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JUDICIAL NOTICE IS BEING USED AS A SUBSTITUTE FOR PROOF OF FACTS THAT ARE CONTESTED

Posted on April 24, 2018 by Neil Garfield

The entire playbook of the banks and servicers consists of one underlying theme: to obtain foreclosures based upon presumptions that are contrary to the facts.

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see Judicial Notice in Florida 90.202

and notice these provisions that are common to most if not all Judicial Notice statutes specifically state that judicial notice is ONLY for facts not subject to dispute.

Get up to speed on judicial notice. It is a ruse in the context of foreclosures and especially evictions or unlawful detainer actions filed after a supposed sale. They are seeking to avoid the requirement of proving that which they cannot prove unless the court not only accepts the document has having been judicially noticed but also that what is written on the document is presumptively true.

This is one place where the burden does not shift so easily. As I read the law, once you make the assertion contained in the document a question of fact, then the burden does not shift to you unless and until they introduce testimony (not legal argument) that is the foundation for introducing the document into evidence. It seems crystal clear that they cannot do this because the facts point in an entirely different direction.

You might want to consider filing your own motion for summary judgment on the premise that if all they have is a plea for judicial notice and they can’t otherwise prove the truth of the matters asserted in the documents submitted for judicial notice, then they have nothing and there are no issues of fact left to be tried, the burden does not shift to you, and judgment should be entered against the party seeking possession through eviction.

In your argument you should cite specific case law and statutes on judicial notice. Judicial notice is not meant to be a vehicle for skating around the truth. It is meant to streamline admission of evidence that comes from an independent third party with no interest in the outcome of litigation and is therefore presumptively true — because it is 100% credible.

First judicial notice is only good for proving the fact that the document exists. Second, what is written on the document is presumed true UNLESS you deny or object — so they must still prove that what is written on the document is true with other evidence. Third, judicial notice mostly applies to government generated documents — not self serving documents that are recorded or uploaded somewhere for the sole purpose of invoking judicial notice.

The entire reason why judicial notice exists is judicial economy — why require someone to prove something that everyone already knows is true or is contained in government agency files or website wherein the information is generated by an independent third party with no interest in the outcome of the litigation? Such documents are inherently credible.

They will try to say that they took title by virtue of the deed that was issued. The fact that they are seeking the court to admit into evidence as true is that the deed was valid. You contest that the deed was valid. Therefore it is up to them, apart from the deed, to show facts that the deed was valid and that means that the property was sold by a properly authorized trustee on behalf of an actual beneficiary who was either the obligee of the contested debt or the authorized agent for the obligee.

If the property was “sold” on behalf of a party who was not an obligee on the debt then it was sold by a non-beneficiary. And the filing of a substitution of trustee was void. And the “credit bid” was a false statement equivalent to perjury.

Filed under: burden of persuasion, burden of pleading, BURDEN OF PROOF, CORRUPTION, discovery, evidence, Fabrication of documents, foreclosure, Motions | Tagged: beneficiary, credit bid, judicial economy, judicial notice, Substitution of Trustee, TRUTH | 2 Comments »

Breaking it Down: What to Say and Do in an Unlawful Detainer or Eviction

Posted on December 21, 2017 by Neil Garfield

Homeowners seem to have more options than they think in an unlawful detainer action based upon my analysis. It is the first time in a nonjudicial foreclosure where the foreclosing party is actually making assertions and representations against which the homeowner may defend. The deciding factor is what to do at trial. And the answer, as usual, is well-timed aggressive objections mostly based upon foundation and hearsay, together with a cross examination that really drills down.

Winning an unlawful detainer action in a nonjudicial foreclosure reveals the open sores contained within the false claims of securitization or transfer.

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HAT TIP TO DAN EDSTROM

Matters affecting the validity of the trust deed or primary obligation itself, or other basic defects in the plaintiffs title, are neither properly raised in this summary proceeding for possession, nor are they concluded by the judgment.” (Emphasis added.) (Cheney v. Trauzettel (1937) 9 Cal.2d 158, 159-160.) My emphasis added

So we can assume that they are specifically preserving your right to sue for damages. But also, if they still have the property you can sue to get it back. If you do that and file a lis pendens they can’t sell it again. If a third party purchaser made the bid or otherwise has “bought” the property you probably can’t touch the third party — unless you can show that said purchaser did in fact know that the sale was defective. Actual knowledge defeats the presumptions of facially valid instruments and recorded instruments.

The principal point behind all this is that the entire nonjudicial scheme and structure becomes unconstitutional if in either the wording of the statutes or the way the statutes are applied deprive the homeowner of due process. Denial of due process includes putting a burden on the homeowner that would not be there if the case was brought as a judicial foreclosure. I’m not sure if any case says exactly that but I am sure it is true and would be upheld if challenged.

It is true that where the purchaser at a trustee’s sale proceeds under section 1161a of the Code of Civil Procedure he must prove his acquisition of title by purchase at the sale; but it is only to this limited extent, as provided by the statute, that the title may be litigated in such a proceeding. Hewitt v. Justice’ Court, 131 Cal.App. 439, 21 P.(2d) 641; Nineteenth Realty Co. v. Diggs, 134 Cal.App. 278, 25 P.(2d) 522; Berkeley Guarantee Building & Loan Ass’n v. Cunnyngham, 218 Cal. 714, 24 P.(2d) 782. — [160] * * * In our opinion, the plaintiff need only prove a sale in compliance with the statute and deed of trust, followed by purchase at such sale, and the defendant may raise objections only on that phase of the issue of title

So the direct elements are laid out here and other objections to title are preserved (see above):

The existence of a sale under nonjudicial statutes
Acquisition of title by purchase at the sale
Compliance with statutes
Compliance with deed of trust

The implied elements and issues are therefore as follows:

Was it a Trustee who conducted the sale? (i.e., was the substitution of Trustee valid?) If not, then the party who conducted the sale was not a trustee and the “sale” was not a trustee sale. If Substitution of Trustee occurred as the result of the intervention of a party who was not a beneficiary, then no substitution occurred. Thus no right of possession arises. The objection is to lack of foundation. The facial validity of the instrument raises only a rebuttable presumption.
Was the “acquisition” of title the result of a purchase — i.e., did someone pay cash or did someone submit a credit bid? If someone paid cash then a sale could only have occurred if the “seller” (i.e., the trustee) had title. This again goes to the issue of whether the substitution of trustee was a valid appointment. A credit bid could only have been submitted by a beneficiary under the deed of trust as defined by applicable statutes. If the party claiming to be a beneficiary was only an intervenor with no real interest in the debt, then the “bid” was neither backed by cash nor a debt owed by the homeowner to the intervenor. According there was no valid sale under the applicable statutes. Thus such a party would have no right to possession. The objection is to lack of foundation. The facial validity of the instrument raises only a rebuttable presumption.

The object is to prevent the burden of proof from falling onto the homeowner. By challenging the existence of a sale and the existence of a valid trustee, the burden stays on the Plaintiff. Thus you avoid the presumption of facial validity by well timed and well placed objections.

” `To establish that he is a proper plaintiff, one who has purchased property at a trustee’s sale and seeks to evict the occupant in possession must show that he acquired the property at a regularly conducted sale and thereafter ‘duly perfected’ his title. [Citation.]’ (Vella v. Hudgins (1977) 20 Cal.3d 251,255, 142 Cal.Rptr. 414,572 P.2d 28; see Cruce v. Stein (1956) 146 Cal.App.2d 688,692,304 P.2d 118; Kelliherv. Kelliher(1950) 101 Cal.App.2d 226,232,225 P.2d 554; Higgins v. Coyne (1946) 75 Cal.App.2d 69, 73, 170 P2d 25; [*953] Nineteenth Realty Co. v. Diggs (1933) 134 Cal.App. 278, 288-289, 25 P2d 522.) One who subsequently purchases property from the party who bought it at a trustee’s sale may bring an action for unlawful detainer under subdivision (b)(3) of section 1161a. (Evans v. Superior Court (1977) 67 Cai.App.3d 162, 169, 136 Cal.Rptr. 596.) However, the subsequent purchaser must prove that the statutory requirements have been satisfied, i.e., that the sale was conducted in accordance with section 2924 of the Civil Code and that title under such sale was duly perfected. {Ibid.) ‘Title is duly perfected when all steps have been taken to make it perfect, i.e. to convey to the purchaser that which he has purchased, valid and good beyond all reasonable doubt (Hocking v. Title Ins. & Trust Co, (1951), 37 Cal.2d 644, 649 [234 P.2d 625,40 A.L.R.2d 1238] ), which includes good record title (Gwin v. Calegaris (1903), 139 Cal. 384 [73 P. 851] ), (Kessler v. Bridge (1958) 161 Cal.App.2d Supp. 837, 841, 327 P.2d 241.) ¶ To the limited extent provided by subdivision (b){3) of section 1161a, title to the property may be litigated in an unlawful detainer proceeding. (Cheney v. Trauzettel (1937) 9 Cal.2d 158, 159, 69 P.2d 832.) While an equitable attack on title is not permitted (Cheney, supra, 9 Cal.2d at p. 160, 69 P.2d 832), issues of law affecting the validity of the foreclosure sale or of title are properly litigated. (Seidel) v. Anglo-California Trust Co. (1942) 55 Cai.App.2d 913, 922, 132 P.2d 12, approved in Vella v. Hudgins, supra, 20 Cal.3d at p. 256, 142 Cal.Rptr. 414, 572 P.2d 28.)’ ” (Stephens, Partain & Cunningham v. Hollis (1987) 196 Cai.App.3d 948, 952-953.)

Here the court goes further in describing the elements. The assumption is that a trustee sale has occurred and that title has been perfected. If you let them prove that, they win.

acquisition of property
regularly conducted sale
duly perfecting title

The burden on the party seeking possession is to prove its case “beyond all reasonable doubt.” That is a high bar. If you raise real questions and issues in your objections, motion to strike testimony and exhibits etc. they would then be deemed to have failed to meet their burden of proof.

Don’t assume that those elements are present “but” you have a counterargument. The purpose of the law on this procedure to gain possession of property is to assure that anyone who follows the rules in a bona fide sale and acquisition will get POSSESSION. The rights of the homeowner to accuse the parties of fraud or anything else are eliminated in an action for possession. But you can challenge whether the sale actually occurred and whether the party who did it was in fact a trustee.

There is also another factor which is whether the Trustee, if he is a Trustee, was acting in accordance with statutes and the general doctrine of acting in good faith. The alleged Trustee must be able to say that it was in fact the “new” beneficiary who executed the substitution of Trustee, or who gave instructions for issuing a Notice of Default and Notice of sale.

If the “successor” Trustee does not know whether the “successor” party is a beneficiary or not, then the foundation testimony and exhibits must come from someone who can establish beyond all reasonable doubt that the foreclosure proceeding emanated from a party who was in fact the owner of the debt and therefore the beneficiary under the deed of trust.

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Filed under: burden of persuasion, BURDEN OF PROOF, Eviction, foreclosure, Trail Objections, Unlawful Detainer | Tagged: beneficiary, credit bid, duly perfected title, Eviction, foreclosure sale, owner of the debt, Substitution of Trustee, the debt, TRIAL OBJECTIONS, trustee, TRUTH, Unlawful Detainer | 22 Comments »

WINDFALL TO BANKS: Credit Bid Still Not Drawing Attention to Defective Fraudulent Foreclosures

Posted on January 12, 2017 by Neil Garfield

The only party that can make a credit bid (i.e., use the foreclosure judgment instead of paying cash) is one who is still a senior secured creditor as to the property being auctioned.

