Tonight on the Neil Garfield Show: Enforcement of Rescission

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TILA RESCISSIONS ARE NOT CONTINGENT ON ANYTHING

If no lawsuit is required to make rescission effective, why do you need to file a lawsuit to enforce it?

How do you enforce TILA rescission after notice has been given?

What NOT to say when you are enforcing rescission?

When do you file a lawsuit to enforce TILA rescission?

What are you asking for?

What is the 20 day window in which the banks must comply?

What are the banks required to do? Who is the creditor?

If the note and mortgage are void, why do you need the canceled note?

If the note and mortgage are void, why do you need a satisfaction of mortgage?

Why is the borrower entitled to recover all the money he ever paid on the alleged loan?

What if the loan contract was never completed? What if the originator was not the lender?

Is a void loan contract the same result as a rescinded loan?

When do you owe money back to some creditor?

When you get the next loan, who do you pay off for the last loan?

When you get the next loan, how much do you pay to satisfy the last loan creditor?

When Rescission Was Ignored and Final Order/Judgment Entered: What now?

For further information please call 520-405-1688 or 954-495-9867

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One of the warriors in this fight just got a negative result in court relating to rescission. Not surprising. Judges never liked TILA and they certainly don’t like rescission, but Justice Scalia made it very plain that the Judges must apply the law as it is — not as they think it should be.

The facts are that the notice of rescission was sent years ago and the bank stonewalled it — the very thing that Congress wanted to make very painful for banks. While Judges all over the country were saying I was wrong about rescission under TILA and applying common law principles, the outcome was very predictable — they found reasons why the rescission was not effective. But Scalia in Jesinowski changed all that. TILA rescission is effective by operation of law at the time the notice is dropped in the mail. And what Judges are still seeking to do is “say it isn’t so.” Here is my response

Interesting and wrong. I understand the reasoning. But jurisdiction can be brought up at any time. If your rescission was effective, which it was, then by operation of law the note and mortgage did not exist at the time of the decision by the trial court. The Jesinowsi decision was not a change in the law. The law remained unchanged. The prior decisions under which the Court rendered judgment were all based on a misconception which this court continues to accept despite the explicit instruction from Justice Scalia, whom this court cannot overrule.

The LAW has always been that the rescission is effective by operation of law at the moment notice is given. There is no dispute as to whether the notice was given. The law has always been that “by operation of law” means that the mortgage and note ceased to legally exist at the point in time when rescission was effective. If the note and mortgage were void at the time of any decision regarding the enforcement of those nonexistent instruments then subject matter jurisdiction and probably personal jurisdiction was absent since there was no indication as to the identity of the true creditor.

For the court to say today that it is true that the mortgage and note didn’t exist when it rendered its judgment but that the attack now is collateral is a veiled attempt to overrule the unanimous decision of the Supreme Court. To the extent it rendered judgment on property and instruments that did not exist at the time of the order or judgment, the judgment or order is void.

The issue of finality is what this court is raising. That only applies with respect to facts that were known at the time of judgment and not raised. This is a legal issue since there are no factual issues in dispute and it is universally held that a Judgment without subject matter jurisdiction is void. And the void judgment cannot withstand any attack if the subject matter — the note and mortgage — did not exist. If a party wished to bring a proof of claim in court without the note and mortgage then that could have been considered. But it was not represented as such and so it the pretend creditor that should be barred from a “collateral attack” — a doctrine that does NOT apply to lack of jurisdiction.

Perhaps it is time for a motion for rehearing or an appeal from the order.

COMBO vs Rescission Package

For more information please call 520-405-1688 or 954-495-9867

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A lot of questions about the difference between the COMBO reports and the Rescission Package have been received. So I figured I would publish the description and the differences between the two services. SO here is the email I sent to our new team member, Susan, and upon reading it I thought I would share it with everyone.

The COMBO is a title and securitization report to provide the lawyer or borrower with enough information and commentary from us about the deficiencies in the chain of title and the deficiencies in the claims regarding the balance of the loan. This work is performed by forensic analysts and myself as we apply findings of the claims of securitization (and claims that the loan was NOT securitized when there is in fact a private label Trust that claims ownership of the loan).

This in turn allows us to suggest that the notice of default was either never sent or contained false statements as to the default, false statements as to the owner of the loan, and false statements as to the amount required to “reinstate.” It shows servicer and other third party advances or gives an opinion regarding the receipt of those moneys and how that should reduce the balance of the loan claimed by the pretender lender and attacks the claim that the real creditor (the investors usually) have NOT suffered a default because they have continued to get paid by the Master Servicer or subservicer.

And finally it provides an analysis of deficiencies in the chain of title — along with showing that the pretender lender at closing of the loan never loaned any money and how subsequent assignments, endorsements, and powers of attorney were not only defective, but in most cases, fraudulent. In short, it shows how the loan never made it into the REMIC trust claimed to be the Plaintiff many foreclosure actions, which in turns means that neither the alleged trustee nor the servicer have any interest or authority to represent as to the loan of this particular borrower. These are essential issues of standing.

This is an evolving service and is continually changed to reflect the realities in litigation. The issues presented in this paragraph are precisely the issues that Patrick Giunta and I have won several cases — and lawyers across the country resulting in defeat for the banks, and even sanctions and an award of disgorgement of all money ever paid to the “servicer” (see Nash case) or the pretender lender, plus attorneys fees and court costs and even punitive damages in the millions of dollars where wrongful foreclosure actions have been filed.
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The RESCISSION package is a prelitigation package is best used when there is already a COMBO report issued by any competent forensic analyst and it is aimed at the lawyer for homeowners, since most of the concepts relate to procedural rules and substantive law. In the rescission package we analyze the title, securitization, and foreclosure process (review of pleadings, orders etc) for the specific purpose of determining whether (a) a prior notice of rescission was effective (b) a present notice of rescission is effective or (c) whether a new notice of rescission is a potential strategy.

This is analyzed in connection with the statutes under the Truth in Lending Act for TILA rescission, which operates completely differently than the rules we learned in law school about common law and other statutory rescission remedies. In this package we provide templates for rescission letters, but more importantly, we provide the commentary that provides the lawyer with arguments and strategies to ENFORCE rescission.

It is our premise that every rescission notice will be ignored or rejected by the pretender lender or pretender servicer that receives the notice. Thus borrowers are not likely to get the canceled note, the satisfaction of mortgage nor the return of money paid. We have anticipated many arguments that the banks might make and some basic trap doors that should be avoided both in pleading and argument regarding the filing of an enforcement action for the rescission which is effective by operation of law when mailed. An attorneys understanding of procedure, evidence and burden of proof is essential to get the most out of this package.
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QWR is a qualified written request for information on a loan under the Real Estate Settlement Procedures Act and is often called a RESPA 6. It sets the stage for either a current notice of rescission or enforcement of an existing one. Suggestions for a QWR are included in both packages. We provide services where we do the QWR but most people seem able to do it themselves.

DVL is a debt validation letter to establish the grounds for damages under the Uniform Debt Collection Act — FDCPA. Suggestions for a DVL are included in both packagesWe provides services where we do the DVL but most people seem able to do it themselves.

Bank Business Model is Foreclosure NOT “Repayment”

For further information or assistance please call 954-495-9867 or 520-405-1688.

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see http://newswire.net/newsroom/pr/00088375-6-tricks-banks-use-to-drive-homeowners-into-foreclosure.html

For many years it has been apparent most observers of the mortgage crisis that the Banks have switched their traditional role of creditor seeking to get paid to something else — a “servicer” or “Trustee” seeking foreclosure. in fact, in multiple cases where the homeowner has had sufficient funds to pay off the “debt” upon proof of ownership and balance, the banks have actually argued in court that they should not be required to accept the money. They argue that is their election to seek foreclosure. Judges did not agree, but they still are pursuing a business model of exactly that — seeking foreclosure rather than payment.

An important quote from the above article strips the tip off of the iceberg —

When a bank assigns the risk of a loan to the investors of a securitized trust, the “bank” is no longer a traditional bank that gets the benefit when mortgage payments are made.  Instead, the bank has become a servicer that actually benefits disproportionately from foreclosure on a homeowner’s property.

Note the language that says at some point the Banks decide where to assign the risk of loss to investors. It is only after they have sold the loans, obtained insurance payments, Government funds, credit default swap bets, and other things that make every loan a virtual fountain of money. This also suggests that the risk of loss had not been assigned to investors before which means by definition in most cases that the alleged transfer to the trust was an illusion.

