The Solution to Defective Securitization of Mortgage Debt: The Bare Legal Truth About Securitization of Mortgage Debt

The basic truth is that current law cannot accommodate securitization of mortgage debt as it has been practiced. In short, what they (the investment banks) did was illegal. It could be reformed. But until the required legal steps are taken that address all stakeholders virtually all foreclosures ever conducted were at best problematic and at worst the product of a fraudulent scheme employing illegal tactics, false documents and false arguments of law and fact.

Without specifically saying so the courts have treated the situation as though the correction has already occurred. It hasn’t.

It is through no fault of the borrower that the investors put up money without acquiring the debt. That doesn’t mean they were not the ones who paid value for the debt. Therefore the only conceivable party, in equity, who should be able to enforce the mortgage is the investors but they cannot because they contractually barred from doing so. 

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Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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I think it is worth noting that securitization of loans was never completed in most scenarios. Value was paid by the Investors who, contrary to popular belief, never received ownership of the debt, note or mortgage.
  1. Cash flow was promised by the investment banker doing business as an alleged Trust, but the investors who were the recipients of that promise had no recourse to the mortgages (or the notes and underlying debts) and hence no recourse to enforce them.
  2. The alleged Trust never acquired the debt. Neither the trust nor any trustor or settlor ever entered into a transaction in which value was paid for the debt as required under Article 9 § 203 of the Uniform Commercial Code. It should be emphasized the this is not a guideline. It is statutory law in all U.S. jurisdictions. People get confused by court rulings in which ownership of the debt was presumed. Those decisions are not running contrary to Article 9 § 203 of the Uniform Commercial Code. To the contrary, those decisions seek to conform to that statutory requirement and the common law Doctrine that any reported transfer of the mortgage without transfer of ownership of the debt is a legal nullity. In short they avoid the issue by presuming compliance — contrary to the actual facts. 
  3. Under Article 3 of The Uniform Commercial Code it is possible that the trust acquired the note but under Article 9 of the Uniform Commercial Code the trust could not have acquired the mortgage, unless the transferor had sold the debt to the trust or the transferor was a party to the trust and had paid value for the debt. This is black-letter law.
  4. Endorsement of the note is of questionable legality since the endorser did not own the debt. In addition, the endorser had no legal right to claim a representative capacity for the investors who had paid value for the promise of the Investment Bank  (ie, they did not pay value for the debt). 
  5. I think that the only way an endorsement could be valid is if the endorser owned the debt or has legal authority to represent the owners of the debt who had paid value for the debt. I don’t believe that such a party exists.
  6. The only party who had barely legal title to the debt, the investment banker, had sold all or part of the cash flow from the mortgage loans for amounts in excess of the amount due on the debts. The remaining attributes of the debt or indirectly sold by financial instruments whose value was derived from the value of the derivative certificates issued in the name of the trust.
  7. There is no one party who has legal ownership of the debt and who has paid value for it. The brokerage of the note was merely a process of laundering title and rights to the debt to create the illusion that someone had both. The actual owner of the debt is a collection of legal entities that are not in privity with each other. That Gap was intentional and that is what enabled the Investment Bank to effectively sell the same loan an average of 12 times — for its own benefit.
  8. A Court of equity needs to allocate those sales proceeds. The implied contract with borrowers required disclosure of all compensation arising from the loan transaction. The implied contract with investors was the same. Both would have bargained for a piece of the pie that was generated by the investment bank. Neither one could do that because the large accrual of  heretofore impossible profits and compensation was both unknown and actively concealed from any reporting by investment banks.
  9. It is through no fault of the borrower that the investors put up money without acquiring the debt.
  10. The only way to bridge this problem is by somebody pleading Reformation or some other Equitable remedy in which the liability on the note or the liability on the debt is canceled.
    1. Anything less than that leaves the borrower with an additional prospective liability on either the debt or the note.
    2. But for the court to consider such a remedy in a court of equity it must restructure the relationship between the Investors and either the debt or the note and mortgage.
    3. And in turn it must then restructure the relationship between the party claiming a representative capacity to enforce the mortgage and the investors.
    4. In short, the investors must be declared to be the owner of the debt and the owner of the mortgage who has paid value for the debt.
    5. Only after a court order is entered to that effect may the investors then enforce the mortgage.
    6. The only way the Investors could enforce the mortgage would be if they were each named as the claimant and the investor(s) were receiving the proceeds of foreclosure sale to reduce or eliminate the debt.
    7. They could act through a collective entity, such as a trustee under a trust agreement in which the trustee was directly representing the investors. In that event the named trust in the Foreclosure action could be ratified and come into full legal existence as the legal claimant.
    8. Until then virtually all foreclosures naming a trust as claimant or naming “certificate holders” as unnamed claimants are fatally defective requiring dismissal with prejudice.
  11. However, this restructuring could interfere with the other derivative products sold on the basis of the performance of the certificates. The proceeds of such sales went to the Investment Bank and Affiliates who assisted in the selling of the additional derivative products.
  12. I repeat that none of this was caused by borrowers or investors or even known to be in existence.
  13. And the problem would not exist but for the persistence of the investment banks in maximizing Revenue at the expense and detriment of both investors and Borrowers.
  14. The problem with my solution is that much of the revenue collected by the investment Banks would accrue to the benefit of the investors.
  15. So the court would need to claw back a substantial amount of the revenue collected by the Investment Bank in each securitization scheme and then allocate the proceeds as to principal and interest on the underlying debt. Hence principal balances on the debt and the accrual of interest could be affected by the restructuring.

Ocwen Stock Is Riskier Than Investors Know

the truth is there for anyone who wants to see it, which means that the entire prospect for Ocwen is that of an actor with only one foot on the edge of a cliff.

This article represents the analysis and opinion of the writer. Take no action with consulting a legal and financial adviser. 

The common stock of Ocwen Loan Servicing is traded actively. The company is backed by the largest banks in the world and its reported income is generally rising. BUT Ocwen has also been positioned by its backers (Goldman, BofA, Citi, etc.) to be thrown under the bus if the going gets rough.

The stock is currently valued based upon the presumption of economic viability because all the mortgages claimed to be servicing are generating revenue and Ocwen is receiving revenue and making a profit.

But another scenario is emerging from the shadows even if it appears unlikely. The number and percentage of homeowner successes in foreclosure is increasing. Those successes are all based upon one single fact, whether explicitly stated in court findings or not — that the named creditor on whose behalf Ocwen says it is collecting was not the owner of the debt. Hence Ocwen’s claims, notices, and testimony are not based upon its relationship with such named creditors or claimants.

If it is further revealed that Ocwen was in fact acting at the behest of an investment bank rather than a trustee of a named REMIC trust, the result could be catastrophic for both Ocwen and the investment bank. That scenario occurs if the investment bank was giving instructions on loan administration and foreclosure while it had no financial interest in the underlying debt.

That would mean that Ocwen never had any nexus to the debt owner. And that in turn would mean that Ocwen, in many and perhaps most cases, does not have any right to administer or service the loan “portfolio” it claims to be managing. And it would mean that all “modification” applications were improperly directed and processed. It could also mean that Ocwen is being paid to pretend it possesses such rights.

Ocwen could be the target of even more lawsuits alleging fraud and other intentional torts. On a more granular level the absence of any agency relationship with an identified creditor who owned the debt by reason of having paid for it would disqualify an Ocwen representative from testifying as the robowitness and would fail the exception test to hearsay objections as to their records, since they would not be records of either the named claimant nor of the actual owner of the debt.

If the facts are revealed and finally accepted by American courts, most foreclosures would grind to a halt. American law requires that paper title and actual payment of value for the debt must be combined into one party before any foreclosure action is filed. Under the weird securitization scheme adopted by the major investment banks no such party exists. The whole point of what they were doing was to sell parts of the debt for amounts vastly exceeding the market value of the actual debt.

By using Ocwen as the front for enforcing foreclosure actions, Ocwen is primed to be the one thrown under the bus wherein the inevitable finger pointing from investment banks will be directed at Ocwen and other servicing entities like it. Acting without authority and knowingly contributing to windfall illicit gains from foreclosures also places Ocwen at risk for actions by Attorneys General of all 50 states and several regulatory authorities.

The combined administrative and legal risks vastly exceeds the market valuation of the entire company. If and when these facts are finally accepted in the courts, Ocwen would be forced into bankruptcy and would most likely file under Chapter 7 or Chapter 11 as a liquidation in bankruptcy. Either way, the outlook for  the valuation of Ocwen shares would be bleak at best.

If somehow the investment banks are either able to maintain the ruse or continue the current governmental attitude of wink and nod, none of those scenarios are applicable. But the truth is there for anyone who wants to see it, which means that the entire prospect for Ocwen is that of an actor with only one foot on the edge of a cliff.

Rescission and Burden of Proof

There are winners and losers in every courtroom. When dealing with TILA Rescission under 15 USC §1635 you must go the extra mile in not merely showing the court why you should win, but also revealing that the opposition is not actually losing anything. The same logic applies to every foreclosure where securitization is either obvious or lurking in the background.

The bottom line is that no payment of value has ever been paid or retained as a financial interest in the debt by the named claimant nor anyone in privity with the named claimant. Once you can show the court the possibility or probability that the foreclosure is simply a ruse to generate revenue then it is easier for the court to side with you. Once you show the court that your opposition refuses to disclose simple basic questions about ownership of the debt then you have the upper hand. Use it or lose it.

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GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

Another analysis just completed for a client: The situation is that the homeowner sent a notice of rescission under the TILA REscission Statute 15 U.S.C. §1635 within days of having “consummated” the loan agreement. By statute that notice of rescission canceled the loan agreement and substituted in place of the loan agreement a statutory scheme for repayment of the debt which is NOT void. The notice of rescission only voids the written note and mortgage, it does not void the debt. The free house argument is pure myth.

The client goes on to ask how we can prove when the transactions occurred and who were the parties to those transactions and when they occurred. The answer is that you will never prove that. But you can raise an inference that the claimant is not the owner of the debt who has paid and retains value in the debt such that a successful foreclosure will not be used for restitution of an unpaid debt.

By undermining the presumptions arising from possession of facially valid and recorded documents you eliminate the ability of your opposition to use legal presumptions and thus require them to prove their case without those presumptions. The simple truth is that generally speaking they can never prove a case without legal presumptions. Once the presumptions are gone there is no case.

Here is my response:

It sounds like you are on solid ground. But as you probably know trial judges and even appellate judges and justices bend over backwards to either ignore or rule against the notice of rescission and its effect. For a long time, the bench has rebelled against the Truth in Lending Act generally. They rebelled against TILA rescission viscerally. Despite the unanimous SCOTUS decision in Jesinoski both the trial and lower appellate courts are unanimous in opposition to following the dictates of the statute and following the rule of law enunciated by SCOTUS.

You must be extremely aggressive and confrontative in standing your ground.
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As for the “free house”  argument the answer is simple. There is no free house. unless you are seeking to quiet title, which I think is an unproductive strategy if you not on solid ground with TILA Rescission. You are only seeking to eliminate the current people from attempting to enforce the mortgage, collect on the note or enforce the note. The last point might be your weakest point (without rescission). Enforcement of the note under Article 3 of The Uniform Commercial Code is much more liberal the enforcement of the security instrument under Article 9.
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It is actually possible that they could get a judgement on the note for monetary damages but not a judgment on the mortgage (without rescission in play). They can only get a judgment on the mortgage if the claimant has paid value for the debt. of course all of this should be irrelevant in view of the rescission which completely nullifies the note and mortgage.
Education of the court is extremely important. There is no free house in rescission. The obligation to repay remains the same. That obligation is not secured by the mortgage which has been rendered void nor is it payable pursuant to the terms of the promissory note which was also rendered void by the rescission. the obligation under contract (loan agreement)is simply replaced buy a statutory obligation to repay the debt.
They had ample opportunity to comply with the statute and get repaid. They didn’t. That is no fault of the homeowner.
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If they want repayment of the debt they might be able to still get it. If they produce a claimant who has paid value for the debt and had no notice of the rescission and who regarded your current claimants as unlawful intervenors, the same as you, then it is possible but the court might allow the actual owner of the debt to comply with the statute and seek repayment of the debt.
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At least that is what you will argue. You probably know that no such person exists. The ownership of the debt has been split from the party who paid value for it. So they probably don’t have anyone who qualifies.
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As for your last question about discovering the actual dates on which the debt was purchased pursuant to Article 9 § 203 of the Uniform Commercial Code, as a condition precedent to enforcement of the security instrument (mortgage or deed of trust), the answer is that neither the debt nor the note were ever purchased for value. The whole point is that they’re saying that these transactions occurred when in fact they did not.
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The only transaction that actually took place in which money exchanged hands is the one in which the certificates were sold to the investors. It might be successfully argued that the Investment Bank had paid the value for the debt so that is another possibility. If that argument succeeds then for a brief moment in time the Investment Bank was both the owner of the debt and the party who had paid value for it. But then it subsequently sold all attributes of the debt to the investors. the investors did not acquire any right title or interest directly in the subject debt, note or mortgage the only correct legal analysis would be that the Investment Bank retained bare naked title to the debt but had divested itself of any Financial interest in the debt. That divestiture generally occurred within 30 days from the date of funding the origination or acquisition of the loan.

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So if you are looking for the dates of transactions in which money exchanged hands in exchange for ownership of the note you are not going to find them. but strategically you want to engage in exactly that investigation as you have indicated. there’s no need to hire a private investigator who will never have access to the money Trail starting with the investors in the Investment Bank. So your investigation would be limited to aggressive discovery. Your goal in discovery is to reveal the fact that they refuse to answer basic questions about the identity of the party who currently owns the debt by reason of having paid for it as required by article 9 section 203 of the Uniform Commercial Code as adopted by state statute.

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This requires properly worded Discovery demands and aggressive efforts to compel Discovery, followed by motions for sanctions and probably a motion in limine.
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Since you have a notice of rescission within the 3-year time period, what you are actually revealing is that your opposition has no legal standing. Their claims to have legal standing are entirely dependent upon the loan agreement which has been cancelled by your notice of rescission. Unless they can now also state that they are the owners of the debt by reason of having paid for it, they are not a creditor or a lender. therefore they have no legal standing to challenge legal sufficiency of the notice of rescission nor any standing to seek collection on the debt. And they certainly have no legal standing to enforce the note and mortgage which have been rendered void according to 15 USC 1635.
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Their problem now is that their only claim now arises from the TILA rescission statute — and all such claims are barred by the statute of limitations on claims arising from the Truth in Lending Act. That time has long since expired.

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It appears that no judge is going to like this argument even if it is completely logical and valid according to all generally accepted standards for legal analysis.

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So you’re going to have to address the elephant in the living room. The fact remains that if you are successful, as you should be, you will end up with a windfall gain. The judge knows that and denying it will only undermine your credibility. The Counterpoint is that if your opposition does not own the debt by virtue of having paid for it pursuant to the requirements of statute then their attempt at foreclosure is really an attempt to generate Revenue. If the Foreclosure is not going to provide money for restitution of an unpaid debt it can’t be anything else other than Revenue.
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In order to drill that point home you are going to need to argue, contrary to the judge’s bias, that not only is the current claimant not the owner of the debt by reason of having paid for it, but that the current claimant is not an authorized representative of any party who paid for the debt by reason of having paid for it and that the proceeds of foreclosure, if allowed, will never be used to pay down the debt. Again the only way you’re going to accomplish this is through very aggressive Discovery and motions.
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Don’t attempt to prove the dates of transactions, the data for which is within the sole care custody and control of your opposition, and can be easily manipulated, if you only focus only on the paperwork.
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Don’t accept that burden of proof. The only way your opposition has gotten this far is because of legal presumptions arising from that claimed possession of the original note. you need to research those legal presumptions. Generally speaking the legal presumption of fact must include the conclusion that the claimant is the owner of the debt by reason of having paid for it. Possession of the note is considered the same as title to the debt, The presumption arises therefore that possession of the note is ownership of the debt and the further presumption is that ownership of the debt is not likely to have been transferred without payment of value.

Legal presumptions are subject to rebuttal. the way to rebut the presumption is not by proving a particular fact but raising an inference that destroys the presumption. And the way to do that is by asking questions about payment to value for the debt (not just a note on mortgage) and pointing to the refusal of your opposition to give you an answer and to produce documents corroborating their answer.

After the appropriate motions, you will be able to legally require an inference that they are not the owner of the debt by reason of having paid for it and that they don’t represent anyone who does own the debt by reason of having paid for it. Once the presumption is rebutted, the burden of proof falls back onto your opposition. and because they violated the rules of discovery, your motion should demand that they be prohibited from introducing evidence to the contrary of your inference that they don’t own the debt by reason of having paid for it and they don’t represent anyone who owns the debt and who paid for it.

Jurisdictional Defense —- Certificate Holders vs Trust

Litigators often miss the point that the foreclosure is brought on behalf of certificate holders who have no right, title or interest in the debt, note or mortgage — and there is no assertion, allegation or exhibit that says otherwise.

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GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Here is an excerpt from one of my recent drafts on this subject:

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LACK OF SUBJECT MATTER JURISDICTION: the complaint attempts to state a cause of action on behalf of the certificate holders of an apparent trust, although the trust is not identified as to the jurisdiction in which it was created or the jurisdiction in which it operates.
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Even assuming that such a trust exists and that it issued certificates, there is no allegation or attachment of an exhibit demonstrating that the certificates contain a conveyance enabling the holder of the certificate to enforce the alleged debt, note or mortgage upon which the complaint relies. In fact, independent investigation shows the exact opposite.
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Nor is there any allegation that any money is due to the certificate holders or any allegation that the certificate holders possess the promissory note or have the right to enforce either the promissory note or the mortgage. Even if the indenture for the certificates were produced before this court, it would only show a contract for payment from a party other than the homeowner in this action. Accordingly, no justiciable controversy has been presented to the court. In the absence of an amendment curing the above defects, the complaint must be dismissed for lack of subject matter jurisdiction.
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STANDING:
  1. As to Bank of New York Mellon there is no allegation or attachment to the complaint that alleges or demonstrates an agency relationship between Bank of New York Mellon and the certificate holders, on whose behalf the complaint is allegedly filed. If Bank of New York Mellon is the trustee of an existing trust and the trust is alleged to own the debt note and mortgage along with the rights to enforce, then the agency or representative capacity of Bank of New York Mellon is with the trust, and not with the certificate holders. Based upon the allegations of the complaint and independent research defendant asserts that there is no representative capacity between Bank of New York Mellon and the certificate holders.
  2. As to the alleged trust which has not been properly identified there is no allegation that the action is brought on behalf of the trust; but the implied allegation is that the trust is the plaintiff. The complaint states that the action is brought on behalf of the certificate holders who merely hold securities or instruments apparently issued in the name of the alleged trust. There is no allegation or exhibit attached to the complaint that would support any implication that Bank of New York Mellon possesses a power of attorney for the certificate holders or the trust. In fact, in litigation between Bank of New York Mellon and investors who have purchased such certificates, Bank of New York Mellon has denied any duty owed to the certificate holders.
  3. As to the certificate holders, there is no allegation or exhibit demonstrating that the certificate holders have any right, title or interest to the debt, note or mortgage nor any right to enforce the debt, note or mortgage. Based upon independent research, the certificate holders do not possess any right, title or interest to the debt, note or mortgage nor any right to enforce. In fact, in Tax Court litigation the certificate holders are deemed to be holding an unsecured obligation, to wit: a promise to pay issued in the name of a trust which may simply be the fictitious name of an investment bank. There is no contractual relationship between the defendant and the certificate holders. Further, no such relationship has been alleged or implied by the complaint or anything contained in the attachments to the complaint.
  4. As to the certificate holders, they are neither named nor identified. Yet the complaint states that the lawsuit is based upon a claim for restitution to the certificate holders. The reference to the trust may be identification of the certificates but not the certificate holders. In fact, based upon independent investigation, the holders of such certificates never received any payments from the borrower nor from any servicer who collected payments from the borrower nor from the proceeds of any foreclosure. In the case at bar. the complaint is framed to obscure the fact that the forced sale of the property will not be used to satisfy the debt, note or mortgage in whole or in part.
  5. As to any of the parties listed in the complaint as being a plaintiff or part of the plaintiff there is no allegation or exhibit demonstrating that any of them paid value for the debt, or received a conveyance of an interest in the debt, note or mortgage from a party who has paid value for the debt as required by article 9 § 203 of the Uniform Commercial Code as adopted by state law, which states that a condition precedent to the enforcement of a mortgage is the payment of value for the debt. Hence regardless of who is identified as being the actual plaintiff none of the parties listed can demonstrate financial injury arising from nonpayment or any other act by the defendant.
  6. In the absence of any amendment to cure the above defects, the entire complaint and exhibits must be dismissed with prejudice for lack of subject matter jurisdiction and lack of a plaintiff who has legal standing to bring a claim against the defendant.
The only thing I would add to the existing second affirmative defense is the affirmative statement that based upon independent investigation, such signatures were neither authorized nor proper, to wit: they consist of forgeries or the product of robosigned in which the signature of a person is affixed without knowledge of the contents of the instrument to which it is affixed.
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In my opinion, the specificity that I have employed in the above comments not only provides a basis for dismissal, but also the foundation to support Discovery requests that might otherwise be denied, to wit: who, if anyone, ever paid money for the debt?

