Transcript of Neil Garfield Show on Foreclosure Settlement

Lots of question and comments about the Neil Garfield Show last Thursday. I explained the real context for settlement and it provoked quite a bit of discussion. Since many people asked for a transcript, here is a transcript that is almost verbatim but leaves out some comments that were made extemporaneously on air.

Hi Neil Garfield here and this is Thursday February 28th, 2019. If my voice breaks it’s because I’m still dealing with the tail end of a head cold or allergies I don’t know which.
In the marketplace of mortgage loans and foreclosures and declarations of default, we have a fake world in which investment banks hide their existence and connection to real estate loans. Virtually nobody on whose behalf declaration of default is issued, nobody has suffered a default, because they don’t own the debt, because they suffered no loss. And yet they do, and they start foreclosure proceedings and they take houses by default unless some homeowner says wait minute, who the heck are you?
 It was the investment bank who funded the loans or their acquisition, not some trust, not some investors, not Fannie Mae or Freddie Mac and in most cases certainly not the indiscriminately named originator. Goldman Sachs is a typical example of what is basically only a handful of mega banks that have tacit reciprocal agreements to cover for each other as Master Servicers, Trustees, Depositors, and masquerade as sellers of loan documents they do not own. They sell promissory notes made payable to other people. They pretend they own the mortgage or deed of trust. But they don’t because they chose not to own those documents.
They enter into contracts with newly formed companies or existing companies to perform services that are illegal. Pursuant to these illegal contracts still other new or old companies are indiscriminately designated as claimants, plaintiffs, beneficiaries pretending to hold claims or pretending to have the right or even excuse to enforce claims. All the while the investment bank has always and only been the owner of the debts that originated in illegal loan closings that indiscriminately designated non lenders as Payees on the notes and non lenders on mortgages on deeds of trust.
Yes the investment bank, Goldman Sachs in many instances was the sole owner of the debt at the time it was created by wire transfer into the account of the closing agent and thence to pay your seller or prior lender etc.
The reason why GS doesn’t step forward and say we are the owner of the debt, even though they were, is simple. They don’t own it anymore.
There are two essential steps to the lie we live with day in and day out.
First saying that they were the owner of the debt admits they lied to investors when they said a trust owned the debt. That led to the required lie in court that US bank or Deutsch Bank was Trustee on belief of certificate holders of certificates issued in the name of a nonexistent trust.
Second, saying they were the owner of the debt then exposes them to inquiries about other things  — many things — like whether they are still the owner of the debt, which they are not.
They repeatedly sold the debt in sales disguised as deviates or hedge products. So if they say they are the owner of the debt they would be opening themselves up to billions, perhaps trillions of dollars in liability. Why because they lied about owning the note and mortgage. It was the paper that they pretended to securitize, never the debt.
But the paper was worthless because it named a creditor who didn’t loan money and who had no contract or other right to loan money. Like magic money from Goldman Sachs appeared at the closing table making borrowers falsely believe they were signing notes and mortgages to the companies that had loaned them money.
Worse yet, as we have seen several times where candor was required, nobody knows anymore the identity of the owners of the debts because they number, for each debt, in the dozens, hundreds or thousands by virtue of derivative contracts.
And still worse, the owner of the debt when it was created, the investment bank, has already allocated the money proceeds of those multiple sales on its own books and taken a profit from the resale of the debt multiple times. So the owner of the debt at creation shows a credit balance that should be allocated tot eh account of the borrower. That credit never appears.
And Yes on average, according to my analysis the average $200,000 loan produced a whopping $3-$4 million in profit. And still they want to take your home because if they don’t try they would be admitting to fraud and that would undermine the value of all derivates traded on the basis of residential mortgage loans.
It is in the context of this fake world in which indiscriminate parties are allowed to foreclose by default upon millions of homes and allowed billions of dollars have been paid to as bonuses to everyone in the chain to keep their mouths shut. This fake world is so convoluted that both courts and lawyers are reluctant to try to penetrate to the truth.
It is only when this world is threatened with actual exposure that homeowners with $200,000 loans get paid settlements, sometimes in the millions if they play their cards right. Those decisions occur from a central decision making place for all the banks.
Because the settlement is based not on the value of the loan but the value of the threat of exposure.