In my review of the results of many auctions it is apparent that a credit bid was submitted by a party relying upon a dubious claim as the actual creditor at the time the auction was held. The clerk is committing error when it accepts a credit bid from a party who is not the creditor. The question is whether the right to attack the certificate of sale or the auction process is preserved when the homeowner has failed to object to the credit bid.

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In a judicial state, most people treat the actions and events after judgment as ministerial acts of no consequence. But upon review, as pointed out by me in 2011, based initially upon the research by Charles Koppa (in San Diego), it seems that the initial problems with the loan documents persist even at auction.

This is revealed in one of three flavors: (1) a credit bid submitted by someone other than the Plaintiff in the foreclosure action and who is not the secured creditor at the time of the auction and (2) the certificate of title is issued to a party who was neither the plaintiff nor the party who submitted the credit bid and finally (3) a credit bid is submitted by the Plaintiff but the Plaintiff is no longer the senior secured creditor. All three can overlap as we have repeatedly seen in Florida and several other states which have come under our review.

In Branch Banking v Tomblin, a 2015 case dealing with the issue of who can submit a credit bid the logic of allowing a credit bid was explained:

Credit bidding is allowed because “no useful purpose [is] served in requiring a bondholder or a mortgagor to pay cash to a court officer conducting a judicial sale when he would be entitled to immediately have it paid back to him under the decree authorizing the sale.” Grable v. Nunez, 66 So. 2d 675, 677 (Fla. 1953). However, credit bidding would not appear to be available to a senior mortgagee that has not foreclosed its mortgage. (e.s.)

So the upshot is that in a situation where a party claims to be the senior secured creditor it must have been the Plaintiff in a foreclosure action. Any other reasoning would allow what we already know is happening: widespread fraudulent foreclosures performed by entities whoa re indemnified against charges that it intentionally mislead the court and the borrower.

So the bottom line is that the credit bid may ONLY be submitted and should not be accepted by the clerk unless the Plaintiff submits the credit bid and where the Plaintiff is still, at the time of the auction, the senior secured creditor on the property that was subject to the foreclosure action — in short the real party in interest.

At this point the issue is NOT whether they are the “holder” or “owner” of the promissory note. They must be the party to who would be entitled to immediately have it paid back to him under the decree authorizing the sale.” Grable v. Nunez, 66 So. 2d 675, 677 (Fla. 1953).

This seems to be where the rubber meets the road. If the party submitting the credit bid is not entitled to the actual monetary proceeds of the sale (because they are in fact financially damaged by the defendant’s failure to pay) then if they want to bid they must do so in cash.

This is exactly opposite to the strategy employed in foreclosures today. The foreclosing party seeks and obtains a foreclosure judgment, an auction follows and NOBODY pays any cash for the bid. Instead the foreclosing party receives a windfall having absolutely no money in the deal either for origination of the alleged loan or for the purchase of the alleged loan (an event that clearly has not happened in 99% of all “loans” subject to claims of securitization).

Thus it would seem pretty clear that anyone, including the homeowner, could object to the auction and the certificate of title and demand they be set aside. And if the next highest bidder would be the one awarded the property, or depending upon the court, the auction might be reset along with a finding of who, if anyone, can submit a credit bid. Is anyone listening?

Filed under: foreclosure | Tagged: Branch Banking v Tomblin, credit bid, Grable v Nunez, judgment creditor, senior creditor | 7 Comments »

Looming Title Problems from Fabricated, Fraudulent Forged Documents

Posted on October 17, 2016 by Neil Garfield

The one thing that is perfectly clear is that at some point the state legislatures who govern title to property already have a huge problem brewing under their feet. There is no doubt in my mind, that the solution will follow the example of the Murphy Act in Florida when title became unintelligible some 80 years ago.

The new acts will essentially reset title as of a certain date. All the previous illegal and potentially criminal actions will be ignored. All the people who were swindled out of their life savings will also be ignored, because in the end it is the banks who control legislation, not the people.

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

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see http://www.vice.com/read/when-you-buy-a-house-but-dont-actually-own-it

You have two problems looming here.

The first and largest problem is that most, nearly all, of the foreclosures were void and fraudulent. The credit bid was accepted from a party who was not the creditor. THAT probably means that any deed on foreclosure was and is void. In some states there is a “statute of limitations” on the void title which is waived if you don’t try to make it right before the one-year statute runs out. In Florida, after one year, you can get damages (i.e., money) but you can’t reclaim your title even from a void, fraudulent foreclosure. Hence the Florida legislature institutionalized fraud in exchange for campaign donations.

The second problem is even worse and might not be correctable by legislation or even a court order. For those who sent a notice of rescission and the “lender” did nothing, there is no doubt that if the rescission was sent within 3 years of the fabricated “closing” that the nonexistent “loan contract” was canceled and the note and mortgage were rendered void as of the date of mailing of the notice of rescission.

Under Federal Law that notice of rescission rendered the mortgage or deed of trust void along with the note. Therefore any action on the loan contract, the note or the mortgage or deed of trust after rescission is void because those “instruments” are void. Void=Nothing. As far as I have been able to determine, there is no statute of limitations on “nothing.”

It gets worse. If the homeowner recorded the rescission, then according to State law, there is notice to the world that title derived from the mortgage is void. And there is no statute of limitations on that either, as far as I can tell.

Anyone who has taken title arising from either of the above scenarios has no title. If and when the day comes that they are forced to defend the illusion of their “title” they will quickly find out that the title insurer will be of no help and will deny coverage. And the same holds true for lenders — but the lenders don’t care because their goal is merely to perpetuate the illusion of securitization.

Nearly all the foreclosures in the past 10 years fall under the first category, the second category or both. Any legislation that deprives the owner of property without due process (i.e., judicial action) violates the 14th Amendment to the constitution.

Judicial action is void if it is based upon nonexistent facts. The facts are nonexistent if they were never proffered in court or found, based upon competent evidence to be true, by the trier of fact. That is missing from virtually all foreclosures.

Accordingly, it is my opinion that this another situation where the constitution be damned. The courts and legislatures are continuing to advance nonsense: the pretense of valid loan contracts, valid notes, valid mortgages and valid foreclosure sales to valid creditors submitting a valid credit bid.

Ask these lawmakers and law interpreters four questions:

did you hear or see any evidence that identified the party to whom the payments from the borrower were forwarded?
If not, why did you assume that such a party existed and had authorized the parties in court to act on collateral for the benefit of the real creditor?
did you hear or see any evidence that connects the real creditors with the parties who appeared in court?
If not, why did you assume that such a connection existed with an unidentified entity?

Filed under: foreclosure | Tagged: credit bid, creditor, recorded rescission, rescission, title | 8 Comments »

“Credit Bid” Comes Under Scrutiny in 9th Circuit

Posted on September 16, 2016 by Neil Garfield

As I have been writing and talking about the forced judicial sales, my opinion has always been that in most cases there is an absence of evidence that the party making the credit bid was in fact the creditor thus entitled to make a “credit bid” at the auction. The credit bid is an allowance for the creditor to bid up to the amount of the debt owed to them without paying cash at the sale. This has been ignored since I first started writing about it. I think the credit bid is void and fraudulent if a non-creditor submits a credit bid when it is not the creditor. In nonjudicial states this is an easier proposition than in judicial states where a Final Judgment has been rendered.

This case is also notable because it finally addresses the issue of the liability of the Trustee on a deed of trust, concluding that if the party claiming to be the beneficiary was in fact not the beneficiary, and there is no evidence to suggest otherwise, the trustee is potentially liable. It would be helpful to pursue discovery against the Trustee, since it is always a “substituted trustee” that is in fact under the thumb or owned by the parties who are making self-serving declarations of their status as “beneficiaries” under the deed of trust. THAT of course provides grounds to object and challenge the substitution of trustee and everything that follows. If the self-proclaimed beneficiary is a nonexistent entity or otherwise does not conform to the statutory definition of a beneficiary, then it has no power to substitute a new trustee. And everything that the trustee does after that point is void. In discovery look for the agreement that says the new Trustee is indemnified and held harmless for all claims, violations etc. It’s there — but you need to force the issue.

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER. ALSO NOTE THAT THIS IS NOT YET PUBLISHED AND THEREFORE IS NOT MANDATORY AUTHORITY YET.

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see 9th Circuit decision, Jacobsen v. Aurora Loan Services, Case No. 12-17021

Wrongful foreclosure. We reverse the district court’s grant of summary judgment in favor of Aurora on the wrongful foreclosure claim. In California, the elements of a wrongful foreclosure action are (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering. Sciarratta v. U.S. Bank Nat’l Ass’n, 202 Cal. Rptr. 3d 219, 226 (Ct. App. 2016). The district court erred by granting summary judgment on the ground that it found nothing wrong with the foreclosure sale.

First, the district court failed to review the record in the light most favorable to the non-movants when the district court assumed that the form of Aurora’s bid at the foreclosure sale was a cash bid. On appeal, the parties now agree that the form of the bid was a credit bid.

Second, a genuine dispute of material fact remains regarding whether Aurora properly made a credit bid. California law permits “present beneficiary of the deed of trust” to credit bid at the foreclosure sale. Cal. Civ. Code § 2924h(b). However, it is not uncontroverted that Aurora was the present beneficiary of the deed of trust. A deed of trust is “inseparable from the note it secures.” Yvanova v. New Century Mortg. Corp., 365 P.3d 865, 850 (Cal. 2016); see also Domarad v. Fisher & Burke, Inc., 76 Cal. Rptr. 529, 536 (Ct. App. 1969) (“[A] deed of trust has no assignable quality independent of the debt, it may not be assigned or transferred apart from the debt, and an attempt to assign the deed of trust without a transfer of the debt is without effect.”). The record contains evidence that Aurora did not “own” O’Brien’s loan before the foreclosure. ER 19-20, 136-38, 181. However, the record also contains evidence that Aurora is “currently in possession” of the original promissory note, which was endorsed in blank, although it is not clear from Aurora’s declaration when Aurora became the holder of the note.^[4] [ER 179-80; 185-195]. It appears that there remains a question of fact whether Aurora was the “beneficiary” of the deed of trust at the time of the foreclosure and thus whether it was entitled to make a credit bid at the foreclosure sale, and we remand for the district court to address this issue in the first instance.

Moreover, in order to prevail on their claim of wrongful foreclosure, Plaintiffs must also show that they suffered prejudice or harm as a result of irregularities or illegalities in the foreclosure sale. Sciarratta, 202 Cal. Rptr. 3d at 226. Because the district court granted summary judgment to Aurora on a different ground, the court did not address the element of prejudice or harm. In the circumstances, we also deem it prudent to remand this claim to the district court to consider the prejudice question in the first instance. We therefore reverse the district court’s grant of summary judgment on the wrongful foreclosure claim and remand for further proceedings.^[5]

AFFIRMED IN PART AND REVERSED AND REMANDED IN PART. The parties shall bear their own costs on appeal.

[**] The Honorable James V. Selna, United States District Judge for the Central District of California, sitting by designation.

[*] This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.

[1] The district court did not address standing. However, “[w]e may affirm on any ground supported by the record, even it if differs from the rationale used by the district court.” Buckley v. Terhune, 441 F.3d 688, 694 (9th Cir. 2006) (en banc).

[2] We GRANT both parties’ requests for judicial notice.

[3] In their reply, Plaintiffs suggest that their cancellation of instruments claim survives their contention that the note and deed of trust were void ab initio. Because this argument was first raised in the reply brief, we deem it waived. Delgadillo v. Woodford, 527 F.3d 919, 930 n.4 (9th Cir. 2008).

