Beach v Ocwen: 1997 Decision that will be used by banks and servicers against rescission

For Further information and assistance please call 954-495-9867 and 520-405-1688.

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

See Beach v Ocwen Fla. Supreme Court

I have no doubt that the Banks will attempt to use this decision — but it still is trumped by Jesinowski and other Federal decisions on equitable tolling. Having the right to cancel/rescind is described as extinguished by TILA regardless of the circumstances — including the absence of any enforceable loan contract.
This decision (1998) was rendered far before the idea of securitization was introduced into mortgage litigation. The interpretation of the extinguishment of the underlying right made sense in the context of loans from Bank A to Borrower B. In the era of securitization you have all kinds of questions — like when the transaction was “commenced”. The courts say it is when the “liability” arose. I agree — if we are saying that the consummation of the transaction begins when the lender loans money to the borrower. But in most cases we see that the lender did not loan money to the borrower and that is corroborated by the absence of anypurchase transaction, for value, when the alleged loan is “transferred.” There is no reasonable business explanation of why anyone would release an asset worth hundreds of thousands of dollars without receiving payment — unless it wasn’t an asset of the “seller” in the first place.The presumption is that TILA rescission rights run from the date the liability arose from the Borrower to the Lender. If the Lender was not properly disclosed, then one of two things are true: (1) there is no loan contract which means a nullification and quiet title action is appropriate or (2) until the real lender was disclosed, the transaction was not consummated. That might mean that both the three day rescission and the three year rescission are in play. If the position of the foreclosing party is that a REMIC Trust was finally disclosed to the borrower — and that the Trust was the lender, then disclosure is complete. But that isn’t what happened.

The ultimate decision here is going to be on the question of whether there is in fact a loan contract, and, if so, who were the parties to it? If there was no contract, it is the same as rescission by operation of law. No new rights arise on assignment or even sale of the loan from a pretender lender — unless the purchase was in good faith FOR VALUE and occurred without notice of borrower’s defenses and NOT when the loan was already in “default.” This narrow exception arises under the UCC for a Holder in Due Course to be Protected if they meet the narrow criteria stated in the UCC, article 3, and the narrow enforcement criteria for the mortgage expressed in Article 9.

The so called default is another hidden issue. If someone “acquires” the note and mortgage where the Borrower has already not paid or stopped paying on the alleged loan, then (1) it isn’t negotiable paper and (2) it provides notice that the borrower might not be paying because they don’t owe the party or successor on the note and mortgage (and never did).
When the mortgage crisis began, the banks and servicers were claiming that there were no Trusts and that they could file suit or initiate non-judicial foreclosure without any reference to trusts. That was why forensic audits were initially required — when we thought that REMIC Trusts were the true players. Banks and servicers argued convincingly in court that the Trust was irrelevant. Now in most cases (with some notable CitiMortgage, Chase and BOA exceptions) the Plaintiff or beneficiary is identified as a Trustee, bank or servicer (US Bank usually is the Trustee these days) on behalf of a REMIC Trust. They are now saying that they have the right to be in court or initiate foreclosure because (1) the Trust received an assignment and endorsement of the note and mortgage (2) the servicer has a right to represent and even testify for the the Trustee on the basis of the rights set forth in the Pooling and Servicing Agreement or by virtue of Powers of Attorney that magically appear at trial.
So the banks, servicers and their attorneys are side-stepping the issue of consummation of the transaction. They are withholding the information where the right of rescission would first become apparent to the borrower. When they withhold the information longer than 3 years from the date of the purported “loan closing”, they claim the right of rescission has expired. That is cynical and circular reasoning. That “closing” may be the point in time that the borrower’s “liability” arose, but the liability did NOT arise with the creditor being the party named on the note, mortgage and required disclosure documents.
Instead, the Payee was a naked nominee regardless of whether the “lender” was a thinly capitalized mortgage broker or a 150 year old bank.
Neither one loaned the money. In both cases there were using money essentially stolen from clueless investors on Wall Street who advanced money for the purchase of shares (mortgage backed securities) issued by an unregistered Trust that existed only on paper, had no bank account, and never received the proceeds of the shares that were supposedly sold to pension funds and other “investors” (actually victims of a fraudulent scheme).
The real answer is, as I have repeatedly said, that there was no loan contract and therefore the note and mortgage were induced to sign by both fraud in the inducement and fraud in the execution.  But the courts may turn to a foggier notion that the disclosures were intentionally withheld and that this entitles the borrower to equitable tolling of the 3 day or three year statute of limitations. It seems highly doubtful that the US Supreme Court will reverse itself.
If they deny equitable tolling by allowing stonewalling from the Banks then no new Bank would be able to enter the picture which is the whole purpose of the TILA rescission. While courts might find the argument from the banks and servicers as appealing, history shows that the US Supreme Court is just as likely to effectively reverse thousands of decisions based upon the wrong premise that rules and doctrines for common law rescission can be applied to TILA rescission.
Yet my point goes further. The express wording of the TILA rescission as affirmed by a unanimous Supreme court in Jesinowski is that the rescission is effective by operation of law when it is dropped in the mailbox — and that there is nothing else required by the borrower. If the “lender” wants to challenge that rescission it must do so before the 20 day deadline for compliance — return of canceled note, satisfaction of mortgage and disgorgement of all money paid. This makes it very clear that stonewalling or bringing up defenses later when the borrower seeks to enforce the rescission is not permissible. The idea behind TILA rescission has been to allow a borrower to cancel one transaction and replace it with another — which means that title is clear for a new lender to offer a first or second mortgage free from claims of the prior pretender lender.
Thus the expected defense from the banks and servicersis going to be that the rescission was void ab initio because of the statute of limitations or some other reason. But these are affirmative defenseswhich is to say they are pleas for affirmative relief in a formal pleading with a court of competent jurisdiction. That court does not have any jurisdiction or discretion to find that the rescission was void ab initio if more than 20 days has expired after the notice of cancellation or rescission was made.Thus procedurally, the express wording of TILA and Jesinowski totally bars the banks and servicers from raising any defenses to the effectiveness of the rescission after 20 days from the date of notice of rescission. To interpret it any other way is to overrule Justice Scalia in Jesinowski. It would mean that the banks and servicers and Trustees could later bring up defenses to the rescission which would completely bar the ability of the borrower to apply for a substitute loan. No lender is going to offer a mortgage loan where they are taking on the risk that they are not getting the lien priority that is required to assure payment and collateral protection.

And the reason why there is no qualifying creditor to bring the action within 20 days will be taken up in an upcoming article “What if a Broker Sold an IPO and Kept the Proceeds? — The True Explanation of Securitization Fail.” Also see Adam Levitin on that.

Rescission: Equitable Tolling Extends Statute of Limitations

For further information please call 954-495-9867 or 520-405-1688

Important Message: This blog should NEVER be used as a substitute for competent legal advice from an attorney licensed in the jurisdiction in which your property is located.

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

see http://openjurist.org/784/f2d/910/king-v-state-of-california-d-m

The most popular question I get here on the blog and on my radio show is what happens when the three year statute has run? The answers are many. First is the question of whether it ever started running. If the transaction was not actually consummated with anyone in the chain of parties claiming rights to collect or enforce the loan it would be my opinion that the three day right of rescission has not begun to run. That would be a remedy to an event in which the note and mortgage (or deed of trust) has been signed and delivered but the loan was never funded by the originator any creditor in the chain of “ownership.” The benefit of the three day rescission is that you don’t need a reason to do it. But in order to do that you need to be careful that you are not stating that there was a closing because that would be consummation and therefore the right to rescind unconditionally ran three days after that “Closing.”

Second is the three year statute of limitations. The same reasoning applies.  But it also raises the question of non-disclosure and withholding information. The rather obvious delays in prosecuting foreclosures on alleged “defaults” are clearly a Bank strategy for letting the 3 year statute run out and then claim the homeowner cannot rescind because the closing was more than 3 years ago. That is where the doctrine of equitable tolling comes into play. A party who violates TILA and fails to disclose material facts and continues to hide them from the borrower should not be permitted to benefit from continuing the violation beyond the apparent statute of limitations. People keep asking why the banks wait so long to prosecute foreclosures. The answer is that it is because they have no right to do so and they are running out the apparent statute of limitations on rescission and TILA disclosure actions.

Third is a procedural issue. According to TILA the “lender” who receives such a notice of rescission is (1) obligated to send it to the “real” lender and (2) must file a declaratory action against the borrower within 20 days in order to avoid the rescission. If they don’t file the 20 day action, they waive the objections they could have raised. So far I have not heard of one case in which such an action has been filed. I think the reason for that is that nobody can file an action in which they establish standing. Such a party would be obliged to allege that they are the “lender” or “creditor” as defined by TILA. That means they either loaned the money or bought the loan for “valuable consideration” just like it says in Article 9 of the UCC. Then they would have to prove that allegation before any burden shifted to the borrower to answer or file affirmative defenses against the action filed by this putative “lender.”

CAVEAT: The doctrine of equitable tolling is remedial as is the statute, but it is fairly strictly construed. I’m am quite confident that the best we will get from the courts is that the 3 day and 3 year rules and other limitations in TILA starts running the moment you knew or should have known the facts that had been withheld from you at “closing.” The fact that you are not a lawyer and did not realize the significance of this will not allow you to delay the start of the statute running after the date of discovery of the facts, whether you understood them or not.  But this is a two-edged sword. The current practice of objecting to any QWR, DVL or discovery question without answering the truth about the claimed chain of ownership or servicers on the loan corroborates the borrowers allegation that the parties are continuing to withhold this information. So a well-framed TILA defense might serve as the basis for enforcing your rights of discovery and rights to answers on your Qualified Written Request or Debt Validation Letter.

Additional Caveat: The doctrine of equitable tolling has been applied with respect to the one year statute of limitations on TILA disclosures but it remains open as to whether it would be otherwise applied. From the 9th Circuit —

“Section 1640(e) provides that “[a]ny action under this section may be brought within one year from the date of the occurrance of the violation.” We have not yet determined when a violation occurs so as to commence the one-year statutory period. See Katz v. Bank of California, 640 F.2d 1024, 1025 (9th Cir.), cert. denied, 454 U.S. 860, 102 S.Ct. 314, 70 L.Ed.2d 157 (1981). Three theories have been used by other circuits to determine when the statutory period commences: (1) when the credit contract is executed; (2) when the disclosures are actually made (a “continuing violation” theory); (3) when the contract is executed, subject to the doctrines of equitable tolling and fraudulent concealment (limitations period runs from the date on which the borrower discovers or should reasonably have discovered the violation). See Postow v. OBA Federal S & L Ass’n, 627 F.2d 1370, 1379 (D.C.Cir.1980) (adopting “continuing violation” theory in some situations); Wachtel v. West, 476 F.2d 1062, 1066-67 (6th Cir.), cert. denied, 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973) (rejecting “continuing violation” theory, statutory period commences upon execution of loan contract); Stevens v. Rock Springs National Bank, 497 F.2d 307, 310 (10th Cir.1974) (rejecting “continuing violation” theory); Jones v. TransOhio Savings Ass’n., 747 F.2d 1037, 1043 (6th Cir.1984) (applying equitable tolling and fraudulent concealment).”

