EDITOR’S NOTE: Soliman brings out some interesting and important issues in his dialogue with Raja.

  • The gist of what he is saying about sales accounting runs to the core of how you disprove the allegations of your opposition. In a nutshell and somewhat oversimplified: If they were the lender then their balance sheet should show it. If they are not the lender then it shows up on their income statement. Now of course companies don’t report individual loans on their financial statements, so you need to force discovery and ask for the ledger entries that were made at the time of the origination of the loan.
  • If you put it another way the accounting and bookkeeping amounts to an admission of the real facts of the case. If they refuse to give you the ledger entries, then you are entitled to a presumption that they would have shown that they were not acting as a lender, holder, or holder in due course. If they show it to you, then it will either show the admission or you should inquire about who prepared the response to your discovery request and go after them on examination at deposition.
  • Once you show that they were not a lender, holder or holder in due course because their own accounting shows they simply booked the transaction as a fee for acting as a conduit, broker or finder, you have accomplished several things: one is that they have no standing, two is that they are not a real party in interest, three is that they lied at closing and all the way up the securitization chain, and four is that you focus the court’s attention on who actually advanced the money for the loan and who stands to suffer a loss, if there is one.
  • But it doesn’t end there. Your discovery net should be thrown out over the investment banking firm that underwrote the mortgage backed security, and anyone else who might have received third party insurance payments or any other payments (credit default swaps, bailout etc.) on account of the failure of the pool in which your loan is claimed to be an “asset.”
  • Remember that it is my opinion that many of these pools don’t actually have the loans that are advertised to be in there. They never completed or perfected the transfer of the obligation and the reason they didn’t was precisely because they wanted to snatch the third party payments away from the investors.
  • But those people were agents of the investors and any payment they received on account of loss through default or write-down should be credited and paid to the investor.
  • Why should you care what the investor received? Because those are payments that should have been booked by the investors as repayment of their investment. In turn, the percentage part of the pool that your loan represents should be credited proportionately by the credit and payment to the investor.
  • Those payments, according to your note should be allocated first to payments due and outstanding (which probably eliminates any default), second to fees outstanding attributable to the borrower (not the investor) and third to the borrower which normally would be done as a credit against principal, which would reduce the amount of principal outstanding and thus reduce the number of people who think they are under water and are not.



I am really loving this upon closer inspection Raja! The issues of simple accounting rules violations appear narrow, yet the example you cite here could mean A DIFFERENCE AND SWAY IN ADVANTAGE.

Many more cases can potentially address broader issues of pleading sufficiency with repsect to securities and accounting rules violations prohibiting foreclosures.

Sale accounting is the alternative to debt or financing arrangements which is what the lender seeks to avoid in this economic downturn. Both approaches to accounting are clearly described and determinable by GAAP. In sales accounting there is no foreclsure. In debt for GAAP accounting your entitled to foreclose.

Its when you mix the two you r going to have problems. Big problems.

Pleading sufficiency is (by this layperson) the need for addressing a subject matter in light of the incurable defects in proper jurisdiction. The subject can be convoluted and difficult, I realize that.

Where the matter is heard should allow ample time to amend as a plaintiff. This is given to the fact the lender can move quicklly and seek dismissal.

The question is how far must a consumer plaintiff reach to allege that serverity of the claims, based on adverse event information, as in foreclosure.

This is significant in order to establish that the lender or a lender defendants’ alleged failure to disclose information. Therein will the court find the claim to be sufficently material.

In possession hearings the civil courts have granted the plaintiffs summary judgment and in actions brought against the consumer. The courts are often times granting the defendants’ motion to dismiss, finding that these complaints fail to adequately suffice or address the judicial fundamental element of materiality.

I can tell you the accounting rules omissions from the commencement of the loan origination through a foreclosure is one continual material breach. Counsel is lost to go to court without pleading this fact.

The next question is will the pleading adequately allege the significance of the vast number of consumer homeowner complaints. One would think yes considering the lower court level is so backlogged and a t a time when budget cuts require one less day of operations.

These lower courts however are hearing post foreclosure matters of possession. there is the further possibility that the higher Court in deciding matters while failing to see any scienter. Its what my law cohorts often refer to as accountability for their actions. That is what the “Fill in the Dots” letter tells me at first glance.

I believe it’s only in a rare case or two that a securities matter is heard in the Ninth Circuit. Recently however, there the conclusion was in fact that scienter allegations raised by the opposition were sufficient based on plaintiff’s allegations that the “high level executives …would know the company was being sued in a product liability action,” and in line with the many, customer complaints (I assume that were communicated to the company’s directors…)

The FASB is where the counterproductive rule changes always seem to take place and where lobbyist and other pro life and pro bank enthusiasts seem to spend their days. No need to fret however as gain on sale accounting is specific and requires the lender to have SOLD your loan in order to securitize it as part of a larger bulk pool.

The document I am reading, submitted by Raja tells me something is very concerning to the “lender parties” that they believe is downstream and headed their way. I’ll try and analyze each line item for you as to what it says and what they really are trying to do. I think for now though its value is for determining the letter as an admission of “we screwed up!”


20 Responses

  1. Hey! It seems as though we both have a interest for the same thing.
    mine are very similar. Have you ever thought of writing a guest write-up for a related website?

    It will surely help gain publicity to your blog
    (my website recieves a lot of traffic). If you might be interested, contact me at: bernd. Many thanks


  3. MAHER SOLIMAN is a FRAUD. I can’t believe you let him post on your website. I paid this guy $5k and he provided FALSE CREDENTIALS and PHONY CASE INFO which I provided to the court to introduce him as an Expert Witness. THE JUDGE discovered he was a FRAUD and DISMISSED him from the case. We have filed complaints with DOJ and Calif Attorney General. If someone knows his location, please let us know so we can notify authorities, etc.

  4. Neil,

    I just wrote something like this to my attorney. I state that the transfer of the ‘note’ is more than a transfer or assignment, but a purchase of the note. Meaning that if one purchases the note from another, then the monies from the purchasing creditor is credited to the account of the debtor of the previous creditor zeroing out the account. This creates a performing asset for the current creditor against the debtor. This should be shown in the ‘ledgers’ of both the previous and current debtors.

    What I have noticed on my credit report is that though the servicer’s have changed, they do NOT close out the old account but change the name of the company servicing the loan. If a new creditor had purchased the loan (assigned, etc). Then why are banks not asking the credit agencies to close out the previous account and open an new one?


  5. In reference to the accounting, during Mr. Garfield’s seminar in San Diego, Ca. he mentioned he was involved in a possible class-action demanding an accounting of the surplus moneies that were paid by third partys. Can you please state the name of the case, case number, and current status? Thank you

  6. Just a layman , but, in my opinion a forensic auditing is extremely important.

    Would I be correct?

  7. @ Jim Macklin,

    May all the good and just forces be with you. I am in California too. Please keep us posted on your progress.

  8. Soliman, next week we are going to destroy these lenders in RI. If they think i am flooding the courts with lawsuits now, wait until you and I hook up as a team. Let Justice Prevail.

  9. Soliman you make me laugh. I knew just by reading the title of the post that that was you.

  10. I managed to get a copy of my income verification form that was used in my loans creation, and it shows the bank making my new loan about $10,755 more than my original, and that’s after fees and such.

    So, the question is, where did that $10,755 go? I know it didn’t come to me, i only got $2000 cash out, and that’s part of the fees.

    Who got that money, and why hell didn’t it come to me???

    Thoughts, ideas?

  11. Richard I think someone said a this, or a modified version, before Eminem!

    I wanted to just comment on the great posting.

    A good forensic Accountant is worth his weight in Gold!
    Mr Solomon do you offer your services?

