In 2013, while I was litigating these cases in Tallahassee Florida, there were several circuit judges on the bench who were both thoughtful and analytical. They were the first ones (out of many judges) who questioned two specific aspects of the foreclosure crisis: (1) why were servicers changed so often? and (2) why were modifications seemingly random rather than following some logical basis?
Many other judges like Judge Shack in New York were liberal in their criticism of claims brought by competing entities consisting of the largest financial institutions in the world, operating out of the same Suite at the same address in West Palm Beach, Florida (an Ocwen address). And Judge Boyco in Ohio started ruling against the foreclosure claims before he was silenced. Several bankruptcy judges in California and other states were ruling against the foreclosrue mills as well until they too went dark.
And other Judges privately voiced their wondering about why any “lender” would offer the NINJA and other supposed “loans” offered in the lending marketplace. The alternate or option contracts were the most troublesome since they virtually guaranteed that the payments would not and could not be made after short periods of time — a clear TILA violation in which the “lender” is responsible for assessing viability of the deal. .
But in the absence of such issues being brought before the court in a coherent manner they felt constrained to rule for the lawyer representing the foreclosure mill.
Adam Levitin, who first coined the phrase “Securitization fail,” pointed out that modifications were not in the interest of servicers. He was right, but that was only part of the story. There was no securitization of debt. There was only securitization of data. And neither the debt nor the data was owned by anyone. In plain language, securitization eliminated the role of a creditor.
Adam was only partially right. It’s not really the fees that block servicers from modifying instead of foreclosing. They really don’t have a choice. Their entire purpose is to serve as the sham conduit for financial technology companies working for Wall Street securities brokerage firms. They have no power and do not handle, receive, process or distribute any money from homeowners.
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A servicer does not decide to initiate foreclosure procedures or initiate modification. The financial technology companies might send application forms designed to elicit admissions that the alleged or implied unpaid loan account exists on the books of some creditor and that records from the named servicer are both authorized and valid representations of the unpaid loan account on the books of the creditor.
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The decision to offer a modification, and the decisions on the terms of the offer, are made strictly in compliance with the explicit restrictions and instructions issued by securities brokerage firms that initiated the sale of securities, the proceeds of which eliminated any risk of loss by anyone. Those Wall Street firms are committed only to preserving securitization infrastructure. The decision to modify is never based on the quality of a virtual loan with the homeowner nor any risk of loss on the specific transaction with the homeowner.
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All representations made by companies named as servicers that they have communicated with a controlling “investor” are false. Those representations do not come from the companies named as servicers. There is no such communication, primarily because the company named as the servicer is not performing any servicing functions. They serve only as corporate veils through which the homeowner or the lawyer for the homeowner must pierce to obtain any affirmative relief.
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Taking the existence and authority of companies named as servicers as though any of those representations were true leads to the self-defeating dissemination of false information.
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In 2013, while I was litigating these cases in Tallahassee Florida, there were several circuit judges on the bench who were both thoughtful and analytical. They were the first ones (out of many judges) who questioned two aspects of the foreclosure crisis: (1) why were servicers changed so often? and (2) why were modifications seemingly random rather than following some logical basis?
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Servicers are changed for one simple reason: it produces a confusing and chaotic series of veils that make it more difficult for homeowners to defend foreclosures and obtain affirmative relief in the form of damages for wrongful foreclosure.
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Modifications are in fact random if you are looking at the economic realities attached to a transaction: one that results in a virtual account instead of an actual unpaid loan account that appears or could be claimed by a creditor who paid value for the underlying obligation and who therefore paid value for lien which is the subject of the foreclosure.
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Many judges have asked similar questions and even occasionally made rulings based on the absence of any evidence or support for the claims of lawyers whose client, they say, is the creditor and not the named servicer.
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Neither the company named as creditor nor the company named as servicer is the lawyer’s client. This has been the subject of other articles dealing with litigation immunity and bar ethics. At the moment, those lawyers are NOT held to any standard for demonstrably untrue representations.
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These lawyers have no contact whatsoever with the named creditor and very little direct contact with the company named as the servicer. They receive all of their instructions and all of the documents to be used as exhibits in litigation through electronic transmission from unknown sources.
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Like all other schemes that are often described as organized crime, the general method of operations is to prevent any individual player from knowing or understanding the full scope of the scheme.
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It is hard to believe that any lawyer who has been representing a foreclosure mill for any length of time would not be in a position where they must have known about the insufficiencies of any claim against any homeowner.
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But that does not appear to be enough for bar associations to bring grievances and discipline. Yet those same bar associations have brought actions for disbarment against virtually all of the country’s major successful foreclosure defense lawyers.
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The fundamental premise behind those disbarment actions is that the offer of a defense to foreclosures was something close to misrepresentation. But if the Bar Association did their work, they would find that their fundamental premise was incorrect and that the foreclosure action’s premise was false.
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A failure of our political representatives – on both sides of the aisle.