Consummation- Is an Act not an Illusion

by William Hudson

Neil Garfield is adamant that if consummation did not occur, there can be no contract. His belief is supported by hundreds of years of contract law (including the marriage contract). In regards to marriage, most people know if consummation occurred, yet when it comes to taking out a securitized loan like a mortgage, most people only assume it did.   Without proof one can only speculate that consummation occurred.

Due to the Sarbanes-Oxley Act, any lender in America should be capable of producing the needed documentation to prove they own a Mortgage and Note- and that consummation occurred. With the click of a computer mouse, instantaneously the journal entries in the lender’s financial, accounting, and general ledger systems should show that a loan was consummated and the Note was assigned to a valid trust. Instead, the banks resort to forgery and fraud. If they had the documentation, fraud would not be necessary.

Since around 2001 banks have been mocking up documents to create a paper trail to create the illusion of ownership- but in light of all the fabricated document fraud, it is time that homeowners demand to see the money trail and are permitted to do so. The money trail should begin at consummation of the loan between the two parties who agreed to contract: the homeowner and lender. However, this is not the way that consummation works in a securitized mortgage transaction. By design, the homeowner is not allowed to know who they are borrowing funds from- and transparency is of no concern.

Can you imagine this occurring in any other consumer transaction?  Imagine the chaos that would ensue, for instance, if you thought you were financing a truck through Ford Credit, yet unbeknownst to you, Honda funded the loan.  You may have ended up with the truck, but you may have been induced into a contract you didn’t agree with (especially if your goal was to “buy American”).  Why should Mortgage loans be any different?  And why should Congress bother passing laws like TILA if the banks are going to ignore consumer protection laws with impunity?

There can be no consummation when the party lending the money is never disclosed to the borrower. A homeowner is conned into believing the party listed on their note and mortgage is actually the party who is taking the risk by lending their own funds- when this party who is named on the Note is an originator- not a lender.

Has anyone stopped to ask why all the secrecy?   The only reason for secrecy is to hide the truth- whatever that may be (dark pools? empty trusts? stolen funds?). There is a reason for the deception that begins at the closing table, endures through servicing, and only ends upon sale of the property or payoff.

Consummation under the Federal Truth-in-Lending-Act occurs when the state law on contract or lending says it begins. According to attorney Neil Garfield, “Most state laws require offer, acceptance and consideration. So while the door is open to inconsistent results, in order to find that consummation did happen and that the date of consummation is known, we still must visit the issue of consideration.” Consideration is basically the exchange of something of value in return for the promise or service of the other party. Take note, consideration is not the exchange of value in return for the promise or service of an unidentified third party. However, modern securitization has nothing to do with the name of the original “lender” on the Note that in 99% of all cases did not loan anything of value.

When a homeowner is not provided the name of the party who is actually taking the risk and has skin in the game- they lose their ability to negotiate in good faith with this party (the investors of the trust). Over the span of a 30 year loan, “life” happens. It is terrifying that a bank can use one late payment as an excuse to create a default.

Banks were once responsive to homeowners because they had an actual investment and needed the homeowner to successfully make payments.   If a homeowner had a short-term cash flow problem, the banks were willing to work with them- it was in their best interest to do so. Homeowners no longer have the luxury of negotiating with the party who provided the funds, but must attempt to solve any mortgage issues with a loan servicer who is financially rewarded by engineering a default- by failing to provide responsive customer service to the homeowner (or by blatantly misleading the homeowner).

In fact, this week the CFPB announced that consumers made almost 900,000 complaints about their loan servicers between March and April 2016. The complaints center around three areas:

  1. Problems when consumers are unable to pay: Consumers complained of prolonged loss mitigation review processes in which the same documentation was repeatedly requested by their servicer. Consumers also complained that they received conflicting and confusing foreclosure notifications during the loss mitigation review process.
  2. Confusion over loan transfers: Consumers complained that they were often not properly informed that their loan had been transferred. As a result, payments made to either the prior or current servicer around the time of the transfer were not applied to their account.
  3. Communication issues with servicers: Consumers complained that when they were able to speak with their servicer, the information they received was often confusing and did not provide the clarifications they were hoping for.

According to the report, the mortgage companies with the worst records between November 2015 to January 2016 were Wells Fargo, Bank of America, Ocwen, and Nationstar Mortgage. Consumers are not receiving customer care because by design servicers profit when a default can be engineered. Based on the CFPB findings, it is obvious that the longer the servicer can prolong loss mitigation, the more fees they will potentially receive. A default allows them to collect thousands in late fees and penalties; and if they are lucky- foreclose on the home.

The servicer has no skin in the game and is incentivized to create a default by any means necessary- whereas, a true creditor does not want a default. The problem with the way the system is rigged is that the homeowner is prevented from knowing who they borrowed money from and therefore cannot negotiate in good faith with the party who has a vested interest in the homeowner making payment.

The central problem in all securitized mortgages is that the homeowner has no idea who they consummated the loan with. Although it is considered a predatory practice under Regulation Z to conceal the true lender, no government regulatory agency has stopped the practice of concealing the identity of the true lender at closing.  The TILA laws are on the books, but have no teeth.

