Discussion Started Between Livinglies and AZ Attorney General Tom Horne

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Editor’s Comment:

Dear Kathleen,

Thank you very much for taking my call this morning.

The question that Neil F. Garfield, Esq. had asked AZ Attorney General Tom Horne at Darrell Blomberg’s meeting was:

Why is the Arizona Attorney General not prosecuting the banks and servicers for corruption and racketeering by submitting false credit bids from non-creditors at foreclosure auctions?

Please feel free to browse Mr. Garfield’s web blog, www.LivingLies.wordpress.com as you may find much of the research and many of the articles to be relevant and of interest.

Mr. Garfield wishes the following comments and observations to be added, in order to clarify the question being asked.

It should probably be noted that in my own research and from the research from at least two dozen other lawyers whose practice concentrates in real property and foreclosures have all reached the same conclusion.  The submission of a credit bid by a stranger to the transaction is a fraudulent act.  A credit bid is only permissible in the event that the party seeking to offer the bid meets the following criteria:

1.  The homeowner borrower owes money to the alleged creditor

2.  The money that is owed to the alleged creditor arises out of a transaction in which the homeowner borrower agreed to the power of sale regarding that debt

3.  Any other creditor would be as much a stranger to the transaction as a non-creditor

Our group is also in agreement that:

4.  Acceptance of the credit bid is an ultra vires act.

5.  The deed issued in foreclosure under such circumstances is a wild deed requiring the title registrar to attach a statement from the office of the title registrar (for example Helen Purcell) stating that the deed does not meet the requirements of statute and therefore does not meet the requirements for recording.

6.  In the event that nobody else is permitted to bid, the auction violates Arizona statutes.

And we arrived at the following conclusions:

7.  In the event that there is no cash bid and the only “bid” was accepted as a cash bid from either a non-creditor or a creditor whose debt is not secured by the power of sale, no sale has legally occurred.

8.  The applicable statutes preventing the corruption of the title chain by such illegal means include the filing of false documents, grand theft, and evasion of the payment of required fees.

9.  This phenomenon is extremely wide spread and based upon surveys conducted by our office and dozens of other offices (including an independent audit of the title registry of San Francisco county) strongly suggest that the vast majority of foreclosures in Arizona resulted in illegal auctions, illegal acceptance of a bid, and illegal issuance of a deed on foreclosure-which resulted in many cases in illegal evictions.

10.  Federal and State-equivalent RICO may also apply, as well as Federal mail fraud which should be referred to the US Attorney.


It should also be noted that all the same attorneys agreed that the use of an instrument called “Substitution of Trustee” was improper in most cases in that it removed a trustee owing a duty to both the debtor and the creditor and replaced the old trustee with an entity owned or controlled by the creditor.

This is the equivalent of allowing the creditor to appoint itself as Trustee.

In virtually all cases in which a securitization claim was involved in the attempted foreclosure the Substitution of Trustee was used exactly in the manner described in this paragraph.  This method of applying the powers set forth in the Deed of Trust is obviously unconstitutional as applied.

Constitutional scholars agree that the legislature has wide discretion in substituting one form of due process for another.  In this case, non-judicial sale was permitted on the premise that an independent trustee would exercise the ministerial duties of what had previously been a burden on the judiciary.

However, the ability of any creditor or non-creditor to claim the status of being the successor payee on a promissory note, being the secured party on the Deed of Trust, and having the right to substitute trustees does not confer on such a party the right to appoint itself as the trustee, auctioneer, and signatory on the Deed upon foreclosure nor to have submitted a credit bid.

We are very interested in your reply.  If your office has any cogent reasons for disagreement with the above analysis, we would like to “hear back from you” as you promised at Mr. Blomberg’s meeting 22 days ago.  We would encourage you to stay in touch with Mr. Blomberg or myself with regard to your progress in this matter in as much as we are considering a constitutional challenge not to the statute, but to the application of the statute on the above stated grounds.

