Down to the Nitty Gritty: Holder vs Owner of the Note

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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Hat Tip to Patrick Giunta, Esq. (Ft. Lauderdale, Fl) for sending this case to me.
This is an important case as it shows the shifting judicial attitude toward foreclosure defense. Originally thought to be mostly frivolous, the courts are now actually applying the law.
Two things important about this case are that (1) the trial court was reversed for treating an “owner” of the note as the same thing as a “holder” at the time the suit was filed and (2) the recognition that there is a difference between holder, owner and non-holder with rights of a holder (i.e., rights to enforce).
Lastly the court is following the progression of cases where instead of remanding for further proceedings (like substitution of Plaintiff) the Court ordered entry of involuntary dismissal.
And finally my comment is that there is still room for litigation in these cases, since the involuntary dismissal is against only one of what I call co-conspirators. BUT the deeper we drill the easier it is to force them into a corner. The plain fact is that they have been successfully fighting against revealing the money trail. If that was actually revealed from one end to the other on each of multiple chains used by the banks, it would be apparent that what went on here was more sinister than what has thus far been revealed — and the reason why Bush and Obama were scared into preserving the status quo rather than holding the banks’ feet to the fire.
I will explain more at a later time. But here is a teaser: the fractional reserve banking system with the Federal Reserve as the Central Bank was replaced with a virtual fractional reserve system in which non-banks acted as though they were banks.
This was tied to a virtual central bank controlled by the banks. It enabled them to act as though they were commercial banks acting within the Federal Reserve system when in fact they were operating a rogue system wherein the sale of each loan created “capital” to create more loans. The MERS model was in fact used throughout the vast universe of finance as to law firms, servicers, banks, conduits, and even the central bank.
This explains why the banks begged for and received commercial bank status effectively ratifying their prior illegal behavior but putting the real Federal Reserve in the position of having no choice but to do “quantitative easing” to make up for the shortfalls.
And it explains why the original documentation on so many loans was intentionally destroyed. The numbers didn’t add up. The amount of money invested by managed funds into dead REMIC Trusts was NOT enough to account for the number of loans given out. They were both skimming the real money and then using the proceeds of “sale” of the “loan contracts” to create both assets and income that the Banks say belong to them. So the pile-up of original notes with an inventory would have revealed that somehow the investment banks were acting as commercial banks with impunity without charters or licenses. The physical presence of the notes were an embarrassment.  Do the math.
So the notes being represented in court have a high likelihood of being fabricated through mechanical means and the “borrower” doesn’t know the difference. All of this means that on any given loan there are multiple claimants. LPS and MERS were used to siphon the cases such that one specific player was chosen for each foreclosure — when in fact none of them had any actual right to collect, enforce or foreclose.
THE DISTINCTION BETWEEN OWNER, HOLDER, HOLDER IN DUE COURSE, NON-HOLDER WITH RIGHTS TO ENFORCE AND POSSESSOR IS CHIPPING AWAY AT THE VENEER. IN DISCOVERY, THESE INCONSISTENT CLAIMS SHOULD BE USED TO DRILL DOWN TO THE MONEY TRAIL. AND FOR TRIAL THESE INCONSISTENT  CLAIMS SHOULD BE USED TO STRIP THE BANKS OF THE BENEFIT OF LEGAL PRESUMPTIONS ATTENDANT TO BEING A “HOLDER.” But note that we are still talking about the PAPER that talks about a transaction that was never consummated — as it relates to the party seeking collection or enforcement or any of its predecessors.

Bank of New York Mellon

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation.
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 have periodically reminded people that they should be carefully watching litigation between the perpetrators of the massive false securitization scheme. You really should see those cases, including tax cases, where the admissions and allegations in some cases directly contravene allegations by the same parties in foreclosure cases. It doesn’t bother them taking inconsistent positions because (a) nobody looks and (b) they will get away with it anyway, as long as Judges presume that all is well with the paperwork.
The prime issues in these cases revolve around a simple proposition. If the Trustee of a REMIC Trust was the Trustee of a REMIC Trust, why didn’t they act like it — demanding buy-backs, damages etc. for horrendous underwriting criteria that was opposite to what was promised in the prospectus, what was reported to the rating agencies and what was disclosed through press releases?
The answer is simple — there was no Trust, REMIC or otherwise. Investors who believed that the money would be managed by the Trust were intentionally deceived by the Underwriter/Master Servicer. The money did not go under Trustee management. Instead it went into the pocket of the Wall Street Bank that acted as the underwriter/master servicer.
While the terms of the Trust duties as spelled out in the prospectus and the Pooling and Servicing Agreement are craftily worded, it is apparent that the duties of the Trustee shrink as you read further and further. But under common law and apparently the TRUST INDENTURE ACT, a named Trustee who  accepts the assignment and is named in the Trust has duties that transcend the caveats that essentially leave the so-called Trustee with no duties at all.
Normally this would bother a prospective Trustee (US Bank, DEUTSCH, BONY/MELLON, Citi, BOA, Wells Fargo etc.). But what is STILL not being recognized is that the initial premise of the transaction never occurred. The money from the sale of the MBS to investors never made it into any account under management by the Trustee. It really was THERE that the named Trustee failed to act, even though they were recruited for their name (leasing their brand) for a monthly fee with no Trustee responsibilities. Upon issuance of the MBS from the Trust, the Trust was owed the proceeds. It never received the proceeds and the Trustee either didn’t know, didn’t care or both.
Josh Yager writes the following:

 

The preamble to the Uniform Prudent Investor Act notes, “The tradeoff in all investing between risk and return is identified as the fiduciary’s central consideration.”  For most trustees determining the return that was produced by the assets held in trust is a fairly straightforward exercise. Most investment managers are required to produce performance data that is SEC-compliant. However, defining whether the return experienced was appropriate, given the level of risk that was taken, is more complicated.

The Bogert treatise states, “The trustee cannot assume that if investments are legal and proper for retention at the beginning of the trust, or when purchased, they will remain so indefinitely. Rather, the trustee must systematically consider all the investments of the trust at regular intervals to ensure that they are appro­priate” (A. Hess, G. Bogert, & G. Bogert, Law of Trusts and Trustees §684, pp.145–146 (3d ed. 2009)).

To fulfill this duty to monitor the risk and return of the trust assets a prudent trustee, acting in good faith, will make the following inquiries:

Target Return: The manager’s actual performance will initially be compared to the trustee’s stated return objective. This begs the question whether the trustee has taken steps to define a targeted rate of return for the assets of which they are responsible. If they have not, they are encouraged to do so. The Target Return is stated as an absolute number (e.g., 7.0%) or as a real, inflation-adjusted number (e.g., Inflation + 4.0%).

Strategic Benchmark: The manager’s actual performance will be tested to determine whether any strategic value has been added by the manager.  This test answers the specific question, “Have the manager’s strategic investment choices produced a better outcome than a simple investment in a few major asset classes?”  This is done by comparing the actual performance and risk to that of a simple “vanilla” Strategic Benchmark that is historically consistent with the trustee’s stated Target Return (see above).  The Strategic Benchmark is a combination of Russell 3000 (US Stock), MSCI ACWI ex-US (Int’l stock including Emerging Markets), and Barclays 1-10 Yr Muni (Bonds).  For tax-deferred/free accounts, the bond component will be the BOFAML US Corp/Govt 1-10 Yr.

  1. The stock-to-bond ratio used is a mix of stocks and bonds which historically matched the client’s Target Return over the last 50 years.
  2. The Russell 3000 and MSCI ACWI ex-US are intended to represent the entire stock universe.  For example, the Russell 3000 includes US Small Cap stocks, US Value stocks, etc., and the MSCI ACWI ex-US includes Emerging Market stocks.
  3. The US-to-Int’l ratio is fixed at 70/30 to represent the “home bias” that investors of any given country typically exhibit and to recognize that the client usually spends US Dollars.
  4. For example, if the client’s Target Return is 7.0% (or Inflation + 4.0%), the Strategic Benchmark will be 40% Barclays 1-10 Yr Muni, 42% Russell 3000 and 18% MSCI ACWI ex-US.

Risk: In addition to measuring the manager’s performance against these two benchmarks, there must be an evaluation of the risk that has been accepted by each manager. Some forms of risk are quantitative and can be discovered through statistical analysis. Other types of risk cannot be deduced from statistical inquiry and require a more subjective analysis.

  1. Quantitative Risk Measures
  • Standard Deviation / Downside Deviation
  • Value-at-Risk
  • Beta
  • Max Drawdown
  • High Month Return / Low Month Return
  • Sharpe Ratio (risk-adjusted return)
  • M-Squared (risk-adjusted return)
  • Information Ratio (risk-adjusted return)
  1. Qualitative Risks
  • Lack of Liquidity: The % of the trust that cannot be liquidated within 5 business days
  • Concentration: The % of the trust held in the single largest security
  • Leverage: The % of leverage used by the trust as reflected in a debt-to-equity ratio
  • Lack of Valuation: The % of the trust assets that do not have daily valuation

Most investment managers, if provided with this overview, can help the trustee create a record that these factors have been considered and documented. If the investment manager is unable to help the trustee develop such a record, a prudent trustee will take steps to independently evaluate these factors or find an investment manager that is willing and able to do so.

Hiring an Expert: What Are you Looking For in Foreclosure Litigation?

I have spent the last 7 years developing the narrative for an expert opinion that could be presented, believed and sustained in court. In writing to a probable new expert we will offer through the livinglies.store.com I summarized what attorneys should be looking for when they consult with an expert in structured finance (i.e., derivatives, securitization etc.).

Here  are some of the issues you want covered by the expert declaration and testimony in court. The basic rule of thumb is that the expert must have both the qualifications to testify as an expert and a persuasive narrative of why his conclusions are right. Without both, the testimony of the expert simply doesn’t matter and will be rejected.

If you are a proposed expert in structured finance, then here is what I would want to know, and what I think lawyers should ask, depending upon what fact pattern is present in each case.

One thing I need to know is whether you feel comfortable in talking about the ownership and balance of the loan.

In one example American Brokers Conduit was the payee on the note and mortgage. We alleged that they didn’t loan the money. Our narrative ran something like this: if you ask me for a loan, and I respond “Yes just sign this note and mortgage” AND THEN you sign the note and mortgage AND THEN I don’t give you a loan, ARE YOU PREPARED TO SAY THAT THE NOTE AND MORTGAGE WERE DEFECTIVE IN A BASIC WAY, TO WIT: THAT THE SIGNATURE ON THE NOTE AND MORTGAGE WAS PROCURED BY FRAUD OR MISTAKE AND THAT WITHOUT THE IDENTIFICATION OF THE REAL CREDITOR BOTH INSTRUMENTS ARE DEFECTIVE.

Would you, as a reasonable business person accept a note purporting to be a negotiable instrument under the UCC if you knew that the transferor neither funded the loan nor (if they purport to be a successor) paid for the assignment?

What is your opinion of your position if you found out after acceptance of the note and mortgage that there was doubt as to whether the obligation was funded or purchased for value? What would you do or suggest to a client in either of those positions — (1) knowledge [or “must have known] or (2) no knowledge [and later finding out that there is doubt as to funding and purchasing for value]?

Are you prepared to say that the fact that the borrower actually did receive money as a loan from another different party does not create a circumstance where the borrower is construed to convey any rights to anyone other than the source of funds or someone in actual privity with the lender — and that both note and mortgage are defective under normal recording statutes — and certainly not a commitment by the debtor to BOTH the source of the funds and the receiver of the signed promissory note and mortgage?

In the one case referred to above, the corporate representative conceded that ABC didn’t loan the money. He was unable to explain what was transferred by ABC to Regents and from Regents to 1st Nationwide and thence to CitiCorp by merger. He admitted that “Fannie Mae was the investor from the start.” You and I understand that neither Fannie and Freddie are lenders. They are guarantors and they serve as Master Trustee for hidden REMIC trusts. (Do you know or agree with that assertion?)

But the question is whether the note is actual “evidence of the debt” (the black letter definition of a promissory note when it contains a promise to pay) when the creditor is identified as a party who was not a lender. In the absence of disclosures of some representative capacity for an actual lender, are you prepared to testify that the note is unenforceable even if the debt is otherwise enforceable in relation to the actual source of funds?

Or would you say that it is not enforceable by the stated payee but it might still be evidence of the debt and evidence of the terms of repayment to the third party source? How does the marketplace treat such questions in valuing a note and mortgage?

