Banking Lesson to Aid Homeowners in Discovery or Statutory Demand Letters

Homeowners and their lawyers look at a canceled check and understandably and reasonably come to an erroneous conclusion. They think the check shows who physically received the check, who deposited it into a depository account, and who owns that account.
Therefore, they erroneously conclude that the report issued under that name was prepared by or on behalf of the name they think they know, and that report is waived into evidence as a business record under an exception to the hearsay rule barring hearsay from the record of the evidence that a judge is permitted to consider.
This forms the pretext under which nearly everyone believes that payments from the homeowner were due, payments made by the homeowner were posted as a reduction of the balance due on an accounting ledger of the designated owner of the obligation, and that the claimed amount due is equal to the amount shown on that ledger. The problem, of course, is that there is no such ledger, and there is no amount due.
All of this stems from the natural human tendency to believe what we read. Every con job usually involves the fabrication of some document. And the more official it looks or the more official the circumstances appear, the more it is believed. Wall Street has weaponized this phenomenon into the biggest economic scam in human history. And for good measure, we should note that repetition places fiction into the category of fact.
It has been so successful that even government officials have erroneously concluded that they know something. Mainstream media stopped all investigative reporting back in 2010 just went they were getting close to the truth.
So you look at the markings on a negotiated check. What is contained in the depository agreement or instructions? You don’t know. But when looking at these cases, I do know that this shows clear evidence of the customary practice of dealing with payments from homeowners. This is the process of concealment and cover-up.
The lawyer or homeowner needs to know how the system works before they decide on which facts to contest — i.e., which documents to ask for and what testimony you want to elicit from an authorized officer or employee of the designated company. This is done by notice if the company is a named party or by subpoena if the company is not a named party.

Banking lesson.

  1. A depository account is a liability of the bank that accepts deposits.
  2. The owner of the account is the depository bank.
  3. The owner of the contents of the account is the depositor — or whoever is designated by the source of the deposit.
  4. The owner and the depository bank enter into a contract that covers the terms of the deposit and the availability of funds after the deposit. That agreement sets forth various possibilities and what happens when one of those possibilities occurs.
  5. In business situations, it is common to have the name of an account shown as whatever name is designated by the owner in the contract. So, for example, if the owner is JPMorgan Chase, it could give a name to the account of SPS. So when people issue payments to SPS, it is going to JPM Chase. But the people think they paid SPS. Therefore they think they know that SPS is a servicer.
    1. And they think that SPS must have deposited the check to its own account and then issued distributions to a creditor or agent of the creditor.
    2. Therefore they think that the report issued under the name of SPS was prepared by SPS and represents transactions conducted by SPS. This results in the report being accepted as a “business record,” which is accepted as a substitute for the collateral loan account owned by the designated claimant (creditor or owner of the lien).
    3. The court proceeds without any evidence of the existence of an unpaid loan account, and judgment is entered as though such evidence and been produced.
    4. However, if SPS did not have an employee or officer receive the check and deposit it into an SPS account, any report issued regarding homeowner payments and balance due would be hearsay and not allowed into evidence as an exception to the hearsay rule. In plain language, the report would be a compilation of reported facts from third parties other than SPS. That is exactly what the hearsay rule was designed to prevent because of the opportunity for mischief.
  6. Also, in business situations, it is quite common to set up a depository account that is cleared every night. The terms of clearance are set forth in the depository agreement, which probably refers to receiving instructions from the owners. Those instructions must be in writing.
    1. The terms of clearance may create a funnel to one other account or many other accounts —  each owned and operated as described above.
    2. So continuing our example, if homeowner Smith sends a check to SPS, something is happening that is not apparent but also NOT illegal.
    3. The check is not received by SPS and is never deposited into any account that is owned or controlled by SPS. Therefore SPS has no record of receiving it because it didn’t receive it and no record of making any deposit because it made no such deposit.
    4. It is deposited, in our example, into an account owned by JPMorgan Chase because JPM retained control of the money trail and the paper trail — even though it did not legally own or even claim to own any right, title, or interest to any payment from homeowner Smith.
      1. In turn, the check deposited to the account name of SPS is cleared to several different accounts, each also controlled by JPM. Some of those accounts are to subsidiaries or controlled business entities organized and existing under the jurisdiction of off-shore places.
      2. But again, the reasonable conclusion drawn by Homeowner Smith is that he owes a debt, and it is being collected, deposited, and distributed to creditors as he makes payments. This is not the case. It is never the case. But as long as the homeowner believes it, it is likely that his/her lawyer will believe it.
        1. And thus, the facts become uncontested even though they are untrue. Once that is established, the judge has no choice but to apply the uncontested facts to the case and then enter a ruling based on those uncontested facts.
        2. Are they lies? Yes, but they are reasonably believed by both the homeowner and the lawyer. Federal and state agencies are chartered to address widespread problems like this one. But the failure of those agencies to act dumps the burden onto the uninformed or under-informed homeowner and the uninformed or under-informed lawyer for the homeowner.
      3. There is a record of this bank activity, and it is accessible through the rules of discovery and, to a lesser degree, through the laws governing qualified written requests and debt validation letters.
        1. Whatever value the QWR or DVl might have is usually squandered by well-meaning but uninformed homeowners who attempt to substitute the QWR or DVl as a discovery demand. That only enables the recipient to ignore most parts of the request.
        2. Through enforcement of those laws and rules in court, homeowners win- not by proving that the other side is composed of dark figures who should be shot.
      4. The banks know that, and they employ thousands of lawyers to side-step the obligation to respond to any legal request regarding the ownership and control of any account.
      5. The structure of this plan leaves an essential question unanswered: who is the party that must respond to the QWR or DVL?
      6. To the extent that the names used by JPM do not represent companies that perform any function, it is difficult under current rules to ascribe an obligation to answer the QWR or DVL.
      7. But there is one exception to that “rule.” If one of the company names used by JPM is, for example, Bank of New York Mellon, U.S. Bank or Deutsche Bank National Trust Company, and that company is represented as the owner of the right, title, and interest to payments received from homeowner Smith, then that Bank is required to answer the QWR and DVL.
      8. Delegation of the obligation to respond to a “servicer,” either real or apparent, is insufficient. There must be an answer from the designated “owner” — or the answer printed up under the name of SPS as “servicer” is unauthorized.
        1. That answer should be signed by an authorized officer or employee of the bank asserting ownership of an unpaid obligation due from Homeowner Smith and, if they so choose, that they have designated the “servicer” to answer questions more fully.
        2. But it should also include a copy of the collateral account or loan account, as it might be named. This is the sticking point when the homeowner wins.
          1. The reason is simple: there is no collateral account. There is only a faux collateral account presented as a Payment History for purposes of illegally obtaining profits and revenues from making false claims for restitution. There is no collateral account —- or at least not one owned by the designated “owner”– because everyone is ducking liability under Federal and State lending laws.
  7. The problem here for homeowners who are victims of fraudulent and fake claims is that they and their lawyers stop looking once they see the canceled check. As a result, the Judge is never presented with a contested issue about what goes on behind the iron curtain. But Homeowners know that they are being screwed and that their opponents are getting paid for nothing.


PRACTICE NOTE: All payments of all types are now electronic. Virtually all money is electronic in the form of 1s and 0s on a computer server that is accessed through desktop applications. A paper check, therefore, is no longer different from any other payment, including but not limited to various names attached to payments:

  1. ACH
  2. Wire transfer
  3. Automatic deduction
  4. Zelle

The processing of all such payments is the same, with some small differences. Basically, every payment is initiated by the payor (the signor on what would be a check), which is then marked as received by the party who physically received the payment. If electronic, and there is no check,  the receiver is the party who is the owner of the account into which the deposit was posted. The rest is as above. tracing this is fairly easy once you force the opposition to comply with the statute and the rules of procedure. All payments involve the following entities:

  1. Issuing bank and account processor
  2. Intercept processor
  3. gateway processor
  4. Receiving bank and account processor

The Federal reserve bank is usually an intermediary/intercept/ processor also.

When attempting to put factual issues into dispute, you are looking for the actual “tracking” information as the payment is passed from one electronic source to another.

If an assignment says that it was executed in consideration of $10 and other valuable consideration, you want to know how the $10 was paid and what was the other consideration. If payments are alleged to have been made electronically, you now know what you are looking for —electronic interbank receipts issued by intercept, gateway, and account processors.



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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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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 14 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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