Challenging Deeds Issued After Auction (Sale) of Property

One of the rewarding aspects of what I do is to see more and more people not only hopping on board, understanding securitization, but adding to the body of knowledge I have amassed. In the following article Bill Paatalo, who has done the loan level accounting for many of our readers, expands upon a topic that I have introduced (and of course Dan Edstrom) but not explained nearly as well as Bill does: see http://bpinvestigativeagency.com/time-to-challange-those-trustees-deeds/

EDITOR’S NOTE: I would add that where servicer advances are paid to the creditor (or who we think is the creditor), then there is often an overpayment, which might account for why the “credit bid” is lower than the total amount demanded by the servicer for redemption or reinstatement. This anomaly could void the notice of default and notice of sale and create a problem on the amount required for redemption after the so-called sale.

The legal issue presented by Bill is whether the party who submitted the bid satisfies the state’s legal definition of a creditor who is allowed to submit a credit bid at closing in lieu of cash. This issue is fairly easily analyzed before any order or judgment is entered by a court.

But afterwards, because of the rubber stamping, the judgments mostly state something along the lines that $XXXX.XX is owed by the borrower to the opposing party in litigation. The judgment is final until overturned by appeal or a motion to vacate.

That Judgment makes them a possible creditor and even raises the presumption that they are a creditor when in fact there was no evidence to support that finding in the order or judgment. And ordinarily the courts require that the motion or other attack be verified by a sworn statement from the homeowner. That gets tricky because without having an actual forensic report in your hands, how would the borrower even know about such things?

The judgment can be attacked for fraud because the opposing party had never entered into a transaction wherein it paid value (see Article 9 of UCC) to originate or acquire the loan. Procedural rules vary from state to state on  how this is done and the time limit fro such challenges. In fact, none of the people in the cloud of “securitization” paid anything for the loan, with the exception of the servicer who is credited with having paid servicer advances to the creditor when in fact it appears as though the servicer advances were paid by the investment bank who reserved money out of the pool of money advanced by investors to pay the investors out of their own money. Hence, we see the reason for calling the scheme a PONZI scheme. This is why the issue of STANDING keep bouncing back front and center.

Without an attack on the Judgment I doubt if your state law will allow you to challenge the sale or the sale price. Obviously, before you act on anything on this blog, you need to consult with an attorney who is licensed and experienced in such matters and who practices in the jurisdiction in which your property is located.

For those who are good with computer graphics, here are two drawings I recently made to describe the process of securitization as it played out. The bottom line is that the investment bank diverted the money from the trust and diverted the documentation that was due to the investors to its own strawmen, trading on that documentation and making a ton of money while the investor/lenders and homeowner/borrowers lost either everything or a substantial amount of their wealth that ended up in the pocket of the banks. Anyone who is good with graphics is invited to donate their time to this website and make my hand drawn sketches easier to read and perhaps animated. Neil Garfield Securitization Diagrams 12-20-13

Posted by BPIA on December 18, 2013 bi Bill Paatalo:

For the past couple of years, I have been providing clients with the internal loan level accounting data, which reveals in most instances of private securitization, that all payments “due” on the notes have been paid regularly by undisclosed “co-obligors.” Thus there becomes an issue of fact as to whether or not the “note” is actually in “default.” Word through the grapevine is that this particular argument is gaining some momentum in certain jurisdictions throughout the United States.

Well now it’s time to use the same internal accounting data to attack those dubious “Trustee’s Deeds.” In non-judicial foreclosure states, a ”Trustee’s Deed Upon Sale” or Trustee’s Deed” is recorded after the foreclosure sale. Often, the property is sold back to the supposed creditor into what is called “REO” status. In cases where the subject loans were alleged to have been securitized, the Trustee’s Deed will typically state that the Trustee for “XYZ Mortgage-Backed Trust” was the “highest bidder” at the sale and paid cash in the amount of $………..(whatever dollar figure.) There are many reasons to question the validity of these documents; such as the actual parties submitting the “credit bids,” and whether or not any actual cash exchanged hands as attested to under notary acknowledgment. However, there is a way to provide evidence and proof that no such payment ever exchanged hands.

The following language was extracted from a typical Trustee’s Deed:

Trustees Deed language snip

In this particular case, the alleged amount owed in the “Notice of Default” was roughly $314,000.00. A check of the internal accounting for this particular loan (6-months after the sale) shows the loan in “REO” status with no such payment having ever been applied. In fact, the certificateholders (investors) are still receiving their monthly payments of P&I with the trust showing “zero” losses.

This is good hard evidence that the sale and subsequent Trustee’s Deed filed in this case was a “sham” transaction.

If your loan was alleged to have been securitized by a private mbs trust, and your home sold in similar fashion with a recorded Trustee’s Deed, contact me today (bill.bpia@gmail.com) to see if your Trustee’s Deed matches up with the internal accounting data.

Living lies now offers Expert Affidavits showing what was stated in the Trustee’s Deed as opposed to what has actually occurred behind the curtains. See www.livingliesstore.com. Most people ask for consults with me and/or the expert, like Bill, so their lawyer understands what to do with this information.

Banks Could Owe Trillions on Fake Rigged Credit Bids

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Analysis of Auctions of Foreclosed Properties: Nobody thinks about it because it basically never happened. The laws of each state whose statutes I have looked at including the provisions of most promissory notes are clear — if the creditor receives a payment in excess of the amount due, the excess must be paid to the borrower.

We all know how keen I am on applying that that precept to the receipt of insurance, credit default swaps, guarantees and Federal bailouts, but there is a much simpler aspect to this that can be pled in the alternative when one is attacking the foreclosure sale. Remember that in most states alternative pleading is allowed and even encouraged. So your alternative pleading in this case would be that the foreclosure was wrongful OR, if it wasn’t wrongful then the borrower is entitled to money. How? Why?

If the Judge won’t let you come in through the front door, you find another door or point of entry. In this case, the strategy I am proposing puts the issue  right on the table and could even be limited to this one cause of action. It would be breach o contract and perhaps a second count for breach of statutory duty, nullification of instrument (the deed in foreclosure). What you are looking for is damages.

The allegations supporting the cause of action for damages would be that the creditor never alleged pr proved the amount they lost or misrepresented the amount they lost. We are talking money here, not notes, mortgages, assignments and indorsements. Money is the key to the evil that was perpetrated and money is what will bring the perpetrators into a perp walk even if the government is reluctant to do so.

If the non-creditor bids $350,000 for the property based upon the  Foreclosure Judgment or the papers filed with the “substitute trustee” (why is there ALWAYS a substitute trustee?), then the amount due on the bid is $350,000.

If your allegation is that the “creditor” never had a loss, never showed proof of payment , proof of loss or any actual transaction in which money exchanged hands from the “creditor” to any other party to acquire or fund the origination of the loan, then there is no loss. Yet the non-creditor paid nothing because it submitted a credit bid which if you look at your state statutes you will see is near impossible for them to offer and certainly should not be accepted in lieu of cash. The statutes say the bidder must pay for the bid, especially if they have already received the deed on foreclosure (which you have pled alternatively should be nullified). Paying the bid means payment in cash.

So the court is faced with a conundrum. On the one hand it ignored your prior arguments of lack of standing, lack of injured party, but on the other hand the Judge has before him or her a perfectly valid complaint that cannot be dismissed on its face on the basis of res judicata or collateral estoppel because the cause of action arose AFTER final judgment. If the Judge does the right thing, then he wil deny any motion to dismiss from the other side and then allow discovery.

Once you get into discovery the only issue is whether the “creditor” was indeed a creditor and if so how much they actually “lost” by the alleged breach of the promissory note by the borrower. They can only prove their side of the case by showing that money exchanged hands and that the money came from their pocket, not someone else’s pocket.

This discovery will also lead to the question of what was reported to investors, how the proceeds of insurance and credit default swaps were applied, all of which reduce the amount due from the borrower because they reduce the amount payable to the “creditor.”

Assuming the “creditor” is unable to account for the application of proceeds of insurance and credit default swaps, and assuming that they are unable to show a canceled check or wire transfer receipt and wire transfer instructions, then the amount of their injury is zero or perhaps even less than zero if they received fees and compensation from the yield spread premium, the insurance, and the guarantees and hedges like credit default swaps.

The auctioneer has a duty to collect the money and distribute it according to statute. If the “Creditor” submitted any bid, you have just proved that they were owed nothing and therefore their bid should have been paid in cash. The Court must them either nullify the sale or, if enough time has gone by, the probabilities rise that the “creditor” will be forced to pay for the bid. The amount paid is an “overpayment” for the actual loss. Under statute and the note, such overpayment are due back to the borrower.

This is an easy case, like personal injury only less paperwork, for lawyers to take on contingency and make a ton of money for themselves and their clients. With standard contingency if the bidder is forced to make a payment in the amount of the bid, then your fee in the above example would be over $100,000.

If the Court nullifies the foreclosure, the next step is quieting title perhaps in the same order, and you get paid by a note from the client with collateral — namely the house upon which there are no longer any encumbrances. That note can be negotiated into the secondary market the way the banks should have done in the first place.

The next step would obviously be the abuse of process, wrongful foreclosure and slander of title just to name a few causes of action that can be prosecuted against the “creditor” and its successors or assigns, seeking damages, treble damages, punitive damages and exemplary damages.

The moral of the story is that the banks can fake the story about the money in the loan documents, the assignments and indorsements. But they can’t fake the money transaction for which their are footprints at the banks, account processors for the banks, Federal reserve and network exchanges where the money is routed when paid. They will argue that they already proved their case with the note. But the note proves the DEBT not the LOSS.

Fagan Strikes Again: CA Judge Connects failure to Comply With Discovery with Right to Foreclose

Editor’s note: One of the tricks in civil procedure that has gone over the heads of some Judges is that the banks and servicers are refusing to comply with discovery, and while their refusal is subject to a later hearing they proceed with the foreclosure because there is no TRO.

