Ocwen Stock Is Riskier Than Investors Know

the truth is there for anyone who wants to see it, which means that the entire prospect for Ocwen is that of an actor with only one foot on the edge of a cliff.

This article represents the analysis and opinion of the writer. Take no action with consulting a legal and financial adviser. 

The common stock of Ocwen Loan Servicing is traded actively. The company is backed by the largest banks in the world and its reported income is generally rising. BUT Ocwen has also been positioned by its backers (Goldman, BofA, Citi, etc.) to be thrown under the bus if the going gets rough.

The stock is currently valued based upon the presumption of economic viability because all the mortgages claimed to be servicing are generating revenue and Ocwen is receiving revenue and making a profit.

But another scenario is emerging from the shadows even if it appears unlikely. The number and percentage of homeowner successes in foreclosure is increasing. Those successes are all based upon one single fact, whether explicitly stated in court findings or not — that the named creditor on whose behalf Ocwen says it is collecting was not the owner of the debt. Hence Ocwen’s claims, notices, and testimony are not based upon its relationship with such named creditors or claimants.

If it is further revealed that Ocwen was in fact acting at the behest of an investment bank rather than a trustee of a named REMIC trust, the result could be catastrophic for both Ocwen and the investment bank. That scenario occurs if the investment bank was giving instructions on loan administration and foreclosure while it had no financial interest in the underlying debt.

That would mean that Ocwen never had any nexus to the debt owner. And that in turn would mean that Ocwen, in many and perhaps most cases, does not have any right to administer or service the loan “portfolio” it claims to be managing. And it would mean that all “modification” applications were improperly directed and processed. It could also mean that Ocwen is being paid to pretend it possesses such rights.

Ocwen could be the target of even more lawsuits alleging fraud and other intentional torts. On a more granular level the absence of any agency relationship with an identified creditor who owned the debt by reason of having paid for it would disqualify an Ocwen representative from testifying as the robowitness and would fail the exception test to hearsay objections as to their records, since they would not be records of either the named claimant nor of the actual owner of the debt.

If the facts are revealed and finally accepted by American courts, most foreclosures would grind to a halt. American law requires that paper title and actual payment of value for the debt must be combined into one party before any foreclosure action is filed. Under the weird securitization scheme adopted by the major investment banks no such party exists. The whole point of what they were doing was to sell parts of the debt for amounts vastly exceeding the market value of the actual debt.

By using Ocwen as the front for enforcing foreclosure actions, Ocwen is primed to be the one thrown under the bus wherein the inevitable finger pointing from investment banks will be directed at Ocwen and other servicing entities like it. Acting without authority and knowingly contributing to windfall illicit gains from foreclosures also places Ocwen at risk for actions by Attorneys General of all 50 states and several regulatory authorities.

The combined administrative and legal risks vastly exceeds the market valuation of the entire company. If and when these facts are finally accepted in the courts, Ocwen would be forced into bankruptcy and would most likely file under Chapter 7 or Chapter 11 as a liquidation in bankruptcy. Either way, the outlook for  the valuation of Ocwen shares would be bleak at best.

If somehow the investment banks are either able to maintain the ruse or continue the current governmental attitude of wink and nod, none of those scenarios are applicable. But the truth is there for anyone who wants to see it, which means that the entire prospect for Ocwen is that of an actor with only one foot on the edge of a cliff.

What is the difference between the note and the debt? What difference does it make?

NOTE: This case reads like  law review article. It is well worth reading and studying, piece by piece. Judge Marx has taken a lot of time to research, analyze the documents, and write a very clear opinion on the truth about the documents that were used in this case, and by extension the documents that are used in most foreclosure cases.

Simple answer: if you had a debt to pay would you pay it to the owner of the debt or someone else who says that you should pay them instead? It’s obvious.

Second question: if the owner of the debt is really different than the party claiming to collect it, why hasn’t the owner shown up? This answer is not so obvious nor is it simple. The short version is that the owners of the risk of loss have contracted away their right to collect on the debt, note or mortgage.

Third question: why are the technical requirements of an indorsement, allonge etc so important? This is also simple: it is the only way to provide assurance that the holder of the note is the owner of the note. This is important if the note is going to be treated as evidence of ownership of the debt.

NY Slip Opinion: Judge Paul I Marx carefully analyzed the facts and the law and found that there was a failure to firmly affix the alleged allonge which means that the note possessor must prove, rather than presume, that the possessor is a holder with rights to enforce. U.S. Bank, N.A. as Trustee v Cannella April 15, 2019.

Now the lawyers who claim U.S. Bank, N.A. is their client must prove something that doesn’t exist in the real world. This a problem because U.S. Bank won’t and can’t cooperate and the investment bank won’t and can’t allow their name to be used in foreclosures.

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Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM 
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Words actually matter — in the world of of American Justice, under law, without words, nothing matters.
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So it is especially important to presume nothing and actually read words without making any assumptions. Much of what we see in the language of what is presented as a conveyance is essentially the same as a quitclaim deed in which there is no warranty of title and which simply grants any interest that the grantor MIGHT have. It is this type of wording that the banks use to weaponize the justice system against homeowners.
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There is no warranty of title and there is no specific grant of ownership in an assignment of mortgage that merely says the assignor/grantor conveys “all beneficial interest under a certain mortgage.” Banks want courts to assume that means the note and the debt as well. But that specific wording is double-speak.
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It says it is granting rights to the mortgage; but the rest of wording  is making reference only to what is stated in the mortgage, which is not the note, the debt or any other rights. So in effect it is saying it is granting title to the mortgage and then saying the same thing again, without adding anything. That is the essence of double speak.
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In the Cannela Case Judge Marx saw the attempt to mislead the court and dealt with it:

The language in RPAPL § 258, which this Court emphasized—”together with the bond or obligation described in said mortgage“—stands in sharp contrast to the language used here in the Assignment—”all beneficial interest under a certain Mortgage”. If such language is mere surplusage, as Plaintiff seems to believe, the drafters of RPAPL § 258 would not have included it in a statutory form promulgated for general use as best practice.

So here is the real problem. The whole discussion in Canella is about the note, the indorsement and the allonge. But notice the language in the opinion — “The Assignment did not go on to state that the referenced debt “…. So the Judge let it slip (pardon the pun) that when he refers to the note he means the debt.

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The courts are using “the debt” and “the note” as being interchangeable words meaning the same thing. I would admit that before the era of false claims of securitization I used the words, debt, note and mortgage interchangeably because while there were technical  difference in the legal meaning of those terms, they all DID mean the same thing to me and everyone else.
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While a note SHOULD be evidence of the debt and the possession of a note SHOULD be evidence of being a legal note holder and that SHOULD mean that the note holder probably has rights to enforce, and therefore that note “holder” should be the the owner of a debt claiming foreclosure rights under a duly assigned mortgage for which value was paid, none of that is true if the debt actually moved in one or more different directions — different that is from the paper trail fabricated by remote parties with no interest in the loan other than to collect their fees.
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The precise issue is raised because the courts have almost uniformly assumed that the burden shifts to the homeowner to show that the debt moved differently than the paper. This case shows that might not be true. But it will be true if not properly presented and argued. In effect what we are dealing with here is that there is a presumption to use the presumption.
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If Person A buys the debt (for real) for value (money) he is the owner of the debt. But that is only true if he bought it from Person B who also paid value for the debt (funded the origination or acquisition of the loan). If not, the debt obviously could not possibly have moved from B to A.
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It is not legally possible to move the debt without payment of value. It IS possible to appoint agents to enforce it. But for those agents seeking to enforce it the debtor has a right to know why he should pay a stranger without proof that his debt is being collected for his creditor.
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The precise issue identified by the investment banks back in 1983 (when securitization started) is that even debts are made up of component parts. The investment banks saw they could enter into “private contracts” in which the risk of loss and other bets could be made totalling far more than the loan itself. This converted the profit potential on loans from being a few points to several thousand percent of each loan.
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The banks knew that only people with a strong background in accounting and investment banking would realize that the investment bank was a creditor for 30 days or less and that after that it was at most a servicer who was collecting “fees’ in addition to “trading profits” at the expense of everyone involved.
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And by creating contracts in which the investors disclaimed any direct right, title or interest in the collection of the loan, even though the investor assumed the entire risk of loss, the investment banks could claim and did claim that they had not sold off the debt. Any accountant will tell you that selling the entire risk of loss means that you sold off the entire debt.
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* Thus monthly payments, prepayments and foreclosure proceeds are absorbed by the investment bank and its affiliates under various guises but it never goes to reduce a debt owned by the people who have paid value for the debt. In this case, and all similar cases, U.S. Bank, N.A. as trustee (or any trustee) never received nor expected to receive any money from monthly payments, prepayments or foreclosure proceeds; but that didn’t stop the investment banks from naming the claimant as U.S. Bank, N.A. as trustee.
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**So then the note might be sold but the alleged transfer of a mortgage is a nullity because there was no actual transfer of the debt. Transfer of the debt ONLY occurs where value is paid. Transfer of notes occurs regardless of whether value was paid.
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US laws in all 50 states all require that the enforcer of a mortgage be the same party who owns the debt or an agent who is actually authorized  by the owner of the debt to conduct the foreclosure. For that to be properly alleged and proven the identity of the owner of the debt must be disclosed.
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That duty to disclose might need to be enforced in discovery, a QWR, a DVL or a subpoena for deposition, but in all events if the borrower asks there is no legal choice for not answering, notwithstanding arguments that the information is private or proprietary.
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The only way that does not happen is if the borrower does not enforce the duty to disclose the principal. If the borrower does enforce but the court declines that is fertile grounds for appeal, as this case shows. Standing was denied to U.S. Bank, as Trustee, because it failed to prove it was the holder of the note prior to initiating foreclosure.
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It failed because the fabricated allonge was not shown to be have been firmly attached so as to become part of the note itself.
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Thus the facts behind the negotiation of the note came into doubt and the presumptions sought by attorneys for the named claimant were thrown out. Now they must prove through evidence of transactions in the real world that the debt moved, instead of presuming the movement from the movement of the note.
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But if B then executes an indorsement to Person C you have a problem. Person A owns the debt but Person C owns the note. Both are true statements. Unless the indorsement occurred at the instruction of Person B, it creates an entirely new and separate liability under the UCC, since the note no longer serves as title to the debt but rather serves as presumptive liability of a maker under the UCC with its own set of rules.
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And notwithstanding the terms of the mortgage to the contrary, the mortgage no longer secures the note, which is no longer evidence of the debt; hence the mortgage can only be enforced by the person who owns the debt, if at all. The note which can only be enforced pursuant to rules governing the enforcement of negotiable instruments, if that applies, is no longer secured by the mortgage because the law requires the mortgage to secure a debt and not just a promissory note. See UCC Article 9-203.
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This is what the doctrine of merger is intended to avoid — double liability. But merger does not happen when the debt owner and the Payee are different parties and neither one is the acknowledged agent of a common principal.
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Now if Person B never owned the debt to begin with but was still the payee on the note and the mortgagee on the mortgage you have yet another problem. The note and debt were split at closing. In law cases this is referred to as splitting the note and mortgage which is presumed not to occur unless there is a showing of intent to do so. In this case there was intent to do so. The source of lending did not get a note and mortgage and the broker did get a note and mortgage.
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Normally that would be fine if there was an agency contract between the originator and the investment bank who funded the loan. But the investment bank doesn’t want to admit such agency as it would be liable for lending and disclosure violations at closing, and for servicing violations after closing.
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***So when the paperwork is created that creates the illusion of transfer of the mortgage without any real transaction between the remote parties because it is the investment bank who is all times holding all the cards. No real transactions can occur without the investment bank. The mortgage and the note being transferred creates two separate legal events or consequences.
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Transfer of the note even without the debt creates a potential asset to the transferee whether they paid for it or not. If they paid for it they might even be a holder in due course with more rights than the actual owner of the debt. See UCC Article 3, holder in due course.
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Transfer of the note without the debt (i.e. transfer without payment of value) would simply transfer rights under the UCC and that would be independent of the debt and therefore the mortgage which, under existing law, can only be enforced by the owner of the debt notwithstanding language in the mortgage that refers to the note. The assignment of mortgage was not enough.
Some quotables from the Slip Opinion:

A plaintiff in an action to foreclose a mortgage “[g]enerally establishes its prima facie case through the production of the mortgage, the unpaid note, and evidence of default”. U.S. Bank Nat. Ass’n v Sabloff, 153 AD3d 879, 880 [2nd Dept 2017] (citing Plaza Equities, LLC v Lamberti, 118 AD3d 688, 689see Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d 683, 684). However, where a defendant has affirmatively pleaded standing in the Answer,[6] the plaintiff must prove standing in order to prevail. Bank of New York Mellon v Gordon, 2019 NY Slip Op. 02306, 2019 WL 1372075, at *3 [2nd Dept March 27, 2019] (citing HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d 983, 983-984HSBC Bank USA, N.A. v Calderon, 115 AD3d 708, 709Bank of NY v Silverberg, 86 AD3d 274, 279).

A plaintiff establishes its standing in a mortgage foreclosure action by showing that it was the holder of the underlying note at the time the action was commenced. Sabloff, supra at 880 (citing Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361U.S. Bank N.A. v Handler, 140 AD3d 948, 949). Where a plaintiff is not the original lender, it must show that the obligation was transferred to it either by a written assignment of the underlying note or the physical delivery of the note. Id. Because the mortgage automatically passes with the debt as an inseparable incident, a plaintiff must generally prove its standing to foreclose on the mortgage through either of these means, rather than by assignment of the mortgage. Id. (citing U.S. Bank, N.A. v Zwisler, 147 AD3d 804, 805U.S. Bank, N.A. v Collymore, 68 AD3d 752, 754).

Turning to the substantive issue involving UCC § 3-202(2), Defendant contends that the provision requires that an allonge must be “permanently” affixed to the underlying note for the note to be negotiated by delivery. UCC § 3-202(1) states, in pertinent part, that if, as is the case here, “the instrument is payable to order it is negotiated by delivery with any necessary indorsement”. UCC § 3-202(1) (emphasis added). The pertinent language of UCC § 3-202(2) provides that when an indorsement is written on a separate piece of paper from a note, the paper must be “so firmly affixed thereto as to become a part thereof.” UCC § 3-202(2) (emphasis added); Bayview Loan Servicing, LLC v Kelly, 166 AD3d 843 [2nd Dept 2018]; HSBC Bank USA, N.A. v Roumiantseva, supra at 985see also One Westbank FSB v Rodriguez, 161 AD3d 715, 716 [1st Dept 2018]; Slutsky v Blooming Grove Inn, 147 AD2d 208, 212 [2nd Dept 1989] (“The note secured by the mortgage is a negotiable instrument (see, UCC 3-104) which requires indorsement on the instrument itself `or on a paper so firmly affixed thereto as to become a part thereof’ (UCC 3-202[2]) in order to effectuate a valid `assignment’ of the entire instrument (cf., UCC 3-202 [3], [4])”).

[Editor’s note: if it were any other way the free spinning allonge would become a tradable commodity in its own right. ]

The Assignment did not go on to state that the referenced debt was simultaneously being assigned to Plaintiff.

 

If you don’t challenge the smoke and mirrors the smoke becomes law and the mirrors become an inescapable nightmare.

Bottom Line: Failure to attack the facial validity of the documents is virtually hanging the homeowner letting him/her twist in the wind. Without such a relentless attack based upon scrutiny of the exact wording on documents revealing that nobody is actually identified as a real party in interest, you will be trapped by an endless cascade of legal presumptions against the homeowner.

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Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
A few hundred dollars well spent is worth a lifetime of financial ruin.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
==========================

In response to an email from a fellow attorney asking me about bankruptcy (BKR), the statute of limitations (SOL) adn renewing the debt after BKR discharge or renewing the payment by acknowledging it after BKR, I wrote the following.

  1. If the loan was scheduled as secured in favor of a particular creditor it is probably incorrect. If the loan was subject to a valid encumbrance at all, it almost certainly was not in favor of the current claimant, who has not purchased the debt and therefore no debt was transferred in fact despite paperwork appearing to state the contrary. Nor has the current claimant obtained authorization from the real owner of the debt as agent or representative.
  2. SOL: You are right but courts got tricky with this and they rule, like in Florida, that the statute ran out only on payments that were due and that there is a presumption of deceleration at some point. Check NY law. Florida is changing back to the old rule slowly which supports your view.
  3. Any payment on a debt can restart the statute running. Check Federal BKR law and NY Law. Payment while in BKR presents problems if not done with court approval.
  4. Under “modification” there are several problems. First every such modification is in actuality the transfer of the debt from an old pretender to a new pretender (servicer). In most respects it is a new loan agreement entirely, probably subject to TILA disclosure requirements because the old chain of title is being abandoned and a new one is being started — all without any reference to or formal grant of authority from the actual owner of the debt.  Payments under such a “modification” agreements are not really payments on the debt because the payment is neither going to the owner of the debt nor anyone formally authorized by the owner of the debt. Such payments could be construed as a new and probably unenforceable obligation.
  5. Acknowledgment by borrower of the debt owed to Pretender A directed to Pretender B is not acknowledgment of the debt if neither of them was the owner of the debt or an authorized representative or agent of the owner of the debt. But unless you attack the facial validity of the instruments, the law of the case will slide toward treating both pretenders as real. Once final that becomes irreversible.
  6. BKR discharge operates by law and not individual action. See BKR law and procedure. A promise to pay AFTER discharge might subject both the pretender creditor and the borrower to sanctions.
  7. An unconditional promise is just that and it is enforceable if supported by consideration. But there is no consideration.
  8. At a minimum there should be disclosure to the court and possibly seek court approval for agreements signed. But if you do that you are again creating law of the case that essentially requires treatment of the pretenders as real parties.

Using TILA Rescission as Jurisdictional Issue

I think TILA Rescission should be approached as a jurisdictional issue since it focuses on the procedural aspects of the TILA Rescission statute. In other words it should always be front and center.

I think a problem with TILA Rescission is that not even borrowers understand that the rescission issue is over. By asking a court to  make rescission effective you underline the correct premise that rescission has already occurred. All your pleadings after that should be based upon that premise or you undermine yourself.

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Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
A few hundred dollars well spent is worth a lifetime of financial ruin.
PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
===========================
The plain wording of the statute says that rescission is effective, as a matter of law, when delivered (or sent via USPS). SCOTUS says no lawsuit is required to make rescission effective. The fact that the banks treat it as ineffective is something they do at their own peril. The statute explicitly says otherwise along with REG Z procedures based on the statute 15 USC §1635 and the Jesinoski decision.
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Under the statute and Reg Z the loan contract is eliminated and replaced with a new relationship under the statute — a set of procedures creating a statutory claim for the debt. It follows that ONLY a party who is an actual creditor or owner of the debt can even appear much less claim or defend anything about rescission. If they claim standing from the loan contract, they have no standing.
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Hence if the formers holders of the now nonexistent note and mortgage are also creditors they have no problem. They can plead anything they want, including defenses to or motions (or lawsuits) to vacate TILA Rescission. 
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BUT usually the former holders of the loan contract (note and mortgage) were using the loan CONTRACT as the sole basis of their standing — desiring to raise legal presumptions from the existence of those contracts (note and mortgage).
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What happens next is incontrovertible by logic or legal reasoning. Although they might be named parties to an action pending in court such ex-holders have lost their standing in that court action or they never had it to begin with. By operation of law the note and mortgage from which all their claims derive do not exist. That is a jurisdictional issue and it MUST be decided against the banks — by operation of law. Failure to present this has resulted in a number of escape hatches for judges who don’t like TILA Rescission. Your job is to close those hatches.
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The whole point of the rescission strategy is to remove any possibility of an arguable claim for standing to foreclose on the now nonexistent mortgage or deed of trust. Unless the claim for standing is based upon ownership of the debt subject matter jurisdiction is absent.
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This means that no claim or defense against the effectiveness of the rescission can be raised by anyone other than the owner of the debt.  
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This also means that there can be no foreclosure because the loan contract has been replaced by a statutory “contract.”
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Borrowers undermine this premise by filing lawsuits asking the court to declare that the rescission is effective. The TILA Rescission statute 15 USC §1635 has already answered that and THAT is what should be pled. SCOTUS has also already answered that in the Jesinoski case. Asking the court to declare it so means that you take the position that the statute has not already answered that question, that SCOTUS has not already ruled and that therefore it is now up to the trial court to make a ruling.
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You are opening the door for argument when there is no such argument intended by the statute or the US Supreme Court. Upon being invited to do so a judge who doesn’t like the statute will come with reasons not to declare the rescission effective — usually based upon objections from parties who could not possibly have standing to raise such objections.
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If that is true (and it is true by definition in our legal system once the highest court has ruled) then a party seeking relief from rescission would need to allege that they are the owners of the debt and then  prove it without reference to the note or mortgage. In other words they would need to prove they funded the debt or they purchased it with actual money.
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We all know that the fake securitization scheme was entirely dependent upon illegally funding the origination and purchase of the loans in the fictitious name of the trust for the account of the underwriter and that the investors were cut off contractually from having any right, title, interest or even opportunity to review or audit the portfolio of loans claimed to be in a fictitious pool that was being managed by a trust that did not exist, which in turn was managed by a trustee that had no powers of administration for the benefit of nonexistent beneficiaries.
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Hence the problem of the banks is clearly that they can’t prove funding or purchase because doing so would expose their illegal activities. Whether this would actually lead to a free house is debatable, depending upon the exercise of equitable jurisdiction in the courts.
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What is clear is that the banks were told by their own lawyers not to ignore rescission or they would lose everything. They ignored it anyway believing they could steamroll through the courts, which was in fact an accurate measurement of their own power.
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BUT as the banks persist along this strategy they continually build the inventory of homes that by operation of law are still owned by the borrowers, all other actions being void ab initio, not voidable by any stretch of the imagination.
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AND the banks are by their own actions and inaction causing the debt to slip away from them as well. Under TILA Rescission the old loan contract is replaced with a new statutory contract. Actions for enforcement under that contract must be based on violation of TILA. TILA has a statute of limitations. Thus claims beyond the statute of limitations are barred. And THAT means that claims for the debt are barred after the statute of limitations (on claims arising from TILA) has run — as result of plain arrogance of the banks — and no fault of any borrower.

