1st DCA CA: Not so Fast on Rubber Stamping Foreclosures

As we have seen for months there have been a steady stream of cases in which the courts have turned back to the fundamental requirements of due process and the rule of law. Here the court reminds (again) that judicial notice is not a substitute for foundation of facts in dispute AND that the homeowner’s right to sue for wrongful foreclosure is NOT to be dismissed even if it is poorly worded.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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See CUPP v FNMA 8/2/17

Cupp v. Fannie Mae

While once again we see the regretable tendency to keep essential decisions out of public records, we also see that the court now comprehends the basic fallacy behind “loans” subject to false claims of transfer, securitization, sale and purchase.

And once again the court states with clarity the basic elements of procedural law. The fact that you owe money doesn’t mean you owe it to anyone who sues you.  If the party initiates a nonjudicial sale they will subject to the same rigor as in judicial cases. Nonjudicial procedure was not meant to allow strangers to win cases they would lose if they were required to file suit.

Significant quotes:

The nonjudicial foreclosure system is designed to provide the lender- beneficiary with an inexpensive and efficient remedy against a defaulting borrower, while protecting the borrower from wrongful loss of the property and ensuring that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 926 (Yvanova).)

The elements of a tort cause of action for wrongful foreclosure are: “`(1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.'” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 408.) Grounds satisfying the first element include: when the trustee did not have the power to foreclose, when the borrower did not default, and when the deed of trust is void. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104- 105.) “A foreclosure initiated by one with no authority to do so is wrongful” and satisfies the first element. (Yvanova, supra, 62 Cal.4th at p. 929.)

our Supreme Court observed that the trustee of a deed of trust “acts merely as an agent for the borrower- trustor and lender-beneficiary” and, under section 2924, subdivision (a)(1), may initiate nonjudicial foreclosure “only at the direction of the person or entity that currently holds the note and the beneficial interest under the deed of trust—the original beneficiary or its assignee—or that entity’s agent.” (Yvanova, supra, 62 Cal.4th at p. 927.) “[I]f the borrower defaults on the loan, only the current beneficiary may direct the trustee to undertake the nonjudicial foreclosure process.” (Id. at pp. 927-928.) However, the court also recognized that promissory notes and deeds of trust are negotiable instruments that may be sold by a lender without any notice to the borrower and “that a borrower can generally raise no objection to the assignment of the note and deed of trust.” (Id. at p. 927.) The Yvanova court concluded:

“If a purported assignment necessary to the chain by which the foreclosing entity claims that power is absolutely void, meaning of no legal force or effect whatsoever [citations], the foreclosing entity has acted without legal authority by pursuing a trustee’s sale,” and the borrower would have standing to sue for wrongful foreclosure in the case of such an unauthorized sale. (Id. at p. 935.)

The logic of defendants’ no-prejudice argument implies that anyone, even a stranger to the debt, could declare a default and order a trustee’s sale—and the borrower would be left with no recourse because, after all, he or she owed the debt to someone, though not to the foreclosing entity. This would be an `odd result’ indeed.” (Id. at p. 938.) “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity’s hands. No more is required for standing to sue.” (Id. at p. 939.) The court disapproved a line of Court of Appeal decisions that had reached contrary conclusions. (Yvanova, at p. 939, fn. 13; see Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497; Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75; Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495 (Herrera); Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 (Fontenot).)

The trial court appears to have agreed with respondents’ contention they could conclusively establish that RTC did hold the beneficial interest at the time of the 1995 Assignment. In its preamble, the 1995 Assignment recites that, in June 1993, the Office of Thrift Supervision appointed RTC as receiver for WFSL. It further recites that, in September 1994, the Office of Thrift Supervision replaced the conservator of WFSB with RTC. Finally, the preamble states that RTC, as receiver for WFSB, “is the current beneficiary under the Deed of Trust.”

The trial court could properly take notice of the fact the 1995 Assignment was recorded, the date of its execution, the parties to the transaction, and its legal effect if that effect is undisputed and clear from the face of the document. (See Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1055; Fontenot, supra, 198 Cal.App.4th at pp. 264-265.) However, contrary to respondents’ repeated assertion, we cannot take judicial notice of the truth of hearsay recitations of fact contained within the 1995 Assignment. (See Yvanova, supra, 62 Cal.4th at p. 924, fn. 1; Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1369, 1375 [trial court improperly took judicial notice of truth of hearsay recitation, within assignment, that a particular entity held beneficial interest under deed of trust before its assignment]; Intengan, at pp. 1055, 1057; Fontenot, at p. 265.) Cupp clearly disputes the notion that RTC held the beneficial interest at the time of the 1995 Assignment. We conclude the trial court erred in taking judicial notice that RTC held the beneficial interest in the Deed of Trust at the time of the 1995 Assignment.[8]

Wilmington-Christiana Fail in Back-door Attempt to Have “Trust” Identified as the Owner of Debt, Note and Mortgage

If they had been successful the entire question of whether the Trustee could be named as the foreclosing party would have been off the table — if other courts followed suit. And the entire question of “debt purchasing” could never have been raised despite obvious flaws and defects in fabricated paperwork.

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.
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Hat tip to Bill Paatalo and others
see below for case opinion Blackstone v Sharma v Marvastian, Maryland Special Appeals Court
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In their never ending quest to validate illegal acts, misrepresentation and fraud, the banks are throwing as much legal theory against the wall in hopes that some of it will stick. This one starts with the fact that “debt purchasers” are still “debt collectors” regardless of how they self-describe themselves.
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There has been a trend in which “debt purchasers” step in front of the pile off fabricated documents and then make the claim for foreclosure or enforcement of the debt. By calling themselves “debt purchasers” they once again are using self-serving descriptions that are designed to confuse homeowners, lawyers and the courts. The truth is that no debt, note or mortgage was purchased by anyone. If there had been a purchase the  foreclosing party would merely refer to EVIDENCE that they paid money for a “loan” that was “owned” by the preceding party. Instead they rely upon legal presumptions carried in fabricated documents.
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Despite there having been no movement of the debt by virtue of an actual purchase and sale they continue to call themselves “debt purchasers.” They are not and the implication that the debt was purchase thus morphs into we MUST have purchased it because we now “hold” the note and mortgage.
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This case highlights the issues with “substitution of trustees,” and fabricated transfer documents. It also provides guidance on the “substitution of plaintiffs” in non-judicial states. There is no difference.
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The Trustee on a deed of trust cannot be fired and replaced by anyone other than the ACTUAL beneficiary.
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The Plaintiff in a judicial foreclosure case cannot change unless the attorneys are wiling to amend their pleading to show how the fabricated documents were transferred from the old Plaintiff (which never owned the debt, note or mortgage) to the newly designated Plaintiff.
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Both reveal that the actual party in interest in the foreclosure is the subservicer and Master Servicer for a trust that doesn’t really exist and which does not own any assets, have any liabilities nor conduct any business.
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====================

KYLE BLACKSTONE, ET AL.,
v.
DINESH SHARMA, ET AL.
TERRANCE SHANAHAN, SUBSTITUTE. TRUSTEE, ET AL.,
v.
SEYED MARVASTIAN, ET AL.

Nos. 1524, 1525 Consolidated Case, September Term, 2015.

Court of Special Appeals of Maryland.

Filed: June 6, 2017.

Wright, Shaw Geter, Salmon, James P., (Senior Judge, Specially Assigned), JJ.

Opinion by SALMON, J.

This consolidated appeal originates from two foreclosure cases filed in the Circuit Court for Montgomery County. In both cases, substitute trustees (collectively, “appellants”) acting on behalf of Ventures Trust 2013-I-H-R (“Ventures Trust”), a statutory trust formed under the laws of the State of Delaware, filed orders to docket foreclosure suits against homeowners in the State of Maryland. The circuit court judges who considered the cases dismissed the actions, determining that pursuant to the Maryland Collection Agency Licensing Act (“MCALA”), codified at Maryland Code (1992, 2015 Repl. Vol.), Business Regulation Article (“B.R.”) § 7-101, et seq., Ventures Trust was required to be licensed as a collection agency and, because Ventures Trust had not obtained such a license, any judgment entered as a result of the foreclosure actions would be void. The dismissal of these foreclosure actions, without prejudice, presents us with two questions:

1. Under the MCALA, does a party who authorizes a trustee to initiate a foreclosure action need to be licensed as a collection agency before filing suit?

2. If the answer to question one is in the affirmative, does the licensing requirement apply to foreign statutory trusts such as Ventures Trust?

We shall answer “yes” to both questions and affirm the judgments entered by the Circuit Court for Montgomery County.

BACKGROUND

Appeal No. 1524

On August 4, 2006, Dinesh Sharma, Santosh Sharma, and Ruchi Sharma[1](collectively “the Sharmas”) executed a deed of trust that encumbered real property in Potomac, Maryland, in order to secure a $1,920,000 loan. Washington Mutual Bank, FA was the lender. The Sharmas, in December 2007, defaulted on the loan by failing to make payments when due.

Ventures Trust, by its trustee MCM Capital Partners, LLC (“MCM Capital”), acquired ownership and “all beneficial interest” of the loan on October 9, 2013. The substitute trustees[2] appointed by Ventures Trust filed an order to docket, initiating the foreclosure action, on November 25, 2014. The Sharmas owed $3,008,536.23 on the loan as of November 25, 2014.

The Sharmas responded to the foreclosure action by filing a counterclaim which was later severed by order of the circuit court. They also filed a motion to dismiss or enjoin the foreclosure sale pursuant to Md. Rule 14-211.[3] The substitute trustees moved to strike the Sharmas’ motion, which the court granted on May 7, 2015. The Sharmas filed a motion to alter or amend the May 7th order. On June 22, 2015 the court vacated its May 7th order, denied the substitute trustees’ motion to strike the Sharmas’ motion to dismiss, and set a hearing date for arguments concerning the motion to dismiss.

Following a hearing, the court, on August 28, 2015, issued an opinion and order granting the motion to dismiss the foreclosure action without prejudice. In its written opinion the circuit court determined that, pursuant to the MCALA, Ventures Trust was a collection agency and was therefore required to be licensed before attempting to collect on the deed of trust. The circuit court ruled that because Ventures Trust was not licensed as a collection agency, it had no right to file a foreclosure action. In its written opinion, the court also rejected Ventures Trust’s contention that it was a “trust company” and was therefore exempt from MCALA’s licensure requirements. The substitute trustees noted a timely appeal.

Appeal No. 1525

On June 23, 2006, Seyed and Sima Marvastian executed a deed of trust on property in Bethesda, Maryland in order to secure a $1,396,500 loan. Premier Mortgage Funding, Inc. was the lender. The Marvastians defaulted on the loan by failing to make payments when due in December 2012.

Ventures Trust by its trustee MCM Capital acquired the Marvastians’ loan in February 2014. On October 20, 2014, the substitute trustees filed an order to docket, initiating the foreclosure process. At the time of filing, the substitute trustees alleged that the Marvastians owed $1,632,303.26 on the loan.

The Marvastians responded by filing a counterclaim, which was severed by order of the circuit court. They also filed a motion to dismiss or stay the foreclosure sale pursuant to Md. Rule 14-211. Following extensive briefing and a hearing, the court granted the Marvastians’ motion to dismiss, albeit without prejudice. The judge’s reasons for dismissing the case were exactly the same as those given for dismissing the foreclosure case that is the subject of Appeal No. 1524.

I.

STANDARD OF REVIEW

[B]efore a foreclosure sale takes place, the defaulting borrower may file a motion to stay the sale of the property and dismiss the foreclosure action. In other words, the borrower, may petition the court for injunctive relief, challenging the validity of the lien or . . . the right of the [lender] to foreclose in the pending action. The grant or denial of injunctive relief in a property foreclosure action lies generally within the sound discretion of the trial court. Accordingly, we review the circuit court’s denial of a foreclosure injunction for an abuse of discretion. We review the trial court’s legal conclusions de novo.

Hobby v. Burson, 222 Md. App. 1, 8 (2015) (internal citations and quotation marks omitted). See also Svrcek v. Rosenberg, 203 Md. App. 705, 720 (2012). In the two cases that are the subject of this appeal, the trial judges based their rulings on their legal conclusions. Thus we review those conclusions de novo.

II.

In Finch v. LVNV Funding, LLC, 212 Md. App. 748, 758-64 (2013) we stated that without a license, a collection agency has no authority to file suit against the debtor. Accordingly, a “judgment entered in favor of an unlicensed debt collector constitutes a void judgment[.]” Id. at 764. See also Old Republic Insurance v. Gordon, 228 Md. App. 1, 12-13 (2016) (footnote omitted).

Maryland Code B.R. § 7-101(c) defines a collection agency as follows:

“Collection agency” means a person who engages directly or indirectly in the business of:

(1)(i) collecting for, or soliciting from another, a consumer claim; or

(ii) collecting a consumer claim the person owns, if the claim was in default when the person acquired it;

(2) collecting a consumer claim the person owns, using a name or other artifice that indicates that another party is attempting to collect the consumer claim;

(3) giving, selling, attempting to give or sell to another, or using, for collection of a consumer claim, a series or system of forms or letters that indicates directly or indirectly that a person other than the owner is asserting the consumer claim; or

(4) employing the services of an individual or business to solicit or sell a collection system to be used for collection of a consumer claim.

(Emphasis added.)

As used in the Business Regulations Article, “person” means “an individual . . . trustee . . . fiduciary, representative of any kind, partnership, firm, association, corporation, or other entity.” B.R. § 1-101(g). B.R. 7-101(e) defines a “consumer claim” as meaning a “claim that: 1) is for money owed or said to be owed by a resident of the State; and 2) arises from a transaction in which, for a family, household, or personal purpose, the resident sought or got credit, money, personal property, real property, or services.”

Before the law was amended in 2007, MCALA applied only to businesses that collected debts owed to another person. Old Republic, 228 Md. App. at 16. In 2007, the statute was broadened to include persons who engage in the business of “collecting a consumer claim the person owns, if the claim was in default when the person acquired it[.]” B.R. § 7-101(c)(1)(ii).

The legislative history of the 2007 amendment, insofar as here pertinent, was set forth in Old Republic as follows:

[T]he legislative history makes clear that the General Assembly enacted the 2007 amendments to regulate “debt purchasers,” who were exploiting a loophole in the law to bypass the MCALA’s licensing requirements.

The Senate Finance Committee Report on House Bill 1324 explained:

House Bill 1324 extends the purview of the State Collection Agency Licensing Board to include persons who collect consumer claims acquired when the claims were in default. These persons are known as “debt purchasers” since they purchase delinquent consumer debt resulting from credit card transactions and other bills; these persons then own the debt and seek to collect from consumers like other collection agencies who act on behalf of original creditors.

Charles T. Turnbaugh, Commissioner of Financial Regulation and Chairman of the Maryland Collection Agency Licensing Board offered the following testimony:

[T]he evolution of the debt collection industry has created a “loophole” used by some entities as a means to circumvent current State collection agency laws. Entities, such as “debt purchasers” who enter into purchase agreements to collect delinquent consumer debt rather than acting as an agent for the original creditor, currently collect consumer debt in the State without complying with any licensing or bonding requirement. The federal government has recognized and defined debt purchasers as collection agencies, and requires that these entities fully comply with the Federal Fair Debt Collection Practices Act.