You can always settle any case by horse trading on the amount due, when it is due and at what intervals and interest rate. But more and more foreclosure defense lawyers are asking the right questions — what are the elements to consider when evaluating the settlement value of a foreclosure case? Emphasis on the case at hand distracts from the value of the threat to the other side.
Bottom LIne: If you don’t have the tenacity, stomach and resources to litigate all the way you might just as well settle on any terms you can get. You can improve your odds by sending a QWR, DVL, complaint to CFPB or Complaint to State AG. You can also improve your odds by aggressively pursuing discovery in litigation and getting an order requiring your opposition to produce answers or documents that they don’t have.
BUT if you do have the tenacity, stomach and resources to litigate all the way to the end your chances of a favorable result are greatly improved.
  I am broadcasting live from Duval County Florida and this show is brought to you by the livinglies blog, GTC honors, Lendinglies, AMGAR, and the Garfield firm, and this show is specially brought to you because of donations to the livinglies blog from listeners like you. Thank you. And for those of you who are not contributors we ask that you HIT THE DONATE BUTTON ON THE THE BLOG OR call 954-451-1230 or
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Valuing a case for timing of settlement and amount of settlement.
The answer depends upon your goals and your determination. These cases are settled within a very wide range. The highest known to me is $31 million. The lowest, and there are many, are eventually settled for nominal amounts, cash for keys etc. When pressed to the end the average settlement is in six figures, all under seal of confidentiality. Some settlements allow retention or recovery of the property. Those will often be under the guise of a “modification” that is in reality an entirely new loan.
The only constant factors appear to be the following:
  • The banks force every litigant to either go to the end aggressively or give up. Most give up essentially and settle for far less than the case is worth. So don’t expect any meaningful settlement offers until the 11th hour or beyond.
  • Those cases in which discovery is litigated aggressively settle earlier and better than those who merely wait for trial. Motions to compel, motions for sanctions and motions in limine are common in such cases.
  • Those cases in which cross examination is effective in breaking down the credibility and foundation for the evidence proffered for a foreclosure remedy typically, but not always, result in a judgment for the borrower or a favorable settlement just prior to the announcement or entry of judgment or a final order. Cross examination requires extensive preparation and practice  before trial and the ability and willingness to press points on follow-up.
  • All devices that could result in an award of attorney fees should be employed as this adds a ground floor to the claim for damages in settlement or judgment.
  • Assessing the value of a case is very complex and always evolving. As with all cases there are two main layers, to wit: the value to the Plaintiff and the value to the Defendant. In foreclosures there is a huge disparity between the two.
    • If the homeowner loses the case they lose their financial reputation in addition to their property and suffer the consequences of disruption to their personal lives, emotional and physical health.
    • If the claimant wins, it is almost meaningless to them in terms of monetary reward. The named claimant was never intended to receive the proceeds of liquidation of the property and doesn’t get it. The parties directing the attorneys for the named claimant get another nail in the box in which the myth of securitization is perpetuated.
    • If the homeowner wins, it could either be a dismissal without prejudice, in which case the claimant has lost nothing, or a judgment on the merits, in which case the named claimant loses nothing and the loss is swallowed up amongst hundreds or thousands of other transactions. The threat of a homeowner winning generally has very little meaning to either the designated claimant or the parties pulling the strings.
    • Cases in which a win by the homeowner could represent a threat to the securitization scheme of the subject REMIC trust or other vehicle or to many such alleged trusts or vehicles represent the basis upon which larger settlements are paid. Hence cases in which (a) the existence of the claimant is going to be declared doubtful or fraudulent or (b) the existence of a claim by the claimant is going to be declared invalid or unsupported are then aggressively settled to bury the truth.

2 Responses

  1. Banks will not settle if opens pandora’s box. Settlement is acknowledged on dockets.

    Wrong as to “funding.”. Right as to “no funding.” Wrong as to GSEs – top tranche holders in private label trusts. Earlier on – direct guarantor.

    Bottom tranches were sold first — courtesy of the grandfather of the form. But, all tranches sold before any non-existent funding.

    Just to try to clarify.

  2. Still in my house after 10 year battle in Florida. We have 100% proof of fraud with numerous big banks, large servicers, and crooked law firms. Where do you start with an offer to settle? Ask for $3mil and settle for $500,000? Or, do you win on Lack of Standing, get a dismissal and attorney fees, and then counter-sue for $3mil?

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