Does the Debt Need to Transfer with the Mortgage?

The answer is yes but the movement of the debt is often, all too often, presumed to have occurred. After more than a decade of research and analysis I find no support for the informal “doctrine” that the debt, note and mortgage can be used interchangeably. But the human inclination is to treat them the same. In foreclosure defense it is the job of the advocate to establish the separate nature of each of them.

The debt is what arises, regardless of whether it is in writing or not, by virtue of money being paid to the recipient or paid on his/her/their behalf. The only way the debt is extinguished is by payment or a court order (e.g. bankruptcy) declaring that the debt no longer exists. The recipient of the money is the obligor. The party who paid the money is the obligee under the debt. The transaction itself gives rise to the duty to repay the loan. A writing (e.g. note or mortgage or deed of trust) that purports to relate to or memorialize the debt, is separate from the debt.

If the written instrument (note) is made payable to the obligee under the debt, then they both are saying the same thing. That causes the debt and the written instrument (note) to merge. That way the obligor does not subject himself to an additional liability (double liability) when he executes the note. The note is incident to the debt but not the debt itself. The mortgage is incident to the debt and is neither the note nor the debt itself.

The debt is a demand loan if there is no written instrument. The note, where merger has occurred, sets forth the plan of repayment. The mortgage (if merger occurred on the note) sets forth the plan for enforcement of the debt. The mortgage does not set forth the terms of enforcement of the note since the note already contains its own enforcement provisions.

If the debt and the note don’t say the same thing (i.e., if the obligee and the payee are different), the doctrine of merger does not apply. The obligation to repay still exists but not under the terms and conditions of any note nor is it subject to enforcement of the mortgage. The debt (obligation to repay), the note and the mortgage (or deed of trust) can each be transferred; but the transfer of one does not mean the transfer of all three. Transfer of a note or mortgage does not move the debt unless merger has occurred. And transfer of a mortgage without the debt is a nullity.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consent to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

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NY Case Citation

see NY Court: Transfer of a mortgage without transfer of the debt

Common sense is not necessarily the law or policy. Any number of people can enforce a note even if they don’t own the debt and even if they don’t actually have physical possession of the note (although there is a lot of explaining to do).

BUT nobody can enforce a mortgage unless they are the owner of the debt and the owner of the mortgage or the owner of the beneficial interest under a deed of trust. The assignment of a mortgage or DOT cannot, under any circumstances CREATE an interest in the debt by either party. The assignor must own the debt for the assignment to transfer the debt. All states agree that an assignment means nothing if the assignor had nothing to assign. Such an assignment confers no rights on the assignor and the assignee gets nothing even though the “assignment” document physically exists.

BUT a facially valid note is given many presumptions as to enforcement of the note and those presumptions have led courts to erroneously conclude and presume that the enforcer of the note is the owner of the debt.

The only party who is entitled to claim ownership of the debt (obligation) is the one who paid for it. Any party claiming to represent the owner of the debt must show the agency connection between themselves and the owner of the debt. All other “transfer” documents are fabrications.

The only way the “agent” can prove the “agency” is by disclosing the identity of the owner of the debt, who can corroborate the claim of agency — if the party identified can prove ownership of the debt. Self serving statements are not without some value but if the party proffering self serving statements is unable or unwilling to proffer corroborating evidence at trial or in response to discovery, their self serving statements must be given scant weight.

So in the above link the Court summarized the law in the same way that the courts in all states — when pushed — understand the law. Note the huge difference between alleging standing and proving standing. The allegation makes it through a motion to dismiss. Failure of proof of standing results in denial of summary judgment or any judgment.

“A plaintiff in a mortgage foreclosure action establishes its prima facie entitlement to judgment as a matter of law by producing the mortgage, the unpaid note, and evidence of the defendant’s default (see Loancare v Firshing, 130 AD3d 787, 788 [2015]; Wells Fargo Bank, N.A. v Erobobo, 127 AD3d 1176, 1177 [2015]; Wells Fargo Bank, N.A. v DeSouza, 126 AD3d 965 [2015]; Citimortgage, Inc. v Chow Ming Tung, 126 AD3d 841, 842 [2015]; US Bank N.A. v Weinman, 123 AD3d 1108, 1109 [2014]). Where, as here, a defendant challenges the plaintiff’s standing to maintain the action, the plaintiff must also prove its standing as part of its prima facie showing (e.s.)(see HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d 983 [2015]; HSBC Bank USA, N.A. v Baptiste, 128 AD3d 773, 774 [2015]; Plaza Equities, LLC v Lamberti, 118 AD3d 688, 689 [2014]).” LNV Corp. v Francois, 134 AD3d 1071, 1071—72 [2d Dept 2015].

“[A] plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced. (Bank of NY v. Silverberg, 86 AD3d 274, 279 [2nd Dept. 2011], U.S. Bank N.A. v. Cange, 96 AD3d 825, [*3]826[2d Dept. 2012]; U.S. Bank, N.A. v. Collymore, 68 AD3d 752-754 [2d 2009]; Countrywide Home Loans, Inc. v. Gress, 68 AD3d 709[2d Dpt. 2009].) Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident (citations omitted). However, a transfer or assignment of only the mortgage without the debt is a nullity and no interest is acquired by it, since a mortgage is merely security for a debt and cannot exist independently of it (citations omitted). Where…the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief (citations omitted).” (e.s.)Homecomings Fin., LLC v Guldi, 108 AD3d 506-508[2d Dept. 2013].

Vulture Firms: The Last Step in a Chain of Illegal Paper, with the Debt Long Gone

The key element of the paper strategy has been to create the illusion of transfers of assets, thus supporting the erroneous narrative that with all those parties purchasing the loans, a lot of due diligence MUST have been done and therefore the screaming defense of homeowners (attacking ownership) is nothing but a dilatory stall tactic.

What is consistently missed, even by people who are completely fed up with the banks and regulatory agencies that have given a wink and nod at plainly fraudulent practices, is that the only “asset” is the paper, and that the debt itself has never moved. In a true securitization the debt would indeed be transferred. But all claims of securitization of debt that are based upon CLAIMS of ownership rather than the ownership itself are groundless. Thus neither Vulture Firms nor any of their predecessors ever owned the debt.

This is why we have lawyers go to law schools. Such convoluted schemes are not easily deciphered without experts and lawyers. Lawyers understand the distinction between the debt, the note and the mortgage. But lawyers forget and lay people never knew about the distinction. It isn’t technical. It is all about keeping transactions on paper honest.

And right now nearly all of the hundreds of millions of documents are being used around the world to foreclose, or support the sale of the paper note and mortgage and derivatives based upon the value of those millions of documents containing false recitations and inferences of fact.

So borrowers, whether their payments (to the wrong party) are “current” or not, like the one in the story found in the link below are stuck in the very place that legislators and regulators have said could never happen in a legal mortgage lending situation: no knowledge about the identity of the obligee of the debt. Foreclosure defense lawyers who win cases punch holes in the foreclosure case simply by knowing they are not dealing with anyone who owns the debt nor anyone who is representing the obligee in the underlying debt (i.e., the real world).

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—————-

Hat tip Eric Mains and Bill Paatalo

see Vulture Firms Must Clean Up the Mess

So people ask me the obvious question, to wit: “If the paper didn’t transfer the debt because the seller, assignor or endorser never owned the debt, where is the debt now?”

The answer is simpler than you might imagine. The only two parties are the obligor (the person who took the money) and the obligee (the person who gave the money). The current obligee (owner of the debt) in most instances is a group of investors who are beneficiaries of multiple paper trusts that have never existed nor been active. THAT is why you never see any assertion that the debt has been purchased.

No money has exchanged hands in any of the transfers except in the case of vulture firms who pay fractions of a cent on the dollar for the paper. They don’t buy the debt because the seller of the paper doesn’t own the debt.

The one simple law school issue taught repeatedly in several classes — Contracts, Bills and Notes etc. — is that the debt arises no from paper but from action. There is no debt if there is no money exchanged between the parties claiming to be part of the transaction.

The debt arises by operation of law without  and even despite the existence or nonexistence of any written instruments — virtually all of which are subject to hearsay objections and lacking in factual foundation, to wit: an actual transaction in the real world in which reciprocal consideration was exchanged between the obligor and the obligee.

If the written instrument recites or assumes that the parties to the instrument are in fact identical to the parties to the real world transaction, then the parties to the debt would be identical to the parties on the written instrument. So keep this in your bonnet while you are planning defense strategy: at some point, usually at origination, a debt was created, separate and distinct from the recitals on the note and mortgage.

If the written instrument recites or assumes that the parties to the instrument are in fact identical to the parties to the debt, but the recital or assumption is untrue. Assumptions and presumptions are based upon one singular doctrine — they are used for judicial economy only where the the presumption clearly is true and where no contest to the presumption is introduced by the defense.

If the defense asserts and gives some argument or evidence that is inconsistent with the presumed “fact,” then the burden shifts back to the party who claimed the benefit of the presumption — i.e. they must prove the real world transaction that was being presumed. There is no prejudice to forcing such a party to prove the fact that they wished to be presumed — unless they were lying to begin with.

 

Trustee v Active Trustee US Bank Fails to show or even attempt to show it is an active trustee

CASE DISMISSED,WITH LEAVE TO AMEND. US BANK DECLINED TO AMEND. CASE DISMISSED.

Even where there is a clerk’s default “The burden is on the plaintiff to establish its entitlement to recovery.” Bravado Int’l, 655 F. Supp. 2d at 189.

Here is an example of how lawyers purport to represent US Bank when in fact they are creating the illusion that they represent a trust and in reality they are representing a subservicer who is receiving orders from a master servicer of a nonexistent trust. As Trustee of the nonexistent trust USB had no active role in the nonexistent trust. As the inactive Trustee for a nonexistent Trust, no right, title or interest in the debts of homeowners were within any scope of authority of any servicer, subservicer or master servicer. Each foreclosure is a farce based upon assumptions and presumptions that are exactly opposite to the truth.

Given the opportunity to amend the complaint, lawyers for USB chose not to amend — because they could not plead nor prove the required elements of an active trustee. Because of that USB lacked standing to bring the action except as agent for an active trust or on behalf of the trust beneficiaries. But where the certificates show that the certificate holders do NOT have any interest in a mortgage or note (true in about 70% of all cases), then they too lack of standing. And if the Trust is not an active Trust owning the debt, note or mortgage then it too lacks standing.

Let us draft your motions and do the research necessary to draw the attention of the court to the fraud taking place under their noses. 202-838-6345
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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Hat tip Bill Paatalo

see Memorandum and Order – USBank Trust NA as Trustee for LSF9 MPT v Monroe

See Judgment – USB Trust for LSF9 v Monroe –

While this case discusses diversity and other issues concerning US Bank “as trustee” the reasoning and ruling clearly expose the truth about pleading irregularities by attorneys who purport to represent US Bank or a REMIC Trust.

A debt is an asset to anyone who owns it. Industry practice requires that for transfer of ownership, there must be an agreement or other document providing warranty of title, confirmation of the existence and ownership of the debt and proof of authority of the person executing the document. Go into any bank and try to borrow money using a note as collateral. The bank will require, at a minimum, that the debt be confirmed (usually by the purported debtor) and that each party in the chain show proof of purchase.

Without consideration, the assignment of mortgage or endorsement of the note is just a piece of paper.

When there is an assertion of ownership of the loan, what the banks and so-called servicers are actually saying is that they own the paper (note and mortgage) not the debt. In the past this was a distinction without a difference. In the era of patently f false claims of securitization, the debt was split off from the paper. The owner of the debt were without knowledge that their money was not under Trust management nor that their money was being used to originate or acquire loans without their knowledge.

The securitization sting is accomplished because the owners of the debt (the investors who sourced the funds) are unaware of the fact that the certificate they are holding is merely a promise to pay from a nonexistent trust that never was utilized to acquire the debts and whose ownership of the paper is strictly temporary in order to foreclose.

The failure to make that distinction between the real debt and the fake paper is the principal reason why so many people lose their homes to interlopers who have no interest in the loan but who profit from the sale of the home because a judgment was entered in favor of them allowing them to conduct a foreclosure sale. 

This case also sets forth universally accepted legal doctrine even where there is a clerk’s default entered against the homeowner. The Judge cannot enter a judgment for an alleged debt without proving the debt — even if the homeowner doesn’t show up.

“When a default is entered, the defendant is deemed to have admitted all of the well- pleaded factual allegations in the complaint pertaining to liability.” Bravado Int’l Grp. Merch. Servs., Inc. v. Ninna, Inc., 655 F. Supp. 2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). “While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is liquidated or susceptible of mathematical computation.” Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974); accord, e.g., Bravado Int’l, 655 F. Supp. 2d at 190. “[E]ven upon default, a court may not rubber-stamp the non-defaulting party’s damages calculation, but rather must ensure that there is a basis for the damages that are sought.” United States v. Hill, No. 12-CV-1413, 2013 WL 474535, at *1 (N.D.N.Y. Feb. 7, 2013)

“The burden is on the plaintiff to establish its entitlement to recovery.” Bravado Int’l, 655 F. Supp. 2d at 189.

 

Maine Case Affirms Judgment for Homeowner — even with admission that she signed note and mortgage and stopped paying

While this case turned upon an  inadequate foundation for introduction of “business records” into evidence, I think the real problem here for Keystone National Association was that they did not and never did own the loan — something revealed by the usual game of musical chairs that the banks use to confuse and obscure the identity of the real creditor.

When you read the case it demonstrates that the Maine Supreme Judicial Court was not at all sympathetic with Keystone’s “plight.” Without saying so directly the court’s opinion clearly reveals its doubt as to whether Keystone had any plight or injury.

Refer to this case and others like it where the banks treated the alleged note and mortgage as being the object of a parlor game. The attention paid to the paperwork is designed by the banks to distract from the real issue — the debt and who owns it. Without that knowledge you don’t know the principal and therefore you can’t establish authority by a “servicer.”

The error in courts across the country has been that the testimony and records of the servicer are admissible into evidence even if the authority to act as servicer did not emanate from the real party in interest — the debt holder (the party to whom the MONEY is due.

Note that this ended in judgment for the homeowner and not an involuntary dismissal without prejudice.

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Hat Tip to Bill Paatalo

Keybank – maine supreme court

Here are some meaningful quotes from the Court’s opinion:

KeyBank did not lay a proper foundation for admitting the loan servicing records pursuant to the business records exception to the hearsay rule. See M.R. Evid. 803(6).

KeyBank’s only other witness was a “complex liaison” from PHH Mortgage Services, which, he testified, is the current loan servicer for KeyBank and handles the day-to-day operations of managing and servicing loan accounts.

The complex liaison testified that he has training on and personal knowledge of the “boarding process” for loans being transferred from prior loan servicers to PHH and of PHH’s procedures for integrating those records. He explained that transferred loans are put through a series of tests to check the accuracy of any amounts due on the loan, such as the principal balance, interest, escrow advances, property tax, hazard insurance, and mortgage insurance premiums. He further explained that if an error appears on the test report for a loan, that loan will receive “special attention” to identify the issue, and, “[i]f it ultimately is something that is not working properly, then that loan will not . . . transfer.” Loans that survive the testing process are transferred to PHH’s system and are used in PHH’s daily operations.

The court admitted in evidence, without objection, KeyBank’s exhibits one through six, which included a copy of the original promissory note dated April 29, 2002;3 a copy of the recorded mortgage; the purported assignment of the mortgage by Mortgage Electronic Registration Systems, Inc., from KeyBank to Bank of America recorded on January9, 2012; the ratification of the January 2012 assignment recorded on March 6, 2015; the recorded assignment of the mortgage from Bank of America to KeyBank dated October 10, 2012; and the notice of default and right to cure issued to Kilton and Quint by KeyBank in August 2015. The complex liaison testified that an allonge affixed to the promissory note transferred the note to “Bank of America, N.A. as Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing, LP,” but was later voided.

Pursuant to the business records exception to the hearsay rule, M.R. Evid. 803(6), KeyBank moved to admit exhibit seven, which consisted of screenshots from PHH’s computer system purporting to show the amounts owed, the costs incurred, and the outstanding principal balance on Kilton and Quint’s loan. Kilton objected, arguing that PHH’s records were based on the records of prior servicers and that KeyBank had not established that the witness had knowledge of the record-keeping practices of either Bank of America or Countrywide. The court determined that the complex liaison’s testimony was insufficient to admit exhibit seven pursuant to the business records exception.

KeyBank conceded that, without exhibit seven, it would not be able to prove the amount owed on the loan, which KeyBank correctly acknowledged was an essential element of its foreclosure action. [e.s.] [Editor’s Note: This admission that they could not prove the debt any other way means that their witness had no personal knowledge of the amount due. If the debt was in fact due to Keystone, they could have easily produced a  witness and a copy of the canceled check or wire transfer receipt wherein Keystone could have proven the debt. Keystone could have also produced a witness as to the amount due if any such debt was in fact due to Keystone. But Keystone never showed up. It was the servicer who showed up — the very party that could have information and exhibits to show that the amount due is correctly proffered because they confirmed the record keeping of “Countrywide” (whose presence indicates that the loan was subject to claims of securitization). But they didn’t because they could not. The debt never was owned by Keystone and neither Countrywide nor PHH ever had authority to “service” the loan on behalf of the party who owns the debt.]

the business records will be admissible “if the foundational evidence from the receiving entity’s employee is adequate to demonstrate that the employee had sufficient knowledge of both businesses’ regular practices to demonstrate the reliability and trustworthiness of the information.” Id. (emphasis added).

 

With business records there are three essential points of reference when several entities are involved as “lenders,” “successors”, or “servicers”, to wit:

  1. The records and record keeping practices of the initial “lender.” [If there are none then that would point to the fact that the “lender” was not the lender.] Here you are looking for the first entries on a valid set of business records in which the loan and fees and costs were posted. Generally speaking this does not exist in most loans because the money came a third party source who knows nothing of the transaction.
  2. The records and record keeping practices of any “successors.” Note that this is a second point where the debt is separated from the paper. If a successor is involved there would correspondence and agreements for the purchase and sale of the debt. What you fill find, though, is that there is only a naked endorsement, assignment or both without any correspondence or agreements. This indicates that the paper transfer of any rights to the “loan” was strictly for the purpose of foreclosing and bore new relationship to reality — i.e., ownership of the debt.
  3. The records and record keeping practices of any “servicers.” In order for the servicer to be authorized, the party owning the debt must have directly or indirectly given authorization and come to an agreement on fees, as well as given instructions as to what functions the servicer was to perform. What you will find is that there is no valid document from an owner of the debt appointing the servicer or giving any instructions, like what to do with the money after it is collected from homeowners. Instead you find tenuous documentation, with no correspondence or agreements, that make assertions for foreclosure. The game of musical chairs has bothered judges for a decade: “Why do the servicers keep changing” is a question I have heard from many judges. The typical claims of authorization are derived from Powers of Attorney or a Pooling and Servicing agreement for an entity that neither e exists nor does it have any operating history.