This legislation would include debt purchases within the definition of “collection agency,” and require them to be licensed by the Board before they may collect consumer claims in this State. Other businesses that are collecting their own debt continue to be excluded from this law.

Susan Hayes, a member of the Maryland Collection Agency Licensing Board, submitted the following in support of the bill:

The traditional method of dealing with distressed accounts has been for creditors to assign these accounts to a collection agency. These agencies, operating under a contingency fee arrangement with the creditor, keep a portion of the amount recovered and return the balance to the creditor. Today, a different option is available — selling accounts receivables to a third party debt collector at a discount.

* * *

HB 1324 closes a loophole in licensing of debt collectors under Maryland law. Just because a professional collector of defaulted debt “purchases” the debt, frequently on a contingent fee basis, should not exclude them from the licensing requirements of Maryland law concerning debt collectors.

Id. at 19-20.

Ventures Trust is in the business of buying from banks, at a discount, mortgages and deeds of trust that are in default. In the cases here at issue, there is no dispute that: 1) when Ventures Trust purchased the loans in question, the loans were in default; and 2) Ventures Trust, by filing (through its agents — the trustees) the foreclosure actions it was attempting to collect “consumer debt.”

As we said in Old Republic, the legislative history of the 2007 amendments to the MCALA make it “clear that the General Assembly had a specific purpose in mind in adopting the 2007 amendments, i.e., including [under the Act] debt purchasers, people who purchased defaulted accounts receivable at a discount, within the purview of MCALA.” Id. at 21. Money owed on a note secured by a deed of trust or a mortgage certainly qualifies as an account receivable. And Ventures Trust is in the business of buying up defaulted mortgages or deeds of trust and instituting foreclosure actions to obtain payment.

Appellants contend that the MCALA does not require a party to be licensed as a collection agency in order to file a foreclosure action. They support that contention with the following argument:

Foreclosures are not mentioned [in B.R. § 7-101(c)], although the Legislature clearly knew how to do so if it had wished. There is no specific statement in the MCALA to the effect that “doing business” as a “collection agency” includes actions taken to enforce a security interest, such as foreclosing on a deed of trust, nor is there any specific statement that such actions would fall into the definition of “collecting” a consumer claim. Neither this Court nor the Court of Appeals has ever ruled that pursuing a foreclosure proceeding amounts to “doing business” in Maryland as a “collection agency” under the Act, and for good reason. As the Legislature has made clear in numerous statutes, a foreign entity — including a statutory trust such as Ventures Trust — pursuing foreclosure is not “doing business” in Maryland[.]

Appellants emphasize that Md. Code (2014 Repl. Vol.), Corporations and Associations Article § 12-902(a) requires any foreign statutory trust doing business in Maryland to register with the State Department of Assessments and Taxation (“SDAT”). Section 12-908(a)(5) provides, however, that “[f]oreclosing mortgages and deeds of trust on property in this State” is not considered “doing business.”

According to appellants, because of “the Legislature’s” express decision to make clear that a foreclosure proceeding brought by a foreign statutory trust is by definition, not doing business in Maryland, a foreign trust does not need to be licensed as a collection agency to file a Maryland foreclosure action. That argument would be strong were it not for the fact (relied upon by both circuit court judges who ruled against appellants below) that section 12-908(a) of the Corporations and Associations Article expressly states that the “doing business” exception granted to foreign trusts is “for the purposes of this subtitle[.]” In other words, the foreign trust exception does not apply to the MCALA.

It is true, as appellants point out, that no Maryland appellate court has ever held that a foreign trust needs a license under the MCALA to file a foreclosure action. But the matter has simply not been addressed by any Maryland appellate court.

Judge Ellen Hollander, in Ademiluyi v. PennyMac Mortgage Investment Trust Holdings I, LLC, et al., 929 F.Supp.2d 502, 520-24 (D. Md. 2013) did hold that a MCALA license was needed to bring a foreclosure action based on the allegations set forth in the complaint filed in that case. In Ademiluyi, the holder of the mortgage (PennyMac), filed a foreclosure action on a mortgage even though (it was alleged) that PennyMac purchased the mortgage after it was in default and did not have a debt collection license. Id. at 520. The issue in that case was whether, based on the allegations in the complaint, PennyMac needed a license prior to bringing a foreclosure action. Id.

After a lengthy discussion, Judge Hollander said:

I am persuaded that, even if actions pertinent to mortgage foreclosure are taken in connection with enforcement of a security interest in real property, such actions may constitute debt collection activity under the MCALA. Therefore, based on the facts alleged by plaintiff, PennyMac Holdings may qualify as a collection agency under the MCALA with respect to mortgage debt it seeks to collect, including through judicial foreclosure proceedings or other conduct pertinent to foreclosure.

Id. at 523.

Support for Judge Hollander’s conclusion can be found in a twenty-one page order, dated December 8, 2013, signed by Gordon M. Cooley, Chairperson of the Maryland State Collection Agency Licensing Board.[4] Mr. Cooley ordered several entities, including NPR Capital, LLC, to stop attempting to collect consumer debts by filing foreclosure actions. At page 17 of his order, the Acting Commissioner determined, inter alia, that NPR Capital violated the provisions of the MCALA (specifically B.R. § 7-401(a)) by attempting to collect a debt by filing a foreclosure action at a time when it was not licensed as a collection agency.

When interpreting the MCALA, the ruling by Commissioner Cooley is of consequence because, as the Court of Appeals recently said, it is well established that appellate courts “should ordinarily give `considerable weight’ to `an administrative agency’s interpretation and application of the statute'” it is charged with administering. Board of Liquor License Commissioners for Baltimore City v. Kougl, 451 Md. 507, 514 (2017), (quoting Maryland Aviation Administration v. Noland, 386 Md. 556, 572 (2005)). As can be seen, the Board that administers the MCALA statute is of the view that the MCALA covers persons who attempt to collect consumer debt by filing a foreclosure action.

In support of their position, appellants point out, accurately, that nowhere in the legislative history of the 2007 amendment to the MCALA, is there any mention of foreclosure actions. From this, appellants ask us to infer that the General Assembly did not intend that persons who purchase defaulted mortgages or deeds of trust and then file foreclosure actions needed to purchase a debt collection license. In our view, the absence of a specific reference in the legislative history is not dispositive because, insofar as the issue here presented is concerned, the MCALA is unambiguous.

With exceptions not here relevant except the one discussed in Part III, infra, “a person must have a license whenever the person does business as a collection agency in the State.” B.R. § 7-301(a). The definition of a “collection agency” has five elements. Old Republic, 228 Md. App. at 23 (Nazarian, J. dissenting). Those elements are:

“[a] a person who [b] engages directly or indirectly in the business of . . . collecting a [c] consumer claim the [d] person owns, [e] if the claim was in default when the person acquired it.” BR § 7-101(c)(ii).

Id.

Ventures Trust admits that it meets elements (a), (c), (d) and (e). It argues, however, that element (b) is not met because it does not “engage in the business of collecting” debt by filing foreclosure actions. Boiled down to its essence, appellants’ “not in the business” argument is based on the contention that the General Assembly intended to exempt from the MCALA persons who attempt to collect consumer debt by bringing foreclosure actions. We can find no such intent in the words of the statute or in anything in the Act’s legislative history. We therefore reject that contention and hold that unless some exception to the MCALA is applicable, the licensing requirements of the MCALA applies to persons who attempt to collect a consumer debt by bringing a foreclosure action.

III.

The MCALA states: “This title does not apply to . . . a trust company[.]” B.R. § 7-102(b)(8). The statute does not define “trust company.” See B.R. § 7-101. Appellants claim that even if the MCALA licensing requirement applies to a person who brings a foreclosure action in order to enforce a consumer debt, the MCALA does not apply to Ventures Trust because it is a “trust company.” Black’s Law Dictionary (10th ed. 2014) defines “trust company” as “[a] company that acts as a trustee for people and entities and that sometimes also operates as a commercial bank.” The appellants claim that Ventures Trust meets that definition because, purportedly, Ventures Trust “certainly holds and maintains trust property.”

We pause at this point to discuss what the record reveals about Ventures Trust. In appellants’ filing with the Montgomery County Circuit Court, appellants’ counsel stated that Ventures Trust is the holder of the notes at issue, and that it is a statutory trust formed in Delaware under 12 DEL. CODE § 3801(g). Ventures Trust has two trustees. They are MCM Capital and Wilmington Federal Savings Fund Society, FSB doing business as Christiana Trust. In Appeal No. 1525, counsel for the substitute trustees orally told the motions judge that Ventures Trust was “like an account at Christiana Bank” and that Christiana Trust was the trustee of Ventures Trust. That representation was also made by counsel for the substitute trustee in that case in a supplemental memorandum where it was said: “Ventures Trust. 2013-I-H-R…, is the holding of a Federal Savings Bank[,] which serves as its co-trustee….”

Using the Black’s Law Dictionary (10th edition) definition of “trust company” set forth above, Ventures Trust does not fit within that definition. It does not act as a bank. Moreover, other entities act as trustees for it. There is nothing in the record that shows that Ventures Trust acts as a trustee for anyone.

Appellants also suggest that we use the slightly different definition of “trust company” set forth in Black’s Law Dictionary (5th ed. 1979) because that edition of Black’s was published “around the time of the 1977 amendment” that exempted trust companies from the MCALA. Black’s 1979 definition of “trust company” was as follows: “a corporation formed for the purpose of taking, accepting, and executing all such trusts as may be lawfully committed to it, and acting as testamentary trustee, executor, guardian, etc.” There is no indication in the record that Ventures Trust is a corporation or, as already mentioned, that it acts as a trustee for anyone. Therefore, Ventures Trust does not meet that definition either.

The words “trust company” is defined in Md. Code (2011 Repl. Vol.), Financial Institutions Article (“Fin. Institutions”) § 3-101(g) as meaning “an institution that is incorporated under the laws of this State as a trust company.” But that definition only applies to matters set forth in the Fin. Institutions Article section 3-101(a). In Fin. Institutions §3-501(d), governing common trust funds, the term “trust companies” is defined as including a national banking association that has powers similar to those given to a trust company under the laws of “this State.” That definition, however, only applies to subtitle 5 of the Financial Institutions Article. Md. Code (2011 Repl. Vol.), Estates and Trusts Article§ 1-101(v) also contains a definition of “Trust Company” but it applies only to laws governing the “estates of decedents.” See Estates & Trusts Article § 1-101(a). Lastly, the term “statutory trust” is defined in Md. Code (2011 Repl. Vol.), Corporations and Associations Article § 12-101(h) as meaning: an unincorporated business, trust, or association:

(i) Formed by filing an initial certificate of trust under § 12-204 of this title; and

(ii) Governed by a governing instrument.

(2) “Statutory trust” includes a trust formed under this title on or before May 31, 2010, as a business trust, as the term business trust was then defined in this title.

Ventures Trust admits that it does not fit within any of the above definitions of “trust company” or “statutory trust.” Moreover, even if it did meet one or more of those definitions, there is no indication that the legislature, in 1977, when it exempted “trust companies” from the MCALA, intended those definitions to be used. As appellants concede, we are thus left with the general definition of “trust company” as set forth in Black’s Law Dictionary. See Ishola v. State, 404 Md. 155, 161 (2008)(Dictionary definitions help clarify the plain meaning of a statute.).

The circuit court judge who dismissed the foreclosure action that is the subject of Appeal 1524 reached the following legal conclusion with which we are in complete accord:

MCALA expressly limits the scope of its license requirement exemptions to those “… provided in this title….” Md. Code Ann., Bus. Reg. § 7-301(a) (emphasis added). MCALA does not explicitly exempt “foreign statutory trusts” that bring foreclosure actions from its licensing requirements. See Bus. Reg. § 7-102(b). In fact, the term “foreign statutory trust” never appears in MCALA. See Bus. Reg. § 7-101, et seq. Thus, the General Assembly expressed a clear intent to subject foreign statutory trusts that bring foreclosure actions in Maryland, like Ventures Trust, to MCALA’s licensing requirements.

CONCLUSION

A debt purchaser that attempts to collect a consumer debt by bringing a foreclosure action is required to have a license unless some statutory exemption applies. Contrary to appellants’ contention, Ventures Trust is not a “trust company” within the meaning of the MCALA and must therefore obtain a debt collection license in accordance with the provisions of the MCALA before bringing a foreclosure action. Because Ventures Trust had no such license, it was barred from filing, through its agents, the two foreclosure actions here at issue.

JUDGMENTS AFFIRMED; COSTS TO BE PAID BY APPELLANTS.

Are Foreclosure Trustees Debt Collectors?

Such rulings from appellate courts undermine confidence in the judicial system for those who are victims of wrongdoing and reinforce the confidence and arrogance of those committing the wrongs that they will get away with it.

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.
—————-

see 9th Circuit Foreclosure Trustee not a debt collector 10-56884

The entire “Substitution of Trustee” scheme is performed with two purposes only — (1) to record a self servicing document that will be considered facially valid establishing a “new” beneficiary and (2) the selection of an entity whose sole purpose is to facilitate foreclosure.

As a Trustee on a deed of trust it has obligations set forth in state statutes allowing the use of non-judicial foreclosure proceedings. The old beneficiary, frequently a title company, would follow the requirements of the statutes and common sense. The “new” one is “appointed” by a self-proclaimed beneficiary with instructions to foreclose. Hence the new trustee is obviously selected because of the likelihood that it will follow instructions from the self-proclaimed “successor” beneficiary and thus “establish” the validity of the new beneficiary and the data from the new beneficiary indicating the existence of a default. That is why it is described as “the foreclosure trustee.” The old one might require more information and documentation to establish the authenticity of the successor beneficiary.

The 9th Circuit here amending its prior opinion, rules out the foreclosure trustee as a debt collector because it is only selling collateral and not seeking recovery of money. Never mind the default letter that gives the amounts required for reinstatement or the redemption rights of any borrower. Playing right into the hands of the banks, the 9th Circuit has simply failed to deal with realities and instead has arrived at a result that this is as remote from the realities of today’s foreclosures as any Dickensian portrayal of the courts (see “Bleakhouse“).

The dissenting opinion from which I quote below sums up the weakness of this decision:

The suggestion in Hulse that a foreclosure proceeding is one in which “the lender is foreclosing its interest in the property” is flatly wrong. A foreclosure proceeding is one in which the interest of the debtor (and not the creditor) is foreclosed in a proceeding conducted by a trustee who holds title to the property and who then uses the proceeds to retire all or part of the debt owed by the borrower. See Cal. Civ. Code § 2931; Yvanova v. New Century Mortg. Corp., 365 P.3d 845, 850 (Cal. 2016). Any excess funds raised over the amount owed by the borrower (and costs associated with the foreclosure) are paid to the borrower. See Cal. Civ. Code § 2924k; see also Jesse Dukeminier & James E. Krier, Property 590 (2d ed. 1988). Thus, contrary to the holding in Hulse, “[t]here can be no serious doubt that the ultimate purpose of foreclosure is the payment of money.” Glazer, 704 F.3d at 463. Nor, because the FDCPA defines a “debt collector” as one who collects or attempts to collect, “directly or indirectly,” debts owed to another, 15 U.S.C. § 1692a(6), does it matter that the money collected at a foreclosure sale does not come directly from the debtor.

But even this fairly clear rendition of foreclosures recites “facts” that are in an alternate universe, to wit: that “the money collected at a foreclosure sale does not come directly from the debtor.” Where else did it come from? It came from the sale of the alleged debtor’s homestead which is property owned by the debtor and which can only be stopped by payment of the amount demanded or a lawsuit challenging the Substitution of Trustee, the status of the supposed successor beneficiary and the presence of a default between the homeowner, on the one hand, and the new beneficiary on the other hand. Either way the money comes from the debtor.

Add to that the obvious fact that Recontrust and other entities similarly situated are simply controlled entities of the large banks. In a word, they are appointing themselves as beneficiary and as successor trustee through the use of a sham entity that has no interest nor any power to act like a true trustee. The analytical issue appears to be that taken collectively, the Foreclosure Trustee, the self proclaimed successor beneficiary and the self proclaimed or appointed “servicer” are aiming for foreclosure under the guise of a quest for money.

“Credit Bid” Comes Under Scrutiny in 9th Circuit

As I have been writing and talking about the forced judicial sales, my opinion has always been that in most cases there is an absence of evidence that the party making the credit bid was in fact the creditor thus entitled to make a “credit bid” at the auction. The credit bid is an allowance for the creditor to bid up to the amount of the debt owed to them without paying cash at the sale. This has been ignored since I first started writing about it. I think the credit bid is void and fraudulent if a non-creditor submits a credit bid when it is not the creditor. In nonjudicial states this is an easier proposition than in judicial states where a Final Judgment has been rendered.

This case is also notable because it finally addresses the issue of the liability of the Trustee on a deed of trust, concluding that if the party claiming to be the beneficiary was in fact not the beneficiary, and there is no evidence to suggest otherwise, the trustee is potentially liable. It would be helpful to pursue discovery against the Trustee, since it is always a “substituted trustee” that is in fact under the thumb or owned by the parties who are making self-serving declarations of their status as “beneficiaries” under the deed of trust. THAT of course provides grounds to object and challenge the substitution of trustee and everything that follows. If the self-proclaimed beneficiary is a nonexistent entity or otherwise does not conform to the statutory definition of a beneficiary, then it has no power to substitute a new trustee. And everything that the trustee does after that point is void. In discovery look for the agreement that says the new Trustee is indemnified and held harmless for all claims, violations etc. It’s there — but you need to force the issue.

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER. ALSO NOTE THAT THIS IS NOT YET PUBLISHED AND THEREFORE IS NOT MANDATORY AUTHORITY YET.
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Get a consult! 202-838-6345

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see 9th Circuit decision, Jacobsen v. Aurora Loan Services, Case No. 12-17021

Wrongful foreclosure. We reverse the district court’s grant of summary judgment in favor of Aurora on the wrongful foreclosure claim. In California, the elements of a wrongful foreclosure action are (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering. Sciarratta v. U.S. Bank Nat’l Ass’n, 202 Cal. Rptr. 3d 219, 226 (Ct. App. 2016). The district court erred by granting summary judgment on the ground that it found nothing wrong with the foreclosure sale.
First, the district court failed to review the record in the light most favorable to the non-movants when the district court assumed that the form of Aurora’s bid at the foreclosure sale was a cash bid. On appeal, the parties now agree that the form of the bid was a credit bid.
Second, a genuine dispute of material fact remains regarding whether Aurora properly made a credit bid. California law permits “present beneficiary of the deed of trust” to credit bid at the foreclosure sale. Cal. Civ. Code § 2924h(b). However, it is not uncontroverted that Aurora was the present beneficiary of the deed of trust. A deed of trust is “inseparable from the note it secures.” Yvanova v. New Century Mortg. Corp., 365 P.3d 865, 850 (Cal. 2016); see also Domarad v. Fisher & Burke, Inc., 76 Cal. Rptr. 529, 536 (Ct. App. 1969) (“[A] deed of trust has no assignable quality independent of the debt, it may not be assigned or transferred apart from the debt, and an attempt to assign the deed of trust without a transfer of the debt is without effect.”). The record contains evidence that Aurora did not “own” O’Brien’s loan before the foreclosure. ER 19-20, 136-38, 181. However, the record also contains evidence that Aurora is “currently in possession” of the original promissory note, which was endorsed in blank, although it is not clear from Aurora’s declaration when Aurora became the holder of the note.[4] [ER 179-80; 185-195]. It appears that there remains a question of fact whether Aurora was the “beneficiary” of the deed of trust at the time of the foreclosure and thus whether it was entitled to make a credit bid at the foreclosure sale, and we remand for the district court to address this issue in the first instance.
Moreover, in order to prevail on their claim of wrongful foreclosure, Plaintiffs must also show that they suffered prejudice or harm as a result of irregularities or illegalities in the foreclosure sale. Sciarratta, 202 Cal. Rptr. 3d at 226. Because the district court granted summary judgment to Aurora on a different ground, the court did not address the element of prejudice or harm. In the circumstances, we also deem it prudent to remand this claim to the district court to consider the prejudice question in the first instance. We therefore reverse the district court’s grant of summary judgment on the wrongful foreclosure claim and remand for further proceedings.[5]
AFFIRMED IN PART AND REVERSED AND REMANDED IN PART. The parties shall bear their own costs on appeal.
[**] The Honorable James V. Selna, United States District Judge for the Central District of California, sitting by designation.
[*] This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.
[1] The district court did not address standing. However, “[w]e may affirm on any ground supported by the record, even it if differs from the rationale used by the district court.” Buckley v. Terhune, 441 F.3d 688, 694 (9th Cir. 2006) (en banc).
[2] We GRANT both parties’ requests for judicial notice.
[3] In their reply, Plaintiffs suggest that their cancellation of instruments claim survives their contention that the note and deed of trust were void ab initio. Because this argument was first raised in the reply brief, we deem it waived. Delgadillo v. Woodford, 527 F.3d 919, 930 n.4 (9th Cir. 2008).
[4] Note that in today’s modern mortgage world, the “owner” of the underlying debt (that is, the entity who will receive the ultimate economic benefit of payments from the note, less a servicing fee) and “holder” of the note (the party legally entitled to enforce the obligations of the note) are not always one and the same. See, e.g., Brown v. Wash. State Dep’t of Commerce, 359 P.3d 771, 776-77 (Wash. 2015) (discussing modern mortgage practices and the secondary market for mortgage notes; “Freddie Mac owns [borrower’s] note. At the same time, a servicer . . . holds the note and is entitled to enforce it.“)(emphasis added). It thus appears possible that the “beneficiary” under the deed of trust would follow with the note (and with the entity “currently entitled to enforce [the] debt”), rather than the income stream. See Yvanova, 365 P.3d at 850-51; see also Hernandez v. PNMAC Mortg. Opp. Fund Investors, LLC, 2016 WL 3597468, *6 (Cal. Ct. App. June 27, 2016) (unpublished) (if the foreclosing party “could properly and conclusively establish . . . that it did hold the Note at the [time of foreclosure], that would be dispositive and preclude a wrongful foreclosure cause of action because a deed of trust automatically transfers with the Note it secures—even without a separate assignment.”)(citing Yvanova).
[5] We also reverse the district court’s grant of Cal-Western’s motion to dismiss the wrongful foreclosure claim. The trustee must conduct the foreclosure sale “fairly, openly, reasonably, and with due diligence” “to protect the rights of the mortgagor and others.” Hatch v. Collins, 275 Cal. Rptr. 476, 480 (Ct. App. 1990). Here, the complaint alleges that Cal-Western’s acceptance of a void credit bid was unlawful. If the credit bid was void and the acceptance of the credit bid was unlawful, Cal-Western failed to conduct the foreclosure sale with due diligence, and thus the complaint states a claim against Cal-Western.

 

Now You See Them, Now You Don’t

ARE LAW FIRMS CROSSING THE LINE FOR BANKS WHO WILL THROW THEM UNDER THE BUS?

It is a chaotic circular round of documents emanating ultimately by, for and from the same parties. And somehow it is becoming custom and practice to allow law firm employees to sign important documents that transfer possession, delivery, ownership and servicing rights from one party to another while those parties themselves sign nothing.

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

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I can’t help thinking about whether there is a motion in California and other nonjudicial states that allows you to challenge the right of the attorney to be the attorney of record when the law firm is a fact witness on issues that are central to the case. Having signed the proof of claim, being the trustee (who supposedly represents the party who signs a proof of claim), etc., the question is whether they are acting on their own behalf or on behalf of a third party who might indeed have some objections against the law firm representing the interests of parties whose interests might be antithetical to their own.

In a deed of trust you have the trustor (homeowner) and the Trustee in the middle between the trustor and the beneficiary who presumably is the creditor. By now we know that original beneficiary probably did not make the loan and that the alleged new beneficiary didn’t buy it. The beneficiaries’ claims are only as good as the words on the fabricated paper on which they are written and certain legal presumptions that are routinely misapplied.

So the first sign of trouble is the “Substitution of Trustee” wherein a “New” beneficiary executes a document appointing a new Trustee on the Deed of Trust. Why? What was wrong with the old one if everything was on the up and up? They substitute because they know the original Trustee won’t accept the instructions from the new party because the original Trustee has no objective reason to believe that the new “party” is a “beneficiary”. Who signs that “substitution of Trustee”?

It is usually someone who has been given instructions to sign it on the promise and premise that they have been appointed attorney in fact for the “new beneficiary.” In fact, in many cases their only job is signing documents that they have received instructions to sign. But the actual person signing knows absolutely nothing about the deal and has no knowledge about the facts behind the business of signing such documents — assuming their signature was not forged or robo-signed.

So in this and many if not nearly all cases, the actual signature is supplied by a third party who will then fabricate a power of attorney to do it — still without any facts about why the Trustee needs to be replaced. In most cases it is an employee of the law firm who by definition (?) has no actual interest in the loan, the debt, the note or the mortgage (Deed of Trust). This makes the person who signed it a fact witness and watch how the law firm fights to prevent that person from testifying at deposition or trial. In many cases they will assert that the person is no longer employed and they don’t know where he or she is now located.

And then you have the new Trustee who often turns out to be the same law firm who signed the Substitution of Trustee, making it a double self-serving document for which no legal presumptions should apply since there is no foundation in evidence that establishes the law firm as a real party in interest — and if such evidence existed the law firm would be disqualified from representing the allegedly new beneficiary and from being the Trustee AND advocate against the Trustor. If the legislature meant to allow that sort of thing they would have been violating the due process clause of the U.S. Constitution making the entire nonjudicial statutory scheme unconstitutional.

Who signs the power of attorney once it is fabricated? It is either the law firm employee or an employee who works for a “servicer” who in most cases is not named in any document as servicer. Who signs the validation of the foreclosure? Same person. It is a chaotic circular round of documents emanating ultimately by, for and from the same parties. And somehow it is becoming custom and practice to allow law firm employees to sign important documents that transfer possession, delivery, ownership and servicing rights from one party to another while those parties themselves sign nothing.

That is what they are talking about when they refer to “remote” vehicles. It is a situation where actions are taken and the people for whom the action was taken cannot be tied into the transaction in case someone needs to go to jail, or pay a fine or sanctions. But somehow the Courts have twisted this into meaning that what is good for the goose is not good for the gander. The banks can distance themselves from liability for a fabricated transaction but they also can receive the benefits of the fabrication as though they were present.

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How “Standing” Is Causing the Longest Economic Recovery Since the Great Depression

THE PERFECT CRIME: THE VICTIMS DON’T KNOW ANYTHING

WHY INVESTORS AND BORROWERS SHOULD GET RID OF THE SERVICERS AND REPLACE THEM WITH SERVICING COMPANIES THEY CAN TRUST TO MITIGATE THE LOSSES CAUSED BY INVESTMENT BANKS

HOW? It is simple: since the perpetrators ignored the REMIC trust, didn’t fund them and never intended to actually have the REMIC trusts own the loans, the investors can go directly to homeowners or through their own servicers to settle and modify mortgages. This would leave the investors with claims against the investment banks for the balance of the losses, plus punitive damages, interest and court costs. It is the same logic as piercing the corporate veil — if you pay your grocery bills using the account of your limited liability corporation, the corporate entity is ignored.

Vasquez v Saxon (Arizona supreme Court) revisited

Assume the following facts for purposes of analogy and analysis:

  1. John Jones is a Scammer, previously found to have operated outside the law several times. He conceives of yet another PONZI scheme, but with the help of lawyers he has obscured the true nature of his next scheme. He creates a convoluted scheme that ultimately was never understood by regulators.
  2. The first part of his scheme is to offer shares in a company where the money will be held in trust. The money will be disbursed based upon standards that are promised to incoming investors.
  3. The new company will issue the shares based upon the receipt of money from investors who are buying those shares.
  4. Jones approaches Jason Smartguy, who manages a pension fund for 3,000 employees of ABC Company, a Fortune 500 company.
  5. Jason Smartguy manages the pension funds under strict restrictions. A pension fund is a “stable managed fund” whose investments must be at the lowest risk possible and whose purpose is capital preservation.
  6. John Jones promises Jason Smartguy that the new company will invest in assets that are valuable and stable, and that these investments will pay a return on investment higher than what Jason Smartguy is getting for the pension fund under his management. Jason likes the idea because it gives him employment security and probably bonuses for increasing the rate of return on the funds managed for the pension fund.
  7. The lawyers for John Jones have concealed the PONZI nature of the scheme (paying back investors with their own money and with money from new investors) by disclosing the existing of a reserve fund — consisting entirely of money from Jason Smartguy.
  8. Jason advances $100 Million to John Jones who says he is acting as a broker between the new Company (the one issuing the shares) and the Pension fund managed by Jason Smartguy.
  9. The new Company never receives the money. Instead the money is placed in accounts controlled by people who have no relationship with the new Company.
  10. The new Company never receives title or any documentation showing they own shares of the money pool now controlled by John Jones when it should be controlled by the new Company.
  11. John Jones uses the money to bet against the new Company, insurance on the value of the shares of the new Company, and the proceeds of other convoluted transactions — mostly based on the assumption that John Jones owns the money in the pool and based entirely on the assumption that any assets of the pool therefore belong to John Jones — not the new Company as promised.
  12. John Jones also uses the money to buy assets, so everything looks right as long as you don’t get too close.
  13. The assets Jones buys are designed to look good on paper but are pure trash — which is why John Jones bet against the pool and shares in the pool.
  14. Everyone is fooled. The investors get monthly statements from John Jones along with a check showing that the investment is working just as was planned. They don’t know that the money they are receiving comes entirely from the reserve pool and the meager actual returns from the assets. The insurance company believes that Jones is the owner of the money and the assets purchased with money from the pool created by Jason Smartguy’s advance from the pension fund.
  15. John Jones goes further. He pretends to own the shares of the new Company that actually belong to the pension fund managed by Jason Smartguy. He insures those shares naming himself as the insurance beneficiary and naming himself as the receiver of proceeds from his bets that the shares in the new Company would crash, just as he planned.
  16. While the assets are proving as worthless as John Jones had planned, Jason Smartguy receives payments to the pension fund exactly as outlined in the Prospectus and the Operating Agreement for the New Company. Unknown to Jason, the assets are increasingly proving worthless, as a whole and the income is declining. So Jason buys more shares in the new Company, thus providing Jason with a larger “reserve” fund and more “assets” to bet against and more “shares’ to bet against.
  17. John Jones sets out to “acquire” assets that will fail, so his bets will pay off. He buys assets whose value is low (and getting worse) and he creates fictitious transactions in which it appears as though the new Company has bought the assets at a much higher price than their value. The “sales” to the Company are a sham. The Company has no money because Jason Smartguy’s pension money never was made to the new Company in exchange for the new Company issuing shares of the company to Jason’s pension fund.
  18. The difference between the real value of the assets and the price “sold” to the pool is huge. In some cases it is 2-3 times the actual value of the asset. John Jones treats these sales as “proprietary trading profits” for John Jones,when in fact it is an immediate loss to Jason’s pension fund. The shares of the new Company are worthless because it never received any money nor title to any assets. John Jones as “broker” took all the money and assets.
  19. Meanwhile John Jones continues to pay Jason’s pension fund along with distribution reports showing the assets are in great shape and the income is just fine. In reality the assets are virtually worthless and the income is declining just as John Jones planned. John Jones is taking money hand over fist and calling it his own. His bets on the whole thing crashing are paying off handsomely and he is not reporting to Jason how much he is making by taking Jason’s managed money and calling part of it proprietary profits.
  20. The beauty of John Jones PONZI scheme is in the BIG LIE told not only to Jason Smartguy but also to Henry Homebody, who owns a home in Tucson Arizona. Henry is easier to sell on a stupid scheme than Jason Smartguy because Jason requires proof of independent appraisals (ratings), proof of insurance and various other aspects of the investment. Henry Homebody trusts the “lenders” and considers them to be banks, some with reputations and brands that go back 150 years.
  21. Henry Homebody’s house has been in the family for 6 generations and is fully paid off. He pays only insurance and taxes. Unknown to him, he is a special target for scammers like Merendon Mining, whose operators are now in jail. Merendon got homeowners with unencumbered houses to “invest” in a mirage (gold shares) thus putting the fantastic equity in their homes to work. Henry is flown to Canada, wined and dined, and has a very good time, just before he agrees to take out a loan using his family home as collateral, which will provide an income to him of $16,000 over month (which is about ten times his current income).
  22. Henry is approved for a loan equal to twice the value of the property and in which the mortgage broker (now on the run from the law) used projected income from the speculative investment in Merendon mining. This act by the mortgage broker was illegal but worth the risk because the broker was part of the Merendon Mining scam. (look up Merendon Mining and First Magnus Funding).
  23. Henry makes Payments on the mortgage principal, interest, taxes and insurance (all higher because of the false appraisal that was used for the property). He is able to do this because some of the money from the “loan” was given to him and he was able to make payments until the magnificent returns started to come in from his Merendon Mining shares. But those shares were worded in such a way that they were not exactly the ownership of gold that Henry thought he was getting. In fact, it was another pool with options on gold. And of course the money never materialized and neither did the gold. (Note 1996-2014: more than 50% of all loans were “refi’s” in which the home was fully paid or nearly so).
  24. Henry’s lender turned out to be a party pretending to lend him money, using MERS as a nominee for trading purposes, and naming the originator as lender when in fact they were also just a nominee.
  25. Henry’s mortgage and note recite terms that are impossible to meet unless Merendon Mining pays off.
  26. Henry believes at closing that First Magnus was the lender and that some entity called MERS is hanging in the background. Nobody explains anything to him about the lender or MERS. And of course he was told not to get an attorney because nothing can be changed anyway.
  27. Henry did not know that John Jones had spread out Jason’s money into several entities and then used Jason’s money to fund the origination of Henry’s loan.
  28. Jason does not know that the note and mortgage were never executed in the name of the pension fund or the new Company that was supposed to own the loan as an asset.
  29. Eventually the truth starts coming out, the market crashes and prices of homes return to actual value. Merendon Mining is of course a bankrupt entity as is First Magnus, whose operator appears to be on the run.
  30. Henry can’t make the payments after the extra money they gave him runs out. He has $2 million in loans and the “guaranteed” investment in Merendon Mining has left him penniless.
  31. John Jones fabricates and forges dozens of documents to piece together a narrative wherein an “independent” company would claim ownership of Henry’s loan despite the complete absence of any real transactions between any of the companies because the loan was fully funded using Jason Smartguy’s pension money.
  32. Henry knows nothing about the scam John Jones pulled on Jason Smartguy and certainly doesn’t know that the new Company was involved in his loan (because it wasn’t). Henry doesn’t understand that First Magnus and MERS never loaned him any money and that he never owed them money. And Henry knows nothing about John Jones, whose name appears on nothing.
  33. John Jones, the PONZI operator goes about the business of finishing the deal and making sure that the multiple people who bought into Henry’s loan (without knowing of the other sales and bets placed by John Jones) don’t start asking for refunds.
  34. John Jones MUST get a foreclosure or there will be auditing and reporting requirements that most everyone will overlook as long as this looks like just another loan gone bad. His PONZI scheme will be revealed if the true facts become known so he makes sure that nobody sees the actual money trail except him. He might go to jail if the truth is discovered.
  35. The lawyers for John Jones have told him that even fabricated, forged, non-authentic, falsely signed, and falsely notarized documents carry a presumption of validity. Thus the lawyers and Jones concocted a PONZI scheme that would most likely succeed because even the borrower, Henry, still thinks he owes money to First Magnus or its “successors”, whose identity he doesn’t really care about because he knows he took the loan. He doesn’t know that First Magnus and several other entities were involved in collecting fees and making profits the moment he signed the papers, and possibly before.
  36. Meanwhile Jason Smartguy, manager of the pension fund is starting to get disturbing reports about the assets that were purchased. Jason still doesn’t know that the money he gave John Jones never went into the New Company, that the Company never engaged in any transactions, and that John Jones was claiming “losses” that were really Jason’s losses (the pension fund).
  37. John Jones was collecting money from multiple sources without any of them knowing about each other and that he had no losses, he had only profits, and even got the government to lend him more money so he wouldn’t go out of business which might ruin the economy.
  38. Most of all John Jones never made a loan to Henry Homeowner; but that didn’t stop him from saying he did make the loan, and that the paperwork between John Jones and Jason Smartguy’s pension fund was irrelevant — the borrower got a loan and stopped paying. Thus judicial or non judicial process was available to sell the home that had been in Henry’s family for 6 generations.
  39. But the weakness in John Smith’s PONZI scheme is that his entire strategy is based upon presumptions of validity of his false documentation. If courts start applying normal rules and require Jones to disclose the money trail, he is cooked. There can be no foreclosure if a non-creditor initiates it by simply declaring that they are the creditor and that they have rights to enforce the debt — when the only proof of that is that Jason Smartguy, manager of the pension fund, has not yet put the pieces together and demanded ownership of the loan, settled the cases with modifications and went after John Jones for the balance of the money that was skimmed off the deal.
  40. And since Henry’s house is in Tucson, Az, he is subject to non-judicial foreclosure and he is in big trouble. He has no reason to believe the “servicer” is unauthorized, that the debt that is subject to correspondence and monthly statements does not exist, nor that the mortgage or deed of trust was void for lack of consideration — none of the “lenders” at closing ever loaned him a dime. The money came from Jason but Henry didn’t, and possibly still doesn’t know it.
  41. John Jones files a document called “Substitution of Trustee.” In this false document Jones declares that one of his many entities is the “new beneficiary” (mortgagee). Jones holds his breath. If Henry objects to the substitution of trustee he might have to reveal that the new trustee is not independent, it is a company controlled by John Jones.
  42. John Jones has made himself the new trustee. If the substitution of trustee is nullified in a court proceeding, NOTHING can be done by John Jones or his controlled companies.
  43. If the old trustee realizes that they have received no information on the validity of the claim and might still be the trustee, they might file an “interpleader” action in which they say they have received competing claims, demand attorney fees and costs along with their true statement that as the trustee named on the deed of trust, they have no stake in the outcome.
  44. If that happens Jones is cooked, broiled and boiled. He would be required to allege and prove that the “new beneficiary” is in fact the creditor in the transaction by succession, purchase or otherwise. he can’t because it was Jason who gave the money, it was Jason who was supposed to get evidence of ownership of the loan, and it is Jason who should be deciding between foreclosure (which John Jones MUST have to escape enormous civil and criminal liability).
  45. Jones doesn’t file documents for recording unless and until the case goes into foreclosure. That is because he continuing to trade and make claims of losses on “bad loans.”
  46. In fact, just to be on the safe side, he doesn’t file the fabricated, forged perjurious assignment of the loan at all if nobody makes him. He only files the assignment when he absolutely must do so, because he knows each filing is false and potentially proof of identity theft from the pension fund and from the homeowner.
  47. So it often happens that despite laws in each state requiring the filing of any transfer of an interest in real property for recording, Jones files the assignment when there is the least probability and least likelihood that the PONZI scheme will be revealed. Jones knows the mortgage is void and should never have been recorded, as a matter of law.
  48. Henry brings suit against Jones seeking justice and relief. But he really doesn’t know enough to get traction in court. Jones filed the assignment after the notice of default, after the notice of sale, and after the notice of substitution of trustee.
  49. The Judge who knows nothing about the presence of Jason, who still does not know this is going on, rules for Jones saying that it is irrelevant when the assignment was recorded because it is still a valid assignment between the parties to the assignment.
  50. Jason knows nothing about how the money from his pension fund was handled.
  51. Jason knows nothing about how each foreclosure seals the doom and affirms the illegal windfall to intermediaries who were always playing with OPM (other people’s money).
  52. The Court doesn’t know that that the assignment was just on paper, that there was no business reason for it to be executed, that there was no purchase of the loan from Jason’s pension fund, to whom the actual loan was payable. Thus the Judge sees this as much ado about nothing.
  53. Starting from the premise that Henry owed the money anyway, that there were no real defenses, and that since nobody else was making a claim it was obvious that Jones was the creditor, the Arizona Supreme Court says that anyone can can foreclose on an undated, backdated fabricated assignment forged and robo-signed with no real transaction; and they can execute a substitution of trustee even if they are complete strangers to the loan transaction and once they file that, they can foreclose on property that was never used as collateral for the real loan.

Because there are hundreds of John Jones characters in this tragedy, the entire marketplace has been decimated. The middle class is permanently stalled because their only net worth has been stolen from them The borrowers would gladly execute a real mortgage for real value with real terms that make sense 95% of the time, but they need to do it with the owner of the debt — the pension fund. The pension fund the borrower need to be closely aligned on the premise that the loans can be modified for better terms that forced sales, the housing market could recover, and money would start flowing back to the middle class who drives 70% of our consumer based economy.

They are all wrong and are opening the door for more PONZI schemes and even better ways to steal money and get away with it. The Arizona Supreme Court in Vasquez as well as all other decisions from the trial bench, appellate courts, regulators and law enforcement are all wrong. The burden of proof in due process is on the party seeking affirmative relief. Anyone who wants the death penalty equivalent in civil litigation (forfeiture of homestead), should be required to prove beyond all reasonable doubt or by clear and convincing evidence that the mortgage was valid and should have been recorded.

If they didn’t make the loan they had no right to record the mortgage or do anything with the note or mortgage except give it back to the borrower for destruction. If they didn’t make disclosure of the real nature of the loan and all the profits that would arise from the borrower signing an application and the loan documents, those profits are due back to the borrower.

Each time the assumption is made that there are no valid defenses for the borrower, we are cheating investors and screwing the homeowners. And as for the windfall proposition we know who gets it — the John Jones PONZI operating banks that started all of this. Exactly how can this lead anyway other than a continued drag on our economy?

Vasquez v saxon Az S Ct CV110091CQ

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

Here it is: Nonjudicial Foreclosure Violates Due Process in Complex Structured Finance Transactions

No, there isn’t a case yet. But here is my argument.

The main point is that we are forced to accept the burden of disproving a case that had not been filed — the very essence of nonjudicial foreclosure. In order to comply with due process, a simple denial of the facts and legal authority to foreclosure should be sufficient to force the case into a courtroom where the parties are realigned with the so-called new beneficiary is the Plaintiff and the homeowner is the Defendant — since it is the “beneficiary” who is seeking affirmative relief.

But the way it is done and required to be done, the Plaintiff must file an attack on a case that has never been alleged anywhere in or out of court. The new beneficiary anoints itself, files a fraudulent substitution of trustee because the old one would never go along with it, and then files a notice of default and notice of sale all on the premise that they have the necessary proof and documents to support what could have been an action in foreclosure brought by them in a judicial manner, for which there is adequate provision in California law.

Instead nonjudicial foreclosure is being used to sell property under circumstances where the alleged beneficiary under the deed of trust could never prevail in a court proceeding. Nonjudicial foreclosure was meant to be an expedient method of dealing with the vast majority of foreclosures when the statute was passed. In that vast majority, the usual procedure was complaint, default, judgment and then sale with at least one hearing in between. Nearly all foreclosures were resolved that way and it become more of a ministerial act for Judges than an actual trier of fact or judge of procedural rights and wrongs.

But the situation is changed. The corruption on Wall Street has been systemic resulting in whole sale fraudulent fabricated forged documents together with perjury by affidavit and even live testimony. Contrary to the consensus supported by the banks, these cases are complex because the party seeking affirmative relief — i.e., the new “beneficiary” is following a complex script established long before the homeowner ever applied for a loan or was solicited to finance her property.

The San Francisco study concluded, like dozens of other studies across the country that most of the foreclosures were resolved in favor of “strangers to the transaction.” By definition, the use of several layers of companies and multiple sets of documents defining two separate deals (one with the investor lenders and one with the borrower, with the only party in common being the broker dealer selling mortgage bonds and their controlled entities) has turned the mundane into highly complex litigation that has no venue. In non-judicial foreclosures the Trustee is the party who acts to sell the property under instructions from the beneficiary and does so without inquiry and without paying any attention to the obvious conflict between the title record, the securitization record, the homeowner’s position and the prior record owner of the loan.

The Trustee has no power to conduct a hearing, administrative or judicial, and so the dispute remains unresolved while the Trustee proceeds to sell the property knowing that the homeowner has raised objections. Under normal circumstances under existing common law and statutory authority, the Trustee would simply bring the matter to court in an action for interpleader saying there is a dispute that he doesn’t have the power to resolve. You might think this would clog the court system. That is not the case, although some effort by the banks would be made to do just that. Under existing common law and statutory law, the beneficiary would then need to file a complaint, verified, sworn with real exhibits and that are subject to real scrutiny before any burden of proof would shift to the homeowner. And as complex as these transactions are they all are subject to simple rules concerning financial transactions. If there was no money in the alleged transaction then the allegation of a transaction is false.

It was and remains a mistake to allow such loans to be foreclosed through any means other than strictly judicial where the “beneficiary” must allege and prove ownership and the balance due on the loan owed to THAT beneficiary. Requiring homeowners with zero sophistication in finance and litigation to bear the initial burden of proof in such highly complex structured finance schemes defies logic and common sense as well as being violative of due process in the application of the nonjudicial statutes to these allegedly securitized loans.

By forcing the parties and judges who sit on the bench to treat these complex issues as though they were simple cases, the enabling statutes for nonjudicial foreclosure are being applied unconstitutionally.

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