Filed under: burden of pleading, BURDEN OF PROOF, evidence, expert witness, foreclosure, foreclosure defenses, forensic investigation, forgery, legal standing, Pleading, prima facie case, sham transactions | Tagged: assignments, CONSULT, declaratory action, document review, forensic loan analysis, hybrid legal services, MERS, quiet title, title analysis | 4 Comments »
My Final Word On Quiet Title Strategies
What is the difference between the note and the debt? What difference does it make?
NOTE: This case reads like law review article. It is well worth reading and studying, piece by piece. Judge Marx has taken a lot of time to research, analyze the documents, and write a very clear opinion on the truth about the documents that were used in this case, and by extension the documents that are used in most foreclosure cases.
Simple answer: if you had a debt to pay would you pay it to the owner of the debt or someone else who says that you should pay them instead? It’s obvious.
Second question: if the owner of the debt is really different than the party claiming to collect it, why hasn’t the owner shown up? This answer is not so obvious nor is it simple. The short version is that the owners of the risk of loss have contracted away their right to collect on the debt, note or mortgage.
Third question: why are the technical requirements of an indorsement, allonge etc so important? This is also simple: it is the only way to provide assurance that the holder of the note is the owner of the note. This is important if the note is going to be treated as evidence of ownership of the debt.
NY Slip Opinion: Judge Paul I Marx carefully analyzed the facts and the law and found that there was a failure to firmly affix the alleged allonge which means that the note possessor must prove, rather than presume, that the possessor is a holder with rights to enforce. U.S. Bank, N.A. as Trustee v Cannella April 15, 2019.
Now the lawyers who claim U.S. Bank, N.A. is their client must prove something that doesn’t exist in the real world. This a problem because U.S. Bank won’t and can’t cooperate and the investment bank won’t and can’t allow their name to be used in foreclosures.
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The language in RPAPL § 258, which this Court emphasized—”together with the bond or obligation described in said mortgage“—stands in sharp contrast to the language used here in the Assignment—”all beneficial interest under a certain Mortgage”. If such language is mere surplusage, as Plaintiff seems to believe, the drafters of RPAPL § 258 would not have included it in a statutory form promulgated for general use as best practice.
So here is the real problem. The whole discussion in Canella is about the note, the indorsement and the allonge. But notice the language in the opinion — “The Assignment did not go on to state that the referenced debt “…. So the Judge let it slip (pardon the pun) that when he refers to the note he means the debt.
A plaintiff in an action to foreclose a mortgage “[g]enerally establishes its prima facie case through the production of the mortgage, the unpaid note, and evidence of default”. U.S. Bank Nat. Ass’n v Sabloff, 153 AD3d 879, 880 [2nd Dept 2017] (citing Plaza Equities, LLC v Lamberti, 118 AD3d 688, 689; see Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d 683, 684). However, where a defendant has affirmatively pleaded standing in the Answer,[6] the plaintiff must prove standing in order to prevail. Bank of New York Mellon v Gordon, 2019 NY Slip Op. 02306, 2019 WL 1372075, at *3 [2nd Dept March 27, 2019] (citing HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d 983, 983-984; HSBC Bank USA, N.A. v Calderon, 115 AD3d 708, 709; Bank of NY v Silverberg, 86 AD3d 274, 279).
A plaintiff establishes its standing in a mortgage foreclosure action by showing that it was the holder of the underlying note at the time the action was commenced. Sabloff, supra at 880 (citing Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361; U.S. Bank N.A. v Handler, 140 AD3d 948, 949). Where a plaintiff is not the original lender, it must show that the obligation was transferred to it either by a written assignment of the underlying note or the physical delivery of the note. Id. Because the mortgage automatically passes with the debt as an inseparable incident, a plaintiff must generally prove its standing to foreclose on the mortgage through either of these means, rather than by assignment of the mortgage. Id. (citing U.S. Bank, N.A. v Zwisler, 147 AD3d 804, 805; U.S. Bank, N.A. v Collymore, 68 AD3d 752, 754).
Turning to the substantive issue involving UCC § 3-202(2), Defendant contends that the provision requires that an allonge must be “permanently” affixed to the underlying note for the note to be negotiated by delivery. UCC § 3-202(1) states, in pertinent part, that if, as is the case here, “the instrument is payable to order it is negotiated by delivery with any necessary indorsement”. UCC § 3-202(1) (emphasis added). The pertinent language of UCC § 3-202(2) provides that when an indorsement is written on a separate piece of paper from a note, the paper must be “so firmly affixed thereto as to become a part thereof.” UCC § 3-202(2) (emphasis added); Bayview Loan Servicing, LLC v Kelly, 166 AD3d 843 [2nd Dept 2018]; HSBC Bank USA, N.A. v Roumiantseva, supra at 985; see also One Westbank FSB v Rodriguez, 161 AD3d 715, 716 [1st Dept 2018]; Slutsky v Blooming Grove Inn, 147 AD2d 208, 212 [2nd Dept 1989] (“The note secured by the mortgage is a negotiable instrument (see, UCC 3-104) which requires indorsement on the instrument itself `or on a paper so firmly affixed thereto as to become a part thereof’ (UCC 3-202[2]) in order to effectuate a valid `assignment’ of the entire instrument (cf., UCC 3-202 [3], [4])”).
[Editor’s note: if it were any other way the free spinning allonge would become a tradable commodity in its own right. ]
The Assignment did not go on to state that the referenced debt was simultaneously being assigned to Plaintiff.
Filed under: burden of persuasion, burden of pleading, BURDEN OF PROOF, CORRUPTION, discovery, Discovery -Subpoena, Fabrication of documents, foreclosure, foreclosure defenses, foreclosure mill, forensic investigation, investment banking, Investor, jurisdiction, legal standing, MBS TRUSTEE, originator, Pleading, prima facie case, Servicer, sham transactions, standing, STATUTES | Tagged: allonge, assignments, Cannela decision, debt, DEED OF TRUST, endorsement, indorsement, Mortgage, note, Obligation, REMIC trustee, U.S. Bank | 16 Comments »
TONIGHT! Aggregation and Assignments on the Neil Garfield Show
Are Assignments Based Upon Aggregated Pools Real?
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Or call in at (347) 850-1260, 6pm Eastern Thursdays
East-West: Charles Marshall California Attorney co-hosts the discussion
The bottom line is that the courts are not accepting denials of assertions or allegations by the foreclosing party. The courts are requiring the homeowner to file an affirmative defense rather than simply denying everything in the complaint. This forces the burden of proof and burden of persuasion onto the homeowner to come up with facts supporting their denial. These facts are within the sole care, custody and control of the party initiating foreclosure.
Through the magic of writing things down on paper anyone can make anything seem like it might be real. Of course in the legal system it goes further than that. If it is written there are many assumptions and presumptions that arise simply because a piece of paper was produced with some writing on it. But nobody ever intended such writing to be used in lieu of facts that are contrary to the truth.
The first place you see this scheme in operation is in the supposed aggregation of loans. The truth is that the DATA for the loans was aggregated, which only means that information ABOUT the supposed loans was taken from several spreadsheets and combined into one.
This is done all the time when a PROPOSED deal is in the works. The aggregation of the data is known as a pro forma presentation — with all parties knowing that it isn’t real, but here is what it might look like if we really did it.
The banks have elevated pro forma spreadsheets into the illusion of actual deals. The reason nobody has ever come up with a money trail showing that the aggregation took place and was sold to a trust is that no such money trail exists.
The truth is that no actual aggregation took place and there was no sale to the trust. In fact probing the trusts, there is never a time that the trust is actually created by entrusting money or property to the named Trustee. Without that there is no Trust because nothing is held “in trust.”
The money from investors is never held by the Trustee. The loan debt is never owned by the Trustee or the Trust. There is no sale. And that is because the Broker Dealers funded the loans in the first place using the money of investors.
So there was nobody to pay for purchase of the underlying debt except the investors and the banks certainly were not going to pay for the underlying debt by handing the investors a check or wire transfer.
How did they do it? Through the illusion of Assignments and endorsements by entities and people who have no ownership interests or other rights to the underlying debt. Even servicing relies upon authority from a trust that does not exist and which neither owns the paper nor the underlying debt.
Let’s go back to the beginning. For ANY deal to be legally binding you need the following elements:
- An offer of terms by A to B.
- Acceptance of those exact terms by B.
- Now you have an agreement but not a contract (yet).
- Memorialization of the contract in writing.
- The contract is not enforceable until the parties sign
- The Closing: Reciprocal consideration is exchanged.
- Now you have an enforceable contract.
The only thing we get with assignments and endorsements on supposed “allonges” is #4 — Memorialization in Writing. There is no evidence or even assertion that any of the other things happened. Hence the foreclosing party is using an unenforceable false memorialization of a transaction (transfer of loan paper and no transfer of the underlying debt) that never occurred in order to create the illusion of a foreclosure by a real party in interest.
This is all basic Black Letter law. Yet the courts have routinely ignored several very specific laws governing loans, notes, mortgages and assignments and endorsements. Judges have routinely assumed and even presumed that the paper memorialization was all they needed. The door to moral decay and hazard was opened wide. And we all experienced the shock of seeing our economy nearly turn on its belly.
Now Congress is in the process of rolling back the safeguards so that the investment banks can return to business as usual — transforming the role of banks from being financial intermediaries into some multi-headed hybrid creature that can steal money and homes. The banks can do this by using ordinary deposits by its customers, or by soliciting new deposits with the false promise that the money is actually going into a Trust where a big name bank like US Bank will watch over it.
How do you stop it? By litigating on the strategy and narrative that there is no meat in the sandwich, no deal that ever occurred in real life and no authorized intermediary whose claim is solely based upon the existence of a nonexistent trust and nonexistent transactions in which the underlying debt was bought and sold.
Filed under: boarding process, burden of persuasion, burden of pleading, BURDEN OF PROOF, evidence, Fabrication of documents, foreclosure, Investor, legal standing, MBS TRUSTEE | Tagged: Aggregation of Mortgage Loans, assignments, blog talk radio, endorsements, Neil Garfield Show | 2 Comments »
Investigator Bill Paatalo: FOIA Request Reveals Servicer’s “Justification” For Fraud In Obtaining Limited Power Of Attorney From FDIC
This FOIA response from the FDIC dated June 29, 2017 contains a request to renew CIT Bank, N.A.’s “Limited Power of Attorney” from the FDIC regarding the failed IndyMac Bank, fsb and IndyMac Federal Bank, fsb. The “Justification” for CIT Bank’s request states as follows:
Justification
We have undertaken a thorough review of our books, records, and existing loan files for all Group 2 loans and believe we have completed assignments into the appropriate entity for both portfolios where appropriate, available, and where such a need for an assignment is known. However, in our mortgage servicing activities, we continue to be faced with legal and technical challenges, such as borrower bankruptcies and enjoined proceedings, requiring we recreate a chain of title based on factors that cannot be identified in advance without obtaining an updated title report on every loan serviced. It is cost prohibitive to obtain an updated loan level title report for each loan we are servicing, which, again, would be the only way to ensure a clean chain of title through all prior transfers.
Absent a renewed power of attorney, to avoid the risk of jeopardizing our lien position and to enable the bank to transfer title when regularly permissible we would be obliged to approach the FDIC for each instance requiring a signature on an assignment or other instrument of transfer or conveyance where, despite having exercised considerable efforts, we find at the commencement of collection or bankruptcy activities that we do not have a recorded assignment into the appropriate entity.”
(See: FDIC FOIA Response – IndyMac LPOA Servicer Request 2017 )
The document then states,
Though this document needs no further explanation, I’ll take the liberty to simplify: The only way this servicer believes it can ensure a “clean chain of title” is to obtain an updated title report for each loan it services. However, that costs too much money. CIT Bank is basically saying, “So with your permission FDIC, and knowing as much as we do, we’re going to recreate the chains of title by executing assignments and endorsing notes for all these loans to which we have no ‘clean’ chain of title as your attorney-in-fact.”
This also begs the question. If you don’t have a clean chain of title in your servicing records, and won’t invest in a title report to determine who owns the loans you service, who are you sending the money to?
From Investigator Bill Paatalo’s blog on http://www.bpinvestigativeagency.com
Private Investigator – OR PSID# 49411
Bill.bpia@gmail.com
Filed under: foreclosure | Tagged: assignments, cit bank, FDIC, investigator bill paatalo, Power of Attorney | 6 Comments »
9th Circuit: Assignment in Breach of PSA is Voidable not Void. Here is why they are wrong
The thousands of trial court and appellate decisions that have hung their hat on illegal assignments being “voidable” demonstrates either a lack of understanding of common law business trusts or an adherence to a faulty doctrine in which homeowners pay the price for fraudulent bank activities.
Some of the problems might be in the presentation of evidence, failures to object and failure to move to strike evidence or testimony. But most of it deals with the inability of lawyers and the Courts to pierce the veil of uncertainty and complexity with which the banks have covered their fraudulent tracks.
Here are the reasons the assignment might be void. No self-serving newly invented doctrine can overcome the failure of an illegal assignment.
- Common Law Trusts are almost always formed under New York State law that allows unregistered trusts to be created for business purposes. Any act in contravention of the express provisions of the trust instrument (usually the Pooling and Servicing Agreement) is void, not voidable. It cannot be revived through ratification — especially when there is nobody around to change the trust instrument, thus ratifying the void act.
- Many if not most assignments are fabricated for foreclosure and either nonexistent or backdated to avoid the fact that the assignment is void when it is fabricated — years after the so-called trust was described in a trust instrument that is rarely complete because no mortgage loan schedule at the time of the drafting of what is in most cases an incomplete trust instrument.
- Assignments are clearly void and not entitled to any presumptions under the UCC if they are dated after the loan was declared in default (albeit by a party who had no right to declare a default much less enforce the debt or obtain a forced sale of homestead and other residential properties) schedule existed at the time of the drafting of the trust instrument. The application of UCC presumptions after the alleged date of default is simply wrong.
- The fact that an instrument COULD be ratified does not mean that it WAS ratified. What is before the court is an illegal act that has not been ratified. The possibility that the parties to the trust instrument (trustor, trustee, beneficiaries) could change the instrument to allow the illegal act AND apply it retroactively is merely speculative — and against all legal doctrine and common sense. These courts are ruling on the possibility of a nonexistent act that without analysis of the trust instrument, is declared to be possibly subject to “ratification.”
- Assuming the trust even exists on paper does not mean that it ever entered into an actual transaction in which it acquired the “loan” which means the debt, note and mortgage.
- Any “waiver” or “ratification” would result in the loss of REMIC status under the terms of the Internal Revenue Code. No rational beneficiary would ratify the act of accepting even a performing loan after the cutoff period. To do so would change the nature of the trust from a REMIC vehicle entitled to pass through tax treatment. Hence even if the beneficiaries were entitled to change, alter, amend or modify the trust instrument they would be firing a tax bullet into their own heads. Every penny received by a beneficiary would be then be taxed as ordinary income including return of principal.
