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But the servicing rights exist only by virtue of the provisions in the Pooling and Servicing Agreement. There are no other documents showing the transfer of servicing rights or even the original grant of servicing rights as to this loan. At trial they will attempt to surprise counsel for the homeowner with a “power of attorney” or some other document that does not actually transfer rights and comes from a party who has no ownership or rights to enforce the loan. They have disclosed that they will introduce the PSA as evidence in the trial. But the loan most likely never made it into the trust. If that is true then the PSA is irrelevant as to the loan because it only deals with loans owned by the trust. They always decline to show us any transaction in which the Trust paid money for the loan.
The reason that they are (a) not claiming holder in due course status and (b) won’t show us that the trust actually paid for the loan is that the trust didn’t pay for the loan. In actuality, legally speaking, they destroyed the possibility of using the note as a negotiable instrument and raising the assumptions and presumptions that attach to holding a negotiable instrument. THAT results in proof of debt and proof that the debt is secured by the mortgage as to some lender in the chain, since they are not alleging holder in due course.
They probably can’t do that because WAMU was in actuality acting as a conduit and sham nominee for undisclosed “lenders” — a direct violation of the Truth in Lending Act and Regulation Z issued by the Federal reserve which dubs those loans as table funded loans and predatory per se.
Predatory per se means that it is against public policy. Since the essence of the transaction was against public policy, the court should declare that the foreclosing party has unclean hands. If the foreclosing party has unclean hands then it should not be permitted to prevail in a court of equity — in other words, the equitable remedy of foreclosure is not available.
The problem we have is that the Courts fail to recognize this analysis most of the time. They focus on the fact that the borrower has been declared in default because the borrower stopped paying. And the court further assumes that the declaration of default is (a) authorized and (b) true. Neither one is correct.
The servicer declares the default in part because they want to recover servicer advances, which makes them the real party in interest. But the servicer’s interest is NOT secured by the mortgage because the servicer and the borrower were never in privity and the servicer has not been assigned the mortgage. And since the creditor(s) have been paid, there actually is no default event and the declaration of default by the servicer was for its own interests, which are in conflict with the interests of the creditor who has not experienced any shortfall or default. Hence the foreclosure is wrongly used as a means to collect on the servicer’s claim for unjust enrichment for having advanced funds “on behalf” of the borrower (as a volunteer).
At trial the robo-witness is usually a corporate representative of the servicer, not the Plaintiff (foreclosing party). This person usually has had no access or knowledge as to what is on the books and records of the creditor. They, at best, only have information about what their employer has — which is partial snapshot of the payments made by the homeowner to one or more parties who wrongfully claimed to have an interest in the the loan. It is generally assumed that if the borrower stopped making payments that a default exists — but not if the creditor continued to receive payments under the heading of “servicer advances” or any other third party payment.
Those advances are NOT a liability of the Trust or the investors/beneficiaries. But the servicer has a claim for payment out of the proceeds of recovery from only a failed Loan, which means it is in the interest of the servicer to declare the default or failure of the loan even if that action is against the interests of the creditor and the borrower. So the servicer does NOT get paid unless the servicer is successful in declaring and enforcing a default in foreclosure, which is to say only if the servicer is successful in convincing a judge to ignore the reported status of the debt on the books of the actual creditor.
Since the interests of the service are not aligned with the creditor, the records they seek to introduce in court lack the element of trustworthiness required to qualify as an exception to the hearsay rule under the business records exception. This is how thousands of borrowers are winning their cases — but you don’t hear about it because they are paid by the banks and servicers to execute a confidentiality agreement, so the case can’t be publicized. Thus it appears that the banks and servicers are a monolith that cannot be defeated, when in fact they are losing all the time.
Filed under: foreclosure