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There are three central strategies that need to be pursued with vigor. The Banks have once again moved the goal posts because they are starting to lose cases with increasing frequency when confronted with the requirement that they actually prove their case with facts instead of presumptions. They are attacking the need for discovery, the need for an expert witness, and the need for foundation of fabricated documents by leveraging certain legal presumptions to achieve results that were never intended to be used to win a case that they would lose if they had to prove their case with actual facts from a witness who has personal knowledge.
Yet that is exactly what is happening. It happens almost automatically in non-judicial foreclosures and it happens most of the time in judicial states. “Legal presumptions” are being manipulated to win an unwinnable case. Those presumptions are for expedience and not to slant cases in favor of a litigant who is wrong.
In Discovery it is important to set a hearing on the blanket objections that are commonly filed by the Banks without any obligation on their part to set those objections for hearing. So it is up to the borrower to set the objections for hearings. Lawyers are finding that they must also file a motion to compel and that without a compelling memorandum of law supporting discovery or supporting the need for an expert witness, the banks will control the narrative by maintaining the impression that laws and presumptions about negotiable instruments are the only issues.For the Judge, the real issues are hidden from view, so you must reveal them. The latest iteration the the Bank tactics is the “Self-authenticating” document which is the subject of another article.
The central theme is always the same. The Banks can’t win on the actual facts, so they are relying upon and leveraging certain rules of evidence that allow certain documents to be admitted into evidence, where the contents of those documents are taken as true (despite the fact that they are barred by the hearsay rule) and the Judges are treating the contents as true over the objection of counsel for the borrower. Like Judicial notice, such documents might be admissible for the limited purpose of acknowledging their existence, but their contents are very much in issue.
However, many judges disregard the notion that the contents are at issue unless the borrower produces compelling evidence that the facts in the document are false. In my opinion, it is wrong to require a defendant who has no access to the actual facts — the money trail — to bear the burden of proof and doubly wrong when the borrower has asked for exactly that information through statutory, formal, informal and discovery requests only to be met with stonewalling.
My thought is that this is an opportunity to educate the judge — against what he or she wants to hear. It is an opportunity to get him to hear YOUR narrative twice. Iadvise lawyers to file a memorandum in opposition to objections and file a motion to compel to make your record. Present a credible argument for the need for the borrower to get information that either lies solely in the hands of theforecloser or in the hands of others who are co-venturers with theforecloser.The need for an expert is evident from the section of the PSA which is entitled “Definitions” which uses words, concepts, business processes, lending and practices that are outside of the statutory scheme for the transfer of loans. The same arguments exist for enforcing discovery. Attach a copy of the PSA Definitions section to your memo. Despite the current trend of the Banks toward introducing the PSA as an exhibit at trial, they continue to argue that the borrower has no standing to contest whether the procedures and restrictions of the PSA are relevant in a foreclosure case. Many judges agree. I believe they are wrong and that this is an evasion of the truth with the help of the Court.
They may seem unrelated but they are identical — only the other side has or does not have the actual evidence of the transactions that are presumed to exist by virtue of some document they are producing like an assignment, a mortgage, a note, or a notice. To the extent that they are responsive to discovery, the need for an expert diminishes or is reduced.
The plaintiff is alleging that a trust owns the mortgage and that various parties have authority to service, receive documents and pay for the the origination of acquisition of loans. It is only the PSA that establishes the right of the Plaintiff forecloser or beneficiary under a deed of trust to pursue foreclosure.
The very essence of the defense is that the Plaintiff does not own the loan, is not a holder with rights to enforce and is not a holder in due course because the plan laid out by the PSA, was never followed. That starts with the conclusion that the trust was never funded and therefore could not have the resources to pay for the origination or acquisition of loans. The defense theory is that based upon the pleadings and proof of the Plaintiff, it is a stranger to the loan transaction despite a snow storm of paper creating appearances to the contrary.
The Plaintiff has not alleged it is a holder in due course. Thus by law they are subject toall of the potential defenses of the borrower starting with the processes that began in the application stage for the loan, the presence of an assignment and assumption agreement that governed theactual events that occurred at closing — includingthe fact that the named party identified as “lender” was not the source of the loan and had no rights under the agreement with third parties toperform any act with respect to the loan except topermit their name to be used as a nominee.This was a table funded loan in which an undisclosed third party funded the loan. The importance of that is that the third party should have been identified on the note and mortgage and the mortgage should not have been executed, delivered or recorded. It is ONLY with the help of an expert who understands the terms and processes that are outside the norm of conventional lending — which is already so complex that Federal law requires that summaries and good faith estimates and disclosure are required to be delivered to the borrower prior to closing.
The plaintiff is taking two opposite positions at the same time — first that they have a trust that exists, that has engaged in business pursuant to the requirements of the PSA and who has paid for the origination or acquisition of the loan. Second, that it doesn’t matter whether the trust exists or owns the loan because they are a holder, and they want this court to presume that being a holder creates a presumption under state law that as such, they have the rights to enforce. Hence they want presumption to triumph over fact.
