Punitive Damages for Violations of Automatic Stay in Bankruptcy §362

Since 2008 I have called out bankruptcy practitioners for their lack of interest in false claims of securitization. The impact on the bankruptcy estate is usually enormous. But without aggressive education of the presiding judge the case will not only go as planned by the banks, it will also lock in the homeowner to “admissions” in bankruptcy schedules and orders that lead to a false conclusion of fact.

Where a pretender lender ignores the automatic stay Bankruptcy judges are and should be very harsh in their penalty. The stay is the bulwark of consumer protection under bankruptcy proceedings which are specifically enabled by the U.S. Constitution. Hence it is as important as free speech, freedom of assembly, freedom of religion and the right to keep and bear arms.

The attached article shown in the link below gives the practitioner a running start on holding the violator responsible and in giving the homeowner a path to punitive damages, given the corrupt nature of the mortgages and foreclosures that arose during the great mortgage meltdown.

This might be the place where a hearing on evidence is conducted as to the true nature of the forecloser and a place where the petitioner/homeowner will be given far greater latitude in discovery to reveal the emptiness behind the presumptions that the foreclosing “party” exists at all or to show that it never acquired the debt but seeks instead to enforce fabricated paper.

Remember that in cases involving securitization claims or which are based upon apparent securitization patterns the named “Trustee” is not the party in interest. The party is the named “Trust.” If the Trust doesn’t exist it doesn’t matter if the Pope is named as the Trustee, there still is no existing party seeking relief from the Court.

see Eviction Can Lead to Sanctions Including Punitive Damages for Violation of Automatic Stay

The challenge here is that most bankruptcy lawyers are not well equipped for litigation. So it is advised that a litigator be introduced into the case to plead and prove the case for sanctions, if the situation arises in which a violation of stay has occurred or if there is an adversary proceeding seeking to prevent the pretender lender from acting on its false claims.

Most of the litigation in bankruptcy court has simply been directed at motions to lift the automatic stay. In such motions, the petitioner is merely saying we want to litigate this in state court. The burden of proof is as light as a puff of smoke. If the court finds any colorable interest in the alleged loan, it will ordinarily grant the motion to lift stay — as it must under the existing rules. Homeowners in bankruptcy find it a virtually impossible uphill climb to defend because they are required to have evidence only in possession of the opposing party who also might not have the information needed to prove the lack of any colorable interest.

But the lifting of the stay applies to the litigation concerning foreclosure. It does not necessarily extend to the eviction or unlawful detainer that occurs afterwards. And where the stay has not been lifted the pretender lender is out of luck because there is no excuse for ignoring the automatic stay.

So further action by the foreclosing party is probably a violation of the automatic stay. And in certain cases the court might apply punitive damages on top of consequential damages, if any. The inability to prove actual damages is relatively unimportant unless the homeowner has such damages. It is the violation of the automatic stay that is paramount.

The article below starts with a premise that the “creditor” has received notice of the BKR and ignored it — sometimes willfully and arrogantly.

Here are some notable quotes from this well-written article by Carlos J. Cuevas.

The imposition of punitive damages for egregious violations of the automatic stay is vital to the function of the consumer bankruptcy system. Most consumer debtors cannot afford to pay their attorneys to prosecute an automatic stay violation. The enforcement of the automatic stay is predicated upon major financial institutions observing the automatic stay.

If there is a doubt as to the applicability of the automatic stay, then a creditor can obtain a comfort order as to the applicability of the automatic stay, or obtain relief from the automatic stay from the Bankruptcy Court.

“Parties may not make their own private determination of the scope of the automatic stay without consequence.”

What would be sufficient to deter one creditor may not even be sufficient to gain notice from another. Punitive damages must be tailored not only based upon the egregiousness of the violation, but also based upon the particular creditor in violation.

In determining whether to impose punitive damages under Bankruptcy Code Section 362(k), several bankruptcy courts have identified five factors to guide their decision. They are the nature of the creditor’s conduct, the creditor’s ability to pay, the motives of the creditor, any provocation by the debtor, and the creditor’s level of sophistication: In re Jean-Francois, 532 B.R. 449, 459 (Bankr. E.D.N.Y. 2015).

The fact that Church Avenue pursued the eviction more than a week after it learned of the debtor’s bankruptcy suggests that Church Avenue either made its own—incorrect—legal conclusion with respect to whether the eviction would be a stay violation, or decided that moving ahead to empty the building quickly and evict the occupants was worth more to it than the risk associated with defending a future § 362(k) motion.

when a creditor acts in arrogant defiance of the automatic stay it is circumventing the authority of the bankruptcy judge to exercise authority over that particular bankruptcy case. A bankruptcy judge is the only entity vested with the authority to determine whether the automatic stay should be lifted.

Egregious violations of the automatic stay can be deleterious to a consumer bankruptcy debtor. For example, a creditor who refuses to return a repossessed vehicle after the commencement of a bankruptcy case can create a significant hardship for a consumer debtor. A debtor whose vehicle has been repossessed may not be able to rent a substitute vehicle. This can create a significant hardship for a debtor who has to commute to work, who has to transport a child to school, or who is a caregiver for a sick relative.

