Lehman to Pay $2.4 Billion out of Bankrupt Estate

“Lehman’s own documents show it was aware of the widespread problems and deteriorating performance of the loans it had securitized,” with half the loans at one point containing material misrepresentations, the trustees said in a court filing.

Editor’s Note: The difference is money — investors have it and borrower’s don’t. So while investors are successfully litigating fraud and deceit, the borrowers can’t afford to litigate the same issues. The idea that Lehman was somehow honest with borrowers and not with investors is preposterous.

Lehman recently closed out a $2 billion dispute with Citigroup Inc. over derivatives, and similar litigation over derivatives with Credit Suisse Group AG is the last major remaining contest.

Around 14 large institutional holders, including Goldman Sachs Asset Management LP and BlackRock Financial Management, broke ranks with hedge funds and accepted a settlement last year valuing claims around $2.4 billion. Chapman noted that these “sophisticated players” held around 24 percent of the RMBS.

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See Lehman Brothers Knew 1/2 the loans were misrepresented to both borrowers and investors

The trustees representing RMBS holders are Deutsche Bank National Trust Co., Law Debenture Trust Co. of New York, U.S. Bank National Association and Wilmington Trust Co., according to court papers.

A group of hedge funds, including Whitebox Advisors LLC, Deer Park Road Management Co. and Tilden Park Capital Management LP, was formed in 2016, and expanded in May 2017 to include Prophet Capital Management LP, Tricadia Capital Management LLC, BlueMountain Capital Management LLC and others, according to court records.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

Practice note: Dig into the pleadings and exhibits in these cases and you will find a treasure trove of information that supports your contention at trial that the documents are unreliable and therefore the proof of the matters asserted must be proven with facts, not assumptions. You will probably uncover inconsistent allegations from Deutsch, Credit Suisse et al. They are most likely saying one thing in court with borrowers and another in court with investors.

An important note here is that these actions are based upon the presumptive finding of the US Bankruptcy trustee as to Lehman misrepresentations.

 

 

DARK POOLS OF SECURITIES AND MONEY FUNDED MORTGAGE LOANS

In answer to questions frequently asked of me, the term “dark pool” was not coined by me nor was it discovered by me as an instrumentality of obscuring financial transactions. I have understood the workings of dark pools since my Wall Street days. But back then, in the 1960’s and 1970’s they were not so common.

What I did discover was a dark pools were in widespread use in the era of false claims of securitization — a discovery provoked by reading the prospectuses and pooling and servicing agreements (Trust instruments) for the issuance of of “certificates” a/k/a “mortgage bonds.”  There, in black and white, was a “reserve fund” consisting of money from investors who bought the certificates from underwriters using the fictitious name of a Trust that never existed. And it was stated therein that investors could be paid from this reserve — i.e.,. paid using their own money.

There were virtually no restrictions on the use of the “reserve fund.” The more I read and the more I asked my tipsters, it became very apparent that the reserve funds were interconnected, that the Trusts did not exist and so the reserve fund was actually a dark pool — a trading ground for securities and money. It is also the locale where the the most gross violations of law occur because they are hidden from public view and often hidden even from the financial statements of the participants.

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see DARK POOLS DEFINED — https://ag.ny.gov/press-release/ag-schneiderman-announces-landmark-resolutions-barclays-and-credit-suisse-fraudulent

Securitization was at first disclaimed by all the banks and servicers 10-15 years ago. Most people don’t remember that. The defense was “What Trust?”

Forensic researchers then discovered that underwriters or others had uploaded “securitization” documents to the SEC website and later added mortgage loan schedules, (that trend out to be false and fabricated) in which certain “REMIC” trusts claimed ownership of the “mortgage loans.”

Going with the flow, the banks and servicers then filed foreclosures in the name of the nonexistent trusts — and they got away with it. Today we have a mixed blend of claims of trust ownership of loans (i.e., the underwriter using the fictitious name of the nonexistent trust) and claims of corporate ownership of loans where a major bank or “successor” trust initiates foreclosure.