[4] Note that in today’s modern mortgage world, the “owner” of the underlying debt (that is, the entity who will receive the ultimate economic benefit of payments from the note, less a servicing fee) and “holder” of the note (the party legally entitled to enforce the obligations of the note) are not always one and the same. See, e.g., Brown v. Wash. State Dep’t of Commerce, 359 P.3d 771, 776-77 (Wash. 2015) (discussing modern mortgage practices and the secondary market for mortgage notes; “Freddie Mac owns [borrower’s] note. At the same time, a servicer . . . holds the note and is entitled to enforce it.“)(emphasis added). It thus appears possible that the “beneficiary” under the deed of trust would follow with the note (and with the entity “currently entitled to enforce [the] debt”), rather than the income stream. See Yvanova, 365 P.3d at 850-51; see also Hernandez v. PNMAC Mortg. Opp. Fund Investors, LLC, 2016 WL 3597468, *6 (Cal. Ct. App. June 27, 2016) (unpublished) (if the foreclosing party “could properly and conclusively establish . . . that it did hold the Note at the [time of foreclosure], that would be dispositive and preclude a wrongful foreclosure cause of action because a deed of trust automatically transfers with the Note it secures—even without a separate assignment.”)(citing Yvanova).

[5] We also reverse the district court’s grant of Cal-Western’s motion to dismiss the wrongful foreclosure claim. The trustee must conduct the foreclosure sale “fairly, openly, reasonably, and with due diligence” “to protect the rights of the mortgagor and others.” Hatch v. Collins, 275 Cal. Rptr. 476, 480 (Ct. App. 1990). Here, the complaint alleges that Cal-Western’s acceptance of a void credit bid was unlawful. If the credit bid was void and the acceptance of the credit bid was unlawful, Cal-Western failed to conduct the foreclosure sale with due diligence, and thus the complaint states a claim against Cal-Western.

Filed under: foreclosure | Tagged: beneficiary under deed of trust, cash bid, credit bid, deedof trust, foreclosure defense, fraud, securitization, Substitution of Trustee, wrongful foreclosure | 8 Comments »

The Confusion Over Consideration: If they didn’t pay for it, they have nothing against the property

Posted on March 21, 2014 by Neil Garfield

There have been multiple questions directed at me over the issue of consideration arising from presumptions made about a note and mortgage that appear to be facially valid. Those presumptions are rebuttable and indeed in many cases would be rebutted by the actual facts. That is why asserting the right defenses is so important to set the foundation for discovery.

The cases thrown at me usually relate to adequacy of consideration. Some relate wrongly to Article 3 as to enforcement of the note. I agree that enforcement of the note is easier than enforcement of the mortgage. But that is the point. If they really want the property even a questionable holder of the note might be able to get a civil judgment and that judgment might result in a lien against the property and it might even be foreclosed if the property is not homestead. That is how we protect creditors and property owners. To enforce the mortgage, the claim must be much stronger — it must be filed by a party who actually has the risk of loss because they paid for it.

One case just sent to me is a 2000 case 4th DCA in Florida. Ahmad v Cobb. 762 So 2d 944. The quote I lifted out of that case which was presented to me as though it contradicted my position is the most revealing:

“First, there is no doubt that Ahmad, as the assignee of the Resolution Trust Corporation, owned the rights to the Cobb Corner, Inc. note and mortgage and to the guarantees securing those obligations. He obtained a partial

[762 So.2d 947]

summary judgment which fixed the validity, priority and extent of his debt. Any questions as to the adequacy of the consideration he paid were settled in that ruling.“

That is your answer. The time to contest consideration is best done before judgment when you don’t need to prove fraud by clear and convincing evidence. We are also not challenging adequacy of consideration — except that if it recites $10 and other value consideration for a $500,000 loan it casts doubt as to whether the third leg of the stool is actually present — offer, acceptance and consideration. People tend to forget that this is essentially contract law and the contract for loan is no exception to the laws of contract.

We are challenging whether there was any consideration at all because I already know there was none. There couldn’t be. The consideration flowed directly from the investors to the borrower. That is the line of sight of the debt, in most cases.

The closing agent mistakenly or intentionally applied funds from a third party who was not disclosed on the settlement documents. Without receiving any money from the “originator”, the closing agent proceeded to get the signature from the borrower promising to pay the originator when it was a third party who gave the closing agent the funds. If this was a “warehouse loan” in which the originator was borrowing the money with a risk of loss and the liability to pay it back then the originator is a proper party and any assignments from the originator would be valid — if they were supported by consideration. Some loans do fit that criteria but most do not.

I repeat that this is not an attempt to get out of the debt altogether. It is an attack on the note and mortgage because the actual terms of repayment were either never agreed between the investors and the borrowers or are as set forth in the PSA and NOT the note and mortgage.

If the third party (source of funds) is NOT in privity with the originator (which is the structure we are dealing with because the broker dealers wanted to shield themselves from liability for violating fair lending laws) then the closing agent should have obtained instructions from the source of funds as to the application of funds wired into escrow. Anyone who didn’t would be an idiot. But most of them, under that definition would qualify. The closing agent would also be wrong to have demanded the signature of the borrower on documents that (a) did not reveal the source of funds and (b) did not contain all the terms of repayment, as recited in the PSA.

The foreclosure crowd is saying the PSA is irrelevant — but only when it suits them. They are saying that the PSA gives them the authority to proceed with foreclosure but that the terms of the PSA are not relevant. That is crazy, but up until now judges have been buying it because they have not been presented with the fact pattern and legal argument that we are asserting.

In summary, we are saying there was NO CONSIDERATION. We are not attacking adequacy of consideration. I am saying there was no actual transaction between the originator and the borrower and there was no actual transaction between the assignor, indorsor, and the assignee or indorsee. Article 9 of the UCC is clear.

The terms of enforcement of a note govern a looser interpretation of when negotiable paper can be enforced. But the terms of a mortgage cannot be enforced by anyone unless they obtain it for value. Value is consideration. We are saying there wasn’t any consideration. Any decision to the contrary is wrong and can be contested with contrary decisions that are all correct and can be found not only in the public records but in treatises.

And this is absolutely necessary. In a mortgage foreclosure or even attachment, the party seeking the forfeiture must show that this forfeiture is necessary to secure repayment of a debt. It must also show that without this forfeiture, it will suffer a loss. In so doing they establish grounds not only for the foreclosure judgment but also for the foreclosure sale.

As pointed out in the above case, the creditor is the one who submits a creditor’s bid by definition. If the party bringing the action cannot satisfy the elements of a creditor in real money terms, then they are not permitted to bid anything other than cash. Allowing a party who did not acquire the mortgage rights for value would enable strangers to the transaction to acquire property for free, except the costs of litigation. Thus the “free house” argument is specious. It is a distraction from the real facts as to who is getting a free house.

Filed under: CASES, CORRUPTION, evidence, expert witness, foreclosure defenses, GARFIELD KELLEY AND WHITE, GTC | Honor, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, Servicer, Title, TRUST BENEFICIARIES, trustee | Tagged: adequacy of consideration, consideration, contract law, credit bid, creditor, creditor bid, discovery, foreclosure sale | 170 Comments »

Challenging Deeds Issued After Auction (Sale) of Property

Posted on December 20, 2013 by Neil Garfield

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Filed under: CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GARFIELD KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Pleading, securities fraud, Servicer, TRUST BENEFICIARIES, trustee | Tagged: Auction, Bill Paatalo, credit bid, default, foreclosure sale, Notice of Default, Notice of Sale, redemption, reinstatement, standing | 24 Comments »

Being Aggressive: Attacking the ability to submit a credit bid

Posted on August 1, 2013 by Neil Garfield

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As I have previously stated on these pages the changes in the law and the rules are all designed to eliminate delay tactics on the part of the borrower. Most of these changes do not eliminate delay tactics on the part of the party seeking foreclosure. Frankly I don’t think many of these changes will survive constitutional challenge. But as long as they are on the books they represent the reality in which we are litigating.

The bottom line is that the walls are closing in on the strategy of delay. This is changing the landscape of litigation and will cause changes in the retainer agreements between the attorneys and their clients who are defending foreclosures. Where the goal has been delay and recovering economic damages through nonpayment of rent or mortgage payments, those cases are likely to come up for summary disposition.

The cost of litigating a case aggressively as opposed to buying time is different. One of the problems that some homeowners are going to experience is that they are now accustomed to not paying rent or mortgage payments or even taxes or insurance. That time is coming to an end. One way or the other you are going to have to be prepared to start making some payments on the maintenance, taxes, insurance, principal and interest. The only real question is the size of the monthly payments and the principal balance of the loan payable to the party who owns the unpaid account receivable, loan receivable, note receivable or bond receivable.

Motions can be brought before the court and heard within short periods of time demonstrating that the borrower is seeking to move the case along if the motions contain simplified elements. For example, instead of arguing the academic question of standing and indispensable parties (all of which I think are legitimate and under other circumstances would be sustained) a motion could be filed in court which challenges the ability of the foreclosing party to submit a credit bid at the time of auction.

Of course I am not an expert in the state laws of all 50 states. And this article is for general information purposes only and not an acceptable substitute for seeking the advice of an attorney who is licensed in the jurisdiction in which the property is located.

My suggestion is that a motion be filed after proper discovery has revealed that neither of the foreclosing party nor any party they purport to represent is the owner of an unpaid account receivable. Instead of using that to dismiss the case, I am suggesting that it be used to prevent the foreclosing party from submitting a credit bid because they do not fulfill the requirements and elements set forth in the statutes of the state in which the foreclosure auction is going to take place.

While the statutes may differ in their wording, the general rule is that a party may submit a credit bid and buy the property without offering any cash if they are the creditor. Generally that means that they are currently the owner of an unpaid account receivable that was or is the subject matter of the current foreclosure action — and that they are a party to the pending action in one form or another. If discovery is pursued aggressively I believe you’ll find that there is no account receivable, bond receivable, or note receivable in existence — or that the parties seeking foreclosure refuse to reveal the location of such an account.

Even if the account can be found, the probabilities favor a finding that the account receivable bears no relationship with the paper trail on which the foreclosing party has placed reliance. Without going into academic arguments, this could very well mean that even if the account receivable is located, it is not secured by any mortgage or deed of trust. This is why I think HOA’s are missing the boat because I think their lien has priority over any of the claims of the foreclosing parties.

While it could be argued that the reason for that finding would be splitting the note and mortgage, a better argument that would get more traction in court would be that the original debt has been paid in full and that the account receivable is in the nature of contribution which is a separate cause of action apart from collection on the note (which has been paid) or enforcement of the mortgage (worthless because it secures the paid note).

I don’t think there would be much discretion on the part of the court in finding that the foreclosing party is not entitled to submit a credit bid. The burden would be on the foreclosing party to show the money trail and proof of the existence and location of the account receivable that is unpaid. Revealing the money trail will show that the note and original debt had been paid in full, which is why they will oppose your efforts with every tool at their disposal. But if you get that far where such an order has been entered, it would seem inevitable that the case would quickly settle.

The interesting potential result of this would be that anyone could bid on the property if they had the cash and the cash would have to be held until the creditor was determined. The creditor was not determined, money taken in from the sale presumably would be payable to the homeowner.

There is also the possibility of a bid from an investor who then challenges the legality of the credit bid from the non-creditor who submitted the bid. This might lead to a whole other area of litigation. That might not be a good thing when dealing with judges who believe they are under a public mandate to clear the court calendars of foreclosure cases.

