PennyMac Laundromat: Is anything real there?

PennyMac appears to be a vehicle of “cleaning” fatal title deficiencies to the debt, note and/or mortgage on loans. It operates on behalf of CitiMortgage and multiple other entities on loans where the selection of a claimant is essentially random.

The basic playbook of the banks is to insert a real business entity with no actual connection or transaction involving payment of value for the debt, note or mortgage and fabricating documents to imply that such transactions exist. My investigation and that of others reveals that PennyMac is one such sham conduit, in order to create documents that give rise to the legal presumptions that are available when a document appears to be facially valid.


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PennyMac is generally used as a vehicle to launder bad title and pursue foreclosures on behalf of entities that have no right, title or interest in the debt, note or mortgage. Generally speaking all of the documents that purport to involve PennyMac and its predecessors are fabricated and false. They are false because they falsely imply the existence of financial transactions in which value was paid for the debt.
All residential home loans are about money and nothing else. The banks seek to distract you and the courts from looking at the money and instead, direct you into looking to documents. If I produced a document that looked facially valid, a judge might accept it as valid and true even though the matter asserted in the document is actually untrue. So for example if I were to produce a “facially valid” document saying I am your father, it wouldn’t be true but it would still be taken as true until you rebut the presumption arising from the “facially valid document.
So the first step is really examining a document to determine whether it is facially valid. There are times, strategies and tactics where it might be wise to direct the court’s attention to this issue by simply filing a motion that disputes the facial validity of a particular pleading oir document and asks for an evidentiary hearing on the subject. Some judges grant such motions because a ruling from such a proceeding might propel the case to an early end.
A facially valid means what is says. If the document recites all the elements required by statute and it is properly signed (and notarized if so required), the document is facially valid and the legal presumptions are available to the proponent of such a document or pleading.
So the court takes as true all assertions on the face of the document. A document is not facially valid if it is impossible to determine what is asserted as factually true.
A reference to an external document that is not attached or even identified frequently results in a dispute over the facial validity of the document which may require an evidentiary hearing on the validity and authenticity of the document. But if the opposing party fails to raise such an objection the document will be accepted as facially valid and then the factual assertions contained or implied by the document will generally be taken as true.
The debt lies at the root of the loan, the servicing, the collection, and the enforcement of the loan. Without the debt, there is no authority. Without the debt the action is not a foreclosure even though the lawyers label it as a foreclosure. The lawsuit or notice of sale is merely a device to generate revenue which is expressly void against public policy and law.
The problem is that the banks developed a scheme by which investors paid for the debt and never received ownership of the debt, note or mortgage. This means that third parties receive borrower payments, insurance payments, bailout payments and proceeds of foreclosure sales — something which is not allowed under current law, nor should it be allowed.
None of these third parties ever turn over such money to the investors who paid for value but did not pay value in exchange for ownership of the debt. As a result, any document implying the transfer of the debt through payment of value is substantively invalid because no such transaction ever occurred in the real world.
There is no reason for a “successor” to pay a “predecessor” if neither of them owned the debt. The only way you get to own a debt is by paying for it with real value which means money. When you ask for a description of such transactions you will be met with a variety of obscure objections whereas if they had it, they would gleefully reveal it. Neither the note nor the mortgage (or deed of trust) can be actually fully separated from the debt because the obligation to make payment on the debt is all that those documents are about.
I’m not saying the debt doesn’t exist. I’m saying based upon review and analysis of documents, there is nobody in the chain of title relied upon by your opposition who has ever participated in a transaction in which value was paid for the debt. Ownership of the debt can only be accomplished, based upon my research, by payment of value for the debt. See Article 9 §203 of the Uniform Commercial Code as adopted by all U.S. jurisdictions including your own.
Payment of value for the debt is a condition precedent to enforcement of the debt. This is both common sense and statutory law. If “servicing”, administration, collection or enforcement of the debt is performed on behalf of a claimant that does not own the debt, then the condition precedent is not met. Such actions are illegal and any documents that are created to support such illegal actions are void.
If the “servicer” or holder of a limited power of attorney, as in many cases, is not the legally authorized representative of a party who possesses ownership of the debt (i.e., they paid for it) then their actions are illegal, unauthorized and probably fraudulent. In a foreclosure the court must know (not hope) that the proceeds of the foreclosure sale will go to a party or group of parties who paid value in exchange for ownership of the debt. If the court does not know that, it isn’t a foreclosure, which is a remedy exclusively designed to provide restitution of an unpaid debt. 
The issue confronting you is that the documents, at first blush, appear to be facially valid. But the reference to an unidentified unattached external document like a Power of Attorney in lieu of an actual servicing agreement reciting the authority of the parties, makes such documents facially invalid but still subject to proof. Upon proving authority as I have outlined above, the document could be deemed valid, if the proffering party proves the line of succession that starts with an owner of the debt. In virtually all “securitization” cases I don’t think any such line of succession exists.

Royal Bank of Scotland Trained Employees on How to Forge Signatures

Fraud for the first time in history has been institutionalized into law.

It is foolishness to believe that the banking industry is trustworthy and that they have the right to claim legal presumptions that their fabricated documents, and the forged documents are valid, leaving consumers, borrowers and in particular, homeowners to formulate a defense where the banks are holding all the information necessary to show that the current foreclosing parties are anything but sham conduits.

Here we have confirmation of a practice that is customary in the banking industry today — fabricating and forging instruments that sometimes irreparably damage consumers and borrowers in particular. Wells Fargo Bank did not accidentally create millions of “new accounts” to fictitiously report income from those accounts and growth in their customer base.

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Across the pond the signs all point to the fact that the custom and practice of the financial industry is to practice fraud. In fact, with the courts rubber stamping the fraudulent representations made by attorneys and robo-witnesses, fraud for the first time in history has been institutionalized into law.

RBS here is shown in one case to have forged a customer’s signature to a financial product she said she didn’t want —not because of some rogue branch manager but because of a sustained institutionalized business plan based solidly on forgery and fabrication in which employees were literally trained to execute the forgeries.

The information is in the public domain — fabrication, robo-signing and robo-winesses testifying in court — and yet government and the courts not only look the other way, but are complicit in the pandemic fraud that has overtaken our financial industries.

Here are notable quotes from an article written by J. Guggenheim.

Once upon a time, in a land far, far away- forgery, fabrication of monetary instruments, and creating fake securities were crimes that would land you in prison.  If you forged the name of your spouse on a check it was a punishable crime.  The Big Banks now forge signatures and fabricate financial instruments on a routine basis to foreclose on homes they can’t prove they own, open accounts in unsuspecting customer’s names, and sign them up for services they don’t want.  If this isn’t the definition of a criminal racketeering enterprise- what is?

RBS, following the Wells Fargo Forgery model, conceded that a fake signature had been used on an official document, which means a customer was signed up to a financial product she did not want.  RBS’s confession comes only two weeks after whistle-blowers came forward claiming that bank staff had been trained to forge customer signatures. [e.s.]

The confession comes only two weeks after The Scottish Mail on Sunday published claims by whistle-blowers that bank staff had been trained to forge signatures.

At first, RBS strenuously denied the allegations, but was forced to publicly acknowledge this was likely a widespread practice. [e.s.]  The bank was forced to apologize publicly after retired teacher Jean Mackay came forward with paperwork that clearly showed her signature was faked on a bank document.  The great-grandmother was charged for payment protection insurance (PPI) back in 2008 even though she had declined to sign up for the optional product.

At first the bank refunded her fees but refused to admit the document was forged.  [e.s.]A forensic graphologist confirmed the signatures were ‘not a match’, forcing the bank to concede and offered her a mere £500 in compensation for their fraudulent act.

Forensic Graphologist Emma Bache, who has almost 30 years’ experience as a handwriting expert, examined the document and said the fundamental handwriting characteristics do not match.

The Banks in Britain, Australia, New Zealand and Canada, along with the United States include forgery and fabrication in their business models to increase profits.  Why shouldn’t they?  There is NO THREAT because they know they will not be held accountable by law enforcement or the courts- so they continue to fleece, defraud, and steal from their customers.

Homeowners must force an urgent investigation into claims of illegal practices by the banks.  Wells Fargo is not doing anything that CitiBank, JPMorgan Chase, Bank of America and others aren’t doing.  To remain competitive in an unethical marketplace, you almost have to resort to the same fraudulent tactics.[e.s.]

However, whistle-blowers have now revealed that managers were coached on how to fake names on key papers.  Whistle-blowers said that staff members had received ‘guidance’ on how to download genuine signatures from the bank’s online system, trace them on to new documents then photocopy the altered paperwork to prevent detection.  When in fact the bank taught its employees how to engage in criminal conduct.

Although clearly against the law, the whistle-blowers claim it was “commonly done to speed up administration and complete files.”  Just like American banks forge notes and assignments to ‘speed up foreclosures and complete files.’  They claim the technique was also used to sign account opening forms – and even loan documents. [e.s.]


According to, the “criminal offense of forgery consists of creating or changing something with the intent of passing it off as genuine, usually for financial gain or to gain something else of value.” This often involves creation of false financial instruments, such as mortgage notes, assignments, checks, or official documents. It can also include signing another person’s name to a document without his or her consent or faking the individual’s handwriting.  Forgery often occurs in connection with one or more fraud offenses. 

Smoke and Mirrors: Illinois Case

This 2016 Illinois case corroborates exactly what I have been saying for 11 years. Sleight of hand accounted for the 1st Mortgage that was payable to Lehman Brothers who funded every loan with advances from Investors who then owned the debt. The investors were cut out of the chain of paper and the chain of money.

Thus equitable principles were attempted in order to establish a right to foreclose. But nothing can take away the fact that the forecloser, as in virtually all foreclosure cases these days, is a complete stranger to any part of any transaction that is memorialized in fabricated, forged, robo-signed, false representations on worthless documents of transfer.

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Hat tip to Cement Boots

see CitiMortgage, Inc. v. Parille, 2016 IL App (2d) 150286, (For some reason it won’t upload). Try This:

Citi steps into the paper chain based upon nothing and THAT is their legal problem. So they attempt to file multiple amended complaint that only get themselves in worse trouble because in the final analysis, they are making allegations that imply legal standing that they will never be able to prove.

Specifically they seek to have the court declare an equitable mortgage in favor of Citi. For the most part, equitable mortgages don’t exist, but there is a doctrine called equitable subrogation in which title to the existing mortgage shifts to a new owner because the new owner has paid for the debt — something that is impossible because even Citi does not say they paid the investors who owned the debt. Further, as this Court points out such a doctrine won’t do Citi any good if the initial mortgage was defective.

In short the fundamental assumptions (arising from political rather than legal policies) do not apply. Those assumptions are frequently erroneously raised to legal presumptions), that the debt MUST be owed by the homeowners to the putative foreclosing party and that the imperfections in the paper chain are technical in nature and that therefore allowing the homeowner to win would be inequitable.

As the Courts dig deeper they are confronting the fundamental conflict between political doctrine and legal doctrine. Political doctrine mandates that the banks win in order to preserve a financial system that is now largely dependent on a ladder of financial products deriving (hence derivative) their value from each other, but based upon the assumption that the base transaction exists. The base transaction in the paper chain is a loan by the Payee on the note. In this case as in most cases, there is no base transaction in real life that would support the closing documents. Hence all the paper deriving value from the nonexistent transaction is worthless.

The simple truth is that in order for equitable subrogation to apply, one must allege and prove facts that there is injury to the pleading party — something that none of the players could ever claim in this case. Injury could only occur in financial form. And the only thing lost to Citi or even the Lehman estate, which is still in bankruptcy, is the opportunity to make a profit by deceit.


It is NOT enough to ALLEGE standing. They must PROVE it. Judges across the country are making mistakes with this simple concept. Standing to SUE is presumed if you allege (in words or by incorporation of exhibits) that you have it. Possession of the “original note” can be alleged but at trial the foreclosing party must PROVE (not argue) that (1) they have the original note and (2) they have the right to enforce it either because they own it or because they have been authorized by a person who owns it or a person who has the right to enforce it. 

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In the end we are closing in on the unthinkable: that anyone who was entitled to be treated as creditor was severed from the transactions leaving all other parties floating and leaving legal analysts to wonder (the borrower, that is) or make fraudulent representations (the banks and servicers) that the putative creditors cannot refute.
In the end, with very few exceptions, none of the trusts own anything and none of the servicers or trustees have any authority over any loans. This is the direct result of asymmetry of knowledge. The investors, the borrowers and the closing agents and even the sales agents do not have sufficient information to know what is going on — forcing everyone to look to the “Bank” who appears to be the source of funding.
And the Banks get to explain it in whatever way benefits them the most. They are thus permitted to explain away any hint that they were stealing investor money on an unprecedented scale. That is what happened in the TARP bailout and that is what happens in court.
Here is a 4th DCA case in Florida that spells out the difference between alleging a case and proving it.



No. 4D13–3514.

    Decided: March 25, 2015

David H. Charlip of Charlip Law Group, LC, Aventura, for appellant. Raymond Hora of McCalla Raymer, LLC, Orlando, for appellee.

Appellant challenges a final judgment of foreclosure, claiming that the court erred in denying his motion for involuntary dismissal. He claimed that appellee did not prove standing to foreclose at the time suit was filed. We agree that the evidence is insufficient to show the plaintiff had standing and reverse. (e.s.)

Appellant executed a note and mortgage to ABN Amro Mortgage Group [EDITOR’S NOTE: SEARCH ABN AMRO ON THIS BLOG]. (“ABN”) in 2006. In 2009, appellant received a letter from CitiMortgage informing him that the servicing of his note and mortgage was being transferred from CitiMortgage to Residential Credit Solutions (“RCS”). RCS also sent a letter informing appellant of the transfer of the servicing of the loan. When he defaulted on the mortgage, RCS sent him a notice of default and subsequently filed suit, alleging that it had the right to enforce the note and mortgage. [EDITOR’S NOTE: HOMEOWNER DID NOT DEFAULT ON ANY OBLIGATION DUE RCS]

Attached to the complaint was the mortgage and note to ABN. The note was stamped “original” and did not contain any endorsements or allonges. Also attached was an assignment of the mortgage from the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Franklin Bank, to Mortgage Electronic Registrations Systems (“MERS”), as nominee for RCS. [EDITOR’S NOTE: THE PRESENCE OF EITHER FRANKLIN OR MERS TELLS US THAT THE SUBJECT LOAN IS SUBJECT TO FALSE CLAIMS OF SECURITIZATION WHERE THE SOURCE OF FUNDS HAS BEEN CUT OFF FROM ITS INVESTMENT DESTROYING ITS STATUS AS A CREDITOR]

About nine months after filing the complaint, RCS filed what it claimed was the “original” note. Filed with this note was an undated, blank allonge, payable to the bearer, allegedly executed by a vice president of ABN. Nothing about the appearance of this allonge, as contained in the appellate record, shows that it was affixed to the note with which it was filed. (e.s.) [EDITOR’S NOTE: NO PROOF THE “ALLONGE” WAS ATTACHED? THEN THE ALLONGE IS  A NULLITY. NO PRESUMPTION APPLIES].

Just two weeks before the foreclosure trial, RCS moved to substitute Bayview Loan Servicing as the plaintiff, alleging it had transferred servicing of the loan to Bayview. The documents attached to the motion do not mention that the ownership of the loan or mortgage was also transferred. The trial court allowed the substitution over appellant’s objection. (e.s.)

At trial, a litigation manager for Bayview testified. He was not a records custodian for RCS or for Bayview. He was not familiar with the computer systems that either of the prior servicers, CitiMortgage and RCS, used for compiling information on the loan or how it was inputted into the systems. He had no information as to whether the information on the loans was inputted into the prior servicers’ systems correctly. He could not testify to the truth or accuracy of RCS’s records, just that they were provided to Bayview. (e.s. [EDITOR’S NOTE: THESE ARE ELEMENTS OF PROOF THAT ARE ABSENT FROM THE TESTIMONY OF NEARLY EVERY ROBO-WITNESS]

He testified that Bayview was the servicer and holder of the note. He believed that Bayview had acquired the note through a purchase agreement with RCS, but he had not seen the agreement, nor did he have a copy of it. His belief that Bayview was the owner of the note under the purchase agreement was based on “a screen shot of our capital assets systems, which has information in regards to the status of the loan with us.” This screen shot was not produced at trial.

[Editor’s NOTE: Recent case decisions state that screen shots are hearsay and do not fall within any exceptions to the hearsay rule and are therefore barred from being admitted into evidence. The most important point to take away from this is that the witness nearly always knows absolutely nothing other than the script that he was required to memorize. Getting to that is actually fairly easy if you know how to do cross examination.]


As to the allonge with the blank endorsement from ABN, he did not know when it was executed or whether the signature on it was a “wet ink” signature or a stamp. He did not know whether the allonge was affixed to the note prior to it being filed in the court file. He did not know if the vice president who signed the allonge on ABN’s behalf was in the employ of ABN in November 2009, when Bayview’s records showed that servicing of the loan had been transferred from ABN to Franklin Bank. (e.s.)

The manager agreed that on January 29, 2010, when RCS mailed appellant a notice of intent to take legal action on the note and mortgage, RCS was not the owner and holder of the note by way of the September 30, 2009 assignment of mortgage, but testified, “[t]here may have been a purchase agreement or some other document.” He testified that, on that date, “I only know that RCS was servicing. I don’t know for a fact who was the holder of the note at the time.” While he did testify that RCS owned the note and mortgage on the date the complaint was filed, he then inconsistently stated that RCS had brought the suit as the servicer of the loan, not its owner. (e.s.)

Although appellant moved for involuntary dismissal on the ground that Bayview had not proved standing because it had not shown that it had the right to enforce the note and foreclose the mortgage, the trial court rejected this claim. It entered a final judgment of foreclosure in which it found that Bayview was due and owing the unpaid balance of the note. This appeal follows.

Appellant argues that Bayview failed to prove that it was the owner or holder of the note and that it had the right to foreclose. Based upon this confusing record, we agree that it presented no competent evidence that RCS was the holder of the note at the time it filed suit or that it was a nonholder in possession and entitled to enforce the note. Therefore, Bayview failed to prove standing.

