Bank Fraud News: The reason why banks and servicers should receive no presumption of reliability

The following is but a short sampling supporting the argument that any document coming from the banks and servicers is suspect and unworthy of any legal presumption of authenticity or validity. Judges are looking into self-serving fabricated documentation and coming to the wrong conclusion about the facts.

Chase following bank playbook: screw the customer

“Chase provided no prior notice to its cardholders that their crypto ‘purchases’ would be treated as ‘cash advances’ on a going forward basis,” according to the suit.

Tucker claims he was hit with about $140 in fees and a “sky-high” interest rate of 26 percent without warning after Chase reclassified his purchases as cash advances, a violation of the Truth in Lending act.

Fannie Mae and Freddie Mac Stealth: Hiding the elephant in the living room

Its never been a secret that Freddie Mac’s business policy is to remain stealth in any chain of title if possible, and to rely on the servicers to keep its presence a secret in foreclosure proceedings. In fact, this PNC case which was overturned against PNC, involved the Defendant’s assertion that PNC was concealing Freddie Mac’s interest in the loan. Freddie Mac’s business policy appears to rely upon nothing more than handshakes with the originators and servicers. Here is some verbiage from a “Freddie Mac – Mortgage Participation Certificates” disclosure (See: Freddie Mac – Mortgage Participation Certificates):

Deutsch files lawsuit against private mailbox troller following the Deutsch playbook of foreclosure

“Defendants, and each of them initiated a malicious campaign to disrupt the chain of title to prevent Plaintiff from enforcing its contractual rights in the 2006 DOT by way of recording fraudulent documents to purportedly assign the rights under the 2006 DOT without the consent of Plaintiff, and otherwise thereafter fraudulently transfer all rights via a trustee deed upon sale, even though no trustee sale was ever conducted. All subsequently recorded or unrecorded transactions are therefore null, void, and of no effect.”

EDITOR COMMENT: So Deutsch is admitting that its practice of recording fraudulent documents are “null, void and of not effect.” In order to get to that point Deutsch is going to be required to prove standing — i.e., definitive proof that it paid for the debt, which it did not. Deutsch is on dangerous ground here and might deliver a bonus for homeowners. As for the defense, is it really a crime to steal a fraudulent deed of trust supported by fraudulent assignments and endorsements?

Barclays Bank settles for $2,000,000,000 for fraud on investors

Barclays’ offering documents “systematically and intentionally misrepresented key characteristics of the loans,” and more than half of the loans defaulted, federal officials said.

Additionally, the Department of Justice reached similar settlements with two Barclays’ employees involved with subprime residential mortgage-backed securities. They will pay $2 million collectively.

The agreements mark the latest in a string of U.S. settlements with major banks over sales of tainted mortgage securities from 2005 to 2007 that helped set the stage for the real estate crash that contributed to the financial crisis.

Deutsch Pays $7.2 Billion for Fraudulent securitizations

Confirming settlement details the bank disclosed in late December, federal investigators said Deutsche Bank will pay a $3.1 billion civil penalty and provide $4.1 billion in consumer relief to homeowners, borrowers, and communities that were harmed.

The federal penalty is the highest ever for a single entity involved in selling residential mortgage-backed securities that proved to be far more risky than Deutsche Bank led investors to believe. Nonetheless, the agreement represents relief of sorts for the bank and its shareholders, because federal investigators initially sought penalties twice as costly.

Credit Suisse‘s announcement said it would pay the Department of Justice a $2.48 billion civil monetary penalty. The bank will also provide $2.8 billion in consumer relief over five years as part of the deal, which is subject to negotiations over final documentation and approval by Credit Suisse’s board of directors. [Credit Suisse owns SPS Portfolio Servicing.]

Ocwen Settles with 10 States for Illegal Servicing

“The consent order provides that Ocwen will transition its servicing portfolio off of its current servicing platform to a platform better able to manage escrow accounts and establish a new complaint resolution process,” the Georgia Department of Banking and Finance said in a press release. “Ocwen shall hire a third-party firm to audit a statistically significant number of escrow accounts in high-risk areas of the portfolio to determine whether problems continue to exist around the management of escrow accounts and to identify the root cause of those problems.

“Ocwen has faced many legal and regulatory challenges in recent years. In December 2013 it reached a settlement over foreclosure and modification processes with the CFPB and state regulators. A year later, it made a separate agreement with New York regulators that removed company founder William Erbey as CEO.

Wells Fargo Whistleblower is Fired Among Others Who refused to Lie to Customers

In 2014, according to Mr. Tran, his boss ordered him to lie to customers who were facing foreclosure. When Mr. Tran refused, he said, he was fired. He worried that he wouldn’t be able to make his monthly mortgage payments and that he was about to become homeless.

