Why Are We having So Much Trouble Connecting the Dots?

Posted on October 31, 2013 by Neil Garfield

Matt Weidner reports that he went to court on a case where IndyMAc was the plaintiff. IndyMac was one of the first banks to collapse. It was found that they owned virtually zero mortgages and had “securitized” the rest which is to say they never loaned the money or got paid off by a successor. Now the servicing rights on IndyMac have been sold. So when the time came for trial he finds the lawyer fighting with his own witness. It seems that she would not say she worked for IndyMac because she didn’t. That meant there was no corporate representative present to testify for the plaintiff. case over? Not according to what we have seen where IndyMac foreclosures continue to be rubber stamped by Judges who do not understand the gravity of the situation.

The precedent being set is for anyone who knows about a default to race to the courthouse with a complaint to foreclose after fabricated a notice of default and asserting themselves as the successor to whoever the borrower was paying. The borrower doesn’t know the difference and generally doesn’t care because they mistakenly think they are screwed no matter what. So the pretender lender that was collecting takes it time partly because they are simply collecting fees on “non-performing” loans. Meanwhile our creative criminal goes in and alleges that he is the holder of a lost note, submits affidavits, but of course stays away from the essential allegation that there ever was a transaction between himself and the borrower. These days Judges don’t seem to require that.

Judgment is entered for our creative criminal and he becomes by court order, the creditor who can submit a credit bid at auction. He makes the non-cash bid at the auction and presto he just got himself a free house which he sells at discount on the open market. He only needs to do a few of those before he vanishes with a few million dollars. In fact, we have learned that such “foreclosures” are going on now sometimes creatively named such that it looks like the name of a bank. That is why I have been saying for 7 years that  the foreclosures, if they are allowed to proceed, will eventually create chaos in the marketplace.

You might ask why the banks don’t raise a big stink about this practice. The answer is that there are only a few such scams going on at the moment. And the banks are relying on the loopholes created in pleading practice to get their own foreclosures through the same way as our criminal because they really don’t own the loan or even the servicing rights. Yup! That is called a syllogism: if the creative criminal is a criminal for doing what he did, then the bank or anyone else who engages in the same behavior is also a criminal.

And that is why the justice department and regulators are ramping up their investigations and charges, getting ready to indict the bankers who thought they were untouchable. If you read the reports of securities analysts, you will see three types of authors — those who obviously have drunk the Kool-Aide and believe Bank of America and Chase hinting the stock is a good buy, those who are paid to plant pretty articles about the banks, and supposedly declining foreclosures and increasing housing prices, and those who have looked at the jury conviction of Countrywide, looked at the pace of settlements, and looked at the announcements that there are many more investigations and charges to be resolved, and who have seen the probability of indictments, and they conclude that BOA is soon going to be on the chopping block for sale in pieces and the same will happen with Chase, Citi and maybe even Wells.

While the media is not paying attention to the impending doom of the mega banks, the market is discounting the stock and the book value of these companies is dropping like a stone because real investment analysts under stand that much of what is being carried on the books as assets, is really worthless garbage. Charges of fraud are announced practically everyday, saying that the banks defrauded investors, defrauded Fannie and Freddie, and defrauded each other, as well as insurance companies and counterparties on credit default swaps. In other words it is pretty well settled that the sale of mortgage bonds was a sweeping fraudulent scheme and that the word PONZI scheme is accurate, not some conspiracy theory as I was treated back in 2007-2010.

So now that we know that there was complete fraud at one end of the stick (where the funding for the origination and acquisition of mortgages took place), the question is why is anyone looking at foreclosures as inevitable or proper or even possible. It is the same stick. If one end is burning then it is quite likely that the other end will be burning soon and that is exactly what I predict for the coming months.

Having been in court multiple times over the last month representing clients seeking to retain their homes it is readily apparent that the Judges are changing their minds about whether the foreclosure is inevitable or that collection by these creative criminals is wise or legal — i.e., whether the enire exercise involves an arrogant willingness to commit perjury. Since the mortgages were part of the scheme and the part where the lender appeared with the money is covered in fraud, it is certainly reasonable to assume that the the fraudulent schemes included the origination and transfer of mortgage paper. And that is exactly the case.

If it wasn’t the case there never would have been fraud at the top because the investors would be on the note and mortgage and some some nominee of the broker dealer (“BANK”) or they would have been on a recorded assignment closed out within 90 days of the start of the REMIC trust, which would have been funded by money from investors paid to the investment bank (broker dealer) who then forwarded the net proceeds tot he Trust. None of that ever happened, though, which is how the fraud was enabled.

Practice Hint: I like to demonstrate by drawing a large “V” where the bottom is the closing agent, the left side is the money trail and the right side is the paper trail — and showing that they never meet. That means the paper trail is a fictional story about transactions that never occurred. The money trail is actual facts and data showing actual transactions where money exchanged hands but there was no documentation. The “Trust” was never funded with money or assets, so the money went straight down the left side from the investors at the top of the left side to the closing agent, who applied the investors money to close a transaction that was documented as though the originator had loaned the money. The same reasoning applies to transfers and assignments.

The core of the cases filed by the banks is that the Note is prima facie evidence that a transaction occurred. It is entitled to a presumption of validity. But where the borrower denies the transaction ever occurred, and files the right discovery to get evidence of the wire transfers and canceled checks, the banks go wild because they know their entire case will not only fall apart but subject them to prosecution.

Which brings us to Marshall Watson, who seeks to be licensed again to practice law, and David Stern who is about to be disbarred forever. The good news is that they were disciplined for fabrication and forgery of documents. The bad news is that the inquiry stopped there and nobody ever asked why it was necessary to fabricate or forge documents.

FRAUD! In Foreclosure Court Indymac/Onewest Doesn’t Own Notes and Mortgages, But “They” Continue To Foreclose Anyway
http://ireport.cnn.com/docs/DOC-1051166/

–Suspended Ft. Lauderdale foreclosure mill head seeks return
http://therealdeal.com/miami/blog/2013/10/24/suspended-fort-lauderdale-foreclosure-mill-head-seeks-return/

Florida Bar referee calls for ex-foreclosure king’s disbarment
http://therealdeal.com/miami/blog/2013/10/30/florida-bar-referee-calls-for-ex-foreclosure-kings-disbarment/

Filed under: CDO, CORRUPTION, evidence, expert witness, Fannie MAe, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, Servicer | Tagged: , , , , , , , , , , , | 195 Comments »

2 Florida Cases Decided in Favor of Borrower

Posted on October 29, 2013 by Neil Garfield

The Wadsworth case clearly shows that the appellate courts are requiring the trial court to scrutinize the claims and filings of would-be forecloser and that things like notice of acceleration and the right to cure are important enough to reverse summary judgment. This is directly contrary to the rulings of many judges who say that the lack of notice is NOT a basis for granting a motion to dismiss. It can be argued that if it is enough to defeat a motion for summary judgment, it ought to be sufficient to dismiss the complaint that does not allege the existence of the loan, the financial injury and the compliance with paragraph 22, with a copy thereof.

Wadsworth

The Beaumont decision is especially interesting because it deals with a rather obvious alteration of documents by Bank of America or its “successors” or lawyers. Or I would not be surprised to learn that LPS was involved in this one. They changed the due date and foreclosed. The trial court disregarded the defense that the note was altered and said it wasn’t enough that they alleged these facts on information and belief.  The appellate court that might be true, but the documents of records clearly raise the issue themselves.

Beaumont

Filed under: CASES, CORRUPTION, evidence, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, Mortgage, Motions, Pleading, Servicer | Tagged: , , , , , , , | 61 Comments »

Why do we need to force the banks to accept more money in modification?

Posted on October 28, 2013 by Neil Garfield
Selecting a forensic analyst or a lawyer to represent you in a mortgage dispute. You need to look at their credentials rather than listen to their sales pitch. And you need people who really believe that you can and SHOULD win. For our services and products call our customers service numbers at 520-405-1688 on the West Coast, and 954-495-9867. Or visit http://www.livingliesstore.com. Don’t waste your money if the people lack the credentials and experience and commitment to make things work out the way you want it. Everyone promises the world. We promise expertise and guidance on how to use it in court.

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It seems obvious. And if you are a lawyer practicing in real estate, you have probably attending CLE seminars about mortgage lending requirements and what to do when the borrower is in default or claimed to be in default. The answer is always a “workout” wherever possible. And the reason is that you get more from a workout than the proceeds from a foreclosure and all the financial requirements of ownership like maintenance, taxes, insurance and the expenses of selling, repairs etc. It really is that simple.

But Banks don’t want workouts or modifications. They only want to use the illusory promise of modification to get the borrower in so deep he sees no way out when the application is eventually denied. Why are so many trial modifications now in court because the bank denied the permanent modification after the trial modification as approved and the borrower met all the requirements including payments? why are the banks pursuing a strategy where they are guaranteed far less money than ramping up the “workout” programs. Maybe because if they did, they would be admitting that the loan was defective in the first place, the appraisal was inflated, the viability of the loan was zero, and the borrower had been tricked.

So why do the Banks need to be forced to take more money and less responsibility for the property? It seems obvious that they would want a workout rather than a foreclosure because it will end up with more money in their pockets and the whole mortgage mess behind them with a nice clean note and mortgage.

The answer can only be that the Banks oppose such efforts because the rational strategy of a true lender won’t end up with more money in THEIR pockets. And THAT can only be true if they are working off some different business model than a lender. It means by definition in a rational world, as Greenspan likes to say, that they could not possibly be the lender or working for the lender.

It can only be true if they are protecting the fees they are earning on nonperforming loans and justifying their stubborn resistance to modification and principal reduction by showing that the foreclosure was the only way out even though it wasn’t. The destruction of tens of thousands of homes in various cities shows that the net value of the foreclosure was zero even while the homeowners were applying for modifications that, if approved, would have not only saved individual homes, but entire neighborhoods.

The other reason of course is that the banks don’t own the loans and they did receive multiple payments on the loans from multiple sources. A foreclosure hides these payments.

