Federal Bankruptcy Judge Explains Wells Fargo Servicer Advances

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Mortgage Lenders Network v Wells Fargo, Chapter 11, Case 07-10146(PJW), Adv. Proc., Case 07-51683(PJW)

In an adversary proceeding in which evidence was presented, Judge Walsh dissected the confusing complex agreements involving the real set of co-obligors’ liability to the Creditor REMIC trust. Many thanks to our legal intern, Sara Mangan, currently a law student at FSU.

I had no idea the case existed. It apparently got buried because of all the ancillary issues presented. If you really want to understand the complexity of repayments to the creditor, this is one case that deserves your full attention.

As usual the best decisions are found when the adversaries are both institutions. We are looking for more such cases. This certainly applies to any Wells Fargo case and explains the nervousness of the witness during trial when I asked him about whether the records he brought were complete.

The LPS Desktop system (formerly Fidelity) INCLUDES servicer advances and computations made based upon that. The unavoidable conclusion, drawn by this Judge, is that everything we have been saying about servicer advances is true. Everything in our forensic report is true as to all properties. The servicer makes those payments based upon a payment of enlarged fees for taking the risk on itself, according to the agreements. Whether there is an actual right to recover from anyone is actually not specifically stated except that the net proceeds of liquidation of REO properties after the auction are subject to servicer claims. This might include other insurance or guarantees.

There is no default experienced by the creditor. There is a new potential for a new party (not mentioned in note or mortgage) for recovery outside the terms of the note and mortgage. The expectation is that there will be a foreclosure and there will be a sale. If there is no foreclosure and there is no sale, then the amounts are not recoverable — unless the servicer too is insured. But all of those insurance contracts seem to have been purchased and procured by the broker-dealer (investment bank) that sold the bogus mortgage bonds. The conclusion to be drawn is that the default notice to the homeowner-borrower might be valid (probably not, because servicer advances have already begun) but it is cured immediately after it is sent by payments, often from the same party who sent the default notice.

Remember the language in US Bank and Chase et al. The servicer SHALL make the advances unless it believes the advances are not recoverable. If the servicer was merely making a loan to the trust beneficiaries there would be little doubt that the advances were recoverable. They can argue that the advances are recoverable in substance from the borrower, but that is only AFTER the foreclosure Judgement and AFTER the sale and AFTER the liquidation of the property after the auction sale.

In this case, the following issues are addressed:

1. Servicer advances — in 4 categories. Why they are advanced and when and how they might be recoverable — when the properties are liquidated. There is some confusing language in there about the trusts, so you need to read it carefully. But the main point is that this is a case of prior servicer and new servicer, both of whom take on the obligation of making servicer advances whether the borrower pays or not. If there is a short fall, the servicer pays — or an insurer. In reality, and not addressed by the Court is the fact that in all probability the actual money advanced by the servicer most likely comes from a slush fund created by language buried deep inside the Prospectus or Pooling and Servicing Agreement that allows the investment banker to pay the trust beneficiaries using their own money advanced by them when they became trust beneficiaries.
2. Recovery is clearly stated as whatever money is left after the REO property has been liquidated or from the borrower. [Note there is ONE reference by the Judge to recovering from the Trust but he doesn’t explain it nor does he cite to anything in the agreements]. Since this provision is not referenced in the mortgage, they cannot be traveling under the mortgage and there is no mention of the mortgage provisions in this decision. Since those proceeds frequently are far less than the amount advanced, there is ono direct right of action by the servicer against the borrower, although I postulate that they could potentially bring an unsecured claim for restitution or unjust enrichment.
3. In the end one previous servicer owes the other new servicer the advances, not the trust and not the borrower.
4. There is insurance that makes sure that if the servicer doesn’t make the payments, then the insurer will make-up the shortfall. The insurers do not appear to have any recourse against anyone.

5. There can be no doubt that there are two types of default — one where the borrower stops paying on a note and mortgage (assuming the note and mortgage are valid) and the other, where the REMIC trust beneficiaries fail to get the required distribution as set forth by the Prospectus and Pooling and Servicing Agreement.

6. The conclusion I draw is that the recovery of advances “by the servicer” takes place after the mortgage has been foreclosed, by which time the initial homeowner borrower is out of the picture. Hence, it seems that while there are “proceeds” that can be claimed by the servicer, it is under a separate transaction with the REMIC Trust and under a potential right to claim money from the borrower for contribution or unjust enrichment — with unjust enrichment being a center-point of this case.

This case also explains many other transactions that occur between the servicer and other entities. It isn’t the encyclopaedia of servicer advances, but it explains a lot of what I have been talking about. When the borrower stops making payments for any reason (and perhaps legal reasons for withholding payment, or being prevented from making payments by a servicer who proclaims the loan to be in default), the creditor keep getting paid. So even if the allegation is that the cessation of payments was a default under the note and mortgage, the fact remains that the creditor is not experiencing any default because payments are being made in full by various parties to the creditor. Hence, my question to corporate representatives, about whether they are showing the full record, and whether the books of the creditor show a default. They don’t, if servicer advances were made. I have personally seen a Wells Fargo witness get quite agitated as I approached this subject.

Servicers have kept this information away from borrowers and have withheld it from the courts when they do their accounting.  I would add that if the  argument from opposing counsel is that the servicer advances are secured by the mortgage because of language that includes the word “advances” then they are admitting at this point that the entire structure of the loan as presented to the homeowner borrower was a lie. Under the federal truth in lending act such disclosure was entirely necessary to complete the transaction.

It will also be inevitably argued that this gives the homeowner borrower a free ride. Of course we all know that there is no free ride in this. The homeowner has usually made a substantial down payment and has made monthly payments for years. The homeowner had spent a lot of money on furnishing and completing the house. There is no free ride. But the best argument against the “free ride” allegation is that this is asserted by the party with unclean hands (and often intentionally withheld information from the court or even committed perjury).

read all about it: case on servicer advances and unjust enrichment

47 Responses











  3. MS if the Note is destroyed and the title was in the name of the originator or let say WaMu at the court and Wells Fargo come to foreclose the Note Note destroyed cannot help them because you know the Note was blank and relinquished to Ginnie Mae if the loan is in the Ginnie Mae pool.

    I believe the arguments were not made because nobody in the industry was ask how this stuff works. We are 5yrs into this and what being said makes no sense, that a Note that does not identify the party calling the Note due cannot even product a receipt. You cannot take UCC 3 to accept the Notes and then ignore what it take to sell the Note in UCC 9!

  4. Christine – I read the material re PITT bank and JPM. 400M lost! How in the sam hell can anyone think of that whole gang as anything but
    what they are? Free house? Nothing is free. We’ve all paid a pretty darn stinking high price for “free”. God knows how many people suffered for the loss of that 400M and the other zillions like it.
    And no one indicted – a ^%$#@!* gain. This whole country and maybe even the whole world must be being held hostage by those guys. There’s really no other good explanation to me. Obama is never going to have the legacy he wanted. They were never going to let him. He might as well take as many with him as he can (which he should do, anyway).

  5. Hammertime

    You got it

    The Originator is the Grantee who’s interest is held by a nominee for the shares its purchasing as the investor. Its trustee is alleged the servicing agent and the obligation created under this clandestine financing scheme is sold to off shore central banks as bank to bank debt

    There you have it . Lender , investor and servicing.


  6. again THE NOE WAS DESTROYED. Common law will not deny the claims made by a holder in due course lost note or not. This sets up an abuse of law whereby the benefit achieved by act of destroying a makers instrument benefits the dominant party ….and places the maker in a compromised position.

    If you use a blank endorsement its only good for 180 days anyway Why ? The lost note is moot argument – the reason it was destroyed is valid for failure of consideration

    JG how much time on the internet over the holidays?
    You have a family ?

  7. Mr. Garfield, have you or any of your associates come across a case where an advance was removed from the payment history. The “lender/servicer/investor”, claims to be all 3, only ackowleged the question much later and said it was an internal matter.The original date seems to correspond to a major merger/sale (day after) while the acknowledgement date is years later. In CA.

  8. Why Ginnie, Wells & MERS are done is because we got a letter from both Ginnie Mae and Wells Fargo confessing that neither is the “lien holder” and the originator providing a letter that they sold the loan to WaMu on Jul 21, 2003. So it legally impossible for the originator to have sold the loan to Wells Fargo on Oct 22, 2009 as the assignment of is suggesting and as the NOD tricks the land recorders office.

    The crime is creating the forgeries and delivering it to the court, confusing the term holder so that the recorder would think “holder in due course” and allow a administrative foreclosure to take place. Cleave plan but without the receipt per UCC 9 is dead. The problem is the originator not involved in the scheme of forgery and that they provided a letter letting the regulator in the FDIC know when and to who the sale was too, and the fact that WaMu is a “fail bank” and cannot ever talk for themselves ever again in the matter, then the documentation speaks for itself, in the blank Note, Ginnie Mae pool certification and no assignment of DOT by originator to WaMu.

    Even if WaMu was still alive and not ever having a assign of DOT the best they would have had was a unsecured loan!

  9. We are taking one GSE (Ginnie) and one lender turned issuer (WaMu) and one servicer plus their position as custodian (Wells) and 37,000 of the Ginnie pool loans and they all be uniformly, so the required process trap them in every single case, in how each loan is process. This is why I submitted the Whistle-blower case in 2011.

  10. MS your the custodian of records, you cannot come to court and claim you lost 100% of 1.3 million WaMu government insured loan you were in custody of and claim your a custodian. Especially when Ginnie Mae got not other proof that the document was as part of the requirements to relinquish the Note in blank endorsement, plus you got a HUD 11711A signed by WaMu!

    We only have to present the Ginnie regulation to prove our case in 100% of every single foreclosed loan that Wells Fargo conducted that was a WaMu loan. The are going to be at least 37,000 of them for 2009-2010 just with a 3% default rate which was under the standard of government loans default rate. Plus we know Ginnie Mae was unable to modify the loan because they had no financial interest and by law cannot authorize a change in interest rate or term, as Ginnie Mae is not a lenders and cannot make the debt for the taxpayer. Ginnie Mae is a victim of their regulation!

  11. MS why the Note is not destroyed in the case of WaMu and Ginnie Mae pooled loan is that in the end Ginnie Mae got no proof of ever possessing the Note nor Wells Fargo because there is no sale receipt for them to make there case the are entitled.

    Yes if the originator lost the Note there going to be a receipt that X dollar went to the borrowers to purchase home or refinance, however as the holder of the Note in the successor or custodian of recorder, who alleged some ownership but does not have any record that monies exchanged hands, come to court asking what?

    I was delivered a blank Note I did not purchase and now I cannot find it, so I want to foreclose on the property? You have no claim as it publish by Ginnie Mae that the don’t originate, buy or sell home mortgage loan at all, because they are not an investors, and the also do not purchase sell MBS! They (Ginnie) are done in any claim and Wells Fargo already admitted they are not the “lien holder/holder in due course” and have already supplied the Note as the custodian of record to their regulator in the OCC!

  12. John gault – I believe that the actual difference between a holder and holder-in-due-course is that the HIDC status is the result of a perfected chain of title.

  13. @ Master Servicer .

    1st , What is the particular “unenforceable clause” we should be looking for?

    2nd , YES the note was destroyed… I have WF as plaintiff , they are also doc custodian and in 2+ years they have been unable to supply an original note… Of course I also have the “originator” , Option One and the local branch manager here (friend of the wife back then) has told me they never mailed/FedEx’d anything to California ,, just scanned and shredded… This involves JPM (minor underwriter) , BAC (lead underwriter) and WF (depositor/ms/trustee etc.) With that many major players involved this had to be standard industry practice … and we can all surmise why.

  14. Leave a Reply

    Blank endorsement – Very valuable to a securities platform as it is open to the world and enforceable by anyone who holds it …

    Even when held by another lacking consideration , if LOST and then found by another, or given in fraud or transferred by hands illegally to an innocent of a party who takes it in good faith

    …..its blank and open enforcability is DANGEROUS yet critical however allowing Mers to act as a surrogate beneficiary or random assignee to step in as a token holder in due course.

    …..Do you see why a controversy exists for the LOST NOTE
    Trust me it was destroyed ….. D E S T R O Y E D

    Your friend;

    Not an attorney and in no way is this intended as legal advice – Call your state Bar for more information on finding an attorney in your area .

