The difference between paper instruments and real money

There is a difference between the note contract and the mortgage contract. They each have different terms. And there is a difference between those two contracts and the “loan contract,” which is made up of the note, mortgage and required disclosures.Yet both lawyers and judges overlook those differences and come up with bad decisions or arguments that are not quite clever.

There is a difference between what a paper document says and the truth. To bridge that difference federal and state statutes simply define terms to be used in the resolution of any controversy in which a paper instrument is involved. These statutes, which are quite clear, specifically define various terms as they must be used in a court of law.

The history of the law of “Bills and Notes” or “Negotiable Instruments” is rather easy to follow as centuries of common law experience developed an understanding of the problems and solutions.

The terms have been defined and they are the law not only statewide, but throughout the country, with the governing elements clearly set forth in each state’s adoption of the UCC (Uniform Commercial Code) as the template for laws passed in their state.

The problem now is that most judges and lawyers are using those terms that have their own legal meaning without differentiating them; thus the meaning of those “terms of art” are being used interchangeably. This reverses centuries of common law and statutory laws designed to prevent conflicting results. Those laws constrain a judge to follow them, not re-write them. Ignoring the true meaning of those terms results in an effective policy of straying further and further from the truth.

Listen to the Last Neil Garfield Show at http://tobtr.com/s/9673161

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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So an interesting case came up in which it is obvious that neither the judge nor the bank attorneys are paying any attention to the law and instead devoting their attention to making sure the bank wins — even at the cost of overturning hundreds of years of precedent.
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The case involves a husband who “signed the note,” and a wife who didn’t sign the note. However the wife signed the mortgage. The Husband died and a probate estate was opened and closed, in which the Wife received full title to the property from the estate of her Husband in addition to her own title on the deed as Husband and Wife (tenancy by the entireties).
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Under state law claims against the estate are barred when the probate case ends; however state law also provides that the lien (from a mortgage or otherwise) survives the probate. That means there is no claim to receive money in existence. Neither the debt nor the note can be enforced. The aim of being a nation of laws is to create a path toward finality, whether the result be just or unjust.
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There is an interesting point here. Husband owed the money and Wife did not and still doesn’t. If foreclosure of the mortgage lien is triggered by nonpayment on the note, it would appear that the mortgage lien is presently unenforceable by foreclosure except as to OTHER duties to maintain, pay taxes, insurance etc. (as stated in the mortgage).

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The “bank” could have entered the probate action as a claimant or it could have opened up the estate on their own and preserved their right to claim damages on the debt or the note (assuming they could allege AND prove legal standing). Notice my use of the terms “Debt” (which arises without any documentation) and “note,” which is a document that makes several statements that may or may not be true. The debt is one thing. The note is quite a different animal.
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It does not seem logical to sue the Wife for a default on an obligation she never had (i.e., the debt or the note). This is the quintessential circumstance where the Plaintiff has no standing because the Plaintiff has no claim against the Wife. She has no obligation on the promissory note because she never signed it.
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She might have a liability for the debt (not the obligation stated on the promissory note which is now barred by (a) she never signed it and (b) the closing of probate. The relief, if available, would probably come from causes of action lying in equity rather than “at law.” In any event she did not get the “loan” money and she was already vested with title ownership to the house, which is why demand was made for her signature on the mortgage.
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She should neither be sued for a nonexistent default on a nonexistent obligation nor should she logically be subject to losing money or property based upon such a suit. But the lien survives. What does that mean? The lien is one thing whereas the right to foreclose is another. The right to foreclose for nonpayment of the debt or the note has vanished.

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Since title is now entirely vested in the Wife by the deed and by operation of law in Probate it would seem logical that the “bank” should have either sued the Husband’s estate on the note or brought claims within the Probate action. If they wanted to sue for foreclosure then they should have done so when the estate was open and claims were not barred, which leads me to the next thought.

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The law and concurrent rules plainly state that claims are barred but perfected liens survive the Probate action. In this case they left off the legal description which means they never perfected their lien. The probate action does not eliminate the lien. But the claims for enforcement of the lien are effected, if the enforcement is based upon default in payment alone. The action on the note became barred with the closing of probate, but that left the lien intact, by operation of law.

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Hence when the house is sold and someone wants clear title for the sale or refinance of the home the “creditor” can demand payment of anything they want — probably up to the amount of the “loan ” plus contractual or statutory interest plus fees and costs (if there was an actual loan contract). The only catch is that whoever is making the claim must actually be either the “person” entitled to enforce the mortgage, to wit: the creditor who could prove payment for either the origination or purchase of the loan.
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The “free house” mythology has polluted judicial thinking. The mortgage remains as a valid encumbrance upon the land.

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This is akin to an IRS income tax lien on property that is protected by homestead. They can’t foreclose on the lien because it is homestead, BUT they do have a valid lien.

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In this case the mortgage remains a valid lien BUT the Wife cannot be sued for a default UNLESS she defaults in one or more of the terms of the mortgage (not the note and not the debt). She did not become a co-borrower when she signed the mortgage. But she did sign the mortgage and so SOME of the terms of the mortgage contract, other than payment of the loan contract, are enforceable by foreclosure.

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So if she fails to comply with zoning, or fails to maintain the property, or fails to comply with the provisions requiring her to pay property taxes and insurance, THEN they could foreclose on the mortgage against her. The promissory note contained no such provisions for those extra duties. The only obligation under the note was a clear statement as to the amounts due and when they were due.  There are no duties imposed by the Note other than payment of the debt. And THAT duty does not apply to the Wife.

The thing that most judges and most lawyers screw up is that there is a difference between each legal term, and those differences are important or they would not be used. Looking back at AMJUR (I still have the book award on Bills and Notes) the following rules are true in every state:

  1. The debt arises from the circumstances — e.g., a loan of money from A to B.
  2. The liability to pay the debt arises as a matter of law. So the debt becomes, by operation of law, a demand obligation. No documentation is necessary.
  3. The note is not the debt. Execution of the note creates an independent obligation. Thus a borrower may have two liabilities based upon (a) the loan of money in real life and (b) the execution of ANY promissory note.
  4. MERGER DOCTRINE: Under state law, if the borrower executes a promissory note to the party who gave him the loan then the debt becomes merged into the note and the note is evidence of the obligation. This shuts off the possibility that a borrower could be successfully attacked both for payment of the loan of money in real life AND for the independent obligation under the promissory note.
  5. Two liabilities, both of which can be enforced for the same loan. If the borrower executes a note to a third person who was not the party who loaned him/her money, then it is possible for the same borrower to be required, under law, to pay twice. First on the original obligation arising from the loan, (which can be defended with a valid defense such as that the obligation was paid) and second in the event that a third party purchased the note while it was not in default, in good faith and without knowledge of the borrower’s defenses. The borrower cannot defend against the latter because the state statute says that a holder in due course can enforce the note even if the borrower has valid defenses against the original parties who arranged the loan. In the first case (obligation arising from an actual loan of money) a failure to defend will result in a judgment and in the second case the defenses cannot be raised and a judgment will issue. Bottom Line: Signing a promissory note does not mean the maker actual received value or a loan of money, but if that note gets into the hands of a holder in due course, the maker is liable even if there was no actual transaction in real life.
  6. The obligor under the note (i.e., the maker) is not necessarily the same as the debtor. It depends upon who signed the note as the “maker” of the instrument. An obligor would include a guarantor who merely signed either the note or a separate instrument guaranteeing payment.
  7. The obligee under the note (i.e., the payee) is not necessarily the lender. It depends upon who made the loan.
  8. The note is evidence of the debt  — but that doesn’t “foreclose” the issue of whether someone might also sue on the debt — if the Payee on the note is different from the party who loaned the money, if any.
  9. In most instances with nearly all loans over the past 20 years, the payee on the note is not the same as the lender who originated the actual loan.

In no foreclosure case ever reviewed (2004-present era) by my office has anyone ever claimed that they were a holder in due course — thus corroborating the suspicion that they neither paid for the loan origination nor did they pay for the purchase of the loan.

If they had paid for it they would have asserted they were either the “lender” (i.e., the party who loaned money to the party from whom they are seeking collection) or the holder in due course i.e., a  third party who purchased the original note and mortgage for good value, in good faith and without any knowledge of the maker’s defenses). Notice I didn’t use the word “borrower” for that. The maker is liable to a party with HDC status regardless fo whether or not the maker was or was not a borrower.

“Banks” don’t claim to be the lender because that would entitle the “borrower” to raise defenses. They don’t claim HDC status because they would need to prove payment for the purchase of the paper instrument (i.e., the note). But the banks have succeeded in getting most courts to ERRONEOUSLY treat the “banks” as having HDC status, thus blocking the borrower’s defenses entirely. Thus the maker is left liable to non-creditors even if the same person as borrower also remains liable to whoever actually gave him/her the loan of money. And in the course of those actions most homeowners lose their home to imposters.

All of this is true, as I said, in every state including Florida. It is true not because I say it is true or even that it is entirely logical. It is true because of current state statutes in which the UCC was used as a template. And it is true because of centuries of common law in which the current law was refined and molded for an efficient marketplace. But what is also true is that law judges are the product of law school, in which they either skipped or slept through the class on Bills and Notes.

California Suspends Dealings with Wells Fargo

The real question is when government agencies and regulators PLUS law enforcement get the real message: Wells Fargo’s behavior in the account scandal is the tip of the iceberg and important corroboration of what most of the country has been saying for years — their business model is based upon fraud.

Wells Fargo has devolved into a PR machine designed to raise the price of the stock at the expense of trust, which in the long term will most likely result in most customers abandoning such banks for fear they will be the next target.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://www.sacbee.com/news/politics-government/capitol-alert/article104739911.html

John Chiang, California Treasurer, has stopped doing business with Wells Fargo because of the scheme involving fraud, identity theft and customer gouging for services they never ordered on accounts they never opened. It is once again time for Government to scrutinize the overall business plan and business map of Wells Fargo and indeed all of the top (TBTF) banks.

Wells Fargo is attempting to do crisis management, to wit: making sure that nobody looks at other schemes inside the bank.

It is the Consumer Financial Protection Bureau (CFPB) that was conceived by Senator Elizabeth Warren who has revealed the latest example of big bank fraud.

The simple fact is that in this case, Wells Fargo management made an absurd demand on their employees. Instead of the national average of 3 accounts per person they instructed managers and employees to produce 8 accounts per customer. Top management of Wells Fargo have been bankers for decades. They knew that most customers would not want, need or accept 5 more accounts. Yet they pressed hard on employees to meet this “goal.” Their objective was to defraud the investing public who held or would buy Wells Fargo stock.

In short, Wells Fargo is now the poster child for an essential defect in business structure of public companies. They conceive their “product” to be their stock. That is how management makes its money and that is how investors holding their stock like it until they realize that the entire platform known as Wells Fargo has devolved into a PR machine designed to raise the price of the stock at the expense of trust, which in the long term will most likely result in most customers abandoning such banks for fear they will be the next target. Such companies are eating their young and producing a bubble in asset values that, like the residential mortgage market, cannot be sustained by fundamental facts — i.e., real earnings on a real trajectory of growth.

So the PR piece about how they didn’t know what was going on is absurd along with their practices. Such policies don’t start with middle management or employees. They come from the top. And the goal was to create the illusion of a rapidly growing bank so that more people would buy their stock at ever increasing prices. That is what happens when you don’t make the individual members of management liable under criminal and civil laws for engaging in such behavior.

There was only one way that the Bank could achieve its goal of 8 accounts per customer — it had to be done without the knowledge or consent of the customers. Now Wells Fargo is trying to throw 5,000 employees under the bus. But this isn’t the first time that Wells Fargo has arrogantly thrown its customers and employees under the bus.

The creation of financial accounts in the name of a person without that person’s knowledge or consent is identity theft, assuming there was a profit motive. The result is that the person is subjected to false claims of high fees, their credit rating has a negative impact, and they are stuck dealing with as bank so large that most customers feel that they don’t have the resources to do anything once the fraud was discovered by the Consumer Financial protection Board (CFPB).

Creating a loan account for a loan that doesn’t exist is the same thing. In most cases the “loan closings” were shams — a show put on so that the customer would sign documents in which the actual party who loaned the money was left out of the documentation.

This was double fraud because the pension funds and other investors who deposited money with Wells Fargo and the other banks did so under the false understanding that their money would be used to buy Mortgage Backed Securities (MBS) issued by a trust with assets consisting of a loan pool.

The truth has emerged — there were no loan pols in the trusts. The entire derivative market for residential “loans” is built on a giant lie.  But the consequences are so large that Government is afraid to do anything about it. Wells Fargo took money from pension funds and other “investors,” but did not give the proceeds of sale of the alleged MBS to the proprietary vehicle they created in the form of a trust.

Hence the trust was never funded and never acquired any property or loans. That means the “mortgage backed securities” were not mortgage backed BUT they were “Securities” under the standard definition such that the SEC should take action against the underwriters who disguised themselves as “master Servicers.”

In order to cover their tracks, Wells Fargo carefully coached their employees to take calls and state that there could be no settlement or modification or any loss mitigation unless the “borrower” was at least 90 days behind in their payments. So people stopped paying an entity that had no right to receive payment — with grave consequences.

The 90 day statement was probably legal advice and certainly a lie. There was no 90 day requirement and there was no legal reason for a borrower to go into a position where the pretender lender could declare a default. The banks were steering as many people, like cattle, into defaults because of coercion by the bank who later deny that they had instructed the borrower to stop making payments.

So Wells Fargo and other investment banks were opening depository accounts for institutional customers under false pretenses, while they opened up loan accounts under false pretenses, and then  used the identity of BOTH “investors” and “borrowers” as a vehicle to steal all the money put up for investments and to make money on the illusion of loans between the payee on the note and the homeowner.

In the end the only document that was legal in thee entire chain was a forced sale and/or judgment of foreclosure. When the deed issues in a forced sale, that creates virtually insurmountable presumptions that everything that preceded the sale was valid, thus changing history.

The residential mortgage loan market was considerably more complex than what Wells Fargo did with the opening of the unwanted commercial accounts but the objective was the same — to make money on their stock and siphon off vast sums of money into off-shore accounts. And the methods, when you boil it all down, were the same. And the arrogant violation of law and trust was the same.

 

Predominant Interest Defines “True Lender”

Based on the totality of the circumstances, the Court concludes that CashCall, not Western Sky, was the true lender. CashCall, and not Western Sky, placed its money at risk. It is undisputed that CashCall deposited enough money into a reserve account to fund two days of loans, calculated on the previous month’s daily average and that Western Sky used this money to fund consumer loans. It is also undisputed CashCall purchased all of Western Sky’s loans, and in fact paid Western Sky more for each loan than the amount actually financed by Western Sky. Moreover, CashCall guaranteed Western Sky a minimum payment of $100,000 per month, as well as a $10,000 monthly administrative fee. Although CashCall waited a minimum of three days after the funding of each loan before purchasing it, it is undisputed that CashCall purchased each and every loan before any payments on the loan had been made. CashCall assumed all economic risks and benefits of the loans immediately upon assignment. CashCall bore the risk of default as well as the regulatory risk. Indeed, CashCall agreed to “fully indemnify Western Sky Financial for all costs arising or resulting from any and all civil, criminal or administrative claims or actions, including but not limited to fines, costs, assessments and/or penalties . . . [and] all reasonable attorneys fees and legal costs associated with a defense of such claim or action.”

Accordingly, the Court concludes that the entire monetary burden and risk of the loan program was placed on CashCall, such that CashCall, and not Western Sky, had the predominant economic interest in the loans and was the “true lender” and real party in interest. [E.S.]

See 8-31-2016-cfpb-v-cash-call-us-dist-ct-cal

Federal District Court Judge John Walter appears to be the first Judge in the nation to drill down into the convoluted “rent-a-bank” (his term, not mine) schemes in which the true lender was hidden from borrowers who then executed documents in favor of an entity that was not in the business of lending them money. This decision hits the bulls eye on the importance of identifying the true lender. Instead of blindly applying legal presumptions under the worst conditions of trustworthiness, this Judge looked deeply at the flawed process by which the “real lender” was operating.

A close reading of this case opens the door to virtually everything I have been writing about on this blog for 10 years. The court also rejects the claim that the documents can force the court to accept the law or venue of another jurisdiction. But the main point is that the court rejected the claim that just because the transactions were papered over doesn’t mean that the paper meant anything. Although it deals with PayDay loans the facts and law are virtually identical to the scheme of “securitization fail” (coined by Adam Levitin).

Those of you who remember my writings about the step transaction doctrine and the single transaction doctrine can now see how substance triumphs over form. And the advice from Eric Holder, former Attorney General under Obama, has come back to mind. He said go after the individuals, not just the corporations. In this case, the Court found that the CFPB case had established liability for the individuals who were calling the shots.

SUMMARY of FACTS: CashCall was renting the name of two banks in order to escape appropriate regulation. When those banks came under pressure from the FDIC, CashCall changed the plan. They incorporated Western Sky on the reservation of an an Indian nation and then claimed they were not subject to normal regulation. This was important because they were charging interest rates over 100% on PayDay loans.

That fact re-introduces the reality of most ARM, teaser and reverse amortization loans — the loans were approved with full knowledge that once the loan reset the homeowner would not be able to afford the payments. That was the plan. Hence the length of the loan term was intentionally misstated which increases the API significantly when the fees, costs and charges are amortized over 6 months rather than 30 years.

Here are some of the salient quotes from the Court:

CashCall paid Western Sky the full amount disbursed to the borrower under the loan agreement plus a premium of 5.145% (either of the principal loan amount or the amount disbursed to the borrower). CashCall guaranteed Western Sky a minimum payment of $100,000 per month, as well as a $10,000 monthly administrative fee. Western Sky agreed to sell the loans to CashCall before any payments had been made by the borrowers. Accordingly, borrowers made all of their loan payments to CashCall, and did not make a single payment to Western Sky. Once Western Sky sold a loan to CashCall, all economic risks and benefits of the transaction passed to CashCall.

CashCall agreed to reimburse Western Sky for any repair, maintenance and update costs associated with Western Sky’s server. CashCall also reimbursed Western Sky for all of its marketing expenses and bank fees, and some, but not all, of its office and personnel costs. In addition, CashCall agreed to “fully indemnify Western Sky Financial for all costs arising or resulting from any and all civil, criminal or administrative claims or actions, including but not limited to fines, costs, assessments and/or penalties . . . [and] all reasonable attorneys fees and legal costs associated with a defense of such claim or action.”

Consumers applied for Western Sky loans by telephone or online. When Western Sky commenced operations, all telephone calls from prospective borrowers were routed to CashCall agents in California.

A borrower approved for a Western Sky loan would electronically sign the loan agreement on Western Sky’s website, which was hosted by CashCall’s servers in California. The loan proceeds would be transferred from Western Sky’s account to the borrower’s account. After a minimum of three days had passed, the borrower would receive a notice that the loan had been assigned to WS Funding, and that all payments on the loan should be made to CashCall as servicer. Charged-off loans were transferred to Delbert Services for collection.

“[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied, . . ., unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.”
Restatement § 187(2). The Court concludes that the CRST choice-of-law provision fails both of these tests, and that the law of the borrowers’ home states applies to the loan agreements.

after reviewing all of the relevant case law and authorities cited by the parties, the Court agrees with the CFPB and concludes that it should look to the substance, not the form, of the transaction to identify the true lender. See Ubaldi v. SLM Corp., 852 F. Supp. 2d 1190, 1196 (N.D. Cal. 2012) (after conducting an extensive review of the relevant case law, noting that, “where a plaintiff has alleged that a national bank is the lender in name only, courts have generally looked to the real nature of the loan to determine whether a non-bank entity is the de facto lender”); Eastern v. American West Financial, 381 F.3d 948, 957 (9th Cir. 2004) (applying the de facto lender doctrine under Washington state law, recognizing that “Washington courts consistently look to the substance, not the form, of an allegedly usurious action”); CashCall, Inc. v. Morrisey, 2014 WL 2404300, at *14 (W.Va. May 30, 2014) (unpublished) (looking at the substance, not form, of the transaction to determine if the loan was usurious under West Virginia law); People ex rel. Spitzer v. Cty. Bank of Rehoboth Beach, Del., 846 N.Y.S.2d 436, 439 (N.Y. App. Div. 2007) (“It strikes us that we must look to the reality of the arrangement and not the written characterization that the parties seek to give it, much like Frank Lloyd Wright’s aphorism that “form follows function.”).4 “In short, [the Court] must determine whether an animal which looks like a duck, walks like a duck, and quacks like a duck, is in fact a duck.” In re Safeguard Self-Storage Trust, 2 F.3d 967, 970 (9th Cir. 1993). [Editor Note: This is akin to my pronouncement in 2007-2009 that the mortgages and notes were invalid because they might just as well have named Donald Duck as the payee, mortgagee or beneficiary. Naming a fictional character does not make it real.]

In identifying the true or de facto lender, courts generally consider the totality of the circumstances and apply a “predominant economic interest,” which examines which party or entity has the predominant economic interest in the transaction. See CashCall, Inc. v. Morrisey, 2014 WL 2404300, at *14 (W.D. Va. May 30, 2014) (affirming the lower court’s application of the “predominant economic interest” test to determine the true lender, which examines which party has the predominant economic interest in the loans); People ex rel. Spitzer v. Cty. Bank of Rehoboth Beach, Del., 846 N.Y.S.2d 436, 439 (N.Y. App. Div. 2007) (“Thus, an examination of the totality of the circumstances surrounding this type of business association must be used to determine who is the ‘true lender,’ with the key factor being ‘who had the predominant economic interest’ in the transactions.); cf. Ga. Code Ann. § 16-17-2(b)(4) (“A purported agent shall be considered a de facto lender if the entire circumstances of the transaction show that the purported agent holds, acquires, or maintains a predominant economic interest in the revenues generated by the loan.”).

Although a borrower electronically signed the loan agreement on Western Sky’s website, that website was, in fact, hosted by CashCall’s servers in California. While Western Sky performed loan origination functions on the Reservation, the Court finds these contacts are insufficient to establish that the CRST had a substantial relationship to the parties or the transaction, especially given that CashCall funded and purchased all of the loans and was the true lender. Cf. Ubaldi v. SLM Corp., 2013 WL 4015776, at *6 (N.D. Cal. Aug. 5, 2013) (“If Plaintiffs’ de facto lender allegations are true, then Oklahoma does not have a substantial relationship to Sallie Mae or Plaintiffs or the loans.”).

The Court concludes that the CFPB has established that the Western Sky loans are void or uncollectible under the laws of most of the Subject States.7 See CFPB’s Combined Statement of Facts [Docket No. 190] (“CFPB’s CSF”) at ¶¶ 147 – 235. Indeed, CashCall has admitted that the interest rates that it charged on Western Sky loans exceeded 80%, which substantially exceeds the maximum usury limits in Arkansas, Colorado, Minnesota, New Hampshire, New York, and North Carolina. (Arkansas’s usury limit is 17%; Colorado’s usury limit is 12%; Minnesota’s usury limit is 8%; New Hampshire’s usury limit is 36%; New York’s usury limit is 16%; and North Carolina’s usury limit is 8%). A violation of these usury laws either renders the loan agreement void or relieves the borrower of the obligation to pay the usurious charges. In addition, all but one of the sixteen Subject States (Arkansas) require consumer lenders to obtain a license before making loans to consumers who reside there. Lending without a license in these states renders the loan contract void and/or relieves the borrower of the obligation to pay certain charges. CashCall admits that, with the exception of New Mexico and Colorado, it did not hold a license to make loans in the Subject States during at least some of the relevant time periods.

Based on the undisputed facts, the Court concludes that CashCall and Delbert Services engaged in a deceptive practice prohibited by the CFPA. By servicing and collecting on Western Sky loans, CashCall and Delbert Services created the “net impression” that the loans were enforceable and that borrowers were obligated to repay the loans in accordance with the terms of their loan agreements. As discussed supra, that impression was patently false — the loan agreements were void and/or the borrowers were not obligated to pay.

The Court concludes that the false impression created by CashCall’s and Delbert Services’ conduct was likely to mislead consumers acting reasonably under the circumstances

The Court concludes that Reddam is individually liable under the CFPA.

“An individual may be liable for corporate violations if (1) he participated directly in the deceptive acts or had the authority to control them and (2) he had knowledge of the misrepresentations, was recklessly indifferent to the truth or falsity of the misrepresentation, or was aware of a high probability of fraud along with an intentional avoidance of the truth.” Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1193 (9th Cir. 2016) (quotations and citations omitted).

The Court concludes that Reddam both participated directly in and had the authority to control CashCall’s and Delbert Services’ deceptive acts. Reddam is the founder, sole owner, and president of CashCall, the president of CashCall’s wholly-owned subsidiary WS Funding, and the founder, owner, and CEO of Delbert Services. He had the complete authority to approve CashCall’s agreement with Western Sky and, in fact, approved CashCall’s purchase of the Western Sky loans. He signed both the Assignment Agreement and the Service Agreement on behalf of WS Funding and CashCall. In addition, as a key member of CashCall’s executive team, he had the authority to decide whether and when to transfer delinquent CashCall loans to Delbert Services.

 

So all that said, here is what I wrote to someone who was requesting my opinion: Don’t use this unless and until you (a) match up the facts and (b) confer with counsel:

Debtor initially reported that the property was secured because of (a) claims made by certain parties and (b) the lack of evidence to suggest or believe that the property was not secured. Based upon current information and a continuous flow of new information it is apparent that the originator who was named on the note and deed of trust in fact did not loan any money to petitioner. This is also true as to the party who would be advanced as the “table funded” lender. As the debtor understands the applicable law, if the originator did not actually complete the alleged loan contract by actually making a loan of money, the executed note and mortgage should never have been released, much less recorded. A note and mortgage should have been executed in favor of the “true lender” (see attached case) and NOT the originator, who merely served as a conduit or the conduit who provided the money to the closing table.

Based upon current information, debtor’s narrative of the case is as follows:

  1. an investment bank fabricated documents creating the illusion of a proprietary common law entity
  2. the investment bank used the form of a trust to fabricate the illusion of the common law entity
  3. the investment bank named itself as the party in control under the label “Master Servicer”
  4. the investment bank then created the illusion of mortgage backed securities issued by the proprietary entity named in the fabricated documents
  5. the investment bank then sold these securities under various false pretenses. Only one of those false pretenses appears relevant to the matter at hand — that the proceeds of sale of those “securities” would be used to fund the “Trust” who would then acquire existing mortgage loans. In fact, the “Trust” never became active, never had a bank account, and never had any assets, liabilities or business. The duties of the Trustee never arose because there was nothing in the Trust. Without a res, there is no trust nor any duties to enforce against or by the named “Trustee.”
  6. the investment bank then fabricated documents that appeared facially valid leading to the false conclusion that the Trust acquired loans, including the Petitioner’s loan. Without assets, this was impossible. None of the documents provided by these parties show any such purchase and sale transaction nor any circumstances in which money exchanged hands, making the Trust the owner of the loans. Hence the Trust certainly does not own the subject loan and has no right to enforce or service the loan without naming an alternative creditor who does have ownership of the debt (the note and mortgage being void for lack of completion of the loan contract) and who has entered into a servicing agreement apart from the Trust documents, which don’t apply because the Trust entity was ignored by the parties seeking now to use it.
  7. The money from investors was diverted from the Trusts who issued the “mortgage backed securities” to what is known as a “dynamic dark pool.” Such a pool is characterized by the inability to select both depositors and beneficiaries of withdrawal. It is dynamic because at all relevant times, money was being deposited and money was being withdrawn, all at the direction of the investment bank.
  8. What was originally perceived as a loan from the originator was in fact something else, although putting a label to it is difficult because of the complexity and convolutions used by the investment bank and all of its conduits and intermediaries. The dark pool was not an entity in any legals sense, although it was under the control of the investment bank.
  9. Hence the real chain of events for the money trail is that the investment bank diverted funds from its propriety trust and used part of the funds from investors to fund residential mortgage loans. The document trail is very different because the originator and the conduits behind what might be claimed a “table funded loan” were not in privity with either the investors or the investment bank. Hence it is clear that some liability arose in which the Petitioner owed somebody money at the time that the Petitioner received money or the benefits of money paid on behalf of the Petitioner. That liability might be framed in equity or at law. But in all events the mortgage or deed of trust was executed by the Petitioner by way of false representations about the identity of the lender and false representations regarding the compensation received by all parties, named or not,
  10. The current parties seek to enforce the deed of trust on the false premise that they have derived ownership of the debt, loan, note or mortgage (deed of trust). Their chain is wholly dependent upon whether the originator actually completed the loan contract by loaning the money to the Petitioner. That did not happen; thus the various illusions created by endorsements and assignments convey nothign because the note and mortgage (deed of trust) were in fact void. They were void because the debt was never owned by the originator. hence the signing of the note makes it impossible to merge the debt with the note — an essential part of making the note a legally enforceable negotiable instrument. The mortgage securing performance under the note is equally void since it secures performance of a void instrument. Hence the property is unsecured, even if there is a “John Doe” liability for unjust enrichment, if the creditor can be identified.
  11. The entire thrust of the claims of certain self-proclaimed creditors rests upon reliance on legal presumptions attached to facially valid documents. These same entities have been repeatedly sanctioned, fined and ordered to correct their foreclosure procedures which they have failed and refused to do — because the current process is designed to compound the original theft of investors’ money with the current theft of the debt itself and the subsequent theft of the house, free from claims of either the investors or the homeowner. The investment bank and the myriad of entities that are circulated as if they had powers or rights over the loan, is seeking in this case, as in all other cases in which it has been involved, to get a court judgment or any order that says they own the debt and have the right to enforce the evidence of the debt (note and mortgage).
  12. A Judgment or forced sale is the first legal document in their entire chain of fabricated documentation; but the entry of such a document in public records, creates the presumption, perhaps the conclusive presumption that all prior acts were valid. It is the first document that actually has a legal basis for being in existence. This explains the sharp decline in “workouts’ which have dominated the handling of distressed properties for centuries. Workouts don’t solve the problem for those who have been acting illegally. They must pursue a court order or judgment that appears to ratify all prior activities, legal or not.

 

Florida FCCPA Has Teeth

The FCCPA is one of those statutes that are often missed opportunities to hold the banks and servicers accountable for illegal conduct. It is like “Mail Fraud” which only applies to US Postal Services (the reason why servicers prefer to communicate through Fedex or other private mail carriers.

REMEMBER THE ONE YEAR STATUTE OF LIMITATIONS. THE TIME RUNS FROM EACH NEW ACT PROHIBITED BY THE STATUTES.

Some of the prohibited practices are self explanatory. But others deserve comment and guidance:

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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§559.72(5): Disclosure of alleged debt. This could be one of the grounds for an FCCPA action. If you accept the premise that in most cases the disclosing party has neither ownership nor authorization over the alleged debt, then it would follow that reporting to third parties about the debt would illegal under this section. This is escalated in the event that the “debt” (i.e., a description of a liability owed by A to B) does not exist. B may not be the creditor. Neither B nor any successor or other third party would be acting appropriately if they communicated with each other if neither “successors” nor B had any ownership or authority over the liability of A.
§559.72(6): Failure to disclose to third party that debtor disputes the debt. The catch here is “reasonably disputed.” But as you look at an increasing number of case decisions Judges are finding an absence of evidence supporting the claims of banks and servicers. After a failed attempt t foreclosure, it might be reasonably presumed that the debtor/homeowner was reasonably disputing the debt. After all he/she won the case.
§559.72(9): Enforcing an illegitimate debt. This one is self evident and yet it forms the basic structure and strategy of the banks and servicers. Perhaps my labeling is too narrow. The facts are that (A) alleged REMIC Trusts are making completely false claims about the Mortgage Loan Schedule and (B) banks and servicers are directly making false claims without the charade of the alleged trusts. This one has traction.
§559.72(15): Improper identification of the debt collector. My reasoning is that when the debt collector calls and says they are the servicer for the creditor, this section is being violated and the breach interferes with the HAMP and other loan modification programs. It is a pretty serious breach designed to lure the homeowner into foreclosure. Continued correspondence with the false servicer and the  false or undisclosed creditor probably doesn’t waive anything but it does given them an argument that you never objected. So my suggestion is that homeowners and their attorneys object to all such communications until they provide adequate evidence that they can identify the creditor (with evidence that can be confirmed) and adequate evidence that the creditor has indeed selected the debt collector as the servicer. My thinking is that as soon as they refuse to identify the creditor(s) they are in potential violation of this section.
§559.72(18): Communication with person represented by counsel. This is meant to prevent the debt collector from making an end run around the the lawyer. But it does get in the way of efficient communications. The alleged “servicer” starts sending correspondence tot he lawyer thus delaying the response. And the debt collector will call the lawyer to disclose the loan and ask for details about the loan, the property or the alleged debtor that are known only by the homeowner.

Florida Statutes §559.72 Prohibited practices generally.—In collecting consumer debts, no person shall:

(1) Simulate in any manner a law enforcement officer or a representative of any governmental agency.
(2) Use or threaten force or violence.
(3) Tell a debtor who disputes a consumer debt that she or he or any person employing her or him will disclose to another, orally or in writing, directly or indirectly, information affecting the debtor’s reputation for credit worthiness without also informing the debtor that the existence of the dispute will also be disclosed as required by subsection (6).
(4) Communicate or threaten to communicate with a debtor’s employer before obtaining final judgment against the debtor, unless the debtor gives her or his permission in writing to contact her or his employer or acknowledges in writing the existence of the debt after the debt has been placed for collection. However, this does not prohibit a person from telling the debtor that her or his employer will be contacted if a final judgment is obtained.
(5) Disclose to a person other than the debtor or her or his family information affecting the debtor’s reputation, whether or not for credit worthiness, with knowledge or reason to know that the other person does not have a legitimate business need for the information or that the information is false.
(6) Disclose information concerning the existence of a debt known to be reasonably disputed by the debtor without disclosing that fact. If a disclosure is made before such dispute has been asserted and written notice is received from the debtor that any part of the debt is disputed, and if such dispute is reasonable, the person who made the original disclosure must reveal upon the request of the debtor within 30 days the details of the dispute to each person to whom disclosure of the debt without notice of the dispute was made within the preceding 90 days.
(7) Willfully communicate with the debtor or any member of her or his family with such frequency as can reasonably be expected to harass the debtor or her or his family, or willfully engage in other conduct which can reasonably be expected to abuse or harass the debtor or any member of her or his family.
(8) Use profane, obscene, vulgar, or willfully abusive language in communicating with the debtor or any member of her or his family.

(9) Claim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate, or assert the existence of some other legal right when such person knows that the right does not exist.

(10) Use a communication that simulates in any manner legal or judicial process or that gives the appearance of being authorized, issued, or approved by a government, governmental agency, or attorney at law, when it is not.
(11) Communicate with a debtor under the guise of an attorney by using the stationery of an attorney or forms or instruments that only attorneys are authorized to prepare.
(12) Orally communicate with a debtor in a manner that gives the false impression or appearance that such person is or is associated with an attorney.
(13) Advertise or threaten to advertise for sale any debt as a means to enforce payment except under court order or when acting as an assignee for the benefit of a creditor.
(14) Publish or post, threaten to publish or post, or cause to be published or posted before the general public individual names or any list of names of debtors, commonly known as a deadbeat list, for the purpose of enforcing or attempting to enforce collection of consumer debts.

(15) Refuse to provide adequate identification of herself or himself or her or his employer or other entity whom she or he represents if requested to do so by a debtor from whom she or he is collecting or attempting to collect a consumer debt.

(16) Mail any communication to a debtor in an envelope or postcard with words typed, written, or printed on the outside of the envelope or postcard calculated to embarrass the debtor. An example of this would be an envelope addressed to “Deadbeat, Jane Doe” or “Deadbeat, John Doe.”
(17) Communicate with the debtor between the hours of 9 p.m. and 8 a.m. in the debtor’s time zone without the prior consent of the debtor.

(a) The person may presume that the time a telephone call is received conforms to the local time zone assigned to the area code of the number called, unless the person reasonably believes that the debtor’s telephone is located in a different time zone.
(b) If, such as with toll-free numbers, an area code is not assigned to a specific geographic area, the person may presume that the time a telephone call is received conforms to the local time zone of the debtor’s last known place of residence, unless the person reasonably believes that the debtor’s telephone is located in a different time zone.
(18) Communicate with a debtor if the person knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the debtor’s attorney fails to respond within 30 days to a communication from the person, unless the debtor’s attorney consents to a direct communication with the debtor, or unless the debtor initiates the communication.
(19) Cause a debtor to be charged for communications by concealing the true purpose of the communication, including collect telephone calls and telegram fees.
History.—s. 18, ch. 72-81; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 1, 6, ch. 81-314; ss. 2, 3, ch. 81-318; ss. 1, 3, ch. 83-265; ss. 7, 13, ch. 93-275; s. 819, ch. 97-103; s. 1, ch. 2001-206; s. 4, ch. 2010
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.

 

About Those PSA Signatures

What is apparent is that the trusts never came into legal existence both because they were never funded and because they were in many cases never signed. Failure to execute and failure to fund the trust reduces the “trust” to a pile of ashes.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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From one case in which I am consulting, this is my response to the inquiring lawyer:

I can find no evidence that there is a Trust ever created or operational by the name of “RMAC REMIC Trust Series 2009-9”. In my honest opinion I don’t think there ever was such a trust. I think that papers were drawn up for the trust but never executed. Since the trusts are phantoms anyway, this was consistent with the facts. The use of the trust as a Plaintiff in a court action is a fraud upon the court and the Defendants. The fact that the trust does not exist deprives the court of any jurisdiction. We’ll see when you get the alleged PSA, which even if physically hand-signed probably represents another example of robo-signing, fabrication, back-dating and forgery.

I think it will not show signatures — and remember digital or electronic signatures are not acceptable unless they meet the terms of legislative approval. Keep in mind that the Mortgage Loan Schedule (MLS) was BY DEFINITION  created long after the cutoff date. I say it is by definition because every Prospectus I have ever read states that the MLS attached to the PSA at the time of investment is NOT the real MLS, and that it is there by way of example only. The disclosure is that the actual loan schedule will be filled in “later.”

 

see https://livinglies.me/2015/11/30/standing-is-not-a-multiple-choice-question/

also see DigitalSignatures

References are from Wikipedia, but verified

DIGITAL AND ELECTRONIC SIGNATURES

On digital signatures, they are supposed to be from a provable source that cannot be disavowed. And they are supposed to have electronic characteristics making the digital signature provable such that one would have confidence at least as high as a handwritten signature.

Merely typing a name does nothing. it is neither a digital nor electronic signature. Lawyers frequently make the mistake of looking at a document with /s/ John  Smith and assuming that it qualifies as digital or electronic signature. It does not.

We lawyers think that because we do it all the time. What we are forgetting is that our signature is coming through a trusted source and already has been vetted when we signed up for digital filing and further is backed up by court rules and Bar rules that would reign terror on a lawyer who attempted to disavow the signature.

A digital signature is a mathematical scheme for demonstrating the authenticity of a digital message or documents. A valid digital signature gives a recipient reason to believe that the message was created by a known sender, that the sender cannot deny having sent the message (authentication and non-repudiation), and that the message was not altered in transit (integrity).

Digital signatures are a standard element of most cryptographic protocol suites, and are commonly used for software distribution, financial transactions, contract management software, and in other cases where it is important to detect forgery or tampering.

Electronic signatures are different but only by degree and focus:

An electronic signature is intended to provide a secure and accurate identification method for the signatory to provide a seamless transaction. Definitions of electronic signatures vary depending on the applicable jurisdiction. A common denominator in most countries is the level of an advanced electronic signature requiring that:

  1. The signatory can be uniquely identified and linked to the signature
  2. The signatory must have sole control of the private key that was used to create the electronic signature
  3. The signature must be capable of identifying if its accompanying data has been tampered with after the message was signed
  4. In the event that the accompanying data has been changed, the signature must be invalidated[6]

Electronic signatures may be created with increasing levels of security, with each having its own set of requirements and means of creation on various levels that prove the validity of the signature. To provide an even stronger probative value than the above described advanced electronic signature, some countries like the European Union or Switzerland introduced the qualified electronic signature. It is difficult to challenge the authorship of a statement signed with a qualified electronic signature – the statement is non-reputable.[7] Technically, a qualified electronic signature is implemented through an advanced electronic signature that utilizes a digital certificate, which has been encrypted through a security signature-creating device [8] and which has been authenticated by a qualified trust service provider.[9]

PLEADING:

Comes Now Defendants and Move to Dismiss the instant action for lack of personal and subject matter jurisdiction and as grounds therefor say as follows:

  1. The named plaintiff in this action does not exist.
  2. After extensive investigation and inquiry, neither Defendants nor undersigned counsel nor forensic experts can find any evidence that the alleged trust ever existed, much less conducted business.
  3. There is no evidence that the alleged trustee ever ACTUALLY conducted any business in the name of the trust, much less a purchase of loans, much less the purchase of the subject loan.
  4. There is no evidence that the Trust exists nor any evidence that the Trust’s name has ever been used except in the context of (1) “foreclosure” which has, in the opinion, of forensic experts, merely a cloak for the continuing theft of investor money and assets to the detriment of both the real parties in interest and the Defendants and (2) the sale of bonds to investors falsely presented as having been issued by the “trust”, the proceeds of which “sale” was never received by the trust.
  5. Upon due diligence before filing such a lawsuit causing the forfeiture of homestead property, counsel knew or should have known that the Trust never existed nor has any business ever been conducted in the name of the Trust except the sale of bonds allegedly issued by the Trust and the use of the name of the trust to sue in foreclosure.
  6. As for the sale of the bonds allegedly issued by the Trust there is no evidence that the Trust ever issued said bonds and there is (a) no evidence the Trust received any funds ever from the sale of bonds or any other source and (b) having no assets, money or bank account, there is no possible evidence that the Trust acquired any assets, business or even incurred any liabilities.
  7. Wells Fargo, individually and not as Trustee, has engaged in a widespread pattern of behavior of presenting itself as Trustee of non existent Trusts and should be sanctioned to prevent it or anyone else in the banking industry from engaging in such conduct.

WHEREFORE Defendants pray this Honorable Court will dismiss the instant complaint with prejudice, award attorneys fees, costs and sanctions against opposing counsel and Wells Fargo individually and not as Trustee of a nonexistent Trust for falsely presenting itself as the Trustee of a Trust it knew or should have known had no existence.

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https://www.vcita.com/v/lendinglies to schedule, leave message or make payments.

FDCPA Claims Upheld in 9th Circuit Class Action

The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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If anyone remembers the Grishom book “The Firm”, also in movies, you know that in the end the crooks were brought down by something they were never thinking about — mail fraud — a federal law that has teeth, even if it sounds dull. Mail fraud might actually apply to the millions of foreclosures that have taken place — even if key documents are sent through private mail delivery services. The end of month statements and other correspondence are definitely sent through US Mail. And as we are seeing, virtually everything they were sending consisted of multiple layers of misrepresentations that led to the detriment of the receiving homeowner. That’s mail fraud.
Like Mail Fraud, claims based on the FDCPA seem boring. But as many lawyers throughout the country are finding out, those claims have teeth. And I have seen multiple cases where FDCPA claims resulted in the settlement of the case on terms very favorable to the homeowner — provided the claim is properly brought and there are some favorable rulings on the initial motions.
Normally the banks settle any claim that looks like it would be upheld. That is why you don’t see many verdicts or judgments announcing fraudulent conduct by banks, servicers and “trustees.”And you don’t see the settlement either because they are all under seal of confidentiality. So for the casual observer, you might see a ruling here and there that favors the borrower, but you don’t see any judgments normally. Here the banks thought they had this one in the bag — because it was a class action and normally class actions are difficult if not impossible to prosecute.
It turns out that FDCPA is both a good cause of action for damages and a great discovery tool — to force the banks, servicers or anyone else that is a debt collector to respond within 5 days giving the basic information about the loan — like who is the actual creditor. Discovery is also much easier in FDCPA actions because it is forthrightly tied to the complaint.
This decision is more important than it might first appear. It removes any benefit of playing musical chairs with servicers, and other debt collectors. This is a core of bank strategy — to layer over all defects. This Federal Court of Appeals holds that it doesn’t matter how many layers you add — all debt collectors in the chain had the duty to respond.
.

Justia Opinion Summary

Hernandez v Williams, Zinman and Parham, PC No 14-15672 (9th Cir, 2016)

Plaintiff filed a putative class action, alleging that WZP violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692(g)(a), by sending a debt collection letter that lacked the disclosures required by section 1692(g)(a) of the FDCPA. Applying well-established tools of statutory interpretation and construing the language in section 1692g(a) in light of the context and purpose of the FDCPA, the court held that the phrase “the initial communication” refers to the first communication sent by any debt collector, including collectors that contact the debtor after another collector already did. The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt. In this case, the district court erred in concluding that, because WZP was not the first debt collector to communicate with plaintiff about her debt, it had no obligation to comply with the statutory validation notice requirement. Accordingly, the court reversed and remanded.

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RESCISSION Revalidated in CA Decision

1sT Appellate District US Bank v Naifeh: “… we conclude that a borrower may rescind the loan transaction under TILA without filing a lawsuit, but when the rescission is challenged in litigation, the court has authority to decide whether the rescission notice is timely and whether the the procedure set forth in the TILA (sic) should be modified in light of the facts and circumstances of the case.”

The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

HE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see US BANK VS NAIFEH

In a carefully worded opinion at least one appellate court seems to be moving closer to the view I have expressed here on these pages. But they still left some simple propositions unclear.

It remains my opinion that a recorded rescission forces those who would challenge it to file suit to remove the rescission from the title record. In that suit they would need to plead and prove standing — without using the note or mortgage to do it because rescission renders them void at the moment the letter of rescission is mailed..

  1. The decision clearly says that for the rescission to be effective (deriving its authority from 15 USC §1635 and the unanimous SCOTUS decision in Jesinoski v Countrywide), the borrower need NOT file suit. That means it is effective when mailed (NOT FILED) just as the statute says and just as the late Justice Scalia penned in the Jesinoski case.
  2. The decision anticipates a challenge to rescission — which in and of itself is recognition that the rescission IS effective and that something must be done about it.
  3. But the court does not clarify what is meant when it said “when the rescission is challenged in litigation.” Clearly the decision stands for the proposition that the rescission stands as effective unless challenged in litigation. The unanswered question is ‘what form of litigation?’
  4. If we apply ordinary rules of procedure, then the decision dovetails with my opinions, the statute and the US Supreme Court decision. The rescission is effective when mailed. So the “challenge” must be “in litigation.” But whether that means a lawsuit to vacate or a motion challenging the rescission is unclear. A “motion challenging the rescission” is problematic if it does not set forth the standing of the party making the challenge and if it does not set forth the plain facts that the rescission, under law, is already effective but should be vacated, then it is trying to get the court to arrive at the position that the rescission can be ignored even if it is recorded (a condition not addressed in the opinion).
  5. The claimant challenging the rescission must state a cause of action, if the rescission is recorded, that is in essence a quiet title claim that needs to be framed as an original complaint in a lawsuit. So far the banks have been successful in getting trial judges to IGNORE the rescission rather than remove it as an effective instrument, whether recorded or not. This only compounds title problems already present.
  6. The procedural oddity here is that in foreclosure litigation the court might conclude (erroneously in my opinion) that the beneficiary under the deed of trust had standing to substitute trustee, standing to to have the trustee record a notice of default, and standing to record a notice of sale.
  7. BUT once the rescission is effective, there is absolutely no foundation for a claim of standing based upon the void note, the void mortgage and the consequential void assignments, which even if they were not otherwise void, are void now because the assignment is purporting to transfer something that no longer exists.
  8. Standing vanishes if it is dependent upon presumptions applied from the assignment, endorsement and other attributes wherein false statements are made concerning purchase and sale of the note or mortgage. The note and mortgage are void the moment the rescission is mailed. No reliance on the mortgage, note or any transfer of same can constitute standing, since those documents, as a matter of law, no longer exist.
  9. Hence STANDING TO CHALLENGE RESCISSION must logically be dependent upon the ability of the challenger to affirmatively plead that they own the debt or obligation and to prove it at a hearing in which evidence is produced. This is the holy grail of foreclosure defense. We know that 99% of the foreclosers do NOT qualify as owners of the actual debt or obligation. They are traveling on legal presumptions as alleged “holders” etc. under the UCC. If the note and mortgage don’t exist then the status of holder is nonexistent and irrelevant.
  10. This court further leaves us in a gray area when it correctly reads that portion of the statute giving the court authority to consider the options, procedurally, but incorrectly states that one of those options is that a Federal Statute that preempts state law could be “modified in light of the facts and circumstances. This is NOT contained in either the statute or the Jesinoski decision. This court is putting far too much weight on the provision of the statute that allows for a petition to the court at which the court could change some of the procedural steps in complying with rescission, and possibly by implication allowing for a challenge to the rescission in order to vacate the legal effectiveness of the rescission.
  11. ANY DECISION ON “PROCEDURE” THAT NULLIFIES THE EFFECTIVENESS OF THE RESCISSION WHEN MAILED IS ERRONEOUS.  Any such decision would effectively be eviscerating the entire statute and the opinion of the US Supreme Court. The simple rule of thumb here (heuristic reasoning) is that the rescission is and always will have been effective when mailed. The parts of the statute that deal with procedure can only be related to a party who claims to be the creditor (owner of the debt or obligation) who intends to comply.
  12. Since tender is expressly excluded in the statute and the Jesinoski decision, the change can not require the borrower to tender money — especially when the statute says that no such demand need be considered by the borrower until there is full compliance with the rescission — return of canceled note, release of encumbrance and payment to the borrower of all money ever paid by the borrower for principal, interest, insurance, taxes, and fees.
  13. Hence the changes are limited perhaps granting additional time, or maybe even to credits against what might be due from the homeowner but even that looks like a stretch. The committee notes and subsequent decisions clearly state that the intent of Congress was to prevent any bank from stonewalling the effectiveness of a rescission, which is what judges have been doing despite the Jesinoski decision and the clear wording of the statute.
  14. And this is how we know that the challenge, if brought, must be within the 20 days available for the creditor, “lender” etc to comply with the rescission. Any other interpretation would mean that the rescission was NOT effective upon mailing and would also mean that the owner of the property cannot get a substitute mortgage to pay off any legitimate claim from a true creditor. Such interpretations, while apparently attractive to bank lawyers and judges, are directly contrary to the express wording of the statute and directly contrary tot he express wording of the Jesinoski decision, decided unanimously by SCOTUS. Hence ANY CHALLENGE outside the 20 days is barred by the statute. Just like any action to enforce the TILA duties against the “lender” must be brought within one year of the mailing and receipt of the rescission.
  15. The failure of either the “lender” to comply or the borrower to enforce simply means that after one year, the rescission is still effective (meaning the note and mortgage are void) the claim for enforcement of the duties of the lender is extinguished, and the financial claim of the lender is extinguished. Hence, the infamous free house — not caused by sneaky borrowers but caused instead of malfeasant banks who continue to use their influence to get judges to re-write the law.
  16. But regardless of how one looks at this decision, the Jesinoski decision or the statute one thing is perfectly clear — vacating the rescission is strictly dependent upon timely filing of a challenge in litigation and a hearing on evidence, because the legal presumptions used in determining standing are no longer available in the absence of the the note or mortgage, which were irretrievably rendered void upon mailing of the rescission.

The banks and servicers have so far been successful in pulling the wool over judges eyes, perhaps because judges have long disliked TILA and especially TILA rescission. The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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Was There a Loan Contract?

In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.  The absence of the defined set of investors is the reason why bank lawyers fight so hard to make such disclosures “irrelevant” in courts of law.

The important fact that is often missed is that the “warehouse” lender was neither a warehouse nor a lender. Like the originator it is a layer of anonymity in the lending process that is used as a conduit for the funding received by the “borrower.”

None of the real parties who funded the transaction had any knowledge about the transaction to which their funds were committed. The nexus between the investors and/or REMIC Trust and the original loan SHOULD have been accomplished by the Trust purchasing the loan — an event that never occurred. And this is why fabricated, forged documents are used in foreclosures — to cover over the fact that there was no purchase and sale of the loan by the Trust and to cover up the fact that investors’ money was used in ways directly contrary to their interests and their agreement with the bogus REMIC Trusts whose bogus securities were purchased by investors.

In the end the investors were left to rely on the unscrupulous investment bank that issued the bogus MBS to somehow create a nexus between the investors and the alleged loans that were funded, if at all, by the direct infusion of investors’ capital and NOT by the REMIC Trust.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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also see comments below from Dan Edstrom, senior securitization analyst for LivingLies
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David Belanger recently sent out an email explaining in his words the failed securitization process that sent our economy into a toxic spiral that continues, unabated, to weaken our ability to recover from the removal of capital from the most important source of spending and purchasing in our economy. This was an epic redistribution of wealth from the regular guy to a handful of “bankers” who were not really acting as bankers.

His email article is excellent and well worth reading a few times. He nails the use of remote conduits that have nothing to do with any loan transaction, much less a loan contract. The only thing I would add is the legal issue of the relationship between this information and the ability to rescind.

Rescission is available ONLY if there is something to rescind — and that has traditionally been regarded as a loan contract. If there is no loan contract, as Belanger asserts (and I agree) then there is nothing to rescind. But if the “transaction” can be rescinded because it is an implied contract between the source of funds and the alleged borrower, then rescission presumably applies.

Second, there is the question of what constitutes a “warehouse” lender. By definition if there is a warehouse lending contract in which the originator has liabilities or risk exposure to losses on the loans originated, then the transaction would appear to be properly represented by the loan documents executed by the borrower, although the absence of a signature from the originator presents a problem for “consummation” of the loan contract.

But, as suggested by the article if the “warehouse lender” was merely a conduit for funds from an undisclosed third party, then it is merely a sham entity in the chain. And if the originator has no exposure to risk of loss then it merely acted as sham conduit also, or paid originator or broker. This scenario is described in detail in Belanger’s article (see below) and we can see that in practice, securitization was distorted at several points — one of which was the presumption that an unauthroized party (contrary to disclosure and representations during the loan “approval” and loan  “closing”) was inserted as “lender” when it loaned no money. Yet the originator’s name was inserted as payee on the note or mortgagee on the mortgage.

All of this brings us to the question of whether judges are right — that the contract is consummated at the time that the borrower affixes his or her signature. It is my opinion that this view is erroneous and presents moral hazard and roadblock to enforcing the rights of disclosure of the parties, terms and compensation of the people and entities arising out of the “origination” of the loan.

If judges are right, then the borrower can only claim breach of contract for failure to loan money in accordance with the disclosures required by TILA. And the “borrower’s” ability to rescind within 3 days has been virtually eliminated as many of the loans were at least treated as though they had been “sold” to third parties who posed as warehouse lenders who in turn “sold” the loan to even more remote parties, none of which were the purported REMIC Trusts. Those alleged REMIC Trusts were a smokescreen — sham entities that didn’t even serve as conduits — left without any capital, contrary to the terms of the Trust agreement and the representations of the seller of mortgage backed securities by these Trusts who had no business, assets, liabilities, income, expenses or even a bank account.

If judges are right that the contract is consummated even without a loan from from the party identified as “lender” then they are ruling contrary to the  Federal requirements of lending disclosures and in many states in violation of fair lending laws.

There is an outcome of erroneous rulings from the bench in which the basic elements of contract are ignored in order to give banks a favorable result, to wit: the marketplace for business is now functioning under a rule of people instead of the rule of law. It is now an apparently legal business plan where the object is to capture the signature of a consumer and use that signature for profit is dozens of ways contrary to every representation and disclosure made at the time of application and “closing” of the transaction.

As Belanger points out, without consideration it is black letter law backed by centuries of common law that for a contract to be formed and therefore enforceable it must fit the four legs of a stool — offer, acceptance of the terms offered, consideration from the first party to the alleged loan transaction and consideration from the second party. The consideration from the “lender”can ONLY be payment to fund the loan. If the originator does it with their own funds or credit, then they have probably satisfied the requirement of consideration.

But if a third party supplied the consideration for the “loan” AND that third party has no contractual nexus with the “originator” or alleged “warehouse lender”then the requirement of consideration from the “originator” is not and cannot be met. In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.

David Belanger’s Email article follows, unabridged:

AND AS I SAID, WITH NO CONSUMMATION AT CLOSING, BELANGER NEVER CONSUMMATED ANY MORTGAGE CONTRACT/ NOTE.

BECAUSE THEY ARE THE ONLY PARTY TO THE FAKE CONTRACT THAT FOLLOWED THROUGH WITH THERE CONSIDERATION, WITH SIGNING THE MORTGAGE AND NOTE,

AS REQUIRED, TO PERFORM. BUT GMAC MORTGAGE CORP. DID NOT PERFORM , I.E. LEND ANY MONEY AT CLOSING, AS WE HAVE THE WIRE TRANSFER SHOWING THEY DID NOT FUND THE MORTGAGE AND NOTE AT CLOSING. CANT HAVE A LEGAL CONTRACT IF ONLY ONE OF THE PARTY’S. PERFORMS HIS OBLIGATIONS.

THIS MAKE , AS I SAID. RESCISSION IS VALID. AND THEY HAVE NOT FOLLOWED THRU, THERE PART.

AND IT DOES GIVE ME THE RIGHT TO

RESCIND THE CONTRACT BASED ON ALL NEWLY DISCOVERED EVIDENCE, THAT THE PARTY TO THE MORTGAGE /NOTE CONTRACT, DID NOT

FULFILL THERE DUTY AND DID NOT PREFORM IN ANY WAY AS REQUIRED TO HAVE A VALID BINDING CONTRACT.

Tonight we have a rebroadcast of a segment from Episode 15 with a guest who is a recent ex-patriot from 17 years in the mortgage banking industry… Scot started out as a escrow agent doing closings, then advanced to mortgage loan officer, processor, underwriter, branch manager, mortgage broker and loss mitigator for the banks. Interestingly, he says,

“Looking back on my career I don’t believe any mortgage closing that I was involved in was ever consummated.”
Tonight Scot will be covering areas relating to:

1 lack of disclosure and consideration
2 substitution of true mortgage contracting partner
3 unfunded loan agreements
4 non-existent trusts
5 securitization of your note and bifurcation of the security interest and
6 how to identify and prove the non-existence of the so-called trust named in an assignment which may be coming after you to foreclose

: http://recordings.talkshoe.com/TC-139335/TS-1093904.mp3

so lets look at what happen a the closing of the mortgage CONTRACT SHELL WE.

1/ MORTGAGE AND NOTES, SAYS A ( SPECIFIC LENDER) GAVE YOU MONEY, ( AS WE KNOW THAT DIDN’T HAPPEN. )

2/ HOME OWNER WAS TOLD AT CLOSING AND BEFORE CLOSING THAT THE NAMED LENDER WOULD SUPPLY THE FUNDS AT CLOSING, AND WAS ALSO TOLD BY THE CLOSING AGENT , THE SAME LIE.

3/ THERE ARE 2 PARTIES TO A CLOSING OF A MORTGAGE AND NOTE, 1/ HOMEOWNER, 2/ LENDER.

3/ Offer and acceptance , Consideration,= SO HOMEOWNERS SIGN A MORTGAGE AND NOTE, IN CONSIDERATION of the said lender’s promises to pay the homeowner for said signing of the mortgage and note.

4/ but the lender does not, follow thru with his CONSIDERATION. I.E TO FUND THE CONTRACT. AND THE LENDER NAMED ON THE CONTRACT, KNEW ALL ALONG THAT HE WOULD NOT BE THE FUNDING SOURCE. FRAUD AT CONCEPTION. KNOWINGLY OUT RIGHT FRAUD ON THE HOMEOWNERS.

5/ THERE ARE NO STATUES OF LIMITATIONS ON FRAUD IN THE INDUCEMENT, OR ANY OTHER FRAUD.

6/ SO AS NEIL AND AND LENDING TEAM, AND OTHERS HAVE POINTED OUT, SO SO MANY TIMES HERE AND OTHER PLACES,

THERE COULD NOT BE ANY CONSUMMATION OF THE CONTRACT AT CLOSING,BY THE TWO PARTY’S TO THE CONTRACT, IF ONLY ONE PERSON TO THE CONTRACT ACTED IN GOOD FAITH,

AND THE OTHER PARTY DID NOT ACT IN GOOD FAITH OR EVEN SUPPLIED ANY ( CONSIDERATION WHAT SO EVER AT CLOSING OF THE CONTRACT.) A MORTGAGE AND NOTE IS A CONTRACT PEOPLE.

7/ SO THIS WOULD GIVE RISE TO THE LAW OF ( RESCISSION).

. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

AND THE BANKS CAN SCREAM ALL THEY WANT, IF THE PRETENDER LENDER THAT IS ON YOUR MORTGAGE AND NOTE, DID NOT SUPPLY THE FUNDS AT CLOSING, AS WE ALL KNOW DID HAPPEN, THEN THE MORTGAGE CONTRACT IS VOID. AND THERE WAS NO CONSUMMATION AT THE CLOSING TABLE, BY THE PARTY THAT SAID IT WAS FUNDING THE CONTRACT.

CANT GET MORE SIMPLE THAT THAT. and this supports all of the above. that the fake lender did not PERFORM AT CLOSING, DID NOT FUND ANY MONEY OR LOAN ANY MONEY AT CLOSING WITH ANY BORROWER, SO ONLY ONE ( THE BORROWER ) DID PERFORM AT CLOSING. BOTH PARTY’S MUST PERFORM TO HAVE A LEGAL BINDING CONTRACT.

SEE RODGERS V U.S.BANK HOME MORTGAGE ET, AL

THE WAREHOUSE LENDER NATIONAL CITY BANK OF KENTUCKY HELD THE NOTE THEN DELIVERED TO THIRD PARTY INVESTORS UNKNOWN

SECURITY NATIONAL FINANCIAL CORPORATION

5300 South 360 West, Suite 250

Salt Lake City, Utah 84123

Telephone (801) 264-1060

February 20, 2009

VIA EDGAR

U. S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N. E., Mail Stop 4561

Washington, D. C. 20549

Attn: Sharon M. Blume

Assistant Chief Accountant

Re: Security National Financial Corporation

Form 10-K for the Fiscal Year Ended December 31, 2007

Form 10-Q for Fiscal Quarter Ended June 30, 2008

File No. 0-9341

Dear Ms. Blume:

Security National Financial Corporation (the “Company”) hereby supplements its responses to its previous response letters dated January 15, 2009, November 6, 2008 and October 9, 2008. These supplemental responses are provided as additional information concerning the Company’s mortgage loan operations and the appropriate accounting that the Company follows in connection with such operations.

The Company operates its mortgage loan operations through its wholly owned subsidiary, Security National Mortgage Company (“SNMC”). SNMC currently has 29 branch offices across

the continental United States and Hawaii. Each office has personnel who are qualified to solicit and underwrite loans that are submitted to SNMC by a network of mortgage brokers. Loan files submitted to SNMC are underwritten pursuant to third-party investor guidelines and are approved to fund after all documentation and other investor-established requirements are determined to meet the criteria for a saleable loans. (e.s.) Loan documents are prepared in the name of SNMC and then sent to the title company handling the loan transactions for signatures from the borrowers. Upon signing the documents, requests are then sent to the warehouse bank involved in the transaction to submit funds to the title company to pay for the settlement. All loans funded by warehouse banks are committed to be purchased (settled) by third-party investors under pre-established loan purchase commitments. The initial recordings of the deeds of trust (the mortgages) are made in the name of SNMC. (e.s.)

Soon after the loan funding, the deeds of trust are assigned, using the Mortgage Electronic Registration System (“MERS”), which is the standard in the industry for recording subsequent transfers in title, and the promissory notes are endorsed in blank to the warehouse bank that funded the loan. The promissory notes and the deeds of trust are then forwarded to the warehouse bank. The warehouse bank funds approximately 96% of the mortgage loans to the title company and the remainder (known in the industry as the “haircut”) is funded by the Company. The Company records a receivable from the third-party investor for the portion of the mortgage loans the Company has funded and for mortgage fee income earned by SNMC. The receivable from the third-party investor is unsecured inasmuch as neither the Company nor its subsidiaries retain any interest in the mortgage loans. (e.s.)

Conditions for Revenue Recognition

Pursuant to paragraph 9 of SFAS 140, a transfer of financial assets (or a portion of a financial asset) in which the transferor surrenders control over those financial assets shall be accounted as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The transferor has surrendered control over transferred assets if and only if all of the following conditions are met:

1

(a) The transferred assets have been isolated from the transferor―placed presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership.

SNMC endorses the promissory notes in blank, assigns the deeds of trust through MERS and forwards these documents to the warehouse bank that funded the loan. Therefore, the transferred mortgage loans are isolated from the Company. The Company’s management is confident that the transferred mortgage loans are beyond the reach of the Company and its creditors. (e.s.)

(b) Each transferee (or, if the transferee is a qualified SPE, each holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received, and no

condition restricts the transferee (or holder) from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor.

The Company does not have any interest in the promissory notes or the underlying deeds of trust because of the steps taken in item (a) above. The Master Purchase and Repurchase Agreements (the “Purchase Agreements”) with the warehouse banks allow them to pledge the promissory notes as collateral for borrowings by them and their entities. Under the Purchase Agreements, the warehouse banks have agreed to sell the loans to the third-party investors; however, the warehouse banks hold title to the mortgage notes and can sell, exchange or pledge the mortgage loans as they choose. The Purchase Agreements clearly indicate that the purchaser, the warehouse bank, and seller confirm that the transactions contemplated herein are intended to be sales of the mortgage loans by seller to purchaser rather than borrowings secured by the mortgage loans. In the event that the third-party investors do not purchase or settle the loans from the warehouse banks, the warehouse banks have the right to sell or exchange the mortgage loans to the Company or to any other entity. Accordingly, the Company believes this requirement is met.

(c) The transferor does not maintain effective control over the transferred asset through either an agreement that entitles both entities and obligates the transferor to repurchase or redeem them before their maturity or the ability to unilaterally cause the holder to return the specific assets, other than through a cleanup call.

The Company maintains no control over the mortgage loans sold to the warehouse banks, and, as stated in the Purchase Agreements, the Company is not entitled to repurchase the mortgage loans. In addition, the Company cannot unilaterally cause a warehouse bank to return a specific loan. The warehouse bank can require the Company to repurchase mortgage loans not settled by the third-party investors, but this conditional obligation does not provide effective control over the mortgage loans sold. Should the Company want a warehouse bank to sell a mortgage loan to a different third-party investor, the warehouse bank would impose its own conditions prior to agreeing to the change, including, for instance, that the original intended third-party investor return the promissory note to the warehouse bank. Accordingly, the Company believes that it does not maintain effective control over the transferred mortgage loans and that it meets this transfer of control criteria.

The warehouse bank and not the Company transfers the loan to the third-party investor at the date it is settled. The Company does not have an unconditional obligation to repurchase the loan from the warehouse bank nor does the Company have any rights to purchase the loan. Only in the situation where the third-party investor does not settle and purchase the loan from the warehouse bank does the Company have a conditional obligation to repurchase the loan. Accordingly, the Company believes that it meets the criteria for recognition of mortgage fee income under SFAS 140 when the loan is funded by the warehouse bank and, at that date, the Company records an unsecured receivable from the investor for the portion of the loan funded by the Company, which is typically 4% of the face amount of the loan, together with the broker and origination fee income.

2

Loans Repurchased from Warehouse Banks

Historically, 99% of all mortgage loans are settled with investors. In the process of settling a loan, the Company may take up to six months to pursue remediation of an unsettled loan. There are situations when the Company determines that it is unable to enforce the settlement of a loan by the third-party investor and that it is in the Company’s best interest to repurchase the loan from the warehouse bank. Any previously recorded mortgage fee income is reversed in the period the loan was repurchased.

When the Company repurchases a loan, it is recorded at the lower of cost or market. Cost is equal to the amount paid to the warehouse bank and the amount originally funded by the Company. Market value is often difficult to determine for this type of loan and is estimated by the Company. The Company never estimates market value to exceed the unpaid principal balance on the loan. The market value is also supported by the initial loan underwriting documentation and collateral. The Company does not hold the loan as available for sale but as held to maturity and carries the loan at amortized cost. Any loan that subsequently becomes delinquent is evaluated by the Company at that time and any allowances for impairment are adjusted accordingly.

This will supplement our earlier responses to clarify that the Company repurchased the $36,291,000 of loans during 2007 and 2008 from the warehouse banks and not from third-party investors. The amounts paid to the warehouse banks and the amounts originally funded by the Company, exclusive of the mortgage fee income that was reversed, were classified as the cost of the investment in the mortgage loans held for investment.

The Company uses two allowance accounts to offset the reversal of mortgage fee income and for the impairment of loans. The allowance for reversal of mortgage fee income is carried on the balance sheet as a liability and the allowance for impairment of loans is carried as a contra account net of our investment in mortgage loans. Management believes the allowance for reversal of mortgage fee income is sufficient to absorb any losses of income from loans that are not settled by third-party investors. The Company is currently accruing 17.5 basis points of the principal amount of mortgage loans sold, which increased by 5.0 basis points during the latter part of 2007 and remained at that level during 2008.

The Company reviewed its estimates of collectability of receivables from broker and origination fee income during the fourth quarter of 2007, in view of the market turmoil discussed in the following paragraph and the fact that several third-party investors were attempting to back out of their commitments to buy (settle) loans, and the Company determined that it could still reasonably estimate the collectability of the mortgage fee income. However, the Company determined that it needed to increase its allowance for reversal of mortgage fee income as stated in the preceding paragraph.

Effect of Market Turmoil on Sales and Settlement of Mortgage Loans

As explained in previous response letters, the Company and the warehouse banks typically settle mortgage loans with third-party investors within 16 days of the closing and funding of the loans. However, beginning in the first quarter of 2007, there was a lot of market turmoil for mortgage backed securities. Initially, the market turmoil was primarily isolated to sub-prime mortgage loan originations. The Company originated less than 0.5% of its mortgage loans using this product during 2006 and the associated market turmoil did not have a material effect on the Company.

As 2007 progressed, however, the market turmoil began to expand into mortgage loans that were classified by the industry as Alt A and Expanded Criteria. The Company’s third-party investors, including Lehman Brothers (Aurora Loan Services) and Bear Stearns (EMC Mortgage Corp.), began to have difficulty marketing Alt A and Expanded Criteria loans to the secondary markets. Without notice, these investors changed their criteria for loan products and refused to settle loans underwritten by the Company that met these investor’s previous specifications. As stipulated in the agreements with the warehouse banks, the Company was conditionally required to repurchase loans from the warehouse banks that were not settled by the third-party investors.

3

Beginning in early 2007, without prior notice, these investors discontinued purchasing Alt A and Expanded Criteria loans. Over the period from April 2007 through May 2008, the warehouse banks had purchased approximately $36.2 million of loans that had met the investor’s previous criteria but were rejected by the investor in complete disregard of their contractual commitments. Although the Company pursued its rights under the investor contracts, the Company was unsuccessful due to the investors’ financial problems and could not enforce the loan purchase contracts. As a result of its conditional repurchase obligation, the Company repurchased these loans from the warehouse banks and reversed the mortgage fee income associated with the loans on the date of repurchase from the warehouse banks. The loans were classified to the long-term mortgage loan portfolio beginning in the second quarter of 2008.

Relationship with Warehouse Banks

As previously stated, the Company is not unconditionally obligated to repurchase mortgage loans from the warehouse banks. The warehouse banks purchase the loans with the commitment from the third-party investors to settle the loans from the warehouse banks. Accordingly, the Company does not make an entry to reflect the amount paid by the warehouse bank when the mortgage loans are funded. Upon sale of the loans to the warehouse bank, the Company only records the receivables for the brokerage and origination fees and the amount the Company paid at the time of funding.

Interest in Repurchased Loans

Once a mortgage loan is repurchased, it is immediately transferred to mortgage loans held for investment (or should have been) as the Company makes no attempts to sell these loans

to other investors at this time. Any efforts to find a replacement investor are made prior to repurchasing the loan from the warehouse bank. The Company makes no effort to remarket the loan after it is repurchased.

Acknowledgements

In connection with the Company’s responses to the comments, the Company hereby acknowledges as follows:

· The Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· The staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· The Company may not assert staff comments as defense in any proceeding initiated by the Commission or any person under the Federal Securities Laws of the United States.

If you have any questions, please do not hesitate to call me at (801) 264-1060 or (801) 287-8171.

Very truly yours,

/s/ Stephen M. Sill

Stephen M. Sill, CPA

Vice President, Treasurer and

Chief Financial Officer

Contract law

Part of the common law series

Contract formation

Offer and acceptance Posting rule Mirror image rule Invitation to treat Firm offer Consideration Implication-in-fact

Defenses against formation

Lack of capacity Duress Undue influence Illusory promise Statute of frauds Non est factum

Contract interpretation

Parol evidence rule Contract of adhesion Integration clause Contra proferentem

Excuses for non-performance

Mistake Misrepresentation Frustration of purpose Impossibility Impracticability Illegality Unclean hands Unconscionability Accord and satisfaction

Rights of third parties

Privity of contract Assignment Delegation Novation Third-party beneficiary

Breach of contract

Anticipatory repudiation Cover Exclusion clause Efficient breach Deviation Fundamental breach

Remedies

Specific performance Liquidated damages Penal damages Rescission

Quasi-contractual obligations

Promissory estoppel Quantum meruit

Related areas of law

Conflict of laws Commercial law

Other common law areas

Tort law Property law Wills, trusts, and estates Criminal law Evidence

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation

Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.

According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation
Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.
According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

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

Comments from Dan Edstrom:

My understanding in California (and probably most other states) is the signature(s) were put on the note and security instrument and passed to the (escrow) agent for delivery only upon the performance of the specific instructions included in the closing instructions. The homeowner(s) did not manifest a present intent to transfer the documents or title….   Delivery was not possible until the agent followed instructions 100% (specific performance).  Their appears to be a presumption of delivery that should be rebutted. In California the test for an effective delivery is the writing passed with the deed (but only if delivery is put at issue).
Here is a quote from an appeal in CA:
We first examine the legal effectiveness of the Greggs deed. Legal delivery of a deed revolves around the intent of the grantor. (Osborn v. Osborn (1954) 42 Cal.2d 358, 363-364.) Where the grantor’s only instructions concerning the transaction are in writing, “`the effect of the transaction depends upon the true construction of the writing. It is in other words a pure question of law whether there was an absolute delivery or not.’ [Citation.]” (Id. at p. at p. 364.) As explained by the Supreme Court, “Where a deed is placed in the hands of a third person, as an escrow, with an agreement between the grantor and grantee that it shall not be delivered to the grantee until he has complied with certain conditions, the grantee does not acquire any title to the land, nor is he entitled to a delivery of the deed until he has strictly complied with the conditions. If he does not comply with the conditions when required, or refuses to comply, the escrow-holder cannot make a valid delivery of the deed to him. [Citations.]” (Promis v. Duke (1929) 208 Cal. 420, 425.) Thus, if the escrow holder does deliver the deed before the buyer complies with the seller’s instructions to the escrow, such purported delivery conveys no title to the buyer. (Montgomery v. Bank of America (1948) 85 Cal.App.2d 559, 563; see also Borgonovo v. Henderson (1960) 182 Cal.App.2d 220, 226-228 [purported assignment of note deposited into escrow held invalid, where maker instructed escrow holder to release note only upon deposit of certain sum of money by payee].)
LAOLAGI v. FIRST AMERICAN TITLE INSURANCE COMPANY, H032523 (Cal. Ct. App. July 31, 2009).
In most cases I have seen the closing instructions state there can be no encumbrances except the new note and security instrument in favor of {the payee of the note}…
Some of the issues with this (encumbrances) would be who provided the actual escrow funding, topre-existing agreements, the step transaction and single transaction doctrines, MERS, payoffs of previous mortgages (to a lender of record), reconveyance (to a lender of record), etc…
Thx,
Dan Edstrom

Schedule A Consult Now!

“Lost” Note Found and Linda Green Assignments

Virtually none of the nonjudicial or judicial foreclosures can be won by banks without use of legal presumptions that lead the court to assume facts that are plainly untrue.

The bottom line is that the rules of evidence require proof of the transaction chain with no right to rely on legal presumptions. The banks can’t do that. Press hard on this issue and experience shows that at the very least a good settlement is in the offing and even a perfectly good judgment for the homeowner would be rendered.

The bottom line to keep your eye on the ball is that the Trust doesn’t own the note and never did; the same thing applies to nearly all bogus “beneficiaries” and “mortgagees.”

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

—————-
*
We have all known that the banks, servicers and trustees have been fabricated, back-dating and forging documents. And they continue to do it because they are getting away with it. In all but a few cases Judges uphold bank objections to reveal the transaction chain in which money is actually exchanged.
 *
So banks are winning cases based upon legal presumptions stemming from the facial “validity” of the documents. By admitting fabricated documents into evidence and applying, without proper objection, legal presumptions that remove the obligation to actually prove their case, the banks win.
 *
Homeowners are defenseless because even though they and their attorneys know this is a farce, they have no way to prove it except by access to the only entities that actually have records in which the absence of a real transaction that ever took place — including both the origination of the alleged loan and the presumed acquisition of the loan. .
 *
But there are several circumstances in which one can argue that the legal presumptions should not be applied and in the absence of the required proof, the party seeking foreclosure can be showed to lack standing. Take for example the lost note, later abandoned and the robo-signed assignment executed by a known robo-signer, which is also later abandoned.
 *
The lost note is intended to be straight forward — a pleading that says the note was lost, that due diligence has been performed, that the present claimant owns or holds the original note and that the note has not been otherwise negotiated.  It is a lie of course. They never had the note because ti was destroyed intentionally. But they also don’t want to be subject to discovery or requirements of proof as to the chain of possession and the chain of transactions that would prove that the present holder actually owns or holds the note.
 *
So the tactic employed is to “withdraw” the count stating that the note is lost. And there is where the opportunity for the homeowner comes into play. If they have admitted losing the note, they are admitting that the chain might be broken. By simply withdrawing the lost note count without explanation they have failed to explain how it was found, where it was found and why it was lost.
 *
In other words the possibility that the note has already been negotiated is still present and the possibility exists that the “original” note is not an original but rather a mechanical reproduction — which leaves the question of the banks either admitting they destroyed it (and explaining that in pleadings, proof at trial or both) or admitting that they cannot produce admissible evidence that they actually own the debt, loan, note or mortgage.
 *
This possibility is raised to a probability once you establish at least “probable cause” to believe that the foreclosing party is relying upon the utterance of false or fraudulent documentation, at which point they are stripped or should be stripped of the benefits of a legal presumptions that the documents upon which they are relying are true.
 *

Even if they can come up with the actual original “original” note, they have already put on record that they lost it. Now they withdraw Count I without any amendment to the complaint explaining what happened to the note with no certification of possession and no documents attached to the complaint showing endorsement or assignment at the time of the filing of the lawsuit except that the Linda Green “assignment” was supplied and later abandoned after all the publicity about her which is now in the records I have sent to you.

*

So you have 2 “abandonments”: the allegation that the note was lost and the assignment executed by a robo-signer. The banks cover this deficiency by still more paper  — in which the banks file a “corrective” assignment that might withstand scrutiny in place of the original fabricated and forged assignment.
 *
They want the court to assume that since it is merely a “corrective” assignment that it relates back to the original assignment. But there is no legal presumption that covers that. So if they want to relate the assignment produced AFTER suit was filed with the bogus assignment dated BEFORE the lawsuit was filed then they should be required under the rules of evidence to show and when the assignment really related back to the time they of the transaction in which ownership and rights to enforce were transferred.
 *
The burden is on the banks to show they had standing before suit was filed or foreclosure was initiated. If they can’t prove by testimony and evidence of proof of payment that they had a transaction in which the loan, debt, note or mortgage was acquired by purchase and sale BEFORE the action was commenced, then they are stuck with their “Corrective” assignment which is obviously filed AFTER the foreclosure suit or forced sale was initiated. ( I need not explore here what they mean by :corrective” other than to say that naming it as a “corrective assignment” doesn’t make it relate back to the prior one.)
 *

So the only operative assignment is a “corrective” assignment that was filed AFTER the lawsuit was filed. We have no explanation of the chain of possession and there should be no presumptions about the chain of possession since it was their own pleadings that raised the issue.

The only way they reconcile this is by proving that they had an actual transaction resulting in the assignment (the equivalent of a bill of sale) BEFORE the lawsuit. But they have no records listed on their exhibit list showing that they intend to show they actually purchased the loan, debt, note or mortgage before suit was filed. The reason is simple — there was no such transaction. But this time they are not entitled to presumptions since the use of Linda Green’s signature (or some other robo-signor) that was clearly robo-signed has been abandoned and the trustworthiness of the documents are clearly in doubt.

*

Under Florida Rules of Evidence on presumptions the proponent must now actually prove an actual transaction without benefit of the legal presumption where the document is at least dubious and does not scream out trustworthiness.

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This could be argued to the Judge as a simple burden of proof problem. The banks must prove their case. The banks have a history in this case of using a fabricated, forged document that they have tacitly admitted by their abandonment of the Linda Green assignment. Therefore they still have a possible case but they must prove the facts of the origination of the loan and the transfers of the loan without benefit of presumptions that those transactions actually took place.

*

So you have two problems here that go against the Bank — the failure to explain chain of custody of the lost note and the failure to have an assignment before suit is filed.On both issues there is plenty of case law that says the banks lose in that scenario. But failure to object and I might add failure to educate the judge as to your theory of the case could be fatal.

*

So I am suggesting to most lawyers who are not already doing that they file a pretrial memorandum outlining the issues for trial and why you think the court’s ruling’s on evidence should favor of the borrower. There is no real prejudice if the transactions actually took place.

*

The only prejudice is that they need to spend a few more minutes showing that the bank, trustee, servicer or whoever paid for the acquisition fo the note and perhaps that the originator actually paid to fund the loan for which the originator is given credit on the note and mortgage.

*

If the originator did not fund the loan, that would obviously explain the absence of an actual transaction in which the originator received consideration for the transfer of the loan papers improperly naming the originator as the lender. And it would explain the large fees paid to originator to engage in this pretense despite the Reg Z definition of table funded loans as “predatory per se.”

***

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Banks Struggle to “FIND” Nonexistent Documents

So for the people who are unemployed due to a recession that won’t really quit until the money stolen from the system is somehow replaced or clawed back, you have a job waiting for you if you can sleep at night knowing that if your activities are exposed, the bank will disavow your “irresponsible” actions, leaving you exposed to jail or prison.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see http://4closurefraud.org/2016/06/17/mortgage-companies-seek-time-travelers-to-find-missing-documents/

Every Bubble Bursts. The banks are now struggling to find people who will “find” nonexistent documents without expressly telling their superiors at the bank that the “found” documents were fabricated. The evidence is all over the internet as banks troll for prospective employees who will get their hands dirty and be prepared to get thrown under the bus should the malfeasance be discovered.

The documents are not merely missing. They do not exist. And without the critical documents required in every foreclosure, there can be no foreclosure. The documents must be fabricated because they don’t exist. The documents don’t exist because they were actually intentionally destroyed and because the banks have no interest in the property, the alleged loan, the “original” note (“missing” in most cases), the mortgage or the debt itself. Many documents existed but were destroyed by the banks.

If pushed to open their books we would find a complete absence of any financial transaction in which the banks or their pet trusts were involved. Up until recently the banks were able to get their employees to execute documents that were fabricated for the purposes of presentation in court. But the number of people who are willing to do that is diminishing. Bank employees sense the impending disaster for the banks and they don’t want to take the blame even if it costs them their job.

The entire bank scheme, as I previously reported, is based upon the ability to use legal presumptions. These presumptions create an opportunity for epic fraud and theft. If a document is facially valid, the burden shifts to the homeowner to rebut the presumption that it is indeed a valid, authentic document. But now homeowners are hiring forensic document examiners who are showing that the document presented is not the original even if it looks that way. More and more homeowners, when presented with a “blue ink” document will say they don’t know if that particular signature is their own signature because they know that the documents and signatures are being fabricated. The bank’s witness in court is treading the fine line between ignorance and perjury when they say that the note is the original. The same holds true to bogus assignments, indorsements (“endorsements”), powers of attorney and other documents the banks use to avoid being required to prove their case without the presumptions.

So the banks, without using their own names, are posting job openings for what 4closurefraud.com calls “time travelers.” People get hired for their willingness to create documents that appear to have been prepared and executed years ago. This is required because if there was no transaction years ago, then the sham is exposed — the “loan contract” between the homeowner and the originator never existed. And so when the originator endorses or assigns the note or mortgage to an undisclosed third party, the assignment is completely and irrevocably void as coming from an entity that never owned the loan but was merely named as the Payee or Mortgagee.

BUT if the original loan documents look valid, and the alleged transfers of the loan look valid, then the burden shifts to the homeowner to rebut the presumption that a real transaction took place between the homeowner and the originator and between the originator and the next party in the false chain of possession and ownership of the loan. This is why I have been relentless in insisting that discovery take place and be pursued aggressively. I have already seen many cases in which an order was entered requiring the banks to respond to discovery requests; in virtually all cases someone steps forward and settles with the homeowner. The only exceptions are where it is clear that the judge is going to rule for the banks anyway and will deny subsequent motions to compel the discovery that was previously ordered.

Of course the problem with the settlement is that the homeowner is being coerced into accepting a settlement that acknowledges some bank, servicer or trustee as actually having rights to collect or enforce the loan; since these parties are merely intermediaries who issue self-serving paper designating themselves as real parties in interest, such settlements could result in the homeowner being presented with claims later from the real source of funding in their loan. This is unlikely, but nonetheless possible. The only reason it is unlikely is that the real parties in interest are investors whose money was commingled with thousands of other investors in hundreds of trusts that never received any proceeds from their offering of mortgage backed securities that were neither mortgage backed or securities. The investors need a way to trace their money into the loans or, if they elect not to do so, to settle with the bank that cheated them in the first place with bogus mortgage bonds. There have been many such settlements, most of them unreported.

The fact remains that the “lender” is never part of any documented transaction. Hence the “lender” (the investors) enjoy none of the protections of a holder of a note nor the security of a mortgage. Fabricating documents and forging them is the only way of breathing life into the false loan contract that was documented, even if it never happened. And borrowers and their attorneys should take note that the entire loan infrastructure is an illusion that has been awarded judgments that pretend the illusion is real. we are either a nation of laws or a nation of men. Our Constitution makes us a nation of laws. This is our challenge. Do we allow bankers and politicians to turn back time on paper and treat them as though they are doing something right because NOW it is right because they declared it right, or do we reject that and apply rules of law that have existed for centuries for this very reason.

So for the people who are unemployed due to a recession that won’t really quit until the money stolen from the system is somehow replaced or clawed back, you have a job waiting for you if you can sleep at night knowing that if your activities are exposed, the bank will disavow your “irresponsible” actions, leaving you exposed to jail or prison.

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Not even the Federal Government Can Determine Who owns Your Loan

It was impossible to trace the majority of the mortgage loans on the over 300 homes sold by DSI that were the subject of the FBI investigation; it would have been harder yet to identify individual victims of the fraud given that the mortgages were securitized and traded. (Emphasis added.)

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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Originally posted at http://mortgageflimflam.com
With additional edits by http://4closurefraud.org

“Counter-intuitive” is the way Reynaldo Reyes (Deutschbank VP Asset Management) described it in a taped telephone interview with a borrower who lived in Arizona.  “we only look like the Trustee. The real power lies with the servicers.”

And THAT has been the problem since the beginning. That means “what you think you know is wrong.” This message has been delivered in thousands of courtrooms in millions of cases but Judges refuse to accept it. In fact most lawyers, even those doing foreclosure defense, and even their clients — the so-called borrowers — can’t peel themselves away from what they think they know.

In the quote above it is obvious that the sentencing document reveals at least two things: (1) nobody can trace the loans themselves which in plain English means that nobody can know who loaned the money to begin with in the so-called loan origination” and (2) nobody can trace the ownership of the loans — i.e., the party who is actually losing money due to nonpayment of the loan. Of course this latter point was been creatively obscured by the banks who set up a scheme in which the victims (investors, managed funds, etc.) continue to get payments long after the “borrower” has ceased making payments.

If nobody knows who loaned the money then the presumption that the loan was consummated when the “borrower”signed documents placed in front of them is wrong for two reasons: (1) all borrowers sign loan documents before funding is approved which means that no loan is consummated when the documents are signed. and (2) there is no evidence that the “originator” funded the loans (regardless of whether it is a bank or some fly by night operation that went bust years ago) loaned any money to the “borrower.” (read the articles contained in the link above).

The reason why I put quotation marks around the word borrower is this: if I don’t lend you money then how are you a borrower, even if you sign loan papers? The courts have nearly universally got this wrong in virtually all of their pretrial rulings and trial rulings. Their attitude is that there must have been a loan and the homeowner must be a borrower because obviously there was a loan. What they means is that since money hit the closing table or the last “lender” received a payoff there must have been a loan. What else would you call it?

Certainly the homeowner meant for it to be a loan. The problem is that the originator did not intend for it to be a loan because they were not lending any money. The originator played the traditional part of a conduit (see American Brokers CONDUIT for example). The originator was paid a fee for the use of their name and traditionally sold the homeowner on taking a loan through the friendly people at XYZ Speedy No Fault Lending, Inc. (a corporation that often does not exist).

Somebody else sent money but it wasn’t a loan to the homeowner. It was the underwriter who was masquerading as the Master Servicer for a Trust that also does not exist. Where did the underwriter get the money? Certainly not from its own pockets. It took money from a dynamic dark pool that should not exist, according to the false “securitization” documents (Prospectus and Pooling and Servicing Agreement).

Who deposited the money into the dark pool? The sellers of fake “mortgage-backed securities”who took money from pension funds and other managed funds under the false pretense that the money would be under management of a specific REMIC Trust that in actuality does not exist, never conducted business under any name, never had a bank account, and for which the Trustee had no duties except window dressing to make it look good to investors. How is that possible? NY law allows for the documentation of a trust without any registration. The Trust does not exist in the eyes of the law unless there is something in it. This like a stick figure is not a person.

None of the money from investors went into any Trust account or any account of any trustee to be held and managed for a REMIC Trust. Sound crazy? It is crazy, but it is also true which is why it is impossible for even the Federal Government with virtually limitless resources cannot tell you who loaned you any money nor who owns any debt from you.

The money was surreptitiously deposited into hundreds of dark pools in institutions around the world. The actual business of the dark pols was to create the illusion of profits for the banks and a huge dark reserve that siphoned some $5 trillion out of the U.S. economy and more out of other economies around the world.

To cover their tracks, the banks took some of the money from the dark pool and started a chain reaction of offering what appeared to be loans but which in most cases were financial death sentences.

The investors, for sure, have a potential claim against the homeowners who received actual benefit from a flow of funds, but without being named in the loan documents, they have no direct right of foreclosure. And then there is the problem of coming up with the correct list of investors whose money was commingled with hundreds of fake trusts. The investors know that collectively, as a group they are owed money from homeowners as a group. But NOBODY KNOWS which investors match up with what alleged loan. The homeowner can ONLY be a “borrower” if they executed a loan contract and the contract became enforceable because there was offer, acceptance and consideration flowing both ways. Without all four legs of the stool it collapses.

Judges resist this “gift” to homeowners while ignoring and accepting the consequence of a gift of enormous proportions to the few banks at the top who started all this. Somehow word has spread that the middle and lower class is the right place to put the burden of this illegal bank behavior.

The homeowner’s offer of consideration is the promise to pay principal sometimes with interest. The originator’s offer of consideration is not to the homeowner. The originator has offered services for a fee to the conduits and sham corporations that put the originator up to selling bad loans from undisclosed third parties to people who lacked the financial knowledge to understand what was happening. So no contract there. No contract? No borrower. No contract? No lender. Hence the term I used back in 2007, “pretender lender.” I should have also coined the term “mock borrower.”

Sound impossible? Here is the finding from the sentencing document:

During the time of the information, DSI worked with two “preferred lenders,” Wells Fargo Bank and J.P. Morgan Chase. Certain employees and managers of those two preferred lenders knew about the incentive programs offered by DSI and the builders, and knew that the incentives were not being disclosed in the loan files. (Emphasis added.)

And that is what we mean by “counter-intuitive.” It is a lie, a cover-up and a fraudulent scheme directed at multiple  victims. Under existing law, foreclosure is not an option for persons who lack standing and have unclean hands. Nearly all loan transactions were table funded and that means, according to TILA, that they are and were predatory loans. And that means, according to me, that it is impossible to allow any equitable relief be had by those who have unclean hands — especially those who seek foreclosure, which is an equitable remedy.

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The Chase-WAMU Illusion

In the mortgage world “successor by merger” is simply a living lie that continues as you read this article. Like many other major illusions in our world economy, the Chase-WAMU merger was nothing more than illusion

The reason for the rebellion showing up as votes for Sanders and trump and the impending exit of the UK from the European Union is very simple — every few decades the populace gets a ahead of their elected leaders and yanks their leash so hard that some of them choke.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see FDIC_ Failed Bank Information – WASHINGTON MUTUAL BANK – Receivership Balance Sheet Summary (Unaudited)

see wamu_amended_unsealed_opinion

When Bill Clinton was asked how he balanced the budget and came out with a $5 Trillion surplus when he left office his reply was unusually laconic — “Arithmetic.” And he was right, although it wasn’t just him who had put pencil to paper. Many Republican and Democrats had agreed that with the rising economy, the math looked good and that their job was not to screw it up. THAT was left to the next president.

I’m not endorsing Clinton or Trump nor saying that Democrats or Republicans are better that the other. Indeed BOTH major political parties seem to agree on one egregiously erroneous point — the working man doesn’t matter.

The people who matter are those with advanced degrees and who reach the pinnacle of the economic medal of honor when they are dubbed “innovators.”

The reason for the rebellion showing up as votes for Sanders and Trump and the impending exit of the UK from the European Union is very simple — every few decades the populace gets a ahead of their elected leaders and yanks their leash so hard that some of them choke. To say that the BREXIT vote was surprising is the height of arrogance and stupidity. People round the world are voicing their objection to an establishment that doesn’t give a damn about them and measures success by stock market indexes, money supply and GDP activity that is manipulated at this point that it bare little if any resemblance to the GDP index we had come to rely upon, albeit that index was also arbitrarily and erroneously based on the wrong facts.

The fact that large percentages of the populace of many countries around the world are challenged to put food on the table and a roof over their heads doesn’t matter as long as the economic indices are up. But truth be told even when those indices go down, the attitude is the same — working people don’t matter. They are merely resources like gold, coal and oil from which we draw ever widening gaps between the people who run the society and the economy and those who drive the economy and society with their purchases.

In the mortgage world “successor by merger” is simply a living lie that continues as you read this article. Like many other major illusions in our world economy, the Chase-WAMU merger was nothing more than illusion — just like BOA’s merger with BAC/Countrywide (see Red Oak Merger Corp); Wells Fargo’s merger with Wachovia who had acquired World Savings; OneWest’s acquisition of IndyMac;  CitiMortgage acquisition of ABN AMRO, CPCR-1 Trust;  BOA’s merger with LaSalle; Ditech’s acquisition by multiple entities GMAC, RESCAP, Ally,  Walter investment etc.) when DiTech was dead and the name was the only this being traded, and so much more. All these mergers bear one thing in common — they were cover screen for one simple fact: they had not in one instance acquired any loans but then relied on the illusion of the merger to call themselves “successors by mergers.”

Let’s take the example of WAMU. When they went broke they had less than $3 Billion in assets (see link above). This totally congruent with the $2 billion committed by Chase to acquire the WAMU estate form the FDIC receiver Richard Schoppe (located in Texas) and the US Trustee in bankruptcy — especially when you consider the little known fact that Chase received 1/3 of a tax refund due to WAMU.

That share of the Tax refund was, as you might already have guessed, MORE than the $2 billion committed by Chase. whether Chase ever actually paid the $2 billion is another question.But in any event, pure arithmetic shows that the consideration for the purchase of WAMU by Chase was LESS THAN ZERO, which means we paid Chase to acquire WAMU.

This in turn is completely corroborated by the Purchase and Assumption Agreement between WAMU, the FDIC Receiver, the US Trustee in Bankruptcy and of course Chase. On the first page of that agreement is a express recital that says the consideration for this merger is “-$0-.” But before you look up the “Reading Room on the FDIC FOIA cite, here is one caveat: some time after the original agreement was published on the site, a “different” agreement was posted long after WAMU was dead, the US Trustee had been discharged, and the FDCI receiver was discharged as a receiver. The “new” agreement implies that loans were or may have been acquired but does not state which loans or how much was paid for these loans. The problem with the new agreement of course is that Chase paid nothing and was not entitled to nothing, except the servicing rights on some fo those loans.

The so-called new agreement placed there by nobody knows, also stands in direct contrast of the interview and depositions of Richard Schoppe — that if there were loans to sell the principal amount would have been hundreds of billions of dollars for which Chase need pay nothing. I dare say there are millions of people and companies who would have taken that deal if it was real. But Schoppe states directly that the number of assignments was NONE, zero, zilch.

Schoppe also stated that the total amount of loan originations was just under $1 Trillion. And he said that the loan portfolio might have been, at some time, around 1/3 of the total loans originated. Putting pencil to paper that obviously means that 2/3 of all originated loans were either pre-funded in table funded “loans” or that they were immediately sold into the secondary market for securitization. All evidence points to the fact that WAMU never owned the loans at all — as they were table funded  through multiple layers of conduits none of whom were disclosed as required under the Truth in lending Act.  Because the big asset that WAMU retained were (a) the servicing rights and (b) the right to claim recovery for servicer advances. It could be said that the only way they could perfect their claim for “recovery” of “servicer” “Advances” was by acquiring WAMU since Chase was the Master servicer on nearly all WAMU originations.

The interesting point of legal significance is that Chase emerges as the real party in interest even though it it appeared only as the servicer in the background after subsequent servicers were given “powers” of attorney to prevent the new “servicer” (actually an enforcer) from claiming a recovery  for “servicer” “Advances.,” that are recoverable not from the borrower, not from the investor, and not from the trust but in a foggy chaos in which the property was liquidated.

So the assets of WAMU at the time it went belly up was under $3 Billion which means that after you deduct the brick and mortar locations and the servicing rights Chase still got the deal of a lifetime — but one thing doesn’t add up. If WAMU had less than $3 Billion in assets and 99% of that were conventional bank assets excluding loans, then the “value” of the loan portfolio, using FDIC Schoppe estimates was $3 Million. If the WAMU loan portfolio implied by the a,test antics of Chase was true — then Chase acquired $300 BILLION in loans for $3 MILLION. Even the toxic waste loans were worth more than one tenth of one percent.

Chase continues to assert ownership with impunity on an epic scale of fraud, theft and manipulation of the courts, investors and borrowers. The finding that Chase NOT assumed repurchase obligations in relation to the originated loans goes further to corroborate everything I had written here. There seems to be an oblique reference to attempted changes in the “P&A” Agreement, and the finding that the original deal cannot be changed, but the actual finding of two inconsistent agreements posted on the FDIC site is worth investigating. I can assure the reader that I have found and read both.

And lastly I have already published numerous articles on victories in court (one fo which was mine and Patrick Giunta) for the borrower based upon the exact principles and facts written in this article — where the judge concluded that US Bank had never acquired the loan, that the “servicer” in court testifying through a robo-signer had no power over the loan because their power was  derived from Chase who was named as servicer for a REMIC Trust that never acquired the loan nor any rights to the loan.

The use of powers of attorney were found to be inadequate simply because the party who executed the POA had no rights to the money, the enforcement of the loan nor any collection or foreclosure. If Chase had acquired the loan from WAMU they would have won. Their total reliance on deflective legal presumptions based upon presumed fact that were untrue completely failed.

BOTTOM LINE: CHASE ACQUIRED NO LOANS FROM WAMU. Hence subsequent documents of transfer or powers (Powers of attorney) are void.

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Rescissions and Preemptive Lawsuits by Borrowers — 2 Things the Courts Dislike the Most.

For short-term results it is absolutely essential that discovery be pressed as hard as possible and that attorneys prep for a punishing cross examination of the corporate representative of the company claiming to be the servicer for the company that claims to be the trustee or successor for a trust that by implication claims to own the loan but won’t allege that. Layers upon layers.

I have heard dozens of judges caution the “banks” that they better show up with someone who doesn’t need to place a call or wait to get authorization. But that is exactly what they do.

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Listen to Attorneys Neil Garfield and James Randy Ackley discuss this issue:

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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Based upon reports coming in across the country it appears that we are actually receding from the application of law again. The two things that the Courts obviously don’t like and essentially refuse to enforce are preemptive lawsuits and TILA Rescission, even where they give it lip service approval. What are now known as preemptive lawsuits in which the borrower tries to head off their title and collections problem by demanding the real data on identification of a creditor who owns the debt, note and mortgage or deed of trust are a bridge too far although California looks like it is edging toward that the fastest amongst the states. See Yvanova decision

In both cases the Courts are grasping at straws because of the fear of undermining the entire banking system causing another financial collapse. As I did in 2008-2009 I am predicting that these cases will be decided in favor of the borrower. And again it might take more years to get there. Having examined pleadings and orders from across the country there is no doubt in my mind that everything we have said is true and these are useful tools for the borrower.

But for short-term results it is absolutely essential that discovery be pressed as hard as possible and that attorneys prep for a punishing cross examination of the corporate representative of the company claiming to be the servicer for the company that claims to be the trustee or successor for a trust that by implication claims to own the loan but won’t allege that. Layers upon layers.

In 2008 I had a conversation (previously reported) with one of the architects of this scheme and he predicted that the legal presumptions attached to the notes and mortgages and assignments would overcome any factual rebuttal regardless of how persuasive the rebuttal. I thought he was wrong. He was right, but back then I could tell he wasn’t as sure as he is today. It worked. Millions of foreclosures proceeded in favor of entities who had already stolen the money from investors and now were stealing their security.

Proof of all my basic premises is abundantly clear but well hidden by confidential settlements under seal. Cash offers to settle the case seem almost always to produce a settlement that includes damages for wrongful foreclosure.

Mediations continue to proceed almost exclusively with “representatives” who lack full settlement authority and truth to be told, they lack any settlement authority. This point is getting under the skin of many judges and should be pressed. I even said to one judge who ordered mediation that I questioned when his orders “meant anything at all.” He was upset but he started entering other orders that required real action by my opposition.

Mediations by definition under Supreme Court rules require the presence of the parties with full settlement authority. Instead the alleged servicer shows up with representative that has only one duty — handover an application for modification without any discussion or authority to settle. That is the stuff of motions for sanctions. I have heard dozens of judges caution the “banks” that they better show up with someone who doesn’t need to place a call or wait to get authorization. But that is exactly what they do and frequently they get away with it. Don’t expect sanctions to be ordered until the “bank” fails to “show up” more than twice.

Usually the attorney represents the servicer and if pressed, sometimes you can get an admission that the attorney is not able to assert they represent the plaintiff. The representative also might admit that he is there on behalf of the servicer but not the Plaintiff. In those cases I think you are well on your way to getting sanctions, but not until you are ordered back into mediation multiple times.

The problem remains the same — the servicer derives its alleged authority from the Plaintiff who derives its power to enforce from legal presumptions derived from possession and its declaration that it is the “holder.” The Plaintiff rarely alleges that it owns the debt, loaned the money or anything like that and they never allege that they are holders in due course which would mean, by definition, that the trust paid for the loan. The trusts did not pay for the loan and the creditor is, at least according to some live testimony I got in court, a group of unnamed investors. By definition then in hearings for sanctions relating to mediation, you can elicit admissions that defeat the foreclosure.

Once you get to the fact that the Trust never was in operation and was never funded it goes without saying that as an inactive business with no history it could not possibly have paid for the debt or even accepted the assignment. Having cut the chain (the hip bone is connected to the thigh bone etc) the strawman figure must collapse. NO authority flows from such an entity —especially when the representative says the creditors are the investors.

My prediction is that while it may still take some time, the courts are eventually going to routinely require real proof instead of relying exclusively upon legal presumptions arising from fabricated, forged, robo-signed documents. Real proof means real transactions — something that will unwind claims by the servicer and Trustee or successor like pulling a thread from a poorly made sweater.

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Rescission Procedure Explained — Tonight on the Neil Garfield Show

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Or call in at (347) 850-1260, 6pm Eastern Thursdays

More than 40,000 people listen to the Neil Garfield Show. Maybe you should too.
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https://www.vcita.com/v/lendinglies to schedule, leave message or make payments.

For further information please call 954-495-9867 or 520-405-1688.  If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.

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THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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The following is lifted from the content of a report you can get by clicking on https://www.vcita.com/v/lendinglies. The review, report and analysis includes a 30 minute consult. Legal opinions are rendered to attorneys in all 50 states and to clients in the State of Florida.

  1. TILA Rescission is an event. It is not a theory, claim or defense. It is a nonjudicial procedural remedy. It is accomplished by mailing a letter. In most cases it is an event that has indisputably occurred. The effect of TILA Rescission is, as a matter of law and by operation of law, to cancel the loan contract, and to render the note and mortgage void. In its Motion to Dismiss, the pretender lenders seek to have courts assume that the rescission exists but is not effective, despite all law to the contrary. The matter is well settled, to wit: if the rescission exists, it is effective as a matter of law.
  2. The effectiveness of a TILA Rescission is not predicated upon any judicial analysis of the likelihood of the borrower’s success if a lawsuit to vacate the rescission is filed by a party with legal standing. Any such interpretation would be opposite to the holding in Jesinoski that the rescission is effective upon mailing, whether disputed or not.
  3. The pretender lenders do not dispute that rescission has occurred but seek to invoke issues in a case that is not and cannot be before any Court, to wit: whether the rescission is effective. And they seek to do so through motions in which they deftly avoid the requirement of pleading and proving facts in a proper lawsuit to vacate the rescission, thus depriving the homeowners of their right to raise appropriate defenses to the non-existent lawsuit seeking to vacate the rescission.
  4. Pretender lenders want the courts to enter an order that would impliedly vacate the rescission.

The pretender lenders seek to have the court assume facts about the consummation of the alleged loan including the date or dates when consummation occurred and the source of funding for the alleged loan. They even want the court to assume that disclosures were adequate. These are questions of fact requiring a lawsuit, discovery and trial. They seek to have courts adopt the premise that the rescission is not effective upon mailing if there are potentially defects in the reasoning or actions of the borrower. SCOTUS has expressly rejected that argument. (Jesinoski v Countrywide). SCOTUS clearly stated that the rescission is complete upon mailing, regardless of whether it is disputed or not.

This does not remove the ability of the creditor to vacate the rescission but it does eliminate the right of any creditor to raise a challenge based upon the theory that the rescission was not effective when mailed. That issue is completely settled by SCOTUS.

All three branches of government are in unanimous agreement: TILA Rescission is effective upon mailing by operation of law. Nothing further is required from the borrower.

Hiring an Expert: What Are you Looking For in Foreclosure Litigation?

I have spent the last 7 years developing the narrative for an expert opinion that could be presented, believed and sustained in court. In writing to a probable new expert we will offer through the livinglies.store.com I summarized what attorneys should be looking for when they consult with an expert in structured finance (i.e., derivatives, securitization etc.).

Here  are some of the issues you want covered by the expert declaration and testimony in court. The basic rule of thumb is that the expert must have both the qualifications to testify as an expert and a persuasive narrative of why his conclusions are right. Without both, the testimony of the expert simply doesn’t matter and will be rejected.

If you are a proposed expert in structured finance, then here is what I would want to know, and what I think lawyers should ask, depending upon what fact pattern is present in each case.

One thing I need to know is whether you feel comfortable in talking about the ownership and balance of the loan.

In one example American Brokers Conduit was the payee on the note and mortgage. We alleged that they didn’t loan the money. Our narrative ran something like this: if you ask me for a loan, and I respond “Yes just sign this note and mortgage” AND THEN you sign the note and mortgage AND THEN I don’t give you a loan, ARE YOU PREPARED TO SAY THAT THE NOTE AND MORTGAGE WERE DEFECTIVE IN A BASIC WAY, TO WIT: THAT THE SIGNATURE ON THE NOTE AND MORTGAGE WAS PROCURED BY FRAUD OR MISTAKE AND THAT WITHOUT THE IDENTIFICATION OF THE REAL CREDITOR BOTH INSTRUMENTS ARE DEFECTIVE.

Would you, as a reasonable business person accept a note purporting to be a negotiable instrument under the UCC if you knew that the transferor neither funded the loan nor (if they purport to be a successor) paid for the assignment?

What is your opinion of your position if you found out after acceptance of the note and mortgage that there was doubt as to whether the obligation was funded or purchased for value? What would you do or suggest to a client in either of those positions — (1) knowledge [or “must have known] or (2) no knowledge [and later finding out that there is doubt as to funding and purchasing for value]?

Are you prepared to say that the fact that the borrower actually did receive money as a loan from another different party does not create a circumstance where the borrower is construed to convey any rights to anyone other than the source of funds or someone in actual privity with the lender — and that both note and mortgage are defective under normal recording statutes — and certainly not a commitment by the debtor to BOTH the source of the funds and the receiver of the signed promissory note and mortgage?

In the one case referred to above, the corporate representative conceded that ABC didn’t loan the money. He was unable to explain what was transferred by ABC to Regents and from Regents to 1st Nationwide and thence to CitiCorp by merger. He admitted that “Fannie Mae was the investor from the start.” You and I understand that neither Fannie and Freddie are lenders. They are guarantors and they serve as Master Trustee for hidden REMIC trusts. (Do you know or agree with that assertion?)

But the question is whether the note is actual “evidence of the debt” (the black letter definition of a promissory note when it contains a promise to pay) when the creditor is identified as a party who was not a lender. In the absence of disclosures of some representative capacity for an actual lender, are you prepared to testify that the note is unenforceable even if the debt is otherwise enforceable in relation to the actual source of funds?

Or would you say that it is not enforceable by the stated payee but it might still be evidence of the debt and evidence of the terms of repayment to the third party source? How does the marketplace treat such questions in valuing a note and mortgage?

The question is whether the expert actually believes and is willing to argue that these conclusions are true and correct.  The expert must earnestly believe these assertions to be true, logically and legally.
Is it acceptable to the prospective expert to see a result where the application of law and facts results in the homeowner getting his home free and clear — on the basis that the wrong party sued him or initiated foreclosure (in non judicial states), or that the notice of default, notice of acceleration, and statements of money due were wrong.
The approach is an attack on ownership and balance. The balance would be wrong, even if the ownership was established, if the payments were not applied properly. The payments include all payments received by the creditor.  That includes all servicer advances directly to trust beneficiaries, as well as insurance and loss sharing payments (i.e., from FDIC and others) paid and received on behalf of the investors directly or the trust beneficiaries.
Part of the reasoning here is that you really have an interesting problem. The Trust beneficiaries agreed to “loan” money to a REMIC trust in exchange for a complex formula of repayment under the indenture of the mortgage bond (contained in the Prospectus and Pooling and Servicing Agreement). Those terms are different than the terms signed by the homeowner.
So there are two agreements — the mortgage bond and the mortgage note. Different parties, new parties are in the PSA as insurers, servicers,servicer advances etc. all resulting in a DIFFERENT payment from an assortment of parties expected by the creditor —different than the one promised by the debtor whether you refer to the note as evidence of the debt or not.Add the complicating factor that without evidence that the Trust was ever funded (i.e., without evidence that the broker dealer sent the proceeds from the offering prospectus to the trust) how do we answer the basic contract question: was there a meeting of the minds? The expectations of the lender (investors) and the borrower (homeowner) are entirely different and the documents used are completely different.

How could the Trust have entered into any transaction for the origination or acquisition of loans without evidence of funding?

On what basis can the Trustee or servicer claim any authority if the Trust was not funded and was essentially ignored? Does the expert agree that avoiding or ignoring the trust means avoiding and  ignoring the prospectus AND the PSA, which contains the authority for ANYONE to act on behalf of the investors, who are no longer “trust beneficiaries” but just a group of investors without a vehicle for their investment?

ESSENTIAL QUESTION: Is the expert prepared to testify about this aspect of structured finance — i.e., how do you connect up the debtor and the creditor? As an expert you would be expected to be able to testify on exactly that question.

And finally there is testimony about the mortgage. If the mortgage secures the note (not the debt, necessarily), which is what is stated in the mortgage, then is the expert willing to testify that the mortgage was defective and should never have been recorded?

Would it not be true, in your estimation, that if a homeowner executes a mortgage in favor of a party posing as a lender, and that party is not a lender to the homeowner, that you could testify that the moment such a mortgage is recorded it probably clouds title?

Would you be willing to testify that based upon those facts, you would say that it is an unknown variable as to who to pay?

Would you be wiling to testify that if you don’t know who to pay, you have no basis for trusting a satisfaction of mortgage from any party including the the original mortgagee?

And lastly that if there is no basis on the face of the instruments or in recorded instruments to presume a valid creditor has been named, that no better presumptions would attach to any assignment, endorsement or other instrument of transfer?

For information concerning expert declarations, consultations and testimony from experts with appropriate credentials to be qualified as an expert, or for litigation support, please call 954-495-9867 or 520-405-1688.

The Big Cover-Up in Our Credit Nation

Regulators have confirmed that there were widespread errors by banks but that the errors didn’t really matter. They are trying to tell us that the errors had to do with modifications and other matters that really didn’t have any bearing on whether the loans were owned by parties seeking foreclosure or on whether the balance alleged to be due could be confirmed in any way, after deducting third party payments received by the foreclosing party. Every lawyer who spends their time doing foreclosure litigation knows that report is dead wrong.

So the government is actively assisting the banks is covering up the largest scam in human history. The banks own most of the people in government so it should come as no surprise. This finding will be used again and again to say that the complaints from borrowers are just disgruntled homeowners seeking to find their way out of self inflicted wound.

And now they seek to tell us in the courts that nothing there matters either. It doesn’t matter whether the foreclosing party actually owns the loan, received delivery of the note, or a valid assignment of the mortgage for value. The law says it matters but the bank lawyers, some appellate courts and lots of state court judges say that doesn’t apply — you got the money and stopped paying. That is all they need to know. So let’s look at that.

If I found out you were behind in your credit card payments and sued you, under the present theory you would have no defense to my lawsuit. It would be enough that you borrowed the money and stopped paying. The fact that I never loaned you the money nor bought the loan would be of no consequence. What about the credit card company?

Well first they would have to find out about the lawsuit to do anything. Second they could still bring their own lawsuit because mine was completely unfounded. And they could collect again. In the world of fake REMIC trusts, the trust beneficiaries have no right to the information on your loan nor the ability to inquire, audit or otherwise figure out what happened tot heir investment.

It is the perfect steal. The investors (like the credit card company) are getting paid by the borrowers and third party payments from insurance etc. or they have settled with the broker dealers on the fraudulent bonds. So when some stranger comes in and sues on the debt, or sues in foreclosure or issues of notice of default and notice of sale, the defense that the borrower has no debt relationship with the foreclosing party is swept aside.

The fact that neither the actual lender nor the actual victim of this scheme will ever be compensated for their loss doesn’t matter as long as the homeowner loses their home.  This is upside down law and politics. We have seen the banks intervene in student loans and drive that up to over $1 trillion in a country where the average household is $15,000 in debt — a total of $13 trillion dollars. The banks are inserting themselves in all sorts of transactions producing bizarre results.

The net result is undermining the U.S. economy and undermining the U.S. dollar as the reserve currency of the world. Lots of people talk about the fact that we have already lost 20% of our position as the reserve currency and that we are clearly headed for a decline to 50% and then poof, we will be just another country with a struggling currency. Printing money won’t be an option. Options are being explored to replace the U.S. dollar as the world’s reserve currency. No longer are companies requiring payments in U.S. dollars as the trend continues.

The banks themselves are preparing for a sudden devaluation of currency by getting into commodities rather than holding their money in US Currency. The same is true for most international corporations. We are on the verge of another collapse. And contrary to what the paid pundits of the banks are saying the answer is simple — just like Iceland did it — apply the law and reduce the household debt. The result is a healthy economy again and a strong dollar. But too many people are too heavily invested or tied to the banks to allow that option except on a case by case basis. So that is what we need to do — beat them on a case by case basis.

National Honesty Day? America’s Book of Lies

Today is National Honesty Day. While it should be a celebration of how honest we have been the other 364 days of the year, it is rather a day of reflection on how dishonest we have been. Perhaps today could be a day in which we say we will at least be honest today about everything we say or do. But that isn’t likely. Today I focus on the economy and the housing crisis. Yes despite the corruption of financial journalism in which we are told of improvements, our economy — led by the housing markets — is still sputtering. It will continue to do so until we confront the truth about housing, and in particular foreclosures. Tennessee, Virginia and other states continue to lead the way in a downward spiral leading to the lowest rate of home ownership since the 1990’s with no bottom in sight.

Here are a few of the many articles pointing out the reality of our situation contrasted with the absence of articles in financial journalism directed at outright corruption on Wall Street where the players continue to pursue illicit, fraudulent and harmful schemes against our society performing acts that can and do get jail time for anyone else who plays that game.

It isn’t just that they escaping jail time. The jailing of bankers would take a couple of thousand people off the street that would otherwise be doing harm to us.

The main point is that we know they are doing the wrong thing in foreclosing on property they don’t own using “balances” the borrower doesn’t owe; we know they effectively stole the money from the investors who thought they were buying mortgage bonds, we know they effectively stole the title protection and documents that should have been executed in favor of the real source of funds, we know they received multiple payments from third parties and we know they are getting twin benefits from foreclosures that (a) should not be legally allowed and (b) only compound the damages to investors and homeowners.

The bottom line: Until we address wrongful foreclosures, the housing market, which has always led the economy, will continue to sputter, flatline or crash again. Transferring wealth from the middle class to the banks is a recipe for disaster whether it is legal or illegal. In this case it plainly illegal in most cases.

And despite the planted articles paid for by the banks, we still have over 700,000 foreclosures to go in the next year and over 9,000,000 homeowners who are so deep underwater that their situation is a clear and present danger of “strategic default” on claims that are both untrue and unfair.

Here is a sampling of corroborative evidence for my conclusions:

Senator Elizabeth Warren’s Candid Take on the Foreclosure Crisis

There it was: The Treasury foreclosure program was intended to foam the runway to protect against a crash landing by the banks. Millions of people were getting tossed out on the street, but the secretary of the Treasury believed the government’s most important job was to provide a soft landing for the tender fannies of the banks.”

Lynn Symoniak is Thwarted by Government as She Pursues Other Banks for the Same Thing She Proved Before

Government prosecutors who relied on a Florida whistleblower’s evidence to win foreclosure fraud settlements with major banks two years ago are declining to help her pursue identical claims against a second set of large financial institutions.

Lynn Szymoniak first found proof that millions of American foreclosures were based on faulty and falsified documents while fighting her own foreclosure. Her three-year legal fight helped uncover the fact that banks were “robosigning” documents — hiring people to forge signatures and backdate legal paperwork the firms needed in order to foreclose on people’s homes — as a routine practice. Court papers that were unsealed last summer show that the fraudulent practices Szymoniak discovered affect trillions of dollars worth of mortgages.

More than 700,000 Foreclosures Expected Over Next Year

How Bank Watchdogs Killed Our Last Chance At Justice For Foreclosure Victims

The results are in. The award for the sorriest chapter of the great American foreclosure crisis goes to the Independent Foreclosure Review, a billion-dollar sinkhole that produced nothing but heartache for aggrieved homeowners, and a big black eye for regulators.

The foreclosure review was supposed to uncover abuses in how the mortgage industry coped with the epic wave of foreclosures that swept the U.S. in the aftermath of the housing crash. In a deal with the Office of the Comptroller of the Currency and the Federal Reserve, more than a dozen companies, including major banks, agreed to hire independent auditors to comb through loan files, identify errors and award just compensation to people who’d been abused in the foreclosure process.

But in January 2013, amid mounting evidence that the entire process was compromised by bank interference and government mismanagement, regulators abruptly shut the program down. They replaced it with a nearly $10 billion legal settlement that satisfied almost no one. Borrowers received paltry payouts, with sums determined by the very banks they accused of making their lives hell.

Investigation Stalled and Diverted as to Bank Fraud Against Investors and Homeowners

The Government Accountability Office released the results of its study of the Independent Foreclosure Review, conducted by the Office of the Comptroller of the Currency and the Federal Reserve in 2011 and 2012, and the results show that the foreclosure process is lacking in oversight and transparency.

According to the GAO review, which can be read in full here, the OCC and Fed signed consent orders with 16 mortgage servicers in 2011 and 2012 that required the servicers to hire consultants to review foreclosure files for efforts and remediate harm to borrowers.

In 2013, regulators amended the consent orders for all but one servicer, ending the file reviews and requiring servicers to provide $3.9 billion in cash payments to about 4.4 million borrowers and $6 billion in foreclosure prevention actions, such as loan modifications. The list of impacted mortgage servicers can be found here, as well as any updates. It should be noted that the entire process faced controversy before, as critics called the IFR cumbersome and costly.

Banks Profit from Suicides of Their Officers and Employees

After a recent rash of mysterious apparent suicides shook the financial world, researchers are scrambling to find answers about what really is the reason behind these multiple deaths. Some observers have now come to a rather shocking conclusion.

Wall Street on Parade bloggers Pam and Russ Martens wrote this week that something seems awry regarding the bank-owned life insurance (BOLI) policies held by JPMorgan Chase.

Four of the biggest banks on Wall Street combined hold over $680 billion in BOLI policies, the bloggers reported, but JPMorgan held around $17.9 billion in BOLI assets at the end of last year to Citigroup’s comparably meager $8.8 billion.

Government Cover-Up to Protect the Banks and Screw Homeowners and Investors

A new government report suggests that errors made by banks and their agents during foreclosures might have been significantly higher than was previously believed when regulators halted a national review of the banks’ mortgage servicing operations.

When banking regulators decided to end the independent foreclosure review last year, most banks had not completed the examinations of their mortgage modification and foreclosure practices.

At the time, the regulators — the Office of the Comptroller of the Currency and the Federal Reserve — found that lengthy reviews by bank-hired consultants were delaying compensation getting to borrowers who had suffered through improper modifications and other problems.

But the decision to cut short the review left regulators with limited information about actual harm to borrowers when they negotiated a $10 billion settlement as part of agreements with 15 banks, according to a draft of a report by the Government Accountability Office reviewed by The New York Times.

The report shows, for example, that an unidentified bank had an error rate of about 24 percent. This bank had completed far more reviews of borrowers’ files than a group of 11 banks involved the deal, suggesting that if other banks had looked over more of their records, additional errors might have been discovered.

Wrongful Foreclosure Rate at least 24%: Wrongful or Fraudulent?

The report shows, for example, that an unidentified bank had an error rate of about 24 percent. This bank had completed far more reviews of borrowers’ files than a group of 11 banks involved the deal, suggesting that if other banks had looked over more of their records, additional errors might have been discovered.

http://www.marketpulse.com/20140430/u-s-housing-recovery-struggles/

http://www.csmonitor.com/Business/Latest-News-Wires/2014/0429/Home-buying-loses-allure-ownership-rate-lowest-since-1995

http://www.opednews.com/articles/It-s-Good–no–Great-to-by-William-K-Black–Bank-Failure_Bank-Failures_Bankers_Banking-140430-322.html

[DISHONEST EUPHEMISMS: The context of this WSJ story is the broader series of betrayals of homeowners by the regulators and prosecutors led initially by Treasury Secretary Timothy Geithner and his infamous “foam the runways” comment in which he admitted and urged that programs “sold” as benefitting distressed homeowners be used instead to aid the banks (more precisely, the bank CEOs) whose frauds caused the crisis.  The WSJ article deals with one of the several settlements with the banks that “service” home mortgages and foreclose on them.  Private attorneys first obtained the evidence that the servicers were engaged in massive foreclosure fraud involving knowingly filing hundreds of thousands of false affidavits under (non) penalty of perjury.  As a senior former AUSA said publicly at the INET conference a few weeks ago about these cases — they were slam dunk prosecutions.  But you know what happened; no senior banker or bank was prosecuted.  No banker was sued civilly by the government.  No banker had to pay back his bonus that he “earned” through fraud.

 

 

Fatal Flaws in the Origination of Loans and Assignments

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.
There are two fatal flaws in the origination of the loan and in the origination of the assignment of the loan.

As I see it …

The REAL Transaction is between the investors, as an unnamed group, and the borrower(s). This is taken from the single transaction rule and step transaction doctrine that is used extensively in Tax Law. Since the REMIC trust is a tax creature, it seems all the more appropriate to use existing federal tax law decisions to decide the substance of these transactions.

If the money from the investors was actually channeled through the REMIC trust, through a bank account over which the Trustee for the REMIC trust had control, and if the Trustee had issued payment for the loan, and if that happened within the cutoff period, then if the loan was assigned during the cutoff period, and if the delivery of the documents called for in the PSA occurred within the cutoff period, then the transaction would be real and the paperwork would be real EXCEPT THAT

Where the originator of the loan was neither legally the lender nor legally a representative of the source of funds for the transaction, then by simple rules of contract, the originator was incapable of executing any transfer documents for the note or mortgage (deed of trust in nonjudicial states).

If the originator of the loan was not the lender, not the creditor, not a party who could legally execute a satisfaction of the mortgage and a cancellation of the note then who was?

Our answer is nobody, which I know is “counter-intuitive” — a euphemism for crazy conspiracy theorist. But here is why I know that the REMIC trust was never involved in the transaction and that the originator was never the source of funds except in those cases where securitization was never involved (less than 2% of all loans made, whether still existing or “satisfied” or “foreclosed”).

The broker dealer never intended for the REMIC trust to actually own the mortgage loans and caused the REMIC trust to issue mortgage bonds containing an indenture for repayment and ownership of the underlying loans. But there were never any underlying loans (except for some trusts created in the 1990’s). The prospectus said plainly that the excel spreadsheet attached to the prospectus contained loan information that would be replaced by the real loans once they were acquired. This is a practice on Wall Street called selling forward. In all other marketplaces, it is called fraud. But like short-selling, it is permissible on Wall Street.

The broker dealer never intended the investors to actually own the bonds either. Those were issued in street name nominee, non objecting status/ The broker dealer could report to the investor that the investor was the actual or equitable owner of the bonds in an end of month statement when in fact the promises in the Pooling and Servicing Agreement as to insurance, credit default swaps, overcollateralization (a violation of the terms of the promissory note executed by residential borrowers), cross collateralization (also a violation of the borrower’s note), guarantees, servicer advances and trust or trustee advances would all be payable, at the discretion of the broker dealer, to the broker dealer and perhaps never reported or paid to the “trust beneficiaries” who were in fact merely defrauded investors. The only reason the servicer advances were paid to the investors was to lull them into a false sense of security and to encourage them to buy still more of these empty (less than junk) bonds.

By re-creating the notes signed by residential borrowers as various different instruments, and there being no limit on the number of times it could be insured or subject to receiving the proceeds of credit default swaps, (and with the broker dealer being the Master Servicer with SOLE discretion as to whether to declare a credit event that was binding on the insurer, counter-party etc), the broker dealers were able to sell the loans multiple times and sell the bonds multiple times. The leverage at Bear Stearns stacked up to 42 times the actual transaction — for which the return was infinite because the Bear used investor money to do the deal.

Hence we know from direct evidence in the public domain that this was the plan for the “claim” of securitization — which is to say that there never was any securitization of any of the loans. The REMIC Trust was ignored, thus the PSA, servicer rights, etc. were all nonbinding, making all of them volunteers earning considerable money, undisclosed to the investors who would have been furious to see how their money was being used and the borrowers who didn’t see the train wreck coming even from 24 inches from the closing documents.

Before the first loan application was received (and obviously before the first “closing” occurred) the money had been taken from investors for the expressed purpose of funding loans through the REMIC Trust. The originator in all cases was subject to an assignment and assumption agreement which made the loan the property and liability of the counter-party to the A&A BEFORE the money was given to the borrower or paid out on behalf of the borrower. Without the investor, there would have been no loan. without the borrower, there would have been no investment (but there would still be an investor left holding the bag having advanced money for mortgage bonds issued by a REMIC trust that had no assets, and no income to pay the bonds off).

The closing agent never “noticed” that the funds did not come from the actual originator. Since the amount was right, the money went into the closing agent’s escrow account and was then applied by the escrow agent to fund the loan to the borrower. But the rules were that the originator was not allowed to touch or handle or process the money or any overpayment.

Wire transfer instructions specified that any overage was to be returned to the sender who was neither the originator nor any party in privity with the originator. This was intended to prevent moral hazard (theft, of the same type the banks themselves were committing) and to create a layer of bankruptcy remote, liability remote originators whose sins could only be visited upon the aggregators, and CDO conduits constructed by CDO managers in the broker dealers IF the proponent of a claim could pierce a dozen fire walls of corporate veils.

NOW to answer your question, if the REMIC trust was ignored, and was a sham used to steal money from pension funds, but the money of the pension fund landed on the “closing table,” then who should have been named on the note and mortgage (deed of trust beneficiary in non-judicial states)? Obviously the investor(s) should have been protected with a note and mortgage made out in their name or in the name of their entity. It wasn’t.

And the originator was intentionally isolated from privity with the source of funds. That means to me, and I assume you agree, that the investor(s) should have been on the note as payee, the investor(s) should have been on the mortgage as mortgagees (or beneficiaries under the deed of trust) but INSTEAD a stranger to the transaction with no money in the deal allowed their name to be rented as though they were the actual lender.

In turn it was this third party stranger nominee straw-man who supposedly executed assignments, endorsements, and other instruments of power or transfer (sometimes long after they went out of business) on a note and mortgage over which they had no right to control and in which they had no interest and for which they could suffer no loss.

Thus the paperwork that should have been used was never created, executed or delivered. The paperwork that that was created referred to a transaction between the named parties that never occurred. No state allows equitable mortgages, nor should they. But even if that theory was somehow employed here, it would be in favor of the individual investors who actually suffered the loss rather than the foreclosing entity who bears no risk of loss on the loan given to the borrower at closing. They might have other claims against numerous parties including the borrower, but those claims are unliquidated and unsecured.

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.

Why any court would allow the conduits and bookkeepers to take over the show to the obvious detriment and damage to the real parties in interest is a question that only legal historians will be able to answer.

Don’t Admit the Default

Kudos again to Jim Macklin for sitting in for me last night. Excellent job — but don’t get too comfortable in my chair :). Lots of stuff in another mini-seminar packed into 28 minutes of talk.

A big point made by the attorney guest Charles Marshall, with which I obviously agree, is don’t admit the default in a foreclosure unless that is really what you mean to do. I have been saying for 8 years that lawyers and pro se litigants and Petitioners in bankruptcy proceedings have been cutting their own throats by stating outright or implying that the default exists. It probably doesn’t exist, even though it SEEMS like it MUST exist since the borrower stopped paying.

There is not a default just because a borrower stops paying. The default occurs when the CREDITOR DOESN’T GET PAID. Until the false game of “securitization started” there was no difference between the two — i.e., when the borrower stopped paying the creditor didn’t get paid. But that is not the case in 96% of all residential loan transactions between 2001 and the present. Today there are multiple ways for the creditor to get paid besides the servicer receiving the borrower’s payment. the Courts are applying yesterday’s law without realizing that today’s facts are different.

Whether the creditor got paid and is still being paid is a question of fact that must be determined in a hearing where evidence is presented. All indications from the Pooling and Servicing Agreements, Distribution Reports, existing lawsuits from investors, insurers, counterparties in other hedge contracts like credit default swaps — they all indicate that there were multiple channels for payment that had little if anything to do with an individual borrower making payments to the servicer. Most Trust beneficiaries get paid regardless of whether the borrower makes payment, under provisions of the PSA for servicer advances, Trustee advances or some combination of those two plus the other co-obligors mentioned above.

Why would you admit a default on the part of the creditor’s account when you don’t have access to the money trail to identify the creditor? Why would you implicitly admit that the creditor has even been identified? Why would you admit a payment was due under a note and mortgage (or deed of trust) that were void front the start?

The banks have done a good job of getting courts to infer that the payment was due, to infer that the creditor is identified, to infer that the payment to the creditor wasn’t received by the creditor, and to infer that the balance shown by the servicer and the history of the creditor’s account can be shown by reference only to the servicer’s account. But that isn’t true. So why would you admit to something that isn’t true and why would you admit to something you know nothing about.

You don’t know because only the closing agent, originator and all the other “securitization” parties have any idea about the trail of money — the real transactions — and how the money was handled. And they are all suing the broker dealers and each other stating that fraud was committed and mismanagement of the multiple channels of payments received for, or on behalf of the trust or trust beneficiaries.

In the end it is exactly that point that will reach critical mass in the courts, when judges realize that the creditor has no default in its business records because it got paid — and the foreclosure by intermediaries in the false securitization scheme is a sham.

In California the issue they discussed last night about choice of remedies is also what I have been discussing for the last 8 years, but I must admit they said it better than I ever did. Either go for the money or go for the property — you can’t do both. And if you  elected a remedy or assumed a risk, you can’t back out of it later — which is why the point was made last night that the borrower was a third party beneficiary of the transaction with investors which is why it is a single transaction — if there is no borrower, there wold be no investment. If there was no investment, there would have been no borrower. The transaction could not exist without both the investor and the borrower.

Bravo to Jim Macklin, Dan Edstrom and Charles Marshall, Esq. And remember don’t act on these insights without consulting with a licensed attorney who knows about this area of the law.

Who Has the Power to Execute a Satisfaction and Release of Mortgage?

 The answer to that question is that probably nobody has the right to execute a satisfaction of mortgage. That is why the mortgage deed needs to be nullified. In the typical situation the money was taken from investors and instead of using it to fund the REMIC trust, the broker-dealer used it as their own money and funded the origination or acquisition of loans that did not qualify under the terms proposed in the prospectus given to investors. Since the money came from investors either way (regardless of whether their money was put into the trust) the creditor is that group of investors. Instead, neither the investors or even the originator received the original note at the “closing” because neither one had any legal interest in the note. Thus neither one had any interest in the mortgage despite the fact that the nominee at closing was named as “lender.”

This is why so many cases get settled after the borrower aggressively seeks discovery.

The name of the lender on the note and the mortgage was often some other entity used as a bankruptcy remote vehicle for the broker-dealer, who for purposes of trading and insurance represented themselves to be the owner of the loans and mortgage bonds that purportedly derive their value from the loans. Neither representation was true. And the execution of fabricated, forged and unauthorized assignments or endorsements does not mean that there is any underlying business transaction with offer, acceptance and consideration. Hence, when a Court order is entered requiring that the parties claiming rights under the note and mortgage prove their claim by showing the money trail, the case is dropped or settled under seal of confidentiality.

The essential problem for enforcement of a note and mortgage in this scenario is that there are two deals, not one. In the first deal the investors agreed to lend money based upon a promise to pay from a trust that was never funded, has no assets and has no income. In the second deal the borrower promises to pay an entity that never loaned any money, which means that they were not the lender and should not have been put on the mortgage or note.

Since the originator is an agent of the broker-dealer who was not acting within the course and scope of their relationship with the investors, it cannot be said that the originator was a nominee for the investors. It isn’t legal either. TILA requires disclosure of all parties to the deal and all compensation. The two deals were never combined at either level. The investor/lenders were never made privy to the real terms of the mortgages that violated the terms of the prospectus and the borrower was not privy to the terms of repayment from the Trust to the investors and all the fees that went with the creation of multiple co-obligors where there had only been one in the borrower’s “closing.”.

The identity of the lender was intentionally obfuscated. The identity of the borrower was also intentionally obfuscated. Neither party would have completed the deal in most cases if they had actually known what was going on. The lender would have objected not only to the underwriting standards but also because their interest was not protected by a note and mortgage. The borrower  would have been alerted to the fact that huge fees were being taken along the false securitization trail. The purpose of TILA is to avoid that scenario, to wit: borrower should have a choice as to the parties with whom he does business. Those high feelings would have alerted the borrower to seek an alternative loan elsewhere with less interest and greater security of title —  or not do the deal at all because the loan should never have been underwritten or approved.

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