But in the end what they filed in foreclosures was antithetical to the claim they were making. None of the Trusts ever acquired loans from a settlor or trustor. Nor did any trust receive the proceeds of investor capital. By definition, securitization never actually happened. Adam Levitin calls this “securitization fail.”

The true money trail starts with the dark pool consisting of all proceeds of the sale of certificates or bonds issued by the underwriter in the name of the nonexistent trust. Hence the money is not in the trust; it is in the dark pool where money and trading, deposits and withdrawals occur in great frequency. Hence the underwriter has performed a Texas two step — on the one hand it claims that ownership is in the name of the fictitious REMIC Trust while at the same time funding the origination and acquisition of loans from the dark pool.

This is critically relevant to the foreclosures. In virtually all cases, the money came from the dark pool (not a trust) to originate (not allowed under the prospectus) or acquire loans. Careful securities analysis reveals a simple fact, to wit: that there IS a money trail but it leads back to the dark pools. Hence the paper trail that leads to the successors and “trusts” are documenting transactions that never occurred between the parties named on the written instruments. This in turn means that the certificates and bonds issued in the name of the named trust were neither backed by notes or mortgages and were most certainly not backed by debts.

A careful reading of certificates indicates that most of them have a disclaimer of any interest in the underlying debts, notes and mortgages. The investors acknowledge that all they are receiving is a promise to pay issued by in the name of the trust (but not issued By the trust). The real party in interest is the underwriter who also poses as “Master Servicer” for assets owned by the named Trust. But there are no such assets; so in the end we should be dealing with, and litigating with the underwriter.

Investors gave money to the underwriter believing their money would be deposited into the “REMIC” Trust. It wasn’t. Instead their money ended up in a dark pool with no rules. The money in the dark pool should be considered as deposits by investors rather than investments since the certificates were bogus. To consider it otherwise would be to deprive investors of the last vestige of ownership of the debts, notes and mortgages that were to be conveyed into the trust in exchange for the money paid to the “trust” by investors and then paid out by the “Trustee.” No such thing ever happened.

So the answer to the frequently asked question of “then where did the money come from” is that it came from an unregulated, undisclosed dark pool invented for the purpose of defrauding investors and homeowners. And the answer to the the other frequently asked question of “how do I prove that” is you don’t prove it. You prove the inevitable gaps that show that no financial transaction occurred anywhere along the paper trail.

Remember: documenting a false transaction doesn’t make it real. The document (note, mortgage, assignment, etc.) is either tethered to a real transaction in the real world that can be disclosed or it is untethered to any real transaction. If there is no real transaction in the real world the document becomes only a piece of paper. If there is a real transaction in the real world that your opposition can prove resulted in the creation of the document, then they win — simple as that. If there is no such transaction then the claimed liability does not exist, hence there can be no default. You can’t default on a nonexistent obligation. But obviously the investors have an equitable right to the loans funded with their money.

 

TILA RESCISSION: The Bottom Line for Now

Probably the main fallacy of the people who say that TILA Rescission is not possible or viable is that they project the outcome of a lawsuit to vacate rescission. Based upon their conjecture, they assume that Rescission is no more than a technicality. Congress, and SCOTUS beg to differ. It was enacted into law 50 years ago in an effort to prevent unscrupulous banks from screwing consumer borrowers.

Let us help you plan your TILA RESCISSION narrative and strategy: 202-838-6345. Ask for a Consult.

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Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments. It’s better than calling!
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

I keep getting emails from non lawyers who have a “legal opinion” that not only differs from mine, but also the opinion of hundreds of lawyers who represent the banks and servicers. They say that because disclosures were probably made that rescission is nothing more than a gimmick that will never succeed and they point to the many case decisions in which courts have ruled erroneously in favor of the banks despite a rescission that eliminated the subject matter jurisdiction of the court, since the loan contract, note and mortgage no longer exist. The debt, however, continues to exist even if it is unclear as to the identity of the party to whom it is owed.

First the courts ruled erroneously when they said that tender had to be made before rescission was effective. Then the courts said that no rescission could be effective without a court saying it was effective. That one put the burden on proving the figure to make proper disclosure on the homeowner. The Supreme Court of the United States, (SCOTUS — see Jesinoski v Countrywide) after thousands of decisions by trial and appellate courts, told them they were wrong. As of this date, no court has ever ruled that the rescission was vacated — the only thing that could stop it.

