Yes your loan documents were all shredded. No, not even the note survived

Hat Tip to Bill Paatalo, Private investigator. Kudos for investigative excellence.

see WaMu Loan Files – Shredding Procedures

When I first looked at mortgage loans in 2004 I was struck by one simple thing. There was an obvious movement, pushed by the banks, away from original documentation and towards reliance on images. At first I was confused. After all it was the banks who wrote the rules concerning the use of original documentation and the insistence on the availability of original documents.

In 2006-7 it became clear to me what was going on. The banks wanted everyone to rely on images because they didn’t and couldn’t account for the movement of the promissory note without giving a specific date, time and the parties to the transaction in which the underlying obligation has been acquired. Instead they relied on affidavits, declarations and trestiompony from robowitnesses, robo signers and robo offers who neither knew anything nor had any authority to do anything except sign on the dotted line without reading anything.

There were elements of this in the great papert crash of 1968-9, where certificates went missing and many were never recovered. Securities firms collapsed as they had to make good on securities they were supposedly holding for clients. I was there in 1968-9, Director of Securities Research, but consigned to counting stock and bond certificates. I know what happened.

The cheating firms had been selling the same certificate over and over again because they were all in “street name” which means they were legally owned by the firm. the only thing investors had were statements from the firm saying it was holding securities for their account.

With mortgage loans from the year 2000 until now, it occurred to me in 2007 that the only the plan could work was by destruction of the original loan documents. If all the major institutions adopted that stance then everyone would consider that the custom and practice of the industry. If they needed an “original” they would create it.

My “theory” was tested out in  the battlefield. Foreclosures were being filed in the name of MERS and in the name of servicers while at the same time denying the existence of any REMIC trust — an assertion which I think turned out to be true.

When the attempt to name MERS and the servicers failed utterly, the banks pivoted to saying that indeed there were REMIC Trusts and that they owned the loans — an assertion that was as untrue as the same assertions for MERS and the servicers. In order lend credence to the newest lie they hired banks like US Bank and Bank of New York and Deutsche to pretend that they were trustees for the REMIC trust — an assertion that was and remains wholly untrue.

That gave the action an institutional flavor and judges started allowing the foreclosures to proceed without any knowledge as to whether the trust existed, whether the debt existed and whether anyone had the right to enforce the debt, note or mortgage.

So beginning in 2007-8 I tested out the theory myself. I sent out hundreds of demands for documents and reconciliations to dozens of servicers.

Just as expected the requests were split into two types of response.

The first was based upon whether the loan was headed into or already in foreclosure, in which case they responded with copies of what hey said were original documents and records of the servicers — but without saying who the servicers were working for. but I already knew the answer to that. The servicers wer working for securities firms on Wall Street — not any REMIC trust or trustee.

The second type of response was more interesting. These were cases in which the homeowner was “current” (on payments that were apparently due on what turned out to be a nonexistent obligation). the response was zilch. No answer.

So I arrived at the conclusion that the documents did not exist and had been shredded contemporaneously with the loan closing, as crazy as that initially sounds. But it makes perfect sense if people are willing to trade on images instead of the real thing. You can always print more images — and sell them.

Which they led me to the conclusion that the documents were being printed to look like originals. But that came with a problem. Someone had to testify to the foundation of allowing those documents into evidence. If they knew what they were doing, they would need to lie. And most people are unwilling to lie in court because that involves jail for perjury.

So the banks hired people who knew nothing and would be kept from knowing anything except their duty to sign documents, the contents of which they knew nothing. These were newly minted documents without the borrower’s consent and attested to by a stamped signature of a person who was willing to accept actually very low wages for “signing” thousands of documents per week. Lorraine Browne at DOCS went to jail for that.

Every signature was worth hundreds of thousands of dollars in foreclosure proceeds but the signor, just like the homeowner who signed the loan documents originally, had no idea they were unleashing a vast revenue scheme in which salespeople were rewarded with more money than they had ever seen.

This is all pretty obvious now to people who have been litigating these cases for any length of time. But to judges, it is incomprehensible that anyone would shred a facially valid note even if there were defense against its enforcement. Promissory notes are cash equivalents. To judges that makes no more sense than  shredding a $10 bill. I explained to the skeptical listeners that you WOULD shred the $10 bill if its production would show that it was only $10 when you had represented it to be a $100 bill and had used manufactured images to convince people of that.

But that still left the question of proof of shredding because it is just too crazy to assume it to be true, Enter Bill Paatalo who keeps digging like I do. And he found the exhibit to the agreement between Washington Mutual and ACS Services in which the documents were images and shredded off-site and then the images were delivered — not original documents.

There you have it. And this is wholly congruent with representation from the Florida Bankers Association to the Florida legislature that the documents were customarily shredded at or near closing.

THE BOTTOM LINE: Don’t assume that the original documentation of the loan ws ever delivered to anyone. Without delivery there can be no possession. Without possession it is highly unlikely that they could ever prove the right to enforce.

Neil F Garfield, MBA, JD, 73, is a Florida licensed trial 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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3 Responses

  1. More hyperbole and useless information.

    Every court in the country has held that pursuant to the Uniform Commercial Code, a party may enforce a lost instrument – like a promissory note – if they satisfy this three-part test:

    the person was in possession of the instrument and entitled to enforce it when loss of possession occurred;

    The loss of possession was not the result of a transfer by the person or a lawful seizure; and

    The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

  2. Also congruent with the Texas Foreclosure Task Force Transcript deleted from the web.
    Planning and Deception – OurLemon.Com › docs › Planning-and-Deception

  3. This is interesting. While courts routinely accept “images” and robo-signed documents, courts further the fraud by not forcing proper representation. What we see in courts is — “ABC trustee for XYZ trust.” But the trustee itself is NOT represented. However, foreclosures are commonly claimed done under the trustee name – as the party in interest who claims to hold the “note” – even though the trustee is not there. .

    For loans paying, Bill is correct, the scenario is different, the trustee will claim to have nothing to do with the mortgage or note, and that they do NOT hold either. They will claim the “trust” can act without the trustee – even if the trustee name is wrongly placed in front of the claimed trust name as if one entity. .

    So — is there a different scenario for those paying as compared to those who may have missed payments? Is there a different “claimed holder” under these two scenarios? And why?

    One of the rather more recent additions in court is claimed representation by the “trustee” – “not in its individual capacity” but “solely in capacity as “trustee to the (claimed) trust.” I can find no explanation how the “capacity” differs to eliminate actual representation by the claimed (bank) trustee.

    It appears to me that the bank is the bank is the bank. Placing the “bank’s” name in front of claimed trust, should not designate authority and representation to the “trust” alone – or to servicers – without actual “trustee” representation. But if no one questions — nothing is done. .

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