Neil has said in the past that consummation only occurs after the closing agent receives and disburses the funds according to the alleged loan contract. Therefore, consummation does not occur on the date that the closing papers are signed. The requirement of giving the borrower disclosure papers three days before the closing is complete might put some daylight between the assumption that consummation occurred on the day the papers were signed.

Garfield states, “The simple argument is that the industry practice has always been that the borrower signs papers and THEN the closing agent requests or receives the money for the “loan.”” Therefore, Garfield doubts there is any support for saying that the borrower is contractually obligated to comply with the terms of the note or the mortgage if the money never came at all. Neil Garfield says that where the true problem lies is what occurs in the NEXT step.

“If we can agree that if no money ever came from anyone, the borrower doesn’t owe anyone anything and is not bound by the “facially valid” loan contract, then it follows that if no money came from the named Payee on the note and mortgagee on the mortgage, (beneficiary in a deed of trust), the “borrower” doesn’t owe anything to anyone,” states Garfield. If contract law was strictly followed, the homeowner is under no obligation to repay a party who didn’t lend them a dime.
This is where the issue of consummation becomes difficult to understand. “If money is sent to the closing agent by a party unrelated to the named payee on the note, then under what theory do we say that the note is evidence of the debt? It certainly should not be used to show that the borrower owes the payee any money because the payee did not make the loan and nobody related to the payee made the loan,” Garfield has repeatedly stated. Neil Garfield agrees with the assumption that the borrower owes back the money that was advanced on behalf of the borrower, but that transaction is not a debt nor a contract- it is a potential liability to the party whose funds were used to send to the closing agent.

That claim could not be in contract because the source of funds and the “borrower” never entered into a contract. The liability would be in equity and would exist independently of the false note and false mortgage, which means the claim from a real source of funds would not be subject to the note and mortgage but simply due on the basis of fairness in equity: the borrower received the benefit of the money from the money source and under quantum meruit would be obligated to repay the money.

This is where most people get lost on Garfield’s Rescission theories. Garfield never advocates that money is not owed to someone- what he argues is that the Note and Mortgage represent a transaction that never occurred- and therefore should be rescinded under TILA. Rescission would allow the REAL creditor (or investors) to come to the table and demand/receive payment.

And yet, loan servicers wanting to protect their unlawful gains (at the expense of the investors) are successfully deceiving the courts that consummation did occur. The entire mortgage scheme is rigged by a system of smoke and mirrors. There is evidence that the closing did not occur according to the contract- if the homeowner can manage to obtain the information through Discovery (but in 99% of all lawsuits the bank will not be compelled to reveal actual evidence). The courts could demand sua sponte that the servicer provide the actual business records and settle the matter- but this would reveal the truth that everyone has gone to great lengths to keep hidden.

When Congress wrote the Truth in Lending Act, they deliberately stated that the homeowner could rescind the Note within three days of consummation (they specifically did not say origination). The Supreme Court in Jesninoski reinforced the right to rescind and TILA was enacted so that banks would self-regulate and not devise reckless and predatory schemes (like what has happened). The homeowners and investors should not be punished for the deliberate obfuscation of the true terms of the “loan”.

All this analysis is aimed at one single point, to wit: that the source of funds does not meet the definition of a creditor to whom the money is owed. Most people understand Neil Garfield’s point but reject it regardless of how well it is founded in law and fact. They reject it because it upsets the mortgage securitization scheme started 20 years ago by the investment banks. It would mean that there is no creditor, there is no contract, and there is no obligation to comply with the payment terms under the note and mortgage. This is an unacceptable result for most people. They worry that the entire system would collapse if they were to follow the law as it has been written and decided for centuries.

But the feared consequence is not based in fact. The entire system does not collapse under this scenario. What happens is that the investors who bought fake Mortgage backed securities could deal directly with the borrowers and workout the terms of a mortgage loan that is both legal and enforceable. More importantly it would be a loan that would survive in value to the investor. As things stand now the Wall Street banks are driving as many cases as possible toward foreclosure because that is the way they collect the most fees — when the equity in the property is no longer higher than the claims for money upon liquidation.

So accepting the application of existing law as stated here, would mean that investors would suffer much lower losses and the homeowners would regain the equity in their homes or at least the prospect of equity while the wild terms and wild appraised prices of the past are abandoned. Obviously the SERVICERS would hate this equitable solution- because it would cost them the huge profits they receive through document fabrication, robosigning and other creative “solutions” that require fraud.

Let’s remember that when TARP was first announced, it was all about losses from mortgage defaults. When the government realized that homeowner defaults had little to do with TARP they expanded its meaning to include failing mortgage backed securities. But there were no bank losses from MBS because the banks were selling MBS not buying them. So then they expanded it again to include losses from credit default swaps, insurance contracts and other hedge products.

This was all based upon the premise that there MUST be a loan contract in there somewhere. There wasn’t in most cases. Nearly all of the foreclosures that have been rubber stamped by the court system were not only unnecessary, they were patently illegal based upon false representations from the banks. The foreclosure was a legal cover for all the prior illegal actions.

With that being said, if the homeowner only recently discovered that consummation did not occur; does the 3-year TILA window is likely untolled and the 3-day/3-year expiration time may never have commenced in the first place. Remember that according to law, Rescission is the act of rescinding; the cancellation of a contract and the return of the parties to the positions they would have had if the contract had not been made; rescission may be brought about by decree or by mutual consent.

Congress did not give you the Right to Cancel under TILA but the Right to Rescind. Cancellation means termination of the entire agreement by the act of parties/law. Whereas Rescission places the person back to the condition they were PRIOR to the contract; cancellation merely voids the contract and has no restorative properties. Congress could have simply allowed homeowners to cancel under TILA, but instead opted for Rescission. Cancellation would have stopped the bleeding, but Rescission actually reattaches the Limb. The judiciary must recognize that Congress used the words CONSUMMATION and RESCISSION not ORIGINATION and CANCELLATION in the Truth-in-Lending-Act so why should any Judge ignore the intention of the Act?  Rescission will eventually be won based on lack of consummation- but it may take another hearing before the Supreme Court before the state courts accept what consummation means.

Like the Mortgages, Rescission is Counter-Intuitive

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
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THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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There seems to be some miscommunication regarding rescission. The confusion seems to emanate from the assumption that the “borrower” would lose if there was a creditor with standing who filed a lawsuit to vacate the rescission. If so, that would be missing the point. The point is not whether the homeowner would lose if the lawsuit was filed. The point is that the lawsuit is never going to be filed. The rescission is effective as a matter of law, regardless of whether there exists an arguable or even valid defense.

Normally as lawyers we would anticipate the end result, but in this case the end result never happens because there is no creditor with standing, which is the whole point of understanding the false claims of securitization that have permeated the foreclosure marketplace. The answer, which I understand is completely counter-intuitive, is that there is no creditor — i.e., no party who could answer to the description of the owner of the debt (not the paper) — i.e. the party to whom the money is actually owed. The absence of a creditor is hard to fathom, but it is nonetheless true. AND THAT is why no bank, despite advice of counsel, has filed any action within the 20 day window to file, that seeks to vacate the rescission.

It may be true that we could expect to lose if there was a case filed and there was a trial. But if the case is never filed, the rescission stands. And since it is effective by operation of law, the loan contract (if it was ever consummated — which is doubtful) is canceled, the note is void and the mortgage is void. The only restriction I see is that in judicial states after judgment, it would appear that there is no loan contract that still exists after judgment and so there is nothing to cancel.

Looking at the date of documents is not the way to determine when a loan contract was consummated. We must return to basics, and that is what is presumed but the presumption is wrong. basic contract law X makes an offer to Y. Y accepts the offer. X and Y exchange consideration. In these loans, not only did X and Y NOT exchange consideration, but the very fact that they didn’t makes X a predatory lender as per REG Z. But more to the point, if X did not perform by loaning money to Y, there is no loan contract= no consummation= void note and void mortgage. If there was a consummation you need to know the date of funding, which is after the documents were signed and could be days, weeks or even months afterwards.

Check the Yvanova decision for more on this. Ownership of the debt, as per the Yvanova court, is what counts, not merely possession of paper that could and probably is fabricated.

Here are some quotes from recent articles or upcoming articles

“TILA rescission in which the notice of rescission alone (upon mailing) immediately cancels the loan contract, and voids the note and mortgage — even if the rescission is disputed on grounds of the 3 year limitations etc.

As Justice Scalia said, “the statute makes no distinction between disputed and undisputed rescission.” Thus the rescission is effective even if it APPEARS As though the right to rescind under TILA may not have existed on the date the notice of rescission was mailed.
NOTE TO LAWYERS: ANY OTHER INTERPRETATION WOULD REQUIRE THE “BORROWER” TO FILE SUIT TO MAKE THE RESCISSION EFFECTIVE WHICH IS THE OPPOSITE OF THE TILA RESCISSION STATUTE, REGULATION Z AND THE UNANIMOUS DECISION OF THE US SUPREME COURT IN JESINOSKI. THE STATUTE PUTS THE RESPONSIBILITY FOR PUTTING THE EFFECTIVENESS OF THE TILA RESCISSION IN ISSUE SQUARELY ON THE PARTIES PURPORTING TO BE THE LENDER AND THEY ONLY HAVE 20 DAYS FROM RECEIPT TO FILE A LAWSUIT SEEKING TO HAVE THE RESCISSION VACATED.”

The Money Trail: Does anyone meet the definition of a creditor?

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
================================

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

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I speak to people across the country. As I discuss the issues that get increasingly complex, we reach areas in which there are differences of opinion which is why you need to consult with someone who is licensed in your state and who has done the heavy research (no skimming allowed). The issue is what payments should be credited to whom. And the answer really is you should be asking an accountant and a lawyer. This is why my team is reaching out to accountants and auditors to round out what is needed in cases.

The problem is that this is a grey area. Payments made to the beneficiaries of the trust were never intended to discharge the debt from the “borrower.” That’s obvious. But payments were made on account of this debt. So we go back to the law of presumptions. If the creditor receives a payment and the payment is on account of a particular debt due from a particular debtor, then it is discharged to the extent of the payment — regardless of the stated “intent” of the payor after the fact. So servicer advances definitely fall into that category. But in addition, if the entire debt has been discharged by the replacement of the obligation with another obligation from another party, then you have similar issues.

