Discovery Changes and Broadens After Hawaii Supreme Court Decision

Based on questions that greeted me when I got to my desk this morning, here are just some of the thoughts that apply — a case review and analysis for each case being necessary to actually draft the right questions and to close any trap doors.

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

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

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

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

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

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NOTE: Procedural questions should be posed to local counsel who knows local discovery rules and court procedure. My answer is based upon general knowledge and not based upon any experience in litigating discovery issues in your state.
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The effect of the new decision in the link above is most probably (a) a broadening of existing discovery requests (b) rehearings on recent decisions denying discovery and (c) an opportunity and a reason to ask the questions you really want to ask.
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The first question is whether the questions you would ask now are already within the scope of the questions you have already asked. If so, generally speaking, there is nothing to do. In this scenario you could send a letter, I think, that clarifies your questions in view of the new Supreme Court ruling. The letter would specifically address certain issues that were raised in questions already asked and tells them the details you expect. This could be done in a supplemental request for discovery citing the new Supreme Court decision. Check with local counsel.
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Second, and this is more likely, your case should be analyzed within the context of the new decision. It seems to me that the decision opens up some broader scope of discovery than had previously been submitted. Your opposition will fight this tooth and nail. Pointing to the Hawaii Supreme Court decision is not going to be enough even if the property is in Hawaii. You need to have a very clear narrative that explains why you are asking for the answers to questions and the production of documents and answers to request for admissions. Without a clear defense narrative your first Motion to Compel them to respond will likely fail. The general rule is that discovery, with certain exceptions, can be any request that could lead to the discovery of admissible evidence. By “admissible” the meaning is evidence that is relevant and “probative” to the truth of the matter asserted. It isn’t relevant unless it ties into either the case against you or the defense narrative. Lack of clarity can be fatal.
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The opposition is going to claim privilege, privacy, and proprietary information. You should force them to be more specific as to how the identification of the creditor is proprietary, or an invasion of privacy or some privilege. Tactically I would let them paint themselves into a corner, so you need someone who knows how to litigate. Once it is established that they can’t or won’t disclose the matters into which you have inquired, then the question becomes how they will prove authority from the creditor without identification of the creditor from whom all authority flows.
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That could lead to a motion for summary judgment wherein you allege that they have failed and refused to make disclosure as to the most fundamental aspect of pleading a case. Since their authorization to initiate and maintain a foreclosure action must relate back to the authorization of the creditor (owner of the debt) and they now have not or will not identify that party(ies), the presumption of authority must be considered rebutted, thus requiring them to prove their case with facts and not with the benefit of legal presumptions.
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Since they have admitted on record that they cannot prove they are acting on behalf of the creditor, it follows that they cannot prove authority to initiate or maintain a foreclosure action. Hence, the outcome is certain. They will not be able to prove standing although they might have made certain assertions or allegations that might pass for standing such that they can withstand a motion to dismiss or demurrer. The essential assertion of standing is either rebutted or barred from proof. Hence judgment should be entered for the homeowner.
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Some of this might come out in a motion for sanctions which is virtually certain to come from you when they fail to properly respond to your requests for discovery. This is intricate litigation that should be handled by a local attorney.
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Again don’t start a second front in the battle if you have already covered it in your previously submitted requests for discovery. I think you have asked most of the right questions, although now with this decision it becomes more refined.Among the questions I would ask in view of the new decision from the Supreme Court of Hawaii are the following presented only as narrative draft, subject to improvement by local counsel:
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  1. Does the trust exist under the laws of any jurisdiction? If yes, describe the jurisdiction in which the trust is recognized as existing.
  2. Was the trust organized under the laws of any jurisdiction? If yes, when and where?
  3. Does the trust own the subject debt? If yes, please explain why the trust is not claimed as a holder in due course.
  4. Does the trust allow the beneficiaries an interest in the assets of the trust?
  5. Please describe the manner in which the certificate holders are beneficiaries of a trust.
  6. Does the named Trustee of the Trust have any rights or obligations to monitor trust assets?
  7. Does the named Trustee of the Trust engage in any activities in which it is administering the assets of the Trust.
  8. Describe the assets of the Trust.
  9. Please identify the Trustor or Settlor of the Trust.
  10. Please identify the date, place and parties involved in any transaction in which assets were entrusted to the named trustee for the benefit of named or described beneficiaries.
  11. Please identify the date, place and parties involved in any transaction in which assets were purchased by the Trust or in which a Trustor or Settlor purchased assets that were then entrusted to the named trustee of the Trust for the benefit of named or described beneficiaries.
  12. Is the named Trust a fictitious name being used by one or more other entities?
  13. Do the certificates contain provisions in which the holder of the certificate disclaims any right, title or interest to assets of the Trust or any right, title or interest to the subject loan? If yes, please describe the provision, in what document it is located, the date of the document, and where that document currently exists in the care, custody and/or control of the Trust or any party doing business as or on behalf of the named Trust.
  14. Please describe the owner of the debt, to wit: describe the party currently carrying a receivable on its books that includes the subject loan, wherein no other party is ultimately entitled to proceeds of payments, proceeds or recovery on the subject loan.
  15. Is it your contention that residential foreclosure is legally allowed without ownership of the underlying debt from the borrower? If so, describe the elements of a party who would be legally allowed to foreclose on a residential mortgage without ownership of the underlying debt.
  16. Does the Trust have a bank account in the name of the Trust?
  17. Does the Trust have a bank account in the name of the named Trustee as Trustee for the Trust.
  18. If the answer to either of the two preceding question is yes, please describe the account, its location and identify the signatories on said account.
  19. Please describe the retainer agreement between the named Trust and current counsel of record including all the parties thereto, the date(s) of execution and date that the agreement became effective, the names of the signatories, and their authority to execute the instrument.
  20. With respect to loans attributed to or allegedly owned by the Trust please describe the parties who make decisions, along with a description of their authority, with respect to the following relating to the subject loan:
    1. Whether to foreclose
    2. When to foreclose
    3. What documents are needed for foreclosure
    4. Applications for modification
    5. Terms of modification
    6. Terms for settlement of the debt

Hawaii Supreme Court: Yes to wrongful foreclosure counterclaim BEFORE foreclosure is completed and no to”plausible” pleading

Now that the courts are no longer in fear of precipitating an economic meltdown, it’s time to return to legal decisions instead of political decisions. The Hawaii Supreme Court has done just that in a common sense decision that sweeps aside most of the Wall Street arguments against allowing homeowners to raise the fraudulent foreclosure issue. The decision goes back decades in reaffirming the law and the intent of the rules of civil procedure.

The bottom line is that homeowners must be allowed an opportunity to prove their claim at the same time they are defending a foreclosure action. This levels the playing field and hopefully is a harbinger of future decisions from the high court in each of the states.

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

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

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

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

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

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see Landmark Hawaii Supreme Court Case

BANK OF AMERICA, N.A., SUCCESSOR BY MERGER TO BAC HOME LOANS SERVICING, LP FKA COUNTRYWIDE HOME LOANS SERVICING LP, Respondent/Plaintiff-Appellee, vs. GRISEL REYES-TOLEDO, Petitioner/Defendant-Appellant,

Remember that while this decision could be used as persuasive authority, it is not binding authority over the courts of any state other than Hawaii.

There are several parts to this decision each consistent with the others.

  1. On a motion to dismiss, plausibility of the allegations are now irrelevant. The homeowner must be given the opportunity to prove the allegations of the complaint. As the Court correctly points out, the plausibility test requires some consideration of some facts that have not been proven or disproven. Hence the plausibility test conflicts directly with the presumption, on a motion to dismiss, that all allegations are true. “Notice pleading” is the law in Hawaii and purportedly is so in many other states where plausibility tests are nonetheless applied. This opinion may go a long way to reversing that erroneous trend.
  2. Notice pleading requires only a short plain statement of ultimate facts upon which the relief sought could be granted. But I would add that the rules about fraud and deceit are still in play, i.e., I don’t believe that any state, including Hawaii would allow a count sounding in fraud without giving some examples in the pleading of the misleading and/or deceitful way that the defendant(s) acted. This decision basically addresses violation of statute and similar kinds of actions.
  3. The implication of this decision is that the pleading should be short and that the homeowner must be given a fair chance to prove his/her allegations.
    1. I am quite certain that this Court would insist on allowing discovery to penetrate far more deeply that is currently generally allowed.
    2. The arguments that the actual transactions and the actual creditor’s identities are private, proprietary and remote was silly to begin with.
    3. This decision will be used by practitioners in Hawaii to demand access to records and to get it through court orders. This alone will result in a landslide of settled cases under seal of confidentiality — if lawyers for homeowners insist on such discovery.
  4. Further moving the ball forward, this Court decided emphatically that claims of wrongful foreclosure can be filed in a counterclaim against the parties involved with the  initiation of wrongful or illegal foreclosure proceedings. That means that contrary to California law and other states, the homeowner does not need to wait to file the claim.
    1. This is a two edged sword. It virtually mandates the filing of the wrongful foreclosure claim because the clock is probably ticking on the statute of limitations the moment the foreclosure is initiated by either judicial or nonjudicial means.
    2. The California doctrine has always been ridiculous and anti-consumer. By denying access to the courts for what is already known to be a wrongful foreclosure based upon false documentation they tie both hands behind the backs of attorneys representing homeowners in foreclosure cases.
    3. Knowing this, most lawyers are now declining representation of homeowners despite clear defects, lies and fabrication of documents relied upon by the lawyers supposedly representing a foreclosing party that many times does not even exist.
    4. Hence the doctrine that wrongful foreclosure claims ONLY arise after the foreclosure is complete produces an absurd result. Once the homeowner proves his/her claims they shouldn’t have lost their home, their life-style and their credit reputation, all based upon illegal acts that were known at the outset, the only remedy under that doctrine is money damages.
  5. The decision also addresses the very important issue of standing. Simply stated, if some party is designated as the foreclosing party, it is the duty of that party and the attorney representing that party to perform sufficient due diligence as to
    1. whether the entity exists,
    2. whether it has possession of the note,
    3. whether the note is endorsed to them by a party who owned the debt,
    4. whether the mortgage or deed of trust was assigned to them by a party that owned the mortgage and the debt, and
    5. whether the debt was in fact transferred from a party who owned the debt to the party claiming the right to foreclose.
  6. If they fail or refuse to perform that due diligence they are violating the law in Hawaii and most likely in dozens of other states. In Hawaii that alone gives rise to a cause of action for damages if damages can be proven, which in most cases is fairly easy. So they are liable for damages if they didn’t perform due diligence.
  7. If they did perform the due diligence and filed knowing that the threshold markers of legal standing are absent, it is malicious abuse of process, it is breach of statutory duties, and it is fraud because the filing of the the lawsuit is a representation that the due  diligence was completed and showed legal standing. And it is probably RICO.

Summary: While it is difficult to predict how and when other states will react to this opinion, it seems likely that this decision in the State of Hawaii will make jurists in other states very uncomfortable. The bias to rule for the alleged foreclosing party just received a blow to any rationality supporting that bias.

What should I pay my attorney?

Like all professions the practice of law mostly involves activities that the client never sees. And it is the quantity and quality of work by the attorney that is the largest factor in getting a good result.

The best result is having the foreclosure dismissed or vacated with findings of fact that make it virtually impossible for the foreclosing party to try again. To get that result you need experienced trial counsel who does all the work he/she thinks is necessary to achieve the goal. Those are at the top of winning food chain.

If you must pay less then you must lower your goal or buy a winning lottery ticket.

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

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

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

See VIDEO TERA EXPLAINED AND VIDEO HOW TO USE TERA REPORT

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

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There are some lawyers to whom I refer clients for representation.  Like me, they like to win — not merely justify a fee. They don’t consider “delaying the inevitable” to be a winning or even viable strategy, mainly because they don’t believe that foreclosure is inevitable. I consider their fees to be very reasonable.

On the issue of attorney fees, I have a story. When I first started practicing law I worked in the law office of what I then considered to be an “older” lawyer — i.e., a little more than 1/2 my present age. His wife was the bookkeeper. She was the one that had to argue with clients to pay the fees that were charged. Eventually people who were complaining or objecting said the obvious — that other lawyers charge less for the “same work” —  which was true. So she put up a sign in the waiting room that said the following:

“If you want nice fresh oats we can give them to you at a reasonable price. But if you are satisfied with oats that have already been through the horse, you can get them for a lot less.”

Moral of the story: It’s not the hourly rate you should be shopping for. And it’s not the length of time it takes to get there that counts. It’s the result. The only way to get legal representation is to pay for it. The question is cost of services vs cost of losing the home.

I hear many complaints from homeowners about how the lawyer didn’t do all the things that could have been done — discovery, motions, trial preparation etc. They are right in most cases that the lawyer did not do the work that now, in retrospect, the client would have liked. But in almost all cases, the problem was not with the lawyer; it was with the client who couldn’t pay or didn’t want to pay for the full work load.

To put numbers to this issue, if you are paying the equivalent of $100 per hour, don’t expect the lawyer to drop everything and concentrate for days on developing a defense narrative that the lawyer thinks he can “sell” to the trial court. If you are paying a few hundred dollars per month the result is the same. The lawyer owes you nothing except to provide the services you pay for.

If your retainer agreement calls for billing at $450+ per hour, you have every right to expect the full job to be done. Likewise if you are paying $2500+ per month, you can expect the full job to be done.

If you are paying $300 per month and expecting services worth $2500 per month you are mistaken. Those services will not be delivered which means that discovery, motions to compel, motions for summary judgment, depositions, trial preparation will either not get done at all or will be perfunctory.

I generally don’t litigate in court anymore. I serve as consultant, writer, researcher and expert witness on cases involving the securitization of debt. I have been actually licensed by government agencies and securities trade groups to do business literally on Wall Street in Manhattan and I did so. My hourly rate is $650 per hour for my time and $150 per hour for paralegal time. The fee is justified not only by our past successes but because we can actually accomplish more in less time and we win (not all the time). So while our customers are paying $650 per hour, in many cases it only takes an hour for me to do my work because I have so much experience with similar cases and fact patterns. Other less experienced lawyers either take much longer for the same job (thus increasing the cost of the project) or they might not take time to do what lawyers are really paid to do — think.

I am not engaging in a discussion about what our judicial system should look like. I am merely dealing with reality. In a capitalist economy where everything is measured in monetary value, everything happens because of money. It’s the fuel that pushes things along. Without the fuel, the horse simply lays down and takes a nap.

The Neil Garfield Radio Show LIVE at 6pm Eastern: Fighting the Trusts in Discovery with Patricia Rodriguez

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

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FIGHTING THE TRUSTS IN DISCOVERY

Title is often changed for the sole purpose of overcoming a disputed forced sale conducted under a nonjudicial state’s foreclosure statutes.   A homeowner, fighting a wrongful foreclosure, should make a request for production  regarding the details of the sale upon which the bank relies on in its filing of the instant action and it’s “response” to the homeowner’s (defendants) inquiry.  The ‘lender’, or servicer, will typically contend that the homeowner’s requests are beyond the scope of discovery, especially in a nonjudicial action.
The homeowner can file a motion to compel the production of documents upon which the Plaintiff relies on to assert that its forced sale was valid, proper, and legal.  A lender will typically reference a Power of Attorney as its authority to bring the action and as proof that the sale was valid, –i.e., that it was conducted by a duly authorized substitute trustee, appointed by a beneficiary, that meets the definition of a beneficiary under the mortgage or deed of trust.
The validity of the referenced power of attorney and its reality of its existence are crucial for the alleged ‘lender’ to even bring the instant non-judicial action and respond, as a party, to discovery. If it does not exist or is not a current source of power granted by the creditor, then the bank’s reliance upon it is misplaced. However, the lender typically refuses to produce it for inspection.
A homeowner may then file a request to produce that which is asked for, inter alia, (1) the power of attorney, and (2) the alleged trust instrument that might be evidence of the existence or nonexistence of the trust for which the Lender/Trustee claims to be acting.   If there is no completed trust instrument for an existing entity that had been funded, then there is no trust, and therefore, there can be no trustee or servicer deriving their “powers” from a trust that does not exist.
The servicer or plaintiff will typically refuse to produce the Power of Attorney claiming that the homeowner/defendant is not entitled to such documents.  In its response, the servicer’s strategy is to rely entirely upon “legal presumptions” that it asserts arise by virtue of the existence of a forced sale in the property records. This avoids the issue of whether the forced sale was void, voidable or conducted under presumptions of fact that are in conflict with actual fact.
The servicer’s position is that because the sale occurred, the homeowner/defendant has no right to inquire about any information that might lead to the discovery of admissible evidence that the sale was or could be declared void or subject to being vacated.
This is circular reasoning and contrary to due process. If the sale was conducted in favor of a party who claimed to be a beneficiary, but was not a beneficiary under the deed of trust, then the appointment of the substitute trustee was void, as was the notice of default and the notice of sale, thus leading to the clear conclusion that the sale was void or subject to being vacated. Without the validity of the forced sale, no action for unlawful detainer arises.
This article is not legal advice, but for discussion purposes only.
Patricia Rodriguez, Attorney
If you need immediate assistance and are located in California, please call 626-888-5206.
To receive a free consultation, please fill out the contact form here.

The Rodriguez Law Firm is Located at:
1492 West Colorado Boulevard Suite 120
Pasadena, CA 91105

Banks Fighting Subpoenas From FHFA Over Access to Loan Files

Whilst researching something else I ran across the following article first published in 2010. Upon reading it, it bears repeating.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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WHAT IF THE LOANS WERE NOT ACTUALLY SECURITIZED?

In a nutshell this is it. The Banks are fighting the subpoenas because if there is actually an audit of the “content” of the pools, they are screwed across the board.

My analysis of dozens of pools has led me to several counter-intuitive but unavoidable factual conclusions. I am certain the following is correct as to all residential securitized loans with very few (2-4%) exceptions:

  1. Most of the pools no longer exist.
  2. The MBS sold to investors and insured by AIG and the purchase and sale of credit default swaps were all premised on a general description of the content of the pool rather than a detailed description with the individual loans attached on a list.
  3. Each Prospectus if it carried any spreadsheet listing loans, contained a caveat that the attached list was by example only and not the real loans.
  4. Each distribution report contained a caveat that the parties who created it and the parties who delivered it did not guarantee either authenticity or reliability of the report. They even had specific admonitions regarding the content of the distribution report.
  5. NO LOAN ACTUALLY MADE IT INTO ANY POOL. The evidence is clear: nothing was done to assign, indorse or deliver the note to the investors directly or indirectly until a case went into litigation AND a hearing was scheduled. By that time the cutoff date had been breached and the loan was non-performing by their own allegation and therefore was not acceptable into the pool.
  6. AT ALL TIMES LEGAL TITLE TO THE PROPERTY WAS MAINTAINED BY THE HOMEOWNER EVEN AFTER FORECLOSURE AND SALE. The actual creditor who submitted a credit bid was not the creditor. The sale is either void or voidable.
  7. AT ALL TIMES LEGAL TITLE TO THE LOAN WAS MAINTAINED BY THE ORIGINATING “LENDER”. Since there was no assignment, indorsement or delivery that could be recognized at law or in fact, the originating lender still owns the loan legally BUT….
  8. AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the Lender and payee on the note, both created a LEGAL obligation from the borrower to the Lender and at the same time, the LEGAL obligation was extinguished because the LEGAL Lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.
  9. Since the Legal obligation was both created and extinguished contemporaneously with each other, any remaining obligation to any OTHER party became unsecured since the security instrument (mortgage or deed of trust) refers only to the promissory note executed by the borrower.
  10. At the time of closing, the investor-lenders were the real parties in interest as lenders, but they were not disclosed nor were the fees of the various intermediaries who brought the investor-lender money and the borrower’s loan together.
  11. ALL INVESTOR-LENDERS RECEIVED THE EQUIVALENT OF A BOND — A PROMISE TO PAY ISSUED BY A PARTY OTHER THAN THE BORROWER, PREMISED UPON THE PAYMENT OR RECEIVABLES GENERATED FROM BORROWER PAYMENTS, CREDIT DEFAULT SWAPS, CREDIT ENHANCEMENTS, AND THIRD PARTY INSURANCE.
  12. Nearly ALL investor-lenders have been paid sums of money to satisfy the promise to pay contained in the bond. These payments always exceeded the borrowers payments and in many cases paid the obligation in full WITHOUT SUBROGATION.
  13. NO LOAN IS IN ACTUAL DEFAULT OR DELINQUENCY. Since payments must first be applied to outstanding payments due, payments received by investor-lenders or their agents from third party sources are allocable to each individual loan and therefore cure the alleged default. A Borrower’s Non-payment is not a default since no payment is due.
  14. ALL NOTICES OF DEFAULT ARE DEFECTIVE: The amount stated, the creditor, and other material misstatements invalidate the effectiveness of such a notice.
  15. NO CREDIT BID AT AUCTION WAS MADE BY A CREDITOR. Hence the sale is void or voidable.
  16. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO DEDUCTIONS FOR THIRD PARTY PAYMENTS.
  17. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR UNJUST ENRICHMENT THAT IS UNSECURED.
  18. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR A LIEN TO REFLECT THE INTENTION OF THE INVESTOR-LENDER AND THE INTENTION OF THE BORROWER.  Both the investor-lender and the borrower intended to complete a loan transaction wherein the home was used to collateralize the amount due. The legal satisfaction of the originating lender is not a deduction from the equitable satisfaction of the investor-lender. THUS THE PARTIES SEEKING TO FORECLOSE ARE SUBJECT TO THE LEGAL DEFENSE OF PAYMENT AT CLOSING BUT THE INVESTOR-LENDERS ARE NOT SUBJECT TO THAT DEFENSE.
  19. The investor-lenders ALSO have a claim for damages against the investment banks and the string of intermediaries that caused loans to be originated that did not meet the description contained in the prospectus.
  20. Any claim by investor-lenders may be subject to legal and equitable defenses, offsets and counterclaims from the borrower.
  21. The current modification context in which the securitization intermediaries are involved in settlement of outstanding mortgages is allowing those intermediaries to make even more money at the expense of the investor-lenders.
  22. The failure of courts to recognize that they must apply the rule of law results not only in the foreclosure of the property, but the foreclosure of the borrower’s ability to negotiate a settlement with an undisclosed equitable creditor, or with the legal owner of the loan in the property records.

