Re-Orienting the Parties to Clarify Who is the Real Plaintiff

The procedural motion missed by most lawyers is re-orienting the parties. Just because you are initially the plaintiff doesn’t mean you should stay that way. Once it is determined that the party seeking affirmative relief is seeking to sell your personal residence and that all you are doing is defending, they must become the plaintiff and file a lawsuit against you which you have an opportunity to defend. A Judge who refuses to see that procedural point is in my opinion committing clear reversible error.

If the would-be forecloser could not establish standing and/or could not prove their case in a judicial foreclosure action, there is no doubt in my mind that the ELECTION to use the power of sale is UNAVAILABLE to them. They must show the court that they have a prima face case and the homeowners must present a defense. But that can only be done if the parties are allowed to conduct discovery. Otherwise the proceedings are a sham, and the Judge is committing error by giving the would-be forecloser the benefit of the doubt (which means that the Judge is creating an improper presumption at law).

If the Judge says otherwise, then he/she is putting the burden on the homeowner. But the result is the same. Any contest by the would-be forecloser should be considered under the same rules as a motion to dismiss, which means that all allegations made by the homeowner are taken as true for purposes of the preliminary motions.

Some people have experienced the victory of a default final judgment for quiet title only to have it reversed on some technical grounds. While this certainly isn’t the best case scenario, don’t let the fight go out of you and don’t let your lawyer talk you into accepting defeat. Reversal of the default doesn’t mean anyone won or lost. It just means that instead of getting the ultimate victory by default, you are going to fight for it. The cards are even more stacked in your favor with the court decisions reported over the last 6 months and especially over the last two weeks. See recent blog entries and articles.

All that has happened is that instead of a default you will fight the fight. People don’t think you can get the house for free. Their thinking is based upon the fact that there IS an obligation that WAS created.

The question now is whether the Judge will act properly and require THEM to have the burden of proof to plead and prove a case in foreclosure. THEY are the party seeking affirmative relief so they should have the burden of pleading and proving a case. Your case is a simple denial of default, denial of their right to foreclose and a counterclaim with several counts for damages and of course a count for Quiet Title. As a guideline I offer the following which your lawyer can use as he/she sees fit.

The fact that you brought the claim doesn’t mean you have to plead and prove their case. Your case is simple: they did a fraudulent and wrongful foreclosure because you told them you denied the claim and their right to pursue it. That means they should have proceeded judicially which of course they don’t want to do because they can’t make allegations they know are not true (the note is NOT payable to them, the recorded documentation prior to sale doesn’t show them as the creditor etc.).

I don’t remember if MERS was involved in your deal but if it was the law is getting pretty well settled that MERS possesses nothing, is just a straw man for an undisclosed creditor (table funded predatory loan under TILA) and therefore can neither assign nor make any claim against the obligation, note or mortgage.

Things are getting much better. Follow the blog — in the last two weeks alone there have been decisions, some from appellate courts, that run in your favor. There is even one from California. So if they want to plead a case now in foreclosure they must first show that they actually contacted you and tried to work it out. Your answer is the same as before. I assume you sent a qualified written request. Under the NC appellate decision it is pretty obvious that you do have a right of action for enforcement of RESPA. They can’t just say ANYONE contacted you they must show the creditor contacted you directly or through an authorized representative which means they must produce ALL the documentation showing the transfers of the note, the PSA the assignment and assumption agreement etc.

They can’t produce an assignment dated after the cutoff date in the PSA. They can’t produce an assignment for a non-performing loan. Both are barred by the PSA. So there may have been an OFFER of assignment  but there was no authority to accept it and no reasonable person would do so knowing the loan was already in default. And they must show that the loan either was or was not replaced by cash or a substitute loan in the pool, with your loan reverting back to the original assignor. Your loan probably is vested in the original assignor who was the loan aggregator. If it’s in the pool it is owned by the investors, collectively. There is no trust nor any assets in the trust since the ownership of the loans were actually conveyed when the investors bought the mortgage backed securities. They don’t want you going near the investors because when you compare notes, the investors are going to realize that the investment banker did not invest all the money that the investor gave the investment banker — they kept about a third of it for themselves which is ANOTHER undisclosed yield spread premium entitling you to damages, interest and probably treble damages.

The point of all this is that it is an undeniable duty for you to receive disclosure of the identity of the creditor, proof thereof, and a full accounting for all receipts and disbursements by the creditor and not just by the servicer who does not track third party payments through insurance, credit default swaps and other credit enhancements. It’s in federal and state statutes, federal regulations, state regulations and common law.

The question is not just what YOU paid but what ANYONE paid on your account. And even if those payments were fraudulently received and kept by the investment banker and even if the loan never made it through proper assignment, indorsement, and delivery, those payments still should have been allocated to your account, according to your note first to any past due payments (i.e., no default automatically, then to fees and then to the borrower). That is a simple breach of contract action under the terms of the note.

Again they don’t want to let you near those issues in discovery or otherwise because the fraud of the intermediaries would be instantly exposed. So while you have no automatic right to getting your house free and clear, that is often the result because they would rather lose the case than let you have the information required to prove or disprove their case in foreclosure. The bottom line is that you don’t want to let them or have the judge let them (Take an immediate interlocutory appeal if necessary) use the power of sale which is already frowned upon by the courts and use it as an end run around the requirements of due process, to wit: if you think you have a claim you must plead and prove it and give the opposition an opportunity to defend.

The procedural motion missed by most lawyers is re-orienting the parties. Just because you are initially the plaintiff doesn’t mean you should stay that way. Once it is determined that the party seeking affirmative relief is seeking to sell your personal residence and that all you are doing is defending, they must become the plaintiff and file a lawsuit against you which you have an opportunity to defend. A Judge who refuses to see that procedural point is in my opinion committing clear reversible error.

The worst case scenario if everything is done PROPERLY is that you get the full accounting, you are not in default (unless there really were no third party payments which is extremely unlikely) and they must negotiate new terms based upon all the money that is owed back to you, which might just exceed the current principal due on the loan — especially once you get rid of the fabricated fees and costs they attach to the account (see Countrywide settlement with FTC on the blog).

13 Responses

  1. […] This post was mentioned on Twitter by Teri Sherwood, Teri Sherwood. Teri Sherwood said: Re-Orienting the Parties to Clarify Who is the Real Plaintiff: #Law […]

  2. Specifics please! I’m about to file suit in Georgia to stop a foreclosure attempt by U.S Bank as trustee for the Certificate Holders of Banc of America Funding 2007-6 Trust. Is there something I can put in the (Federal) Complaint that can re-orient the parties? What motion and when?

  3. Sorry….. It’s just so ridiculously unbelievable to me some days god help us I wish the government could help but forget that.

  4. Gregory. You get the bank to lie their heads off in bankruptcy court first

  5. Dear Neil,

    I’m new to your website & want to thank you so much for what I’ve learned already. I’ll soon be ordering your Securitization Research, & feel a lot of relief to have someone in my corner.

    The reorientation of the parties in a non-judicial state such as mine (Calif.) would seem to be a hugely important strategy.

    Would you please elaborate on this as to how it might be accomplished in non-judicial states?

    With gratitude,
    Debbie Lou, San Jose

  6. HSBC Bank as Trustee for WFHE Trust 05-2 foreclosed on me pursuant to a PSA dated Sept of 05. SEC info shows ownership of this trust by Wells Fargo Asset Securities Corp 1996 Trust. This trust is now governed by a PSA Dated 6/4/08. PSA also shows Lehman Brothers as Securities Underwriter. CDSs show in Maiden Lane 1 (TARP).

    Would this not be grounds for the judge to reverse the summary judgment since:
    1) Loan Pools are governed by a different PSA now in effect.
    2) Wells Fargo Asset Securities Corp is the beneficiary and holder in due course (subject to the counterclaims of borrower)
    3) Since Lehman is in US Bankruptcy court, Lehman’s creditors (TARP) would also be a real party in interest.
    4) Plaintiffs’ counsel is committing a Sarbannes Oxley violations by misrepresenting the securities’ ownership in court.

    Any opinions? Mr. Van Eck? Neil?

  7. I don’t know if Neil is intentionally vague about the “motion to reorient the parties,” but in non-judicial states the first “motion” actually comes from the banks. Homeowner files suit and the bank files a motion to dismiss, which the homeowner must defeat. This, from what I’ve seen, people have been unable to do, mostly because of lack of clear understanding of the burden of proof. Frankly, I don’t see how you can “reorient the parties” via an affirmative motion, but a good response to a motion to dismiss may do it. You just need to know how much weight their self-proclamations actually carry and what it takes to defeat them.

  8. PSA = Pooling service Agreement

  9. Thank you KickBoxer. I had JPM assign the loan in default to BOA. Which by the way JPM received the loan via WAMU which never had an assignment from WAMU to JPM.Just a few particlars to that need to be clarified by the plaintiff before we really get to the meat and potatoes.

  10. Quote: richard, on June 11, 2010 at 3:33 pm Said:

    “What does PSA stand for?”


    PSA is the Pooling and Servicing Agreements. The PSA lists the responsibilities and duties owed to the trust by the Master Servicer.

  11. What does PSA stand for?

  12. Can someone interpret PSA.

  13. The bomb. Blessu

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