From the Horse’s Mouth: WAMU Originated “Loans” Are not Assets of Chase or Even Any trust If the Sale was to a “Depositor”

Many thanks to Bill Paatalo for bringing this to my attention.

This article brings to the forefront a central issue that Wall Street cannot escape unless we let them: in the context of securitization, the paper transfers to the “depositor” is not a sale even if it is treated as a sale by the “Seller.” That means that the homeowner transactions that were falsely labeled as loans were never securitized. In other words, the whole thing is a lie. A LivingLie, which is why I named named this blog as such.

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I would suggest that practitioners take note of this. As many judges have specifically declared in their finding of facts, the “sale” to the   “depositor” in a securitization scheme is a sale to a legal entity.

Take special note that the filings with the SEC admit that the issue of whether and when any sale has actually taken place is subject to “argument.” That is a peculiar statement when you’re dealing with paperwork that “memorializes” the sale of trillions of dollars worth of transactions.

This means that when feeders like Long Beach Mortgage originated homeowner transactions on behalf of WAMU, the most likely cash flow (i.e. real transactions) included a fee paid to Long Beach to act as Lender (so everyone else could avoid lender liability for violations of lending laws). It also means that WAMU was only the servicer. And it means that the homeowner transacted was actually funded by a third party (investment bank) — and what THAT means is that no actual sale ever took place of any debt, note or mortgage. 

And THAT brings to the central issue — on what basis can a non-creditor appoint a designee or nominee to collect on a debt that they don’t own?

And without a sale to the trustee of the REMIC “trust” it is the Depositor who owns the homeowner obligation. That means under black letter law that neither the trustee nor the trust can be named as claimant or beneficiary or plaintiff in a foreclosure proceeding because they are not a creditor.

see WaMu’s securitized mortgages were “legally isolated” and out of the reach of the FDIC’s Receivership. Hence, “Nemo dat quod non habet” (One cannot give what one does not have).

“For transactions in which WMB is a mortgage loan seller, investors should consider the following:
WMB sells mortgage loans to the depositor. WMB is a federal savings association, and its deposits are insured by the FDIC. If certain events occur relating to WMB’s financial condition or the propriety of its actions, the FDIC may be appointed as conservator or receiver for WMB.

WMB will treat its transfer of mortgage loans to the depositor as a sale. Arguments may be made, however, that the transfer of the mortgage loans constitutes only the grant of a security interest under applicable law.
Nevertheless, the FDIC has issued a regulation surrendering certain rights to reclaim, recover, or recharacterize a financial institution’s transfer of financial assets such as the mortgage loans if:
the transfer involved a securitization of the financial assets and meets specified conditions for treatment as a sale under relevant accounting principles;
the financial institution received adequate consideration for the transfer;
the parties intended that the transfer constitute a sale for accounting purposes; and
the financial assets were not transferred fraudulently, in contemplation of the financial institution’s insolvency, or with the intent to hinder, delay, or defraud the financial institution or its creditors.
WMB’s transfer of the mortgage loans will be intended to satisfy all of these conditions.
If a condition required under the FDIC’s regulation were found not to have been met, however, the FDIC could seek to reclaim, recover, or recharacterize WMB’s transfer of the related mortgage loans. The FDIC may not be subject to an express time limit in deciding whether to take these actions, and a delay by the FDIC in making a decision could result in delays or reductions in distributions on the certificates. If the FDIC were successful in any of these actions, moreover, holders of the certificates may not be entitled under applicable law to the full amount of their damages.
Even if the conditions set forth in the regulation were satisfied and the FDIC did not reclaim, recover, or recharacterize WMB’s transfer of the related mortgage loans, distributions to holders of the certificates could be delayed or reduced if WMB entered conservatorship or receivership.
The FDIC may be able to obtain a stay of any action by the trust, the trustee, the servicer, or any holder of certificates to enforce any obligations of WMB under any transaction document or to collect any amount owing by WMB under any transaction document. The FDIC also may require that its claims process be followed before payments
For transactions in which WMMSC is a mortgage loan seller, investors should consider the following:
WMMSC sells mortgage loans to the depositor. WMMSC will represent and warrant in the mortgage loan sale agreement that the transfer of the mortgage loans to the depositor is an absolute sale, so that the depositor is the sole owner of each mortgage loan. WMMSC is eligible to be the debtor in a bankruptcy case. If WMMSC were to become a debtor in a bankruptcy case, and a party in interest (including WMMSC itself) were to take the position that the transfer of the mortgage loans to the depositor is not a sale, but rather should be recharacterized as the grant of a security interest in the mortgage loans to secure a borrowing of WMMSC, delays in distributions on the certificates could result. If a court were to adopt such a position, then delays or reductions in distributions on the certificates could result.
  WMMSC and the depositor have taken steps to minimize the risk that in the event WMMSC were to become the debtor in a bankruptcy case, a court would order that the assets and liabilities of the depositor be substantively consolidated with those of WMMSC. The depositor is a separate special purpose corporation.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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Coming this fall! A new wave of illegal foreclosure claims. Will we get it right this time?

Some have pointed to some articles indicating that the securitization ponzi scheme collapsed already.

It might be more accurate to say that the scheme was reorganized rather than collapsed. But even if it collapsed the Wall Street banks will continue sending servicers and foreclosure mills into the field to file foreclosures. After, all, it’s free money if they win, and there is so far, a statistical certainty that in nearly all cases they will win simply because of the erroneous belief by homeowners that they have done something wrong and that they have a moral obligation to leave the house, once they stop paying.

So homeowner will give their precious house to people who have no right to receive it.

