THE NEXT MOVE: ACCOUNTING AND RECEIVERSHIP

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TWO SETS OF CLOSING DOCUMENTS REQUIRES A TOTAL ACCOUNTING FROM INVESTOR DOWN TO BORROWER

The next step is preventing the pretenders from limiting the inquiry to the servicer report which only reflects a small part of the securitization chain. Let’s see ALL the money.
Let’s take a step back and get out of the forest so we can see the trees. As I draw back my perspective into a wider scope, several things become apparent, all of which are documented in one case or another. See today’s Post on the Grossman decision from a year ago for examples.

Zooming out back to 100,000 feet, we see that there were two actual closings and a series of fictitious ones. You should mark each item as relating to one closing or the other, like

  • 1 Deed of Trust  — executed by borrower at closing with homeowner on August 26, 2006, but relates to undisclosed credit/lender in closing with investors that occurred on or about October, 17, 2006 and which was authorized by an general assignment and assumption agreement included in the investor’s closing and prospectus.
  • 2- Substitution of Trustee. Purports to relate to deed of trust (see above) but derives all claimed authority from provisions and actions taken pursuant to provisions of documents that were used at closing with investors.

The point being here that you want the Judge’s head turning left to see the homeowner’s closing documents and right to see the investor closing. Do it a few times until he gets the fact that you have to look at both in order to know the terms of the transaction in which the investors loaned the borrower money. Then you have all the arguments about how the other side failed to attach pertinent documents etc. But more than that —

These cases are about money. And so the Judge is saying to the parties in court—

“Did you borrow the money?” Your answer will be that you’ll be more than happy to answer the question in an evidentiary hearing at which point the same corollary question will be addressed to your opposition: “Did you lend the money?” Neither one is entitled to any presumption other than that an issue of fact arises. If the putative creditor neither loaned the money nor purchased the loan in a real transaction in which they paid for the loan, then the putative creditor is merely a stranger to the transaction as the audit found in the records of San Francisco County.

And for theoretical purposes supposing the answer from the borrower is yes, he did borrow the money but he now knows he never was told (a) the identity of the creditor nor (b) the rest of the terms of repayment contained in the closing with the investor.

“Did you make the payments?” Your answer should be that I made all payments that were due. The parties here owe both me and the lender credits and refunds.

Which brings us to the issue of a cause of action for an accounting and appointment of receiver. The accounting would be for all money received and all monies disbursed including all bookkeeping and accounting entries relating to this loan, directly or indirectly.

The pretenders here would have you believe that they, not this court, have the right to determine, in their sole discretion, how payments are applied. We think that is not the law and never has been the law. If the investor has been credited properly, the debt from the homeowner is correspondingly reduced, which is an express provision contained in the promissory note which, as we have stated, does not describe the actual transaction because it excludes the name of the real lender and it excludes references to the pooling and services agreement which contain many more terms that relate to payment of the investor, credits to the homeowner, and expenses of third parties whose fees are paid by diverting payments from the investor to the vendors.

Since it is apparent that no effort has been made to even create an internal accounting of payments received on behalf of the investors, and there is no desire to do so, it is necessary to appoint  a receiver to collect all information  from all parties that in the closing with the lender and all parties in the closing with the homeowner and render a report as to the current status of the parties, the current status of the debt, when and if the debt was in default, when and if the default was cured and the balance currently due to the creditor after all appropriate debits and credits have been applied — not just payments from the borrower.

