The difference between paper instruments and real money

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

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

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

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

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

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

Get a consult! 202-838-6345

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FAMILIARITY IS BREEDING CONTEMPT IN THE COURTS

Business Records Exception On Shaky Ground: The main point is foundation: the affidavit or testimony by the robo-witness must show that the company he works for is in fact the servicer of the loan, as authorized by the owner of the debt, and that he/she has actual knowledge of the procedures and posting policies of the servicer and the owner of the debt. I would add that this “corporate representative” must show that he/she and the “servicer” is authorized to speak for, and thus appear for the foreclosing party.

see http://www.newyorklawjournal.com/home/id=1202770275522/Casting-Doubt-on-Validity-of-Servicer-Affidavits-in-Foreclosure-Litigation?mcode=1202615326010&curindex=0&slreturn=20160925141040

Hearsay is always excluded from evidence — at least when it is ruled as hearsay. A document is hearsay in nearly all instances and thus may not be introduced into evidence — unless it satisfies the elements of a exception to the hearsay rule of exclusion.

In foreclosures the main hearsay event arises from the fact that no creditor appears in court. It is virtually always a company that claims to be a servicer for the owner of the debt, but the situation is nearly always opaque as to the identity of the owner of the debt who they say authorized them as servicer.

The typical testimony from a robo-witness, on leading questions from the attorney, is that he/she is familiar with the the record keeping process and policies of the servicer and that the letter, or payment history sought to be introduced into evidence was produced in the ordinary course of business from records kept in the ordinary course of business based upon entries made at or near the time of an actual event. Of course, with most of such documents there is no “event” and that is a problem for banks and servicers.

New York seems to be leading the way on the issue of whether these documents are trustworthy exceptions to the hearsay rule of exclusion. See the above link.

Judges in New York now know they will be reversed unless there is clear and competent evidence that the witness can attest from their own personal knowledge using one or more of their five senses — i.e., that they have seen and heard and followed the process of making and keeping records and that they had access to the records showing that the “servicer” was authorized to act as such.

The reason why banks have shifted from the old tried and true practice of sending a representative of the alleged owner of the debt to court is that such a person knows too much and would either be required to perjure themselves or tell the truth, to wit: that the company he/she works for is not the owner of the debt and he/she has no idea who is the owner. Such a person would be forced to admit either ignorance of any transaction in which their employer purchased the loan or that the loan was not in fact purchased by his/her employer.

Such an admission would completely obliterate the claim of the company claiming to be a servicer on behalf of the owner of the debt. This in turn would eliminate the business records exception to the hearsay rule of exclusion. We could go deeper into the number of IT platforms that are maintained and by whom they are maintained and whether the “servicer” even has access to the actual records, but it seems potentially unnecessary with decisions coming from appellate courts who are worried about opening the door on hearsay in millions of other cases unrelated to foreclosure.

Those courts are rapidly retreating from the temporary imposition of an extended exception to the hearsay rule because they can readily see how justice would not be served in criminal and civil matters if the rule remains as loose as it is now.

It is much better for the banks to send someone who knows nothing and therefore cannot accidentally or otherwise tell the truth about these bogus loans and fraudulent foreclosures. The banks are in essence throwing the servicers under the bus, along with the attorneys hired by the servicers. But the walls are caving in on them and they will soon need to put up or shut up — producing a real witness with real (not presumed) knowledge or take a voluntary dismissal. As we have seen in thousands of cases, when presented with that choice the banks voluntarily dismiss their actions even when it means they must pay attorney fees to the homeowner.

The obvious conclusion is that there is no such witness and the facts asserted by the foreclosing party are pure fiction, reliant entirely upon illusion and the erroneous application of legal presumptions.

From the article cited above:

“Lenders will need to find ways in which to meet the new requirements imposed in order to satisfy the business records exception to the hearsay rule announced in decisions such as Royal. For instance, lenders may seek to avoid altogether obtaining affidavits from third-party loan servicers, and instead use representatives of the lender, who can attest to their familiarity with the lender’s record-keeping practices and procedures, in order to submit affidavits and documents to the court.

 
Alternatively, if lenders continue to insist, even after Royal and the other decisions of the Second Department discussed above, to use affidavits from third-party loan servicers in mortgage foreclosure litigation, then the best practice will be to have loan servicers (as opposed to lenders) be the party to act as the plaintiff in the foreclosure litigation. So long as the loan servicer is authorized to do so by the lender, courts have found that loan servicers have standing to present claims for foreclosure and sale on behalf of the lender that owns and holds the note and mortgage at the time of the commencement of the action. See, e.g., Flushing Preferred Funding Corp. v. Patricola Realty Corp., 964 N.Y.S.2d 58 (Sup. Ct. Suffolk Co. 2012).”

Looming Title Problems from Fabricated, Fraudulent Forged Documents

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.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://www.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?

 

Quiet Title Revisited: Not Quite a Dead End

Void means that the instrument meant nothing when it was filed, not that it is unenforceable now.

 

I know how hard it is to let go of something that you really want to believe in. But for practical reasons I consider it unwise to continue on the QT path until we can find a way to get rid of the void assignment. That unto itself might a form of quiet title action and it is far easier to do. The allegation need only be that neither the assignor nor the assignee (a) had any right, justification or excuse to claim an interest in the recorded mortgage and (b) neither one was ever party to a completed transaction in which either of them had paid value for any interest in the recorded mortgage. Hence the assignment is void and should be removed from the chain of title reflected in the county records. So that takes care of one of several problems and the attack does not seek to remove the mortgage — yet.

 

Quiet title is a very limited remedy. In nearly all cases if the facts are contested it almost automatically means that there is no quiet tile relief available. It is meant to remove wild deeds or any other void (not voidable) instrument. Void means that the instrument meant nothing when it was filed, not that it is unenforceable now.

I contributed to the mystery of quiet title because it was apparent that the mortgage was void because it never named the true lender. In fact the existence and identity of the true source of funds for the transaction was intentionally withheld from the borrower leaving the mortgage with only one party instead of two.

 

The problem many courts are having with this is that the mortgage might still be subject to reformation that would insert the correct name of the actual lender (theoretically, potentially reformation). The fact that there is no such creditor whose name can be inserted does not make the mortgage void. It makes it voidable. Actually proving that there is no such creditor won’t be easy since only the banks have the information that shows that.

 

If there are any future events that could revive the mortgage deed, then quiet title can’t work. Add to that the fact that judges are not treating these attacks seriously and routinely ruling for the banks and you have a what appears to be a dead end.

 

All that said, there ARE causes of action that could attack the void assignment and the voidable mortgage in which the court could theoretically declare that in the absence of information sought from the defendants, who appear to be the only potential claimants, the mortgage is THEN declared void by court order, THEN a second count in quiet title would be in order. I cannot emphasize enough the fact that Judges are going to be very resistant to this but I think that appellate courts are starting to understand what happened with false claims of securitization.

 

Essentially, the Court must state that:

  1. The mortgage failed to name the correct party as lender.
  2. That failure makes the mortgage voidable.
  3. Despite publication and notice, there are no parties who could answer to the description of the creditor whose name should have been on the mortgage.
  4. The mortgage is therefore void
  5. Court declares title to be vested in the name of Smith and Jones without any encumbrance arising out of the mortgage recorded at Page 123 Book 456 of the public records of XXXX County, Florida.
 This of course directly challenges the judicial notion that once the homeowner receives money, it is a loan, it is enforceable and it doesn’t matter who comes into court to enforce it. To say that this judicial “law” opened the door to mayhem and moral hazard would be an understatement. Using the opinions written by trial judges, appellate judges and even Supreme Court justices, people who like to “leverage the system” have seized on this obvious opening to steal receivables from the rightful recipient — with no negative consequences. They write a letter that appears on its face to be correct and valid. According to current practices this raises the presumption that the contents of the letter are true.
 Hence the self-serving letter creates the legal presumption that the writer is authorized to tell the debtor that the writer is now the owner of the debt and to direct payments to the “new owner.” This isn’t speculation. Starting in California this business plan is spreading across the country. By the time the rightful owner of the debt wakes up the Newco Debt Servicing company has collected or settled the account.
Since the presumption is raised that the thief writing the letter is authorized, the real party in interest cannot beat the defense of payment by a debtor who thought they were doing the right thing. Reasonable reliance by the borrower is presumed since the authority and the validity of the letter was presumed. And that is not just a description of some dirty rag tag gangsters; it is a verifiable description of what the banks have been doing for years with mortgage debt, credit card debt, student loan debt and every other kind of debt imaginable.
By the time the investors wake up and find out their money was not used to fund a trust or real business entity, their money is gone and they are at the mercy of the big time banks who will offer settlements of claims that should have resulted in jail time for the bankers. Instead we have literally authorized small time crooks to emulate the behavior of the banks thus throwing the marketplace into further chaos.
So if you start off knowing that the banks can never come up with the name and contact information of a creditor, then you begin to see how there are some attacks on the position of banks that could have enormous traction even though on their face those strategies look like losers.

One Step Closer:It’s Impossible to Tie Any Investors to Any Loan

The current talking points used by the Banks is that somehow the Trust can enforce the alleged loan even though it is the “investors” who own the loan. But that can only be true if the Trust owns the loan which it doesn’t. And naming the “investors” as the creditor does nothing to clarify the situation — especially when the “investors” cannot be identified.

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

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see http://4closurefraud.org/2016/06/07/unsealed-doj-confirms-holders-of-securitized-loans-cannot-be-traced/

I know of a case pending now where US Bank allegedly sued as Trustee of what appears to be named Trust. In Court the corporate representative of the servicer admitted that the creditor was a group of investors that he declined to name. I knew that meant two things: (1) neither he nor anyone else knew which investor was tied to the subject loan and (2) the “Plaintiff” Trust had never acquired the loan and therefore had no business being in court.

The article in the above link demonstrates that not even the FBI could figure out the identity of the investors. And as we have seen across the country whenever the homeowner asks for discovery of the identity of the creditor it is met with multiple objections and claims that the information about the identity of the debtor’s credit is proprietary. This is an absurd claim and it seeks to have the court rubber stamp a blatant violation of Federal and State lending laws which require the disclosure of the identity of the “lender.”