Hats off to James Macklin who sent me this email:

Hang on to your hats fella’s…in Sargis’ ruling … back in 2012…he confirms the equitable tolling principles of TILA as I had argued…just saw this again while reviewing…to wit:
“The Ninth Circuit applies equitable tolling to TILA’s … statute of limitations (King v. California, 784 F.2d 910, 914 (9th Cir. 1986).
“Equitable Tolling is applied to effectuate the congressional intent of TILA.”, Id.
Courts have construed TILA as a remedial statute, interpreting it liberally for the consumer.” (Id. Citing Riggs v. Gov’t Emps. Fin. Corp., 623 F.2d 68, 70-71 (9th Cir. 1980).
 Specifically the 9th Circuit held: “[T]he limitations period in section 1640(e) runs from the date of consummation of the transaction but that the doctrine of equitable tolling may, in appropriate circumstances, suspend the limitations period until the borrower discovers or had the reasonable to discover the fraud or non-disclosures that form the basis of the TILA action.” 
Gentlemen…I give you proof positive that the statute tolls and the fact that the term “consummation” is also subject to broad interpretation as we know…the loan could not have consummated if what we allege is found to be true… However, the non-disclosures language used by the 9th Circuit gives rise to possible myriad rescissions upon discovery of those non-disclosures…
James L. Macklin, Managing Director
Secure Document Research(Paralegal Services/Legal Project Management)

Rescission: Shifting the Burden of Proof

For more information please call 954-495-9867 or 520-405-1688

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

see http://www.foreclosuredefenseresourcecenter.com/top-f-foreclosure-defense-strategies-in-california/truth-in-lending-rescission/

I ran across an excellent article on rescission in mortgage cases that I think is a MUST READ for those who might be affected or entitled to use it. Check the link above. Make sure you check with a knowledgeable attorney licensed in the jurisdiction in which your property is located before you act, but I think there are very good reasons to send out the notice of rescission in virtually all cases.

From my reading of the Supreme Court’s decision and other cases the notice need only be a statement that the “borrower” hereby rescinds the transaction with appropriate reference to the loan number. It would be wise to attach the note and mortgage, in my opinion. It does not appear that you need to state your reasons and I would suggest you not do so. Basically the statute says you can rescind within three days of “consummation” of the transaction without a reason or within three years if the disclosures were wrong, inadequate or withheld. But the statute does not appear to require you set forth what disclosures were wrong or how they were wrong so I would suggest that no such statement be included.

In cases where the disclosures were intentionally withheld (table funded or third party sourced loans) the statute of limitations might not start to run until the date that you knew or should have known of the defective disclosure package. It also might not start to run unless you received two copies of your right to rescind with all the information filled in by the LENDER. Of course right there is a problem since the likely “lender” (the one who actually loaned you the money) was probably unknown to everyone at closing including the borrower. But that doesn’t stop the rescission. In fact, in my opinion, it supports the rescission.

So it is possible for virtually all the loans to be subject to the right of rescission which is meant to give the borrower a very strong remedy with teeth, since all the money, the mortgage and the note must be returned and the mortgage is void by operation of law as soon as a homeowner declares his rescission of the “transaction’ (which is probably nonexistent — something that TILA was intended to prevent).

The most interesting thing to me is the tactical advantage of sending a notice of rescission even if it turns out to be unsupported (disclosures were all there and adequate). It changes the burden of proof. Once the rescission is declared by the borrower, it is then up to the creditor to file a lawsuit (within 20 days of the notice of rescission) against the borrower seeking a declaratory judgment that the notice of rescission is not supported by the facts or should otherwise be declared invalid because of statute of limitations or other grounds.

Thus the statute of limitations also applies to the pretender lender. Since none of them ever filed a declaratory action that I know of (within the 20 days required by statute), every notice of rescission has, by operation of law, and as confirmed by the Supreme Court, rendered the mortgage void. This means that at best the obligation is unsecured and can be discharged in bankruptcy. Any subsequent foreclosure after such a notice of rescission is equally void in my opinion and it appears from the statute and the case law now that the notice can be sent anytime up until the mortgage no loner exists because of satisfaction or forced sale.

In order to file such a lawsuit the pretender lender would have to allege and prove the validity of the origination, including the fact that it was not a table funded loan. This is going to be mostly impossible for any of them to achieve. Strategically it is an opportunity to shift the burden of proof on matters that should already be within their burden of proof (but ignored by many trial judges) to the party seeking foreclosure or the party whom they purport to represent as the creditor. I am even wondering if the rescission should be stated in responsive pleading or notice of filing in pending foreclosure cases.

This might be the powerful tool I thought it was back in 2007 where the parties involved in “securitization fail” (see Adam Levitin) must stop everything and (if they do it within the time period prescribed by statute) actually prove (a) that there really is a transaction under that pile of documents they show the court and (b) that there was adequate disclosure of the real parties in their closing and real terms. Remember that the statute has a “tolerance” of only $35 for the the disclosed terms.

Comments are invited.

Unconscionable and Negligent Conduct in Loan Modification Practices

JOIN US EVERY THURSDAY AT 6PM Eastern time on The Neil Garfield Show. We will discuss the Stenberger decision and other important developments affecting consumers, borrowers and banks. We had 561 listeners so far who were on the air with us or who downloaded the show. Thank you — that is a good start for our first show. And thank you Patrick Giunta, Esq. (Broward County Attorney) as our first guest. For more information call 954-495-9867.

In the case of Wane v. Loan Corp. the 11th Circuit struck down the borrower’s attempt to rescind. The reasoning in that case had to do with whether the originator was the real lender. I think, based upon my review of that and other cases, that the facts were not totally known and perhaps could have been and then included in the pleading. It is one thing to say that you don’t think the originator actually paid for the loan. It is quite another to say that a third party did actually pay for the loan and failed to get the note and mortgage or deed of trust executed properly to protect the real source of funds. In order to do that you might need the copy of the wire transfer receipt and wire transfer instructions and potentially a forensic report showing the path of “securitization” which probably never happened.