Specific questions the receiver should answer are as follows:

  1. Did the homeowner accept a loan?
  2. What was the principal amount of the loan due and what were the main financial provisions regarding repayment of the loan.
  3. What accounting and bookkeeping records, correspondence and instructions were used at closing with the homeowner borrower and how were these records or the data on those records transmitted to any receiver?
  4. What entities received the records and data regarding the closing of this loan and why did they receive it?
  5. Did the named lender on the promissory note actually make the loan — i.e., was a loan receivable created on the books and records of the loan originator? Or, did the originator book the transaction as a fee for standing in as the lender when in fact it was not?
  6. What was the identity of the actual creditor that advanced funds?
  7. Did the party that advanced funds (aggregator) post bookkeeping or accounting entries for the loan as a loan receivable? Or, did the aggregator book the transaction as a fee for standing in as the lender when in fact it was not?
  8. What is the name of the party who booked the subject loan transaction as a loan receivable? What is the current status on the books of that lender as to the loan receivable? What is the date of the entry on the books of the party identified as the lender in the subject transaction who booked the transaction as a loan receivable or any such similar entry indicating that they were owed money to be paid directly or indirectly by the homeowner borrower in this transaction?
  9. At any time since the closing with the borrower has the loan been sold for value received to any other party?

10. At any time since the closing of the transaction with the borrower has the loan been settled with the investors who advanced funds for the subject loan? Who were the parties to that settlement and what were the terms?

11. As to the party who actually loaned the money to the borrower and who claimed it as a loan receivable or equivalent, is there a claim pending upon behalf of that party? If yes, what is the nature of the claim and against which parties does the investor(s) wish to pursue that claim.  How much is the claim relating to the subject loan in this case, as it would be allocated under generally accepted accounting principles as promulgated under the Financial Accounting Standards Board.

12. Does the actual lender in the subject transaction actually exist currently and if not, who are the successors?

13.  What parties in the putative securitization chain or otherwise received any money relating to the pool that claims ownership of the subject loan? How was that money allocated? Was the money paid or allocated to the investors and if not, why not? If the money was paid or allocated to investors, was the balance of the debts due from homeowners borrowers, including the homeowner borrower in the case at bar correspondingly reduced for receipt of those actual or allocated payments? If not, why not?

14. As presented to the investors, was there any part of the investment plan that contemplated holding the money taken from the investors for a use other than funding mortgages and standard industry fees for servicing and brokering the transactions? If there were no loans made or expected to be closed and considered included in the investment pool claiming ownership of the subject loan, do the documents with the investors call for a refund to the investors of all of their money?

15. As presented to the borrowers, was there any part of the loan program that contemplated funding of the loan from any source other than an investor or group of investors?

16.  What is the date that the obligation arose between the borrower and the investor pool?

17. What is the date that the note was transferred to the investor pool? Was the note sold to the investment pool? If so, for how much?  Where are the documents verifying payment and sale of the subject documents.?

18. What was the date that the mortgage was transferred to the investor pool claiming ownership of the subject loan? Was the mortgage sold to the investor pool? If so, for how much?  Where are the documents verifying payment and sale of the subject documents.?

22 Responses

  1. concerned citizen 12

    If you are looking for “experts” I doubt if many who post here would claim to be “experts” at anything. We are thrilled when an “expert” posts. If you are an expert please post. I and many others just bumble along trying to piece it all together and understand their own mortgage along with the bigger picture we are all facing as a society. Personally I think it ought to be easier to just figure out who you truly owe (are you paying the right party?) and how much you truly owe on the obligation (has the right party been paid at all?) that encumbers a home and who truly deserves (who invested their money – has been harmed – has not been paid?) to get your cherished home that you invested time and money in if you can’t pay. Just seeking to understand the simple Trustor – Beneficiary relationship has turned out to be very complex (it is not disclosed as per state and federal and ucc ect. requires to protect both trustor and beneficiary) when it should be simple. Just trying to figure out who can satisfy a lien has turned out to be complex. Not promoting any point of view (other than outright theft is wrong and should be prevented – already is prevented if the laws are followed). I have not bookmarked the “materials” you are asking for – just read regularly whatever I come across – found this today searching – it is a decent explanation of this point of view and it makes sense to me – not that I know anything – no “expert” here. I hope the author doesn’t mind the quote and the link.

    http://debbyreagan.wordpress.com/page/2/

    “Once a loan has been converted into stock, it no longer is a loan. A negotiable instrument can only be in ONE of two states when it undergoes securitization, but NOT BOTH at the same time. It can be either a loan and treated and governed as such, or as stock and treated and governed as such. But once converted to stock, it is forever stock. When a promissory note gets converted into stock, that promissory note no longer exists. Because a Deed of Trust/Security Instrument, SECURITIZES a promissory note and if that promissory note is destroyed or no longer exists (as it is when converted into stock), then that trust is invalid. The trust secures nothing. “Mortgage is not a “debt”, but merely a security for payment of debt”- Maine vs Clack 33 P.2d 283, 43 Ariz. 492 (1934). And since the Deed of Trust/Security Instrument is what gives the bank the right to foreclose and that Deed of Trust/Security Instrument is invalid, then the bank loses their right to foreclose. In order to enforce a debt obligation secured by a mortgage and note, a party must be in possession of the note. See Premier Capital, Inc. v. Doucette, 2002 ME 83, ¶ 7, 797 A.2d 32, 34 (describing a note associated with a mortgage as a negotiable instrument). Once a REMIC is formed, its assets (your loan pooled with many others) are declared a permanent fixture to the REMIC. This is registered with the SEC. You can not register one thing with the SEC and stock market, and then after the money is transferred, switch out the asset. This is called “switch and bait”. In other words, once an asset is registered and traded as part of the security, you can’t just switch it out because it has become a permanent fixture of the traded asset. This is a permanent conversion. And this is also why it is so very important for the ORIGINAL “wet ink” mortgage loan note to be produced. If it got destroyed, by being converted into stock, then the loan has been paid for. It also breaks the chain of title. Because ONLY the original promissory note has the legally binding chain of title. When a loan goes into default, the REMIC writes it off. Once that happens, the REMIC gets tax credits from the IRS. This means it is settled. The note is gone and paid for. The only way the bank can now try to foreclose on a property is to buy it back from the open market just like any other debt collector does. And since the debt has been written off and is no more, the bank buys it for pennies on a dollar. They then try to reattach the converted loan to the Deed of Trust/Security Instrument and try to say that they are the real party of interest. In trying to foreclose on your property knowing this (or should know as it is basic banking and trading practices), the bank and their lawyer have committed fraud by submitting false documentation claiming that the Deed of Trust/Security Instrument is valid thus being the real party in interest and holder in due course. By reattaching the loan to the Deed of Trust/Security Instrument they have deceived the court and you by adhesion, (which you must object to) and both the bank AND their lawyer should be sanctioned for fraud by adhesion. Because your loan was securitized, it destroyed the note, so anything brought into the court as evidence by the bank and their lawyer is prima facie evidence of counterfeit fraud. They also are attempting to steal your home through these fraudulent means which is attempted theft. They also have committed securities fraud. Because if the loan and the stock exists at the same time it is known as double dipping. And double dipping is a form of securities fraud. All of this is clearly deceptive trade practices. “Fraud vitiates the most solemn Contracts, documents and even judgments” [U.S. vs. Throckmorton, 98 US 61, at pg. 65].”

  2. FLORIDA- mortgage document- page 14 of 16 line # 23- RELEASE what does this mean?
    page 3 of 16- TRANSFER OF RIGHTS IN THE PROPERTY.
    PAGE 3 OF 16 -TOGETHER WITH MERS holds only legal title.

    can anyone explain each one?

  3. Hi (Joann on February 22, 2012 @ 6:18 pm) I see you also agree with Huey Reed) Why don’t you help us understand this issue by citing the materials you claim you have read articulating this position. If anyone else has a position on this matter please comment.

  4. Say “Huey Reed 2/22/2012 at 2:45 pm” a security and note cannot by law exist on the same asset.Perhaps I am not as bright as you. Please explain and cite statue and case law. Any of you other experts want to comment? Please do so.

  5. Solly, you gotta be laughin’ yer ass off!

  6. The registration for the pool is shelf filed and typically the pool must close within 90 days of the registration, go live. Not 5 years. Second, who pays the cost of the receiver. if the borrower is asking, plaintiff / defendant, who bears the cost.