So first of all, the beneficiaries agreed to take payments from the REMIC Trust — not the “borrowers”. There is no relationship between the beneficiaries of a trust and any single “borrower” or group of “borrowers.” The REMIC Trust doesn’t pay the beneficiaries despite the paperwork to the contrary. The REMIC Trust is inactive with no assets, bank accounts, business activity etc.

It is the Master Servicer that pays the beneficiaries. And the Master Servicer makes those payments regardless of whether it has received payments from the beneficiaries. (servicer advances). The note and mortgage name a specific payee that is neither the Trust (or Trustee) nor the Master Servicer. So the first real legal question that I raised back in 2007 was the issue of who was the owner of the debt or the holder in due course?

The debt arose when the “borrower” accepted the benefits of funding that came from an unidentified source. It is presumed not to be a gift. The “borrower” has signed a note and mortgage in favor of a party that never loaned him any money — hence there is no loan contract and the signed note and mortgage should have been destroyed or released back to the “borrower.” Such a loan is table-funded and is almost certainly “predatory per se” as described in REG Z.

Since there is no privity between the “originator” and the Trust or Master Servicer the loan documents cannot be said to be useful, much less enforceable. Those documents should be considered void, not voidable, when the payee and mortgagee failed to fund the loan. The repeated transfers of the loan documents without anyone ever paying for them clearly means that the consideration at the base “closing” was absent. Hence there is no consideration at either the origination or acquisition of the loan documents. Acquisition of the loan documents does not mean acquisition of the loan. If there was no valid loan contract or there is no valid loan contract (rescission) executing endorsements, assignments and powers of attorney are meaningless.

So there is a serious question about whether there is a legal creditor involved in any of these loans. There are parties with equitable and legal claims, but not with respect to the loan documents that should have been shredded at the very beginning. All those claims are unsecured. And the foreclosures, in truth, are for the benefit of parties who have no relationship with the actual money that was used to the benefit of the alleged “borrower” who is looking more and more like a party who is not a borrower but who could be debtor if there is anyone answering to the description of “creditor.” No party in this scenario seems to answer to that description.

And THAT would explain why NO PARTY steps forward to challenge rescissions as a creditor and instead they attempt to retain their status of having apparent “Standing” and attack the rescission through arguments that require the court to interpret the TILA Rescission Statute, 15 USC §1635. But the US Supreme Court has already declared that it is the law of the land that this statute is not subject to interpretation by the courts because it is clear on its face. So such parties are seeking relief they didn’t ask for (vacating the rescission) using the void note and void mortgage as their basis for standing.

Thus without someone filing an equitable claim showing that their money is tied up in the money given to the “borrower” there does not seem to be a creditor at law.

Add that to the fact that most of the “Trusts” were resecuritized by more empty trusts and you have the original beneficiaries completely out of the picture as to any particular loan and the so-called REMIC Trust being completely out of the picture with respect to the loan or loan documents that were originated, even if they were not consummated.

Rescission: Equitable Tolling Extends Statute of Limitations

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

Important Message: This blog should NEVER be used as a substitute for competent legal advice from an attorney licensed in the jurisdiction in which your property is located.

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see http://openjurist.org/784/f2d/910/king-v-state-of-california-d-m

The most popular question I get here on the blog and on my radio show is what happens when the three year statute has run? The answers are many. First is the question of whether it ever started running. If the transaction was not actually consummated with anyone in the chain of parties claiming rights to collect or enforce the loan it would be my opinion that the three day right of rescission has not begun to run. That would be a remedy to an event in which the note and mortgage (or deed of trust) has been signed and delivered but the loan was never funded by the originator any creditor in the chain of “ownership.” The benefit of the three day rescission is that you don’t need a reason to do it. But in order to do that you need to be careful that you are not stating that there was a closing because that would be consummation and therefore the right to rescind unconditionally ran three days after that “Closing.”

Second is the three year statute of limitations. The same reasoning applies.  But it also raises the question of non-disclosure and withholding information. The rather obvious delays in prosecuting foreclosures on alleged “defaults” are clearly a Bank strategy for letting the 3 year statute run out and then claim the homeowner cannot rescind because the closing was more than 3 years ago. That is where the doctrine of equitable tolling comes into play. A party who violates TILA and fails to disclose material facts and continues to hide them from the borrower should not be permitted to benefit from continuing the violation beyond the apparent statute of limitations. People keep asking why the banks wait so long to prosecute foreclosures. The answer is that it is because they have no right to do so and they are running out the apparent statute of limitations on rescission and TILA disclosure actions.

Third is a procedural issue. According to TILA the “lender” who receives such a notice of rescission is (1) obligated to send it to the “real” lender and (2) must file a declaratory action against the borrower within 20 days in order to avoid the rescission. If they don’t file the 20 day action, they waive the objections they could have raised. So far I have not heard of one case in which such an action has been filed. I think the reason for that is that nobody can file an action in which they establish standing. Such a party would be obliged to allege that they are the “lender” or “creditor” as defined by TILA. That means they either loaned the money or bought the loan for “valuable consideration” just like it says in Article 9 of the UCC. Then they would have to prove that allegation before any burden shifted to the borrower to answer or file affirmative defenses against the action filed by this putative “lender.”