How Do We Know That the Name of the Trustee was Rented?

The practice of paying a fee to a “service provider” to conceal the real nature of a transaction and the real parties in interest has been at the center of all Wall Street schemes that are at variance from conventional loan products.

Virtually all parties who appear in the chain of title or possession in securitization schemes are parties who rent their name to lend credence to the illusion of the loan transaction, loan transfers and foreclosures.

The truth is simply that the debt is never purchased and sold in such circumstances. But paper is created to create the illusion that “the loan” has been purchased and sold. It wasn’t. This illusion is created by simply using the names of the biggest banks in the world.

See Rent-A-Name popular amongst banks

So Payday lenders, the bottom feeders of an already corrupt lending industry, are renting the names of Native American tribes in order to escape rules and laws that apply to lending in general and Payday lenders in particular. They do it because the tribes might be exempt from certain Federal laws and rules. This enables them to charge higher and higher “interest rates” that are in fact gouging American consumers. So the tribal name or jurisdiction is invoked and the lenders pretend that they are not the real parties in interest. More pretender lenders.

This is what happens when we don’t enforce the existing laws and rules in the first place for fear of angering or collapsing the major banks. The prevailing view is that collapsing the TBTF banks — i.e., putting them out of business — is a bad thing no matter how badly they behave.

In the case of REMIC Trusts, big name banks have a tacit and express agreement (which should be pursued in discovery) in which they each will allow their names to be used or rented for a fee. This cross pollination of names, makes it appear that the giant banks are in fact the injured parties in foreclosures. I can say with 100% certainty this is not the case where claims of securitization are involved.

Banks have been quick to point out when faced with judgments for costs, fees or sanctions that they are NOT the foreclosing party and that their name only appears as “Trustee” of a self-proclaimed REMIC Trust. The “party” is the REMIC Trust itself, they say. But when you peek under the hood, the named Trust is just that — only a name. There is no trust and there have been no transactions in which the nonexistent trust’s name has been involved wherein loans have been purchased — or in which anything has been purchased.

Logic dictates and data confirms that the reason for this lack of transactional data is that there were no such transactions. Logic further dictates that the only possible conclusion is that the “investor money” was never entrusted to the falsely named big bank, as trustee and therefore could not have been entrusted to the REMIC Trust. Hence a key element of any valid trust is missing — the active management by a named trustee of assets that were entrusted tot he trustee on behalf of beneficiaries.

So there is no trust and there is court jurisdiction to grant relief in the name of a nonexistent trust. Reading the so-called trust instrument (Pooling and Servicing Agreement) also reveals the absence of trustor/settlor. So not only is the putative trust empty, it also lacks a trustor and trustee. Further inquiry into the PSA and the indenture for the the fake RMBS certificates reveals that the investors are not beneficiaries of a trust because even if the trust existed, the indenture disclaim such an interest in compliance with the buried description in the PSA.

So there is no trust, no trustee, no trustor, and no beneficiary. The investors’ only interest is in the form of a constructive trust, shared with other investors who may or may not be in the same “pool”. The opportunity for commingling money from thousands of investors in multiple pools is just too good for the bank to pass up.

Thus the laws and rules governing the highly complex lending marketplace require only an illusion of compliance instead of the real thing. Court administrators justified their “rocket dockets” by judicial economy and expediency, requiring the courts to hire more judges and personnel. But that is only true if the foreclosure were real. Some courts have required that the original note must be filed with the court upon suit and others require an affidavit describing possession and ownership of the so-called loan documents. Some affidavits must be executed by the lawyers seeking foreclosure on behalf of their clients.

My question is if the trust does not exist except in the minds of certain financiers and there are no trust assets and no active management of them (obviously) then how truthful is it for any lawyer  to execute documents for filing in court on behalf of a client that the lawyer knows or should know does not exist?

 

Impact of Serial Asset Sales on Investors and Borrowers

The real parties in interest are trying to make money, not recover it.

The Wilmington Trust case illustrates why borrower defenses and investor claims are closely aligned and raises some interesting questions. The big question is what do you do with an empty box at the bottom of an organizational chart or worse an empty box existing off the organizational chart and off balance sheet?

At the base of this is one simple notion. The creation and execution of articles of incorporation does not create the corporation until they are submitted to a regulatory authority that in turn can vouch for the fact that the corporation has in fact been created. But even then that doesn’t mean that the corporation is anything more than a shell. That is why we call them shell corporations.

The same holds true for trusts which must have beneficiaries, a trustor, a trust instrument, and a trustee that is actively engaged in managing the assets of the trust for the benefit of the beneficiaries. Without the elements being satisfied in real life, the trust does not exist and should not be treated as though it did exist.

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About Neil F Garfield, M.B.A., J.D.