Joining a cadre of former employees claiming they were mistreated for speaking out about problems at the bank, Mr. Tran sued. He argued in court filings that he had been fired in retaliation for blowing the whistle on misconduct at the giant San Francisco-based bank. Mr. Tran said he didn’t want his job back — he wanted Wells Fargo to admit that it had been wrong to fire him and wrong to mislead customers who were facing foreclosure.

 

 

 

Adam Levitin on Backdating: A Pattern of Conduct at Ocwen and Other Players in the Foreclosure Frenzy

see also http://themreport.com/news/government/01-13-2015/california-moving-suspend-ocwens-mortgage-license

Adam Levitin has definitely established himself as one of the more respected figures in analyzing and commenting on mortgage and foreclosure practices. In this article below, he reveals the fraudulent nature of even the most benign looking foreclosures. Various parties, including Ocwen which he cites in particular, regularly backdated denials of modification and backdated ownership paperwork.

His emphasis is on the pattern of conduct dating back many years which continues unabated despite administrative findings of wrongdoing, and settlements in which they agreed to correct these practices. If you look at Select Portfolio Servicing, formerly Fairfield Capital, (and now owned by Credit Suisse) you will see that they were guilty of fraudulent servicing practices as far back as 2003.In a recent case where Patrick Giunta and I represented the homeowners the court found that there was no authority of the servicer and no loan transfer to the alleged Trust. The Judge specifically expressed her displeasure with the obvious indications of backdating and fabrication of endorsements, assignments and the attempt at using Powers of Attorney that were a fabricated work-around

Levitin is right in his conclusion. And I would add that any “presumption” rebuttable or otherwise, should not be allowed regarding any paperwork that is produced by these players. Levitin should be a regular read for those of you who are following this evolving mess.

http://www.creditslips.org/creditslips/

Corporate Recidivism? Ocwen’s Charter Problems

posted by Adam Levitin
Last month mortgage servicer Ocwen (that’s NewCo backwards) was mauled by the NY State Department of Financial Services. Now the California Department of Corporations is seeking to revoke Ocwen’s license to do business in that state.
Here’s the thing that is often forgotten: this ain’t the first time! Ocwen used to be a federal thrift. In 2005, however, Ocwen “voluntarily” surrendered its thrift charter in the face of predatory lending/servicing investigation. And here we are, a decade later. What’s changed? By the NY and California allegations, not much. In other words, we’re looking at a potential case of corporate recidivism. I’ll refrain from commenting on the merits of the allegations, but there should be zero tolerance for corporate recidivism.
While I’m at it, a word about the substance of the NY allegations and remedy. NYDFS accused Ocwen of backdating loan modification denial letters to borrowers facing foreclosure (and thereby depriving the borrowers of a chance to timely appeal the denial). Sadly, this isn’t the first time backdating has reared its head in the servicing business. Remember how the robo-signing story broke? A GM/Ally employee named Jeffrey Stephan stated in a deposition that he personally signed some 10,000 foreclosure affidavits a month. That was the story that the media glommed onto. But the 10,000 affidavits/month was an unexpected deposition by-product. The real issue uncovered in that deposition was that GM/Ally had been backdating foreclosure documents to show that it had standing at the time it filed foreclosure suits, despite not actually being the noteholder and mortgagee until a subsequent date. Loans were supposedly transferred on Christmas Day, Easter, New Year’s Day, etc. So it would seem that backdating may not be an isolated problem to Ocwen. Lastly, it’s worth comparing the NYDFS remedy with the National Mortgage Settlement. NYSDFS got $150 million in “hard dollar” loan mods (not mods paid for on investors’ dime). Ocwen is subject to an independent monitor’s supervision for three years and cannot acquire any more mortgage servicing rights (MSRs). And, Ocwen’s Chairman must resign and two additional independent board members must be added.
In contrast, the National Mortgage Settlement (NMS) was largely based on “soft dollar” mods, rather than real borrower relief. It did come with an independent monitor, but the NMS monitor isn’t able to be in the banks’ face the way the Ocwen monitor can. The NMS didn’t limit acquisition of MSRs. And it didn’t touch existing bank management or board structure. Put it this way: if the federal government and state AGs had as much spine as Ben Lawsky, Mssrs. Dimon, Moynihan, and Stumpf would be looking for new jobs (or enjoying their retirement). Of course, Ocwen is a scrappy, non-bank, non-SIFI. So it doesn’t enjoy the kid glove treatment.
The NYDFS Ocwen settlement sets out a new potential paradigm for mass consumer financial abuse settlements: real money, serious monitoring, and heave-ho to the old management. If senior management thinks that their job security is at risk for consumer abuse, they might well be more proactive at preventing it in the first place.

Are Fraud Claims Barred by Statute of Limitations? Credit Suisse (Owner of SPS) Loses

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

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

I have long argued that TILA claims are not barred and that fraud claims based upon intentional withholding of information (required by the Truth in Lending Act) are also not barred by the statute of limitations UNTIL the claimant knew or should have known about the fraud. What is interesting here is that Credit Suisse, parent company of Select Portfolio Servicing (SPS) went up against the New York attorney general banking (pardon the pun) on the idea that the Martin Act could not be used against them for committing financial fraud because it was barred by the statute of limitations. They lost.

