BAD FAITH: Shack Decision Unravels the Chase-Wamu Mystery -At least in Part

Shack Blasts Chase, Fannie Mae for Bad Faith on Wamu Merger

It is obvious that documents were produced for Shack to issue these rulings. The affidavits to which he refers should be obtained in their entirety. There is lots to take away from this decision, but most important, is that Chase never acquired the loans from WAMU. The loans originated or acquired by WAMU were already sold to investors, trusts and Fannie or Freddie. The issue with Fannie and Freddie of course is that they were merely fronting for “private label” securitizations hiding behind the veil of the GSE’s who were mere guarantors and not lenders. I’d like to see any agreement and transactional documents showing the alleged purchase by Fannie, but it is presumed in the Shack Order and Findings.

It is also obvious that the finding that Chase was not the owner of the debt at any time came from an admission from both a Fannie Mae representative in an affidavit from an alleged Fannie Mae representative. We should direct discovery in Chase cases to that person in Fannie Mae who says they acquired the subject debt and that Chase merely received the servicing rights in the Chase-WAMU merger.

Note that Fannie Mae is considered by Shack to have acted in bad faith, and that Fannie was less than forthcoming in its description of itself stating that they might be the owner or they might be the trustee (pursuant to the Master Trustee Agreement published in 2007) for a securitized trust. Note also that Fannie at no time was chartered as a lender. Thus it could not originate any loans and never did so. The vagueness with which Fannie Mae addresses the issue of ownership shows that the hiding and non-disclosure in bankruptcy courts and state courts continues across the country.

The admission from Fannie that they “might” be the Master trustee for allegedly securitized assets (debts arising out of fictitious transactions on paper that looked like mortgage loans) is both alarming and encouraging. The rush to foreclosure is partially explained by this chaotic pile of fraudulent paper trails.

When you take into account the non stop servicer advances, you can see what the parties are hiding — that the real creditor on those debts, has been paid all the interest they were expecting, that the principal is being paid in settlements with pennies on the dollar, and that the default alleged in notices from servicers and informing the borrower of the right to reinstate were defective, to wit: that the amount stated as required to cure the alleged default was and remains incorrect. The amount should have been reduced by third party payments including but not limited to the servicer advances which were not loans, and thus could only be characterized as PAYMENT, which is the ultimate defense against a lawsuit or any enforcement mechanism designed to collect a debt.

The dirty little secret is that they diverted title and money from the investors and converted what could have been a secured loan into an unsecured loan. The advances and payments by third parties satisfied the debt that arose when the borrower took the loan. They in turn MIGHT have claims for contribution or unjust enrichment but they are most certainly not protected by a pledge of collateral either as mortgage or assignment of rents or anything else.

Note that it could not have acquired loans except with money from what were represented as securitized trusts with Fannie as master Trustee. Therefore there are no circumstances under which Fannie or Freddie could be owners of the the debt with rights to enforce except upon the only event in which money is paid by Fannie for the loan — a guarantee payment AFTER FORECLOSURE) that is the only transaction permitted under its charter. This point was missed by Shack or ignored by him, because he had bigger fish to fry — the lawyers for Chase itself with a copy of the order to be served upon Jamie Dimon, the head of Chase.
The fact is that with the WAMU bankruptcy, seizure by OTS and appointment of FDIC, there were no assignments, agreements of sale or even a permission slip under which Chase could or did acquire loans from WAMU. But that didn’t stop Chase from claiming exactly that in tens of thousands of foreclosures.
In cases where Chase is allegedly at the root of title through the merger with WAMU, it would be appropriate to site to the Shack case, get the case documents, get a Title and Securitization report (see http://www.livingliesstore.com) and lawyers should look into a motion for summary judgment, or a motion for involuntary dismissal with prejudice. Even where Chase might allege that it is filing the foreclosure as a representative of Fannie or Freddie, the basis for that allegation needs to be in their pleading or it is not an ULTIMATE fact upon which relief could be granted. Discovery should be aimed at getting the documents upon which Chase allegedly relies in showing that it has the authority to represent Fannie — and don’t stop there. The truth is that nearly all the so-called Fannie and Freddie loans were veils for the private label securitization in which the money was diverted from the trust, as was the title, leaving Fannie and Freddie as well as the investors and the buyers holding nothing.

In cases where the statute of limitations has already run, the dismissal of the foreclosure action, is barred in most cases from ever being brought again by anyone. But the dismissal against Chase should be with prejudice in all events because it isn’t the creditor and therefore does not satisfy the statutory requirements in Florida, and I presume all other states, to submit a credit bid at auction in lieu of cash.
The Judges are beginning to understand that by applying basic contract law, they can clear their dockets. It is up to us to help them. The offer of a loan was met with acceptance by the borrower but the loan never occurred. The transfers also had offer and acceptance but again no money because the investors’ money was used (outside the trust) directly to fund the origination or acquisition of the loan. This was part of a larger scheme to defraud to investors whose money was to have been deposited into the trust and then used to fund origination or acquisition of the he loans within 90 days (the cutoff).

The investment bank fraudulently induced (see complaints filed by investors, insurers, government guarantee entities etc.) the investors to give them money for an investment into a controlled trust when in fact they diverted the money for their own purposes, taking outsized fees for themselves as the toxic loans materialized to “support” the alleged investment into loans. That is the “mismanagement” part of investors’ allegations — diversion of money into a PONZI scheme.

The investment bank fraudulently diverted title to the loans to strawman entities or were — sometimes even by name (see American Brokers Conduit) — mere conduits for undisclosed third party lenders. The argument that the parties managed to hide this from the borrower long enough for the statute of limitations to run out on TILA claims is an affront to the court system and to the statutory scheme enacted by Congress to protect borrowers from predatory lenders and “steal” deals where huge fees were taken, rather than earned, without disclosure to the Borrower.

So the first element of fraud alleged by investors is diversion of the the money. The second is diversion of the paperwork that would have protected the investors at least to some extent. In this scheme title to the loan papers was intentionally diverted from the owners of the the debt, thus rendering the so-called mortgage documents unenforceable — all alleged by investors, insurers and other co-obligors who have discovered to their chagrin that each of them paid the investment bank 100 cents on the the dollar on each loan multiple times.

And yet borrowers continue to seek modifications, which means they are not looking for free houses. Even knowing they are dealing with criminals the borrowers are willing to start paying these thieves if the terms can be adjusted to give them the benefit of the bargain that was intended at origination of the purchase money mortgage or refinancing or second mortgage or HELOC.

That leaves the servicers and their lawyers being the only ones who want Foreclosures because they want a free house and/or they want the foreclosure to recapture Servicer advances to the creditors — advances that vastly reduce the amount owed and which cure the alleged borrower default. That has now become a foreclosure folly in which the servicers and their lawyers are the only parties who want it. The investors don’t care because they are getting settlements for the fraud of the investment banks for creating unenforceable loan documents (that are frequently enforced anyway because of judicial ignorance) and diversion of investor money.

In the end, the “clean hands” that Shack talks about are clearly absent from both Servicer and government sponsored entities and as judge Shack states in his decision, wrongdoers should not be permitted to profitf or their wrongdoing. If that means a windfall to the borrower, so be it. It can be likened to the old usury laws and the current usury laws where the principal of the debt is wiped out and the fraudster is hit with a judgment for three times the principal, three times the interest or both.

28 Responses

  1. US Bank and SN Servicing has submitted Forged documents in our federal bankruptcy case too and we will never stop perusing them in court for damages. We are also asking our Federal judge to prosecute their current attorney out of Jacksonville Florida who continued to defend this case knowing that forged document are before a federal court. All the offending parties at SN Servicing and their attorneys are committing a serious crime against our country. We have filed a formal complaint with the FBI and the US attorney general and many great Judges all across this nation are finally stopping them from this kind of fraud on American families. US Bank and SN servicing and their attorneys are also violating a serious consent order that was to protect the people from these crimes but they could care less. Please feel free to have your clients join a class action suit so that we can end their behavior with a multi billion dollar punitive damage suit. Join us, call Ray Shelton in Florida at 352 274 8467

  2. 2013 NY Slip Op 51050(U)

    The case is JP Morgan Chase Bank, Natl. Assn. v Butler.

  3. has anyone found a link to this ruling?

  4. gotta love Shack

  5. KC, I guess I meant they don’t give a rats ass because they know they will pull one out of thin air or fabricate it making it their own anyway. ‘They don’t care’ as in, no matter who has it they will try to claim it anyway.

  6. RE: “They don’t give a rats ass about the title”

    Oh Girl, you need to get a grip! Of course its the Title they want! Its the only way to keep the dough and wash assets (cover up the fraud).

  7. @Carie 11:24 ,

    I like what’s in your link.. NICE.

  8. @ Charles Reed 05:09p

    AGREE WITH YOUR ANALYSIS , but that would be acknowledging the allonge/asmt/whatever as coming from a valid party ,, otherwise it is a nullity .. many of us have asmts from a “originator” who in actuality wasn’t part of the transaction to (usually) the master servicer who also didn’t put up money .. I like your premise (and yes it is all a fraud) , but I don’t like becoming part of the lie by ratifying the lie that the originator had anything to sell.

  9. Ginnie is not just the ‘guaranteeing’ party, I have come to see that is BULLRONI. They CLAIM to only be, but in year after year in GNMA audits they have announced their purchase of TBA & Hold MBS. I call BS. “Ginnie Mae’s Authority to Buy Mortgages” page 3 :
    http://www.ginniemae.gov/inside_gnma/Documents/statutes.pdf

    Most Ginnie’s issuers are not up to par for being document custodian and th pools can only have 1 DC per pool or MI pool. The Note is held by the document custodian, the DEBT lays with the federal reserve NY and everything else flows between the servicer>CTPA>FRBoNY
    TITLE, KC? I’d claim the owner has fee simple.
    They don’t give a rats ass about title. They just want the $$ behind it.
    Ginnie is a different ballpark than F&F…and I still call BULLRONI.
    I am starting to waffle on my personal position on Judges. Bad faith, money, fraud,forgery,owner, fudge nuggets and fiddlesticks I say!
    When the Judge holds these issues in his hand the only thing apparent is what HE/SHE is interested in. Justice, Maybe some vengeance, maybe a nap. Maybe Fiddlesticks.

  10. Charles, you’ve told us who holds the note and who owns the debt, would you like to share with us who holds title? 1-2-3 way split.

    Maybe the better question would be who (‘se) abandoned title?
    No Beneficiary for them …?

    Has more than one party abandoned claim to title?

  11. Deb, An Example would be

    NA as sub servicer for master servicer …
    Master servicer is a lender, but not your lender…

  12. Now you are talking my Language Neil,

    RE; “In cases where the statute of limitations has already run, the dismissal of the foreclosure action, is barred” ” from rebirth ”

    KC … goes to QT

  13. carie- re your link
    I suspect not an isolated situation

  14. hello the 1099A I have says the servicer type guy is lender, that’s just the tip of the iceberg now

  15. If the Notes been signed in blank and relinquished and is in the physical possess of another and there was no a purchase, the blank Note is forever separated from the debt and there is no legal way to put the two back together again.

    So there is no Beneficiary because you need to be both the holder of the Note and debt at the same time. A Note is not legally a Note if it does not have a debt attached to it, and you cannot collect on a debt without a Note!

  16. Where’s the Beef? Where are my payments and who is the real beneficiary?

    Focus

  17. Who is the lender (Beneficiary) ? the million dollar or in todays world Trillion Dollar question.

  18. Judge shack sets the exsmple
    This is what we all nerd to hit home
    Their hands are nit clean sng nothing they fo there after is.

  19. Follow up!

    It just occurred to me that TENS or maybe even HUNDREDS OF THOUSANDS of those affected might not even receive the NOTICE if they were already foreclosed and evicted more than one year ago and therefore the USPS change of address for forwarding mail may not be deliverable.

    Please follow up as the way the proposed settlement reads is that if 5% of those affected opt out it makes the settlement go away!

    Offered only as instructive information, not a legal opinion. I am not an attorney. I welcome any and all feedback.

  20. It’s such a SHAME that no other Judge knows as much as Judge Shack. So many homeowners have lost their home as a result of the lack of knowledge of the other Judges.

  21. Last week I received 2 Class Action Settlement notices. The case is Saccoccio v. JP Morgan Chase, et al. The day after receiving those I got 6 more just like the first two, except all 8 had different Case and Control Numbers.

    The case is from the Southern District of Florida and involves a $300M settlement negotiated for Chase’s force-placed insurance policies.

    Chase continues to force place hazard insurance policies (even on properties already foreclosed!) and apparently in multiples for a single loan.

    Please go to the saccocciosettlementinfo.com website and read the effect of filing a claim, but MORE importantly, the effect of doing nothing…or failing to opt out!

    YOU FORFEIT ANY AND ALL CLAIMS, PAST, PRESENT OR FUTURE as against Chase. Do yourselves a favor and read the terms of the proposed settlement available at the website above. It is not so clear in the packet you will receive by mail, although it is spelled out in bold faced all caps at the bottom of page 1 of the insert:

    “YOUR LEGAL RIGHTS ARE AFFECTED WHETHER YOU ACT OR DON’T ACT. PLEASE READ THIS NOTICE CAREFULLY, AND GET MORE INFORMATION IF YOU NEED IT. THE NOTICE WILL TELL YOU HOW TO GET THAT INFORMATION.”

    You need to be informed as it looks like Chase is attempting to finally and forever dispose of a large number of claims utilizing another sneeky back door “settlement” approach. Take the time to read and fully understand what is coming to you soon. The deadlines to respond are very strict and have huge ramifications.

  22. Judge Shack is my hero, even though that word is used too frequently. He is by all standards, an exceptional legal mind, believes in the equitable application of laws and rules…regardless of financial status and the purchase of the best legal minds…hooray to him, he is in fact, blazing the path of truth and justice, within the meaning of the oath he took empowering him, in his legal endeavors.

    I can only hope more will follow his lead!

  23. As I have already submitted a whistle-blower claim first in Aug 2011 to the SEC for exactly this with the WaMu government insured loan (1.3 million or them) that Wells Fargo was and still is servicing and foreclosing. It easier to see this crime in these cases because at not time could Ginnie Mae ever originate, buy or sale a home mortgage loan and has already said this but it a know fact that they have publish and is part of its regulation,

    FDIC already knew from dealing with IndyMac that these loans had title issues and it was Shelia Bair decision to not deal with this with WaMu because the bank threaten to deplete the entire FDIC insurance reserve and place the agency under the thumb of Treasury Secretary Geithner, in which Bair did not want.

    So this is were these loans that WaMu was suppose to have owned but were when relinquished to Ginnie, Fannie or Freddie with blank endorsed Notes without a purchase created a situation where all the debts are separated from the Notes. This does not even leave a unsecured loan but not loan, as the holder of the blank Note is legal, but what not a part of the situation is the purchasing of debt and result in forgeries having to be created to obtain an assignment or in the case that a loan was placed into the pool by the originator or they purchase the loans, and place them into the pools relinquishing the blank Notes yet are going back using the already title loan documentation as it currently correct, would make that a type of forgery in that it being used to foreclose but those old facts have changed and the court were not informed of the change in status.

    This Fannie Mae v. Carvalho put all this one step closer to some type of end if everybody stop wanting to invent a new wheel of these securities as Szymoniak v. Ace has already address but she one of the only people in the room that still understand what at issue. But I am sure other than the first case she got at least another pot in the fire an I am sure they had to pay off more with this last settlement because she address these issue of the JPMorgan settlement in her complaint. Who did the SEC pay on Oct 1, 2013 $14 million and why? They said the person did not want to be identified…what the Fox. We are talking about recovering over $100 million and the case nor the whistle-blower are identified????

    Any and every Ginnie Mae loan foreclosed since the program was created in 1971 could never have been done because of this huge Glitch!

  24. What is the case cite.

  25. The link to more info doesn’t work. Please provide a better link

    Thanks.
    Linda Z.

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