The question is whether the expert actually believes and is willing to argue that these conclusions are true and correct.  The expert must earnestly believe these assertions to be true, logically and legally.
Is it acceptable to the prospective expert to see a result where the application of law and facts results in the homeowner getting his home free and clear — on the basis that the wrong party sued him or initiated foreclosure (in non judicial states), or that the notice of default, notice of acceleration, and statements of money due were wrong.
The approach is an attack on ownership and balance. The balance would be wrong, even if the ownership was established, if the payments were not applied properly. The payments include all payments received by the creditor.  That includes all servicer advances directly to trust beneficiaries, as well as insurance and loss sharing payments (i.e., from FDIC and others) paid and received on behalf of the investors directly or the trust beneficiaries.
Part of the reasoning here is that you really have an interesting problem. The Trust beneficiaries agreed to “loan” money to a REMIC trust in exchange for a complex formula of repayment under the indenture of the mortgage bond (contained in the Prospectus and Pooling and Servicing Agreement). Those terms are different than the terms signed by the homeowner.
So there are two agreements — the mortgage bond and the mortgage note. Different parties, new parties are in the PSA as insurers, servicers,servicer advances etc. all resulting in a DIFFERENT payment from an assortment of parties expected by the creditor —different than the one promised by the debtor whether you refer to the note as evidence of the debt or not.Add the complicating factor that without evidence that the Trust was ever funded (i.e., without evidence that the broker dealer sent the proceeds from the offering prospectus to the trust) how do we answer the basic contract question: was there a meeting of the minds? The expectations of the lender (investors) and the borrower (homeowner) are entirely different and the documents used are completely different.

How could the Trust have entered into any transaction for the origination or acquisition of loans without evidence of funding?

On what basis can the Trustee or servicer claim any authority if the Trust was not funded and was essentially ignored? Does the expert agree that avoiding or ignoring the trust means avoiding and  ignoring the prospectus AND the PSA, which contains the authority for ANYONE to act on behalf of the investors, who are no longer “trust beneficiaries” but just a group of investors without a vehicle for their investment?

ESSENTIAL QUESTION: Is the expert prepared to testify about this aspect of structured finance — i.e., how do you connect up the debtor and the creditor? As an expert you would be expected to be able to testify on exactly that question.

And finally there is testimony about the mortgage. If the mortgage secures the note (not the debt, necessarily), which is what is stated in the mortgage, then is the expert willing to testify that the mortgage was defective and should never have been recorded?

Would it not be true, in your estimation, that if a homeowner executes a mortgage in favor of a party posing as a lender, and that party is not a lender to the homeowner, that you could testify that the moment such a mortgage is recorded it probably clouds title?

Would you be willing to testify that based upon those facts, you would say that it is an unknown variable as to who to pay?

Would you be wiling to testify that if you don’t know who to pay, you have no basis for trusting a satisfaction of mortgage from any party including the the original mortgagee?

And lastly that if there is no basis on the face of the instruments or in recorded instruments to presume a valid creditor has been named, that no better presumptions would attach to any assignment, endorsement or other instrument of transfer?

For information concerning expert declarations, consultations and testimony from experts with appropriate credentials to be qualified as an expert, or for litigation support, please call 954-495-9867 or 520-405-1688.

The Big Cover-Up in Our Credit Nation

Regulators have confirmed that there were widespread errors by banks but that the errors didn’t really matter. They are trying to tell us that the errors had to do with modifications and other matters that really didn’t have any bearing on whether the loans were owned by parties seeking foreclosure or on whether the balance alleged to be due could be confirmed in any way, after deducting third party payments received by the foreclosing party. Every lawyer who spends their time doing foreclosure litigation knows that report is dead wrong.

So the government is actively assisting the banks is covering up the largest scam in human history. The banks own most of the people in government so it should come as no surprise. This finding will be used again and again to say that the complaints from borrowers are just disgruntled homeowners seeking to find their way out of self inflicted wound.

And now they seek to tell us in the courts that nothing there matters either. It doesn’t matter whether the foreclosing party actually owns the loan, received delivery of the note, or a valid assignment of the mortgage for value. The law says it matters but the bank lawyers, some appellate courts and lots of state court judges say that doesn’t apply — you got the money and stopped paying. That is all they need to know. So let’s look at that.

If I found out you were behind in your credit card payments and sued you, under the present theory you would have no defense to my lawsuit. It would be enough that you borrowed the money and stopped paying. The fact that I never loaned you the money nor bought the loan would be of no consequence. What about the credit card company?

Well first they would have to find out about the lawsuit to do anything. Second they could still bring their own lawsuit because mine was completely unfounded. And they could collect again. In the world of fake REMIC trusts, the trust beneficiaries have no right to the information on your loan nor the ability to inquire, audit or otherwise figure out what happened tot heir investment.

