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

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

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

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

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

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

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

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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Coming this fall! A new wave of illegal foreclosure claims. Will we get it right this time?

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

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

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

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

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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Has any homeowner transaction ever been sold to investors? No? Then why are we accepting the bank myth that it was securitized?

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

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

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

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

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

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

What is Real in “Securitization”?

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

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

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

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

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If I issue a note to someone who actually did give me money as a loan, and he asks me for collateral, I can conditionally assign my rights to a mortgage I actually own because someone issued me a note and secured it with a mortgage. How “conditional” is the assignment? That depends upon state law and the contents of the assignment.
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And in turn the Payee on the note I issued now has an asset upon which he can borrow. etc. The asset is the receivable from me that he has on his books which got there because he paid out money. So he debited CASH and Credited ACCOUNTS RECEIVABLE. Classic double entry bookkeeping.
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The ONLY question is whether the paperwork is a memorialization of actual events in the real world or if the paperwork is merely an attempt to create fake facts, an illusion that supports the designee of a non creditor to foreclose on property.
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If all the events are real then the law allows it and recognizes it and enforces it. But that enforceability under current law stops at the door of paperwork that does not memorialize an actual financial event in the real world.
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People think that it isn’t so simple. But it is. People say that there would be no foreclosures if I was right. But it is they who are wrong because they don’t understand legal procedure and the banks not only understand it, they were also responsible for writing it.
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So by codifying into law the proposition that the holder of a note is presumed to own the debt until rebutted, they have thus created a vehicle for deceit because judges are not presented with evidence in rebuttal. The truth is that the claimants are not even “holders”. And dig a little deeper they are not even possessors because the original note was destroyed.
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And because judges are sloppy people just like the rest of us, they will often treat a non creditor claiming to possess a note as a holder in due course — thus denying homeowner attempts at discovery. All without any allegation of HDC status or any evidence that the claimant is a party who paid value in good faith without knowledge of the borrower’s defenses.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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Please visit www.lendinglies.com for more information.

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

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

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

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

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

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

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And in the underwriting process, despite the obvious and expressly stated requirements of law no lender was left who had any stake or risk of loss in ensuring the validity of the appraisal or the viability of the loan.
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They might call it a loan transaction, but it wasn’t. It was deceitful process for obtaining the homeowner’s participation in a highly profitable securitization scheme. A scheme where the profits were neither disclosed as to existence or amount and that withheld consideration from the homeowner for his/her participation.
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As such the apparent “loan agreement” was simply a cover and a vehicle for concealment of the true nature of the transaction with the homeowner.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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Please visit www.lendinglies.com for more information.

Regulatory Capture and Monopoly of Residential Lending by Wall Street

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

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

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

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

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

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

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

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

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

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

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

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Are Lawyers Missing the Boat Again on Foreclosure Defense?

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

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

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

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

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Transactions with Homeowners Are Part of Securitization Scheme: Why don’t homeowners and their lawyers use this fact?

So the “RMBS” industry is pushing for “economic relief” in the Pandemic. If they get it, it will be another windfall for Wall Street and investment bankers will go from laughing to convulsing in the privacy of their board rooms.

The Wall Street Journal published an article yesterday on how the mortgage market is not behaving “as expected.” With interest rates down so low there should be a flood of refinancing. And there is plenty demand to do just that. But, as the article points out, there might be demand but there is no supply. There is no supply because investors are not buying certificates issued as RMBS (Real Estate Mortgage Backed Securities). https://www.wsj.com/articles/mortgage-credit-tightens-creating-drag-on-any-economic-recovery-11590431459

The reason they are not buying RMBS is simple. They don’t trust the economy and all of the investors have growing doubts about the valuation and risk assessment associated with RMBS. Investors see mortgage default risks as being associated with safety of their investment because the certificates state that one of the discretionary reasons why investment banks don’t need to pay them is if there are declared defaults on certain specified loans — whether or not they are owned by the investment bank or anyone else.

And since securitization is in essence a Ponzi scheme, the more difficult it is to sell new certificates, the more difficult it is to pay investors. That part admittedly is counterintuitive but nonetheless true. While homeowner’s payments actually do cover the liability of the investment bank to investors, the reality is that the investment bank continues ot make payments to investors regardless fo receipt of money from homeowners IF they are continuing to make sales of new certificates.

The practical effect of all this for homeowners is to realize that if they sign on any dotted line they are pulling the trigger on a securitization scheme, of which their receipt of money is a tiny fraction. At the end of the day there is no person, company, business entity or trust that maintains any books and records showing the homeowner’s promise to pay as an asset on their balance sheet. In plain words, the role fo the creditor has been eliminated to avoid lender and servicer liability imposed by federal and state laws.

This fact — the absence of a creditor — has been the topic of discussion for two decades. And it is has never been addressed because the investment banks, who have the greatest amount of influence over politicians, don’t want it addressed. They don’t want it addressed because if it was addressed then the role of investment banks AS LENDERS would be revealed along with their gargantuan profits from “securitization” in which the obligations of homeowners are NOT sold to anyone, much less securitized.

In practice this means that homeowners can and probably should dispute their obligation to make payments before, during and after any false declaration of default. A declaration of default is a legal nullity if it isn’t declared by or on behalf of a creditor. If there is no creditor then there can be no default. Yes it is that simple.

So that is why I have been a broken record. Criminal lawyers tell their clients to keep their mouths shut because 80% of all criminal convictions are the direct result of what comes from the mouth of the defendants. That’s why I tell professionals with grievances filed against them the same thing.

And that is why I tell homeowners the same thing —- admit NOTHING. The reason is simple — your opposition is an investment bank regardless of who is named as claimant or plaintiff. If you admit any part of what they are saying they will argue that you admitted all of it. And they may be right under current rules.

Force them to the PROOF and they will fail the test every time.

Nothing they are saying is true and none of their documents are anything more than pure fiction. Don’t admit that the transaction was a loan, that there is an obligation, that the obligation is secured by a mortgage, that the obligation is set forth in the note, that the note or mortgage has been transferred, that the default ever occurred, or that the action is a foreclosure.

Don’t admit the trust or that a bank is a trustee or that the bank has any authority to represent a trust or the holders of certificates. None of it is true. Don’t even think that the action is for the benefit of investors. It isn’t.

And don’t think that you are cheating someone out of money by not making the payments you promised to make. Anyone who was legally entitled to receive a payment from you has already been paid. It is not your doing or your fault they got paid without your money. And it isn’t your responsibility to pay them again.

If investment banks want to change this analysis and return to the world where we are a nation of laws and not a nation where men make up their own rules and go to illegal or extra-legal schemes then they must seek to legally reform (see reformation) their schemes to protect all the stakeholders and not just themselves as intermediaries with the most to gain and the least to lose.

Your position is that you entered into a transaction in which you knew only a small part of the whole transaction and that you were entitled to know about the rest of it. Your intent was to establish a loan transaction. their intent was to start a securitization scheme in which the role of lender was eliminated.

