Federal and State Judges Think they Can Overrule the US Supreme Court

Jeff Barnes has put into words what I have been thinking about for several weeks. Barnes is a lawyer who has concentrated on foreclosure defense and has won many cases across the country. He is a good lawyer, which means that he understands how to get traction. So when he complains about Judges, people ought to sit up and take notice.

I think he has hit the nail on the head:

Posted on October 22, 2015

October 22, 2015

In recent months, we have been advised by homeowners in different states that certain Judges in those states have taken the position that decisions by either the Supreme Court of that state or decisions of the United States Supreme Court are not binding on them. Taking such a position violates the Judge’s duties as an officer of the Court, erodes confidence in the judiciary, and renders the public more suspicious of the court system than it already is.

A Judge is duty-bound to follow the “law of the land” whether they agree with it or not. A Judge cannot impose his or her own personal views as to whether the state or US Supreme Court made the correct decision on an issue: when a state Supreme Court or the US Supreme Court decides a specific legal issue, the law is established and Judges must follow it. State supreme courts (other than as so denominated in New York, as the “Supreme Court” is a lower level court in NY) and the US Supreme Court are the highest appellate courts, and their decisions establish “the law of the land”: a state Supreme Court decision establishes the law for that State, while the US Supreme Court establishes the law for the country.

In our experience, the overwhelming majority of Judges are fair, honest, considerate of the position of both sides, and take the law into account when rendering their decisions. The examples below are isolated, but the fact that two such examples have been recently brought to our attention is disturbing.

One of the cases which we were advised of concerned the use of Mr. Barnes’ successful appeal of the MERS issues in the Supreme Court of Montana, which by its decision established that MERS was not the “beneficiary” of a Deed of Trust despite claiming to be so. Although this decision was issued two years ago, the homeowner advised that when that decision was presented to a local Montana county Judge, the Judge took the position that he was not bound by the Supreme Court of Montana’s decision.

Another homeowner advised us that in a prior foreclosure-related hearing before a state court Judge that the Judge told the homeowner that he was not bound by decisions of the United States Supreme Court.

This contempt and disrespect for state Supreme Courts and the US Supreme Court is beyond disconcerting.  There is no reason why homeowners facing foreclosure should be treated adversely when a decision of a state or the US Supreme Court is in favor of them and presented to the Judge. “And Justice for All” means just that: it does not mean “except no justice for homeowners in foreclosure.”

Jeff Barnes, Esq.

see http://foreclosuredefensenationwide.com/?p=612

We see it in many cases involving rescission. It is isn’t that the Judge doesn’t understand. As pointed out by Justice Scalia in the Jesinoski decision the wording of the Federal statute on TILA Rescission could not be more clear and could not be less susceptible to judicial construction. In that unanimous decision of the US Supreme Court in January, 2015, the Court said that like it or not, notice of rescission is effective by operation of law when mailed and nothing else is required to make it effective. The court specifically said that common law rescission is different than the statutory rescission in the Truth in Lending Act.

In fact, the court was perplexed as to how or why any judge would have found otherwise. Thousands of Judges in hundreds of thousands of cases had refused to apply the plain wording of the TILA statute 15 USC 1635. Then came Jesinoski in which the Supreme court said there is no distinction between disputed and undisputed rescissions — they are both effective upon mailing by operation of law. That became the law of the land.

And yet, trial judges and even appellate court are again leaning toward NOT upholding the law and NOT forcing the banks to comply with statute. Many more are “reserving ruling” denying the homeowner remedies that are readily available through TILA Rescission. These courts don’t like TILA rescission. They don’t want to punish the banks for bad behavior. But that is what Congress wanted when they passed TILA 50 years ago.

As many Judges have said in their own written findings and opinions — if you don’t like the law then change it; don’t come to a court of law and expect a judge to change the law. Whether this will lead to some sort of discipline for Judges or simply make them vulnerable to being removed from the bench is unknown. What I do know is that when ordinary people come to realize that the foreclosure crisis could end now, thus stimulating our limping economy, they will likely vote accordingly.

