and homeowners needing cash in an economy where there wages and earnings were not keeping up with the cost of living —- all reacted with glee when this system went into action. As “prices” rose by leaps and bounds — fed by a flood of money and demands for more mortgages — everyone except the banks ended up crashing when the money stopped flowing. That is how we know that it was the money that made prices rise, rather than demand.

So most appraisers were both stuck and pleasantly enjoying incomes 4-10 times what they had previously received, and obediently submitted appraisal reports that were in fact unsupportable by industry standards or any other standards that a reasonable and rational lender would use — if they were lending their own money. By lending money from investors the risk of loss was entirely removed. The originators got paid regardless of whether the mortgage was paid, or went underwater or caused the homeowner to execute a strategic default.

By using the originators as surrogates at the closing, the appraisal report was accepted without the required due diligence and confirmation that would be present if you went to the old style community bank loan department. The fact is that there was NO UNDERWRITING involved as we knew it before the securitization scam. The “extra” interest charged to No DOC loans (usually 3/4%-1.5%) and the premium interest charged on NINJA (No income, no assets, no job) loans was sold to borrowers on the premise that the “lender” was taking a higher risk. But the truth is they didn’t do any due diligence or underwriting of the loans regardless of whether or not the borrower was submitting information that confirmed their income, assets and ability to pay.  Thus the premium for the “extra risk” was based upon a false premise (like all the other premises of the securitization PONZI scheme).

The normal way of judging the price of a loan (the interest rate) was the perceived risk composed of two elements: ability to repay the loan, and the value of the property if the loan is not repaid. The banks that foisted the securitization scam upon the world got rid of both: they did nothing to confirm the ability to repay because they didn’t care if the borrower could repay. And they intentionally hyped the “value” of the property far above any supportable level as is easily shown in the Case Schiller index.

This is where PRICE and VALUE became entirely different concepts. By confusing the homeowner and hoodwinking the investors with false appraisals, they were able to move more money into the PONZI Scheme, as long as investors were buying the bogus mortgage bonds issued by fictitious entities that had no assets, no income and no prospects of either one. The REMICS are a mirror image of NINJA loans.

The value of the property was not the same as the prices supported by the false appraisal reports. The prices were going up because of the sales efforts of the banks to get homeowners giddy over the the numbers, making them feel, for a few moments as though they were more wealthy than they were in reality. But median income was flat or declining, which means that the value was flat or declining.

Thus prices went up while values of the homes were going down not only because of the median income factor but because of the oversold crash that was coming. Thus the PONZI scheme left the homeowner with property that would most likely be valued at less than any value that was known during the time the homeowner owned the property, while the contract price and appraisal report “valued” the property at 2-4 times the actual value.

The outcome was obvious: when all was said and done, the banks would be holding all the money and property while the investors, taxpayers, and homeowners were all dispensable pawns whose losses came under the category of “tough luck.”

While this might seem complex, the proof of appraisal fraud is not nearly as difficult as the explanation of why the banks wanted false appraisals. In the civil actions for wrongful lending or wrongful foreclosure, the homeowner need only show that the lender intentionally deceived the borrower as to the value of the property.

And the lack of actual underwriting committees and confirmations is essentially the proof, but you would be wise to have an appraiser who can testify as an expert as to what standards apply in issuing an appraisal report, to whom the appraisal report is addressed (i.e., the “originator”). Then using the foundation for the standards apply it to the property at hand at the time the original appraisal report was issued. It might also help if you catch the “originator” getting a part of the appraisal fee (like Cornerstone Appraisals, owned by Quicken Loans).

The borrower testifies that they were relying upon the “lender” representation that the loan had been carefully reviewed, underwritten, confirmed and approved based upon market conditions, ability of the borrower to repay and the value of the property. After all it was the “lender” who was taking the risk.

Thus the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors whose money was used to fund the loan — albeit not in the way it was presented in the prospectus where the REMIC was the supposed vehicle for the funding of the loans or the purchase of the loans.

Everyone in the securitization PONZI Scheme got paid. When you look at it from the perspective described above then you probably arrive at the same conclusion I did — all that money that was made and paid and not disclosed to the borrower changes the dynamics of the deal and the undisclosed compensation and profits should be paid to the borrower who was the party with the real risk of loss.

And in fact, if you look at the Truth in Lending Act, THAT is exactly what it says — all undisclosed compensation (which is broadly defined by the Act) is refundable with treble damages. Why lawyers have not taken action on this highly lucrative and relatively easy case to prosecute is a mystery to me.

Because of the statute of limitations applied in TILA cases, the TILA cause of action might not survive, especially in today’s climate, although more and more  judges are starting to see just how badly the banks acted. I therefore recommend to attorneys to use alternative pleading and add counts under other federal statutes (RICO, etc) and state statutes of deceptive lending, and common law fraud. The action for common law fraud, is the easiest to prosecute as I see it.

The interesting aspect of this that will lead to early settlement is that the pleading is simple as to the elements of the cause of action and can easily survive a motion to dismiss, the facts are clearly going to be in dispute which makes survival on a motion for summary judgment a much higher probability, and in discovery you have a nuclear option: since your cause of action is for return or sharing of the unlawful booty that was paid, plus treble, punitive or exemplary damages, discovery into all the different parties who made money in the chain is far easier to argue than the usual defensive foreclosure case.

The other thing you have is the possibility of stating a cause of action to force the retention of the property, to protect the homeowner in the collection of damages rendered by the final verdict. A lis pendens might be appropriate, and the bond need not be much more than nominal because unless the bank or servicer has a BFP to buy the property, you can easily show that your client is already posting bond every month they pay the utilities and maintain the property.

The compensatory damages would be a measure of the difference between the actual value of the deal and the deal that was offered to the homeowner. In simple terms, it could be that the appraisal report was $250,000 higher than the actual value of the property. As a result, the damages include the $250,000 plus the interest paid on that $250,000 and where appropriate, the loss of the house in foreclosure, plus interest from the date of the fraud (i.e. the closing), attorney fees, and costs of the action.

This action might also have special applications in commercial property cases where the appraisals are known to have come in much higher than the owner or buyer had ever expected. In some cases the “appraisal” actually changed the terms of the contract on the assumption that the property was worth much more than the original offer.

Deny and Discover Strategy Working

For representation in South Florida, where I am both licensed and familiar with the courts and Judges, call 520-405-1688. If you live in another state we provide direct support to attorneys. call the same number.

Having watched botched cases work their way to losing conclusions and knowing there is a better way, I have been getting more involved in individual cases — pleading, memos, motions, strategies and tactics — and we are already seeing some good results. Getting into discovery levels the playing field and forces the other side to put up or shut up. Since they can’t put up, they must shut up.

If you start with the premise that the original mortgage was defective for the primary reason that it was unfunded by the payee on the note, the party identified as “Lender” or the mortgagee or beneficiary, we are denying the transaction, denying the signature where possible (or pleading that the signature was procured by fraud), and thus denying that any “transfer” afterwards could not have conveyed any more than what the “originator” had, which is nothing.

This is not a new concept. Investors are suing the investment banks saying exactly what we have been saying on these pages — that the origination process was fatally defective, the notes and mortgages unenforceable and the predatory lending practices lowering the value of even being a “lender.”

We’ve see hostile judges turn on the banks and rule for the homeowner thus getting past motions to lift stay, motions to dismiss and motions for summary judgment in the last week.

The best line we have been using is “Judge, if you were lending the money wouldn’t you want YOUR name on the note and mortgage?” Getting the wire transfer instructions often is the kiss of death for the banks because the originator of the wire transfer is not the payee and the instructions do not say that this is for benefit of the “originator.”

As far as I can tell there is no legal definition of “originator.” It is one step DOWN from mortgage broker whose name should also not be on the note or mortgage. An originator is a salesman, and if you look behind the scenes at SEC filings or other regulatory filings you will see your “lender” identified not as a lender, which is what they told you, but as an originator. That means they were a placeholder or nominee just like the MERS situation.

TILA and Regulation Z make it clear that even if there was nexus of connection between the source of funds and the originator, it would till be an improper predatory table-funded loan where the borrower was denied the disclosure and information to know and choose the source of a loan, thus enabling consumers to shop around.

In order of importance, we are demanding through subpoena duces tecum, that parties involved in the fake securitization chain come for examination of the wire transfer, check, ACH or other money transfer showing the original funding of the loan and any other money transactions in which the loan was involved INCLUDING but not limited to transactions with or for the fake pool of mortgages that seems to always be empty with no bank account, no trustee account, and no actual trustee with any powers. These transactions don’t exist. The red herring is that the money showed up at closing which led everyone to the mistaken conclusion that the originator made the loan.

Second we ask for the accounting records showing the establishment on the books and records of the originator, and any assignees, of a loan receivable together with the name and address of the bookkeeper and the auditing firm for that entity. No such entries exist because the loan receivable was converted into a bond receivable, but he bond was worthless because it was based on an empty pool.

And third we ask for the documentation, correspondence and all other communications between the originator and the closing agent and between each “assignor” and “assignee” which, as we have seen they are only too happy to fabricate and produce. But the documentation is NOT supported by underlying transactions where money exchanged hands.

The net goals are to attack the mortgage as not having been perfected because the transaction was and remains incomplete as recited in the note, mortgage and other “closing” documents. The “lender” never fulfilled their part of the bargain — loaning the money. Hence the mortgage secures an obligation that does not exist. The note is then attacked as being fatally defective partly because the names were used as nominees leaving the borrower with nobody to talk to about the loan status — there being a nominee payee, nominee lender, and nominee mortgagee or beneficiary.

The other part, just as serious is that the terms of repayment on the note do NOT match up to the terms agreed upon with the institutional investors that purchased mortgage bonds to which the borrower was NOT a party and did not issue. Hence the basic tenets of contract law — offer, acceptance and consideration are all missing.

The Deny and Discover strategy is better because it attacks the root of the transaction and enables the borrower to deny everything the forecloser is trying to put over on the Court with the appearance of reality but nothing to back it up.

The attacks on the foreclosers based upon faulty or fraudulent or even forged documentation make for interesting reading but if in the final analysis the borrower is admitting the loan, admitting the note and mortgage, admitting the default then all the other stuff leads a Judge to conclude that there is error in the ways of the banks but no harm because they were entitled to foreclose anyway.

People are getting on board with this strategy and they have the support from an unlikely source — the investors who thought they were purchasing mortgage bonds with value instead of a sham bond based upon an empty pool with no money and no assets and no loans. Their allegation of damages is based upon the fact that despite the provisions of the pooling and servicing agreement, the prospectus and their reasonable expectations, that the closings were defective, the underwriting was defective and that there is no way to legally enforce the notes and mortgages, notwithstanding the fact that so many foreclosures have been allowed to proceed.

Call 520-405-1688 for customer service and you will get guidance on how to get help.

1. Do we agree that creditors should be paid only once?
2. Do we agree that pretending to borrow money for mortgages sand then using it at the race track is wrong?
3. Do we agree that if the lender and the borrower sign two different documents each containing different terms, they don’t have a deal?
4. Can we agree that if you were lending money you would want your name on the note and mortgage and not someone else’s?
5. Can we agree that banks who loaned nothing and bought nothing should be worth nothing when the chips are counted in mortgage assets?

 

Underwater homes under 40 and over 55 still in dire straights

Obama response unclear. He keeps saying that the  object here is not to include “undeserving” borrowers who are just trying to get out of a bad deal a deal that went bad or whose eyes were bigger than their pocket book. As long as he keeps saying that he is missing the whole point. This was a Ponzi Scheme and even if the borrowers were convicted felons behind bars they would still be victims of THIS Scheme. ALl the elements are present — identity theft, diversion of funds, false documentation to both sides, fabrication of documents as the lies came under scrutiny, forgeries, surrogate signing, robo-signing, and profits 1000 times the usual profits for processing or originating loans.

None of these profits were disclosed to either the lender-investor nor the homeowner borrower, violating a myriad of mending and contract laws. It doesn’t matter whether the borrower is perceived as deserving relief — they all are if they were fraud victims.

If the average guy on the street knows we have been screwed without all the economic statistics, why won’t Obama at least acknowledge it?

See Vast geography contains underwater homes inviting homeowners to walk away from homes they are willing to pay for

White Paper: Many Causes of Foreclosure Crisis

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Editor’s Comment:

I attended Darrell Blomberg’s Foreclosure Strategists’ meeting last night where Arizona Attorney General Tom Horne defended the relatively small size of the foreclosure settlement compared with the tobacco settlement. To be fair, it should be noted that the multi-state settlement relates only to issues brought by the attorneys general. True they did very little investigation but the settlement sets the guidelines for settling with individual homeowners without waiving anything except that the AG won’t bring the lawsuits to court. Anyone else can and will. It wasn’t a real settlement. But the effect was what the Banks wanted. They want you to think the game is over and move on. The game is far from over, it isn’t a game and I won’t stop until I get those homes back that were ripped from the arms of homeowners who never knew what hit them.

So this is the first full business day after AG Horne promised me he would get back to me on the question of whether the AG would bring criminal actions for racketeering and corruption against the banks and servicers for conducting sham auctions in which “credit bids” were used instead of cash to allow the banks to acquire title. These credit bids came from non-creditors and were used as the basis for issuing deeds on foreclosure, each of which carry a presumption of authenticity.  But the deeds based on credit bids from non-creditors represent outright theft and a ratification of a corrupt title system that was doing just fine before the banks started claiming the loans were securitized.

Those credit bids and the deeds issued upon foreclosure were sham transactions — just as the transactions originated with borrowers were based upon the lies and false pretenses of the acting lenders who were paid for their acting services. By pretending that the loan came from these thinly capitalised sham companies (all closed with no forwarding address), the banks and servicers started the lie that the loan was sold up the tree of securitization. Each transaction we are told was a sale of the loan, but none of them actually involved any money exchanging hands. So much for, “value received.”

The purpose of these loans was to create a process that would cover up the theft of the investor money that the investment bank received in exchange for “mortgage bonds” based upon non-existent transactions and the title equivalent of wild deeds.

So the answer to the question is that borrowers did not make bad decisions. They were tricked into these loans. Had there been full disclosure as required by TILA, the borrowers would never have closed on the papers presented to them. Had there been full disclosure to the investors, they never would have parted with a nickel. No money, no lender, no borrower no transactions. And practically barring lawyers from being hired by borrowers was the first clue that these deals were upside down and bogus. No, they didn’t make bad decisions. There was an asymmetry of information that the banks used to leverage against the borrowers who knew nothing and who understood nothing.  

“Just sign everywhere we marked for your signature” was the closing agent’s way of saying, “You are now totally screwed.” If you ask the wrong question you get the wrong answer. “Moral hazard” in this context is not a term anyone knowledgeable uses in connection with the borrowers. It is a term used to express the context in which unscrupulous Bankers acted without conscience and with reckless disregard to the public, violating every applicable law, rule and regulation in the process.

Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis

Public Policy Discussion Paper No. 12-2


by Christopher L. Foote, Kristopher S. Gerardi, and Paul S. Willen

This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.

To ready the entire paper please go to this link: www.bostonfed.org/economic/ppdp/2012/ppdp1202.htm

How Did H & R Block Get into the Subprime Mortgage Business?

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Tax Preparer Slammed with $24 Million in Fines on Toxic Mortgages

Editor’s Comment:  You really have to think about some of these stories and what they mean. 

1. Where is the synergy in a merger between Option One and H&R Block? The answers that they were both performing services for fees and neither one was ever a banker, lender or even investor sourcing the funds that were used to lure borrowers into deals that were so convoluted that even Alan Greenspan admits he didn’t understand them.

2. The charge is that they didn’t reveal that they could not buy back all the bad mortgages — meaning they did buy back some of them. which ones? And were some of those mortgages foreclosed in the name of a stranger to the transaction? WORSE YET — how many satisfactions of mortgages were executed by Ocwen, which was not the creditor, never the lender, and never the successor to any creditor. Follow the money trail. The only trail that exists is the trail leading from the investor’s banks accounts into the escrow agent’s trust account with instructions to refund any excess to parties who were complete strangers to the transaction disclosed to the borrower. The intermediary account in which the investor money was deposited was used to pay pornographic fees and profits to the investment banker and close affiliates as “participants” in a scheme of ” securitization” that never took place.

3. Under what terms were the loans purchased? Was it the note, the mortgage or the obligation? There are differences between all three.

4. Since they didn’t have the money to buy back the loans it might be inferred that they never had that money. In other words, they appeared on the “closing papers” as lender when in fact they never had the money to loan and they merely had performed a fee for service — I.e., acting as though they were the lender when they were not.

5. Who was the lender? If the money came from investors, then we know how to identify the creditor. but if we assume that the loan might have been paid or purchased by Option One, then isn’t the lender’s obligation paid? let’s see those actual repurchase transactions.

6. If that isn’t right then Option One must be correctly identified as the lender on the note and mortgage even though they never loaned any money and may or may not have purchased the entire loan, just the receivable, the right to sell the property — but how does anyone purchase the right to submit a credit bid at the foreclosure auction when everyone knows they were not the creditor?

7. How could any of these entities have any loans on their books when they were never the source of funds and why are they being allowed to claim losses obviously fell on the investors who put up the money on toxic mortgages believing them to be triple A rated. 

8. Why would anyone underwrite a bad deal unless they knew they would not lose any money? These mortgages were bad mortgages that under normal circumstances would never have been  offered by any bank loaning its own money or the it’s depositors. 

9. The terms of the deal MUST have been that nobody except the investors loses money on this deal and the kickers is that the investors appear to have waived their right to foreclose. 

10. So the thieves who cooked up this deal get paid for creating it and then end up with the house because the befuddled borrower doesn’t realise that either the debts are paid (at least the one secured by the mortgage) or that the debt has been paid down under terms of the loan (see PSA et al) that were never disclosed to the borrower — contrary to TILA.

11. The Courts must understand that there is a difference between paying a debt and buying the debt. The Courts must require any “assignment” to be tested b discovery where the money trail can be examined. What they will discover is that there is no money trail and that the assignment was a sham.  

12. And if the origination documents show the wrong creditor and fail disclose the true fees and profits of all parties identified with the transaction, the documents — note, mortgage and settlement statements are fatally defective and cannot create a perfected lien without overturning centuries of common law, statutory law and regulations governing the banking and lending industries.

H&R Block Unit Pays $28.2M to Settle SEC Claims Regarding Sale of Subprime Mortgages

By Kansas City Business Journal

H&R Block Inc. subsidiary Option One Mortgage Corp. agreed to pay $28.2 million to settle Securities and Exchange Commission    charges that it had misled investors, federal officials announced Tuesday.

The SEC alleged that Option One promised to repurchase or replace residential mortgage-backed securities it sold in 2007 that breached representations and warranties. The subsidiary did not disclose that its financial situation had degraded such that it could not fulfill its repurchase promises.

Robert Khuzami, director of the SEC’s Division of Enforcement, said in a release that Option One’s subprime mortgage business was hit hard by the collapse of the housing market.

“The company nonetheless concealed from investors that its perilous finances created risk that it would not be able to fulfill its duties to repurchase or replace faulty mortgages in its (residential mortgage-backed securities) portfolios,” Khuzami said in the release.

The SEC said Option One was one of the nation’s largest subprime mortgage lenders, with originations of $40 billion in its 2006 fiscal year. When the housing market began to decline in 2006, the unit was faced with falling revenue and hundreds of millions of dollars’ worth of margin calls from creditors.

Parent company H&R Block (NYSE: HRB) provided financing for Option One to meet margin calls and repurchase obligations, but Block was not obligated to do so. Option One did not disclose this reliance to investors.

Option One, now Sand Canyon Corp., did not admit or deny the allegations. It agreed to pay disgorgement of $14.25 million, prejudgment interest of nearly $4 million and a penalty of $10 million.

Kansas City-based H&R Block reported that it still had $430.19 million of mortgage loans on its books from Option One as of Jan. 31. That’s down 16.2 percent from the same period the previous year.

Using UDCPA Fair Debt Collection Acts to get Money, Information and Fees

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RIPE AREA FOR STEADY INCOME FOR LAWYERS REPRESENTING HOMEOWNERS

Editor’s Comment: One small step for a man, one giant leap for mankind. You have both a private right of action against the debt collector and the right to apply to the FTC to set up administrative hearings, where these cases should probably be heard by experienced hearing officers who know what they are looking at.

The practice of playing the numbers on debt collection has been around for a long time. Whether the debt is real or not, there is a statute of limitations, bankruptcies and other obstacles to collection. A lot of times the debt is now owed at all, but byb pestering customers, the collection agency gets some money out of them, which they keep because they have already bought the portfolio at pennies or less on the dollar.

This is where servicers and other intermediaries in the fake securitization chain are going to get into hot water. The debt was created when the investor loaned the borrower the money. The intermediaries are by definition debt collectors under the UDCPA and they are, and have been banged for fines many times on individual cases.

This is an instance where the Obama administration is attacking the practice head-on and taking away their toys. So when the pretender lender comes knocking, it isn’t just a RESPA 6 (Qualified Written Request) that you send out, it is a UDCPA letter you send demanding to know both the identity and contact information for the creditor. As you can see from this article, failure to provide you with that information  plus the balance due and how it was computed, is a violation of that Federal Statute.

It might also be a shortcut way of identifying the pretender not as holder of the note but as agent for an undisclosed principal seeking to collect on a note that was defective in the first place because they did not identify the correct creditor (in violation of TILA) and it did not provide you with a proper accounting showing exactly what this “creditor” received that would reduce your loan balance.

The MAIN point here is that the servicer might well be the one sending you the notice of delinquency swhen they have performed zero due diligence as to the creditor’s accounting. Where the servicer itself or some other party is keeping the account current, as is often the case, the loan is neither delinquent nor susceptible to being declared in default — but they do it anyway.

Now that the FTC has declared war on debt collectors who perform illegally, and banged them with this fine, we can invoke the same administrative procedures and grievances with the FTC as to the collection efforts on mortgages where the “collector” is not the creditor and where the money demanded is not actually shown as due.

There is a presumption that if you didn’t make the payment as set forth in the note, then you must be delinquent and you must be declared (at some point) in default. But that is not true in most cases. There can only be a delinquency or default under the mortgage loan if the borrower has failed to make a payment or cure a payment that is actually due. If the payment has been made already, then no such payment is due, regardless of whether it came from the borrower or not.

This is why you need to know the four legs of the stool in order to object, sue, defend, and present genuine issues of fact before a trial court that will have no choice but to allow you to proceed to discovery. Discovery is where these cases settle because the pretenders know they didn’t fund the loan, they didn’t pay for the loan and the creditor has been paid in whole or in part, with a lower or zero balance remaining.

Just for reminders, the four legs of the stool are:

1. The loan closing papers with the investors under which he agrees to advance funds into a pool in exchange for a note or bond from a REMIC (which is never properly constituted). Here the investors expects that the money advanced will be used for funding mortgages conforming with the standards set forth in the prospectus and pooling and servicing agreement. Note that there is no nexus or connection between the investor and the borrower because the borrower usually does not even exist at that point in time. If a nexus ever arises, it is when the loan is transferred into the pool, something which we all now know was never done until the loan went into litigation or foreclosure — obviously in violation of the cut-off date required by the IRS REMIC statute, and the concurrent cut-off date in the PSA. But more importantly is the money angle — the investors didn’t advance money for loans that were delinquent or in default. They invested their money for good quality performing loans. Thus there is no way that the loans could be transferred into the pools if they were already declared problematic, delinquent, or non-performing. The failure to provide a nexus between borrower and lender (investor) is fatal to the enforcement of the mortgage lien. The creditor has no interest in the loan and doesn’t want one. Any claim from third parties who also have no nexus with the borrower would be on causes of action that are separate or apart from the mortgage lien. (SEE COMBO TITLE AND SECURITIZATION REPORT ABOVE)
2. The loan closing papers with the borrower(s), which are subject to roughly the same analysis with identical result. There is no nexus between the borrower and the investor because neither one knows the other, despite requirements in the TILA and RESPA laws that require disclosure of parties and their compensation. (SEE FORENSIC ANALYSIS TILA+ REPORT on Livinglies-store.com) The note does not describe the actual monetary transaction between the investor lender and the borrower. Instead it inserts a straw-man as “lender” and a straw-man as “beneficiary”. This usually takes the form of a new animal in mortgage lending called an “originator” who is a paid fee service provider whose sole duty is to pretend to be the lender, even though they never funded the loan, never bought the loan and never had any interest in the debt, the note or the mortgage. This is deemed by many in the title industry as a corrupted document that breaks the chain of title if any action was taken on such a loan in foreclosure. 
3. The actual money trail which varies from both the requirements set forth in the paperwork with the investor lender and the paperwork with the homeowner borrower. A full accounting would show that the parties in the middle without any interest in the loan, bought, sold, transferred and used those fabricated, forged documents to initiate foreclosure and eviction proceedings. Under the investor documentation, the pretenders are allowed to use a legal PONZI scheme in which the investors money is used to pay him his interest income, although it is not reported as such. The servicer also has the option of taking money from other revenue and pools and paying certain investors in complete  violation of the explicit requirements of any standard promissory note from a borrower requiring that payments be credited to the account of the borrower. Instead, they make the payment and do not credit the borrower or they receive the money and they pay neither the investors nor the give credit to the borrowers. (see Loan Level Accounting REPORT on Livinglies-store.com). The servicers and intermediaries and attempting, with some success to take over the position of the investor without an assignment from the investor, and enforce a mortgage to which they are not a party.
4. The Fourth legal of the stool arises from the false representations made in court or foreclosure proceedings. These representations made by people who purport to be authorized to substitute trustees, or file notice of defaults, notice of sales, notice of evictions, or lawsuits for all of those in judicial states, turn out to be at variance with all three of the other legs of the stool — the investor paperwork, the borrower’s paperwork and the actual money trail. 

Using a service like Elite Litigation Management services or others to present the matrix, which we also offer at livinglies-store.com, dial 480-405-1688, and you can present a poster-size board that shows a number of the discrepancy between all four legs of the stool, thus giving rise to the question of fact necessary to get to the next step in litigation. remember, if you go in thinking you have a magic bullet that will end your case, you are dreaming of a better worked than the one we have.

F.T.C. Fines a Collector of Debt $2.5 Million

See Full Article on New York Times and Firedoglake.com

By TARA SIEGEL BERNARD

The Federal Trade Commission signaled on Monday that it would continue to crack down on debt collectors who harass consumers for money they may not even be legally obligated to pay.

In the second-largest penalty ever levied on a debt collector, the F.T.C. said that Asset Acceptance, one of the nation’s largest debt collection companies, had agreed to pay a $2.5 million civil penalty to settle charges that the company deceived consumers when trying to collect old debts.

The settlement is part of a broader effort to patrol the industry, agency officials said.

“Our attention to debt collection has increased over the past couple of years because the complaints have been on the rise,” said J. Reilly Dolan, assistant director for the F.T.C.’s division of financial practices.

Consumer complaints about debt collection companies consistently rank as the second-highest category among all complaints at the agency, behind identity theft. But in 2010, complaints jumped 17 percent to 140,036, which represented 11 percent of all complaints in the commission’s database, up from 119,540, or about 9 percent of complaints, in 2009.

Asset Acceptance, based in Warren, Mich., was charged with a variety of complaints, including failing to tell consumers that they could no longer be sued for failing to pay some debts because the debts were too old. The company’s collectors also failed to inform consumers that paying even a small portion of the amount owed would revive the debt — in other words, making a payment would extend the amount of time the collector could legally sue.

Debt collectors have only a certain number of years to sue consumers. The statute of limitations varies by state, but typically ranges from two to 15 years, Mr. Dolan said, beginning when a consumer fails to make a payment. But borrowers often do not realize that making a payment on the old debt may restart the clock.

Among other things, the complaint also contended that the company — which buys unpaid debts for pennies on the dollar from credit card companies, health clubs and telecommunications and utility providers and tries to collect them — reported inaccurate information about the consumers to the credit reporting agencies. It also said that Asset Acceptance failed to conduct a reasonable investigation when it was notified by one of the credit agencies that a debt was being disputed. Moreover, the complaint says that the company used illegal collection practices and that it continued to try to collect debts that consumers disputed even though the company failed to verify that the debt was valid.

The proposed settlement with Asset Acceptance requires the company to tell consumers whose debt may be too old to be collected that it will not sue. It also requires the company to investigate disputed debts and to ensure it has a reasonable basis for its claims before going after the consumer. It is also barred from placing debt on credit reports without notifying the consumer.

The penalty “is certainly a slap on the wrist and probably a little bit more, but it really depends on what the F.T.C. does to enforce this in the coming months and years,” said Robert Hobbs, deputy director at the National Consumer Law Center and author of “Fair Debt Collection” (National Consumer Law Center, 1987). But “it is a great step forward. It is not self-enforcing, and it has a mechanism for the F.T.C. to follow up.”

