Livinglies's Weblog

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In a normal world transfer of the title to the property from one trustee to another is made on behalf of and at the instruction of the beneficiary under the deed of trust. The beneficiary can only call themselves a beneficiary if they qualify as a beneficiary under the statutory scheme for deeds of trust. In all cases, this must mean that the beneficiary is the owner of the “underlying obligation,” as is stated in hundreds of case law decisions.

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The problem for the courts and for homeowners is how you define the “underlying obligation.” Before the era of securitization, the answer was simple. You had to be the owner of an unpaid loan account before making claims to administer, collect or enforce a promise to make scheduled payments, as outlined in a promissory note. I think it still means that.

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But many lawyers hired by many actors from Wall Street have successfully convinced judges that the underlying obligations is a reference to the liability on the note, not the liability on any underlying debt. I think that is circular reasoning and I think that I have proven in dozens of cases that when brought to the judge’s attention, they will consistently rule in favor of the homeowner where the evidence is insufficient to establish the ownership of an unpaid loan account.

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This is also required to establish the bona fides of a company that has been designated as a “servicer.” Such companies might, in fact, be in some contractual relationship (privity) with the company that has been designated as a “beneficiary” under a deed of trust. But most readers are misled by that.

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The fact that entity A and entity B have a contractual relationship does not mean that either of them have a contractual relationship with entity or person C. Based upon prior historical experiences, it was quite reasonable to assume that if someone was designated as a creditor, they were claiming to be a creditor. Not so anymore.

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If you go to US Bank, for example, and ask them if they are the creditor making a claim on behalf of a trust, they won’t answer you. If you ask for their acknowledgment on a document that purportedly acts to release and satisfy lien or mortgage upon payment in full, you’ll get the same non-response. But a third party is still busy in court convincing the judge that US bank is the creditor — a claim that US Bank will not acknowledge nor affirm.

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If someone was designated as a servicer, it was reasonably presumed that they were a servicer. And if they were a servicer, they were performing servicing duties. This is also not so anymore. None of it is.

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The actual structure is a pyramid with a false base. The investment bank (the IB) controls the entire scheme without owning anything. They are not the beneficiary because they neither paid for nor received ownership of the unpaid loan account from someone who owned it.

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The IB appoints intermediaries who enter into contracts with front companies —- i.e., licensing agreements for the use of the names of the companies in any ways chosen to be used by the intermediaries acting on behalf of the IB. The presence, behind the curtain, of the IB and the minions acting in concert with the IB is never disclosed to anyone.

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Additional intermediaries are appointed who contract with financial technology companies (CoreLogic, Black Knight, FiServ etc.) to perform the actual servicing functions of receiving, processing, and accounting for payments received by homeowners — but the data entries are never posted to any unpaid loan account because there is no loan account.

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For enforcement, the documents are prepared to establish the foundation of the foreclosure claim by the FINTECH companies. But it is all done in the name of licensee “servicer” names.

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My point here is that if you boil everything down to the component parts, you find no beneficiary. Therefore, no trustee has the authority to do anything on behalf of a beneficiary. This leads to an issue with the title. The homeowner has entered a deal in which he received title subject to an unpaid loan account claim, the terms of which are set forth on a promissory note.

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The obvious problem is that the chain of title, as recorded with the clerk for official records, shows a trustee and beneficiary and apparent transfers. Statutes require presumptions for such instruments, even if they are untrue. I favor offering full payment provided the designated creditor acknowledges, warrants, and affirms the claim.

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When pressed to complete a refinancing or sales transaction, the judge will usually issue an order requiring the disclosure of the identity of the creditor and a release to be issued by or under the authority of the party who acknowledges, warrants and affirms ownership of the unpaid loan account and thus the right to enforce or satisfy the lien.

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Legally this means that the attempts to quiet title are very well justified. But the courts see it as a windfall for the homeowner, which is probably correct or at least partially correct — but only in the sense that the homeowner never knew they were entitled to that value or payment.

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But the reverse is also true. If the foreclosure is successful, then the sales proceeds will be distributed as revenue and not used to pay down an unpaid loan account because (a) there is no loan account and (b) all the parties have already been paid through the sale of securities.

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Nobody suffers any injury when a homeowner refuses to make a scheduled payment. There is no financial injury because there is no loss of anything other than the expectancy of profit — a profit that was never disclosed.

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The disclosure would have been mandatory if the transaction had been a loan. But if you sue them for breach of statutory duties under TILA, the response is revealing, to wit: we can’t be liable for lending violations because we were not the lender. And since they neither acquired MERS nor the original lender, they usually escape the liability that was intended by Congress to apply against such tricksters automatically.

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Wall Street’s problem is, of course, greed. If they had told the homeowners that they were generating revenues in geometric proportion to the amount paid to or on behalf of the homeowner, the homeowner would have understood that the counterparty had no stake in the successful outcome of the transaction and that the homeowner was probably entitled to incentive payments for launching the scheme. He/she would certainly have been entitled to better terms than the homeowner performing the service, getting paid, and then paying back what they were paid.

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Without the homeowner’s signature, there would be no sale of securities, and the sale of securities is what the entire scheme was always about. It was never about loans. Lenders only make 2-3 points per year on loans, if they are lucky. Wall Street generates at least 1200 points on each loan. (If you were wondering how idiot pizza delivery people made $1 million per year).