It is my opinion that the more aggressively you pursue the case to conclusion the more likely it is that you will achieve a settlement or modification that is satisfactory. The foreclosure mills are set up process these files for $1200 each as a flat fee regardless of how long it takes to litigate them. If the level of litigation activity is increased force the foreclosure mills to go back to the servicers asking for more money because the cases are involving more time, more attorneys, more paralegals and more clerical staff. But I would add the cautionary remark that if you file a motion there must be substantial arguable merit to it or the judge will be annoyed and bring the case to a close in ways that will not satisfactory to the homeowner.

Filed under: AMGAR, CDO, CORRUPTION, eminent domain, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, MODIFICATION, Mortgage, Motions, Servicer | Tagged: account receivable, BID, BOND receivable, cash bid, credit, credit bid, creditor, foreclosure auction, Investor, note receivable, strategy of delay | 14 Comments »

Will the Real Creditor Please Stand Up?

Posted on July 17, 2013 by Neil Garfield

I was speaking with Patrick Giunta, Esq. a successful foreclosure trial attorney in Fort Lauderdale about credit bids, necessary and indispensable parties, standing and strategy and I thought I would make a blog out of it. His direct number is 954-928-0100 and his office is located on Federal Highway. But you will probably have more luck calling our customer service numbers for the intake information, which is probably what he will tell you to do. (see below). If you want to bypass customer service and do your own intake just go to INTAKE FORM AND SUBMIT IT.

BTW — the title to this Blog is taken from similar wording in a Fordham Law review article published 6 years ago which I think can still be accessed on the right column of the home page of this blog. It was obvious then just as it is obvious now that we are headed toward chaos by making the business records exception the RULE and the hearsay rule the EXCEPTION.

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available TO PROVIDE ACTIVE LITIGATION SUPPORT to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

The big issue confronting litigators representing homeowners in foreclosures and other related litigation matters, is that you can’t get any credible factual information from a credible competent witness with personal knowledge of the loan or personal knowledge that can establish a foundation for the business records exception to the hearsay rule. Actually all of the legal issues examined by this blog are intertwined. It starts off as an inquiry into the voir dire or cross examination of a witness who is proffered by the attorney for the bank in preparation for laying the foundation for the introduction of documents into the court record as evidence. But the closer you look the more you end up also including jurisdictional issues, standing, and whether the necessary and indispensable parties to the action are present in court or even know that the court proceeding is in process.

My conclusion is that if the judge is not open to a direct argument regarding jurisdiction and standing then you can reopen that same issue by pointing out the reason why it is important in your case. Starting off with jurisdiction and standing sounds like you are trying to get out of the legitimate debt with a legal gimmick. If you really want traction, you must present your argument and evidence in a way that shows the judge that the issue is not whether the borrower should be off the hook for the loan, but whether the foreclosing party has any interest in the loan. I suggest working backwards from the foreclosure auction. Florida statutes are pretty clear. And so other statutes of other states. The court can order the auction to occur but only an actual creditor (on the loan that is the subject of the dispute) can submit a credit bid in lieu of cash.

The unfortunate tendency of judges sitting on the bench to treat the business records exception as the rule can only be offset by demonstrating in a clear and convincing manner that the rule is that hearsay evidence is not admissible. The exception to the rule might be business records but only if they are cloaked in a presumption of credibility. The general use of business records as an exception to the hearsay rule is applied when the business records sought to be introduced are from the records custodian of an independent third-party who has no interest in the outcome of the case. Florida statutes allow for introduction of business records without the records custodian but only under restrictive circumstances.

The point is always to use evidence that has the highest degree of credibility so that the judge can make an informed decision.

I would argue that the business records of a litigant should never be used as an exception to the hearsay rule even if the judge thinks that it is convenient to do so. If a lender has a legitimate claim they can certainly ask for a stipulation from the borrower as to the legitimacy of documents, but if the borrower refuses I see no reason why the lender should be exempted from the requirement that would be imposed upon the borrower if the borrower was attempting to introduce documents as business records and an exception to the hearsay rule. Both the “lender” and the borrower must prove their case without playing with the rules of evidence.

In all the cases that I have reviewed I have yet to see testimony from a witness who actually knew anything about the loan or the documents. Why not?

If the foreclosing party actually was a legitimate party who had an interest in the loan or who had the authority to enforce the loan then they would easily have access to actual records custodians who had actual original records who could also testify as to the way the records were received and maintained and how the records were secured — which is all about credibility of the evidence again because if the records were accessible by a large group of people than the possibility of the records being amended, altered, fabricated, added, removed, etc. is exponentially increased.

The court might be correct in a technical sense that many different types of parties could initiate a foreclosure proceeding without possession or ownership of the note. You can arrive at this conclusion using the Uniform Commercial Code or common law. That is all on the contract side of the legal argument. When you get to the property law side of the legal argument, you find yourself in the position of a shadow boxer and losing by sheer exhaustion.

The creditor is clearly the party who owns 100% of the account receivable (whether you want to refer to it as a bond receivable or a note receivable is another story). The creditor is clearly the party who would lose money but for obtaining legal redress from the court. And that is only the creditor who has the right to make a credit bid at the foreclosure auction in lieu of bidding with cash, which is what everyone else has to do.

So you end up with the court denying your motion to dismiss or motion for temporary injunction if it is based solely on standing, possession of the note or status of the holder or holder in due course. But what you don’t have is the creditor identified nor the amount of the account receivable quantified as to that creditor as shown on the books and records of the creditor, which would include all payments and disbursements to or from all sources. The banks have thus far been successful in directing the attention of the court to solely the accounts of the sub servicer as though that was the account receivable of the creditor. It isn’t. Just look at the bond and the securitization documents and you will see that the amounts accounted for by the sub servicer do not include any categories that are in the amounts to be accounted for in the books and records of the actual creditor(s).

This leads to the absurd situation in which the court orders the foreclosure to go forward without specifying a creditor or an amount due (unless the court has approved discovery into the accounts receivable of the actual creditor, and taken evidence of same into consideration for the entry of the final judgment). This could lead to someone else buying the property for cash (and very little cash at that). In effect the judgment of the court will be to strip the creditor of the supposedly secured interest in the collateral (the property).

It gets even more crazy when you consider what might happen next. The creditor now prevented from seizing the collateral by virtue of the error of the trial court, sues the borrower for the money due. But because of the prior action the borrower will defend using the doctrine of collateral estoppel among other things. If the borrower prevails on the issue of collateral estoppel, the court will have succeeded in first stripping the creditor of lien rights and then blocking the creditor from collecting on the legitimate debt (if any) upon which the court relied when it granted standing to a foreclosing party that was not a creditor.

That analysis leads us inevitably to the issue of whether the real creditor as defined above is a necessary and indispensable party to the action. I can see very little to argue for the proposition that the creditor is anything but a necessary and indispensable party in an action concerning title to real property.

And once you get to that point, why is it necessary to have the foreclosing party who is not a creditor? So whether you call it standing or just common sense it seems impossible to analyze this issue without coming to the conclusion that in some manner, shape or form the creditor must be brought into the courtroom, or at least must be given notice that is proven in court, and that the books and records of the creditor must be introduced in the absence of a stipulation from the borrower as to the amount due.

The books and records of the creditor could obviously be manipulated, fabricated, changed and falsified and the creditor would have an obvious reason for doing so. Therefore, the business records exception to the hearsay rule should never be applied to a litigant with an interest in the outcome of the case. They have both motive and opportunity to change the records to suit themselves.

And they do not need to use the business records exception in order to establish the unpaid debt because they have actual live witnesses with actual personal knowledge of various aspects of the loan transaction, credits and debits to the account, and activity between the creditor or the creditor’s agents with respect to receipt and disbursement of insurance, credit default swap proceeds, investments by investors, and other matters that are addressed in the bond receivable but never mentioned specifically by the note receivable (which is why I question whether or not a contract was ever completed).

Filed under: CDO, CORRUPTION, evidence, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, Servicer | Tagged: account receivable, BOND receivable, business records exception, credibility, credit bid, creditor, hearsay rule, mortgage bond, mortgage note, necessary and indispensable party, note receivable, Patrick Giunta, standing | 82 Comments »

12 QUESTIONS THAT COULD END THE CASE

Posted on May 31, 2013 by Neil Garfield

http://dtc-systems.net/2013/05/top-democrats-introduce-legislation-protect-military-families-foreclosure/

CALL OR WRITE TO FLORIDA GOVERNOR — THE CLOCK IS TICKING

Veto Clock Ticking on Florida Foreclosure Bill HB 87
http://4closurefraud.org/2013/05/30/veto-clock-ticking-on-florida-foreclosure-bill-hb-87/

DISCOVERY TIP: Has anyone asked for a received the actual agreement between the party designated as “lender” and MERS? Please send to neilfgarfield@hotmail.com.

Questions for interrogatory and request to produce, possible request for admissions:

(1) If we accept the proffer from opposing counsel that the transaction (i.e, the loan) was done for the express purpose of fulfilling an obligation to investors for backing mortgage bonds through a REMIC asset pool, then why was MERS necessary?

(2) Why wasn’t The asset pool disclosed to the borrower?

(3) Why wasn’t the asset pool made the payee on the promissory note at origination of the loan?

(4) Why wasn’t the asset pool shown on a recorded assignment immediately after closing as the new payee and secured party?

(5) What was the business purpose of using MERS?

(6) Was the lender the source of funding on the loan or was it too just another nominee?

(7) Is there any identified real party in interest on the note and mortgage as the creditor?

(8) If there is no real party in interest on the note and mortgage, then how can the mortgage be considered perfected when nobody has notice of who they can go to for a satisfaction or release or rescission of the mortgage?

(9) In which document and what provision are the parties at the loan “closing” empowered to identify a party other than the source of funds as the payee and secured party?

(10) Who were the parties to the loan? — (a) the borrower and the source of funds or (b) the borrower and the holder of paper documenting a transaction that is incomplete (the payee and secured party never fulfilled their obligation to fund the loan)?

(11)If the servicer’s scope of employment, authority or apparent authority was limited to tracking the payments of the borrower only, and did not include accounting for the creditor, then how does the servicer know what is contained in the creditor’s accounting records? — Since the creditor in any loan subject to claims of securitization received a bond whose indenture provided repayment terms different than those terms signed by the borrower to another party entirely, how can any finding of money damages be determined by any court without a full accounting for all transactions relating to the loan?

(12) What is the identity of the party who was injured by the refusal of the borrower to make any further payments? To what extent were they injured? Are they qualified to submit a “credit bid” or must they pay cash for the property at auction? If they are not qualified to submit a credit bid then (see below) then under what legal theory should they be permitted to foreclose or for that matter seek any collection? Are these intermediary parties violating the FDCPA because they are neither the creditor nor the agent of the creditor and yet demanding payment for themselves?

THE COURTS ARE STARTING TO GET THE POINT:

FLORIDA 5th DCA: To establish standing to foreclose, Plaintiff must show that it acquired the right to enforce the note before it filed suit to foreclose. Important: the right to enforce the note means either they were the injured party or they represent the injured party. An assignment from a party who is proffered to be the injured party must be established with proper foundation from a competent witness.