The lay naysayers keep harping on how wrong I am about rescission. Unfortunately many people believe what they read just because it is in writing. In my case I simply instruct the lawyers and homeowners to simply read the TILA Rescission statute and the unanimous SCOTUS decision in Jesinoski. What they will discover is that I am only repeating what they said — not making it up as some would have you believe.

To the naysayers and  all persons in doubt, i say the following:

As I have repeatedly said, in practice you are right, for the time being.
But the legal decision from SCOTUS will undoubtedly change the practice. The law is obvious and clear. SCOTUS already said that. So no interpretation is required or even permissible. SCOTUS said that too. TILA Rescission is mainly a procedural statute, not a substantive one. SCOTUS said that too. On the issue of when rescission is effective, it is upon mailing (USPS) or delivery. SCOTUS said that too. On the issue of what else a borrower needs to do to make TILA rescission effective, the answer is nothing. SCOTUS said that too.

Hence the current argument that you keep making is true “in practice” but only for the moment. SCOTUS will soon issue another scathing attack on the presumptuous courts who defied its ruling in Jesinoski. There can be no doubt that SCOTUS will rule that any “interpretation” that contradicts the following will be void, for lack of jurisdiction, because the loan contract is canceled and the note and mortgage are void:

  1. No court may change the meaning of the words of the TILA Rescission statute.
  2. Rescission is law when it is mailed or delivered.
  3. Other than delivery no action is required by the borrower. That means the loan contract is canceled and the note and mortgage are void. They do not exist by operation of law.
  4. Rescission remains effective even in the absence of a pleading filed by the borrower to enforce it.
  5. Due process is required to vacate the rescission. That means pleading standing and that proper disclosure was made, an opportunity for the borrower to respond, and then proof that the pleader has standing and that proper disclosures were made.
  6. Pleading against the rescission must be filed within 20 days or it is waived.
  7. At the end of one year both parties waive any remedies. That means the borrower can no longer enforce the duties imposed on the debt holder and the debt holder may no longer claim repayment.
  8. The only claim for repayment that exists after rescission is via the TILA Rescission statute — not the note and mortgage. This is based upon the actual debt, not the loan contract or closing documents.
  9. Any claim for repayment after rescission is predicated on full compliance with the three duties imposed by statute.
  10. A court may — upon proper notice, pleading and hearing — change the order of creditor compliance with the three duties imposed upon the debt holder. This does not mean that the court can remove any of the duties of the debt holder nor summarily ignore the rescission without issuing an order — upon proper notice, pleading and proof — that the rescission is vacated because the proper disclosures were made or for any other valid legal reason that does not change the wording of the statute.
  11. The three duties, which may not be ignored, include payment of money to the borrower, satisfaction of the lien (so that the borrower might have an opportunity to refinance), and delivery of the original canceled note.

Virtually 100% of lawyers for the banks and servicers agree with the above. They have advised their clients to file a lawsuit challenging the TILA Rescission because such a lawsuit could be easily won and would serve as a deterrent to people attempting to use TILA rescission as a defense to collection or foreclosure efforts. Yet their clients have failed to follow legal advice because they know that they have no debt holder to whom funds can be traced. If they did identify the debt holder(s) they would be showing that they played just as fast and loose with investor money as they have done with the paperwork in foreclosures.

Does this mean a free house to homeowners? Maybe. Considering how many times the loans were sold directly and indirectly, and how many times the banks received insurance, bailout and purchases from the Federal Reserve, that wouldn’t be a bad result. But the truth is that everyone knows that won’t happen unless the courts continue their decisions with blinders on.

In the end, the homeowners do owe money to the investors whose money was used too fund the loans, directly and indirectly. Whether it is secured or not may depend upon state law, but as a practical matter very few borrowers would withhold their signature from a valid mortgage and note based upon economic reality.

What and Who is a Creditor?

