Insider Lawsuit Summarizes the BIG LIE About “Securitization.”

This is an insider case filed in April 2018. The ironic aspect of this case is the probability that Nationstar probably does not have standing. But that aside, for those who remain skeptics about what I have been writing about, here is an unexpurgated recitation of all the ways that all the loans, debts, notes and mortgages were fabricated based upon pure lies, making foreclosure a legal impossibility.

This is a case where a servicer has sued various parties, some of whom are players in the securitization game. The allegation is that the documents and assertions made by the Defendants were completely false and that none of them, despite the documents, had any nexus, right, title or interest to any of the loans, debts, notes or mortgages.

Lawyers would be doing themselves and their clients a favor by using this case as a drafting guide. But they can only do so after they have a achieved a level of knowledge to make sense out of all the chaos. If they do study the issue, even for a little while, they will have that “AHAH” moment and realize that the entire playing field is low hanging fruit for various types of lawsuits for compensatory and punitive damages.

Hat Tip Bill Paatalo

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

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

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

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

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

===========================

See Complaint – Nationstar v Soria

Since the perspective is that of a claimed servicer that sometimes claims to be more than a servicer, you should remember that this is not 100% on point. Also not all of the Defendants are what they appear to be, so  don’t leap to conclusions about the specific actors named but rather recognize the truth when you read it. But it is very close. The allegations against these Defendants could just as well be used against all the securitization players.

And the knowledge that the lawyers for Nationstar had when writing this complaint clearly shows that Mr. Cooper and its lawyers had actual knowledge of the fictitious documents, entities and assertions made by the investment banks every day in court starting with “Good Morning your Honor, my name is John Smith and I represent the Plaintiff [a trust that does not exist]. This is a standard foreclosure case.”

Here are some interesting quotes from the allegations by Nationstar (now Mr. Cooper).

Who formed [West H&AJ]?
A: I did… .
Q: Has West H&A ever originated a single loan? A: Funded loan? . . . No. . . .

Q: [Y[ou were a complete stranger to this loan; correct?

A: Yeah. Suree……..

Q: [‘T]he assignment, who drafted it?

A: The assignment deed of trust, I wrote thatt…….. Q: Were you authorized by anyone other than yourself to assign this deed of trust? A: No.

“Defendants, strangers to the subject loans and having never lent a penny to anyone, created a criminal enterprise by which they hijacked ““thousands”” of mortgages via void assignments all in the name of ““helping”” borrowers.”

Q: [YJ]ou didn’t fund a single loan; correct?

A: No. Didn’t fund a single loan.

Q: [Y[ou were a complete stranger to this loan; correct?

A: Yeah, sure …

Q: The assignment, who drafted it?
A: The assignment deed of trust, I wrote that. …. . .

Q: Were you authorized by anyone other than yourself to assign this deed of trust?
A: No.

Over the last four (4) years, for the purpose of executing the scheme to 13 defraud, Defendants, together with others known and unknown, transmitted, and caused the transmission of, by means of wire and radio communication in interstate and foreign commerce, the following writings, signs, signals, and sounds which 16 constitute no fewer than thirty-eight (38) instances: …

Defendants falsely designated themselves as nominees for entities or sometimes used an outright fraudulent designation of another entity in order to gain credibility and trust, thus, purposely confusing the
public. Further, Defendants falsely advertised that they owned the hijacked properties for purpose of defrauding those individuals and creating confusion in the 6 marketplace. Finally, Defendants used the false claims to engage in deceptive practices to further their fraudulent acts. The following are no fewer than fourteen 8 (14) instances of the false information and deceptive acts perpetuated by Defendants.

 

The Role of Dynamic Dark Pools in Ponzi Schemes Masquerading as Securitized Loan Pools

The bottom line is that there are no financial transactions in today’s securitization schemes. There is only fabricated paper. If you don’t understand the DDP, you don’t understand “securitization fail,” a term coined by Adam Levitin.

GET A CONSULT

GO TO LENDINGLIES to order forms and services. Our forensic report is called “TERA“— “Title and Encumbrance Report and Analysis.” I personally review each of them for edits and comments before they are released.

Let us help you plan your answers, affirmative defenses, discovery requests and defense narrative:

954-451-1230 or 202-838-6345. Ask for a Consult. You will make things a lot easier on us and yourself if you fill out the registration form. It’s free without any obligation. No advertisements, no restrictions.

Purchase audio seminar now — Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations.

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

===================================

I received a short question today to which I gave a long answer. The question is “What happens when an investor decides that he or she wants to cash it in does someone redeem their certificate ?”

Here is my answer:

YES they get paid, most of the time. It is masked as a “trade” on the proprietary trading desk of the CMO Dept. which is completely unregulated and reports nothing. As long as the Ponzi scheme is going strong, the underwriter issues money from the investor pool of money (dynamic dark pool -DDP). It looks like a third party bought the “investment.” If the scheme collapses then the underwriter reports to investors that the market is frozen and there are no buyers.