And I think the arguments that caused them to lose can also be applied to common law fraud claims as well as RICO and TILA claims as long as the required disclosures were intentional withheld about the loan closing. Kudos to Schneiderman in New York for beating back people who know they have committed fraud but earnestly hope they can get away with it because of statutes of limitations and statutes of repose. I know that the US Supreme Court has recently come out with some decisions that go against this idea, but I think in the long run they will not apply it to financial fraud arising from the mortgage crisis.

So if you raise claims that relate to TILA and you are litigating against SPS, they will argue that the statute of limitations bars any mention of TILA claims. This decision presents credible argument to the contrary. You might want to say that their parent company Credit Suisse already lost that argument.

All that money going into PR and getting “objective” securities analysts and pundits to say that BOA and the stock of other banks are a great buy now may have worked up until now, but the pyramid is starting to collapse. In my opinion things are going to go pretty bad for the big banks. When people wake up to realize that the smaller regional banks, community banks and credit unions can pick up the slack left behind by the collapse of a few large banks with extreme dominance over the marketplace, support for the big banks is going to crumble. Senator Warren might seem like an extremist to some but to me she just a realist who is sticking to the truth.

see Credit Suisse Loses in Attempt to Bar Action Under Martin Act

UNFUNDED TRUSTS: WHY IT MATTERS

Click in to tune in at The Neil Garfield Show

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

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

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

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

On tonight’s show we will talk about the alleged trusts that allegedly own the loans. In most cases, they do not own the loan nor do they represent the interests of the owners. The owners of the DEBT are the investors who advanced money to the investment bank that sold mortgage bonds to the investor (pension fund). There are two main reasons why this is important:

  1. An unfunded trust has no money to buy or originate loans. Therefore it is an improper party to bring any action to collect or enforce the debt. This is especially true when the unfunded trust has no legal claim to enforce the loan on behalf of the owners. The REMIC Trust should not be allowed to cause a foreclosure, or interfere with the rights of borrowers and investors. Its “servicers” have no right to collect money and when they do collect money from the borrower, they owe the money back to the borrower who paid it to the servicer. This has been discussed in cases highlighted on this blog over the last week.
  2. The unfunded trust is evidence of a fraudulent scheme in which the investors (pension funds) were tricked into advancing money to an investment bank who then misused the money, didn’t deliver it to the trust that issued the mortgage bonds that were sold, and then acted as a conduit between the investors and the borrowers — without either one knowing what was really happening. In a foreclosure, this means that the alleged enforcement of the loan is really furtherance of the fraudulent scheme against investors. Raising this issue does NOT mean there is no debt. It means, in most cases, that foreclosure is not an option because the perpetrators of the fraud and the initiators of the collection and enforcement of the alleged “loan” are one and the same. Hence the Court SHOULD be interested in not being part of a fraudulent scheme. It is a classic case of unclean hands.

The issue is proof and mores specifically the willingness of the court to let you prove your case. This comes down to pleading, discovery, motions to compel that spell out your narrative for the case and investigation through forensic auditors and private investigators. Unfunded REMIC Trusts represent a potential attack against the party initiating foreclosure that can be fatal to their claim if properly presented.

As a general observation these attacks are met with claims of presumptions when dealing with negotiable paper, and the claim that the borrower has no standing to raise the issue. But the borrower clearly does have standing to raise the issue if the borrower is claiming return of all money paid and claiming that the foreclosure action is part of a fraudulent scheme to the detriment of the real creditor and the detriment of the borrower, both of whom under Federal Law are required to pursue options for modification or settlement.

And the legal presumptions only apply to paper that is truly negotiable and where there is no evidence of trustworthiness or lack of credibility. The recent transfers from Chase and other entities to SPS are not really transfers of servicing rights. The “loan” is clearly already declared to be in default — making the claim of negotiable paper (and the presumptions) moot. So the entrance of SPS or another “servicer” under these circumstances is just another layer to fool the court and the borrower.

They are merely hiring SPS to

(a) enforce, because SPS is not processing payments from the borrower nor making payments to the investors (that is done by Chase or whoever is the the named servicer in the PSA) and

(b) create the illusion of business records by having an SPS representative testify that the business records of SPS should be admitted because SPS examined the prior records of the prior servicers and found them to be correct in what they call a “boarding” process. This is a blatant attempt to circumvent the rules of evidence. Both the attempt at creating legal presumptions regarding the note and mortgage and the attempt to use the business records of an “enforcer” posing as a “servicer” should be rejected.