  15. Securities Act of 1933 -Reg D Filing . . . Often referred to as the “truth in securities” law, the Securities Act of 1933 Its objective prohibit deceit, misrepresentations, and other fraud in the sale of securities.

    Now – read again your security agreement / deed of trust and notice of intent / default


  16. Causes Claims and Other Lender Violations

    Read your Notice of Default and look for the following
    1) A certain Deceptive Disclosure (formatting)
    2) Specific Unenforceable Clause

    The deceptiveness is found in over 100 NOD’s I have reviewed and the court must be brought up to speed as to this unethical practice . The unenforceable clause is also hidden and in no way can be enforced if shown on a recorded Notice of default . And yes, I find it in 100 percent of the Notices I have reviewed .

    Your reader Christine is skeptical (abusive) about our sharing good news with you all so —I’ll not say anymore .

    But please, read your notices (NOD) . Its critical evidentury in support of rescinding a sale for claims of failure of consideration, defect disclosure and question of enforceabilty!

    More to come …I promise you .


  17. johnG here what I got and that is a request fax copy of the blank endorsed Note 1 1/2yr after the foreclosure, that I was sure to make Wells Fargo fax to the OCC at my request on Jul 13, 2011 that has the fax stamp from Wells to the OCC to me. They did not know why I wanted it but I did, and it was as I knew it must be and the was from WaMu to no one.

    What I knew was that because the Federal Government works in the same manner in each loan they have placed in the MBS, they are caught because their regulation kills them. So as I was the mortgage loan officer at the bank that originated my loan I knew every step it took, and my boss was the signature that sold the loan to WaMu and endorsed the Note.

    So I already knew after having a title search done in Aug 2010 and talking directly to one of the founders of MERS in Bill Hultman, that he was lying as to MERS authority in Nebraska, because I had already pull from the Secretary of State Office that MERS had never finish registering to do business in the State, because of them taking the Department of Banking & Finance all the way to the NE Supreme Court and won determining that they were not a “mortgage bank”.

    You see in the State of NE they are heavy on registration fees and taxes, and MERS in 2005 did not want to pay. However this case will come back to hunt them because NE put in a statute 76-2710 as part of the Foreclosure Protection act that said that no registry that does not have a financial interest in the loan can act as a lender and cannot assign interest.

    You have to register and be certified by receiving a certificate to do business in the State or you cannot use the State’s court system to do business. MERS v. NE Banking & Finances 2005. You can see that the State did not like losing to MERS so they passed laws forcing MERS to show their hand. Now I believe NE is currently milking these settlement, until this all settled out, and they are waiting on the New York lead saving legal cost.

    Back to the issue at hand, I knew for sure the Note was sold to WaMu as I put the overnight packet to be purchase by WaMu 48 hour after the Wednesday Jul 9, 2003 by FEDEX. So what I did, not working for the bank any longer I wrote to the regulator in the FDIC and had the sale date to WaMu in letter form to them and sent to me (I already had a letter from the bank as to who and when they sold the loan).

    Next was to get the OCC to work for me and that was to confront them with the forgeries and they confessed that they were not the “lien holder” and they said Ginnie Mae was the “lien holder”. Next I wrote HUD Secretary Donovan and supplied the letter from Wells Fargo and he had Ginnie Mae response to me and in their letter stated the Wells Fargo was mistaken and that Ginnie Mae was not the “lien holder” as they don’t purchase of sale home mortgage loans!

    WaMu was the last link to Great Western Bank the originating lender who I know funded the loan because I hand carried the bank’s check to the closing. Ginnie Mae did not know why earlier I was requesting my file, but before I wrote HUD Secretary I had already received most of the file from them through the FOIA.

    However Ginnie knows now I am trying to back them into a corner, which I now that I got them because it is what it is. There cannot be a trust between Ginnie Mae and the blank Note, but we already have statement from the two player in Wells and Ginnie that neither is the “lien holder” and have not purchase the so they are not damage and cannot collect and WaMu not in court calling the Note due because they no longer exist, but they did not have a Contract/Note to present to a court.

    The paper trial for a Ginnie Mae pooled loan is set in stone, so there are no surprise entity the could put in the blank endorsement spot. Plus we already got a Note copied on a date 1 1/2yr after the foreclosure!

    Every single loan is placed into the Ginnie Mae pool exactly the same way! You cannot claim what your not owed!

  18. Terrie – I’m not a lawyer so this is a lay opinion and not advice. Generically: Last time I looked, someone had to buy a loan from fnma to modify a loan. FNMA itself had to buy back whatever it sold to end its guarantee (but had to make four payments first – probably to ascertain that the borrower would remain in default – a “seasoned” default!) Maybe FNMA changed the rules, tho I doubt it. Svcrs get paid from X to Y to service loans, basically determined by the type of loan, like fixed v an arm. By temp agreement, I’m taking it that you mean a “trial mod”, so I’m taking it that for whatever reason, the svcr gets half the modified pyment amt for instituting the “trial mod”. Or maybe the rules are the same x FNMA waives the repurchase agreement (temporarily), pending the result of the trial mod. I’m guessing fnma suspends the repurchase, but charges to do so. Weird, tho, since if fnma owns the loan, it should get all the payment in the first place. Hmmm…..fnma isn’t to my knowledge compelled to repurchase….it just has to keep making payments until it does, so maybe that’s the trade-off. Yeah, there’s no payment to get (all or half of) if there’s no “trial mod”. FNMA gets half the trial payment (instead of none) and doesn’t itself have to eat the whole amt of the guarantee payment. How do you know how the payment was split?
    I don’t know what you mean by the servicer reported a foreclosure date, but it sounds like dual-tracking, now out-lawed, I THINK.

    OMG! Is a trial mod a trick to ease FNMA’s guarantee?! If this were the old days and “a lender is a lender”, a trial mod (one of value to the borrower) wouldn’t be so bad. In fact, it would make sense. Why bother agreeing to 1400 a mo. v 1900 a mo. long term if the borrower can’t swing it for a few months even? But these days, when there is no intent (or ability) to “modify” a loan, it’s a bunch of crapinski. I lost track of the cases which ruled that a borrower has a right of action for a promised modification. Anyone seen an outcome?