CAVEAT: The doctrine of equitable tolling is remedial as is the statute, but it is fairly strictly construed. I’m am quite confident that the best we will get from the courts is that the 3 day and 3 year rules and other limitations in TILA starts running the moment you knew or should have known the facts that had been withheld from you at “closing.” The fact that you are not a lawyer and did not realize the significance of this will not allow you to delay the start of the statute running after the date of discovery of the facts, whether you understood them or not.  But this is a two-edged sword. The current practice of objecting to any QWR, DVL or discovery question without answering the truth about the claimed chain of ownership or servicers on the loan corroborates the borrowers allegation that the parties are continuing to withhold this information. So a well-framed TILA defense might serve as the basis for enforcing your rights of discovery and rights to answers on your Qualified Written Request or Debt Validation Letter.

Additional Caveat: The doctrine of equitable tolling has been applied with respect to the one year statute of limitations on TILA disclosures but it remains open as to whether it would be otherwise applied. From the 9th Circuit —

“Section 1640(e) provides that “[a]ny action under this section may be brought within one year from the date of the occurrance of the violation.” We have not yet determined when a violation occurs so as to commence the one-year statutory period. See Katz v. Bank of California, 640 F.2d 1024, 1025 (9th Cir.), cert. denied, 454 U.S. 860, 102 S.Ct. 314, 70 L.Ed.2d 157 (1981). Three theories have been used by other circuits to determine when the statutory period commences: (1) when the credit contract is executed; (2) when the disclosures are actually made (a “continuing violation” theory); (3) when the contract is executed, subject to the doctrines of equitable tolling and fraudulent concealment (limitations period runs from the date on which the borrower discovers or should reasonably have discovered the violation). See Postow v. OBA Federal S & L Ass’n, 627 F.2d 1370, 1379 (D.C.Cir.1980) (adopting “continuing violation” theory in some situations); Wachtel v. West, 476 F.2d 1062, 1066-67 (6th Cir.), cert. denied, 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973) (rejecting “continuing violation” theory, statutory period commences upon execution of loan contract); Stevens v. Rock Springs National Bank, 497 F.2d 307, 310 (10th Cir.1974) (rejecting “continuing violation” theory); Jones v. TransOhio Savings Ass’n., 747 F.2d 1037, 1043 (6th Cir.1984) (applying equitable tolling and fraudulent concealment).”

Hats off to James Macklin who sent me this email:

Hang on to your hats fella’s…in Sargis’ ruling … back in 2012…he confirms the equitable tolling principles of TILA as I had argued…just saw this again while reviewing…to wit:
“The Ninth Circuit applies equitable tolling to TILA’s … statute of limitations (King v. California, 784 F.2d 910, 914 (9th Cir. 1986).
“Equitable Tolling is applied to effectuate the congressional intent of TILA.”, Id.
Courts have construed TILA as a remedial statute, interpreting it liberally for the consumer.” (Id. Citing Riggs v. Gov’t Emps. Fin. Corp., 623 F.2d 68, 70-71 (9th Cir. 1980).
 Specifically the 9th Circuit held: “[T]he limitations period in section 1640(e) runs from the date of consummation of the transaction but that the doctrine of equitable tolling may, in appropriate circumstances, suspend the limitations period until the borrower discovers or had the reasonable to discover the fraud or non-disclosures that form the basis of the TILA action.” 
Gentlemen…I give you proof positive that the statute tolls and the fact that the term “consummation” is also subject to broad interpretation as we know…the loan could not have consummated if what we allege is found to be true… However, the non-disclosures language used by the 9th Circuit gives rise to possible myriad rescissions upon discovery of those non-disclosures…
James L. Macklin, Managing Director
Secure Document Research(Paralegal Services/Legal Project Management)

Bank of America Ordered to Pay $1.2 BILLION for Fraudulent Mortgages

“Given the current environment where robo-signing became institutionalized as a practice even though it is the equivalent of forgery and where fabrication of documents by law offices and “document processors” were prepared according to a published menu of prices, why would anyone, least of all a court of law, apply general principles surrounding presumptions when established fact makes it more likely than not that the presumptions lead to the wrong conclusions? Where is the prejudice to anyone in abandoning these presumptions in light of all the information in the public domain?” — Neil Garfield, livinglies.me

THEY ACTUALLY CALLED IT “HUSTLE”

U.S. District Judge Jed Rakoff in Manhattan ruled nine months after jurors found Bank of America and former Countrywide executive Rebecca Mairone liable for defrauding government-controlled mortgage companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) through the sale of shoddy loans by the former Countrywide Financial Inc in 2007 and 2008.

The case centered on a mortgage lending process known as “High Speed Swim Lane,” “HSSL” or “Hustle,” and which ended before Bank of America bought Countrywide in July 2008.

Investigators said the program emphasized quantity over quality, rewarding employees for producing more loans and eliminating checkpoints designed to ensure the loans’ quality. (see link below)

Now that an actual employee of the Bank has also been ordered to pay $1 Million, maybe others will start coming out of the woodwork seeking immunity for their testimony. There certainly has been a large exodus of employees and officers of Bank of America to other Banks and even other industries. They are all trying to distance themselves from the inevitable down fall of the Bank. Meanwhile the corrupt system is heavily engaged with financial news reporting. For every article pointing out that Bank of America might have hundreds of Billions of dollars in legal liabilities for their fraudulent practices in originating, acquiring, servicing and foreclosing mortgages, there are five articles spread over the internet telling investors that BOA is a good investment and it is advisable to buy the stock. I know how that system works. For favors or money some people will write anything.

THE BURDEN OF PLEADINGS AND PROOF MUST BE CHANGED

The question I continue to raise is that if there was an administrative finding of fraud by an agency of the government, which there was, and if there was a jury finding of fraud involved in the Countrywide mortgages (and other mortgages) why are we presuming in court that that the mortgage is valid?

I understand the statutory and common law presumptions arising out of certain instruments that appear to be facially valid. But I propose that lawyers challenge those presumptions based upon the widespread knowledge and information across the public domain that many if not most of the mortgages were procured by fraud, processed fraudulently, serviced fraudulently, and foreclosed fraudulently. In my opinion it is time for lawyers to challenge that presumption in light of the numerous studies, agency investigations and findings that the mortgages, from beginning to end, were fraudulently originated, acquired and processed.

Why should the filings of a pretender lender receive the benefit of the presumptions of validity just because it exists when we already know it is more likely than not that there are no underlying facts to support the presumptions — and knowing that there was probably fraud involved? Why should the burden remain on the borrowers who have the least access to the information about that fraud and who get nothing from the banks during discovery?

Forfeiture of the private residence of a person is the worst outcome of any civil litigation. It is like the death penalty in criminal litigation. Shouldn’t it require intense scrutiny instead of a rocket docket that presumes the validity of the mortgage and note, and presumes that a possessor of a note (that more likely than not was fabricated and forged by a machine) has the right to enforce?

In a REAL transaction in the REAL world, the originator of a loan would demand that all underwriting restrictions be applied, and confirmation of the submissions by the borrower. If anyone was buying the loan in the secondary market, they would demand the same thing and proof that the assignor, endorser or transferor of the loan had title to it in every conceivable way.

The buyer would demand copies of the actual documentation so that they could enforce the loan. These documents would exist and be kept in a vault because the fate of the investment normally depends upon the ability of the “lender” or “purchaser” of the loan to prove that the loan was properly originated and transferred for value in good faith without knowledge of any defenses of the borrower.

In short, they would demand that they receive proof of all aspects in the chain of title such that they would be considered a Holder in Due Course.

Today, nobody seems to allege they are a holder in due course and nobody seems to want to identify any party as a Holder in Due Course or even a creditor. They use the term “holder” with its presumptions as a sword against the hapless borrower who doesn’t have the information to know that his or her loan is likely NOT owned by anyone in the chain claimed by the foreclosing party.

If it were otherwise, all foreclosure cases would end with a thud — the loan would be produced in all its glory with everything in its place and fully disclosed. The only defense left would be payment. Instead the banks are waiting years to run the statute on TILA rescission and TILA violations before they start actively prosecuting a foreclosure.

What bank with a legitimate claim for foreclosure would want to wait before it got its hands on the collateral for a loan in default? Incredibly, these delays which often amount to five years or more, are ascribed to borrowers who are “buying time” without looking at the docket to see that the delay is caused by the Plaintiff foreclosing party, not the borrower who has been actively seeking discovery.

What harm would there be to anyone who is a legitimate stakeholder in this process if we required the banks to plead and prove in all cases — judicial and nonjudicial — the following:

  1. All closing documents with the borrower conformed with Federal and State law as to disclosures, Good Faith Estimate and appraisals.
  2. Underwriting and due diligence for approval of the loan application was performed by [insert name of party].
  3. The payee on the note loaned money to the borrower.
  4. The mortgagee on the mortgage (or beneficiary on the deed of trust) was the source of funds for the loan.
  5. The “originator” of the loan was the lender.
  6. No investor or third party was the creditor, investor or lender at the closing of the loan.
  7. Attached to the pleading are wire transfer receipts or canceled checks showing that the borrower received the funds from the party named on the settlement documents as the lender.
  8. Each assignment in the chain of title to the loan was the result of a transaction in which the loan was sold by the owner of the loan for value in good faith without knowledge of borrower’s defenses.
  9. Each assignment in the chain of title to the loan was the result of a transaction in which the loan was purchased by a bona fide purchaser for value in good faith without knowledge of borrower’s defenses.
  10. Attached to the pleading are wire transfer receipts or canceled checks showing that the seller of the loan received the funds from the party named on the assignment or endorsement as the purchaser.
  11. The creditor for this debt is [name the creditor]. The creditor has notice of this proceeding and has authorized the filing of this foreclosure [see attached authorization document].
  12. The date of the purchase by the creditor Trust is [put in the date]. Attached to the pleading are wire transfer receipts or canceled checks showing that the seller of the subject loan received the funds from the REMIC Trust named in the pleadings as the purchaser.
  13. The purchase by the Trust conformed to the terms and conditions of the Trust instrument which is the Pooling and Servicing Agreement [attached, or URL given where it can be accessed]
  14. The Creditor’s accounts show a deficiency in payments caused by the failure of the borrower to pay under the terms of the note.
  15. All payments received by the creditor (owner of the loan) have been posted whether received directly or received indirectly by agents of the creditor.
  16. The creditor has suffered financial injury and has declared a default on its own account. [See attached Notice of Default].
  17. The last payment received by the creditor from anyone paying on this subject loan account was [insert date].

When I represented Banks and Homeowner Associations in foreclosures against homeowners and commercial property owners, I had all of this information at my fingertips and could produce them instantly.

Given the current environment where robo-signing became institutionalized as a practice even though it is the equivalent of forgery and where fabrication of documents by law offices and “document processors” were prepared according to a published menu of prices, why would anyone, least of all a court of law, apply general principles surrounding presumptions when established fact makes it more likely than not that the presumptions lead to the wrong conclusions? Where is the prejudice to anyone in abandoning these presumptions in light of all the information in the public domain?

see http://thebostonjournal.com/2014/07/30/bank-of-america-ordered-to-pay-1-27-billion-for-countrywide-fraud/

For consultations, services, title and securitization reports, reviews and analysis please call 520-405-1688 or 954-495-9867.

Fatal Flaws in the Origination of Loans and Assignments

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.
There are two fatal flaws in the origination of the loan and in the origination of the assignment of the loan.

As I see it …

The REAL Transaction is between the investors, as an unnamed group, and the borrower(s). This is taken from the single transaction rule and step transaction doctrine that is used extensively in Tax Law. Since the REMIC trust is a tax creature, it seems all the more appropriate to use existing federal tax law decisions to decide the substance of these transactions.

If the money from the investors was actually channeled through the REMIC trust, through a bank account over which the Trustee for the REMIC trust had control, and if the Trustee had issued payment for the loan, and if that happened within the cutoff period, then if the loan was assigned during the cutoff period, and if the delivery of the documents called for in the PSA occurred within the cutoff period, then the transaction would be real and the paperwork would be real EXCEPT THAT

Where the originator of the loan was neither legally the lender nor legally a representative of the source of funds for the transaction, then by simple rules of contract, the originator was incapable of executing any transfer documents for the note or mortgage (deed of trust in nonjudicial states).

If the originator of the loan was not the lender, not the creditor, not a party who could legally execute a satisfaction of the mortgage and a cancellation of the note then who was?

Our answer is nobody, which I know is “counter-intuitive” — a euphemism for crazy conspiracy theorist. But here is why I know that the REMIC trust was never involved in the transaction and that the originator was never the source of funds except in those cases where securitization was never involved (less than 2% of all loans made, whether still existing or “satisfied” or “foreclosed”).

The broker dealer never intended for the REMIC trust to actually own the mortgage loans and caused the REMIC trust to issue mortgage bonds containing an indenture for repayment and ownership of the underlying loans. But there were never any underlying loans (except for some trusts created in the 1990’s). The prospectus said plainly that the excel spreadsheet attached to the prospectus contained loan information that would be replaced by the real loans once they were acquired. This is a practice on Wall Street called selling forward. In all other marketplaces, it is called fraud. But like short-selling, it is permissible on Wall Street.

The broker dealer never intended the investors to actually own the bonds either. Those were issued in street name nominee, non objecting status/ The broker dealer could report to the investor that the investor was the actual or equitable owner of the bonds in an end of month statement when in fact the promises in the Pooling and Servicing Agreement as to insurance, credit default swaps, overcollateralization (a violation of the terms of the promissory note executed by residential borrowers), cross collateralization (also a violation of the borrower’s note), guarantees, servicer advances and trust or trustee advances would all be payable, at the discretion of the broker dealer, to the broker dealer and perhaps never reported or paid to the “trust beneficiaries” who were in fact merely defrauded investors. The only reason the servicer advances were paid to the investors was to lull them into a false sense of security and to encourage them to buy still more of these empty (less than junk) bonds.

By re-creating the notes signed by residential borrowers as various different instruments, and there being no limit on the number of times it could be insured or subject to receiving the proceeds of credit default swaps, (and with the broker dealer being the Master Servicer with SOLE discretion as to whether to declare a credit event that was binding on the insurer, counter-party etc), the broker dealers were able to sell the loans multiple times and sell the bonds multiple times. The leverage at Bear Stearns stacked up to 42 times the actual transaction — for which the return was infinite because the Bear used investor money to do the deal.

Hence we know from direct evidence in the public domain that this was the plan for the “claim” of securitization — which is to say that there never was any securitization of any of the loans. The REMIC Trust was ignored, thus the PSA, servicer rights, etc. were all nonbinding, making all of them volunteers earning considerable money, undisclosed to the investors who would have been furious to see how their money was being used and the borrowers who didn’t see the train wreck coming even from 24 inches from the closing documents.

Before the first loan application was received (and obviously before the first “closing” occurred) the money had been taken from investors for the expressed purpose of funding loans through the REMIC Trust. The originator in all cases was subject to an assignment and assumption agreement which made the loan the property and liability of the counter-party to the A&A BEFORE the money was given to the borrower or paid out on behalf of the borrower. Without the investor, there would have been no loan. without the borrower, there would have been no investment (but there would still be an investor left holding the bag having advanced money for mortgage bonds issued by a REMIC trust that had no assets, and no income to pay the bonds off).

The closing agent never “noticed” that the funds did not come from the actual originator. Since the amount was right, the money went into the closing agent’s escrow account and was then applied by the escrow agent to fund the loan to the borrower. But the rules were that the originator was not allowed to touch or handle or process the money or any overpayment.

Wire transfer instructions specified that any overage was to be returned to the sender who was neither the originator nor any party in privity with the originator. This was intended to prevent moral hazard (theft, of the same type the banks themselves were committing) and to create a layer of bankruptcy remote, liability remote originators whose sins could only be visited upon the aggregators, and CDO conduits constructed by CDO managers in the broker dealers IF the proponent of a claim could pierce a dozen fire walls of corporate veils.

NOW to answer your question, if the REMIC trust was ignored, and was a sham used to steal money from pension funds, but the money of the pension fund landed on the “closing table,” then who should have been named on the note and mortgage (deed of trust beneficiary in non-judicial states)? Obviously the investor(s) should have been protected with a note and mortgage made out in their name or in the name of their entity. It wasn’t.

And the originator was intentionally isolated from privity with the source of funds. That means to me, and I assume you agree, that the investor(s) should have been on the note as payee, the investor(s) should have been on the mortgage as mortgagees (or beneficiaries under the deed of trust) but INSTEAD a stranger to the transaction with no money in the deal allowed their name to be rented as though they were the actual lender.

In turn it was this third party stranger nominee straw-man who supposedly executed assignments, endorsements, and other instruments of power or transfer (sometimes long after they went out of business) on a note and mortgage over which they had no right to control and in which they had no interest and for which they could suffer no loss.

Thus the paperwork that should have been used was never created, executed or delivered. The paperwork that that was created referred to a transaction between the named parties that never occurred. No state allows equitable mortgages, nor should they. But even if that theory was somehow employed here, it would be in favor of the individual investors who actually suffered the loss rather than the foreclosing entity who bears no risk of loss on the loan given to the borrower at closing. They might have other claims against numerous parties including the borrower, but those claims are unliquidated and unsecured.

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.

Why any court would allow the conduits and bookkeepers to take over the show to the obvious detriment and damage to the real parties in interest is a question that only legal historians will be able to answer.

Servicer Advances: More Smoke and Mirrors

Several people are issuing statements about servicer advances, now that they are known. They fall into the category of payments made to the creditor-investors, which means that the creditor on the original loan, or its successor is getting paid regardless of whether the borrower has paid or not. The Steinberger decision in Arizona and other decisions around the country clearly state that if the creditor has been paid, the amount of the payment must be deducted from the amount allegedly owed by the “borrower” (even if the the borrower doesn’t know the identity of the creditor).

The significance of servicer advances has not escaped Judges and lawyers. If the payment has been made and continues to be made, how can anyone declare a default on the part of the creditor? They can’t. And if the payment has been made, then the notice of default, the end of month statements, the notice of acceleration and the amount demanded in foreclosure are all wrong by definition. The tricky part is that the banks are once again lying to everyone about this.

One writer opined either innocently or at the behest of the banks that the servicers were incentivized to modify the loans to get out of the requirement of making servicer advances. He ignores the fact that the provision in the pooling and servicing agreement is voluntary. And he ignores the fact that even if there is a claim for having made the payment instead of the borrower, it is the servicer’s claim not the lender’s claim. That means the servicer must bring a claim for contribution or unjust enrichment or some other legal theory in its own name. But they can’t because they didn’t really advance the money. Anyone who has experience with modification knows that the servicers make it very difficult even to apply for a modification.

Once again the propaganda is presumed to be true. What the author is missing is that there is no incentive for the Servicer to agree to make the payments in the first place. And they don’t. You can call them Servicer advances but that does not mean the money came from the Servicer. The prospectus clearly states that a reserve pool will be established. Usually they ignore the existence of the REMIC trust on this provision like they do with everything else. The broker dealer (investment banker) is always the one party who directly or indirectly is in complete control over the funds of investors.
Like the loan closing the source of funds is concealed. The Servicer issues a distribution report with disclaimers as to authenticity, accuracy etc. That report gets to the investor probably through an investment bank. The actual payment of money comes from the reserve pool made out of investor’s funds. The prospectus says that the investor can be paid out of his own funds. And that is exactly what they do. If the Servicer was actually taking its own money to make payments under the category of Servicer advances, the author would be correct.
The Servicer is incentivized by two factors — its allegiance to the broker dealer and the receipt of fees. They get paid for everything they do, including their role of deception as to Servicer advances.
When you are dealing with smoke and mirrors, look away from the mirror and walk through the smoke. There, in all its glory, is the truth. The only reason Servicer advances are phrased as voluntary is because the broker dealer wants to make the payments every month in order to convince the fund manager that they should buy more mortgage bonds. They want to be able to stop when the house of cards falls down.
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