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The banks have been pulling the wool over our eyes for two decades, pretending that the name of a REMIC Trust invokes and creates its existence. They have done the same with named Trustees and asserted “Master Servicers” of the asserted trust. Without a Trustor passing title to money or property to the named Trustee, there is nothing in trust.

Therefore whatever duties, obligations, powers or restrictions that exist under the asserted trust instrument do not apply to assets that have not been entrusted to the trustee to administer for the benefit of named beneficiaries.

The named Trustee or Servicer has nothing to claim if their claim derives from the existence of a trust. And of course a nonexistent trust has no claim against borrowers in which the beneficiaries of the trust, if they exist, have disclaimed any interest in the debt, note or mortgage.

The serial nature of asserted transfers in which servicing rights, claims for recovery of servicer advances, and purported ownership of note and mortgage is well known and leaves most people, including judges and regulators scratching their heads.

An assignment of mortgage without a a transfer of the indebtedness that is claimed to be secured by a mortgage or deed of trust means nothing. It is a statement by one party, lacking in any authority to another party. It says I hereby transfer to you the power to enforce the mortgage or deed of trust. It does not say you can keep the proceeds of enforcement and it does not identify the party to whom the debt will be paid as proceeds of liquidation of the home at or after the foreclosure sale.

As it turns out, many times the liquidation results in surplus funds — i.e., proceeds in excess of the asserted debt. That should be turned over to the borrower, but it isn’t; and that has spawned a whole new cottage industry of services offering to reclaim the surplus proceeds.

In most cases the proceeds are less than the amount demanded. But there are proceeds. Those are frequently swallowed whole by the real party in interest in the foreclosure — the asserted Master Servicer who claims the proceeds as recovery of servicer advances without the slightest evidence that the asserted Master Servicer ever paid anything nor that the asserted Master Servicer would be out of pocket in the event the “recovery” of “servicer advances” failed.

The foreclosure of the property proceeds with full knowledge that whatever the result, there are no creditors who will receive any money or benefit. The real parties are trying to make money, not recover it. And whatever proceeds or benefits might arise from the foreclosure action are grabbed by a party in a self-proclaimed assertion that while the foreclosure was brought in the name of a trust, the proceeds go to a different third party in derogation of the interests of the asserted trusts and the alleged investors in those trusts who are somehow not beneficiaries.

So investors purchase certificates in which the fine print usually says that for their own protection they disclaim any interest in the underlying debt, note or mortgages. Accordingly we have a trust without beneficiaries.

The existence of those debts, notes or mortgages becomes irrelevant to the investors because they have a promise from a trustee who is indemnified on behalf of a trust that owns nothing. The certificates are backed by assets of any kind. Even if they were “backed” by assets, the supposed beneficiaries have disclaimed such interests.

Thus not only does the trust own nothing even the prospect of security has been traded off to other investors who paid money on the expectation of revenue from the notes and mortgages claimed by the asserted trust through its named trustee.

In the end you have a name of a trust that is unregistered and never asserted to be organized and existing under the laws of any jurisdiction, trustee who has no duties and even if such duties were present the asserted trust instrument strips away all trustee functions, no beneficiaries, and no res, and no active business requiring administration nor any business record of such activity.

Yet the trust is the entity that  is chosen as the named Plaintiff in foreclosures. But the way it reads one is bound to believe that assumption that is not and never was true or even asserted: that the case involves the trustee bank for anything more than window dressing.

It is the serial nature of the falsely asserted transfers that obscures the real parties in interest in both securities transactions with investors and loans with borrowers. The unavoidable conclusion is that nothing asserted by the banks (players in  falsely claimed securitization schemes) is real.

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Breaking it Down: What to Say and Do in an Unlawful Detainer or Eviction

Homeowners seem to have more options than they think in an unlawful detainer action based upon my analysis. It is the first time in a nonjudicial foreclosure where the foreclosing party is actually making assertions and representations against which the homeowner may defend. The deciding factor is what to do at trial. And the answer, as usual, is well-timed aggressive objections mostly based upon foundation and hearsay, together with a cross examination that really drills down.

Winning an unlawful detainer action in a nonjudicial foreclosure reveals the open sores contained within the false claims of securitization or transfer.

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HAT TIP TO DAN EDSTROM

Matters affecting the validity of the trust deed or primary obligation itself, or other basic defects in the plaintiffs title, are neither properly raised in this summary proceeding for possession, nor are they concluded by the judgment.” (Emphasis added.) (Cheney v. Trauzettel (1937) 9 Cal.2d 158, 159-160.) My emphasis added

So we can assume that they are specifically preserving your right to sue for damages. But also, if they still have the property you can sue to get it back. If you do that and file a lis pendens they can’t sell it again. If a third party purchaser made the bid or otherwise has “bought” the property you probably can’t touch the third party — unless you can show that said purchaser did in fact know that the sale was defective. Actual knowledge defeats the presumptions of facially valid instruments and recorded instruments.