It is the perfect steal. The investors (like the credit card company) are getting paid by the borrowers and third party payments from insurance etc. or they have settled with the broker dealers on the fraudulent bonds. So when some stranger comes in and sues on the debt, or sues in foreclosure or issues of notice of default and notice of sale, the defense that the borrower has no debt relationship with the foreclosing party is swept aside.

The fact that neither the actual lender nor the actual victim of this scheme will ever be compensated for their loss doesn’t matter as long as the homeowner loses their home.  This is upside down law and politics. We have seen the banks intervene in student loans and drive that up to over $1 trillion in a country where the average household is $15,000 in debt — a total of $13 trillion dollars. The banks are inserting themselves in all sorts of transactions producing bizarre results.

The net result is undermining the U.S. economy and undermining the U.S. dollar as the reserve currency of the world. Lots of people talk about the fact that we have already lost 20% of our position as the reserve currency and that we are clearly headed for a decline to 50% and then poof, we will be just another country with a struggling currency. Printing money won’t be an option. Options are being explored to replace the U.S. dollar as the world’s reserve currency. No longer are companies requiring payments in U.S. dollars as the trend continues.

The banks themselves are preparing for a sudden devaluation of currency by getting into commodities rather than holding their money in US Currency. The same is true for most international corporations. We are on the verge of another collapse. And contrary to what the paid pundits of the banks are saying the answer is simple — just like Iceland did it — apply the law and reduce the household debt. The result is a healthy economy again and a strong dollar. But too many people are too heavily invested or tied to the banks to allow that option except on a case by case basis. So that is what we need to do — beat them on a case by case basis.

National Honesty Day? America’s Book of Lies

Today is National Honesty Day. While it should be a celebration of how honest we have been the other 364 days of the year, it is rather a day of reflection on how dishonest we have been. Perhaps today could be a day in which we say we will at least be honest today about everything we say or do. But that isn’t likely. Today I focus on the economy and the housing crisis. Yes despite the corruption of financial journalism in which we are told of improvements, our economy — led by the housing markets — is still sputtering. It will continue to do so until we confront the truth about housing, and in particular foreclosures. Tennessee, Virginia and other states continue to lead the way in a downward spiral leading to the lowest rate of home ownership since the 1990’s with no bottom in sight.

Here are a few of the many articles pointing out the reality of our situation contrasted with the absence of articles in financial journalism directed at outright corruption on Wall Street where the players continue to pursue illicit, fraudulent and harmful schemes against our society performing acts that can and do get jail time for anyone else who plays that game.

It isn’t just that they escaping jail time. The jailing of bankers would take a couple of thousand people off the street that would otherwise be doing harm to us.

The main point is that we know they are doing the wrong thing in foreclosing on property they don’t own using “balances” the borrower doesn’t owe; we know they effectively stole the money from the investors who thought they were buying mortgage bonds, we know they effectively stole the title protection and documents that should have been executed in favor of the real source of funds, we know they received multiple payments from third parties and we know they are getting twin benefits from foreclosures that (a) should not be legally allowed and (b) only compound the damages to investors and homeowners.

The bottom line: Until we address wrongful foreclosures, the housing market, which has always led the economy, will continue to sputter, flatline or crash again. Transferring wealth from the middle class to the banks is a recipe for disaster whether it is legal or illegal. In this case it plainly illegal in most cases.

And despite the planted articles paid for by the banks, we still have over 700,000 foreclosures to go in the next year and over 9,000,000 homeowners who are so deep underwater that their situation is a clear and present danger of “strategic default” on claims that are both untrue and unfair.

Here is a sampling of corroborative evidence for my conclusions:

Senator Elizabeth Warren’s Candid Take on the Foreclosure Crisis

There it was: The Treasury foreclosure program was intended to foam the runway to protect against a crash landing by the banks. Millions of people were getting tossed out on the street, but the secretary of the Treasury believed the government’s most important job was to provide a soft landing for the tender fannies of the banks.”

Lynn Symoniak is Thwarted by Government as She Pursues Other Banks for the Same Thing She Proved Before

Government prosecutors who relied on a Florida whistleblower’s evidence to win foreclosure fraud settlements with major banks two years ago are declining to help her pursue identical claims against a second set of large financial institutions.

Lynn Szymoniak first found proof that millions of American foreclosures were based on faulty and falsified documents while fighting her own foreclosure. Her three-year legal fight helped uncover the fact that banks were “robosigning” documents — hiring people to forge signatures and backdate legal paperwork the firms needed in order to foreclose on people’s homes — as a routine practice. Court papers that were unsealed last summer show that the fraudulent practices Szymoniak discovered affect trillions of dollars worth of mortgages.

More than 700,000 Foreclosures Expected Over Next Year

How Bank Watchdogs Killed Our Last Chance At Justice For Foreclosure Victims

The results are in. The award for the sorriest chapter of the great American foreclosure crisis goes to the Independent Foreclosure Review, a billion-dollar sinkhole that produced nothing but heartache for aggrieved homeowners, and a big black eye for regulators.

The foreclosure review was supposed to uncover abuses in how the mortgage industry coped with the epic wave of foreclosures that swept the U.S. in the aftermath of the housing crash. In a deal with the Office of the Comptroller of the Currency and the Federal Reserve, more than a dozen companies, including major banks, agreed to hire independent auditors to comb through loan files, identify errors and award just compensation to people who’d been abused in the foreclosure process.

But in January 2013, amid mounting evidence that the entire process was compromised by bank interference and government mismanagement, regulators abruptly shut the program down. They replaced it with a nearly $10 billion legal settlement that satisfied almost no one. Borrowers received paltry payouts, with sums determined by the very banks they accused of making their lives hell.

Investigation Stalled and Diverted as to Bank Fraud Against Investors and Homeowners

The Government Accountability Office released the results of its study of the Independent Foreclosure Review, conducted by the Office of the Comptroller of the Currency and the Federal Reserve in 2011 and 2012, and the results show that the foreclosure process is lacking in oversight and transparency.

According to the GAO review, which can be read in full here, the OCC and Fed signed consent orders with 16 mortgage servicers in 2011 and 2012 that required the servicers to hire consultants to review foreclosure files for efforts and remediate harm to borrowers.

In 2013, regulators amended the consent orders for all but one servicer, ending the file reviews and requiring servicers to provide $3.9 billion in cash payments to about 4.4 million borrowers and $6 billion in foreclosure prevention actions, such as loan modifications. The list of impacted mortgage servicers can be found here, as well as any updates. It should be noted that the entire process faced controversy before, as critics called the IFR cumbersome and costly.

Banks Profit from Suicides of Their Officers and Employees

After a recent rash of mysterious apparent suicides shook the financial world, researchers are scrambling to find answers about what really is the reason behind these multiple deaths. Some observers have now come to a rather shocking conclusion.

Wall Street on Parade bloggers Pam and Russ Martens wrote this week that something seems awry regarding the bank-owned life insurance (BOLI) policies held by JPMorgan Chase.

Four of the biggest banks on Wall Street combined hold over $680 billion in BOLI policies, the bloggers reported, but JPMorgan held around $17.9 billion in BOLI assets at the end of last year to Citigroup’s comparably meager $8.8 billion.

Government Cover-Up to Protect the Banks and Screw Homeowners and Investors

A new government report suggests that errors made by banks and their agents during foreclosures might have been significantly higher than was previously believed when regulators halted a national review of the banks’ mortgage servicing operations.

When banking regulators decided to end the independent foreclosure review last year, most banks had not completed the examinations of their mortgage modification and foreclosure practices.

At the time, the regulators — the Office of the Comptroller of the Currency and the Federal Reserve — found that lengthy reviews by bank-hired consultants were delaying compensation getting to borrowers who had suffered through improper modifications and other problems.

But the decision to cut short the review left regulators with limited information about actual harm to borrowers when they negotiated a $10 billion settlement as part of agreements with 15 banks, according to a draft of a report by the Government Accountability Office reviewed by The New York Times.

The report shows, for example, that an unidentified bank had an error rate of about 24 percent. This bank had completed far more reviews of borrowers’ files than a group of 11 banks involved the deal, suggesting that if other banks had looked over more of their records, additional errors might have been discovered.

Wrongful Foreclosure Rate at least 24%: Wrongful or Fraudulent?