Stupid Law

Hat tip to Bill Paatalo who wrote the main article. See link below.

I would like to say that this could have happened only in Arkansas, but that isn’t true. Watch how the Court twisted itself into a pretzel in its determines effort to make Wells Fargo win despite admitting to unlawfully altering the note by a forged endorsement.

I note also how the court steadfastly avoids the subject of ownership of the debt and clings to the notion that ownership of the note — i.e., the piece of paper that is EVIDENCE OF THE LOAN — is as deep as the court is willing to go.

see https://bpinvestigativeagency.com/wells-fargo-admits-to-executing-wamu-note-endorsement-in-2013-and-gets-away-with-it/

Register Now- 2 CLEs: Death of a Salesman — when the party who “originated” an apparent loan transaction is dead or bankrupt.

 

 

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.

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

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).

*

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.
 *
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.
 *
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.
 *

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.

*

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.

*

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.

*

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.
 *

The “free house” mythology has polluted judicial thinking. The mortgage remains as a valid encumbrance upon the land.

*

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.

*

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.

*

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.

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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DEBT vs. Note: What is the difference?

 current trial court decisions are getting reversed because the courts are waking up to the reality of the rule of law. What they have been following is an off the books rule of “anything but a free house.”

the Courts may think they are saving the financial system, the economy and our society from disintegration, but in truth they are undermining all three.

A recent Yale Law Review article eviscerates the assumptions of a “free house” for the homeowners and destroys the myth that somehow that policy has saved the nation. Yale-In Defense of Free Houses 2016 03 23

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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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Like many other cases, current trial court decisions are getting reversed because the courts are waking up to the reality of the rule of law. What they have been following is an off the books rule of “anything but a free house.” A recent Yale Law Review Article eviscerates the assumptions of a free house for the homeowners and destroys the myth that somehow that policy has saved the nation.
The Trial Judges are making the assumption that there is an underlying debt and an underlying liability of the homeowner to make a payment to the parties in litigation even if the paperwork was found to be defective. Or worse, they are disregarding the rule of law altogether and ruling for the banks and servicers because of policy reasoning (a province exclusively reserved to the legislative branch of government and excluded from the judicial branch).

The key legal analysis goes back to basic contract law pounded into our heads in the first year of law school, to wit: the note is not the debt, it is evidence of the debt.” So if there is no debt and the homeowner challenges on that basis, the homeowner SHOULD win every time. The mistake made by pro se litigants and lawyers alike is that they cannot conceive of the notion of “there is no debt.” That’s because they don’t complete the sentence, to wit: There is no debt owed to the beneficiary or claimed beneficiary on the deed of trust (non judicial states) or there is no debt owed to the mortgagee or claimed mortgagee named in the mortgage.”

Basic contract law: an enforceable contract must contain three elements and a hidden fourth element. The three key elements without which there can be no enforcement are OFFER, ACCEPTANCE AND CONSIDERATION. The hidden fourth element is that contracts in violation of public policy are void.

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In nearly all cases where there are claims of securitization and most where no such claims are brought forward (but still exist) they are missing consideration (i.e., PAYMENT) from the origination and/or acquisition of the loan. The DEBT was never created in favor of the party receiving documents.
The documents, including the note refer to a transaction in which the originator loaned money to the homeowner. This is nearly always NOT true. And the contract, even if it existed, is part of a larger plot to defraud both the borrowers and the investors in which the originators, brokers, servicers, Master Servicers and Trusts are the fraudsters.
*
These cases thus involve contracts to violate both laws and public policy — particularly those in which prior agreement is executed in which the parties to agree to create table funded loans as a pattern and practice — something which REG Z clearly says is PREDATORY PER SE.
Either predatory or predatory per se mean something or they don’t. But if they mean anything they set the bar such that parties who violate this provision cannot claim “clean hands.” And if the court of equity is being asked by the violators for the equitable remedy of foreclosure sale based upon, at best, dubious documentation (without proof of the debt or who owns the debt) then the availability of foreclosure should be barred.

Lawyers must meet this challenge head-on and stop pussy footing around. If the alleged loan was table funded, then there was never any completed loan contract. If the money came from a third party, then that third party has the right to the note and mortgage — if the note and mortgage are executed in favor of that third party or if the “originator” was in privity with the third party through contract. There is no other way.

BUT if the identified third party was just a conduit for a source of funds outside the circle of the originator and the party through whom the funds were sourced, then the homeowner owes the DEBT to someone else. What Wall Street banks did in its simplest form is to relieve the investors of money in such a way that the investors would see very little of it ever returned because the Wall Street banks had reached for and grabbed the holy grail of finance — selling financing for nonexistent entities and keeping the proceeds.

And the same logic then applies. If the FOURTH party was somehow in privity (contract) with the originator then the homeowner owes the debt to that fourth party. BUT unless the note and mortgage are properly delivered and executed in favor of the fourth party, neither the fourth party nor any agent or “servicer” for the fourth party can claim rights under the note and mortgage which should never have been released, delivered or recorded in the first place.

In short, without BOTH the money trial and the paper trail being synchronized there is no loan contract. And that means there is no valid note or mortgage which are then VOID ab initio. Can the real source of funds collect? Yes of course, but they do not own a claim that is secured by a mortgage or deed of trust. And they cannot use the note as direct evidence of the debt. This has always been the law. Ironically, nearly all “borrowers” would gladly execute notes and mortgages with the real investors that would be fully enforceable and would represent workouts that would protect both the investor and the borrower. But in order to do that, the banks and servicers in the false securitization industry must be benched and a new group of entities employed directly by investors must arise.

*

As stated in the recent Yale Law Review article, document defects do not occur as a result of any action or fault of the alleged borrower and there is no reason not to apply the rule of law to any situation, much less one in which a party can lose their personal residence.

The theory of anything except a free house for the homeowner is full of holes that are amply challenged in the Yale Law Review article. As the authors point out, the trial judges may think they are saving the financial system, the economy and our society from disintegration, but in truth they are undermining all three.

See Yale-In Defense of Free Houses 2016 03 23

Two Different Worlds — Note and Mortgage

Further information please call 954-495-9867 or 520-405-1688

No radio show tonight because of birthday celebration — I’m 68 and still doing this

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The enforcement of promissory notes lies within the context of the marketplace for currency and currency equivalents. The enforcement of mortgages on real property lies within the the context of the marketplace for real estate transactions. While certainty is the aim of public policy in those two markets, the rules are different and should not be ignored.

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see http://www.uniformlaws.org/Shared/Committees_Materials/PEBUCC/PEB_Report_111411.pdf

This article is not a substitute for getting advice from an attorney licensed to practice in the jurisdiction in which your property is or was located.

Back in 2008 I had some correspondence and telephone conversations with an attorney in Chicago, Robert Wutscher when I was writing about the reality of the way in which banks were doing  what they called “securitization of mortgages.” Of course then they were denying that there were any trusts, denying that any transfers occurred and were suing in the name of the originator or MERS or anyone but the party who actually had their money used in loan transactions.  It wasn’t done the right way because the obvious intent was to play a shell game in which the banks would emerge as the apparent principal party in interest under the illusion created by certain presumptions attendant to being the “holder” of a note. For each question I asked him he replied that Aurora in that case was the “holder.” No matter what the question was, he replied “we’re the holder.” I still have the letter he sent which also ignored the rescission from the homeowner whose case I was inquiring about for this blog.

He was right that the banks would be able to bend the law on rescission at the level of the trial courts because Judges just didn’t like TILA rescission. I knew that in the end he would lose on that proposition eventually and he did when Justice Scalia, in a terse opinion, simply told us that Judges and Justices were wrong in all those trial court decisions and even appellate court decisions that applied common law theories to modify the language of the Federal Law (TILA) on rescission. And now bank lawyers are facing the potential consequences of receiving notices of TILA rescission where the bank simply ignored them instead of preserving the rights of the “lender” by filing a declaratory action within 20 days of the rescission. By operation of law, the note and mortgage were nullified, ab initio. Which means that any further activity based upon the note and mortgage was void. And THAT means that the foreclosures were void.

Is discussing the issue of the “holder” with lawyers and even doing a tour of seminars I found that the confusion that was apparent for lay people was also apparent in lawyers. They looked at the transaction and the rights to enforce as one single instrument that everyone called “the mortgage.” They looked at me like I had three heads when I said, no, there are three parts to every one of these illusory transactions and the banks fail outright on two of them.

The three parts are the debt, the note and the mortgage. The debt arises when the borrower receives money. The presumption is that it is a loan and that the borrower owes the money back. it isn’t a gift. There should be no “free house” discussion here because we are talking about money, not what was done with the money. Only a purchase money mortgage loan involves the house and TILA recognizes that. Some of the rules are different for those loans. But most of the loans were not purchase money mortgages in that they were either refinancing, or combined loans of 1st mortgage plus HELOC. In fact it appears that ultimately nearly all the outstanding loans fall into the category of refinancing or the combined loan and HELOC (Home Equity Line of Credit that exactly matches the total loan requirements of the transaction (including the purchase of the home).

The debt arises by operation of law in favor of the party who loaned the money. The banks diverged from the obvious and well-established practice of the lender being the same party as the party named on the note as payee and on the mortgage as mortgagee (or beneficiary under a Deed of Trust). The banks did this through a process known as “Table Funded Loans” in which the real lender is concealed from the borrower. And they did this through agreements frequently called “Assignment and Assumption” Agreements, which by contract called for both parties (the originator and the aggregator to violate the laws governing disclosure (TILA and frequently state law) which means by definition that the contract called for an illegal act that is by definition a contract in contravention of public policy.

A loan contract is created by operation of law in which the borrower is obligated to pay back the loan to the source of the funds with or without a written instrument. If the loan contract (comprised of offer, acceptance and consideration) does not exist, then there is nothing to enforce at law although it is possible to still force the borrower to repay the money to the actual source of funds through a suit in equity — mainly unjust enrichment. The banks, through their lawyers, argue that the Federal disclosure requirements should be ignored. I think it is pretty clear that Justice Scalia and a unanimous United States Supreme Court think that argument stinks. It is the bank’s argument that should be ignored, not the law.

Congress passed TILA specifically to protect consumers of financial products (loans) from the overly burdensome and overly complex nature of loan documents. This argument about what is important and what isn’t has already been addressed in Congress and signed into law against the banks’ position that it doesn’t matter whether they really follow the law and disclose all the parties involved in the transaction, the true identity of the lender, the compensation of all the parties that made money as a result of the origination of the loan transaction. Regulation Z states that a pattern of behavior (more than 5) in which loans are table funded (disclosure of real lender withheld from borrower) is PREDATORY PER SE.