The principal point behind all this is that the entire nonjudicial scheme and structure becomes unconstitutional if in either the wording of the statutes or the way the statutes are applied deprive the homeowner of due process. Denial of due process includes putting a burden on the homeowner that would not be there if the case was brought as a judicial foreclosure. I’m not sure if any case says exactly that but I am sure it is true and would be upheld if challenged.


It is true that where the purchaser at a trustee’s sale proceeds under section 1161a of the Code of Civil Procedure he must prove his acquisition of title by purchase at the sale; but it is only to this limited extent, as provided by the statute, that the title may be litigated in such a proceeding. Hewitt v. Justice’ Court, 131 Cal.App. 439, 21 P.(2d) 641; Nineteenth Realty Co. v. Diggs, 134 Cal.App. 278, 25 P.(2d) 522; Berkeley Guarantee Building & Loan Ass’n v. Cunnyngham, 218 Cal. 714, 24 P.(2d) 782. — [160] * * * In our opinion, the plaintiff need only prove a sale in compliance with the statute and deed of trust, followed by purchase at such sale, and the defendant may raise objections only on that phase of the issue of title

So the direct elements are laid out here and other objections to title are preserved (see above):

  • The existence of a sale under nonjudicial statutes
  • Acquisition of title by purchase at the sale
  • Compliance with statutes
  • Compliance with deed of trust

The implied elements and issues are therefore as follows:

  • Was it a Trustee who conducted the sale? (i.e., was the substitution of Trustee valid?) If not, then the party who conducted the sale was not a trustee and the “sale” was not a trustee sale. If Substitution of Trustee occurred as the result of the intervention of a party who was not a beneficiary, then no substitution occurred. Thus no right of possession arises. The objection is to lack of foundation. The facial validity of the instrument raises only a rebuttable presumption.
  • Was the “acquisition” of title the result of a purchase — i.e., did someone pay cash or did someone submit a credit bid? If someone paid cash then a sale could only have occurred if the “seller” (i.e., the trustee) had title. This again goes to the issue of whether the substitution of trustee was a valid appointment. A credit bid could only have been submitted by a beneficiary under the deed of trust as defined by applicable statutes. If the party claiming to be a beneficiary was only an intervenor with no real interest in the debt, then the “bid” was neither backed by cash nor a debt owed by the homeowner to the intervenor. According there was no valid sale under the applicable statutes. Thus such a party would have no right to possession. The objection is to lack of foundation. The facial validity of the instrument raises only a rebuttable presumption.

The object is to prevent the burden of proof from falling onto the homeowner. By challenging the existence of a sale and the existence of a valid trustee, the burden stays on the Plaintiff. Thus you avoid the presumption of facial validity by well timed and well placed objections.

” `To establish that he is a proper plaintiff, one who has purchased property at a trustee’s sale and seeks to evict the occupant in possession must show that he acquired the property at a regularly conducted sale and thereafter ‘duly perfected’ his title. [Citation.]’ (Vella v. Hudgins (1977) 20 Cal.3d 251,255, 142 Cal.Rptr. 414,572 P.2d 28; see Cruce v. Stein (1956) 146 Cal.App.2d 688,692,304 P.2d 118; Kelliherv. Kelliher(1950) 101 Cal.App.2d 226,232,225 P.2d 554; Higgins v. Coyne (1946) 75 Cal.App.2d 69, 73, 170 P2d 25; [*953] Nineteenth Realty Co. v. Diggs (1933) 134 Cal.App. 278, 288-289, 25 P2d 522.) One who subsequently purchases property from the party who bought it at a trustee’s sale may bring an action for unlawful detainer under subdivision (b)(3) of section 1161a. (Evans v. Superior Court (1977) 67 Cai.App.3d 162, 169, 136 Cal.Rptr. 596.) However, the subsequent purchaser must prove that the statutory requirements have been satisfied, i.e., that the sale was conducted in accordance with section 2924 of the Civil Code and that title under such sale was duly perfected. {Ibid.) ‘Title is duly perfected when all steps have been taken to make it perfect, i.e. to convey to the purchaser that which he has purchased, valid and good beyond all reasonable doubt (Hocking v. Title Ins. & Trust Co, (1951), 37 Cal.2d 644, 649 [234 P.2d 625,40 A.L.R.2d 1238] ), which includes good record title (Gwin v. Calegaris (1903), 139 Cal. 384 [73 P. 851] ), (Kessler v. Bridge (1958) 161 Cal.App.2d Supp. 837, 841, 327 P.2d 241.) ¶ To the limited extent provided by subdivision (b){3) of section 1161a, title to the property may be litigated in an unlawful detainer proceeding. (Cheney v. Trauzettel (1937) 9 Cal.2d 158, 159, 69 P.2d 832.) While an equitable attack on title is not permitted (Cheney, supra, 9 Cal.2d at p. 160, 69 P.2d 832), issues of law affecting the validity of the foreclosure sale or of title are properly litigated. (Seidel) v. Anglo-California Trust Co. (1942) 55 Cai.App.2d 913, 922, 132 P.2d 12, approved in Vella v. Hudgins, supra, 20 Cal.3d at p. 256, 142 Cal.Rptr. 414, 572 P.2d 28.)’ ” (Stephens, Partain & Cunningham v. Hollis (1987) 196 Cai.App.3d 948, 952-953.)
 