Finally a Judge Asks the right Questions about TILA Rescission and Invites Briefs

The time may now be coming where the court systems and Federal and State legislatures must come to terms with two inescapable legal facts:

(1) That borrowers who sent TILA rescission notices — and particularly those who sent them within 3 years of consummation of the mortgage — still own the land that was deemed “lost” in foreclosure.

(2) That such borrowers possess valid claims to recover title. possession and money damages. 

It was bound to happen and now it has. In one case, a judge is asking the following questions and inviting briefs on the following subjects:

  1. What is the effect of the failure to return consideration upon an attempt to exercise the right of TILA Rescission?  
  2. What is the effect on rescission if the borrower continues to pay? 
  3. Does TILA pertain to refinancing?

See HOW TO FRAME TILA RESCISSION IN YOUR PLEADINGS

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GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================
The Tila Rescission Statute 15 USC §1635 requires, as a condition precedent to demanding payment of the borrower’s debt, that the parties who received money from the borrower arising out of the loan agreement return all such money to the borrower first before anyone can make a claim for repayment. This is why bank lawyers have long advised their arrogant bank clients that failure to follow the rules set forth in the TILA Rescission statute could not only result in loss of enforcement of the mortgage which is automatic, but also loss of the right to enforce the debt.
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The investment houses, who were the real parties in interest behind the origination or acquisition of residential loans, have long been bullying their way through the TILA Rescission statute since it undermines the value of the derivative infrastructure built and sold over every loan. Thus far they have succeeded in getting virtually all courts. except the Supreme Court of the United States, to go along with the bank narrative regarding 15 USC §1635. In plain terms they got what they wanted: judges ignored TILA rescission and entered orders as though it didn’t exist. But it did exist by operation of law and the US SUpreme Court said so.
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Failure to return consideration bars collection of the debt. And there are two other things that the “lenders” are required to do as conditions precedent (return cancelled original note, which we all know they don’t have, and file a satisfaction and release of the mortgage in the county records so that the world will know that rescission has occurred. This is the replacement for cancellation of the loan agreement. The new “agreement” is set forth by the statute.
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The judge doesn’t ask “effect on what?” The mortgage in all events is void, by operation of law. Neither the borrower nor the  creditor can effectively take any out of court action that changes that.
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There is no unilateral or bilateral action that can be taken by either or both parties to change something that is effective “by operation of law.” The only exception MIGHT be (and probably WILL be) that rescissions sent outside the 3 year period of expiration could conceivably be ignored, but if they are recorded in county records only a party with legal standing could have the rescission notice removed from the chain of title with a court order.
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And the problem for the banks is that they have no party who could be defined as a creditor — a party who had paid value for the debt and owns the debt, to wit: a party to whom the debt is currently owed. Another way of saying it, if you were listening to to the forensic auditor seminar last Friday, is that only a party who was carrying the borrower’s debt as an asset on its balance sheet as a loan receivable could claim the status of owner of the debt i.e., creditor.
*
The genius of the way securitization has been practiced with respect to residential loans, is that there is nobody who takes a loss from nonpayment of any debt. Nobody is entitled to actually receives the borrower’s payments or the proceeds from a foreclosure or other sale. The money that is received therefore, is revenue upon which they pay no tax because they report it as repayment of debt rather than income. This explains why you can’t get a straight answer on “who owns my debt.” The answer is nobody. But that answer is counter intuitive which is another way of saying nobody wants to actually believe that.
*
The issue is whether the borrower’s should forfeit their homes on a scheme that was based upon receipt of revenue rather than repayment of debt?
*
TILA Rescission highlights this problem because it cuts down the veil or curtain behind which the banks hide. There is no more loan agreement and there is no more note or mortgage from which all sorts of legal presumptions can arise. While I would have thought this day would come sooner we finally have our first judge asking the right questions. Thus the hard “talk” begins.
*
  • What is worrisome is the Judge’s use of the word “attempt.” He phrases the questions in the context of an “attempt at rescission” rather than the event of rescission. Either the rescission was sent or it wasn’t. In Jesinoski v Countrywide that is the end of the issue. If it was sent then TILA rescission is effective by operation of law. There is no attempt which insinuates that TILA rescission is a claim rather than an action with legal consequence. There is no attempt and there is no claim.
*
Paying on the mortgage is only to protect the borrower’s credit rating and prevent action to foreclose on the mortgage that does not exist but will obviously be treated as existing in the current judicial climate. It does nothing to effect what has already occurred by operation of law. The loan agreement is cancelled and with it the note and mortgage became void. The only consequence, rather than effect, is such payments increase the amount of money due back from the parties to whom the money was given or from  parties who originated the loan agreement under TILA or unjust enrichment. No person, whether borrower or lender, can “waive” a legal event that occurred by operation of law any more than they can ignore a court order without being in contempt of court.
*
TILA does pertain to refinancing. I don’t know what is meant by instant “circumstances.” Many “modifications” are actually refinancing. The creditor has changed and remains concealed. The entire purpose of the banks in modification is to validate what is otherwise a void or unenforceable loan agreement using undue duress or even extortion to get the borrower to sign away rights.

How to Use Reports and Affidavits in Foreclosure Litigation: Required Reading for Forensic Audit Seminar Next Friday

Reports and affidavits are helpful but not always useful as evidence. It seems that many people think an affidavit from me will be the magic bullet in their case. It could be but only with proper presentation and following the rules of civil procedure and the laws of evidence.

This is required reading for people attending the forensic audit seminar next Friday. In the end I am seeking your reports to conform to the style and content of what I present at the seminar, in this article and other articles appearing on this blog. The end result for homeowner and their attorneys is to file reports and affidavits that are not only admitted into evidence but also given great weight by the trier of fact.

In plain language I would like to outsource the preparation of the forensic reports on the facts and limit my involvement to what I do best: present the facts with opinion corroborated by those facts. That means learning which facts are likely to give the homeowner’s lawyer some traction and which facts are just surplus accusations that can never be proven in a foreclosure case.

Because in a foreclosure case, the issue is not whether the players are bad players, evil or even thieves. The issue is whether the players can successfully present a case in which it appears that they have satisfied the conditions precedent and the elements of a prima facie case for enforcement of the mortgage through foreclosure.

The answer to that is either yes or no. And walking into any courtroom the presumption, at the very beginning, is that the answer is yes. Our job is turn that around and persuade through logic and facts that the presumption of the existence of the elements for a prima facie case for foreclosure are missing. And while out burden of proof is only a predominance of the evidence, in practice, for homeowners, that translates as something more than “more likely than not.” Where the answer is close, the court will always lean toward the party seeking foreclosure.

=======================================

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

*

An affidavit is a sworn statement. It is not evidence unless a judge admits it as evidence. And it get no weight as evidence unless the trier of fact (the judge in most foreclosure cases) decides to give it weight. The judge won’t allow it or give it weight if it is merely opinions that are not persuasively presented by reference to specific facts or absence of facts. So while my affidavit may be helpful, it is not the opinion that counts nearly as much as the credibility and persuasiveness of the affidavit or report. There is also confusion as to how and when to use forensic reports or affidavits from me. So let me put it this way.

*
In what I call the case analysis, we ordinarily perform vigorous investigation and analysis and then sum up what we have found in the context of what we think might be the best issues on which you could get traction in court.
*
Sometimes we render an opinion and conclusions based upon a forensic report done by others, which we prefer to do. We then issue a report that can be formatted into the form of an affidavit. The issue being addressed in this article is for forensic examiners, homeowners and their lawyers.  An affidavit is frequently requested from me under the mistaken belief that possession of such an affidavit will be crushing blow to the lawyers seeking to enforce the mortgage or deed of trust on behalf of a party who does not ordinarily qualify as a claimant.
*
The simple truth is that the affidavit, no matter how strong or how great does nothing by itself. The issue is how and when the affidavit is used and under what circumstances — e.g. will the homeowner seek to have it introduced as fact or opinion. And will my testimony be used to pride adequate foundation for the affidavit to be introduced as evidence in a court proceeding.
*
So frequently the affidavit homeowners are seeking is “limited scope.” That code for “on the cheap.” I don’t issue reports or affidavits that I don’t think I can defend easily in court under cross examination.  But even if the scope is limited to one question, to wit: in my opinion is US bank a real party in interest, as you know I have already answered that in the articles I have published, although such articles are not necessarily applicable to any one specific case. The answer was “NO.”
*
And you say you want that answer in affidavit form. This is where consultation with local counsel is critical. There are several different ways the affidavit can be phrased and I have some doubts as to whether the answer, in the form of an affidavit, is going to help you. If you don’t know how and when to use the affidavit it won’t do you any good.
*
But I concede that it might do some good inasmuch as sometimes the affidavit is accepted in court in connection with a motion for summary judgment. In all other circumstances the affidavit is not admitted into evidence unless I am retained to appear in court or at deposition in lieu of live testimony in which I give live testimony providing the foundation for the admission of the affidavit into evidence.
*
The admission of opinion evidence is restricted based upon the court’s acceptance of my credentials, experience, education, training etc. To date no court in any state has rejected me as an expert who could give an opinion on the securitization of residential debt.
*
But in all cases where my affidavit or testimony was accepted it wasn’t the opinion that was given weight, it was my report on the facts, revealing an absence of necessary elements to the claim for enforcement of the debt, note or mortgage.
*
Opinion evidence is not admissible without a court approval or order. If it is opposed there is a hearing on whether to allow opinion evidence and if so whether it will be allowed from me.
*
So an affidavit that for a lay person or their lawyer could be helpful to shore up confidence in the attorney’s presentation of the defense, but not much more. It would look something like this.
Based upon the chain of title revealed in the forensic report and my examination of the actual documents recorded, together with my education, knowledge, my proprietary database, and my experience in the securitization of businesses and assets including debt, it is my firm opinion that US Bank never purchased the debt of the homeowner nor did US Bank ever receive ownership of the debt from any person who had paid value for the debt. 

*

Third party claims of possession of the homeowner’s promissory note are attenuated in terms of credibility and lack foundation as to whether such possession by third parties would be possession by US Bank. But such claims are nevertheless taken as true for purposes of this opinion.
 
Based upon Article 9 §203 of the Uniform Commercial Code (UCC) there are two deficiencies in the claim of U.S. Bank to enforce the security instrument (mortgage), to wit: 
a) it does not and never has complied with the condition precedent in the UCC that it paid value and therefore has a direct financial stake in the come of a forced sale through foreclosure (i.e., the sale will not produce money proceeds that are paid to US Bank either in a representative capacity nor on its own behalf and
*
b) US Bank does not possess any claim for restitution because it has suffered no loss. Nor is US Bank expecting the receipt of any funds regardless of whether or not the homeowner makes a payment. While foreclosures have been concluded in the name used as claimant in this case, the proceeds of sale of foreclosed property has never been received or deposited by US Bank or on behalf of U.S. Bank.
*
The claim to enforce the mortgage like all civil claims must present a legal person that is possessed of a claim for restitution of a legal debt owed to the claimant based upon a duty of the opposing party owed to the claimant that was breached by the opposing party that produced real legally recognized injury to the claimant.
*
Failure to own the debt is therefore failure to present a legally recognizable claim to enforce the security instrument. Such failure is generally regarded in case decisions to be construed as a lack of jurisdiction by the trial court to consider any controversy where the real parties in interest are not present in person or by proxy.
*
In this case, neither of these conditions is met. The implied trust (and/or US bank as “trustee”), if it/they has any legal existence, has never entered into any financial transaction in which the debt was sold for value or transferred by a person who had paid value. This eliminates compliance with the UCC condition precedent to enforcement and eliminates judicial standing for US Bank to even bring a claim inasmuch as it lacks a legally recognized claim for anything against the homeowner in the case at bar. 

*
The affiant concedes that there is confusion in case decisions on this subject in which possession of the original note gives rise to the presumption of a right to enforce it. While it is doubtful that US Bank ever acquired possession of the original note much less rights to enforce the note, even assuming those conditions were met, that would only raise a presumption of title to the debt and the right to enforce it. But that presumption is factually and completely rebutted by the absence of any claim, transaction or instrument indicating that on any certain day the debt was sold to US Bank.
*
In fact, my specific knowledge regarding the securitization of debt is that an investment bank (brokerage firm) funded the origination or acquisition of the debt and retained ownership of the debt for usually less than 30 days. Hence no transaction in which the debt was sold could have taken place without the participation of the investment bank who advanced the funds. No such transaction ever occurred between the investment bank and US Bank.

Hence the subject debt was never sold or entrusted to US Bank. Hence possession of the note, at most, entitles the possessor to enforce the note, albeit not as a holder in due course since no value was paid. Such enforcement would be under Article 3 of the UCC and not under Article 9 relating to enforcement of secured transactions. 
*
My conclusion is that none of the parties named in connection with the claim against the homeowner have legal standing nor have any of them satisfied the condition precedent to enforcement of the mortgage through foreclosure.

In answer to the specific question posed by the homeowner’s attorney as to the status of US Bank in connection with this loan agreement, US Bank is not a real party in interest with any actual financial stake or risk of loss relating to the loan agreement nor was its purpose ever to serve as an actual trustee for a legal trustee of an actual trust that had any actual financial stake or risk of loss relating to the subject loan agreement.

Although certificates were sold in the name of the trust by the investment bank and other derivative contracts were sold based upon the value of the certificates, none of those contracts transfers any right, title or financial interest, nor any right to enforce, the subject debt, note and mortgage.

Hence any representations that US Bank is serving as authorized representative or trustee on behalf of the holders of such certificates or contracts is not relevant, since none of them have the right to enforce nor any ownership of the debt, even if they did receive the risk of  loss associated with the actual debt. 

So here is where local counsel comes into the picture. Depending upon how he or she wants to present your defense, is the above what they want, or do they want something more, less or different? Are you getting involved in pleading, discovery, preparation for a hearing or trial?

Because my credentials give me credibility and status, and because I would rather review forensic reports than prepare them, I am giving the free forensic law seminar on August 2 which is sold out. It is my hope that the business plans of forensic examiners will be enhanced by associations with established experts like myself in which affidavits are filed not by the examiners whose credentials nearly always in doubt but rather under the signature of someone whose credentials are not in doubt.

Tonight! Why the Bankruptcies of DiTech and Aurora Matters! Neil Garfield Show 6PM EDT

Thursdays LIVE!

The Neil Garfield Show — WEST COAST

with CHARLES MARSHALL AND BILL PAATALO

or prior episodes

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

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I get that the complexity of securitization and foreclosure litigation can be mind-numbing even to an experienced litigator. But once you start winning you get a rush. Tonight we talk about making some of the more tedious aspects of examination of the case productive for the lawyer and for the homeowner.

The continued appearance of DiTech and or Aurora is actually a sparkling example of arrogance emanating from the investment banks that too often control the narrative. If either DiTech or Aurora ever owned a single debt, it was probably one in a million.

With the bankruptcy petitions involving several entities bearing the name of DiTech or Aurora and additional bankruptcies involving closely related entities like GMAC and Lehman Brothers, somehow we have been led to believe that the investment banks were so negligent that they actually left the loans in the entities that filed petitions for relief in bankruptcy with schedules that were devoid of virtually any loans.

On the Show tonight Charles and Bill address the following:

How MERS misused the transfer of Aurora servicing rights to Nationstar, all starting out of the Lehman Brothers BK following the Mortgage Meltdown.

How borrowers can use these servicer bankruptcies, particularly the one of Ditech, to advance the following:

– Using notices (of the Ditech) of stay to manage litigation options;

– Ditech’s non-judicial foreclosure auctions are apparently on hold, due to the automatic stay rules and restrictions on recording documents, in their BK. Judicial actions by Ditech should be on hold too. These restrictions even limit Ditech’s ability to direct the removal of Lis Pendens in lawsuits in which they received a judgment.

How Ocwen may be using a recent merger with PHH to shore up their book of business, to ameliorate credit issues or avoid bankruptcy.

The Truth about US Bank

Lawyers and pro se litigants continue to ignore the basics when mounting a challenge to foreclosures in which US Bank is asserted to be a trustee of a name that is then treated as though it was trust or REMIC Trust. If you look closely, the name is word salad, containing references or names to several named entities and other categories of entities.
*
 A typical presentation asserts no presence of US Bank in its individual capacity, so the institutional implication is false. It is appearing strictly in a representative capacity and an court award of costs against the “claimant” would not, according to US Bank, attach liability to US Bank but to rather whoever was being represented by US Bank “as trustee.” On that we have word salad presenting many options such as
  1. US Bank, as trustee
  2. as successor to Bank of America, as trustee
  3. as successor by merger to LaSalle Bank, as trustee
  4. for the holders of certificates entitled
  5. XYZ Corp.
  6. Mortgage pass through Certificates series 200x-a1

If anyone can tell me  from that description who would be liable for costs I applaud them. But I can tell you who would pay the costs regardless of actual legal liability. It would be a company claiming to be an authorized servicer who in fact is getting the money from the investment bank through conduits.

The issue of what if anything was transferred between LaSalle Bank and Bank of AMerica and thus what if anything was transferred between Bank of America and US Bank has actually not been litigated.

My answer is that LaSalle Bank had no duties as trustee, was subjected to the impact of three mergers — ABN AMRO, Citi and Bank of America — and that a trustee only exists for a legally existing trust in which the subject matter (Loan) was entrusted to the trustee for administration of the active affairs of the “trust.” With none of those elements present, nothing could have been transferred.

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================
As to U.S. Bank, Deutsch, BONY etc. there are two categories that must be considered. If US Bank is named in a Pooling and Servicing agreement then the reasons for its non existence (or more specifically lack of legal presence in court or any other foreclosure proceeding) in fact and at law remain as previously stated in prior articles —- but exclude one central issue that has not been litigated.
*
If US Bank has been asserted as successor to another alleged trustee then all sorts of other issues pop up. The main one that has not been litigated is whether the position of trustee can be transferred or sold like a commodity without consent of the beneficiaries or some other authorized party.
*
In truth the only real “beneficiary” would be the investment bank — if only the trust legally existed. And in truth the investment bank indemnified US Bank from liability in exchange for the use of the US Bank name to create the illusion of institutional involvement.
*
And in truth the only real party in interest is the investment bank, and if the trust actually existed the investment bank would be the only real beneficiary in an arrangement in which the trust name is used as a shield or sham conduit to hold bare naked legal title to paper that fabricates the illusion of debt ownership, much like MERS.
*
And of course the whole use of the term “successor” is constantly used to distract lawyers, judges and homeowners from the fact that the previous party had no interest or right to administer, own, or enforce the subject debt, note or mortgage — unless they are able to produce authorization from the investment bank.
*
But the investment banks have been loath to even hint that they could or would issues such authorization because that would be an admission that they were or are the real party in interest — an admission which probably would subject them to many levels of liability for fraud and statutory violations.
*
It may well be that the pursuit of court costs and discovery available to do that might be the achilles heel of this house of imaginary cards. It would reveal the absence of any party to pay them, which would reveal the absence of a claimant, which would reveal the absence of a claim which would reveal the absence of a client, which would reveal false representations by the foreclosure mill.

No the Mortgages Are Not Securities, But the “Certificates” Do Not Qualify for Exemption As “Mortgaged Backed”

For those straining to find a way to categorize mortgage loans as securities I offer this based upon my licensing, training and experience as a Wall Street Broker and Investment Banker and as an attorney who has practiced law, including securities law for over 42 years.

You are climbing the right tree but you are on the wrong branch, in my opinion. Despite possible legal and logical arguments for your point of view there is no way any court is going to take the common mortgage loan and say it is a security, and therefore was subject to regulation, registration, disclosure and sales restrictions. And the secondary market does not rise to the level of a free exchange. While loans appear to be traded under the guise of securitization they are not actually traded.

BUT
I like your reasoning when applied to (a) certificates issued by investment banks in which the investment bank makes promises to pay a passive income stream and (b) derivative and hedge contracts issued on the basis of deriving their value from the certificates.
*
The specific challenge I think should be on the status of the certificates or “bonds” issued by the investment banks. If securitization in theory were a reality then under the 1998 exemption they would not be treated as securities and could not be regulated.
*
That would mean that the fictitious name used by the investment bank was a real entity, an existing Trust (or special purpose vehicle) (a) organized and existing under the laws of some jurisdiction and (b) the trust actually acquired loans through (i) purchase for value or (ii) through  conveyance from a trustor/settlor who owned the loans, debts, notes and mortgages.
*
But that isn’t what happened in practice. The entire business plan of the investment banks who participated in this scheme was predicated on their ability to sell the loans multiple times in multiple ways to multiple layers and classes of investors, thus creating profits far in excess of the amount of  the loan.
*
Right now each of those sales is considered a separate private contract that is (a) separate and apart from the loan agreement and (b) not subject to securities regulation due to exemption under the 1998 law that does not allow securities regulation of mortgage-backed instruments.
*
So the goal should be to show that
*
(a) the securitization scheme was entirely based on the loan agreement under the single transaction and step transaction doctrines and therefore was not separate from the loan transactions
*
(b) the certificates or bonds were not mortgage-backed because the holders have no right, title or interest to the loan agreements, debts, notes or mortgages and
*
(c) the derivative and hedge contracts deriving their value from the certificates were securities based upon the certificates (“bonds”) that are more in the nature of warrants and options on the value of the certificates rather than any direct interest in the debt, note or mortgage of any borrower.
*
Hence both the certificates and hedge contracts and all other derivatives of the certificates would be subject to regulation as securities. Based upon information I have that is very suggestive although not conclusive, it appears that the Internal Revenue Service has already arrived at the conclusion that the certificates are not mortgage-backed and the trusts are not viable entities because in order to have a valid trust it must have assets and active affairs. It must also have identifiable beneficiaries, a trustor etc.
*
None of those elements are present or even alleged or asserted by the lawyers for the foreclosure mills. The only “beneficiary” is the investment bank, not the certificate holders who all expressly or impliedly disclaim any right, title or interest in the loans, debts, notes or mortgages and have no right to enforce. This has already been decided in tax court. The owners of certificates are not the holders of secured debt.
*
There is no “res” or “thing” that is entrusted to the named Trustee of the so-called REMIC Trust for the benefit of identifiable beneficiaries. There is no settlor who conveyed loans to the Trustee to hold in trust for identifiable beneficiary except that as a catch-all the investment bank is named as beneficiary of any title to anything that might be attributed to the trust, if only the trust existed.
*
Attacking this from the top down is the job of regulators who refuse to do so. But the attack can occur from the bottom up in courts. As shown above, in any case where a trust is referenced in a foreclosure there is no legal standing. That is there is no existing entity that owns the debt. The investment bank funded the origination or acquisition of the loan but contemporaneously sold off the value of the debt, the risk of loss, the cash flow and other attributes of the loan.
*
The notes had to be destroyed and a new culture based upon images had to be put in place even if it violated law. The problem with the courts is not that they don;t get it; I think a lot of judges get it but don’t like the outcome of applying the law as it currently exists. So they wink and nod at fabricated notes, assignments and endorsements.
But those same judges, when confronted with unexplained deficiencies are forced to rule in favor of borrowers. And they do. This would best be done in mass joinder, class action or some other vehicle where resources could be pooled, but the procedural deck is stacked against such efforts.

===============================
GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

Right in Front of Our Eyes: Black Knight and U.S. Bank

Anyone who knows about foreclosure litigation and securitization of residential debt knows that the only way the banks could succeed is if they had a central repository and central command center from which all documents were fabricated and all instructions were issued.

For nearly all loans the central command was Lender Processing Systems, aided by DOCX. While DOCX is technically defunct and Loraine Brown went to jail taking one for the team, the functions of LPS remained the same.

LPS  changed its name to Black Knight and in a PR coup transformed itself into the publisher of what is largely viewed as comprehensive data on mortgage lending and foreclosures.

Hence it went from the purveyor of false, fraudulent, forged documentation to the purveyor of data perceived as reliable and thence became a trusted source whose data is considered worthy of legal presumptions.

Systems at LPS/Black Knight include data processing on virtually all residential loans subject to claims of securitization many of which are represented by data on the MERS  Platform which is a workaround to hide separate split transfers of the debt, the note and the mortgage or deed of trust.

The systems on LPS/Black Knight are designed for the the express purpose of presenting consistent data in foreclosure claims. As such it also enables the rotation of apparent servicers, none of whom perform bookkeeping functions even if some of them interact with borrowers as if they were actually the servicers.

The rotation of servicers comes with the false representation and illusion of boarding in which the process is falsely represented as meaning that the new servicer inspected, audited, reviewed and input the data into their own system. None of that occurred. Instead the new servicer merely gained access to the same LPS system as the last servicer with a new login and password.

All evidence shows that the functions for fabricated, forging and robosigning documents continue to be performed under the direction of LPS/Black Knight which receives all instructions from various investment banks who have each started their own securitization scheme masking apparent trades in the secondary market for loans and trades in the shadow banking market where “private contracts” are regularly traded without any securities regulation.

Far from dropping their connection with LPS/DOCX the major banks have completely embraced this central repository of all loan data, all of which is subject to manual and algorithmic manipulation to suit the needs of the banks; thus they produce a report that creates the illusion of credibility, reliability and even independence even though none of those things are true.

So now U.S. Bank is further embracing LPS/Black Knight technology in the form of “Empower” for loan originations. U.S. bank is of course the major player whose name is used in foreclosures despite the fact that it has no interest in the loans and does not receive one cent from foreclosure sales of property. It merely receives a royalty for the use of its name as part of a fictitious name of a nonexistent trust which is falsely represented to have engaged in a transaction in which the trust acquired the debt, note and mortgage on multiple loans.

This deal furthers the PR myth. It strengthens Black Knight as having the attributes of a legitimate player when in fact it is a central figure in the greatest economic crime in human history.

see https://www.prnewswire.com/news-releases/us-bank-expands-relationship-with-black-knight-to-correspondent-and-hfa-lending-channels-on-empower-loan-origination-system-300859760.html

US Bank will implement the Empower LOS to manage loans purchased via its correspondent and HFA lending channels. The bank already uses Black Knight’s MSP servicing solution which integrates with the LOS; and its artificial intelligent virtual assistant AIVA.

“Aligning with Black Knight’s Empower for our Correspondent and HFA business serves our forward-looking vision of providing innovative capabilities that advance the lending process and provide a better client experience,” said Tom Wind, executive vice president, US Bank. “Expanding our enterprise relationship with Black Knight allows us to enhance our digital capabilities and customer experience throughout the entire homeownership cycle.”

 

SCOTUS Revives Qui Tam Actions

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

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

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

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

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

See https://www.natlawreview.com/article/supreme-court-recognizes-longer-statute-limitations-qui-tam-plaintiffs-false-claims

See Review of False Claims Act 18-315_1b8e

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

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

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

Point of reference:

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

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

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

See also

http://www.mondaq.com/unitedstates/x/809786/White+Collar+Crime+Fraud/False+Claims+Act+Statute+of+Limitations+Relators+Now+Get+Up+to+10+Years+to+File+Suit

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

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

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

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

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM. The key to victory lies in understanding your own case.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 954-451-1230. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

see https://www.nytimes.com/2019/05/20/nyregion/nyc-taxi-medallion-loans-attorney-general.html?smid=nytcore-ios-share

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

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

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

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

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

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

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

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

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

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

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

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

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

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

AND NOTE THIS:

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

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

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

see https://www.washingtonpost.com/business/2019/05/21/lingering-impact-foreclosure-crisis-felt-most-hispanic-black-communities-study-says/?noredirect=on&utm_term=.457379756595

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

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

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

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

*

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

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

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

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

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

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

 

C&E Strategy is the beginning of a successful attack on the claimed enforcement of a mortgage or deed of trust.

Attacks on technical deficiencies of assignments of mortgage is a great place to start, but it is not the finish line.

This is a follow up with the radio show we did last week on cancellation of assignments of mortgage, and upon successful cancellation of the assignment(s), the further cancellation of the notice of substitution of trustee, the notice of default, the notice of sale, and/or the lis pendens and foreclosure lawsuit.

The C&E (Cancel and Expunge) strategy has some good and even essential attributes of the defense and counterattack on the would-be enforcer of a mortgage. But here are some potential weak points. If you are not ready for them the strategy will fail.

see https://livinglies.me/2019/04/11/cal-3d-dca-wrongful-foreclosure-you-can-cancel-the-assignment-notice-of-default-notice-of-sale-and-reverse-the-sale/

You are still on the right track — especially where the notary certifies that the person signing had authority to do so. That is simply a lie. The notary has no idea. The problem with the C&E strategy is that it appeals to lay people and not lawyers.

*

The lay people like it because it sounds like a magic bullet that enables them  to avoid litigation over whether the claimant is real and whether the claim is real. The lawyers are reluctant because they know that courts will almost always side with the party who appears to be losing the benefit of an actual bargain in which the claimant paid money. It’s all about money, whether you like it or not.

*

The reality is that they are both right. And the place to start is always at the beginning — when and where and why the offending document was executed.

*
Lay people don’t understand what it means to have a facially valid document. They want to get a court to get rid of the whole document (and the presumed transaction behind it, whether it exists or not) because of some perceived invalid procedure in its execution. The world doesn’t work like that, nor should it.
*
The court looks at the substance. If someone paid for the loan they don’t lose their money because of a signature that is missing or in the wrong place. They are at least given opportunities to correct errors. If the errors are not corrected then that is a different matter. Even a frivolous lawsuit can result in a judgment and levy against property if the defendant failed to answer or appeal. That is the way the system works.
*
The court might temporarily decline to enforce an instrument because it does not comply with statutory requirements for facial validity — but it won’t invalidate the presumed transaction UNLESS the presumed transaction is either proven not to exist or the presumed transaction is not proven to exist. There is a difference between those two. Both involve proof. The difference is in who has the burden of proof.
*
Even with a deed lacking a witness —- the deed is valid as between the grantor and the grantee and anyone who knows about it. There are differences between states but the substance is the same.
*
If Person A executes a deed to Person B and Person B pays Person A then the court, in equity, will not allow person C to exercise the rights of a title owner in fee simple absolute unless Person C also paid Person A (assuming person A had title) AND the state has a race to record statute. If the state is not a “race” state, then the deed is valid against all who have notice of it.
*
At the end of the day courts will not ordinarily issue an order in which they think a party is getting cheated out of the benefits of a legitimate deal. The dominant public policy is preservation of contracts and legitimate transactions first, not the strict adherence to statutory requirements in execution of contracts or conveyances. So the only defense that works with consistency is the one in which either the claim or the claimant’s existence is not supported by sufficient evidence. This is the gray area that lay people don’t want to hear about.
*
But all that said, the attack on the assignments for lack of statutory requirements is correct in its strategy and its goals. The reason that is correct is not that the document is just defective in some technical way. The reason it is effective strategy is (a) the court should not enforce it until the needed correction is effectuated and (b) they can’t correct it without revealing the creditor who owns the debt.
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The 20 year effort to conceal the identity of anyone who owns the debt is testimony to the fact that the investment banks don’t want anyone to know. The answer would be highly complex and probably involve matters of novel fact patterns and law.
*
By selling off the risk of loss did the investment bank thus sell the debt? If they sold the debt, but did not sell the rights to enforce the debt, note or mortgage, did the investment bank retain the right to enforce?  If so, that probably conflicts with all law in all jurisdictions that requires that the enforcer of a mortgage be the owner of the debt. If the enforcement is allowed what assurances does the court have that the proceeds of foreclosure will go to the benefit of the owner of the debt, however that ownership is defined?
*
While the courts have assiduously avoided addressing such questions they are moving inexorably in the direction of being required to address them and to finally decide what to do with the confusion and chaos created not by borrowers, but by the investment banks who sought to and did in fact create profits that were multiples of the amount loaned without paying the borrower for use of his/her name, signature or reputation.
*
So the attacks on technical deficiencies of assignments of mortgage is a great place to start, but it is not the finish line.

 

Cal. 3d DCA: WRONGFUL FORECLOSURE — You Can Cancel the Assignment, Notice of Default, Notice of Sale and Reverse the Sale.

This decision “Not for publication” takes one more step toward unravelling the false claims of securitization that resulted in millions of fake foreclosures over at least 15 years. The pure nonsense being peddled by Wall Street investment banks still remains as the underlying basis for assumptions and presumptions that are contrary to fact and contrary to legal and equitable principles.

But the window is now open to include the investment banks as defendants in complaints for damages and disgorgement, because as this decision reveals, the courts may not be willing to take a giant leap of faith that someone must be the lender and that “someone” is part of the chain of players who are pursuing foreclosure. Without that leap of faith, without that bias, their “doctrine” is left dangling in the wind.

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

See http://lawzilla.com/blog/rainn-gauna-v-jpmorgan-chase-bank/

YES it does stand for the proposition that at least this court says that cancellation of instruments is the one cause of action that in fact does exist because the assignment was from an assignor that had no interest in the debt. I think that it is important to make it clear that the words “no beneficial interest” means “no ownership of the debt.” But the use of the words “no beneficial interest” implies the validity of the deed of trust by which the property was encumbered in favor of a “lender” (or its agent “MERS”) who was a sales agent and not a lender and from whom the borrower received no funds.

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This twisted concept seems to be saying to the judicial world that we know that table funded loans occur but we are not going to invalidate the enforcement of contracts lacking in consideration because there must be someone in the mix who did provide consideration and who was in some kind of relationship with the sales agent. Hecne the courts are thinking that they are following substance over form and thus preventing a windfall to borrowers. Instead they are stepping over the facts.
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The money came from an investment bank and yes the investment bank knew that the “originator” would be named as lender. The purpose of this arrangement was to shield the investment bank from liability for violations of lending laws of which we all know there were many spanning the categories of appraisal fraud, avoidance of underwriting risk (without which nobody could be considered a lender), to concealment instead of disclosure of terms, compensation etc.
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You can’t pick up one end of the stick without  picking up the other. If we are going to accept the notion that in foreclosure cases we are going to treat a contract as enforceable even though it lacked consideration and nobody else that is named in the chain has ever paid value, then the assumption is that an unnamed party who actually did pay value, is the real party in interest. That is the investment bank. And THAT can ONLY mean that the investment bank was present in underwriting and granting the loan through its naked nominee, the sales agent or “originator.”
*

If that is so then the liability for lending violations MUST attach to the investment bank. And if that is so then at least in judicial states, by alleging those lending violations through the affirmative defense of recoupment, the foreclosure can be mitigated or defeated entirely. In nonjudicial states one would need to allege active concealment preventing the borrower from knowing the real party in interest with whom he was dealing.

*

This could be the end of nonjudicial foreclosures at least as to LBMT-WAMU-Chase. It should be treated as such. If I had time, I could literally write a book about this decision as it is so instructive as to pleading requirements and common mistakes made by trial and appellate courts like for example, assuming that a legal default exists when nobody who owned the debt declared such a default or even said that payment was delinquent in some way.

*
It also shows the lengths that many courts will go to avoid “fraud.” While they will accept the notion that something was wrongful and that the defendants knew it was wrongful, contrary to fact and law, they refuse so see it as fraud. A quick look at any FTC action will reveal that such restrictions do not apply if the same allegations come from a governmental agency.
*

The case is also instructive in that it repeats a very common scenario regarding the origination and progression of the loan. This court and other courts will eventually face the day when their assertions come full circle: for now, they are saying that just because there was no consideration between then named lender and the borrower doesn’t mean there was no enforceable contract.

*

Yes it does mean that in every context other than foreclosure litigation. But because of the rules in UCC Article 3 the maker of a note takes a risk when they execute the promissory note without having received any consideration because the note represents, under law, the right to enforce it, which if it is acquired for value might mean the enforcement would be free from borrower”s defenses. That liability does not create an enforceable loan contract. Even common sense dictates that for a loan contract to be enforceable there must be a loan between the parties to the contract.

*

PRACTICE NOTE: All that said, this case only stands for the proposition that a complaint is sufficient when it pleads that the party on whose behalf an assignment was made had no ownership in the debt. The proof of the pudding will be at trial. How will you prove this basic proposition. The answer is that you have taken the first step which is that you put the matter in issue. The second step is discovery. And the third step, if it ever gets to that, is establishing at trial that the supposed beneficiary under a deed of trust or the mortgagee under a mortgage deed had not satisfied its burden of proof showing an ownership interest in the underlying debt.”

*

The opposition to that narrative will be what it has always been. That possession of the “original” note raises the legal presumption that the named beneficiary under the deed of trust in fact was the legal beneficiary under the deed of trust. Possession of the note, they will argue equals ownership of the debt. If the judge accepts that proposition, the burden of proof will then fall on the borrower to rebut that presumption — a leap that most judges have already demonstrated they don’t want to make. So the persuasiveness of then presentation including an unrelenting march toward revelation of the truth is the only thing that carries the day.

*

The banks know that what they’re doing is wrong. But history shows that they can get away with it except with the apparently rare homeowner who aggressively and relentlessly defends the foreclosure.

Stop Feeling Guilty — Be A Warrior

Shame is the reason why most borrowers don’t contest foreclosures. That shame turns to intense anger when they realize that they were used, screwed, abused and now they are targets in a continuing blitz to embezzle much needed money from their lives and from the financial system generally.

The genius behind companies like Citi is… Deception by Branding.  “Citi” is not a company, it’s a brand of a conglomerate of companies.  Even its subsidiary “Citibank N.A.” is deceptive.  First let’s dispel the myth that subsidiaries are equal to their parents.  Not true, not even when they are wholly-owned subsidiaries.  They are separate companies, albeit owned by a common parent. —- From Anonymous Writer
GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================

Probably the biggest goof of the court system in foreclosure litigation (and in business litigation) is mistaking a brand for a company and not realizing that there is both a business and legal distinction between even a wholly owned subsidiary and another subsidiary or parent company.

The reason that is such a big goof is that the actual transaction is being ignored while a small part of the transaction is being treated as the entire matter. That is like taking the spark plug out of car and then selling it to someone as though it was the whole car. It doesn’t work that way.

In conglomerates like “Citi” the brand intentionally blurs the factual and legal distinctions. And these distinctions make a difference precisely because the debt, note and mortgage are split and transferred multiple times between subsidiaries wherein each one is either moved off the books entirely or each subsidiary is showing an “asset” that it sells into the shadow banking market.

These practices results in a ten-fold increase in the apparent size of the asset, which is then owned by dozens, perhaps hundreds of different unrelated investors. And that enabled the banks siphon literally trillions of dollars out of the US economy and trillions more out of the world economy.

Through the devices of branding and “off balance sheet transactions” this wealth is controlled by handful of people; but this wealth is directly derived from one simple plan — to market the signature, reputation and identity of borrowers who were led to believe that they were executing loan documents. In fact they were executing the foundation documents for a string of transactions and book entries that would result in profits far beyond the amount of the loan.

These unsuspecting consumers had become ISSUERS without ever knowing it and they still don’t know it or understand it. So they still believe that somehow the investment bank behind the scheme is actually entitled to collect on a debt that the bank sold multiple times through multiple affiliates and subsidiaries in transactions that were often “off balance sheet.” And the fact that in virtually all cases the proceeds of foreclosure sales are not applied to reduce the debt owed to the owner of the debt is completely overlooked.

The clear issue that investment banks have been avoiding is that every one of their originated loans is part of a larger intended transaction, and that the homeowner gets absolutely no clue or disclosure that the bulk of the transaction is actually very different from a loan and actually the antithesis of a loan. Clearly the two were both unrelated and related.

The borrower thought it was a loan and it was a loan but the loan was a part of a larger transaction in which the attributes of a loan were shredded. So the loan was essentially a sham entry to allow the investment banks to profit regardless of the performance of the loan. Hence the transaction was not really a loan anymore. This is true even for loans acquired after origination by an actual lender.

Risk underwriting, the most basic part of lending, was thrown to the winds because it was irrelevant. And legally required disclosures were also thrown to the winds because lending laws (TILA) clearly state that compensation received after the loan closing must be disclosed.

What would have happened if the borrowers knew their signatures, reputation and identity were the real subject of the transaction and that they would be sold in a myriad of way producing compensation far beyond the amount of the loan. How would bargaining have changed? It’s obvious.

Even the most unsophisticated homeowner would have gone shopping for someone who would offer a share of the bounty. And that is why the “free house” PR gimmick is a myth. If the investment banks had not concealed the major attributes of the transaction, the mortgage meltdown would never have occurred.

And if “securitization” had proceeded anyway then homeowners would have received immediate and possibly total reductions in the amount due. Yes I recognize that this is a contradiction because if there is no loan then there are no derivatives to be sold. But that is not a problem created by homeowners or borrowers or consumers. It is a problem created by fraud and deceit by the investment banks.

In the final analysis the investment banks used homeowners and investors to issue unregulated securities and instead of turning the proceeds over to the issuers they kept the money. In any world of law enforcement they should have been jailed for that.

The goal was to get the signature and then sell it. That is not a loan. And the failure to disclose it violated everything about Federal  and State lending laws that require disclosure of identities of the real parties in interest and the amount of money they are getting as compensation for their role in “the transaction.”

The investment banks chose to unilaterally define “the transaction” as just the part dealing with the origination of the debt, note and mortgage. That was a lie. It concealed the fact that the borrower was in fact a real party in interest in a much larger transaction in which at each step profits, fees, and other compensation would be distributed in amounts vastly exceeding the amount that was disclosed to the borrower as the value of the transaction. For each $1 “loaned” there was $20 in profit.

By concealing this information the investment banks took all of the profit, fees and compensation without allowing the homeowner to participate in what amounted to a monetization of their signature, reputation and identity.

Thus the most essential part of the Federal and State lending laws was thwarted: that the “borrower” must know the identity of the parties with whom he/she is dealing and the “borrower” must know the amount of compensation being earned as result of the “borrower” signing documents at loan closing.

Instead the homeowner had become the issuer of unregulated securities, the proceeds of which were largely concealed and withheld from the homeowner. No lawyer would have permitted their client to enter into such a scheme — if the facts were known.

Borrowers get lost in the weeds when they make these allegations because they can’t prove them. Truth be told, even the bank could not prove them because of the number of transactions that occur “off balance sheet.” Abraham Briloff (in his book Unaccountable Accounting) first observed over 50 years ago, the invention of this ploy of “off balance sheet” transactions was an open door to fraud that would likely occur but might never be proven.

We are a nation of laws not opinions. Our laws depend upon findings of fact, not opinions or political views. That is the only control we have to prevent fraud or at least bring fraudsters to justice, or at the very least prevent them from continuing to reap the rewards of their multiple violations of statutory laws, common law  and the duty of good faith, honesty and fair dealing.

So when the robowitness signs affidavits, certifications or other documents or testifies at deposition or in court, be aware that in nearly all cases, he/she is either an independent contractor with absolutely no knowledge or authority concerning the subject transaction (as a have defined it herein) or an employee of a subsidiary with no connection to any transaction involving the homeowner or both.

You can reveal the lack of actual personal knowledge and thus then lack of foundation for evidence proffered in a foreclosure by discovery, motions to enforce discovery, motions in limine and good cross examination which always depends upon one single attribute to be successful: follow-up.

And in many cases the robowitness is not nearly as stupid as his/her script makes him out to be. The  robowintess often knows everything that is contained in this article. Good cross examination can frequently reveal that — that is where the case turns from enforcement of a legitimate debt to a case in which both the claim and the claimant have not been proven by any standard.

That is all you need to win. You don’t need to prove how they did it. You only need to reveal the gaps that exist because the substance is not there — the claiming parties have all long since divested themselves, at a profit,of any interest in the debt, note or mortgage. There is no debt left to pay, at least not to them. Stop feeling guilty and be a warrior.

Discovery from REMIC Rules

I have added to my templates for discovery questions  and requests relating to a claimant that is named “XYZ Bank, N.A. as trustee for the ABCDE Corp. Trust Series 12345-4321A Certificates” and where, as in most cases, there is a PSA and/or a Trust Instrument that identifies the “trust” (if ti exists) as a REMIC — Real Estate Mortgage Investment Conduit. It turns out that the Internal Revenue Code provides some guidance that might get you through objections to your discovery.

Keep in mind that there is very often a “Trust Agreement” that is different from the PSA and that there is very often a “Servicing  Agreement” that is different from the PSA.  It’s somewhat like saying “Do as I say not as I do.”

Also keep in mind that the only trust relationship I can decipher out of the so called trust instruments and associated documents is that the Trustee is basically a naked nominee (like MERS) for the investment bank, for which it is paid a monthly fee with no rights of administration nor any duties or obligations.

Thus the investors as beneficiaries is a red herring distraction from the truth. Hence any power of attorney executed in the name of the named Trustee is worthless because you cannot create a right by purporting to transfer it. The trick in litigation is revealing that the named Trustee is not a legal trustee and should not be so named because it lacks all indices of power attributed to a trustee.

Thus a “trust” might indeed exist even if it is not anything like what is being presented in court. And the res of the trust is the nominal title to documents like a note and mortgage to hold at the direction of but necessarily for the benefit of the investment bank. But since the nominal  title is without value there still is probably no res and hence no trust nor anything to administer.

While the investment bank once had a claim as owner of the debt, it has long since divested itself of any right, title interest or obligation with respect to the debt, note or mortgage.

GET FREE HELP: Just click here and submit  the confidential, free, no obligation, private REGISTRATION FORM.
Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
========================
IRC § 301.7701(i)-1 Definition of a taxable mortgage pool.

(a)Purpose. This section provides rules for applying section 7701(i), which defines taxable mortgage pools. The purpose of section 7701(i) is to prevent income generated by a pool of real estate mortgages from escaping Federal income taxation when the pool is used to issue multiple class mortgage-backed securities. The regulations in this section and in §§ 301.7701(i)-2 through 301.7701(i)-4 are to be applied in accordance with this purpose. The taxable mortgage pool provisions apply to entities or portions of entities that qualify for REMIC status but do not elect to be taxed as REMICs as well as to certain entities or portions of entities that do not qualify for REMIC status.

(b)In general.

(1) A taxable mortgage pool is any entity or portion of an entity (as defined in § 301.7701(i)-2) that satisfies the requirements of section 7701(i)(2)(A) and this section as of any testing day (as defined in § 301.7701(i)-3(c)(2)). An entity or portion of an entity satisfies the requirements of section 7701(i)(2)(A) and this section if substantially all of its assets are debt obligations, more than 50 percent of those debt obligations are real estate mortgages, the entity is the obligor under debt obligations with two or more maturities, and payments on the debt obligations under which the entity is obligor bear a relationship to payments on the debt obligations that the entity holds as assets.

Subject to considerable editing and fine tuning, this gives rise the the following recitations and questions:

  1. Contention Interrogatory: Do you contend that the claimant is a REMIC?
  2. Do you contend that the subject REMIC is subject to IRC §301.7701(i)-1 Definition of a taxable mortgage pool?
  3. Contention Interrogatory: Do you contend that the subject REMIC is the actual and legal owner of the subject debt, note and mortgage?
    1. If Yes, please describe the manner in which the subject debt, note and mortgage were acquired or became entrusted to XYZ Bank as Trustee of the named REMIC.
  4. Does the subject REMIC maintain books of account and business records relating to the ownership, transfer and management of REMIC assets?
    1. Please describe how the books and records are maintained, along with the description of the persons or entities who are authorized to keep or maintain or make entries in those books and records.
  5. Does the named REMIC make payments to any party as an obligor (the REMIC)?
    1. Do those payments bear a relationship to payments to payments received by the REMIC on debt obligations that the entity holds as assets?
      1. Please Describe such payments including the categories of recipients as referenced on the books of account maintained by the REMIC.
      2. Please describe the relationship between the debt obligations that the REMIC holds as assets and the obligation of the REMIC as obligor to third parties.
  6. If yes, please answer the following
    1. Is the Pooling and Servicing Agreement (PSA) as found at url _________ the document upon which the REMIC was organized and still exists.
      1. If not, please describe the document upon which or by which the REMIC was created, organized and still exists.
    2. Is the identity of the claimant in foreclosure the same as the identity of the named Trust in the PSA.
    3. As stated in §301.7701(i)-1 Definition of a taxable mortgage pool, does the named REMIC qualify as a legal entity?
    4. Does the named REMIC own assets?
      1. If yes, please describe the assets.
      2. Are substantially all the claimed assets categorized as debt obligations?
      3. Is the debt in the subject disputed loan one of the assets owned by the named REMIC?
        1. If yes please describe the date, parties and location of the transaction in which the named REMIC became the owner of the subject debt.
        2. If yes please list and describe the date and parties involved (as Payors or Payees) in the distribution of any money by or on behalf of XYZ Bank relating in any way to the subject REMIC and relating in any way to the subject contested loan.
        3. Please list all other foreclosure proceedings initiated under the name of this subject REMIC as the claimant.
          1. Please list which of the previous cases have been concluded with a foreclosure sale and subsequent liquidation (sale) of the property.
            1. Please list the cases in which the property was sold where the named REMIC herein received the sale proceeds.
            2. Please list the cases in which XYZ Bank received money from the sale proceeds in any capacity.
            3. Out of those cases please describe the manner in which XYZ Bank received the money and the manner in which the money was distributed.

Be prepared for objections and long memoranda of law.

Comments welcome

Common Sense Prevails: SCOTUS Broadens Primary Liability for Fraudulent Schemes

For quite some time, the courts have struggled with the concept of primary liability for a lying liar and secondary liability for a liar who passes on the lie knowing that it was a lie. Scotus, in the Lorenzo decision has now said that is a distinction without a difference.

It is not a secondary issue of aiding and abetting, it is a primary issue where the agent, employee, officer or representative of the liar is equally liable for the dissemination of a lie if they know it is a lie.

BUT you still need to prove intent to lie along with the other elements of fraud. A lie is not actionable if the recipient knew it was untrue or should have known or did not rely upon it. If the lie is not material then it is presumed to belie upon which nobody relied.

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see https://www.morganlewis.com/pubs/supreme-court-adopts-broad-interpretation-of-primary-liability-in-sec-antifraud-case

See Lorenzo v. Securities and Exchange Commission

The interesting part of this decision is that it is parallel to false securitization claims where various lawyers, servicers and others say things that are lies to mislead the recipient of such information into thinking that the trust has assets that everyone who knows, knows that the trust doesn’t have those assets (i.e., loans).

Justice Breyer writes:

Petitioner Francis Lorenzo, while the director of investment banking at an SEC-registered brokerage firm, sent two e-mails to prospective investors. The content of those e-mails, which Lorenzo’s boss supplied, described a potential investment in a company with “confirmed assets” of $10 million. In fact, Lorenzo knew that the company had recently disclosed that its total assets were worth less than $400,000.

Some quotes from an article (see link above) on this highly important decision:

In a decision beneficial to the US Securities and Exchange Commission, the US Supreme Court has affirmed that those persons who disseminate statements containing material misrepresentations or omissions are primarily liable for such misstatements even if they did not directly make them.Private securities litigants will likely rely on Lorenzo v. SEC to assert claims against secondary actors—including bankers, lawyers, and accountants—who disseminate statements made by others that they allegedly know are materially misleading, and the Commission is now clear to charge such persons as primary violators without demonstrating that the person who actually made the statement also violated federal securities laws.
*
the Court endorsed the SEC’s approach to scheme liability against those who distribute materially misleading statements with scienter, regardless of whether they are actually the maker of the statements. By holding that a nonmaker can still violate Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, it is expected that private securities litigants will rely on Lorenzo to assert claims against secondary actors who, with scienter, disseminate alleged misstatements made by others. Lorenzo may also further embolden the Commission to allege primary violations against “gatekeepers” and others who did not make the alleged misstatements, but are nonetheless alleged to have been involved in their dissemination.
*
At the request of his supervisor, Lorenzo, an investment banker, sent two emails that he did not draft to prospective investors. Lorenzo’s supervisor provided the content of the two emails, which Lorenzo merely copy and pasted into his own emails. Lorenzo then transmitted the emails and included his signature block with a note that he could be contacted with any questions, but also stated in each email that he had sent it at the request of his supervisor. Although Lorenzo did not draft the content of the emails, the Commission found he acted with intent to defraud because he knew some of the content was false or misleading when he sent them.
*
Before Lorenzo, the Janus and Central Bank decisions seemed to impose strict limits on claims brought by private plaintiffs. The Supreme Court’s new decision affirms that those who disseminate misstatements can commit a primary violation of Rule 10b-5, rather than just a secondary aiding and abetting violation, for which there is no private right of action. Accordingly, Lorenzo may curtail the effect of Janus and Central Bank, and could be interpreted to mean that a secondary actor (e.g., banker, lawyer, accountant) may, under similar facts, be held primarily liable under a scheme liability theory.[19]
*
It will therefore be left to lower courts to determine how far Lorenzo—which on its face appears to limit primary liability to “those who disseminate false statements with intent to defraud”—will stretch primary liability in private actions, if at all. Indeed, plaintiffs will still be required to plead with particularity that the “nonmaker” had such an intent.

If you think foreclosures are a thing of the past, think again

In order to maintain the illusion of legality and an orderly marketplace the banks and their servicers must continue to push foreclosures even if it means going after people who are not actually withholding payments. The legacy of the mortgage meltdown and the brainless government policies that let the banks get away with what they had done, is that the crime not only continues but is being repeated with each new claimed securitization or “resecuritization” of residential loans.

As I predicted in 2006, the  tidal wave of foreclosures was in fact unprecedented, underestimated and continues to this day. With a starting point of around 2002, foreclosures attributed to the mortgage meltdown have continued unabated for 17 years. I said it would 20-30 years and I am sticking with that, although new evidence suggests it will go on much longer. So far more than 40 million people have been displaced from their homes and their lives.

Google Buffalo and New Jersey, for example and see whether they think foreclosures are a thing of the past. They don’t. And the people in Buffalo are echoing sentiments across the nation where the economy seems better, unemployment is down, wages are supposedly increasing but foreclosures are also increasing.

And let’s not forget that back in the early and mid 2000’s foreclosures did not mention trustees or trusts. In fact when the subject was raised by homeowners it was vehemently denied in courts cross the country. The denials were that the trusts even existed. This was not from some homeowner or local lawyer. This was from the banks and their attorneys. It turns out they were telling the truth then.

The trusts didn’t exist and there were no trustees. But in the upside down world of foreclosure here we are with most foreclosures filed in the name of a nonexistent implied trust on behalf of a “trustee” with no trustee powers, obligations or duties to administer any assets much less loans in foreclosure.

In order to understand this you must throw out any ideas of a rational market driven by fundamental economics and accept the fact that the banks  and their servicers continue to be engaged in the largest economic crime in human history. Their objective is foreclosure because that accomplishes two goals: first, it rubber stamps prior illegal practices and theft of borrowers’ identities for purposes of trading profits and second, it gives them a free house and free money.

If they lose a foreclosure case nobody suffers a financial loss. If they win, which they do most of the time (except where homeowners aggressively defend) they get a free house and the proceeds of sale are distributed to the players who are laughing, pardon the pun, all the way to the bank. Investors get ZERO.

As for modifications, look closely. The creditor is being changed along with the principal interest and payments. It might just be a new loan, except for the fact the new “lender” is a servicer like Ocwen who has not advanced any money for the purchase or acquisition the loan. But that’s OK because neither did the lender or the claimant. Modification is a PR stunt to make it look like the banks are doing something for borrowers when in fact they are stealing or reassigning the loan to a totally different party from anyone who previously appeared in the chain of title.

Modification allows the banks to claim that the loan is performing — thus maintaining the false foundation supporting trades and profits amounting to dozens of times the amount of the loan. Watch what happens when you ask for acknowledgement from the named Plaintiff in judicial states or the named beneficiary in nonjudicial states. You won’t get it. If US Bank was really a trustee then acknowledging a settlement on its behalf would not be a problem. As it stands, that is off the table.

The mega banks, with unlimited deep pockets derived from their massive economic crimes, began a campaign of whack-a-mole to create the impression that foreclosures were on the decline and the crisis is over. Their complex plan involves decreasing the number of filed foreclosures where the numbers are climbing and increasing the filed foreclosures where they have allowed the numbers to sink. Add that to their planted articles in Newspapers and Magazines around the country and it all adds up to the impression that foreclosures derived from claimed securitized loans are declining.

Not so fast. There were over 600,000 reported foreclosures last year and the numbers are rising this year. Most of them involve false claims of securitization where the named claimant is simply appointed to pretend to be the injured party. It isn’t and in many cases a close look at the “name” of the claimant reveals that no legal person or entity is actually named.

US Bank is often named but not really present. It says it is not appearing on its own behalf but as Trustee. The trust is not specifically named but is implied without the custom and practice of naming the jurisdiction in which the trust was organized or the jurisdiction in which it maintains a business. That’s because there is no trust and there is no business and US Bank owns no debt, note or mortgage in any capacity. The certificates are held by investors who acknowledge that they have no right, title or interest in the debt, note or mortgage. So who is the claimant? Close inspection reveals that nobody is named.

In fact, those foreclosures proceed often without contest because homeowners mistakenly believe they are in default. In equity, if the facts were allowed in as evidence, the homeowner would be entitled to a share of the bounty that was a windfall to the investment bank and its affiliates by trading on the borrower’s signature. A “free house” only partially compensates the homeowner for the illegal noncensual trading on his name with the intent of screwing him/her later.

Upon liquidation of the property the proceeds of sale are deposited not by an owner of the debt, but by one of the players who just added insult to injury to both the borrower and the original investors who paid real money but failed to get an interest in the fabricated closing documents — i.e., the note and mortgage.

The Banks have succeeded in getting everyone to think about how unfair it is that homeowners would even think of pursuing a “free house”. By doing that they distract from the fact that the homeowners and the investors who put up the origination or acquisition money are both excluded from the huge profits generated by trading on the signature of borrowers and the money of investors who do not get to share in the bounty, which is often 20-40 times the amount of the loan.

The courts don’t want to hear about esoteric arguments about the securitization process. Judges assume that somewhere in the complex moving parts of the securitization scheme there is an owner of the debt who will get compensated as a result of the homeowner’s refusal or failure to make monthly payments of interest and principal. That assumption is untrue.

This is revealed when the money from the sale of property is traced. If you trace the check you will be mislead. Regardless of where the check is mailed, the check is actually cashed by a servicer who deposits it to the account of an investment bank who has already received many times the amount of the loan principal. That money is neither credited to the account of the borrower nor reported, much less distributed to investors who bought certificates (wrongly named “mortgage bonds”).

Neither the investors who bought the original uncertificated certificates nor the investors who purchased contracts based upon the apparent value of the certificates ever see a penny of the proceeds of a foreclosure sale.

In order to maintain the illusion of legality and an orderly marketplace the banks and their servicers must continue to push foreclosures even if it means going after people who are not actually withholding payments. The legacy of the mortgage meltdown and the brainless government policies that let the banks get away with what they had done, is that the crime not only continues but is being repeated with each new claimed securitization or “resecuritization” of residential loans.

When the economy contracts, as it always does, the number of foreclosures will shoot up like a thermometer held over a steam radiator. And instead of actually looking for facts people will presume them. And that will lead to more tragedy and more inequality of income, wealth and opportunity in a country that should be all about a level playing field. This is not the marketplace doing its work. It is the perversion of the marketplace caused by outsized and unchecked power of the banks.

My solution is predicated on the idea that everyone is to blame for this. Everyone involved should share in losses and gains from this illicit scheme. Foreclosures should come to a virtual halt. Current servicers should be barred from any connection with these loan accounts. Risk and loss should be shared based upon an equitable formula. And securitization should be allowed to continue as long as securitization is actually happening — so long as the investors and borrowers are aware that they are the only two principals on opposite sides of a complex transaction in which trading profits are likely as part of the disclosed compensation of the intermediaries in the loans originated or acquired.

Disclosure allows the borrowers and the investors to bargain for better deals — to share in the bounty. And if there is no such bounty with full disclosure it will then be because market forces have decided that there should not be any such rewards.

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