If it is predatory per se then there are remedies available to the borrower which potentially include treble damages, attorneys fees etc. Equally important if not more so is that a transaction, whether illusory or real, that is predatory per se, is therefore against public policy and the party seeking to enforce an otherwise enforceable document cannot do so because of the doctrine of unclean hands. In fact, if the transaction is predatory per se, it is dirty hands per se. And this is where Judges get stuck and so do many lawyers. The outcome of that unavoidable analysis is, they say, a free house. And their remedy is to give the party with unclean hands a free house (because they paid nothing for the origination or acquisition of the loan). I think the Supreme Court will not look kindly upon this “legislating from the bench.” And I think the Court has already signaled its intent to hold everyone to the strict construction of TILA and Regulation Z.

So there are two reason the debt can’t be enforced the way the banks want. (1) There is no loan contract because the source of the money and the borrower never agreed to anything and neither one knew about the other. (2) the mortgage cannot be enforced because it is an action in equity and the shell game of parties tossing the paperwork around all have unclean hands. And there is a third reason as well — while the note might be enforceable based merely on an endorsement, the mortgage is not enforceable unless the enforcer paid for it (Article 9, UCC).

And THAT is where the confusion really starts — which bank lawyers depend on every time they go to court. Bank lawyers add to the confusion by using the tired phrase of “the note follows the mortgage and the mortgage follows the note.” At one time this was a completely true presumption backed up by real facts. But now the banks are asking the courts to apply the presumption even when the courts actually know that the facts presumed by the legal presumption are untrue.

Notes and mortgages exist in two different marketplaces or different worlds, if you like. Public policy insists that notes that are intended to be negotiable remain negotiable and raise certain presumptions. The holder of a note might very well be able to sue and win a judgment ON THE NOTE. And the judgment holder might be able to record a judgment lien and foreclose on it subject to homestead exemptions.

But it isn’t as simple as the banks make it out to be.

If someone pays for the note in good faith and without knowledge of the borrower’s defenses when the note is not in default, THAT holder can enforce the note against the signor or maker of the note regardless of lack of consideration or anything else unless there is a provable defense of fraud and perhaps conspiracy. But any other holder steps into the shoes of the original lender. And if there was no consummated loan contract between the payee on the note and the borrower because the payee never loaned any money to the borrower, then the holder might have standing to sue but they don’t have the evidence to win the suit. The borrower still owes the money to whoever was the source, but the “holder” of the note doesn’t get a judgment. There is a difference between standing to sue and a prima facie case needed to win. Otherwise everyone would get one of those mechanical forging machines and sign the name of someone with money and sue them on a note they never signed. Or they would promise to loan money, get the signed note and then not complete the loan contract by making the loan.

So public policy demands that there be reasonable certainty in the negotiation of unqualified promises to pay. BUT public policy expressed in the UCC Article 9 says that if you want to enforce a mortgage you must not only have some indication that it was transferred to you, you must also have paid valuable consideration for the mortgage.

Without proof of payment, there is no prima facie case for enforcement of the mortgage, but it does curiously remain on the chain of title of the property (public records) unless nullified by the fact that the mortgage was executed as collateral for the note which was NOT a true representation of the loan contract based upon the real debt that arose by operation of law. The public policy is preserve the integrity of public records in the real estate marketplace. That is the only way to have reasonable certainty of title and encumbrances.

Forfeiture, an equitable remedy, must be done with clean hands based upon a real interest in the alleged default — not just a pile of paper that grows each year as banks try to convert an assignment of mortgage into a substitute for consideration.

Hence being the “holder” might mean you have the right to sue on the note but without being a holder in due course or otherwise paying fro the mortgage, there is no automatic basis for enforcing the mortgage in favor of a party with no economic interest in the mortgage.

see also http://knowltonlaw.com/james-knowlton-blog/ucc-article-3-and-mortgage-backed-securities.html

When an assignment of a mortgage is invalid, does it require a foreclosure case to be dismissed?

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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There seems to be confusion about what is necessary to file a foreclosure. To start with the basics, the debt is created when the borrower receives the funds or when the funds are disbursed for the benefit of the borrower. This requires no documentation. The receipt of funds presumptively implies a loan that is a demand loan. The source of funding is the creditor and the borrower is the debtor. The promissory note is EVIDENCE of the debt and contains the terms of repayment. In residential loan transactions it changes the terms from a demand loan to a term loan with periodic payments.

But without the debt, the note is worthless — unless the note gets into the hands of a party who claims status as a holder in due course. In that case the debt doesn’t exist but the liability to pay under the terms of the note can be enforced anyway. In foreclosure litigation based upon paper where there are claims or evidence of securitization, there are virtually all cases in which the “holder” of the note seeks enforcement, it does NOT allege the status of holder in due course. To the contrary, many cases contain an admission that the note doesn’t exist because it was lost or destroyed.

The lender is the party who loans the money to the borrower.  The lender can bring suit against the borrower for failure to pay and receive a money judgment that can be enforced against income or non-exempt property of the borrower by writ of garnishment or attachment. There is no limit to the borrower’s defenses and counterclaims against the lender, assuming they are based on facts that show improper conduct by the lender. The contest does NOT require anything in writing. If the party seeking to enforce the debt wishes to rely on a note as evidence of the debt, their claim about the validity of the note as evidence or as information containing the terms of repayment may be contested by the borrower.

If the note is transferred by endorsement and delivery, the transferee can enforce the note under most circumstances. But the transferee of the note takes the note subject to all defenses of the borrower. So if the borrower says that the loan never happened or denies it in his answer the lender and its successors must prove the loan actually took place. This is true in all cases EXCEPT situations where the transferee purchases the note for value, gets delivery and endorsement, and is acting in good faith without knowledge of the borrower’s defenses (UCC refers to this as a holder in due course). The borrower who signs a note without receiving the consideration of the loan is taking the risk that he or she has created a debt or liability if the eventual transferee claims to be a holder in due course. Further information on the creation and transfer of notes as negotiable paper is contained in Article 3 of the Uniform Commercial Code (UCC).

Thus the questions about enforceability of the note or recovery on the debt are fairly well settled. The question is what happens in the case where collateral for the loan secures the performance required under the note. This is done with a security instrument which in real property transactions is a mortgage or deed of trust. This is a separate contract between the lender and the borrower. It says that if the borrower does not pay or fails to pay taxes, maintain the property, insure the property etc., the lender may foreclose and the borrower will forfeit the collateral. This suit is an action to enforce the security instrument (mortgage, deed of trust etc.) seeking to foreclose all claims inferior to the rights of the lender established when the mortgage or deed of trust was recorded.

The mortgage is a contract that does not qualify as a negotiable instrument and so is not covered by Article 3 of the UCC. It is covered by Article 9 of the UCC (Secured Transactions). The general rule is that a party who purchases the mortgage instrument for value in good faith and without knowledge of the  borrower’s defenses may enforce the mortgage if the contract is breached by the borrower. This coincides with the requirement that the holder of the mortgage must also be a holder in due course of the note — if the breach consists of failure to pay under the terms of the note. Any party may assign their rights under a contract unless the contract itself says that it is not assignable or assignment is barred by statute or administrative rules.

The “assignment” of the mortgage or deed of trust is generally taken to be an instrument of conveyance. But forfeiture of collateral, particularly one’s home, is considered to be a much more severe remedy against the borrower than a money judgment for economic loss caused by breach of the borrower in making payments on a legitimate debt. So the statute (Article 9, UCC)  requires that the assignment be the result of an actual transaction in which the mortgage is purchased for value. The confusion that erupts here is that no reasonable person would merely purchase a mortgage which is not really an asset deriving its value from a borrower’s promise to pay. That asset is the note.

So if the note is purchased for value, and assuming the purchaser receives delivery and endorsement of the note, as a holder in due course there is no question that the mortgage assignment is valid and enforceable by the assignee. The problems that have emerged is when, if ever, any value was paid to anyone in the “chain” on either the note or the mortgage. If no value was paid then the note might be enforceable subject to borrower’s defenses but the mortgage cannot be enforced. Additional issues emerge where the “proof” (often fabricated robo-signed documents) imply through hearsay that the note was the subject of a transaction at a different time than the date on the assignment. Denial and/or discovery would reveal the fraud upon the Court here — assuming you can persuasively argue that the production of evidence is required.

Another interesting question comes up when you seen the language of endorsement on the mortgage. This might be seen as splitting hairs, but I think it is more than that. To assign a mortgage in form that would ordinarily be accepted in general commerce — and in particular by banks — the assignment would be in the form that recites the ownership of the mortgage and the intention to convey it and on what terms. Instead, many cases show that there is an additional page stapled to the mortgage which contains only the endorsement to a particular party or blank endorsement. The endorsement is not recordable whereas a facially valid assignment is recordable.

The attachment of the last page could mean nothing was conveyed or that it was accidentally done in addition to a proper assignment. But I have seen several cases where the only evidence of assignment was a stamped endorsement, undated, in which there was no assignment. This appears to be designed to confuse the Judge who might be encouraged to apply the rules of transfer of the note to the circumstances of transfer of the mortgage. This smoke and mirrors approach often results in a foreclosure judgment in favor of a party who has paid nothing for the debt, note or mortgage. It leaves the actual lender out in the cold without a note or mortgage which they should have received.

It is these and other factors which have resulted in trial and appellate decisions that appear to be in conflict with each other. Currently in Florida the Supreme Court is deciding whether to issue an opinion on whether the assignment after the lawsuit has begun cures jurisdictional standing. The standing rule in Florida is that if you don’t own the mortgage at the time you declare a default, acceleration and sue, then those actions are essentially void.

————————————–

Valid assignment is necessary for the plaintiff to have standing in a foreclosure case. (David E. Peterson, Cracking the Mortgage Assignment Shell Game, The Florida Bar Journal, Volume 85, No. 9, November, 2011, page 18).

In BAC Funding Consortium v. Jean-Jeans and US Bank National Association, the Second District of Florida reversed summary judgment for a foreclosure for bank because there was no evidence that the bank validly held the note and mortgage. BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques 28 So.2d, 936.

