Judge Zloch Deals Blow to Wells Fargo and Ocwen on Trial by Jury

In a short written opinion Judge William J Zloch, formerly of Notre Dame football fame (quarterback and wide receiver) dealt a huge blow to bankers pretending to be lenders and servicers pretending to be bankers. For him the issue was simple. And he is right. His opinion contains irrefutable logic. Ocwen wanted to escape trial by jury because the mortgage documents contained a waiver. Wells Fargo also wanted to escape trial by jury, but they were being sued vicariously through the actions of Ocwen.

Zloch said no to Ocwen and seems to be saying the same thing to Wells Fargo. His reasoning is simple and bulletproof — the borrower sued Ocwen stating that it had committed various wrongdoing. Ocwen by all accounts is only a servicer and never has been a lender notwithstanding its prior assertions in court, which many judges have rubber stamped and now wish they didn’t.

This decision appears to be important for at least three reasons:

1. The Judge accepts the notion that Ocwen is a controlled entity of Wells Fargo.

2. The Judge rejects the idea that a party other than the owner of the mortgage can rely on the mortgage terms for any reason (except to show that they were servicing and processing in compliance with the terms of the note and potentially the mortgage). Thus the Judge underscores a central point on this blog — that the servicers, aggregators and broker dealers and trusts and trust beneficiaries are all independent entities and the servicers, among others, have inescapable conflicts of interests that results in action contrary to the expectations of both real parties in interest — i.e., the investors as lenders and the homeowners as borrowers.

3. Trial by jury is available as to all damage claims against any party who is not party to the mortgage contract; and for those banks that are using the servicers as a shield, they may be subject to claims that will be heard by a jury as well.

So in the end he says that the jury will render a verdict as to the claims against Ocwen and render an advisory verdict as to the claims against Wells Fargo. This is a potential nightmare for the banks. It is about time. And now it is time to get your claims heard by a jury.

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BONY Objections to Discovery Rejected

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It has been my contention all along that these cases ought to end in the discovery process with some sort of settlement — money damages, modification, short-sale, hardest hit fund programs etc. But the only way the homeowner can get honest terms is if they present a credible threat to the party seeking foreclosure. That threat is obvious when the Judge issues an order compelling discovery to proceed and rejecting arguments for protective orders, (over-burdensome, relevance etc.). It is a rare bird that a relevance objection to discovery will be sustained.

Once the order is entered and the homeowner is free to inquire about all the mechanics of transfer of her loan, the opposition is faced with revelations like those which have recently been discovered with the Wells Fargo manual that apparently is an instruction manual on how to commit document fraud — or the Urban Lending Solutions and Bank of America revelations about how banks have scripted and coerced their employees to guide homeowners into foreclosure so that questions of the real owner of the debt and the real balance of the debt never get to be scrutinized. Or, as we have seen repeatedly, what is revealed is that the party seeking a foreclosure sale as “creditor” or pretender lender is actually a complete stranger to the transaction — meaning they have no ties i to any transaction record, and no privity through any chain of documentation.

Attorneys and homeowners should take note that there are thousands upon thousands of cases being settled under seal of confidentiality. You don’t hear about those because of the confidentiality agreement. Thus what you DO hear about is the tangle of litigation as things heat up and probably the number of times the homeowner is mowed down on the rocket docket. This causes most people to conclude that what we hear about is the rule and that the settlements are the exception. I obviously do not have precise figures. But I do have comparisons from surveys I have taken periodically. I can say with certainty that the number of settlements, short-sales and modifications that are meaningful to the homeowner is rising fast.

In my opinion, the more aggressive the homeowner is in pursuing discovery, the higher the likelihood of winning the case or settling on terms that are truly satisfactory to the homeowner. Sitting back and waiting to see if the other side does something has been somewhat successful in the past but it results in a waiver of defenses that if vigorously pursued would or could result in showing the absence of a default, the presence of third party payments lowering the current payments due, the principal balance and the dollar amount of interest owed. If you don’t do that then your entire case rests upon the skill of the attorney in cross examining a witness and then disqualifying or challenging the testimony or documents submitted. Waiting to the last minute substantially diminishes the likelihood of a favorable outcome.

What is interesting in the case below is that the bank is opposing the notices of deposition based upon lack of personal knowledge. I would have pressed them to define what they mean by personal knowledge to use it against them later. But in any event, the Judge correctly stated that none of the objections raised by BONY were valid and that their claims regarding the proper procedure to set the depositions were also bogus.

tentative ruling 3-17-14

Quite a Stew: Wells Fargo Pressure Cooker for Sales and Fabricated Documents

Wells Fargo Investigated by 4 Agencies for Manual on Fabricating Foreclosure Documents

Wells Fargo is under investigation for a lot of things these days, just as we find in Bank of America and other major “institutions.” The bottom line is that they haven’t been acting very institutional and their culture is one that has led to fraud, identity theft and outright fabrication of accounts and documents.

There can be little doubt about it. Documents that a real bank acting like a bank would have in its possession appear to be completely absent in most if not all loans that are “performing” (i.e., the homeowner is paying, even if the party they are paying isn’t the right and even if the loan has already been paid off). But as soon as the file becomes subject to foreclosure proceedings, documents miraculously appear showing endorsements, allonges, powers of attorney and assignments. According to a report from The Real Deal (New York Real Estate News), these are frequently referred to as “ta-da endorsements” a reference from magic acts where rabbits are pulled from the hat.

Such endorsements and other fabricated documents have been taken at face value by many judges across the country, despite vigorous protests from homeowners who were complaining about everything from “they didn’t have the documents before, so where did they get them?” to luring homeowners into false modifications that were designed to trap homeowners into foreclosure.

After 7 years of my reporting on the fact that the documents do not exist, including a report from Katherine Anne Porter at what was then the University of Iowa that the documents were intentionally destroyed and “lost” it has finally dawned on regulators and law enforcement that something is wrong. They could have done the same thing that I did. I had inquiries from hundreds (back then, now thousands) of homeowners looking for help.

So the first thing I did was I  sent qualified written requests to the parties who were claiming to be the “lenders.” After sending out hundreds of these the conclusion was inescapable. Any loan where the homeowner was continuing to make their payments have no documentation. Any loan where the homeowner was in the process of foreclosure had documentation of appear piece by piece as it seemed to be needed in court. This pattern of fabrication of documents was pandemic by 2007 and 2008. They were making this stuff up as they went along.

It has taken seven years for mainstream media and regulators to ask the next obvious question, to wit: why would the participants in an industry based on trust and highly complex legal instruments created by them fall into patterns of conduct in which nobody trusted them and where the legal instruments were lost, destroyed and then fabricated? In my seminars I phrased the question differently. The question I posed is that if you had a $10 bill in your hand, why would you stick it in a shredder? The promissory note and the other documents from the alleged loan closings were the equivalent of cash, according to all legal and common sense standards. Why would you destroy it?

As I said in 2008 and continue saying in 2014, the only reason you would destroy the $10 bill is that you had told somebody you were holding something other than a $10 bill. Perhaps you told them it was a $100 bill. Now they want to see it. Better to “lose” the original bill then admit that you were lying in the first place. One is simple negligence (losing it) and the other is criminal fraud (lying about it). The banking industry practically invented all of the procedures and legal papers associated with virtually every type of loan. The processing of loans has been the backbone of the banking industry for hundreds of years. Did they forget how to do it?

The answers to these questions are both inconvenient and grotesque. I know from my past experience on Wall Street that bankers did not deserve the trust that everyone seemed to repose in them. But this conduct went far beyond anything I ever saw on Wall Street. The answer is simply that the bankers traded trust for money. They defrauded the investors, most of whom were stable managed funds guarding the pensions of millions of people. Then they defrauded homeowners creating a pressure cooker of sales culture in which banking evolved simply into marketing and sales. Risk analysis and risk control were lost in the chaos.

The very purpose for which banks came into existence was to have a place of safety in which you could deposit your money with the knowledge that it would still be there when you came back. Investors were lured into a scheme in which they thought their money was being used to fund trusts; those trusts issued mortgage bonds that in most cases were never certificated. In most cases the trust received no money, no assets and no income. The fund managers who were the investors  never had a chance.

The money from the investors was instead kept by the broker-dealers who then traded with it like drunken sailors. They pumped up real estate PRICES  far above real estate VALUES, based on any reasonable appraisal standards. The crash would come, and they knew it. So after lying to the investor lenders and lying to the homeowner borrowers they lied to the insurers, guarantors, co-obligors and counterparties to credit default swaps that had evolved from intelligent hedge products to high flying overly complicated contracts that spelled out “heads I win, tails you lose.”

In order to do all of that they needed to claim the loans and the bonds as though they were owned by the broker-dealers when in fact the broker-dealers were merely the investment banks that had taken the money from investors and instead of using it in the way that the investors were told, they created the illusion (by lying) of the scheme that was called securitization when in fact it was basically common fraud, identity theft of both the lenders and borrowers, in a Ponzi scheme. When Marc Dreier was convicted of similar behavior the amount was only $400 million but it was the larger scheme of its kind ever recorded.

When Bernard Madoff was convicted of similar behavior the amount was only $60 billion, but the general consensus was that this was the largest fraud in history and would maintain that status for generations. But when the Madoff scandal was revealed it was obvious that members of the banking industry had to be involved; what was not so obvious is that the banking industry itself had already committed a combination of identity theft, fraud and corruption that was probably 300 times the size of the Madoff scandal.

The assumption that these are just loans that were to be enforced just like any other loans is naïve. The lending process described in the paperwork at the closings of these loans was a complete lie. The actual lender did not know the closing had occurred, never received the note and mortgage, nor any other instrument that protected the investor lenders. The borrower did not know the actual lender existed. Closing agent was at best negligent and at worst part of the scheme. Closing agent applied money from the investors to the closing of the “loan” and gave the paperwork that should’ve gone to the investors to third parties who didn’t have a dime invested in the deal. Later the investment banks would claim that they were suffering losses, but it was a lie, this time to the taxpayers and the government.

The reason the investment banks need to fabricate documentation is simply because their scheme required multiple sales of the same loan to multiple parties. They had to wait until they couldn’t wait any longer in order to pick a plaintiff to file a foreclosure lawsuit or pick a beneficiary who would appear out of nowhere to start the nonjudicial sale of property in which they were a complete stranger to the transaction.

The reason that homeowners should win in any reasonable challenge to a foreclosure action is that neither the forecloser nor the balance has been correctly stated. In many cases the balance “owed” by the borrower is negative! Yes that means that money is owed back to the borrower even know they stopped making payments. This is so counter intuitive that it is virtually impossible for most people to wrap their brains around this concept and that is exactly what Wall Street banks have been counting on and using against us for years.

LA Times Report on Wells Fargo Sales Culture

Damages Rising: Wrongful Foreclosure Costs Wells Fargo $3.2 Million

Damage awards for wrongful foreclosure are rising across the country. In New Mexico a judge issued a $3.2 million judgment (including $2.7 million in punitive damages) against Wells Fargo for foreclosing on a man’s home after his death even though he had an insurance policy through the bank that paid the remaining balance on his mortgage. The balance “owed” on the mortgage was $125,000. Despite the fact that the bank knew about the insurance (because it was purchased through the bank) Wells Fargo continued to pursue foreclosure, ignoring the claim for insurance. It is because of cases like this that people are asking “why would they do that?”

The answer is what I’ve been saying for years.  Where a loan is subject to claims of securitization, and the investment banks lied to insurers, investors, guarantors and other co-obligors, they most likely have been paid many times for the same loan and never gave credit to the investors. By not crediting the investors they created the illusion of a higher balance that was due on the loan. They also created the illusion of a default that probably never occurred. But by pursuing foreclosure and foreclosure sale, they compounded the illusion and avoided claims for refund and repayment received from third parties and created claims for recovery of servicer advances. In many foreclosures that I have  reviewed, payments received from the FDIC under loss-sharing were never taken into account. Thus the bank collects money repeatedly for a loss it never incurred.

This case is another example of why I insist on following the money. By following the money trail you will discover that the documents upon which the foreclosure relies referred to  fictitious transactions. The documents are worthless, but nevertheless accepted in court unless a proper objection is made based upon preserving issues for trial and appeal by proper pleading and discovery.

Lawyers should take note of this profit opportunity. Most homeowners are looking for attorneys to take cases on contingency. Typical contingency fee is 40%. If these lawyers were on a typical contingency fee arrangement, their payday would have been around $1.2 million.

I should add that for every one of these judgments that are reported, I hear about dozens of confidential settlements that are of similar nature, to wit: clear title on the house, damages and attorneys fees.

Wells Fargo Ordered to Pay $3.2 Million for “Shocking” Foreclosure

Banks Still Out Cheating Their Customers and Everyone Else

It is easy to think of the mortgage meltdown as a period of time in which the banks went wild. Unfortunately that period of time never ended. They are still doing it. The level of sophistication it takes to do the kinds of things that banks have been doing for the last 20 years is probably beyond the knowledge and experience of any of the regulators. In addition, it is beyond the knowledge and experience of most consumers, lawyers and judges; in fact as to non-regulators, bank behavior makes no sense. After having seen the results of what are euphemistically called subprime mortgages, Wells Fargo is plunging back in and obviously expecting to make a profit. Apparently the quasi governmental entities that issue guarantees on certain mortgages will allow these subprime mortgages. Wells Fargo says it now understands the parameters under which the guarantors (Fannie and Freddie) will approve those mortgages without a risk that Wells Fargo will be required to buy them back.

That is kind of a mouthful. We have thousands of transactions that are being conducted that directly affect the ownership and balance of various types of loans including mortgage loans. The picture presented in court is that the ownership and status of each loan is stable enough for representations to be made. But the truth is that the professional witnesses hired by the bank’s foreclosure actions only present a slice of the life of a loan. They neither know nor do they inquire about the rest of the information. For example, they come to court with a a report showing the borrower’s record of payments to the servicer but they do not show servicer’s record of payments to the creditor. By definition they are saying that they only know part of the financial record and that consists of a made for trial report on the borrower’s activities. It does not show what happened to the payments made by the borrower and does not show payments made by others —  like loss sharing with the FDIC, servicer advances, insurance, and other actual payments that were made.

These payments are not allocated to any specific loan account because that would reduce the amount claimed as due from the borrower to the creditor — as it should. And the intermediaries and conduits who are making claims against the borrower have no intention of paying the actual creditors (the investors) any more than they absolutely have to. So you have these intermediaries claiming to be real parties in interest or claiming to represent the real parties in interest when in fact they are representing themselves.

They cheat the investor by not disclosing payments received from insurance and FDIC loss sharing. They cheat the borrower by not disclosing those payments that reduce the count receivable and therefore the account payable. They cheat the borrower again when they fail to show “servicer advances” which are payments received by the alleged trust beneficiaries regardless of whether or not the borrower submits monthly payments.  (That is, there can’t be a default in payments to the “trust” because the pass through beneficiaries are getting paid. Thus if there is any liability of the borrower it would be to intermediaries who made those servicer payments by way of a new liability created with each such payment and which is NOT secured by any mortgage because the borrower never entered into any deal with the servicer or investment bank — the real source of servicer advances).

Then they cheat the investor again by forcing a case into a foreclosure sale when the borrower was perfectly prepared, willing and able to enter into a settlement agreement that would have paid the rest are far more than the proceeds of a foreclosure sale and final liquidation. Their object is to maximize the loss of the investor and maximize the loss of the borrower to the detriment of both and solely for the benefit of the intermediary or conduit that is pulling the strings and handling the money.  And they are still doing it.

The banks have become so brazen that they are manipulating currency markets in addition to the debt markets. While we haven’t seen any reports about activities in the equity markets, there is no reason to doubt that their illegal activities are not present in equity transactions. For the judicial system to assume that the Banks are telling the truth or presenting an accurate picture of the  transaction activity relating to a particular loan is just plain absurd now. The presumption in court should be what it used to be, at a minimum. Before the era of securitization, most judges scrutinized the documentation to make sure that everything was in order. Today most judges will say that everything is in order because they are pieces of paper in front of them, regardless of whether any of those pieces of paper represents an accurate rendition of the facts related to the loan in dispute. Most judges in most cases are rubber-stamping judgments for intermediaries and thus are vehicles for the intermediaries and conduits to continue cheating and stealing from investors and borrowers.

The latest example is the control exercised by the large banks over currency trading. Regulators are clueless.  The banks are no longer even concerned with the appearance of propriety. They are cheating the system, the society, the government and of course the people with impunity. They are continuing to pay or promote their stocks as healthy investment opportunities. Perhaps they are right. If they continue to be impervious to prosecution for violating every written and unwritten rule and law then their stock is bound to rise both in price and in price-to-earnings ratio. They now have enough money which they have diverted out of the economy of this country and other countries that they can create fictitious transactions showing proprietary trading profits for the next 20 years.

This is exactly what I predicted six years ago. They are feeding the money back into the system and laundering it through the appearance of proprietary trading. It is an old trick. But they have enough money now to make their earnings go up every year indefinitely. On the other hand, if the regulators and investigators actually study the activities of the banks and start to bring enforcement actions and prosecutions, maybe some of that money that was taken from our economy can be recovered, and the financial statements of those banks will be revealed and smoke and mirrors. Then maybe their stock won’t look so good. Right now everyone is betting that they will get away with it.

New forex lawsuit parses data to make case

Yesterday, 03:13 PM ET · JPM

  • There have been a number of suits against the global banks over claims of forex manipulation, but this latest by the City of Philadelphia Board of Pensions and Retirement is the first to include research highlighting unusual movements in major currencies.
  • Using data compiled by Fideres, the plaintiffs analyzed daily trading right around the 4 PM fix of currency prices … curiously, anomalous price movements became rarer and less pronounced after the initial reports of rigging surfaced last summer.
  • Morgan Stanley has spent some time looking at euro/dollar spikes at 4 PM and also concluded they were unrelated to economic events. Instead of collusion though, Morgan pins the blame on computerized trading programs.
  • The seven banks sued by Philadelphia which is seeking damages as high as $10B: Barclays (BCS), Citigroup (C), Deutsche Bank (DB), HSBC, JPMorgan (JPM), RBS, and UBS.

Read more at Seeking Alpha:
http://seekingalpha.com/currents/post/1565171?source=ipadportfolioapp_email

The Rush to Foreclosure: Wells Fargo Loses the Argument on Trial Modifications

As Danielle Kelley, Esq. (Tallahassee) has repeatedly predicted, the trial modification practices of the big banks are getting them into hot water. Scenarios vary. But one typical scenario  is that the trial modification is “approved” (which under current law means that it has been through underwriting) and the borrower makes the trail payments. Then the bank says the “investor” (with whom they have most likely NOT been in contact) has denied the modification. After receiving the trial payments and assuring the borrowers that they were safe in their home, the bank then forecloses. Many homeowners, unaware that they in fact probably have a binding contract with the bank on the modification, walk away.

Kelley has won cases based upon the argument that the bank had no choice but to modify the loan according to the terms of the trial modifications — and to make any other adjustments necessary to make the numbers come out right. The important point being that the payments offered in the trial modification are the same payment they will have for the rest of the term of the loan. The Bank argued that they were under no obligation to make the trial modification permanent. The Judge was furious with the bank and its attorneys, reminding them that forfeiture of one’s home is an extreme remedy, not to be taken lightly.

Of course the game of the Banks has been, all along, that they want as many of the mortgage loans in foreclosure, because that is the only way out of potential liability for refunds and buybacks of loans that have now been “assigned” to REMIC trusts, most of which were never funded and thus lacked the capacity to originate or acquire any loans. The servicers are rushing to foreclosure sale because that is an opportunity for them to claim the proceeds of liquidation of the property to get back “servicer advances” paid while they claimed the homeowner was in default (but the creditors (investors) were being paid on time in the right amount — i.e., NO DEFAULT).

The investors are suing the broker dealers (investment banks) for fraud, mismanagement of funds, documents and title. The investors affirmatively allege that the loan documents are unenforceable but when it gets down to state court level in the foreclosure cases, those assertions by the creditors are not considered relevant by a standard that does not seem to have any support under the law but which is nonetheless applied.

In all probability no investor knows of any foreclosures nor do they get notice of how the Servicers and Trustees are forcing the cases into foreclosures where the investors do the worst, the borrowers do the worst, and the banks, trustees and servicers get to take all the spoils of the largest economic fraud in human history.  I know that sounds like hyperbole. But I will bet anything that the time will come when the real truth comes out in its entirety — and the shock and awe of the whole thing becomes apparent to everyone.

While most of the cases involving trial modifications result in confidential settlements that cannot be discussed here or I would be violating the confidentiality agreement, one case recently stands out as having been at least partially litigated now.

Borrowers Can Sue Wells Fargo Over Mortgage Modifications — Reuters

The 9th Circuit, which has been considered unfriendly to borrowers, changed course in this decision.

The 9th U.S. Circuit Court of Appeals said Wells Fargo was required under the federal Home Affordable Modification Program [HAMP] to offer loan modifications to borrowers who demonstrated their eligibility during a trial period. … the appeals court rejected the argument that Wells Fargo became bound only upon sending borrowers signed modification agreements.

 

The court said this would create “unfettered discretion” for the San Francisco-based bank to reject modifications “for any reason whatsoever – interest rates went up, the economy soured, (or) it just didn’t like the borrower.”

While a federal appeals court in Chicago reached a similar conclusion last year, the 9th Circuit decision applies in several western U.S. states – among them California, Arizona and Nevada – that have been particularly hard-hit by foreclosures.

Corvello v. Wells Fargo Bank NA et al, 9th U.S. Circuit Court of Appeals, No. 11-16234.

 

This decision, like others coming out of Federal and State courts shows a growing anger and mistrust of the banks and their attorneys that most borrowers would say is long overdue.

For people familiar with determining the present value of a flow of funds, the analysis of the modification deals is easier. The average length of time a home is held by its owner is around 7 years, but many people stay in the home for life. Just to make things easier, here is a way of looking at certain modifications that don’t seem to offer anything of value on their face.

Assuming the original mortgage was $500,000 and now with default interest, attorneys fees etc. the total demanded is $600,000 the bank might offer a low interest rate (2%-5%) with amortization for forty years at a payment you can afford. But you don’t like the deal because you were the victim of appraisal fraud so you would be accepting a mortgage and waiving your defenses and ratifying the ownership of the loan in exchange for what?

The payment over 40 years changes the equation dramatically and does address the appraisal fraud if you stay in the house for a long time. In 40 years, with even low inflation, each dollar you are spending now is going to be worth around 20 cents. And even without any organic growth in prices from demand, your house might be worth $300,000 now, will be priced in 40 years at around $1,200,000. This assumes 2% rate of inflation. The risk factors are deflation and stagnation, which at this point most economists are not predicting.

For more information on trial modifications, litigation support, or other related information contact Danielle Kelley at 850-765-1236.

 

 

 

 

 

World Savings Bank Loans Were Securitized Before Wachovia Merger

World Savings Bank  was acquired by Wachovia Bank  which in turn was acquired by Wells Fargo.  We have previously reported here that we had no information regarding the actual securitization of loans had been originated by World Savings Bank.  Now we have that information. And in a case of the right hand not aware of the left hand it turns out the source is our very own senior securitization analyst — Dan Edstrom, who operates DTC Systems (shown as watermark on documents shown below).

The original opinion that I had written about was that virtually all of the loans originated by world savings bank were eventually securitized either by World Savings Bank directly,  or by Wachovia Bank after it acquired WSB, or by Wells Fargo bank after it acquired Wachovia Bank.  I am now more sure than ever that this is correct. Despite the public assurances during the mortgage meltdown WSB was in fact acting solely as an originator and not as a lender in many transactions. Many other transactions in which they were technically the lender were actually closed in anticipation of sale into the secondary market for securitization.

If you look at the link below, you will be able to see part of the information that has been sent to me. Apparently Foreclosure Hamlet has been ahead of me on this issue since some of the screenshots show that they are from that blog site. This opens the door to a whole set of cases in which Wells Fargo is insisting that it is the current creditor when in fact the loan was securitized and sold into what appeared to be a REMIC trust. of course it still remains an issue as to whether or not the money taken from investors for the purchase of mortgage bonds ever made it into the trust; so it remains an issue as to whether or not the trust is the creditor or the investors are the creditor.

Thus it remains an issue as to whether or not any of the alleged securitization participants can claim authority to act on behalf of the “trust beneficiaries” when the actual status of the entity (the trust) was ignored by those parties. It might be that they can only claim apparent authority as opposed to legal authority since the documents that were given to the investors show a structure that is very different from what was done in  the real world.

World Savings Bank REMICs

Comment from Dan Edstrom:

These docs are mostly from DTC Systems.  We have been reporting on this since at least October 2010.  DTC Systems does Securitization Reverse Engineering and Failure Analysis for attempted World Savings securitizations and they are also included in the LivingLies combo’s where your client had a World Savings loan.  We have the names of all (or most) of the REMICs.  In a judicial foreclosure case in the mid-west a Wells Fargo expert (a former World Savings Bank employee) testified that the loan was pledged to a World Savings REMIC, but was “unpledged” when the homeowner was behind on the loan.  This is why we see several World Savings promissory notes with an endorsement to The Bank of New York on the back but they are stamped “Cancelled”.

Which is very interesting because the PSA states that the loans will be endorsed to the trustee (without recourse and showing an unbroken chain of endorsements (and/or certificates of corporate succession) from the originator thereof to the Person endorsing ti to the Trustee AND an original assignment to Trustee or a copy of such assignment.
So they seem to have the FORM of without recourse but the SUBSTANCE of the transaction is recourse?  What is the purpose of such ambiguity?  Or is it only ambiguous now in light of the mortgage meltdown and the related handling, such as that discussed (unsafe and unsound handling) in the OCC Cease and Desist Consent Order against Wells Fargo and others?
Also note this law from CA which I have yet to see brought up in a case like this (it seems that it is highly probable this same law exists in most states):
CA Civ. Code 1058
Redelivering a grant of real property to the grantor, or canceling it, does not operate to retransfer the title.
The expert testified that it was a pledge and that World Savings (and thus Wells Fargo) owned both the loan and the REMIC.

 

Mortgage Lenders Network and Wells Fargo Battled over Servicer Advances

It is this undisclosed yield spread premium that produces the pool from which I believe the servicer advances are actually being paid. Intense investigation and discovery will probably reveal the actual agreements that show exactly that. In the meanwhile I encourage attorneys to look carefully at the issue of “servicer advances” as a means to defeat the foreclosure in its entirety.

As usual, the best decisions come from cases where the parties involved in “securitization” are fighting with each other. When a borrower brings up the same issues, the court is inclined to disregard the borrower’s defense as merely an attempt to get out of  a legitimate debt. In the Case of Mortgage Lenders  versus Wells Fargo (395 B.K. 871 (2008)), it is apparent that servicer advances are a central issue. For one thing, it demonstrates the incentive of servicers to foreclose even though the foreclosure will result in a greater loss to the investor then if a workout or modification had been used to save the loan.

See MLN V Wells Fargo

It also shows that the servicers were very much aware of the issue and therefore very much aware that between the borrower and the lender (investor or creditor) there was no default, and on a continuing basis any theoretical default was being cured on a monthly basis. And as usual, the parties and the court failed to grasp the real economics. Based on information that I have received from people were active in the bundling and sale of mortgage bonds and an analysis of the prospectus and pooling and servicing agreements, I think it is obvious that the actual money came from the broker dealer even though it is called a “servicer advance.” Assuming my analysis is correct, this would further complicate the legal issues surrounding servicer advances.

This case also demonstrates that it is in bankruptcy court that a judge is most likely to understand the real issues. State court judges generally do not possess the background, experience, training or time to grasp the incredible complexity created by Wall Street. In this case Wells Fargo moves for relief from the automatic stay (in a Chapter 11 bankruptcy petition filed by MLN) so that it could terminate the rights of MLN as a servicer, replacing MLN with Wells Fargo. The dispute arose over several issues, servicer advances being one of them. MLN filed suit against Wells Fargo alleging breach of contract and then sought to amend based on the doctrine of “unjust enrichment.” This was based upon the servicer advances allegedly paid by MLN that would be prospectively recovered by Wells Fargo.

The take away from this case is that there is no specific remedy for the servicer to recover advances made under the category of “servicer advances” but that one thing is clear —  the money paid to trust beneficiaries as “servicer advances” is not recoverable from the trust beneficiaries. The other thing that is obvious to Judge Walsh in his discussion of the facts is that it is in the servicing agreements between the parties that there may be a remedy to recover the advances; OR, if there is no contractual basis for recovering advances under the category of  “servicer advances” then there might be a basis to recover under the theory of unjust enrichment. As always, there is a complete absence in the documentation and in the discussion of this case as to the logistics of exactly how a servicer could recover those payments.

One thing that is perfectly clear however is that nobody seems to expect the trust beneficiaries to repay the money out of the funds that they had received. Hence the “servicer advance” is not a loan that needs to be repaid by the trust or trust beneficiaries. Logically it follows that if it is not a loan to the trust beneficiaries who received the payment, then it must be a payment that is due to the creditor; and if the creditor has received the payment and accepted it, the corresponding liability for the payment must be reduced.

Dan Edstrom, senior securitization analyst for the livinglies website, pointed this out years ago. Bill Paatalo, another forensic analyst of high repute, has been submitting the same reports showing the distribution reports indicating that the creditor is being paid on an ongoing basis. Both of them are asking the same question, to wit:  “if the creditor is being paid, where is the default?”

One attorney for US bank lamely argues that the trustee is entitled to both the servicer advances and turnover of rents if the property is an investment property. The argument is that there is no reason why the parties should not earn extra profit. That may be true and it may be possible. But what is impossible is that the creditor who receives a payment can nonetheless claim it as a payment still due and unpaid. If the servicer has some legal or equitable claim for recovery of the “servicer advances” then it can only be against the borrower, on whose behalf the payment was made. This means that a new transaction occurs each time such a payment is made to the trust beneficiaries. In that new transaction the servicer can claim “contribution” or “unjust enrichment” against the borrower. Theoretically that might bootstrap into a claim against the proceeds of the ultimate liquidation of the property, which appears to be the basis upon which the servicer “believes” that the money paid to the trust beneficiaries will be recoverable. Obviously the loose language in the pooling and servicing agreement about the servicer’s “belief” can lead to numerous interpretations.

What is not subject to interpretation is the language of the prospectus which clearly states that the investor who is purchasing one of these bogus mortgage bonds agrees that the money advanced for the purchase of the bond can be pooled by the broker-dealer; it is expressly stated that the investor can be paid out of this pool, which is to say that the investor can be paid with his own money for payments of interest and principal. This corroborates my many prior articles on the tier 2 yield spread premium. There is no discussion in the securitization documents as to what happens to that pool of money in the care custody and control of the broker-dealer (investment bank). And this corroborates my prior articles on the excess profits that have yet to be reported. And it explains why they are doing it again.

It doesn’t take a financial analyst to question why anyone would think it was a great business model to spend hundreds of millions of dollars advertising for loan customers where the return is less than 5%. The truth in lending act passed by the federal government requires the participants who were involved in the processing of the loan to be identified and to disclose their actual compensation arising from the origination of the loan — even if the compensation results from defrauding someone. Despite the fact that most loans were subject to claims of securitization from 2001 to the present, none of them appear to have such disclosure. That means that under Reg Z the loans are “predatory per se.”

To say that these were table funded loans is an understatement. What was really occurring was fraudulent underwriting of the mortgage bonds and fraudulent underwriting of the underlying loans. The higher the nominal interest rate on the loans (which means that the risk of default is correspondingly higher) the less the broker-dealer needed to advance for origination or acquisition of the loan; and this is because the investor was led to believe that the loans would be low risk and therefore lower interest rates. The difference between the interest payment due to the investor and the interest payment allegedly due from the borrower allowed the broker-dealers to advance much less money for the origination or acquisition of loans than the amount of money they had received from the investors. That is a yield spread premium which is not been reported and probably has not been taxed.

It is this undisclosed yield spread premium that produces the pool from which I believe the servicer advances are actually being paid. Intense investigation and discovery will probably reveal the actual agreements that show exactly that. In the meanwhile I encourage attorneys to look carefully at the issue of “servicer advances” as a means to defeat the foreclosure in its entirety.

I caution that when enough cases have been lost as a result of servicer advances, the opposition will probably change tactics. While you can win the foreclosure case, it is not clear what the consequences of that might be. If it results in a final judgment for the homeowner then it might be curtains for anyone to claim any amount of money from the loan. But that is by no means assured. If it results in a dismissal, even with prejudice, it might enable the servicer to stop making advances and then declare a default if the borrower fails to make payments after the servicer has stopped making the payments. Assuming that a notice of acceleration of the debt has been declared, the borrower can argue that the foreclosing party has elected its own defective remedy and should pay the price. If past experience is any indication of future rulings, it seems unlikely that the courts will be very friendly towards that last argument.

Attorneys who wish to consult with me on this issue can book 1 hour consults by calling 520-405-1688.

Wells Fargo Attempting to “offer” Modifications But Refusing to Put it in Writing

Danielle Kelley, Esq. is getting corroboration on trial modifications from lawyers and other professionals assisting homeowners all over the country. She is bearing down hard on situations where the homeowner enters into the trial modification, complies with all the terms, and then is faced with a unilateral decision by the bank to foreclose anyway. Decisions are coming that have forced the banks to reconsider that position and lately there are other tricks being deployed — like refusing to put the modification offer in writing. Thus puts the homeowner in the position of paying money for nothing, which appears to be exactly what the banks want.

Here is what Darrel Blomberg in Arizona wrote to me this morning:

We all remember the Wigod v. Wells Fargo Bank N.A. (673 F.3d 547) case out of the Seventh Circuit.  You know, the one where Wells Fargo had to fess up and honor a homeowner’s modification after the homeowner had agreed in writing to a trial loan modification offer and subsequently made all of the required payments.

Anyway, I’ve been helping an associate with his home loan assistance request with, none other than, Wells Fargo.  After many months of doing the document and financial proctology dance with Wells Fargo, my associate had a success.  Uh, of sorts.

Wells Fargo called him today with the details of his trial loan modification offer.  (Did you catch that?)

We were on the call together with Mr. E. of Wells Fargo.  Mr. E., his single point of contact (at least his third one) ran down the details of the trial loan modification offer.  That’s fine and dandy.  Here’s the killer.  Mr. E. was asked when the trial loan modification offer would be sent to the homeowner in writing.  My associate was informed that nothing would be sent out until my associate had completed his three trial payments.

I could see exactly where this was coming from.  Wigod!  So, this is Wells Fargo’s feeble attempt to make sure they can, without accountability, deny a defenseless homeowner their rightful modification because nothing has been reduced to writing.

Do you think you would ever be able to transact business orally with Wells Fargo at any of their branches?

My answer to him was this:

If you kept careful notes, then the fact of the matter is that you have been orally informed that the underwriting is complete. That is what the law says — if the offer is made it means the underwriting has been completed. Talk to Danielle Kelley about these details, whom I am copying on with this email. I think I would serve a letter demanding that the offer be sent in writing because in order to make the offer they had to complete the underwriting and that there would be no choice but to make the modification permanent after the trial payments were timely made. As to forcing them to put it in writing, I don’t know. They are obviously trying to get the trial payments and then keep their options open for foreclosure despite compliance by the borrower. The Courts are not liking that one bit.

NOTE: FOR MORE INFORMATION ON THIS, PLEASE SEND EMAIL TO neilFgarfield@hotmail.com.

To all readers: Please add to this post by commenting below.

Federal Bankruptcy Judge Explains Wells Fargo Servicer Advances

In order to obtain forensic reports including servicer advances please go to http://www.livingliesstore.com or call 520-405-1688. for litigation support to attorneys call 850-765-1236.

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Mortgage Lenders Network v Wells Fargo, Chapter 11, Case 07-10146(PJW), Adv. Proc., Case 07-51683(PJW)

In an adversary proceeding in which evidence was presented, Judge Walsh dissected the confusing complex agreements involving the real set of co-obligors’ liability to the Creditor REMIC trust. Many thanks to our legal intern, Sara Mangan, currently a law student at FSU.

I had no idea the case existed. It apparently got buried because of all the ancillary issues presented. If you really want to understand the complexity of repayments to the creditor, this is one case that deserves your full attention.

As usual the best decisions are found when the adversaries are both institutions. We are looking for more such cases. This certainly applies to any Wells Fargo case and explains the nervousness of the witness during trial when I asked him about whether the records he brought were complete.

The LPS Desktop system (formerly Fidelity) INCLUDES servicer advances and computations made based upon that. The unavoidable conclusion, drawn by this Judge, is that everything we have been saying about servicer advances is true. Everything in our forensic report is true as to all properties. The servicer makes those payments based upon a payment of enlarged fees for taking the risk on itself, according to the agreements. Whether there is an actual right to recover from anyone is actually not specifically stated except that the net proceeds of liquidation of REO properties after the auction are subject to servicer claims. This might include other insurance or guarantees.

There is no default experienced by the creditor. There is a new potential for a new party (not mentioned in note or mortgage) for recovery outside the terms of the note and mortgage. The expectation is that there will be a foreclosure and there will be a sale. If there is no foreclosure and there is no sale, then the amounts are not recoverable — unless the servicer too is insured. But all of those insurance contracts seem to have been purchased and procured by the broker-dealer (investment bank) that sold the bogus mortgage bonds. The conclusion to be drawn is that the default notice to the homeowner-borrower might be valid (probably not, because servicer advances have already begun) but it is cured immediately after it is sent by payments, often from the same party who sent the default notice.

Remember the language in US Bank and Chase et al. The servicer SHALL make the advances unless it believes the advances are not recoverable. If the servicer was merely making a loan to the trust beneficiaries there would be little doubt that the advances were recoverable. They can argue that the advances are recoverable in substance from the borrower, but that is only AFTER the foreclosure Judgement and AFTER the sale and AFTER the liquidation of the property after the auction sale.

In this case, the following issues are addressed:

1. Servicer advances — in 4 categories. Why they are advanced and when and how they might be recoverable — when the properties are liquidated. There is some confusing language in there about the trusts, so you need to read it carefully. But the main point is that this is a case of prior servicer and new servicer, both of whom take on the obligation of making servicer advances whether the borrower pays or not. If there is a short fall, the servicer pays — or an insurer. In reality, and not addressed by the Court is the fact that in all probability the actual money advanced by the servicer most likely comes from a slush fund created by language buried deep inside the Prospectus or Pooling and Servicing Agreement that allows the investment banker to pay the trust beneficiaries using their own money advanced by them when they became trust beneficiaries.
2. Recovery is clearly stated as whatever money is left after the REO property has been liquidated or from the borrower. [Note there is ONE reference by the Judge to recovering from the Trust but he doesn't explain it nor does he cite to anything in the agreements]. Since this provision is not referenced in the mortgage, they cannot be traveling under the mortgage and there is no mention of the mortgage provisions in this decision. Since those proceeds frequently are far less than the amount advanced, there is ono direct right of action by the servicer against the borrower, although I postulate that they could potentially bring an unsecured claim for restitution or unjust enrichment.
3. In the end one previous servicer owes the other new servicer the advances, not the trust and not the borrower.
4. There is insurance that makes sure that if the servicer doesn’t make the payments, then the insurer will make-up the shortfall. The insurers do not appear to have any recourse against anyone.

5. There can be no doubt that there are two types of default — one where the borrower stops paying on a note and mortgage (assuming the note and mortgage are valid) and the other, where the REMIC trust beneficiaries fail to get the required distribution as set forth by the Prospectus and Pooling and Servicing Agreement.

6. The conclusion I draw is that the recovery of advances “by the servicer” takes place after the mortgage has been foreclosed, by which time the initial homeowner borrower is out of the picture. Hence, it seems that while there are “proceeds” that can be claimed by the servicer, it is under a separate transaction with the REMIC Trust and under a potential right to claim money from the borrower for contribution or unjust enrichment — with unjust enrichment being a center-point of this case.

This case also explains many other transactions that occur between the servicer and other entities. It isn’t the encyclopaedia of servicer advances, but it explains a lot of what I have been talking about. When the borrower stops making payments for any reason (and perhaps legal reasons for withholding payment, or being prevented from making payments by a servicer who proclaims the loan to be in default), the creditor keep getting paid. So even if the allegation is that the cessation of payments was a default under the note and mortgage, the fact remains that the creditor is not experiencing any default because payments are being made in full by various parties to the creditor. Hence, my question to corporate representatives, about whether they are showing the full record, and whether the books of the creditor show a default. They don’t, if servicer advances were made. I have personally seen a Wells Fargo witness get quite agitated as I approached this subject.

Servicers have kept this information away from borrowers and have withheld it from the courts when they do their accounting.  I would add that if the  argument from opposing counsel is that the servicer advances are secured by the mortgage because of language that includes the word “advances” then they are admitting at this point that the entire structure of the loan as presented to the homeowner borrower was a lie. Under the federal truth in lending act such disclosure was entirely necessary to complete the transaction.

It will also be inevitably argued that this gives the homeowner borrower a free ride. Of course we all know that there is no free ride in this. The homeowner has usually made a substantial down payment and has made monthly payments for years. The homeowner had spent a lot of money on furnishing and completing the house. There is no free ride. But the best argument against the “free ride” allegation is that this is asserted by the party with unclean hands (and often intentionally withheld information from the court or even committed perjury).

read all about it: case on servicer advances and unjust enrichment

Wells Fargo: Insured Mortgages Still Being Foreclosed After Death Benefit is Paid to Bank

In my newly formed practice and thanks to the diligent work of my partners at GGKW, we have discovered something that is over the top even by current standards in the current mortgage mess, to wit: servicers, banks and other entities are receiving complete payoffs of the mortgage upon the death of the insured homeowner and then either (1) getting the heirs to sign a modification agreement as though the debt was still owed or (2) FORECLOSING. (OR BOTH).

This is not accident. The Banks are rolling the dice. Many of the mortgages were in foreclosure or had been declared in default before the payment came in. Others were completely current. But the common factor is that the heirs did not know the policy existed because it was done at closing of the loan. The heirs either didn’t know or forgot if they were told. Either way the Bank received payment directly or through one of the many agents in the securitization chain and continued to collect the money as though it was due. And the affidavit or testimony of the bank representative does not disclose the payment even though it was received, cashed and posted — and that goes a long way toward showing that the corporate representative is neither corporate, a representative or with any knowledge.

This phenomenon is entirely different than the mortgage bond insurance that was also paid to the bank or one of its many agents in the securitization chain.

Why is this happening? Because the banks have elected not to make it a data input factor at LPS whose roulette wheel decides who to foreclose, when, how, and by whom regardless of the facts of the case. Nobody seems to know just how many homes were foreclosed on mortgages that were paid once by accidental death coverage or other PMI, and paid several times over by mortgage bond insurance and credit default swaps.

The bottom line is that if one of the alleged mortgagors (homeowners) has died, check thoroughly to see if an insurance policy may have been in force and if it is already paid off. It is obvious that the banks would rather pay the damages and sanctions when they caught than change their practices. The reason is that only 5% of foreclosures are contested. If they win most of those, which they have been doing, the benefits of taking multiple payments on the same mortgage are far outweighed by the occasional sanction or damage award.

Until Judges start assuming that they should be vigilant and instead of expedient, the tide will turn.

Paid by Insurance, Wells Fargo continues collection and foreclosure. Damages $3 Million awarded

 

How and When to Use Title and Securitization Reports

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

If your loan has been securitized you are looking for either confirmation that what the servicer told you was true, or that the servicer is lying about it. Wells Fargo is fond of denying securitization but when you apply for the modification they tell you that the investor denied it. Then they put “Pooling and Servicing Agreement” on their list of Exhibits, thus removing any doubt that the loan was subject to claims of securitization but not telling you the name of the trust or anything else.

Our combo title and securitization report gives you the most information we can find on public record PLUS our proprietary database. It lays out a road map for discovery, motions for summary judgment and trial. It is might be admissible in evidence (usually it is accepted into evidence) but without an expert stating the conclusions reached and why — in a clear and convincing manner — the judge will go to sleep and you won’t make your points.

No forensic audit is a substitute for discovery, motions to compel discovery and aggressive litigation of the issues. For the same reasons that the Banks should lose, YOU need a competent witness who can testify as tot he work done, what was found and authenticating the study and the report. THEN having an expert declaration along with the willingness of the expert to appear at deposition or trial will have its greatest impact.

The problem I am seeing out there is lawyers and pro se litigants are trying to take short cuts that don’t exist in civil procedure or substantive law. The judge has no choice but to find in favor of the bank. You can’t do some of the work and expect the judge to take it the rest of the way. But you can raise doubts in the the mind of the Judge as to whether the right party is actually doing the foreclosing or has any substantive rights at all.

If Wells Fargo is the Plaintiff and they have not filed on behalf of the actual creditor, it is because neither the trust (which was unfunded) nor the investors have any clear claim against you and especially means that the mortgage encumbrance is at least clouded if not defective. Entry of Judgement for Wells Fargo in such a case would transfer the collateral and the claim from the principal (investors) to the agent. This would enable the agent (who probably only has apparent authority because the PSA terms were not followed) to submit a credit bid, take the property and screw both the investor and the homeowner.

The combo title and securitization report is a first step toward making your case and setting it up properly for appeal if the Judge is intent on “moving the case along” by allowing the foreclosure. It raises the issue as to whether the secured loan described in the “loan documents” was paid or extinguished at origination or in transfer. It puts the Judge on notice that the claims of the forecloser do not follow the actual transaction path and that the forecloser is interfering with your ability to mediate, modify or settle the claims with the real party in interest.

 

ELIZABETH WARREN AND JOHN MCCAIN TEAM UP TO REIGN IN BANKS

Go to http://www.msnbc.com. CONTACT YOUR SENATORS AND CONGRESSMEN AND WOMEN. LET THEM KNOW THEY ALREADY HAVE YOUR SUPPORT FOR THIS LAW AND THAT THEY DON’T NEED TO SELL THEMSELVES TO GET SUPPORT FROM THEIR CONSTITUENCY.

MSNBC had a segment today in which they interviewed Elizabeth Warren about a new set of laws reinstating the old style of Chinese walls. There are probably similar interviews on other channels with Senator Warren or Senator McCain and others. Just go to your favorite news channel and look it up. Their approach has bi partisan support because of its simplicity and its history. Historically it is merely a tune-up of the old laws to include definitions of new financial products that did not exist and were not adequately considered in the 1930′s when EVERYONE AGREED THE RESTRICTIONS WERE NEEDED.

Bottom Line: RETURN TO THE BORING BANK SAFETY WITHOUT BOOMS AND BUSTS FROM 1930′s into the 1990′s: leading republicans and democrats are stepping out of gridlock into agreement. They want to stop Wall Street from access to checking and savings accounts for use in high risk investment banking because that is what brought us to the brink and some say brought us Into the abyss. And it would stop commercial banks that are depository institutions for your checking and savings accounts from using your money on deposit in ways where there is a substantial risk of loss that would require FDIC ((taxpayer) intervention.

Banking should be boring. In the years when restrictions were in place we only had one serious breach of banking practices — the S&L Scandal in the 1980′s. But it didn’t threaten the viability of our entire economy and more than 800 people were serving prison terms when the dust cleared. Of course Bankers saw prison terms as an invasion of their business practices and regulation as unnecessary.

But the simple reason for bipartisan support is that the public is enraged that the mega banks (too big to fail) have GROWN 30% SINCE THE 2007-2008 while the people on Main Street are losing jobs, homes, businesses, families (divorce), thus stifling an already grievously injured economy because credit and cash are now scarce — unless you are a mega bank that made hundreds of billions or even trillions of dollars because they were able to create an illusion (securitization) and at the same time, knowing it was an illusion, they bet heavily using extreme leverage on the illusion being popped.

They made it so complex as to be intimidating to even bank regulators. So no wonder borrowers could not realize or even contemplate that their mortgage was not a perfected lien, so they admitted it. Foreclosure defense attorneys made the same mistake and added to it by admitting the default without knowing who had paid what money that should have been allocated to the loan receivable account of the borrower that was supposedly converted for a note receivable from the borrower to a bond receivable from an asset pool that supposedly owned the note receivable account.

The complexity made it challenging to enforce regulations and laws. The complexity was hidden behind curtains for reasons of “privacy”. The real reason is that as long as bankers know they are acting behind a curtain, they are subject to moral hazard. In this case it erupted into the largest PONZI scheme in human history.

And the proof of that just beginning to come out in the courts as judges are confronted with an absurd position — where the banks “foreclosing” on homes and businesses want delays and the borrower wants to move the case alone; and where those same banks want a resolution (FORECLOSURE OR BUST) that ALWAYS yields the least possible mitigation damages, the least coverage for the alleged loss on the note because they would be liable for all the money they made on the bond. Just yesterday I was in Court asking for expedited discovery and the Judge’s demeanor changed visibly when the Plaintiff seeking Foreclosure refused to agree to such terms. The Judge wanted to know why the defendant borrower wanted to speed the case up while the Plaintiff bank wanted to slow it down.

And because of all the multiple sales, the insurance funds, the proceeds of credit default swaps, because the initial money funding mortgages came from depositors (“investors”), and all the money from the Federal Reserve who is still paying off these bond receivables 100 cents to the dollar — all that money amounting to far more than the loans to borrowers — because it related to the bond receivable, the banks think they can withhold allocation of that money to the receivable until after foreclosure and avoid refunding all the excess payments to the borrower the investor and everyone else who paid money in this scheme. And the system is letting them because it is difficult to distinguish between the note receivable and the bond receivable and the asset pool that issued the bond to the actual lender/depositor.

Senators Warren and McCain and others want to put an end to even the illusion that such an argument would even be entertained. Support them now if not for yourselves then for your children and grandchildren.

BANKS EDGE CLOSER TO THE ABYSS: Florida Judge Forces Permanent Modification

GGKW (GARFIELD, GWALTNEY, KELLEY AND WHITE) provides Legal Services across the State of Florida. We also provide litigation support to attorneys in all 50 states. We concentrate our practice on mortgage related issues, litigation and modification (or settlement). We are available to represent homeowners, business owners, and homeowner associations seeking to preserve their interest in the property and seeking damages (monetary payment).  Neil F Garfield is a licensed Florida attorney who provides expert witness and consulting fees all over the country. No board certification is offered by the Florida Bar, so the firm may not claim expertise in mortgage litigation. Mr. Garfield’s status as an “expert” is only as a witness and not as an attorney.
If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

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

For the second time in as many weeks a trial judge has ordered the pretender lender to execute a permanent modification based upon the borrowers total compliance with the provisions of the trial modification.This time Wells Fargo (Wachovia) was given the terms of the modification, told to put it in writing and file it. If they don’t sanctions will apply just as they will be in the Florida Panhandle case we reported on last week.

Remember that before the trial modification begins the pretender lender is supposed to have done all the underwriting required to validate the loan, the value of the property, the income of the borrower etc. That is the responsibility of the lender under the Truth in Lending Act.

Of course we know that cases were instead picked at random with a cursory overview simply because there was no intention to ever give a permanent modification. Borrowers and their attorneys have known this for years. Government, always slow on the uptake, is starting to get restless as more and more Attorneys General are saying that the Banks are not complying with the intent or content of the agreement when the banks took TARP money.

The supreme irony of this case is that Wells Fargo didn’t want the TARP money and was convinced to take it and accept the terms of HAMP because if only the banks that really need it took the money it was argued that this would start a run on the banks named that had to take TARP. The other ironic factoid here is that the whole issue of ownership of the loans blew up in the face of the government officers around the country that thought TARP was a good idea — only to find out that the “toxic assets” (TARP – “Toxic Asset Relief Program”) were not defaulting mortgages.

  1. So instead of telling the banks they were liars and going after them the way Teddy Roosevelt did 100 years ago, they changed the definition of toxic assets to mean mortgage bonds.
  2. This they thought would take care of it since the mortgage bonds were the evidence of “ownership” of the  “underlying” home loans.
  3. Then the government found out that the mortgage bonds were not failing, they were merely the subject of a declaration from the Master Servicer (a necessary and indispensable party to all mortgage litigation, in my opinion) that the value of the bond had fallen ,thus triggering payment from insurers, counterparties on credit default swaps etc to pay up to 100 cents on the dollar for each of the bonds —
  4. which means the receivable account from the borrower had been either extinguished or reduced through third party payment.
  5. But by cheating the investors out of the insurance money (something the investors are taking care of right now in the courts), they thought they could keep saying the loans were in default and the mortgage bond had been devalued and thus the payment of insurance was legally valid.
  6. BUT the real truth is that the loans had never made into the asset pools that issued the mortgage bonds.
  7. So the TARP definitions were changed again to “whatever” and the money kept flowing to the banks while they were rolling in money from all sides — investors, insurers, CDS counterparts, sales of the note to multiple asset pools (REMICs) and then sales of the note to the Federal Reserve for 100 cents on the dollar.
  8. This leaves the loan receivable account in many cases in an overpaid status if one applies generally accepted accounting principles and allocates the Federal, insurance and CDS money to the bonds and the “underlying” loans.
  9. So the Banks took the position that since the money was not coming in to cover the loans (because the loans were not in the asset pool that issued the mortgage bond and therefore the mortgage bond was NO evidence of ownership of the loan) that therefore they could apply the money any way they wanted, and that is where the government left it, to the astonishment and dismay of the the rest of the world. that is when world economies went into a nose dive.

The whole purpose of the mega banks in in entering into trial modification was actually to create the impression that the mega banks were modifying loans. But to the rest of us, the trial modification was supposed to to be last hurdle before the disaster was finally over. Comply with the payment schedule, insurance, taxes, and everything else, and it automatically becomes your permanent modification.

Not so, according to Bank of America, Wells Fargo, Chase, Citi and their brothers in arms in the false scheme of securitization. According to them they could keep the money paid by the borrower to be approved for the trial modification, keep the money paid by the borrower to comply with the terms of the trial modification and then the banks could foreclose making up any excuse they wanted to deny the permanent modification. The sole straw upon which their theory rests is that they were only obligated to “consider” the modification; according to them they were NEVER required to make it such that the modification would become permanent unless the bank expressly said so, which in most cases it does not.

When you total it all up, the Banks received a minimum of $2.50 for each $1.00 loan “out there” regardless of who owns it. Under the terms of the promissory note signed by the borrower, that means the account is paid in full and then some. If the investor has not stepped up to file a competing claim against the borrower’s new claim for overpayment, then the entire overage should be paid to the borrower.

The Banks want to say, like they did to the government, that the trial modification is nothing despite the presence of an offer, acceptance and consideration. To my knowledge there are at least two judges in Florida who think that is a ridiculous argument and knowing how judges talk amongst themselves behind closed doors, I would expect more of these decisions. If the borrower applies for and is approved for trial modification and they comply with the trial provisions, a contract is formed.

The foreclosure defense attorney in Palm Beach County argued SIMPLE contract. And the Judge agreed. My thought is that if you are in a trial modification get ready to hire that attorney or some other one who gets it and can cover your geographical area. Once that last payment is made, and in most cases, the payment is continued long after the trial modification period is officially over, the Bank has no equitable or legal right to deny the permanent modification.

The only caveat here is whether the Judge was correct in stating the amount of principal due without hearing evidence on third party payments and ownership of the loan. WHY WOULD THE BANK WANT LESS MONEY IN FORECLOSURE RATHER THAN MORE MONEY IN A MODIFICATION? The answer is that out of the $2.50 they received for the loan, they would be required to refund $2.50 because the Bank was supposed to be an intermediary, not a principal in the transaction. So the balance quoted by the judge without evidence was quite probably wrong by a mile.

If there is any balance it is most likely a small fraction of the original principal due on the promissory note. And, as we have been saying for years, it is most likely NOT due to the party that is entering into the modification. This last point is troubling but “apparent authority” doctrines might cover the problem.

Every time a loan does NOT go into foreclosure, the Banks’ representation of defaults and the value of the loan (in order to trigger insurance and other third party payments)  come under question and the prospect of disaster for the Bank rises, to wit:  refunding trillions of dollars in insurance and CDS money as well as money received from co-obligors on the bond (the finished product after the note was moved through the manufacturing process of a false securitization scheme).

Every time a loan is found NOT to have actually been purchased by the asset pool (REMIC, Trust etc.) because there was no money in the asset pool and that the investors merely have an equitable right to claim the note and mortgage under constructive trust or resulting trust theories, the validity of the mortgage encumbrance fades to black. There is no such thing as an equitable mortgage lien or an equitable lien of any sort. And there is plenty of good sense and many law review articles as well as case decisions that explain why that is true.

151729746-Posti-Final-Judgment-062513

PRACTICE HINT FOR ATTORNEYS: Whether you are litigating or negotiating, send a preservation letter to every possible party or witness that might be involved. That way when you ask for production, they can’t say they destroyed or lost it without facing severe consequences. It might even stop the practice of the Banks trashing all documents periodically as has been disclosed in the whistle-blower affidavits from BOA and other banks. If you need assistance in creating a long form preservation letter we are available to provide litigation assistance on that and many other matters that might arise in foreclosure defense.

Wells Fargo and Chase Quietly Prepare to Take Over BOA and Citi as They Collapse

Major banks [WELLS AND CITI] have reportedly made proposals to the Fed on how to pay for the restructuring of large financial institutions that collapse, with the idea being to avoid the chaos that followed Lehman’s bankruptcy. Among the suggestions, the largest financial-services holding companies would maintain combined debt and equity equal to 14% of their risk-weighted assets, which would be used to support any failed bank unit seized by regulators. Full Story: http://seekingalpha.com/currents/post/1100632?source=ipadportfolioapp

Editor’s Analysis: This is why I keep insisting on following the money trail rather than the paper trail. The paper trail is full of lies. The money trail cannot be faked. Or to put it more succinctly anyone who tries to fake the money trail will probably end up in jail. Checks, wire transfers, ACH transfers leave footprints throughout the electronic funds transfer infrastructure.  In the paper trail there are documents that describe transactions as if they had occurred. It is the money trail that will tell you whether or not any transaction in fact did occur and if so,  when and under what terms.

PRACTICE HINT:  the money trail (Canceled checks, wire transfer receipts) is the main point. The paper trail should only be used to corroborate your allegations concerning the reality of the transactions after you have shown that the money trail reveals an entirely different story —  or that the banks are stonewalling access to the money trail because it will prove beyond a reasonable doubt that everything they have said in the creation of the mortgage, transfers of the mortgage, defaults and the mortgage, foreclosures, auction sales, credit bids and attempts for modification is a complete lie.

Bank of America has approximately $300 billion on its balance sheet which are composed mainly of mortgage bonds (unsupported by any transaction in which money exchanged hands or any other consideration; and not backed by any loans which never made it into the asset pools that issued the mortgage bonds). It is one thing when people like me saying that the bonds are worthless and that Bank of America is broke. It is quite another when investors and traders arrive at the same conclusion. Recent trading activity indicates that a number of investors and traders are betting that Bank of America will collapse. They have arrived at the conclusion that the mortgage bonds are either worthless or not worth anything near what is reported by Bank of America. As rates go up the treasury bonds bought by Bank of America in exchange for free money at the Federal Reserve window, will drop like stones. This will leave Bank of America with insufficient capital to operate at its current levels.

What is interesting is that two banks submitted a proposal for resolution of a bank that had been too big to fail. The two banks that submitted the proposal were Wells Fargo and Chase. Notably absent was Bank of America and Citibank. I take that to mean that the government and the financial community are expecting Bank of America and possibly Citibank to collapse and that it might be very soon. The timing of the Wells Fargo and Chase proposal might well be their assessment that the time is near and that if their proposal is the only one on the table it will be the one that is used by the government.

FALLING BOND PRICES AND RISING YIELDS ARE THREATENING THE RECOVERY IN THE BALANCE SHEETS OF GLOBAL BANKS: Falling bond prices and rising yields are threatening the recovery in the balance sheets of global banks, which have built up huge portfolios of liquid securities to comply with regulatory requirements and due to a lack of better investments. For example, 90% of Bank of America’s (BAC) $315B portfolio comprises mortgage bonds and Treasurys. Some analysts, though, believe that QE tapering should increase interest margins and offset the one-time hit to book values because of rising bond yields. Full Story: http://seekingalpha.com/currents/post/1105882?source=ipadportfolioapp

THE FUTILITY OF OF BANKS FIGHTING REPRESENTATION AND WARRANTIES LAWSUITS OVER MORTGAGE BACKED SECURITIES: Flagstar Bancorp’s (FBC +2.7%) weekend settlement with Assured Guaranty (AGO -3.3%) for $105M (vs. the $106.5M court verdict) shows the futility of banks fighting representation and warranties lawsuits over MBS, writes Mark Palmer. Next up is BofA (BAC) which has already settled with Assured and MBIA (MBI), but is still tussling with Ambac (AMBC). Credit Suisse (CS) and JPMorgan (JPM) have also been reluctant to settle with the monolines. Flagstar is sharply higher in a bright red market as the settlement removes a big overhang on the stock. Full Story: http://seekingalpha.com/currents/post/1101932?source=ipadportfolioapp

[Editor: If the loans were real and the bonds were real, why would this be necessary?) BOA Caught Gesturing to Witness Coaching Answers: Bank of America's (BAC) Article 77 hearing is on hiatus until July 8 to allow the presiding judge time on other cases. Day 8 of the hearing was an uneventful one, reports Mark Palmer, notable mostly for the judge admonishing an attorney representing the supporters to quit coaching (through gestures) a witness on the stand. Full Story: http://seekingalpha.com/currents/post/1087682?source=ipadportfolioapp

One way to profit from the false values of loans and the false representations of ownership is to buy them up as though they were real. The buyers have real bargaining power with the mere threat of revealing the bonds to be worthless and the ownership unknown. [I propose to put together a fund that offers the payment if ownership can be proven beyond a reasonable doubt]: Deutsche Bank (DB) is leading a wave of big banks ramping up exposure to single-family housing by extending credit to Wall Street firms so they can buy up homes to turn them into rentals. The bank reportedly just lent another $1.5B to Blackstone (BX) after an earlier $2.1B line got used up. Wayne Hughes’ American Homes 4 Rent has as much as a $1B line from Wells Fargo (WFC), and SilverBay Realty (SBY) just inked a $200M facility from Bank of America (BAC) and JPMorgan (JPM) Full Story: http://seekingalpha.com/currents/post/1087962?source=ipadportfolioapp

Traders betting big on BOA collapse: The purchase of 50K January $11 puts on Bank of America (BAC) yesterday was indeed a the initiation of a position, writes Steven Sears, noting this morning’s open interest shows a 50K rise to 116,958 contracts. Rather than an outright bearish position, the purchase could just as easily be a BofA long hedging his/her bet (though the recent uptick in volatility has made this a more expensive move).
Full Story: http://seekingalpha.com/currents/post/1111972?source=ipadportfolioapp

JPMorgan Looks Like A Winner to Traders — probably because the U.S. government will look to Chase and Wells Fargo when BOA and Citi collapse: Full Story: http://seekingalpha.com/article/1526362?source=ipadportfolioapp

BOND MARKET LIQUIDATION: Bond Funds Hit With Biggest Outflows Ever This Week
http://www.businessinsider.com/weekly-epfr-fund-flows-data-june-26-2013-6

[Editor: When mortgage rates rise the price of older bonds with lower interest falls. Most people agree rate increases are inevitable which means that the value of Treasuries and other bonds offering tiny returns are going to fall like stones. The ripple effect is going to be on going for years] Mortgage rates jump to highest in 2 years [Some novices are trying to make the case that if rates double bond prices will fall by half. That is not true and never has been true. Despite the value of the bond on the market the face value remains the same so the GAIN between the purchase price and the Face Amount (Principal) of the Bond must be factored in by using the present value of the that gain over the remaining term of the loan]
http://www.bizjournals.com/dayton/blog/morning_call/2013/06/mortgage-rates-jump-highest-in-2-years.html

[Editor: This is a disaster waiting to happen for the banks. When those modifications are done they will face trillions in liability for insurance and credit default swap proceeds and probably claims from the Federal Reserve because the true value of the bonds will be marked down to market contrary to the representations of the banks when they sell the bonds to the FED] Regulations are now in effect that will prohibit Mass. foreclosures if loan modifications cost less
http://www.boston.com/businessupdates/2013/06/26/regulations-are-now-effect-that-will-prohibit-mass-foreclosures-loan-modifications-cost-less/4W2NEXiN7w9xvNruGBxpXL/story.html

Foreclosure documentation issues trap investors, creating litigation risk
http://www.housingwire.com/fastnews/2013/06/21/foreclosure-documentation-issues-trap-investors-creating-litigation-risk

Must See Video: Arizona Homeowners Losing their Homes to Foreclosure Through Forged Documents
http://4closurefraud.org/2013/06/21/must-see-video-arizona-homeowners-losing-their-homes-to-foreclosure-through-forged-documents/

Lawsuit: Bank of America Gave Employees Gift Cards for Hitting Foreclosure Quotas
http://www.breitbart.com/Big-Government/2013/06/24/Lawsuit-Bank-of-America-Gave-Employees-Gift-Cards-For-Foreclosures

[Editor: This is BOA putting distance between itself and policies and procedures that produce an illegal result] Bank of America Said to Send Property Reviews to India
http://www.bloomberg.com/news/2013-06-27/bank-of-america-said-to-send-property-reviews-to-india.html

[Editor: I doubt if this tactic applies to most people] Illinois Attorney Saves Homes from Foreclosure Using Reverse Mortgages
http://mandelman.ml-implode.com/2013/06/illinois-attorney-saves-homes-from-foreclosure-using-reverse-mortgages/

 

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

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

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

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

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

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

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

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

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

CONVERSION OF PROMISSORY NOTE TO MORTGAGE BOND WITHOUT NOTICE

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

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

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

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

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

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

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

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

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

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.”

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-296-1960. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

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

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

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

New York Getting Ready to Prosecute Banks for Violations of Settlement

At the end of the day everyone knows everything. If you start with the premise that the securitization of debt was a farce and that the necessary element of the false securitization of mortgage loans was the foreclosure of those loans, then you move one step closer to understanding the mortgage and foreclosure mess and a giant step forward to understanding and implementing a solution. All the actions, statements and myths promulgated by the Wall Street banks become clear, including their violation of every consent decree,order and settlement they ever made with respect to mortgage loans.
Attorney General Schneiderman of New York seems to understand this and he is taking the mega banks to task for violating a settlement that looks like pennies on the dollar. He doesn’t care why they violated the $26 Billion settlement but he is taking action for their consistent violation of the settlement. But I care about the reason and so should you. The reason is nothing less than the obvious: the mega banks expose themselves to liability that far exceeds the terms of the settlement.
In any normal circumstances when a big company enters into a settlement that amounts to pennies on the dollar, the company rushes to make the settlement final by paying the money and performing the actions required in the agreement. Thus they commit illegal acts and get away with it by entering into an agreement that looks big but doesn’t put them out of business. They are nothing but anxious to put the settlement behind them.
So why are the mega banks refusing to abide by a $26 billion settlement on a multi- trillion theft? The answer by pure logic and my sources is that if the banks actually performed on the material portions of the agreement they risk going out of business. Why?
The answer is arithmetic. The purpose of the settlement was to stop illegal foreclosure practices and compensate those who lost their homes in illegal Foreclosures (as opposed to simply reversing the Foreclosures and starting over again which is what any court of law would require if there was an admission that the documents and claims in foreclosure were false).
Arithmetic is the answer. Without Foreclosures, the banks cannot support their claim of failure of the mortgages. If the loans are reinstated then the “sales” of loans and mortgage bonds become immediately subject to an accounting and to payback to investors who bought empty bogus bonds issued by a trust that existed in name only. If the loans must be considered performing loans because of any of the reasons contained in those multistage settlements, consent decrees,orders and agency settlements, then the banks must reimburse the insurers, buyers and counter-parties on hedge products like credit default swaps.
Thus satisfactions the settlement agreement exposes the banks to a reduction in their tier 1, tier 2, and tier 3 capital such that the reality and empty underbelly of the banksia displayed for all to see. Those banks and are not nearly as big as they say they are and must be resolved by the FDIC because they actually do not have the minimum capital requirements that all banks must have to continue operations. That is why the Brown bill in the U.S. Senate is dead on right.
If the Foreclosures were invalid there is only one way to correct them, just like any title problem. Correct the defect In Title by reversing the foreclosure or get an affidavit from the homeowner joining in some correction of the corrupted title resulting from fake Foreclosures.
With trillions in liability at stake of course the banks are violating the settlement agreements and consent decrees. All they can do is try to control state and federal action by providing photo opportunities and planted articles around the media to make people feel good. But neither the housing market nor the economy will get the stimulus necessary for a full recovery until the truth is addressed instead of pretending you can fix this mortgage and foreclosure mess with Tiny settlements and promises that nobody intends to keep.
Wells Fargo, BofA threatened with lawsuit over mortgage allegations
http://www.bizjournals.com/dallas/blog/morning_call/2013/05/wells-fargo-bofa-threatened-with.html

Eric Schneiderman: Banks Have ‘Confidence’ That Law Enforcement Is Not Taking Violations ‘Seriously’
http://www.huffingtonpost.com/2013/05/07/eric-schneiderman-banks_n_3226992.html

Winning Cases Against the Mega Banks

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

Editor’s  Comment: It is hard to interpret what people mean when they say they are winning cases. In the example below the case is oversimplified. Wells Fargo, as usual, wanted to foreclose on the home of an 80-year-old woman regardless of whether she was in default or not. Her main defense was simply that she was never in default. Wells Fargo took the position that the payments they accepted could be allocated towards expenses of the foreclosure, which never should’ve happened in the first place.

It was quite clear that the homeowner had made all of her payments. It was quite clear that Wells Fargo had not applied the payments properly. And after three years of litigation, during which most people would have folded, judgment was entered in favor of the borrower and against Wells Fargo.

No big surprise except for the persistence of the homeowner in fighting off a big bad bank despite dwindling resources and a gaggle of people who were treating her as a leper because she was a deadbeat who didn’t pay her bills and was trying to get out of a legitimate debt.

Of course as it turns out, she was neither a deadbeat nor was she trying to get out of the debt even though it probably is not a legitimate debt and Wells Fargo is most probably not a legitimate creditor in relation to this homeowner.

I am happy that this woman got what she wanted. But some questions that linger on include why Wells Fargo failed to do the proper accounting to bring her loan account up-to-date? Why did Wells Fargo want that foreclosure regardless of whether she was in default or not? And what other payments received from third parties in the form of insurance or credit default swaps were not applied to the appropriate receivable account on the books of the real creditor?

My opinion is that in all probability there is still plenty of meat left on the bone. This homeowner  probably has several causes of action for slander of title, breach of contract, probably fraud, and abuse of process,  just to name a few.

And another thought comes to mind: would the result  or the timing have been different if the roles were  reversed? This particular case is so obvious as to whether or not money was actually paid and received that it is difficult to comprehend how it could possibly have stretched out to three years.

The only way I can think of is that the judge had a preconception of the relationship of the parties and assumed that the debt was real and was in default instead of forcing Wells Fargo to immediately prove lack of payment and their status as the real creditor. For those who complain that the courts are jammed up with foreclosure lawsuits, this case is instructive as to why that is happening.

If judges would simply take each case on its own merits and require each party to actually prove their position rather than rely on dubious and rebuttable presumptions, most of the foreclosures wouldn’t be filed and those that ended up in litigation would be over in just a few months.

 The bottleneck in the court systems across the country is not caused by volume. It is caused by bias. Judges assume that a big-name bank with 150 year old reputation on the line would never make a claim they couldn’t back up. If judges would stop making that assumption and require the backup at the beginning of the litigation the bottleneck would vanish.

Oregon Woman Wins 3-Year Fight Against Wells Fargo Foreclosure
http://abcnews.go.com/blogs/business/2013/04/oregon-woman-wins-3-year-fight-against-wells-fargo-foreclosure/

 

FDCPA Strikes Again: West Virginia Slams Wells Fargo

YARNEY v. OCWEN LOAN SERVICING, LLC, Dist. Court, WD Virginia 2013

SARAH C. YARNEY, Plaintiff,

v.

OCWEN LOAN SERVICING, LLC, ET AL., Defendants.

No. 3:12-cv-00014. United States District Court, W.D. Virginia, Charlottesville Division.

March 8, 2013

MEMORANDUM OPINION

NORMAN K. MOON, District Judge.

The Plaintiff Sarah C. Yarney (“Plaintiff”), pursuant to Fed. R. Civ. P. 56, seeks summary judgment as to liability on all claims asserted in her complaint. Plaintiff alleges that Defendants Wells Fargo Bank N.A., as Trustee for SABR 2008-1 Trust (“Wells Fargo”), and its loan servicer, Ocwen Loan Servicing, LCC (“Ocwen”), attempted to collect on her home mortgage loan after she had settled the debt with Wells Fargo.

III. DISCUSSION

A. Plaintiff’s FDCPA Claims as a Matter of Law

In summary, mortgage servicers are considered debt collectors under the FDCPA if they became servicers after the debt they service fell into default. At the time Ocwen became the servicer on Plaintiff’s home loan, the loan was already in default. Therefore, Ocwen is a debt collector seeking to collect an alleged debt for the purposes of FDCPA liability in this case.[4]

1. Defendants’ Liability under 15 U.S.C. § 1692e(2)(A)

Given the contents of the monthly bills and notices sent to Plaintiff directly, along with the continued calls she received from collection agents, I find that the least sophisticated consumer in Plaintiff’s position could believe that she still owed a debt. Thus, Plaintiff is entitled to summary judgment on her count that Ocwen violated § 1692e(2)(A) of the FDCPA.
2. Defendants’ Liability under 15 U.S.C. § 1692c(a)(2)

Because Plaintiff continued to directly receive bills, statements and phone calls from Ocwen representatives seeking to collect on an alleged debt obligation, despite notice that she was represented by counsel, Plaintiff is entitled to summary judgment that Ocwen violated section 1692c(a)(2).

B. Plaintiff’s Breach of Contract Claim as a Matter of Law

Plaintiff contends that Wells Fargo breached its agreement with Plaintiff, through the action of its agent, Ocwen ….
plaintiff contends, Wells Fargo failed to comply with its obligations, due to the actions of Ocwen, its servicer.
By attempting to collect payments from Plaintiff on behalf of Wells Fargo, Ocwen acted as Wells Fargo’s agent with respect to the original mortgage loan.[10] Further, the undisputed facts in this case demonstrate that Ocwen continued to behave in all respects towards Plaintiff as Wells Fargo’s agent after the March 18, 2011 settlement agreement.[11] While a party may delegate the performance of its duties under a contract, it retains the ultimate obligation to perform….
[11] While Defendants argued during the February 25, 2013 motion hearing that Wells Fargo shouldn’t be held liable for Ocwen’s conduct from now until eternity, Ocwen’s actions at the center of this case constituted collection efforts in connection with the same mortgage loan debt for which Ocwen had been assigned to service, and that Plaintiff and Wells Fargo had attempted to resolve under the March 18, 2011 settlement agreement. Thus, given the facts of this case, Ocwen continued to act as Wells Fargo’s agent with respect to Plaintiff following the settlement agreement.
Due to Ocwen’s subsequent attempts to collect mortgage loan payments from Plaintiff, Wells Fargo neither absolved Plaintiff of her possible deficiency nor properly accepted the deed in lieu of foreclosure.
. . .
“… and thus, due to the actions of its servicer, Plaintiff is entitled to summary judgment that Wells Fargo breached the March 18, 2011 contract agreement.
IV. CONCLUSION

For the foregoing reasons, Plaintiff’s motion for partial summary judgment is granted. This case is scheduled for a jury trial on April 9, 2013, at 9:30 a.m. in Charlottesville, VA, at which time Plaintiff will have the opportunity to testify in regards to any damages she may be entitled to in this matter.[12] An appropriate order accompanies this memorandum opinion

 

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