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The essence of the Garfield defense is to (a) get the Judge mad at the foreclosure mill and (b) reveal the inability to produce one iota of evidence of a money trail, thus rebutting the clear legal presumptions arising from the supposedly facial validity of fabricated documents containing untrue statements.

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First, let me say that there is nothing wrong with supply chain finance. In one form or another, it has been used for thousands of years. The same can be said for securitization — if that is what is really happening.

Second I have been getting quite a lot of questions about my articles and one of the more common questions can be paraphrased as “So where does the money come from?” I want to re-emphasize that while it doesn’t hurt to understand this scheme better, the details are most likely outside the purview of any points that homeowners should be using in litigation — in pleadings, discovery demands, and argument.

The answer is something called Supply Chain Finance. “It works by partnering with a supply chain finance company that extends you trade credit, and it acts as an intermediary between your company and your suppliers. … Once your supplier gets the purchase order, they produce and deliver the goods to you. The finance company pays your supplier and issues an invoice to you.”

So in securitization, this deal unfolds like this. Credit Suisse, for example, might extend short-term credit to JPM Chase, using certificates that are issued and being sold to investors as collateral for the loans. The Credit Suisse money is used to pay homeowners and the homeowners execute notes and mortgages. Those notes and mortgages are used as reference points for the promises of JPM Chase to investors that the investors will receive scheduled payments. Those promises are contained in “certificates”. When the certificates are sold by JPM Chase, the loan from Credit Suisse is paid off and retired.

From the perspective of Credit Suisse in the above example, the transaction is a simple loan and payback with one additional step — it is funding the payment to the homeowner while accepting repayment from JPM Chase after the sale of the certificates.

From the perspective of JPM Chase, the transaction is a simple sale of securities with one additional step — Credit Suisse extends the money that is paid to the homeowner. This enables the claim that a loan was created when the homeowner signed the documents. This JPM Chase is enabled to issue and sell certificates that reference that loan and JPM Chase receives the proceeds of the sale of certificates.

From the perspective of the homeowner, the transaction is simple but wrongly perceived because they are not aware of the above facts. The homeowner has applied for a loan generally with a mortgage loan broker who then presents the homeowner with the name of an institutional or noninstitutional “lender.” A closing agent is selected who will receive funds from Credit Suisse and pay the homeowner or make payments on behalf of the homeowner.

That “lender” has entered into a purchase and assumption agreement, sometimes bearing the title of a warehouse credit agreement, in which the designated “lender” is in substance an originator who waives all right, title and interest to any transaction or documents obtained from the homeowner at closing. So the designated lender becomes only an “originator” which is just another word for a nominee.  It is a placeholder.

The homeowner, believing it has received money from the originator, executes a note and mortgage payable to the originator. But the originator does not and will not receive any payments from the homeowner.

This is why you often see the “endorsement” or “allonge” executed within days after the homeowner leaves the office of the closing agent. That endorsement is usually blank but sometimes fabricated as a specific endorsement to a REMIC Trust. the signor, most often, is the mortgage broker who has no authority to sign anything on behalf of the originator, JPM Chase or Credit Suisse.

The important thing is that NO TRANSACTION has occurred in which the originator received any money because the originator did not advance any money, even on paper. The originator has no claim to receive any money other than the retention of fees as set forth in the purchase and assumption agreement. And there is no reason to pay anyone for ownership of the underlying obligation of the homeowner arising from his/her promise to pay. Hence the obligation is issued by the homeowner but never transferred from the originator to anyone else because that would involve payment of value.

Since it was Credit Suisse who advanced the funds at the very beginning and Credit Suisse has been repaid by the sale of certificates, it has no legal or equitable interest in the alleged debt, note, and mortgage signed by the homeowner.

With JPM Chase the story is different. It could have reported the homeowner transaction as a loan but it didn’t. If it had reported the homeowner transaction as a loan, it would be the lender and it would be required to comply with Federal and state lending laws, rules and regulations. It would also have a risk of loss if the “loan” was not “repaid.” But in this example, JPM Chase has no interest in becoming a lender. It wants the profits (shared with credit Suisse) from the sale of derivatives which includes but is not limited to the sale of certificates.

So how did the originator get designated or selected? Continuing with the JPM only as an example, JPM Chase agrees to appoint a financial institution as the feeder for the procurement of homeowners who will sign loan documents. With Chase that was usually Washington Mutual (WAMU). WAMU was actually just an aggregator who like the originator waived all right, title, and interest to any “loan.”

WAMU in turn would hire other feeders who were not financial institutions and who could be folded up in bankruptcy at the first hint of trouble. That was often Long Beach Mortgage, who is the name often appearing on such loan documents. That is also the name used to identify the “REMIC Trust” in whose name JPM Morgan issued the certificates. That “Trust” owns nothing although it receives bare naked claims of title through fabricated assignments of mortgage and note endorsements. No money exchanges hands.

Nobody even establishes a loan account receivable because that would make them responsible for compliance with lending laws. Instead, JPM Chase appoints a company to act as a “servicer.” For example, Select Portfolio Servicing, owned by Credit Suisse. Like all the other previously identified parties, the servicer is not allowed to claim or touch any money receipts or disbursements and is merely a nominee who is tasked with pulling reports off of servers owned by third-party vendors and operators like Black Knight and Core Logic.

The servicer then produces the report prepared by Black Knight and/or Core Logic, for example, and then sends a contract laborer to testify that the report is a business record of the servicer. But in fact, it is a business record kept by Black Knight and Core Logic and does not include all receipts and disbursements on the loan account receivable. That is because there is no loan account receivable on the accounting ledgers of any entity. So the report is just a payment history for the period of time that the technology vendors were processing payments using mostly automated reading and input from either paper checks or electronic funds transfer receipts.

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FREE REVIEW: Don’t wait, Act NOW!

• But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more.
• Yes you DO need a lawyer.
• If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

Filed under: foreclosure | 5 Comments »

The word “derivative” is used like “alakazam!” It is as if the word conjures up some magical mystery formula by which brokers and traders can engage make money without ever investing in anything real. The most recent explosion happened with Mr. Hwang and the Archegos hedge fund. Here is the quote from the April 3, 2021 New York Times article by Kate Kelly, Matthew Goldstein, Matt Phillips and Andrew Ross Sorkin.

Hwang kept amassing his stake, people familiar with his trading said, through complex positions he arranged with banks called “swaps,” which gave him the economic exposure and returns — but not the actual ownership — of the stock. [e.s.]

See https://www.nytimes.com/2021/04/03/business/bill-hwang-archegos.html?referringSource=articleShare

The article points out that the positions taken by Hwang were “complex” and did not involve ever buying or owning the stocks that would bring him riches or losses. Hwang was not a shareholder. His complex positions boiled down to one simple point: he was betting on data that arose from reports about the movement of the real stock on real exchanges. He could not bring a shareholder derivative action because he wasn’t a shareholder.

This is a whole new level of securitization. And it was brought to us by Wall Street brokers. They were not satisfied by finding undervalued bonds that would pay out 3-4 times the price on the bond market. They were not satisfied by the creation of junk bonds in which value was created out of nothing with the near certainty that the acquired companies would fail. The broker’s next generation’s scheme was to bring forth a cloud of smoke and mirrors in which there was no value and there were no losses for the broker and they named it “derivative.”

So they invented certificates that would be called mortgage bonds. They were issued not by any lender but by the brokers themselves in the name of a brand name bank, as trustee for a nonexistent trust. The purchaser of the certificates received discretionary promises from the broker that they would receive some regular payment — not from the trustee bank who was guaranteed and indemnified against any claims or losses by the brokers.

The investors were told that the money to pay them would come from homeowners who were putting up their homes as collateral for a loan deal. The homeowners, of course, had no idea the investors, the brokers, the trustee or the trust was named or existed. The homeowner thought that he/she was dealing with a company that was lending them money. That company would become known as the originator.

But they were not given any right to collect that money. They only received a promise from the investment bank that the scheduled payments to investors would be made. Investors received no right, title or interest in any transaction, obligation, debt, note or mortgage from homeowners. And buried within the prospectus was the “disclosure” that the payments might come from the money the investors had advanced and not from homeowners. It might even come from investors in other deals. And any analysis by any competent securities analyst would have and did reveal that this was a Ponzi scheme.

Meanwhile, the brokers took part of the money from the investors and paid homeowners to execute the note and mortgage. But the brokers never took ownership of the transaction, debt, note, or mortgage. Like Hwang, the brokers started trading securities as if they owned the stock (or loan) but not really owning it. But the brokers took it one step further. Unlike Hwang who could not bring a shareholder derivative action because he wasn’t a shareholder, they instructed companies to pose as loan servicers who in turn would hire attorneys to foreclose on the loans that were not owned by any of the designated parties.

The linchpin problem in foreclosures is simple. The brokers had borrowed money from lenders like Credit Suisse against the sale of certificates to investors, the proceeds of which were used to pay off the lenders. The borrowed money was what was used to pay homeowners. So the investors’ purchase of certificates was in no way linked to funding any transaction with homeowners.

This meant that nobody owned the loan and nobody had ever made an entry on any general ledger on which any loan account receivable was ever started. It also meant that nobody had a loss arising from a missed scheduled payment from the homeowner. And since nobody in the chain had ever paid for ownership of a loan, no loan was created, despite the homeowners’ belief that they had applied for and received a loan.

Since the money for the homeowner transaction came from a third party loan to the brokers, and since that loan was satisfied by the sale of certificates (“mortgage bonds”) there was no possible transaction in real life in which anyone could legally transfer ownership of the loan. Such a transfer could only (a) come from someone who owned it and (b) be effective upon payment of value for the underlying debt of the homeowner.

So they faked it. And nearly all foreclosures in all U.S. jurisdictions arise out of the transaction described above. And that means that nearly all of them were fraudulent organized schemes to defraud homeowners, investors, and all related people. When homeowners agreed to pay money to the originator and its assigns and successors, they had no idea that there was no reason to pay any money to anyone under this scenario.

When the homeowner issued the note and mortgage, he/she did so with the contractual intent to enter into a loan agreement that never materialized. There would never be anything more than a payment history if the homeowner started making scheduled payments. there would never be a loan account a loss arising from performance on the “loan,” and there would never be compliance with federal and state lending statutes, rules, and regulations.

Homeowners didn’t know it and they had no way of knowing that they were not involved in a loan that would be owned by anyone. They were paid a fee ranging from 2%-10% of the total amount of revenue generated from the fake “securitization” of their “loan.” They had no reason to return that fee without their specific and explicit contractual assent to the arrangement.

But what homeowner would have entered into such a transaction where there was no risk of loss by a real lender, complying with the law? What homeowner would have wanted to be part of any securitizations scheme? What homeowner would not have sought professional help from advisers? What homeowner would not have been advised that the incentives for this transaction, were not to profit from payments of interest, but rather to profit from the sale of securities? What homeowner would not have been advised that the appraisals produced for the “Closing” were merely made as instructed and did not represent actual value? What homeowner would have signed a deal where the securities stood to gain windfalls of money if the loan failed?

And all of that is useful to know not because you are going to prove it in court. It is useful because it is true and you can be confident that when you insist on compliance with timely and proper discovery demands your opposition will fail or refuse to do it. And that is what opens the door to the homeowner’s victory.

The claim against the homeowner cannot be proven as a prima facie case unless the named claimant can be proven to have owned the loan, debt, note, and mortgage and would receive the proceeds of foreclosure to make up for an economic loss caused by the homeowner. that prima facie case is generally viewed as presumed from the start of the litigation.

But once the homeowner contests the presumptions, and demands discovery relating to the actual movement of money in the real world in exchange for ownership of the debt, note and mortgage, the presumption can be rebutted if the opposition fails to comply. And it will be rebutted because the opposition can’t comply.

Click

FREE REVIEW: Don’t wait, Act NOW!

• But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more.
• Yes you DO need a lawyer.
• If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

Filed under: foreclosure | 7 Comments »

In the Berkshire Hathaway 2002 Annual Report, Warren Buffett called derivatives “financial weapons of mass destruction carrying dangers that, while now latent, are potentially lethal.”

Virtually all Ponzi schemes are fake securitization schemes. Ponzi’s victims thought they were buying shares of an exclusive arbitrage system based upon fake ownership of postal receipt, Madoff’s victims thought they were buying into an exclusive fake options trading scheme in a faraway market operated in Europe, and Wall Street’s victims were split into two classes (1) investors thought they were buying, indirectly, shares of ownership of fake loan portfolios that existed in name only and (2) homeowners who thought they were buying a loan product that did not exist on the other end of the transaction.

The reason why Ponzi schemes are still so attractive to sociopaths is that they work. People seem to be born with an inclination to believe something that they want to be true — regardless of how preposterous the claims. Ponzi schemes are all about selling something you don’t own. But the “successful” Ponzi schemes seem to start with a real business plan. On paper, there was nothing wrong with the theoretical business plan of Ponzi, Madoff or the investment banks. In practice, they never intended to do the business plan. They intended to fake it and they did, with varying degrees of success. All Ponzi schemes succeed and then fail.

Charles Ponzi, for whom the scheme was named, started off in arbitrage of postal service receipts. But he “expanded” the scope of the business by reporting exchanges that never occurred. The trading business essentially vanished but he kept selling shares. Madoff sold shares in a nonexistent hedge fund. With investment banks, they created the illusion of a trading vehicle — a REMIC Trust — and then never put anything in it. Securities were issued on the premise of the REMIC trust owning loans but not on the premise of sharing or selling shares of transactions with homeowners.

In all PONZI cases the upside for the founders of the scheme was that as long as there were investors who could be conned into buying, the scheme would continue to put money into the pockets of the founders and those who acted as commission agents for the founders.

By enlarging the promise of ever-higher returns and downplaying any risk in the “investment” more and more people gave him money under the belief that they were investing their money safely. Like all such schemes, it dried up when people stopped buying into the scheme because there were no returns on the investment other than those faked by Ponzi when he remitted part of incoming investments to prior investors.

If you look at the Madoff Ponzi scheme and the “securitization” Ponzi scheme from Wall Street you can see that the sophistication of the schemes has increased but the bottom line is always the same. The scheme is largely or totally dependent upon new sales to new suckers. Like the Madoff scheme, the Wall Street scheme is taking decades to play out, which is great, because the founders get the benefit of the state of limitations to legally bar claims for damages from their illicit activities.

Since I have spent a great deal of time analyzing both the Madoff and Wall Street “securitization” forms of Ponzi schemes I thought it might be a good idea to share the attributes of “successful” Ponzi schemes. By “successful” I obviously mean those in which victims poured large sums of money, often their entire life savings, into this scheme.

• The scheme always promises something that no ordinary financial service can promise because it is simply impossible. There is no such thing as an investment that might produce rates of return that are higher than the market levels without a concurrent increase in risk. So the founder of such schemes plays up the increase in the rate of return and downplays the risks.
  • So in a market where the average rate of return on investment is 3% per year, the scheme might offer 12% which is pretty much what Madoff did.
  • Investment banks relied upon a hybrid that enabled them to launder the illicit revenue.
  • They were promising the highest quality investment grade providing a rate of return that was higher than anything available on the open markets, but they were entering into transactions with homeowners in which the nominal interest rate was far higher. (Look up arbitrage).
  • This enabled them to pay homeowners far less than they received from investors and treat the balance as trading profits that were reported on an as-needed basis. The balance was and remains parked in offshore accounts. I have referred to this as the second-tier yield spread premium. That might be a misnomer since there is no “yield spread premium” on an investment or loan that does not exist.
• Investors will be lulled into complacency by the receipt of payments as scheduled in their investment contract. This is simply a marketing ploy to get people talking about the great investment they just made and how proud they are of having the business acumen to have discovered this pearl.
• Statements are issued each month. This is a key ingredient of the scheme. Putting it in writing is the best way of confirming the bias of the victims that they made a sound investment. Madoff issued monthly statements that conformed to the usual form and content of such statements. Investment banks issued statements to investors and statements to homeowners that also conformed to the facially valid statements in the industries that they were supposedly operating within. The problem, of course, is that there was no options trading by Madoff, no lending by investment banks, and no “securitization” of mortgage loans. But statements often allow the scheme to run undetected for years or even decades.
• The scheme is based on a “Secret” formula. With Madoff, it was an options trading strategy that nobody else has thought of and which only he can execute or even understand. It is proprietary trade secrets. With investment banks, it was a “bond” trading strategy that nobody else has thought of and which only they can execute or even understand. Only “Quants” could possibly understand the algorithms that created the ranches and derivative security offerings derived therefrom. The problem of course is that the quants were massaging data about transactions with homeowners and investors and not creating a pro-rata share of ownership of anything.
• It is always about “proprietary trade secrets”. The secret is that nothing they’re telling you is true. Both Madoff and investment bankers said they required supercomputers that required stratospheric computations taking many days to complete and then produced transactions that could be executed in milliseconds. This is the “secret sauce” that many investors find so alluring. They’re getting in on the ground floor of something really exciting (and stupid).
• The big Ponzi schemes all have “feeders.” And the more feeders they have, the more they enhance the illusion that what they are saying is true.
  • Madoff started with an accounting firm that advertised itself as the only path to be accepted into Madoff’s brilliant hedge fund. Eventually, he had all sorts of “feeders” that included institutional investors and “qualified” investors.
  • Investment bankers developed feeders by either duping or corruptly influencing credit reporting agencies, securities rating services, and insurance companies to make it appear as though the crap they were issuing were real securities that were worth something.
  • The feeders all get commissions and kickbacks because no investing is really happening. There is plenty of money to overpay all sorts of people because there is no investment activity other than getting more money or value from victims. It is a Ponzi scheme which means that the business of this scheme is to get more investors.
• The big Ponzi schemes must appear to be institutional. Despite the historical fact that most crashes occurred as the result of bad behavior by institutions, they continued to be viewed as credible. Madoff made himself into an institution. That was a high-risk gambit that exploded in his face when the scheme crashed. Investment banks, while institutional, recognized the risk of being “the one.” So they retained other institutions to serve as the face of the scheme without sacrificing control.
• All Ponzi schemes carry a mystique of exclusivity. Victims of Madoff literally had to wait for approval from Madoff himself in order to have Madoff take their money. Fund managers and homeowners considered themselves lucky to get a piece of a new derivative offering or “loan” offering. The investment banks took advantage of the IPO mentality of investors who want to get into the ground floor of an offering. But the securities were unreal and unregulated.
• The base of all Ponzi schemes is the absence of any real investment activity.
  • Madoff’s scheme relied upon his superhuman ability to make a market in options trading. No options existed and Madoff was not operating or making any market in any options.
  • Investment bank schemes relied upon their superhuman ability to make a market in derivatives trading PLUS the illusion of loan accounts receivable owned mysteriously by either the investment bank or a REMIC trust that was understood to be the investment bank.
    • Of course, the investment bank and the designated “institution” kept their distance from the real action. The intermediaries between the homeowners and the investment bank was a company calling itself a lender, servicer, trustee or originator even though they were not permitted to touch any money and therefore could not account for it, but who nonetheless produced witnesses who testify that the opposite is true for the case involving foreclosure.
    • The intermediary between the institutional investors (without whom no money could have been paid to homeowners to induce them to sign notes and mortgages) and investment banks was the selling agent.
    • The interesting thing about the “Securitization” Ponzi scheme is that there were two classes of investors — fund managers whose business was investing and homeowners who had no notice or access to any information that they were investors in the Ponzi scheme. In both cases, the scheme could only “succeed” by selling more “derivatives” or “loans.”
• All Ponzis schemes rely upon false documentation. The big ones spend a lot of money creating a consensus of opinion that the documentation is authentic and valid.
  • Madoff was audited more than once and passed with flying colors.
  • Securitization schemes were audited multiple times by multiple rating agencies, insurance carriers, and even regulators.
  • Despite clear warnings to agencies and investors, Madoff’s scheme was not revealed until his sons reported him. Madoff operating a fraudulent scheme was simply unthinkable and impossible.
  • So far, the investment banks are still operating securitization Ponzi schemes with impunity.
  • And yet, in any court action where a court ordered compliance with requests to show ownership through payment for loan accounts, no such evidence was forthcoming, the entire position of the foreclosure mills and the investment banks rests solely on a consensus of opinion that they would not lie.

The reasons why the securitization Ponzi scheme has not been outed are as follows:

1. The Class 1 investors who purchased the worthless securities are fund managers who (a) don’t want to admit error and (b) don’t want to reduce benefits to retirees who are too remote from the investment to (i) know that it exists and (ii) know anything about it.
2. The Class 2 investors who thought they were purchasing loan products have never been informed that they were investors in the scheme. So they don’t know that they have been cheated out of “profits” and they don’t know the amount of set-off that should offset their promise to pay the disguised “loan.” They still don’t know because most of them have never thought to make inquiries or do any research, and they don’t have access to the data or court decisions that might have alerted them.
3. All the insiders who know the truth got rich off of the scheme and were part of it. They have no reason to go public because they’re still making money far beyond their normal earnings potential.
4. The media outlets including those sporting investigative journalism simply switched off reporting about the mess created in the mortgage meltdown. The reporters who were digging were told to stop, and they did. The reasons for this are various. What is clear is that publications like The New York Times and Rolling Stone were getting deep into the mess when suddenly they were switched off like a lamp. (E.g. see Matt Taibbi and Gretchen Morgenson).

THE UPSHOT: It was actually the investment banks that caused the Madoff scheme to fail when it did. They caused the mortgage meltdown and that caused the “freezing” of the “bond” markets. Add the foreclosure crisis that created a panic amongst investors generally. Investors did what they usually do in such situations — take their money out of the market and wait for things to settle down. The bond market was negatively affected because most of the activity was in derivatives. People were all Sellers and few of them were buyers. They wanted their money out of the market.

When people stopped buying derivatives because they could see the “defaults” in “mortgage loans” the bond markets froze because there was no market making without buyers. That panic started the panic in the stock markets. And so there was a run on any kind of fund including hedge funds, of which Madoff was supposedly one. Only Madoff did not have the investment or the money. But for the mortgage meltdown, Madoff might have continued for more decades. So far the investment banks are continuing their own run with impunity but that might change when regulators realize that the transactions have not been reported honestly to the SEC, FTC, CFPB, etc. But we might be a long way from that day.

Of course there is a certain irony in all of that. Defaults in home mortgages, even if they occurred and even if they occurred in a significant amount of transactions with homeowners, could not really impact the position of investors unless the investment bank wanted that impact to occur. Sure enough, they did want it because they had created, issued and sold or purchased insurance, credit default swaps that would pay windfall profits to them if the securities they issued were to be subjected to an “event” which was in the sole discretion of the investment banks to declare.

They got two benefits — a reduction in what the investors could reasonably expect from the discretionary payments of the investment banks (under cover of homeowners “defaults” that were erroneously presumed to have caused losses to investment banks) and payment on large swathes of securities that were index referenced on homeowner transactions that (a) did not exist or (b) were not even in default even by common definitions of default. See AIG payout of $40 billion to Goldman Sachs.

I just finished listening to a seminar for lawyers. Among the things that were said is that the outcome of an audit for a troubled bank depends heavily on the relationship that was previously built with the regulators. With no depositor or borrower sitting at the table, regulation of the investment banks and commercial banks is a one-sided deal with only the regulator and the bank in the room. The government is supposed to be sitting in that room making sure that the interests of the little guy are taken into consideration before an outcome is announced for a failed bank or failed scheme or, more importantly, the beginning of any new scheme.

The SEC is charged with evaluating the disclosure of risk in new securities offerings. They say that they never got the chance to do that because the “certificates” were excluded from regulation in 1998-1999. But that would only be true if the securities they issued were mortgage-backed bonds and not just IOUs, which is what everyone now knows them to be. So regulation is possible but simply not done. Those certificates were securities subject to regulation pure and simple and they had nothing to do with the ownership of any obligation from any homeowner. Analysis easily reveals that they were junk bonds or debentures having no intrinsic value save the hope that the investment bank, in its sole discretion would make payments on some scheduled basis. Like all derivatives, they are bets, not any investment in any asset.

The result was entirely predictable and was in fact predicted by many people before I ever entered the picture. If you exclude a particular form of securities sale from regulation, the investment banks are going to flock to it because they have permission to say, or not say, anything they want. But they were not permitted to lie or withhold vital and material information from fund investors or homeowners who did not even know they were investing in a securities scheme.

The possibility for both regulation and recovery of taxes that should have been paid still exists. In all vents, allowing the investment banks to continue foreclosing on loan accounts that do not exist (except for purposes of foreclosure) is continuing to undermine the economy of the U.S. and other economies around the world. Based upon heuristic computations, it is entirely possible that the U.S. government is entitled to receive more than $5 trillion in back taxes on income that was not reported, or reported as a return of capital.

Note also that with respect to securitization Ponzi schemes the premise is that there was a lack of sufficient business activity to justify the offer of investment. In securitization schemes, this means that the primary advertised activity was not happening at all or was not happening in sufficient quantity to justify the intake of investor money and value.

This was hidden in transactions with homeowners. While they were paying money to and on behalf of most homeowners in those transactions, they were not purchasing a loan account receivable. The money was paid only because it was the only way to get homeowners to execute a note and mortgage which was the only way that investment banks could claim they were securitization transactions. But the reality is that no loan account receivable was created nor any reserve for bad debts — because there was no debt. By their execution of the note and mortgage, homeowners thought they re getting a loan when inf act they were investing in the fake scheme perpetrated by Wall Street.

Specifically, the entire scheme was completely dependent upon the existence of an enforceable loan account receivable created in transactions with homeowners. But, contrary to the illusion promoted by the investment banks, no loan account receivable was ever created or maintained. The reference to data about the transaction was the basis for asserting the existence of a loan — rather than actual ownership or even claims to own the nonexistent loan account receivable.

And the enforceability of the promise elicited from homeowners was entirely dependent upon the ability of the investment banks, operating through sham conduits, to convince a court that the paperwork should be enforced regardless of who owned the underlying obligation, even if there was nobody who owned the obligation. this was contrary to all existing laws in all U.S. jurisdictions. See Article 9 §203 UCC adopted verbatim.

Hence, investors thought they were indirectly buying large pools of loans when they were just getting a discretionary IOU from the investment bank. And homeowners thought they were getting a lender, a loan account, compliance with lending statutes, and a counterparty who had some risk of loss if the “loan” went south. Both were taking risks that they knew nothing about.

Filed under: foreclosure | 4 Comments »

Defending against discovery demands is a contact sport that most litigators enjoy because they get to torture their opposition — while at the same time learning all about the litigation strategy of their opposition. It is mostly regarded as a win-win situation for the defenders and that especially includes foreclosure mills who in reality don’t even have a client who is a party in the subject litigation (hard as it might be to believe).

I often hear from people who say to me something along the lines of “I did that” or “I tried that” and the judge was just too corrupt and biased to give me a fair ruling. My answer is always the same “What exactly and precisely and specifically did you do and how did you do it?” The answer is usually that the homeowner, usually litigating pro se, but often also the attorney representing the homeowner, failed to execute the defensive strategy in a proper and timely fashion.

One example of this is in discovery where a lay person thinks that if they ask the question they have come up with, there will be grounds for a motion to compel, a motion for sanctions, and a motion in limine or motion for adverse inference or evidentiary sanctions. One look and any experienced litigator will be able to see where they went wrong. And the central issue is clarity and specificity. The lay person thinks they’re asking the right question while they are playing into the hands of the foreclosure mill.

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Let’s take a recent example in which the lay person or their lawyer filed interrogatories and request to produce in discovery during the period of time where the discovery was allowed (timely filed as early as possible, allowing for time to contest the objections raised to discovery).

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The lay person wants to know when and with whom Fannie Mae bought the subject “loan” and to whom it was “sold.” So that is the question they ask. They end up losing the case and blaming the judge or their lawyer claiming corruption and bias. In reality, they were not playing by the rules and therefore they did not achieve their goal.

Filed under: foreclosure | 7 Comments »

One of the peculiar aspects of foreclosure litigation over the past two decades has been the overuse (by appellate courts) of instructions not to publish opinions that favor homeowners in litigation. So the homeowner wins in that case but other homeowners and their attorneys probably never hear about it. This means that another homeowner who is fighting with exact same parties on an identical claim can lose and even have the case affirmed per curium (all in agreement) even though the same court on the same facts decided exactly opposite in the other case.

People are noting this phenomenon and asking me what to do about it.

This is true and I think (opinion here, not established fact) it reveals the fear of the courts that if they undermine the securitization infrastructure they will be taking down the entire financial system and society with it. That threat of armageddon is both not corroborated by any evidence and completely untrue. Other than the threat itself (from Wall Street), there is no reason to believe it.

We have been through plenty of crashes where the securities brokerage firms went up in flames. We now have more than 7,000 community banks and credit unions and Savings and Loans all connected to the exact same EFT backbone in the exact same way as any of the big banks. If the big ones fail, it will hurt their shareholders and help competition in both commercial banking and investment banking. After the initial scare is over it will be like a smoke bomb.

Filed under: foreclosure | 3 Comments »

Thursdays LIVE! Click into the WEST COAST Neil Garfield Show

with Attorney Charles Marshall and

Private Investigator Bill Paatalo

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

We break down on the Show today the latest from MERS. Now before the 9th Circuit Court of Appeals, to try and reverse a quiet title judgment taken in State Court against Central Pacific Mortgage (CPM), claiming since CPM, the original lender, past shortly after origination all beneficial interest in the note and mortgage (DOT–Cal is a deed of trust state) to MERS, the fact that MERS was not noticed in the lawsuit at the State level which went to judgment, same judgment is reversible, arguing that MERS was the only beneficial interest holder in the chain of title–not just an intermediary passing the beneficial interest to other successors-in-interest to the loan origination.

Which is to say, where large pools of money are at stake, institutional players to a given mortgage loan’s chain of title, will indeed engage in legal Jujutsu to get or prevent the loss of that money, contradicting their typical arguments which were made in countless previous cases.

Then Charles Marshall will address the latest Covid-19 legal impacts, covering the latest on both the national foreclosure moratorium and eviction front, as well as the latest in California’s moratorium landscape.

Filed under: foreclosure | 1 Comment »

Case 09-17787 Doc 1330 Filed 04/29/11 Page 13 of 41

listings and Plaintiffs‟ investigation show that those improvements were never completed, and so the appraisal was not accurate or complete. The loan file notes that a complete appraisal was never received for the property. [NOTE: UNDER FEDERAL TRUTH IN LENDING ACT, LENDER IS RESPONSIBLE FOR ACCURACY OF APPRAISAL AND VIABILITY OF LOAN, NOT THE BORROWER OR ANYONE ELSE]

Inappropriate valuation: Countrywide represented that the mortgage loan was originated in a way that was in all respects legal, proper, prudent, and customary. The property was conditionally appraised for $4.8 million. Nine months before the loan was originated, the property sold for $500,000. A Countrywide employee noted in the loan file that, if the conditional appraisal was used, the property had appreciated 860% in nine months. If a property has been sold in the 12 months prior to a loan being originated it is customary to use the lower of the sale price or the appraised value as the value of the property. Because this was not done, the loan was not originated in a customary manner.

[NOTE: UNDER FEDERAL TRUTH IN LENDING ACT, LENDER IS RESPONSIBLE FOR ACCURACY OF APPRAISAL AND VIABILITY OF LOAN, NOT THE BORROWER OR ANYONE ELSE]

Poor ability to repay: Countrywide represented that the mortgage loan was originated in a way that was in all respects legal, proper, prudent, and customary. However, the Countrywide underwriting system described the borrower‟s ability to pay as “questionable” and “poor” and stated that her debt-to-income ratios of 48.4% and 57.7 % were too high and exceeded the limits in the underwriting guidelines. The borrower‟s credit report showed late payments and numerous credit inquiries in the months before the loan was originated. Because of the high risk that the borrower would default, as she eventually did, the loan was not underwritten in a prudent way.

Failure to follow underwriting standards: Countrywide represented that the mortgage loan was originated in a way that was in all respects legal, proper, prudent, and customary. Under Countrywide‟s underwriting guidelines in effect at the time the loan was originated, the maximum loan amount for a reduced documentation loan like this one was $1.5 million; however, this loan was for $2.8 million. Thus, this loan was not underwritten in a prudent way.

No manager approval: Countrywide represented that the mortgage loan was originated in a way that was in all respects legal, proper, prudent, and customary. A Countrywide employee noted in the loan file that a manager needed to sign off on the loan before it was funded, but there is nothing in the loan file that shows that a manager ever signed off on the loan. In the loan file, Countrywide employees note that the borrower‟s husband called and pressured Countrywide to close the loan within 24 hours because he and his wife were leaving the country. Countrywide acquiesced and cut corners to close the loan quickly. This failure to follow protocol shows that the loan was not underwritten in a prudent way.

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The excuse for the sloppy ways that the rules of civil procedure and the rules of evidence are applied in a case where the foreclosure process is invoked has always been “limited judicial resources.”

That is shorthand for we don’t have the time to hear stupid defenses since the claims are clearly valid. Practically every successful foreclosure defense attorney knows that the courts would be far more successful at conserving judicial resources if they simply went back to the centuries-old practice of strictly applying the rules of civil procedure and the rules of evidence to prove the elements necessary to invoke the foreclosure process. It is very clear.

There are a number of reasons why the courts strayed from a tried and true method of evaluating claims in foreclosure. One of them is that the investment banks were paying (indirectly, of course) for the rocket dockets and other devices meant to process such claims more quickly while trampling on the protections for homeowners that are included in multiple statutes.

Another has been the threat of apocalypse which has been repeated many times in thousands of courts — if you let the homeowner win, then the entire economic system will fail and take our entire society and government down with it. Of course, there is no evidence that any such threat is or was ever imminent. It was simply a way of scaring everyone into letting the investment banks have their way regardless of law, justice, or fairness.

Gary Dubin, Esq. has been a successful groundbreaking foreclosure defense lawyer (in addition to his previous areas of practice) for more than 15 years. Like most other successful foreclosure defense attorneys he has been targeted for extinction, even while he continues to make new law, beating down the fictitious claims of the investment banks as expressed by foreclosure mills who imply their representation of some placeholder intermediary that has absolutely no interest in any homeowner transactions and who does not receive any proceeds of foreclosure.

In a recent exchange of emails with him (we correspond somewhat regularly) he wrote something that expresses something better than I have ever been able to articulate:

To argue that every fact in the chain of documents must be verified on personal knowledge as a practical matter is insanity.

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Similarly, to argue that anyone bearing the self-appointed title of “custodian of records” must be believed or that any negotiable paper is itself self-authenticating is insanity.

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Of course, over the course of history shorthand ways of establishing authenticity became established, but in the past decades what has been happening with mortgages tied to promissory notes has radically changed, making the prior shorthand rules no longer valid.

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There is a middle ground upon which the Mattos and Behrendt decisions can be reconciled. I sensed that “trustworthiness” was what was surfacing as the underlying touchstone in the reasoning in the newest cases.

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Of course, legal reasoning is still in its infancy and Nakayama and Rechtenwald will never understand, if for no other reason than change is psychologically difficult to adjust to especially in older folks, which is why I am predicting that the others will fold unless an incredibly successful effort is made at the oral arguments to explain why robosigners and false authentications and $600 Billions in regulatory fines and lender admissions in the AG settlement makes the underlying difference.

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Ultimately, for thinking jurists it also comes down to policy considerations.

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There is plainly too much sloppiness and fraud on the lenders’ side, which has generated — via unquestioning judicial decisions — an intolerable lack of respect for the judiciary, appearing to be rubber-stamping collection agency letters for crooks.

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For me, Mattos (later Behrendt) was the equivalent of the Miranda Rule for securitized trust foreclosure cases, placing the burden on lenders to police and straighten up their own paperwork.

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Courts meanwhile are always concerned about rules that require more court time which in this area is always in the minds of judges whether expressed or not at oral hearings.

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It is therefore always a hobgoblin in such instances for judges to look for simple ways of cutting case backlogs, considering for instance that many times half the cases in our circuit courts have been foreclosure cases.

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Not only must it therefore be emphasized that court time needed will be minimized if lenders follow the rules of evidence, but that we are dealing here with equity and justice as well as resource allocation in this age of judicial administration that understandably has propelled judges to become bureaucrats as well to keep our courts working for everyone.

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A report is not a record. It is a statement made about a record and it is by definition a statement made out of court by often unknown persons. That means it is at least hearsay and probably lacking in the foundation since the person who made entries from which the report was generated is unknown and cannot be questioned.

• The loan account receivable exists

• The loan account receivable is portrayed on that report

• The amount promised is shown on the payment history report

• The amount due is shown on the payment history report

• The witness has personal knowledge and familiarity with the way the report was generated.

• The report was generated from records kept by the employer of the witness

• The report is a complete “record” of all transactions relating to the alleged loan receivable account as represented on the payment history report.

• All payments have been properly accounted for and entered by competent trained personnel at or near the time of their receipt.

• All disbursements have been properly accounted for and entered by competent trained personnel at or near the time of their payment.

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NONE OF THOSE THINGS ARE TRUE IN FORECLOSURES SPONSORED BY INVESTMENT BANKS WHO DO NOT APPEAR ON THE CORUT RECORD AND THEREFORE CANNOT BE DIRECTLY SANCTIONED FOR PRESENTING FALSE AND FRAUDULENT INFORMATION.

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THE NEXT SET OF REPORTS ARE PRESENTED AS THOUGH THEY WERE COPIES OF THE RECORDS. This includes all other documents upon which the foreclosure mill relies to obtain a foreclosure sale.

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How is a foreclosure rescue scam any worse than a foreclosure theft scam? Or the real question — why is one scam punished and the other is rewarded with government help?

Filed under: foreclosure | 27 Comments »

Allowing 5 million people to be evicted when moratoriums end, is not a solution. It’s problem.

Here is the solution for any landlord that owns rental property and any homeowner living in their homestead, where the property is subject to a recorded lien (mortgage or deed of trust).

1. Require all current servicers AND “successors” of “lenders” to prove they paid value for the underlying obligation. By that, I mean a canceled check or wire transfer confirmation.
2. For those who can produce that proof in a form and with content that can be independently confirmed, they should be allowed to continue with foreclosure. The percentage of cases in which this will be true is going to be around 1-2% of all liens, at most.
3. For those who can’t produce that proof, they have no way of legally enforcing any claim to administer, collect or enforce any presumed debt of any property owner.
4. But a simplified way of reforming the “loan agreement” to include all aspects of the deal and not just the parts that the “borrowers” and “investors” were told about, would produce settlements that could be passed on to both the property owners and the tenants.
5. Those settlements would reduce the profits of investment banks without eliminating them.
6. Losses would be incurred by the investment banks who are still holding onto trillions of dollars of illicit gains from false claims of securitization — in which securities of all types, manner, shapes, and sizes were issued under false pretenses. Some losses would be realized by investors who were fooled into these treacherous deals. [“Securitization” without the sale of assets to investors is a practical and legal nullity].
7. Practically nobody would go out of business although threats of the apocalypse will ring through the hallways of congress etc.
8. Most tenants would be able to resume payments shortly.
9. Most homeowners would restart their payment schedule under a new loan agreement settlement.
10. Not a single dollar of taxpayer money would need to be spent.
11. The result would stimulate the economy by relieving a huge amount of false debt from the economy.
12. Business activities would increase across the board.
13. Tax revenues would go up.
14. The federal deficit would decline.
15. The current practice of securitization (appointing a virtual creditor) would become officially legal — as long as there was adequate disclosure along the lines required by lending statutes and securities laws and regulations.

The only way to disagree with this somewhat simple plan is to presume that the number of persons who claim to be lienholders who can presently claim ownership of the lien, debt, note, or mortgage through payment of value for the underlying obligation (see Article 9 §203 UCC), would be very high. Really? Prove it!

Filed under: foreclosure | 2 Comments »

What exactly does U.S. Bank, Deutsch Bank or Bank of New York Mellon “as trustee” do for “REMIC Trusts”? It might be as simple as nothing at all.

Back in the early stages of the mortgage meltdown, judges were more open to challenging claims from servicers or MERS. Foreclosure lawyers were attempting to name claimants that by definition had no interest in the transaction with the homeowner. Back then when homeowners were screaming that there were trusts who owned the loans and that they had a right to know which one. The foreclosure mills denied the existence or relevance of the trusts. It became big business for people like me to identify such trusts.

But because claims from MERS and companies calling themselves “Servicers” were losing traction. So the foreclosure mills did a 180-degree turn and started naming banks as trustees of an implied or stated trust entity as though one existed.

Such banks are real, but in the case of Deutsch Bank people often don’t realize that while they are saying and referring to the institutional giant, the actual party named is Deutsch Bank National Trust Company — a California company acquired by the commercial bank.

In any event, the question is whether the words “as trustee” are meant to convey anything real or are just window dressing on a fraudulent scheme that requires deceit, theft, fraud on the court, and misleading homeowners from start to finish. Obviously, I think it is the latter, so let’s look at this issue.

See https://www.floridabar.org/the-florida-bar-journal/the-trust-beneficiarys-right-of-access-to-information/

If you wrote down the name of a trust, it must refer to a legally recognized entity. If you don’t do that, you might just as well make up a fictional character that you created in your imagination and try to convince the judge that the character is real and has a claim. Good luck — unless you are a bank.

That recognition of status a legal entity or “legal person” is a fiction that comes from either statute or common law and sometimes both. And you can’t simply say there is a legally existing trust. You must present a valid legal entity organized and existing under the laws of some jurisdiction that recognizes the trust name as the name of an entity. Other than foreclosure actions that name REMIC trusts, any claim of a trust brought in court must identify the trust as to its status of the organization and current existence. That is true for all legal fictions that are granted the status of a “legal person.”

So the first mistake often made is that when the foreclosure lawsuit is styled as” U.S. Bank, as trustee for SASCO trust 2006-1a, on behalf of the registered certificate holders of pass-through certificates series SASCO Trust series 1a”, most people fail to recognize that they have not been told anything about who is making the claim. That means the lawsuit (or notice of substitution of trustee, a notice of default, a notice of sale) is facially invalid. No defense is necessary until a court determines what to do with the facially valid lawsuit or claim.

