Servicer Advances, Modification of Loans and Sundry Matters

I appear to have sparked some controversy over my comments that were directed at modifications and servicer advances — subjects that are not necessarily related. But they could be related — as where the homeowner seeks a modification on which there have been servicer advances.

So to answer some questions about Modifications, I will first state that no article on any subject on this blog is intended to be a complete exposition of an issue — if it was, each post would equivalent to a treatise several hundred pages long. That is why we say don’t use any one article as the authority for your situation and to get advice from competent licensed professionals who can service your needs based upon your information.

That said, there have been numerous comments about modifications, some of which have correct information in them. Like anything else found here, you should check with knowledgeable licensed professionals before you act on anything — especially the comments posted by people who have their own axe to grind. One thing is true — modification has a lot of moving parts and it isn’t as simple as anyone would like it to be. There are also tax issues that effect the calculations which I have not yet explored on these pages.

Modification is a sub-specialty of law in which I do not claim any rights. But that is the point. Most of the people who are giving opinions on modification are not lawyers, nor accountants, nor trained, licensed individuals in any area of any discipline. They have some experience, and that experience has molded their perceptions but they don’t know enough to conceive of solutions outside the box in which they operate. And some of them are on the payroll of banks who are waging a PR campaign in which they are spending billions, in one form or another, to make it look like the loans are real and the modification of them is the right way to go.

Modification IS a real option as long as you get something real. Qualifying for a modification takes time, expertise and the ability to present a credible threat in litigation, which is why I favor lawyers over anyone else doing modifications. The cost-benefit analysis should be done by someone who does this all day long and who is constantly researching options.

I write about bits and pieces. Attorneys who have well defined departments that handle modifications, short-sales, hardest hit programs, and other programs that offer assistance are miles ahead of me and any of the comments I have seen on my writing about modification.

As to servicer advances there is a small debate going on but I stick with my analysis. If the creditor has indeed received payment on the account of the loan that is being collected or foreclosed then there is either no default or the notice of default, notice of acceleration and/or the lawsuit itself and the evidence submitted are wrong as to amount.

The fact that there COULD be a claim against the borrower for unjust enrichment is irrelevant. First, even if the claim exists, it is not secured by the mortgage nor described by the note. Second, it is not likely that those claims will ever be brought.

And lastly — and I do mean lastly — thank you for your various invitations for a debate. My answer is no, I will save that for court or a seminar in which we cover the four corners of the issues. I will not “debate” issues of law with non-lawyers, or anyone else that lacks credentials to challenge anything I have said. And if you have reading this blog for years you can see how I have evolved in my own thinking and analysis causing me to reverse some prior strategies that I had suggested.

But the basic information about securitization presented here is, to the best of my knowledge and belief (see about Neil Garfield), still completely correct and facts and decisions on the ground have proven me right in each case. At first everyone scoffs, then  they end up arguing for it. They scoff because some of these things are counter-intuitive — i.e., they seem impossible. That doesn’t make them any less true. I was right about everything, factually in 2007, legally in 2008 and I believe I remain so. It is taking the judicial system a long time to catch up because of the intense complexity and opacity of the “securitization” game.

67 Responses

  1. On the topic of servicer advances but in a different context, defective obligations – a loan in default – can be cured if the REMIC discovers the defect with 90 days. This could be done with a credit enhancement in which some entity advances delinquent principle and interest to temporarily cure the defect. Generally done at the issuance. My question: can it cure the long term delinquency of a loan in Chapter 13 and make it suitable for inclusion in a REMIC? Anybody know?

  2. All, I need some assistance and advice. We received a Notice of Foreclosure a few months back. I have still been corresponding with Wells Fargo telling them they have no standing. After several QWR’s and letters to OCC and CFPB, WF responded with more documents than they did in the past. This time they included 2 Allonge Notes which I had never seen before. Keep in mind that they did not respond with the documents even to OCC and CFPB. Then it clicked I went on to the Baltimore More Public Records and there it is a Deed of Trust had been posted there on the 11th of this month. I have not been able to view it yet, but I can imagine what it is. I need some help on which way I should go with this. I need to know what I need to do in order to prove that the documents are Fraudulent. I am sure they are. Any assistance would be greatly appreciated. James 443-677-2799, Thanks

  3. Ian – imo same reason everything else is ignored by courts in favor of alleged poss of a bearer note and “mers” assignment. If article III applies at all to these notes, it’s not a shield, but that’s how it’s being used. Article III is one provision of what is default law, used in the absence of clarification of anything in a contract. When something is expressed in a contract, as long as its lawful, there’s no reason imo to turn to default law. But then banksters will just say the borrower has no standing to assert the contract, I guess, unless a law, like trust law, makes an act void. I don’t know that that’s the only time a borrower could assert that contract as a defense, but that’s what’s being held to date (and of course, sparingly so far). I also suppose a borrower could make a case she’s an intended third party beneficiary.

  4. You know, the more I think about it, the more it seems wrong for XYZ to leave it of record that XYZ has an interest in someone’s home when it no longer does. Yeah, I know that’s a new one and seems like left field, but I think it IS wrong. It actually also seems wrong that borrower’s don’t know whom they’re paying, who’s on the other end of their agreements, as if it’s none of their business! I guess there’s a presumption that when a borrower is notified by the last servicer that the servicing is going to a new servicer that THAT should be enough assurance the borrower is paying the right party when we’re all witness to the ramifications of alleged possession of a bearer note. Can you see GM paying a new intermediary on a 50M contract like that?
    What’s the difference? Let’s say “B” did sell a note to “C”, but didn’t deliver. Under the current m.o., what’s to stop B from coming after the note maker himself? How is C, over in Hoboken, even to know of B’s action in Peoria? Esp when B can use one of his own employees to execute a “MERS” assgt? Of course C should have seen to it that he got the note, but since he didn’t, the borrower could be dragged into the time and expense and whatnot of future litigation. There’s NO way a loan should be paid off without a surrendered note – one needs to make sure B doesn’t deliver to C after the note has served C’s purpose (which mol seems what is being done here). B doesn’t get to use the note for X, which is basically its own claim and which claim may well have impacted the note balance (that or a false claim was made – is there another option?) and then send it over to a trust to use to foreclose. People say here, I think, that if there’s no f/c, the banksters will owe back the money from numerous, or at least one, claim. But I think if they had sold the note, they owe back the money anyway, because it wasn’t their claim to make. But, if somehow – unknown to me – it were their claim to make, then the note was paid off dollar for dollar and whatever balance is left, if any, is all there is to transfer belatedly to anyone else, including a trust, and in this case, the records of the alleged servicer for the trust have entirely inaccurate entries, since they’d be missing the payments to a bankster. The balance on the note at the time of actual transfer to the trust is plain wrong, because and even tho the trust paid for a note with X balance).
    One note simply can’t make for two remedies and esp to two different creditors. If MERS weren’t in the act, and assgts were executed and recorded, they couldn’t have made those claims (if the trusts had paid for the transfers of loans).

  5. And I’ll reiterate that the bk rule(s) which allow someone to avoid unrecorded interests is derivative of the FRCP’s and as such, I seriously doubt it’s a deal only available in bk. But no one’s been on it, including me. Maybe someone will get on it, since it doesn’t look like it’s gonna be me. Attorneys would be good………….

  6. “Entities have very specific contractual duties and obligations toward each other and one party cannot substitute his own for someone else’s and vice versa.”

    That’s a two-way street. Someone may not assert the rights of another, either or rightfully invoke jurisdiction without injury. Further, someone else’s voluntarily assumed obligation imo is a valid aff defense to a contract (as is the case with a “fnma loan” until and unless fnma repurchases, esp and not exclusively since the borrower paid for that guarantee). FNMA is a necessary, indispensible party to an action, regardless of who starts it. imo.

    And anyway, that’s not what I said. I was talking about Notice before enforcement of someone’s obligation. Where’d I say there isn’t one?!
    If a loan weren’t transferred to a trust, say, and can’t be, I’ve never even said the borrower owes no one. He might well, unless third party payments to that someone paid off the note or even if it were the trust’s money that paid off the note to the seller! The note is in terminal limbo, I’d say, in that case, read unenforceable and toast, leaving or not the trust with a claim against the note-seller (if a remic trust may make such a claim). Judges might remember that the homeowner was not in charge of the m.o. / business plan of that gang. It isn’t illegal to not have to pay for something one expected to pay for. Not so good for the economy and surely a sore point for those who make their payments, but not illegal. But, as for a cure, the banksters are free to disgorge that money, far as I know.

  7. And also in case I never get to it, Ukpe has a fine discussion of what MUST be turned over pursuant to Rule 26 (withOUT a discovery plan).
    I think I have that pleading and I’ll link it if I do.

  8. Imo it doesn’t matter one iota what the truth is or what one believes as long as (oh, that as long as!) the current posture of litigation continues:
    the bearer note and a mers’ assignment. They have to be assailed in favor of jurisdiction-invoking injury and mers’ right to assign the beneficial interest in an instrument to which it claims to have only “legal title” (or even MERS’ right to assign that ‘legal title” to another). If a bearer note and a “mers” assgt is the bomb, what’s to argue? If you can’t get past those two things, what difference does anything else make, like who paid who – or didn’t? (except for the decision in Glaski and whatever attorney Lenore Albert came up with, which I can’t recall this minute).
    I have a suggestion for serious students if I may. I was going to to a blog on it, but who knows if I will. Get a pacer account and or scour the internet – scribd for one – for docs in the Ukpe case in NJ. The decisions in cases often just aren’t enough because they don’t always include all the relevant arguments the court heard in reaching its decisions. This case doesn’t cover everything to be covered, but it’s a darn good place to start. The attorneys forced the players to get separate counsel for one, citing a very real conflict of interest between them. The attorneys won on their argument that when a borrower rescinds, like it or not, it’s the lender which must act first, not the borrower in forking over $$$$. And there are ramifications for that non-performance by the lender. This second one isn’t applicable of course to everyone, but it’s still instructive imo. I think this case is very instructive on discovery. No one is getting to discovery if the bankster gets a mtn or sj based on a bearer note and a “mers” assgt. It’s nigh on impossible to affirmatively state something, the proof of which is in the sole possession of the other party. The banksters really don’t allege breach of contract or injury. They just say, contrary to MERS in that one case (hilmon?) that article III is their reliance and that’s all they need. Bull!!!!

  9. As last seen, the Master Purchase Agreement and PSA says that real estate transactions must be filed at the county level according to state law. MERS does not negate the filing of the assignments or any other real estate related transaction document at the Reg of Deeds or Recorder’s office along with paying the fee.

  10. JG,

    Once again, you’re mixing apples with oranges. I’m talking defenses available to foreclosure. Not BK. Two different, completely unrelated animals and the fact that people chose to mix them by filing BK as an answer to foreclosure (even though it is NOT what BK is originally intended for) doesn’t change that.

    Entities have very specific contractual duties and obligations toward each other and one party cannot substitute his own for someone else’s and vice versa. That, in a nutshell, is EXACTLY why homeowners consistently lose and will continue to lose.

  11. And I still say that since from its own mouth, MERS says it only holds
    “legal title” to the interests created in and by the dot, that’s all MERS could assign, if it were authorized to sub in another party for that status. I don’t see how MERS could assign the beneficial interest, when it doesn’t have it to assign by its own admission (except that I believe it does, that MERS is in fact thee one and only ben).

  12. Well, as I’ve said, I believe the next round is the “unrecorded assgt” – aka bs. It’s true that if a true officer of a corporation properly executes an assignment of the corp’s interest in a dot, say, to another, that assgt is binding on the corp, recorded or not. What is not true or at least unclear is what the corp had to assign. Recording an assgt is a tacit stmt that the corp HAD something to assign. But it isn’t evidence.
    And even if the assignor had something to assign, i.e., the assgt is legit,
    the assignee may not act on it without proper Notice to anyone and everyone entitled to Notice. That ties in with why they’re going to allege unrecorded assgts post-Glaski et al – “they were done, but we didn’t need to provide Notice until now.” And some states do in fact mandate recordation of transfers of those interests. Whether or not a transfer fee is due when a transfer occurs but is unrecorded, I couldn’t say (likely depends on the reading of a particular state’s statute), but I WOULD feel confidant in saying they weren’t done.

