TPS — Third Party Strangers in Mortgage Cases

I’m sharing the wording I use in my TERA and Case Analysis reports now. I think the benefit of this wording is that it fills in the blank on who is the real creditor (owner of the debt). Hopefully it answers the following informal question lurking in the context of mortgage litigation: “If the parties claiming enforcement rights are not the owners or representatives of the owners then who is?”

Those who have that question in mind are asking the wrong party when they pose it to the homeowner as if the homeowner had an obligation to present a credible narrative of what actually happened to their loan. And the strategy of the foreclosure mills is to keep the questions directed at homeowners instead of themselves so that their prima facie case is presumed and never proven.

Just to be clear — and to avoid confusion sewn by foreclosure mill lawyers — the owner of the debt would have the following characteristics:

  • Paid value for the debt

  • Expecting payment arising from the debt itself (i.e., in accounting terms the subject debt is carried as an asset that falls under the category of a receivable, in this case a loan receivable.

  • Unencumbered authority to transact any business affecting the subject debt .

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

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

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Here is the current wording I use in my analysis and reports:

Standards and customary practices in commercial banking, lending, investment banking and auditing require, at a minimum, a reference to the date and parties to a transaction so that the data can be confirmed. This is also required in courts of law under the category of “foundation.” No such references are made in the entire paper chain relied upon by the current claimant. The wording of each document appears to side-step the issue of an actual financial transaction and skips to memorializing the proffered transaction. 

Our conclusion is that the payee on the note is almost certainly part of a failed securitization scheme. It follows then that the alleged loan transaction is a table-funded loan, and described as both against public policy and predatory under REG Z of the Federal Truth in Lending Act. We consider it certain that all actual funds came from a third party stranger (TPS) in a transaction predating the loan itself and/or predating the erroneously implied purchase of the loan or both. Hence in this case the TPS is the party who paid value for the debt and is therefore the owner of the debt. 

Standards and customary practices in commercial banking, lending, investment banking and auditing require, at a minimum, a reference to the TPS and any successors to TPS with sufficient descriptive certainty to confirm the authority of those persons or entities claiming ownership, rights to enforce, or rights to service the subject loan on behalf of the TPS or its successors, if any.

In the absence of any reference or proof of payment, payment is not presumed under generally accepted accounting principles as published by the Financial Accounting Standards Board. The failure to reference actual monetary payment causes a rebuttable presumption in auditing that there is an absence of an actual monetary payment and therefore that the documents memorializing a transaction are fabricated, entitled to no legal presumption of authenticity or validity.

An alternative explanation is that the documents were not fabricated but prepared in anticipation of an actual transaction that failed to occur. Either way the conclusion is the same, i.e., that the documents refer to a nonexistent transaction and should be discarded.

The normal and reasonable presumption is that the “predecessor” would only have transferred a valuable ownership interest in the subject debt upon payment of money or the equivalent; the lack of payment creates a presumption that there was nothing upon which a claim for payment could be made. Therefore the transfer of a promissory note as “title” to the debt from a party who had no right, title or interest in the debt conveys nothing, and a transfer of a mortgage or beneficial interest in a deed of trust would also convey nothing.

Presumptions are intended ONLY as a convenience — not to alter a result. If they would alter the result then they should be discarded. If there are two different results — one based upon legal presumptions and the other based on facts both the auditor and the court should discard the presumptions and go with the facts. 

The only thing I would add is that the title confusion and the convoluted schematics of failed securitization are not the result or fault of any action undertaken by homeowners —- ever. The burden of proving a prima facie case is and always has been on the party making the claim or initiating action for relief through foreclosure of a security interest. In our system of justice that is black letter bedrock of all legal matters in dispute.

Such a party has not proven a prima facie case if the entire body of evidence is based upon various presumptions — unless the homeowner fails to object. The objection does not change the homeowner’s burden of proof; it changes the would-be forecloser’s burden of proof. Upon timely and reasonable objection the presumptions falls away and the foreclosure mill must actually prove the facts they previously sought to be presumed. Theoretically there is no prejudice to the foreclosure mill; but we all know that most foreclosures would fail if actual proof was required.