Loan File Issue Brought to Forefront By FHFA Subpoena
Posted on July 14, 2010 by Foreclosureblues
Wednesday, July 14, 2010

foreclosureblues.wordpress.com

Editor’s Note….Even  U.S. Government Agencies have difficulty getting
discovery, lol…This is another excellent post from attorney Isaac
Gradman, who has the blog here…http://subprimeshakeout.blogspot.com.
He has a real perspective on the legal aspect of the big picture, and
is willing to post publicly about it.  Although one may wonder how
these matters may effect them individually, my point is that every day
that goes by is another day working in favor of those who stick it out
and fight for what is right.

Loan File Issue Brought to Forefront By FHFA Subpoena

The battle being waged by bondholders over access to the loan files
underlying their investments was brought into the national spotlight
earlier this week, when the Federal Housing Finance Agency (FHFA), the
regulator in charge of overseeing Fannie Mae and Freddie Mac, issued
64 subpoenas seeking documents related to the mortgage-backed
securities (MBS) in which Freddie and Fannie had invested.
The FHFA
has been in charge of overseeing Freddie and Fannie since they were
placed into conservatorship in 2008.

Freddie and Fannie are two of the largest investors in privately
issued bonds–those secured by subprime and Alt-A loans that were often
originated by the mortgage arms of Wall St. firms and then packaged
and sold by those same firms to investors–and held nearly $255 billion
of these securities as of the end of May. The FHFA said Monday that it
is seeking to determine whether issuers of these so-called “private
label” MBS misled Freddie and Fannie into making the investments,
which have performed abysmally so far, and are expected to result in
another $46 billion in unrealized losses to the Government Sponsored
Entities (GSE).

Though the FHFA has not disclosed the targets of its subpoenas, the
top issuers of private label MBS include familiar names such as
Countrywide and Merrill Lynch (now part of BofA), Bear Stearns and
Washington Mutual (now part of JP Morgan Chase), Deutsche Bank and
Morgan Stanley. David Reilly of the Wall Street Journal has written an
article urging banks to come forward and disclose whether they have
received subpoenas from the FHFA, but I’m not holding my breath.

The FHFA issued a press release on Monday regarding the subpoenas
(available here). The statement I found most interesting in the
release discusses that, before and after conservatorship, the GSEs had
been attempting to acquire loan files to assess their rights and
determine whether there were misrepresentations and/or breaches of
representations and warranties by the issuers of the private label
MBS, but that, “difficulty in obtaining the loan documents has
presented a challenge to the [GSEs’] efforts. FHFA has therefore
issued these subpoenas for various loan files and transaction
documents pertaining to loans securing the [private label MBS] to
trustees and servicers controlling or holding that documentation.”

