How to Distinguish the Promissory Note from the Debt in a Loan Transaction

It seems nothing gets a judge angrier than being challenged on the court’s misconception of law. In 42 years of trial experience my conclusion is that sometimes you need to risk veins popping in the neck and even contempt  citation to get your point across. Yet in the heat of the moment it is easy to cross the line that the judge wants you to cross where it gets personal, nasty and genuinely contemptuous of the court. Having been cuffed twice, I recommend that this line need not be crossed.

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

It is a common misconception that the note IS the debt. It isn’t and never was. At best the promissory note has only been EVIDENCE of the debt. But it has been used interchangeably with “the debt” because until recently in almost every case the debt and note were merged by the common law doctrine of merger which prevents two liabilities — one as maker of the note and the other as borrower of money.

Each of those, under law, creates a separate and distinct liability in which the payee under the note (or its successor) can recover damages for breach of the note and the lender of the money can recover damages to get repayment of the debt.

If the Payee on the note is the same as the party who loaned money to the borrower then the doctrine of merger applies and the note, while technically only EVIDENCE  of the debt is merged with it and the terms can be used interchangeably without doing violence to either the note or the debt.

TILA requires that the actual lender be disclosed along with all compensation, profits, fees, commissions or anything else arising from the origination of the loan of money.


[NOTE: I believe that there is still a right of action under TILA to offset the entire balance demanded by claiming right to receiver under TILA, RESPA, FDCPA etc. all undisclosed compensation that rose by virtue of the origination of the loan. And I further believe that this is not barred by statute of limitations if contained in recoupment claims as part of affirmative defenses either in primary foreclosure cases in judicial states or secondary unlawful detainer cases in nonjudicial states. But I could be wrong about these issues being raised in nonjudicial states where the statute of limitations has otherwise expired]


SINCE AROUND 1997, most lending originated with investment banks who used money from their own assets or more likely from investors. To insulate themselves from liability for lending or servicing violations they invented a laddering scheme (a term invented by Goldman Sachs). Sham conduit entities [“remote entities] were created or used to sell loans posing as lenders. I dubbed them “pretender lenders.” In some cases actual banks served as as the sham conduit entities in the sense that they were not really loaning money. They too were pretender lenders.

At the beginning they didn’t even bother to disguise the loans. The “originator” executed a Purchase and Assumption Agreement in which all future loans were already deemed owned by an intermediary like Countrywide, who likewise was not lending any money. Later when foreclosure was an issue the investment bank contracted with LPS (Black Knight) to fabricate documentation that creating a false chain of title, as though a series of purchases and sales of the debt had occurred. No such transactions occurred.

Later they disguised the loans to have been made as funded by a “warehouse lender” but in all events the transaction was funded with real money by the investment bank, not the wholesale lender, the originator or the mortgage broker. However, the investment bank intentionally prohibited the use of its name on any documents connected with loans to consumers for residential mortgage loans even though the only real parties in interest were the homeowner(s) and the investment bank.

That chain of title was not accompanied by any correspondence or even agreements concerning any transaction because there was no transaction. No transaction was commercially possible since the sole investment in the loan was made by the investment bank at the time of origination who in turn sold the investment multiple times through a variety of “bonds” and “private contracts” (Credit Default Swaps for example); hence  no payment of value was ever made by any of the parties in the false chain of title. Under UCC 9-203 that precludes enforcement of the security instrument (mortgage) but under Article 3 the note could be enforced and a judgment could be obtained for damages for breach of the note.

It is true that many cases, judges and lawyers have stated that it is the note that is required to enforce the mortgage but that is only because of an assumption and in some cases a legal presumption that the promissory note represents the “title” to the debt. If it is a legal presumption then the homeowner is stuck with rebutting the presumption which actually is not difficult in discovery although it will be hard fought since the opposition will be fighting not only to win the case but also to avoid jail for perjury or sanctions for perpetrating a fraud upon the court — with the fall out including possible loss of licenses for the attorneys, servicers, lenders and even securities, real estate and mortgage brokers — all of whom continue to reap outsize fees for looking the other way and playing along with the house of cards built by the investment banks who initiated this scheme.

So the actual law is that a transfer of the mortgage without the DEBT is a nullity. Transfer of the note without purchase for value may well entitle the transferee (indorsee, endorsee) to enforce the note but it does not entitle the transferee to enforce the mortgage.

Tonight! Charles Marshall on Key Topic for Homeowners — Hybrid Legal Representation

Editors; Note: Everyone looking for an attorney should listen to this show. Every lawyer thinking about turning down or accepting a case involving foreclosure defense should listen to this show.

Thursdays LIVE! Click in to the Neil Garfield Show

Tonight’s Show Hosted by Charles Marshall

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

Charles Marshall is on today hosting the Neil Garfield Show to discuss what he calls Hybrid legal representation, which is a combination of pro per representation alternately mixed with formal legal representation at times from an attorney, and/or, pro per representation with the assistance of an attorney or other advocate/support person who has some expertise in the legal or factual issues at play in the legal case, whether a Plaintiff’s case you run in a non-judicial foreclosure state, or a defense case in a judicial foreclosure state. The following elements/issues are the most important to figure out re whether this type of representation makes sense, or when to use alternatives to this model, in certain circumstances:

– Pro Hac Vice: what it is, how to use it;

– Lis Pendens in non-judicial foreclosure states;

– Having an attorney come into and go off of your pleadings, either in non-judicial foreclosure states, or judicial ones;

– The attorney retainer agreement in a Hybrid situation;

– Working with a non-attorney re legal issues and pleadings;

– Attorney hearing appearance issues, pluses and minuses.

Re all these issues, it is best to keep in mind one of Marshall’s major aphorisms: As in law, so in life; as in life, so in law…..

SCOTUS Revives Qui Tam Actions

Until this decision I had assumed that Qui Tam actions were essentially dead in relation to the mortgage meltdown. Now I don’t think so.

The question presented is whether actions brought by a private person acting as a relator on behalf of a government entity can bring claims for damages under the False Claims Act. Such actions are barred by the statute of limitations, which requires a violation to be brought within six years of the violation or three years “after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances.”[3] 

In a unanimous decision the Court held that the tolling period applies to private relator actions. This does not by any stretch of the imagination create a slam dunk. Relators must have special knowledge of the false claim and the damage caused to the government. It will still be necessary to argue in an uphill battle that the true facts of the securitization scheme are only now unfolding as more evidence appears that the parties claiming foreclosure are neither seeking nor receiving the benefit of sale proceeds on foreclosed property.

Some claims might relate back to the origination of mortgages and some relate to the trading of paper creating the illusion of ownership of loans. Still others may relate to the effect on local and State government (as long as the Federal government was involved in covering their expenses) in the bailout presumably for losses incurred as a result of default on mortgage loans in which there was no loss to the party who received the bailout, nor did such bailout proceeds ever find the investors who actually funded the origination or acquisition of loans.

And remember that a relator needs to prove special knowledge that is arguably unique. The statute was meant to cover whistleblowers from within an agency or commercial enterprise but is broader than that. The courts tend to restrict the use of Qui Tam actions when brought by a relator who is not an “insider.”


See Review of False Claims Act 18-315_1b8e

See Cochise Consultancy, Inc. v. United States ex rel. Hunt

I also find some relevance in the decision penned by J. Thomas writing for the court as it applies to TILA Rescission, FDCPA claims, RESPA claims and other claims based upon statute:

Because a single use of a statutory phrase generally must have a fixed meaning, see Ratzlaf v. United States, 510 U. S. 135, 143, interpretations that would “attribute different meanings to the same phrase” should be avoided, Reno v. Bossier Parish School Bd., 528 U. S. 320, 329. Here, the clear text of the statute controls. Cochise’s reliance on Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U. S. 409, is misplaced. Nothing in Graham County supports giving the phrase “civil action under section 3730” in §3731(b) two different meanings depending on whether the Government intervenes. While the Graham County Court sought “a construction that avoids . . . counterintuitive results,” there the text “admit of two plausible interpretations.” Id., at 421, 419, n. 2. Here, Cochise points to no other plausible interpretation of the text, so the “ ‘judicial inquiry is complete.’ ” Barnhart v. Sigmon Coal Co., 534 U. S. 438, 462. Pp. 4–8. (e.s.)

