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MISSION STATEMENT: I believe that the mortgage crisis has produced manifest evil and injustice in our society. I believe our recovery will never reach the majority of struggling Americans until we restore equal protection for all citizens and especially borrowers in our debt-ridden society. LivingLies is the vehicle for a collaborative movement to provide homeowners with sufficient resources to combat bloated banks who are flooding the political market with money. We provide thousands of pages of free forms, articles and discussion of statutes, case precedent and policy on this site. And we provide paid services, books and products that enable us to maintain an infrastructure to provide a voice to the victims of Wall Street corruption.

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California Seminar Recommended — July 18

Our Senior Forensic Analyst, Dan Edstrom and Jim Macklin are the presenters of a seminar along with Charles Marshall, Esq. who has been very active in foreclosure defense. I know them for years, trust them with all outsource work and analysis and I have prior experience with them as presenters. It is worth the trip and 6 hours of your time and the price is in keeping with the livinglies philosophy — just enough to pay for itself.

I strongly endorse the presenters and this seminar. Click on the link below and sign up now as I am quite sure that their small venue will fill up quickly.

Bank of America: The End Is In Sight


It’s always hard to imagine that some giant corporation will crumble all at once. But that has happened repeatedly over our economic history and BofA has trended on the edge throughout its 111 year history. The article in the above link tracks those events and comes to the conclusion that BofA has finally learned its lesson and could be a gigantic opportunity for investors. I beg to differ. As anyone who is involved with foreclosures will tell you, BofA continues to operate as though it was above the law. Bank management is still so impressed with themselves that they fail to see the precipice they are on.

For too long the public policy has been to save the megabanks who are literally too big to regulate — especially across state boundaries and national boundaries. For too long the public policy has been to force homeowners to shoulder the price of the mortgage meltdown. The banks survived financially but the homeowners didn’t. If the banks had been allowed to fail, the homeowners would not have lost $13 trillion in household wealth and the great recession would never have happened. The spending power would have been hit but not nearly as hard as what resulted from a refusal to do the obvious — take the bad behavior of the banks and spread it over all players, not just the homeowners. Iceland did it and the banks and the homeowners did just fine without a major recession. (Not so much for the bankers, who were thrown in jail for defrauding investors, borrowers and everyone in between).

The amount of liability out there for BofA and other major banks remains staggering. And the rulings regarding rescission and proof of foreclosure are a tightening noose around the necks of the the banks, even if their managers have escaped prosecution for criminal activity. As the pace picks up it is obvious that BofA and other banks are facing huge losses from loans “that never were” and mega write-offs on their balance sheet that will put them, once again, in the official position of what everyone already knows to be the case: insolvent.

BOTTOM LINE: The banks knowingly took money from investors for the “purchase” of mortgage backed securities that were issued by empty, non-operating REMIC Trusts. It was the holy grail of criminal investment banking — do an IPO and keep the money because the issuing entity doesn’t need nor want the money. Then through a series of “remote” or “bankruptcy remote” vehicles they slid money onto the loan closing table, pretending that the originator was the lender. The paperwork at closing should have protected the investors because it was their money). Instead it created fake paperwork creating the illusion of rights under the UCC and other theories to enforce worthless paper without alleging or proving that they ever paid for the paper, the loan or anyone else. In legal speak, the banks have the courts treating them as holders in due course of negotiable instruments without BEING holders in due course, and the paper upon which they rely is neither real nor negotiable.

The investor’s money was the source of the loan and it was fraud and breach of contract that their money ended up on the closing table with borrowers. This was precisely why Congress labeled such behavior as predatory per se — for the protection of borrowers, investors and the marketplace. Government missed its cue and instead geared up to millions of foreclosures instead of taking control of the failed banks and renegotiating the loan terms with adequate protections for the investors and the borrowers — the only real parties in the transaction. The Courts missed their cue as well. Instead of actually learning the details of these transactions, knowing that they knew nothing about securitization judges nevertheless ruled repeatedly in favor of the banks and prevented the borrower from getting discovery and forcing the borrower to absorb the burden of proof of facts that were uniquely in the hands of the banks, hidden away from public and private view.

None of the transactions reported by the banks ever took place except as paper trades on their trading desks — with fictional sellers and buyers and fictional money. The reason the banks cling so desperately to the presumptions regarding negotiable paper is that they win no cases if the court allows the borrower to drill down in discovery or the court forces the burden of proof onto the the alleged “holder” to prove the loan or any transaction implied by the false paper they are using in court. They lose every time except in those instances where the originator actually loaned money to the borrower and still has the loan (about 4% of all loans over the last 15 years).

Bank Lawyer’s Seminar: Rescission Changes Everything

QUOTE FROM SEMINAR: “The bottom Line: Until 3 years have elapsed, a mortgage is only as secure as the lender’s proof of compliance with TILA.”


For more information please call 954-495-9867 or 520-405-1688


see tila-right-of-recission-041415

From one of my readers, I received the Power Point Presentation given by a law firm representing the banks. It confirms everything I have been saying. It also offers a glimpse of some of the ways they will try to wiggle out of it. Suffice it to say that in addition to losing far more cases than what has been previously been reported, the banks are now stuck with a problem that they can’t fix, to wit: when they try to “securitize” a pool of new loans they cannot say that the deal is done because the borrower could assert a right to rescind triggering a nightmare of problems for all the parties starting with origination. The appetite for mortgage backed securities is almost certainly going to decline or vanish completely.

Key points from seminar: (You would think I was the presenter!)

  1. Mailing the notice is sufficient to cancel the loan, note and mortgage.
  2. No tender of money or property is required
  3. It is risky for lender to ignore notice of rescission
  4. Rescission is really a borrower’s remorse remedy
  5. Bringing suit immediately is the only way to end the issue — but only if you have absolute proof of the loan and the disclosures conforming to TILA. [Editor’s note: any failure to disclose compensation off the books of the “closing” would probably be evidence of non-disclosure on multiple levels]
  6. AFTER the lender has complied with 1635(b) (termination of security interest), after the lender has returned the canceled note and after the lender has complied with 12 CFR 1026.23(d)(2) (Return of any money or property that has been given to anyone) THEN the borrower must tender [Editor’s Note: This imposes a requirement that will put the trusts in immediate conflict with the investors and the facts. In order to “return” the money to borrower somebody has to pay it. The servicers, the banks sand the trusts don’t have any investment in these loans. They have been getting a free ride for years. They can’t go to the investors for the money and ask them so they can only advance the funds and hope they will get it back or just steal it from investors, which looks eerily like the start of mortgage securitizations]
  7. According to TILA the lien is void upon mailing of the notice.
  8. Banks better do their homework and identify all the loans that are not supported by TILA disclosures. [Editor’s note: My observation is that this is approximately 90%-96% of all alleged mortgage loans. As I said in 2007-2008: In my opinion the vast majority of all loans produced void notes and mortgages or were subject to rescission which results in the same thing — cancellation of the note, cancellation of the encumbrance, and disgorgement of all money paid.]


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The parties were invited to attend a meeting at which the borrowers signed the papers. The originator is usually not in attendance. The closing agent, usually a title agent, takes the signed documents into escrow. At some later time the alleged loan is “funded” by a wire transfer from an unknown source. The borrower believes that the originator is loaning him the money. In truth it was a “table-funded” loan in which the name of the actual lender was actively concealed from the borrower and the actual “loan” was not funded until some time after the meeting. Later the mortgage is recorded and the note is released from escrow and sent to someone whom the closing agent assumes to be authorized to receive it. When was consummation?

Later the successors to the loan documents will allege that the loan closing was “consummated” at the time of signing, but that is not right. If there was a consummation of the loan at all it didn’t occur until hours, days, weeks or months or even years after the meeting. It is a question of fact as to when the alleged loan was consummated. And if there was a table-funded loan there might have been no consummation at all. Instead whoever the real lender is might have some claim for quantum meruit or unjust enrichment to get their money back but if they raise that claim they cannot do it using the note and mortgage. So when does the three day period commence for rescission? When does the three year period begin for rescission? Is there a time when the borrower is prohibited by statute from sending the notice of rescission? And what happens if some company steps up and complies and then asks for the money? They don’t have to object to rescission — they can agree. If rescission is effective when mailed, who can vacate it?

Old Habits Die Hard: Rescission Confusion Continues Despite Supreme Court Clarity

You know something stupid is going on when you see tens of millions of dollars spent on ads enticing consumers to get a loan at 2.99%. There is no profit at that rate so something else is going on — leading to the conclusion that disclosure from the start has been misleading — unknown to the borrower.


For more information please call 954-495-9867 or 520-405-1688

This is not a legal opinion on your case. Consult a qualified, knowledgeable licensed attorney in the jurisdiction in which your property is located.


Let me put it this way: even the borrower lacks the authority to undo the rescission which is effective by operation of law. The loan, the note and mortgage are canceled. If the borrower wants to reinstate them, the borrower would need to get together with the creditor and sign new documents for a new loan transaction.

see Hiding-in-Plain-Sight_-Jesinoski-and-the-Consumer_s-Right-of-Rescind

A recent law review article from the law school at Duke University gets a lot of things right. But it still gets some key points wrong. You will see highlighted portions that raise questions if you click on the link above. But overall it does provide excellent background on the Truth in Lending Act and rescission.

Some of the errors I found —-

The twenty days applies to the duties of the “lender” or “creditor” not to the borrower and the writer completely misses the point in that sentence when he says that the lender must “return the property.” The creditor does not have the property. It might be that this is just poor wording. But as it is written, it is wrong.

There is no procedural bar to asserting the rescission. It is effective by operation of law. That means it is a fact — not a claim yet to be determined. Whether he meant to say that he agreed with what the court was doing or he just got it wrong, I don’t know. Once again we see some very intelligent people who have done a lot of study but still can’t get their heads around a very simple proposition — the statute says the rescission is effective by operation of law. There is nothing left to be done. That means the note and mortgage are void (REG Z and Jesinoski). This is substantive law and not subject to change by any procedural rules.

Footnote 102 is also poorly worded indicating that rescission under common law can be effected without suit. It is ONLY TILA rescission that can cancel the loan without suit.

His conclusion is also poorly worded adding to the confusion out there. He should have said that the rescission is effective by operation of law and that from that point forward the loan contract, the note and the mortgage have been nullified and are void, as stated under Reg Z.

Without this point of clarity the simple TILA rescission “procedure” is lost. The big mistake is that people, judges and lawyers continue to view rescission as a pending claim — despite the US Supreme Court stating that courts cannot interpret a statute without finding ambiguity (and being right about that) they don’t have power to change, add, amend or modify the the express wording of the statute. After rescission is sent there is no pending claim. After rescission is sent there is only the fact that the note and mortgage are gone.

My attempt at clarification would be said as follows: if you are in a court or in a transaction after a notice of rescission has been sent, then the previous note and mortgage no longer exist. No court action may be undertaken on an instrument that does not exist. No transaction can ignore the fact that the note and mortgage were canceled and under Reg Z are void.

Lawyers and some scholars continue to miss the point — despite the Jesinoski decision, unanimously in the US Supreme Court (a place where all arguments cease because it is the court of last resort). Old habits die hard. Sanctity of contract seems to be causing a kind of mental pollution causing many people to continue to assert positions based upon the premise that in order for the loan, mortgage and note to be canceled and rendered void upon mailing the notice of rescission, some court action is required or permitted. Let me put it this way: even the borrower lacks the authority to undo the rescission which is effective by operation of law. The loan, the note and mortgage are canceled. If the borrower wants to reinstate them, the borrower would need to get together with the creditor and sign new documents for a new loan transaction.


While it is true that the loan deal is over the moment that the notice of cancellation and/or rescission is put in the mail, there is a different starting date for when the recipient is bound to comply with TILA Rescission statutes. The days for compliance begin upon presumed receipt or actual receipt depending upon the facts of the situation Since nobody has ever filed one of those actions (or at least I have not found one) it doesn’t seem to make much difference. And none of that changes the fact that the loan deal, the note and the mortgage are void the moment the notice is dropped in the mail which is a point in time before the clock starts ticking against the banks to return the canceled note, file the satisfaction of mortgage and pay the money to the borrower. If more than one year elapses after receipt or presumed receipt of the notice then not only is the note and mortgage void, but the debt is too. [But the borrower’s right to collect disgorgement of all money paid or compensated as a result of the subject loan is also lost after one year].

Hat tip to Carol Molloy in Tennessee for pointing this out to me.

Rooker Feldman Explained — Finally

The RF doctrine is generally thought to mean that anything that was litigated in state court cannot be brought up in Federal court and that the reverse is also true. One of my anonymous contributors has detected a case that makes the whole RF doctrine thing and res judicata doctrines COMPARED and found to be different.

Here is what he sent me from the decision

from the case:

What   Johnson   adds—what   the   defendants   in   this   suit   have   failed   to   appreciate—is   that   federal   courts   retain   juris-­‐‑ diction   to   award   damages   for   fraud   that   imposes   extra-­‐‑ judicial   injury.   The   Supreme   Court   drew   that   very   line   in   Exxon  Mobil:

Nor  does  [the  doctrine]  stop  a  district  court  from  exercising  sub-­‐‑ ject-­‐‑matter   jurisdiction   simply   because   a   party   attempts   to   liti-­‐‑ gate   in   federal   court   a   matter   previously   litigated   in   state   court.   If   a   federal   plaintiff   “present[s]   some   independent   claim,   albeit   one   that   denies   a   legal   conclusion   that   a   state   court   has   reached   in   a   case   to   which   he   was   a   party   …   ,   then   there   is   jurisdiction   and   state   law   determines   whether   the   defendant   prevails   under   principles   of   preclusion.”   GASH   Assocs.   v.   Rosemont,   995   F.   2d   726,  728  (7th  Cir.  1993);  accord  Noel  v.  Hall,  341  F.  3d  1148,  1163– 1164  (9th  Cir.  2003).

544   U.S.   at   293.   In   other   words,   if   a   plaintiff   contends   that   out-­‐‑of-­‐‑court   events   have   caused   injury   that   the   state   judici-­‐‑ ary  failed  to  detect  and  repair,  then  a  district  court  has  juris-­‐‑ diction—but   only   to   the   extent   of   dealing   with   that   injury.   As  we  wrote  in  Johnson,  the  federal  court  cannot  set  aside  the   state  court’s  judgment.

Iqbal   alleges   that   the   defendants   conducted   a   racketeer-­‐‑ ing   enterprise   that   predates   the   state   court’s   judgments.   He   cannot   have   those   judgments   annulled   but   can   contend   that   he   was   injured,   out   of   court,   by   being   “set   up”   by   Patel   and   Johnson   so   that   they   could   take   over   his   business   and   reap   the   profits   he   anticipated.   The   district   court   believed   that   any  pre-­‐‑litigation  fraud  is  “intertwined”  with  the  state  court   judgments   and   therefore   forecloses   federal   litigation,   but   Exxon   Mobil   shows   that   the   Rooker-­‐‑Feldman   doctrine   asks No.  14-­‐‑1959   5  

what  injury  the  plaintiff  asks  the  federal  court  to  redress,  not   whether  the  injury  is  “intertwined”  with  something  else.  See   544  U.S.  at  291;  see  also  Richardson  v.  Koch  Law  Firm,  P.C.,  768   F.3d   732,   734   (7th   Cir.   2014)   (deprecating   any   inquiry   into   what  is  intertwined  with  what).  

Because  Iqbal  seeks  damages  for  activity  that  (he  alleges)   predates  the  state  litigation  and  caused  injury  independently   of   it,   the   Rooker-­‐‑Feldman   doctrine   does   not   block   this   suit.   It   must  be  reinstated.  

Logically   the   district   court’s   next   inquiry   is   whether   the   doctrine   of   claim   preclusion   (res   judicata)   applies.   (Exxon   Mobil  observes,  544  U.S.  293,  that  preclusion  differs  from  the   Rooker-­‐‑Feldman   doctrine   and   comes   to   the   fore   once   the   fed-­‐‑ eral   court   concludes   that   it   has   subject-­‐‑matter   jurisdiction.)   At   least   two   decisions   by   intermediate   appellate   courts   in   Indiana   hold   that   fraud   causing   nonpayment   is   a   compulso-­‐‑ ry   counterclaim   in   a   debt-­‐‑collection   suit.   Ratcliff   v.   Citizens   Bank,   768   N.E.2d   964,   967–69   (Ind.   App.   2002);   Broadhurst   v.   Moenning,  633  N.E.2d  326,  331–32  (Ind.  App.  1994).  Cf.  Fox  v.   Maulding,   112   F.3d   453   (10th   Cir.   1997)   (similar   conclusion   under  Oklahoma  law).  State  law  determines  the  rules  of  pre-­‐‑ clusion,  see  28  U.S.C.  §1738,  so  the  district  court  will  need  to   decide   whether   the   Supreme   Court   of   Indiana   is   likely   to   agree  with  these  decisions,  and  if  so  whether  there  is  any  ex-­‐‑ ception  to  the  rules  of  preclusion.  The  court  also  will  need  to   consider   whether   Patel   and   Johnson   receive   the   benefits   of   any   compulsory-­‐‑counterclaim   requirement,   given   that   S-­‐‑ Mart  Petroleum  was  the  sole  plaintiff  in  the  state  actions.

The   judgment   is   reversed,   and   the   case   is   remanded   for   further  proceedings  consistent  with  this  opinion.


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