In this case, Judge Tarle understood the connection immediately. While normally the Court is fairly liberal in giving parties time to respond to discovery, he also understood that this could open a window of opportunity for them to foreclose making the case moot for all intents and purposes. So he wrote in his order the same thing that a Judge would right in granting a TRO and prevented them from taking any action on the loan until the issues of discovery was resolved.

see Fagan – 7.27.12 Minute Order Re Ex Parte Hearing

I’ve asked the leading attorneys for banks that are not involved in the securitization illusion. They all respond the same way:

Q; You are the attorney for a bank, right?

A: Yes

Q: And as such you are required to file foreclosure actions on borrowers who can’t pay, right?

A: Yes if the board orders it, which is only after attempts have been made to do a workout.

Q: If you were met with challenges as to whether you funded the loan, owned the loan or had it as an account receivable would you delay discovery?

A: Absolutely not. I would immediately comply with the discovery, produce affidavits from witnesses and copies of our books and records showing the funding of the loan and our continuous ownership of the loan.

Q: If your bank said we have the note but we don’t have this loan as a loan receivable because it is owed to someone else, would you tell them to foreclose?

A: Absolutely not, unless they foreclosed in the name of the real owner of the obligation where the trail of assignments leads to that real creditor.

Q: At the auction of the property, if you were asked to submit a credit bid for the bank you are representing, you would ordinarily submit it in the name of that bank, right?

A: Yes

Q: But if you were only representing the bank who had documented authority to foreclose on behalf of another lender, on whose behalf would you submit the credit bid?

A: Obviously the real creditor, That is what the statute says. You pay cash unless you are the actual creditor to whom the money is owed and the note is collateralized by the property.

 

Az Statute on Mortgage Fraud Not Enforced (except against homeowners)

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Editor’s Comment:

With a statute like this on the books in Arizona and elsewhere, it is difficult to see why the Chief Law Enforcement of each state, the Attorney General, has not brought claims and prosecutions against all those entities and people up and down the fraudulent securitization chain that brought us the mortgage meltdown, foreclosures of more than 5 million people, suicides, evictions and claims of profits based upon the fact that the free house went to the pretender lender.

Practically every act described in this statute was committed by the investment banks and all their affiliates and partners from the seller of the bogus mortgage bond (sold forward, which means that the loans did not yet exist) all the way down to the people at the closing table with the homeowner borrower.

I’d like to see a script from attorneys who confront the free house concept head on. The San Francisco study and other studies clearly show that many if not most foreclosures resulted in a “sale” of property without any cash offered by the buyer who submitted a credit bid when they had not established themselves as creditors nor had they established the amount due. And we now know that they failed to establish themselves as creditors because they neither loaned the money nor purchased the loan in any transaction in which they parted with money. So the consideration for the sale was not present or if you want to put it in legalese that would effect those states that allow review of the adequacy of consideration at the auction.

I’d like to see a lawyer go to court and say “Judge, you already know it would be wrong for my client to get a free house. I am here to agree with you and state further that whether you rule for the borrower or this pretender lender here, you are going to give a free house to somebody.

“Because this party initiated a foreclosure proceeding without being the creditor, without spending a dime on the loan or purchase of the loan, and without any right to represent the multitude of people and entities that should be paid on this loan. This pretender, this stranger to this transaction stands in the way of a mediated settlement or HAMP modification in which the borrower is more than happy to do a traditional workout based upon the economic realities.

“And they they maintain themselves as obstacles to mediation or modification because they have too much to hide about the origination of this loan.

“All I seek is that you recognize that we deny the loan on which this party is pursuing its claims, we deny the default and we deny the balance. That puts the matter at issue in which there are relevant and material facts that are in dispute.

“I say to you that as a Judge you are here to call balls and strikes and that your ruling can only be that with issues in dispute, the case must proceed.”

“The pretender should be required to state its claim with a complaint, attach the relevant documents and the homeowner should be able to respond to the complaint and confront the witnesses and documents being used. And that means the pretender here must be subject to the requirements of the rules of civil procedure that include discovery.

“Experience shows that there have been no trials on the evidence in all the foreclosures ever brought during this period and that the moment a judge rules on discovery in favor of the borrower, the pretender offers settlement. Why do you think that is?”

“If they had a good reason to foreclose and they had the authority to allege the required the elements of foreclosure and they had the proof to back it up they would and should be more than willing to put a stop to all these motions and petitions from borrowers. But they don’t allow any case to go to trial. They are winning on procedure because of the assumption that the legitimate debt is unpaid and that the borrower owes it to the party making the claim even if there never was transaction with the pretender in which the borrower was a party, directly or indirectly.”

“Neither the non-judicial powers of sale statutes nor the rules of civil procedure based upon constitutional requirements of due process can be used to thwart a claim that has merit or raises issues that have merit. You should not allow the statute and rules to be applied in a manner in which a stranger to the transaction who could not even plead a case in good faith would win a foreclosed house at auction without court review and a hearing on the merits.”

Residential mortgage fraud; classification; definitions in Arizona

Section 1. Title 13, chapter 23, Arizona Revised Statutes, is amended by adding section 13-2320, to read:
13-2320.

A. A PERSON COMMITS RESIDENTIAL MORTGAGE FRAUD IF, WITH THE INTENT TO DEFRAUD, THE PERSON DOES ANY OF THE FOLLOWING:

  1. KNOWINGLY MAKES ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  2. KNOWINGLY USES OR FACILITATES THE USE OF ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  3. RECEIVES ANY PROCEEDS OR OTHER MONIES IN CONNECTION WITH A RESIDENTIAL MORTGAGE LOAN THAT THE PERSON KNOWS RESULTED FROM A VIOLATION OF PARAGRAPH 1 OR 2 OF THIS SUBSECTION.
  4. FILES OR CAUSES TO BE FILED WITH THE OFFICE OF THE COUNTY RECORDER OF ANY COUNTY OF THIS STATE ANY RESIDENTIAL MORTGAGE LOAN DOCUMENT THAT THE PERSON KNOWS TO CONTAIN A DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION.

Those convicted of one count of mortgage fraud face punishment in accordance with a Class 4 felony.  Anyone convicted of engaging in a pattern of mortgage fraud could be convicted of a Class 2 felony


OCCUPYERS TARGET THE AUCTIONS by BOA

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TARGET AUCTIONS, ACHILLES HEAL OF THE SECURITIZATION SCAM

EDITOR’S ANALYSIS: The occupiers have the right target. Shining a light on the auctions will not only reveal deficiencies and illegalities — it will reveal the essential vulnerability of the entire securitization scam.It is at the auction when they can no longer play shell games and where they have committed themselves as to the identity of the creditor, the amount due and their own status in the transaction. The deed issued from a foreclosure sale names a specific party and that cannot be redone — but it can be overturned.
Each “bid” must either be in cash or it can be a ” credit bid.” The credit bid can’t be by just anyone claiming to be a creditor. The credit bid must come from THE secured creditor on the loan for the house and cannot exceed the amount due from the borrower. AND it must be the same “creditor” that foreclosed. If they don’t fulfill the criteria, then the sale is a sham and MUST be overturned by the Court. In all cases reviewed by our team the bid was submitted as a credit bid and in nearly all cases the bid was submitted by a party who (a) wasn’t a creditor or (b) wasn’t the same party who foreclosed or both.
The bid process is pretty clear-cut. If you bid, and you win the auction you are required to pay in cash unless it is a bona fide credit bid. If they want to bid more than the debt they alleged is owed they must do it in cash. If they bid less than the amount they claim as due, then they have admitted that the property is worth less than the loan and they are asserting a value based upon current data. Thus once the credit bid is made, you may have very clear cut grounds for stating that the foreclosure was wrongful.
If the homeowner submitted a modification offer that was turned down, then you can use that against the bidder if certain conditions are met. If the modification offer was worth substantially more than the bid, which is unusually the case, then you can attack the so-called creditor for failing to consider the modification offer. This argument is getting increasing traction around the country. As far as I can tell these lawsuits are settled promptly and confidentially, thus far. We will see what happens as the numbers increase. But Judges like settlements and modifications. The HAMP requires “consideration” but does not require acceptance. By presenting a prima facie case from their own actions, you force them to come up with a reasonable business purpose for taking less money at the auction than they could have received from the homeowner.

Once you are in court, you should start discovery early as to their status as a creditor and as to the loan status. If behind the scenes payments reduced the balance due to the creditors (investors) you catch them flat-footed — but I have never seen a case that didn’t settle on highly favorable terms to the borrower where the borrower prevailed in getting an order requiring the so-called creditor to respond to discovery that even got close to these points.

Occupy LA protesters now battling foreclosure auctions – Los Angeles Times
http://www.justiceunited.net/2011/12/occupy-la-protesters-now-battling.html

 

ANTITRUST INVESTIGATING BID-RIGGING AT SO-CALLED AUCTIONS — 7 plead guilty

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EDITOR’S NOTE: Investigations are one thing, charges and convictions are quite another. It is my opinion that the so-called auctions, at least in the non-judicial states are rigged, unlawful and possibly criminal.  The person who shows up is some agent or employee of the substitute trustee who shouldn’t be in the picture anyway because they ARE in substance the pretender who makes claims to being a creditor. This person conducts an auction-like event that is not really an auction because there are no actual bids. Then the person acting for the “substitute trustee” issues a wild deed without consideration received from anyone. At that point the homeowner becomes a tenant in their own home because state law is neither followed nor enforced. If state law were enforced, there would be no substitute trustee, there would be no auction and there would be no sale nor issuance of a deed.

The person conducting the so-called auction comes there armed with instructions from undisclosed persons within the organization who hired him to go there. He is not a trustee and he is not acting in accordance with statute which requires that the trustee exercise the utmost due diligence to make up for the fact there is no judicial review in non-judicial sales under the power of sale in the deed of trust. The instructions are for this person, of dubious authority to do anything for anyone, to pretend that there is a bid from a party he/she identifies a as creditor.

But the person posing as the auctioneer has no idea where the bid came from and whether it is valid. It could only be valid if it were tendered as the debt owed to the bidder. But the bidder can’t say that because the debt is not owed to the so-called bidder. So the bidder doesn’t show up and protects itself with plausible deniability as to what happened at the auction. They will probably say that they might have been negligent in their procedures but the the sales were right and correct. Those sales are neither right, correct, legal or proper. They are not ethical either because the money the borrower owes, if any, has yet to be decided by the evidence.

SUBMITTED BY USED CAR GUY:

I guess you can tell I’m on a mission today….
I called the gal at the Wisconsin AG’s office because her e-mail quit working. Talked to her assistant and came to find out she went to work for the DOJ in Washington D.C. I think that is good news. The longer these banks go without being able to force a grant of blanket amnesty, the better. And now, for a little vindication of what we all know is going on after the homes are stolen…….

Friday August 12, 2011 SACRAMENTO, Calif. — A real estate investor pleaded guilty today in U.S. District Court in Sacramento to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Sharis A. Pozen, Acting Assistant Attorney General of the Department of Justice’s Antitrust Division, and Benjamin B. Wagner, U.S. Attorney for the Eastern District of California, announced.

Walter Daniel Olmstead, 39, of Tracy, pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. According to court documents, the primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices.

According to the court documents, after the conspirators’ designated winning bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit, and it was divided among the conspirators in payoffs. According to his plea agreement, Olmstead participated in the scheme beginning in or about November 2008 until in or about July 2009.

To date, seven individuals, including Olmstead, have pleaded guilty in U.S. District Court for the Eastern District of California in connection with this investigation the others being Anthony B. Ghio, John R. Vanzetti, Theodore B. Hutz, Richard W. Northcutt, Yama Marifat and Gregory L. Jackson.

“The Antitrust Division continues to vigorously pursue bid rigging conspiracies at real estate foreclosure auctions that eliminate competition in the marketplace and harm consumers,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will work with its law enforcement partners to ensure that the real estate foreclosure auction process is fair and open so that consumers will benefit from competition.”

U.S. Attorney Wagner said: “By rigging public auctions of foreclosed properties, the defendants who have pleaded guilty as a result of this investigation illegally manipulated the market for residential real estate. The Department of Justice is committed to improving the transparency and integrity of that market, and we will continue to investigate and prosecute those who would seek to undermine the market through such illegal activities.”

Olmstead pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. Olmstead also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

These charges arose from an ongoing federal antitrust investigation of fraud and bid rigging in certain real estate auctions in San Joaquin County. The investigation is being conducted by the Antitrust Division’s San Francisco Office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division and the San Joaquin County District Attorney’s Office. Trial attorneys Anna Pletcher, Richard Cohen and Tai Milder from the Antitrust Division’s San Francisco Office and Assistant U.S. Attorney Russell L. Carlberg are prosecuting the case.

Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. One component of the task force is the national Mortgage Fraud Working Group, co-chaired by U.S. Attorney Wagner. For more information on the task force, visit http://www.StopFraud.gov.

Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660 or visit http://www.justice.gov/atr/contact/newcase.htm, the U.S. Attorney’s Office for the Eastern District of California at 916-554-2700, or the FBI’s Sacramento Division at 916-481-9110.

TRUSTEES, ACTING FOR BANKS, ISSUE DEEDS TO NONEXISTENT BIDDER

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TRUSTEE LIABILITY FOR DAMAGES MIGHT BE THE NEXT MAIN THRUST OF HOMEOWNER LITIGATION

SEE \”NO BIDDER\” BIDDING IN MISSOURI: TRUSTEE ACTS FOR THE BANK IN VIOLATION OF STATE LAW

Anyone familiar with the writing on this blog knows that I have grave reservations about the so-called auction. My opinion is that in most cases there was no auction, there was no sale, nothing was paid and the issuance of the Trustee Deed is pure fraud, breach of fiduciary duty and breach of statutory duty — particularly when the name on the deed differs from the so-called “bidder.”

In this video clip which I took from the comment section of this blog it is clear that some guy in jacket merely stands there, as trustee, and despite his obligation to remain fair and impartial with regards to both the borrower and the “lender” he does neither. On behalf of an entity OTHER THAN THE NAMED LENDER, the Trustee in Missouri “opens the bidding” based upon some instruction from a third party who is not even in the title chain. Usually there is no bidding at all. In fact, usually nobody from ANY ENTITY is there to bid. And yet the Trustee records a sale and issues a deed.

In olden times Trustees were not substituted and didn’t need to be. They would simply send the notice of default and notice of sale and if the borrower had an issue with the default, sale or amount demanded, the borrower would say so and the trustee would make sure all the ducks were lined up before he went ahead with the sale.

Of course now the Trustee is always a “Substitute trustee” by virtue of a document that is most probably (i.e., on the plus side of 95%) likely to have been forged, fabricated and improperly notarized on the orders of entities that had no authority to have or cause any involvement in the first place. Such substitution of trustees are “backed” by a limited power of attorney that is considered in most states to undermine the authority of a corporation and therefore must be strictly construed and proven clearly and convincingly (i.e., more than a preponderance of the evidence).

In any auction, by definition, there must be a bidder present in the legal sense. The Trustee therefore cannot serve as the agent for any bidder in most states, which require by statute that the Trustee perform due diligence as to the debt, holder, enforcement, title record etc. The “pull-down title report” that was always used prior to a foreclosure sale has been eliminated in the new scenario of mystery guests who “appear” merely in concept at the auction, so they can say that they were not really doing anything wrong because they were not even there.

Now the Trustee does no investigation because if he did, he would be required to ask questions. Performing the due diligence that Trustees always performed before the modern securitization era, would reveal that there are inquiries that need to be made regarding the creditor identification and the authority of the servicer or whoever sent instructions to the Trustees. Of course the Trustee person is not concerned with any of that because he works for an entity that was created by a bank who will later claim to be a creditor.

Thus the appearance of a “Trustee” is satisfied in form when in fact the entity and the person assigned are not Trustees as defined by the statute. They are not Trustees because they are the employees of the same entity that intends to take the property by a silent bid process that is illegal in some states and subject to review in others. This “substitute trustee” is taking his orders from a bank or non-bank servicer instead of taking his orders from the legislature who passed statutes specifically designed to protect the borrower and prevent the statute from being struck down as a denial of due process.

The amount of the “opening” bid announced by the Trustee usually bears no relation to the amount of the debt. It can be more or less. Nobody tenders a note or cash to the Trustee at any time. It is like the original closing where the loan is funded from a third party. The actual closing between the borrower and the loan originated has no consideration because the originator is not the lender or creditor, even for a second in time. Thus you have a non-sale resulting in a faulty, defective or void (wild) deed at an improperly conducted auction by an unauthroized “Substitute Trustee.” But the face of the deed looks right, and for many judges, that is enough. The same is true for the original closing. Neither deed appears to be valid once you scratch the surface.

Dan Edstrom, the senior securitization analyst for LIVINGLIES, has said that we have passed the foreclosure crisis and moved into an even more pernicious crisis — one of title. Because the 100 million transactions that have occurred on property wherein there claims of securitization made on or off record all have the same defects. Thus even if you bought your house fair and square and paid cash, you could find yourself in the middle of a foreclosure or, when you go to sell your house, you might find you cannot deliver marketable title. The title companies know this and are well-prepared for the claims denial process.

This TITLE CRISIS is the one that can’t be fixed by backdating documents, fabrication, or forgery. It can only be fixed if you go back to the point of origin and get either a signature from the affecting homeowners and securitization parties who claimed, on or off record, or if you get a court order declaring the status of the title. In my opinion you need both. But a signature from all the record homeowners in the title record would probably give enough cover for title companies to issue title insurance.

I will not stop until Justice Prevails!!

by Tracey T. Wilson

The Wells Fargo Bank, N.A. vs. Sandra A. Ford was NOT a Pro Se case. Sandra A. Ford was defended by Legal Services of New Jersey, Inc., attorneys; Ms. Jurow and Rebecca Schore and the case was decided January 28th 2011. The case in New Jersey that WAS defended and won Pro Se was Deutsche Bank vs. Tracey T. Wilson. Tracey T. Wilson was the Pro Se defendant and the case was decided ninedays earlier on January 19th 2011 in favor of the Pro Se defendant.
To ignore the case Deutsche Bank vs. Tracey T. Wilson allows concealment of the following facts and truths in the case not disclosed to the public:
• Tracey T. Wilson et al, Pro Se defendant was the first Appellate case decided in the State of NJ in a foreclosure matter in favor of the Defendant. The appellate decision was on January 19th, 2011 and was not approved for publication since defendant was Pro Se and not an attorney.
• Defendant was Pro Se due to the fact that upon the onset of the initial foreclosure action in October 2007 every attorney she contacted in the State of NJ refused to take the case to defend the foreclosure action and told her that there was nothing she could do. Defendants did not qualify for free Legal Services of New Jersey due to family incomes being over the Legal Aid Services guidelines. Finally, an attorney who actually accepted the case in August of 2008 was never heard in the court when his Motion to Reconsider Summary Judgment was not granted by the court. Judge quoted that “defendant did not deserve a second “bite at the apple” simply because they now have an attorney.
• Defendants owned the property with her husband of 25 years since 1994 and had previously paid over $370k in mortgage payments through the years.
• Plaintiff’s counsel submitted a Certification with a signature from the plaintiff’s attorney. This submission / signed document was not based upon personal knowledge, but was based upon incompetent hearsay by the plaintiff’s attorney.
• Attorneys’ for plaintiff never proved that they were the lawful holder to the note and mortgage prior to their commencement of foreclosure action. As of today Plaintiff has still not proved that they were a holder in due course.
• The court did not dismiss foreclosure complaint filed by plaintiff, but however within the next six months from March 2008 through August 2008 were allowed several adjournments for plaintiff to produce assignment of mortgage and original mortgage note. As the months progressed awaiting the plaintiff to produce valid documentation, within those six months plaintiff produced an assignment that was signed by Laura Hescott, alleged AVP of Washington Mutual and notarized by Bethany Hood, in the State of MN; A certification from Ann Garbis; and a final certification from Janine Timmons on August 29th 2008. Laura Hescott and Bethany Hood were at that time employees of LPS and are now known to the public as Robo-signers who have admitted fraud and not having any personal knowledge. The certification from Janine Timmons was accepted by the court on August 29th 2008, without allowing defendant discovery. The court granted Summary Judgment to the Plaintiff. Defendant was denied due process.
• Defendant obtained attorney to file a Motion to Reconsider, however, as mentioned in earlier bullet points this motion was denied in October 2009.
• Defendant asked her attorney to Appeal the Final decision and attorney told her he would NOT write appeal and then provided incorrect dates of final decision, documentation, due dates, etc.
• With no other choice defendant Tracey T. Wilson filed her own appeal Pro Se in December 2009.
• Plaintiff never responded to Appeal.
• The case was placed on the calendar for the Appellate Judges on November 3rd, 2010.
• The Appellate Court rendered their decision on January 19th 2011 in favor of Pro Se Defendant and the case was REVERSED AND REMANDED back to the lower court. Same Judge who presided over the case since 2007.
• Unfortunately, within the thirteen month time period when the appeal was submitted December 2009 and Appellate Court decision on January 19th 2011, a Sheriffs sale notice was placed on my home December 16th 2009 less than two weeks after my appeal was submitted with a sale date of January 6, 2010.
• Findings reveal that my home was sold to the bank at sheriffs’ sale in February 17th 2010 for $100.00.
• The home was sold to a third party (believed to be an investor) in June 2010 for $262,000.00 to cure the debt to prevent the sheriff sale, the plaintiff was asked to pay in excess of $550,000.00 which included tagged on erroneous fees b y the bank.
• Other illegal tactics such as the mortgage never being filed in the County Clerk’s office and altered files of tax record lot and block numbers exist.
• As of today, there is no property and I have been told there is nothing I can do to ever get my home back. The case should be dismissed since my home was foreclosed upon illegally and there is no property however the Judge has now requested a trail for June 2011 for the “Discovery” that was never granted to me in the first place. The court no longer has jurisdiction since there is no equitable property, however plaintiff will once again be given the chance to produce documents he was not able to produce to the Appellate Court nor during the four years this case has gone on for.
• The banks want a pass on the law and want to skirt the law; there are no laws currently on the books that have allowed for the injustice done to our society. – Standing is a major issue.
• The Republic has to be for the people and by the people. The banks are attacking a main component of the constitution which is protection of its citizen’s property rights. They did not take care of their due diligence. The whole premise of home ownership has been eroded.
• This is why they want to conceal my case and not hear the truth.
• I will not stop until Justice Prevails!!

Tracey T. Wilson

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HOMES BEING SOLD TWICE BY BANKS

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

EDITOR’S NOTE: This is exactly the result you can expect when you allow anyone to play the part of the creditor and submit a “credit bid” (no money at auction) or selling the house on a short-sale, pretending that they can execute a satisfaction of mortgage when they can’t. And this is exactly the problem that is going to get increasingly complex as the title records are revealed to have just as many problem — in fact exactly as many problems as the foreclosure and mortgage problems in so-called securitized loans that were never actually documented and securitized.

Contrary to what you will hear elsewhere, this is neither an isolated instance nor a situation that can distinguished from ALL the other foreclosures, sales, auctions, etc. stemming from the table-funded loans violating TILA, violating RESPA, violating the securities laws, based upon appraisal fraud, and using dummy entities as “bankruptcy remote” vehicles to ACT as creditors.

If your loan was the subject of a securitization attempt, whether successful or not, it is my de finite opinion to all lawyers that you look at the issue of clouded title, defective title and unmarketable title. I don’t think there is a title company in existence, unless it is owned or controlled by the pretender lenders, that will issue a title policy on any of the tens of millions of properties that were subject to so-called loan or possibly security transactions. You can check it out for yourself.

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Stern’s foreclosure mistake leads two to buy same house

Paperwork error complicates home sale, raises questions about process

By Diane C. Lade and Doreen Hemlock, Sun Sentinel5:00 p.m. EST, December 4, 2010

    fl-home-sold-twice-1204-20101203

Real estate investor Marjorie Oster was pleased when she snagged what looked like a good deal through a Miami-Dade County foreclosure court auction: a four-bedroom house in Cutler Bay, with a swimming pool, for about $95,000.

But when her husband drove by the next day to check on the property, he saw “someone cleaning the pool, a lawn service cutting the grass and a note it was being tented for termites,” said Oster, a Miami resident who has been in real estate for 15 years.

It turns out the house she thought she had purchased had been sold in a short sale the week before to someone else — Osberto Jimenez, a 40-year-old Cuban-born truck driver. The law firm handling the foreclosure for the lender mishandled the paperwork and never canceled the auction sale.

“So we both own the same house and I’m frustrated as hell,” said Oster. “Someone screwed up.”

New attorneys representing CitiMortgage say that “someone” was David Stern’s beleagured law office, which originally represented the lender. Citi ultimately pulled the case from Stern’s offices and gave it to Shapiro and Fishman, another large South Florida foreclosure firm that represents banks and loan servicers.

Both law offices, along with two others, are under investigation by the Florida Attorney General. They’re accused of engaging in shoddy pratices, including fabricating documents. Shapiro and Fishman has defended its practices and said it did nothing wrong. Jeffrey Tew, the attorney representing Stern, declined to comment.

Stern, who at one point claimed he processed 20 percent of the state’s foreclosures through a staff of more than 1,000, has been forced to lay off the vast majority of his employees as his biggest clients continue to abandon him. Citi spokesman Mark Rodgers declined to comment specifically on the Cutler Bay double sale, but said the company stopped referring new foreclosures to Stern in September and now has removed all of its business from the firm.

Federal lawmakers, listening to testimony at a Senate Banking Committee hearing this week, said ongoing and widespread problems with loan servicing and foreclosures indicated a “significant weakness” in the entire system. Attorneys general in 50 states continue to investigate reports of servicers and foreclosure firms like Stern’s “robo-signing” hundreds of thousands of affidavits without reviewing them.

“We are seeing more instances of mistakes being made,” said Darryl Wilson, a professor and real estate expert at Stetson University‘s College of Law. “That’s why you keep seeing moratoriums [on foreclosures] coming up.”

At Wednesday’s Senate hearings, some federal regulators urged mortgage guarantors Fannie Mae and Freddie Mac to suspend foreclosure proceedings while homeowners looked for new mortgages or tried to work out loan modifications.

In the situation with the Cutler Bay house, attorney Leora B. Freire, with Shapiro and Fishman, said Stern’s office didn’t notify the courts to take the house out of the foreclosure auction after the short sale had been processed.

Oster and Citi reached an agreement Wednesday, Freire said, vacating Oster’s sale, which allows Jimenez to keep the house. Oster said she would be refunded her money, paid some interest, and have her legal fees covered.

Documents show Oster bought the property for cash on Oct. 6 and received a certificate of title. Seven days earlier, Jimenez executed a warranty deed and took out a $123,000 mortgage in a short sale approved by CitiMortgage and the previous owners.

The tsumani of negative news about Stern’s operation had Oster fearing she never would see her money again. She said she contacted the office numerous times for more than a month, but attorneys either would never return her calls or couldn’t tell her what had happened to her payment.

“I just wanted out because it was David Stern’s firm,” she said.

Mortgage giants Fannie Mae and Freddie Mac, who comprised the majority of Stern’s referrals, pulled all of their cases from the firm over the past two months. Shapiro and Fishman, however, remain on Fannie’s referral list.

Darryl Wilson, a professor and real estate expert at Stetson University’s College of Law, said that while selling the same house twice was “quite strange,” it does happen – and increasingly more so lately, as lenders, attorneys and the courts scramble to push a huge number of foreclosures through the pipeline. “There needs to be a lot more diligence and patience in dealing with these cases,” he said.

While there is no specific statute addressing double sales, Wilson said basic common law suggests that the first person buying the property would have the first rights to it. But the outcome could vary according to the specifics in each case, Wilson said.

Jimenez, who came from Cuba five years ago, said he always assumed he would get to keep his home because he bought it first. He already has started renovating the kitchen, and has decorated the front yard with holiday lights.

“I knew things would get resolved. I did everything legal,” he said.

Diane Lade can be reached at dlade@SunSentinel.com or 954-356-4295.

The Games Are on At the Auction: Home Advantage?

Editor’s Note: While the banking industry have made it “illegal” for a homeowner to have a relative buy the home at foreclosure auction and then give it back to their son or daughter, there are many games at play in the auction. And don’t forget there are no auction police around. They have to figure it out in order to do something about it. And if your claim is fraud, which it probably ought to be, it becomes a he-said, she-said sort of thing that they don’t want to get into because that could mean you might have the right to legal discovery which would blow open the whole can of worms. It is obvious that the credit bid submitted to buy the property by the pretender lender is not a credit bid. A credit bid could only come from the creditor and the party submitting the “credit bid” is not the creditor.

So one thing emerging is that if you submit a bid  of SOME amount, even $100, and then invalidate the credit bid, you might end up with the house. Not so fast — it won’t be that easy most of the time but several reports received by this author indicate it has gone just that way. The higher the bid from you the more likely a court will confirm it, although there are some states that do not require confirmation of the bid, which is like non-judicial foreclosure in favor of the borrower. The key is to invalidate the credit bid. The next thing is to assert that your bid had to be accepted because it was the next highest bid and the only valid one. Obviously you need an attorney with guts and brains to do this.

Another interesting practice that has been in motion for for the past 2 years is peer-to-peer auction buying. The buyers know each other and have made a deal before the auctions on BOTH their homes. Each buys the home of the other. Usually they have the money to do it from relatives or some source. But the invalidation of the credit bid could be used in this scenario. After the auction is complete on both homes and the title is issued the two buyers either rent or swap titles. Now both are back in position where they can get a mortgage or loan from somebody that reflects the actual value of the home. In those states where the non-judicial sale or judicial sale prohibits the “lender” from pursuing a deficiency, the game is over. In other states I wouldn’t worry too much about it, because it is a regular law suit and they would have to prove how much they lost. If the pretender lender brings the suit, they didn’t have a dime in the deal and it is an admission that the credit bid was bogus. If anyone else files the suit they are alleging that the credit bid was submitted by someone other than the lender. Either way you win.

Then you have the games required to just do it using conventional means which are described in the article below.

The main point that I want to make here is that regardless which strategy you pick, including just walking away from the house, there is very good legal support for the proposition that a foreclosed house has neither been foreclosed nor sold and that the “former” homeowner is still in fact the legal owner of the house. This leads to all sorts of lawsuits and actions for damages. So whatever you do, you are probably missing an opportunity to get some money or the house back if you don’t file suit for quiet title and damages. Naturally this blog is no substitute for legal advice, so you should secure the advice and services of a licensed attorney before you make any decisions.

But here is a little word of caution to LAWYERS about MALPRACTICE. Don’t let your laziness or your failure to bring yourself up to speed on securitization get you into trouble with the bar or in a lawsuit later for attorney malpractice. And start re-tracing your steps for clients you have seen over the last 3 years.

  • Whether you practice in property law, civil litigation or bankruptcy, if you don’t know the basics of securitization and if you don’t advise your client to get the information pertaining to their transaction and determine the identity of the creditor and the net amount of the obligation and whether there really is a default after loss mitigation payments, then you have failed to give advice to a client who needs it.

  • Later, just as the last few weeks have revealed, you may end up with egg on your face. I wouldn’t be too surprised to see some legal malpractice cases started by people who went to lawyers who didn’t notice that the notarization was invalid, that the document was fabricated and that the signatures were unauthorized and forged.

October 29, 2010

What It Takes to Buy a House in Foreclosure

By RON LIEBER

ATLANTA — As in any economic downturn, the wave of home foreclosures has attracted voracious opportunists — investors among them who are buying, fixing and then renting the places out.

In their wake are aspiring owner-occupants. How hard could it be, they ask, to pick up one of these houses on the cheap and make it livable?

For an answer, consider Jennifer Kuzara, 32, a grants manager for a nonprofit organization here. From early 2009 to early this year, she spent about 1,000 hours on her foreclosure project. The gang of helpers she assembled included two real estate agents, a banker, an architect, a contractor and her parents.

To stand a chance of making the project work in the neighborhoods where she was willing to live, she needed $100,000 in cash. Ultimately, Ms. Kuzara and her parents were exposed to a fair bit of risk, all in the name of a bungalow in a middle-class neighborhood.

And while the specifics are particular to Ms. Kuzara, plenty of people in foreclosure-ridden markets in Florida, Arizona, Nevada and elsewhere are in for a house hunt that is going to look a lot like hers. The headlines may be raising all sorts of questions about whether the foreclosures were legitimate. But there will always be people who want to buy when things are really cheap and are willing to press ahead when the quest seems most challenging.

So this is the story of what it will take for their search to have a happy ending.

It began in 2006, when Ms. Kuzara had nearly six figures in student loan debt and the housing market was at its most heated. She was virtually certain that she would never be able to afford a home. “I remember thinking that it might have been the end of my American dream,” Ms. Kuzara said.

Two years later, after she had finished her Ph.D. course work in anthropology at Emory University, and begun full-time work in the nonprofit field, the housing market began to turn. Not long after, a friend was considering buying a foreclosed home as an investment property and encouraged Ms. Kuzara to look at the listings.

Through another friend, Ms. Kuzara found Lisa Iakovides and her business partner, Michael Redwine, real estate agents at a company called Atlanta Intown. They established some price parameters and some items that would be deal breakers, like mold and crooked rooflines.

Then they shopped for neighborhoods. One, East Atlanta, made the short list, even though Ms. Kuzara hit the floor of Mr. Redwine’s car one day when she heard gunshots on the way back from visiting a home there. She and Ms. Iakovides hadn’t even started up the walkway of a house in another neighborhood, Peoplestown, when a neighbor loudly made her feelings known about white people moving in.

Other homes told stories in subtler ways. “Squatters had taken them all over,” Ms. Kuzara said. “Some moved in furniture and their families. But there was one where I never would have known until I opened up a closet and saw a little stack of sleeping bags and blankets. And on the top ledge there was a knife, a fork and a spoon.”

Ms. Kuzara vowed to leave cookies and a nice note for whomever was living there if she bought that home, but she didn’t get it or many others. By the time she entered the fray, investors were already swarming. She bid on at least 10 homes over six months and lost them all.

The house she finally bought had been divided in half and turned into apartments, which might have been why she did not have to fight so hard for it.

The 1,100-square-foot bungalow sits high on a small piece of property in the Edgewood neighborhood. It is one of those places where you can walk a few blocks to the left and find two stores with a fine malt liquor selection, then stroll 10 minutes to the right to Bed Bath & Beyond for high thread-count sheets to sleep off the hangover. Ms. Kuzara’s block has a halfway house for former substance abusers next door and a beautifully renovated home across the street with an alarm service sign planted prominently out front.

Ms. Iakovides managed to get a preliminary $39,000 offer accepted by the bank on the home in early August 2009, and she began trying to set a closing date. Ms. Kuzara drove by the home each day, planning the renovation.

But one day she found the front door wide open and called her real estate agents in a panic, worried that vandals were casing the place or that squatters would take up residence. Without really asking the bank’s permission, the agents called a contractor to padlock the door. “Who would we have asked?” Mr. Redwine said, incredulously, as if the bank that still owned the house was actually going to return his calls.

Ms. Kuzara’s next step was to get together the money to pay for the place and the $60,000 or so in repair work. After trying early on in her hunt to cobble together various combinations of tax credits, down payment assistance programs and government loans, it became clear that most banks preferred all-cash offers for their foreclosed homes.

But Ms. Kuzara had no cash. Her parents, Mark and Jennie, had some savings but not nearly enough. So her parents borrowed $25,000 at about 8 percent interest against a life insurance policy and $50,000 more at a lower rate from his 401(k) and bought the $39,000 home themselves. They used the remaining money for the renovation, planning all along to sell it to Ms. Kuzara as soon as the repairs were done.

For that to work, however, Ms. Kuzara would need to qualify for a mortgage to buy it from her parents. She had no money for a down payment, though. To qualify for the Federal Housing Administration loan that she needed, the home, postrenovation, would have to be appraised at a high enough amount that her parents could give her some of the newly created equity for a down payment while still getting all their money back.

And therein lay the risk. Because Ms. Kuzara bought one of the worst homes on a nice block, her agents were convinced that the renovation could yield an appraisal at the value that the bank required.

It helped that they had ushered in a contractor they had worked with before, whom they could count on to stay within the strict budget. Under his supervision, the renovations were finished in less than two months.

Then came the deciding moment: the appraisals. One came in at $130,000, while the other was for $145,000. As a result, the bank allowed Ms. Kuzara to borrow $100,000 to buy the home from her parents and thus make them whole. Then she used some of the remaining, newly created equity for the required down payment.

Ms. Kuzara moved in a year ago this weekend, and today the cozy house has three bedrooms, two baths, a front porch for dinner parties and a backyard for her two dogs. She’s furnished the place with chairs from consignment stores and thrift shops and has assembled a nice collection of vintage cookware and dishes.

She pays $828 a month on her 30-year fixed-rate mortgage, including taxes and insurance, and she has a roommate who chips in $500 month.

Including the weeks when she painted every inch of the interior, Ms. Kuzara spent about 1,000 hours on her foreclosure project — poring over listings, researching every last one in county databases, visiting houses and making her eventual home habitable.

So anyone who wants to do what she did needs to be ready to put in that much time. You may need a source of funds or willing co-conspirators like Ms. Kuzara’s parents. And you will need a team of people who know the rules of the foreclosure game cold.

The odds of success are certainly long. But for those with the patience to pull it off, it sure seems a whole lot of fun to play this game and win.

“It turned out to be a sweet little house,” said Mark Kuzara, Jennifer’s father. “And I think somewhere down the road, she’ll sell that house and come out pretty nicely on it.”

PROFITS BEING MADE ON FORCED SALE OF PROPERTIES

TOP READER PICKS FOR SERVICES AND PRODUCTS

“My mortgage was $124,000…property was titled to the lender after foreclosure and conveyed to Fannie Mae for $132,000…property was then transferred to new purchaser for $156,000…all my equity was lost because lender would not work with me…am I entitled to any portion of Fannie Mae’s profit in selling my house?”

ANSWER: The answer is a qualified YES, but there is a wrinkle here. The scenario you have described is being reported by other readers as well. It is rare that any profit occurs in the forced sale of a home in foreclosure. At least it WAS rare. But the work done by Charles Koppa has shown that this is happening all over the country in one form or another. First of all the only party that can bid without money (called a “credit bid”) is the the party to whom the money is owed. THAT is not happening. The “credit bid” is submitted by a party who has no financial stake in the loan. And then the property is titled to yet another entity and frequently transferred to still another entity or person, rewarding them for playing in this scheme.

So the first thing is that the “credit bid” was invalid and that under the applicable state law, the bid was completely ineffective to cause title to be issued. Check with a local licensed attorney who is very well versed in property law before you take any action, since this is general information and opinion and not an opinion on your case.

The second thing you want to do is check and see if the foreclosure was fraudulent to begin with — see the recent posts and comments on that. It is entirely possible that not only was the paperwork fabricated, forged and wrong, it was based based upon a presumed default that never occurred or was cured by third party payments that mitigated the loss.

The third thing you want to do is consider an action (lawsuit) to recover the excess. Every note and mortgage and state law I have ever seen states quite clearly that if the proceeds of sale exceed the obligation, the homeowner gets the rest. In that case you might also be entitled to recover attorney fees and costs.

What I worry about is lawyers and pro se litigants making it tougher for those who actually have done their homework. If you are going to attack these events and get your house back in a quiet title action and/or recover damages, punitive damages, treble damages, attorney fees, for rescission, fraud, predatory loan practices, violations of TILA or whatever cause of action you pursue you MUST NOT ASSUME that because of news stories you are a winner and the other side is the loser. You must prove your case. THAT is why people are getting title searches, securitization searches, title reports, securitization reports and analyses of there loan and foreclosure by competent experts.

If you don’t have the facts in the form that can be admitted into evidence, you have nothing. If you do have the facts in the form that can be admitted into evidence your chances of winning or settling on favorable terms are immeasurably improved.

MEDIATIONS, MODIFICATIONS, SHORT-SALES AND SETTLEMENTS

SERVICES YOU NEED

AUTHORITY AND AGENCY

In “Fair Game” Gretchen Morgenson continues to unravel the failing process of “saving homes” while the world ignores the simple truth that legally the homes are in no jeopardy but for the pranks and illusions created by the pretender lenders.

  • There is no valid foreclosure, auction, mediation, modification, short-sale, satisfaction of mortgage, release and re-conveyance, or even settlement with a party to whom the money is not owed and a party owning no rights under the security instrument (the mortgage or deed of trust).

It is all an illusion given reality by repetition not by truth. It is fraud ignored by courts who naturally find it far more likely that a deadbeat homeowner is trying to trick the court than a world class bank or someone pretending to be an agent of a world class bank. But in the end, whether title moves by foreclosure or any of the procedures mentioned above, there is no clear title. There is clouded, fatally defective title and a settlement with a party lacking any power to even be in the room.

This is why I have maintained that lawyers err when they do not aggressively (on the front end despite the rules requiring mediation etc.) insist on proof of authority to represent and proof of agency and proof that a decision-maker is in the room. If those elements are not satisfied, there can be deal — only the appearance of a deal.It is entirely possible that not even the lawyer has authority to represent and that the lawyer has conflicts of interest when you make the challenge. If a lawyer asserts he represents a party you have a right to demand proof of that. I’ve seen dozens of cases unravel at just that point.

The foreclosure mills play musical chairs but they are forgetting that this fraud on the court may come back and haunt them with liability, discipline and even criminal charges. They keep their options open until they absolutely are forced to name a pretender lender. That lawyer standing in the room has generally spoken to nobody other than a secretary in his own firm. he doesn’t know the client, or any representative of the client. He or she presumed to be authorized to represent the client because the file was given to him or her.

Think I am kidding. Try it out on Deutsch Bank or U.S. Bank or BONY-Mellon. Demand that the lawyer produce incontrovertible proof that their client knows the case even exists and that this lawyer represents them.

From what I am seeing, this interrupts the flow of plausible deniability. Nobody high up in the food chain wants to come in and say they have personal knowledge or that they have anything to do with these foreclosures. They just want their monthly fee for pretending to be Trustee over a pool that was never created, much less funded. They will try to use affidavits from people who know nothing and who are probably not even employed by the “client.” Even if they are employed a quick inquiry will reveal that the signatory lacks authority to hire legal counsel and has no personal knowledge of the case.

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September 18, 2010

When Mortgage Mediation Is a Gamble

By GRETCHEN MORGENSON

NEVADA — one of the states where home prices went stratospheric during the housing mania — is now reporting some of the nation’s most horrifying foreclosure figures. Last week, RealtyTrac said that 1 in every 84 households in the state had received a foreclosure notice in August, 4.5 times the national average.

To mitigate this continuing disaster, the Nevada Assembly created a foreclosure mediation program last year. Intended to help keep families in their homes, the program brings together troubled borrowers and their lenders to negotiate resolutions.

The program began on July 1, 2009, and in its first year, 8,738 requests for mediation were received and 4,212 completed, according to the state’s Administrative Office of the Courts. Some 668 borrowers gave up their homes and 445 were foreclosed upon in the period.

“We are the only state that requires the bank to do something — they must come to the table if the homeowner elects mediation,” said Verise V. Campbell, who administers the program. “We are now touted as the No. 1 foreclosure mediation program around the country. The program is working.”

During its first year, 2,590 cases — more than 60 percent of completed mediations — resulted in agreements between borrower and lender, Ms. Campbell said. But when asked how many actually wound up assisting homeowners through permanent loan modifications, she said her office did not track that figure.

Most of these agreements, say lawyers who have worked in Nevada’s program, were probably for temporary modifications like those that have frustrated borrowers elsewhere — you know, the kind of plan that lasts only three months until the bank decides that the borrower does not qualify for a permanent modification.

Clearly, the Nevada program is superior to the White House’s Home Affordable Modification Program, where borrowers have trouble even reaching lenders by phone. Forcing banks to meet with borrowers is definitely a good step.

But some mediators who have participated in the Nevada program and some lawyers who represent borrowers in it say it has flaws that may give the banks an advantage over borrowers.

Patrick James Martin, a lawyer in Reno who is a certified public accountant and an arbitrator for the Financial Industry Regulatory Authority, was an early mediator in the program. In a recent letter to Nevada’s state court administrator, Mr. Martin expressed concern that the program favored lenders.

“I really felt the lenders didn’t have too much interest in having the program work,” Mr. Martin said in an interview. “A lawyer would show up for the lender with none of the documents required by the program. When they got into the mediation, they would call somebody in a bullpen someplace who had a computer handy and the borrower might or might not qualify for modification. No discussion, no negotiation.”

Mr. Martin said he no longer received cases to mediate.

Another experienced mediator, who declined to be identified because he feared reprisals, was removed from the system after he recommended sanctions for banks that did not meet their obligations under the program. These duties include showing up, bringing pertinent documents and having authority to negotiate with the borrower.

After this mediator made a petition for sanctions in a case this year, Ms. Campbell sent him and the other parties in the matter a letter saying that the recommendation was not a “valid Foreclosure Mediation Program document.” The letter, on Supreme Court of Nevada stationery, also stated that nothing in the law that established the mediation program “requires or permits a mediator to recommend specific sanctions.”

But the statute governing mediations in Nevada clearly specifies that if a lender does not participate in the mediation in good faith, by failing to appear, for example, “the mediator shall prepare and submit to the mediation administrator a petition and recommendation concerning the imposition of sanctions” against the lender. The court then has the power to issue sanctions, which can include forcing a loan modification.

Keith Tierney is a veteran real estate lawyer who was until recently a mediator in the program. He, too, stopped receiving mediation assignments after recommending sanctions against lenders in a number of cases. He said that a program official told him last week that he was no longer eligible because he issued a petition and recommendation for sanctions, even though that is what the law allows.

When asked why she believed that such recommendations were not allowed, Ms. Campbell said mediators who issued them were not following the program rules as interpreted by Nevada’s Supreme Court.

But Mr. Tierney said: “The statute trumps rules. Every attorney in the world knows that if a rule is in contradiction to a statute, the rule is null and void.”

Administering the program gives Ms. Campbell great power. She issues certificates allowing foreclosures to take place after mediations occur. And while she said such certificates were submitted only when mediators’ statements showed they should be, mistakes have happened.

ONE woman went through a mediation in which the lender didn’t provide necessary documents and the mediator noted it, according to legal documents. Under the rules, no certificate is supposed to be issued in such a circumstance, but shortly afterward, the borrower received notice of a trustee sale. Ms. Campbell’s office had issued a certificate allowing foreclosure; only by filing for bankruptcy could the borrower stop it.

Ms. Campbell said such problems were rare. The state doesn’t produce data that would allow her assertion to be verified.

Ms. Campbell is not a lawyer and is not a veteran of the housing or banking industries. Before overseeing the mediation program, she worked in the casino industry. She worked for a Chinese company developing a gambling property in Macau and was director of administration for the Cosmopolitan Resort and Casino in Las Vegas.

Ms. Campbell said that her position involved administrative duties, not legal insight, and that her experience overseeing large projects amply prepared her to manage the Nevada mediation program.

But David M. Crosby, the lawyer who represented the borrower whose case resulted in an erroneous foreclosure action, said significant questions remained about the program. Among them, he said, was the role that Ms. Campbell played in the process.

“Does she just do administrative stuff or does she make decisions?” he asked. “That doesn’t seem well decided.”


The Myth of the Credit Bid – Red-Handed

COMBO TITLE and SECURITIZATION Search, Report, Documents and Comprehensive Analysis

SUBSCRIPTION MEMBERSHIP WITH BENEFITS

Credit Charles Koppa (Poppa Koppa) with putting me onto this. He does GREAT work. poppakoppa@hotmail.com. He’s not lawyer but I trust him more than I do most lawyers to get to the bottom of things. He’s kind like one of those dogs that gets a bite of something and then NEVER lets go as the teeth go in deeper and deeper. I like that approach. The pretenders deserve it.

Credit Dan Edstrom with compiling everyone’s work including my own into securitization commentaries that work the material they way it should be done. Besides doing the Subscriber Members COMBO TITLE and Securitization Analysis, and the component parts, he also does a magnificent job of drilling down even further proving two points: (1) that while the borrower is dealing with a “Notice of Default” the Trust and investors are getting reports specifically stating that the same loan is performing — and they a re getting paid! and (2) that the distribution reports at the pool level are either on-going (Meaning the pool still exists) or they are no longer being sent (meaning the pool has been dissolved).

