Over the years many lawyers and laypeople have sent me proposed motions to disqualify or bar opposing counsel from representing to the court that the bank he or she named in a complaint or claim is his client.
It seems like an open secret that virtually no lawyer engaged in the foreclosure process is actually representing that bank; it is also an open secret that no lawyer is actually pursuing a legally recognizable claim against homeowners. Instead, they have been creating false claims (virtual claims) based upon virtual loan accounts that do not exist on the books and records of any creditor much less the bank they say they’re representing.
Such attacks on the lawyers get little support from the courts. And Bar Associations that could prevent and punish such conduct are doing nothing. So I don’t think I am speaking out of turn when I say that you are not likely to get satisfactory results in filing a motion in court or a grievance with the bar association.
A recent interesting countermovement in bar associations is the current effort to remove words like “zeal” and “zealously” from the rules and oath of the lawyer. There is a growing recognition that the use of such words provides cover from unscrupulous lawyers who weaponize the legal process in order to obtain an illegal result.
I can think of no other areas of law where such conduct prevails more than in foreclosures. For nearly 25 years the courts have bent over backward allowing the remedy of foreclosure to be used solely on the basis of “zealous” representations from lawyers whose [principal objective is to make money for themselves, their law firm, the erroneously named “servicer,” and the undisclosed investment bank.
But since so many people keep returning to the subject I will admit that without lawyers being willing to undermine their own due diligence obligation (to assure the factual existence of the client and the claim). Protected by a doctrine called litigation immunity afforded to the lawyers, the investment bank, acting through lawyers with whom it has no direct contact, controls all events and actions by all actors in connection with the administration, collection, and enforcement of a debt that is fictional (virtual) instead of real.
While there have been instances in which lawyers were sanctioned for falsely representing to the court that U.S. Bank was their client acting as a trustee, such arguments are treated dismissively almost all the time. Frankly, it isn’t easy establishing that the law firm itself does not consider its attorney-client relationship is with parties OTHER THAN THE PLAINTIFF OR CLAIMANT. You can allege it, but how do you back that up with proof?
The answer lies in circumstantial evdience and in effective persuasion in court directed at a judge who for the most part has already decided the outcome of the case based solely upon the allegations.
So far I still don’t recommend that homeowners file such motions. If you fail you will make it look like you are trying to distract the court from the debt you owe instead of dealing with the fact that no such debt exists.
But, if I was going to do it, here are my notes on the subject:
Background facts:
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The lawyer executes and files documents that contain or imply a short plain statement of ultimate facts upon which the remedy of foreclosure could be granted. The lawyer is naming the claimant as a bank acting as trustee of a trust that is always implied but never stated to own the underlying obligation surviving the “closing” of a transaction that was labeled as a loan. No allegation is ever made that the named claimant or Plaintiff ever paid value for the underlying obligation. The closest they come is the general allegation that all conditions precedent have been satisfied.
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In truth, the lawyer has initiated the foreclosure process for the benefit of several actors, including the lawyer, and not for the benefit of the bank acting as trustee or the trust itself. In fact, the lawyer knows that any payments from the homeowner or payments arising from the forced sale of the subject property will be diverted away from the named claimant which is the bank acting supposedly on behalf of the trust, which in fact does not own any right, title or interest to the subject obligation, debt, note or mortgage. Neither the bank nor the lawyer expects or receives any flow of funds to or on behalf of the bank.
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In no case do the common “trustees” (U.S. Bank, Bank of New York Mellon, Deutsch) receive or distribute money from homeowners or to any beneficiaries. In no case do the common “trustees” actively manage the affairs of a trust that owns a legal right, title or interest to the subject obligation, legal debt, note or mortgage. In no case, does the lawyer receive any instructions, information, or legal right to administer, collect or enforce an alleged unpaid loan account receivable owned, maintained or administered by the bank or any trust. In no case does such a receivable exist on the books of account for any trust or other creditor to whom the homeowner owes money.
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The lawyer is using a fictitious name to further his own interest, that of the company named as a “servicer,” and the securities brokerage firm named as investment bank book runner with permission to use the name of the bank in a vaguely worded Plaintiff or claimant. If the foreclosure effort is unsuccessful no loss of income, principal or interest occurs on the books of record of any entity. If it succeeds, the proceeds are distributed to many different actors as revenue or other non-categorized receipts of money — but no unpaid loan account receivable is decreased by the receipt of such money because no such account exists.
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The appearance of the unpaid loan account receivable is a fiction, but not a legal fiction. It is illegal and extra-legal. There are no provisions in statutory or common law for the administration, collection, and enforcement of a virtual debt. At the base of every legal debt is a transaction in which consideration is exchanged. The unpaid loan account must be real and it must be reflected on the books of account of the supposed creditor. And the enforcer must be a party who paid value for the underlying obligation (not the note or mortgage).
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The attorney then misleads the court by both promoting and allowing untrue statements to stand as true, while the attorney knows they are false. When, for example, U.S. Bank is named as Trustee for the SASCO Trust 2006-A1, for the benefit of registered holders of SASCO Trust 2006-A1 pass-through certificates, the lawyer is making a misleading statement of claim, a misleading identification of the claimant, and promoting and active attempt to mislead the court into believing that ultimately it is investors who will compensate for their loss a rising from a claimed “default” by the homeowner.
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It was my discovery in 2006 that nearly everything said about securitization consisted of bold big lies, that caused me to name my blog (beginning in October 2007) “LivingLies.”
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- It was a lie to send statements to homeowners indicating they had a legal obligation or even a moral one to pay the newly designated “servicer” who actually performed no servicing duties.
- It was a lie to declare delinquency or default without disclosing the creditor who had suffered any loss arising out of the non-receipt of scheduled payments.
- It was a lie to declare delinquency or default when no creditor suffered any financial loss arising from the alleged non-receipt of a scheduled payment.
- It was a lie to imply that investors were buying pieces of mortgage loans or that foreclosures were being prosecuted on behalf of the investors, often referred to as the “holders of certificates” or “registered holders of certificates” — especially since they were not holders of any notes nor were they registered to receive any part of any payment from any homeowner.
- It was a lie to assert or imply that the naming of a trust in the claim or complaint was sufficient to explain the appearance of the trust since it expressly disclaimed any economic interest in any debt, note or mortgage even if there was an assignment or endorsement — all as stated in the “Trust Agreement” or equivalent document.
- It was a lie to assert that the trust had any right to administer, collect or enforce any promise or agreement with the homeowner and a concurrent lie to assert that the trustee had any right to grant powers of attorney or execute any servicing agreement for unpaid loan accounts that it did not own.
- It was a lie to imply that the outcome of a “successful” foreclosure would result in the payment of a creditor.
- It was a lie to assert representation of “the plaintiff” or “the claimant” when no such representation, retainer agreement, or contract existed.
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The list could go further, to be sure. But the point is already made. Without lawyers willing to bend custom and norms to the breaking point there would be no successful foreclosure because the law does not allow foreclosure for fun and profit. It only allows it for restitution of an unpaid debt.
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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE COMMENTS ON THIS BLOG AND ELSEWHERE ARE BASED ON THE ABILITY OF A HOMEOWNER TO WIN THE CASE NOT MERELY SETTLE IT. OTHER LAWYERS HAVE STRATEGIES DIRECTED AT SETTLEMENT OR MODIFICATION. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).
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