Practically everyone thinks they know what is a creditor even if they cannot identify who is the creditor. The reason that this is important is that the lawyers for the banks have created a divergence of the money trial and the paper trail. One is worth every cent claimed and the other is worth nothing, but for the repeated acceptance of a claim as proof in and of itself that a real transaction is referenced in the paper trail. In most cases, it isn’t.

Let us help you plan your narrative and strategy: 202-838-6345. Ask for a Consult.
Register now for Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense webinar.
Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments. It’s better than calling!
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

The problem is very real when you look at it through a semantic lens.

*

What is a creditor? In court it has come to mean anyone with a claim. What it does not automatically mean is that the so-called creditor owns the debt. In normal situations before claims of securitization, ownership of the debt was presumed to be underlying the claim for money and thus the term creditor and owner of the debt were used interchangeably. That is what the TBTF banks were counting on and that is what they got.

*

The “creditor” in foreclosures is just a party holding paper. If the paper is fabricated or otherwise does not represent an actual transaction in real life it should be struck since the paper doesn’t prove anything. A note is evidence of the debt. It is not the debt. That is why we have the merger doctrine to prevent double liability. But the merger doctrine only operates if the Payee on the note and the owner of the debt are the same.

*

If the party seeking the foreclosure cannot produce the proof that the Payee and debt owner are the same, then the note lacks foundation and would be disallowed as evidence. The mortgage being incident to the note would therefore secure nothing and would be equally invalid and subject to being removed from the country records. More than a decade of experience shows that you won’t get anywhere at trial with his knowledge UNLESS you have conducted proper discovery and pursued it through motions to compel.

*

But what we are left with is entirely counter-intuitive. You end up with a debt owner with no paperwork and the homeowner having two liabilities — one in the form of a debt that arises by operation of law when the debt owner advanced money and the homeowner received it — and one in the form of a potential liability in the form of a note that has no reference point in the real world, but if acquired by value in good faith and with no knowledge of the borrower’s defenses, can nonetheless be enforced leaving the maker (homeowner) to seek remedies from other parties who tricked him. {See Holder in Due Course}

*

This type of analysis is not well received by courts who come to each situation with a bias toward what they perceive to be “the bank” who wouldn’t be in court if they were not the owner of the debt. But as we have seen in most instances “the bank” is not appearing on its own behalf but merely as a representative of what is most often a nonexistent common law trust. If there is any bank involved at all it must be the underwriter of “securities” that were issued under the name of an alleged REMIC Trust.

Nonetheless we see the courts referring to the case at U.S. Bank adv the homeowner instead of saying XYZ Trust adv the homeowner for the simple reason that in practice styling the case refers to the first name that appears on the pleadings. So invariably the case is referred to as “U.S. Bank. adv John Smith.”

*

This continually reinforces the erroneous presumption that this is a case of a financial institution versus the homeowner; in fact, however, it is a case of an unlicensed unregistered private entity (the alleged REMIC Trust) outside the world of banking or finance whose existence as a trust entity is problematic at best, especially if the subject loan was never purchased by the Trust (acting  through the Trustee).

*

Without the debt being entrusted to the Trustee on behalf of the Trust there is no trust. The existence of an assignment, absent evidence of purchase, merely means that the alleged Trust has “ownership” of the paper, not the debt. But in practice owning the paper raises a presumption of ownership of the debt — which is why so much effort must be made toward preventing the application of the presumption through objections to foundation that are themselves founded on prior discovery showing the failure or refusal to provide proof of ownership and in fact, proof the paper chain being congruent with the money trial.

*

Hence the claim of creditor status may be true as to the paper but untrue as to the debt or any other monetary transaction in the real world.

Wells Fargo “Explains” Securitization

YOU NEED AN INFINITE NUMBER OF BASES AND PLAYERS TO PLAY BALL WITH THESE GUYS: The Trustee controls the trust as trustee. Oops, wait, it is the Master Servicer who has all the control. No, wait again, it is the subservicer who has the right to administer the loan. But actually if there is an alleged default it is the special servicer who has exclusive authority over decision making. Except that the “Controlling Class” has the last say in the matter. But actually it is the Controlling Class Representative who has the last word.

I have always felt that there must be some way to force the other side into approving a modification or at least providing access by the borrower to the “lender” to discuss or negotiate the matter. I still believe that. Maybe this article will help spur some ideas. Information is leverage, especially in the world of false claims of securitization.

 

Let us help you prepare your narrative (blue print) for litigation: 202-838-6345
Get a consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments. It’s better than calling!
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Hat Tip Bill Paatalo

see Wells Fargo Document – No Lender in Remics

Essentially the banks would have us believe that by magic they created loans without owners or holders in due course. So it might as well be the banks who foreclose under any pretense they choose to offer. The political decision was to let them do it for fear that the banks would bring down the entire system. But if that were true, the bank’s capital would be worthless as would every world currency including the dollar. They bluffed Presidents Bush and Obama and the Presidents blinked. Millions of foreclosures followed because the ordinary guy is just not that important even if it involves a substantial portion of a population.

I will provide my comments and suggestions for discovery or cross examination along with each statement in the above cited article. Keep in mind that the entire article is an exercise in deceit: It is assuming that securitization actually happened. If that were true then they would be more than happy to show that the subject loan was purchased on a certain date by the payment of value to a specific seller by a trust. The trust would then be a holder in due course. But as we have seen numerous times nobody ever refers to the trust as a holder in due course which can only mean there was no such purchase.

The indented portions are direct quotes from the WFDb article cited above.

The thing most borrowers fail to realize about conduit loans is that once a loan has been securitized, they are not working with a “lender” anymore.

That’s the first sentence of the “explanation.” And the first thing that pops out is “conduit loans.” What is a conduit loan? Is the subject loan a conduit loan? In what way is the subject loan a conduit loan? [This also corroborates what I have been writing for years — that Matt Taibbi (Rolling Stone Magazine) got it right when he describes securitization as a monster with multiple tentacles.]

There is no legal definition for a conduit loan. The banks would have us believe that if they present any tentacle, that is sufficient for them to foreclose on a loan. But that isn’t legal standing — it is fraud on the court. A loan is a loan, but Wall Street banks don’t want you thinking about that. But by calling it something different it immediately plays into the bias of the court assuming that the big banks know what they are doing and that only they can explain what is going on.

Corroborating my description of the “Conduit”: remark, WFB explains that you are not dealing with a lender anymore. Is that supposed to make us feel better? There is no lender? Was there ever a lender? If, yes, then please identify the party who loaned their money to the borrower.

Now this on servicer advances:

If a loan becomes delinquent, the Master Servicer is usually obligated to make the first three or four payments to the certificate holders as well as pay trust expenses on delinquent assets…

The Master Servicer is reimbursed when the borrower makes up the payment or when the property goes into foreclosure and is later sold.

So we are being told that the Master Servicer is making payments to investors regardless of whether the borrower makes any payment. First, the payments to investors are made by the Master Servicer because they are the only one with access to a giant slush fund or dark pool created out of money that should have a gone to each trust and been maintained as a trust account, administered by the trustee.

But it is true that the Master Servicer gets paid for the “servicer advances” when the property is sold. So if the investors received 12 months of payments (of at least interest), even though it was taken out of a reserve pool (read the prospectus) consisting of their own money, the Master Servicer gets paid as though it was a reimbursement when in fact it is a windfall. Needless to say the incentive is to let the case languish for years before foreclosure and sale take place.

The longer the time period between the alleged default and the sale of the property, the more money is received by the Master Servicer as “reimbursement” for money it never advanced.

The Special Servicer makes all final decisions about dispositions of defaulted property and Real Estate Owned (REO). Often they are also the holders of the “first loss pieces” of the pool. Because they are taking the most risk, as part of their agreement to take that risk, they usually insist on being the Special Servicer as a requirement of their investment. There are only a handful of special servicers in the country.

Really? So the Master Servicer, the subservicer and the Trustee of the alleged REMIC trust have no say in whether to work out or modify a loan that is economically not feasible but which could be feasible if there was a workout or modification. What is a first loss piece of the pool? What is the account name of the pool supposedly held in a bank somewhere? Does the account name match the alleged REMIC trust in any way? Is there an account administered by the Trustee? Does the Trustee get performance reports or end of month statements?