GREEN V CHASE 4-5-2013

————-

FLORIDA 4TH DCA: DATES MATTER: While the note introduced had a blank endorsement (note conflict with PSA, which is supposedly source of authority to represent creditor: note may not be endorsed in blank and in fact must be endorsed and assigned in recordable form and recorded where the law allows or requires it) and was sufficient [under normal rules governing commercial transactions — except if the parties agree otherwise which they certainly did in the PSA) to prove ownership by appellee, who possessed the note, nothing in the record (e.s) shows that the note was endorsed prior to filing of the complaint (or if you want to use this decision by analogy prior to initiation of the notice of default and notice of sale in non-judicial states). The endorsement did not cotnain a date, nor did the affidavit filed in support of the motion for summary judgment contain any sworn statement that the note was owned by the Plaintiff on the date that the suit was filed. [PRACTICE TIP: THEY DON’T WANT TO GIVE A DATE BECAUSE THAT WILL LEAD TO YOU ASKING FOR DETAILS OF THE TRANSACTION, PROOF OF PAYMENT, THE ASSIGNMENT AND WHETHER THE TRANSACTION CONFORMED TO THE PSA, NONE OF WHICH WILL BE PRODUCED. But considering past behavior it is highly probable that they will fabricate documents that ALMOST give you a copy of the canceled check or wire transfer receipt but don’t quite get them to the finish line. Being aggressive on this point will clearly put them on the defensive].

4th DCA Cromarty v Wells Fargo 4-17-2013

2d DCA: IS THE TRANSACTION GOVERNED BY THE UCC PROVISIONS EVEN IF THE PARTIES HAVE AGREED OTHERWISE? This is the nub of the issue in the Stone case (link below). We think that the courts are confused i applying ordinary rules from the UCC regarding the negotiation of commercial instruments and certainly we understand why — the UCC is the basis upon which we can conducted trusted business transaction and maintain liquidity in the marketplace. But if the party attempting to foreclose derives its powers from the Prospectus, PSA,or purchase and Assumption Agreement, then they cannot invoke the powers in those instruments on the one hand and disregard the provisions that prohibit blank endorsements of loans of dubious quality without an assignment that can only be accepted by the supposed creditor if it complies with the assignment provisions of the agreement under which the foreclosing party is claiming to have authority to enforce the note and mortgage. And this is precisely the risk and consequences of a lawyer not understanding claims of securitization and the reality of what the UCC means when it says things like “unless otherwise agreed” and “for value.” Without raising those issues on the record, the homeowner was doomed:

Stone v BankUnited May 3 2013

OCC: 13 Questions to Answer Before Foreclosure and Eviction

Posted on May 22, 2013 by Neil Garfield | Edit

13 Questions Before You Can Foreclose

foreclosure_standards_42013 — this one works for sure

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage | Tagged: 13 questions, 4th DCA Cromarty v Wells Fargo, agreement between lender and MERS, AGREEMENT BETWEEN MERS AND "LENDER", asset pool, assignment, Assignment and ASsumption Agreement, credit bid, creditor, endorsement, florida foreclosure, FLORIDA HB 87, GREEN V CHASE 4-5-2013, MERS, mortgage bonds, Pooling and Servicing Agreement, protection of military families, PURPOSE OF MERS, Real estate | 136 Comments »

What Obama Still Has Wrong and Why the Recession Will Drag On for years

Posted on May 13, 2013 by Neil Garfield

It is encouraging that Obama is the police trying to get the housing and foreclosure situation resolved. But he is starting from a premise that is faulty just as Florida and other states are passing legislation from a similar premise, to wit: that the blame for title corruption, litigation and the court that is clogging the system, and the housing market, together with the bogus mortgage bonds that were issued by nonexistent unfunded special purpose vehicles (“trusts”) is somehow the fault of borrowers.

In his weekly Saturday address, Obama made reference to reckless behavior without specifying that the reckless behavior was that of the banks. The pervasive and insidious assumption is that 30 million borrowers woke up one morning and decided to enter into a conspiracy that would destroy the countries economy and financial system. If anything is obvious it is that only the Wall Street banks had the capacity and sophistication as well as the motive and opportunity to ruin the lives of millions of people, corrupt a title system that had been working perfectly for centuries, and control the governmental response using the influence they had acquired through lobbyists and direct financial contributions.

The reason that is so important is not just that the bankers probably belong in jail just like they ended up going to prison in the savings-and-loan crisis of the 1980s; the real reason it is important to start with the premise that the banks on Wall Street created a fraudulent Ponzi scheme that has not yet been addressed. Neither the economy nor the corrupted title system in our country can enjoy any serious correction without at least considering the idea that the entire bogus plan of false securitization was premeditated and clearly intentional.

This is not to say that there was no fraud on the part of any of the borrowers. But it is quite obvious from news reports that any prosecutions for mortgage fraud have been directed at borrowers who merely used the same techniques, procedures, tactics and fabricated documents that the banks used when they caused the loans to be originated and caused the worthless paper from the “loan closing” to be assigned, sold, insured and hedged as though the loans were the property of the Wall Street banks who in fact had merely used the deposits of unsuspecting investors. Even a appraisal fraud is being prosecuted against small individual investors who merely followed the directions of the thinly capitalized” originator” and mortgage broker. The reason those loans went through was not because of the fraudulent intent of the actors who were prosecuted but because of the fraudulent intent of the Wall Street banks and their affiliates whose business plan called for the origination of loans in unsustainable amounts and the diversion of the documents that were supposed to protect the investors whose money was used for the origination or acquisition of loans.

If the securitization of debt had been real, there would’ve been no need for MERS, or any private system that was used in reality to track transactions that were a complete sham. The Wall Street banks made sure that they used the money of third parties and created “paper closings” in favor of entities, “originators”, and even banks who pretended to underwrite the loans but who never had any risk of loss and in fact in most cases never showed any bookkeeping or accounting entries reflecting the creation of a loan receivable. The amount of “money” in the shadow banking system of insurance, collateralized debt obligations, credit default swaps and other exotic instruments is now said to exceed one quadrillion dollars. It is universally accepted, and I agree, that this amount is geometrically larger than any real money in the system, with estimates of real value varying from $25 trillion-$70 trillion.

My point here is simply that the Wall Street banks entered into a relationship with investors wherein the investors were principles of the Wall Street banks were agents. Regardless of how many layers the Wall Street banks used in terms of the use of subsidiaries and affiliates, their actions were subject to the expectations of the investors and the written promises to those investors, all of which were breached nearly all of the time by the Wall Street banks. Hence their trading in the defect of loans and unenforceable paper created at the “paper closings” produced a volume of “trading profits” which were in reality the proceeds of transactions that should have been used to reimburse the investors.

Once you accept the notion that the above scenario is true, the legal question of whether or not a monthly payment is due or in fact whether any payment is due from the borrower becomes the front and Center question in all action seeking to collect or foreclose on consumer debt including but not limited to alleged “mortgages”.

PRACTICE note: this is why you want to issue a subpoena or other discovery device that forces the party seeking foreclosure or collection to produce a live witness and documents that shows that there is an actual risk of loss by virtue of an actual transaction on a specific date for a specific amount of money which was paid by the party seeking foreclosure to another party who actually on the loan by virtue of another actual transaction on another specific date for a specific amount of money that was paid by check, wire transfer, ACH, or check 21. All the information that I have indicates that none of those transactions actually occurred, no money ever exchanged hands, and that the assignments and endorsements reflect transactions that were a sham — including but not limited to the so-called “origination” or assignment or any other form of acquisition of the loan. This is important not only on the issue of standing and subject matter jurisdiction in which there is no injured party, but on the issue of identifying a party who could conceivably submit a credit bid at the time of the auction of the foreclosed property. In judicial states the final judgment of foreclosure identifies the amount of the judgment awarded without there having been any actual trial or hearing in which evidence is heard on the actual payment, proof of loss, and the dates and amounts in which money exchanged hands. this entitles the foreclosing party to submit a credit bid when in fact they never had paid any money toward the origination or acquisition of the loan. Thus it is important to bring the issue up very early by way of subpoena to show that the party seeking foreclosure lacks standing, and has filed an action for which there is no substantive jurisdiction, nor any remedy without a financial injury.

Weekly Address: Growing the Housing Market and Supporting our Homeowners
http://www.whitehouse.gov/blog/2013/05/11/weekly-address-growing-housing-market-and-supporting-our-homeowners

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: acquisition, credit bid, debt, foreclosure, loan, Mortgage, note | 35 Comments »

The Truth: Was the Loan Sold or Not?

Posted on May 2, 2013 by Neil Garfield

see http://livinglies.me/2013/04/29/hawaii-federal-district-court-applies-rules-of-evidence-bonymellon-us-bank-jp-morgan-chase-failed-to-prove-sale-of-note/

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Analysis: Suppose you wanted to foreclose on property for which you never made a loan. Suppose you don’t have a lien and never did. Suppose you wanted to do this on a grand scale. How could you get away with it?

If you start with the premise in the preceding paragraph then the entire foreclosure and mortgage mess comes into focus and makes a lot of sense. Conversely if you start with the premise that all mortgage claims are presumptively valid then nothing makes sense and when you try to fix it you get nowhere. That’s what the Florida legislature is attempting to do with Senate Bill 1666 (appropriately numbered).

If you start with the premise that the mortgage claims are valid then it is quite logical and appropriate to conclude that the attempts by borrowers to escape inevitable consequences of their own bad judgment are clogging the court system and that borrowers are essentially abusing their due process rights costing each state billions of dollars in one form or another. But you have to ask yourself why there has been a sudden meteoric rise in the percentage of cases in which the borrower vigorously defends and brings claims against the supposedly valid holder of the note. What if all your assumptions and presumptions are not valid?

This is the essence of the issue confronting the courts, borrowers and their attorneys. And in a display of extreme irony the Wall Street banks even have the borrowers and their attorneys convinced that the loan was closed and the loan was sold. “The Loan” refers to the transaction that is memorialized in the loan documents. “The sale” refers to the transaction in which the loan was sold by the owner of the loan to a buyer of the loan.

There are two key questions:

The first (origination) fact pattern is usually the same. A borrower applies to an entity that advertises itself as a lender and that “lender” agrees to loan the money to the borrower. A closing agent contacts the borrower with information concerning the closing of the loan. The borrower goes to the closing, the money appears, and the borrower signs a myriad of documents. Here’s the question: what if the “lender” did not loan the money and either played the part of an undisclosed nominee, and unlicensed mortgage broker or licensed mortgage broker, and never had a valid legal claim to collect on the note or enforce the mortgage?

The second (assignment) fact pattern is also usually the same. In cases where there is litigation documents magically appear showing the assignment or endorsement of the loan using a claim of authority or the production of an apparent power of attorney. The assignment or endorsement frequently occurs more than once. There are actually two questions here: (A) assuming the facts in paragraph 1 above are true what difference does it make if there were one or 100 assignments? If there is no valid or perfected lien and the assignor never had a claim to collect on the “loan,” the assignment may give the appearance of propriety but it conveys nothing; (B) If the assignee never paid for the sale of the note how could the assignment transaction be considered complete? The Uniform Commercial Code governing the creation and sale of negotiable instruments indicates that each transaction must be for value received or consideration. Is the so-called assignment merely an offer lacking acceptance and payment?

You can have 100 or 1000 pages of documentation, but without a completed underlying transaction nothing in the documentation will have any legal effect on anyone despite the apparent “weight of the evidence.”

The point is actually very simple. Don’t get lost in the weeds of the documentation. The first question to be asked at the threshold is whether or not a transaction actually occurred containing the legal elements required for a completed transaction. If there is no consideration there is no transaction. If there is no transaction then there are no rights to enforce by or against anyone.

The arguments about the holder of the note are frankly silly. In the absence of consideration the party holding the note is merely possessing the note without any rights of collection or enforcement. If it were otherwise then any Courier, attorney or closing agent would be able to collect on the note and even foreclose on the mortgage leaving the lender out in the cold.

Whether or not a party is a holder or holder in due course is a question of law which raises presumptions if the proper foundation is established in order to conclude that a party is a holder or holder in due course. These are all legal conclusions and not factual issues. In order to establish the legal conclusion of holder or holder in due course the proponent of that legal conclusion must have a prima facie case showing a legal transaction in which ownership of the loan was transferred. Imagine if it were otherwise: accepting the circular logic of the banks, if six people were sitting around a table with a note in the middle the one with the fastest hands would be able to collect on a note and foreclose the mortgage. This is not the law.

