NON-JUDICIAL CANCELATION OF LOAN DOCS: Rescission Litigation Coming on Many Fronts

For further information please email us at neilfgarfield@hotmail.com or call 954-495-9867 or 520-405-1688.

This is not a legal opinion on any one case, even if the transaction is a Florida transaction where I am licensed as an attorney. Consult with licensed legal counsel before taking any action or deciding not to take any action. I advise people to obtain our Rescission Analysis Package (RAP) before taking any action in or out of court.

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see Beach v Ocwen Federal bank 692 so2d 146 (US Supreme Court).

Opposing counsel will rely on Beach v. Ocwen Federal Bank, 692 So. 2d 146, on certiorari to the Supreme Court of Florida and then to the Supreme Court of the United States, decided on April 21, 1998. My suggestion to attorneys is that they should use the same case (in addition to Jesinoski). In Beach, the “lender” did file an action or affirmative pleading contesting the rescission. Nobody argued that it was outside the 20 day window so that was not an issue. Nobody denied or contested the date of consummation so no hearing was required to determine the moment of consummation which is usually hours, days, weeks, or even months or years after the date the borrower executed loan documents. Nobody denied the 3 years had expired. This is all procedural, so heads up, this is not for pro se litigants to argue.

The loan was originated by Great Western. Ocwen was later substituted for Great Western. The Beaches acknowledge their default by raised affirmative defenses alleging among other things that the bank’s failure to make disclosures under the Truth in Lending Act gave them the right under 15 USC § 1635 to rescind the mortgage agreement. The Florida Trial Court rejected that defense and that was affirmed by the District Court of Appeal which was then affirmed by the Florida Supreme Court. The point raised by the Florida Supreme Court was that Section 1635(f) in plain language evidenced an unconditional congressional intent to limit the right of rescission to three years and distinguished its prior cases permitting a recoupment defense by ostensibly barred claims as involving statutes of limitations, not statutes extinguishing rights defensively asserted. The lessen is that rescission should not be in your pleading as a defense. It is an event and no pleading is necessary. it is effective by operation of law.

The holding of the court in the US. Supreme Court was that a borrower may not assert the Section 1635 right to rescind as an affirmative defense in a collection action brought by the lender after the three-year period has run. The Supreme Court said that the three-year period is not a statute of limitation that governs only the institution of suit; instead it operates, with the lapse of time, to extinguish the right of rescission. The language in the statute that the borrower’s right “shall expire” with the running of time manifests a congressional intent to extinguish completely the right of rescission at the end of the three-year period. The matching provision is that if after one year neither the borrower nor the “lender” has taken legal action on the rescission, the borrower loses all rights to enforce the rescission and the lender loses all rights to make a claim on the debt which is no longer represented by a note or mortgage (they were rendered void by operation of law immediately upon mailing the rescission notice).

The court stated “the absence of a provision authorizing rescission as a defense stands in stark contrast to Section 1640(e) which provides that the one‑year limitation on actions for recovery of damages does not bar assertion of a violation in an action brought more than one year from the date of the violation as a matter of defense by recoupment.” The court went further to state that “this quite different treatment of recoupment of damages and rescission and the nature of recoupment must be understood to reflect a deliberate intent on the part of congress. Since a statutory rescission right could cloud a bank’s title on foreclosure, congress may well have chosen to circumscribe that risk, while permitting recoupment of damages regardless of the date a collection action may be brought.”