Oops wait! There are other people with special powers —

The PSA also designates a “Controlling Class” who will provide input on recommendations for Special Serviced Loans and REO.

If the Special Servicer is willing to extend the loan, they have to get permission from the Controlling Class Representative (CCR), who is a fiduciary for all the certificate holders.

Anyone who has seen that famous but from Abbot and Costello in the 1950’s understands what is happening here. The Trustee controls the trust as trustee. Oops, wait, it is the Master Servicer who has all the control. No, wait again, it is the subservicer who has the right to administer the loan. But actually if there is an alleged default it is the special servicer who as exclusive authority over decision making. Except that the “Controlling Class” has the last say in the matter. But actually it is the Controlling Class Representative who has the last word.

So in discovery ask which of those entities was contacted about modification and why the borrower was instructed to send the application and documents to the subservicer when the subservicer had no authority?

And let’s not forget the fact that the certificate holders have no right, title or interest in the loans, the debt , the note or the mortgage. So their “Fiduciary” (who apparently is not the Trustee of the alleged Trust) does what?  How do we contact these intermediaries to whom powers and obligations of a trustee are passed around like free money? How do we know if the subservicer is telling the truth when it reports that the “investor” turned down the settlement or modification.

And by the way, why do we not have recording of the modification agreement? Why does not the Trustee of the REMIC Trust sign the modification agreement? Instead it is ALWAYS the signature of the servicer who, as we already know, has no power to accept or deny requests for modifications — and of course it is never recorded in county records. Why?

Remember, there are no “pockets of money” to use for refinance. Special Servicers, although legally allowed by the PSA to forgive any portion of the debt, rarely do so because often that would negatively affect one or more of the bondholders at the expense of the others. Instead, the Special Servicer, on behalf of the conduit, will almost always foreclose and sell the asset.

Hmmmm. So the Special Servicer (and the CCR?) ordinarily chooses to drive down the price of the collateral and take a larger loss on the subject loan because it “would negatively affect one or more of the bondholders at the expense of the others.” But the principal reduction would positively affect some bond holders more than others by saving the collateral. So exactly what are they saying as Wells Fargo Bank about the roles and rules of securitization?

And lastly, why did WFB task authors to write about this when their experience is limited to manufactured home communities? Probably the same reason why robo-witnesses know nothing.

 

 

 

 

 

 

 

 

Wells Fargo, Ocwen and Fake REMIC Trust Crash on Standing

What is surprising about this case is that there was any appeal. The trial court had no choice but to dismiss the foreclosure claim.

  1. A copy of the note without an indorsement was attached to the complaint. This leads to the presumption that the indorsement was attached after the complaint was filed. Standing must be proven to ex isa at the time the suit was filed.
  2. The robo-witness could have testified as to the date the indorsement was affixed but he said he didn’t know.
  3. The robo-witness was unable to testify that the default letter had been sent.
  4. It didn’t help that the foreclosure case had been brought before by two different parties and then dismissed.
  5. Attorneys attempted to admit into evidence an unsigned Pooling and Servicing Agreement that could not be authenticated and was merely “a copy of a printout obtained from the SEC website”. This is an example of how court’s are rejecting the SEC website as a government document subject to judicial notice or even introduction into evidence without competent testimony providing the foundation for introducing the PSA for a fake trust.
Let us analyze your case and give you ammunition for the court battle: 202-838-6345
Get a consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments. It’s better than calling!
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

see Wells Fargo, as trustee v Madl

Note that the style of the case shows that Wells Fargo was never the Plaintiff. The purported or implied trust was the named Plaintiff. But as Wells Fargo explained in its own article, the Trust is not the Plaintiff and neither are the certificate holders the Plaintiff because their certificates most often expressly state that the holder of the certificate does NOT have any right, title or interest in the “underlying” loans.

In fact if you read it carefully you will see that no trust is actually named or mentioned. AND the failure of the “trust instrument” (the PSA) shows that the trust was never created and never existed. An unsigned, incomplete document downloaded from a site (SEC.gov) that anyone can access to upload documents is not evidence.

