Ohio Sets Back Steamrolling: First Things First

Mellon Bank v Shaffer Ohio Appeals Ct Says You can’t Fix Jurisdiction

In a decision that is interesting from many points of view an Ohio appellate court ruled that you can’t fix jurisdiction by assigning the loan and recording the documents after the foreclosure suit is filed. This could have substantial effects on non-judicial states as well. If at the time of the notice of sale the foreclosing party did not possess ownership of the loan the notice should be declared void and anything that happened after that point would be reversed. In this case the foreclosure judgment was reversed and so was the sale.

I find it interesting from other points of view as well. If you look at the style of the case you will see a sneaky attempt to correct fatal defects in the alleged securitization of the loan. As I have seen in numerous other cases especially those involving US Bank there is no actual trust mentioned as the plaintiff. In effect, nobody is suing. There are a lot of  places where the word “trust” is mentioned but there is nothing that actually says that interest exists or that a trust has been named as the plaintiff.

In previous articles I have outlined why I think that the investors are actually in a common-law general partnership and not as beneficiaries in the trust. In cases like this the first reason is that the trust doesn’t exist at all under the laws of any state. The second reason is that they are using the self-serving designation of “trustee” for a pile of certificates. In most cases the certificates do not exist on paper and therefore there is no pile. But even if there was a pile of certificates they would only be evidence of the issuance of a mortgage bond by an entity that doesn’t actually exist (the trust) or could only exist by operation of common law as a general partnership.  In effect each investor seems to own either an indivisible share or a divisible share of a cluster of loans —  but only if their money was used to purchase those loans or was used to pay for the origination of those loans. I have no doubt that the investor money was used for the origination of the loans.

The problem for the banks is that  the note and mortgage do not mention or name the individual investors or the investors as a group even though the money trail leads directly from the investors down to the closing agent, who will undoubtedly claim that they did not realize that the money was not coming from the party claiming to be the originator (the pretender lender) which is why the closing agent prepared a note and mortgage naming a party who was not the source of funds (and therefore not the lender) and who had no contractual relationship with the source of funds. In fact it is fair to assume that the closing agent had no idea of the identity or existence of the investors individually or as a group either as a general partnership or a trust.

This is the reason why I have expressed the opinion that the mortgage never became a perfected lien against the property even though it was recorded. It is either fraudulent or a wild deed.  whether the investors can claim the benefits of a contract signed by the borrower without assuming the liability for disclosures required under the truth in lending act is a question that has yet to be decided. But part of it has been decided. In Missouri and other states it is established law that there is no such thing as an equitable lien. It either exists because it conforms to state law or it does not exist.

Another thing about this decision which comes from the style of the case is that the plaintiff is supposedly the successor in interest to J.P. Morgan Chase Bank. This is where discovery and subpoenas aimed at the money trail will prove that no such transaction ever existed. As Judge Shack in New York has pointed out several times there is no reasonable business basis for the purchase of a loan that is already in default and where the collateral is either worthless or substantially below the amount due. While it is true that generally speaking the law does not look to the adequacy of consideration, is also true that where the consideration is wildly out of reason, that something other than the loan itself was conveyed, to wit: either the mortgage servicing rights or the right to receive income as “trustee”.

In the  last point I will make is simply that all of the entities mentioned in this specific case were heavily involved in the securitization scam. First they sold the mortgage bonds under false pretenses and then claimed ownership of the bonds and the underlying mortgages; second they received third-party mitigation payments under circumstances where there was an express waiver of subrogation or contribution from the borrower. Those payments were not sale of the bonds or the loans.

Thus the bond receivable account should have been correspondingly reduced by the amount of money received by the banks on behalf of the investors. This obviously would reduce the account receivable that was due to each investor.

If the account receivable was properly adjusted for payments received from third parties the amount due from anyone (including the borrower) would be correspondingly reduced.

Thus even if the securitization scheme was executed properly, most of the loans to borrowers should have reflected a decrease in the principal amount due because the creditors’ account receivable had been reduced by payment. This is why I say to follow the money trail before you follow the paper trail. The paper trail only talks about transactions. The money trail reveals the actual transactions against which you can compare the paper trail proffered by the banks in illegal and wrongful foreclosures.

