Non Judicial as Private Contract: Opening the Door to Homeowners for Self-Help

What is good for the goose is good for the gander.

After months of wrangling with the obvious due process issues invovled in allowing a Trustee on the Deed of Trust to send a Notice of Default, Notice of Default and to file an eviction (unlawful detainer), it has occurred to me that the reasoning behind “non-judicial” process can be turned on its head in favor of the homeowner.

The reason why non-judicial foreclosure is NOT a denial of due process is two-fold:

(1) public policy and judicial economy favors it because until the mortgage meltdown era, nearly all judicial foreclosures had the same pattern, to wit: Suit in Foreclosure with Summons, No Answer by the the borrower, clerk’s default entered, Motion for Entry of Default Final Judgment, Judgment entered, Sale date is set, Auction on the courthouse steps and that’s it. It was a rare case in which the borrower had any legitimate defenses and virtually impossible for the foreclosing party to be the wrong party bring the suit. The title record was clear, the bank held the note and mortgage, and but for some relatively minor TILA or RESPA issues it was highly unusual for predatory lending to be a factor in the case, and even if it was, the borrower simply didn’t raise it. Today, none of those assumption are true. Virtually all mortgages between 2001-2008 were between an undisclosed investor or group of investors and the borrower who was funded from proceeds of sales of unregulated securities. Everyone in between was merely an undisclosed conduit or middleman collecting an undisclosed fee as the money from the investor was parsed out for fees, profits, insurance premiums, rebates, kickbacks and of course funding of the alleged loan transaction. None of these middlemen have any loss, claim, or right to foreclose property and all of them have been superceded by the authority of the holders of mortgage backed securities. Even the Trustee on the Deed of Trust has been superceded by at least two other Trustees. They don’t have the note, they don’t have the full record of all the parties who collected fees or paid the principal or interest on the note and mortgage, and they don’t really have any stake in the outcome of the foreclosure — because they didn’t fund the loan or lose any money.

(2) Under the legal theories that purport to support non-judicial foreclosure, it is said that non judicial foreclosure is a matter of private contract and not state action. Thus, the theory goes, parties are free to contract amongst themselves for authority to sell the property when the loan is reported by some party (alleging to be the beneficiary under the Deed of Trust). So anything the Trustee does that is wrong is really a matter of breach of contract, not violation of due process. If the Trustee on the deed of trust lacks authority, if the beneficiary is out of business and some other party is alleging it is now the new beneficiary, if anyone with or without knowledge alleges that the loan is in default and they are wrong or acting wrongfully, it is a matter of private contract, not subject to the rules of civil procedure governing the conduct of lawsuits in state or Federal Court. It is a contract authorizing “self-help”. Thus I conclude that the homeowner is equally entitles to utilize self-help to preserve his interest in his real property. Of course filing a notice of intent to preserve interest in real property, a notice of non-compliance with statute, or some other instrument that clouds title could force the conversion to a judicial foreclosure where the Trustee and beneficiary would be required to step forward and reveal the true holder in due course, account for the flow of the funds paid thus far, etc. But adding the force of Federal Law (TILA, RESPA and HOEPA), and applicable state laws on deceptive lending practices, and applicable common law to the permission to use self-help gives the homeowner greater power than the entities that seek to use self-help to foreclose. By filing a Qualified Written Request, Federal Law requires an answer and resolution. Barring that resolution, and using the common law doctrine of tacit procuration as a tool of enforcement at the end of the QWR, the homeowner has a legal right under color of state and federal law to file an instrument or reconveyance as attorney in fact for the “beneficiary” of record — forcing the “pretender lender” to either back off or prove their case.


32 Responses

  1. I need your help please!!!

    I would like to get more information to see how I can file “Intent to preserve” against the 1st lien. The 2nd (junior) loan foreclosed on my property on Nov 14, 2013. I am current on the first loan. I want to buy back the 2nd but they declined every offer I made. I guess the 2nd with WF will eventually buy the first and evict me.

    My question: Do you think if I file a intent to preserve against the first lien, would it delay/make it more difficult for the 2nd to buy the first and evict me?

    What is the procedure for filing “intent to preserve” in CA? What other options I have to stay in my home?

    Best Regards,


  2. Georgia Supreme Court has in fact decided that the borrower has no right to know the identity of the true secured creditor/holder of the note. You v. JP Morgan Chase. 2013

  3. I have sued my lender (WaMu), trustee and Chase on this theory — that who may foreclose etc. is governed by the CONTRACTS. The Note says clearly that it may be sold “together with the deed of trust.” The Deed of Trust states clearly that no material change to the terms of the DOT may be made without the written consent of the borrower, the borrower’s assigns, and the Lender.

    In other words, yes, they may securitize my note without my permission, but if in the course of doing so they separate the deed from the note, and the holders of both are not agents of each other, it may be a breach of the terms of the note, but in any event it materially changes the character of the “mortgage” to something else — the holder of the DOT can never experience default, and the holder of the Note could (try to) sue to enforce payment, but can never take my property (who would it order to do so, if the holder of the DOT is not an agent??)

    Since Chase claims to be our Beneficiary under the Deed of Trust, and does so on recorded documents, it has violated state law which allows a private cause of action for the recording of an instrument based on a false claim or material misstatement of fact. Also, Chase is NOT the Beneficiary under the DOT (I would know, as I never signed any document approving that assignment). Yes, beneficiary interest may be assigned — but it must be done ACCORDING TO THE TERMS OF THE CONTRACT.

    I think the private contract contains very little protection for the borrowers — but what protection it DOES provide can be used to ward off the attempts of non-beneficiaries to foreclose. Chase had no authority under the Deed to invoke the power of sale and order anyone to initiate non-judicial foreclosure. The trustee knew that, and knew or should have known that the holder of one instrument was not the holder of the other. There were no assignments from WaMu, FA to WaMu to FDIC to Chase.

    Oh, and here’s another kicker, just for the fun of any of your readers who might also be dealing with Chase who had “loans” from WaMu from 2005 — it appears WaMu, FA stopped doing business by that name in APRIL of 2005 but our closing was in AUGUST of 2005.

    I could use some pointers on what kind of discovery I should be asking for. I survived our Motion to Dismiss (pro se). I’ve also had to sue FDIC separately as the Receiver and would love some discovery help there, too.

    My main question for Neil is: besides being Not What I Thought I Was Contracting For, and the bifurcation of the Note from the DOT, what is the significance of the securitization? If the investors were defrauded, how does that create a private cause of action for the borrower, who still signed a promise to pay someone?

    I feel that if a borrower promises to pay, and it is the promise to pay that is “sold” or securitized, it must be done according to the terms of the contracts that are put in place for the borrower’s protection — and who the beneficiary is of my own Trust document is a primary and material term, I would think, especially in a non-judicial foreclosure state.

    There is so much talk about securitization that I don’t understand — please clarify for me what I should be asking for regarding the securitization as it pertains to my rights under the DOT/Note as a borrower. I would think the main thing is to attempt to prove no agency relationship between the holder of one instrument and the holder of the other, which virtually paralyzes the ability of anyone to invoke the Power of Sale. Anything else?


  4. Mr. Garfield, I am in desperate need of an experienced
    person to help in the completion and collection of
    comercial lien’s thru tacit procuration, I am disabled
    and have other serious health issius. Ihave 10 sub-
    stancial collections already in default. Thanks

  5. CLASS ACTION SUIT AGAINS SAXON! Hi everyone! Saxon messed with us for 1 1/2 yrs. They saved us $9,000 during the “trial period”, now say we’ve been denied and they’ll foreclose if we dont’ come up with $30,000! There’s a class action suit started with a group of excited atty’s! Anyone interested in jumping on board? write me

  6. The copy of my note included the endorsents and an allonge. It is endorsed by Residential Funding (a subsidiary of GMAC). If the note has no endorsements my guess is it has not been negotiated or it may be a copy or forgery or counterfeit. Consult an attorney and/or an expert. If it hasn’t been negotiated, in my opinion you only owe the money to the “Lender” specified on the note itself (probably not GMAC).

    Disclaimer: I am not an attorney and this is not legal advice. This is for educational and informational purposes only.

    Dan Edstrom

  7. I have a question. The trustee produced a copy of the original note for deed of trust, but the original note lists the original lender do they not have to provide something showing where GMAC purchased the note from the original lender? Actually GMAC is the third lender involved, Do they not have to have a paper trail showing where the original note was sold twice?

  8. Most people just complain and expect someone else to solve their problems.
    I take action and will hammer these a-holes to the end of the earth thanks to web-sites like this.

    Thanks to everyone who has contributed their ideas and thoughts to this website and when you are done bitchn’ SUE THE BASTARDS


  9. record notices to revoke the powers in non judicial under tila, and trustee revocation and power of attorney revocation

  10. Check this out:

    Are Courts in California Truly Limited by Non-Judicial Foreclosure Statutes?

    By Michael Doan on May 2, 2009 in Foreclosure Defense, Foreclosure News

    Recently, many California Courts have been dismissing lawsuits filed to stop non-judicial foreclosures, ruling that the non-judicial foreclosure statutes occupy the field and are exclusive as long as they are complied with. Thus, in the case where a notice of default is recorded and a lawsuit then filed in response to stop the foreclosure since the foreclosing party does not possess the underlying note, all too often the Court will simply dismiss the case and claim “2924 has no requirement to produce the note.”

    Thus, these Courts view the statutes that regulate non-judicial foreclosures as all inclusive of all the requirements and remedies in foreclosure proceedings. Indeed, California Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. This comprehensive statutory scheme has three purposes: ‘“(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” [Citations.]’ [Citation.]” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1249–1250 [26 Cal. Rptr. 3d 413].)

    Notwithstanding, the foreclosure statutes are not exclusive. If someone commits murder during an auction taking place under Civil Code 2924, that does not automatically mean they are immune from criminal and civil liability. Perhaps this is where some of these courts are “missing the boat.”

    For example, in Alliance Mortgage Co. v. Rothwell (1995) 10 Cal. 4th 1226, 1231 [44 Cal. Rptr. 2d 352, 900 P.2d 601], the California Supreme Court concluded that a lender who obtained the property with a full credit bid at a foreclosure sale was not precluded from suing a third party who had fraudulently induced it to make the loan. The court concluded that “ ‘the antideficiency laws were not intended to immunize wrongdoers from the consequences of their fraudulent acts’ ” and that, if the court applies a proper measure of damages, “ ‘fraud suits do not frustrate the antideficiency policies because there should be no double recovery for the beneficiary.’ ” (Id. at p. 1238.)

    Likewise, in South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc. [*1071] (1999) 72 Cal.App.4th 1111, 1121 [85 Cal. Rptr. 2d 647], the court held that a junior lienor retains the right to recover damages from the trustee and the beneficiary of the foreclosing lien if there have been material irregularities in the conduct of the foreclosure sale. (See also Melendrez v. D & I Investment, Inc., supra, 127 Cal.App.4th at pp. 1257–1258; Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1095 [106 Cal. Rptr. 2d 443] [a trustee’s sale tainted by fraud may be set aside].)

    In looking past the comprehensive statutory framework, these other Courts also considered the policies advanced by the statutory scheme, and whether those policies would be frustrated by other laws. Recently, in the case of California Golf, L.L.C. v. Cooper, 163 Cal. App. 4th 1053, 78 Cal. Rptr. 3d 153, 2008 Cal. App. LEXIS 850 (Cal. App. 2d Dist. 2008), the Appellate Court held that the remedies of 2924h were not exclusive. Of greater importance is that the Appellate Court reversed the lower court and specifically held that provisions in UCC Article 3 were allowed in the foreclosure context:

    Considering the policy interests advanced by the statutory scheme governing nonjudicial foreclosure sales, and the policy interests advanced by Commercial Code section 3312, it is clear that allowing a remedy under the latter does not undermine the former. Indeed, the two remedies are complementary and advance the same goals. The first two goals of the nonjudicial foreclosure statutes: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor and (2) to protect the debtor/trustor from a wrongful loss of the property, are not impacted by the decision that we reach. This case most certainly, however, involves the third policy interest: to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.

    This is very significant since it provides further support to lawsuits brought against foreclosing parties lacking the ability to enforce the underlying note, since those laws also arise under Article 3. Under California Commercial Code 3301, a note may only be enforced if one has actual possession of the note as a holder, or has possession of the note not as a non-holder but with holder rights.

    Just like in California Golf, enforcing 3301 operates to protect the debtor/trustor from a wrongful loss of the property. To the extent that a foreclosing party might argue that such lawsuits disrupt a quick, inexpensive, and efficient remedy against a defaulting debtor/trustor, the response is that “since there is no enforceable obligation, the foreclosing entity is not a party/creditor/beneficiary entitled to a quick, inexpensive, and efficient remedy,” but simply a declarant that recorded false documents.

    This is primarily because being entitled to foreclose non-judicially under 2924 can only take place “after a breach of the obligation for which that mortgage or transfer is a security.” Thus, 2924 by its own terms, looks outside of the statute to the actual obligation to see if there was a breach, and if the note is unenforceable under Article 3, there can simply be no breach. End of story.

    Accordingly, if there is no possession of the note or possession was not obtained until after the notice of sale was recorded, it is impossible to trigger 2924, and simple compliance with the notice requirements in 2924 does not suddenly bless the felony of grand theft of the unknown foreclosing entity. To hold otherwise would create absurd results since it would allow any person or company the right to take another persons’ home by simply recording a false notice of default and notice of sale.

    Indeed, such absurdity would allow you to foreclose on your own home again to get it back should you simply record the same false documents. Thus it is obvious that these courts improperly assume the allegations contained in the notice of default and notice of sale are truthful. Perhaps these courts simply can not or choose not to believe such frauds are taking place due to the magnitude and volume of foreclosures in this Country at this time. One can only image the chaos that would ensue in America if the truth is known that millions of foreclosures took place unlawfully and millions more are now on hold as a result of not having the ability to enforce the underlying obligation pursuant to Article 3.

    So if you are in litigation to stop a foreclosure, you can probably expect the Court will want to immediately dismiss your case. These Courts just can not understand how the law would allow someone to stay in a home without paying. Notwithstanding, laws can not be broken, and Courts are not allowed to join with the foreclosing parties in breaking laws simply because “not paying doesn’t seem right.”

    Accordingly, at least for appeal purposes, be sure to argue that 2924 was never triggered since there was never any “breach of the obligation” and that Appellate Courts throughout California have routinely held that other laws do in fact apply in the non-judicial foreclosure process since the policies advanced by the statutory non-judicial foreclosure scheme are not frustrated by these other laws.

    Written by Michael G. Doan

  11. Is there anything I can do after the fact of the foreclosure sale Oct 08 when I know now that since having the house since ’87 there have been many servicers (and not all transferred prpoerly) and I do not believe the lender that foreclosed had the original note or recorded their loan takeover, etc.

    The 2nd Heloc lender ended up paying the 1st off at the sale and the house sits with no activity.

  12. Jose, you are a warrior for justice, do not yield, you are on the right side of the law….Keep fighting the good fight….and Kudos to Chris Brown and the team in DC area

  13. the Radio Interview is at 10:00 AM

  14. Tomorrow I will have a radio interview in Spanish, you may listen on
    and the people who got their foreclosures reversed will provide testimony of their fight.

    Let us keep pushing forward do not despair some lawyers do get it!!!!!!

  15. We got two foreclosures reversed in VA today and one stopped by injunction thanks to Brown, Brown and Brown P.C.

    Great Job Guys!!!!

    May god bless you.

    By the way we got one of the foreclosure lawyers lying in court, so sweet!!!

  16. Stopping the Trustee Sale

    The only way a non-judicial trustee sale can be effective in taking your home, is through its unquestioned notice of trustee sale, trustee’s deed, relevant affidavits if any, and the trustees ultimate unquestioned conveyance of title to the new owner(Buyer or Bank).

    If the title is “clouded”, meaning there are questions about the chain, or the validity of a specific trustee’s ability to clearly convey the title, then the next person in line would have difficulty at the least in getting a title insurance policy, and more importantly, an unlawful detainer granted.

    The Title record to your home= is the key to your home! It is where all ownership records are kept publicly(County Recorder).

    If you successfully record a Lis Pendens (Pendency of Action), against the title to your home(with County Recorder), at the same time as filing your lawsuit(with County Court Clerk), making it known for all interested, that a lawsuit has in fact been filed, and any parties taking action against the property may be joined as a Defendant in the action, you will prevent anyone from being able to assert ownership of your home clearly, without clarification in the form of a court order, and due process(we all pray).

    This tactic has been successful at not stopping the trustee sale, but at stopping it from being valid.

    If you would like to hear more about this(Each state is different in the details), send me an email.

    Allan Hennessey
    “Still a Homeowner”
    1-800-552-9313 Ext. 111

  17. Gump59,
    I understand your concerns. In my case I am using all tactics I can to warn them they are going down the wrong path and violating laws, etc.. Their answer?
    – They did nothing wrong.
    – They cannot say one way or the other anything about closing as they weren’t there.
    – They did not commit fraud.
    – All accounting is correct (obviously false as they advanced my principal and interest payments for at least 3 months).
    – They reported to the credit bureaus correctly (obviously false).
    – I cannot rescind (obviously false).
    – Here is a copy of the note – this validates the loan.

    Blah blah blah. They just don’t care. I will be sending them an objection to Trustee letter filled with everything including SEC violations and Sarbanes-Oxley violations. But it won’t stop them, scare or intimidate them. It makes no difference to them. The only way I can stop is to sue or go bankrupt.

    I thought at a few points “this is good, they will drop it”. But I am past that thinking now – although I am still trying.

    I am in IT (a consultant). My plan is to declare bankruptcy using Neil’s suggestions. Once they drop out because they cannot prove they own the note, I will get Quiet Title and get the bankruptcy dismissed (I have high hopes). I have no idea what that will do to my credit and consulting. I will look into it. It is just a better option then a lawsuit for me because it puts the burden on them. But I still have 6 weeks or so to decide.

    Dan Edstrom

  18. Thanks gump, and I would never hold you accountable in any regard in claiming to be a legal authority – we just read and listen a lot!!

    My reinstatement request is more of a “see if they come up with it or fail” tactic along with many other usual and customary requests I’ve made with them to no avail.

    I’m more than ready to go “legal”. I have made several posts in the “get it now” section too. What holds me back from actually retaining an attorney is 1. my endless use of denial and 2. Countless others have had less than desireable results in California.

    But I’m still searching however at an expedited pace. Thanks again.

    Diane Wheatley
    (909) 981-5589

  19. Dan,

    What I was going for with the ideas is stopping the actual foreclosure sale from happening at all. I figure the trustee is the weak link and has nothing to lose under normal circumstances. What I am proposing is giving the trustee something significant to lose, as soon as they violate the FDCPA by either not responding or improperly responding to validation/dispute requests, hit them with an injunction.

    That’s where it gets hairy as you now argue the “contract” vs. state action to get the foreclosure sale considered as debt collection in order to get the injunction.

    I have no idea if this is remotely possible… that is where I am hoping for somebody like Neil to weigh in. Any way to stop a foreclosure in a non-judicial state without declaring bankruptcy would be nice. Bankruptcy is extremely dangerous these day to some jobs, particularly in the IT field.

    disclaimer: I’m (obviously) not a lawyer, practicing law or giving legal advice. This is all just wild, theoretical, crazy talk. Please don’t try this at home, consult qualified legal counsel so he/she can tell you exactly how crazy I am.

  20. Diane… I’m not a lawyer, not practicing law, or giving you legal advice, blah blah blah….

    But you may wish to consider checking the “lawyers that get it” section. Based on what you have said so far, spending some money on a retainer rather than a reinstatement may be a better financial investment 🙂

  21. Ok, I’m legitimately beyond concerned. My cool and collective nature is worn down to its nubs.

    I’ve done everything in my ability to abide by the processes offered to me, made all the right phone calls, called all the appropriate parties and help/assistance programs, sent numerous correspondence per my right to dispute my mortgage using a QWR to all parties of the action certified mail twice now, 1/2/09 and again 1/22/09 and receive NOTHING in return.

    My sale date is scheduled per the trustee for 2/9/09 even though I’ve been verbally promised this, that and the other from Countrywide’s Loan Servicing, Foreclosure, Loss Mitigation and Home Retention Departments.

    Today’s calls are fruitless due to CW’s entire data system is apparently down and has been down since sometime yesterday. The calls are fruitless even if the systems are operating so there is really no difference.

    All I want from CW is the reinstatement figures for my loan before it goes to sale so that I can redeem it; a possibility that I’m procuring funds for just in case my loan modification (bogus terms) is returned after it has been approved since 12/29/08 but no documentation has been sent or received.

    I have requested the terms of my note with CW to be provided to me in writing such as principle balance, interest rate, existence of an escrow account, monthly payment with no success. They cannot provide this information to me verbally either due to the loan’s current “mod” state of action. I guess you only get one choice – loan mod, reinstatement, short sale or pay-off but only one at a time, no multi-tasking.

    This is an outrage! I want to pull the pants down on CW, Greenpoint, Old Republic Trustee Services, MERS so bad and give them the spanking they so well deserve.

    It looks like I’m headed towards the inevitable foreclosure sale after all the time, communication, cooperation I’ve provided in order to trump my sale and salvage my home.

    I can’t think of anything else to do except file BK and to find an attorney that bears an ounce of this whole foreclosure madness as it relates to BK and my sanity is a burden in itself.

    My head hurts.

    (909) 981-5589

  22. Gump59,
    Here is what happened to me and what I did:

    Servicer decided to foreclose and hired a foreclosure company which is acting as a debt collector. Because the servicer is NOT the holder in due course, at the time they hired the debt collector, they became a debt collector themselves. So, I sent out a debt dispute/validation notice to both parties disputing the debt.

    Of course, as usual, they will response with a copy of my note as validation (no affidavit will come I am fairly certain).

    I do not expect it to stop the non-judicial foreclosure. I do expect them to violate the law.

    If/when I sue them or declare bankruptcy, these will just be added to my list of pleadings.

    So, yes go for it and make sure you dispute. But don’t expect it to stop the foreclosure.

    Dan Edstrom

  23. Neil (and/or anybody else:)

    There are exceptions in the FDCPA for “judicial enforcement”. If non-judicial foreclosure is considered to be contractual in nature instead of state action, could you then possibly go after the trustee as a debt collector for the actual foreclosure sale itself as debt collection activity, since the FDCPA exemption under:

    “any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;”

    should not apply to the non-judicial foreclosure sale based on the theory above (contract, not state action)? If this is the case, a well timed dispute + validation of debt should be able to stop the foreclosure sale itself since it is not a “judicial enforcement” action in any way.

    The possible catch I see to it is they may fall on FDCPA exemption:

    “any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity
    (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement;”

    Thoughts and opinions would be greatly appreciated.

  24. DAMMMMMMM I cant imagin not owing anything because they screwed up. Bring it on.

  25. FL Firm Eyes ‘Illegal’ Foreclosures

    National Mortgage News

    January 26, 2009

    BYLINE: Jennifer Harmon

    WEST PALM BEACH, FL-MFI-Miami here, a mortgage fraud investigation and forensic auditing firm, said it is launching an investigation against several banks, including Deutsche Bank and LaSalle Bank, for what it alleges to be illegal foreclosures in six states.

    Steve Dibert, chief executive, said the investigation will encompass homeowners in Florida, Maryland, Massachusetts, Michigan, New York and Virginia and will be covering foreclosure actions that were filed between 2005 and 2008.

    “Every day I get calls from homeowners in foreclosure and in nearly 80% of the cases, the lender cannot prove they have the legal standing to execute the foreclosure. It boils down to simple Real Estate 101,” Mr. Dibert told NMN. “If you don’t own the note, you can’t sell it, modify it, enforce it or collect payments on it.”

    Most of the cases are exotic loans or subprime loans that have been transferred from servicer to servicer and from note holder to note holder.

    Mr. Dibert said the problem was created by Wall Street firms who traded mortgage-backed securities with each other.

    “They would package mortgages in pools and sell them, repackage them and sell them again and again.

    “Through this maze of trades and countertrades, the mortgage and the note are moved upstream but in no case are all of the transfers of ownership recorded in the local property records,” he said.

    “The real reason is fund managers wanted to save a few dollars by avoiding taxes and filing fees that would apply to each recording. Without recording these transfers in the public record, the right to enforce the mortgage and note is nullified because that recording is what proves ownership.”

    According to Larry Platt, a partner with the Washington law firm K&L Gates, the wave of investigations and cases claiming illegal foreclosures began last year based on a case in Ohio. In Cleveland, the ruling in November 2007 by Judge Christopher Boyko related to 14 foreclosure cases brought by Deutsche Bank National Trust Co.

    The judge dismissed the cases brought on by mortgage investors, ruling they had failed to prove they owned the properties they were trying to seize. According to an unnamed source in the industry, the cases were refiled in state court and these homes were foreclosed on.

    “While the paperwork has not always followed sales of loans as quickly as possible, there is little doubt that that sales took place,” said Mr. Platt. “The issue is not whether the foreclosing lender really owns the mortgage, but whether it has the paperwork to prove it. This is not about fraud, but about paper evidence.”

    In Florida, Mr. Dibert describes how chief justices have been inundated with cases questioning foreclosure.

    “They have said if you can’t prove you that you are the legal holder of the note, as required under Florida law, I am dismissing it permanently. Attorneys are showing up for the lenders and for the investors totally unprepared. It’s really prevalent in non-judicial foreclosure states like Michigan where the homeowner never goes in front of a judge. It’s all done in a civil manner. The attorney handling the foreclosure for the lender does not go back and do all the research and trace the chain of ownership of the mortgage and the note.”

    He believes lenders are relying on the Mortgage Electronic Registration Systems, but said MERS is not doing what it is getting paid to do. MERS should properly track who the legal holder of the note is to record them with the county.

    “The only true way to back up that the lender, the foreclosing party, is the legal holder of the note, without a doubt, is to record it to the county,” said Mr. Dibert.

    “MERS and the investment firms and banks, they don’t record them with the county because of the cost involved.

    In Florida, for example, every time you do a refi you have to pay the mortgage tax. With everything that went on with the boom, they were trading these mortgage-backed securities like baseball cards.

    They sold them to another pool, bundled them up and sold them based on client income. All of these people kept getting shifted around and no one kept track of it. MERS was supposed to but now it’s a double-edged sword. MERS comes along and says, ‘We have the legal authority to foreclose.’ Then you owe all these states and/or municipalities the unpaid filing fees for every time these mortgages switched hands.

    “Putting MERS on a mortgage looks good and scary on the mortgage and note, but is essentially meaningless. The trustees try to hide behind them, but when push comes to shove MERS runs away and tells the trustee essentially they are on their own.”

    R.K. Arnold, president & CEO of MERS, responded to Mr. Dibert’s comments by saying, “We agree that it is essential that a foreclosing entity prove its legal standing to foreclose before any homeowner should be subjected to losing their home.”

    Mr. Arnold said numerous state and federal courts have affirmed the right of MERS to be the mortgagee in the public land records and its ability to foreclose. “MERS was created to keep track of the parties to a mortgage loan. We offer our services free to the public so anyone can always find their mortgage company.”

    According to Mr. Dibert, “The lack of accountability by the lending industry has cost nearly 250,000 homeowners their homes in these six states alone.”

    He said when his company completes the investigations, it will determine if the report will be handed over to the attorney generals of those six states so they can do their own investigation or if the clients are eligible for some type of class-action litigation in federal court.

    A represent for Deutsche Bank said the company could not comment on the matter. LaSalle Bank did not return a call for comment.

  26. Mortgage market clouds who owns woman’s house


    The Atlanta Journal-Constitution

    Sunday, January 25, 2009

    Twenty years ago, Zella Mae Green bought a modest brick ranch house in DeKalb County with an American ideal in mind. The single mother of four, who raised her children working low-wage jobs, wanted to own something someday. And she wanted to pass something on.

    “I was thinking that if anything would ever happen to me, the children would have a place they could come and stay,” said Green, a seamstress who is 68. “Their father passed away when they were young.”

    Enlarge this image

    Zella Mae Green has been in a stalemate with mortgage lenders for years trying to learn who holds the note on her Decatur home and how much she really owes.
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    Green says she has done her part, making payments on the house she bought for $40,000 to the series of lenders who have managed her mortgage over two decades.

    But Citigroup and Wells Fargo say Green has failed miserably as a homeowner and is nine years behind on her payments. And they want to take the house.

    “Nine years? There ain’t no way,” Green said. “Ain’t no way you can stay someplace for nine years without paying anything.”

    Determining whether a homeowner is truly years behind on a mortgage seems like a straightforward question.

    But Green and a string of lenders have been arguing about the matter in court for years now — with no resolution in sight. Her lawyer says the lenders have not even proven who owns the mortgage, let alone established how much Green owes.

    Citigroup and Wells Fargo and the lawyers representing them declined to be interviewed for this article, citing pending litigation.

    Green’s case illustrates the complexities of the modern mortgage market and just how difficult it can be to unwind the history of a mortgage. Most mortgages are originated by one lender, then sold — often repeatedly — to other lenders or groups of investors. Other companies are often brought in to process payments and manage escrow accounts.

    For the thousands of homeowners who are behind on mortgage payments or in a dispute about how much is owed, getting accurate information about a loan can be difficult. Negotiating a resolution — especially when a series of lenders and managers has been involved — can be even harder.

    “Here is a homeowner who wants to get her mortgage worked out so she can pay it,” said Howard Rothbloom, Green’s attorney. “She can’t get it done.”

    Question of ownership

    Green picked out her house 20 years ago. It’s a two-bedroom, one-bath brick ranch with about 1,000 square feet. Green borrowed $40,250 from All Georgia Mortgage at an interest rate of 10 percent in 1988. She felt sure she could handle the $353 payments with her job at J.C. Penney.

    “I was excited about it because I knew one day it would be mine,” said Green, now a great-grandmother.

    The home’s interior today is a reflection of Green. It’s adorned with fancy curtains and pillows she made — the kind she creates in her seamstress job for an upscale decorating company. And it’s the place her family gathers to enjoy Green’s home cooking.

    Trouble with the mortgage began years ago, she said, when she mailed in money orders that she says were applied to the wrong account — something she believes went on for at least seven months.

    The mortgage companies involved with the loan at that time have since sold it.

    Green said she sought help from several housing agencies and attorneys over the years, trying to get credit for all the payments she has made. “They told me it’s the biggest mess they have ever seen,” she said.

    All Georgia Mortgage Co. originated Green’s loan, but it has been owned or managed by at least seven parties over the years. Citigroup now says it owns the loan and Wells Fargo is managing the payments.

    Green acknowledged paying her mortgage late sometimes over the years, but she said she always made up for it. She has filed for bankruptcy four times since 1989 — usually when a lender threatened foreclosure.

    Lenders in Georgia can proceed with a foreclosure without the involvement of any court. Bankruptcy automatically stops a foreclosure, and the court generally serves as the forum for resolving mortgage disputes.

    Green said the bankruptcies were the only way to try to figure out what happened to her payments and to keep her house.

    Complicated accounts

    Green’s case sounds extreme. But lawyers who represent homeowners say most mortgage lenders rely on such complicated accounting systems that experts have to be hired to even read the history of payments and charges.

    “The payment histories are designed by these servicing companies to be gobbledygook,” said William J. Brennan Jr., an attorney at Atlanta Legal Aid and national expert on mortgage lending. “Knowing what somebody owes is crucial. They will give you a number, but if you want to see if that’s right — good luck.”

    A payment history provided by lenders in Green’s case is complicated. It shows numerous credits on the same day for relatively small amounts, listed as “payment rec’d,” but shows no change in the account’s balance.

    The history also appears to show her account being within months of being current, then suddenly more than seven years behind and then current again in 2000.

    Green filed for bankruptcy protection for a fourth time in 2004 with the help of Rothbloom, an attorney with a successful record of challenging mortgage lenders.

    “I’m just trying to find out two things: What Ms. Green’s proper loan balance is and who she owes it to,” Rothbloom said.

    So far, who owns the mortgage has not been resolved.

    A lender proves ownership of a mortgage by producing the “promissory note,” the document signed at closing in which the borrower agrees to the debt. The note is valuable and can be bought and sold by lenders. But like a personal check, it is only valuable in its original form.

    Green’s lenders have admitted in court documents they can’t find her note. Legal experts say that’s a big deal.

    “There is no excuse for the inability of mortgage lenders to know where the note is,” said Frank Alexander, an Emory University law professor and a leading expert on real estate law. “Without the note, you have virtually nothing. That is the one thing that is always locked in a vault.”

    The lender says everybody knows that Citigroup owns the note. If Green thought otherwise, they say in court documents, why would she send Citigroup her payments?

    Rothbloom says that’s not good enough. “Their answer is, ‘We have a copy,’” Rothbloom said. “My answer is, ‘I have a copy, too.’ “

    Katherine Porter, a University of Iowa law professor, found in a study that lenders routinely fail to file required documents in bankruptcy cases to prove what consumers owe. And their accounting systems, she said, make it hard for them to track the history of payments over the life of a loan, especially when numerous lenders are involved.

    Porter said Green’s case illustrates how complicated these cases can become.

    “If she can’t get this information through litigation and with a skilled attorney, what happens to people facing foreclosure who sent their check in and can’t get the lender to admit it?” Porter said.

    ‘System is broken’

    In legal filings, the lenders say Green has never been able to keep up with the payments. They cite her numerous bankruptcies and the fact that Green participated in a federal program designed to help struggling homeowners between 1997 and 2000.

    Rothbloom said payment records appear to show her loan was current in 2000, when under the management of the U.S. Department of Housing and Urban Development. He said it’s possible HUD’s program transferred past-due payments to the end of the loan to allow Green to stay in the house.

    “Anything is a possibility,” Rothbloom said. “That’s why we sued. To find out what’s going on.”

    What Rothbloom knows, he said, is that Green has made every payment since 2004. Still, he has made no progress getting lenders to agree to a settlement in a case involving a house that DeKalb County values at $67,000.

    “Why do they want this house?” Rothbloom said. “The answer is the system is broken.”

  27. Good morning Neil,

    If I am reading this correctly………would my wrongful foreclosure claim; where my proper right of rescission claim was not responded to for approximately sixty days, TILA and RESPA violations, and the fact that I was a class member of the FTC vs. Fairbanks Capital Corporation Settlement Agreement and Curry vs. Fairbanks Capital Corporation Class Action Settlement Agreement; both which were settled in Federal Court: apply here???????Fairbanks was only the servicer and U.S. Bank Trustee Series 2002 was the beneficiary, who brought the foreclosure???

    Please clarify for me.

    Thank you,


  28. I’m at my 11th hour now before the alleged TS date on the 9th. Countrywide has promised me this, that and the other as well as so many inconsistent repeated verbal facts regarding my loan its nearly comical. I’ve sent my second QWR last week certified mail after my first on the 2nd of January certified as well.

    With little time on the clock unless they grant me a new sale date as they continue to tell me they have done (trustee confirms the 9th) in lieu of a workout package, what is my next step? Can I facilitate further action on my own standing or is it time to hire the big guns? And who?? I’m hanging tough but have had enough.

  29. Hey Jose,

    I am interested in Neil’s thoughts on this one as well. Fannie Mae and Freddie Mac are insurers, as well as securitizers, in many cases if I am not mistaken. Therefore it would seem that the GSE’s would have to prove ownership, by disclosing the policy or other method with which the specific loan was acquired, and show a chain of ownership to validate the party conveying to them.

    I know of a Homeowner where a Realtor showed up and took possession of the vacant property after auction, (While a lawsuit had been served filed, and recorded with a Lis Pendens prior to auction). They asserted their authority from FNMA to take the property and list it, although they admitted they had “no paperwork” on the file. They are going to be joined as a defendant in the suit, and have since cancelled the MLS listing, and possession of the property was retaken.

    Thanks to everyone that posts “insider” information, you are helping many of us professionals out there develop our cases.

    I have depositions scheduled with Countrywide, MERS, REcontrust, and Saxon.

    It is my belief that EVERY FORECLOSURE should be litigated to ensure against the rampant wild west style “Negligent Acts” that are going on commonplace.

  30. Hi Neil
    It appears in my case that the lender does not want to provide discovery. I live in a non judicial state (NH). With your help I was able to get my auction canceled (scheduled 8/1/08) by filing a lawsuit against Bank of New York & Saxon Mtg Services, the foreclosing entities. On 11/24/08 I served the foreclosing attorneys with formal discovery which included all your interrogatories, requests for admissions and requests for the production of documents. According to NH law they had 30 days to comply, before the 30 days were up they requested and received an extension of 30 days which ran out on 1/24/09. I have heard nothing, nor received any correspondence whatsoever. It seems as you have said many times, that they don’t want to come to the fight, even with a lowly pro se litigant like myself. According to NH Rules of Civil Procedure my options would include a motion to compel, or a motion for conditional default. Do you recommend that I go forward aggressively and try to end the case, or file a quiet title action? Or should I just stop right here? My concern if I were to stop would be that they would be able to come back and refile a foreclosure acion as my ultimate goal would be to remove them completely from county records and own the property free and clear. Obviously the foreclosing party does not own or hold the note or I would have gotten a copy by now. Also, this loan was securitized. Any suggestions would be appreciated. Also, thanks for all the hard work that you’ve put into the Foreclosure Defense Institute, along with Brad. You’ve not only helped me save my home, but I’d venture to say, thousands of others.
    Steve B.

  31. You state that “[b]y filing a Qualified Written Request, Federal Law requires an answer and resolution…” however the bank has ignored my request for a Qualified Written Request and there are no apparent remedies for the lack of a timely response.

  32. Dear Mr. Garfield,,

    does This also applies to cases where the foreclosure attorney goes into court with what appears to be the original note?

    I have a case where an outfit called Skyline Mortgage was the table funded lender, Aurora and Lehman Brothers sold the mortgage into a pool , the loan was being foreclosed under Aurora, and at the time the case was going to court they showed up with a note and Freddie MAc is now the alleged note holder , even though they were never mentioned on any document. It appears that they are selling securitized notes prior to foreclosure to these foolish GSE’s and at the foreclosure hearings they are coming to the table alleging they own a note that was securitized previously.

    In order to secure 100% of the rights under the note they must own 100% of all the certificates that were issued from the pool and if that is not the case can they still foreclose?

    If the certificates were pooled and overcollaterilized, and even if Freddie Mac or Fannie Mae buy the notes on the original pool, this mean that the rights to the notes were transferred to other parties prior to the GSE purchase therefore we as tax payers were defrauded again.

    Also the insurance issue. Should attorneys be bringing the bail out money and the insurance money being distributed to lenders and investors as a means to prove the fact that the current foreclosure attempt is or may be improper or in fact illegal??

    That it may be possible that the actual parties in interest and who may have rights over the notes being foreclosed have been paid through different means?

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