PAYBACK TIME: $5.1 IN PUNITIVE DAMAGES AGAINST SERVICER ON A $79K CASE

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.” (Editor’s Note: Notice that the investors are referred to as lenders, hence the term “pretender lender” as to all others pretending to be lenders.)

“The investors also said that when borrowers tried to pay off or otherwise resolve defaulted loans, Compass/Silar refused to negotiate. In other cases when Compass/Silar urged the investors to modify troubled mortgages, the servicer reaped undisclosed fees in the deals.

The jury affirmed every claim the plaintiffs had brought against Compass/Silar, including conspiracy, as well as breach of contract, of fiduciary duty, and of good faith and fair dealing. The jury found improper actions by Compass/Silar on eight loans.”

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EDITOR’S ANALYSIS: For those slow learners out there practicing law, this might get your attention. The compensatory damages were $79,000. Punitive damages: $5,100,000. If the lawyers were on contingency, they just made over $2 million.

Besides the obvious importance of this case for investors and what is about to happen, you’ll notice that all the things we have been saying about the borrowers were alleged and proven against the servicer with respect to the investors. Thus you can understand why I have been saying that the interests of the investors and the interests of the borrowers are very similar and the factual basis of their claims are the same. The jury said GUILTY on breach of contract, of fiduciary duty, and of good faith and fair dealing. Sound familiar?

Borrowers take hope. The investors are doing some of your work for you. So is the SEC now and the attorney generals of all 50 states. But you have to take a stand if you want to play in this high stakes game. You can’t just wait for lightening to strike. Nobody is going to come knocking on the door handing you the deed to a home you thought you already lost and moved out of or satisfaction of mortgage or a check. It’s time for ALL homeowners who EVER had a loan (especially if originated after 1999) to go back to their paperwork and have it examined for potential claims. There’s probably gold in those mounds of paper.

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Opening the Bag of Mortgage Tricks

By GRETCHEN MORGENSON

ALL the revelations this year about dubious practices in the mortgage servicing arena — think robo-signers and forged signatures — have rightly raised borrowers’ fears that companies handling their loans may not be operating on the up and up.

But borrowers aren’t the only ones concerned about potential mischief. Investors who hold mortgage securities are increasingly worried that servicers may be putting their interests ahead of those who own the loans.

A servicer might, for example, deny a loan modification to a borrower because it also owns a second mortgage on the same property and doesn’t want to write down that asset, as required in a modification. Levying outsize default fees is another tactic — the fees typically go to the servicer, not the lender, but they can still propel a property into foreclosure more quickly. And foreclosures aren’t a good outcome for investors.

Last week, a jury in federal district court in Reno, Nev., awarded a group of 50 mortgage investors $5.1 million in punitive damages against defendants in a loan servicing case. Although the numbers in the case aren’t large, its facts are fascinating. Indeed, the case exposed some of the tricks of the servicers’ trade.

The case is also notable because the main defendant, Silar Advisors, was one of the institutions that struck a deal in 2009 with the Federal Deposit Insurance Corporation to buy the assets of a notorious failed bank, IndyMac. Of the $5.1 million in damages awarded in the case, Silar must pay $3 million.

John W. Bickel II, a co-founder of Bickel & Brewer in Dallas, represented the investors in the case. Because he represents an additional 1,450 investors whose loans were serviced by Silar, he said more suits like this one would follow soon.

Loan servicers act as intermediaries between borrowers and their lenders, collecting monthly payments and real estate taxes and forwarding them to the appropriate parties. As long as borrowers meet their payments, such operations typically run smoothly.

Defaults and foreclosures, however, complicate servicers’ duties. As the Silar matter shows, borrower difficulties also open the door to improprieties.

Because loan servicers operate behind the scenes, it’s hard for investors who own these mortgages to monitor fee-gouging. In addition, the servicing contracts make it difficult to fire administrators — under a typical arrangement, investors holding at least 51 percent of the loans must agree on termination.

In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.

Troubles for investors in the Silar matter began back in 2006 when the USA Commercial Mortgage Company went bankrupt. Founded in 1989, the company had underwritten and serviced short-term commercial real estate loans. It sold them to private investors, typically older people who hoped to live off the income generated by the loans. At the time of its bankruptcy, USA Commercial serviced 115 loans worth almost $1 billion.

After the company collapsed, a small firm called Compass Partners bought the servicing rights to these assets for $8 million. A short time later, Silar Advisors, a company overseen by Robert Leeds, a former Goldman Sachs executive, got involved by financing Compass. Compass/Silar began servicing the loans for the investors.

Almost immediately, the plaintiffs in the suit contended, Compass/Silar started siphoning off money owed to investors holding the loans. Among the servicer’s tactics, the plaintiffs said, were improperly charging default interest, late fees and loan origination fees that reduced amounts due to investors.

The investors also said that when borrowers tried to pay off or otherwise resolve defaulted loans, Compass/Silar refused to negotiate. In other cases when Compass/Silar urged the investors to modify troubled mortgages, the servicer reaped undisclosed fees in the deals.

THE jury affirmed every claim the plaintiffs had brought against Compass/Silar, including conspiracy, as well as breach of contract, of fiduciary duty, and of good faith and fair dealing. The jury found improper actions by Compass/Silar on eight loans.

A Silar spokesman said the firm was pleased that the jury awarded only $79,000 in compensatory damages to the plaintiffs but was disappointed by the punitive-damages assessment. “The jurors are to be commended for their careful consideration of the facts in a very lengthy trial,” the spokesman said. He declined to comment as to whether Silar was currently servicing any loans.

One loan history, on a defaulted asset known as Standard Property, indicates what these investors were up against with their servicer.

In March 2007, immediately after Compass/Silar took over administration of the investors’ loans, the Standard Property mortgage had a principal value of $9.64 million. The borrower wanted to repay the loan at that time, but instead of directing it to pay principal and the accrued interest to the holder of the loan, as required by the servicing agreement, Compass/Silar arranged for the borrower to refund only the principal.

At the same time, court papers show, Compass/Silar quietly took in almost $860,000 in late fees, default interest and other costs from the Standard Property borrower. This ran afoul of the servicing agreement governing the Standard Property mortgage. The agreement stated that such fees could go to the servicer only after investors had been paid principal and accrued interest on a loan.

“No one really knows what is in the black box known as loan servicing, and most investors don’t even think of their servicer taking advantage of them,” Mr. Bickel said in an interview. “There’s not a lot of transparency, and I think this case is going to bring to the forefront the potential for abuse.”

It is obvious that we are in the litigation stage of the financial debacle of 2008. That usually means shining the light on dark corners and watching what scurries away. The view may not be pretty, but at least in this case, investors got some recompense in addition to an education.

42 Responses

  1. do not use Patrick Pulatie of LFI Analytics to review the mess the bank made of your loan people!! He is a troll on here to get clients and do not buy into his so called professionalism. His work is beyond pathetic.
    Oh and when you realize it and call him on it he tells you that you are racist…the guy is a major loser.

  2. Here’s one for you. There is a gentleman in Michigan that has been taken through hell and back again. He purchased his home in 1998 2 months after marrying what he thought was to be an honest and true spouse, knowing his disability not able to comprehend what he read, and believing what his spouse say’s because she had the degrees in business, criminal justice and thus fore, buys their home, after 1 year wife tells him they have to refinance, because their interest rates were going to increase, so he does, and then after 3 years into the marriage, him working 3 jobs, trusting his wife to handle all the business, she tells him she’s filing bankruptcy chapter 13 and they will be taking money from his paycheck, because that was part of the process, him not understanding what a bankruptcy is, never signing any documents, allows money to come from his pay for 2.5 years. Wife passes away in Oct. 2008, in Dec. 2008, he receives a notice from the servicer, Carrington Mtg. which he knows nothing about, indicating he owes over $140,000 dollars on a mortgage that he only refinanced once, and the amount owed was $76,000, learns that this trusting spouse forged his name not once but 2 times refinancing their home, and the bankruptcy 13 that was filed was also forged. The Bankruptcy Atty. that performed this transaction, mysteriously destroys the file, the Atty. that was hired to represent this man, is assumed to have taken a bribe from the defendant’s Attorney’s, sells him out, and the Atty. that has taken his case is now indicating that he has filed a motion to extend discovery after all the evidence including signed documentation from a forensic handwriting expert analysis, stating that the signatures on the mortgage documents are not of those of this gentleman, but is the handwriting of the spouse. The Atty. now is talking as if this poor man has a slim chance of justice being served by deeming the note null and void, and suing for punitive damages caused by the defendant’s Flaggstar Bank where the fraudulent mortgage originally took place, not bringing suit against the servicer Carrington Mtg. for assuming liability after learning the note was fraudulent, and not providing legal documentation when requested such as (ss) and (dl), the Bankruptcy Atty. that signed an affidavit stating that the file was destroyed, and he had no information pertaining to the original signed documents on the bankruptcy. The Atty. that’s representing this poor man is asking why don’t he just file bankruptcy chapter 7 and be done with it, because if the case goes to trial, in which he should be going after justice on all parties involved especially Flaggstar Bank, The Bankruptcy Atty. for fraud, is trying to push him to the side by saying if the case goes to trial it can only go for negligent, and that the money would only be enough to clear the amount that was originally owed that this poor man befitted from, in which he did not benefit anything except betrayal, and money that was taken from him and taken advantage of. Why wouldn’t the banks be held liable, and the Attorney’s that betrayed trust, and committed fraud be held accountable and award this man a rightful settlement? Why can’t so called professionals of the law believe that a spouse can deceitfully file bankruptcy, and forge the name of his/her spouse even if they have proof that the application was sent through the mail, and another application dated for 2007 from the same bank flaggstar, but from a different location, proving she had indications of performing the same act again, which is believed to be a conspiracy in the making, but was intercepted by a heart attack on her part less than 12 months later. where is the justice, and what’s wrong with this picture? are there any attorney’s that is willing to go after justice instead of looking at the dollar of how much a person can pay to do what is fair and just? Don’t they understand that it is not always the fee they can collect upfront to prove their worth, sometimes it’s the point of going to bat for what’s right and just? Are there any Attorney’s reading this, willing to step up and do what they took an oath for? Can anyone take the challenge? cause what I am seeing here it’s all about getting money the easy way, no one want’s to roll up their sleeves, and say enough is enough! no one is above the LAW! I have gone over and beyond putting all that I have into gathering information, discoveries, documents, paying out of my pocket, putting my bills, sacrificed buying transportation for myself which is badly needed to try and help this man, and I am totally pissed off at the judicial system here in Michigan, and the Attorney Grievance Comm. has done nothing except write a letter indicating they are investigating this corrupt attorney that took this man, myself, and several others money, and has done nothing except disappear, and is still reporting on the Michigan Bar as in good standing. Can you believe this? Please help.

  3. NRS 40.451 provides an interesting aside. Most Nevada foreclosures involve an assignment from MERS. At pages 123-24 of his April 7, 2010, deposition MERS Secretary William C. Hultman admits MERS does not receive consideration for these assignments, i.e., nothing is paid. Yet, NRS 40.451, on its face (the statute has not been litigated) the amount of a deficiency judgment to the amount paid by the lienholder. Ergo, there cannot be a deficiency judgment in Nevada if MERS has purported to assign the beneficial interest. NRS 40.451 directly references NRS 40.455 — the deficiency statute. At mediation, ask the entity which shows up whether it will release the borrower from the exposure to a deficiency judgment. When “no” is the answer, ask the next question, to wit, how much was paid for the assignment. A refusal violates the general principle in favor of full disclosure (see, e.g., NRS 205.372). Note also the use of MERS violates the venerable anti-clogging doctrine and, usually, 15 U.S.C. 1641(g).

  4. John

    You are probably in business with Patrick.

  5. Patrick is totally wrong about MERS. MERS cannot be the principal and the agent of the same contract inside the same document. The people that write these agreements are supposed to know the basic principles of Agency and Contract law. Homeowners are not expected to bring with them to a closing, the local Professor from the nearest university to proofread these documents. If a document contains an incongruous or inherently contradictory term or conjoining of concepts, it is discarded. There are always provisions in the end, stating that if there are any provisions against public policy or for any other good reason, cannot be given credibility, they are to dropped from the document and it is to be construed as if they were not there. That is the answer to this argument, the homeowner signed it and so you are stuck.
    http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  6. Hey Patrick Pulatie, A lot of these people posting are rebel rouser’s but I appreciate your postings.

  7. BANK OF AMERICA ASSIGNS SAME NOTE TWICE AND GETS PAID TWICE!

    (To prevent further retribution to our family, I post this information under a pseudonym.)

    1) In 2001, I closed on a refinancing loan, with XXXX Mortgage Company “A” (“MCA”).
    2) “MCA” immediately thereafter assigned the loan to Bank of America (“BOA”).
    3) According to the “journey” of the Note as indicated in the endorsement stamps (the Note was just produced last week, yes last week) and a recorded assignment – “BOA” assigned the NOTE to Residential Funding at some point within the immediate 12 week period following the “MCA” assignment to “BOA”.
    4) At the time of the assignment “BOA” was paid by Residential Funding.
    5) Residential Funding then assigned the NOTE to Bankers Trust Company, as Trustee, also at some point within the 12 weeks immediately following the “MCA” assignment to “BOA”.
    6) Residential Funding was paid by Bankers Trust Company, as Trustee
    7) Additionally during the same 12 week time frame, “BOA” also assigned the same aforementioned NOTE to Bankers Trust Company, as Trustee.
    8) “BOA” at the time of that assignment, was also paid by Bankers Trust Company, as Trustee for the same NOTE.
    9) Four years later, “BOA” returned a payment to me as “Misapplied Funds”.
    10) I then received correspondence from Litton Loan Servicing indicating the servicing of the loan had been transferred from “BOA” to Litton Loan Servicing.
    11) Litton Loan stated they were servicing the loan for “GMAC- RFC”.
    12) I had never heard of either Litton or GMAC-RFC.
    13) Two months after “Litton Loan” becoming involved, I received notice our home was going to be foreclosed by “Deutsche Bank Trust Company Americas”.

    [Confused does not begin to state my concern as to whether our payments were being properly applied.]

    14) I was fortunate to obtain a reinstatement of loan after payment of over $28,000 to the law firm representing “Deutsche”.
    15) The attempts to obtain clarification were not successful, and the foreclosure advertisements continued.
    16) In order to protect our home, I was foreced to file a Chapter 13 “pro se”.
    17) The case came to be converted to a Chapter 7.
    18) Our family came to be evicted (despite our request to pay the first mortgage, which was denied) from our home by a real estate agent reportedly acting with the same power as vested in the Chapter 7 Trustee. The Chapter 7 Trustee sent me an email stating, “A failure to cooperate with her is the equivalent of a failure to cooperate with me.”

    Any party interested in reviewing partially redacted copies of the Note and BOA assignment showing the transfers to confirm this story or any other comments or suggestions can contact the writer at alvinessel@gmail.com.

  8. Patrick Pulatie

    Table funding is a violation of RESPA — not a bona-fide secondary market sale — and, therefore, must be disclosed to borrowers. Case law states that if the warehouse line of credit was to be used for no other reason than to sell the loans to undisclosed lender — it is a violation of the law. Read the case law.

    Thanks THE A MAN and Swarm the Banks —
    A MAN — just so we get it straight — it is PATRICK PULATIE — (not Paul) — and maybe Mr. Pulatie is afraid of investigations. Hmmmmm

  9. I was screaming and with your correction on the number of foreclosures (thank you). I am glad you brought it out to the attention of the readers of this blog.

    Paul Pulatie suffers from the Pattie Hearst syndrome. When you start siding with the kidnappers. When you start believing the kidnappers propaganda. When you become open minded to the kidnappers propaganda.

    The Banksters are parasytes they ruined the Great State of Calfornia. They blamed it on the illegal immigrants (just like the nazi’s blamed the jews and the gypsy’s) While they the banksters drained the blood out of the State of California. Once the 8th largest economy in the world. The State that brought us pride in almost every field. Entertainment Hi tech Venture Capital Aviation Defense Agricultrue etc… and the Banksters found a way to bankrupt The State of California.

