Foreclosure Defense: The Defense of PAYMENT

Thus the fund is present for payment and controlled by the combined entities of the entire single transaction. A default by the borrower is actually therefore impossible under the scheme of securitization as it was implemented. 

The fact that the borrower has not made a payment to the mortgage service provider has typically been accepted as prima facie proof that the mortgage is at least technically in default. But what if payment HAS been made by the borrower or by a third party? PAYMENT is an absolute defense and completely removes the ability of anyone to take any action in collection of the debt because the debt is not due.

Consider this latest entry to Garfield’s Glossary:

THIRD PARTY PAYMENT: (Foreclosure Defense: “PAYMENT”)

A basic defense to any foreclosure action or any action on a debt, whether evidenced by a note, security agreement or otherwise is PAYMENT. It is entirely possible and in fact probable that the ultimate party to whom payment was to be made actually received the payment from a third party, or a portion of the payment, or has a claim for the payment from a third party.

This third party obligation, taking the entire transaction as one single transaction arises from the sale, assignment, aggregating, re-assignment, sale, or transfer to an investment banker or entity created by an investment banker and in turn sold to an investor in pieces as an asset backed security (ABS).

Presumably the investor who purchased an asset backed security which was backed in small part by YOUR mortgage and note and the balance backed by (a) other mortgages and notes, and possibly other portfolios of obligations which may or may not have been mortgages and notes, (b) insurance from the rating agency, (c) insurance from an insurer against the risk of default, (d) insurance from the investment banker, (e) insurance from the mortgage broker, (f) insurance from the appraiser of the house, (g) insurance from the “lender”, (h) lender liability for buy back or guarantee of payment and potentially other third party entities who did make payment or who will make payment curing the borrower’s alleged default or nullifying the alleged default altogether.

The transfer of risk allocation sought by securitization, cross indemnity agreements, guarantees, ratings, insurance and “buy-back arrangements, convert the payment allegedly due from borrower as part of a larger option Ponzi scheme.

Using the Countrywide model which can be seen buried deep within their filings with the SEC, one can see that the proceeds of the sale of the ABS can be used to make the payments.

Thus the fund is present for payment and controlled by the combined entities of the entire single transaction. A default by the borrower is actually therefore impossible under the scheme of securitization as it was implemented.

The reality is that the underwriting standards for loaning money were dropped, along with even the escrow account for insurance and taxes in some cases, so that the loan would qualify for for closing at closing, even if it would later NOT qualify knowing the inflated value of the home, and the likelihood of increases in payments beyond the financial capacity of the borrower.

The gap created between what the borrower could actually pay and what the loan terms demanded was made up by the “option” quality referred to above  through insurance and other terms between the multiple players in the chain of title for the mortgage, note, risk of loss and right to payment (all of which was separated out into different entities — none of whom qualified as a lender or as an entity with a right to do business in the state where the property was situated or the state where the loan was originated.) (see LENDER).


Mission Statement and Introduction to Blog

This is a developing resource for attorneys and borrowers to assist them in creating strategies and tactics in foreclosure defense and offense. Assistance and comments regarding bankruptcy jurisdiction is also covered. Bottom Line: The procedure invoked by the mortgage meltdown scheme defrauded investors (false ratings and insurance) in asset backed derivative securities, who were the source of funding for the fraudulent loans on residential real property (false appraisals, undisclosed parties, undisclosed fees, abandonment of underwriting standards etc.). 


We are finding that the notice of sale or filing of foreclosure starts with the wrong people using information that cannot be verified based upon authorization that is assumed rather than provable. we also find that there are good legal grounds for challenging any loan, whether in default or not, that was originated between 2001-2008, and in particular any such transaction in which the borrower is now “upside down” (negative equity, despite the down payment of as much as 20%-35%).


The central theme here is a SINGLE TRANSACTION consisting of many new players in the mortgage loan transaction, new roles for old players, and shifting of the risk of loss, right to receive payment, ownership of the note and ownership of the security instrument, all of which are usually vested in different entities or individuals, trustees, or divisions of had been conventional lending institutions and investment banking institutions. 


In a great many cases, if not the majority of cases, we find that the “lender”, while possessing all the attributes of a bank or Lending Institution is actually a mortgage broker or front for an investment banking firm. 


A summary of the starts with the source of funds (an investor in an asset backed security -ABS) who buys a share of an entity that possesses certain rights by assignment and certain guarantees by indemnification and indenture. This entity, like all capitalist structures is broken up into smaller shares that investors buy. 


The shares are sold to qualified investors through an exemption in SEC laws that allows limited disclosure and virtually no prospectus. The investors appear to have most of the rights to the stream of revenue generated by borrower payments along with guarantees, indemnifications and sue of proceeds allowances from the investment banker, the lender, or other third party insurer or guarantor. Thus the total revenue to the investor is partially from his own funds, partially from third parties and the rest from the payments made by the various borrowers whose mortgages and notes are the center piece of the overall transaction.


The shares are rated by conventional rating agencies who were corrupted by the mortgage meltdown scheme and the flow of funds is insured by one of a variety of insurers of revenue, default risk etc. 


The securitized entity appears to have the most rights (but apparently not the exclusive rights) to the mortgage notes that make up the portfolio of assets within the securitized entity. 


The investment banker that created the entity whose shares were sold to investors appears to have formed subsidiary of affiliated entities that (a) hold most of the rights to the  security instrument (mortgage) and (b) other entities that act as mortgage aggregators, lenders, mortgage brokers etc.


A perusal of the blog site will reveal that our opinion is that in all cases the “lender” should at best be identified as contingent, the mortgage and note should at best be identified as contingent, and that “John Doe” should be added to the list of Defendants and/or schedule of creditors, being the unknown person(s) or entity (ies) that own shares or bonds that are backed by the mortgages and notes of hundreds or thousands of people. 


Each party received a fee that could be called a transaction fee arising out of the real estate closing which included the loan closing in which the signature of the borrower on the loan documents on one end, and the signature and funding of the investor in the ABS on the other end. 


The point that needs to be made immediately to any sitting Judge is that the foreclosure process has changed from simple to complex litigation by virtue of the fact that securitization of loans introduced many new parties into the transaction, many of whom were not disclosed, each of whom received compensation that was not disclosed, each of whom violated Truth in lending laws, Unfair and Deceptive Trade Practices Acts, and Securities laws and rules, with multiple rights of rescission accruing to the borrower from a variety of applicable laws. 


Foreclosure has become far more complex and complicated that it was before the securitization of mortgages and other loans began, and before that financial model spawned a surge of predatory lending practices that changed the landscape of foreclosure litigation.


We have seen several cases around the country where the lender was found to have decoupled the security interest from the note, where the note was satisfied by Truth in Lending violations (TILA), and where the Trustee, Lender and/or mortgage servicer is unable to produce the original note and mortgage, unable to produce the actual assignment of the mortgage and note to a mortgage aggregator and unable to to trace a particular asset backed security that was sold somewhere in the world to dozens, hundreds or thousands of investors to a particular piece of property (in this case — YOUR property).


Our purpose here is to provide a beginning point for lawyers and non-lawyers in their quest to save their property and recover refunds, points, closing expenses, compensatory damages and punitive, exemplary or statutory treble damages. Secondarily we provide information generally on economic data and other stories of interest.


Many apologies for the typos. We now have the able hand of Tiffany Goldwater as proof reader and grammarian assisting us in keeping the verbiage correct and within the bounds of the English language. Many thanks to Tiffany.

%d bloggers like this: