Livinglies's Weblog

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Your problem is always that the focus on the note presumes that the note is evidence of an underlying obligation owned by the holder of the note. This ignores the increased burden of proof established by 9-203 which requires that, as a condition precedent, the claimant MUST have paid value for the underlying obligation (not the assignee of the mortgage or the endorsee of the note).

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The simple test is whether the alleged “holder” of the note paid cash for the underlying obligation. if so, the holder/purchaser can enforce both the note and mortgage. If not,  it might be able to enforce the note but it cannot enforce the security instrument (mortgage). Contrary to dicta and opinions around the country, the law does not automatically permit enforcement of the mortgage simply because the claimant managed to involve the right to enforce the note. The law requires ownership and payment of value for the underlying obligation.

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Nearly all judges miss the significance of this distinction. So you need to address their ignorance in the most respectful way possible but nevertheless aggressively to the point of risking contempt. The argument, well established by common law and statutes, is that no foreclosure is allowed which is not a remedy awarded to the creditor who has paid value for the unpaid loan account. This is not a policy argument. The question of whether that law should be applied is definitively stated in the state statute adopting 9-203. That law must be applied.

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The reason why this is so important is the explosive conclusion that judges are seeking to avoid. If the claimant has not paid value for the underlying obligation then the claimant is not intended to receive the proceeds of the forced sale of the property. If that is the case, then the court has no jurisdiction to adjudicate a claim based upon financial loss that does not exist at least for the claimant that is presented.

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Further, by naming a false Plaintiff, the foreclosure lawyers are intentionally by sidestepping basic required disclosure as to the ultimate facts upon which relief could ever be granted. This bars the homeowner from asserting counterclaims or affirmative defenses that would apply to whoever the real creditor might be. It also treats the most basic element of the claim as already decided — i.e., that the unpaid loan account exists.

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Without evidence corroborating the assumption that the loan account exists on the books of an identified creditor (who paid value for the underlying obligation) the foreclosure lawyers are not entitled to rely on those assumptions and presumptions if the foreclosure is contested —- and as part of the action, the homeowner demands discovery, to wit: sworn answers to interrogatories demanding the identification of a creditor who maintains the loan account as an asset on its own books and records.

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When you get to that point where the court has ordered compliance with discovery demands and there is no compliance, then the foreclosure lawyers can be barred from presenting evidence of the existence of an underlying obligation — as long as the homeowner has not already admitted the existence of the underlying obligation.

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It gets pretty easy to unintentionally waive this crucial argument against foreclosure. But in cases where the argument is pursued, as early as possible in the claims cycle, homeowners either prevail in court or obtain highly favorable settlement offers most of the time (65%-80%).

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The biggest problem is that neither homeowners nor their lawyers have any experience in investment banking or even basic accounting that would enable them to understand and argue this issue effectively.

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The most basic element of this issue is that some company must have entries on its own books of account (ledgers) showing the reduction of cash or some other asset account in exchange for the payment and acquisition of the underlying obligation owed the homeowner to that specific creditor (no substitutions allowed).

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If no such company exists then as a matter of law and generally accepted accounting principles the obligation does not legally exist. The 20-year-old practice of substituting a payment history in the name of a “servicer” is not a legally permissible substitute for reports from the alleged creditor submitted pursuant to a credible foundation from the creditor itself.

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So the only reason why most foreclosures have not been barred is the erroneous but nevertheless consensus belief that the loan account does exist and that the claimant owns it by virtue of being named as a claimant. Anyone with a passing interest in logic understands that is circular reasoning. But homeowners fail to even consider that the loan account they intended to start either never was created or was extinguished in the securitization process leaving nobody with an ownership interest in the underlying obligation and therefore nobody entitled to receive money from the forced sale of the subject property.

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As a result, homeowners and their lawyers fail to deny the existence of the loan account, fail to deny ownership of the account, and fail to deny authority or even factual administration by the apparent “servicer.” But the ones who do deny and who demand discovery responses that corroborate the lie that the loan account exists are the very small minority of homeowners who prevail in foreclosure litigation.

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Turning to the case at hand, like many homeowners you are dealing with smoke, mirrors and a number of moving parts designed to prevent you from nailing down the illegal behavior that resulted in the false claim being asserted against the homeowner. Countrywide Home Loan Servicing LP is NOT the same as Countrywide Bank, Countrywide Home Loans or other Countrywide entities.

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The merger with Bank of America consisted of several steps. First BOA created Red Oak Merger Corp. and it was that entity that acquired Countrywide Home Loan Servicing LP. There is nothing on record nor even any assertion that RedOak acquired any loans in that merger. The CW entity was established as a “servicing” entity even though it probably did not perform servicing functions that were performed by FiNTECH companies who were acting as agents for the investment bank that started the securitization cycle.

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The purpose of the merger was to protect the control of the money trail without owning it and thus becoming subject to regulation as a lender, successor lender, or creditor. With the failure of CW as a conduit for data produced from the illusion of loan closings and the failure of entities like Aurora and Lehman, the objective was to sustain the securitization infrastructure that included multiple transactions (derivatives) whose value was dependent upon control, but not ownership, of the flow of money paid by homeowners who were ignorant of the fact that there was no loan account that was being reduced or debited with the receipt of funds paid in monthly installment.

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All of this boils down to a very basic legally required foundation. If the transaction with the homeowner was a loan then the parties to that loan transaction needed to be disclosed, warts and all. In addition, all profits,  compensation, fees, and commissions were required to be disclosed. In plain language, the existing laws and rules governing the application of loan closings under the Truth in Lending Act require the disclosure of the investment bank, its role in the transaction, and its profit along with all the other actors who were receiving fees as a result of the homeowner signing his or her name to “loan” papers.

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The Good Faith Estimate at the “closing” would have disclosed that the objective of the named “lender” (MortgageIt) was merely to cajole and coax the homeowner into signing papers so that the investment bank and other actors could generate revenue exceeding the amount funded to or on behalf of the homeowner. This would open the door for homeowners to bargain for more incentives since the transaction created only a virtual loan account instead of a real one. And it would have opened the door for competitive investment bankers to offer better terms to the homeowner as well — in change for allowing a virtual loan account to be enforced as though it was real.

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In short, homeowners should have had the opportunity to accept offers to become part of a securitization scheme or to reject that in favor of conventional loans.

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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.

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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE COMMENTS ON THIS BLOG AND ELSEWHERE ARE BASED ON THE ABILITY OF A HOMEOWNER TO WIN THE CASE NOT MERELY SETTLE IT. OTHER LAWYERS HAVE STRATEGIES DIRECTED AT SETTLEMENT OR MODIFICATION. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.

But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

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If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

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