On my way out the door for the weekend, but wanted to post this. It’s validation of what we all know. But it also puts a plan on the table to stop the continuing damage and heal some of the damage caused by the banks. The banks have been regularly and arrogantly rampaging the weaponized justice system to gain more illicit profit, destroy more lives and strip communities of taxpayer dollars.
Filed under: foreclosure | 6 Comments »
The issue is jurisdiction. Lawyers filed papers for AWL but AWL was dissolved as a corporation. The lawyers countered with the allegation, on appeal, that AWL was a fictitious name for Countrywide without specifying the location of CW. Hence no diversity of jurisdiction could be supported by the allegations in the notice for removal.
The claim of diversity was not supported by either facts or allegations establishing diversity. This is the common practice of foreclosure mills and their defenders. They simply make a claim and leave it as “implied” that the grounds exist. Attack that, and you can win.
So the issue before the 9th Circuit was whether the Federal District Court had jurisdiction to enter a dismissal of the claims for wrongful foreclosure. That in turn depended upon whether the case had been properly removed from state court by AWL. If it hadn’t been properly removed then the District Judge had no jurisdiction to enter any order other than the ministerial act of remand to the state court.
The 9th Circuit Court of Appeals approached the subject gingerly. Since AWL didn’t exist and there was no viable supporting allegation that it was the fictitious name of Countrywide the answer was obvious. AWL could not remove because it didn’t exist.
The hidden story is (a) the number of times AWL was named by lawyers as the foreclosing party with no reference to CW or anyone else claiming to use AWL as a fictitious name and (b) the number of entities claiming that AWL was a fictitious name for them.
The real question is why should lawyers enjoy immunity from litigation under “litigation Privilege” when they file not for an actual legal entity but for a group of vendors who all stand to benefit from the foreclosure? If there is no client why should lawyers be immunized?
Filed under: foreclosure, foreclosure mill, jurisdiction, legal standing, Mortgage, Motions, Pleading, standing | Tagged: 9TH CIRCUIT, america's wholesale lender, AWL, countrywide, diversity, jurisdiction, litigation privilege, remand, removal | 2 Comments »
Fraud can be a very effective claim or defense. But it is not an easy claim. Fraud must be both pled and proven clearly and convincingly. Some view the burden of pleading and proof as unfair when compared to a claim for foreclosure which has a burden of proof that requires only that it is more likely than not that the claimant is real and has a real claim entitling the claimant to a remedy. That is a philosophical argument.
If fraud is used as a defense the damages are limited to the amount of the foreclosure claim. If it is used as a counterclaim or in a separate lawsuit then the statute of limitations is probably going to be an issue because the fraud most likely occurred many years before.
But the counter arguments to application of the statute of limitations are active concealment of the truth and continued misrepresentation, and then maturation of the claim which might not accrue until the foreclosure is decided against the borrower. I think the only valid argument is active concealment. But depending upon which state you are in the statute of limitations may not be applicable if fraud is alleged as an affirmative defense in recoupment.
The pleading and proof requirements for fraud in all circumstances are very rigorous. Knowing now to plead and wording the complaint or defense properly is essential to getting fraud on the table in litigation which by the way opens the door to discovery that might not otherwise be allowed if you are merely defending the foreclosure on other grounds. That said, a successful action for fraud has a high likelihood of achieving a significant verdict for compensatory and potentially punitive damages.
Filed under: foreclosure | 4 Comments »
Attacks on technical deficiencies of assignments of mortgage is a great place to start, but it is not the finish line.
This is a follow up with the radio show we did last week on cancellation of assignments of mortgage, and upon successful cancellation of the assignment(s), the further cancellation of the notice of substitution of trustee, the notice of default, the notice of sale, and/or the lis pendens and foreclosure lawsuit.
The C&E (Cancel and Expunge) strategy has some good and even essential attributes of the defense and counterattack on the would-be enforcer of a mortgage. But here are some potential weak points. If you are not ready for them the strategy will fail.
You are still on the right track — especially where the notary certifies that the person signing had authority to do so. That is simply a lie. The notary has no idea. The problem with the C&E strategy is that it appeals to lay people and not lawyers.
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The lay people like it because it sounds like a magic bullet that enables them to avoid litigation over whether the claimant is real and whether the claim is real. The lawyers are reluctant because they know that courts will almost always side with the party who appears to be losing the benefit of an actual bargain in which the claimant paid money. It’s all about money, whether you like it or not.
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The reality is that they are both right. And the place to start is always at the beginning — when and where and why the offending document was executed.
Filed under: burden of persuasion, burden of pleading, BURDEN OF PROOF, discovery, Discovery -Subpoena, evidence, Fabrication of documents, foreclosure, foreclosure defenses, foreclosure mill, forensic investigation, investment banking, Investor, jurisdiction, legal standing, originator, Pleading, prima facie case, sham transactions, standing, TRUST BENEFICIARIES | Tagged: Cancellation of assignment, cancellation of instrument, Cancellation of Lis pendens, cancellation of notice of default, cancellation of notice of sale, cancellation of notice of subsitution of trustee, dismissal of foreclosrue lawsuit | 1 Comment »
DiTech was not a lender. It was a sales agent or loan broker. Nonetheless a new agreement has been executed in which major creditors of DiTech are resurrecting the illusion that the current use of the DiTech name is sufficient to establish ownership of the debt, note or mortgage on any loan that was “originated” by DiTech. This is nothing less than a brazen attempt to attach orphan loans (no known creditor) to a newly conceived entity bearing little or no resemblance to the entity that once sold loans to the public under the advertising banner of “lost another one to DiTech.” It’s a lie.
see DiTech RSA
Courtesy of Philip Koebel, Esq. and Charles Cox, here is a list of the entities involved in the consolidated DiTech Bankruptcy, which was only kept alive because it representing a legacy name that could be used to reconstitute apparent ownership of loans. The creditors are basically reversing the transactions and writing off nearly $1 billion in “debt” and then miraculously allowing orphan loans to appear as though DiTech was the lender the whole time. It never was the lender. It didn’t own loans at the time of the bankruptcy. It never owned the loans. But the current deal allows the emga banks to use DiTEch as a vehicle of illusion and deception.
Schedule 1
Debtor Case Number Tax ID Number Date Filed District
Green Tree Credit LLC 19-10411 (JLG) 75-3115864 February 11, 2019 S.D.N.Y
Ditech Holding Corporation 19-10412 (JLG) 13-3950486 February 11, 2019 S.D.N.Y
DF Insurance Agency LLC 19-10413 (JLG) 30-0936918 February 11, 2019 S.D.N.Y
Ditech Financial LLC 19-10414 (JLG) 41-1795868 February 11, 2019 S.D.N.Y
Green Tree Credit Solutions LLC 19-10415 (JLG) 27-1311565 February 11, 2019 S.D.N.Y
Green Tree Insurance Agency of Nevada, Inc. 19-10416 (JLG) 88-0187331 February 11, 2019 S.D.N.Y
Green Tree Investment Holdings III LLC 19-10417 (JLG) 20-0031008 February 11, 2019 S.D.N.Y
Green Tree Servicing Corp. 19-10418 (JLG) 20-0843552 February 11, 2019 S.D.N.Y
Marix Servicing LLC 19-10419 (JLG) 56-2646101 February 11, 2019 S.D.N.Y
Mortgage Asset Systems, LLC 19-10420 (JLG) 87-0798148 February 11, 2019 S.D.N.Y
REO Management Solutions, LLC 19-10421 (JLG) 27-2377787 February 11, 2019 S.D.N.Y
Reverse Mortgage Solutions, Inc. 19-10422 (JLG) 77-0672274 February 11, 2019 S..D.N.Y
Walter Management Holding Company LLC 19-10423 (JLG) 86-1059818 February 11, 2019 S.D.N.Y
Walter Reverse Acquisition LLC 19-10424 (JLG) 46-0928837 February 11, 2019 S.D.N.Y
Filed under: CORRUPTION, discovery, Fabrication of documents, foreclosure, forensic investigation, originator, sham transactions | Tagged: bankruptcy, DiTech, GMAC, orphan loan | 2 Comments »
As a quasi government agency Fannie Mae is forced to be forthcoming about its role in lending. But the wording of disclosures mostly come from Wall Street investment banks.
In the latest description of Fannie’s current activities the wording is carefully crafted to avoid referring to ownership of the debt, but the substance is the same. By shifting the 95% risk of loss to investors they are transferring ownership of the debt and legal standing to those investors. By using separate agreements that are often described as “bets” they maintain the false illusion that they are not selling the debts, and that therefore they can sell 3000% of any debt because they are only selling “risk.”
The reason legal standing is at issue is simple. Only an injured party can sue. In this case Fannie retains a nominal interest while the investors move into Fannie’s shoes after Fannie has moved into the shoes of an originator by paying the investment bank that actually funded the loan. The investment bank is paid with certificates issued in the name of a “bankruptcy remote trust” that are then sold through brokers to pension funds and other types of investors.
If there are defaults on borrower obligations it is the investors who suffer a loss, directly or indirectly but not the investment bank, not the trust, not the trustee and not the “lender.”
But which investors? Apparently all of them. When Fannie acquires a loan it is described as “depositing” the loan into a “bankruptcy remote trust.” Fannie usually retains the role as “Master Trustee” but the named Trustee on the Bankruptcy Remote Trust is your familiar US Bank et al. Here is the kicker: the reason it is “bankruptcy remote” is that it doesn’t own any loans and doesn’t manage any loans and doesn’t handle any money. It is a legal fiction to take advantage of some tax avoidance structure in the Internal Revenue Code.
That doesn’t grant it legal standing. Like the NINJA loans, if there is no income, no assets and no business the trust doesn’t exist nd even if it was construed to be an inchoate trust, it still doesn’t own the loan nor suffer any injury if a borrower doesn’t pay on the debt.
In Rogue Trusts this infrastructure is presented without any reality. No loan was acquired by anyone. But the risk of loss on non performance of the debt is scattered in hundreds or thousands of instruments including but not limited to those falsely described as “mortgage backed securities” and “risk sharing instruments.”
Thus when a foreclosure is filed the lawyers are using a name that is either concocted out of thin air or appointed by some unauthorized party who sounds “institutional.” The proceeds of foreclosure never go to the named claimant. Some portion of the proceeds might find its way to investors but a large portion of then proceeds are simply retained by the investment bank and hidden in the category of “trading profits.”
Look no further than the following link to find that all the “competitors” on Wall Street are actually in tacit or express agreements as co-venturers in a scheme that only looks like securitization because the investment bank insulates itself from liability if it appears to be only an intermediary. In reality it is the principal and it sells off virtually all aspects of the debt to investors who are relying on the illusion.
seehttp://www.fanniemae.com/portal/funding-the-market/credit-risk/conn-ave.html
For purposes of foreclosure the chain started by the investment bank thus links to either no creditor or a nominal creditor with no risk of loss or shared risk of loss on debts. This means that standing might exist for many parties, because they are diversified, but not for one party. It also means that standing exists for parties who have not been identified and probably cannot be identified without recourse to the actual contract documents under which the investor counterparties assumed various portions of the risk of loss.
A tally of all such instruments far exceeds 100% of the debt so the chain started by the investment bank is all paid off with no standing and no financial injury.
But discovery of those documents is blocked by parties claiming the information is private and proprietary — until some enterprising and highly aggressive lawyer pierces through those specious arguments and gets an order from a judge requiring the documents to be delivered. At that point the case settles under seal of confidentiality and the public none the wiser continues to think that securitization is real and that most foreclosures are actually properly done and result in paying down the debt of a borrower.
Rinse and repeat. Every borrower starts from scratch whereas the banks and servicers continue to promote their schemes.
Filed under: foreclosure | 11 Comments »
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F.S. 736.0103 Definitions.—Unless the context otherwise requires, in this code:
(4) “Beneficiary” means a person who has apresent or future beneficial interest in a trust, vested or contingent, or who holds a power of appointment over trust property in a capacity other than that of trustee. An interest as a permissible appointee of a power of appointment, held by a person in a capacity other than that of trustee, is not a beneficial interest for purposes of this subsection. Upon an irrevocable exercise of a power of appointment, the interest of a person in whose favor the appointment is made shall be considered a present or future beneficial interest in a trust in the same manner as if the interest had been included in the trust instrument.
(18) “Settlor” means a person, including a testator, who creates or contributes property to a trust. If more than one person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion.
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Filed under: foreclosure | Tagged: Al West, Canc ellation of notice of default, Cancellation of assignment, Cancellation of Lis pendens, cancellation of notice of sale, Cancellation of notice of substitution of trustee, investigator bill paatalo | 6 Comments »
Filed under: foreclosure | 5 Comments »
Small business owners should think about what happened to homeowners when they failed to get advice of counsel and failed to get advice from a financial adviser. Millions of homeowners lost their homes, their reputation and suffered permanent damage to their financial identity. Many ended up in divorce, suicide and stress related illnesses.
The pressure from the lender to accept more and more money based on fewer and fewer indicia of viability of the loan says that the loans are intended to fail. It might seem like a good idea, but it isn’t. Free money is never free.
You better look this gift horse in the mouth because this is no gift and that it isn’t a horse.
If it matters to you that your name, signature and reputation are in the process of being sold, resold and traded on the open market then you might want to take a step back from the proposed loan. Look for an established community bank that is actually underwriting the loan for performance — thus protecting both borrower and lender.
Between the residential loan bubble that still exists and is again growing, the student loan bubble that nobody wants to deal with, and now the small business loan bubble it is hard to imagine a scenario where another crash is not imminent leaving borrowers and the investors in the lurch AGAIN.
Filed under: foreclosure | Leave a comment »
Tonight Neil Garfield and Bill Paatalo discuss the issues in revealing void transfers of debt, note and mortgage (or beneficial interest).
The Rainn case in California stands for the proposition that a complaint is sufficient when it pleads that the party on whose behalf an assignment was made had no ownership in the debt. The proof of the pudding will be at trial. How will you prove this basic proposition. The answer is that you have taken the first step which is that you put the matter in issue. The second step is discovery. And the third step, if it ever gets to that, is establishing at trial that the supposed beneficiary under a deed of trust or the mortgagee under a mortgage deed had not satisfied its burden of proof showing an ownership interest in the underlying debt.”
Neil Garfield and Bill Paatalo discuss how to reveal that the assignment is void without getting in over your head.
See http://lawzilla.com/blog/rainn-gauna-v-jpmorgan-chase-bank/
Filed under: foreclosure | Leave a comment »
This decision “Not for publication” takes one more step toward unravelling the false claims of securitization that resulted in millions of fake foreclosures over at least 15 years. The pure nonsense being peddled by Wall Street investment banks still remains as the underlying basis for assumptions and presumptions that are contrary to fact and contrary to legal and equitable principles.
But the window is now open to include the investment banks as defendants in complaints for damages and disgorgement, because as this decision reveals, the courts may not be willing to take a giant leap of faith that someone must be the lender and that “someone” is part of the chain of players who are pursuing foreclosure. Without that leap of faith, without that bias, their “doctrine” is left dangling in the wind.
See http://lawzilla.com/blog/rainn-gauna-v-jpmorgan-chase-bank/
YES it does stand for the proposition that at least this court says that cancellation of instruments is the one cause of action that in fact does exist because the assignment was from an assignor that had no interest in the debt. I think that it is important to make it clear that the words “no beneficial interest” means “no ownership of the debt.” But the use of the words “no beneficial interest” implies the validity of the deed of trust by which the property was encumbered in favor of a “lender” (or its agent “MERS”) who was a sales agent and not a lender and from whom the borrower received no funds.
If that is so then the liability for lending violations MUST attach to the investment bank. And if that is so then at least in judicial states, by alleging those lending violations through the affirmative defense of recoupment, the foreclosure can be mitigated or defeated entirely. In nonjudicial states one would need to allege active concealment preventing the borrower from knowing the real party in interest with whom he was dealing.
This could be the end of nonjudicial foreclosures at least as to LBMT-WAMU-Chase. It should be treated as such. If I had time, I could literally write a book about this decision as it is so instructive as to pleading requirements and common mistakes made by trial and appellate courts like for example, assuming that a legal default exists when nobody who owned the debt declared such a default or even said that payment was delinquent in some way.
The case is also instructive in that it repeats a very common scenario regarding the origination and progression of the loan. This court and other courts will eventually face the day when their assertions come full circle: for now, they are saying that just because there was no consideration between then named lender and the borrower doesn’t mean there was no enforceable contract.
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Yes it does mean that in every context other than foreclosure litigation. But because of the rules in UCC Article 3 the maker of a note takes a risk when they execute the promissory note without having received any consideration because the note represents, under law, the right to enforce it, which if it is acquired for value might mean the enforcement would be free from borrower”s defenses. That liability does not create an enforceable loan contract. Even common sense dictates that for a loan contract to be enforceable there must be a loan between the parties to the contract.
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PRACTICE NOTE: All that said, this case only stands for the proposition that a complaint is sufficient when it pleads that the party on whose behalf an assignment was made had no ownership in the debt. The proof of the pudding will be at trial. How will you prove this basic proposition. The answer is that you have taken the first step which is that you put the matter in issue. The second step is discovery. And the third step, if it ever gets to that, is establishing at trial that the supposed beneficiary under a deed of trust or the mortgagee under a mortgage deed had not satisfied its burden of proof showing an ownership interest in the underlying debt.”
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The opposition to that narrative will be what it has always been. That possession of the “original” note raises the legal presumption that the named beneficiary under the deed of trust in fact was the legal beneficiary under the deed of trust. Possession of the note, they will argue equals ownership of the debt. If the judge accepts that proposition, the burden of proof will then fall on the borrower to rebut that presumption — a leap that most judges have already demonstrated they don’t want to make. So the persuasiveness of then presentation including an unrelenting march toward revelation of the truth is the only thing that carries the day.
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The banks know that what they’re doing is wrong. But history shows that they can get away with it except with the apparently rare homeowner who aggressively and relentlessly defends the foreclosure.
Filed under: CORRUPTION, discovery, evidence, Fabrication of documents, foreclosure, foreclosure defenses, forensic investigation, investment banking, Investor, jurisdiction, legal standing, originator, Pleading, Servicer, sham transactions, standing | Tagged: cancellation of instrument, Chase, DECLARATORY RELIEF, Long beach, slander of title, WAMU, Washington Mutual | 13 Comments »
Courtesy of Bill Paatalo, I have located the stark 2009 admission by the Florida Bankers Association that original notes were destroyed contemporaneously with the loan closing.
Here is the quote:
The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated (e.s.) to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry (e.s.) and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.
see Florida Bankers Assoc Comment Letter
The Florida Bankers Association is the only bankers association in Florida and its members include all the community bankers whose voices have been muffled and of course all the banks that have been involved in the entire “securitization” mortgage meltdown. Note that bankers are not bad. Bad bankers are bad.
I first became aware of the practice of eliminating original documentation in 2004 and again in 2007 when I was involved in some real estate transactions in Arizona. They refused to let the Buyer or the Seller have an original contract and required the parties to only use Fax copies as confirmation of a deal. In fact, that is what prompted me to start ask questions.
I noticed for example that when buyers wanted to add landscaping or other such items to new construction they were being encouraged to add it to the mortgage rather than pay for it. This “encouragement” was opposite to good practices and very distant from best banking practices. While landscaping theoretically made the property more marketable it did little to add value.
So an 80-20 LTV was being shrunk before it even had begun. A $200,000 home with an additional $20,000 in landscaping expense resulted in a loan of $176,000 instead of $160,000, for a home that was still worth less than $200,000 since appraisals were regularly marked up by $20,000. Thus the loan was basically a 100-0 loan (and going down fast when the market made a “Correction.” After the correction the loan was upside down on average 130-0. In commercial loans borrowers are allowed to walk away from that. In residential loans consumers are stuck with it.
It didn’t take long for me to realize that a bubble was being created that was astronomical by comparison to all other financial bubbles in human history. Given my personal experience on Wall Street as an investment banker I knew that they had to be involved simply because there was no way to make money from such lending as a commercial bank. The rates were too low and the risk was not just too high, it was obviously intended. The lender would get burned. It had to be an investment bank who had a scheme.
My suspicion about Wall Street was further corroborated when I saw the intense competition to get borrowers to sign for such loans, spending hundreds of millions of dollars on advertising in virtually every media and especially targeting areas where the typical borrower would ordinarily have trouble getting any loan. This was further exacerbated when the NINJA loans were revealed — No Income No Job No Assets.
There was only one possible way to make money from this jumble. And that was to sell the same loan many times. It’s simple math. The trick was in how to hide the fact that you were assuming a risk of virtually guaranteed failure of the loan while leaving the homeowner and the neighborhood to eat it and hide the multiple sales of the same asset, keeping all the profit even in a market collapse which, as an investment banker, you knew was coming because you made it collapse.
As any embezzler knows you can’t hide it if you don’t control it. So the essence of the greatest trick of all time was to sell the loans without selling the rights contained in the paper. Sell the paper but then take back everything that is written on it. And that is what happened.
So the problem with the plan was that hundreds of years of common law and statutory law required that the original note be produced if that was the basis for a claim for enforcement of the note or ownership of the underlying debt (and therefore for a claim for foreclosure of mortgage or deed of trust).
If everyone continued to demand delivery of the original note then that loan could not be sold multiple times. Thus it became the job of the investment banks to convince investors that an image was even better than the original note, regardless of what the law requires. That was easily accomplished once the assertion appeared to be accepted by all major banks who were in on the deal and some who didn’t realize what they were doing.
And the insurers of the bogus mortgage bonds issued in the name of trusts that didn’t exist were distracted from looking for transfer of the original note. I know this partly from the reports and my interviews with hedge fund managers who actually did peek under the hood and were horrified by what they saw and refused to buy the mortgage bonds or any hedge contract based upon the alleged mortgage bonds which were neither bonds nor actually derived in value from real mortgage loans. Certificate holders were barred or otherwise disclaimed any right, title or interest to the loans. They received a promise from an “obligor” who was actually the investment bank doing business under the fictitious name of a nonexistent trust. Sell it but don’t REALLY sell it. But by all means keep the money!
Once everyone accepted the image files it was easy to do commerce in images instead of the real thing. But then came the legal requirement to produce the original note in court so everyone was filing foreclosures based upon a lost note. That didn’t work well. It made foreclosures go judicial in non judicial states and the requirements of proving a lost note were greater than the capacity of the appointed claimant to prove it mainly because the appointed claimant had no claim.
That’s when they pulled the rabbit out of the hat. The next “industry practice” was to mechanically reproduce the original note from an image because the original had in fact actually been destroyed as revealed in the Katie Porter study when she was a law professor in Ohio in 2007. Now she is in Congress. The recreations were so good that even the borrowers could not distinguish the mechanical signatures from their own — except when they remembered that they had signed in a different colored ink.
The real proof problem was that borrowers were unwilling to spend money on forensic document examiners to uncover the widespread practice of forgery and perjury. The strategy of the investment bankers was brilliant. They reasoned quite correctly that since the borrowers knew they had signed an original note and that there appeared to be no reason to duplicate their signature the borrowers would simply walk from their homes and never be the wiser. In addition to pornographic profit from sellign the loan multiple times, the investment banks would also get millions of homes. It worked.
So here we have a banking association representing BofA, Chase, Wells Fargo, Citi et al saying that it was OK to have destroyed the original notes and OK also not to comply with laws requiring them to prove the lost note, although their argument by stealth uses the strict requirements of establishing a lost note, as if that were the practice. In practice they were getting judges to overlook strict compliance and go with legal presumptions.
The information reviewed to verify the plaintiff’s authority to commence the mortgage foreclosure action will be drawn from the same database that includes the electronic document and the record of the event of default. The verification, made “to the best of [the signing record custodian’s] knowledge and belief” will not resolve the need to establish the lost document.
So in answer to the proposed rule that would require verification (and penalty of perjury) the association says
Verification adds little protection for the mortgagor and, realistically, will not significantly diminish the burden on the courts. The amendment is not needed or helpful.
Some form of weak verification is required in most states now — especially after the 50 state multi billion dollars settlements and other settlements now totalling nearly half a trillion dollars arising out of these morally bankrupt and lawless strategies. But the fact remains that whether verification is required or not, the investment banks have directly or indirectly convinced most members of the public, the judiciary and the legal profession that each case is about a real creditor (buried in the woodpile) against a deadbeat borrower.
And because the people in poor and middle class neighborhoods don’t have deep pockets they don’t have deep voices either. The media has long since given up on the largest economic crime in human history and so has government — which assures us and the investment bankers that it can, it will and it is all happening again. This time the emphasis is on student loans and small business loans because the residential loan market is saturated.
Filed under: foreclosure | 3 Comments »
Shame is the reason why most borrowers don’t contest foreclosures. That shame turns to intense anger when they realize that they were used, screwed, abused and now they are targets in a continuing blitz to embezzle much needed money from their lives and from the financial system generally.
The genius behind companies like Citi is… Deception by Branding. “Citi” is not a company, it’s a brand of a conglomerate of companies. Even its subsidiary “Citibank N.A.” is deceptive. First let’s dispel the myth that subsidiaries are equal to their parents. Not true, not even when they are wholly-owned subsidiaries. They are separate companies, albeit owned by a common parent. —- From Anonymous Writer
Probably the biggest goof of the court system in foreclosure litigation (and in business litigation) is mistaking a brand for a company and not realizing that there is both a business and legal distinction between even a wholly owned subsidiary and another subsidiary or parent company.
The reason that is such a big goof is that the actual transaction is being ignored while a small part of the transaction is being treated as the entire matter. That is like taking the spark plug out of car and then selling it to someone as though it was the whole car. It doesn’t work that way.
In conglomerates like “Citi” the brand intentionally blurs the factual and legal distinctions. And these distinctions make a difference precisely because the debt, note and mortgage are split and transferred multiple times between subsidiaries wherein each one is either moved off the books entirely or each subsidiary is showing an “asset” that it sells into the shadow banking market.
These practices results in a ten-fold increase in the apparent size of the asset, which is then owned by dozens, perhaps hundreds of different unrelated investors. And that enabled the banks siphon literally trillions of dollars out of the US economy and trillions more out of the world economy.
Through the devices of branding and “off balance sheet transactions” this wealth is controlled by handful of people; but this wealth is directly derived from one simple plan — to market the signature, reputation and identity of borrowers who were led to believe that they were executing loan documents. In fact they were executing the foundation documents for a string of transactions and book entries that would result in profits far beyond the amount of the loan.
These unsuspecting consumers had become ISSUERS without ever knowing it and they still don’t know it or understand it. So they still believe that somehow the investment bank behind the scheme is actually entitled to collect on a debt that the bank sold multiple times through multiple affiliates and subsidiaries in transactions that were often “off balance sheet.” And the fact that in virtually all cases the proceeds of foreclosure sales are not applied to reduce the debt owed to the owner of the debt is completely overlooked.
The clear issue that investment banks have been avoiding is that every one of their originated loans is part of a larger intended transaction, and that the homeowner gets absolutely no clue or disclosure that the bulk of the transaction is actually very different from a loan and actually the antithesis of a loan. Clearly the two were both unrelated and related.
The borrower thought it was a loan and it was a loan but the loan was a part of a larger transaction in which the attributes of a loan were shredded. So the loan was essentially a sham entry to allow the investment banks to profit regardless of the performance of the loan. Hence the transaction was not really a loan anymore. This is true even for loans acquired after origination by an actual lender.
Risk underwriting, the most basic part of lending, was thrown to the winds because it was irrelevant. And legally required disclosures were also thrown to the winds because lending laws (TILA) clearly state that compensation received after the loan closing must be disclosed.
What would have happened if the borrowers knew their signatures, reputation and identity were the real subject of the transaction and that they would be sold in a myriad of way producing compensation far beyond the amount of the loan. How would bargaining have changed? It’s obvious.
Even the most unsophisticated homeowner would have gone shopping for someone who would offer a share of the bounty. And that is why the “free house” PR gimmick is a myth. If the investment banks had not concealed the major attributes of the transaction, the mortgage meltdown would never have occurred.
And if “securitization” had proceeded anyway then homeowners would have received immediate and possibly total reductions in the amount due. Yes I recognize that this is a contradiction because if there is no loan then there are no derivatives to be sold. But that is not a problem created by homeowners or borrowers or consumers. It is a problem created by fraud and deceit by the investment banks.
In the final analysis the investment banks used homeowners and investors to issue unregulated securities and instead of turning the proceeds over to the issuers they kept the money. In any world of law enforcement they should have been jailed for that.
The goal was to get the signature and then sell it. That is not a loan. And the failure to disclose it violated everything about Federal and State lending laws that require disclosure of identities of the real parties in interest and the amount of money they are getting as compensation for their role in “the transaction.”
The investment banks chose to unilaterally define “the transaction” as just the part dealing with the origination of the debt, note and mortgage. That was a lie. It concealed the fact that the borrower was in fact a real party in interest in a much larger transaction in which at each step profits, fees, and other compensation would be distributed in amounts vastly exceeding the amount that was disclosed to the borrower as the value of the transaction. For each $1 “loaned” there was $20 in profit.
By concealing this information the investment banks took all of the profit, fees and compensation without allowing the homeowner to participate in what amounted to a monetization of their signature, reputation and identity.
Thus the most essential part of the Federal and State lending laws was thwarted: that the “borrower” must know the identity of the parties with whom he/she is dealing and the “borrower” must know the amount of compensation being earned as result of the “borrower” signing documents at loan closing.
Instead the homeowner had become the issuer of unregulated securities, the proceeds of which were largely concealed and withheld from the homeowner. No lawyer would have permitted their client to enter into such a scheme — if the facts were known.
Borrowers get lost in the weeds when they make these allegations because they can’t prove them. Truth be told, even the bank could not prove them because of the number of transactions that occur “off balance sheet.” Abraham Briloff (in his book Unaccountable Accounting) first observed over 50 years ago, the invention of this ploy of “off balance sheet” transactions was an open door to fraud that would likely occur but might never be proven.
We are a nation of laws not opinions. Our laws depend upon findings of fact, not opinions or political views. That is the only control we have to prevent fraud or at least bring fraudsters to justice, or at the very least prevent them from continuing to reap the rewards of their multiple violations of statutory laws, common law and the duty of good faith, honesty and fair dealing.
So when the robowitness signs affidavits, certifications or other documents or testifies at deposition or in court, be aware that in nearly all cases, he/she is either an independent contractor with absolutely no knowledge or authority concerning the subject transaction (as a have defined it herein) or an employee of a subsidiary with no connection to any transaction involving the homeowner or both.
You can reveal the lack of actual personal knowledge and thus then lack of foundation for evidence proffered in a foreclosure by discovery, motions to enforce discovery, motions in limine and good cross examination which always depends upon one single attribute to be successful: follow-up.
And in many cases the robowitness is not nearly as stupid as his/her script makes him out to be. The robowintess often knows everything that is contained in this article. Good cross examination can frequently reveal that — that is where the case turns from enforcement of a legitimate debt to a case in which both the claim and the claimant have not been proven by any standard.
That is all you need to win. You don’t need to prove how they did it. You only need to reveal the gaps that exist because the substance is not there — the claiming parties have all long since divested themselves, at a profit,of any interest in the debt, note or mortgage. There is no debt left to pay, at least not to them. Stop feeling guilty and be a warrior.
Filed under: burden of persuasion, burden of pleading, BURDEN OF PROOF, CORRUPTION, discovery, Discovery -Subpoena, evidence, Fabrication of documents, foreclosure, foreclosure defenses, foreclosure mill, forensic investigation, forgery, investment banking, Investor, jurisdiction, legal standing, MBS TRUSTEE, MODIFICATION, Mortgage, Motions, originator, Pleading, prima facie case, Servicer, sham transactions, standing, STATUTES, TILA, TRIAL OBJECTIONS, trial strategy | 6 Comments »
Filed under: foreclosure | 7 Comments »
I have added to my templates for discovery questions and requests relating to a claimant that is named “XYZ Bank, N.A. as trustee for the ABCDE Corp. Trust Series 12345-4321A Certificates” and where, as in most cases, there is a PSA and/or a Trust Instrument that identifies the “trust” (if ti exists) as a REMIC — Real Estate Mortgage Investment Conduit. It turns out that the Internal Revenue Code provides some guidance that might get you through objections to your discovery.
Keep in mind that there is very often a “Trust Agreement” that is different from the PSA and that there is very often a “Servicing Agreement” that is different from the PSA. It’s somewhat like saying “Do as I say not as I do.”
Also keep in mind that the only trust relationship I can decipher out of the so called trust instruments and associated documents is that the Trustee is basically a naked nominee (like MERS) for the investment bank, for which it is paid a monthly fee with no rights of administration nor any duties or obligations.
Thus the investors as beneficiaries is a red herring distraction from the truth. Hence any power of attorney executed in the name of the named Trustee is worthless because you cannot create a right by purporting to transfer it. The trick in litigation is revealing that the named Trustee is not a legal trustee and should not be so named because it lacks all indices of power attributed to a trustee.
Thus a “trust” might indeed exist even if it is not anything like what is being presented in court. And the res of the trust is the nominal title to documents like a note and mortgage to hold at the direction of but necessarily for the benefit of the investment bank. But since the nominal title is without value there still is probably no res and hence no trust nor anything to administer.
While the investment bank once had a claim as owner of the debt, it has long since divested itself of any right, title interest or obligation with respect to the debt, note or mortgage.
IRC § 301.7701(i)-1 Definition of a taxable mortgage pool.(a)Purpose. This section provides rules for applying section 7701(i), which defines taxable mortgage pools. The purpose of section 7701(i) is to prevent income generated by a pool of real estate mortgages from escaping Federal income taxation when the pool is used to issue multiple class mortgage-backed securities. The regulations in this section and in §§ 301.7701(i)-2 through 301.7701(i)-4 are to be applied in accordance with this purpose. The taxable mortgage pool provisions apply to entities or portions of entities that qualify for REMIC status but do not elect to be taxed as REMICs as well as to certain entities or portions of entities that do not qualify for REMIC status.
(b)In general.
(1) A taxable mortgage pool is any entity or portion of an entity (as defined in § 301.7701(i)-2) that satisfies the requirements of section 7701(i)(2)(A) and this section as of any testing day (as defined in § 301.7701(i)-3(c)(2)). An entity or portion of an entity satisfies the requirements of section 7701(i)(2)(A) and this section if substantially all of its assets are debt obligations, more than 50 percent of those debt obligations are real estate mortgages, the entity is the obligor under debt obligations with two or more maturities, and payments on the debt obligations under which the entity is obligor bear a relationship to payments on the debt obligations that the entity holds as assets.
Subject to considerable editing and fine tuning, this gives rise the the following recitations and questions:
Be prepared for objections and long memoranda of law.
Comments welcome
Filed under: CORRUPTION, discovery, Discovery -Subpoena, evidence, Fabrication of documents, foreclosure, foreclosure mill, forensic investigation, investment banking, Investor, Servicer, TRUST BENEFICIARIES | 4 Comments »
Tonight’s Agenda:
The devil is in the details. The details in litigation lie basically in discovery — asking and responding. Very few pro se litigants know how to construct good Interrogatories, Requests to Produce, or Requests for Admission. They know even less about how to use the responses, if they get any.
And they know still less about how to use inconsistencies or lack of response as the basis for enforcement and motions for contempt and sanctions and ultimately to limit the evidence that can be introduced by the claimant in foreclosure.
Failure to know about this is fatal because it is failure to understand the nature and procedure of litigation. Most lawyers don’t suffer from that ignorance. But they often do suffer from lack of motivation and thus they head for failure when they could be heading for success.
Judges are getting increasingly irritated by sloppy and bad discovery practices by both sides in litigation.
See Exterro-EDRM Judges Survey 2019 Series-…iscovery Specialists (ACEDS) – JDSupra
Filed under: burden of persuasion, burden of pleading, BURDEN OF PROOF, CORRUPTION, discovery, Discovery -Subpoena, evidence, Fabrication of documents, foreclosure, foreclosure defenses, Mortgage, Motions, Pleading, prima facie case, Servicer, sham transactions | 2 Comments »
The way that borrowers lose cases is by picking out one thing from a case or statute and treating it as a magic bullet. If the law were that simple a computer would be deciding all cases. The distinctions between possessors of a note, rights to enforce, status as a holder, owning the debt and the status as holder in due course are extremely detailed and they are fairly rigid. That is because the UCC was designed to effectuate the free flow of commerce and protection of both parties under a set of rules that must be rigid to accomplish the goals of free commerce and protection.
To assist foreclosure defense attorneys and pro se litigants I offer my take on application of UCC rules to residential foreclosures. As to my foundation for doing so I offer the following: I was the winner of the American Jurisprudence book award in law school for bills and notes; I was deeply involved on wall street with the actual trading of bills and notes; I was the original drafter of hundreds of deals involving bills and notes; and I have spent 43 years litigating cases involving bills and notes.
Confusion arises because of references to holder in due course. A holder in due course is one who purchases a note for value in good faith and without knowledge of the borrower’s defenses. If such a transaction actually occurred it would be difficult in this context to say that the buyer was not acting in good faith or knew of the borrower’s defenses.
Here is a key rule to guide all foreclosure litigation: As long as the judge thinks that the sale of the home will be used to pay the down the borrower’s debt to a party who owns the debt the court will find any possible way to rule for the party claiming rights to foreclose.
The converse is equally true — after step by step takedown of the evidence of the claimant — no judge will knowingly allow a claimant to force the sale of a home where the proceeds are more likely than not going to be used for profit rather than paying down the debt.
Most losing attempts are based upon the premise that there is a way to block the remedy. Most winning defenses are based upon the premise that there is no remedy because there is no claim and there is no claimant.
Filed under: burden of persuasion, burden of pleading, BURDEN OF PROOF, CORRUPTION, discovery, evidence, Fabrication of documents, foreclosure, foreclosure defenses, foreclosure mill, forensic investigation, jurisdiction, legal standing, Mortgage, Pleading, prima facie case, Servicer, sham transactions, standing, TRIAL OBJECTIONS, trial strategy | 14 Comments »
For quite some time, the courts have struggled with the concept of primary liability for a lying liar and secondary liability for a liar who passes on the lie knowing that it was a lie. Scotus, in the Lorenzo decision has now said that is a distinction without a difference.
It is not a secondary issue of aiding and abetting, it is a primary issue where the agent, employee, officer or representative of the liar is equally liable for the dissemination of a lie if they know it is a lie.
BUT you still need to prove intent to lie along with the other elements of fraud. A lie is not actionable if the recipient knew it was untrue or should have known or did not rely upon it. If the lie is not material then it is presumed to belie upon which nobody relied.
See Lorenzo v. Securities and Exchange Commission
The interesting part of this decision is that it is parallel to false securitization claims where various lawyers, servicers and others say things that are lies to mislead the recipient of such information into thinking that the trust has assets that everyone who knows, knows that the trust doesn’t have those assets (i.e., loans).
Justice Breyer writes:
Petitioner Francis Lorenzo, while the director of investment banking at an SEC-registered brokerage firm, sent two e-mails to prospective investors. The content of those e-mails, which Lorenzo’s boss supplied, described a potential investment in a company with “confirmed assets” of $10 million. In fact, Lorenzo knew that the company had recently disclosed that its total assets were worth less than $400,000.
Some quotes from an article (see link above) on this highly important decision:
In a decision beneficial to the US Securities and Exchange Commission, the US Supreme Court has affirmed that those persons who disseminate statements containing material misrepresentations or omissions are primarily liable for such misstatements even if they did not directly make them.Private securities litigants will likely rely on Lorenzo v. SEC to assert claims against secondary actors—including bankers, lawyers, and accountants—who disseminate statements made by others that they allegedly know are materially misleading, and the Commission is now clear to charge such persons as primary violators without demonstrating that the person who actually made the statement also violated federal securities laws.*the Court endorsed the SEC’s approach to scheme liability against those who distribute materially misleading statements with scienter, regardless of whether they are actually the maker of the statements. By holding that a nonmaker can still violate Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, it is expected that private securities litigants will rely on Lorenzo to assert claims against secondary actors who, with scienter, disseminate alleged misstatements made by others. Lorenzo may also further embolden the Commission to allege primary violations against “gatekeepers” and others who did not make the alleged misstatements, but are nonetheless alleged to have been involved in their dissemination.*At the request of his supervisor, Lorenzo, an investment banker, sent two emails that he did not draft to prospective investors. Lorenzo’s supervisor provided the content of the two emails, which Lorenzo merely copy and pasted into his own emails. Lorenzo then transmitted the emails and included his signature block with a note that he could be contacted with any questions, but also stated in each email that he had sent it at the request of his supervisor. Although Lorenzo did not draft the content of the emails, the Commission found he acted with intent to defraud because he knew some of the content was false or misleading when he sent them.*Before Lorenzo, the Janus and Central Bank decisions seemed to impose strict limits on claims brought by private plaintiffs. The Supreme Court’s new decision affirms that those who disseminate misstatements can commit a primary violation of Rule 10b-5, rather than just a secondary aiding and abetting violation, for which there is no private right of action. Accordingly, Lorenzo may curtail the effect of Janus and Central Bank, and could be interpreted to mean that a secondary actor (e.g., banker, lawyer, accountant) may, under similar facts, be held primarily liable under a scheme liability theory.[19]*It will therefore be left to lower courts to determine how far Lorenzo—which on its face appears to limit primary liability to “those who disseminate false statements with intent to defraud”—will stretch primary liability in private actions, if at all. Indeed, plaintiffs will still be required to plead with particularity that the “nonmaker” had such an intent.
Filed under: CORRUPTION, discovery, evidence, Fabrication of documents, foreclosure, foreclosure mill, forensic investigation, investment banking, Investor, jurisdiction, legal standing, securities fraud, Servicer, sham transactions, standing | 5 Comments »
There are two morals to this story. First always use a legal and financial adviser if you are about to make the largest investment of your life. Second, there is no such thing as boilerplate or standard clauses.
So you have a “lender” who is offering to lend you money, even though you have trash credit and no visible means of support, at a very low rate and they offer to further reduce the monthly payments for as much as five years, and they are paying wild commissions and salaries to everyone involved while spending hundreds of millions of dollars just to get your signature. And good news the appraisal came in $20,000 higher than expected so you already have “equity!”
Some of the rates have been as low as 2% or even less in certain cases. Many if not most of the loans in certain classes were nearly certain to fail. Yet onward and upward the banks persisted in driving up the money supply and raising housing prices like the tulip craze back 400 years ago.
It was all coming from Wall Street investment banks who caused the 1929 crash. The investment banks made money lending money like that starting around 1996. The loans failed and still they made money. They didn’t need the bailout but they took it anyway.
So I ask you to consider the fact that the investment banks were indeed making a lot of money on 2% loans. How? By selling your signature, your name and your financial reputation all without disclosure or even a wink at getting your consent. That’s because they don’t want to share the bounty with you. They didn’t just make money. They practically invented a printing press without the need for physical printing. All the contracts, all the notes, all the mortgages, all the closing documents exist only in digital images and data.
So those 2% loans, even though they failed, made about $20 for every dollar loaned. And that’s the dirty secret they are hiding behind the “free house” myth that most people believe. And now, adding insult to injury, they want your house too, even though the proceeds of sale will not be used to pay down the debt.
Filed under: foreclosure | 13 Comments »
The reason why thousands of cases have been confidentially settled with satisfactions of mortgages, payment of attorney’s fees and damages is that the banks are willing to pay anything necessary to preserve the tree (certificates) and the branches (derivatives) and the leaves (minibonds and contracts like credit default swaps). The risk to the investment bank is enormous if the tree falls. All that profit turns into liability. Borrowers and their attorneys miss the point when they value the case based upon the principal due or the amount of arrearages. The banks don’t actually care about that because they already recovered that money long ago — after the loan closing.
The currently prevailing view is that the foreclosure presumably results in the payment of a debt to a creditor who is owed the debt and would otherwise suffer a financial loss. A lot of forensic material is interesting but does not address this fundamental bias. I think the fundamental error committed by most borrowers and their attorneys is not understanding the practice of securitization — PLUS not taking time to analyze the timeline of ownership.
This scheme was conceived in the context of a belief that they could get away with it and so far, they have in all but a few thousand cases in which the borrower’s have mounted an aggressive defense revealing gaps in the claimant and gaps in the claim. The painful truth is that most people who left their keys on a clean kitchen counter were delivering a free house to a band of thieves who had already screwed them several times.
Filed under: foreclosure | 7 Comments »