    The lawyer may cost you 5k but an actuary to sit and try to compel cash flow, discount rates, reserve tranche, over-collat tranche etc.. You are talking 20k in work. I don’t see a Judge allowing it when the mindset still remains, somebody is owed something.

  7. Tammy Freeman v. Quicken Loans -Oral Args Transcript at the US Supreme Court re: RESPA

    http://www.scribd.com/doc/82506786/Tammy-Freeman-v-Quicken-Loans-US-Supreme-Court-Oral-Argument-Transcript-of-2-21-2012-Case-10-1042-Re-RESPA

  8. And/or could you use the 18 questions in a QWR sent to the “debt collector” faux forecloser prior to court?

  9. @Huey Reed

    “After the securitization all payments made to the pretender lender are owed back to the borrower. A security and a note cannot (by law) exist on the same asset. Anything brought into the courtroom by the plaintiff after securitization is a fraud, And if it’s a copy of the note, it’s a copy of a security which is a felony.”

    I understand this basically and agree with it and have read other materials that articulate it. Have these arguments been made effectively in cases yet and more importantly have they been taken seriously by judges – (and hopefully not cause them to ignore other claims in a case)? Any decisions or rulings that you know of? It is my understanding that it may not be a good idea to question securitization as a practice or say securitization is wrong to a judge but to make your claims based on state real property statutes, UCC and federal codes ect. It doesn’t mean a person cannot state the above also and I would like to (have already written it into my complaint rough draft) but is there case precedent or other that you know of? The same thing goes for the undisclosed funder of the loan (not on the DOT)…..not that this was your comment but it is Neil’s main point……I wish to make that claim as well (and have rough drafted it) and have a bit of evidence that should compel discovery but as everyone knows that is the biggest hurdle even for attorneys (discovery and production of documents ect.).

  10. we have alot of good news this week. not being privy to the real loan originator. fraudulently approving borrowers for loans they could never aford. losing paper work during modification, not sending bank statements while paying a modification, telling home owners to not pay to apply for a modification, foreging notes and assignments. any thing and everything to continue the foreclsoure machine. the judges dont get it especially in florida. a prominent lawyer just lost a trial case in lower court in hillsbourough county, TAMPa. because the judge knows the lawyer wil win in upper court. putting undue stress on homeowner emotionally and financially. now they have to file an appeal and pay the lawyer. its neverending. MONey money money. doesnt matter the lawyer had great arguements. the state of florida is out of money and the judges are told from the top how to rule. money for florida is the name of the game. the only thing to stop this fraud is a foreclsoure mortitorium.! se below is a repost from my email

    On Sat, 2/18/12, David Sole <dsole1@wcccd.edu

    From: David Sole
    Subject: re: Moratorium on foreclosures
    Date: Saturday, February 18, 2012, 12:40 PM

    Hi – thanks for your comments. We originally raised a 2 year moratorium just to get people to pay attention over 5 years ago when almost no one was thinking about the foreclosure crisis. A state representative worked with us to craft a bill introduced in the Michigan legislature. We were aware that Michigan had a 5 year moratorium back in the 1930’s. So we threw out the idea of a 2 year moratorium. We also felt that it would take a mass movement in the streets to win even a 2 year moratorium, and if that happened people would easily demand an extension. We aren’t wedded to a 2 year period. Thanks again – David Sole

    New comment on Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge
    Michael Shane commented on Message Board.

    THE NEW “NATIONAL SETTLEMENT WITH THE BANKS” WILL NOT STOP ONE FORECLOSURE A CALL TO A NATIONAL CONFERENCE TO DEMAND A TWO YEAR NATIONAL MORATORIUM TO STOP FORECLOSURES Saturday – March 31, 2012 Central United Methodist Church – 2nd Floor 23 E. Adams St. (at Woodward Ave.) Detroit, Michigan Registration: 8-9 am Conference: 9 am – 6 pm Register at National Moratorium In recent months, there has been a tremendous upturn in the movement against foreclosures and evictions. From New York to California the Occupy movement, unions and many community organizations have organized direct actions at people’s homes and at the banks to prevent families from being thrown out of their homes by the banksters – and the federal government which bails them out. However, as important as these actions are, they will be not enough to stop the two million foreclosures that already are being processed and the additional 3.8 million foreclosures projected to take place over the next 2 years. Along with continuing the direct actions it’s time to raise the demand that the government place a Two Year National Moratorium to halt foreclosures and foreclosure-related evictions. A Moratorium would keep people in their homes and stabilize our communities while a long term solution to the crisis, including reducing principal to the actual value of the homes, is developed and implemented. In the 1930’s, 25 states enacted moratoriums on foreclosures. The Michigan Moratorium Act meant that anyone facing foreclosure got an automatic 5 year stay on the foreclosure, with a judge ordering a reasonable payment based on the homeowner’s ability to pay. These laws were upheld by the U.S. Supreme Court in the case of Home Building & Loan Building Association v Blaisdell, which held that the people’s right to survive during an economic emergency superseded the contract clause of the U.S. constitution. The moratoriums were not a result of the generosity of the legislatures or the courts, but were a direct result of the actions of workers and communities flooding the streets and preventing the foreclosures that were being carried out. The legislatures and courts essentially ratified the moratoriums that were won in the streets. The demand for a Moratorium on Foreclosures has never been more timely. Today, with the federal government owning or backing 75% of mortgage loans through Fannie Mae, Freddie Mac and HUD, and paying the banks full value for the inflated, fraudulent and predatory loans, the President has the absolute authority to implement a two year moratorium on foreclosures and foreclosure-related evictions through executive order. And the President could immediately authorize a reduction of the principal to actual market values on all mortgages owned by the federal government. The Moratorium Now! Coalition, which has been raising the demand for a moratorium on foreclosures and challenging foreclosures and evictions in Michigan for the past five years, invites all activists to come to Detroit—the city hit hardest by the economic war on the 99%—for a one day conference on March 31, 2012. The conference will be an opportunity to share our experiences fighting foreclosures and evictions through direct actions. We will share legal strategies in challenging the banks in federal and state courts. And we will plan a campaign to raise and win the demand for a National Two Year Moratorium on Foreclosures and Foreclosure-Related evictions. ALL OUT TO WIN A TWO-YEAR NATIONAL MORATORIUM ON FORECLOSURES Saturday – March 31, 2012 – Detroit, Michigan Central United Methodist Church – 2nd Floor 23 E. Adams St. (at Woodward Ave.) Registration: 8-9 am Conference: 9 am – 6 pm Sponsored by: Moratorium NOW! Coalition to Stop Foreclosures, Evictions & Utility Shutoffs 5920 Second Avenue, Detroit, MI 48202 313-680-5508 moratorium@moratorium-mi.org moratorium-mi.org

  11. And another thing….

    Neil talks about it….

    OK so the YSP was disclosed OK fine I got hit for 1% great fine. I also as a capitalists understand that if I agree to 5.75% fixed rate on $300k then fine and I agree they can sell the loan fine.

    But again I did not know that they ALREADY had in place trusts and tranches to take that same loan of mine and pay out only 5.25% to end investor.

    0.5% on $300k over 30 yrs is a lot of cake. Again they have the right to sell the loan but I had no idea of this. I was too busy looking at YSP disclosure fooled into thinking that was only markup.

    Maybe the simple legal question is.. DID THEY HAVE THE RIGHT TO PRE-SELL THE LOAN without disclosure???

    hmmmm

  12. I am not a lawyer but I have hired lawyers and have 12 yrs experience in real estate investment.

    Contract law is not unknown to me. To me contract is law kinda simple. Who is injured? How to you determine that etc? What does the agreement actually say?

    Forget the TILA garbage ‘protect the consumers’ stuff. I am just saying that I am sitting at a table reviewing a contract (note/mortgage) that is being CONTROLLED by hidden contracts such as MLPA and PSA and SEC filings that identify my contract and loan AHEAD OF TIME!!!!

    Maybe that means nothing. But as Neil points out maybe it does.

    I am working on something to reveal that originator never funded the loan. If I can prove that maybe I am in good shape. Before you all get TOO excited though I have seen cases in FL where the judge does not care because he calls it an ‘equitable loan’ and will hold the borrower to that (meaning if ABC did not loan but XYZ did he finds for XYZ anyhow).

    But yeah I don’t understand how the MPLA (morg purchase loan agreements) dont cause BIG probs for the banks.

    Yes I agreed that they could sell the loan downstream after I signed but I did NOT agree to a 45 page agreement I NEVER read that was set up 2 to 5 yrs before settlement. I dunno. U can argue both ways.

  13. If the Mortgage Note was securitized the money trail only matters when the borrower sues. After the securitization all payments made to the pretender lender are owed back to the borrower. A security and a note cannot (by law) exist on the same asset. Anything brought into the courtroom by the plaintiff after securitization is a fraud, And if it’s a copy of the note, it’s a copy of a security which is a felony. Example: I can’t make copies of Ford Motor Company stock certificates and claim they’re the real deal, I would go to jail. How can banks get away with it!!

  14. Outstanding!

  15. COMINGLING OF FUNDS IS JUST ONE ISSUE THE ACCOUNTING WILL REVEAL.

    In my opinions the main issue the banksters have been running away from. Comingling of funds will expose the ponzi scheme.

    NEVER AGAIN

  16. @Chas404,

    I think you’re hilarious! I’m glad you’re having a problem with that: it is a lot worse than lack of disclosure. It is fraud in the sense that you, as the borrower, are being purposely set up into a situation you know abolutely nothing about, with players you have no knowledge of. It’s not just failure to disclose. It’s complete misrepresentation of a contract and its clauses…

    Why do you think we’re in such a doodoo?

  17. I have a problem with the mortgage loan purchase agreement being agreed to by the originator with say Countrywide for instance 5 yrs ahead of the subject loan closing with the buyer and the originator.

    I just seem to find it problematic that the borrower is sitting there at the closing table with ABC originator yet ABC has made a 45 page agreement 5 years before to sell ALL its loans that same day automatically to a Countrywide.

    I think that fails disclosure. Who is technically the lender? I think it is Countrywide and the borrower has not been allowed to review the 45 page mortgage loan purchase contract.

    I would love to see a lawyer present this to a judge and see what the judge says.

  18. It would be nice if we could get a real document trail to prove the notes were sold multiple times. The books were cooked big time, and we need to see them

  19. Neil,

    Thanks for being “on the mark” AGAIN about these things.

    Our organization has recently been utilizing receivership in State court, federal court, and bankruptcy. In BK, you are subject to approval by the US trustee, and the judge, however…

    Think of receivership as a way to help the judge understand the accounting of these issues, by hiring(appointing) an accountant as a receiver, who acts as an officer of the court. The judge listens to the counsel of the receiver, who is neutral.

    The receiver requests proof of claim from creditors, who gets scrutinized, and subsequently denied.

    Many state jurisdictions allow for avoidance of liens in receivership, just like BK. In addition, there are powers to avoid fraudulent transfers from the estate.(post foreclosure eviction is a great place to petition for the appointment of a receiver.

    For more information, about appointment of a receiver contact us:

    Mortgage Legal Defense Associates
    MortgageLegalDefense.com
    1-800-659-5785

  20. i think the answer will be that the borrowers mortgage/note has been paid in full

  21. I think Neil is posting about the bookkeeping, accounts recievable
    and accounts payable.

  22. @Neil,

    It sums up what I’ve been saying all along: follow the money.

    That being said, the title of your article is “accounting and receivership”. Are you talking about receivership as in bankruptcy or foreclosure? Whose receivership?

    Inother words, would you say that your article applies to defense only or do you think that this is something that can be argues and used in… let’s say, an lawsuit filed by the homeowner against the servicer in federal court (Tila, respa, etc. kind of action)? Because those are the questions and answers that I find the most pertinent. But it wouldn’t do me any good if i can’t use them…

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