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Borrowers beware: your assumption that you are in default is based upon the fact that YOU didn’t make a payment. But you can only be in default if that payment was due. The payment cannot be due if the creditor has been satisfied in whole or in part by the various means by which these Bankers diverted money from the investors into their own pockets. You should be very concerned about that — because that money sitting in the pockets of Bankers is actually money that should be applied against the balance due on your “loan.” After all you paid for it with your own money in the form of taxes, payments to the servicer and the value of your signature and identity without which the mortgage bonds could never have been sold to investors.” Neil Garfield http://www.livinglies.me

EDITOR’S NOTE: I picked this up from the comments. It’s very good and helps describe some of the inner workings of how this crisis manifested as a grueling indictment of Wall Street and government laissez-faire, while the system played with our money, our future and the quality of our lives.

The one thing that keeps bothering me about the Lehman Brothers situation is that Lehman is in Bankruptcy while Aurora is not. But Aurora is essentially an arm of Lehman, and it is a mere servicer that is asserting rights of ownership over loans in direct derogation of the rights of (1) investors who put up the money and (b) borrowers who are trying to modify or settle the claims relating to their loan or  the title on their property. By what right is Aurora operating outside the scrutiny of the Bankruptcy Court in New York that is unraveling the Lehman puzzle?

I am aware of motions filed with respect to this issue but I am unaware of any resolution of those motions. It seems that the Bankruptcy Court is being used as yet another layer to keep investors from understanding or even knowing the facts about their investments. The goal is obviously  to deplete the apparent equity in the homes down to zero, which is why housing prices are going down. It is no mystery. The lower the housing prices, the easier it is to eat up the equity with fees that are uncontrollable.

Thus the Banks have a vested interest in keeping the housing market in a downward spiral just as they had a vested interest in keeping it in an upward spiral when they were soliciting unsophisticated borrowers and investors to buy into this game. I might add that  Alan Greenspan himself said in a television interview that he and a 100 other highly respected PhD economists looked at these financial products and were unable to decipher them.

Thus the effort by Wall Street to create asymmetry of information succeeded, which is all they needed to make the investors rely on the investment banks for the value of their investment and make the borrowers rely on them (through fraudulent inflated appraisals) for the value of their signature on paper that was in truth only part of the scheme of issuance of unregistered fraudulent securities. The fraud continues because the government regulators still don’t understand that the Banks are controlling the modification process, that they are producing scant modifications that fail anyway, just to pacify the government, and not to create an actual steady flow of modifications.

The Banks want the property, and then, using the valuation factors that were buried in the prospectus and pooling and services agreement, they are in the position of declaring a total loss  for the investors, while the Banks diverted money and assets that were due to the investors. This is really very simple. If the Banks wanted to settle the claims on the mortgages and foreclosures, they would have done so. They have the power, the infrastructure and the money to do it. They are not doing it because they are creating the appearance of a total loss while they line their pockets with investors money — money that should be paid to or credited to the investor.

If the investor actually received the money or was the recipient of a credit for the money pocketed by the Banks, then the amount due to the creditor would be reduced. This is turn would reduce the obligation due to the investor — an obligation that supposedly derives in large part from borrowers who thought they were entering into conventional loans but were in fact issuing paper that was traded without regulation or accountability. Thus all or part of the money that went into the pockets of the Banks is actually a credit against the obligation due to the ivnestor, a fact well known to investors and which is causing them to sue, the SEC to bring enforcement actions and other administrative actions to take a variety of actions, all leading presumably to criminal prosecutions.

The fact that is getting lost in all this is that if the obligation is reduced, then the amount claimed as due from the borrower is correspondingly reduced. The borrowers’ obligations may have been reduced to zero but in virtually all cases, it has been substantially reduced IN FACT, but applied IN LAW — i.e., the Notice of Default is wrong in every case as is the the notice of sale, the judgments entered, and the bogus auction that takes place in which title goes not to the investors or for the benefit of the investors but to the Banks who were using the money of the investors and thus had no loss.

In many cases the balance, unknown to the homeowner, was reduced to zero long before they were even notified that action was taken being against them for failing to pay — but what they failed to pay was a payment that was not due. IN fact, the diverted funds sitting in the pockets of the Bankers, is equal to far more than any group of so-called defaulted loans — and it is looking like far more than any group of loans that were funded during this period. That being the case, it is easy to see why the economy is anemic — the bankers have sucked out all the blood and as the body tries to cover they keeping taking that too.

