Foreclosure Defense in a Nutshell

The goal of the foreclosure defense strategy is to undermine the ability of the foreclosrue mill to put on a case — not to prove that the allegations are wrong.
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Let me first correct what I think is a misimpression or misapprehension: Defense of a civil case in court consists of two possible strategies — usually used in conjunction with each other.
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First and best is proving that the allegations against the defendant (homeowner) are untrue. this is generally impossible in the foreclosure of transactions that have been subject to the securitization process.
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Second, and equally effective, is to undermine the ability of the Plaintiff’s lawyers to put on a case, to wit: to establish the prima facie elements of a foreclosure case. This is the best option to win or settle a foreclosure case on favorable terms.
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Every foreclosure case starts with a pleading and exhibits. the allegations and the exhibits are required by law to be taken as true at the beginning of the case. In the middle of the case, the homeowner wants to show the inability or unwillingness of the attorneys for the named claimant/plaintiff to corroborate facts that the attorneys want to have the court presume are true.
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[The attorneys for the named claimant is always relying upon available legal presumptions arising from the facial validity of the exhibits and from relaxed pleading requirements that were created before the era of securitization.]
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By a series of motions to compel, motions for sanctions and motions in limine gradually the homeowner can bring the court to an inevitable conclusion that is 180 degrees opposite from the inevitable result that the court was presuming at the beginning of the case. to wit: having failed or refused to answer interrogatories and request for admissions, and having failed to respond to a request to produce, even after court orders (usually many of them) the foreclosure mill lawyers are barred from putting on evidence as to the truth of the matters that they wanted the court to presume were true.
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That leaves the foreclosure mill with no evidence at trial which means they lose. But it is only at the eleventh hour that the foreclosure mill will finally relent and offer a settlement (on the authority of unknown persons). This can be further leveraged in favor of the homeowner by insisting that the settlement be acknowledged by the named claimant/creditor. This particular aspect can be highlighted by motions for sanctions during the mediation process as well as at the end of litigation when the parties are discussing settlement.
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[Motions for Sanctions during the mediation process are often overlooked. The foreclosure lawyers are required to ring with them a representative of the named claimant who is authorized to negotiate and settle the case regardless of what comes up during the negotiations process — and to do so without pausing the mediation without getting instructions from unknown people of dubious authority. The failure to produce such a person will ordinarily be a violation of both administrative orders and direct orders from the trial judge.]
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So the goal of the homeowner is to show what didn’t happen rather than what did happen. The law requires that any assignment of the mortgage be accompanied by a transfer of ownership of the underlying obligation.
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The absence of a valid purchase and sale of the underlying obligation makes the paper transfer of the mortgage a legal nullity, which means that for legal purposes, it is treated as though it never happened. It is not necessarily true that an endorsement of a note creates such a transfer.
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So if the assignment of mortgage recites “for value received” and no such transaction occurred, then there was no assignment and all claims that rely on that assignment are void. Failure to produce evidence corroborating the truth of the matter asserted (that value was paid) results in rebuttal or exclusion of the legal presumption arising from the endorsement of the note or any other presumption.
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The homeowner wants to show that that the opposing side — the foreclosure mill — is unable or unwilling to produce evidence that the payment of value occurred — but not try to prove that the transfer, while on paper, never actually occurred. The burden of proof is on the party pleading allegations. To put it more bluntly, even if there was a purchase and sale of the obligation the foreclosure mill still loses if they can’t prove it when properly presented with well-drafted discovery demands and motions to enforce.
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The claim against the homeowner must be established with a prima facie case. If you stop that process, then you win. Don’t try to go beyond that point or you will end up raising more presumptions in favor of the foreclosure mill. You can’t prove anything if you don’t have the actual evidence and only the investment banks have evidence of what really happened outside the sight of prying eyes.
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You may know that the reason they cannot produce evidence of payment of value for the underlying obligation is that the underlying obligation no longer exists and therefore there was no reason to make a payment which in turn means that no payment was made.
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But if you try to actually prove that case without a cooperating defendant in a case brought for declaratory, injunctive, and supplemental relief, that could be an unreachable goal — except for using the same strategy of proving the unwillingness or inability of the parties you are suing to produce any evidence of the existence of the underlying obligation or the authority to administer, collect or enforce it. That claim is a lot easier once you have won the principal foreclosure case.
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Neil F Garfield, MBA, JD, 74, 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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8 Responses

  1. And, I have been shouting this for a very long time. No one sold ME on anything.
    “Dottie — I lived it.” It is not the system — it was the crisis and deregulation. Covered-up.
    Now — we will have the pandemic foreclosures. Rent moratorium already expired. But this is different. UNLESS — foreclosures derived from the crisis transactions. Because since the crisis — 96% of loans are GSE loans. They will be advanced by government — but not the (non-bank) crisis loans. Thus, we will have a BIGGER problem. We are talking collapse unless this virus goes away — and that is not looking good. It will mutate further. Perhaps, beyond any thought of containment. People don’t care — and that is always a big problem. They don’t care – UNTIL – it personally affects them. “Not me” they think – let someone else be suckers. Often, when they realize — yeah about me too – it is simply — TOO LATE.

  2. And — some repurchases DID occur despite zero value and liquidation. FHFA lawsuit – and settlement. And you will see ABS reports that cannot account because repurchases did occur. Do we see those reports? NO. And, what happened after that? Who knows. It is like Biden spokes lady telling us — we don’t have to know details of COVID. Don’t ask questions.

  3. I know what occurred — for massive quantity of “crisis” loans — prior never recorded as paid by the borrower. Now, was money intercepted? I think that is a possibility quite often. But where was the FBI back then when crisis exploded? Loans were reported as “LIQUIDATED” to prior trusts – as not collectible just prior to refinances (or, sometimes a purchase). This later became a huge investor litigation ” repurchase” issue. Zero value (which is what happens at liquidation) – is not subject to repurchase – investors lost. Nothing was accounted for (at least not properly on a balance sheet), at the “new loan” origination. The new loan is just reinstated debt – which is moved from one place to another. It is not that a loan never existed — it did — sometime long ago. But the crisis allowed things to go wild. And, that is the only reason the crisis exploded. NO ACCOUNTING – then no securitization. And no accounting because prior loan is liquidated — they could not account. . Motivation was to get the loans out of the GSEs and into PLMBS. And the GSEs would invest in the PLMBS — satisfying the Community Reinvestment Act — and all would be happy with higher (adjustable) cash flows for profit – until all exploded. All borrowers got was a non-friendly debt collector who called themselves a servicer. I agree — it we stray too far from actual crisis fraud – we lose. I think you are onto it with contract claim. Check the accounting for that contract!! Thanks Can’t just say “no loan” — without saying how it happened.

  4. TILA was and is broken. There was no “source of funds.” There was no “funds.” There was no truth in Lending. This is also not about consummation. Borrowers never intended to get a mortgage where there is no money lent to pay off prior transaction. There can be no valid note when fraud is involved. Cases below point out “authority” is necessary to enforce, but there can be no authority because nothing was lent. Looking for the “true” source of funds is worthless – there was none. Courts will eventually get this. Don’t ask for source of funds — ask who was paid off and by who?

  5. With advocates like Legisman Wall Street does not need to hire mill lawyers

    But Legisman forgot to mention one thing – the alleged “Lender” did not provide money.

    In most situations at all. Wait, but aren’t lenders suppose to LEND MONEY, not show information about some money on nicely printed paperwork? Oh, doesn’t matter.

    “the law is clear, whoever is the named lender in your contract is who the borrower is obligated to pay, or its assigns.”

    In other words, if you name a neighbor’s dog as a lender, homeowners are obligated to pay.

    “It doesn’t matter where the loaned money came from.”

    Just to add: or any money are loaned at all.

  6. And, what if that named claimed originator LENDER is GONE — and the Trustee to Trust by assignment does not have it? Trusts are not Lenders. Trustees and security investors are not lenders. Trustees must represent trust as the legal holder. (I can give you much case law on that). So — you are saying if assigned to a trustee to a trust, and not successor of the original Lender –it is okay to not have a Lender to collect? In order to securitize – the loan must first be sold to security underwriter. So that would be the last stop as the “Lender.” According to contract – ONLY The LENDER can discharge or release lien upon payoff. No one should care about securitization other than the security investors. An assignment to a trustee to trust is ONLY for cash flows for security investors — a borrower has no concern with it – which is why they cannot challenge it. Their only challenge is with the LENDER.
    – which can never be security investors. Where is the LENDER? Not answering my question.
    Thanks.

  7. Question Legi — Agree courts state cannot challenge the securitization PSA , and Prospectus and claimed associated assignment. But security trusts do NOT lend to any borrower. The Fed Res clarified this in conjunction with TILA – years ago. It is codified now by law. So — if all you have is an assignment to trustee to a trust, you have no Lender. Say you want a refinance and never defaulted. The first place you should be able to go is to your CURRENT lender, but you don’t have one. Where did they go? Missing in action.

  8. Extremely well put, straightforward and simplified. Without any tongue-twisting jargon or polysyllabic gobbledygook.

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