City of Oakland Sues Wells Fargo for Discriminatory/Predatory Lending

see http://www.housingwire.com/articles/35126-oakland-sues-wells-fargo-for-mortgage-discrimination

My first suggestion was in 2007 that governmental units sue the big banks for what they were doing to their constituents and government budgets. Nobody was interested. They were all listening to Greenspan and Paulson saying that this was nothing and that it was contained. How do you warn people about the tidal wave when they have turned their back to it?

Had the lawsuits began then, the number of foreclosures would have dropped sharply as the predatory practices and fraudulent practices were revealed — the servicers and trustees would have been revealed as emperors without clothes, and governmental agencies would have taken over the process of cleanup instead of allowing the “servicers” and “trustees” to walk off with the money and the property.

But I now renew my OTHER question: Why would anyone spend hundreds of millions of dollars promoting loans that were guaranteed to fail? And the corollary question: Why would anyone spend hundreds of millions of dollars (remember DiTech and Quicken and the Lending Tree?) promoting loans that carried an interest rate of 2.5%???? At that rate, there is a guaranteed loss from inflation even if the borrower pays!!!

The answer is obvious but few people have really drilled down on this stuff and fewer still have done anything about it.

The answer is that no sane person would want those loans much less promote them through surrogate “originators”.

So the next question is if nobody would do that, how did it get done?

And the answer to that is also obvious,  and we all know about it now — other people’s money (OPM). The big banks were making a fortune buying and selling mortgages they didn’t own with mortgage bonds they didn’t own that were sold as guaranteed, insured, high-rated mortgage backed securities, when they were neither securities nor backed by mortgages.

AND THAT is the beginning of why eminent domain is completely appropriate to seize the loans, share the benefit with investors and kick the servicers and trustees out of the picture. Since the Trusts have zero assets anyway, the Trustee and servicer are legally empowered to do NOTHING. None of them have standing to challenge eminent domain.

SERVICER ADVANCES: The Big Modification—> Foreclosure Scam by Wells Fargo and Others — “Better be 90 days behind”

See West Coast Workshop Northern California

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

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

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see http://www.occupy.com/article/how-wells-fargo-fraudulently-foreclosed-florida-homeowner

The Big Question:

How can there be a declaration of default

when the creditor is showing no default and no loss on its books?

I have been through the ringer myself, as the homeowner in the article linked above said about himself. We have a steady policy of the banks luring homeowners into default or luring them into deeper defaults. The reason is clear. They want the foreclosure — not the house and definitely not the money owed. As one BOA manager said “we are in the foreclosure business not the modification business.” The facts are always the same: the homeowner is faced with two choices based upon the information that comes from the only source he or she knows about — the party claiming to own the loan or claiming the authority to service the loan. In nearly all cases neither representation is true.

The two choices are to find another way to get help from friends and relatives (i.e., forget about modification) or go into a default. The message is perfectly clear that the “customer representative” is inviting them to go into default. But they have a script that carefully avoids the direct words of “I am telling you to go into default.” And so nearly all judges say that this is not illegal legal advice and not fraudulent misrepresentation, even though the homeowner is told that there is nobody else they can talk to about their loan.

Millions of homeowners were looking for modification rather than a free house — mostly on loans that had reset to unaffordable monthly payments that were not properly disclosed at closing and which should never have been approved by any legitimate underwriting process. In fact, such loans were never approved prior to the era of the illusion of securitization in the secondary markets where mortgage loans are bought and sold. Industry practices, rules and regulations preventing banks from approving loans in which it was obvious that some or all of the terms would be breached based upon current information. So if a borrower is approved for a mortgage with a teaser payment of $500 per month in a household that grosses $50,000 per year, it is obvious what will happen when the payment resets to $5,000 per month ($60,000 per year) — $10,000 more than their entire income.

The ONLY reason why such loans were approved is that the banks were not putting the bank at risk in such loans and were making money hand over fist in the “secondary” markets that were completely under the control of the same banks. They sold that loan as though the $5,000 per month would be paid — and even had ratings and insurance indicating that the loan was “low risk” when the bank knew for sure that default was imminent due to the reset  of the amount of payments. And in fact, payments were made to the investor creditors just as expected —> but paid by the investment bank as “Servicer advances.”

But were they really paying the certificate holders in REMIC Trusts? Yes, but they were paying investors out of their own money which was hijacked into a commingled slush fund. But since they were called “servicer advances” that are now being bundled as derivatives and sold to the same investors as securitized debt, it is the SERVICER who has a claim for the advanced money even though it wasn’t their money that funded the “advances” which were really refunds out of the money paid by the investors themselves.

The banks created this scheme so that investors would remain ignorant that anything was wrong with the portfolio despite mountains of delinquencies that were DECLARED BY THE SERVICER to be “defaults.” And so the investors would buy more “mortgage backed” securities they were neither mortgage backed nor securities because the Trust never saw a penny of the offering of mortgage backed bonds and never operated nor purchased nor received ownership of the loans.

Those “advances” or refunds or whatever you want to call them can be “recovered” (I would say stolen) by the investment banks masquerading as the Master Servicer of a REMIC Trust that existed only on paper and not in the real world. But they can only “recover” those advances (that they are quickly selling to investors through new securitization schemes) if the property goes into foreclosure. If the property is foreclosed then the servicer no longer needs to make advances although in many cases it continues to do so in order to keep the investors in the dark. But more importantly it is ONLY when the property is sold that the “Master Servicer” can “recover” those servicer advances.

It’s complicated. But if you stop for a moment and put pencil to paper suddenly the reason for those long delays in prosecuting foreclosures becomes crystal clear. The investment bank is using the investor money to make “advances” to the investor to make good on the expectations of the investor in receiving income from their “investment.” Since the investment bank is not actually making the advances, the “receivable” due to the investment bank under this convoluted scheme increases with each passing month (without any corresponding liability or expense). So the investment bank that controls the slush fund where investor money is kept, makes payments to the investor for the amounts due regardless of whether the borrowers are paying.

In the example above, they want to keep that time running as long as possible. By making advances of $5,000 per month, that is $60,000 per year and over an 8 year period, for example, the receivable is now $480,000 without the bank having to spend one dime and in fact, actually collecting fees during the entire time at a premium rate for those loans that are distressed. So they have a $480,000 asset waiting. But there is a catch. They can only get the $480,000 if the property is foreclosed and the property is sold. It is only out of the sale proceeds that the bank as “master Servicer” can lay claim for its $480,000. Of course in the end the investors get screwed because that $480,000 was their money and THEY should have received it. But they didn’t and they don’t. Just read the prospectuses on the bundling of “servicer advances.”

So Wells Fargo and other banks adopted strategies that lure homeowners into default and get them believing and hoping they will get a modification when in fact they don’t give the modifications at all. In truth they are neither authorized to collect the money nor enforce the obligation because their so-called authority comes from the PSA for a REMIC Trust that was never used, never funded, never in operation. And they do it in a variety of ways—

Here are some excerpts from the article in the above link from about a year ago:

Occupy.com Article

Wells Fargo put them “through the ringer”. “We were happy living in a rural-suburban area. Time went by quickly. One thing that we always did was pay our bills on time. We took pride in our credit score, which were 760 each. We were so proud when we needed a new car we could just “walk” off the lot with it. [I’m] not sure what happened, where everything went wrong. I actually believe it was President Obama telling Americans to apply for a Home Affordable Modification Program (HAMP) loan. When job loss occurred in our family, I was aware that we would qualify for that loan and I called Wells Fargo to inquire. They put us through the ringer. That is what started our tumble down the credit hole. Wells Fargo approved a forbearance agreement, while we submitted a HAMP application in 2009.” – See more at: http://www.occupy.com/article/how-wells-fargo-fraudulently-foreclosed-florida-homeowner#sthash.iIM39zPY.dpuf

[HAMP had been introduced by the Obama administration as a tool to help homeowners keep their homes. It turned out that the yellow brick road led many into foreclosure disasters – a prolonged disaster that kept homeowners’ hope alive while chipping away their savings, their equity, and ruining their credit scores. Americans were watching in disbelief while the servicers and banks didn’t comply with the HAMP requirements, continued with dual tracking (processing modifications and foreclosing at the same time), pushing homeowners towards in-house modifications even when they qualified for HAMP, and many other irregularities.] – See more at: http://www.occupy.com/article/how-wells-fargo-fraudulently-foreclosed-florida-homeowner#sthash.iIM39zPY.dpuf

This is when the games began,” continued J.S. “The forbearance ruined my credit score. Every fax I sent to Wells Fargo has not been received – that’s what their representatives claimed. Week after week, always [with] a two-week lag. Always something missing. Then I started my Internet research on “lost paper work” and I found Living Lies website, which led to Foreclosure Hamlet, and now Facebook. My search for answers brought many wonderful people in my life together with the answers and they helped me through the darkest moments of my life. [Editor’s note: Ruining the credit score of the homeowner is key to insuring a foreclosure. If their credit score remained high they would be able to refinance and the investment bank as Master Servicer would have no claim for “servicer advances.”]

“In 2009 I was informed by a Wells Fargo representative that I may not be approved because someone moved my application out of the review folder from her computer! Their incompetence was limitless. Eventually I was approved for a modification, but it was more than my original mortgage. However, I wanted to save my house at all costs. At this time I had a good job. [But] after the BP oil spill my salary was cut in half and I re-applied for the HAMP loan in 2010. – [Editor’s Note: I have personal knowledge and tape recordings of Wells Fargo employees speaking without realizing they were being recorded by their own system. In those recordings they acknowledged that images and data from one borrower was mixed in with another. They agree that they shouldn’t admit that to the borrower. Then Wells Fargo blames the borrower for not having sent the required documentation which they have had all along or destroyed. Evidence in a case involving BOA and other banks shows that on a periodic basis the banks simply destroy all applications and submissions by borrowers.]

“I was told by Wells Fargo that we had to be 90 days late before they would consider my HAMP loan application. At that time, I still had a great credit score, and now they were telling me to actually STOP PAYING MY MORTGAGE. I think that I literally freaked out then. I didn’t want to lose my home.” [This is the big one. And up till now it has been foolproof. Most homeowners are unaware of the news or history of other borrowers. So when they are told about the “90 day” requirement, they think they don’t qualify for relief unless they withhold payments for 90 days. But that isn’t true for two reasons — the bank is only telling them about the policy of Wells Fargo, not the investors (sometimes Fannie or Freddie).  The bank is creating the impression that they are a reliable source of information when in fact they are lying to the borrower in order to get them into default, foreclosure, sell the property and then claim “Servicer advances.”]

One of the biggest traps by the servicers during the HAMP modification process was pushing homeowners into default without telling them that they would be reported by those same servicers to the credit agencies, thus ruining their credit.] – See more at: http://www.occupy.com/article/how-wells-fargo-fraudulently-foreclosed-florida-homeowner#sthash.iIM39zPY.dpuf

“After reluctantly not paying my mortgage for 90 days, I was able to apply for a HAMP loan. Again every fax I sent was lost. I didn’t know what to do anymore. My frustration reached its limits and I realized that next time I will FedEx my documents, so they can’t lose it, since there will be a tracking number as a proof of delivery. The new HAMP application letter stated that paper work was due on or before Feb. 14, 2011. I gathered everything and sent on Feb. 3, 2011. It was received on Feb. 4, 2011, and signed via FedEx tracking. On Feb. 16, 2014, I received a letter from Wells Fargo that my documents were not received. WHAT? I called them right away. They say they never received my package. After I cried over the phone, their representative sounded very upset and finally told me, ‘We have some of your documents, but things are missing.’ – See more at: http://www.occupy.com/article/how-wells-fargo-fraudulently-foreclosed-florida-homeowner#sthash.iIM39zPY.dpuf

“I called FedEx and spoke to the supervisor of the delivery person and she tried to call Wells Fargo but I was told no one would answer the phone and she never contacted me again. I had no choice but to wait for foreclosure proceedings. They obviously wanted to give me the run around. I was served Dec. 27, 2011. I was ready. – See more at: http://www.occupy.com/article/how-wells-fargo-fraudulently-foreclosed-florida-homeowner#sthash.iIM39zPY.dpuf

Ocwen: Investors and Borrowers Move toward Unity of Purpose!

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

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

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

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

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

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

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

 

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

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

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

Gretchen Morgenson Weighs in On Wall Street Corruption: “Two Judges Who get It About Banks”

For more information on UNDOCUMENTED LOANS please call 954-495-9867 or 520-405-1688

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Competing Transactions:

The One Banks Use Which never Existed

vs

The Real Loan that was Undocumented

You may have noted that in response to my articles and briefs, banks don’t argue with the premise that they have no original money transaction; instead they argue that there doesn’t need to be one. I disagree. For those of you who have been reading my articles over the last week, you will see some familiar comments and facts in this New York Times article. The deeper questions have yet to be asked in mainstream media — why was it necessary for the banks to fabricate documentation — that is, if the transactions they are claiming to enforce were real? My only answer is that the transaction they are claiming to document never existed.

If the transactions represented by banks actually existed, they would never have needed to fabricate documents with forged, robosigned signatures. The fabricated, back-dated, forged, robosigned documents and now robo witnesses are corroboration for the irrefutable conclusion that there is no underlying transaction with the banks. This entire fiasco is simply based upon greed and opportunity.

The banks saw an opportunity to use other people’s money for their own benefit and to the detriment of everyone else involved. They converted themselves from intermediaries, which is their primary role for which they are licensed, to the principal. It is as simple as this: imagine your bank claiming to won your TV set because you signed a check payable to the store that sold it to you. The bank claims they were the real party in interest and they can enforce the warranty on the TV against the manufacturer and even take your TV away from you because “they own it.” What Judges are missing is that banks are intermediaries. They are a middleman not the actual player; but Banks have convinced the court that they are the principal player and that even if they are not the principal real party in interest, it is irrelevant. If we were to keep moving down this path, the entire fabric of our laws concerning contract and negotiable paper will be destroyed.

And the fact that their puppets happen to be named at the closing of the loan does not mean those puppets did anything except look cute. If the money came from someone else, then the paperwork should have disclosed that and more importantly the note and mortgage should have been made out in favor of the source of funds.

The assumption that it is none of anyone’s business how the banks securitized mortgage loans is just plain wrong, and just plain dangerous. It opens the door to far more trips into the moral hazard zone. Judges have been assuming that the note and mortgage were made out in favor of a properly constituted representative of the party who was the source of funds or they are assuming that the numerous parties involved in the loan closing were somehow in privity with the sources of funds. This is not true and obviously not based upon any evidence presented anywhere; but as Judges loosen the ropes that bind us and allow inquiry into the money trail, they will discover, to their horror, that the originating transaction was actually undocumented and the one described by the banks never existed.

The problem the Judges are having is an old one now — well if the party named on the note and mortgage didn’t loan money to the borrower, then who did loan money to the borrower? And the answer has been “I don’t know, but they are out there.” That has been an unsatisfactory answer caused by the failure of the same courts to enforce reasonable discovery requests seeking exactly that information. Hence the frustration of foreclosure defense work for lawyers.

When it comes to writing about Wall Street corruption, Gretchen Morgenson gets very little support from her Employer, the New York Times. If you want to give her more leverage to write more of these articles then start writing letters to the editor and comment on her articles when it deals with Wall Street corruption.

Here is the link to her article: Two Judges That Get It — Gretchen Morgenson

Title After Wrongful Foreclosure: Martha Coakley Getting to Heart of the Problem of Fraudulent Foreclosures

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

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see Massachusetts Settlement: Fine PLUS Curing Title Defects

Martha Coakley gets it. She is the attorney general of Massachusetts. And she alone has enforced the law the way it should be enforced. When a bank or anyone else files a fraudulent foreclosure action they should pay for it AND the title should be corrected. If the foreclosure was false then the title is defective as shown in the county records. All previous national and state settlements were for money only. In this case four banks have agreed that they will pay a fine AND take all necessary steps to cure title. The four banks are the usual suspects — Bank of America (BOA), Chase, Citi, Wells Fargo.

Bank of America, Citi, JPMorgan Chase, and Wells Fargo were accused of violating Massachusetts foreclosure laws and the Massachusetts Consumer Protection Act by foreclosing on properties in the Commonwealth when they did not hold the rights to the mortgages, and therefore did not legally have the right to foreclose….

The Massachusetts AG office alleges in the amended complaint that the four banks ignored a fundamental legal mandate established in the Supreme Judicial Court’s Ibanez decision in January 2011 that mortgagees must strictly comply with the Commonwealth’s foreclosure laws. The Massachusetts foreclosure law states that a mortgage is void if whoever initiates the foreclosure does not hold the mortgage through valid assignment or is not the mortgagee of record at the time the foreclosure notice is published.

The complaint further alleges that the four banks did not obtain a valid assignment of the mortgage prior to publishing foreclosure notices on the properties and therefore the foreclosures should be invalidated. Also according to the complaint, the banks’ actions adversely affected the marketability and insurability of titles to numerous properties in the Commonwealth.

As part of the settlement, the banks will be required to assist consumers who claim the title to his or her residence is void from an unlawful foreclosure. Assistance will likely include conducting a thorough title review, providing curative documents, releasing junior leans held by banks, and paying costs associated with the title cure in cases where consumers do not have title insurance, according to the Massachusetts AG office.

Modification Offers Are Enforceable Contracts

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

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We have all seen it, heard and experienced it over and over again. In this case Wells Fargo offered a “temporary” modification, it was accepted and the trial payments were made. Wells Fargo said the modification offer and acceptance lacked consideration — the height of arrogance since they have no transaction with consideration supporting their claim of ownership of the debt, note or mortgage.

Wells disavowed the settlement and went forward with foreclosure. The homeowner’s claim to enforce the modification contract was dismissed for failure to state a cause of action, agreeing with Wells Fargo that there was no consideration. The appellate court reversed stating that there was consideration and that it was more than adequate. There are now hundreds of cases in which trial judges and appellate courts have enforced the modification agreements.

Here is one you can look at:

http://www.ca4.uscourts.gov/Opinions/Unpublished/132390.U.pdf

Wisconsin BKR Judge Orders Wells Fargo to Disgorge Payments It Received

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

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Hat tip to anonymous

The full case was 25 pages, I redacted to about 4 below, but very substantial topics and analysis on this similar to Rivera in full version.
– A win on recovery of mortgage payments made to Wells, $73,000.
– Loss on recovery of attorneys fee’s to Debtor, BUT, court stated these would be proper if circumstances met criteria, just not here, and
Very interesting analysis on return of note, which backs up your prior analysis; Note will not be returned to Debtor, as even though note is not enforceable by Wells or its servicers, real party in interest may show up at some point. Debtor also did not point to any prior case law that would require return of note.

I question whether the bankruptcy judge had the required jurisdiction to enter this order in all respects. But the analysis he presents is pretty much on target and once again Wells Fargo is shown to be making false statements and representations in court with virtual immunity even in this case.

Decision dated 10/21/14
http://stopforeclosurefraud.com/wp-content/uploads/2014/12/2014-10-21-In-Re-Thompson-.pdf

UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF WISCONSIN

In re Chapter 13 Dennis E. Thompson and Pamela A. Thompson, Case No. 05-28262-svk Debtors.

MEMORANDUM DECISION ON DEBTORS’ MOTIONS FOR CERTAIN RELIEF AGAINST WELLS FARGO

Since this case’s inception in 2005, it has been fraught with litigation, failed mediations, discovery disputes, accusations of attorney misconduct and otherwise tumultuous actions. In 2013, these proceedings eventually culminated in this Court’s disallowance of the proof of claim filed on behalf of Wells Fargo Bank after it was established that Wells Fargo was not the holder of the mortgage note underlying the claim. As a result, the pro se debtors filed a flurry of motions to effectuate the claim disallowance decision. This memorandum decision will hopefully end the litigation concerning the mortgage note, at least in the bankruptcy court………………

……..“On January 12, 2006, the Court confirmed the Debtors’ Chapter 13 plan. Under the plan, the Debtors proposed to make direct current mortgage payments and cure their pre-petition mortgage arrearage via payments to the trustee. On June 27, 2011, the Debtors filed a motion to enter into the Court’s mortgage modification mediation program with Litton. (Docket No. 142.) In preparation for the mortgage mediation, the Debtors hired an attorney and conducted a title search on their property. (Hearing Recording, Docket No. 164, at 10:53:15.) The title search revealed that Wells Fargo did not hold the title to their mortgage. (Id.) Mediation attempts with both Litton and Ocwen Loan Servicing, LLC4 (“Ocwen”), the current servicer for Wells Fargo, failed. (Docket No. 168; Docket No. 213.) On March 19, 2012, the Debtors filed a motion that the Court construed as an objection to the Claim. (Docket No. 159.) On April 2, 2012, Ocwen responded to the objection. After several preliminary hearings, discovery disputes, and a final evidentiary hearing, the Court entered an order disallowing the Claim. (Docket No. 217, 5.) The Court determined that neither Wells Fargo nor its servicers had standing to file a claim in the Debtors’ bankruptcy case. (Id.) Wells Fargo appealed. U.S. District Judge J.P. Stadtmueller affirmed the Court’s decision to disallow Wells Fargo’s Claim, holding:

“[E]ven if each version of the note self-authenticates under FRE 902(9), without testimony or other evidence from Ocwen to “‘connect the dots’” between the disputed allonge and the note, the evidentiary record contained only equally probable “authentic” versions of the note countervailing one another. Against that evidentiary backdrop, the bankruptcy court committed no error in finding insufficient evidence to confer standing on Ocwen to prosecute the disputed proof of claim.

Ocwen Loan Servicing, LLC v. Thompson, No. 13-CV-487, 2014 U.S. Dist. LEXIS 2109, at *14- 15 (E.D. Wis. Jan. 7, 2014).

Prior to the district court decision, the Debtors filed motions for reimbursement of mortgage payments (Docket No. 222) and attorneys’ fees. (Docket No. 223.) The Court entered an order determining that no action would be taken on the Debtors’ motions until after the district court entered a final order in the appeal. (Docket No. 225.) After the district court decision, the Debtors filed a motion to require the return of the original note to them. (Docket No. 239.) The Court set a briefing schedule. The parties have filed briefs. The motions are now ripe for decision.

 

ANALYSIS

Reimbursement of Mortgage Payments made on Disallowed Claim

Based on the disallowance of the Claim, the Debtors request a refund of all mortgage payments and trustee payments made to Litton and Ocwen since their bankruptcy case was filed in 2005. (Docket No. 222, 1.) Arguing that they “have every legal right to believe that they were or should have been paying the proper party,” (Id.), the Debtors calculate that a total of $146,972.45 should be reimbursed to them. (Docket No. 257, 4.) This amount includes $21,587.64 for “lost mortgage payments,” $106,167.91 for mortgage payments made outside the plan from July 2005 to December 2011, $11,716.90 for disbursements made by the Chapter 13 trustee on the disallowed Claim, and $7,500.00 for “return of sanction.”5 (Id.)

Wells Fargo raises only two objections to the Debtors’ motion for a refund of mortgage payments. First, Wells Fargo contends that the Court previously denied this motion at the March 14, 2013 hearing on the Debtors’ objection to Wells Fargo’s Claim……………….”

Second, Wells Fargo argues that the Court must balance the equities under the circumstances.6 Wells Fargo notes that Ocwen and Litton both expended funds during the course of the bankruptcy to prevent the Debtors’ property from going into tax foreclosureWells Fargo also argues that the Court’s decision disallowing the Claim did not alter the fact that the “Debtors borrowed money on April 14, 2000, and have yet to repay their debt,” and “[u]nder the circumstances, it would be inequitable to require Ocwen to take yet another loss on this account.” (Id. at 5-6.)

“The Court rejects Wells Fargo’s attempt to characterize the Court’s comments at the March 13, 2013 hearing as a definitive ruling on whether Wells Fargo should have to refund the payments it received from the Debtors during the bankruptcy case…………..

Wells Fargo’s second argument requests that the Court balance the equities under the circumstances. Wells Fargo cites one case to support its position, which notes that “[c]ourts exercising equitable powers must behave akin to doctors operating under the Hippocratic Oath: first, do no harm. We must do equity to all parties and not just the party seeking equitable assistance . . .” Briarwood Club, LLC v. Vespera, LLC, 2013 WI App 119, ¶ 1, 351 Wis. 2d 62, 839 N.W.2d 124. Wells Fargo suggests that if the Court grants the Debtors’ request, the Debtors will gain a free house. It notes that the Debtors borrowed money that they have not fully repaid, and as long as they are not required to repay it twice, the Debtors are obligated under the mortgage note. (Docket No. 246, 6.) Wells Fargo explains that while it may not have legal enforcement power under Wisconsin law, it does still hold physical possession of the note. (Id.)

And, according to Wells Fargo, since there have not been any competing claims for repayment on the loan, it would be inequitable for the Court to require Wells Fargo to take another loss on this delinquent account. (Id. at 7.)

A similar argument was made and rejected in Thomas v. Urban P’ship Bank, Residential Credit Solutions, Inc., 2013 U.S. Dist. LEXIS 59818 (N.D. Ill. April 26, 2013). In that case, Barbara Thomas filed suit against Urban Partnership Bank, alleging that Urban sought payments on a mortgage loan that it did not own. The central issue involved whether Thomas’s mortgage loan was included in an asset purchase agreement executed between Urban and Thomas’s original lender, ShoreBank. Urban moved to dismiss the complaint, arguing among other theories that there were no competing claims for payment on the note. But Thomas’s unjust enrichment claim survived the motion to dismiss. According to the district court:

Thomas clearly alleges that she owes someone money under the mortgage loan and that that someone is not Urban, and so it is irrelevant that no one else is currently making claims to her mortgage payments. If Thomas is correct that she owes money to someone other than Urban, then by paying Urban she has lost money without reducing the debt she owes to the loan’s true owner. . . . That amounts to the enrichment of Urban to Thomas’s detriment, since Thomas has lost and Urban has gained money for nothing . . . If, as Thomas adequately alleges, Urban had no right under the mortgage loan to the payments it received and Thomas made the payments on the mistaken premise that Urban was the loan’s owner, then fundamental principles of justice, equity, and good conscience require that Urban disgorge the payments . . . .

Id. at *27-29 (internal citations and quotations omitted).8

The district court in Thomas relied on Bank of Naperville v. Catalano, 86 Ill. App. 3d 1005, 408 N.E.2d 441, 444, 42 Ill. Dec. 63 (Ill. App. 1980), in which the court held,

“As a general rule, where money is paid under a mistake of fact, and payment would not have been made had the facts been known to the payor, such money may be recovered.”

The court also cited the Restatement (Third) of Restitution and Unjust Enrichment § 6 (2011) “Payment of Money Not Due” to the effect that payment by mistake gives the payor a claim in restitution against the recipient to the extent payment was not due, and a payor’s mistake as to liability may be a mistake about the identity of the creditor. The Restatement discusses two examples of payment by mistake that may be applicable here: mistake as to payee and mistake as to liability.9 Under mistake as to payee, the Restatement notes that “[a] mistaken payor has a claim in restitution when money is mistakenly transferred to someone other than the intended recipient.”…………..

Under mistake as to liability, the Restatement states that “[a] payor’s mistake as to liability may be a mistake about the identity of the creditor. In such a case, the payor believes that an obligation runs to the payee when in fact the obligation is to someone else.” The latter example applies here.10 The Debtors mistakenly believed that Wells Fargo was entitled to enforce the mortgage note. Wells Fargo’s servicers filed proofs of claim in the bankruptcy case, and they directed the Debtors to send their mortgage payments to Wells Fargo, in care of the servicers. The servicers accepted the Debtors’ mortgage payments on behalf of Wells Fargo, when in fact, Wells Fargo did not validly hold the mortgage note, and Wells Fargo was not entitled to the payments.

Although Wells Fargo has responded to the Debtors’ request for a refund with a plea for equity,11 in fact, the equities here favor the Debtors.

“A claim for unjust enrichment is based on the “universally recognized moral principle that one who received a benefit has the duty to make restitution when to retain such a benefit would be unjust.” Puttkammer v. Minth, 83 Wis. 2d at 689 (quoting Fullerton Lumber Co. v. Korth, 37 Wis. 2d 531, 536 (Wis. 1968))…..

 However, it is not enough to merely establish that a benefit was conferred and retained; the retention must also be inequitable. Id. This Court previously determined that Wells Fargo is not the holder of the Debtors’ mortgage note with legal authority to enforce it; that determination was affirmed on appeal. Without authority to enforce the note, Wells Fargo is not entitled to receive payments under the note. Only the party with a legally enforceable right to enforce the note is entitled to retain the benefit of the Debtors’ mortgage payments. Nevertheless, Wells Fargo, through its servicers, received voluntary payments from the Debtors and payments from the Trustee since the commencement of this bankruptcy case, subjecting the Debtors to the possibility of having to pay twice if the true owner of the note appears. Since Wells Fargo and its servicers have no legal right to the Debtors’ mortgage payments, retention of the Debtors’ mortgage payments would be inequitable.

 

Adding all of the entries for “payment” shows that the Debtors paid $97,979.68 from February 2006 to July 2011. (Docket No. 211, Ex. 11).12 Additionally, Wells Fargo should credit the Debtors with $7,500 for the sanctions awarded in the prior claim objection proceeding. (See Docket No. 103, at 10), for a total of $105,479.68. Wells Fargo points out that it made real estate tax payments on the Debtors’ behalf that should be deducted from any refund claim. The Court agrees. After subtracting $32,438.19 for the tax payments made on the Debtors’ behalf, the Debtors’ total claim for unjust enrichment is $73,041.49. Under the circumstances, Wells Fargo should be required to return this amount to the Debtors to avoid being unjustly enriched………….

Attorney Fee’s

“The Debtors also filed a motion for attorneys’ fees, arguing that Wells Fargo should pay approximately $12,500 in fees and costs the Debtors expended in connection with the failed mediations with Litton and Ocwen. According to the Debtors, “[u]nnecessary protracted negotiations have been ongoing since 2010. Starting with Litton Loan and ending with Ocwen. The plaintiff has misrepresented their standing, despite the efforts of the debtors to discuss this matter in the mediation process.” (Docket No. 223 at 1-2.) The Debtors also request punitive damages under 28 U.S.C. § 1927 for “vexatious litigation conduct” by Litton and Ocwen. (Id. At 2.) They note that Litton failed to attend several scheduled mediation sessions, and when Ocwen reinitiated mediation proceedings in 2012, there was a “delay to the debtors of 6 hours in the first and only scheduled mediation, with the debtors believing that progress was being established.”……………………… Although the Debtors have the right to be disappointed that the mediation did not succeed despite the attorneys’ fees that the Debtors expended, Wells Fargo’s attorneys acted under the impression that their client had proper standing. The Court finds that Wells Fargo’s attorneys did not unreasonably and vexatiously multiply the proceedings by their conduct in this case, and the Debtors’ request for attorneys’ fees is denied.

Request for Return of Note

The Debtors’ final motion asks the Court to order Wells Fargo to turn over the original mortgage note to them. Despite the Court’s ruling that Wells Fargo cannot enforce the note, the Debtors are concerned that Wells Fargo will somehow sell, transfer or trade the note, subjecting the Debtors to further litigation, emotional distress and financial hardship. Wells Fargo responds by attempting to discern the legal theories under which the Debtors are attempting to proceed, and then casting aspersions on those theories. The Court generally agrees with Wells Fargo that the Debtors could not succeed on a replevin claim or turnover action based on the note as property of the bankruptcy estate. However, the theory that the surrender of the original note consequently follows from the disallowance of Wells Fargo’s Claim warrants further analysis. The Court also takes this opportunity to clarify that, while not “undoing” any part of the Foreclosure Court’s judgment, Wells Fargo’s ability to enforce that judgment was never finally determined by the Foreclosure Court, and the disallowance of Wells Fargo’s Claim on standing grounds strongly suggests that Wells Fargo has no such ability………………..

Neither the Debtors nor Wells Fargo cited any case law supporting their position on whether the note should be returned to the Debtors after disallowance of the Claim, and the Court’s independent research uncovered no case directly on point…………………..Here, while the validity of the note and mortgage in favor of Provident was actually litigated and determined in the Foreclosure Case, Wells Fargo’s substitution as the plaintiff was summarily ordered without notice to the Debtors or any hearing on the issue. The Debtors were not afforded a reasonable opportunity to obtain review of the substitution order before the automatic stay intervened. That the party sought to be precluded had a reasonable opportunity to obtain review of the prior court’s order is a basic premise of the fundamental fairness prong of the issue preclusion analysis. Id. This Court previously denied Wells Fargo’s attempt to establish its standing to file the Claim based on the judgment and order of substitution in the Foreclosure Case. For the same reasons, issue preclusion does not act to bar the Debtors’ claim for return of the note……………..

“The court agreed with other courts that simply because a creditor lacks standing to enforce a note, the debtor is not discharged of her obligations under the note. Id. This Court has concluded (and the district court on appeal agreed) that Wells Fargo is neither the holder of the note nor a nonholder in possession of the instrument with the rights to enforce it. (Docket No. 233, 11.) Therefore, Wells Fargo (and its affiliates, servicers, successors and assigns) cannot enforce the note, but that fact does not cancel the note nor discharge the Debtors’ obligations to the true owner. In the absence of any authority for their request for turnover of the original note and analogizing to the cases requesting dismissal with prejudice, the Debtors’ motion to require Wells Fargo to surrender the original note is denied….

CONCLUSION

The Debtors’ motion for reimbursement of the payments made on Wells Fargo’s disallowed Claim is granted, subject to offset for real estate taxes paid by Wells Fargo. Within 30 days of the date of this Order, Wells Fargo must pay $73,041.49 to the Debtors and $11,716.90 to the Chapter 13 trustee. The Debtors’ motions for reimbursement of attorneys’ fees and turnover of the original note are denied. The foregoing constitutes the Court’s findings of fact and conclusions of law. The Court will enter separate orders on each motion.

Dated: October 21, 2014

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