The only thing the article gets wrong is the statement that the loans were sold into a trust. That is obviously false. If the investors are the creditors, then their money was used to fund the origination or acquisition of the loan — without the Trust. Otherwise the Trust would be the creditor. And if the Trust is not the owner of the loan as specified by the Prospectus and Pooling and Servicing Agreement, then it follows that it has no status at all, which means that neither the Trustee nor the servicer have any authority to manage, service or otherwise enforce the alleged loan. The entire strategy of asserting the Trust is a holder of the note is thus unhinged when it is confronted with reality. The whole “standing” argument revolves around this point — that no loan actually made it into any Trust. Many cases have been won by borrowers on that point without the extra step of saying that the creditor is completely unknown.

So the upshot is that there is no known, presumed or identified creditor. Although that seems implausible and counter-intuitive, it is nonetheless true. That doesn’t mean that theoretically there couldn’t be an unsecured claim from the investors to collect from the homeowner under a theory of unjust enrichment, but it does mean that the investors are neither named on the note and mortgage nor are they the current owners of any paper instruments that purport to be evidence of the “debt” — i.e., the note and mortgage. If they are not the current owners of the “debt” originated at closing nor the owners of the paper instruments signed at the alleged closing, then there is no evidence of any contract or privity between the investors and the Trustee or servicer at all. The PSA was ignored which means the entity of the Trust was ignored.  And THAT means lack of standing and lack of any ability to cure it.

Which brings me to one of my earliest articles for this Blog that announced “You Don’t Owe the Money.” Using the step transaction doctrine and single transaction doctrines arising mostly out of tax courts, it was plain as day to me back in 2007 and 2008 that there was no “debt.” And until someone stepped up with an equitable unsecured claim against the homeowner, there wasn’t even a liability. But nobody ever steps up. The banks tell us that is because the whole securitization scheme is to prevent and even prohibit the investors from even making an inquiry into any specific “loans.”

But the real reason is simple and basic — the Trusts were ignored, which means that investor money was deposited with investment banks under false pretenses — the falsehood being that the investors were buying into a specific Trust (which never received any proceeds of sale of the Trust securities) with a specific Mortgage Loan Schedule. The Mortgage Loan Schedule was therefore a complete illusion as an attachment to the Trust because the Trust never had the money to pay for the “pool” of loans. That is why the Mortgage Loan Schedule shows up mainly in litigation in order to confuse the Judge into thinking that somehow it is “facially valid” instead of being the self-serving fabrication of a stranger to the transaction who is engaged in stealing the loans after they already stole the money from investors.

In fact, the “pool” was an ever widening dark dynamic pool of money in which all the money of all investors was commingled with all the other investors of all the alleged Trusts. As I have previously stated the result can be compared to taking an apple, an orange and a banana and setting a food processor on Puree. At the end of that simple process it is impossible for the chef to produce the original apple, orange or banana.

If securitization was real, the banks could have easily done two things that would have completely knocked out any borrower defenses except payment. The first was to show the money chain and the second would be produce the proof that the Trust owned the debt, not the investors. The current talking points used by the Banks is that somehow the Trust can enforce the alleged loan even though it is the “investors” who own the loan. But that can only be true if the Trust owns the loan which it doesn’t. And naming the “investors” as the creditor does nothing to clarify the situation — especially when the “investors” cannot be identified.

As it stands now, the investors continue to allow the banks to act like they are really intermediaries, stealing both the money and the loans that should have been executed in favor of the investors and even allowing claims for collecting “servicer advances” that were not advances (they were return of investor capital) and never came from the servicer. It was and remains a classic PONZI scheme that government is too scared to do anything about and investors are too ignorant of the false securitization (or unwilling to admit human error in failing to do due diligence on the securitization package).

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Consummation- Is an Act not an Illusion

by William Hudson

Neil Garfield is adamant that if consummation did not occur, there can be no contract. His belief is supported by hundreds of years of contract law (including the marriage contract). In regards to marriage, most people know if consummation occurred, yet when it comes to taking out a securitized loan like a mortgage, most people only assume it did.   Without proof one can only speculate that consummation occurred.

Due to the Sarbanes-Oxley Act, any lender in America should be capable of producing the needed documentation to prove they own a Mortgage and Note- and that consummation occurred. With the click of a computer mouse, instantaneously the journal entries in the lender’s financial, accounting, and general ledger systems should show that a loan was consummated and the Note was assigned to a valid trust. Instead, the banks resort to forgery and fraud. If they had the documentation, fraud would not be necessary.

Since around 2001 banks have been mocking up documents to create a paper trail to create the illusion of ownership- but in light of all the fabricated document fraud, it is time that homeowners demand to see the money trail and are permitted to do so. The money trail should begin at consummation of the loan between the two parties who agreed to contract: the homeowner and lender. However, this is not the way that consummation works in a securitized mortgage transaction. By design, the homeowner is not allowed to know who they are borrowing funds from- and transparency is of no concern.

Can you imagine this occurring in any other consumer transaction?  Imagine the chaos that would ensue, for instance, if you thought you were financing a truck through Ford Credit, yet unbeknownst to you, Honda funded the loan.  You may have ended up with the truck, but you may have been induced into a contract you didn’t agree with (especially if your goal was to “buy American”).  Why should Mortgage loans be any different?  And why should Congress bother passing laws like TILA if the banks are going to ignore consumer protection laws with impunity?

There can be no consummation when the party lending the money is never disclosed to the borrower. A homeowner is conned into believing the party listed on their note and mortgage is actually the party who is taking the risk by lending their own funds- when this party who is named on the Note is an originator- not a lender.

Has anyone stopped to ask why all the secrecy?   The only reason for secrecy is to hide the truth- whatever that may be (dark pools? empty trusts? stolen funds?). There is a reason for the deception that begins at the closing table, endures through servicing, and only ends upon sale of the property or payoff.

Consummation under the Federal Truth-in-Lending-Act occurs when the state law on contract or lending says it begins. According to attorney Neil Garfield, “Most state laws require offer, acceptance and consideration. So while the door is open to inconsistent results, in order to find that consummation did happen and that the date of consummation is known, we still must visit the issue of consideration.” Consideration is basically the exchange of something of value in return for the promise or service of the other party. Take note, consideration is not the exchange of value in return for the promise or service of an unidentified third party. However, modern securitization has nothing to do with the name of the original “lender” on the Note that in 99% of all cases did not loan anything of value.

When a homeowner is not provided the name of the party who is actually taking the risk and has skin in the game- they lose their ability to negotiate in good faith with this party (the investors of the trust). Over the span of a 30 year loan, “life” happens. It is terrifying that a bank can use one late payment as an excuse to create a default.

Banks were once responsive to homeowners because they had an actual investment and needed the homeowner to successfully make payments.   If a homeowner had a short-term cash flow problem, the banks were willing to work with them- it was in their best interest to do so. Homeowners no longer have the luxury of negotiating with the party who provided the funds, but must attempt to solve any mortgage issues with a loan servicer who is financially rewarded by engineering a default- by failing to provide responsive customer service to the homeowner (or by blatantly misleading the homeowner).

In fact, this week the CFPB announced that consumers made almost 900,000 complaints about their loan servicers between March and April 2016. The complaints center around three areas:

  1. Problems when consumers are unable to pay: Consumers complained of prolonged loss mitigation review processes in which the same documentation was repeatedly requested by their servicer. Consumers also complained that they received conflicting and confusing foreclosure notifications during the loss mitigation review process.
  2. Confusion over loan transfers: Consumers complained that they were often not properly informed that their loan had been transferred. As a result, payments made to either the prior or current servicer around the time of the transfer were not applied to their account.
  3. Communication issues with servicers: Consumers complained that when they were able to speak with their servicer, the information they received was often confusing and did not provide the clarifications they were hoping for.

According to the report, the mortgage companies with the worst records between November 2015 to January 2016 were Wells Fargo, Bank of America, Ocwen, and Nationstar Mortgage. Consumers are not receiving customer care because by design servicers profit when a default can be engineered. Based on the CFPB findings, it is obvious that the longer the servicer can prolong loss mitigation, the more fees they will potentially receive. A default allows them to collect thousands in late fees and penalties; and if they are lucky- foreclose on the home.

The servicer has no skin in the game and is incentivized to create a default by any means necessary- whereas, a true creditor does not want a default. The problem with the way the system is rigged is that the homeowner is prevented from knowing who they borrowed money from and therefore cannot negotiate in good faith with the party who has a vested interest in the homeowner making payment.

The central problem in all securitized mortgages is that the homeowner has no idea who they consummated the loan with. Although it is considered a predatory practice under Regulation Z to conceal the true lender, no government regulatory agency has stopped the practice of concealing the identity of the true lender at closing.  The TILA laws are on the books, but have no teeth.

Neil has said in the past that consummation only occurs after the closing agent receives and disburses the funds according to the alleged loan contract. Therefore, consummation does not occur on the date that the closing papers are signed. The requirement of giving the borrower disclosure papers three days before the closing is complete might put some daylight between the assumption that consummation occurred on the day the papers were signed.

Garfield states, “The simple argument is that the industry practice has always been that the borrower signs papers and THEN the closing agent requests or receives the money for the “loan.”” Therefore, Garfield doubts there is any support for saying that the borrower is contractually obligated to comply with the terms of the note or the mortgage if the money never came at all. Neil Garfield says that where the true problem lies is what occurs in the NEXT step.

“If we can agree that if no money ever came from anyone, the borrower doesn’t owe anyone anything and is not bound by the “facially valid” loan contract, then it follows that if no money came from the named Payee on the note and mortgagee on the mortgage, (beneficiary in a deed of trust), the “borrower” doesn’t owe anything to anyone,” states Garfield. If contract law was strictly followed, the homeowner is under no obligation to repay a party who didn’t lend them a dime.
This is where the issue of consummation becomes difficult to understand. “If money is sent to the closing agent by a party unrelated to the named payee on the note, then under what theory do we say that the note is evidence of the debt? It certainly should not be used to show that the borrower owes the payee any money because the payee did not make the loan and nobody related to the payee made the loan,” Garfield has repeatedly stated. Neil Garfield agrees with the assumption that the borrower owes back the money that was advanced on behalf of the borrower, but that transaction is not a debt nor a contract- it is a potential liability to the party whose funds were used to send to the closing agent.

