How to Use the Business Records Exception to Hearsay Rule to Keep Out “Servicer” Records in Foreclosure Cases

Fundamentally you must understand that the investment banks want you and everyone else to look only at the payments history — not the debt, who owns it and whether anyone suffered a loss resulting from any lack of payment by the homeowner.
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Their strategy is to get the court to presume that in the absence of payments someone must have suffered a financial loss since the debt was clearly established in a transaction in which the homeowner received money and issued a note and mortgage. In the present securitization era that paradigm is wholly untrue but not obvious because the banks turned “lending” on its head. The homeowners took what they thought was a loan but the banks were not lenders and had no intention of becoming lenders.
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The problem is that most homeowners believe the myth promulgated by the banks because they don’t understand what really happened in what the banks call “securitization.”
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The truth is that nobody has suffered a financial loss from “nonpayment” by the homeowner.
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Everyone has already been paid as to the principal obligation.
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Collection efforts directed at the extinguished obligation are pure business strategy designed to increase already astonishing profits achieved through “Securitization” which like everything else is not in substance what the label conveys, to wit: the homeowner obligation was never sold to investors and therefore cannot be said to have been securitized. 
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One of my most prolific contributors points out how Fannie Mae uses a company who to this day incredibly remains out of the limelight despite being the only company whose division president, Lorraine Brown, went to jail for falsifying documents. It wasn’t really her fault. There were no transactions that fit the mold required to have an enforceable claim in foreclosure. But the banks wanted the money anyway. So they invented the appearance of transactions even though nothing had happened in the real world.

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It isn’t just Fannie Mae. Most homeowner transactions are established on LPSDesktop.

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The banks, in their never ending quest to send us down rabbit holes only present the “servicers” and their “business records”.

They do that to (a) avoid the hearsay rule because someone comes in without knowledge and says he has knowledge that these records were created in the ordinary course of business and they were created at or near the time of the transactions — which is only partially true and (b) to avoid the pesky problem of presenting details about the transaction that could show that the debt and the role of the creditor were extinguished in the process they’re calling “Securitization.”

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Practitioners would be wise to keep in mind two things:
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(1) the “servicers” are not servicers in the sense that anyone thinks of a servicer. They do process payments from homeowners but they do not process anything else. — The “servicer” records do NOT show where payments were forwarded, which would identify and confirm that the claimant or Plaintiff in foreclosure is in fact the owner of the debt.
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(2) the payment record from the “servicer” reflects only those payments received by that servicer (and perhaps an unaudited compilation of prior payments reported through LPS Desktop). The payment history might be admissible in evidence but only as to the record of payments, about which the practitioner should object for lack of foundation. — Without testimony or other evidence that (a) the debt was established as owned by a specific creditor anad (b) that the payment history is part of the records of the creditor, not just the servicer, the payment history should be excluded. 
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(3) A subpoena issued to Black Knight fka Lender processing Systems, aka LPS, demanding records relating to the subject debt, note or mortgage will be met with a barrage of objections, which if properly litigated will probably result in a favorable decision for the homeowner.
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(4) The object of litigation of foreclosure defenses is to show that the debt was removed from the chain. You accomplish this by relentlessly and aggressively pursuing the identity of the creditor. there isn’t one where any REMIC is involved.
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(5) Without a creditor there can be no delegated authority to enforce, collect or even administer the loan. “Authority” does not exist in a vacuum. there must be a source of authority. And the source of authority must be someone who legally owns rights to the debt over which he can delegate, as owner, the rights to enforce. 

see Black KnightÕ latest innovation: LoanSphere supports entire loan lifecycle – HousingWire

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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Coming this fall! A new wave of illegal foreclosure claims. Will we get it right this time?

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

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

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

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

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

My opinion is that the reason most people are dissatisfied with the status of business and politics is that we have all bought into the myth or at least tolerated the myth that capitalism IS democracy. It isn’t.

Capitalism is an economic system whose basic premise is to make as much money as possible. Democracy is a political system whose basic premise in our country is to regulate imbalance, injustice and over-reaching by the rich and powerful.

We have reached another tipping point in which capitalism is affecting our political decision making and voting. It should be the other way around. Democracy (or in our case a democratic republic) should be affecting  capitalism such that the country benefits from capitalism, not just a few successful people who come to dominate our laws.

They are both good systems and a healthy debate between the two is what our founders intended. But capitalism is a vehicle of democracy as it was intended. Democracy is not a vehicle of capitalism. Democracy is the antithesis of capitalism. Only democracy can preserve a free market system with relatively equal access and opportunity. No capitalist wants that. Once they get in they want only to preserve, control and enlarge their share of the market. So it’s up to government, not business, to make the necessary corrections.

Capitalists attempt to equate, with some success, the requirements of democracy with the imposition of a totally new economic system — like Marxism or Socialism — to scare people into voting for people who will preserve “america’s greatness.” What they’re really doing is using their considerable influence to preserve their power and their never ending quest to make more money.

see Why Are Workers getting Paid Less

The American economy has become more ruthless, as declining unionization, increasingly demanding and empowered shareholders, decreasing real minimum wages, reduced worker protections, and the increases in outsourcing domestically and abroad have disempowered workers — with profound consequences for the labor market and the broader economy.

The reason for this imbalance is really very simple, Business owners did it because they could. Business owners did it because stockholders think they should. And that is fine in a capitalist system. And such imbalances would never have worked but for the availability of and the marketing of credit options in lieu of salary and other compensation to workers. Debt replaced wages.

And now the businesses that supply credit are inventing ever more abundant ways to sell us on more credit, which results in a playground of “investing” and gambling in the securities markets. In the end only the intermediary securities brokerage firm make any money. Don’t blame them. That is what they are supposed to be doing.

Fundamentally the problem is that as long as we cling to the view that capitalism is the government system rather than just an economic vehicle for our democracy, we will accept the party line from Wall Street which sees consumers, workers and homeowners not as victims, which they are, but as worthless individuals who are demanding undue benefits.

Take a step back. With some entrepreneurs reaching the trillionaire mark, who is getting undue benefits? We have people now that could purchase, without any help, more than 4 million homes in America at at an average of $250,000 each.

It is not an undue benefit to seek the opportunity to bargain for a fair share of American Prosperity. That opportunity does not exist with laws and policies that discourage worker unions, consumer unions and a judicial system that virtually hands the control over to the mega rich companies who are torturing consumers and especially homeowners with forfeitures and losses while the banks, as intermediaries, are making a fortune.

American law is based upon the proposition that nobody should be able to even ask for a remedy in court without there being pleading and evidence to show that that the object of their attack has done something wrong to them and that the claimant suffered injury. In the current world of securitization no such injury exists and yet we continue to pile profits onto the intermediaries that created this system. Don’t blame the banks. Hold your government accountable and wake up to the reality of a government system that is tipping toward corporate ownership and control.

All politics is local (quoting former Speaker of the US House of Representatives). This November vote for people who are committed to making your life better in concrete ways.

The difference between Donald Duck and MERS? Zero. They are both fictional characters.

The beloved cartoon character is registered by copyright. the MERS entity is registered as a corporation. Neither one ever owned any debt, note or mortgage, directly or indirectly. Neither one serves as agent of any “successor” to the “originator/Lender” on any residential mortgage loan. Decisions in Maine mirror the issues across the country.

MERS is NOTHING. No document executed on behalf of MERS allegedly transferring ownership of a mortgage or deed of trust is legally valid in any manner, shape or form.

And that is because unless the transfer of the ownership of the mortgage comes from one who legally owns it, it is a legal nullity — the equivalent of a wild deed.

Any document purporting to transfer ownership of the mortgage or the right to enforce the mortgage that is not accompanied by a transfer of the debt is a legal nullity.

Since MERS NEVER touches any money and specifically disclaims any interest in any debt, note or mortgage, it can only serve as agent. Since the law (and about 300 years of legal precedent) requires that the mortgagee can only be one who has paid value for the debt, MERS has no power or right to transfer any mortgage or deed of trust unless the originator was an actual lender who owned the debt at the time MERS was asked to execute an assignment.

Any acceptance of instructions from a self proclaimed “principal” and “successor” in the MERS agency is merely a request to perform an illegal act. There are no successors unless someone acquired the originator. But nobody does because to do so would be inviting liability for lending law violations.

see… https://www.americanbar.org/groups/business_law/publications/blt/2020/05/mers-mortgages/

Maine’s Supreme Court recently held that a foreclosing lender’s equitable interest in the mortgage does not by itself equate to ownership of the mortgage and does now allow courts to compel the mortgage’s assignment.Beal Bank USA v. New Century Mortg. Corp., 2019 ME 150, ¶ 15. The opinion revives concerns over the viability of foreclosing Maine mortgages involving Mortgage Electronic Registration Systems, Inc. (MERS).