Here the court goes further in describing the elements. The assumption is that a trustee sale has occurred and that title has been perfected. If you let them prove that, they win.
  • acquisition of property
  • regularly conducted sale
  • duly perfecting title

The burden on the party seeking possession is to prove its case “beyond all reasonable doubt.” That is a high bar. If you raise real questions and issues in your objections, motion to strike testimony and exhibits etc. they would then be deemed to have failed to meet their burden of proof.

Don’t assume that those elements are present “but” you have a counterargument. The purpose of the law on this procedure to gain possession of property is to assure that anyone who follows the rules in a bona fide sale and acquisition will get POSSESSION. The rights of the homeowner to accuse the parties of fraud or anything else are eliminated in an action for possession. But you can challenge whether the sale actually occurred and whether the party who did it was in fact a trustee. 

There is also another factor which is whether the Trustee, if he is a Trustee, was acting in accordance with statutes and the general doctrine of acting in good faith. The alleged Trustee must be able to say that it was in fact the “new” beneficiary who executed the substitution of Trustee, or who gave instructions for issuing a Notice of Default and Notice of sale.

If the “successor” Trustee does not know whether the “successor” party is a beneficiary or not, then the foundation testimony and exhibits must come from someone who can establish beyond all reasonable doubt that the foreclosure proceeding emanated from a party who was in fact the owner of the debt and therefore the beneficiary under the deed of trust. 

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Illusion of Confusion: Dealing with Unresponsive “Responses” in Discovery

The bank playbook is very simple: keep it as complicated as possible. That way the court and even the homeowner will come to rely on what the banks and so-called servicer say about names, places, documents and money. That’s how they sold the initial fraudulent MBS and around 10 million foreclosures.

If you had a high success rate and you succeeded in scaring most homeowners off from contesting fraudulent foreclosures, what would you do? You would keep going based upon a strategy of creating the illusion of complexity. The only really complex thing is the fact that the foreclosing parties make inconsistent assertions not only from case to case but from one pleading to another in one case.

What is simple? That the only two real parties in interest in this whole affair have been investors on one side and homeowners on the other side. Everyone else is an intermediary with little or no authority to do anything — a fact that has not stopped them from nearly destroying our financial system.

For reasons that have been discussed elsewhere on this blog, the acceptance of the illusion of confusion by the courts is NOT rooted in law, as it is required to be, but rather in politics. This isn’t the first time the courts made political decisions and it won’t be the last. But through persistence and good litigation techniques homeowners who went all the way to the end have often prevailed — probably because the judge was too uncomfortable once the real nature of the asserted transactions was revealed.

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I was writing an article on discovery when by coincidence Dan Edstrom who has been our senior most forensic analyst since 2008 forwarded some questions and comments about the discovery process. He understands full well that the discovery process does NOT consist of just asking a question or asking for a document and the other side then gives you all you need to win.

No, the response will be framed to confuse, which is generally enough to make the homeowner or the foreclosure defense walk away. The foreclosure goes though even though it is most likely completely fraudulent.

And the message that goes out to the world is the banks are winning a huge percentage of foreclosures when in fact they pretty much don’t win when the foreclosure is ably contested.  The issue is obvious — not enough people are ably contesting foreclosures.

In discovery it usually starts with interrogatories. And the first question is who is answering the interrogatories. So in one example, the answer was Sally Torres. The response was that Torres was “from” Ocwen Financial Corporation (OFC). She is described as a “representative” of OFC, which leaves open the question of the identity of her employer.

Back to basics — A corporation is a legal person. And THAT means it is not the same as another legal person, as for example Ocwen Loan Servicing (OLS).

So you need to read carefully and not skip the parts that nobody pays attention to — like the answer to the question and the verification where Torres signs the response. There she signs as a “representative” of OLS not OFC. That ,eaves open the same question but also adds another — is she a representative of both legal persons (OFC and OLS)? If so what is the nature of her “agency” for either legal person? If she is not an employee is there a contract?

The answers further state that she is a “Senior Loan Analyst” for OFC and a “Senior Loan Analyst” for OLS. Is it both? How does that work? And of course that gives rise to yet another question — What is a Senior Loan Analyst? Google it.

Job Summary. Responsible for analyzing financial and supporting documents on incoming applications consistent with internal and insurer policies. Evaluate property values based on appraised market prices and recommend or deny mortgages to clients after examining financial status.

Hmmmm. This sounds like a made-up title to impress a judge. The industry definition of a loan analyst describes a job that ends with the approval of a loan. What would a loan analyst know about foreclosure — years after the alleged origination of the alleged loan? More specifically, what did Torres actually know or do with regard to the subject loan? It doesn’t take a genius to speculate about a number of questions:

  • Did Torres actually sign the verification?
  • Why was a loan analyst necessary in the litigation of a foreclosure?
  • Is Ocwen a lender? Why need a loan analyst?
  • What as it that Torres analyzed?
  • Did she review the work of a “Junior” Analyst ?
  • Did someone else draft the answers?
  • Was there anyone who had personal knowledge of the loan history involved with answering the interrogatories?

The kicker in the case I reviewed, was that the notice letters were sent not by any Ocwen entity but by Wells Fargo. The problem here is that most lawyers do not wish to confess their ignorance and therefore don’t follow through with obvious questions. Everything they are seeing is incomprehensible and confusing.

Here is another example right out of a hearsay treatise: The “Plaintiff” in an unlawful detainer (eviction) action makes the assertion that the rental value of the subject property is $1,800 per month and that the only way they know that is from a website called “Rentometer.” How this number is calculated by the website is unknown. Nor do we know if any person was involved. But Judges regularly take this representation to be true, even though it comes from a declarant not present in court.

Here is the rub. If the attorney for the homeowner fails to raise an objection and motion to strike that assertion or representation the objection is waived. But on cross examination of the robo-witness it is fairly easy to show that there is no appraisal or opinion rendered by the witness, nor could there be. It is also fairly easy to establish that the witness has no idea who runs, operates, owns or is otherwise involved with Rentometer.

Like Zillow and other sites, Rentometer does not employ people. It employs computer algorithms that may or may not work in any given situation.

For all we know it is a site set up by the banks that looks professional but is used specifically to extract outsize rents from people defending their property. (thus cutting off income that could be used for an attorney).  It looks like it might be useful but no presumption should arise from the projection by Rentometer unless someone from Rentometer can lay the foundation for the estimate. But that would mean putting a person on the witness stand who is not a robo-witness so the foreclosing party is going to fight against that tooth and nail.

And of course any site that leis exclusively on algorithms could not possibly take into consideration whether the subject property is habitable, the school district, and other factors that apply to both marketability and price. In the case presented it appears that the rental value is zero or in fact negative. That is because the property’s condition is such that nobody would move into it without extensive major repairs and because taxes and maintenance of the exterior would still need to be paid.

And then there is this example: You ask for the documents that support the authority of the alleged new beneficiary to substitute the trustee on the deed of trust. You get back an assignment. But it turns out later, in court, that they are relying upon some additional unrecorded assignments. So you ask for the additional unrecorded assignments and the response is essentially “We already gave you the assignments.” In  this case with 1 recorded assignment and 2 unrecorded assignments their answer is exactly 1/3 true and 2/3 untrue. And THAT is why you need to be prepared to compel their response by a specific court order pointing to those documents and any others that pertain the request for production.

The most challenging thing after the foreclosure sale is to prove it should never have taken place. But it is possible and necessary to do that if you want the property or you want leverage for a settlement. You are challenging circular reasoning.

Their argument is that they followed the rules and appointed a substitute trustee who sold the property. Your answer is that the new ‘Beneficiary” was not a beneficiary, had no right to substitute the trustee and thus no right to file a notice of sale (nonjudicial states).

Here is where legal presumptions point the court in the wrong direction. Because the sale took place and it was “facially” valid, the presumption adopted by the court is usually that there was a sale even though you are contesting that narrative. You say that a sale didn’t take place, particularly where there was “credit bid” on behalf of an entity that had no interest in the debt and therefore could not possibly submit a credit bid.

Lastly the sleight of hand trick that is so successful for the banks is the assertion or inference that there is a trust. In this case US Bank is asserted, probably without tis knowledge, as the trustee of certificates which is no trusteeship at all. Even if you slip in “the holders of certificates” they still have not named a beneficiary.

So the common error being made out there is to ask for answers and documents and so forth and accepting the response from the servicer or alleged servicer. Back to basics: the  first question should be “please identify the person or entity that is the [Plaintiff (judicial state or any eviction action) / beneficiary on the deed of trust (nonjudicial states)].

Then the next question should be “Is the party executing the verification of these interrogatories an employee, officer of said Plaintiff/Beneficiary? They will respond with gibberish because the real party in interest is a remote “Master Servicer” of a trust that doesn’t exist.

And of course “Where are the records of the Plaintiff/Beneficiary that relate to the subject alleged loan?” Once again they will respond with gibberish because they want the court to accept the fabricated records of Ocwen as though they were the records of the Plaintiff/Beneficiary whose books and records do not exist. The closer you get the more likely they are to walk away or offer a settlement that includes a seal of confidentiality. And yes I have seen this scenario thousands of times.

 

 

 

 

 

 

 

 

 

Banks Fighting Subpoenas From FHFA Over Access to Loan Files

Whilst researching something else I ran across the following article first published in 2010. Upon reading it, it bears repeating.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

WHAT IF THE LOANS WERE NOT ACTUALLY SECURITIZED?

In a nutshell this is it. The Banks are fighting the subpoenas because if there is actually an audit of the “content” of the pools, they are screwed across the board.