As for the cataclysmic end of the financial system feared by judges, lawyers and regulators, blind justice requires that the chips fall where the evidence points. Anything less allows the system to punish homeowners for the errors and misdeeds of the banks.

TONIGHT! How to confront legal presumptions and get to the real facts.

Thursdays LIVE! Click in to the EAST COAST Neil Garfield Show

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

 

Foreclosure defense essentially boils down to three major categories. Procedural errors, lack of standing and absence of an actual creditor.
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Procedural errors involve improper notice, improper accounting, and inconsistent documents.
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As for no creditor and no party with standing, it all depends upon the burden of proof decided by the judge. If he/she says the forecloser must prove their case with facts and not presumptions, then you probably will win. If he/she says you must prove lack of standing and/or the absence of a creditor then you must file for discovery and hope that the judge won’t sustain objections.
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But there is a middle ground that I have been writing about. It’s all about legal presumptions regarding facially valid documents and self-authenticating signatures. The New York case I wrote about yesterday explains it better than I do.
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The bottom line is that in our system any party who makes an assertion must prove it and the party against whom such assertion is made must have an opportunity to challenge it. If it is not challenged by pleadings or objections then the “fact” is true for purposes of the case at hand.
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In certain circumstances certain facts are legally presumed to exist unless they are challenged with at least some credible evidence that shows the presumed facts may not be true.
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Tonight we talk about how to deal with those presumptions and how much proof you need to undermine the presumptions and thus force the foreclosing party (if it exists at all) to prove its case with real evidence, testimony and documents that are valid and authenticated.
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Based upon 12 years of experience with this issue I have concluded with complete certainty that the named foreclosers are pretenders and that they have no right, title or interest in the loans. More importantly I have concluded that the lawyers for the named foreclosers do not have witnesses nor documents that can be corroborated or authenticated.
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This leaves ownership of the debt in the winds. The fact that the court is not given the information necessary to conclude that the party who initiated foreclosure is not the creditor and that as far as the case is concerned  no creditor stepped forward is not a problem for homeowners. It is a problem for the banks who want the courts to grant foreclosure to whoever claims it.

If it is their case, then THEY must prove it

As I have said since 2006, the burden of proof should not shift to homeowners until the pretenders have made their case. To get rid of legal presumptions homeowners need only prove a credible narrative (like probable cause) that the documents are fabricated or falsely executed. After that, what is the harm of making the pretenders actually prove their case?

The lawyers who flee from foreclosure defense cases are missing out on a golden opportunity. If this were a golf game the ball would have left the tee in a perfect shot. The fundamental aspect is that nobody can actually prove a claim on a debt, note or mortgage by proving actual facts because those facts are not present.

Defense lawyers spend too much time worrying that maybe the facts will show that they have filed a frivolous defense and not enough time researching objections to claims and proof of claim. It’s time to roll back the burden of proof where it belongs.

It is not the fault of the homeowner that the debt and the owner of the debt is lost. Homeowners had nothing to do with it.

The Franklin decision (see below) from 2016 is an exquisite exposition of the law as it was written, as it is understood by jurists and as it is opposed by Wall Street banks whose very survival is completely dependent upon maintenance of lies that were propagated long before the 2008 crash.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

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

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see franklin-appellate-decision-tirelli-2016

The 2016 Franklin case is, point by point, an independent corroboration of what I have been saying for years about presumptions and burden of proof. Unprepared lawyers for homeowners are the greatest contributors to bad law.
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The documents carry a presumption of validity. The signatures carry a presumption of authenticity. Both presumptions are weak and do NOT provide cover for the proponent of the document to step over a legitimate challenge. The homeowner does not need to prove the invalidity or inauthenticity such that judgment would be in favor of the homeowner BECAUSE the homeowner is not proponent of the document or the signatures.
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It is here that that lawyers for the nonexistent foreclosing party step over the real issue only because foreclosure defense lawyers don’t stop them. The presumption stands if not contested. But if it is contested, then the homeowner must only show enough evidence of inconsistency such that a court COULD reasonably infer that the document might have been fabricated and that the signatures were without authority.
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At that point nothing is decided. AND the burden of proof falls on the proponent of the document to prove its validity and authenticity step by step — something that neither the mill lawyers nor their “clients” could ever do.
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Bottom Line: Homeowners do not need to prove “their case.” They only need to prove enough to cast doubt on validity and authenticity that the would-be foreclosers must prove their case without the use of legal presumptions presumptions. In the end it is their case not the homeowner’s case. When you bring a case to court, it is your case to prove — not the other guy’s case to disprove. Remember that legal presumptions are strictly for judicial economy and not to actually prove a contested fact, especially where there is a credible narrative that is opposite to the presumed facts.
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I think judges around the country are now ready to hear and accept this message. Lawyers who are fleeing retainers to represent homeowners are missing the boat to both fame and fortune.