Any Judge who refuses to follow the law as it is written and passed by a legislative body and signed into law by the executive branch (the {President or the Governor) has no right to be on the bench and should resign if his “moral compass” makes following the law so onerous that he or she cannot uphold the laws. In the absence of resignation, then momentum will likely rise and push the agenda of those people who want such judges removed involuntarily. Those Judges are acting against the most basic thrust of our society — that we are a nation of laws and not of men. We have a very well defined process of passing laws and that does not include any one person (on or off the bench) deciding on their own the way the law should read.

Patricia Rodriguez Tonight on the Neil Garfield Show

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Patricia Rodriguez returns tonight to talk about her Seminar on October 31, 2015.. Patricia is a good lawyer and particularly good at organizing cases. She will be talking about Foreclosure Defense, Rescission, Intakes of Clients, and of course the latest in what is happening on the ground in Southern California. One of her strong points is organization — something that most lawyers are not so great at doing. Her seminar will focus on the bricks and mortar of setting up a case for litigation or modification.

Compelling Discovery and Explaining Why You want Answers

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I have always said that these cases will be won in discovery. Discovery must of course be preceded by proper pleading. Typically borrowers ask all the right questions and get no answers. They are met with objections that are, to say the least, disingenuous. The motion to compel better answers or to overrule the objections of the party seeking foreclosure is the real battle ground, not the trial. And speaking from experience, just noticing the objections for hearing or using a brief template and then  relying on oral argument will not, in most cases, cut to the quick.  The motions and hearings aimed at forcing the opposition to answer fairly simple questions (yes or no responses are best) should be accompanied with a brief that states just why the question was relevant, and why you need the answers from the opposition and why you can’t get it any other way. This involves educating the judge as to the fundamentals of your position, your defenses and your claims as the backdrop for why the discovery requests you filed should be compelled.

Practically every case in which there was a major settlement under seal of confidentiality involves an order from a judge wherein the servicer or bank was required to answer the real questions about the actual money trail and the accounting and management of the money from soup to nuts. So if a judge says that the borrower gets all the information about the loan starting with the source of funding at the alleged time of origination and the judge says that the borrower is entitled to know where the borrower’s money was sent after being received by a servicer, and the judge says the borrower can know what other payments were made on account of the subject loan, the case is ordinarily settled in a matter of hours.

The only money trail is the one starting with investors who thought they were buying mortgage backed securities, the proceeds of which sale would go to a REMIC trust, but were instead diverted to the coffers of the investment bank who created and sold those mortgage backed securities. And it ends with a “remote” vehicle sending money to a clueless closing agent who assumes that the money came from the originator. BECAUSE THE MONEY DIDN’T COME FROM THE ORIGINATOR, THERE IS NO MONEY TRAIL AFTER THE ALLEGED “CLOSING.” Who would pay an originator for a loan they know the originator never funded? Who would pay an assignor when they know the assignor never paid any money to acquire the loan, debt, note or mortgage? Answer nobody. And that is why the servicers and banks cannot open their books up — the entire scheme is an illusion.

What follows is an abstract from my notes on one such case: (The trial was bifurcated in time)

What we are seeing here is a master at obfuscation. In one case I have in litigation, Wells Fargo wants to assert that it can foreclose on the mortgage in its own name. It has alleged in the complaint that it is the owner of the loan and then testified that it is not the owner but rather the servicer. It has testified that Freddie Mac was the investor from the start but it has produced an assignment from a nonexistent entity in which Wells Fargo was the assignee.

Nobody testified that they were in court on behalf of any investor and the only thing we have is the bare assertion from the witness stand that Freddie Mac is the investor from the start. And yet during this whole affair, Wells posed as the lender, owner and then servicer of the loan without any authority to do so. And they posed as a party who could foreclose on the borrower without any evidence and probably without any knowledge as to what was showing on the books and records of whoever actually did the funding of this loan (or if the funding was in the amount claimed at closing) or whoever is claimed to be the owner of the loan.

A Motion to Compel should be filed citing their response to Yes or No questions — objection vague and ambiguous etc.

The point should be made that the defendants are the sole source of records, data and witnesses by which the Plaintiff’s case can be proven as to liability, damages and punitive damages. We have limited discovery to asking about their procedures as they relate to this particular alleged loan.

The issue at hand is that our position is that they knew that the alleged originator could not have been the lender because they did not exist, did not have bank account etc. And they have admitted that the named successor was not the lender either and  admit that the foreclosing party did not buy the loan, the debt, the note or the mortgage.. Not until the first part of trial did the representative from Wells state that contrary to the pleading they were acting as servicer not the creditor or owner of the loan. And they stated that the real lender was Freddie mac “from the start.”

So we are asking how it happened that Wells entered the picture at all as servicer or representative for any actual creditor — the only indication we have that some creditor exists is the surprise testimony from the designated representative of Wells in which he admitted that the named originator was not the lender, could not explain how such an “originator” was put on the note and mortgage and that Wells Fargo was not the lender or owner of the loan either. But we have no documentary evidence or data or witness from them explaining why they proceeded to assert any right to collect any money much less enforce a loan of money that came from somewhere but we don’t know from where.

The corporate representative of Wells says Freddie Mac was the “investor from the start.” But we have the direct refusal of Wells Fargo to produce a servicing, agency or representative agreement that applies to this loan.

We know that Freddie Mac was never a lender in the sense that they never originated any loans. So now we are asking for how they did get involved. The charter of Freddie Mac allows them to be two things: (1) guarantor and (2) Master trustee for REMIC Trusts. Freddie can buy loans with either cash or mortgage backed bonds issued by the REMIC Trust if such bonds were issued by one or more Trusts to Freddie Mac.

But all of that still leaves the question of where did the money come from — the money that was used to give to the borrower? It appears that the money came from investors who bought mortgage backed securities from REMIC Trust if Freddie Mac was really involved (A fact that is unknown at this time) or that the money came from investors who bought mortgage backed securities from a private label REMIC trust that is not registered with the SEC. But the money came from somewhere and we want to know the identity of the source because it will tell us who was really involved. And it is only in the context of knowing who was really involved that we assess the behavior of Wells Fargo and why they did what they did.

We ask them about their risk of loss and they respond by saying that they deny that they would not incur damages if the borrower defaults on the loan. Since they have said they didn’t provide funding and that they were not the investor (they say Freddie Mac was the investor (from the start), and they have no servicing agreement or at least not one they are willing to produce, then exactly how would they suffer damages on “default” on the loan?

They should be compelled to answer our discovery requests in a more forthright manner. If they are answering truthfully, which we must assume they are, for the moment, then that could only mean that there is a deal somewhere in which they have some potential exposure and which has never been disclosed. That exposure has nothing to do with the debt, note or mortgage that was originated in the name of the alleged originator. And THAT goes to the essence of their motivation to lie to the borrower and to interfere with her ability to sell the property and pay off the loan.

The exposure relates to the fact that without a foreclosure judgment and subsequent sale of the property, they lose their ability to recover servicer advances. Servicer advances are the exact opposite of the basis for a foreclosure action. In a foreclosure action it is based upon the fact that the creditor experienced a default — i.e., the creditor did not receive payments. With servicer advances, the investor gets the money regardless of whether or not the borrower pays. They are volunteer payments because the borrower is not in privity with the advancer of payments to the creditor and in fact is completely unaware of the fact that such payments are being made.

It also hints at another proposition: that some third party would hold them responsible unless they got a foreclosure judgment. We are left with equivocating answers that continue the pattern of obscurity as to the nature of the origination of the loan and the ownership or authority to represent anything. So it might just be that they they could not give a payoff figure and that their motivation was obtain the foreclosure judgment at all costs, even if they had to lie and dodge to get it. It would also explain why they lured her into the default. Certainly their turnover of SOME of the audio files which did not include the call in which she was told she needed to be 90 days behind (contrary to HAMP) in order to get some sort of relief.

And there is another issue that comes up when you consider borrower’s testimony that she did receive a forbearance 2 years earlier. Did they have authority to do that? What changed, if anything? Did some other party intervene? Was there a change in internal Wells Fargo policy?

All these things could be answered if they would be more forthright in their answers and if they reconciled the obvious discrepancy between not being the owner of the loan, but alleging that they were, not being the servicer or unwilling to state the source of their authority to represent another party, and testifying that they were the servicer, and testifying about Freddie Mac involvement without any records showing that involvement (indicating that the witness did NOT have access to the entire file). This also goes to the issue of whether there was any default at all if there is a PSA for a trust that claims ownership and if that PSA shows that through servicer advances or other payments means the real creditors — the investors — were NOT showing any default at all.

The point of this diatribe is that this case highlights the fact that in virtually all Wells Fargo cases (and with other banks), the real party seeking a foreclosure judgment is the servicer (since they are the only ones showing up at trial anyway), but that whatever the servicer’s interest is or whatever their risk of loss is, it relates to a claim either not against the borrower or not based upon the mortgage which is either void or owned by someone else.

If the self-proclaimed servicer is saying they will suffer damages upon default and they admit they have no ownership of the loan nor did they fund the original loan transaction, then any recovery would be based upon a cause of action other than a foreclosure of a mortgage where they are neither the mortgagee, successor or creditor. Their claim if caused by volunteer payments (servicer advances) to the creditors, it is based upon unjust enrichment not breach of the contractual duty to pay the loan.

Remember that the witness testified to being the corporate representative of Wells Fargo as servicer and not to being a corporate representative of the “investor.” And the witness testified that the records of the investor were never available to him, so how can he testify that the creditor has experienced a default? Since the borrower never had any privity with Wells Fargo as servicer or lender how else could they be exposed to a loss? And more importantly, why are they suing the borrower for collection on the note and enforcement of the mortgage when the actual creditor has not experienced any default?

THAT is the draft of the memo or brief that should accompany the Motion to Compel answers to simple questions. It is almost comical that their answer to a yes or no question was an objection that it was too broad, ambiguous etc. What IT platform are you using? Answer: None of your business. But it is written as an objection to the form or content to the question. That is how the servicers stonewall borrowers and that is how borrowers are prevented from ever knowing the truth about the origination or management of their loan.

Articles of Deception: PSA and Reynaldo Reyes Affidavit for Deutsch Bank as Trustee


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


Hat tip to Carol Molloy who sent me the affidavit

See Reynaldo Reyes Affidavit New Jersey Union County 2010 CCF11162014


Reynaldo Reyes, AVP of Deutsch Bank said to a borrower, in a taped interview, that the whole scheme was “counter-intuitive.” In plain language that means that nothing is what it appears to be. And THAT in turn means that disclosures” were deceptive or “counter-intuitive.” And THAT means that the disclosures at closing were also “counter-intuitive” or deceptive. Reyes in a sworn affidavit drafted many times and edited by various top level attorneys for the banks has submitted an affidavit on behalf of Deutsch Bank but which will be used by Banks to try to legitimize their deceptive tactics. Again, to put it simply, they were lying to everyone — investors, borrowers, regulators, law enforcement, Congress, and the President.

Witness the following paragraph from Reyes’ affidavit. Here he says in the affidavit in Paragraph 1, that the Trustees serve the Trust. But then he takes it all back by saying that the Servicers perform all the functions of administering the loans — not on behalf of the Trustee, but rather on behalf of the Trust. THAT can only mean that the named Trustee, is not the Trustee. It means that the power of administering the Trust assets is with the servicers. Does that mean the servicers should be sued for wrongful foreclosures? Then why is the Trust named or the Trustee named?

So the beginning of the PSA, which designates a Trustee, is merely window dressing to give the impression that Deutsch Bank is the Trustee with all the powers of a Trustee, when in fact, the servicer is the one who performs most or all of the functions of a Trustee. But they do so giving the impression that they must go back to the Trustee or the “investor” when in fact they assert the power to do everything. In their circular reasoning, they could say to the court that they must get approval from the investor and then leave the court room. Then they speak for the investors, according to the servicers. So now they come back to the homeowner or homeowner’s counsel and say the application for modification or settlement has been declined. Whether that assertion turns out to be true after analysis in court is another story.

This is contrary to the position taken by U.S. Bank and Deutsch Bank and BONY Mellon in foreclosure cases where they sue for foreclosure in their own name as Trustee for the REMIC Trust. It also accounts for why they sometimes sue as Trustees for the certificate holders, and sometimes even get away with saying they are trustees only for the certificates delivered to the investors. This of course makes no sense, since they are neither holding nor asserting ownership over the certificates.

Paragraph 7: No entity services loans on behalf of the trustees. The trustees and the loan services that are appointed by the the PSA’s each perform their designated functions on behalf of the trusts. In other words, loan servicers to service mortgage loans that have been pooled and sold into a securitization trust are performing services on behalf of the trusts, not on behalf of the trustees.

Then we get to Paragraph 10 which admits that the Trustee has neither any accounts nor any information or business records of its own. According to this paragraph 10, the Trustee receives loan level data from the servicers “to facilitate certain payments to bondholders.” But wait here comes the language that takes all THAT away: “However, for a number of trusts” [unspecified, but probably all of them] “a party other than the Trustee handles those payments responsibilities.” And then the rest is taken away by his statement that “With respect to the Trusts for which the Trustees serve as a Trustee but not as securities administrators, the Trustee do not receive loan level data.”

Get it? Just like the PSA, Reyes’ affidavit says one thing and then takes it all away in the next breath. The fact is that in virtually no case is the Trustee the securities administrator. And that, Reyes, says means that the Trustee neither gets loan level data, nor does it make payments to the bondholders. “Other parties” perform those functions. Who? The servicer who is according to Reyes the party with the actual powers of the Trustee. So why is Deutsch claiming to be a Trustee.

The answer is very simple — MONEY. The sellers of mortgage bonds pay Deutsch to rent their name to underwriters to make it appear as though an independent fiduciary is handling the money, the purchase or origination of loans, and the enforcement or modification of loans. This is meant to deceive the investors into a false sense of complacency. The same is true for borrowers, although at this point “complacency” would hardly be the word.

Everyone believed the wording at the beginning of the PSA and practically nobody read the PSA from end to end to see that the beginning was sales material and the end was a hodgepodge of obfuscation to make it difficult if not impossible to determine the identity of the players or what they were doing. This analysis can certainly NOT be done without reference to the underlying transaction in which we see who actually sent money to originate the loans, from whom they received the money etc.

The fact is that that while most people think the Trusts acquired the loans by sale of the loans into the trust, the evidence shows that practically none of them were sold to the Trust. The only logical conclusion from the facts at hand is that the investors’ money was pooled in an entirely different scheme while hiding behind claims of securitization.

The investors money was used directly, without their knowledge or consent, to fund origination of loans like the toxic Pick a Pay, reverse amortization, payment increase cap (usually 7.5%) that results in what appears to be affordable payments, but also results in uncontrolled liability.

A $139,000 loan that I recently analyzed, indicates the eventual liability could be nearly $4 million — all at the end of 30 years of payments, resulting in an undisclosed hidden balloon payment in the 13th payment and every payment thereafter which thanks to the miracles of compounding interest and an adjustable rate that could go as high as over 12% APR process an obligation that looks affordable but is infinitely not affordable. The interest alone on the new principal (original balance + deferred interest on negative amortization loan) could exceed $24,000 per month on a $139,000 loan.

Then you get to paragraph 11: Here the affidavit produces more obfuscation by referring to the Master Servicer who might (or might not) be responsible for performing any duties. But in the PSA you see the ultimate authority for virtually everything lies with the Master Servicer, who also turns out to be the the underwriter and seller of mortgage bonds. And since we now know that the Trustee had neither trust accounts nor any control or responsibility for the accounts, THAT makes it impossible for the Trustee to have received any proceeds from the sale of bonds issued by the Trust.

Since a Trust cannot operate except through the Trustee by law (see New York law and the law of your state for more information) it is an inevitable conclusion that there were no accounts established for the Trust in the manner expected by the investors who bought the mortgage bonds. And since there was no money in the Trust, the Trust could not have originate or purchased any loan documents, regardless of whether or not there was in fact an underlying loan transaction at the base of the chain relied upon by these parties when they foreclose.

Then Reyes gets to the meat of why he submitted the affidavit. BONY Mellon did the same thing by a lawsuit and so have hundreds of investors, insurers, guarantors, holders of loss mitigation hedge contracts, whose cases have been quietly settled. Reyes states that “the Trustee would not be in the best position to address further inquiries by the Court concerning any possible ‘irregularity in the handling of foreclosure proceedings.’” So to put it simply, Reyes is disclaiming any role in foreclosures and trying to distance Deutsch bank from wrongful foreclosures [i.e. most or nearly all of them] despite its APPARENT AUTHORITY.

Examination of the PSA reveals deep within its pages, prohibitions and restrictions against either the Trustee or the bond purchasers (“trust beneficiaries”) from knowing or even inquiring about anything involving the business of the trust, which we already know never existed because the trust never received its IPO (bond sale) money. This is why servicers assert control over the settlement and modification process. This is why they say the investor declined the modification or settlement because they never contacted the investor or the trust or the Trustee.

The truth is that the servicers assert, in the final analysis, the right to speak for the investors even thought they have a patent CONFLICT OF INTEREST RESULTING FROM SERVICER ADVANCES. A true servicer would be required to mitigate the damages and minimize the losses. Servicers have no interest in doing that because they can make a ton of money for having advanced the principal and interest payment to the creditors from an account that contained the investors money and that would count, as stated in the PSA, as payment in full to the creditor — so the creditor could not declare a default against the servicer.

And THAT is why these foreclosures are pushed through, among other reasons, [avoiding workouts, modifications and settlements] to wit: the foreclosures proceed even though the creditors (investors) are being paid right through the date of foreclosure. The reason is the banks want to “recover” those “advances” (paid from money stolen from the investors) not from the borrower and not from the creditors, who have already been paid, but through a claim against the final liquidation of the property to a third party “innocent” purchaser. BY controlling the foreclosure process, the servicer gets paid a lot of money and protects the banks against claims for refunds and damages arising out of the improper loan practices, loan processing by the servicer, and wrongful foreclosures.

So far the servicers have fooled the courts into thinking that their claim to recover servicer advances is somehow secured. It isn’t. In order to do that the court would be required to issue a declaratory judgment specifying the breakup of the mortgage lien on a continual basis for each servicer advance or find that the total advanced by the servicer from the underwriter’s controlled slush fund, is subject to an equitable mortgage lien. Equitable liens are not accepted in virtually any court because ti would require the buyer of property to make exhaustive investigation into matters that a re not contained on the face of the note or mortgage.


You might want to get the court to take judicial notice of the affidavit and just to be on the safe side get a certified copy of it. You might want to file a motion for involuntary dismissal based upon the affidavit of Reyes who was THE person in charge of the trustee “program.” Think also about a subpoena for Reyes to appear at trial, if there is one.

Reyes is saying that only the servicer can enforce. And he is saying that when the servicer acts, it does so for trust NOT THE TRUSTEE. So the Trustee, according to him is not a proper party to bring the action. The inference corroborates what I have been saying all along. It is that the investors are the real parties in interest and the servicer is acting in a representative capacity — IF IT IS THE TRUSTEE NAMED IN THE TRUST INSTRUMENT (THE PSA).

Why You Need an Expert Witness and Why You Should be Aggressive in Discovery

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There are three central strategies that need to be pursued with vigor. The Banks have once again moved the goal posts because they are starting to lose cases with increasing frequency when confronted with the requirement that they actually prove their case with facts instead of presumptions. They are attacking the need for discovery, the need for an expert witness, and the need for foundation of fabricated documents by leveraging certain legal presumptions to achieve results that were never intended to be used to win a case that they would lose if they had to prove their case with actual facts from a witness who has personal knowledge.
Yet that is exactly what is happening. It happens almost automatically in non-judicial foreclosures and it happens most of the time in judicial states. “Legal presumptions” are being manipulated to win an unwinnable case. Those presumptions are for expedience and not to slant cases in favor of a litigant who is wrong.
In Discovery it is important to set a hearing on the blanket objections that are commonly filed by the Banks without any obligation on their part to set those objections for hearing. So it is up to the borrower to set the objections for hearings. Lawyers are finding that they must also file a motion to compel and that without a compelling memorandum of law supporting discovery or supporting the need for an expert witness, the banks will control the narrative by maintaining the impression that laws and presumptions about negotiable instruments are the only issues.For the Judge, the real issues are hidden from view, so you must reveal them. The latest iteration the the Bank tactics is the “Self-authenticating” document which is the subject of another article.
The central theme is always the same. The Banks can’t win on the actual facts, so they are relying upon and leveraging certain rules of evidence that allow certain documents to be admitted into evidence, where the contents of those documents are taken as true (despite the fact that they are barred by the hearsay rule) and the Judges are treating the contents as true over the objection of counsel for the borrower. Like Judicial notice, such documents might be admissible for the limited purpose of acknowledging their existence, but their contents are very much in issue.
However, many judges disregard the notion that the contents are at issue unless the borrower produces compelling evidence that the facts in the document are false. In my opinion, it is wrong to require a defendant who has no access to the actual facts — the money trail — to bear the burden of proof and doubly wrong when the borrower has asked for exactly that information through statutory, formal, informal and discovery requests only to be met with stonewalling.
My thought is that this is an opportunity to educate the judge — against what he or she wants to hear. It is an opportunity to get him to hear YOUR narrative twice. Iadvise lawyers to file a memorandum in opposition to objections and file a motion to compel to make your record. Present a credible argument for the need for the borrower to get information that either lies solely in the hands of theforecloser or in the hands of others who are co-venturers with theforecloser.The need for an expert is evident from the section of the PSA which is entitled “Definitions” which uses words, concepts, business processes, lending and practices that are outside of the statutory scheme for the transfer of loans. The same arguments exist for enforcing discovery. Attach a copy of the PSA Definitions section to your memo. Despite the current trend of the Banks toward introducing the PSA as an exhibit at trial, they continue to argue that the borrower has no standing to contest whether the procedures and restrictions of the PSA are relevant in a foreclosure case. Many judges agree. I believe they are wrong and that this is an evasion of the truth with the help of the Court.

They may seem unrelated but they are identical — only the other side has or does not have the actual evidence of the transactions that are presumed to exist by virtue of some document they are producing like an assignment, a mortgage, a note, or a notice. To the extent that they are responsive to discovery, the need for an expert diminishes or is reduced.

The plaintiff is alleging that a trust owns the mortgage and that various parties have authority to service, receive documents and pay for the the origination of acquisition of loans. It is only the PSA that establishes the right of the Plaintiff forecloser or beneficiary under a deed of trust to pursue foreclosure.

The very essence of the defense is that the Plaintiff does not own the loan, is not a holder with rights to enforce and is not a holder in due course because the plan laid out by the PSA, was never followed. That starts with the conclusion that the trust was never funded and therefore could not have the resources to pay for the origination or acquisition of loans. The defense theory is that based upon the pleadings and proof of the Plaintiff, it is a stranger to the loan transaction despite a snow storm of paper creating appearances to the contrary.

The Plaintiff has not alleged it is a holder in due course. Thus by law they are subject toall of the potential defenses of the borrower starting with the processes that began in the application stage for the loan, the presence of an assignment and assumption agreement that governed theactual events that occurred at closing — includingthe fact that the named party identified as “lender” was not the source of the loan and had no rights under the agreement with third parties toperform any act with respect to the loan except topermit their name to be used as a nominee.This was a table funded loan in which an undisclosed third party funded the loan. The importance of that is that the third party should have been identified on the note and mortgage and the mortgage should not have been executed, delivered or recorded. It is ONLY with the help of an expert who understands the terms and processes that are outside the norm of conventional lending — which is already so complex that Federal law requires that summaries and good faith estimates and disclosure are required to be delivered to the borrower prior to closing.

The plaintiff is taking two opposite positions at the same time — first that they have a trust that exists, that has engaged in business pursuant to the requirements of the PSA and who has paid for the origination or acquisition of the loan. Second, that it doesn’t matter whether the trust exists or owns the loan because they are a holder, and they want this court to presume that being a holder creates a presumption under state law that as such, they have the rights to enforce. Hence they want presumption to triumph over fact.
Theirposition is that they can close the matter of refunds and repurchasing obligations with the creditors by foreclosing the mortgage and getting a judgment on the note. Both the investors and the borrowers think otherwise.The defense theory of the case is that the trust was never funded nor used in this transaction and thus should not be allowed to enforce a loan that it never owned, funded, originated or acquired. The initial proof lies in the pleading of the Plaintiff in judicial cases. They never assert that they are a holder in due course, the elements of which are payment of value for the loan, acting in good faith and without knowledge of the borrower’s defenses. Through aggressive and relentless pursuit of truth in discovery (which only requires the possibility that it might lead to admissible evidence) you can easily establish that they are not claiming that the Trust was acting in bad faith or with knwoeldge fo the borrower’s defenses (although in some situations that might also be in issue). That leaves the single element of payment for the loan.

Each PSA sets forth the elements of a holder in due course for the loan to be accepted by the trustee. If the allegation is onlythat that there is a holder, or even a holder with rights to enforce, the only conclusion, from their own pleadings is that the trust has not paid for this loan. If it has not paid for the origination or acquisition of the loan, the Trust has no reasonable basis for claiming any interest in it. Hence it shouldn’t be suing for collection or foreclosure. And the allegation that the Trust or representative is a holder is contrary to the presumption underlying court proceedings that the Trust has paid money and will lose money if the loan is not enforced. The truth is that the investors will lose money if the loan IS enforced.The defense theory of the case is that there is a direct debtor-creditor relationship between the investors, as creditors and who should have been on the note and mortgage but were not, in order to create the illusion of a veil in which the investors would not be liable for fraudulent, deceptive or shady lending practices.

And the defense theory of the case is that the securitization plan under which the investors were supposedly parties through the Trust and the PSA never occurred and that therefore the mortgage was defective on its face for naming the wrong lender and for not disclosing, as required by Federal and Florida law all the parties to the transaction and all the intermediaries were were receiving compensation and profits arising from the origination of the loan. — since it was the investor funds that were used in the origination or acquisition of the loan.

Since we can presume that the distance of the Trust from theactual origination eliminates any questionas to whether they were proceeding in good faith IF they accepted the note and mortgage, we must then presume that were acting in good faith and without notice of the borrower’s defenses. Those are two out of three of the elements for a holder in due course.By alleging that the Trust owns the loan, that would by definition mean that that if the PSA was followed the Trust was intended to be a holder in due course — having paid value for the loan in good faith and without knowledge of the borrower’s defenses.

That would mean that the PSA requires the Trust to be a holder in due course, because that would prevent the borrower from raising most defenses against the Trust when it seeks to enforce the loan. If it is not a holder in due course, the Trust provisions bar acceptance of the loan. Hence any allegation to the contrary is void under New York State law.

Thus the plaintiff is trying to slip by on two conflicting theories — that the trust owns the loan and that the trust can enforce it just by alleging it is a holder despite the fact that the trust is a stranger to the loan transaction and never transacted any business in which it acquired ownership of the loan. This leaves the actual creditor — a group of investors who were in the same darkness as the borrower — without having received the truth when the transaction was proposed to either of them.
What is interesting here is that the allegation is not that the trust is a holder in due course which can only mean that the Trust never paid consideration for the ownership of the loan. And the acceptance of the loan by the trustee has not been alleged because it most likely never happened because the transfer was outside of the cutoff period.The cutoff period exists for two reasons — to get certain tax advantages for the trust beneficiaries who are the real creditors and to prevent any defective loans from coming into the trust that would have an adverse consequence to the trust and its beneficiaries.

And the fact that the Trust is governed by New York State law means that any act that is expressly prohibited by the PSA is void not voidable. So the assignment is a cover-up for what really happened.

For the loan to be included in the pool of loans that form the res of the trust, the trustee must accept the loan. That acceptance is manifest after the cutoff period when the pool is closed. After that individual acceptances based upon opinions of counsel must be documented. None of that happened.

At best it is an offer that could never be accepted by the trust — because there was no acceptance by the trustee who could not accept because it would be a void act both because of the cutoff period and the fact that it produce adverse consequences in both tax treatment and actual money paid to them to allow the late deposit of a loan that has been declared in default). See the provisions for acceptance by the Trustee.

An expert witness steeped in the language and practice of investment banking and the securitization of loans is necessary to explain how this transaction must be interpreted and the conclusion that the investors are the direct creditors — not the trust — because their money was mismanaged, as the investors have alleged in their own complaints against the underwriters.

At worst, it is, as the investor suits and the suits by government and insurers allege outright fraud in which the money and the documents were intentionally managed in a way that was to the detriment of both the creditors and the debtor and ultimately the government and society.

The second point in the defense is that the documents submitted by the Plaintiff are not supported by anything because they have refused to provide appropriate responses to discovery that would show the actual authority to represent the actual creditors, based upon the actual creditors granting them that authority.At trial documents will be admitted for the forecloser if you have failed to enforce discovery. Admission into evidence is barred if they have failed to respond even after being ordered to do so by the court — but those cases don’t go to trial. They are settled. And that is the point.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Big Cover-Up in Our Credit Nation

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

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

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

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

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

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

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

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

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


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