My analysis of dozens of pools has led me to several counter-intuitive but unavoidable factual conclusions. I am certain the following is correct as to all residential securitized loans with very few (2-4%) exceptions:

  1. Most of the pools no longer exist.
  2. The MBS sold to investors and insured by AIG and the purchase and sale of credit default swaps were all premised on a general description of the content of the pool rather than a detailed description with the individual loans attached on a list.
  3. Each Prospectus if it carried any spreadsheet listing loans, contained a caveat that the attached list was by example only and not the real loans.
  4. Each distribution report contained a caveat that the parties who created it and the parties who delivered it did not guarantee either authenticity or reliability of the report. They even had specific admonitions regarding the content of the distribution report.
  5. NO LOAN ACTUALLY MADE IT INTO ANY POOL. The evidence is clear: nothing was done to assign, indorse or deliver the note to the investors directly or indirectly until a case went into litigation AND a hearing was scheduled. By that time the cutoff date had been breached and the loan was non-performing by their own allegation and therefore was not acceptable into the pool.
  6. AT ALL TIMES LEGAL TITLE TO THE PROPERTY WAS MAINTAINED BY THE HOMEOWNER EVEN AFTER FORECLOSURE AND SALE. The actual creditor who submitted a credit bid was not the creditor. The sale is either void or voidable.
  7. AT ALL TIMES LEGAL TITLE TO THE LOAN WAS MAINTAINED BY THE ORIGINATING “LENDER”. Since there was no assignment, indorsement or delivery that could be recognized at law or in fact, the originating lender still owns the loan legally BUT….
  8. AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the Lender and payee on the note, both created a LEGAL obligation from the borrower to the Lender and at the same time, the LEGAL obligation was extinguished because the LEGAL Lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.
  9. Since the Legal obligation was both created and extinguished contemporaneously with each other, any remaining obligation to any OTHER party became unsecured since the security instrument (mortgage or deed of trust) refers only to the promissory note executed by the borrower.
  10. At the time of closing, the investor-lenders were the real parties in interest as lenders, but they were not disclosed nor were the fees of the various intermediaries who brought the investor-lender money and the borrower’s loan together.
  11. ALL INVESTOR-LENDERS RECEIVED THE EQUIVALENT OF A BOND — A PROMISE TO PAY ISSUED BY A PARTY OTHER THAN THE BORROWER, PREMISED UPON THE PAYMENT OR RECEIVABLES GENERATED FROM BORROWER PAYMENTS, CREDIT DEFAULT SWAPS, CREDIT ENHANCEMENTS, AND THIRD PARTY INSURANCE.
  12. Nearly ALL investor-lenders have been paid sums of money to satisfy the promise to pay contained in the bond. These payments always exceeded the borrowers payments and in many cases paid the obligation in full WITHOUT SUBROGATION.
  13. NO LOAN IS IN ACTUAL DEFAULT OR DELINQUENCY. Since payments must first be applied to outstanding payments due, payments received by investor-lenders or their agents from third party sources are allocable to each individual loan and therefore cure the alleged default. A Borrower’s Non-payment is not a default since no payment is due.
  14. ALL NOTICES OF DEFAULT ARE DEFECTIVE: The amount stated, the creditor, and other material misstatements invalidate the effectiveness of such a notice.
  15. NO CREDIT BID AT AUCTION WAS MADE BY A CREDITOR. Hence the sale is void or voidable.
  16. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO DEDUCTIONS FOR THIRD PARTY PAYMENTS.
  17. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR UNJUST ENRICHMENT THAT IS UNSECURED.
  18. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR A LIEN TO REFLECT THE INTENTION OF THE INVESTOR-LENDER AND THE INTENTION OF THE BORROWER.  Both the investor-lender and the borrower intended to complete a loan transaction wherein the home was used to collateralize the amount due. The legal satisfaction of the originating lender is not a deduction from the equitable satisfaction of the investor-lender. THUS THE PARTIES SEEKING TO FORECLOSE ARE SUBJECT TO THE LEGAL DEFENSE OF PAYMENT AT CLOSING BUT THE INVESTOR-LENDERS ARE NOT SUBJECT TO THAT DEFENSE.
  19. The investor-lenders ALSO have a claim for damages against the investment banks and the string of intermediaries that caused loans to be originated that did not meet the description contained in the prospectus.
  20. Any claim by investor-lenders may be subject to legal and equitable defenses, offsets and counterclaims from the borrower.
  21. The current modification context in which the securitization intermediaries are involved in settlement of outstanding mortgages is allowing those intermediaries to make even more money at the expense of the investor-lenders.
  22. The failure of courts to recognize that they must apply the rule of law results not only in the foreclosure of the property, but the foreclosure of the borrower’s ability to negotiate a settlement with an undisclosed equitable creditor, or with the legal owner of the loan in the property records.

