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Tune-in to the Neil Garfield Radio Show Tonight at 6 pm EST featuring Attorney Stephen Wright

Tune-in to the  The Neil Garfield Show

or call in to listen at (347) 850-1260

Tonight (Thursday) at 6 pm EST

_____________________________________________________________________

Tonight’s guest will be Connecticut Attorney Steve Wright. We will be talking about the Buset decision, unclean hands, presumptions, and other developments in foreclosure defense and foreclosure offense.

Attorney Stephen P. Wright can be reached at:

Stephen P. Wright

Wright Law Firm

324 Elm Street

Suite 103B

Monroe, CT 06488

203-261-3050 (O)

203-218-6395 (C)

spwrightlawfirm@gmail.com

Stephen went to Trumball High School, Florida State University and Western New England College of Law where he graduated in 1980. So we are not talking about a new comer in the practice of law we are talking about a litigator with experience. He is a lecturer in the Commercial Law League of America, a former faculty member of the College of the State Bar in Texas, and a current member of the Connecticut Bar and previous member of the Texas Bar. He has lectured and written on workouts, collection of judgments, debtor/creditor relations, the UCC, and bankruptcy

The Mortgage Loan Schedule: Ascension of a False Self-Serving Document

At no time were the Trusts anything but figments of the imagination of investment banks.

As an exhibit to the alleged Pooling and Servicing Agreement, the Mortgage Loan Schedule” appears to have legitimacy. Peel off one layer and it is an obvious fraud upon the court.

The only reason the banks don’t allege holder in due course status is because nobody in their chain ever paid anything. The transactions referred to by the assignment or endorsement or any other document never happened — but they are  wrongly presumed to be true.

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THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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I’m seeing more and more cases where once again the goal post keeps moving, in order to keep the court and foreclosure defense counsel off balance. Now it is the attachment of a “Mortgage Loan Schedule” [MLS] to the PSA. As an exhibit to the alleged Pooling and Servicing Agreement, the “Mortgage Loan Schedule” appears to have legitimacy. Peel off one layer and it is an obvious fraud upon the court.

Here is my thought. The MLS supposedly attached to the PSA never has any proof as to when it was attached. It has the same problem as the undated endorsement on the note only worse. It is not a facially valid document of transfer. It relies, derivatively on the PSA that was created long before an MLS existed even if they were telling the truth (which they are not — the trusts are empty).

The securitization process is described in the Pooling and Servicing Agreement along with the parties who are involved in the purchase, Sale and ownership of the alleged loans that were “purchased” by the Trust. But there was no purchase. If there was a purchase the bank would assert status as a holder in due course, prove the payment and the borrower would have no defenses against the Trust, even if there were terrible violations of the lending laws.

First you create the trust and then after you have sold the MBS to investors you are supposed turn over the proceeds of the sale of mortgage backed securities (MBS) to the Trustee for the Trust. This never happened in any of the thousands of Trusts I have reviewed. But assuming for a moment that the proceeds of sale of MBS were turned over to the Trust or Trustee THEN there is a transaction in which the Trust purchases the loan.

The MLS, if it was real, would be attached to assignments of mortgages and bulk endorsements — not attached to the PSA. The MLS as an exhibit to the PSA is an exercise in fiction. Adhering strictly to the wording in the PSA and established law from the Internal Revenue Code for REMIC Trusts, and New York State law which is the place of origination of the common law trusts, you would THEN sell the loan to the trust through the mechanism in the PSA. Hence the MLS cannot by any stretch of the imagination have existed at the time the Trust was created because the condition precedent to acquiring the loans is getting the money to buy them.

The MLS is a self serving document that is not proven as a business record of any entity nor is there any testimony that says that this is in the business records of the Trust (or any of the Trust entities) because the Trust doesn’t have any business records (or even a bank account for that matter).

They can rely all they want on business records for payment processing but the servicer has nothing to do with the original transaction in which they SAY that there was a purchase of the loans on the schedule. The servicer has no knowledge about the putative transaction in which the loans were purchased.

And we keep coming back to the same point that is inescapable. If a party pays for the negotiable instrument (assuming it qualifies as a negotiable instrument) then THAT purchasing party becomes a holder in due course, unless they were acting in bad faith or knew of the borrower’s defenses. It is a deep stretch to say that the Trustee knew of the borrower’s defenses or even of the existence of the “closing.”By alleging and proving the purchase by an innocent third party in the marketplace, there would be no defenses to the enforcement of the note nor of the mortgage. There would be no foreclosure defenses with very few exceptions.

There is no rational business or legal reason for NOT asserting that the Trust is a holder in due course because the risk of loss, if an innocent third party pays for the paper, shifts to the maker (i.e., the homeowner, who is left to sue the parties who committed the violations of lending laws etc.). The only reason the banks don’t allege holder in due course status is because nobody in their chain ever paid anything. There were no transactions in which the loans were purchased because they were already funded using investor money in a manner inconsistent with the prospectus, the PSA and state and federal law.

Hence the absence of a claim for holder in due course status corroborates my factual findings that none of the trusts were funded, none of the proceeds of sale of MBS was ever turned over to the trusts, none of the trusts bought anything because the Trust had no assets, or even a bank account, and none of the Trusts were operating entities even during the cutoff period. At no time were the Trusts anything but figments of the imagination of investment banks. Their existence or nonexistence was 100% controlled by the investment bank who in reality was offering false certificates to investors issued by entities that were known to be worthless.

Hence the bogus claim that the MLS is an attachment to the PSA, that it is part of the PSA, that the Trust owns anything, much less loans. The MLS is just another vehicle by which banks are intentionally confusing the courts. But nothing can change the fact that none of the paper they produce in court refers to anything other than a fictional transaction.

So the next question people keep asking me is “OK, so who is the creditor.” The answer is that there is no “creditor,” and yes I know how crazy that sounds. There exists a claim by the people or entities whose money was used to grant what appeared to be real residential mortgage loans. But there was no loan. Because there was no lender. And there was no loan contract, so there is nothing to be enforced except in equity for unjust enrichment. If the investment banks had played fair, the Trusts would have been holders in due course and the investors would have been safe.

But the investors are stuck in cyberspace without any knowledge of their claims, in most instances. The fund managers who figured it out got fat settlements from the investment banks. The proper claimant is a group of investors whose money was diverted into a dynamic commingled dark pool instead of the money going to the REMIC Trusts.

These investors have claims against the investment banks at law, and they have claims in equity against homeowners who received the benefit of the investors’ money but no claim to the note or mortgage. And the investors would do well for themselves and the homeowners (who are wrongly described as “borrowers”) if they started up their own servicing operations instead of relying upon servicers who have no interest in preserving the value of the “asset” — i.e., the claim against homeowners for recovery of their investment dollars that were misused by the investment banks. An educated investor is the path out of this farce.

 

PRESUMPTIONS, PLEADING, PROCEDURE AND PROOF REALLY MATTER IN FORECLOSURE ACTIONS

In the final analysis nearly all foreclosures have been rubber-stamped based upon facts that are presumed to be true but which are untrue.
 *
In my opinion every case lost by homeowners has been the result of the court using legal presumptions and shifting the burden of persuasion onto the homeowner who has been stonewalled, with the court’s help, during discovery and stonewalled before there was any foreclosure when the homeowner submitted qualified written requests and debt validation letters. Hence the court shifts the burden to the homeowner and then helps the bank by not allowing access to information that would prove that the presumed fact is rebutted by competent evidence.
================================

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

—————-
 *
As if it isn’t hard enough to defend foreclosure actions, pro se litigants and lawyers alike get caught up in a spiral of presumptions that are said to apply because of state law.
 *
Florida Statute 90.302 makes it clear that if there is credible evidence to sustain a finding of nonexistence of the presumed fact then the existence of nonexistence of the presumed fact shall be determined from the evidence without regard to the presumption. In other words the banks must plead the facts upon which they want relief and not rely upon presumptions of fact that are clearly untrue or at least debatable. After they plead those facts they must prove those facts. In other words the burden of persuasion is on the banks to show the fact is true instead of being on the hapless homeowner to show that the fact is untrue. The only party who actually knows, and the only party that has access to the information that would prove it one way or the other is the bank or entity that is initiating foreclosure.
 *
This provision is often overlooked — especially when arguing to compel discovery. Patrick Giunta, Esq. (Ft. Lauderdale)  has had success in demanding discovery that would rebut the rebuttable presumption. The bank responded with alarm.
*
For example, the promissory note that is facially valid (complies with statute to be a negotiable instrument) enables the bank to invoke the legal presumption that everything in the note is true. That in turn gives rise the presumption that the Payee in that note is a lender.
*
But that is also a rebuttable presumption. So discovery requests for information that might lead to the discovery of admissible evidence showing that the Payee was not a lender, but rather a broker would be appropriate. Courts have almost uniformly used the rebuttable presumptions as though they were conclusive presumptions. During discovery they will most often deny requests for information about one instrument or another and the underlying presumption of a real transaction for which the note is evidence.
*
The note is evidence of the debt, not the debt itself. Theoretically at least, demanding information about that underlying transaction should produce no prejudice to the bank. But he fight on presumptions is so intense that it leads one to conclude that the banks are winning cases based upon facts that are not true but taken to be true as a result of the application of legal presumptions.
*

It isn’t enough to know that the loans and foreclosures are fraudulent generally. It must be specific to the case. But I am leading the attack now on legal presumptions. I am attempting to use the information in the public domain and, where possible, inconsistencies in specific case filings, to show that the rebuttable presumptions that are normally applied should not be applied because of the common wording in the statutes that say if there are circumstances that show lack of trustworthiness about what appears to be a facially valid document then the party who proffers that document must prove their case without the benefit of legal presumptions. This, if accepted, would shift the burden of proof squarely on those attempting to use the vehicle of foreclosure, requiring them to prove the actual loan from a specific party, and the actual ownership of the debt by a specific party.

*
The argument from the banks should be interesting. On its face there is obviously no prejudice requiring the banks to prove a fact that is true. What if the presumed fact is untrue? The banks will fight it because without the presumption they cannot prove the truth of  the matter asserted in the “facially valid” document. My proposition is this: they can’t prove those facts because they are not true. In the final analysis nearly all foreclosures have been rubber-stamped based upon facts that are presumed to be true but which are untrue. In my opinion every case lost by homeowners has been the result of the court using legal presumptions and shifting the burden of persuasion onto the homeowner who has been stonewalled, with the court’s help, during discovery and stonewalled before there was any foreclosure when the homeowner submitted qualified written requests and debt validation letters.
 *
Hence the court shifts the burden to the homeowner and then helps the bank by not allowing the homeowner to access information that would prove that the presumed fact is rebutted by competent evidence.
 *

Whether this attack will be allowed is another story. The underlying bias is that regardless of the malfeasance of the banks, the homeowner shoulders the entire burden of the wrongdoing. As stated in Yvanova while legally it matters whether the homeowner owes any money or anything else to the initiator of a foreclosure, in practice this is NOT followed in most court actions. The simple truth is that the courts are allowing the banks to bend, break or twist the rules and laws — until the bank wins. This obviously is wrong on many levels. The decisions being made during this 10 year holocaust will come back to haunt us on a variety of levels. These cases will be cited to enable fraudsters of all stripes and colors to escape liability and even accountability in civil and criminal courts.

*

I have marveled, for example, at how the small fish have been convicted of white collar crime for issues relating to “mortgage fraud” when in fact they were doing exactly what their “victims” had wanted them to do. They were merely tossed under the bus to make it appear that a mega bank would never have sanctioned such behavior. In truth, they not only allowed continuous violations of lending laws, they invented most of the ways that lending laws were ignored. And the violations continue because the banks are obviously immune from serious prosecution.
 *
Both political parties are responsible for that and thus all three branches of government are infected with what has repeatedly been shown to be a fatal virus — fatal to the middle class who make up the vast majority of the consumer driven economy. We are undermining ourselves every time another foreclosure is allowed. In each foreclosure we remove another family from the ranks of consumers whose purchases normally make up 70% of GDP.  Look that up — the economists have replaced consumer purchases with the movement of paperwork linked to worthless financial instruments. Where the financial industry pretty much had an important place at 16% of GDP, it is now reported as just under 50%. But Wall Street is allowed to exist because it is a conduit for capital. How could the currently reported figures be right if the middle class has been indisputably decimated? What is so valuable on Wall Street that it now makes up half of our GDP? What are they measuring — inflated salaries and bonuses?
 *
As long as this bias remains true, the continuing epic financial fraud revealed in 2007-2009 will dominate our legal and living landscape.
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HSBC v Buset: Dirty Deeds Done Dirt Cheap

By William Hudson

Buset-Final-Order-Granting-Mtn-for-Involuntary-Dismissal

CASE NO.: 12-38811 CA 01
HSBC v BUSET
JUDGE: BEATRICE BUTCHKO

The Honorable Judge Beatrice Butchko of Florida’s 11th Judicial Circuit, Dade County, Florida granted an involuntary dismissal against Plaintiff HSBC for unclean hands, lack of competent evidence and an order to show why plaintiff shouldn’t be sanctioned for fraud upon the court under the court’s inherent contempt powers. Judge Butchko did her homework and nailed HSBC for what amounts to a securitization fail.

The Defendant’s Motion for Involuntary Dismissal was granted because the Court opined that HSBC could not prove standing because Ocwen’s Assignment of Mortgage was a “sham” and the transaction described in the AOM never legally occurred. The court noted that the Depositor was incorrect and that an undated, specific endorsement affixed to the back of the promissory note reflected the same defective transfer from the originator to the Plaintiff, without reference to the depositor. Furthermore, the judge recognized that placement in a trust requires that a Note has the proper endorsements, assignments and is timely, therefore this, “could never happen for a securitized trust.” The Buset decision has to be one of the finest decisions to come out of South Florida all year.

Judge Butchko demonstrated that she was able to grasp the nuances of securitization and wrote, “This endorsement is contrary to the unequivocal terms of the PSA, in evidence over Plaintiff’s objection, which required all intervening endorsements be affixed to the face of the note because there was ample room for endorsements on the face of the note. There is also no evidence the endorsement was affixed before the originator went out of business in 2008.” While most judges would have ruled that these issues were unimportant or mere technicalities, Butchko questions the authenticity of the endorsements and even the dates before deciding the evidence does not support HSBC’s claims.

Securitization has specific criteria that must be met as the Note is transferred for the protection of assets from future bankruptcy clawbacks. This is done to protect the investors of the trust (MBS investors typically receive lower returns for higher levels of safety). Therefore, there could be no direct sale from the originator to the trust directly. Securitization also requires a sale from the Depositor acting as a “middleman” between the originator and Trust to provide bankruptcy remoteness in the event the originator goes bankrupt or sells the Note.

Neil Garfield has always been adamant that foreclosure settlements do not occur until a bank is forced to provide evidence through Discovery. HSBC’s failure to comply with the Court’s Discovery Order of April 27, 2015 resulted in claims of Unclean Hands after the plaintiff refused to provide the requested Discovery items. The Court ordered the Plaintiff to provide:

(1) the final executed documents evidencing the chain of title for the subject loan;

(2) all records of any custodian related to the chain of custody of the note; and

(3) all records showing how and when the specific endorsement on the promissory note was created.

If the court is angry now, wait until they discover there is no chain of title for the subject loan and that there are no records showing how the endorsement on the note was created. It would be paramount if the business records further reflected that monthly mortgage payments were not being forwarded to any trust.

Judge Butchko writes that she, “fails to comprehend why Plaintiff would not fully comply with the Court’s Order compelling discovery when the evidence sought by the Defendant would actually assist Plaintiff in establishing the missing link in the chain of ownership in the endorsement and assignment of mortgage.” Good judges, like sharks, are beginning to smell blood in the water. Since business records are available at the click of a mouse- why doesn’t HSBC just put the issue to rest and produce the documents? Because, as all Living Lies readers know- any business records would likely reveal the bank’s fraudulent activities. Did Judge Butchko miss the memo that she isn’t supposed to ask these questions?

The Court entered an Order to Show Cause why Plaintiff should not be Sanctioned for violating the Court’s order on April 27, 2015, after representing that it fully complied on or before January 14, 2016. The court then demanded that HSBC conduct further discovery in support of these orders to show cause and set an evidentiary hearing on them. The defendants repeatedly attack HSBC’s use of records they claim they received from prior servicers as hearsay and quote Professor Charles Ehrhardt, who warned against allowing the poor evidentiary practices in foreclosure courts to “erode the requirement of reliability upon which section 90.803 (6) and the other hearsay exceptions are premised.” 1 Fla. Prac., Evidence § 803.6 (2015 ed.).

Professor Ehrhardt argues:
While the decision seems to focus on records in the mortgage servicing industry,
which are plagued by inaccuracies, its rationale extends to all records offered
under 90.803(6) which are records of a prior business and are presently located in
the records of the current business…. The [Calloway] decision is a significant
change in Florida law and inconsistent with many other Florida decisions.” 1 Fla.
Prac., Evidence § 803.6 (2015 ed.).

The Judge ruled that the Court could not exercise its discretion to admit the prior servicer’s
records into evidence as HSBC’s own witness failed to satisfactorily establish a foundation to warrant finding those records are trustworthy. The defendant’s attorneys of Jacobs Keeley repeatedly attacked the credibility of the HSBC witness instead of allowing an employee without personal knowledge to testify on issues she had no knowledge about.

HSBC’s employee witness, when questioned, admitted there was absolutely no math done to check the accuracy of the prior servicer’s records or numbers. She could not verify the trustworthiness of the prior servicer’s records and therefore her testimony was a legal fiction. In this case, Ocwen simply accepted the prior servicer’s numbers as true without any effort to audit or confirm their accuracy. The only confirmation appears to have been to check the carryover of figures from one servicer’s columns to the columns of another. This testimony was complete hearsay and testimony like this should never be allowed to stand unchallenged.

Judge Butchko further impresses by commanding the Court to take Judicial Notice of the Consent Order entered in the matter of Ocwen Financial Corporation, Ocwen Loan Servicing, LLC by the New York State Department of Financial Services dated December 22, 2014. This Consent Order documents Ocwen’s practice of backdating business records that it failed to fully resolve “more than a year after its initial discovery.” All homeowner’s fighting foreclosure should move to have the court take notice of records in the public domain that demonstrate that a servicer has participated and been fined for fraudulent behavior.

Where Judge Butchko really shines is in her ability to comprehend how the securitization issue applies in this case. The Court ruled that HSBC failed to prove standing by virtue of an endorsement and an assignment of mortgage, “created for purposes of litigation” that both missed a key component in the Title of Ownership- namely the need for a Depositor.  HSBC Bank as trustee for Freemont Home Loan Trust 2005-B mortgage Backed Certificates, Series 2005-B, failed to prove it was the proper owner and holder of the Defendant’s loan by virtue of the endorsement on the note or the assignment of mortgage. Both the endorsement and the assignment omit the Depositor, Freemont Mortgage Securities Corporation, from the transaction which constitutes a fatal break in the chain of title.

The Defendant presented the testimony from their expert witness, who testified that the endorsement on the note is contrary to the instructions in §2.01 of the PSA that required a “complete chain of endorsements, which would include the Depositor, to be placed on the face of the note so long as space allowed.” The court noted that there was sufficient space on the face of the note for the endorsements. The court questioned that an undated specific endorsement from the originator directly to the trust found on the back of the note was, “inherently untrustworthy.” YES Judge Butchko! That wasn’t so difficult to understand- and perhaps other Florida courts will take notice.

The Court questioned the validity of the endorsement in that HSBC violated the Court’s order to produce the custodian’s records or documents showing when and how the endorsement was affixed to the original note. WHY is this NOT DONE in every foreclosure case in the United States? If the bank has the records- produce them!

The Court was in agreement that HSBC’s endorsement and assignments would be grounds for the Trust to reject this loan pursuant to the PSA since there was not a complete chain of endorsements on the face of the note. The Court ruled that HSBC had failed to prove its standing to foreclose on the note and mortgage in this action.

The court went on to rule that a Promissory Note Is Not a Negotiable Instrument. The defendant through their expert witness was able to provide testimony explaining that the negotiability of a promissory note is not a consideration in the securitization model. Securitization sells pools of thousands of mortgages with ever having an intention to sell each loan by individual negotiation.  Moreover, the court held that securitization routinely involves the sale of non-negotiable instruments like car loans, rent receivables, even, “David Bowie’s intellectual property rights.”

The Model Uniform Commercial Code as it relates to the note and mortgage for the subject loan fall under Article 3 of Florida’s Uniform Commercial Code. The Court noted that, “However, it is axiomatic that all promissory notes are not automatically negotiable instruments”. The Court stated that the Note is subject to and governed by the Mortgage, rendering the note a non-negotiable instrument. “This Court finds that the Note is non-negotiable as the amounts payable under the Complaint include amounts not described in the Note and as the Note does not contain an unconditional promise to pay.”

Moreover, the court held that the UCC definition of “holder” would necessarily include a thief that takes by forcible transfer. However, a thief would never be entitled to the equitable relief of foreclosure. The Defendant correctly cited the language of the promissory note expressly provides a different definition of “Note holder” from the definition of holder under Fla. Stat. §673.3011. The promissory note defined the term “Note Holder” as “anyone who takes this Note by [lawful] transfer and who is entitled to receive payments under this Note.”

The court concluded that the Note required that “any subsequent party attempting to enforce the note prove they came into possession of the note by lawful transfer and have the right to receive payments under the Note.” This provision establishes the parties’ intention to contract out of the UCC definition of holder, so as to limit the right to enforce only to those who proved ownership.

Judge Butchko’s decision eloquently and succinctly confirms the California Court in Yvanova, “The borrower owes money NOT TO THE WORLD at large but to a particular person or institution.”  Could it be that the judiciary is finally coming to terms with the illusion of ownership that the banks have spun for the past 9 years is a façade? This decision was epic.

The decision follows below:

The Defendant’s Motion for Involuntary Dismissal after the trial was granted was for the following reasons:
I. The Court Finds Unclean Hands In Plaintiff’s Prosecution of This Action
That Bars the Equitable Relief of Foreclosure

1. The Florida Supreme Court has long recognized the maxim that in equitable
actions such as this foreclosure, “he who comes into equity must come with clean hands.” Bush v. Baker, 83 So. 704 (Fla. 1920).

2. In Bush, the Florida Supreme Court instructed that the “principal or policy of the
law in withholding relief from a complaint because of ‘unclean hands’ is punitive in nature.”

3. The Court finds several examples of Plaintiff’s unclean hands that mandate
punitive action that affirmatively bars plaintiff’s entitlement to the equitable relief of foreclosure.

A. Unclean Hands Involving the Specific Endorsement and Assignment
of Mortgage That Both Reflect a Transaction that Never Happened

4. Plaintiff’s trial witness, Sherry Keeley, an Ocwen employee, gave extensive
testimony regarding the Assignment of Mortgage (AOM) that Ocwen prepared in June of 2012 and recorded in the Public Records of Miami-Dade County in July of 2012.

5. On its face, this AOM purports to document a sale of Defendant’s loan from
Mortgage Electronic Registration Systems, Inc (“MERS”) as nominee for the originator,
Freemont Investment and Loan, directly to the securitized trust identified as the plaintiff.

6. Ms. Keeley testified that Ocwen prepared this assignment in preparation for filing
the foreclosure complaint. The Ocwen employee identified the originator of the promissory note and prepared the AOM to reflect a transfer from MERS, as Nominee of that originator to the same party as Ocwen intended to name as Plaintiff in the foreclosure action.

7. The Court takes judicial notice that on July 25, 2008, Freemont Investment and
Loan (“Freemont”) entered into a voluntary liquidation and closing which did not result in a new institution. https://www5.fdic.gov/idasp/confirmation_outside.asp?inCert1=25653. As such, the
status of MERS as nominee for Freemont ended when Freemont closed on July 25, 2008, which renders the AOM created in 2012 void ab initio.

8. Ms. Keeley further testified the Pooling and Servicing Agreement for this
securitized trust backed up the veracity of the AOM. However, Ms. Keeley later conceded that, according to the PSA, the chain of title for any loan within this trust went as follows:

Originator- FREEMONT INVESTMENT AND LOAN
Depositor- FREEMONT MORTGAGE SECURITIES CORPORATION
Trust- HSBC BANK USA, NATIONAL ASSOCIATION, AS TRUSTEE FR FREMONT HOME LOAN TRUST 2005-B, MORTGAGE-BACKED CERTIFICATES, SERIES 2005-B

9. This Court finds the AOM created in 2012 does not document a transaction that
occurred in 2005, as Plaintiff suggests. The transaction described in the AOM never legally occurred. There was never a transaction between MERS and/or Freemont Investment and Loan that sold Defendant’s loan directly to the Trust. Not in 2012, not in 2005, not ever.

10. The AOM is missing a key party in the chain of ownership, the Depositor,
Freemont Mortgage Securities Corporation.

11. Similarly, the undated, specific endorsement affixed to the back of the promissory note reflects the same defective transfer from the originator to the Plaintiff, without reference to the depositor.

12. This endorsement is contrary to the unequivocal terms of the PSA, in evidence
over Plaintiff’s objection, which required all intervening endorsements be affixed to the face of the note because there was ample room for endorsements on the face of the note. There is also no evidence the endorsement was affixed before the originator went out of business in 2008.

13. The Court finds unclean hands in the AOM and undated endorsement reflect a
transaction that never happened, and could never happen for a securitized trust.

14. The Court accepts the testimony of Defendant’s well qualified expert witness,
Kathleen Cully, who explained the securitization model which required the protection of assets from future bankruptcy clawbacks. There could be no direct sale from the originator to the trust directly.

15. The Court accepts Ms. Cully’s testimony that Securitization always required a
sale from the Depositor acting as a “middleman” between the originator and the Trust to provide bankruptcy remoteness in the event the originator went bankrupt.

B. Unclean Hands For Violating the Court’s Discovery Order Despite
Plaintiff’s Representations That It Fully Complied With That Order

16. The Court also finds unclean hands in Plaintiff’s failure to comply with the
Court’s Discovery Order of April 27, 2015.

17. In that order, the Court overruled plaintiff’s blanket objections and found no basis
for Plaintiff to object to providing any discovery under Fla. Stat. 655.059.

18. The Court then ordered Plaintiff to provide (1) the final executed documents
evidencing the chain of title for the subject loan; (2) all records of any custodian related to the chain of custody of the note; and (3) all records showing how and when the specific endorsement on the promissory note was created.

19. On January 14, 2016, the Court’s Order on Defendant’s Motion for Sanctions for
Deposition Abuses and Violations of the Court’s Order Compelling Discovery reflected:
“Plaintiff submits it has fully complied with the Court’s Order of April 27, 2015.”

20. At trial and deposition, Ms. Keeley admitted that Ocwen, Plaintiff’s servicer,
received the Order compelling discovery. However, Ms. Keeley could not testify to any action taken by Ocwen to obtain responsive documents admittedly under Plaintiff’s care, custody, and control. Defendant clearly established that Plaintiff did not comply with the discovery order.

21. The Court fails to comprehend why Plaintiff would not fully comply with the
Court’s Order compelling discovery when the evidence sought by the Defendant would actually assist Plaintiff in establishing the missing link in the chain of ownership in the endorsement and
assignment of mortgage.

22. The Court hereby enters an Order to Show Cause why Plaintiff should not
be Sanctioned for violating the Court’s order on April 27, 2015, after representing that it fully complied on or before January 14, 2016.

23. Moreover, the Court hereby enters an Order to Show Cause why Plaintiff
should not be sanctioned for the reasons set forth in Defendant’s Motion for Sanctions Under the Court’s Inherent Contempt Powers for Fraud Upon the Court filed on March 16, 2016.

24. Defendant is hereby ordered to conduct further discovery in support of these
orders to show cause and set an evidentiary hearing on them at the Court’s earliest
convenience.

II. Defendant’s Motion For Involuntary Dismissal Is Also Granted For
Plaintiff’s Failure to Prove Damages, Conditions Precedent, and Standing

25. At trial, Plaintiff produced Ms. Keeley as an “other qualified witness” to
introduce Ocwen’s business records in accordance with Fla. Stat. §90.803(6).

26. During her testimony, Ms. Keeley attempted to lay a predicate to introduce the
business records from Litton Loan Servicing, a prior servicer.

27. This Court fully understands and abides by analysis regarding prior servicer’s
records set forth in the Fourth DCA’s opinion in Bank of New York v. Calloway, 2015 WL 71816, 40 Fla. L. Weekly D173 (Fla. 4th DCA 2015)). In Calloway, the Fourth DCA held a trial court could exercise discretion to deem the prior servicer’s records trustworthy if there were evidence that during the loan boarding process, records were reviewed for accuracy. Id. at *8.

28. Notwithstanding the holding of the Fourth DCA, the Defendant challenges
Calloway citing to Professor Charles Ehrhardt, who warns against allowing the poor evidentiary practices in foreclosure courts to “erode the requirement of reliability upon which section 90.803 (6) and the other hearsay exceptions are premised.” 1 Fla. Prac., Evidence § 803.6 (2015 ed.). Professor Ehrhardt further argues:
While the decision seems to focus on records in the mortgage servicing industry,
which are plagued by inaccuracies, its rationale extends to all records offered
under 90.803(6) which are records of a prior business and are presently located in
the records of the current business…. The [Calloway] decision is a significant
change in Florida law and inconsistent with many other Florida decisions.” 1 Fla.
Prac., Evidence § 803.6 (2015 ed.)(emphasis added).

29. In addition, Defendant further suggested the Court should follow another Fourth
DCA opinion dealing with business records from a prior company which does not verify for accuracy. Landmark Am. Ins. Co. v. Pin-Pon Corp., 155 So. 3d 432, 435-43 (Fla. 4
where the Fourth DCA held:
[W]e find that Pin–Pon did not establish that the architect was either in charge of
the activity constituting the usual business practice or was well enough acquainted
with the activity to give the testimony. Although the documents in Exhibit 98
might have qualified as the general contractor’s business records, the mere fact
that these documents were incorporated into the architect’s file did not bring those
documents within the business records exception. In short, Pin–Pon failed to lay
the necessary foundation for the admission of Exhibit 98 as a business record. Id.

Hence, in this case, the Court cannot exercise its discretion to admit the prior servicer’s
records into evidence as Plaintiff’s witness failed to satisfactorily establish a foundation to
warrant finding those records are trustworthy.

A. The Legal Fiction That Ocwen’s Loan Boarding Process In This Case
Verifies The Accuracy, Reliability of Correctness of the Prior
Servicer’s Records

30. At trial, Ms. Keeley explained that she received training on Ocwen’s loan
boarding process which qualified her to give testimony to lay the foundation for the prior
servicer’s records under the business records exception.

31. Ms. Keeley testified the loan boarding process involved two steps. First, Ocwen
confirmed that the categories for each column of financial data from the prior servicer matched or corresponded to the same name Ocwen used for that same column of financial data. Ocwen confirmed the figures from the prior servicer transferred over such that the top figure from Litton became the bottom figure for Ocwen. The court notes that when testifying about Ocwen’s boarding process, Ms. Keeley appeared to be merely repeating a mantra or parroting what she learned the so called boarding process is without being able to give specific details regarding the procedure itself.1 Her demeanor at trial although professional, was hesitant and lacking in confidence in this court’s estimation as the trier of fact.

32. Ms. Keeley admitted there was absolutely no math done to check the accuracy of
the prior servicer’s records or numbers. The loan boarding process’ verification to ensure the trustworthiness of the prior servicer’s records is therefore a legal fiction. In this case, Ocwen simply accepted the prior servicer’s numbers as true without any effort to audit or confirm their accuracy. The only confirmation appears to have been the check a carryover of figures from one servicer’s columns to the columns of another.

33. Moreover, Ms. Keeley testified loans with “red flags” would never be allowed to
board onto Ocwen’s system until the prior servicer resolved them. However, Ms. Keeley also admitted she has witnessed loans that went through the boarding process that had misapplied payments and substantially incomplete loan payment histories from the prior servicer.

34. The existence of misapplied payments and incomplete payment histories in loans
that went through the loan boarding process contradicts any suggestion that the boarding process identifies red flags and/or clears them, such that Courts can trust the reliability of their records.

35. To support the court’s concern regarding the lack of foundation of the so called
boarded records in this case, the Court takes Judicial Notice of the Consent Order entered in the matter of Ocwen Financial Corporation, Ocwen Loan Servicing, LLC by the New York State Department of Financial Services dated December 22, 2014. This Consent Order documents Ocwen’s practice of backdating business records that it failed to fully resolve “more than a year after its initial discovery.”

36. Therefore, the Court finds Plaintiff failed to inquire into the accuracy, reliability
or trustworthiness of the prior servicer’s payment history. Ocwen’s own payment history merely accepts the prior servicer’s records as accurate without question unless the numbers were challenged at some point after the loan boarding process. That is simply not enough to for this court to accept the prior servicer’s records as trustworthy and admit them into evidence here. A mere reliance by a successor business on records created by others, although an important part of establishing trustworthiness, without more is insufficient. Bank of New York v. Calloway, 157 So.3d 1064, 1071 (Fla. 4th DCA 2015). As such, this Court exercised its discretion to sustain Defendant’s objections to both payment histories as inadmissible hearsay. Therefore Plaintiff lacked evidence of an essential element of proof, damages, warranting an involuntary dismissal.

B. Plaintiff’s Failure to Lay a Predicate for Prior Servicer Litton’s
Breach or Default Letter

37. Plaintiff made the unusual effort of seeking to introduce over an inch thick stack
of default letters generated by Litton prior to filing this action.

38. Plaintiff failed to lay a proper business record foundation for these default letters
and the Court exercised its discretion to sustain Defendant’s hearsay objection to their admission.

39. Ms. Keeley testified there was no attempt during Ocwen’s loan boarding process
to check the accuracy of the breach letters. The loan boarding process merely verified that all the prior servicer’s PDF documents for the subject loan were uploaded to Ocwen’s system.

40. At the onset, the Court noted that the first two default letters in the inch thick
stack which Plaintiff sought to admit into evidence were inexplicably dated a week apart and had a $1,900 difference in the amount required to cure the default. The Court rejects Plaintiff’s mere suggestion that the difference is explained by the fact that the loan has an adjustable rate mortgage. Plaintiff produced no reasonable explanation for the $1,900 difference.

41. Moreover, Ms. Keeley testified that in the training she received about Ocwen’s
loan boarding process, she learned that Litton, the prior servicer used an outside vendor to actually mail out the default letters. Therefore, without more, the admission of the default letters mailed by an outside entity not testifying in court creates a double hearsay problem as there is no evidence of a boarding process of that third party vendor’s mailing practices and procedures. Nor did the Ocwen representative testify that she had received training regarding the procedure used by the third party vendor in mailing the default letters.

42. Furthermore, to compound the double hearsay hurdle, Defendant’s counsel
impeached Ms. Keeley’s testimony at trial with her deposition taken in December of 2015, wherein she testified she did not know how the prior servicer mailed the default letters. The Court cannot reconcile Ms. Keeley’s deposition testimony and her trial testimony where she testified she learned about the third party vendor’s mailing procedure during her Ocwen boarding process training. This inconsistent testimony calls into question the veracity of her testimony and further undercut’s Plaintiff’s evidentiary foundation for the proposed documents.

C. Plaintiff Failed To Prove Standing By Virtue of an Endorsement and
an Assignment of Mortgage Created For Purposes of Litigation That
Both Miss a Key Line in the Title of Ownership, namely the Depositor

43. Plaintiff, HSBC Bank USAS, National Association, as trustee for Freemont Home
Loan Trust 2005-B mortgage Backed Certificates, Series 2005-B, failed to prove it is the proper owner and holder of the Defendant’s loan by virtue of the endorsement on the note or the assignment of mortgage.

44. Both the endorsement and the assignment omit the Depositor, Freemont Mortgage
Securities Corporation, from the transaction which constitutes a fatal break in the chain of title.

45. The Defendant presented the testimony of their expert witness, Ms. Cully, who
testified that the endorsement on the note is contrary to the instructions in §2.01 of the PSA that required a complete chain of endorsements, which would include the Depositor, to be placed on the face of the note so long as space allowed.

46. The Court notes there is ample space on the face of the note for endorsements.
Therefore, the Court finds that the undated specific endorsement from the originator directly to the trust found on the back of the note is inherently untrustworthy.

47. The Court further questions the validity of the endorsement in that Plaintiff
violated the Court’s order to produce the custodian’s records or documents showing when and how the endorsement was affixed to the original note.

48. In addition, the Court accepts Ms. Cully’s testimony that the form of the
endorsement and assignment would be grounds for the Trust to reject this loan pursuant to the PSA. There is not a complete chain of endorsements on the face of the note. The PSA required no assignment of mortgage, only that the Trust appear in the MERS system as the loan owner.

49. For these reasons, the Court finds Plaintiff failed to prove its standing to foreclose
the note and mortgage in this action.

III. The Promissory Note Is Not A Negotiable Instrument

50. The Court gives great weight as the trier of fact to the testimony of Defendant’s
expert witness, Kathleen Cully. Ms. Cully is a Yale Law School graduate that worked her entire career in structured finance transactions since 1985. She was extremely well versed in the Uniform Commercial Code. Among many other tasks and accomplishments, Ms. Cully testified that she led the Citigroup team that created the first pooling and servicing agreement ever. She led Citigroup’s Global Securitization strategy. The Court finds Ms. Cully eminently qualified as an expert witness in the area of securitized transactions and their interplay with the Model Uniform Commercial Code.

51. Ms. Cully gave extensive testimony explaining that the negotiability of a
promissory note is not a consideration in the securitization model. Securitization sells pools of thousands of mortgages with ever having an intention to sell each loan by individual negotiation.

52. Moreover, securitization routinely involves the sale of non-negotiable instruments
such as car loans, rent receivables, even David Bowie’s intellectual property rights.

53. The Court finds Ms. Cully’s testimony gives a highly credible analysis of the
Model Uniform Commercial Code as it related to the note and mortgage for the subject loan. Her testimony on the negotiability of the promissory note is attached as Exhibit A. The Buset Note is attached as Exhibit B and the Buset Mortgage is attached as Exhibit C.

54. The Court applies Ms. Cully’s reasoned analysis as it relates to the note and
mortgage for the subject loan and to Article 3 of Florida’s Uniform Commercial Code.
However, it is axiomatic that all promissory notes are not automatically negotiable instruments.

55. The Court recognizes that no Florida appellate court has yet to consider Ms.
Cully’s analysis. The Court has reviewed the recent Fourth DCA opinion in Onewest Bank FSB v. Nunez, (2016 WL 803542 (Fla. 4th DCA March 2, 2016)) which found the Uniform Secured Note provision contained in the promissory note does affect its negotiability because it merely references the mortgage and cites provisions governing rights in collateral and acceleration.

56. The Nunez opinion states the controlling UCC law on negotiability as:
“Florida has adopted the Uniform Commercial Code, including its provision on
negotiability and enforcement of negotiable instruments. Under section
673.1041(1), Florida Statutes (2013), the term “negotiable instrument” means:

[A]n unconditional promise or order to pay a fixed amount of money, with
or without interest or other charges described in the promise or order, if it:
…..
(c) Does not state any other undertaking or instruction by the person
promising or ordering payment to do any act in addition to the
payment of money . . .

Section 673.1061, Florida Statutes (2013), defines “unconditional” by stating
those conditions that prevent it from being unconditional:

(1) Except as provided in this section, for the purposes of s. 673.1041(1), a
promise or order is unconditional unless it states:
(a) An express condition to payment;
(b) That the promise or order is subject to or governed by
another writing; or

(c) That rights or obligations with respect to the promise or
order are stated in another writing.

A reference to another writing does not of itself make the promise or order conditional.
(2) A promise or order is not made conditional:
(a) By a reference to another writing for a statement of rights with respect to
collateral, prepayment, or acceleration. . . .” Id. at *1-2.

57. The Uniformed Note Provision in Nunez is identical to that found in the
Defendant’s Promissory Note herein which provides:
In addition to the protections given to the Note Holder under this Note, a
Mortgage, Deed of Trust, or Security Deed (the “Security Instrument”),
dated the same date as this Note, protects the Note Holder from possible
losses that might result if I do not keep the promises that I make in this Note.
That Security Instrument describes how and under what conditions I may be
required to make immediate payment in full of all amounts I owe under this Note.
Some of these conditions are described as follows: . . . Id. at *1 (emphasis added).

58. This Court does not address the provision described in the Nunez opinion, instead
grounding this decision on a myriad of other provisions of the Mortgage establishing the Note is subject to and governed by the Mortgage, rendering the note a non-negotiable instrument.

59. Among other things, the additional protections routinely change the “fixed
amount of money” due under the promissory note and require additional undertakings and instructions for the borrower beyond the mere repayment of money.

60. First, at page 2 of the mortgage, sub-section (G) expressly provides that “‘Loan’
means the debt evidenced by the Note, plus interest, any prepayment charges and late charges due under the note, and all sums due under this Security Instrument, plus interest.” (emphasis added).

61. Paragraph 3 of the Mortgage provides for the payment of taxes and interest on the
property. These payments are not described in the Note, which requires payment only of
principal, interest, late fees and costs and expenses of enforcement.

62. The Court finds the amounts due under the Mortgage are “other charges” that are
not “described in” the Note, as required by §673.1041(1), Florida Statutes. That alone destroys negotiability.

63. Furthermore, Plaintiff’s complaint seeks damages for all sums due under the Note
and “such other expenses as may be permitted by the mortgage.” Standard mortgage servicing industry practice treats all sums due under the note and mortgage as the “loan” payoff amount or the total amount needed to liquidate in full all monetary obligations arising under both the Note and the Mortgage—the Loan, as defined in the Mortgage—not just the Note.

64. Not only does that payoff amount include charges not described in the Note, it is
much more than a mere “reference” to the Mortgage “for a statement of rights with respect to collateral, prepayment or acceleration”—it means that the Note is effectively “subject to or governed by” the Mortgage, which in turn means that it is not unconditional. See Fla. Stat. §673.1061. That also destroys negotiability of the Note.

65. This Court finds that the Note is non-negotiable as the amounts payable under the
Complaint include amounts not described in the Note and as the Note does not contain an
unconditional promise to pay.

66. The promise is not unconditional because the Note is subject to and/or governed
by another writing, namely the Mortgage. Moreover, rights or obligations with respect to the Note itself—as opposed to the collateral, prepayment or acceleration—are stated in another writing, namely the Mortgage.