Still, while the settlement requires the company to take more responsibility for checking the statute of limitations before it contacts consumers, he said most states did not require debt collectors to do that. That means it is up to consumers to know the rules on the statute of limitations, which, he said, can be “an enormously complex legal question.”

In a statement, Asset Acceptance said that the settlement ended an F.T.C. investigation that began nearly six years ago, and that the company did not admit to any of the allegations. “We are pleased to have this matter behind us, and to have clarity on the F.T.C.’s policies and expectations of the debt collection industry,” said Rion Needs, president and chief executive of Asset Acceptance.

In March, another leading debt collection company, West Asset Management, agreed to pay $2.8 million, the largest civil penalty ever levied by the F.T.C., to settle charges that its collection techniques violated the law. The commission charged that West Asset’s collectors often called consumers multiple times a day, sometimes using rude and abusive language, about accounts that were not theirs. The Consumer Financial Protection Bureau and the F.T.C. now share enforcement authority for debt collection companies, though the new bureau has a power that the F.T.C. did not: it can write new rules for debt collectors. But F.T.C. officials said that debt collection enforcement would remain a top priority.

 

MBS Investors in Revolt: Ultimatums to US Bank and Wells Fargo

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INVESTORS COMING OUT OF THE SHADOWS: BANKS’ WORST NIGHTMARE

EDITOR’S ANALYSIS: For those who have followed this Blog for any length of time, this news will come as no surprise. Ultimately, the proof and the relief sought by homeowners will come from investors who demand answers to what happened to their money when they purchased mortgage backed securities and pooled their money to fund mortgages.

The result is a pincer action, to put it military terms, where the creditors and the debtors are making the same allegations against the intermediaries who stole from both sides, “borrowed” the loss to claim Federal bailout money, and left both sides holding the bag.

Lawyers for the investors are clearly smelling blood and are on the hunt. Unlike the foreclosure defense side where the arguments and theories are the same, these lawyers will represent institutional investors whose credibility in court will rival, if not exceed, the credibility normally allowed to anyone with the word “Bank” in their name. These lawyers are going to make a fortune, as will any foreclosure defense lawyer who realizes the true nature of what is going on.

What they already know and they are demanding answers: that the mortgage origination process was defective in multiple ways that created fatal defects in the the quality and quantity of loans as well as the security of the collateral (the homes). The proof that will emerge is that the homes were not subject to a perfected lien because the intermediaries wanted to claim the loans themselves to create “trading profits” before they provided for any accounting to the investors and with no intention of ever providing an accounting to the borrower.

The document trail from the closing with investors, the document trail from the closing with borrowers, the actual money trail and the representations made in court are all at variance with each other. “Transfers” to the pool occurred only after the alleged default by the borrower, which was misrepresented because the default claimed did not match the actual receipt of funds that should have been reported to investors. All of this is in direct violation of the PSA and other securitization documents.

The final result will be the investors disavowing any interest in the loans, absent a broad settlement that allows for modifications of the mortgages based upon realistic values and terms. The investors will see, that the deep pockets here for recovery of their losses are where the money went in the first place — the investment banks.

The money advanced by investors was not used to fund mortgages as advertised but rather was sponged into a complex matrix of fees, trading profits for the investment banks, credit enhancements that inured to the benefit of the banks, and bets that the bonds would fail — a sure thing because the banks reserved the right exclusively to declare the failure.

All of this projects broad similar actions from investors around the world demanding answers on each and every pool. All loans will be thrown into a grey area of ownership and the end result may well be that the “free house” spin by the Banks will come back and bite them. With the creditors disavowing the transaction and making no claim against the homeowners there might be nobody to pay. Short of that, the proof will most likely provide a relatively easy way for homeowners to strip their homes of the liens of record as they relate to loans in which a securitization claim is present — because in most cases, the loan was not made or paid for by the originator who appears on the note and mortgage.

TILA rescission is most probably going to get much easier as a result of these actions. Meanwhile US Bank and Wells Fargo are going to experience the frustration that they have caused homeowners. Their attempts at foreclosure are going to met with stiff resistance as the investors emerge and have their say in foreclosure actions.

HSBC and US Bank to Investigate Ineligible Mortgages in Over $19 Billion of Wells Fargo-Issued RMBS

BY EVAN BEDARD ON JANUARY 5, 2012 IN MORTGAGE NEWS DAILY | MORTGAGE RATE NEWS – LOANSAFE.ORG

(Source: Gibbs & Bruns, LLP) – HOUSTON, Jan. 5, 2012 - Gibbs & Bruns LLP announced today that its clients have issued instructions to US Bank and HSBC, as Trustees, to open investigations of ineligible mortgages in pools securing over $19 billion of Residential Mortgage Backed Securities (RMBS) issued by various affiliates of Wells Fargo.  Collectively, Gibbs & Bruns’ clients hold over 25% of the Voting Rights in 48 Trusts that issued these RMBS.

“Our clients continue to seek a comprehensive solution to the problems of ineligible mortgages in RMBS pools and deficient servicing of those loans.  Today’s action is another step toward achieving that goal,” said Kathy D. Patrick of Gibbs & Bruns LLP, lead counsel for the Holders.

The Holders anticipate that they may provide additional instructions to Trustees, as needed, to further the investigations.  The securities that are the subject of these instruction letters include:

WFALT 2005-1		WFMBS 2005-9		WFMBS 2006-19		WFMBS 2007-13
WFALT 2007-PA2		WFMBS 2005-AR11		WFMBS 2006-20		WFMBS 2007-8
WFALT 2007-PA3		WFMBS 2005-AR12		WFMBS 2006-6		WFMBS 2007-9
WFALT 2007-PA4		WFMBS 2005-AR14		WFMBS 2006-7		WFMBS 2007-AR3
WFALT 2007-PA6		WFMBS 2005-AR16		WFMBS 2006-8		WFMBS 2007-AR8
WFHET 2005-3		WFMBS 2005-AR3		WFMBS 2006-AR10		WMLT 2005-A
WFHET 2006-3		WFMBS 2005-AR5		WFMBS 2006-AR13		WMLT 2005-B
WFHET 2007-1		WFMBS 2005-AR8		WFMBS 2006-AR14		WMLT 2006-A
WFMBS 2005-12		WFMBS 2005-AR9		WFMBS 2006-AR18		WMLT 2006-ALT1
WFMBS 2005-17		WFMBS 2006-11		WFMBS 2006-AR2
WFMBS 2005-18		WFMBS 2006-13		WFMBS 2006-AR4
WFMBS 2005-3		WFMBS 2006-14		WFMBS 2006-AR8
WFMBS 2005-4		WFMBS 2006-17		WFMBS 2007-10

ABOUT GIBBS & BRUNS LLP
Gibbs & Bruns is a leading boutique law firm engaging in high-stakes business and commercial litigation.  The firm is renowned for its representation of both plaintiffs and defendants in complex matters, including significant securities and institutional investor litigation, director and officer liability, contract disputes, fraud and fiduciary claims, energy, oil and gas litigation, construction litigation, insurance litigation, trust & estate litigation, antitrust litigation, legal and professional malpractice, and partnership disputes. Gibbs & Bruns is routinely recognized as a top commercial litigation firm in the US.  For more information, visit www.gibbsbruns.com.

Source: Gibbs & Bruns, LLP

 

TILA ACTIONS MAKING A COME-BACK AS LAWYERS AND JUDGES GET MORE RECEPTIVE

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EDITOR’S NOTE: FULL CIRCLE. When I started writing this blog I had researched the Truth in Lending law and concluded that it was one of the better pieces of legislation designed to protect consumers and maintain competition in the marketplace. That said, I advised many lawyers to concentrate on TILA violations because the rescission remedy was effective to remove the mortgage and the MONEY (not the house) due back tot he “lender” was subject to constraints (who was the creditor and how much is owed, especially after you offset TILA damages, which are significant.

Alas, Judges read things into the law that were not there. Although the “lender” in rescission was obligated to either return all money paid at closing and return the note cancelled and satisfy the mortgage FIRST (or file a Declaratory Action (lawsuit) within 20 days why the rescission does not apply, the theory emerged even at the appellate level (9th Circuit, Federal) that in order to “rescind” one had to tender the money back and that the amount tendered had to be the amount demanded regardless of the actual amount that was due.

But things are changing. They had to change, because the basic problem with every closing in which their was claim of securitization was that the closing was defective, it lacked the disclosure required by law, and it presented loans that were not within industry standard underwriting of loans, nor were things like borrowers income or the value of the property confirmed by an internal review as was done in all mortgage loans prior to the onset of the securitization cancer.

The proposed CFPB rule simply takes existing law and codifies it in a new way — referring tot hose loans that comply with TILA as “qualified” and those loans that do not comply with TILA as “unqualified.” My prediction is that this new rule will pass. And with it, the challenge to foreclosures for noncompliance with TILA will rise exponentially because TILA fives the lawyer two things that he ordinarily isn’t seeing these days if he is defending foreclosures — (1) attorney fees and (2) damages, a lot of them, on which he can take a contingency fee. Defeat of the foreclosure by invalidating the mortgage lien leaves the homeowner with a lien free house but an obligation outstanding that can be discharged in bankruptcy.

Such an obligation will also be offset by damages for identity theft because the credit record and personal history of each borrower was used to sell bogus mortgage bonds to investors. Many other causes of action like slander of title flow from the that TILA audit. That is why I suggest to everyone who will listen that they get the COMBO, because that is what gives the TILA analyst vital information about what actually happened after closing, but also to get the LIVINGLIES FORENSIC TILA ANALYSIS.

SEE NEW CFPB RULE COULD LEAD TO FLOOD OF FORECLOSURE CHALLENGES

CFPB LIKELY TO ADOPT RULES REGARDING “QUALIFIED” MORTGAGES

If the Consumer Financial Protection Bureau wishes, it could allow borrowers to challenge future foreclosure actions by questioning whether the loan was a “qualified mortgage” in court.

Banks have been lobbying policymakers since May when the Federal Reserve published several options for how lenders must determine a borrower’s ability to repay a mortgage under the Truth in Lending Act. The new rules were proposed under the Dodd-Frank Act to outlaw risky and misleading home loans.

One of the options, known as the QM rule, would allow lenders to originate “qualified mortgages” under a legal safe harbor, provided the loans do not have certain features such as negative amortization, balloon payments, interest-only payments, or terms exceeding 30 years. As long as the bank stays within these guidelines, it will be in compliance.

Another option for QM, though, provides a “rebuttable presumption of compliance” clause, meaning the lender is presumed compliant as long as it follows guidelines in the first option and also verify the borrower’s employment, debt-to-income ratio and credit history.

The industry is very concerned that the CFPB, which assumed the rulemaking duty from the Fed this summer, will choose option two. According to some, the “rebuttable presumption” would mean any future foreclosure would be thrown into court. Foreclosure defense attorneys will able to challenge whether or not the loan being foreclosed upon was QM compliant or not, and if it wasn’t, judges could award TILA damages to the borrower.

“It would be much more expensive if everyone did this,” said Richard Andreano, a partner at the financial law firm Ballard Spahr. “It would get to a point to where it would almost be malpractice for a foreclosure defense attorney not to pursue the claim.”

Roy Oppenheim at Oppenheim Law Firm, a defense attorney in Florida, said there would only be challenges brought when the homeowner and the defense attorney have evidence of noncompliance.

“Not every foreclosure defense attorney will do this,” he said. “If they make good loans there should never be a problem.”

 

JUDGE MARGERET MANN (SO. CA BKR) PLUNGES INTO DETAILS AND COMES UP WITH WELL-REASONED DECISION

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AURORA LOAN SERVICES LLC, SCME MORTGAGE BANKERS INC, ING BANK FSB, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS ALL BITE THE DUST, SUBJECT TO LIABILITY AND NO ABILITY TO FORECLOSE WITHOUT COMPLYING WITH LAW.

Salient points of Judge Mann’s Decision:

1. TRUTH IN LENDING  was dismissed because they were time-barred. LESSON: Don’t ignore TILA claims or TILA audits. Get a forensic Analysis as early as possible, assert them immediately, assert rescission as soon as possible. TILA has teeth, but if you assert it late in the game.
2. YOU CAN’T FORECLOSE ON UNRECORDED INSTRUMENTS: Judge Mann came right out and said the California Supreme Court would not and could not decide otherwise. Any other holding would defeat the purpose of recording and create uncertainty in the marketplace. This will cause a lot of grief to pretenders. It is getting harder for them to come up with people who are willing to lie, forge or fabricate documents. Getting a notary to affix their signature and seal will soon be a thing of the past unless the signature, the person and the document is real.
3. THE ASSUMPTION THAT THE LOAN IS IN DEFAULT IS STILL A PROBLEM: As long as lawyers and pro se litigants are willing to concede that the obligation was in default, they are giving up their largest chip — i.e., that the loan was not in default and the loan was not subject to a perfected lien for the same reason that the court cites in its opinion. Our loan level analysis shows repeatedly that in most cases the servicer is continuing to make payments and reporting to investors that the loan is performing even as they send delinquency letter’s notices of default and notices of sales. The Court missed this point because nobody brought it up. Don’t expect the Court to do your work for you. If you have reason to believe that the servicer is still paying on your loan you should be stating that the loan is not in de fault, denying any delinquency to the creditor and objecting to any action that is based upon the premise of “default.” Note that if the servicer is paying your bills, the servicer MIGHT have a right of action against you, but it certainly isn’t under the terms of the note or mortgage.
4. THE ASSUMPTION THAT A VALID PERFECTED MORTGAGE LIEN EXISTS IS STILL A PROBLEM: Again, the problem is not with the Courts but with the lawyers and pro se litigants who simply assume that this is not an issue. Put yourself in the banks’ shoes. If all you had were nominees for undisclosed principals on the note and mortgage would you be OK with that? No? Then the lien was never perfected, which means for legal purposes it doesn’t exist. Just because it shows in black and white doesn’t make it true. LESSON: Deny the lien exists, deny it was perfected and make them prove how it was perfected. They can’t. In most cases neither the mortgage originator nor the nominee beneficiary (MERS) had a disclosed lender or beneficiary, nor did they incorporate the real terms of  the payment to the investor/lenders. If this was a law school exam and the student wrote that the loan was perfected, the grade would be “F”.
5. THE ISSUE OF FEDERAL PREEMPTION AND THEREFORE JURISDICTION AND VENUE ARE STILL IN FLUX: This Judge found that federal preemption prevents the homeowner from alleging TILA as state claims. The courts are not decided on this and the issue of res judicata and Rooker -Feldman will come into play once the issue is really resolved with finality. Beware then how you assert a claim and that you don’t let the statute of limitations run out by failing to assert the right claim under TILA in the right court. better to get dismissed than to find out that you are time-barred.
6. WRONGFUL FORECLOSURE IS A TITLE ISSUE NOT A FAIRNESS OR TECHNICAL ISSUE: Judge Mann, correctly in my opinion, states that an assignment from MERS must be allowed in order to clear up title. But, she states that without recording an interest within the chain of title, you have no right to foreclose under the states recording laws. I think this is right, and I think it applies in all 50 states. LESSON: Plead your wrongful foreclosure, slander of title and quiet title cases as title cases and stop adding extra things that you think may them juicier. Either the title is right or it is wrong. There is no middle ground.
7. MERS ISSUE IS STILL OBSCURE: While the assignment from MERS, if recorded clears up one part it leaves another part undecided again because it wasn’t raised properly. There is a difference between “bare record title” and an “interest in the land.” The MERS assignment is like a quit-claim deed from someone without any interest in the land and used to clear up the chain of title on paper, but it does not convey any interest. MERS on its website and in the public domain specifically disclaims any interest in the obligation, note or mortgage. That is its selling point to members who use its “Service.” And that is why it can’t foreclose and it is subject to cease and desist orders from regulators. As with other affidavits or quit-claims to clear up apparent clouds on title, the recorded assignment or quitclaim does nothing to convey a larger interest than that possessed by the grantor. LESSON: If the pretenders want to foreclose they can’t rely on the MERS assignment. They must file a credible affidavit that states that the affiant was the undisclosed principal in the original transaction with the borrower and that it joins in or separately assigns the actual interest in the obligation, note or mortgage. In my opinion, this is the only way to perfect the original “lien.” Whether it will relate back to the original transaction is an issue the courts must decide.
8. NO DIFFERENCE BETWEEN A DEED OF TRUST AND A MORTGAGE: Pretenders who try to elevate a deed of trust above a mortgage are headed for a brick wall. Courts never liked non-judicial foreclosure in the first place. They are not about to to reverse centuries of law and provide higher status to a non-judicial foreclosure or the instruments that allow it. ONLY the statutes that provide for extra care on the part of the trustee are constitutional, since due process is the only way anyone in this country can be deprived of life, liberty or property. LESSON: Pound on the issue that the pretender cannot prevail in a judicial foreclosure so they are trying to get away with it in a non-judicial foreclosure. If you want to see how this will eventually unfold, look at Florida and other states that had similar issues in their “Contracts for deed.” Despite clear contractual language the courts have universally held they are mortgages and that they must be foreclosed as mortgages.

THE ESSENCE OF TILA: BORROWER’S BILL OF RIGHTS

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EDITOR’S ANALYSIS: There is a reason why TILA, RESPA and HOEPA were enacted into law. The central theme, as clearly stated in a recent seminar led by lawyers for the banks, is to provide the consumer with a credible and understandable method of deciding between two or more potential loan offerings. The reason for these Federal Laws is to make certain that the borrower is given the information he/she needs to decide whether they want Deal A or Deal B — or none of the above.

These laws worked fairly well until wall Street stepped into the lending scenario with the illusion of securitization. The result was that the “disclosure documents” lied to the borrower. These documents took away the possibility of deciding between one loan or another and one lender or another because they intentionally misstated the identity of the lender in table-funded loans, which are identified by TILA and Reg Z as presumptively predatory loans.

The reason they are predatory is because a table-funded loan (funds and terms coming from an unidentified third party) actually tricks the borrower into thinking he/she knows the lender, thus eliminating the possibility for the borrower to reject the real lender.

The disclosure statements are also supposed to tell the borrower who is getting paid in their loan transaction and how much they are getting paid. Once again, the “disclosure” documents straight out lie to the borrower, by withholding vital information about the securitization scheme, without which the “lender” at the table would never have offered the loan.

If the securitization scheme was not in place at the time of the loan, the lender identified at closing would have had to assume risk, putting the loan on its financial statements as an asset (loan receivable) along with an entry for “reserve for bad debt”on the liability side of the balance sheet.

Of course it is easy to see why this disclosure was not made. Promises were made to the creditor (investor who advanced funds for a bogus mortgage-backed bond) including insurance, servicer obligations to continue payments, credit default swaps, and cross collateralization would have informed the borrower that the creditor was not getting the note they were signing.

The investors (I.E., THE REAL LENDER/CREDITORS) were getting a bond that included multiple sources of revenue to reduce the risk of non-payment from any of the parties who promised to pay. The borrowers would have learned that even if they made their payments on time, they could still be part of a pool that a Master Servicer would declare was in default or was subject to write-down, thus triggering payments from third parties.

The investment banks of course need to hide this information from borrowers who might be more likely to stop paying if they knew there were third party sources from which payments could be made. Any lawyer who knew these facts would have told them that it would be pretty difficult to declare the borrower in default when so many other people were obligated to pay for varying reasons that were not necessarily ties to whether the borrower made payments.

The robo-signing frenzy that ensued was a cover-up for obviously defective notes and mortgages that did not describe the actual transaction that took place — a single transaction in which investors advanced the money and borrowers received part of it, with the rest going to a myriad of third party players who were trading hedges, insurance and bets on the value of the mortgage bonds. Whether the homeowner actually made payments was and is almost irrelevant to the obligation of others (AIG, servicers et al) to make payments to the creditor either against principal, interest or both.

Nobody wanted the borrower to know what was really going on. But that is exactly what TILA, RESPA and HOEPA were all about — requiring the real lenders to show themselves, identify themselves, and disclose the identities of all the intermediary parties who were making money as a result of the money transaction between the investor and the homeowner.

The effect of this line of reasoning on RESCISSION remedies both under TILA (or HOEPA) is huge. The three day window is a “buyer’s remorse” window of opportunity where the borrower can reverse the transaction, no questions asked. If they go beyond the three-day window they have three years to cite a material violation and then give notice of rescission. Lenders want the courts to construe it as a claim of rescission but congress specifically worded the statute leaving it entirely within the hands of the homeowner and shifting the burden of the challenge to the “lender” who would be required to file a lawsuit (declaratory action) pleading and proving why the borrower should not be allowed to rescind.

The importance of rescission under TILA is that it gives the borrower the power to disconnect the mortgage lien from the property leaving the obligation unsecured. If there is a balance due from homeowner to “lender”, after the “lender” has returned all documents, filed the satisfaction (although Reg Z  says that the mortgage is terminated by operation of law upon sending of the notice to rescind) then the homeowner is obligated to tender a payment plan.

The failure to properly disclose the parties and terms and the outright lying that went on at nearly every closing, provides a window of opportunity to invoke the 3 day rule that starts from the date the disclosure is made. At this point, even with millions of foreclosures, the pretender lenders have still not identified the real lender or creditor and still have withheld the full accounting for the payments received by or on behalf of the real lenders or creditors. So, it would seem that the three-day right of rescission has not even begin to run in nearly all cases.

Now the new Consumer Financial Protection Bureau has inherited this problem and is charged withe responsibility of  making certain that at least future transactions comply with the law. But the future transactions include satisfactions, payoffs, foreclosures etc., all of which are predicated upon a false foundation of liens that were never perfected, defective and incurable. Politically it is a third rail to suggest that the banks be held tot he letter of the law. If the borrower showed up at closing by way of a straw-man the transaction would have been canceled or the “lender” would have cried “foul!” But now the shoe is on the other foot and what happens from this point forward is going to be interesting.

Sorting Through Lending Costs

The New York Times

By MARYANN HAGGERTY

PLENTY of people have ideas about what you should be told when you’re shopping for a mortgage, but for now, that may not be much help.

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Even before it officially opened for business on July 21, the Consumer Financial Protection Bureau, the federal agency created to oversee mortgage lending, started looking at loan shopping. The bureau is legally required to propose by July 2012 a way to streamline mortgage disclosure. It is exploring avenues for combining the two forms that borrowers get now — the three-page Good Faith Estimate and the two-page Truth in Lending Act form.

These forms tell would-be borrowers the terms of their loan — for instance, how payments on an adjustable-rate mortgage change. They also lay out fees.

Although interest rates grab attention, fees can make a big difference, said Eileen Anderson, senior vice president of the Community Development Corporation of Long Island, which provides home buyer education. The easiest way to compare loans, she said, remains the Annual Percentage Rate, or A.P.R. That calculation rolls in fees as well as the stated interest rate. Because lenders are required to follow the same formula, useful comparisons can be made. “That’s the best way to shop for a loan, whether it’s 10 years ago, or now,” she said.

In May, the Consumer Financial Protection Bureau solicited reactions to two versions of a form that combines the current forms onto one double-sided sheet. It received more than 13,000 comments. According to a bureau summary, people praised the effort, but had specific suggestions on layout and phrasing.

On June 27 the bureau posted two more revised versions. The comment period on them closed July 5; among those responding was the Mortgage Bankers Association, which said in a three-page http://www.mortgagebankers.org/files/News/InternalResource/77017_Letter.pdf”>letter that the proposals didn’t mesh with current laws, and also criticized the mechanics and design. The bureau says forms are evolving.

All this comes less than two years after the Department of Housing and Urban Development overhauled the Good Faith Estimate — an effort that involved years of soliciting comments and was mightily resisted by some in the lending industry. That form not only changed the way information was presented, but also required brokers and lenders to commit to many parts of their estimates — a big change, as previous estimates sometimes had little relationship to actual closing costs.

But the forms themselves are longer and, for some borrowers, more confusing than the previous ones, Ms. Anderson said.

The form is still “horrible, just horrible,” said Mark Yecies, an owner of SunQuest Funding, a lender in Cranford, N.J. “The G.F.E. doesn’t actually itemize the closing costs in such a way that makes it easy for a borrower to understand what they are.”

Still, he advises people to get the form from every lender they approach. “If you receive approximate closing costs in an e-mail or a form that is not the G.F.E.,” he said, “it doesn’t mean squat.”

He added that some lenders had become adept at manipulating the estimates, by providing interest-rate quotations that expire almost instantaneously, or by low-balling fees in instances where they have legal flexibility. “If you get two or three different G.F.E.’s and there’s several thousand dollars’ difference,” he said, “you know someone is playing games.”

But David Flores, a financial counselor with GreenPath Debt Solutions in New York, which provides home buyer education, says game playing is not as big a problem as it used to be. “We’re removed from the day when it was a 3 percent interest rate with a big asterisk,” with the asterisk leading to fine print about teaser rates, he said.

Borrowers seem to have learned a lot from the attention paid to shaky loans in the last few years, he said. “More people are asking the right questions when it comes to these adjustable rates and exotic loan types. More people are wise to them.”

BANKS CONTINUE TO HOLD NEARLY 1 MILLION HOMES AS SALES AND PRICES CONTINUE TO PLUMMET

GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE

STATED INCOME, STATED ASSETS (SISA) NO DOC ASSETS AND INCOME FOR THE BANKS: AS FALSE AS IT ALWAYS WAS

EDITOR’S COMMENT: DICK DURBIN said it when the democratically controlled senate and house refused to even inquire about the real nature of the securitization illusion — “The Banks own the place.” He was of course referring to the incredible amount of influence of the banking lobby fueled by hundreds of millions of dollars in campaign cash and other benefits. Now SISA — Stated Income, Stated Assets — has acquired new meaning, this time for the banks, who are using it as fraudulently as the mortgage brokers who “corrected” homeowner applications for loans to reflect the amount of income and assets needed to justify the underwriting of the loan. Now it means to justify the stock prices, management jobs, and business viability of broken banks.

And with nearly 1 million homes “owned” by the banks, the housing market looks weaker indefinitely. How could these prices and the prospect of lower prices be possible? It’s easy. The whole thing is based upon a false premise that nobody wants to face — the banks do NOT own those properties. They are legally owned by the homeowners who were the subject of false and fabricated foreclosures initiated by non-creditors with no skin in the game except the desire to get a “free house.” They never loaned the money, they never bought the “loans,” the loans were defective from the start, and they never had the right to purchase those homes with a non-cash (credit) bid at auction because the auction was fraudulently obtained and the credit bid was devoid of any reality.

THOSE HOMES ARE STILL OWNED BY THE HOMEOWNERS WHO THINK THEY WERE FORECLOSED AND THAT THE MATTER IS OVER. THE SITUATION PERSISTS BECAUSE HOMEOWNERS, LAWYERS AND JUDGES PERSIST IN THE BELIEF THAT IT “JUST CAN’T BE SO.”

Ask any real estate professional and they won’t be able to come up with a fundamental reason why the housing market went down this far nor why the prospects for the housing market are still lower. Ask them or any economist, and the answer slowly emerges by process of elimination — there is no fundamental reason for this situation because it isn’t real. You want the economy to recover? Remove the illusion of securitization of loans, unless they are proven under existing laws and existing rules of evidence, and then the unthinkable happens — the wealth that was stolen from the American middle class turns out not to have been stolen after all — the victim is simply giving up what was stolen because the victim is convinced the scam was real.

Let’s see what happens as the Title Companies start to tackle this issue because they have potential liability in the trillions, which is money they don’t have. The simplest way out for them is to state that there is no claim against the title policy because the loss never occurred. If the homeowner still owns the house then who is to be paid. If the “lender” at closing (pretender lender” never loaned any money, there is no loss. If any other named payee on the insurance policy lost no money, then the title policy does not come into play.

If you want a stimulus to the economy, the just tell the truth. The mortgages are fatally defective, they were never transferred, they were never intended to be transferred, and borrowers’ undocumented obligations have long since been extinguished by the feeding frenzy on Wall Street from the money advanced by investors and paid by borrowers, federal bailouts, insurance, credit default swaps, guarantees and settlements. Check it out yourself. This sounds crazy because it is — it is crazy-making by the world’s largest financial institutions (on paper) when in fact they are not large and not even viable if their auditors would just do their job and tell the truth.

How far will this go, dragging housing prices and the the prospects of recovery down with them? It looks like the answer is it will go as far as we let them.

May 22, 2011

As Lenders Hold Homes in Foreclosure, Sales Are Hurt

By ERIC DASH

EL MIRAGE, Ariz. — The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.

All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months.

“It remains a heavy weight on the banking system,” said Mark Zandi, the chief economist of Moody’s Analytics. “Housing prices are falling, and they are going to fall some more.”