So your intent was a loan and theirs was the creation, issuance, sale, trading and hedging of securities. Without your signature the securitization would not exist. Without securitization your homeowner transaction would not exist.

You got a payment for issuance of the note and mortgage and for a disguised and unintended license to resell personal data. That part of the consideration was offset by your required (see adherence contract) promise to make payments far in excess of the transaction payment received by the homeowner.

So was there any net consideration paid to the homeowner for issuance of the note, issuance of the mortgage and license to resell personal data? Auditors might vary in their opinions on that.

And given the requirements under all lending and securities laws to disclose the whole transaction — and not just the part of it called a “loan” — how much money should the homeowner have received for triggering a profit firestorm?

We won’t know because in a free market the homeowner would have been able to bargain for greater incentives if he/she knew about the entirety of the transaction. We won’t know because in a free market competitors for homeowners’ signatures would have offered more incentives. We won’t know because in a free market, investors would have asked for much greater incentives since, besides the homeowner, they were the only real player in the securitization scheme.

And THAT is what quasi contract law and the law of quantum meruit is all about. Use it or lose it.

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

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*Please visit www.lendinglies.com for more information.

Could IRS Enforcement of REMICs Bring Wall Street Into Line? Yes but they won’t do it. Investors and homeowners continue to suffer as victims of fraud.

The most obvious places to look for correction in the illegal conspiracies masquerading as securitization of residential debt were the IRS , the SEC, the FDIC and the FTC and probably later the CFPB. Qui tam (whistleblower) actions were regularly dismissed because the agency that lost money due to false claims rejected the notion that it was a false claim or that anything bad had occurred. Sheila Bair lost her job as head of the FDIC for protesting policy set by Presidents Bush and Obama that failed to hold the line.

So here is a 2014 article that talks about how we could have regulated the investment banks through IRS examination of the REMICs.

Corruption is the answer. Too many people were making too much money and were “donating” too much money to people in public office. Enforcement was impossible. The real answer is extremely simple — stop all private money in elections. All elections should be publicly funded. No exceptions.

see.. PA Journal of Business Law – REMIC Tax Enforcement

The problem remains that US government agencies refuse to police schemes that are labelled as securitization of debt. If they are securitization of debt then market forces apply and everything COULD even out in the end. The problem is that the debt was never sold into a securitized scheme and nobody cares even though that has eliminated even the possibility of the existence of any creditor.

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REMIC policing by the IRS would be ideal to reveal the fatal deficiencies and fraudulent character of these securitizations schemes. It is why the first 9 lawyers tasked with drafting the documents for securitization all quit with one declaring that she would not be party to or an accessory to a criminal enterprise. There is no entity that qualifies as REMIC in residential loans. AND the reason is very simple:  neither investors nor the trust is buying the loans.
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So all the tests and premises about having an ownership interest, and about the quality of the loans are all false tests designed to cover up the fact that there has never been securitization of any residential loan except is very specific rare circumstances where individual mortgage brokers have sold loans to small groups of investors with repurchase agreements. In most instances those turned out to be scams.
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The way they got away with it is that there was a securitization process — i.e., one in which new securities were issued, even if they were unregulated. But only those schooled in Wall Street finance grasp the fact that they were securitizing bets on data — something that is very ornate and complex.
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Once you DO grasp the idea of what they really were doing and are still doing then you see why all the documents in all the foreclosures had to be fabricated, forged, backdated and robosigned. 
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You can also see why they have robowitnesses come to court and why they show only the business records of a servicer who has no contact with the so-called principal named in the claim or lawsuit. You can see why there is never a proffer of the business records of a creditor because there is no creditor.

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There cannot be contact between foreclosure mill and trustee of REMIC trust, there cannot be contact between “servicer” and Trustee of REMIC trust, there cannot be direct contact between investment bank and any of the players because any such contact would undermine the essential ingredient of the entire plan — plausible deniability of intent or knowledge of the scope of the illegal plan.

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The job of the litigator is to assume that that the entire thing is fraudulent and to ask for what they cannot give — answers to simple questions about the ownership and authority and status of the “obligation” that in reality is nothing more than a return of the consideration paid for a license to sue the homeowner’s private data and homeownership as mere points of reference for the issuance and trading of complex securities.
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But you must make it look like all of those companies are in actual contact and that payments from consumers or from the forced sale of their property are going to a creditor. You need to do that in order to give a judge cover for ruling in favor of the investment bank who is not even in the courtroom.
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The answer is as simple as simple can be: they are making everything up.
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Documents are not real unless they memorialize something that happened in the real world. But Wall Street banks put together a plan that made it appear that a sale of the debt occured where there had been no such sale. Or to be even more specific, they made it appear that there had been a purchase by or on behalf of the investors or trusts. Nothing could have been further from the truth. The truth is that investment bankers never looked at homeowner transactions as loans. They saw the money they paid to homeowners as a cost and condition precedent to creating and selling new securities. 
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Why no creditor? Because that is how you escape liability for lending law violations. 
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Why call it a loan? Because that is how you keep consumers from bargaining for their share of the very rich pie created by investment banks in the sale and trading of derivatives, insurance contracts, hedge products and just plain bets on fictitious “movement” of data that was completely controlled, in the sole discretion, of the investment banks. 
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They were printing money for themselves. The losers were and remain investors who buy “certificates” that are nothing more than a cover for underwriting the sale of securities for a company that doesn’t exist. the losers are the homeowners whose issuance of a note and mortgage triggers a vast undisclosed profit scheme in which the wealth of America shifted from the many to the few.

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BUYING RMBS CERTIFICATES IS LIKE BUYING TULIPS JUST BECAUSE THERE IS A MOB OF PEOPLE WHO FOR COMPLETELY IRRATIONAL AND TEMPORARY REASONS THINK THEY ARE VALUABLE.
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Three Card Monty: Why is Pandemic Relief Going to Servicers? Why are they not claiming relief for REMIC Trusts? Will homeowner debts be reduced by Federal payments to “Servicers?”

https://www.nytimes.com/2020/04/21/business/mortgage-investors-coronavirus.html?referringSource=articleShare

By failing to require a credit to homeowners when the Federal government makes payments on claimed obligations, the bailout is simply adding to profit of investment banks, servicers and foreclosure mills. They are eating their cake and having it too. Obligations are paid off but their claim against homeowners remains unchanged.

Sign Petition to Change the rules to Protect Homeowners from Fraudclosure.

Foreclosures are filed in the name of a named Trustee for a collection of words that is then treated as an entity. More specifically it is treated as a trust. Sometimes the foreclosure mill goes further and says it is filed for the holders of certificates.

  • If a “trust” is the claimant in a foreclosure, why isn’t it a claimant in a plea for relief due to nonpayments from homeowners?
  • If the holders of certificates are suffering economic loss from nonpayment by homeowners why are they not the direct recipients of Federal relief?
  • Who is really going to get Federal bailout money and will it cover a loss or will it be profit?
  • If the ultimate result is that obligations are being paid, why isn’t the homeowner getting notice of a corresponding reduction in the amount of payments claimed as due?
  • Who is the real party collecting money and why?