The importance of the Steinberger decision (see prior post) is that it reverts back to simple doctrines of law rather the complexity and resistance in the courts to apply the clear wording in the Truth in Lending Act. The act says that any statement indicating the desire to rescind within the time limits set forth in the statute is sufficient to nullify the mortgage or deed of trust by operation of law unless the alleged creditor/lender files an action within the prescribed time limits. It is a good law and it covers a lot of the abuses that we see in the legal battleground. But Judges are refusing to apply it. And that includes Appellate courts including the 9th Circuit that wrote into the statute the requirement that the money be tendered “back to the creditor” in order for the rescission to have any legal effect.

The 9th Circuit obviously is saying the they refuse to abide by the statute. The tender back to the creditor need only be a statement that the homeowner is prepared to execute a note and mortgage in favor of the real lender. To tender the money “back” to the originator is to assume they made the loan, which ordinarily was not the case. The courts are getting educated but they are not at the point where they “get it.”

But with the Steinberger decision we can get similar results without battling the rescission issue that so far is encountering nothing but resistance. That case manifestly agrees that a borrower can challenge the authority of those who are claiming money from him or her and that if there are problems with the mortgage, the foreclosure or the modification program in which the borrower was lured into actions that caused the borrower harm, there are damages for the “lender” to pay. The recent Wells Fargo decision posted a few days ago said the same thing. The logic behind that applies to the closing as well.

So lawyers should start thinking about more basic common law doctrines and use the statutes as corroboration for the common law cause of action rather than the other way around. Predatory practices under TILA can be alleged under doctrines of unconscionability and negligence. Title issues, “real lender” issues can be attacked using common law negligence.

Remember that the common allegation of the “lenders” is that they are “holders” — not that they are holders in due course which would require them to show that they paid value for the note and that they have the right to enforce it and collect because the money is actually owed to them. The “holders” are subject to claims detailed in the Steinberger decision without reference to TILA, RESPA or any of the other claims that the courts are resisting. As holders they are subject to all claims and defenses of the borrower. And remember as well that it is a mistake to assume that the mortgage or deed of trust is governed by Article 3 of the UCC. Security instruments are only governed by Article 9 and they must be purchased for value for a party to be able to enforce them.

All of this is predicated on real facts that you can prove. So you need forensic research and analysis. The more specific you are in your allegations, the more difficult it will be for the trial court to throw your claims and defenses out of court because they are hypothetical or too speculative.

Question: who do we sue? Answer: I think the usual suspects — originator, servicers, broker dealer, etc. but also the closing agent.

THREE DAY RESCISSION, THREE YEAR RESCISSION AND GENERAL RESCISSION

SEE foreclosure-defense-objecting-to-trustee-sale

NOTE: THERE ARE ACTUALLY THREE LETTERS OF OBJECTION AND RESCISSION THAT COULD BE SENT: (1) THREE DAY NOTICE OF RESCISSION, (2) THREE YEAR NOTICE OF RESCISSION AND (3) GENERAL CLAIMS NOTICE OF RESCISSION OR NULLIFICATION. IN ALL CASES, THE NOTICE SHOULD CONFORM TO STATE LAW AS TO FROM, SUBSTANCE AND METHOD OF MAILING. GENERALLY IT SHOULD BE SENT CERTIFIED MAIL RETURN RECEIPT REQUESTED. IN ADDITION, A FILING OF LIS PENDENS OR NOTICE OF PENDENCY TOGETHER WITH YOUR NOTICES AS ATTACHMENTS WOULD GUM UP THE WORKS ON THE PROPOSED SALE AND PROBABLY FORCE THE ACTION TO CONVERSION FROM NON-JUDICIAL SALE TO JUDICIAL SALE. THE ADVANTAGE IN CONVERTING TO JUDICIAL SALE IS THAT THE TRUSTEE OR “LENDER” MUST FILE A COMPLAINT AND ALLEGE THINGS THAT WILL EXPOSE THEM TO LIABILITY BECAUSE THE ALLEGATIONS ARE NOT TRUE. IT KEEPS THE BURDEN WHERE IT BELONGS — ON THE “LENDER.”

The three day rescission letter should go out to everyone you know or think has anything to do with this loan. The pretender lender who is on the note, the mortgage broker, the trustee, any attorneys, any name you have for mortgage servicer, aggregator, investment bank, SPV, etc. Even if they respond with ‘we have nothing to do with this loan’ you have narrowed it down. More likely you will get a more tentative (we are looking into it) because they don’t know whether a specific loan is tied to a specific pool, SPV or mortgage backed security.

The point being that failure to disclose the real parties in interest at the loan closing and failure to disclose the fees paid to those real parties behind the curtain that the borrower didn’t even know was there, they deprived the borrower of the knowledge of who he should send his rescission letter or other claims and objections to.

They can argue that the rescission letter is effective if sent to the pretender lender. But is it? And if they do argue that, have they opened yet another door? How do we now that beyond them just saying it? At best they have placed the borrower in the untenable position, now having discovered that there was a real lender and that the lender he had at closing was a pretender lender paid a fee for pretending to be the lender in what is referred to in the industry as a table funded loan of not knowing who to pay, not knowing who has authority to communicate with him, and not knowing for sure to whom he should address objections and claims.

By having insurance contracts, credit default swaps, cross guarantees, and buyback provisions as the ‘note’ moved through the chain of securitization, combined with the right to replace one loan with another, all mixed in with the fact that the buyback/substitution requirement is rarely enforced, there is no way for them to know with certainty whether the specific loan, even if initially assigned to a specific pool, is still in that pool, or has been supplemented with another note, or has been satisfied by one of the third party guarantee contracts.