THIS ARTICLE IS MY OPINION AND SHOULD NOT BE USED AS A SUBSTITUTE FOR THE ADVICE FROM AN ATTORNEY LICENSED TO PRACTICE IN THE JURISDICTION IN WHICH YOUR PROPERTY IS LOCATED.

Business Records Exception — The Loophole That Needs Closing

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

———————————————-

see AppellateOpinion Holt v Calchas 4th DCA decision

The clear assumption in this case is that Wells Fargo had stepped into the shoes of the lender and that if Wells Fargo did not win or if its surrogate did not win, it was assumed that the homeowner would be getting a free house, a free ride and a windfall at the expense of Wells Fargo Bank. Despite years of articles and treatises written on the subject, the courts have still not caught up with the basic fact that both the lenders and borrowers were victims of an illegal and fraudulent scheme. At the very least, the court owes it to our society and to all parties involved in foreclosure litigation, to enforce the laws that already exist —  especially the rules concerning the burden of proof in a foreclosure action.

—-

The Holt decision is a curious case. There are a number of unique factors that occurred in the trial court and again in the appellate court. The first judge recused herself shortly into the trial and was replaced by a senior judge. There is no transcript of the proceedings prior to the point where the senior judge took over. At the same time the homeowners attorney was also replaced. So my first question is how anyone could have reached any decision. In the absence of the transcript of the proceedings leading up to the recusal of the original judge I find it troublesome that either the judge or the attorney for the homeowner could come to a decision or develop any trial strategy or theory of the case for the defense of this foreclosure case.

The second thing that I have trouble with is that the homeowner filed the appeal based on three different theories, to wit:

(1) the proffered promissory note, mortgage, and assignment of mortgage should not have been admitted into evidence—  an argument that the appellate court rejects;

(2)  the homeowner’s motion to dismiss should have been granted for failure to prove compliance with paragraph 22 [default, reinstatement and acceleration] of the mortgage —  with which the appellate court agreed. Since the appellate court agreed with this point and reversed the trial court it would seem that the case should have been dismissed, but instead the 4th District Court of Appeal chose to remand the case for further proceedings thus giving a second bite of the apple to the party who was claiming the right to foreclose —  despite the finding that the trial was over and on appeal and the foreclosing party had failed to make its case. If the homeowner had failed to prove its defenses, would the appellate court have issued legal advice to the homeowner and remanded for another bite at the apple?

(3)  the payment history should not have been admitted into evidence over the hearsay objection raised by the homeowner. The court goes into great lengths essentially tying itself into knots over this one, but eventually sides with the homeowner. Instead of ordering the entry of judgment for the homeowner, the court remanded the action for further proceedings in which the foreclosing party, having received legal advice from the District Court of Appeal, is now permitted to retry the case to fill in the blanks that the appellate court had pointed out with great specificity and particularity.

While I agree with much of the reasoning that is stated in this appellate decision, I still find it very troublesome that there remains an assumption and perhaps even a bias in favor of the foreclosing party. This is directly contrary to the rules of court, common law, and statutory law. The party bringing a claim for affirmative relief (like foreclosure) must bear the burden of proving every element required in their cause of action. This is not a motion to dismiss where every allegation is taken as true. At trial, it is the opposite — there is no case for the homeowner to defend unless the foreclosing party establishes all elements of its right to foreclose. If they fail to do so, the other side wins. In the interest of justice as well as finality courts do not easily allow either side to have another trial unless there are exceptional circumstances.

(In non-judicial states, this is particularly perplexing — the homeowner is required to sue for a TRO (temporary restraining order). In actuality the homeowner probably should have sued immediately upon the notice of the purported “substitution of trustee.” But the point is that the homeowner is required to prove a negative as the non-judicial statutes are construed. What SHOULD happen is that if the homeowner sues for the TRO and objects to the notices filed, challenges the standing of the “new” beneficiary on the deed of trust, and otherwise denies the elements of a foreclosure action, then the parties should be realigned with the new beneficiary required to plead and prove its standing, ownership and ability to prove the default and the balance owed.)

The next thing I find potentially troublesome is that the tactic of inserting a new entity as plaintiff or as servicer in order to shield the actual perpetrator was clearly employed in this case, although it seems not to have been mentioned in the trial court or on appeal. In this case an entity called Consumer Solutions 3 LLC was substituted for Wells Fargo. Then Wells Fargo was substituted for Consumer Solutions. This is a game of three card monte in which everyone loses except for the dealer — Wells Fargo.

As long as they are going back to trial, it would seem that the homeowner would be well served to do some investigations into the parties, and to determine what transactions if any had actually occurred. If there were no transactions, which I think is the case, then any paperwork generated from those fictitious transactions would be completely worthless, lacking in any foundation and could never be enforced against anybody —  with the possible exception of a holder in due course.

 BUSINESS  RECORDS EXCEPTION:

I am continually frustrated by the fact that most people simply do not consider the elements of the business records exception to the hearsay rule within the context of why the hearsay rule exists. By its very nature hearsay tends to be untrustworthy, untested and usually self-serving. That is why the rule exists. It bars any document or testimony offered to prove the truth of the matter asserted unless the person who spoke or wrote the words is present in court to be cross examined as to their personal knowledge, whether they had an interest in creating one appearance or another,  or whether the entire statement could be impeached.

Instead most people on all sides of foreclosure litigation seem to think that the business record should be admitted into evidence unless there is a compelling reason to the contrary. This is incorrect. And if you just scratched the surface of any of these claims you will find that the party who is seeking to introduce these hearsay statements into evidence has a vested interest in the outcome of the case and absolutely no direct knowledge of any of the facts of the case.

Like Chase Bank does with SPS, Wells Fargo has inserted this entity that is essentially run by a hedge fund (Cargill) to prevent any employee or contract party from testifying on behalf of Wells Fargo, because Wells Fargo knows that it has already been sanctioned millions of dollars for telling lies in court.

So instead they have somebody else come in to tell the lies, and that witness is trying to say that they are familiar with the record-keeping of their own company which includes the record-keeping of the previous company, Wells Fargo. Consumer Solutions is a shame shell that never did anything but rent its name for foreclosures while its parent, Cargill, received compensation  (a piece of the pie) for doing nothing.

This obvious ploy has worked for nearly a decade but is coming under increasing scrutiny — with Judges musing out loud about the shuffling of “servicers” and “lenders” and creditors. In an effort to stifle any real challenge to foreclosures courts have often held that the securitization documents are “irrelevant.”

So the courts take jurisdiction over the action and the parties by virtue of claims of securitization, authority allegedly granted by a pooling and servicing agreement, and ownership “proven” merely by claiming it on the basis of self-serving fabricated documents not subject to scrutiny, and a default and balance that excludes the payments received by the creditors from servicer advances and other third party payments paid without right of subrogation.

Then the courts limit discovery, overrule objections and allow the party initiating foreclosure to “prove” its case by using dubious legal “presumptions” instead of facts, most of which were denied by the homeowner.

And now that the Wall Street banks perceive a risk in having real people with real knowledge testify, because they might admit or testify to things that might hurt them, they insert a complete stranger to the process and double down on “business record exception” to get paperwork into evidence, much of which is completely fabricated and nearly all of which contains errors in computation by exclusion of (a) the fact that the creditors were paid every payment despite the declaration of default by the “servicer” and (b) deducting those payments from the original debt owed to those investors who advanced funds for the origination or acquisition of “loans.”

In the Holt decision the 4th DCA declares that the assignment was properly allowed into evidence because it was a “verbal act” and not offered to prove the truth of the matter asserted. Once in evidence however, the contents were taken as true shifting the burden of proof to the homeowner who was stone walled in discovery. The homeowner in many cases is not allowed to compel the production of evidence of payment or consideration for the assignment — without which the assignment is merely an empty document conferring no rights greater than the assignor had at the time of the alleged “assignment”. Most often the assignor did not require payment for the simple reason that they too had no money in the deal.

PAYMENT  HISTORY HEARSAY OBJECTION

The court inserts Florida Statute 90.803(6)(a), which is part of the evidence code, providing for exceptions to the hearsay rule for business records. In that statute is the general wording for the types of records that might qualify for the exception. But the court completely ignores the last words of that statute — “unless the sources of information or other circumstances show lack of trustworthiness.” (e.s.)

The question is why should we trust a servicer or its “professional witness”? The witness is there and was often hired for the sole purpose of testifying in foreclosure trials. If they lose, they risk their jobs. The “servicer” whether they are designated in the PSA or have been slipped in as another layer of obfuscation, has an interest that is in conflict with the the actual creditors — recovery of “servicer advances” (which were paid from funds provided by the Master Servicer — often the underwriter and seller of mortgage bonds to investors) and to make more money because they are allowed to collect a vast amount of “fees” for enforcement of a “non-performing” loan.

The fact is that the servicer advances negates the default and might give rise to a new cause of action for unjust enrichment against the homeowner but that claim would not be secured. This in turn leads to the unnatural conclusion of aggravating the the alleged damages by forced sale of the property as opposed to modification and reformation of the loan documents to (a) name the true creditor and (b) use the true balance owed to the creditors.

Thus both the specific witness and the company he or she represents have a vested interest in seeing to it that the foreclosure results in a forced sale for their own benefit and contrary to creditors who have no notice of the pending action. At the very least, this certainly raises the question of trustworthiness. Add to that the fraudulent servicing practices, the lies told during the “modification” process, and I would argue that the source and circumstances raise a presumption that the testimony and business records not trustworthy.