29 Responses

  1. all
    maybe enough of us sent in complaints to the Federal Trade Commission about Fidelity being allowed to buyback LPSDOcx
    that LPS could no longer operate in this country.

    Now we have to be on the lookout by the FTC or another agency about input into that these fraudulent documents made in India
    be banned from being imported into America.

  2. I miss you Stripes but I remember reading here you said you to go to Court in August.
    Yesterday I bumped into an friend that got her message out and WON against a bank by tweeting.

  3. NG – since no prudent business would purchase a note in default,
    who is trying to do what? The investors laid out money years ago and got nothing (as evidenced by the prima facie assignments of the notes and dots). What do the investors actually have and who is trying to stick them with what and in so doing, the who is avoiding what? It’s own liability to the investors including for any shortfall as to the collateral.

  4. NG: you’re absolutey right – there is no reasonable business basis for anyone to purchase a note in default, especially when the collateral will not return an amt anywhere near what is alleged to be owing on the note. But a caution: that it won’t is not a fact in evidence. But then,
    especially on a note in default, any prudent business person would (wouldn’t you?) do some kind of at least cursory look to determine the value of the collateral. Even in states which allow deficiency judgments (by way of judicial foreclosure and not non-j f/c), what business wants to put up the dough to find out if it can get one, i.e., is the borrower collectible?
    About that partnership, I need to review a couple of your older posts, but just now, because these are notes reg’d by the UCC, I don’t see the partnership. I see something else, starting with the investors owning the notes with them being held in trust (not a secn trust – just held in trust) for them by whomever* or the investors hold security interests pursuant to the UCC, neither or which appear to be cool with the trust law relevant here. The bottom line of that for me is there is no NY Trust in play here and no preferential tax status, the ramification of which must be borne by the bad actors who caused the loss of that status = the bad actor is liable for the tax liability incurred by the investors.
    *hard to say exactly who that whomever is

    Either way, held in trust or security interests, seems to me the investors, probably as a matter of law, would be entitled to any proceeds the banksters received from any source.

    An assignment of a dot requires acceptance by the assignee (way I got it).
    Where is the evidence a trust would accept 1) a post cut-off date assignment of a 2) loan in default?

  5. Thank you, NG et al!

  6. now I can go back to 1 Prozac a day……

  7. @tnharry…sorry, old boy, but you’re a little late to the party. we got rid of her by a slew of letters, emails and direct phone conversations with Neil’s daughter over the last month or so.

  8. Tnharry,

    You haven’t completed your assignment. Get back to work, there’s still more to do 🙂

  9. I’d like to claim full credit for the stripes departure since it happened right after I complained…. 😉

  10. Bob,

    She’ll go haunt some other blog…

  11. To All…Time to pop the champagne !

    Not only is Stripes gone, all her posts have been “stripped” from this entire blog!

    @Marilyn Lane…now there is no one crazier than you on this blog. Word to the wise…you’re now in the “on deck circle.” Forewarned is forearmed.

    A concerted effort by a substantial number of good and useful posters got that lunatic booted off here. I have an image in my mind of her levitating in front of her computer, with her head revolving 360 degrees rapidly, and her screaming obscenities and projectile vomiting green goo.

    I will guarantee you that we are now feeling our oats, and won’t hesitate to take additional action to clean this place up. So I strongly encourage you to shape up, ask good questions, avoid insane diatribes and insults against your fellow posters, make positive contributions, or be silent.

    And now that NG has booted one menace, I don’t think that he will hesitate to boot any other troublemakers that attempt to hijack his website.

  12. Bob, I hope we do not see any more of Stripes, but she has come back before.

  13. Bob G.,

    I noticed too but I don’t want to rejoice too fast.

  14. Do my eyes deceive me or has stripes finally been exorcisms from this site ?

  15. Remember louise, it is a bond trust…check the ability for bond holders to foreclose! LOL

  16. as for math skills I was top of the class, that’s why I cant type.

  17. the proof of a big accounting problem is the 1099A
    look at the originator recorded as “beneficiary”, look at the substitute trustee, how it was appointed by who, look at the trustees deed upon sale, who, what dollars, look at the 1099A, who, what dollars, look at the Bank NA, look at the capacity in which each player operates, who how when where for how much money. In my case there may have been an easier path, im taking careful baby steps, Capricorn is a mountain goat, they keep going until they reach the summit.

  18. “Do the max gardner thing”

    Welcome back, Tnharry. Of course! Get the goods, get past the MSJ (or appeal it… smartly) and move on to the negotiating table!

    And move on if you lose or tell people what went wrong. Now that would be real information!

  19. @Christine

    Yes I’m glad to see tnharry back and enjoy Bob’s commentaries as well!! Let’s hope it stays this way. . .

  20. and…”Equity”/assets should always cover your Debt- I did not use my home as a credit card ok…I though I had equity, based on a hyper- inflated appraisal- no appraisal – no “loan” underwriting, Reliance, and PUBLIC TRUST. – and I have always thought this argument a big darn point- stretch those numbers over a few years and it may look very convincing, but economically it was a hostile market, median home price outstripped median income, if not for the Bubble market the homes real value, considering economic forces were about half the selling price in 2007. and, that’s all I have to say about that.

  21. the ” trust” is not mentioned until they file a forcible then the atty for the foreclosure mill tells them sorry matey, ive done my part (not literally) and they switch chairs and become an “attorney in fact”..
    they all suk

  22. One of the easiest ways to get some quick traction and relief is to blend RESPA, FDCPA, and your state’s consumer protection laws. You can usually make those stick long enough to make it thru a 12b6 motion. Do the max gardner thing – work a payoff, a qwr, and the demand letter together to show discrepancy in their figures and go from there. Use discovery to justify amending the complaint. They’ll drag their feet on responses. Hold their feet to the fire with a motion to compel. Use requests for admissions to trap them into one version of the “truth”

  23. Papergate,

    Let’s just hope Tnharry sticks around… And Bob G. doesn’t take a hike.

  24. I notice the return of some bright people . . .!

  25. @tnharry – How do you question the amount paid for the Subject Loan or chain of beneficiary interest? If transfer to ‘vesting’ forecloser was done after NOD in first case, you can reference that to show they had knowledge of default when they bought note and are not holders “in due course” as a result. Or at least QUESTION THE AMOUNT PAID for your note as a question of equitable capacity, because they can’t collect more than they paid for the note.

    If your state does not require assignments to be recorded, then you have a second reason to question chain of title.

  26. I am not sure how “special” math skills are part of the equation. I would put this issue on the level of responsibility of the homeowner. I would also add in the “fraud” calculation of the servicers. After all, they get paid more money if they cause additional defaults. How is that for adding and subtracting?

  27. To all the Fraud Busters that think they know something about mortgages and the Bible – Learn to add

    Forbes 2013 Article – Whether you’re good with numbers predicts how likely you are to default,” said Stephan Meier, an associate professor of business at Columbia Business School, who authored the report along with economists from the Federal Reserve of Atlanta and the University of Louisiania.

    The study examined several hundred borrowers who held mortgages issued in 2006 and 2007 — right before the mortgage meltdown. Of the study subjects, 25% of the borrowers who scored in the lowest bracket for math skills had defaulted on mortgage payments within five years of getting the loans. Meanwhile, only 5% of those in the top tier for math skills defaulted.

    Related: Homebuyers clueless about mortgages

    The survey sample included homebuyers from a variety of backgrounds, from blue collar workers to corporate professionals. Their math ability covered the gamut — from those with very limited abilities to a mathematician with a six-figure salary, according to Kristopher Gerardi, an economist with the Federal Reseves.

  28. Reversed and remanded with instruction to dismiss without prejudice. Foreclosing party refiles now that their docs line up. Win the battle, lose the war.

    Have to find good defenses or clear, concise causes of action to stay in the game.

  29. As far as I can see, we have debt being created without actual funding of the transaction by anyone. How can a non-performing loan be put into a trust in the first place? How can a non-performing loan be put into a trust AFTER the trust closed? Violations of NY Trust law.

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