Theirposition is that they can close the matter of refunds and repurchasing obligations with the creditors by foreclosing the mortgage and getting a judgment on the note. Both the investors and the borrowers think otherwise.The defense theory of the case is that the trust was never funded nor used in this transaction and thus should not be allowed to enforce a loan that it never owned, funded, originated or acquired. The initial proof lies in the pleading of the Plaintiff in judicial cases. They never assert that they are a holder in due course, the elements of which are payment of value for the loan, acting in good faith and without knowledge of the borrower’s defenses. Through aggressive and relentless pursuit of truth in discovery (which only requires the possibility that it might lead to admissible evidence) you can easily establish that they are not claiming that the Trust was acting in bad faith or with knwoeldge fo the borrower’s defenses (although in some situations that might also be in issue). That leaves the single element of payment for the loan.
Each PSA sets forth the elements of a holder in due course for the loan to be accepted by the trustee. If the allegation is onlythat that there is a holder, or even a holder with rights to enforce, the only conclusion, from their own pleadings is that the trust has not paid for this loan. If it has not paid for the origination or acquisition of the loan, the Trust has no reasonable basis for claiming any interest in it. Hence it shouldn’t be suing for collection or foreclosure. And the allegation that the Trust or representative is a holder is contrary to the presumption underlying court proceedings that the Trust has paid money and will lose money if the loan is not enforced. The truth is that the investors will lose money if the loan IS enforced.The defense theory of the case is that there is a direct debtor-creditor relationship between the investors, as creditors and who should have been on the note and mortgage but were not, in order to create the illusion of a veil in which the investors would not be liable for fraudulent, deceptive or shady lending practices.
And the defense theory of the case is that the securitization plan under which the investors were supposedly parties through the Trust and the PSA never occurred and that therefore the mortgage was defective on its face for naming the wrong lender and for not disclosing, as required by Federal and Florida law all the parties to the transaction and all the intermediaries were were receiving compensation and profits arising from the origination of the loan. — since it was the investor funds that were used in the origination or acquisition of the loan.
Since we can presume that the distance of the Trust from theactual origination eliminates any questionas to whether they were proceeding in good faith IF they accepted the note and mortgage, we must then presume that were acting in good faith and without notice of the borrower’s defenses. Those are two out of three of the elements for a holder in due course.By alleging that the Trust owns the loan, that would by definition mean that that if the PSA was followed the Trust was intended to be a holder in due course — having paid value for the loan in good faith and without knowledge of the borrower’s defenses.
That would mean that the PSA requires the Trust to be a holder in due course, because that would prevent the borrower from raising most defenses against the Trust when it seeks to enforce the loan. If it is not a holder in due course, the Trust provisions bar acceptance of the loan. Hence any allegation to the contrary is void under New York State law.
Thus the plaintiff is trying to slip by on two conflicting theories — that the trust owns the loan and that the trust can enforce it just by alleging it is a holder despite the fact that the trust is a stranger to the loan transaction and never transacted any business in which it acquired ownership of the loan. This leaves the actual creditor — a group of investors who were in the same darkness as the borrower — without having received the truth when the transaction was proposed to either of them.
What is interesting here is that the allegation is not that the trust is a holder in due course which can only mean that the Trust never paid consideration for the ownership of the loan. And the acceptance of the loan by the trustee has not been alleged because it most likely never happened because the transfer was outside of the cutoff period.The cutoff period exists for two reasons — to get certain tax advantages for the trust beneficiaries who are the real creditors and to prevent any defective loans from coming into the trust that would have an adverse consequence to the trust and its beneficiaries.
And the fact that the Trust is governed by New York State law means that any act that is expressly prohibited by the PSA is void not voidable. So the assignment is a cover-up for what really happened.
For the loan to be included in the pool of loans that form the res of the trust, the trustee must accept the loan. That acceptance is manifest after the cutoff period when the pool is closed. After that individual acceptances based upon opinions of counsel must be documented. None of that happened.
At best it is an offer that could never be accepted by the trust — because there was no acceptance by the trustee who could not accept because it would be a void act both because of the cutoff period and the fact that it produce adverse consequences in both tax treatment and actual money paid to them to allow the late deposit of a loan that has been declared in default). See the provisions for acceptance by the Trustee.
An expert witness steeped in the language and practice of investment banking and the securitization of loans is necessary to explain how this transaction must be interpreted and the conclusion that the investors are the direct creditors — not the trust — because their money was mismanaged, as the investors have alleged in their own complaints against the underwriters.
At worst, it is, as the investor suits and the suits by government and insurers allege outright fraud in which the money and the documents were intentionally managed in a way that was to the detriment of both the creditors and the debtor and ultimately the government and society.
The second point in the defense is that the documents submitted by the Plaintiff are not supported by anything because they have refused to provide appropriate responses to discovery that would show the actual authority to represent the actual creditors, based upon the actual creditors granting them that authority.At trial documents will be admitted for the forecloser if you have failed to enforce discovery. Admission into evidence is barred if they have failed to respond even after being ordered to do so by the court — but those cases don’t go to trial. They are settled. And that is the point.
Filed under: AMGAR, CORRUPTION, evidence, expert witness, foreclosure, foreclosure defenses, GTC | Honor, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, originator, Pleading, securities fraud, Servicer, Title, TRUST BENEFICIARIES, trustee | Tagged: discovery, Expert witnesses, foreclosure defense, foreclosures, judicial foreclosures, legal presumptions vs facts, NONJUDICIAL, self-authenticating documents | 24 Comments »