SUMMARY OF MY ANALYSIS

  1. The admission by Beach that there was a default causes a number of logical consequences. It is an implicit admission that the loan is owed to the party bringing the foreclosure and an implicit admission that the documents signed at closing were correct as well as an implicit admission that the loan was consummated (see below) at the time that the documents were executed.
  1. While the decision states in unequivocal terms that the right of rescission expires at the end of three years it does not address the starting point in time that the three years begins to run. This is answered in other cases where the general term that is used, as per the statute, is that the time limit on both the three-day and the three-year rescission starts to run from the date of “consummation.” The question is when did consummation occur? This is a question of fact that must be brought up by any party seeking to defend or vacate a notice of rescission that has been received.
  1. Consummation has not been defined as the time when the documents were signed. Obviously if the loan was not funded, the documents do not represent consummation of the loan contract. Rather, consummation occurs when the liability of the borrower arises by virtue of the fact that they have received consideration. In the case of these mortgage closings, the practice is to have the borrower sign the closing papers, which are then forwarded to some undisclosed third party for underwriting after closing, at which point they either “approve” the closing papers or not. At that point if the funds are sent to the closing agent and if the funds were provided by the party disclosed as the lender, the three years ( and the three days) would obviously commence running.
  1. The difference between the Beach case and the Jesinoski case is that the Jesinoski case makes a distinction between the effective date of the rescission which cancels the loan contract and renders the note and mortgage void, and the timeliness, which is an issue of fact that must be brought up by the alleged “lender” who clearly has the option to accept the rescission or to contest it. If they contest it they need to bring a lawsuit in order to have a court order which would vacate the rescission, which is effective by operation of law.

DISCUSSION

It is my conclusion that in the absence of a lawsuit from an alleged “lender” seeking to vacate a notice of rescission which has become effective by operation of law, according to the U.S. Supreme Court, the Truth in Lending Act, and the Federal Reserve (Regulation Z), they must bring a lawsuit within 20 days from their receipt of the notice of rescission or they have automatically and perhaps involuntarily accepted the rescission.

As stated in the Jesinoski decision the rescission is effective with the mailing of a letter from the borrower. This is an unusual procedure, which is very distinct in the statute and which is referenced by Justice Scalia in the Jesinoski decision. No such provision exists in favor of the lender to contest the rescission; and this is simply because congress had a very clear intent to

provide the lender with an opportunity to accept the rescission but no opportunity to stonewall the effectiveness of the rescission, which is affected by operation of law on the day that it is mailed. The time periods that run for the lawsuit from the alleged “lender” to contest the rescission and the time periods for the borrower to enforce the rescission start running from the date of receipt by the parties asserting either an ownership or representative (servicing) interest in the loan. It is during that period that the lender has the option of simply accepting the rescission and disbursing back all monies paid along with returning the cancelled note and if necessary filing a satisfaction of mortgage (if indeed the mortgage has even been submitted for recording). In the real world none of these actions tend to occur at the time of the execution of the documents by the borrower. They occur some unknown period of time after the borrower executes the loan documents based upon the borrower’s understanding of who the lender is and the terms of the transaction.

In the usual case we don’t know if the originating bank actually funded the loan and all indications or that they did not. Thus the disclosures are automatically wrong and predatory per se according to Regulation Z because if the originating bank did not fund the loan then it was a table-funded loan and presumably followed a pattern of conduct which makes it predatory per se and thus against public policy. See Regulation Z)

The fundamental defect in relying upon the Beach case, is that the Beach case is all about whether the borrower can raise the right of rescission as an affirmative defense to the foreclosure action. It does not address whether the borrower’s right of rescission ever became effective by operation of law. Only the Jesinoski decision does that.

The essential question here is not so much whether the statute operates as a statute of limitations or simply an expired right as set forth in the Florida Supreme Court and U.S. Supreme Court decision. The issue is procedural. If the lender believes that the rescission is invalid, then the lender must file some pleading in a court of competent jurisdiction in which it contests the rescission and seeks to vacate it, since the rescission is already effective by operation of law when it is mailed.

The point is that Congress wanted to make it possible for a borrower to cancel a deal without being required to hire an attorney, file a lawsuit, file affirmative defenses or anything else. The Congressional intent as stated by Justice Scalia in Jesinoski was clearly to put the burden on the lender to either decide to accept the rescission or to raise the issues of whether or not the right to rescind should be considered to have expired or was beyond the statute of limitations all of which hinge on questions of fact about whether consummation ever occurred or if it did when the consummation did occur and when the three-year period expired. There is also the question of equitable tolling given the fact that it is both public policy and common law policy not to allow a party who commits a criminal or civil act to benefit from their fraudulent behavior withholding the true information from the borrower until after the three years has run. This would defeat the entire purpose of the right of rescission which is all about complete and accurate disclosure, failing which the alleged “lender” would face criminal and civil liability.