Point of reference:

I still believe that local governments are using up their time or might be time barred on a legitimate claim that was never pursued — that the trading of loans and certificates were transactions relating to property interests within the State or County and that income or revenue was due to the government and was never paid. A levy of the amount due followed by a lien and then followed by a foreclosure on the mortgages would likely result in either revenue to the government or government ownership of the mortgages which could be subject to negotiations with the homeowners wherein the principal balance is vastly reduced and the government receives all of the revenue to which it is entitled. This produces both a fiscal stimulus to the State economy and much needed revenue to the state at a cost of virtually zero.

In Arizona, where this strategy was first explored it was determined by state finance officials in coordination with the relevant chairpersons of select committees in the State House and Senate and the governor’s office that the entire state deficit of $3 Billion could have been covered. Intervention by political figures who answered to the banks intervened and thus prevented the deployment of this strategy.

I alone developed the idea and introduced it a the request of the then chairman of the House Judiciary committee. We worked hard on it for 6 months. Intervention by political figures who answered to the banks intervened and thus prevented the deployment of this strategy. It still might work.

See also

The Court also held that the relator’s knowledge does not trigger the limitations period. The statute refers to knowledge of “the official of the United States charged with responsibility to act in the circumstances[.]” Had the Court interpreted this provision to include relators, fears of protracted tolling by relators would largely dissipate because the qui tam action would have to be filed within three years of the relator’s knowledge or six-years of the violation, whichever is later. The Court rejected this approach, finding the express reference to “the” government official excludes private citizen relators. The Court held it is the government’s knowledge that triggers the limitations period.

The Court, however, left unanswered the question of which government official’s knowledge triggers the limitations period. The government argued in its briefs and at oral argument that such official is the Attorney General or delegate. As we have noted in prior posts (see Holland & Knight’s Government Contracts Blog, “ Self-Disclosure and the FCA Statute of Limitations: Cochise Consultancy, Inc. v. United States v. ex. rel. Billy Joe Hunt,” March 27, 2019), there is a broader question as to whether knowledge by governmental actors outside of DOJ, including knowledge trigged by self-disclosure, should start the limitations period. The Court did not rule on this question, though its decision hints at an interpretation that includes only the Attorney General. If true, DOJ becomes the sole repository for disclosures that trigger the limitations period. That is, unless defendants can argue that DOJ “should have known” of the violation when investigative bodies such as the Office of Inspector General or the FBI have actual knowledge of the violation … more on this latter issue is sure to come.

Response to My Inquiry About Homeowner Right of Action for Damages or Offset Against Foreclosure Action

In response to my blog post last week about whether there might be causes of action for royalty or other damages or offset arising from the fact that the loan is actually a small part of a much larger group of transactions in which the borrower is a party but not a participant in profits, I received the following from “Summer Chic” which I found interesting, even if I don’t completely agree with all of her points.

I would remind readers again that pleading such claims including violations of statutes like FDCPA, RESPA and TILA (and state lending or servicing statutes) are subject to various statutes of limitation.

BUT if they are pled not as claims  but as affirmative defenses entitling the homeowner to offset up to the amount claimed by the foreclosing party such allegations are generally not deemed to be subject to any statute of limitations because they are not technically claims, to wit: they seek no damages to be paid by the opposing party.

BUT it may well be that such claims might need to include the investment bank as a necessary party who was controlling all the other parties and who received the bulk of the profits that would be the source of the offset or claim.

Hence a deep understanding of legal procedure is required to even achieve the objective of pleading these allegations. It won’t be easy but the reward could be substantial.  And by including Federal and State statutes the recovery of attorney fees is considerably enhanced.

Judge Arthur Schack Dead at 71

New York State Judge Arthur Schack passed away on May 2nd, aged 71. As phrased by “Summer Chic” “he was nothing short of a mensch which, in Yiddish, is an honorific not bestowed lightly.

“His life was a testament to compassion; evidenced during his sixteen years on the bench in Brooklyn’s State Supreme Court and, in particular, as crusader for the rights of homeowners facing foreclosure. Schack was among a minuscule number of judges who never bought into the notion of simply rubber-stamping evictions [and foreclosures].”

Schack was one of the few judges that were beacon in a dense sea of nonsensical judicial errors. We had Judge Boyco in Ohio and a few others who were eventually silenced or drowned out. Schack saw through the obvious fabrications that were at the heart of most foreclosures. He was merciless in making fun of practices in which all of the major banks were combined into a single Suite 205 in West Palm Beach, Florida.

Yet he was also exacting when it came to homeowners who did not present their cases properly. He understood he was there to rule upon “strikes and balls” of litigation and not to decide the game until it was over.

All homeowners owe him a debt of gratitude because it was only him and a handful of other judges that gave foreclosure defense an aura of credibility.


Pump and Dump: When “Lenders” Have No Risk of Loss They Spend Millions Selling Defective Loan Products and Blame Borrowers

It’s easy to blame borrowers for loans that are in “default.” The American consensus is based upon “personal responsibility”; so when a loan fails the borrower simply failed. But this does not take into account the hundreds of millions of dollars spent every year peddling loans in the media and the billions of dollars paid as commissions and bonuses to those who sell defective loans to consumers.

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).


The current case in point, in addition to the ongoing crimes of residential foreclosures, is the last decade in the taxi industry where in New York the playbook that produced the mortgage meltdown produced a replay that is now on display in New York City, where select major owners of taxi medallions artificially propped up prices of medallions, and then lured low earning drivers to take loans of $1 million to buy the medallions from the City who was complicit in the scheme. Now the loans are all in “default” while the players all got rich.

This is a direct parallel with the mortgage meltdown. Developers artificially raised prices in their developments creating a basis on which to base false appraisals of home prices that went far above home values. Then the banks lured borrowers into loans that were doomed to fail, producing “defaults” that did not take into account all the money that was made by selling and reselling the loan data and attributes. Local government was complicit in allowing the false appraisals to stand and even used the absurdly high “values” for taxation of real property.

The “default” only exists if two conditions are present. The first condition is a party who actually has a financial loss arising from nonpayment. The second condition is that the party owning the debt and presumably suffering the “loss” is allowed to ignore the profits generated from selling the name, signature and reputation of the borrowers.

In my view the first condition is not met in nearly all current loans. There is only one party who ever had any actual money directly invested in the loan; that is the investment bank who was doing business under various names to protect itself from liability and to preserve anonymity.

A key point to remember in assessing blame for nonpayment is that where there is no actual risk of loss for nonpayment on loans, the lenders will lend any amount of money on any terms to anyone. We saw that in the NINJA, No Doc and other crazy loans. We saw that because the “lenders” didn’t care about anything other that getting your name, signature and evidence of your reputation from credit reporting agencies.

The truth is that they didn’t care if the borrower paid anything. But the borrower didn’t know that and thus reasonably relied on the supposition and the law that placed the responsibility for viability of the new loan on the lender, not the borrower.

The investment bank sold the risk of loss and sold the debt multiple times. Its financial investment in the loan frequently never happened at all because it was using investor money, or terminated in all events within 30 days after the loan was included in a supposed portfolio of loans.

Concurrently with the sale of certificates to investors who were seeking secure income, and who received nothing more than a disguised promise from the investment bank, the investment bank sold the debt, risk of loss and other attributes of the loan dozens of times to other investors in the form of “contracts” that hedge losses or movement in the value of the certificates that were issued to the pension fund investors who bought certificates.

In my view these sales were nothing more than the sale of the borrower’s name, signature and reputation, without which the sale could never have occurred. All sales derived their value from the promise of the investment bank to make regular payments to the owners of certificates who had disclaimed any interest in the debt, note or mortgage, leaving such ownership to the investment bank. All promises by the investment bank derived their value from the name, signature and reputation of the borrower. And all sales of debt or risk of loss to additional investors derived their value from the value of the promise contained in the certificates.

Each sale represented profits arising from the name, signature and reputation of the borrower used on loan documentation that originated the loan. Hence the profits represent undisclosed compensation that according to TILA and RESPA should have been disclosed at closing. Imagine a borrower being told that his $200,000 loan would be generating $2 million in profits for the bank. Negotiations over the loan would likely be different but in any event the Truth in Lending Act requires the real players (Investment bank) and the real compensation (all profits, fees and commissions) to be disclosed to the borrower.

I have suggested and I am still receiving comments on whether the borrower might be entitled to royalty income for each sale. If so, the royalty income due would substantially offset the amount due on the loan, but the catch is that the investment bank must be joined in such foreclosures as a real party in interest.

However, regardless of the success of that theory, the fact remains that there is no debt left on the books of any entity as an asset or which is subject to risk of loss. By definition then, the mortgage is not enforceable because there is no current party who has paid value for it.

The named foreclosing party, as it turns out, rarely receives any proceeds from a successful foreclosure sale. In many cases the “named party” cannot be identified.

When the check is issued as proceeds of the sale of the foreclosed property it is deposited into the account of the investment bank. It all goes to the investment bank despite the fact that the investment bank has no debt on its books against which to apply the receipt of such proceeds. That debt has long since been sold and is no longer on its books as a risk of loss.


The current crisis amongst taxi drivers was caused by aiming at unsophisticated, and uneducated borrowers, some of whom had issues with understanding the English language in addition to lacking knowledge of American law.

This recent article (see link below) shows that the ravages of predatory and fraudulent practices in originating and trading in residential mortgages are still present 12 years after the crash started. Where? Of course it was in Latin communities or black communities where residents were deprived or otherwise had no ready access to information or education that would enable them to understand and evaluate the nature of the documents they were signing.

Most such people signed documents that contained either purely English words and /or specific legal jargon that is not generally known by anyone other than a lawyer. TILA requires that the borrower be informed. This was not done.


Partial Transcript of Neil Garfield Show on 5/16/19 -Chase WAMU Fraudulent Scheme

Listen to Show Click Here:
Hello, Neil Garfield here and this is Thursday April 25, 2019. Tonight, with the help of my guest Stephen Renfrow, we are going to take a closer look at the whole fraudulent scheme surrounding the false claims of Chase. I mean the claim that it somehow became the owner of loans that in some cases were not even originated by WAMU but in all cases were sold by WAMU contemporaneously with origination of all their loans.
The buyer was never Chase Bank. Yet Chase has escaped criminal penalties and still is allowed to foreclose on loans, pretending to be the creditor when in fact the owner of the debt has no knowledge of the foreclosure and never sees a dime from the proceeds of a foreclosure sale.
But first I want to give a preview of something I am working on. It is how mortgage loan debts go up in smoke, something that will be published initially tomorrow and then explored in further articles on my blog, Remember that the old url for is now redirected too
When I first started publishing articles about foreclosure in 2006 and continuing every day since then I made the point that the foreclosures were not being initiated by or even on behalf of any creditor. That remains true today.
The main strategy I suggested was to follow the money.
The main tactics I recommended were discovery and cross examination together with properly made objections at trial.
Those who followed my advice won their cases regularly if not always — there are no guarantees when you go to court.
The ultimate strategy is to keep the burden on opposing counsel. If you are successful in doing that through the strategies and tactics I suggest for each case your chances of an outright win increase exponentially. And that is because opposing counsel has no case other than the thin veneer, often successful, raised by apparent facial validity of documents that are specially prepared for trial but presented as business records or through the misplaced use of judicial notice.
The point about knowing how securitization actually worked is not to prove it but to let that knowledge guide you to strategies and tactics that might appear risky but are not. By knowing that the money trail contradicts the paper trail you can ask increasingly probing questions that a robo0witness will not be able to answer.
If you actually accept the possibility that following the money would lead to a conclusion that is opposite from the paperwork relied upon by opposing counsel you will see every time that there are fatal gaps, inconsistencies and outright lies, fabrication and forgery of every document they proffer or present.
Here is the preview of debts going up in smoke. The investment bank funds the origination or acquisition of the loan. Then it sells all of the risk of loss many times over marketing the name, signature and reputation of each borrower without their knowledge or consent and creating pornographic profits.
Concurrently or within 30 days after funding the sales are complete. The income flow is sold to investors who think that they are getting shares of a trust. Concurrently with that and continuing thereafter the investment bank enters into various hedge contracts that remove all possibility of a risk of loss.
Each sale of such a contract represents another profit for the investment bank. When all is said and done, nobody owns the debt and the risk of loss has shifted from a default on a loan to a decrease in the value of the contract they are holding. The end result is that the many classes of investors are holding all the risk and are holding all rights to the income stream while the investment bank essentially controls but does not even hold the servicing rights.
It is completely walled off from any potential liability for violation of lending, disclosure or servicing laws. When the foreclosure is complete the investment bank who no longer owns the debt, is the one who collects the money and maintains the illusion that the contracts are all still valid even though the loan is gone.
 I am broadcasting live from Duval County Florida and this show is brought to you by the livinglies blog, GTC honors, Lendinglies, AMGAR, and the Garfield firm, and this show is specially brought to you because of donations to the livinglies blog from listeners like you. Thank you. And for those of you who are not contributors we ask that you HIT THE DONATE BUTTON ON THE THE BLOG OR call 954-451-1230 or
202-838-6345  and pledge whatever you think you can afford. If this show has value for you, if  our work on the blog and our radio shows, without payment or other support has value to you then chip in. Please make a contribution to help us continue helping you and all consumers.

Stephen R. Renfrow, born in 1957 in Louisiana, graduated with honors from Louisiana Business College, and Bakers Professional Real Estate College, has a varied background in multiple disciplines, including Management, Sales, EDP, in the fields of Banking, Insurance, Real Estate, Engineering and Telecom. Holds an honorary degree of Juris Doctor from American Justice Foundation.

How Digitizing the Mortgage Process is Further Enabling Massive Fraud and Windfalls for the Banks

Banks should be intermediaries, not the principals in a transaction. If you write a check your bank is not buying the TV. Original documentation and actual facts clears everything up. But what happens if original documentation disappears like it did in the mortgage meltdown? We are left at the mercy (nonexistent) of the banks who can manipulate digital data which is kept, maintained and changed at will on systems controlled and accessed solely by the banks.

Like I said about Facebook in 2006, “Do we really want this?”


They are institutionalizing MERS and allowing individual banks to essentially start their own subroutines where they completely control the data out of the view of prying eyes — like regulators, borrowers and consumer watchdogs.


Foreclosures Rising Again

“While overall foreclosure activity is down nationwide, there are still parts of the country where we may need to keep a close eye on,” said Todd Teta, chief product officer at ATTOM Data Solutions. “For instance, Florida is seeing a steady annual increase in total foreclosure activity for the 8th consecutive month, which is being sustained by a constant annual double-digit increase in foreclosure starts.”


Tonight! Real Life Story of 11 year War with Chase-WAMU Fraudulent Foreclosure 6PM EDT

Thursdays LIVE! Click in to the Neil Garfield Show

Tonight’s Show Hosted by Neil F Garfield

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

Tonight’s guest is Stephen R Renfrow, born 1957 in Louisiana. He graduated with Honors from Louisiana Business College and Bakers Professional Real Estate College. He has extensive experience in Banking and Real Estate and he holds an honorary Juris Doctor degree.

His story about confronting and winning against the WAMU-Chase scheme led him to perform deep investigation and research into the facts and the law over a period of 11 years. He recently published an article at summarizing the years-long ordeal in which he saved his life, his house and his sanity by fighting against the largest economic crime in human history. He won’t be collateral damage in this story.

I invited him to be a guest because he has an interesting story to tell that can serve as an inspiration to those homeowners who keep hearing that their case is a loser or that the law is against them. The truth is that the law is for the homeowner but it takes grit to get it enforced. Those that persevere and understand civil procedure and courtroom dynamics generally win. Everyone else screams bias as they run from the courthouse.

Searching LivingLies Blog

LivingLies is still LivingLies

Millions of people use LivingLies as a resource for considering foreclosure defenses, new laws and even law enforcement.

A few weeks ago I added PureChat for people to ask direct questions. The Chat function is located at the bottom right of your computer screen. I usually respond fairly quickly. The domain name of what was is now

The change in name of the domain (Url) required a change in the platform far beyond anything I had understood.

Among the things that were affected is the search function. You find the search bar in the upper right hand part of each page. Same as before.

If you type in “US Bank” for example you will now see only one article pop up. Before the change in domain name, you immediately saw a list. Now it takes a second step.

At the bottom of the page you will see a “Next Page” link which will take you to a list of all of the articles mentioning US Bank since 2009.

You can still do your research on LivingLies.

Many thanks to all the readers who pointed out the issues with LivingLies search functions.


New Strategies: Request for Comments from Attorneys and Interested Parties

Please address comments suggestions, case law and statutes to the following email address:

I am currently looking at a few new strategies. I will briefly outline them here not as recommendations but as possibilities that I think deserve exploration. As part of the collaborative effort of the LivingLies blog started in 2007 I am again asking for feedback as I analyze these strategies for legal foundation and likelihood of traction in Federal or State Court.

  1. RECENT QUOTE: “The document which I signed as a Mortgage was in fact an Initial Intent to Issue Mortgage-Backed Securities using my name, my home, my signature and my reputation as a collateral to sell and resell  myriads of times by all possible companies, without any disclosures to me and without my consent to be sold like a cow.

    “Of course nobody disclosed me profits received from selling my home and my private information several times a day; and make millions by trading on my name and reputation.”
  2. It has been obvious for at least 10 years that fabricated notes, allonges and assignments have been routinely fabricated, forged, robo-signed, created and utilized for the purpose of depriving homeowners of title to their property. QUESTIONS:
  3. One of my jobs as a legal consultant to homeowners and lawyers across the country is to perform what I call “legal proctology” — attempting to undo the errors in the file committed by omission or inclusion of facts important to the defense of property against which foreclosure has been initiated. Clients are forever telling me about the mistakes their lawyers made, many of which were not mistakes. QUESTIONS:


The Big Hoax: Are “Sales” of “Loans” and “Servicing” Real?

References to sales of loans and servicing rights are usually merely false assertions to distract homeowners and lawyers from looking at what is really happened. By accepting the premise that the loan was sold you are accepting that the loan was (a) real and (b) owned by the party who was designated to appear as a “Seller.”

By accepting the premise that the servicing data and documents were transferred you are accepting that the transferor had the correct data and documents and that the designated servicer is actually in position to represent the accounting records of the party whose name was used to initiate the foreclosure.

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

As Reynaldo Reyes of Deutsche Bank said in deposition and in recorded interviews, the entire structure and actual events are “counterintuitive.” The banks count on that for good reason. Most lawyers and almost all homeowners assume that at least some of what the banks are saying is true. In fact, nearly everything they say, write or produce as “business records” is a fabrication. But homeowners, lawyers and judges buy it as though it was solid gold.

In defending homeowners from foreclosure, lawyers who win more cases than they lose do so because of their willingness to believe that the entire thing is a hoax. Their withering cross examination and use of discovery reveals the complete absence of any corroborating evidence that would be admissible in court.

Even the most “biased” judges will concede that the case for foreclosure has not been made and they rule for the homeowner. But this only happens if the lawyer takes the opposition to task.

Chase did not acquire loans from WAMU and WAMU did not acquire loans from Long Beach etc. At the time of the claimed “acquisition” those loans were long gone, having been funded or purchased by one of the big 4 investment banks, directly or indirectly (through intermediate investment banks or simple cham conduit fictitious names or entities). In fact the ONLY time that the actual debt was clearly owned by anyone was, at best, a 30 day period during which the investment bank had the debt on its balance sheet as an asset.

So all sales from any seller other than one of the investment banks is a ruse. And there are no references to sales by the investment banks because that would be admitting and accepting potential liability for lending and servicing violations. It would also lead to revelations about how many times and in how many pieces the debt was effectively sold to how many investors who were NOT limited to those who had advanced money to the investment bank for shares in a nonexistent trust that never owned anything and never transacted any business.

Similarly the boarding process is a hoax. There is generally no actual transfer of servicing even with the largest “servicers.” They are all using a central platform on which data is kept, maintained, managed and manipulated by a third party who is kept concealed using employees who are neither bonded nor trained in maintaining accurate records nor protecting private data.

There is no transfer of servicing data. There is no “boarding” and no “audit.” In order to keep up the musical chairs game in which homeowners and lawyers are equally flummoxed, the big investment banks periodically change the designation of servicers and simply rotate the names, giving each one the login and password to enter the central system (usually at a server maintained in Jacksonville, Florida).

BOTTOM LINE: If you accept the premises advanced by the lawyers for the banks you will almost always lose. If you don’t and you aggressively pound on the legal foundation for the evidence they are attempting to use in court the chances of winning arise above 50% and with some lawyers, above 65%.

To be successful there are some attitudes of the defense lawyer that are necessary.

  • The first is that they must believe or be willing to believe that their client deserves to win. A lawyer who thinks that the client is only entitled to his/her time or a delay of the “inevitable” will never, ever win.
  • The second is that they must believe or be willing to believe that the entire scheme of lending, servicing and foreclosure is a hoax. Each word and each document that a lawyer assumes to be valid, authentic and not fabricated is a step toward defeat.
  • The third is that the lawyer must fight to reveal the gaps, consistencies and insufficiencies of the evidence and not to prove that this is the greatest economic crime in human history. All trials are won and lost based on evidence. The burden is always on the foreclosing party or the apparent successors to the foreclosing party to prove that title properly passed.
  • Fourth is arguably the most important and the one that is most overlooked. The lawyer must believe or be willing to believe that the foreclosure was not initiated on behalf of any party who could reasonably described as a creditor or owner of the debt. The existence of the trust, the presence of a real trust in any transaction in which a loan was purchased, sold or settled to a trustee, and the various permutations of strategies employed by the banks are not mere technical points. They are a coverup for the fact that no creditor and no owner of the debt ever receives any benefit from a successful foreclosure of the property.

Yes it is counterintuitive. You are meant to think otherwise and the banks are counting on that with you, your lawyer and the judge. But just because something is counterintuitive doesn’t mean that it isn’t true.

What is the difference between the note and the debt? What difference does it make?

NOTE: This case reads like  law review article. It is well worth reading and studying, piece by piece. Judge Marx has taken a lot of time to research, analyze the documents, and write a very clear opinion on the truth about the documents that were used in this case, and by extension the documents that are used in most foreclosure cases.

Simple answer: if you had a debt to pay would you pay it to the owner of the debt or someone else who says that you should pay them instead? It’s obvious.

Second question: if the owner of the debt is really different than the party claiming to collect it, why hasn’t the owner shown up? This answer is not so obvious nor is it simple. The short version is that the owners of the risk of loss have contracted away their right to collect on the debt, note or mortgage.

Third question: why are the technical requirements of an indorsement, allonge etc so important? This is also simple: it is the only way to provide assurance that the holder of the note is the owner of the note. This is important if the note is going to be treated as evidence of ownership of the debt.

NY Slip Opinion: Judge Paul I Marx carefully analyzed the facts and the law and found that there was a failure to firmly affix the alleged allonge which means that the note possessor must prove, rather than presume, that the possessor is a holder with rights to enforce. U.S. Bank, N.A. as Trustee v Cannella April 15, 2019.

Now the lawyers who claim U.S. Bank, N.A. is their client must prove something that doesn’t exist in the real world. This a problem because U.S. Bank won’t and can’t cooperate and the investment bank won’t and can’t allow their name to be used in foreclosures.

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
Words actually matter — in the world of of American Justice, under law, without words, nothing matters.
So it is especially important to presume nothing and actually read words without making any assumptions. Much of what we see in the language of what is presented as a conveyance is essentially the same as a quitclaim deed in which there is no warranty of title and which simply grants any interest that the grantor MIGHT have. It is this type of wording that the banks use to weaponize the justice system against homeowners.
There is no warranty of title and there is no specific grant of ownership in an assignment of mortgage that merely says the assignor/grantor conveys “all beneficial interest under a certain mortgage.” Banks want courts to assume that means the note and the debt as well. But that specific wording is double-speak.
It says it is granting rights to the mortgage; but the rest of wording  is making reference only to what is stated in the mortgage, which is not the note, the debt or any other rights. So in effect it is saying it is granting title to the mortgage and then saying the same thing again, without adding anything. That is the essence of double speak.
In the Cannela Case Judge Marx saw the attempt to mislead the court and dealt with it:

The language in RPAPL § 258, which this Court emphasized—”together with the bond or obligation described in said mortgage“—stands in sharp contrast to the language used here in the Assignment—”all beneficial interest under a certain Mortgage”. If such language is mere surplusage, as Plaintiff seems to believe, the drafters of RPAPL § 258 would not have included it in a statutory form promulgated for general use as best practice.

So here is the real problem. The whole discussion in Canella is about the note, the indorsement and the allonge. But notice the language in the opinion — “The Assignment did not go on to state that the referenced debt “…. So the Judge let it slip (pardon the pun) that when he refers to the note he means the debt.


The courts are using “the debt” and “the note” as being interchangeable words meaning the same thing. I would admit that before the era of false claims of securitization I used the words, debt, note and mortgage interchangeably because while there were technical  difference in the legal meaning of those terms, they all DID mean the same thing to me and everyone else.
While a note SHOULD be evidence of the debt and the possession of a note SHOULD be evidence of being a legal note holder and that SHOULD mean that the note holder probably has rights to enforce, and therefore that note “holder” should be the the owner of a debt claiming foreclosure rights under a duly assigned mortgage for which value was paid, none of that is true if the debt actually moved in one or more different directions — different that is from the paper trail fabricated by remote parties with no interest in the loan other than to collect their fees.
The precise issue is raised because the courts have almost uniformly assumed that the burden shifts to the homeowner to show that the debt moved differently than the paper. This case shows that might not be true. But it will be true if not properly presented and argued. In effect what we are dealing with here is that there is a presumption to use the presumption.
If Person A buys the debt (for real) for value (money) he is the owner of the debt. But that is only true if he bought it from Person B who also paid value for the debt (funded the origination or acquisition of the loan). If not, the debt obviously could not possibly have moved from B to A.
It is not legally possible to move the debt without payment of value. It IS possible to appoint agents to enforce it. But for those agents seeking to enforce it the debtor has a right to know why he should pay a stranger without proof that his debt is being collected for his creditor.
The precise issue identified by the investment banks back in 1983 (when securitization started) is that even debts are made up of component parts. The investment banks saw they could enter into “private contracts” in which the risk of loss and other bets could be made totalling far more than the loan itself. This converted the profit potential on loans from being a few points to several thousand percent of each loan.
The banks knew that only people with a strong background in accounting and investment banking would realize that the investment bank was a creditor for 30 days or less and that after that it was at most a servicer who was collecting “fees’ in addition to “trading profits” at the expense of everyone involved.
And by creating contracts in which the investors disclaimed any direct right, title or interest in the collection of the loan, even though the investor assumed the entire risk of loss, the investment banks could claim and did claim that they had not sold off the debt. Any accountant will tell you that selling the entire risk of loss means that you sold off the entire debt.
* Thus monthly payments, prepayments and foreclosure proceeds are absorbed by the investment bank and its affiliates under various guises but it never goes to reduce a debt owned by the people who have paid value for the debt. In this case, and all similar cases, U.S. Bank, N.A. as trustee (or any trustee) never received nor expected to receive any money from monthly payments, prepayments or foreclosure proceeds; but that didn’t stop the investment banks from naming the claimant as U.S. Bank, N.A. as trustee.
**So then the note might be sold but the alleged transfer of a mortgage is a nullity because there was no actual transfer of the debt. Transfer of the debt ONLY occurs where value is paid. Transfer of notes occurs regardless of whether value was paid.
US laws in all 50 states all require that the enforcer of a mortgage be the same party who owns the debt or an agent who is actually authorized  by the owner of the debt to conduct the foreclosure. For that to be properly alleged and proven the identity of the owner of the debt must be disclosed.
That duty to disclose might need to be enforced in discovery, a QWR, a DVL or a subpoena for deposition, but in all events if the borrower asks there is no legal choice for not answering, notwithstanding arguments that the information is private or proprietary.
The only way that does not happen is if the borrower does not enforce the duty to disclose the principal. If the borrower does enforce but the court declines that is fertile grounds for appeal, as this case shows. Standing was denied to U.S. Bank, as Trustee, because it failed to prove it was the holder of the note prior to initiating foreclosure.
It failed because the fabricated allonge was not shown to be have been firmly attached so as to become part of the note itself.
Thus the facts behind the negotiation of the note came into doubt and the presumptions sought by attorneys for the named claimant were thrown out. Now they must prove through evidence of transactions in the real world that the debt moved, instead of presuming the movement from the movement of the note.
But if B then executes an indorsement to Person C you have a problem. Person A owns the debt but Person C owns the note. Both are true statements. Unless the indorsement occurred at the instruction of Person B, it creates an entirely new and separate liability under the UCC, since the note no longer serves as title to the debt but rather serves as presumptive liability of a maker under the UCC with its own set of rules.
And notwithstanding the terms of the mortgage to the contrary, the mortgage no longer secures the note, which is no longer evidence of the debt; hence the mortgage can only be enforced by the person who owns the debt, if at all. The note which can only be enforced pursuant to rules governing the enforcement of negotiable instruments, if that applies, is no longer secured by the mortgage because the law requires the mortgage to secure a debt and not just a promissory note. See UCC Article 9-203.
This is what the doctrine of merger is intended to avoid — double liability. But merger does not happen when the debt owner and the Payee are different parties and neither one is the acknowledged agent of a common principal.
Now if Person B never owned the debt to begin with but was still the payee on the note and the mortgagee on the mortgage you have yet another problem. The note and debt were split at closing. In law cases this is referred to as splitting the note and mortgage which is presumed not to occur unless there is a showing of intent to do so. In this case there was intent to do so. The source of lending did not get a note and mortgage and the broker did get a note and mortgage.
Normally that would be fine if there was an agency contract between the originator and the investment bank who funded the loan. But the investment bank doesn’t want to admit such agency as it would be liable for lending and disclosure violations at closing, and for servicing violations after closing.
***So when the paperwork is created that creates the illusion of transfer of the mortgage without any real transaction between the remote parties because it is the investment bank who is all times holding all the cards. No real transactions can occur without the investment bank. The mortgage and the note being transferred creates two separate legal events or consequences.
Transfer of the note even without the debt creates a potential asset to the transferee whether they paid for it or not. If they paid for it they might even be a holder in due course with more rights than the actual owner of the debt. See UCC Article 3, holder in due course.
Transfer of the note without the debt (i.e. transfer without payment of value) would simply transfer rights under the UCC and that would be independent of the debt and therefore the mortgage which, under existing law, can only be enforced by the owner of the debt notwithstanding language in the mortgage that refers to the note. The assignment of mortgage was not enough.
Some quotables from the Slip Opinion:

A plaintiff in an action to foreclose a mortgage “[g]enerally establishes its prima facie case through the production of the mortgage, the unpaid note, and evidence of default”. U.S. Bank Nat. Ass’n v Sabloff, 153 AD3d 879, 880 [2nd Dept 2017] (citing Plaza Equities, LLC v Lamberti, 118 AD3d 688, 689see Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d 683, 684). However, where a defendant has affirmatively pleaded standing in the Answer,[6] the plaintiff must prove standing in order to prevail. Bank of New York Mellon v Gordon, 2019 NY Slip Op. 02306, 2019 WL 1372075, at *3 [2nd Dept March 27, 2019] (citing HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d 983, 983-984HSBC Bank USA, N.A. v Calderon, 115 AD3d 708, 709Bank of NY v Silverberg, 86 AD3d 274, 279).

A plaintiff establishes its standing in a mortgage foreclosure action by showing that it was the holder of the underlying note at the time the action was commenced. Sabloff, supra at 880 (citing Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361U.S. Bank N.A. v Handler, 140 AD3d 948, 949). Where a plaintiff is not the original lender, it must show that the obligation was transferred to it either by a written assignment of the underlying note or the physical delivery of the note. Id. Because the mortgage automatically passes with the debt as an inseparable incident, a plaintiff must generally prove its standing to foreclose on the mortgage through either of these means, rather than by assignment of the mortgage. Id. (citing U.S. Bank, N.A. v Zwisler, 147 AD3d 804, 805U.S. Bank, N.A. v Collymore, 68 AD3d 752, 754).

Turning to the substantive issue involving UCC § 3-202(2), Defendant contends that the provision requires that an allonge must be “permanently” affixed to the underlying note for the note to be negotiated by delivery. UCC § 3-202(1) states, in pertinent part, that if, as is the case here, “the instrument is payable to order it is negotiated by delivery with any necessary indorsement”. UCC § 3-202(1) (emphasis added). The pertinent language of UCC § 3-202(2) provides that when an indorsement is written on a separate piece of paper from a note, the paper must be “so firmly affixed thereto as to become a part thereof.” UCC § 3-202(2) (emphasis added); Bayview Loan Servicing, LLC v Kelly, 166 AD3d 843 [2nd Dept 2018]; HSBC Bank USA, N.A. v Roumiantseva, supra at 985see also One Westbank FSB v Rodriguez, 161 AD3d 715, 716 [1st Dept 2018]; Slutsky v Blooming Grove Inn, 147 AD2d 208, 212 [2nd Dept 1989] (“The note secured by the mortgage is a negotiable instrument (see, UCC 3-104) which requires indorsement on the instrument itself `or on a paper so firmly affixed thereto as to become a part thereof’ (UCC 3-202[2]) in order to effectuate a valid `assignment’ of the entire instrument (cf., UCC 3-202 [3], [4])”).

[Editor’s note: if it were any other way the free spinning allonge would become a tradable commodity in its own right. ]

The Assignment did not go on to state that the referenced debt was simultaneously being assigned to Plaintiff.


Why You Should Vote in This Political Season

Our 4th President, James Madison was insistent on reminding everyone that in the end it is the vote of people that ultimately makes law in our Democratic Republic. Your vote does count even though there are forces trying to prevent you from voting and PR campaigns to convince you not to vote.
In the U.S. about half the people entitled to vote don’t vote. They have many reasons but it all comes down to the same type of rationalization that causes procrastination. Each person really does matter no matter how they think about their world and how it should be. It’s in the mix of conflicting views that good national policy emerges. Staying out of voting removes a large and probably deciding part of the debate, allowing minority interests to dominate the political stage without regard to what people want.
A quick reminder serves to underscore Madison’s constant mantra. The so-called Tea Party changed the face of American politics although their initial goal, to let the banks fail, was thwarted. The Bailout, costing trillions of dollars, all went to the banks. That’s not what most people wanted.
But because most people either don’t vote or forget about such issues when they do vote, the government was able to open the purse and extend money and policy to protect the perpetrators of the largest economic crime in human history. This left the investors and the borrowers as victims without any hope of real restitution. Without the investors and borrowers the scheme  could never have worked. And it was only by lying to both that the scheme worked. They are still lying and the people know it. And that is one reason why people are still angry.
The good news is that public anger about that bank bailout is about the same as it was when it happened. And THAT is what is driving much of American politics because the reaction to the continuing cozy relationship between bankers and government is to elect those who will disrupt Washington and State capitals. With anger comes the use of tools that might otherwise be considered inappropriate. So we elect people who are like grenades to be thrown into the political mix.
The anger remains and is constantly driving people from all political spectrums into thinking and doing things. Eventually their goal will be realized because the anger remains in the American people. If you put labels aside and bring people together there is a remarkable degree of agreement between them even though they consider themselves to be “opposite” the person who is espousing basically the same view.
The establishment politicians essentially use the labels to cloud our vision so that we don’t see what we have in common. The polls all indicate that regardless of what label is applied, most people are in agreement on most aspects of government. It’s the politicians who raise disagreements and create fake issues.
The disrupters from left side of political spectrum staged a virtual coup in 2018 again changing the face and content of American politics. They were successful because the anger remains and the public’s willingness to endure power battles in Washington is basically over. The public has endured income and wealth inequality and welfare for corporations long enough.
If you look at just those two examples, you can see that the people have more in common than  what any political pundit or candidate wants us to think. The people have decided on what they want in policy regarding banking and lending, energy and climate change, healthcare and education. The people don’t want to be used as ignorant pawns by those whose only ambition is power. And the labels don’t matter. The voters matter.
For those who see the past few years as something horrible because they disagree with Trumpian politics think again. Without Trump there would still be only dim awareness of the processes of government. We had the ultimate civics lesson. And before anyone succumbs to the elitist notion that Trump supporters are ignorant people who can’t think, think again. Trump supporters include doctors and lawyers, accountants and engineers etc.
Trump succeeded because he promised and delivered disruption. That is what most people wanted. It’s worthwhile to point out that many voters in 2016 were ambivalent when it came to a choice between Trump and Bernie Sanders. The signature attribute of both of them was the promise of disruptions of the status quo in Washington.
So think about your role in our democracy, recognizing yourself as the ultimate arbiter of government and policy. And then vote. I don’t care about whether you vote the same way I vote. I want you to vote because ultimately, if the people vote, things change for the better.
Ignore the labels: That is what politicians use to divide us and scare us into voting for them. “Capitalist” isn’t good if it is being used to take away healthcare. “Socialist” isn’t bad if the politician is trying to increase your safety net without undermining a competitive economy. When you hear labels you should become immediately suspicious of the politician using them.
Don’t be scared into not voting or voting for some guy who is promising protection from something you may actually want. If you don’t like the size of the safety net then vote for someone who promises a safety net that is smaller or larger. If you think that health care could be better vote then vote for someone who promises to lead and vote for a plan than is clearly better — not someone who rails against the system and scares you into thinking that the “other side” is going to destroy your life.
Decide on whether you want further disruption or a calmer more incremental approach to evolving policy. That’s your decision and whatever you decide is right.

How to Write an Appeal Without Looking Silly

Besides strict compliance with all appellate rules, lawyers must be in strict compliance with common sense.

I know of no better way to immediately eliminate your chances on appeal than to assert abuse of discretion unless you have a situation that is shocking and stupid. Everything else comes under the heading of reversible error.


Abuse of discretion means that the judge had discretion and went ultra vires — beyond the bounds of his/her authority. Abuse of discretion is a part of the larger set of reversible error.

Reversible error means that the judge applied the law wrong and/or came to factual conclusions for which there was no admissible evidence.
Those are two different sets of tracks. But they overlap.
Appeals based upon abuse of discretion require that the judge had discretion but abused it. It implies that the judge had discretion but then went outside the bounds of propriety or came to a conclusion that shocks the appellate court. If you allege that the judge had discretion then the only remaining question is whether there was abuse of the discretion. Being wrong is not abuse of discretion. But it still might be reversible error.
If the judge lacked jurisdiction, it was not abuse of discretion. It was reversible error. Absence of jurisdiction means that the judge lacked any discretion and was required by law to simply enter an order closing the case. If a party raises a defense that they have no standing to invoke, the court lacks jurisdiction over the subject matter. If the court instead rules on the defense it is reversible error. It is not abuse of discretion.
Abuse of discretion is a technical term of art used in appellate procedure. It does not mean anything in a more general sense of the words implying a wrong decision.

By asserting abuse of discretion you are declaring that the judge had discretion. That is an implied waiver of your jurisdictional argument. At best it presents a conflict requiring the appellate court to reconcile your two different assertions — discretion and no jurisdiction. Those two are mutually exclusive.


Foreclosure Defense Revisited

Originally published in October, 2008 this is a revised version of an article that correctly articulated the main weak points in the cases being presented for enforcement of mortgages and deeds of trust. Back then I made a few errors as to the actual duties of the trustee. I found out later that there were no parties charged with the duties, rights, and obligations of a REMIC trustee because the REMIC existed in name only and did not own any assets. There was no settlor, there was no trustee, there was no trust and there were no assets owned in the name of a named trustee.


One new answer we are getting when we ask for the identity of the real holder in due course of the note is “that information is confidential. You are not entitled to that.” Of course this is ridiculous — if you signed a note and it has been indorsed or “assigned” to some third party, you have a right to know where to send your payments and to whom. You have a right to know whether the note was destroyed and whether it could have been delivered or was delivered.

There is no confidential status under any law or theory, legally, morally or ethically. And you have the right to know if the holder in due course is getting paid if there is a mortgage servicer involved. And if there is a mortgage servicer, you have a right to know whether they are indeed authorized to make collections — authorized by the real holder of the note, whoever that might be. And you have a right to know to whom the service did make payments when you were making payments. The answers would surprise you if you could get them. It would show that the REMIC trustee and the trust fund never received a penny. 

Why is that important? It shows that the REMIC is not the party with legal standing since it never received any payment and obviously doesn’t expect any — even from the proceeds of the foreclosure sale. THAT is information likely to lead to the discovery of admissible evidence which is the heart of the rules of discovery.

Lawsuits in Texas and other states indicate that the distribution reports to investors are vague at best and outright fabrications in other cases.

All of this brings us back to how they did it. How did they sell a $300,000 mortgage for $1 million and get away with it? And what happened to all that money? ANSWER: They sold the same mortgage over and over again. That is called fraud. They put the loan documents in pools that were described in tables that were impossible to decipher. See dsvrn.6m.d.htm .

They were able to do this and make it “work” because they wanted and pressured the lenders to give them (the investment banks) the worst loans possible carrying the highest interest rates possible with the most onerous terms for prepayment etc. that were possible to insert. That is because these loans were made with a note bearing an interest rate of 16% or more but they were put into pools of assets that contained a few real loans, thus bringing the average STATED return on investment to perhaps 6-8%. This was a fictitious return because none of the 16% loans were paying anything other than zero or teaser rates.

Even though the pool contained numerous loans on homes that were appraised at 50% over market, and terms wherein the “borrower” was paying nothing to nearly nothing on the loan for the first few months or years, the loan went into the pool as a “performing loan” (because nothing was expected from the borrower) and sold as though the 16% income ($48,000 on a $300,000 note) was being paid.

An unsuspecting investor would put up perhaps $750,000 to buy certificates for the $48,000 in income, especially if it was insured and carried a AAA rating. There is a $450,000 profit on a $300,000 loan — available to the investment banker only if the the loan was toxic waste (Z tranche) classified as such because there was no chance whatsoever that it could ever be repaid. The investor put that money up because in the mind of the pension fund manager he was buying 6% loans. If he had known that a significant portion of the investment went to buy 16% loans he wouldn’t have invested one penny. The difference in rates creates a huge yield spread premium (YSP)that is pocketed as trading profit by the investment bank. In this example the YSP is bigger than the loan.

But wait there’s more. If you assign the $48,000 fictitious income into multiple parts (say 8 parts of $6,000), you could assign the same note to eight different pools. In other words they were selling the same note multiple times. But they were not necessarily selling the debt. That came later. If you and I did that we have free room and board courtesy of the state or federal government in a prison of their choosing. But on this scale, despite the clear presence of two sets of victims that were coerced, deceived, cheated and misled (borrowers and investors) the bailout went to the thieves instead of the victims.

Concurrently with the origination of the mortgage loan and the sale to investors of certificates as outlined above, there are “contracts” that are disguised sales of the risk (i.e., the debt ). So the investment bank as (1) split the note up and (2) split up the debt to buyers (investors) who each signed contracts that they disclaim any right to enforce the debt, note or mortgage.

What this means to foreclosure defense is that your defense goes far beyond the “where’s the note” strategy. It goes to whether the note has been paid in full to the investment bank and whether there are multiple parties (investors) who are equity holders in the note and perhaps even the mortgage, all of whom have at least an arguable right to collection — totaling perhaps 300%-500% of your loan amount. It means that your payments probably went into the wrong pockets. It means that even if you made no payments, they probably paid the investor anyway out of reserves, overcollateralization, cross collateralization or one of several insurance products.

The reason the note is gone in most cases (destroyed in most cases) and lost in most other cases is that the terms of the note do not match up with the description that went up line in the securitization process. That leads to only two possible conclusions:

Either the note was separated from the mortgage making the secured obligation into an unsecured obligation thus voiding the power to foreclose OR the “assignments” were invalid because they were undated or otherwise defective leaving the mortgage and note intact — but PAID in full. Either there are assignees out there who have rights to the note obligation or there are not assignees with any rights.

If there are assignees with rights, you need to know who they are, how they got the loan, and whether they are proper holders and if they are still holders in due course and if the seller of your mortgage sold the same deal to other assignees.  Most of the sales to investors were not memorialized with recorded assignments of mortgage or even endorsements of the note.

The question is whether your payments or someone else’s payments were properly or improperly allocated to your account — not at the mortgage servicer level but much higher up at the level of the Trustee for asset backed securities series AAAA2007. You find that in the distribution reports. And if it isn’t there you find it through discovery asking for explanations of exactly where the payments went, who got them and why, along with proof of deposits and how they were entered on the books of the receiving party.

If there are no assignees with rights, then the case is simple it is defended by one word: PAYMENT. The current claimants were paid in full by a third party, plus an undisclosed fee (TILA violation) for “borrowing” the lender’s license in a “table funded loan” where the agent (mortgage aggregator) of the investment banker, directed by the CDO Manager (Collateralized debt obligation manager) reached around the apparent lender and placed the money on the table to fund your loan. The apparent lender’s name was put on the note and mortgage. Why? Because they wanted to qualify for all the exemptions that apply to banks and lending institutions even though those institutions were not making the loans.

The apparent lender was paid a fee for 2.5% for pretending to underwrite the loan, perform due diligence, confirm the appraisal, confirm the viability of the transaction, confirm the affordability and benefits etc. The lender did no such thing. Brown’s lawsuit brought by the Attorney general of California, shows that the people doing the underwriting were under quotas that amounted to approving 70-80 loans PER DAY. 10,000 convicted felons were recruited in Florida to become LICENSED mortgage brokers. A virtual army of people were given scripts and marching orders to get those loans signed no matter what they had to offer or what lie they had to tell.


Bottom Line: Go Get Them. They don’t have the goods and can’t produce them because if they do produce them it may be an admission of criminal fraud.

Check with local counsel before taking any action or deciding on any course of action in your particular case. This is general information only.

Two Foreclosures, One Property, One Owner, Both Claiming Possession of the Original Note, Neither Claiming Ownership of the Debt

Originally posted in November, 2008 this illustrates what happens when you destroy notes and then “recreate” them for purposes of claiming you have the original in court. The fact remains that neither of them had the original note because, as the Florida Bankers Association told the Florida Supreme Court, it was industry practice to destroy the notes and then rely on the image. [NOTE: An error occurred in which it was printed here that they relied on the original. This was an error].

Had it not been for a judge who was alert and had a good memory BOTH would have received a foreclosure judgment and possibly the clerk would have sold it twice, once to each claimant under a “credit bid” signifying that it was the owner of the debt — a blatant lie by both claimants.

Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage
Posted By Amir Efrati On November 14, 2008 @ 1:38 pm In Global | No Comments
It’s been a while since we revisited the foreclosure crisis, which has obviously gotten worse. Foreclosure numbers are skyrocketing, while numerous states, the federal government and financial institutions are tackling the issue in various ways.
For the legal beagles at so-called foreclosure “mills,” which do assembly-line lawyering for lenders and other mortgage owners, the crisis has meant lots of work but also woes, including sanctions and stern lectures from judges (examples here, here and here). Why are judges so frustrated? The increased volume is leading to mistakes and irregularities, which we’ve chronicled before.
Now comes the foreclosure case of Joanne Fredenburg, a widowed homeowner in Lehigh Acres, Fla., where real estate prices have plummeted. Last month Ms. Fredenburg was served with not one but two foreclosure lawsuits from two different plaintiffs that both claimed to own her promissory note and mortgage and said she owed them each more than $276,000. That, of course, is impossible. (Click here and here for the two complaints.)
One lawsuit seems to make sense. The plaintiff is a unit of Deutsche Bank that acts as a guardian or “trustee” for investors of mortgage-backed securities. Those investors collectively own loans such as Fredenburg’s. But the other lawsuit was filed by a mortgage-servicing company that collects borrower payments on behalf of investors. Surely that is a mistake, as servicers don’t typically own loans.
Indeed, following an inquiry by the Law Blog, we’re told that the servicer, American Home Mortgage Servicing, will withdraw its lawsuit, which was filed by Miami-based Adorno and Yoss LLP. (We’ve put out calls to both and will let you know if we hear back.)
But Ms. Fredenburg’s lawyer is none too happy. Even after American Home withdraws its suit, J. Rex Powell of Cape Coral says he will ask for discovery to find out what payments his client made, whether they were paid to the right entity and whether she was given the proper credit. Given that most people don’t defend against foreclosure lawsuits and the plaintiffs are awarded default judgments, Powell says the case raises an interesting question: Are entities wrongly filing foreclosure suits and collecting on notes they don’t own?
Perhaps Florida Circuit Judges Jay Rosman or Michael McHugh, whose dockets include the Fredenburg foreclosure suits, will be able to shed some light.

Why Accounting Firms and Investment Bankers Should Be Sued

Originally posted in September 2008, here is my update of issues that lawyers, regulators, judges and even borrowers have still not quite absorbed:

Some time ago we mentioned on these pages that the auditors who certified the financial statements (KPMG, here) would come under intense scrutiny simply because they MUST have known, by simple common sense, that the economics of mortgage lending had been turned on its head.

The worse the loan quality the more money was created by investment bankers — leaving hapless investors, who put up the money, and hapless borrowers, who put up their homes, in unworkable investment schemes devised to deceive, manipulate and steal.

Here, laid bare, along with the IndyMac story, shows the outright complicity of the big accounting firms in the major frauds to jolt our economy in the past few years. regulators, virtually owned by the banks, of course played the game. As former, current or future employees of the banks they knew who was writing their paychecks, directly or indirectly.

The article that follows is all about Bernie Madoff and the potential liability of accounting forms. The Madoff scandal came at the perfect time for the banks. His scheme was easily provable and even confessed. It was large by prior standards. But more importantly it distracted attention from an economic crime by investment bankers acting in tacit and overt agreements that constituted an epic distortion of economic and legal realities.
Madoff’s scheme involved $60 billion. The press jumped on it because they understood it. In his case he simply lied about ever making any transaction, falsifying account statements sent out to thousands of “investors”.
So far the investment bank scam which they call securitization involves $1 quadrillion.
Instead of no transactions there were hundreds of them for each loan that were hidden from the only true parties in interest — the investors who put up the cash buying bogus mortgage certificates and borrowers who put up their homes and in the process became the unwitting issues of unregulated securities in which the borrowers’ names, signatures, reputations and lives were traded on the open market.
This was not only contrary to law. It was contrary to good sense for everyone except the investment bankers who kept all the trading profit and left the investors and borrowers with little or nothing compared to the actual size of the venture. Adding insult to injury, the investment banks have succeeded in convincing  investors and borrowers it was their own fault they lost money while the investment bank profited by pornographic production of cash equivalent  instruments.
Now 11  years later I renew my call to hold the investment banks, their accountants and their lawyers accountable for the largest economic crime in human history.
December 22, 2008

In Madoff’s Wake, Scrutiny of Accounting Firms

As more details unfurl in the Bernard L. Madoff fraud case, so do the lawsuits. And the big accounting firms, which oversaw many of the feeder funds that funneled billions of dollars into what prosecutors describe as the largest Ponzi scheme ever perpetrated, are likely to be among the defendants.

Though Bernard L. Madoff Investment Securities itself was audited by small firms, questions are arising over how major firms like PricewaterhouseCoopers and KPMG overlooked several red flags related to the operations over a number of years. The big accounting firms are likely to face queries about why they gave their seal of accounting to the astoundingly steady positive returns booked by a fund manager whose investment strategy was nearly completely opaque.

One investor in a feeder fund, New York Law School, has already sued BDO Seidman, the auditor of one of its money managers, arguing that the firm failed to notice warning signs related to the $50 billion scandal.

The district attorney for Rockland County, N.Y., Thomas P. Zugibe, has also begun inquiries into Friehling & Horowitz, the three-person accounting firm that provided services to Mr. Madoff’s firm. Many have asked how a company as small as Friehling — a three-employee firm based in New City, N.Y., that occupies a 13-foot-by-18-foot storefront space in an office plaza — could have handled an operation as large as Bernard L. Madoff Investment Securities. Friehling & Horowitz is also the subject of a preliminary ethics investigation by the American Institute of Certified Public Accountants started after the scandal broke.

Another small accounting firm, Sosnik Bell, handled paperwork for investors in Mr. Madoff’s firm, according to Clusterstock, a financial news blog. Sosnik Bell, based in Fort Lee, N.J., processed forms for these investors, and then forwarded its work to the investors’ own accountants. Executives from Sosnik Bell could not be reached for comment.

A more lucrative place for victims of the fraud, however, are at the giant accounting firms that audited the investment managers who directed money into Mr. Madoff’s firm.

In several other fraud cases, accounting firms, which are responsible for scrutinizing the financial underpinnings of companies, have become targets for investor lawsuits. Ernst & Young paid $300 million to settle a lawsuit filed by Cendant related to fraud at one of the conglomerate’s subsidiaries. It had earlier paid $335 million to settle a lawsuit filed by Cendant shareholders.

Also last year, Pricewaterhouse agreed to pay $225 million to settle auditing malpractice claims tied to the Tyco scandal, which saw the convictions of top executives for grand larceny, conspiracy and securities fraud. Pricewaterhouse’s payment amounted to about 7 percent of total amount paid in Tyco lawsuits.

But the Madoff case presents an unusual situation, said Scott M. Berman, a partner at the law firm Friedman Kaplan Seiler & Adelman who represents investors in several feeder funds. Previous cases focused on the auditors of the firm at the center of the scandal, not the auditors of investment managers one rung removed.

“I expect that this is an issue that has not been litigated before,” Mr. Berman said.

With many of the feeder funds’ managers having taken losses from their own personal exposure to Mr. Madoff’s firm, the accounting firms may be a likely target for investors seeking to recoup at least some of their money.

PricewaterhouseCoopers was the main auditor for Sentry, the largest fund run by Fairfield Greenwich Group, the $14.1 billion investment manager that has lost the most money so far in the Madoff scandal. The accounting firm was tasked with minding Sentry, which had about $7.5 billion invested in Mr. Madoff’s firm.

“The company has not yet settled on a legal strategy,” said a Fairfield spokesman, Thomas Mulligan.

A spokesman for PricewaterhouseCoopers, Mike Davies, said, “No claim has been asserted against the PWC member firm in relation to Madoff, and we know of no valid basis for any claim.”

The lawsuit by New York Law School, filed in federal court in Manhattan last week, names J. Ezra Merkin, the money manager who placed $3 million of the school’s money into Mr. Madoff’s firm. But it also sues BDO Seidman, the American arm of BDO International and the auditor for one of Mr. Merkin’s funds, Ascot Partners.

In its lawsuit, New York Law School said that BDO Seidman had “utterly failed” in its auditing of Ascot Partners. The lawsuit says that BDO Seidman failed to flag Ascot’s reliance on a single money manager, Mr. Madoff, as well as Mr. Madoff’s reliance on Friehling & Horowitz.

BDO Seidman has said that it never audited Mr. Madoff’s firm, just Mr. Merkin’s, and that its audits of Ascot Partners “conformed to all professional standards.”

Mr. Berman, however, said the firm had a duty to dig deeper. “I don’t think that they can simply, blindly accept what Madoff did without doing their own auditing work,” he said.

Tonight! Sanctions Against U.S. Bank, N.A. Expected

Thursdays LIVE! Click in to the Neil Garfield Show

Tonight’s Show Hosted by Charles Marshall and Bill Paatalo

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

It’s not so easy to ascertain the name of the Plaintiff in foreclosure cases, where the Plaintiff is named as “U.S. Bank as trustee for XYZ Trust.” But the sanctions that might be expected in a Florida case are most likely going to be against U.S. Bank N.A., mainly because the alleged trust is not described as a legal entity having been organized and existing under the laws of any jurisdiction.

Depending upon what happens in court, the sanctions could broaden to include the attorneys who claim they represent U.S. Bank, N.A. or the alleged trust (or maybe both). It is unlikely that they have a retainer agreement with either one or for that matter any contact at all.

Charles Marshall is back along with Bill Paatalo to discuss the appalling if not surprising developments in a Florida judicial foreclosure lawsuit, US Bank National Association as Trustee v. Zayas. By appalling we refer to the behavior of the US Bank Trust, not the Judge’s Order to Show Cause, which is a needed cudgel to push more forcefully for U.S. Bank N.A. who  “as trustee” is named Plaintiff in this case.

Bruce Jacobs, Esq. attorney for the homeowner is seeking essential long-sought documents and essential testimony by way of depositions of key executives pertinent to the Plaintiff “Trust’s” case, including Nationstar executives whose servicing of the subject loan has been a not-so-funhouse charade of smoke and mirrors.

Plaintiff’s attorneys in this case have avoided for many months on behalf of their Bank or Trust client providing already overdue documents violating previous discovery time frames and associated orders. The Judge in this case is demanding the production of certain documents, and the scheduling and directing of several depositions of Plaintiff-related executives, including executives from Nationstar. The Judge has scheduled a Show-Cause hearing for July 30, at which Plaintiff must appear to explain and ultimately justify the almost year-long disregarding of a previous discovery order of August 2018.

Charles and Bill will break down further the nuts and bolts of not only the discovery sanctions motion aspects in this case, but implications for homeowners around the country.

See u-s-bank-facing-sanctions-in-miami/

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