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We are a long way from when homeowners realize that they were flim flammed from the very start and that taking the substance of the homeowner transaction in total and in perspective, the homeowner (a) did not owe any money to anyone claiming it and (b) the homeowner was probably owed more money from the investment bank than he/she could possibly owe under the note and mortgage that was issued.
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It wasn’t a loan and we should stop calling it that. The “lender” side had no lending intent. At the conclusion of the process there was no creditor holding the homeowner obligation as an asset. Therefore they were not lenders or even creditors and accordingly not liable or accountable to act in accordance with lending and servicing statutes.
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The confusion emanates from the fact that all homeowners entered into the transaction with borrower intent. But there was no lending intent from the other side. The other side masked the real transaction as a loan to deceive the homeowner into accepting the label “borrower”.
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The real transaction was payment to the homeowner for issuance of note and mortgage to start the securitization processes. It was in reality a simple commercial transaction, to wit: the investment bank, through intermediaries agrees to pay money to the homeowner in exchange for the homeowner issuing a note and mortgage and putting up their home as collateral for an obligation that offsets the payment received. It could have been a loan, but it wasn’t.
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Because the banks lied about the transaction to the homeowner and to further make it look like a loan, they got the homeowner to issue a note and mortgage in most cases to an entity that never paid any money. This might negate the consideration for the transaction altogether because they were making a payment  but also getting a promise to pay even more to unknown creditors who would be illegally designated later. That part is a close question.
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But in quantum meruit, quasi contract and reformation, the only legal way that their designation system could be made legal is by getting consent from the homeowner to that system of designation of a creditor to act as a lawful creditor even though it wasn’t. That was the real reason for MERS, the use of Originators and the offering of “modifications.” The players on paper are designees or nominees — not real players. They are using the language of the notes and mortgages to imply consent to a “no creditor” transaction.
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But that is not informed consent or real consent, nor is it legal without other language of contract. A binding contract must have offer, acceptance, clear terms and consideration between the parties to the contract. In most cases the homeowner transactions were therefore not binding contracts. The Payee on the note was not a creditor. The doctrine of merger cannot apply when the payee is different from the source of funds unless there is a specific express contractual provision stating that. The mortgagee is usually a nominee which I think is a tacit admission that there is no creditor.
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In order to foreclose, the party asking for foreclosure remedy must be a creditor. A creditor is only one who either (a) owns the debt or (b) represents someone who owns the debt. Ownership of the debt is only accomplished in one way — payment of value in exchange for an instrument conveying title to the debt from an owner of the debt to a new owner of the debt.
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The ONLY time any value was paid was by investors. But they did not get any instrument of conveyance of the debt. Quite the contrary. The intent was to make certain that they would never be considered lenders. What they received was a discretionary promise from the investment bank dba REMIC trust to make payments that were partially indexed on but not dependent upon receipt of payments from homeowners.
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It is therefore impossible for any transaction to have occurred wherein value was paid for ownership of the debt after the investors paid the investment bank. Even if someone wanted to pay value in exchange for an instrument of conveyance of ownership of the debt, there was nobody to pay.
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The only party who paid value was the group of investors or arguably the investment bank. But neither of those entities had ever received any instrument of conveyance of ownership of the debt and in fact they disclaimed any such ownership because it would have made them lenders subject to TILA and other lending and servicing laws.
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BUT in order to foreclose, the papers filed by the foreclosure mill would need to show that a creditor was applying for the remedy of forfeiture. See Article 9 §203 UCC. So that required assignments of mortgage to be prepared, executed and recorded even though there was no financial transaction between the parties. In short, the scheme required the preparation, execution and recording of false utterances in false documents that were forged and illegally recorded.
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Since the homeowner has always assumed the homeowner transaction was a loan agreement, almost nobody has thought to credibly and properly challenge these assignments as legal nullities.
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The credible challenge would be not only that there was no consideration paid for the assignment, but that the payment of consideration was not a commercially reasonable basis for the execution and recording of the instrument, since the only consideration came from parties who did not and do not want ownership of the debt.
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The absence of any valid assignment is not just a fact; it is legally impossible under current securitizations schemes to have a valid legal assignment. The investment banks as intermediaries between investors and homeowners have structured the cash flow such that the investment banks get most of the benefits from the securitization process at the cost to and detriment of investors and homeowners — the only two real parties in interest in the homeowner transaction which is mistakenly called a “loan.”
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The note, payable to a party with whom the homeowner unknowingly conducted no actual business, creates a liability under Article 3 of the Uniform Commercial Code regardless of the lack of consideration. The maker of the note has defenses to be sure, but if someone buys the note for value, without knowledge of the maker’s defenses, and in good faith, then the maker must pay the note and the only remedy available to the maker is by making a claim against the Payee on the note and anyone else that induced him to execute a note in favor of someone who gave him/her nothing.
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The foreclosure mills for claimants in foreclosure do not plead status as a holder in due course because they can’t prove the elements: payment, good faith and lack of knowledge of borrower’s defenses. But they induce both homeowners, their attorneys and the courts to treat the claimant as a holder in due course because of the complexity of legal analysis in distinguishing between an HDC, holder, possessor and anyone with rights to enforce.
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As a result, because the position is not properly challenged, the court then often reduces or even eliminates discovery on the central issue — whether the claimant is a creditor of the homeowner.
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The “rights to enforce” argument almost always leaves out the presumed component that is a condition precedent to any such analysis, to wit: that the creditor has authorized the enforcement. But if there is no creditor — i.e., anyone holding the debt as an asset — then such authority cannot legally exist.
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This explains the appearance of false, fabricated, forged, backdated and robo signed documents that are still regularly used. Since there is no creditor the pursuit of foreclosure is a pursuit of profit rather than restitution for an unpaid debt. It is not recovery on a loan.
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And if the transaction was unraveled from its complex appearance, it is plain as day that the homeowner is entitled to credits and probably payments from the investment bank under quantum meruit and quasi contract for being drafted into a highly profitable securitizations scheme that gave the homeowner nothing for initiating the scheme.
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We are about to be besieged with new foreclosure claims. Let’s get it right this time. The “flood of litigation” argument for rocket dockets is not valid because it presumes that the claimant does have status as a creditor and that the foreclosure is for restitution of an unpaid debt.
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Aggressive and persistent demands for identification of the claimant and for evidence of proof payment for value — along with thoughtful, credible and persuasive presentation might well result in prevention of a flood of foreclosures because there is no entity that actually stands to lose any money arising from the action or inaction of any homeowner.
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They won’t plead injury because there is no injury. They can’t prove any injury. They can only induce the court to presume it based upon erroneous application of legal presumptions arising from the apparent facial validity of documents that are neither facially valid nor true representations of any transaction in the real world. 

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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How to Use the Real Deal On Securitization to Homeowner’s Advantage

Like citizenship in this country litigation is not easy. We keep banging our heads against the same wall expecting a different result. We need a strategy that directly addresses the inescapable realities of every homeowner transaction and every securitization cycle.

My substantive analysis of the transaction is that the homeowner was drafted into a securitization scheme which in my opinion clearly triggers quasi contract and quantum meruit — the only possibility for inquiring into the adequacy of consideration. Lawyers and litigants have shied away from this because of its complexity and because they don’t know how to approach it.
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In simple terms the homeowner transaction was a “”Qualified Financial Contract” (QFC), part of which contained some apparent attributes of a loan, but which went much further and diverged extensively from a “loan” as the term is currently used in custom and practice in the financial industry and society in general.
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The QFC is not some invented term for this article. it is defined in all securitization documents. Investment banks knew they were not creating a loan. The job of litigants and their attorneys is to point out and argue that the documents submitted as a foundation for their claim of legal standing contains language that opens the door to quasi contract and quantum meruit. 
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In logistical terms, the homeowner delivered the only service the investment bank was seeking, to wit: issuance of the note and mortgage. Neither the investment bank nor the originator designee of the investment bank was at all interested in making a loan, collecting revenue from repayment nor assuming any meaningful risk of loss.
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Although the homeowner entered the transaction desiring a loan he/she didn’t receive a loan. If there is no legally responsible lender or creditor at the conclusion of that transaction, it isn’t a loan.
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And since too many bona fide third party transactions have occurred to rescind or unwind the transaction the only possibility remaining is to have a court reframe the agreement to include the basis upon which the investment bank entered into the transaction — i.e., the creation, issuance, selling, trading and hedging of unregulated securities.
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We know the investment bank had no intention of becoming a lender and that there was no intention to make investors lenders.
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And we know that the investment banks funded the origination or acquisition of the loan through originators and aggregators.
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Further we know that investors paid value for the certificates which excluded any right, title or interest in any debt, note or mortgage.
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The result, obviously intended, is that while parties were paying value, none of them ever received a conveyance of ownership of the debt, note or mortgage.
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And we can easily see that anyone who received such a conveyance (a) did not pay value and (b) was not acting as an authorized agent or representative of anyone who paid value in exchange for a conveyance of an ownership interest in the subject debt, note or mortgage.
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It was partly a scheme for avoidance or evasion of lending and securities laws.
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The reason for this is blatantly stated in all of the promotional material for sale of certificates, to wit: no liability for violation of lending or servicing laws using “bankruptcy remote” vehicles  for origination and acquisition of homeowner obligations.
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And scratch the surface and you discover that the only thing that makes the transactions bankruptcy remote is that the underlying obligation, note and mortgage are not included in the schedules of bankruptcy because they were never owned by the originator or aggregator.
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The problem for the last 20 years has been that nobody has been asking the obvious question: “if they don’t own the loan, then who does?” Or at least nobody has followed up on that question in which they truly persisted in aground war to get the answer.
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So any such conveyance was either a legal nullity (mortgage assignment) or did not carry the right to enforce (note). If the conveyance didn’t include the obligation there are very specific rules that apply.
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Authority to enforce the note can only come from one who is entitled to enforce. And the premier person who has the right to enforce is owner of the underlying debt that the note is supposed to memorialize. Under the laws of all jurisdictions nobody gets to own the obligation without paying value.
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This seems to be challenging not only for the courts but for defense lawyers. It is a very simple logical progression. In the end enforcement of the note is intended to pay the debt. If it doesn’t pay the debt the maker of the note is subject to multiple liabilities for the same transaction. And that is what happened. Since the originator did not substantively fund the homeowner transaction the issuing of the note and mortgage in favor of the originator was a legal nullity. The issuance of the note created a new liability that was not merged with the underlying obligation to repay the money, if any, that was received or paid on behalf of the homeowner.
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So the reason I mention all of this is that I have somewhat reluctantly but persistently arrived at the conclusion that the homeowner transaction was not a loan and yet the obligation to make payment survives even in quasi contract or quantum meruit.
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This is an unavoidable conclusion because we know that where money was funded to the homeowner or on his/her behalf and where the homeowner issued a promise to pay money, the obligation to pay arises and can be secured by a lien (mortgage or deed of trust) which in fact is enforceable.
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But note that since there is no lender or creditor at the conclusion of the securitization cycle, the intent of the homeowner is thwarted — i.e., he/she does not have a loan agreement. It is something else. And that is where quasi contract and  quantum meruit come into play.
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The homeowner could have bargained away reasonable compensation or consideration for his/her role in initiating the only documents that made securitization claims possible — i.e., the note and mortgage.
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Our legal system is not designed to correct stupid mistakes in bargaining or negotiation in transactions or agreements.
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Our system is designed to enforce the intent of the parties. So we can’t get away from the intent to create an obligation and the intent to have that obligation enforceable and memorialized by a note and mortgage. In fact, I propose we should embrace it.
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The reason is that the intent to create the enforceable homeowner obligation was not the only intent operating. Since the securitizations cheme — and the homeowner’s vital role in it — was not disclosed (actually actively concealed), the homeowner did not, could not and never did bargain away rights to compensation or consideration for his role and risks in this dangerous risky transaction.
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Thus we enter the realm of quasi contract and quantum meruit. 
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So now the question is how much consideration  did the homeowner actually receive for issuance of the note and mortgage? Since it wasn’t a loan, even though that was what was intended by the homeowner, the receipt of money must be categorized as payment of consideration. And that is a lot of consideration by any standard.
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But now the issuance of the note and mortgage becomes a service rather than the result of an underlying obligation to repay.
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So the consideration of the receipt of benefit from the funding of the homeowner transaction is entirely offset by a promise to pay more than the consideration received in the form of money paid to the homeowner. That might still result in a court finding some consideration, since the money on the front end might not be found by a court to exactly equal the money promised on the back end.
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On the other hand there is good reason to find that the consideration for issuance of the documents required to start securitization claims, securities, selling trading and hedging was entirely negated by the concurrent promise to pay more than the money received. But assuming there was a finding of consideration, was it enough?
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In a court of equity wherein rescission is no longer an option the court must determine what a reasonable homeowner would have bargained for or received through the process of free market forces if disclosure had actually been made regarding the securitizations scheme and the vast profits and revenue generated under the scheme.
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The court would hear testimony from a variety of experts and reach a conclusion as to whether the homeowner had received enough consideration or if the homeowner should have received more as per the quasi contract and not just what was presented as a loan agreement.
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The range of possibilities is nearly infinite. From zero to a majority of the pot because the investment bank secretly tricked the homeowner into a dangerous transaction, the risks of which were unknown to the homeowner. Using the shadow banking marketplace (i.e., where all derivatives are traded for nominal value) as the external reference point for heuristic projection, it may be fairly assumed that the average revenue generated from each securitization cycle was $12 for each $1 transacted with homeowners. Additional securities analysis reveals that the figure could be much higher.
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In a free marketplace where there was no asymmetry of information the fair question could be posed as follows: from the investment bank’s perspective they would be saying that they are going to make $12 on each $1 during the securitization cycle, perhaps more.
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The homeowner and investor sitting at the same fictional but still legal table would inevitably concede that for inventing and managing such an ingenious scheme the investment bank might be entitled to the lion’s share of the profit.
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The investors would say their role as investors is critical to the existence and success of the securitization cycle. And since capital is valued more highly than labor they would claim a greater share than that awarded to homeowners. Homeowners would make the same argument as investors — without them there is no securitization and there are no revenues and there are no transactions claimed as “loans.”
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So looking at the customs and practices of the financial industry the investors would probably initially claim 40% as angels and the homeowners could justify a claim of around half that amount for their indispensable role.
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Or one could look at the money actually spent (commissions, bonuses etc) on getting homeowners to execute the required note and mortgage while concealing the truth about the transaction as a measure of what the homeowners should get. Or a license or royalty arrangement might be adopted.
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All of them in my opinion average around 15%-20% of the total revenue generated by the scheme. this would leave the investment bank with 40% or more of the securitization cycle revenue which is around 1000% of normal revenues for underwriting and sale of debt securities.
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So the court would offset the obligation with whatever it decided was reasonable consideration for the homeowner. It would either order payment to the homeowner of any excess consideration due or order the homeowner to pay the balance of the obligation after offset for the consideration due. And if the homeowner still owed money both the note and mortgage would be enforceable.
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But here is the rub. None of this is possible without creating a contract by decree in which it is possible to designate a party who is not a creditor to act as a creditor — in a transaction to which the homeowner agrees that for all purposes the designee will be a creditor. And that creditor is subject to lending and servicing laws. This is essential because under current law only the owner of the debt can enforce the mortgage and only someone representing the owner of the debt can enforce the note unless they are a holder of the note in due course — which means they purchased it for value in good faith and without knowledge of the  maker’s defenses. 
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So it becomes necessary to plead for this attribute to be made part of the newly minted agreement because without it, you don’t have an enforceable agreement  Without an enforceable agreement you’re left pleading for damages under RICO, wrongful foreclosure, etc. And while the note and mortgage might not be subject to enforcement, they still exist. No lender or buyer will complete a transaction with that hanging over the deal.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business 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 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.
*
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How to Stop the Court from Speculating About the Identity of Claimants in Foreclosure Cases

As long as you continually attack the sub silentio assumptions of the court, you will be weakening the case against you for foreclosure. Failure to do so means almost certain failure.

Foreclosure is considered a draconian remedy equivalent to capital punishment. All US jurisdictions have adopted as a matter of law and public policy (Article 9 §203 UCC) that the remedy will only be granted to one who paid value for the underlying obligation.

If you don’t challenge the sub silentio assumptions of the court, then the judge is free is assume that the granting of foreclosure is a remedy for restitution of unpaid debt and that he/she has granted it under the assumption that the owner of the debt is going to get the money when the property is sold to a third party.

THE FIRST MISTAKE YOU MAKE IS IN ASSUMING THAT THE OBLIGATION STILL EXISTS AND HAS NOT BEEN EXTINGUISHED IN THE PROCESS OF SECURITIZATION BY PAYMENT OUT OF HIGHLY PROFITABLE SECURITIZATION SCHEMES THAT WERE PART OF THE ISSUANCE OF THE MORTGAGE AND NOTE.

None of the court assumptions are true. But you can make them true by failure to challenge the assumptions and misleading arguments presented by the foreclosure mill. It is through no doing of the homeowner that the obligation has been retired without payment from the homeowner. And the homeowner has no legal or moral reason to pay it again. BOTTOM LINE: IF NOBODY HAS AN ASSET ON THEIR BOOKS SHOWING THEY PAID FOR THE DEBT, THEY HAVE NO RIGHT TO ENFORCE IT. THEY ARE JUST A WITNESS — NOT A PARTY.

This is a procedural problem. Technically speaking, a motion to dismiss has very strict rules — taking all allegations and exhibits of the complaint, does the complaint does state a potential cause of action upon which relief could be granted. Once you introduce something outside of the allegations of only the complaint you are in the realm of Motion for Judgment on the Pleadings, Motion for Summary Judgment etc.

 
Opposing counsel is attempting to mislead the court into speculating about the identity and nature of the claim, and the identity of the parties who are named as Plaintiff. The essence of the position of opposing counsel is a sub silentio argument: i.e., presume that somebody, somewhere is going to get the benefit of payment on a debt they own owed by the homeowner. The complaint and exhibits filed do not contain allegations of ultimate facts upon which relief could or should be granted. Such relief can only be granted if the court rejects basic jurisdictional and procedural requirements. Neither the Defendant nor the court has any basis for actually knowing the identity of the claimant(s) in this action. Relief cannot be granted to the world at large. 


The issue here is that opposing counsel now admitted certain things and their own complaint basically says the opposite of their current position in court. Inconsistent statements, some of which must logically and of necessity be false, are protected by litigation immunity behind which both opposing counsel and the participants in the instant lawsuit are hiding. But just because they cannot be held accountable for misleading the court doesn’t mean that they should be permitted to do it. 


Since the complaint is clearly filed, in its own words, on behalf of certificate holders, their current position that the bank is somehow the actual party is without foundation. The complaint lacks an allegation stating that the bank is the legal representative of certificate holders and further lacks any allegation that the bank is trustee for the certificate holders who are beneficiaries of a trust. Further the complaint fails to allege that the trust exists or was organized under the laws of any jurisdiction. 


They appear to be taking the position that the bank is a plaintiff, not on its own behalf but on behalf of some third party. If it is a trust, they have failed to identify the trust or any transaction in which the subject loan was entrusted to the trustee under the terms of a trust instrument which is also not alleged. 


Accordingly, based upon the argument of counsel, the complaint fails to state the cause of action that opposing counsel is currently pursuing. This court lacks jurisdiction to hear any matter in which the Plaintiff is not identified or in which the named Plaintiff is not alleged to have suffered some injury caused by the Defendant or someone through whom the Defendant claims an interest in the subject matter. 


As it stands the complaint must be dismissed because it lacks both basic requirements for authority of the court to hear any dispute, to wit:  The identity of the Plaintiffs is concealed, withheld or otherwise not alleged and the ultimate facts upon which relief could be granted as the basis of their claim is not alleged.

The current action is based upon the implied conveyance contained within unidentified certificates, the contents of which are neither described nor attached as exhibits. And the claim is alleged to be brought on behalf of undefined holders of those certificates, who are not alleged to have any interest in the subject obligation. On the contrary, opposing counsel continues to assert the position that the plaintiff is a bank acting as trustee for an implied trust. 


Opposing counsel is attempting to have it both ways and to distract the court from the obvious conflict presented in this case. Either the claim is brought on behalf of an actual or implied trust or it is brought on behalf of holders of certificates. In either case neither the “trust” nor the “certificates” or “holders” are identified. Defendant is forced to litigate with a ghost. This court is being guided into a final judgment that grants to relief to unknown legal persons based upon assumed injury that is never alleged. 


Defendant is entitled to know exactly who she is litigating against and why. that is basic pleading practice as required by the most basic constitutional standards, statutes and rules of civil procedure. As it stands, opposing counsel is promoting a case that has not been alleged. 


Defendant asserts that the case must be dismissed without prejudice or that judgment must be entered for the Defendants. The opposition filed by opposing counsel actually corroborates every basis for the motion to dismiss that was filed. This court should refuse to consider an unspecified case with unspecified plaintiffs on an unspecified claim. To do otherwise opens the door to new doctrine in which anyone can file a lawsuits based upon facts known to them as a witness instead of a party. 

The court should reject the sub silentio argument presented by opposing counsel — that even if the the trustee, trust and holders have no right, title or interest in the mortgage, the action should proceed because they know that the homeowner did not make a payment.

The protections enunciated by the state legislature in their adoption of Article 9 §203 of the Uniform Commercial Code are not optional. Only the owner of the underlying obligation can force forfeiture of property to pay a debt. Black letter law in all jurisdictions is crystal clear: debt is not acquired without paying value for it. Black letter law is in all jurisdiction is clear: assignment of mortgage without a sale of the underlying obligation is a legal nullity. 


“even if we could entertain the argument we would reject it. The complaint alleges that US Bank claims to hold the beneficial interest and the right to foreclose, which is fully consistent with defendants’ representations in their brief as well as the judicially noticeable documents in the record. The issue is not Chase’s role as the loan servicer, but the proper identification “of the party enforcing [the] debt.” (Yvanova, supra, 62 Cal.4th at p. 937.) Yvanova makes clear that “􏰀􏰁􏰂he borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.” (Id. at p. 938, italics added.)”

Masoud v JP Morgan Chase, Cal. 4DCA, May 26, 2020, Case #D075582.

Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919, 937 (Cal. 2016) (“Defendants argue a borrower who is in default on his or her loan suffers no prejudice from foreclosure by an unauthorized party, since the actual holder of the beneficial interest on the deed of trust could equally well have foreclosed on the property. As the Jenkins court put it, when an invalid transfer of a note and deed of trust leads to foreclosure by an unauthorized party, the “victim” is not the borrower, whose obligations under the note are unaffected by the transfer, but “an individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note.” (Jenkins, supra, 216 Cal.App.4th at p. 515156 Cal.Rptr.3d 912; see also Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 85161 Cal.Rptr.3d 500 ”)

Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919, 937-38 (Cal. 2016) (“Nor is it correct that the borrower has no cognizable interest in the identity of the party enforcing his or her debt. Though the borrower is not entitled to object to an assignment of the promissory note, he or she is obligated to pay the debt, or suffer loss of the security, only to a person or entity that has actually been assigned the debt. (See Cockerell v. Title Ins. & Trust Co., supra, 42 Cal.2d at p. 292267 P.2d 16 [party claiming under an assignment must prove fact of assignment].) The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.”)

In any valid case for foreclosure, the complaining party must plead and prove the current existence of the debt, the current ownership of the debt being in the claimant or plaintiff, and the default of the homeowner as to the claimant (not someone else, about whom the court could only speculate as to their existence or their interest in the proceedings).

If they fail to make such allegations or prove that case, foreclosure must be rejected. And if the reason they failed to make such allegations is that they are pursuing a profit motive in lieu of an attempt to collect on an existing debt held as an asset by some creditor then all parties involved should be held accountable for abusing or weaponizing foreclosure process in an extra-legal and therefore illegal manner, all claims of litigation privilege notwithstanding.

*Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.*

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Three Card Monty: Why is Pandemic Relief Going to Servicers? Why are they not claiming relief for REMIC Trusts? Will homeowner debts be reduced by Federal payments to “Servicers?”

https://www.nytimes.com/2020/04/21/business/mortgage-investors-coronavirus.html?referringSource=articleShare

By failing to require a credit to homeowners when the Federal government makes payments on claimed obligations, the bailout is simply adding to profit of investment banks, servicers and foreclosure mills. They are eating their cake and having it too. Obligations are paid off but their claim against homeowners remains unchanged.

Sign Petition to Change the rules to Protect Homeowners from Fraudclosure.

Foreclosures are filed in the name of a named Trustee for a collection of words that is then treated as an entity. More specifically it is treated as a trust. Sometimes the foreclosure mill goes further and says it is filed for the holders of certificates.

  • If a “trust” is the claimant in a foreclosure, why isn’t it a claimant in a plea for relief due to nonpayments from homeowners?
  • If the holders of certificates are suffering economic loss from nonpayment by homeowners why are they not the direct recipients of Federal relief?
  • Who is really going to get Federal bailout money and will it cover a loss or will it be profit?
  • If the ultimate result is that obligations are being paid, why isn’t the homeowner getting notice of a corresponding reduction in the amount of payments claimed as due?
  • Who is the real party collecting money and why?

The answers are obvious. Wall Street is again playing fast and loose with its labels to suit its own ends. If investors fail to receive payments promised them by the investment banks they have only the rights set forth in their contract with an investment bank —- the “underwriter” that underwrote the offering of certificates that were false labelled as “mortgage backed” and again falsely labeled as “bonds.” But the underwriter was actually the issuer. So the entire proceeds of sale of certificates went to the investment bank instead of a “REMIC Trust.”

And that is why there is no trust getting a Federal bailout and there was no trust getting a Federal bailout in 2008-2009. No trust has any claim to any money. So why are they Plaintiffs in judicial foreclosures and beneficiaries in nonjudicial foreclosures? Because the Wall Street banks are inserting a jumble of words to escape liability for making false claims.

Investors have no right to receive the payments from homeowners. So the relief package proposed by Fannie and Freddie is designed to shore up the value and liquidity of holding unregulated securities (certificates) in a market that is wholly controlled by investment banks (not a free market) and completely dependent on continued sales of certificates that are neither worthy of the high ratings conferred upon them by rating agencies nor worthy of being insured (unless the insurance contract is a ruse backed up by the expectation of a Federal bailout, again).

Hidden beneath the waves of economic loss and relief packages is an essential truth about what Wall Street has most people believing was the securitization of loans. But the loans were never sold, much less divided into pieces that were sold off as securities. It was personal data that was securitized and then there were complex instruments indexed on that personal homeowner data that was securitized. None of it had anything to do with the sale of any loan nor the collection of any money from homeowners.

While the foreclosure judgment and a sale of property  results in money proceeds, as I have reported here, it never goes to any Trustee, trust, or even investor. The money is sent to companies that have claimed to be servicers although they never say they are servicing on behalf of owners of the loans. that’s because the loans were never sold.

Those self-proclaimed “servicers” are actually collecting money for the investment banks who have labelled themselves “Master Servicers.” The investment banks receive money from multiple sources — continued sales of “certificates” (falsely  dubbed mortgage backed bonds), homeowner payments, and most importantly trading profits on various derivative and hedge contracts.

The obligation of the investment bank to make any payment to any investor who paid for a certificate is limited to their agreement when they purchased the certificate from the investment bank.

That obligation is in large part discretionary — i.e., it is based upon the sole discretion of the investment bank as to whether money paid to investors can be recovered and is further restricted by a discretionary determination s to whether there have been “events” based on indexing to certain data that is called “loan data.”

The servicing companies mentioned in the article cited above have no obligation to make any payments to the investors. Their function is to distribute money to investors by access to funds made available by the investment bank. And the assumption that their thin capitalization puts them in danger of extinction is a misapprehension of the true facts.

“Servicers” have no obligation to make payments to investors. None. Investors will get paid as long as investment banks see a reason to pay them. And the investment banks will see a reason to pay them as long as they can sell more certificates.

The proof is in the pudding. After the payments are made, homeowners are never given notice that the money claimed as due from them has been reduced. The game is on — get money from homeowners, force the sale of their homes even though everyone is getting paid. 

Neil F Garfield, MBA, JD, 73, is a Florida licensed attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.

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“Lost notes” and the Sudden Appearance of “Original Notes.”

Think of it this way: If someone wrote you a check for $100, which would you do? (1) make a digital copy of the check and then shred it or (2) take it to the bank? Starting with the era in which banks made what is abundantly clear as false claims of securitization the banks all chose option #1. And they collected incredible sums of money far exceeding the Madoff scam or anything like it.

Back in 2008 Katie Porter was a law professor and is now a member of the US House of  Representatives. For those of who don’t know her, you should follow her, even on C-Span. She nails it every time. She knows and other congressmen and women are following her lead. Back in 2008 she uncovered the fact that in her study of 1700 filings in US Bankruptcy court, 41% were missing even a copy of the note, much less the original note.

Around the same time, the Florida Bankers Association, dominated by the mega banks and who absorbed the Florida Community Bank Association, told the Florida Supreme Court that, after the purported “loan closing,” digital copies of the notes were made — and then the original notes were destroyed. FBA said it was “industry practice.” It wasn’t and it still isn’t — at least not for actual creditors who loan money. Out in the state of Washington on appeal, lawyers for the claimant in foreclosure admitted they had no clue as to the identity of the creditor. The state banned MERS foreclosures, along with Maine.

That admission, with full consent of the mega banks, raised the stakes from 41% to around 95% — a figure later confirmed in Senate Hearings by Elizabeth Warren. The other 5% are loans that were truly traditional — funded by the “lender” (no pretender lender) and still owned by the lender who had the original documents in their vault.

The law didn’t change. In order to enforce a note you needed the original. And in order to plead you “lost” the note, you had to allege and prove very specific things starting with the fact that it was lost and not destroyed. Then of course you had to prove that the original was delivered to you, which nobody could because the original was destroyed immediately after closing and a fax copy was the only thing used after that.

Typically destruction of the note means that the debt is discharged or forgiven — something that is actually a natural outgrowth of the same debt being sold dozens of times in varying pieces under various contracts, none of which give the buyer any direct right, title or interest in the “underlying” debt, note or mortgage. In short, neither the debt nor the note exist in most cases shortly after the alleged loan closing.

The representatives of the mega banks who started the illusion of securitization of mortgage debts could neither produce the original note (because it was destroyed) nor tell a credible story to explain its absence. So they did the next best thing. They recreated the note to make it appear like an original using advanced technology that could even mimic the use of a pen to sign it.

Some of us saw this early on when they failed to account for the color of the ink that was used at closing. Those were among the first cases involving a complete satisfaction of the alleged encumbrance, plus payment of damages and attorney fees, all papered over by a settlement agreement that was under seal of confidentiality.

While obviously presenting moral hazard, the process of recreation could have been legal if they had simply followed the protocols of the UCC and state law to reestablish a lost note. But they didn’t. The reason they didn’t is that they still had to prove that the note was a legal representation of a debt owed by the borrower to a creditor that they had to identify. But they couldn’t do that.

If they identified the creditor(s) they would admitting that they had no claim because a person or entity possessing a right, title or interest in the debt did not include the named claimant in the foreclosure. Naming a claimant does not create a claim. A real claim must be owned by a real claimant. That is the very essence of legal standing.

If they had no claim they would be admitting that the securitization certificates, swaps and other contracts were all bogus. That would tank the $1 quadrillion shadow banking market. That is where we see the evidence that for every $1 loaned more than $20 in revenue was produced and never allocated to either the debt of the borrower or the investment of the investors. The banks took it all. $45 trillion in loans and refi’s turned into $1 quadrillion in “nominal” value. Nice work if you can get it.

So then they did the next next best best thing thing. They simply presented the recreation of the note as the actual original and hoped that they could push it through and that has worked in many, probably most cases.

It works because most borrowers and their lawyers fail to heed my advice: admit nothing — make them prove everything. By giving testimony regarding the “original” note the borrower provides the foundation and the rest of the foreclosure is preordained.

For some reason, lawyers who are usually suspicious, refuse to acknowledge the basic fact that the entire process is a lie designed to take property, sell it and apply or allocate the sale proceeds to anyone except the owner(s) of the debt. They hear “free house” and get scared they will look foolish.

A free house to those persistent and enduring souls who finance the great fight is a small price to pay for the mountains of windfall profit of the banks and related parties. As for the banks, adding the proceeds of a house that should never have been sold is adding insult to injury not only to the homeowner but to the entire society.

If anyone wants to know why so many Americans are angry, look no further than the 40 million people were directly displaced by illegal foreclosure and the additional 70 million people who were affected by those dislocations. Voters know that if the many $trillions spent on bailouts had been used to level the playing field, 110 million Americans and millions more worldwide would have never faced the worst effects of the great recession.

And we will continue voting for disruptors until a level playing field re-emerges.

see Lost notes and Bad Servicing Practices and Incentives SSRN-id1027961

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
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Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Why Regulation is Failing the Mortgage Market

A new report from the Federal Reserve Board identifies the central issues confronting regulators — issues that regulators have avoided assiduously. The bottom line is that the FED knows that it lacks accurate information and knows that it is not confirming information given to it by banks who are now all in the background of lending.

The real information should be coming from small thinly capitalized private entities that serve as sham conduits for loans. Neither the FED nor any other regulator gets any information on those loans which now account for more than 50% of all loans. This presents important ramifications for litigating foreclosure defenses.

The practice, which they detail as starting in the early 1990’s of separating servicing rights from the loans was the beginning. Separating the rest of components through facial warehouse lending to avoid lending laws was the rest of the story and is continuing to evolve today.

Bottom line: everyone knows that the lenders are a sham and nobody wants to anything about it. The authors are raising warning flags about market liquidity as a consequence of using thinly capitalized “lenders” who can’t be held accountable for bad lending practices and whose loans are underwritten by third parties who are never mentioned in the chain of “lenders.”

But it’s what they don’t say that is really scary. Investment banks, who are now commercial banks also, have created a lending industry in which they are the principal players but nobody can or will hold them accountable for their actions.

And those same investment banks are selling off the debts of borrowers so that they too have no liability for defaults. Ultimately you end up with rogue REMICs or SPV’s and an orphan debt in which the only risk of loss is on the borrower who simply does not know that the debt has been the source of profit for everyone in the chain. No losses are sustained because investors keep selling to other investors and the government guarantees the balance.

Warehousing Lending Liquidity Crisis Federal Reserve Board

Practice Note: Government guarantees are paid AFTER all other alternatives have been exhausted. So the question always becomes whether the currently named claimant has any loss, a partial loss, or a total loss. This is especially true in most credit default swaps and similar contracts of “insurance” where the insuror explicitly waives subrogation to the claim.

So the net “loss” rather than the gross “loss” would need to be calculated in most loan foreclosures. I put “quotes” around the wor “loss” because in most cases the named claimant has suffered no loss — and the parties for whom it is serving as conduit have enjoyed a profit regardless of whether or not the borrower pays the debt.

In short if you can move the needle and get the court to accept the question of fact as to the amount of the loss, you might have a winning case despite all appearances to the contrary.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
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PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

 

Is that Mortgage or Deed of Trust Void or Just Unenforceable?

Proving that an instrument is unenforceable does not void the instrument unless it is unenforceable by anyone. Better to prove that it should never have been written.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
A few hundred dollars well spent is worth a lifetime of financial ruin.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================
The DOT could only be void if it was not facially or actually valid. That, in my opinion, means that the the DOT should never have been written, should never have been executed and should never have been recorded. It must the equivalent of uttering a false instrument and have the qualities of being a wild deed.
You need to look at your state statute that authorizes the use of a Deed of Trust. Look for the elements. If they are present, the DOT is not void on its face. If the elements are falsely presented then the  instrument can still be proven void. 
Proving that an instrument is not enforceable by the party trying to enforce it does NOT prove that nobody could enforce it. Hence it isn’t void until you can show that there is nobody who can or will enforce it. You must show that the DOT should never have been presented, signed and certainly not recorded.
That isn’t easy. And it is nearly impossible without investigation and discovery in which some party claiming to have an interest admits that there are fatal defects in the DOT. Defects in assignments or legal standing do not prove that the original instrument is void.
Put yourself in the shoes of a party whose money was used to give you the loan. Would you want your collateral wiped out because your servicer did something wrong in enforcement?
So in Washington DC the operative statute says as follows:

§ 42–801. Execution, acknowledgment, and recordation in same manner as deeds.

Mortgages and deeds of trust to secure debts, conveying any estate in land, shall be executed and may be acknowledged and recorded in the same manner as absolute deeds; and they shall take effect both as between the parties thereto and as to others, bona fide purchasers and mortgagees and creditors, in the same manner and under the same conditions as absolute deeds.

So then we are referred to the execution of absolute deeds. That statute says as follows:

§ 42–401. Effective date of deeds; exception.

Any deed conveying real property in the District, or interest therein, or declaring or limiting any use or trust thereof, executed and acknowledged and certified as provided in §§ 42-10142-121 to 42-123 [repealed], 42-306, and 42-602 and delivered to the person in whose favor the same is executed, shall be held to take effect from the date of the delivery thereof, except that as to creditors and subsequent bona fide purchasers and mortgagees without notice of said deed, and others interested in said property, it shall only take effect from the time of its delivery to the Recorder of Deeds for record.

And you may have trouble with this one:

§ 42–403. Defective grants recorded on or after April 27, 1994.

Any instrument recorded in the Office of the Recorder of Deeds on or after April 27, 1994, shall be effective notwithstanding the existence of 1 or more of the failures in the formal requisites listed in § 42-404, unless the failure is challenged in a judicial proceeding commenced within 6 months after the instrument is recorded.

But look at this —-

§ 42–404. Failures in formal requisites of an instrument.

(a) The failures in the formal requisites of an instrument that may be cured by this act are:

(1) An omission of an acknowledgment or a defective or improper acknowledgment;

(2) A failure to attach a clerk’s certificate;

(3) An omission of a notary seal or other seal; or

(4) An omission of an attestation.

(b) Nothing in this act shall be construed to eliminate the requirement that a deed be under seal. Any deed accepted for recordation without a seal but made effective by operation of this act shall be deemed a sealed instrument.

(c) Nothing in this act shall be construed to validate any instrument with respect to which there was any misrepresentation, fraudulent act, or illegal provision in connection with its execution or acknowledgment.

(d) Any person convicted of a fraudulent act, in connection with the validation of any instrument under §§ 42-10142-40242-403, and 42-602 shall be subject to the penalties set forth in § 22-3222.


So putting it all together you probably cannot prove that the instrument is facially invalid but you can prove that it is invalid for misrepresentation of the lender and the terms of the loan referenced by the DOT by its reference to the promissory note. The actual terms were that a remote undisclosed party would sell the borrower’s signature multiple times reaping huge rewards without any application of sale proceeds to the borrower’s account. 
*
The part about the wrong name being inserted as the lender is a good one. But that could be theoretically corrected by an affidavit of scrivener’s error, although supporting such an affidavit would be nearly impossible. 
*
But since the statute speaks to the commission of a fraudulent act you might be able to invalidate the the DOT without appearing to invalidate the debt. Or you could attempt to reform the DOT to name the actual lender, which I think might be a more productive tack, since it completely avoids the appearance of seeking a free house. 
Remember thought that fraud must be specific: You need a representation that was false, which the party knew was false, for the purpose of getting you to reasonably rely on the representation to your detriment and to their advantage. I think you have that here.
*
And remember that once you prove by clear and convincing evidence that the DOT was void for being part of a fraudulent scheme, any assignments of the mortgage or assignments of the beneficial interest in the void deed of trust are equally void because assignments convey only the interest possessed — they do not create interests. 

 

TILA Rescission and Bankruptcy: What Happens When the Bankruptcy Court Gets it Wrong

When TILA rescission has occurred the encumbrance is eliminated and the debt converts from one arising from a promissory note to one arising from a statute — 15 USC §1635. The debt then becomes subject to the statute of limitations for claims under TILA because the debt now arises under TILA. If the statute has run the debt is barred. Thus when the court gets it wrong and ignores the TILA Rescission it is warping the value of the bankruptcy estate as well as allowing secured status to unsecured creditors.

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Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
A few hundred dollars well spent is worth a lifetime of financial ruin.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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The motions for reopening cases in bankruptcy based upon error in ignoring TILA Rescission generally fail to drill home the fact that the error causes the entire bankruptcy estate to be valued incorrectly.

I think the motion is missing something — the effect on the BKR estate that has been overlooked. By virtue of 15 USC §1635 the original loan contract has, by operation of law, been replaced with a statutorily imposed new agreement, the terms of which are spelled out in the statute.

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This means, as per the statute and REG Z which must be read along with the statute, that the note is replaced by a new obligation and the mortgage has been eliminated — all by the express wording of the statute “by operation of law.” Hence the obligation to repay continues as an enforceable liability provided that the claimant satisfies the conditions precedent set forth in the statute. But that obligation is no longer secured — for the express purposes of allowing the borrower to seek new financing from which the obligation could be repaid.
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The parties claiming to be owners of the debt or claiming to be representatives of the owner of the debt failed to comply with their obligations under the new agreement. Hence any right to enforce the obligation became inchoate. That failure was not in any way caused by the borrower.
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The obligation arises not from the original loan agreement but from the statutorily imposed obligation that replaced the original loan agreement. The statute is part of the Federal Truth in Lending Act (TILA). Claims under TILA are barred by the statute of limitations contained within that act.
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Hence the obligation was wrongfully treated as secured when it had been converted to unsecured by the statute. And the obligation itself is now barred by the statute of limitations.
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The effect on the bankruptcy estate is obvious — any claimants under the original loan agreement are moved from secured to unsecured and, since they no longer have the benefit of the written instruments (the void note and mortgage) they must establish their claim by filing a proof of claim in which they establish ownership of the obligation and thereby establish that the they hold the risk of pecuniary loss, without which they cannot be paid.
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No party has established ownership of the statutorily imposed obligation. The time for pressing such a claim is now barred by the statute of limitations.
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Hence the value of the estate that was overlooked is understated by the fair market value of the property that is now unsecured and the liabilities of the petitioner are overstated by whatever amount was erroneously claimed by the claimants.
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These effects change the entire picture of the estate having an undeniable effect on all creditors and the petitioner. The court erred in ignoring these indisputable facts and laws thus casting the estate in an entirely erroneous light. This can only be corrected by re-opening the case and entering orders consistent with the true facts and applicable laws.

If you don’t challenge the smoke and mirrors the smoke becomes law and the mirrors become an inescapable nightmare.

Bottom Line: Failure to attack the facial validity of the documents is virtually hanging the homeowner letting him/her twist in the wind. Without such a relentless attack based upon scrutiny of the exact wording on documents revealing that nobody is actually identified as a real party in interest, you will be trapped by an endless cascade of legal presumptions against the homeowner.

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Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
A few hundred dollars well spent is worth a lifetime of financial ruin.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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In response to an email from a fellow attorney asking me about bankruptcy (BKR), the statute of limitations (SOL) adn renewing the debt after BKR discharge or renewing the payment by acknowledging it after BKR, I wrote the following.

  1. If the loan was scheduled as secured in favor of a particular creditor it is probably incorrect. If the loan was subject to a valid encumbrance at all, it almost certainly was not in favor of the current claimant, who has not purchased the debt and therefore no debt was transferred in fact despite paperwork appearing to state the contrary. Nor has the current claimant obtained authorization from the real owner of the debt as agent or representative.
  2. SOL: You are right but courts got tricky with this and they rule, like in Florida, that the statute ran out only on payments that were due and that there is a presumption of deceleration at some point. Check NY law. Florida is changing back to the old rule slowly which supports your view.
  3. Any payment on a debt can restart the statute running. Check Federal BKR law and NY Law. Payment while in BKR presents problems if not done with court approval.
  4. Under “modification” there are several problems. First every such modification is in actuality the transfer of the debt from an old pretender to a new pretender (servicer). In most respects it is a new loan agreement entirely, probably subject to TILA disclosure requirements because the old chain of title is being abandoned and a new one is being started — all without any reference to or formal grant of authority from the actual owner of the debt.  Payments under such a “modification” agreements are not really payments on the debt because the payment is neither going to the owner of the debt nor anyone formally authorized by the owner of the debt. Such payments could be construed as a new and probably unenforceable obligation.
  5. Acknowledgment by borrower of the debt owed to Pretender A directed to Pretender B is not acknowledgment of the debt if neither of them was the owner of the debt or an authorized representative or agent of the owner of the debt. But unless you attack the facial validity of the instruments, the law of the case will slide toward treating both pretenders as real. Once final that becomes irreversible.
  6. BKR discharge operates by law and not individual action. See BKR law and procedure. A promise to pay AFTER discharge might subject both the pretender creditor and the borrower to sanctions.
  7. An unconditional promise is just that and it is enforceable if supported by consideration. But there is no consideration.
  8. At a minimum there should be disclosure to the court and possibly seek court approval for agreements signed. But if you do that you are again creating law of the case that essentially requires treatment of the pretenders as real parties.

New Florida Law Sneaks Under the Radar

BE CAREFUL HOW AND WHEN YOU FILE BANKRUPTCY PETITIONS

Governor Scott, admits 30 other bills signed SB 220 into law. You can barely find it using search engines. The law is   confusing at best and probably unconstitutional but here it is.

The new law makes BKR filings by Petitioner into presumptions in judicial foreclosures — but only the filings of the Petitioner (raising all sorts of constitutional issues). The filings by parties claiming to be creditors do not raise the same presumption unless other legal presumptions should be applied.

So now foreclosing parties can use the filings of the Petitioner against himself. As I have repeatedly stated, BKR filings by homeowners are generally misleading or wrong. Petitioners are admitting the lien and they temporarily surrender the property. The usual computer program that creates the Petition and schedules of bankruptcy makes it difficult to file anything but the wrong schedules.

This new law enables banks and servicers to use the interim period where the home is technically owned by U.S. Trustee in Bankruptcy, disregarding the fact that the Trustee typically abandons any such interest by the end of the BKR proceedings. The logic is the homeowner lacks standing to raise defenses because he/she has surrendered the  property to the court. It gets even worse when the schedules admit the debt and admit the security instrument. ALL OF THIS CAN BE USED AS PRESUMPTIVE (AND TREATED AS CONCLUSIVE) EVIDENCE IN FORECLOSURE PROCEEDINGS.

Bottom Line: Florida has enacted a law that is out of context and fails to treat debtors and creditors equally with respect to their filings in bankruptcy court. Homeowners in bankruptcy might be blocked from using the proceeding to stop a foreclosure, although the party claiming the status of “creditor” must still apply to lift the stay. Under the new law, the filing of a BKR petition  would essentially be a confession of judgment in foreclosure judicial proceedings blocking homeowners from raising any meritorious defenses because they no longer own the property.

Meanwhile the property records still show the homeowner as owner, and will continue to do so until the foreclosure judgment is entered and the judicial sale is complete together with a certificate of title to the bidder, who in most cases is a sham creditor claiming the right to submit a sham credit bid instead of paying for the home.

Let us help you plan your Bankruptcy petition, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.
Purchase now Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense webinar including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations. Presenters: Attorney and Expert Neil Garfield, Forensic Auditor Dan Edstrom, Attorney Charles Marshall and and Private Investigator Bill Paatalo. The webinar and materials are all downloadable.
Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments. It’s better than calling!
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see New Florida Law Traps Homeowners Who File for Bankruptcy Protection

So instead of getting protection from creditors, a Petitioner for Bankruptcy Relief gets the opposite -screwed out of meritorious defenses. This is what happens when nobody is watching and we keep voting for people who will vote or sign for any legislation against the homeowners and for the banks.

This is a law of evidence and until challenged, ruled unconstitutional or invalid, it MUST be followed by judges unless the judge in a foreclosure case rules the new Florida law is invalid. Good luck with that. Not likely.

PRACTICE POINTER: I have often seen Proofs of Claim (and exhibits attached thereto) filed for parties claiming to be creditors that differ materially from the filings in the court where the foreclosure is being heard. Those too could be admissions under existing rules of evidence. POCs are generally sworn documents.

And also keep in mind that if a creditor doesn’t file a timely proof of claim the debtor can file one for the creditor which can say almost anything. If your schedules don’t list a creditor with a secured interest and instead show that you don’t admit this party has that status many people have found that there is no admission that an be used in other courts.

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702.12 Actions in foreclosure.— 19

(1)(a) A lienholder, in an action to foreclose a mortgage, 20 may submit any document the defendant filed under penalty of 21 perjury in the defendant’s bankruptcy case for use as an 22 admission by the defendant. 23

(b) A rebuttable presumption that the defendant has waived 24 any defense to the foreclosure is created if a lienholder 25 submits documents filed in the defendant’s bankruptcy case 26 which: 27

1. Evidence the defendant’s intention to surrender to the 28 lienholder the property that is the subject of the foreclosure; 29

2. Have not been withdrawn by the defendant; and ENROLLED 2018 Legislature SB 220 2018220er Page 2 of 2 CODING: Words stricken are deletions; words underlined are additions. 30

3. Show that a final order has been entered in the 31 defendant’s bankruptcy case which discharges the defendant’s 32 debts or confirms the defendant’s repayment plan that provides 33 for the surrender of the property. 34

(2) Pursuant to s. 90.203, a court shall take judicial 35 notice of an order entered in a bankruptcy case upon the request 36 of a lienholder. 37

(3) This section does not preclude the defendant in a 38 foreclosure action from raising a defense based upon the 39 lienholder’s action or inaction subsequent to the filing of the 40 document filed in the bankruptcy case which evidenced the 41 defendant’s intention to surrender the mortgaged property to the 42 lienholder. 43

(4) This section applies to any foreclosure action filed on 44 or after October 1, 2018. 45 Section 2. This act shall take effect October 1, 2018.

 

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