  13. JG, we still don’t know how the money is divided up and exactly who gets what. We still do not k now that. We have lots of theories, but we do not know who gets what. Who is the creditor?

    As to assignments, it was explained to me a long time ago by an atty that the box of sticks theory for each property applies. The mortgage, the title, the Note are all part of the theory that makes up the real property. Why have title searches and title insurance if title is not important. Thus, all documents filed at the county level as to real property including assignments, etc.

  14. It goes to issues of Quiet Title and/or slander of title. It is like the shell game. Which shell is the pea under.

  15. Christine, I appreciate your thoughts, but they’re just not accurate. Why, if recordation is nada as to the homeowner, do you think certain bk debtors and bk trustees, for instance, may avoid those unrecorded interests? BK rules are derivative, by and large if not totally, on other rules not applicable to bk. They’re just unfortunately unexplored. NO one may enforce an obligation against anyone else without notice of that party’s interest and rights. Recordation is constructive notice. Would actual notice get it? No, because the notice is not intended
    exclusively for the benefit of the borrower.
    As a prospective foreclosure sale buyer, would you agree to pay C if public record shows B with the interest being sold?!

  16. Let me add one more thing to that A and B scenario.

    If B is uninsured, once A’s carrier has disclaimed, nothing prevents A from filing a direct action against B. And even if A was drunk as a skunk, there is absolutely NO contributory negligence on his part. As guilty of drunk driving as A might be, it is NOT a defense available to B.

    Homeowners are mixing all the parties and their respective legal and contractual duties toward each others. And they don’t get it when judges throw their cases out because they make no sense.

  17. I thought I made it clear. Guess not. I don’t believe the servicers advances may be loans to the trust (loan = something to be repaid) because I don’t believe, as I said or tried to, that the trust may accept the servicer advances as loans. That would be doing business and it would create a liability to/of the trust. The only financial obligation a remic trust may have to my knowledge is the one to pass thru the monies received on the trust’s assets by way of payments made on those assets. By accepting an advance as a loan, the trust has created a totally different account payable / liability, separate and distinct from its obligation to pass thru payment funds to the cert holders. In fact, it may be that having that contractual agreement – in the PSA – could itself vitiate the trust as a remic. Imo, it certainly does that once a liability – the obligation to return the advance-loan – has actually been incurred.
    Yes, servicers may get paid first, but imo, that’s for normal servicers’ expenses. A loan by the servicer to a trust is not a normal servicing expense, like the percentage servicers receive each month for performing their duties. A loan creates a separate and distinct obligation, an account payable (regardless of how it’s repaid) and that’s what I believe is not allowable for a remic trust. I guess I can recognize that there may be arguments to the contrary, but I still believe the trust may not create such an account payable. There is, as far as I can tell, no other money actually advanced to the trust relevant to the servicer expenses, like attorney fees, or what not. Those are simply deducted from proceeds to the trust (unless those, too, have been advanced and wrongfully turned into unallowable loans). imo. At any rate, even if allowable, which I highly doubt, without an expressed right to subrogation, which again, I haven’t heard of, if the trust owes back those advances, it isn’t under the note or notes. The trust then has no legitimate way to repay those advances / loans.
    And consider this, if you would:

    Stop the presses. Take a look at a moment in time. The servicing of the loans in the trust is transferred from “A” to “B”. “A” has advanced and thus loaned (acc to you, okay) the trust 500k, but the properties weren’t foreclosed yet. “B” takes over and forecloses on those properties, but B didn’t make those advance /loans and doesn’t repay “A”. Instead, it remits all funds to the trust. Even if “A” could point to the PSA to establish its claim on the 500k, that would be an account payable of the trust, wouldn’t it? This may better describe what I believe is not possible for remic trusts: to take money which creates an obligation to anyone other than the trust investors. Again, the normal servicer expenses aren’t advanced (as loans); they’re deducted from sales proceeds, and as to those un-advanced-to-the-trust expenses, there is a right of subrogation, under the note, I’d say / agree. Servicers may, I suppose, withhold attorney fees in their remittances to trusts, but that’s different than an advance of cashola to the trust as a LOAN.
    In the scenario I spelled out above, I have to say it could be true that the servicer expenses related to a started but incomplete foreclosure action could be an expense / obligation to the trust, BUT it may also
    be that the fact is, servicer A just isn’t getting reimbursed its foreclosure-starting expenses if it doesn’t complete the foreclosure and
    realize its expense from the sale. It may be that changing servicers
    mid-stream is an issue all its own. Servicer A and B probably come to some legit agreement about the expenses “A” has already incurred relative to a started foreclosure.

    Someone here said the servicer’s decision to modify is at least somewhat dependant on whether or not the servicer will be reimbursed for certain expenses (like perhaps including those advances / loans). Well, I believe it, and doesn’t that seem a major conflict of interest and an untenable situation?

  18. “Almost every state has a requirement via statute to file documents regarding real property.”

    Recordation is completely irrelevant to whether or not the foreclosing entity has the right to do so. Different allegations, different issues altogether and NOTHING to do with homeowner.

    Let me illustrate with a similar scenario:

    A drives drunk as a skunk. It’s a crime. Drunk A is stopped at a red light and gets rear-ended by sober B. A is seriously injured. Cops come and ticket B for negligence. Fair enough. Cops also realize A is drunk and ticket him too. In fact, they confiscate the car and prepare for legal action.

    Does that mean that sober B is off the hook, for what A’s injuries are concerned? Hell no! If sober B is insured, his insurance WILL HAVE TO PAY.

    However, if B is not insured and Drunk A tries to get coverage from his own uninsured/underinsured coverage, coverage will be disclaimed. Why? Because A committed a breach of contract against his own carrier.

    Different issues, hence different allegations, for different parties. If banks breached the recordation statute, IT HAS NO BEARING on foreclosure and bank’s relation with homeowner.

  19. Gene, beg to differ on filing assignments with the Register of Deeds or Recorder’s office at the county level in states. Almost every state has a requirement via statute to file documents regarding real property. It was an issue on my last case and presently is in the new action for breach of contract, quiet title, bad faith, etc. All of the assignments are inaccurate, forged, untimely, fraudulent and do not correctly represent the transaction.

  20. Gene, I used to be a court reporter and worked free lance. Sometimes depos can be very informative. Thanks

  21. Ian,

    Got a handful of minutes before I head out to meeting, so I will try to clarify how the transfers really work. Let’s look at two scenarios:

    Scenario 1

    1. Capital Mtg funds the loan through a Warehouse Line with Greenpoint.

    2. Capital sells the loan to Greenpoint, who is the Sponsor for the Trust. The transaction is covered by a Purchase and Sale Agreement between Capital and Greenpoint. This is the first true sale even though a Warehouse Line was involved. (I participated in one case where it was argued that the loan transfer was a “pledge and not a sale”. It was a weird case with fractional lending involved. The court ruled in favor of a Purchase based upon the Agreement.) The funds for the Greenpoint transaction came from a Lehman Credit line.

    3. Greenpoint takes the loans sells them to Lehman Brothers, who is the Depositor. It matters not that the funds came from the Lehman Brothers Warehouse line, because there is a Purchase and Sale Agreement between Greenpoint and Lehman. This is the second true sale.

    4. Lehman takes the loans, does the necessary actions to convert income streams into bonds, gets ratings, etc, and then on the closing date of the Trust, deposits the loans into the Trust with the Trustee holding the loans for the Trust. This is the third true sale. (Another Purchase and Sale also exists.)

    5. Finally, the bonds are offered for sale.

    In this scenario, you see three true sales.

    Scenario 2

    This is the more scenario difficult.

    1. Wells Fargo funds the loan, acting as Originator and Depositor.

    2. Wells sells the loans to Wells Fargo Securities Corp, a subsidiary, who is the Depositor. (This is supposed to be a True Sale.)

    3. WF Securities sells the loans to the HSBC Trust which is a True Sale. A Purchase and Sales Agreement exists that covers the transaction from Sponsor to Depositor to Trust.)

    The problem for this under the Two True Sale standard, does WF selling the loan to a subsidiary actually convey True Sale status? So far, there have been no rulings on this. The only challenges on this would come from either the IRS or the Investors who bought the bonds like PIMCO.

    You are not going to see any challenges to the True Sale position. If an Investor successfully challenged the True Sale, then it not only creates liability for the lender, it also creates a Tax Liability for the Investor under the Pass Through provision being voided. That causes real problems.

    The IRS is going to avoid this type of ruling as well. They will not touch it due to the harm that would be caused by an adverse ruling.

    Next you have the Assignment issue. Recording statutes apply to individual states. In CA, assignments do not have to be recorded. Actually, this is true in most states.

    PSA Section 2.01 describes the process of “assigns and transfers”. For MERS loans, having MERS as nominee, the PSA cites no need for a trail of recorded assignments. For non MERS loans, there must be a trail of either recorded assignments or “recordable assignments”, and those recordable assignments could be in blank.

    Unless the particular state requires the recording of the assignment, and there might only be two needed for non MERS loans, there will be no chain of assignments.

    Does this mean that the loans were never properly placed into the Trust? New York Trust Law is cited but I have studied the statute and I still find it to be ambiguous as to what is actually required to transfer the loan.

    Using UCC Code, the simple endorsement of the Note in blank serves to transfer the Note and the Deed. And the PSA was written with UCC in mind.

    As to Glaski which everyone quotes, the arguments presented on either side were weak. I could tear apart each side equally fast.

    Oops, time to go………….

  22. Gene thx for the response. I found it in my PSA and Prospectus.
    Now why is that “inferred” rule adhered to, when the 2 true sales rule in the PSA is ignored? (In order to create a bankruptcy remote entity). A lot of attorneys have stated ” I’ve represented hundreds of homeowners and in not one case have I seen an A>B>C>D>E transfer”.
    Why is this never addressed by the courts?

  23. Louise,

    I will try and post it. It will be a basic deposition where I will simply answer yes or no as much as possible, trying to avoid giving out unnecessary information. If asked do I have an opinion, the response is Yes I do. It is about asking the right questions, and answering the questions with the least amount of info. Save the good stuff for trial, if we can.

    I will say I hate Expert Witness stuff, but at times it is required. It is not “exciting”.

  24. John Gault,

    What do you mean by “enter into a loan agreement” for clarity? Is it the argument that the loan was originated between the Trust and the Borrower? All other parties are “Pretender Lenders”?

    If so, you have been listening to NG far too long. I can show TILA and REPSA regulations that prove otherwise. Federal Commentary as well. Plus, I have been involved in one case whereby a transaction between a Warehouse Lender and a Mortgage Bank who controlled a REIT where arguments close to that were made and failed.

  25. Right of First Creditor is inferred from the Trust Servicing Agreement. In it, when the sale of the property to a bonafide third party occurs, the servicer removes all money owed to them right off the top. The residual amount then goes to the Trustee for the bonds.

  26. Christine,

    Tower of Babel is correct when you learn about how dysfunctional the banks are, and the lack of interdepartmental communications or even concern for what other departments are doing. The common response to concerns about a subject is akin to, “I don’t know anything about that, you need to go to this department.” This is even though the person has full responsibility for that department.

  27. Gene- where can I find it written that the servicer is the first creditor in a foreclosure sale? I have t heard that before and don’t know where to look.

  28. as lender or borrower, of course is what I meant.

  29. Gene:

    “BTW, if you were correct and the advances meant that the loans were not in default, and therefore the foreclosures were unlawful, I must ask this question of you.”

    The only loans which I’ve opined are not in default as a result of a third party payment is a fnma loan. As for non-gse loans, I don’t believe I’ve addressed default per se. You’ve inferred I mean that, as with wrongful foreclosure. I HAVE said I believe the remic trusts may only take in pass-thru income, i.e., they can’t engage in (new) loans, as lender or creditor.

    “In any sale of a foreclosed property, the servicer becomes the “first creditor”. It is basic law.”

    I can agree this is true of ‘normal’ servicer fees (whatever falls in the category of a normal svcr fee). But “normal” servicer monies imo don’t include advances as loans. And at least for now, I stand by what I said.
    These trusts may not enter into loan agreements. Even if they could,
    I addressed the only benefit I see to cert holders (get out before the losses are realized, long and short), but you didn’t respond (last week or so). If I had a trust, say, a common law trust, the servicer and I could enter an agreement for a loan or two, but I don’t believe it with these trusts.* But I do believe you read it in a PSA. No, I dont’ believe the trusts may do that, and further, because the only benefit I see is cert holders being able to get out before the loss is realized, I don’t know how that couldn’t artificially (also l & s) impact the price of the securities. The only way I see for this part not to be true is if the price of the security reflects the accounts payable, the loan / advances. The price of the securties imo should reflect the correct status of whaddup in the trust, including any accounts payable by way of loans. Maybe they do, but only if the “loans” owed were considered. (What I wanna’ do is pay 100 a pop and then find out there’s an unreported outstanding account payable of a million dollars! What is my 100 a pop really worth?) My biggest objection is that I firmly believe a remic trust may not enter into a loan agreement. It’s limited to passing – thru monies received on the trust assets. That just doesn’t describe a loan.
    (And I believe it’s also commingling). of course I don’t think I’m the brightest kid on the block, but there’s no doubt in my mind I’m not in left field.

    *and the loan would still not be under the note when there’s no right of subrogation (which I haven’t seen or heard being expressed) and imo

  30. Gene,

    “However, what they have not realized is that there is no way to automate out the human errors.”

    So True! “Human error” is a given. Every single individual makes them, most of the time in good faith. Multiply that by the number of humans in a way-too-large corporation and it becomes a nightmare to troubleshoot but many large corporations never brought the world to its knees. The most damaging factors in the current American debacle are: hubris, secrecy and greed. And fear. If your solutions address those without imposing Big Brother on the entire world, it’s all good. If Big Brother is a necessity, then big corporations will have to go. The same way the Tower of Babel went…

  31. Gene, Love to see the deposition when you get it transcribed from the Court Reporter.

  32. Gene,

    Any time.

    “Yes, I am working for the homeowners.” I have never doubted it. Not one minute. Just had to read what you post. The same way that I’ve always known Tnharry does too. And so does Bob. Or Jan, for that matter. All the bloggers who get such a bad press here. Interesting, isn’t it?

    Doers v. talkers. Nothing new there…

  33. John Gault,

    You really need to read the documents from an objective position. In any sale of a foreclosed property, the servicer becomes the “first creditor”. It is basic law.

    BTW, if you were correct and the advances meant that the loans were not in default, and therefore the foreclosures were unlawful, I must ask this question of you.

    Why have not PIMCO and other Investor lawsuits not cited this argument? If it was accurate, then they would win the case and damages “hands down”.

    The law firms that PIMCO and others hire are the best in the nation. You would think that they would know your arguments.

    Or are you and NG just like Obama, the smartest guy in the room?

  34. Christine,

    I will send you an email over the weekend to find out more about your case. You did good focusing upon the servicing issues. That is where the servicers are most vulnerable.

    The new RESPA regulations have servicers frightened. They know that they are vulnerable under the new regs, so they are trying to solve the problem by automating. However, what they have not realized is that there is no way to automate out the human errors. That is the arena where we are playing and developing solutions. And if the servicers don’t take us up on the solutions, then they will suffer because we also offer the same type of analysis for homeowner attorneys.

    FYI, just keep a watch on QM mortgages and Ability to Pay. When the first defaults start to occur, it will be very painful for lenders.

    As the Ng and the “win win” scenario, you are absolutely correct in how NG has created unreasonable expectations. Three years ago, I quit speaking to people who started to quote NG and his theories. Today, there is no attorney I know of who went through his seminars that will use his arguments. They know that it is garbage.

    Guess I need to reply to John Gault, and then get back to real work. Preparing a presentation for two regulatory agencies and also prepping for Expert Witness Deposition on the 21st. That will be on Securitization practices and lending, and modification processes and foreclosure law.

    (Yes, I am working for the homeowners.)

  35. The judge in New Century each week is dumping all homeowner claims….and some of us have gained traction, in our states. Very telling. Carey is denying stuff that is valid and proves out with preliminary wins in the state and federal court outside his jurisdiction.

  36. Well, now Abby, I’m very happy that you brought the issue to our attention – thanks, but it isn’t really that attorney Albert wants the case removed. She wants it flagged and highlighted appropriately. This, I’m afraid, is hardly news to some of us. I have felt strongly that mainstream research sites have been scrubbed of case law which supports or appropriately explains the issues relevant to our defense, particularly cases pre-securitization, pre-MERS. The value of those cases is major imo. The internet has been scrubbed, too.
    That makes for an even tougher road to hoe. Kudos to Ms Albert for her rightful challenge.


  38. Agreed, ian…no one size fits all in this game. One MUST know what applies to them and how, with research from beginning to end! IMO

  39. Iwantmynpv- thanks for another illuminating post.
    There are some of us who are trying to learn and understand from those who know, such as yourself. And we all have different situations, so are looking for different information. Please disregard the endless blather of some on this blog and keep posting. Thanks again.

  40. I have a question. Capitol One took over from two previous banks or some entity. There hasn’t been a recording at the Clerk’s office here in Saratoga County NY until a couple of months before being served foreclosure papers. I’ve lived here for ten years. The recording now has MERS listed. They waited 18 months of non payment before acting. The required modification attempt went through rapidly and they offered 1 dollar less per month as an offer. Does this sound similar to other bank actions? I do have a lawyer and he advised me it will proceed in three stages. At stage three I will have to either acquiesce or start litigating as plaintiff myself and hire forensics.

  41. All people have to do is turn off the TV and open their eyes. Even OPEC, the last bastion of the petrobuck, is pulling away: Saudi Arabia is starting to trade directly with China. How much longer do you believe this country will last?

    Is this really about a house? Foreclosures were only meant as a desperate effort to seize enough land and sell it to foreign investors. And all this didn’t happen overnight. Where was everyone when that was being put into place?

    Is the US or the World Coming to an End? — Paul Craig Roberts
    April 9, 2014 | Categories: Articles & Columns | Tags: | Print This Article Print This Article

    Is the US or the World Coming to an End?
    It will be one or the other

    Paul Craig Roberts

    2014 is shaping up as a year of reckoning for the United States.

    Two pressures are building on the US dollar. One pressure comes from the Federal Reserve’s declining ability to rig the price of gold as Western gold supplies shrivel and market knowledge of the Fed’s illegal price rigging spreads. The evidence of massive amounts of naked shorts being dumped into the paper gold futures market at times of day when trading is thin is unequivocal. It has become obvious that the price of gold is being rigged in the futures market in order to protect the dollar’s value from QE.

    The other pressure arises from the Obama regime’s foolish threats of sanctions on Russia. Other countries are no longer willing to tolerate Washington’s abuse of the world dollar standard. Washington uses the dollar-based international payments system to inflict damage on the economies of countries that resist Washington’s political hegemony.

    Russia and China have had enough. As I have reported and as Peter Koenig reports here Russia and China are disconnecting their international trade from the dollar. Henceforth, Russia will conduct its trade, including the sale of oil and natural gas to Europe, in rubles and in the currencies of its BRICS partners.

    This means a big drop in the demand for US dollars and a corresponding drop in the dollar’s exchange value.

  42. If you read the sub-servicer agreements – you will see two things – the sub-servicer and master servicer have stopped making advances on most of the loans for P&I payment, they do advance escrow, which is reimbursable outside the trust, on liquidation or modification funded by the US Government or Guarantor.

    The servicing advances recovered are also recovered outside the Trust, with most funded by the Depositor / Investment Bank to the servicer – to the big title companies – to the municipality.

    Upon the sale date, the funds are wired to the sub-servicer, WHO recovers all advances, and then forwards the net proceeds to the collection account held by the master servicer for the benefit of the Trust.

    The NPV was not created to help borrowers, it was created to resucuritize the loan, at the reduced cash flow variable ratio. Finally, get a lawyer, even if for the procedural process with the Court.


  43. “And I think Mandelman is confused. He and Gene appear to think…”

    Thinkers with nothing to show for it Versus doers with results… Hmmm. What a dilemma!

  44. The FNMA Prospectus contains the fnma guarantee on the certificates, but makes it clear the guarantee is paid to the TRUST. Additionally:


    Issuer and Trustee


    Dated as of September 1, 2006



    evidencing beneficial interests in


    [Authorized by Title III of the National Housing Act,12 U.S.C. § 1719(d)

    4.05. Distributions; Fannie Mae Guaranty.

    On each Distribution Date for each Series, the Trustee of the related
    Trust shall withdraw from the related Trust Account the Class Distribution Amount for each Class in such Series, and shall cause the Paying Agent to make the appropriate distributions to the Holders of each such Class…..

    In the event that the amount on deposit in the Trust Account for any Series on any Distribution Date allocable to any Class of such Series shall be less than the related Class Distribution Amount, Fannie Mae, in its corporate capacity, guarantees to the related Trust that it shall provide from its OWN* funds the amount of any insufficiency and shall deposit such funds into the applicable Trust Account for distribution by the related Trustee pursuant to this Section 4.05.”

    *where’d fnma get the funds? the g-fees charged to borrowers, built into the rate.

  45. And Gene,

    “For our problems to be resolved, a “win-win-win” scenario must be created”

    That was the motto in my 20 years working in litigation for AIG. Win-win. We used to joke about it. The utopia of a well-balanced society. Except that… one party always comes to the table with unreasonable expectations.

    Where I seriously fault NG is that he created unreasonable expectations in people who never had them in the first place. For an officer of the court, I find that actionable.

  46. And I think Mandelman is confused. He and Gene appear to think that since the PSA allegedly provides for reimbursement of servicer advances (and also in my estimate, we are only speaking of non-gse loans), that makes it a claim under the note. It isn’t. It may be a business to business type loan, but it isn’t under the note (unless that gang REALLY wants to hear about commingled funds – see “commingled funds assets” – and the potential ramifications to REMIC’s).

    IF reimbursement of a servicer advance can pass remic / trust law (which I don’t believe it can, regardless of anything recited in a PSA – that or the investors got tricked and it doesn’t qualify as a REMIC), then the trust could owe the reimbursement of an advance. That has nothing to do with the advance being made as a loan to the trust. Those advances are and must be applied to the loans, the only thing a trust has to apply them to, whether their source is a loan or from the man in the moon. Even if that language appears in some PSA’s, and even if it could pass remic muster, no right of subrogation is spelled out that I’ve heard – just a repayment obligation. That does not make for a right under the note. And a right of subrogation in a PSA under the note would, further, probably if not definitely vitiate the transfer to the trust as a true sale. So I can agree, IF a loan to a trust passes muster, that a repayment obligation is created by advances on non-gse loans, but I can’t agree it’s under the note -or- that the money doesn’t apply to a note balance. I asked legitimate questions, are they not, after the first run on NG’ material the other day and got NO response. Before any knee-jerk smarmy reaction, try to consider we’re on the same team (that is, if we are) and do try not to get dizzy looking down! (Hey, come on. You earned that one).

  47. Gene,

    Contact me at and I’ll send you the case. It is in federal court and published.

    My case was strictly based on servicing issues. Payments made and not applied, resulting in a slew of late fees, another atrocity called “suspense account” better known as lalaland, a miraculous discovery of my payments after official intervention but no reversal of the late fees, and what has been since known as a completely artificial default. An ignored QWR (and I was still paying) and a seriously pissed off homeowner with a 2″ tall file, a tainted credit report and two years of her life invested into it.

    My shtick has been from the beginning: follow YOUR money.

    And with all due respect, good attorneys are not hard to find. Like everything else, one must shop for them. Another couple of months of my life. Every minute I spent fighting the servicer has a value. Can’t do that without documenting, documenting, documenting. The one thing people don’t do until it’s too late.

    I can’t count the numbers of hours/days I’ve tried to put some sense into LL followers.

    Of course you won’t represent them: I wouldn’t!

  48. Christine,

    Appreciate the kind comments.

    I have almost 20 years in the lending industry with the last 7 being involved in assisting homeowners and attorneys as case consultants and providing Expert Witness testimony in default litigation.

    For me, my credibility is on the line every single day. I must be well versed in what I do, and be able to back it up with evidence. If I cannot back something up, I don’t offer opinions, etc. If I speculate, I identify it as pure speculation.

    That is why I get so upset at NG. If I made such comments and claims, I would be nailed to the wall. It happened to me on one item in a deposition, and it will never happen again.

    There are an incredible amount of things going on behind the scenes, in both lending industry and regulatory arenas. Everything is in play right now. How things will play out is uncertain, but I can say that non bank servicers are going to take some big hits.

    For our problems to be resolved, a “win-win-win” scenario must be created so that all three parties, homeowner, investor and servicer, must either benefit or suffer harm in roughly equal amounts. Otherwise, things will continue as they do now. Having a situation where only one party wins does not benefit anyone.

    Though it seems like the regulatory agencies are doing nothing, they are actually trying to cope with things. It is just that the problem is so pervasive, and even they have problems understanding. They need assistance, but there are few firms able to really assist.

    For the last year, my team has been developing solutions for many of the problems. We have just started to roll them out, and are now in contact with regulatory agencies about what we have. Where that leads is anyone’s guess.

    Our initial solutions should benefit homeowners in default. They combine meeting the needs of the homeowner, the servicer, and the investor. We attempt to address the concerns of all, without the need for costly litigation, which benefits no one except the law firms.

    For homeowners who are in litigation, there is much less that can be done. The die is generally cast, and it cannot be undone. Where we can help is with the “distressed” homeowner, assisting in getting mods that allow for true repayment of the loan or in being able to complete BK repayment plans.

    It is going to be an “interesting” 2014.

  49. Christine,

    Good points.

    Curious about TILA/RESPA win. What were the allegations? And when? Were they based upon loan origination, or later servicing issues?

    Were there problems with the Statute of Limitations, or were you able to argue “tooling”? And what state?

    I have talked with many Pro Se filers. They don’t win because they don’t know court procedures. I refuse to work with them because I know that they will lose.

    Good that you found a competent attorney, for there are very few good ones who will work for what a homeowner can afford. The good ones demand high fees, but the results are worth it. And they know what they know, and if they don’t know it, they seek out competent help.

    Over the next year, there are going to be substantial changes in the servicing arena. Watch for the legal issues to arise.

    My associates and I, plus others who work within the financial industry are constantly having discussions about the viability of the servicer industry model. It is not nearly as profitable as people believe. And when the new compliance regulations hit at the end of the year, plus the litigation to come from investors like PIMCO, it is difficult to see how the servicers will remain in business.

    Just another thought to consider………

  50. Excelquisitor

    For this case, the court came to the right conclusion.

    It is going to be an interesting fight ahead. There are ways to prove that the actions of IndyMac created a reliance upon the borrowers, inducing the default, etc.

    What will be very interesting is the “damages” to be considered if Dirienzo wins. How does one calculate the damages of a harmed FICO score? The loss of the ability to obtain credit? Interest Rate increases on credit cards, etc?

    Too bad it is an unpublished opinion, but that is understandable due to the fact pattern.

    I suggest that the case be watched…..

  51. Gene,

    Just happens that I won an appeal on what I understood: Tila/Respa. In all fairness to my fellow bloggers, I was extremely fortunate to find a competent attorney. I have no qualms admitting either that I would not have known how to plead. Pro se, I would have lost and I knew it.

    NG is dangerous. He sent people with no understanding of the system directly to the slaughterhouse. I don’t give advice on what I don’t know. What I do know is that homeowners need attorneys and to stay away from exotic theories NG has yet to prove arguable and winnable IN COURT.

  52. Gene,

    I truly appreciate your comment. And… you lost me. Way over my head (and I have no qualms admitting to my limitations). I am pretty much where everyone on this site is:

    1) Banking and securities are not my forte. I excel in other things.
    2) Common sense dictates most of what I do and I’m still alive, in my house and functioning. It must be appropriate.
    3) We’ve all been waiting for answers we could seek our teeth in and never got, or for people whose lead to follow because… it rung true to us.
    4) NG gave lots of answers and no case law to illustrate that he not only argued them but even WON on them in court. Not ONE blogger here has won anything. In fact, people stopped paying their mortgage for whatever reasons (and God knows many are legitimate!), played the NG game and… lost.
    5) Quite a few attorneys have been regularly coming here and refuting what NG states and claims of “banks were fully paid by insurance”, “no one is out of anything” and “homeowners can claim their free house”. Common sense tells me it isn’t true. I haven’t dug into it much further and I don’t care to but since I was forced, I ended up suing the bank for answers on the very little I understood (and winning on appeal).
    6) As much as he is hated for it, a guy like Andelman has taken action and helped homeowners stay put where they wanted to remain… Given that one helps and the other hurts, I tend to listen to Andelman a lot more than NG, who’s proved to be harmful. Common sense again.

    Honestly, I don’t know all the ins and outs of the past 50 years of banking shenanigans and, quite frankly, I never said: “When I grow up, I want to investigate banks and spend years of my life at it”. I naively thought that regulatory agencies I was paying for were doing their job of watching them.

    If you have the ability to contribute anything toward undoing the atrocities committed against people whose only ambition was to work, have a life and 1.8 kids, put them through college, retire and relax with a well-deserved retirement they prepaid for for 45 or 50 years, by all means, you have my entire support. Fatigue has long settled in. People are wearing thin and NG still comes short of results 7 years into this debacle.

    If you do know, though… all those bank settlements in the millions and even billions… where is the money going? Now that’s a question everyone has.

    Again, thank you though. Much appreciated.

  53. Just read Martin’s post. He is accurate with what he writes. (BTW, Martin and I know each other, and we do disagree on many things, but we do agree on other things.)

    NG claims to know what is really going on, and he may have convinced himself that what he writes is true, but it is not. The complexity of the “advances” alone is unbelievable. Add in all the other agreement requirements and regulatory requirements, and it takes the best person a year to understand the issue from both sides.

    The simple fact is that both Martin and I are tired of the absurd arguments being promoted to homeowners in trouble. The arguments do nothing to assist homeowners, and in fact, serve only to hurt homeowners.

    There are ways to solve the different problems being encountered and new methodologies being designed and implemented to assist in solving the problems in a timely manner. For many homeowners, investors and servicers, all will win in the process. For some, no matter what is done, they will not be able to keep the home and when this occurs, the investor will lose as well.

    As I have written before, do your own due diligence. Study the regulations, TILA/RESPA and learn about how lending really worked. Yes, there were problems that you will find, but if you look at things without a “confirmation bias”, you will start to differentiate between what is correct and what is not.

  54. Interesting CA Appellate perspective of damages when servicer states borrower has to be delinquent in order to obtain modification –

  55. Christine,

    Modifications and advances are related in some ways. Dependent upon the terms of the Trust, doing a modification can allow for return of the advances. Plus it returns a loan to performing status which reduces required Regulatory Capital and Loan Loss Reserves, if the loan is portfolio.

    Erica Johnson Seck of IndyMac fame stated in a deposition that the main element for doing a modification was whether or not the servicer advances could be recovered by the modification. If so, they were more inclined to do the mod. If not, then they would more likely decline the mod.

    The servicing model presents a different set of circumstances than portfolio loans. That is a Phd course in business to understand……

  56. “I appear to have sparked some controversy over my comments that were directed at modifications and servicer advances — subjects that are not necessarily related.”

    Sure did!

    “But they could be related — as where the homeowner seeks a modification on which there have been servicer advances.”

    Could be related? Please pray tell… How?


    Is there an SOL on tax liability?

  57. My hat’s off to you Neil for your advice over the past 7 years that I have been a “lurker” here. Your advice is solid and sound. Granted, we are on a learning curve, and expand on what works and what doesn’t. These banksters are really lulling their prey to sleep. I am a veteran of 2 attempted foreclosures and bankruptcies and still fighting. Your advice on seeking counsel for a “Modification” is way under-stated. The Judge strongly suggested we reach a compromise and settlement. The Bankster presented a “loan modification” on an extremely short term with payments larger than I could afford. This was a recipe for instant failure. I declined the offer, and counter-offered to pay their new principal balance in full. They refused my offer and immediately raised their “new principal balance” by 35%. After re-reading the loan modification, it instantly became apparent what they were doing. They intended to collect this addition 35% once the Mod was paid via an innocent one-sentence provision in the Mod contract . Keep the faith Neil I would not be where I am if not for your efforts! Thank You.

  58. BTW, if you understood the author of the FAS140 discussion, you might perceive the principle of TITLE (per DOT), and the beneficiary interest thereof as being consistent with the recording laws of title to real estate in the several states.

  59. Earlier discussions of securitization indicated that the conversion of GAAP loans into FAS assets required different numbers and a THIRD set of books (Al Capone only needed 2 sets for his crimes). From stories of the early Notes being destroyed it may be deduced that the banksters used the original loan numbers for identifying early security CDOs and destroyed the notes to avoid a possible conflict if the 2nd and 3rd sets of books were ever allowed to see the light of day by a court. When you are ready to wade in those waters this oversight might be of use to you –

  60. Has anyone received a 1099 on principle after the SOL has run?

  61. Javagold,

    Nothing is out of the blue, there is a reason. Everything is specific.

    My guess is the veil is lifted…not lifting but lifted.

    They may have securitized the promissory note under the prior account.

    I have been looking but I didn’t save where I read or heard in some talkshoe (some opinion) that the securitized notes had the social security number of the homeowner and so the funds the banks received belonged to the homeowner, but they wait until three years after the money has been made to claim it as theirs.

    It just seems, if anything remote linking the money they are making to the people they are claiming still owe them because of that note may make them try to sever the connection by creating a new account.

    We will never know, but it is not out of the blue that they do anything. Everything is specific.

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

  62. My account number was changed. BOA lender. BOA SERVICER. BOA ORIGINATOR.

    Account was in good standing. And out of blue, they changed the account number. And now 3 years later there are no record of original account number any time I question them. I do have ALL documents with the original account number kept in my records.

    And the switch hAppened the very month I asked, not even applied, just asked about HAMP modification.

  63. Louise,

    People get confused all the time with the sale of servicing rights which will often change the loan payment number, and the sale of a note.

    Two totally different animals.

  64. Once again NG is absolutely wrong on the subject of advances. If he would read the Master Servicing Trust Agreement, the PSA’s and other documents, he would realize this.

    As to modifications, he is correct about speaking with knowledgeable people. There is much to modifications that is not spoken about or even known, even by those he claims are knowledgeable.

    The NPV models are flawed in how they were put together and how they are handled by the lenders. Lender inputs are subjective, especially the Probability of Re-default inputs. A lender uses their own “experience” for re-defaults as a guide, not a true Probability of Re-default.

    These inputs and others affect the NPV results tremendously.

    Also, NG, bet you don’t know the flaw in Dodd Frank & TILA/RESPA that affects modifications and bk to a borrower’s benefit.

    I will let people know here when my team goes public with it later this year. It will be a surprise for lenders and servicers.

  65. Have you or anyone found a way to determine whether the Note has been sold more than once? (I know that many subscribe to the view that if the loan number has changed, it has been sold more than once.) Another question I have is when the Note is sold, what insurance kicks in so that the servicers/banksters get paid?

  66. Capitol One offered my a modification on the third attempt. They offered a payment of $2999/month instead of the usual $3000 per month payment.

  67. You are spot on!!

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