MERS operates as an electronic mortgage registry whereby borrowers taking out mortgage loans give the mortgage to MERS as nominee for the lender’s successors and assigns.

Has any homeowner transaction ever been sold to investors? No? Then why are we accepting the bank myth that it was securitized?

Bob gives me a mortgage and I sign a note for $300k. Bob assigns the mortgage and note to Steve in exchange for “certificates / securities.” Bob retains the note and pledges to Jim in a collateral assignment to raise money to fund more loans. (i.e. WaMu and the Federal Home Loan Banks). I stop paying and soon Steve declares a default and tries to foreclose. My defense is that Steve doesn’t have the note, never took the note, and the note was collaterally assigned elsewhere before Steve filed the foreclosure action. If so, we can make that same defensive argument in every case it would seem.

No that is not a good defense. Your defense should be centered on who owns the debt. And only someone who has paid value for the debt can own it. If someone pays value in exchange for ownership of either the note or mortgage, then it is presumed that they own the debt — and it would be very hard to rebut that presumption.

So if someone pays money without getting or being entitled to a document that transfers the ownership of the debt from the current owner to the new owner, they have not acquired the debt.

Similarly, if someone has not paid value for the debt or note and they do get such a conveyance of ownership of the debt, even from one who is the owner of the debt, they too don’t own the debt. And a non-owner of the debt cannot issue any rights or instructions regarding the debt without deriving authority from an owner of the debt who paid for it.

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The transaction between Bob and Steve was a sale. Steve paid value unless the certificates or securities he used as payment were known to be worthless at the time of the sale. The fact that Bob retained possession of the note does not change the analysis. When Steve seeks to enforce the note he either has to get Bob to produce it or if he can’t, then he needs to plead a lost note. The transaction that you have used as an example does not convert the note to a security.

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Steve also has the option of suing Bob in the event that Bob is reluctant to turn out for possession of the note. but in all events Steve can show that he bought the note, which means that he bought the debt, and therefore is probably a holder in due course or at least a holder with rights to enforce as the owner of the debt.
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But the analysis does change if the example is changed slightly. If Bob was loaning you money because Steve was contemporaneously taking Bob out of the loan, then in substance the conduct of the parties shows that Steve was the actual lender and that Bob was simply an intermediary. This is the essence of a table funded loan which is against public policy as set forth in the Truth in Lending Act.
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So if Steve did not take possession of the note because Steve did not want to be accountable or liable for violations of lending laws as a lender, there is a case to be made that the nature of the transaction shifted. And if Steve gave Bob the money to lend to you because Steve was contemporaneously divesting himself from any risk of loss on the loan, then the argument would go one of two ways.
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Either the next person in the chain acquired ownership interest in the debt and note — or if Steve was merely selling derivatives whose value was indexed on the performance of your loan, then then the debt and note probably lost a creditor who could legally claim rights to enforce. As I see it, this would definitely be true if nobody in the chain was carrying the debt and note as an asset after Steve made his sale of derivatives.
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But I don’t think that under Securities analysis, the latter example would result in finding that the note had been converted to a security. It’s hard to see any analysis that would support that conclusion. If nobody was paying for legal ownership of the note then how would the note be converted?
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Of course that could be one possibility that would preserve the securitization infrastructure. And maybe if the courts catch the Wall Street banks with their hands in the cookie jar, the banks themselves might push that idea.
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Given the political climate that allows Wall Street to make up its own rules, that might happen, leaving both investors and homeowners out in the cold. That is why I’m starting to push Reformation as the better alternative which takes all stakeholders into account.

Tonight! FDIC Regs Show Sham WAMU-Chase Transfers, And Covid Updates 3PM PDT, 6PM EDT

Thursdays LIVE! Click in to the WEST COAST Neil Garfield Show

with Charles Marshall and Bill Paatalo

Or call in at (347) 850-1260, 6pm Eastern Thursdays

When some mortgage broker pretends that they are a mortgage lender and steals the money or the house or both, he or she goes to jail and a receivership is set up to claw back the illicit gains. But when a monster like Chase does it, it barely lifts an eyebrow even though people and institutions are being cheated left and right.

The big question is when our institutions start working again and when specifically be Chase foreclosures be forever barred when they are based upon false claims that Chase is the creditor or somehow has obtained authority to foreclose. That authority must come from a creditor who owns the debt by reason of having paid for it in exchange for an instrument of conveyance of that debt from someone who owns it. Yes it is that simple.

The plain fact is that WAMU, if it ever owned any loans, sold them long before Chase entered the picture. Therefore Chase didn’t buy them and if they had any intention of doing so the FDIC, for the protection of all stakeholders would have demanded far greater consideration than the ZERO consideration recited in the Purchase and Assumption Agreement executed on September 25, 2008.

Bill Paatalo in a recent Blog Post (May 14), laid out the position that the FDIC’s own promulgated Rules and Regulations demonstrate that the WAMU to Chase purported transfers of securitized trust mortgage loans never legally properly happened due to the criteria laid out in same Rules and Regulations. Bill will cover the factors at play here, including showing how WAMU’s loan were ‘legally isolated’ from the FDIC Receivership of WAMU when WAMU went into bankruptcy in 2008 to facilitate transferring loans to Chase.

Charles Marshall will cover the latest in Covid-19 policies, with special attention to California and the impact these overlapping policies have on foreclosure sales and foreclosure litigation.

HELOC Securitization Analysis — Why Are There Two “wet ink” Signatures? What Rights Does MERS Possess?

“a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it”

“because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose.”

The writer of this article shall remain anonymous. He sent me the following. I concur with his analysis:

I came across your June 17th post about the mortgage exec that double-pledged some notes.  This is a subject I’ve been looking into for a while, thanks to Nye Lavalle’s writings – damn him for sending me down that rabbit-hole.  You might also look at:

https://www.justice.gov/usao-sdny/pr/former-comptroller-mortgage-lender-charged-bank-fraud-and-wire-fraud and the incitement at https://www.justice.gov/usao-sdny/press-release/file/1017921/download

As I came to realize that this isn’t a one-off scam…  I got to thinking about why do all closings require two wet-ink originals?  Not only for “sum certain” mortgages but for HELOC’s too.  So, I darned my tinfoil hat and let my mind wander into the conspiracy abyss.  I’ve always been uncomfortable with the double-document signing at closings.

As I carefully nit-pick through my own documents, I can’t help noticing that, often is the case that the County recording uses one set of the wet-inks, while the bank uses the other.  Is this just a matter of convenience, whereby the closing title/abstract company sends one set to the county clerk and the other to the lender, for its MERS recording.  Of course, the counties don’t record notes, only mortgages, so that’s a bit of a chink in the armor there.

Then I realized that the Clerk set isn’t indorsed because that process comes later (albeit not much later, actually depending on the county’s back-log it could be sooner than later) – OK, no big deal – BUT WAIT – it’s not like they wait to get the recorded set back and then indorse it – no – they just indorse the other set.  So, the secondary-market set is not the recorded set.  Hmmm, Ok, a bit nefarious, but is it a non-starter for foreclosure –  probably not.

But then I realized that my HELOC had the same slipperiness.  In HELOC foreclosures (at least mine with Citibank), the bank presents the endorsed HELOC (HELOC-CEMA because it’s NY) as its prima facie evidence for standing, swearing that it’s the “indorsed note”; while sometimes also swearing that it’s not securitized it never left the bank’s hands (holding), which in-and-of itself is curious, because if it never transferred, then why is it indorsed?

TIME OUT:  No Neil, I didn’t make a spelling mistake (indorsed vs endorsed), but I am messing with you, because so are the banks.  Of course, you know (but your readers probably don’t, and many judges probably miss the subtlety too).  “Endorse” means accredit by bestowing recognition; whereas “Indorse” means to sign a negotiable instrument for transfer as per the UCC.  Sadly, many dictionaries, especially software and web-based lexicons make these two words synonymous, which they are not.  Some lexicons don’t sanction“indorse” as a correct spelling, which it is, but as a different word, not just an alternate British/American spelling choice.

OK, back to the bank’s slip & slide of portending that they are presenting an indorsed note.  Nope, a revolving line of credit agreement (HELOC or Reverse mortgage) is not a note.  It’s not a “sum certain” so it can’t be a note, because a “note” is a negotiable instrument (as per article 3 — but even article 9 provides the same definition albet enables transfer by assignment because it may not be indorsed, hence non-negotiable).

This lack of “sum certainty” restricting “note” status was adjudicated in NY Appellate 2nd Dept. in 2018 (i.e. it’s not a note)

But it’s rarely cited – probably best, since most lawyers would mess-up the citing and blow it for those of us who know how to use it – i.e. hand judges opportunities to make bad precedential decisions.

An observing-eye reminds us that a note is a one-sided promise, whereas an agreement is a two-sided contract (signed and countersigned – regardless of adhesion); thus, not really assignable, carte blanche, it requires a blessing by both parties but that step never transpires – imagine that…

Anywho: This is just the jumping-off point, the next part is the fun stuff.

So, the bank provides affidavits and exhibitions swearing (a/k/a perjuring) up-and-down that the indorsed note is right there in front of the judge.  Sure, it may look like a HELOC agreement, but the plaintiff’s attorney assures the judge, it’s a note – pointing to the prima facie doc – look right there, there’s the indorsement, so it must be a note – Right?  WRONG!  i.e. your long-standing argument about “presumption”.

Well, first of all, we (you and I) believe that the HELOC was securitized, so they don’t, or shouldn’t really, have a copy of the document anyway.  But we haven’t really dug much deeper, because we believe it’s impossible to get anywhere  with the dastardly banks in discovery.  So, I did some digging…. albeit without the help of formal discovery.

HELOCs (revolving lines of credit) can’t be securitized, because securitizations require fixed assets for valuations, and a revolving line of credit isn’t a fixed asset, it can’t be valued “sum certain” from its “four corners.”  But wait, that’s ridiculous, because we all know that HELOCS, Reverse mortgages, Credit Cards, etc. ARE securitized; perhaps not as RMBSs but rather as ABSs or other permutations.  So, what the hell am I talking about, saying they can’t, it’s impossible, bla bla bla…

You guessed it, there’s a work-around; and it’s documented.  The bank (the originator) transfers the HELOCs to a flimflam trust.  To do this they “endorse” the Agreement in-blank, which looks exactly like an “indorsement-in-blank” but the endorsement is an accreditation, not a negotiation.  Now the trustee (a/k/a “the Issuer”) does his sorting and stacking of the pool and – and this is the magic part – then, he (or she) makes notes against the HELOCs.  Yes, of course, it’s a legal fiction, and they have a name for it,  – “HELOC-backed notes” and it is those notes (the HELOC-backed notes) that are securitized.

The originator (who is often the servicer) retains the HELOC agreement & mortgage (a/k/a “lien”) since it is supposedly the “PETE”, but is it?  Is it really?  Does it matter?  Well, not until the servicer has the enviable task of foreclosure of a HELOC that has been pledged elsewhere, likely to an ABS that’s vaporized into the secondary market either-zone.  Hence, the foreclosing bank has nowhere to send the proceeds from the foreclosure – oh well – that’s a shame.

There’s more, but I sense you’re getting bored.  HELOC-backed notes – interesting.  Think about the Article 9 maxim “the mortgage follows the note;” A maxim laid down over a-hundred years ago by Justice Noah Swayne (Appointed to SCOTUS by Abraham Lincoln – a republican – LOL)

“The note and mortgage are inseparable; the former as essential, the latter as an incident.  An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”  Carpenter v. Longan (USA 1872)

Words that still carry-the-day in such recent stare decisis cases as Bank of NY v. Silverberg (NY 2nd Dept. 2011).

Ironically, this HELOC-backed note means that the note follows the mortgage(a/k/a HELOC Agreement, with a mortgage nested inside it).

“The issue presented on this appeal is whether a party has standing to commence a foreclosure action when that party’s assignor — in this case, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS) — was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but was never the actual holder or assignee of the underlying notes. We answer this question in the negative.

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 275 (N.Y. App. Div. 2011)”

because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose.

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 283 (N.Y. App. Div. 2011)

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 280 (N.Y. App. Div. 2011) (“ “a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it” ( Merritt v Bartholick36 NY 44, 45 [1867]; see Carpenter v Longan83 US 271, 274 [an assignment of the mortgage without the note is a nullity]; US Bank N.A. v Madero80 AD3d 751, 752US Bank, N.A. v Collymore68 AD3d at 754Kluge v Fugazy145 AD2d 537, 538 [plaintiff, the assignee of a mortgage without the underlying note, could not bring a foreclosure action]; Flyer v Sullivan284 App Div 697, 698 [mortgagee’s assignment of the mortgage lien, without assignment of the debt, is a nullity]; Beak v Walts266 App Div 900). A “mortgage is merely security for a debt or other obligation and cannot exist independently of the debt or obligation” ( FGB Realty Advisors v Parisi265 AD2d 297, 298). Consequently, the foreclosure of a mortgage cannot be pursued by one who has no demonstrated right to the debt ( id.; see 1 Bergman on New York Mortgage Foreclosures § 12.05 [1] [a] [1991]).”)

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 281-82 (N.Y. App. Div. 2011) (“as “nominee,” MERS’s authority was limited to only those powers which were specifically conferred to it and authorized by the lender ( see Black’s Law Dictionary 1076 [8th ed 2004] [defining a nominee as “(a) person designated to act in place of another, (usually) in a very limited way”]). Hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS’s authority as nominee or agent of the lendersee Aurora Loan Servs., LLC v Weisblum85 AD3d 95, 108 [2d Dept 2011]; HSBC Bank USA v Squitieri29 Misc 3d 1225[A], 2010 NY Slip Op 52000[U]; LNV Corp. v Madison Real Estate, LLC2010 NY Slip Op 33376[U]; LPP Mtge. Ltd. v Sabine Props., LLC2010 NY Slip Op 32367[U]; Bank of N.Y. v Mulligan, 28 Misc 3d 1226[A], 2010 NY Slip Op 51509[U]; OneWest Bank, F.S.B. v Drayton29 Misc 3d 1021Bank of N.Y. v Alderazi28 Misc 3d 376, 379-380 [the “party who claims to be the agent of another bears the burden of proving the agency relationship by a preponderance of the evidence”]; HSBC Bank USA, NA. v Yeasmin27 Misc 3d 1227[A], 2010 NY Slip Op 50927[U]; HSBC Bank USA, N.A. v Vasquez24 Misc 3d 1239[A], 2009 NY Slip Op 51814[U]; Bank of NY. v Trezza14 Misc 3d 1201[A], 2006 NY Slip Op 52367[U]; LaSalle Bank Nat’l. Assn. v Lamy12 Misc 3d 1191[A], 2006 NY Slip Op 51534[U]; In re Agard, 444 BR 231; but see US Bank N.A. u Flynn, 27 Misc 3d 802).”)

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 278 (N.Y. App. Div. 2011) (“”Mortgage lenders and other entities, known as MERS members, subscribe to the MERS system and pay annual fees for the electronic processing and tracking of ownership and transfers of mortgages. Members contractually agree to appoint MERS to act as their common agent on all mortgages they register in the MERS system” ( Matter of MERSCORP, Inc. v Romaine8 NY3d at 96 [footnotes omitted]).”)

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 278-79 (N.Y. App. Div. 2011) (“This leaves borrowers and the local county or municipal recording offices unaware of the identity of the true owner of the note, and extinguishes a source of revenue to the localities. According to MERS, any loan registered in its system is “inoculated against future assignments because MERS remains the mortgagee no matter how many times servicing is traded.” Moreover, MERS does not lend money, does not receive payments on promissory notes, and does not service loans by collecting loan payments.”)

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 279-80 (N.Y. App. Div. 2011) (“Where, as here, the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief ( see U.S. Bank, N.A. v Collymore68 AD3d 752, 753Wells Fargo Bank Minn., N.A. v Mastropaolo42 AD3d at 242). In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced ( seeU.S. Bank, NA. v Collymore68 AD3d at 753Countrywide Home Loans, Inc. v Gress68 AD3d 709, 709Wells Fargo Bank, N.A. v Marchione69 AD3d 204, 207-208Mortgage Elec. Registration Sys., Inc. v Coakley41 AD3d 674, 674Federal Nat’l. Mtge. Assn. v Youkelsone303 AD2d 546, 546-547First Trust Nat’l. Assn. v Meisels, 234 AD2d 414).”)

What is Real in “Securitization”?

The first thing to remember about securitization is that it isn’t real. No Investor ever bought any debt, note or mortgage on residential property. That makes all the documents used in foreclosure of “securitized” loans totally fake. And that is why there was a 50 state settlement and hundreds of other settlements with regulators, attorneys general and investors.

What was left out of all those settlements was any means by which illegal foreclosures could be stopped and any credits earned by homeowners or any credit which reduced the amount owed by the homeowners. As it turns out — nothing ever reduces the homeowner’s debt. Not even payment. Not even foreclosure. 

This could only be true if there was no account on any books of account in which the homeowner’s debt was held as  an asset. You cannot reduce what isn’t there. So failure to credit the nonexistent account is somehow treated as a completely legal event. think about it.

There is nothing wrong about hypothecating an asset in service of a financial transaction. As Wall Street has shown us anything could be an asset and therefore subject to a legal transaction. what they didn’t show us is that there was no legal transaction, which means nobody paid money except at the front end. And those who paid — the investors — didn’t buy any debt, note or mortgage.

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If I issue a note to someone who actually did give me money as a loan, and he asks me for collateral, I can conditionally assign my rights to a mortgage I actually own because someone issued me a note and secured it with a mortgage. How “conditional” is the assignment? That depends upon state law and the contents of the assignment.
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And in turn the Payee on the note I issued now has an asset upon which he can borrow. etc. The asset is the receivable from me that he has on his books which got there because he paid out money. So he debited CASH and Credited ACCOUNTS RECEIVABLE. Classic double entry bookkeeping.
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The ONLY question is whether the paperwork is a memorialization of actual events in the real world or if the paperwork is merely an attempt to create fake facts, an illusion that supports the designee of a non creditor to foreclose on property.
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If all the events are real then the law allows it and recognizes it and enforces it. But that enforceability under current law stops at the door of paperwork that does not memorialize an actual financial event in the real world.
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People think that it isn’t so simple. But it is. People say that there would be no foreclosures if I was right. But it is they who are wrong because they don’t understand legal procedure and the banks not only understand it, they were also responsible for writing it.
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So by codifying into law the proposition that the holder of a note is presumed to own the debt until rebutted, they have thus created a vehicle for deceit because judges are not presented with evidence in rebuttal. The truth is that the claimants are not even “holders”. And dig a little deeper they are not even possessors because the original note was destroyed.
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And because judges are sloppy people just like the rest of us, they will often treat a non creditor claiming to possess a note as a holder in due course — thus denying homeowner attempts at discovery. All without any allegation of HDC status or any evidence that the claimant is a party who paid value in good faith without knowledge of the borrower’s defenses.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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Another Dubin Victory: Hawaii Supreme Court Says Unauthorized Foreclosures Must Fail

It is insane that it even needs to be said. But here it is. If any legal person —whether a natural person, bank or trust — performs an unauthorized act, the act is a legal nullity regardless of how they document it or record it.

It is not a legally defensible position to say that having committed the unauthorized illegal act, you are now entitled to rights emanating from that act and the person you injured by your act has no rights to seek a remedy.

This decision should also serve as a reminder that many foreclosures are sought without legal authority to do so with windfall results to the claimant — primarily because the homeowner failed to challenge it.

Many homeowners are lured into a trap thinking that because they stopped making payments they lose all rights to keep their property. This decision, among others, shows that such premises are untrue and not applicable.

Even someone with a claim must pursue it in the manner required by law. And I would add that anyone without a claim has no law at their back to pursue a claim.

 

see 1586596137

Another excellent job that improves American jurisprudence. Instead of twisting things around to permit and even encourage sales of homestead property in the absence of any authority to do so, the Hawaii Supreme Court seeks only to apply the law as written.

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Just as they have previously done with other claims of wrongful foreclosure, they are simply stating that if you had no authority to do so, the foreclosure proceeding is completely voidable and the property can be recovered along with damages for trespass etc.

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This decision is probably a harbinger of other decisions that will be rendered shortly. It seems that the playbook of the Foreclosure Mills is to invoke statutes that have nothing to do with the actual facts.

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In one such case, they convinced a trial judge to apply the limitations contained within the adverse possession law in a manner that rendered the statute of limitations meaningless on claims for recovery on a debt or note. Of course there is no claim for adverse possession nor are there any facts that would support any such claim. But the Foreclosure mill somehow convinced the judge to apply the adverse possession statute to a claim for foreclosure.
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The entire playbook consists of invoking statute and common law out of context. Gary Dubin has once again prevailed by asserting reality over fake arguments that are untethered to any facts.

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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Is PennyMac Just a Front for Blackrock? How does anyone revive a dead debt?

see 888_Garfield v Blackrock

The answer is that there is no relation between Robert Garfield and myself. So skip that.

This opinion reveals the intricacies that I have actually avoided in my articles but which are now being forwarded to me by readers. In the unending quest to find a creditor who does not exist, things get even more confusing than they already were.

I have always said that PennyMac was a shill for Blackrock and Citi. Here, in this opinion, is an ample description of the control that Blackrock exercised over PennyMac, as a founding investor and controlling entity that worked in partnership with other entities.

The bottom line is that entities like PennyMac, Ocwen, Specialized Loan Service, etc are basically sham conduits designed to advance the false illusion that they represent creditors. If you look at their financial statements you can easily see how the Wall Street banks basically keep them afloat just to preserve the illusion of a corporate veil.

The bottom line is whose  interests these companies are serving when they claim to be servicers? Are they to be considered servicers just because they sent self-serving letters proclaiming themselves to be servicers? And in substance how they they make a claim to administer, collect or enforce a debt when they do not represent (a) anyone who owns the debt or (b) anyone who represents the owner of the debt? 

This is relevant because there is only one proffer of evidence as to the debt and nonpayment,  to wit: the payment history. Those are proffered as business records of the “servicer”. There are two things  to focus on: (1) those records do not establish ownership of the debt, financial loss or injury and (2) those are not records of the named plaintiff unless the named Plaintiff is the owner of the debt.

So the bottom line is that objections and motions to strike should be used against any proffer of payment history by any company purporting to be a servicer. The objection is lack of foundation.

Unless there is testimony and documentary evidence showing that the existence of a legal relationship between the claimed servicer and the claimant who owns the debt  — by reason of  having paid for it (as opposed to claiming it because of a void assignment or unenforceable endorsement) those documents are strictly hearsay and not admissible under the business records exception. But the objection must be timely and properly raised and you better have case law on hand to support your objections and motion to strike if necessary.

The argument against you will be that possession of the note is evidence of ownership of the note and that ownership note is evidence of ownership of the debt. That is not necessarily true but it is often treated that way in court.

So the argument, with case law in hand and copies of the statutes (especially Article 9 §203 UCC as adopted by all U.S. jurisdictions), is that possession of the note without rights to enforce entitles the possessor to nothing — not even a presumption. If the court chooses to assume or presume that mere possession is evidence of the right to enforce the note then it is a rebuttable presumption. You rebut it by discovery showing that there was no sale of the debt by anyone who owned it — despite documents memorializing transactions that never occurred.

Rights to enforce the note are ultimately derived from ONLY one source — the party who paid value for it in exchange for a conveyance of ownership of it, from someone who owned it. Your opposition will show documents that imply or even assert such transactions but those documents are invariably false. The demand is simple. Produce the proof of payment from the buyer of the obligation to the seller.

Rule of thumb to remember: if the claim is securitization, it never happened. No sale of any debt owed by any homeowner is ever sold to investors. There was no securitization despite all the claims and documents implying the contrary. All you need to do is ask for proof of sale, proof purchase and proof of payment. they can’t produce it because no such sale ever occurred.

This is no mere technicality. And it’s not the fault of the homeowner that the foreclosure mill doesn’t actually have a client or claim.

What you need to realize is that the reason there is no real client or claim is that the homeowner transaction was not a loan. It was presented as a loan in order to draft the homeowner into a highly profitable securitization plan in which the role of lender was extinguished along with the debt. At the end of the day there is nobody holding the debt as an asset on their books. 

Without the homeowner issuing the note and mortgage the securitization cycle could never have been started or completed. What was securitized? A lot of mythical ideas that took on value in the marketplace because of the mistaken assumption that someone owned the debt.

What did the homeowner get for his/her role in securitization? Nothing. What is the current value of the debt? Nothing.

The ONLY legal procedure that could bring the debt back to life is in reformation, with doctrines of quasi contract and quantum meruit applied. Then and only then does the debt have meaning — after the court decides how much compensation the homeowner was entitled to receive had they been told of the true nature of the transaction.

But in order to get reformation the claimant must ask for it and plead the elements for reformation. Wall Street doesn’t want to do that because it means sharing the securitization pie. With an average of $12 generated for each dollar of a homeowner transaction, the pot is big enough to reward both homeowner and investors (as the only real parties in interest) with a fair share of the scheme and to get assurances that were implied when they entered into the transaction. Such implied assurances are contained within lending and securities statutes requiring conformity with law and regulations.

The real bottom line, once courts take responsibility and jurisdiction over the real transaction, is that the debt can be revived and a claimant can be designated even though they don’t own the debt (if the newly declared quasi contract asserts the provision).

But that will always mean an offset or award to homeowners and investors for the fair share of a scheme about which they knew nothing (homeowners) or very little (investors).

The debt, note and mortgage can therefore only be legally enforced after the court determines a net amount due from the homeowner to the newly designated claimant after reduction for compensation that should have been paid to the homeowner. 

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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Paatalo: How MERS Screwed UP Title for Unsuspecting Homeowner

From Bill Paatalo:
This is an interesting law journal article. I hadn’t realized that MERS destroys the title and value of all properties that border other properties with MERS on title. This is everyone’s problem, not just those facing foreclosure.

Because MERS is utilized for transferring title and these transfers are not publicly recorded (thereby imparting constructive notice), MERS does not comply with race (first in time) or (constructive or actual) notice statutes and, therefore, senior/junior property rights cannot be determined when a discrepancy arises in property boundaries lines.  Consider the following:
 What happens if the chain of title cannot be determined because there are no accurate and publicly recorded deeds/title documents showing chain of title to determine senior and junior rights designations for boundary determinations between neighbors?
 What happens when you destroy the adjoining property rights and records of homeowners who never defaulted on their mortgages are now forced to litigate boundary disputes and property rights?
 Why did the title insurance companies repeatedly refuse to underwrite foreclosures if land title was stable?

Bill Paatalo
Oregon Private Investigator – PSID#49411

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Tonight! How we will all win this time when the second foreclosure tidal wave hits 6PM EDT 3PM PDT

Fundamentally, we must accept and acknowledge the fact that if we don’t get it right this time, we are condemning ourselves to despair and economic disaster. It’s coming. And this time we know what is wrong. 

Thursdays LIVE! Click in to the Neil Garfield Show

Tonight’s Show Hosted by Neil Garfield, Esq.

Call in at (347) 850-1260, 6pm Eastern Thursdays

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I have been right on every point since 2006. I correctly predicted the collapse and even the order of collapse of certain investment banks, the foreclosure tidal wave of 2008-11, the ways to beat foreclosures, I won foreclosure cases both as lead attorney and as consultant to other attorneys, and now I’m predicting a new tidal  wave of foreclosures. Wall Street loves foreclosures but nobody else does. It’s all there on video, in print, on radio. I was right.
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So tonight we are talking about how to prepare for the new wave of foreclosures. Even homeowners who think they are current on their payments might want to listen in to this because foreclosures depress property values, decrease tax revenue, and cause mayhem in housing, crime and hardship.
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We can pretend that we are over Covid and that economic problems are behind us, but it just isn’t true. We have a huge new wave of corona cases coming on top of the existing one which is projected to cause at least 200,000 deaths by October 1. That will force shutdowns even though nobody wants it. The current ridiculous behavior of the stock market will turn very dark as we head into unknown territory — corporate earrings decreasing, some entire industries vanishing, and huge losses for new bored investors who decided to go into stock market investing as a replacement for their gambling habits.
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So for those of you who prefer to be human and not pretend to be Ostriches with your head buried in the sand I suggest you listen up. You can’t have 40 million people file for unemployment and not have deep long lasting consequences — particularly as it relates to new foreclosure attempts by investment banks who have no right to do it.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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NOTE: THE MORATORIUM ONLY DELAYS THE INEVITABLE. The banks will foreclose if they are allowed to do so. The proceeds are pure profit for them. There is no order forgiving missed payments. And the reason for that is that there would first need to be an administrative finding of fact that the debts are owed in which the creditors are identified.
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If they could do that the banks and investors would be delighted to see a bailout of homeowners for a few months or even a year. But they can’t do that because the initial sale to investors was not a sale of any homeowner transaction or debt. Securitization of residential debt never happened.

Why Reformation Makes Sense as a Response to Illegal Claims of Servicing, Collection or Enforcement of Homeowner Mortgage Obligations

In the world of pretend REMICs, there can be no debate that investors who buy “certificates” are unsecured creditors of the investment banks and that investment banks are not legally creditors of homeowners. So why are we allowing investment banks to administer, collect and enforce homeowner obligations?

This has been my point from the beginning in 2006 when I started writing and appearing on TV and Radio. The “Securitization” never happened. Investors became unsecured creditors of the investment bank (IB) not secured creditors of homeowners. In turn the investment bank also wanted to avoid accountability and liability as lender so the IB never accepted any legal document saying that it had paid for and it owned the underlying homeowner obligation.

But for purposes of enforcement through foreclosure the IB designates a non-creditor to initiate foreclosure proceedings. There is no basis in law for this behavior and it is both illegal and inequitable for this conduct to be allowed.

  • The claim that  the action is brought on behalf of  or for the benefit of investors who own certificates is false.
  • The implied assertion that whatever deficiencies exist in the presentation of parties and documents in foreclosures, the granting of a foreclosure will result in payment to a creditor who would otherwise have suffered a loss is also false.
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That leaves nobody to own the debt. Under current law, absent a contract that says otherwise, nobody can administer, collect or enforce a debt without owning it or representing someone who owns it. Since nobody owns it nobody satisfied that condition precedent as set forth in Article 9 §203 UCC.
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In the absence of a creditor the obligation can only be enforced by a designee or nominee that is accepted by the debtor.
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It will take a court decision to decree that since there is no alternative remedy at law, the homeowner is consenting to the designation of a party to enforce who then becomes the lender for purposes of accountability or liability under lending and servicing laws.

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There is no contract that says otherwise  unless and until a court declares it under the rules of reformation, quasi contract and quantum meruit.
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So in all homeowner transactions arising within the scope of claimed securitization, homeowners lost their access to any party who claimed to be a lender or creditor except the originator who was not lending any money and who was in most cases thinly capitalized such that penalties for lending and servicing violations would simply result in bankruptcy and no relief to homeowners. 

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And in the underwriting process, despite the obvious and expressly stated requirements of law no lender was left who had any stake or risk of loss in ensuring the validity of the appraisal or the viability of the loan.
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They might call it a loan transaction, but it wasn’t. It was deceitful process for obtaining the homeowner’s participation in a highly profitable securitization scheme. A scheme where the profits were neither disclosed as to existence or amount and that withheld consideration from the homeowner for his/her participation.
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As such the apparent “loan agreement” was simply a cover and a vehicle for concealment of the true nature of the transaction with the homeowner.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
*

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*
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*
FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
*
Please visit www.lendinglies.com for more information.

How Would This Scam Be Possible If the Loans Were Real?

see https://www.mpamag.com/news/former-mortgage-company-president-indicted-in-multimilliondollar-fraud-224874.aspx

So not to rain on anyone’s parade, this scam seems only possible if nobody was minding the store. And nobody would be minding the store only if nobody owned the debt.

This is the pot calling the kettle black. The other institutions were posing as lenders when they were not. they were at all times being funded by Wall Street securities firms calling themselves “investment banks.”

If you boil it down it probably amounts to the banks getting angry because they were scammed out of the profits of their own scam.

Regulatory Capture and Monopoly of Residential Lending by Wall Street

It is simply not true and has not been true for 20 years that lending is subject to free market forces or that lenders are subject to regulation. 

all of this has resulted from extraordinary illegal Market Control which has resulted in the complete inability of small financial institutions to compete with lending practices sponsored by investment banks on Wall Street.

As a result consumers are negatively affected. Contrary to the requirements of law they do not have the right to choose the party with whom they are dealing, they do not have the protections of the truth in Lending Act, and they are lured into a dangerous transaction in which the counterparties have an incentive merely to bring a transaction into existence and label it as a loan.

When it comes to regulation, it is the legislature that deems who is worthy of regulating and on what terms. The legislature then enacts into law those terms and creates the agency or enforcement mechanism.
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Regulatory Capture occurs when persons and companies whom the legislature has deemed worthy of regulating have control over the agency or enforcement mechanisms. This happens all the time when the regulators are persons formerly, currently or intended to be employed by the companies that they are supposed to regulate.
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I am sure, now that it has been pointed out, that there has been in a concerted strategy of regulatory capture that has negatively impacted the legal profession and therefore chilled access to the courts and to counsel. This has enabled a monopoly that has so constrained free market forces as to make them virtually irrelevant. It is simply not true and has not been true for 20 years that lending is subject to free market forces or that lenders are subject to regulation.
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Even the most uninformed lay person knows by now that the Wall Street banks screwed the market and the marketplace. True, they don’t understand how it was done. But they know it happened, which is why I have counseled persons running for public office to run against the banks, because right now, almost everyone hates the Wall Street securities firms that call themselves “investment banks.”  But very little is being done to counter their illegal impact on free markets, consumer rights, and the hallmark of any capitalist economic system — competition.
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This has shown up in regulation and discipline of lawyers. Lawyers who advance false claims in court go with both impunity and immunity. Lawyers who defend homeowners from those false claims almost always find themselves the target some investigation, complaint discipline, sanctions or judgements from Bar associations, the FTC or the attorney general of some state.
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The result is entirely predictable. Most trial lawyers won’t take on cases involving foreclosure defense because they fear for their livelihood. Consumers are the ones who suffer the most because they can’t find a lawyer to take their case. So they try to appear pro se and they lose because only lawyers know how to navigate the judicial system. It’s a perfect storm for the Wall Street firms.
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I am also sure that all of this has resulted from extraordinary illegal Market Control which has resulted in the complete inability of small financial institutions to compete with lending practices sponsored by investment banks on Wall Street.
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Homeowner transactions sponsored by Wall Street do not rely upon profits from the transactions with homeowners. They rely entirely upon profits from false claims arising out of securitization Cycles. so it is literally possible and often happens that the marketing and other expenses associated with generating transactions with homeowners are much higher than any cash flow that could be considered Revenue. This makes it possible to offer incentives and lower interest rates for the sole purpose of initiating another securitization cycle, which is the source of all actual profit.
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As a result consumers are negatively affected. Contrary to the requirements of law they do not have the right to choose the party with whom they are dealing, they do not have the protections of the truth in Lending Act, and they are lured into a dangerous transaction in which the counterparties have an incentive merely to bring a transaction into existence and label it as a loan.
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Those counterparties also have an incentive to see the transactions fail, since they have knowingly created obligations based upon false appraisals and false assessments of viability. In doing that they have guaranteed themselves additional profit simply by insuring the certificates that are indexed on the performance of the homeowner transactions. And they further profit from false claims leading to forced sale of property for profit rather than restitution for an unpaid obligation.
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Thus this monopolistic control causes homeowners to enter into transactions that they think are loans but instead are investments into securitization schemes. The terms and incentives for conduct are far different than the reasonable expectation of any reasonable consumer borrower. 
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The other class negatively impacted by this strong arm behavior is the U.S. class of approximately 7,000 community banks, credit unions and savings and loan associations that would otherwise be able to compete for loan business but can’t because they are presented with a bad choice: either they serve merely as sham conduits to feed securitization or their loan business virtually fails. In turn this negatively impacts their ability to cross market for depository business and other bank services. 
My point is that just like 100 + years ago when the big trusts were considered impregnable, they were brought down with a thud by claims that they had ruined the free markets with both economic control and asymmetry of information. Regulatory capture was of course a perk that enabled them to write and make laws that made their ruinous behavior totally legal — until the courts and Congress said it wasn’t legal.

Plaintiffs present this evidence as a prototypical example of “regulatory capture,” a term coined by public choice economists to indicate when members of a regulated occupation also dominate the regulatory and law-making process in their field. Professor Todd Zywicki of George Mason University School of Law, a leading scholar in law and economics, testified that the limitations on funeral home ownership in Maryland are consistent with the principles of regulatory capture. He stated that in his opinion the Morticians Act appears to be:

an effort to create governmentally imposed barriers to entry in the funeral home industry and thereby to transfer wealth to a discrete, well-organized interest group at the expense of consumers of funeral home services and the public at large. The result of this regulation is reduced competition in the provision of funeral home services and higher prices and reduced choice in funeral home products and services for consumers.

Brown v. Hovatter, 516 F. Supp. 2d 547, 553 (D. Md. 2007)

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

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In the meanwhile you can order any of the following:
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*
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
*
Please visit www.lendinglies.com for more information.

How to Use the Real Deal On Securitization to Homeowner’s Advantage

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

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

FREE REVIEW:

If you want to submit your registration form click on the following link and give us as much information as you can. CLICK HERE FOR REGISTRATION FORM. It is free, with no obligation and we keep all information private. The information you provide is not used for any purpose except for providing services you order or request from us.
In the meanwhile you can order any of the following:
*
*
CLICK HERE TO ORDER CONSULT (not necessary if you order PDR)
*
*
CLICK HERE TO ORDER PRELIMINARY DOCUMENT REVIEW (PDR PLUS or BASIC includes 30 minute recorded CONSULT)
*
FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
*
Please visit www.lendinglies.com for more information.

Are Lawyers Missing the Boat Again on Foreclosure Defense?

The problem is that while most people think everyone has been bought off, and to a certain extent that is true, the real problem is that the clever plan of securitization is so counter-intuitive that nobody believes the truth that is in plain sight. The reason for fabricated documents is that there were no transactions, so the documents had to be fabricated to fit facially with the requirements of law for administration, collection and enforcement.
To anyone who is not conversant in the language of finance, that seems impossible, unlikely, or just plain wrong. So rather than keeping an open mind about it, they react to such assertions with aggression and incredulity.

I recently received a question from a fairly knowledgeable reader. Why are lawyers dropping the ball on foreclosure defense? His specific question, along with similar questions from other readers is where are the trust lawyers, the securities lawyers, the property lawyers, the civil litigations lawyers, the personal injury lawyers (emotional distress etc), etc.?

Here was my answer with some edits for typos which all of you know I am prone to make and miss on edits.

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The question you posed is the million-dollar question. I think you are correct in your analysis. I have attempted to enlist attorneys who specialize in those areas but I have failed.
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The only explanation that I can give you that has any truth to it is that lawyers, despite their reputation, are easily intimidated, lazy and greedy. I surveyed hundreds of lawyers over a two-year period In 2008–2009.
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The proposition was simple. assuming a client with sufficient financial resources to pay any reasonable fee, were they willing to represent homeowners in distress?
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The fact that the answer was in the negative was frustrating enough. But the reason most often cited was that they would rather represent “the bank.” And when I pointed out that they did not represent any banks nor did they have any prospects for doing so, that’s when they said that it didn’t matter.
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Some did express reservation about the assumption that the client could pay. I pointed it out that if they were not making a monthly payment for housing, they could easily pay. That made no difference. They saw the entire endeavor as futile and unprofitable — but in reality I could tell, like any trial lawyer could detect, that I was dealing with raw unbridled fear.
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So I attacked it with seminars on foreclosure defense that highlighted business strategies in which the lawyer could become rich, and some of the attendees did. Others made a good living.
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But it was based on lowering of expectations. By adopting a hub-and-spoke strategy some lawyers, adopting the business plan that I proposed, began servicing hundreds of homeowners at a time. But like all such practices, their business success depended upon settlement of the cases, which meant modifications. This resulted in adding to the illusion that the servicer had any right to be in the picture.
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My latest plan is that I am working on potential pleadings for a case in Reformation in which the investment banks are literally drafted into the litigation. The Court decides whether the homeowner received consideration for issuing the documents (note and mortgage) that enabled the securitization plan, and whether the homeowner received or should receive adequate or additional consideration that could offset the claim. (There is a lot more to this but for purposes of this article I simply state in brief form).
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I have no doubt that there is an opportunity to achieve immense wealth simply by pursuing the obvious. But it appears that the General Public, law enforcement, the Judiciary, and most lawyers have succumbed to the party line that enables the Investment Bank to sit in the shadows and designate names of irrelevant parties with no stake and the outcome to administer, collect and enforce obligations that were long ago retired through securitization, proof of which is easy to obtain, to wit: is there any company showing the existence of the debt as an asset on their balance sheet and a loss from nonpayment? 
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I definitely know the answer to that question. Current law therefore does not allow the current scheme of securitization to exist nor should it. It depends entirely upon concealment of the most relevant data in any transaction — the terms and conditions under which each party intends to serve the other and the terms and conditions under which each party might profit from the transaction.
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Most of all under the federal and state lending and securities laws (and general laws requiring fair dealing) the identity of the counterparty must be included in order to make the agreement an enforceable contract.
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This concealment allows investment banks to act illegally and against the idea of free markets or capitalism. It prevents both investors and homeowners from bargaining for adequate consideration based upon the true nature of the transaction. 
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The problem is that while most people think everyone has been bought off, and to a certain extent that is true, the real problem is that the clever plan of securitization is so counter-intuitive that nobody believes the truth that is in plain sight. The reason for fabricated documents is that there were no transactions, so the documents had to be fabricated to fit facially with the requirements of law for administration, collection and enforcement.
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To anyone who is not conversant in the language of finance, that seems impossible, unlikely, or just plain wrong. So rather than keeping an open mind about it, they react to such assertions with aggression and incredulity.
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Some lawyers do get it and they win their cases most of the time. Everyone else seems to argue for their own weaknesses (See Steven Covey’s Book) without looking to actual information or data. They insist that the foreclosure cases are both unwinnable and are morally unconscionable if they give the homeowner a free house.
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I insist that there is no debt because the investment bank was never depending upon the economics of a loan to make money. Foreclosures are gravy. They made all their money creating, selling, issuing, trading, and hedging securities. The labelling of the homeowner transaction as a loan was a false representation. The investment bank, who never appeared on any of the paperwork, was the real party in interest and at the end of the day there was no person or company who owned the so-called debt from the homeowner. 
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If that plan had been disclosed — as it was required to be disclosed under both “lending” laws and “securities” laws — both investors and homeowners would have had the opportunity to bargain for more more compensation and better terms — because they would have known they were taking a much larger risk than the one that was actually presented.
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Indeed, investors that were pension or other types of “stable managed funds” would not have been able to invest at all had they known the true nature of the certificate scheme into which they they were investing the futures of workers and companies that had contributed to the fund.
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Such funds, as investors, were critical to the success of the securitization scheme. Investment banks would have been legally required to present additional safeguards to the fund managers such as participation in the trading profits, hedge contracts and insurance contracts in order to make the sale of certificates to stable managed fund investors. 
The same logic holds true for homeowners.
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They were making the largest investments of their lives based upon their reasonable belief that the apprasial was real and the loan was viable — all resposnibilities imposed on the “lender” by law (see TILA).
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Had they known the true incentives and motives and existence of the investment bank they would have understood that this was no loan. It was a service they were performing and an investment — for which they were being paid to issue documents that required them to pay money over time in order to enable the securitization scheme.
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If the true profits of the securitization scheme were disclosed as as required by law, homeowners and originators would have been able to compete for a greater share of the securitization pie or they would have had the opportunity to choose not to do business in such a hazy scheme. 
*
Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
*

FREE REVIEW:

If you want to submit your registration form click on the following link and give us as much information as you can. CLICK HERE FOR REGISTRATION FORM. It is free, with no obligation and we keep all information private. The information you provide is not used for any purpose except for providing services you order or request from us.
In the meanwhile you can order any of the following:
*
*
CLICK HERE TO ORDER CONSULT (not necessary if you order PDR)
*
*
CLICK HERE TO ORDER PRELIMINARY DOCUMENT REVIEW (PDR PLUS or BASIC includes 30 minute recorded CONSULT)
*
FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
*
Please visit www.lendinglies.com for more information.

Tonight!! More on Qui Tam (Whistleblower) Actions and their Intersection with Foreclosure Litigation

Thursdays LIVE! Click in to the WEST COAST Neil Garfield Show

with Charles Marshall and Bill Paatalo

Or call in at (347) 850-1260, 6pm Eastern Thursdays

Homeowner groups are forming and lawyers are talking. We are all expecting another tidal wave of foreclosure proceedings arising from false claims against homeowners. But foreclosures impact communities, not just individuals. And communities are run by governments whose revenue is largely derived from taxes and fees on land, transfers and recording of mortgages and deeds of trust.

When government revenue declines the remaining taxpayers get to pay the balance. there is no other way. What happens if when declining revenue and increased costs are the result of false claims by private companies?

Wall Street securities firms have been sidestepping tax liability, stamps, recording fees and even income tax as they freely pretend to transfer mortgages while no money exchanges hands. The courts treat the transfers as real even though the law says no transfer of a mortgage can be completed without a transfer of ownership of the underlying debt.

So if it is real why is state and local government not receiving their fair share of revenue as prescribed by law? And why does state and local government get stuck with the bill on Zombie foreclosures?

More lawyers are looking at qui tam actions, mass joinder, and actions against regulatory capture that interfere with homeowners’ right to counsel and access to the courts.

Qui Tam Actions generally are lawsuits in which an individual sues on behalf of a governmental entity, typically the Federal Government, with the goal of remedying a defrauding of the government by a private organization or individual. These actions typically take the form of a whistleblower exposing the defrauding actions of his or her employer. Qui tam actions in the US are often brought under the False Claims Act, a Federal law specifically empowering individuals to sue as whistleblowers to recover private funds garnered through defrauding the Federal Government.

In the foreclosure context, individuals who are connected with, or in some cases simply apprised of, the defrauding behavior, can then bring a qui tam action to remedy the fraud. As a whistleblower, the suing individual is entitled to substantial compensation, including penalties, attorney’s fees, court costs, on top of the disputed amount of the fraud. The whistleblower receives his or her compensation as a percentage of the fraud money recovered. This amount can and often does run into the millions of dollars, depending on the nature of the fraud and the amount in dispute. Bill will highlight a recent successful qui tam action and address previous qui tam matters, involving for example mortgage servicers such as Nationstar.

W A R N I N G ! ! Dept of Labor seeks to allow pension and 401(k) investments into hedge funds with heavy investments in worthless residential REMIC certificates

Fund manager’s nightmare. With all the information currently available in the public domain and yoru subscription services you may be liable for placing any orders for purchase of residential REMIC certificates. DO YOUR RESEARCH.

Investors: Call your fund manager and demand that they do no such thing.

This is another move to create an artificial demand for securities that in this case are not only overvalued but also unregulated.

PennyMac and Other Companies are Making False Claims as “Servicers”: Black Knight, the king of fabricated documents is behind 62% of all “servicing records.”

The bottom line is that companies claiming to be servicers are not servicers although they perform some servicing functions as “clients” of Black Knight.

This provides a veil of plausible deniability for lying in court about testimony and documents. Hiding behind litigation immunity foreclosures are being pursued and granted resulting in windfall payments to intermediaries who never had any stake in the financial stake of any homeowner transaction. 

Examination of the facts shows that the “boarding process” is nonsense i.e., a lie). “New Servicers” simply log on to the Black Knight system. There is no boarding required. It is a total lie to fool courts into believing that the records were tested when they were not. 

Black Knight is not mentioned in part because of its prior record of criminal conduct. That record gives rise to inferences of lack of credibility or questions or credibility — either one of which is enough to prevent the employment of legal presumptions arising from what appear to be facially valid documentation. Without those presumptions there is no case because none of the claimants can offer proof of transactions in which actual ownership and control over the underyling obligation can be established. 

There is nothing like an admission that can change the course of thinking by a judge, lawyer, homeowner or law maker. Except for one thing: when the party not only admits the truth of the matter asserted but affirmatively alleges it in a lawsuit against someone else.

Exhibit A, brought to my attention by multiple sources and contributors to my blog. It is a lawsuit by someone who professes to have no connection with the alleged “servicing” of any transactions that are referred to as residential mortgage loans. It is never named in any lawsuit as a servicer. It does not show up in court as the source of servicing records. It does not send any robowitness to court to say that he/she is familiar with the books and records of this company. And yet, here is Black Knight, formerly Lender Processing Services and DOCX infamy (Lorraine Brown, President went to jail).

In a lawsuit against PennyMac, Black Knight asserts that PennyMac infringed upon its proprietary system that supplies the servicing records for 62% of all “servicing” performed in the U.S., — and that means that in 62% of all foreclosures, the companies that were proffered as servicers were not the servicers or at least did not perform all servicing functions — especially, as you read the complaint, as to payment histories and relevant documents for foreclosure.

So we have the only company that was ever caught red handed with fabricating, falsifying, recording, forging, robosigning false transaction documents. They changed their name but not their business model. Their business model is being the central repository of all the data that is created, stored, and manipulated with respect to 62% of all alleged “loans.”

That makes Ocwen and other loan servicers liars. And I have successfully pointed that out in trial. When you look at the copies submitted to qualify for an exception to the hearsay rule as a “business record” you can see that this did not come off of any particular system. And upon questioning of the witness they will profess ignorance as to the location of the server on which documents and records are created, maintained and manipulated.

No document is ever produced showing that Black Knight was named as servicer for any trust. That is because the trust has nothing and Black Knight is not working for nothing. Black Knight is working for investment banks who are the prime and only drivers of all trading, administration, collection and enforcing of contracts relating to securities and homeowner transactions. The transaction data (38%) not controlled by Black Knight is primarily controlled by a Chase controlled entity in the same way.

So the bottom line is that when the servicer representative comes into court to testify as to the foundation of the payment history, there are two things to remember for cross examination.

First, the copies he/she is attesting to are not from any system owned or controlled by his company and are not the records of the trustee or trust of any REMIC Trust.

Second those records are always missing any references to what goes out. Without entries showing disbursements to creditors, the records are incomplete. Without records showing establishment of the debt as an asset of some creditor, the records are incomplete. And THAT is what undermines the foundation for the admission of the records and can lead to objection and a motion to strike the exhibit during trial.

Failure to object and failure to attack in this way leads inevitably to a finding that the documents are real and that the information is true which then proves a default because the payment history says so.

But it doesn’t prove a default and the litigator must be able to show that. A default is established ONLY when proof of ownership of the asset (Loan) is established in the name of the claimant or Plaintiff. This never happens because there is no creditor showing the loan as an asset on its financial statements.

In current securitization practices, there is no creditor that actually claims ownership under generally accepted accounting principles that require a financial transaction (payment) in exchange for a conveyance of ownership of the underlying debt as a required by Article 9 §203 UCC as adopted by all U.S. jurisdictions. And if they are not creditors then they can’t be considered lenders and therefore can claim that lender liability does not attach to them. 

And without any officer of the trustee or trust testifying that those are there records of test rust, the copies preferred by the foreclosure mill and the robowitness are just props and not evidence and do not qualify as exceptions as business records. Accordingly they are barred by the hearsay rule which stands in the way of any evidence that lacks credibility.

Black Knight vs PennyMac Lawsuit

So why am I saying all this?

Here are some quotes from a complaint filed by high end lawyers representing Black Knight against PennyMac who they say falsely and illegally used the Black Knight systems, namely MSP© and Navigator©. Here is what Black Knight says, which corroborates, word for word what I have been saying for 14 years:

“Black Knight’s proprietary MSP® System, including its interdependent NavigatorTM electronic reference and procedural library, is the mortgage industry’s leading mortgage servicing software [e.s.] package. The result of years of research, complex coding, and continuous improvement, the MSP® System is used to service over 62% of the first lien mortgage loans in the United States, providing its users – the country’s largest and most successful lending institutions – with the ability to manage their portfolios in compliance with a broad set of laws and regulations. Black Knight protects its proprietary system through secrecy, and users of the MSP® System are granted access only under strict nondisclosure agreements with individual access controls.”

Now to be sure, they will claim that they are only providing software that “servicers” use. But that is not the way it actually happens. Black Knight owns, operates, maintains all servers with an iron hand as directed by the investment banks who like Black Knight want to be out of sight and therefore out of mind of any court.

The facts that every litigator should know is that the two parties who are not mentioned — the investment bank who started ands till controls the securitization scheme and Black Knight who is the central repository for all data to make sure that there is no public competition for claiming the same loan, are the only ones that actually out as real parties real witnesses.

So then we come to the fact that claims of servicing by PennyMac are completely false. If you read carefully and make appropriate inquiries one fact stands out: PennyMac is acting under Black Knight. PennyMac may get to make certain entries which in turn are tested by Black Knight and PennyMac may get to print out copies of reports that are produced by certain algorithms at Black Knight but PennyMac has no role in creation or maintenance of business records on Black Knight, who in turn does not do anything for trusts because it has no contracts with trusts. it has contracts with investment banks.

Notice how they are keeping the agreement between PennyMac and Black Knight a secret. Also note that the agreement names Fidelity Information Services, Inc. an Arkansas corporation as the principal and PennyMac is referred to as “client”.

“Pursuant to that certain Master Agreement entered into as of April 30, 2008, together with any addenda thereto (the “Master Agreement”), PennyMac became a registered user of the MSP® System and was granted a limited right to access and use the MSP® System in order to process PennyMac mortgage transactions.[e.s.] The Master Agreement includes clear and comprehensive restrictions against misuse of the MSP® System and associated confidential materials. Due to a confidentiality requirement in the Master Agreement, as well as the volume of documents, Black Knight attaches hereto as Exhibit “A” the cover page of the Master Agreement. A complete copy of the Master Agreement is in the possession of PennyMac, but a duplicate copy will be provided upon request.”

So the lawsuit is couched as a copyright infringement case. But the real purpose is that of the investment banks — to prevent the decentralization of data records that could reveal the fact that loans were sold multiple times in multiple ways. Of course there is also the monopolistic position that Black Knight enjoyed and wanted to protect. But without the support of the investment banks it would never have filed this lawsuit,.

“The MSP® System is made of a number of interdependent “modules,” with each performing a different function in the process of servicing a mortgage loan. These modules work together synergistically to produce the familiar experience and end product that is critical to the system’s success.”

“For example, the following specific aspects of the MSP® System contribute to its unique value: data schema and fields; user experiences and interfaces; files and records; transaction-type codes and sequence codes; input, processing and output transactions; workstation guides; technical support services; and documentation of the foregoing. Data collected are organized in specific files incorporated in a table that includes multiple records, each of which is a row that also includes a series of fields or cells, each of which has a specific name and position range. The confidential logic and business rules that drive the collection and manipulation of the data provide Black Knight a competitive advantage.” [e.s.]

“The NavigatorTM application is a critical component of the MSP® System. Acting in effect as an extremely detailed electronic reference and procedural user manual, it provides authorized users of the MSP® System with comprehensive information regarding each MSP® System module and workstation necessary to understand and use the MSP® System to service mortgage loans. This includes confidential details of MSP®-specific files; data dictionaries; data schema, records, and fields; MSP®-specific transaction-type and sequence codes; processing operations associated with MSP®-specific files; and MSP®-specific input and output transactions. It also contains confidential workstation guides and other user materials explaining how to work with MSP®-specific files and initiate execution of MSP®-specific operations. The NavigatorTM application and its related documentation are made available only to authorized users of the MSP® System for limited uses and are specifically designated by Black Knight as confidential proprietary, and trade secret information.

An authorized MSP® System user can also access data from the MSP® System in real-time using MSP® Mortgage Web Services. Like the NavigatorTM application, MSP® Mortgage Web Services contains detailed confidential documentation explaining its functionality and unique and proprietary data formatting structures and request codes, among other topics. And like the NavigatorTM application, MSP® Mortgage Web Services and its related confidential documentation”

One of our prolific readers and contributors “summer chic” has offered the following information that I consider useful in framing complaints:

On June 8, 2020 Black Knight announced that former OneWest CEO (aka OCC) Joseph Otting joined Black Knight’s  Board of Directors…..
 
 Black Knight is a renamed Lenders Processing Services/DocX who forged millions of assignments which were filed in Courts around the Nations to steal homes from American families.
 
 Bill Foley (FNF) , owner of LPS, DocX, Black Knight, ect. continues its illegal practices as of today while deceive borrowers with bogus Title Insurances. 
 
Speaking about monopoly, Mr. Foley owns majority of US Title Companies.
 
PennyMac is a renamed Countrywide Financial 
 
Caliber Home Loan is a renamed Countrywide Financial
 
HomeXMortgage is a renamed Fremont Loan and Investments
 
Matrix Private Capital is a renamed Lehman Brothers
 
New OCC Mr. Brooks is also a former OneWest CEO….
 
Former BlackRock CEO Michael Bright was CEO of Ginnie Mae….
 
VA Appraisal system is controlled by Bank of America via Core Logic LoanSafe program which is  renamed Countrywide’s LandSafe Appraisal system which BOA sold to VA in 2014….
 
Ginnie Mae’s Senior VP Michael Drayne is a seasoned  fraudster from Chevy Chase bank who was sued by investors and insurers for over $5.2 Billion securities fraud. Drayne was never charged for any damages.

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

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