As a tactical note, the practitioner should be relentless in the pursuit of the actual proof of payment (at origination or purported sale of the loan) without which there can be no proof of loss. If there is no proof of loss than there is no creditor. If there is no creditor there can be no credit bid at the time of auction of the property. And since that has occurred on a regular basis in all 50 states it would be fair to say that the sale of the property in foreclosure was never completed and that the homeowners still owns the home — or is entitled to compensatory damages equal to the value of the home because of breach of contract, slander of title, fraud etc. I believe that the claim that is easier to pursue is the one for compensatory and punitive damages plus attorneys fees and costs of the action.

In discovery what you are looking for is the actual wire transfer receipt, wire transfer instructions, ACH confirmation, cancelled check or Check 21 confirmation, showing the name of the party who paid and the name of the party who received the payment. Whether you are in small claims court or federal court the requirement is always the same. Any party seeking affirmative relief from the court must show that they were injured or damaged by the party whom they have sued. If they can’t show the payment and an unbroken chain of payments leading up and including the supposed assignment, then they have no claim because the court lacks jurisdiction and the party lacks standing to enforce or even consider a claim in which there is no injury.

So the answer to the question posed in the title of this article is no, the loan was never sold. We know that because the investors deposited money with the investment bank and it was the investors’ money that funded the loan. Contrary to popular misconception the money from the investors was never used to fund any pool of assets or trust. It was used directly to fund loans and the various fees to undisclosed third parties contrary to the requirements of the truth in lending act. The investment by the investors into each loan was the only time money changed hands which in turn means it was the only time that consideration existed.

That is why you will never find payment from one party to another in the alleged securitization chain. the truth is that there is no securitization chain and the banks intentionally failed to document the interest of the investors in each mortgage because the banks wanted to assert their own claim to ownership of the loan and the bogus securities allegedly backed by the loan. If they had been honest, then they would have taken the investor money, put it into an account that was owned by the asset pool, fund the loan from the asset pool and then document the transaction showing the interest of the asset pool at the time of origination of the loan or at the time that the loan was in fact sold to the asset pool for payment received.

And THAT is why I say that the existence of MERS is proof of fraudulent intent. There would have been no need for MERS or anything like it (See Chase Bank and Wells Fargo) if the Banks were not going to trade securities based upon THEIR ownership of a loan they never made.

If you prove these points in court I believe you will win the case.

SB 1666: Fast Foreclosure Bill Resurrected in Senate After Thought Dead
http://4closurefraud.org/2013/05/01/sb-1666-fast-foreclosure-bill-resurrected-in-senate-after-thought-dead/

WOULD THEY STILL BE TIGHT LIPPED IF THE NEWS WAS GOOD FOR THE BANKS? Regulators to Keep Tight Lips on Foreclosure Improprieties
http://www.truthdig.com/eartotheground/item/regulators_keep_tight_lips_over_foreclosure_improprieties_20130430/

Foreclosure Scams Rampant in Florida
http://www.jdsupra.com/legalnews/foreclosure-scams-rampant-in-florida-21904/

UBS faces calls for break-up at investor meeting
http://www.foxbusiness.com/news/2013/05/02/ubs-faces-calls-for-break-up-at-investor-meeting/

Macro Factors and Their Impact on Monetary Policy, The Economy and Financial Markets
http://www.ritholtz.com/blog/2013/05/macro-factors-and-their-impact-on-monetary-policy-the-economy-and-financial-markets/

Roubini: Fed Risking Sequel to 2008 Financial Crisis
http://www.cnbc.com/id/100698405

Filed under: CDO, CORRUPTION, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: assignment, consideration, credit bid, money changing hands, money damages, origination, proof of loss, proof of payment, sale of loan | 177 Comments »

Foreclosure Bid Rigging at Its Worst: Tiffany and Bosco Reportedly Worst Offender

Posted on April 5, 2013 by Neil Garfield

Challenging the Foreclosure Auction Process

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Analysis: The piece below is a report from our best investigator doing some work in Arizona. If you want to hire him, just contact us and we will put you in touch with him. The emphasis is added by me.

The report speaks for itself, but there clearly is something wrong with the operation of a system that allows for bidding without proof of loss, without paying the $10,000 required as earnest money and without any transparency.

The auctioneer, selected by the substituted trustee who was substituted usually by a fabricated document claiming false authority and forged by someone who may never have existed, is clearly the paid underling of the banks that ordered the foreclosure with perks offered at the end of the auction process for those who want the house in question.

Despite numerous law-breaking allegations and even proof of violations of the notary laws and recording laws, Tiffany and Bosco continue to practice without any impediment. You can thank the DOJ and AG Holder along with the Obama administration for establishing a climate where crime and moral hazard run rampant.

More importantly, while the bids and value of the notes are manipulated to be in conformance with what is reported to Wall Street investors (as pointed out by Charles Koppa), they still have no jumped the hurdle of having a non-creditor bid at the auction and are essentially hoping that the passage time will overcome any claim that they should have paid cash. It is for this and other reasons that we believe that both the substitute trustee and auctioneer, individually and as representative of the company that sent them to the auction have exposure to liability and if the right fact pattern emerges from all this, they should be sued and prosecuted.

Fundamentally the strings are being pulled by Wall Street banks who are so far successfully avoiding trillions of dollars in liabilities for paying cash on bids made on their behalf but for which there was no consideration in the form of the debt or the cash required by statute.

In my opinion those banks are extremely vulnerable to this challenge and the piercing of the corporate veils and ladders and layering will be relatively easy. There is gold in these hills for both evicted homeowners and lawyers who represent them. The pot can be measured in the trillions of dollars.

—————————————————

Hi Neil,
I have digitally recorded, at the request of a client, FIVE Tiffany & Bosco trustee sales from beginning to end. My declarations regarding these trustee sales are now part of the record in a BK Adversary Proceeding.

I can state categorically the creditor is never at the auction.

THIS is how it goes at T&B [Tiffany and Bosco]. T&B has an auction list on their web site. You can print it out on their web site and take it to the auction.

The auctioneer enters the room, sits down, and proceeds to read at LIGHT SPEED the list of properties scheduled for that auction. All he calls is the T&B internal auction number and the street address. If a bidder is interested, he yells PULL. The auctioneer proceeds with the list with a variable number of trustee sales having had a PULL yelled. The auctioneer then leaves the room and the bidders talk amongst themselves.

The auctioneer then returns with a stack of files, that match the sales that had a yell of PULL. The other homes on the list are never brought up again. I have checked the recorders web site and every one of the homes which never got passed the PULL stage had a trustee deed which T&B stated that an auction occurred and the property was sold for cash or, protanto, via a credit bid (which never happened, I have it on tape).

Now, regarding the sales prefaced with PULL. The auctioneer then starts reading a long trustee disclaimer at rapid speech. He then calls a property, starts that T&B as trustee for the lender, opens the bid with XXXXXX amount, whatever is listed on the form. Anyone who wants to bid can not do so but has to have first handed the auctioneer a $ 10,000.00 check. The auction continues until the last bid is received. I have checked these properties and the Trustee Deed does match the final amount bid.

HOWEVER, I do not recall, ever, an auction where the sale amount was MORE than the declared amount of the original note (that number is in the sales list). And I believe I know why. The Arizona excess funds statute says there are excess funds, only, when the sale amount is HIGHER than the declared value of the original note on the Notice of Trustee Sale. Therefore, whatever made up amount is on the Trustee Notice controls whether or not there are excess funds.

So, to avoid having excess funds, all a lender has to be is gerrymander the note about, enter whatever credit bid they want, and certainly low enough to encourage a sale, and voila, not a dime back to homeowners, even if they have received payment on the note from credit default swaps, etc.

Finally, the creditor is never there at the sale. At least in the case of T&B, the creditor has their bid PLACED by the AUCTIONEER when a file is PULLED, or, the credit bid is never even mentioned for properties that are not PULLED!

As an aside, during some auctions, when nearly everyone has left, a couple of bidders would linger behind and when alone with only the auctioneer and ME looking like I am packing to go, the bidders ask for a LATE PULL. Of course my recorder is still running. The auctioneer goes and gets the late PULL property files. He calls an auction and in these case, there is only one bidder who offers ONE DOLLAR above the credit amount bid by T&B on behalf of the lender. You can draw a conclusion from these collusive late events that is probably entirely accurate. AND, I have them on tape.

IF you would like a copy of the videos to see for yourself, just ask.

Filed under: CDO, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: auctioneer, cash bid, credit bid, creditor, debt, foreclosure bid rigging, Mortgage, non-creditor, note, Tiffany and Bosco | 22 Comments »

Banks Could Owe Trillions on Fake Rigged Credit Bids

Posted on April 4, 2013 by Neil Garfield

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Auction, contract obligation, credit bid, credit default swaps, creditor, debt, guarantees, hedges, insurance, Mortgage, note, overpayment, statutory obligation | 79 Comments »

1.5 Million Seniors Foreclosed — Most Illegally

Posted on December 4, 2012 by Neil Garfield

What’s the Next Step? Consult with Neil Garfield

CHECK OUT OUR NOVEMBER SPECIAL

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment and Analysis: As I predicted (along with many others), the foreclosure scam is reaching further and further to all segments of the population. With more than half of all homeowners under 40 being “underwater” and the release of information showing that widows are being hit hardest, the statistics showing 1.5 million foreclosures on people over 50 are hardly surprising. But they don’t tell the whole human story of grief, confusion and disbelief that the banks would engage in large-scale fraud.

It is ironic that many of the millions who were hit with foreclosure were the same people who joined the public outcry against mortgage relief because they were playing by the rules, making their payments, and also losing money. They failed to educate themselves and their naive belief that the debts were legitimate and the borrowers were deadbeats led the public, the media, and those who pull the levers of power in Federal and State government to conclude that the debts were legitimate and the market simply went sour.

To call these debts legitimate in the face of absolutely incontrovertible facts regarding appraisal fraud, forgery, robo-signing, and lies told in in court is akin to drawing the distinction between rape and legitimate rape. You can argue all you want about what a woman should look for to “detect” a possible criminal and and argue circumstances when she “asked for it” but rape is rape.

And you can argue all you want about how homeowners should have read a pile of papers 6 inches thick to determine what was really going to happen to their lives if they signed those papers and that they should have investigated who was behind the easy money, but in the end they were the victims, just like many investors were the victims.

And until we agree that the money the banks received should have been allocated to the investors on whose behalf they received the money we won’t know the amount of the debt of the homeowner, if any, that is remaining. Allowing foreclosures to start, foreclosure “sales” to be conducted, foreclosure deeds to be issued “for cash received” when they accepted a credit bid from a non-creditor, and then allowing evictions was and remains wrong.

In fact, while I have not seen a study analyzing this, I’ll bet you will find that the same people who were foreclosed were on pensions paid by managed funds that bought the bogus mortgage bonds that enabled the mortgage meltdown in the first place.

So the same people were both losers in investing in mortgages and then losers when their own money was used against them in deals that were impossible to be viable.

The tragic irony here is that most borrowers still don’t get it. They also think the debts are legitimate and that any claims of fraud or predatory loan practices are just ways of delaying the inevitable foreclosure and eviction.

Precious few homeowners have any idea that they have legitimate defenses and remedies that would lead to a mortgage-free house or a modification that uses fair market value as a basis for the loan balance and applies the payments received by creditors from insurance, credit default swaps and federal bailouts.

