LoanDepot Whistleblower Files Suit for Retaliation, Revealing the Continuation Same Practices as the 2008 Crisis

See Her Complaint Here: full

This LoanDepot case reveals how companies are “originating” loan documents without originating loans. If they were originating loans, nobody would allow or participate in any corporate culture that “approved” loan documentation and triggered some far off entity transferring money to a “closing agent” on a transction in which they had no idea whether they would ever make a profit.

In the same way, foreclosure proceedings are initiated by lawyers who do not have any client who owns an unpaid debt owed by the homeowner. The paperwork looks right, but nothing else makes sense because there is no loan and there might not be any debt — but in all events the debt (if it exists) is not owed to the claimant named by the lawyer.

PRACTICE NOTE: When you ask to see the accounting ledger on which the designated creditor shows the existence and status of the alleged loan, you can’t get it. Most people give up. But for those homeowners who pay their lawyers not to give up, they end up with a successful or favorable result. The inability to show the ledger undermines the ability to establish a prima facie case for Foreclosure. The attempt to substitute a payment history from a company claiming to be a “servicer,” can be defeated. 

In a world where news is condensed into just a few words, fraudsters escape detection and their schemes remain unknown. Those schemes are intentionally complex and appear to be obtuse.

We know that since the early 2000’s Wall Street securities firms entered the marketplace with schemes to do what they do — sell securities. They had no intention of becoming lenders subject to regulation and they didn’t — and neither did the investors who bought their unsecured “Certificates” that promised nothing with any certainty.

And now again we see a company — LoanDepot, who is often cited as one of the world’s largest “lenders”—  being accused of retaliation against an executive who refused to drink the kool-aid. She thought that the LoanDepot should be making real loans and not just acting as some sort of feeder for the securities firms on Wall Street.

Her internal reports and attempts to get the company into compliance from the inside were met with punishment.

Her complaint? That the company was “approving” loans without documentation or any history that could or would suggest that the proposed borrower had any ability to make payments. The law (TILA and state lending laws) and common sense require that every lender make that assessment. Her worry was that the company was violating the laws discussed in this article. And she didn’t want to be a part of breaking the law. Like any sane person she thought that was a bad thing.

The answer to the obvious question: LoanDepot was approving loan documentation and not underwriting any loans. 

And so once again as I have repeatedly asked since 2006, why doesn’t anyone ask “why would any lender do that?” Every loan deal is about someone paying to rent money from someone who makes money on the rent (monthly payments). If it’s not just about that, there are legal disclosure requirements that must be met and enforced, according to law. Those requirements make it mandatory to disclose to the consumer what the rest of the deal is about.

The only reason why any “lender” would not inquire about the likelihood of receipt of payments is that the payments don’t matter — or that payments are not the full story. This fundamentally changes the elements of the deal that the homeowners thought they were entering and fundamentally breaches the statutory duties — as to (1) responsibility for viablity and (2) disclosure of compensation. Obviously they are making money some other way.

The law requries LENDERS to disclose such details because the Congress, 60 years ago, decided that homeowners and other borrowers should have reasonable access to information in which they could (a) make an informed choice or decision as to who they were doing business with and (b) understand the full monetary parameters of the deal instead of just part of it. Contrary to both law and common sense, this has never been enforced nor have consumers been allowed to enforce it in the courts — even with the help of a US Supreme Court decision (Jesinoski).

But the law does not contemplate enforcement against parties who only pretend to be lenders. Wall Street securities firms can honestly say “we are not lenders.” From their perspective they merely brokered three deals — (1) the loan of money to a sham conduit or intermediary from some off shore source (e.g. Credit Suisse) for example $1.2 billion, (2) sending funds to the closing agent in exchange for securing execution of “loan” documents, and (3) underwriting the sale of securities in the name of a trust which may or may not exist — for $2 Billion.

They never said they were selling loans, so the profit between what they actually paid to the closing agent on behalf of homeowners and what they received from the sale of securities did not need to be reported. That sale paid off the off shore loan” leaving the securities firm with full contractual control over the behavior of every player without ever investing a penny in any deal.

The rather obvious enforcement action against the securities firms can probably only be done by law-enforcement or a regulatory agency, neither of which seems inclined to do so. The securities firms entered the lending market place by stealth, violating virtually every law governing lending, servicing, debt collection or just honest and fair dealing.

But law-enforcement is only concerned with the small time players who use the same tactics against the players in the securitization market. That is called “bank fraud,” or “mortgage fraud.” But what are you call it when there is no actual victim? Since there is no risk of loss on the part of any player in the securitization scenario, there can be no victim.


The simple answer is what I have been reporting since 2006, along with dozens of others. Wall Street securities firms, which control everything in nearly all loan transactions today, are concerned with the sale of securities. They are in the securities business but not in the business of lending and they devised a securities scheme that would enable them to penetrate the lending marketplace without ever becoming lenders. Most people either don’t understand that statement or fail to recognize its significance.

The bottom line is that every borrower is legally and morally entitled to have a counterparty who is in fact a lender. That is what enables the “meeting of the minds” elements for all enforceable contracts. There is no meeting of the minds in today’s lending marketplace and in fact in most other consumer transactions, especially online, there is no such meeting of the minds.


We are coerced or tricked into giving consent to deals we know nothing about. We get only what we asked for (hopefully) but we are not informed in any clear language about the true parameters of the deal and how we might be risking things we know nothing about or how we might lose money, reputation, privacy, our wealth, homestead or lifestyle by clicking or signing “I Accept.”

Financial and legal Technology have outstripped basic common sense in the marketplace. We agree to terms we have not read and could not understand even if we read them.
The most basic meaning of the word “contract” has been altered. Instead of a meeting of the minds, it is a one-sided deal in which the consumers are coerced and tricked into allowing their most valuable personal data and assets to be used as the basis for issuing securities or selling access, the sale of which produces nothing to the consumer. The transaction with the consumer is incidental to the sale of securities or the sale of data.
Law enforcement and regulators have been turning a blind eye to this behavior even while Congress and legislatures pass more and more definitive and stringent prohibitions against such conduct.
This is producing a breakdown in the division of power between the legislative branch which makes the law and the executive branch which refuses to enforce it against the large players. Instead of closing down efforts to fool the public on a grand scale, the executive branch is focusing on the little scam artist who in many cases is merely mirroring the strategies and tactics of his larger counterparts who have national brand names.
Case in point: we frequently hear of people who have been arrested for bank fraud or mortgage fraud because they falsified documents, forged documents, and misled consumers as to the basic nature of the deal they were offering.
This is exactly what is happening in the lending marketplace where huge multinational corporations and banks acting illegally through sham conduits and intermediaries, falsely offer “loans” when in fact they are merely selling an entry into a concealed securities scheme.
The scheme is compounded when someone decides to enforce the “loan” — when false documents are fabricated, forged, backdated for the sole purpose of reaping additional profit.
Wall Street insists that all of this information is irrelevant. The homeowner wants a loan, gets the money, and agrees to pay it back. What else is there to discuss?
That question was addressed 60 years ago by Congress and resulted in the passage of the Federal Truth in Lending Act. The reason they answered that question is because it was asked. And the reason it was asked was that even back (1960’s) then commercial banks (not securities firms) were tricking and fooling consumers into entering loan deals that were unfair and which failed to disclose key components of the deal. This is nothing new. The homeowner could neither search for a new lender nor bargain for different terms when the consumer knew absolutely nothing about most of the moving parts of the deal.
As to mega-sized players, both the executive branch and judicial branch have refused to even acknowledge the enforcement mechanism and the disclosure requirements set forth in that law, which has now existed for more than half a century. It is obvious that both the executive branch and the judicial branches of government simply disagree with the passage of that law.
This is but one example of why the public has grown to mistrust government and our institutions. The clearly worded and expressly stated dictates of the legislative branch, empowered by the Constitution, are not being followed, enforced, or changed — if any change is necessary.
The plain truth in our current system is that people may not rely on equal protection and due process under the existing and clearly worded legislation that both Congress and state legislatures have passed. Why should they trust the government when the government is clearly unable to function as designed?
The argument from judges on the bench clearly shows the obvious bias. “You got the loan didn’t you?” (and homeowners nod because that is what they thought they received because of misrepresentations made to them), “you signed the note, didn’t you?” ( and homeowners nod because it never occurred to them that the money they were receiving was merely an incentive payment to get involved in a securities issuance scheme), and “you failed to repay the loan” (and homeowners nod because they think it is a loan which means that someone out there maintains a risk of loss on a loan account when in fact there is no such person and there is no such account).
All law is intended to be a codification of common sense. If a consumer seeks a loan it is not just the money that the consumer is requesting — although that is the precisely wrong bias applied against consumers who execute documents and are then punished for having done so.
The consumer who intends to be a borrower using common sense expects to be dealing with a real common sense lender who has a risk of loss which means a stake in seeing to it that the deal is viable.
That expectation is codified in the Federal Truth In Lending Act where the viability of the loan is the responsibility of the lender. The fact that the consumer was successfully fooled into signing documents that enabled a securities scheme instead of a loan process is not a reason to enforce those documents, as is. It is a reason to reform everything about those documents and the transaction to encompass everything that really happened instead of what appears to have happened.

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, 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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One Response

  1. This is all correct. But there is more. The reason there is no accounting — and “loans” that are not funded is simple. These claimed “loans’ came from GSEs. The “BANK” servicers to GSEs – would report in default with fees to GSEs — but never report same to borrowers. Borrowers did not have a clue. So when borrower gets claimed “refi” or claimed “purchase” — all it is – is reinstatement of already declared internal default to GSEs. Thus, the homeowner gets – added debt to reinstated default debt. NO FUNDING – nothing paid off by homeowner. TILA Fraud. This is simple – I have no idea why no one brings forward. Simple to bring forward — get the accounting for what was claimed to be paid off BY YOU – by bogus “refi” or purchase. You will find NOTHING. You will find – you were reported in internal default. No Notice necessary – no according by them. NO FUNDING. It is outrageous. It is a cover-up. It is fraud upon the court. It is fraud upon you. And, no one cares. Why? Financial system WILL collapse. Stock market will fall — and we will have 1929 all over again. However – we CANNOT be the scapegoats. Let the chips (and stocks) fall as they may. IT IS OUTRAGEOUS what has been done. And it is all right there – in accounting (or lack thereof) – to show this. DEMAND accounting.

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