Borrowers beware: your assumption that you are in default is based upon the fact that YOU didn’t make a payment. But you can only be in default if that payment was due. The payment cannot be due if the creditor has been satisfied in whole or in part by the various means by which these Bankers diverted money from the investors into their own pockets. You should be very concerned about that — because that money sitting in the pockets of Bankers is actually money that should be applied against the balance due on your “loan.” After all you paid for it with your own money in the form of taxes, payments to the servicer and the value of your signature and identity without which the mortgage bonds could never have been sold to investors.

Submitted on 2011/10/19 at 11:47 pm by Esther 9

I was watchng Cnbc around 1AM: it was about the repackagind of CDO’s and the great export they are, also stated that the issue in the mortgage origination and Kyle Vance who note the historic crash we are undergoing now …. I guess there are transcripts, set the stage from beginning to where we are now on Wall Street

Also, following in researchng HSBC:

How maths killed Lehman Brothers
by Horatio Boedihardjo
Submitted by plusadmin on June 1, 2009
• credit crunch
• finance
• financial mathematics
• financial modelling
• Plus new writers award 2009

This article is the winner in the university category of the Plus new writers award 2009.
On a sunny morning in 2001, a piece of investment plan landed on the desk of Dick Fuld, the then Chief Executive of Lehman Brothers. The document, compiled by a team of maths and physics PhDs, included a calculation to show how the bank will always end up with a profit if they invest on the real estate markets. Fuld was impressed. The next five years saw the bank borrowing billions of dollars to invest in the housing market. It worked. The housing market boom had turned Lehman Brothers from a modest firm into the world’s fourth largest investment bank.

The Lehman Brothers headquarters, Rockefeller Center, New York, before the collapse. Image: David Shankbone.
But as the housing market started to shrink, the assumptions that the PhDs made began to break down one by one. The investment now became a mistake, resulting in a stunning loss of $613 billion. On September 15 2008 Lehman Brothers collapsed — “The largest bankruptcy in the US history,” as described by Wikipedia.
The money making model
Imagine that you are working for Lehman Brothers and one morning you receive a phone call from HSBC.
“Hi! A hundred customers have each borrowed $1 million from us for a year. We would like to buy an insurance from you which will cover us in the case of any of them defaulting. From their application forms we reckon they each have a 3% chance of default. How much will the insurance cost?”
You can in fact calculate it, easily. The 100 customers each have a 3% chance of defaulting, so you expect three customers to default next year. That is, you will need to pay $3 million next year. Assuming the interest rate is about 3% each year, next year’s $3 million would be worth 3/(3/100+1)=3/1.03=2.91 million now.
Therefore HSBC will have to pay you at least $2.91 million for the insurance. Obviously Lehman Brothers wasn’t a charity and so, to make money, they would double the price to $5.82 million and expect to make $2.91 million out of each of these deals on average. This kind of insurance is called a credit default swap (CDS).
The legendary CDO
After putting down the phone, you might be quite worried about what would happen if ten of the borrowers defaulted, because then you would have to pay $10 million back! In this case, consider this deal: how about paying me a certain premium, and if more than ten defaults occur, you will only need to pay for ten of them and I will pay for the rest. If less than ten defaults occur, you will have to pay for all the defaults and I won’t pay anything. The type of deal that I am offering is called the senior tranche of a collateralised debt obligation (CDO) contract, while the one you are getting is called the junior tranche of the CDO.

Looks like a safe investment? Better think twice!
The attractiveness of the senior tranche is that almost all of the time I don’t have to pay anything, just pocketing my premium. Imagine how unlikely it is to have more than ten borrowers defaulting together! Senior tranches were generally considered to be almost as safe as borrowing money from the government. Since the senior tranche offers a better return than, but seems to be just as safe as, putting the money in the bank, the investors just loved it. In 2004 there were only $157.4 billion of CDO being issued, but by 2007 the amount grew to $481.6 billion.
But don’t you find it a bit unfair that you can have something as safe as bank deposits, that offers a higher return?

The pitfalls
Yes, it is unfair! In fact, CDO is a lot riskier than bank deposits, but Lehman Brothers, like many investors, didn’t seem to know that. Let’s go back to our original model. The first source of error is that we have assumed that each investor has a 3% chance of defaulting. How do we know that? It must be from historical data. The problem is, there hasn’t been a national drop of housing price since the great depression in the 1920s, so the chance that a borrower defaults was calculated on the basis of a good period when the housing prices surged. However, the housing market crashed in 2007. Many borrowers’ properties are now worth even less than the loan they have to pay in the future, so many of them refuse to pay. To worsen the situation, 22% of these borrowers are the so-called subprime borrowers — those who had little income and had little hope of returning money. Banks were not afraid of lending money to them because even if they defaulted, the insurance would pay them back. The participation of the subprime borrowers makes lending much riskier than before.
In fact, the default probability in the US has quadrupled from the 3% as assumed in the model to 12% since 2007, making it four times riskier. This means that investors like Lehman Brothers will be hit four times harder than they have anticipated.
Actually it is worse than that. The profitability, or lack of it, of financial products more complicated than CDS and CDO may depend on the square of the default probability, rather than the probability itself. Now as the default probability rises from 0.03 to 0.12, the square of the probability increased from 0.0009 to 0.0144 — that’s an increase by a factor of 16!

The Lehman Brothers headquarters on the night of September 15, 2008. Image: Robert Scoble.
There is also a second and more subtle source of error. Whether you can make money from selling the CDO insurance for the bank depends on whether the borrowers return the money, which in turns depends on the economy. So if the economy goes down, you are a lot more likely to lose money. If you are an active investor, then you probably have invested in the stock market as well. Now if the market crashes you lose both the money invested in the stock market and in the CDO. Suppose, on the other hand, that instead of spending the money on CDO, you bet on whether Manchester United will win the European Champion League. This time in order to lose all your money you need both the market to go down and Manchester United to lose their match — this is less likely than just having the market go down. Therefore, investing on CDO is a riskier choice than betting for Manchester United. The error in our model is that we have not taken into account this extra risk due to its dependence of CDO on the market.
These two errors were sufficient to mask the risk in CDO. In fact, the errors are so serious that 27 out of 30 of the CDOs issued by Merril Lynch were downgraded from AAA (the safest investment) to “junk” when the errors were spotted.
The fall of Lehman Brothers
Lehman Brothers, unaware of the hidden risks, decided to invest big on CDO. It even had a 35 to 1 debt to equity ratio, that is, it only owned $1 out of every $36 in its bank account — the other $35 were borrowed from somewhere. This meant that a loss of just 3% of the money on its balance sheet, would have meant the loss of all the money it owned. After suffering heavy losses (more than 3% of the money in its balance) from CDO, borrowers began to lose confidence and called back the loans. As Lehman had always relied on short-term loans, its lenders were able to pull their cash back quickly. Now the bank was in trouble. It borrowed much more than it was able to return and soon found itself unable to pay back.

37 Responses

  1. Whatever tn—you just don’t have to be so rude and sarcastic all the time when you are trying to make a point…it’s really getting old.

  2. @carie – “whining and moaning about jurisdiction and unsecured debt” wasn’t a reference to your posting and reposting the same thing here. it was a reference to a defense to foreclosure. despite what Tony and others have said here, subject matter jurisdiction isn’t a defense to a non-judicial foreclosure. it’s not a panacea. the only way to stop a non-judicial sale is to make it judicial yourself. and that’s when it helps to know some case law. Be pissed off at Enraged and me all you want, but he was cautioning you to be aware of Fontenot. and you should….it could bite you in the end…

  3. @carie – most cases to stop or otherwise set aside a foreclosure.

  4. And, Mr. you-know-what, I told you I post and re-post things to be helpful to new people—or to make sure someone sees them that maybe didn’t—so it’s NOT all about me—what an ignorant thing to say.
    Do you even know what compassion is? Probably not. That’s the problem with the world.

  5. To file what, exactly?

  6. Carie he cited a case that makes trouble for you and said that it may pose a problem for you. He didn’t just say you are toast. Toughen up carie, it’s not all about you. Jerk I may be, but whining and moaning about jurisdiction and unsecured debt won’t work in non-judicial states absent independent action. What about the CA rules that require tender to file? Are those still in effect? I’ve seen several people lamenting the effect of them

  7. tn—how exactly is saying “I’m afraid you are toast” trying to help?
    You are still a colossal jerk. Sad.

  8. @Louise – “As to being in a nonjudicial foreclosure state, sue the servicer or pretender lender for Quiet Title.”

    probably the first time I’ve agreed with Louise.

  9. @A man – “We need more people like Carie.” why do we need more people like carie exactly? i applaud her efforts and resolve, but she latches on to the last soundbite and copy/pastes it like she’s playing an electronic game of hot potato. and anytime someone disagrees with her, she either “wonders about their motives” or attacks. there’s plenty of room for opinion and theory here. enraged was trying to help and she went on the offensive. the idea to attack jurisdiction is all well and good. in fact, it’s much better than the naked “unsecured/debt collector” argument from before. but it doesn’t even get off the ground in a nonjudicial state.

  10. The banks and servicers are stealing from the homeowners just like the debt collection companies have been stealing from people all along. It is the same scam. The debt collection companies are not in the business of debt collection per say. They are in the business of bamboozling people into thinking they must pay the debt collection company without benefit of the proper documents or the legal right to do so.

    As to being in a nonjudicial foreclosure state, sue the servicer or
    pretender lender for Quiet Title.

  11. We need more people like Carie.


  12. @ Enraged—to say “I’m afraid you are toast” is the statement I find irritating and rude. You have no idea what my “strategy” is. I don’t list every step I take on this site. So please don’t assume things about me.

    A servicer cannot foreclose if they can’t get past subject matter jurisdiction. Period.

  13. I’m talking strictly jurisdiction…that goes for all states.

  14. @Carie,

    Wonder what?

    You’re in CA. You quit paying a while back (as I did and for good reasons too). CA is non-judicial and, thus far, has fanded decisions that were extremely unfavorable to homeowners. You know that, sooner or later, your servicer will wake up and start foreclosing. Shouldn’t you attack first to control better the outcome?

    Here is my fear for you: arguing any decision from any other state will not help you. Once judges have taken one path in one state and until something is done at the federal level, you’re pretty much assured that all judges will walk alongside the same path. Judges will range on the side of the majority of the previous CA judges.

    I applaud people who fight and are optimistic. But I also can recognize when a strategy is not the soundest. That’s all.

  15. Cubed,
    You are so right about the confusion over “lending” money vs. creating money. Preach on!


    I fight for the truth. No matter if I loose my house because I refuse to pay for fraud and abuse committed by the 1% . This country was fleeced with a few words within the walls of the US Senate and one final signature by the hand of one President.
    Neither have tried to resolve the situation. Now families have been kicked to the curbed, savings lost and jobs no where to be found. The world suffers in agony.

    We thank you for your posting. You are the Voice of truth. Do not forgive and Do not forget. Strength and Honor

  17. @Enraged…I’m starting to wonder about you…

  18. Once again:

    tony, on October 17, 2011 at 6:57 pm said:

    “It is “unsecured” debt protected by smoke and mirrors. What makes it funny is that it isn’t even unsecured debt. Unsecured debt is when you at least owe someone money. These servicers are not even owed any money they just hoping they can get something from you.

    I was at a hearing the another day and the judge asked the “banks” lawyer does the servicer have standing? They said no, then she asked can they join the “real party in interest”? Lawyer said no, the judge shook his head and hoped that the pro se didn’t hear that.

    Of course the pro se did and he said can we end this case now, I think I won on the issue of standing and real party in interest plus lack of subject matter jurisdiction. Judge said yeah I think you did. Denied the banks (without prejudice of course). The the judge asked for the so called note that they had. Lawyer said no you can not get my note, how will I foreclose he said you know it and I know it that’s not going to happen. Banks lawyer said but we have the note we should be able to move. Judge said you can’t even get pass jurisdiction first much less talk about notes.

    It was a funny case, after the case the judge closed out the rest of the docket he was so mad. So in short always bring up jurisdiction first before you even get to your other areas of defense.”

  19. Well, they have no jurisdiction—they are toast and they know it.

  20. @Carie,

    I pray that your servicer does not wake up. Otherwise, I’m afraid you are toast. Fontenot argues quite a few of your claims and… it simply didn’t fly.

    I find it astounding through that from one state to the other, you can have completely opposite decisions from the courts. Not just “different”. Diametrically opposed!!!

    Might it come down to MA, you win. CA, you lose? Seriously hair-pulling, mind-boggling and ass-tearing…


  21. @cubed2K

    I will pay off my debt as soon as I can and I will never apply for a loan again. However, I AM concerned about my credit score. Getting a job might depend on good credit score. If my credit score is low, I will pay higher deposits for utilities if I relocate for a job, higher move-in fees for an apartment, higher car insurance, and higher fees for other needful services for which my credit is pulled.

  22. @ Anonymous

    I was just sued by the security investor on a second mortgage. But only after first getting a letter claiming to be the “new creditor” (with an fka of almost the same name, who was allegedly the investor when I sent my QWR). The plaintiff also claims to be a successor of MERS.

    I found the loan number listed on the PSA, along with several other loans, under columns labeled Liquidated Balance, Liquid Proceeds and Realized Loss. An insurance payment is listed of an amount equal to the liquidated loans total. The PSA addresses subrogation, but investor says it will pay back the insurance company if the borrower pays off the loan after liquidation. (Anyone who believes that, raise your right hand…)

    The odd thing, the Mortgage Loan Schedule, which usually lists the loan number of the notes in a trust, is filed completely blank. The liquidated list is the only place I could track my loan.

    I’m trying to find out how to defend against this most effectively. Your comments would be appreciated.

    Like so many other issues about the fraud: They can’t do that! … but they do.

  23. think about it.

    If you as an individual could print real US Federal Reserve Notes, or money, for $1, $5, $10, $20 or $100 dollar bills,,,,,,,

    why would you need to receive some back as taxes?

    You can print them at will to fund your operation. Why would you need to charge an income tax to fund your operation or Government…..you print them at will……………..????

  24. Oh, here is the media saying banks are business’s and should earn a profit………….

    but what if the banks were actually government owed or government institutions who can issue money via loans or credit, and they do so via charging a interest rate of 2%, 5%, 20%, 30% and what if those interest rates earned, or profits, are what finance government and pay the salaries of our elected officials? There would be no income tax?

    Don’t you think? And people could prosper and create and expand. Think about it. Why do we have income tax? When the Government can create money, why do you need to have an income tax? When was the IRS income tax created in our modern money system?

  25. I will add this:

    I said—

    “It is obvious from the simple fact that I haven’t paid on my credit cards in 3 years now. Jeepers, if the credit card company was really out the money,,,,,,,,,,,,,why…………why 3 years have gone by…………..fact is they are not out any money……………….”
    So the CC company wrote off debt and sell debt for pennies on the dollar. OK, where is the loss?


    I will add this…………they are not out money,,,,,,,,,,,,,but what are they out?

    Answer is PROFIT and they call it INTEREST @ 10%, 5%, 2%, 30%. If 2% at 30 years why that is a lot of money…………don’t you think.

    But they call it RISK on credit cards and charge nowadays 20-30%. But there is no time limit on it. Meaning you can pay it off in 30 days and pay no interest————but it should be called pay NO Profit. That is the risk——loss of profit. It is NOT Loss of money lent since no money was lent. BIG difference. It is LOSS of PROFIT.

    Loss of profit vs loss of money lent created from book keeping entry. The risk is loss of profit……………..nothing more or nothing less>>>>>>>>>>>>

    stay away from the banks………..get out, and get out NOW

  26. @anonymous

    the lie has been been since the 1913 enactment of the Federal Reserve System of Banks, there are 13 of them……………why you think after you found out———a few years ago,,,,,,,,,,,,,that it would take a few emails, messages, constant postings here, on and on——that your message would reach thousands and thousands and stop the fraud??????????

    Why others have tried to no end. They have written books, they have written congress, senators and so on………….and yet most do not believe,,,,,,how can it be………..

    AND YET the evidence is as simple as this>>>>>>

    I lend you money based on a contract, a written agreement, a verbal agreement. I can get my money back via the court system and the codes. This is all between individuals.

    But WHY this? A credit card company lends me CREDIT, I don’t pay them back. They send me offers for settlement of reduced balance owed. I no accept. Then they sell debt to debt collectors, who after many months go buy, maybe sell debt to another debt collector, and maybe a law firm acting as debt collector. And then the law firm as a debt collector sues……………

    So the question is – why must we go thru that? Why go thru all the motions? The answer is simple but yet most do not understand. Money or credit is a debt based system. The original money or credit lend by a bank or CC company is just book keeping entry, so there is no loss. People think money is “lent” when it should be called “money created”. It is sleight of words. And it is so simple that people do not get it. They think money is lent when in fact it is created.

    It is obvious from the simple fact that I haven’t paid on my credit cards in 3 years now. Jeepers, if the credit card company was really out the money,,,,,,,,,,,,,why…………why 3 years have gone by…………..fact is they are not out any money……………….

    BUT ANONYMOUS I KNOW YOU KNOW THIS, so I state for others………………..

    so stay away from the banks, pay off your credit cards, bank loans off,,,,,,,,,and stay away from the banks………..,and if you are insolvent and can file ch 7 BK, then do so………and do it now………..and don’t worry about your so called credit rating………..and who cares,,,,,,,,,,,,just pay cash for everything………and buy used at a discount////////////// PLEASE.

  27. BSE

    Very important video.

    I am not any ANONYMOUS related to anything. I am simply an ANONYMOUS that has witnessed fraud firsthand — for a very long time.

    When I asked for help — many years ago — no one was paying attention.
    No one listened – except one university professor — who also knew — something is very wrong. He gave me hope – he encouraged me to never give up. And, I never will give up. I tell it like is — what I know.

    After all these years — I watch in amazement that, finally, after so many years — so many others are coming forward.

    Much yet to be disclosed — and we WILL get there. I am confident.

  28. If security investors were still entitled to foreclosure — they would not be winning in investor lawsuits to recoup “lost” investment — and — ALSO foreclosing. Cannot “recoup” — and then foreclosure. That is why security investors are not the real party — not the creditor — and never were the lender. They did NOT fund any mortgage — they funded a bank security investment for pass-through of BANKS’ cash flows — that is all. Collection rights ALWAYS remained with bank — until disposal.

    As to CDO investors — CDOs were nothing more than glorified derivatives — fabricated mortgage securities — to which “investors” had full disclosure. They were risky investments — and security investors — synthetic security investors – or otherwise — knew this. Who the heck would count on “poor credit” borrowers to support their investment at outrageous interest rates — and still believe this was viable?? Case law never supports security investor claims due to due diligence. But, we are not seeing this litigated — we are seeing settlements — before litigation — and without investigation of fraud against victim homeowners. Nevertheless, security investors cannot also recoup by foreclosure — never.

    Talk about Lehman and Aurora — see the just out of NJ case regarding same. Quote —

    “There is an additional potential problem with purported assignment. The assignment was not made by Lehman, as payee of the promissory notes secured by the mortgage, but rather by MERS, “as nominee for Lehman.” Although the notes and mortgages appointed MERS as Lehman’s nominee, Lehman filed a petition for bankruptcy protection in September 2009, see….. , which was before the purported assignment of defendant’s mortgage and note on January 30, 2009. Therefore, we question whether Lehmans’s designation of MERS as its nominee remained in effect after Lehman filed its bankruptcy petition, absent ratification of that designation by the bankruptcy trustee.”

    Case — remanded. Just another symptom of the fraud.

  29. Daniel Tarullo, Federal Reserve Board Governor, Says Fed Should Buy More Mortgage Bonds


    “…I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities,” Tarullo said in text prepared for deliver at a conference at Columbia University. “There is need, and ample room, for additional measures to increase aggregate demand in the near to medium term, particularly in light of the limited upside risks to inflation over the medium term.”

    The Fed’s earlier interventions in the mortgage bond market, which totaled a whopping $1.25 trillion, were controversial, with some top policy makers saying they were leery of engaging in what potentially constituted allocating credit to a specific sector of the economy. Tarullo downplayed such concerns, arguing that putting the economic expansion on a more solid footing was the more pressing issue.


  30. speaking of Lehman Bros, does anybody have information on who “client 708” is in the Wells Fargo cesspool of securitizations? I have account codes that show an “LC” and the 708 number.

  31. A Game-Changer on Motions to Dismiss

    Posted on October 20, 2011 by Mark Stopa

    As a foreclosure defense attorney with foreclosure cases in many different counties before a wide array of judges, I’ve seen a significant difference in opinion, even among judges, about the merits of motions to dismiss in foreclosure cases. Perhaps the biggest reason for the wide variety of opinions is the absence of case law from Florida’s appellate courts on the issue. The problem is largely procedural – an order denying a motion to dismiss is not appealable until the end of the case, and by the time a foreclosure case is over, the homeowner’s best argument for appeal likely isn’t whether the Complaint stated a cause of action, but the propriety of the foreclosure itself. What has resulted is an unusual dynamic where Florida circuit judges have been ruling on thousands upon thousands of motions to dismiss without clear direction from Florida’s appellate courts on what it takes for a bank to state a cause of action and survive a motion to dismiss. That’s not an indictment of anyone – there just haven’t been appellate decisions that clearly address this standard.

    Suffice it to say I was elated to read this opinion from Florida’s Second District Court of Appeal. Here is the key language …

    On November 18, 2009, U.S. Bank filed another copy of the Note as a supplemental exhibit to its complaint. In contrast to the copy attached to the complaint that contained no endorsements, this copy contained two endorsements …

    We view U.S. Bank’s filing of a copy of the note that it later asserted was an original note as a supplemental exhibit to its complaint to reestablish a lost note as an attempt to amend its complaint in violation of Florida Rule of Civil Procedure 1.190(a). U.S. Bank did not seek leave of court or the consent of Feltus to amend its complaint. A pleading filed in violation of Rule 1.190(a) is a nullity, and the controversy should be determined based on the properly filed pleadings. See Warner-Lambert Co. v. Patrick, 428 So. 2d 718 (Fla. 4th DCA 1983).

    Why is this language so significant? Think about it. How many instances are there in foreclosure cases where the note attached to the Complaint contains no indorsement, but the bank later files an indorsement that contains one, then tries to defeat a motion to dismiss by asking the court to consider the subsequently-filed indorsement?

    I see this all of the time – perhaps the majority of cases. The Note attached to the complaint typically has no indorsement, yet the note filed thereafter does. When I argue a motion to dismiss, I argue the court must stay within the confines of the “four-corners” of the complaint (black-letter law), which means the court can consider only the note attached to the complaint, not the note subsequently filed with an indorsement. Bank lawyers, by contrast, want judges to consider the subsequently-filed note, arguing “we filed the original note, indorsed in blank, so we are the holder.”

    I’ve argued the impropriety of this argument before from the standpoint of “standing at inception,” i.e. if the bank lacked an indorsement when it filed the suit, it cannot cure that deficiency by obtaining the requisite indorsement thereafter. See Progressive Express Ins. Co. v. McGrath Community Chiro., 913 So. 2d 1281, 1285 (Fla. 2d DCA 2005) (“the plaintiff’s lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed.”).

    In its recent opinion, the Second District goes a step further. It’s not merely an issue of the bank lacking standing at the inception of the case. The court is not even allowed to consider the subsequently-filed note without the bank amending its complaint. References to the subsequently-filed note, for pleading purposes, are “a nullity.”

    Everyone should be citing Feltus v. U.S. Bank when arguing motions to dismiss. It’s time that banks stopped getting away with amending their pleadings via the filing of a note that contravenes the note attached to their complaints without leave of court and without the consent of all defendants. See Fla.R.Civ.P. 1.190. In other words, as soon as a bank’s lawyer has to resort to referencing a note that is not attached to the complaint when opposing a motion to dismiss, that shows the bank has failed to state a cause of action and either needs to amend its complaint or suffer a dismissal without leave to amend, as in Progressive.
    Mark Stopa


  32. I keep the same position: from the moment we bailed out any of the servicers, we paid forward. It is now time for the bankers to give back what they pocketed and for us (we the people) to reinvest it into fixing that horrendous debacle.

  33. I found this link online yesterday. I think it relates to Aurora being disolved soon. This article goes beyond my limitd understanding but maybe someone here can interpet it. It looks as though Auroras looking for a buyer? Here’s the link


  34. Has anybody been tracking how many Subpoenas and commisions Ms Harris has.

    So Many commisions subpoenas etc.. anD the only thing she has actually done is Sue the attorneys who represent the homeowners.
    The banksters are still foreclosing.

    Can somebody please clarify and tell me if I am write or wrong.


  35. Bof A today is continuing its alleged illegal foreclosures on the alleged Borrowers in California This in my opinion is another smoke screen by the Attorney General of California.



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