HSBC v Buset: Fraudulent Fabrications are okay because the “bank never attempted to misrepresent the 2012 mortgage assignment….” Of course they didn’t!


By: TT MacKinstry

Note:  Neil Garfield will common on this case on Monday on Livinglies.

See Decision here: HSBC v Buset

Instead of being sanctioned for Fraud on the Court and unclean hands, HSBC and counsel are being rewarded.

Things originally  appeared grim for HSBC Bank USA N.A. in 2015 when it faced involuntary dismissal of its case after a bench trial and sanctions for prosecuting a foreclosure suit with “unclean hands.”

Back then, the trial judge sided with borrowers accusing the bank of building its case on a forged mortgage assignment and granted their request to force the financial institution to show why it shouldn’t be punished for committing a fraud on the court.

The foreclosure battle was between HSBC, as trustee for FR Fremont Home Loan Trust mortgage-backed certificates, against homeowners Joseph and Margaret Buset.

The Busets’ lawyers, Bruce Jacobs and Court Keeley of Jacobs Keeley in Miami, sought to block a review in the Third District Court of Appeal. They claimed the Third District Court of Appeal lacked jurisdiction because the lower court was still weighing evidence and had reserved jurisdiction to impose sanctions and award attorney fees. Jacobs said a dismissal would allow “the Third DCA (to) make a ruling based on everything we know on the issue, as opposed to having successive appeals over and over.”

This week upon review, the Florida appellate court did a 360 turn and vindicated HSBC Bank USA N.A., reversing a Miami-Dade Circuit judge who’d found the lender forged mortgage documents to prosecute a real estate foreclosure.

The Third District Court of Appeal ruled in favor of New York-based HSBC, and remanded the case to Miami-Dade Circuit Judge Beatrice Butchko to enter a final judgment of foreclosure.

“This is a very disappointing decision, which ignores most of Judge Butchko’s groundbreaking ruling,” said Bruce Jacobs, the Miami foreclosure defense attorney who won at trial.

Butchko  dismissed HSBC’s foreclosure suit in April 2016 against the Busets. In response to an accusation of forgery against Ocwen Loan Servicing LLC, she sided with borrowers who accused the loan servicing company of faking a mortgage assignment for HSBC.

“Judge Butchko found Ocwen and HSBC relied on false testimony, false evidence, violated the court’s discovery order and then lied about their violation of that order,” the defense attorney from Jacobs Keeley said. “Judge Butchko found the documents were untrustworthy. She found Ocwen’s loan boarding process was a legal fiction.”

Jacobs of Jacobs Keeley in Miami argued at trial that to prove the plaintiff had legal standing to sue, the financial services firm forged documents in 2012 to show the transfer of the debt about seven years earlier from one lender to another.

“They’re creating fake evidence of transactions that didn’t really happen,” Jacobs said after Butchko found the mortgage assignments “never legally occurred.” Unfortunately, it doesn’t appear that a forensic document examiner was hired to review if the note and endorsements were fabrications, and likely the assignments too.  Attorney Bruce Jacobs may want to hire a forensic analyst to review if the documents were created simply to create the illusion that they were existing documents or created for litigation.  It is highly likely these documents are fabrications.

The judge had found the lender pursued the case with “unclean hands” and lacked competent evidence to support its lawsuit. She also granted the homeowners’ request to force the financial institutions to show why she shouldn’t punish them for committing a fraud on the court.

But the defense victory ended on appeal.

Instead, the court cited multiple missteps and a shift in focus in a dispute that should have ended in the homeowner’s favor. The court found that the “bank never attempted to misrepresent the 2012 mortgage assignment, and that the documents governing the sale of the debt during the last foreclosure crisis allowed for undated, signed and blank endorsements.”  How does a court determine intent?   Thus sanctifying the act of forgery and fabrication.

“At first blush, this case appears straightforward,” Judge Thomas Logue wrote in a unanimous decision with Judges Robert Luck and Norma Lindsey. “The borrowers stipulated to the note, mortgage and default. … At some point, however, the focus of this case shifted from foreclosure to securitization.”

According to the appellate ruling, Butchko relied “heavily on expert legal testimony of an out-of-state lawyer who specialized in securitization,” referring to that witness at least seven times in the final judgment. The witness, New York attorney Kathleen Cully, gave her opinion on several issues, including that the promissory note was not negotiable, the bank lacked standing to sue the homeowners, and that the financial institutions violated their pooling and servicing agreement by transferring the debt via an undated and unsigned indorsement.”

Allowing that testimony and then emphasizing it in the ruling were missteps that opened the door for reversal on appeal, according to the Third DCA.

“Even if Cully had an expertise in Florida law, the admission of expert testimony on the legal issues central to the case was an abuse of discretion,” Logue wrote for the judicial panel.

The appellate court also disagreed with Butchko on several key points. It found, for instance, that the promissory note was negotiable under Florida law, that the bank did not violate the pooling and servicing agreement and that the mortgage assignment did not destroy HSBC’s legal standing to foreclose.

“The Third DCA never ruled on my motion (to) relinquish jurisdiction, to dismiss the appeal as premature, to strike as sham and for sanctions,” Jacobs said. “Instead, they focused on whether the note was negotiable, even though Judge Butchko said negotiability was not a basis for her ruling. … This is just not a fair and impartial analysis of whether the big banks are still engaged in unclean hands in foreclosures.”

Greenberg Traurig attorneys Patrick Broderick, Kimberly Mello, Jonathan Tannen and Vitaliy Kats represented the appellants.

This case was a legal windfall for the financial services industry, and sends the message that if banks resort to perjury, fabrication and forgery there will be no consequences and “unclean” hands is not applicable when a lender is defrauding a consumer.

“This case presented multiple issues of significance to the financial services industry,” Broderick said in a statement. “We are pleased that the appellate court found no basis for a finding of unclean hands by our client in the handling of the underlying action.”

Original opinion:



BUSET, et. al.,


CASE NO.: 12-38811 CA 01




THIS CAUSE having come before the Court for Trial on March 17 and 18, 2016, and the
Court having reviewed Defendant’s Motion for Sanctions Under the Court’s Inherent Contempt
Powers for Fraud Upon the Court, and being otherwise advised in the premises, it is hereupon:
ORDERED AND ADJUDGED that Defendant’s Motion for Involuntary Dismissal after
Trial is GRANTED for the following reasons:

I. The Court Finds Unclean Hands In Plaintiff’s Prosecution of This Action
That Bars the Equitable Relief of Foreclosure

1. The Florida Supreme Court has long recognized the maxim that in equitable
actions such as this foreclosure, “he who comes into equity must come with clean hands.” Bush
v. Baker, 83 So. 704 (Fla. 1920).

2. In Bush, the Florida Supreme Court instructed that the “principal or policy of the
law in withholding relief from a complaint because of ‘unclean hands’ is punitive in nature.”

3. The Court finds several examples of Plaintiff’s unclean hands that mandate
punitive action that affirmatively bars plaintiff’s entitlement to the equitable relief of foreclosure.

A. Unclean Hands Involving the Specific Endorsement and Assignment
of Mortgage That Both Reflect a Transaction that Never Happened

4. Plaintiff’s trial witness, Sherry Keeley, an Ocwen employee, gave extensive
testimony regarding the Assignment of Mortgage (AOM) that Ocwen prepared in June of 2012
and recorded in the Public Records of Miami-Dade County in July of 2012.

5. On its face, this AOM purports to document a sale of Defendant’s loan from
Mortgage Electronic Registration Systems, Inc (“MERS”) as nominee for the originator,
Freemont Investment and Loan, directly to the securitized trust identified as the plaintiff.

6. Ms. Keeley testified that Ocwen prepared this assignment in preparation for filing
the foreclosure complaint. The Ocwen employee identified the originator of the promissory note
and prepared the AOM to reflect a transfer from MERS, as Nominee of that originator to the
same party as Ocwen intended to name as Plaintiff in the foreclosure action.

7. The Court takes judicial notice that on July 25, 2008, Freemont Investment and
Loan (“Freemont”) entered into a voluntary liquidation and closing which did not result in a new
institution. As such, the status of MERS as nominee for Freemont ended when Freemont closed on July 25, 2008, which renders the AOM created in 2012 void ab initio.

8. Ms. Keeley further testified the Pooling and Servicing Agreement for this
securitized trust backed up the veracity of the AOM. However, Ms. Keeley later conceded that, according to the PSA, the chain of title for any loan within this trust went as follows:


I. The Court Finds Unclean Hands In Plaintiff’s Prosecution of This Action
III. The Promissory Note Is Not A Negotiable Instrument

50. The Court gives great weight as the trier of fact to the testimony of Defendant’s
expert witness, Kathleen Cully. Ms. Cully is a Yale Law School graduate that worked her entire career in structured finance transactions since 1985. She was extremely well versed in the Uniform Commercial Code. Among many other tasks and accomplishments, Ms. Cully testified that she led the Citigroup team that created the first pooling and servicing agreement ever. She led Citigroup’s Global Securitization strategy. The Court finds Ms. Cully eminently qualified as
an expert witness in the area of securitized transactions and their interplay with the Model Uniform Commercial Code.

58. This Court does not address the provision described in the Nunez opinion, instead grounding this decision on a myriad of other provisions of the Mortgage establishing the Note is subject to and governed by the Mortgage, rendering the note a non-negotiable instrument.

82. The Court grants Defendants’ Motion for Involuntary Dismissal and enters
judgment in favor of the Defendants who shall go forth without day.
83. The Court reserves jurisdiction to award prevailing party attorney’s fees and
to impose sanctions against Plaintiff under the inherent contempt powers of the court for fraud on the court, and such other orders necessary to fully adjudicate these issues.
84. Plaintiff is ordered to produce a corporate representative with most
knowledge regarding its efforts to comply with the discovery order dated April 27, 2015, for deposition at the offices of Defendant’s counsel within 15 days from the entry of this  order.
DONE AND ORDERED in Chambers at Miami-Dade County, Florida, on 04/26/16.





9 Responses

  1. Judges has hands in sharing taking interest on our F forclosure! Unethical incentive. Discouraging us from taking our case to the court

  2. If Note is not a negotiable instrument, how does UCC apply on it ?

    Could someone tell me a federal law stating that mortgagee must have original of the promissory note as successor of interest.

  3. @ neidermeyer

    I feel great empathy for you. Ocwen has drained my bank account and stressed me out to the point of cardiac assessments and medication. Unbelievable, how these people live with themselves. A special place in hell for all of them.

  4. Neil ,

    Can’t wait to see your take on this Monday… I really want to see some kind of action plan…

  5. @ Poppy ,

    I agree 1000% about OCWEN purchasing distressed notes at a BIG discount… it is HIGHLY likely in my case with a $64MM purchase of a $800MM face value “trust” ,, backed up in my case with a self serving AOM where every person named on it is an OCWEN employee.

  6. Truth is, if Plaintiff show Original note endorsed in blank at the time of trial, game is over.
    I have a same case, when Ocwen employee acting as Mers executed assignment of mortgage as nominee for party which ceased to exist 5 years prior subject assignment. Her name is Jamalli Martinez.

  7. Chances are “very” high Ocwen bought the note, at a very deep discount, so they are not entitled to the house, only the amount of loss, if any. They are debt collectors, not for the REMIC Trust they are alluding too, but for themselves. I too have the same issue: 5th time in court with the same player, Ocwen(vexatious litigators). I have ledgers from a modification, with the same payment from the origin (cooked the books). Have assignments in 2012 with New Century still in bankruptcy, paperwork with repurchase agreement-where they say SPS, Ocwen are in play, when Carrington paid interest for 2 days in February 2007 (Tax statement), not SPS or Ocwen, payments were missing from the onset of the “alleged” origination (have receipts), Steve Nagy “stamp” in 2012 when he never worked for New Century in 2012-left in 2007, all of the signatures for VP’s or notaries are people who work for Ocwen (have all the secretary of state documents), have original wiring instructions…HUD paperwork has lenders as RBC, Wells Fargo and New Century on 3 different closing documents, law suit in 2011 by FHFA states: CSMC NC1 OSI 2007 Pass Through Certificates was purchased by Freddie Mac the suit was settled in 2014, and Ocwen has sent me multiple documents stating: they acquired the note from Weichart, New Century, and SPS, it goes on and on…the reality is: the rule of law is non-existent in these matters. The only person failing to state a claim for relief, according to the judge, is me. My “alleged” loan has been passed around like an old whore…

  8. These judges should be investigated to see if they any investments in HSBC or any REMIC Trusts. We live in time where they call good evil and evil good. It’s way past time to bring these judges to justice. The people need to all come together and take a stand. This is such bs. Ocwen is the one bringing foreclosure not HSBC. The foreclosure mill lawyers are misrepresenting who is really hiring them. The homeowners are spending fortunes on defense. To have a ruling like this is sickening. So how do you a wrongful foreclosure case after a ruling like this

  9. Check the judge’s disclosures. Unbelievable.

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