Why You Need to be Thinking About GAAP

For 15 years I have tried to get CPA auditors to enter the field of expert witnesses against the investment banks. While some have nibbled at the line, none have taken the bait or come on board. So homeowners and their lawyers must familiarise themselves with some basic accounting concepts to avoid the many trap doors and pitfalls the investment banks have set for them.

The premise here is that nobody has maintained a loan account receivable on any accounting ledger. That would be the account where debits and credits are posted, resulting in an adjustment of the value of the account. That is, in other words, the place where the loan can be found. That is the only place. Litigants have been mucking up their requests for information by asking for the wrong things. The simple truth is that the loan no longer exists on any accounting ledger.

There is only one way an entry is made on any ledger — a transaction has occurred and the ledger shows the debit from one account and a credit to another account. Each transaction has a paper trail usually starting with receipt or payment of money. So there is a wire transfer receipt, ACH receipt, or canceled check that will prove the payment along with some bill of sale or other documents describing the transaction in which a third party has agreed to the terms. This is how auditors prove up the financial statements that are published or used for loans, shareholders etc.

Auditors do not use the published statements from management. they look at the ledgers. And it is in the ledgers that virtually all foreclosures fail because there is no debt, there is no owner and there is no authority to administer, collect or enforce the “debt” that seemed to have been previously created — no matter how crazy or counter-intuitive that seems to be.

The rules for accounting are well-established over centuries and while there are tricks and gambits played by management, the basic rules have been in place for millennia. The application of those rules is now law adopted in all U.S. jurisdictions. And the short name for it is GAAP (Generally Accepted Accounting Principles).

GAAP are those principles recognized by the accounting profession and the SEC as the uniform rules, conventions, and procedures necessary to define accepted accounting practices at a particular time. GAAP principles are the official standards accepted by the SEC and promulgated in part by the American Institute of Certified Public Accountants (“AICPA”). SEC Regulation S-X (17 C.F.R. § 210.4-01(a)(1)) states that financial statements filed with the SEC that are not prepared in compliance with GAAP are presumed to be misleading or inaccurate, despite footnote or other disclosures. SEC Regulation S-X requires that interim financial statements must also comply with GAAP, with the exception that interim financial statements need not include disclosures that would be duplicative of disclosures accompanying the most recent annual financial statements. 17 C.F.R. § 210.10-01(a)(5). Additionally, SEC registrants are required under SEC rules to maintain sufficient systems of internal controls to ensure fair reporting in conformity with GAAP. PA. Public School  Employee Retuirement System vs. Bank of America see yesterday’s post for copy of complaint. 

That is the law and no amount of argument can escape the simple fact that if someone is claiming an unpaid loan, it must exist.

It is under these laws that investors sue companies who gave them false information, that bankers charge bank fraud and that homeowners can claim and establish that their opposition in foreclosure has failed and refused to respond to statutory requests for information (QWR under RESPA and DVL under FDCPA), proper and timely discovery requests, Court orders requiring the response, and even grace periods for purging themselves of contempt. They can’t respond because their clients won’t let them. And their clients (investment banks acting through intermediaries like purported “subservicers”), won’t let them because to respond truthfully would be to admit there was no claim.

The rules work simply after that. The entire premise of every foreclosure is the collection of a debt that is presumed to be owned by the claimant and which is unpaid and therefore causing the claimant to be damaged. Without the loan account receivable on a proper accounting ledger there can be no such claim and there isn’t.  This is why the “Creditor” is never identified.


Nobody paid me to write this. I am self-funded, supported only by donations. My mission is to stop foreclosures and other collection efforts against homeowners and consumers without proof of loss. If you want to support this effort please click on this link and donate as much as you feel you can afford.

Please Donate to Support Neil Garfield’s Efforts to Stop Foreclosure Fraud.


Neil F Garfield, MBA, JD, 73, is a Florida licensed trial and appellate 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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2 Responses

  1. “a transaction has occurred and the ledger shows the debit from one account and a credit to another account.”

    It is impossible in Wall Street scheme where creditors (secretive investors and homebuyers) are never connected with each other. They not even knew about each other.

    And the actual debtors – Wall Street Banks – never disclosed where money to fund home purchases came from.

    Here is NO ONE who can maintain such account or who would be allowed by Wall Street Banks to maintain such account.

    Look that happened to PennyMac who used their password to MSP to claim some “rights” to loans in this system. BK immediately sued them for theft. Of course no one from Wall Street would not allow PennyMac to have accounts receivable to actually collect money from homeowners

    1. Debit from one account. Impossible.
    This debit (home “loan”) came from third party investors who provided short-term financing to Wall Street Bank part of which they used to finance home purchases. These investors could be either Federal Reserve (Big Banks’ common fund) or someone overseas who wanted to stay in the shade.

    Borrowers in this transaction unknowingly acted as creditors/guarantors for Wall Street Banks.

    THIS transaction – Wall Street’s DEBT to some secretive investors – was probably recorded on their records – but it dis not related to any home loans or any other loans. But here is no debit to any homeowners on anyone’s ledger. Because the debtor was Wall Street Bank, who borrowed money from someone under guarantee from homebuyers (application for a loan).

    2. Credit to another account. Impossible.

    In order to credit any payments from borrowers, someone must establish an account receivable.

    It is impossible under Wall Street scheme. The “Lender” (actor for hire) who presumed to have these debit and credit accounts never lent any money to anyone. They merely collected data from homebuyers which was passed to Wall Street Banks via Black Knight. Inc Empower MSP. No “Lender” had any debit account from which they disbursed money for closing; or credit account where they put payments from homeowners.

    These fake “Lenders” pretend that they fund loans and immediately “sell them” to someone else (which still must be reflected on their accounting ledgers), but this is a lie. Nobody sell any loans, “Lenders” merely replaced in MSP with a “servicer” who cannot even tell whom they servicing if asked.

    This DATA (application) was used by Wall Street Banks as a guarantee to borrow funds from someone else. Here is no debit on WSB’ ledger, thus no corresponding account receivable.

    When borrowers’ signed closing documents which were scanned and information about this transactions was securitized via Depository Trust Corporation, Wall Street Banks started to sell securities backed by this DATA on indefinite base as bets to other investors – Pension Funds.

    The original investors who loaned money to Wall Street Bank under guarantee from homebuyers, were repaid shortly, probably in first 30 days. So, this DEBIT account on unknown investors to Wall Street Banks was satisfied right away.

    Everything else were pure profits for Wall Street who used borrowers’ identity as collateral for indefinite bets.

    And here is no need to maintain any account receivable; nobody who can maintain such account receivable; and no one whom Wall Street Banks will allow to have such account receivable to risk their profits.

  2. The “accounting” never left the GSEs. At least not in any valid GAAP form. Litigants not “mucking up.” Try getting anything from GSEs which should be the starting place. Impossible. That is where should start.
    There are layers of servicers, and there are layers of “protectors.” But all traces back – if you can get those layers.

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