Holy Crap! This COURT OPINION (IN RE DAVIS) is everything I have been saying about rescission, procedure, pleading, proof, the burden of proof and the intent of the financial community to commit fraud upon homeowners and the courts.

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“BOA also submitted satisfactions of mortgage listing the face amount of loans to the Debtor that were satisfied, but these documents do NOT demonstrate the balance owed or WHO satisfied them.” (e.s.)

And you can’t get much more recent than last Wednesday!

Lawyers purportedly representing Bank of America were arguing that the documents reciting the loan deal should be enforced as a virtual loan even if the actual loan was not present. Homeowners and their lawyers should take note that neither the “loan” nor the “transfer” of the loan is what it appears to be. As I have been saying since 2006, neither law nor common sense allows for enforcement of virtual claims. 

Kudos to Attorney Michael Faro of Faro and Crowder, P.A. in Melbourne, Florida. They understand how to litigate. It’s obvious from the case. 

Hat tip to Elle

Bankers! Read this and weep! (problems with uploading this decision. See In Re Davis, 2021 Bankr. Lexis 2518 (search term “Ocwen”)

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IMPORTANT CAVEAT: THIS DECISION IS NOT FINAL AND NOT BINDING ON ANY OTHER JUDGE IN ANY OTHER COURT. BUT THE LEGAL ANALYSIS USED BY THE JUDGE TO ARRIVE AT HER DECISION GIVES HOMEOWNERS AND LAWYERS A TEMPLATE FOR ARGUMENT, PLEADINGS, AND PROCEDURE ON A WIDE VARIETY OF ISSUES.

This decision should be distributed to as many people as possible before it disappears. An examination of most transactions that are labeled as “refinancing” will reveal all of the same deficiencies as were revealed in this case. And while the banks will try to distinguish this case because it was in bankruptcy court, the answer is simple: the Judge was applying State and Federal Law as it was written. When that happens, the foreclosure mill loses and the homeowner wins.

And the court throws out the “free house” argument. The question is not the benefit the homeowner might receive by winning. the real question is whether the claimant has produced any evidence at all that they are the owner of a valid claim — without relying upon presumptions of fact arising from incomplete or fabricated documents.

The “free house” argument is rejected as being irrelevant — unless the foreclosure mill can produce proof of funding. But note that this is not a magic bullet. The homeowner must mount a serious and consistent challenge for the court to move in the same direction as this bankruptcy judge. This Judge is not saying that that foreclosure mills must produce evidence of payment for the underlying debt when it makes a claim. It is saying that if the debtor challenges the claim, then they must produce such evidence. 

Nearly all foreclosures are based upon a supposed refinancing or a disguised refinancing in the form of a modification or forbearance agreement. It is highly probable, that in many (if not most) cases in which the homeowner believed they were refinancing a loan,  the underlying investment banker did not fund and instead merely changed the paperwork. This case stands for the proposition that if the foreclosure mill cannot prove they funded the loan, then they have no loan to enforce — something I have used for years with considerable success on a case-by-case basis.

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TILA Rescission revived: Apparently abandoning the political orthodoxy that has emerged from the bench, this Judge simply did her job — applying the law as it was written. Contrary to practically every other judge in the country, she has found that rescission under the Federal Truth in Lending Act is to be applied when the homeowner has taken the action required to trigger the changes in the relationship required by 15 US C 1635. But that is only one part of the decision. And, as I have said since 2007, as soon as the rescission is triggered, the mortgage and note are legally gone as if they never existed. Neither the homeowner nor any claimant can change that.
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I note that the primary underlying theme of the judge’s opinion arises from the fact that Bank of America made no effort whatsoever to produce a witness or any document that established the funding of the loan. As with nearly all other cases, Bank of America was essentially asking the judge to enforce loan documents on a loan that might have occurred, and which they wanted the court to presume had occurred without any proof. This judge rejected that. Recognizing that the burden of proof starts with the claimant, shifts to the homeowner, and then shifts back, the Judge makes it clear that she wants no part of enforcing a loan that might have occurred — only loans that did occur.
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The legal presumption that the loan DID occur arises from the filing of facially valid documents, even if the documents are false. That presumption completely disappears when the presumed facts are (1) challenged effectively and (2) the claimant fails to provide concrete proof of payment that establishes the existence of the transaction recited on the face of the documents.
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This case is also a model for using the same procedure that banks use against homeowners. In this case, the lawyers stayed with the case and used their knowledge of how the burden of proof shifts to successfully argue that the burden shifted back to Bank of America to actually establish the existence of a funded loan rather than presume that it existed.
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If the lawyers had failed to do that, Bank of America would have won regardless of whether or not they ever funded the loan. This is what drives homeowners crazy because of all the technical details. But that is why I keep saying that going cheap will get you nowhere. HIre competent counsel.
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Litigators and litigants should take heart from this decision, and read it more than once to capture every word of the reasoning of the judge. There is nothing she got wrong. But it is also true that bankruptcy judges look more closely at the claims than state court judges in foreclosure actions. The discussion regarding the shifting of the burden of proof surrounding the filing or non-filing of a proof of claim in a bankruptcy action is particularly interesting and on point.
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This case decision represents a threat to the entire illusory securitization infrastructure and reveals the vulnerable underbelly of the players acting in that space. I am quite certain they won’t let this decision remain on the books without casting as much doubt or covering it over with as much paper as possible.
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I have no doubt that they will either be an appeal or they will resort to a confidential settlement of this case. Most likely there will be a settlement and the case will disappear, possibly with an order expunging or pleadings from the court record.

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WARNING TO U.S. TRUSTEES IN BANKRUPTCY COURT: There is also a hidden warning to U.S Trustees in bankruptcy court. In hundreds of thousands of cases, they failed to require proof of payment for a creditor’s claim —despite clear evidence in the public domain that fake documents were being forged to pursue false foreclosure claims
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That failure falsely reduced the assets of the debtor’s bankruptcy estate by the value of the home. In most cases, the reduction was below zero in terms of assets reported. But if the claim was unenforceable as to the lien then the claimants were simply unsecured creditors who could not force the sale of the home except as provided by state law governing judgments for debts.
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And if the debt was not enforceable because nobody was present in the bankruptcy court showing that they had paid value, then the debt did not exist and would have been discharged completely without any credit or payment to other creditors. This would also mean that the bankruptcy petition would be subject to dismissal since assets would exceed liabilities.
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Like foreclosure cases in general the courts (and in particular U.S. Trustees in bankruptcy) have missed significant opportunities to eliminate the need to process such claims. In most cases, the claims, when litigated as in this case, vanish because the claim was based on a bet that the presumption of facts recited on facially valid documents would be sufficient to carry the day without providing anything.
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This is one more reason why attempts to require more from lawyers and so-called servicers have been ineffective. the question is simple: if you can provide proof of payment and an accounting ledger showing all debts and credits to a real loan account, you may proceed. If not, you are out of court. That is the way it was until securitization came along and that is what we need to return to so we are not litigating fictitious claims and ruin the lives of millions of Americans.
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Securitization should not be used as a license to pursue false claims on nonexistent debt. If there has been no funding, there is no debt.
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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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5 Responses

  1. Thank you Hammer. I suggest that everyone read this case VERY carefully. Satisfaction of prior loan by homeowner? Need proof. Thank You!! Oh — and bogus title recorded doc does not count. Anyone can do that including Mickey Mouse. Need proof of FUNDING — where it came from – to who it went – and to who it was paid off by as internally reported by THE HOMEOWNER. There is no proof of this. Does not exist. Don’t tell me no right to challenge. If homeowner is not reported as paying off prior loan — which is what exists – there is no securitization (impossible) – no loan, no mortgage, no note, no accounting. THERE IS NOTHING. Conned.

  2. Hi Neil, please check the link to the case, it appears as 404

    Thanks

  3. The link to the case doesn’t work…

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