In what I have called Deny and Discover, lawyers following this blog or who have arrived at the same conclusions on their own are winning case after case. Mark Stopa published an article about 14 cases in Florida in which 14 different judges entered summary final judgment FOR THE BORROWER!

As the banks plant articles warning against strategic defaults, ultimately, there is no debtor’s prison in this country and they can’t do a thing about it. And widows, pensioners and others who are on fixed incomes and facing rising medical and living expenses are forced into default. This mess will take decades to clear up unless government does its job of governing and applying the same set of rules to everyone. If you commit fraud, you owe restitution and you are punished either civilly or criminally.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: appraisal fraud, credit bid, Eviction, foreclosure sale, foreclosure scam, fraud, legitimate debt, pension funds, seniors foreclosure, underwater, widow foreclosure | 39 Comments »

Ron Ryan Takes to the Next Level, Taking the Offensive

Posted on November 23, 2012 by Neil Garfield

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Ron Ryan , Esq. lives and works in Tucson, Az. He has been working, analyzing and writing and representing people whoa re the victims of this huge scam which the banks and media call securitization that never actually happened. He practices almost exclusively in bankruptcy and while he understood the basic elements of what was happening he struggled to put it into wording and allegations that the Court would be hard-pressed to ignore.

I think he succeeded in these two pleadings, and I suggest that you read them carefully. While he admits that a “loan” existed he takes apart the origination, assignment and securitization piece by piece leaving US Bank naked in the wind.

I congratulate him on a job well done.

See

COMPLAINT TO DETERMINE EXTENT AND VALIDITY OF LIEN AND ETC Doc 1 Filed 01-16-12

RESPONSE TO MOTION TO DISMISS COMPLAINT CONNELLY VS USB AS MBS TRUSTEE

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Attacking the lien, credit bid, creditor, Deny and Discover, perfected lien, standing, unperfected lien | 73 Comments »

DOJ: Bid Rigging at Auctions: The Achilles Heal of the Securitization Scam

Posted on November 6, 2012 by Neil Garfield

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Editor’s Comment and Opinion: Frankly I think bid rigging is the rule rather than the exception. The number of “investors” popping up and buying these properties at auction, and the question of whether they are getting their financing from the bank or servicer that illegally foreclosed is still open. Skyline is one of the companies of interest that I am investigating.

Livinglies is now offering investigation services from a licensed private investigator to show the connection between the “bidder” and the “beneficiary” or “mortgagee” pretending to be the creditor. Call 520-405-1688 for more details.

The biggest part of the rigging comes from the “credit bid” that the “trustee” (actually some low-paid employee supposedly “representing” the trustee) is used to create an aura of plausible deniability.

The trustee, often at an auction that doesn’t actually take place, simply sits in his office and signs papers to the effect that he received a bid from XYZ and it was accepted and then issues a deed on foreclosure that carries with it a presumption of validity — even though the “Credit bid” was not submitted by a creditor or, in many cases, where the “creditor” has not shown any evidence to the “substitute trustee” that it is owed any money from the borrower.

If you scratch the surface you will find that the bidder neither funded nor ever paid to buy the loan, so where is the receivable entitling them to submit a credit bid, according to statute?

The case below shows the kind of penalty that SHOULD apply to everyone involved in bid rigging. But if things continue to go the way they are already headed, these guys are thrown under the bus as the sacrifice and it is made to look like this is an isolated incident instead of the rule.

If drill down instead of scratching you will find in many cases that the amount of money being demanded is far higher than the amount due to any creditor, whoever they are, because of the receipt of insurance and bailouts that explicitly waive the right to go after the borrower. How the banks and Master servicers received that insurance and bailout money while the investors were taking the loss has been the subject of many previous articles.

Investor pleads guilty of bid rigging at foreclosure auctions

November 02, 2012, 05:00 AM By Michelle Durand Daily Journal Staff

A real estate investor pleaded guilty yesterday to bid rigging at public foreclosure auctions in San Mateo and San Francisco counties over a two-year span, according to the Department of Justice.Norman Montalvo, of Concord, conspired with others at the auctions, including the one held outside the Redwood City courthouse, to designate a winning bidder for selected properties rather than compete against each other, according to court documents.

Those involved kept the wining price low which, in turn, federal prosecutors say, damaged the real estate market and defrauded those expecting a level playing field.

The investors “illegally restrained competition … by falsely creating the appearance of unfettered bidding while they were secretly colluding to suppress prices,” said Scott D. Hammond, deputy assistant attorney general of the antitrust division, in an announcement of Montalvo’s plea.

Montalvo was also charged with conspiring to use the mail to carry out the scheme, make and receive payoffs and divert co-conspirators money that would have otherwise gone to mortgage holders and others.

When property is auctioned, the proceeds pay off the mortgage and debt with any remaining money going to the homeowner. Squelching competitive bids limits how much money is available for both.

Montalvo is accused of committing bid rigging and mail fraud in San Mateo and San Francisco counties as early as June 2008 until approximately September 2010. He is the 26th person to plead guilty or agree to plead guilty as part of the DOJ’s ongoing antitrust investigation at public real estate auctions in Northern California, including those in San Mateo County.

Montalvo’s plea is proof the effort is working, said Joel Moss, acting special agent in charge of the FBI’s San Francisco division.

“Criminals who take advantage of the real estate auction process will be brought to justice,” he said in a prepared statement.

Montalvo faces up to a decade in federal prison and $1 million fine for violating the antitrust law known as the Sherman Act and up to 30 years and a similar fine for each count of conspiring to commit mail fraud. The government can also go after the proceeds made by the fraud.

Anyone with information about bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at (415) 436-6660 or visit http://www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at (415) 553-7400.

Michelle Durand can be reached by email: michelle@smdailyjournal.com or by phone: (650) 344-5200 ext. 102.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Antitrust Division, Bid Rigging, credit bid, Durand, MOntalvo, San Francisco county, San MAteo COunty | 27 Comments »

With All the Settlements, What is Owed on Principal?

Posted on October 10, 2012 by Neil Garfield

CREDITOR HAS BEEN PAID

The complexity and shroud of mystery surrounding claims of securitizations, assignments etc can be simplified if you just look at the money. This is why I have forensic auditors who chase this information down. Call living lies customer service 520-405-1688 if you can’t find an adequate analyst of your own who REALLY dig in.

What money was paid to whom? When? How? Who is a witness that can authenticate and verify the documents used (ACH, Wire transfer, check) the documents used for money transfer?
If the creditor already settled with the investment bank, then is the claim for collection or foreclosure on the mortgage still viable?
How was the settlement allocated as to the investor-lenders?
If the investor-lenders received all or part of the money from the investment bank, how much is owed by the homeowner and to whom?
To whom was money paid? Who received the actual payments from borrowers, co-obligors, insurance, credit default swaps, federal bailouts and civil settlements? How much of this money was received as agent for the investor-lenders (creditors)?

There are lots of questions but they can all be answered with arithmetic. If investor bought a bogus mortgage bond for $100 million and received $50 million in settlement, then they are either owed still $50 million or they settled the claim and if you contact them, they will say they have no interest in pursuing the matter any further. So why the foreclosure? And if there is a foreclosure, who gets the money? Who is the “creditor that submits a “credit bid.?”

People don’t like talking about the free house syndrome, but SOMEONE IS GETTING A FREE HOUSE one way or the other — either the banks or the homeowner.

One thing I am sure about is that there is a claim that can be firmly supported by the presence of a settlement or proceeds from co-obligors (insurers, CDS counterparties etc.). Either the amount due is wrong, eliminated or at least subject to a proper accounting. This would negate the issues of foreclosure, at least for a while, in the notice of default and initiation of foreclosure based upon the assertion that the creditor has been identified as beneficiary or mortgagee and the amount due is as stated. The amount due is probably NOT as stated and the creditor identified might not even have a dog in the race anymore.

Judges get angry at borrowers for bringing this up. I think lawyers should have the guts to stand up to such judges and say your anger is misplaced. Don’t shoot the messenger! The borrower didn’t create this mess, it was the financial industry and this loan was not even originated using standard rules of underwriting and document preparation.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: balance due, CDS, co-obligors, credit bid, creditor, foreclosure settlements, insurance, mortgage bond | 111 Comments »

It’s the title, Stupid!

Posted on September 5, 2012 by Neil Garfield

“What is surprising is the fresh evidence these cases are turning up of cockeyed mortgage practices, during both the boom and the bust. As these matters are adjudicated, perhaps we will finally learn whether these practices were intended or accidental.” — Gretchen Morgenson, NY Times

Editor’s Analysis: Gretchen Morgenson has latched onto the key element of the “securitization” of home loans that was faked to cover a Ponzi scheme in which the largest financial players in the world were pulling all the strings.

While the propaganda would have us believe that the situation is improving, the looming number of decisions from now alerted Judges may well produce a tidal change in the outcome of foreclosure litigation, the value of the bogus mortgage bonds which appear to be worthless from start to finish, and the balance owed on any of the debt issued under the guise of securitization.

Romney and the Republicans, taking their talking points from Wall Street are saying let’s wait until the market “bottoms out.” What people want and could have is a market where prices are going up, not “bottoming out.” Voters do not want to hear that because each year the predictions are the same: the market is finally hit bottom and is recovering, only to be bashed by news of ever-decreasing prices on homes.

The judicial system is where it all happening, albeit at the usual frustrating snails pace that the courts are known for, some of which is caused by the sheer volume through which the banks and servicers, masquerading as note holders push good-looking documents with not a single word of truth recited.

Judges are starting to realize that the issue of the identity of the creditor is important if any of these cases are going to settle or where a modification is the final result.

Under HAMP the servicers and “owners” of the mortgages are required to consider the mortgage modification proposal from borrowers. But they are not doing that, complaining that it is straining their resources and infrastructure since they are not set up for that. Whose fault is that? They took the TARP money and they agreed to modify where appropriate and even get paid for it.

The borrower is left in purgatory with no knowledge of the proper party to whom they can submit a proper proposal for modification, with principal loan r eduction or actually principal loan correction since the original appraisal was false and procured by the bank. Judges like settlements. But they can’t get it if they keep siding with the banks that the identity of the lender and the actual accounting for all money paid in or paid out of the loan receivable account is irrelevant.

The problem is MERS and the entire origination process where the rented name of a payee on the note, the rented name of the lender described in the note and mortgage, and the rented name of the mortgagee or beneficiary was used instead of the actual source of funds.

The second problem is the balance due, on which the servicers and attorneys have piled illegal fees.

The answer is the strategy of deny and discover which is being pursued by alliance partners of livinglies and the garfieldfirm.com. By the way, we are especially ready in South Florida. Call our customer service number 520-405-1688 for details on getting legal representation.

The banks and servicers are pretending that the report from the most recent sub-servicer is sufficient for the foreclosure. That has never been the case. Historically, if a lender felt it needed to foreclose it came to court with the entire loan receivable account starting with the funding and origination of the loan and continuing without breaks, up to and including the date of filing.

The banks and servicers have been steadfast in their stonewalling to prevent the homeowner from knowing the true status of their account, the true identity of the creditor, all of which can be gleaned not from the the records of the subservicer but from the records of the Master Servicer and the “Trustee” of the supposed common law trust which was “qualified” as a REMIC for tax purposes.

An accounting from the Master Servicer and Trustee would lead to the discovery of admissible evidence as to what the real creditor was owed after receipt of all payments, and who the current real creditor might be. After all, they looking for foreclosure and they are taking these properties by “credit bids” instead of paying cash at the auction. Only a creditor whose debt was secured by the mortgage or deed of trust can submit a credit bid.

The truth is that virtually all credit bids that have been submitted are invalid because they were not submitted by a secured creditor. And that leads to an even larger problem for the banks. Those “assets” they are holding on their balance sheet are not just fake, worth zero, they are also offset by a liability to those whose money was taken by the same investment banks that sold bogus mortgage bonds to the investors.

Since those sales were made through elaborate CDOs, CDS and other devices, we have known since 2007, that the reported “leverage” (using investor money) was as much as 42 times the amount of the average loan in the portfolio.

So that loan for $300,000 resulted in a 100 cents on the dollar payoff to banks who had neither funded nor purchased the loans but were representing themselves as the legal holder of the note and thus the obligation.

If the mortgage was invalid, the note was unenforceable because it wasn’t funded by the parties named on the note, and the “assignment,” or other transfer or sale of the “note” were all equally null and void, then the bank that has picked one end of the stick saying the assets on their balance sheet are real, should also have put a contingent liability on their balance sheet for as much as $12 million on the $300,000 loan.

Each time foreclosure is completed, or appears to be completed, that huge liability is wiped out arguably. Then the banks keep the $12 million, and dump the loss on the individual loan on the investors, which is usually some 50%-65% of the loan amount.

THAT is why the banks and servicers are in the business of foreclosure, not modification or settlement. They have no choice. They could owe back all that money they received. It isn’t the loss of $300,000 or some part thereof they are worried about, it is the liability of $12 million on that loan that they are avoiding.

The political impact of this will be devastating to incumbents not in 2012 but in 2014 when the pension funds, who have already reported they are “underfunded” start slashing pension benefits, thus requiring another round of Federal Bailouts because the government so far has refused to claw back all of the money that was made by the banks and distribute it to the investors and reduce the borrowers balance owed on the “loan.”

Given the above scenario and the widespread use of nominees in lieu of real lenders and real sources of funding, it is highly probable that the title to potentially tens of millions of properties have clouds either because the foreclosure was wrongful or because the wrong party executed the satisfaction of mortgage or both.

And as stated in the previous post, this is not a gift to homeowners. They will owe tax on the elimination of the mortgages and loans because the loans were paid, not forgiven.

It is left-handed way of providing huge principal reductions because of PAYMENT (not forgiveness). With the balance paid, the borrowers must report the claim as a gain paid by co-obligors they never knew existed. With a top tax rate of 35% currently, soon to be 38%, the homeowner will have a tax obligation for no more than the tax rate applied against the balance due on the loan — the equivalent of a loan reduction of 65%-75%, which would satisfy anyone.

Modification proposals from homeowners are much higher than that. The only reason they are rejected is because each modification would transform each loan into the class of “performing” and would materially change the balance sheet of each of the mega banks with adverse consequences for the mega banks and a bonanza for the 7,000 community banks sand credit unions in this country.

But in order to determine the balance due, the accounting must be a total accounting starting from the original funding of the loan right up to the present. When Judges realize that the would-be foreclosers can’t or won’t provide that they will start making the opposite presumption — that it is the banks and servicers that are the deadbeats.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: accounting, balance sheet, credit bid, Gretechen Morgenson, MERS, modification, Ny Times, payment, Ponzi, taxes on cancellation of mortgage and note | 283 Comments »

MERS: No Agency with Undisclosed Rotating “Principals”

Posted on August 17, 2012 by Neil Garfield

THE WASHINGTON SUPREME COURT DECISION WILL BE USED EXTENSIVELY AT THE EMERYVILLE AND ANAHEIM CLE WORKSHOPS.

The Stunning clarity of the decision rendered by the Washington Supreme Court, sitting En Banc, corroborates the statements I have made on this blog and under oath that they might just as well have put the name “Donald Duck” in as the mortgagee or beneficiary.

The argument, previously successful, has been that even if the entity MERS had nothing to do with financial transaction and even if they didn’t know about the transaction because the “knowledge” was all contained on a database that nobody at MERS checked for authenticity or veracity, the instrument was still valid. This coupled with a “public policy”argument that if the courts were to rule otherwise none of the MERS “mortgages” would be valid thus making the creditor unsecured.

The Washington Supreme court rejected that argument and further added that if such was the result, then it was through no fault of the borrower. SO now we have a situation where the law in the State of Washington is that MERS beneficiary instruments do not establish a perfected lien and therefore there is no opportunity to foreclose using either non-judicial or judicial means. A word of caution here is that this applies right now as law only in that state but that it closely follows the Landmark decision in Kansas Supreme Court. But the decision is extremely persuasive and reinvigorates the fight over whether the loans were secured loans or unsecured — especially powerful in bankruptcy courts.

It should be noted that the Washington Supreme Court has wider application than might appear at first blush. This is because the question was certified not from a state judge but from a federal court. Thus in Federal Courts, the decision might be all the more persuasive that MERS, which never had anything to do with the financial transaction, never handled a dime of the money going in or out of the loan receivable account, and never had any person with personal knowledge who could identify and verify that there was a disclosed principal for whom they were acting should be identified as a non-stakeholder with bare (naked) title recited in a fatally defective instrument.

This does not mean the obligation vanishes. It just means that they can’t foreclose through non-judicial foreclosure and probably can’t foreclose even through judicial means unless they accompany it with a request that the court reconstruct the mortgage — in which case they would need to allege and prove that the disclosed parties were the sources of funds for the origination of the loans, which in most cases, they were not.

The actual parties who were the source of funds either still exist or have been settled or traded out into new investment vehicles. This is why putting intense pressure to move the discovery along is so powerful. You are demanding what they should have had when they started the foreclosure timeline with a defective notice of default signed by a person who had no idea what the loan receivable account looked like or even the identity of the party or entity that had the loan booked as a loan receivable.

You’ll remember that MERS issued a proclamation to everyone that nobody should use its name in foreclosures in 2011. But that doesn’t address the underlying fatal defect of the MERS business model and the instruments that recite MERS as the mortgagee or beneficiary.

Th reasoning behind the rejection of the “Agency” argument is also very important. The court states that “While we have no reason to doubt that the lendersand their assigns control MERS, agency requires a specific principal that is accountable for the acts of its agent. If MERS is an agent, its principals in the two cases before us remain unidentified.12 MERS attempts to sidestep this portion of traditional agency law by pointing to the language in the deeds of trust that describe MERS as “acting solely as a nominee for Lender and Lender’s successors and assigns.” Doc. 131-2, at 2 (Bain deed of trust); Doc. 9-1, at 3 (Selkowitz deed of trust.); e.g., Resp. Br. of MERS at 30 (Bain). But MERS offers no authority for the implicit proposition that the lender’s nomination of MERS as a nominee rises to an agency relationship with successor noteholders.13 MERS fails to identify the entities that control and are accountable for its actions. It has not established that it is an agent for a lawful principal.” Hat tip again to Yves Smith on picking up on that before I did.

And the court even went further than that on the issue of modification that I have been pounding on for so long — how can you submit a request for modification with a proposal unless you know the identity of the secured party and the identity of any party or stakeholder who is unsecured? Hoe can anyone settle or modify a claim without knowing the identity of the claimant or the actual status of the claim as affected by payments of co-obligors? “While not before us, we note that this is the nub of this and similar litigation and has caused great concern about possible errors in foreclosures, misrepresentation, and fraud. Under the MERS system, questions of authority and accountability arise, and determining who has authority to negotiate loan modifications and who is accountable for misrepresentation and fraud becomes extraordinarily difficult.”

BUT WAIT! THERE IS MORE! The famed Deutsch bank acting as trustee ruse is also exposed by the court, leaving doubt ( a question of material fact that is in dispute) as to the identity and character of the creditor and the status of the loan. Without those nobody can state with personal knowledge that the principal due is now this figure or that and that the following fees apply. The Supreme Court in the footnotes takes this on too, although it wasn’t argued (but will be in the future I can assure you): “It appears Deutsche Bank is acting as trustee of a trust that contains Bain’s note, along with many others, though the record does not establish what trust this might be.”

The Court also is not shy. It also takes on the notion that the borrower is not entitled to know the identity of the creditor or principal and that the borrower only has a right to know the identity of the servicer. This of course is patently absurd argument. If it were true anyone could assert they were the servicer and you could not look behind that assertion to determine its veracity.

“MERS insists that borrowers need only know the identity of the servicers of their loans. However, there is considerable reason to believe that servicers will not or are not in a position to negotiate loan modifications or respond to similar requests. See generally Diane E. Thompson, Foreclosing Modifications: How Servicer Incentives Discourage Loan Modifications, 86 Wash. L. Rev. 755 (2011); Dale A. Whitman, How Negotiability Has Fouled Up the Secondary Mortgage Market, and What To Do About It, 37 Pepp. L. Rev. 737, 757-58 (2010). Lack of transparency causes other problems. See generally U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 941 N.E.2d 40 (2011) (noting difficulties in tracing ownership of the note).”

And lastly, about making the rules up as you along, and moving the goal posts around, the Court challenges the argument and rejects the MERS position that the parties are free to contract as they choose despite any statutory language. Specifically the question what is what is the definition of a beneficiary. In Washington as in other states, the definitions of the Act apply to all transactions described and there is no room for anyone to change the law by contract. “Despite its ubiquity, we have found no case—and MERS draws our attention to none—where this common statutory phrase has been read to mean that the parties can alter statutory provisions by contract, as opposed to the act itself suggesting a different definition might be appropriate for a specific statutory provision.”

And again corroborating my work and manuals on the livinglies store. the Court finally addresses for the first time that I am aware, the essential reason why all this is so important. It is the auction itself and the acceptance of the credit bid from a non-creditor. Besides the challenges as to whether the substitution of trustee and instructions to trustee are valid, nobody can claim title suddenly born as a result of a “transfer” or assignment” or other document from MERS, an entity that had specifically claimed any interest in the obligation. The Court concludes that you either have the proof of being the actual creditor to whom the obligation is owed, in which case you can submit a credit bid if it is properly secured, or you must pay cash.

“Other portions of the deed of trust act bolster the conclusion that the legislature meant to define “beneficiary” to mean the actual holder of the promissory note or other debt instrument. In the same 1998 bill that defined “beneficiary” for the first time, the legislature amended RCW 61.24.070 (which had previously forbidden the trustee alone from bidding at a trustee sale) to provide:
(1) The trustee may not bid at the trustee’s sale. Any other person, including the beneficiary, may bid at the trustee’s sale.
(2) The trustee shall, at the request of the beneficiary, credit toward the beneficiary’s bid all or any part of the monetary obligations secured by the deed of trust. If the beneficiary is the purchaser, any amount bid by the beneficiary in excess of the amount so credited shall
18
Bain (Kristin), et al. v. Mortg. Elec. Registration Sys., et al., No. 86206-1
be paid to the trustee in the form of cash, certified check, cashier’s check, money order, or funds received by verified electronic transfer, or any combination thereof. If the purchaser is not the beneficiary, the entire bid shall be paid to the trustee in the form of cash, certified check, cashier’s check, money order, or funds received by verified electronic transfer, or any combination thereof. Laws of 1998, ch. 295, § 9, codified as RCW 61.24.070. As Bain notes, this provision makes little sense if the beneficiary does not hold the note.”

Thus this court has now left open the possibility of challenging wrongful foreclosures both in equity and at law for damages (slander of title etc.) It would be hard to believe that Washington State Attorneys won’t pounce on this opportunity to do some good for their clients and themselves.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: agency, Anaheim, Bain, beneficiary, credit bid, creditor, Deutsch Bank as trustee, emeryville, INDYMAC, MERS, perfected lien, principal and agent, servicers, TRUSTEES, Washington Supreme Court, wrongful foreclosure | 21 Comments »

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