Thank you for your time and consideration,


Neil F Garfield esq

licensed in Florida #229318


17 Responses

  1. Is it normal in California for the original trustee on the Deed of Trust to be affiliated with the originating “lender?” If not, does anyone know where the laws are that state that they are supposed to be an independent party?

  2. Anyone had any sucess with the FBI Phoenix

  3. “The nonjudicial foreclosure proceedings were marred by repeated statutory noncompliance. The financial institution acting as lender also appeared to be acting as the trustee under a different name…and the trustee conducted a sale without statutory authority. Equity cannot support waiver given these procedural defects and the purchaser’s status as a sophisticated real estate investor or buyer who had constructive knowledge of the defects in the sale…We conclude the trustee sale was invalid…”

  4. and this for newbies:

    First, “certificate purchasers” are the banks themselves (security underwriters), and they only purchase a “pro-rata” share to a “pool” of cash flows —- that is all — they are NOT the mortgagee/creditor—the trust is assigned the loans from which the pass-through cash flows are derived—it is the DEPOSITOR (subsidiary), that owns the collections rights (they are not mortgage loans), and the Trust itself. The “certificate purchasers” (the bank security underwriters (another subsidiary) themselves) then repackage the certificates to “pro-rata” cash flows into CDOs that are marketed to security investors — who are also never the mortgagee/creditor. According to all PSAs — there must be a documented valid sale of the “loans”, with supporting Mortgage Schedule to the Depositor in order for any Trust to be valid. There was never any valid sale of loans — and the loans were never actually loans — they were collection rights.
    Second, since the “loan” refinances (subprime/alt-a), and jumbo new purchases were non-compliant and non-performing manufactured defaults, no funding at all was necessary (except for the cash-out for the loans). The warehouse lines of credit never actually transferred any actual cash for funding. These lines of credit were simply “credit lines” that the “Depositor” would provide to their correspondent lenders. Once the “loan” refinance origination was completed the Depositor would then reverse the “credit” owed by the correspondent (originator). This never involved any actual deposit of cash proceeds —- the “funding” payoff check is never “deposited” into any bank account. The check is routed to a security derivative clearing house — who then simply cancels the credit-line transaction.
    Third, it is not productive to state that since someone else was actually making payments on the “loan”, “albeit” not the borrower, that the loan is not in default. Courts do not care about this — they only care if the borrower is in default. However, if the actual party does not come forward claiming that the debt is owed to them, and the actual party cannot prove how they came to own the collection rights — borrower does not owe the debt to anyone. That party is never going to able to demonstrate that collection rights belong to them because they would have to divulge the above fraudulent process and that the “mortgage loan” from onset was not a mortgage but, instead, collection rights. This admission would also mean that the “debt” is unsecured and can be discharged in BK.”

  5. for newbies:

    Search Maiden Lane. Maiden Lane is the purchaser of all the security tranches that the banks could no longer hold. Maiden Lane has “restructured” those tranches into one big TRUST, that is now sold to other distressed debt buyers by the management of distressed debt buyer bigwigs. You certainly cannot have pass-through of “cash flows” to the old (dissolved trust) and to Maiden Lane managed by distressed debt buyers.
    But, the problem is that these trusts, dissolved and Maiden Lane, is only for pass-through of current cash flows. They were not, and are not, the current creditor/lender as now defined by the Federal Reserve. The Federal Reserve has long stated that security investors are not the creditor/lender and that collection rights are not passed along with cash flow pass-through. This is clarified by the Fed Res Opinion (now Rule) to the TILA Amendment. This is quite clear, and as I posted elsewhere, recently clarified by a Federal District Court (as to the Fed Res Opinion and TILA).
    The biggest mistake we have made is to EVER claim that security investors are the lender/creditor. This has been a disaster, in error, and absurd.
    I can only surmise that those that continue to believe the dissolved trusts still exist, and that security investors are the creditor/lender, have a self interest that has been extremely counter-productive to fighting foreclosure fraud.
    ANONYMOUS, on December 11, 2011 at 5:36 pm said:
    Testimony??? Yeah, by debt buyers themselves. Is it not ironic that the “goal” by these so called “investors” is to “keep people in their homes?” That should NOT be the “goal”, because “keeping people in their homes” by their terms, means continued victims and continued fraud. The goal should be to expose the fraud and to allow people to rightfully OWN their homes. You cannot promote home ownership by continued fraud. The goal MUST BE to expose the fraud that has been perpetrated by the “investors” and then let the people “KEEP there homes” — not “keep people in their homes” by continued fraud.
    We are not talking securitization of cash flows, that is a separate issue, and those are “security investors” that are not the lender or creditor. We are talking debt buyer “investors” of (fraudulent) collection rights. Debt buyers do not want homeowners to keep their homes because to rightfully keep their homes, the fraud MUST be exposed. And, certainly, debt buyers have no incentive or desire to expose that mass fraud.

  6. He doesn’t prosecute probably because he is similar to: http://www.justice.gov/opa/pr/2012/May/12-crm-633.html

  7. This should be done in CA also. The FBI, Local DA, Attorney General, SEC, CA Dept of Corp all have no interest in any prosecution

  8. Not everything that can be counted counts. Never Give up !

  9. neidermeyer

    Not sure if we can fight with conventional weapons. However, these bastards are not so conventional. We need men like William Wallace who can consume the banksters and congress with fire balls from their eyes and crap lighting from their a$$. It is now time we bleed together and once again secure our freedom! Our fathers fought for our land – and it is not theirs to steal ! . Never give up!

  10. @BSE ,

    We need a lawyer that is

    1.) knowledgable ..
    2.) fed up at the system..
    3.) willing to take a few hits (look at the attacks on Matt Weidner)

    We need to go nuclear on them .. the sale on credit is ballgame … here’s an inspirational speech for us all ..


  11. neidermeyer

    Hell of an idea. I should go to the auction and pick up a home for $300 bucks and dump this junk that I am $ 200,000 upside down on. Sounds like a damn good trade. Please teach me “how”

  12. Good stuff.

    “It should also be noted that all the same attorneys agreed that the use of an instrument called “Substitution of Trustee” was improper in most cases in that it removed a trustee owing a duty to both the debtor and the creditor and replaced the old trustee with an entity owned or controlled by the creditor”

  13. @javagold

    Big thumbs up from me … The sale is where the rubber meets the road … if they can’t convert their lies to cash they will stop.

    Neil , we need one big showstopper of a lawsuit to drive this point home … to gain standing all we need is to be a bidder that was outbid on credit … As bad as Florida is we can get a foothold here … Neil you know my real name .. look up suits in FL Ninja9 http://myclerk.myorangeclerk.com/default.aspx with my name … I successfully (and at NO COST and with no resources) challenged 15 sales on standing and delayed them for up to a year … This is a good way to access the courts .. I can be a figurehead if you like I don’t mind upsetting them ,, lets go after million dollar estates … They bid $100 , I bid $200 , they bid $300 , they win , we challenge , I get the estate!! We’ll do it on maybe 10 properties and sell them off afterwards to pay for other peoples defense.. I have a person that may be able to supply as much as $15k if we need it and we can show him a credible plan.. I can’t do it myself but I’d be happy to be a cog in your machine.

    I’m not joking ,, lets do this ,, it’s time to go out in style.

  14. Good luck getting an answer! Way too specific for anyone to stick his neck out. Especially when we don’t know whose marching orders they are following. But the guy should now know loud and clear that he may very well be a… one term AG. His choice.

  15. The credit bid at auction is where the war needs to be fought moving forward. The banks will never come up with the cash and the homeowners should stick together.

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