The Elephant in the Living Room — “No Action Arises From Deceit”

For the past decade we have been dealing with the politics of foreclosure. The law of foreclosure has been pushed to the curb because of political decisions. Out of abject terror and total confusion the rule of law has been abandoned in favor of not angering the beast that brought ruin to millions of families.

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I think that it is time to talk about the elephant in the living room — that foreclosures are not so much about law — which  favors homeowners — than they are about politics, which favors the banks.
If you look at litigation in the student loan marketplace, you will see that the same defenses that we use in foreclosure are getting traction because of the perception that students are different from homeowners.
Student stereotype is young white up and coming professional who got a raw deal. The homeowner is a lower middle class person of color whose eyes were bigger than their wallet.
This type of stereotyping produces incongruous results. And it is based upon the erroneous notion that there was a legal, valid loan at the base of all the paper. In almost all cases there was not. In almost all cases, if the disclosure had been proper, the investor and the homeowner would have known that the banks were creating “trading profits” to launder the money they stole from investors.
In all cases neither the investor nor the homeowner would have opted in on the deal without the investor being compensated for  their investment or the homeowner being compensated for his/her signature and reputation.

The biggest problem for people to wrap their heads around is that there was no loan, as it is defined by law. You can’t argue that point because it makes you sound nuts, but it is true. If we were to use hundreds of years of common law development, as it exists today, the money received by most homeowners was not the result of a loan contract. In real life, investors were defrauded into thinking their money would be managed by a trust with a trustee that they knew very well. That never happened. SOME of the stolen money ended up on the “Closing table” where the homeowner thought he/she was getting a home loan.

The fundamental error committed by the courts is that they are allowing benefits to flow to the banks from an illegal scheme.

Ex dolo malo non oritur actio [“no action arises from deceit”].

“from a dishonorable cause an action does not arise”) is a legal doctrine which states that a plaintiff will be unable to pursue legal remedy if it arises in connection with his own illegal act.[1] Particularly relevant in the law of contract, tort and trusts,[2] ex turpi causa is also known as the “illegality defence”, since a defendant may plead that even though, for instance, he broke a contract, conducted himself negligently or broke an equitable duty, nevertheless a claimant by reason of his own illegality cannot sue.
So the actual legal effect is as follows: the homeowner is credited with money that ultimately came from the investors but was paid by the banks who intercepted the money that was intended for a REMIC Trust. The banks, under ex dola malo non oritur actio, cannot receive the benefits of their illegal scheme.
The investors contributed money and the homeowners contributed their personal reputation and signature without knowing they were being used for an illegal scheme. Neither one received disclosure or a share of the pornographic “profits” created by the illegal scheme.
As for the current status, legally, the investors have an equitable unsecured claim against the homeowner that could be converted to a judgment lien. The mortgage and note are void and unenforceable both because they are defective in referring to a nonexistent loan and a nonexistent loan transaction and because they are part of a fraudulent scheme.
BUT the politics of foreclosure is entirely different. As noted above, homeowners are seen not as victims but as the appropriate parties to bear the risk of untenable “loans.” Every branch of government had a choice when this thing broke in 2008. Either make the banks pay for it and provide direct relief for homeowners and investors (thus providing a stimulus to the economy), as they did in Iceland, or buckle under the threat that the entire financial system would collapse if the illegal behavior was not sanctified. In most countries the choice is obvious — let the homeowners burn.
The problem with politics governing legal decisions (besides the fact that it should never happen) is that politics change. Thus it is the trial lawyers job to embarrass the judge, piece by piece, such that the judge feels pushed into a corner and that in this one case he/she will allow the homeowner to prevail.

16 Responses

  1. The owner of our mortgage is Deutsche National Trust and servicer is OCWEN. Our mortgage originated Dec 2007.

    We cant get help through HAMP with our mortgage because it was not purchased by Freddie or Fannie.

    Didn’t Deutsche settle with regulators for several billion dollars over empty mortgage pools for 2006-07? If I remember, Deutsche was also sued by the investors of those mortgage pools and they won? Then Deutsche attempted to sue Quicken and lost?

    I could never find our loan number in the SEC for Quicken Loans Dec 2006-Jan 07. How can we find out if it was among the loans settled in those lawsuits?

  2. […] Neil Garfield, published on Living Lies, on November 29, 2017 BZ: I have included some comments extracted by a friend of mine well versed in the Elephant in the […]

  3. The WF use of proceeds had me more focused when reading the PSA on some research. Servicer still used PSA as evidence of sale to “new” beneficiary after supposed trust was undone. Description says plainly sale of loans to Depositor. So far judge ignoring basic facts. How did investors allow this and then claim to be victims. Oh yeah they’re paid off w settlements! That needs to be our focus even if u lost ur home and anyone w a mortgage.

  4. UKG u stole my thunder lol think I’ll send one to hammer the point home


    I sent this guy an email stating “F–You and your free lunch!”

  6. “Wells Fargo Bank will use the proceeds from the sale of the Mortgage Loans to the Seller for its general business purposes”.
    They did not use the money to purchase the notes and mortgages.

  7. Power, power of predatory lending, the introduction of a new profession that I did not even know existed…mortgage broker. Everyone’s palms greased except I lost every penny I had earned , with $300 k already out of my pocket, I ended up with one copper Lincoln, and loosing all my worldly goods, right down to my paintings, all the art supplies necessary for my livelihood, my lifetime collection of photos…I have not one photo of my parents, relatives, my own children’s lifetimes…and I am autistic.

  8. Maxim – He is guilty of barratry who for money sells justice.

  9. @UKG all sounds like double talk. The net proceeds vs proceeds doesn’t seem consistent And the “without limitation” part looks like a big hole for investor to agree to. Then that they purchase original loans then new loans as well looks fishy. But not a lawyer lol

  10. They told the investors they were going to abscond with the money!
    Read the 424B and it may say something like this:

    The net proceeds from the sale of each Series of Certificates will be used by the Seller for the purchase of the Mortgage Loans represented by the Certificates of such Series from Wells Fargo Bank. It is expected that Wells Fargo Bank will use the proceeds from the sale of the Mortgage Loans to the Seller for its general business purposes, including, without limitation, the origination or acquisition of new mortgage loans and the repayment of borrowings incurred to finance the origination or acquisition of mortgage loans, including the Mortgage Loans underlying the Certificates of such Series.

    Did you find it?

  11. And…. to further show the game that the banks, FDIC, office of thrift supervision and the US treasury have been playing together, take a look at any Single Family Loss Share version agreement (this is a separate from the purchase and assumption agreement) that they created that gave the successor banks millions of dollars of loans from failed banks for FREE!! And I can prove it. This is what has happened to me. Who gave the FDIC permission to give my loan away for free and to unduly enrich a bank that I have no contract with and who never lent me a dime! And even worse, insure any of the banks losses! My god WTF!

  12. And still they push the “free house” shaming after robosigning laws and policy as in NJ

  13. Exactly every judge, elected official, brokers etc should be shamed for allowing this to happen.


    HOMEOWNERS versus Students…

    NO ROL versus ROL…


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