 *
There is no redemption because there are no certificates. They are all digital entries on a server. Since the 1998 law deregulated the certificates, reporting is limited or nonexistent. The entries can be changed, erased, altered, amended or modified at will without any regulator or third party knowing. There is no paper trail. Thus the underwriter will say, if they were ever asked, whatever suits them and there is no way for anyone to confirm or rebut that. BUT in discovery, the investors have standing to ask to see the records of such transactions. That is when the underwriter settles for several hundred million or more.
 *
They discount the settlement based upon “market” values and by settling for pennies on the dollar with small community banks who do not have resources to fight. Thus if they received $2 billion for a particular “securitized pool” that is allocated to a named trust they will instantly make about 10-20 times the normal underwriting fee by merely taking money before or after the money hits the DDP. Money is paid to the investors as long as sales of certificates are robust. Hence the DDP is constantly receiving and disbursing money from many more sources than a fixed group of homeowners or investors.
 *
It is all about gaps and absences. If a debt was properly securitized, the investor would pay money to the underwriter in exchange for ownership of a certificate. The money would then be subject to fees paid to the underwriter and sellers of the certificates. The balance would be paid into a trust account on which the signatory would be a trust officer of the Trustee bank.
 *
If a scheme is played, then the money does not go into the trust. It goes to the DDP. From there the money is funneled through conduits to the closing table with the homeowner. By depositing the exact and expected amount of money into the trust account of the closing agent, neither the closing agent nor the homeowner understands that they are being played. They don’t even have enough information to arouse suspicion so that they can ask questions.
 *
Hence if you combine the proper securitization scheme with the improper one you see that the money is diverted from the so-called plan. This in turn causes the participants to fabricate documents if there is litigation. They MUST fabricate documents because if they produced real documents they would have civil and criminal liability for theft, embezzlement in investor litigation and fraud and perjury in foreclosure litigation.
 *
It is only by forcing a peek around the multiple layers of curtains fabricated by the players that you can reveal the absence of ownership, authority or even an economic interest — other than the loss of continued revenue from servicing and resales of the same loan through multiple investment vehicles whose value is completely derived from the presumed existence of a party who is the obligee of the debt (owner of the debt, or creditor).
 *
That party is the DDP — fund that is partially authorized for “reserve” and which the prospectus and trust instrument (PSA) state (1) that the mortgage loan schedule is not the real one and is presented as an example and (2) that the investors acknowledge that they might be paid from their own money from the “reserve.”
 *
The gap is that the DDP and the reserve are two different accounts. The “reserve” is a pool of money held in trust by, for example, U.S. Bank as trustee for the trust. There is no such account. The DDP is controlled by the underwriter but ownership is intentionally obscured to avoid or evade detection and the liability that would attach if the truth were revealed.
 *
We win cases not by proving theft from investors but by hammering on the fact that the documents are fabricated, which is true in virtually all cases involving a named trust. We will win a large award if we can show that the intended beneficiaries of the foreclosure were parties other than the obligee on the debt.
 *
Thus the attorneys, servicers and trustee are protecting their ill-gotten gains and seeking to grab more money and property at the expense of the unnamed investors and homeowners. They are then transforming an expected revenue stream into the illusion of a secured debt owed not to the funding sources but to the intermediaries.
Go to LENDINGLIES for more help.

The Neil Garfield Radio Show at 6pm Eastern: JPMorgan Chase operates a Racketeering Enterprise according to Plaintiffs

The Neil Garfield Show LIVE today at 6 pm Eastern/3 pm Pacific.  Join us!

Thursdays LIVE! Click in to the The Neil Garfield Show

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

For a copy of the LIST OF LOANS involved in the RICO lawsuit Click the following link: First Fidelity loans purchased from Chase

For a copy of this case click here: RICO Complaint – Chase

JPMorgan Chase has been accused of creating a “racketeering enterprise” whose purpose was to evade legal duties owed to borrowers, regulators and Plaintiffs, among others, to appropriately service federally regulated mortgage loans.  Basically, JPMorgan Chase cannot provide the necessary documentation to the Plaintiff’s regarding the loans they purchased, while borrowers whose loans were sold to JPMorgan Chase cannot obtain proof regarding the ownership of their loans (likely because all documentation was intentionally destroyed). The loans are void without the proper documentation (notes, reconveyances and assignments).   It is noteworthy, that when JPMorgan Chase went to foreclose on the “loans” with no legitimate documentation,  they would use entities like Nationwide Title Clearing to create false title and paperwork necessary to foreclose or to attach to a proof of claim in bankruptcy.

This blockbuster lawsuit illuminates the fact that JPMorgan Chase was selling thousands of loans it didn’t own including loans it had previously sold to other MBS trusts!  It is alleged that Chase transferred these defective “loans” in order to avoid non-reimbursable advances and expenses.

S&A Capital Mortgage Partners, Mortgage Resolution Servicing and 1st Fidelity Loan Servicing are suing JPMorgan Chase in the Southern District of New York District court for failure to service loans in a manner consistent with its legal obligations under: RESPA, TILA, FTC violations, the FDCPA, The Dodd Frank Wall Street Reform act, the Equal Credit Opportunity Act, the Fair Housing Act; and other applicable state and federal usury, consumer credit protection and privacy, predatory and abusive lending laws (collectively “the Acts”).  It is likely that this is not an isolated incident, but JPMorgan Chase’s normal operational standard.