Financial Industry Caught with Its Hand in the Cookie Jar

Like the infamous NINJA loans, the REMICs ought to be dubbed NEITs — nonexistent inactive trusts.

The idea of switching lenders without permission of the borrower has been accepted for centuries. But the idea of switching borrowers without permission of the “lender” had never been accepted until the era of false claims of securitization.

This is just one example of how securitization, in practice, has gone far off the rails. It is significant to students of securitization because it demonstrates how the debt, note and mortgage have been separated with each being a commodity to sell to multiple buyers.

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see https://asreport.americanbanker.com/news/new-risk-for-loan-investors-lending-to-a-different-company

Leveraged loan investors are now concerned about whether they are funding a loan to one entity and then “by succession” ending up with another borrower with a different credit profile, reputation, etc. You can’t make this stuff up. This is only possible because the debt has been separated from the promissory note — the same way the debt, note and mortgage were treated as entirely separate commodities in the “securitization” of residential mortgage debt. The lack of connection between the paper and the debt has allowed borrowers to sell or transfer their position as borrower to another borrower leaving the “lender” holding a debt from a new borrower. This sounds crazy but it is nevertheless true. [I am NOT suggesting that individual homeowners try this. It won’t work]

Keep in mind that most certificates issued by investment bankers purportedly from nonexistent inactive trusts (call them NEITs instead of REMICs) contain an express provision that states in clear unequivocal language that the holder of the certificate has no right, title or interest to the underlying notes and mortgages. This in effect creates a category of defrauded investors using much the same logic as the use of MERS in which MERS expressly disclaims and right, title or interest in the money (i.e., the debt), or the mortgages that reregistered by third party “members.”

Of course those of us who understand this cloud of smoke and mirrors know that the securitization was never real. The single transaction rule used in tax cases establishes conclusively that the only real parties in interest are the investors and the borrowers. Everyone else is simply an intermediary with no more interest in any transaction than your depository bank has when you write a check on your account. The bank can’t assert ownership of the TV you just paid for. But if you separate the maker of the check from the seller of the goods so that neither knows of the existence of the other then the intermediary is free to make whatever false claims it seeks to make.

In the world of fake securitization or as Adam Levitin has coined it, “Securitization Fail”, the successors did not pay for the debt but did get the paper (note and mortgage or deed of trust). All the real monetary transactions took place outside the orbit of the falsely identified REMIC “Trust.” The debt, by law and custom, has always been considered to arise between Party A and Party B where one of them is the borrower and the other is the one who put the money into the hands of the borrower acting for its own account — or for a disclosed third party lender. In most cases the creditor in that transaction is not named as the lender on the promissory note. Hence the age-old “merger doctrine” does not apply.

This practice allows the sale and resale of the same loan multiple times to multiple parties. This practice is also designed to allow the underwriter to issue investors a promise to pay (the “certificate” from a nonexistent inactive trust entity) that conveys no interest in the underlying mortgages and notes that supposedly are being acquired.

It’s true that equitable and perhaps legal rights to the paper (i.e., ownership) have attached to the paper. But the paper has been severed from the debt. Courts have inappropriately ignored this fact and stuck with the presumption that the paper is the same as the debt. But that would only be true if the named payee or mortgagee (or beneficiary on a Deed of Trust) were one and the same. In the real world, they are not the same. Thus we parties who don’t own the debt foreclosing on houses because the real parties in interest have no idea how to identify the real parties in interest.

While the UCC addresses situations like this Courts have routinely ignored statutory law and simply applied their own “common sense” to a nearly incomprehensible situation. The result is that the courts apply legal presumptions of facts that are wrong.

PRACTICE NOTE: In order to be able to litigate properly one must understand the basics of fake securitization. Without understanding the difference between real world transactions and paper instruments discovery and trial narrative become corrupted and the homeowner loses. But if you keep searching for things that ought to exist but don’t — thus undercutting the foundation for testimony at deposition or trial — then your chances of winning rise geometrically. The fact is, as I said in many interviews and on this blog as far back as 2007, they don’t have the goods — all they have is an illusion — a holographic image of an empty paper bag.

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