Fact Check: Robo-witness knows nothing

Information is admitted in evidence only after a proper foundation has been laid. If the witness knows nothing about the foundation the evidence should not be admitted as evidence. Appellate courts will usually reverse a trial court’s error in ruling on evidence UNLESS the appellate panel decides that the error would not have made any difference in the outcome. The fundamental fact at the root of all foreclosures is that the homeowner owes a debt to the foreclosing party and has not paid.

In the passage below a witness supposedly employed by US Bank displays a lack of personal knowledge on anything that would contribute to foundation for establishing the standing of the foreclosing party. I have inserted in brackets the significance of each answer of an actual witness in a court proceeding.

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Videoconference deposition of JOHN G. RICHARDS,II

Would you please provide your official title for
11 the record.
12 A Yes, I’m the vice president at U.S. Bank within
13 the global corporate trust services group. [The problem that was overlooked here is that his title is not foundation for establishing the existence of a trust that is managed by US Bank as Trustee. Additional questions regarding the existence of any account that is under trust management by US Bank would have revealed lack of knowledge because the witnesses are not given any information that could be used by the homeowner or counsel for the homeowner. In truths I have repeatedly pointed out, if you proceed under the assumption that there is no “account” in existence under which Trust assets are managed for the benefit of beneficiaries, all the pieces fall into place. There is no Trustee because there is nothing that has been entrusted to the trustee for the benefit of beneficiaries. Thus parties claiming authority “from the Trust” to serve as services or master servicers lack any foundation to support the assertion of that authority. This is why no modification is signed by anyone other than the servicer acting as attorney in fact for the purported Trust or other foreclosing party.]


Q I see. Do you know who the beneficiaries are of

10 the WaMu trust?

11 A I do not know the specific beneficiaries — or I

12 would call them certificate holders. I don’t know the

13 identity of those investors or certificate holders. [Here is US Bank whom the attorneys have named as the foreclosing party. The witness is supposedly someone who knows about the USB trust arrangement for a REMIC Trust. Yet on the most basic questions about the existence of a trust — the existence of beneficiaries, he is unable to answer the question regarding their identity. A trust without beneficiaries is not a trust   — i.e., it is not an legal entity. In fact he is saying that there are no beneficiaries but that there are certificate holders. He can’t identify either the beneficiaries or the certificate holders. Note also that he knows nothing about the “certificates, which in most cases expressly state that the holder is NOT entitled to an interest in the loan, debt, note or mortgage. What they have is a promise to pay them money coming from a nonexistent trust.]

14 Q That’s fine. And because you don’t know, do you

15 know who would know or is there a list?

16 A I do not know specifically if there is a list

17 that would have the names of actual individuals or

18 entities who are certificate holders. [This further erodes the foundation for proving that the trust exists, the beneficiaries exist or the certificate holders exist. More importantly it is an admission that even a list of the certificate holders might not exist — thus corroborating a central point on this blog — that the money never went into the trust and that instead it was commingled with the money of other investors in a different entity altogether. I have referred to this scenario as a dark pool or slush fund in which the underwriting banks (who appoint themselves as Master Servicers) take charge of the investor funds instead of the money being administered by a Trust. Remember that in 2008-2009, the banks and servicers were asserting that such Trusts did not exist. That was probably a true statement in that the Trust was never an active trust and the trustee was never an active trustee.] 

19 It is common for many of these certificates to

20 be held. I’m not sure the exact way to hold it, but

21 something that is significant amount to brokerage or some

22 other place for the general holding of investment

23 securities. [He is referring to the practice of holding securities in street name — i.e., in the name of the brokerage house that allegedly completed the transaction on behalf of the investor. This enables the investment banking entity to assert ownership of the certificates for title purposes while supposedly holding the certificates for investors, the only evidence of which would be the end of month brokerage statement telling the investors that they own the rights to certificates even though the certificates are not in their name. Of course the rub here is that most certificates are uncertificated — merely computer entries. But that doesn’t mean that there isn’t a master certificate in electronic or paper form. The witness is saying he doesn’t know where such certificates are held, by whom or for what purpose] It’s a company called DTC that serves that

24 function just generally in the industry. But I don’t

25 have information about the identity of the specific certificate holders.