    I also find that when the date is entered inaccurately there is usually something hiding. Also it is sometimes a clue to a treasure box of Accounting Revelations. I guess just tying the two in by cross referencing all your dates,every single one written down by them and you. I have made so many discoveries in this way
    Thanks for the great posting

  12. To: M. Soliman,

    I wrote to Neils’ blog over 10 months ago stating the exact facts that you are promulgating here in this recent post. I have been in litigation for over a year now and have been removed to US Dist. Court recently, at the behest of Deutsche Bank. They have brought in a securities attorney from the Bay Area to fight me on the discovery of such documentation as: FR 2046 balance sheets, Statement 95, 133, 140 FASB statements, 424 B-5 prospectus., etc… They claim that I have no statutory right to see any of these “work product” doc’s. Thus far, the judges have not been able to determine the necessity or veracity of my demands for discovery of these doc’s, however, I am now in US Dist. in Northern Calif., Eastern Dist. and have just defeated a MTD 12(b)(6). I think that the new judge actually wants to see this info because we illustrated a time line of underlying securitization mandates and we have the mortgage loan trust package in it’s entirety, i.e.; trust indenture, master sales and servicing agreements, asset trust account, master pay accounts, sub-trust accounts, loan loss insurance providers, credit default swap providers, Note insurer, etc. The thing we found very interesting is the fact that the Indenture Trustee (Deutsche), the Swap provider and the Note insurer (AMBAC) are listed in the trust indenture as “Beneficiaries” with priority over the investors and are first in line for payment from the sub-trust accounts, as well as the master pay account. This is absolute evidence of the scheme. Moreover, the spill of money that came pouring into these accounts never went to the general master pay account, rather, directly to the sub-trust accounts, which we believe are located in the Caymen Islands. The usual suspects are the recipients of this windfall. These are obvious defaults pursuant to the original Deed language wherein the flow of allocable payments are defined as to the priority of payment to the “obligation”, yet, the pillagers are directing these payments to other accounts which benefit themselves rather than being responsive to the mandates of the trust.


  13. Aaah – we are finally looking at accounting. And, that is what the TILA Amendment implies – to determine your creditor.

    M. Soliman – you are looking at things more closely – but let’s leave out the “pro-life” as part of the “pro-bank enthusiasts.” Just glad everyone is starting to look at accounting. Accounting was always the key.

    Who will account for recovery on a foreclosure? Not the same as interest income MBS security investors.

    By the way, news anchors, today, talking about foreclosure mediation in Florida and, possibly, California. Anchors said – do not expect a principal reduction in mediation – borrowers will not get it.

    Until borrowers get a significant principal reduction, mediation is worthless. We cannot continue to pay for Wall Street fraud. Stand firm – and demand ACCOUNTING in mediation. And, make sure the CREDITOR (not servicer or trustee) is PRESENT at any ordered mediation.

  14. Intrinsic fraud
    From Wikipedia, the free encyclopedia

    This article does not cite any references or sources.
    Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (September 2008)
    Intrinsic fraud is an intentionally false representation that goes to the heart of what a given lawsuit is about, in other words, whether fraud was used to procure the transaction. (If the transaction was fraudulent, it probably does not have the legal status of a contract.) Intrinsic fraud is distinguished from extrinsic fraud (a/k/a collateral fraud) which is a deceptive means of keeping a person from discovering and/or enforcing legal rights. It is possible to have either intrinsic or extrinsic frauds, or both.

    During a trial, perjury, forgery, and bribery of a witness constitute frauds that might have been relieved by the court. Such actions will usually lead to a mistrial being declared and after any penalties for the involved parties a new trial will take place on the same matter.

    Two types of intrinsic fraud in contract law are fraud in the inducement and fraud in the factum.

    Fraud in the factum is a legal defense, and occurs where A signs a contract, but either does not realize that it is a contract or does not understand the nature of the contract, because of some false information that B gave to A. For example, if John tells his mother that he is taking a college course on handwriting analysis, and for his homework, he needs her to read and sign a pretend deed. If Mom signs the deed believing what he told her, and John tries to enforce the deed, Mom can plead “fraud in the factum.”

    Fraud in the inducement is an equitable defense, and occurs when A signs a contract, knowing that it is a contract and (at least having a rough idea) what the contract is about, but the reason A signed the contract was because of some false information that B gave to A. For example, if John tells his mother to sign a deed giving him her property, Mom refuses at first, then John explains that the deed will be kept in a safe deposit box until she dies. If Mom signs the deed because of this statement from John, and John tries to enforce the deed prior to Mom’s death, Mom can plead “fraud in the inducement.”

    [edit]See also

    Extrinsic fraud
    Per minas
    This legal term article is a stub. You can help Wikipedia by expanding it.

  15. Extrinsic fraud
    From Wikipedia, the free encyclopedia
    Main article: Fraud
    Extrinsic fraud is fraud that “induces one not to present a case in court or deprives one of the opportunity to be heard [or] is not involved in the actual issues ….”[1][2] It can involve fraud on the court, but is not necessarily the same.[3]

    More broadly, it is defined as:

    fraudulent acts which keep a person from obtaining information about his/her rights to enforce a contract or getting evidence to defend against a lawsuit. This could include destroying evidence or misleading an ignorant person about the right to sue. Extrinsic fraud is distinguished from “intrinsic fraud,” which is the fraud that is the subject of a lawsuit.
    —Legal Explanations website.[4]
    Extrinsic fraud does not mean merely lying or perjury, nor misrepresentations, nor intrinsic fraud, nor “to matters that could have been raised during the divorce proceeding.”[5] It must involve “collateral … circumstances” such as:

    “bribery of a judge or juror,”
    “fabrication of evidence by an attorney,”
    “preventing another party’s witness from appearing,”
    “intentionally failing to join a necessary party,” or
    “misleading another party into thinking a continuance had been granted….”[5]
    Contents [hide]

  16. Neil, Mr. Soliman, and Raja,

    Thank you for breaking this down. I was trying to help myself and was up until 3am trying to read FASB 140, GAAP, etc. etc. etc.

    It’s the accounting that always gets them busted, just like with Al Capone!

    So now we all just need forensic accountants.

  17. to Maher : I posted on another thread, but this re-affirms my thought’s : that you should have your own ” tab ” on this blog. After re-reading your post , you have the most ” Crucial ” part of the puzzle; The GENERAL LEDGER does NOT LIE !!! This re-affirm’s my thought’s , that I need to hire you to re-construct the general ledger for my loan. Thank you Maher.

  18. Scienter, Cold, Cruel, and Calculated. First the Legal term
    “Scienter” refers to Intent or Knowledge of wrongdoing.
    This means that an offending party has Knowledge of wrongdoing of the “wrongness” of the act or event prior to committing it. For example, if a man sells his car to his friend with brakes that do not work, and he does know about the problem, then the man who has no “Scienter”.
    If he sells his car and knew of the problem before he sold the car, he has “Scienter “. the word has the same root of as science, the Latin “Scienter” (knowingly), from scire (to know, to seperate one thing for another). More on this very soon.

  19. In the modified words of Eminem,

    Could the real accounting paperwork, please stand up….

  20. Raja,
    You should prepare two packages. One for the FBI and the other for the Financial Crisis Inquiry Commission(FCIC).

    The FCIC is currently meeting and they are to have their report finalized by December. In my opinion, your findings of fraud should be shared with the FCIC so that they can better understand this from the homeowner’s perspective. They might even invite you to testify.

    Neil should also share a letter of his with the FCIC in hopes they ask him to also testify.

    This commission needs to be made aware of the fraud. Here is where you can mail your packages/letters:

    Financial Crisis Inquiry Commission
    1717 Pennsylvania Avenue, NW
    Suite 800
    Washington, D.C. 20006-4614

    The Commission Chairman is Phil Angelides.

    I really think they would appreciate your input.

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