Facially Invalid Recorded Documents

The view proffered by the banks would require them to accept declarations of fact from potential borrowers without any indicia of truth or reliability. It is opposite to the manner in which they do business. Currently they have it both ways, to wit: for purposes of borrowing you must submit documents that are facially valid without reference to external evidence and which can be easily confirmed but for purposes of foreclosure, none of those conditions apply. 

As part of the the scheme of “securitization fail” (see Adam Levitin) banks, servicers and third party vendors have been creating, fabricating and executing documents that are not facially valid nor do they comply with industry standards or even common sense. But once recorded judges take them “at face value” by assuming that somehow the document makes sense, when it clearly does not comport with law or logic. Defenders of foreclosure act at their peril when they fail to attack the facial validity of the documents upon which the foreclosure claims rely.

In a recent article written by Dale Whitman for the ABA he states the following “Conclusion. The recording system is archaic and fraught with the potential for yielding wrong conclusions. Conversion by many recording jurisdictions to computer-based electronic indexes has been helpful, but most of the legally problematic flaws continue to exist. Title insurance has been invaluable in making the weight of the recording system bearable, but it adds a further layer of complexity as buyers try to understand the limitations of their title policies. It seems unlikely that major changes will occur, so it is essential that real estate lawyers understand the peculiarities and limitations of our present system.” (e.s.)

As he points out recording is not required to make a document valid, but once it is recorded the document takes on a life of its own. It also presents numerous trapdoors and pitfalls that should be analyzed before answering the initiation of a foreclosure proceeding with any action on behalf of the homeowner including the motion to dismiss in judicial states, the answer, affirmative defenses and the Petition for TRO or lawsuit for wrongful foreclosure.

see what you didn_t know about recording acts_whitman (2).authcheckdam

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Common sense tells you that for a document to mean anything it must say enough that a reasonable person would be able to confidently draw meaning from it. Analyzing the facial validity of documents used in foreclosure reveals a pattern of misrepresenting the facial validity and misdirecting judges into NOT looking closely at the documents from which they are making assumptions and thence to legal conclusions that bind homeowners into proving matters beyond their control.

I proffer here an analysis that I just completed (our TERA report) as an example.

  1. We have already seen documentary proof that BONY Mellon does not receive the proceeds of the sale of property subject to the power of sale in a nonjudicial state or the forced sale in a judicial state. There are many reasons for this.
  2. Analysis of the facial validity of the use of various names and descriptions reveals the absence of an actual party, unless extrinsic “parole) evidence is added. Hence the documents upon which the above language relies does not support facial validity.
  3. BONY Mellon is said to be the “successor to JP Morgan Chase.” It is not and never has been a successor to JPMorgan Chase. There is nothing in the public domain to support that assertion. There is no instrument attached and no description of any transaction in which, as to this subject property and loan, we can ascertain how BONY Mellon became the successor to JPM Morgan Chase. Hence the documents in which BONY Mellon appears are not facially valid and are defective in terms of proof of title. This could be corrected by affidavit or any process that is allowed in the state where the property is located but it hasn’t been done on record, and there is no evidence to suggest that it has been done but is not recorded. The usual and acceptable manner of phrasing such a succession, if it were true, would be “as successor to JP Morgan Chase pursuant to that certain agreement of transfer by and between JPMorgan Chase (and /or other parties) and BONY Mellon dated July 6, 200X.” The absence of such description leaves the reader to pursue extrinsic or parole evidence to determine if the succession is documented and if so whether that documentation is facially valid. This is all absent.
  4. The succession suggests that it is in the role of trustee. There is no instrument attached and no description of any transaction in which, as to this subject property and loan, we can ascertain how BONY Mellon became the successor Trustee to JPM Morgan Chase. Hence the documents in which BONY Mellon appears as trustee are not facially valid and are defective in terms of proof of title. This could be corrected by affidavit or any process that is allowed in the state where the property is located but it hasn’t been done on record, and there is no evidence to suggest that it has been done but is not recorded. The usual and acceptable manner of phrasing such a succession, if it were true, would be “as successor to JP Morgan Chase, trustee pursuant to that certain agreement of transfer by and between JPMorgan Chase (and /or other parties) and BONY Mellon dated July 6, 200X.” The absence of such description leaves the reader to pursue extrinsic or parole evidence to determine if the succession is documented and if so whether the documentation is facially valid. This is all absent. The absence of a description of a specific trust and trust instrument is yet another factor that renders the instrument facially invalid, but theoretically correctible.
  5. This leads to a further question of extrinsic evidence being required. Other than by the use of parole evidence (outside the information contained on the document itself) the reader cannot ascertain the existence or description of a specific trust organized and existing under the laws of any jurisdiction. In addition, the issue of a transfer or change of trustees of a trust, if one can be found, is not supported by language such as “pursuant to the provisions of the trust agreement dated the 3rd day of May, 200Y in which the trust named ‘Structured Asset Mortgage Investment II, Inc. Bear Stearns ALT-A Trust’ was created under the laws of the State of New York”. Without such reference the facial validity of the instruments remains invalid although theoretically correctible. Without the knowledge of the legal existence of the trust being confirmable by public record, there is no support for the implied trust. Without support for the implied trust and the trust agreement creating it, there is no obvious support for how trustees could exist or be changed. Without support on the face of the instruments for how trustees of a trust could be changed, the description of the change of trustees is merely a declaration that is not supported by anything on the face of the document.
  6. JPMorgan is implied to have been the trustee of the potentially nonexistent trust. Once again the implied assertion leaves the reader to determine if the trust was created pursuant to the laws of any jurisdiction, and if JPMorgan was named as trustee for the trust.
  7. In either event both BONY Mellon and JPMorgan are described to be acting in a representative capacity on behalf of “holders… of pass through certificates” and not as “trustees” of any “trust.” The certificates are identified as Mortgage Pass Through Certificates Series 2004-12. The reference to being a “trustee” and the implied representation of the holders of certificates would be acceptable if the “holders” were described as beneficiaries. The extrinsic evidence often shows that such holders are not beneficiaries. This leads to the question of how and why there is representation of the holders, apart from the alleged trust, Is the representation implied from the trust agreement that is not described? Is the representation the result of some other trust or agency agreement? It is not possible to ascertain the answers to these vital questions without resort to extrinsic evidence, thus making the instruments relying upon such language, facially invalid.

Every state has statutory requirements for an instrument to be facially valid. A deed between Donald Duck and Mickey Mouse as Grantor and Grantee respectively would not be facially valid because both the grantor nor the grantee are fictitious names of cartoon characters and unless used as a egla fictitious name for an actual entity doing business under that name the document could not be corrected to become a valid document suitable for recording.

Yet county recorders are allowing the recordation of millions of documents across the country with exactly that defect. By allowing such documents to be recorded they are lending support to the legal presumption that Donald and Mickey are real people with rights to transfer interests in real property and even foreclose on real property. At the end of the chain of written documents someone holds paper that is recorded but based upon a chain of title with two large gaps in it — Donald and Mickey, and by the time the foreclosure occurs probably Minnie Mouse as well (or maybe Fannie or Freddie whose names are being used, just like the “REMIC trustees”, but who have no part in any transaction involving the subject loan).

Back to Real Property 101.

  1. Who is the grantor? If that cannot be readily determined from the face of the instrument the instrument is facially invalid.
  2. Who is the grantee? If that cannot be readily determined from the face of the instrument the instrument is facially invalid.
  3. What is the effective date of transfer? If that cannot be readily determined from the face of the instrument the instrument is facially invalid.
  4. What is being transferred? If that cannot be readily determined from the face of the instrument the instrument is facially invalid — or, in the case of a mortgage or beneficial interest in a deed of trust if the instrument declares a transfer but without the underlying debt, the instrument is facially invalid and unenforceable both because of state statutes regarding facial validity and the UCC Article 9 requiring value to be paid (see above linked article).
  5. What is the legal description of the property affected? If that cannot be readily determined from the face of the instrument the instrument is facially invalid.

An instrument that is not facially valid should be returned by the recording office with notes specifying what needs to be corrected. This vital step is being overlooked on all documents relating to foreclosures. If rules, laws and procedures were followed with regard to such documents there would not be any foreclosure or, if the corrections could actually be made, there would be no defense. It is in the valley between those two notions that all foreclosures based on “successors” are based.

By overlooking the obvious lack of clarity on the face of the documents county recorders keep creating a vacuum that the banks are only too happy to fill with MERS — an IT platform that is the opposite of tamper-proof allowing virtually anyone with a login and password to create the illusion of authority where none existed before. Hence the use of MERS and other systems to give depth to the illusion of facial validity.

The conclusion is that documents containing the language described above should not have been recorded.  The county recorder should have rejected such documents as being facially invalid, requiring additional documents to be attached, if they existed.

Such language is a substantial deviation from custom and practice as well as common sense and logic.  Custom and practice of the same banks that are listed in the language described above requires that they not accept such language without the additional documentation and confirmation of facts that are declared on the face of the instrument.  Common sense dictates that the reason why such custom and practice exists is that most fraudulent schemes involve written instruments in which various declarations are made that are untrue or lack support.  For purposes of recording, any declaration on the face of the instrument that requires the attachment or description of documents that are readily available in the public domain would be unacceptable, much as, for example, a deed without a signature.  The property must be described with precision (or later corrected by affidavit), the grantor must be described with precision (or later corrected) and the grantee must be described with precision (or later corrected).  Without the required corrections, the documents are facially invalid.

For purposes of case analysis, the absence of facially valid documents, even though they were improperly recorded, negates the potential use of legal presumptions arising from the facial validity of documents.  Therefore such documents should be rejected without proper foundation in connection with the use of such documents for any purpose, and the attempt to introduce such documents into evidence in any court or administrative proceeding.

In the case currently under analysis, this means that the proceedings in which the property was allegedly foreclosed, were themselves all improper and based upon invalid terms.  Whether this renders the proceedings void or voidable depends upon case law and interpretations of constitutional due process.

However it is safe to say that based upon the above analysis, it is obvious that all such documents including the deed upon foreclosure are defective in several material respects.  Therefore, our conclusion is that the current title chain in the county records regarding this property is at best clouded.  The procedures for correcting clouded title vary from state to state and are subject to both federal and state laws.  Individual research on each case in each state is required before taking any action.

The view proffered by the banks would require them to accept declarations of fact from potential borrowers without any indicia of truth or reliability. It is opposite to the manner in which they do business. Currently they have it both ways, to wit: for purposes of borrowing you must submit documents that are facially valid without reference to external evidence and which can be easily confirmed but for purposes of foreclosure, none of those conditions apply. 

 

Rogue REMICs? 2016 Study Reveals Lack of Standing

I read a lot. I came across this article today published in 2016. Nobody has paid attention to it but as far as I can tell on first skim, the author has both coined the name “rogue REMIC” and described it well enough to come to a conclusion, to wit: everything about them is a scam and no legal standing exists with respect to them. I would only add that the author is incorrectly assuming that any securitization took place or if it was, as Adam Levitin coined the phrase, “Securitization Fail.”

see campbell – capstone inquiry into rogue remics

Significant quote from the abstract of the article:

The business of privatized mortgage loan securitization (Real Estate Mortgage Investment Conduits or “REMICS”) is so arcane and specialized that few people outside of that realm of investment knowledge understand, or even care to understand how loan securitization functions. However, if the difference between a legitimate REMIC and a Rogue REMIC is adequately explained, one can begin to understand why Rogue REMICs must be exposed as unlawful enterprises whose affiliates are not only able to disregard existing federal securities and tax laws, but are also able to circumvent state and local foreclosure laws at will. [e.s.] These ongoing violations result from the intentional and commonplace shortcutting of the proper mortgage loan securitization processes during the several years preceding the 2008 financial crisis. This Inquiry will not focus primarily on how and why Rogue REMICS violate federal tax and securities laws [e.s.]; although those aspects are part of the discussion by necessity. I will argue that all Rogues lack the perquisite legal standing to prosecute both judicial and non-judicial foreclosures. I will present compelling evidence that, in the aftermath of the 2008 financial crisis, foreclosures by Rogues may have exceeded 10% of all foreclosures. I will further argue that county officials may be violating state laws by recording the documents that impart false legal standing to the Rogues. I will conclude with a suggestion to homeowners on how to proceed if a mortgage assignment to a Rogue turns up in the local County public records. [e.s.]

And then there is this:

federal government regulators have no will to criminally prosecute the Rogues for financial crimes against individual homeowners even though the crimes are being committed by nationally-chartered investment banks. And so individual homeowners are left to fend for themselves against these behemoths. As a result, a hodge-podge of civil cases in State courts have created such a plethora of conflicting decisions that, in the aggregate, only serve to obfuscate the overriding principle of standing.

and this:

If a borrower’s loan did not leave the “warehouse” timely (if ever) to be incorporated into any REMIC, which includes memorializing that transfer in the local county, the REMIC trustee cannot create standing years later by filing a bogus assignment. As Levitin (2010) explains that “Securitization is the legal apotheosis of form over substance, and if securitization is to work it must adhere to its proper, prescribed form punctiliously” (p. 3).

and finally diagrams of a Rogue REMIC which is an empty pool (something I have been railing about for 12 years). The author describes it as

“A REMIC in name only. A shell of financial instrument. It never had any mortgages assigned to it when it was created and, years later, it is now closed to the introduction of new loans.”

Reaching the conclusion

homeowners were unwitting participants in an elaborate pump and dump scheme to deceive and profit from unwitting REMIC investors. By failing to record assignments during the warehouse phase of REMIC creation, the big investment banks created REMICs that existed in name only; then sold shares of them to the public as if they were the real thing.

And then they foreclosed on homeowners using the fake trusts as the name of the claimant, never revealing the true parties in interest because that would expose them to investigation aid discovery in which their lies would be obvious.

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MISSION STATEMENT: I believe that the mortgage crisis has produced manifest evil and injustice in our society. Pretenders with more money and more lawyers than any consumer or borrower are stealing homes from homeowners while they undermine the investments by Pension Funds.

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Pope Francis: Help from an Unexpected Source — Derivative Markets “Ethically Unacceptable”

Warren Buffett saw it 15 years ago after analysis performed on the derivative markets. He said that the derivatives, as they were then (and now) being used, were “financial weapons of mass destruction.” If he was ignored what chance does anyone else have?

Enter Pope Francis from the perspective of income and wealth inequality and arriving at the conclusion that the aim of the derivative market was to create and trade on poverty and financial distress.

And he called out the financial system as a whole as being a “ticking time bomb,” something that many of us have been saying for years, starting (like Buffett) from before the manifestation of the Ponzi scheme that was ridiculously named “securitization.”

GET A CONSULT

GO TO LENDINGLIES to order forms and services. Our forensic report is called “TERA“— “Title and Encumbrance Report and Analysis.” I personally review each of them for edits and comments before they are released.

Let us help you plan your answers, affirmative defenses, discovery requests and defense narrative:

954-451-1230 or 202-838-6345. Ask for a Consult. You will make things a lot easier on us and yourself if you fill out the registration form. It’s free without any obligation. No advertisements, no restrictions.

Purchase audio seminar now — Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations.

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see – Pope Francis Calls Derivatives and Credit Default Swaps Immoral

The financial markets have long identified themselves as being “amoral.” Just part of the capitalistic system which is code for “if you do it for money, then it’s OK.” Accepting that argument would mean that a perfect defense to a murder charge is that it was based upon the desire to get money.

The Pope assails “unbridled global capitalism.” He isn’t a socialist. The Vatican is merely pointing out that the chaos we call society has tilted the playing field such that capitalism has moved from a system of finance to a system of governance.

Instead of government reigning in and holding the banks accountable for targeting people of low income and people in poverty (along with everyone else) politicians have (a) taken Wall Street assertions as though they were the product of thorough investigation and (b) blamed the victims and forced them to bear the cost of the blow out that only the Wall Street could have created.

Mainstream media succumbed to this phenomenon. They started off with exposes and investigative journalism only to abandon the follow-up that might have educated the consumer population. Some journalists were told point blank to lay off critical pieces on banks. That became increasingly difficult as verdicts and settlements started pouring like rain all based upon fraud, which the Pope references. They were all based upon investigations, administrative findings and allegations from all attorneys general in the country and many if not most of the investors who were duped into buying worthless “certificates” that existed only in the digital world.

The Vatican analysts came to the same conclusion I did in 2006. Dozens of other analysts across the world came to the same conclusion, some before me and most after me.

The conclusion reached by this group of writers and investigators was basically the same although phrased differently, person to person, to wit: virtually all “loans” generated over the past 20 years have been based upon fiction —  a fictional value for the home, a fictional value for the household income (ability to repay) a fictional value for the “certificates” issued by a fictionally named “trust” that was in fact the bank doing business under the fictitious name of the “trust.”

In 2003, Buffett warned of crisis if the government did not intervene in the proliferation of derivative trading and underwriting. The predicted crisis arrived. Now the Vatican is warning of another one perhaps worse than the 2008 crash. Nobody wants to hear that.

Federal and State lending laws state that the responsibility for determining whether the debt will be repaid lies with the bank underwriting the “loan.” Yet the banks were the only entities to come out of the Great 2008 Recession not only whole, but bigger and stronger. The consumer is seen and treated as meat for the hungry bear. Just ask anyone on Wall Street.

Ultimately the responsibility for what governance is acceptable lies with voters. But they only exercise that control when they vote. The status quo is elevating our financial system to a governance system. It leaves the banks in control of most domestic and global issues. Democrats and Republicans are both guilty of the same things: (a) their sole driving  force is retention of power and (b) pushing down fresh new candidates who actually want to accomplish something. The Banks agree.

If you want something different, then VOTE!

 

The Role of Dynamic Dark Pools in Ponzi Schemes Masquerading as Securitized Loan Pools

The bottom line is that there are no financial transactions in today’s securitization schemes. There is only fabricated paper. If you don’t understand the DDP, you don’t understand “securitization fail,” a term coined by Adam Levitin.

GET A CONSULT

GO TO LENDINGLIES to order forms and services. Our forensic report is called “TERA“— “Title and Encumbrance Report and Analysis.” I personally review each of them for edits and comments before they are released.

Let us help you plan your answers, affirmative defenses, discovery requests and defense narrative:

954-451-1230 or 202-838-6345. Ask for a Consult. You will make things a lot easier on us and yourself if you fill out the registration form. It’s free without any obligation. No advertisements, no restrictions.

Purchase audio seminar now — Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations.

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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I received a short question today to which I gave a long answer. The question is “What happens when an investor decides that he or she wants to cash it in does someone redeem their certificate ?”

Here is my answer:

YES they get paid, most of the time. It is masked as a “trade” on the proprietary trading desk of the CMO Dept. which is completely unregulated and reports nothing. As long as the Ponzi scheme is going strong, the underwriter issues money from the investor pool of money (dynamic dark pool -DDP). It looks like a third party bought the “investment.” If the scheme collapses then the underwriter reports to investors that the market is frozen and there are no buyers.

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There is no redemption because there are no certificates. They are all digital entries on a server. Since the 1998 law deregulated the certificates, reporting is limited or nonexistent. The entries can be changed, erased, altered, amended or modified at will without any regulator or third party knowing. There is no paper trail. Thus the underwriter will say, if they were ever asked, whatever suits them and there is no way for anyone to confirm or rebut that. BUT in discovery, the investors have standing to ask to see the records of such transactions. That is when the underwriter settles for several hundred million or more.
 *
They discount the settlement based upon “market” values and by settling for pennies on the dollar with small community banks who do not have resources to fight. Thus if they received $2 billion for a particular “securitized pool” that is allocated to a named trust they will instantly make about 10-20 times the normal underwriting fee by merely taking money before or after the money hits the DDP. Money is paid to the investors as long as sales of certificates are robust. Hence the DDP is constantly receiving and disbursing money from many more sources than a fixed group of homeowners or investors.
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It is all about gaps and absences. If a debt was properly securitized, the investor would pay money to the underwriter in exchange for ownership of a certificate. The money would then be subject to fees paid to the underwriter and sellers of the certificates. The balance would be paid into a trust account on which the signatory would be a trust officer of the Trustee bank.
 *
If a scheme is played, then the money does not go into the trust. It goes to the DDP. From there the money is funneled through conduits to the closing table with the homeowner. By depositing the exact and expected amount of money into the trust account of the closing agent, neither the closing agent nor the homeowner understands that they are being played. They don’t even have enough information to arouse suspicion so that they can ask questions.
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Hence if you combine the proper securitization scheme with the improper one you see that the money is diverted from the so-called plan. This in turn causes the participants to fabricate documents if there is litigation. They MUST fabricate documents because if they produced real documents they would have civil and criminal liability for theft, embezzlement in investor litigation and fraud and perjury in foreclosure litigation.
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It is only by forcing a peek around the multiple layers of curtains fabricated by the players that you can reveal the absence of ownership, authority or even an economic interest — other than the loss of continued revenue from servicing and resales of the same loan through multiple investment vehicles whose value is completely derived from the presumed existence of a party who is the obligee of the debt (owner of the debt, or creditor).
 *
That party is the DDP — fund that is partially authorized for “reserve” and which the prospectus and trust instrument (PSA) state (1) that the mortgage loan schedule is not the real one and is presented as an example and (2) that the investors acknowledge that they might be paid from their own money from the “reserve.”
 *
The gap is that the DDP and the reserve are two different accounts. The “reserve” is a pool of money held in trust by, for example, U.S. Bank as trustee for the trust. There is no such account. The DDP is controlled by the underwriter but ownership is intentionally obscured to avoid or evade detection and the liability that would attach if the truth were revealed.
 *
We win cases not by proving theft from investors but by hammering on the fact that the documents are fabricated, which is true in virtually all cases involving a named trust. We will win a large award if we can show that the intended beneficiaries of the foreclosure were parties other than the obligee on the debt.
 *
Thus the attorneys, servicers and trustee are protecting their ill-gotten gains and seeking to grab more money and property at the expense of the unnamed investors and homeowners. They are then transforming an expected revenue stream into the illusion of a secured debt owed not to the funding sources but to the intermediaries.
Go to LENDINGLIES for more help.

Same Old Story: Paper Trail vs, Money Trail (Freddie Mac)

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

The explanations of securitization contained on the websites of the government Sponsored Entities (GSE’s) clearly demonstrate what I have been writing for 11 years and reveal a pattern of illusion and deception.

The most important thing about a financial transaction is the money. In every document filed in support of the illusion of securitization, it steadfastly holds firm to discussion of paper instruments and not a word about the actual location of the money or the actual identity of the obligee of that money debt.

Each explanation avoids the issue of where the money goes and how it was “processed” (i.e., stolen, according to me and hundreds of other scholars.)

It underscores the fact that the obligee (“debt owner” or “holder in due course” is never present in any legal proceeding or actual transaction or transfer of of the debt. This leaves us with only one  conclusion. The debt never moved, which is to say that the obligee was always the same, albeit unaware of their status.

Knowing this will help you get traction in the courtroom but alleging it creates a burden of proof for you to prove something that you know is true but can only be confirmed with access to the books, records an accounts of the parties claiming such transactions ands transfers occurred.

GET A CONSULT

GO TO LENDINGLIES to order forms and services. Our forensic report is called “TERA“— “Title and Encumbrance Report and Analysis.” I personally review each of them for edits and comments before they are released.

Let us help you plan your answers, affirmative defenses, discovery requests and defense narrative:

954-451-1230 or 202-838-6345. Ask for a Consult. You will make things a lot easier on us and yourself if you fill out the registration form. It’s free without any obligation. No advertisements, no restrictions.

Purchase audio seminar now — Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations.

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

===================================

For one such example see Freddie Mac Securitization Explanation

And the following diagram:

Freddie Mac Diagram of Securitization

What you won’t find anywhere in any diagram supposedly depicting securitization:

  1. Money going to an originator who then lends the money to the borrower.
  2. Money going to a named REMIC “Trust” for the purpose of purchasing loans or anything else.
  3. Money going to the alleged unnamed beneficiaries of a named REMIC “Trust.”
  4. Money going to the alleged unnamed investors who allegedly purchased “certificates” allegedly issued by or on behalf of a named REMIC “Trust.”
  5. Money going to the originator for sale of the debt, note and mortgage package.
  6. Money going to originator for endorsement of note to alleged transferee.
  7. Money going to originator for assignment of mortgage.
  8. Money going to the named foreclosing party upon liquidation of foreclosed property. 
  9. Money going to the homeowner as royalty for use of his/her/their identity forming the basis of value in issuance of derivatives, hedge products and contract, insurance products and synthetic derivatives.
  10. Money being credited to the obligee’s loan receivable account reducing the amount of indebtedness (yes, really). This is because the obligee has no idea where the money is coming from or why it is being paid. But one thing is sure — the obligee is receiving money in all circumstances.

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

BLOOMBERG: Mortgage Crisis Still Unresolved, New Crisis Looming

No two financial crises are ever quite the same. The next one won’t be like the last. But history teaches lessons, and there’s no excuse for ignoring them.

Regulators have done a lot to reform the financial system since the 2008 crisis, but they still haven’t fixed the market where the trouble started: U.S. mortgages. It’s an omission they need to put right before the next crisis hits.

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see https://www.bloomberg.com/view/articles/2018-04-30/america-s-mortgage-market-is-still-broken

David Shipley, Senior Editor for Bloomberg Views has hit the nail on the head. While there are some errors in his article, they are understandable.

He’s right when he says that the servicers lacked the necessary incentives and resources and still lack those incentives and resources. But when he talks about “delinquencies” he fails to grasp the fact that those “delinquencies” are based upon a debt that neither the servicer nor its client is authorized to administer.

This failure of perception is understandable. It is difficult to to accept the fact that the debt went up in smoke and therefore no creditor has authorized the administration or collection of the debt. It is challenging to accept the notion that the banks engineered this scheme so they could step in as if they were creditors without actually saying so.

But he gets very close when he says

Private-label mortgages (which aren’t guaranteed by the government) were packaged into securities with extremely poor mechanisms for deciding who — investors, packagers or lenders — would take responsibility for bad or fraudulent loans.

The whole idea was to make it unclear who would be injured by nonpayment of a debt. That was how the banks, as intermediaries, transformed themselves into apparent principals and how entities created the illusion of self proclaimed servicers. Or as Shipley puts it

The parties involved in securitizations became embroiled in legal battles about who owed what to whom — litigation that goes on to this day.

So even amongst the principals of the scheme coined as “securitization fail” (Adam Levitin) there is no agreement and in fact fierce court battles as to the identity of the injured party. In other words their pleadings in court constitute admissions that are inconsistent with the pleadings in foreclosure cases. If there is no identified party with injury then there is no legal standing.

What is clear now is that the money taken from investors was not used to fund REMIC trusts, that the REMIC Trusts never bought any debts and in fact never bought any of the dubious paper that was issued in connection with origination or transfer of the “loans.” Those investors were largely not becoming beneficiaries of the trust; instead they were becoming creditors of the trust.

Knowing that, investors are stuck — if they blow the whistle on the diversion of their money into a completely different “investment” than the one they thought they were buying, they are undermining their potential claim based upon the “security” offered by the mortgages. And they are undercutting the value of the certificates they bought. That is what threatens a large segment of the shadow banking market.

The fix that Shipley thinks should happen will never come to fruition because the government has been convinced that a fix would eviscerate the shadow banking market where derivatives are traded. Nobody knows what the outcome will be if that market fails.

But in the meanwhile current policy reflects a decision to let investors and borrowers take the entire brunt of the scheme that ultimately left the banks in solid control and rising profits despite small settlements compared to the amount of money siphoned out of the US economy. So the Federal reserve and American taxpayers continue the bailout by lending support to the false presumption that the RMBS derivatives are based upon mortgage loans owned by a trust.

Shipley narrowly misses the point when he says

Advancing payments to investors when loans go delinquent — a core responsibility of servicers — demands a lot of cash. It also requires ample capital to absorb possible losses on servicing rights, an asset whose value can quickly evaporate if defaults and prepayments eat into expected fees.

Think about it. Why would a company guarantee payments from a third party? Who would take that risk on loans known to be at best fragile? Where is the money coming from to make those payments? Is it really the “servicer.” And if the money is “recovered” as “servicer advances” when the property is liquidated, is the foreclosure really a disguised suit to force the recovery of servicer advances rather than a true foreclosure — contrary to the interests of the certificate holders?

And if Ocwen was actually entitled to receive and expected to receive recovery of servicer advances why would it be teetering on the edge of bankruptcy? The more likely scenario is that subservicers like Ocwen have nothing at all to do with servicer advances. They don’t make them, they don’t initiate them and they don’t collect them. The Wall Street playbook has the real puppet masters hidden behind several layers of curtains. Ocwen, like so many others, is just there to get tossed under the bus to make people happy that they extracted a pound of flesh — except there was no skin in the game.

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