BAC has been negatively distinguished by two cases:

  • Riggs v. Aurora Loan Services, LLC, 36 So.3d 932, (Fla.App. 4 Dist.,2010) was distinguished from BAC, because in BAC the bank did not file an affidavits that the mortgage was properly assigned; in Riggs they did. The 4th District held that the “company’s possession of original note, indorsed in blank, established company’s status as lawful holder of note, entitled to enforce its terms.” [Editor’s note: The appellate court might have erred here. The enforcement of the note and the enforcement of the mortgage are two different things as described above].
  • Dage v. Deutsche Bank Nat. Trust Co., 95 So.3d 1021, (Fla.App. 2 Dist.,2012) was distinguished from BAC, because in Dage, the homeowners waited two years to challenge the foreclosure judgment on the grounds that the bank lacked standing due to invalid assignment of mortgage. The court held that a lack of standing is merely voidable, not void, and the homeowners had to challenge the ruling in a timely manner. [Editor’s note: Jurisdiction is normally construed as something that cannot be invoked at a later time. It can even be invoked for the first time on appeal.]

In his article, “Cracking the Mortgage Assignment Shell Game,” Peterson in on the side of the banks and plaintiffs in foreclosure cases, but his section “Who Has Standing to Foreclosure the Mortgage?” is full of valuable insights about when a case can be dismissed based on invalid assignment. Instead of reinventing the wheel, I’ve copied and pasted the section below:

It should come as no surprise that the holder of the promissory note has standing to maintain a foreclosure action.34 Further, an agent for the holder can sue to foreclose.35 The holder of a collateral assignment has sufficient standing to foreclose.36 [Editor’s note: Here again we see the leap of faith that just because someone might have standing to sue on the note, they automatically have standing to sue on the mortgage, even if no value was paid for either the note or the mortgage].

Failure to file the original promissory note or offer evidence of standing might preclude summary judgment.37 Even when the plaintiff files the original, it might be necessary to offer additional evidence to show that the plaintiff is the holder or has rights as a nonholder. In BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d 936 (Fla. 2d DCA 2010), for example, the court reversed a summary judgment of foreclosure, saying the plaintiff had not proven it held the note. The written assignment was incomplete and unsigned. The plaintiff filed the original note, which showed an indorsement to another person, but no indorsement to the plaintiff. The court found that was insufficient. Clearly, a party in possession of a note indorsed to another is not a “holder,” but recall that Johns v. Gillian holds that a written assignment is not needed to show standing when the transferee receives delivery of the note. The court’s ruling in BAC Funding Consortium was based on the heavy burden required for summary judgment. The court said the plaintiff did not offer an affidavit or deposition proving it held the note and suggested that “proof of purchase of the debt, or evidence of an effective transfer” might substitute for an assignment.38 [e.s.]

In Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. 4th DCA 1990), the court held that an assignment executed after the filing of the foreclosure case was not sufficient to show the plaintiff had standing at the time the complaint was filed. In WM Specialty Mortgage, LLC v. Salomon, 874 So. 2d 680 (Fla. 4th DCA 2004), however, the court distinguished Jeff-Ray Corp., stating that the execution date of the written assignment was less significant when the plaintiff could show that it acquired the mortgage before filing the foreclosure without a written assignment, as permitted by Johns v. Gilliam.39

When the note is lost, a document trail showing ownership is important. The burden in BAC Funding Consortium might be discharged by an affidavit confirming that the note was sold to the plaintiff prior to foreclosure. Corroboratory evidence of sale documents or payment of consideration is icing on the cake, but probably not needed absent doubt over the plaintiff’s rights. If doubt remains, indemnity can be required if needed to protect the mortgagor.40 [e.s.] 34  Philogene v. ABN AMRO Mortgage Group, Inc., 948 So. 2d 45 (Fla. 4th D.C.A. 2006); Fla. Stat. §673.3011(1) (2010).

35                  Juega v. Davidson, 8 So. 3d 488 (Fla. 3d D.C.A. 2009); Mortgage Electronic Registration Systems, Inc. v. Revoredo, 955 So. 2d 33, 34, fn. 2 (Fla. 3d D.C.A. 2007) (stating that MERS was holder, but not owner and “We simply don’t think that this makes any difference. See Fla. R.Civ. P. 1.210(a) (action may be prosecuted in name of authorized person without joining party for whose benefit action is brought)”). [Editor’s note: This is an example of judicial ignorance of what is really happening. MERS is a conduit, a naked nominee, whose existence is meaningless, as is its records of transfer or ownership of the the debt, the note or the mortgage]

36                  Laing v. Gainey Builders, Inc., 184 So. 2d 897 (Fla. 5th D.C.A. 1966) (collateral assignee was a holder); Cullison v. Dees, 90 So. 2d 620 (Fla. 1956) (same, except involving validity of payments rather than standing to foreclose).

37                  See Fla. Stat. §673.3091(2) (2010); Servedio v. US Bank Nat. Ass’n, 46 So. 3d 1105 (Fla. 4th D.C.A. 2010).

38                  BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d at 938-939 (Fla. 2d D.C.A. 2010). See also Verizzo v. Bank of New York, 28 So. 3d 976 (Fla. 2d D.C.A. 2010) (Bank filed original note, but indorsement was to a different bank). But see Lizio v. McCullom, 36 So. 3d 927 (Fla. 4th D.C.A. 2010) (possession of note is prima facie evidence of ownership). [Editor’s note: this is the nub of the problems in foreclosure litigation. The law requires purchase for value for ownership, along with other criteria described above. This court’s conclusion places an unfair burden of proof on the borrower. The party with the sole care, custody and control of the actual evidence and information about the transfer or sale of the ndebt, note or mortgage is the Plaintiff. The plaintiff should therefore be required to show the details of the transaction in which the debt, note or mortgage was acquired. To me, that means showing a cancelled check or wire transfer receipt in which the reference was to the loan in dispute. Anything less than that raises questions about whether the loan implied by the note and mortgage ever existed. See my previous articles regarding securitization where the actual loan was actually applied from third party funds. hence the originator, who did not loan any money, was never paid for note or mortgage because consideration from a third party had already passed.]

39                  See also Glynn v. First Union Nat. Bank, 912 So. 2d 357 (Fla. 4th D.C.A. 2005), rev. den., 933 So. 2d 521 (Fla. 2006) (note transferred before lawsuit, even though assignment was after). [Editor’s note: if the note and mortgage were in fact transfered for actual value (with proof of payment) then a “late” assignment might properly be categorized as a clerical issue rather than a legal one — because the substance of the transaction actually took place long before the assignment was executed and recorded. But the cautionary remark here is that in all probability, nobody who relies upon the “Chain” ever paid anything but fees to their predecessor. Why would they? If the consideration already passed from third party — i.e., pension fund money — why would the originator or any successor be entitled to demand the value of the note and mortgage? The originator in that scenario is neither the lender nor the owner of the debt and therefore should be given no rights under the note and mortgage, where title was diverted from the third party who DID the the loan to the originator who did NOT fund the loan. 40 Fla. Stat. §673.3091(2) (2010); Fla. Stat. §69.061 (2010).-David E. Peterson, “Cracking the Mortgage Assignment Shell Game”, The Florida Bar Journal, Volume 85, No. 9, November, 2011.

I also came across a blog post from another attorney on how to argue Florida assignments of judges. I don’t know how reliable this is, but it does cite several cases, and may be a useful resource to you: http://discoverytactics.wordpress.com/tactics-strategies/how-to-argue-florida-assignments-to-judges/. Someone also posted the content of the above link verbatim in a comment on my blog at http://livinglies.me/foreclosure-defense-forms/people-players-and-resources/state-laws/florida-laws/.

 

AMGAR

After years of writing about the AMGAR program, people are finally asking about this program. So here is a summary of the program. As usual I caution you against using my articles as the final word on any subject. Before you make any decisions about your loans, whether you are in foreclosure, collection or otherwise you should seek competent legal counsel who is licensed in the jurisdiction in which the collateral is located. Also for those who think they would invest in such a program, you should seek both legal advice and consult with a person qualified and licensed as a financial adviser. And for full disclosure, this plan does include an equity provision and fees to the livinglies team.

The AMGAR program was first developed by me when I was living in Arizona where, after the 2008-2009 crash, the state was facing a $3 Billion deficit. The Chairman of the Arizona House Judiciary Committee invited me to testify about possible solutions to the foreclosure crisis, which at that time was just ramping up. So I developed a program that I called the Arizona Mortgage Guarantee and Resolution plan, which was dubbed “AMGAR.” Now the acronym stands for American Mortgage Guarantee and Resolution program. In Arizona it was mostly a governmental program with some private enterprise components.

For a while it looked as though Arizona would adopt the program and pass the necessary legislation to do it. All departments of the legislative and executive branches of government had examined it carefully and concluded that I was right both as to its premises and its results.

The objective was to tax and fine the various entities that were “trading” in loans improperly, illegally and failing to report it as taxable income, as well as failing to pay the fees associated with filing such transfers in the County records of each county.

The State would essentially call the bluff of the banks, which was already obvious in 2008 — they did not appear to have any ownership interest in the loans upon which they initiated foreclosures.

Thus the State and private investors would offer to pay off the mortgage at the amount demanded if the foreclosing party could prove ownership and the balance (it was already known that the banks had received a lot of money from both public and private sources that reduced the loss and thus should have reduced the balances owed to investors, which in turn reduces the balance owed from borrowers).

The offer to pay off the the money claimed due by the forecloser was on behalf of the homeowner who would enter into an agreement with AMGAR for a new, real, valid mortgage at fair market value with industry standard terms instead of the exotic mortgages that borrowers were lured into signing when they understood practically nothing about the loan. The State would levy a tax or enforce existing taxes against the participants in the alleged securitization plan for the trading they had been doing. The State would foreclose on the tax liens thus opening the door to settlements that would reduce the amount expended on paying off the old loan.

The AMGAR program would receive a mortgage and note equal to what was actually paid out to the foreclosing parties, which was presumed to be discounted sharply because of their inability to prove ownership and balance. Hence the state would receive a valid note and mortgage for every penny they paid and it would receive the taxes and fees that were due and unpaid, and then sell these clean mortgages into the secondary market place. Both the legislative and executive branches of Arizona government — all relevant departments — concluded that the plan would erase the $3 Billion Arizona deficit and put a virtual halt on foreclosures that had already turned new developments into ghost towns.

But the plan went dark when certain influential Republicans in the state apparently received the word from the banks to kill the program.