STANDING: THE CRUX TO DEFENDING FALSE CLAIMS OF SECURITIZATION OF MORTGAGE LOANS

Mortgage foreclosure is the civil equivalent of the death penalty. in criminal cases. Many court decisions have enthusiastically supported that notion and attached much more stringent rules to the enforcement of a mortgage or deed of trust than they use in enforcement of a note. That is, until the last 20 years.

If you begin with the assumption that securitization is false, you start looking at the cover-up. Banks continue to win foreclosures because the truth is counterintuitive. Tactically the homeowner does not need to prove securitization fail in order to block a foreclosure. If that was the goal you would need to know and prove things that are in the exclusive possession, care, custody, and control of documents of third parties who are not even parties to the litigation nor mentioned in correspondence, notices or forms.

Successful defenders know that the securitization is faked and use that knowledge to ferret out relevant grounds to undermine and impeach testimony and documents proffered by lawyers for “stand-ins” called “naked nominees”, “lenders,” successors by merger, attorneys in fact, etc. wherein each such designation represents another layer of obfuscation.

Legal standing requires that the party who brings a foreclosure action must have legal injury resulting solely from nonpayment of the debt. The Federal Practice Manual published by and for Legal Aid describes and analyses gives good guidance that should be followed up with competent legal research of statutes and  cases in your state.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consent to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

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

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see Legal Aid Federal Practice Manual on STANDING

Published by the Sargent Shriver National Center on Poverty Rights

Here are some of the more salient quotes from the guide.

The law of standing has its roots in Article III’s case and controversy requirement.1 The U.S. Supreme Court has established a three-part test for standing. The “irreducible constitutional minimum of standing” requires the plaintiff to establish:

First … an “injury in fact”—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) “actual or imminent,” not “conjectural” or “hypothetical.” Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be “fairly … trace[able] to the challenged action of the defendant, and not … th[e] result [of] the independent action of some third party not before the court.” Third, it must be “likely,” as opposed to merely “speculative,” that the injury will be “redressed by a favorable decision.”2

So the ONLY party with standing to bring an action to foreclose on a mortgage is (a) the party who would suffer economic loss if the debt is paid (and the party entitled to payments on the debt) and (b) the party who would actually receive the proceeds of sale in a foreclosure action because they are holding a loan receivable reflecting ownership of the debt relating to the subject mortgage.

Both defense attorneys and judges have made the mistake of confusing standing to collect on a note, which does not necessarily require ownership of a debt, and standing to foreclose or otherwise enforce a mortgage which does require ownership of the debt. This is the law in every state under their adoption of the Uniform Commercial Code (UCC — Article 3 (NOTE) and Article 9 (MORTGAGE).

The cover for this erroneous conclusion is amply provided by the failure of homeowners to object resulting in default foreclosure sales. And further cover is provided by the fact that the delivery of the original note is presumed to be delivery of ownership of the debt. However, this is ONLY true if the execution of the note merged with the debt.

Merger ONLY occurs if the note and the debt are, in fact, the same, i.e., the Payee on the note is the same as the creditor who loaned the money. Banks have engaged in various illusions to cause courts to assume that merger occurred. But in fact, the substance of the loan transaction remains the same as what I wrote 10 years ago, to wit: (1) the sale of certificates naming an issuer without existence on behalf of the “underwriter”/”master servicer” of the nonexistent entity, (2) the underwriter taking the money and using it, in part, to fund loans through pre-purchase agreements (before anyone has even applied for loan) and through form warehouse loans that are in substance pre-purchase of loans.

Hence in all cases the money at the closing table came from the underwriter forwarding the funds to the closing agent. Since the money came from parties intending to be investors, the owner of the debt is (a) a group of investors (b) the underwriter or (c) both the group of investors and the underwriter, with the underwriter acting as agent. But the agency of the underwriter is at the very least problematic.

The underwriter may claim that the agency arises because of the Pooling and Servicing Agreement for the nonexistent “REMIC TRUST” to which the investors agreed. But the investors would be quick to point out (and have done so in hundreds of lawsuits) that the PSA and the “Trust” were sham conduits and fabricated documents to create the illusion that investor money would be entrusted to the named Trustee for administration within a trust, not a blanket power of attorney for the underwriter to use the money anyway they wished. It is the opposite of a power of attorney or agency because it arises by breach of the terms and conditions of the sale of the certificates.

While the standing test is easily stated, it can be difficult to apply. The Supreme Court has observed that “[g]eneralizations about standing to sue are largely worthless as such.”3

The Supreme Court also imposes “prudential” limitations on standing to ensure sufficient “concrete adverseness.”4 These include limitations on the right of a litigant to raise another person’s legal rights, a rule barring adjudication of generalized grievances more appropriately addressed legislatively, and the requirement that a plaintiff’s complaint must fall within the zone of interests protected by the statute at issue.5

The Supreme Court has made it clear that the burden of establishing standing rests on the plaintiff.6 At each stage of the litigation—from the initial pleading stage, through summary judgment, and trial—the plaintiff must carry that burden.7Standing must exist on the date the complaint is filed and throughout the litigation.8 Moreover, standing cannot be conferred by agreement and can be challenged at any time (e.s.) in the litigation, including on appeal, by the defendants or, in some circumstances, by the court sua sponte.9 Finally, plaintiffs must demonstrate standing for each claim and each request for relief.10  There is no “supplemental” standing: standing to assert one claim does not create standing to assert claims arising from the same nucleus of operative facts.11

The Supreme Court has held that, to satisfy the injury in fact requirement, a party seeking to invoke the jurisdiction of a federal court must show three things: (1) “an invasion of a legally protected interest,” (2) that is “concrete and particularized,” and (3) “actual or imminent, not conjectural or hypothetical.”12

In foreclosure cases, trial courts have nearly universally found that a party had standing because of legal presumptions without any proof of ownership of the debt. The good practitioner will drill down on this showing that the “presumption” is conjecture or hypothetical and that there is no harm in making the foreclosing party prove its status instead of relying on presumptions.

One last comment on both judicial and nonjudicial foreclosure. In typical civil cases if the defending party makes it clear that he/she is challenging standing, the party bringing the action must then prove it. In foreclosure cases judges typically adopt the position that the homeowner brought it up and must prove the non-existence of standing. This is the opposite of what is required under Article 3 of the US Constitution.

The party who “brought it up” is the foreclosing party. It manifestly wrong to shift the burden to the homeowner just because the foreclosing party asserts, or as in many cases, implies standing, In fact, in my opinion, nonjudicial foreclosure is constitutional but NOT in the way it is applied — by putting an impossible burden on the homeowner that makes it impossible for the homeowner to confront his/her accusers.

WHAT HAPPENS TO THE DEBT IF THE COURTS APPLY THE LAW? The debt still exists in the form of a liability at law and/or in a  court of equity. The creditor is a group of investors who have constructive or direct rights to the debt, and potentially the note and mortgage. The difference is that decisions on settlement and modification would be undertaken by the creditors — or designated people they currently trust. And that  means the creditors would be maximizing their financial return instead of minimizing it through intermediaries. But there is also the possibility that the investors have in fact been paid or have accepted payment in the form of settlements with the underwriters. Those settlements preserve the illusion of the status quo. In that case it might be that the underwriter is the actual creditor, if they can prove the payment.

HOW CAN THE NOTE BE TRANSFERRED WITHOUT THE DEBT?

Here is an analogy that might help this counterintuitive process.

