How securitization affects defense strategy in securitization cases.

A new set of lawyers is coming into the marketplace and they smell blood. They are seeking guidance and they are up for making money and winning cases. Here is what I just wrote to one of them who is “boots on the ground” in California in a case in which I am the lead “Consultant”.

I would only add that nearly all cases are actually securitization cases even if they are not filed in the name of a trust.


I understand you are favorably disposed to defense of foreclosures and you are in the steep learning curve associated with most foreclosures in which sales of paper instruments have occurred in the secondary market to support claims of securitization. The essential flaw in those paper documents is that the debt never moves. Hence the documents refer to transactions that never existed. All such documents are fabricated strictly for the purposes of foreclosure and are not used for reporting to any regulatory authority because that would subject the signor to charges of perjury.

I would be happy to answer your questions if you want to set up a Q&A. It will be helpful for me to gauge your comfort zone because regardless of what I write, the lawyer on the ground must feel it in order to be persuasive. If you don’t believe it neither will the judge. So I like feedback from the local lawyer as to the wording and concepts with which they are comfortable. And as I have specifically and emphatically communicated to Calhoun and Ennis, even in the best circumstances there is at least a 1 in 3 chance of losing. And as I have elaborated to them, this is not the best of cases primarily but not solely because of the passage of time.

For starters the defense premise is “Counterintuitive” (as phrased by Reynaldo Reyes, VP Asset Management of Deutsche Bank), which is another way of saying unbelievable. Yet it is true. So the purpose and strategy and tactics are directed at only going so far as necessary to show that the basic fundamental requirements of foreclosure have not been met — not to prove that the entire securitization scheme is a Ponzi scheme (which it was and remains).

We must be extra careful with labels. Stockbrokers masquerading as “investment banks” and acting through conduits and attorneys (who actually only represent the conduits) often set the stage with labels that are presumed to be true. Most of them are untrue. Take Mr. Reyes for example, who is indeed a VP of Deutsche Bank but he has no assets to manage because none of the trusts own any property or mortgage debts. By accepting him as an asset manager you might be accepting that there are trust assets including the subject loan. That in turn would be acknowledgement that the trust exists and perhaps that the subject loan was entrusted to the “trustee.” And that could be used as an admission that the trust exists when it actually doesn’t.

The actual legal status of the named trust is one of two things.

(1) a fictitious name by which stockbrokers do business with investors and then do  business with the courts in order to initiate illegal foreclosure proceedings in order to steal the house and the proceeds from the only real parties in interest — the investors who advanced the funds and the borrowers whose house they are taking without any intention of using sale proceeds to pay the investors.

(2) an actual trust (you must refer only to the actual trust agreement and not the pooling and servicing agreement that only implies the existence of a trust) whose sole purpose is to hold “bare naked title” to the mortgage for  the benefit of the stockbroker doing business under the name of the trust and who has divested itself of all or nearly all of the ownership and risks attendant to ownership of the debt.

Yes it is and was always intended to be as complicated as possible. Wall Street learned a long time ago that the more complicated the financial instrument the more everyone will depend upon Wall Street to tell them what is means. Even judges do it.

So our strategy is as follows: for purposes of planning start with the premise that the current claimant has no direct or indirect connection to the debt, note or mortgage (except for apparently facially valid documents from which rebuttable presumptions arise). Then flip to what is required for a valid foreclosure.

Well first of all it must be a proceeding in which the object and the result is restitution of an unpaid debt. If the named claimant does not exist and/or does not own the debt by reason of having paid value for it then it has suffered no injury and there is no claim.

If the lawyers for the named claimant say that it is authorized to collect on behalf of such an entity then that entity must be identified for the court and the homeowner to know that a claim is being pursued to pay down the debt. Keep in mind that the lawyers represent the conduits (servicers) and don’t really maintain any retainer agreement or attorney client relationship with the named claimant.

If it is not being used to pay down the debt the only other option is that this is an illegal revenue scheme that weaponized the foreclosure process — but we don’t say that in today’s judicial climate. At least not yet.

We don’t actually prove that this is a scheme to generate more ill-gotten revenue, which is exactly what it is, because that would raise fears in the judge that such a judgment might undermine a large part of the American financial sector which it would.  We gradually educate the judge to the point where he/she draws the conclusion and then skirts around it in a final judgment that recites all the deficiencies in the case brought by the named claimant and the documents, their fabrication, backdating etc.

In this case instead of damages that are probably barred by the statute of limitations we will pursue disgorgement in the theory that the pornographic profits, fees and commissions arising from origination of the loan were not disclosed pursuant to the disclosure requirements under state and Federal statutes, which is public policy. We won’t say that on average $12 in revenue was generated from each dollar loaned. But we will either prove it or raise the inference because they refuse to answer questions in discovery even after being ordered to do so by the court.

Once the court gets the idea that this was not a traditional loan situation and that the players have all been paid several times over, then the bias about not letting the borrower get away with a free house starts to fade.

Get the idea?

6 Responses

  1. Nothing was done Kali. And I suspect it is because what Neil says – IT – “raise fears in the judge that such a judgment might undermine a large part of the American financial sector which it would.”

    Does anyone get? We are scapegoats to prevent a financial meltdown?

    How do we battle that??????

  2. @ ALL

    Reposting the working web-link to the DOJ case referenced in the Recovery Base letter (non-working link), and the LL post of August 13, 2019, to wit:

  3. Thanks Roger —

  4. Neil – “I, for one , “get it.” Bob G — very interesting strategy – and probably more in line with my personal situation!!

    For those that know, I have been in court a very long time — and I never missed a payment. That does not matter – what is recorded internally matters.

    Problem I have, Bob G, is that I do not have a bank “attorney.” Servicer attorney claims there is a trust and that he directly represents the “trust.” There is a trustee to the trust, but not for me. And that is even though the “loan” is recorded to a trustee to a trust — and title picks up the trustee as the mortgagee/assignee/legal holder of the mortgage. Trustee, in my case,holds nothing – and will NOT show their face. This is probably the truth, but foreclosures don’t reflect that. Why am I different?

    So – can anyone answer, how do you have a trust without a trustee? I find it so odd that the foreclosures are under the name of the trustee (to a trust) — but I am not in foreclosure (although internally records are different) and I do not have a trustee. Can anyone explain that?

    I am always posting here, trying to help, but no one has been able to answer that question for me. Would appreciate SOMEONE to address.

    How did I get here for so long in court? Started out a long time ago on a separate issue. But along the way discovered that past payoffs at refinances were never recorded as paid by me (despite my proof of payoff). Early payment not recorded as paid by me (despite my proof of payment). This has led to – BAD TITLE. Can’t get out of a high rate loan – without foreclosing – but I have substantial equity, which I will lose if I foreclose and lose. There are separate issues of massive fees charged to undisclosed “investor” — who servicer attorney says is the trust – but without “trustee” representation.

    Neil is correct. Addressing the issues would – – “raise fears in the judge that such a judgment might undermine a large part of the American financial sector which it would.” I suspect I have been in court so long for that reason.

    Thanks. Would appreciate any feedback. My issues are just not addressed. I have shared what I can, for a long time, to help others, but, right now, I need help to address my question. .

  5. Since the bank atty claims to be retained by the trustee, my strategy is to call the bank atty as MY witness, and request that the court allow me to treat him as a “hostile” witness. Since no trust officer will be present at the trial, there will be no “client” present to invoke atty-client privilege.

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