In response to my blog post last week about whether there might be causes of action for royalty or other damages or offset arising from the fact that the loan is actually a small part of a much larger group of transactions in which the borrower is a party but not a participant in profits, I received the following from “Summer Chic” which I found interesting, even if I don’t completely agree with all of her points.
I would remind readers again that pleading such claims including violations of statutes like FDCPA, RESPA and TILA (and state lending or servicing statutes) are subject to various statutes of limitation.
BUT if they are pled not as claims but as affirmative defenses entitling the homeowner to offset up to the amount claimed by the foreclosing party such allegations are generally not deemed to be subject to any statute of limitations because they are not technically claims, to wit: they seek no damages to be paid by the opposing party.
BUT it may well be that such claims might need to include the investment bank as a necessary party who was controlling all the other parties and who received the bulk of the profits that would be the source of the offset or claim.
Hence a deep understanding of legal procedure is required to even achieve the objective of pleading these allegations. It won’t be easy but the reward could be substantial. And by including Federal and State statutes the recovery of attorney fees is considerably enhanced.
- QUESTIONS: ARE HOMEOWNERS IN SIMILAR POSITIONS ENTITLED TO RECOVER A ROYALTY FOR UNAUTHORIZED USE OF THEIR NAME UNDER THEORIES OF UNJUST ENRICHMENT?
Answer: Mortgages and Notes are initiated as Contractual Obligations which require FULL disclosures under SEC, RESPA TILA, and UCC.
Pursuant to Section 401(a) of the Sarbanes-Oxley Act directed the SEC to issue rules requiring public companies to disclose in their annual and quarterly financial reports all material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships with unconsolidated entities or other persons that may have a material current or future effect on one or more of the companies’ financial measures.
The final rule defines the term “off-balance sheet arrangement” to mean any transaction, agreement or other contractual arrangement to which an entity that is not consolidated with the company (borrower and their original lenders is a party, under which the company has:
- any obligation under a guarantee contract (ala mortgage) that has any of the characteristics identified in paragraph 3 of FASB Interpretation No. 45,Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (November 2002) (“FIN 45”),[1] and that is not excluded from the initial recognition and measurement provisions of FIN 45 pursuant to paragraph 6 or 7 of that Interpretation;
The same apply to mortgages. Lender is ALWAYS in the position of the higher bargaining power. While Lender conducts a full review of borrowers’ ability to perform under the Contract, Borrower usually has no idea about that will be going on with his/her mortgage behind their backs.
Basically, Borrower, who thinks that he/she is signing a UCC document in fact is getting involved into numerous transactions under myriad of SEC laws when they becoming an Issuer and DIRECT Guarantor to the Originator; and indirect Guarantor to those who purchased hundreds of pieces of his once Mortgage as a Securities, which constitute indebtness by both, the borrower, and the Company who issued and holds securities – aka Investment banks (they do not lend us their money, they lend us OUR money which they get from FedRes under minimal percent (today is 2.5%, lending it for $5.00 to a million borrowers makes double profit right away; plus numerous sales of securities; plus tax breaks for profitability ; plus evasion of taxes via empty Trusts- name it. Zero disclosures to borrowers whose name they trade.
Current Mortgages provide very broad and evasive disclosures about the real nature of the Contract, which constitutes a breach ab initio. For example, mortgages usually state that this LOAN can be resold more than once. In fact, the essential part is missing. It should read as “this loan will be CONVERTED (for example) into 20 various trading products and SOLD more than 10 times a day to more than 100 parties, at the same time, for $15.00 per piece for $1 million per each combined transaction. I am wondering how many borrowers they will see again.
According to the Contract law, borrower is entitles to receive a benefit from his bargaining Agreement, which now is merely an opportunity to RENT a house (under glimpse of ownership), take maintenance, pay all expenses, conduct improvements – while undisclosed party whom Lender sold this Rental Agreement – collects ALL profits times more than the price of the loan
For example, a simple $150,000 loan generates about $100,000 in interest over 30 years, plus $3-4K closing costs; plus costs of improvements; plus taxes and insurance which their “landlord” – investment banker – does not pay – all while the landlord makes $10-15 million on top of the interest rate, and does not disclose it to other party of the Contract.