Over all, economists project that it would take about three years for lenders to sell their backlog of foreclosed homes. As a result, home values nationally could fall 5 percent by the end of 2011, according to Moody’s, and rise only modestly over the following year. Regions that were hardest hit by the housing collapse and recession could take even longer to recover — dealing yet another blow to a still-struggling economy.

Although sales have picked up a bit in the last few weeks, banks and other lenders remain overwhelmed by the wave of foreclosures. In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac. In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one.

Before the housing implosion, the inflow and outflow figures were typically one-to-one.

The reasons for the backlog include inadequate staffs and delays imposed by the lenders because of investigations into foreclosure practices. The pileup could lead to $40 billion in additional losses for banks and other lenders as they sell houses at steep discounts over the next two years, according to Trepp, a real estate research firm.

“These shops are under siege; it’s just a tsunami of stuff coming in,” said Taj Bindra, who oversaw Washington Mutual’s servicing unit from 2004 to 2006 and now advises financial institutions on risk management. “Lenders have a strong incentive to clear out inventory in a controlled and timely manner, but if you had problems on the front end of the foreclosure process, it should be no surprise you are having problems on the back end.”

A drive through the sprawling subdivisions outside Phoenix shows the ravages of the real estate collapse. Here in this working-class neighborhood of El Mirage, northwest of Phoenix, rows of small stucco homes sprouted up during the boom. Now block after block is pockmarked by properties with overgrown shrubs, weeds and foreclosure notices tacked to the doors. About 116 lender-owned homes are on the market or under contract in El Mirage, according to local real estate listings.

But that’s just a small fraction of what is to come. An additional 491 houses are either sitting in the lenders’ inventory or are in the foreclosure process. On average, homes in El Mirage sell for $65,300, down 75 percent from the height of the boom in July 2006, according to the Cromford Report, a Phoenix-area real estate data provider. Real estate agents and market analysts say those ultra-cheap prices have recently started attracting first-time buyers as well as investors looking for several properties at once.

Lenders have also been more willing to let distressed borrowers sidestep foreclosure by selling homes for a loss. That has accelerated the pace of sales in the area and even caused prices to slowly rise in the last two months, but realty agents worry about all the distressed homes that are coming down the pike.

“My biggest fear right now is that the supply has been artificially restricted,” said Jayson Meyerovitz, a local broker. “They can’t just sit there forever. If so many houses hit the market, what is going to happen then?”

The major lenders say they are not deliberately holding back any foreclosed homes. They say that a long sales process can stigmatize a property and ratchet up maintenance and other costs. But they also do not want to unload properties in a fire sale.

“If we are out there undercutting prices, we are contributing to the downward spiral in market values,” said Eric Will, who oversees distressed home sales for Freddie Mac. “We want to make sure we are helping stabilize communities.”

The biggest reason for the backlog is that it takes longer to sell foreclosed homes, currently an average of 176 days — and that’s after the 400 days it takes for lenders to foreclose. After drawing government scrutiny over improper foreclosures practices last fall, many big lenders have slowed their operations in order to check the paperwork, and in two dozen or so states they halted them for months.

Conscious of their image, many lenders have recently started telling real estate agents to be more lenient to renters who happen to live in a foreclosed home and give them extra time to move out before changing the locks.

“Wells Fargo has sent me back knocking on doors two or three times, offering to give renters money if they cooperate with us,” said Claude A. Worrell, a longtime real estate agent from Minneapolis who specializes in selling bank-owned property. “It’s a lot different than it used to be.”

Realty agents and buyers say the lenders are simply overwhelmed. Just as lenders were ill-prepared to handle the flood of foreclosures, they do not have the staff and infrastructure to manage and sell this much property.

Most of the major lenders outsourced almost every part of the process, be it sales or repairs. Some agents complain that lender-owned home listings are routinely out of date, that properties are overpriced by as much as 10 percent, and that lenders take days or longer to accept an offer.

The silver lining for home lenders, however, is that the number of new foreclosures and recent borrowers falling behind on their payments by three months or longer is shrinking.

“If they are able to manage through the next 12 to 18 months,” said Mr. Zandi, the Moody’s Analytics economist, “they will be in really good shape.”

WHY ELIZABETH WARREN SCARES THE CRAP OUT OF BANKS

SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM

“If there had been a cop on the beat to hold mortgage servicers accountable a half dozen years ago,” she said at one point, “the problems in mortgage servicing would have been found early and fixed while they were still small, long before they became a national scandal.”

EDITORIAL COMMENT: It’s a simple answer really. She is real and they are not. She wants us to  have the truth, they want us to fight with each other over ideology while the truth sails away.

With Barofsky leaving the TARP watchdog, and the only meaningful prosecutions Warren is the only person left in the administration whose intent conforms with the job of a public servant protecting consumers from wholesale fraud by the banking industry. Now they are after her with a vengeance to extinguish the risk of action by the administration that puts away people who should be convicted felons, and the risk that restitution to the government, taxpayers, homeowners and investors will be seriously pursued.

Whereas Barofsky’s eye was on past transgressions and unraveling the mystery of the TARP money, Warren’s eye is more on the future to stop the banks from using business models that uses consumers as targets. We have a very unbalanced situation that seems likely to get worse unless Warren is successful.

The failure of Congress and thus the Justice department to include banking in the scope of industries where monopolies must be regulated and controlled has left the industry in charge of itself and controlling what little is left of government regulation. In any other situation the justice department would have a clear path to antitrust remedies. It’s like water, electric and phone service — if we are going to give companies monopolistic share of the marketplace and raise barriers to entry for competition, then they should be regulated like utilities or broken up into much smaller companies.

If water companies were allowed the freedom of the banks, we would be paying $100 per gallon. That is what we are doing in finance, but nobody wants to see it that way except a few people who are accused over being alarmist.

It strikes me as hypocritical for the anti-regulators to say that big government is unwieldy and can’t be managed properly and then allow the creation of a financial industry that in every real metric is bigger than government and even more unmanageable — and not possible to regulate. We’re getting the worst case scenario every way we turn. We’ve already tried deregulating the financial industry and except for top members of the industry itself, NOBODY IS BETTER OFF. Quite the contrary, debt, which is the life blood of the financial industry, is draining the life force out of economy.

Whenever it is that we push the reset  button to clear title and stabilize commercial transactions, it better include a practical view of the financial industry. It should be serving the needs of the country and the marketplace. Instead we have them dictating what the economy and the country will get.

Elizabeth Warren has an uphill battle without much support from anywhere that counts. SO she needs YOUR support by writing to her and your congressman and state legislators about the inequalities in our economy that have stretched us past the breaking point. The goal is to have a healthy and productive society and a fair marketplace governed by democratic principles. The current status quo, for which the banks have dug in their heels to maintain, is anti-capitalism, anti-free market, and anti American.

Capitalism is an economic system that is midway between fascism (controlled by business) and socialism (everyone gets a share of the pie). The American dream is what drives capitalism — where we know there will be inequalities and excesses and we are willing to tolerate that because that is how opportunity and innovation flourish creating better circumstances for each generation of Americans. Using the unfounded fear of socialism, big business has taken us over the line to fascism in the marketplace and the society. we are a nation in which the government does not respond, much less fear, the reaction of the people because they are so easily manipulated by sound bites that scare them. Elizabeth Warren is practical and firm in her drive to return us to true capitalism, in which trickery is not protected by a system where predators run the government.

We need to return the favor and give her support every way we can.

An Advocate Who Scares Republicans

By JOE NOCERA

The piñata sat alone at the witness table, facing the members of the House subcommittee on financial institutions and consumer credit.

The Wednesday morning hearing was titled “Oversight of the Consumer Financial Protection Bureau.” The only witness was the piñata, otherwise known as Elizabeth Warren, the Harvard law professor hired last year by President Obama to get the new bureau — the only new agency created by the Dodd-Frank financial reform law — up and running. She may or may not be nominated by the president to serve as its first director when it goes live in July, but in the here and now she’s clearly running the joint.

And thus the real purpose of the hearing: to allow the Republicans who now run the House to box Ms. Warren about the ears. The big banks loathe Ms. Warren, who has made a career out of pointing out all the ways they gouge financial consumers — and whose primary goal is to make such gouging more difficult. So, naturally, the Republicans loathe her too. That she might someday run this bureau terrifies the banks. So, naturally, it terrifies the Republicans.

The banks and their Congressional allies have another, more recent gripe. Rather than waiting until July to start helping financial consumers, Ms. Warren has been trying to help them now. Can you believe the nerve of that woman?

At the request of the states’ attorneys general, all 50 of whom have banded together to investigate the mortgage servicing industry in the wake of the foreclosure crisis, she has fed them ideas that have become part of a settlement proposal they are putting together. Recently, a 27-page outline of the settlement terms was given to banks — terms that included basic rules about how mortgage servicers must treat defaulting homeowners, as well as a requirement that banks look to modify mortgages before they begin foreclosure proceedings. The modifications would be paid for with $20 billion or so in penalties that would be levied on the big banks.

Naturally, the banks hate these ideas, too. So the Republican members of the subcommittee had another purpose as well: to use the hearing to serve as a rear-guard action against the proposed settlement.

“Under what statutory authority are you currently acting?” demanded Representative Patrick McHenry, a Republican from North Carolina, questioning the legitimacy of her role in setting up the consumer bureau. He also questioned whether the government had the right to impose a $20 billion penalty on the banks — and then use that money for (heaven forbid) mortgage modifications.

Spencer Bachus, Republican of Alabama, the new chairman of the Financial Services Committee, wanted to know how closely Ms. Warren had been consulting with the White House and Treasury Secretary Timothy Geithner about naming a director for the bureau — and whether she would accept a recess appointment “knowing the type of blowback from that.” (A recess appointment is a temporary appointment the president can make when the Senate is in recess, thus avoiding the need for Senate confirmation.)

Representative Steve Pearce, Republican of New Mexico, said that he fully expected the Consumer Financial Protection Bureau to be no better than “the S.E.C. and Mr. Madoff.” “Within two years,” he added, “your agency is going to be operating exactly the same, that it’s simply out there grinding wheels away.”

Representative Scott Garrett, Republican of New Jersey, zeroed in on the proposed settlement. Where in the statute did she have the authority to consort with the attorneys general? he demanded to know. “Are you making recommendations to government regulators about the dollar amount?” he badgered. “Is that part of your role, to make recommendations about dollar amounts?”

On and on it went, until the hearing sputtered to a close, two and a half hours after the browbeating had begun.

•

To listen to the House Republicans, you’d think the financial crisis of 2008 was like that infamous season of the long-running soap opera “Dallas,” the one that turned out to be a season-long dream. Subprime mortgages? Too-big-to-fail banks? Unregulated derivatives? No problem! With the exception of their bête noire, Fannie Mae and Freddie Mac, the Republicans act as if nothing needs to be done to prevent another crisis. Indeed, they act as if the crisis never happened.

The home page on the House Financial Services Committee’s Web site has been turned into a screed against Dodd-Frank. Clearly, the committee is going to spend this session trying to minimize the effect of the legislation, starving agencies of the funds needed to enact the regulations mandated by the new law, for instance. In fact, that effort has already begun.

It’s not just the House Republicans either. Already the Office of the Comptroller of the Currency has reverted to form, becoming once again a captive of the banks it is supposed to regulate. (It has strenuously opposed the efforts of the A.G.’s to penalize the banks and reform the mortgage modification process, for instance.) The banks themselves act as if they have a God-given right to the profit they made precrisis, and owe the country nothing for the trouble they’ve put us all through. The Justice Department has essentially given up trying to make anyone accountable for the crisis.

Thank goodness, then, for the attorneys general — and for Ms. Warren. On Main Street, where the attorneys general operate, it is pretty obvious that problems persist. During the subprime boom, many states tried to stop the worst lending abuses, only to be blocked by federal banking regulators. Now that the country is dealing with the aftermath of those abuses — the rising tide of defaults and foreclosures — it is the attorneys general who are, once again, put in the position of trying to stamp out abuses, this time of the foreclosure process itself.

Their leverage comes from the fact that the banks and their servicing divisions have, in the words of the University of Minnesota law professor Prentiss Cox, “routinely violated basic legal process” by, for instance, not transferring the note after the sale of a home. But in addition to assessing a financial penalty on the banks, the A.G.’s are trying to use the threat of litigation to force the banks to finally deal with defaulting homeowners more fairly and humanely. That is the essence of the settlement proposal that has been floating around. That — and a big push to finally come up with a modification plan that works.

When I spoke to Tom Miller, the Iowa attorney general — and the leader in this 50-state effort — he said that one reason he had asked Ms. Warren for advice was that she had already hired people with genuine expertise that he wanted to take advantage of. But that’s not the only reason. If the banks were to agree to settle the case on the A.G.’s terms, the Consumer Financial Protection Bureau would be the agency charged with enforcing the terms. So it makes sense to include its current leadership as they work through ideas for a settlement. Besides, the A.G.’s don’t really trust anybody else in the federal government to be on the side of financial consumers. Given their previous experience, why would they? Ms. Warren is the one person in Washington they feel is on the same side they’re on.

The notion that Ms. Warren lacks statutory authority to talk to the attorneys general is an objection so silly it is hard to take seriously. Consulting with the only government officials around who are actually trying to do something for financial consumers is precisely what she ought to be doing. Given that her agency could wind up enforcing the terms, it’s practically a necessity.

As for the idea the Republicans have been spreading talk that the attorneys general are overstepping their bounds by trying to force reform — and a big penalty — on the mortgage servicers, that’s pretty silly, too. As Adam Levitin, a Georgetown law professor, has pointed out on his blog recently, settlements are private agreements between two parties. The banks can accept what the A.G.’s are proposing. Or they negotiate different terms. Or they can reject them outright, and go to court to fight over the proper remedy. It’s really not any different from the multistate tobacco settlement of some years ago, which imposed some minor reforms on the tobacco industry along with a giant financial penalty. Congress had nothing to do with it.

I wish I could say with certainty that the ideas put forth by the attorneys general will finally help ease the foreclosure crisis. I hope they do. Mr. Levitin thought there was a decent likelihood of success; Mr. Cox, a former assistant attorney general himself, was also hopeful — though more skeptical. “So much of it rides on how well it is enforced,” he said.

Which is also why Ms. Warren is the most logical person to be the agency’s initial director: if the settlement does come to pass, no one will understand its terms better, or have a better feel for how to enforce them. Let’s face it: there isn’t anybody in Washington more fearless about standing up to the big banks. No wonder they don’t like her.

As I listened to her on Wednesday, I was struck anew at how clearly she articulates the need for the new bureau. “If there had been a cop on the beat to hold mortgage servicers accountable a half dozen years ago,” she said at one point, “the problems in mortgage servicing would have been found early and fixed while they were still small, long before they became a national scandal.”

Senate Republicans have vowed to block her appointment if President Obama nominates her. Yet even if her nomination goes down in flames, Senate confirmation hearings would be clarifying. Americans would get to hear Ms. Warren explain why the Consumer Financial Protection Bureau has the potential to help Americans. And they would get to hear Republicans explain why the status quo — including the everyday horror of the foreclosure mess — is just fine.

It has been much noted in recent months that President Obama seems unwilling to start a fight with Republicans. Maybe that’s why he has shied away from nominating Ms. Warren to a job for which she is so clearly suited. But if protecting financial consumers — and helping the millions of Americans struggling to hold onto their homes — isn’t worth fighting for, then what is?

ILLLINOIS: RESCISSION REVIVED WITH DAMAGES!!!!

COMBO TITLE AND SECURITIZATION SEARCH, REPORT, ANALYSIS ON LUMINAQ

3.16.2011 Illinois Recission Stewart-v-BAC-w

EDITOR’S NOTE: THIS CASE STANDS FOR THE PROPOSITION THAT YOU CAN’T TELL THE BORROWER LATER WHAT SHOULD HAVE BEEN DISCLOSED AT CLOSING: Federal Law has governed these fake securitized loan transactions from their beginning. That is why they are fatally defective and the law provides a remedy. The most important remedy is rescission which operates as a matter of law and is NOT subject to a letter of rejection by the creditor. This case shows the efforts made by Bank of America to hide the creditor and then take the position that the rescission notice was not sent to the creditor. This Judge recognizes that ploy and rejects it.

PRACTICE NOTE: TWO STATUTE OF LIMITATIONS ARE AT WORK HERE. THE FIRST BEING THE TIME IN WHICH YOU CAN SEND NOTICE OF THE RESCISSION AND THE SECOND BEING THE TIME IN WHICH YOU CAN BRING AN ACTION TO ENFORCE THE RESCISSION. MANY PEOPLE SENT RESCISSION LETTERS ONLY TO HAVE THEM “REJECTED”. THOSE PEOPLE MIGHT OWN THEIR HOUSE FREE AND CLEAR BY OPERATION OF LAW AS PER TILA AND REG Z, WHICH MEANS THAT ANYTHING THAT HAPPENED AFTERWARD, IS A NULLITY (INCLUDING FORECLOSURE). THIS IS ONE OF THE HIDDEN FATAL DEFECTS IN THE CHAIN OF TITLE IN SECURITIZED LOANS. BOTH DISTRESSED AND NON-DISTRESSED LOANS HAVE BEEN RESCINDED. LAWYERS: THERE IS A WHOLE MARKETPLACE OF HUNDREDS OF THOUSANDS OF PEOPLE WHO CAN ENFORCE THEIR RIGHT TO OWN THEIR HOME EVEN IF THEY WERE KICKED OUT YEARS AGO.

You must remember that it is only after the creditor complies with the rescission that the borrower has any obligation to tender anything back. The goal, as stated in this decision, is to put the borrower back in the position they were in before the lenders violated the law and violated the borrower’s rights to disclosure. Since disclosure was not complete until years after the closing, the three year extension on the right to rescind was tolled, allowing the three years to START running AFTER the disclosure was made. In this case the details of the actual transaction were withheld, thus entitling the borrower to rescind 6 years after closing.

BORROWER DOES NOT LOSE THE HOUSE IN RESCISSION UNLESS THEY WANT TO LOSE IT: You must also remember that it is only after the mortgage is taken off the record (after the loan security is extinguished) and after the lender returns all payments made by the borrower in connection with the closing whether those payments were made to the lender or third parties, that the borrower must tender something back — and according to at least some case law, the tender it is ONLY money and that amount and timing of payments are subject to the claims of the borrower for damages, and a reasonable payout period, the payment being unsecured and therefore dischargeable in bankruptcy.

NOTABLE QUOTES:

“Stewart asserts that Home 123 committed two disclosure violations during the refinance closing: (1) it failed to provide two copies of the NORTC and (2) it failed to provide a complete TILDS. Although this claim alleges violations by Home 123, the claim is currently against Deutsche Bank based on its status as the assignee of Home 123.”

“BAC received notice, did not respond within 20 days, and then refused to rescind the transaction. Deutsche Bank’s involvement is less clear, but Stewart alleged sufficient facts to proceed with her case under the theory that BAC either forwarded the notice to Deutsche Bank or acted as its agent in the transaction. This is a reasonable inference given that BAC, the loan servicer, actually responded to the rescission notice and refused it without referring to whether the assignee, Deutsche Bank, assented to the decision. BAC, Deutsche Bank, or both refused to rescind the transaction and discovery is necessary to sort out who is responsible for the decision to deny the rescission.”

“The complaint has three core claims. First, Stewart claims that Home 123 violated TILA by failing to provide her with the NORTC and a complete TILDS. For this “failure to disclose” claim, Stewart seeks statutory damages of $4,000 from Deutsche Bank as Home 123’s assignee. (Doc. 1, Prayer for Relief.) Second, Stewart seeks recession of the loan based on this disclosure violation. For this “loan rescission” claim, Stewart seeks a judgment forcing Defendants to void the loan and return her to the position she occupied before entering into the mortgage. (Id.) Third, Stewart alleges that Defendants failed to honor her election to rescind, which is itself a violation of TILA. For this “failure to honor rescission” claim, Stewart seeks actual damages and statutory damages of $4,000 from Defendants. As an additional remedy for all three claims, Stewart seeks an order requiring Defendants to delete all adverse credit information relating to the loan. (Id.)”

“Only creditors and assignees are subject to liability under TILA. See 15 U.S.C. §§ 1640, 1641(a). Stewart acknowledges that MERS is not a creditor or assignee. (See Doc. 15 at 4).^[1] Therefore, MERS is not subject to damages under TILA and Stewarts’ failure to disclose and failure to honor rescission damages claims against MERS are dismissed. See 15 U.S.C. §§ 1640, 1641(a); see also Horton v. Country Mortg. Servs., Inc., No. 07 C 6530, 2010 U.S. Dist. LEXIS 67, at *3 (N.D. Ill. Jan 4, 2010) (granting summary judgment to MERS because the plaintiff provided no evidence that MERS was a creditor or assignee)”

“Because Stewart alleges, albeit generally, that MERS may be necessary to get her back to that status quo if her rescission is enforced by the Court, MERS cannot be dismissed entirely at this time. Rather, Stewart’s rescission claim stands as to MERS.”

“As to defendant BAC, TILA expressly disclaims liability for servicers “unless the servicer is or was the owner of the obligation.” 15 U.S.C. § 1641(f)(1). Stewart alleges that BAC “has an interest” in the loan and, as a result, is subject to liability. (Compl. ¶ 7.) While Stewart does not provide any specifics on how a loan servicer gained an interest in the loan, on a motion to dismiss, the Court must accept this allegation as true. See Tamayo, 526 F.3d at 1081. Even if the Court could ignore this allegation, BAC must remain a defendant in any event. The pleadings reveal that the January 26 letter refusing Stewart’s rescission was sent by BAC, not Deutsche Bank. BAC is a necessary defendant on the failure to honor rescission claim because it is not clear whether BAC independently refused rescission, refused as an agent of Deutsche Bank, or merely communicated Deutsche Bank’s refusal. As such, BAC cannot be dismissed outright as it may be liable on this claim.”

“The next issue in this case is whether Stewart is time-barred from seeking rescission in court. “Under the Truth in Lending Act, [] 15 U.S.C. § 1601 et seq., when a loan made in a consumer credit transaction is secured by the borrower’s principal dwelling, the borrower may rescind the loan agreement” under certain conditions. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411 (1998). A borrower typically has three days to rescind following execution of the transaction or delivery of the required disclosures. See 15 U.S.C. § 1635(a). However, under § 1635(f) of TILA, the right of rescission is extended to “three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first,” if any of the required disclosures are not delivered to the borrower. See 15 U.S.C. § 1635(f). Stewart alleges that she did not receive the required disclosures, so this case involves the extended three year period. Here, the loan transaction occurred on October 24, 2006; Stewart sent a letter electing to rescind the transaction on October 14, 2009, and then filed her complaint in court on April 1, 2010. This time line presents the legal question of whether a claim for rescission filed after the three-year time period is timely if a rescission letter is sent within the three-year time period.”

“Stewart acknowledges that she did not send a notice of rescission to defendant Deutsche Bank. (See Doc. 23-1.) She alleges that she, like many borrowers, was unaware who owned her mortgage note. She did not know that Deutsche Bank was the assignee of her loan, and so she requested notice of the “identity of the owner of this note” from Home 123 and BAC in her rescission letter. (Id.) Stewart argues that she complied with TILA and Regulation Z by mailing notice to the original creditor, Home 123, and the loan servicer, BAC. Stewart distinguishes Harris from the current case because “there is no mention of whether the consumer in Harris mailed a notice to the loan servicer or another party who may be the agent of the holder of the note.” (Doc. 23 at 4). Deutsche Bank concurs that mortgage ownership changes make communication difficult, but suggests that this actually supports the approach of the Harris court. Harris noted that “adopting Stewart’s interpretation of the notice requirement . . . would have the absurd effect of subjecting to rescission and damages assignees that, in some case, have absolutely no means of discovering that a rescission demand has been made.” (Doc. 22 at 2 (quoting Harris).)”

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ILLINOIS Judge Not Clear, “Discovery IS Necessary On Rescission Claims” STEWART v. BAC, DEUTSCHE BANK, MERS

ELLIE STEWART, Plaintiff,
v.
BAC HOME LOANS SERVICING, LP, DEUTSCHE BANK NATIONAL TRUST CO., and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants.

Case No. 10 C 2033.

United States District Court, N.D. Illinois, Eastern Division.

March 10, 2011.

MEMORANDUM OPINION AND ORDER

VIRGINIA M. KENDALL, District Judge.

On April 1, 2010, plaintiff Ellie Stewart (“Stewart”) filed the current complaint against Defendants BAC Home Loans Servicing (“BAC”), Deutsche Bank National Trust Company (“Deutsche Bank”) and Mortgage Electronic Registration Systems (“MERS”) (together, “Defendants”) alleging violations of the Truth In Lending Act (“TILA”) (15 U.S.C. §§ 1601-1667f) and its implementing regulation, 12 C.F.R. § 226 (“Regulation Z”), and demanded rescission of the mortgage on her residence.

Defendants moved to dismiss the Complaint, asserting BAC and MERS are improper defendants under TILA, the Complaint is time-barred and the Complaint fails to state a claim. For the reasons stated below, Defendants’ motion is granted in part and denied in part. The Court dismisses Stewart’s failure to disclose claim because it is untimely, but denies dismissal of Stewart’s rescission claim. The motion to dismiss is denied with regard to the failure to honor rescission claim against defendants Deutsche Bank and BAC.

I. BACKGROUND

A. Complaint Allegations.

Stewart owns her residence in Chicago, Illinois. (Compl., Doc. 1, ¶ 4.) On October 24, 2006, Stewart refinanced her mortgage on this residence through Home 123 Corporation (“Home 123″). (Compl. ¶¶ 5-8, 10.) Home 123 filed for Chapter 11 bankruptcy in April 2007 and Deutsche Bank is the current assignee of this loan. (Compl. ¶¶ 5, 8, 21.) BAC services this loan and MERS is the nominee. (Compl. ¶¶ 7-9; Ex. C.)

This case stems from a dispute concerning the documentation provided at the closing of Stewart’s refinance back in 2006. Stewart alleges that Home 123 violated TILA twice in regards to these documents. First, she claims that Home 123 did not provide her with a copy of the Notice of Right to Cancel (“NORTC”). (Compl. ¶¶ 19-20.) Second, she claims that Home 123 provided a Truth in Lending Disclosure Statement (“TILDS”) that was incomplete because it did not include the timing of the required loan payments. (Compl. ¶¶ 17-18.)

Due to these deficiencies, on October 14, 2009, Stewart’s attorneys sent a letter entitled “Notice of Rescission and Lien” to Home 123 and BAC. (Compl. ¶ 23.) The letter stated that “Ms. Stewart hereby elects to cancel the loan of October 24, 2006 for failure to comply with the Truth In Lending Act,” and specified that Home 123 failed to provide the NORTC and a complete TILDS. (See Doc. 23-1.) The letter also demanded the identity of the owner of the mortgage. (Id.) On January 26, 2010, BAC sent a letter to Stewart which denied her rescission claim. (See Doc. 23-2.) BAC asserted that Stewart’s right to rescind had expired and attached copies of the NORTC and TILDS purportedly signed by Stewart and dated October 24, 2006. (Id.)

B. Procedural History.

On April 1, 2010, Stewart filed this suit and it was assigned to Judge Harry Leinenweber. Defendants filed the present motion to dismiss on August 11 and briefing was completed on October 5. On October 28, Judge Leinenweber requested that the parties provide a copy of Stewart’s rescission letter and submit a supplemental brief addressing whether Stewart’s election to rescind constituted proper notice to Deutsche Bank as assignee of Home 123. Supplemental briefing was completed on November 8. The case was transferred to this Court on December 8.

II. LEGAL STANDARD

A motion to dismiss should be granted if the complaint fails to satisfy Rule 8’s pleading requirement of “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Tamayo v. Blagojevich, 536 F.3d 1074, 1081 (7th Cir. 2008) (holding well-leaded allegation of the complaint must be accepted as true).

Although a complaint does not need detailed factual allegations, it must provide the grounds of the claimant’s entitlement to relief, contain more than labels, conclusions, or formulaic recitations of the elements of a cause of action, and allege enough to raise a right to relief above the speculative level. Twombly, 550 U.S. at 555. Legal conclusions can provide a complaint’s framework, but unless well-pleaded factual allegations move the claims from conceivable to plausible, they are insufficient to state a claim. Iqbal, 129 S. Ct. at 1950-51.

III. DISCUSSION

The complaint has three core claims. First, Stewart claims that Home 123 violated TILA by failing to provide her with the NORTC and a complete TILDS. For this “failure to disclose” claim, Stewart seeks statutory damages of $4,000 from Deutsche Bank as Home 123’s assignee. (Doc. 1, Prayer for Relief.) Second, Stewart seeks recession of the loan based on this disclosure violation. For this “loan rescission” claim, Stewart seeks a judgment forcing Defendants to void the loan and return her to the position she occupied before entering into the mortgage. (Id.) Third, Stewart alleges that Defendants failed to honor her election to rescind, which is itself a violation of TILA. For this “failure to honor rescission” claim, Stewart seeks actual damages and statutory damages of $4,000 from Defendants. As an additional remedy for all three claims, Stewart seeks an order requiring Defendants to delete all adverse credit information relating to the loan. (Id.)

The present motion presents four legal issues that need to be resolved to determine which, if any, of these three claims may stand. First, Defendants seek to dismiss BAC and MERS, asserting that servicers and nominees are improper defendants in a TILA action. Turning to Stewart’s individual claims, Defendants argue that the failure to disclose claim is barred by a one year statute of limitations because the alleged violation occurred over three years ago. Next, Defendants assert that the rescission claim is barred by a three-year statute of repose because the loan closed on October 24, 2006 but this suit was not filed until April 1, 2010. Finally, Defendants argue that the failure to honor rescission claim fails because assignees are not liable for TILA violations which are not apparent on the face of the loan disclosures.

A. Liability of MERS and BAC Under TILA.

Only creditors and assignees are subject to liability under TILA. See 15 U.S.C. §§ 1640, 1641(a). Stewart acknowledges that MERS is not a creditor or assignee. (See Doc. 15 at 4).^[1] Therefore, MERS is not subject to damages under TILA and Stewarts’ failure to disclose and failure to honor rescission damages claims against MERS are dismissed. See 15 U.S.C. §§ 1640, 1641(a); see also Horton v. Country Mortg. Servs., Inc., No. 07 C 6530, 2010 U.S. Dist. LEXIS 67, at *3 (N.D. Ill. Jan 4, 2010) (granting summary judgment to MERS because the plaintiff provided no evidence that MERS was a creditor or assignee). Stewart claims MERS is still a proper party based on the non-monetary relief requested in connection with the rescission. Stewart seeks an order “voiding” her mortgage, (see Doc. 1 at Prayer) and, according to her, “this Court may directly order MERS to record a release or take other actions in connection with the mortgage document that was recorded.” (Doc. 15 at 4.)

The Court notes that courts in this District are split on whether such a party, usually a servicer, may be kept in a case based on such contingent, or future, relief. Compare Miranda v. Universal Fin. Grp., Inc., 459 F. Supp. 2d 760, 765-66 (N.D. Ill. 2006) (denying dismissal of loan servicer as an indispensable party under Rule 19 because a rescission would require return of payments made on the loan and “could impair the borrower’s ability to fully protect his or her interest in rescinding the loan because the servicer could improperly report to credit bureaus”) with Bills v. BNC Mort., Inc., 502 F. Supp. 2d 773, 776 (N.D. Ill. 2007) (finding “a concern that [the servicer] might thereafter engage in improper reporting to the credit agencies or attempt to foreclose on a rescinded loan is purely speculative and does not warrant retaining [the servicer] as a defendant”). The Court agrees with Miranda and the cases it cites because they appear more consistent with the Seventh Circuit’s holding in Handy v. Anchor Mortgage Corporation, 464 F.3d 760, 765-66 (7th Cir. 2006). There, the Seventh Circuit held “more generally . . . the right to rescission `encompasses a right to return to the status quo that existed before the loan.’” Id. (internal citation omitted). Handy makes clear that rescission under TILA entirely unwinds the transaction. Because Stewart alleges, albeit generally, that MERS may be necessary to get her back to that status quo if her rescission is enforced by the Court, MERS cannot be dismissed entirely at this time. Rather, Stewart’s rescission claim stands as to MERS.

As to defendant BAC, TILA expressly disclaims liability for servicers “unless the servicer is or was the owner of the obligation.” 15 U.S.C. § 1641(f)(1). Stewart alleges that BAC “has an interest” in the loan and, as a result, is subject to liability. (Compl. ¶ 7.) While Stewart does not provide any specifics on how a loan servicer gained an interest in the loan, on a motion to dismiss, the Court must accept this allegation as true. See Tamayo, 526 F.3d at 1081. Even if the Court could ignore this allegation, BAC must remain a defendant in any event. The pleadings reveal that the January 26 letter refusing Stewart’s rescission was sent by BAC, not Deutsche Bank. BAC is a necessary defendant on the failure to honor rescission claim because it is not clear whether BAC independently refused rescission, refused as an agent of Deutsche Bank, or merely communicated Deutsche Bank’s refusal. As such, BAC cannot be dismissed outright as it may be liable on this claim.

B. Failure to Disclose Claims.

Stewart asserts that Home 123 committed two disclosure violations during the refinance closing: (1) it failed to provide two copies of the NORTC and (2) it failed to provide a complete TILDS. Although this claim alleges violations by Home 123, the claim is currently against Deutsche Bank based on its status as the assignee of Home 123. TILA permits an individual to assert a claim against a creditor for disclosure violations so long as such action is brought within one year from the occurrence of the violation. See 15 U.S.C. §§ 1640(a), 1640(e); see also Garcia v. HSBC Bank USA, N.A., No. 09 C 1369, 2009 U.S. Dist. LEXIS 114299, at *9-10 (N.D. Ill. Dec. 7, 2009) (finding the § 1635’s three year period for rescission does not extend the one-year period available under § 1640(e) to assert damages claims for disclosure violations and noting that the majority of courts in this District have found “affirmative damage claims for disclosure violations must be brought within one year of the closing of any credit transaction”). Stewart filed this claim on April 1, 2010, over three years after the October 24, 2006 loan closing and well past the one year statute of limitations. Stewart’s failure to disclose claim is time-barred and dismissed with prejudice against all defendants.

C. Loan Rescission Claim.

The next issue in this case is whether Stewart is time-barred from seeking rescission in court. “Under the Truth in Lending Act, [] 15 U.S.C. § 1601 et seq., when a loan made in a consumer credit transaction is secured by the borrower’s principal dwelling, the borrower may rescind the loan agreement” under certain conditions. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411 (1998). A borrower typically has three days to rescind following execution of the transaction or delivery of the required disclosures. See 15 U.S.C. § 1635(a). However, under § 1635(f) of TILA, the right of rescission is extended to “three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first,” if any of the required disclosures are not delivered to the borrower. See 15 U.S.C. § 1635(f). Stewart alleges that she did not receive the required disclosures, so this case involves the extended three year period. Here, the loan transaction occurred on October 24, 2006; Stewart sent a letter electing to rescind the transaction on October 14, 2009, and then filed her complaint in court on April 1, 2010. This time line presents the legal question of whether a claim for rescission filed after the three-year time period is timely if a rescission letter is sent within the three-year time period.

Stewart argues that she exercised her right to rescind within the three years, as required by § 1635(f), because her letter actually rescinded the loan. According to Stewart, this suit is just the legal remedy to force Defendants to accept her rescission. Stewart argues that she is entitled to an additional year after Defendants’ failure to accept the rescission to file suit under § 1640(e). Defendants argue that the language of § 1635(f) creates a statute of repose that completely extinguishes the right to rescind after the three year-time period. As Stewart filed suit over three years after the closing, Defendants assert that Stewart’s recession claim under TILA is barred.

Both parties cite authority for their respective positions from many different jurisdictions. E.g., compare Falcocchia v. Saxon Mortg., Inc., 709 F. Supp. 2d 860, 868 (E.D. Cal. 2010), with Sherzer v. Homestar Mortg. Servs., No. 07-5040, 2010 WL 1947042, at *11 (E.D. Pa. July 1, 2010); see also Obi v. Chase Home Fin., LLC, No. 10-C-5747, 2011 WL 529481, *4 (N.D. Ill. Feb. 8, 2011) (Kendall, J.) (noting “[t]here is a split of authority as to whether § 1635(f) requires a borrower to file a rescission claim within three years after the consummation of a transaction or whether the borrower need only assert his right to rescind to a creditor within that three year period” and collecting cases.) Stewart’s authority concludes that a borrower exercises her right of rescission when she mails a notice of rescission to the creditor, so rescission occurs at the time of the letter. See 12 C.F.R. § 226.23(a)(2). Defendants’ authority, on the other hand, holds that a borrower cannot unilaterally rescind a loan, and therefore can only preserve her rights by filing a suit for rescission within the three-year time period. The Seventh Circuit has not yet addressed this issue so this Court has no binding guidance.

As the Court indicated in Obi (albeit in dicta), the Court is persuaded by the authority finding that a borrower may assert his rescission rights under § 1635(f) through notice to the creditor. See Obi, 2011 WL 529481 at *4; see also In re Hunter, 400 B.R. 651, 661-62 (N.D. Ill. 2009) (finding “[t]he three-year period limits only the consumer’s right to rescind, not the consumer’s right to seek judicial enforcement of the rescission” (internal citation omitted)). The approach in Hunter is more consistent with the language of § 1635 and Regulation Z than the approach advocated by Defendants. Section (a)(2) of Regulation Z provides explicit instructions to the consumer as to how to exercise her right to rescind: “[t]o exercise the right to rescind, the consumer shall notify the creditor of rescission by mail, telegram, or other means of written communication.” See 12 C.F.R. § 226.23(a)(2). The next provision of Regulation Z, § (a)(3), describes when a consumer may exercise that right: either within the three-day “cool off” period, if all proper disclosures are made, or within the three-year period, if they are not. See 12 C.F.R. § 226.23(a)(3). The more reasonable interpretation of Regulation Z is that § (2)(a)’s method of exercising the right to rescission applies to both scenarios under § (3)(a). Indeed, this approach is consistent with the wording of the statute. Even if a consumer received all necessary disclosures, § 1635(a) allows a consumer to rescind within the three-day “cool off” period after closing “by notifying the creditor, in accordance with regulations of the [Federal Reserve Board ("FSB")], of his intention to do so.” 15 U.S.C. § 1635(a). Though § 1635(f) has no comparable reference to the FSB regulations, it seems incongruous for the FSB to allow rescission via letter during the “cool off” period—in accordance with Regulation Z—but require a consumer to bring a suit to exercise that same right to rescind under § 1635(f).

The Court’s approach is not inconsistent with Beach. In that case, the Supreme Court found a defendant could not assert rescission as an affirmative defense under TILA beyond the three-year period. See Beach, 523 U.S. at 418. The Court noted that § 1635(f) “says nothing in terms of bringing an action but instead provides that the `right of rescission [under TILA] shall expire’ at the end of the time period . . . it talks not of a suit’s commencement but of a right’s duration . . . .” Id. at 417. Beach addresses when the right to rescind expires and whether it can be tolled. It leaves unresolved the question of how a consumer must exercise that right to rescind — suit, or notice via letter.

The Court turns to the question of when a consumer, having exercised her right to rescind by sending a letter to her creditor, must bring suit to enforce that exercise. In Hunter, the debtor, like Stewart, sent notice to the creditor before the three-year period expired, but his trustee filed suit after expiration. Hunter, 400 B.R. at 659. As Stewart did here, the trustee brought suit within a year after the creditor allegedly failed to respond to the rescission notice. Id. Hunter,Id.; seeHunter approach. Under this approach, the last day a borrower may send notice to rescind is the three-year anniversary of the transaction. If the borrower has not sent notice by that time, her right to rescind expires under § 1636(f). If the borrower sends timely notice, the creditor then would have 20 days to respond after receipt of that notice. See 15 U.S.C. § 1635(b). The borrower then has one year from the end of that 20-day period to bring a suit to enforce the rescission under § 1640(e)’s limitations period. citing the one-year limitations period in § 1640(e), found that the trustee’s action for rescission was timely, as it was brought within a year of the alleged violation of TILA, namely the refusal to respond to the rescission request. 15 U.S.C. 1635(b) (requiring a creditor to “take any action necessary or appropriate to reflect the termination of any security interest created under the transaction”). The Court adopts the Hunter, 400 B.R. at 660-61, see also Johnson v. Long Beach Mort. Loan Trust 2001-4, 451 F. Supp. 2d 16, 39-41 (D.D.C. 2006) (applying § 1640(e)’s one year period to enforce rescission claim after notice); Sherzer, 2010 WL 1947042, at *11 (following Hunter). This approach balances the creditor’s need for certainty (the borrower cannot indefinitely fail to bring suit to enforce the right to rescind she exercised) with the express language of Regulation Z (which states that a borrower may exercise the right to rescind through notice by mail). Because Stewart brought suit within five months of her recession notice, Stewart’s claim for recession is timely.

D. Failure to Honor Rescission Claim.

A claim for damages for failure to honor rescission is based on § 1635(b) of TILA, which requires a creditor to respond to a notice of rescission within twenty days of receipt. If a creditor does not respond within the statutorily-mandated period, TILA permits an individual to bring a claim for damages against the creditor. 15 U.S.C. § 1640(a). An action for damages must be brought “within one year from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e). An assignee’s failure to honor a valid rescission notice made pursuant to § 1635 may subject the assignee to actual and statutory damages. 15 U.S.C. § 1640(a).

Stewart asserts that she did not receive a NORTC or a complete TILDS as required by TILA, so she had a right to rescind her loan. Specifically, the TILDS does not state the timing of payments, as Regulation Z requires. See 12 C.F.R. § 226.18. Defendants respond that they were not the original creditor, and as assignees (at best), they are only required to rescind if the violations were apparent on the face of the documentation and that they were not in this case. See 15 U.S.C. § 1641(a) (assignee is only liable if the violation “is apparent on the face of the disclosure statement”).

The Seventh Circuit has specifically addressed the requirements for the payment schedule in the TILDS. In Hamm, the TILDS listed the payment schedule as 359 payments of $541.92 beginning on March 1, 2002 and one payment of $536.01 on February 1, 2032. Hamm v. Ameriquest Mortg. Co., 506 F.3d 525, 527 (7th Cir. 2007). The court found that this violated TILA because it did not list all payment dates or state that payments were to be made monthly, and TILA requires such specificity in the TILDS even though “many (or most) borrowers would understand that a mortgage with 360 payments due over approximately 30 years contemplates a payment by the borrower each month during those 30 years.” Id. This case is no different. Stewart alleges that her TILDS listed 359 payments at $3,103.53 but failed to mention that these payments would be made monthly. Exhibit A of Stewart’s complaint, her TILDS, shows the incomplete payment schedule on the face of the document. That schedule is almost exactly the same as the one the Seventh Circuit found insufficient in Hamm. Id. at 527. Consequently, Stewart alleges a disclosure violation apparent on the face of the documents which would grant Stewart the right to rescind against Defendants as assignees. Stewart’s NORTC claim does not need to be evaluated at this time because her failure to honor rescission claim could be based on either a NORTC or TILDS violation, and the TILDS allegations stand.

The final issue is whether Defendants are responsible for refusing to respond and for rejecting rescission. This turns on whether Stewart’s notice of rescission was properly sent to Defendants. In response to a request from Judge Leinenweber prior to reassignment of this case to this Court, the parties addressed whether Stewart properly noticed defendant Deutsche Bank of her election to rescind when she sent letters to only BAC and Home 123, which filed for Chapter 11 bankruptcy in 2007. Courts within the District have reached different conclusions under similar factual scenarios. Compare Harris v. OSI Fin. Servs. Inc., 595 F. Supp. 2d 885, 897-98 (N.D. Ill. 2009) (finding that notice of election to rescind sent to the original creditor did not suffice as notice to the assignee), with Hubbard v. Ameriquest Mortg. Co., 624 F. Supp. 2d 913, 921-22 (N.D. Ill. 2008) (concluding that an election to rescind sent to the original creditor is sufficient to seek rescission against an assignee) and Schmit v. Bank United FSB et al., No. 08 C 4575, 2009 WL 320490, at *3 (N.D. Ill. Feb. 6, 2009) (acknowledging disagreement between Harris and Hubbard and following Hubbard).

Stewart acknowledges that she did not send a notice of rescission to defendant Deutsche Bank. (See Doc. 23-1.) She alleges that she, like many borrowers, was unaware who owned her mortgage note. She did not know that Deutsche Bank was the assignee of her loan, and so she requested notice of the “identity of the owner of this note” from Home 123 and BAC in her rescission letter. (Id.) Stewart argues that she complied with TILA and Regulation Z by mailing notice to the original creditor, Home 123, and the loan servicer, BAC. Stewart distinguishes Harris from the current case because “there is no mention of whether the consumer in Harris mailed a notice to the loan servicer or another party who may be the agent of the holder of the note.” (Doc. 23 at 4). Deutsche Bank concurs that mortgage ownership changes make communication difficult, but suggests that this actually supports the approach of the Harris court. Harris noted that “adopting Stewart’s interpretation of the notice requirement . . . would have the absurd effect of subjecting to rescission and damages assignees that, in some case, have absolutely no means of discovering that a rescission demand has been made.” (Doc. 22 at 2 (quoting Harris).)

The split between Harris and Hubbard does not need to be resolved at this stage of litigation due to the particular facts of this case. Stewart alleges that she sent BAC the rescission notice on October 14, 2009, ten days before the three-year deadline. BAC denied the rescission in a letter sent to Stewart on January 26, 2010. While Harris was concerned that an innocent party with no notice could be subject to damages, this case involves clear notice to at least one party that Stewart seeks to hold responsible. BAC received notice, did not respond within 20 days, and then refused to rescind the transaction. Deutsche Bank’s involvement is less clear, but Stewart alleged sufficient facts to proceed with her case under the theory that BAC either forwarded the notice to Deutsche Bank or acted as its agent in the transaction. This is a reasonable inference given that BAC, the loan servicer, actually responded to the rescission notice and refused it without referring to whether the assignee, Deutsche Bank, assented to the decision. BAC, Deutsche Bank, or both refused to rescind the transaction and discovery is necessary to sort out who is responsible for the decision to deny the rescission.

IV. CONCLUSION

For the reasons stated herein, Defendants’ motion to dismiss (Doc. 10) is:

1. Granted as to Stewart’s failure to disclose claim against all Defendants;

2. Denied as to Stewart’s rescission claim against all Defendants; and

3. Denied as to Stewart’s failure to honor rescission claim against defendants Deutsche Bank and BAC, but granted as to defendant MERS.

SO ORDERED.

[1] The Court also notes that the mortgage instrument attached to the complaint identifies MERS as “a separate corporation that is acting solely as a nominee for Lender and Lender’s assigns.” (See Doc. 1, Ex. C at 1.) Though Stewart alleges MERS has an interest in the loan (see Compl. ¶ 7), the exhibits contradict that pleading and the exhibits control. See N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 454 (7th Cir. 1998).

COMBO: CONFUSING FACTS MUST LEAD TO REPORTS WITH CONFLICTING FACTS AND ANALYSIS

COMBO TITLE AND SECURITIZATION SEARCH, REPORT, ANALYSIS ON LUMINAQ

The Combo Title and Securitization Search, Report and Analysis, is meant to catalog the confusion created by Wall Street  — the manner in which they intentionally obfuscated the facts and how they are continuing a shell game. Since many people have asked if we can make this simpler I choose to answer their inquiries here. The answer is NO, we cannot make it simpler because it would alter our output into a work of fiction. This is particularly true where there is more than one loan on the property each of which was securitized differently or held differently.

The pretender lenders clearly want the judicial system, the legislative branches of government and the executive branch (particularly law enforcement) to focus exclusively on certain documents created for the express purpose of making the transaction LOOK like a simple mortgage transaction. If we allow our impulses toward simplicity to govern our actions we are falling into the trap they have set.

Here is an example of a recent response I wrote to one such customer who was confused after reading the materials from the COMBO:

“What you received can be explained as follows, in brief:

1. Facts: Documents and transactions of record — that’s the report and the copies of documents. A lawyer can take these facts and exhibits and create pleadings and correspondence based upon them because they are indisputable.
2. Analysis: Using the facts and documents, you have received a title analysis and a securitization analysis. A lawyer can take this analysis and use it as a guide to focus on those issues that are most promising in your jurisdiction.
   

Most lawyers have reported to us that these elements are sufficient for them to direct their correspondence, litigation, motions and discovery. Some lawyers need more which might include compliance analysis (TILA and RESPA), loan level accounting, an expert declaration, expert testimony, or strategic advice concerning the use of the litigation support materials we have prepared. In the last 18 months we have seen an upsurge in loan level accounting, an upsurge in TILA and RESPA compliance analysis, and a sharp drop in need for expert declaration, expert testimony or strategic advice.

We are restricted in what services we perform for non-lawyers as it could be construed as the unauthorized practice of law. We cannot give legal advice to you without violating those laws. But we CAN give advice to your lawyer on all aspects of the case.

The materials are always conflicting because that is the nature of securitization as it was practiced by the players. Since their behavior was convoluted and conflicting it is inevitable for us to report that as a fact and include it in our analysis. For example, you might have read in your analysis and on the blog (www.livinglies.wordpress.com) that the loans are CLAIMED as being owned by an asset-backed pool, which may only be a general partnership notwithstanding the use of the word “Trust” or “Trustee.” The issue is further complicated by the fact that the loans claimed lack any trail of documentation transferring the loan documents to anyone. Then the issue is further complicated by the fact that the loan originator is either a non-depository lender or a depository institution, either one acting more as mortgage broker than a lender, hiding the real lender from the borrower. These facts and analysis raise legal issues that may apply to your case but only a lawyer licensed in the jurisdiction in which the property is located could advise you as to what to do with these facts and those analyses or what steps to take. Any decision you make should be based on the advice of such an attorney and not merely on the basis of the reports and analysis.

There are many such examples in which the parties claiming to be lenders or creditors are confronted with facts and documents which contradict their position. Thus the intricate and often contradictory information you see is simply a compilation of the information arranged and analyzed in ways that assist attorneys in choosing their strategies and tactics. We cannot change the facts to make them simple without changing the story. Telling you the name of a “Trust” would mislead you into believing that the “Trust” exists or ever held the loan as an asset. The situation is further complicated by the bailouts, subsequent trading of the mortgage backed securities, insurance payments and other payments by third parties. Application of these facts and local law is the exclusive province of a local licensed attorney.

Regards
Neil

HUFFPOST: FIGHT FEDERAL RESERVE RULE CHANGE NOW!!! five star alert *****

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

RESCISSION UNDER TILA MORE VIABLE THAN WE THOUGHT

Editor’s Alert on TILA Rescission: Judges didn’t like the way the statute was worded, but the wording was very clear. “I rescind” is enough to clear the title of your property of any mortgage UNLESS WITHIN 20 DAYS the lender files a declaratory action contesting your right to rescission. To date, hundreds of thousands of people have sent letters saying, in one form or another, that they wish to rescind. Some held back under the mistaken belief that you had to give up the house to rescind. Just the reverse. TILA was written just for times like this and it has a lot of teeth. And an increasing number of Judges are applying the law just as it was written.

So the TILA audit and TILA rescission went out of favor for the last three years because Judges didn’t like the way it sounded — or the banks that put them on the bench didn’t like the way it worked. THE STATUTE SAYS that it is only AFTER the bank sends you the note back marked canceled, and only AFTER they record a satisfaction of mortgage that they are entitled to demand tender of payment on what is now an UNSECURED OBLIGATION.

So as if we didn’t already know it,, the Federal Government is in league with the banks. In this case the Federal Reserve is trying to change that statute by changing Reg Z to say that if you want to use the TILA rescission you FIRST PAY THE AMOUNT demanded, whether it is due or not and regardless of who is making the demand. How they expect to get this through is beyond my comprehension.

Any first year law student will tell you that only the legislating body — in this case the U.S. Congress — can change the law. It was Congress who passed the law as a protection for consumers/homeowners and it gave them real teeth if the dark Dexter passenger of the bankers went wild. That protection is the law and no agency of the Federal government can change the law by enacting a rule in conflict with the law.

Nonetheless, the Federal Reserve has announced it is going to exactly that, proving that this rescission remedy is indeed worrisome. It’s a real problem for all those rescission letters that canceled the mortgage by operation of law. Because none of the “lenders” and none of the pretender lenders filed declaratory actions. They just “rejected” the rescission by letters. By not filing the lawsuit in time, they were not allowed, by operation of law, to foreclose even if they were the proper lender or creditor. And by not producing the note and filing the satisfaction of mortgage they can’t enforce the note, even if the note is authentic and all legal. So many thousands of foreclosures were allowed to take place when the party doing the foreclosing no longer had any title even if they once really had title.

The only possible reason for this brazen design is to try to “fix” our corrupted title system in favor of the banks, since the Federal Reserve is clearly not a consumer agency. In fact, there is even a question about whether the FED has rule-making authority since its status as an agency of the federal government is obscured by its ownership — consisting of private banks.

The most important thing to know is that they wouldn’t be taking this big a chance unless THEY thought that this was so dangerous it had to be sterilized out of existence. If they think that then it is time to renew the efforts at rescission. That includes reclaiming houses that were allegedly sold at auction, and stopping all existing foreclosures. By the way, don’t let the statute of limitations stop you, if you just learned of the facts giving rise to rescission and did not have access to the information (because the agents of Wall Street withheld disclosure) then the statute doesn’t start to run until the day you DID know.

This law was intended to inhibit predatory and fraudulent lending practices. The law was passed fair and square. It’s been the law of the land for many years. It cannot be changed by the FED and it shouldn’t be changed at all.

LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL

by Zach Carter, HUFFPOST

The Federal Reserve is pushing a new mortgage regulation that would effectively eliminate the most powerful federal remedy for predatory lending.

The regulation would severely limit a practice called “rescission,” used to strike down demonstrably-illegal or fraudulent loan contracts and void a bank’s ill-gotten gains from such predatory lending practices. When a mortgage borrower wins a rescission case in court, the bank loses the right to foreclose, and has to give up all profits from interest and fees on the loan. The borrower still has to repay the principal — the original amount of money extended by the bank — but can’t be kicked out of the house.

Under the Fed’s new proposal, however, borrowers would be required to pay off the balance of the loan before the bank loses its right to foreclose — that means borrowers could still lose their homes, even in cases where banks have broken the law.

Unsurprisingly, banks support the move, but consumer advocates say this would essentially make rescission worthless to borrowers.

“The … proposal would eviscerate the single most effective tool that homeowners have to stop foreclosures and avoid predatory loans,” reads a letter penned by Margot Saunders of the National Consumer Law Center and signed by 16 national public interest groups, along with 33 state housing and legal aid groups and 144 individual attorneys. “Passage of the proposed rule will considerably exacerbate foreclosure statistics in this nation.”

Six Democratic senators, led by Sherrod Brown of Ohio, also urged the Fed to reconsider its rule in a Monday letter. “In this time of record foreclosures and reports of systemic problems with the operations of the largest mortgage servicers, the proposed revisions are unfortunate and unnecessary,” the letter reads. “The mortgage market needs greater oversight and accountability to restore borrower confidence lost in the mortgage crisis. The proposed rules would undermine this goal.” The signatories included outgoing Senate Banking Chairman Chris Dodd (Conn.), incoming Chairman Tim Johnson (S.D.), and Sens. Jack Reed (R.I.), Daniel Akaka (Hawaii) and Jeff Merkley (Ore.).

The controversy comes as the U.S. mortgage market enters one of the bleakest years in its history. Foreclosures continue at a record pace, slowed only briefly by recent concerns that borrowers were being improperly evicted due to bank errors. At the end of September, nearly 1 million homes were in foreclosure, according to data collected by the foreclosure analyst RealtyTrac. According to the Center for Responsible Lending, 2.5 million homes were lost to foreclosure between January 2007 and the end of 2009, and another 5.7 million stand in “imminent” danger of foreclosure today.

“There are thousands of rescission cases in hundreds of courtrooms all across the country,” Center for Responsible Lending spokeswoman Kathleen Day said. “Rescission is a main tool for fighting foreclosures.”

The proposed change is part of a larger package of rules the Fed hopes to adopt, several of which appear designed to protect the public from shady financial hucksters. But while consumer groups are enthusiastic about some of the possible new regulations, they are so worried by the rescission changes that they are asking the Fed to withdraw the whole package. If winning a predatory lending case still means losing their home and owing hundreds of thousands of dollars to the bank that ruined them, they say, many consumers would prefer not to fight.

Dozens of other consumer advocacy organizations and concerned citizens have also sent the Fed comments on new rules. Many of the comments from individuals were more colorful than the letter penned by Saunders. All Fed regulations are open to public comment from anyone, but it is unusual to see a high volume of individuals weigh in on a technical consumer protection rule.

“I view this as nothing less than a criminal ploy to shove hard working Americans out of their homes and onto the streets,” wrote Ann Capotosto in an undated comment letter. “It is immoral and must be stopped.”

“Think of mankind for once, please,” requested Larissa Cavanaugh in a Dec. 4 letter.

“Have you lost your minds?” inquired Beth Findsen in another letter from Dec. 4. “In the depths of an unprecedented catastrophe for the middle class, related to the predatory loans and their rapacious securitization by the financial industry, resulting in millions of middle class Americans losing all of their wealth and their homes, you want to loosen TILA? Are you tone deaf? Have you lost your humanity entirely?”

A Fed representative did not immediately respond to a request for comment.