[PRACTICE HINT FOR LAWYERS: Given that it may be possible to show that the servicer has an economic interest in the outcome, and that its interest is enhanced by foreclosure rather than modification or settlement, the foreclosure defense lawyer might argue that the servicer is not entitled to the same presumptions that would apply to a “disinterested party.” And that can lead you into forcing them to prove the real facts instead of having the court accept presumed “facts” that are actually false.]

The article states

Most homeowners are unaware that their mortgage banks make more money from foreclosure than actual payment.  Mortgage banks give as few modifications as possible and comply minimally with statutes put in place to protect borrowers, all while employing tricks to “cash in” on homeowners’ defaults, pushing them to foreclosure.  The banks take the risk of litigation because few people sue, but getting legal assistance as soon as possible can make the difference between homeowners asserting their rights or losing their homes while being bulldozed by the bank.

In other words the banks know that they have no right foreclosing and that they are gaming the system pretending to be lenders, servicers or trustees for essentially nonexistent trusts. And they know they will lose some cases. And in some cases the sanctions or punitive damage awards is in the millions of dollars. But it doesn’t matter. The fact remains that they are still successfully pushing through wrongful foreclosures by the thousands for each one they lose. And since it is not their money at risk, this is a perfectly acceptable business model.

So the article points to 6 common tricks that banks sue to push homeowners into foreclosure. These tricks work because on some level most borrowers still trust the bank’s representations of ownership and balance and don’t think to challenge the basic foundation of the party claiming to be servicer or trustee or owner of the debt. There is no default if the alleged debt never existed. That doesn’t mean you didn’t get a loan. But ti does mean that you didn’t get the loan that is referenced in the closing documents including the note and mortgage.

The six tricks:

Bank Trick #1:  Refusing Payments

Bank Trick #2:  Switching Service[r]s During Modification

Bank Trick #3:  Breaching a Modification Contract

Bank Trick #4:  Extra Fees & Escrow Accounts

Bank Trick #5:  False Notices [like including an amount required to reinstate that is completely without any basis]

Bank Trick #6:  Multiple Modifications

Foreclosure is clearly the fattest pot of gold possible and it’s for this reason foreclosure is the bank’s primary goal.

If a homeowner spots any of the above tricks, the best thing to do is immediately seek legal assistance in order to avoid the situation from getting any worse.

Rescission Summary As I see It

If you read my blog for the last 3 weeks or so you should get a good idea of where I am coming from on this. If you still have questions or need assistance call me at 954-495-9867 or 520-405-1688. The basic thrust of my argument is that

  1. BOTH Congress and US Supreme Court agree that there is nothing left for the borrower to do other than dropping notice of rescission in the mail. It is EFFECTIVE BY OPERATION OF LAW at the point of mailing. The whole point is that you don’t need to be or have a lawyer in order to cancel the loan contract, the note and the mortgage (deed of trust) with the same force as if a Judge ordered it. No lawsuit, no proof is required from the borrower. No tender is required as it would be in common law rescission. The money for payoff of the old debt is presumed to come from a new lender that approves a 1st Mortgage loan without fear that they will lose their priority position.
  2. Lender(s) must comply within 20 days — return canceled note, satisfy mortgage, and return money to borrower.
  3. Lenders MUST file a lawsuit challenging the rescission within 20 days or their defenses are waived. Any other interpretation would make the rescission contingent, which is the opposite of what TILA and Scalia say is the case.
  4. Therefore a lawsuit by borrower to enforce the rescission need only prove mailing.
  5. Any attempt to bring up statute of limitations or other defenses are barred by 20 day window.
  6. The clear reason for this unusual statutory scheme is to allow borrower to cancel the old transaction and replace with a new loan. This can only happen if the rescission is ABSOLUTE. It can be declared void or irregular or barred or anything else ONLY within the 20 day window. If the 20 day window was not final (like counting the days for filing notice of appeal appeal, motion for re-hearing, etc.) then no new lender or bank would fund a loan that could be later knocked out of first priority position in the chain of title because the rescission was found to be faulty in some way. This is the opposite of what TILA and Scalia say.
  7. The content of the rescission notice should be short — I hereby cancel/rescind the loan referenced above. You merely reference the loan number, recording information etc. at which point the note and mortgage become VOID by operation of law.
  8. BY OPERATION OF LAW means that the only way it can be avoided is by getting a court order.
  9. If any court were to allow “defense” in a rescission enforcement action AFTER the 20 day window the goal of allowing the borrower to get another loan to pay off the old lender(s) would be impossible.
  10. Hence the ONLY possible logical conclusion is that they MUST file the action within 20 days or lose the opportunity to challenge the rescission. And any possible defenses are waived if not filed during that period of time. That action by the “lender” or “creditor” must be an equitable action to set aside the rescission, which is already “effective” by operation of law.

The worst case scenario would be that rescission is the most effective discovery tool available. If the lender(s) file the 20 day action they would need to establish their positions as creditors WITHOUT the note and mortgage (which are ALREADY VOID). This would require proof of payment and proof of economic interest and proof of ownership and balance. Any failure to plead these things would fail to establish standing. The attempt to use the note and mortgage as proof or the basis of pleading should be dismissed easily. The note and mortgage are void by operation of law by the time the bank or servicer files its action.

In all probability the only parties who actually have an interest in the debt are clueless investors who by contract have waived their right to enforce or participate in the collection process. The problem THEY have is they gave their money to a securities broker. They can neither show nor even allege that they know what happened to their money after they gave it to the broker.

The important thing about TILA Rescission is that it is a virtual certainty that the borrower will be required to file an enforcement action. In that action they should not allow themselves to get sucked into an argument over whether the rescission was correct, fair, barred by limitations or anything else, all of which should have been raised within the 20 day window. AND that recognition is the reason why we have been inundated to prepare pre-litigation packages, analysis and reports to assist lawyers in filing actions to enforce rescissions, whether filed today or ten years ago.

Caveat: I have no doubt that attempts will be made to change the law. The Supreme Court has made changing the law impossible by a ruling from the bench, That means state legislatures and Congress are going to be under intense pressure to change this law or the effect of it. But as it stands now, I don’t think any other analysis covers all the bases like the one expressed here.

Anatomy of a Winning Case in Foreclosure Defense: Special Guest Patrick Giunta Tonight!

Click in to tune in at The Neil Garfield Show

Or call in at (347) 850-1260, 6pm Eastern Thursdays

Tonight we will discuss a foreclosure case that was recently won in Broward County, Florida. Our guest tonight is Patrick Giunta, one of the risking stars in the legal community.

Beach v Ocwen: 1997 Decision that will be used by banks and servicers against rescission

For Further information and assistance please call 954-495-9867 and 520-405-1688.

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See Beach v Ocwen Fla. Supreme Court

I have no doubt that the Banks will attempt to use this decision — but it still is trumped by Jesinowski and other Federal decisions on equitable tolling. Having the right to cancel/rescind is described as extinguished by TILA regardless of the circumstances — including the absence of any enforceable loan contract.
This decision (1998) was rendered far before the idea of securitization was introduced into mortgage litigation. The interpretation of the extinguishment of the underlying right made sense in the context of loans from Bank A to Borrower B. In the era of securitization you have all kinds of questions — like when the transaction was “commenced”. The courts say it is when the “liability” arose. I agree — if we are saying that the consummation of the transaction begins when the lender loans money to the borrower. But in most cases we see that the lender did not loan money to the borrower and that is corroborated by the absence of anypurchase transaction, for value, when the alleged loan is “transferred.” There is no reasonable business explanation of why anyone would release an asset worth hundreds of thousands of dollars without receiving payment — unless it wasn’t an asset of the “seller” in the first place.The presumption is that TILA rescission rights run from the date the liability arose from the Borrower to the Lender. If the Lender was not properly disclosed, then one of two things are true: (1) there is no loan contract which means a nullification and quiet title action is appropriate or (2) until the real lender was disclosed, the transaction was not consummated. That might mean that both the three day rescission and the three year rescission are in play. If the position of the foreclosing party is that a REMIC Trust was finally disclosed to the borrower — and that the Trust was the lender, then disclosure is complete. But that isn’t what happened.

The ultimate decision here is going to be on the question of whether there is in fact a loan contract, and, if so, who were the parties to it? If there was no contract, it is the same as rescission by operation of law. No new rights arise on assignment or even sale of the loan from a pretender lender — unless the purchase was in good faith FOR VALUE and occurred without notice of borrower’s defenses and NOT when the loan was already in “default.” This narrow exception arises under the UCC for a Holder in Due Course to be Protected if they meet the narrow criteria stated in the UCC, article 3, and the narrow enforcement criteria for the mortgage expressed in Article 9.

The so called default is another hidden issue. If someone “acquires” the note and mortgage where the Borrower has already not paid or stopped paying on the alleged loan, then (1) it isn’t negotiable paper and (2) it provides notice that the borrower might not be paying because they don’t owe the party or successor on the note and mortgage (and never did).
When the mortgage crisis began, the banks and servicers were claiming that there were no Trusts and that they could file suit or initiate non-judicial foreclosure without any reference to trusts. That was why forensic audits were initially required — when we thought that REMIC Trusts were the true players. Banks and servicers argued convincingly in court that the Trust was irrelevant. Now in most cases (with some notable CitiMortgage, Chase and BOA exceptions) the Plaintiff or beneficiary is identified as a Trustee, bank or servicer (US Bank usually is the Trustee these days) on behalf of a REMIC Trust. They are now saying that they have the right to be in court or initiate foreclosure because (1) the Trust received an assignment and endorsement of the note and mortgage (2) the servicer has a right to represent and even testify for the the Trustee on the basis of the rights set forth in the Pooling and Servicing Agreement or by virtue of Powers of Attorney that magically appear at trial.
So the banks, servicers and their attorneys are side-stepping the issue of consummation of the transaction. They are withholding the information where the right of rescission would first become apparent to the borrower. When they withhold the information longer than 3 years from the date of the purported “loan closing”, they claim the right of rescission has expired. That is cynical and circular reasoning. That “closing” may be the point in time that the borrower’s “liability” arose, but the liability did NOT arise with the creditor being the party named on the note, mortgage and required disclosure documents.
Instead, the Payee was a naked nominee regardless of whether the “lender” was a thinly capitalized mortgage broker or a 150 year old bank.
Neither one loaned the money. In both cases there were using money essentially stolen from clueless investors on Wall Street who advanced money for the purchase of shares (mortgage backed securities) issued by an unregistered Trust that existed only on paper, had no bank account, and never received the proceeds of the shares that were supposedly sold to pension funds and other “investors” (actually victims of a fraudulent scheme).
The real answer is, as I have repeatedly said, that there was no loan contract and therefore the note and mortgage were induced to sign by both fraud in the inducement and fraud in the execution.  But the courts may turn to a foggier notion that the disclosures were intentionally withheld and that this entitles the borrower to equitable tolling of the 3 day or three year statute of limitations. It seems highly doubtful that the US Supreme Court will reverse itself.
If they deny equitable tolling by allowing stonewalling from the Banks then no new Bank would be able to enter the picture which is the whole purpose of the TILA rescission. While courts might find the argument from the banks and servicers as appealing, history shows that the US Supreme Court is just as likely to effectively reverse thousands of decisions based upon the wrong premise that rules and doctrines for common law rescission can be applied to TILA rescission.
Yet my point goes further. The express wording of the TILA rescission as affirmed by a unanimous Supreme court in Jesinowski is that the rescission is effective by operation of law when it is dropped in the mailbox — and that there is nothing else required by the borrower. If the “lender” wants to challenge that rescission it must do so before the 20 day deadline for compliance — return of canceled note, satisfaction of mortgage and disgorgement of all money paid. This makes it very clear that stonewalling or bringing up defenses later when the borrower seeks to enforce the rescission is not permissible. The idea behind TILA rescission has been to allow a borrower to cancel one transaction and replace it with another — which means that title is clear for a new lender to offer a first or second mortgage free from claims of the prior pretender lender.
Thus the expected defense from the banks and servicersis going to be that the rescission was void ab initio because of the statute of limitations or some other reason. But these are affirmative defenseswhich is to say they are pleas for affirmative relief in a formal pleading with a court of competent jurisdiction. That court does not have any jurisdiction or discretion to find that the rescission was void ab initio if more than 20 days has expired after the notice of cancellation or rescission was made.Thus procedurally, the express wording of TILA and Jesinowski totally bars the banks and servicers from raising any defenses to the effectiveness of the rescission after 20 days from the date of notice of rescission. To interpret it any other way is to overrule Justice Scalia in Jesinowski. It would mean that the banks and servicers and Trustees could later bring up defenses to the rescission which would completely bar the ability of the borrower to apply for a substitute loan. No lender is going to offer a mortgage loan where they are taking on the risk that they are not getting the lien priority that is required to assure payment and collateral protection.

And the reason why there is no qualifying creditor to bring the action within 20 days will be taken up in an upcoming article “What if a Broker Sold an IPO and Kept the Proceeds? — The True Explanation of Securitization Fail.” Also see Adam Levitin on that.
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