Mortgages: Weapons of Middle-Class Mass Destruction

PITCHFORK AND HOUSE

By the Lending Lies Team

http://www.zillow.com/research/foreclosures-and-wealth-inequality-12523/

Losing your home by foreclosure to a bank that used fabricated documents to foreclose is a tragedy that has tainted the American dream for millions of Americans. The process is unjust, unlawful and dehumanizing. But even years after the former homeowner has moved forward with their lives they sustain another injury they are probably not even aware of- and that is the loss of rebound gains in the market.

Oddly, homes that are foreclosed on tend to gain value back at a higher rate than properties that have not been previously foreclosed according to real estate website Zillow who conducted research on the matter.  Former owners missed out on potential profits generated by the “recovery” and therefore sustained even more financial harm. Instead, the profits went to governmental agencies, GSEs (Fannie/Freddie), hedge funds, investors and flippers who bought these properties for pennies on the dollar.

In the Miami-Dade, Broward and Palm Beach, homes that were foreclosed had a 79 percent increase in price from the market’s lowest point. The research also shows that the homes that were foreclosed upon were the homes of lower-income people and young families.

These families who were illegally foreclosed upon were thrust into an inflated renters market where they likely secured accommodations that were inferior to the living conditions of the home they lost and even less affordable. The prior owner lost their down payment, any equity and any appreciation in home value. Many of these families may never recover from the financial slaughter they suffered.

“You had a ton of appreciation for these foreclosed homes, but the [prior] homeowners weren’t getting the benefits,” said Svenja Gudell, Zillow’s chief economist. “Lower-end and foreclosed homes were bought up by investors who would transform those homes into rental properties. … Had they held onto their home in many markets, homeowners would’ve made back their original investment plus much more.” The foreclosure crisis has contributed to the massive wealth gap that has evolved since the 2008 market crash.

Even more concerning are the actions of the Veteran’s Association that guarantees the loans of United States service members who obtain VA-guaranteed mortgages. The VA is not assisting veterans who served their country to retain their homes when default threatens. In fact, the VA is known to foreclose on the homes of veterans for pennies on the dollar, evict the veteran, hold the property and then sell the property at a large profit.

Recently the Lending Lies team learned of a veteran with health issues caused by Agent Orange exposure. The VA foreclosed on his home that had a remaining balance of 7k. The VA held the property for a year and then sold the home for over 100k. The displaced veteran who had paid on his home for decades did not share in the profits the VA made from the sale of his home.

Homeowners have the potential to be damaged at three different junctions during  their loan: at closing, during default, and post-default. The homeowner is damaged at closing when they receive a table funded loan, there is no disclosure regarding WHO the true creditor is, and they are not told that they are signing a Note that is actually a security and not a mortgage. The homeowner does not receive disclosure that investors will make millions of dollars from the homeowner’s signature and is not told that he/she will carry all of the risk when the game of securitization is put into play.

A homeowner may be damaged during the term of their loan by the loan servicer who is looking for an opportunity to create a default so they can foreclose on the home. The homeowner may be given erroneous information by the servicer or may not receive service to resolve an issue that may occur during the life of the loan. The servicer may create a default by misapplying payments, inflating the balance by applying illegal fees, and other tactics to engineer a default. When a homeowner facing default contacts their loan servicer looking for assistance, the homeowner is not engaging with a servicer who is looking to find a solution.  Instead, the homeowner is dealing with an agent who is trained to find the homeowner’s Achilles heel in which to exploit and create a default.

At this point the homeowner in default will experience the Foreclosure Machine where documents disappear into ether or magically transform, bank presidents have G.E.D’s, and due process means you had your three minutes in front of a judge. The majority of homeowners caught up in this stage of foreclosure will gladly do anything to end their misery. Despite their knowledge that the servicer foreclosing has no standing- the wounded homeowner may prefer to chew off their own arm to escape the clutches of attorneys, motions, and bank intimidation.  This is the stage where the homeowner should refuse to back down and dig in their heels, but the majority flee.

After the homeowner has lost their home to an entity who had no standing to foreclose, the homeowner will suffer further economic decimation. The vultures who made millions off of the economic destruction of the American middle and lower-middle class will become their landlord. While the tenant works to make his monthly rental payment and is not building any equity, the landlord will sit back and collect the passive income while the foreclosed property appreciates at 18% plus a year.

Can there be any doubt that taking out a home mortgage from a mega-bank is not a method of middle-class mass destruction?  Caveat Emptor.

 

A Double Standard: Only Mega-Bank’s can Fabricate Mortgage Documents without Consequence

see http://www.pe.com/articles/san-808058-defendants-homeowners.html

“The defendants filed bogus petitions and court pleadings and recorded false deeds in county recorders’ offices.”

So here is my issue. That description of what they did sounds really bad. And maybe it IS bad and should be punished. BUT has the judiciary now opened the door to calling this behavior “not so bad?”

The banks are filing bogus pleadings to support foreclosures in which they have no interest except to complete the project of stealing investors money with homeowners being collateral damage. The banks and their servicers are sending bogus notices of substitution of trustee in non judicial states and filing bogus notices of default on behalf of a “beneficiary” or “mortgagee” that is not a creditor, not a holder, not a possessor of any written instrument that is true. The banks and their servicers are creating and recording false instruments attendant to nearly every fraudulent foreclosure. Among the most egregious examples are the void assignment of mortgage and the conjured endorsement on the note.

If an assignment can suddenly create rights rather than merely transfer them, then maybe these defendants being prosecuted created false documents that now have meaning in the fight against the banks. And if that is true then maybe no crime was committed at all — as long as we follow the current legal doctrine of “protect the banks.” Once upon a time in California it was said that homeowners have no standing to challenge standing based upon a void assignment. Yvanova v Countrywide changed all that. Maybe these defendants did not have pure motives and maybe they should be punished; but if they deserve to be brought to justice then so do thousands of bankers, robo-signers, robo-witnesses and fabricators of “original” documentation.

The courts meanwhile have been open to all kinds of excuses for that behavior. Have they now opened the door for scams on the other side — in which homeowners are the direct victims — can be called “irrelevant? Can we say that the government has no standing to prosecute claims against scam artists? Is this a case of unequal protection under the law? Is this case really a scam — or just fighting fire with fire?

Those of us who have been heavily engaged in the defense of homeowners know that the banks are given so much credibility that their fabrication, forgery and robosigning of documents that are created out of thin air and then recorded is then given the benefit of a legal presumption of truth and proof of facts that we all know are in fact nonexistent and therefore making the assertion untrue.  When the documents are untrue and false the Court’s rubber stamp means that false representations and false documents will be considered as true when, without the legal presumption, that can never be proven.

So in defense of fraudulent foreclosures is it possible that a new doctrine has been born: you can create and record fake documents and wait to see if anyone takes them seriously in which case they can be enforced. That is clearly the case with the banks and servicers in millions of foreclosures. And if that is the case then it follows logically that the targets of such fraud should respond in kind.

I’d like to see an explanation from prosecutors for why they don’t prosecute the banks, their “witnesses” and their robosigners for filing false documents and recording them when that is exactly their complaint on the other side of the fence. Could the State be estopped from enforcing such laws when they are giving a free pass to the main culprits?

“Prejudice” Element of Wrongful Foreclosure

http://www.jdsupra.com/legalnews/court-of-appeal-addresses-prejudice-48045/

By Kevin Brodehl

If a property owner loses their property through a foreclosure sale initiated by someone who did not validly own the debt, has the property owner automatically suffered enough “prejudice” to pursue a claim for wrongful foreclosure?  Or does the property owner also need to show that it would have been able to avoid foreclosure by paying the debt to the true lender?

The California Supreme Court’s recent Yvanova decision (reviewed on Money and Dirt here: California Supreme Court:  Borrowers Have Standing to Allege Wrongful Foreclosure Based on Void Assignment of Note) only partially addressed the “prejudice” issue.  In Yvanova, the Supreme Court discussed prejudice, but only “in the sense of an injury sufficiently concrete and personal to provide standing,” not “as a possible element of the wrongful foreclosure tort.”  The Court held that the plaintiff in that case demonstrated sufficient prejudice — lost ownership of property in an allegedly illegal foreclosure sale — to confer standing to pursue a wrongful foreclosure claim.

A recent opinion by the California Court of Appeal (Fourth District, Division One, in San Diego) — Sciarratta v. U.S. Bank National Association — picks up the “prejudice” analysis where Yvanova left off, and addresses prejudice as an element of a wrongful foreclosure claim.

The facts: a twisted tale of note assignments

In 2005, the property owner obtained a $620,000 loan secured by real property in Riverside County.  The note and deed of trust identified the lender as Washington Mutual (WaMu).

In April 2009, JPMorgan Chase Bank (Chase), as successor in interest to WaMu, assigned the note and deed of trust to Deutsche Bank.  The trustee promptly recorded a Notice of Default, followed by a Notice of Sale.

In November 2009, Chase recorded a document assigning the note and deed of trust to Bank of America (even thought just months earlier, Chase had already assigned the note and deed of trust to Deutsche Bank — oops!).  On the same date as the assignment, Bank of America recorded a Trustee’s Deed, reflecting that Bank of America had acquired the property at a trustee’s sale in exchange for a credit bid.

In December 2009, Chase recorded a “corrective” assignment of the note and deed of trust, suggesting that the April 2009 assignment to Deutsche Bank was a mistake, and was really intended to be an assignment to Bank of America.

The property owner sued the banks and the trustee for wrongful foreclosure.

The trial court’s ruling: no prejudice; case dismissed

The banks filed a demurrer, arguing that the property owner could not allege “prejudice,” which is an essential element of a wrongful foreclosure claim.

The trial court sustained the banks’ demurrer and dismissed the case.

The property owner appealed.

The court of appeal’s opinion

The Court of Appeal reversed, holding that a property owner who loses property to a foreclosure sale initiated by someone purporting to exercise rights under a void assignment suffers enough prejudice to state a claim for wrongful foreclosure.

The court first relied on the Supreme Court’s holding in Yvanova that “only the entity currently entitled to enforce a debt may foreclose on the mortgage or deed of trust securing that debt.”  In this case, based on the clear paper trail of assignments, the entity entitled to enforce the debt was Deutsche Bank, but the entity that foreclosed was Bank of America.

Based on the complaint’s allegations, the court noted, the assignment was not merely voidable but void.  The court observed, “Chase, having assigned ‘all beneficial interest’ in [the property owner’s] notes and deed of trust to Deutsche Bank in April 2009, could not assign again the same interests to Bank of America in November 2009.”

The court concluded that a property owner “who has been foreclosed on by one with no right to do so — by those facts alone — sustains prejudice or harm sufficient to constitute a cause of action for wrongful foreclosure.”  The court added:

The critical issue is not the plaintiff’s ability to pay, but rather whether defendant’s conduct resulted in the plaintiff’s harm; i.e., a foreclosure that was wrongful because it was initiated by a person or entity having no legal right to do so; i.e. holding void title.

The court also offered policy grounds supporting its decision.  The court’s ruling would encourage “lending institutions to employ due diligence to properly document assignments and confirm who currently holds a loan.”  A contrary ruling, on the other hand, would subject property owners to unfairly losing their property in foreclosure to someone who does not even own the underlying debt, with no court oversight.

Lesson

The Sciarratta decision will make it easier for property owners to assert wrongful foreclosure claims…….

To read more please visit:

http://www.jdsupra.com/legalnews/court-of-appeal-addresses-prejudice-48045/

The Psychological Warfare of Loan Servicing

 

wolf

Trust your Loan Servicer at your own Peril.

 

By William Hudson

 

“Emotional violence is another kind of abuse … it’s not about words because an emotionally abusive person doesn’t always resort to using the verbal club, but rather the verbal untraceable poison.”   ~Augusten Burroughs

 
The banks commit felonious financial crimes against homeowners with impunity. But even more egregious and unconscionable than the theft of assets, is the theft of solitude, hope, and life quality. The banks decimate families and often eradicate a person’s belief in what is “just” and lawful.

 
Millions of American homeowners have arrived at the harsh reality that government, the judiciary and law enforcement are not to be trusted. The reality is that the banks are engaging in psychological warfare against the American homeowner- and no one is doing a thing to stop the bullying or psychological abuse.

 
Banks utilize the planned use of propaganda and other psychological operations to influence the opinions, emotions, attitudes, and behavior of homeowners, attorneys, the courts and policy makers. This practice is actually a breach of Article 10 of the European Convention on Human Rights, which reads, “Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.”

 
The Foreclosure Machine is engaging in a deliberate strategy of emotional abuse towards desperate homeowners who are looking for an equitable solution (when most simply want an opportunity to meet the terms of their mortgage). The bank representatives may speak professionally, and even appear to be concerned, but their words are meant to deceive and may even kill. The stress created from corporate psychological abuse often culminates in health problems that may result in a silent death or even suicide. The banks do not play fair, and they will do whatever is necessary to take a home- including the destruction of a life if necessary.

 
The covert abuse used by banks is administered in barely detectable and cunning strategies that can, over time, cause a homeowner to doubt their own sanity. Called ‘gaslighting’ by psychologists, this process is implemented to cause the homeowner to doubt their own decisions and thoughts- and to keep them off-center. Because of the uniformity of this practice among servicers, there can be no doubt that employees were trained in this process.

 
The Gaslight Effect allows the loan servicer to define the reality and the rules, while the less powerful party is left vulnerable by relying on the abuser for information or validation. Many homes have been lost to a servicer who used this technique to exploit the vulnerabilities of a homeowner who has had financial problems, emotional upheaval, divorce, illness or job loss that resulted in the homeowner falling behind on their mortgage payments. The process is systematic, confuses the victim and by providing erroneous information ultimately results in the loss of a home. It is not a random practice but executed to target society’s most vulnerable.

 
For instance, back when banks were pushing loan modifications, the banks deliberately lost paperwork and provided contradictory information to ensure the customer would fall further behind on their mortgage. It was a uniform practice among all large servicers. The homeowner, despite having fax and mail receipts, would be told the information was never received- and often questioned their own memory of events. In our society, for hundreds of years, banking was built on the concept of “trust” and this in itself provided a false confidence that the banks would not engage in illegal acts.

 
There were other games the banks played to ensure they would get the foreclosure they so desperately wanted. One game was the game of “musical-chairs customer representative agent” where the homeowner was forced to start from the beginning and explain their complex situation to a new agent every time they called the bank. This was done so there was no solution continuity. Homeowners would speak to agents who provided conflicting information from each representative. Just when the homeowner thought a solution was at hand after hours on the phone, the phone call would be “accidentally” disconnected. This psychological tactic was well rehearsed, until when after years of this abuse, new rules assigned a homeowner a single point of contact.

 

 

A majority of homeowners we have spoken with at LivingLies, have reported methods of intimidation that often result in the homeowner wanting to walk away from the home.  These tactics include having people sit outside their homes in cars watching the house, bank employees peering inside their windows (many owners claim they have resorted to covering all windows), and even having realtors list the home while they are still in possession and living in the home.

 

There have been hundreds of reports of banks breaking into occupied homes, and when the homeowner reports the break-in to law enforcement, the homeowner is told the trespass is a civil matter.  The homeowner literally has no relief or protection from their loan servicer, except to sue.

 
The negative impact of foreclosure on emotional and physical health, as well as overall mental functioning is gradual and insidious. When the trauma of endless delays in resolution, unjust court tactics, financial burden and the feeling of having impending doom hanging over your head (sometimes for over a decade) becomes overwhelming- something has to give and it is typically either mental or physical functioning. Careers are impacted, the raising of children neglected, and other opportunities forsaken because the homeowner- armed with evidence the bank has no standing- still clings to the belief that the system is fair.

 

 

The homeowner has so much invested emotionally, financially, and in life sacrifices- there becomes a point of no return where the homeowner feels they must take the case the entire distance. To quit would be to admit yet another life failure. Therefore, many homeowners will hang on until they can no longer afford the costs (financially or emotionally).   The bank has the resources to outlast, outspend and often outmaneuver but it doesn’t mean a homeowner can’t prevail.  The key is to document every interaction or event that occurs over the course of negotiations, and to examine the Note, assignments, signature and balances that inevitably tell the truth about the lack of standing.

