Livinglies's Weblog

One of my constant comment contributors recently informed me and others that she was trying a new tack. She writes “My attorneys are making a demand that any refi money be placed with the Court and that the judge decides who he wants to pay.”

This is very close to an Interpleader action which is virtually unknown amongst laypeople and many lawyers. In an interpleader action, a party says to the court I have this asset and there are two conflicting claims to get it from me. In its purest form, the Interpleader says that he doesn’t care who gets the asset. In a more advanced form, the interpleader might say that he does have an interest in making sure that the asset goes to A rather than B.

The point of all this is that a homeowner could turn the tables on companies who are masquerading as “servicers” (basically all companies who claim to be servicers). [NOTE: YOUR SERVICER IS A FINTECH COMPANY NOT THE COMPANY THAT IS CLAIMING TO BE A SERVICER).

The homeowner’s contract is NOT with the company claiming to be a servicer. The homeowner’s contract was with an alleged lender and then the successor to the originally named “lender” or pretender lender. This point is almost always missed by both homeowners and their lawyers. It leads the homeowner into a black hole.

In order for a company to become a successor to the “lender”, the new company must pay value for ownership of the underlying obligation, the legal debt, the note, and the mortgage (note that each of those has its own set of rules). In the world of securitization, no such sale ever occurs.

And that is why I have been declaring for 16 years that with respect to homeowner obligations, there is no securitization. No sale=no securitization. And that means there is no succession. No succession means no creditor even if money exchanged hands for reasons other than the purchase of the underlying obligation. 

So people are trying shortcuts to quickly end the claim for administration, collection, and enforcement of the promise to make installment payments issued by the homeowner. If it was that easy the entire securitization myth would have exploded 20 years ago.

Attempting to put the refi proceeds into escrow rather than pay the “servicer” can ONLY work if you have a funded lender who conditions payment on the absolute assurance that the new lender will be getting first priority position as mortgagee or beneficiary under a deed of trust.

The typical answer is that there is a title insurance policy to protect against any problems. But the new lender replies that it refuses to fund the deal unless it receives both insurable and actual title free from any possibility of litigation over the issue of the validity or priority over the lien. The new lender position is best expressed in a letter of commitment. This is the AMGAR strategy that I have promoted since 2008. It works but only for people who are willing and able to invest money in the strategy.

If it is a situation in which there is a real new loan from an institutional lender, they will never go along with the plan to highlight these conditions because they are all heavily invested in the securitization illusion. While there is the possibility that a quick surprise suit against the escrow agent could theoretically work contemporaneously with the “closing” it is doubtful that this strategy would work in the real world.

That is a strategy that has been tried in a few iterations and failed.

But it is still possible it could work. It is called Interpleader. But in order for it to work, you need a disinterested third party willing to do it. I think that the disinterested party ought to be a receiver for the asset.

• The homeowner pays the receiver the monthly payments along with instructions that say to pay the creditor if there is one and if there is an unpaid loan account.
• The receiver asks the current servicer if it is an authorized agent of a creditor (and to please give the name and contact information so the receiver can confirm it) — i.e., someone who owns an unpaid loan account due from the homeowner.
• The “servicer” demands payment. The receiver says he. she or it cannot pay until the conditions are met: a creditor with ownership of the loan account. There is substantial law going back centuries that nobody is under an obligation to make payments to a party who is not owed the money.
• The “servicer” serves notice of default.
• The receiver files an interpleader action that says he/she it is holding money to pay to the creditor, but the original creditor is not in the chain anymore and there is a new party, a self-proclaimed “servicer”, who refuses to provide adequate assurance that it is the authorized agent of a creditor.
• The interpleader deposits the money into the court registry and exits. It remains a party until the judges’ order is to pay this one or that one.

Filed under: CORRUPTION, discovery, Discovery -Subpoena, evidence, Fabrication of documents, Motions, Pleading, Presumptions, prima facie case, Servicer, sham transactions |