TONIGHT! Neil Garfield on the “FREE House” Myth and TILA Rescission — How to deal with bias from the bench.

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Contrary to popular belief bias is neither grounds for recusal nor a basis for appeal in and of itself. But if you can show that the judge prejudged the case (i.e., made a decision before he/she heard any evidence, then you have some red flags — but still probably nothing on which to hang your hat.

STOP COMPLAINING AND ATTACK HEAD ON
If bias were the basis for challenging a decision there would be no final decisions. The losing party would always shout bias and the decision would go into limbo. Our judicial system recognizes that judges are human beings and that all human beings have biases and preferences. The question is not whether the bias exists; it is whether the bias caused the judge to prejudge the case.
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The backdrop of all judicial decisions is that judges refuse to give homeowners a free house. I tend address this head-on and state the obvious bias. Bias is not grounds for recusal in and of itself. Having stated the common bias, I then attack the notion of a free house.
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Under 15 U.S.C. §1635 the loan contract is canceled but the debt remains and is completely enforceable. The fact that the paperwork (note and mortgage/DOT) is now void by operation of law does not extinguish the debt.
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A creditor who relies on his payment for ownership of the debt can still sue for judgment and foreclose on that judgment along with other property and money of the borrower. However if the creditor with legal standing (i.e., the owner of the receivable created by the debt) fails to comply with the TILA Rescission statute it is precluded from collecting the debt.
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But the creditor still has options. It can avoid both compliance with the statute and avoid the loss of enforcement of the debt and can reinstate the note and mortgage (or DOT) by filing a lawsuit to vacate the TILA (statutory) rescission.
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In this case no creditor was named as owning the receivable i.e, ownership of the debt regardless of whether or not the paperwork (note and mortgage) are valid and enforceable.
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The would-be foreclosing parties are relying on the paper which is now void by operation of law. They decided, despite strong advice and articles from their own lawyers (readily viewed on the internet), that they would ignore the notice of rescission and would attempt to steamroll their way through court, inventing various restrictions that conflicted with the express unambiguous words of the TILA rescission federal statute.
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In short, there is only one way that a creditor can lose the debt altogether and a borrower can get a free house, to wit: noncompliance with 15 U.S.C. §1635

2 Responses

  1. Oh, by the way…..

    UNITED STATES OF AMERICA
    BEFORE THE
    BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
    WASHINGTON, D.C.
    In the Matter of
    CITIGROUP INC.
    New York, New York
    Docket No. 18-027-CMP-HC
    Order of Assessment of a Civil
    Money Penalty Issued Upon
    Consent Pursuant to the Federal
    Deposit Insurance Act, as Amended
    WHEREAS, Citigroup Inc., New York, New York (“Citigroup”), a registered bank
    holding company, owns and controls CitiFinancial Credit Company, Baltimore, Maryland
    (“CitiFinancial”), a nonbank subsidiary of the holding company;
    WHEREAS, Citigroup, through CitiFinancial, prior to September 15, 2017, indirectly
    engaged in the business of servicing residential mortgage loans made by CitiFinancial;
    WHEREAS, the Board of Governors of the Federal Reserve System (the “Board of
    Governors”) is the appropriate federal banking agency supervisor of Citigroup and CitiFinancial;
    WHEREAS, a horizontal review of major residential mortgage servicers conducted in
    2010 by federal banking agencies and a related review of certain practices at CitiFinancial raised
    concerns at that time that Citigroup had not adequately assessed the risks associated with
    residential mortgage loan servicing, foreclosure activities and related functions;
    WHEREAS, on April 13, 2011, the Board of Governors issued a Consent Order against
    Citigroup and CitiFinancial relating to mortgage servicing and requiring Citigroup and
    CitiFinancial to take specific measures to address deficiencies relating to mortgage servicing (as
    amended on February 28, 2013, the “Consent Order”);

    WHEREAS, the Consent Order stated that the conduct that was the subject of the
    Consent Order allegedly constituted unsafe or unsound practices in conducting the affairs of
    Citigroup within the meaning of section 8 of the Federal Deposit Insurance Act, as amended
    (12 U.S.C. § 1818) (the “FDI Act”);
    WHEREAS, on February 13, 2012, the Board of Governors issued an Order of
    Assessment of a Civil Money Penalty Issued Upon Consent against Citigroup based on the
    conduct that was the subject of the Consent Order;
    WHEREAS, beginning in the second half of 2014, Citigroup began taking steps to exit
    the mortgage servicing business of CitiFinancial;
    WHEREAS, Citigroup identified and reported evidence that, from January 2015 through
    August 2015, in connection with the exit of the servicing business of CitiFinancial:
    (a) mortgage-related affidavits were executed by CitiFinancial employees making
    assertions regarding the ownership of the mortgage note (“Lost Note Affidavits”) in which the
    affiant represented that the assertions in the affidavit were based on personal knowledge or based
    on a review by the affiant of the relevant books and records, when, in certain cases, the signer
    was not in a position to have personal knowledge or review the relevant books and records; and
    (b) Lost Note Affidavits were not properly notarized as they were not signed or
    affirmed in the presence of a notary.
    WHEREAS, CitiFinancial states that Lost Note Affidavits that may have been impacted
    by the conduct described above were, where necessary, replaced by CitiFinancial with properly
    executed and notarized affidavits before being used, in courts or otherwise, to make assertions
    regarding the ownership of lost mortgage notes;
    WHEREAS, the conduct described above occurred while Citigroup and CitiFinancial
    were subject to the Consent Order, which required them to remedy deficiencies relating to
    mortgage servicing;
    WHEREAS, as a result of the conduct described above, Citigroup, through CitiFinancial,
    engaged in unsafe or unsound banking practices within the meaning of section 8 of the FDI Act,
    as amended (12 U.S.C. § 1818);
    WHEREAS, Citigroup and CitiFinancial have taken steps to address the deficiencies that
    were the subject of the Consent Order, replaced, where necessary, the affidavits potentially
    impacted by the conduct described above with properly executed and notarized affidavits, and
    taken steps to correct weaknesses related to the conduct described above;
    WHEREAS, as of September 15, 2017, Citigroup has completed the exit of the mortgage
    servicing business of CitiFinancial;
    WHEREAS, the Board of Governors issues this Order of Assessment of a Civil Money
    Penalty Issued Upon Consent (the “Consent Assessment Order”) against Citigroup;
    WHEREAS, Citigroup has consented to the assessment of a civil money penalty in the
    amount of $8,600,000 by the Board of Governors pursuant to sections 8(b)(3) and (i)(2)(B) of
    the FDI Act, as amended (12 U.S.C. §§ 1818(b)(3) and 1818(i)(2)(B));
    WHEREAS, the board of directors of Citigroup has authorized the undersigned signatory
    to enter into this Consent Assessment Order on behalf of Citigroup, and consent to compliance
    with each and every provision of this Consent Assessment Order, and to waive any and all rights
    that Citigroup may have pursuant to section 8 of the FDI Act (12 U.S.C. § 1818), and 12 C.F.R.
    Part 263, including, but not limited to: (i) the issuance of a notice of assessment of civil money
    penalty; (ii) a hearing for the purpose of taking evidence on any matters set forth in this Consent
    Assessment Order; (iii) judicial review of this Consent Assessment Order; and (iv) challenge or
    contest, in any manner, the basis, issuance, validity, terms, effectiveness, or enforceability of this
    Consent Assessment Order or any provision hereof;
    NOW, THEREFORE, it is hereby ordered by the Board of Governors, before the filing of
    any notices, or taking of any testimony, or adjudication of or finding on any issues of fact or law
    herein, and solely for the purpose of settling this matter without a formal proceeding being filed
    and without the necessity for protracted or extended hearings or testimony, pursuant to sections
    8(b)(3) and (i)(2)(B) of the FDI Act (12 U.S.C. §§ 1818(b)(3) and 1818(i)(2)(B)), that:
    1. The Board of Governors hereby assesses Citigroup a civil money penalty in the
    amount of $8,600,000 to be paid upon the execution of this Consent Assessment Order by
    Fedwire transfer of immediately available funds to the Federal Reserve Bank of Richmond, ABA
    No. 05 1000033, beneficiary, Board of Governors of the Federal Reserve System. This penalty
    is deemed to be a penalty paid to a government agency for a violation of law for purposes of
    26 U.S.C. § 162(f) and 26 C.F.R. § 1.162-21. The Federal Reserve Bank of Richmond, on behalf
    of the Board of Governors, shall distribute this sum to the U.S. Department of the Treasury,
    pursuant to section 8(i) of the FDI Act (12 U.S.C. § 1818(i)).
    Communications
    2. All communications regarding this Order shall be sent to:
    (a) Richard M. Ashton, Esq.
    Deputy General Counsel
    Patrick M. Bryan, Esq.
    Assistant General Counsel
    Board of Governors of the Federal Reserve System
    20th and C Streets N.W.
    Washington, D.C. 20551

    (b) Charles Sgro, Esq.
    Deputy General Counsel
    Citigroup Inc.
    388 Greenwich Street
    New York, New York 10013
    Miscellaneous
    The provisions of this Consent Assessment Order shall be binding on Citigroup and
    its institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the FDI Act (12 U.S.C.
    §§ 1813(u) and 1818(b)(3)) in their capacities as such, and their successors and assigns.
    4. Except as otherwise provided in this paragraph, the Board of Governors hereby agrees
    not to initiate any further enforcement actions, including for civil money penalties, against
    Citigroup, and its affiliates, successors, and assigns, with respect to the conduct described in the
    WHEREAS clauses of this Consent Assessment Order to the extent known by the Board of
    Governors as of the effective date of this Consent Assessment Order. This release and discharge
    shall not preclude or affect: (i) any right of the Board of Governors to determine and ensure
    compliance with this Consent Assessment Order, (ii) any proceedings brought by the Board of
    Governors to enforce the terms of this Consent Assessment Order, or (iii) any proceedings
    brought by the Board of Governors against individuals who are or were institution-affiliated
    parties of Citigroup or CitiFinancial.
    Nothing in this Consent Assessment Order, express or implied, shall give to any
    person or entity, other than the parties hereto, and their successors hereunder, any legal or
    equitable right, remedy, or claim under this Consent Assessment Order.
    By order of the Board of Governors effective this 10th day of August, 2018.
    CITIGROUP INC. BOARD OF GOVERNORS OF THE
    FEDERAL RESERVE SYSTEM
    By: /s/ Rohan Weerasinghe By: /s/ Ann E. Misback
    Rohan Weerasinghe Ann E. Misback
    General Counsel and Secretary Secretary of the Board

    Like

  2. No one responded to this broadcast, and I don’t know why as it is very important. 1) The free house stigma was perpetrated by the media as justification for the bail out of the banks with little done for the homeowners until many years later — and that was too little too late.

    2) If the loan was not a true mortgage refinance, and fraud was involved – which is likely the case, and is rarely addressed in courts, then rescission may not apply. That is, notice of rescission can be for a minor issue that does not claim that the refinance was fraudulent.

    3) There are EXEMPTED TRANSACTIONS. I am not an attorney, but perhaps Neil can look at these, and explain how a fraudulent refinance may be exempted.

    If there was no valid contract for various reasons — how can there be a valid rescission?

    Perhaps, my use of the word fraud is strong. But, if anyone thinks the refinances were valid that is a wrong presumption.

    So presuming they were not valid refinances — how does this affect rescission – and, as Neil explains — how does it affect the claim that the debt is still owed?.

    Then we come back to the “free house” idea that was proclaimed by the media in support of the government’s action to save the banks. By that action we never learned what really happened, and why these loans were NOT on the balance sheet of the banks. All we had was what was called “toxic” securities – which could NOT be taken back onto the balance sheets of the banks because they were never there in the first place.

    Bottom line — how does one rescind a contract that should be void — and still owe the debt? By addressing rescission is not one admitting that the contract is valid — but, it can be rescinded for a simple reason such as not receiving two notices of Right to Cancel?

    The 4th is issue is the “creditor” Who is the real creditor? Federal Reserve has already addressed that the security investors are NOT a covered person defined as a creditor. Why the courts continue to allow this is unexplained and may go beyond human bias.

    Like

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