Buset Update: HSBC Challenges Foreclosure Dismissal Amid Claims of ‘Unclean Hands’

http://www.dailybusinessreview.com/id=1202784059887/HSBC-Challenges-Foreclosure-Dismissal-Amid-Claims-of-Unclean-Hands

BY Samantha Joseph/Daily Business Review, South Florida

Things looked grim for HSBC Bank USA N.A. last year when it faced involuntary dismissal of its case after a bench trial and sanctions for prosecuting a foreclosure suit with “unclean hands.”

Back then, the trial judge sided with borrowers accusing the bank of building its case on a forged mortgage assignment and granted their request to force the financial institution to show why it shouldn’t be punished for committing a fraud on the court.

But HSBC seems off to a strong start on appeal—at least in its challenge of one aspect of the lower court’s order—having survived a motion to dismiss its case as premature before a state appellate panel.

The foreclosure pitted HSBC, as trustee for FR Fremont Home Loan Trust mortgage-backed certificates, against homeowners Joseph and Margaret Buset.

The Busets’ lawyers, Bruce Jacobs and Court Keeley of Jacobs Keeley in Miami, sought to block a review in the Third District Court of Appeal. They claimed the Third District Court of Appeal lacked jurisdiction because the lower court was still weighing evidence and had reserved jurisdiction to impose sanctions and award attorney fees. Jacobs said a dismissal would allow “the Third DCA (to) make a ruling based on everything we know on the issue, as opposed to having successive appeals over and over.”

But HSBC’s challenge covered only one aspect of the ruling—the involuntary dismissal of its mortgage foreclosure—and that portion contained language entering judgment and therefore making it ripe for appeal, according to the judicial panel.

“The trustee does not seek appellate review of either the order’s reservation of jurisdiction to award prevailing party attorney fees or the order’s reservation of jurisdiction to impose sanctions,” Judge Barbara Lagoa wrote for the Third District Court of Appeal.

The ruling opens the door for the bank to continue challenging dismissal of its foreclosure suit.

“It is well established that a trial court’s reservation of jurisdiction to award fees, costs or sanctions does not affect the finality of a judgment,” Lagoa wrote in a unanimous decision with Judges Kevin Emas and Thomas Logue.

Kimberly Mello and Jonathan Tannen of Greenberg Traurig represent HSBC.

The litigation grabbed headlines in May after Miami-Dade Circuit Judge Beatrice Butchko issued a ruling finding financial companies handling and trading the Busets’ debt relied on a fraudulent assignment of mortgage.

“This court finds the AOM created in 2012 does not document a transaction that occurred in 2005 as plaintiff suggests,” Butchko ruled. “The transaction described in the AOM never legally occurred. There was never a transaction between MERS and/or Fremont Investment and Loan that sold defendant’s loan directly to the trust. Not in 2012, not in 2005, not ever.”

But the Third DCA found the judge’s involuntary dismissal of the complaint after a bench trial did not adhere to best practices, and that Butchko should have instead entered a final judgment on the merits, instead of tossing the litigation.

Miami Judge: No Transaction=Unclean Hands. Judgment for Homeowner with Sanctions.

It’s time to sit up and take notice. Judges are turning the corner and getting pretty angry about what passed before as evidence. In April this order seemed like a shot in the dark. But now, we are seeing more and more judges actually study the chain of alleged transactions relied upon those who seek forced sale of a residence. The motivation of those seeking foreclosure is gradually being revealed this year. Not surprisingly they are not in the least bit interested in the property or the loan. They want a foreclosure judgment because THAT is what has value for them — getting the judge to unwittingly ratify all the preceding illegal acts and frauds perpetrated on the borrower and the courts. Once again our friends at Ocwen are named as the culprits, but this judge goes further when she says

‘This Court finds the AOM [assignment of mortgage] 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.’ (e.s.)

see ocwen-order

HSBC v Buset, Case # 12-38811 CA 01 Decided 4/26/16 Hon Beatrice Butchko

For about 10 years now I have endured taunts from people representing the banks or themselves citing case after case saying I was wrong in my legal analysis. I persisted because I knew I was right. The reality of a transaction is far more important than the self serving paperwork that parties use to justify their illegal actions  — the last decade notwithstanding. If there was no purchase of the loan then the assignee received nothing.

But more important than that is something that Judge Butchko seemed to pick up on. She asks the simple question: why would Ocwen violate a mandatory discovery order that would prove the Plaintiff’s case? Instead they tried to plow through without the reality of a single transaction in which a loan was made, purchased or sold.

If the alleged loan was not sold then why were there any papers showing a transfer of the “loan.” And if each party in the chain was paying nothing to the party before them, why was the assignor signing an assignment without getting paid for it. And if that is true for all the assignments and endorsements then was the originator a lender? If the originator received nothing in a purchase transaction for the alleged loan, the only logical conclusion is that there was no loan by the originator and there might have been no loan at all.

With that conclusion why would a party with no money in the “game” be suing for foreclosure? The answer must be completely separate from the loan because that is obviously of no consequence to those participating parties that were getting fees for executing documents that pretended that there was a purchase and sale of the debt. The answer is that foreclosure is the ONLY way they could cover their tracks in the false sales of mortgage bonds issued by an empty non-operating trust. If you look at decisions like this and thousands of other cases the conclusion is inescapable — a foreclosure judgment is the first and only legal document is the entire chain.

Here are some quotes

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.

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.

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.

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.

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.

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. Second, 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.

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.”

1 This Court estimates that it has presided over hundreds of foreclosure bench trials since being assigned to the Civil Division in 2011. The court has accordingly heard hundreds of bank witnesses testify regarding their company’s boarding process and has accepted thousands of documents into evidence pursuant to same. The boarding process and training of personnel regarding the boarding of documents varies greatly from one institution to another.

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 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.

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 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.

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.

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.

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.

 

Bank of New York Mellon

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation.
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
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THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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I have periodically reminded people that they should be carefully watching litigation between the perpetrators of the massive false securitization scheme. You really should see those cases, including tax cases, where the admissions and allegations in some cases directly contravene allegations by the same parties in foreclosure cases. It doesn’t bother them taking inconsistent positions because (a) nobody looks and (b) they will get away with it anyway, as long as Judges presume that all is well with the paperwork.
The prime issues in these cases revolve around a simple proposition. If the Trustee of a REMIC Trust was the Trustee of a REMIC Trust, why didn’t they act like it — demanding buy-backs, damages etc. for horrendous underwriting criteria that was opposite to what was promised in the prospectus, what was reported to the rating agencies and what was disclosed through press releases?
The answer is simple — there was no Trust, REMIC or otherwise. Investors who believed that the money would be managed by the Trust were intentionally deceived by the Underwriter/Master Servicer. The money did not go under Trustee management. Instead it went into the pocket of the Wall Street Bank that acted as the underwriter/master servicer.
While the terms of the Trust duties as spelled out in the prospectus and the Pooling and Servicing Agreement are craftily worded, it is apparent that the duties of the Trustee shrink as you read further and further. But under common law and apparently the TRUST INDENTURE ACT, a named Trustee who  accepts the assignment and is named in the Trust has duties that transcend the caveats that essentially leave the so-called Trustee with no duties at all.
Normally this would bother a prospective Trustee (US Bank, DEUTSCH, BONY/MELLON, Citi, BOA, Wells Fargo etc.). But what is STILL not being recognized is that the initial premise of the transaction never occurred. The money from the sale of the MBS to investors never made it into any account under management by the Trustee. It really was THERE that the named Trustee failed to act, even though they were recruited for their name (leasing their brand) for a monthly fee with no Trustee responsibilities. Upon issuance of the MBS from the Trust, the Trust was owed the proceeds. It never received the proceeds and the Trustee either didn’t know, didn’t care or both.
Josh Yager writes the following:

 

The preamble to the Uniform Prudent Investor Act notes, “The tradeoff in all investing between risk and return is identified as the fiduciary’s central consideration.”  For most trustees determining the return that was produced by the assets held in trust is a fairly straightforward exercise. Most investment managers are required to produce performance data that is SEC-compliant. However, defining whether the return experienced was appropriate, given the level of risk that was taken, is more complicated.

The Bogert treatise states, “The trustee cannot assume that if investments are legal and proper for retention at the beginning of the trust, or when purchased, they will remain so indefinitely. Rather, the trustee must systematically consider all the investments of the trust at regular intervals to ensure that they are appro­priate” (A. Hess, G. Bogert, & G. Bogert, Law of Trusts and Trustees §684, pp.145–146 (3d ed. 2009)).

To fulfill this duty to monitor the risk and return of the trust assets a prudent trustee, acting in good faith, will make the following inquiries:

Target Return: The manager’s actual performance will initially be compared to the trustee’s stated return objective. This begs the question whether the trustee has taken steps to define a targeted rate of return for the assets of which they are responsible. If they have not, they are encouraged to do so. The Target Return is stated as an absolute number (e.g., 7.0%) or as a real, inflation-adjusted number (e.g., Inflation + 4.0%).

Strategic Benchmark: The manager’s actual performance will be tested to determine whether any strategic value has been added by the manager.  This test answers the specific question, “Have the manager’s strategic investment choices produced a better outcome than a simple investment in a few major asset classes?”  This is done by comparing the actual performance and risk to that of a simple “vanilla” Strategic Benchmark that is historically consistent with the trustee’s stated Target Return (see above).  The Strategic Benchmark is a combination of Russell 3000 (US Stock), MSCI ACWI ex-US (Int’l stock including Emerging Markets), and Barclays 1-10 Yr Muni (Bonds).  For tax-deferred/free accounts, the bond component will be the BOFAML US Corp/Govt 1-10 Yr.

  1. The stock-to-bond ratio used is a mix of stocks and bonds which historically matched the client’s Target Return over the last 50 years.
  2. The Russell 3000 and MSCI ACWI ex-US are intended to represent the entire stock universe.  For example, the Russell 3000 includes US Small Cap stocks, US Value stocks, etc., and the MSCI ACWI ex-US includes Emerging Market stocks.
  3. The US-to-Int’l ratio is fixed at 70/30 to represent the “home bias” that investors of any given country typically exhibit and to recognize that the client usually spends US Dollars.
  4. For example, if the client’s Target Return is 7.0% (or Inflation + 4.0%), the Strategic Benchmark will be 40% Barclays 1-10 Yr Muni, 42% Russell 3000 and 18% MSCI ACWI ex-US.

Risk: In addition to measuring the manager’s performance against these two benchmarks, there must be an evaluation of the risk that has been accepted by each manager. Some forms of risk are quantitative and can be discovered through statistical analysis. Other types of risk cannot be deduced from statistical inquiry and require a more subjective analysis.

  1. Quantitative Risk Measures
  • Standard Deviation / Downside Deviation
  • Value-at-Risk
  • Beta
  • Max Drawdown
  • High Month Return / Low Month Return
  • Sharpe Ratio (risk-adjusted return)
  • M-Squared (risk-adjusted return)
  • Information Ratio (risk-adjusted return)
  1. Qualitative Risks
  • Lack of Liquidity: The % of the trust that cannot be liquidated within 5 business days
  • Concentration: The % of the trust held in the single largest security
  • Leverage: The % of leverage used by the trust as reflected in a debt-to-equity ratio
  • Lack of Valuation: The % of the trust assets that do not have daily valuation

Most investment managers, if provided with this overview, can help the trustee create a record that these factors have been considered and documented. If the investment manager is unable to help the trustee develop such a record, a prudent trustee will take steps to independently evaluate these factors or find an investment manager that is willing and able to do so.

Musical Chairs: The music is slowing down — HSBC Goes Down in Flames in Florida

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

This is not a legal opinion on any case. Get a lawyer.

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see Parent Company Cannot Pretend the Subsidiary Doesn’t Exist

The devil is in the details. The article in the above link is by Brendan Sweeney. His point is that the existence of corporate entities may not be ignored. You would think that any large bank with a huge legal department would understand that, and you would be right. But they have a strategy that is working. Their strategy is to pick an entity that has no connection with the loan transaction, either in origination or in acquisition. This ensures that the records of that entity cannot be used to blow up the failed securitization scheme. And then by using a Robo witness from an entity that is referred to as a servicer, they can be sure that the witness knows nothing about the origination or acquisition of the paperwork and certainly knows nothing about the money trail.

Over the last 10 years the courts have disregarded or overruled the objections and defenses of borrowers that rely on the application of existing law. One of those things has been that the names on the documents don’t match up with the names used in the foreclosure. Most judges, believing that this is an inconsequential error, and also believing that a bank like HSBC would not be attempting to foreclose unless they actually had the right to do so, thus rule against the homeowner who is gratuitously described as “The borrower.” Of course just referring to the homeowner as a borrower prejudges the entire case.

Now the courts are starting to take a closer look at these transactions which appear to be facially valid on paper, but nonetheless do not exist. Simple application of black letter law is all that is needed for a borrower to win in foreclosure, if the judge is willing to apply the law in a proper fashion. In this case the party chosen to be the foreclosing party was HSBC Bank. But the paperwork whole pointed to a subsidiary of HSBC Bank.

The homeowner argued that the subsidiary was not the same as the parent and that therefore the action should be dismissed for lack of jurisdictional standing. HSBC argued that they owned all of the subsidiary and that it was the same thing, knowing full well that there was no legal support for their position. If you form a corporation it creates what is known as a corporate veil. In fact had HSBC Bank been successful in this case it would have provided the groundwork for Discovery and claims against parent companies and affiliated companies — something that none of the securitization players would allow or want.

Court in this case simply decided that simple law should be directly applied. So it wasn’t up to HSBC Bank to initiate a foreclosure action, Based upon the paperwork in the court record, then it should’ve been done in the name of the party to whom the paperwork was assigned or endorsed — and not in the name of any other entity, even if the other entity was the parent company.

The Court stated that Florida law is clear in that “[a] parent corporation and its wholly-owned subsidiary are separate and distinct legal entities. . . . As a separate legal entity, a parent corporation . . . cannot exercise the rights of its subsidiary.” Wright v. JP Morgan Chase Bank, N.A., 169 So. 3d 251 (Fla. 4th DCA 2015) (quoting Am. Int’l Group, Inc. v. Cornerstone Bus., Inc., 872 So. 2d 333, 336 (Fla. 2d DCA 2004)). Despite this, HSBC Bank put forward two documents to establish standing: (1) an Assignment and Assumption Agreement from HSBC Mortgage to HSBC Bank; and (2) a Secretary’s Certificate (dated after the commencement of the action) from HSBC Mortgage indicating that HSBC Bank is the sole shareholder of HSBC Mortgage. The Court concluded that neither document could be utilized to demonstrate that HSBC Bank had standing.

Ocwen: Investors and Borrowers Move toward Unity of Purpose!

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

Please consult an attorney who is licensed in your jurisdiction before acting upon anything you read on this blog.

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Anyone following this blog knows that I have been saying that unity of investors and borrowers is the ultimate solution to the falsely dubbed “Foreclosure crisis” (a term that avoids Wall Street corruption). Many have asked what i have based that on and the answer was my own analysis and interviews with Wall Street insiders who have insisted on remaining anonymous. But it was only a matter of time where the creditors (investors who bought mortgage backed securities) came to realize that nobody acting in the capacity of underwriter, servicer or Master Servicer was acting in the best interests of the investors or the borrowers.

The only thing they have tentatively held back on is an outright allegation that their money was NOT used by the Trustee for the Trust and their money never made it into the Trust and that the loans never made it into the Trust. That too will come because when investors realize that homeowners are not going to walk away, investors as creditors will come to agreements to salvage far more of the debts created during the mortgage meltdown than the money salvaged by pushing cases to foreclosure instead of the centuries’ proven method of resolving troubled loans — workouts. Nearly all homeowners would execute a new clean mortgage and note in a heartbeat to give investors the benefits of a workout that reflects economic reality.

Practice hint: If you are dealing with Ocwen Discovery should include information about Altisource and Home Loan Servicing Solutions, investors, and borrowers as it relates to the subject loan.

Investors announced complaints against Ocwen for mishandling the initial money, the paperwork and the subsequent money and servicing on loans created and a acquired with their money. The investors, who are the actual creditors (albeit unsecured) are getting close to the point where they state outright what everyone already knows: there is no collateral for these loans and every disclosure statement involving nearly all the loans violated disclosure requirements under TILA, RESPA, and Federal and state regulations.
The fact that (1) the loan was not funded by the payee on the note and mortgagee on the mortgage and (2) that the money from creditors were never properly channeled through the REMIC trusts because the trusts never received the proceeds of sale of mortgage backed securities is getting closer and closer to the surface.
What was unthinkable and the subject of ridicule 8 years ago has become the REAL reality. The plain truth is that the Trust never owned the loans even as a pass through because they never had had the money to originate or acquire loans. That leaves an uncalculated unsecured debt that is being diminished every day that servicers continue to push foreclosure for the protection of the broker dealers who created worthless mortgage bonds which have been purchased by the Federal reserve under the guise of propping up the banks’ balance sheets.

“HOUSTON, January 23, 2015 – Today, the Holders of 25% Voting Rights in 119 Residential Mortgage Backed Securities Trusts (RMBS) with an original balance of more than $82 billion issued a Notice of Non-Performance (Notice) to BNY Mellon, Citibank, Deutsche Bank, HSBC, US Bank, and Wells Fargo, as Trustees, Securities Administrators, and/or Master Servicers, regarding the material failures of Ocwen Financial Corporation (Ocwen) as Servicer and/or Master Servicer, to comply with its covenants and agreements under governing Pooling and Servicing Agreements (PSAs).”
  • Use of Trust funds to “pay” Ocwen’s required “borrower relief” obligations under a regulatory settlement, through implementation of modifications on Trust- owned mortgages that have shifted the costs of the settlement to the Trusts and enriched Ocwen unjustly;
  • Employing conflicted servicing practices that enriched Ocwen’s corporate affiliates, including Altisource and Home Loan Servicing Solutions, to the detriment of the Trusts, investors, and borrowers;
  • Engaging in imprudent and wholly improper loan modification, advancing, and advance recovery practices;
  • Failure to maintain adequate records,  communicate effectively with borrowers, or comply with applicable laws, including consumer protection and foreclosure laws; and,

 

  • Failure to account for and remit accurately to the Trusts cash flows from, and amounts realized on, Trust-owned mortgages.

As a result of the imprudent and improper servicing practices alleged in the Notice, the Holders further allege that their experts’ analyses demonstrate that Trusts serviced by Ocwen have performed materially worse than Trusts serviced by other servicers.  The Holders further allege that these claimed defaults and deficiencies in Ocwen’s performance have materially affected the rights of the Holders and constitute an ongoing Event of Default under the applicable PSAs.  The Holders intend to take further action to recover these losses and protect the Trusts’ assets and mortgages.

The Notice was issued on behalf of Holders in the following Ocwen-serviced RMBS: see link The fact that the investors — who by all accounts are the real parties in interest disavow the actions of Ocwen gives rise to an issue of fact as to whether Ocwen was or is operating under the scope of services supposedly to be performed by the servicer or Master Servicer.
I would argue that the fact that the apparent real creditors are stating that Ocwen is misbehaving with respect to adequate records means that they are not entitled to the presumption of a business records exception under the hearsay rule.
The fact that the creditors are saying that servicing practices damaged not only the investors but also borrowers gives rise to a factual issue which denies Ocwen the presumption of validity on any record including the original loan documents that have been shown in many cases to have been mechanically reproduced.
The fact that the creditors are alleging imprudent and wholly improper loan modification practices, servicer advances (which are not properly credited to the account of either the creditor or the borrower), and the recovery of advances means that the creditors are saying that Ocwen was acting on its own behalf instead of the creditors. This puts Ocwen in the position of being either outside the scope of its authority or more likely simply an interloper claiming to be a servicer for trusts that were never actually used to acquire or originate loans, this negating the effect of the Pooling and Servicing Agreement.  Hence the “servicer” for the trust is NOT the servicer for the subject loan because the loan never arrived in the trust portfolio.
The fact that the creditors admit against interest that Ocwen was pursuing practices and goals that violate laws and proper procedure means that no foreclosure can be supported by “clean hands.” The underlying theme here being that contrary to centuries of practice, instead of producing workouts in which the loan is saved and thus the investment of the creditors, Ocwen pursued foreclosure which was in its interest and not the creditors. The creditors are saying they don’t want the foreclosures but Ocwen did them anyway.
The fact that the creditors are saying they didn’t get the money that was supposed to go to them means that the money received from lost sharing with FDIC, guarantees, insurance, credit default swaps that should have paid off the creditors were not paid to them and would have reduced the damage to the creditors. By reducing the amount of damages to the creditors the borrower would have owed less, making the principal amounts claimed in foreclosures all wrong. The parties who paid such amounts either have or do not have separate unsecured actions against the borrower. In most cases they have no such claim because they explicitly waived it.
This is the first time investors have even partially aligned themselves with Borrowers. I hope it will lead to a stampede, because the salvation of investors and borrowers alike requires a pincer like attack on the intermediaries who have been pretending to be the principal parties in interest but who lacked the authority from the start and violated every fiduciary duty and contractual duty in dealing with creditors and borrowers. Peal the onion: the reason that their initial money is at stake is that these servicers are either acting as Master Servicers who are actually the underwriters and sellers of the mortgage backed securities,
I would argue that the fact that the apparent real creditors are stating the Ocwen is misbehaving with respect to adequate records means that they are not entitled to the presumption of a business records exception under the hearsay rule.
The fact that the creditors are saying that servicing practices damaged not only the investors but also borrowers gives rise to a factual issue which denies Ocwen the presumption of validity on any record including the original loan documents that have been shown in many cases to have been mechanically reproduced.
The fact that the creditors are alleging imprudent and wholly improper loan modification practices, servicer advances (which are not properly credited to the account of either the creditor or the borrower), and the recovery of advances means that the creditors are saying that Ocwen was acting on tis own behalf instead of the creditors. This puts Ocwen in the position of being either outside the scope of its authority or more likely simply an interloper claiming to be a servicer for trusts that were never actually used to acquire or originate loans, this negating the effect of the Pooling and Servicing Agreement.
The fact that the creditors admit against interest that Ocwen was pursuing practices and goals that violate laws and proper procedure means that no foreclosure can be supported by “clean hands.” The underlying theme here being that contrary to centuries of practice, instead of producing workouts in which the loan is saved and thus the investment of the creditors, Ocwen pursued foreclosure which was in its interest and not the creditors. The creditors are saying they don’t want the foreclosures but Ocwen did them anyway.
The fact that the creditors are saying they didn’t get the money that was supposed to go to them means that the money received from lost sharing with FDIC, guarantees, insurance, credit default swaps that should have paid off the creditors were not paid to them and would have reduced the damage to the creditors. By reducing the amount of damages to the creditors the borrower would have owed less, making the principals claimed in foreclosures all wrong. The parties who paid such amounts either have or do not have separate unsecured actions against eh borrower. In most cases they have no such claim because they explicitly waived it.
This is the first time investors have even partially aligned themselves with Borrowers. I hope it will lead to a stampede, because the salvation of investors and borrowers alike requires a pincer like attack on the intermediaries who have been pretending to be the principal parties in interest but who lacked the authority from the start and violated every fiduciary duty and contractual duty in dealing with creditors and borrowers.

Banks Still Out Cheating Their Customers and Everyone Else

It is easy to think of the mortgage meltdown as a period of time in which the banks went wild. Unfortunately that period of time never ended. They are still doing it. The level of sophistication it takes to do the kinds of things that banks have been doing for the last 20 years is probably beyond the knowledge and experience of any of the regulators. In addition, it is beyond the knowledge and experience of most consumers, lawyers and judges; in fact as to non-regulators, bank behavior makes no sense. After having seen the results of what are euphemistically called subprime mortgages, Wells Fargo is plunging back in and obviously expecting to make a profit. Apparently the quasi governmental entities that issue guarantees on certain mortgages will allow these subprime mortgages. Wells Fargo says it now understands the parameters under which the guarantors (Fannie and Freddie) will approve those mortgages without a risk that Wells Fargo will be required to buy them back.

That is kind of a mouthful. We have thousands of transactions that are being conducted that directly affect the ownership and balance of various types of loans including mortgage loans. The picture presented in court is that the ownership and status of each loan is stable enough for representations to be made. But the truth is that the professional witnesses hired by the bank’s foreclosure actions only present a slice of the life of a loan. They neither know nor do they inquire about the rest of the information. For example, they come to court with a a report showing the borrower’s record of payments to the servicer but they do not show servicer’s record of payments to the creditor. By definition they are saying that they only know part of the financial record and that consists of a made for trial report on the borrower’s activities. It does not show what happened to the payments made by the borrower and does not show payments made by others —  like loss sharing with the FDIC, servicer advances, insurance, and other actual payments that were made.

These payments are not allocated to any specific loan account because that would reduce the amount claimed as due from the borrower to the creditor — as it should. And the intermediaries and conduits who are making claims against the borrower have no intention of paying the actual creditors (the investors) any more than they absolutely have to. So you have these intermediaries claiming to be real parties in interest or claiming to represent the real parties in interest when in fact they are representing themselves.

They cheat the investor by not disclosing payments received from insurance and FDIC loss sharing. They cheat the borrower by not disclosing those payments that reduce the count receivable and therefore the account payable. They cheat the borrower again when they fail to show “servicer advances” which are payments received by the alleged trust beneficiaries regardless of whether or not the borrower submits monthly payments.  (That is, there can’t be a default in payments to the “trust” because the pass through beneficiaries are getting paid. Thus if there is any liability of the borrower it would be to intermediaries who made those servicer payments by way of a new liability created with each such payment and which is NOT secured by any mortgage because the borrower never entered into any deal with the servicer or investment bank — the real source of servicer advances).

Then they cheat the investor again by forcing a case into a foreclosure sale when the borrower was perfectly prepared, willing and able to enter into a settlement agreement that would have paid the rest are far more than the proceeds of a foreclosure sale and final liquidation. Their object is to maximize the loss of the investor and maximize the loss of the borrower to the detriment of both and solely for the benefit of the intermediary or conduit that is pulling the strings and handling the money.  And they are still doing it.

The banks have become so brazen that they are manipulating currency markets in addition to the debt markets. While we haven’t seen any reports about activities in the equity markets, there is no reason to doubt that their illegal activities are not present in equity transactions. For the judicial system to assume that the Banks are telling the truth or presenting an accurate picture of the  transaction activity relating to a particular loan is just plain absurd now. The presumption in court should be what it used to be, at a minimum. Before the era of securitization, most judges scrutinized the documentation to make sure that everything was in order. Today most judges will say that everything is in order because they are pieces of paper in front of them, regardless of whether any of those pieces of paper represents an accurate rendition of the facts related to the loan in dispute. Most judges in most cases are rubber-stamping judgments for intermediaries and thus are vehicles for the intermediaries and conduits to continue cheating and stealing from investors and borrowers.

The latest example is the control exercised by the large banks over currency trading. Regulators are clueless.  The banks are no longer even concerned with the appearance of propriety. They are cheating the system, the society, the government and of course the people with impunity. They are continuing to pay or promote their stocks as healthy investment opportunities. Perhaps they are right. If they continue to be impervious to prosecution for violating every written and unwritten rule and law then their stock is bound to rise both in price and in price-to-earnings ratio. They now have enough money which they have diverted out of the economy of this country and other countries that they can create fictitious transactions showing proprietary trading profits for the next 20 years.

This is exactly what I predicted six years ago. They are feeding the money back into the system and laundering it through the appearance of proprietary trading. It is an old trick. But they have enough money now to make their earnings go up every year indefinitely. On the other hand, if the regulators and investigators actually study the activities of the banks and start to bring enforcement actions and prosecutions, maybe some of that money that was taken from our economy can be recovered, and the financial statements of those banks will be revealed and smoke and mirrors. Then maybe their stock won’t look so good. Right now everyone is betting that they will get away with it.

New forex lawsuit parses data to make case

Yesterday, 03:13 PM ET · JPM

  • There have been a number of suits against the global banks over claims of forex manipulation, but this latest by the City of Philadelphia Board of Pensions and Retirement is the first to include research highlighting unusual movements in major currencies.
  • Using data compiled by Fideres, the plaintiffs analyzed daily trading right around the 4 PM fix of currency prices … curiously, anomalous price movements became rarer and less pronounced after the initial reports of rigging surfaced last summer.
  • Morgan Stanley has spent some time looking at euro/dollar spikes at 4 PM and also concluded they were unrelated to economic events. Instead of collusion though, Morgan pins the blame on computerized trading programs.
  • The seven banks sued by Philadelphia which is seeking damages as high as $10B: Barclays (BCS), Citigroup (C), Deutsche Bank (DB), HSBC, JPMorgan (JPM), RBS, and UBS.

Read more at Seeking Alpha:
http://seekingalpha.com/currents/post/1565171?source=ipadportfolioapp_email

OCC Issuing Alert to Consumers About Independent Foreclosure Reviews

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The OCC is rolling out its first public service announcements to alert consumers about the Independent Foreclosure Review announced by it, the Fed, and the OTS in early November.  The campaign follows the distribution of over 4 million letters to potentially eligible borrowers which include forms for submitting requests and instructions on how to use them.

The public service materials include a feature story and two 30-second radio spots in English and Spanish.  These will be distributed to 7,000 small newspapers and 6,500 radio stations throughout the U.S. The announcements inform consumers of the specifics of the program which lets borrowers who faced foreclosure during 2009 or 2010 request reviews of their cases if they believe errors in the procedures used by servicers pursuing foreclosure actions caused them to suffer financial loss. 

The parameters for determining eligibility are explained and borrowers are directed to a starting point for their requests.  Over 20 of the largest servicing companies are mandated to offer and process the reviews:  America’s Servicing Company, Aurora Loan Services, Bank of America, Beneficial, Chase, Citibank, CitiFinancial, Citi Mortgage, Country-Wide, EMC, EverBank/Everhome, Freedom Financial, GMAC Mortgage, HFC, HSBC, IndyMac Mortgage Ser vices, MetLife Bank, National City, PNC, Sovereign Bank, Sun-Trust Mortgage, U.S. Bank, Wachovia, Washington Mutual, and Wells Fargo.

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