In addition, the overcollateralization and reserve pools, and the hierarchical pledges between divisions (tranches) of the SPV corporation means that contractually, hundreds (perhaps thousands) of people had their loan payment assigned to pay off your payments if they were in a tranche below the one to which you were assigned without your knowledge or consent.

And even if you did make payments, your payments might just as well have been allocated to other loans in tranches above the one your loan was assigned to. With the AIG Federal reserve bailout, there is no question that there is insurance coverage on a lot of these loans. Why should ANYONE get paid twice? Is AIG asserting the right to recover under the note and mortgage? No!

In a letters to all the same parties a general rescission letter should go out under the three year rule under TILA, and then a third rescission letter even more general should allege rescission or nullification, something along these lines:

General Claims rescission Letter TO ALL PARTIES

LETTERHEAD

DATE:

SENT CERTIFIED MAIL RETURN RECEIPT REQUESTED

RE: BORROWER’S NAME AND ADDRESS
LOAN NUMBER(S)

Dear TRUSTEE (NOTE TO READER: SEPARATE LETTER TO EACH OF THE PARTIES AT CLOSING AND ANYONE ELSE YOU HAVE SUBSEQUENTLY DISCOVERED WAS IN THE SECURITIZATION CHAIN.

I HEREBY EXERCISE MY RIGHTS TO RESCIND THE LOAN TRANSACTION IN ITS ENTIRETY UNDER THE THREE DAY RULE, THE THREE YEAR LIMITATION, AND UNDER THE USURY AND GENERAL CLAIMS THEORIES AND CAUSES OF ACTION. BY FAILING TO DISCLOSE THE TRUE LENDER AND USING SUBTERFUGE TO HIDE THE FACT THAT THE “LENDER” AT CLOSING WAS PAID TO POSE AS THE LENDER WHEN IN FACT AN UNDISCLOSED UNREGISTERED THIRD PARTY HAD RENTED THE CHARTER OR LENDING LICENSE OF THE “LENDER “, THE LIMITATION ON MY RIGHT TO RESCIND WAS EXTENDED INDEFINITELY. UNDER STATE AND FEDERAL LAW, THE MORTGAGE IS NOW EXTINGUISHED AND YOUR RIGHTS UNDER THE TRUSTEE DEED HAVE TERMINATED. I hereby rescind the above referenced loan and/or declare it to be null and void and demand treble damages for the face value of the note, on the grounds set forth below:

1. Appraisal fraud: The original loan transaction and application were falsified by the ‘lender’ (the party named at closing as the beneficiary under the Trustee or the mortgagee, and the party named on the promissory note that was allegedly secured by the mortgage or terms of the need of trust), its agents, servants and employees as to fair market value of the property, the borrower’s ability to repay and the prospective terms and fees associated with the loan. At the behest and direction of the  ‘lender’ the property was appraised at a much higher amount that was warranted by good appraisal practices conforming with industry standards. All parties at the loan closing, other than the borrower(s), were aware of the appraisal fraud and directly and intentionally withheld this vital information from the borrower. The borrower reasonably relied upon this appraisal, believing that the ‘lender’ was at risk and had performed due diligence and conformed with underwriting practices conforming with industry standards, when in fact the ‘lender’ was not at risk, the loan was in essence ‘table funded’ and the real lender was hidden from the borrower. Not only did the borrower no know about the existence of the real lender, but the real lender’s identify and contact information were withheld at the loan closing so that the borrower was unaware of the any of the realities of the closing, nor that the ‘loan closing’ was in fact part of a scheme to issue a negotiable instrument that would be issued by the borrower (by trick and deception) and later converted to other uses and terms, including allocation of payments inconsistent with the original terms of the note and inconsistent with the reasonable expectations of the borrower. The over-appraisal conformed with an illegal scheme to defraud investors in certificates of asset backed securities that were similarly overvalued. In both instances — the appraisal of the property, and the appraisal of the securities, the true parties to the entire transaction paid and directed ‘independent’ third parties to lie about the quality and value of the ‘investment.’ For the borrower, the scheme shortened the expected life or duration of the loan transaction, and taking the appraisal fraud into consideration, along with the many undisclosed fees, resulted in an exponentially higher cost of the loan than what was estimated or disclosed prior to or at closing. Borrower was induced to pay more for the property and borrow more on the property than the property was worth.
2. Fraud in the inducement: Borrower reasonably relied to borrower’s detriment upon the representations and good faith estimates and the duty of the mortgage broker and “lender” to act within their duties as fiduciaries and representatives of the borrowers in executing a loan that was vastly different from the loan the borrower was promised or reasonably believed to be the case at the loan closing.
3. Fraud in the execution: Borrower reasonably relied upon the representations and good faith estimates of the parties at the loan closing and was tricked into issuing what became a negotiable security from which the participants received fees and profits far in excess of their normal remuneration. The participants at the loan closing knew that the borrower believed that the borrower was merely entering into a loan closing when the borrower, without his knowledge or consent was in fact issuing what would be used as a negotiable security to commit fraud upon other third parties.
4. Usury: The appraisal fraud resulted in an undisclosed cost of the loan, in addition to the loss of earnest money, costs of closing and after-purchase expenses and costs that raised the cost of the loan well above standards set in this state for usury. No exemptions apply because (1) the real lender was not a bank or other registered or chartered lender nor even a party registered to do business within this state and (2) the transaction was in fact a securities transaction in which the rights of rescission were ignored and undisclosed.
5. PAYMENT:  The “lender” was paid in full before, during or immediately following the loan closing by an agent of the real lender. To this was added a fee of approximately 2.5%. If there was or is a party that is a holder in due course of the note and who has not been paid by reserves, overcollateralization, credit default swaps, insurance, or cross guarantees, then demand is herewith made for the name(s) of such holder(s) in due course and their contact information.

PLEASE GOVERN YOURSELVES ACCORDINGLY!