Standing of the plaintiff to foreclose on a mortgage must be established at the time the plaintiff files suit. See McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So.3d 170, 173 (Fla. 4th DCA 2012). McLean set forth the requirements that a plaintiff may prove standing in a mortgage foreclosure:

Standing may be established by either an assignment or an equitable transfer of the mortgage prior to the filing of the complaint ․ For example, standing may be established from a plaintiff’s status as the note holder, regardless of any recorded assignments․

If the note does not name the plaintiff as the payee, the note must bear a special endorsement in favor of the plaintiff or a blank endorsement․ Alternatively, the plaintiff may submit evidence of an assignment from the payee to the plaintiff ․

Even in the absence of a valid written assignment, the mere delivery of a note and mortgage, with intention to pass the title, upon a proper consideration, will vest the equitable interest in the person to whom it is so delivered.

Id. at 173 (citations and quotation marks omitted).

Appellant notes several deficiencies in Bayview’s proof which result in a failure to show standing to foreclose the mortgage. First, while the note and mortgage were originally held by ABN, the only assignment of mortgage attached to the complaint and introduced at trial was one from FDIC as receiver for Franklin Bank to MERS as nominee for RCS. There is no proof of any transfer of the note or mortgage from ABN to Franklin Bank. Second, while Bayview contends that the undated allonge supplies the connection, as it shows a transfer payable to bearer, there was no proof that the allonge was attached to the note, and Bayview presented no proof of when it was executed. (e.s.) [EDITOR’S NOTE: THE ENDORSEMENT MEANS NOTHING IF IT WASN’T ON THE NOTE. IT WASN’T ON THE NOTE UNLESS THE ALLONGE WAS AFFIXED TO THE NOTE. THE ENDORSEMENT MEANS NOTHING WITHOUT FOUNDATION TESTIMONY PROVING THAT THE ENDORSER HAD THE AUTHORITY TO EXECUTE THE ENDORSEMENT] Finally, there was no competent evidence of what rights Bayview acquired from RCS.

We recently addressed how a plaintiff may show it is entitled to foreclose on a promissory note in Murray v. HSBC Bank, 40 Fla. L. Weekly D239 (Fla. 4th DCA Jan. 21, 2015):

“Because a promissory note is a negotiable instrument and because a mortgage provides the security for the repayment of the note, the person having standing to foreclose a note secured by a mortgage may be ․ a nonholder in possession of the note who has the rights of a holder.” Mazine v. M & I Bank, 67 So.3d 1129, 1130 (Fla. 1st DCA 2011).

A “person entitled to enforce” an instrument is: “(1) [t]he holder of the instrument; (2)[a] nonholder in possession of the instrument who has the rights of a holder; or (3)[a] person not in possession of the instrument who is entitled to enforce the instrument pursuant to s[ection] 673.3091 or s[ection] 673.4181(4).” § 673.3011, Fla. Stat. (2013). A “holder” is defined as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” § 671.201(21)(a), Fla. Stat. (2013). Thus, to be a holder, the instrument must be payable to the person in possession or indorsed in blank. See § 671.201(5), Fla. Stat. (2013).

Although, nine months after filing the complaint, RCS filed what purported to be the original note with an allonge payable to bearer, it was undated and there is no proof it was affixed to the promissory note. “An allonge is a piece of paper annexed to a negotiable instrument or promissory note, on which to write endorsements for which there is no room on the instrument itself. Such must be so firmly affixed thereto as to become a part thereof.” See Booker v. Sarasota, Inc., 707 So.2d 886, 887 n. 1 (Fla. 1st DCA 1998) (quoting Black’s Law Dictionary 76 (6th ed.1990)); see also Isaac v. Deutsche Bank Nat’l Trust Co., 74 So.3d 495, 496 n. 1 (Fla. 4th DCA 2011). The litigation manager did not know when the allonge was executed, or whether it was affixed to the note prior to filing. No evidence was presented that the allonge was executed and attached to the note prior to the filing of the initial complaint. Indeed, RCS did not allege in the complaint that it owned and held the mortgage. It merely alleged that it had the right to foreclose the note and mortgage. Therefore, the allonge provided no evidence that RCS was a “holder” at the time it filed the complaint.

Alternatively, Bayview argues that RCS was a nonholder in possession. However, Murray shows the fallacy of that claim. In Murray, we held that the lender, HSBC, had not proved standing where it had alleged that it was a nonholder in possession of the note and mortgage, because it did not prove that each prior transfer of the note conferred the right to enforce it: (e.s.)

HSBC was thus left to enforce the note under section 673.3011(2) as a nonholder in possession of the instrument with the rights of a holder. The issue then is whether HSBC is a nonholder in possession with the rights of a holder.

Anderson v. Burson, 424 Md. 232, 35 A.3d 452 (2011), is instructive. There, the court held that the plaintiff was a nonholder in possession and analyzed whether it had rights of enforcement pursuant to a Maryland statute that employs the same language as section 673.3011, Florida Statutes. Anderson, 35 A.3d at 462. “A transfer vests in the transferee only the rights enjoyed by the transferor, which may include the right to enforce [ment],” through the “shelter rule.” Id. at 461–62.

A nonholder in possession, however, cannot rely on possession of the instrument alone as a basis to enforce it․ The transferee does not enjoy the statutorily provided assumption of the right to enforce the instrument that accompanies a negotiated instrument, and so the transferee “must account for possession of the unendorsed instrument by proving the transaction through which the transferee acquired it.” (e.s.) [EDITOR’S NOTE: NO PRESUMPTIONS AND THEREFORE NO CASE FOR ENFORCEMENT IF NO TRANSACTION PROVEN. THE TRANSACTION IS NOT PRESUMED] Com. Law § 3–203 cmt. 2. If there are multiple prior transfers, the transferee must prove each prior transfer. Once the transferee establishes a successful transfer from a holder, he or she acquires the enforcement rights of that holder. See Com. Law § 3–203 cmt. 2. A transferee’s rights, however, can be no greater than his or her transferor’s because those rights are “purely derivative.” (e.s.)

Murray, 40 Fla. L. Weekly D239 (emphasis in original) (internal citations omitted). Because HSBC did not offer evidence of one of the prior transfers of the note, we held it did not prove that it was a nonholder in possession.

Similarly, in this case, Bayview did not prove that either RCS or itself was a nonholder in possession. It never connected FDIC as receiver of Franklin Bank, from which RCS acquired an assignment of mortgage, to ABN, the original note holder.

As alternative proof of its “ownership” of the note and mortgage, Bayview relied on a letter from RCS to the appellant, notifying him of the transfer of servicing rights to RCS, and a similar one from Bayview when it became the servicer of the loan. Neither letter addressed a right to enforce the note. None of the servicer agreements were placed in evidence to prove what rights either RCS or Bayview acquired under those agreements. (e.s.) [EDITOR’S NOTE: It is very rare that the servicer agreements are proffered by “Plaintiff” Trust (or other sham nominee) in evidence because those agreements, like Assignment and Assumption Agreements contain information that the securitization players don’t want the borrower, the court or government regulators or enforcers to see].Finally, as to the transfer between RCS and Bayview, the litigation manager testified that while he believed that Bayview purchased the note and mortgage from RCS, he had never seen a purchase agreement, and no document memorializing the purchase was entered into evidence. Therefore, because there is a gap in the transfer of the note and mortgage, Bayview did not prove that RCS, and subsequently Bayview, were nonholders in possession. See Murray, 40 Fla. L. Weekly D239. 

Simply stated, the evidence presented was woefully inadequate to prove standing to foreclose. It was quite apparent from the record that Bayview’s litigation manager did not have the requisite knowledge, nor did he produce documentary evidence, to support the claim.

We thus reverse and direct judgment in favor of the appellant dismissing the foreclosure on the mortgage for failure of the appellee to prove its standing.

Reversed and remanded.


CIKLIN and GERBER, JJ., concur.

CitiFinancial, CitiMortgage To Pay $28.8M Over Mortgage Servicing Issues

Millions of consumers lost their homes when the housing market bubble burst. But federal regulators say some of those people may have been able to stay in their homes had mortgage lenders fulfilled their requirements. To that end, the Consumer Financial Protection Bureau has ordered two Citigroup subsidiaries to pay $28.8 million to resolve allegations that some of its mortgage units harmed home borrowers. 

The CFPB announced Monday that CitiMortgage [PDF] and CitiFinancial Services [PDF] will pay fines and restitution to thousands of customers who were allegedly not made aware of their options to avoid foreclosure.

In all, CitiMortgage must pay $17 million to consumers and pay a civil penalty of $3 million, while CitiFinancial Services must refund approximately $4.4 million to consumers and pay a civil penalty of $4.4 million.

According to the CFPB complaint, the subsidiaries gave customers struggling to make mortgage payments the runaround when it came to trying to save their homes.

For example, CitiFinancial Servicing — which collects payments from borrowers for loans it originates and handles customer service, collections, loan modifications, and foreclosures — failed to consider a borrower’s application for deferred payment as a request for foreclosure relief options, the CFPB alleges.

Requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules, that include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.

In the case that CitiFinancial did allow customers to defer payments, the CFPB claims, the subsidiary did not provide borrowers with information on how that would affect their future payment. Specifically, the company did not notify borrowers that the deferred amounts would become due when the deferment ended.

Additionally, the CFPB alleges that CitiFinancial charges customers for credit insurance — which cover a home loan if the borrower couldn’t make a payment — despite the fact that the insurance should have been canceled.

From July 2011 to April 30, 2015, the CFPB claims that 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled based on the terms that insurance would not be applicable if the borrower had missed four or more monthly payments.

As for CitiMortgage, the CFPB complaint alleges that the subsidiary failed to help consumers looking for assistance in making their mortgage payments.

Instead, the Bureau alleges that when customers asked for help, CitiMortgage requested borrowers provide dozens of documents and forms that had no bearing on the application for foreclosure relief or that the consumer had already provided.

In 2014 alone, the CFPB claims that CitiMortgage sent 41,000 borrowers letters requesting unneeded documents with descriptions such as “teacher contract,” and “Social Security award letter.”

In addition to paying fines and refunds, CitiFinancial and CitiMortgage must clearly provide customers with information on what documents are needed for foreclosure relief, and provide terms for deferments upfront.

Citi continues moving away from mortgages as originations plummet

By Ben Lane at Housingwire

Citigroup continues moving away from mortgages as originations plummet

Nearly finished with exit from mortgage servicing

Citigroup first-quarter earnings show that the bank is continuing to move further and further away from mortgages and into other lines of business (The bigger question is why is Citi moving away from originating and servicing consumer mortgages).

According to information released Thursday by the bank, Citi’s residential first mortgage originations plummeted in the first quarter, dropping from $5.6 billion in the fourth quarter of 2016 to $3.8 billion in the first quarter of 2017.

That’s a drop of 32% in one quarter, and a drop of 31% from the same time period last year, when Citi originated $5.5 billion in first mortgages.

Citi’s mortgage servicing rights portfolio is also dwindling, as the bank continues to shed mortgage servicing rights (Citi is vulnerable to litigation for foreclosing on homes it didn’t own, revoking loan modifications and other servicing improprieties).

Earlier this year, CitiMortgage announced that it agreed to a massive mortgage servicing rights deal with New Residential Investment and Nationstar Mortgage that will transfer the servicing rights for approximately 780,000 mortgages away from CitiMortgage.

That deal is part of a larger play for Citi to get out of the servicing business altogether.

In addition to selling the mortgage servicing rights on approximately $97 billion in unpaid principal balance to New Residential, Citi also earlier this year that it entered into a separate subservicing agreement with Cenlar that will effectively end Citi’s mortgage servicing business.

And Citi’s latest earnings show just how close Citi already is to exiting the servicing business.

According to Citi’s report, the bank claims $567 million in mortgage servicing rights as assets in the first quarter. That’s down a whopping 64% from the fourth quarter of 2016, when the bank claimed $1.564 billion in MSR assets.

So in just one quarter, Citi sold off nearly $1 billion in mortgage servicing rights.

While the bank’s mortgage portfolio is clearly down, the bank’s overall earnings didn’t take a hit.

The bank said Thursday that its net income for the first quarter of 2017 was $4.1 billion, or $1.35 per diluted share, on revenues of $18.1 billion. That’s up from the same time period last year, when the bank reported net income of $3.5 billion or $1.10 per diluted share, on revenues of $17.6 billion.

The bank said that its revenues increased 3% from the prior year period, “driven by growth in both the Institutional Clients Group and Global Consumer Banking, partially offset by lower revenues in Corporate/Other primarily due to the continued wind down of legacy assets.”

The bank also said that its net income of $4.1 billion increased 17%, “driven by the higher revenues and lower cost of credit.”

The lower revenue in the “Corporate/Other” segment of Citi’s business is partially mortgage related.

Here’s how Citi breaks it down (emphasis added by HousingWire):

Corporate/Other revenues of $1.2 billion decreased 40% from the prior year period, driven by legacy asset runoff and divestiture activity, as well as lower revenue from treasury-related hedging activity. The current quarter revenue included approximately $750 million of gains on asset sales which more than offset a roughly $300 million charge related to the previously announced exit of Citigroup’s U.S. mortgage servicing operations. As of the end of the first quarter 2017, Corporate/Other assets were $96 billion, 23% below the prior year period and 7% below the prior quarter, primarily reflecting the continued wind down of legacy assets.

Corporate/Other net income was $92 million, compared to $450 million in the prior year period, reflecting the lower revenue, partially offset by lower operating expenses and lower cost of credit. Corporate/Other operating expenses declined 11% to $1.1 billion, primarily driven by the wind-down of legacy assets, partially offset by approximately $100 million of episodic expenses related to the exit of Citigroup’s U.S. mortgage servicing operations.

Corporate/Other cost of credit was $52 million compared to $170 million in the prior year period. Net credit losses declined 43% to $81 million, reflecting the impact of ongoing divestiture activity as well as continued improvement in the North America mortgage portfolio, and the provision for benefits and claims declined by $59 million to $1 million reflecting lower insurance-related assets. The net loan loss reserve release was largely unchanged.

While the mortgage revenue is down, Citi’s revenue in other areas is up.

Here’s how Citi breaks that down (emphasis again added by HousingWire):

North America Global Consumer Banking revenues of $4.9 billion increased 2%, with higher revenues in Citi-branded cards partially offset by declines in retail services and retail banking. Citi-branded cards revenues of $2.1 billion increased 13%, reflecting the addition of the Costco portfolio and modest organic growth, offset by the impact of day count. Citi retail services revenues of $1.6 billion were down 5% driven by the absence of gains on the sales of two portfolios sold in first quarter 2016. Retail banking revenues declined 3% mainly due to lower mortgage revenues partially offset by growth in average loans, deposits and assets under management.

“The momentum we saw across many of our businesses towards the end of last year carried into the first quarter, resulting in significantly better overall performance than a year ago,” Citi CEO Michael Corbat said.

“Revenues increased in both our consumer and institutional lines of business, most notably in areas where we have been investing such as Equities, U.S. Cards and Mexico,” Corbat continued.

“We grew loans and deposits and achieved an efficiency ratio of just under 58%, an ROA of 91bps and a ROTCE ex-DTA of over 10%, showing good progress towards achieving our near-term financial targets,” Corbat added.

“Through our earnings and the utilization of $800 million in Deferred Tax Assets, we generated $5.5 billion of total regulatory capital before returning $2.2 billion to our shareholders,” Corbat concluded. “Our CET 1 Capital ratio rose to 12.8% and we could not be more committed to continuing to increase the capital we return to our shareholders.”

Citi’s attempts to act ethically are a smoke-screen to hide Fraud

by the Lending Lies Team

CitiGroup’s attempts to act Ethically are a Smoke-Screen for its Fraud Spree.

In last Saturday’s edition of the Wall Street Journal an article entitled, “The Banker-Turned-Seminarian Trying to Save Citigroup’s Soul”.  I didn’t projectile vomit but my gag reflex was activated.

Citigroup’s latest attempt to schmooze regulators and the general public by addressing past and ongoing legal and ethical violations is by hiring theologian and Princeton University professor Dr. David Miller to ‘white wash’ its crime spree.  Hiring an ethicist at Citigroup is akin to the Vatican consulting on evil prevention with mass-murderer Charles Manson.

Dr. David Miller has been retained as Citi’s “on call ethicist.”  Dr.  Miller heads Princeton’s Faith & Work Initiative and has worked with Citi over the last three years. He says, “You need banking, just like you need pharmaceuticals.”  Interesting analogy considering that both banking and big pharma are more interested in profits than improving your financial, physical or mental health.

Miller will provide “advice and input to senior management.” Is it even possible to instill a sense of ethics in Citi CEO Michael Corbat who endorses Citi’s fraudulent foreclosures by way of fabrication, forgery and deception?   Mr. Corbat parroted Miller when he said when faced with an uncertain situation, “ask the four M’s: What would your mother, your mentor, the media and—if you’re inclined—your maker think?” While Corbat was saying all the right things to appease shareholders, his mind was saying, “ask the four M’s: What is your profit motive, your mode of deception, media manipulation and how much money can be made?”

Corbat claims he isn’t worried about the bad employees, but is concerned when good employees justify bad decisions when they face gray-zone questions.  When an employee is financially rewarded for denying or revoking a loan modification and for quickly foreclosing on a homeowner- there are going to be a lot of employees caught in that “gray zone”.  Has Citi changed the incentives that drive the behavior?  Not hardly.

Citi operates in an area of gray-zones and black-zones.  Citigroup has had numerous issues and has earned a reputation for ethical problems before and after the financial crisis. Mr. Corbat actually feigned shock when the company’s employee surveys showed some workers weren’t comfortable escalating concerns about possible wrongdoing.  What could be ethically wrong with sabotaging modifications and work outs or fabricating notes and assignments in order to foreclose?  Past Whistleblowers like ex-Citi employee Richard Bowen know all about the consequences of exposing wrong doing at Citi- it is a career ender.

Corbat claims he was shocked by the banking industry’s image problem overall. “If you look today at what the poll numbers say, what the general population says, there is distrust of banks,” Mr. Corbat said in an interview.  Is Corbat living under a rock?

The Wall Street Journal reports, “Citigroup is embracing Dr. Miller’s idea (influenced by Plato and Aristotle) of three lenses to apply in ethical decision-making, an approach: Is it right, good and fitting?” In other words, in Citispeak-is it right to gain an advantage, profitable and easy to implement?

Citigroup executives also pose these questions:  Is it in our clients’ interest, does it create economic value, and is it systemically responsible?”  Who is the client?  Fannie Mae or Freddie Mac?  It isn’t the homeowner or consumer.  These questions actually promote unethical behavior instead of prevent it when posed by upper management who are rewarded for improving Citi’s bottom line.

At Lendinglies we have a client who has been in litigation since 2003 with CitiMortgage.  To date, Citi has revoked a completed modification, prevented a sale of the home, stripped all of the equity and most recently in mid-appeal altered an Appellee brief by slipping an endorsement onto a note, altering an affidavit, and thus committed fraud and fraud on the court.  Citi won the appeal by resorting to fraud and then directed its attorneys to break into the client’s occupied home.  The case is ongoing.   Citi is probably the most corrupt servicer in America and yet they hide behind the pathetic and obvious ruse of hiring an “ethicist”.

Citi claims they are sharing these ideas with employees worldwide, working these concepts into its ethics and training manuals and mission statement, and posting on the wall of its Manhattan headquarters lobby.  This strategy is akin to inviting PETA for a strategy lunch at the Chicago cattle feedlots while trading cattle futures.

Every Citi operation has been cited for fraud and ethical transgressions while fined billions of dollars.  Forex issues, currency rigging, bribery, forgery, fraud, racketeering and employee violations are among the violations Citi has faced and yet nothing changes until the next controversy emerges.  Just because the devil slips on a halo for the night doesn’t cancel out the horns below.  Citi’s culture is ingrained in predatory and fraudulent practices that create an unfair competitive advantage.  Discussions about transparency, trust and developing an ethical culture is a smoke screen.  Citi is rotten from top to bottom.

Citi has recently started unloading its servicing rights after a decade of fabricating documents, forging signatures, breaking into homes, revoking completed modifications, ignoring bankruptcy automatic stays and grossly destroying the lives of those homeowners who were unfortunate enough to have their servicing rights sold to Citi.  Mortgage servicing is a highly profitable activity- especially when you never paid a dime for a loan.  Likely the only reason Citi is offloading servicing rights is to create some distance from its fraudulent practices.

Citi is built on a foundation of unfair competition, operating above the law, and by the theft of other’s resources.  It is what Citi knows and it is entrenched in Citi’s DNA.  The American Bank is free to racketeer, laundry money, rig currencies and break federal law with impunity.  If anyone, especially Dr. David Miller thinks an ethics class and a few posters are going to change the Citi corporate culture- your Ph.D. isn’t worth jack.

Evidence shows Citi will not change its culture and has never followed an ethics plan despite implementing others in the past. Citi may have killed many trees to publish its 60-page ethics policy; but only harsh financial penalties coupled with prison time is going to change Citi’s organized crime operation.

Dr. Miller naively believes banks can change and likely knows very little about how a bank like Citi operates. “To make the assumption that an organization cannot be more ethical than it was is to give up before you start… It is not naive. It is a realistic and necessary goal.”    Okay Dr. Miller, let’s see how your Ivy League theories play out in the real world.  Most of us on this blog know that your ethical ideologies will never gain traction in an organization built on greed, deception and profits at any cost.

2d Florida DCA Knocks Down CitiMortgage – PennyMac Dance

“In order to establish its entitlement to enforce the lost note, PennyMac could establish standing “through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer.” BAC Funding Consortium, 28 So. 3d at 939. PennyMac’s filings in support of its motion for summary judgment did not present evidence of any of these things. In the absence of such evidence, the order of substitution standing alone was ineffective to establish PennyMac’s entitlement to enforce the lost note. See Geweye v. Ventures Trust 2013-I-H-R, 189 So. 3d 231, 233 (Fla. 2d DCA 2016); Creadon v. U.S. Bank, N.A., 166 So. 3d 952, 953-54 (Fla. 2d DCA 2015); Sandefur v. RVS Capital, LLC, 183 So. 3d 1258, 1260 (Fla. 4th DCA 2016); Lamb, 174 So. 3d at 1040-41.”

Get a consult! 202-838-6345 to schedule CONSULT, leave message or make payments.


The Second  District Court of Appeal in Florida has issued an opinion that diligently follows the law and the facts. This decision should serve as the blue print of foreclosure defense in all cases involving the dance between CitiMortgage and PennyMac. It is a shell game and the Court obviously is growing weary of the claims of “immunity” issued by the banks in foreclosure cases.

It all starts with self serving proclamations of owning the note, the mortgage or both. It NEVER starts with an allegation or assertion of ownership of the debt because they don’t own the debt. When the note was made payable to someone other than the owner of the debt, there could be no merger wherein the debt became merged into the note. And the reason for all this is that the mega banks were engaged in the a program of institutionalizing theft from investors.

The aim of the game is to get a court to enter an order which then raises the presumption that everything that preceded the entry of the order was legal — a presumption that is hard to rebut. So the strategic path for borrowers is to show that the program or scheme is not legal before the foreclosure is entered or to attack for damages based upon fraud after the foreclosure judgment or sale is entered.

In this decision lies the foundation for most cases involving foreclosure defense. The reader is encouraged to use the above link to read and then reread the decision. My comment on the highlights follows:

“In order to establish its entitlement to enforce the lost note, PennyMac could establish standing “through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer.” BAC Funding Consortium, 28 So. 3d at 939.

COMMENT: Merely alleging that it was the holder of a note when it was lost is insufficient to assume standing to enter a judgment on behalf of the foreclosing party (in this case PennyMac). In the absence of physical possession of the note standing can be established by (1) EVIDENCE of (2) a VALID assignment or (3) PROOF of PURCHASE OF THE DEBT or (4) evidence of “effective” transfer.

The steamrolling presumptions that buried millions of homeowners are now hitting the wall. The main point here is that an allegation is not enough and most importantly standing to file suit does NOT mean that the party has standing for the entry of judgment in favor of the foreclosing party.

The error that both courts and lawyers for litigants have consistently made for the last 10 years is their assumption that a sufficient allegation that a party has legal standing at the time suit is filed (or notice of sale, notice of default, notice of acceleration) means that the party has proven standing with evidence. It does not. Like any other allegation it is subject to being discredited or rebutted. AND it requires proof, which places the burden of persuasion upon the party making that allegation. It is neither the law of the case nor subject to any twisted notion of res judicata to assume that matter is proven when merely alleged.

The 2d DCA shows it has a firm grasp of this basic fact. The fact that standing was challenged in an unsuccessful motion to dismiss does NOT mean the matter is resolved or has been litigated.

Fundamentally the issue in all these cases is about money. The question of foreclosure should always have been a secondary issue of much less importance. American jurisprudence is filled with recitations of how foreclosure was a severe remedy that requires greater scrutiny by the court. Up until about 15 years ago, Judges would sift through the paperwork and deny foreclosure even if it was uncontested if the paperwork raises some unanswered questions. That tradition follows centuries of tradition and doctrine.

Thus the 2d DCA has placed purchasing of the debt and ownership of the debt in the center of the table. In the absence of a party who owns the actual debt, it is possible for a party to seek enforcement of the note, the mortgage or both — but that can only be true if the foreclosing party has indeed acquired the right to enforce the instrument from an instrument signed by the owner of the debt; simply alleging that one is owner of the note has no effect at trial or summary judgment as to evidence of ownership of the debt. And without evidence of the true owner of the debt being the payee on the note, the grant of authority through Powers of Attorney, Servicing agreements or anything else is evidence of nothing.

The use of the word “effective” (i.e., effective transfer) in this decision also opens the door to the rescission debate that was actually settled by the unanimous decision of the Supreme Court of the United States in Jesinoski v Countrywide. What does it mean that something is effective? Reviewing court decisions and legislative histories it is clear that “effective” means that the event or thing has already happened at the moment of its rendering. Thus the court here is talking about an effective assignment (not just a piece of paper entitled “assignment”), meaning that all the elements of a proper assignment had been met, and NOT just the writing or execution of the instrument. It is not effective if the elements are missing. And the elements are missing if the proponent of the assignment does not prove the elements — not just allege them.

There is a difference between pleading and proof.

In the absence of such evidence, the order of substitution standing alone was ineffective to establish PennyMac’s entitlement to enforce the lost note. See Geweye v. Ventures Trust 2013-I-H-R, 189 So. 3d 231, 233 (Fla. 2d DCA 2016); Creadon v. U.S. Bank, N.A., 166 So. 3d 952, 953-54 (Fla. 2d DCA 2015); Sandefur v. RVS Capital, LLC, 183 So. 3d 1258, 1260 (Fla. 4th DCA 2016); Lamb, 174 So. 3d at 1040-41.”

COMMENT: This addresses the musical chairs tactics that have perplexed the Courts, borrowers and attorneys for nearly 2 decades. The court here is presenting for consideration the notion that substitution of parties does not confer anything on the apparent successor or new foreclosing party. What it DOES accomplish is removing the original party from having any legal standing for judgment to be entered in its favor. The claim of “succession”must be proven by the party making the claim — not by the party defending. What it does NOT accomplish is bootstrapping the allegations of standing from the original plaintiff or foreclosing party to a new party also having standing to pursue the judgment.

In all events therefore, the party alleging and/or asserting standing must prove it before the homeowner is required to rebut or even cross examine it.



Houk v. PennyMAC CORP. | FL 2DCA – PennyMac failed to meet its burden of showing the nonexistence of a genuine issue of material fact regarding its entitlement to enforce the lost note.

Hat tip to


LANE A. HOUK, Appellant,

Case No. 2D15-2583.District Court of Appeal of Florida, Second District.Opinion filed February 10, 2017.Appeal from the Circuit Court for Lee County; Thomas S. Reese, Senior Judge.

Mark P. Stopa of Stopa Law Firm, Tampa, for Appellant.

Nancy M. Wallace of Akerman LLP, Tallahassee; William P. Heller and Marc J. Gottlieb of Akerman LLP, Fort Lauderdale; and Kathryn B. Hoeck of Akerman LLP, Orlando, for Appellee, PennyMac Corp.

No appearance for remaining Appellees.


Lane A. Houk challenges a final summary judgment of foreclosure entered in favor of PennyMac Corp., an entity that was substituted as the party plaintiff in place of CitiMortgage, Inc., during the pendency of the litigation in the circuit court. Because a genuine issue of material fact exists regarding PennyMac’s standing to foreclose, we reverse.


On September 27, 2005, Mr. Houk executed a note for $584,800 in favor of Cherry Creek Mortgage Co., Inc. Mr. Houk and his wife executed a mortgage on real property in Lee County to secure payment of the note on the same day. A stamp with a signature appearing on a copy of the note indicates that Cherry Creek indorsed the note to the order of CitiMortgage.

On January 11, 2008, CitiMortgage filed a two-count complaint against Mr. and Mrs. Houk and other defendants. Count I of the complaint sought the foreclosure of the note and mortgage. Count II requested the reestablishment of the note that CitiMortgage alleged had been lost. In an affidavit of lost note that was subsequently filed in the case, a document control officer for CitiMortgage stated that the note had been lost or destroyed while it was in the possession of the law firm that was responsible for filing the foreclosure action.[1]

On May 20, 2013, CitiMortgage filed an unsworn motion to substitute party plaintiff seeking the substitution of PennyMac as plaintiff. The motion stated, in pertinent part: “Subsequent to the filing of the present action, the underlying note and mortgage were transferred.” A copy of a recorded assignment of mortgage from CitiMortgage to PennyMac was attached to the motion. The circuit court entered an order granting the motion on the same day that it was filed.

After the entry of the order of substitution, PennyMac filed a second amended verified complaint seeking both foreclosure and reestablishment of the lost note. In Count I, PennyMac alleged, in pertinent part:

4. CitiMortgage, Inc. subsequently transferred all rights in the note and mortgage to PennyMac Corp.

5. PennyMac Corp. is entitled to enforce the mortgage and mortgage note pursuant to Florida Statutes § 673.3011(3) as a person not in possession of the instrument who is entitled to enforce the instrument. PennyMac Corp. is entitled to enforce the instrument, but has lost the Mortgage Note pursuant to Florida Statutes § 673.3091.

In paragraph 25 of Count II, PennyMac alleged, in pertinent part: “Plaintiff was in possession of the Note and entitled to enforce it when loss of possession occurred or Plaintiff has been assigned the right to enforce the Note.”

Mr. Houk filed an answer to the second amended complaint. In his answer, Mr. Houk generally denied the material allegations of the complaint. He also raised ten affirmative defenses, including the defense that PennyMac lacked standing and that CitiMortgage lacked standing to enforce the note when it filed the action.

PennyMac filed a motion for summary judgment with supporting affidavits. It subsequently filed an amended motion for summary judgment. In its motion, PennyMac sought both foreclosure of the mortgage and reestablishment of the note. On February 25, 2015, the circuit court held a hearing on the amended motion for summary judgment. There is no transcript of this hearing, and the parties have not prepared a statement of the proceedings in accordance with Florida Rule of Appellate Procedure 9.200(b)(4). At the conclusion of the hearing, the circuit court entered a final judgment of foreclosure. Strangely, the final judgment does not include a provision reestablishing the lost note. Mr. Houk filed a motion for rehearing that was denied. This appeal followed.


On appeal, Mr. Houk raises two issues. First, he argues that the circuit court erred in entering the summary judgment because PennyMac failed to refute his affirmative defenses in its amended motion for summary judgment. Second, Mr. Houk contends that the entry of the summary judgment was error because PennyMac failed to establish its standing to foreclose. We need address only Mr. Houk’s second issue.


Before considering the parties’ arguments regarding the issue of standing, it is appropriate to review what PennyMac was required to demonstrate in order to establish its entitlement to enforce the note. PennyMac had to establish that CitiMortgage had standing when the complaint was filed and its own standing when the final judgment was entered. See Lamb v. Nationstar Mortg., LLC, 174 So. 3d 1039, 1040 (Fla. 4th DCA 2015). Section 673.3011, Florida Statutes (2012), addresses the question of how one may qualify as a person entitled to enforce an instrument:

The term “person entitled to enforce” an instrument means:

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder; or

(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s. 673.3091 or s. 673.4181(4).

A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

In this case, PennyMac’s claim was that the note had been lost after it had been indorsed by Cherry Creek to the order of CitiMortgage. Therefore, PennyMac had to satisfy the requirements outlined in section 673.3091 in order to prevail. See Federal Nat’l Mortg. Ass’n v. McFadyen, 194 So. 3d 418, 420 (Fla. 3d DCA 2016).

Section 673.3091 provides, in pertinent part, as follows:

(1) A person not in possession of an instrument is entitled to enforce the instrument if:

(a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;

(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and

(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

(2) A person seeking enforcement of an instrument under subsection (1) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, s. 673.3081 applies to the case as if the person seeking enforcement had produced the instrument.

It was CitiMortgage—not PennyMac—that was entitled to enforce the note when it was lost. Therefore, PennyMac had to establish that it had directly or indirectly acquired ownership of the note from CitiMortgage. See § 673.3091(1).

In the Lamb case, the Fourth District outlined what a substituted plaintiff seeking to enforce an instrument indorsed to the original plaintiff must establish as follows:

“When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person.” § 673.2051(1), Fla. Stat. (2013). Where a bank is seeking to enforce a note which is specially indorsed to another, it may prove standing ” `through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer.’” Stone v. BankUnited, 115 So. 3d 411, 413 (Fla. 2d DCA 2013) (quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 939 (Fla. 2d DCA 2010)); see also Hunter v. Aurora Loan Servs., LLC, 137 So. 3d 570, 573 (Fla. 1st DCA), review denied, 157 So. 3d 1040 (Fla. 2014); Dixon [v. Express Equity Lending Grp., LLLP], 125 So. 3d [965, 967 (Fla. 4th DCA 2013)] (“`[T]he plaintiff must submit the note bearing a special [i]ndorsement in favor of the plaintiff, an assignment from payee to the plaintiff or an affidavit of ownership proving its status as holder of the note.’”) (quoting Rigby v. Wells Fargo Bank, N.A., 84 So. 3d 1195, 1196 (Fla. 4th DCA 2012)). “A witness who testifies at trial as to the date a bank became the owner of the note can serve the same purpose as an affidavit of ownership.” Sosa v. U.S. Bank Nat’l Ass’n, 153 So. 3d 950, 951 (Fla. 4th DCA 2014).

Lamb, 174 So. 3d at 1040-41. With these principles in mind, we turn to the parties’ arguments about whether PennyMac established the nonexistence of a material fact about its entitlement to enforce the note.


A. Introduction

Mr. Houk concedes that the affidavit of lost note with the copy of the note attached was sufficient to establish CitiMortgage’s entitlement to enforce the note when the complaint was filed. Instead, Mr. Houk contends that PennyMac failed to establish its entitlement to enforce the note at the time of the entry of the summary judgment of foreclosure. In response to Mr. Houk’s challenge to its entitlement to enforce the note, PennyMac raises five arguments. First, the absence of a transcript of the hearing on the motion for summary judgment “demands affirmance.” Second, the order substituting PennyMac as the party plaintiff was sufficient to give it standing to enforce the lost note. Third, the assignment of mortgage was sufficient to establish its standing to foreclose. Fourth, the allegations of the motion to substitute and the verified second amended complaint were sufficient to establish its entitlement to enforce the lost note. Finally, PennyMac had standing to foreclose as the servicer of the loan. We will consider PennyMac’s arguments separately below.

B. The Absence of a Transcript

PennyMac correctly notes that the record on appeal does not include a transcript of the hearing on the amended motion for summary judgment or a statement of the proceedings prepared in accordance with Florida Rule of Appellate Procedure 9.200(b)(4). “However, hearing transcripts ordinarily are not necessary for appellate review of a summary judgment.” Shahar v. Green Tree Servicing LLC, 125 So. 3d 251, 254 (Fla. 4th DCA 2013). We join the Fourth District in agreeing with the Third District, which has addressed this question as follows:

It is the burden of the appellant to bring up a proper record for consideration of the issues presented on appeal. Where the appeal is from a summary judgment, the appellant must bring up the summary judgment record, that is, the motion, supporting and opposing papers, and other matters of record which were pertinent to the summary judgment motion. Those are the portions of the record essential to a determination whether summary judgment was properly entered. However, the hearing on a motion for summary judgment consists of the legal argument of counsel, not the taking of evidence. Consequently, it is not necessary to procure a transcript of the summary judgment hearing, although it is permissible and often helpful to do so.

Seal Prods. v. Mansfield, 705 So. 2d 973, 975 (Fla. 3d DCA 1998) (citations omitted); see also Inglis v. Casselberry, 200 So. 3d 206, 212 (Fla. 2d DCA 2016) (citing Mansfield for the foregoing proposition with approval).

In this case, the record includes the operative complaint, Mr. Houk’s answer and affirmative defenses, the motion and the order for substitution of the plaintiff, the amended motion for summary judgment, and the supporting and opposing affidavits, including the affidavit of lost note. Thus we have all of the portions of the record necessary for us to determine whether the summary judgment was properly entered. Under these circumstances, a transcript of the hearing on the motion for summary judgment is not critical to a determination of this appeal.

C. The Sufficiency of the Order of Substitution

PennyMac asserts that it “became entitled to enforce the lost note when it was substituted as party plaintiff.” According to PennyMac, its standing derives from CitiMortgage, the holder of the note when it was lost or destroyed.

Mr. Houk concedes that CitiMortgage had standing to enforce the note when it filed the original complaint. But PennyMac also had to establish its standing to enforce the note at the time of the entry of judgment. See Russell v. Aurora Loan Servs., LLC, 163 So. 3d 639, 642 (Fla. 2d DCA 2015). Here, the lost note had been specially indorsed to CitiMortgage. In order to establish its entitlement to enforce the lost note, PennyMac could establish standing “through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer.” BAC Funding Consortium, 28 So. 3d at 939. PennyMac’s filings in support of its motion for summary judgment did not present evidence of any of these things. In the absence of such evidence, the order of substitution standing alone was ineffective to establish PennyMac’s entitlement to enforce the lost note. See Geweye v. Ventures Trust 2013-I-H-R, 189 So. 3d 231, 233 (Fla. 2d DCA 2016); Creadon v. U.S. Bank, N.A., 166 So. 3d 952, 953-54 (Fla. 2d DCA 2015); Sandefur v. RVS Capital, LLC, 183 So. 3d 1258, 1260 (Fla. 4th DCA 2016); Lamb, 174 So. 3d at 1040-41.

In support of its argument that it has standing to enforce the lost note derived from CitiMortgage through the order of substitution, PennyMac relies on the decision in Brandenburg v. Residential Credit Solutions, Inc., 137 So. 3d 604 (Fla. 4th DCA 2014). We find the decision in Brandenburg to be distinguishable because its facts are substantially different from the facts in this case. In Brandenburg, the Fourth District affirmed a final judgment of foreclosure in favor of Residential Credit Solutions, Inc. (RTS). Id. at 606. The original plaintiff in the action and prior holder of the note was Amtrust Bank (Amtrust). Id. at 605. During the course of the litigation, RTS was substituted as the party plaintiff in place of Amtrust. Id. The issue before the Fourth District in Brandenburg was whether Amtrust had standing at the inception of the foreclosure action. Id. The Fourth District concluded that the evidence established that Amtrust had standing to foreclose when it filed the complaint. Id. at 605-06. In affirming the final summary judgment of foreclosure, the Fourth District specifically noted that RTS had standing because it had “acquired the note and mortgage from the prior holder.” Id. at 605. In Brandenburg, it was RTS’s acquisition of the note and mortgage from the prior holder—coupled with the order substituting it as party plaintiff—that enabled RTS to pursue the foreclosure to judgment. In the case before us, PennyMac failed to make a sufficient showing that it had acquired the note from the prior holder, CitiMortgage. Thus, unlike in Brandenburg, the order of substitution was unavailing to give PennyMac standing to enforce the note. It follows that PennyMac’s reliance on Brandenburg is misplaced.

D. The Assignment of Mortgage

PennyMac relies on the copy of the recorded assignment of mortgage that was attached to its motion to substitute plaintiff as being sufficient to establish its standing. According to PennyMac, “[t]he assignment of mortgage showed the mortgage was assigned `with all rights due or to become due thereon.’ This would include monies owed on the note. See § 701.01, Fla. Stat. [(2012)].” This argument falls short of the mark for several reasons.

First, the assignment transferred only the mortgage, not the note. “The mortgage follows the assignment of the promissory note, but an assignment of the mortgage without an assignment of the debt creates no right in the assignee.” Tilus v. AS Michai LLC, 161 So. 3d 1284, 1286 (Fla. 4th DCA 2015) (citing Bristol v. Wells Fargo Bank, Nat’l Ass’n, 137 So. 3d 1130, 1133 (Fla. 4th DCA 2014)). PennyMac did not acquire standing to foreclose based on an assignment of only the mortgage. See Eaddy v. Bank of America, N.A., 197 So. 3d 1278, 1280 (Fla. 2d DCA 2016); Caballero v. U.S. Bank Nat’l Ass’n ex rel. RASC 2006-EMX7, 189 So. 3d 1044, 1046 (Fla. 2d DCA 2016); Geweye, 189 So. 3d at 233; Lamb, 174 So. 3d at 1041.

Second, the only evidence of the assignment of the mortgage was the copy attached to the unsworn motion for substitution. Mr. Houk’s pleadings did not admit the genuineness of the assignment. The copy of the assignment was not a certified copy, and none of the affidavits filed by PennyMac attested to the authenticity of the document. “Merely attaching documents which are not `sworn to or certified’ to a motion for summary judgment does not, without more, satisfy the procedural strictures inherent in [Florida Rule of Civil Procedure] 1.510(e).” Bifulco v. State Farm Mut. Auto. Ins. Co., 693 So. 2d 707, 709 (Fla. 4th DCA 1997). In the absence of an admission or appropriate proof of the authenticity of the assignment, it could not properly be considered as evidence in support of PennyMac’s amended motion for summary judgment. See DiSalvo v. SunTrust Mortg., Inc., 115 So. 3d 438, 439-40 (Fla. 2d DCA 2013); Bryson v. Branch Banking & Trust Co., 75 So. 3d 783, 786 (Fla. 2d DCA 2011); Toyos v. Helm Bank, USA, 187 So. 3d 1287, 1290 (Fla. 4th DCA 2016); Rodriguez v. Tri-Square Const., Inc., 635 So. 2d 125, 126-27 (Fla. 3d DCA 1994).

E. The Motion to Substitute and the Verified Complaint

PennyMac points out that “[b]oth the motion to substitute plaintiff and the verified [second] amended complaint stated CitiMortgage transferred its interest in the note and mortgage to PennyMac.” PennyMac contends that the allegations in these papers were sufficient to establish its entitlement to enforce the lost note. We disagree for several reasons.

First, the motion to substitute was unsworn. Therefore, it was plainly insufficient as a basis for supporting a motion for summary judgment. See Fla. R. Civ. P. 1.510(e). However, PennyMac’s second amended complaint was verified. With regard to the sufficiency of a verified complaint to support a motion for summary judgment, this court has said:

We acknowledge that “[a] verified complaint may serve the same purpose as an affidavit supporting or opposing a motion for summary judgment.” “However, in order to be so considered, the allegations of the verified complaint must meet the requirements of the rule governing supporting and opposing affidavits.” Rule 1.510(e), in turn, provides that affidavits must be based on personal knowledge and shall “show affirmatively that the affiant is competent to testify to the matters stated therein.” A verification which is improperly based on information and belief is insufficient to entitle the verifying party to relief because the verification is qualified in nature.

Ballinger v. Bay Gulf Credit Union, 51 So. 3d 528, 529 (Fla. 2d DCA 2010) (citations omitted). In this case, the verification of the complaint in accordance with Florida Rule of Civil Procedure 1.110(b) stated: “Under penalty of perjury, I declare that I have read the foregoing, and the facts alleged therein are true and correct to the best of my knowledge and belief.” Where, as in this case, a verification of a complaint is based on knowledge and belief and fails to show that the affiant had personal knowledge of the matters stated in the complaint, the trial court cannot consider the verified complaint as a basis for the entry of summary judgment. See Ballinger, 51 So. 3d at 530; Colon v. JP Morgan Chase Bank, N.A., 162 So. 3d 195, 199 (Fla. 5th DCA 2015); see also Lindgren v. Deutsche Bank Nat’l Trust Co., 115 So. 3d 1076, 1076 (Fla. 4th DCA 2013) (finding a verification based on “information and belief” to be insufficient for purposes of summary judgment).

Second, the allegations of the second amended complaint regarding PennyMac’s standing to enforce the note were conclusory in nature. The pertinent allegations did not state any facts regarding PennyMac’s claim that CitiMortgage had “transferred all rights in the note and mortgage to PennyMac Corp.” This conclusory statement was insufficient to sustain PennyMac’s burden for summary judgment. See Jones Constr. Co. of Cent. Fla., Inc. v. Fla. Workers’ Comp. JUA, Inc., 793 So. 2d 978, 980 (Fla. 2d DCA 2001) (holding that an affidavit containing “only conclusory statements of ultimate fact [was] insufficient to sustain the movant’s burden of demonstrating the absence of any genuine issue of material fact”); Seinfeld v. Commercial Bank & Trust Co., 405 So. 2d 1039, 1041 (Fla. 3d DCA 1981) (stating that general statements in an affidavit, which are framed only in conclusions of law, do not satisfy the movant’s burden on a motion for summary judgment).

Third, the allegations of the second amended complaint regarding PennyMac’s claim to entitlement to enforce the note are in hopeless conflict with one of the affidavits that PennyMac itself filed in support of its amended motion for summary judgment. PennyMac filed an Affidavit of Indebtedness sworn to by a “default specialist” for PennyMac Loan Services, LLC, the alleged servicer of the loan for PennyMac. In this affidavit, the default specialist stated that PennyMac “is the holder of said Note and Mortgage.”[2] Thus PennyMac’s own affidavit undercut and contradicted the theory advanced in the complaint that it qualified under section 673.3011(3) as a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 673.3091. Unquestionably, PennyMac could not meet its burden to establish the nonexistence of a material fact regarding its standing when the affidavit that it filed in support of its motion was in express and irreconcilable conflict with the theory of standing alleged in its operative complaint.

F. Standing as the Loan Servicer

Finally, PennyMac asserts that it “had standing as the loan servicer.” This argument is without merit. We recognize that “[a] servicer that is not the holder of the note may have standing to commence a foreclosure action on behalf of the real party in interest, but it must present evidence, such as an affidavit or a pooling and servicing agreement, demonstrating that the real party in interest granted the servicer authority to enforce the note.” Rodriguez v. Wells Fargo Bank, N.A., 178 So. 3d 62, 63 (Fla. 4th DCA 2015) (citing Elston/Leetsdale, LLC v. CWCapital Asset Mgmt. LLC, 87 So. 3d 14, 17 (Fla. 4th DCA 2012)). But in this case, two of the affidavits filed in support of the amended motion for summary judgment recite that the servicer for Mr. Houk’s loan is PennyMac Loan Services, LLC, not the plaintiff, PennyMac Corp. In making the argument about its purported standing as the loan servicer, PennyMac seems to have forgotten or ignored its own affidavits.


For the foregoing reasons, PennyMac failed to meet its burden of showing the nonexistence of a genuine issue of material fact regarding its entitlement to enforce the lost note. Accordingly, we reverse the final summary judgment of foreclosure and remand this case to the circuit court for further proceedings.

Reversed and remanded.



[1] Counsel for PennyMac had no involvement in the loss of the note.

[2] Because the note had been lost long before the alleged transfer from CitiMortgage, it would be a physical impossibility for PennyMac to be a holder of the note. “`Holder’ means: (a) The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. . . .” § 671.201(21)(a), Fla. Stat. (2012). “To hold a note under the Uniform Commercial Code ordinarily connotes possession of the document itself.” Phan v. Deutsche Bank Nat’l Trust Co., ex rel. First Franklin Mortg. Loan Trust 2006-FF11, 198 So. 3d 744, 747 (Fla. 2d DCA 2016).


Here’s how and why CitiMortgage is leaving mortgage servicing

Editor’s Note:  CitiMortgage is the 6th largest loan servicer in the United States.  Citi is now exiting the lucrative industry of mortgage servicing and foreclosing on loans it doesn’t own.  Citi was fined $28.8 million dollars last week for servicing improprieties.  By selling the servicing rights to these loans, CitiMortgage creates another layer of confusion and further distances them from their fraudulent scheme.  Stay tuned for further developments.

A deeper dive into a complex deal

CitiMortgage surprised few in the housing business on Monday when it announced that it agreed to a massive mortgage servicing rights deal with New Residential Investment and Nationstar Mortgage that will transfer the servicing rights for approximately 780,000 mortgages away from CitiMortgage.

As it often is with deals of this type, the devil is in the details.

And one of the details of this deal is the MSR sale is a precursor to CitiMortgage completely exiting the mortgage servicing business.

In addition to selling the mortgage servicing rights on approximately $97 billion in unpaid principal balance to New Residential, Citi said that it also entered into a separate subservicing agreement with Cenlar that will effectively end Citi’s mortgage servicing business.

Here’s a break down of how the deal works, and why Citi plans to leave mortgage servicing behind.

According to Citi, the deals with New Residential and Cenlar will end Citi’s mortgage servicing operations “by the end of 2018.”

Breakdown of Citi deal with New Residential

The deal with New Residential will see Citi sell all of the mortgage servicing rights to its portfolio of loans that are owned by either Fannie Mae or Freddie Mac and did not come from Citibank retail bank customers.

According to a separate announcement from New Residential, it will pay $950 million to Citi for the MSRs. The deal also includes “related servicer advances” from CitiMortgage, for which New Residential will pay an additional $32 million.

Before the deal is completed, it needs to be approved by Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency. New Residential said that it expects the deal to close in the first quarter of 2017, while Citi said it anticipates the deal closing in the first half of 2017.

While the deal is awaiting approval, Citi will continue to service the mortgages, before transfer the servicing to Nationstar, which will subservice the loans for New Residential.

Nationstar said that expects the MSRs to board beginning in the second quarter of this year and continue boarding throughout 2017.

How is New Residential paying for the deal

As stated above, New Residential plans to pay approximately $982 million to Citi for the MSRs. New Residential separately announced Monday that it plans to pay for the Citi MSR acquisitions with a stock offering of nearly 50 million shares.

According to New Residential, it plans to use the proceeds of the stock offering to “fund a portion” of the Citi MSR deal, although New Residential does not state at this time how much of the deal it hopes to fund with the stock offering.

Breakdown of Citi deal with Cenlar

For all of Citi’s remaining mortgage servicing rights, meaning the MSRs for the mortgages originated and owned by Citi for Citi’s retail bank clients, the servicing will now go to Cenlar.

According to Citi, the subservicing agreement with Cenlar covers the remaining Citi-owned loans and “certain other mortgage servicing rights” that are not being sold to New Residential.

Citi said that the servicing on these loans is expected to be transferred to Cenlar beginning in 2018.

As part of its assumption of the servicing obligations, Cenlar will provide core operations, customer service and default operations, Citi said in its announcement.

Going forward, the servicing for Citi’s retail banking clients will be retained by Citi but will be included in the subservicing contract with Cenlar, meaning that all loans for Citi retail bank clients will be subserviced by Cenlar.

According to a spokesperson for Citi, existing and new loans for Citi retail clients will begin transferring to Cenlar beginning in 2018.  In the interim, various stages of the transaction will take place over the next two years.

“The actions will be conducted in waves to help ensure a smooth transition,” the Citi spokesperson said.

Why is Citi exiting mortgage servicing?

Citi did not provide much of an explanation as why to it plans to exit mortgage servicing, but perhaps the regulatory overhang became more than the bank could bear.

Case in point, one week ago, the Consumer Financial Protection Bureau fined CitiFinancial Servicing and CitiMortgage a total of $29 million for foreclosure-related issues.

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” CFPB Director Richard Cordray said last week. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.”

Now, Citi is laying out its plans to leave mortgage servicing altogether.

The bank said that going forward it plans to “intensify focus” on mortgage originations, and that mortgage servicing deals will “simplify CitiMortgage’s operations, reduce expenses, and improve returns on capital.”

The bank said that the New Residential and Cenlar deals are expected to negatively impact the bank’s pre-tax results by approximately $400 million, including a loss on sale and certain related transaction costs, in the first quarter of 2017.

Overall, excluding these items, the deals are expected to have a minimal impact on operating revenues in 2017, with expense benefits beginning to accrue in 2018 as servicing is transferred to Cenlar and fully realized in 2019, Citi said.

“Over the past several years, we have made significant progress transforming our business to deliver a sustainable annuity of growth,” said CD Davies, president and CEO of CitiMortgage.

“CitiMortgage remains a critical part of serving our customers, deepening relationships with existing and prospective retail bank clients and driving growth in our core markets,” Davies continued. “We will continue to originate loans for current and new clients.”

CitiMortgage Engineers another Default by providing Inaccurate Information

Couple Loses Home To Bank They Thought Was Helping Them

Editor’s Note:  At Livinglies we have noticed a pattern of CitiMortgage deliberately providing inaccurate and conflicting information to homeowners to ensure a foreclosure will occur.  The story below is representative of the typical CitiMortgage modification or attempt to stave off foreclosure that results in foreclosure.


GRAPEVINE (CBS11) – Elizabeth and David Ball have 21 years of memories at their Grapevine home. Elizabeth recalled the time her kids learned how to ride a bike or where they skateboarded. Every street corner has memories, but they don’t have their home.

The couple told CBS11 they lost their home to a bank they believed was helping them keep it. They said the whole process caught them by surprise.

In 2014, Mr. Ball lost his job. He took up a freelance job with an unsteady income. They decided to modify their mortgage loan which would lower their monthly payments. “We didn’t want to have to dip into our savings,” Elizabeth Ball said.

They called CitiMortgage, their mortgage company and started their loan modification process.  “In one of the conversations, I was like should I make a house payment?” Elizabeth recalled asking the bank representative on the phone. “They were like no! Don’t do that because that will confuse the issue, that will really mess things up.”

As the couple started getting the documents together, they also started receiving foreclosure notices from CitiMortgage. Citi was working on their loan modification and their foreclosure.

They called the bank again. Elizabeth said the customer service rep told them not to worry, “She said, that department isn’t caught up with what we’re doing here in the modification department.”

Elizabeth and David say they trusted the service representatives they were speaking to.

“Never once did I truly believe that we were going to be foreclosed” Elizabeth said.

She believed everything was going to be take care of.

They recall the day when David received an eviction notice. Their home of 21 years was being foreclosed on and they had three days to get out of their home.

“I crumbled to the ground and sat there and cried and cried,” Elizabeth recalled.

The Consumer Finance Protection Bureau said it receives thousands of consumer complaints related to loan modifications and foreclosure. From July 2001 to March 2016, it has logged 223,000 mortgage related complaints.

Consumers told CFPB that lenders drag out the process by repeated requests to submit the same documentation. The CFPB report also states that lenders sent consumers conflicting foreclosure notices while the homeowners were trying to get help.

Molly Rogers, an attorney with legal aid in Austin, handles mortgage and foreclosure related cases. She said sometimes consumers don’t really know why their loan modification applications get rejected or take too long to complete.

She said consumers have 37 days before any scheduled foreclosure sale. But it depends on if you have a completed application.

“Once that complete application is on file, the bank has to stop the foreclosure from going forward,” she said. But she said the bank decides when the application is complete.

Elizabeth and David Ball (CBS11)

Elizabeth and David Ball (CBS11)

The Balls also believe that Citi dual-tracked their loan. It happens when a mortgage company continues foreclosure proceedings while considering an application for a loan modification at the same time.

That’s illegal under federal regulations.

Citi told CBS11 “Citi works closely with financially distressed borrowers to help them avoid foreclosure and remain in their homes.  We explore potential options which may include loan modifications, forbearance or other financial relief plans. If, however, there is no plan in place, and we do not receive a complete financial information package from the homeowner prior to the foreclosure sale, the foreclosure process moves forward.  In such cases, dual tracking regulations do not apply to the loan. ”

The couple feel like they were taken advantage, “I trusted the mortgage company,” she said. “I worked with them in good faith.”

If you’re having trouble with loan modification. Rogers says you can seek advice from a certified HUD counselor or get an attorney to help you thorough the process. You can also file a complaint with the CFPB.  She also says do not stop payment on your home, even if you hear conflicting information.

(©2016 CBS Local Media, a division of CBS Radio Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

4th DCA Florida: Exploding the Merger Myth

Achieving standing via merger also requires that the surviving entity prove that it “acquired all of [the absorbed entity’s] assets, including [the] note and mortgage, by virtue of the merger.”Fiorito v. JP Morgan Chase Bank, Nat’l Ass’n, 174 So. 3d 519, 521 (Fla. 4th DCA 2015).


Finally the courts are turning back to the simple rules of law that always applied until the era of false claims of securitization. Hopefully this decision will be persuasive authority in all jurisdictions. As stated in other cases, the banks can’t continue to operate using multiple choice assertions. Either their entity is real or it isn’t. Either they acquired the loan or they didn’t — and the fact that there was a merger does NOTHING for them in asserting transfer of the loan. They must show that the subject loan was in fact acquired by the surviving entity in the merger. This was always the law before and now we are simply turning back to it.

Unanimous Montana High Court Affirms $426,000 Damages Against Bayview

the “mistakes” of “lenders” are neither mistakes nor are the parties seeking foreclosures “lenders” or “servicers.”




In yet another case of illegal conduct in a foreclosure the high Court of Montana affirmed an award of $427,000 against Bayview who will undoubtedly get the money from CitiMortgage for whom they were fronting the foreclosure. As these cases increase in their frequency, judicial attitudes will change — specifically that the “mistakes” of “lenders” are neither mistakes nor are the parties seeking foreclosures “lenders” or “servicers.”

Some quotes from the case that are self-explanatory:

The total award includes damages and attorney’s fees awarded because Bayview Loan Servicing LLC of Coral Gables, Florida — despite losing their case — notified Robin and Kathleen Jacobson that it was adding over $50,000 of its attorney’s fees to their mortgage.

“We do not find error with the District Court’s damage award because it is reasonable compensation for the substantial injury and financial detriment suffered by the Jacobsons,” state Supreme Court Justice Michael Wheat wrote in the 5-0 ruling Wednesday.

The Jacobsons’ problems with Bayview haven’t ended, the couple’s attorney, Ray Kuntz, said Thursday. They can’t determine from county records to whom they should be making their mortgage payments and on Tuesday, Bayview sent them another default notice, Kuntz said.

Over the next several years Bayview encouraged the Jacobsons not to make mortgage payments so they could qualify for a loan modification, made false promises to them about modifying their loan and then misinformed them about their rights, court documents said.

Call now for our special on 1/2 hour consult with Neil Garfield, expert in the securitization of alleged mortgage loans. 954-495-9867 or 520-405-1688.


Why are modifications being undermined when they would so obviously preserve the value of the “loan?” The answer is because the real party in interest in the foreclosures is the servicer, not the trust, which doesn’t own the loan anyway, nor even the investor/beneficiaries, who reap very little out of the proceeds of foreclosure.

The servicer wants the loan to fail. The investor expects the servicer and trustee of the REMIC trust to make sure value is preserved. But that isn’t the game. If the property goes to foreclosure sale then the “servicer” can make its claim for “recovery” of “servicer advances.” The fact that “servicer advances” are made from a pool of funds established by investor money and the fact that the servicer accesses these funds to make payments, regardless of whether the borrower pays or not — all of that makes no difference in the game.

In that context a modified loan is worthless. A failed loan is the gold standard.


HAMP Modifications Sabotaged to Fail by the Usual Suspects

By William Hudson

Click to access Homeowners_Wrongfully_Terminated_Out_of_HAMP.pdf

On January 27, 2016 The Special Inspector General over the Troubled Asset Relief Program (SIGTARP) released data on the poorly executed and enforced Home Affordable Mortgage Program (“HAMP”) that shows that the banks not only have the right to modify loans they don’t own, but have no interest in helping homeowners save their homes through modification when they can set the homeowner up to fail.

HAMP was created to provide sustainable and affordable mortgage assistance to homeowners at risk of foreclosure but has instead forced many homeowners into foreclosure by requiring homeowners to miss payments, revoking approved modifications and a slew of other unethical practices.

The Inspector General writes that, “mortgage servicers administering HAMP will continue to need strict oversight in upcoming years because apparently the servicers are unable to implement and properly administer the program without resorting to sabotaging compliant homeowners.”

The audit notes that  the “largest seven mortgage servicers in HAMP over the most recent four quarters show disturbing and what should be unacceptable results, as 6 of 7 of the mortgage servicers had wrongfully terminated homeowners who were in “good standing”  with their HAMP modifications.”

These failure rates demonstrate that servicer misconduct is continuing to contribute to homeowners falling out of HAMP by terminating the agreement when homeowners are making timely payments.  This practice is an obvious attempt to put homeowners at risk of losing their home so that when the foreclosure occurs, the servicer can swoop in and steal the home while keeping all of the homeowner’s equity, payments and improvements.

This study provides further documentation that homeowners are being forced out of the HAMP program for no reason and that servicers are using HAMP as another tool to steal homes.  If the servicer can keep the homeowner in a state of vulnerability, create further arrearages and provide the homeowner contradictory and confusing information- their chances of taking back the home increase exponentially. This is the modification business model of the major loan servicers.

The servicers are running the show and the government is apparently impotent to stop them from their illegal tactics. The treasury admits that they have no idea how many other homeowners were forced out of HAMP.  I can attest that I was one of the homeowners forced out of a loan modification in which I was 100% compliant. For a year I repeatedly applied for modifications, sending in documentation and spending hours and hours going through CitiMortgage’s futile application process.  Either CitiMortgage representatives are completely incompetent or their modification process is intentionally set-up to create such a diabolical application process that most borrowers give up.

Thirteen applications later and a year later I was granted an “approved repayment plan” that required three timely payments before becoming permanent.  If all three payments were made  by the first of each month I would be given a permanent modification with no need for further qualification.  After making the third timely payment by certified mail I didn’t hear back from CitiMortgage. By then I was familiar with their lack of competence and accountability so I continued to make payments hoping I would hear from them any day.

When I received the “approved repayment plan” I celebrated thinking that I was finally free from seven years of servicer torment.  The modification would allow me to immediately sell the home in which I had several buyers- and make Citi 100% whole including being paid over 15k in fees they had assessed.  At the time I received the loan modification I had over 100k in equity.  I would have paid CitiMortgage any amount they claimed I owed to be free of their tyrannical servicing practices.

Not trusting CitiMortgage to honor their word- I called CitiMortgage and once again confirmed that “approved” meant “approved” and that I could prepare the home for sale. The CitiMortgage agent promised me that as long as all three payments were made it was a done deal.  I didn’t want any surprises down the road if they changed their minds.  The home needed some updating prior to being placed on the market so I took 35k from my retirement account and went to work renovating the home top to bottom.  By the time my third payment was made I had a beautifully restored home and two anxious buyers for the property.  I was close to grasping the golden ring…..until CitiMortgage grasped the ring right out of my hands.

When I didn’t hear from Citimortgage I continued to make the modification payments for three more months while waiting to hear from them about the new loan terms. Unbeknownst to me the modification payments I had made were not being applied to my loan but placed in a suspense account while CitiMortgage was continuing to add on late payments and other delinquent fees.  I had not agreed to this arrangement but was powerless to complain.

I finally received a letter from CitiMortgage stating my check (my fifth payment) was being returned to me with no reason provided. I knew CitiMortgage was up to something, so I checked the internet to discover that CitiMortgage was dual-tracking me and had filed to foreclose on me while compliant with the modification plan. To add further injury,  I received two more offers from CitiMortgage that week offering to modify my loan! CitiMortgage did not want full payment- they wanted my house and the financial windfall that follows a successful foreclosure.

It has now been six years and the house has sat vacant since Citi revoked my modification.  All the work I did has been reversed by humidity and vacancy.  I no longer have any equity in the property.  I sued CitiMortgage over this egregious bait and switch scheme and even provided evidence to the court that I was granted an “approved repayment plan” with no contingencies.  The judge in my case, with 20 percent of his retirement in CitiMortgage, did not recuse himself but instead threw out my entire complaint and provided no reason for his decision.  Not only did CitiMortgage get away with this fraud, the corrupt judge dismissed my case on summary judgement stating there was no controversy.  Even when you have irrefutable evidence of fraud- if you have a biased and unethical judge you will not prevail.   I reported my experience to SigTarp, the CFPB, FCC and the Office of the Comptroller- and not one agency bothered to respond to my complaint or sanction CitiMortgage for this blatant contract violation.  I requested that CitiMortgage return the modification payments they fraudulently extorted from me- and of course they refused.

My situation appears to be the norm, not the exception.  SigTarp reported that one out of every three homeowners in HAMP re-defaults on their payments. They suggest that the Treasury, “research and analyze whether, and to what extent, the conduct of HAMP mortgage servicers contributed to homeowners redefaulting on HAMP permanent mortgage modifications.”  I can tell them from experience that examining the behaviors and motivations of the servicers would be a great place to start. I can almost guarantee in most modification cases that it isn’t the homeowner who defaults.  In the first place, a homeowner who prevails in obtaining a loan modification may work diligently for years before being granted a modification and persevere against great odds! I would estimate I spent around 45 hours on the phone, faxing and following up with CitiMortgage before receiving my modification.  In fact, dealing with CitiMortgage became my occupation.  The homeowner who receives a modification, in most cases, has fought a long and hard battle for the modification and has no idea that the bank can refuse to honor the agreement.

To get the true story about what is going on, the Treasury could begin by sending out questionnaires to prior homeowners in HAMP that were compliant when their modifications were revoked for no other reason than the servicer wanting to take another stab at stealing the home.  SIGTARP’s concerns over servicer misconduct contributing to homeowner redefaults in HAMP was revealed through the Treasury’s on-site visits to the largest seven mortgage servicers in HAMP over the last year and apparently reveal disturbing and unacceptable results, finding that 6 of 7 of the mortgage servicers had wrongfully terminated homeowners who were in “good standing”.

It doesn’t take a rocket scientist to assume that servicers are up to their same old tricks and forcing compliant homeowners out of HAMP.  Servicers have no incentive to not unjustly enrich themselves at the expense of the homeowner when a successful foreclosure is more lucrative than modifying a mortgage.  The usual six non-compliant culprits are named in the report:


Q4 2014 TO Q3 2015    

Servicer                                       Wrongful Termination of Homeowner  From HAMP

Bank of America, N.A.                                        X

CitiMortgage Inc                                                  X

JPMorgan Chase Bank, N.A.                              X

Nationstar Mortgage LLC                                    X

Ocwen Loan Servicing, LLC                               X

Select Portfolio Servicing, Inc.

Wells Fargo Bank, N.A.                                       X

According to SIGTARP, homeowners who make their modified mortgage payments on time, or who do not fall three months behind on those payments are entitled to remain in HAMP. However, the Treasury’s results found that, within the last year, Bank of America,CitiMortgage, JP Morgan Chase, Nationstar, Ocwen and Wells Fargo all claimed that homeowners had redefaulted out of HAMP by missing three payments when, in reality, they had not.

These six mortgage servicers account for 74% of non-GSE HAMP modifications funded by TARP since the start of the program. Upon further reading, and despite the fact that the Treasury has done nothing to stop this misconduct, the servicers are engaging in a process of holding the homeowner’s payments in suspense accounts (so they can continue accruing late fees and other delinquent charges), reversing and reapplying the homeowner’s payments improperly and terminating homeowners who have not defaulted on the required three payments.

This misconduct is also probably much larger in scale than it appears because the Treasury only samples 100 redefaulted homeowners per servicer each quarter.  It is possible that the number of homeowners impacted is much, much larger.  This has been going on since the inception of the program and the Treasury’s response over time has been anemic and unresponsive.  The servicers appear to have an understanding that if they don’t comply there is no consequence other than a little bad publicity (as if a little more bad publicity would impact them at this point).

The potential profit of a fraudulent foreclosure is incentive enough to kick compliant homeowners out of the HAMP program. It should be known that many of the servicers making offers to modify do not have legal standing to make an offer to modify the loan in the first place and are simply engaging in a process to get the homeowner further into default.

In my particular case, all I wanted was to modify my mortgage, sell my home, and go forward with my life.  CitiMortgage did NOT want payment- they WANTED the HOME and used modification as a tool to  obtain this goal.  A modification is nothing short of a tool of deception used by servicers to steal a home.  Servicers use modification for these purposes:

1.  Intimidate the unsophisticated or vulnerable Homeowner- Create Fear and Confusion by processes of circular phone transfers, lost documents, false claims, conflicting messages and blatant lies.

2. Time Destruction- Time spent in modification compromises other available options like refinancing, a short sale or hiring an attorney.  A consumer’s options diminish as time goes by. It is to the bank’s benefit to not modify the loan but to paint the homeowner into a corner.

3. Equity Erosion- Every month while in a modification the equity in the home is eroded by late fees and other charges the consumer is not advised about in advance.

4. Payment Hostage- The servicer retains the monthly modification payment in a suspense account.  These funds then cannot be used for a more beneficial purpose like retaining an attorney or refinancing. The consumer is not told that the payment will not be applied to their mortgage or if the modification fails that the payments will not be returned.

5. Dual-Tracking- A homeowner in the process of modifying their mortgage or who has an approved modification may be subsequently foreclosed upon in violation of law.

6. Government Kickbacks- Servicers who engage in the modification process receive compensation for each modification attempt and successful modification.  Servicers are accepting government payments (from tax payers) only to sabotage modifications.

The time has come for a full investigation into the behavior of loan servicers.  Not only do servicers make offers to modify loans they have no legal right to modify, but they engage in fraudulent practices that are not in the best interest of the homeowner, investor or community.  This article won’t get into the fact that servicers lie about their relationship to the loan, the balance owed and need to be heavily fined and sanctioned for forging documents, filing false affidavits and other criminal acts.  The bottom line is that a servicer is incentivized to lie, to cheat and to steal by a lack of governmental oversight and by the  potential windfall of profits that occur upon a successful foreclosure (including insurance, “servicer advances” and other compensation).  The bank has bet your mortgage will fail, and you can bet they will resort to every trick in the book to take your home including the use of faux modifications.

It is ironic that two months ago I received a letter from CitiMortgage offering to modify again.  This is despite the fact that the note and mortgage were rescinded under TILA.  I’m not sure what CitiMortgage thinks they are going to modify now that the note and mortgage are void by operation of law- but why would I expect rogue servicer CitiMortgage to comply with any state or federal law?

Advice: Your servicer is not your friend and will act only in their best interest.

I have attached copies of my “approved repayment plan” as evidence of the modification agreement.

If you would like to share your modification story with us please email us at:  We would like to hear about your experiences.


Repayment Plan One cleanRepayment Plan Two clean

US Bank, BofA, LaSalle Bank and Other Trustees Slammed the Door on Their Own Toes

NOTE: THE FOLLOWING IS A LEGAL ANALYSIS THAT MAY OR MAY NOT APPLY TO CASES ON WHICH YOU ARE WORKING. IT IS REALLY MEANT FOR ATTORNEYS WHO ARE REPRESENTING PARTIES IN FORECLOSURE LITIGATION. No lay person should assume that anything in this article is true or applies to their case. Nobody should use this information without careful consultation with a knowledgeable attorney licensed in the jurisdiction in which the subject property is located. This may or may not have applicability to other securitized debt including student loans, auto loans etc. Each case rests on its own merits. Do not assume that there is any magic bullet that ends any case in favor of the borrower.

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Upon analysis, research and reflection it appears as though the game could be over in the US Bank cases, the Bank of America cases, and any case in which the foreclosing party is identified as the Trustee. US Bank clearly has no right or even access to the foreclosure process. How do we know? Because US Bank says so on its own website. SEE

Here are some notable quotes from the US Bank websites which references materials to make their own assertions apply to all trustees over MBS trusts:
“Parties involved in a MBS transaction include the borrower, the originator, the servicer and the trustee, each with their own distinct roles, responsibilities and limitations.”

“ U.S. Bank as Trustee:

“As Trustee, U. S. Bank Global Trust Services performs the following responsibilities:

Holds an interest in the mortgage loans for the Benefit of investors
Maintains investors/securities holder records
Collects payments from the Servicer
Distributes payments to the investors/securities holder
Does not initiate, nor has any discretion or authority in the foreclosure process (e.s.)
Does not have responsibility for overseeing mortgage servicers (e.s.)
Does not mediate between the servicers and investors in securitization deals (e.s.)
Does not manage or maintain properties in foreclosure (e.s.)
Is not responsible for the approval of any loan modifications (e.s.)

“All trustees for MBS transactions, including US Bank have no advanced knowledge of when a mortgage loan has defaulted.

“ Trustees on MBS transactions, while named on the mortgage and on the legal foreclosure documents, are not involved in the foreclosure process.”

“ While trustees are listed on mortgages, and therefore in legal documents as well, as the owner of record, its interest is solely for the benefit of investors. The trustee does not have an economic or beneficial interest in the loans and has no authority to manage or otherwise take action on the loans which is reserved for the servicer.” (e.s.)

“Additional sources of information:
— American Bankers Association White Paper, The Trustee’s Role in Asset-backed securities, dated November 9, 2010,

— The Trust Indenture Act of 1939

In several cases I am litigating, the servicer seems to be saying that they approve the foreclosure but do not want the turnover of rents. This brings up the question of whether the notice of default was sent by the Trustee, who according to the attached information would not even know if the default is being “called,” in which case the notice would be fatally defective. The fatal defect would be that it is not a function of the Trustee if the PSA has the usual language. That function is exclusively reserved for the Servicer. Since the PSA probably has language in it that restricts the knowledge of the Trustee to virtually zero, and certainly restricts the knowledge of the Trustee as to all receipts and disbursements processed by the sub-Servicer, the broker dealer (investment bank), and the Master Servicer. Thus the Trustee of the MBS trust is the last party on whom one could depend for information about a default — except that if “Servicer advances” (quotations used because the money is coming from the investment bank) then the Trustee would presumably know that from the creditor’s point of view, there is no default.


But the complexity gets worse. If the action should have been brought by the servicer, but the creditor was really a funded trust who was legally represented by a properly authorized servicer, then the bid by the Trustee at the auction might have been valid. Hence the attack should be on the foreclosure process itself rather than the credit bid.

Not to worry. I don’t think any of the Trusts were funded — or to put it more precisely, I have found no evidence in the public domain that any of the MBS trusts were in fact funded the way it was set forth in the prospectus and pooling and servicing agreement. There does not appear to be any actual trust account over which the Trustee has control. Hence both the existence and capacity of the Trust and the Trustee are issues of fact that must be decided by the Court.
That leaves the MBS trusts with no money to originate or acquire mortgages. So who really owns the loans? This is why in Court on appeal, the attorneys agree that they don’t know who owns the loans. But what they really mean, whether they realize it or not, is that they don’t know if any of the loans are secured by a perfected mortgage. If none of the parties in their “chain” actually came up with money or value, then the lien is not perfected or valid. The mortgage would be subject to nullification of the instrument.
If the question was really who owns the loans, the answer is simple — the investors who put up the money. We all know that. What they are dancing around is the real nub of the confrontation here:  Since we know who put up the money and therefore who owns the loan, was there any document or event that caused the loan as owned by the investors to be secured? The answer appears to be no, which is why the investment banks are all being sued every other day for FRAUD. First they diverted the investor money from the trust and then they diverted the title from the trust beneficiaries to one of their own entities. The actions of the investment banks constitutes, in my opinion, an intervening tortious or criminal act that frustrated the intent of both the borrowers (homeowners) and the lenders (investors).

So the real question is whether the Court can be used to reform the closing and create a loan agreement that is properly enforceable against lender and borrower. That appears to require the creation of an equitable mortgage, which is held in extremely low regard by courts across the country. And then you have questions like when does the mortgage begin and what happens to title with respect to intervening events?
The simple answer, as I said in 2007, is do some sort of amnesty and reframe the deals to reflect economic reality allowing everyone to bite a bullet and everyone to cover their losses but avoid, at this point another 6 million families being displaced. My experience with borrowers is that the overwhelming majority would sign a new mortgage document that is enforceable together with a new note that is enforceable and leaves all issues behind even though they know they could push the issue further. The borrower s are a lot more honest and straightforward than their banker counterparts. The deal should essentially be between the investors and the homeowners.
The question is whether the case is dismissed, possibly with prejudice, or if they can try to substitute the servicer as the Plaintiff in a style that would or might read “SPS, as servicer, on behalf of ????, Trustee for the asset backed trust” or “on behalf of the trust beneficiaries.”

The further question is whether the complaint could be amended. But if the servicer didn’t send the NOTICE OF DEFAULT, there is nothing to amend since on its face, the Notice of Default was sent by a party who not only was not authorized to start the process but who was expressly precluded from having any knowledge of the default.

This in turn leads to the further question of whether the verification was valid if signed on behalf of US Bank or any other party “as trustee” on the complaints to foreclose.
The smaller file tells the whole story we have been arguing and it should be attached. I would attach the smaller one page synopsis of quotations from their website. It leaves no room for interpretation — trustees do not, and cannot initiate foreclosures or anything else relating to enforcement. They may not meddle in the foreclosure and they may not meddle or mediate in settlement or mediation. Here is the smaller file: US BANK ROLE OF TRUSTEE

As to Bank of America, the situation is even more dire —-

contains the Federal reserve Order approving the Bank of America – LaSalle merger. I can find no such order for the CitiMortgage-ABN Amro mortgage. It is also true that I can find no evidence that the BOA merger was completed whereas there is plenty of evidence that the Citi-ABN merger was in fact completed. This means that CitiMortgage became the parent company of LaSalle Bank.

While it is theoretically possible for an ACQUISITION of LaSalle to have taken place in which BOA acquired LaSalle Bank, no evidence exists that any such transaction exists between BofA and Citi. It is clear that Citi completed its deal in September of 2007 at around the same time that BOA was getting the approval order shown above on the federal reserve website.  But most curiously the Fed does not mention the Citi-ABN Amro deal. What we know for sure is that there was no MERGER between BofA and Citi.

In my opinion based upon review of this order from the Federal Reserve and other pronouncements from the FED, this order was either never officially issued in actuality or it never was used. In the absence of further contrary information which I have not been able to uncover, thus far, the irrefutable conclusion is that BOA never became the successor by merger to LASalle Bank. Therefore BOA was never the trustee for the asset backed REMIC trust. Therefore, the transaction to which US Bank refers granted US Bank nothing even if the position of trustee is determined to be a commodity — an idea that would create havoc in the marketplace.

As for whether US Bank as trustee for MBS trusts has standing, the answer is no and they have absolutely no right, obligation or even access to the foreclosure or settlement process. In the same REMIC out in California, I am the expert witness on a case in which the same trust is represented by Chase as servicer. The case has not caught up with the fact that Chase has sold or transferred servicing rights to SPS (Select Portfolio Services) or at least that is what they say.

This being the case, several questions arise:

Since this information from the public domain is on the U.S. Bank website without any disclaimers, are we sure they authorized the foreclosure and the action for turnover of rents? Or are they going to say it was an error by the law firm? Who is actually the client of the opposing law firm — the trust beneficiaries, the trust,, the trustee or US Bank who doesn’t really appear to be the trustee?

The same question could be asked of Bank of America who says they are or were a trustee based upon a dubious series of announcements that seem to lack the same underlying transactions as all securitized loans that report a transaction has taken place (i.e.., on the note the contract is implied because the borrower agrees to repay a loan to a lender that never gave them the money).

New Bank Strategy: There was no securitization — IRS AMNESTY FOR REMICs

Reported figures on the financial statements of the “13 banks” that Simon Johnson talks about, make it clear that around 96% of all loans originated between 1999 and 2009 are subject to claims of securitization because that is what the investment banks told the investors who advanced money for the purchase of what turned out to bogus mortgage bonds. So the odds are that no matter what the appearance is, the loan went through the hands of an investment banker who sold “bonds” to investors in order to originate or acquire mortgages. This includes Fannie, Freddie, Ginny, and VA.

The problem the investment banks have is that they never funded the trusts and never lived up to the bargain — they gave title to the loan to someone other than the investors and then they insured their false claims of ownership with AIG, AMBAC, using credit default swaps and even guarantees from government or quasi government agencies. Besides writing extensively in prior posts, I have now heard that the IRS has granted AMNESTY on the REMIC trusts because none of them actually performed as required by law. So we can assume that the money from the lender-investors went through the investment banks acting as conduits instead of through the trusts acting as Real Estate Mortgage Investment Conduits.

This leads to some odd results. If you foreclose in the name of the servicer, then the authority of the servicer is derived from the PSA. But if the trust was not used, then the PSA is irrelevant. If you foreclose in the name of the trustee, using a fabricated, robo-signed, forged assignment backdated or non dated as is the endorsement, you get dangerously close to exposing the fact that the investment banks took a chunk out of the money the investors gave them and booked it as trading profit. One of the big problems here is basic contract law — the lenders and the borrowers were not presented with and therefore could not have agreed to the same terms. Obviously the borrower was agreeing to pay the actual amount of the loan and was not agreeing to pay the overage taken by the investment bank. The lender was not agreeing to let the investment bank short change the investment and increase the risk in order to make up the difference with loans paying higher rates of interest.

When we started this whole process 7 years ago, the narrative from the foreclosing entities and their lawyers was that there was no securitization. Their case was based upon them being the holder of the note. Toward that end they then tried lawsuits and non-judicial foreclosures using MERS, the servicer, the originator, and even foreclosure servicer entities. They encountered problem because none of those entities had an interest in the loan, and there was no consideration for the transfer of the loan. Since they were filing in their own name and not in a representative capacity there were effectively defrauding the actual creditor and having themselves designated as the creditor who could buy the property at foreclosure auction without money using a “credit bid.”

Then we saw the banks change strategy and start filing by “Trustee” for the beneficiaries of an asset backed (securitized) trust. But there they had a problem because the Pooling and Servicing Agreement only gives the servicer the right to enforce, foreclose, or collect for the “investor” which is the trust or the beneficiaries of the asset-backed trust. And now we see that the trust was in fact never used which is why the investment banks were sued by nearly everyone for fraud. They diverted the money and the ownership of the loans to their own use before “returning” it to the investors after defaults.

Now we are seeing a return to the original strategy coupled with a denial that the loan was securitized. One such case I am litigating CURRENTLY shows CitiMortgage as the Plaintiff in a judicial foreclosure action in Florida. The odd thing is that my client went to the trouble of printing out the docket periodically as the case progressed before I got involved. The first Docket printed out showed CPCA Trust 1 as the Plaintiff clearly indicating that securitization was involved. Then about a year later, the client printed out the docket again and this time it showed ABN AMRO as trustee for CPCA Trust-1. Now the docket simply shows CitiMortgage which opposing counsel says is right. We are checking the Court file now, but the idea advanced by opposing counsel that this was a clerical error does not seem likely in view of that the fact that it happened twice in the same file and we never saw anything like it before — but maybe some of you out there have seen this, and could write to us at

Our title and securitization research shows that ACCESS Mortgage was the originator but that it assigned the loan to First National which then merged with CitiCorp., whom opposing counsel says owns the loan. The argument is that CitiMortgage has the status of holder and therefore is not suing in a representative capacity despite the admission that CitiMortgage doesn’t have a nickel in the deal, and that there has been no financial transaction underlying the paperwork purportedly transferring the loan.

Our research identifies Access as a securitization player, whose loan bundles were probably underwritten by CitiCorp’s investment banking subsidiary. The same holds true for First National and CPCA Trust-1 and ABN AMRO. Further we show that ABN AMRO acquired LaSalle Bank in a reverse merger, as I have previously mentioned in other posts. Citi has reported in sworn documents with the SEC that it merged with ABN AMRO. So the docket entries would be corroborated as to ABN AMRO being the trustee for CPCA Trust 1. But Citi says ABN AMRO has nothing to do with the subject loan. And the fight now is what will be allowed in discovery. CitiMortgage says that their answer of “NO” to questions about securitization should end the inquiry. I obviously take the position that in discovery, I should be able to inquire about the circumstances under which CitiMortgage makes its claim as holder besides the fact that they physically possess the note, if indeed they do.

Some of this might be revealed when the actual court file is reviewed and when the clerk’s office is asked why the docket entries were different from the current lawsuit. Was there an initial filing, summons or complaint or cover sheet identifying CPCA Trust 1? What caused the clerk to change it to ABN AMRO? How did it get changed to CitiMortgage?

Arizona Supreme Court Hogan Case Holds that Note is Not required to Start Foreclosure

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the trustee owes the trustor a fiduciary duty, and may be held liable for conducting a trustee’s sale when the trustor is not in default. See Patton v. First Fed. Sav. & Loan Ass’n of Phoenix, 118 Ariz. 473, 476, 578 P.2d 152, 155 (1978).” Hogan Court

Editor’s Comment: Here is another example of lawyers arguing out of a lack of understanding of the securitization process and trying to compress an elephant into a rabbit hole. They lost, unsurprisingly.

If you loaned money to someone, you want the money repaid. You DON’T want to be told that because you don’t have the note you can never enforce the loan repayment. You CAN start enforcement and you must prove why you don’t have the note in a credible way so that the court has footprints leading right up to the point that you don’t have the note. But the point is that you can start without the note. 

The Supreme Court apparently understood this very well and they didn’t address the real issue because nobody brought it up. The issue before them was whether someone without the note could initiate the foreclosure process. Nobody mentioned whether the same party could submit a credit bid at the auction which is what I have been pounding upon for months on end now.

Apparently, right or wrong, the feeling of the courts is that there is a very light burden on the right to initiate a foreclosure whether it is judicial or non-judicial. It is very close to the burden of the party moving to lift stay in a bankruptcy procedure. Practically any colorable right gives the party enough to get the stay — because the theory goes — whether it is a lift stay or starting the ball rolling on a foreclosure there is plenty the borrower can do to  oppose the enforcement procedure. I don’t agree with either standard or burden of proof in the case of securitized mortgages but it is about time we got real about what gets traction in the courtroom and what doesn’t.

In the Hogan case the Court makes a pretty big deal out of the fact that Hogan didn’t allege that WAMU and Deutsch were not entitled to enforce the note. From the court’s perspective, they were saying to the AG and the borrowers, “look, you are admitting the debt and admitting this is the creditor, what do you want from us, a free pass?”

This is why you need real people with real knowledge and real reports that back up and give credibility to deny the debt, deny the default, deny that WAMU and/or Deutsch are creditors, plead payment and force WAMU and Deutsch to come forward with pleadings and proof. Instead WAMU and Deutsch skated by AGAIN because nobody followed the money. They followed the document trail which led them down that rabbit hole I was referencing above.

In order to deny everything without be frivolous, you need to have concrete reasons why you think the debt does not exist, the debt does not exist between the borrower and these pretender lenders, the debt was paid in full, and deny that the loan was NOT secured (i.e. that the mortgage lien was NOT perfected when filed).

For anyone to do that without feeling foolish you must UNDERSTAND how the securitization model AS PRACTICED turned the entire lending model on its head. Then everything makes sense, which is why I wrote the second volume which you can get by pressing the appropriate links shown above. But it isn’t just the book that will get you there. You need to give rise to material, relevant issues of fact that are in dispute. For that you need a credible report from a credible expert with real credentials and real experience and training.

I follow the money. In fact the new book has a section called “Show Me the Money”. To “believe” is taken from an ancient  language that means “to be willing”. I want you to believe that the debt that the “enforcers” doesn’t exist and never did. I want you to believe that the declarations contained in the note, mortgage (deed of trust), substitution of trustee etc. are all lies. But you can’t believe that unless you are willing to consider the the idea it might be true. That I might be right.

At every “Securitized” closing table there were two deals taking place — one perfectly real and the other perfectly unreal, fake and totally obfuscated. The deal everyone is litigating is the second one,  starting with the documents at closing and moving up the chain of securitization. Do you really think that some court is going to declare that everyone gets a free house because some i wasn’t dotted or t crossed on the back of the wrong piece of paper when you admit the debt, the default and the amount due?

It is the first deal that is real because THAT is the one with the money exchanging hands. The declarations contained in the note, mortgage and other documents all refer to money exchanging hands between the named payee and secured party on one side and the borrower on the other. The deal in those documents never happened. The REAL DEAL was that money from investor lenders was poured down a pipe through which the loans were funded. The parties at the closing table with the borrower had nothing to do with funding; acquiring, transferring the receivable, the obligation, note or the mortgage or deed of trust.

Every time you chase them down the rabbit hole of the document trail you miss the point. The REAL DEAL had no documents and couldn’t possibly be secured. And if you read the wording from the Hogan decision below you can see how even they would have considered the matter differently if the simple allegation been made that the borrower denied that WAMU and Deutsch had any right to enforce the note either as principals or as agents. They were not the creditor. But Hogan and its ilk are not over — yet.

There is still a matter to be determined as to whether the party who initiated the foreclosure is in fact a creditor under the statute and can therefore submit a credit bid in lieu of cash. THAT is where the rubber meets the road — where the cash is supposed to exchange hands. And THAT is where nearly all the foreclosures across the country fail. The failure of consideration means the sale did not take place. If the borrower was there or someone for him was there and bid a token amount of money it could be argued in many states that the other bid being ineligible as a credit bid, the only winning bidder is the one who offered cash.


Hogan argues that a deed of trust, like a mortgage, “may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation the mortgage secures.” Restatement (Third) of Prop.: Mortgages § 5.4(c) (1997); see Hill v. Favour, 52 Ariz. 561, 568-69, 84 P.2d 575, 578 (1938).

We agree. (e.s.) But Hogan has not alleged that WaMu and Deutsche Bank are not entitled to enforce the underlying note; rather, he alleges that they have the burden of demonstrating their rights before a non-judicial foreclosure may proceed. Nothing in the non-judicial foreclosure statutes, however, imposes such an obligation. See Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009) (citing A.R.S. § 33-807 and observing that “Arizona’s [non-]judicial foreclosure statutes . . . do not require presentation of the original note before commencing foreclosure proceedings”); In re Weisband, 427 B.R. 13, 22 (Bankr. D. Ariz. 2010) (stating that non-judicial foreclosures may be conducted under Arizona’s deed of trust statutes without presentation of the original note).



Pandemic Lying Admission: Deutsch Bank Up and Down the Fake Securitization Chain

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Editor’s Comment:

One problem with securitization in practice even under the academic model is the effect on potential enforcement of the obligation, even assuming that the “lender” is properly identified in the closing documents with the buyer of the loan product and the closing papers of the buyer of the mortgage bonds (and we’ll assume that the mortgage bonds are real and valid, as well as having been issued by a fully funded REMIC in which loans were properly assigned and transferred —- an assumption, as we have seen that is not true in the real world). Take this quote from the glossary at the back of this book and which in turn was taken from established authoritative sources used by bankers, securities firms and accountants:

cross guarantees and credit default swaps, synthetic collateralized asset obligations and other exotic equity and debt instruments, each of which promises the holder an incomplete interest in the original security instrument and the revenue flow starting with the alleged borrower and ending with various parties who receive said revenue, including but not limited to parties who are obligated to make payments for shortfalls of revenues.

Real Property Lawyers spot the problem immediately.

First question is when do these cross guarantees, CDS, Insurance, and other exotic instruments arise. If they are in existence at the time of the closing with the borrower homeowner then the note and mortgage are not properly drafted as to terms of repayment nor identity of the lender/creditor. This renders the note either unenforceable or requiring the admission of parole evidence in any action to either enforce against the borrower or enforce the cross obligations of the new cross creditors who supposedly are receiving not just rights to the receivable but to the actual note and the actual mortgage.

Hence even a truthful statement that the “Trustee” beings this foreclosure on behalf of the “trust” as creditor (assuming a Trust existed by law and that the Trustee, and beneficiaries and terms were clear) would be insufficient if any of these “credit enhancements” and other synthetic or exotic vehicles were in place. The Trustee on the Deed of Sale would be required to get an accounting from each of the entities that are parties or counterparties whose interest is effected by the foreclosure and who would be entitled to part of the receivable generated either by the foreclosure itself or the payment by counterparties who “bet wrong” on the mortgage pool.

The second question is whether some or any or all of these instruments came into existence or were actualized by a required transaction AFTER the closing with the homeowner borrower. It would seem that while the original note and mortgage (or Deed of Trust) might not be affected directly by these instruments, the enforcement mechanism would still be subject to the same issues as raised above when they were fully actualized and in existence at the time of the closing with the homeowner borrower.

Deutsch Bank was a central player in most of the securitized mortgages in a variety of ways including the exotic instruments referred to above. If there was any doubt about whether there existed pandemic lying and cheating, it was removed when the U.S. Attorney Civil Frauds Unit obtained admissions and a judgment for Deutsch to pay over $200 million resulting from intentional misrepresentations contained in various documents used with numerous entities and people up and down the fictitious securitization chain. Similar claims are brought against Citi (which settled so far for $215 million in February, 2012) Flagstar Bank FSB (which settled so far for $133 million in February 2012, and Allied Home Mortgage Corp, which is still pending. Even the most casual reader can see that the entire securitization model was distorted by fraud from one end (the investor lender) to the other (the homeowner borrower) and back again (the parties and counterparties in insurance, bailouts, credit default swaps, cross guarantees that violated the terms of every promissory note etc.

Manhattan U.S. Attorney Recovers $202.3 Million From Deutsche Bank And Mortgageit In Civil Fraud Case Alleging Reckless Mortgage Lending Practices And False Certifications To HUD

FOR IMMEDIATE RELEASE                  Thursday May 10, 2012

Preet Bharara, the United States Attorney for the Southern District of New York, Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division of the U.S. Department of Justice, Helen Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and David A. Montoya, Inspector General of HUD, announced today that the United States has settled a civil fraud lawsuit against DEUTSCHE BANK AG, DB STRUCTURED PRODUCTS, INC., DEUTSCHE BANK SECURITIES, INC. (collectively “DEUTSCHE BANK” or the “DEUTSCHE BANK defendants”) and MORTGAGEIT, INC. (“MORTGAGEIT”). The Government’s lawsuit, filed May 3, 2011, sought damages and civil penalties under the False Claims Act for repeated false certifications to HUD in connection with the residential mortgage origination practices of MORTGAGEIT, a wholly-owned subsidiary of DEUTSCHE BANK AG since 2007. The suit alleges approximately a decade of misconduct in connection with MORTGAGEIT’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program (“DEL program”), which delegates authority to participating private lenders to endorse mortgages for FHA insurance. Among other things, the suit accused the defendants of having submitted false certifications to HUD, including false certifications that MORTGAGEIT was originating mortgages in compliance with HUD rules when in fact it was not. In the settlement announced today, MORTGAGEIT and DEUTSCHE BANK admitted, acknowledged, and accepted responsibility for certain conduct alleged in the Complaint, including that, contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations. MORTGAGEIT also admitted that it submitted certifications to HUD stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; that FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and that HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted. The defendants also agreed to pay $202.3 million to the United States to resolve the Government’s claims for damages and penalties under the False Claims Act. The settlement was approved today by United States District Judge Lewis Kaplan.

Manhattan U.S. Attorney Preet Bharara stated: “MORTGAGEIT and DEUTSCHE BANK treated FHA insurance as free Government money to backstop lending practices that did not follow the rules. Participation in the Direct Endorsement Lender program comes with requirements that are not mere technicalities to be circumvented through subterfuge as these defendants did repeatedly over the course of a decade. Their failure to meet these requirements caused substantial losses to the Government – losses that could have and should have been avoided. In addition to their admissions of responsibility, Deutsche Bank and MortgageIT have agreed to pay damages in an amount that will significantly compensate HUD for the losses it incurred as a result of the defendants’ actions.”

Acting Assistant Attorney General Stuart F. Delery stated: “This is an important settlement for the United States, both in terms of obtaining substantial reimbursement for the FHA insurance fund for wrongfully incurred claims, and in obtaining the defendants’ acceptance of their role in the losses they caused to the taxpayers.”

Giving Back to the Community through a variety of venues & initatives.

Making sure that victims of federal crimes are treated with compassion, fairness and respect.                  1/45/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

HUD General Counsel Helen Kanovsky stated: “This case demonstrates that HUD has the ability to identify fraud patterns and work with our partners at the Department of Justice and U.S. Attorney’s Offices to pursue appropriate remedies. HUD would like to commend the work of the United States Attorney for the Southern District of New York in achieving this settlement, which is a substantial recovery for the FHA mortgage insurance fund. We look forward to continuing our joint efforts with the Department of Justice and the SDNY to combat mortgage fraud. The mortgage industry should take notice that we will not sit silently by if we detect abuses in our programs.”

HUD Inspector General David A. Montoya stated: “We expect every Direct Endorsement Lender to adhere to the highest level of integrity and accountability. When the combined efforts and attention of the Department of Justice, HUD, and HUD OIG are focused upon those who fail to exercise such integrity in connection with HUD programs, the end result will be both unpleasant and costly to the offending party.”

The following allegations are based on the Complaint and Amended Complaint (the “Complaint”) filed in Manhattan federal court by the Government in this case:

Between 1999 and 2009, MORTGAGEIT was a participant in the DEL program, a federal program administered by the FHA. As a Direct Endorsement Lender, MORTGAGEIT had the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay. Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance. Direct Endorsement Lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and endorsing mortgages for FHA insurance and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. These requirements include maintaining a quality control program, pursuant to which the lender must fully review all loans that go into default within the first six payments, known as “early payment defaults.” Early payment defaults may be signs of problems in the underwriting process, and by reviewing early payment defaults, Direct Endorsement Lenders are able to monitor those problems, correct them, and report them to HUD. MORTGAGEIT failed to comply with these basic requirements.

As the Complaint further alleges, MORTGAGEIT was also required to execute certifications for every mortgage loan that it endorsed for FHA insurance. Since 1999, MORTGAGEIT has endorsed more than 39,000 mortgages for FHA insurance, and FHA paid insurance claims on more than 3,200 mortgages, totaling more than $368 million, for mortgages endorsed for FHA insurance by MORTGAGEIT, including more than $58 million resulting from loans that defaulted after DEUTSCHE BANK AG acquired MORTGAGEIT in 2007.

As alleged in the Complaint, a portion of those losses was caused by the false statements that the defendants made to HUD to obtain FHA insurance on individual loans. Although MORTGAGEIT had certified that each of these loans was eligible for FHA insurance, it repeatedly submitted certifications that were knowingly or recklessly false. MORTGAGEIT failed to perform basic due diligence and repeatedly endorsed mortgage loans that were not eligible for FHA insurance.

The Complaint also alleges that MORTGAGEIT separately certified to HUD, on an annual basis, that it was in compliance with the rules governing its eligibility in the DEL program, including that it conduct a full review of all early payment defaults, as early payment defaults are indicators of mortgage fraud. Contrary to its certifications to HUD, MORTGAGEIT failed to implement a compliant quality control program, and failed to review all early payment defaults as required. In addition, the Complaint alleges that, after DEUTSCHE BANK acquired MORTGAGEIT in January 2007, DEUTSCHE BANK managed the quality control functions of the Direct Endorsement Lender business, and had its employees sign and submit MORTGAGEIT’s Direct Endorsement Lender annual certifications to HUD. Furthermore, by the end of 2007, MORTGAGEIT was not reviewing any early payment defaults on closed FHA-insured loans. Between 1999 and 2009, the FHA paid more than $92 million in FHA insurance claims for loans that defaulted within the first six payments.


Pursuant to the settlement, MORTGAGEIT and the DEUTSCHE BANK defendants will pay the United States $202.3 million within 30 days of the settlement.

As part of the settlement, the defendants admitted, acknowledged, and accepted responsibility for certain misconduct. Specifically,

MORTGAGEIT admitted, acknowledged, and accepted responsibility for the following:                  2/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

MORTGAGEIT failed to conform fully to HUD-FHA rules requiring Direct Endorsement Lenders to maintain a compliant quality control program;

MORTGAGEIT failed to conduct a full review of all early payment defaults on loans endorsed for FHA insurance;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations;

MORTGAGEIT endorsed for FHA mortgage insurance certain loans that did not meet all underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the DEL program; and;

MORTGAGEIT submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted.

The DEUTSCHE BANK defendants admitted, acknowledged, and accepted responsibility for the fact that after MORTGAGEIT became a wholly-owned, indirect subsidiary of DB Structured Products, Inc and Deutsche Bank AG in January 2007:

The DEUTSCHE BANK defendants were in a position to know that the operations of MORTGAGEIT did not conform fully to all of HUD-FHA’s regulations, policies, and handbooks;

One or more of the annual certifications was signed by an individual who was also an officer of certain of the DEUTSCHE BANK defendants; and;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations.


The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.

To date, the Office’s Civil Frauds Unit has brought four civil fraud lawsuits against major lenders under the False Claims Act alleging reckless residential mortgage lending.

Three of the four cases have settled, and today’s settlement represents the third, and largest, settlement. On February 15, 2012, the Government settled its civil fraud lawsuit against CITIMORTGAGE, INC. for $158.3 million. On February 24, 2012, the Government settled its civil fraud suit against FLAGSTAR BANK, F.S.B. for $132.8 million. The Government’s lawsuit against ALLIED HOME MORTGAGE CORP. and two of its officers remains pending. With today’s settlement, the Government has achieved settlements totaling $493.4 million in the last three months. In each settlement, the defendants have admitted and accepted responsibility for certain conduct alleged in the Government’s Complaint.

The Office’s Civil Frauds Unit is handling all three cases as part of its continuing investigation of reckless lending practices.

The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Mr. Bharara thanked HUD and HUD-OIG for their extraordinary assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.                  3/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

Assistant U.S. Attorneys Lara K. Eshkenazi, Pierre G. Armand, and Christopher B. Harwood are in charge of the case.

While We Were Sleeping, Idaho Took the Lead: In re Sheridan — Real Party Must Have Actual Pecuniary Interest



“The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced. Even if a servicer or agent has authority to bring the motion on behalf of the holder, it is the holder, rather than the servicer, which must be the moving party, and so identified in the papers and in the electronic docketing done by the moving party’s counsel.”

For 2 years I have been saying “stick with the basics.” Black Letter Law will set you free. But time and again attorneys, pro se litigants and judges go astray and find themselves in never never land. Most attorneys and Judges take preliminary motions with a grain of salt. Virtually all foreclosures would be eliminated if lawyers and judges paid attention to the very beginning of the case. Gator Bradshaw in Florida delivers a nice piece at our seminar on motion practice.


Your job is to immediately focus the Judge’s attention on the fatal defects presnted by the actions of the intermediaries in the securitization process and more specifically, whoever is attempting to foreclose. By failing to challenge this at the outset you have effectively waived the issue and now face an uphill battle. This case reported below shows that a mere objection from the Trustee in BKR caused the entire claim of the forecloser to completely collapse.

7 months ago, before any of the landmark decisions reported on these pages,  Federal Bankruptcy Judge Myers in Idaho was presented with an objection from the Trustee to  Motion for Relief From stay.  Full pdf version at Sheridan_decision Idaho BKR J Myers

That the Trustee took up the cause is reason enough to note this case. What the Court did with it, in an articulate, well-reasoned memorandum of decision, is nothing short of startling in its clarity. One by one, this Judge takes down the arguments and tactics of the intermediaries in the securitization chain and basically says that none of them has a right to make a claim.

In short, just as in these pages, the Judge doesn’t say say who CAN assert and enforce the claim, he just says that none of these nominees, intermediaries, conduits, bookeepers, servicers, MERS, or pretender lenders has any pecuniary interest in the outcome and therefore they lack standing to be in court. On jurisdictional grounds, therefore, the case is closed and these interlopers are thrown out of court. Will the REAL Lender please stand up? Maybe, maybe not. 

The Judge points out that  “The Motion further alleges that Debtors were indebted at filing “to Movant” and that the debt arose out of a promissory note and a deed of trust dated September 20, 2006 “naming Movant as beneficiary.”

Judge Myers calmly and correctly points out that this was a total lie. When pressed the attorney acknowledged that the movant was not owed any money and that MERS was merely an agent for an undisclosed principal for an undisclosed purpose acting purportedly for the real party in interest. But the Judge says quite clearly and correctly that the rules require the real party in interest to be the movant.

This Judge also addresses the issue of burden of proof, a sticking point for many readers of this blog. He states that the burden is on the movant to prove standing, not on the homeowner or petitioner to prove lack of of standing. In fact, pointing to the rules again, he says that the pleading must  “[p]rovide the details of the underlying obligation or liability upon which the motion is based;” In a stroke of his pen, this Judge ends the issue over who has the burden of proof and even provides grounds BEFORE DISCOVERY for dumping fraudsters out of court. They must plead the allegations, and they must attach documentation that shows their pleadings are true and correct. This Judge is telling fraudsters to stop coming to court with attorney affidavits that are not evidence (see his memorandum) and to stop submitting affidavits, notes, revisions to notes, late indorsements, assingments that don’t match up with the pleadings or the requirements of pleading.










) Case No. 08-20381-TLM



) Chapter 7

Debtors. )

________________________________ )





In this Chapter 7 case, the trustee, Ford Elsaesser (“Trustee”), objects to a

motion under § 362(d) for relief from the § 362(a) automatic stay.

§ 362(d) are common in bankruptcy cases.

promptly to entry of an order, after proper notice, without any objection.

1 Motions under2 Most stay relief requests proceed3


However, changes in mortgage practices over the past several years have

created a number of new issues. The one highlighted in this case is the standing of



& Kronz

(Bankr. D. Idaho 2008). Debtors indicated in their § 521 statement of intention that they would


There was no objection, and the exemption was therefore allowed.

Taylor v. Freeland, 503 U.S. 638, 643-44 (1992); Rainsdon v. Farson (In re Farson), 387 B.R. 784, 797



the moving creditor. Serial assignments of the mortgagee’s interest(s) and the

securitization of mortgages have complicated what was previously a generally

straight-forward standing analysis. Though many creditors provide in their

motions adequate explanation and documentation of their standing to seek relief

on real estate secured debts, Trustee challenges the adequacy of the subject motion

in this case.

Following hearing and consideration of the arguments of the parties, the

Court determines that Trustee’s objection is well taken and the same will be

sustained. The motion for stay relief will be denied.




On June 24, 2008, Darrell and Sherry Ann Sheridan (“Debtors”) filed their

joint chapter 7 bankruptcy petition, schedules and statements. They scheduled a

fee ownership interest in a residence located in Post Falls, Idaho.

at sched. A (the “Property”). Debtors asserted the Property’s value was


Servicing” ($197,000.00) and “Citimortgage” ($34,000.00).

While this left no apparent equity in the Property, Debtors nevertheless claimed

the benefit of an Idaho homestead exemption.

See Doc. No. 1Id. They indicated secured claims existed in favor of “Litton LoanId. at sched. D.Id. at sched. C.4



reaffirm the secured debts on the Property.




Property as a scheduled but not administered asset,


Closing of the case as a no asset chapter 7 would constitute an abandonment of the

see § 554(c), and the automatic stay wouldsee § 362(c)(1).



to by others and in the case law, as “MERS.”

Mortgage Electronic Registration Systems, Inc. refers to itself, and is generally referred



The § 341(a) meeting of creditors occurred on July 31, 2008. Debtors

received a discharge on October 3, 2008. While the case was noticed to creditors

as a “no asset” chapter 7, and though Trustee concedes there will be no anticipated

distribution to creditors, Trustee has not yet filed his final report of no distribution

which would allow the case to close.



On October 16, 2008, the subject motion for relief from stay was filed.



Doc. No. 21 (the “Motion”). It was filed by “Mortgage Electronic Registration

Systems, Inc. as nominee HSBC Bank USA, National Association, as Indenture

Trustee of the Fieldstone Mortgage Investment Trust Series 2006-3.”



Movant” and that the debt arose out of a promissory note and a deed of trust dated

September 20, 2006 “naming Movant as beneficiary.”

Id. at 1 (the6 The Movant characterized itself as a “secured creditor andId. The Motion further alleges that Debtors were indebted at filing “toId.


Attached to the Motion is a promissory note (the “Note”) executed by

Debtors. It is payable to “Fieldstone Mortgage Company” as the “Lender.”




by stipulation of the parties, as “Exhibit 1.”

The documents attached to the Motion were admitted into evidence at the final hearing,



evidentiary hearing is a result of the presence of material, disputed facts, which under Fed. R.

Bankr. P. 9014(d) requires testimony in the same manner as in an adversary proceeding.

A “final hearing” is contemplated under § 362(d) and (e). That it would be an



Ex. 1.

Lender or anyone who takes this Note by transfer and who is entitled to receive

payments . . . is called the Note Holder.”

The Note is secured by a deed of trust dated September 20, 2006 and

recorded in the real property records of Kootenai County, Idaho, on September 22,

2006 (the “Deed of Trust”). The Deed of Trust at paragraph (C) identifies and

defines the “Lender” as “Fieldstone Mortgage Company, a Maryland corporation.”

Paragraph (E) of the Deed of Trust recites:

MERS is a separate corporation that is acting solely as nominee for

Lender and Lender’s successors and assigns. MERS is the beneficiary

under this Security Instrument.

Ex. 1.

Trustee objected to the Motion, contending that the Movant failed to

establish its interest in the Property or its standing to seek stay relief. Doc. No. 23.

At a preliminary hearing on November 4, 2008, the parties requested a final

hearing because the question of standing remained unresolved.

was held on December 16, 2008, at which Trustee and counsel for Movant made

argument, but no evidence was presented other than the documents that, as noted

7 A portion of the Note states: “I understand Lender may transfer this Note.8 A final hearing



The Code establishes time frames for preliminary hearing, final hearing and ruling.



§ 362(e)(2), the stay generally “shall terminate on the date that is 60 days after a request is made

by a party in interest” if the case is one under chapters 7, 11 or 13 and the debtor is an individual.

However, that period may be extended by either agreement of the parties or by the Court for good


December 16, 2008, about the 60th day after the request. This delay was by or with concurrence

of the parties. The Court concludes that additional delay to the date of this Decision was required

to address the contentions of the parties.

§ 362(e)(1), (2). In this case, the Motion was originally filed October 16, 2008. Under

See § 362(e)(2)(B). Here, the scheduling of the hearings resulted in a final hearing on



equity in such property coupled with a lack of necessity of such property for an effective


light of the fact that this is a chapter 7 liquidation, the Property is not required for reorganization.

Another ground for stay relief with respect to acts against property is an absence of

See § 362(d)(2). The Motion indicated a lack of equity in the Property and, in



above, were admitted by agreement.




A. Stay relief requires a motion by a party in interest with standing


The Bankruptcy Code, Bankruptcy Rules and this District’s local rules

govern stay relief requests.

Under the Code, relief from the § 362(a) stay is authorized “[o]n request of



made by a “party in interest.”) One ground for stay relief is “cause, including the

lack of adequate protection of an interest in property

§ 362(d)(1) (emphasis added). The Motion here alleged “cause” based on

delinquent payments,

though no specific citations to § 362(d)(1) are made.

party in interest and after notice and a hearing, . . . .” See § 362(d) (emphasisSee also § 362(e)(1) and (2), § 362(f), § 362(j) (all referring to requestsof such party in interest[.]”see Doc. No. 21 at 2, thus implicating § 362(d)(1) even10



The Rules require that a stay relief request be made by a motion.

R. Bankr. P. 9013 (“A request for an order, except when an application is

authorized by these rules, shall be by written

hearing.”) (emphasis added); Fed. R. Bankr. P. 4001(a)(1) (“A

from an automatic stay provided by the Code . . . shall be made in accordance with

Rule 9014[.]”) (emphasis added).

In addition to the Bankruptcy Rules, this District’s local rules require,


– the request shall be made by a “party in interest” and by “motion;”

– the motion shall “[p]rovide the details of the underlying obligation or

liability upon which the motion is based;” and

– the motion shall have attached “accurate and legible copies of all

documents evidencing the obligation and the basis of perfection of

any lien or security interest[.]”

LBR 4001.2(a), (b)(2), and (b)(5).

See Fed.motion, unless made during amotion for reliefinter, that:


1. Party in interest, and standing


While the term “party in interest” is not defined by the Code, this Court has

held that such a party must have a “pecuniary interest” in the outcome of the

dispute before the Court.

D. Idaho Aug. 28, 2007) (citing

4705220 (Bankr. D. Idaho 2005), and


D. Idaho 2003)).

18 (9th Cir. BAP 2007) (noting that a “party in interest” may be one who has an

actual pecuniary interest in the case, one who has a practical stake in the outcome

of the case, or one who will be impacted in any significant way in the case).

See In re Simplot, 2007 WL 2479664 at *9 n.45 (Bankr.In re Elias, 05.2 I.B.C.R. 41, 42, 2005 WLIn re Stone, 03.2 I.B.C.R. 134, 135 (Bankr.See also Brown v. Sobczak (In re Sobczak), 369 B.R. 512, 517-



The question there was whether the J. R. Simplot Company, which was not a

creditor with a claim against the debtor or estate, “had sufficient party in interest

standing to be heard[.]” 2007 WL 2479664 at *9. This Court stated:

not only defined party in interest, it addressed “standing” issues.


Hasso v. Mozsgai (In re La Sierra Fin. Servs.)

BAP 2002), explained that the doctrine of standing encompasses both

constitutional limitations on federal court jurisdiction (

controversy requirements of Article III), and prudential limitations on

the court’s exercise of that jurisdiction. Constitutional standing

requires an injury in fact,

interest. 290 B.R. at 726-27. Prudential standing requires that the

party’s assertions fall within the zone of interests protected by the

statute and, further, requires that the litigant assert only its own rights

and not those of another party.

U.S. 154, 162, 167-68 (1997). The party asserting standing exists has

the burden of proving it.

the cases as principles applicable to standing on appeal, the same

propositions apply to a party at the bankruptcy court level.

, 290 B.R. 718 (9th Cir.

i.e., the case orviz. an invasion of a judicially cognizableId. at 727 (citing Bennett v. Spear, 520Id. at 726. Though sometimes articulated in



not assert . . . objections that relate solely to others, or that go to issues that do not

directly and adversely affect them pecuniarily.”

omitted). These same standing requirements were recently highlighted in a stay

relief context by the court in


*5-6 (Bankr. W.D. Wash. Mar. 6, 2009).

(footnote citations omitted). In

Simplot, the Court concluded that “parties mayId. at *10 (footnote citationsIn re Jacobson, ___ B.R. ___, 2009 WL 567188 at


2. Real party in interest


Under Rule 9014, which by virtue of Rule 4001(a)(1) governs stay relief

requests, certain “Part VII” rules are applicable.

incorporated rules is Rule 7017, which in turn incorporates Fed. R. Civ. P. 17, and

Rule 17(a)(1) provides that “An action must be prosecuted in the name of the real

party in interest.”

See Rule 9014(c). Among those



holder of the note, “neither asserts beneficial interest in the note, nor that it could

enforce the note in its own right.” 2009 WL 567188 at *4. It concluded that Fed.

R. Civ. P. 17 applied, requiring the stay relief motion to be brought in the name of

the real party in interest.

Cal. 2008));

notes that its moving party, who claimed to be a servicer for the

Id. (citing In re Hwang, 396 B.R. 757, 767 (Bankr. C.D.see also In re Vargas, 396 B.R. 511, 521 (Bankr. C.D. Cal. 2008). As



The real party in interest in relief from stay is whoever is entitled to

enforce the obligation sought to be enforced. Even if a servicer or

agent has authority to bring the motion on behalf of the holder, it is the

holder, rather than the servicer, which must be the moving party, and

so identified in the papers and in the electronic docketing done by the

moving party’s counsel.





The upshot of these several provisions of the Code, Rules, local rules and

case law is this: to obtain stay relief, a motion must be brought by a party in

interest, with standing. This means the motion must be brought by one who has a



Cir. 2008) does not require a different conclusion.

did not violate the automatic stay by seeking to foreclose on the debtors’ property after the

bankruptcy court granted the loan servicer’s (Washington Mutual) § 362(d) motion.

62. Although Wachovia did not join in the motion or separately seek stay relief, the court held

that the order entered “as to Washington Mutual” was effective as to Wachovia.

Notably, however, the Reussers never challenged Washington Mutual’s standing in bankruptcy

court; instead, they launched that attack in a subsequently filed district court action.

62. The Ninth Circuit held that “a final order lifting an automatic stay is binding as to the

property or interest in question—the res—and its scope is not limited to the particular parties

before the court.”

standing and, of course, no final order has been entered.

The Ninth Circuit’s recent decision in

Reusser v. Wachovia Bank, 525 F.3d 855 (9thReusser held that a lender, Wachovia Bank,Id. at 861-Id. at 857, 861.Id. at 861-Id. at 861. The difference here is that Trustee has timely objected to Movant’s



pecuniary interest in the case and, in connection with secured debts, by the entity

that is entitled to payment from the debtor and to enforce security for such

payment. That entity is the real party in interest. It must bring the motion or, if

the motion is filed by a servicer or nominee or other agent with claimed authority

to bring the motion, the motion must identify and be prosecuted in the name of the

real party in interest.



B. The present Motion


Under the documents attached to the Motion and later admitted at hearing

as Ex. 1, Fieldstone Mortgage Company, a Maryland corporation, would certainly

appear to be a party in interest and have standing. It has an economic interest

according to the Note attached to the Motion and an interest in Debtors’ Property

according to the Deed of Trust that is also attached.

However, the Motion was not brought by Fieldstone Mortgage Company.



“the person named or otherwise designated in a trust deed as

deed is given, or his successor in interest, and who shall not be the trustee.” Idaho Code § 45-

1502(3) defines trust deed as “a deed executed in conformity with this act and conveying real

property to a trustee in trust

person named in the deed

Idaho Code § 45-1502(1) defines beneficiary for purposes of the trust deed statute as

the person for whose benefit a trustto secure the performance of an obligation of the grantor or otherto a beneficiary.” Id. (emphasis added).




1. MERS as “nominee” or “beneficiary”


Counsel for Movant argues that MERS, given its titular designation of

“beneficiary” under the Deed of Trust, is or should be able to prosecute the

Motion under the Code, Rules and Local Rules. Counsel conceded, however, that

MERS is not an economic “beneficiary” under the Deed of Trust. It is owed and

will collect no money from Debtors under the Note, nor will it realize the value of

the Property through foreclosure of the Deed of Trust in the event the Note is not




Further, the Deed of Trust’s designation of MERS as “beneficiary” is

coupled with an explanation that “MERS is . . . acting

Lender and Lender’s successors and assigns.” Ex. 1 (emphasis added). Movant’s

briefing suggests that a “nominee” is synonymous with an “agent.”

26 at 2.

The Motion was filed by MERS “as nominee [for] HSBC Bank USA,

National Association, as Indenture Trustee of the Fieldstone Mortgage Investment

Trust Series 2006-3.” Even assuming that MERS as a “nominee” had sufficient

rights and ability as an agent to advance its principal’s stay relief request, there

solely as nominee forSee Doc. No.



evident consistency. The Motion commenced as follows:

“COMES NOW Mortgage Electronic Registration Systems, Inc. as nominee

HSBC Bank USA, National Association, as Indenture Trustee of the Fieldstone

Mortgage Investment Trust Series 2006-3, a secured creditor and Claimant

herein, and moves the Court for its Order granting relief from the automatic


Thus, the “Claimant” and evidently the “Movant” (

moves”) are one and the same, and this entity also purports to be a “secured creditor.” Since

MERS is acting as nominee, the Claimant/Movant and secured creditor appears by these

allegations to be HSBC Bank USA (in its role as indenture trustee for others). The Motion

continues by asserting that “Debtor was on the date of filing the petition herein,


Movant as beneficiary

Bank USA or the Fieldstone Mortgage Investment Trust as its beneficiary. Nor is there

explanation of how Debtors came to owe HSBC Bank USA.

The Motion uses several terms (Movant, Claimant, Petitioner) without definition or

i.e., the party who “COMES NOW . . . andindebted toarising out of [the Note] and a Deed of Trust dated September 20, 2006, naming.” Contrary to these assertions, the Deed of Trust does not name HSBC




This language appears in the Deed of Trust only. There is no mention of MERS in the



remains an insuperable problem. The Motion provides no explanation, much less

documentation or other evidence, to show that the Fieldstone Mortgage

Investment Trust Series 2006-3 (as an entity) or HSBC Bank USA (as that entity’s

“indenture trustee”) has any interest in the subject Note or the subject Deed of




In light of Trustee’s objection on this score, Movant argues that MERS’

role as “nominee for Lender [

successors and assigns” gives it ample authority to assert the stay relief request

under the Deed of Trust for whatever successor in interest or assignee might have

the beneficial interest.

i.e., Fieldstone Mortgage Company] and Lender’s14 Even if the proposition is accepted that the Deed of Trust



assignments resulting in the movant becoming the holder of the note.

B.R. 259, 269 (Bankr. D. Mass. 2008) (“The Court and the Debtor are entitled to insist that the

moving party establish its standing in a motion for relief from stay through the submission of an

accurate history of the chain of ownership of the mortgage.”);

(Bankr. D. Mass. 2007) (“‘If the claimant acquired the note and mortgage from the original lender

or from another party who acquired it from the original lender, the claimant can meet its burden

through evidence that traces the loan from the original lender to the claimant.’”) (quoting

Some courts have indicated that the stay relief request should explain the serial

See, e.g., In re Hayes, 393In re Maisel, 378 B.R. 19, 22In re





provisions give MERS the ability to act as an agent (“nominee”) for another, it

acts not on its own account. Its capacity is representative.


2. Documentation


This District’s Local Bankruptcy Rule 4001.2 requires copies of “all

documents evidencing the obligation and the basis of perfection of any lien or

security interest.” The sole documentation provided with the Motion here

evidences the interests in the Note and Deed of Trust held by Fieldstone Mortgage

Company, a Maryland corporation. This submission does not answer the key

question — Who was the holder of the Note at the time of the Motion?

Several movants for stay relief have argued that the holder of a note secured

by a deed of trust obtains the benefit of the deed of trust even in the absence of an

assignment of the deed of trust, on the theory that the security for the debt follows

the debt. Under this theory, it would appear that when bankruptcy intervenes, and

somewhat like a game of Musical Chairs, the then-current holder of the note is the

only creditor with a pecuniary interest and standing sufficient to pursue payment

and relief from stay.







“need not here go so far” as to require such tracing, because of the paucity of proof presented in

that case. 2009 WL 567188 at *6. The same is true here. Movant’s proof does not even show

who presently holds the Note. That alone provides sufficient basis to deny the Motion.

, 326 B.R. 708, 720 (Bankr. N.D. Ohio 2005)). The court in

Jacobson decided that it



The Motion here certainly suggests that the Fieldstone Mortgage

Investment Trust Series 2006-3 (or perhaps HSBC Bank USA in its capacity as

indenture trustee for that trust) was the holder of the note on the June 24, 2008,

petition date. But at the time of the final § 362(e) evidentiary hearing herein, the

parties discussed and Movant ultimately conceded that (I) the Note contained

nothing indicating its transfer by Fieldstone Mortgage Company, (ii) the Motion

was devoid of allegations regarding the details of any such transfer, and (iii) the

record lacked any other documents related to the issue.


3. The supplemental affidavit


Subsequent to the closing of the hearing and after the Court took the

dispute under advisement, Movant filed a “supplemental affidavit” of its counsel.



counsel obtained on such date the “original” Note and that the same contains an

indorsement. Counsel states that his “affidavit is presented to supplement the

record herein and for the Court’s consideration in the pending motion[.]”

The filing and consideration of this supplemental affidavit are improper for

several reasons.

Doc. No. 28 (filed January 2, 2009). This affidavit alleges that Movant’s

Id. at 2.




Accord Jacobson, 2009 WL 567188 at *6-8 (discussing inadequacies of evidentiary



First, the record was closed, and the Court did not authorize the reopening

of that record, nor did it indicate any post-hearing submissions would be accepted.

Second, Trustee did not have the opportunity to address this “newly

obtained” document at hearing, and nothing shows his consent to the

post hoc

supplementation of the evidentiary record.

Third, disputed factual issues in contested matters may not be resolved

through testimony in “affidavits” but rather require testimony in open court.


Fed. R. Bankr. P. 9014(d). Under the circumstances, the identity of the holder of

the Note certainly appears to be a fact in dispute falling within the ambit of this


Fourth, the affidavit is insufficient to establish that counsel, as affiant, has

the ability to testify regarding or lay the foundation required to admit the


594-95 (Bankr. D. Idaho 2000).

the “original” appears to be based not on the affiant’s (counsel’s) personal

knowledge but on the assertions of someone else.

Fifth, the proffer of this “new” note as the “original” note directly

contradicts Movant’s prior representations that the Note attached to the Motion

See Esposito v. Noyes (In re Lake Country Invs., LLC), 255 B.R. 588,16 The assertion that the newly possessed note is


payable to the bearer and may be negotiated by transfer of possession alone until specially

indorsed.”); § 28-3-301 (providing that the holder of the instrument may enforce it). These

provisions make identification of the current holder significant.

See generally Idaho Code § 28-3-205(2) (“When indorsed in blank, an instrument is


was “true and correct” and the operative document in this matter.

at 1.

Sixth, even were it considered, the “new” Note’s asserted indorsement

states: “Pay To The Order Of [

signed by Fieldstone Mortgage Company through a named assistant vice

president. There is no date nor indication of who was or is the transferee.

Fieldstone Mortgage Company may have indorsed the Note in blank, but this

document does not alone establish that either HSBC Bank USA or Fieldstone

Mortgage Investment Trust is the Note’s holder.

See Doc. No. 21blank] Without Recourse” and then purports to be17

Thus, even if a “nominee” such as MERS could properly bring a motion for

stay relief in the name of and on behalf of the real party in interest – the entity that

has rights in and pecuniary interest under the Note secured by the Deed of Trust –

nothing of record adequately establishes who that entity actually is. Under the

evidence submitted at the § 362(e) final hearing, which consists solely of Exhibit

1, the only entity that MERS could conceivably represent as an agent/nominee

would be Fieldstone Mortgage Company. But MERS does not represent that party

according to the Motion and, in fact, its contentions are to the effect that


2006) is misplaced.

nominee, had standing to seek stay relief.

continued to hold the note, and the mortgage had not been transferred.

For this reason, Movant’s reliance on

In re Huggins, 357 B.R. 180 (Bankr. D. Mass.Huggins held that MERS, which was named in a mortgage as the lender’sId. at 184-85. But in Huggins, the original lenderId. at 182, 184.


presentation constitutes a certification that there has been an “inquiry reasonable under the

circumstances” and that factual allegations made “have evidentiary support or, if specifically so

identified, are likely to have evidentiary support after a reasonable opportunity for further

investigation or discovery”). Trustee here was clear, though, that he asserted no Rule 9011

claims against Movant or its counsel.

See Fed. R. Bankr. P. 9011(b) (providing inter alia that a motion’s filing or other


Fieldstone Mortgage Company is no longer a party in interest.


At the time of that final hearing, counsel for Movant conceded that he had

no documentation provided to him by his “client” which indicated the interests

under the Note or Deed of Trust were held by either HSBC Bank USA or the

Fieldstone Mortgage Investment Trust. Counsel filed the Motion and

characterized the Movant’s identity therein based solely on undocumented

representations made to him. This would appear to be a problematic approach


matter at issue and Movant to its proof.

19 And, in this particular case, Trustee’s objection to the Motion put the


When Trustee challenged the Motion’s bare assertions, Movant failed to

provide an adequate record showing it was a party in interest with standing

entitled to seek such relief. On the record presented, the Court finds and

concludes Trustee’s objection is well taken. That objection will be sustained. The

Motion will be denied. The Trustee will provide a form of order for the Court’s


review and entry.

DATED: March 12, 2009




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