    The State of California is on the verge of bankruptcy and has nothing to show for it. Nothing. The Roads are falling apart the Airports are at over capacity. The jails are a overcrowded etc……… NOthing to show for it. The schools suck etc…..

    The State of California is #1 in Foreclosures Thanks to the Banksters.

    NEVER AGAIN.

  10. Patrick. Imagine someone in traffic, and suddenly a car slams into them at 40 miles an hour. We discover that the driver is drunk.

    You come along and somehow, because you know WHY that driver got drunk, you try and explain that the reason the driver was drunk makes them less responsible and the person being hit responsible for not watching where the drunk was going.

    That’s what I’m getting from your posts. Except, your not even explaining the exact reasons the drunk got drunk, just defending the drunk.

  11. Patrick, that is part of the scam, complex money laundering schemes that the average person is supposed to understand and then bow to for the “sophistication” behind it.

    It’s just people creating fake profit off the backs of others who actually work, quit glorifying it or validating it…

    If you can briefly explain it, do so. You have a couple of super long posts below, I bet you could explain CDS and Synthetic CDO’s in less space than your prior long posts.

  12. There are around 3.5 to 4 million foreclosures a year but apparently half of those get “worked out” before the homeowner is actually evicted.

    Much more than the one million that the ALL CAPS A Man is suggesting. (A Man, ALL CAPS IS CONSIDERED SHOUTING on the internet.)

  13. THE WORLD ACCORDING TO PAUL PULATIE THE HEROIN OR COCAINE DEALER IS NOT A CRIMINAL, THE DEALER SHOULD BE GIVEN A MINOR TICKET, THE ADDICT SHOULD HAVE KNOWN BETTER AND SHOULD GO TO JAIL FOR LIFE.

    YES THE ADDICT IS ALSO TO BLAME BUT HE/SHE WAS USUALLY INDUCED BY THE PUSHER. THAT IS WHY THEY ARE CALLED PUSHERS. YES THE ADDICT SHOULD HAVE KNOWN BETTER BUT HE/SHE IS NOT AS STRONG AS THE PUSHER AND WITHOUT THE PUSHER THEIR ARE VERY FEW ADDICTS.

    IF THE BANKSTERS HADNT COMMITED FRAUD AT ORIGINATION AND CONTINUES TO COMMIT FRAUD IN THE FORECLOSURE (ROBOSIGING ETC…) THEN WE WOULDNT BE IN THIS MESS.

    WE WOULDNT HAVE GOTTEN THE LOAN AND WE WOULD LIVE IN A BETTER WORLD.

    PAUL PULATIE IF THEIR WERE NOT 1 MILLION + FORECLOSURES A YEAR MAYBE YOU WOULD HAVE AN ARGUEMENT.

    THE 1 MILLION FORECLOSURES A YEAR ARE CRIMES AGAINST HUMNITY.

    NOT TO MENTION LOST JOBS NOT TO MENTION BUSINESSS ETC…… THIS IS A HOLOCAUST.

    NEVER AGAIN.

  14. Table Funding is not unlawful, except in the mind of Garfield.

    Read RESPA and TILA.

  15. Patrick Pulatie,

    Most of the loans were “table-funded” — another violation of federal law. The lender was NOT the loan officer — and not the so-called originator —- loans were sold by prearranged agreements BEFORE the borrower signed on the dotted line.

    Loan origination fraud is up to the AGs/government — homeowners have to focus on the foreclosure fraud — which stems from origination fraud. Believe origination securities fraud is also new focus of SEC — while SEC is for investors — there should be some “trickle-down” effect. Problem for homeowners is that they cannot get the same discovery/subpoenas as the SEC/AGs. And, they do not have the same power and financial means afforded the so-called Lender — and the US government.

    You are talking about a small percentage (of total) of homeowners who owned multiple homes as investments — And, even these homeowners will not rise to the level of sophistication courts attach to SECURITY investors.

    As to the loan officers — Unfortunately, it will be THEM that are indicted when criminal charges do come down — and they are going to come down.
    Even though the loans officers acted on LENDER instructions.

    Borrowers do not have a “duty” as you call it — to “due diligence” — due diligence is part of underwriting and securitization. Borrowers have an obligation to read documents — but when the documents are fraudulent — borrowers have no obligation to ascertain that fraud.

    As far as what you think you have “seen” — I can tell you — what you see is bogus documents, bogus securities, bogus foreclosures — AND, all in an attempt to cover up. Believe me — you have seen nothing.

    Cognitive dissonance — ????? The conflict is an absurd justification in your mind — that homewoners were to be defrauded in order to feed fat pocketbooks. But, then again, people like you somehow try to justify this in their mind.

    I understand CDOs and synthetic CDOs (and most were synthetic – by the way)., squared CDOs, and derivatives. But, that does not give you or I credibility – are you justifying them?? Nearly collapsed our country — and, Mr. Pulatie — the target for transfer of wealth was the American home. It is a disgrace what did – and is happening. But — keep justifying it your mind — if it makes you feel better!!!

  16. Swarm the Banks,

    You need to read “The Big Short” by Michael Lewis so as to understand what really happened with CDS.

    Also, pay attention to Michael Burry who essentially started the ball rolling on CDS.

    Then, learn about CDO’s and Synthetic CDO’s. Until you know and understand this, it is not possible to have a realistic discussion.

  17. ANONYMOUS,

    Fraud in the origination applies primarily with the loan officer and the borrower. You can try an argument of aiding and abetting by the lender, but good luck on that one.

    Do you even understand all the elements of showing fraud in loan origination? There is a high standard to showing causation and damages. Most homeowner lawsuits can never meet that standard.

    Homeowners are not sophisticated investors? Most exams that I have done are with people who have owned more than one home, in Option ARMs, had them before, and they try to claim that they did not know what they were doing.

    Do you have any clue about how many loan officers or realtors or multiple property owners are the ones trying to argue fraud on the part of the lenders, when they knew fully well what they were doing?

    You attempt to absolve the borrower from any blame. That is simply wrong. Borrowers have a duty to themselves to do their own due diligence. But, they got wrapped up in the idea of owning a home like anyone else, and they did not do their own due diligence.

    I view things from a totally UNBIASED viewpoint. I originally started out being a homeowner advocate, but if I was to have integrity in what I do, I had to present a totally unbiased exam. I had to look at all parties involved, and not just the broker or lender or foreclosure firm.

    I have reviewed court cases around the country, reading and getting a feel for the arguments on each side and in each state.

    As a result of my studying of both sides and trying to keep an unbiased approach, I have had to change opinions in many areas. Now, I recognize that the arguments on these issues are unsettled, and each side has compelling arguments.

    I also see documents that you or others never see. These documents present a story that contradicts many arguments being made about MERS and other issues.

    When I take the time to post here, I simply want people to understand that there are other valid arguments in opposition to what is presented. These are viewpoints and cases that “Your Lord Garfield” will never post. That is because they are in opposition to what he says. An unbiased source would post both sides.

    Homeowners need to know both sides, not just one. Without properly knowing the other side, they cannot properly evaluate their options and likelihood of success.

    Why doesn’t anyone respond to my comment about each Deed of Trust allowing for MERS to foreclose and the borrower agreeing to it when they sign the document? Has anyone EVER mentioned that being in the document?

    These are the things that I am talking about…..

    But, if one cannot practice cognitive dissonance, then there is no hope.

  18. Patrick, your explanation of CDS’s actually buttresses the homeowners’ position. It wasn’t until CDS’s took off in 2005 and 2006 (according to you), that securitization fraud may have taken off, big time.

    Maybe in 2005 and 2006 is when the securitization tail started wagging the home mortgage note dog.

    The bigger the thirst for securitization deals that may have been based on overly exaggerated home mortgage note values, perhaps the more seductive the home loan “deals” that were being offered to wanna be homebuyers.

    Lets not dismiss the ease with which MERS allows mortgage securitization swaps galore to occur. MERS allowed Titles to become numbers that, to quote Frank Barrone from Everybody Loves Raymond, “were passed around the campfire like a bag of chips”.

    When do we get to follow one mortgage note that was resold over and over, and also see what the securitization deal was that was also changing hands over and over. And how does anyone know that a mortgage note only has one MERS number?

    The lure of turning a physical product (a mortgage note) into a number (MERS) can lead to fraud taking place because once a physical product becomes a number, more than one set of numbers can be surreptitiously used to represent the same mortgage.

    Does anybody know what safeguards are in place to prevent one mortgage note from being replicated?

  19. Patrick Pulatie,

    Lenders have a duty not to violate federal/sate law when they make a loan. The fraud in origination is so widespread — borrowers should not have to do the legwork themselves — there should be criminal indictments against multiple parties in the loan origination fraud perpetrated against homeowners. If you really understood what you claim to understand — you would know this.

    And, the foreclosure fraud is just additional fraud — also should be criminal – on top of the origination fraud.

    There is much to be told — and eventually it will be. This not about “fiduciary duty” —- it is about fraud and violation of the law.

    Homeowners can NEVER grant a loan to themselves — and they are NOT sophisticated investors — who should know better.

    You are very wrong in your post — and, as I have said before — you must be benefiting in some form or fashion.

  20. I have heard the arguments about no borrower responsibility for three years. I have had many borrowers come to me for examinations claiming fraud. Many have come from this website.

    Yes, there was fraud by banks. But, what Garfield will not tell you is that except for very rare circumstances, a lender has no fiduciary duty to a borrower. None. The duty is to the investor.

    But you, as a homeowner, cannot claim on behalf of the investor and fiduciary duty violation. That is acting as a third party beneficiary, and courts will not allow it.

    As for the person disagreeing with me on CDS as being side bets, read the court case I cited. It is explicit.

    Instead of just hanging out on foreclosure websites supporting what you want to believe, why not start getting into the other side. Read cases where the arguments you try have failed. Then, read the cases cited. It is very informative.

    What Garfield preaches is not cut and dried. Why do you think that he wrote in one column not to try many of these arguments? He knows that it is all speculation.

    FYI, when I started doing what I do, I felt the same way as all of you do. But I expanded my knowledge, reading everything I could on the law, and books coming from insiders. That reveals much.

    For example, CDS for mortgage loans did not even come into being until late 2005. Trades in them were not that common until 2006. Most of you argue that the CDS were part of the package when the Trusts were done, but that is false. Often, that is because you confuse Interest Rate Swaps with CDS.

    Most of you cannot even explain the difference in a MBS, and a CDO or synthetic CDO. This is all important to know.

    As to arguments regarding MERS, etc., I was arguing that in Oct 08. Now, I have seen enough law, and I have seen bank documents that most will never see, that leads me to believe that the arguments of MERS and power of attorney status, as well as the ability to assign, may be legitimate.

    BTW, as to MERS foreclosing, have any of you ever read the Deed of Trust or Mortgage. If you read it, Page 2, bottom of page, gives MERS the right to foreclose. You even signed the document. Therefore, you agreed to MERS having the ability to foreclose. Did Garfield ever bring that up to you?

    Of course, you will always argue that you did not know what you were signing. But ignorance, or not reading the paperwork is no excuse.

    The truth is that most homeowners should never have qualified for a loan, based upon 1980’s underwriting criteria. But, the government subverted the process, and everyone followed suit.

    When you went to get the loan, if you had been declined, then you would have gotten mad and gone somewhere else to get the loan. And if declined, you would have gone elsewhere. It happened all the time.

    Now, homeowners want to be absolved of all their own fault. Blame it on everyone, but don’t include them.

    Now, regarding loan modifications, most people who get them will likely fail anyway. Look at the Back End Debt Ratios, and it is evident. So you argue principal reduction, but that is not equitable to the investors who bought the notes, nor is it equitable to the persons not underwater, or the taxpayers, or renters.

    But, equitibility in this era means nothing anymore.

    Yes, I am ticked about all of this. I have done over 4000 exams, and over 95% of them have borrower fraud, in one manner or another. None have “clean hands”. They also have broker fraud.

    I am ticked off about loan mod companies who lie and take peoples money for doing nothing. I am ticked off about attorneys who misrepresent what can and can’t be done. All they care about is bringing in more and more clients, with only a chance of simply postponing the foreclosure for a few months.

    I am ticked off about so-called audit companies. These are former loan officers who bought software for TILA, and then claim that they know what they are doing. Yet, most of them could never even fill out a GFE or TILDS correctly, but they do audits where they need to know how to correctly fill such out.

    I am ticked off by audit companies who are provided my exams to duplicate for themselves, by attorneys I have worked with. The attorneys violate my attorney/client privilege, and then the audit companies violate my copyright. But, even worse, the companies don’t understand the arguments and how I arrived at developing the arguments, so they do a disservice to the attorney and client.

    Again, the truth is that everyone in the process is guilty. Lender, Wall Street, the Government, brokers, realtors, auditors, loan mod companies, and the homeowner. No one is guilt free.

  21. PattyCakesPalaties, the PMI on my loan is listed at 35%. If they posted the loan 3 times that’s 105%. After receiving HAMP solicitations on 3 different “identifier” numbers, I have no doubt.
    If you audit a loan file and find a fraudulent asset used for the underwriting, is the transaction fraudulent? and if the closing agent looked the other way when proof of asset was required?

    does that prove scienter? the loan was sold 3 days prior to closing. kinky?

    Youbetcha!

  22. @Lenecia
    Many homeowners here have been lied to which resulted in them loosing their homes. Thousands are trying desperately to save their homes. Are you aware that these sites are being monitored by entities who want nothing but to steal our homes? What type of info can you deliever that will help us in the fight for our homes? I applaud you for coming here and offering help. Give us something to work with. Also, have you been in contact with foreclosure defense attorneys to offer your help?

  23. fighting mad, mad as hell
    I agree with you. Predatory Lending. Loan To Own.
    But I also agree with Patrick Pulaties (believe it or not).

    This is just one of the frauds and for some reason the Judges don’t like this arguement anymore.

    I like the broken chain of title arguement. This allows us to argue that Humpty Dumpty story. We cant put humpty dumpty together again.

    Co Mingling of funds by itself is criminal not civil.

    Our Arguement is should be that they broke the chain of title intentionally so they could allegedly defraud both the borrower and the investor. And that we do not know the extent of the damage (Dan Edstrom comes in with his reversre engineering).

    Once the Judge realizes that the alleged fraud damages is really immeasurable. How many times did the banksters really sell the same loan to multiple investors.. He realizes that quiet title is a small piece of the pie and he/she can rationlalize it.

    If anybody thinks that fighting mad, mad as hell is wrong about the mortgage broker. I have mortgage broker friends and I can second that.

    The list with the Banksters and their alleged fraud is so long. And getting longer because they have to much pride and continueing to make more and more stupid mistakes.

    But I like the broken chain of title (Dan Edstrom Lminaq should be able to prove) and Comingling of funds.

    NEVER AGAIN

  24. Patrick Pulatie, Patrick Pulatie, YOU need to get your facts straight.
    The INTENT of the mortgage brokers from the start was to DEFRAUD AND CHEAT the borrowers, no matter who they were.
    IT WAS PART OF THE PLAN, TAUGHT TO MORTGAGE BROKERS.
    Plain and simple, defraud and cheat, to take back the home and resell it. It was a waiting game, knowing that sooner or later, the refi’s would overwhelm the borrower and they would default.
    The only people who never get into the discussion are THE MORTGAGE BROKERS.
    Why, because they know they are guilty, they know they committed fraud, intent to defraud.
    THEY KNOW IT.
    How do I know?
    I was in training to be a mortgage broker, but got out because it was flat wrong.
    Blame the borrower?
    Hell no, they were set up from day one.

  25. CDS as side bets? I doubt it. The selling and reselling and reselling of CDS signifies something is up.

  26. Once MERS entered the picture, securitization became digital, and it became much much easier to replicate and resecuritize the same mortgage over and over, and that is where the fraud began.

    Securitization before MERS was probably more legit because the original paperwork and required filings were probably being conducted in a legal manner.

    Digital copies and the internet have opened a whole new world of fraudulent opportunites. In my opinion, any linking of securitization prior to MERS and the internet to present times as somehow implying nothing has changed is disingenuous.

  27. I’m not saying the following as a legal expert or financial expert, just from what I believe is common sense.
    ——————-

    I believe Parallel Foreclosure is a form of bait and switch. I think Bait and Switch is considered illegal by consumer advocates and attorneys generals as well. When homeowners wanted a HAMP mod, they were bait and switched into a Parallel Foreclosure instead.

    Even the president hyped HAMP without warning about Parallel Foreclosure, could that lead to a Hobbs Act Violation since taxpayer funds were used to lure homeowners into an accelerated, parallel foreclosure action?

    PARALLEL FORECLOSURE is an act that affected homeowners and Investors appear to have been used by the banks as the excuse for denying HAMP , and instead proceeding with parallel foreclosure…..

    If so, then Parallel Foreclosure could be JUST ONE of many acts that homeowners may be able to sue against the mortgage servicers and or banks.

    ROBO SIGNING could be another cause of action.

    CHANGE IN TERMS from when the homeowner originally signed their mortgage papers versus how the mortgage terms changed as the note changed hands over and over might be considered an actionable offense as well.

    Any change in fees, penalties, customer service(including response time), timeliness of processing payments, even problem solving techniques, if any of those regressed without the expressed written consent of the homeowner, I think that could be grounds for suing as well.

    If SECURITIZATION caused the homeowner a more difficult time refinancing their home loan, that could be considered a change in terms, and possibly grounds for a lawsuit also.

    The above are four distinct possible causes of action that a homeowner could pursue if they think they got a bad deal during the foreclosure process.

    Gasp, I didn’t even mention predatory loans.

  28. Lenecia,
    Ok thank you, maybe you can be of some help for some of us layman.
    Mark

  29. I am fully aware of what Clayton Holdings did. It was a very superficial review that I could easily refute for the banks.

    To argue Reps and Warranties, you need much more, and more extensive investigation.

    BTW, I am involved in doing a Rep and Warranties investigation for one lender going after another lender. But the real strength is showing other fraud.

  30. Patrick Putlatie- Clayton holdings exemined each and every one of 926,000 loans. This wasn’t a 10% sampling. Or random sampling. I clipped the article out of WSJ. I’ll see if my memory is correct. I have to take my son to the Dr.. I will check in later. If I can dig up the clipping, I can be more specific in trying to get answers.

  31. Ian,

    Ian,

    You don’t understand. Reps and Warranties require a complete examination of each loan. Period. You cannot just do a few loans, and then claim that all meet the standard.

    Checking assignments is much easier. I know for a fact it is easier because that is what I do daily, as well as complete fraud and securitization exams.

    Third party payments are PMI or similar. Such payments would entitle the payer to go after the homeowner for the amount paid. Also, it can be shown that such parties grant a power of attorney to the lender to continue collection efforts.

    Third party payments don’t dissolve the debt.

    Also, do you know why the Assignment issues to the Trust do not have many rulings? That is because only a few judges accept such arguments. Only a handful of cases outside of FL and NY exist. Even in NY and FL, there are relatively few cases.

    The truth is that most arguments don’t even survive the demurrer or dismissal stage. Less that 2% do so. Even then, very few of those go to trial.

    Arguments can be made that the judges are corrupt, but is that realistic? Are only a handful of judges in the country NOT corrupt?

    Here is the bottom line reality…….the homeowners are in default. They can’t make the payments. So they turn to Prove the Note arguments hoping that they can void the Note. I know, because I get phone calls weekly from people visiting this website and calling me so that they can try this.

    Many argue that the banks defrauded the homeowners in getting them into the loan, but here is that reality……..If the homeowner had been denied, then they would have gone elsewhere to get approved for the loan. They would not have been denied.

    As to appraisal fraud, yes, that did occur. But here is the other part of the story. You could have easily offered a lesser price for the home, and not the “appraised” price. Then the seller had the decision to take the price or decline. Simple negotiations. That is all.

    And, for every homeowner, when a home sold in a neighborhood, did each homeowner in the area complain about the sales price? No!!!! In fact, each homeowner started to count how much money was made.

    The truth is that every single person involved in the transaction process was at fault. Lenders, loan officers, realtors, and the homeowner. No one was not complicit.

    Securitization is only being attacked now because of the foreclosures. Since 1968, securitization has been with us in some manner or another, but was not questioned. Now, it is the “outrage du jour”.

    Where was Garfield in questioning Securitization prior to 2007? In the early 1990’s, he was apparently involved in the ABS industry. he wasn’t concerned about the practices then.

  32. Patrick Pulatie- I was referring to NY UCC law regarding the obligation being paid by a third party. I didn’t mention CDS, I know they are side bets. Along with that, we had the loan originators and the banks, pushing loans which failed to conform to both federal and securitizer underwriting standards in a huge way. This is what I understand that the reps and warranties claims are pursuing. If the so-called ratings agencies bestowed AAA ratings on loan pools which were in essence loans which were guaranteed to default, then the investors have absolute recourse against the entire lineup of perpetrators.
    As far as fraudulent assignments go, I think it would be harder to vet each loan, one would have to pull the docs from every courthouse in each county where a mortgage/deed of trust was filed. Whereas the loan-level data has to a large degree already been studied, I belive that Clayton Holdings reviewed each of 926,000 loans and found up to 80% in breach of reps and warranties. But none of the peddlers of the toxic waste was interested in purchasing these studies from Clayton.

  33. Ian,

    If you are talking about Credit Default Swaps paying off the loan, then you need to know that Garfield is absolutely wrong about this. CDS were “side bets” that had no effect on the loan. There is a case in Virginia that addresses the issue full on.

    PMI is another thing that he misleads you on. PMI only covers up to 15% of LTV, based upon the particulars. It will not pay off the LTV under 80%, just over. The homeowner is still responsible for the rest, at the very least. And, the PMI lender could come after a person for the rest.

    Garfield ONLY posts items that support his contentions. He does NOT post anything against what he rights.

    Here is a question for you. With the issue of New York Trust law, if the Deed is not “properly assigned” to the Trust prior to closing, it is being argued that the Deed never made it into the Trust. Therefore, the Deed is with the Depositor or some other entity, depending upon the chain of assignments.

    The Investors in the CW lawsuit has hired a top notch law firm to force CW to “buy back” loans. The arguments focus on “reps and warranties”, which is difficult to prove and involves examining every single loan. Using the assignment issue would be much easier.

    Why are the attorneys not using the assignment issue? If it is a legitimate argument, then one would expect that it would be of primary focus.

    What do they know about the issue that either Garfield does not know, or does not reveal to you on the website?

    Here is what he does not tell you about CDS and payoffs.

    Forez v. Goldman Sachs Mortgage, Lexis 35099 (E.D Va. 2010) “no provision in the U.S. or Virginia Codes supports [their] argument that credit enhancements or credit default swaps (“CDS”) are unlawful. No decision from any court in any jurisdiction supports such a claim.”

    “Plaintiffs’ double recovery theory ignores the fact that a CDS contract is a separate contract, distinct from Plaintiffs’ debt obligations under the reference credit (i.e. the Note). The CDS contract is a “bilateral financial contract” in which the protection buyer makes periodic payments to the protection seller. See Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168, 172 (2d Cir. 2004).”

  34. It all boils down to brokne chain of title (laymen’s term)
    Once the chain of title is broken the so called “bank” Servicing company allegedly chopped up the loans into pieces and sold the same loan multiple times. Co mingling of funds.

    1. Broke the law
    2. Cannot guarantee as to were my payments went.
    3. Cannot provide Title when I finish or payoff my loan.

  35. @ Mark yes I do feel bad about all the thousands of documents I signed for BankUnited as AVP and VP. You can contact me at that number.

  36. Patrick Pulatie- if you read Neil’s newest post, it appears as though,under UCC law,at least in NY state, that the obligation is satistied if paid by a third party, even if that party is a stranger to the transaction. So if your loan was paid by the trust to the servicer,TARP to the bank, AMBAC/MBIA/ASSURED GUARANTY to the bank,then the bank can’t collect on the same debt twice. Let alone 3 times. Or 4. Do you think that the borrowers know what is going on with their loan? Hell, you can’t even find out who the lender is,unless you got your loan from a local bank which holds the note and mortgage in their vault. I have one of them, I have actually SEEN my note and mortgage-and if I have any questions, they pull the paperwork out and go over it with me! IN PERSON! My other loan though is another story. That’s why I read this site.

  37. Ok, Lenecia Knighton, Your a robo-signer, do you want to help all of us in fighting the Banks/Pretender
    Lenders & Bad Mortgage Servicers, who reaped undisclosed fees in the deal, Foreclosed on peoples homes illegally, with some good information or what ?

  38. The more lawsuits the better. You sue the servicer enough times with plenty of damages sued for, and you will put them out of business. If our government condones these servicers’ acts, then the only way is through the court system. Do not give up. It is not an option. Fight for what is rightfully yours. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  39. My name is Lenecia Knighton and I am a robo signer and I’m not hiding you can contact me at 404-226-3740. I’m located at 7396 Rockhouse Rd. Austell Ga. 30168.

  40. Patrick Farrell,

    That is an absurd argument.

    The bank owes the borrower nothing. The borrower owes the bank the amount of the loan.

    The liability would be owed to the depositors, the Fed, or other sources of funding. Not to the borrower.

    Get your facts straight.

  41. While encouraging, the jury lacked a clear understanding of how punitive damages (“puni’s”) actually work. In these cases,after Judgment, the defendants will more likely than not file a Motion for Remitteur, asking the COurt (Judge) to unilaterally reduce the puni award to a multiple no more than 10x the actual damages. That would limit the puni’s to $790K – still a tidy sum, but not the expression of outrage that the Jury wanted to send to the Servicer defendants.

    Practice tip: you have to get your damages in the actual damages section; then the puni’s expand in concordance. The private plaintiff (homeowner) has more grounds here than investors, since no doubt the defendants have utterly wrecked the homeowner’s life, marriage, credit, erputation in the community, standing in Church, and emotional health. What the jury finds in actual damages is not likely to be reduced; the puni’s then flow from that.

  42. Every promissory note issued by a bank to a “borrower” becomes an ASSET in the banks books.
    There is another unknown set of books called liabilities.
    That means the bank owes the borrower the amount of the loan, because the bank uses the note, when deposited, as a cash asset that it can sell, or lend out 9 times the amount of the loan, thereby collecting the original amount, tyherefore there is no debt to the borrower.
    THe borrower, can make a deand upon the bank for that amount to be refunded to them, THank you very much!

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