As a result of an unexpected scheduling conflict tonight’s show is postponed until next Thursday.
The news over the last week has been largely good. While many judges are still entering judgments against borrowers by rote, the truth about securitization is oozing out of the court system. A Tax court found that the investors were not secured creditors against the home and could not foreclose. That means that any claim “on behalf of the certificate holders” is false and perhaps void.
The CFPB is starting to ban servicers from accepting new loans to service until they can prove they cleaned up their act — especially with respect to modifications. A California court wrote that they were on the verge of finding that the modification process is a sham. That means that there are potential claims for damages, which have reached as high as $39 million thus far and that means that lawyers are starting to take notice of the pot of gold on contingency cases.
Wells Fargo and Bank of America in particular are taking hits practically every day leading them to file last minute voluntary dismissals. While this might cost as much as $100,000 in attorney fees to homeowner’s counsel it avoids a judgment for the homeowner, which preserves their gaming of the system and the investors and insurers and the government — most particularly the Federal Reserve who paid 100 cents on the dollar for worthless mortgage bonds — issued by REMIC Trusts whose assets consisted of derivatives or whose assets consisted of nothing at all. The fee awards are leading some attorneys to take cases entirely on contingency — just for the fee award.
We are on the verge in my cases and others I have been following of getting court orders for the response to discovery that includes the money trail. Thus for cases in which a nonexistent entity is named on the note and mortgage, it is plain as day that there is a high probability that although their name was used on the note and mortgage, no money funding the loan can be attributed to any entity using the name of the “lender” hence the term “pretender lender”.
There are many findings that there is a lack of continuity between the claims of the foreclosing party and the actual authority of the Plaintiff to be in court. Slowly the Courts are pushing the banks back, step by step. If the loan never made it into the Trust, as seems to be true on most cases, then the servicer might be the servicer for the trust but lacks any authority to claim representative authority for processing loan payments or enforcing the loan documents. So it might be the servicer for the trust, but NOT the loan, which is not in the Trust.
The case finding that the holder must control the note is particularly interesting because Wells Fargo used all the usual tricks and presumptions only to find that it still lost. This is because of the line of cases dating back centuries regarding commercial paper. A courier has no right to enforce the note even though he has it in his possession. But he can still file a case and even survive a motion to dismiss. Summary Judgment would be entered against the courier (along with some free bracelets and free room and board provided by the state or Federal government) because while the courier has the possession, he could not prove he had the “right to enforce.” Like the servicers and Trustees, he could allege that he was the possessor of the note and therefore presumed to be the holder. But that is not enough. He must allege and prove that he has the right to enforce — or that he is the holder in due course (or owner) of the debt and note. CONTROL therefore becomes the key byword out of that decision and it is supported by cases dating back many decades.
Yet opposing counsel for the banks still insist that they can rely on documents that talk about the transaction in which the loan was transferred but insist that they have no obligation to show the actual purchase of the loan. This is absent from their allegations and they say it is not necessary for their prima facie case. But the courts are starting to peek under the hood and they are starting to reject the bank’s assertion that the demand for proof of the payment in the alleged purchase of the loan is not discoverable because it won’t lead to information that might be admissible evidence that the presumption relied upon by the bank has been rebutted.
Lawyers framing their arguments in that fashion are finding more friendly responses from the court. What could possibly be the harm in finding out if the presumed transaction actually took place? And if it didn’t take place then why was the endorsement placed on the note and mortgage with an assignment as well?
So what the bank lawyers are finding is that they cannot pick up one end of the stick without picking up the other. If they are going to rely upon legal presumptions about the transaction for which they are submitting evidence (e.g. the note) then they must respond to discovery that seeks information to rebut those presumptions. The day of treating the presumptions as irrefutable is essentially over. The courts are catching up. Legal presumptions force the burden of proof onto the other party. But they do not eliminate the defenses. Hence demanding discovery relating to facts that would rebut the presumption is entirely correct and it would be error of the trial court to prevent the homeowner from seeking facts that are entirely within the care, custody and control of the foreclosing party.
If there is an original note then it is not unreasonable to trace the chain of possession of that note. Nor is it unreasonable to ask for proof that there was consideration for the loan in the first instance. And even if the borrower received money, that doesn’t automatically mean they received that money from the party whose name appears on the note and mortgage. And that matters because the enforcement of the note and mortgage by anyone other than the owner of the debt or the holder in due course or a holder with rights to enforce requires false representations and presumptions in court.
It also negates the authority of “servicers” who claim authority for representing the REMIC Trust when in fact their relationship with the trust is irrelevant because the debt and loan papers were never actually transferred into the trust. None of the people in the chain relied upon by the forecloser ever had legal control over the debt because they used investor money, contrary to their agreement with the investors, to fund the loans or acquisition of the loans. They cannot ignore the Trust in the actual transactions and then prevail in the case based upon the presumption that the Trust owns the loan.
And as we have seen in the tax cases published on this blog, the investors are NOT secured by the mortgage nor do they have any control over the note or mortgage. But they remain the owner of the debt because their money was sued to fund the origination or acquisition. And since the real control over the note and mortgage was never transferred to the Trust or the Trustee on behalf of the Trust, it cannot be said that the Trust, the Trustee or the servicer has any legal authority to do anything with respect to the loan even though there exists a pattern of behavior based upon false representations of authority.
The only negative factor looming on the horizon is the fact that the money for the hiring of extra retired judges is about to be cutoff and the pressure is on to terminate these cases any way the judge can do it — which usually means ruling against the borrower. This is a clear denial of due process and probably grounds to assert systemic bias which several attorneys in Florida and across the country are pursuing. The big problem is that this “extra money” is coming largely from the banks themselves who in effect are paying the salaries of the retired judges. This raises the possibility of individual bias. It might be time to voir dire the judge regarding the source of payment for his salary. The fact that it comes from state coffers is not sufficient if in fact the money is traceable to the banks themselves and the judge knows that.
Filed under: foreclosure |