The answers are obvious. Wall Street is again playing fast and loose with its labels to suit its own ends. If investors fail to receive payments promised them by the investment banks they have only the rights set forth in their contract with an investment bank —- the “underwriter” that underwrote the offering of certificates that were false labelled as “mortgage backed” and again falsely labeled as “bonds.” But the underwriter was actually the issuer. So the entire proceeds of sale of certificates went to the investment bank instead of a “REMIC Trust.”

And that is why there is no trust getting a Federal bailout and there was no trust getting a Federal bailout in 2008-2009. No trust has any claim to any money. So why are they Plaintiffs in judicial foreclosures and beneficiaries in nonjudicial foreclosures? Because the Wall Street banks are inserting a jumble of words to escape liability for making false claims.

Investors have no right to receive the payments from homeowners. So the relief package proposed by Fannie and Freddie is designed to shore up the value and liquidity of holding unregulated securities (certificates) in a market that is wholly controlled by investment banks (not a free market) and completely dependent on continued sales of certificates that are neither worthy of the high ratings conferred upon them by rating agencies nor worthy of being insured (unless the insurance contract is a ruse backed up by the expectation of a Federal bailout, again).

Hidden beneath the waves of economic loss and relief packages is an essential truth about what Wall Street has most people believing was the securitization of loans. But the loans were never sold, much less divided into pieces that were sold off as securities. It was personal data that was securitized and then there were complex instruments indexed on that personal homeowner data that was securitized. None of it had anything to do with the sale of any loan nor the collection of any money from homeowners.

While the foreclosure judgment and a sale of property  results in money proceeds, as I have reported here, it never goes to any Trustee, trust, or even investor. The money is sent to companies that have claimed to be servicers although they never say they are servicing on behalf of owners of the loans. that’s because the loans were never sold.

Those self-proclaimed “servicers” are actually collecting money for the investment banks who have labelled themselves “Master Servicers.” The investment banks receive money from multiple sources — continued sales of “certificates” (falsely  dubbed mortgage backed bonds), homeowner payments, and most importantly trading profits on various derivative and hedge contracts.

The obligation of the investment bank to make any payment to any investor who paid for a certificate is limited to their agreement when they purchased the certificate from the investment bank.

That obligation is in large part discretionary — i.e., it is based upon the sole discretion of the investment bank as to whether money paid to investors can be recovered and is further restricted by a discretionary determination s to whether there have been “events” based on indexing to certain data that is called “loan data.”

The servicing companies mentioned in the article cited above have no obligation to make any payments to the investors. Their function is to distribute money to investors by access to funds made available by the investment bank. And the assumption that their thin capitalization puts them in danger of extinction is a misapprehension of the true facts.

“Servicers” have no obligation to make payments to investors. None. Investors will get paid as long as investment banks see a reason to pay them. And the investment banks will see a reason to pay them as long as they can sell more certificates.

The proof is in the pudding. After the payments are made, homeowners are never given notice that the money claimed as due from them has been reduced. The game is on — get money from homeowners, force the sale of their homes even though everyone is getting paid. 

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

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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT.  IT IS NOT A SHORT PROCESS IF YOU PREVAIL. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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This will probably get me in plenty of hot water with lawyers. Homeowners should be winning foreclosures most of the time. The reason they don’t? — Ineffective Counsel.

The problem is not the judges. The problem is the lawyers who walk into court believing that the loan is real, claimant is real, the claim is real and that they are only looking for technical ways to get their client out of a valid deal.
The problem is exacerbated by magical thinking — that by pointing out bad acts by the foreclosure mill or servicer they will automatically cancel the mortgage, get quiet title and somehow the “debt” will disappear. Is it any wonder that judges are responding negatively to such assertions?
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Well I am rapidly coming to the conclusion that the primary basis for appeal in capital murder cases — ineffective counsel — is the real reason why homeowners think that the courts are ignoring the obvious. This is most manifest in a phenomenon I refer to as hallway trial lawyers. When they are speaking to their clients in the hallway outside the courtroom they sound great; but once inside the courtroom they are either mute or should be mute.
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Hallway lawyers can be great trial lawyers — if they would only prepare and obsessively roll the issues over in their mind as they approach a hearing or filing of a motion, pleading, or brief. And they would win far more often than they would lose if they did the work. That takes two things that most people lack — other than trial lawyers — commitment and courage. Like any performer you must give it your best and accept a pie in the face occasionally.
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In 45 years of litigation I have won and lost cases. Most of them I won. In hindsight I would say that virtually every loss is attributable to one factor —- lack of adequate planning, preparation and execution.
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My own experience is that when I have done my job as a litigator I have consistently successfully defended foreclosure cases because there is no case. That knowledge propels to me to object, challenge and refute basic assumptions in an orderly, timely and effective way. I am clear as to the basis of my objections and challenges and how it it lacks foundation, relevance or relies upon inadmissible statements or documents. And I am relentless. 
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While there are judges who simply refuse to consider any possibility of a homeowner victory, many of such judges can be turned when approached correctly. They are merely starting from assumptions they are required to make. They are not against the homeowner. They are for the rule of law.
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The problem is not the judges. The problem is the lawyers who walk into court believing that the loan is real, the claim is real and that they are only looking for technical ways to get their client out of a valid deal. The problem is exacerbated by magical thinking — that by pointing out bad acts by the foreclosure mill or servicer they will automatically cancel the mortgage, get quiet title and somehow the “debt” will disappear. Is it any wonder that judges are responding negatively to such assertions? 
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Why should any judge relieve a debtor of an obligation because of bad acts by a creditor? The answer is that they should not because if they did they would be destroying the foundation of a nation of laws. If you were owed the money then you would not think that is such a good idea either.
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That is why I strive to show the truth of the transaction between the homeowner and whoever sold the transactional documents for the homeowner to sign or the truth behind the acquisition of what had been a valid loan agreement.
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For the homeowner it was a loan and as soon as you admit that it was a loan, you are already in deep trouble. By admitting the loan you admit the existence of a conventional creditor and a conventional debtor. You also admit the existence of a conventional debt and you can’t contest  the non payment by the homeowner and therefore you are conceding that the homeowner is in breach of a loan agreement without excuse. Fabricating paperwork is no excuse to get out of paying a loan you received. You still owe the money.
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The lawyers and homeowners who complain that this gives them no place to go are missing the essential truth of Wall Street securitization: in nearly all cases the debt was never sold. If you start with the wrong premise you will always end up with the wrong result. 
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The entire enterprise was about selling and reselling private financial data of homeowners who for their part were tricked into thinking they were entering a loan agreement while the other side spared no effort in avoiding the title and liability of a lender under lending laws. That is not a loan and the agreement was not a loan agreement. 
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More importantly, the agreement might not be enforceable at all since (a) there was no meeting of the minds and (b) there was an absence of consideration caused by the payment of consideration together with an obligation to pay it back.
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For the investment banks this was solely about getting consent to sell private data and issuing sand trading securities based on the data not any debt. Anyone who does not understand the significance of that should probably not be litigating these cases. They will lose and thus contribute to the growing body of evidence that most people lose defending actions titled or labelled as foreclosures even though most people could win.
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Mass joinder and mass petitions to change the mandatory requirements for filing foreclosure actions can be done with direction from licensed people who actually understand that there is neither an actual claimant nor a claim in the creation, administration, servicing or enforcement of any transactional documents in which a homeowner is one of the parties.
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My opinion is that without central direction, preparation, investigation, and strategic and tactical planning by experienced trial lawyers, homeowners will continue to be food for a profitable scheme created and advanced by Wall Street.
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My opinion is that this is a massive social issue as well. By finally denying Wall Street banks of profit from foreclosures and all the profitable events leading up to foreclosure, the vast inequality of power and wealth can be addressed, at least in part.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
*