  19. Last week or so (?) someone linked a consent order with think it was a title co in IL. I talked about it a little, but I left out something very important to people in IL whose assgts involved that co. The Consent Order specifically stated that the co. is compelled to cooperate in “fixing” the bs assgts. A robo-signed recorded instrument constitutes an ongoing crime, as does any false instrument recorded, as long as it remains of record. A civil fine is a punishment of sorts (slap on the wrist), but as long as the bs instrument remains of record, it’s an ongoing, persisting offense. A civil fine, if it actually does anything – if it’s actually paid – is a punishment (yawn) for doing the bad act at most. It’s not a remedy for an ongoing, persisting offense and of course, that’s the part (well, second part, shy of no. 1, criminal prosecution) to which we most object, right?
    If Alex takes over part of your property and a court fines him, but doesn’t remove his tail, what good is that? Even IF a bona fide purchaser stands between one and the return of his property, one should still be able to file a suit for damages based on robo-signing.
    Surely there are attorneys out there who know what to call the claims for a civil suit.
    And I still think that (at least) where MERS showed as the foreclosing party and the property were snarfed by an alleged credit bid (instead of sold to a third party), there was no credit bid = no sale (but the statute of limitations might be running).

  20. charles, I love you, man, and even admire your dogged determination, but no one is listed on any note as a holder in due course. That’s a legal determination which is not evident on the note. I can’t swear to it, but seriously doubt that there’s even a presumption that one in poss of a note endorsed in blank is a holder in due course. When it’s finally brought up, the banksters imo will just use their famous stamps and insert whatever name works that day. Even so, a specially endorsed note is not evidence of hidc status, even if that does constitutes a rebuttable presumption (so get ready). Going to mention that anyone who endorses a note in any representative capacity whatsoever without so indicating becomes liable on the note (info and belief from UCC article awhile back). I take that to mean that if Thomas Barns endorses a note allegedly by way of some POA, and doesn’t endorse the note accordingly, she (and her company if acting for one) have become liable. I haven’t looked into that further to see how WE might benefit.
    No one is really arguing against you that I know of. I believe you know some valuable stuff (and fwiw, I’ve said that before). Sorry, I just personally can’t get what you’re saying most of the time, but I have to holler when someone says a holder in due course is ‘listed on a note’. For you, I’m going to copy one of the basic tenets of a hidc from Cornell (take 5!):

    “2) the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306, and (vi) without notice that any party has a defense or claim in recoupment described in Section 3-305(a).”

    The instrument is not overdue if anyone else is making payments, yet the maker has dishonored the instrument by not paying! But the operative word here is “or”. Imo, the only one who may ‘dishonor’ the note itself is the maker (someone else may dishonor another agreement related to the note). So anyone who takes a note with notice that the MAKER has dishonored the note is not a hidc, and the law will not find in favor of (willful) ignorance when a duty to know exists: just the occasion of a “MERS” assgt is evidence IMO (by at least a preponderance) of a maker’s dishonor, because it’s the only time a “MERS” assgt is executed and recorded that I know of – for foreclosure (post – Consent Order).
    lay opinions, as always

  21. I’ve hollered about injury. Here’s some good info from that MERS v Ditto case from Charles: (hope some read it – I had to type the dang thing since it wouldn’t stinking copy)

    “The doctrine of standing invokes “whether a particular litigant is entitled to have a court decide the merits of a dispute or of particular issues. “American Civil Liberties Union of Tennessee v. Darnell, l95 S.W. 3d 612, 619 (TN, 2006)……(other citations omitted by me – sic)

    In Darnell, the Court explained the concept of standing by stating:
    Grounded upon “concern about the proper and properly limited role of the courts in a democratic society”, the doctrine of standing precludes courts from adjudicating an action at the instance of one whose rights have not been invaded or infringed. The doctrine of standing ‘restricts the exercise of judicial power’, which can so profoundly affect the lives, liberty, and property of those to whom it extends, ….to litigants who can show injury in fact resulting from the action from which they seek the court to adjudicate……
    In order to establish standing, a claimant must SHOW** three elements:

    1) a distinct and palpable injury, as opposed to a conjectural or
    hypothetical injury

    2) a casual connection between the claimed injury and the challenged
    conduct and

    3) the alleged injury is capable of being redressed by a favorable
    decision of the court.”

    What is the injury to a party in poss of a bearer note if the note weren’t transferred (for valuable consideration, with intent to transfer, etc.)? The UCC, III anyway, says a bearer note is enforceable by its bearer.
    So, it looks like a conflict, doesn’t it? The question is resolved in favor of the Constitution, which says courts may only adjudicate claims of injury and injury that will be relieved by granting the claimant what it wants. There is no prohibition of a “free house”. The perception is unpopular with the judiciary, yes. But prohibitted; NO, and further more, it isn’t even relevant to anyone’s claim. No one is being unjustly enriched when the guy who suffered the loss is compensated, regardless of who paid him. Anyone who paid him either got paid to take the risk or was dumb enough to sign up to do so, anyway. It isn’t even equitable let alone of-law to make someone give up his home to one with no skin in the game and or one who has been otherwise compensated by guarantee, cds, insurance, or any other means of satisfaction of a debt owed.

    **banksters, kindly show us how you meet these three elements, as it is written you must. This isn’t an isolated case in support of injury and jurisdiction. ( It just happens it came to my attention and fwiw I’m big on injury). Banksters don’t allege breach of contract, because it doesn’t have one with the borrower. The bankster stands on article III poss and usually if not always its self-executed “MERS” assignment or self-ordered assignment from some yeahoo posing as a MERS’ officer, none of which is evidence of injury.

