The first question is, “if it wasn’t a loan, then what is it?” Lawyers and homeowners get hooked on this question because they think it is up to them to answer it. But the first rule of procedure and due process is that if you have a claim, then you need to describe it. If it is left to your opponent to speculate about the nature of the claim, then all existing US law requires dismissal of the case, perhaps with leave to amend.
And the corollary is if it wasn’t (or at least is not currently) a loan, how do we fix the transaction so that it reflects the duties and obligations of a fair transaction (assuming it can’t simply be rescinded).
The answer is reformation, but this is a blade that the investment banks are very careful to step away from. The court takes in evidence about the entire transaction and then decides what the contract would look like if all those factors were known at the relevant time(s).
Since the late 1990s this means the court would require an accounting for the entire money trail, including the sale of securities, without which there would have been no loan to the investment bank, without which there would have been no transaction offered or sold to the homeowner.
What I find so interesting is that the issue of reformation of the debt, note, or mortgage lien arises so frequently between the lawyer, purportedly representing a creditor, and a party other than the owner of the Homestead. Reformation is the only legal and fair way out of a situation created entirely by Wall Street. This is widely known in legal circles and especially by lawyers who represent players in securitization schemes and players in foreclosure schemes.
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This is particularly relevant in cases involving the service of a notice of intent to resend under the federal truth in lending act.
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Three things are true:
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(1) given the universal absence of a loan account receivable and, therefore, the absence of an owner of the nonexistent loan account receivable, there is no cause of action or defense that can be raised because of lack of standing and lack of a justiciable issue.
a. The simple counterargument is that the present party named as claimant/creditor has paid for the underlying obligation, note or lien (and has both alleged that and proven that when the allegations are contested by the homeowner).
(2) the only way out of this pickle is to either (a) dismiss the current proceedings and file a new lawsuit or pleading that truly is filed by a lawyer on behalf of a client that is a creditor or (b) to file an action in reformation — admitting that the transaction was not a loan but pleading reasons why the money is still owed.
(3) in most cases, the opportunity to file a real pleading is barred by the statute of limitations. After spending years pretending to be lenders and successor lenders, they ran their own statutes. No amendment is possible without asserting actual ownership, rather than presumed ownership, of the alleged underlying obligation (if it even exists).
Here is an example where this is relevant, but the lesson carries over to virtually all activities undertaken by players in securitization and players in false foreclosure claims.
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Under 15 USC §1635 the homeowner has the ultimate power to end the note, end the mortgage lien, and force the rescission of the transaction, including disgorgement of all money paid by the homeowner. Those events occur by operation of the statute. No lawsuit, claim or notice is required other than posting the rescission in the US Mail.
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The contractual claim for money is replaced by a statutory scheme when the rescission is posed in US Mail. But there are preconditions to citing the statutory scheme for “recovery” of the money that the lawyer claims is due to his/her client. The lender or successor lender must remove the extinguished mortgage lien from the chain of title; the lender or successor lender must return the original canceled note; and the lender or successor lender must actually pay the homeowner for disgorgement of all money expended by the homeowner in relation to the transaction.
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Thus the claim for money against the homeowner completely depends upon the existence of a lender or successor lender. This is true in all foreclosure situations and expressly and unambiguously true in TILA rescission cases.
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Wall Street has worked around these requirements using apparent legal presumptions arising from false, fabricated, and forged documents. That forces the homeowners or at least lures the homeowner into attacking those red herring issues. In fact, homeowners who win do so simply by using their right to due process.
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If the party is named as a successor lender, then it must have paid for the right to enforce the underlying obligation, note, and lien. The absence of such a transaction is easily revealed by their refusal to provide an unequivocal response and copies of the loan account from creation until the day of their response.
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The problem, overlooked by nearly everyone, is that no party can return the canceled note or even file a satisfaction and release of lien to remove the statutorily extinguished lien from the chain of title. No such party exists. The absence of the unpaid account receivable and any owner of a nonexistent account receivable (creditor with a claim of damage) takes care of that.
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So despite a unanimous decision from the Supreme Court of the United States, the courts have ignored the rescission even though it received notice. At that point, there was no note to enforce or lien to foreclose.
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The method of collection was changed by statute from contractual or statutory. First, the lender or successor lender had to comply with the rescission. Then they could make a claim to receive the payoff of the claimed underlying debt. The alleged obligation of the homeowner did not exist until after compliance with this Federal statute.
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If there was a real transaction with the homeowners and real transactions in which the alleged obligation was purchased and sold, the investment banks (who were at the heart of all such activity) would have had no problem in complying with the statute, filing a lawsuit saying the rescission notice was not in good faith or otherwise defective, and demanding payment. And if that were true, they would have done so.
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Instead, the lawyers who implied representation of entities they claimed to be creditors adopted a much more circuitous and risky strategy. They did nothing and then lobbied the trial courts to rule in favor of entering a final judgment of foreclosure because of the policy (legislative authority only) that SHOULD be followed despite the express unambiguous wording of the TILA rescission statute.
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The risk was obvious to anyone like me. The ONLY remedy available for collecting the alleged debt was under TILA. The mortgage lien and note no longer existed. But the statute of limitations under TILA is generally 1 year.
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There is no statute of limitations on title unless the adverse possession statutory limit has expired — i.e., adverse actual, continuous open possession as though the possessor owned the property contrary to the deeds of record (usually against a neighbor).
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Thus the claim to obtain any money from the homeowner has expired, leaving the lien that is still reported in the chain of title to be securing nothing. And the deed by which the homeowner received the title is still as valid as when it was f first recorded years, decades or centuries ago.
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The same statute of limitations is applied against homeowners when they attempt to bring actions for violation of TILA long after the transaction was “consummated.” The judge rule against the homeowners in both instances because they don’t like the policy of giving homeowners the power to enforce punishment against the financial institutions when they misbehave. Of course, this violates separation of powers in the Federal and State constitutions.
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Since hundreds of thousands of homeowners sent rescission notices within 3 years of “consummation” and were still victims of void court orders and judgments allowing the forced sale of their property, those homeowners still legally own the property despite piling on false documentation and void judgments and even sales.
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It is only by very aggressive strategies and tactics that homeowners can retain both title and possession of their homestead or the land upon which it once stood. Federal and State agencies are well aware of this problem. There have been dozens of studies demonstrating chapter and verse how the chain of title in the residential market is no longer a valid report of ownership.
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While some lawyers are, in fact, winning their cases, there is always a settlement that includes an NDA and scrubbing the court record of pleadings and orders. No appeal is ever taken from a loss unless there is some clear procedural basis to overturn the rare decision in favor of homeowners. Hence when any lawyer or paralegal researches to discover cases in which the ruling favored the homeowner, they find nothing helpful.
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The erroneous conclusion drawn by almost all lawyers and virtually all judges is that there is no body of law supporting the position of the homeowner when in fact, there is no body of law that supports the ruling against the homeowner in contested — and fully litigated — foreclosure cases.
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Neil F Garfield, MBA, JD, 76, 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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Reformation should have been done by the government when they backed Too Big To Fail and slimy settlements.
⚖️😢OMG Justice ? Need a money trail for who paid the real estate taxes and when. Just slimy 🐍🐍🐍🐍