The FHFA’s Acting Director, Edward DeMarco, is then quoted as saying
““FHFA is taking this action consistent with our responsibilities as
Conservator of each Enterprise. By obtaining these documents we can
assess whether contractual violations or other breaches have taken
place leading to losses for the Enterprises and thus taxpayers. If so,
we will then make decisions regarding appropriate actions.” Sounds
like these subpoenas are just the precursor to additional legal
action.

The fact that servicers and trustees have been stonewalling even these

powerful agencies on loan files should come as no surprise based on

the legal battles private investors have had to wage thus far to force

banks to produce these documents. And yet, I’m still amazed by the

bald intransigence displayed by these financial institutions. After

all, they generally have clear contractual obligations requiring them

to give investors access to the files (which describe the very assets

backing the securities), not to mention the implicit discovery rights

these private institutions would have should the dispute wind up in

court, as it has in MBIA v. Countrywide and scores of other investor

suits.

At this point, it should be clear to everyone–servicers and investors
alike–that the loan files will have to be produced eventually, so the
only purpose I can fathom for the banks’ obduracy is delay. The loan
files should, as I’ve said in the past, reveal the depths of mortgage
originator depravity, demonstrating convincingly that the loans never
should have been issued in the first place. This, in turn, will force
banks to immediately reserve for potential losses associated with
buying back these defective mortgages. Perhaps banks are hoping that
they can ward off this inevitability long enough to spread their
losses out over several years, thereby weathering the storm caused (in
part) by their irresponsible lending practices. But certainly the
FHFA’s announcement will make that more difficult, as the FHFA’s
inherent authority to subpoena these documents (stemming from the
Housing and Economic Recovery Act of 2008) should compel disclosure
without the need for litigation, and potentially provide sufficient
evidence of repurchase obligations to compel the banks to reserve
right away. For more on this issue, see the fascinating recent guest
post by Manal Mehta on The Subprime Shakeout regarding the SEC’s
investigation into banks’ processes for allocating loss reserves.

Meanwhile, the investor lawsuits continue to rain down on banks, with
suits by the Charles Schwab Corp. against Merrill Lynch and UBS, by
the Oregon Public Employee Retirement Fund against Countrywide, and by
Cambridge Place Investment Management against Goldman Sachs, Citigroup
and dozens of other banks and brokerages being announced this week. If
the congealing investor syndicate was looking for political cover
before staging a full frontal attack on banks, this should provide
ample protection. Much more to follow on these and other developments
in the coming days…
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Posted by Isaac Gradman at 3:46 PM

“Participants” in False Claims of Securitization

What do you think the average homeowner would have said if he was told “Look, the actual lender is someone else but we want you to name us as the lender.”

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

see http://bpinvestigativeagency.com/beware-the-lsf9-master-participation-trust-is-operating-as-a-secret-agent/

Bill Paatalo has uncovered another layer of onion skin revealing the emptiness of the claims of participants who say they were involved in either the lending of money to homeowners or involved in the transfer of the obligation to repay the alleged loan. As he points out, some refer to “participants” who are ill-defined and essentially unknown quantities. There are many such entities lurking behind the curtain. The one thing they have in common is that they are all making pornographic amounts of money that ultimately comes out of the pockets of investors who were deceived into buying, hedging or insuring bogus and worthless MBS.

The essential fact is that those mortgage backed securities are (a) not backed by anything (b) issued by an empty SPV (Trust) entity existing only on paper (c) completely unrelated to any actual transaction and (d) completely unrelated to the documentation that was fabricated and executed at the “loan” closing.

GASLIGHT: None of the “participants” are who they appear or claim. What is emerging is that in addition to playing musical chairs with actual entities, the banks have created musical terms to the multiple players who are in constant motion switching roles on paper. Several judges have either mused from the bench or confided their discomfort as to why the servicers keep changing and the ownership goes through so many iterations.

The good news is that this is leading to inconsistencies between their correspondence with the borrower, their pleading in court and their proof — often with last minute Powers of Attorney. It appears that all of them are sham conduits for the the ultimate sham entities — the underwriter (“Master Servicer”) of MBS issued by the empty trust and the Seller of those securities. Revealing those inconsistencies often leads to victory (successful defense) in court. And it often can lead to large cash awards for damages arising from violations of FDCPA, FCCPA, RESPA and common law doctrines like wrongful foreclosure — with aggravating circumstances permitting the award of punitive damages.

The reason for all of this chicanery is simple: the party who gave the homeowner money didn’t even know it was their money on the “closing” table. But the moral and legal view on this is that he who gave the money is owed the money in return (unless it is a gift). This is true regardless of what documents are drafted or even executed by homeowners whose signature was obtained by fraud in the inducement.

What do you think the average homeowner would have said if he was told “Look the actual lender is someone else but we want you to name us as the lender.” THAT is a cause of action for common law rescission and cancellation of the instrument — once the homeowner finds out that he made the “check” out to the wrong person. Since the designated “lender” gave no money of its own and assumed no risk of loss the homeowner cannot be required to give “back” what he or she never received from the fake lender.

Adam Levitin might be right in calling it “Securitization Fail” because the securitization never happened; but it assumes that the intent was to have securitization succeed. This is not the case. The entire business model of the banks, as confirmed by industry insiders, was to take the money out of the securitization chain that had been created on paper.  Actual securitization of debt in residential “transactions” was never intended to happen. It was always supposed to be an illusion to cover criminal and civil theft.

PRACTICE HINT: Assume none of the transactions that are represented, assumed or presumed ever happened. Aim your discovery, motions, trial objections and cross examination at that and you will have the best shot at hitting the bulls-eye. That is exactly how Patrick Giunta and I won our cases.

FASB on Sham Transactions

See AU Section 332 Auditing Derivative Instruments, hedging Activities and Investment in Securities.
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Every written instrument is by definition the memorialization of an event. Absent the event in the real world, the instrument is worthless at best and at worst fraudulent. This is derived from the my knowledge of generally accepted accounting principles (GAAP) as enunciated by the Financial Accounting Standards Board (FASB) supported by the American Institute of Certified Public Accountants (AICPA).
 *
In any audit of bookkeeping and/or accounting records written instruments are the starting point for inquiry as to whether the documents represents a true and fair representation of an actual transaction. While the auditor may be aware of certain legal presumptions concerning the validity of a facially valid instrument, the auditor is tasked with testing all transactions including those that appear to possess the attributes of facial validity.
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Specifically the audit process for alleged transactions relating to derivative securities (mortgage backed bonds, for example) goes further than standard auditing confirmation under the rules recognized as nationwide and binding. In large part because of the admissions or quasi admissions in settlements with government regulators, attorneys general and investors, it has become obvious that transactions that are related to activity in the derivative marketplace are subject to special scrutiny. Auditors are required to test the following, among other things:
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  1. Occurrence. Transactions and events that have been recorded have occurred and pertain to the entity.
  2. Completeness. All transactions and events that should have been recorded have been recorded.
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In the definition of the confirmation process required by auditors, it is clearly stated that a plan of confirmation is to be used. Facially valid documents are not excluded from the confirmation process. And as seen above, transactions relating to alleged securitization are subject to specific testing. The courts are out of their element in assessing the risk of fraudulent representation because the Courts’ inquiry generally starts and ends with the written instrument.
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The Auditor wants to know if the transaction memorialized in that instrument actually took place and wants to see evidence to that effect — i.e., the money trail as represented by cash flow, balance sheet and income statements as well as the general ledger (and supporting documents, bank statements and receipts) of the entity that claims to have been a party to a transaction and now claims an asset as a result.
 *
These sections are the beginning point for discovery and the foundation for objections when “business records” are proffered at trial as exceptions to the hearsay rule.
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The big question is whether the transactions that are represented in court as loans or assignments or endorsement are actually reflected on the general ledger, bookkeeping records and accounting records of the party who was supposedly involved in any of those transactions is proffering false testimony or fabricated documents into evidence.
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The answer is simple: based upon reliable sources the facts are that the big banks have produced a convoluted set records of loosely connected entities. One fact is clear: the acquisition of loans is generally not found in their records nor supported by any entry reflecting a financial transaction. The little originators and banks are generally buried after having gone out of business, but the ones that are left will show that most originated “loans” did not result in the flow of cash from the originator to the alleged borrower.
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My recommendation is that foreclosure defense attorneys employ the use of CPA’s who have specific auditing experience and knowledge. The testimony of these experts might be invaluable to the discovery process and lead the opposing side to soften their approach.
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