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My observation is that the cases that are aggressively litigated before trial are most likely the ones that achieve success. “Success” is not necessarily a judgment for the homeowner, although that is happening with increasing frequency. Lawyers for banks are experimenting with the concept of “self-authenticating” documents to get by the legitimate defenses raised by foreclosure defense lawyers.
But the principal concept underlying aggressive litigation before trial is to take control of the narrative. From the start, this is the Plaintiff’s case and they automatically have the advantage. It is necessary to shift control of the story to the narrative proposed by the homeowner’s case. The narrative needs to be simple and direct, which involves an element of risk. If you don’t state your theory of the case, the court is left with motions that are raising hair splitting objections to the Plaintiff’s case.
The fact is that you don’t know the identity of the creditor because you don’t know the details of “private” transactions that depend upon facts that are only in the possession or access of the foreclosing party. They routinely file blanket objections, like anything relating to the the pooling and servicing agreement raises the objection that the homeowner is not a third party beneficiary of the agreement. If you let it end there, you are barred from getting vital information for your defense.
The “third party beneficiary” objection is a red herring. You are not seeking to receive the benefits of the trust. That is reserved exclusively for the trust beneficiaries. But the trust provisions in the PSA or other trust document specifically provide for the method by which loans enter and exit the trust. You don’t know if the loan ever made it into the trust and you you don’t know if the loan was repurchased or transferred out of the trust. And you don’t know the status of the books of account on your particular loan as it is shown by the creditor. If those books and records of the creditor show that the subject loan is paid in full through servicer advances, then by what right did the servicer declare a default?
So your narrative is that the entire chain is a smokescreen for irregularity or fraud which resulted in bad paper on bad loans. That is exactly what investors alleged when they sued the investment banks. That is what was alleged by Fannie and Freddie when they sued for repurchase of the loans. That is what was alleged when the insurers and other third parties sued the investment banks for refunds on payments made and received by the investment bank.
Why the investment bank? Because (1) the investment bank was the broker dealer who created and sold the mortgage backed securities issued by the trust and (2) they took the money and ran, doing whatever they wanted with it including pocketing huge profits from the sale of bad loans under the guise of a safe “bundle.” The credit rating and reputation of your client was used many times to give the bundle or pool some aura of legitimacy. Either the investment bank was the agent for the investors or the trust or it wasn’t. If it was the agent, then all the profits it made that were undisclosed coming from the “loan closing” should have been disclosed and credited to both the investor and the borrower (TILA, Reg Z).
But the investment banks take the position that their profits and fees arose from proprietary transactions. So according to them, they were not acting as agents for the trust when they made all that money but they were agents for the trust when they directly took control of the closing instructions with “lenders” they selected and the disclosures to borrowers. The problem with that story is that the PSA says that is not the way it should be done as it would damage the the REMIC’s tax status and increase the likelihood of economic loss. Your narrative should probably include the fact that the only reasonable interpretation of events is that the money from investors was used to fund closings and acquisitions of loans OUTSIDE OF THE TRUST, which was never followed as to payment, delivery of loan documents or assignments and endorsements within the cutoff period. Remember that acceptance of loans after the cutoff period is barred. The trustee must formally accept loans, in order to place the loan in the pool allegedly owned by teh trust. The trustee may not accept such loan packages after the cutoff without receiving an opinion letter from counsel
The PSA includes all the procedures and parties that are supposed to be involved in the transfer and Trustee’s acceptance of loans into the trust. Under New York State Law, which governs most common law REMIC trusts, any attempt to engage in a transaction or act of any kind that is in violation of the trust provisions is VOID, not voidable. And repurchase provisions of the PSA certainly raise the reasonable question in discovery as to whether the loan was purchased by third parties or repurchased by the “seller.” It raises the question of whether the investors actually received their money and are showing an account status that is not in default.
The “third party beneficiary” objection belies the fact that without a connection between the closing with the borrower and the closing with the lenders (investors) the debt does not exist in the manner portrayed by the foreclosing parties. All of this is corroborated by the fact that the forecloser is never claiming the status of a holder in due course. If they were holders in due course they would allege it because that would end most borrower defenses. So why do they insist that they are “holders” and that is enough? There is an inherent admission that the trust did not pay for the loan, did not act in good faith and knew about the borrower’s defenses. And a fair reading of the PSA clearly shows that the Trust was intended (as promised to investors) to receive the benefits of being a holder in due course.
So here is one version of attacking the forecloser (US Bank as trustee) in discovery who has raised blanket objections. It is by no means complete. And even if your facts appear to be the same make sure you do your homework, get a title and securitization report that raises the questions discussed above, and gives you reason to inquire about information that might lead to the discovery of admissible evidence.
Pro se litigants are cautioned here that this goes far beyond the normal knowledge of a layman in court. You should seek the services of a lawyer licensed in the jurisdiction in which your property is located AND who knows and understands all the facts of your case AND who has received a title and securitization report.
For further information please call 954-495-9867 or 520-405-1688.
COMES NOW the Defendants by and through their undersigned attorney and moves this court to enter an order denying the Plaintiffs’ objections to discovery and compelling complete responses with respect to Defendants’ Interrogatories, Request for Production and Request for Admission and as grounds therefor say as follows:
- This is a foreclosure case in which the Plaintiffs have alleged that a Trust is the creditor with respect to debt for which a promissory note is alleged to be evidence of the Defendant’s indebtedness.
- The Trustee is alleged to be US Bank as successor to Bank of America as successor to LaSalle Bank.
- The note is alleged to be secured by a mortgage executed by the Defendants.
- The Plaintiffs have not alleged a loan to the Defendant by the Plaintiff or anyone else in their alleged chain of “title” to the loan or loan documents. Instead they are relying upon rebuttable presumptions arising from execution of alleged documents bearing the alleged signature of the Defendants.
- Defendants have denied the Plaintiffs’ allegations and are pursuing inquiries, investigations and discovery as to the actual facts to determine if they are congruent with the presumed facts as alleged by the Plaintiff.
- Defendants challenge the alleged default, ownership of the debt and loan documents and the balance alleged in the complaint, and affirmatively defend with payment by way of servicer advances received by the trust beneficiaries from the servicer.
- Defendants also are inquiring as to the authority of US Bank, who is not named in the Trust instrument (Pooling and Servicing Agreement) as the Trustee. If US Bank is not the Trustee then the trust is not in court as a party. It is indisputable that the Trustee named is LaSalle Bank which was subject to two mergers on record: one in 2007 in which ABN AMRO acquired LaSalle in a reverse merger by which the stock of LaSalle was issued in such quantity as to give ABN AMRO total control over LaSalle, and the other in 2008 in an alleged merger that Defendants know little about except that announcements were made about the alleged merger with Bank of America.
- Defendants theory is that the Trust is not the creditor and that US Bank is not the Trustee.
- Defendants are entitled to pursue discovery for anything that might lead to the discovery of admissible evidence.
Counsel for the Plaintiffs has informed undersigned counsel that the basis for the objection in every case is that the Defendants are not third party beneficiaries of the Trust.
- Defendants position is that such an objection is irrelevant to the inquiry of whether the trust is in fact the creditor and whether US Bank has a legal basis for claiming succession to the position of Trustee.
- Defendants point out to the court that the suit is brought as a holder and not a holder in due course. Hence all defenses of the borrower may be raised as though the trust was the originator of the loan.
- Even as “holder” Plaintiffs fail to allege and object to any information as to the basis of their claim rights to enforce a claim on the alleged note and alleged mortgage.
- If the Plaintiff is merely a holder and not a holder in due course then the question becomes whether there was ANY transaction in which the Trust paid for the loan or if the trust is acting in a representative capacity for an undisclosed creditor.
- Or, if the reason that the Plaintiff is not alleging status as holder in due course, the other two reasons are potentially that the trust was not acting in good faith or that the trust had knowledge of the borrower’s defenses.
- Defendants investigation has led it to believe that at no time through the present have the loan documents ever been delivered to the appointed agent (Depository) as expressly set forth in the trust instrument. Defendants have a right to know when such delivery occurred, if ever and to inquire as to the circumstances of such delivery or non delivery.
These are all issues that Defendants are entitled to pursue.
- If the Trust owns the loan, as alleged, then it must have done so according to the terms of the trust instrument which is governed by New York State and potentially Delaware State law — both of which declare transactions outside the scope of authority of the Trustee to be void, not voidable.
- In order for the trust to have ever acquired an interest in the loan, the transaction must have occurred with the Trustee’s acknowledgement and consent. The Trustee at the time of the required cutoff period was not US Bank. This is indisputable. Defendants seek documents showing the actual money trail and the actual document trail — not just documents the Plaintiffs wishes to use at trial.
- As for the balance, Plaintiffs object to the Defendants getting confirmation that “servicer advance payments” were made to the trust beneficiaries and that all distributions required to be made to the “creditor” have been made. If such payments were made and the creditor is or was, at the time of the declaration of default, not showing a default because the creditor had been paid in full, it is a matter of argument as to whether such payments negate the default and whether the payments gave rise to a different cause of action by the servicer against the Defendants for unjust enrichment that would not be secured by the mortgage unless this court is going to cut pieces off the security instrument and declare equitable part ownership of the mortgage in favor of the servicer or other third party payor.
- Defendants have a right to know the balance actually due to the creditor on account of the alleged property loan apart from any claims of the servicer or other third party who may have made payments that were in fact received by or on behalf of the creditor(s). In other words, if the creditor is showing a different balance due, why is that? If the creditor is not or was not showing a default, why is that?
- Defendants theory of the case is that neither the trust nor any predecessor in interest ever participated in loaning money to the Defendants. If that is the case, it is something that could lead to the discovery of admissible evidence.
WHEREFORE, Defendants pray that this court enter an order denying each and every objection raised by the Plaintiff with respect to discovery and that the Court award attorney fees and costs as sanctions for obstructive behavior on the part of the Plaintiff.
Filed under: foreclosure |