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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT.  IT IS NOT A SHORT PROCESS IF YOU PREVAIL. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
*
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The Problem With those Powers of Attorney

Just because a power of attorney appears to be facially valid doesn’t  mean that it IS facially valid, nor that it is substantively valid.

Sign Petition to Change the rules to Protect Homeowners from Fraudclosure.

Powers of Attorney are part of the strategy engineered by investment banks on Wall Street. Here is the problem with the POA or LPOA strategy.

In summary it is merely part of a larger strategy that seeks to create the illusion of real claims by real parties when in fact no such claim exists and no claimant exists. the claimant never gets the proceeds of foreclosure sale.

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The reason they do it is to insert an intermediary who can claim plausible deniability and that they were just following orders. It also serves the purpose of creating the illusion of a representative capacity between principal and agent.
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And that serves to create the illusion that the “principal” is somehow relevant to the transactional documents with the homeowner — although they never come right out and say that (because it is untrue).
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So the introduction of a Power of Attorney or Limited Power of Attorney is merely sleight of hand maneuvering to get a judge to believe that nobody would have gone to the trouble of creating and executing these documents unless there was something real going on. Unfortunately most lawyers, including those who represent homeowners in foreclosure, believe that to be true. As a result they completely miss the strategy that works in defeating such actions that are falsely labelled as foreclosures.
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Here is the truth.
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No POA ever gives anyone the right to claim ownership, control, administrative rights or the right to enforce any obligation of any homeowner. Instead it says it gives rights to speak for a label which may or may not be a legal entity — i.e., a “trust” which in fact is either nonexistent or “inchoate” under law.
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No trust, no matter how well written, creates a valid legal trust unless and until something of value is entrusted to the named trustee to hold for the benefit of defined beneficiaries upon certain terms expressly set forth in the trust. If the trustee does not own the alleged obligation, then the trust is irrelevant to any claim or proceeding.
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No named “trustee” has ever been party to a transaction in which the named trustee has ever received something of value from a seller or settlor who conveyed anything to the named trustee much less ownership of any obligation, note or mortgage from any homeowner.
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The existence of a note and mortgage is generally construed to be prima facie evidence of the existence of a loan agreement. But the absence of any “lender” conduct of the counterparties to those transactional documents demonstrates conclusively that there was no meeting of the minds. This leads to the counterintuitive conclusion that the investment banks wanted the transaction to look like a loan but but were completely unwilling to be considered “lenders” for purposes of compliance with lending statutes.
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The homeowner had every reasonable basis to think he/she was getting a loan — which means that there was a lender with a risk of loss and who therefore would not underwrite a transaction that was doomed to fail. Instead the real parties in interest, operating through dummy entities, were intentionally creating agreements that were extremely likely to fail. This enabled them to bet against the viability of those agreements. Therefore the less the quality of the appraisal, the loan terms, the household income etc., the more certain the investment bank could be of making money though failure of the DATA (not the debt) to perform. But since the investment banks and the homeowners had entirely different transactions in mind, there could be no meeting of the minds and there never was.
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None of the counterparties or their representatives ever considered themselves to be lenders. None of them ever purchased any obligation from a homeowner and registered such purchase as an asset receivable from a homeowner nor did they make an entry on the liability side of their balance sheet as a reserve for bad debt. Clearly nobody on the other side wanted to be liable as a lender for violations of lending statutes. None of them wanted to be “lenders.” Hence the transactional documents do not represent  meeting of the minds.
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Therefore, every such Power of Attorney grants nothing. It might be facially valid but it is not substantively valid because the purported grantor owned nothing and therefore could grant no powers over assets that were not owned.
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Note that I no longer refer to “loan documents.” Instead I refer to transactional documents. That is because I no longer believe that the transaction involving the homeowner should be referred to as a loan, even though that was what was intended by the homeowner. It wasn’t intended as a loan by anyone else who was directly or indirectly a counterparty to the transaction with the homeowner.
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In nearly all cases, the original transactional documents referred to the purchase of the homeowner’s consent and rights to resell personal data. The part of the transaction requiring payments from the homeowner was merely a vehicle for reducing the consideration paid for that consent. And the only place it is obliquely albeit not directly referenced as a loan is in actions that are falsely labelled as foreclosures. In all other transactions and documents the subject is clearly the sale and trading on data, not ownership of any debt owed by anyone.
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In a court of equity (i.e., foreclosure) the payment of consideration concurrent with an obligation to return that consideration should be treated as no consideration.
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Hence the apparent contract is rendered unenforceable for lack of consideration. This construction does not produce any financial loss to any party who paid consideration to the homeowner. All such parties are richly rewarded for procuring the signature of the homeowner far in excess of any claim for repayment of the consideration paid for the homeowner’s consent. This construction merely restricts the profits of the players in “securitization” to a level that is fair and proper after full disclosure.
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Further, in a court of equity, the payment of consideration for the consent of the homeowner to allow sale and resale of his personal  financial data should have been disclosed, was legally required to be disclosed and failure of which disclosure is a basis for the court to use its inherent authority to determine the amount of the compensation to be fairly paid to homeowners.
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That amount would be equal to what homeowners would have demanded in general and what investment banks would have offered as incentives in a free market with full disclosure.

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

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

Magic Bullet? Maybe this: the foreclosure “team” are all witnesses, not claimants

The fact that the foreclosure players know — or even witnessed — the fact that you refused to make any further payments makes them a witness, not a claimant. 
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The investment banks say they are not liable as lenders for noncompliance with lending laws. OK. A good lawyer can make a powerful argument for estoppel — the investment banks cannot take one position — that it wasn’t a loan in terms of regulation of lenders   — and then that it is a loan so they can foreclose without a creditor.
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Two wrongs don’t make something right. The fact that they used a shill as the originator doesn’t mean they are allowed or should be allowed to use another shill to falsely invoke foreclosure laws and procedures. You can’t foreclose on a debt that does not exist.
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Most homeowners take out their frustration by attacking the judge or the opposing lawyer. This is a mistake on many levels.
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My concern here is that you are far too interested in two subjects that have the least probability of you achieving anything. The object of your ire is understandable. But you may be playing into the hand of the banks if you continue.
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The Judge, even if he or she is the most reprehensible person on Earth, is simply untouchable without very specific evidence that links the Judge to a corrupt scheme in which the decision of the Judge is directly tied to the scheme and where the Judge receives a  specifically identified reward for a corrupt decision. This does not exist in your case and it rarely exists in any case. So attacks on the Judge’s integrity or intelligence will provoke what they would when you attack anyone for anything. They get defensive and antagonistic — just the opposite of what you need.

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The foreclosure mill, even if they too consist of the most reprehensible human beings on the planet, is considered immune from liability for misrepresenting things in court. You don’t need to agree with this for it to be true. And railing against that fact will get you nowhere. I have tried to go after the lawyers and the result has been consistently negative — claim dismissed because of “litigation immunity.”
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So going after the Judge and the lawyers is a waste of valuable time, money and energy — something that the banks need you to do because they are sitting on a plan that claims money due when there is no money due to them, if at all. That is foreclosure.
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So if you are addressing the Judge for example, you first do what you must do whenever you are attempting to establish rapport with anyone — find common ground. You talk about obvious things about which you all agree so you are perceived as reasonable.
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THEN you move on to your argument about how this situation does not lead to the same result as the conventional case of foreclosure where an actual creditor is actually claiming a right to payment of an actual debt that is actually carried on its books as an asset receivable, which means that nonpayment did in fact cause it financial injury.
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Under our laws and just plain common sense, if you see someone rob a bank for example, then you, as a witness, have no right to sue the robber for the money they stole; true simply because they didn’t steal it from you. Why should you get any money that was stolen from the bank? And that is your point. The fact that the foreclosure players know — or even witnessed — the fact that you refused to make any further payments makes them a witness, not a claimant. 
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And yet…. if you do make the claim against the robber and the bank failed to press its own claim, you could get a judgement especially if the robber failed to raise any defenses. After all he knows he stole the money. [I am not equating homeowners with robbers. I am equitating banks with a unscrupulous version of you, making a claim to which you and  they are not entitled to receive any redress under law or common sense.]
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The question is not whether you owed the money or had any reason to pay or not to pay. The question is why are they appearing as claimants instead of witnesses in a claim by someone who actually did suffer some financial loss caused by your alleged nonpayment.
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And the question is why isn’t such a person (creditor) present in the foreclosure? Where are they? Who are they? Do they exist? If they don’t exist, was the transaction with the homeowner actually a loan transaction or was it something else entirely that was disguised as a loan transaction? 
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So you START with the premise that all legal debts should be paid to the obligee — the person to whom the debt is owed. Everyone agrees with that. And you follow with the premise, under the U.S. Constitution, that only people who have been injured can seek redress in court. You get the judge to agree that everyone agrees that if someone fails to pay a mortgage debt to someone who owns it, they should be subject to foreclosure, forced sale of their home, no matter how long it has been in the family, and evicted if they try to stay anyway.
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You talk about it as though you are in favor of foreclosure because that is where every judge starts. You don’t talk about foreclosure as though it is a new scheme that doesn’t have any support in logic or law because foreclosure has existed for centuries. It must exist because if someone parts with their money to give you a loan, they must be able to force repayment if you are unable or unwilling to make repayment. But that does not mean that a witness to nonpayment can make a claim.
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And you must take the time to study and understand the true nature of what has been really been going on. Securitization is by definition the issuance of securities. While it can be a source of financing it is just as often a means to distribute risk. The reason why thinly capitalized companies like DiTech and Quicken Loans were given hundreds of millions of dollars to sell trillions of dollars of low interest loans was not because the investment banks had come up with a new formula to squeeze profit out of low interest payments.
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It was because the return of principal and interest payments was irrelevant to their plan. The “failure” of such repayment plans was a centerpoint of the plan and they bet on it, making more and more money as each “loan” “failed.” Their plan was to sell securities. And the more securities they sold the more money they made because unlike all other securitization plans, they were not selling securities from an independent legal entity (client) that was going into business and using the proceeds to conduct or grow its business.
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Instead they were selling securities for themselves, taking the money and using as little of it as possible to cover the scheme. The money used to create the illusion of loans was a cover for the real scheme.
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The money, if any, that was sent to closing agents to close a transaction that was inaccurately described as a loan transaction was not delivered by the banks with the intent of creating a conventional loan product subject to lending laws. That would have made the investment bank a lender and they would have been named as such on the note and mortgage.
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Quite the contrary. It was designed to evade lending laws in a scheme that had has its hallmark claims by the investment banks, who were running the show, that the scheme did not subject them to lending laws and was not a loan. 
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By designating a false flag “originator” who was contractually unrelated to the investment bank and who received fees and bonuses from acting as though it was a lender, the banks now claim that they are not regulated by lending laws.
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My position is take them at their word and stop fighting them.
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OK, you are right but the only reason you are not subject to lending laws is that you did not engage in lending. So the money that arrived at the closing table was disguised conditional payment in exchange for a the homeowner’s signature on documents that could be used to fill in data on a spreadsheet.
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It was that data (not the loans) that was sold dozens of times thus relieving the investment bank from any risk of loss. The money was a fee paid to homeowners who were lured into transactions that were fraudulently disguised as loans but were in fact part of a plan to steal money and homes.
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Foreclosure is sought because it represents still more revenue and because by not foreclosing the banks would be admitting this wasn’t a loan in the first place. The money that went to homeowners or which was paid on their behalf was not a loan — it was only part of payment of a fee to which the homeowner was entitled (under quantum meruit) but knew nothing about and never had any opportunity to engage in free market negotiation.
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The reason why (a) there is no creditor and the reason why (b) all the documents are fabricated and (c) all this testimony is pre-scripted for perjury is simply that it wasn’t a loan to begin with — and nobody now is carrying the loan as an asset receivable on their books. NOBODY! The loan does not and never did exist. And that is because the money received was not a loan, it was payment for signature and implied consent to use private data for resale.
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The most basic law of contract is that there must be, at the outset, a meeting of the minds. The homeowner went into the transaction believing the false assertions that the money was a loan — instead of consideration for use of his or her private financial information and his or her signature.
*
The investment bank went into the transaction through a myriad of sham conduits posing as “lenders” for exorbitant fees. The investment banks were not lending money. They were paying money so they could issue and profit from the sale of securities in “securitization.” Without that there would have been transaction at all. Refer to the “Step Transaction Doctrine” and “Single Transaction Doctrine” for support in case decisions and statutes. You’ll find multiple references on this blog from the early days (2007–2008) of this blog.
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The investment banks say they are not liable as lenders for noncompliance with lending laws. OK. A good lawyer can make a powerful argument for estoppel — the investment banks cannot take one position — that it wasn’t a loan in terms of regulation of lenders   — and then that it is a loan so they can foreclose without a creditor.
*
But to get the judge to even consider such an apparently ridiculous assertion you need to demonstrate, step by step, relentlessly, that the foreclosure team has nothing. That doesn’t happen in one pleading or one hearing. It ONLY happens if you know and consistently use and apply the rules and laws relating to court procedure, discovery and trial objections.
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PRACTICE NOTES:
This argument can be made directly where the transaction was originated by the investment banks. Don’t get lost in the “warehouse lender” thickets — they were just one of many steps in a the circuitous process by which investment banks gave money to homeowners.
*
But where a real loan was actually made by a real lender and then acquired by investment banks through what they called “securitization” then the argument shifts to the idea that the debt was extinguished at acquisition. this is because when all was said and done there was no creditor who was holding the debt as an asset receivable on its books.
*
The fundamental point here, which can be corroborated with any knowledgeable person in the world of finance, is that neither the delivery of money to homeowners nor the acquisition of the debt after a real loan was originated was related to securitization as it had ever been done in the past.
*
Securitization is simply the process of dividing up an asset into shares and selling them. This was never done in connection with these transactions. Nobody ever received a share of any loan. Securitization in this context consisted solely of the issuance of securities by the securities brokerage firm (investment bank) posing as an underwriter for a “trust name” that was merely a fictitious name of the the underwriter itself. That is not securitization. The job of the litigator is to gently and relentlessly lead the judge to conclude that this might indeed be the case and thus deny the foreclosure.
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Neil F Garfield, 73, is a Florida licensed attorney. He has received multiple academic and achievement awards in business and law. He is a former investment banker. securities analyst, and financial analyst.

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Investors Were Not Injured By Non Payment from Homeowners. They Were Injured by Non Payment from Investment Banks

The trap door is thinking that investors were hurt by borrowers failing to make payments when in fact they were injured by brokerage companies not paying them regardless of how much money was being received and created. This trap door inevitably leads one into thinking that the money proceeds from a forced sale of property in foreclosure are being paid to investors. That is just not true.

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Exchange between me and fairly knowledgeable client:

Client: “But if investors put up the money then they would be the injured party if borrowers don’t pay, or at least if things were normal.”

From me:

Incorrect. Investors were injured by  the failure of brokerage firms to make payments to them that were purely optional. Investors were not injured by failure of borrowers to pay their mortgage payments as defined in the promissory note.

At the option of the investment bank, the investors who paid value for the certificates issued by the investment bank, continue to receive payments. Those payments come from a reserve pool of money funded entirely by the investors initial purchase of certificates (but they are labeled “Servicer advances”).

You are falling through the trap door that the banks and their lawyers have created. Investors did not put up money to purchase your loan or acquire it or originate your loan. They had no legal part in that unless a judge were to enter an order stating that while the form of the transaction says they had nothing to do with your loan, the investors were nonetheless substantively the “lenders.” The banks and the investors would argue against that since it would make investors liable for lending and servicing violations.

You are presuming something that the banks want you to presume. The truth is that the investors were told that they would be paid by the brokerage firm that set up the plan of what they called “securitization.”

The promise received by investors was from the brokerage firm not the borrower. The money on deposit with the brokerage firm was used to originate or acquire loans as a cost of doing business, to wit: the business of issuing and trading in derivative securities to which neither the investors nor “borrowers” were parties and therefore received no compensation despite the fact that without them none of those trades could have taken place.

The promise (certificate or mortgage bond) was issued in the name of a “trust” that at best was inchoate” under law (i.e., “sleeping”). The trust name was merely a business name under which the brokerage firm was doing business. The promise was not secured by any interest in the debt, note or mortgage on any loan. In fact, at the time of investment there were no loans in any portfolio that were the subject of the investment. There was a promise to aggregate such a portfolio and the list of loans attached to the prospectus is subject to the disclaimer that it is not the real list but rather an example of the kind of data the investors will see when the offering of certificates is complete.

The certificates themselves do not convey and right, title or interest to the debt, note or mortgage on any loan. The investors merely hold an unsecured promise to pay where the promissor is the brokerage firm (Investment bank) and the amount of payments to be received by investors are indexed on the data for an aggregate of loans; but such payments are entirely dependent upon the sole discretion of the investment bank (Brokerage firm) and the performance of the index — i.e., the performance of borrowers.

Investors thus receive money as long as the investment bank wants them to receive money regardless of actual performance of loans. The non performance of borrowers represents an excuse for the investment bank to stop paying the entire amount of their promise, if the managers of the investment bank so choose.

But since the investment bank (brokerage firm) was using money deposited on account the net result is that the investors paid value for the origination or acquisition of the debt but never got to own it under current law.

And the investment bank briefly became the “owner” of the debt without having actually paid for it, and then created a “sale” at its trading desk in which the loans were “sold” to the “trust” at an enormous premium (second tier yield spread premium) from the amount that was actually loaned to borrowers at much higher interest rates than the amount demanded by the investors. 

Bottom Line: Under current law in all jurisdictions nobody qualifies as the owner of the debt by reason of having paid for it because those two functions were split by the investment bank.

The value was paid by investors who did not receive ownership of the debt. The ownership of the debt as in the hands of the brokerage firm that started the securitization scheme and then transferred to itself using the name of the fictional trust. Hence the brokerage firm, directly or indirectly continued to “own” the debt without having actually paid for it. This is legally impossible under current law.

Under current law, nobody can claim to own or enforce a debt without having paid value for it. A transfer of rights to a mortgage is a legal nullity unless there is a concurrent payment of value for the debt. The only possible claimant in a court of equity is the investment bank, but they continue to hide behind multiple layers of sham conduits who actually have no contractual or other relationship with the investment bank. All such “securitized” loans are therefore orphans under current law where the debt, note and mortgage cannot be legally enforced.

The only way they have been enforced has the acceptance by the courts of erroneous presumptions that effectively reconstitute the debt, note and mortgage out of the prior transactions that split it all up. This produced the opportunity for profits that were far in excess of the loan itself which was viewed by the investment bank as simply a cost of doing business rather than an actual loan. Besides violating current law under the Uniform Commercial Code it also violates public policy as explicitly enunciated under the Federal Truth in Lending Act and public policy stated in various state laws prohibiting deceptive lending and servicing practices.

Those excessive profits should, in my opinion, be the subject of reallocation that includes the investors and borrowers without whom those profits could not exist. These are the actions for disgorgement and recoupment to which I have referred elsewhere on this blog. But in order to have real teeth I believe it is necessary to join the investment banks who had a role in the claimed “securitization.”

In affirmative defenses you can name a third party but you must express the defense as something for which the actual named claimant is vicariously accountable. Otherwise you need to file a counterclaim, the downside of which is that many such claims are barred by the statute of limitations whereas affirmative defenses are not usually subject to the statute of limitations.

The reason you can’t get a straight answer to discovery is that ownership and payment have been split between two entirely different parties. Yet current law demands that the enforcing party be (a) the owner of the debt, note and mortgage and (b) the party who paid value for the loan. In most situations involving claims of securitization that requirement cannot and is not meant to be fulfilled.

Clearly  changes in the law are required to allow for securitizations as practiced. But in order to do that the laws regarding disclosures to investors and borrowers must get far more specific and rigorous so that freer market forces can apply. With transparency market corrections for excessive or even unconscionable transactions are possible — allowing both borrowers and investors to bargain for a share of the bounty created by securitization arising from the investment of investors and borrowers.

Current law supports disgorgement of such profits because they were not disclosed. But current law fails to identify such “trading profits” as arising from the the actual transaction with investors, on one hand, and the borrowers on the other hand. This might be accomplished in the courts.

But a far better alternative is to level the playing field with clearly worded statutes that prevent what had been merely intermediaries from draining of money and other value from the only two real parties in interest as defined by both the single transaction doctrine and the step transaction doctrine.

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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========================
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.

Just to be clear, MERS is absolutely nothing.

For some reason I have been getting more questions about MERS lately. My analogy has always been that MERS is like a holograph of an empty paper bag. So here are some basic factors for the checklist and analysis:

  1. MERS never signed any contract with any borrower.
  2. MERS never has any contractual or other legal relationship with investors (certificate holders) or Government Sponsored Entities (GSEs) like Fannie, Freddie or Sallie.
  3. MERS never signed any agreement or contract with most named “lenders.”
  4. MERS never signed any agreement or contract with respect to any specific loan transaction or acquisition.
  5. MERS was never the Payee on any note from a borrower.
  6. MERS never loaned any money in any residential loan transaction.
  7. MERS never paid any money for the acquisition of any residential loan agreement, debt, note or mortgage.
  8. MERS never handled any money arising from the origination of the loan.
  9. MERS never handled any money raising from administration of the loan.
  10. MERS never received a loan payment.
  11. MERS never disbursed any money to any creditor of a debt created by a loan.
  12. MERS does not conduct meeting of its board of directors to authorize any officer to sign any document.
  13. MERS never asserts warrants that the information maintained on its platform is true, correct or even secure from manipulation.
  14. MERS’ members can enter the system to insert any data  they want to insert, delete, or change.
  15. MERS never claims any right, title or interest in any debt, note or mortgage. In fact, its website disclaims such an interest.
  16. MERS never maintains any agency relationship with any actual lenders.
  17. MERS never retains any agency relationship with any named lenders who are creditors after the loan is consummated.
  18. MERS has no successors.
  19. MERS never has power on its own to assign any right, title or interest to any debt, note or mortgage.
  20. MERS never has power as an agent to assign any right, title or interest  to any debt, note or mortgage except for a principal who does have a right, title or interest to whatever is assigned.
  21. MERS never warrants that it has any agency relationship or power of attorney on behalf of any party whom it warrants is its principal and who owns the right, title or interest to any debt, note  or mortgage.
  22. MERS never has any legal relationship or retainer with any lawyer seeking to enforce the note or mortgage in any transaction or court proceeding.
  23. MERS never has any legal relationship or agreement with any company asserted to be an administrator or servicer of a residential loan.
  24. MERS never has any legal relationship or agreement with any trustee of any REMIC trust.
  25. MERS has been sanctioned, banned and fined in many states along with the parties who claim rights through the use of MERS. Despite that MERS has never changed its practices or procedures.
  26. Any document of transfer of rights to a security instrument that shows a signature of a person who is identified as an officer or employee of MERS is a false document, with a false signature containing one or more false utterances.
  27. MERS is always a naked nominee possessed with no powers, rights or obligations and possessed with no rights, title or interests in any loans originated or acquired by third parties; however the courts have held that if a new party had paid for the debt, then it may instruct MERS to execute an assignment even if the original principal no longer exists.
  28. MERS is never party to any part of any loan transaction or loan acquisition in which consideration is paid.
  29. MERS is always a diversion from the true facts. In 2008 16 banks took my deposition for 5 1/2 days straight regarding the status of MERS. I said then and I say now that the use of MERS is less meaningful than using the name of a fictional character like Donald Duck.
  30. Despite thousands of attacks on me and my work over 12 years, not one memo, treatise or article has ever been published that said otherwise.
  31. No expert opinion has ever been given by affidavit or in live testimony to the contrary.
  32. In fact, not even a blog article or fake news article has ever said MERS is either a legitimate alternative to tracing title through county recording or a legitimate beneficiary under a deed of trust or a legitimate mortgagee under a mortgage. 
  33. The asserted presence of MERS on any document or pleading or notice always means that the lawyers, servicers and other third parties are seeking to conceal material facts from the borrower and from the courts.

What is Fair?

The question should not be the bipolar question of who gets a “free house,” with the answer being the borrower or a party claiming entitlement to enforce. The question should be how to create a new equitable and legal infrastructure to clean up the mess that the banks created without unnecessarily penalizing either the investors who put up the money in the first place and the borrowers who put up their lives.

This is a question that BOTH the courts and the legislatures must face for failure to do so compounds the already compounding chaos and tragedy that befell our nation when the scheme initially collapsed in 2008.

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

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 borrower was lured into a loan contract in which she thought that the named lender had a financial interest in the outcome of the contract. The actual lender was a remote investment bank about whom she had received no disclosure and, as an average person of ordinary knowledge and means, had no access to information that would revealed the true nature of the contract.
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Rather than seeking to conform to law in selling such loan products the real lender sought to avoid the law.
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Rather than making money through the receipt of interest payments, the real lender intended and quickly divested itself of any interest or expectation of receiving interest or principal payments. The real lender also divested itself all of all risk of loss associated with payments. In short, the real purpose of the loan was to create multiple vehicles that could be sold as private contracts, resulting in the receipt of money that far exceeded the principal amount of the loan made to the borrower.
*
While ordinary residential homeowners normally rely on the premise that the loan’s purpose was to generate revenue and profit for the lender through the receipt of interest payments, her named lender would not and did not receive interest payments and had no profit except from fees paid by the remote investment bank through conduits.
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Thus the actual lender entered into a loan arrangement without contract for the sole purpose of selling various attributes of the loan to as many investors as possible using as many complex financial instruments as they could conjure. The borrower had entered the arrangement believing that the named lender was the actual lender and that all compensation arising from the consummation of the loan was disclosed.
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The actual lender retained no direct interest in the performance or outcome of the loan. The borrower was unaware that they had signed up for an arrangement in which the other side of the equation would create millions of dollars in “trading profits” arising from the declared existence of the loan, along with her name, reputation, signature and the collateral of her home.
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Hence the goal of the lender was to create such loans regardless of quality. In fact, the lower the quality the more profit they made. And foreclosures became the vehicle by which the actual lender (investment bank) covered up the violation of federal and state lending statutes and common law doctrines of fair dealing and public policy.
*
Since judges thought that the proceeds of a foreclosure sale would go to the owner of the debt, and thus pay down the debt, they thought that there was little harm in granting foreclosures even if the paperwork was somewhat “dodgy.” But an increasing number of judges are questioning two main issues.
*
The first issue, which has been repeatedly voiced by hundreds of judges since 2008, is why there have been so many changes in the name of the servicer who supposedly was authorized to administer the loan and whether the servicer was actually administering the loan for or on behalf of an owner of the debt as required by law. Because without that its records would not  be allowed in as an exception to the hearsay rule. (The claimed “servicer” would just be a company that had intervened for its own financial interest which included fees for enabling a successful foreclosure. Hence their records would not have intrinsic credibility of a third party who had no interest in the outcome of litigation).
*
The second issue which is being raised with increasing frequency is why it was necessary to create documents of dubious origin and authenticity? In an industry that created virtually all the paperwork required for closing loan transactions, and created the industry standards for maintenance of such documents how and why did they manage to lose or destroy the original promissory note so often? (And why was it necessary to fabricate any documents?)
*
And a third issue which is only now being discussed with some earnest, is whether the right to resell the loan automatically includes the the right to use the personal data of the borrower for many sales of many of the loan attributes that were not contemplated by the borrower because they were hidden from the borrower.
*
Europe is ahead of the U.S. in understanding that personal data is a property right. But laws in the U.S. do answer the question. Where the contract in known by only one side to have attributes that are withheld from the other side it is subject to the doctrine of implied contract (assumpsit) in which the party discovering the true nature of the contract may enforce a right to receive compensation for the attributes that were previously unknown.
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There can be little doubt that nearly all loan arrangements for residential property as collateral since 1996 have all the elements of an implied contract that is far beyond the scope of the written contract. Hence there can be no doubt that the borrowers are entitled to some form of compensation or damages arising from the implied contract and/or the violation of disclosure requirements in the Truth in Lending Act and state lending laws.
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The scope of this issue is a fact. In 1983 there was zero in nominal or actual value of instruments deriving their value from debt. Today there is over 1 quadrillion ($1,000,000,000,000,000) dollars in the shadow banking market. The total amount of fiat (actual) currency in the world is only 85 trillion ($85,000,000,000,000) dollars.
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The meaning is clear: for every dollar ($1.00) in real transactions of fiat currency there is, on average, $11.75 in trading profits for the banks and investors who trade in that market. That means that for the average of loan of $200,000 it is almost certain that the profits generated from the origination or acquisitions that loans was on average $2,352,941. In other words, payoff on the loan was incidental to the loan transaction — not the point of the loan arrangement.
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The current claim by the banks is that this enormous profit from lending is the result of separate contracts and transactions that should not be included as part of the original contract with borrowers.
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The claim by borrowers, while phrased in different ways, is that somehow the borrowers should be receiving some compensation or allowance as part of the package since the base transactions from which all value was derived for further instruments or agreements was their own signature, name, reputation and home as at least apparent collateral. Borrowers consider the non disclosure of the actual intention of the actual lender to be base violations of TILA and state lending laws.
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In addition, with the proceeds of foreclosure sale being distributed as revenue rather than the payoff of a loan receivable, existing law is insufficient to deal with the crisis of nonpayment by borrowers most of whom have been paying servicers who have been feeding such payments into large pools of cash from which payments are made to the holders of “certificates” who only have a right to receive payments from the investment banker who was doing  business under the name of a nonexistent trust.
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In some sense the holders of such certificates are the ones most likely to be considered owners of the debt. But the certificates themselves and the accompanying contracts (prospectus) clearly state that the certificates convey no right, title or interest in the borrower’s debt, note or mortgage.
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There is no right of investors to enforce the certificates against borrowers and the certificates are not “mortgage backed” despite claims to the contrary. This has already been decided in several tax cases. Their exemption from securities regulation is therefore unfounded.
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This has resulted in various parties posing as authorized enforcers of the debt and the security instrument ( mortgage or deed of trust). Regardless of their claimed title or status, all such entities share one controlling characteristic: they all initially or eventually claim to be acting in a representative capacity even when they present themselves as the “holder” of the note or any other claim to rights to enforce the note or mortgage.
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The evolution of such claims lends some perspective. Initially foreclosures were brought in the name of “servicers” and when challenged the servicing claims were then accompanied by an denial of securitization or the existence of any trust that owned the debt, note or mortgage. As it turned out the lawyers for such entities were telling the truth — there was no such trust nor would it have been the owner of the debt, note or mortgage even it had existed.
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In addition foreclosures were brought in the name of Mortgage Electronic Registration Systems, Inc. (MERS).
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Neither the servicers nor MERS ever could assert or allege that they had any right, title or interest in debt, note or mortgage. In the case of MERS it could not even alleged possession of the note or mortgage and had handled no money whatsoever in relation to any loan.
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And in all cases the proceeds of foreclosure sales permitted by the courts were distributed as revenue to several participant claiming authority to act, including the lawyers, servicers, master servicers, and the investment bank. In no case were such proceeds distributed to the owners of certificates issued in the name of a “trust.” Several forensic analysts tracked the “credit bids” and quickly discovered that those bids were not submitted by a creditor.
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The existence of the actual debt from the borrower has been converted from actual to theoretical; this explains the lack of any identified party who is the owner of the debt. This is not a problem created by borrowers who knew nothing of this scheme nor do they now understand it.
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This all results in the posing of three issues that need to be addressed head on if this crisis is to end.
  • The first which everyone has voiced since the beginning of the crisis is whether the homeowner should get a “free house” merely because the paperwork is now out of order.
  • The second is whether the current parties receiving revenue from the sale of foreclosed homes should be allowed to receive a “free house.”
  • The third is whether the borrowers have always been entitled to receive compensation for the larger implied contract in which compensation and revenue was generated from the origination or acquisition of their loan.
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Since this is a pervasive issue occurring through tens of millions of loan contracts, the best possible vehicle for addressing a remedy is through government action that goes far beyond the nominal settlements that have been announced thus far.
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All stakeholders should be given a voice at this table. Any approach that is punitive only to one particular class of stakeholders should be rejected. Laws need to be changed to reflect the modernization of financial instruments, only after consideration of the effects of such changes. Any law that simply makes it easier to foreclose or to merely cover up the title and legal errors that have been occurring for 20 years should also be rejected.
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If we are to make sense out of this chaos that was in fact conjured and created by investment banks, then we need changes in our property laws, contract laws, securities laws, lending laws, laws of civil procedure and due process, and laws of evidence. If the banks have put themselves in a position where they cannot foreclose on mortgages, that should not be the end of the inquiry.
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The question should not be the bipolar question of who gets a “free house,” with the answer being the borrower or a party claiming entitlement to enforce. The question should be how to create a new equitable and legal infrastructure to clean up the mess that the banks created without unnecessarily penalizing either the investors who put up the money in the first place and the borrowers who put up their lives. 

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.
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 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.

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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.
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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.
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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.
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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.
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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.
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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.
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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.
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