That claim could not be in contract because the source of funds and the “borrower” never entered into a contract. The liability would be in equity and would exist independently of the false note and false mortgage, which means the claim from a real source of funds would not be subject to the note and mortgage but simply due on the basis of fairness in equity: the borrower received the benefit of the money from the money source and under quantum meruit would be obligated to repay the money.

This is where most people get lost on Garfield’s Rescission theories. Garfield never advocates that money is not owed to someone- what he argues is that the Note and Mortgage represent a transaction that never occurred- and therefore should be rescinded under TILA. Rescission would allow the REAL creditor (or investors) to come to the table and demand/receive payment.

And yet, loan servicers wanting to protect their unlawful gains (at the expense of the investors) are successfully deceiving the courts that consummation did occur. The entire mortgage scheme is rigged by a system of smoke and mirrors. There is evidence that the closing did not occur according to the contract- if the homeowner can manage to obtain the information through Discovery (but in 99% of all lawsuits the bank will not be compelled to reveal actual evidence). The courts could demand sua sponte that the servicer provide the actual business records and settle the matter- but this would reveal the truth that everyone has gone to great lengths to keep hidden.

When Congress wrote the Truth in Lending Act, they deliberately stated that the homeowner could rescind the Note within three days of consummation (they specifically did not say origination). The Supreme Court in Jesninoski reinforced the right to rescind and TILA was enacted so that banks would self-regulate and not devise reckless and predatory schemes (like what has happened). The homeowners and investors should not be punished for the deliberate obfuscation of the true terms of the “loan”.

All this analysis is aimed at one single point, to wit: that the source of funds does not meet the definition of a creditor to whom the money is owed. Most people understand Neil Garfield’s point but reject it regardless of how well it is founded in law and fact. They reject it because it upsets the mortgage securitization scheme started 20 years ago by the investment banks. It would mean that there is no creditor, there is no contract, and there is no obligation to comply with the payment terms under the note and mortgage. This is an unacceptable result for most people. They worry that the entire system would collapse if they were to follow the law as it has been written and decided for centuries.

But the feared consequence is not based in fact. The entire system does not collapse under this scenario. What happens is that the investors who bought fake Mortgage backed securities could deal directly with the borrowers and workout the terms of a mortgage loan that is both legal and enforceable. More importantly it would be a loan that would survive in value to the investor. As things stand now the Wall Street banks are driving as many cases as possible toward foreclosure because that is the way they collect the most fees — when the equity in the property is no longer higher than the claims for money upon liquidation.

So accepting the application of existing law as stated here, would mean that investors would suffer much lower losses and the homeowners would regain the equity in their homes or at least the prospect of equity while the wild terms and wild appraised prices of the past are abandoned. Obviously the SERVICERS would hate this equitable solution- because it would cost them the huge profits they receive through document fabrication, robosigning and other creative “solutions” that require fraud.

Let’s remember that when TARP was first announced, it was all about losses from mortgage defaults. When the government realized that homeowner defaults had little to do with TARP they expanded its meaning to include failing mortgage backed securities. But there were no bank losses from MBS because the banks were selling MBS not buying them. So then they expanded it again to include losses from credit default swaps, insurance contracts and other hedge products.

This was all based upon the premise that there MUST be a loan contract in there somewhere. There wasn’t in most cases. Nearly all of the foreclosures that have been rubber stamped by the court system were not only unnecessary, they were patently illegal based upon false representations from the banks. The foreclosure was a legal cover for all the prior illegal actions.

With that being said, if the homeowner only recently discovered that consummation did not occur; does the 3-year TILA window is likely untolled and the 3-day/3-year expiration time may never have commenced in the first place. Remember that according to law, Rescission is the act of rescinding; the cancellation of a contract and the return of the parties to the positions they would have had if the contract had not been made; rescission may be brought about by decree or by mutual consent.

Congress did not give you the Right to Cancel under TILA but the Right to Rescind. Cancellation means termination of the entire agreement by the act of parties/law. Whereas Rescission places the person back to the condition they were PRIOR to the contract; cancellation merely voids the contract and has no restorative properties. Congress could have simply allowed homeowners to cancel under TILA, but instead opted for Rescission. Cancellation would have stopped the bleeding, but Rescission actually reattaches the Limb. The judiciary must recognize that Congress used the words CONSUMMATION and RESCISSION not ORIGINATION and CANCELLATION in the Truth-in-Lending-Act so why should any Judge ignore the intention of the Act?  Rescission will eventually be won based on lack of consummation- but it may take another hearing before the Supreme Court before the state courts accept what consummation means.

Like the Mortgages, Rescission is Counter-Intuitive

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
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THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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There seems to be some miscommunication regarding rescission. The confusion seems to emanate from the assumption that the “borrower” would lose if there was a creditor with standing who filed a lawsuit to vacate the rescission. If so, that would be missing the point. The point is not whether the homeowner would lose if the lawsuit was filed. The point is that the lawsuit is never going to be filed. The rescission is effective as a matter of law, regardless of whether there exists an arguable or even valid defense.

Normally as lawyers we would anticipate the end result, but in this case the end result never happens because there is no creditor with standing, which is the whole point of understanding the false claims of securitization that have permeated the foreclosure marketplace. The answer, which I understand is completely counter-intuitive, is that there is no creditor — i.e., no party who could answer to the description of the owner of the debt (not the paper) — i.e. the party to whom the money is actually owed. The absence of a creditor is hard to fathom, but it is nonetheless true. AND THAT is why no bank, despite advice of counsel, has filed any action within the 20 day window to file, that seeks to vacate the rescission.

It may be true that we could expect to lose if there was a case filed and there was a trial. But if the case is never filed, the rescission stands. And since it is effective by operation of law, the loan contract (if it was ever consummated — which is doubtful) is canceled, the note is void and the mortgage is void. The only restriction I see is that in judicial states after judgment, it would appear that there is no loan contract that still exists after judgment and so there is nothing to cancel.

Looking at the date of documents is not the way to determine when a loan contract was consummated. We must return to basics, and that is what is presumed but the presumption is wrong. basic contract law X makes an offer to Y. Y accepts the offer. X and Y exchange consideration. In these loans, not only did X and Y NOT exchange consideration, but the very fact that they didn’t makes X a predatory lender as per REG Z. But more to the point, if X did not perform by loaning money to Y, there is no loan contract= no consummation= void note and void mortgage. If there was a consummation you need to know the date of funding, which is after the documents were signed and could be days, weeks or even months afterwards.

Check the Yvanova decision for more on this. Ownership of the debt, as per the Yvanova court, is what counts, not merely possession of paper that could and probably is fabricated.

Here are some quotes from recent articles or upcoming articles

“TILA rescission in which the notice of rescission alone (upon mailing) immediately cancels the loan contract, and voids the note and mortgage — even if the rescission is disputed on grounds of the 3 year limitations etc.

As Justice Scalia said, “the statute makes no distinction between disputed and undisputed rescission.” Thus the rescission is effective even if it APPEARS As though the right to rescind under TILA may not have existed on the date the notice of rescission was mailed.
NOTE TO LAWYERS: ANY OTHER INTERPRETATION WOULD REQUIRE THE “BORROWER” TO FILE SUIT TO MAKE THE RESCISSION EFFECTIVE WHICH IS THE OPPOSITE OF THE TILA RESCISSION STATUTE, REGULATION Z AND THE UNANIMOUS DECISION OF THE US SUPREME COURT IN JESINOSKI. THE STATUTE PUTS THE RESPONSIBILITY FOR PUTTING THE EFFECTIVENESS OF THE TILA RESCISSION IN ISSUE SQUARELY ON THE PARTIES PURPORTING TO BE THE LENDER AND THEY ONLY HAVE 20 DAYS FROM RECEIPT TO FILE A LAWSUIT SEEKING TO HAVE THE RESCISSION VACATED.”

The Money Trail: Does anyone meet the definition of a creditor?

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
================================

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

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I speak to people across the country. As I discuss the issues that get increasingly complex, we reach areas in which there are differences of opinion which is why you need to consult with someone who is licensed in your state and who has done the heavy research (no skimming allowed). The issue is what payments should be credited to whom. And the answer really is you should be asking an accountant and a lawyer. This is why my team is reaching out to accountants and auditors to round out what is needed in cases.

The problem is that this is a grey area. Payments made to the beneficiaries of the trust were never intended to discharge the debt from the “borrower.” That’s obvious. But payments were made on account of this debt. So we go back to the law of presumptions. If the creditor receives a payment and the payment is on account of a particular debt due from a particular debtor, then it is discharged to the extent of the payment — regardless of the stated “intent” of the payor after the fact. So servicer advances definitely fall into that category. But in addition, if the entire debt has been discharged by the replacement of the obligation with another obligation from another party, then you have similar issues.

So first of all, the beneficiaries agreed to take payments from the REMIC Trust — not the “borrowers”. There is no relationship between the beneficiaries of a trust and any single “borrower” or group of “borrowers.” The REMIC Trust doesn’t pay the beneficiaries despite the paperwork to the contrary. The REMIC Trust is inactive with no assets, bank accounts, business activity etc.

It is the Master Servicer that pays the beneficiaries. And the Master Servicer makes those payments regardless of whether it has received payments from the beneficiaries. (servicer advances). The note and mortgage name a specific payee that is neither the Trust (or Trustee) nor the Master Servicer. So the first real legal question that I raised back in 2007 was the issue of who was the owner of the debt or the holder in due course?

The debt arose when the “borrower” accepted the benefits of funding that came from an unidentified source. It is presumed not to be a gift. The “borrower” has signed a note and mortgage in favor of a party that never loaned him any money — hence there is no loan contract and the signed note and mortgage should have been destroyed or released back to the “borrower.” Such a loan is table-funded and is almost certainly “predatory per se” as described in REG Z.

Since there is no privity between the “originator” and the Trust or Master Servicer the loan documents cannot be said to be useful, much less enforceable. Those documents should be considered void, not voidable, when the payee and mortgagee failed to fund the loan. The repeated transfers of the loan documents without anyone ever paying for them clearly means that the consideration at the base “closing” was absent. Hence there is no consideration at either the origination or acquisition of the loan documents. Acquisition of the loan documents does not mean acquisition of the loan. If there was no valid loan contract or there is no valid loan contract (rescission) executing endorsements, assignments and powers of attorney are meaningless.

So there is a serious question about whether there is a legal creditor involved in any of these loans. There are parties with equitable and legal claims, but not with respect to the loan documents that should have been shredded at the very beginning. All those claims are unsecured. And the foreclosures, in truth, are for the benefit of parties who have no relationship with the actual money that was used to the benefit of the alleged “borrower” who is looking more and more like a party who is not a borrower but who could be debtor if there is anyone answering to the description of “creditor.” No party in this scenario seems to answer to that description.

And THAT would explain why NO PARTY steps forward to challenge rescissions as a creditor and instead they attempt to retain their status of having apparent “Standing” and attack the rescission through arguments that require the court to interpret the TILA Rescission Statute, 15 USC §1635. But the US Supreme Court has already declared that it is the law of the land that this statute is not subject to interpretation by the courts because it is clear on its face. So such parties are seeking relief they didn’t ask for (vacating the rescission) using the void note and void mortgage as their basis for standing.

Thus without someone filing an equitable claim showing that their money is tied up in the money given to the “borrower” there does not seem to be a creditor at law.

Add that to the fact that most of the “Trusts” were resecuritized by more empty trusts and you have the original beneficiaries completely out of the picture as to any particular loan and the so-called REMIC Trust being completely out of the picture with respect to the loan or loan documents that were originated, even if they were not consummated.

Rescission: Equitable Tolling Extends Statute of Limitations

For further information please call 954-495-9867 or 520-405-1688

Important Message: This blog should NEVER be used as a substitute for competent legal advice from an attorney licensed in the jurisdiction in which your property is located.

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see http://openjurist.org/784/f2d/910/king-v-state-of-california-d-m

The most popular question I get here on the blog and on my radio show is what happens when the three year statute has run? The answers are many. First is the question of whether it ever started running. If the transaction was not actually consummated with anyone in the chain of parties claiming rights to collect or enforce the loan it would be my opinion that the three day right of rescission has not begun to run. That would be a remedy to an event in which the note and mortgage (or deed of trust) has been signed and delivered but the loan was never funded by the originator any creditor in the chain of “ownership.” The benefit of the three day rescission is that you don’t need a reason to do it. But in order to do that you need to be careful that you are not stating that there was a closing because that would be consummation and therefore the right to rescind unconditionally ran three days after that “Closing.”

Second is the three year statute of limitations. The same reasoning applies.  But it also raises the question of non-disclosure and withholding information. The rather obvious delays in prosecuting foreclosures on alleged “defaults” are clearly a Bank strategy for letting the 3 year statute run out and then claim the homeowner cannot rescind because the closing was more than 3 years ago. That is where the doctrine of equitable tolling comes into play. A party who violates TILA and fails to disclose material facts and continues to hide them from the borrower should not be permitted to benefit from continuing the violation beyond the apparent statute of limitations. People keep asking why the banks wait so long to prosecute foreclosures. The answer is that it is because they have no right to do so and they are running out the apparent statute of limitations on rescission and TILA disclosure actions.

Third is a procedural issue. According to TILA the “lender” who receives such a notice of rescission is (1) obligated to send it to the “real” lender and (2) must file a declaratory action against the borrower within 20 days in order to avoid the rescission. If they don’t file the 20 day action, they waive the objections they could have raised. So far I have not heard of one case in which such an action has been filed. I think the reason for that is that nobody can file an action in which they establish standing. Such a party would be obliged to allege that they are the “lender” or “creditor” as defined by TILA. That means they either loaned the money or bought the loan for “valuable consideration” just like it says in Article 9 of the UCC. Then they would have to prove that allegation before any burden shifted to the borrower to answer or file affirmative defenses against the action filed by this putative “lender.”

CAVEAT: The doctrine of equitable tolling is remedial as is the statute, but it is fairly strictly construed. I’m am quite confident that the best we will get from the courts is that the 3 day and 3 year rules and other limitations in TILA starts running the moment you knew or should have known the facts that had been withheld from you at “closing.” The fact that you are not a lawyer and did not realize the significance of this will not allow you to delay the start of the statute running after the date of discovery of the facts, whether you understood them or not.  But this is a two-edged sword. The current practice of objecting to any QWR, DVL or discovery question without answering the truth about the claimed chain of ownership or servicers on the loan corroborates the borrowers allegation that the parties are continuing to withhold this information. So a well-framed TILA defense might serve as the basis for enforcing your rights of discovery and rights to answers on your Qualified Written Request or Debt Validation Letter.

Additional Caveat: The doctrine of equitable tolling has been applied with respect to the one year statute of limitations on TILA disclosures but it remains open as to whether it would be otherwise applied. From the 9th Circuit —

“Section 1640(e) provides that “[a]ny action under this section may be brought within one year from the date of the occurrance of the violation.” We have not yet determined when a violation occurs so as to commence the one-year statutory period. See Katz v. Bank of California, 640 F.2d 1024, 1025 (9th Cir.), cert. denied, 454 U.S. 860, 102 S.Ct. 314, 70 L.Ed.2d 157 (1981). Three theories have been used by other circuits to determine when the statutory period commences: (1) when the credit contract is executed; (2) when the disclosures are actually made (a “continuing violation” theory); (3) when the contract is executed, subject to the doctrines of equitable tolling and fraudulent concealment (limitations period runs from the date on which the borrower discovers or should reasonably have discovered the violation). See Postow v. OBA Federal S & L Ass’n, 627 F.2d 1370, 1379 (D.C.Cir.1980) (adopting “continuing violation” theory in some situations); Wachtel v. West, 476 F.2d 1062, 1066-67 (6th Cir.), cert. denied, 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973) (rejecting “continuing violation” theory, statutory period commences upon execution of loan contract); Stevens v. Rock Springs National Bank, 497 F.2d 307, 310 (10th Cir.1974) (rejecting “continuing violation” theory); Jones v. TransOhio Savings Ass’n., 747 F.2d 1037, 1043 (6th Cir.1984) (applying equitable tolling and fraudulent concealment).”

Hats off to James Macklin who sent me this email:

Hang on to your hats fella’s…in Sargis’ ruling … back in 2012…he confirms the equitable tolling principles of TILA as I had argued…just saw this again while reviewing…to wit:
“The Ninth Circuit applies equitable tolling to TILA’s … statute of limitations (King v. California, 784 F.2d 910, 914 (9th Cir. 1986).
“Equitable Tolling is applied to effectuate the congressional intent of TILA.”, Id.
Courts have construed TILA as a remedial statute, interpreting it liberally for the consumer.” (Id. Citing Riggs v. Gov’t Emps. Fin. Corp., 623 F.2d 68, 70-71 (9th Cir. 1980).
 Specifically the 9th Circuit held: “[T]he limitations period in section 1640(e) runs from the date of consummation of the transaction but that the doctrine of equitable tolling may, in appropriate circumstances, suspend the limitations period until the borrower discovers or had the reasonable to discover the fraud or non-disclosures that form the basis of the TILA action.” 
Gentlemen…I give you proof positive that the statute tolls and the fact that the term “consummation” is also subject to broad interpretation as we know…the loan could not have consummated if what we allege is found to be true… However, the non-disclosures language used by the 9th Circuit gives rise to possible myriad rescissions upon discovery of those non-disclosures…
James L. Macklin, Managing Director
Secure Document Research(Paralegal Services/Legal Project Management)

Bank of America Ordered to Pay $1.2 BILLION for Fraudulent Mortgages

“Given the current environment where robo-signing became institutionalized as a practice even though it is the equivalent of forgery and where fabrication of documents by law offices and “document processors” were prepared according to a published menu of prices, why would anyone, least of all a court of law, apply general principles surrounding presumptions when established fact makes it more likely than not that the presumptions lead to the wrong conclusions? Where is the prejudice to anyone in abandoning these presumptions in light of all the information in the public domain?” — Neil Garfield, livinglies.me

THEY ACTUALLY CALLED IT “HUSTLE”

U.S. District Judge Jed Rakoff in Manhattan ruled nine months after jurors found Bank of America and former Countrywide executive Rebecca Mairone liable for defrauding government-controlled mortgage companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) through the sale of shoddy loans by the former Countrywide Financial Inc in 2007 and 2008.

The case centered on a mortgage lending process known as “High Speed Swim Lane,” “HSSL” or “Hustle,” and which ended before Bank of America bought Countrywide in July 2008.

Investigators said the program emphasized quantity over quality, rewarding employees for producing more loans and eliminating checkpoints designed to ensure the loans’ quality. (see link below)

Now that an actual employee of the Bank has also been ordered to pay $1 Million, maybe others will start coming out of the woodwork seeking immunity for their testimony. There certainly has been a large exodus of employees and officers of Bank of America to other Banks and even other industries. They are all trying to distance themselves from the inevitable down fall of the Bank. Meanwhile the corrupt system is heavily engaged with financial news reporting. For every article pointing out that Bank of America might have hundreds of Billions of dollars in legal liabilities for their fraudulent practices in originating, acquiring, servicing and foreclosing mortgages, there are five articles spread over the internet telling investors that BOA is a good investment and it is advisable to buy the stock. I know how that system works. For favors or money some people will write anything.

THE BURDEN OF PLEADINGS AND PROOF MUST BE CHANGED

The question I continue to raise is that if there was an administrative finding of fraud by an agency of the government, which there was, and if there was a jury finding of fraud involved in the Countrywide mortgages (and other mortgages) why are we presuming in court that that the mortgage is valid?

I understand the statutory and common law presumptions arising out of certain instruments that appear to be facially valid. But I propose that lawyers challenge those presumptions based upon the widespread knowledge and information across the public domain that many if not most of the mortgages were procured by fraud, processed fraudulently, serviced fraudulently, and foreclosed fraudulently. In my opinion it is time for lawyers to challenge that presumption in light of the numerous studies, agency investigations and findings that the mortgages, from beginning to end, were fraudulently originated, acquired and processed.

Why should the filings of a pretender lender receive the benefit of the presumptions of validity just because it exists when we already know it is more likely than not that there are no underlying facts to support the presumptions — and knowing that there was probably fraud involved? Why should the burden remain on the borrowers who have the least access to the information about that fraud and who get nothing from the banks during discovery?

Forfeiture of the private residence of a person is the worst outcome of any civil litigation. It is like the death penalty in criminal litigation. Shouldn’t it require intense scrutiny instead of a rocket docket that presumes the validity of the mortgage and note, and presumes that a possessor of a note (that more likely than not was fabricated and forged by a machine) has the right to enforce?

In a REAL transaction in the REAL world, the originator of a loan would demand that all underwriting restrictions be applied, and confirmation of the submissions by the borrower. If anyone was buying the loan in the secondary market, they would demand the same thing and proof that the assignor, endorser or transferor of the loan had title to it in every conceivable way.

The buyer would demand copies of the actual documentation so that they could enforce the loan. These documents would exist and be kept in a vault because the fate of the investment normally depends upon the ability of the “lender” or “purchaser” of the loan to prove that the loan was properly originated and transferred for value in good faith without knowledge of any defenses of the borrower.

In short, they would demand that they receive proof of all aspects in the chain of title such that they would be considered a Holder in Due Course.

Today, nobody seems to allege they are a holder in due course and nobody seems to want to identify any party as a Holder in Due Course or even a creditor. They use the term “holder” with its presumptions as a sword against the hapless borrower who doesn’t have the information to know that his or her loan is likely NOT owned by anyone in the chain claimed by the foreclosing party.

If it were otherwise, all foreclosure cases would end with a thud — the loan would be produced in all its glory with everything in its place and fully disclosed. The only defense left would be payment. Instead the banks are waiting years to run the statute on TILA rescission and TILA violations before they start actively prosecuting a foreclosure.

What bank with a legitimate claim for foreclosure would want to wait before it got its hands on the collateral for a loan in default? Incredibly, these delays which often amount to five years or more, are ascribed to borrowers who are “buying time” without looking at the docket to see that the delay is caused by the Plaintiff foreclosing party, not the borrower who has been actively seeking discovery.

What harm would there be to anyone who is a legitimate stakeholder in this process if we required the banks to plead and prove in all cases — judicial and nonjudicial — the following:

  1. All closing documents with the borrower conformed with Federal and State law as to disclosures, Good Faith Estimate and appraisals.
  2. Underwriting and due diligence for approval of the loan application was performed by [insert name of party].
  3. The payee on the note loaned money to the borrower.
  4. The mortgagee on the mortgage (or beneficiary on the deed of trust) was the source of funds for the loan.
  5. The “originator” of the loan was the lender.
  6. No investor or third party was the creditor, investor or lender at the closing of the loan.
  7. Attached to the pleading are wire transfer receipts or canceled checks showing that the borrower received the funds from the party named on the settlement documents as the lender.
  8. Each assignment in the chain of title to the loan was the result of a transaction in which the loan was sold by the owner of the loan for value in good faith without knowledge of borrower’s defenses.
  9. Each assignment in the chain of title to the loan was the result of a transaction in which the loan was purchased by a bona fide purchaser for value in good faith without knowledge of borrower’s defenses.
  10. Attached to the pleading are wire transfer receipts or canceled checks showing that the seller of the loan received the funds from the party named on the assignment or endorsement as the purchaser.
  11. The creditor for this debt is [name the creditor]. The creditor has notice of this proceeding and has authorized the filing of this foreclosure [see attached authorization document].
  12. The date of the purchase by the creditor Trust is [put in the date]. Attached to the pleading are wire transfer receipts or canceled checks showing that the seller of the subject loan received the funds from the REMIC Trust named in the pleadings as the purchaser.
  13. The purchase by the Trust conformed to the terms and conditions of the Trust instrument which is the Pooling and Servicing Agreement [attached, or URL given where it can be accessed]
  14. The Creditor’s accounts show a deficiency in payments caused by the failure of the borrower to pay under the terms of the note.
  15. All payments received by the creditor (owner of the loan) have been posted whether received directly or received indirectly by agents of the creditor.
  16. The creditor has suffered financial injury and has declared a default on its own account. [See attached Notice of Default].
  17. The last payment received by the creditor from anyone paying on this subject loan account was [insert date].

When I represented Banks and Homeowner Associations in foreclosures against homeowners and commercial property owners, I had all of this information at my fingertips and could produce them instantly.

Given the current environment where robo-signing became institutionalized as a practice even though it is the equivalent of forgery and where fabrication of documents by law offices and “document processors” were prepared according to a published menu of prices, why would anyone, least of all a court of law, apply general principles surrounding presumptions when established fact makes it more likely than not that the presumptions lead to the wrong conclusions? Where is the prejudice to anyone in abandoning these presumptions in light of all the information in the public domain?

see http://thebostonjournal.com/2014/07/30/bank-of-america-ordered-to-pay-1-27-billion-for-countrywide-fraud/

For consultations, services, title and securitization reports, reviews and analysis please call 520-405-1688 or 954-495-9867.

Fatal Flaws in the Origination of Loans and Assignments

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

As I see it …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Servicer Advances: More Smoke and Mirrors

Several people are issuing statements about servicer advances, now that they are known. They fall into the category of payments made to the creditor-investors, which means that the creditor on the original loan, or its successor is getting paid regardless of whether the borrower has paid or not. The Steinberger decision in Arizona and other decisions around the country clearly state that if the creditor has been paid, the amount of the payment must be deducted from the amount allegedly owed by the “borrower” (even if the the borrower doesn’t know the identity of the creditor).

The significance of servicer advances has not escaped Judges and lawyers. If the payment has been made and continues to be made, how can anyone declare a default on the part of the creditor? They can’t. And if the payment has been made, then the notice of default, the end of month statements, the notice of acceleration and the amount demanded in foreclosure are all wrong by definition. The tricky part is that the banks are once again lying to everyone about this.

One writer opined either innocently or at the behest of the banks that the servicers were incentivized to modify the loans to get out of the requirement of making servicer advances. He ignores the fact that the provision in the pooling and servicing agreement is voluntary. And he ignores the fact that even if there is a claim for having made the payment instead of the borrower, it is the servicer’s claim not the lender’s claim. That means the servicer must bring a claim for contribution or unjust enrichment or some other legal theory in its own name. But they can’t because they didn’t really advance the money. Anyone who has experience with modification knows that the servicers make it very difficult even to apply for a modification.

Once again the propaganda is presumed to be true. What the author is missing is that there is no incentive for the Servicer to agree to make the payments in the first place. And they don’t. You can call them Servicer advances but that does not mean the money came from the Servicer. The prospectus clearly states that a reserve pool will be established. Usually they ignore the existence of the REMIC trust on this provision like they do with everything else. The broker dealer (investment banker) is always the one party who directly or indirectly is in complete control over the funds of investors.
Like the loan closing the source of funds is concealed. The Servicer issues a distribution report with disclaimers as to authenticity, accuracy etc. That report gets to the investor probably through an investment bank. The actual payment of money comes from the reserve pool made out of investor’s funds. The prospectus says that the investor can be paid out of his own funds. And that is exactly what they do. If the Servicer was actually taking its own money to make payments under the category of Servicer advances, the author would be correct.
The Servicer is incentivized by two factors — its allegiance to the broker dealer and the receipt of fees. They get paid for everything they do, including their role of deception as to Servicer advances.
When you are dealing with smoke and mirrors, look away from the mirror and walk through the smoke. There, in all its glory, is the truth. The only reason Servicer advances are phrased as voluntary is because the broker dealer wants to make the payments every month in order to convince the fund manager that they should buy more mortgage bonds. They want to be able to stop when the house of cards falls down.

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

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.

Glaski Court refuses to “depublish” decision, two judges recuse themselves.

Corroborating what I have been saying for years on this blog, the Supreme Court of the state of California is reasserting its position that if entity ABC wants to collect on a debt in California, then that particular entity must own the debt. This is basic common sense and simply follows article 9 of the Uniform Commercial Code. If a court were to adopt the position of the banks, then a new industry would be born, to wit: spying on people to determine whether or not they are behind on any payment to anyone and then beating the real creditor to court, filing a complaint and getting a judgment without the real creditor even knowing about it. The Supreme Court of the state of California obviously understands this.

This is not really complicated although the words used are complicated. If you find out that your neighbor is behind in payments on their credit cards, it is obvious that you cannot serve your neighbor and collect. You don’t own the debt because you never loaned any money and because you never purchased the debt. If you are allowed to sue and collect on the credit card debt, you and the court would be committing a fraud on the actual creditor. This is why it is absurd for lawyers or judges to say “what difference does it make who they owe the debt to?  They stopped making payments and they are clearly in default.”  Any lawyer or judge makes that statement is wrong. It lacks the foundation of the factual determinations required to establish the existence of the debt, the current balance of the debt after deductions for all payments received from all parties on this account, and the ownership of the debt.

In the first year of law school, we learned that the note is not the debt.  The note is evidence of the debt and the terms of repayment but it is not a substitute for the actual transaction documents. Those transaction documents would have to include proof of transfer of consideration, which in this case would mean wire transfer receipts and wire transfer instructions. The banks don’t want to show the court this because it will show that the originator in most cases never made any loan at all and was merely serving as a sham nominee for an undisclosed lender. The banks are attempting to use this confusion to make themselves real parties in interest when in fact they were never more than intermediaries. And as intermediaries that misused their positions of trust to misrepresent and create fraudulent “mortgage bond” transactions with investors that led to fraudulent loans being made to borrowers.

The banks diverted or stole money from investors on several different levels through multiple channels of conduit sham entities that they called “bankruptcy remote vehicles.” The argument of “too big to fail” is now being rejected by the courts. That is a policy argument for the legislative branch of government. While the bank succeeded in scaring the executive and legislative branches into believing the risk of “too big to fail” most of the people in the legislative and executive branches of government on the federal and state level no longer subscribe to this myth.

There are dozens of other courts on the trial and appellate level across the country that are also grasping this issue. The position of the banks, which is been rejected by Congress and the state legislatures for good reason, would mean  the end of negotiable paper. The banks are desperate because they know they are not the owner of the debt, they are not the creditor, they have no authority to represent the creditor, and their actions are contrary to the interests of the creditor. They are pushing millions of homeowners into foreclosure, or luring them into an apparent default and foreclosure with false promises of modification and settlement.

The reason is simple. Without a foreclosure sale at auction, the banks are exposed to an enormous liability for all the money they collected on the alleged defaulted loans. The amount of the liability is vastly in excess of the entire principal of the loans, which is why I say that the major banks are publishing financial statements that are based on fictitious assets and fictitious income. Nobody can ignore the fact that the broker-dealers (investment banks) are getting sued by investors, insurers, counterparties on credit default swaps, government agencies who have already paid for alleged “losses”, and government agencies that have paid on guarantees for mortgages that did not conform to the required industry-standard underwriting practice.

This latest decision in which the Glaski court, at the request of the banks, revisited its prior decision and then reaffirmed it as a law of the land in the state of California, is evidence that the courts are turning the corner in favor of the real creditors and the real debtors. The recusal by two judges on the California Supreme Court is interesting but at this point there are no conclusions that can be drawn from that.

This opens the door in the state of California for people to regain title to their property or damages for the loss of title. It also serves to open the door to discovery of the actual money trail in order to trace real transactions as opposed to fictitious ones based upon fabricated documentation which often contain forgery, backdating, and are signed by people without authority or people claiming authority through a fictitious power of attorney.

Glaski Court Reaffirms Law of the Land In California: If you don’t own the debt, you cannot collect on it.

Foreclosure Defense: Notes on Practice

I went to a hearing a few days ago and discovered to my surprise a Judge, in a remote section of Florida, who was fully conversant in the rules of procedure, due process and the laws of evidence. It would be improper for me to name him as I am currently counsel of record in an active case before him. The first thing that caught my attention was that in a case before me the Judge reserved ruling on an uncontested motion for summary judgment, to give himself time to review the paperwork and make sure that the paperwork was all in order. That is old style court practice.

In the 1970’s through the 1990’s that is what judges did to make sure the lawyer for the Bank had done his job properly — and that was before routine questions relating to who made the loan, whether the loan was properly originated, whether the loan was properly sold, whether the balance due was properly stated and whether there was an actual creditor who was present in court — someone who fulfilled Florida laws on the description of a creditor who could submit on credit bid at the auction.

The Judge also mentioned that he had presided over three bench trials the day before, two of which he had given judgment to the borrower because the Plaintiff had been unable to make its case. This bespeaks an understanding, knowledge, acceptance and execution of the procedural requirement of establishing a prima facie case thus shifting the burden of proof to the Defendant. And contrary to current practice in many courts, this Judge does not view his role as rubber stamping Foreclosures.

This Judge wants to see the things we have been pointing out on this blog: that if you are the Plaintiff you must prove your case according to the rules. First you must have a witness that actually knows something instead of merely reading off of a computer or a computer report. You must establish a proper foundation rather than an illusion by merely giving the appearance of proffering testimony from an incompetent witness with no knowledge of their own whose employment description consists of testifying in court. And your chain of evidence must be complete before you can be recognized as having established a prima facie case.

In the case in which I appeared the Plaintiff had filed a foreclosure against two homeowners, husband and wife, who then pro se fended off the Plaintiff with materials mostly from this blog and from other sources. But they were at the point where being a lawyer counts, knowing the content and timing of objections, filing motions to strike, motions in limine, responding to 11 th hour motions for protective order etc.

In this case their exists a legitimate question over whether the loan was subject to securitization. Originated in 1996 the loan date goes to the beginning of the era of securitization and this one didn’t have MERS, which I argue is evidence per se of securitization because there is no reason for MERS if your intent is not securitization. But 2 days after the alleged closing the loan was transferred to a player in the world of securitization. Thus the first argument is that this was obviously a table funded loan. Hence the question of where the money came from at the alleged closing table.

Adding to the above, the notice letter to the borrowers of default, acceleration and the right to reinstate suggests that the then “holder” was, in their own words “either a Servicer or lender.” So the very first piece of evidence in the file raises the issue of securitization since the party who sent the notice was not the transferee mentioned above two days after the alleged closing.

Thus questions about the origination and transfers of the loan were appropriately asked in discovery. The Judge was on the fence. Could one slip of the pen open up a whole area of discovery even with the table funded loan allegation?

But in the halls of the foreclosure mills, they had decided to file standardized pretrial statements disclosing witnesses and exhibits. So they filed a motion for protective order as to the discovery, refusing to answer the Discovery, and filed a statement that identified the witness they would use at trial 19 days later as “a corporate representative.” That is no disclosure of a witness and is subject to a motion in limine to block the introduction of any witness. The witness disclosure also attached a list of possible witnesses —37 of them, which I argued is worse than no disclosure and the Judge agreed.

Then in their list of exhibits that they will present at trial they refer to powers of attorney, pooling and servicing agreement, investors, servicer’s, sub-servicers, and all the other parties and documents used in creating the illusion of securitization.

I argued that if they filed a pretrial statement referring to all the parts of securitization of a mortgage loan, then the issues surrounding that are properly the subject of inquiry in discovery and that the 11 th hour filing of a sweeping motion for protective order and failure to respond to any discovery was in bad faith entitling us to sanctions and granting our two motions in limine. The judge agreed but removed the problem by setting the trial for February, and setting forth a schedule of deadlines and hearings a few days after the deadlines so both sides could develop their cases. The ruling was in my opinion entirely proper, even if it denied the motions in limine since he was giving both sides more time to develop their cases.

The moment the hearing ended, opposing counsel approached and was asking about settlement. I countered with a demand that his client immediately show us the chain of actual money starting with origination. He said that wouldn’t be a problem because this was definitely not a securitized loan. I told him I actually knew the parties involved and that most probably this was amongst the first group of securitized loans. I also told him that he would most likely fail in getting the proof of payment at closing, and proof of payment in each of the alleged transfers of the loan.

We’ll see what happens next but I would guess that there will be a lot of wrestling over discovery and more motions in limine. But this time I have a Judge who no matter his personal views that are most likely very conservative, will dispassionately call balls and strikes the way a judge is supposed to do it.

Banks Won’t Take the Money: Insist on Foreclosure Even When Payment in Full is Tendered

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We have seen a number of cases in which the bank is refusing to cooperate with a sale that would pay off the mortgage completely, as demanded, and at least one other case where the homeowner deeded the property without any agreement to the foreclosing party on the assumption that the foreclosing party had a right to foreclose, enforce the note or mortgage. There is a reason for that. They don’t want the money, they don’t even want the house — what they desperately need is a foreclosure judgment because that caps the liability on that loan to repay insurers and CDS counterparties, the Federal Reserve and many other parties who paid in full over and over again for the bonds of the REMIC trust that claimed to have ownership of the loan.

This should and does alert judges that something is amiss and some of their basic assumptions are at least questionable.

I strongly suggest we all read the Renuart article carefully as it contains many elements of what we seek to prove and could be used as an attachment to a memorandum of law. She does not go into the issue of their being actual consideration in the actual transactions because she is unfamiliar with Wall Street practices. But she does make clear that in order for the sale of a note to occur or even the creation of a note, there must be consideration flowing from the payee on the note to the maker. In the absence of that consideration, the note is non-negotiable. Thus it is relevant in discovery to ask for the the proof of the the first transaction in which the note and mortgage were created as well as the following alleged transactions in which it is “presumed” that the loan was sold because of an endorsement or assignment or allonge. To put it simply, if they didn’t pay for it, then it didn’t happen no matter what the instrument or endorsement says.

The facts are that in many if not most cases the origination of the loan, the execution of the note and mortgage and the settlement documents were all created and recorded under the presumption that the payee on the note was the source of consideration. It was easy to make that mistake. The originator was the one stated throughout the disclosure and settlement documents. And of course the money DID appear at the closing. But it did not appear because of anything that the originator did except pretend to be a lender and get paid for its acting service. Lastly, the mistake was easy to make, because even if the loan was known or suspected to be securitized, one would assume that the assignment and assumption agreement for funding would have been between the originator or aggregator (in the predatory loan practice of table funding) and the Trust for the asset pool. Instead it was between the originator and an aggregator who also contributed no consideration or value to the transaction. The REMIC trust is absent from the agreement and so is the ivnestor, the borrower, the isnurers and the counterparties to credit default swaps (CDS).

If the loan had been properly securitized, the investors’ money would have funded the REMIC trust, the Trust would have purchased the loan by giving money, and the assignment to the trust would have been timely (contemporaneous) with the creation of the trust and the sale of the the loan — or the Trust would simply have been named as the payee and secured party. Instead naked nominees and disinterested intermediaries were used in order to divert the promised debt from the investors who paid for it and to divert the promised collateral from the investors who counted on it. The servicer who brings the foreclosure action in its own name, the beneficiary who is self proclaimed and changes the trustee on deeds of trust does so without any foundation in law or fact. None of them meet the statutory standards of a creditor who could submit a credit bid. If the action is not brought by or on behalf of the creditor there is no jurisdiction.

Add to that the mistake made by the courts as to the accounting, and you have a more complete picture of the transactions. The Banks and servicers do not want to reveal the money trail because none exists. The money advanced by investors was the source of funds for the origination and acquisition of residential mortgage loans. But by substituting parties in origination and transfers, just as they substitute parties in non-judicial states without authority to do so, the intermediaries made themselves appear as principals. This presumption falls apart completely when they ordered to show consideration for the origination of the loan and consideration for each transfer of the loan on which they rely.

The objection to this analysis is that this might give the homeowner a windfall. The answer is that yes, a windfall might occur to homeowners who contest the mortgage or who defend foreclosure. But the overwhelming number of homeowners are not seeking a free house with no debt. They would be more than happy to execute new, valid documentation in place of the fatally defective old documentation. But they are only willing to do so with the actual creditor. And they are only willing to do so on the actual balance of their loan after all credits, debits and offsets. This requires discovery or disclosure of the receipt by the intermediaries of money while they were pretending to be lenders or owners of the debt on which they had contributed no value or consideration. Thus the investor’s agents received insurance, CDS and other moneys including sales to the Federal reserve of Bonds that were issued in street name to the name of the investment bankers, but which were purchased by investors and belonged to them under every theory of law one could apply.

Hence the receipt  of that money, which is still sitting with the investment banks, must be credited for purposes of determining the balance of the account receivable, because the money was paid with the express written waiver of any remedy against the borrower homeowners. Hence the payment reduces the account receivable. Those payments were made, like any insurance contract, as a result of payment of a premium. The premium was paid from the moneys held by the investment bank on behalf of the investors who advanced all the funds that were used in this scheme.

If the effect of these transactions was to satisfy the account payable to the investors several times over then the least the borrower should gain is extinguishing the debt and the most, as per the terms of the false note which really can’t be used for enforcement by either side, would be receipt of the over payment. The investor lenders are making claims based upon various theories and settling their claims against the investment banks for their misbehavior. The result is that the investors are satisfied, the investment bank is still keeping a large portion of illicit gains and the borrower is being foreclosed even though the account receivable has been closed.

As long as the intermediary banks continue to pull the wool over the eyes of most observers and act as though they are owners of the debt or that they have some mysterious right to enforce the debt on behalf of an unnamed creditor, and get judgment in the name of the intermediary bank thus robbing the investors, they will continue to interfere with investors and borrowers getting together to settle up. Perhaps the reason is that the debt on all $13 trillion of mortgages, whether in default or not, has been extinguished by payment, and that the banks will be left staring into the angry eyes of investors who finally got the whole picture.

READ CAREFULLY! UNEASY INTERSECTIONS: THE RIGHT TO FORECLOSE AND THE UCC by Elizabeth Renuart, Associate Professor of Law, Albany Law School — Google it or pick it off of Facebook

 

WHY JOIN ORIGINATOR AND THE PARTY WHO PARTICIPATED IN THE ILLEGAL TABLE FUNDED LOAN

Amongst the cases I review and manage, the question was raised by one of the homeowners as to why I insisted on holding both the originator and subsequent intermediaries in the alleged securitization chain and/or table-funded loan where both the party alleging having (1) the capacity to sue see SEC Corroborates Livinglies Position on Third Party Payment While Texas BKR Judge Disallows Assignments After Cut-Off Date, (2) the standing to sue and/or the authority to initiate foreclosures and (3) financial injury where they allege sale or assignment of the note. The reason is simple from a tactical and legal point of view. I wish to close out their options to keep moving the goal posts.

Here is the answer I wrote to the customer, whose property is located in a judicial state. This particular person is being pro-active — always a wise choice — in that he has been making his payments, was told to to stop making payments if he wanted a modification which he did initially and then changed his mind and reinstated, and remains convinced he was the victim of various forms of fraud and crimes including false Appraisals of the supposedly fair market value of the property at the time of the loan closing or the alleged loan closing. His goal is not a free house. His goal is to pursue any rights you might have for modification or settlement of his claims with respect to the illusion of a loan closing and the office of a closing agent. As any reader of this blog knows, it is my opinion that any such loan closing was in fact an illusion and that all the parties participating in that illusion were paid actors pretending to be something they were not —  less creating plausible deniability for any of the improper actions of the intermediaries at the “loan closing.”

There is a reason why I insist on continuing the joinder of those two defendants. Embrace wants to be dismissed out with prejudice because it says that sold the loan to Wells. I want to say that they didn’t sell the loan to Wells.  If I prevail on that point then Wells Fargo is out as a plaintiff in any foreclosure they might file, and potentially out as a servicer since they might not be able to show any authority.  If that is the case then they owe you an accounting for all of the money they collected from you and a statement of what they did with the money that they collected from you. You might well have a cause of action against Wells Fargo for taking money under false pretenses.

 If I don’t Prevail on that point and somehow they are able to show that Wells Fargo paid for the loan and owns the loan by virtue of that payment, then Embrace is still a proper party in the action because they are the owner of record of a mortgage based on a note that was never funded by Embrace.  The issue here is whether or not the mortgage was transferred with the debt and that issue is tied closely with the issue of securitization, which both of them deny. I believe that I will be able to show that the loan is subject to claims of securitization on behalf of a loan pool that may never have existed or which might not exist now.  and if I am able to show that the loan pool was never funded and therefore could never have paid for the loan then the apparent authority of both defendants is eviscerated.

  Either way, I don’t want to let either of them out of the litigation quite yet.  If we prevail on the question of whether or not there was an actual sale and the sale was authorized (see my blog article from yesterday) then Embrace is the only party left on record in the recording office. At that point I would drill down on them to see whether or not they can show that they fulfill their part of the bargain with you, to wit: that you sign a note and they give you adequate disclosure under the law and they fund a loan to you. It is my position that they did not give adequate disclosure and that they did not fund a loan to you even if the loan was not securitized. The best they can say is that this was a table funded loan which is according to Reg Z of the Federal Reserve a predatory loan  per se if it was part of a pattern of conduct.

 Given the statistics and information we have about both defendants it is my opinion that the chances are 96% that the loan was allegedly sold into the secondary market where it is the subject of a potential claim from an asset pool. The problem I wish to reveal here is that the entire chain of ownership collapses on itself. The other problem that I want to addressed is who actually received the money that you pay every month and what did they do with it (who did they pay).  the strategy here is to show that regardless of whether or not a claim of securitization exists, there were co-obligors (Wells Fargo),  insurance payments and proceeds of credit default swaps and multiple resales all of which should be applied against the amount owed to the real creditor, whoever that might be, thus reducing the loan receivable.

 If I can tie the loan receivable to one which derives its value from the alleged loan made to you, even if the originator paid for it, then there is a strong argument for agency and allocation of receipts under which the payment of monthly payments and the receipt of insurance proceeds and the proceeds from other obligors (including but not limited to counterparties on credit default swaps) were received and kept, like in the Credit Suisse case. 

From that point forward it is a simple accounting task to allocate third-party receipts of insurance and hedge money to the benefit of the investors whether they received it or not. The auditing standards under the rules of the financial accounting standards Board would require a further analysis and allocation of the money received —  specifically the reduction of the loan receivable or bond receivable held by the investors (directly if the REMIC trust was ignored or indirectly if the agents for the trust purchased insurance and hedge products, the proceeds of which should have been credited to the investors.

 If the investors are the real creditors than the amount that they are entitled to have repaid to them does not exceed the amount they advanced. It practically goes without saying that if the money advanced from investors was based on their reasonable belief that they were acquiring title to the loans funded by the money advanced by the investors, they should recover part or all of their investment to the extent that the other players (see the SEC order against Credit Suisse) paid for insurance and hedge products using the money of the investors and kept the proceeds for themselves —-  thus explaining rising reports of profits in the banks who are supposedly merely intermediaries in the conduct of commerce which was in sharp decline.

 In the end, under a series of unjust enrichment and other common-law actions, as well as the requirements of statute and the terms of the promissory note executed by the borrower, all money received in that manner should reduce the principal balance due from the borrower because the creditor has already been paid either directly or indirectly through its agents who were either authorized or possessed of apparent authority.

In fact , the great likelihood is that the banks received substantial overpayments amounting to multiples of the original principal amount of the loan.  According to both law and the terms of the proposed agreement between the borrower and the apparent lender, subject to the terms of the documents themselves as well as state and federal law, the borrower is entitled to recover all such undisclosed payments and receipts which are defined under the truth in lending act as “compensation.”

 Thus while the creditors not entitled to any more recovery than the amount advanced under an alleged loan, the borrower is entitled to full recovery of all money paid in connection with or related to the loan received by the borrower, regardless of the original source of the loan and any agreements between the intermediaries in the alleged securitization chain that do not have the signature of the borrower on them. The reason is public policy. While securitization was not considered in the original passage of laws  it was the overreaching by banks to the disadvantage of consumers and borrowers that was sought to be discouraged by penalties that would be so great as to prevent the practice altogether.

 Usually it is money that is taken under false pretenses and the illusion of securitization claims is no exception. But in the case of the borrower it is the signature of the borrower that was obtained under the false pretenses that  the party obtaining the borrower’s signature. The consideration was the money advanced by an unrelated party tot he transaction (investor) who thought their money was first going through a REMIC trust that would give them certain tax advantages.

Regards

Neil

 Garfield, Gwaltney, Kelley & White

4832 Kerry Forest Parkway, Suite B

Tallahassee, Florida 32309

(850) 765-1236

Unrhetorical Questions — Money, Lies and Accounting Records: Gander and Goose

Why are our courts routinely accepting allegations and documents from foreclosing banks that they would summarily throw out if the same allegations and documents came from borrowers?

 How can possession of an ALLONGE construed as ownership

of the debt without any other evidence being presented?

Why is the standard definition of “Allonge” ignored?

IF THE COURT IS USING THE TERMS OF “ALLONGE”, “ASSIGNMENT”AND “ENDORSEMENT” INTERCHANGEABLY, WHY DOES ALL THE LITERATURE ON LEGAL DEFINITION AND ELEMENTS SAY OTHERWISE? ARE WE MAKING A NEW UCC?

WHY ARE COURTS ALLOWING ENDORSEMENTS (SHOULD BE SPELLED “INDORSEMENT”) IN BLANK TO TRANSFER THE LOAN WHEN THE BASIS OF THE PROPONENT’S AUTHORITY TO FORECLOSE IS A DOCUMENT THAT FORBIDS ACCEPTANCE OF  ENDORSEMENTS IN BLANK?

 I recently received a question from an old friend of mine who was a solicitor in Canada and who is frustrated with our court system that continues to assume the validity of loans that have already been thoroughly discredited. He has attempted on numerous occasions to get information through a qualified written request or a debt validation letter and has attempted to verify the authority of any party to whom he would address a request for modification of his loan in Florida. While chatting with him online I realized that this information might be of some value to attorneys and borrowers. The principal point of this article is the old expression “what is good for the goose is good for the gander.” For those of you who are unfamiliar with the old expression it means that there should be equality of treatment, all other things being equal. In mortgage litigation is apparent that when an allegation is made or a proffer is made through counsel rather than the introduction of evidence, the courts continue to function from both a misconception and  misapplication of the Rules of Court and the rules of evidence.

 When the case involves one institution against another, the same arguments that are summarily  rejected when they are advanced by a borrower are given considerable traction because the argument was advanced by a financial institution or financial player that identifies itself as a financial institution. In fact, a review of most cases reveals a much heavier burden on the party defending against the loss of their homestead than the party seeking to take it —  which is a complete reversal of the way our justice system is supposed to work.  The burden of proof in both judicial and nonjudicial states is constitutionally required to be on the party seeking affirmative relief and not on the party defending against it.

In the nonjudicial states, in my opinion, the courts are violating this basic constitutional requirement on a regular basis under circumstances where the party announcing a right to enforce a dubious deed of trust, collection on a dubious note, and therefore having the right to sell the property without judicial intervention despite the inability of the foreclosing entity to produce any evidence that it owns the debt, note, mortgage rights,  or even demonstrate a financial interest in the outcome of the foreclosure sale; to make matters worse the courts are allowing trustees on deeds of trust to be appointed or substituted even though they have a direct or indirect financial relationship with the alleged lender.

These trustees are accepting “credit bids” without any due diligence as to whether or not the party making the offer of the credit bid at auction is in fact the creditor who may submit such a credit bid according to the statutes governing involuntary auctions within that state.  In nonjudicial states the burden is put on the borrower to “make a case” and thus obtain a temporary restraining order preventing the sale of the property. This is absurd. These statutes governing nonjudicial sales were created at a time when the lender was easily identified, the borrower was easily identified, the chain of title was easily demonstrated, and the chain of money was also easily demonstrated. Today in the world of falsely securitized loans, the courts have maintain a ministerial attitude despite the fact that 96% of all loans are subject to competing claims by false creditors. The borrower is forced to defend against allegations that were never made but are presumed in a court of law. If anything is a violation of the due process requirements of the United States Constitution and the Constitution of most of the individual states of the union, this must be it.

 In the judicial states,  the problem is even more egregious because the same presumptions and assumptions are being used against borrowers as in the nonjudicial states. Thus in addition to being an unconstitutional application of an otherwise valid law, the judicial states are violating their own rules of civil procedure mandated by the Supreme Court of each such state (or to be more specific where the highest court is not called the Supreme Court, we could say the highest court in the state).  This is why I have strongly suggested for years that an action in mandamus be brought directly to the highest court in each state alleging that the laws and rules, as applied, violate constitutional standards and any natural sense of fairness.

 Here is the question posed by my Canadian friend:

(1)  The documents are phony documents (copies) produced by Ben Ezra Katz. It will cost me several thousand dollars to have a document expert evaluate the documents and then testify if they find them to be copies. At the beginning of this case, The Plaintiff’s attorney (Ben Ezra Katz associate) told the court (I do have a transcript) that they has found the ORIGINAL documents (note, mortgage, etc.) and that they had couriered the ORIGINAL documents to the clerk of Court. They did a Notice of Filing which on its’ face states ORIGINAL documents. I can not afford a document expert, however the AG in S. Florida has an open investigation into this case. Would I be out of line in requesting that they include this case per-se as part of their investigation and accordingly make a determination as to if or if not the subject documents which are on file with the clerk of court are originals or copies ??
(2)  The only nexus that Wells Fargo produces to establish themselves as a real party in interest is a hand filled out allonge (copy attached). Please note that the signer only signs as “assistant secretary” without further specifics. On the basis of what they provide it is virtually impossible to depose this person to determine if she actually did or did not sign this document, and if so what is her authority to do so.  I want to launch some sort of discovery that seeks to discover what else the Plaintiff has which would support the alleged allonge. Things such as any contracts, copies of any consideration, what was the consideration, who authorized the transaction, etc.  Do you have any suggestions in this regard. I bounced this off my attorney and I am not sure that we are on the same page. He wants to go to trial and have the proven phony documents as the main thrust. I agree with that, however I also would feel far better if we were able to cut them off at the knees as to standing such as the alleged allonge is part of the phony documents, and there are no documents that the Plaintiff can produce to support not only its’ authenticity, but its’ legitimate legal function. I do not like to have all of my eggs in one basket.

 And here is my response:

 You are most probably correct in your assessment of the situation. If they lied to the court and filed phony documents you should file motion for contempt. You should also file a motion for involuntary dismissal based on the fact that they have had plenty of time to either come up with the original documents or alleged facts to establish lost documents. The affidavit that must accompany the allegation of lost documents must be very specific as to the content of the documents and the path of the documents and it must the identify the person or records from which the allegations of fact are drawn. They must be able to state with certainty when they last had the original documents if they ever did have the original documents. If they didn’t ever have the original documents then an affidavit from them is meaningless. They have to establish the last party had physical custody of the original documents and establish the reason why they are missing. If they can’t do those things then their foreclosure should be dismissed. The more vague they are in explaining what happened to the original documentation the more likely it is that somebody else has the original documentation and may sue you again for recovery. So whatever it is that they allege should result in your motion to strike and motion to dismiss with prejudice. As far as the attorney general’s office you are correct that they ought to cooperate with you fully but probably incorrect in your assumption that they will do so.

I think you should make a point about the allonge being filled out by hand as being an obviously late in the game maneuver. You can also make a point about the “assistant Sec.” since that is not a real position in a corporation. Something as valuable as a note would be reviewed by a real official of the Corporation who would be able to answer questions as to how the note came into the possession of the bank (through interrogatories or requests for admission) and  what was paid and to whom for the possession and rights to the note, when that occurred and where the records are that show the payment and how Wells Fargo actually came into possession of the note or the rights to collect on the note. As you are probably aware the predecessor that is alleged to have originated the note or alleged to have had possession of the note must account for whether they provided the consideration for the note and what they did with it after the closing. If they say they provided consideration than they should have records showing a payment to the closing agent and if they received consideration from Wells Fargo they should have those records as well.

But the likelihood is that neither Option One nor Wells Fargo ever funded this mortgage which means that the note and mortgage lack consideration and neither one of them has any right to collect or foreclose.   In fact, since they are taking the position that the loan was not securitized and therefore that no securitization documents are relevant,  neither of them can take the position that they are representing the real party in interest as an authorized agent for the real lender.  And the reason you are seeing lawsuits especially by Wells Fargo in which it names itself as the foreclosing party is that the bank knows that Iit ignored and routinely violated essential and material provisions of the securitization documents including the prospectus and pooling and servicing agreement upon which investors relied when they gave money to an investment banker.

In that case, since you seek to modify the loan transaction and determine whether or not it is now or is potentially subject to  a valid mortgage, you should seek to enforce a request for information concerning the exact path of the money that was used to fund the mortgage. And you should request any documentation or records showing any guarantee, payment, right to payment, or anything else that would establish a loan to you where actual money exchanged hands between the declared lender and yourself. The likelihood is that the money was in a co-mingled account somewhere —  possibly Wells Fargo —  which came from investors whose names should have been on the closing and the closing documents.  Those investors are the actual creditors. Or at least they were the actual creditors at the time that the loan money showed up at the alleged “loan closing.” Since then, hundreds of settlements and lawsuits were resolved based upon the bank tacitly acknowledging that it took the money and used it for different purposes than those disclosed in the prospectus and pooling and servicing agreement. These settlements avoid the embarrassing proof problems of any institution since they not only ignored the securitization documents, more importantly, they chose to ignore all of the basic industry standards for the underwriting of a real estate loan because the parties who appeared to be underwriting the loan and funding the loan had absolutely no risk of loss and only had the incentive to close deals in exchange for sharing pornographic amounts of money that were identified as proprietary trading profits or fees.

And the reason why this is so important is that the mortgage lien could never be perfected in the absence of the legitimate creditor who had advanced actual money to the borrower or on behalf of the borrower. This basic truth undermines the industry and government claims about the $13 trillion in loans that still are alleged to exist (despite multiple payments from third parties in multiple resales, insurance contracts and contracts for credit default swaps). The abundant evidence in the public domain as well as the specific factual evidence in each case negates any allegation of ultimate facts upon which relief could be granted, to wit: the money came from third-party investors who are the only real creditors. The fact that the money went through intermediaries is no more important or relevant than the fact that you are a depository bank is intended to honor checks drawn on your account provided you have the funds available. The inescapable conclusion is that the investors were tricked into making unsecured loans to homeowners and that the entire foreclosure scandal that has consumed our nation for years is based on completely false premises.

Your attorney could pose the question to the court in a way that would make it difficult for the court to rule against you. If the lender had agreed to make a loan provided you put up the property being financed PLUS additional collateral in the form of ownership of a valid mortgage on another piece of property,  would the court accept a handwritten allonge from you as the only evidence of ownership or the right to enforce the other mortgage? I think it is clear that neither the banks nor the court would accept the hand written instrument as sufficient evidence of ownership and right to collect payment if you presented the same instruments that they are presenting to the court.

PRACTICE HINT: In fact, you could ask the bank for their policy in connection with accepting its mortgages on other property as collateral for a business loan or for a loan on existing property or the closing on a new piece of property being acquired by the borrower. You could drill down on that policy by asking for the identification of the individual or committee that would decide whether or not a handwritten allonge would be sufficient or would satisfy them that they had  adequate collateral in the form of a mortgage on the first property and the pledge of a mortgage on a second piece of property.

The answer is self-evident. No bank or other lending institution or lending entity would loan money on the basis of a dubious self-serving allonge.  There would be no deal. If you sued them for not making the loan after the bank issued a letter of commitment (which by the way you should ask for both in relation to your own case and in relation to the template used by the bank in connection with the issuance of a letter of commitment), the bank would clearly prevail on the basis that you provided insufficient documentation to establish the additional collateral (your interest in the mortgage on another piece of property).

The bank’s position that it would not loan money on such a flimsy assertion of additional collateral would be both correct from the point of view of banking practice and sustained by any court has lacking sufficient documentation to establish ownership and the right to enforce. Your question to the court should be “if justice is blind, what difference does it make which side is using an unsupportable position?”

HSBC Hit with Foreclosure Suit; FHA’s $115 Billion Loss Scenario; Return of the Synthetic CDO?
http://www.americanbanker.com/bankthink/hsbc-hit-with-foreclosure-suit-fhas-115-billion-dollar-loss-scenario-1059622-1.html
Massachusetts foreclosures decline 79% as local laws stall the process
http://www.housingwire.com/news/2013/06/05/massachusetts-foreclosures-decline-79-local-laws-stall-process
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Money from thin air? If the bank does not create currency or money then where does the money come from? Answer investor deposits into what they thought was an account for a REMIC trust. And if the money came from investors then the banks were intermediaries whether they took money on deposit, or they were the underwriter and seller of mortgage bonds issued from non existent entities, backed by non existent loans. And any money received by the banks should have been for benefit of the investors or the REMIC trust if the DID deposit the money into a trust or fiduciary account.Dan Kervick: Do Banks Create Money from Thin Air?
http://www.nakedcapitalism.com/2013/06/dan-kervick-do-banks-create-money-from-thin-air.html

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