- No rational beneficiary would be willing to change the trust instrument from accepting only properly underwritten performing loans to loans already declared in default.
- No Trustee, or beneficiary has the power to change the terms of the trust or to ratify an illegal act.
- In fact the trust instrument specifically prohibits the trustee and beneficiaries from knowing or even asking about the status of loans in the trust. Under what reasonable scenario could anyone even know that they were getting a non-performing loan outside the 90 day cutoff period.
- The very act of introducing the possibility of ratification where none exists under the trust instrument is the adjudication of rights of senior investors who are not present in court nor given notice of its proceeding. Such decisions are precedent for other defenses and claims in which the trust instrument could be changed to the detriment of the beneficiaries.
Filed under: foreclosure | Tagged: assignments, common law trusts, IRC, IRS, New York LAw, ratification, REMIC TRUST, VOID, VOIDABLE | 7 Comments »
Falling Into the Traps Set By the Banks
For the past 15 years there has been a huge chasm between what a document says and what actually occurred. In foreclosure settings, the conscious decision has been made to ignore the Truth and proceed on the falsehoods promulgated by the banks. This arises from the “national security” fear that if the banks are not allowed to continue their fraudulent behavior, the entire financial system will collapse taking the entire society down with it. This myth is promulgated by the Banks, who supply the government with people to regulate the banks. Even as a theory it is untested, and unsupported by any real evidence. Unfortunately for Americans, too many people believe it.
Listen to the last Last Neil Garfield Show at http://tobtr.com/s/9673161
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Filed under: foreclosure | Tagged: assignments, DEED OF TRUST, forensic analysis, FOUNDATION, hearsay, information, infrastructure, National Security, Prepared by, Return to, TRUTH, warranty deed | 20 Comments »
Documents You Might Not Have Asked For Could be Key to Case
One of the interesting things that nobody is talking about yet is the fact that the “business records” are either not complete or the foreclosing party is producing documents that serve its purpose when it knows that it holds documents that would negate the very proposition they are proffering in court.
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One of the interesting things that nobody is talking about yet is the fact that the “business records” are either not complete or the foreclosing party is producing documents that serve its purpose when it knows that it holds documents that would negate the very proposition they are proffering in court. Certainly a void assignment fills that bill.
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The “purchaser” is really a conduit for investor funds that have been laundered six times before they got to the closing table. But regardless of how many items it is laundered it still comes down to the same thing — the Payee on the note never made the loan. Someone else did, using money from an unidentified and perhaps unidentifiable group of investors/victims.
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The only REAL reasons why a bank would not demand all the actions, documents, representations and warranties (warrants) is that it already knows what you are getting and you have already performed the due diligence in another transaction cycle. These are things that could be pursued in discovery, but you must assume that what I am saying is true if you are going to fight for them. And you must commit to being very aggressive in fighting for them.
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The banks will say “we complied” when they give you nothing. You should have an expert affidavit that says the banking industry doesn’t work that way. They always perform due diligence unless they control the entire transaction cycle — in which case they still have documents to give you showing they controlled the transaction cycle.
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Here is the normal track for the sale of a mortgage loan:
Take this quote from one of many websites that “assist” in the sale of mortgage loans:
“If you’re like us, you can’t really start your due diligence until you reference your MLSA (Mortgage Loan Sale Agreement) and check over to see what representations (reps) and warrants are contractually included or not. It’s a given that you must know your note seller as this is absolutely a relationship based business. Remember that collateral comes post closing, so you can’t just trust everyone without some sort of verification. Sure you can have safeguards like a Bailee letter, exceptions reports, Power of Attorney’s (so you can create your own assignments and allonges as opposed to waiting for the note seller to create them), and even escrow accounts, but at the end of the day know who you’re dealing with. It’s also important to know the cure periods and terms with any buyback scenarios or missing collateral. Back in 2007 contracts looked much different than today when there were plenty of reps and warranties. Today it’s mostly buyer beware with few reps and warranties at all. If you are ever in need of document retrieval, I highly recommend trying Orion Financial.”
Filed under: foreclosure | Tagged: assignments, buback agreements, business records, collateral agreements, cure periods, mortgage loan sale agreement, originators, powers of attorney, prior relationships, Purchase and Assumption Agreement, representations, warrants | 6 Comments »
New York Judge Orders Release of Hidden Documents
This is just the beginning of what I have been predicting for 10 years. When the public finds out that the government itself is addicted to the false scheme of securitization — and that this has led to abandonment of policies and rules of law that have continued to depress the U.S. economy — the “movements” of Sanders and Trump will look like garden parties.
The mortgage loan schedules, assignments, and endorsements are all pure fabrication, illusion smoke and mirrors. This is why 10 years ago the banks were denying the existence of the trusts. They created a void between the investors and their money on the one hand and the homeowners and their homes on the other. They stepped into the void acting as principals when they were in fact rogue intermediaries.
“In the discovery battle in these suits, the government’s pleas for secrecy were so extreme that it asked for, and received, “attorneys’ eyes only” status for the documents in question. This meant that not even the plaintiffs were entitled to see the raw papers. This designation is usually reserved for cases involving national security or proprietary business secrets.”
THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
Filed under: foreclosure | Tagged: assignments, Bush, endorsements, Fannie, Freddie, Matt Taibbi, MLS, mortgage loan schedules, Obama, Rolling Stone | 8 Comments »
Revisiting the Boyco Decision in 2007
Probably the most important comments from judge Boyco relate to the fact that (1) these cases are about money for the banks (or whoever is claiming to be the successor to an originator who may or may not have actually loaned money to the homeowner) and (2) these cases are about forfeiture as it relates to the homeowner. Forfeiture is an extreme remedy in which the courts should pay special attention to the requirements of standing and other jurisdictional issues, as well as rulings in discovery, motion practice and at trial. My comment is that nearly all the Judges have relied upon the former assumption: that the case for money automatically leads to forfeiture even if the requirements are not met.
THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
see Ohio – Judge Boyko Decision 2007
Hat tip to Bill Paatalo
Sometimes it is a good idea to look at older decisions that occurred before millions of foreclosures were concluded against the homeowner in which the homeowner forfeited ownership and possession of their homestead under at best, questionable circumstances. The argument from the banks has been consistent: this is the way we have been doing things so now it is law. Federal Judge Boyco stops them at the gate.
Here are some of the relevant comments by Judge Boyco when he dismissed a series of cases. He clearly understood that there was something inherently wrong with the position of the “banks” and trusts and servicers and therefore something inherently wrong and defective about allowing foreclosures when the initiator of the foreclosure showed no real interest in the alleged transaction.
Probably the most important comments from judge Boyco relate to the fact that (1) these cases are about money for the banks (or whoever is claiming to be the successor to an originator who may or may not have actually loaned money to the homeowner) and (2) these cases are about forfeiture as it relates to the homeowner. Forfeiture is an extreme remedy in which the courts should pay special attention to the requirements fo standing and other jurisdictional issues, as well as rulings in discovery, motion practice and at trial. My comment is that nearly all the Judges have relied upon the former assumption: that the case for money automatically leads to forfeiture even if the requirements are not met.
To satisfy the requirements of Article III of the United States Constitution, the plaintiff must show he has personally suffered some actual injury as a result of the illegal conduct of the defendant. (Emphasis added). Coyne, 183 F. 3d at 494; Valley Forge, 454 U.S. at 472.
In each of the above-captioned Complaints, the named Plaintiff alleges it is the holder and owner of the Note and Mortgage. However, the attached Note and Mortgage identify the mortgagee and promisee as the original lending institution — one other than the named Plaintiff.
none of the Assignments show the named Plaintiff to be the owner of the rights, title and interest under the Mortgage at issue as of the date of the Foreclosure Complaint. The Assignments, in every instance, express a present intent to convey all rights, title and interest in the Mortgage and the accompanying Note to the Plaintiff named in the caption of the Foreclosure Complaint upon receipt of sufficient consideration on the date the Assignment was signed and notarized. Further, the Assignment documents are all prepared by counsel for the named Plaintiffs. These proffered documents belie Plaintiffs’ assertion they own the Note and Mortgage by means of a purchase which pre-dated the Complaint by days, months or years.
“The provision should not be misunderstood or distorted. It is intended to prevent forfeiture when determination of the
proper party to sue is difficult or when an understandable mistake has been made. … It is, in cases of this sort, intended to insure against forfeiture and injustice …” Plaintiff-Lenders do not allege mistake or that a party cannot be identified. Nor will Plaintiff-Lenders suffer forfeiture or injustice by the dismissal of these defective complaints otherwise than on the merits.
since the unique nature of real property requires contracts and transactions concerning real property to be in writing. R.C. § 1335.04. Ohio law holds that when a mortgage is assigned, moreover, the assignment is subject to the recording requirements of R.C. § 5301.25. Creager v. Anderson (1934), 16 Ohio Law Abs. 400 (interpreting the former statute, G.C. § 8543). “Thus, with regards to real property, before an entity assigned an interest in that property would be entitled to receive a distribution from the sale of the property, their interest therein must have been recorded in accordance with Ohio law.” In re Ochmanek, 266 B.R. 114, 120 (Bkrtcy.N.D. Ohio 2000) (citing Pinney v. Merchants’ National Bank of Defiance, 71 Ohio St. 173, 177 (1904).1
the federal courts must act as gatekeepers, assuring that only those who meet diversity and standing requirements are allowed to pass through. Counsel for the institutions are not without legal argument to support their position, but their arguments fall woefully short of justifying their premature filings, and utterly fail to satisfy their standing and jurisdictional burdens. The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the Court to stop them at the gate.
The Court will illustrate in simple terms its decision: “Fluidity of the market” — “X” dollars, “contractual arrangements between institutions and counsel” — “X” dollars, “purchasing mortgages in bulk and securitizing” — “X” dollars, “rush to file, slow to record after judgment” — “X” dollars, “the jurisdictional integrity of United States District Court” — “Priceless.
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
Filed under: foreclosure | Tagged: assignments, back-dated assignments, Boyco, Federal court, forfeiture, Ohio, requirement of recording | 1 Comment »
Assignment Questions and Answers
For further information please call 954-495-9867 or 520-405-1688
The following article is for general information only. Slight changes in facts or procedures at trial can have a substantial impact on the conclusions or reports suggested in this article. This is not a legal opinion on your case. Before making any decision or taking any action, the reader is instructed to seek the advice of an attorney who is licensed in the jurisdiction in which your property is located or where the transaction was consummated.
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I offer my insight here as a guide to attorneys and to homeowners who need to know that when they use words, they probably don’t know the meaning of the words they are using.
A good example came in from a reader who asks “is the effective date of an assignment the 1) date it was signed; 2) date it was notarized; or 3) date it was recorded?”
As simple as this question appears it actually is missing facts, and assuming that the assignment was “effective” at any time. So first let me say that an assignment is not effective in any sense of the word if the assignor didn’t possess any rights or ownership that could be enforced by the assignor. The existence of the assignment does not raise the status of non-ownership. It is like a Trust: if the trust exists on paper but doesn’t have anything in it, the trust instrument is not effective in relation to any money or property or other rights. If the assignment is from a party who has nothing, then the instrument purporting to assign something is not effective. But presumptions arise in processing evidence in court that could result and often does result in finding the assignment valid and that the assignment is effective in creating rights now owned by the assignee.
The only “exception” to this is that if someone pays for a negotiable instrument in good faith and without knowledge of the maker’s defenses then the risk of loss does shift to the maker (borrower on a note). So the sale of a note that was in fact executed by the maker DOES raise the status such that a fraudulent “transaction” that could not be enforced by the “holder” of the note becomes, by operation of law, a valid claim against the maker. Such a transfer might be called an “assignment” or “endorsement”. The maker may still sue the intermediary parties asserting claims of fraud or other matters but the note can no longer be contested because the transaction was not consummated — thus making the transfer “effective” even though the prior party who was the assignor, endorser or transferor had absolutely no right to enforce the instrument.
An assignment is presumed to be a valid transfer of rights if it is facially valid. It is effective upon delivery, as I understand the laws governing negotiable and/or security instruments (like mortgages). The date of the assignment is generally presumed to be the date it was delivered. All of this can be rebutted by (a) discovery into what transpired in the assignment and (b) proof (admissible evidence) showing that nothing was actually transferred because no payment was made or because of other reasons that might defeat the assertion that the instrument is a negotiable instrument.
The date the document is notarized might be evidence that the date of the assignment was incorrectly stated or it might not. If the signor acknowledged his signature after the date it was signed, the date of notarization changes nothing. If the date of notarization was years later then there is at least reason to propound discovery or requests to the other side seeking to discover if the assignment was backdated AND seeking to discover whether the assignor had anything to assign. If an assignment is backdated it may or may not mean anything. If the actual date of the assignment is much later than the actual transaction in which the note and mortgage were transferred it would only be relevant if the foreclosure started before the assignment was executed. This is not universally true in all states. The issue of when a foreclosing party can initiate the proceedings (before or after the receipt of the assignment instrument) is in the process of being decided by several courts across the country.
The date the document is recorded is potentially relevant. If the document was recorded years after the date of the assignment, that might be evidence of backdating or that the assignment was fabricated. The instrument itself is effective as to all people who know about it, starting from when they knew about it. Upon recording, it is effective as to the world, if it is a valid assignment in fact.
If all this sounds convoluted to the reader, it s proof that the days of pro se litigation are nearly over with respect to the defense of false claims for foreclosure.
The “effect” of an invalid assignment cannot be improved by the fabrication of an instrument that explicitly or implicitly refers to a transaction in which the paper was acquired. The effect of such an invalid assignment also cannot be improved by notarization or recording. A recording gives notice of the existence of a claim of an interest in real property.
The existence of the claim doesn’t mean the claim is valid. Judicial notice of the existence of the recorded assignment is appropriate ONLY to the extent that the Court recognizes that the assignment exists in the public records of the county where deeds and mortgages are recorded. What is written on the recorded instrument is hearsay subject to objection by the opposing party. So the assignment would not be “effective” in court as to proving the matters stated in the assignment; BUT if no objection is made, the proffer by the assignee of the instrument as to both existence and content will probably considered to be accepted into the record as evidence.
Filed under: foreclosure | Tagged: assignments, UCC | 89 Comments »
When an assignment of a mortgage is invalid, does it require a foreclosure case to be dismissed?
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There seems to be confusion about what is necessary to file a foreclosure. To start with the basics, the debt is created when the borrower receives the funds or when the funds are disbursed for the benefit of the borrower. This requires no documentation. The receipt of funds presumptively implies a loan that is a demand loan. The source of funding is the creditor and the borrower is the debtor. The promissory note is EVIDENCE of the debt and contains the terms of repayment. In residential loan transactions it changes the terms from a demand loan to a term loan with periodic payments.
But without the debt, the note is worthless — unless the note gets into the hands of a party who claims status as a holder in due course. In that case the debt doesn’t exist but the liability to pay under the terms of the note can be enforced anyway. In foreclosure litigation based upon paper where there are claims or evidence of securitization, there are virtually all cases in which the “holder” of the note seeks enforcement, it does NOT allege the status of holder in due course. To the contrary, many cases contain an admission that the note doesn’t exist because it was lost or destroyed.
The lender is the party who loans the money to the borrower. The lender can bring suit against the borrower for failure to pay and receive a money judgment that can be enforced against income or non-exempt property of the borrower by writ of garnishment or attachment. There is no limit to the borrower’s defenses and counterclaims against the lender, assuming they are based on facts that show improper conduct by the lender. The contest does NOT require anything in writing. If the party seeking to enforce the debt wishes to rely on a note as evidence of the debt, their claim about the validity of the note as evidence or as information containing the terms of repayment may be contested by the borrower.
If the note is transferred by endorsement and delivery, the transferee can enforce the note under most circumstances. But the transferee of the note takes the note subject to all defenses of the borrower. So if the borrower says that the loan never happened or denies it in his answer the lender and its successors must prove the loan actually took place. This is true in all cases EXCEPT situations where the transferee purchases the note for value, gets delivery and endorsement, and is acting in good faith without knowledge of the borrower’s defenses (UCC refers to this as a holder in due course). The borrower who signs a note without receiving the consideration of the loan is taking the risk that he or she has created a debt or liability if the eventual transferee claims to be a holder in due course. Further information on the creation and transfer of notes as negotiable paper is contained in Article 3 of the Uniform Commercial Code (UCC).
Thus the questions about enforceability of the note or recovery on the debt are fairly well settled. The question is what happens in the case where collateral for the loan secures the performance required under the note. This is done with a security instrument which in real property transactions is a mortgage or deed of trust. This is a separate contract between the lender and the borrower. It says that if the borrower does not pay or fails to pay taxes, maintain the property, insure the property etc., the lender may foreclose and the borrower will forfeit the collateral. This suit is an action to enforce the security instrument (mortgage, deed of trust etc.) seeking to foreclose all claims inferior to the rights of the lender established when the mortgage or deed of trust was recorded.
The mortgage is a contract that does not qualify as a negotiable instrument and so is not covered by Article 3 of the UCC. It is covered by Article 9 of the UCC (Secured Transactions). The general rule is that a party who purchases the mortgage instrument for value in good faith and without knowledge of the borrower’s defenses may enforce the mortgage if the contract is breached by the borrower. This coincides with the requirement that the holder of the mortgage must also be a holder in due course of the note — if the breach consists of failure to pay under the terms of the note. Any party may assign their rights under a contract unless the contract itself says that it is not assignable or assignment is barred by statute or administrative rules.
The “assignment” of the mortgage or deed of trust is generally taken to be an instrument of conveyance. But forfeiture of collateral, particularly one’s home, is considered to be a much more severe remedy against the borrower than a money judgment for economic loss caused by breach of the borrower in making payments on a legitimate debt. So the statute (Article 9, UCC) requires that the assignment be the result of an actual transaction in which the mortgage is purchased for value. The confusion that erupts here is that no reasonable person would merely purchase a mortgage which is not really an asset deriving its value from a borrower’s promise to pay. That asset is the note.
So if the note is purchased for value, and assuming the purchaser receives delivery and endorsement of the note, as a holder in due course there is no question that the mortgage assignment is valid and enforceable by the assignee. The problems that have emerged is when, if ever, any value was paid to anyone in the “chain” on either the note or the mortgage. If no value was paid then the note might be enforceable subject to borrower’s defenses but the mortgage cannot be enforced. Additional issues emerge where the “proof” (often fabricated robo-signed documents) imply through hearsay that the note was the subject of a transaction at a different time than the date on the assignment. Denial and/or discovery would reveal the fraud upon the Court here — assuming you can persuasively argue that the production of evidence is required.
Another interesting question comes up when you seen the language of endorsement on the mortgage. This might be seen as splitting hairs, but I think it is more than that. To assign a mortgage in form that would ordinarily be accepted in general commerce — and in particular by banks — the assignment would be in the form that recites the ownership of the mortgage and the intention to convey it and on what terms. Instead, many cases show that there is an additional page stapled to the mortgage which contains only the endorsement to a particular party or blank endorsement. The endorsement is not recordable whereas a facially valid assignment is recordable.
The attachment of the last page could mean nothing was conveyed or that it was accidentally done in addition to a proper assignment. But I have seen several cases where the only evidence of assignment was a stamped endorsement, undated, in which there was no assignment. This appears to be designed to confuse the Judge who might be encouraged to apply the rules of transfer of the note to the circumstances of transfer of the mortgage. This smoke and mirrors approach often results in a foreclosure judgment in favor of a party who has paid nothing for the debt, note or mortgage. It leaves the actual lender out in the cold without a note or mortgage which they should have received.
It is these and other factors which have resulted in trial and appellate decisions that appear to be in conflict with each other. Currently in Florida the Supreme Court is deciding whether to issue an opinion on whether the assignment after the lawsuit has begun cures jurisdictional standing. The standing rule in Florida is that if you don’t own the mortgage at the time you declare a default, acceleration and sue, then those actions are essentially void.
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Valid assignment is necessary for the plaintiff to have standing in a foreclosure case. (David E. Peterson, Cracking the Mortgage Assignment Shell Game, The Florida Bar Journal, Volume 85, No. 9, November, 2011, page 18).
In BAC Funding Consortium v. Jean-Jeans and US Bank National Association, the Second District of Florida reversed summary judgment for a foreclosure for bank because there was no evidence that the bank validly held the note and mortgage. BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques 28 So.2d, 936.
BAC has been negatively distinguished by two cases:
- Riggs v. Aurora Loan Services, LLC, 36 So.3d 932, (Fla.App. 4 Dist.,2010) was distinguished from BAC, because in BAC the bank did not file an affidavits that the mortgage was properly assigned; in Riggs they did. The 4th District held that the “company’s possession of original note, indorsed in blank, established company’s status as lawful holder of note, entitled to enforce its terms.” [Editor’s note: The appellate court might have erred here. The enforcement of the note and the enforcement of the mortgage are two different things as described above].
- Dage v. Deutsche Bank Nat. Trust Co., 95 So.3d 1021, (Fla.App. 2 Dist.,2012) was distinguished from BAC, because in Dage, the homeowners waited two years to challenge the foreclosure judgment on the grounds that the bank lacked standing due to invalid assignment of mortgage. The court held that a lack of standing is merely voidable, not void, and the homeowners had to challenge the ruling in a timely manner. [Editor’s note: Jurisdiction is normally construed as something that cannot be invoked at a later time. It can even be invoked for the first time on appeal.]
In his article, “Cracking the Mortgage Assignment Shell Game,” Peterson in on the side of the banks and plaintiffs in foreclosure cases, but his section “Who Has Standing to Foreclosure the Mortgage?” is full of valuable insights about when a case can be dismissed based on invalid assignment. Instead of reinventing the wheel, I’ve copied and pasted the section below:
It should come as no surprise that the holder of the promissory note has standing to maintain a foreclosure action.34 Further, an agent for the holder can sue to foreclose.35 The holder of a collateral assignment has sufficient standing to foreclose.36 [Editor’s note: Here again we see the leap of faith that just because someone might have standing to sue on the note, they automatically have standing to sue on the mortgage, even if no value was paid for either the note or the mortgage].
Failure to file the original promissory note or offer evidence of standing might preclude summary judgment.37 Even when the plaintiff files the original, it might be necessary to offer additional evidence to show that the plaintiff is the holder or has rights as a nonholder. In BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d 936 (Fla. 2d DCA 2010), for example, the court reversed a summary judgment of foreclosure, saying the plaintiff had not proven it held the note. The written assignment was incomplete and unsigned. The plaintiff filed the original note, which showed an indorsement to another person, but no indorsement to the plaintiff. The court found that was insufficient. Clearly, a party in possession of a note indorsed to another is not a “holder,” but recall that Johns v. Gillian holds that a written assignment is not needed to show standing when the transferee receives delivery of the note. The court’s ruling in BAC Funding Consortium was based on the heavy burden required for summary judgment. The court said the plaintiff did not offer an affidavit or deposition proving it held the note and suggested that “proof of purchase of the debt, or evidence of an effective transfer” might substitute for an assignment.38 [e.s.]
In Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. 4th DCA 1990), the court held that an assignment executed after the filing of the foreclosure case was not sufficient to show the plaintiff had standing at the time the complaint was filed. In WM Specialty Mortgage, LLC v. Salomon, 874 So. 2d 680 (Fla. 4th DCA 2004), however, the court distinguished Jeff-Ray Corp., stating that the execution date of the written assignment was less significant when the plaintiff could show that it acquired the mortgage before filing the foreclosure without a written assignment, as permitted by Johns v. Gilliam.39
When the note is lost, a document trail showing ownership is important. The burden in BAC Funding Consortium might be discharged by an affidavit confirming that the note was sold to the plaintiff prior to foreclosure. Corroboratory evidence of sale documents or payment of consideration is icing on the cake, but probably not needed absent doubt over the plaintiff’s rights. If doubt remains, indemnity can be required if needed to protect the mortgagor.40 [e.s.] 34 Philogene v. ABN AMRO Mortgage Group, Inc., 948 So. 2d 45 (Fla. 4th D.C.A. 2006); Fla. Stat. §673.3011(1) (2010).
35 Juega v. Davidson, 8 So. 3d 488 (Fla. 3d D.C.A. 2009); Mortgage Electronic Registration Systems, Inc. v. Revoredo, 955 So. 2d 33, 34, fn. 2 (Fla. 3d D.C.A. 2007) (stating that MERS was holder, but not owner and “We simply don’t think that this makes any difference. See Fla. R.Civ. P. 1.210(a) (action may be prosecuted in name of authorized person without joining party for whose benefit action is brought)”). [Editor’s note: This is an example of judicial ignorance of what is really happening. MERS is a conduit, a naked nominee, whose existence is meaningless, as is its records of transfer or ownership of the the debt, the note or the mortgage]
36 Laing v. Gainey Builders, Inc., 184 So. 2d 897 (Fla. 5th D.C.A. 1966) (collateral assignee was a holder); Cullison v. Dees, 90 So. 2d 620 (Fla. 1956) (same, except involving validity of payments rather than standing to foreclose).
37 See Fla. Stat. §673.3091(2) (2010); Servedio v. US Bank Nat. Ass’n, 46 So. 3d 1105 (Fla. 4th D.C.A. 2010).
38 BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d at 938-939 (Fla. 2d D.C.A. 2010). See also Verizzo v. Bank of New York, 28 So. 3d 976 (Fla. 2d D.C.A. 2010) (Bank filed original note, but indorsement was to a different bank). But see Lizio v. McCullom, 36 So. 3d 927 (Fla. 4th D.C.A. 2010) (possession of note is prima facie evidence of ownership). [Editor’s note: this is the nub of the problems in foreclosure litigation. The law requires purchase for value for ownership, along with other criteria described above. This court’s conclusion places an unfair burden of proof on the borrower. The party with the sole care, custody and control of the actual evidence and information about the transfer or sale of the ndebt, note or mortgage is the Plaintiff. The plaintiff should therefore be required to show the details of the transaction in which the debt, note or mortgage was acquired. To me, that means showing a cancelled check or wire transfer receipt in which the reference was to the loan in dispute. Anything less than that raises questions about whether the loan implied by the note and mortgage ever existed. See my previous articles regarding securitization where the actual loan was actually applied from third party funds. hence the originator, who did not loan any money, was never paid for note or mortgage because consideration from a third party had already passed.]
39 See also Glynn v. First Union Nat. Bank, 912 So. 2d 357 (Fla. 4th D.C.A. 2005), rev. den., 933 So. 2d 521 (Fla. 2006) (note transferred before lawsuit, even though assignment was after). [Editor’s note: if the note and mortgage were in fact transfered for actual value (with proof of payment) then a “late” assignment might properly be categorized as a clerical issue rather than a legal one — because the substance of the transaction actually took place long before the assignment was executed and recorded. But the cautionary remark here is that in all probability, nobody who relies upon the “Chain” ever paid anything but fees to their predecessor. Why would they? If the consideration already passed from third party — i.e., pension fund money — why would the originator or any successor be entitled to demand the value of the note and mortgage? The originator in that scenario is neither the lender nor the owner of the debt and therefore should be given no rights under the note and mortgage, where title was diverted from the third party who DID the the loan to the originator who did NOT fund the loan. 40 Fla. Stat. §673.3091(2) (2010); Fla. Stat. §69.061 (2010).-David E. Peterson, “Cracking the Mortgage Assignment Shell Game”, The Florida Bar Journal, Volume 85, No. 9, November, 2011.
I also came across a blog post from another attorney on how to argue Florida assignments of judges. I don’t know how reliable this is, but it does cite several cases, and may be a useful resource to you: http://discoverytactics.wordpress.com/tactics-strategies/how-to-argue-florida-assignments-to-judges/. Someone also posted the content of the above link verbatim in a comment on my blog at http://livinglies.me/foreclosure-defense-forms/people-players-and-resources/state-laws/florida-laws/.
Filed under: AMGAR, CASES, CORRUPTION, escrow agent, evidence, expert witness, foreclosure, foreclosure defenses, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Motions, Neil Garfield Show, originator, Pleading, securities fraud, Servicer, STATUTES, Title, TRUST BENEFICIARIES, trustee | Tagged: ARTICLE 3, ARTICLE 9, assignments, debt, holder in due course, Note and Mortgage, purchase for value, UCC | 48 Comments »
Who is the “lender” or “creditor”?
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LET’S PROCEED STEP BY STEP. – Based upon actual documentation filed with the SEC
1. let’s assume that the mortgage is defective because it was not perfected. The note described a party who was not the creditor and gave no notice as to the actual identity of the creditor.
2. Let’s assume also that the note was paid in full from a variety of sources, which you know about ad nauseum.
3. Let’s further assume that the transfer documents are either non-existent or defective in that there was no actual transaction (they are false), there was no authority of the signatories etc.
4. Now let’s see what evidence I come up with to show that one or all of these things are true.
SUPPLEMENT TO PROSPECTUS:
We will issue and guarantee the certificates. Each certificate represents an undivided ownership interest in a pool of adjustable-rate residential mortgage loans. We offer each certificate by this prospectus supplement and the prospectus referenced in the pool statistics included herein.
Notice the reference to “pool statistics” and not the loans. There was a spreadsheet attached as though those were the loans, but it says later in the prospectus that those are not the real loans. So we have an offer, acceptance and consideration given by the investor to the broker dealer. If they had put the money in the trust, as they were required to do, then the Trust would have funded the transactions and received the necessary assignment through the Depositor. Discovery from hundreds of cases strongly suggests they never did that, because they were more interested in lining their own pockets (i.e., the broker dealers) than in giving the protection promised to the investors — which was an undivided ownership interest in the loans through a derivative security (mortgage bond). They got the mortgage bond but it was issued by a trust that in all probability never received the money and never engaged in any transaction.
What that means is that they (a) intend to do something in the future as of the date of this instrument, which appears to be some time in 2005 and (b) each certificate represents an undivided interest in the loans as a pool and do not represent direct ownership of the loans themselves (c) and it appears to indicate that that FNMA issues and guarantees the certificates, not the loans. Note that FNMA is not a lender but rather a guarantor although it is frequently referred to as a lender because it serves in the nominal position of “Master Trustee” for REMIC Trusts whose Trust Beneficiaries funded the loan, even if it wasn’t through the trust.
The certificates are issued under the terms of the ARM trust indenture dated as of July 1, 1984, as amended.
What that means is that the agreement and intentions of the parties were set long before the first contact or application was made by the borrower. This impacts the mortgage origination. TILA and RESPA require full disclosure of the identity of the lender because the very purpose of TILA was to make sure the borrower had enough information to make a choice between one lender or another. By depriving the borrower of this knowledge, the borrower was unaware that the purpose of his/her “loan” product was to sell securities and that the “securitization” parties had a greater incentive to sell the loan than make sure that the loan was viable — even if they had no intention of actually securitizing the loan in the manner set forth in the Prospectus and Pooling and Servicing Agreement.
The borrower is also not advised that his/her name and credit score would be used to sell those securities. Now this doesn’t mean the loan wasn’t real, but it does point to the fact that the actual identity of the funders of the loan was being kept secret and that the note was defective in failing to show that this was the intent of the parties sitting across the table from the borrower. By keeping this information from both the lender and the borrower, the “securitization” parties were obviously intending to use the identities of the lenders and use the identities of the borrowers to create actual or fictitious transactions to cover any excessive compensation or payoffs they were anticipating.
We have responsibility for the servicing of the mortgage loans in the pool. Every month we will pay to certificate holders scheduled installments of principal on the mortgage loans in the pool, together with one month’s accrued interest at the pool accrual rate. We guarantee to pay these amounts, whether or not the borrowers under the mortgage loans pay us. If we foreclose on a mortgage loan, we also must pay certificate holders the full principal balance of that loan even if we recover a lesser amount.
There are several possible interpretations here. And that is because “we” is not actually an identification of any party or parties. One is that FNMA was the creditor in fact the whole time. The fact that FNMA is not the creditor because it never loaned any money and never bought the loans (except possibly as Master Trustee for a REMIC Trust, which could only mean that the REMIC trust bought it acting through FNMA acting as a “manager”). Another is that the investors were the creditors, and still another is that the trust was the creditor. It’s really not that clear.
What IS clear is that the investors were paid no matter what, which means that from the investor point of view there could be no default — ever, unless FNMA defaulted. This is the quasi equivalent of servicer advances. In truth both servicer advances and the guarantee payments probably came from a reserve fund taken out of the investors’ pool of money sitting in the broker dealer’s account. The reason why the payments were made regardless of what the borrower did was that the broker dealers wanted to sell more bonds.
By creating the illusion that all is well with the loan pool, the investors continued to buy the mortgage bonds. The authority for paying the investors out of their own money is directly stated in language buried in the prospectus, at a point where most fund managers have stopped reading and are relying upon their trust of investment banks who have a reputation dating back as much as 150 years. This was a reputation they cashed. The only true securitization was that the reputation of the major banks was sold off multiple times in bogus instruments that do NOT qualify for security exemption and SHOULD be subject to SEC enforcement.
Hence the source of funding was paid and is being paid and is guaranteed to be paid in all events. So here is the problem: if the guarantee was of the certificate and not of the mortgage how exactly does FNMA claim direct ownership of the loan? You have a right to see those transactions and ascertain the true value of the mortgage and the true creditor. It is unlikely that there were two guarantees — one for the certificates and one for the loans. And the interesting part of that is my understanding of the process is that FNMA was to created to guarantee loans not certificates.
The point of this exercise is to emphasize the importance of actually reading the “securitization” documents and to compare the events set forth in the documents with the actual events. If the document says the loan was to be acquired through an assignment that is in recordable form and which is recorded, then there are several questions. Was the document of assignment prepared? Was it recorded? And most of all was there any transaction in which the Trust paid for the assignment?
And of course as almost everyone knows in foreclosure defense, when did this alleged transaction take place. The name of the trust usually has a year and sometimes a month in it and that gives the answer about when the transaction must have taken place in order to qualify for a valid acquisition of loan — i.e., the 90 day cutoff.
So we know by definition and from the facts of closing that if the closing took place on December 1, 2006 and the cutoff date for trust business was January 1, 2007, that the assignment was required during that period. But we also know from experience that these assignments appear out of thin air only for mortgages that are in litigation — leading to what some in foreclosure defense refer to as “ta da!” assignments — obviously fabricated minutes before they were used in court.
The last item is the most deadly for the banks. It is perfectly appropriate to ask for the transaction in which the transfer took place. The assignment, fabricated or not, says it took place on a certain date. The banking system is set up so that there are multiple sets of footprints for the movement of money. So your question is, show me the transaction where the Trust issued a check or wire transfer for this mortgage. Their answer is no. They will cite all sorts of reasons for this, but the real one is that the transaction does not exist.
It doesn’t exist now, it didn’t exist then and it never will exist because in most cases the money advanced by investors to the broker dealers was never used in the manner set forth in the prospectus. That is a subject for litigation between investors and broker dealers and there have been hundreds of such claims now that the truth is coming out. The only significance to you is that you now have actual knowledge that the investors directly and involuntarily funded the origination or acquisition of your loan, but failed to get the what they should have received — a note and mortgage payable to the investors.
Naming the mortgage broker or originator on the note and mortgage is pure fiction and in my opinion renders those instruments void. The alleged transaction at the closing with the borrower was a sham. He or she was induced to sign closing documents upon the mistaken belief that the originator or mortgage broker was actually lending the money to him or her. The moment the borrower signed the note and mortgage, and the moment the mortgage was recorded, there was a cloud on title because the mortgage was defective — a mortgage which the investors themselves allege was unenforceable for exactly the reason set forth in this article.
Analysis taken from
ADJUSTABLE RATE TRUST INDENTURE FOR ADJ RATE PRIOR TO 6-1-07.pdf;
SET 2 TEXT RECOGNIZABLE FM 000471 – MERS history of lender, investor, servicing.pdf;
FNMA LISTING OF ARM MBS SUBTYPES.pdf;
FORM 10-K ANNUAL REPORT FOR DECEMBER 2005.pdf;
LOAN LEVEL INFO.pdf;
monthly reporting.pdf;
NOTES WHILE REVIEWING SECURITIZATION DOCUMENT.wpd;
Prospectus July 1, 2004.pdf;
SECURITY SPECIFIC DETAILS FROM FNMA WEBSITE BASED ON POOL NUMBER PROVIDED IN DISCLOSURE.pdf;
Supplement to Prospectus.pdf
Filed under: CORRUPTION, discovery, evidence, expert witness, Fannie MAe, foreclosure, foreclosure defenses, foreclosure mill, GARFIELD KELLEY AND WHITE, GTC | Honor, investment banking, Investor, MBS TRUSTEE, Mortgage, Motions, Pleading, Servicer, TRUST BENEFICIARIES | Tagged: 10-K annual report, assignments, date of assignment, date of transaction, Fannie Mae guarantee, Fannie Mae Master trustee, mortgage bonds, payments on behalf of investors, payments to investors, Pooling and Servicing Agreement, Prospectus, Servicer advances | 97 Comments »
New Mexico Supreme Court Wipes Out Bank of New York
bony-v-romero_nm-sup.ct.-reverses-with-instruction_2-14
There are a lot of things that could be analyzed in this case that was very recently decided (February 13, 2014). The main take away is that the New Mexico Supreme Court is demonstrating that the judicial system is turning a corner in approaching the credibility of the intermediaries who are pretending to be real parties in interest. I suggest that this case be studied carefully because their reasoning is extremely good and their wording is clear. Here are some of the salient quotes that I think it be used in motions and pleadings:
We hold that the Bank of New York did not establish its lawful standing in this case to file a home mortgage foreclosure action. We also hold that a borrower’s ability to repay a home mortgage loan is one of the “borrower’s circumstances” that lenders and courts must consider in determining compliance with the New Mexico Home Loan Protection Act, NMSA 1978, §§ 58-21A-1 to -14 (2003, as amended through 2009) (the HLPA), which prohibits home mortgage refinancing that does not provide a reasonable, tangible net benefit to the borrower. Finally, we hold that the HLPA is not preempted by federal law. We reverse the Court of Appeals and district court and remand to the district court with instructions to vacate its foreclosure judgment and to dismiss the Bank of New York’s foreclosure action for lack of standing.
The Romeros soon became delinquent on their increased loan payments. On April 1, 2008, a third party—the Bank of New York, identifying itself as a trustee for Popular Financial Services Mortgage—filed a complaint in the First Judicial District Court seeking foreclosure on the Romeros’ home and claiming to be the holder of the Romeros’ note and mortgage with the right of enforcement.
The Romeros also raised several counterclaims, only one of which is relevant to this appeal: that the loan violated the antiflipping provisions of the New Mexico HLPA, Section 58-21A-4(B) (2003).[They were lured into refinancing into a loan with worse provisions than the one they had].
Litton Loan Servicing did not begin servicing the Romeros’ loan until November 1, 2008, seven months after the foreclosure complaint was filed in district court.
At a bench trial, Kevin Flannigan, a senior litigation processor for Litton Loan Servicing, testified on behalf of the Bank of New York. Flannigan asserted that the copies of the note and mortgage admitted as trial evidence by the Bank of New York were copies of the originals and also testified that the Bank of New York had physical possession of both the note and mortgage at the time it filed the foreclosure complaint.
{9} The Romeros objected to Flannigan’s testimony, arguing that he lacked personal knowledge to make these claims given that Litton Loan Servicing was not a servicer for the Bank of New York until after the foreclosure complaint was filed and the MERS assignment occurred. The district court allowed the testimony based on the business records exception because Flannigan was the present custodian of records.
{10} The Romeros also pointed out that the copy of the “original” note Flannigan purportedly authenticated was different from the “original” note attached to the Bank of New York’s foreclosure complaint. While the note attached to the complaint as a true copy was not indorsed, the “original” admitted at trial was indorsed twice: first, with a blank indorsement by Equity One and second, with a special indorsement made payable to JPMorgan Chase.
the Court of Appeals affirmed the district court’s rulings that the Bank of New York had standing to foreclose and that the HLPA had not been violated but determined as a result of the latter ruling that it was not necessary to address whether federal law preempted the HLPA. See Bank of N.Y. v. Romero, 2011-NMCA-110, ¶ 6, 150 N.M. 769, 266 P.3d 638 (“Because we conclude that substantial evidence exists for each of the district court’s findings and conclusions, and we affirm on those grounds, we do not addressthe Romeros’ preemption argument.”).
We have recognized that “the lack of [standing] is a potential jurisdictional defect which ‘may not be waived and may be raised at any stage of the proceedings, even sua sponte by the appellate court.’” Gunaji v. Macias, 2001-NMSC-028, ¶ 20, 130 N.M. 734, 31 P.3d 1008 (citation omitted). While we disagree that the Romeros waived their standing claim, because their challenge has been and remains largely based on the note’s indorsement to JPMorgan Chase, whether the Romeros failed to fully develop their standing argument before the Court of Appeals is immaterial. This Court may reach the issue of standing based on prudential concerns. See New Energy Economy, Inc. v. Shoobridge, 2010-NMSC-049, ¶ 16, 149 N.M. 42, 243 P.3d 746 (“Indeed, ‘prudential rules’ of judicial self-governance, like standing, ripeness, and mootness, are ‘founded in concern about the proper—and properly limited—role of courts in a democratic society’ and are always relevant concerns.” (citation omitted)). Accordingly, we address the merits of the standing challenge.[e.s.]
the Romeros argue that none of the Bank’s evidence demonstrates standing because (1) possession alone is insufficient, (2) the “original” note introduced by the Bank of New York at trial with the two undated indorsements includes a special indorsement to JPMorgan Chase, which cannot be ignored in favor of the blank indorsement, (3) the June 25, 2008, assignment letter from MERS occurred after the Bank of New York filed its complaint, and as a mere assignment
of the mortgage does not act as a lawful transfer of the note, and (4) the statements by Ann Kelley and Kevin Flannigan are inadmissible because both lack personal knowledge given that Litton Loan Servicing did not begin servicing loans for the Bank of New York until seven months after the foreclosure complaint was filed and after the purported transfer of the loan occurred.[NOTE BURDEN OF PROOF](“[S]tanding is to be determined as of the commencement of suit.”); accord 55 Am. Jur. 2d Mortgages § 584 (2009) (“A plaintiff has no foundation in law or fact to foreclose upon a mortgage in which the plaintiff has no legal or equitable interest.”). One reason for such a requirement is simple: “One who is not a party to a contract cannot maintain a suit upon it. If [the entity] was a successor in interest to a party on the [contract], it was incumbent upon it to prove this to the court.” L.R. Prop. Mgmt., Inc. v. Grebe, 1981-NMSC-035, ¶ 7, 96 N.M. 22, 627 P.2d 864 (citation omitted). The Bank of New York had the burden of establishing timely ownership of the note and the mortgage to support its entitlement to pursue a foreclosure action. See Gonzales v. Tama, 1988-NMSC- 016, ¶ 7, 106 N.M. 737, 749 P.2d 1116
[THE DIFFERENCE BETWEEN REMEDIES ON THE NOTE AND REMEDIES ON THE MORTGAGE]
(“One who holds a note secured by a mortgage has two separate and independent remedies, which he may pursue successively or concurrently; one is on the note against the person and property of the debtor, and the other is by foreclosure to enforce the mortgage lien upon his real estate.” (internal quotation marks and citation omitted)).
3. None of the Bank’s Evidence Demonstrates Standing to Foreclose
{19} The Bank of New York argues that in order to demonstrate standing, it was required to prove that before it filed suit, it either (1) had physical possession of the Romeros’ note indorsed to it or indorsed in blank or (2) received the note with the right to enforcement, as required by the UCC. See § 55-3-301 (defining “[p]erson entitled to enforce” a negotiable instrument). While we agree with the Bank that our state’s UCC governs how a party becomes legally entitled to enforce a negotiable instrument such as the note for a home loan, we disagree that the Bank put forth such evidence.
a. Possession of a Note Specially Indorsed to JPMorgan Chase Does Not Establish the Bank of New York as a Holder
{20} Section 55-3-301 of the UCC provides three ways in which a third party can enforce a negotiable instrument such as a note. Id. (“‘Person entitled to enforce’ an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the [lost, destroyed, stolen, or mistakenly transferred] instrument pursuant to [certain UCC enforcement provisions].”); see also § 55-3-104(a)(1), (b), (e) (defining “negotiable instrument” as including a “note” made “payable to bearer or to order”). Because the Bank’s arguments rest on the fact that it was in physical possession of the Romeros’ note, we need to consider only the first two categories of eligibility to enforce under Section 55-3-301.
{21} The UCC defines the first type of “person entitled to enforce” a note—the “holder” of the instrument—as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” NMSA 1978, § 55-1-201(b)(21)(A) (2005); see also Frederick M. Hart & William F. Willier, Negotiable Instruments Under the Uniform Commercial Code, § 12.02(1) at 12-13 to 12-15 (2012) (“The first requirement of being a holder is possession of the instrument. However, possession is not necessarily sufficient to make one a holder. . . . The payee is always a holder if the payee has possession. Whether other persons qualify as a holder depends upon whether the instrument initially is payable to order or payable to bearer, and whether the instrument has been indorsed.” (footnotes omitted)). Accordingly, a third party must prove both physical possession and the right to enforcement through either a proper indorsement or a transfer by negotiation. See NMSA 1978, § 55-3-201(a) (1992) (“‘Negotiation’ means a transfer of possession . . . of an instrument by a person other than the issuer to a person who thereby becomes its holder.”). [E.S.] Because in this case the Romeros’ note was clearly made payable to the order of Equity One, we must determine whether the Bank provided sufficient evidence of how it became a “holder” by either an indorsement or transfer.
Without explanation, the note introduced at trial differed significantly from the original note attached to the foreclosure complaint, despite testimony at trial that the Bank of New York had physical possession of the Romeros’ note from the time the foreclosure complaint was filed on April 1, 2008. Neither the unindorsed note nor the twice-indorsed
7
note establishes the Bank as a holder.
{23} Possession of an unindorsed note made payable to a third party does not establish the right of enforcement, just as finding a lost check made payable to a particular party does not allow the finder to cash it. [E.S.]See NMSA 1978, § 55-3-109 cmt. 1 (1992) (“An instrument that is payable to an identified person cannot be negotiated without the indorsement of the identified person.”). The Bank’s possession of the Romeros’ unindorsed note made payable to Equity One does not establish the Bank’s entitlement to enforcement.
We are not persuaded. The Bank provides no authority and we know of none that exists to support its argument that the payment restrictions created by a special indorsement can be ignored contrary to our long-held rules on indorsements and the rights they create. See, e.g., id. (rejecting each of two entities as a holder because a note lacked the requisite indorsement following a special indorsement); accord NMSA 1978, § 55-3-204(c) (1992) (“For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.”).
[COMPETENCY OF WITNESS]
the Bank of New York relies on the testimony of Kevin Flannigan, an employee of Litton Loan Servicing who maintained that his review of loan servicing records indicated that the Bank of New York was the transferee of the note. The Romeros objected to Flannigan’s testimony at trial, an objection that the district court overruled under the business records exception. We agree with the Romeros that Flannigan’s testimony was inadmissible and does not establish a proper transfer.
Litton Loan Servicing, did not begin working for the Bank of New York as its servicing agent until November 1, 2008—seven months after the April 1, 2008, foreclosure complaint was filed. Prior to this date, Popular Mortgage Servicing, Inc. serviced the Bank of New York’s loans. Flannigan had no personal knowledge to support his testimony that transfer of the Romeros’ note to the Bank of New York prior to the filing of the foreclosure complaint was proper because Flannigan did not yet work for the Bank of New York. See Rule 11-602 NMRA (“A witness may testify to a matter only if evidence is introduced sufficient to support a finding that the
9
witness has personal knowledge of the matter. [E.S.] Evidence to prove personal knowledge may consist of the witness’s own testimony.”). We make a similar conclusion about the affidavit of Ann Kelley, who also testified about the status of the Romeros’ loan based on her work for Litton Loan Servicing. As with Flannigan’s testimony, such statements by Kelley were inadmissible because they lacked personal knowledge.
[OBJECTION TO HEARSAY BUSINESS RECORDS REVERSED AND SUSTAINED]When pressed about Flannigan’s basis of knowledge on cross-examination, Flannigan merely stated that “our records do indicate” the Bank of New York as the holder of the note based on “a pooling and servicing agreement.” No such business record itself was offered or admitted as a business records hearsay exception. See Rule 11-803(F) NMRA (2007) (naming this category of hearsay exceptions as “records of regularly conducted activity”).
The district court erred in admitting the testimony of Flannigan as a custodian of records under the exception to the inadmissibility of hearsay for “business records” that are made in the regular course of business and are generally admissible at trial under certain conditions. See Rule 11-803(F) (2007) (citing the version of the rule in effect at the time of trial). The business records exception allows the records themselves to be admissible but not simply statements about the purported contents of the records. [E.S.] See State v. Cofer, 2011-NMCA-085, ¶ 17, 150 N.M. 483, 261 P.3d 1115 (holding that, based on the plain language of Rule 11-803(F) (2007), “it is clear that the business records exception requires some form of document that satisfies the rule’s foundational elements to be offered and admitted into evidence and that testimony alone does not qualify under this exception to the hearsay rule” and concluding that “‘testimony regarding the contents of business records, unsupported by the records themselves, by one without personal knowledge of the facts constitutes inadmissible hearsay.’” (citation omitted)). Neither Flannigan’s testimony nor Kelley’s affidavit can substantiate the existence of documents evidencing a transfer if those documents are not entered into evidence. Accordingly, Flannigan’s trial testimony cannot establish that the Romeros’ note was transferred to the Bank of New York.[E.S.]
[REJECTION OF MERS ASSIGNMENT]
We also reject the Bank’s argument that it can enforce the Romeros’ note because it was assigned the mortgage by MERS. An assignment of a mortgage vests only those rights to the mortgage that were vested in the assigning entity and nothing more. See § 55-3-203(b) (“Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course.”); accord Hart & Willier, supra, § 12.03(2) at 12-27 (“Th[is] shelter rule puts the transferee in the shoes of the transferor.”).
[MERS CAN NEVER ASSIGN THE NOTE]
As a nominee for Equity One on the mortgage contract, MERS could assign the mortgage but lacked any authority to assign the Romeros’ note. Although this Court has never explicitly ruled on the issue of whether the assignment of a mortgage could carry with it the transfer of a note, we have long recognized the separate functions that note and mortgage contracts perform in foreclosure actions. See First Nat’l Bank of Belen v. Luce, 1974-NMSC-098, ¶ 8, 87 N.M. 94, 529 P.2d 760 (holding that because the assignment of a mortgage to a bank did not convey an interest in the loan contract, the bank was not entitled to foreclose on the mortgage); Simson v. Bilderbeck, Inc., 1966-NMSC-170, ¶¶ 13-14, 76 N.M. 667, 417 P.2d 803 (explaining that “[t]he right of the assignee to enforce the mortgage is dependent upon his right to enforce the note” and noting that “[b]oth the note and mortgage were assigned to plaintiff.
[SPLITTING THE NOTE AND MORTGAGE]
(“A mortgage securing the repayment of a promissory note follows the note, and thus, only the rightful owner of the note has the right to enforce the mortgage.”); Dunaway, supra, § 24:18 (“The mortgage only secures the payment of the debt, has no life independent of the debt, and cannot be separately transferred. If the intent of the lender is to transfer only the security interest (the mortgage), this cannot legally be done and the transfer of the mortgage without the debt would be a nullity.”). These separate contractual functions—where the note is the loan and the mortgage is a pledged security for that loan—cannot be ignored simply by the advent of modern technology and the MERS electronic mortgage registry system.
[THE NOBODY ELSE IS CLAIMING ARGUMENT IS EXPLICITLY REJECTED]
Failure of Another Entity to Claim Ownership of the Romeros’ Note Does Not Make the Bank of New York a Holder
{37} Finally, the Bank of New York urges this Court to adopt the district court’s inference that if the Bank was not the proper holder of the Romeros’ note, then third-party-defendant Equity One would have claimed to be the rightful holder, and Equity One made no such claim.
11
{38} The simple fact that Equity One does not claim ownership of the Romeros’ note does not establish that the note was properly transferred to the Bank of New York. In fact, the evidence in the record indicates that JPMorgan Chase may be the lawful holder of the Romeros’ note, as reflected in the note’s special indorsement.
[HOLDER MUST PROVE ENTITLEMENT TO ENFORCE — NO PRESUMPTION ALLOWED]
Because the transferee is not a holder, there is no presumption under Section [55-]3-308 [(1992) (entitling a holder in due course to payment by production and upon signature)] that the transferee, by producing the instrument, is entitled to payment. The instrument, by its terms, is not payable to the transferee and the transferee must account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired it.
[LENDER’S OBLIGATION TO ASSURE THAT THE LOAN IS VIABLE]
B. A Lender Must Consider a Borrower’s Ability to Repay a Home Mortgage Loan in Determining Whether the Loan Provides a Reasonable, Tangible Net Benefit, as Required by the New Mexico HLPA
{39} For reasons that are not clear in the record, the Romeros did not appeal the district court’s judgment in favor of the original lender, Equity One, on the Romeros’ claims that Equity One violated the HLPA. The Court of Appeals addressed the HLPA violation issue in the context of the Romeros’ contentions that the alleged violation constituted a defense to the foreclosure complaint of the Bank of New York by affirming the district court’s favorable ruling on the Bank of New York’s complaint. As a result of our holding that the Bank of New York has not established standing to bring a foreclosure action, the issue of HLPA violation is now moot in this case. But because it is an issue that is likely to be addressed again in future attempts by whichever institution may be able to establish standing to foreclose on the Romero home and because it involves a statutory interpretation issue of substantial public importance in many other cases, we address the conclusion of both the
12
Court of Appeals and the district court that a homeowner’s inability to repay is not among “all of the circumstances” that the 2003 HLPA, applicable to the Romeros’ loan, requires a lender to consider under its “flipping” provisions:
No creditor shall knowingly and intentionally engage in the unfair act or practice of flipping a home loan. As used in this subsection, “flipping a home loan” means the making of a home loan to a borrower that refinances an existing home loan when the new loan does not have reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan and the borrower’s circumstances.
Section 58-21A-4(B) (2003); see also Bank of N.Y., 2011-NMCA-110, ¶ 17 (holding that “while the ability to repay a loan is an important consideration when otherwise assessing a borrower’s financial situation, we will not read such meaning into the statute’s ‘reasonable, tangible net benefit’ language”).
[DOOMED LOANS — WHO HAS THE RISK?]
We have been presented with no conceivable reason why the Legislature in 2003 would consciously exclude consideration of a borrower’s ability to repay the loan as a factor of the borrower’s circumstances, and we can think of none. Without an express legislative direction to that effect, we will not conclude that the Legislature meant to approve mortgage loans that were doomed to end in failure and foreclosure. Apart from the plain language of the statute and its express statutory purpose, it is difficult to comprehend how an unrepayable home mortgage loan that will result in a foreclosure on one’s home and a deficiency judgment to pay after the borrower is rendered homeless could provide “a reasonable, tangible net benefit to the borrower.”
[LENDER’S OBLIGATION TO MAKE SURE IT IS A VIABLE TRANSACTION] a lender cannot avoid its own obligation to consider real facts and circumstances [E.S.] that might clarify the inaccuracy of a borrower’s income claim. Id. (“Lenders cannot, however, disregard known facts and circumstances that may place in question the accuracy of information contained in the application.”) A lender’s willful blindness to its responsibility to consider the true circumstances of its borrowers is unacceptable. A full and fair consideration of those circumstances might well show that a new mortgage loan would put a borrower into a materially worse situation with respect to the ability to make home loan payments and avoid foreclosure, consequences of a borrower’s circumstances that cannot be disregarded.
if the inclusion of such boilerplate language in the mass of documents a borrower must sign at closing would substitute for a lender’s conscientious compliance with the obligations imposed by the HLPA, its protections would be no more than empty words on paper that could be summarily swept aside by the addition of yet one more document for the borrower to sign at the closing.
[THE BLAME GAME]
Borrowers are certainly not blameless if they try to refinance their homes through loans they cannot afford. But they do not have a mortgage lender’s expertise, and the combination of the relative unsophistication of many borrowers and the potential motives of unscrupulous lenders seeking profits from making loans without regard for the consequences to homeowners led to the need for statutory reform. See § 58-21A-2 (discussing (A) “abusive mortgage lending” practices, including (B) “making . . . loans that are equity-based, rather than income based,” (C) “repeatedly refinanc[ing] home loans,” rewarding lenders with “immediate income” from “points and fees” and (D) victimizing homeowners with the unnecessary “costs and terms” of “overreaching creditors”).
[FEDERAL PREEMPTION CLAIM FROM OCC STATEMENT DOES NOT PROVIDE BANK OF NEW YORK ANY PROTECTION]
While the Bank is correct in asserting that the OCC issued a blanket rule in January 2004, see 12 C.F.R. § 34.4(a) (2004) (preempting state laws that impact “a national bank’s ability to fully exercise its Federally authorized real estate lending powers”), and that the New Mexico Administrative Code recognizes this OCC rule, neither the Bank nor our administrative code addresses several actions taken by Congress and the courts since 2004 to disavow the OCC’s broad preemption statement.
Applying the Dodd-Frank standard to the HLPA, we conclude that federal law does not preempt the HLPA. First, our review of the NBA reveals no express preemption of state consumer protection laws such as the HLPA. Second, the Bank provides no evidence that conforming to the dictates of the HLPA prevents or significantly interferes with a national bank’s operations. Third, the HLPA does not create a discriminatory effect; rather, the HLPA applies to any “creditor,” which the 2003 statute defines as “a person who regularly [offers or] makes a home loan.” Section 58-21A-3(G) (2003). Any entity that makes home loans in New Mexico must follow the HLPA, regardless of whether the lender is a state or nationally chartered bank. See § 58-21A-2 (providing legislative findings on abusive mortgage lending practices that the HLPA is meant to discourage).
Filed under: CASES, CORRUPTION, escrow agent, Eviction, evidence, expert witness, Fannie MAe, foreclosure, foreclosure defenses, foreclosure mill, GARFIELD KELLEY AND WHITE, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Neil Garfield Show, Pleading, securities fraud, Servicer, STATUTES, Student Loans, TRUST BENEFICIARIES, trustee | Tagged: ABUSIVE LOAN PRACTICES, assignments, bank of new york, business records exception, competency of witness, DANIEL YOHALEM, endorsements, FEDERAL PREEMMPTION --- OCC STATEMENT, FREDERICK ROWE, hearsay, HLPA, holder of note, JOSEPH ROMERO, JOSHUA SIMMS, JUDICIAL SELF GOVERNANCE, JURISDICITION, KATHERINE ELIZABETH MURRAY, liar loans, MARY ROMERO, MERS, New Mexico, NEW MEXICO ATTORNEY, personal knowledge, POPULAR FINANCIAL SERVICES MORTGAGE PASS THROUGH CERTIFICATE SERIES #2006, RIGHT TO ENFORCE MORTGAGE, RIGHT TO ENFORCE NOTE, standing, Supreme Court, UCC AND FORECLOSURES | 50 Comments »
SEC Corroborates Livinglies Position on Third Party Payment While Texas BKR Judge Disallows Assignments After Cut-Off Date
Maybe this should have been divided into three articles:
- Saldivar: Texas BKR Judge finds Assignment Void not voidable. It never happened.
- Erobobo: NY Judge rules ownership of note is burden of the banks. Not standing but rather capacity to sue without injury.
- SEC Orders Credit Suisse to disgorge illegal profits back to investors. Principal balances of borrowers may be reduced. Defaults might not exist because notices contain demands that include money held by banks that should have been paid to investors.
But these decisions are so interrelated and their effect so far-reaching that it seems to me that if you read only one of them you might head off in the wrong direction. Pay careful attention to the Court’s admonition in Erobobo that these defenses can be waived unless timely raised. Use the logic of these decisions and you will find more and more judges listening with increasing care. The turning point is arriving and foreclosures — past, present and future — might finally get the review and remedies that are required in a nation of laws.
Courts and SEC Drilling Down on Reality of BANK Fraud.
The effects will be far-reaching. The complexity of the false securitization scam was intended to shield Wall Street from continuing its endless pattern of conduct of fraud, misdeeds, perjury and other crimes and other acts of contempt for the courts. The result was that the entire finance system and the economies of the world were turned upside down. Now we are going to see them turn right-side up.
It has taken years, but the SEC and the Courts are now unraveling the mysteries behind the secret curtains of the scam of securitization, which turns out to be nothing more than a cover for a giant PONZI scheme that fell apart as soon as investors stopped buying mortgage bonds. That is the hallmark of PONZI schemes — using the new investor money to pay the expected returns to the older investors.
If it was a legitimate business plan, the failure of the investors to buy more mortgage bonds would have no effect on the rest of the system. Each bond, each mortgage would have either succeeded or failed on its own merit. But that is not what happened.
As can be seen by the decisions noted below, Wall Street defrauded investors on many levels, defrauded the government, and defrauded the borrowers on mortgages they knew with certainty would never survive even a few months.
In confidential deals, the banks entered into agreements to be compensated for the failure of the mortgage bonds and defaulting loans and then simply lied to regulators, investors and borrowers — and kept the money for themselves instead of turning over the money to the investors who were going to lose more money than they had ever dreamed on “triple A” rated “insured” and “hedged” (credit default swaps).
The SEC is now ordering Credit Suisse (and soon others) to disgorge $60 million that clearly should have been paid to investors and thus reduced the accounts receivable of investors. A much better educated SEC and much better educated Judges are peeking behind the curtains and they don’t like what they see. These decisions are, in my opinion, the precursors of a wave of decisions that overturns the entire foreclosure tragedy.
The bottom line is that investors funded the mortgages (plus a lot of fees and “proprietary trading profits” that were hidden from the investors and indeed the world), the banks stole the money, the accounts due to the investors is much lower than what is alleged in foreclosure actions, and none of the foreclosers have any right to be in court because (a) they have no capacity to sue in the absence of financial injury caused by the borrower and (b) they are relying on assignments that in the eyes of the law never happened. They not only didn’t lose money, they made more money than most people imagined. Now they are being ordered to pay back the money they promised to investors whose losses will be correspondingly reduced.
How this will be apportioned to the principal balance supposedly due from borrowers has yet to be determined. But it is clear that the receivable from the only real lender is being reduced by the amount of money received by the intermediaries in the securitization chain — in deals that were intended to defraud investors on two levels — not giving the money that the investors should have received and withholding disclosure about the actual quality of the loans.
The reduction in loss or accounts receivable of the investors should proportionately reduce the amount due from borrowers, which means that most foreclosures were based upon a number of false premises: a balance due, a default by borrowers, and the right to submit a false credit bid at auction from a non-creditor on a “foreclosure” that should never have occurred in the first place. Ownership of the note can only be proven if the would-be forecloser received the actual note (not a photo-shopped “original”) in a transaction in which it paid money pursuant to the actual authority to enter into the transaction. That is three elements: the real note, real ownership of the note and real authority to enter into the transaction by which the loans were allegedly assigned years after the cut-off date. The authority for this position is (a) New York Law, (b) the Internal revenue Code, (c) constitutional requirements of due process, (d) the UCC requiring an instrument to be “negotiated rather than just delivered (meaning payment was involved) and (e) common sense, to wit: lenders are entitled to be repaid but only once.
It has been argued here that the REMICs were ignored and that therefore they could not possibly be in the ownership chain of the note and mortgage. We have also argued that the originator of the mortgage has originated nothing if they didn’t pay anything.
With the help of the SEC and the these two court decisions we can see that there are many reasons why the REMIC could not be the owner of the loan and that no party in the securitization chain could be secured unless we invent a new entity in which all the parties in the securitization chain are rolled into one entity.
In the absence of such an entity or the lawful ability to create one retroactively we are left with an unsecured debt — the amount of which runs the gamut from the banks owing the borrower money to the substantial reduction of the principal due after credit is given for the ill-gotten gains stolen by the banks from the investors. Given these facts, there is no legal justification for even contemplating the purported existence of a default by the borrower since the amount due, and the amount of the required payment are both unknown without an accounting from ALL parties in the securitization chain.
If the cut-off date and the Internal Revenue Code and the Pooling and Servicing Agreement all state that any transaction assigning a loan after the cut-off date is not allowed, then the assignment is void. Add to that New York law that expressly states that the transaction is void, not voidable, (see below) which means that legally it never happened. Without a valid assignment, there can be no foreclosure. Add to that the lack of any consideration, and you have a dead shark on your hands —something that struck fear into the hearts of homeowners, governments, and investors but is now lying, gasping for breath, as the finale nears.
There is nothing left to hide because the doors are all open. It will still take years to unravel the financial mess, but now we have a chance to change policy and direct relief to where it belonged all along — to the investors who supplied the money and the homeowners who were duped into crazy, exotic mortgages that hid the real objective: foreclosure.
REQUIRED READING: Read Carefully and Take Notes
“Plaintiff’s ownership of the note is not an issue of standing but an element of its cause of action which it must plead and prove.(e.s.) …
PRACTICE AND DISCOVERY NOTE: ”
In fact, the identity of the owner of the note and mortgage is information that is often in the exclusive possession of the party seeking to foreclose. Mortgages are routinely transferred through MERS, without being recorded. (e.s.) The notes underlying the mortgages, as negotiable instruments, are negotiated by mere delivery without a recorded assignment or notice to the borrower. A defendant has no method to reliably ascertain who in fact owns the note, within the narrow time frame allotted to file an answer. In light of these facts and the fact that Defendant contested the factual allegations asserted in Plaintiff’s pleading, Defendant’s general denial is sufficient to contest whether Plaintiff owns the note and mortgage.”
4th paragraph, page 11
“Since the trustee acquired the subject note and mortgage after the closing date, the trustee’s act in acquiring them exceeded its authority and violated the terms of the trust.The acquisition of a mortgage after 90 days is not a mere technicality but a material violation of the trust’s terms, which jeopardizes the trust’s REMIC status.”


Filed under: CDO, CORRUPTION, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: accounting for true balance due investors, assignments, BKR, capaicty to sue, credit default swaps, disgorgement of illegal profits, erobobo, insurance, IRC, New York LAw, PSA, REMIC, standing, Texas, VOID AB INITIO, void or voidable | 283 Comments »
Forgery! Now You’ve Got Them, Or Do You?
CHECK OUT OUR EXTENDED DECEMBER SPECIAL!
What’s the Next Step? Consult with Neil Garfield
For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).
Editor’s Analysis: First of all hats off to April Charney, http://www.nakedcapitalism.com and Yves Smith for the article on Forgery (see link below) James M. Kelley as a forensic document examiner — outstanding work!
This is one of the places where the rubber meets the road, but before you start celebrating take a deep breath: proof of forgery will NOT necessarily stop delay or alter the foreclosure. That is why I start with questioning the monetary transactions before I introduce the document deficiencies, fabrications and forgeries.
You have to put yourself in the Judge’s seat (or more properly, bench). A simple example will suffice to make my point. Suppose I loaned you $100 and you didn’t pay it back the way we agreed. Later I sue you and produce a promissory note you know you never signed but it looks like your signature, but you’ve admitted you owe the $100 and you admit you defaulted. Under those circumstances your evidence of forgery might be excluded from evidence –— because it is already established you owe the money and defaulted. In fact it should be excluded because it is no longer relevant to the proceedings. The debt is not the not — and vica versa.
The note is only evidence of the debt and taking that out of the equation still leaves the admissions, presumptions and witnesses by which the authenticity of the debt and default have already been taken as agreed and irrefutable. Some people look askance as Judges who apply the rules of evidence and accuse them of stupidity or dishonesty. But the truth is the forged fabricated note is at most corroborative evidence of something that is no longer a material issue of fact in dispute. The Judge has little choice but to rule in favor of the forecloser at that point. Hence, we keep pounding on DENY AND DISCOVER.
If you are filing the lawsuit you should, along with the initial summons and and complaint, file whatever discovery requests you have at the same time which all amount to “who are you, what are you doing here, why are you seeking collection of this debt, and by what authority.
Admitting the debt, note, mortgage etc can be either direct (“I admit that”) or indirect/tacit (“I understand what you are saying Judge but there is ample evidence of skullduggery here”). In most cases, either one is enough, especially with a Judge who is already assuming that the bank wouldn’t be there if there was no debt, note and mortgage and the presence of a default.
The borrower, who knows they did get money on loan, knows they did sign papers and knows they didn’t pay, naturally assumes that it is pointless to deny the basic elements of the foreclosure — the debt between the borrower and the forecloser, the note, which is evidence of the debt, and the mortgage, assignments and other instruments used by the banks to get you pointed in the wrong direction. AND THAT is where the defense goes off the deep end every time there is a “bad” decision.
The Judge is going to be looking for admissions by the borrower (not the forecloser) because of a very natural presumption that at one time was a perfectly reasonable assumption — that the bank would not waste time and money enforcing a debt that didn’t exist and a note that was never valid, nor a mortgage that was never perfected.
And the Judge is going to see any avoidance of enforcement on the basis of paperwork as a tacit admission that the debt is real, the default is real, and the note and mortgage were properly executed under proper circumstances —- because that is what banks do! Maybe it isn’t “fair” but it is perfectly understandable why we encountered a mindset that treated borrowers as lunatics when they first came up with the notion that the paperwork was missing, lost, fabricated, forged, robo-signed etc.
The study by Katherine Ann Porter, the San Francisco study and the studies in Massachusetts and Maryland and Massachusetts all point to a credit bid being submitted at foreclosure auction by a party who wasn’t a creditor at all. The San Francisco study said 65% of the credit bidders were strangers to the transaction and strange is the word to use in court. Did it change anything? No!
So where does that leave you? In order to be able to show the relevance of the forgery or fabrication you must attack the debt itself. Where would I be if I sued you on the $100 loan, produced a fabricated, forged note and you DIDN’T admit the debt or the default. The burden falls back on me to prove I gave you the $100.
What if I didn’t give you the $100 but I know someone else did. That doesn’t give me standing to sue you because I am not injured party. Can any of you state with certainty that the loan money you received came from the originator disclosed on the TILA, settlement and closing documents? Probably not because the ONLY way you would know that is if you had seen the actual wire transfer receipt and the wire transfer instructions.
Thus if you don’t know that to be true — that the originator in your mortgage loan was funded by the originator and was not a table-funded loan (which accounts for about 95%-96% of all loans during the mortgage meltdown), why would you admit it, tacitly, directly or any other way?
As a defense posture the first rule is to deny that which you know is untrue and to deny based upon lack of information or deny based upon facts and theory that are contrary to the assertions of the forecloser. Deny the debt. THAT automatically means the note can’t be evidence of anything real, because the note refers to a loan between the originator and the borrower where the borrower unknowingly received the money from a third or fourth party (table funded loan, branded “predatory” by TILA and reg Z).
Your defense is simply “we don’t know these people and we don’t know the debt they are claiming. We were induced to sign papers that withheld vital information about the party with whom I was doing business and left me with corrupt title. The transaction referred to in the note, mortgage, assignments, allonges etc. was never completed. The fact that we received a loan from someone else does not empower this forecloser to enforce the debt of a third party with whom they have had no contact or privity.”
THEN HAMMER THEM WITH THE FORGERY BUT USE SOMEONE AS GOOD AS KELLEY TO DO IT. WATCH OUT FOR CHARLATANS WHO CAN CONVINCE YOU BUT NOT THE COURT. THUS THE DEFICIENT DOCUMENTS CORROBORATE YOUR MAIN DEFENSE RATHER THAN SERVE AS THE CORE OF IT.
Practice Pointer: At this point either opposing counsel or the Judge will ask some questions like who DID give the loan or what proof do you have. If you are at the stage of a motion to dismiss or motion for summary judgment, your answer should be, if you set up case correctly and you have outstanding discovery, that those are evidential questions that require production of witnesses, testimony, documents and cross examination. Since the present hearing is not a trial or evidential hearing and was not noticed as such you are unprepared to present the entire case.
The issues on a motion to dismiss are solely that of the pleadings. At a Motion for Summary Judgment, it is the pleadings plus an affidavit. Submit several affidavits and the Judge will have little choice but to deny the forecloser’s motion for summary judgment.
Attack their affidavit as not being on personal knowledge (voir dire) and if you are successful all that is left is YOUR motion for summary judgment and affidavits which leaves the Judge with little choice but to enter Summary Final Judgment in favor of the homeowner as to this forecloser.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: admissions, allonge, assignments, debt, fabrication, forgery, James m. Kelley, Katherine Ann Porter, Mortgage, Naked Capitalism, note, relevance, San Francisco study, yves Smith | 63 Comments »
GUILTY! DOCX Defendants Plead in Fraud Cases
“Ms. Brown admitted to participating in the falsification of more than a million documents.”
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Editor’s Comment: A 2 year sentence can only be justified if she is cooperating with authorities, but he narrative coming out of this is that her “clients” didn’t know what she was doing. THAT is impossible.
“If citizens had filed these types of documents with a bank in an attempt to get a loan, the banks would have filed criminal cases against them,” Mr. Koster said. “The mortgage servicing industry has to be held to the same standard that the banks hold the rest of us to.”
The fact is that no bank would have accepted these documents if they came from a borrower and the deals would never have been done. Banks know when they are looking at fabricated documents and they know what questions to ask including requiring supporting documentation from the people who are “represented” on those one million falsified documents.
The real question is whether anyone in government is going to undo the damage caused by these practices. And perhaps even more important, why was it necessary to falsify documents if the deals were legitimate?
Think about it. If the origination of these loans had been proper, all the documents that were routinely required, verified and investigated would be present and accounted for. Instead the documents vanished, destroyed or lost 40%-80% of them. That is no accident.
If the origination documents had been done properly, securitization could have been possible. But the banks were not interested in securitization, except as a buzz word to get investors to buy bonds. The origination documents would have named the REMICs as the payee and secured party. This is property law 101. If securitization was actually in action then the money from the investors would have been put in a trust account bearing the name of that REMIC. Neither one happened.
The Wall Street banks snookered the investors by diverting the money from the sale of bogus mortgage bonds from unfunded, incomplete common law trusts, which is to say, the trusts either held nothing or didn’t even exist for all practical purposes. They diverted the paperwork away from the REMIC so they could claim ownership of the loans for purposes of “trading” (tier 2 yield spread premium) and collecting the insurance, hedge proceeds and federal bailouts.
Here is what the “trading” looked like: The Wall Street Banks took let’s say $1 million from a pension fund (simplifying the situation) into numbers we can all grasp).
The pension fund was expecting a return of 5% or $50,000 per year in interest plus amortized principal. The banks put in the prospectus that the payments could come out of the money from the investing pension funds — the first red flag that a PONZI scheme was at work.
Then the Bank pulling the strings on thousands of puppets, the banks steered blacks, Latins and other unsophisticated, purposely uneducated borrowers into higher priced loans than they were qualified to receive. (I.e., predatory lending according to Federal and state deceptive lending laws).
For simplicity let’s say the loan was for $500,000 at 10%. The originator was representing several things that were not true to the borrower. First that they were the lender (violation of TILA), second that standard underwriting procedures were being followed including verification of income and verification of the value of the property (no such underwriting occurred because neither the originator nor the bank pulling the strings had any risk of loss — they were playing with investor — i.e., pension fund — money).
So they take the $500,000 loan at 10% which means that it would pay $50,000 per year in interest (just like the investor pension fund thought) but they did it knowing that the high price of the loan and the falsely appraised value of the property and false statement of income of the borrower would not repay the loan.
Now here comes the “trade”: They “sell” the loan to the investors for $1 million, the amount invested, because it produces $50,000 per year in interest income but that was contrary to the expectations and representations made to the investor who expected high quality mortgages in viable loans that would be repaid.
So the bank takes in $1 million, funds $500,000 and take the other $500,000 as a “trading profit,” without putting up a dime. And THAT is why the REMIC’s name was not put on the note and mortgage (or deed of trust). If the REMIC’s name had been put on the origination documents, the “trade could not exist because it would be selling the loan to itself.
The end result is that the Wall Street bank makes a $500,000 tier 2 yield spread premium trading profit by stealing the money of the pension funds. By not putting the name of the real source of funds on the origination documents, they raise another red flag showing that a PONZI scheme and a separate fraud were in play here.
And this is why I say you should FIRST FOLLOW the money using the DENY and Discover strategy. Once that order is entered requiring them to show the money trail they are dead in the water and you’ll either get the house or get a settlement in all likelihood — but you must present a credible, understandable threat to them.
And you must be as relentless in pursuing them as they are in pursuing the homeowner. The lawyers that have followed this advice or realized it on their own are picking up victory and after victory. The timid lawyers who for reasons unknown to this writer are afraid to deny the obligation, note and mortgage, lose almost every time.
Back in 2007 I told everyone that the defense was going to be plausible deniability on the part of the Wall Street banks — that they didn’t know of all the violations in the origination and assignments of the loans. That they deny knowledge is already established. That is plausible for them to deny it is impossible. It was the violations themselves that enabled the Wall Street banks to profit while the rest of the country was plunged into recession.
Guilty Pleas in Foreclosure Fraud Cases
By GRETCHEN MORGENSON, NY Times
The founder and former president of DocX, once one of the nation’s largest foreclosure-processing companies, pleaded guilty on Tuesday to fraud in one of the few criminal cases to have arisen out of the housing crisis.
The executive, Lorraine O. Brown, 56, entered a guilty plea in federal court in Florida and a plea agreement in state court in Missouri related to DocX’s preparation of improper documents used to evict troubled borrowers from their homes. Ms. Brown’s guilty pleas will lead to a prison term of at least two years, the Missouri attorney general said.
Foreclosure abuses, like the routine filing of apparent forgeries with the nation’s courts, gained widespread notoriety in 2010. Ms. Brown admitted to directing DocX employees, beginning in 2005, to sign other peoples’ names on crucial mortgage documents. Many of the documents, like assignments of mortgages and affidavits claiming that a borrower’s i.o.u. had been lost, were used by banks and their representatives to foreclose on homeowners. DocX also filed falsely notarized documents with county clerks across the country. These practices are now known as robo-signing. In her plea, Ms. Brown admitted to participating in the falsification of more than a million documents.
“We are sending a signal to the financial industry that these mortgage documents have meaning, they are legal documents and if you are going to file them in the courthouses of this country then they had better be honestly drafted,” said Chris Koster, the Missouri attorney general.
In a statement, Mark Rosenblum, a lawyer for Ms. Brown in Jacksonville, Fla., said: “By negotiating a settlement to her situation and entering her guilty plea, Lori has started the process of getting on with the rest of her life.”
Ms. Brown entered her pleas Tuesday afternoon. She pleaded to one count of mail fraud in federal court in Jacksonville and agreed to one count each of forgery and perjury in Missouri. The Missouri pleas follow a settlement last summer in which DocX agreed to pay the state $2 million and to cooperate with its investigation.
DocX, founded by Ms. Brown and later purchased by Lender Processing Services of Jacksonville, has executed and notarized millions of mortgage documents for big banks and loan servicers. Lender Processing closed the company in April 2010 after evidence of problems emerged.
According to her plea in Missouri, Ms. Brown said that in 2009 she directed a DocX employee to develop a surrogate signers program at the company because there were “too many documents to sign and not enough people with signature authority.”
Mr. Koster said he was unsure when Ms. Brown would be sentenced. In the federal case, she could face a minimum of probation and a maximum of five years in prison. In the Missouri matter, she could receive a sentence of two to three years. But if she receives a federal sentence of probation or fewer than two years in prison, Mr. Koster said, she would be obligated to serve at least two years in Missouri.
“If citizens had filed these types of documents with a bank in an attempt to get a loan, the banks would have filed criminal cases against them,” Mr. Koster said. “The mortgage servicing industry has to be held to the same standard that the banks hold the rest of us to.”
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: assignments, bond trading, Docx, Fabrication of documents, sale of loan, tier 2 yield spread premium | 77 Comments »
BULK SALES OF MORTGAGE LOANS: WHAT ARE THEY BUYING?
Wall Street is gearing up to buy properties en masse from Fannie, Freddie and other holders (including the Federal Reserve. The question for these investors is what are they buying and what are they doing?
I think these sales represent an attempt to create a filler for an empty hole in the title chain. we already know that strangers to the transaction were submitting credit bids at rigged auctions of these properties. The auctions were based upon declarations of default and instructions from a “beneficiary” that popped up out of nowhere. The borrowers frequently contested the sale with a simple denial that they ever did business with the forecloser and that the chain of “assignments” were fabricated, forged, robo-signed, surrogate signed and executed by unauthroized people on behalf of unauthroized entities.
The reason the banks and servicers resorted to such illegal tactics was that they understood full well that the origination documents were fatally defective and they were papering over the defects that continually recited the validity of the preceding documents. That is putting lipstick on a pig. It is still a pig.
While apparently complex, the transaction in a mortgage loan is quite simple — money is loaned, a note is made payable to the lender and a separate agreement collateralizes the loan as guarantee for faithful performance of repayment in accordance with the terms of the note. An examination of the money trail shows that this procedure was not followed and that the practices followed and which have become institutionalized industry standards lead to grave moral hazard, fabrication, forgery and fraud. The entire matter can be easily resolved if the forecloser is required to produce original documentation and appropriate witnesses to lay the foundation of the introduction of documents starting with the funding of the loan through the present, including all receipts and disbursements relating to the loan.
Since the receipts and disbursements clearly involve third parties whose existence was not contemplated or known at the time of origination of the loan, it would probably be wise to appoint an independent receiver with subpoena powers to obtain full records from the subservicer, Master Servicer, trustee, other co-obligors or co-venturers including the investment bank that sold mortgage bonds and investors with the sole restriction that it relate to the accounting and correspondence, agreements and other media relating to the subject loan and the subject pool claiming to own the loan.
Starting from that point, (knowing all receipts and disbursements, sources and recipients, the rest is relatively uncomplicated. Either the documents follow the money trail or they don’t. If they do, then the foreclosure should proceed. If they don’t then there are discretionary decisions of the court as well as mandatory applications of law that are required to determine whether or not the discrepancies are material.
The chain of documents relied upon by the foreclosing party is neither supported by consideration nor do the origination documents recite the terms of the transaction authorized by the lender. Hence there was no meeting of the minds. At a minimum, the recorded lien is a wild deed or should otherwise be subject to invalidation or removal from county records, and the note should be excluded as evidence of the obligation. The actual obligation runs through a different chain the terms of which were never documented between the lenders and the borrower. Hence at common law, it is a demand loan, unsecured.
But the sale from a GSE or other entity creates yet another layer of paper giving the appearance that the origination documented were valid, even though the evidence strongly points in the opposite direction. The purchase of such loans or properties would thus lead to the inevitable wrongful foreclosure suits in which the property is sought to be returned to its rightful owner, and/or compensatory and punitive damages including damages for emotional distress in California.
So my answer is that these buyers did not buy property or loans. They bought themselves into lawsuits that they will lose once discovery is opened up on the underlying transactions, all of which were faked. Is the government colluding with these “buyers” to fix an fixable title problem?
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: accounting, assignments, emotional distress, Fannie, Federal reserve, Freddie, GSE, money trail, origination, receiver | 21 Comments »
SELLOUT TO MERS MEMBERS — AMNESTY!?: FANNIE MAE ISSUES NEW GUIDELINES ON RECORDING ASSIGNMENTS
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EDITOR’S NOTE: It appears as though Fannie Mae is trying to give some wiggle room to banks and servicers under the guise of new guidelines. But State law prevails and the guidelines are only effective as a matter of contract between FANNIE and correspondent lenders. One thing is clear, FANNIE is trying to legitimize MERS. It requires the following:
- the lender must report the MERS registration when it delivers the mortgage to us (by entering the applicable MIN on the Loan Schedule or Schedule of Mortgages). After we purchase or securitize the mortgage, we will notify MERS to ensure that the MERS records are updated to reflect our ownership interest. [Editor’s Note: This is a quasi government agency that was nationalized. MERS is a private recording system that is essentially unsecured — any person gaining a password and user ID can use it indefinitely to change the records. FANNIE should be eliminating MERS not including it in its operations. This is an attempt to say that MERS is a legitimate operation and that FANNIE will continue using it. It gives the impression that what they are doing it right, when in fact it is contributing to the title mess that is growing into nightmarish proportions throughout the United States]
- the lender will need to report our ownership interest to MERS when it registers the mortgage [Editor’s Note: This is a tricky way of leaving it to the correspondent lender to determine if the transfer to FANNIE has made proper and complete. It will be used by Banks to say that the administrative rules create a presumption of validity when in fact the requirements of state law either have not been met or it will be used to block borrower’s attempts to find out if State law has been followed. Once again attention to diverted from the discrepancies between (a) what they did at closing with the borrower (b) what they said they would do for the investor and (c) what they actually did with the money.
- After we purchase or securitize the mortgage, we will notify MERS to ensure that the MERS records are updated to reflect our ownership interest [Editor’s Note: This is doubletalk. If they purchase the mortgage, which they virtually never do except in cases of default, then they are the owner if they get a complete chain of title and properly executed documents by properly authorized people. If they securitized the mortgage, which is nearly always the case then they don’t own it. Why would they report to anyone, much less MERS that they own the loan? Once again attention to diverted from the discrepancies between (a) what they did at closing with the borrower (b) what they said they would do for the investor and (c) what they actually did with the money.
- For mortgages in existing Fannie Mae servicing portfolios, the lender will need to report our ownership interest to MERS when it registers the mortgage. (Note: If the original assignment of the mortgage to Fannie Mae was recorded in the public records, the servicer will first need to prepare an assignment from Fannie Mae to MERS and send it to us for execution. [Editor’s Note: THEY ARE DOING IT AGAIN! ASSIGNING INTERESTS TO MERS WHEN MERS EXPRESSLY DISCLAIMS ANY INTEREST IN THE NOTE OR MORTGAGE BY CONTRACT AND BY ADVERTISEMENT.]
- MERS will promptly notify us when a lender reports that we have an ownership interest in mortgages that it is registering with MERS. [THEY ARE DOING IT AGAIN. Leaving it to banks, servicers and MERS to sort out ownership of the loan without regard to the financial realities of the loan — whether payments have been made by obligors other than the borrower on the promissory note, whether the loan has been paid off in whole or in part by the servicer, insurer, credit enhancement or Federal bailout.]
- The lender will not need to include in the delivery package for a MERS-registered mortgage a copy of the assignment of the mortgage to MERS, nor will the lender be required to prepare and submit an unrecorded assignment of the mortgage to Fannie Mae, unless we specify otherwise for a particular transaction or transactions. [This is a blatant sellout to the Banks and servicers. It basically says that FANNIE will regard the package as in proper form and authentically transferred if the mortgage is MERS-registered. That is nuts. It means that they are formalizing the institutionalization of uncertainty in the marketplace. If this is allowed. Nobody will know the true owner of the loan from any public record, and therefore no owner and no lender will ever know if they really have a priority interest in the property. State statutes do not, in any case, allow MERS to pre-empt the county recording system. Yet that is exactly what FANNIE is attempting to do here.
- If a loan is registered with MERS and the servicing of the mortgage is subsequently transferred to another lender that is a MERS member, the transferee will not need to prepare an unrecorded assignment of the MERS-registered mortgage as part of the custody documents unless we specify otherwise for a particular transaction or transactions.
- if servicing of a MERS-registered mortgage is transferred to a lender that is not a member of MERS, or if the MERS registration for an active mortgage is terminated for any reason, an assignment from the servicer to Fannie Mae in recordable form but unrecorded will be required. [THUS A MERS MEMBER IS ELEVATED TO A POSITION HIGHER THAN THE NORMAL PERSON WHO MUST FOLLOW STATE LAW. MERS MEMBERS, ACCORDING TO FANNIE, DO NOT NEED OT FOLLOW THE LAW.]
https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/mers/pdf/merspolicy.pdf
Federal Home Mortgage dba FANNIE MAE (FORCE UPON ‘COMMERCE’ UTILIZING ‘MIN#’ ASSIGNMENT PRIOR TO SECURITIZATION.
Rules and Instructons to Correspondent Lenders
– For new mortgage deliveries to Fannie Mae, the lender must report the MERS registration when it delivers the mortgage to us (by entering the applicable MIN on the Loan Schedule or Schedule of Mortgages). After we purchase or securitize the mortgage, we will notify MERS to ensure that the MERS records are updated to reflect our ownership interest. (PLEASE NOTE THAT IT IS IMPORTANT TO REGISTER THE MIN ON THE MERS SYSTEM PRIOR TO DELIVERY OF THE LOAN (AND THE ASSOCIATED MIN) TO FANNIE MAE.)
-For mortgages in existing Fannie Mae servicing portfolios, the lender will need to report our ownership interest to MERS when it registers the mortgage. (Note: If the original assignment of the mortgage to Fannie Mae was recorded in the public records, the servicer will first need to prepare an assignment from Fannie Mae to MERS and send it to us for execution.) MERS will promptly notify us when a lender reports that we have an ownership interest in mortgages that it is registering with MERS.
• The lender will not need to include in the delivery package for a MERS-registered mortgage a copy of the assignment of the mortgage to MERS, nor will the lender be required to prepare and submit an unrecorded assignment of the mortgage to Fannie Mae, unless we specify otherwise for a particular transaction or transactions.
• If a loan is registered with MERS and the servicing of the mortgage is subsequently transferred to another lender that is a MERS member, the transferee will not need to prepare an unrecorded assignment of the MERS-registered mortgage as part of the custody documents unless we specify otherwise for a particular transaction or transactions. However, if servicing of a MERS-registered mortgage is transferred to a lender that is not a member of MERS, or if the MERS registration for an active mortgage is terminated for any reason, an assignment from the servicer to Fannie Mae in recordable form but unrecorded will be required.
• The lender will be responsible for the accurate and timely preparation and recordation of security instruments, assignments, lien releases, and other documents relating to MERS-registered mortgages and must take all reasonable steps to ensure that information on MERS is updated and accurate at all times. The lender will also be solely responsible for any failure to comply with the provisions of the MERS Member Agreement, Rules, and procedures and for any liability that it or Fannie Mae incurs as a result of the registration of mortgages with MERS or any specific MERS transaction.
Fannie Mae Guides and with the terms and conditions of the lender’s Master Agreement or any negotiated contract that it has with us, unless we specify otherwise. In addition, MERS’ failure to perform any obligation with respect to a MERS- registered mortgage does not relieve the lender (or the mortgage servicer) from its responsibility for performing any obligation required by the terms of its Fannie Mae contracts or the provisions of the Fannie Mae Guides.
For more information, please visit the AllRegs® website (http://www.allregs.com/efnma/) and perform a search under Fannie Mae Single Family for MERS.
MORNET is a registered trademark of Fannie Mae. MERS is a registered trademark of Mortgage Electronic Registrations Systems, Inc. and AllRegs is a registered trademark of Mortgage Resource Center Corporation.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: assignments, bankruptcy, borrower, countrywide, disclosure, Fannie, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, recording, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND | 60 Comments »
ANOTHER CALIFORNIA BANKRUPTCY JUDGE SLAMS PRETENDER LENDERS AND MERS
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Bankruptcy Judge Margaret M. Mann GETS IT!
1 Posted by Dan Edstrom on April 12, 2011 at 8:19 pm
Bankruptcy Judge Margaret M. Mann GETS IT!
By Daniel Edstrom
DTC Systems, Inc.
Coming off of the heels of in re: Agard (http://dtc-systems.net/2011/02/mers-agency-york-bankruptcy-court-agard/), the Honorable Judge Mann from the United States Bankruptcy Court Southern District of California took 76 days to review the Motion for Relief From Automatic Stay for the in re: Salazar Chapter 13 bankruptcy (Bankruptcy No: 10-17456-MM13). The findings of fact and conclusions of law were an amazing reading that confirms many of the issues we have been discussing in regards to loans, securitization and foreclosure. Like Judge Grossman in the agard case, Judge Mann goes to great lengths to research the details that are applicable to this case. Here are some highlights:
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Assignments must be recorded before the foreclosure sale
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Civil Code Section 2932.5 applies to Deeds of Trust
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Recorded assignments are necessary despite MERS’ role
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The Gomes case does not apply [to the Salazar case]
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US Bank or MERS cannot contract away their obligations to comply with the foreclosure statutes
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As a matter of law, Salazar’s acknowledgment cannot be read as a waiver of his right to be informed of a change in beneficiary status.
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MERS System is not an alternative to statutory foreclosure law
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US Bank as the foreclosing assignee was obligated to record its interest before the sale despite MERS’ initial role under the DOT, and this role cannot be used to bypass Civil Code section 2932.5. Since US Bank failed to record its interest, Salazar has a valid property interest in his residence that is entitled to protection through the automatic stay
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Cause does not exist to grant relief from stay
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Denying relief from stay at this time is the least prejudicial option for both parties
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: 10-17456-MM13, assignee, assignments, bankruptcy, beneficiary, Chapter 13, Civil Code Section 2932.5, Conclusions of Law, Daniel Edstrom, deeds of trust, DTC-Systems, Findings of Fact, foreclosure, foreclosure defense, foreclosure offense, fraud, Gomes, in re: Salazar, Judge Grossman, Judge Margaret M. Mann, Memorandum Decision, MERS, Motion for Relief from Stay, obligated, obligations, prejudicial, rescission, securitization, Southern District of California, trustee, United States Bankruptcy Court, US BANK, waiver | 28 Comments »
YOU MAY BE ENTITLED TO CASH PAYMENT FOR WRONGFUL FORECLOSURE — Coming to a Billboard Near YOU
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EDITOR’S NOTE: Well it has finally happened. Three years ago I couldn’t get a single lawyer anywhere to consider this line of work. I predicted that this area of expertise in their practice would dwarf anything they were currently doing including personal injury and malpractice. I even tried to guarantee fees to lawyers and they wouldn’t take it. Now there are hundreds, if not thousands of lawyers who are either practicing in this field or are about to take the plunge. The early adopters who attended my workshops and read my materials, workbooks and bought the DVD’s are making some serious money and have positioned themselves perfectly ahead of the crowd.
Congratulations, everyone, it was the readers who made this happen. Without your support I would not have been able to reach the many thousands of homeowners and lawyers and government officials whoa re now turning the corner in their understanding of this mess and their willingness to do something about it.
The article below from Streitfeld sounds like it was written by me. No attribution though. No matter. The message is out. The foreclosures were and are wrongful, illegal, immoral and the opposite of any notion we have of justice. They were dressed up to look right and they got way with it for years because so many homeowners simply gave up convinced they had only to blame themselves for getting into a raw deal. Those homeowners who gave up were wrong and now they will find themselves approached by lawyers who will promise them return of the house they lost or damages for the wrongful foreclosure. When you left, you thought your loan had not been paid and that the notice you received was legitimate. You were wrong on both counts. The loan had been paid, there were other people who had signed up for liability along with you to justify the price on steroids that was sold to your lender (investor).
For those who are just catching up, here it is in a nutshell: Borrower signs a note to ABC Corp., which says it is the lender but isn’t. So you start right away with the wrong party named on the note and mortgage (deed of trust) PLUS the use of a meaningless nominee on the mortgage (deed of trust) which completely invalidates the documents and clouds the title. Meanwhile the lender gets a mortgage bond NOT SIGNED BY THE BORROWER. The bond says that this new “entity” (which usually they never bothered to actually form) will pay them from “receivables.” The receivables include but ARE NOT LIMITED TO the payments from the borrower who accepted funding of a loan. These other parties are there to justify the fact that the loan was sold at a huge premium to the lender without disclosure to either the borrower or the lender. (The tier 2 Yield Spread Premium that raises some really juicy causes of action under TILA, RESPA and the 10b-5 actions, including treble damages, attorney fees and restitution).
And and by the way for the more sophisticated lawyers, now would be the time to sharpen up your defense skills and your knowledge of administrative laws. Hundreds of thousands of disciplinary actions are going to filed against the professionally licensed people who attended the borrower’s “closing” and who attended the closing with the “lender.” With their livelihood at stake, their current arrogance will morph into abject fear. Here is your line when you quote them fees: “Remember that rainy day you were saving up for? Well, it’s raining!” Many lawyers and homeowners are going to realize that they have easy pickings when they bring administrative grievances in quasi criminal proceedings (don’t threaten it, that’s a crime, just do it) which results in restitution funded by the professional liability insurer. careful about the way you word the grievance. Don’t go overboard or else the insurance carrier will deny coverage based upon the allegation of an intentional act. You want to allege gross negligence.
EVERYBODY in the securitization structure gets paid premium money to keep their mouth shut and money changes hands faster than one of those street guys who moves shells or cards around on a table. Yes everyone gets paid — except the borrower who never got the benefit of his the bargain he signed up for — a home worth whatever they said it was worth at closing. It wasn’t worth that and it will never be worth that and everyone except the borrower knew it with the possible exception of some lenders who didn’t care because the other people who the borrower knew nothing about, had “guaranteed” the value of the lender’s investment and minimized the risk to the level of “cash equivalent” AAA-rated.
The securitization “partners” did not dot their “i’s” nor cross their “t’s.” And that is what the article below is about. But they failed to do that for a reason. They didn’t care about the documents because they never had any intention of using them anyway. It was all a scam cleverly disguised as a legitimate part of the home mortgage industry. It was instead a Ponzi scheme without any of the attributes of real appraisals, real underwriting reviews and committees and decisions. They bought the signature of the borrowers by promising the moon and they sold the apparent existence of signature (which in many cases) did not even exist) to Lenders by promising the stars.
And now, like it wasn’t news three years ago when we first brought it up, suddenly mainstream media is picking up the possibility that the foreclosures were all fraudulent also. The pretender lenders were intentionally and knowingly misrepresenting themselves as lenders in order to grab property that didn’t belong to them and to which they had no rights — to the detriment of both the borrowers and the lenders. And some judges, government officials and even lawyers appear to be surprised by that, are you?
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GMAC’s Errors Leave Foreclosures in Question
By DAVID STREITFELD
The recent admission by a major mortgage lender that it had filed dubious foreclosure documents is likely to fuel a furor against hasty foreclosures, which have prompted complaints nationwide since housing prices collapsed.
Lawyers for distressed homeowners and law enforcement officials in several states on Friday seized on revelations by GMAC Mortgage, the country’s fourth-largest home loan lender, that it had violated legal rules in its rush to file many foreclosures as quickly as possible.
Attorneys general in Iowa and North Carolina said they were beginning separate investigations of the lender, and the attorney general in California directed the company to suspend all foreclosures in that state until it “proves that it’s following the letter of the law.”
The federal government, which became the majority owner of GMAC after supplying $17 billion to prevent the lender’s failure, said Friday that it had told the company to clean up its act.
Florida lawyers representing borrowers in default said they would start filing motions as early as next week to have hundreds of foreclosure actions dismissed.
While GMAC is the first big lender to publicly acknowledge that its practices might have been improper, defense lawyers and consumer advocates have long argued that numerous lenders have used inaccurate or incomplete documents to remove delinquent owners from their houses.
The issue has broad consequences for the millions of buyers of foreclosed homes, some of whom might not have clear title to their bargain property. And it may offer unforeseen opportunities for those who were evicted.
“You know those billboards that lawyers put up seeking divorcing or bankrupt clients?” asked Greg Clark, a Florida real estate lawyer. “It’s only a matter of time until they start putting up signs that say, ‘You might be entitled to cash payment for wrongful foreclosure.’ ”
The furor has already begun in Florida, which is one of the 23 states where foreclosures must be approved by courts. Nearly half a million foreclosures are in the Florida courts, overwhelming the system.
J. Thomas McGrady, chief judge in the foreclosure hotbed of St. Petersburg, said the problems went far beyond GMAC. Four major law firms doing foreclosures for lenders are under investigation by the Florida attorney general.
“Some of what the lenders are submitting in court is incompetent, some is just sloppy,” said Judge McGrady of the Sixth Judicial Circuit in Clearwater, Fla. “And somewhere in there could be a fraudulent element.”
In many cases, the defaulting homeowners do not hire lawyers, making problems generated by the lenders hard to detect.
“Documents are submitted, and there’s no one to really contest whether it is accurate or not,” the judge said. “We have an affidavit that says it is, so we rely on that. But then later we may find out that someone lost their home when they shouldn’t have. We don’t like that.”
GMAC, which is based in Detroit and is now a subsidiary of Ally Financial, first put the spotlight on its procedures when it told real estate agents and brokers last week that it was immediately and indefinitely stopping all evictions and sales of foreclosed property in the states — generally on the East Coast and in the Midwest — where foreclosures must be approved by courts.
That was a highly unusual move. So was the lender’s simultaneous withdrawal of important affidavits in pending cases. The affidavits were sworn statements by GMAC officials that they had personal knowledge of the foreclosure documents.
The company played down its actions, saying the defects in its foreclosure filings were “technical.” It has declined to say how many cases might be affected.
A GMAC spokeswoman also declined to say Friday whether the company would stop foreclosures in California as the attorney general, Jerry Brown, demanded. Foreclosures in California are not judicial.
GMAC’s vague explanations have been little comfort to some states.
“We cannot allow companies to systematically flout the rules of civil procedure,” said one of Iowa’s assistant attorneys general, Patrick Madigan. “They’re either going to have to hire more people or the foreclosure process is going to have to slow down.”
GMAC began as the auto financing arm of General Motors. During the housing boom, it made a heavy bet on subprime borrowers, giving loans to many people who could not afford a house.
“We have discussed the current situation with GMAC and expect them to take prompt action to correct any errors,” said Mark Paustenbach, a spokesman for the Treasury Department.
GMAC appears to have been forced to reveal its problems in the wake of several depositions given by Jeffrey Stephan, the team leader of the document execution unit in the lender’s Fort Washington, Pa., offices.
Mr. Stephan, 41, said in one deposition that he signed as many as 10,000 affidavits and other foreclosure documents a month; in another he said it was 6,000 to 8,000.
The affidavits state that Mr. Stephan, in his capacity as limited signing officer for GMAC, had examined “all books, records and documents” involved in the foreclosure and that he had “personal knowledge” of the relevant facts.
In the depositions, Mr. Stephan said he did not do this.
In a June deposition, a lawyer representing a foreclosed household put it directly: “So other than the due date and the balances due, is it correct that you do not know whether any other part of the affidavit that you sign is true?”
“That could be correct,” Mr. Stephan replied.
Mr. Stephan also said in depositions that his signature had not been notarized when he wrote it, but only later, or even the next day.
GMAC said Mr. Stephan was not available for an interview. The lender said its “failures” did not “reflect any disrespect for our courts or the judicial processes.”
Margery Golant, a Boca Raton, Fla., foreclosure defense lawyer, said GMAC “has cracked open the door.”
“Judges used to look at us strangely when we tried to tell them all these major financial institutions are lying,” said Ms. Golant, a former associate general counsel for the lender Ocwen Financial.
Her assistants were reviewing all of the law firm’s cases Friday to see whether GMAC had been involved. “Lawyers all over Florida and I’m sure all over the country are drafting pleadings,” she said. “We’ll file motions for sanctions and motions to dismiss the case for fraud on the court.”
For homeowners in foreclosure, the admissions by GMAC are bringing hope for resolution.
One such homeowner is John Turner, a commercial airline pilot based near Detroit. Three years ago he bought a Florida condo, thinking he would move down there with a girlfriend. The relationship fizzled, his finances dwindled, and the place went into foreclosure.
GMAC called several times a week, seeking its $195,000. Mr. Turner says he tried to meet the lender halfway but failed. Last week it put his case in limbo by withdrawing the affidavit.
“We should be able to come to an agreement that’s beneficial to both of us,” Mr. Turner said. “I feel like I’m due something.”
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: affidavits, allonge, assignments, damages, fraud, GMAC, Indorsements, Ny Times, slander of title, Streitfeld, Substitution of Trustee, wrongful foreclosure | 62 Comments »
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