    MERS should be prosecuted for all the robo-signing done in its name. LPS was ostracized by its cronies when all that came up. But when the coast was clear, it was taken right back into the fold. (*&!*&%!
    Post – Consent Order, “MERS” is executing assgts to trusts and who knows who else. Glaski is important because the court said the borrower may make an issue of the fact that the assgt is void (I’ve also posited its prima facie evidence that the loan was not transferred previously). Even if not, where are the three elements to establish jurisdiction-invocation SHOWN? Poss of a bearer note (or maybe even one with a special endorsement) and an assgt don’t meet those elements. period.
    If a common law trust could show that it paid for a loan but never got it, it would have to file something to compel delivery if its demand for delivery went unheeded. Once a court ordered delivery, then it could enforce. These trusts can’t do that because they’re not common law trusts. if they paid for loans they didn’t get, they have security interests (per article 9, I believe) – against the seller who didn’t fork them over, just like a traditional warehouse lender does by contract. The distinction is the trust has sec interests by operation of law and the traditional WH lender has sec interests contractually (until the wh line is paid). The trusts may not imo, just like no one may, just forget the details and enforce against the note maker on their security interests. No, they can’t. Their recourse is against the non-deliverer UNless they have entered into new agreements with the seller for the seller to concede the collateral for the sec interests – our loans. And why would anyone do that – accept the underlying collateral – with severely diminished value of the underlying collateral? Why aren’t investors suing for the return of their funds less any payments received? Why aren’t they squawking about
    the guarantees on GSE loans?
    I can’t explain that one, but seems to me it’s got to do with a novation of the contract, as Neil suggested. The investors may well be in a you-get what-you-get situation, especially since there are at least intervening third party contracts with / about them. (I’m not considering sub-prime or jumbo loans necessarily and a lot of them were made. those didn’t or at least shouldn’t have gone thru and or been insured by a GSE.
    Like to see someone knowingly accept 100 for 200, I would, since the value of the underlying collateral is a fraction of what is owed the investors, if you take what the investors are owed as the loans. The guy who pays for a note and doesn’t get it is owed the face amt of the note at the time the note was paid for. The seller could, I suppose, argue laches, but in the case of sec’n, that defense would be aimed squarely at the secn trustee who did not see to it that the loans were properly transferred. A secn trustee pointing to the PSA to support an “I didn’t have to” position imo is SOL. The law imposes a fiduciary on a trustee, at least in a common law trust. Does a PSA, a contract, overrule the imposition of fiduciary? In this case, I don’t think so, but don’t know (contractual agreements will be honored unless they are unlawful or plainly inequitable or unconscionable or there clearly was no meeting of the minds, and contracts are construed against their authors). Surely it’s unconscionable for no one to be in charge of seeing that the loans were delivered. (I also believe the mtg loan contract is unconscionable because of the way MERS operates. That wasn’t exactly the Ditto court’s take on MERS. That appeal court just found MERS had no injury, so MERS, get lost).

    Neil believes the investors monies were used to fund loans. If so, I believe not that that makes the investors the lenders, but that it finds the investors with the same sec interests as one who pays for a note but doesn’t get it. So I would be more comfortable asserting the trusts already had security interests if the investors funded the loans and I would further assert the loans were made with embezzled funds – we don’t know, we just don’t, that that makes the investors the lenders (but like I’ve said, it can’t be first impression). But one way or another, if those monies were used to fund the loans, there was no money to “buy” the loans. If the trusts, under any scenario, already have security interests, with the exception of any lawful defenses by the banksters, the trusts are owed the value of the loans at the time they paid for them (or funded them ala NG) less any payments received. The loss has to be borne by the banksters.
    Now throw in guarantees, insurance, CDS’s, and so on. IF the banksters failed to deliver, they still own the loans subject to the sec interests of the trusts (though they have no right to enforce for lack of skin in the game / injury – they’ve been paid at least once by the investors). Because they still owned them, any payment from ANYbody retired the notes dollar for dollar (yes, it’s in the UCC – I just don’t want to spend all week hunting for it again from a few years ago), leaving the banksters on the hook to the investors for the full amt of the investors’ security interests. Chances are, a party who is subject to security interests (the banksters) who receives payment must reduce the security interest by that payment, but I don’t know – maybe not. Maybe it just reduces the amt owed on the note and the buyer is left to sue the non-deliverer for the lost value of the collateral if he ever gets the note (again, not something I think is first impression – must be case law out there). But, these trusts can’t (at least by Glaski) take post-cut-off delivery / transfer. Be nice if someone could point to chapter and verse. Hint hint.
    lay opinions

    C – I’ll read it – thanks (but 50 pages – yawn!)

  22. The long and the short of what I been trying to say is that the properties are located in the states, and there is were the Contracts/Notes are written and executed, and the Federal Government is not involved in Home Mortgage Loan originating, buying or selling them.

    So it the contract stupid, because we can go round and round on these other issues, but the bottom line is who currently is listed on the Note as the “holder in due due”, and who is on title at the county land recording office!

    With WaMu loan only in Ginnie Mae MBS, who was last listed on the “lien” and how did they get there as there is only two way a entity can be listed on the “lien” and that is the either originated the loan of the purchased it, and there are no other way, as a “lien” means an amount of monies owe. The WaMu government insured loan don’t owe Ginnie Mae money, and nowhere are they listed in this country as the “lien holder'” and where Wells Fargo been inserted as the “lien holder” it because a forgery has occurred because they did not by these WaMu government insured loans!

    So at a conservative number of only 3% default rate of the 1.3 million loans that 37,000 loans at the average loan balance for these loans a $100,000, give us average 10% insurance payout according to the OCC matrix. This give us a $370 million False Claim amount received and a recovery amount for the government of 3 time for treble damage, which is 1.17 billion!

  23. Fannie, Freddie, Ginnie and banks tried to circumvent States titling laws by trying to insert there made up National registry in MERS that unregulated by any agency in the Nation.

    Ginnie Mae while saying to the borrowers and the public that it does not purchase a single home mortgage loan, but itself instruct the lender turned issuer to register all loans place in Ginnie Mae securities pools by have been alerted by the GinnieNET system, to input the information for a Transfer Beneficial – Rights Option 1.

    All ever government insured pooled borrower has to do is write the Freedom of Information Act Department at HUD and request the Milestones for your loan, and it also give you the insight that FDIC back in 2006 was the receiver of these loans and the servicing rights were sold.

    The FDIC knew back in 2006 WaMu was in trouble and it look as if the FDIC was protecting Ginnie Mae by getting the physical blank Notes out the hands of WaMu. If these blank Notes would have been in WaMu hand when the OTS & FDIC seized the bank. At best the the shareholder of WaMu may have had some type of claim for the loans by way of insurance that had been paid.

    I am saying that on the day that the loan was accepted in the pool it voided the Note/Contract which you will find that date also on the Milestones sheet which is a MERS generated form. Now it put into question JPMorgan agreement with FDIC and what Shelia Bair hide from the world.

    Ms Bair why were the loan listed as received by the FDIC in 2006, but not a part of the WaMu/JPMorgan/FDIC deal? Why is Wells Fargo still servicing the loans under a Mortgage Servicing agreement between WaMu and Wells Fargo? Would not the owner change be required on Sept 25, 2008 to the borrower?

    Why was there never a Lender change sent to each borrower?

  24. oops if I owe them at all.

  25. I made payments for many years. The servicers have many many many more years before I owe them. They owe me, until they tell me where my payments went.

  26. Ginnie Mae pools. As Ginnie cannot purchase the loans but only takes the blank endorse Notes for the underlying collateral it does not have the ability to put the loan in a Trust because it cannot endorse the blank Notes to the Trust, and they cannot endorse the Note to another period because there is an open endorse that blank and there been not sale. There can be no transfer just as there can be no sale because Ginnie Mae not the “holder in due course’!

    Ginnie Mae must maintain physical possession of the blank Note at all time or they don’t have any ability to claim the loan as they will not have any receipt that a purchase occurred, because none has occurred!

  27. JG,

    “Imo, there is no claim on any theory for a voluntarily assumed risk.”

    Actually, it is what law school teaches us: you can’t sue for damages on seculation gone bad since there is an inherent risk and no guarantee. It is also what insurance companies stand by in order to deny claims. And yet…

    Without a hefty does of lies, misrepresentations, and flat out cons, it would have been absolutely obvious that it was speculation run wild. What troubles me, though, is that it was done with the blessings of Congress.

    And the American people are still voluntarily paying their salaries… after having elected and re-elected them so many times! Is the problem really with government or is it with the people who simply abdicated all authority and handed it out, no questions asked? Didn’t happen overnight… what part did laziness and complacency really play in it?

  28. JPMorgan expected to pay $2B for role in Madoff case
    Kevin McCoy, USA TODAY 12:56 p.m. EST January 6, 2014

    JPMorgan’s settlement tab for the last 12 months could rise to $20 billion under expected agreements.

    JPMorgan Chase is expected to pay approximately $2 billion in civil and criminal settlements as early as Tuesday to settle government suspicions that the global bank ignored signs of Bernard Madoff’s massive Ponzi scheme.


    More money going to Lalaland… It sure isn’t stopping foreclosures as we speak.

  29. J.P. Morgan, Pittsburgh lender settle lawsuit over bad mortgages
    About Jason Cato
    Staff Reporter
    Pittsburgh Tribune-Review

    Published: Saturday, Jan. 4, 2014, 9:00 p.m.

    A Pittsburgh-based home lender reached a settlement deal with J.P. Morgan Chase & Co., which it accused of selling it bad mortgage-backed securities that cost it hundreds of millions of dollars in the housing-bubble collapse.

    Details of the settlement agreement between Federal Home Loan Bank of Pittsburgh and J.P. Morgan, announced on Friday before Allegheny County Common Pleas Judge Stanton Wettick, were not disclosed.

    “The case is still before the court, and we are not commenting at this time,” said FHLBank spokeswoman Terri McKay.

    Read more: http://triblive.com/news/allegheny/5359425-74/morgan-securities-fhlbank#ixzz2pfUFmDKU
    Follow us: @triblive on Twitter | triblive on Facebook

  30. JG,

    Just sent you a failed securitization case that was just recently filed. The expert report if pretty long (50+ pages).

    Chew on it for a while. I think we may be getting there, slowly…

  31. Here’s something which imo needs to be done. Something like this, what was supposed to be done:

    loans are originated
    aggregators aggregate them
    aggregators sell them – to whom
    then what happens to them
    who does the trust pay for loans?
    are they really supposed to be true sales?
    who sells the certificates to investors and how does the
    seller of the certs get paid – by whom?

    If anyone is capable (I’m not), please cut and paste this inquiry and insert answers, but only if you know them or at least feel strongly that you do! Once we’ve got this down, then we can look at insurance, guarantees, non-delivery, new contracts, intervening contracts, and so on, right? A big thanks to anyone who contributes. Oh, and please only use words of one syllable!

  32. johngault I am trying to take your comment “I don’t know if you know what holder in due course means” “even if you don’t know, you were right”.

    john I first and still have a whistle-blower claim about the Ginnie Mae MBS, but have been using the term “holder in due course” before my Aug 2011 submission of the complaint. I know I my not write a great post, however as I used the term I used it in the correct way.

    Its everybody else who are now coming along to understand what been done, and these parties that are not due a debt, are not are not a party the “holder in due course”!

    People criticize my writing but if they had the slightest knowledge of what I try to convey there would not be this current exchange between you and I. I known since Oct 2010 that the proper parties were not in title to perform these foreclosure.

    MERS is only given power through the DOT and not the Note, as MERS is not mention in the Note. What I find so hard to get folk to understand that once the Notes are relinquish signed endorse in blank and the physical exchange is made according to UCC 3 the ownership of the Note becomes the possession of the physical holder of, however when claiming debt as a result of that possession the holder has the burden of proof that they purchase the debt in order to collect!

    I been write for over three year on this matter, however without some understand from court or regulator it been a tough battle, not matter how well I could have written it!

  33. I get that it saying the loan are not in default, but it would seem the loans would have to protect itself and paying the insurances, but I am finding it hard for the court to want to give back a house when the homeowners admitting that they were behind on their payment so in the end if does not correct the fact that the borrowers were many payment, and paying if allowed the lender to be cover for any forms insurance coverages.

    So the borrowers make this claim after admitting being delinquent, so how is the borrowers damage other than to prolong the eventual foreclosure. What was the plan to bring current the delinquent amount? Is not the judge going to ask why was that amount not offer up to to bring current and stop the foreclosure?

    I believe this is why after year five we just getting to were the judges are understand the argument that who claiming the foreclosure action has “No Standing”.

    The fact if a borrower was behind is a matter for the borrower and the party that has “Standing” and if that party is not in court raising this claim it is a moot point, and it is not the business of the forging party!

  34. The note says it’s enforceable by one who has taken it by transfer, not negotiation, which is a change of possession. To me, this precludes these particular notes from being enforced by a thief. And a change of possession certainly doesn’t come with the right to an assgt of the coll instrument, without which, if not contractually, in “security first” states the note is unenforceable and constitutes no claim.

  35. charles, my friend, do you know what a holder in due course is, may I ask? Even if you don’t, you’re right: only a holder in due course may itself or thru anyone else compel the assignment the coll instrument for the note to another. A mere holder may not, because he has not taken the note by transfer. A thief, say, in possession of a note, may not compel the assgt of the coll instrument. So whether you know it or not, you’ve said something very important.
    But even a hidc may not assign the coll instrument; that has to come from the last hidc. He may compel the assignment because he has a right to the assgt. When a court finds in favor of equitable assgt, imo it’s because the COURT found so. An assgt is not a self-help remedy for the failure of the last hidc to assign to the new hidc.
    MERS imo is allowing one crime after another by allowing servicer’s employees to execute and record assgts in its name to those claiming mere poss of a bearer note, not to mention any fiduciary to the owner of the note. But, if MERS is a novated party, meaning the note and dot are optimally bifurcated, it wouldn’t necessarily need anyone’s authority to assign the dot because it IS thee ben (which is what the dot says).
    The dot doesn’t say and it’s just not reasonable to presume agency was intended when by its clear language, MERS is designated thee ben, not to mention that nowhere in that instrument does MERS accept agency. (IF agency is the case, the acceptance must be found elsewhere and demonstrated). So as a novated party, MERS could assign the dot at will, notwithstanding any unknown contractual agreement to the contrary. Note that “MERS” doesn’t execute the assgt in any capacity (such as “as agent for XYZ”, which is how agent’s execute things) other than its own right. I may not make anyone your agent, not even and esp by the language of the dot and even if I could, my agent, now someone else’s, would need to identify its new principal. It was all about foreclosure, taking title to real property, and the credit bid; MERS’ charges to others are right up there if not worse than recording fees, altho it did save a lot of time, and that’s being nice about what it really did. It also imo allowed all kinds of bad acts, foreseeable or not. Sooner or later, for instance, we’re going to know beyond speculation that these trusts may not own real estate, just as, if not more certainly, they can’t accept post-cut-off assets.
    An assignment requires acceptance. Like I’ve said, I’d like to see one secn trustee acknowledge acceptance of a late assgt. That’s a guy who needs deposing.

    It’s possible, I don’t know, that one may yet control a novated party contractually. But I still say there’s no complete mtg loan contract because the lender was not initially named the ben and THEN novated MERS. They pretty much did at first – the lender was named the ben and then they assigned to MERS. Guess that was too much trouble, so they said heck with it and went to naming MERS in the dot right off the bat: to me, no complete mtg loan contract between any two parties.

  36. good question, christine. I can at least say I brought this up and have kept at it since almost three years ago, when I first learned of the guarantees. I’m not blowing my horn – I just really don’t and haven’t understood why the guarantee has been ignored all this time. I’ve posited in my blog elsewhere that the guarantee is a voluntarily assumed risk and there is no right of recourse against the borrower, and I’ve posited it here, also. I’ve quoted the GSE’s here at LL and suggested that material is judicially noticeable. Unless an agreement exits which provides for rights of subrogation AND the right to foreclose based on guarantee payments by and between the trust and the guarantor, the loan is not in default and may not be called. After the loan was made (or maybe before), someone guaranteed payment. Neil’s post, seems to me, is looking at non-GSE loans, like the worst of sub-prime, because the servicers on loans that went on their way thru FNMA are reimbursed by FNMA for their advances: there’s a contract between FNMA and the servicers which compels the servicer to make the advances and then be reimbursed by FNMA by submitting a bill. The servicer incurs no expense for which to make a claim. FNMA guaranteed payment and the only way to get out of the guarantee is to repurchase the loan (or its securities?) at face value. Imo, FNMA has no right to reimbursement of its guarantee payments. And as I noted a few weeks ago, FNMA actually charges, basically, for its guarantee. The cost of the guarantee is reflected in the purchase price it pays for the loans from the aggregators (the bigger guys). I’ve speculated it’s also priced in the yield paid to investors on their certificates. I’d bet what’s left of the farm that FNMA has no right of subrogation. It, like any insuror, has to bear the cost of its guarantee (which it charged for, also just like any insuror). When we pay for homeowner insurance and our house incurs damage, the ins. co. who has to pay on a claim doesn’t get our homes.
    I can’t swear FNMA has no right of subrogation, but like I said, I’d bet what I could it doesn’t, and if so, any guarantee payment is, at best,
    a claim outside the note. Imo, there is no claim on any theory for a
    voluntarily assumed risk.
    As to non-GSE loans, like those which went thru Residential Funding
    Corp (an outfit which bought jumbo and sub-primes), the cost of insurance was likely built into the cost of the loan – the rate and fees – and were what’s called self-insuring, meaning no third party pmi co.
    had to underwrite and approve the loan. They formed their own insurance pools funded by the built-in-the-loan cost.

    fwiw – I just read that the FNMA intended to raise its “g rate”, what the guarantee fee is called in the industry (which would impact the purchase or ‘strike price’ of loans it buys), but someone is fighting it.
    I’m with you, Christine. Although I haven’t read the case yet, it’s more than maddening that we somehow missed that case. Obviously, there were depo’s and discovery in that case. Gee, real litigation.

  37. Here what you got is that 1.3 million loan that have three parties in Ginnie Mae, Wells Fargo and MERS who none of the three are endorsed the Notes that are blank and when you ask, none admits to being the “lien holder” as WaMu placed the loan into the Ginnie Mae MBS.

    So these loans could not and were not in any sale to JPMorgan and are just flouting out there, but Wells Fargo is being assigned the title and foreclosing in there name as the “lien holder”.

    So what MERS does is to create a forgery in an assignment that says that Wells Fargo is the lawful hold of the Promissory Note. Look at how the crafted the assignment to say the Wells was the legal holder of the Note, which only the “holder in due course” can have submitted an assignment of the title, but the assignment is phrased in a way to make the county recorders think that Wells Fargo is the holder of the debt, which in fact that assignment does not say that, and next Wells Fargo bank executes an administrative foreclosure, having a prearranged sale price from the FHA of VA.

    On several point they violate the law because the are not allowed to submit the documentation, but there intention are prove in deceiving by caring out the foreclosures know they are not the “holder in due course”!

  38. Elexquisitor-
    And may i add to your ” prudent man” point – neither would a subsequent purchaser of that property !