Of course borrower has all rights to collect a part of profits from trades; and HAS standing in securities trades because – well, the borrower actually CREATED, ISSUED, GUARANTEE at all times – thus OWNS these securities more than anybody else. Even when borrower stops to make payments and default, the investment bank still makes profits by re-packaging and reselling defaulted mortgages as bonds.
Clearly, it creates a huge disproportionate level of freedom between parties
- CAN THIS BE PLED IN RECOUPMENT IN JUDICIAL FORECLOSURES?
YES, because it was a breach of Contract ab initio by the Party with higher bargaining power. Lender breached their obligations first – thus borrower is not obligated to comply with his/her part of the bargain either. The Lender from who borrower purchased the loan already received full satisfaction of their bargain. The party who purchased this loan also received a full satisfaction for their price; investors who buy a part of the HOUSE for $15.00 as for a worthless piece of paper, thus, assumed all risk from puch purchases.
For example, somebody offered you ROLEX watch for $10.00. This is unreasonable price which constitutes that this watch was probably stolen. If you purchase it anyway and police later discover who is a real owner and come to you to return the watch – you will be criminally liable for possession of stolen goods.
- WOULD SUCH PLEADING OPEN DISCOVERY TO FACTS THAT WOULD OTHERWISE NOT BE ALLOWED?
YSE, the first thing lawyer should ask – was the Borrower fully informed about their REAL role under contractual obligation as an Issuer/Guarantor for the Securities; did the Borrower gave his/her consent/ did the Lender disclosed how much profits expected be be received on the top of the bargaining price – interest on the loan, payment of taxes, insurances; and expenses associated with property maintenance during therm Term of the Contract.
- DOES THE TRUE NATURE OF THE MORTGAGE TRANSACTION NEGATE THE FORMAL MORTGAGE STRUCTURE OF THE DOCUMENTS IN A COURT OF EQUITY OR LAW?
Yes, the Lender has obligation to inform Borrower and failure to disclose constitutes a breach of contract, identity theft and unjust enrichment. Since Lender failed their obligations under the Contract, Borrower does not have to comply with their part either.
- ARE THERE NEW CAUSES OF ACTION FOR INVASION OF PRIVACY ARISING FROM CONTINUED TRADING OF SECURITIES THAT USE THE HOMEOWNER’S NAME AND FINANCIAL DATA AS FOUNDATION FOR THE VALUE OF THE TRADE?
Yes, and it can even include Human Trafficking Cause since borrower and their family are transferred to hundreds of “owners” of their home to provide them FREE labor – without any compensation. To the contrary, homeowners PAY to provide free labor to those who make millions on $150K loans without moving a finger, merely by trafficking Borrowers and their families from one company to another,
- DO HOMEOWNERS HAVE ANY STANDING TO BRING CLAIMS FOR SECURITIES VIOLATIONS?
YES, because the Borrower is the issuer and Guarantor.
Filed under: foreclosure |
@ANON…I don’t know the answer to your questions.
BOB G — yes, you are correct — FDCPA is the federal law and damages for violations are small. But, if found that the law is being violated, would the actual creditor have to be disclosed? Or, just small damages awarded? I would think it brings in other avenues.
For many, who are denied modifications (which I really don’t like anyway because they just extend the fraud), do they have a right then for a new action, once true creditor exposed, by demanding reasons for denial? In foreclosure, once true creditor is disclosed,if FDCPA is applied, is there an action for fraud in the foreclosure?
In other words, by acknowledging the “loan” was always a debt and not a mortgage, can the FDCPA compliance then become the starting point for new actions?
Possibly, also, this may apply to bankruptcy fraud. In BK the true creditor must be disclosed. And, if a debt, rather than a mortgage, this would affect whether secured or unsecured as disclosed in BK. .
The big problem with the FDCPA is the short statute of limitations. However, there is a big difference between collection of a “debt” and a mortgage. If derivatives — it is collection of a debt. And, that is what has been concealed.
Imagine – if one is paying — finally knowing that you have been paying a “debt” – not a mortgage — for many years — even though you never defaulted. What should one do with that information to benefit others?
Partial list of trading products created by borrowers’ signature on the loan
MRS’ backed by mortgages aka loans, yet, they are different type of securities. This is absurd since both products are backed by the same asset- a borrower’s house. Then these loans pooled again to create more complex product – Collateralized Mortgage Obligations (CMO) aka REMIC- also different products; Pass-Through Certificate; Callable pass through (aka split Pass through); Planned Amortization Tranches, Targeted Amortization Tranches; Companion Traches; Z-Tranches; Principal-only Securities; Interest only securities; Floating Rate Tranches, Residuals Tranches; Constant Maturity Treasure and so on
Chicago Corruption at its finest: Lone Star Funding (who is a secret party behind millions of fraudulent foreclosures) and owner of Caliber Home Loans (aka Countrywide Financial) got $534 MILLION from our Tax Increment Financing to build luxury condos and shopping malls in Lincoln Yards.
Racket in Courts is very rewarding!
http://www.chicagonow.com/getting-real/2019/05/what-exactly-is-the-problem-with-the-lincoln-yards-tif/
Bob G. I agree.
I’m going with BOA NA or BAC Home Loans, (another shell game I still haven’t got a full grasp on) sold the loan to Freddie Mac 31 days after origination 10 years ago. So judge, Who are these pretenders Specialized Loan Servicing trying to fraudclose as plaintiff with a bunch of copied statements with wrong figures.
What say you Bob G. ???
@ ANON…”derivatives are CONTRACTS — not securities. Debt buying contracts – and is a multi multi trillion dollar business. However, not disclosing true ‘creditor’ to borrowers is violation of federal law.” The borrower was not a party to the debt buying contract nor an intended third party beneficary. that’s well settled law. moreover, what’s the penalty for not disclosing who the real creditor is? a $1K statutory penalty? and if its a RESPA violation the homeowner would have to prove nonstatutory damages before he could recover the $1K statutory damages. that also is well settled law.
Nothing is going to change. this only matters now to a very small % of the population, and they have no financial or political clout. in ten years this will have all faded from institutional memory. such is life.
@Terrie and BoB G —
You are both right. Terrie — I have said for a very long time derivatives are involved. I KNOW that for fact. And those derivatives existed before anyone signed dotted line.
Problem is derivatives are CONTRACTS — not securities. Debt buying contracts – and is a multi multi trillion dollar business. However, not disclosing true “creditor” to borrowers is violation of federal law. Unfortunately, the statute of limitations is short. And, no one makes it in time under the SOL for federal law. Too late before they know something is wrong. .
Bob G is correct – “IT WOULD BRING DOWN THE ENTIRE FINANCIAL SYSTEM.” If all exposed – even though that whole system was built upon fraud. No one in authority is going to fix it. No one. Already covered up. Courts are clueless. Players intended it that way.
Here is the catch – the players in the system are now screwing each other. THAT is not something anticipated and not acceptable to even the players. That is a consequence beyond the borrower victims that is turning, if possible, even dirtier. . .
The truth will get out there. Too much “playing” around. Ultimately – get caught.
Wake up Trump. Don’t cover for past administrations. Do something.
Thanks to all. ..
Terrie…with all due respect, I don’t think that you understand precisely how the derivatives markets work. It’s not the face value or the notional value that matters. It’s the distance between the notional or face value and the market value that matters. it wouldn’t matter if the notional or face value were a septillion dollars. it’s only the difference between the strike value and the market value.
a foreclosure case will resolve around the note, the mortgage, and the alleged default. period.
nobody is going to win anything with these wild ass “the investment banker ate my lunch” arguments. you’re giving people false hopes that will only make bad law or enrich pseudo foreclosure defense attys.
show that the servicer’s affidavits are not affidavits but are merely acknowledgements, or use the request for admissions with a follow up of demand for documents that i recently posted. also, if the original loan was not subprime then it was most likely sold to fannie or freddie. subpoena the originating bank’s records to show that they never sold the loan to the current plaintiff, but rather to fan or fred.
I would be curious to know which aspects of Summer Chic’s analysis you agree with?
I Hate this process so bad to where the courts make it to big of a hill to climb for a homeowner who has lost his life savings, Who knows very well they were scammed,But we are suppose to just take it on the chin,And be a good little loser so the banks and the courts do not get embarrassed And actually have to follow the laws of this country,Like we homeowners get these scams shoved down our throats, We must go by the procedure that has been made up to help the banks get away with this robbery,And we are out lawyered and unable to find anybody who gives a shxx that we lost everything we own, And the courts and the banks know we have no way to protect ourselves,After we become homeless like i have ,Finding the cash to fight back is just as hard as finding a judge or a lawyer that could give a dam,When you lose your home of 30 years ,You have no borrowing power after that,Every dime you have is taken just for daily survival. I Challenge any court or lawyer to consider doing the right and just thing,And turn this around it is a disgrace.
Given the average cds hedge on mortgages are at 20x face value – Therin lies the leverage and why The derivatives market stands at around $1.4 QUADRILLION – there is nothing illegal with hedging – however was there proper disclosure – that the lender may have an adverse position to the homeowner – the average homeowner would have to spend easily $250,000 upwards to hire a team
Of securities /specialists to prosecute a securities case – in fact the homeowners signed the documents that essentially covered the issue of securitization – the issue was the disclaimer sufficient under SEC guidelines – furthermore – the real issue is the fraud that was perpetrated upon the homeowners by the servicers in foreclosure – modification – etc The discovery should include questions as to how much did or have the servicers collected in default insurance (opaque market) and how much in credit default swaps are held against the pool where the mortgage is held – that may be a good place to start – thus illustrating to the court – how lucrative a foreclosure is – for example a $200,000 mortgage may be worth $4 Million in realized profits on the hedge – it’s simply a matter of by what means did they induce or commit fraud to the homeowner to achieve their profits – ever wonder how the top 5 banks got so big since 2008? Look at their propriety trading of derivatives – oh but wait that’s all A dark market – 😉- watch frontline special The Warning with Brooksley Born-
In my opinion, “Summer Chic” lives in a fantasy world. Try to raise such legal theories and arguments in court and see where it gets you. The judge would look at you like you just fell through the ceiling wearing a suit of armor. This argument is preposterous and I have no idea why NG would even consider posting such nonsense.
For example, the “landlord,” i.e. the investment banker, DOES NOT make $10,000,000 to $15,000,000 on your mortgage loan. There’s not enough money in the known universe for that to be true, considering the millions upon millions of securitized mortgage loans that were made since the year 2000. And if they did make that much money, it would have shown up on the investment bankers’ financial statements and tax returns, and their stock would have been worth trillions, and we wouldn’t have the national debt that we have today. Does anyone here actually believe this pablum? (If you do, I have a canyon in Arizona and a tower in Paris to sell you, and they are priced to move. [Sorry, but the bridge in Brooklyn is no longer available, because i sold it hundreds of times over already.])
I am compelled to say this once again, with emphasis for those with a learning disability: THERE IS NO SYSTEM WAY FOR HOMEOWNERS TO WIN MILLIONS OF FORECLOSURE ACTIONS NATIONWIDE, BECAUSE IT WOULD BRING DOWN THE ENTIRE FINANCIAL SYSTEM. And that’s not going to be allowed to happen.You have to win foreclosure actions case by case and be willing to sign a nondisclosure agreement if you want a free house, or unless a court grants you judgment based upon mistakes that the bankster attorneys made in the case. these two ways of getting a free house are as rare as hens’ teeth.
In my opinion, Summer Chic’s legal theories are less credible than some madcap inventor claiming that he had invented a perpetual motion machine.