67. Moreover, the UCC definition of “holder” would necessarily include a thief that
takes by forcible transfer. However, a thief would never be entitled to the equitable relief of foreclosure. Defendant correctly cites to ¶1 of the promissory note that expressly provides a different definition of “Note holder” from the definition of holder under Fla. Stat. §673.3011.

68. The promissory note defines the term “Note Holder” at ¶1 as “anyone who takes
this Note by [lawful] transfer and who is entitled to receive payments under this Note.”

69. By its terms, ¶1 requires that any subsequent party attempting to enforce the note
prove they came into possession of the note by lawful transfer and have the right to receive payments under the Note. This provision establishes the parties’ intention to contract out of the UCC definition of holder, so as to limit the right to enforce only to those who proved ownership.

70. The Court finds the amounts due under the mortgage are “additional protections”
from possible losses that protect the Note Holder pursuant to the Uniform Secured Note
provision. The protections necessarily affect the fixed amount of money due under the note.

71. The Court further notes Plaintiff’s complaint seeks all sums due under the note
and mortgage. Standard mortgage servicing industry practice treats all sums due under the note and mortgage as the “loan” payoff amount or the total amount needed to liquidate in full all monetary obligations arising under both the Note and the Mortgage.

72. At page 4 of the mortgage, Uniform Covenant 2 entitled “Application of
Payments or Proceeds” provides that “payments be applied in the following order of priority: (a) interest due under the Note; (b) principal due under the Note; and (c) amounts due under Section 3 [of this Security Instrument]. Any remaining amounts shall be applied first to late charges, second to any other amounts due under this security Instrument, and then to reduce the principal balance of the Note.” (emphasis added).

73. As payments are applied to amounts due under both the note and mortgage, this
Court finds the Uniform Covenant 2 in the mortgage must be read as an integrated agreement with the promissory note that will necessarily change the fixed amount of money due thereunder.

74. At the first paragraph of page 7, the mortgage provides: “Any amounts disbursed
by lender under this Section 5 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.”

75. Therefore, pursuant to the Uniform Secured Note Provision of the note and
Section 5 of the mortgage, forced placed insurance premiums become additional debt secured by the mortgage bearing interest at the note rate which changes the “fixed amount of money” due.

76. At page 8 of the mortgage are two provisions which involve rights or obligations
with respect to the promise or order stated in another writing and constitute instructions and undertakings of the borrower to do acts in addition to the payment of money.

77. At ¶6 of the mortgage the borrower is obligated to occupy the property as a
principal residence within 60 days after signing the mortgage and must continue to occupy the property as Borrower’s principal residence for a least one year.

78. At ¶7, Borrower is obligated to maintain the property and permit lender to
conduct inspections, including interior inspections, upon notice stating cause for the inspection.

79. At ¶8 of the mortgage, “Borrower shall be in default if” borrower gave materially
false or misleading information during the loan application process or concerning Borrowers occupancy of the property as Borrower’s principal residence.

80. At ¶9 of the mortgage entitled, “Protection of Lender’s Interest in the Property
and Rights Under this Security Instrument” the mortgage states “any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.”

81. At ¶14 of the mortgage entitled “Loan Charges” provides for refunds of such
charges and states: “the Lender may choose to make this refund by reducing the principal owed under the Note or by making a direct payment to Borrower.” Again these additional protections for the Note Holder provided in the Uniform Secured Note provision in the note necessarily affect the “fixed amount of money” due under the note.

82. The Court grants Defendants’ Motion for Involuntary Dismissal and enters
judgment in favor of the Defendants who shall go forth without day.

83. The Court reserves jurisdiction to award prevailing party attorney’s fees and
to impose sanctions against Plaintiff under the inherent contempt powers of the court for fraud on the court, and such other orders necessary to fully adjudicate these issues.

84. Plaintiff is ordered to produce a corporate representative with most
knowledge regarding its efforts to comply with the discovery order dated April 27, 2015, for deposition at the offices of Defendant’s counsel within 15 days from the entry of this order.

DONE AND ORDERED in Chambers at Miami-Dade County, Florida, on 04/26/16.

No Further Judicial Action Required on THIS
MOTION
CLERK TO RECLOSE CASE IF POST
JUDGMENT
_____________________________
BEATRICE BUTCHKO
CIRCUIT COURT JUDGE

Copies furnished to:
Defendant’s counsel: Jacobs Keeley, PLLC., 169 E. Flagler Street, Ste. 1620, Miami, FL 33131,
efile@jakelegal.com

Plaintiff’s counsel: Brock and Scott, 1501 NW 49th Street, Ft. Lauderdale, FL 33309,
flcourtdocs@brockandscott.com
http://stopforeclosurefraud.com/2016/04/29/hsbc-v-joseph-t-buset-ocwen-guillotined-in-florida-bench-trial-and-then-rapped-for-oh-so-filthy-hands-order-granting-defendants-motion-for-involuntary-dismissal-for-u-n-c-l/

Florida Foreclosure: Where No Case is Over-Ever

I have not commented on the arguments regarding the statute of limitations here in Florida. It is time I did. The article here points out that the 3rd DCA has bent over backward and essentially broken its own backbone by creating legal fictions to save the banks. What they continue to ignore is that saving the banks means screwing the consumer, the citizen and the taxpayer. They also have essentially ruled that the banks can keep coming into court, filing the same lawsuit over and over again, until they win by attrition — few homeowners can afford to contest foreclosures repeatedly. The 3rd DCA decision essentially says that it isn’t over until the bank wins.

 
The obvious premise behind this flawed decision is that somehow this will make everything turn out “right.” It doesn’t. The court completely ignores the huge body of law and information in the public domain that reveals the banks as the perpetrators of epic fraud. Either the court doesn’t know about the fraud or it doesn’t care.

 
And what the court does not address is the nature of the fraud by assuming facts that don’t exist. These banks don’t have a penny invested in any of the loans that they are using for foreclosure and even modification where ownership of the debt gets transferred from the investors who advanced the money to the banks who sold them the bad deals. The investor is left with nothing in most cases while the borrower cleans out his savings account trying to save his/her home only to lose it to a party who is stealing the home from the borrower and the loan from the investor.

 
The court is creating multiple legal fictions. In so doing the court has destroyed the value of stare decisis — legal precedent. Or, if you look from another point of view creating a destructive legal precedent. Instead of taking each legal effective act as something that matters, they have bent and broken the language of the note and mortgage — essentially converting the act of acceleration to an option that means nothing unless foreclosure is successful.

 
If this decision is left standing then no case is over, ever. And lawyers will start arguing that even though their client committed themselves to an act with legal significance, they now choose to disavow that act and proceed on an alternative theory — after they have already lost the case in prior proceedings. This creates an endless chain of alleging “new facts” or “alternative facts” on every case where a party previously lost the legal contest, or where their case was dismissed.

 
The inherent presumption is that borrowers have no voice in this process because they received the benefit of fraudulent schemes. But in the courts where I grew up as a lawyer, no party was allowed presumptions if they had unclean hands seeking the equitable remedy of foreclosure.

 

Nor would a fraudster be allowed to benefit from his schemes once the scheme was revealed. The courts are turning this on its head. As stated in the Yvanova decision in California, it DOES matter if the wrong party is bringing the foreclosure action. It is not enough that the homeowner may owe someone money based upon some equitable theory of law; the homeowner must respond only to a claim from the actual party to whom the debt is owed, i.e., the creditor.

 
That California decision said it well — we don’t enter judgments against people simply because they must owe somebody (or anybody) money. The legal system is only available to those with legal standing — a party to whom the debt is actually owed because they paid for it.

 
This rush to “convict” the homeowner of bad behavior (breach of an unconscionable arrangement where there is no actual enforceable loan contract) is the insidious basis of most of the court decisions where the courts have “read in” fictions that never existed by contract, statute or legal precedent.

 

They did it with due process by putting the burden on homeowners to prove facts that were solely within the care, custody and control of third parties.

 

They rubbed it in when they blocked discovery to get to those facts.

 

They did it again by reading into TILA rescission that the homeowner must file a legal action to make rescission effective (despite the express wording of the statute to the contrary).

 

They did it again by reading into TILA rescission that the homeowner had to offer some tender to the “lender” in order to make rescission effective.

 

And they are doing it again, even after the Supreme Court of the United States told them they were wrong by reading into TILA rescission that the conditions precedent to a valid rescission mean that the rescission is not legally effective until a judge decides the issues raised by the pretender lenders. THAT theory brings us full circle around to the erroneous theory that TILA rescission is not effective upon mailing and that it is not effective until someone files a lawsuit. But they do it again when they say that the Court can decide the outcome of a nonexistent lawsuit filed by a nonexistent party.

 
This won’t end until the Courts return to basic contract law. The courts must abandon their intrusion into the legislative agendas where public policy is declared. They must especially back off when the court doctrines on public policy conflict with the legislators who are the ONLY people constitutionally permitted to make policy. Those legislators have spoken on Federal and State levels. But the courts are unconstitutionally refusing to abide by laws passed by the legislative branch. The statute of limitations is just another example.

 

The way it destroys legal precedent is that it directly conflicts with the doctrine of finality. For example if a person is in an auto accident and chooses to make the claim before they reach maximum medical improvement, the measure of damages is diminished because once they sue the damages are based upon the proven injury. They might even lose because the proven damages are inconsequential. When they later discover they have more injuries and more damages they cannot come back into court and say that their last claim was an option — and more importantly that the fact that their claim was dismissed should be ignored.   And even more to the point, if their last claim was within the statute of limitations and their present claim is outside of the statute of limitations the plaintiff’s claim is dismissed on the basis of res judicata — the matter has already been litigated AND the statute of limitations.

 

If the judiciary is able to rewrite laws of the legislature from the bench in regards to Mortgages, then why shouldn’t the court do the same for ALL legal issues?  It is only a matter of time until these cases are used to circumvent the statute of limitations in other cases- opening up an onslaught of new cases that have already been tried.  Finality will be a thing of the past.

 

There can be little doubt that the banks control the judiciary. The Third District Court of Appeal ruled that the statute of limitations in mortgage foreclosure actions are not applicable. The court had earlier determined in the 2014 Deutsche Bank v. Beauvais opinion that the statute barred Deutsche Bank from filing a foreclosure action five years after the borrower’s default and the lender’s acceleration demanding full payment of the loan.

 
The Third District Court reversed this decision in a 6-4 ruling on April 12 and held that the statute of limitations can NEVER bar a bank’s efforts to foreclose on a Florida homeowner! What does this mean? It means that the banks will have until 5 years after the maturity of the loan to foreclose, and the ability to repeatedly file foreclosure actions until they have outspent and exhausted the homeowner.

 
This decision is a travesty. This decision ensures the foreclosure crisis will continue for decades, and allows the banks unlimited court actions until they can successfully foreclose on the homeowner. Very few homeowners have the financial means to endure decades of litigation, and very few homeowner’s attorneys will have the endurance or desire to defend cases for long durations of time. This ruling allows the banks to regroup, correct the issue, and re-litigate (or fabricate documents to “cure” the error).

 
The Third District’s en banc decision was based on the 2004 Florida Supreme Court opinion in Singleton v. Greymar. In Singleton, the trial court dismissed the lender’s foreclosure action on an accelerated debt with prejudice after the bank failed to appear at a hearing. What is unclear from the Singleton record is why the lender failed to appear. The court should have recognized that there was an agreement to reinstate under which the borrower made payments prior to the dismissal.

 
The lender filed a second foreclosure action after the borrower defaulted on a new, subsequent workout plan. The borrower sought to avoid the second action claiming res judicata. It is noteworthy that the lender’s Supreme Court brief in Singleton was only four pages long, with only one paragraph of actual argument stating that to deny the foreclosure would create “uncertainty” for banks and a “windfall” for homeowners, offering no analysis of res judicata, collateral estoppel or the consideration of the statute of limitations.

 
Even the attorney who represented the lender in Singleton, Mark Evans Kass, said that Singleton has been misinterpreted and misapplied by many courts across Florida, including the Third District in Deutsche Bank v. Beauvais. The Florida Supreme Court found the two actions were different events and the second action involved a new and distinct default by the borrowers.

 
“There really is no mystery as to why the Florida Supreme Court ruled that my client was not barred by res judicata in bringing the second foreclosure action,” Kass stated. “It’s simple. The debtors, Gwendolyn and William Singleton, made payments and reinstated the loan after we accelerated the debt. A few months after reinstating and dismissing the first lawsuit, they defaulted again, which is why we filed a second lawsuit and alleged a subsequent and separate default date — because there actually was a subsequent and separate default.”

 

Kass commented on the Third District’s recent en banc opinion and said, “I would agree with the dissent that Deutsche Bank v. Beauvais has created a new legal fiction. In Singleton, we had a reinstatement and then a new and separate default. For that reason, our second foreclosure was a different cause of action. I understand that the borrower in Beauvais never reinstated the accelerated loan, never made additional payments, and there was never a new or subsequent default.”

 
The four dissenting judges in Beauvais agreed and stated that Beauvais: 1) creates a “legal fiction” that acceleration does not affect the installment nature of the loan; 2) rewrites the contract provisions between the parties; and 3) rewrites the statute of limitations to favor banks. Thus, the only exceptions to the statute of limitations in Florida are capital crimes like murder and now-mortgage foreclosures. However, ONLY murder is an exception actually carved out by a statute enacted by the Florida Legislature.

 

The Florida Supreme Court failed to address is how there can legally be a new default after a debt has already been accelerated. Over the years the banks have worked to convince the courts that Singleton supports the proposition that if a foreclosure is dismissed “for any reason,” there is an automatic reinstatement of the installment nature of the loan, thereby resetting the statute of limitations period for foreclosures.

 
In an unprecedented move, the Third District took Beauvais to an entirely new level claiming that the installment nature of the loan was never affected by the lender’s acceleration of the debt. Thus, even if a bank demands full repayment, the borrower is still obligated to make monthly payments as if there were no acceleration. The courts have opportunistically misinterpreted Singleton and the Florida Supreme Court will need to clarify whether Singleton changes the meaning and effect of “acceleration” and therefore nullified the statute of limitations for mortgages.

 

 

With so many courts misinterpreting the Florida Supreme Court’s Singleton opinion, the Florida Supreme Court must clarify whether Singleton changed the meaning and effect of “acceleration” and nullified the statute of limitations for mortgages. New exceptions to the statute of limitations is a Legislature issue, not for the judiciary to decide.

Ocwen Forced to Freeze 17k Foreclosures

by William Hudson

Over 17,000 loans placed on foreclosure hold, that Ocwen likely has no right to foreclose upon in the first place.

Ocwen not only has been posting huge financial losses this year, but the non-bank servicer has finally been halted from foreclosing on more than 17,000 loans it services due to violations of the National Mortgage Settlement that it failed in the second half of 2014.

Joseph Smith, the monitor of the National Mortgage Settlement (NMS) announced back in October that Ocwen had failed metric 31. Metric 31 tested whether the mortgage servicer sent a loan modification denial notification to a borrower that included the reason for the denial, the factual information considered by the servicer in making its decision and a time-frame by which the borrower can provide evidence that the decision was made in error.

According to Smith, Ocwen failed to remedy the issues that led to the compliance failure.
Smith’s office stated that Ocwen “was delayed” in implementing its Corrective Action Plan for the failure because of “difficulties in resolving the technical issues that led to the original fail.”   Therefore, Ocwen must place 17,496 loans that “could have been affected” by this issue on hold and cannot pursue foreclosure.

“While Ocwen has made progress toward correcting a number of past fails, it has not resolved its issues that led to its failure of Metric 31,” Smith stated. “Therefore, I will not allow Ocwen to move forward with foreclosures on any borrowers who could have been affected by this failure until each of these borrowers has correct information and a chance to appeal,” Smith said. The freeze will not be lifted until every borrower who was possibly been affected receives the correct information and is offered a chance to appeal.

However, this is a minor slap on the wrist for Ocwen who routinely violates the National Mortgage Settlement in ways much more egregious than this. In fact, all banks that agreed to the National Mortgage Settlement are in serious breach of their NMS agreements.  There has literally been NO change in behavior except that the banks have become more sophisticated in their ability to create the illusion of compliance, while continuing to present fabricated documents to foreclose.

The fabrication of documents has now resulted in tens of thousands of foreclosures by entities that had NO standing to foreclose but were able to create the prima facie appearance of holder status by presenting fabricated endorsements, assignments, notarizations and false affidavits.  The noncompliance of Ocwen and other big banks should be grounds for lawyers to challenge legal presumptions because we have, again, obvious proof in the public domain that Ocwen has not complied with the National settlement, has not performed any real audit as to pretender lender, ownership, authority and standing of the loans Ocwen services.

 
However, this a deliberate sleight of hand. Why are we focusing only on the servicer to the exclusion of the principal who is being named as Plaintiff in Judicial states or as beneficiaries in nonjudicial states? What the banks are doing here is a PR trick. The banks are getting everyone to focus on the bookkeeping for the payments instead of whether Ocwen had any right to be involved in the first place- because it was serving at the behest (allegedly) of a trust that does NOT and never did own the loan. The auditor is well aware that Ocwen has bigger issues than failing to correct metric 31- but the NMS monitors must maintain the appearance that they “mean business” and that has resulted on focusing on a relatively inconsequential detail.

 
The real question is why is anyone relying upon Ocwen? Best case scenario is they are a bookkeeper who keeps tracks and enforces payments and then forwards them to the alleged creditor. Ocwen doesn’t know or care if the purported creditor is the creditor. They just do their work and PRESUME (best case) that they have the name of the creditor. We all know now that any trust named as a creditor is NOT a creditor because if they were, there would be an assertion that the trust was a holder in due course which would eliminate all borrower defenses.

 
The worst case scenario is that they are not forwarding payment to any creditor and they have no idea who the trust is or if it still exists. We know the trusts are empty, we know most loans were not delivered to the trusts, we know there is no holder in due course- so why are we focused on the fact that Ocwen violated one metric when it has violated all settlement metrics and is engaging in massive fraud?

 
Not to be deterred by the NMS reprimand, Ocwen spun the issue into a positive stating, “Families across the country are still being impacted by the financial crisis,” the company stated. “Ocwen will continue to work with our customers, especially those facing foreclosure, to find loan modification programs, including principal reduction programs, to help them better afford and remain in their homes.”

 
What Ocwen really should have said is “Families across the country are still being impacted by the financial crisis because we have snowed Congress and the Courts.” Furthermore, “Ocwen will continue to confuse and deceive our unfortunate customers, especially those who are going to end up giving us their home, find ways to deny loan modification programs, and hope they find a place to rent.”

 

The National Mortgage Settlement was an insignificant slap on the wrist and was nothing more than a “cost of doing business” tax deduction that will do little to impact their bottom line. This strategy is similar to the pharmaceutical companies who create billion-dollar blockbuster drugs by “fudging”  clinical safety trials, knowing that in 7 years when the drug goes off-patent they will likely be sued by approximately 5% of those treated by the drug who experienced medical complications (think Risperdal, Gardasil, etc). When you have a billion dollar a year drug, the $500 million dollars paid in damages is merely a cost of doing business and is built into the drug’s profit/loss structure. Apparently large banking institutions have the same profit strategy.

 
For instance, hypothetically, 90% of all homeowners will not fight foreclosure. Of the 10% who fight back, 5% of those homeowners will have their cases dismissed, another 2% will have incompetent counsel, and another 1% will have a biased judge. Therefore, the banks will face 2% of homeowners who persevere over great odds to simply enforce their right to due process. For the billions in profit they have made they will pay a paltry penalty. In order for the banks to change their wicked ways they must face heavy punitive costs, legal costs, fines and sanctions.

 
But even then, until bankers are prosecuted for criminal conduct- nothing is going to change because the banks will still be financially rewarded for their conduct. White collar banking fraud and forgery must be treated like any other type of fraud and forgery. The crimes are identical. The banks are confident (after 8 years of this behavior) they will not be heavily fined by government regulators or the courts; and no bank employee will be prosecuted.  The banks have received a message to pillage with abandon and forge, fabricate, deceive, and conspire with impunity if you wear a tie or expensive shoes. The banks are modern day pirates but instead of a ship, hook and eye patch; they conduct their crime with Bugattis, Breitling watches, and Lasik surgery.

 
When the National Mortgage Settlement actually starts to penalize servicers for foreclosing on loans they don’t own- the NMS will have done their job. Stories like this are merely window dressing for an ineffective program that has no chance of deterring the behavior of the pretend lenders.  Until bankers and their counsel are charged criminally for their conduct or huge punitive awards are given to homeowners who lose their homes- it is business as usual for the banker crime syndicate. Ocwen being forced to put 17k foreclosures on hold does one thing- it gives them more time to fabricate documents to ensure the “metrics” appear to be met.

 

The Deliberate Destruction of Evidence

By William Hudson

To Listen:  https://youtu.be/jOeAe9zT5D0

Attorney Neil Garfield and James “Randy” Ackley got into a discussion on the Neil Garfield Show about why the courts were allowing loan servicers to present evidence that was hearsay, often fraudulent and did not comply with the rules of evidence. Ackley stated that, “The court is allowing evidence to be introduced that would not be admitted in any other type of case.”

The discussion brought up the fact that courts are making erroneous presumptions in favor of the banks despite the fact that there is now a public record of banks fabricating evidence, robosigning documents, false notarizations and bank employees testifying under oath about facts they know nothing about. The argument dovetails back to the locus of destroying (or losing) a promissory Note- the central issue in almost every foreclosure to date.

 
Why would a lender deliberately lose a promissory note when the note has cash value? Why deliberately destroy or lose a promissory note? Last summer, after 13 years of Litigation- a client of Neil Garfield’s said their servicer wrote a letter saying, “oops we can’t seem to find your promissory note.” They did this about the same time the client discovered that they had fabricated the Note and the employee who they claimed signed the Note hadn’t endorsed Notes for 13 years.  The “lost” Note appears to be the strategy du jour for 2016 (better to “lose” a Note than go to prison).

 
And yet, it is now clear that promissory notes underlying mortgage backed securities were deliberately lost or destroyed on a systematic basis, in what can only be deemed as outright fraud at this point.  The Florida Bankers Association already admitted to the Florida Supreme Court that banks destroyed notes after e-recording the notes to “avoid confusion” and that this was a standard business practice. Professor Katherine Porter wrote way back in a 2008 Texas Law Review article that examined the loan documentation from 1700 bankruptcy cases and discovered 41.1 % of the files audited lacked a promissory note to support the proof of claim.

 
Nothing has changed, other than the banks now have the ability to hire firms that will forge the documents for them (although they typically do a poor job with their sloppy photoshop attempts). It is now FACT that the Notes were almost NEVER delivered to the MBS trusts but the courts continue to pretend that the prima facie evidence before them is legitimate. This isn’t shoddy paperwork- it is flat out criminal conduct. The banks are daily getting away with what would result in you or I going to jail for at least three years or more.

 
Destroying or losing a Note is insane. Promissory notes are negotiable instruments (like checks) and by law only the original (and not any copy) is enforceable against the borrower. Under the UCC (uniform commercial code), section 3-309, a lost note may not be detrimental to recovery by the owner of the note. But the requirements of proof under this section are stringent; the section requires that possession and ownership of the promissory note occur while vested in the plaintiff at the time of loss.

 
Most MBS notes disappeared before being transferred to the trust that allegedly holds the note, which would defeat recovery under U.C.C 3-309. In order to enforce a lost note under the UCC, the court must be stringent to ensure that “the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument.”

 

Yet, on a daily basis homes are foreclosed on with absolutely NO compliance with the Uniform Commercial Code requirements. Furthermore no indemnity bond is posted by the bank to protect the homeowner from another party who actually can prove they own the Note, leaving the homeowner exposed to double-jeopardy.

 

There is a gross DOUBLE STANDARD that applies to foreclosure cases in America. However, look on the bright side- if the courts are this corrupt it is better to fight a foreclosure than a murder charge. If the courts operated the criminal courts the way they do the trial courts, the incarceration rates would quadruple. Can you imagine the same rules of evidence applied to a murder charge that are applied in foreclosure defense? “Your honor, it appears to be blood but it could be ketchup.” Judge, “The prima facie evidence is sufficient. Let’s make sure we can fit him in on the lethal injection schedule for next year.”

 

The fact that the banks do not possess the Notes is not a technicality. Instead, the lost Note issue is a scheme designed to protect the commercial banks with no concern for protecting the borrower from fraudulent claims. The ultimate protection for the borrower is an original canceled note- but even if you pay off your home in full- you will never receive the cancelled Note. Everything has been flipped on its head- Notes are fabricated on a computer, presented as real, and if the paperwork “looks” legitimate- foreclosure can proceed. The consumer has more protection when they register an old vehicle for $500.00 than they do when they purchase a $500,000 home (and the DMV records are much more accurate).

 
The courts have an obligation to homeowners to demand proof that the bank has standing. The banks have gotten away with so much fraud that they are now brazen in their arrogance. On a routine basis banks show up with documentation that is deficient or even fraudulent and the judges are still ruling in favor of the banks. No Note? No problem! No Indorsement? Oh well- go create one and bring it to the next hearing! The courts and banks are concerned that foreclosures will slow and costs will increase but have no concern that the rule of law has imploded and fraud is now considered a standard business practice.

 

The ONLY solution to the current foreclosure crisis is for EVIDENCE to be introduced like it is in ANY other civil or criminal case.  In light of the fact that banks have now admitted they have participated in fraudulent activities- the servicers must turn over their business records to ensure they mesh with both the paper trail and the alleged money trail.  There is simply no other option for homeowners now that banks lie with impunity, law enforcement takes no action, and the courts look the other way.

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