  39. Don’t forget the unclean hands for bid-rigging when the beneficiary on the notice of default doesn’t match the beneficiary of record, and a subsequent assignment is with notice of defect, and title is clouded either way because note holder lacks holder in due course status and is subject to defenses of borrower. In CA that is violation of Penal Code 115.5 and Civ Code 2924h(g). A prudent man would be deterred from bidding a full price on a property with a known cloud on the title.

  40. Well on top of all that….when one is making mortgage payments, according to a prospectus I read for one sec. trust, Chase can take the monies in the ‘Collection’ Account (servicer account where your mortgage payments are deposited) and can use the monies for short term investments. The profits from those short term investments –Chase gets to keep and NOT pass on to the REMIC investors–in other words, those short term investment profits on the collection account monies DO NOT go to the ‘Distribution’ Account (for investors).

    I do not know if Chase insures the monies which go into short term investments…….

  41. You got 1.3 million WaMu loans from Jul 31, 2006 that were and are still currently being service by Wells Fargo Bank and you got both Ginnie Mae and Wells Fargo saying that they are not the “lien” and you only have to ask both. Wells Fargo is saying they are the servicer, trustee and the loan are in the Wells Trust and they are the custodian of records.

    However once a loan is placed in the hands of Ginnie Mae so that the lender turned “issuer” they can never ever possess the blank endorsed Note because there is no legal procedure to reverse the process, because as the Note are blank and were without a purchase, there can not be another endorser on the Note because the blank endorsement is void of a successor to forever to transfer from to another!

    Once WaMu relinquishes the blank Note the no longer own the Note so they cannot have a debt. No Note=No Debt, No Debt=No Note! these two are attached at the hip and one without the other they do not exist!

    So we must ask how are the loan being service when there not a party that can legally accept the payment, and the payments are a part of a pass-through payment system that take the home mortgage payment and pays the securities investor. Now the accounting of this process usually works where the “issuer” is crediting the homeowner/borrower account as if the payment is first going to that account and then the lender/issuer is paying the “investor”.

    However look at what actually happen is the payment go straight to the investor and there is no lender because there is no Note held by WaMu, but after the fact that the bank is declared a “fail bank” on Sept 25, 2008 how does these direct payment get credit to the homeowner’s account when there no “holder in due course” is Wells Fargo bank paid $1,000 to pay down the principal balance from the “investor”? The “investor” is not sending dollars back to a servicer servicing for who it is servicing a question, but the payment to the “investor” is the principal & interest due them.

    You got an accounting problem in the first place. Now what is done is that the homeowner is given a credit for the payment, but the monies was not eligible any kind of way to be collected. The “issuer/lender” is in debt to the “investor” for the sale of the securities and is not owe an amount from the “investor” so how is that amount paid to the “investor” directed back, when the “investor” does not owe the “issuer” a dime? Ginnie Mae who is only the “insurer” is in possession of the Notes, whether it through the process that a custodian of record is hired to perform that task for Ginnie.

    Wells Fargo I would argue is not even the holder because they are employed to act as Ginnie Mae in securing the blank Note, but they are in possession of as if the blank Notes were transfer to them per transaction simply involving WaMu, and not the the loan were already in the securities!

  42. It is unbelievable to me that such a ruling, which is public, was nevertheless occulted for so long. 6 years later, we are still arguing the same issues ad nauseam when, had this been picked up on in December, 2007, when the opinion was rendered, most of the subequent insanity would not have taken place, especially for what bankrupt servicers is concerned.

    How many more decisions such as this one have been conveniently ignored? And how many casualties arose because of the secrecy? The bulk of the foreclosures took place between 2007 and 2012. What else is hidden in broad daylight?

  43. So I get what Neil saying is the loan is never in default if Wells Fargo advances the fund, but there still the issue is Wells Fargo the “lien holder”? So we in the end it still whether or not your indebted to Wells!

    I my point is does this matter as you got a party that has no financial interest maybe or maybe not paying on your account, however their is no financial interest party claiming anything at all in court about you owning a debt, because the contract been void sent the day the the loan was placed into the securities. Now the party that place the loan in the securities with a blank endorsed Note is without the Note and it been physically transferred to another who did not purchase it and the relinquisher in WaMu is now out of busy and the is no claim by them that a debt is due!

  44. Come on Neil, For real?
    Why do you mix the entities in these discussions.

    You indicate the creditor has no default.
    There is no default experienced by the creditor.

    Then you come back and state:
    The conclusion to be drawn is that the default notice to the homeowner-borrower might be valid (probably not, because servicer advances have already begun) but it is cured immediately after it is sent by payments, often from the same party who sent the default notice.

    Where all debts are satisfied by the terms of the United States bankruptcy of 1933, as long as our trust has assets and we didn’t liquidate it by filing for bankruptcy of our trust; once we sign, it’s discharged, so of course the creditor did not experience a default.

    Why keep escrow open except to maintain access to the trust after the initial access to the trust? Why create a security and insure it when the loan was paid in full? Why steal the private property of the peaceful inhabitants under a bastardized claim of a loss of right, or injury, or failure to perform the obligations of a contract or trust agreement?
    Isn’t there a conflict of interest in that the court is a bank, and the bank has hired someone to go to the court’s bank to settle a claim of a contract dispute that by their own rules, the entire claim is a fraud.

    What happens to them for what they’ve done, I may show grace for them being endowed by the same Creator, but I’ll have no mercy for them; because just like they punished us for completed performance of contracts that had been satisfied by our estates, their judgement will be from failing to perform the obligations of contracts they took an oath on penalty of death to perform, and they have a conscience and know what they do. They are not insane, nor wards of the state, nor infants, nor incompetent. They are sovereigns acting upon people they are entrusted to protect and instead they insured, then robbed and pilfered and plundered our assets, and then claimed the insurance.

    Trespass Unwanted, Creator, Corporeal, Life, People, State, Independent, Free, In Jure Proprio, Jure Divino

  45. Para 6 seems dangerous.

    Sent from my HTC

  46. Interesting – I have a question – How is it that a Servicer gets 1/2 the mortgage in payment from Fannie Mae 30 days after client signs temporary agreement? Servicer reported a foreclosure date 2 weeks after the agreement was signed and the foreclosure filing didnt happen for 9 months after the temporary agreement.

  47. EXACTLY !!!!…….And yet the homeowner still loses house, equity, and in court.

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