The report shows, for example, that an unidentified bank had an error rate of about 24 percent. This bank had completed far more reviews of borrowers’ files than a group of 11 banks involved the deal, suggesting that if other banks had looked over more of their records, additional errors might have been discovered.

http://www.marketpulse.com/20140430/u-s-housing-recovery-struggles/

http://www.csmonitor.com/Business/Latest-News-Wires/2014/0429/Home-buying-loses-allure-ownership-rate-lowest-since-1995

http://www.opednews.com/articles/It-s-Good–no–Great-to-by-William-K-Black–Bank-Failure_Bank-Failures_Bankers_Banking-140430-322.html

[DISHONEST EUPHEMISMS: The context of this WSJ story is the broader series of betrayals of homeowners by the regulators and prosecutors led initially by Treasury Secretary Timothy Geithner and his infamous “foam the runways” comment in which he admitted and urged that programs “sold” as benefitting distressed homeowners be used instead to aid the banks (more precisely, the bank CEOs) whose frauds caused the crisis.  The WSJ article deals with one of the several settlements with the banks that “service” home mortgages and foreclose on them.  Private attorneys first obtained the evidence that the servicers were engaged in massive foreclosure fraud involving knowingly filing hundreds of thousands of false affidavits under (non) penalty of perjury.  As a senior former AUSA said publicly at the INET conference a few weeks ago about these cases — they were slam dunk prosecutions.  But you know what happened; no senior banker or bank was prosecuted.  No banker was sued civilly by the government.  No banker had to pay back his bonus that he “earned” through fraud.

 

 

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.

Don’t Admit the Default

Kudos again to Jim Macklin for sitting in for me last night. Excellent job — but don’t get too comfortable in my chair :). Lots of stuff in another mini-seminar packed into 28 minutes of talk.

A big point made by the attorney guest Charles Marshall, with which I obviously agree, is don’t admit the default in a foreclosure unless that is really what you mean to do. I have been saying for 8 years that lawyers and pro se litigants and Petitioners in bankruptcy proceedings have been cutting their own throats by stating outright or implying that the default exists. It probably doesn’t exist, even though it SEEMS like it MUST exist since the borrower stopped paying.

There is not a default just because a borrower stops paying. The default occurs when the CREDITOR DOESN’T GET PAID. Until the false game of “securitization started” there was no difference between the two — i.e., when the borrower stopped paying the creditor didn’t get paid. But that is not the case in 96% of all residential loan transactions between 2001 and the present. Today there are multiple ways for the creditor to get paid besides the servicer receiving the borrower’s payment. the Courts are applying yesterday’s law without realizing that today’s facts are different.

Whether the creditor got paid and is still being paid is a question of fact that must be determined in a hearing where evidence is presented. All indications from the Pooling and Servicing Agreements, Distribution Reports, existing lawsuits from investors, insurers, counterparties in other hedge contracts like credit default swaps — they all indicate that there were multiple channels for payment that had little if anything to do with an individual borrower making payments to the servicer. Most Trust beneficiaries get paid regardless of whether the borrower makes payment, under provisions of the PSA for servicer advances, Trustee advances or some combination of those two plus the other co-obligors mentioned above.

Why would you admit a default on the part of the creditor’s account when you don’t have access to the money trail to identify the creditor? Why would you implicitly admit that the creditor has even been identified? Why would you admit a payment was due under a note and mortgage (or deed of trust) that were void front the start?

The banks have done a good job of getting courts to infer that the payment was due, to infer that the creditor is identified, to infer that the payment to the creditor wasn’t received by the creditor, and to infer that the balance shown by the servicer and the history of the creditor’s account can be shown by reference only to the servicer’s account. But that isn’t true. So why would you admit to something that isn’t true and why would you admit to something you know nothing about.

You don’t know because only the closing agent, originator and all the other “securitization” parties have any idea about the trail of money — the real transactions — and how the money was handled. And they are all suing the broker dealers and each other stating that fraud was committed and mismanagement of the multiple channels of payments received for, or on behalf of the trust or trust beneficiaries.

In the end it is exactly that point that will reach critical mass in the courts, when judges realize that the creditor has no default in its business records because it got paid — and the foreclosure by intermediaries in the false securitization scheme is a sham.

In California the issue they discussed last night about choice of remedies is also what I have been discussing for the last 8 years, but I must admit they said it better than I ever did. Either go for the money or go for the property — you can’t do both. And if you  elected a remedy or assumed a risk, you can’t back out of it later — which is why the point was made last night that the borrower was a third party beneficiary of the transaction with investors which is why it is a single transaction — if there is no borrower, there wold be no investment. If there was no investment, there would have been no borrower. The transaction could not exist without both the investor and the borrower.

Bravo to Jim Macklin, Dan Edstrom and Charles Marshall, Esq. And remember don’t act on these insights without consulting with a licensed attorney who knows about this area of the law.

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