The Phantoms of Foreclosure: Phantom Creditors, Trusts and Debt

by Jay Guggenheim

Hurry!  Sign up for the ‘Death of a Salesman’ seminar on Monday at 4pm Eastern here.

 

Neil Garfield, attorney Charles Marshall and investigator Bill Paatalo discuss how mortgage servicers are collecting phantom debt on behalf of phantom creditors by creating fabricated and forged documents on the Neil Garfield show.  Servicers counterfeit mortgage notes and pursue collection of this ‘debt’- but who do they send the proceeds they collect to, if there is no true creditor or funded trust that can be identified, or can accept payments from the servicer?

It is now known that:

  • The banks funded themselves instead of the trusts which never really existed (phantom trusts).
  • The banks covered up their theft of investor money by originating or buying loans with investor money and not trust money.
  • The theft has been the subject of settlements in which the owner of the debt — the investors — is paid off with cash and “resecuritization” in which actual loans were “sold” into a new trust (Like Zuni) by a party who STILL didn’t own them (phantom sales).
  • The proceeds of judicial and nonjudicial sales do not go to investors but back to the “underwriters” of nonexistent worthless certificates issued by nonexistent trusts that are registered nowhere and unfunded (phantom trusts).
  • The underwriter acts as “Master Servicer” for the phantom trust and collects “servicer advances” that were neither advances nor from the servicer, but rather a return of investor capital even if it was OTHER investors.
  • The “Trustee” of the Trust is not a Trustee either in writing nor in practice (phantom trustees).
  • We know the banks are acting on their own behalf and not on behalf of the investors or the trusts.

What we still don’t know- is where do the proceeds collected by the servicers from homeowners go- if there is no Trustee or Trust? 

The servicers are trying a ‘hide in plain site’ strategy by deliberately adding new players to the chain of title and switching servicers so another opaque level is created.

  1. Servicers are often changed the moment a homeowner goes into default.  Therefore, if litigation ensues, the servicer won’t have to reveal who payments are being forwarded to because no payments are being made, and
  2.  Servicers often change immediately after a foreclosure sale occurs so it isn’t disclosed where the sale proceeds went to.

Therefore, Neil Garfield suggests that homeowners and attorneys subpoena, not demand in discovery, who receives/received payments from the servicer, and name not only the current servicer in litigation, but former servicers as well.   Charles Marshall points out that he sees this servicer-switch particularly with homeowners who prove difficult or litigious, and to create an additional layer to conceal the truth.  The servicer transfers are an attempt to launder the papertrail.  He also says that this strategy makes it more difficult to discover who the true lender at origination was.

 

Neil Garfield says this plan is standard operating procedure now and that he can “imagine a room full of lawyers trying to plan out a strategy to confuse the homeowners, attorneys and courts- first they must make the money and ownership transfers difficult to understand, and then they must devise a system that makes it difficult for pro se litigants to get the information they need to create a defense.”

Back in 2007 and 2008 Garfield said he was sending out QWRs on behalf of homeowners who were not in default and saw an interesting pattern.  The homeowners who were current, and not in foreclosure, would receive letters providing a payoff amount, but no copies of note or assignments; but homeowners in foreclosure would receive payoff amounts including endorsed notes and assignments, to establish a credible chain-of-title.  Thus, those in foreclosure received a full QWR response including fabricated and robosigned documents that created the appearance of legitimacy.

Neil Garfield says that the banks and servicers have created an Industry of Fraud where people can create an entity, purchase lists of old debt that may or may not be valid, and attempt to collect.  Most people will tell the debt-collector to prove it or go to hell, but there is a percentage of poor, disadvantaged or unsophisticated people who will pay up.  Mortgage servicers and REMIC trustees are following the same business model by attempting to collect on debt they can’t prove they own without resorting to fabricated and forged documents.

Investigator Bill Paatalo says that in all of the years of investigating the trusts he has not yet seen any evidence that the trusts were funded or the entity foreclosing on the home purchased the debt legitimately.  In litigation, he never sees a credit or certificate holder identified and the banks rely on smoke and mirrors to collect on the phantom debt.  He said that he recently had a client that was not in default but was curious about who owned his loan.  Bill’s client received a response from Aurora emphatically stating that the note had never been transferred and would never be transferred unless there was a default.  Aurora was perplexed why a homeowner that was not in default was concerned about the ownership of his loan.  Paatalo claims he has called the GSEs and Hud who refuse to return his phone calls so he can verify a Power of Attorney.  He says it is clear that the Power of Attorneys are being substituted for the missing assignment of mortgages- because Power of Attorneys are typically not recorded in the county records.

Phantom debt is being collected on behalf of phantom creditors and the nonexistent party is being papered over by pledging the loan to a trust that doesn’t exist, as agents of agents of agents, and false Power of Attorneys and Attorneys in Fact.  The scheme creates such a convoluted ‘fact’ pattern so that homeowners and their attorneys must try to untangle the ownership knot thus requiring hours and  hours of work.  Garfield points out that this layering, or laddering as Goldman Sachs calls it, id a deliberate attempt by the banks, to confuse whoever is bothering them.

For example, there may be a signature and the name of a corporation on a document, below  it will show Bank of America as successor to Lasalle Bank as Trustee, as Trustee for XYZ trust, as Attorney In Fact, for x entity.  This deliberate obfuscation should be brought to the attention of the court and is a strategy to push out time and space- to buy time and also for attorneys to create additional billing hours.

Neil Garfield calls this strategy of the major investment banks, the “real thiefs in interest” because they do not posses a party who can be identified as the “true party in interest” as required to declare a default or foreclose.  The investment banks create puppet attorneys who do their dirty work, and because of this risk, the lawfirms facilitating this crime are paid handsomely.

Bill Paatalo recently who is an expert on the ‘hide, conceal, and cover’ strategies by the banks, recently obtained a copy of a itemized settlement statement from a lawfirm defending a USBank/Chase foreclosure.  The bank had paid over $450k and over 1,224 billable hours to defend against a simple foreclosure action, to buy a Cynthia Riley issue and hide the fact there was no certificate holders.  Paatalo points out that the head attorney was paid $628 an hour for four months of full 40-hour work weeks.   It is likely the mortgage wasn’t a fraction of this amount, but it shows that the banks are afraid. He points out that it is unlikely that any investors would authorize that type of expenditure if they existed- but would look for an equitable solution.

Garfield says to take the billing expense issue one step further, and states that attorney fees are deliberately ran up by law firms defending the banks due to the risk of the work being done.   Attorneys submitting forged and fabricated documents are putting their careers on the line, therefore they build in a profit for undertaking that much risk.

Additionally, the lawfirms have software that can recreate the record, cover up bonuses, move numbers around and create legitimate billing hours that were never done.  This ‘bonus’ is overlooked by the bank as compensation for risk taking.    Listen to the audio recording above to listen to investigator Bill Paatalo discuss a recent tax settlement where the certificate holders state that they have no right to recover from the homeowner, and no right to enforce the mortgage or note.

And lastly, Neil Garfield educates homeowners that the chances of proving in court ‘what really happened’ will likely not happen for sometime, if ever, and the goal of the homeowner and his or her attorney should be to reveal the GAPS in what is being assumed as the foreclosure path.

 

 

 

 

 

 

3 Responses

  1. Mr. Seal. 99% of the loans in the so-called trusts were deemed “refinances” – not purchases of a home. No proceeds were ever disbursed to pay off the prior loan BY THE BORROWER, despite the borrower being told it was at the so-called “refinance. Only proceeds disbursed were any cash-out received by re-structured debt. So any proceeds to borrower were small or non-existent. However, there is debt owed, but it is not on a mortgage loan. The problem is — who is that “debt” owed to? To what phantom? The law says that the “phantom” must be disclosed. Who is it owed to? If you are trying to modify phantom debt, you better disclose who the CURRENT creditor/debt buyer is, or that modification is VOID.

  2. Our home was foreclosed and we have some secrets to expose. We were and still are victims of noise nuisance just like what happened to several employees in the US embassy located in Cuba. This noise harassment is very real and WE HAVE RECORDINGS OF IT. It started as early as 2006 which caused job loss and other problems. If you are a homeowner and underwent the same before foreclose, please share your experience. We need to find out who is behind in these extortion efforts as we got no help from the FBI.

  3. Correct — the underwriter is Master Servicer for the debt. That would be the banks. But, the banks funded NOTHING. These loans in these so-called trusts were NOT mortgages – even though they were presented to the borrower as such. The debt was already declared in default to the GSEs, with insurance paid out and just “restructured” at the so-called “refinance.” There is no “funding” of already classified default debt. Borrowers and investors were not informed. Investors – including the GSEs, simply purchased a “cash flow” stream of payments that they thought were backed by mortgages. Nope. They purchased the cash flow rights to debt collection backed by declared default debt. No different from the sale of credit card debt reported in default. Hence the financial collapse. The difference is — no one was told. No one. These loans were never on any bank’s balance sheet. Securitization/Accounting 101 — is that the “assets” are removed from on-balance sheet to off balance sheet. But, if the “assets” were never on anyone’s balance sheet –there was never a mortgage or asset or valid securitization. Security underwriters either purchased the debt rights (falsely called a refinance) directly – or by the fake certificate securities to a trust that they claimed was backed by mortgage loan ASSETS. NOT. All in the Accounting. So who owns collection rights? Undisclosed debt buyers to which the banks pawned off the rights after the crisis collapse. The problem is getting judges to understand – it matters. ,

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