SINCERELY.

BORROWER(S) SIGNATURES AND ADDRESSES
OR ATTORNEY FOR BORROWER

WAMU Screws UP and Tries to Sue 7 Years Later!!!

COME TO OUR SANTA MONICA SEMINARS 9/3-9/4

florida-regulator-resigns-after-letting-bank-robbers-and-other-felons-operate-as-mortgage-brokers

Dear Bryan:

OK. FIRST OF ALL YOU WILL BE CONTACTED BY A MEMBER OF OUR TEAM TO GET FURTHER INFORMATION SO WE MIGHT BE ABLE TO HELP YOU A LITTLE MORE. PLEASE REMEMBER THAT I AM A LICENSED ATTORNEY IN FLORIDA BUT ACTUALLY DON’T PRACTICE ANYMORE. WHATEVER I TELL YOU HERE SHOULD BE REVIEWED WITH COMPETENT LICENSED LOCAL COUNSEL BEFORE YOU MAKE ANY DECISION OR TAKE ANY ACTION. ANYTHING I SAY HERE IS BASED UPON THE LIMITED AMOUNT OF INFORMATION YOU HAVE GIVEN TO ME AND UPON A COMPLETE REVIEW OF YOUR FACTS,MY OPINION COULD CHANGE AND IN ANY EVENT MY OPINION MIGHT NOT BE RELEVANT IN YOUR LEGAL JURISDICTION.

I’ll break down your fact pattern piece piece and comment on each piece:

1. You write “I am currently dealing with an issue in court where I actually rescinded a loan within the 3 day period.”

ANSWER:

  • Whether your rescission was effective depends upon how you did it. But most cases state that ANY written intention to rescind is sufficient. The rescission, as you can see in the blog and general comments below, has the effect of canceling the note and mortgage.
  • The 3 day rescission appears to be different than other rescission remedies in that it applies automatically.
  • Other rescissions are subject to acceptance or objection by lenders.
  • This means that ALL documents should have been returned to you, canceled with an acknowledgment that the loan is null and void.
  • If the mortgage was recorded, a satisfaction of mortgage should be recorded by the “lender” and can be required in a court of law.
  • If the note was signed, then the note should be returned to you in its original form, along with some writing on it that says “rescinded or canceled.”
  • Remember that rescission under TILA is NOT  the only rescission remedy available under State and Federal Statutes and common law.
  • PLEASE NOTE THAT THE PRACTICE OF “SELLING FORWARD” MIGHT COMPLICATE ANY RESCISSION. THE “LENDER” MIGHT WELL RESIST YOUR ATTEMPT TO RESCIND EVEN THOUGH IT HAS NO RIGHT TO DO SO. ITS MOTIVATION IS THAT BY “SELLING FORWARD” IT ESSENTIALLY RECEIVED MONEY IN FULL FOR THE FULL AMOUNT OF THE PRINCIPAL STATED ON YOUR NOTE OR PROPOSED NOTE AND IT ASSIGNED YOUR NOTE AND MORTGAGE EVEN IF YOUR NOTE AND MORTGAGE NEVER EXISTED.
  • IN ADDITION, THE “LENDER” WAS ACTUALLY A STAND-IN FOR THE REAL LENDER WHO WAS NOT DISCLOSED SO YOUR RESCISSION MIGHT HAVE BEEN ADDRESSED, UNDER TILA, TECHNICALLY TO THE WRONG PARTY, BUT THE APPARENT AGENCY OF THE NOMINAL DISCLOSED LENDER WILL PROBABLY BE SUFFICIENT TO MAKE YOUR RESCISSION VALID.
  • UNDER THE POOLING AND SERVICE AGREEMENT SIGNED BETWEEN THE “LENDER” AND THE REAL LENDER THE “LENDER” MIGHT HAVE TO BUY BACK YOUR LOAN OR SUBSTITUTE WITH ANOTHER “LIKE” LOAN AND MIGHT NOT HAVE THE SOLVENCY (OR WILLINGNESS) TO DO IT.
  • IN 40% OF THE CASES, THE DOCUMENTATION HAS DISAPPEARED BECAUSE THE “SELLING FORWARD” CAN ONLY BE ACCOMPLISHED BY EXECUTING A FRAUDULENT OF ASSIGNMENT OF A NON-EXISTENT NOTE AND MORTGAGE AND EXECUTED IN BLANK WITH A SQUIGGLE OVER YOUR NAME AS THOUGH YOU HAD SIGNED IT. THIS PRACTICE HAS BEEN USED EVEN WHERE THE LOAN WAS SOLD AT OR AFTER CLOSING. Thus the REVERSAL OF THE TRANSACTION REVEALS FRAUD ON THE PART OF AGENTS, SERVANTS OR EMPLOYEES OF “LENDER” AND OTHER PARTIES. Thus the note is destroyed or missing when the subject comes up.
  • If you DID sign a note, there is the distinct possibility that it was transferred or transmitted to a Structured Investment Vehicle (SIV — see Glossary) in the Cayman Islands or to some other third party and might not be recoverable by your lender.

2. You write: “(The closing atty. at the title co. seemed shady and we did not feel comfortable with the whole deal.) Well, they (WAMU) funded and paid off the other mort. co. within the 3 days which violated the “delay of performance” statute. Then they attempted to collect and I informed them that I had rescinded. (I have a copy of the form, a copy of the express mail label, a copy of the signed delivery receipt, etc.) Plenty of proof that I rescinded in a timely manner. This was 2001. I made no payment to them at all.”

ANSWER:

  • If you willl look at one of the recent blog posts, you will see that a title company sued Countrywide mortgage basically saying that they should not be on the hook for fraudulent dealing engendered by Countrywide. The title company is supposed to make sure you have clear title and it is required to perform due diligence before it issues a title policy. Once it issues the title policy it is liable for any damages resulting from ad efect in title. It is presumed, I think correctly, that the title company knows all it needs to know. In most cases, the title company was well aware of the securitization of these loans and the fact that recording, fees paid, real parties in interest and other disclosure requirements, together with other wrongful behavior, created a cloud on the title to the property, the mortgage and the note — three separate issues of ittle, each having its own legal consequences. You might have good claims against the title company and the title insuraunce company (and the title company and the title insurance company might have good claims against your “lender”).
  • The attorney for the title company is under the same obligations as the title company PLUS his obligations as a lawyer to avoid even the appearance of impropriety. You might have claims against the attorney as well. If you have a gut feeling that something is wrong, it usually is wrong, and you should not proceed unless and until you have consulted with someone who is competent, licensed and objective, with no dog in the race except to do right by you.
  • WAMU, according to its 10k annual reports filed with the Securities and Exchange Commission, which is a sworn public document, sold all of its loans and participated in the loose procedures desribed above. In all probability their problem resulted from the fact that they received the money but didn’t have the money or the willingness to reverse the transaction because all of a sudden they were at risk on what they thought was a risk free transaction. From an accounting perspective their problem was simple. They never took the loan onto their balance sheet as an asset, never set aside a reserve for rescission, default or delinquency, and therefore have no way of accounting for a rescission where all they really did was act as an unregistered mortgage broker and conduit for a loan from an undisclosed third party.

3. You write: “I made no payment to them at all. I attempted to pay my old mort. co. but they sent my payment back. Well I faxed them (WAMU) several copies of my rescission documents over the years and it wasn’t until 2005 that they canceled the mortgage with a “lost note” affidavit. Clearly beyond the 20 day requirement in paragraph (d)(2) of reg. Z. Now here in 2008 they are trying to sue for the money they paid out back in 2001.”

ANSWER:

  • This is slightly confused and the reason why we need more information. I assume you mean that you made no payment to WAMU because you had rescinded. The fact that they canceled the note with a lost note affidavit might not be sufficient if they were no longer the holder or holder in due course.
  • In any event, my guess is that applicable statutes of limitations or the rarely used common law doctrine of laches would prevent them from proceeding in litigation. There is also a possibiity of estoppel since you acted on their cancellation of the note with the lost note affidavit. Beware the affidavit however — it was probably signed by someone with absolutely no knowledge of you, your transaction, your note or your mortgage. In this case, though it would seem that a full recovery of your attorney fees and costs would be appropriate.
  • They key here is to keep the burden of proof on them. If they succeed in somehow shifting the burden of proof onto you, there is considerable expense in discovery and other investigations that are required.
  • Seems like the suit should be met with a speaking motion to dismiss, a notice of action that you will seek attorney fees for a frivolous lawsit, and/or a motio  for summary judgment.
  • If you ahve the lost note affidavit and there is paperwork showing that they were cancelling the debt, and they can’t show that you ever paid,they have a problem. They have an even greater problem if they never resolved the payoff of your old mortgage. Sounds to me that at this point you have your house free and clear of any encumbrance of mortgage or note.
  • In order to clarify the situation, it would seem appropriate to file an action to quiet title against WAMU.
  • Then I think Iw ould file a separate lawsuit to quiet title against the old mortgage company. from thier prospective they were right in returning your attmmepted payments because the loan was paid off.

4. You write: “Several questions because my lawyer has never faced anything like this. Wouldn’t violation of Federal Law be used as a defense against an “unjust enrichment” claim? Couldn’t a SOL defense be used because they let so much time expire and in a sense “NEVER” complied with paragraph (d)(2)?”

ANSWER: Your lawyer and every lawyer is actually facing issues like this every day — they just don’t realize it. Almost all loans from 2001-2008 fall into this category. This is only different because it highlights the chaos the players were creating. Yes SOL applies.

5. You Write: “Could it be established that I never have to comply with paragraph (d)(3) because they can never comply with (d)(2) technically because of an implied “statute of limitations” ie. the 20 days? Could my attempts to fax copies and work towards a resolution be considered an attempt to “tender” if a timely compliance with (d)(2) had occurred? Honestly, my wife and I sought a resolution years ago and instead WAMU sought on lt to force a loan on us and then tried all kinds of tactics to collect, EVEN FORECLOSURE proceedings! On a property that they had NO CLAIM to under the Right of Rescission we exercised. Their harassment has gone on to this day, and now THEY HAVE THE GALL TO SUE US! After all of this, I don’t think they deserve anything. I have done everything properly under the law, they have at every turn not followed the law and even denied that we had a rescission. Now a Judge may possibly rule in their favor, but I feel that the Right of Rescission may be the key to beating them. I know this is a lot, but do you have any advice on this situation?
>
> Thanks in advance and GOD BLESS!
>
> Bryan

ANSWER: I THINK WE HAVE COVERED IT. I AGREE WITH YOU BUT IT MIGHT BE MORE CHALLENGING WITH MORE FACTS. I WOULD PROCEED WITH MORTGAGE AUDITS ON BOTH “LOANS” AND A TITLE OPINION.

We have several who MIGHT assist you and you can of course find your own. You can also use the information on this blog to get started yourself or to get your lawyer started in the right direction.

A member of our team will contact you shortly to get information. This information will be passed on to a member of our volunteer team who will give you suggestions or options on how to proceed.

The normal procedure is as follows (although every case has some differences)

1. Information gathering — have your loan information and closing documents at your fingertips before our team member calls you. If you don’t get a call, please dial 954-494-6000.
2. File review
3. Referral to Mortgage Audit Group that will analyze your mortgage, find potential or actual violations of TILA and initiate RESPA procedures to settle your case.
4. Demand Letter to “lender” requesting documents to prove they are the holder of the note and that they have the power to enforce the mortgage and note.
5. Rescission Letter or Cancellation where appropriate: Note that this might be under TILA but it will probably include rescission or cancellation under other Federal and State statutes and common law. Rescission does NOT mean you are offering your house to the lender. Rescission is the reversal of a transaction. The transaction you reverse here is the “loan” of money in exchange for your signature on a pile of documents that you could not possible understand, and where the real lender was hidden from you, and where most of the fees generated by your loan closing was were not disclosed, which is a violation of several different Federal and State requirements. Rescission cancels the note and mortgage and gives rise to a possible claim by the lender for return of the loan — but without any claim on your house. The lender’s claim is subject to numerous defenses, affirmative defenses, set offs, and counterclaims.
6. Litigation: referral to a competent licensed legal professional in your area. Or you can find your own and our attorneys will assist. Fees vary, but a retainer is ordinarily involved since these attorneys must be paid for their time. However, most of the attorneys we work with keep their retainers low and take most of the case on contingency — a good indication that they believe a substantial recovery for you is possible. Recovery of attorneys fees and costs is deducted off the amount you owe.

NOTE: WHILE I AM LICENSED TO PRACTICE LAW IN THE STATE OF FLORIDA AND I AM AN EXPERIENCED LITIGATOR — ESPECIALLY WITH THE ISSUES RAISED BY FORECLOSURE DEFENSE, I CONSIDER MYSELF RETIRED, AND I HAVE NO INTENTION OF ACCEPTING A RETAINER OR APPEARING IN COURT ON BEHALF OF ANY NEW CLIENTS. I AM A WRITER AND A RESOURCE. SINCE I LIVE IN ARIZONA, THE LIKELIHOOD OF MY APPEARING IN ANY CASE IN FEDERAL OR STATE COURT IN FLORIDA IS EXTREMELY LOW. THEREFORE I HAVE BEEN SEEKING AND RECRUITING ATTORNEYS WHO ‘GET IT” TO TAKE THESE CASES ON. I TEACH SEMINARS AND I MENTOR LAWYERS OVER THE PHONE. I AM ALSO AUTHORING A BOOK ON THE HOMEOWNER’S WAR, WORKBOOKS FOR LAWYERS AND WORKBOOKS FOR PRO SE LITIGANTS WHO CANNOT FIND OR AFFORD AN ATTORNEY. I DO NOT RECOMMEND PRO SE APPEARANCES ALTHOUGH I WILL CANDIDLY REPORT THAT PRO SE LITIGANTS ARE HAVING CONSIDERABLE SUCCESS AT THE MOMENT.

Neil F. Garfield, Esq.
ngarfield@msn.com

This e-mail transmission may be protected by attorney client privilege and attorney work product privilege if it contains legal advice or opinions, and it contains information that are private, trade secrets, protected by non-disclosure and non-circumvention agreements between the parties and is therefore confidential and privileged. It may also be for the sole purpose of compromise and settlement only if it contains an offer and may not be used in any judicial or quasi-judicial or administrative proceeding without the express written consent of the sender. It is intended only for the addressee(s) named above. If you receive this e-mail in error, please do not read, copy or disseminate it in any manner. If you are not the intended recipient, any disclosure, copying, distribution or use of the contents of this information is prohibited. Please reply to the message immediately by informing the sender that the message was misdirected. After replying, please erase it from your computer system. Your assistance in correcting this error is appreciated.

> Date: Mon, 18 Aug 2008 12:14:33 +0000
> To: ngarfield@msn.com
New comment on your post #165 “FORECLOSURES: TILA RIGHT OF RESCISSION and CONSEQUENCES”
> E-mail : bkfoster@bellsouth.net

> Comment:
> I am currently dealing with an issue in court where I actually rescinded a loan within the 3 day period. (The closing atty. at the title co. seemed shady and we did not feel comfortable with the whole deal.) Well, they (WAMU) funded and paid off the other mort. co. within the 3 days which violated the “delay of performance” statute. Then they attempted to collect and I informed them that I had rescinded. (I have a copy of the form, a copy of the express mail label, a copy of the signed delivery receipt, etc.) Plenty of proof that I rescinded in a timely manner. This was 2001. I made no payment to them at all. I attempted to pay my old mort. co. but they sent my payment back. Well I faxed them (WAMU) several copies of my rescission documents over the years and it wasn’t until 2005 that they canceled the mortgage with a “lost note” affidavit. Clearly beyond the 20 day requirement in paragraph (d)(2) of reg. Z. Now here in 2008 they are trying to sue for the money they paid out back
> in 2001. Several questions because my lawyer has never faced anything like this. Wouldn’t violation of Federal Law be used as a defense against an “unjust enrichment” claim? Couldn’t a SOL defense be used because they let so much time expire and in a sense “NEVER” complied with paragraph (d)(2)? Could it be established that I never have to comply with paragraph (d)(3) because they can never comply with (d)(2) technically because of an implied “statute of limitations” ie. the 20 days? Could my attempts to fax copies and work towards a resolution be considered an attempt to “tender” if a timely compliance with (d)(2) had occurred? Honestly, my wife and I sought a resolution years ago and instead WAMU sought on lt to force a loan on us and then tried all kinds of tactics to collect, EVEN FORECLOSURE proceedings! On a property that they had NO CLAIM to under the Right of Rescission we exercised. Their harassment has gone on to this day, and now THEY HAVE THE GALL TO SUE US! After all of
> this, I don’t think they deserve anything. I have done everything properly under the law, they have at every turn not followed the law and even denied that we had a rescission. Now a Judge may possibly rule in their favor, but I feel that the Right of Rescission may be the key to beating them. I know this is a lot, but do you have any advice on this situation?
>
> Thanks in advance and GOD BLESS!
>
> Bryan

>
>

%d bloggers like this: