FDCPA Claims Upheld in 9th Circuit Class Action

The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt.

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

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If anyone remembers the Grishom book “The Firm”, also in movies, you know that in the end the crooks were brought down by something they were never thinking about — mail fraud — a federal law that has teeth, even if it sounds dull. Mail fraud might actually apply to the millions of foreclosures that have taken place — even if key documents are sent through private mail delivery services. The end of month statements and other correspondence are definitely sent through US Mail. And as we are seeing, virtually everything they were sending consisted of multiple layers of misrepresentations that led to the detriment of the receiving homeowner. That’s mail fraud.
Like Mail Fraud, claims based on the FDCPA seem boring. But as many lawyers throughout the country are finding out, those claims have teeth. And I have seen multiple cases where FDCPA claims resulted in the settlement of the case on terms very favorable to the homeowner — provided the claim is properly brought and there are some favorable rulings on the initial motions.
Normally the banks settle any claim that looks like it would be upheld. That is why you don’t see many verdicts or judgments announcing fraudulent conduct by banks, servicers and “trustees.”And you don’t see the settlement either because they are all under seal of confidentiality. So for the casual observer, you might see a ruling here and there that favors the borrower, but you don’t see any judgments normally. Here the banks thought they had this one in the bag — because it was a class action and normally class actions are difficult if not impossible to prosecute.
It turns out that FDCPA is both a good cause of action for damages and a great discovery tool — to force the banks, servicers or anyone else that is a debt collector to respond within 5 days giving the basic information about the loan — like who is the actual creditor. Discovery is also much easier in FDCPA actions because it is forthrightly tied to the complaint.
This decision is more important than it might first appear. It removes any benefit of playing musical chairs with servicers, and other debt collectors. This is a core of bank strategy — to layer over all defects. This Federal Court of Appeals holds that it doesn’t matter how many layers you add — all debt collectors in the chain had the duty to respond.
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Justia Opinion Summary

Hernandez v Williams, Zinman and Parham, PC No 14-15672 (9th Cir, 2016)

Plaintiff filed a putative class action, alleging that WZP violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692(g)(a), by sending a debt collection letter that lacked the disclosures required by section 1692(g)(a) of the FDCPA. Applying well-established tools of statutory interpretation and construing the language in section 1692g(a) in light of the context and purpose of the FDCPA, the court held that the phrase “the initial communication” refers to the first communication sent by any debt collector, including collectors that contact the debtor after another collector already did. The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt. In this case, the district court erred in concluding that, because WZP was not the first debt collector to communicate with plaintiff about her debt, it had no obligation to comply with the statutory validation notice requirement. Accordingly, the court reversed and remanded.

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NM and Fla Judges Express Doubt Over Whether Loans Ever Made it Into trust

Judges are thinking the unthinkable — that none of the trusts ever acquired anything and that the foreclosures were and are a sham.

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

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It isn’t “theory. It is facts, or rather the absence of facts.

As shown in the two articles by Jeff Barnes below, we are obviously reaching the tipping point. First, the presentation of a Trust instrument means nothing if there is no proof the trust was active — and in particular actually purchased the subject loan. And Second, Judges will deny all objections to discovery and will rule for the borrower if the Trust did not acquire the loan.

In ruling this way the two Judges — thousands of miles apart — are obviously recognizing that the long standing bank objection to borrowers’ defenses based upon lack of legal standing absolutely do not apply. It is not a matter of whether the borrower has “standing” to bring up the PSA, it is a matter of whether the trust was party to any real transaction with relation to the subject mortgage. The answer is no. And no amount of extra paper, powers of attorney, assignments, or endorsements can change that.

Judges are thinking the unthinkable — that none of the trusts ever acquired anything and that the foreclosures were and are a sham.

It is probably worth re-publishing this portion from a long article by Adam Levitin written shortly after the Ibanez decision was reached in Massachusetts. Note how he points out that the vast majority of PSAs that are offered as evidence are neither executed nor do they have a mortgage loan schedule that is “reviewable.” The real problem — and the reason why the SEC-filed PSA documents do not have any signatures and why there is no mortgage loan schedule is that there was no transaction in which the Trust acquired the loans. Virtually all assignments are backdated and virtually none of the assignments relate back to any ACTUAL transaction in which the Trust was involved. The banks have been winning on fumes generated by legal inapplicable presumptions. —

It seems to me that any trust with Massachusetts loans that doesn’t have a publicly filed, executed PSA with a reviewable loan schedule should be on a downgrade watch. Very few publicly filed PSAs are executed and even fewer have publicly filed loan schedules. That doesn’t mean they don’t exist, but somewhere off-line, but if I ran a rating agency, I’d want trustees to show me that they’ve got those papers on at least a sample of deals. Of course should and would are quite different–the ratings agencies, like the regulators, are refusing to take the securitization fail issue as seriously as they should (and I understand that it is a complex legal issue), but I think they ignore it at their (and our) peril

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Excerpts from Barnes’ articles:

A Florida Circuit Judge has gone on the record requiring Wells Fargo, as the claimed “trustee” of a securitized mortgage loan trust, to show that the mortgage loan which WF is attempting to enforce actually went into the PSA, and if not, the standing requirement has not been met and the case will fall on summary judgment. The homeowner is represented by Jeff Barnes, Esq.

The Judge specifically stated as follows:

“…but what I want plaintiff’s counsel to understand, that what you submitted to me with regards to the pooling and servicing agreement still does not have the actual mortgages that went into that pooling and servicing agreement…So at some point you’re going to have to show that this mortgage and note certainly went into that pooling and servicing agreement, which is what I have requested before. …  So I’m just asking you that before we get too far out, please make sure that’s there, or its going to be taken out on summary judgment. … In other words, if you’re a trustee for that pooling and servicing agreement, and the mortgage and note are not in that pooling and servicing agreement, you don’t have standing.”

This ruling not only directly confirms the proof requirements for standing in a securitization case, but supports the production of discovery on the issue as well.


DISCOVERY IS KEY.

The borrower thus requested 53 categories of documents from BAC, including securitization documents. BAC filed a Motion for Protective Order which claimed that public information on the SEC website was “confidential”; that the securitization-related discovery was “irrelevant”; and that it was essentially entitled to withhold discovery because it “has the original note” and has moved for summary judgment on the “relevant” issues.

The Court disagreed, denying BAC’s Motion in its entirety and commanding full responses to the borrower’s discovery request (including production of all responsive documents) within 30 days. The Court found BAC’s Motion to be “sparse”; not in compliance with New Mexico court rules as to discovery; and against New Mexico’s case law which provides for liberal discovery in foreclosure actions so that all of the issues are fully developed and a fair trial is had.

 

A New Mexico District Judge yesterday denied BAC Home Loan Servicing’s Motion for Protective Order which it filed in an attempt to avoid producing documentary discovery to a homeowner who BAC has sued for foreclosure. The loan was originated by New Mexico Bank and Trust, was sold to Countrywide, and thereafter allegedly “assigned” first to MERS and then by MERS to BAC.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

The Adam Levitin Article on Ibanez and Securitization fail:

Ibanez and Securitization Fail

posted by Adam Levitin

The Ibanez foreclosure decision by the Massachusetts Supreme Judicial Court has gotten a lot of attention since it came down on Friday. The case is, not surprisingly being taken to heart by both bulls and bears. While I don’t think Ibanez is a death blow to the securitization industry, at the very least it should make investors question the party line that’s been coming out of the American Securitization Forum. At the very least it shows that the ASF’s claims in its White Paper and Congressional testimony are wrong on some points, as I’ve argued elsewhere, including on this blog. I would argue that at the very least, Ibanez shows that there is previously undisclosed material risk in all private-label MBS.

The Ibanez case itself is actually very simple. The issue before the court was whether the two securitization trusts could prove a chain of title for the mortgages they were attempting to foreclose on.

There’s broad agreement that absent such a chain of title, they don’t have the right to foreclose–they’d have as much standing as I do relative to the homeowners. The trusts claimed three alternative bases for chain of title:

(1) that the mortgages were transferred via the pooling and servicing agreement (PSA)–basically a contract of sale of the mortgages

(2) that the mortgages were transferred via assignments in blank.

(3) that the mortgages follow the note and transferred via the transfers of the notes.

The Supreme Judicial Court (SJC) held that arguments #2 and #3 simply don’t work in Massachusetts. The reasoning here was heavily derived from Massachusetts being a title theory state, but I think a court in a lien theory state could easily reach the same result. It’s hard to predict if other states will adopt the SJC’s reasoning, but it is a unanimous verdict (with an even sharper concurrence) by one of the most highly regarded state courts in the country. The opinion is quite lucid and persuasive, particularly the point that if the wrong plaintiff is named is the foreclosure notice, the homeowner hasn’t received proper notice of the foreclosure.

Regarding #1, the SJC held that a PSA might suffice as a valid assignment of the mortgages, if the PSA is executed and contains a schedule that sufficiently identifies the mortgage in question, and if there is proof that the assignor in the PSA itself held the mortgage. (This last point is nothing more than the old rule of nemo dat–you can’t give what you don’t have. It shows that there has to be a complete chain of title going back to origination.)

On the facts, both mortgages in Ibanez failed these requirements. In one case, the PSA couldn’t even be located(!) and in the other, there was a non-executed copy and the purported loan schedule (not the actual schedule–see Marie McDonnell’s amicus brief to the SJC) didn’t sufficiently identify the loan. Moreover, there was no proof that the mortgage chain of title even got to the depositor (the assignor), without which the PSA is meaningless:

Even if there were an executed trust agreement with the required schedule, US Bank failed to furnish any evidence that the entity assigning the mortgage – Structured Asset Securities Corporation [the depositor] — ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale.

So Ibanez means that to foreclosure in Massachusetts, a securitization trust needs to prove:

(1) a complete and unbroken chain of title from origination to securitization trust
(2) an executed PSA
(3) a PSA loan schedule that unambiguously indicates that association of the defaulted mortgage loan with the PSA. Just having the ZIP code or city for the loan won’t suffice. (Lawyers: remember Raffles v. Wichelhaus, the Two Ships Peerless? This is also a Statute of Frauds issue–the banks lost on 1L contract issues!)

I don’t think this is a big victory for the securitization industry–I don’t know of anyone who argues that an executed PSA with sufficiently detailed schedules could not suffice to transfer a mortgage. That’s never been controversial. The real problem is that the schedules often can’t be found or aren’t sufficiently specific. In other words, deal design was fine, deal execution was terrible. Important point to note, however: the SJC did not say that an executed PSA plus valid schedules was sufficient for a transfer; the parties did not raise and the SJC did not address the question of whether there might be additional requirements, like those imposed by the PSA itself.

Now, the SJC did note that a “confirmatory assignment” could be valid, but (and this is s a HUGE but), it:

cannot confirm an assignment that was not validly made earlier or backdate an assignment being made for the first time. Where there is no prior valid assignment, a subsequent assignment by the mortgage holder to the note holder is not a confirmatory assignment because there is no earlier written assignment to confirm.”

In other words, a confirmatory assignment doesn’t get you anything unless you can show an original assignment. I’m afraid that the industry’s focus on the confirmatory assignment language just raises the possibility of fraudulent “confirmatory” assignments, much like the backdated assignments that emerged in the robosigning depositions.

So what does this mean? There’s still a valid mortgage and valid note. So in theory someone can enforce the mortgage and note. But no one can figure out who owns them. There were problems farther upstream in the chain of title in Ibanez (3 non-identical “true original copies” of the mortgage!) that the SJC declined to address because it wasn’t necessary for the outcome of the case. But even without those problems, I’m doubtful that these mortgages will ever be enforced. Actually going back and correcting the paperwork would be hard, neither the trustee nor the servicer has any incentive to do so, and it’s not clear that they can do so legally. Ibanez did not address any of the trust law issues revolving around securitization, but there might be problems assigning defaulted mortgages into REMIC trusts that specifically prohibit the acceptance of defaulted mortgages. Probably not worthwhile risking the REMIC status to try and fix bad paperwork (or at least that’s what I’d advise a trustee). I’m very curious to see how the trusts involved in this case account for the mortgages now.

The Street seemed heartened by a Maine Supreme Judicial Court decision that came out on FridayHarp v. JPM Chase. If they read the damn case, they wouldn’t put any stock in it.

In Harp, a pro se defendant took JPM all the way to the state supreme court. That alone should make investors nervous–there’s going to be a lot of delay from litigation. Harp also didn’t involve a securitized loan. But the critical difference between Harp and Ibanez is that Harp did not involve issues about the validity of chain of title. It was about the timing of the chain of title. Ibanez was about chain of title validity. In Harp JPM commenced a foreclosure and was subsequently assigned a loan. It then brought a summary judgment motion and prevailed. The Maine SJC stated that the foreclosure was improperly commenced, but it ruled for JPM on straightforward grounds: JPM had standing at the time it moved (and was granted) summary judgment. Given the procedural posture of the case, standing at the time of summary judgment, rather than at the commencement of the foreclosure was what mattered, and there was no prejudice to the defendant by the assignment occurring after the foreclosure action was brought, because the defendant had an opportunity to litigate against the real party in interest before judgment was rendered. The Maine Supreme Judicial Court also indicated that it might not be so charitable with improperly foreclosing lenders that were not in the future; JPM benefitted from the lack of clear law on the subject. In short, Harp says that if the title defects are cured before the foreclosure is completed, it’s ok. There’s a very limited cure possibility under Harp, which means that the law is basically what it was before: if you can’t show title, you can’t complete the foreclosure.

What about MERS?

The Ibanez mortgages didn’t involve MERS. MERS was created in part to fix the problem of unrecorded assignments gumming up foreclosures in the early 1990s (and also to avoid payment of local real estate recording fees). In theory, MERS should help, as it should provide a chain of title for the mortgages. Leaving aside the unresolved concerns about whether MERS recordings are valid and for what purposes, MERS only helps to the extent it’s accurate. And that’s a problem because MERS has lots of inaccuracies in the system. MERS does not always report the proper name of loan owners (e.g., “Bank of America,” instead of “Bank of America 2006-1 RMBS Trust”), and I’ve seen lots of cases where the info in the MERS system doesn’t remotely match with the name of either the servicer or the trust bringing the foreclosure. That might be because the mortgage was transferred out of the MERS system, but there’s still an outstanding record in the MERS system, which actually clouds the title. I’m guessing that on balance MERS should help on mortgage title issues, but it’s not a cure-all. And it is critical to note that MERS does nothing for chain of title issues involving notes.

Which brings me to a critical point: Ibanez and Harp involve mortgage chain of title issues, not note chain of title issues. There are plenty of problems with mortgage chain of title. But the note chain of title issues, which relate to trust law questions, are just as, if not more serious. We don’t have any legal rulings on the note chain of title issues. But even the rosiest reading of Ibanez cannot provide any comfort on note chain of title concerns.

So who loses here? In theory, these loans should be put-back to the seller. Will that happen? I’m skeptical. If not, that means that investors will be eating the loss. This case also means that foreclosures in MA (and probably elsewhere) will be harder, which means more delay, which again hurts investors because there will be more servicing advances to be repaid off the top. The servicer and the trustee aren’t necessarily getting off scot free, though. They might get hit with Fair Debt Collection Practices Act and Fair Credit Reporting Act suits from the homeowners (plus anything else a creative lawyer can scrape together). And mortgage insurers might start using this case as an excuse for denying coverage. REO purchasers and title insurers should be feeling a little nervous now, although I doubt that anyone who bought REO before Ibanez will get tossed out of their house if they are living in it. Going forward, though, I don’t think there’s a such thing as a good faith purchaser of REO in MA.

You can’t believe everything you read. Some of the materials coming out of the financial services sector are simply wrong. Three examples:

(1) JPMorgan Chase put out an analyst report this morning claiming the Massachusetts has not adopted the UCC. This is sourced to calls with two law firms. I sure hope JPM didn’t pay for that advice and that it didn’t come from anyone I know. It’s flat out wrong. Massachusetts has adopted the uniform version of Revised Article 9 of the UCC and a non-uniform version of Revised Article 1 of the UCC, but it has adopted the relevant language in Revised Article 1. There’s not a material divergence in the UCC here.
(2) One of my favorite MBS analysts (whom I will not name), put out a report this morning that stated that Ibanez said assignments in blank are fine. Wrong. It said that they are not and never have been valid in Massachusetts:

[In the banks’] reply briefs they conceded that the assignments in blank did not constitute a lawful assignment of the mortgages. Their concession is appropriate. We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment.”

A similar line is coming out of ASF. Courtesy of the American Banker:

Perplexingly, the American Securitization Forum issued a press release hailing the court’s ruling as upholding the validity of assignments in blank. A spokesman for the organization could not be reached to explain its interpretation.

ASF’s credibility seems to really be crumbling here. It’s one thing to disagree with the Massachusetts SJC. It’s another thing to persist in blatant misstatements of black letter law.

(3) Wells and US Bank, the trustees in the Ibanez case, immediately put out statements that they had no liability. Really? I’m not so sure. Trustees certainly have very broad exculpation and very narrow duties. But an inability to produce deal documents strikes me as such a critical error that it might not be covered. Do they really want to litigate a case where the facts make them look like such buffoons? Do they really want daylight shed on the details of their operations? Indeed, absent an executed PSA, I don’t think the trustees have any proof of exculpation. They might be acting, unwittingly, as common law trustees and thus general fiduciaries. I think they’ll settle quickly and quietly with any investors who sue.
Finally, what are the ratings agencies going to do?

It seems to me that any trust with Massachusetts loans that doesn’t have a publicly filed, executed PSA with a reviewable loan schedule should be on a downgrade watch. Very few publicly filed PSAs are executed and even fewer have publicly filed loan schedules. That doesn’t mean they don’t exist, but somewhere off-line, but if I ran a rating agency, I’d want trustees to show me that they’ve got those papers on at least a sample of deals. Of course should and would are quite different–the ratings agencies, like the regulators, are refusing to take the securitization fail issue as seriously as they should (and I understand that it is a complex legal issue), but I think they ignore it at their (and our) peril

 

Holder or PETE?

You can prove your point thus rebutting the legal presumptions that attach to facially valid paper by starting at the top of the paper trail, the bottom or anywhere in between. You won’t find a single transaction in which money exchanged hands. That means whoever transferred this “valuable” note received no payment. The transportation of a note that never should have been signed in the first place is almost irrelevant — except as to the issue of delivery which in turn goes to the issue of possession. Absent some purchase of the “loan”, such a PETE or holder may not enforce.

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

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See http://4closurefraud.org/2016/06/14/north-carolina-court-of-appeals-u-s-bank-n-a-v-pinkney-a-party-seeking-foreclosure-must-establish-holder-status-of-note/

Ever so slowly and carefully, with the dread of dismantling the entire financial system, the courts are looking more closely at what the banks and servicers are doing in foreclosures. In this case US Bank says in its foreclosure complaint that it is the holder of the note and then argued that it was either the holder or the possessor with rights to enforce. What’s the difference?

A possessor is someone who physically has possession of the original note. You might liken this to a courier who is entrusted with picking up the note from one place and carrying it to another place. The courier cannot, as some have claimed, enforce the note because it merely possesses the note. In order to be a possessor with rights to enforce (PETE) it must (1) have the actual original and not a mechanical reproduction of it, (2) plead that it is a PETE and (3) prove that it has the right to enforce.

Proving the right to enforce was simple before the current era. The creditor executes the necessary paperwork and comes into court if necessary to verify that it has given the possessor the right to enforce the note. What happens to the money after the possessor gets it and what happens to the Judgment (it could be assigned) afterwards is nobody’s business. But the banks have steadfastly insisted that they should not be required to produce or even identify the creditor. That falls under the legal theory of “NUTS.” But it has been allowed in millions of foreclosures so far. A party comes into court and says I am here to enforce this “original note” on behalf of someone, but I can’t tell you who that is because it’s private.

I’ve tried a few things in courtroom in my 40 years of doing this but if I had ever tried to do that I think most judges would have literally thrown a book at me.

We are expected to presume that since the possessor has the original note it MUST have the the authority to enforce it. And THAT is where the trial judges and many appellate court have it wrong. In fact those courts have complicated the matter further by treating the possessor as a holder in due course who paid value for the note in good faith and without knowledge of the borrower’s defenses. This in the old days would have been sufficient to cause enforcement to issue even if the borrower/maker had meritorious defenses against the payee.

The court in this case looked at the complaint for foreclosure and presumed nothing except what was in the pleading. The pleading said the Plaintiff was a holder. There was no mention of being a holder, much less a holder in due course. Since there was no argument about whether the Plaintiff was a holder nor any assertion that such proof existed, the trial judge dismissed it and the bank foolishly appealed revealing its soft underbelly.

A holder is distinguished from a PETE and distinguished from a holder in due course. The banks revel in the fact that they were able to misuse the status of “holder” thus accomplishing their goal of foreclosure where in yesteryear, they would have kicked out of court probably with sanctions.

A holder must not only have possession, but also have an endorsement from the prior owner of the debt and note where the endorsement actually identifies the party receiving physical possession of the note or endorsed in blank which means it payable to the “bearer” — i.e., possessor — of the note. Thus the facts to be proven are expanded: (1) possession of an actual original (prove delivery) and (2) endorsement by an authorized signatory on behalf of a new possessor either in blank or to the new possessor. The difference between PETE and holder is that the right to enforce is right on the note. But if the endorsement is robosigned, which is to say fabricated and forged by an unauthorized person sitting in the back of LPS or a law office, the endorsement is a nullity (it is void).

If there is no objection to the authenticity of the note (i.e., whether the note is the actual original) and no objection as to whether it was properly endorsed, then the only other question is whether the party for whom the endorsement was made was the actual owner of the debt and note. And there’s the rub again.

A party comes into court and says I have the original note right here and it has been endorsed in blank so I can enforce it. What the banks never say because they don’t like jail cells is that the person who executed the endorsement was authorized and did so on behalf of a party who did own the debt and note at the time of the endorsement. They don’t say that because it isn’t true. The endorser is either MERS or some other conduit or intermediary who never had any interest in the subject debt, note or mortgage. And when the borrower tries to drill down in discovery on the truth of whether the prior endorser/possessor actually had possession or actually had the right to enforce or actually owned the debt or note, the banks run to the presumptions as if they were at trial. The problem is that trial judges have been buying that strategy for 10 years. Thus the homeowner is hit with the idea that it doesn’t matter whether any of this is real, it is still happening.

This also is something banks assiduously avoid since they are essentially throwing layers of fictitious ownership at the Judge such that the Judge assumes that it is not credible to assume that all the signatures, endorsements and assignments are void when issued by so many upstanding members of the community. And THAT is why discovery is so important because unless you are extraordinarily gifted at cross examination, the “robo-witness” is not likely to blurt out that he has no idea what happened or who owns it. If you assume nothing and deny everything and you aggressively pursue discovery, you are much more likely to come out on top.

As long as you go down the rabbit hole that the banks have prepared for you, the focus will be on the paper trail which they have created, recreated, fabricated and forged. BUT if you pursue discovery along the money trail you will find that all of the paper was signed by parties who never had a penny in the deal and probably never received delivery of the “loan” documents. That means that whoever started off the paper trail was not party of the money trail — i.e., they were never involved in any actual transaction relating to the subject loan.

You can prove your point thus rebutting the legal presumptions that attach to facially valid paper by starting at the top of the paper trail, the bottom or anywhere in between. You won’t find a single transaction in which money exchanged hands. That means whoever transferred this “valuable” note received no payment. Hence there was no purchase of the debt or note or mortgage. The transportation of a note that never should have been signed in the first place is almost irrelevant — except as to the issue of delivery which in turn goes to the issue of possession. Absent some purchase of the “loan”, such a PETE or holder may not enforce. Who would do that unless they already knew that they were entitled to nothing except fees?

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Discovery: Your BlackKnight in Shining Armor?

http://www.bkfs.com/RealEC/DivisionInformation/SettlementAgents/ClosingInsightSettlementAgents/Pages/default.aspx

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

Maybe it is time to drill down a little deeper into ways to obtain Discovery. The same company that brought us the DOCX line of “original” fabricated documents has created a software platform used by the mega banks to streamline closings. Closing Insight and its predecessors (I think Chase uses its own version of this platform) could provide information on the real facts of each “closing”. Discovery requests should be directed to access the information on the platform which is now owned and operated by LPS/BlackKnight.

 
Note that most loans over the mortgage meltdown period that are still in existence were refi’s and not original loans. Most lawyers and judges presume that the closing paid off the old loan. But this is often not the case. Since the party on the prior “mortgage” and “note” was simply a conduit, they would not have received a penny from the new closing with the “borrower.” The reason for this is simple: they never had a dime of their own money in the loan nor were they in a contractual relationship with anyone who did have money in the deal. Hence they would not have received any money since the source of both deals was a dynamic dark pool of money where “trust” money was commingled in a way that made it impossible or nearly impossible to trace any specific investor to any specific loan deal.

 
Add all that up and you get (1) a satisfaction of mortgage from a non-mortgagee and (2) no consideration for the signing of the loan documents and (3) withholding that information from the “borrower” who in fact borrowed no money from the “refinance” of his prior “loan.” This means to me that the loan documents should never have been signed or delivered much less recorded. It also means that the current loan documents (and possibly the previous loan documents) are VOID and thus subject to an action for a Quiet Title action.

 
None of this means that there is not some liability for repayment of the party(ies) who DID have money in the deal in which they could plead to get repayment of their money. But two things are true: (1) the statute of limitations has probably run on most of those liabilities and (2) the injured party would need to know they are injured. Since the borrower clearly does not know the identity of the injured party, the borrower cannot be said to be guilty of creating a situation where the debt is diminished or nullified. And since the injured party(ies) don’t even know they are injured, much less how or in relation to what deal, they are prevented from stepping forward to claim their due.

 
Once upon a time such schemes would be cleared up by courts very quickly. Back then they understood that foreclosure was a drastic remedy that should not be taken lightly. But today the erroneous presumption that the borrower received money (presumed even by the borrower) leads courts to bend and break laws, rules and regulations such that any claiming bank or servicer will win regardless of whether they are in fact a creditor and regardless of whether or not they have any actual authority to represent the other victims of this scheme — the investors.

 
PRACTICE NOTE: It is necessary to be very aggressive and very well prepared to argue for discovery on these closings. The Judge arrives with the assumption in mind that what happened back then is none of your business and already established. Potentially an affidavit from a forensic analyst or expert witness might assist in discovery litigation. The problem with waiting on the affidavit or declaration until trial is that the expert can only offer an opinion without corroboration. If discovery has been fought and won, the expert’s opinion will be nearly self-evident. If discovery has been fought and lost, it should provide very strong grounds for appeal.

Compelling Discovery that the Banks can’t Give You Without Admitting Wrongdoing

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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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The thrust of litigation in foreclosure issues needs to be discovery. Discovery proceedings are the ONLY place where the scope of inquiry is beyond what is allowed in cross examination of the “corporate representative” of the servicer (usually there is no corporate representative of the REMIC Trust).
With the rules opened up, there is a huge opportunity to end cases far before the bank seeks in stretching out the time between alleged default and foreclosure sale. This article and the ruling within it deserves intense study.

With respect to the financial information, the court analyzed the motion to compel under the new proportionality standards set for in Fed.R.Civ.P. 26: The party seeking discovery, to prevail on a motion to compel or resist a motion for protective order, may well need to make its own showing of many or all of the proportionality factors, including the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, and the importance of the discovery in resolving the issues, in opposition to the resisting party’s showing. ..

And the party seeking discovery is required to comply with Rule 26(b)(1)’s proportionality limits on discovery requests; is subject to Rule 26(g)(1)’s requirement to certify “that to the best of the person’s knowledge, information, and belief formed after a reasonable inquiry: … (B) with respect to a discovery request…, it is: (i) consistent with these rules and warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law, or for establishing new law; (ii) not interposed for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; and (iii) neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action”; and faces Rule 26(g)(3) sanctions “[i]f a certification violates this rule without substantial justification.” FED. R. CIV. P. 26(g)(1)(B), 26(g)(3); see generally Heller v. City of Dallas, 303 F.R.D. 466, 475-77, 493¬95 (N.D. Tex. 2014).

New Federal Rules Create New Discovery Environment

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:
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  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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Not much time for discussion although this probably be discussed on radio show.

The issue is that most judges in Federal State court were ruling on discovery (interrogatories, requests to produce, request for admissions etc) from the perceptual standpoint of whether the requested information would itself be admissible at trial. This was always wrong but judges, particularly in foreclosure litigation, made the error repeatedly. It is probably an excellent point on appeal when this has happened.

The new federal rules, disabuse the judges of their notions that they can do that in order to “speed things along.” The new rules assume correctly that if the discovery is allowed, then the relative positions of the parties will become clearer and more settlements or dismissals will occur. This is just like the Jesinoski decision that disabused judges of the notion that they could over-ride the express wording of the statute and make willy-nilly insertions of language and conditions in TILA rescission. This is important. The new rules have been effective since December 1, 2015.

The standards for discovery have long been litigated. These rules set forth the real standards and will heavily favor homeowners in Federal court and will probably produce a substantial effect on State court because most states already have a body of common law decisions that already say the same thing.

The one point I would make here is that it might be better, for effect, to submit a detailed memorandum in support of your discovery, with citations to case law. Once you do it in one case you pretty much have it for all cases. I would suggest citing to the Federal Rules as well state rules.

Bottom Line: This should make it easier to ask for the evidence of the money trail that supposedly is underlying all that paper the banks are using. My experience is that as soon as the order is entered telling them to open their books, even in a limited way, the case settles under seal of confidentiality. There are reports of some huge settlements that I cannot confirm under exactly those circumstances. Other cases, in which I was a consultant, I actually have the results of settlements but I can’t share them because the client signed a confidentiality agreement.

So try it out for yourself, lawyers, and see what happens. If, as we already know, we have a path to show that the money trail and the paper trail diverged, then we have fabricated false instruments being used in court and used for recording in county records. And the argument that the identity of the real creditor is “privileged” will be revealed as obfuscation of false and fraudulent facts being represented to the courts. Federal law requires this disclosure and the continued failure to give it represents a continuing failure to comply with TILA disclosure and could mean that the loans are still not consummated.

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see http://www.lexology.com/library/detail.aspx?g=d34b6e33-fae9-4568-9ccd-355150323775

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“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within the scope of discovery need not be admissible in evidence to be discoverable.”

Chase Admits Violations of Consent Order

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

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see http://dtc-systems.net/2015/03/jpmorgan-chase-admits-failure-comply-april-13-2011-independent-foreclosure-review-consent-order/#more-2157

see also 27_page_settlement2

We already knew that the servicers, banks and trustees were violating the settlements and consent orders that were entered against them for filing fraudulent papers in fraudulent foreclosures. Now the question is what to do about it.

With respect to the 2011 consent orders Chase admitted the wrongdoing and the settlement was supposed to compensate and give notice to borrowers who had been defrauded.

In the proposed settlement, Chase acknowledges that it filed in bankruptcy courts around the country more than 50,000 payment change notices that were improperly signed, under penalty of perjury, by persons who had not reviewed the accuracy of the notices.  More than 25,000 notices were signed in the names of former employees or of employees who had nothing to do with reviewing the accuracy of the filings.  The rest of the notices were signed by individuals employed by a third party vendor on matters unrelated to checking the accuracy of the filings.

The first question that SHOULD come to mind is WHY a multi trillion dollar bank would need or want to engage in such practices? After all they were committing perjury by their own admission. The second question is why borrowers who were hurt by this behavior have not used the admissions to win their foreclosure cases? And the third question is what is the effect of these admissions?

The answer lies in the lies. The plain truth is, based upon my direct knowledge in several cases, that Chase did not own the loans, the Trusts therefore could not have purchased the loans and that not only Chase was lying but so was US Bank when it was named in foreclosure actions as Trustee for a Trust that plainly did not purchase the loans nor was any of the paperwork showing a transfer authentic. The underlying transaction simply isn’t there and Chase (and other banks) successfully hoodwinked courts into applying legal presumptions that were plainly contrary to the facts.

I think the admission could be used as an argument that the banks are not entitled to the legal presumptions that normally apply because of the wrongful behavior that they have admitted. If they want to show that the Trust bought the loan then they must prove it and not just produce a self-serving piece of paper that says it happened. we know it didn’t happen. Why should the burden of proof fall on a homeowner with limited resources?

The bank, with virtually unlimited resources and exclusive access to all the information, should be able to show the transaction date, amount and proof of payment (wire transfer receipt, wire transfer instructions, canceled check etc.) for the loans that were allegedly acquired and/or conveyed by the assignor and the assignee. With obviously unclean hands, the banks should not be rewarded for their subterfuge. The bank should not be allowed to claim any presumptions, legal or otherwise, that are normally applied to documents or commercial paper. If they really have a case, let them prove it — or at least respond to discovery without objection on various spurious grounds.

When I represented banks if someone had said that we didn’t own the loan or never funded the loan I would have stopped them dead with proof of the actual movement of money and that would have ended the discussion. Instead we are splitting hairs in court with the banks saying they don’t want to produce actual proof. All they need, according to them, is some self-serving piece of fabricated paper with a forged signature containing perjurious statements and the court is bound to accept such paper and apply legal presumptions that what is written on the paper is true. They have the temerity to argue that when we all know that the paper is inherently untrustworthy and not credible, given their admissions and continuous behavior.

I think discovery directed at compliance with the settlements and consent orders ought to be pressed against the banks, on the grounds that they could not have fulfilled all conditions precedent because among the conditions precedent are the requirements set forth in the settlements and consent orders. At trial I think the argument should be made, using the settlements and consent orders as exhibits, with Judicial notice, that the banks are not entitled to the presumptions and that they must prove every fact they would otherwise have the court “presume” or “assume.”

Comments invited

see also Katie Porter on servicing

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