Quoting Florida Statute 90.803(6)(a) the court goes not to set forth the elements of the business records exception — the issue being that ALL elements must be met, not just some or even most of them:

  1. The record was made at or near the time of the event [so in many cases where SPS was inserted as the “servicer” when in fact it was merely an enforcer without knowledge of prior events, it is impossible for the records of SPS  to contain entries that were made at or near the time of any relevant event].
  2.  the record was made by or from information transmitted by a person with knowledge [ if the court permitted proper discovery, voir dire, and cross examination is doubtful that any witness would be able to testify that the record was made by a particular person who had actual knowledge]
  3.  the record was kept in the ordinary course of a regularly conducted business activity [ while it might be true that the actual servicer could claim that it’s records were in the ordinary course of a regularly conducted business activity, it is not true where the witness is a representative of a “new” servicer for plaintiff —  neither of whom were processing any data concerning the loan from the moment of origination through the date that the foreclosure was filed]
  4.  that the record was a regular practice of that business to make such a record [ here is where the courts are in my opinion making a singular error —  by accepting proof of only the fourth element required for the business records exception, trial court and appellate courts are ignoring the other elements and therefore allowing untrustworthy documents into evidence.  “While it is not necessary to call the individual who prepared a document, the witness to open a document is being offered must be able to show each of the requirements for establishing a proper foundation.” Hunter v  or Aurora loan services LLC, 137 S 3d 570 (Fla 1st DCA 2014).

The Holt Court then goes on to analyze several cases:

  1. Yisrael v State 993 So 2d 952, 956 (FLA 2008) — a Florida Supreme Court decision quoting the elements of the business records exception. see sc07-1030
  2. Glarum v LaSalle Bank, N.A. 83 So 3d (Fla 4th DCA 2011) — where the witness was unable to lay the proper foundation for the business records exception  because the witness testified that he “did not know who, how, or when the data entries were made into [ the previous mortgage holders’] system and he could not stated the records were made in the regular course of business.” ( My only objection to this is the wording that was used. The predecessors in the document chain are referred to as “mortgage holders” —  indicating an assumption which is probably not true). see Glarum v. LaSalle
  3. Weisenberg v Deutsch Bank N.A. 89 So 3d 1111 (FLA 4th DCA 2012) — Where the court held that “the deposition excerpts show that [the witness] knew how the data was produced and her testimony demonstrated that she was familiar with the bank’s record-keeping system and had knowledge about data is uploaded into the system.” (My problem with the Weisenberg decision is that the word “familiar” is used generically so that the witness is allowed to testify about the business records — without any personal knowledge about the trustworthiness of the data in those records — again with the apparent assumption that the foreclosing party SHOULD win and the second assumption being that the homeowner should not be allowed to take advantage of hairsplitting technicalities to get a free house.  In fact it is the servicer that is taking advantage of such technicalities by getting business records into evidence without verification that those are all the business records. For example, the question I often ask is who did the servicer pay after receiving payment from the borrower or anyone else? The records don’t show that — thus how can the court determine the balance on the creditor’s books and records? The underlying false assumption here is that the servicer records ARE the creditor’s records even though the creditors have not even been identified.)
  4. WAMCO v Integrated Electronic Environments 903 So 2d 230 (Fla 2d DCA 2005) —  Where another appellate court held that “a document which contains the amount of money owed on the loan was admissible under the business records exception even where the testimony as to the amount owed was based on information from a bank that previously held the loan.” (I think this decision was at least partially wrong. The witness testified that it was part of his duties to oversee the collection of loans that the bank urges and the initial members he used his calculations were provided by the previous bank.  In my opinion the court properly concluded that the witness to testify —  that he should have been limited to the business records of the company that employed him. Witness knew nothing about the previous bank practices and did not employ any verification processes. see 2D04-2717
  5. Hunter v Aurora Loan Services 137 So 3d 570 (Fla 1st DCA 2014) — where the witness was incompetent to testify and could not lay a proper foundation for the business records exception and in which the HOLT Court quotes from the Hunter decision with obvious approval:  “At trial, a witness who works for the current note holder, but never worked for the initial note holder, attempted to lay the foundation for the introduction of records pertaining to prior ownership and transfer of the note and mortgage as business records. The witness testified that based on his dealings with the original note holder, the original note holders business practice regarding the transfer of ownership of loans was standard across the industry. He could not testify, based on personal knowledge, who generated the information. He also testified, in general fashion and without any specifics, that some of the documents sought to be introduced were generated by a computer program used across the industry  and that records custodian for the loan servicer was the person who usually it puts the information obtained in the documents. The trial court admitted the documents into evidence.” see hunter-v-aurora-loan-servs-llc

The most interesting quote from the Hunter decision is “absent such personal knowledge, the witness was unable to substantiate when the records were made, whether the information they contain derived from a person with knowledge, whether the original note holder regularly make such records, or indeed, whether the records belong to the original note holder in the first place. The testimony about standard mortgage industry practice only arguably established that such records are generated and kept in the ordinary course of mortgage loan servicing.” 

“FREE HOUSE” in NJ Bankruptcy Court

For further information and assistance please call 954-495-9867 and 520-405-1688. We will be covering this decision on the Neil Garfield show tonight.

———————————-

Click in to tune in at The Neil Garfield Show

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

see http://stopforeclosurefraud.com/2014/11/18/in-re-washington-bankr-court-d-new-jersey-morris-county-homeowner-gets-a-free-house/

also see Senator Elizabeth Warren Ramping Up Attack: When Will “Principal reduction” become a reality?

This case is notable for several reasons:

  1. The Judge expresses outright that it is general judicial bias that homeowner should not prevail in foreclosure litigation.
  2. Nevertheless this Judge trashes the the claim of SPS (Specialized Loan Services) and BONY (Bank of New York) Mellon leaving the homeowner with what the Judge calls a free house.
  3. The Judge concludes that the mortgage was unenforceable and that the note was unenforceable after a careful examination of the statute of limitations under New Jersey law.
  4. The Judge concludes that the mortgage is void, not just unenforceable, thus clearing title.

While we can be pleased with the result, some of the reasoning might not withstand an appeal, if the foreclosers take the risk of filing one.

Here are some interesting excerpts:

“No one gets a free house.” This Court and others have uttered that admonition since the early days of the mortgage crisis, where homeowners have sought relief under a myriad of state and federal consumer protection statutes and the Bankruptcy Code. Yet, with a proper measure of disquiet and chagrin, the Court now must retreat from this position, as Gordon A. Washington (“the Debtor”) has presented a convincing argument for entitlement to such relief. So, with figurative hand holding the nose, the Court, for the reasons set forth below, will grant Debtor’s motion for summary judgment.
The Defendants accelerated the maturity date of the loan to the June 1, 2007 default date, as acknowledged in the Assignment (dkt. 7, Exhibit L).[10] Moreover, neither the Debtor nor the Defendants have taken any measures under the note or mortgage, or under the Fair Foreclosure Act, to de-accelerate the debt, and the Defendants have further failed to file a foreclosure complaint within 6 years of the accelerated maturity date as required by N.J.S.A. § 2A:50-56.1(a). Accordingly, the Defendants are now time-barred from filing a foreclosure complaint and from obtaining a final judgment of foreclosure.

11 U.S.C. § 502(b)(1) (emphasis added). 11 U.S.C. § 506 controls the allowance of secured claims and provides that, if the claim underlying the lien is disallowed, then the lien is void:

(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless [conditions not relevant here exist].
As explained above, by application of N.J.S.A. § 2A:50-56.1(a) and (c), the Defendants are time-barred under New Jersey state law from enforcing either the note or the accelerated mortgage. As a result, Defendants’ proof of claim 7 must be disallowed under 11 U.S.C. § 502(b)(1) as unenforceable against the Debtor or against Debtor’s property under applicable state law. Having determined that Defendants do not have an allowed secured claim, the underlying lien is deemed void pursuant to 11 U.S.C. §§ 506(a)(1) and (d).[11]
In light of Defendants’ acceleration of the maturity date of the underlying debt as of June 1, 2007, and because neither Debtor nor Defendants took any action under either the mortgage instruments, or the Fair Foreclosure Act, to de-accelerate the maturity date, Defendants’ right to file a foreclosure complaint expired 6 years after the June 1, 2007 acceleration date under N.J.S.A. § 2A:50-56.1(a). Given that Defendants’ putative secured claim is unenforceable under 11 U.S.C. § 502(b)(1), by applicable New Jersey statute, their mortgage lien is void under 11 U.S.C. § 506(d), and the Debtor retains the property, free of any claim of the Defendants. Debtor is to submit a form of judgment. The Court will proceed to gargle in an effort to remove the lingering bad taste.
11] In as much as the Court finds that the Defendants are time-barred from enforcing the note or the mortgage, it is not necessary to address Debtor’s arguments that Defendants lack standing to enforce the note and mortgage based on alleged defects in the Assignment or the alleged impact of a Settlement Agreement.

SPS and the Chase Servicer Shell Game

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

—————————————-

Many Judges have expressed their concern about the constant movement of servicers and trustees. They are asking why the servicer keeps changing and why the trustees are changing. And now they are asking for legal argument why the substitution of the only named Plaintiff is not an amendment to the Complaint which must specifically allege facts in support of the claim of the “new Plaintiff.” This is a result of the multifaceted fraudulent scheme where claims of securitization are unfounded and claims of debt are fictitious — in derogation of the rights of both investors on Wall Street and borrowers on main Street.

Taking an example from one case being litigated now, we have a fact pattern where WAMU was the “lender” in the purchase money mortgage. Chase steps in and refinances the loan. Long after these events and long after the “default” was declared by Chase, SPS is said to be the servicer, not Chase. This successor entity is thus the party whose corporate representative is brought to trial to testify. The witness admits to having no direct personal knowledge and has no job other than testifying. The witness has no knowledge nor employment history with Chase, WAMU or the Trust or Trustee (usually US BANK where Chase is involved). The borrower, despite encouragement to take more money on refinancing, elected only to get enough money to make repairs due to storm damage. They received $45,000 in this example.

This is an issue which is slowly dawning on me that could shake things up considerably. Whether we use it or not is a different story.

It might mean that the real loan was only $45k — in total. That would affect the collections on the loan, which could have paid off the actual loan in its entirety, as well as the validity of the declaration of default and the truth of the matters asserted in the judicial complaint or the notice of non-judicial default and notice of sale. Specifically the “reinstatement” figure or “redemption” figure might actually be a negative figure — money due from the parties stating that they are the creditors, which claim they can hardly deny since they are pursuing foreclosure.

LOAN #1 was with WAMU. WAMU according to the FDIC receiver had sold the loans into the secondary market for securitization. This was the purchase money mortgage. So at some point before the refinancing in LOAN#2 the purchase money loan was sold into the secondary market. Thus WAMU only had servicing rights — if the “purchaser” entered into an agreement for WAMU to service the loan. In the case where the loan is subject to securitization, the “purchaser” is a REMIC Trust. But it appears as though few, if any, of the REMIC Trusts ever achieved the status of the owner of the debt, holder in due course, or owner of the mortgage or note. While it is possible to start a lawsuit to collect on the note, that lawsuit can never be resolved in favor of the Plaintiff unless the maker of the note defaults.

LOAN#2 was with Chase. This was supposedly a refinancing. The loan closing documents show that WAMU was paid and WAMU issued the satisfaction of mortgage and did not return the old note cancelled.

WAMU usually retained servicing rights so it would be claimed that WAMU had every right to collect the money and issue the satisfaction. But the servicing rights only existed if LOAN#1 actually made it into a Trust. If not, the loan was NOT subject to the Pooling and Servicing Agreement. If WAMU — or Chase as successor or SPS as successor are actually the servicers, it MUST therefore be by virtue of some other document. That is why we are seeing some rather strange Powers of Attorney and other “enabling” documents appear out of nowhere in which the issues are further confused.

The borrowers received $45k which was for roof repairs from storm damage. So the borrowers did receive  $45k presumably from Chase, but not necessarily as we have already seen, where the originator, even if it was a big bank was using money from an illegally formed pool outside of the REMIC Trust that the investors thought was getting the money from the proceeds of sale of mortgage backed securities.

So the witness probably has absolutely no access to information and therefore no testimony about whether LOAN#1 got paid off. And in fact it is most likely that WAMU was either paid or not depending upon internal agreements with Chase. And the witness can only testify using hearsay about the preceding records of Chase, US Bank and WAMU. Several trial judges have refused to accept such testimony saying directly that the witness and the company represented by the witness are too far removed from the actual transactions to have any credibility as to the authenticity or accuracy of the business records of other entities and that the SPS records are simply an attempt to get around the hearsay rules without exposing the predecessors to direct discovery and questioning where the answers would either be embarrassing or perjury.

If WAMU was paid in the refinancing (proceeds from LOAN#2) the wrong party was paid and the debt still exists unless Chase can show that the real creditor was paid off. It is unlikely they can show that because it probably is not true. Chase was hiding the default status of loans, as we have seen in Matt Taibbi’s story in Rolling Stone. The reason was simple — the more it  looked like these Mortgage backed Securities were performing as expected, the more the investors were inclined to buy more mortgage bonds — and that is where the bulk of the money is for Chase.

By selling loans at 100 cents on the dollar (Par Value) when the true value might only have been 1/10th that amount, the profit was enormous and it all went to Chase (not the investors whose money was used to start the string of transactions in the first place).

The witness will not be able to say that WAMU was definitely paid, and if it was paid, whether the money was paid to the real creditor. This is probably a primary reason why SPS was inserted between Chase and the foreclosure proceedings. It is also why they are attempting to rely on the business records of SPS instead of the business records of Chase.

SPS is usually inserted AFTER all events have occurred relating to the debt, note, mortgage, “default,” and foreclosure. Using a witness from SPS is, on its face, allowing a witness with zero personal knowledge about anything to verify records of other companies whose records the witness has never seen.

This is done to camouflage the actual events — wherein the money from investors was stolen or diverted from its intended target (REMIC Trust) and then used to fund loans in the name of a naked nominee whose interest in the loan was only that of a vendor whose name was being rented to withhold disclosure of the real creditor, the compensation received, and the identity of all the real parties who were getting paid as a result of the “loan origination.”

This is a direct conflict with TILA, requiring that disclosure and Reg Z which states that such a loan is “predatory per se.” If the loan is predatory per se it might be “unclean hands” per se which would mean that the mortgage could never enforced even if the consideration was present.

%d bloggers like this: