The Importance of Discovery and Motion Practice

Practically all the questions I get relate to how to prove the case that the loan was securitized. This is the wrong question. While it is good to have as much information about the pool a loan MIGHT BE INCLUDED, that doesn’t really answer the real question.

The real question is what is the identity of the creditor(s). The secondary question is what is owed on my obligation — not how much did I pay the servicer.

It might seem like a subtle distinction but it runs to the heart of the burden of proof. You can do all the research in the world and come up with the exact pool name that lists your property in the assets as a secured loan supporting the mortgage backed security that was issued and sold for real money to real investors.  But that will not tell you whether the loan was ever really accepted into the pool, whether it is still in the pool, or whether it is paid in whole or in part by third parties through various credit enhancement (insurance) contracts or federal bailout.

You must assume that everything is untrue. That includes the filings with the SEC. They may claim the loan is in the pool and even show an assignment. But as any first year law student will tell you there is no contract unless you have an offer AND an acceptance. If the terms of the pooling and service agreement say that the cutoff date is April 30 and the assignment is dated June 10, then by definition the loan is not in the pool unless there is some other documentation that overrides that very clear provision of the pooling and service agreement.

Even if it made it into the pool there are questions about the authenticity of the assignment, forgery and whether the pool structure was broken up (trust dissolved, or LLC dissolved) only to be broken up further into one or more new resecuritized pools. And even if that didn’t happen, someone related to this transaction most probably received payments from third parties. Were those allocated to your loan yet? Probably not. I haven’t heard about any borrower getting a letter with a new amortization schedule showing credits from insurance allocated to the principal originally due on the loan.

The pretender lenders want to direct the court’s attention to whether YOU paid your monthly payments, ignoring the fact that others have most likely made payments on your obligation. Remember every one of these isntruments derives its value from your loan. Therefore every payment on it needs to be credited to your loan whether the payment came from you or someone else. [You know all that talk about $20 billion from AIG going to Goldman Sachs? They are talking about YOUR LOAN!]

The error common to pro se litigants, lawyers and judges is that this is not a matter of proof from the borrower. The party sitting there at the other table in the courtroom with a file full of this information is the one who has it — and the burden of proof. Your case is all about the fact that the information was withheld and you want it now. That is called discovery. And it is in motion practice that you’ll either win the point or lose it. If you win the point about proceeding with discovery you have won the case.

You still need as much information as possible about the probability of securitization and the meaning it has in the context of the subject mortgage. But just because you don’t have it doesn’t mean the pretender lender has proved anything. What they have done, if they prevailed, is they blocked you from getting the information.

By rights you shouldn’t have to prove a thing about securitization where there is a foreclosure in process. By rights you should be able to demand proof they are the right people with the full accounting of all payments including receipts from insurance and credit default swaps. The confusion here emanating from Judges is that particularly in non-judicial states, since the borrower must bring the case to court in the first instance, the assumption is made that the borrower must prove a prima facie case that they don’t owe the money or that the foreclosing pretender lender is an impostor. That’s what you get when you convert a judicial issue into a non-judicial one on the basis of “judicial economy.”

In reality, the ONLY way that non-judicial statutes can be constitutionally applied is that if the borrower goes to the trouble of raising an objection by bringing the matter to court, the burden of proof MUST shift immediately to the pretender lender to show that in a judicial proceeding they can establish a prima facie case to enforce the obligation, the note and the mortgage (deed of trust). ANY OTHER INTERPRETATION WOULD UNCONSTITUTIONALLY DENY THE BORROWER THE RIGHT TO A HEARING ON THE MERITS WHEREIN THE PARTY SEEKING AFFIRMATIVE RELIEF (THAT IS THE FORECLOSING PARTY, NOT THE BORROWER) MUST PROVE THEIR CASE.

24 Responses

  1. Innovation and careful financial planning-like the new emerging market of stadium construction, debt refinancing and revolving loans-are considered as the prime considerations of any sports organization if it plans to excel

  2. Willow,

    Great job on an easy to read securitization explanation. I too am in Portland. Would it be possible for us to communicate via email? My address is mrsdiamond@msn.com. Thanks~

  3. Bravo Willow – best argument I have read.

  4. Ian,

    I think part of the answer you seek lies in the fact that the trusts are pass throughs, meaning, that the certificate holders purchased rights to share of the income stream from the notes. If you read the posts from ANONYMOUS, that person explains in much better detail that I can how this whole securitization scheme works.

    As for what Goldman was doing, it was something along the line of one of those Super Bowl office pool bets. No one in the office actually owns any of the teams playing and you are only betting on who will win. In Goldman’s case, they were actually betting on the loser (short). In this case, Abacus did not actually own or hold the notes, the mortgage trusts selected were pooled together into a separate deal and then bets were placed on whether the deal would succeed (long) or fail (short). The notes were never sold and never left their original trusts. Again, I would defer to ANONYMOUS for a much better explanation as this person is an expert in the field.

  5. Alina- thanks for the response- while I know that the lost note affidavit has been generally regarded by the judiciary as an acceptable excuse due to “sloppy paperwork” resulting from an overwhelming volume of mortgages being bought, sold, refinanced,etc., it seems too coincidental that this also allowed the notes to end up as collateral for multiple abs/mbs/rmbs securities at the same time. An entity could sell a pool of say 5000 mortgages to investors worldwide, when in fact the mortgages contained within were just “borrowed” from some other entity. Especially after they went into default, were paid off, and assumed to have been purchased by a debt buyer. Who would know? No one, which makes this scenario all the more feasible. Just a thought.

  6. Can someone please answer this question for me? When it said that the note must be transferred with the assignment, do this mean that the note must have the bank or lender name on the note. For instance, when my loan was transfered from SBA to MERS, the assignment said transfered from SBA to MERS. Do the note have state that note transfered from SBA to MERS?

  7. Ian,

    Lost note counts are not something new. For the most recent case law check out the FDIC and RTC decisions following the S&L crisis. The banks were doing the same thing that they are doing now – in their effort to trade notes at lighting speed, the paperwork was sloppy. The federal court however did not listen to the banks arguments and came down hard on them.

    For additional case law, check out the the decisions following the Depression or the farmers crisis of the 70s.

    The problem today is not that the arguments are invalid but rather that the judges are retiscent to apply black letter law because in may instances it could mean that the homeowner is entitled to the home free and clear. Those of you who are helping homeowners need to fight tooth and nail to educate the judges. It does not matter that some judges do not get it. You will be doing the homeowners an injustice by not fighting based on established case law.

    For those of you that think that Florez v. Goldman is good case law, go back to the SCOTUS decision of 1872 re bifurcation.

  8. Ian,

    Lost note counts are not something new. Check the FDIC and FTC case law following the S&L crisis. At th t time, the banks were doing exactly what is happening today – they were in a hurry to process loans at lightening speed which resulted in extremely sloppy paperwork. The federal courts came down hard on them and denied their arguments. As a result of this, two things happened: 1) the UCC-3 was amended to add 3-112; and 2) MERS was created as a way to make it appear that the note and mortgage are kept together.

    If you want to go further back in time, check out case law from the 20s and 30s following the Depression or the farmers crisis of the 70s.

    The problem today is not that the arguments are invalid but rather that the judges refuse to apply black letter law. They cannot seem to want to accept the fact that the banks messed up big time. Judges need to be educated and those representing the borrowers need to ifght tooth and nail to make sure that the judges listen. E

  9. Here is a thought for the brainiacs out there- Has anyone researched the origins and original intents of the Lost/Missing/Destroyed note affadavit? i.e. when it was first invoked, what the circumstances were, what the initial response by the court(s) was/were? We have all read that just 10 years ago, less than 1% of the foreclosures involved lost note affadavits, yet now, in some locales, the rate is 60-90%. It would appear to me that the lost note affadavit is a foundation of the foreclosure fraud we have now. As Neil has stated repeatedly, a note is cash, why would anyone “lose” a cash chit, unless they were better off without it. IF everyone in every walk of life, from bankers, servicers, foreclosure mills, judges, etc, KNEW that there was just ONE NOTE, WITH NO EXCEPTIONS, then there would be no games to play. Goldman Sachs admitted, among other things, that the tranches of mortgages within the CDOS contained in many cases the same mortgages which were in other CDOS, so what was the payoff on these arrangements? The credit default swaps were in addition to the PMI, AMBAC, MBIA payments, TARP and TALF funds, etc. So why was the lost note affadavit with its pathetic months or years late assignment allowed to grow into the nightmare which almost sunk the global financial system? And why is no one making use of SEC form 13F (i think that’s it) which mandates that if any collateral (notes, in this case) go missing, each and every one is to be reported? Chime in, let’s get to the bottom of this.

  10. Brian,
    You are a badass! I love it! We have to show these people that we ain’t playin’!

  11. Collette,
    I loved your post below. It brilliantly explains what so few people understand. Or even if they understand it, they refuse to accept that it is true. It’s the “Big Lie” theory put into practice–the lie is that banks loan deposits. Nothing could be further from the truth. And the banks know it–the Dallas Fed says it very clearly: “Banks actually create money when they lend it.”
    Just as your post illustrates, we have let ourselves be conned into a scheme in which banks charge US money to lend to THEM. It’s an amazing feat. If you or I had suggested to someone that we would be able to get people to pay us for lending us money, we would have been told we were insane. Yet that is exactly the state of affairs that exists now–we loan money to banks and they charge us interest for doing so! It’s crazy!
    I suggested to my wife, who is an attorney, that we use a defense like the one described in your post. She said that no judge would ever entertain such an argument even if the judge believed it, because that would be “opening the floodgates” for all debts to be cancelled, and judges don’t want to be responsible for a flood.
    I disagreed with her, though–I think that if a judge allowed an argument like the one in your post to stand, he’d actually be CLOSING the floodgates–the floodgates that drowned the entire world in debt that was created at NO RISK to the “lenders.”
    I mean, what drives me up the wall is the fact that, in a “borrower’s” hands, a promissory note has no cash value in the present system. But the nanosecond after that same promissory note enters the “lender’s” hands, it is worth the face value of the note, even though it is still just the exact same piece of one cent white copy paper that it was in the borrower’s hands.
    The only reason I can think of that we the people are allowing this system to continue is because almost no one believes that this is the way it actually works. The “Big Lie” has worked its magic, and it’s reinforced by a whole labyrinth of chutes and ladders like credit scores, credit reports, economics classes, financial services advertisements, etc.
    Great post!

  12. http://www.scribd.com/doc/30959688/Complaint-to-Comptroller-of-the-Currency-againt-Deutsche-Bank-National-Trust-Company

    DO EVERYTHING TO BLOCK FIGHT INCLUDING ALL MOTIONS TO OBJECT. IF DEUTSCHE BANK NATIONAL TRUST IS YOUR TRUSTEE MAKE A COMPLAINT TO THE OFFICE OF THE COMPTROLLER OF THE CURRENCY. THEY ARE THE REAL DEAL.

  13. It seems to me that what is really lacking here is “consideration”. In order for a contract to be enforceable, even under the UCC, there has to be something of value exchanged. A contract consists of a valid “offer”, a valid “acceptance” and the exchange of “consideration”. This is basic contract law that every first year law student is taught, including the judge.

    Let me elaborate: Bob borrows $1000 from Fred. To secure the loan, Fred takes a deed of trust (security instrument) from Bob in Bob’s bike. Thus, you have a valid contract: Bob’s promise to pay the $1000 loan from Fred as executed in a written promissory note (to satisfy the Statue of Frauds for goods over $500) in exchange for a security interest in Bob’s bike. The money and the security interest are the consideration given as a value of exchange.

    Now, let’s say the terms of the loan is that Bob is required to pay Fred $50 a month plus $20 in interest for a total of $70 per month for 20 months. Fred has the note, which is a negotiable instrument that has a cash value of $1000 and the deed of trust in the bike. Now, what Fred does is he sells the note to Aunt Sallie. Aunt Sallie gives Fred $1000 for the note and Fred gives her an assignment of rights, giving up all right, title and interest in receiving the payments from Bob. The assignment is a subsequent contract that also must be have consideration exchanged in order to be valid. In our example, Aunt Sallie gave Fred $1000 and Fred gave Aunt Sallie the Promissory note signed by Bob and executed the assignment of rights to Bob’s money. This is a valid assignment of rights because there was consideration exchanged. At this point, Aunt Sallie is entitled to receive payments from Bob because she owns the note and the deed of trust in the bike.

    Now, let’s complicate this a bit: Fred doesn’t give Aunt Sallie the deed of trust in the bike. Instead, he appoints Marty as his “beneficiary, mortgagee and nominee” in the deed of trust for the bike. In order for Marty to be considered a “beneficiary” he has to receive some benefit from the payments that Bob is giving to Fred. Since, Fred assigned his rights, title and interest in the bike and the $1000 payments from Bob to Aunt Sallie, she is the beneficiary of the payments, not Marty. Marty is not receiving any money from Bob either directly or indirectly, so he is not benefiting from the Assignment of rights in the Promissory note.

    Further, Marty is not a “mortgagee” because he did not give any money to Fred to lend to Bob nor did he give Bob any money, either. A mortgagee is a lender and in this example, Marty hasn’t loaned anyone any money so he can’t be a mortgagee.

    So, what is Marty? Marty is a nominee for Fred. In the deed of trust instrument as the nominee, Marty is a place-holder for Fred and any assigns or successors in interest to the promissory note. In order for Marty to be an agent he must have an agency agreement to act on behalf of any principle who owns the note. He can not foreclose on the bike in his own name but only in the name of the principle he represents who is the note-holder. So, if Bob defaults, Aunt Sallie is the principle in the subsequent assignment of the promissory note and Marty can foreclose on the bike in Aunt Sallie’s name, not his. This is standard Agency law, where the agent derives his rights from the principle. Thus, the principle must have some rights to begin with in order for the agent to “step in to the shoes” of the principle. Thus, if Marty does not have an agency agreement with Aunt Sallie, he can not foreclose on the bike in her name nor can he foreclose on the bike in his own name because he is not owed anything from Bob.

    At this point in our example, Bob hasn’t a clue who has the note. He still thinks he owes Fred the money because Bob was in privity of contract with Fred not Aunt Sallie. He thinks Fred still has the note and the deed of trust in his bike. He also doesn’t know who the hell Marty is either. Poor Bob. He’s about to get screwed.

    Now, let’s add another layer to this scheme: Aunt Sallie likes to travel and she hasn’t got the time to collect any money from Bob. So, in her deal with Fred she tells him he can still collect the money from Bob on her behalf. Since Fred’s been collecting the money from Bob anyway, there’s no harm in continuing to collect the money for Aunt Sallie. So, they strike a deal. Fred tells Aunt Sallie he’ll give her $60 from the $70 payment he’s getting from Bob and he’ll take a $10 cut for his services. Aunt Sallie is getting $60 a month and Fred’s getting $10. All Marty is doing is keeping track of this transaction on his home computer for Fred and Aunt Sallie because they are members of Marty’s Transaction Tracking Club. For a small fee he’ll do the bookkeeping and they can do what ever the hell they want.

    Bob is still clueless. Now, it comes to pass that Aunt Sallie gets a little nervous. The economy is rocky and Bob may lose his job, get sick and can’t work or maybe gets hit by a bus. If Bob stops paying Fred, everybody goes belly-up. So, Aunt Sallie, being smart, decides to visit her local insurance agent and gets ABC insurance company to write a policy that states they will pay Aunt Sallie if Bob defaults. Aunt Sallie has now got her “assets” covered. You go girl!

    Now, it comes to pass, that Bob loses his job and can’t pay the $70 a month to Fred anymore. So, he goes to Fred and tells him what happened and asks if they can modify their loan agreement until he gets a new job. Fred tells Bob to fill out some papers outlining his proposal and he’ll think about it. At this point, Fred can’t modify the loan agreement because he assigned the note to Aunt Sallie giving up his rights, title and interest in the note and in the bike as the security interest.

    So, he goes to Aunt Sallie and tells her that Bob can’t pay. Aunt Sallie tells Fred to get Marty to foreclose on the bike. Meanwhile, she files a claim with the insurance company. The carrier does an investigation and finds out that Bob lost his job and can’t pay the loan so Bob’s in default. Since they insured Aunt Sallie against Bob’s default, they pay the claim. Aunt Sallie’s note has now been paid by an undisclosed third party. So, at this point, Fred’s been paid and so has Aunt Sallie and Bob’s still waiting to hear from Fred about the loan modification.

    Meanwhile, back at the outhouse, things are piling up. Marty gets the message from Fred to take the bike. Marty has no clue if Aunt Sallie has been paid but he does know that Fred has and that Fred’s been collecting the money for Aunt Sallie. It’s all on his computer. So, Marty assumes that since Bob hasn’t paid Fred, Aunt Sallie probably isn’t getting paid either so it’s time to get the bike. Marty forecloses on the bike and gives it to Fred so he can give it to Aunt Sallie. Well, Aunt Sallie doesn’t want the bike so she tells Fred to sell the bike and they split the proceeds.

    Meanwhile, Bob finds out his bike’s been taken and now he wants to find out what the hell happened. He thought he was going to get a loan modification. When he confronts Marty for taking the bike, Marty says he doesn’t have any interest, right or title to the note and he was only foreclosing for Fred. So, Bob then goes to see Fred and Fred tells him he doesn’t have the note either because he sold it to Aunt Sallie and was only collecting money on her behalf. When Bob confronts Aunt Sallie about the bike and the note, she tells him she was paid by insurance. The bike however was sold to a bona fide purchaser for cash and now cuts off all rights Bob may have had in the bike. So, now Bob is out of a job, out of his money and out of a bike.

    At all steps in this transaction each person paid consideration for the note and the assignment. The only person who didn’t was Marty.

    Now, let’s make this situation really hairy. Aunt Sallie decides to sell the note to four of her nieces and nephews. They each have a $250 interest in the note and the cash that Fred collects from Bob is passed through to Aunt Sallie to the four nieces and nephews because they now hold a 1/4 interest in the note. So, at this point Fred’s been paid and so has Aunt Sallie. The four nieces and nephews now sell their 1/4 interest in the pool to eight friends and neighbors. The note is now divided among eight people. Then those eight people sell their shares in the note to another pool of 16 subsequent people.

    They in turn sell to 32 people who then sell to 64 people who then sell to….and so on. The $1000 note begins to diminish in value as more and more people get smaller and smaller pieces. This is called the law of diminishing returns. The larger the pool of people who have shares in the note, the less the note’s value becomes. As the note continues to change hands the folks in the middle get their cut. Pretty soon, the note isn’t worth the paper it is printed on.

    This is all going on without Bob knowing anything. So, in this case…who does Bob owe? Certainly not Fred. He’s been paid. Nor Aunt Sallie, or the nieces and nephews or the friends and neighbors or the 32 folks or the 64 folks…so, who owns the damn note? Well, now that this note went from $1000 to junk, the Federal Reserve or the Federal Government steps in and buys it. So does Bob owe them? Well, they bought this piece of crap note with Bob’s tax money so maybe Bob’s note has been paid off by his own money.

    The key to all of this insanity isn’t just who owns the note but what consideration has been paid for the right, title and interest in the proceeds from the note and the security interest in the bike. Remember, for a contract or assignment to be valid consideration for value must be paid. Bob has the right to demand who is the present note holder and an accounting of all consideration paid for the right, title and interest in it. Thus, the deed of trust in the bike must follow the promissory note because without the note the deed to the bike is worthless and without the deed of trust in the bike the note is unsecured.

    Now, as far as standing goes: only those who have a stake in the note and the bike can come forward and press their claim for payment. Marty doesn’t have standing to foreclose on the bike because he doesn’t hold the note as a mortgagee nor does he receive a beneficial interest in the proceeds from Bob’s payment. Therefore, Marty has no stake in the outcome. Fred doesn’t have standing either because he sold his right, title and interest in the note to Aunt Sallie. Aunt Sallie doesn’t have standing either because she sold the note to the nieces and nephews…and so on. Each time the note was sold the subsequent party in the chain of title to the bike was paid for their interest in the note. The only person who can enforce the note is the last guy who has it.

    That’s why this shit storm is a shell game. The question is: who owns the note? To whom does Bob pay his money to? How much is actually owed? And who can release the note as satisfied and release the deed of trust in the bike? At this point, even if Bob made all his payments on time and he’s not in default on the note, if he wants to sell the bike how is he going to give clear title to the bike to a subsequent purchaser? Assuming he sells the bike for $1000 to Patty, who does he pay? If he pays Fred the $1000…well, we’ve already established that Fred doesn’t own the note anymore so he can’t cancel the note and give it back to Bob as paid in full. And since Marty lost track of all the assignments sometime after the nieces and nephews he may not know either.

    Bob may very well discover, based on the law of diminishing returns, that the last group of dopes to buy this note paid $1. This means that the note now has a value of $1 not $1000. The only value a note has is what a person is willing to pay for it. So, in the end Bob may end up paying $1 for his note and get a court to Quiet Title to him in his bike.

    So, folks…the moral of this story is you have got to demand not only the note be produced but also a full and complete accounting for all the consideration that was paid for the right, title and interest on that note in any subsequent assignment. If no one paid any consideration for the note in any subsequent assignment, the assignment is invalid. Follow the money. Make them prove to the court the money trail.

    They may very well produce a note. Or an assignment. In this day and age, anything can be scanned and photoshopped and made to look like a real, wet-ink note. In fact, the technology is so good that the Federal Reserve had to redesign our cash to include all kinds of tricky things to make forgery of bills extremely difficult. Just hold up one of your newly designed $20 bill to the light. You’ll see what I mean. So, if the Feds are concerned enough that forging money is relatively easy with advanced technology so should the Judge be concerned that a promissory note can be as well. Thus, producing the note or an assignment is not enough proof that either is valid. There must be a showing via an accounting of all consideration paid for the right, title and interest in the note and the assignment.

    Willow.

    BTW, I am, like Neil, a retired attorney on inactive status with the State Bar of California, living in Portland and in the same crappy situation you’re all in. At the time I signed my note and gave a deed of trust as security on my home, I had no clue either that all this stuff was going on and had no way of finding out. Willow is my screen name. I’ve no idea if we are being monitored by the evil ones.

  14. ET VOILA!

  15. LOUISIANA MUNICIPAL POLICE EMPLOYEES RETIREMENT SYSTEM

    “Dying truth”,

    I’ve read your posts avidly, but with some SKEPTICISM when you implied some VAST number of government employees financial interests being AT ODDS with their OBVIOUS MISSION. I believe in strict adherence to only those things which are FACT when disseminating information.

    Below is a “Letter” included in an 8-K Disclosure required by the SEC direct from GOLDMAN SACHS. Just published in the last few days.

    There is NO ROOM for skepticism or speculation as to it’s meaning. Perhaps there is ample room to ask the question, WHY? Why have so many things been occurring in opposition to the PUBLIC WELFARE?

    No matter if YOU call yourself “Dying Truth”. Hence I will call you “Living Truth”.

    =====================================

    Exhibit 99.7

    LOUISIANA MUNICIPAL POLICE EMPLOYEES RETIREMENT SYSTEM

    PARTNERS OF COUNSEL ASSOCIATES
    Charles C. Foti, Jr., LA Neil Rothstein, PA
    Paul S. Balanon, LA, MD, & D.C
    Lewis S. Kahn, IA Sarah Catherine Boone, CA & MT
    Kim E. Miller, NY & CA Melissa Ryan Clark, NY
    Albert M. Myers, NY & GA
    Michael A. McGuane, NY
    Kevin L. Oufnac, LA & SC
    Geoffrey Rodriquez, LA
    Michael A. Swick

    VOLKER LOUISIANA ATTORNEY GENERAL,
    2006-2009

    April 23, 2010
    By Overnight Mail and By Fax (w/o Exhibit)
    Lloyd C. Blankfein
    Chairman of the Board of Directors
    The Goldman Sachs Group, Inc.

    c/o David H. Braff, Esq.
    Sullivan & Cromwell LLP
    125 Broad Street
    New York, NY 10004

    RE: SHAREHOLDER DEMAND CONCERNING AUCTION-RATE SECURITIES, SEC FRAUD CHARGES, AND “BONUS” PAYMENTS

    Dear Mr. Blankfein:

    This firm represents the LOUISIANA MUNICIPAL POLICE EMPLOYEES RETIREMENT SYSTEM(“MPERS”), an
    institutional shareholder of The Goldman Sachs Group, Inc. (“Goldman Sachs” or the “Company”). MPERS RELIES ON ITS HOLDINGS OF SHARES OF GOLDMAN SACHS and other companies TO PROVIDE RETIREMENT AND OTHER BENEFITS TO THOUSANDS OF *** MUNICIPAL POLICE PERSONNEL *** throughout the state of Louisiana.

    We write on behalf of MPERS concerning the demand we made to Goldman Sachs’s Board of Directors on September 2, 2009 to
    take action to remedy breaches of fiduciary duties and other misconduct committed by certain officers and directors of the Company.

    The Board having failed to respond in any manner to the prior demand, we now renew that demand and, in addition to the breaches
    of fiduciary duty specified therein, we write to further demand that the Board take action to remedy the additional breaches of fiduciary duties and other misconduct by certain other officers and directors of the Company that have become public since the date of
    our original demand letter.

    This later misconduct relates to charges by the United States Securities and Exchange Commission (“SEC”) of fraud in the structuring and marketing of a synthetic collateralized debt obligation (“CDO”) known as ABACUS 2007-AC1 in 2007, as well as from the payment of “bonuses” to Goldman Sachs executives in 2009 and recent revelations regarding the Company’s policies as to disclosure of the receipt of highly material Securities and Exchange Commission Wells” notices—or the lack thereof.

    All of these episodes are discussed at length below.

    8 EX-99.7 http://www.sec.gov/Archives/edgar/data/886982/000095012310042391/y84170exv99w7.htm 68446

  16. your attorney could make use of any of the following, but just in case… I recently got this from “Taxcore:”
    For those that may have wondered how a loan works in a fiat currency debt based banking system here it is. Here’s how a “bank loan” really works.
    Interviews with bankers about a foreclosure. The banker was placed on the witness stand and sworn in. The plaintiff’s (borrower’s) attorney asked the banker the routine questions concerning the banker’s education and background.
    The attorney asked the banker, “What is court exhibit A?”
    The banker responded by saying, “This is a promissory note.”
    The attorney then asked, “Is there an agreement between Mr. Smith (borrower) and the defendant?”
    The banker said, “Yes.”
    The attorney asked, “Do you believe the agreement includes a lender and a borrower?”
    The banker responded by saying, “Yes, I am the lender and Mr. Smith is the borrower.”
    The attorney asked, “What do you believe the agreement is?”
    The banker quickly responded, saying, ” We have the borrower sign the note and we give the borrower a check.”
    The attorney asked, “Does this agreement show the words borrower, lender, loan, interest, credit, or money within the agreement?”
    The banker responded by saying, “Sure it does.”
    The attorney asked, `”According to your knowledge, who was to loan what to whom according to the written agreement?”
    The banker responded by saying, “The lender loaned the borrower a $50,000 check. The borrower got the money and the house and has not repaid the money.”
    The attorney noted that the banker never said that the bank received the promissory note as a loan from the borrower to the bank. He asked, “Do you believe an ordinary person can use ordinary terms and understand this written agreement?”
    The banker said, “Yes.”
    The attorney asked, “Do you believe you or your company legally own the promissory note and have the right to enforce payment from the borrower?”
    The banker said, “Absolutely we own it and legally have the right to collect the money.”
    The attorney asked, “Does the $50,000 note have actual cash value of $50,000? Actual cash value means the promissory note can be sold for $50,000 cash in the ordinary course of business.”
    The banker said, “Yes.”
    The attorney asked, “According to your understanding of the alleged agreement, how much actual cash value must the bank loan to the borrower in order for the bank to legally fulfill the agreement and legally own the promissory note?”
    The banker said, “$50,000.”
    The attorney asked, “According to your belief, if the borrower signs the promissory note and the bank refuses to loan the borrower $50,000 actual cash value, would the bank or borrower own the promissory note?”
    The banker said, “The borrower would own it if the bank did not loan the money. The bank gave the borrower a check and that is how the borrower financed the purchase of the house.”
    The attorney asked, “Do you believe that the borrower agreed to provide the bank with $50,000 of actual cash value which was used to fund the $50,000 bank loan check back to the same borrower, and then agreed to pay the bank back $50,000 plus interest?”
    The banker said, “No. If the borrower provided the $50,000 to fund the check, there was no money loaned by the bank so the bank could not charge interest on money it never loaned.”
    The attorney asked, “If this happened, in your opinion would the bank legally own the promissory note and be able to force Mr. Smith to pay the bank interest and principal payments?”
    The banker said, “I am not a lawyer so I cannot answer legal questions.”
    The attorney asked, ” Is it bank policy that when a borrower receives a $50,000 bank loan, the bank receives $50,000 actual cash value from the borrower, that this gives value to a $50,000 bank loan check, and this check is returned to the borrower as a bank loan which the borrower must repay?”
    The banker said, “I do not know the bookkeeping entries.”
    The attorney said, “I am asking you if this is the policy.”
    The banker responded, “I do not recall.”
    The attorney again asked, “Do you believe the agreement between Mr. Smith and the bank is that Mr. Smith provides the bank with actual cash value of $50,000 which is used to fund a $50,000 bank loan check back to himself which he is then required to repay plus interest back to the same bank?”
    The banker said, ” I am not a lawyer.”
    The attorney said, “Did you not say earlier that an ordinary person can use ordinary terms and understand this written agreement?”
    The banker said, “Yes.”
    The attorney handed the bank loan agreement marked “Exhibit B” to the banker. He said, “Is there anything in this agreement showing the borrower had knowledge or showing where the borrower gave the bank authorization or permission for the bank to receive $50,000 actual cash value from him and to use this to fund the $50,000 bank loan check which obligates him to give the bank back $50,000 plus interest?”
    The banker said, “No.”
    The lawyer asked, “If the borrower provided the bank with actual cash value of $50,000 which the bank used to fund the $50,000 check and returned the check back to the alleged borrower as a bank loan check, in your opinion, did the bank loan $50,000 to the borrower?”
    The banker said, “No.”
    The attorney asked, “If a bank customer provides actual cash value of $50,000 to the bank and the bank returns $50,000 actual cash value back to the same customer, is this a swap or exchange of $50,000 for $50,000.”
    The banker replied, “Yes.”
    The attorney asked, “Did the agreement call for an exchange of $50,000 swapped for $50,000, or did it call for a $50,000 loan?”
    The banker said, “A $50,000 loan.”
    The attorney asked, “Is the bank to follow the Federal Reserve Bank policies and procedures when banks grant loans.”
    The banker said, “Yes.”
    The attorney asked, “What are the standard bank bookkeeping entries for granting loans according to the Federal Reserve Bank policies and procedures?” The attorney handed the banker FED publication Modern Money Mechanics, marked “Exhibit C”.
    The banker said, “The promissory note is recorded as a bank asset and a new matching deposit (liability) is created. Then we issue a check from the new deposit back to the borrower.”
    The attorney asked, “Is this not a swap or exchange of $50,000 for $50,000?”
    The banker said, “This is the standard way to do it.”
    The attorney said, “Answer the question. Is it a swap or exchange of $50,000 actual cash value for $50,000 actual cash value? If the note funded the check, must they not both have equal value?”
    The banker then pleaded the Fifth Amendment.
    The attorney asked, “If the bank’s deposits (liabilities) increase, do the bank’s assets increase by an asset that has actual cash value?”
    The banker said, “Yes.”
    The attorney asked, “Is there any exception?”
    The banker said, “Not that I know of.”
    The attorney asked, “If the bank records a new deposit and records an asset on the bank’s books having actual cash value, would the actual cash value always come from a customer of the bank or an investor or a lender to the bank?”
    The banker thought for a moment and said, “Yes.”
    The attorney asked, “Is it the bank policy to record the promissory note as a bank asset offset by a new liability?”
    The banker said, “Yes.”
    The attorney said, “Does the promissory note have actual cash value equal to the amount of the bank loan check?”
    The banker said “Yes.”
    The attorney asked, “Does this bookkeeping entry prove that the borrower provided actual cash value to fund the bank loan check?”
    The banker said, “Yes, the bank president told us to do it this way.”
    The attorney asked, “How much actual cash value did the bank loan to obtain the promissory note?”
    The banker said, “Nothing.”
    The attorney asked, “How much actual cash value did the bank receive from the borrower?”
    The banker said, “$50,000.”
    The attorney said, “Is it true you received $50,000 actual cash value from the borrower, plus monthly payments and then you foreclosed and never invested one cent of legal tender or other depositors’ money to obtain the promissory note in the first place? Is it true that the borrower financed the whole transaction?”
    The banker said, “Yes.”
    The attorney asked, “Are you telling me the borrower agreed to give the bank $50,000 actual cash value for free and that the banker returned the actual cash value back to the same person as a bank loan?”
    The banker said, “I was not there when the borrower agreed to the loan.”
    The attorney asked, “Do the standard FED publications show the bank receives actual cash value from the borrower for free and that the bank returns it back to the borrower as a bank loan?”
    The banker said, “Yes.”
    The attorney said, “Do you believe the bank does this without the borrower’s knowledge or written permission or authorization?”
    The banker said, “No.”
    The attorney asked, “To the best of your knowledge, is there written permission or authorization for the bank to transfer $50,000 of actual cash value from the borrower to the bank and for the bank to keep it for free?
    The banker said, “No.”
    Does this allow the bank to use this $50,000 actual cash value to fund the $50,000 bank loan check back to the same borrower, forcing the borrower to pay the bank $50,000 plus interest? ”
    The banker said, “Yes.”
    The attorney said, “If the bank transferred $50,000 actual cash value from the borrower to the bank, in this part of the transaction, did the bank loan anything of value to the borrower?”
    The banker said, “No.” He knew that one must first deposit something having actual cash value (cash, check, or promissory note) to fund a check.
    The attorney asked, “Is it the bank policy to first transfer the actual cash value from the alleged borrower to the lender for the amount of the alleged loan?”
    The banker said, “Yes.”
    The attorney asked, “Does the bank pay IRS tax on the actual cash value transferred from the alleged borrower to the bank?”
    The banker answered, “No, because the actual cash value transferred shows up like a loan from the borrower to the bank, or a deposit which is the same thing, so it is not taxable.”
    The attorney asked, “If a loan is forgiven, is it taxable?”
    The banker agreed by saying, “Yes.”
    The attorney asked, “Is it the bank policy to not return the actual cash value that they received from the alleged borrower unless it is returned as a loan from the bank to the alleged borrower?”
    “Yes”, the banker replied.
    The attorney said, “You never pay taxes on the actual cash value you receive from the alleged borrower and keep as the bank’s property?”
    “No. No tax is paid.”, said the crying banker.
    The attorney asked, “When the lender receives the actual cash value from the alleged borrower, does the bank claim that it then owns it and that it is the property of the lender, without the bank loaning or risking one cent of legal tender or other depositors’ money?”
    The banker said, “Yes.”
    The attorney asked, “Are you telling me the bank policy is that the bank owns the promissory note (actual cash value) without loaning one cent of other depositors’ money or legal tender, that the alleged borrower is the one who provided the funds deposited to fund the bank loan check, and that the bank gets funds from the alleged borrower for free? Is the money then returned back to the same person as a loan which the alleged borrower repays when the bank never gave up any money to obtain the promissory note? Am I hearing this right? I give you the equivalent of $50,000, you return the funds back to me, and I have to repay you $50,000 plus interest? Do you think I am stupid?”
    In a shaking voice the banker cried, saying, “All the banks are doing this. Congress allows this.”
    The attorney quickly responded, “Does Congress allow the banks to breach written agreements, use false and misleading advertising, act without written permission, authorization, and without the alleged borrower’s knowledge to transfer actual cash value from the alleged borrower to the bank and then return it back as a loan?”
    The banker said, “But the borrower got a check and the house.”
    The attorney said, “Is it true that the actual cash value that was used to fund the bank loan check came directly from the borrower and that the bank received the funds from the alleged borrower for free?”
    “It is true”, said the banker.
    The attorney asked, “Is it the bank’s policy to transfer actual cash value from the alleged borrower to the bank and then to keep the funds as the bank’s property, which they loan out as bank loans?”
    The banker, showing tears of regret that he had been caught, confessed, “Yes.”
    The attorney asked, “Was it the bank’s intent to receive actual cash value from the borrower and return the value of the funds back to the borrower as a loan?”
    The banker said, “Yes.” He knew he had to say yes because of the bank policy.
    The attorney asked, “Do you believe that it was the borrower’s intent to fund his own bank loan check?”
    The banker answered, “I was not there at the time and I cannot know what went through the borrower’s mind.”
    The attorney asked, “If a lender loaned a borrower $10,000 and the borrower refused to repay the money, do you believe the lender is damaged?”
    The banker thought. If he said no, it would imply that the borrower does not have to repay. If he said yes, it would imply that the borrower is damaged for the loan to the bank of which the bank never repaid. The banker answered, “If a loan is not repaid, the lender is damaged.”
    The attorney asked, “Is it the bank policy to take actual cash value from the borrower, use it to fund the bank loan check, and never return the actual cash value to the borrower?”
    The banker said, “The bank returns the funds.”
    The attorney asked, “Was the actual cash value the bank received from the alleged borrower returned as a return of the money the bank took or was it returned as a bank loan to the borrower?”
    The banker said, “As a loan.”
    The attorney asked, “How did the bank get the borrower’s money for free?”
    The banker said, “That is how it works.”
    GOOD LUCK!

  17. Hi Nye, tried to Google C. W. GROOVER v. Erick PETERS and nor able to find it. To you have a link to read about the case ?

  18. Neil, every time I’ve broached this topic with attorneys – they shake their head and simply point to the different sections of the Mortgage which are initialed by the borrowers and it repeatedly states…

    Mortgage Insurance reimburses the Lender (or any entity that purchases the Note) for certain losses it may incur if the Borrower does not repay the Loan as agreed. Borrower is not a party to the Mortgage Insurance.
    (a) Any such agreements will not affect the amounts that Borrower has agreed to pay for Mortgage Insurance, or any other terms of the Loan. Such agreements will not increase the amount Borrower will owe for Mortgage Insurance, and they will not entitle Borrower to any refund.

    We have proven the pretender lender did not have a valid assignments. It stalled the process for a month but the judge essentially didn’t care. We proved that the assignments were never recorded which is clearly stated within our state laws of recordation… The assignment MUST be recorded… We even pointed out the attempted to foreclose PRIOR to the assignments and not having a docket number referenced anywhere on the documentation. The judge was getting irritated about this stuff because they look at the bottom line – did we sign – are we paying…

    I agree with you but thus far judge’s simply get ticked… We finally, busted the foreclosure mill for using FORGED signatures on the assignments submitted to the state & courts – PLUS – he used a FORGED NOTARY – he withdrew the lawsuit. However, the judge has YET to file sanctions. We busted him for Fraud on the Court – and I believe you are familiar with our case… It ticked me that my attorney did not countersue and file are lawsuit right-THEN… but he didn’t and he allowed the damn foreclosure mill to withdraw – and the judge dismissed the case without prejudice. So, last week this boneheaded foreclosure mill is coming back again – refilled foreclosure against us.

    This is a huge foreclosure mill – I have the documents proving the Fraud on the Court – thus far they have not changed anything within the assignments but I know this guy isn’t dumb – he is arrogant but he isn’t dumb. What should I be looking for… I have everything related to the Trust – Trustee – MBS – PSA – and I have documents from the loan trust that even have our “specific” loan account number…

    There is so much fraud in our case it would make Lehman proud…? What laws can I use to put this rabid dog foreclosure mill in the dumpster permanently?

  19. The Real Sad Truth about who the current Real creditors are, is that they are Public Service Employee Pension Funds for City, County, State and Federal Workers that got Pooled with the MBSs and CDOs which is why lots of judges don’t like us because all they can see right now is the high yield rate of return on their Roth IRAs. What’s even worse for CA is Goldman Securitized a bunch of State Bonds, sold them and now they’re betting that they’ll fail. They’re trying to bankrupt the Golden State into the Goldman State.

  20. Question for any and all: on my investment property I have non-existent notary notarizing, on the MERS transfer there are only 17 numbers instead of 18, the address of the trust is a 2nd location for the servicer, plus a corrective assignment of mortgage dated 11 days after “lender” went ch11, plus everyone signing on assigments works at servicer’s location. My question is: what could a judge possibly say to this collection of mistruths here in Pa., a judicial state? Does the bogus notarization void the whole action? Thanks.

  21. The PRESUMPTIONS of CORRECTNESS and REGULARITY that the law provides for and that the courts quietly adhere to, to the benefit of the non-bank agents’ foreclosure action — must be effectively REBUTTED.

    Stated another way by Mr. Garfied, move the court into the position to “assume that everything is untrue” by providing proof and citations as to the factual “questions about the authenticity” of (anything and everything), and argue why “the burden of proof MUST shift immediately to the pretender lender to show that in a judicial proceeding they can establish a prima facie case to enforce the obligation, the note and the mortgage (deed of trust).”

    Then, onward to discovery by way of relief from the court for the information and data that has been intentionally withheld.

    Nye Lavalle:
    “…the borrower must be as careful in repaying the debt as the lender PRESUMPTIVELY was in making the loan.”

    Again, do “assume that everything is untrue” and do not allow the court to silently operate on the presumption that the opposition is acting with correctness and regularity.

  22. MY atty had this response when I shared this poste with him:

    “It is a very interesting argument, and one that April Charney beats like a drum every day. The real trick is getting the judges in our state to take a listen to it.

    The problem is that the judges are really stuck on the idea of UCC negotiable instrument laws relative to being an owner and holder in due course. In sum, the position is “I really don’t care about the PSA, the Trust, or the certificate holders in the Trust, all I care about is that this Plaintiff has the original note, and per the Florida UCC they are entitled to enforce it.” That is the real problem that we are running into.”

    Any ideas for us on this obstacle?

  23. Thank You!

  24. Neil is 10000% right!!!!! Every note I have read speaks of the NOTE HOLDER (after prior lender) who has the right to NOTICE, transfer, allow assumptions, modifications etc… NOWHERE do I see that there is ANY privity of contract with the servicer and nowhere do they provide or give you their authority or proof of agency relationship. AND, if an agency relationship, they must still JOIN the real LENDER/NOTE HOLDER as a real and indispensable party.

    Also, when is the default? If my parking meter is running out and some interloper (nice servicer) comes and puts money in my meter without my asking, I don’t get a ticket so meter NEVER EXPIRED. If money was paid to the real lender on YOUR account, are you in default to your real lender? Can the interloper who placed a quarter in the meter for me now claim an obligation from me? What agreement or contract do I have to give them any rights. They are the SERVICER, not my NOTE HOLDER as defined in the NOTE.

    In any event, recently, we found a GA Supreme Ct. Decision I am sharing with you that MANDATES THAT IT IS THE BORROWER’S OBLIGATION AND DUTY BEFORE PAYING OFF HIS NOTE (refi too) to INSURE WHO THE REAL LENDER AND HOLDER IN DUE COURSE IS OR ELSE HE IS SOL IF HE PAYS THE WRONG PARTY AND ANOTHER COMES FORWARD FOR PAYMENT!!! See below…

    Such requirements were made in C. W. GROOVER v. Erick PETERS, No. 28379, Supreme Court of Georgia when on Nov. 29, 1973 the Court ruled:

    “The maker of a negotiable note and security deed must determine at the time of payment whether the payee is the holder of the instrument or the authorized agent of the holder in order to protect himself against liability for double payment. If the original grantee has assigned the instrument to another, who is a holder in due course, the burden rests with the maker to determine same and pay only the holder or his authorized agent. See Wilcox, Gibbs & Company v. Aultman, 64 Ga. 544; Walton Guano Company v. McCall, 111 Ga. 114, 36 S.E. 469; Bank Of The University v. Tuck, 96 Ga. 456, 465, 23 S.E. 467. There is no evidence in the record which even indicates that Norwood was the agent of the appellant. The long and short of the matter is that the borrower must be as careful in repaying the debt as the lender presumptively was in making the loan.” [emphasis added]

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