The Problem With those Powers of Attorney

Just because a power of attorney appears to be facially valid doesn’t  mean that it IS facially valid, nor that it is substantively valid.

Sign Petition to Change the rules to Protect Homeowners from Fraudclosure.

Powers of Attorney are part of the strategy engineered by investment banks on Wall Street. Here is the problem with the POA or LPOA strategy.

In summary it is merely part of a larger strategy that seeks to create the illusion of real claims by real parties when in fact no such claim exists and no claimant exists. the claimant never gets the proceeds of foreclosure sale.

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The reason they do it is to insert an intermediary who can claim plausible deniability and that they were just following orders. It also serves the purpose of creating the illusion of a representative capacity between principal and agent.
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And that serves to create the illusion that the “principal” is somehow relevant to the transactional documents with the homeowner — although they never come right out and say that (because it is untrue).
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So the introduction of a Power of Attorney or Limited Power of Attorney is merely sleight of hand maneuvering to get a judge to believe that nobody would have gone to the trouble of creating and executing these documents unless there was something real going on. Unfortunately most lawyers, including those who represent homeowners in foreclosure, believe that to be true. As a result they completely miss the strategy that works in defeating such actions that are falsely labelled as foreclosures.
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Here is the truth.
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No POA ever gives anyone the right to claim ownership, control, administrative rights or the right to enforce any obligation of any homeowner. Instead it says it gives rights to speak for a label which may or may not be a legal entity — i.e., a “trust” which in fact is either nonexistent or “inchoate” under law.
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No trust, no matter how well written, creates a valid legal trust unless and until something of value is entrusted to the named trustee to hold for the benefit of defined beneficiaries upon certain terms expressly set forth in the trust. If the trustee does not own the alleged obligation, then the trust is irrelevant to any claim or proceeding.
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No named “trustee” has ever been party to a transaction in which the named trustee has ever received something of value from a seller or settlor who conveyed anything to the named trustee much less ownership of any obligation, note or mortgage from any homeowner.
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The existence of a note and mortgage is generally construed to be prima facie evidence of the existence of a loan agreement. But the absence of any “lender” conduct of the counterparties to those transactional documents demonstrates conclusively that there was no meeting of the minds. This leads to the counterintuitive conclusion that the investment banks wanted the transaction to look like a loan but but were completely unwilling to be considered “lenders” for purposes of compliance with lending statutes.
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The homeowner had every reasonable basis to think he/she was getting a loan — which means that there was a lender with a risk of loss and who therefore would not underwrite a transaction that was doomed to fail. Instead the real parties in interest, operating through dummy entities, were intentionally creating agreements that were extremely likely to fail. This enabled them to bet against the viability of those agreements. Therefore the less the quality of the appraisal, the loan terms, the household income etc., the more certain the investment bank could be of making money though failure of the DATA (not the debt) to perform. But since the investment banks and the homeowners had entirely different transactions in mind, there could be no meeting of the minds and there never was.
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None of the counterparties or their representatives ever considered themselves to be lenders. None of them ever purchased any obligation from a homeowner and registered such purchase as an asset receivable from a homeowner nor did they make an entry on the liability side of their balance sheet as a reserve for bad debt. Clearly nobody on the other side wanted to be liable as a lender for violations of lending statutes. None of them wanted to be “lenders.” Hence the transactional documents do not represent  meeting of the minds.
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Therefore, every such Power of Attorney grants nothing. It might be facially valid but it is not substantively valid because the purported grantor owned nothing and therefore could grant no powers over assets that were not owned.
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Note that I no longer refer to “loan documents.” Instead I refer to transactional documents. That is because I no longer believe that the transaction involving the homeowner should be referred to as a loan, even though that was what was intended by the homeowner. It wasn’t intended as a loan by anyone else who was directly or indirectly a counterparty to the transaction with the homeowner.
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In nearly all cases, the original transactional documents referred to the purchase of the homeowner’s consent and rights to resell personal data. The part of the transaction requiring payments from the homeowner was merely a vehicle for reducing the consideration paid for that consent. And the only place it is obliquely albeit not directly referenced as a loan is in actions that are falsely labelled as foreclosures. In all other transactions and documents the subject is clearly the sale and trading on data, not ownership of any debt owed by anyone.
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In a court of equity (i.e., foreclosure) the payment of consideration concurrent with an obligation to return that consideration should be treated as no consideration.
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Hence the apparent contract is rendered unenforceable for lack of consideration. This construction does not produce any financial loss to any party who paid consideration to the homeowner. All such parties are richly rewarded for procuring the signature of the homeowner far in excess of any claim for repayment of the consideration paid for the homeowner’s consent. This construction merely restricts the profits of the players in “securitization” to a level that is fair and proper after full disclosure.
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Further, in a court of equity, the payment of consideration for the consent of the homeowner to allow sale and resale of his personal  financial data should have been disclosed, was legally required to be disclosed and failure of which disclosure is a basis for the court to use its inherent authority to determine the amount of the compensation to be fairly paid to homeowners.
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That amount would be equal to what homeowners would have demanded in general and what investment banks would have offered as incentives in a free market with full disclosure.

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Neil F Garfield, MBA, JD, 73, is a Florida licensed attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.

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4 Responses

  1. 8 years ago SF recorder was questioning “attorney in fact” poas etc
    https://www.sfexaminer.com/opinion/foreclosure-assistance-on-horizon/

    “We all know what a devastating toll the mortgage crisis has taken. Earlier this year, my office released a report showing California’s foreclosure process was “utterly broken.”

    The findings of the report, “Foreclosure in CA: A Crisis of Compliance,” revealed that nearly 85 percent of all foreclosure cases we reviewed had at least one clear violation of the law.”

  2. Steve Nelson — have tried to contact you — just goes to “general” website, and email never responded to by you. Can you leave personal email here?

    Ohh – and been there done that — depos were ignored by Court. Here is what I got from a produced person “not qualified.” And, again, I AM PAYING.

    Question to Servicer:: “Where do the payments go once received by you?

    The answer went round about for a long time.

    “Well, we account for portion applied to principal, and then some to interest. We reduce the principal. ”

    Over and over again – they were asked:

    “Okay, but then what do you do with money????”:

    Then finally got:

    “Well, principal goes to us – the servicer. Interest goes to the trustee.”

    :”HUN??? We answer. ” Thought this was supposed to be a securitized trust. How can that be? Both principal and interest supposed to go to “security investors.” (yeah right).

    Then later got – “A little goes here, and a little goes there.” ,

    GEEZ LOUISE. I am the dope paying.

    Thanks.

  3. The best and likely the only way during litigation to cogently attack the banks are to take depositions of their “persons most qualified” and use a cheat sheet of questions that most PMQ’s can’t respond to or don’t know the answers to. We did this in NJ in Fed Ct foreclosure case now in summary judgment. The corp. deponent did not know who owned the note or when it was obtained. Thus the core foundation for ownership of the note was “I don’t know.” We are looking for a judgment and then sue the bank for abuse of process.
    Congrats to the support team at Consumer Rights Defenders.

  4. Well – thank you for this Neil. I know title insurers feel the same way about a LPOA/POA — they don’t like them and find them “generic” -as they do not relate to any particular assignment or loan. And one title insurer negated right off the bat — said no authority. There were many reasons they gave – not the least of which is that the assignment was recorded with LPOA granted by a defunct entity!!! POAs – I do not think survive dissolution of entities.

    Also, I agree about no longer calling anything a “loan.” I actually used the word “transaction” in Court — and the judge actually picked it up!!! He said that we prefer to call it a “transaction”!!!! You bet we do.

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