The Plaintiffs complain that JPMC, rather than comply with the costly and time consuming legal obligations it faced under the Acts, the Defendants warehoused loans in a database of charged-off loans known as RCV1 and intentionally and recklessly sold these liabilities to unaware buyers such as the Plaintiffs.

To accomplish the transfer of these obligations Defendants prevented Plaintiff’s from conducting normal due diligence, failure to provide information, and changing terms of transactions after consummation; as well as failure to transfer mortgages to them. Because the Plaintiff’s did not receive the information about the loans purchased, the Defendants tortuously interfered with the Plantiff’s relationships with the borrowers including illegally sending borrowers debt forgiveness letters and releasing liens.   These actions not only resulted in specific damage to said lien’s value, but caused Plaintiffs reputational harm with borrowers, loan sellers, investors, lenders and regulators.

In reality both investors and borrowers should unite and sue JPMorgan Chase for Fraud and Fraudulent Inducement, Tortious Interference with Business Relations, conversion, breach of contract, and promissory estoppel and additional relief.

Highlights from the case include these bombshells accusing JPMorgan Chase of:

(iv) Knowingly breached every representation they made in the MLPA, including failing to legally transfer 3,529 closed-end 1st lien mortgages worth $156,324,399.24 to the Plaintiffs, and to provide Plaintiffs with the information required by both RESPA and the MMLSA so that Plaintiffs could legally service said loans.

(v) Took numerous actions post-facto that tortiously interfered with Plaintiffs’ relationships with borrowers including illegally sending borrowers debt forgiveness letters and releasing liens.

RCV1 Evades Regulatory Standards and Servicing Requirements

  1. Defendants routinely and illicitly sought to avoid costly and time-consuming servicing of federally related mortgage loans. Since 2000, Defendants maintained loans on various mortgage servicing Systems of Records (“SOR”) which are required to meet servicing standards and regulatory mandates. However, Defendants installed RCV1, an off-the-books system of records to conduct illicit practices outside the realm of regulation or auditing. Defendants’ scheme involves flagging defaulted and problem federally related loans on the legitimate SOR and installing a subsequent process to then identify and transfer the loan records from the legitimate SOR to RCV1. The process could be disguised as a reporting process within the legitimate SOR and the data then loaded to the RCV1 repository on an ongoing basis undetected by federal regulators.
  2. Defendants inactivated federally related mortgage loans from their various SORs such as from the Mortgage Servicing Platform (“MSP”) and Vendor Lending System (“VLS”).

 

  1. RCV1’s design and functionality does not meet any servicing standards or requirements under applicable federal, state, and local laws pertaining to mortgage servicing or consumer protection. Instead, the practices implemented by Defendants on the RCV1 population are focused on debt collection.

 

  1. Defendants seek to maximize revenue through a scheme of flagging, inactivating, and then illicitly housing charged-off problematic residential mortgage loans in the vacuum of RCV1, improperly converting these problematic residential mortgage loans into purely debt collection cases that are akin to bad credit card debt, and recklessly disregarding virtually all servicing obligations in the process. In order to maximize revenue, Defendants used unscrupulous collection methods on homeowners utilizing third-party collection agencies and deceptive sales tactics on unsuspecting note sale investors, all the while applying for governmental credits and feigning compliance with regulatory standards.

 

  1. In short, the RCV1 is where mortgage loans and associated borrowers are intentionally mishandled in such a manner that compliance with any regulatory requirements is impossible. In derogation of the RESPA, which requires mortgage servicers to correct account errors and disclose account information when a borrower sends a written request for information, the information for loans in RCV1 remains uncorrected and is sent as an inventory list from one collection agency to another, progressively resulting in further degradation of the loan information. In dereliction of various regulations related to loan servicing, loans once in RCV1 are not verified individually and the identity of the true owner of the note per the Truth in Lending Act (TILA) is often concealed. Regulatory controls regarding grace periods, crediting funds properly, charging correct amounts are not followed.

 

  1. More specifically, a borrower sending a qualified written request under Section 6 of RESPA concerning the servicing of his/her loan or request for correction under 12 U.S.C. §2605(e), 12 CFR §1024.35 could not obtain resolution because RCV1 is a repository for housing debt rather than a platform for housing and servicing federally related loans. RCV1 contains no functionalities for accounting nor escrow management in contravention of §10 of RESPA, Regulation X, 12 CFR §1024.34.

 

In contravention of 12 CFR §1024.39, Chase failed to inform Borrowers whose loans were flagged, inactivated, and housed in RCV1, about the availability of loss mitigation options, and in contravention of 12 CFR §1024.40. Chase also failed to make available to each Borrower personnel assigned to him/her to apprise the Borrower of the actions the Borrower must take, status of any loss mitigation application, circumstances under which property would be referred to foreclosure, or applicable loss mitigation deadlines in careless disregard of any of the loss mitigation procedures under Reg X 12 CFR § 1024.41.