There are so many chairs and shells moving around I know it is difficult to keep them straight. That is exactly the point. The pretender lenders are going to keep them moving as long as they can because they are getting thousands of free houses every week through intimidation, fraud and deception of borrowers, court clerks, and Judges. But there are a few points in time at which the the chairs and shells stop moving or at least slow down. One of them is at the sale on the courthouse steps.

Charles Koppa pointed out the chicanery when he shared an ongoing study with me that showed changes in the bid price just hours before the sale and the resulting windfall to the new “buyer.” With pretenders swarming like flies around you-know-what it is no wonder that they find it easy to slip different entities in and out of the foreclosure process. But here is a simple proposition with far reaching implications regarding tracking the money, tracking the title and tracking the real obligation and the real creditor. ONLY THE CREDITOR CAN MAKE THE CREDIT BID. Anyone else must actually pay money.

Oops. It turns out that virtually no money is exchanging hands at these sales. And the Trustee is accepting a credit bid from an entity that wasn’t even named in the Notice of Default or the Trustee is issuing the deed to an entity that never made the credit bid or any bid at all. THAT TRANSACTION IS VOID ACCORDING TO MY READING OF THE STATUTES, WHETHER YOU ARE IN A JUDICIAL OR NON-JUDICIAL STATE. Maybe in some states it would be considered voidable but either way there is no “clear title” transferred and there is no successor in interest, which means that the homeowner still owns the home after the sale and can file a quiet title action against the originating lender and the party who received the title from the Trustee or Clerk, depending upon the procedure used. There is no defense as far as I can see and there might not even be an attempt at defending. Easier to let one slip by than risk a ruling that says these sales are all void.

But there is the rub. You can kick the can down the road for only so long. It doesn’t change the facts. NONE of the creditors filed foreclosure actions or sales in any of the securitized loan transactions. NONE of the creditors even knew the loan was not performing because they were being told quite the contrary by the very same group that declared the loan in default. ALL of the loans had co-obligors who in fact did pay but were not disclosed to either the borrower or the actual lender (investor). NONE of the notes were assigned at or near the time of the closing of the loans. NONE of the security interests were assigned at or near the time of the loan closing. NONE of the notes or security interests were endorsed or even transmitted to anyone after the loan closed unless the case went into litigation in which case they either “found” or re-created the documentation without admitting what they had done.

NONE OF THE OBLIGATIONS WERE COMPLETELY DESCRIBED IN THE NOTE, MORTGAGE OR DEED OF TRUST. AS PAUL  HARVEY LIKED TO SAY, THE “REST OF THE STORY” WAS IN THE MORTGAGE BOND, PROSPECTUS, PSA, ASSIGNMENT AND ASSUMPTION, INSURANCE CONTRACTS, CREDIT DEFAULT SWAPS, TRANCHE STRUCTURING THAT THE LENDER RECEIVED. As I said at the beginning of this blog, this is all going to come down to two doctrines that are inescapably in favor of the homeowners and borrowers, including the ones who THINK they lost their homes: the single transaction doctrine and the step transaction doctrine. NONE of the actions of the securitization intermediaries would have any business reason to occur without the investment by the lender (investor) and the acceptance of the obligation by the borrower. That makes it ONE transaction between the the investor and the borrower no matter how complicated you WANT to describe it.

THE ONLY THING THAT WAS ACTUALLY MOVED WAS MONEY UNDER QUESTIONABLE CIRCUMSTANCES. A SPREADSHEET WAS USED AND SENT ELECTRONICALLY UPSTREAM TO TRANSMIT THE ALLEGED RECEIVABLES THAT WOULD BE CLAIMED AS PART OF POOLS THAT WERE NEVER OFFICIALLY FORMED. THE TERMS OF THAT TRANSACTION INCLUDED CO-OBLIGORS WITHOUT WHICH THE LENDERS WOULD NOT HAVE ADVANCED THE FUNDS FOR WORTHLESS (AND IN MANY CASES NON-EXISTENT) MORTGAGE BONDS.

THE WAY THEY DID IT WAS SIMPLE: GIVE THE BORROWER MONEY, HAVE THE BORROWER SIGN A NOTE TO A SHAM ENTITY AND GIVE THE LENDER EVIDENCE OF A BOND WHICH HAS ENTIRELY DIFFERENT TERMS FROM THE NOTE. THAT WAY THEY COULD USE PLAUSIBLE DENIABILITY AND PLAUSIBLE EXCUSES FOR NOT SHARING CONFIDENTIAL INFORMATION WITH THE THE ONLY TWO REAL PARTIES TO THE TRANSACTION — THE BORROWER AND THE LENDER.

So they wait until nobody is looking, for that moment that appears clerical (ministerial) in nature and then they slip in new entities again, thus cheating the lender (again), but leaving the homeowner with legal title. The homeowner walks from the deal thinking it is over. But in truth, it is only just beginning. Now we enter the NEXT chapter of the mortgage meltdown.

AFTER THE SALE: PART III On the Courthouse Steps

Submitted by Charles Koppa

The auctioneer represents the “beneficiary” in the sale.. If there is a “reserve amount minimum” (see below) the auctioneer actually bids up as agent for the unnamed beneficiary! The recipient “beneficial trust” is finally publically identified and documented by the Foreclosing Trustee in the recorded Trustees Deed Upon Sale.  Try to find a human officer for that trust!

Beneficiary makes no personal bid, delivers no cash, and is allowed a credit bid!  PROBLEM: a beneficiary (if known) would be a “party in interest” and could not be a bonafide buyer.  An est. 80% of the Courthouse sales go “Back to Beneficiary” (publicly unknown) and therefore are unlawful.  Lack of Notice and availability of Due Process to meet your accuser are historically common.

Predatory devaluations, plus untitled transfer of foreclosed mortgage notes systematically confiscated by “investment trusts” that were structured by Bank Holding Companies with no skin in the game, plus processing by shadow intermediaries “against the borrower”, equals “Tyranny on the Courthouse Steps!”

Sellers have the option of setting a hidden Reserve Price that is above the minimum starting bid.  If a reserve price is in effect, then the seller does not have sell the item unless the high bid meets or exceeds his reserve.  Auctions with a reserve price will be noted in their listing, describing whether the reserve has been met or not.  The actual amount of the reserve price is not revealed to bidders, until it has been met.

When you submit a bid on a reserve price auction, one of three things might happen:
(1) If the reserve has already been met, then your bid will be submitted at one increment above the next highest competitor, in the same manner as an auction without a reserve price.
(2) If the reserve has not been met, and your maximum bid is also less than the reserve, then your bid will be entered at one increment above the next highest competitor.
(3) If the reserve has not been met, but your maximum bid is enough to meet the reserve, then your bid will be entered at exactly the seller’s reserve price.  If your maximum was above the seller’s reserve, then your proxy will defend your bid, up to your maximum.If you are the highest bidder at auction close but the reserve was not met, then neither you nor the seller are obligated to the transaction.  However, you may wish to negotiate further via email, to see if a mutually satisfactory price can be reached.

EXAMPLES:

No sale:
Item #9999 had a minimum starting bid of $100.00
The seller set a reserve price in his listing of $200.00.
At the end of the auction, the highest bid is $175.00.
In this case, the seller is not obligated to sell for $175.00, but may choose to do so anyway.

Sale:
Item #8888 had a minimum starting bid of $900.00.
The seller set a reserve price in his listing of $1,200.00.
At the end of the auction, the highest bid is $1,225.00.
In this case, the seller is obligated to sell for $1,225.00 to the highest bidder.

AFTER THE SALE: PART I

Submitted by Charles Koppa. 6/9/2010

Editor’s Note: We are starting to look at events AFTER the sale has taken place and we are discovering a number of things:

  • CREDIT BID: Only the Creditor can submit a credit bid. All others must pay actual money. If a non-creditor submitted a credit bid (essentially bidding the “amount due” which as we have seen from the FTC action against BOA is incorrectly stated) then the procedure has been violated, the sale has not legally occurred. At least that is my interpretation.
  • Also the submission of a credit bid locks in the position of the parties. So if you are suing for wrongful or fraudulent foreclosure, they no longer have the option of fabricating documents as you raise one objection after another.
  • The obligation to return money rightfully owed to the homeowner continues but it is ignored. Thus even if the property is not sold to a bonafied purchaser for value without notice of defects, the net accounting due is the same. So the receipt of third party insurance, credit default swaps, or other credit enhancement payments is still required to be allocated to this loan. Hence there is a damage claim against the participants in the foreclosure and sale.
  • More later. For now read Charles’ comments below

REO’s and OREO’s have NO MERS Identification Numbers.

1.  Loan Servicer (as a MERS member) initiates the NOD and NOTS.
2.  When the auctioneer pronounces “Back To Beneficiary”, the securitized bond trust receives the MinBid at averages of 46% below the NOTS amount posted the day before.  Bondholder “paper certificate losses”  are unconscionably assigned against the Real Estate asset. “The Paper Trust” gains an untitled transfer of the Real Estate Asset which it NEVER Wanted!
3.  The Auction extinguishes the Toxic Security on Wall Street.  Counterparties collect on their bets.  Investor lose their investments” and the monthly cash interest streams are terminated.
4.  Simultaneously, the Servicer (and MERS) are extinguished from all public records.  Servicer collects on MGIC or other mortgage insurance to cover ALL their contrived losses and costs.
5.  When the re-sale is completed, “The Bookkeeping Trust” ALSO disappears from County Property RECORDS!!!
6.  Until re-sold, the real property travels at ZERO book value into an off balance sheet private entity (mostly controlled by the BHC) which was the SIV “depositor” (as an off balance entity) in setting up the REMIC and/or the Investment Trust in the first place.

Only the Beneficiary May Make a Credit Bid at Auction

SO who is the beneficiary? We can’t take the word of the Trustee unless he has satisfied his duty to inquire.

33-810 Sale by public auction; postponement of sale

A. On the date and at the time and place designated in the notice of sale, the trustee shall offer to sell the trust property at public auction for cash to the highest bidder. The trustee may schedule more than one sale for the same date, time and place. The attorney or agent for the trustee may conduct the sale and act at such sale as the auctioneer for the trustee. Any person, including the trustee or beneficiary, may bid at the sale. Only the beneficiary may make a credit bid in lieu of cash at sale. The trustee shall require every bidder except the beneficiary to provide a ten thousand dollar deposit in any form that is satisfactory to the trustee as a condition of entering a bid. The trustee or auctioneer may control the means and manner of the auction. Every bid shall be deemed an irrevocable offer until the sale is completed, except that a subsequent bid by the same bidder for a higher amount shall cancel that bidder’s lower bid. To determine the highest price bid, the trustor or beneficiary present at the sale may recommend the manner in which the known lots, parcels or divisions of the trust property described in the notice of sale be sold. The trustee shall conditionally sell the trust property under each recommendation, and, in addition, shall conditionally sell the trust property as a whole. The trustee shall determine which conditional sale or sales result in the highest total price bid for all of the trust property. The trustee shall return deposits to all but the bidder or bidders whose bid or bids result in the highest bid price. The sale shall be completed on payment by the purchaser of the price bid in a form satisfactory to the trustee. The subsequent execution, delivery and recordation of the trustee’s deed as prescribed by section 33-811 are ministerial acts. If the trustee’s deed is recorded in the county in which the trust property is located within fifteen business days after the date of the sale, the trustee’s sale is deemed perfected at the appointed date and time of the trustee’s sale. If the highest price bid at a completed sale is less than the amount of that bidder’s deposit, the amount of the deposit in excess of the bid price shall be refunded by the trustee at the time of delivery of the trustee’s deed.

B. The person conducting the sale may postpone or continue the sale from time to time or change the place of the sale to any other location authorized pursuant to this chapter by giving notice of the new date, time and place by public declaration at the time and place last appointed for the sale. Any new sale date shall be a fixed date within ninety calendar days of the date of the declaration. After a sale has been postponed or continued, the trustee, on request, shall make available the date and time of the next scheduled sale and, if the location of the sale has been changed, the new location of the sale until the sale has been conducted or canceled and providing this information shall be without obligation or liability for the accuracy or completeness of the information. No other notice of the postponed, continued or relocated sale is required except as provided in subsection C of this section.

C. A sale shall not be complete if the sale as held is contrary to or in violation of any federal statute in effect because of an unknown or undisclosed bankruptcy. A sale so held shall be deemed to be continued to a date, time and place announced by the trustee at the sale and shall comply with subsection B of this section or, if not announced, shall be continued to the same place and at the same time twenty-eight days later, unless the twenty-eighth day falls on a Saturday or legal holiday, in which event it shall be continued to the first business day thereafter. In the event a sale is continued because of an unknown or undisclosed bankruptcy, the trustee shall notify by registered or certified mail, with postage prepaid, all bidders who provide their names, addresses and telephone numbers in writing to the party conducting the sale of the continuation of the sale.

D. A sale is postponed by operation of law to the next business day at the same scheduled time and place if an act of force majeure prevents access to the sale location for the conduct of the sale.

The Year in Foreclosures

The big jump indicates that many foreclosures that were in process in 2009 are now beginning to move to repossession and, eventually, auction. With more than four million homes in that pipeline, the foreclosure crisis shows no sign of abating.

“There is an emerging consensus among financial experts and policy makers that the key to successful modifications is to reduce the amount of the borrower’s loan balance, rather than merely reducing the monthly payment. The goal is to lower the payment while restoring equity, thus giving borrowers both the means and the incentive to keep up with their payments.”

February 15, 2010
Editorial New York Times

The Year in Foreclosures

Last week offered some sobering news on the housing market: Even with broad government support for housing, data from the National Association of Realtors showed that the median price of single-family homes continued to decline in 2009. RealtyTrac, an online marketer of foreclosed properties, said foreclosure filings rose by 15 percent in January compared with a year ago.

Foreclosure is generally a long process, with multiple filings as delinquent borrowers fall ever further behind. What is most ominous about the latest RealtyTrac numbers is that nearly 88,000 people had their homes repossessed in January, a 31 percent increase from a year ago. The big jump indicates that many foreclosures that were in process in 2009 are now beginning to move to repossession and, eventually, auction. With more than four million homes in that pipeline, the foreclosure crisis shows no sign of abating.

Worse, as The Times’s Peter Goodman recently reported, the Obama administration’s antiforeclosure plan (which pays cash incentives to mortgage companies that lower monthly payments for troubled borrowers) may be doing more harm than good for some borrowers.

Before a lender will permanently modify a loan under the plan, eligible borrowers must go through a trial period — several months in which they keep current on reduced monthly payments. For some borrowers, even a reduced payment is too onerous, leading to redefault. Others reported being denied a permanent modification even after keeping up the trial payments. In both cases, the borrowers do not avoid foreclosure, and are out the money they have paid during the trial period. That is money they could have spent moving to a rental home or for other purposes.

There is an emerging consensus among financial experts and policy makers that the key to successful modifications is to reduce the amount of the borrower’s loan balance, rather than merely reducing the monthly payment. The goal is to lower the payment while restoring equity, thus giving borrowers both the means and the incentive to keep up with their payments.

Administration officials have resisted that approach, in part because they believe it would be too expensive. Another obstacle is the lenders themselves. In general, a lender is unwilling to take losses by reducing principal unless the owners of the second mortgage on a home also take a hit. For banks that own the second mortgages, such losses would be huge — something they clearly would prefer not to face up to.

Banks’ unwillingness to take losses on second mortgages may also be holding up so-called short sales, in which a lender agrees to retire a first-mortgage debt by taking the proceeds from the sale of the home, even when the amount is less than the mortgage balance.

Last April, the Treasury detailed a plan to get second-mortgage owners to write down their debt once the first mortgage is modified. But until recently, when Bank of America signed on, no banks had cooperated.

Unless the banks can be compelled to get on board — allowing principal reductions to become the norm — the antiforeclosure effort may have more success in letting banks postpone their losses than in helping Americans keep their homes.

Mortgage Meltdown: Chickens Coming Home to Roost

It might just be that “free market” forces are going to change the landscape forever.

What if other Fortune 500 companies involved in consumer finance, electronic funds transfer, insurance and foreign exchange decide that this huge credibility gap opens the door for their own entry into the market. McDonald’s once was surveyed as a brand name and 30% of the people surveyed said they would bank with McDonald’s over other established financial insitutions. GE is heavily invovled in global financial services. They might be better able to step in and provide a credible alternative that resinstates global confidence in the finanancial markets far better than the perpetrators of the latest financial  crimes against humanity.

Auction-Rate 
Debt Market 
Faces Probe

By LIZ RAPPAPORT
April 18, 2008; Page C1

Backlash is building against Wall Street for the credit crisis.

The latest case: New York state’s attorney general, Andrew Cuomo, has launched a broad investigation into auction-rate securities, instruments used by municipalities, schools, closed-end mutual funds and others to raise money.

[Andrew Cuomo]

Mr. Cuomo’s office sent subpoenas to 18 institutions on Monday and Tuesday seeking information on their auction-rate-securities, including some of Wall Street’s biggest, such asUBS AG, Citigroup Inc., Merrill Lynch & Co., J.P. Morgan Chase & Co. and Goldman Sachs Group Inc., according to a person familiar with the investigation. The New York attorney general has plans to send out additional subpoenas soon, says the person.

The $330 billion auction-rate market virtually collapsed in February when demand for the securities dried up and Wall Street firms stopped providing the support for the market they’d given in the past.

When that happened, many issuers of the securities were faced with higher interest rates. Buyers of the securities — often wealthy clients of the brokerages and corporations — were left with instruments they thought were liquid but couldn’t sell.

Mr. Cuomo’s office considers the investigation an “industry case,” meaning officials are looking into all aspects of the auction-rate business — from what municipalities or other issuers were told about auction rates as methods of cheap financing all the way down to their distribution, sales and marketing to consumers who believed they were buying a safe and easily sold investment.

Jeff Tuller, a 55-year-old, commercial real-estate broker in New York City, says he can’t access his money. He says he placed $300,000 in auction-rate securities in an account with J.P. Morgan Chase in April 2007 and November last year. He tried to liquidate about $200,000 in February to pay down a mortgage on a house in the Hamptons on Long Island, but says he was told there were no bids for the auctions and his money was stuck.

“I was very upset,” he says.

J.P. Morgan Chase declined to comment.

Auction-rate securities are long-term instruments, but they have interest rates that reset weekly or monthly in a bidding process conducted by securities dealers. During a tumultuous February, investors stopped bidding in the auctions and the securities firms stopped stepping in with their own bids, as they had done in the past. Many bonds in failed auctions reset to higher interest rates. Others, depending on the terms of the bonds, reset to low rates.

State securities regulators are investigating auction-rate securities as well, the North American Securities Administrators Association announced Thursday in a press release. Their efforts will be coordinated through a task force led by Massachusetts Securities Division director Bryan Lantagne. The task force includes members from Florida, Georgia, Illinois, Missouri, New Hampshire, New Jersey, Texas and Washington, according to the release.

Wall Street firms, many of which reported yet another round of write-downs and losses in the first quarter, have attempted to address their often-wealthy clients’ woes. But, they have little capital available to work with, and they’re dealing with investors whose patience is wearing thin.

Several lawsuits seeking class-action status also have been filed thus far.

UBS, Goldman Sachs and Citigroup declined to comment. A Merrill Lynch spokesman said it declines to comment on regulatory matters except to say it is company policy to cooperate with any investigations.

Municipal-bond newspaper Bond Buyer reported on Mr. Cuomo’s investigation Wednesday.

Wall Street is facing backlash on many other fronts, from questions about how firms marketed and structured complex mortgage-backed securities to concerns about the high credit ratings attached to many of these instruments.

Write to Liz Rappaport at liz.rappaport@wsj.com1

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