So the practice hint is to be persistent and insistent on following the money trail. What the San Francisco study revealed as well as other similar studies and are own study here at livinglies is that the courts are rubber stamping foreclosures that are in favor of complete strangers tot he transaction. They don’t have a dime in the deal. But they are being given judicial nod that they are the creditor even though they are clearly not the creditor. This false creditor now has authority to claim the status of creditor and to buy property worth millions of dollars with a non-monetary credit bid in the amount of their claim, thus “out bidding” any conceivable competition and guaranteeing their ownership of the property, or allowing someone else to outbid them and taking the money from the sale even though everything they had done up to that point was false.

So you have these people and companies in a cloud of false claims of securitization selling the loan multiple times through insurance and other gimmicks making a ton of money assuming the identity of the investors and assuming ownership over the borrower’s identity and trading on that all for the purpose of ill-gotten gains. It is fraud, identity theft, RICO and Ponzi Schemes all rolled into the fog that comprises the false claims of securitization.

PRACTICE HINT: Test each transaction claimed to see if money exchanged hands and if so between what parties. You will find that the money transactions — that is the reality of what was going on bears no resemblance to the paper trail. The paper trail is meant to lead you down the rabbit hole. First establish what is in the paper trail, then establish what transactions actually occurred and then compare the two and show that the paper trail is a trail of lies.

THE KEY TO THIS MESS IS TO REPLACE OR SUBSTITUTE THE CURRENT SYSTEMS OF SERVICERS WITH AN ENTIRELY DIFFERENT SYSTEM OF SERVICING AND A DIFFERENT SET OF SERVICERS TO REPLACE THOSE WHO ARE BLOCKING THE DIALOGUE BETWEEN LENDERS AND BORROWERS.

Mortgage borrowers get more foreclosure protection from Mass. bank regulators
http://www.bizjournals.com/boston/news/2013/10/17/mortgage-borrowers-get-more.html

The Very Worst Thing About Foreclosures Today Is Watching Consumers That You Know Could be Helped Standing in Court Without An Attorney
http://ireport.cnn.com/docs/DOC-1050081/

 

Filed under: CDO, CORRUPTION, Eviction, evidence, expert witness, Fannie MAe, foreclosure, foreclosure mill, forms, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, trustee | Tagged: , , , , , , , , , | 23 Comments »

JPM Could Lose Its Charter for Criminal Responsibility in Madoff PONZI Scheme

Posted on October 25, 2013 by Neil Garfield

From http://www.seekingalpha.com —
JPM’s Madoff entanglement could prompt review of bank charter
The Office of the Comptroller of the Currency (OCC) has reportedly told the office of U.S. Attorney Preet Bharara that a criminal money laundering conviction of JPMorgan (JPM) for turning a blind eye to Bernie Madoff’s Ponzi scheme could trigger a review of the bank’s charter.

Editor’s Note: practically every day we hear of new gross violations of law and intentional misconduct by the large banks who squandered their brand recognition on absurd situations. I have always said that it was impossible for Madoff to have stolen $60 Billion without the knowledge and complicity of the major firms on Wall Street. The revelations of the Madoff theft of money from investors was quickly cast as the largest fraud in history. But it wasn’t. The largest fraud can be counted in the tens of trillions of dollars by all the key players on Wall Street in the PONZI scheme that is falsely called securitization of debt — the proof of which can easily be seen at ground level as investors and borrowers alike are settling claims or winning key verdicts.

The Madoff affair actually provided cover for the Wall Street banks and helped steer the narrative to supposedly reckless and irresponsible behavior when in fact management was deceiving, stealing and profiting from a PONZI scheme that depended upon (a) the sale of mortgage bonds and (b) the sale of mortgage products. Once investors stopped buying bonds and homeowners stopped buying loan products the scheme collapsed and banks had the temerity to say they had lost vast sums of money — a claim that is clearly untrue. They received a bailout for those losses in the form of TARP and other programs from the U.S. treasury, the Federal reserve and other sources, when it was investors, insurers, borrowers, taxpayers, guarantors and other parties who were taking losses having given tens of trillions of dollars to the Wall Street banks in money and property.

Now the chickens are coming home to roost. And the cries of well-known analysts that the banks are being treated unfairly is losing credibility by the hour. The banks are finally losing the narrative and the association of politicians with them is proving more costly than the benefit of taking money from the bank lobbyists to protect the banks from prosecution arising out of behavior that would land any ordinary mortal in jail for a long time.

Lawyers defending foreclosure cases should take note and use this information pointing out what the court already knows: that there was fraud at the top in the selling of worthless mortgage bonds deriving their value from defective mortgages, there was fraud in the robo-signing, LPS fabrication of documents, the intentional destruction of cash equivalent promissory notes that we now know were defective, in the words of the investors, insurers, government guarantee agencies, insurers and rating agencies.

PRACTICE NOTE: It should be noted and stated openly that any pleading, affidavit or testimony from those banks is inherently untrustworthy and should be subject to intense scrutiny. The remedy of forfeiture in Foreclosures is extreme according to the public policy of every state and should be strictly construed against the party seeking that remedy. Every legislature has put that statement in its laws. Instead, the narrative has been that deadbeat borrowers were clogging the system with bogus defenses.

It never occurred to the courts, the lawyers and even the borrowers that the courts were clogged with bogus claims of ownership, bogus accounting for receipts and disbursements, the existence of co-obligors when the note payable was converted to a bogus bond payable, and wrongful Foreclosures that the banks and the regulators know were wrongful, obtained settlements, consent orders and more promises from people whose business model is all about lying, manipulation of markets and theft.

Filed under: CORRUPTION, evidence, Fannie MAe, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, politics, securities fraud, Servicer, STATUTES, trustee | Tagged: , , , , , , | 124 Comments »

Countrywide Found Guilty of Fraud, JPM Criminal Responsibility for Madoff PONZI Scheme

Posted on October 24, 2013 by Neil Garfield

““The words PONZI SCHEME and FRAUD applied to the mortgage meltdown has been largely dismissed by policy makers, law enforcement and regulators. Instead we heard the terms RISKY BEHAVIOR and RECKLESSNESS. Now law enforcement has finally completed its investigation and determined that those who set the tone and culture of Wall Street were deeply involved in the Madoff PONZI scheme and were regularly committing FRAUD in the creation and sale of mortgage bonds and the underlying “DEFECTIVE” loans. The finding shows that these plans were not risky nor reckless. They were intentional and designed to deceive and cause damage to everyone relying upon their false representations. The complex plan of false claims of securitization is now being pierced making claims of “plausible deniability” RISKY and RECKLESS.

And if the loans were defective there is no reason to believe that this applies only to the loans claimed to be in default. It applies to all loans subject to false claims of securitization, false documentation for non existent transactions, and fraudulent collection practices by reporting and collecting on balances that were fraudulently stated in the first instance. At this point all loans are suspect, all loan balances stated are suspect, and all Foreclosures based on these loans were frauds upon the court, should be vacated and the homeowner reinstated to ownership of the property and possession of the property. All such loans should have the loan balance adjusted by the courts for appropriate set off in denying the borrowers the benefit of the bargain that was presented to them.

“It is now difficult to imagine a scenario where the finding of the intentional use and creation of defective mortgages will not trickle down to all mortgage litigation. The Countrywide decision is the first that expressly finds them guilty of creating defective loans. It is impossible to believe that Countrywide’s intentional acts of malfeasance won’t spread to the investment banks that used Countrywide as the aggregator of defective loans (using the proprietary desk top underwriting software for originators to get approval). The reality is coming up, front and center. And Judges who ignore the defenses of homeowners who were of course defrauded by the same defective mortgages are now on notice that bias towards the banks simply doesn’t work in the real world.” — Neil F Garfield,www.livinglies.me October 24, 2013

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By Neil F Garfield, Esq. Tallahassee, Florida October 24, 2013. If the mortgages were defective and were used fraudulently to gain illicit profits it is not possible to avoid the conclusions that homeowners are among the victims. By using false appraisals the huge banks created the illusion of rising prices. This was manipulation of market prices just as the banks were found guilty of manipulating stated market rates for interbank lending “LIBOR” and use of the manipulated pricing to trade for further benefit knowing that the reality was different. The banks have continued this pattern behavior and are still doing it, and laying fines as a cost of doing business in the manipulation and ownership of natural resources. They are a menace to all societies on the planet. The threat of that menace must be removed In the face of a clear and present danger posed by the real world knowledge that where an opportunity arises for “moral hazard” the banks will immediately use it causing further damage to government, taxpayers, consumers and investors.

None of it was disclosed or even referenced at the alleged loan closing with borrowers despite federal and state laws that require all such undisclosed profits and compensation to be disclosed or suffer the consequence of required payment to the borrower of all such undisclosed compensation. The borrowers are obviously entitled to offset for the false appraisals used by lenders to induce borrowers to accept defective loan products.

Further, borrowers have a clear right of action for treble damages for the pattern of conduct that constituted fraud as a way of doing business. In addition, borrowers can now be scene through a clear lens — that they are entitled to the benefit of the bargain that they reasonably thought they were getting. That they were deceived and coerced into accepting defective loans with undisclosed players and undisclosed compensation and undisclosed repayment terms raises the probability now that borrowers who present their case well, could well start getting punitive damages awards with regularity. It’s easy to imagine the closing argument for exemplary or punitive damages — “$10 billion wasn’t enough to stop them, $25 billion wasn’t enough to stop of them, so you, members of the jury, must decide what will get their attention without putting them out of business. You have heard evidence of the tens of billions of dollars in profits they have reported. It’s up to you to decide what will stop the banks from manipulating the marketplace, fraudulently selling defective loans to borrowers and pension funds alike with the intention of deceiving them and knowing that they would reasonably rely on their misrepresentations. You decide.”

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U.S. prepares to take action against JPMorgan over Madoff
In what would be an almost unheard of move when it comes to U.S. banks, the FBI and the U.S. attorney’s office are in talks with JPMorgan (JPM) about imposing a deferred prosecution agreement over allegations that the bank turned a blind eye to Bernie Madoff’s Ponzi scheme, the NYT reports.
Authorities would suspend criminal charges against JPMorgan but impose a fine and other concessions, and warn the bank that it will face indictments over any future misconduct.
However, the government has not decided to charge any current or former JPMorgan employees.
The report comes as the bank holds talks with various regulators over a $13B deal to settle claims about its mortgage practices.

Countrywide found guilty in U.S. mortgage suit
A federal jury has found Bank of America’s (BAC -2.1%) Countrywide unit liable for defrauding Fannie Mae (FNMA +22%) and Freddie Mac (FMCC +19.4%) by selling them thousands of defective mortgages.
The judge will determine the amount of the penalty – the U.S. has requested $848M, the gross loss to the GSEs as calculated by its expert witness.
The suit centered on Countrywide’s HSSL – High Speed Swim Lane – program instituted in August 2007, says the government, to keep the music playing as the property market was falling apart.

DOJ probes nine leading banks over sale of mortgage debt
The Department of Justice is reportedly investigating nine major banks over the sale of problematic mortgage bonds, although the probes are for civil infractions rather than criminal ones.
The banks are Bank of America (BAC), Citigroup (C), Credit Suisse (CS), Deutsche Bank (DB), Goldman Sachs (GS), Morgan Stanley (MS), RBS (RBS), UBS (UBS) and Wells Fargo (WFC).
The inquiries span U.S. attorney’s offices from California to Massachusetts, and come as JPMorgan tries to reach a multi-billion dollar settlement over the issue.

Filed under: bubble, CASES, CORRUPTION, Eviction, evidence, expert witness, Fannie MAe, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Occupy Movement, Pleading, securities fraud, Servicer, STATUTES, trustee | Tagged: , , , , , , , , , , , | 65 Comments »

The rules matter — CASE DISMISSED, without prejudice

Posted on October 23, 2013 by Neil Garfield

For assistance with your mortgage go to http://www.livingliesstore.com or call 520-405-1688. Remember these issues not only apply to homeowners not paying their mortgages. They apply to everyone who has a mortgage or who has acquired title from someone who had a mortgage that was subject to claims of securitization.

Lenders and buyers can get a risk assessment report and recommendations to clear title from GGKW, with its home office in Tallahassee. Those in litigation can get information and their lawyers can get litigation support by calling 850-765-1236.

For information on direct representation of clients in Florida, call 954-495-9867 in Broward County, and 850-765-1236 for Northern Florida. GGKW is the acronym for Garfield, Gwaltney, Kelley and White, a law firm with offices currently in Tallahassee and Fort Lauderdale.

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When the dam breaks, the speed with which the water starts moving increases dramatically at first before it subsides. This is what is happening in the courts. Judges are increasingly becoming aware as they read the newspaper, that the big broker-dealer banks at the center (Master Servicer) of this mess in mortgages, committed civil fraud, and probably committed criminal fraud in connection with the sourcing of money for originating or acquiring loans from homeowners. The presumption of trustworthiness of the banks is gone, except for a fast shrinking group of judges around the country.

  • If there was fraud at the top of the sham securitization chain then why wouldn’t there by fraud at the bottom?
  • And if there was fraud in the origination of the loan, or the sourcing of money for the loan, then why wouldn’t there be a question of whether the note or mortgage or both were invalid empty pieces of paper referring to a non-existent transaction?
  • And therefore might that not explain why the banks do not allege in judicial states that a loan was made by the payee listed on the note?
  • Why didn’t the Trust show up in the County records within 90 days of its creation and right on the the original note and mortgage?
  • Why wouldn’t there be a question about whether there was any lien to foreclose because the banks were too busy screwing investors to create a perfected encumbrance on the collateral for the investors whose money was improperly channeled and used for the sole benefit of the banks.
  • And why are the banks not alleging the existence of a loan or financial injury in their complaints? Are they avoiding a can of worms that will show they have no transaction to sue on?
  • Are the real lenders so much in the dark that they don’t even know the case has been brought by someone without authority or consent of the lender of money (not the lender on paper)?

The colloquy between judge and counsel in the link below clearly shows what is happening in a growing number of cases where the Judges have stopped ignoring the rules of civil procedure, stopped ignoring the rules of evidence, and stopped assuming that the borrower is a deadbeat looking for a free house.

They are now getting the idea that the homeowner is in search of a lender, not a free house.

The homeowner is in search of a balance on his loan whether it is secured or not and is fully willing to execute new documentation in favor of any investor with an unpaid receivable attributable to the property of the homeowner. The banks are playing fast and loose with the rules and the judges are coming down as hard on them as they were knocking around borrowers just a few months ago. I know, I am seeing it in court over and over again. The entire atmosphere has changed.

So when the bank fails to send out a notice required by the judge’s order, civil procedure or the rules of evidence, they lose. And when they lose, without prejudice, if they have been sitting on it for more than 5 years in Florida they are barred by the statute of limitations at least as to the default that occurred 5 years before and probably everything up to the time of dismissal. The payments might not be cutoff by the statute but foreclosure or collection is barred. payments due after such an order are probably subject to a collection or foreclosure action but they should be met with an argument that due to the statute of limitations they are forever time-barred.

If the bank sends a pretrial statement to you saying “corporate representative” is their witness or even worse, attaches a list of 35 potential witnesses, that is the equivalent of not giving any notice of who the witness is going to be. That is subject to a motion in limine to prevent the bank from putting on witnesses. So far the judges are either extending the trial date out further and requiring compliance with the rules or they involuntarily dismissing the case thus entitling the Defendant to recovery of attorney fees in most cases.

Teaser: Take a close look at the laws of evidence passed by the legislature of your state. You will find some things in there that might prove deadly t the bank at the time of trial if you follow the path required and make your motions and preserve your objections. Those business records don’t belong in evidence and we all know it. They are not complete because they don’t include payment OUT to the creditor thus establishing WHO the creditor is and requiring an explanation of WHY the creditor is not the foreclosing party. But the fact that they are not complete is not nearly as strong as that they are by definition hearsay and inadmissible unless they are business records that follow the requirements of the evidence statutes that carve out an exception to the hearsay prohibition. 

Practice Hint: Judges always seem inclined to think they have discretion in virtually all matters. The evidence statute is a rule of law that the Judge has sworn to uphold, defend and enforce. Unless there is some ambiguity in the statute no judicial interpretation is allowed. The ambiguity must be raised by the party seeking to state that the statute is ambiguous. Without that, the Judge has NO DISCRETION, because it is a law and not a rule of civil procedure.

We are sitting on the edge of a cliff where the judges are ready to tip for the borrower. The sanction for trickery in notices and discovery will be judgment for the borrower or dismissal with prejudice. The conversation below shows just how close we are to that moment.

http://4closurefraud.org/2013/10/23/foreclosure-fight-club-another-trial-another-win-by-the-law-offices-of-evan-m-rosen-part-2/
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Filed under: CASES, CORRUPTION, evidence, expert witness, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee | Tagged: , , , , , , , , , , | 58 Comments »

Only $4 Billion of JPM $13 Billion Settlement Goes for “Consumer Relief”

Posted on October 23, 2013 by Neil Garfield

For assistance in understanding the content of this article and purchasing services that provide information for attorneys and homeowners see http://www.livingliesstore.com.

Josh Arnold has written an interesting article that reveals both realities and misconceptions arising from gross misconceptions. His misperceptions arise primarily from two factors. First he either ignores the fact that JPM was integrally involved in the underwriting, sale and hedging of the alleged mortgage bonds, never actually acquired the loans or the bonds on which they claimed a loss, and made huge “profits” from fictitious trades disguised as “proprietary” trading which was a cover for tier 2 yield spread premiums that were never disclosed to investors or borrowers. The deregulation of those mortgage securities may have provided cover for the fraud that occurred to investors, but the failure to disclose this “compensation” to borrowers violates the truth in lending act and state deceptive lending laws.

Second, the article is based upon a point of view that is not surprising coming from a Wall Street analyst but which is bad for the country. The ideology behind this is clear — Wall Street is there to make money for itself. That has never been true. Wall Street exists solely because in a growing and complex economy, liquidity must be created by breaking up risks into portions small enough to attract investors to the table. Whether they make money or not depends upon their skill in running a company.

Unfortunately in the early 1970’s the door was flung wide open when broker-dealers were allowed to incorporate and go public. Just ask Alan Greenspan who believed the markets would self correct because the players would act rationally in their own self interest. As he he says in his latest book, the banks did not act rationally nor in their own best interest because they were being run by management that was acting for the self interest of management and not the company. Back in the 1960’s none of this would have occurred when the broker-dealers were partnerships —leading partners to question any transaction by any partner that put the partners at risk. Now the partners are remote and distant shareholders who are among the victims of management fraud or excess risk taking.

The effect on foreclosure defense is that, at the suggestion of the former Fed Chairman, we should stop assuming that the broker dealers that are now called banks were acting with enlightened or rational self-interest. The opening and closing statement should refer to the information like this article Quoted below as demonstrating that the banks were openly violating common law, statutory, and administrative rules because the losses from litigation would not be a liability of the actual people who caused the violations.

Any presumption in favor of the foreclosing bank should be looked at with intense skepticism. And in discovery remember to ask questions about just how bad the underwriting process was and revealing the absolute fact, now proven beyond any reasonable doubt, the goal was for the first time NOT to minimize risk, but rather to force applications to closing because of giant profits that could be booked as soon as the loan was sold, since at the time of closing the loans were already part of a reported chain of securitization. Investigation at real banks as opposed to “originators” will reveal two sets of underwriting rules and practices — one for their own portfolio loans in compliance with industry standards and the other for the vast majority of loans that were claimed to be part of a fictitious cloud of securitization that did not comply with industry standards.

In the end my initial assessment in 2007-2008 on these pages is proving to be true. The unraveling of this mess will depend upon quiet title lawsuits and lawsuits for damages resulting from violations of the Truth in Lending Act — where those gross profit distortions at the broker-dealer level are required to be paid to the homeowner because they were not disclosed at closing.
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From Seeking Alpha website, by Josh Arnold —

JPMorgan’s (JPM) legal woes got a lot worse over the weekend with its well-publicized $13 billion settlement. JPM already has much more than that set aside to pay legal claims so it’s really a non-event for the bank; they saw it coming to a degree. I’m not here to debate whether or not JPM’s employees misled investors, including Fannie and Freddie, but what I think the most important, and disconcerting, piece of this settlement is the way it was undertaken by the Administration.

Think back to 2008 when the world as we knew it was ending. Smaller financial institutions were failing left and right and even the larger players, including Lehman, Bear Stearns, Washington Mutual, Wachovia and others eventually found themselves in enormous trouble to the point where distressed sales were the only way to stave off bankruptcy (save Lehman, of course). The federal government, eager to avoid a massive crisis, asked JPM, Wells Fargo (WFC) and others to aid the effort to avoid such a calamity. Both obliged and we know history shows JPM ended up with Washington Mutual and Bear Stearns while Wells purchased Wachovia as it was on the cusp of going out of business. At the time, JPM CEO Jamie Dimon famously asked the government, as a favor for bailing out WaMu and Bear Stearns, not to prosecute JPM down the road for the sins of the acquired institutions. This is only fair and it should have gone without saying as the idea of prosecuting an acquirer for something the acquired company did as an independent institution is preposterous.

However, that is exactly where we find ourselves today with the settlement that has been struck. JPM has said publicly that 80% of the losses accrued from the loans that are the subject of this settlement were from Bear and WaMu. This means that, despite Dimon’s asking and the fact that the federal government “urged” JPM to acquire these two institutions, JPM is indeed being punished for something it had nothing to do with. This is a watershed moment in our nation’s history as the next time a financial crisis rolls around, who is going to want to help the federal government acquire failing institutions? Now that we know that the reward for such behavior is perp walks, public shaming via our lawmakers (who can’t even fund their own spending) and enormous legal fines and settlements, I’m thinking it will be harder for the government to find a buyer next time.

Not only is the subject of this legal settlement and the very nature of the way it has been conducted suspect, but even the fines themselves as part of the settlement amount to nothing more than tax revenue. The $13 billion is split up as follows: $9 billion in penalties and fees and $4 billion in consumer relief. The penalties and fees are ostensibly for the “wrongdoing” that JPM must have performed in order to be subject such a historic settlement. These penalties and fees are for allegedly misleading investors in these securities and misrepresenting the strength of the underlying loans. The buyers of these securities, however, were all very sophisticated themselves, including the government sponsored entities. These companies had analysts working on these securities purchases and could very well have realized that the underlying loans were bad. However, Fannie and Freddie blindly purchased the mortgages and were eventually saddled with large losses as a result. But instead of the GSE’s taking responsibility for bad investment decisions, the government has decided to simply confiscate $13 billion from a private sector company while Fannie and Freddie have claimed zero responsibility whatsoever for their role in the losses.

The other $4 billion is earmarked for “consumer relief” but the worst part of this is that these loans were sold to institutions. This means that this consumer relief is simply a bogus way to confiscate more money from JPM and the alleged reason has no basis in reality. The consumer relief portion would suggest that JPM misled the individual consumers taking the loans that were eventually securitized but that is not what the settlement is about. In fact, this is simply a way to redistribute wealth and the Administration is taking full advantage. In order for the redistribution of wealth to make the alleged victims whole it would need to be distributed among the institutions that purchased the securities. So is this part of the settlement, under the guise of “consumer relief”, really just another tax levy? Or is it going to consumers that had absolutely nothing to do with this case? Either way, it’s confiscatory and doesn’t make any sense. Based on reports about this consumer relief portion of the settlement, this money is going wherever the Administration sees fit. In other words, this is simply tax revenue that is being redistributed and given to consumers that have absolutely zero to do with this case.

Even the $9 billion in penalties and fees is going to be distributed among various government agencies and as such, this money is also tax revenue. Otherwise, the money for these agencies would eventually come from the Treasury but instead, JPM is going to foot the bill.

I’m not against companies that have done something wrong being punished. In fact, that is a necessary part of a fair and open capitalist system that allows the free world the economic prosperity it has enjoyed over history. However, this settlement is a clear case of the federal government confiscating private assets in order to redistribute them among government operations and consumers that had absolutely nothing to do with the lawsuit. I am extremely disappointed in the way the Administration has handled this case and other banks should be on notice; it doesn’t matter what you did or didn’t do, if you’ve got the money, the government will come after you.

In terms of what this means for the stock, JPM has already set aside $23 billion for litigation reserves so when the bill comes due for this settlement, JPM has more than enough firepower available to pay it. In fact, this settlement is likely a positive for the stock. Since this is likely to be the largest of the fines/settlements handed down on the Bank of Dimon, the fact that the uncertainty has been lifted should alleviate some concern on the part of investors. In addition to this, since JPM still has a sizable reserve, $10 billion or so, left for additional litigation, investors may be surprised down the road if JPM can actually recoup some of that litigation expense and boost earnings. Not only would that remove a multi-billion drain on book value but it could also increase the bank’s GAAP earnings if all litigation reserves weren’t used up. In any event, even if that is not the chosen path, JPM could still recognize higher earnings in the coming quarters if it sees it needs less money set aside each quarter for litigation reserves. Again, this is very positive for the stock but for more tangible reasons.

The bottom line is that JPM got the short end of the stick with this settlement. Not only is the bank paying for the sins of others but it is paying very dearly and sustaining reputational damage in the process. I couldn’t be more disappointed with the way the Administration’s witch hunt was conducted and the end result. But that is the world we apparently live in now and if you want to invest in banks you need to be prepared to deal with confiscatory fines and levies against banks simply because they can’t stop the government from taking it.

However, JPM is better positioned than perhaps any of its too-big-too-fail brethren to weather the storm and I think that is why there was virtually no movement in the stock when the settlement became public. JPM has been stockpiling litigation reserves when no one was looking and has done well in doing so. With the looming threat of this settlement now come and gone, investors can concentrate on what a terrific money making machine JPM is again. Trading at a small premium to book value and only nine times next year’s earnings estimates, JPM is the safe choice among the TBTF banks. Couple its very cheap valuation with its robust, nearly 3% yield and the largest settlement against a single company in our country’s history behind it and you’ve got a great potential long term buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Share this ArticleComments(8)

Don Dion
Oct 23 07:49 AM
Josh,

Great article. See also http://seekingalpha.co…

Don

Filed under: CORRUPTION, evidence, expert witness, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES | Tagged: , , , , , , , , , | 8 Comments »

Livinglies Recalibrates Forensic and Litigation Support Services

Posted on October 22, 2013 by Neil Garfield

Responding to specific requests from lawyers and homeowners, the livinglies store has changed its offering. Www.livingliesstore.com

You can still get the old Combo of just a title and securitization report, but we have added some levels and services to meet the demand for our services. Of course pricing has been adjusted to reflect the increased workload. Actual litigation support is provided throughout the country to any attorney by Garfield, Gwaltney, Kelley and White (GGKW) with offices now in Broward County and Leon County. We will soon have offices in the Florida Panhandle and Dade County. I’ll be posting separately on each office and the attorneys we have selected to litigate in accordance with our requirements.

GGKW represents homeowners throughout the state of Florida. Do not ask us to provide the full range of litigation support if you are a pro se litigant, even if your case is in Florida. You would be asking us to provide services that might be the unauthorized or unethical practice of law in states where we are not licensed. It would also be a bad idea because you cannot expect an attorney from another state to know the laws of your state, how they are applied in your courts, and the differences between individual judges. Sometimes local rules are dispositive of cases. Florida homeowners can get some additional assistance from GGKW or the livinglies store, but there is no good substitute for an attorney who knows and can argue rules of procedure and laws of evidence as they relate to your case.

The first additional the Combo offering is the Qualified Written Request and Debt Validation Letters. These are rising in importance and an increasing number of lawyers are asking us to prepare these. We can’t send them out but we can prepare them for the signature of the homeowner. We ask more pointed questions about whether the originator actually loaned money to the homeowner — that is, whether there was any transaction between the homeowner and the party stated on the note and mortgage (or deed of trust). This has grown in importance because of the absence of a fundamental allegation by the pretender lenders — that someone in their chain of paper actually entered into an actual transaction (offer, acceptance, consideration and execution) with the alleged borrower. It appears in many cases that the actual funding of the loan was a stranger to the paperwork and that the parties on the paperwork are strangers to the actual transaction.

We also are offering affidavits and declarations from the auditors or experts, including myself, together with a consultation to answer questions on the methods used and the conclusions to be drawn. Where an attorney for the homeowner is available during the consult, the homeowner will hear suggestions on specific strategies and tactics for the battle in court.

We are also just now adding to the package, Freedom of Information requests to the FDIC, OTS, OCC and the Federal Reserve, where applicable. In all likelihood the request you make about the results of their investigations against the banks that led to the Consent Orders and any filings after those orders were entered will be met with some sort of stonewalling. After all, the investigator grilled by Senator Warren admitted to finding thousands of wrongful Foreclosures but refused to tell her or anyone else in Congress which mortgages were effected or the names of homeowners who were illegally thrown out of their homes. It is important to note that these investigations, like the San Francisco study, found serious defects in which the foreclosure should never have happened.

The the response to FOIA requests will undoubtedly require you to push the agency in court to make the disclosures. And interrogatories directed at compliance with the Consent Orders may reveal the actual findings and the names of homeowners who are living outside the homes they still should ow and possess.

We recommend that the other companies providing these services follow our lead. We believe it will lead to better results and a more comprehensible presentation in Court.

Of course I need to remind you that nothing in this article nor the services and products on the store are a substitute for a licensed attorney. You should take no action at all without consulting with a licensed attorney, hopefully one that is familiar with the issues of securitized loans. Most of these cases are being resolved on the basis of the the rules of civil procedure and the laws of evidence. This is above the head of most pro se litigants. Failure to at least consult with an attorney licensed interest state in which your property is located could well result in losing a case you could have otherwise won.

Filed under: CORRUPTION, evidence, expert witness, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, trustee | Tagged: , , , , , , , , , , | 49 Comments »

Fannie and Freddie Demand $6 Billion for Sale of “Faulty Mortgage Bonds”

Posted on October 21, 2013 by Neil Garfield

You read the news on one settlement after another, it sounds like the pound of flesh is being exacted from the culprits again and again. This time the FHFA, as owner of Fannie and Freddie, is going for a settlement with Bank of America for sale of “faulty mortgage bonds.” And most people sit back and think that justice is being done. It isn’t. $6 Billion is window dressing on a liability that is at least 100 times that amount. And stock analysts take comfort that the legal problems for the banks has basically been discounted already. It hasn’t.

For practitioners who defend mortgage foreclosures, you must dig a little deeper. The term “faulty mortgage bonds” is a euphemism. Look at the complaints there filed. When they are filed by agencies it means that after investigation they have arrived at the conclusion that something was. very wrong with the sale of mortgage bonds. That is an administrative finding that concluded there was at least probable cause for finding that the mortgage bonds were defective and potentially were criminal.

So what does “defective” or “faulty” mean? Neither the media nor the press releases from the agencies or the banks tell us what was wrong with the bonds. But if you look at the complaints of the agencies, they tell you what they mean. If you look at the investor lawsuits you see that they are alleging that the notes and mortgages were “unenforceable.” Both the agencies and the investors filed complaints alleging that the mortgage bonds were a farce, sham or in other words, a PONZI Scheme.

Why is that important to foreclosure defense? Digging deeper you will find what I have been reporting on this blog. The investors money was not used to fund the REMIC trusts. The unfunded trusts never had the money to buy or fund the origination of bonds. The notes and mortgages were never sold to the Trusts even though “assignments” were executed and shown in court. The assignments themselves were either backdated or violated the 90 day cutoff that under applicable law (the laws of the State of New York) are VOID and not voidable.

What to do? File Freedom of Information Act requests for the findings, allegations and names of investigators for the agency that were involved in the agency action. Take their deposition. Get documents. Find put what mortgages were looked at and which bond series were involved. Get a list of the mortgages and the bonds that were examined. Get the findings on each mortgage and each mortgage bond. Use the the investor allegations as lender admissions admissions in court — that the notes and mortgages are unenforceable.

There is a disconnect between what is going on at the top of the sham securitization chain and what went on in sham mortgage originations and sham sales of loans. They never happened in the real world, no matter how much paper you throw at it.

And that just doesn’t apply to mortgages in default — it applies to all mortgages, which is why all the mortgages that currently exist, and most of the deeds that show ownership of the property have clouded and probably “defective” and “faulty” titles. It’s clear logic that the government and the banks are seeking to avoid, to wit: that if the way in which the money was raised to fund the loans or purchase the loans were defective, then it follows that there are defects in the chain of title and the money trail that were obviously not disclosed, as per the requirements of TILA and Reg Z.

And when you keep digging in discovery you will find out that your client has some clear remedies to collect the profits and compensation paid to undisclosed recipients arising out of the closing of the “loan.” These are offsets to the amount claimed as due. If the loan was not funded by the Trust, then the false paper trail used by the banks in foreclosure is subject to successful attack. If the loans were in fact funded directly by the trust complying with the REMIC provisions of the Internal Revenue Code, then the payee on the note and the mortgagee on the mortgage would be the trust — or if the loan was actually purchased, the Trust would have issued money to the seller (something that never happened).

And lastly, for now, let us look at the capital structure of these banks. A substantial portion of their capital derives from assets in the form of mortgage bonds. This is the most blatant lie of all of them. No underwriter buys the securities issued by the company seeking financing through an offering to investors. It is an oxymoron. The whole purpose of the underwriter was to create securities that would be appealing to investors. The securities are only issued when you have a buyer for them, and then the investor is the owner of the security — in this case mortgage bonds.

The bonds are not issued to the investment bank as an asset of the investment bank. But they ARE issued to the investment bank in “street name.” That is merely to facilitate trading and delivery of certificates which in most cases in the mortgage bond market don’t exist. The issuance in street name does not mean the banks own the mortgage bonds any more than when you a stock and the title is issued in street name mean that you have loaned or gifted the investment to the investment bank.

If you follow the logic of the investment bank then the deposits of money by depository customers could be claimed as assets — without the required entry in the liabilities section of the balance sheet because every dollar on deposit is a liability to pay those monies on demand, which is why checking accounts are referred to as demand deposits.

Hence the “asset” has been entered on the investment bank balance sheet without the corresponding liability on the other side of their balance sheet. And THAT remains that under cover of Federal Reserve purchase of these bonds from the banks, who don’t own the bonds, the value of the bonds is 100 cents on the dollar and the owner is the bank — a living lies fundamental. When the illusion collapses, the banks are coming down with it. You can only go so far lying to the public and the investment community. Eventually the reality is these banks are underfunded, under capitalized and still being propped up by quantitative easing disguised as the purchase of mortgage bonds at the rate of $85 Billion per month.

We need to be preparing for the collapse of the illusion and get the other financial institutions — 7,000 community and regional banks and credit unions — ready to take on the changes caused by the absence of the so-called major banks who are really fictitious entities without a foundation related to economic reality. The backbone is already available — electronic funds transfer is as available to the smallest bank as it is to the largest. It is an outright lie that we need the TBTF banks. They have failed and cannot recover because of the enormity of the lies they told the world. It’s over.

Filed under: CORRUPTION, evidence, expert witness, Fannie MAe, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, trustee | Tagged: , , , , , , , , , , , , , , | 61 Comments »

JPMorgan to Pay $13 BILLION in Mortgage Settlement: Which Homes are Affected?

Posted on October 20, 2013 by Neil Garfield

The banks have paid tens of billions of dollars in settlements with Federal and State agencies and law enforcement. Where did the money go? But more importantly the real question arises out of the investigation and the question Elizabeth Warren keeps asking — which homes were found to have defective notes and mortgages as alleged by investors in their lawsuits against the investment banks? Which homes did the agency investigation find were foreclosed by parties who were strangers to the transaction. I agree with Sen. Warren who thinks that nothing could be more important to answer as required public informations hand the finding already made by investigators and admitted by the banks to be illegal Foreclosures on defective mortgage liens based on enforceable notes.

Practitioners should be filing requests for public information disclosures and issuing subpoenas to the investigators and agencies to find out what was revealed in the investigation. As Warren has already revealed, the number might be as high as 95%. Nobody wants to reveal the details because they all reveal what I have said all along — none, or nearly none of the the mortgages were actually securitized, none of those mortgages were ever valid liens on the property, none of the notes were enforceable, no money was due from the borrower to the banks trying to collect, none of the Foreclosures were legal, which means that legally all of the foreclosed homeowners still legally own their homes because the Foreclosures were void, not voidable.

Filed under: CORRUPTION, credit unions, evidence, expert witness, Fannie MAe, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, Servicer | Tagged: , , , , , , | 52 Comments »

Even if You Win, Homeowners Must Quiet title and Clear the Negative Report on Their Credit

Posted on October 18, 2013 by Neil Garfield

This is a nice question to answer for people who have already won their cases successfully defending against a wrongful foreclosure. It is nice because homeowners are winning more and more cases. But it is equally relevant to those who are not in litigation and who think they have clear title and are out of the woods because they are current on their payments. The plain truth is that virtually everyone who has a mortgage lien filed against their property which is subject to claims of securitization, sales into the secondary market, assignments, or other transfers have a problem with title. The time to clear that up is now — not when you are trying to sell or refinance or mortgage the home. The quiet title suit could take several months to resolve.

As for the issue of whether the home can still be subject to foreclosure even after the homeowner has won and judgment has been entered, the answer, I’m sorry to say, is Yes. A Judgement for the Homeowner does not legally bar the same or another “lender” (i.e., pretender lender) from alleging a fresh breach from the lack of payments from the homeowner — especially if the claim is for payments “due” after the judgment was entered. But it is true that they have a lot of explaining to do before they can win, which is probably why we have not seen very many actions like that.

And that again is why a suit to Quiet Title is necessary. In addition, the homeowner’s credit has been wrecked, so that must be restored; and there is possible action for damages for slander of credit and related causes of action.

I think where people have gone astray on their opinion that it is completely over once they win a judgment in court is that the judgment does act as a complete bar to the issues that were litigated.

But the issues that were litigated were the ownership of the loan, proving the balance due, etc and the alleged breach by the homeowner. THAT breach has been litigated, but the failure to pay right after the Judgement could be considered another breach.

And since the Judgment is only against the party who initiated the foreclosure against you it does not act as a bar to another party coming in claiming that they are the owner, or even the same party coming in and saying NOW they are the owner and they are suing on non-payment after the Judgement was entered. There are several defenses to such an action but I think we might see the banks test these theories out over the coming months.

Filed under: GARFIELD GWALTNEY KELLEY AND WHITE | Tagged: , , | 81 Comments »

Hearsay Practice Hints: Meeting Intimidation with Facts

Posted on October 17, 2013 by Neil Garfield

I went to a hearing yesterday on the Bank’s Motion for Summary Judgment. The Motion had the usual deficiencies and the affidavit was, as usual, worthless because the witness failed to state any basis for personal knowledge. The attachments to the motion were absent. The Bank avoided the allegation that it ever made a loan and avoided any allegations that there was financial injury and if so, to whom. The Foreclosure Mill was rotating coverage attorneys who knew little about the case. We quickly agreed to drop the motion for summary judgment and move forward to a status conference in 120 days, allowing time to explore modification and discovery.

The interesting thing is that the Bank’s attorney actually said to me that we should not conduct discovery because it would only add to the attorneys fees that the homeowner would owe. This rolled out of his mouth in a manner that indicated to me that it was a standard ruse to get the homeowner to give up rather than fight. Of course I didn’t take his suggestion seriously and I told him so. But I could see how pro se litigants and even inexperienced lawyers have their confidence undermined by that “suggestion.” The ruse is that the Bank is going to win anyway. The facts are that the Bank in that case has potentially insurmountable proof problems. And the tactic is also used because the foreclosure mills are paid a flat fee for all cases, usually $1200 or $1400 and the law firm therefore wants as little work as possible on each case.

Practice Hint: always check the State Statutes (or the Federal Rules) on evidence, especially here say and hearsay exceptions before you open your mouth or file any discovery. There are some juicy morsels in there. Like how you can use business records as an exception to hearsay and how the fundamental issue is the trustworthiness of the records. Simply stated, if the records are those of a non-party who has no interest in the outcome, then the Court should lean toward allowing the business records into evidence upon the proffer of an appropriate witness and compliance with other rules of procedure requiring notice to the opposing party. Those rules should be carefully reviewed and used against the Bank if they don’t comply. REMEMBER ANY INSTRUMENT IS PROBABLY HEARSAY BECAUSE IT ISN’T A WITNESS. the issue is whether the records qualify for an exception to the hearsay rule. If the records come from a party, then they are inherently suspect because they are self-serving even if they are true or could be true. The rules should be strictly applied and you should preserve the issue not only with motions in limine but also by objecting at trial should the issue come up again even after the Court has entered an order barring the introduction of the business records.

As far as I can tell the Banks make no attempt to comply with the law and rules regarding business records, as an exception to the basic rule that hearsay is not admissible in evidence. If you read and study the applicable laws of evidence, rules of civil procedure and hold their feet to the fire, you just might have punctured their case. Failure to comply with those laws and rules is fatal to the foreclosure case, even if they right. It is potentially fatal to the homeowner if there is a Failure to object to hearsay on the basis that the Bank failed to comply with the laws and rules governing introduction of business records.

Practice Hint: lawyers for the foreclosure mill really know very little about securitization. In fact, few foreclosure defense lawyers have mastered it, which is why my law firm is providing litigation support across the country. The proof of that is that when I ask lawyers to informally comply with our request of proving the money trail with cancelled checks, wire transfer receipts, wire transfer instructions, the lawyers say “no problem” only to later nervously evade the issue after they ask the Bank that is foreclosing.

The lawyers for the Banks honestly believe that the homeowner’s closing was largely in compliance with Federal and state laws. They don’t understand that the securitization was an illusion. They don’t understand why a closing agent would take money from a third party and apply it to the closing and then have the homeowner sign a note and mortgage in favor of a party who was not loaning any money at closing, directly or indirectly. They don’t understand that the original note is fatally defective in those circumstances and that the mortgage is a non-perfected encumbrance that is not enforceable. They don’t understand that recording the mortgage doesn’t correct deficiencies in the closing process.

As always, check with an attorney licensed in your jurisdiction before you apply anything contained in this article. And always remember that just because you are right it doesn’t automatically follow that you win. The Judge must also be convinced that you SHOULD win, which is why I counsel pro se litigants to get lawyers or at least legal advice. Remember that the devil is in the details.

Filed under: CORRUPTION, evidence, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer | Tagged: , , , , , , | 28 Comments »

Foreclosure Defense: Notes on Practice

Posted on October 14, 2013 by Neil Garfield

I went to a hearing a few days ago and discovered to my surprise a Judge, in a remote section of Florida, who was fully conversant in the rules of procedure, due process and the laws of evidence. It would be improper for me to name him as I am currently counsel of record in an active case before him. The first thing that caught my attention was that in a case before me the Judge reserved ruling on an uncontested motion for summary judgment, to give himself time to review the paperwork and make sure that the paperwork was all in order. That is old style court practice.

In the 1970’s through the 1990’s that is what judges did to make sure the lawyer for the Bank had done his job properly — and that was before routine questions relating to who made the loan, whether the loan was properly originated, whether the loan was properly sold, whether the balance due was properly stated and whether there was an actual creditor who was present in court — someone who fulfilled Florida laws on the description of a creditor who could submit on credit bid at the auction.

The Judge also mentioned that he had presided over three bench trials the day before, two of which he had given judgment to the borrower because the Plaintiff had been unable to make its case. This bespeaks an understanding, knowledge, acceptance and execution of the procedural requirement of establishing a prima facie case thus shifting the burden of proof to the Defendant. And contrary to current practice in many courts, this Judge does not view his role as rubber stamping Foreclosures.

This Judge wants to see the things we have been pointing out on this blog: that if you are the Plaintiff you must prove your case according to the rules. First you must have a witness that actually knows something instead of merely reading off of a computer or a computer report. You must establish a proper foundation rather than an illusion by merely giving the appearance of proffering testimony from an incompetent witness with no knowledge of their own whose employment description consists of testifying in court. And your chain of evidence must be complete before you can be recognized as having established a prima facie case.

In the case in which I appeared the Plaintiff had filed a foreclosure against two homeowners, husband and wife, who then pro se fended off the Plaintiff with materials mostly from this blog and from other sources. But they were at the point where being a lawyer counts, knowing the content and timing of objections, filing motions to strike, motions in limine, responding to 11 th hour motions for protective order etc.

In this case their exists a legitimate question over whether the loan was subject to securitization. Originated in 1996 the loan date goes to the beginning of the era of securitization and this one didn’t have MERS, which I argue is evidence per se of securitization because there is no reason for MERS if your intent is not securitization. But 2 days after the alleged closing the loan was transferred to a player in the world of securitization. Thus the first argument is that this was obviously a table funded loan. Hence the question of where the money came from at the alleged closing table.

Adding to the above, the notice letter to the borrowers of default, acceleration and the right to reinstate suggests that the then “holder” was, in their own words “either a Servicer or lender.” So the very first piece of evidence in the file raises the issue of securitization since the party who sent the notice was not the transferee mentioned above two days after the alleged closing.

Thus questions about the origination and transfers of the loan were appropriately asked in discovery. The Judge was on the fence. Could one slip of the pen open up a whole area of discovery even with the table funded loan allegation?

But in the halls of the foreclosure mills, they had decided to file standardized pretrial statements disclosing witnesses and exhibits. So they filed a motion for protective order as to the discovery, refusing to answer the Discovery, and filed a statement that identified the witness they would use at trial 19 days later as “a corporate representative.” That is no disclosure of a witness and is subject to a motion in limine to block the introduction of any witness. The witness disclosure also attached a list of possible witnesses —37 of them, which I argued is worse than no disclosure and the Judge agreed.

Then in their list of exhibits that they will present at trial they refer to powers of attorney, pooling and servicing agreement, investors, servicer’s, sub-servicers, and all the other parties and documents used in creating the illusion of securitization.

I argued that if they filed a pretrial statement referring to all the parts of securitization of a mortgage loan, then the issues surrounding that are properly the subject of inquiry in discovery and that the 11 th hour filing of a sweeping motion for protective order and failure to respond to any discovery was in bad faith entitling us to sanctions and granting our two motions in limine. The judge agreed but removed the problem by setting the trial for February, and setting forth a schedule of deadlines and hearings a few days after the deadlines so both sides could develop their cases. The ruling was in my opinion entirely proper, even if it denied the motions in limine since he was giving both sides more time to develop their cases.

The moment the hearing ended, opposing counsel approached and was asking about settlement. I countered with a demand that his client immediately show us the chain of actual money starting with origination. He said that wouldn’t be a problem because this was definitely not a securitized loan. I told him I actually knew the parties involved and that most probably this was amongst the first group of securitized loans. I also told him that he would most likely fail in getting the proof of payment at closing, and proof of payment in each of the alleged transfers of the loan.

We’ll see what happens next but I would guess that there will be a lot of wrestling over discovery and more motions in limine. But this time I have a Judge who no matter his personal views that are most likely very conservative, will dispassionately call balls and strikes the way a judge is supposed to do it.

Filed under: CDO, CORRUPTION, evidence, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, Servicer | Tagged: , , , , , , , , | 28 Comments »

Wells Fargo: Insured Mortgages Still Being Foreclosed After Death Benefit is Paid to Bank

Posted on October 9, 2013 by Neil Garfield

In my newly formed practice and thanks to the diligent work of my partners at GGKW, we have discovered something that is over the top even by current standards in the current mortgage mess, to wit: servicers, banks and other entities are receiving complete payoffs of the mortgage upon the death of the insured homeowner and then either (1) getting the heirs to sign a modification agreement as though the debt was still owed or (2) FORECLOSING. (OR BOTH).

This is not accident. The Banks are rolling the dice. Many of the mortgages were in foreclosure or had been declared in default before the payment came in. Others were completely current. But the common factor is that the heirs did not know the policy existed because it was done at closing of the loan. The heirs either didn’t know or forgot if they were told. Either way the Bank received payment directly or through one of the many agents in the securitization chain and continued to collect the money as though it was due. And the affidavit or testimony of the bank representative does not disclose the payment even though it was received, cashed and posted — and that goes a long way toward showing that the corporate representative is neither corporate, a representative or with any knowledge.

This phenomenon is entirely different than the mortgage bond insurance that was also paid to the bank or one of its many agents in the securitization chain.

Why is this happening? Because the banks have elected not to make it a data input factor at LPS whose roulette wheel decides who to foreclose, when, how, and by whom regardless of the facts of the case. Nobody seems to know just how many homes were foreclosed on mortgages that were paid once by accidental death coverage or other PMI, and paid several times over by mortgage bond insurance and credit default swaps.

The bottom line is that if one of the alleged mortgagors (homeowners) has died, check thoroughly to see if an insurance policy may have been in force and if it is already paid off. It is obvious that the banks would rather pay the damages and sanctions when they caught than change their practices. The reason is that only 5% of foreclosures are contested. If they win most of those, which they have been doing, the benefits of taking multiple payments on the same mortgage are far outweighed by the occasional sanction or damage award.

Until Judges start assuming that they should be vigilant and instead of expedient, the tide will turn.

Paid by Insurance, Wells Fargo continues collection and foreclosure. Damages $3 Million awarded

 

Filed under: CDO, CORRUPTION, Eviction, evidence, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer | Tagged: , , , , , , | 18 Comments »

Corroboration of Basic Thread of Livinglies Blog: Banks are Claiming Assets That Really Belong to Investors

Posted on October 9, 2013 by Neil Garfield

Corroboration of Basic Thread of Livinglies Blog: Banks are Claiming Assets That Really Belong to Investors

From complexity to simplicity: the banks diverted title to the loans from the investors to their puppets — bankruptcy remote vehicles whose sole purpose was to act as though they were lenders or acquirers or aggregators of the loans. If the loans were properly securitized, the investors or the REMIC trust would show up in property records and there really wouldn’t be any question about who owned the loans.

Similarly the banks controlled the issuance of the mortgage bonds. The investors advanced money to buy the bonds and the banks issued the bonds in “street name” which is to say that the banks issued the bonds in the name of the bank and then reported to the investor that the investor had successfully purchased the bond and issued monthly statements to that effect.

There is no dispute that the bonds are owned by the investors. But the banks diverted the money into their own pockets, failed to fund the REMIC trusts, insured the bonds with the banks declared as payee.

The Banks were also the payee on credit default swaps betting against the bonds. And the Banks were the seller and received the proceeds from sales of the bonds to the Federal Reserve — with nearly all of the so-called delinquent loans now owned by the Federal Reserve except for one thing — the Federal Reserve bought the bonds from the banks instead of paying the investors. So the balance sheets of the banks showing ownership of the bonds are wrong. They don’t own the bonds, which means they don’t have the required capital reported to regulators.

So the entire picture is wrong and this fact cannot have escaped regulators, law enforcement, the Federal Reserve. And the fact that it corrupts the legal effect of the notes and mortgages that were signed by homeowners in favor of bankruptcy remote vehicles or other third party intermediaries instead of the investors is just now being brought to the attention of the Courts by investors and homeowners as lawyers get more sophisticated and knowledgeable about securitization of debt.

Judges are getting exasperated by the stonewalling and scorched earth tactics of the allegedly “consumer friendly banks.” And questions are arising in Courts across the country as to whether the banks are throwing their own lawyers under the bus with the intention of disclaiming the positions and tactics employed by bank foreclosure lawyers.

And THAT is why Judge young in Massachusetts required counsel to produce an original signed resolution signed by the president and Majority of board members of Wells Fargo Bank.

Now the investors are challenging the so-called settlements by the banks where the ownership of the loans was presumed but not correct in fact. They are attacking the settlements with the intention of reclaiming the proceeds of settlements and reclaiming ownership of the bonds.

All of this means that the Banks who are filing suit for foreclosure or starting non judicial foreclosure actions (first assigning themselves as trustees) don’t have a dog in the race but they are getting the benefits of the Foreclosures and tossing the real losses over the fence at the investors by assigning non conforming loans in non conforming ways (directly violating the sole basis for assigning loans to REMIC trusts in the PSA).

With the investors claiming recovery from the banks for the money they received from investors, insurers, and other co-obligors on the bonds the primary question asked by this Blog is finally becoming front and center, the main issue in Courts who are hearing higher level issues: what is the real balance of the bond receivable in view of the money taken in by the banks as agents for the investor sand the investor vehicles (REMIC trusts).

Take a look at the profits reported by the banks which are out of this world and compare it with the losses being reported by the bond investors. Properly allocated, the receipts exceed the liability of the REMIC trusts that issued the bonds, which is to say the liability of the banks since the REMICs were their creatures and they failed to use the money as instructed.

And if the lenders have indeed established that the settlement proceeds and other payment proceeds from the banks should be allocated to investor losses then the balance due to the investors as lenders is reduced. As a consequence, the account receivable is posted as reduced by payment. The payments were under a strict waiver of subrogation or any right of contribution from the borrowers (homeowners).

Thus the account payable from the homeowner is correspondingly reduced, probably back down to levels that mark down the note payable to levels equivalent to the real value of the collateral or less instead of the inflated value pushed onto the homeowner in an inflated loan deal.

JPM | Tue, Oct 8

Mortgage investors urge Holder not to settle with JPM • In a letter to the Attorney General, the Association of Mortgage Investors ask him to consider the impacts any of legal settlements with banks over mortgages. Though not naming JPMorgan (JPM) by name, the group is clearly concerned with the rumored $11B settlement being talked about with the bank – only $7B of which would be in cash, and $4B in consumer relieft. • Last year’s $25B settlement over “robo-signing” allowed banks to get credit for settling abuses by writing down loans – yet those loans are often held by third-party investors. There was also this year’s $9.3B settlement which was similarly structured. “Parties sued by the government or third-parties should not be able to settle with assets that they do not own, namely other people’s money,” says the group’s Chris Katopis.

Full Story: http://seekingalpha.com/currents/post/1318722?source=ipadportfolioapp

PRACTICE NOTE: I was startled when counsel for a bank revealed his complete ignorance of securitization in a recent oral argument at the trial level. The attorney was “explaining” to the court that my argument was absurd. What difference, he asked, does it make how much the investors paid when they bought the stock of the originators? Yes that would be absurd. I was forced to use up my time for argument on clearing that up — that the investors are the people who bought mortgage bonds and whose money was used to fund mortgages. The Judge understood that. The lawyer didn’t know what I was talking about. Hopefully we don’t have too many judges who are that confused about securitization or claims of securitization. But it does show that you should assume nothing and make sure you define your terms in short phrases like the buyers of mortgage bonds were the lenders and they are referred to in the industry as “the investor.”

Filed under: CORRUPTION, evidence, expert witness, Fannie MAe, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer | Tagged: , , | 10 Comments »

Gretchen Morgenson: Tide Turning as Judges Get Irritated by Bank and Lawyer Behavior

Posted on October 7, 2013 by Neil Garfield

“Two recent rulings — one in New York involving Bank of America and one in Massachusetts involving Wells Fargo — serve as examples. In the Wells Fargo case, a ruling on Sept. 17 by Judge William G. Young of Federal District Court was especially stinging. In it, he required Wells Fargo to provide him with a corporate resolution signed by its president and a majority of its board stating that they stand behind the conduct of the bank’s lawyers in the case.”

Editor’s Comment: As I am litigating directly now I see evidence of the same trends discussed in the New York Times article. I adopted a different stance than most foreclosure defense attorneys whose strategies are not less valid than my own. They just don’t suit me. I am accustomed to being the aggressor. So I enter a cases in which the bank has been delaying prosecution of the foreclosure case and step up the pace. The Judges here in Tallahassee and elsewhere are taking note — that the banks are curiously opposing our attempts to move the case along. The resulting shift in perception is palpable. Judges are looking at the files and realizing that it is not because of borrowers who frankly did nothing in the file, but because of the banks who never prosecuted the case.

We ask for expedited discovery and a trial order. The bank attorneys inevitably back pedal and state they cannot agree to expediting the case — which has led the Judges to muse aloud about who is the Plaintiff and who is the defendant.

You would think that the bank would be anxious to produce its witnesses and exhibits for discovery. They are not. In one case the bank has been thwarting the deposition of the person who verified the complaint for over three months.  We only asked for the documents upon which the witness relied when she verified the complaint — something that obviously had to exist before they could file the complaint. So far, no witness nor documents.

When I was representing banks in foreclosures, if someone raised any kind of defense or objection I went out of my way to produce the records custodian,and all the records and proof of the receipt of the money including canceled checks and the bookkeeping records of the banks so there would be no mistake about the existence of the default. I would carefully confirm the figures and history of the borrower before I sent the notice of default, acceleration and right to reinstate because all my figures had to be correct — or else the notice was defective and I would have had to start all over again (something I learned the hard way).

Judges are sensing a disconnect between the banks and their alleged lawyers, and they are right to question that. The assignment usually comes from LPS and the Plaintiff bank usually has no direct knowledge of the action because LPS fabricates most of the documents. That is why Judge Young said that if you want to proceed, I want to see a resolution of the Board of Directors of Wells Fargo bank that they ratify and accept the actions taken by the the attorneys supposedly representing them.

You can almost feel the vibrations of a ship groaning as it makes a turn. The banks are in for a rude awakening.

Fair Game

Why Judges Are Scowling at Banks

By GRETCHEN MORGENSON

District court judges are not generally known as flamethrowers, but some seem to be losing patience with banks in cases involving lending practices.

Filed under: CDO, CORRUPTION, evidence, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES | Tagged: , , , , | 46 Comments »

PONZI SCHEMES: Liability Of Lawyers and Accountants to be Considered

Posted on October 7, 2013 by Neil Garfield

“Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi, (March 3, 1882 – January 18, 1949), commonly known as Charles Ponzi, was an Italian businessman and con artist in the U.S. and Canada. His aliases include Charles Ponci, Carlo and Charles P. Bianchi.[1] Born in Italy, he became known in the early 1920s as a swindler in North America for his money making scheme. Charles Ponzi promised clients a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage.[2][3] In reality, Ponzi was paying early investors using the investments of later investors. This type of scheme is now known as a “Ponzi scheme“. His scheme ran for over a year before it collapsed, costing his “investors” $20 million.” — see Wikipedia.

Editor’s Comments: The Supreme Court is going to hear a case involving a Ponzi Scheme that once upon a time was considered huge, until it was dwarfed by Madoff, which in turn was dwarfed by the Wall Street firms. The interesting thing about the original Ponzi Scheme is that it involved the promotion of false derivatives, which is exactly what happened in the mortgage meltdown.

Ponzi’s scheme was based upon the false premise that certain certificates could be purchased at one price in one place and sold at a higher price in another place because markets vary from one place to another. Had he actually believed the false premise he would have invested according to plan.

But there is no question from anyone about the fact that the plan was unworkable and Ponzi knew it. So he never invested the money and simply relied upon continuing sales of his “securities” in a private investment scheme to fund the illusion of payments as promised; as sales progressed he was able to pay investors their expected return in order to encourage additional sales and word of mouth success. When investors stopped buying the scheme quickly collapsed. Look back on the mortgage bond market. When investors stopped buying, the entire system collapsed.

Ponzi’s derivatives were fake. They were not derivatives because he never invested in the plan. He just kept the money and managed it until the scheme collapsed. The Mortgage Bond market was virtually identical to Ponzi except that it was more complex in terms of the number of moving parts. The mortgage bonds and credit default swaps were not derivative products either because the bonds never derived their value from actual mortgage loans. The “derivatives” that were allegedly exempt from securities regulation, the insurance products that were allegedly exempt from insurance regulation, were in fact not derivatives in most cases. The REMIC tranche that issued the bonds was a creature of the investment banks and the money advanced by investors never made it to the trust.

Like Ponzi the investment banks pocketed the money and then funded only what they needed to fund to give investors the false impression that their money was being invested in the manner required by the enabling documents — the Pooling and Servicing Agreement, Prospectus and the use of an Assignment and Assumption agreement that was used to cover the movement of money. Everything they did was designed to encourage the sales of additional bogus bonds. Profits were made primarily by the cloud of players created by the Wall Street banks, while the losses from the inherent false premise of the “investment” plan fell to investors and borrowers in “loans” that were virtual gifts to cover up the theft of principal by the banks.

Now the question before the Supreme Court is not whether the principals are liable to victims of the fake investment scheme, but whether the professionals and affiliates are liable for their negligence or fraud in helping the Ponzi scheme to progress. To put it in lay terms, the question before the court is whether an accountant or lawyer for the Ponzi scheme can be liable if they negligently or knowingly assisted in the Ponzi scheme.

The very question testifies to the state of our tolerance for misbehavior and why our current foreclosure mess has failed to yield criminal prosecutions on mass fraud. Iceland put their bankers in jail and now enjoys a growing economy and a stable banking environment. In the United States there has been nothing. The FBI has stated that 80% of mortgage fraud is committed by the banks. Yet prosecutions have only been on the other 20%.

So the question is whether a lawyer or accountant negligently or knowingly assisted in defrauding the public should be liable for their actions. To put it more simply, will that lawyer or accountant be liable for actions that we know were wrong and caused and contributed to extensive damage, and without which the scheme could not have operated. The answer seems obvious — except when you consider our awe of large schemes. The larger the scheme, the less likely is the prosecution. This in turn has resulted in the incentive for Ponzi operators to become as large as possible. In turn that means the incentive to escape prosecution requires that the scheme have massive scope and injuries.

If the Supreme Court hands down a decision favorable to investors, it will likely be that the liability extends only to private investment schemes that are not fully registered with the SEC. And if that happens then investors will be able to prove the Ponzi scheme and prove the accountants and lawyers were criminally and civilly liable.

This has everything to do with the mortgages and foreclosures. If the loans were window dressing on a Ponzi scheme instead of real loans by the originators and underwritten in accordance with industry standards, then the securities (mortgage bonds) issued from Wall Street were not derivatives. The impact travels all the way down to the closing table at which the closing agent applied money from investors held by investment banks to fund loans that were doomed to failure not only because of economic factors but also because the control over whether the loans would fail lay with the investment banks — not with the borrower, the lender investor, or anyone else.

If the loans were faked — in terms of NOT being funded in accordance with the indentures on the bonds — then clarity opens up in the mortgage mess, to wit: the loans were made from the pocket of investment banks and not the REMIC trusts. They were using investor money as their own, which is why the banks received insurance proceeds and proceeds of credit default swaps, and the proceeds of sale of the bogus mortgage bonds to the Federal Reserve.

The damage to investors occurred as a result of alleged loans. But the loans were in essence payment to or on behalf of people who believed they were borrowers when in fact they were being used in the Ponzi scheme — and had been exposed to risks that they knew nothing about because despite Federal and State law to the contrary, disclosure was withheld about the identity of the parties to the “loan” transaction, the fees paid to numerous parties, and the nature of the roles of the players that created the appearance of a loan transaction and a false chain of securitization.

The investors money was used to fund the alleged loans and fees but the documentation gave the loan to the Wall Street banks — a practice prohibited by the Truth in lending Act and the deceptive lending practices acts in many states. The point here is that the documentation — the note and mortgage — were executed in favor of a party who was a non-lendor nominee of a non-lender nominee of the investor lenders. And that is why it is nearly impossible to get a valid satisfaction of mortgage on payoff or on short-sale. The “satisfaction” is directed at a recorded instrument that is a lie, which means that the mortgage was not satisfied because it was never a perfected lien in the first place. The money currently being paid on the payoff is going to parties who were strangers to the mortgage transaction.

Thus the decision by the Supreme Court in the Stanford Case could and should have impact on the auditors and attorneys and other professionals that currently enjoy a weird sort of immunity despite their obvious wrongdoing in deceiving the public and enabling the fraud. A proper audit would have revealed that bonds on the balance sheet of the banks were in fact owned by investors and were worthless creating a potential liability that should have been reported. A proper review by the ratings agency would have identified the proposed plan as nonconforming when in fact they granted a triple A rating. These “third parties” were paid to violate the standards of their profession and they knew it. Whistle blowing memos went unheeded in all  such organizations.

The ability of investors to prove the existence of a Ponzi scheme would have huge consequences on the foreclosure procedures. The focus would properly shift from “deadbeat” borrowers to felonious tricksters. A proper ruling in the Stanford case would thus open up the possibility for direct communication between investors and borrowers, enabling settlements that would enable investors to mitigate their damages on a large scale with the help of borrowers who are still willing to sign “modifications” that would result in the recording of actual perfected mortgage encumbrances eliminating nearly all of the foreclosure docket.

Stanford Ponzi Scheme Goes to Supreme Court

Deadline Approaching, U.S. Is Weighing More Charges in Madoff …

  1. dealbook.nytimes.com/…7/…for-some-close-to-madoff
    Among those still under scrutiny in connection with the Ponzi scheme are Shana Madoff Swanson, Mr. Madoff’s niece, and Paul J. Konigsberg, an accountant.

Filed under: CDO, CORRUPTION, Eviction, evidence, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Pleading, securities fraud, Servicer, STATUTES, trustee | Tagged: , , , | 11 Comments »

How Does Insurance Payee Match Up with Claims of Ownership of the Loan?

Posted on October 3, 2013 by Neil Garfield

There have been many admissions by government officials and even parties to the litigation over mortgage Foreclosures to the effect that at this point the ownership of most loans is in doubt. Even President Obama said it, reflecting the views and advice of the senior advisors at the White House. On appeal, recently in California, BOTH sides admitted they had no way of identifying the true creditor — and that is why we have all this litigation, why we have gridlock on modifications and settlements. So what do we do?

One insurance expert I interviewed suggested that his industry might solve the problem, but I think his points raise more questions than answers. Nonetheless, to prove the question, and overcome certain presumptions that are legally applied, examining the insurance policies and the changes that occur in forced placed insurance might reveal the issues and even illuminate the potential solution.

Bank of America is an example of a bank that rushes to take any excuse to place insurance from their own carrier BalBOA, naming BOA as the loss payee on liability policies. The usual previous loss payee was someone else — perhaps the originator or some alleged assignee. The procedure of forced placed insurance creates both additional income to the bank and skips over the question of who owns the loan. When the insurance is reinstated or shown to have never lapsed in the the first place, it often names BOA thus lending support to the bank’s position that it is the owner of the loan.

Looking at the title insurance, who is the loss payee? Besides the owner’s policy there is a rider for the mortgagee named in the mortgage. Of course that party may not be a mortgagee when the mortgage is examined carefully. But changes in loss payees under title insurance usually requires notice and consent of the owner of the property.

Thus the question could be asked in Discovery about who was responsible for tracking title insurance, liability insurance and PMI, why does the policy name a loss payee other than the bank claiming ownership and what efforts were made by the bank to correct the identity of the creditor?

The same thing applies to PMI. If the payee is somebody different than the Forecloser you will notice that none of the banks allege that this is a breach of the mortgage contract. Why not? I think it is because the insurer would demand more proof than what is offered in court as to ownership and that the bank would not be able to satisfy the insurer that it had an insurable interest in the property.

Filed under: CORRUPTION, evidence, expert witness, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Pleading, securities fraud, Servicer, trustee | Tagged: , , , , , , , | 26 Comments »

Reuters: Credit Unions Fail As a Result of Buying Mortgage Bonds

Posted on October 2, 2013 by Neil Garfield

As regulators conclude their long investigation into the cloud of companies and the maze of paths of paperwork and money the real victims are being revealed. We know Pension funds got hit hard and are now underfunded strictly as a result of buying worthless mortgage bonds from investment bankers who promised them protection and transparency but instead proved to be the predator. Now regulators are suing Morgan Stanley for defrauding two credit unions that failed as a result of taking a loss on those bonds — a loss that was a gain to the investment banker.

But they still don’t have it exactly right. The regulators are now freely describing mortgages that were “faulty”, “defective”‘ or “non-conforming”. They are describing bonds whose indentures were violated. Yet the government still stands on the sidelines when we look at the damage caused to millions of homeowners who have been forced from their homes and lost everything. The guise is “personal responsibility” — meaning that homeowners are to blame for what happened to them. Meanwhile the question of ownership of who owns the loan and the balance of the loan are being circumvented through destructive litigation, led by judges who are ill-informed mostly because lawyers have failed to learn securitization of debt.

Thus the government has failed to lead the way to stopping Foreclosures. It is still a basic axiom in the offices of regulators, the courtrooms of the judiciary and in mainstream media that individual borrowers are the people who must take responsibility and pay for the fraud. They should have known better. They should have read the documents. But this “logic” flies in the face that two branches of government have already recognized is that the one party who is at a disadvantage in a mortgage loan transaction and credit generally is the borrower — not the lender.

This issue was officially decided by the Federal Government in The Federal Truth in Lending Act was enacted for just that purpose and reason. The Federal Real Estate Settlement Procedures Act was enacted for just that purpose. And the many states that have enacted deceptive lending statutes that freely borrow from TILA and RESPA. Lawyers need to include this in their pleadings, memorandums and oral arguments to start where we should start — at the beginning. If those mortgages are being settled with the creditors who loaned the money because the loans were defective, and they are being settled with shared risk of loss, then why should our attitude toward borrowers be any different as to the same defective mortgages?

A good starting point would be to find the list of defective mortgages to see if your mortgage is in the
list of mortgages claimed to have been securitized, where the mortgages were described as defective, and where the mortgage bonds were described as fraudulent. Fraudulent appraisals are being ignored in the courtroom despite the clear provisions TILA that makes the appraisal and the viability of the loan the responsibility of the lender. Foreclosure defense attorneys are missing an important part of their argument when they fail to start with the responsibilities of the lender, the reasons why those standards were not applied, and the fact that the real lenders in millions of table-funded (predatory per se– I.e. Presumptively predatory) were being defrauded in two ways — non-conforming defective loans and mortgage bonds.

Of course the agencies could make thing easy by forcing publication of a list of REMIC trusts that have been subject to settlements relating to fraudulent and deceptive lending, and fraudulent and deceptive sale of mortgage bonds. But the truth is that the false axioms of the cloud of companies acting under cover of false claims of securitization are settling in the minds of judges, lawyers and regulators that somehow tens of millions of mostly unsophisticated people conspired to defraud the system. How likely is that? Or is it more likely that mortgage companies were pushing, coercing, lying, and deceiving the borrowers — just as the the lawsuits against the investment banks state? And just as they have done in the past?

Those lawsuits frequently allege that the underlying mortgages were non-compliant and unenforceable. If the investment bankers and investors, insurers and government agencies can agree that those mortgages were not enforceable, why is it that lawyers have not brought that message with them into the courtroom? And when they do, why are judges ignoring the argument. It has already been decided at the highest levels of government that the homeowner is hopelessly outgunned at closing. Why assume anything different? When those laws were passed , the number of loan options was 4 or 5. During this period of mortgage madness and meltdown, the number of mortgage products climbed to over 400 options. Borrowers didn’t do that. It was the mortgage originator who had no risk of loss because the money of the investor was what ended up on the table at closing.

Morgan Stanley
http://www.reuters.com/article/2013/09/24/us-morganstanley-creditunion-lawsuit-idUSBRE98N02E20130924

Filed under: CDO, community banks, CORRUPTION, evidence, Fannie MAe, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer | Tagged: , , , , , | 13 Comments »

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