 
Back to the methodology employed by banks. The banks use the guise of customer service to create the appearance of assistance. Under this act the emotional abuse is passive, subtle, and covert. This strategy makes assigning blame to the bank more difficult because the bank is creating the illusion of service. “Oh go ahead and miss a few payments- we will add it back in when your modification papers are done, “ or they will say, “We can find a solution and you are a good candidate for our program.” Meanwhile, the bank has already filed to foreclose. “You can just ignore the foreclosure letters you are receiving- my notes say that your modification is waiting for final approval.” The unsuspecting homeowner is the wounded impala and the banking lion is simply toying with its prey while creating arrearages and servicing fees.

 
The homeowner senses that something isn’t right, but saddled with financial worries and the fear that foreclosure brings- they attempt to grasp onto anything that seems like hope. That is where homeowners can get into trouble. Desperate for a list of options or some type of solution- the homeowner, terrified and confronting a ticking clock, begin pursuing any type of remedy- instead of focusing on one that might actually work. The homeowner’s strategy becomes fragmented from the lies their servicer is telling them, the facts they see on paper, an inaccessible justice system, and a shady attorney looking for a high retainer.

 
Often an attorney, sensing the homeowner’s desperation, will agree to represent the homeowner when they have no knowledge of foreclosure or securitization. These attorneys are known to purchase pre-fabricated legal Motions off the internet to defend a case. The unsuspecting and naïve homeowner has no idea that their attorney is failing to properly defend their case since everything “looks” fine to a homeowner who is not familiar with law. The homeowner will lose their retainer, all payments made to date, and often the home and any equity in the property (down payment, improvements). In reality the homeowner is surrounded by vipers, opportunists, conmen and predators who will do anything to receive payment or the home.

 

 

Emotional abuse has an aim, and that is to control, belittle, isolate and shame people into subservience. It doesn’t take much skill when dealing with a vulnerable homeowner. This occurs gradually until the victim’s sense of self-worth, self-confidence, and own ideas and perceptions erode.

 
The banks or servicers are emotional abusers and operate under the guise that they are “helping”, “advising”, or “assisting”, and therefore fly under the radar when they are deliberately sabotaging any opportunity the homeowner has to save the home.

 
The bank will now attempt to extort information from the homeowner so that they know where to strike where you are vulnerable. Under the appearance of a loan modification or short sale, they will have you provide extensive personal financial information. Although they have no intention of providing assistance, this form provides your income, finances, assets, accounts and other information you might not share if you had any idea that is was being collected for nefarious purposes. Once this information is front of an agent, they can determine just how many payments at what amount you will be able to afford before you are forced into insolvency.

 
Because people are human and do not hide their emotions or vulnerability well, bank serving agents are able to detect blood in the water. My dealings over the years with service agents is that they treat homeowners like you are expendable, inferior, inadequate, or ignorant. Imbued with the power to engineer a default, some of them have God syndromes.

 

 

I remember a client who had less than three days before she lost her home to foreclosure. After hours on the phone she was able to speak to a senior manager who promised the homeowner she could reinstate her mortgage if she agreed to pay all late fees and arrearages. The homeowner readily agreed to accept over 50k in fees and arrearages (even if she felt they were erroneous). The manager promised to overnight the papers and they would arrive by noon the next day. The manager never had any intention of sending the documents, but it allowed the bank to consume two days where the home owner should have been pursuing other options. The empty promise was given to maximize the chance of foreclosure.
Another game the banks play is to act like they are right, while the homeowner has no valid objections or complaints. Homeowners report that they feel like they must “get permission” and beg and plead for information they have an absolute right to obtain. Bank servicers are predators and it is time that some type of legislation is passed to stop their abusive tactics. The State of California has had to intervene with legislation to protect widows and widowers who are falling prey to servicers who use a spouse’s death to engineer a default.
Although loan servicers typically will accept loan payments, if a homeowner is not on both the loan, the bank will utilize this legal gray area to refuse payment, thus causing fees and an arrearage to occur. When the surviving spouse attempts to make good on the payment they may still be prevented from doing so. The banks also has the power to deny any accommodation to assist the surviving spouse- especially if the see an area to exploit that might result in default. For example, often the widowed spouse who has temporarily lost their spouse’s income, or is waiting on life insurance proceeds will be denied a loan modification.
The problem is growing, advocates say, and the issue has caught the attention of federal regulators and state lawmakers. In just the first three months of this year, the Housing and Economic Rights Advocates, a statewide advocacy group in California, had handled 16 such cases. The California Reinvestment Coalition discovered that 44% of housing counselors said that servicers “always” or “almost always” declined to discuss loan modifications with widowed clients when they weren’t on the loan.

 

Last year the National Housing Resource Center gave servicers a poor rating for communication with widows, widowers and others in similar circumstances. The banks, again, have found a vulnerable client population in which to exploit by failing to provide accurate information or assistance to increase the possibility of default.
Widows and even the elderly are especially vulnerable to the predatory practices and emotional abuse by banks. With the rise of risky first and second mortgages — including many taken out by older Americans who previously avoided getting into new debt, reverse mortgages, and complex securitization schemes, servicers have created a new business model that is intent on foreclosure at all costs. In fact loan servicers no longer service- instead they provide a predatory disservice, provide pseudo-assistance, and target the most vulnerable homeowners.
Servicing companies often refuse a modification until the surviving spouse assumes the loan, which can’t happen until the owner is current on the mortgage — resulting in a catch-22. The spouse may then end up losing their life investment simply because the bank ensured there was no way to cure the default. Misinformation serves to compound the late fees and charges creating a dire situation for those who don’t have the resources (emotional or financial) to force the bank to comply with law.
The bank servicing industry is rotten to the core. It isn’t enough that they are taking a home they have no standing to foreclose upon- but to get the job done they resort to psychological warfare, target the nation’s most vulnerable homeowners, and play dirty tricks that should undermine all credibility within the financial industry. Homeowner beware- document EVERY conversation with the servicer, retain EVERY document they send you, and NEVER believe a word your servicer says. The Bank will do whatever is necessary, legal or illegal, to foreclose on your home-even if it requires resorting to mentally abusive tactics. Be prepared.  The power to service- is the power to destroy.

 

Santa Cruz County Boycotts Big Banks that do Bad Things

 

SantaCruzCountyBy William Hudson

The progressives in Santa Cruz, California- a sleepy surfer community off of California’s stunning Route 1 highway have decided to take action against the big banks and their Wall Street Tactics- and hope their tactics will spread nationwide. Santa Cruz- located about 45 minutes south of San Jose and about 50 minutes north of the luxury enclave of Carmel, is unlike either capitalist-centric communities to their north and south.

 

Santa Cruzians aren’t obsessed with the tech wealth of Silicon Valley north of them, and nor are they impressed with the fortunes of the Carmel/Monterey/Big Sur crowd who have profited from their big bank holdings. Santa Cruz is where people reside who value lifestyle, the natural beauty of its coastline, redwood forests, and hold liberal leanings against corrupt banks. Santa Cruz is demonstrating that social responsibility matters and this concept may take hold in other similarly-minded communities nationwide.

 

The visionaries elected as Santa Cruz County Supervisors decided they would not invest the County’s holdings with the five banks who have participated in criminal felony activity. “Doing business with institutions that are committing federal crimes is not consistent with the obligation that we have to protect public dollars,” said Supervisor Ryan Coonerty, who originated the original proposal to the board. Coonerty recognized, “There’s been so much bad behavior and so few consequences.”

 

Citicorp, JPMorganChase, Barclays, The Royal Bank of Scotland and UBS AG were boycotted by Santa Cruz County after they were fined a scant $5.6 billion dollar penalty for manipulating the foreign-currency market. A measly fine of 5.6 billion dollars when hundreds of billions of dollars were made will never stop the banks from their criminal enterprises. However, if enough communities nationwide begin investing their funds in companies that offer altruistic social policies and sound economic principles- perhaps the impact on the banks will be enough to alter their illegal conduct.   Wall Street won’t mourn the loss of Santa Cruz County’s portfolio, valued at about $650 million- but collectively, if other communities join in- the resulting impact could be enormous.

 

In the case of Citicorp, JPMorganChase, Barclays, The Royal Bank of Scotland and UBS AG- the banks and traders designed the fraudulent scheme in online chat rooms referred to as “the mafia” and “the cartel.” United States Attorney General Loretta Lynch predictably failed to prosecute this criminal enterprise but did admit that the heist was a “brazen display of collusion” that affected “countless consumers, investors and institutions around the globe — from pension funds to major corporations and including the banks’ own customers.”