2 Q So you’re saying that this entity, DTC, holds

3 that information who would know?

4 MS. DARNELL: Objection. Calls for speculation.

5 THE WITNESS: I don’t know. I think I’m using

6 that as an example of sort of how these certificates are

7 commonly held and the entity that might be positioned to

8 communicate with actual certificate holders.

Q So does the trust actually communicate directly

11 with the certificate holders?

12 A I am not familiar with the — with any direct

13 communication between U.S. Bank as trustee for this trust

14 and certificate holders on an individual basis. I’m not

15 familiar with that at all. [This is as close as you will get to the admission that there is no active Trustee and there is no active Trust. If there is no communication or no knowledge of communication between the Trustee and the certificate holders then it is an inescapable conclusion that there is no activity in the alleged REMIC Trust. If there was such activity within the Trust it would need to be disclosed to the “beneficiaries” or “certificate holders.” There isn’t. The master servicer sends out a distribution report with the disclaimer that none of the information on the distribution report has been verified and could be entirely wrong.]


23 Q So with respect to it being vague and

24 ambiguous — and I just want to clarify. Do you manage

25 Chase as the servicer of the trust?

A I would not describe that there is any kind of

2 management or oversight role by the trustee of a servicer

3 in this trust or any other. [So the party claimed to be the servicer is not managed by and need not report to the party named as the Trustee — thus further establishing that the Trustee is inactive and the “trust” is a sham. If there is no “kind of management or oversight role by the trustee of a servicer” then who directs the “servicer” on the distribution of the money collected from homeowners? Some document must exist that is not being produced in court. It would be a document that establishes the duties and responsibilities of the subservicer. It would be executed by the “Servicer” and the Master Servicer but kept secret because the document would establish, once and for all, that for all purposes other than foreclosure the parties conduct business as though the trust did not exist.]

Given the above testimony and commentary, the testimony of the witness should not be admitted into evidence at trial. The reason is lack of foundation. Proper objections on foundation, leading, and hearsay must be repeatedly raised or else the testimony, however riddled with untruth, will be admitted because the objection was” waived” by failing to raise it timely. If the objections are sustained and the witness has managed to spew out an answer as you were objecting then a motion to strike is absolutely required lest the objectionable testimony remain in the record. As Plan B, bring these things out in cross examination and then move to strike the testimony.



14 Responses

  1. Deadly Clear is correct,

    The largest investors (top tier tranche holders) in the private label trusts were the GSEs. Thus, if a loan is reported in default to the underlying trust, it is also reported as in default to the GSE investor in that trust.

    Why was there such a demand during the financial crisis for private trusts? Higher interest rates.

    The loans went out one first door, into another second door, and back to the first door, where all investors (GSEs included) benefited for, relatively speaking, a long period of time – or, until collapse.

    And, yes, Deadly Clear is right, the debt is enormous. But, the government only bailed the banks. Homeowners have struggled to understand why they have bad documents.

    Homeowners were trapped after the crisis was exposed. Interest rates were increasing, as most were adjustable, and property values plummeting. And, while the banks went their merry way, homeowners were left struggling to pick up the pieces, and fight a system that is powerfully controlled- everywhere they go.

  2. Reblogged this on Deadly Clear and commented:
    Are we not yet clear on the distortion of nemo dat? Lay the ground work and pop the $11 Trillion dollar question. “Is this loan encumbered by (a GSE) either Fannie, Freddie and/or the U.S. Treasury?” None of which have appeared before the court or the homeowner in any form since the inception of the loan or their engagement in participation. Deception runs deep as the servicer has, in many cases, stated to the homeowner, “sorry, you can’t get a HAMP modification because you are not a Fannie or Freddie loan” …when in fact it is.

    A securitized trust operates from the basis of an electronically transferred “mortgage loan schedule” spreadsheet in a computer file. Not a physical cardboard box of papers. The trust is not a physical store, it’s a computer file.

    The attorneys filing the foreclosure for the trust are hired by the servicer(s) who work for usually Fannie or Freddie. The foreclosure attorneys know that the GSEs select and approve the attorneys the servicers hire and that they front for the GSEs. The attorneys hired by the servicer know that the GSEs are intentionally concealed. They also know there are back room rehypothecation agreements with the trusts, and they also know that the trusts may no longer exist or have been paid off.

    The reason the trusts are still fronting for the GSEs and/or the Treasury is because the paperwork surrounding the loans and property titles are a mess. And because the fraud on the courts and the debt is so massive that the GSEs and Treasury don’t want the taxpayers, shareholders or Congress to get a grip on the overall debacle.

    Reportedly, America has “$11 TRILLION” in MBS debt” – $5 TRILLION is said to be held by the GSEs and the rest by the Treasury. How, when the universe of mortgaged American homeownership is only about 100 million properties – much of which is in “affordable” housing, did the debt become so exorbitant? Do the math.

  3. The loans had to have been first on a balance sheet to apply any accounting principles. The trusts loans during the financial crisis never had that first critical step.

  4. “Assuming the transferor/sponsor retains the servicing function and holds a variable interest that could potentially absorb losses or receive benefits that may be significant to the issuer, the transferors/sponsors of private label RMBS would generally meet both tests. Accordingly, they would be deemed the primary beneficiary of the issuer trust, and thus
    the consolidator of the trust. As a result, they will keep the mortgage loans and issued bond classes on its books, thus “grossing up” both sides of the balance sheet and precluding gain on sale or establishment of a servicing asset.”

  5. At p. 46:

    “What roles does the originator play besides origination? What is the impact if originator is servicer? What happens if the originator holds bottom classes or if the originator holds bottom classes and is the servicer?

    U.S. Generally Accepted Accounting Principles (GAAP) analysis

    Clearly, the transferor/sponsor is intimately involved in the design of the transaction; indeed, it is likely that one of the purposes of this transaction is to facilitate the liquidity needs of the transferor. Thus, it is important to identify (1) which of the parties have a variable interest in the deal that would potentially expose them to the obligation to absorb
    losses or to receive benefits that could be significant to the issuer, (2) what are the activities that would most significantly impact the economic performance of the issuer, and (3) which entity is in control of those activities.”

  6. “ASC 860 emphasizes the role of agent in evaluating transactions. As defined, an agent is a party that acts for and on behalf of another party; thus, in the preceding scenario, the depositor would be acting as an agent. Generally speaking, transactions involving a third-party intermediary acting as agent on behalf of a debtor, the actions of the intermediary shall be viewed as those of the debtor in order to determine whether there has been an exchange of debt instruments
    or a modification of terms between a debtor and a creditor. On the other hand, commercial or investment banks often purchase whole loans from one or more loan originators (sometimes servicing retained) and accumulate those loans to be securitized using the dealer’s shelf when and how the dealer chooses. In this situation, the commercial or investment bank would be considered the transferor for purposes of applying the sale criteria to the securitization. When trying to determine whether an entity is acting as a principal or an agent in a transaction, securitizers may wish to consider the principal/agent guidance in ASC 470-50-40 on debt modifications and ASC 605-45-45 on revenue recognition by analogy.”

  7. @ ANON

    Further unraveling at p. 25 of the document:

    “In this situation, even though the depositor subsidiary of the commercial or investment bank transferred the loans to the trust issuer, it was doing so more as an accommodation to the loan originator and was not taking the typical risk as a principal. If the securitization transaction with outside investors for some reason failed to take place, the depositor would not acquire the loans from the originator. Accordingly, it is the loan originator that would be considered the transferor for purposes of applying the sale criteria to the securitization.”

  8. @ ANON

    At p. 9 of the Securitization Accounting document, linked below, the issue(s) in a servicer’s power to act is squarely addressed, e.g., etc.:

    “Kick-out rights
    GAAP and IFRS include similar concepts with respect to kick-out or removal rights, but they are framed in slightly different contexts within each respective consolidation model. But regardless of the direction taken to get there, the bottom line is that substantive kick-out rights (i.e., those that can be exercised at will and not upon a contingent event) held by a single party result in the party [SERVICER] performing the relevant activities not having power because it could be removed from that role at the whim of the party holding the removal right.”

    Accordingly, averring on information and belief violation(s) of securitization accounting principles based upon GAAP/FASB/IFRS/ASC is a route to exposing the monetary trails, interloper relations, and commensurate authority to act against the interest(s) of the entity/beneficiary/investors, as well as the MAKER of the paper.

    Debt ownership and control, or lack there of, will be shown in discovery on securitization accounting.

    Just one opinion.

  9. Kalifornia

    Good info for securitization going forward. But, the “securitization” born out of the financial crisis is gone — including most of the entities involved. Sold off to distressed debt buyers, by many avenues, including the government by it’s bail out of the major insurer. None, from that period exist in the original form. Although a “pool” of distressed debt may be found somewhere. It is no longer in the original so called trust.

  10. Maxim – False in one thing, false in everything. The doctrine means that, if testimony of a witness on a material issue is wilfully false and given with an intention to deceive, jury may disregard all the witness’ testimony. The maxim deals only with weight of evidence. It does not relieve jury from passing on credibility of the whole testimony of a false swearing witness or excuse jury from weighing the whole testimony. It is a mere rule of evidence affirming a rebuttable presumption of fact, under which the jury must consider all the evidence of the witness, other than that which is found to be false, and it is their duty to give effect to so much of it, if any, as is relieved from the presumption against it and found to be true. It is not a rule of law and false statement. It is not a rule of the law of evidence, but is merely an aid in weighing and sifting of evidence. It is particularly applied to the testimony of a witness who, if he is shown to have sworn falsely in one detail, may be considered unworthy of belief as to all the rest of his evidence. The rule is merely permissive and not mandatory. Where a party is clearly shown to have embezzled one article of property, it is a ground of presumption that he may have embezzled others also.

  11. The sentence, The Master Servicer send out the Distribution Report.
    I have Deutsch as the Trustee, and the distribution report is done by them. Chase is the Master Servicer. I have actually talked with the person that prepares the report, or at least has her name on it.

    So Neil or Bill can you explain the sentence.

  12. Posted the same under the last entry. It is why the Robo-witness knows nothing.

    There is much confusion over trusts and trustees. This case points out the law accurately. Sometimes one has to go against one’s own instincts, and play their game.

    Neil should delve into this issue more. One of the recent trends by servicers is to remove the trustee as the legal owner of the loan, and replace them with the trust name. Although the trustee is named in foreclosure cases, servicers often insist the trust owns the loan. This is an important distinction in subject matter jurisdiction. If the trust is named without a trustee, the trust must prove it is a corporation, and identify its certificate holders or beneficiaries for subject matter jurisdiction. If the trustee is named, the trustee must be active. And, that is where the problem lies. An active trust CANNOT operate without an active trustee who is the LEGAL owner.

    The trusts were formed, as Neil says, without funding, because the debt was already (wrongly) classified as in default, hence, no funding was necessary. This is also corroborated by the fact that the loans were never removed from on balance sheet accounting, because they were never a true loan asset to any bank. Thus, the securitization by removal to off balance sheet conduits is false. And, once discovered, the market, and nearly whole economy, collapsed.

    Since that time, the trusts have been torn apart and dissolved. Any discussion as to whether the trustee or trust owns the loan is just an exercise in futility. A word courts love to use. In this particular case, a new trust was formed, and it caught the court’s attention.

    Nevertheless, if we assume that the trusts and their trustees, were set up with the intent to be viable, the trustee played an active role, and was designated the legal owner of the loans. The servicer was required to send all payments to the trustee — who acted on behalf of the certificate holders. The trustee’s role was very active. However, once the trusts dissolved, or even if a loan defaulted before it’s dissolution, the defaulted loans (which were declared defaults from the onset), were swapped out by derivatives. Therefore, the trustee’s role became INACTIVE. While the trust can hold now declared defaults, under iRS law, for a certain period of time, the servicer no longer services for the beneficiary certificate holders, but for the swap derivative holder, who is not a part of the trust, and not a security holder (derivative are contracts not securities). Swap Holders remain concealed by the servicers — who own nothing but the right to service the debt UNLESS they are also the swap holder.

    If you are trying for modification, or have one, that modification is actually with the undisclosed devil — the swap holder debt buyer. If you are fighting foreclosure, it should be in federal court, as this case was, so that you may challenge diversity. Is the trustee active for your loan (which has likely been swapped out if the trust is active), and for the trust (which in effect has been torn apart and no longer operates in the intended manner).

    Even if a foreclosure is dismissed, someone will come back at a later date. So the above issues should be exposed to block the devil’s return.

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