Among the things we will cover at the May workshop on Motion Practice and Discovery, are the many ways the pretender lender lenders are obfuscating the truth. Practitioners and litigants need to know the progression of building a case and the progression of presenting a case. They are not the same thing. Pleading-Motions-Hearings-Argument-Exhibits-Raising Issues of Fact- Discovery-Evidentiary hearings is the rough order of things while lawyers may have stylistic differences. Here are your bullet points when you go to court:

  • The money for the funding of the borrower’s loan came from the investor. Thus the borrower is or at least was the debtor and the investor is or at least was the creditor. In old style transactions the borrower would sign a note and it would be kept by the bank that gave him the loan. Why? Because the note was evidence, presumptively correct of the terms of the obligation that came into existence when the borrower accepted the benefits of the funding of the loan.
  • If the borrower did not execute a note, the obligation would still exist, if the borrower accepted the benefit of the funding the loan.
  • If the bank did not fund the loan, the note would not be evidence of any obligation, because there was no obligation. Signing a note does not create the obligation. It is the monetary transaction — the transfer of actual money — that gives rise to the transaction.
  • In securitized residential mortgages, the borrower signs a note which is conveyed to the investor as the lender by way of a mortgage backed bond. Hence the evidence of the holder of the note is in the bond.
  • The only place to start is where the bond was issued and to see the bond that conveyed the ownership interest in the loan pool to the investor.
  • So you want them to produce all the mortgage backed bonds that conveyed an ownership interest in the pool. Without the bond there is no evidence of who owns the note.
  • Remember the terms of the bond: (1) conditional non-recourse payment of interest; (2) conditional non-recourse payment of principal; and (3) conditional non-recourse conveyance of the borrower’s note. The SPV that issued the bond is not the actual Payor or obligor on the Bond. The mortgage backed bond is strictly dependent upon the various conditions, provisions and terms contained in the indenture, prospectus, pooling and service agreement and assignment and assumption agreement.
  • Hence legally the note is “given” to the investor both as collateral and as owner for the obligation acquired when the investor advanced funds to purchase these unregistered securities.
  • The reason why “show me the note” is so powerful is that 40% of them were destroyed and the pleaders have no credible story to explain why or when (key elements in establishing a “lost instrument”).  But the reason it creates a trap door for borrowers is that 60% of the time they do have the note, or they create one using advanced color copying and printing technology off of copies. So if you don’t know the story behind securitization and the litigation tools — motions, discovery, compelling answers, use of qualified written requests etc. you are left with your mouth hanging open.
  • Since you know the loan has a 96% statistical probability of having been securitized, you know that an investor funded it, you have a forensic analysis and expert declaration to support and corroborate your pleading and argument, and a question of fact exists as to how and when the investor received and/or parted with possession of the note and under what circumstances.
  • The only way then that the transaction can be completely presented in court or out of court is for the them to show you the note AND SHOW YOU THE BOND WITH THE INVESTOR’S NAME ON IT. This requires a request to produce the minute books, trustee’s records and actual copies of the certificates, or failing that the names, addresses and contact information of the investor, so you can get a copy from them and find out if they still have it or if they ever had it.
  • You may find they never received the note. You may find that the “depositor” or “trustee” or any other “entity in the securitization chain either never received the note or doesn’t have it anymore. That doesn’t mean the obligation is dead. It means that the two pieces of evidence of the obligation are deed and the court has the power to reform the transaction into what “the parties” (i,e, the real parties) intended.
  • But it also means that if the investor, his agents, servants or employees or servicers or affiliates have received payoffs from insurance, credit default swaps or otherwise that the obligation would of necessity be correspondingly reduced. The corroboration of the existence of the likely reduction is the current opinion evidence and allegation that the entire transaction was based upon fraud — inflated appraisal of the property, inflated rating of the mortgage, inflated appraisal of the mortgage backed bond and inflated rating of the collateral resulting in the issuance of a fictitious security without the collateralization upon which both the borrower and the investor relied.
  • And the last point for today’s “lesson” is that you are entitled to the same presumptions that your allegations are true as they are — nothing more and nothing less. So you better know how to plead, and how to argue when you’re dealing with a presumption of credibility in the brand name of a big bank and a judge who isn’t interested in complex theories. That’s why your argument boils down to “show me the BOND.”
  • So don’t try to win the whole case in the first or even the 10th motion hearing. You should use each hearing as an opportunity to educate the Judge on a little more of securitization and plan out your educational curriculum, demonstrative exhibits, affidavits, declarations, and forensic analysis reports.

One Response

  1. Wow I’m jumping up and down this is great

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