• Is the claim brought on behalf of U.S. Bank? No, it is brought in a representative capacity — or so it is said by lawyers who actually have never spoken with anyone from U.S. bank and who do not represent U.S. Bank; although filing the suit naming U.S. Bank implies that the lawyers represent U.S. Bank, there is no such relationship but lawyers are protected by litigation immunity. So U.S. Bank is not the actual “party Plaintiff” or “party claimant.”
• Is the claim brought on behalf of a need trust organized and existing under the laws of some recognized legal jurisdiction? We don’t know, which is part of what makes the claim facially invalid — although theoretically capable of correction through the affidavit f someone with personal knowledge and who can say that SASCO Trust 2006-1a exists pursuant to a Trust agreement (always an absolute requirement for the existence of any trust). Upon presentation of the trust agreement as an exhibitor or by reference to a recorded official document in the public domain, signed, sealed, and delivered, we can accept that the “REMIC Trust” is supported by the most basic requirement of creating a trust.
• Is the claim brought on behalf of the registered holders of those certificates? If yes, why mention that trust, and do we not now have a conflict between a barely identified trust and unidentified holders of unidentified certificates? A motion to dismiss or Motion for More definite Statement would be in order. Pushing the envelope one might try a motion to quash service saying that the service was on behalf of an unidentified, facially invalid or nonexistent entity.
• The claim must be for the trust or for the certificate holders. Not both. If it is for the trust there is no need to mention the certificate holders. If it is brought for certificate holders, then there is no need to mention the trust — but there is a need to identify both the certificates and the certificate holders for the claim to be legally recognized and adjudicated in any state — judicial or nonjudicial.
• Does U.S. Bank say it has the right, power, or duty to represent the certificate holders? The answer is no according to none other than U.S. Bank when certificate holders brought suit alleging exactly that. That answer was corroborated by multiple courts in a variety of different settings in state, federal and tax courts. So the foreclosure mill (lawyers who appear in court without any named client) is taking the exact opposite of the legal position, sustained by the courts, of U.S. Bank “as trustee.”
• Does U.S. bank have the right, duty, or obligation to represent the named “trust” (assuming the rust exists)? The answer is no, according to both the trust agreement if you can force them to produce it, and the pooling and servicing agreement, which is basically a usually unsigned, incomplete projection of future vents that never occur. Not only does the named trustee lack any powers to administer the active affairs of the trust, it also would be in contractual violation if it even asked to view the affairs. This is the opposite of any definition of any trustee.
• Is there named a trustor or settlor? The answer is no. So any question of whether the named trustee has ever received anything from any third party to hold in trust for the beneficiaries of the named trust is answered first by pointing out that no such third party has ever been identified. Even a trust agreement or statement of trust that checks all the boxes for drafting such an instrument has no effect unless something of value has been trusted to the named trustee to hold and administer on behalf of the named beneficiaries in the trust agreement.

So in practice, one of the ways to reveal all of that is to issue proper and timely discovery demands, qualified written requests, debt validation letters, and to follow up with enforcement of those demands. Another way is to “blow-up” the robo witness from the self-proclaimed servicer at trial (frequently works if the lawyer is skilled at cross-examination).

The key is to get someone who actually works at U.S. Bank and start asking questions about how they handle money, assets, reporting, and filing on behalf of the trust — all obvious functions of any real trustee. You will find they have no answer and refuse or stonewall any subpoena or request for someone who does have the answer. And that is because there is no answer.

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• But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more.
• Yes you DO need a lawyer.
• If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

Filed under: foreclosure | 3 Comments »

Facial validity of documents: Facial validity of documents can and usually is dispositive of claims and defenses in foreclosure proceedings. This is usually overlooked by both homeowners and their attorneys. Legally there is only one level of facial validity. The document must conform to both statute and local practice. But practically there are several levels as follows:

• Even if contested, if it appears to be coming from an apparently trusted source, the document will probably be accepted and admitted into evidence unless and until someone tests and contests the authenticity and validity of the document in a timely and proper fashion.
• This is precisely why the investment banks settled on the use of well-established brand name commercial banks as the first name used in foreclosure actions. Such institutions are viewed as trusted sources despite all the chicanery they have engaged in over the last 50-60 years.
• The fact that their name is merely being used as window dressing for a nonexistent claimant with a nonexistent claim does not affect facial validity — or perhaps more importantly, the appearance of facial validity at a glance.

• the very fact that you cannot contest the facial validity of the document because of external facts and data is the same reason why the document itself may not be facially valid.
• So for example, if a deed fails to name one of the parties and leaves out the legal description it is not facially valid. but very often it will still be recorded, particularly if it refers to some parcel number or index within the county recorder’s office.
• Another example: if the grantee is “Somebody wearing a black hat” the deed is not facially valid because we would need to go to the grantor to find out who he meant when he signed the deed in front of a notary.
• Another example: If the grantor is not someone who is the owner of the property, the deed may still be facially valid but deemed facially invalid as a wild deed because the title record does not support the deed.
• And the final example: if an assignment of mortgage is executed on behalf of a ” successor” to some entity, it might be facially valid but not for long if you attack the proposition of it being a successor. It might also be deemed facially invalid since there is nothing on the face of the instrument that refers to anything in the public domain by which one would know that some legal “succession” had occurred by way of some transaction in the real world.
  • And the fact that it is signed by some self-proclaimed “servicer” as “attorney in fact,” forces the reader to learn from external facts, whether such power of attorney exists.
  • In addition, if the signature block does not make it clear who is the attorney inf act and for whom they are signing as an attorney in fact, the document is clearly not facially valid.
  • That argument can go either way. It is either an attack on the facial validity or it is an attack on the substantive validity of the document.
  • But failure to attack such a document will almost certainly result in the document and everything that is written on it, being admitted as evidence which will be conclusive at summary judgment or trial unless aggressively challenged such that the party proffering the document refuses to answer basic questions about what is recited on the document.

• It is important to note that if investors were beneficiaries under a legally valid trust that owned the debt, note and mortgage there would be no need to even mention them by descriptive group or by name.
  • Since they are mentioned as being the group on behalf of which the foreclosure is brought, the document is not facially valid if it fails to identify with certainty the names of such parties.
  • By implying the existence of a trust that is not identified as to the place of origination or current place of business and whose address is the same as the self-proclaimed servicer, the investment banks have succeeded in having readers assume that the “holders of certificates” are represented by the named “trustee” which is (or appears to be) always a high profile brand name commercial bank.
  • No such relationship exists. And in litigation with such holders, U.S. Bank, Bank of New York Mellon et al have consistently and successfully defended against any allegation that such a relationship exists.
  • And since the trust is implied and the holders of certificates are referenced, one might ask in a motion to quash, motion to dismiss or motion for a more definite statement, whether the claimant is the trustee, the trust or the holders of certificates.
• This redirects the court’s attention to fatal deficiencies in the claim. Such early attacks often succeed in opening the judge’s mind to something being wrong with the form or substance of the claim. But do not expect it to be a magic bullet. 
  
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  Neil F Garfield, MBA, JD, 73, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business 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 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.

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Filed under: foreclosure | 1 Comment »

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You have often asked “how do I prove that?” And my answer is always the same. You don’t prove anything because you don’t need to prove anything. Stop thinking of yourself as making a claim against anyone. And start thinking about it the way it is. Someone is making claim against you. They don’t have a case. If you want to say you are proving something, then say you are proving that they don’t have a case.

I can never give absolute assurance of the outcome of any litigation, no matter how clear anyone thinks the issues are or how well they have been presented. But assuming that proper interrogatories, request for production and request for admission are drafted and filed in a timely manner as prescribed by local discovery rules, I can absolutely assure you of one thing that will be true every time: if the foreclosure claim is in any way related to claims fo securitization, they won’t answer you.

Do not try to prove that securitization is evil. It isn’t and it never will be evil by any commercial standards. What I have written and spoken about is not that securitization is evil but that it never happened. And you don’t need to prove that either.

Keep it simple and add other motions merely to direct the court’s attention to the fact that presumptions are being used rather than actual allegations or evidence.

Like it or not, all those assumptions and presumptions and exist. If you want to win the case, you need to rebut or defeat the use of those presumptions or else in virtually all cases you will lose.

Filed under: foreclosure | 2 Comments »

Since the reports presented in court are generally NOT made in the ordinary course of the “servicer’s” business they are inadmissible hearsay. 

By now it should come as no surprise that companies like Ocwen et al claim to be servicers but do not actually perform any “servicing” work. We all know what that means. A servicer is a company that is the bookkeeper for someone else. So they collect payments, correspond with the customer, and forward or deposit the payments for their principal in a relationship that can only be defined as an agency relationship.

When they go to court, the servicer designates a witness who is either the custodian of records who someone familiar with the actual records. Of course that never happens in foreclosures. The person who appears in court barely works for the servicer, is generally an “independent contractor” operating out of their living room, and has only one job — testifying in court.

In court, they produce a report in which they assert that the entries made on that report were made by someone familiar with an actual transaction at or near the time of that transaction. They present that report as the payment history but not as the ledger of the designated claimant, which would show the establishment of the debt on an actual accounting ledger and receipt of payments reducing the amount of the receivable.

There are several problems with this scenario but those who are not actually familiar with basic double-entry bookkeeping and accounting or auditing will always miss the mark.

The problem is that what is produced in court is a report, not an accounting ledger and that even if the named designated claimant were to come forward (something they will NEVER do) and say that the payment history is part of their general ledger, it isn’t the entire ledger which would show all transactions starting with the origination and ending with the last day any receipt or disbursement was made.

The objection to the admission of the Payment HIstory into evidence as a business record would be that it is not the entire record or even a report of the entire account, which would show ALL receipts and ALL disbursements.

Second, even if the payment history were to show the disbursement to a particular creditor (never will happen) it does not show the reduction of the claimed debt on the ledger of one claimed to own the debt for purposes of enforcement.

But here is the real problem. Servicers generally do not collect payments, so they can hardly produce a witness or person who made a bookkeeping or accounting entry on any record of receipt of payments. This happens because generally all payments are made to an address bearing the name of the servicer but totally controlled by a third party vendor who in turn makes deposits, not into a depository account owned by the servicer but rather an account owned or controlled by an investment bank who is not the owner of the debt.

While sometimes you can make some headway at trial in revealing the utter lack of any knowledge, even hearsay, on the part of the witness, it is far better to do so in discovery.

So you might want to ask for a description and production of the lockbox contract or perhaps something more specific like “JUNIOR PRIORITY INTERCREDITOR AGREEMENT  among  XYZ as the Borrower, the other Grantors party hereto,   ABC BANK, as First Priority Representative for the First Lien Credit Agreement Secured Parties,  DEF TRUST, NATIONAL ASSOCIATION, as Second Lien Collateral Agent  and  each additional Representative from time to time party hereto dated as of the ___ day of _____, 20xx.”

The key question you want to be answered is whether the lockbox deal (frequently with Black Knight) represents the duties of the lockbox operator to the “Servicer” or some third party who has no interest in the homeowner transaction which is always represented as a “loan” but which is most likely not a “loan” as described elsewhere on this blog.

If, as I suggest, the “Servicer” does not and cannot touch any of the money, then its record is not really a record at all. Nor is it admissible in evidence. The truth is, as we have previously disclosed, that the lockbox operator in conjunction with CoreLogic or some such company physically controls all receipts and deposits of those receipts into a financial account that is not owned by, known by, or managed by the “servicer.” The “Payment History” is therefore produced by access to a third-party computer server that is not owned, operated or maintained by the self-proclaimed servicer.

In short, the witness is not from the company who made the entries or created the record that is a “Payment History.” The only witness that is competent to testify is one who employed by and has knowledge of the practices of the third-party vendor.

The reason this is not done is that the investment banks don’t want to put such a witness on these and because that same witness would need to answer the essential question: who gets the money from payments and who will get the money from this foreclosure. If it is not the named designated claimant then the wrong Plaintiff or beneficiary has been named.

Since the reports presented in court are generally NOT made in the ordinary course of the “servicer’s” business they are inadmissible hearsay.

“Out-of-court statements offered to prove the truth of the matter asserted are inadmissible unless the statements fall under a recognized exception to the rule against hearsay. See § 90.802, Fla. Stat. (2004). ” Yisrael v. State, 993 So. 2d 952, 955 (Fla. 2008)

Florida’s business-records exception appears in section 90.803(6)(a), Florida Statutes (2004). To secure admissibility under this exception, the proponent must show that (1) the record was made at or near the time of the event; (2) was made by or from information transmitted by a person with knowledge; (3) was kept in the ordinary course of a regularly conducted business activity; and (4) that it was a regular practice of that business to make such a record. See, e.g., Jackson v. State, 738 So.2d 382, 386 (Fla. 4th DCA 1999). Additionally, the proponent is required to present this information in one of three formats. First, the proponent may take the traditional route, which requires that a records custodian take the stand and testify under oath to the predicate requirements. See § 90.803(6)(a), Fla. Stat. (2004). Second, the parties may stipulate to the admissibility of a document as a business record. See, e.g., Kelly v. State Farm Mut. Auto. Ins., 720 So.2d 1145, 1146 (Fla. 5th DCA 1998) (holding that the parties stipulated to the admissibility of medical records under the business-records exception); but see Gordon v. State, 787 So.2d 892, 894 (Fla. 4th DCA 2001) (holding that the State and defense counsel’s stipulation regarding the defendant’s release date was not sufficient to relieve the State of its burden to prove the defendant’s release date by a preponderance of the evidence). Third and finally, since July 1, 2003, the proponent has been able to establish the business-records predicate through a certification or declaration that complies with sections 90.803(6)(c) and 90.902(11), Florida Statutes (2004). The certification — under penalty of perjury — must state that the record:

(a) Was made at or near the time of the occurrence of the matters set forth by, or from information transmitted by, a person having knowledge of those matters;

(b) Was kept in the course of the regularly conducted activity; and

(c) Was made as a regular practice in the course of the regularly conducted activity[.]

§ 90.902(11)(a)-(c), Fla. Stat. (2004).

Yisrael v. State, 993 So. 2d 952, 956-57 (Fla. 2008)

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