 

This concept may prove revolutionary. What would happen if, at the local and county level, citizens and their representatives took regional action against the felonious conduct of the big banks? Instead of looking at a Macro solution that has failed to materialize, perhaps people should use Santa Cruz as an example and boycott by micro-means. Civil protest has always started at the grassroot level until it becomes such a force that the states and federal government have no choice but to accept the inevitable.

 
To date, Santa Cruz Supervisors have contacted about 50 “progressive” cities nationwide to join them in their boycott, including about a dozen cities and counties in California’s uber-liberal and wealthy Bay Area- but have not disclosed the counties that have been contacted. These supervisors should be commended for being the first county supervisors nationwide to take action against banks that engage in policies detrimental to public policy and that are in fact illegal and criminal enterprises.

 

“It’s a bold step by the supervisors to do this. They’re taking a creative and direct response to the criminal practices of the big banks,” commented Walt McRee, an outspoken chairman of the Public Banking Institute, a nonprofit working to create publicly owned banks. “Whether or not other counties or cities will have the ability or the courage to do it remains to be seen.”

 

Apparently Santa Cruz County is now on Wall Street’s radar. In addition to inquiries from counties worldwide (countries like Australia and Ireland among others) – the supervisors have received emails from Wall Street finance workers who are fed up with the systemic culture of deception and fraud. Wall Street workers are looking for a venue to express their disapproval and the need for financial reform that will finally address the past decade’s Wall Street economic free-for-all at the expense of the middle and lower classes. The county claims that they will invest with other financial institutions including the Bank of the West and other sound financial institutions. However, the county may wish to “peak inside the hood” and conduct their due diligence before taking on smaller banks who may engage in similar practices.

 
The supervisors of Santa Cruz County should also be advised that their county records are in complete disarray, contain thousands of fabricated documents and go after the banks that circumvented the county’s recording laws. If the supervisors really want to take a stand- look at their country recording system and stop the banks from recording fabricated documents. Back in 2011 and 2012, Santa Cruz county cut ties with Barclays, JPMorganChase and Bank of America for deliberately rigging interest rates and other sketchy practices. If anyone can take a stand against banking practices that undermine the financial stability of a county’s financial holdings- it is Santa Cruz’s progressive thinking officials.

 
A revolution may be brewing by simply refusing to engage with banks that destroy the lives of ordinary Americans. Break the Banks!

HSBC v Buset: Dirty Deeds Done Dirt Cheap

By William Hudson

Buset-Final-Order-Granting-Mtn-for-Involuntary-Dismissal

CASE NO.: 12-38811 CA 01
HSBC v BUSET
JUDGE: BEATRICE BUTCHKO

The Honorable Judge Beatrice Butchko of Florida’s 11th Judicial Circuit, Dade County, Florida granted an involuntary dismissal against Plaintiff HSBC for unclean hands, lack of competent evidence and an order to show why plaintiff shouldn’t be sanctioned for fraud upon the court under the court’s inherent contempt powers. Judge Butchko did her homework and nailed HSBC for what amounts to a securitization fail.

The Defendant’s Motion for Involuntary Dismissal was granted because the Court opined that HSBC could not prove standing because Ocwen’s Assignment of Mortgage was a “sham” and the transaction described in the AOM never legally occurred. The court noted that the Depositor was incorrect and that an undated, specific endorsement affixed to the back of the promissory note reflected the same defective transfer from the originator to the Plaintiff, without reference to the depositor. Furthermore, the judge recognized that placement in a trust requires that a Note has the proper endorsements, assignments and is timely, therefore this, “could never happen for a securitized trust.” The Buset decision has to be one of the finest decisions to come out of South Florida all year.

Judge Butchko demonstrated that she was able to grasp the nuances of securitization and wrote, “This endorsement is contrary to the unequivocal terms of the PSA, in evidence over Plaintiff’s objection, which required all intervening endorsements be affixed to the face of the note because there was ample room for endorsements on the face of the note. There is also no evidence the endorsement was affixed before the originator went out of business in 2008.” While most judges would have ruled that these issues were unimportant or mere technicalities, Butchko questions the authenticity of the endorsements and even the dates before deciding the evidence does not support HSBC’s claims.

Securitization has specific criteria that must be met as the Note is transferred for the protection of assets from future bankruptcy clawbacks. This is done to protect the investors of the trust (MBS investors typically receive lower returns for higher levels of safety). Therefore, there could be no direct sale from the originator to the trust directly. Securitization also requires a sale from the Depositor acting as a “middleman” between the originator and Trust to provide bankruptcy remoteness in the event the originator goes bankrupt or sells the Note.

Neil Garfield has always been adamant that foreclosure settlements do not occur until a bank is forced to provide evidence through Discovery. HSBC’s failure to comply with the Court’s Discovery Order of April 27, 2015 resulted in claims of Unclean Hands after the plaintiff refused to provide the requested Discovery items. The Court ordered the Plaintiff to provide:

(1) the final executed documents evidencing the chain of title for the subject loan;

(2) all records of any custodian related to the chain of custody of the note; and

(3) all records showing how and when the specific endorsement on the promissory note was created.

If the court is angry now, wait until they discover there is no chain of title for the subject loan and that there are no records showing how the endorsement on the note was created. It would be paramount if the business records further reflected that monthly mortgage payments were not being forwarded to any trust.

Judge Butchko writes that she, “fails to comprehend why Plaintiff would not fully comply with the Court’s Order compelling discovery when the evidence sought by the Defendant would actually assist Plaintiff in establishing the missing link in the chain of ownership in the endorsement and assignment of mortgage.” Good judges, like sharks, are beginning to smell blood in the water. Since business records are available at the click of a mouse- why doesn’t HSBC just put the issue to rest and produce the documents? Because, as all Living Lies readers know- any business records would likely reveal the bank’s fraudulent activities. Did Judge Butchko miss the memo that she isn’t supposed to ask these questions?

The Court entered an Order to Show Cause why Plaintiff should not be Sanctioned for violating the Court’s order on April 27, 2015, after representing that it fully complied on or before January 14, 2016. The court then demanded that HSBC conduct further discovery in support of these orders to show cause and set an evidentiary hearing on them. The defendants repeatedly attack HSBC’s use of records they claim they received from prior servicers as hearsay and quote Professor Charles Ehrhardt, who warned against allowing the poor evidentiary practices in foreclosure courts to “erode the requirement of reliability upon which section 90.803 (6) and the other hearsay exceptions are premised.” 1 Fla. Prac., Evidence § 803.6 (2015 ed.).

Professor Ehrhardt argues:
While the decision seems to focus on records in the mortgage servicing industry,
which are plagued by inaccuracies, its rationale extends to all records offered
under 90.803(6) which are records of a prior business and are presently located in
the records of the current business…. The [Calloway] decision is a significant
change in Florida law and inconsistent with many other Florida decisions.” 1 Fla.
Prac., Evidence § 803.6 (2015 ed.).

The Judge ruled that the Court could not exercise its discretion to admit the prior servicer’s
records into evidence as HSBC’s own witness failed to satisfactorily establish a foundation to warrant finding those records are trustworthy. The defendant’s attorneys of Jacobs Keeley repeatedly attacked the credibility of the HSBC witness instead of allowing an employee without personal knowledge to testify on issues she had no knowledge about.

HSBC’s employee witness, when questioned, admitted there was absolutely no math done to check the accuracy of the prior servicer’s records or numbers. She could not verify the trustworthiness of the prior servicer’s records and therefore her testimony was a legal fiction. In this case, Ocwen simply accepted the prior servicer’s numbers as true without any effort to audit or confirm their accuracy. The only confirmation appears to have been to check the carryover of figures from one servicer’s columns to the columns of another. This testimony was complete hearsay and testimony like this should never be allowed to stand unchallenged.

Judge Butchko further impresses by commanding the Court to take Judicial Notice of the Consent Order entered in the matter of Ocwen Financial Corporation, Ocwen Loan Servicing, LLC by the New York State Department of Financial Services dated December 22, 2014. This Consent Order documents Ocwen’s practice of backdating business records that it failed to fully resolve “more than a year after its initial discovery.” All homeowner’s fighting foreclosure should move to have the court take notice of records in the public domain that demonstrate that a servicer has participated and been fined for fraudulent behavior.

Where Judge Butchko really shines is in her ability to comprehend how the securitization issue applies in this case. The Court ruled that HSBC failed to prove standing by virtue of an endorsement and an assignment of mortgage, “created for purposes of litigation” that both missed a key component in the Title of Ownership- namely the need for a Depositor.  HSBC Bank as trustee for Freemont Home Loan Trust 2005-B mortgage Backed Certificates, Series 2005-B, failed to prove it was the proper owner and holder of the Defendant’s loan by virtue of the endorsement on the note or the assignment of mortgage. Both the endorsement and the assignment omit the Depositor, Freemont Mortgage Securities Corporation, from the transaction which constitutes a fatal break in the chain of title.

The Defendant presented the testimony from their expert witness, who testified that the endorsement on the note is contrary to the instructions in §2.01 of the PSA that required a “complete chain of endorsements, which would include the Depositor, to be placed on the face of the note so long as space allowed.” The court noted that there was sufficient space on the face of the note for the endorsements. The court questioned that an undated specific endorsement from the originator directly to the trust found on the back of the note was, “inherently untrustworthy.” YES Judge Butchko! That wasn’t so difficult to understand- and perhaps other Florida courts will take notice.

The Court questioned the validity of the endorsement in that HSBC violated the Court’s order to produce the custodian’s records or documents showing when and how the endorsement was affixed to the original note. WHY is this NOT DONE in every foreclosure case in the United States? If the bank has the records- produce them!

The Court was in agreement that HSBC’s endorsement and assignments would be grounds for the Trust to reject this loan pursuant to the PSA since there was not a complete chain of endorsements on the face of the note. The Court ruled that HSBC had failed to prove its standing to foreclose on the note and mortgage in this action.

The court went on to rule that a Promissory Note Is Not a Negotiable Instrument. The defendant through their expert witness was able to provide testimony explaining that the negotiability of a promissory note is not a consideration in the securitization model. Securitization sells pools of thousands of mortgages with ever having an intention to sell each loan by individual negotiation.  Moreover, the court held that securitization routinely involves the sale of non-negotiable instruments like car loans, rent receivables, even, “David Bowie’s intellectual property rights.”

The Model Uniform Commercial Code as it relates to the note and mortgage for the subject loan fall under Article 3 of Florida’s Uniform Commercial Code. The Court noted that, “However, it is axiomatic that all promissory notes are not automatically negotiable instruments”. The Court stated that the Note is subject to and governed by the Mortgage, rendering the note a non-negotiable instrument. “This Court finds that the Note is non-negotiable as the amounts payable under the Complaint include amounts not described in the Note and as the Note does not contain an unconditional promise to pay.”

Moreover, the court held that the UCC definition of “holder” would necessarily include a thief that takes by forcible transfer. However, a thief would never be entitled to the equitable relief of foreclosure. The Defendant correctly cited the language of the promissory note expressly provides a different definition of “Note holder” from the definition of holder under Fla. Stat. §673.3011. The promissory note defined the term “Note Holder” as “anyone who takes this Note by [lawful] transfer and who is entitled to receive payments under this Note.”

The court concluded that the Note required that “any subsequent party attempting to enforce the note prove they came into possession of the note by lawful transfer and have the right to receive payments under the Note.” This provision establishes the parties’ intention to contract out of the UCC definition of holder, so as to limit the right to enforce only to those who proved ownership.

Judge Butchko’s decision eloquently and succinctly confirms the California Court in Yvanova, “The borrower owes money NOT TO THE WORLD at large but to a particular person or institution.”  Could it be that the judiciary is finally coming to terms with the illusion of ownership that the banks have spun for the past 9 years is a façade? This decision was epic.

The decision follows below:

The Defendant’s Motion for Involuntary Dismissal after the trial was granted was for the following reasons:
I. The Court Finds Unclean Hands In Plaintiff’s Prosecution of This Action
That Bars the Equitable Relief of Foreclosure

1. The Florida Supreme Court has long recognized the maxim that in equitable
actions such as this foreclosure, “he who comes into equity must come with clean hands.” Bush v. Baker, 83 So. 704 (Fla. 1920).

2. In Bush, the Florida Supreme Court instructed that the “principal or policy of the
law in withholding relief from a complaint because of ‘unclean hands’ is punitive in nature.”

3. The Court finds several examples of Plaintiff’s unclean hands that mandate
punitive action that affirmatively bars plaintiff’s entitlement to the equitable relief of foreclosure.

A. Unclean Hands Involving the Specific Endorsement and Assignment
of Mortgage That Both Reflect a Transaction that Never Happened

4. Plaintiff’s trial witness, Sherry Keeley, an Ocwen employee, gave extensive
testimony regarding the Assignment of Mortgage (AOM) that Ocwen prepared in June of 2012 and recorded in the Public Records of Miami-Dade County in July of 2012.

5. On its face, this AOM purports to document a sale of Defendant’s loan from
Mortgage Electronic Registration Systems, Inc (“MERS”) as nominee for the originator,
Freemont Investment and Loan, directly to the securitized trust identified as the plaintiff.

6. Ms. Keeley testified that Ocwen prepared this assignment in preparation for filing
the foreclosure complaint. The Ocwen employee identified the originator of the promissory note and prepared the AOM to reflect a transfer from MERS, as Nominee of that originator to the same party as Ocwen intended to name as Plaintiff in the foreclosure action.

7. The Court takes judicial notice that on July 25, 2008, Freemont Investment and
Loan (“Freemont”) entered into a voluntary liquidation and closing which did not result in a new institution. https://www5.fdic.gov/idasp/confirmation_outside.asp?inCert1=25653. As such, the
status of MERS as nominee for Freemont ended when Freemont closed on July 25, 2008, which renders the AOM created in 2012 void ab initio.

8. Ms. Keeley further testified the Pooling and Servicing Agreement for this
securitized trust backed up the veracity of the AOM. However, Ms. Keeley later conceded that, according to the PSA, the chain of title for any loan within this trust went as follows:

Originator- FREEMONT INVESTMENT AND LOAN
Depositor- FREEMONT MORTGAGE SECURITIES CORPORATION
Trust- HSBC BANK USA, NATIONAL ASSOCIATION, AS TRUSTEE FR FREMONT HOME LOAN TRUST 2005-B, MORTGAGE-BACKED CERTIFICATES, SERIES 2005-B

9. This Court finds the AOM created in 2012 does not document a transaction that
occurred in 2005, as Plaintiff suggests. The transaction described in the AOM never legally occurred. There was never a transaction between MERS and/or Freemont Investment and Loan that sold Defendant’s loan directly to the Trust. Not in 2012, not in 2005, not ever.

10. The AOM is missing a key party in the chain of ownership, the Depositor,
Freemont Mortgage Securities Corporation.

11. Similarly, the undated, specific endorsement affixed to the back of the promissory note reflects the same defective transfer from the originator to the Plaintiff, without reference to the depositor.

12. This endorsement is contrary to the unequivocal terms of the PSA, in evidence
over Plaintiff’s objection, which required all intervening endorsements be affixed to the face of the note because there was ample room for endorsements on the face of the note. There is also no evidence the endorsement was affixed before the originator went out of business in 2008.

13. The Court finds unclean hands in the AOM and undated endorsement reflect a
transaction that never happened, and could never happen for a securitized trust.

14. The Court accepts the testimony of Defendant’s well qualified expert witness,
Kathleen Cully, who explained the securitization model which required the protection of assets from future bankruptcy clawbacks. There could be no direct sale from the originator to the trust directly.

15. The Court accepts Ms. Cully’s testimony that Securitization always required a
sale from the Depositor acting as a “middleman” between the originator and the Trust to provide bankruptcy remoteness in the event the originator went bankrupt.

B. Unclean Hands For Violating the Court’s Discovery Order Despite
Plaintiff’s Representations That It Fully Complied With That Order

16. The Court also finds unclean hands in Plaintiff’s failure to comply with the
Court’s Discovery Order of April 27, 2015.

17. In that order, the Court overruled plaintiff’s blanket objections and found no basis
for Plaintiff to object to providing any discovery under Fla. Stat. 655.059.

18. The Court then ordered Plaintiff to provide (1) the final executed documents
evidencing the chain of title for the subject loan; (2) all records of any custodian related to the chain of custody of the note; and (3) all records showing how and when the specific endorsement on the promissory note was created.

19. On January 14, 2016, the Court’s Order on Defendant’s Motion for Sanctions for
Deposition Abuses and Violations of the Court’s Order Compelling Discovery reflected:
“Plaintiff submits it has fully complied with the Court’s Order of April 27, 2015.”

20. At trial and deposition, Ms. Keeley admitted that Ocwen, Plaintiff’s servicer,
received the Order compelling discovery. However, Ms. Keeley could not testify to any action taken by Ocwen to obtain responsive documents admittedly under Plaintiff’s care, custody, and control. Defendant clearly established that Plaintiff did not comply with the discovery order.

21. The Court fails to comprehend why Plaintiff would not fully comply with the
Court’s Order compelling discovery when the evidence sought by the Defendant would actually assist Plaintiff in establishing the missing link in the chain of ownership in the endorsement and
assignment of mortgage.

22. The Court hereby enters an Order to Show Cause why Plaintiff should not
be Sanctioned for violating the Court’s order on April 27, 2015, after representing that it fully complied on or before January 14, 2016.

23. Moreover, the Court hereby enters an Order to Show Cause why Plaintiff
should not be sanctioned for the reasons set forth in Defendant’s Motion for Sanctions Under the Court’s Inherent Contempt Powers for Fraud Upon the Court filed on March 16, 2016.

24. Defendant is hereby ordered to conduct further discovery in support of these
orders to show cause and set an evidentiary hearing on them at the Court’s earliest
convenience.

II. Defendant’s Motion For Involuntary Dismissal Is Also Granted For
Plaintiff’s Failure to Prove Damages, Conditions Precedent, and Standing

25. At trial, Plaintiff produced Ms. Keeley as an “other qualified witness” to
introduce Ocwen’s business records in accordance with Fla. Stat. §90.803(6).

26. During her testimony, Ms. Keeley attempted to lay a predicate to introduce the
business records from Litton Loan Servicing, a prior servicer.

27. This Court fully understands and abides by analysis regarding prior servicer’s
records set forth in the Fourth DCA’s opinion in Bank of New York v. Calloway, 2015 WL 71816, 40 Fla. L. Weekly D173 (Fla. 4th DCA 2015)). In Calloway, the Fourth DCA held a trial court could exercise discretion to deem the prior servicer’s records trustworthy if there were evidence that during the loan boarding process, records were reviewed for accuracy. Id. at *8.

28. Notwithstanding the holding of the Fourth DCA, the Defendant challenges
Calloway citing to Professor Charles Ehrhardt, who warns against allowing the poor evidentiary practices in foreclosure courts to “erode the requirement of reliability upon which section 90.803 (6) and the other hearsay exceptions are premised.” 1 Fla. Prac., Evidence § 803.6 (2015 ed.). Professor Ehrhardt further argues:
While the decision seems to focus on records in the mortgage servicing industry,
which are plagued by inaccuracies, its rationale extends to all records offered
under 90.803(6) which are records of a prior business and are presently located in
the records of the current business…. The [Calloway] decision is a significant
change in Florida law and inconsistent with many other Florida decisions.” 1 Fla.
Prac., Evidence § 803.6 (2015 ed.)(emphasis added).

29. In addition, Defendant further suggested the Court should follow another Fourth
DCA opinion dealing with business records from a prior company which does not verify for accuracy. Landmark Am. Ins. Co. v. Pin-Pon Corp., 155 So. 3d 432, 435-43 (Fla. 4
where the Fourth DCA held:
[W]e find that Pin–Pon did not establish that the architect was either in charge of
the activity constituting the usual business practice or was well enough acquainted
with the activity to give the testimony. Although the documents in Exhibit 98
might have qualified as the general contractor’s business records, the mere fact
that these documents were incorporated into the architect’s file did not bring those
documents within the business records exception. In short, Pin–Pon failed to lay
the necessary foundation for the admission of Exhibit 98 as a business record. Id.

Hence, in this case, the Court cannot exercise its discretion to admit the prior servicer’s
records into evidence as Plaintiff’s witness failed to satisfactorily establish a foundation to
warrant finding those records are trustworthy.

A. The Legal Fiction That Ocwen’s Loan Boarding Process In This Case
Verifies The Accuracy, Reliability of Correctness of the Prior
Servicer’s Records

30. At trial, Ms. Keeley explained that she received training on Ocwen’s loan
boarding process which qualified her to give testimony to lay the foundation for the prior
servicer’s records under the business records exception.

31. Ms. Keeley testified the loan boarding process involved two steps. First, Ocwen
confirmed that the categories for each column of financial data from the prior servicer matched or corresponded to the same name Ocwen used for that same column of financial data. Ocwen confirmed the figures from the prior servicer transferred over such that the top figure from Litton became the bottom figure for Ocwen. The court notes that when testifying about Ocwen’s boarding process, Ms. Keeley appeared to be merely repeating a mantra or parroting what she learned the so called boarding process is without being able to give specific details regarding the procedure itself.1 Her demeanor at trial although professional, was hesitant and lacking in confidence in this court’s estimation as the trier of fact.

32. Ms. Keeley admitted there was absolutely no math done to check the accuracy of
the prior servicer’s records or numbers. The loan boarding process’ verification to ensure the trustworthiness of the prior servicer’s records is therefore a legal fiction. In this case, Ocwen simply accepted the prior servicer’s numbers as true without any effort to audit or confirm their accuracy. The only confirmation appears to have been the check a carryover of figures from one servicer’s columns to the columns of another.

33. Moreover, Ms. Keeley testified loans with “red flags” would never be allowed to
board onto Ocwen’s system until the prior servicer resolved them. However, Ms. Keeley also admitted she has witnessed loans that went through the boarding process that had misapplied payments and substantially incomplete loan payment histories from the prior servicer.

34. The existence of misapplied payments and incomplete payment histories in loans
that went through the loan boarding process contradicts any suggestion that the boarding process identifies red flags and/or clears them, such that Courts can trust the reliability of their records.

35. To support the court’s concern regarding the lack of foundation of the so called
boarded records in this case, the Court takes Judicial Notice of the Consent Order entered in the matter of Ocwen Financial Corporation, Ocwen Loan Servicing, LLC by the New York State Department of Financial Services dated December 22, 2014. This Consent Order documents Ocwen’s practice of backdating business records that it failed to fully resolve “more than a year after its initial discovery.”

36. Therefore, the Court finds Plaintiff failed to inquire into the accuracy, reliability
or trustworthiness of the prior servicer’s payment history. Ocwen’s own payment history merely accepts the prior servicer’s records as accurate without question unless the numbers were challenged at some point after the loan boarding process. That is simply not enough to for this court to accept the prior servicer’s records as trustworthy and admit them into evidence here. A mere reliance by a successor business on records created by others, although an important part of establishing trustworthiness, without more is insufficient. Bank of New York v. Calloway, 157 So.3d 1064, 1071 (Fla. 4th DCA 2015). As such, this Court exercised its discretion to sustain Defendant’s objections to both payment histories as inadmissible hearsay. Therefore Plaintiff lacked evidence of an essential element of proof, damages, warranting an involuntary dismissal.

B. Plaintiff’s Failure to Lay a Predicate for Prior Servicer Litton’s
Breach or Default Letter

37. Plaintiff made the unusual effort of seeking to introduce over an inch thick stack
of default letters generated by Litton prior to filing this action.

38. Plaintiff failed to lay a proper business record foundation for these default letters
and the Court exercised its discretion to sustain Defendant’s hearsay objection to their admission.

39. Ms. Keeley testified there was no attempt during Ocwen’s loan boarding process
to check the accuracy of the breach letters. The loan boarding process merely verified that all the prior servicer’s PDF documents for the subject loan were uploaded to Ocwen’s system.

40. At the onset, the Court noted that the first two default letters in the inch thick
stack which Plaintiff sought to admit into evidence were inexplicably dated a week apart and had a $1,900 difference in the amount required to cure the default. The Court rejects Plaintiff’s mere suggestion that the difference is explained by the fact that the loan has an adjustable rate mortgage. Plaintiff produced no reasonable explanation for the $1,900 difference.

41. Moreover, Ms. Keeley testified that in the training she received about Ocwen’s
loan boarding process, she learned that Litton, the prior servicer used an outside vendor to actually mail out the default letters. Therefore, without more, the admission of the default letters mailed by an outside entity not testifying in court creates a double hearsay problem as there is no evidence of a boarding process of that third party vendor’s mailing practices and procedures. Nor did the Ocwen representative testify that she had received training regarding the procedure used by the third party vendor in mailing the default letters.

42. Furthermore, to compound the double hearsay hurdle, Defendant’s counsel
impeached Ms. Keeley’s testimony at trial with her deposition taken in December of 2015, wherein she testified she did not know how the prior servicer mailed the default letters. The Court cannot reconcile Ms. Keeley’s deposition testimony and her trial testimony where she testified she learned about the third party vendor’s mailing procedure during her Ocwen boarding process training. This inconsistent testimony calls into question the veracity of her testimony and further undercut’s Plaintiff’s evidentiary foundation for the proposed documents.

C. Plaintiff Failed To Prove Standing By Virtue of an Endorsement and
an Assignment of Mortgage Created For Purposes of Litigation That
Both Miss a Key Line in the Title of Ownership, namely the Depositor

43. Plaintiff, HSBC Bank USAS, National Association, as trustee for Freemont Home
Loan Trust 2005-B mortgage Backed Certificates, Series 2005-B, failed to prove it is the proper owner and holder of the Defendant’s loan by virtue of the endorsement on the note or the assignment of mortgage.

44. Both the endorsement and the assignment omit the Depositor, Freemont Mortgage
Securities Corporation, from the transaction which constitutes a fatal break in the chain of title.

45. The Defendant presented the testimony of their expert witness, Ms. Cully, who
testified that the endorsement on the note is contrary to the instructions in §2.01 of the PSA that required a complete chain of endorsements, which would include the Depositor, to be placed on the face of the note so long as space allowed.

46. The Court notes there is ample space on the face of the note for endorsements.
Therefore, the Court finds that the undated specific endorsement from the originator directly to the trust found on the back of the note is inherently untrustworthy.

47. The Court further questions the validity of the endorsement in that Plaintiff
violated the Court’s order to produce the custodian’s records or documents showing when and how the endorsement was affixed to the original note.

48. In addition, the Court accepts Ms. Cully’s testimony that the form of the
endorsement and assignment would be grounds for the Trust to reject this loan pursuant to the PSA. There is not a complete chain of endorsements on the face of the note. The PSA required no assignment of mortgage, only that the Trust appear in the MERS system as the loan owner.

49. For these reasons, the Court finds Plaintiff failed to prove its standing to foreclose
the note and mortgage in this action.

III. The Promissory Note Is Not A Negotiable Instrument

50. The Court gives great weight as the trier of fact to the testimony of Defendant’s
expert witness, Kathleen Cully. Ms. Cully is a Yale Law School graduate that worked her entire career in structured finance transactions since 1985. She was extremely well versed in the Uniform Commercial Code. Among many other tasks and accomplishments, Ms. Cully testified that she led the Citigroup team that created the first pooling and servicing agreement ever. She led Citigroup’s Global Securitization strategy. The Court finds Ms. Cully eminently qualified as an expert witness in the area of securitized transactions and their interplay with the Model Uniform Commercial Code.

51. Ms. Cully gave extensive testimony explaining that the negotiability of a
promissory note is not a consideration in the securitization model. Securitization sells pools of thousands of mortgages with ever having an intention to sell each loan by individual negotiation.

52. Moreover, securitization routinely involves the sale of non-negotiable instruments
such as car loans, rent receivables, even David Bowie’s intellectual property rights.

53. The Court finds Ms. Cully’s testimony gives a highly credible analysis of the
Model Uniform Commercial Code as it related to the note and mortgage for the subject loan. Her testimony on the negotiability of the promissory note is attached as Exhibit A. The Buset Note is attached as Exhibit B and the Buset Mortgage is attached as Exhibit C.

54. The Court applies Ms. Cully’s reasoned analysis as it relates to the note and
mortgage for the subject loan and to Article 3 of Florida’s Uniform Commercial Code.
However, it is axiomatic that all promissory notes are not automatically negotiable instruments.

55. The Court recognizes that no Florida appellate court has yet to consider Ms.
Cully’s analysis. The Court has reviewed the recent Fourth DCA opinion in Onewest Bank FSB v. Nunez, (2016 WL 803542 (Fla. 4th DCA March 2, 2016)) which found the Uniform Secured Note provision contained in the promissory note does affect its negotiability because it merely references the mortgage and cites provisions governing rights in collateral and acceleration.

56. The Nunez opinion states the controlling UCC law on negotiability as:
“Florida has adopted the Uniform Commercial Code, including its provision on
negotiability and enforcement of negotiable instruments. Under section
673.1041(1), Florida Statutes (2013), the term “negotiable instrument” means:

[A]n unconditional promise or order to pay a fixed amount of money, with
or without interest or other charges described in the promise or order, if it:
…..
(c) Does not state any other undertaking or instruction by the person
promising or ordering payment to do any act in addition to the
payment of money . . .

Section 673.1061, Florida Statutes (2013), defines “unconditional” by stating
those conditions that prevent it from being unconditional:

(1) Except as provided in this section, for the purposes of s. 673.1041(1), a
promise or order is unconditional unless it states:
(a) An express condition to payment;
(b) That the promise or order is subject to or governed by
another writing; or

(c) That rights or obligations with respect to the promise or
order are stated in another writing.

A reference to another writing does not of itself make the promise or order conditional.
(2) A promise or order is not made conditional:
(a) By a reference to another writing for a statement of rights with respect to
collateral, prepayment, or acceleration. . . .” Id. at *1-2.

57. The Uniformed Note Provision in Nunez is identical to that found in the
Defendant’s Promissory Note herein which provides:
In addition to the protections given to the Note Holder under this Note, a
Mortgage, Deed of Trust, or Security Deed (the “Security Instrument”),
dated the same date as this Note, protects the Note Holder from possible
losses that might result if I do not keep the promises that I make in this Note.
That Security Instrument describes how and under what conditions I may be
required to make immediate payment in full of all amounts I owe under this Note.
Some of these conditions are described as follows: . . . Id. at *1 (emphasis added).

58. This Court does not address the provision described in the Nunez opinion, instead
grounding this decision on a myriad of other provisions of the Mortgage establishing the Note is subject to and governed by the Mortgage, rendering the note a non-negotiable instrument.

59. Among other things, the additional protections routinely change the “fixed
amount of money” due under the promissory note and require additional undertakings and instructions for the borrower beyond the mere repayment of money.

60. First, at page 2 of the mortgage, sub-section (G) expressly provides that “‘Loan’
means the debt evidenced by the Note, plus interest, any prepayment charges and late charges due under the note, and all sums due under this Security Instrument, plus interest.” (emphasis added).

61. Paragraph 3 of the Mortgage provides for the payment of taxes and interest on the
property. These payments are not described in the Note, which requires payment only of
principal, interest, late fees and costs and expenses of enforcement.

62. The Court finds the amounts due under the Mortgage are “other charges” that are
not “described in” the Note, as required by §673.1041(1), Florida Statutes. That alone destroys negotiability.

63. Furthermore, Plaintiff’s complaint seeks damages for all sums due under the Note
and “such other expenses as may be permitted by the mortgage.” Standard mortgage servicing industry practice treats all sums due under the note and mortgage as the “loan” payoff amount or the total amount needed to liquidate in full all monetary obligations arising under both the Note and the Mortgage—the Loan, as defined in the Mortgage—not just the Note.

64. Not only does that payoff amount include charges not described in the Note, it is
much more than a mere “reference” to the Mortgage “for a statement of rights with respect to collateral, prepayment or acceleration”—it means that the Note is effectively “subject to or governed by” the Mortgage, which in turn means that it is not unconditional. See Fla. Stat. §673.1061. That also destroys negotiability of the Note.

65. This Court finds that the Note is non-negotiable as the amounts payable under the
Complaint include amounts not described in the Note and as the Note does not contain an
unconditional promise to pay.

66. The promise is not unconditional because the Note is subject to and/or governed
by another writing, namely the Mortgage. Moreover, rights or obligations with respect to the Note itself—as opposed to the collateral, prepayment or acceleration—are stated in another writing, namely the Mortgage.

67. Moreover, the UCC definition of “holder” would necessarily include a thief that
takes by forcible transfer. However, a thief would never be entitled to the equitable relief of foreclosure. Defendant correctly cites to ¶1 of the promissory note that expressly provides a different definition of “Note holder” from the definition of holder under Fla. Stat. §673.3011.

68. The promissory note defines the term “Note Holder” at ¶1 as “anyone who takes
this Note by [lawful] transfer and who is entitled to receive payments under this Note.”

69. By its terms, ¶1 requires that any subsequent party attempting to enforce the note
prove they came into possession of the note by lawful transfer and have the right to receive payments under the Note. This provision establishes the parties’ intention to contract out of the UCC definition of holder, so as to limit the right to enforce only to those who proved ownership.

70. The Court finds the amounts due under the mortgage are “additional protections”
from possible losses that protect the Note Holder pursuant to the Uniform Secured Note
provision. The protections necessarily affect the fixed amount of money due under the note.

71. The Court further notes Plaintiff’s complaint seeks all sums due under the note
and mortgage. Standard mortgage servicing industry practice treats all sums due under the note and mortgage as the “loan” payoff amount or the total amount needed to liquidate in full all monetary obligations arising under both the Note and the Mortgage.

72. At page 4 of the mortgage, Uniform Covenant 2 entitled “Application of
Payments or Proceeds” provides that “payments be applied in the following order of priority: (a) interest due under the Note; (b) principal due under the Note; and (c) amounts due under Section 3 [of this Security Instrument]. Any remaining amounts shall be applied first to late charges, second to any other amounts due under this security Instrument, and then to reduce the principal balance of the Note.” (emphasis added).

73. As payments are applied to amounts due under both the note and mortgage, this
Court finds the Uniform Covenant 2 in the mortgage must be read as an integrated agreement with the promissory note that will necessarily change the fixed amount of money due thereunder.

74. At the first paragraph of page 7, the mortgage provides: “Any amounts disbursed
by lender under this Section 5 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.”

75. Therefore, pursuant to the Uniform Secured Note Provision of the note and
Section 5 of the mortgage, forced placed insurance premiums become additional debt secured by the mortgage bearing interest at the note rate which changes the “fixed amount of money” due.

76. At page 8 of the mortgage are two provisions which involve rights or obligations
with respect to the promise or order stated in another writing and constitute instructions and undertakings of the borrower to do acts in addition to the payment of money.

77. At ¶6 of the mortgage the borrower is obligated to occupy the property as a
principal residence within 60 days after signing the mortgage and must continue to occupy the property as Borrower’s principal residence for a least one year.

78. At ¶7, Borrower is obligated to maintain the property and permit lender to
conduct inspections, including interior inspections, upon notice stating cause for the inspection.

79. At ¶8 of the mortgage, “Borrower shall be in default if” borrower gave materially
false or misleading information during the loan application process or concerning Borrowers occupancy of the property as Borrower’s principal residence.

80. At ¶9 of the mortgage entitled, “Protection of Lender’s Interest in the Property
and Rights Under this Security Instrument” the mortgage states “any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.”

81. At ¶14 of the mortgage entitled “Loan Charges” provides for refunds of such
charges and states: “the Lender may choose to make this refund by reducing the principal owed under the Note or by making a direct payment to Borrower.” Again these additional protections for the Note Holder provided in the Uniform Secured Note provision in the note necessarily affect the “fixed amount of money” due under the note.

82. The Court grants Defendants’ Motion for Involuntary Dismissal and enters
judgment in favor of the Defendants who shall go forth without day.

83. The Court reserves jurisdiction to award prevailing party attorney’s fees and
to impose sanctions against Plaintiff under the inherent contempt powers of the court for fraud on the court, and such other orders necessary to fully adjudicate these issues.

84. Plaintiff is ordered to produce a corporate representative with most
knowledge regarding its efforts to comply with the discovery order dated April 27, 2015, for deposition at the offices of Defendant’s counsel within 15 days from the entry of this order.

DONE AND ORDERED in Chambers at Miami-Dade County, Florida, on 04/26/16.

No Further Judicial Action Required on THIS
MOTION
CLERK TO RECLOSE CASE IF POST
JUDGMENT
_____________________________
BEATRICE BUTCHKO
CIRCUIT COURT JUDGE

Copies furnished to:
Defendant’s counsel: Jacobs Keeley, PLLC., 169 E. Flagler Street, Ste. 1620, Miami, FL 33131,
efile@jakelegal.com

Plaintiff’s counsel: Brock and Scott, 1501 NW 49th Street, Ft. Lauderdale, FL 33309,
flcourtdocs@brockandscott.com
http://stopforeclosurefraud.com/2016/04/29/hsbc-v-joseph-t-buset-ocwen-guillotined-in-florida-bench-trial-and-then-rapped-for-oh-so-filthy-hands-order-granting-defendants-motion-for-involuntary-dismissal-for-u-n-c-l/

Why Are the Banks Abandoning Homes? Hundreds of Thousands of Homes Bulldozed After Foreclosure

For More Information and assistance please call 954-495-9867 or 520-405-1688

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No reasonable person would abandon this many homes after taking the trouble to foreclose on them. There is an obvious preference for foreclosure over workouts, modifications, short sales, resales, and other tools. This shows clearly that loss mitigation is not one of the factors in the minds of those who say they represent investors or REMIC trusts.

So they must have a reason to force the sale of a home other than loss mitigation. The people initiating these foreclosures and subsequent abandonment are acting against the interest of the investors who actually put up the money for the “securitization fail” that I identified and Adam Levitin named.

Thus it must be concluded that those who control the foreclosure process at the big investment banks benefit in some way other than loss mitigation. That can only mean one of two things:

  • The people making the decision make more money foreclosing than in pursuing workouts, modifications, or other settlements and/or
  • The people making the decision are using the foreclosing process to institutionalize “securitization fail” and thus avoid trillions of dollars in liability owed to the investors, insurers, guarantors, counterparties on hedge products, the borrowers and local, state and federal government.

This can only mean that the purpose of the foreclosure is not to mitigate damages to the actual lender or creditor. They don’t want performing loans even if it means that the homeowner is paying off the entire balance of the loan. And they make it difficult if not impossible to get a correct figure for a payoff.

So if the money is not the issue, and the house is not really in issue why do they pursue foreclosures, fabricate documents to do it and use robo-signers and robo witnesses to force through foreclosures on homes they will only abandon at the end of the process?

Should we not be asking whether good faith and clean hands have been established to justify the equitable remedy of forfeiture of the home?

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In South Florida news this morning, local Sheriffs are banding together to board up more than 1,000 homes in Lake Worth. In each case the home was foreclosed. In most cases, the homeowner applied for a modification and was told they could not apply until they were 90 days in arrears. In most cases, all efforts at modification were turned down under the guise that the investors refused to modify or workout the loan. That was most probably a lie. Neither the servicer nor the Trustee or other “enforcer” ever went to the investors with a single workout plan.

Continuous allegations of fraudulent foreclosures on predatory and fraudulent loans have been “settled” but not with the effected homeowners nor with local governments and homeowner associations who are deeply effected by this tragic fraud on the courts, the borrowers, the governments, and the society at large — as millions of jobs were lost and hundreds of thousands of businesses closed down as their customers were displaced from their homes (around 16 Million people directly displaced by fraudulent foreclosures thus far).

As foreclosures continue to increase in number (despite news reports to the contrary) more homeowners are being forced out of their homes, including many that were in the family for generations. The houses, now empty, lay dormant sometimes for 6 years or more before the actual “auction” sale takes place. During that time, miscreants move in creating meth labs, crack houses, safe houses for gangs etc. In the end the property is abandoned, and it leads to more foreclosures and more abandonment. Eventually entire neighborhoods are converted to ghost towns reducing the property values to zero — perfect for an intermediary who wants to cheat investors. The foreclosure sale and abandonment show the recovery at zero. Investors are even told that they should be happy that they didn’t incur further liability than their investment in the property.

In most states, effort to reclaim the homes have failed because they were stripped of the vital mechanical systems and even building materials — a new industry resulting from this process of foreclosure and abandonment. The local property taxes are unpaid for years — leading to forever where the homes are completely abandoned and demolished. But the local government is stuck with the bill because with the new construction from the false boom created by the banks they expanded infrastructure and social services (police, fire, medical etc.).

Meanwhile the same local government is being told that their investment in mortgage bonds have produced losses. So they are stuck with the double whammy of non-payment of property and other taxes plus a direct loss incurred from the “securitization fail” scheme. I believe that attorneys ought to take cases on contingency where local government files suit against the banks. The allegation should be made that not only did the banks NOT act in good faith, they acted in BAD faith because they had no right to foreclose on false papers created at the closing of a loan wherein the borrower and investors were unaware of the true nature of the transaction.

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