The Beach decision, in 1997, obviously precedes Jesinoski by 18 years, at which time it was generally assumed that in order to have a rescission the borrower would be required to file some legal action for the rescission to be effective. The Beach court does not address that issue because it was not raised. But in the courts below in Florida it was a general assumption that some pleading by the borrower would be required in order to raise rescission.

Instead, it is quite obvious that rescission raises a jurisdictional issue. If the rescission is effective upon mailing, and it renders the loan contract void and it renders the note and mortgage void then the loan contract, then it follows that the note and mortgage cannot be used in any way at any subsequent time without the lender legally raising the issue and demanding affirmative relief from a court of law. This probably did not come up in the Beach case because that is exactly what the lender did. The borrower asserted the effectiveness of the rescission and the lender contested it by virtue of the expiration of three years. Both sides filed their claims in court, which is exactly what I have been saying since 2007. Where the lender has asserted that attack to vacate the rescission, the court is free to decide whether or not that lender was correct based upon the facts that are admitted or which are proven by one side or the other.

In the usual case that is not the case. In the usual case the borrowers have sent a notice of rescission and the only thing that has been received by borrower or borrower’s counsel is a letter or an email directing his attention to the Beach case. In addition counsel might receive a call from opposing counsel who states in quite definite terms that in order to have a rescission tender of money or property was required, a position which is clearly incorrect under the Jesinoski decision, the Truth in Lending Act, and Regulation Z.

BOTTOM LINE: TILA Rescission is an extreme remedy but it also extremely simple and it was meant to be both. Congressional intent was to hurt the banks if they failed to adequately disclose who was involved in the closing, how much money they were making and why. Like other specific statutory schemes a very small window is allowed to lenders just as a very small window is allowed to borrowers in non-judicial states. The same arguments the banks use against borrowers complaining about non-judicial foreclosure may be used to support non-judicial cancellation of the loan contract, the note, the mortgage and ultimately the debt itself.

32 Responses

  1. Alinna I agree most people reasonable or not in FL and throughout the country aren’t getting it unless there are alot more confidential agreements going on.

    Then besides interest, security when fraud, non consummation that’s where people really aren’t getting it. Serious victim syndrome going on.

  2. Alina…
    Reasonable people understand the Collateral needs cleared so that the property can be used as collateral for a new loan or buyer….
    What ever the case may be.

    The pretenders…understand this all to well.

  3. I want to add some comments that are unique to the State of Florida. As Neil referenced, Beach began in Florida’s Fourth District Court of Appeals. The main issue concerned whether TILA was a statute of limitations or a statute of repose. The Fourth DCA concluded that it was a statute of repose with the extended right being extinguished after 3 years. The Florida Supreme Court affirmed.

    But here’s what everyone in Florida is missing. In affirming the Fourth DCA, the Florida Supreme Court adopted the following language from the Fourth DCA’s opinion:

    “When a borrower exercises his or her right to rescind in either of the above circumstances, he or she is not liable for any finance or other charges, and any security interest given by the borrower becomes void upon rescission.[5] The end result is that the lender can only collect on the loan principal and loses any security for the loan’s collection.”

    Notice the last sentence. “The end result is that the lender can only collect on the loan principal and loses any security for the loan’s collection.” This is crucial because this is established law in the State of Florida. In Florida, “[w]here an issue has been decided in the Supreme Court of the state, the lower courts are bound to adhere to the Court’s ruling when considering similar issues, even though the court might believe that the law should be otherwise.” State v.Dwyer, 332 So.2d at 335.

    The lower courts in Florida are without power to decide any issue in contravention of a Florida Supreme Court opinion.

    In affirming Beach, the Supreme Court of the United States made clear that “[a] borrower who exercises this right to rescind “is not liable for any finance or other charge, and any security interest given by [him], including any such interest arising by operation of law, becomes void” upon rescission.” Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998).”

  4. JG, thanks. They also told me that they let you file letters is a miscellaneous file which is not cross referenced which did not make much sense.

  5. louise: “AMan, I have talked to the Clerk of Court’s office in SC, and they do not have anything in place with regard to letters of rescission or any notice of it. Talked to the Register of Deeds office.”

    jg: a register of deeds needn’t (and doesn’t exactly) have “anything in place” with regard to letters of rescission or anything else for that matter, tho they mostly record standard encumberances and transfers regarding real property. **If one is still in title, one may record what one wants as long as it relates to the property and is truthful to the best of one’s knowledge.
    If I wanted to record my Notice of Rescission, I would simply do a cover sheet something like this (staying within the recorder’s page margins so as not to have to pay extra for the recordation):

    “NOTICE OF LOAN RESCISSION

    Parcel number: xxx xxx xxxxx

    pa: 1234 my street
    My town, My State 43457
    July x, 2xxx

    (If I were going to also include a legal description here, I’d make sure it’s absolutely correct, but generally, the parcel number is what’s critical – depends on how one’s recorder indexes imo).

    This document and its 1 page attachment shall serve as Notice of my (our) Rescission of the note and dot / mtg partially memorialized at document no. xxxxxxxxxxxxxxx (recorder’s doc no. for dot / mtg – get online or go to recorder’s or find it however) dated January 25, 2002 and recorded on January 31, 2002.

    _______________________ ________________________

    Alice C. Myers Thomas J. Myers

    Notary here”

    Attach NOR – make sure the number of pages (in para above) is the same number of pages in the attachment (the nor one sent). I”D include the certification of mailing the NOR if I’d done one (these are done with the doc sent, like the notice of rescission or some type communication and they are often if not always sent with the communication).

    One’s notice of rescission might have been done a year ago, but one may still record it today. A notice of rescission itself may admit the validity of at least the original docs. I DON’T know, but even so, it wouldn’t eliminate defenses and or counter-claims, if any.

    *Here’s what one looks like:

    “CERTIFICATION OF MAILING

    I Certify that on the ____ day of _________, 20xx I sent this Notice of Rescission by fully prepaid U.S. mail to the following recipients:

    ABC Servicing Company
    address

    Registered Agent (see sos to see if there is one) for ABC
    address

    Any one else one thinks is appropriate (dot trustee? SoS?
    Dept of Business and Industry? Your mom? Santa? MERS in
    Reston, VA attn: legal counsel? secn’n trustee?)

    **That’s why it cracks me up when banksters jabber about notes and notices of servicing transfer recordations – neither are recorded.

    THESE ARE STRICTLY LAY OPINIONS and not legal or any advice. It’s just what I’D do – ASK A LAWYER

  6. Loiuse thank you.

  7. AMan, I have talked to the Clerk of Court’s office in SC, and they do not have anything in place with regard to letters of rescission or any notice of it. Talked to the Register of Deeds office. They said they do not have anything in place for that esp. because it is federal and that I would need to talk to an attorney about it. At this point, I think we are going to have to wait and see what happens. But as you said, they are not going to file a lawsuit within 20 days where they have to show how they came to get the Note and Mortgage.
    My other issue as someone on this thread said, these notes are in a trust allegedly. There are several documents required to show how it got to the trust. The trust means those documents cannot be sold again. Allegedly, the servicer is speaking for the Trust?? Once in the trust, that is it. It is supposed to be a REMIC trust which means once sold into the trust that is it..

  8. I think we should all read the above article or any of the TILA articles at least 3 times before commenting.

    Just because it is a new subject and it’s hard to teach an old Dog new tricks (just a saying)

    This is a great article by Neil one of his best. It took me time to digest.

    NEVER AGAIN

  9. @ el we’ve posted title info and links on TILA etc . To stop wasting time what’s ur point? That Garfield’s wrong? That’s the weakness of posting on here can’t search etc. But there may be others besides “us” that benefit even if repetitive so put ego aside. But Garfield presents a great summary here so what’s the deal?

  10. This is Steve Vondran’s (Esq.) more recent dialogue on the topic at hand of rescission and recoupment, in CA.
    http://www.foreclosuredefenseresourcecenter.com/2015/03/equitable-tolling-in-tila-loan-rescission-cases/

  11. Discussion of rescission in recoupment in CA case law – http://activerain.com/blogsview/2644613/the-defense-of-tila-recoupment-in-california

  12. @JG – most states exclude, if not severely restrict, real estate transactions from recoupment due to HOLA preemption of lender.

    IANAL, and I strive not to waste other people’s time.

  13. from some notes around fwiw:

    “tila damage claims = 1 year except as recoupment plus X “as provided by state law”. 15 U.S.C 1640(e). See also 1635(i)(3),
    “Nothing in this subsection affects a consumer’s right of rescission
    in recoupment under state law”.

    What I take that last line to mean is that nothing in the subsection affects (i.e., denies) one’s tila RoR in recoupment, recoupment being the state law referred to. So if state law provides for recoupment, (defenses, counter-claims which would normally be beyond their statute of limitations, generally), and my money’s on all states have recoupment statutes, tila rescission is allowed as a defense or counter-claim (I take it where grounds exist, of course).

    Without looking at any state’s law, I’ve read that recoupment is available against an “action”. Some schools claim non- j f/c doesn’t constitute an “action” on the grounds that there’s no court involvement when the f/c is brought thru a trustee (aka the hired gun of the bankster). To me, that’s just bunk. Of course it’s an “action” and modifying the simple noun “action” with an adjective by demanding that recoupment be limited to a “COURT (here an adjective) action” for f/c is absurd and highly prejudicial to anyone with a dot instead of a mtg (where judicial f/c is pursued).

  14. It’s late, and my brain is tired. I think Beach ruled that TILA rescission, as an affirmative defense, may be asserted within the 3 years, but not after.

    As for ‘consummation’, it has nothing to do with whether the TILA documents are conveyed at all, since the statute specifically references the circumstance of the extinguishment of the TILA right of rescission after 3 years, even if the documents were never provided to the obligor.

    IANAL, so read the damned statutes and rulings for yourselves. There’s too many baseless opinions expressed here to be of any use (mine included).

  15. Reblogged this on California Freelance Paralegal and commented:
    Great blog post by Neil Garfield discussing his analysis of the Beach v. Ocwen Federal Bank case decided by the United States Supreme Court and how it relates to rescission litigation.

  16. Consider these toxic loans Bill Black talked about ( author of best way to rob a bank is to own one)
    http://securitization.weebly.com/private-label-mbs.html

  17. That’s why we need a complete electronic property records database made after the efficient advanced model of MERS!

  18. “Einhorn did his best to attack the assignment on appeal. First, he argued that the assignment was flawed because Ms. Nava signed the assignment on October 23rd, while the notary’s acknowledgment of her signature was not taken until October 30th. The Court rejected the argument and noted that “actually signing the record in the presence of a notarial officer is not necessary as long as the individual declares (wow – in other words, just says so) while in the presence of the officer at the time the acknowledgment is made, that the signature already on the record is, in fact, the signature of the individual.”

    Imo this is how the law is eroded. A notary not only acknowledges a signature, he or she acknowledges the date it’s signed – for good reason. It’s to keep people from dummying-up dates on any number of documents / instruments. Dates matter. They can matter a lot.
    This is another whacked ruling out of a state SC.

    What is actually acknowledged is this (not facts):
    the notary is affirming only that Ms Nava told her this is her signature and that she applied it on a particular date past. That’s not what a notary does. A notary witnesses a signature in front of her on the day it is, today’s date because the signature date matters – it’ll be seen as the effective date most likely. A notary must witness a signature imo. Banksters tried back-dating assignments and it didn’t work – for cause, so don’t know whaddup with this bs. IF Ms Nava didn’t have a notary handy, she shouldda waited to sign it til she had one.
    There are things which the law appropriately calls “de minimus”. This isn’t one of them because effective dates are too important. imo.
    Many if not all documents can’t be recorded until they’re notarized. So what’s the effective date? The date Ms Nava claims she signed it or the date it was acknowledged? My money’s on the courts we’re having such a swell time with will say the date a person claimed to have signed it, which is bull (I don’t believe the date was was crucial in the instant case, but I’m with Einhorn nonetheless).

  19. In Wisconsin I believe that you have to get a order from a judge in order to make a recording for the property, because it is a change basically in ownership. I may be wrong?

  20. A man, I have a :”friend” at the clerk of court’s office. He told me that there were phoney lis pendens being filed at the Register of Deeds office and that we had to bring legal (or not so legal) papers to him first and then it was determined whether it would be recorded with the Register of Deeds. I will call him and see what he says. He probably does not know about rescission though, and he may have to do some digging before getting back to me.

  21. oops in Non Judicial States. Beach, Yamamoto etc….. we dont need that I think once the 20 days are over.

    THANX

  22. Neil why not concentrate on the fact THAT They dont answer in almost all cases with a lawsuit within 20 days. What do we do next? Especially if they continue with the foreclosure.

    How do we record the notice of rescission which is Effective by operation of law which is the same as a Court order.and what do we do when the county recorder doesnt know what we are talking about and give us a hard time recording it.

    NEVER AGAIN

  23. Boots part of basic approach id say. If there’s deception uv been misled language even uses trickery wording just send to whoever’s claiming to be servicer/lender. They have to prove standing, debt etc. Let them go down securitization rabbit hole. But hopefully you have something to back up your being misled or other fraud which can ho back to audit for securitization fail but can be predatory lending or other misrepresentations. Not legal advice just barnstorming.

  24. A Man exactly what people can’t get their heads around the basics. And these ivy league judges, lawyers all knew it. They’re caught or in denial.

  25. Enforce the Contract….

    Requires Consumation. ….

    Rescission Requirements undo Consumation.

    OK then…
    Many Blessings to All!

  26. The directive goes back to Bush/Paulson and the too big to fail. Holder/Gheitner sold Obama or he and Bush were in on it and part of both of their legacies.

  27. From a friend:

    article below is from 2012 by our friend Scott Paltrow. Today an article saying Eric Holder has rejoined Covington and will be at work in Sept.
    And prior the Covington attorneys worked to create MERS.

    Holder might as well have gotten his paycheck directly from Jamie Dimon.

    This is why homeowners were sacrificed and Obama was part of the marriage between justice dept and big banks.

    The whole Lehman thing etc. is all contrived.

    I’m sure Holder sent some sort of a directive to the judges.

    By Scot J. Paltrow

    (Reuters) – U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

    The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

    Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.

    Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.

    The evidence, including records from federal and state courts and local clerks’ offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.

    In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners’ lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven’t responded publicly to any of the requests.

    While Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co – as well as at least one other bank that is among the 10 largest mortgage servicers.

    DEFENDER OF FREDDIE

    Servicers perform routine mortgage maintenance tasks, including filing foreclosures, on behalf of mortgage owners, usually groups of investors who bought mortgage-backed securities.

    Covington represented Freddie Mac, one of the nation’s biggest issuers of mortgage backed securities, in enforcement investigations by federal financial regulators.

    A particular concern by those pressing for an investigation is Covington’s involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.

    Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. — roughly 60 million loans.

    But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS “vice presidents” or “assistant secretaries.”

    Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment on Covington legal work done for MERS.

    It isn’t known to what extent if any Covington has continued to represent the banks and other mortgage firms since Holder and Breuer left. Covington declined to respond to questions from Reuters. A Covington spokeswoman said the firm had no comment.

    Several lawyers for homeowners have said that even if Holder and Breuer haven’t violated any ethics rules, their ties to Covington create an impression of bias toward the firms’ clients, especially in the absence of any prosecutions by the Justice Department.

    O. Max Gardner III, a lawyer who trains other attorneys to represent homeowners in bankruptcy court foreclosure actions, said he attributes the Justice Department’s reluctance to prosecute the banks or their executives to the Obama White House’s view that it might harm the economy.

    But he said that the background of Holder and Breuer at Covington — and their failure to act on foreclosure fraud or publicly recuse themselves — “doesn’t pass the smell test.”

    Federal ethics regulations generally require new government officials to recuse themselves for one year from involvement in matters involving clients they personally had represented at their former law firms.

    President Obama imposed additional restrictions on appointees that essentially extended the ban to two years. For Holder, that ban would have expired in February 2011, and in April for Breuer. Rules also require officials to avoid creating the appearance of a conflict.

    Schmaler, the Justice Department spokeswoman, said in an e-mail that “The Attorney General and Assistant Attorney General Breuer have conformed with all financial, legal and ethical obligations under law as well as additional ethical standards set by the Obama Administration.”

    She said they “routinely consult” the department’s ethics officials for guidance. Without offering specifics, Schmaler said they “have recused themselves from matters as required by the law.”

    Senior government officials often move to big Washington law firms, and lawyers from those firms often move into government posts. But records show that in recent years the traffic between the Justice Department and Covington & Burling has been particularly heavy. In 2010, Holder’s deputy chief of staff, John Garland, returned to Covington, as did Steven Fagell, who was Breuer’s deputy chief of staff in the criminal division.

    The firm has on its web site a page listing its attorneys who are former federal government officials. Covington lists 22 from the Justice Department, and 12 from U.S. Attorneys offices, the Justice Department’s local federal prosecutors’ offices around the country.

    As Reuters reported in 2011, public records show large numbers of mortgage promissory notes with apparently forged endorsements that were submitted as evidence to courts.

    There also is evidence of almost routine manufacturing of false mortgage assignments, documents that transfer ownership of mortgages between banks or to groups of investors. In foreclosure actions in courts mortgage assignments are required to show that a bank has the legal right to foreclose.

    In an interview in late 2011, Raymond Brescia, a visiting professor at Yale Law School who has written about foreclosure practices said, “I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history.”

    Holder has resisted calls for a criminal investigation since October 2010, when evidence of widespread “robo-signing” first surfaced. That involved mortgage servicer employees falsely signing and swearing to massive numbers of affidavits and other foreclosure documents that they had never read or checked for accuracy.

    Recent calls for a wide-ranging criminal investigation of the mortgage servicing industry have come from members of Congress, including Senator Maria Cantwell, D-Wash., state officials, and county clerks. In recent months clerks from around the country have examined mortgage and foreclosure records filed with them and reported finding high percentages of apparently fraudulent documents.

    On Wednesday, John O’Brien Jr., register of deeds in Salem, Mass., announced that he had sent 31,897 allegedly fraudulent foreclosure-related documents to Holder. O’Brien said he asked for a criminal investigation of servicers and their law firms that had filed the documents because they “show a pattern of fraud,” forgery and false notarizations.

    (Reporting By Scot J. Paltrow, editing by Blake Morrison)

  28. Boots, that’s a good question. The chain of events or chain of custody is another area the bankster/servicers have a problem with, but you get no discovery that would prove it.

    A man, you are right because we now have a ruling by the Supreme Court that changes things drastically.

    The domino effect will now take place because the Greeks have the courage to tell the banksters to fly a kite. Crushing debt is killing the planet.

  29. how could a borrowers send their notice of rescission if their loan note has been sold to securitized trust?

  30. Legislating from the bench is coming to haunt the banksters. 3 years or and 3 days starts from January 13th 2015 because up until then the Legislating from the bench did not allow the borower to know if there was fraud or when the the Deal was Consumated.

    Basically the Judges by legislating from the bench did not allow to know if there was fraud.

    The above is just my humble laymens amature opinion.

    The Greek are also being called Lazy Deadbeats by Deutsche Bank.

    Arbeit Macht Frei same as the residents of Auschwitz Death Camp.

    NEVER AGAIN

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