Assume I own a car. I enter into an agreement with my friend Jane to sell the car to her. I sign the title and give it to her. Afterwards we both decide we didn’t want to do that. Jane pays nothing for the car. Jane does not get the car. Jane never uses the car. I still have and use the car and both Jane and I disregard the fact that I gave her a signed title. She does nothing with the title. Later in a loan application she lists the car as an asset. Then the car is stolen from me.

Who gets the insurance proceeds? The question is whether the title represents an actual agreement to buy the car. And all courts that would boil down to whether or not Jane paid me. She didn’t. I get the insurance proceeds because I lawfully applied for a duplicate title and received it.

But Jane still has one copy of the title signed by me in original form. She has also made copies of it that can be printed out with the appearance of an original. So far, she has sold the car 42 times and taken out 7 loans on the car.

One of the people that received the title records it with the DMV. There is a problem with that. I still have title and possession of the car. The gullible person who “bought” the car has a title signed by Jane, who has produced evidence that she received title from me. One Jane’s lenders on car stops receiving payments from Jane’s Ponzi scheme.

They “repo” the car and we go to court. The lender to Jane has no legal title even though they have what looks like an original title that is facially valid. Do I get my car back or does the lender” get to keep it.

One step further: if jane’s lender was actually a co-conspirator who accepted the false title and never gave a loan, does that change anything? I ask because this is exactly what is happening in nearly all foreclosures. The named “successor” in title engaged in no transaction to acquire the debt.

Transfer of the note was without regard to transferring the debt because neither the grantor nor grantee owned the debt. If the truth comes out, the transfer of the note will be seen as a sham paper transfer and the debt will be owned by whoever has money in the loan deal. Hence transfer of the note is not transfer of the debt. By denying the transfer of the note, the burden of proof should be on the would-be foreclosing party to show it was part of a real transaction.

Confusion in The Courts: Pleading vs Proof

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

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A lot of the questions that come in to me relate to the issue of whether the ability to enforce a set of loan documents is a question of law or a question of fact. The answer, I think, is both.

The confusion seems to be on the issue of pleading vs proof. As a matter of law, the courts are largely correct as to their ruling on whether the Plaintiff in a judicial state is fine with alleging bare statements of ultimate facts upon which relief could be granted. But where the judges go astray, based upon improper legal reasoning advanced by the banks, is that they apply the same pleading requirements at trial or even summary judgment.

At trial they must prove the transactions upon which they rely. If the allegation from the owner or the denial and affirmative defenses of the homeowner raise an issue of fact as to the authenticity, validity or enforceability of the paperwork relied upon by the bank, then the bank must prove the underlying transaction. If the homeowner does not raise that issue of fact, then the court is correct in allowing virtually anything in as evidence and awarding the foreclosure to the bank.

But that said, to return to yesteryear, Judges are supposed to actually review the paperwork even in an uncontested situation to see if there are inconsistencies or even something that jumps out at them this is plainly wrong. for example, if the default letter says that for reinstatement, you must pay $6700 in monthly payments to bring the account current and your monthly payments are $3100, the letter is defective. How many months are they saying you are in default? It’s a simple matter of division. This also throws off the date of the alleged default, so there is no compliance with paragraph 22 provisions.

Similarly, if the foreclosing party is saying they have rights to enforce, that is enough to plead their case. But at trial they must tell the story of how they came into the right to enforce the paper. It is this latter part where the courts have erred and where the reversals from appellate courts are coming from. The presumptions at the pleading stage do not apply to the burden of proving facts.

I think the courts are coming around on this issue but it must be presented properly. A thief can sue on the note he stole even if he forged a blank or special endorsement. He will survive a motion to dismiss although law enforcement might be waiting in the back of the room to arrest him.

The presumption at the pleading stage is that possession implies being a holder. And being a holder implies being a holder with rights to enforce, and potentially one might even infer that the holder is a holder in due course. But at trial where the facts are contested, the thief must tell the story of his possession and rights to enforce. The fact that the actual payee or holder does not know the note was stolen does not or should not shift the burden of proof onto the homeowner to prove facts that are exclusively within the knowledge and care, custody and control of the thief.

The homeowner must merely deny that the thief is a holder with rights to enforce.

Banks Brace for Pain: Statute of Limitations on TILA Rescission and TILA Claims

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

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TILA remedies and requirements actually address the “free house” complaint head on: If banks misbehave in material and important ways (as defined by statute and not in the minds of a judge or lawyer) then yes, the homeowner should get a free house. That is what all three branches of the Federal government have said and no re-interpretation of TILA rescission or TILA remedies will be allowed since last week when the Supreme Court unanimously decided that TILA meant what it says. Any Judge or lawyer who thinks otherwise is in fairyland. The fact that a Judge doesn’t “like” the result of a “free house” (as the Judge perceives it) means nothing. The Judge is required to apply the law as decided by the United States Supreme Court.

Practically everyone is asking questions about whether the statute of limitations starts running from the date the documents were signed on the alleged loan or if it could start at a later time. The answer is a grey area, but as pointed out by James Macklin last night on the Neil Garfield show, there is a legal doctrine called equitable tolling that could suspend the start of the running of the statute of limitations for TILA rescission and TILA claims.

“The equitable tolling principles are to be read into every Federal Statute of Limitations unless Congress expressly provides to the contrary in clear and unambiguous language, see: Rotella v. Wood 528, 549, 560-61,120 S. Ct. 1075, 145 L. Ed. 2d 1047(2000). Since TILA does not evidence a contrary Congressional intent, it’s statute of limitations must be read to be subject to equitable tolling, particularly since the Act is to be construed liberally in favor of consumers.”

Basically the doctrine says that the statute starts to run, unless otherwise provided in the statute, when the claimant knew or should have known or most have known of the grounds for, in this case, TILA Rescission or TILA claims. The basis of that is obvious to anyone involved with these fake mortgages and fraudulent foreclosures for 8 years like I have. The very facts that give rise to TILA rescission and other TILA claims, are intentionally withheld by the parties at the fake closing where the borrower signs settlements documents, the note and the mortgage.

The strategy of the banks has been to wait out three years and then pursue foreclosure and when the borrower raises TILA defenses, the answer is that the statute of limitations has run. With the recent unanimous Supreme Court decision that effectively smacked thousands of lawyers and judges in the face for re-interpreting basic law and the specific and express provisions of TILA, this bank strategy should no longer work.

So now if you gave notice of rescission within three years of the date of the fake closing, your mortgage is null and void “by operation of law” and the “lender(s)” are required to give you (a) a satisfaction of mortgage for county records (b) a canceled original note (c) refund all the money you paid at closing for points, fees, costs etc. and (d) refund all the money you ever paid for interest and principal on the loan. Your debt becomes unsecured and there is no requirement for you to offer them any money at all in order to have the TILA rescission (“I hereby rescind my loan”) be effective. If you EVER sent such a notice within the three year period then your mortgage was void by operation of law at that time — unless the “lender(s)” filed a lawsuit (within 20 days of receipt of your notice of rescission) seeking declaratory relief saying your rescission was not based on any mistakes, errors, omissions or misbehavior on their part.

So all those hundreds of thousands of letters sent back to borrowers saying their letter of rescission was not effective were wrong. Dead wrong. And all those foreclosures that happened anyway were wrongful and void. And THAT means that what I said in 2008 is now true — that hundreds of thousands of homeowners who sent notices of rescission still own their homes even though on paper their homes were sold to third parties. The only thing that could interfere with that conclusion would be a state statute that existed at the time of the fraudulent sale  that said that you have 1 year or some other length of time to challenge the title.

So now that we know that nearly all the loans were table funded and therefore “predatory per se” (REG Z) the question becomes when did the three year statute of limitations begin to run.

There are two schools of thought on this. The first one is simple, as one caller on the Neil Garfield Show pointed out last night. If the disclosures were intentionally withheld, then even the three day rescission might still be available because the deal never actually closed and because the disclosures were fraudulent.

But in any event the statute would start to run as soon as the “borrower” found out that there were multiple people involved in his fake closing that were never disclosed — all of which undisclosed parties were involved in serving as conduits or aggregators and all of whom were paid an undisclosed amount of money arising out of the “closing.” So it is possible that even though your loan was the subject of a faked closing in 2005, you might still have a right to rescind and should send the notice of rescission since it forced the burden of proof onto the pretender lenders. This is especially important in nonjudicial states where the borrower must sue to prevent foreclosure and there is confusion over the alignment of parties.

Incidentally to drill in the point that this statute has teeth, the “lender” must pay the borrower all money paid including what was paid to third party vendors. The loss falls on the “lender” for misbehaving. If it didn’t bother the US Government (Congress, President and Supreme Court) when it passed TILA that the borrower would get a “free house” why should it bother anyone else?

Rescission: Shifting the Burden of Proof

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

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see http://www.foreclosuredefenseresourcecenter.com/top-f-foreclosure-defense-strategies-in-california/truth-in-lending-rescission/

I ran across an excellent article on rescission in mortgage cases that I think is a MUST READ for those who might be affected or entitled to use it. Check the link above. Make sure you check with a knowledgeable attorney licensed in the jurisdiction in which your property is located before you act, but I think there are very good reasons to send out the notice of rescission in virtually all cases.

From my reading of the Supreme Court’s decision and other cases the notice need only be a statement that the “borrower” hereby rescinds the transaction with appropriate reference to the loan number. It would be wise to attach the note and mortgage, in my opinion. It does not appear that you need to state your reasons and I would suggest you not do so. Basically the statute says you can rescind within three days of “consummation” of the transaction without a reason or within three years if the disclosures were wrong, inadequate or withheld. But the statute does not appear to require you set forth what disclosures were wrong or how they were wrong so I would suggest that no such statement be included.

In cases where the disclosures were intentionally withheld (table funded or third party sourced loans) the statute of limitations might not start to run until the date that you knew or should have known of the defective disclosure package. It also might not start to run unless you received two copies of your right to rescind with all the information filled in by the LENDER. Of course right there is a problem since the likely “lender” (the one who actually loaned you the money) was probably unknown to everyone at closing including the borrower. But that doesn’t stop the rescission. In fact, in my opinion, it supports the rescission.

So it is possible for virtually all the loans to be subject to the right of rescission which is meant to give the borrower a very strong remedy with teeth, since all the money, the mortgage and the note must be returned and the mortgage is void by operation of law as soon as a homeowner declares his rescission of the “transaction’ (which is probably nonexistent — something that TILA was intended to prevent).

The most interesting thing to me is the tactical advantage of sending a notice of rescission even if it turns out to be unsupported (disclosures were all there and adequate). It changes the burden of proof. Once the rescission is declared by the borrower, it is then up to the creditor to file a lawsuit (within 20 days of the notice of rescission) against the borrower seeking a declaratory judgment that the notice of rescission is not supported by the facts or should otherwise be declared invalid because of statute of limitations or other grounds.

Thus the statute of limitations also applies to the pretender lender. Since none of them ever filed a declaratory action that I know of (within the 20 days required by statute), every notice of rescission has, by operation of law, and as confirmed by the Supreme Court, rendered the mortgage void. This means that at best the obligation is unsecured and can be discharged in bankruptcy. Any subsequent foreclosure after such a notice of rescission is equally void in my opinion and it appears from the statute and the case law now that the notice can be sent anytime up until the mortgage no loner exists because of satisfaction or forced sale.

In order to file such a lawsuit the pretender lender would have to allege and prove the validity of the origination, including the fact that it was not a table funded loan. This is going to be mostly impossible for any of them to achieve. Strategically it is an opportunity to shift the burden of proof on matters that should already be within their burden of proof (but ignored by many trial judges) to the party seeking foreclosure or the party whom they purport to represent as the creditor. I am even wondering if the rescission should be stated in responsive pleading or notice of filing in pending foreclosure cases.

This might be the powerful tool I thought it was back in 2007 where the parties involved in “securitization fail” (see Adam Levitin) must stop everything and (if they do it within the time period prescribed by statute) actually prove (a) that there really is a transaction under that pile of documents they show the court and (b) that there was adequate disclosure of the real parties in their closing and real terms. Remember that the statute has a “tolerance” of only $35 for the the disclosed terms.

Comments are invited.

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