 

  1. Unbeknownst to Plaintiffs and regulatory agencies, Chase has systematically used RCV1 to park flagged loans inactivated in the MSP, VLS, and other customary SORs to (1) eschew Regulatory requirements while publicly assuring compliance, (2) request credits and insurance on the charge-offs., (3) continue collection, and (4) sell-off these problematic loans to unsuspecting investors to maximize profit/side-step liability, all with the end of maximizing profit.

 

Specifics of Defendants’ RICO Scheme and Conduct:

  1. Since at least 2000, Defendants evaded their legal obligations and liabilities with respect to the proper servicing of federally related mortgages, causing Plaintiffs damage through Defendants’ misconduct from their scheme to violate:
  • The Real Estate Settlement Procedures Act (RESPA);
  • The Truth in Lending Act (TILA);
  • The Federal Trade Commission Act (FTC);
  • The Fair Debt Collection Practices Act (FDCPA);
  • The Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank);
  • The Equal Credit Opportunity Act; and
  • The Fair Housing Act.
  1. After Plaintiffs acquired mortgage loans from Defendants, during the period 2011 through at least 2016, Defendants released thousands of liens related to RCV1 loans, including RCV1 loans Defendants no longer owned, to avoid detection of non-compliance with the Lender Settlements. These lien releases caused harm to the Plaintiffs and to numerous other note sale investors.

 

  1. Similarly, in September 2008, Chase Bank entered into an agreement with the FDIC as receiver for WAMU-Henderson. Chase Bank made a number of representations in its agreement with the FDIC, including that Chase Bank and its subsidiaries were in compliance with all applicable federal, state and local laws. However, at the time of execution and delivery of the agreement, Chase owned thousands of loans with respect to which, through its improper servicing and other misconduct relating to the RCV1, it was in violation of many federal and state laws. These circumstances created a further motive for Chase Bank to participate in the scheme to transfer thousands of noncompliant loans to Plaintiffs and others.

 

  1. Plaintiff MRS purchased loans from Chase pursuant to the MLPA that were actually Chase’s most problematic loans and mostly housed in the RCV1 repository. In March, 2009, bare notes and deeds, without the promised required loan files documenting servicing and borrower information, were simply shipped to Plaintiffs as the “loan files”. Plaintiffs also received loans for which no notes, deeds or loan files were provided at all. Nevertheless, Defendants kept promising that the complete loan files were forthcoming, with no intent of ever providing them. Without the necessary documentation, it was difficult or impossible for Plaintiffs to service and collect on the loans. And despite herculean efforts, most often Plaintiffs could not locate the necessary information to service and collect on the loans.

 

  1. Defendants’ plan to entice an existing and approved, but unsuspecting note sale buyer to purchase these toxic loans is in plain view in various recently produced email exchanges discussing Defendant’s fraudulent scheme to dump non-serviced loans with inadequate documentation on Plaintiffs from October 2008 through February 2009.

 

  1. As early as 2008, Defendants’ knew the public was becoming more aware of its the scope of its improper actions. Ultimately, in 2012, public pressure prompted the federal government and many states to bring a complaint against JPMorgan and Chase Bank, as well as other banks responsible for fraudulent and unfair mortgage practices that cost consumers, the federal government, and the states tens of billions of dollars. The complaint alleged that JPMorgan and Chase Bank, as well as other financial institutions, engaged in improper practices related to mortgage origination, mortgage servicing, and foreclosures, including, but not limited to, irresponsible and inadequate oversight of the banks’ quality control standards. Unfortunately, the complaint failed to note, and the government appeared unaware of, the Defendants’ deeper institutional directives designed to hide their improprieties (such as the establishment of the RCV1 and its true purpose).

 

  1. 48. At all applicable times, Defendants had been continuing to utilize its RCV1 database.

 

  1. However, as in 2008, the loans housed in the RCV1 repository presented a huge reputational risk and legal liability as the loans housed in RCV1 were not being treated as federally related mortgage loans, were not in compliance, were no longer being serviced as such, but were being collected upon.

 

  1. By 2012, the RCV1 database contained hundreds of thousands of federally related mortgage loans, which had been inactivated in regular systems of records and whose accounts were no longer tracked pursuant to regulatory requirements, including escrow accounting.

 

  1. Other knowing participants in the conspiracy include third party title clearing agencies, such as Nationwide Title Clearing Company (NTC), Pierson Patterson, and LCS Financial Services, who were directed by Defendants to prepare and then file fraudulent lien releases and other documents affecting interests in property. Either these entities were hired to verify liens and successively failed to properly validate the liens before creating documents and lien releases containing false information, or these entities were directed by Chase to create the documents with the information provided by Defendants. In either case, these title clearing agencies which recorded fraudulent releases of liens and related documents in the public record, had independent and separate duty from Defendants to file, under various state laws, all relevant documents only after a good faith proper validation of the liens. Instead these entities deliberately violated their duty of care by knowingly or recklessly filing false lien releases and false documents on properties not owned by Defendants.

 

  1. In many states, the act of creating these documents is considered the unauthorized practice of law. In Florida, where NTC is organized, there is a small exception for title companies who are only permitted to prepare documents and perform other necessary acts affecting the legal title of property where the property in question is to be insured, to fulfill a condition for issuance of a title policy or title insurance commitment by the Insurer or if a separate charge was made for such services apart from the insurance premium of the Insurer. Plaintiffs have not ascertained whether Nationwide Title or any other agencies created documents for Chase as a necessary incident to Chase’s purchase of title insurance in Florida.

 

  1. Chase used Real Time Resolutions, GC Services, and Five Lakes Agency, among other collection agencies, to maximize its own back door revenues on loans that were problematic and had been inactivated/“charged off” and thereby were invisible to regulatory agencies.

 

  1. At all times, Defendants directed the collection of revenue on problematic federal mortgage loans, placing them in succession at third party collection agencies. Those third party collection agencies included:

 

  1. The third-party collection agencies had a duty to verify whether the debts were owned by Chase, offer pre-foreclosure loss mitigation, offer Borrowers foreclosure alternatives, and comply with any of HUD’s quality control directives and knowingly or recklessly failed to do so. The third-party collectors knew that the debts they were collecting at Defendants’ directions were mortgage loans. They also knew they did not have the mechanisms to provide any regulatory servicing. Nonetheless, the third-party collection agencies continued collection on behalf of Chase for RCV1 loans. The collection agencies continued to collect without oversight or verification and did in fact continue collecting on debt on behalf of Defendants, despite the mortgage loans being owned by the Schneider entities. The ongoing collection gave Chase continued windfalls.

 

  1. A September 30, 2014 document shows that as late as September 30, 2014, Defendants had charged-off and ported 699,541 loans into RCV1.

 

  1. Unbeknownst to Plaintiffs, Chase was selling non-compliant and thus no longer “federally related mortgage loans” to Plaintiff which Chase had ported and inactivated within their regulated systems of records but had copied over to a separate data repository solely for the purpose of collecting without servicing.

 

 

  1. Plaintiff MRS was not privy to Defendants’ internal communications of October 30, 2008, which clarify that Chase knew that the loans it was intending to off load onto the Plaintiff were not on the primary system of record and were being provided from the un-serviced repository called RCV1. The information in RCV1 was not complete because it was not a regulated system of record. As indicated by Chase’s communications, Chase purposefully cut and pasted select information where it could from other systems of records to the information in RCV1. Defendants’ emails discuss data from the FORTRACS application, the acronym for Foreclosure Tracking System, which is an automated, loan default tracking application that also handles the loss mitigation, foreclosure processing, bankruptcy monitoring, and whose data would have originally come from a primary system of record. Rather than a normal and customary data tape, Chase was providing a Frankenstein of a data tape, stitched together from a patchwork of questionable information.

 

  1. Despite its representation and warranty that Chase “is the owner of the Mortgage Loans and has full right to transfer the Mortgage Loans,” a significant portion of the loans listed on Exhibit A were not directly owned by Chase.

 

  1. Upon information and belief, some of the loans sold to MRS were RMBS trust loans which Chase was servicing. Chase had transferred these to MRS in order to avoid non-reimbursable advances and expenses. The unlawful transfer of these loans to MRS as part of the portfolio of loans sold under the MLPA aided the Defendants in concealing Regulatory non-compliance and fraud while increasing the liabilities of MRS.

 

  1. Chase committed, inter alia, the following violations of law with respect to the loans sold to MRS: a. Chase transferred the servicing of the mortgage loans to and from multiple unlicensed and unregulated debt collection agencies which lacked the mortgage servicing platforms to account for or service the borrowers’ loan with any accuracy or integrity.

Investigator Bill Paatalo of the BP Investigative Agency points out that allegations in this case support accusations in other lawsuits against JPMorgan Chase including that:

  1. Chase knowingly provided collection agencies with false and misleading information about the borrowers.
  2. Chase failed to provide proper record keeping for escrow accounts.
  3. Chase stripped loan files of most origination documentation, including federal disclosures and good faith estimates, thus putting MRS in a positionwhere it was unable to respond to borrower or regulatory inquiries.
  4. Chase failed to provide any accurate borrower payment histories for any of the loans in theMLPA.
  5. Chase knowingly executed assignments of mortgage to MRS for mortgage loans that Defendants knew had been foreclosed and sold to third parties.
  6. Chase circumvented its own operating procedures and written policies in connection with servicing federally-related mortgage loans by removing the loans from its primary record-keeping platform and creating an entry in its RCV1 repository. This had the effect of denying the borrowers their rights concerning federally related mortgages yet allowed Chase to retain the lien and the benefit of the security interest,
  7. Chase included on Exhibit A loans that it had previously sold to third parties and loans that it had never owned.
  8. Chase knowingly and deliberately changed the loan numbers of numerous valuable loans sold to MRS after the MLPA had been fully executed and in force. This allowed Chase to accept payments from borrowers whose loans had been sold to MRS without its own records disclosing the wrongful acceptance of such payments.
  9. Chase’s failure to provide the assignments of the notes and mortgages was not an act of negligence. As events unfolded, it became clear that Chase failed to provide the assignments of the notes and mortgages because it wanted, in selective instances, to continue to treat the sold loans as its own property.
  10. Chase converted payments from borrowers whose loans it had sold

At what point does the Federal Government take action against these fraudulent practices?  It is likely that ALL major banks are participating in the exact same racketeering enterprises so obvious at JPMorgan Chase.

Bill Paatalo, Private Investigator:
BP Investigative Agency, LLC
P.O. Box 838
Absarokee, MT 59001
Office: (406) 328-4075
Attorney Charles Marshall, Esq.
Law Office of Charles T. Marshall
415 Laurel St., #405
San Diego, CA 92101

 

 

Collateral & Securitization Failures: There was no Loan in most Refinances

Below is a link to a video where GlobalCollateral’s Chief Commercial Officer Ted Leveroni discusses collateral settlement failures and he basically states that the securitization failed. Collateral fail and securitization fail are exactly the same thing. In this case, the evidence is indisputable that most transactions are not in fact settled but that they are held “in street name” which means the brokers own it as “nominee.” And that enables the banks as brokers to assert ownership over what is not theirs to own. Account holders are getting statements and payments from a slush fund. This is partial corroboration of my conjecture that there literally was no actual loan in most cases involving a refinance.

The Officer states USB doesn’t know who the investors are and says you’ll have to go to DTC to likely find out.

Look at this short video from DTC –

 

False Claims by False Claimants

The “tender” discussion in or out of bankruptcy court is a non sequitur. Why would you “tender” money to a party whose claim is obviously false?

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-
I recently had occasion to respond to an email regarding, as it turned out, understanding the way securitization actually worked, as opposed to what is shown on paper. The topic was “tender.” This is what I wrote:
Why would you “tender” money to a party whose claim is obviously false? This would be adding insult to injury. Your debt arose when you received the money or the benefit of someone paying money on your behalf. If you then execute a note to the party who gave you that money, directly or to a disclosed authorized agent, the debt is merged into the note, as it should be. That prevents double liability — one liability fro the debt and one liability arising from the note.

But if you executed a note in favor of a party who was NOT the source of funds and NOT authorized by the source of funds, then the execution of the note would be the creation of two liabilities — one on the debt, owed to the source of funds, and one on the note which if released, could end up being a negotiable instrument that, if paid for, would indeed create the second liability. (Even without being purchased we have seen millions of cases where the assertion of “holder” is mistakenly used to grant HDC status).

The claimants in your case can collect from you if their claim derives from a transaction in which money was delivered to you by the payee on the note or if the payee on the note was acting in a representative capacity for the source of funding.

But we already know that the payee was not acting in a representative capacity for the the actual source of funding — a group of investors whose identification is withheld from the Petitioner.

We know this because the investors bought certificates issued by a trust. The proceeds of sale of the trust-issued certificates were to have been paid to the issuing trust. If that had happened, then the trust would have paid for the acquisition (not the origination) of loans. And if that was what actually happened then the Trust would be a holder in due course not subject to the petitioner’s defenses.

None of the claimants assert status as holders in due course. Hence one of the elements of HDC status is missing since the only reasonable thing for the trust to have done would have been to assert HDC status and merely prove the purchase of the loans. The missing element is obviously the purchase for value since good faith is presumed and knowledge of borrower’s defenses is difficult to imagine, let alone prove.

Since HDC status is not asserted, the only logical conclusion is that the trust never did the only thing the trust was created to do — purchase loans. And the only reason that can be reasonably applied is that the Trust never made the purchase because it never received the money from the sale of the certificates. And that means that the trust never purchased existing loans as  per the requirements of the trust prospectus and PSA. That takes the Trust out of the mix entirely.

That leaves us with the investors money being used to originate mortgages without their consent or knowledge and contrary to the terms of the documents under which they agreed to fund the purchase of the trust certificates.

There is a complete absence of any paper trail linking the investors to the loans that were originated. All documentation was prepared and executed as if the Payee had loaned money to the Petitioner.

There are only two possibilities. Either the intermediaries who sold the trust issued certificates kept all the money or they kept part of it.

Given the fact that none of the assignments or endorsements were supported by any consideration, the only reasonable assumption is that there was no consideration because none was due — i.e., the transferor had no rights to the debt and the note and mortgage were NOT evidence of the debt.

It follows logically that there is no evidence of the debt other than the events that occurred at the falsely dubbed “loan closing.”

Those events give rise to a debt owed by Petitioner that is NOT the subject of the note and mortgage that were executed. Those instruments refer to a transaction that never existed. Petitioner was given money once, not twice.

The chain of paper offered by the claimants provides the rest of the answer to these highly complex obscure fictitious transactions. Ultimately the paper chain relied upon by the claimants leads up to a trust or party acting as though it were in the position of a REMIC trust.

It does not lead to the investors because we know that the investors’ money never went into the trust and that therefore the trust is a sham entity created solely on paper, without any physical existence or trust administrator in the form of a live person. In fact, upon inquiry, it is obvious that the Trust never had a bank account and never engaged in any business activity at all. The investors therefore have interests in an empty trust — which is all the documentation they have or could claim.

All of the claimants are in fact intermediaries posing as real parties in interest. When confronted they pivot from being servicers, or agents, or attorneys in fact or “holders.” It is a moving target until the question is posed: whose money was used in the origination or acquisition of the debt? Are those parties on any of the documentation? It was the investors’ money that was used. And no, the investors are not directly or indirectly on the paperwork relied upon by the claimants. And the claimants are not directly or indirectly representing the investors. The claimants are intermediaries whose only claim is that they represent the trust and perhaps the trust beneficiaries as it relates to the business of the trust, which is nothing.

Hence tender to the claimants for any reason would be to guarantee two liabilities for one transaction. Tender would pay the baseless claim of the claimants while allowing the real debt to go unpaid under circumstances where the investors, to whom the money is owed, did not give actual or apparent authority to these claimants. All current court events are being carried on without the knowledge of the investors, much less their intention to give authority to these claimants who were part of a larger fraudulent scheme.

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/

Who Are the Creditors?

For litigation support (to attorneys only) and expert witness consultation, referrals to attorneys please call 954-495-9867 or 520 405-1688.

Since the distributions are made to the alleged trust beneficiaries by the alleged servicers, it is clear that both the conduct and the documents establish the investors as the creditors. The payments are not made into a trust account and the Trustee is neither the payor of the distributions nor is the Trustee in any way authorized or accountable for the distributions. The trust is merely a temporary conduit with no business purpose other than the purchase or origination of loans. In order to prevent the distributions of principal from being treated as ordinary income to the Trust, the REMIC statute allows the Trust to do its business for a period of 90 days after which business operations are effectively closed.

The business is supposed to be financed through the “IPO” sale of mortgage bonds that also convey an undivided interest in the “business” which is the trust. The business consists of purchasing or originating loans within the 90 day window. 90 days is not a lot of time to acquire $2 billion in loans. So it needs to be set up before the start date which is the filing of the required papers with the IRS and SEC and regulatory authorities. This business is not a licensed bank or lender. It has no source of funds other than the IPO issuance of the bonds. Thus the business consists simply of using the proceeds of the IPO for buying or originating loans. Since the Trust and the investors are protected from poor or illegal lending practices, the Trust never directly originates loans. Otherwise the Trust would appear on the original note and mortgage and disclosure documents.

Yet as I have discussed in recent weeks, the money from the “trust beneficiaries” (actually just investors) WAS used to originate loans despite documents and agreements to the contrary. In those documents the investor money was contractually intended to be used to buy mortgage bonds issued by the REMIC Trust. Since the Trusts are NOT claiming to be holders in due course or the owners of the debt, it may be presumed that the Trusts did NOT purchase the loans. And the only reason for them doing that would be that the Trusts did not have the money to buy loans which in turn means that the broker dealers who “sold” mortgage bonds misdirected the money from investors from the Trust to origination and acquisition of loans that ultimately ended up under the control of the broker dealer (investment bank) instead of the Trust.

The problem is that the banks that were originating or buying loans for the Trust didn’t want the risk of the loans and frankly didn’t have the money to fund the purchase or origination of what turned out to be more than 80 million loans. So they used the investor money directly instead of waiting for it to be processed through the trust.

The distribution payments came from the Servicer directly to the investors and not through the Trust, which is not allowed to conduct business after the 90 day cutoff. It was only a small leap to ignore the trust at the beginning — I.e. During the business period (90 days). On paper they pretended that the Trust was involved in the origination and acquisition of loans. But in fact the Trust entities were completely ignored. This is what Adam Levitin called “securitization fail.” Others call it fraud, pure and simple, and that any further action enforcing the documents that refer to fictitious transactions is an attempt at making the courts an instrument for furthering the fraud and protecting the perpetrator from liability, civil and criminal.

And that brings us to the subject of servicer advances. Several people  have commented that the “servicer” who advanced the funds has a right to recover the amounts advanced. If that is true, they ask, then isn’t the “recovery” of those advances a debit to the creditors (investors)? And doesn’t that mean that the claimed default exists? Why should the borrower get the benefit of those advances when the borrower stops paying?

These are great questions. Here is my explanation for why I keep insisting that the default does not exist.

First let’s look at the actual facts and logistics. The servicer is making distribution payments to the investors despite the fact that the borrower has stopped paying on the alleged loan. So on its face, the investors are not experiencing a default and they are not agreeing to pay back the servicer.

The servicer is empowered by vague wording in the Pooling and Servicing Agreement to stop paying the advances when in its sole discretion it determines that the amounts are not recoverable. But it doesn’t say recoverable from whom. It is clear they have no right of action against the creditor/investors. And they have no right to foreclosure proceeds unless there is a foreclosure sale and liquidation of the property to a third party purchaser for value. This means that in the absence of a foreclosure the creditors are happy because they have been paid and the borrower is happy because he isn’t making payments, but the servicer is “loaning” the payments to the borrower without any contracts, agreements or any documents bearing the signature of the borrower. The upshot is that the foreclosure is then in substance an action by the servicer against the borrower claiming to be secured by a mortgage but which in fact is SUPPOSEDLY owned by the Trust or Trust beneficiaries (depending upon which appellate decision or trial court decision you look at).

But these questions are academic because the investors are not the owners of the loan documents. They are the owners of the debt because their money was used directly, not through the Trust, to acquire the debt, without benefit of acquiring the note and mortgage. This can be seen in the stone wall we all hit when we ask for the documents in discovery that would show that the transaction occurred as stated on the note and mortgage or assignment or endorsement.

Thus the amount received by the investors from the “servicers” was in fact not received under contract, because the parties all ignored the existence of the trust entity. It was a voluntary payment received from an inter-meddler who lacked any power or authorization to service or process the loan, the loan payments, or the distributions to investors except by conduct. Ignoring the Trust entity has its consequences. You cannot pick up one end of the stick without picking up the other.

So the claim of the “servicer” is in actuality an action in equity or at law for recovery AGAINST THE BORROWER WITHOUT DOCUMENTATION OF ANY KIND BEARING THE BORROWER’S SIGNATURE. That is because the loans were originated as table funded loans which are “predatory per se” according to Reg Z. Speaking with any mortgage originator they will eventually either refuse to answer or tell you outright that the purpose of the table funded loan was to conceal from the borrower the parties with whom the borrower was actually doing business.

The only reason the “servicer” is claiming and getting the proceeds from foreclosure sales is that the real creditors and the Trust that issued Bonds (but didn’t get paid for them) is that the investors and the Trust are not informed. And according to the contract (PSA, Prospectus etc.) that they don’t know has been ignored, neither the investors nor the Trust or Trustee is allowed to make inquiry. They basically must take what they get and shut up. But they didn’t shut up when they got an inkling of what happened. They sued for FRAUD, not just breach of contract. And they received huge payoffs in settlements (at least some of them did) which were NOT allocated against the amount due to those investors and therefore did not reduce the amount due from the borrower.

Thus the argument about recovery is wrong because there really is no such claim against the investors. There is the possibility of a claim against the borrower for unjust enrichment or similar action, but that is a separate action that arose when the payment was made and was not subject to any agreement that was signed by the borrower. It is a different claim that is not secured by the mortgage or note, even if the  loan documents were valid.

Lastly I should state why I have put the “servicer”in quotes. They are not the servicer if they derive their “authority” from the PSA. They could only be the “servicer” if the Trust acquired the loans. In that case they PSA would affect the servicing of the actual loan. But if the money did not come from the Trust in any manner, shape or form, then the Trust entity has been ignored. Accordingly they are neither the servicer nor do they have any powers, rights, claims or obligations under the PSA.

But the other reason comes from my sources on Wall Street. The service did not and could not have made the “servicer advances.” Another bit of smoke and mirrors from this whole false securitization scheme. The “servicer advances” were advances made by the broker dealer who “sold” (in a false sale) mortgage bonds. The brokers advanced money to an account in which the servicer had access to make distributions along with a distribution report. The distribution reports clearly disclaim any authenticity of the figures used, the status of the loans, the trust or the portfolio of loans (non-existent) as a whole. More smoke and mirrors. So contrary to popular belief the servicer advances were not made by the servicers except as a conduit.

Think about it. Why would you offer to keep the books on a thousand loans and agree to make payments even if the borrowers didn’t pay? There is no reasonable fee for loan processing or payment processing that would compensate the servicer for making those advances. There is no rational business reason for the advance. The reason they agreed to issue the distribution report along with money that was actually under the control of the broker dealer is that they were being given an opportunity, like sharks in a feeding frenzy, to participate in the liquidation proceeds after foreclosure — but only if the loan actually went into foreclosure, which is why most loan modifications are ignored or fail.

Who had a reason to advance money to the creditors even if there was no payment by the borrower? The broker dealer, who wanted to pacify the investors who thought they owned bonds issued by a REMIC Trust that they thought had paid for and owned the loans as holder in due course on their behalf. But it wasn’t just pacification. It was marketing and sales. As long as investors thought the investments were paying off as expected, they would buy more bonds. In the end that is what all this was about — selling more and more bonds, skimming a chunk out of the money advanced by investors — and then setting up loans that had to fail, and if by some reason they didn’t they made sure that the tranche that reportedly owned the loan also was liable for defaults in toxic waste mortgages “approved” for consumers who had no idea what they were signing.

So how do you prove this happened in one particular loan and one particular trust and one particular servicer etc.? You don’t. You announce your theory of the case and demand discovery in which you have wide latitude in what questions you can ask and what documents you can demand — much wider than what will be allowed as areas of inquiry in trial. It is obvious and compelling that asked for proof of the underlying authority, underlying transaction or anything else that is real, your opposition can’t come up with it. Their case falls apart because they don’t own or control the debt, the loan or any of the loan documents.

%d bloggers like this: