“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

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Same Old Story: Paper Trail vs, Money Trail (Freddie Mac)

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

The explanations of securitization contained on the websites of the government Sponsored Entities (GSE’s) clearly demonstrate what I have been writing for 11 years and reveal a pattern of illusion and deception.

The most important thing about a financial transaction is the money. In every document filed in support of the illusion of securitization, it steadfastly holds firm to discussion of paper instruments and not a word about the actual location of the money or the actual identity of the obligee of that money debt.

Each explanation avoids the issue of where the money goes and how it was “processed” (i.e., stolen, according to me and hundreds of other scholars.)

It underscores the fact that the obligee (“debt owner” or “holder in due course” is never present in any legal proceeding or actual transaction or transfer of of the debt. This leaves us with only one  conclusion. The debt never moved, which is to say that the obligee was always the same, albeit unaware of their status.

Knowing this will help you get traction in the courtroom but alleging it creates a burden of proof for you to prove something that you know is true but can only be confirmed with access to the books, records an accounts of the parties claiming such transactions ands transfers occurred.

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For one such example see Freddie Mac Securitization Explanation

And the following diagram:

Freddie Mac Diagram of Securitization

What you won’t find anywhere in any diagram supposedly depicting securitization:

  1. Money going to an originator who then lends the money to the borrower.
  2. Money going to a named REMIC “Trust” for the purpose of purchasing loans or anything else.
  3. Money going to the alleged unnamed beneficiaries of a named REMIC “Trust.”
  4. Money going to the alleged unnamed investors who allegedly purchased “certificates” allegedly issued by or on behalf of a named REMIC “Trust.”
  5. Money going to the originator for sale of the debt, note and mortgage package.
  6. Money going to originator for endorsement of note to alleged transferee.
  7. Money going to originator for assignment of mortgage.
  8. Money going to the named foreclosing party upon liquidation of foreclosed property. 
  9. Money going to the homeowner as royalty for use of his/her/their identity forming the basis of value in issuance of derivatives, hedge products and contract, insurance products and synthetic derivatives.
  10. Money being credited to the obligee’s loan receivable account reducing the amount of indebtedness (yes, really). This is because the obligee has no idea where the money is coming from or why it is being paid. But one thing is sure — the obligee is receiving money in all circumstances.

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

Deloitte and Touche Pays $149.5 Million Settling Claims of Audit Failure of Taylor Bean and Whittaker

One of the first cases I ever handled involved TBW in 2008. As usual they filed a lost note count in their foreclosure complaint. And as is required, they offered to indemnify the homeowner if someone else showed up with the original note. With financial firms dropping left and right, my position was two fold: (1) that an indemnification from a firm that was clearly in trouble as reported in the news was of dubious value and (2) that even if that wasn’t the case neither their complaint  nor their affidavit recited any facts about when the loss occurred, who was in possession of the note, whether the possessor had rights to enforce when the note was “lost” etc. TBW folded, went into bankruptcy shortly thereafter and its principals went to prison.

But throwing TBW under the bus, as much as they deserved it, takes nothing away from the fact that everyone was doing what they did. The only difference was they got caught and could not effectively indemnify the homeowner in the event they were lying about the possession of the original note — something that as proven beyond a reasonable doubt in the criminal trial of the execs..

Let us help you plan your discovery requests and defense narrative: 202-838-6345. Ask for a Consult.
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—————-

Hat tip to Dan Edstrom

see  Multiple Sales of Same Loans Force Auditor to Cough Up $149.5 Million

PR shows like this one became one of the ways that the banks were able to throw a curtain over the real customs and practices of the industry — most of which were virtually identical to TBW. The impression from the collapse and prosecution of TBW and its executives implies that this was an unusual event — selling the same “loan” multiple times.

But close examination of the many claims of securitization of debt shows that exactly the same thing was happening in the rest of the industry. In fact, that is where the enormous “profits” came from as reported from their “trading desks.” The only difference is that TBW was blatant about it by using copies of notes that were repeatedly sold, not once, but multiple times.

The leverage of making multiple sales went to ridiculous heights — 42 times in the case of Bear Stearns mortgage related activities. Yes you read that right. That $200,000 loan produced around $8 million in “profit.” Of course none of this was disclosed to the borrower whose name and financial reputation would be used directly or indirectly to accomplish these “sales.” They did it by hiding behind “derivative” documents rather than the actual loan documents, but they also did what TBW did. But while TBW was exclusively faking sales, investment banks mixed up the process such that, if caught, they would be able to say that some of these things happened because of a failure of controls and that they will now correct it.

As the MBS marketplace slowed down and had some hiccups many of the contracts or derivatives came due and Bear Stearns simply didn’t have the money to honor them despite the enormous “profits” earned earlier. This also is a possible indicator that leverage was even higher than what has been reported. As the buying frenzy slowed down and investors suddenly became aware that they were holding certificates issued by entities that didn’t exist and were never active, the buying stopped — and like any Ponzi scheme, the entire infrastructure came crashing down.

Practice Note: So what all of this means is that questions should be posed to parties who file foreclosure actions. But you need to wade through the multiple servicers and multiple “assignees” and multiple “endorsees” and multiple “Underwriters of bogus RMBS to ask the simple question: how many contracts or securities have been issued with the respect to the subject loan? It’s relevant because it is asking whether the foreclosing party has sold its rights to an undisclosed third party. In 99% of all cases, the “REMIC Trust” was never used and the underwriter has already entered into various contracts, sales, and issued “derivatives” in which the PAPER was sold but the underlying debt, if it still exists, was never subject to any transfer, contract or derivative.

BAP Panel Raises the Stakes Against Deutsch et al — Secured Status May be Challenged

Fur Further Information please call 954-495-9867 or 520-405-1688

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ALERT FOR BANKRUPTCY LAWYERS — SECURED STATUS OF ALLEGED CREDITOR IS NOT TO BE ASSUMED

——————————–

I have long held and advocated three points:

  1. The filing of false claims in the nonjudicial process of a majority of states should not result in success where the same false claims could never be proven in judicial process. Nonjudicial process was meant as an administrative remedy to foreclosures that were NOT in dispute. Any application of nonjudicial schemes that allows false claims to succeed where they would fail in a judicial action is unconstitutional.
  2. The filing of a bankruptcy petition that shows property to be encumbered by virtue of a deed of trust is admitting a false representation made by a stranger to the transaction. The petition for bankruptcy relief should be filed showing that the property is not encumbered and the adversary or collateral proceeding to nullify the mortgage and the note should accompany each filing where the note and mortgage are subject to claims of securitization or a “new” beneficiary.
  3. The vast majority of decisions against borrowers result from voluntary or involuntary waiver, ignorance and failure to plead or object on the basis of false claims based on false documentation. The issue is not the signature (although that probably is false too); rather it is (a) the actual transaction which is missing and the (b) false documentation of a (i) fictitious transaction and (ii) fictitious transfers of fictitious (and non-fictitious) transactions. The result is often that the homeowner has admitted to the false assertion of being a borrower in relation to the party making the claim, admitting the secured status of the “creditor”, admitting that they are a creditor, admitting that they received a loan from within the chain claimed by the “creditor”, admitting the default, admitting the validity of the note and admitting the validity of the mortgage or deed of trust — thus leaving both the trial and appellate courts with no choice but to rule against the homeowner. Thus procedurally a false claim becomes “true” for purposes of that case.

see 11/24/14 Decision: MEMORANDUM-_-ANTON-ANDREW-RIVERA-DENISE-ANN-RIVERA-Appellants-v.-DEUTSCHE-BANK-NATIONAL-TRUST-COMPANY-Trustee-of-Certificate-Holders-of-the-WAMU-Mortgage-Pass-Through-Certificate-Series-2005-AR6

This decision is breath-taking. What the Panel has done here is fire a warning shot over the bow of the California Supreme Court with respect to the APPLICATION of the non-judicial process. AND it takes dead aim at those who make false claims on false debts in both nonjudicial and judicial process. Amongst the insiders it is well known that your chances on appeal to the BAP are less than 15% whereas an appeal to the District Judge, often ignored as an option, has at least a 50% prospect for success.

So the fact that this decision comes from the BAP Panel which normally rubber stamps decisions of bankruptcy judges is all the more compelling. One word of caution that is not discussed here is the the matter of jurisdiction. I am not so sure the bankruptcy judge had jurisdiction to consider the matters raised in the adversary proceeding. I think there is a possibility that jurisdiction would be present before the District Court Judge, but not the Bankruptcy Judge.

From one of my anonymous sources within a significant government agency I received the following:

This case is going to be a cornucopia of decision material for BK courts nationwide (and others), it directly tackles all the issues regarding standing and assignment (But based on Non-J foreclosure, and this is California of course……) it tackles Glaski and Glaski loses, BUT notes dichotomy on secured creditor status….this case could have been even more , but leave to amend was forfeited by borrower inaction—– it is part huge win, part huge loss as it relates to Glaski, BUT IT IS DIRECTLY APPLICABLE TO CHASE/WAMU CASES……….Note in full case how court refers to transfer of “some of WAMU’s assets”, tacitly inferring that the court WILL NOT second guess what was and was not transferred………… i.e, foreclosing party needs to prove this!!

AFFIRMED- NO SECURED PARTY STATUS FOR BK PROVEN 

Even though Siliga, Jenkins and Debrunner may preclude the

Riveras from attacking DBNTC’s foreclosure proceedings by arguing

that Chase’s assignment of the deed of trust was a nullity in

light of the absence of a valid transfer of the underlying debt,

we know of no law precluding the Riveras from challenging DBNTC’s assertion of secured status for purposes of the Riveras’ bankruptcy case. Nor did the bankruptcy court cite to any such law.

We acknowledge that our analysis promotes the existence of two different sets of legal standards – one applicable in nonjudicial foreclosure proceedings and a markedly different one for use in ascertaining creditors’ rights in bankruptcy cases.

But we did not create these divergent standards. The California legislature and the California courts did. We are not the first to point out the divergence of these standards. See CAL. REAL EST., at § 10:41 (noting that the requirements under California law for an effective assignment of a real-estate-secured obligation may differ depending on whether or not the dispute over the assignment arises in a challenge to nonjudicial foreclosure proceedings).
We must accept the truth of the Riveras’ well-pled
allegations indicating that the Hutchinson endorsement on the
note was a sham and, more generally, that neither DBNTC nor Chase
ever obtained any valid interest in the Riveras’ note or the loan
repayment rights evidenced by that note. We also must
acknowledge that at least part of the Riveras’ adversary
proceeding was devoted to challenging DBNTC’s standing to file
its proof of claim and to challenging DBNTC’s assertion of
secured status for purposes of the Riveras’ bankruptcy case. As
a result of these allegations and acknowledgments, we cannot
reconcile our legal analysis, set forth above, with the
bankruptcy court’s rulings on the Riveras’ second amended
complaint. The bankruptcy court did not distinguish between the
Riveras’ claims for relief that at least in part implicated the
parties’ respective rights in the Riveras’ bankruptcy case from
those claims for relief that only implicated the parties’
respective rights in DBNTC’s nonjudicial foreclosure proceedings.

THEY REJECT GLASKI-

Here, we note that the California Supreme Court recently

granted review from an intermediate appellate court decision
following Jenkins and rejecting Glaski. Yvanova v. New Century
Mortg. Corp., 226 Cal.App.4th 495 (2014), review granted &
opinion de-published, 331 P.3d 1275 (Cal. Aug 27, 2014). Thus,
we eventually will learn how the California Supreme Court views
this issue. Even so, we are tasked with deciding the case before
us, and Ninth Circuit precedent suggests that we should decide
the case now, based on our prediction, rather than wait for the
California Supreme Court to rule. See Hemmings, 285 F.3d at
1203; Lewis v. Telephone Employees Credit Union, 87 F.3d 1537,
1545 (9th Cir. 1996). Because we have no convincing reason to
doubt that the California Supreme Court will follow the weight of
authority among California’s intermediate appellate courts, we
will follow them as well and hold that the Riveras lack standing
to challenge the assignment of their deed of trust based on an
alleged violation of a pooling and servicing agreement to which
they were not a party.

BUT……… THEY DO SUCCEED ON SECURED STATUS

Even though the Riveras’ first claim for relief principally

relies on their allegations regarding the assignment’s violation
of the pooling and servicing agreement, their first claim for
relief also explicitly incorporates their allegations challenging
DBNTC’s proof of claim and disputing the validity of the
Hutchinson endorsement. Those allegations, when combined with
what is set forth in the first claim for relief, are sufficient
on their face to state a claim that DBNTC does not hold a valid
lien against the Riveras’ property because the underlying debt
never was validly transferred to DBNTC. See In re Leisure Time
Sports, Inc., 194 B.R. at 861 (citing Kelly v. Upshaw, 39 Cal.2d
179 (1952) and stating that “a purported assignment of a mortgage
without an assignment of the debt which it secured was a legal
nullity.”).
While the Riveras cannot pursue their first claim for relief
for purposes of directly challenging DBNTC’s pending nonjudicial
foreclosure proceedings, Debrunner, 204 Cal.App.4th at 440-42,
the first claim for relief states a cognizable legal theory to
the extent it is aimed at determining DBNTC’s rights, if any, as
a creditor who has filed a proof of secured claim in the Riveras’
bankruptcy case.

TILA CLAIM UPHELD!—–

Fifth Claim for Relief – for violation of the Federal Truth In Lending Act, 15 U.S.C. § 1641(g)

The Riveras’ TILA Claim alleged, quite simply, that they did
not receive from DBNTC, at the time of Chase’s assignment of the
deed of trust to DBNTC, the notice of change of ownership
required by 15 U.S.C. § 1641(g)(1). That section provides:
In addition to other disclosures required by this
subchapter, not later than 30 days after the date on
which a mortgage loan is sold or otherwise transferred
or assigned to a third party, the creditor that is the
new owner or assignee of the debt shall notify the
borrower in writing of such transfer, including–

(A) the identity, address, telephone number of the new

creditor;

(B) the date of transfer;

 

(C) how to reach an agent or party having authority to

act on behalf of the new creditor;

(D) the location of the place where transfer of

ownership of the debt is recorded; and

(E) any other relevant information regarding the new

creditor.

The bankruptcy court did not explain why it considered this claim as lacking in merit. It refers to the fact that the
Riveras had actual knowledge of the change in ownership within
months of the recordation of the trust deed assignment. But the
bankruptcy court did not explain how or why this actual knowledge
would excuse noncompliance with the requirements of the statute.
Generally, the consumer protections contained in the statute
are liberally interpreted, and creditors must strictly comply
with TILA’s requirements. See McDonald v. Checks–N–Advance, Inc.
(In re Ferrell), 539 F.3d 1186, 1189 (9th Cir. 2008). On its
face, 15 U.S.C. § 1640(a)(2)(A)(iv) imposes upon the assignee of
a deed of trust who violates 15 U.S.C. § 1641(g)(1) statutory
damages of “not less than $400 or greater than $4,000.”
While the Riveras’ TILA claim did not state a plausible
claim for actual damages, it did state a plausible claim for
statutory damages. Consequently, the bankruptcy court erred when
it dismissed the Riveras’ TILA claim.

LAST, THEY GOT REAR ENDED FOR NOT SEEKING LEAVE TO AMEND

Here, however, the Riveras did not argue in either the bankruptcy court or in their opening appeal brief that the court should have granted them leave to amend. Having not raised the issue in either place, we may consider it forfeited. See Golden v. Chicago Title Ins. Co. (In re Choo), 273 B.R. 608, 613 (9th Cir. BAP 2002).

Even if we were to consider the issue, we note that the

bankruptcy court gave the Riveras two chances to amend their
complaint to state viable claims for relief, examined the claims
they presented on three occasions and found them legally
deficient each time. Moreover, the Riveras have not provided us
with all of the record materials that would have permitted us a
full view of the analyses and explanations the bankruptcy court
offered them when it reviewed the Riveras’ original complaint and
their first amended complaint. Under these circumstances, we
will not second-guess the bankruptcy court’s decision to deny
leave to amend. See generally In re Nordeen, 495 B.R. at 489-90
(examining multiple opportunities given to the plaintiffs to
amend their complaint and the bankruptcy court’s efforts to
explain to them the deficiencies in their claims, and ultimately
determining that the court did not abuse its discretion in
denying the plaintiffs leave to amend their second amended
complaint).

Foreclosure News in Review

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PRETENDER MENDERS: GOVERNMENT IGNORES THE ELEPHANT IN THE LIVING ROOM — DOW HEADED FOR 8,000?

Starting with the Clinton and Bush administration and continued by the Obama administration (see below), the public, the media, the financial analysts, economists and regulators are uniformly ignoring the obvious pointed out originally by Roubini, myself and many others (Simon Johnson, Yves Smith et al). We are pretending the fix the economy, not actually doing it. The fundamental weakness of world economies is that the banks caused a drastic reduction in household wealth through credit cards and mortgages. Credit was used to replace a living wage. That is a going out of business strategy. The economies in Europe are stalling already and our own stock market has started down a slippery path. The prediction in the above-linked article seems more likely than the blitzkrieg of planted articles from pundits for Bank of America, and other banks pushing their common stock as a great investment. The purpose of that blitzkrieg of news is simple — the more people with a vested interest in those banks, the more pressure against real regulation, real enforcement and real correct.

As the facts emerge, there were no actual financial transactions within the chain of documents relied upon by foreclosing parties. That cannot change. So the foreclosures are simply part of a larger fraudulent scheme. If the government regulators and the Federal reserve would tell the truth that they definitely know is the truth, the the mortgages would all be recognized as completely void and the notes would not only be void but subject to civil and potentially criminal charges of fraud. Most importantly it would eliminate foreclosures, for the most part, and allow borrowers to get together with their real (even if reluctant) lenders and settle up with new mortgages., This would restore at least some of house hold wealth and end the policy of making the little guy bear the burden of this gross error in regulation and this gross fraudulent scheme of non-securitization of mortgage debt, student debt, auto loan debt, credit card debt and other consumer debt.

It is ONLY be restoration of a vibrant middle class that our economy and the world economic marketplace can avoid the coming and recurring disaster. This is a matter of justice, not relief. See also Complete absence of mortgage and foreclosures are the largest component of our problems

What happens to restitution and why is the government ignoring the obvious benefits from restitution? NY Times

So a trader no longer needs to be subject to a requirement of restitution because he has already entered into civil agreement to restore creditors who bought bogus mortgage bonds that were issued by REMIC Trusts that were never funded by any cash or any assets. Since the “securitization fail” originated as a fraudulent scheme by the world’s major banks, and restitution is the primary remedy to defrauded victims, it follows that restitution should be the principal focus of enforcement actions, civil suits and criminal prosecutions. Meanwhile some restitution is occurring, just like this case.

The question is, assuming the investors who were in fact the creditors, how are the proceeds of settlement posted in accounting for the recovery of potential losses? If, as is obviously the case, the payments reduce the losses of the investors, then why are those settlements not credited to the books of account of those creditors and why isn’t that a matter subject to discovery of what the “Trust” or “Trust beneficiaries” are showing as “balance due” and what effect does that have on the existence of a default — especially where servicer advances are involved, which appears to be most cases.

The courts are wrong. Those judges that rule that the accounting and posting on the actual creditors’ books and records are irrelevant are succumbing to political and economic pressure (Follow Tom Ice on this issue) instead of calling balls and strikes like they are supposed to do. If third party payments are at least includable in discovery and probably admissible at trial, then the amount that the creditor is allowed to expect would be reduced. In accounting there is nothing more black letter that a reduction in the debt affects both the debtor and the creditor. So a principal reduction would occur by simple application of justice and arithmetic — not some bleeding heart prayer for “relief.”

Why the economy can;t budge — consumers are not participating in greater productivity caused by consumers as workers

Simple facts: our economy is driven by, or was driven by 70% consumer spending. Like it or not that is the case and it is a resilient element of U.S. Economics. Since 1964 workers wages have been essentially stagnant — despite huge gains in productivity that was given ONLY to management and shareholders. I know this is an unpopular position and I have some misgivings about it myself. But the fact remains that when unions were strong EVERYONE was getting paid better and single income households were successful with even some padding in savings account.

By substituting credit for a proper wage commensurate with merit (productivity), the country has moved most of the population in the direction of poverty, burdened by debt that should have been wages and savings.

But the big shock that is not over is the sudden elimination of household wealth and the sudden dominance of the banks in the economy, world politics and our national politics. Proper and appropriate sharing of the losses imposed solely on borrowers in a mean spirited “rocket docket” is not the answer. (see above) The expediting of foreclosures is founded on a completely wrong premise — that the debts, notes and mortgages are, for the most part, valid. They are not valid as to the parties who seek to enforce them for their own benefit at the expense and detriment to both the creditors (investors) and borrowers.

GDP of the United States is now composed of a virtually dead heat between financial “services” and all the rest of real economic activity (making things and doing services). This means that trading paper based upon the other 50% of real economic activity has tripled from 16% to nearly 48%. That means our real economic activity is composed, comparing apples to apples, of about 1/3 false paper. A revision of GDP to 2/3 of current reports would cause a lot of trouble. But it is the truth and it opens the door to making real corrections.

The Basic Premise of the Bailout, TARP, Bond Purchases was Wrong

Now that Bernanke, Geithner, Paulson and others are being forced to testify, it is apparent that they had no idea what they were really doing because they were proceeding on false information (from the banks) and false premises (from the banks). Most revealing is that both Paulson and Bernanke were relying upon Geithner while he was President of the NY Fed. Everyone was essentially asleep at the wheel. Greenspan, former Federal Reserve chairman, admits he was mistaken in believing that while his staff of 100 PhD’s didn’t understand the securitization scheme, market forces would mysteriously cause a correction. Perhaps that would have been painfully true if market forces had been allowed to continue — resulting in the failure of most of the major banks.

The wrong premise was the TBTF assumption — the fall of AIG or the banks would have plunged into a worldwide depression. That would only have been true if government didn’t simply step in, seize bank assets around the world, and provide restitution to the victims — pension funds, homeowners, insurers, guarantors, et al. We already know that size is no guarantee of safety (Lehman, AIG, Bear Stearns et al). There are over 7,000 community banks and credit unions, some with more than $10 billion on deposit, that could easily pick up where bank of America left off before its own crash. Banking is marketing and electronic data processing. All  banks, right down to the smallest bank in America, have access to the exact same IT backbone for transfer of funds, deposits and loans. Iceland showed us the way and we ignored it. They sent the bad bankers to jail and reduced household debt by more than 25%. They quickly recovered from the “failed” banks and things are running quire smoothly.

JDSUPRA.COM: What good is the statute of limitations if it never ends?

A word of caution. In the context of a quiet title action my conclusion is that it should not be available just because the statute of limitations has run on enforcement of the note. But it remains on the public records as a lien. The idea proposed by me, initially, and others later that a quiet title action was the right path is probably wrong. documents in the public records may not be eliminated without showing that they never should have been recorded in the first place. Thus the mortgage or assignment of record remains unless we prove that those documents were void and therefore should not have been recorded.

That said, I hope the Supreme Court of Florida makes the distinction between the context of quiet title, where I agree that it should not easy to eliminate matters in the public record, and the statute of limitations, where parties should not be permitted to bring repeated actions on the same debt, note and mortgage after they have lost. Both positions cause uncertainty in the marketplace — if quiet title becomes easy to allege due to statute of limitations and statute of limitations becomes  harder to raise because despite choosing the acceleration option, and despite existing Florida law and precedent, the court decides that the the foreclosing party is estopped by res judicata, collateral estoppel and the statute of limitations.

JDSUPRA.COM: Association Lien Superior to 1st Mortgage

As I predicted years ago and have repeated from time to time, one strategy that is absent is collaboration between the homeowner and the association whose lien is superior to the 1st Mortgage which can be foreclosed out of existence. This was another area of concentration in my prior practice of law. We provide litigation support to attorneys. We will not make any attempt nor accept direct engagement of associations. But I can show you how to use this to advantage of our law firm, your client’s interests and avoid an empty abandoned dwelling unit.

What a surprise?!? Servicers are steering unsophisticated and emotionally challenged borrowers into foreclosure

by string them along in modifications. This is something many judges are upset about. They don’t like it. More motions to compel mediation (with a real decider) or to enforce a settlement that has already been approved (and then the NEXT servicer says they are not bound by the prior agreement.

The Devil is in the Details — The Mortgage Cannot Be Enforced, Even If the Note Can Be Enforced

Cashmere v Department of Revenue

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Editor’s Introduction: The REAL truth behind securitization of so-called mortgage loans comes out in tax litigation. There a competent Judge who is familiar with the terms of art used in the world of finance makes judgements based upon real evidence and real comprehension of how each part affects another in the “securitization fail” (Adam Levitin) that took us by surprise. In the beginning (2007) I was saying the loans were securitized and the banks were saying there was no securitization and there was no trust.

Within a short period of time (2008) I deduced that there securitization had failed and that no Trust was getting the money from investors who thought they were buying mortgage backed securities and therefore the Trust could never be a holder in due course. I deduced this from the complete absence of claims that they were holders in due course. Whether they initiated foreclosure as servicer, trustee or trust there was no claim of holder in due course. This was peculiar because all the elements of a holder in due course appeared to be present because that is what was required in the securitization documents — at least in the Pooling and Servicing Agreement and prospectus.

If the foreclosing party was a holder in due course they would merely have to show what the securitization required — a purchase in good faith of the loan documents for value without knowledge of any of borrower’s defenses.  This would bar virtually any defense by the borrower and allow them to get a judgment on the note and a foreclosure based upon the auxiliary contract for collateral — the mortgage. But they didn’t allege that for reasons that I have described in recent articles — they could not, as part of their prima facie case, prove that any party in their “chain” had funded or paid any money for the loan.

After analyzing this case, consider the possibility that there is no party in existence who has the power to foreclose. The Trust beneficiaries clearly don’t have that right. The Trust doesn’t either because they didn’t pay anything for it. The Trustee doesn’t have that right because it can only assert the rights of the Trust and Trust beneficiaries. The servicer doesn’t have that right because it derives its authority from the Pooling and Servicing Agreement which does not apply because the loan never made it into the Trust. The originator doesn’t have the right both because they never loaned the money and now disclaim any interest in the mortgage.

Then consider the fact that it is ONLY the investors who have their money at risk but that they failed to get any documentation securing their “involuntary loans.” They might have actions to recover money from the borrower, but those actions are far from secured, and certainly subject to numerous defenses. The investors are barred from enforcing either the note or the mortgage by the terms of the instruments, the terms of the PSA and the rule of law. They are left with an unsecured common law right of action to get what they can from a claim for unjust enrichment or some other type of claim that actually reflects the true facts of the original transaction in which the borrower did receive a loan, but not from anyone represented at the loan closing.

Now we have the Cashmere case. The only assumption that the Court seems to get wrong is that the investors were trust beneficiaries because the court was assuming that the Trust received the proceeds of sale of the bonds. This does not appear to be the case. But the case also explains why the investors wanted to take the position that they were trust beneficiaries in order to get the tax treatment they thought they were getting. So here we have the victims and perpetrators of the fraud taking the same side because of potentially catastrophic results in tax treatment — potentially treating principal payments as ordinary income. That would reduce the return on investment below zero. They lost.

http://stopforeclosurefraud.com/wp-content/uploads/2014/09/Cashmere-v-Dept-of-Revenue.pdf

I have changed fonts to emphasize certain portion of the following excerpts from the Case decision:

“Cashmere’s investments merely gave Cashmere the right to receive specific cash flows generated by the assets of the trust at specific times. But if the REMIC trustee failed to pay Cashmere according to the terms of the investment, Cashmere had no right to sell the mortgage loans or the residential property or any other asset of the trust to satisfy this obligation. Cf. Dep’t of Revenue v. Sec. Pac. Bank of Wash. Nat’/ Ass’n, 109 Wn. App. 795, 808, 38 P.3d 354 (2002) (deduction allowed because mortgage companies transferred ownership of loans to taxpayer who could sell the oans in event of default). Cashmere’s only recourse would be to sue the trustee for performance of the obligation or attempt to replace the trustee. The trustee’s successor would then take legal title to the underlying securities or other assets of the related trust. At no time could Cashmere take control of trust assets and reduce them to cash to satisfy a debt obligation. Thus, we hold that under the plain language of the statute, Cashmere’s investments in REMICs are not primarily secured by mortgages or deeds of trust.
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“Cashmere argues that the investments are secure because the trustee is obligated to protect the investors’ interests and the trustee has the right to foreclose. But, this is not always the case. The underlying mortgages back all of the tranches, and a trustee must balance competing interests between investors of different tranches. Thus, a default in one tranche does not automatically give the holders of that tranche a right to force foreclosure. We hold that if the terms of the trust do not give beneficiaries an investment secured by trust assets, the trustee’s fiduciary obligations do not transform the investment into a secured investment.

“In a 1990 determination, DOR explained why interest earned from investments in REMICs does not qualify for the mortgage tax deduction. see Wash. Dep’t of Revenue, Determination No. 90-288, 10 Wash. Tax Dec. 314 (1990). A savings and loan association sought a refund of B&O taxes assessed on interest earned from investments in REMICs. The taxpayer argued that because interest received from investments in pass-through securities is deductible, interest received on REMICs
should be too. DOR rejected the deduction, explaining that with pass-through securities, the issuer holds the mortgages in trust for the investor. In the event of individual default, the issuer, as trustee, will foreclose on the property to satisfy the terms of the loan. In other words, the right to foreclose is directly related to homeowner defaults-in the event of default, the trustee can foreclose and the proceeds from foreclosure flow to investors who have a beneficial ownership interest in the underlying mortgage. Thus, investments in pass-through securities are “primarily secured by” first mortgages.

“By contrast, with REMICs, a trustee’s default may or may not coincide with an individual homeowner default. So, there may be no right of foreclosure in the event a trustee fails to make a payment. And if a trustee can and does foreclose, proceeds from the sale do not necessarily go to the investors. Foreclosure does not affect the trustee’s obligations vis-a-vis the investor. Indeed, the Washington Mutual REMIC here contains a commonly used form of guaranty: “For any month, if the master servicer receives a payment on a mortgage loan that is less than the full scheduled payment or if no payment is received at all, the master servicer will advance its own funds to cover the shortfall.” “The master servicer will not be required to make advances if it determines that those advances will not be recoverable” in the future. At foreclosure or liquidation, any proceeds will go “first to the servicer to pay back any advances it might have made in the past.” Similarly, agency REMICs, like the Fannie Mae REMIC Trust 2000-38, guarantee payments even if mortgage borrowers default, regardless of whether the issuer expects to recover those payments. Moreover, the assets held in a REMIC trust are often MBSs, not mortgages.

“So, if the trustee defaults, the investors may require the trustee to sell the MBS, but the investor cannot compel foreclosure of individual properties. DOR also noted that it has consistently allowed the owners of a qualifying mortgage to claim the deduction in RCW 82.04.4292. But the taxpayer who invests in REMICs does not have any ownership interest in the MBSs placed in trust as collateral, much less any ownership interest in the mortgage themselves. By contrast, a pass-through security represents a beneficial ownership of a fractional undivided interest in a pool of first lien residential mortgage loans. Thus, DOR concluded that while investments in pass-through securities qualify for the tax deduction, investments in REMICs do not. We should defer to DOR’s interpretation because it comports with the plain meaning of the statute.

“Moreover, this case is factually distinct. Borrowers making the payments that eventually end up in Cashmere’s REMIC investments do not pay Cashmere, nor do they borrow money from Cashmere. The borrowers do not owe Cashmere for use of borrowed money, and they do not have any existing contracts with Cashmere. Unlike HomeStreet, Cashmere did not have an ongoing and enforceable relationship with borrowers and security for payments did not rest directly on borrowers’ promises to repay the loans. Indeed, REMIC investors are far removed from the underlying mortgages. Interest received from investments in REMICs is often repackaged several times and no longer resembles payments that homeowners are making on their mortgages.

“We affirm the Court of Appeals and hold that Cashmere’s REMIC investments are not “primarily secured by” first mortgages or deeds of trust on nontransient residential real properties. Cashmere has not shown that REMICs are secured-only that the underlying loans are primarily secured by first mortgages or deeds of trust. Although these investments gave Cashmere the right to receive specific cash flows generated by first mortgage loans, the borrowers on the original loans had no obligation to pay Cashmere. Relatedly, Cashmere has no direct or indirect legal recourse to the underlying mortgages as security for the investment. The mere fact that the trustee may be able to foreclose on behalf of trust beneficiaries does not mean the investment is “primarily secured” by first mortgages or deeds of trust.

Editor’s Note: The one thing that makes this case even more problematic is that it does not appear that the Trust ever paid for the acquisition or origination of loans. THAT implies that the Trust didn’t have the money to do so. Because the business of the trust was the acquisition or origination of loans. If the Trust didn’t have the money, THAT implies the Trust didn’t receive the proceeds of sale from their issuance of MBS. And THAT implies that the investors are not Trust beneficiaries in any substantive sense because even though the bonds were issued in the name of the securities broker as street name nominee (non objecting status) for the benefit of the investors, the bonds were issued in a transaction that was never completed.

Thus the investors become simply involuntary direct lenders through a conduit system to which they never agreed. The broker dealer controls all aspects of the actual money transfers and claims the amounts left over as fees or profits from proprietary trading. And THAT means that there is no valid mortgage because the Trust got an assignment without consideration, the Trustee has no interest in the mortgage and the investors who WERE the original source of funds were never given the protection they thought they were getting when they advanced the money. So the “lenders” (investors) knew nothing about the loan closing and neither did the borrower. The mortgage is not enforceable by the named “originator” because they were not the lender and they did not close as representative of the lenders.

There is no party who can enforce an unenforceable contract, which is what the mortgage is here. And the note is similarly defective — although if the note gets into the hands of a party who DID PAY value in good faith without knowledge of the borrower’s defenses and DID GET DELIVERY and ACCEPT DELIVERY of the loans then the note would be enforceable even if the mortgage is not. The borrower’s remedy would be to sue the people who put him into those loans, not the holder who is suing on the note because the legislature adopted the UCC and Article 3 says the risk of loss falls on the borrower even if there were defenses to the loan. The lack of consideration might be problematic but the likelihood is that the legislative imperative would be followed — allowing the holder in due course to collect from the borrower even in the absence of a loan by the so-called “originator.”

Powers of Attorney — New Documents Magically Appear

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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BONY/Mellon is among those who are attempting to use a Power of Attorney (POA) that they say proves their ownership of the note and mortgage. In No way does it prove ownership. But it almost forces the reader to assume ownership. But it is not entitled to a presumption of any kind. This is a document prepared for use in litigation and in no way is part of normal business records. They should be required to prove every word and every exhibit. The ONLY thing that would prove ownership is proof of payment. If they owned it they would be claiming HDC status. Not only doesn’t it PROVE ownership, it doesn’t even recite or warrant ownership, indemnification etc. It is a crazy document in substance but facially appealing even though it doesn’t really say anything.

The entire POA is hearsay, lacks foundation, and is irrelevant without the proper foundation be laid by the proponent of the document. I do not think it can be introduced as a business records exception since such documents are not normally created in the ordinary course of business especially with such wide sweeping powers that make no sense — unless you recognize that they are dealing with worthless paper that they are trying desperately to make valuable.

They should have given you a copy of the settlement agreement referred to in the POA and they should have identified the original PSA that is referred to in the settlement agreement. Those are the foundation documents because the POA says that the terms used are defined in the PSA, Settlement agreement or both. I want all documents that are incorporated by reference in the POA.

If you have asked whether the Trust ever paid for your loan, I would like to see their answer.

If CWALT, Inc. or CWABS, Inc., or CWMBS, Inc is anywhere in your chain of title or anywhere else mentioned in any alleged origination or transfer of your loan, I assume you asked for those and I would like to see them too.

The PSA requires that the Trust pay for and receive the loan documents by way of the depositor and custodian. The Trustee never takes possession of the loan documents. But more than that it is important to distinguish between the loan documents and the debt. If there is no debt between you and the originator (which means that the originator named on the note and mortgage never advanced you any money for the loan) then note, which is only evidence of the debt and allegedly containing the terms of repayment is only evidence of the debt — which we know does not exist if they never answered your requests for proof of payment, wire transfer or canceled check.

If you have been reading my posts the last couple of weeks you will see what I am talking about.

The POA does not warrant or even recite that YOUR loan or anything resembling control or ownership of YOUR LOAN is or was ever owned by BONY/Mellon or the alleged trust. It is a classic case of misdirection. By executing a long and very important-looking document they want the judge to presume that the recitations are true and that the unrecited assumptions are also true. None of that is correct. The reference to the PSA only shows intent to acquire loans but has no reference or exhibit identifying your loan. And even if there was such a reference or exhibit it would be fabricated and false — there being obvious evidence that they did not pay for it or any other loan.

The evidence that they did not pay consists of a lot of things but once piece of logic is irrefutable — if they were a holder in due course you would be left with no defenses. If they are not a holder in due course then they had no right to collect money from you and you might sue to get your payments back with interest, attorney fees and possibly punitive damages unless they turned over all your money to the real creditors — but that would require them to identify your real creditors (the investors who thought they were buying mortgage bonds but whose money was never given to the Trust but was instead used privately by the securities broker that did the underwriting on the bond offering).

And the main logical point for an assumption is that if they were a holder in due course they would have said so and you would be fighting with an empty gun except for predatory and improper lending practices at the loan closing which cannot be brought against the Trust and must be directed at the mortgage broker and “originator.” They have not alleged they are a holder in course.

The elements of holder in dude course are purchase for value, delivery of the loan documents, in good faith without knowledge of the borrower’s defenses. If they had paid for the loan documents they would have been more than happy to show that they did and then claim holder in due course status. The fact that the documents were not delivered in the manner set forth in the PSA — tot he depositor and custodian — is important but not likely to swing the Judge your way. If they paid they are a holder in due course.

The trust could not possibly be attacked successfully as lacking good faith or knowing the borrower’s defenses, so two out of four elements of HDC they already have. Their claim of delivery might be dubious but is not likely to convince a judge to nullify the mortgage or prevent its enforcement. Delivery will be presumed if they show up with what appears to be the original note and mortgage. So that means 3 out of the four elements of HDC status are satisfied by the Trust. The only remaining question is whether they ever entered into a transaction in which they originated or acquired any loans and whether yours was one of them.

Since they have not alleged HDC status, they are admitting they never paid for it. That means the Trust is admitting there was no payment, which means they were not entitled to delivery or ownership of the note, mortgage, or debt.

So that means they NEVER OWNED THE DEBT OR THE LOAN DOCUMENTS. AS A HOLDER IN COURSE IT WOULD NOT MATTER IF THEY OWNED THE DEBT — THE LOAN DOCUMENTS ARE ENFORCEABLE BY A HOLDER IN DUE COURSE EVEN IF THERE IS NO DEBT. THE RISK OF LOSS TO ANY PERSON WHO SIGNS A NOTE AND MORTGAGE AND ALLOWS IT TO BE TAKEN OUT OF HIS OR HER POSSESSION IS ON THE PARTY WHO TOOK IT AND THE PARTY WHO SIGNED IT — IF THERE WAS NO CONSIDERATION, THE DOCUMENTS ARE ONLY SUCCESSFULLY ENFORCED WHERE AN INNOCENT PARTY PAYS REAL VALUE AND TAKES DELIVERY OF THE NOTE AND MORTGAGE IN GOOD FAITH WITHOUT KNOWLEDGE OF THE BORROWER’S DEFENSES.

So if they did not allege they are an HDC then they are admitting they don’t own the loan papers and admitting they don’t own the loan. Since the business of the trust was to pay for origination of loans and acquisition of loans there is only one reason they wouldn’t have paid for the loan — to wit: the trust didn’t have the money. There is only one reason the trust would not have the money — they didn’t get the proceeds of the sale of the bonds. If the trust did not get the proceeds of sale of the bonds, then the trust was completely ignored in actual conduct regardless of what the documents say. Which means that the documents are not relevant to the power or authority of the servicer, master servicer, trust, or even the investors as TRUST BENEFICIARIES.

It means that the investors’ money was used directly for fees of multiple people who were not disclosed in your loan closing, and some portion of which was used to fund your loan. THAT MEANS the investors have no claim as trust beneficiaries. Their only claim is as owner of the debt, not the loan documents which were made out in favor of people other than the investors. And that means that there is no basis to claim any power, authority or rights claimed through “Securitization” (dubbed “securitization fail” by Adam Levitin).

This in turn means that the investors are owners of the debt but lack any documentation with which to enforce the debt. That doesn’t mean they can’t enforce the debt, but it does mean they can’t use the loan documents. Once they prove or you admit that you did get the loan and that the money came from them, they are entitled to a money judgment on the debt — but there is no right to foreclose because the deed of trust, like a mortgage, is made out to another party and the investors were never included in the chain of title because the intermediaries were  making money keeping it from the investors. More importantly the “other party” had no risk, made no money advance and was otherwise simply providing an illegal service to disguise a table funded loan that is “predatory per se” as per REG Z.

And THAT is why the originator received no money from successors in most cases — they didn’t ask for any money because the loan had cost them nothing and they received a fee for their services.

Levitin and Yves Smith – TRUST=EMPTY PAPER BAG

Living Lies Narrative Corroborated by Increasing Number of Respected Economists

It has taken over 7 years, but finally my description of the securitization process has taken hold. Levitin calls it “securitization fail.” Yves Smith agrees.

Bottom line: there was no securitization, the trusts were merely empty sham nominees for the investment banks and the “assignments,” transfers, and endorsements of the fabricated paper from illegal closings were worthless, fraudulent and caused incomprehensible damage to everyone except the perpetrators of the crime. They call it “infinite rehypothecation” on Wall Street. That makes it seem infinitely complex. Call it what you want, it was civil and perhaps criminal theft. Courts enforcing this fraudulent worthless paper will be left with egg on their faces as the truth unravels now.

There cannot be a valid foreclosure because there is no valid mortgage. I know. This makes no sense when you approach it from a conventional point of view. But if you watch closely you can see that the “loan closing” was a shell game. Money from a non disclosed third party (the investors) was sent through conduits to hide the origination of the funds for the loan. The closing agent used that money not for the originator of the funds (the investors) but for a sham nominee entity with no rights to the loan — all as specified in the assignment and assumption agreement. The note and and mortgage were a sham. And the reason the foreclosing parties do not allege they are holders in due course, is that they must prove purchase and delivery for value, as set forth in the PSA within the 90 day period during which the Trust could operate. None of the loans made it.

But on Main street it was at its root a combination pyramid scheme and PONZI scheme. All branches of government are complicit in continuing the fraud and allowing these merchants of “death” to continue selling what they call bonds deriving their value from homeowner or student loans. Having made a “deal with the devil” both the Bush and Obama administrations conscripted themselves into the servitude of the banks and actively assisted in the coverup. — Neil F Garfield, livinglies.me

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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John Lindeman in Miami asked me years ago when he first starting out in foreclosure defense, how I would describe the REMIC Trust. My reply was “a holographic image of an empty paper bag.” Using that as the basis of his defense of homeowners, he went on to do very well in foreclosure defense. He did well because he kept asking questions in discovery about the actual transactions, he demanded the PSA, he cornered the opposition into admitting that their authority had to come from the PSA when they didn’t want to admit that. They didn’t want to admit it because they knew the Trust had no ownership interest in the loan and would never have it.

While the narrative regarding “securitization fail” (see Adam Levitin) seems esoteric and even pointless from the homeowner’s point of view, I assure you that it is the direct answer to the alleged complaint that the borrower breached a duty to the foreclosing party. That is because the foreclosing party has no interest in the loan and has no legal authority to even represent the owner of the debt.

And THAT is because the owner of the debt is a group of investors and NOT the REMIC Trust that funded the loan. Thus the Trust, unfunded had no resources to buy or fund the origination of loans. So they didn’t buy it and it wasn’t delivered. Hence they can’t claim Holder in Due Course status because “purchase for value” is one of the elements of the prima facie case for a Holder in Due Course. There was no purchase and there was no transaction. Hence the suing parties could not possibly be authorized to represent the owner of the debt unless they got it from the investors who do own it, not from the Trust that doesn’t own it.

This of course raises many questions about the sudden arrival of “assignments” when the wave of foreclosures began. If you asked for the assignment on any loan that was NOT in foreclosure you couldn’t get it because their fabrication system was not geared to produce it. Why would anyone assign a valuable loan with security to a trust or anyone else without getting paid for it? Only one answer is possible — the party making the assignment was acting out a part and made money in fees pretending to convey an interest the assignor did not have. And so it goes all the way down the chain. The emptiness of the REMIC Trust is merely a mirror reflection of the empty closing with homeowners. The investors and the homeowners were screwed the same way.

BOTTOM LINE: The investors are stuck with ownership of a debt or claim against the borrowers for what was loaned to the borrower (which is only a fraction of the money given to the broker for lending to homeowners). They also have claims against the brokers who took their money and instead of delivering the proceeds of the sale of bonds to the Trust, they used it for their own benefit. Those claims are unsecured and virtually undocumented (except for wire transfer receipts and wire transfer instructions). The closing agent was probably duped the same way as the borrower at the loan closing which was the same as the way the investors were duped in settlement of the IPO of RMBS from the Trust.

In short, neither the note nor the mortgage are valid documents even though they appear facially valid. They are not valid because they are subject to borrower’s defenses. And the main borrower defense is that (a) the originator did not loan them money and (b) all the parties that took payments from the homeowner owe that money back to the homeowner plus interest, attorney fees and perhaps punitive damages. Suing on a fictitious transaction can only be successful if the homeowner defaults (fails to defend) or the suing party is a holder in due course.

Trusts Are Empty Paper Bags — Naked Capitalism

student-loan-debt-home-buying

Just as with homeowner loans, student loans have a series of defenses created by the same chicanery as the false “securitization” of homeowner loans. LivingLies is opening a new division to assist people with student loan problems if they are prepared to fight the enforcement on the merits. Student loan debt, now over $1 Trillion is dragging down housing, and the economy. Call 520-405-1688 and 954-495-9867)

The Banks Are Leveraged: Too Big Not to Fail

When I was working with Brad Keiser (formerly a top executive at Fifth Third Bank), he formulated, based upon my narrative, a way to measure the risk of bank collapse. Using a “leverage” ration he and I were able to accurately define the exact order of the collapse of the investment banks before it happened. In September, 2008 based upon the leverage ratios we published our findings and used them at a seminar in California. The power Point presentation is still available for purchase. (Call 520-405-1688 or 954-495-9867). You can see it yourself. The only thing Brad got wrong was the timing. He said 6 months. It turned out to be 6 weeks.

First on his list was Bear Stearns with leverage at 42:1. With the “shadow banking market” sitting at close to $1 quadrillion (about 17 times the total amount of all money authorized by all governments of the world) it is easy to see how there are 5 major banks that are leveraged in excess of the ratio at Bear Stearns, Lehman, Merrill Lynch et al.

The point of the article that I don’t agree with at all is the presumption that if these banks fail the economy will collapse. There is no reason for it to collapse and the dependence the author cites is an illusion. The fall of these banks will be a psychological shock world wide, and I agree it will obviously happen soon. We have 7,000 community banks and credit unions that use the exact same electronic funds transfer backbone as the major banks. There are multiple regional associations of these institutions who can easily enter into the same agreements with government, giving access at the Fed window and other benefits given to the big 5, and who will purchase the bonds of government to keep federal and state governments running. Credit markets will momentarily freeze but then relax.

Broward County Court Delays Are Actually A PR Program to Assure Investors Buying RMBS

The truth is that the banks don’t want to manage the properties, they don’t need the house and in tens of thousands of cases (probably in the hundreds of thousands since the last report), they simply walk away from the house and let it be foreclosed for non payment of taxes, HOA assessments etc. In some of the largest cities in the nation, tens of thousands of abandoned homes (where the homeowner applied for modification and was denied because the servicer had no intention or authority to give it them) were BULL-DOZED  and the neighborhoods converted into parks.

The banks don’t want the money and they don’t want the house. If you offer them the money they back peddle and use every trick in the book to get to foreclosure. This is clearly not your usual loan situation. Why would anyone not accept payment in full?

What they DO want is a judgment that transfers ownership of the debt from the true owners (the investors) to the banks. This creates the illusion of ratification of prior transactions where the same loan was effectively sold for 100 cents on the dollar not by the investors who made the loan, but by the banks who sold the investors on the illusion that they were buying secured loans, Triple AAA rated, and insured. None of it was true because the intended beneficiary of the paper, the insurance money, the multiple sales, and proceeds of hedge products and guarantees were all pocketed by the banks who had sold worthless bogus mortgage bonds without expending a dime or assuming one cent of risk.

Delaying the prosecution of foreclosures is simply an opportunity to spread out the pain over time and thus keep investors buying these bonds. And they ARE buying the new bonds even though the people they are buying from already defrauded them by NOT delivering the proceeds fro the sale of the bonds to the Trust that issued them.

Why make “bad” loans? Because they make money for the bank especially when they fail

The brokers are back at it, as though they haven’t caused enough damage. The bigger the “risk” on the loan the higher the interest rate to compensate for that risk of loss. The higher interest rates result in less money being loaned out to achieve the dollar return promised to investors who think they are buying RMBS issued by a REMIC Trust. So the investor pays out $100 Million, expects $5 million per year return, and the broker sells them a complex multi-tranche web of worthless paper. In that basket of “loans” (that were never made by the originator) are 10% and higher loans being sold as though they were conventional 5% loans. So the actual loan is $50 Million, with the broker pocketing the difference. It is called a yield spread premium. It is achieved through identity theft of the borrower’s reputation and credit.

Banks don’t want the house or the money. They want the Foreclosure Judgment for “protection”

 

When an assignment of a mortgage is invalid, does it require a foreclosure case to be dismissed?

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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There seems to be confusion about what is necessary to file a foreclosure. To start with the basics, the debt is created when the borrower receives the funds or when the funds are disbursed for the benefit of the borrower. This requires no documentation. The receipt of funds presumptively implies a loan that is a demand loan. The source of funding is the creditor and the borrower is the debtor. The promissory note is EVIDENCE of the debt and contains the terms of repayment. In residential loan transactions it changes the terms from a demand loan to a term loan with periodic payments.

But without the debt, the note is worthless — unless the note gets into the hands of a party who claims status as a holder in due course. In that case the debt doesn’t exist but the liability to pay under the terms of the note can be enforced anyway. In foreclosure litigation based upon paper where there are claims or evidence of securitization, there are virtually all cases in which the “holder” of the note seeks enforcement, it does NOT allege the status of holder in due course. To the contrary, many cases contain an admission that the note doesn’t exist because it was lost or destroyed.

The lender is the party who loans the money to the borrower.  The lender can bring suit against the borrower for failure to pay and receive a money judgment that can be enforced against income or non-exempt property of the borrower by writ of garnishment or attachment. There is no limit to the borrower’s defenses and counterclaims against the lender, assuming they are based on facts that show improper conduct by the lender. The contest does NOT require anything in writing. If the party seeking to enforce the debt wishes to rely on a note as evidence of the debt, their claim about the validity of the note as evidence or as information containing the terms of repayment may be contested by the borrower.

If the note is transferred by endorsement and delivery, the transferee can enforce the note under most circumstances. But the transferee of the note takes the note subject to all defenses of the borrower. So if the borrower says that the loan never happened or denies it in his answer the lender and its successors must prove the loan actually took place. This is true in all cases EXCEPT situations where the transferee purchases the note for value, gets delivery and endorsement, and is acting in good faith without knowledge of the borrower’s defenses (UCC refers to this as a holder in due course). The borrower who signs a note without receiving the consideration of the loan is taking the risk that he or she has created a debt or liability if the eventual transferee claims to be a holder in due course. Further information on the creation and transfer of notes as negotiable paper is contained in Article 3 of the Uniform Commercial Code (UCC).

Thus the questions about enforceability of the note or recovery on the debt are fairly well settled. The question is what happens in the case where collateral for the loan secures the performance required under the note. This is done with a security instrument which in real property transactions is a mortgage or deed of trust. This is a separate contract between the lender and the borrower. It says that if the borrower does not pay or fails to pay taxes, maintain the property, insure the property etc., the lender may foreclose and the borrower will forfeit the collateral. This suit is an action to enforce the security instrument (mortgage, deed of trust etc.) seeking to foreclose all claims inferior to the rights of the lender established when the mortgage or deed of trust was recorded.

The mortgage is a contract that does not qualify as a negotiable instrument and so is not covered by Article 3 of the UCC. It is covered by Article 9 of the UCC (Secured Transactions). The general rule is that a party who purchases the mortgage instrument for value in good faith and without knowledge of the  borrower’s defenses may enforce the mortgage if the contract is breached by the borrower. This coincides with the requirement that the holder of the mortgage must also be a holder in due course of the note — if the breach consists of failure to pay under the terms of the note. Any party may assign their rights under a contract unless the contract itself says that it is not assignable or assignment is barred by statute or administrative rules.

The “assignment” of the mortgage or deed of trust is generally taken to be an instrument of conveyance. But forfeiture of collateral, particularly one’s home, is considered to be a much more severe remedy against the borrower than a money judgment for economic loss caused by breach of the borrower in making payments on a legitimate debt. So the statute (Article 9, UCC)  requires that the assignment be the result of an actual transaction in which the mortgage is purchased for value. The confusion that erupts here is that no reasonable person would merely purchase a mortgage which is not really an asset deriving its value from a borrower’s promise to pay. That asset is the note.

So if the note is purchased for value, and assuming the purchaser receives delivery and endorsement of the note, as a holder in due course there is no question that the mortgage assignment is valid and enforceable by the assignee. The problems that have emerged is when, if ever, any value was paid to anyone in the “chain” on either the note or the mortgage. If no value was paid then the note might be enforceable subject to borrower’s defenses but the mortgage cannot be enforced. Additional issues emerge where the “proof” (often fabricated robo-signed documents) imply through hearsay that the note was the subject of a transaction at a different time than the date on the assignment. Denial and/or discovery would reveal the fraud upon the Court here — assuming you can persuasively argue that the production of evidence is required.

Another interesting question comes up when you seen the language of endorsement on the mortgage. This might be seen as splitting hairs, but I think it is more than that. To assign a mortgage in form that would ordinarily be accepted in general commerce — and in particular by banks — the assignment would be in the form that recites the ownership of the mortgage and the intention to convey it and on what terms. Instead, many cases show that there is an additional page stapled to the mortgage which contains only the endorsement to a particular party or blank endorsement. The endorsement is not recordable whereas a facially valid assignment is recordable.

The attachment of the last page could mean nothing was conveyed or that it was accidentally done in addition to a proper assignment. But I have seen several cases where the only evidence of assignment was a stamped endorsement, undated, in which there was no assignment. This appears to be designed to confuse the Judge who might be encouraged to apply the rules of transfer of the note to the circumstances of transfer of the mortgage. This smoke and mirrors approach often results in a foreclosure judgment in favor of a party who has paid nothing for the debt, note or mortgage. It leaves the actual lender out in the cold without a note or mortgage which they should have received.

It is these and other factors which have resulted in trial and appellate decisions that appear to be in conflict with each other. Currently in Florida the Supreme Court is deciding whether to issue an opinion on whether the assignment after the lawsuit has begun cures jurisdictional standing. The standing rule in Florida is that if you don’t own the mortgage at the time you declare a default, acceleration and sue, then those actions are essentially void.

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Valid assignment is necessary for the plaintiff to have standing in a foreclosure case. (David E. Peterson, Cracking the Mortgage Assignment Shell Game, The Florida Bar Journal, Volume 85, No. 9, November, 2011, page 18).

In BAC Funding Consortium v. Jean-Jeans and US Bank National Association, the Second District of Florida reversed summary judgment for a foreclosure for bank because there was no evidence that the bank validly held the note and mortgage. BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques 28 So.2d, 936.

BAC has been negatively distinguished by two cases:

  • Riggs v. Aurora Loan Services, LLC, 36 So.3d 932, (Fla.App. 4 Dist.,2010) was distinguished from BAC, because in BAC the bank did not file an affidavits that the mortgage was properly assigned; in Riggs they did. The 4th District held that the “company’s possession of original note, indorsed in blank, established company’s status as lawful holder of note, entitled to enforce its terms.” [Editor’s note: The appellate court might have erred here. The enforcement of the note and the enforcement of the mortgage are two different things as described above].
  • Dage v. Deutsche Bank Nat. Trust Co., 95 So.3d 1021, (Fla.App. 2 Dist.,2012) was distinguished from BAC, because in Dage, the homeowners waited two years to challenge the foreclosure judgment on the grounds that the bank lacked standing due to invalid assignment of mortgage. The court held that a lack of standing is merely voidable, not void, and the homeowners had to challenge the ruling in a timely manner. [Editor’s note: Jurisdiction is normally construed as something that cannot be invoked at a later time. It can even be invoked for the first time on appeal.]

In his article, “Cracking the Mortgage Assignment Shell Game,” Peterson in on the side of the banks and plaintiffs in foreclosure cases, but his section “Who Has Standing to Foreclosure the Mortgage?” is full of valuable insights about when a case can be dismissed based on invalid assignment. Instead of reinventing the wheel, I’ve copied and pasted the section below:

It should come as no surprise that the holder of the promissory note has standing to maintain a foreclosure action.34 Further, an agent for the holder can sue to foreclose.35 The holder of a collateral assignment has sufficient standing to foreclose.36 [Editor’s note: Here again we see the leap of faith that just because someone might have standing to sue on the note, they automatically have standing to sue on the mortgage, even if no value was paid for either the note or the mortgage].

Failure to file the original promissory note or offer evidence of standing might preclude summary judgment.37 Even when the plaintiff files the original, it might be necessary to offer additional evidence to show that the plaintiff is the holder or has rights as a nonholder. In BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d 936 (Fla. 2d DCA 2010), for example, the court reversed a summary judgment of foreclosure, saying the plaintiff had not proven it held the note. The written assignment was incomplete and unsigned. The plaintiff filed the original note, which showed an indorsement to another person, but no indorsement to the plaintiff. The court found that was insufficient. Clearly, a party in possession of a note indorsed to another is not a “holder,” but recall that Johns v. Gillian holds that a written assignment is not needed to show standing when the transferee receives delivery of the note. The court’s ruling in BAC Funding Consortium was based on the heavy burden required for summary judgment. The court said the plaintiff did not offer an affidavit or deposition proving it held the note and suggested that “proof of purchase of the debt, or evidence of an effective transfer” might substitute for an assignment.38 [e.s.]

In Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. 4th DCA 1990), the court held that an assignment executed after the filing of the foreclosure case was not sufficient to show the plaintiff had standing at the time the complaint was filed. In WM Specialty Mortgage, LLC v. Salomon, 874 So. 2d 680 (Fla. 4th DCA 2004), however, the court distinguished Jeff-Ray Corp., stating that the execution date of the written assignment was less significant when the plaintiff could show that it acquired the mortgage before filing the foreclosure without a written assignment, as permitted by Johns v. Gilliam.39

When the note is lost, a document trail showing ownership is important. The burden in BAC Funding Consortium might be discharged by an affidavit confirming that the note was sold to the plaintiff prior to foreclosure. Corroboratory evidence of sale documents or payment of consideration is icing on the cake, but probably not needed absent doubt over the plaintiff’s rights. If doubt remains, indemnity can be required if needed to protect the mortgagor.40 [e.s.] 34  Philogene v. ABN AMRO Mortgage Group, Inc., 948 So. 2d 45 (Fla. 4th D.C.A. 2006); Fla. Stat. §673.3011(1) (2010).

35                  Juega v. Davidson, 8 So. 3d 488 (Fla. 3d D.C.A. 2009); Mortgage Electronic Registration Systems, Inc. v. Revoredo, 955 So. 2d 33, 34, fn. 2 (Fla. 3d D.C.A. 2007) (stating that MERS was holder, but not owner and “We simply don’t think that this makes any difference. See Fla. R.Civ. P. 1.210(a) (action may be prosecuted in name of authorized person without joining party for whose benefit action is brought)”). [Editor’s note: This is an example of judicial ignorance of what is really happening. MERS is a conduit, a naked nominee, whose existence is meaningless, as is its records of transfer or ownership of the the debt, the note or the mortgage]

36                  Laing v. Gainey Builders, Inc., 184 So. 2d 897 (Fla. 5th D.C.A. 1966) (collateral assignee was a holder); Cullison v. Dees, 90 So. 2d 620 (Fla. 1956) (same, except involving validity of payments rather than standing to foreclose).

37                  See Fla. Stat. §673.3091(2) (2010); Servedio v. US Bank Nat. Ass’n, 46 So. 3d 1105 (Fla. 4th D.C.A. 2010).

38                  BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d at 938-939 (Fla. 2d D.C.A. 2010). See also Verizzo v. Bank of New York, 28 So. 3d 976 (Fla. 2d D.C.A. 2010) (Bank filed original note, but indorsement was to a different bank). But see Lizio v. McCullom, 36 So. 3d 927 (Fla. 4th D.C.A. 2010) (possession of note is prima facie evidence of ownership). [Editor’s note: this is the nub of the problems in foreclosure litigation. The law requires purchase for value for ownership, along with other criteria described above. This court’s conclusion places an unfair burden of proof on the borrower. The party with the sole care, custody and control of the actual evidence and information about the transfer or sale of the ndebt, note or mortgage is the Plaintiff. The plaintiff should therefore be required to show the details of the transaction in which the debt, note or mortgage was acquired. To me, that means showing a cancelled check or wire transfer receipt in which the reference was to the loan in dispute. Anything less than that raises questions about whether the loan implied by the note and mortgage ever existed. See my previous articles regarding securitization where the actual loan was actually applied from third party funds. hence the originator, who did not loan any money, was never paid for note or mortgage because consideration from a third party had already passed.]

39                  See also Glynn v. First Union Nat. Bank, 912 So. 2d 357 (Fla. 4th D.C.A. 2005), rev. den., 933 So. 2d 521 (Fla. 2006) (note transferred before lawsuit, even though assignment was after). [Editor’s note: if the note and mortgage were in fact transfered for actual value (with proof of payment) then a “late” assignment might properly be categorized as a clerical issue rather than a legal one — because the substance of the transaction actually took place long before the assignment was executed and recorded. But the cautionary remark here is that in all probability, nobody who relies upon the “Chain” ever paid anything but fees to their predecessor. Why would they? If the consideration already passed from third party — i.e., pension fund money — why would the originator or any successor be entitled to demand the value of the note and mortgage? The originator in that scenario is neither the lender nor the owner of the debt and therefore should be given no rights under the note and mortgage, where title was diverted from the third party who DID the the loan to the originator who did NOT fund the loan. 40 Fla. Stat. §673.3091(2) (2010); Fla. Stat. §69.061 (2010).-David E. Peterson, “Cracking the Mortgage Assignment Shell Game”, The Florida Bar Journal, Volume 85, No. 9, November, 2011.

I also came across a blog post from another attorney on how to argue Florida assignments of judges. I don’t know how reliable this is, but it does cite several cases, and may be a useful resource to you: http://discoverytactics.wordpress.com/tactics-strategies/how-to-argue-florida-assignments-to-judges/. Someone also posted the content of the above link verbatim in a comment on my blog at http://livinglies.me/foreclosure-defense-forms/people-players-and-resources/state-laws/florida-laws/.

 

Securitization for Lawyers: Conflicts between reality, the documents and the concept.

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Editor’s Note: The solution is obvious. Remove the servicers, Trustees and other “collection” entities from the situation. Those entities have been working against investors, lenders, the Trusts, and borrowers from the start. They continue to obstruct settlements and modifications because they have substantial liability for performing loans.

Their best strategy is to create the illusion of defaults even when the creditor has been paid in full.

Our best strategy is to remove them from the mix. And then let the chips fall. Since they ignored the PSA they are not authorized to act anyway.

For those who are religious about free market forces, this should be appealing inasmuch as it lets the marketplace function without being hijacked by players who illegally cornered the marketplace in finance, currency and economic activity. — Neil Garfield, livinglies.me

Continuing with my article THE CONCEPT OF SECURITIZATION, and my subsequent article How Securitization Was Written by Wall Street, we continue now with the reality. What we find is predictable conflict arising out of the intentional ambiguity and vagueness of the securitization documents (Prospectus, Pooling and Servicing Agreement, Assignment and Assumption Agreement etc.). The conclusion I reach is that the Banks gambled on their ability to confuse lender/investors, borrowers, regulators, the rating agencies, the insurers, guarantors, counterparties to credit default swaps, the courts and the gamble has paid off, thus far.

THE ECONOMICS OF TOXIC WASTE MORTGAGE LOANS

It is easy to get lost in the maze of documents and transactional analysis. The simple fact is that the banks wanted to make more risky loans than the less risky loans that always worked but gave them only a sliver of the potential profit they would make if they threw their status and reputations to the wind. If they could cash in on the element of “trust” and that people would rather keep their money in a bank than under their mattress there was literally no end to the amount of money they could make. They could even use their hundred year old brand names to create the illusion that THEY would never do something as stupid as what I am about to show you:

  1. To make things simple assume that a pension fund has $1,000 that the fund manager wishes to invest in a low risk “investment.”
  2. Assume that the fund manager wants a 5% return on investment (ROI)
  3. That means of course that the fund manager expects to get his money back ($1,000) PLUS $50 per year (5% of $1,000 invested).
  4. So the fund manager calls one of his “trusted” brokers and tells the broker what the pension is looking for as a return.
  5. The broker tells the fund manager that there is an investment that qualifies.
  6. The fund manager sends the $1,000 from the pension fund to the broker.
  7. The broker lends 25% or $250 out of the $1,000, or so it seems, for interest at 5%, as demanded by the fund manager. It looks good enough that the fund manager wants to give the broker more money.
  8. The fund manager gets deposits of $50 per year and is quite happy.
  9. Skipping a few steps assume that the pension fund has been happily buying into this “investment” for a while.
  10. But the broker takes the next $1,000 and lends out only $500 at 10%, yielding a rate of return of 10% or $50. Oddly, the dollar return is exactly what the fund manager is expecting — $50 per year for each thousand invested.
  11. But the “investment” is only $500.
  12. So the broker forms a series of companies and has his “proprietary trading desk” execute a transaction in which the $500 loan is sold to the pension fund for $1,000. No money exchanges hands because the broker has already “invested” the money for his own purposes. Neither the pension fund nor the Trust gets anything from the broker-controlled entity that “sold” the loan that in many cases had not even been yet originated!
  13. The pension fund’s money is traveling a road very different than the one portrayed in the Prospectus and the Pooling and Servicing agreement. That pension money was used to originate most of the loans without even the originator knowing it. Unknown to the pension fund the pension money was sued to fund origination and acquisition of loans; this is opposite to the apparent IPO scenario where the Trust issued “mortgage-backed bonds” that the lender/investors thought they were buying. The transaction between the REMIC Trust and the pension fund was never completed. The REMIC Trust is left unfunded and the contract documents for the formation and operation of the REMIC Trust were completely ignored in reality, while the illusion was created that the REMIC Trusts (completely controlled by the broker who “sold” the “bonds”) were operating with the money from the pension fund.
  14. It is the money of the pension fund that appears at closing, having been sent there by the broker. The only lender is the pension fund and the only debt is between the homeowner and the pension fund. But that loan is never documented and that is how the brokers get to claim almost anything. They are quintessential pretender lenders operating through a veil of cloaks and curtains and peculiarly NOT branding the product because they knew it was beyond wrong. It was probably criminal.
  15. This evens things out — the fund manager sees his $1,000 “invested” and the return of $50 per year. So the fund manager is clueless as to what is happening. The fund manager does not realize that the pension fund is the direct creditor of the debtor/homeowner.
  16. Now assume that the “investment” is a bond issued by a trust that will loan money or acquire loans.
  17. That means the “sale” transaction is between the Trust created and controlled by the broker and the company that is created and controlled by the broker to loan the money. This trade occurs at the proprietary trading desk of the broker. It shows up as a sale between the Trust and, for example, Countrywide. Countrywide gets no money and delivers no documents. The Trust pays no money nor receives any documents (note or mortgage). The “depositor” for the Trust is left out of all transactions.
  18. And THAT means the broker can declare a “profit” from his proprietary trading desk of $500 — because he only loaned $500 and the pension fund gave him $1,000. That leaves $500 of uninvested capital that the broker converts to “profit” at the broker’s trading desk.
  19. The broker knows that the $500 loan is priced at 10% interest because there is a substantial likelihood that the borrower will default. The higher the risk, the higher the interest rate. Nobody would question that. This gives the broker a chance to “bet” on the failure of the loans and the consequent failure of “bonds” that derived their value from the nonexistent assets of the Trust. Frequently at “closing” the title and liability insurance names a payee other than the originator — maintaining the distance between the originator and the closing.
  20. Getting insurance and credit default swaps is difficult because of the higher risk. So the broker buys a credit default swap from another Trust he has created where the loans are conventional 5% loans. This is the conventional loan Trust, which is also probably mostly unfunded. The sale of the swap actually means that the conventional loan trust has agreed to buy the toxic loan Trust “assets” (which do not exist) if there are a sufficient number of defaults on loans on the list for that toxic waste Trust.
  21. This means that the Trust “selling” the credit default swap will make up for losses in the toxic waste trust containing loans at interest rates of 10% or higher.
  22. When the Trust with the 10% loans goes up in smoke because the loans fail at predictable rates, the conventional Trust is on the hook to bail out the toxic waste trust.
  23. The bailout virtually bankrupts the conventional trust. Both the toxic waste trust and the conventional trust have been essentially wiped out. But the pension fund continues to receive payments as long as the broker can maintain the illusion — a device created as “servicer advances” so that the pension fund will continue to buy more of these bonds which were sold as loans to the Trust.
  24. This causes a “credit event” which the broker declares and sends to the insurance company that insured the risk on the conventional loan trust. The insurer (AIG, AMBAC etc) pays the loss declared by the broker as “Master Servicer”. This further enhances the illusion that the Trust was funded and that the bonds were in fact sold and issued by the Trust in exchange for the investment by the pension fund.
  25. The losses in the toxic waste trust are covered by the credit default swap with the conventional loan trust, and the losses in the conventional loan trust are covered by insurance.
  26. When the borrower in the toxic waste trust finally stops paying, the broker orders the servicer to declare a default and foreclose. The “default” is declared based upon the provisions of the note executed at the borrower’s loan closing. But the note is evidence of a loan that does not exist — i.e., a loan by the originator to the borrower. And the mortgage therefore exists to provide security for a nonexistent debt based upon legal presumptions regarding the note, which in actuality is worthless and should be re turned to the borrower for destruction.
  27. Meanwhile the pension fund continues to get the $50 per year from the broker. So the fund manager is blissfully ignorant of the fact that the “investment” was a scam that has already blown up.
  28. Eventually the loan in “default” is sold at a foreclosure sale in the name of the broker-controlled Trust.
  29. The proceeds are not sent to the pension fund because that would alert the fund manager of the default. So the property is kept as “REO” property as long as possible. As long as the pension fund is buying bonds, the bank retains the property in REO status and keeps paying the pension fund $50 per year.
  30. CONCLUSION: The broker has created a $500 “profit” from the proprietary trading desk, the pension fund is going to get a loss from a loan that was not what they ordered, and the broker collects the proceeds of the credit default swap and the insurance without accounting to anyone. Altogether, the broker makes around $1500 on a $500 loan in which the broker received $1,000 from the pension fund. This is a general and oversimplified example of what happened in virtually all the REMIC trust financing.
  31. If the broker had put the money into the Trust and made the loans from the trust then the profit of $1500 disappears. Any profit becomes the profit of the Trust and the Trust beneficiaries. And the broker is left accepting only his typical sliver of the pie as a commission. Why accept the miniscule commission when you can claim it all and then some?
  32. When most loans are originated, they are funded by the pension fund without the pension knowing about it. In standard transactional analysis that makes the pension fund the creditor and the borrower the debtor.
  33. But the only way the broker could make his “proprietary trading profits” is by placing the name of a third party on the note and mortgage. This raises the prospect of “moral hazard” where originators claim loans as their own even though the money for the loan came from third parties. The originator thinks the money came from an aggregator. In  that scenario, the aggregator would be getting the money from the Trust but in fact, the aggregator gets no money which stays with the broker. The entire “chain” is an illusion culminating with the illusion that the Trust was an actual real party in interest. But in that case the Trust would be a holder in due course. That is the way it is supposed to be as per the Concept and the Securitization documents. Experience shows that no claims of any holder in due course are ever made.
  34. The broker’s position was protected by (a) the Assignment and Assumption Agreement with the originator and (b) control over the money going into each loan closing and coming out of it.
  35. The Assignment and Assumption Agreement is executed before the loan is originated and governs the transaction without disclosure to the borrower. It is the ONLY real assignment (sort of) in that it is the contract in which actual funds are sent to the closing table — albeit not from the originator.
  36. The originator does not get to touch the money and has no rights to the note and mortgage even if the originator’s name is on it. But to make sure, many loans were made using MERS as nominee which was also bank controlled, thus preventing the originator from “moral hazard” in claiming the loan as its own. The real purpose of MERS was not to sidestep recording fees (a perk of the plan) but rather to make sure originators had no legal or equitable claim to the fake mortgage paper that was executed by the borrower. This might constitute an admission in conduct that neither the note nor the mortgage should have been executed, much less delivered and recorded. This leads to the conclusion that none of the mortgages or notes are in actuality enforceable unless they end up in the hands of a holder in due course.
  37. To further protect the broker from the originator taking delivery of the note and doing something with it, the instructions were to destroy the note signed by the borrower which would be resurrected later through mechanical means as needed. (See Katherine Ann Porter study —2007 — when she was at University of Iowa).
  38. Control over the fictitious note and mortgage was thus secured to the broker.
  39. When and if the loan goes into foreclosure and it is contested, then the false paper is mechanically created and signed and then sent up a chain of companies none of which pays any money for the loan because none of their predecessors had anything to sell. Eventually when a loan goes into foreclosure, the paperwork appears and the assignment to the Trust is then created and executed by robo-signors etc.
  40. The only time an assignment appears is when the loan is sent into foreclosure. I have made hundreds of attempts to get the closing documents and assignments to the Trust where the loans were NOT in “default”. None of the banks had the documents. Creative discovery directed at the records custodian will confirm this basic fact.
  41. Loan are sent into foreclosure because the borrower stopped paying — even though the creditor has continued to receive all expected payments. Hence the real creditor, the pension fund, has not experienced a “Credit event” (i.e., a default). Legally no default exists unless the creditor fails to receive a required payment. In nearly all cases the creditor continued to get paid regardless of whether the payments were made by borrowers on the “faulty” notes and mortgages (see below). So the notice of default is merely the intermediaries covering their tracks as often as possible luring people into the illusion of a default or just declaring it even if the payments are current. And that is why modifications and settlements are kept to a minimum so that the government sees efforts being made to help borrowers when in fact the only real instruction is to foreclose because the $500 loan represents at least $1500 in liability to the broker and its co-venturers.
  42. In court, the broker-controlled foreclosing party asserts ownership over the debt, the note and the mortgage. The loans are “scrubbed” by LPS in Jacksonville or some other company or division (like Chase) so that only one party is selected to claim rights to enforce the false closing documents. Occasionally they still get it wrong and two parties sue for foreclosure each filing the “original” note.  In truth the debt is the property of the pension fund who will receive very little money even after the property is completely liquidated, because each of the participants in this scheme gets fees for the “work” they are doing.
  43. The REMIC Trust is left as an unfunded entity except for loans that are the subject of a final judgment of foreclosure in the name of the Trust, which is why they didn’t name the Trust as Plaintiff until recently when they couldn’t avoid it.
  44. The final judgment ends the potential liability to refund the $1500 in “profits” that the broker “made” because it is proof that the loan failed. Then the broker eventually collects the proceeds of liquidation of the property acquired in foreclosure. If such liquidation is not possible, then the broker abandons the property and it is demolished. (see Detroit, Cleveland and other cities where entire neighborhoods were demolished and parks put in their place).
  45. By adding a healthy scoop of toxic waste loans and nearly toxic waste loans to the mix, the broker makes far more money in fees, profits and commissions than the original principal of the loan. By adding multiple sales to the mix of the same loan or the same bond, they made even more. And each time a foreclosure judgment is entered, and each time a foreclosure sale is said to be completed, the brokers are laughing their heads off because they got away with it.

The gamble has worked very well for the brokers (investment banks) because even now, all these parties are assuming there is at least some truth in what the Banks are saying in Court. They are wrong. Most of the positions taken in court are directly in conflict with the actual facts, the actual transactions and the actual movement of money. These banks continue to profit from the confusion and the inability or unwillingness of all those parties to actually read the documents and then demand proof that the transactions were real.

The press has not done much good either. Take a look at virtually any article written by financial and other types reporters. They get close to the third rail of journalism but they fail or refuse to take it to the next step — a report or declaration that most of the mortgages are fatally defective, incapable of being legally enforced, and leaving the borrowers and lenders with nothing but their own wits to figure out what to do with the debt that was created. Such a paradigm shift would mirror the policy adopted in Iceland where household debt was reduced by more than 25% providing the earliest evidence of a stimulus to a failing economy — producing positive GDP growth and low unemployment far ahead of the gains reported in other economies, including the U.S. The fact remains that the debt is no longer as much as what was loaned, it is not owned by any of the strangers who are enforcing them, and the note and mortgage are fatally defective.

If I am a borrower and I receive a loan of money from one person and then I am tricked into signing a note and mortgage in favor of someone else, there are TWO potential liabilities created — in exchange for ONE loan of money. If the signed paperwork gets into the hands of someone who is a Holder in Due Course, the fact that the borrower was cheated is irrelevant. I will owe the entire loan to both the person who loaned me the money AND the person who paid for the fake paperwork in good faith without knowledge of my defenses. But if the end party with the paperwork does NOT claim Holder in Due Course status, then the borrower has a right to show the loan on THAT PAPERWORK never happened. So then I will owe only the person from whom I received the money — a loan that is undocumented (except for proof of payment) and thus unsecured. Thus borrowers should not be seen as seeking relief; they should be seen as seeking justice — one debt for one loan.

The fact is that the borrower is treated as the party with the burden of proving that no loan actually underlies the paperwork upon which the forecloser is placing reliance. It is unfair to place the burden on the borrower, and within the Judge’s discretion, based upon common law, the Judge has the power to require the foreclosing party to prove the underlying loan if it is merely denied (as opposed to appearing in the affirmative defenses).

Both the closing documents with the lender (pension fund) and the closing documents with the borrower (homeowner) should be considered void, in the nature of a wild deed. Hence there could be no foreclosure and any foreclosure that already happened would be wrongful. In a quiet title action the mortgage on record should be nullified first, and then the homeowner could move on to seeking a declaration of rights from the court in which his title is not impaired by the bogus mortgage based upon a bogus note which is evidence of a loan of money that does not exist.

If I am lender and I give a broker money to deliver to a trust that is the borrower in my transaction and then the broker gives my money to someone else as a loan, the same reasoning applies. The mistake made is calling these lenders “investors”. They are not. They think they are investors and everyone calls them that but they have not invested in any Trust because their money was never delivered to the intended borrower and was instead loaned to borrowers that the lender would never have approved in a manner that was specifically prohibited by the securitization documents (which were routinely ignored).

Like the borrower, the lenders are stuck with documentation for a loan that never happened. The loan was intended (concept and written documents) to be between themselves and a trust. But the REMIC Trust never got the money. The lender (pension fund) is left with an undocumented loan to an actual borrower without a note or mortgage made in favor of the lender or any agent of the lender. Neither the common law nor the securitization documents were followed — delivery of the loan documents simply never happened; nor did payment for those documents (except for exorbitant fees and “profits” declared by the participants in the scheme).

If you look at an article like Trustees Seek $4.5 Billion Settlement with JP Morgan, you see the usual code language. But like the court room, follow-up questions would be appropriate. “Mortgage-bond trustees including U.S. Bank N.A. and Bank of New York Mellon Corp. asked a New York state court judge to approve a $4.5 billion settlement with JPMorgan Chase & Co. (JPM) over investor claims of faulty home loans.”

US Bank is consolidating its position as the Trustee of multiple REMIC Trusts whose documents name other parties and conditions for replacement of Trustee that prohibit US Bank from becoming the “new Trustee.” This is like a stranger to the transaction in non-judicial states who declares that it the beneficiary without proving it and then names a “substitute trustee” on the deed of trust. This substitution is frequently bogus. But if it goes unchallenged, it becomes the law of that case. The “beneficiary” under the deed of trust is nothing of the kind and the substitution of trustee is just plain wrong.

Bank of New York Mellon is essentially clueless as to what actions are pending in its name and they never produce a witness even when they are the plaintiff in the judicial foreclosure states. The current common practice is to rotate “servicers” such that the witness at a foreclosure trial is a person employed by a servicer who is new to the transaction — long after the loan was claimed to be in default and long after the “assignment” appeared and long after even the foreclosure litigation commenced. There also exists a confused claim because of rotation of Plaintiffs without amendment to the pleadings.  Plaintiffs are rotated as though it were only a name change. At trial there exists an amorphous claim of being the owner of the debt which is more like an implication or presumption.

The broker (investment banks) never claim to be a holder in due course because THAT would require proof of payment, delivery of the documents, good faith and lack of knowledge of the borrower’s defenses. But worse, it would reveal that BONY/Mellon has no records, knowledge, possession or accounts relating to the trust, the pool or any individual loan — except those that have been foreclosed on false pretenses.

JP Morgan has been caught in flat out lies repeatedly as to “ownership” of loans allegedly obtained from Washington Mutual for a price of “ZERO” without any agreement or assignment even claiming that the loans were purchased by Chase. Many of their claims are based upon “loans” originated by non-existent entities like American Broker’s Conduit. We see the same entities or non entities used by Wells Fargo, Bank of America and CitiMortgage with great regularity.

“Faulty home loans” is a phrase frequently used in press releases and press reports. What does that mean? If they were faulty, in what way? If they were faulty how could they be enforceable? This goes back to what I said above. The real loan was never documented.  And what was documented was not a real loan. This enabled the banks to create the illusion of normal paperwork for “standard home loans” as they frequently claim through their attorneys in court. By trick and intentional confusion they often convince a Judge to treat them as though they were holders in due course even without the claim of HDC status thus defeating the borrower before the case ever gets to trial.

So why are they settling for $4.5 Billion on more than $75 Billion in “securitized” “mortgage backed” bonds? Notice that 5 of them won’t settle which is to say they won’t join the party. The rest are willing to continue playing games with these worthless bonds and worthless loan documents. By “settling” for $4.5 Billion, the Trustees are taking about 6 cents on the dollar. They are also pretending that they are the ultimate owners of the bonds and mortgages. And they are pretending that the bonds and mortgages are real, hoping that the courts will continue to treat them as such. Hence they maintain the illusion that securitization of home loans was real.

The real problem can be seen by reference to the shadow banking marketplace, where the nominal value of cash equivalent instruments are now estimated to be around 1 quadrillion dollars — which is around 12-14 times the actual amount of all the government fiat money issued in the current world. Nobody knows if there is any real value in those instruments but current estimates are that they might be worth as much as $27 Trillion which is still more than 1/3 of all government fiat money issued in the current world. Why so much?

The loans and the bonds were all sold multiple times under various disguises. The simple truth is that a final deed issued as a result of an “auction” from a foreclosure seals off much of the liability for returning the money that the banks received when they posed as lenders and sold, insured or hedged their interest in the bonds and mortgages, neither of which could they possibly own and neither of which had any value in the first place. The original debt between the lenders (pension funds etc) and the borrowers (homeowners) remains in place and is continued to be carried on the books of multiple institutions who think they own it.

The practical solution might be a court recognition of the banks as agents of the lenders, and allocating the multiple payments received by the lenders, the banks and all the other intermediaries. This will vastly reduce or even eliminate the debt from the homeowner leaving the defrauded lender/investors to sue the banks not for 6 cents on the dollar but for 100 cents on the dollar. Any other resolution leaves homeowners holding the bag on transactions they could not possibly have understood because the information — that would have alerted them to these issues — was intentionally withheld.

The behavior of the brokers (investment banks) lends considerable support to the defense of unclean hands. Even if they somehow validated or ratified the closing foreclosure procedures they should be left with an unenforceable mortgage and then a note on which they could sue — if they could prove that the loan of money came from someone in their alleged chain of title.

The solution is to recognize the obvious. This will restore household wealth and prevent further gains by the banks who created this mess.

 

 

Giunta Prevails on Wells Fargo Motion to Dismiss — Federal Court

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Patrick Giunta, Esq. the lead litigator for the livinglies team has done it again. He filed a lawsuit against Wells Fargo while the trial on a foreclosure was underway. Wells Fargo now faces a loss in the foreclosure where their witness admitted to being unable to explain the chain of ownership, the balance and the reason why Wells Fargo refused to cooperate in the sale of the property that would have paid them in full.

This corroborates my strategy that presumes that the foreclosers don’t want the house or the money. What the banks want is a foreclosure judgment that forces the loan onto an investor who does not even know of the existence of the proceedings. besides it being illegal and unfair, it raises questions of jurisdiction and standing, because the actual source of funds — the investors who in reality own the debt directly — receive no notice of the proceeding — and they think they barred by the terms of the Prospectus and Pooling and Servicing Agreement from even inquiring about the status of the “pool” (which is most likely non-existent except where foreclosure judgments have been entered).

Here Judge Dimitroleas, Federal Judge in the Southern District of Florida, ruled that the Homeowner has rights of action for money damages against dubious claims from “holders”, “servicers” and even “trustees.” Along with other claims, Giunta survived a motion to dismiss the homeowner’s claim for fraudulent misrepresentation — as to the status of the loan, the ownership and the balance.

The fact pattern of this case clearly corroborates the fact that “servicers” are claiming ownership or rights to enforce debts that they don’t own and don’t have any authority to represent the creditor because they are making false claims of securitization. Thus the banks cannot say they actually represent the investors who THOUGHT they were buying mortgage backed securities from a funded trust that was originating and acquiring loans. If they admit the facts in reality they are admitting to committing fraud on the investors, the insurers, the guarantors, and of course the borrowers. The presumption regarding ownership or rights to enforce is directly contrary to the actual facts. And the threshold for rebutting those presumptions is fast falling in Federal and State courts.

Patrick Giunta is located in Broward County Florida.

see Grave – (DE28) – Order on Motion to Dismiss

Maine Moving toward the Truth About the Mortgages, MERS and Foreclosures

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The Maine Supreme Court has been active in the last few months – issuing several decisions that will likely impact foreclosure actions in that state. The decisions covered a full range of foreclosure issues, from whether a lender can establish standing when it holds an assignment of the mortgage from Mortgage Electronic Registration Systems, Inc. (“MERS”) to the amount a borrower must pay to cure a default. If you originate and/or service RESIDENTIAL MORTGAGE LOANS in this state, you may want to review these recent cases. This alert focuses on the court’s holdings in one of these cases, Bank of America, N.A. v. Greenleaf, — A.3d —-, 2014 WL 2988236 (Me., July 3, 2014) (Review the Maine Supreme Court Opinion.)

Assignment from MERS May Only Transfer Right to Record Mortgage

The Maine Supreme Court’s decision in Greenleaf may require lenders to make some changes before they initiate FORECLOSURE actions in this state in which the mortgage identifies MERS as the nominee for the lender. This case presented some simple basic facts, but the court’s holdings may raise concerns. In 2006, Scott Greenleaf executed a promissory note for $385,000 to RESIDENTIAL MORTGAGE Services, Inc. (“RMS”) and signed a mortgage securing the debt. The note was endorsed in blank. The mortgage listed RMS as the lender and MERS as the nominee for the lender.
In 2011, Bank of America, N.A. (“BofA”) initiated FORECLOSURE proceedings against Greenleaf. It was undisputed that Greenleaf had failed to make payments on the loan since 2008. Although some interim drama played out in the FORECLOSURE proceeding, a trial was held in 2013. BofA presented the following documents to the court: the original note, the mortgage, and a document recorded in 2011 reflecting the assignment of the mortgage from MERS to BAC Home Loans Servicing, LP (“BAC”), an entity that subsequently merged with BofA. The court entered a judgment of FORECLOSURE IN favor of BofA and Greenleaf appealed.
Greenleaf alleged, among other things, that BofA lacked standing to seek foreclosure of the property since BofA did not have an interest in both the promissory note and the mortgage securing that note. Since the note was endorsed in blank and BofA had possession of the note, the Maine Supreme Court held that BofA met the first prong of the standing test. However, the court found that BofA failed to establish the second prong of the test, ownership of the mortgage.
The court struggled with the 2011 assignment of the mortgage by MERS to BAC. The court focused on one sentence in the 2006 mortgage that specifically provided that MERS was the mortgagee of record for purposes of recording the mortgage. The court held that this provision of the mortgage only granted MERS the right to record the mortgage as the lender’s nominee. When MERS then assigned its interest to BAC, the court held that it granted BAC only the right that it possessed, the right to record the mortgage as nominee for the lender. When BAC then merged with BofA, BofA only obtained the right that BAC had possessed, the right to record the mortgage as nominee. The court also noted that there was no separate and independent assignment of the mortgage from RMS to MERS, BAC, or BofA. As such, the court held that the record only demonstrated a series of assignments of the right to record the mortgage as nominee. In the absence of evidence that BofA owned the Greenleaf mortgage, the Maine Supreme Court held that BofA lacked standing to seek foreclosure and vacated the lower court’s judgment of foreclosure.
Since similar “right to record” language is included in many mortgage forms, lenders and servicers should pay particular attention to whether they are relying on assignments from MERS before initiating a foreclosure action in this state. Unless a lender holds or can obtain an assignment of the mortgage from the originating lender (and many of this lenders may no longer be in business), a lender may need to explore other options for establishing the second prong of the standing test in Maine. A mortgage assignment by MERS, standing alone, may not be sufficient to prove an assignment of a mortgage.
In response to the Greenleaf decision, many of the title insurers in the state have issued guidance regarding title issues under various scenarios in which MERS had assigned the mortgages. At least one title insurer has indicated that if MERS assigned the mortgage in a pending foreclosure action, an assignment from the original lender to the FORECLOSING mortgagee will be required in order for title to be insured without exception.

No Adjustments to Disclosed Payoff Amount Permitted During Cure Period

The Greenleaf court also defined the amount a borrower can be required to pay to cure a default. The notice of default and right to cure sent to Greenleaf included an itemization of all past due amounts and identified the total amount required to be paid by Greenleaf to cure the default. This total amount included a footnote reference that Greenleaf should “[c]ontact the servicer to obtain an up to date figure for outstanding attorney fees, unpaid taxes and costs before sending payment” and the notice also separately provided that Greenleaf should contact BAC at a prescribed telephone number “to obtain an up to date figure before sending payment.” Similar disclosures are generally included in the right to cure notices provided by many lenders and servicers.
Me. Rev. Stat. Ann. tit. 14, § 6111 provides that the contents of the notice of default and right to cure must include, among other things, an itemization of all past due amounts causing the loan to be in default and an itemization of any other charges that must be paid in order to cure the default. Greenleaf argued that the addition of the “call for updated information” references did not meet the statutory requirement that the notice itself must provide an itemization of other charges that must be paid in order to cure the default. The Maine Supreme Court agreed with Greenleaf and held that state law effectively freezes additions to the payoff amount during the cure period.
As such, the amount stated in the notice of default and right to cure is the only amount the borrower can be required to pay to cure the default during the 35 day cure period. Any attorneys’ fees incurred in continuing efforts to recover on the loan and advances made for property taxes or insurance during the cure period – none of these amounts can be added to the amount a borrower may be required to pay to cure the default. The court noted that the incorrect “call for updated information” references in the cure notice were an independent basis on which they could have vacated the lower court’s foreclosure judgment.

Changing Landscape?

Lenders and servicers should work closely with their foreclosure counsel to ensure they can establish standing before initiating a foreclose action in Maine. Lenders and servicers may also want to work with the title insurers to address any title issues that may arise in connection with MERS assignments. With certain changes in their foreclosure practices, lenders and servicers should still be able to prove up ownership of each mortgage sufficient to pass the Greenleaf court’s standing scrutiny. In addition, lenders and servicers should review their cure notice form templates used in this state and any corresponding policies and procedures to ensure that a borrower is never advised or required to pay more than the total amount due as disclosed in the cure notice. The Greenleaf court may have stirred the lobster pot – but lenders and services have options to adapt to the court’s recipes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Securitization for Lawyers: How it was Written by Wall Street Banks

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Continuing with my article THE CONCEPT OF SECURITIZATION from yesterday, we have been looking at the CONCEPT of Securitization and determined there is nothing theoretically wrong with it. That alone accounts for tens of thousands of defenses” raised in foreclosure actions across the country where borrowers raised the “defense” securitization. No such thing exists. Foreclosure defense is contract defense — i.e., you need to prove that in your case the elements of contract are absent and THAT is why the note or the mortgage cannot be enforced. Keep in mind that it is entirely possible to prove that the mortgage is unenforceable even if the note remains enforceable. But as we have said in a hundred different ways, it does not appear to me that in most cases, the loan contract ever existed, or that the acquisition contract in which the loan was being “purchased” ever occurred. But much of THAT argument is left for tomorrow’s article on Securitization as it was practiced by Wall Street banks.

So we know that the concept of securitization is almost as old as commerce itself. The idea of reducing risk and increasing the opportunity for profits is an essential element of commerce and capitalism. Selling off pieces of a venture to accomplish a reduction of risk on one ship or one oil well or one loan has existed legally and properly for a long time without much problem except when a criminal used the system against us — like Ponzi, Madoff or Drier or others. And broadening the venture to include many ships, oil wells or loans makes sense to further reduce risk and increase the likelihood of a healthy profit through volume.

Syndication of loans has been around as long as banking has existed. Thus agreements to share risk and profit or actually selling “shares” of loans have been around, enabling banks to offer loans to governments, big corporations or even little ones. In the case of residential loans, few syndications are known to have been used. In 1983, syndications called securitizations appeared in residential loans, credit cards, student loans, auto loans and all types of other consumer loans where the issuance of IPO securities representing shares of bundles of debt.

For logistical and legal reasons these securitizations had to be structured to enable the flow of loans into “special purpose vehicles” (SPV) which were simply corporations, partnerships or Trusts that were formed for the sole purpose of taking ownership of loans that were originated or acquired with the money the SPV acquired from an offering of “bonds” or other “shares” representing an undivided fractional share of the entire portfolio of that particular SPV.

The structural documents presented to investors included the Prospectus, Subscription Agreement, and Pooling and Servicing Agreement (PSA). The prospectus is supposed to disclose the use of proceeds and the terms of the payback. Since the offering is in the form of a bond, it is actually a loan from the investor to the Trust, coupled with a fractional ownership interest in the alleged “pool of assets” that is going into the Trust by virtue of the Trustee’s acceptance of the assets. That acceptance executed by the Trustee is in the Pooling and Servicing Agreement, which is an exhibit to the Prospectus. In theory that is proper. The problem is that the assets don’t exist, can’t be put in the trust and the proceeds of sale of the Trust mortgage-backed bonds doesn’t go into the Trust or any account that is under the authority of the Trustee.

The writing of the securitization documents was done by a handful of law firms under the direction of a few individual lawyers, most of whom I have not been able to identify. One of them is located in Chicago. There are some reports that 9 lawyers from a New Jersey law firm resigned rather than participate in the drafting of the documents. The reports include emails from the 9 lawyers saying that they refused to be involved in the writing of a “criminal enterprise.”

I believe the report is true, after reading so many documents that purport to create a securitization scheme. The documents themselves start off with what one would and should expect in the terms and provisions of a Prospectus, Pooling and Servicing Agreement etc. But as you read through them, you see the initial terms and provisions eroded to the point of extinction. What is left is an amalgam of options for the broker dealers selling the mortgage backed bonds.

The options all lead down roads that are absolutely opposite to what any real party in interest would allow or give their consent or agreement. The lenders (investors) would never have agreed to what was allowed in the documents. The rating agencies and insurers and guarantors would never have gone along with the scheme if they had truly understood what was intended. And of course the “borrowers” (homeowners) had no idea that claims of securitization existed as to the origination or intended acquisition their loans. Allan Greenspan, former Federal Reserve Chairman, said he read the documents and couldn’t understand them. He also said that he had more than 100 PhD’s and lawyers who read them and couldn’t understand them either.

Greenspan believed that “market forces” would correct the ambiguities. That means he believed that people who were actually dealing with these securities as buyers, sellers, rating agencies, insurers and guarantors would reject them if the appropriate safety measures were not adopted. After he left the Federal Reserve he admitted he was wrong. Market forces did not and could not correct the deficiencies and defects in the entire process.

The REAL document is the Assignment and Assumption Agreement that is NOT usually disclosed or attached as an exhibit to the Prospectus. THAT is the agreement that controls everything that happens with the borrower at the time of the alleged “closing.” See me on YouTube to explain the Assignment and Assumption Agreement. Suffice it to say that contrary to the representations made in the sale of the bonds by the broker to the investor, the money from the investor goes into the control of the broker dealer and NOT the REMIC Trust. The Broker Dealer filters some of the money down to closings in the name of “originators” ranging from large (Wells Fargo, Countrywide) to small (First Magnus et al). I’ll tell you why tomorrow or the next day. The originators are essentially renting their names the same as the Trustees of the REMIC Trusts. It looks right but isn’t what it appears. Done properly, the lender on the note and mortgage would be the REMIC Trust or a common aggregator. But if the Banks did it properly they wouldn’t have had such a joyful time in the moral hazard zone.

The PSA turned out to be the primary document creating the Trusts that were creating primarily under the laws of the State of New York because New York and a few other states had a statute that said that any variance from the express terms of the Trust was VOID, not voidable. This gave an added measure of protection to the investors that the SPV would not be used for any purpose other than what was described, and eliminated the need for them to sue the Trustee or the Trust for misuse of their funds. What the investors did not understand was that there were provisions in the enabling documents that allowed the brokers and other intermediaries to ignore the Trust altogether, assert ownership in the name of a broker or broker-controlled entity and trade on both the loans and the bonds.

The Prospectus SHOULD have contained the full list of all loans that were being aggregated into the SPV or Trust. And the Trust instrument (PSA) should have shown that the investors were receiving not only a promise to repay them but also a share ownership in the pool of loans. One of the first signals that Wall Street was running an illegal scheme was that most prospectuses stated that the pool assets were disclosed in an attached spreadsheet, which contained the description of loans that were already in existence and were then accepted by the Trustee of the SPV (REMIC Trust) in the Pooling and Servicing Agreement. The problem was that the vast majority of Prospectuses and Pooling and Servicing agreements either omitted the exhibit showing the list of loans or stated outright that the attached list was not the real list and that the loans on the spreadsheet were by example only and not the real loans.

Most of the investors were “stable managed funds.” This is a term of art that applied to retirement, pension and similar type of managed funds that were under strict restrictions about the risk they could take, which is to say, the risk had to be as close to zero as possible. So in order to present a pool that the fund manager of a stable managed fund could invest fund assets the investment had to qualify under the rules and regulations restricting the activities of stable managed funds. The presence of stable managed funds buying the bonds or shares of the Trust also encouraged other types of investors to buy the bonds or shares.

But the number of loans (which were in the thousands) in each bundle made it impractical for the fund managers of stable managed funds to examine the portfolio. For the most part, if they done so they would not found one loan that was actually in existence and obviously would not have done the deal. But they didn’t do it. They left it on trust for the broker dealers to prove the quality of the investment in bonds or shares of the SPV or Trust.

So the broker dealers who were creating the SPVs (Trusts) and selling the bonds or shares, went to the rating agencies which are quasi governmental units that give a score not unlike the credit score given to individuals. Under pressure from the broker dealers, the rating agencies went from quality culture to a profit culture. The broker dealers were offering fees and even premium on fees for evaluation and rating of the bonds or shares they were offering. They HAD to have a rating that the bonds or shares were “investment grade,” which would enable the stable managed funds to buy the bonds or shares. The rating agencies were used because they had been independent sources of evaluation of risk and viability of an investment, especially bonds — even if the bonds were not treated as securities under a 1998 law signed into law by President Clinton at the behest of both republicans and Democrats.

Dozens of people in the rating agencies set off warning bells and red flags stating that these were not investment grade securities and that the entire SPV or Trust would fail because it had to fail.  The broker dealers who were the underwriters on nearly all the business done by the rating agencies used threats, intimidation and the carrot of greater profits to get the ratings they wanted. and responded to threats that the broker would get the rating they wanted from another rating agency and that they would not ever do business with the reluctant rating agency ever again — threatening to effectively put the rating agency out of business. At the rating agencies, the “objectors” were either terminated or reassigned. Reports in the Wal Street Journal show that it was custom and practice for the rating officers to be taken on fishing trips or other perks in order to get the required the ratings that made Wall Street scheme of “securitization” possible.

This threat was also used against real estate appraisers prompting them in 2005 to send a petition to Congress signed by 8,000 appraisers, in which they said that the instructions for appraisal had been changed from a fair market value appraisal to an appraisal that would make each deal work. the appraisers were told that if they didn’t “play ball” they would never be hired again to do another appraisal. Many left the industry, but the remaining ones, succumbed to the pressure and, like the rating agencies, they gave the broker dealers what they wanted. And insurers of the bonds or shares freely issued policies based upon the same premise — the rating from the respected rating agencies. And ultimate this also effected both guarantors of the loans and “guarantors” of the bonds or shares in the Trusts.

So the investors were now presented with an insured investment grade rating from a respected and trusted source. The interest rate return was attractive — i.e., the expected return was higher than any of the current alternatives that were available. Some fund managers still refused to participate and they are the only ones that didn’t lose money in the crisis caused by Wall Street — except for a period of time through the negative impact on the stock market and bond market when all securities became suspect.

In order for there to be a “bundle” of loans that would go into a pool owned by the Trust there had to be an aggregator. The aggregator was typically the CDO Manager (CDO= Collateralized Debt Obligation) or some entity controlled by the broker dealer who was selling the bonds or shares of the SPV or Trust. So regardless of whether the loan was originated with funds from the SPV or was originated by an actual lender who sold the loan to the trust, the debts had to be processed by the aggregator to decide who would own them.

In order to protect the Trust and the investors who became Trust beneficiaries, there was a structure created that made it look like everything was under control for their benefit. The Trust was purchasing the pool within the time period prescribed by the Internal Revenue Code. The IRC allowed the creation of entities that were essentially conduits in real estate mortgages — called Real Estate Mortgage Investment Conduits (REMICs). It allows for the conduit to be set up and to “do business” for 90 days during which it must acquire whatever assets are being acquired. The REMIC Trust then distributes the profits to the investors. In reality, the investors were getting worthless bonds issued by unfunded trusts for the acquisition of assets that were never purchased (because the trusts didn’t have the money to buy them).

The TRUSTEE of the REMIC Trust would be called a Trustee and should have had the powers and duties of a Trustee. But instead the written provisions not only narrowed the duties and obligations of the Trustee but actual prevented both the Trustee and the beneficiaries from even inquiring about the actual portfolio or the status of any loan or group of loans. The way it was written, the Trustee of the REMIC Trust was in actuality renting its name to appear as Trustee in order to give credence to the offering to investors.

There was also a Depositor whose purpose was to receive, process and store documents from the loan closings — except for the provisions that said, no, the custodian, would store the records. In either case it doesn’t appear that either the Depositor nor the “custodian” ever received the documents. In fact, it appears as though the documents were mostly purposely lost and destroyed, as per the Iowa University study conducted by Katherine Ann Porter in 2007. Like the others, the Depositor was renting its name as though ti was doing something when it was doing nothing.

And there was a servicer described as a Master Servicer who could delegate certain functions to subservicers. And buried in the maze of documents containing hundreds of pages of mind-numbing descriptions and representations, there was a provision that stated the servicer would pay the monthly payment to the investor regardless of whether the borrower made any payment or not. The servicer could stop making those payments if it determined, in its sole discretion, that it was not “recoverable.”

This was the hidden part of the scheme that might be a simple PONZI scheme. The servicers obviously could have no interest in making payments they were not receiving from borrowers. But they did have an interest in continuing payments as long as investors were buying bonds. THAT is because the Master Servicers were the broker dealers, who were selling the bonds or shares. Those same broker dealers designated their own departments as the “underwriter.” So the underwriters wrote into the prospectus the presence of a “reserve” account, the source of funding for which was never made clear. That was intentionally vague because while some of the “servicer advance” money might have come from the investors themselves, most of it came from external “profits” claimed by the broker dealers.

The presence of  servicer advances is problematic for those who are pursuing foreclosures. Besides the fact that they could not possibly own the loan, and that they couldn’t possibly be a proper representative of an owner of the loan or Holder in Due Course, the actual creditor (the group of investors or theoretically the REMIC Trust) never shows a default of any kind even when the servicers or sub-servicers declare a default, send a notice of default, send a notice of acceleration etc. What they are doing is escalating their volunteer payments to the creditor — made for their own reasons — to the status of a holder or even a holder in due course — despite the fact that they never acquired the loan, the debt, the note or the mortgage.

The essential fact here is that the only paperwork that shows actual transfer of money is that which contains a check or wire transfer from investor to the broker dealer — and then from the broker dealer to various entities including the CLOSING AGENT (not the originator) who applied the funds to a closing in which the originator was named as the Lender when they had never advanced any funds, were being paid as a vendor, and would sign anything, just to get another fee. The money received by the borrower or paid on behalf of the borrower was money from the investors, not the Trust.

So the note should have named the investors, not the Trust nor the originator. And the mortgage should have made the investors the mortgagee, not the Trust nor the originator. The actual note and mortgage signed in favor of the originator were both void documents because they failed to identify the parties to the loan contract. Another way of looking at the same thing is to say there was no loan contract because neither the investors nor the borrowers knew or understood what was happening at the closing, neither had an opportunity to accept or reject the loan, and neither got title to the loan nor clear title after the loan. The investors were left with a debt that could be recovered probably as a demand loan, but which was unsecured by any mortgage or security agreement.

To counter that argument these intermediaries are claiming possession of the note and mortgage (a dubious proposal considering the Porter study) and therefore successfully claiming, incorrectly, that the facts don’t matter, and they have the absolute right to prevail in a foreclosure on a home secured by a mortgage that names a non-creditor as mortgagee without disclosure of the true source of funds. By claiming legal presumptions, the foreclosers are in actuality claiming that form should prevail over substance.

Thus the broker-dealers created written instruments that are the opposite of the Concept of Securitization, turning complete transparency into a brick wall. Investor should have been receiving verifiable reports and access into the portfolio of assets, none of which in actuality were ever purchased by the Trust, because the pooling and servicing agreement is devoid of any representation that the loans have been purchased by the Trust or that the Trust paid for the pool of loans. Most of the actual transfers occurred after the cutoff date for REMIC status under the IRC, violating the provisions of the PSA/Trust document that states the transfer must be complete within the 90 day cutoff period. And it appears as though the only documents even attempted to be transferred into the pool are those that are in default or in foreclosure. The vast majority of the other loans are floating in cyberspace where anyone can grab them if they know where to look.

Holder in Due Course and Due Process

The first thing I want to do is add to my previous comments. I believe there is an implicit admission of failure of consideration in any case where a holder in due course is not identified. In addition, where a REMIC trust not alleged or asserted to be a holder in due course it means by definition that they did not purchase the loan for value in good faith without knowledge of the defense of the “borrower” (maker of the note).

 

I believe that what this means is that any court that enters an order or judgment against the homeowner, who was the maker of the note, is implicitly entering an order or judgment against the trust beneficiaries and the trust, resulting in a loss of favorable tax status and just as importantly an economic loss directly resulting from being forced to accept a loan that is presumed to be in default. The failure of the trust to pay for the loan and receive delivery of the loan documents to the depositor leaves one with the question of “what is the relationship of the Trust to the subject loan?”

 

The same logic would apply regardless of whether the citizens trust is in dispute or not. There is circular logic in the argument of the bank. On the one hand they want to be seen as a holder with rights to enforce but on the other hand they don’t want to disclose, alleged, assert, or prove the foundation or source of the right to enforce.

 

Based upon the provisions and restrictions of the pooling and servicing agreement, the investors who purchased mortgage backed securities issued by the Trust were intended to be the collective creditor for loans that were accepted into the Trust. The acceptance is stated in the pooling and servicing agreement and the exhibits to the pooling and servicing agreement should have the loans that were accepted. After the cutoff period, the only way a loan could be accepted was by acceptance by the Trustee. And the only way there could be acceptance by the trustee would be upon receipt of an opinion letter from counsel for the trust stating that they would be no adverse effect on the beneficiaries. The adverse effects are clear. One is the loss of advantageous tax treatment and the other is the economic loss from accepting a loan does not conform to the types of loans that are acceptable to the trust, as per the terms of the pooling and servicing agreement.

 

Pooling and servicing agreement is the trust instrument. Since the pooling and servicing agreement is governed under the laws of the state of New York, a violation of the restrictions and provisions of the trust is void, not voidable. The acceptance of a loan that is in default is not possible. The acceptance of any transaction that would violate the terms of the Internal Revenue Code sections on REMIC Trusts is not possible.

 

Thus the hidden issue here is that the real parties in interest who will be affected by the outcome of the litigation have not been given any notice of the pendency of the action. And the provisions of the pooling and servicing agreement prevent the trust beneficiaries from knowing or even inquiring about the status of any particular loan.

 

The confusion comes from the fact that the investors are indeed the creditors in practice. But because the trust was actually not utilized in the transaction they are direct creditors whose money was used to fund origination or acquisition of loans, contrary to the subscription agreement which promised that their money would be given to the issuer of the mortgage-backed securities that were being issued and purchased by the investors.

 

It seems obvious that the trust cannot be held to have acted in bad faith. It is equally obvious that the trust would have no knowledge of the borrower’s defenses. As the only element left for a holder in due course is the purchase for value. Since there is no allegation that the trust is a holder in due course, the bank is admitting that the trust never purchased the loan. It may be presumed that the trust might have originated or purchased the loan if it had received the proceeds of sale of the mortgage-backed securities issued by the trust. The logical assumption is that the trust never received those proceeds. The logical assumption is that the underwriter used the funds in ways that were never contemplated by the investors.

 

A further logical assumption would be that the underwriter kept the funds in its own name or in the accounts of entities controlled by the underwriter and is operating contrary to the interests of the investors.

 

The logical conclusion would be that the underwriter conducted a series of disguised sales of the same loan to multiple parties. Since the mortgage-backed securities were issued in the name of the underwriter as nominee (“street name”) they were able to trade on the loan and securities in their own name and receive the benefits without accounting to the investors or the borrower. The allocation of third-party funds (servicers, insurers, guarantors etc.) cannot be determined except by reference to books and records in the exclusive care, custody and control of the parties involved in the claims of securitization. It may be fairly concluded that such claims are false.

 

Now I will address the issues presented as to constitutional disposition of the case. It has long been judicial doctrine to avoid constitutional issues if the case can otherwise be decided on other grounds. It is also true that equal protection has proved more difficult than due process as the basis of any relief.

 

The problem in foreclosure litigation is that it must in my opinion include a claim for both due process and equal protection. The claim for lack of due process is not technically true. The true claim, in my opinion, would be lack of sufficient due process.

 

In actuality due process varies from state to state and even from county to county. If a party has been heard in court and presented arguments, then it may be fairly concluded that some due process was provided to that party. If presumptions arise against that party that give rise to orders and judgments that are contrary to the actual facts, a claim for denial of due process could be present. But the better claim, in my opinion, is to look at the state appellate decisions to show that more due process is allowed to debtors who are not involved in foreclosure litigation. I think this is a more accurate description of the actual situation.

 

The due process argument is simple: presumptions are used as shorthand for the facts. In this case the facts don’t match up with the presumptions. The only question is whose burden of proof is it. If the allegation was that a holder in due course was known and identified there is no doubt that anything the borrower had to say would be an affirmative defense, and thus after a prima facie case was made showing payment in good faith without knowledge of borrower’s defenses, the burden would shift to the alleged borrower who definitely was the maker of the note even if they were not the borrower in a loan transaction with the designated “lender.”

 

But, this is not the case at bar. The foreclosing party is asserting “holder” status, with dubious rights to enforce that are denied by the maker/homeowner. Absent is any allegation of status of a holder in due course, and of course noticeably absent is any allegation of the expenditure of funds or other consideration in exchange for delivery of the loan to the Depository designated in the PSA to receive the delivery. Thus neither the purchase nor the delivery are alleged. While being a holder might raise the presumption of being a holder with rights to enforce, it does not remove the burden of proving that said rights to enforce have been delivered from a party who definitely had the right to enforce — i.e., the holder in due course or “owner” of the loan.

 

The absence of the HDC allegation is an admission that the Trust did not buy the loan. The fact that the Trust did not buy the loan means that it is not and cannot be in the pool owned by the trust, with fractional shares owned by the investors who bought the MBS issued by the Trust. And that can ONLY mean that the right to enforce cannot be delivered or conveyed by the Trust because the Trust never received delivery and never had a right to receive delivery because they didn’t pay for the loan.

 

Thus on the face of the pleading it is up to the foreclosing party to prove its right to enforce the note by showing the identity of the party for whom the loan is being enforced, the fact that the party for whom it is being enforced owned the loan at the time the right to enforce was granted, the current balance ON THE BOOKS OF THE CREDITOR, the presence of a default ON THE BOOKS OF THE CREDITOR, and that the loan is still owned by the party who owns the loan (i.e., the HDC). Hence the burden is on the foreclosing party to reach the point where the borrower assumes the burden of refuting the case against him or her. The maker of the note is in an exclusive position of being shut out of the facts that would either corroborate or refute this narrative.

 

If the burden is placed on the borrower, it would be the equivalent of a murder on video in possession of the murderer but the State and the heirs of the victim are charged with proving the case without the video. The facts suggest here that the Trust paid nothing because it had no money to pay for a loan. The facts suggest that if it were otherwise, the Trust would have paid for the loan and be most anxious to plead HDC status. And thus the facts show that the foreclosing party cannot claim the right to enforce based upon a presumption without violating the due process rights of the homeowners here. Only the foreclosing party and its co-venturers have in their care, custody and control, the necessary information to refute or prove the facts behind the presumptions they are attempting to raise.

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Pretender Mender: Foreclosure Crisis Continues to Rise Despite Obama Team Reports

Despite various “reports” from the Obama Administration and writers in the fields of real estate, mortgages and finance, the crisis is still looming as the main drag on the economy. Besides the fact that complete strangers are “getting the house” after multiple payments were received negating any claim of default, it is difficult to obtain financing for a new purchase for the millions of families who have been victims of the mortgage PONZI scheme. In addition, people are finding out that these intermediaries who received an improper stamp of approval from the courts are now pursuing deficiency judgments against people who cooperated or lost the foreclosure litigation. And now we have delinquency rates rising on mortgages that in all probability should never be enforced. And servicers are still pursuing strategies to lure or push homeowners into foreclosure.

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Most people simply allowed the foreclosure to happen. Many even cleaned the home before leaving the keys on the kitchen counter. They never lifted a finger in defense. As predicted many times on this blog and in my appearances, it isn’t over. We are in the fifth inning of a nine inning game.

Losing homes that have sometimes been in the family for many generations results in a sharp decline in household wealth leaving the homeowner with virtually no offset to the household debt. Even if the family has recovered in terms of producing at least a meager income that would support a down-sized home, they cannot get a mortgage because of a policy of not allowing mortgage financing to anyone who has a foreclosure on their record within the past three years.

To add insult to injury, the banks posing as lenders in the 6 million+ foreclosures are now filing deficiency judgments to continue the illusion that the title is clear and the judgment of foreclosure was valid. People faced with these suits are now in the position of having failed to litigate the validity of the mortgage or foreclosure. But all is not lost. A deficiency judgment is presumptively valid, but in the litigation the former homeowners can send out discovery requests to determine ownership and balance of the alleged debt. Whether judges will allow that discovery is something yet to be seen. But the risk to those companies filing deficiency judgments is that the aggressive litigators defending the deficiency actions might well be able to peak under the hood of the steam roller that produced the foreclosure in the first instance.

What they will find is that there is an absence of actual transactions supporting the loans, assignments, endorsements etc. that were used to get the Court to presume that the documents were valid — i.e., that absent proof from the borrower, the rebuttable assumption of validity of the documents that refer to such transactions forces the homeowner to assume a burden of proof based upon facts that are in the sole care, custody and control of the pretender lender. If the former homeowner can do what they should have done in the first place, they will open up Pandora’s box. The loan on paper was not backed by a transaction where the “lender” loaned any money. The assignment was not backed by a purchase transaction of the loan. And even where there was a transfer for value, the “assignment turns out to be merely an offer that neither trust nor trustee of the REMIC trust was allowed to accept.

All evidence, despite narratives to the contrary, shows that not only have foreclosures not abated, they are rising. Delinquencies are rising, indicating a whole new wave of foreclosures on their way — probably after the November elections.

http://www.housingwire.com/blogs/1-rewired/post/31089-are-we-facing-yet-another-foreclosure-crisis

http://www.newrepublic.com/article/119187/mortgage-foreclosures-2015-why-crisis-will-flare-again

http://susiemadrak.com/2014/08/25/here-comes-that-deferred-mortgage-crisis/

“Teaser” Payments: Trick or Treat?

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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In the final analysis, I think a reverse amortization loan is a way of hiding the true amount of the debt. —- Neil F Garfield, livinglies.me

As an introduction, let me remind you that the viability and affordability of the loan, the loan to value ratios and all the other facts and ratios and computations are the responsibility of the lender, who must faithfully disclose the results to the borrower. It is a myth that these bad loans were in any way related to the bad intent of borrowers.

I have been examining and analyzing loans that are referred to as “reverse amortization loans”. They are, in every case, “teaser payments” that trap homeowners into a deal that guarantees they will not keep their home — even if it has been in their family for generations. And they are loans, in my opinion, that contain secret balloon payments. Nothing in this article should be construed as abandoning the fact that the “lender” never actually made the loan, nor that the actual lenders (investors) would never have approved the loan. The point of this article is that the borrower would not have approved the deal either if they had been informed of the real nature of the sham loan (even if it was real).

Teaser payments are neither illegal nor unfair (if they don’t involve reverse amortization). They have been used all over the world with great success. The deal is that they pay a lower payment before they get to the real payment. Nothing is owed on the lower interest or even lower escrow that results from such a loan product devised and prepared for signature by the Banks or agents for the Banks.

And remember again that when I refer to the Banks, I am talking about intermediary banks that in the “securitization” era were not making loans but were approving paperwork that nobody in their right might would have have approved under any interpretation of national underwriting standards. These banks diverted money and title from the actual transaction in which money from strangers and title of the homeowners was diverted from the real transaction — giving a problem to both. This left “investors” without an investment and the borrowers with corrupt title.

In my opinion the way the teaser payment option was handled in the era of securitization, the borrower ended up with an unaffordable loan with terms that he or she would not have approved and which no bank was permitted to approve under State and Federal lending laws. The result was a hidden balloon and hidden payments of principal and interest payments far higher than the apparent interest rate on the face of the note. In most cases, the requirement that the documents and good faith estimate were never provided to the borrower, to make sure that the sophisticated borrower would not have an opportunity to think about it.

In one case that is representative of many others I have seen, the interest rate was stated as 8.75%, but that was not true. The principal was fixed at $700,000, but that wasn’t true either. The principal was definitely going higher each month for about 26 months, at which point, the principal would have been 115% of the original principal on the note. THAT is because each teaser payment of a fraction of the amount due for interest alone, was being added to the principal due. That is reverse amortization. But that is only part of the story.

When the principal has risen to 115% of the stated principal due in the closing documents, the loan reverts from a teaser payment — promised for several years — to a full amortized payments. So the original teaser payments was $2300 per month, while the amount added to principal was around $3000 PER MONTH. Thus after her first payment, the borrower owed $703,000. While the note and disclosure documents referred to a teaser payment that would continue for five years, that was impossible — because deep in the riders to the note there was a provision that stated the teaser payment would stop when the accrued payment exceed 115% of the original principal stated on the promissory note.

With the original principal at $700,000, the interest due was around $5100 per month on the original principal. 115% of $700,000 is $805,000, which represents a hidden increase of principal built into the payment schedule. That is an increase of $105,000 for as long as it takes with the hidden accrued interest computed in the background and not disclosed to the borrower before, during or after the “loan closing.” For a loan requiring “20% down payment” this is lost money. The 20% vanishes at the loan closing while the borrower thinks they have equity in their property. They don’t — even if property prices had been maintained.

The hidden increase of $105,000 happens a lot sooner than you think. It is called “reverse amortization” for a reason. But the unsophisticated borrower, this computation is unknown and impossible to run. In the first month the interest rate of 8.875% is now applied against a “principal” due of $703,000. This raises the hidden interest due from around $3000 per month to $3025. Each month the hidden accrued interest being added to “principal” rises by $25 per month. At the end of the first year, the payment due and unpaid principal is rising by $3300 per month. At the end of the second year it is more than $3600 per month. And at the end of the third year, if you get that far the actual computation makes the accrued interest (and therefore the principal due) rise by over $4,000 per month.

Using the above figures which are rounded and “smoothed” for purposes of this article (they are actually higher), principal has gone up by around $20,000 in the first year, $56,000 in the second year, and $76,000 in the third year. So by the end of the third year, the principal due has changed from the original $700,000 to over $850,000. But this passes the threshold of $105,000 beyond which interest will no longer accrue and will be payable in full. And THAT means that during the third year, the payment changes from $2300 to the full interest payment of $5900 per month plus amortized principal plus taxes plus insurance. Hence the payment has changed to over $6500 per month plus taxes and insurance.

For a household that qualified for the $2300 payment, the rise in payment means a guaranteed loss of their home if the loan was real and the documents were enforceable. This is a hidden balloon. The company calling itself the “lender” or “servicer” is obviously not going to get many payments at the new rate. So you call up and they tell you that in order to get a loan modification, which was probably promised to you at your original “loan closing” you must be three months behind in your payments.

Relieved that you don’t need to pay an amount you can’t pay anyway, and afraid you are going to lose everything if you don’t follow the advice of the “customer service representative, you stop paying and find yourself looking at a notice of default. The company tells you don’t worry you are in process for modification when i fact they are preparing to foreclose. There are probably a few million families that have been through this process of “lost paperwork” redoing it several times, “incomplete” etc. only to be told that you don’t “qualify” or the “investor has turned down your offer (which is a lie because the investor has not even seen your file much less considered any offer for modification).

Next comes the notice of acceleration either in a letter or in a lawsuit for foreclosure and suddenly the borrower knows they are screwed but feels it is their own fault. They feel ashamed and they feel like a deadbeat but they really don’t understand how they got to this point. THAT is the hidden balloon — an acceleration in about 26 months that is virtually guaranteed. The entire balance becomes due which of course you cannot pay. If you could have paid the full balance you would not have have taken a loan. You never had a chance. But that is only the first balloon payment that is not revealed to the borrower at his or her “loan closing.”

The second one comes at the end of 36 months. And that is because the computation of the amortized payment has been based upon the original principal and the original interest rate, both of which has changed. So even if you made it to 36 months, you would be told that you will be in foreclosure unless you pay the unpaid principal balance as the “bank” has computed it, which will probably be around $50,000-$70,000.

Florida law requires balloon payments to be disclosed in very prominent fashion. In these cases it not only was not disclosed, it was hidden from the borrower.

It is unfair and illegal to force this idiotic loan upon either the investor whose money was used to fund it without their knowledge or consent, or the borrower who obviously would not have signed a loan that he or she had no chance of paying. This is why forensic reviewers are necessary and expert witnesses are necessary. But for those of you who are entering into trial without benefit of forensic reviews and experts, you can still do this computation yourself and see what happens. Or any accountant can compute the final figures for you.

It is simple and simply wrong. And while you are at it, ask any lender of any kind anywhere if they put THEIR OWN MONEY at risk making a loan like that. Notice that I have not even bothered to mentioned the inflated appraisal.

FYI. Failure to Disclose in capital letters with the statutory language in Florida extends the maturity date indefinitely untinl interest and principal are paid in full. For Florida law see

Florida Balloon Payments

But in addition, the failure to disclose this also violates the Federal Truth in Lending Act. And the failure to provide a good faith estimate three days prior to closing is also a violation — all leading to rescission. The 9th Circuit, which had said that rescission requires tender or ability to tender the money back, reversed itself and said that is no longer necessary. But there is a three day right of rescission and a three year statute of limitations on rescission. In my opinion, both time limits would probably be applied BUT I also think that the legislation can be used defensively as corroboration for your argument that the borrower had no way of knowing what he or she was signing. AND the hidden nature of the balloon payments can arguably be said to be a scheme to trick the borrower, which MIGHT extend the running of the statute.

See Reg Z in full, but here is the part that I think is important:

(e) Prohibition on steering.

Prohibits a loan originator from “steering” a consumer to a lender offering less favorable terms in order to increase the loan originator’s compensation.

Provides a safe harbor to facilitate compliance. The safe harbor is met if the consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and the loan options presented to the consumer include:

  • (A) the loan with the lowest interest rate for which the consumer qualifies;
  • (B) the loan with the lowest total dollar amount for origination points or fees, and discount points, and
  • (C) the loan with the lowest rate for which the consumer qualifies for a loan without negative amortization, a prepayment penalty, interest-only payments, a balloon payment in the first 7 years of the life of the loan, a demand feature, shared equity, or shared appreciation; or, in the case of a reverse mortgage, a loan without a prepayment penalty, or shared equity or shared appreciation.

To be within the safe harbor, the loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business. The loan originator can present fewer than three loans and satisfy the safe harbor, if the loan(s) presented to the consumer otherwise meet the criteria in the rule.

The loan originator must have a good faith belief that the options presented to the consumer are loans for which the consumer likely qualifies. For each type of transaction, if the originator presents to the consumer more than three loans, the originator must highlight the loans that satisfy the criteria specified in the rule.

< Back to Regulation Z

 

Loan Without Money

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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If you went to the loan closing, signed the papers and then gave them to the closing agent and then the “lender” didn’t fund the loan, what would you do? If you ask an attorney he or she would probably demand the return of the closing papers. If the mortgage got recorded the attorney would threaten a variety of consequences unless the filing with the county recorder was nullified (because it can never be physically removed).

If you were then contacted by a mysterious stranger who said forget the loan papers, I’ll loan you the money, you might have accepted. This mysterious person sends the money to the closing agent who disperses it to the Seller of the property or pay off the prior mortgage etc.

Now imagine that the first “lender” ( the one who DIDN’T make the loan) has “assigned” the documents you executed to another party who also didn’t loan any money to you and who didn’t pay for the assignment because they knew full well that the loan papers were worthless. And the “lender” designated on the note and mortgage doesn’t ask for money because they know they didn’t loan a dime to you. But they gladly accept fees for “acting” as though they were the lender and renting their name out to be used as “lender.”

And finally imagine that the assignee of the worthless documentation you executed again assigns and endorses the note and mortgage to still another party, like a REMIC Trust. What did the REMIC Trust get? Nothing, right? Not so fast.

If this last transfer of the “loan” PAPERS (described as “documents” to make them sound more important) was purchased for value in good faith without knowledge of your defense that you never received the loan, you might still be liable on that note you executed even though you never received the loan. Yes you owe the holder in due course in addition to owing the money to the mystery stranger who wired the money to the closing agent. The Trust COULD enforce the loan or at least try to do so and it would be legal because they would be a HOLDER IN DUE COURSE (HDC). An HDC can enforce free from borrower’s defenses. That is the risk of signing documents and letting them get out of your hands before you receive what you expected as part of the deal.

Why then is there no evidence or allegation by any forecloser in the securitization schemes that they have HDC status? I represented hundreds of banks, lenders, and associations in foreclosures. If anyone was holding the paper as an HDC that is what I would have said in the pleading and then I would have proven it. end of story. The borrower might have a lawsuit against the third parties who tricked him but the HDC still has a good chance of prevailing despite grievous violations of lending laws and procedures at closing — including lack of consideration (they didn’t fund the loan for which you executed the closing documents).

The ILLUSION of a loan closing has been created because both “loan” scenarios in fact occurred AT THE SAME TIME at most “loan” closings. Two different deals — one where you didn’t get the money and the other where you did. One where you signed the closing documents but didn’t get the loan and the other where you signed nothing and got the money from the loan.  In other words, you signed documents, you delivered them to the closing agent and they were delivered and recorded. But the “lender” didn’t give you any money. Ground zero for the confusion and illusion is the receipt of money by the closing agent fro the mysterious stranger instead of the party in whose favor you executed the note and mortgage.

And here is the good news. The banks know full well they can’t win if they allege they have HDC status or even that the Trust has HDC status. So they allege that they are “holders” or they allege they are “holders with rights to enforce.” More often than not they simply allege either that they are simply a “holder” or that they have the “rights to enforce.” They let the court make the rest of the assumptions and essentially treated as though the party foreclosing on you had HDC status. That is ground zero for judicial error.

The Trust never issued payment to the assignor of the loan because the assignor didn’t ask for any money except for fees in “acting” its part in the scheme. The assignments and endorsements, the more powers of attorney, the higher the stack of paper. And the higher the stack of paper the more it looks like the the loan MUST be valid and enforceable, that you did stop paying on it, and that therefore you MUST be in default.

Meanwhile the mysterious stranger is getting paid by the people who entered into an agreement — a pooling and servicing agreement — under which the investors get paid from the Trust, Trustee or Master Servicer that issued bonds to the mysterious stranger. The terms of payment are very different than the terms of your note but that doesn’t matter because they never loaned you money anyway. The real basis of the ability of the servicer and trustee to see to it that you receive your expected payment is the ability of these brokers, conduits and sham corporate entities and trusts to get their hands on your money, and the money of investors in the Trust.

Why did the mysterious stranger send money for you? Was it a gift? Of course not. But without documentation the mysterious has exactly one legal right — to demand payment at any time for the entire balance of the loan plus reasonable interest. No foreclosure, because there is no mortgage. No acceleration necessary because you already owe the entire amount. Your homestead property is NOT at risk in Florida and many other states, because the mysterious stranger has no mortgage recorded. And the full balance of the loan to the mysterious stranger is completely dischargeable in a chapter 7 bankruptcy or can be reduced substantially in a Chapter 13 or chapter 11 Bankruptcy.

Why did the mysterious stranger make the loan? Because the stranger was tricked by the same people who tricked you — under several layers of complicated relationships such that it is difficult to pin the blame on anyone. But this isn’t about blame. It is about money. Either they made a loan or they didn’t. And the answer is that nobody in their chain of “title” to the loan PAPERS ever paid one dime to loan you money or buy your loan. They are hiding that from both investors and you.

The mysterious stranger gave a broker money because he thought the broker was the intermediary between the mysterious stranger and a REMIC Trust that was issuing a semi-public offering of Mortgage Banked Securities (MBS). The stranger thinks he is an investor buying securities when in fact he has just opened the door for the broker to use his money in anyway the broker wanted, including lining the broker’s own pocket with the principal that should have loaned on good solid viable loans. The illusion is enhanced by the broker when the broker makes certain that the mysterious stranger is addressed as an “investor” or “trust beneficiary” of the REMIC trust.

The mysterious stranger who made the actual lender is tricked into believing that he has purchased a fractional ownership of thousands of mortgages including yours. That what the Prospectus and PSA seem to be saying. In reality the money that the mysterious stranger gave to the broker, stayed with the broker and that satisfied the feeding frenzy of sharks circulating around each dump of money from mysterious strangers.

“Bonuses” that were incomprehensible to the rest of the world were lavished upon the people who actually made this trick work. The  bonuses came from “profits” that were declared by the brokers from some incredibly lucky “trades” that never existed in which the Trust “bought” the loans at a price far higher than the principal balance of the loans, including yours.

AND THAT IS THE REASON FOR THE LOST, DESTROYED, FABRICATED LOAN AND TRANSFER DOCUMENTS. THE BANKS ARE CREATING THE APPEARANCE OF NEGLIGENCE THAT OVERRIDES THE TRUTH — IT WAS FRAUD. The only reason you would destroy a cash equivalent document is because you told someone it promised payment of $100, when in fact it promised only $60. The Banks can’t reveal the real money trail without revealing their vulnerability to criminal prosecution.

Of course the problem was that the broker didn’t loan you any money and either did the trust, the trustee, the servicer or any of the conduits or other intermediaries. And so none of them were entitled to have or do anything with the PAPER that had your signature on them — which contained one key term that they didn’t want anyone to see — the principal balance stated on the note.

If the mysterious stranger found out that for every dollar he paid the broker for a mortgage bond, only 60% was being used for loans, then the mysterious stranger would stop giving the broker money and would have demanded the return of all funds. But the mysterious strangers who in reality had given naked undocumented demand loans to homeowners had no idea that anything was wrong because the payments they were receiving were exactly what they expected.

So when the “borrower” is asked “did you get the loan.” His answer is “which one are you asking about?” Because no loan was ever made, directly or indirectly by the “lender” on the note and mortgage. Did you stop paying? Of course, why should I pay someone who I thought was my lender but isn’t.

All of that is the exact reason why the investor “mysterious stranger” lawsuits have all been settled for hundreds of billions of dollars. But in the end this is about the mysterious stranger and the lender designated on the note and mortgage. The fact that either way the mysterious stranger’s money was to be used for loans is not the point under our system of law. If anyone wants to enforce commercial paper based upon a loan that was never made, they lose if they are merely a “holder,” and “holder” status is all that the foreclosers have ever alleged. Their “right to enforce”comes from cyberspace rather than the owner of the loan. The owner of the loan, is in the final analysis a mysterious stranger to any of their PAPER.

The solution to our economic crisis that simply won;t end until this wrong is addressed is to stop rewarding bad behavior and let the mysterious strangers and the borrowers meet each other in the market place. Under threat of a demand loan due in full right now, nearly all homeowners would execute enforceable, clean notes and mortgages in favor of the mysterious strangers and then they could BOTH sue the intermediaries that corrupted the title and investments of the “mysterious strangers.”

Presented correctly by counsel for the homeowner, the men and women sitting on the bench will accept the truth as long as you exercise your rights to object to the use of presumptions instead of facts and demand your right to receive discovery that would disprove all the presumptions upon which the brokers and their nominees rely. Stop admitting things you know nothing about. Presume that there is a shady reason why the foreclosing party never asserts itself as an HDC. That is your clue to the truth.

 

It Makes No Sense

For further information and consultations please call 520-405-1688 or 954-495-9867. We offer litigation support to attorneys throughout the country. Consultations outside of Florida require an attorney to be on the line with you.

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We received so many calls from my post on Friday asking me to write more on the Burden of Proof that I decided to write a supplement. See The Burden of Proof Must be Changed: BofA Slammed Again

IT MAKES NO SENSE

“Your Honor this is a simple foreclosure on an ordinary mortgage.” Those words, uttered by most foreclosure attorneys are very misleading. Because the attorneys don’t have the information I have, the attorney might actually think the words he or she is speaking are true. But they are not true in most cases.

  • If this was an ordinary loan with an ordinary loan closing why did the banks engage in fraudulent behavior in foreclosure cases — robo-signing, forgery, fabrication and even foreclosing on loans that were neither delinquent nor properly declared in default?
  • If it was so ordinary why are the trial and appellate courts dealing with the issue of jurisdictional standing — because the owner of the loan is in doubt, to say the least?

As for securitization they are right — if it was done right. If you start with the proposition that the intent was for the brokers on Wall Street to create residential loans and give their clients a slightly higher yield from a portfolio of loans than the other bonds the investors were buying, and that ordinary underwriting practices had been employed in approving loans, then

  • why are the Banks so reluctant to allege and prove the identity of the lender?
  • Why have so many studies concluded that the foreclosers are mostly “strangers” to the transaction (San Francisco and Baltimore Study) or that at least half the loan documents were destroyed or lost?
  • Why would a lender or purchaser of loans destroy cash equivalent notes unless they had something to hide?
  • Why do they employ professional “testifiers” instead of actual employees or officers of the creditors?
  • Why are so many foreclosures failing because they failed to prove their case (a rising number with each passing month)?

None of it makes sense. These banks have been dealing with paper instruments for hundreds of years. The plan is laid out in the PSA.

  • Why were the loan settlement documents not delivered to the Depository for the alleged REMIC trust? Why is there no evidence of the Trust actually buying the loan within the cutoff period in the PSA?
  • What were the brokers doing with the investors money while the investors thought the money had gone to the trust in exchange for the mortgage bonds issued and sold by the trust?
  • What were the brokers doing with the closing paperwork after using the investor’s money, without disclosure to anyone, to either buy or originate loans without specifically and expressly protecting the bond buyers in written instruments that were properly and timely recorded?

I submit that there are no GOOD reasons or GOOD answers to those questions. I submit that if you start with the premise that the brokers started with the intent to steal the money and steal the loans, then everything DOES make sense.

  • It makes sense that the loans were nearly all table-funded which is predatory per se according to Reg Z. But it doesn’t make sense if the brokers wanted clean loans with total transparency as required by law. It makes sense that they were concealing the actual source of funds (the investors directly instead of through the REMIC trust). And it makes sense that the Wall Street brokers and the web they spun of multiple layers of multiple companies were collecting and keeping undisclosed compensation that was largely an instant loss to the investors.
  • It makes sense that the money was not deposited into a Trust account where a real trustee would have control over the funds and make sure that the terms of the trust were followed. If they had given the money to the trust, then the brokers would not have been able to play with that money as if it were their own.
  • It makes sense that the investors’ money was used directly, instead of the coming from the trust because if it came directly from a trustee for the trust, then the trust would have had to get the settlement documents deposited with the depository and the required documents for instant ownership of the loan for which the investors’ money was used. By using the investors money under the illusion of a REMIC trust it makes it appear as though a trust is involved when in fact it is the broker who is controlling the transaction, not disclosing to the investors the real nature of the loans that were being approved, and leaving the buyers of those bogus mortgage bonds either without any disclosure to alert them that something was wrong or barred from finding out because of restrictions on inquiries contained in the PSA.
  • And if makes sense that they used multiple layers of nominees without the slightest actual interest or risk in the loan to divert ownership of the loan away from the investors to the broker’s trading desk. By diverting the transaction away from the Trust and the Trust Beneficiaries they were able to create the illusion of a sale of the actual loan with an interest rate of 9% as though it was a 5% loan. That makes sense because the brokers were able to claim a “profit” on that Sale” — a 5% loan sells at twenty times earnings. So the broker sold the loan on its proprietary trading desk for nearly twice the loan amount — bequeathing an instant 50%-70% loss to the investors who thought their money was going through a carefully monitored trustee process and scrutiny.
  • And it makes sense that they kept paying the investors even though the loan portfolio was collapsing, reporting loans as performing when the borrowers were not paying. If they didn’t do that — with a reserve created out of the investors money — then bond buyers would stop buying.
  • And it makes sense that they would seek foreclosure as their first goal because that is the only way to create the illusion of clearing title. If they don’t foreclose as many loans as possible, the whole plan blows up because in a workout of the loan terms the brokers would be required to account for the profits and compensation and losses attributable to their plan. They would be required to refund or repurchase all the crazy loans they made that were made to fail.
  • It makes sense that the brokers, controlling the servicers, would engage in a policy of luring the borrowers into “default” by stating that that the borrower would get a modification only if they are at least 3 months behind on their payments. If they didn’t engage in policies and practices designed to cause foreclosures to be filed, then their story about the crisis being related to loan defaults,falls apart. It would become obvious that the crisis occurred because the brokers took 20%-120% out the money flow created by investments from bond buyers.
  • It makes sense that they don’t have a designated person at trial or can actually testify to each step in each transaction and whether the trust exists and what actual figures are shown on the books of account for the real creditors — the bond purchasers — as to the existence of a default and the principal balance due.

I guess I could go on forever. But you get the point. Start with the premise that the brokers set out on an illegal enterprise and everything falls into place. Start with premise that they were just doing their job according to law, and everything falls apart and MAKES NO SENSE.

Chase Slammed By CA Appellate Panel: Bank committed fraud in order to show ownership

Housing Wire, Ben Lane (see link to article below): “Bank committed fraud in order to show ownership.”

We are entering the 6th inning of the game started by Wall Street when it created the smoke and mirrors game based upon false claims of successors and securitization. As lawyers actually do the work investigating and researching, they are getting results that come closer and closer to the reality that the whole thing was a sham.

For each Appellate decision, like this one, there are hundreds of rulings from Trial courts in which Orders were entered finding for the borrower and against the “lender” — simply because the pretender lender was identified as trying to foreclose on property to enforce a debt that was owed to somebody else. Either Judgment was entered for the borrower or, in thousands of cases, discovery orders were entered in which the pretender had to open its books, along with its co-venturers, to show the money trail, which almost never matches up with the paper trial submitted to the court.

But the problem remains that most Judges are still stuck on moving the burden of proof onto the borrower instead of the party seeking foreclosure. The lawyers say it doesn’t matter what the borrower is saying about the paper trail or the money trail or the so-called securitization of the loan.

It doesn’t matter, according to them, if the act of foreclosure itself is an act in furtherance of a fraudulent scheme that started when mortgage bonds were sold to investors and that the money was used in ways the investors could not have imagined. It doesn’t matter that the pretender lenders are taking money from the the real creditors, along with assets that should have collateralized the investment of the real lenders, and taking the homes of borrowers from them despite their entitlement to credits and opportunities to modify under law.

It doesn’t matter that the “lender” broke the law when they made the loan, broke the law when they transferred the the paperwork, and broke the law when they created paperwork that was NOT the outcome of any real transaction.

Attorneys for the banks are actually arguing that it doesn’t matter where the money came from. All that matters, according to them is that money was received by the borrower. The fact that it didn’t come from the lender identified in the closing documents is irrelevant. The consideration is present because the lender promised the loan, and even though they never made the loan or funded it, the lender managed to get somebody’s money on the closing table. That is consideration, according to them.

The danger of this argument, often readily accepted by trial judges, is that it opens the door to the moral hazard we see playing out in virtually all foreclosures. One attorney actually said that if our “theory” was right, then the whole foreclosure docket would be cleared, as though that would be a bad thing. Here’s our theory: “Follow the Law.” In other words stop the servicers and other intermediaries from pushing cases into foreclosure to the detriment of BOTH the creditor and the lender.

This is not one case involving moral turpitude by one Bank. Chase Bank has been involved in a pattern of behavior of falsifying facts and documents from the beginning in a coordinated effort with all the foreclosure players, to force as many foreclosures as possible, dual tracking innocent homeowners, luring them into default with false statements about how they needed to be 90 days behind to be considered for modification, and falsely claiming that the money on the loan was owed to the forecloser — or some unnamed creditor which gave them the right to enforce.

It is still counter-intuitive for most people in the system to confront the truth and believe it. These loans were mostly created pursuant to prior Assignment and Assumption Agreements that called for violations of Federal and State laws. Those agreements were void, as being against public law and public policy, and so were the acts emanating from those agreements. And the perjury, fabrication, robo-signing and unauthorized execution of false documents are the rule, not the exception. Why? Because it is a cover-up.

If banks (as the middlemen they are supposed to be) really did what the securitization documents said they should do, they wouldn’t need false documents, false facts, and false testimony. If the foreclosures were genuine they would not need to rely on false presumptions about holders, holders with rights to enforce and ignore differences and conflicts with holders in due course.

Falsification of facts and documents for closing of loans, collection of payments, and enforcement of false notes and mortgages, is now the rule. What are we going to do about it. Chase Bank didn’t do this by “accident.” It as intentional. Why would they ever need to do that if the loans were genuine, enforceable and being enforced by the real creditors?

http://www.housingwire.com/articles/30540-chases-fraudulent-foreclosure-court-says-executive-falsified-documents

For further information call 954-494-6000 or 520-405-1688.

It Was the Banks That Falsified Loan Documents

I know it doesn’t make sense. Why would a lender falsify documents in order to make a loan? I had a case in which a major regional bank had their loan representatives falsify loan documents by having the borrower certify that there were houses on his two vacant lots. The bank swore up and down that they were never involved in securitization.

When the client refused to make such a false statement — the bank did the loan anyway AS THOUGH THE NONEXISTENT HOMES WERE ON THE VACANT LOTS. Thus they loaned money out on a loan that was guaranteed to lose money unless the borrower simply paid up despite the obvious loss. The borrower’s error was in doing business with what were obviously unsavory characters. True enough. But he was dealing with the regional bank in his area that had the finest reputation in banking.

He figured they knew what they were doing. And he was right, they did know what they were doing. What he didn’t know is that they were doing it to him! And they were doing it to him in furtherance of a larger fraudulent scheme in which investors were systematically defrauded.

When I took the client’s history all I had to hear was this little vignette and I knew (a) the bank was involved in securitization and (b) this loan was securitized BEFORE the closing and even before any application for loan was solicited or accepted by the bank. The client balked at first, not believing that a bank would openly declare its non-involvement with Wall Street when the truth would so easily be known.

But the truth is not easily known — especially when the bank is involved in “private label” trusts in which there are no filing with the SEC or other agencies.

The real question is why would the bank ask the borrower to certify the existence of two homes that were never built? Why would they want to increase their risk by giving a loan on vacant land that supposedly had improvements? Or to put it bluntly, Why would a bank try to cheat itself?

The answer is that no bank, no lender, no investor would ever try to cheat themselves. The whole purpose of our marketplace is to allow market conditions to correct inefficiencies and moral hazards. So if the bank was cheating or lying, the only rational conclusion is not that they were lying to themselves, but rather lying to someone else. They were increasing the risk of non repayment and decreasing the probability that the loan would ever succeed, while maximizing the potential for economic loss to the lender. Why would anyone do that?

The answer is simple. These were not “overly exuberant” loans, misjudgments or “risky” behavior situations. The ONLY reason or bank or any lender or investor would engage in such behavior is that it was in their self interest to do it. And the only way it could be in their self interest to do it is that they were (a) not lending the money and (b) had no risk of of loss on any of these loans. There is no other conclusion that makes any sense. The bank was being paid to crank out loans that looked valid and viable on their face, but in fact the loans were neither valid nor viable.

Why would anyone pay a bank or other “originator” to pump out bad loans? The answer is simple again. They would pay the originator because they were being paid to solicit originators who would do this and then aggregate over-priced, non-viable loans into bundles where the top layer contained apparently good loans on credit-worthy individuals. And who would pay these aggregators? The CDO manager for the broker dealers that sold toxic waste mortgage bonds to unwitting investors. As for the risk of loss they created an empty unfunded trust entity upon whom they would dump defaulted loans after the 90 day cutoff period and contrary to the terms of the trust.

So it would LOOK LIKE there was a real lending entity that had approved, directly or indirectly, of the the “underwriting” of a loan. But there was no underwriting because there was no need for underwriting because the originators and aggregators never had a risk of loss and neither was the CDO manager of the broker dealer exposed to any risk, nor the broker dealer itself that did the underwriting and selling of the mortgage bonds.

Reynaldo Reyes states that “it is all very counter-intuitive.” That is code for “it was all a lie.” But we keep treating the securitization infrastructure as real. In the 2011 article (see below) in Huffpost, the Federal Reserve cited Wells Fargo for such behavior — and then the Federal Reserve started buying the toxic waste mortgage bonds at the rate of some $60 billion PER MONTH, which is to say that approximately $3 Trillion of toxic waste mortgage bonds have been purchased by the Federal Reserve from the Banks. The Banks settled with investors, insurers, guarantors, loss sharing agencies, and hedge counterparties for pennies on the dollar, but so far those settlements total nearly $1 Trillion, which is a lot of pennies.

Meanwhile in court, lawyers are neither receiving nor delivering the correct message in court. They seek a magic bullet that will end the litigation in their favor which immediately puts them in a classification of lawyers who lose foreclosure defense cases. The bottom line: the lawyers who win understand at least most of what is written in this article, have drawn their own conclusions, and are merciless during discovery and/or at trial. Then the opposition files a notice of voluntary dismissal or judgment is entered for the homeowner “borrower.” Right now, these losses are acceptable to banks who are still playing with other people’s money. If lawyers did their homeowner and litigated these cases aggressively, the bank’s illusion of securitization would end. And THAT means most foreclosures would end or never be started.

Wells Fargo Illegally Pushed Borrowers into SubPrime Mortgages

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