Confronting the Games Played By Stockbrokers Through Their Attorneys in Foreclosures

The first order of business is to recognize two things — (1) that it is a stockbroker who is the actual party foreclosing the mortgage and (2) that the stockbroker is NOT seeking restitution for an unpaid debt — all of which means that it isn’t really a foreclosure. It is a scheme to generate revenue because the investors, who put up the money, will never see the proceeds of sale in a foreclosure.

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So I recently responded to a situation that combined all the worst attributes of a fraudulent and wrongful foreclosure. Here is what I said:

From what you have described, you are under a deadline to file something to oppose confirmation of the sale of the property. Failure to do so timely could result in legal presumption against you that might be conclusive. Even if the sale was wrong, the court might well confirm the sale. Such an order could be used by your opposition as the basis for saying that the matter had already been litigated to conclusion and that you were barred from bringing it up again. You should seek advice from local Counsel.
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The fact that you lost at summary judgment falls into the same category. While there is no question in my mind that the foreclosure was probably fraudulent and wrongful, laws of procedure are aimed at producing finality to any legal dispute. To put it simply, the uphill battle you were facing just became more steep.
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You might have a claim against the “Foreclosure defense company,” but without more information I could not comment further.
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The reason why I firmly believe that further investigation will reveal a fraudulent and wrongful foreclosure is that I am very well acquainted with the players that you have indicated have been involved in the chain of title or chain of servicing.
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While Countrywide Home Loans may have technically qualified as a lender, it rarely acted as such. The only loans it gave were to specific individuals who had value to the securitization effort of stockbrokers who refer to themselves as investment Banks. The real function of Countrywide was as an aggregator of data.
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People often confuse the terms used by the stockbrokers resulting in the erroneous conclusion that Countrywide was buying loans and then grouping them into portfolios that would be used for securitization. This is untrue. But it is always implied in everything that the players do when they are pursuing foreclosure.
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That means that the loans were actually funded through Countrywide as a conduit, not as a lender. Investors either deposited or paid money to the stock brokers for unsecured certificates promising a stream of revenue in monthly or quarterly payments. The money from investors was then funneled through Countrywide, or one of its Originators, to the closing table of each loan. This process insulated both the investors and the stockbroker from claims of violation of lending laws because they were not mentioned as lenders. [This does not actually insulate them but it raises the presumption that they were not lenders.]

This generally means that using the name of Countrywide Home Loans on the note or mortgage was incorrect, since only the party who owns the debt because they paid for it should be listed as payee on the promissory note or mortgagee on the deed of mortgage or beneficiary under a deed of trust. A purported transfer of the mortgage without a concurrent transaction in which the debt was purchased for value is a legal nullity in all U.S. jurisdictions. Thus your chain of title is probably not only defective, but fraudulent.

Any effort aimed at collection, processing or enforcement of the loan by a party with no right to receive the proceeds is actually scheme to generate revenue rather than an action seeking restitution for an unpaid debt — unless the action is brought by an entity who has a contractual right to represent the owner of the debt because they had paid for the debt.

The issue with Chase Bank and Washington Mutual is even more bizarre. The business plan of Washington Mutual, which did start out as an actual lender, evolved into being merely an “originator” which is to say that they were merely a conduit, like Countrywide, for funds that were channeled through stock brokers to the loan closing table.

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Technically speaking, all the loans originated by Washington Mutual after 2001 were sold into the secondary Market to support claims of securitization. In plain language this means that even if Washington Mutual technically owned the loan at some point, it immediately divested itself of all ownership interest in the loan. But it frequently retained the rights to service loan in exchange for a fee.
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At the time that Washington Mutual went bankrupt, its ownership of loans was virtually zero, which was reflected in the purchase and assumption agreement that was executed on September 25th 2008. The consideration was 0. Nonetheless Chase Bank claimed ownership of virtually all loans originated by Washington Mutual. This amounted to about $600 billion in loans.
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This claim was false. it was not even facially valid because there had not been any assignments of mortgage recorded. Later Chase Bank claimed power of attorney from the FDIC who had taken over Washington Mutual in receivership. That claim was also false. But it is likely that Chase Bank may have been the successor to the servicing business of Washington Mutual.
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The continued migration of your loan, or the servicing of your loan, to various entities indicates two things: first that the players wanted to create layers of paper documents that gave the erroneous impression that title was valid and that various transactions had occurred in which money had exchanged hands. This was totally untrue. Second, they are obviously aware that their title chain is defective.
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Your problem consists of two issues confronting you. The first is that you must rebut the legal presumptions that were used to obtain judgement against you. The second is that you need to undo the damage that has occurred procedurally in order to be able to undercut the presumptions that were used to obtain judgement against you. This will no doubt require the assistance of local counsel. There are many procedural strategies and tactics that might be able to be used.
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PRACTICE NOTE ON FRAUD CLAIMS: To be successful in a fraud claim you need much more than a lie. You must show detrimental reliance on the lie, which is to say that the homeowner believed the lie and then acted in a way that caused detriment to the homeowner. If the homeowner did not believe the lie, it is impossible to allege that there was detrimental reliance. Hence fraud claims are not likely to succeed without specific allegations of the content of the lie, how the homeowner reasonably and actually believed the lie to be true and how the homeowner acted in reliance on the lie to his/her detriment.
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However, fraud upon the court is a different matter. If the players lied to the court and obtained a foreclosure judgment or sale based upon the lie then fraud is a proper cause of action for equitable purposes, i.e., (a) to set aside the the judgment or sale because the claimant was lying about their status, ownership and title OR (b) in a legal action for abuse of process seeking monetary damages for misrepresenting the case as being an action for restitution of an unpaid debt when it was in fact a scheme to generate revenue to the detriment of all real parties in interest, including of course the homeowner.

3 Responses

  1. Happy Thanksgiving to one and all…

  2. Great post. And, may I remind – WAMU, and other big banks were servicers to GSEs before they were anything else, and before there was anything else. .

    Thanks.

  3. Great posts tying everything together. Great help in addressing policy makers that are stuck in 2008.

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