Loan File Issue Brought to Forefront By FHFA Subpoena
Posted on July 14, 2010 by Foreclosureblues
Wednesday, July 14, 2010

foreclosureblues.wordpress.com

Editor’s Note….Even  U.S. Government Agencies have difficulty getting
discovery, lol…This is another excellent post from attorney Isaac
Gradman, who has the blog here…http://subprimeshakeout.blogspot.com.
He has a real perspective on the legal aspect of the big picture, and
is willing to post publicly about it.  Although one may wonder how
these matters may effect them individually, my point is that every day
that goes by is another day working in favor of those who stick it out
and fight for what is right.

Loan File Issue Brought to Forefront By FHFA Subpoena

The battle being waged by bondholders over access to the loan files
underlying their investments was brought into the national spotlight
earlier this week, when the Federal Housing Finance Agency (FHFA), the
regulator in charge of overseeing Fannie Mae and Freddie Mac, issued
64 subpoenas seeking documents related to the mortgage-backed
securities (MBS) in which Freddie and Fannie had invested.
The FHFA
has been in charge of overseeing Freddie and Fannie since they were
placed into conservatorship in 2008.

Freddie and Fannie are two of the largest investors in privately
issued bonds–those secured by subprime and Alt-A loans that were often
originated by the mortgage arms of Wall St. firms and then packaged
and sold by those same firms to investors–and held nearly $255 billion
of these securities as of the end of May. The FHFA said Monday that it
is seeking to determine whether issuers of these so-called “private
label” MBS misled Freddie and Fannie into making the investments,
which have performed abysmally so far, and are expected to result in
another $46 billion in unrealized losses to the Government Sponsored
Entities (GSE).

Though the FHFA has not disclosed the targets of its subpoenas, the
top issuers of private label MBS include familiar names such as
Countrywide and Merrill Lynch (now part of BofA), Bear Stearns and
Washington Mutual (now part of JP Morgan Chase), Deutsche Bank and
Morgan Stanley. David Reilly of the Wall Street Journal has written an
article urging banks to come forward and disclose whether they have
received subpoenas from the FHFA, but I’m not holding my breath.

The FHFA issued a press release on Monday regarding the subpoenas
(available here). The statement I found most interesting in the
release discusses that, before and after conservatorship, the GSEs had
been attempting to acquire loan files to assess their rights and
determine whether there were misrepresentations and/or breaches of
representations and warranties by the issuers of the private label
MBS, but that, “difficulty in obtaining the loan documents has
presented a challenge to the [GSEs’] efforts. FHFA has therefore
issued these subpoenas for various loan files and transaction
documents pertaining to loans securing the [private label MBS] to
trustees and servicers controlling or holding that documentation.”

The FHFA’s Acting Director, Edward DeMarco, is then quoted as saying
““FHFA is taking this action consistent with our responsibilities as
Conservator of each Enterprise. By obtaining these documents we can
assess whether contractual violations or other breaches have taken
place leading to losses for the Enterprises and thus taxpayers. If so,
we will then make decisions regarding appropriate actions.” Sounds
like these subpoenas are just the precursor to additional legal
action.

The fact that servicers and trustees have been stonewalling even these

powerful agencies on loan files should come as no surprise based on

the legal battles private investors have had to wage thus far to force

banks to produce these documents. And yet, I’m still amazed by the

bald intransigence displayed by these financial institutions. After

all, they generally have clear contractual obligations requiring them

to give investors access to the files (which describe the very assets

backing the securities), not to mention the implicit discovery rights

these private institutions would have should the dispute wind up in

court, as it has in MBIA v. Countrywide and scores of other investor

suits.

At this point, it should be clear to everyone–servicers and investors
alike–that the loan files will have to be produced eventually, so the
only purpose I can fathom for the banks’ obduracy is delay. The loan
files should, as I’ve said in the past, reveal the depths of mortgage
originator depravity, demonstrating convincingly that the loans never
should have been issued in the first place. This, in turn, will force
banks to immediately reserve for potential losses associated with
buying back these defective mortgages. Perhaps banks are hoping that
they can ward off this inevitability long enough to spread their
losses out over several years, thereby weathering the storm caused (in
part) by their irresponsible lending practices. But certainly the
FHFA’s announcement will make that more difficult, as the FHFA’s
inherent authority to subpoena these documents (stemming from the
Housing and Economic Recovery Act of 2008) should compel disclosure
without the need for litigation, and potentially provide sufficient
evidence of repurchase obligations to compel the banks to reserve
right away. For more on this issue, see the fascinating recent guest
post by Manal Mehta on The Subprime Shakeout regarding the SEC’s
investigation into banks’ processes for allocating loss reserves.

Meanwhile, the investor lawsuits continue to rain down on banks, with
suits by the Charles Schwab Corp. against Merrill Lynch and UBS, by
the Oregon Public Employee Retirement Fund against Countrywide, and by
Cambridge Place Investment Management against Goldman Sachs, Citigroup
and dozens of other banks and brokerages being announced this week. If
the congealing investor syndicate was looking for political cover
before staging a full frontal attack on banks, this should provide
ample protection. Much more to follow on these and other developments
in the coming days…
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Posted by Isaac Gradman at 3:46 PM

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