Not to be deterred from what I considered to be a bold, innovative program aimed at the truth about the hundreds of thousands of wrongful foreclosures, I embarked on a persistent plan of to raise interest and capital to put the program into use. This time the offer to payoff the old loan would come from (1) homeowners who could afford to make the offer and (2) investors who were willing to assume the apparent risk of paying $700,000 as a payoff, only to receive a mortgage and note equal to a much lower fair market value. But the new plan had a kicker for investors to assume that risk.

The plan worked for the few people who were homeowners, in foreclosure and who had the resources to make the offer. Unlike the buyback issue raised by Martha Coakley last week, the plan avoided any possible rule prohibiting the homeowner from getting the house back and in fact employed existing laws permitting the borrower to pay off the loan rather than suffer the loss of the property.

The offer specifies what constitutes proof for purposes of the offer and thus avoids varying interpretations by judges who might think one presumption or another carries the day for the banks. This plan requires actual transactional proof of payments for the origination and acquisition of the loan, and actual disclosure of the loss mitigation payments received by or on behalf of the creditors (investors).

As expected, the banks tried to say that they didn’t have to accept the money. They wanted the foreclosure. But nobody bought that argument. The myth that the bank was “reclaiming” the property was just that — a myth. The bank never owned the property. It was interesting watching the bank back peddle on producing proof that it MUST have had if it brought foreclosure proceedings. But they didn’t have it because it didn’t exist.

Banks claimed to have loaned money to the homeowner and thus were entitled to payment first, or failing that, THEN foreclosure. And what has resulted is an array of confidential settlements in which I cannot reveal the contents without putting the homeowner in danger of losing their home. Suffice it to say they were satisfied.

The reason I am writing about this again is that the latest development is a series of investors have approached me with a request for development of a plan that would put AMGAR into effect. They are looking for profit so that is what I am giving them in the new plan. This has not yet been launched but there are several iterations of the plan that may be offered through one or more entities. You might say this plan is published for comment although we are already processing candidates for which the plan would be used.

If I am right, along with everyone else who says the mortgages, assignments, transactions are all fake with no canceled checks, wire transfer receipts or anything else showing that they funded the origination or acquisition of the loan, then it follows that at the very least the mortgage is an unenforceable document even if it is recorded.

If things go according to plan, then the bank will be forced to either put up or shut up in court — either providing the reasonable proof required by the commitment or offer or suffer a dismissal or judgment for the homeowner. It would not be up to the Judge to state what proof was required. Instead the Judge would only be called upon to determine that the bank had failed to properly respond — giving information they should have had all along. The debt might theoretically exist payable to SOMEONE, but it wouldn’t be secured debt and therefore not subject to foreclosure. The mortgage encumbrance in the public records could then be removed by a court order. Title would be cleared.

Investors would be taking what appears to be a giant risk but obviously perception of the risk is declining.   If the bank comes up with verifiable proof of ownership and balance (according to the terms of the offer or commitment), then the investor pays the bank and gets back a note and mortgage for much less. If the bank loses and the mortgage encumbrance is removed as a result of the assumption of that risk, then the investor gets a fee — 30% of the original loan balance expressed in a new mortgage and note at market rates over 30 years.

So the payoff is quite large to the investors if their assumptions are correct. If they are incorrect they lose all the expenses advanced for the homeowner, all the expenses of selection and potentially the money they put in escrow or the court registry to show proof that the offer is real.

We are currently vetting potential candidates for this program both from the homeowner side and the investor side. This type of investment while potentially lucrative, poses a large risk of loss. People should not invest in such a program unless they do not rely on the money invested for their income or lifestyle. They should be qualified investors as specified by SEC rules even if the SEC rules don’t apply. No money will be accepted and no homeowner will be signed up for the program until we have concluded all registrations necessary for launching the program.

Homeowners who want to be considered as candidates for this program should acquire a title and securitization report, plus a review by our staff, including myself.

You should have a title and securitization report anyway, in my opinion. If you already have one then send it to neilfgarfield@hotmail.com. If you don’t have such a report but would like to obtain one call 954-495-9867 or 520-405-1688 to order the report and review. If you already know someone who does this work, then call them, but a review by a qualified person with a financial background is important as well as a review by a qualified, licensed attorney.

The Banks: Consideration is Irrelevant, Really? Then so is payment!

The issue is what are the elements of the loan contract? Who are the parties? And who can enforce it?

I would agree that an overpayment at closing from the source of funds is rare. What is not rare and in fact common is that the wire transfer instructions that accompany the wire transfer receipt often instructs the closing agent to refund any overpayment to the party who wired the money — not the originator. This leads to questions. If it is a true warehouse lender, such instructions could be explained without affecting the validity of the note or mortgage.

In truth, the procedures used usually prevent the originator from ever touching the flow of funds. Wall Street banks were afraid of fraud — that if the originators could touch the money, they might have faked a number of closings and taken the money. In short, the investment banks were afraid that the originators would not use the money the way it was intended. So instead of doing that, they created relationships by having the originators sign Assignment and Assumption agreements before they started lending. This agreement says the loan belongs to an “aggregator” that is merely a controlled entity of the broker dealer. But the money doesn’t come from either the originator or the aggregator. Thus they have an agreement that controls the loan closings but no consideration for that either.
But this is a lot like the insurance payments, proceeds of credit default swaps etc. The contracts almost always specifically waive subrogation or any other right of action against the borrowers or any other enforcement of the notes or mortgages. It has been presumed that these contracts were for the mitigation of losses and that is true. But they are payable to the broker dealers and not the trust or trust beneficiaries. The investment banks committed fraud when they represented to the insurers, FDIC, Fannie, Freddie and CDS counterparties that they had an insurable interest. Those parties presumed that the investment banks were creating these hedge products for the benefit of the owner of the mortgage bonds or the owner of the loans. But it was paid to the investment banks. That is why all those parties are claiming losses that resulted from fraud — all of which have resulted in settlements (except the Countrywide verdict for fraud).
The similarity is this: in both the closing with borrowers and the closings with investors the same fraud occurred. When dealing with the closing agent they interposed their nominee in the closing which resulted in no note and no mortgage in favor of the investors or the trust. Whether the closing agent is liable is another issue. The point is that the money came from a third party which was a controlled entity of the broker dealer. Thus the investor gets a promise from a trust that is not funded while their money is used to pay fees, create the illusion of trading profits for the broker dealer and funding mortgages.
The wire transfer is not a wire transfer from the originator, nor from the bank at which the originator maintains any account. The wire transfer instructions and the wire transfer receipt fail to identify the actual source of funds and fail to refer to the originator as a real party. If they did, there would not be a problem for the banks to enforce the note and mortgage. If they did, the banks would simply show the transaction record and there would be nothing to fight about.
The only occasion in which the banks appeared to be willing to provide adequate documentation for consideration appears to be in a merger or acquisition with the party that was named as the mortgagee in the mortgage document or the beneficiary in the deed of trust. And all the other transactions, the banks say that consideration is irrelevant or they quote the law that says that courts cannot question the adequacy of consideration. They are dodging the issue. We are not saying that consideration was not adequate; what we are saying is that there was no consideration at all. The banks are fighting this issue  because when it comes out that there really was no consideration the entire house of cards could fall.
 The issue is counterintuitive because everyone knows that there was money on the closing table. Unless the issue is argued and presented with clarity, it will appear to the judge that you are trying to say that there was no money on the closing table. And when a judge hears that, or thinks that he heard that, he or she will not take you seriously. There are three parts to every contract —  offer, acceptance, and consideration. A few courts have started to deal with this question. In the context of foreclosure litigation all three elements are in question. If the lenders are investors who believed that their money was being put into a trust that they were beneficiaries of a trust, they are unaware of the fact that their money is being offered to borrowers on terms that are contrary to their instructions. And the loan is not made on behalf of the investors or the trust. It is made on behalf of some sham entity controlled by the broker dealer. Sometimes the origination is made by an actual bank that is acting in the capacity of a sham lender. Either way the money came from the investors.
So the issue is not whether there was money on the table but rather whether there was a meeting of the minds between the investors and lenders in the homeowners as borrowers. The lender documents (trust documents) reveal far different terms of repayment than the borrower documents. Each of them signed on to a deal that actually didn’t exist because neither of them had agreed to the same terms.
 The fact that money was on the table at the time of the alleged closing of the loan can only mean that the homeowner owed money to repay the source of the money. This duty to repay arises by operation of law and extends from the homeowner to the investor despite the lack of any documentation that explicitly states that. The result is false documentation in which the homeowner was induced to sign under the mistaken belief that the payee on the note and the mortgagee on the mortgage was the source of funds.
If you receive funds from John Smith and the note and mortgage are drafted for the benefit of Nancy Jones as “lender” would that bother you? What would you do as closing agent? Why?

BeforeYou Open Your Mouth Or Write Anything Down, Know What You Are Talking About

EDITOR’S NOTE: By popular demand I am writing a new workbook that is up to date on the theories and practices of real estate loans, documentation, securitizations and effective enforcement and foreclosure of the collateral (real property — i.e., the house). The book will be finished around the end of January. If you want to purchase an advance subscription to an advance copy we can give you a discount off the price of $599. You will receive the final edit drafts of each section as completed. And your comments might be included in the final text with attribution. This is an excerpt from what I have done so far ( the references to “boxes” is a reference to artwork that has not yet been completed but the meaning is clear enough from the words):

[Note: I did borrow some phrases and cites from Judge Jennifer Bailey’s Bench Book for Judges in Dade County. But things have changed substantially since she wrote that guide and my book is intended to update the various treatises, books and articles on the subject of mortgage related litigation in the era of securitization]

 

INTRODUCTION

 

The massive volume of foreclosures and real estate closings have resulted in a failure of the judicial system — both Judges and Attorneys to scrutinize the transactions and foreclosures and other enforcement actions for compliance with basic contract law. This starts with whether there is an actual loan at the base of the tree of assignments, endorsements, powers of attorney etc. If the party at the base of the tree did not in fact make any loan and was not possessed of any actual or apparent authority to represent the party who DID make the loan, then the instruments executed in favor of the originator are void, not voidable. This is simply because the loan contract like any contract requires offer, acceptance and consideration. Lacking any meeting of the minds and/or consideration, there was no contract regardless of what one of the parties signed.

 

The interesting issue at the start of our investigation is how to define the loan contract. Is it a contract that arises by operation of statutory or common law? Is it a contract that arises by execution of instruments? What if the borrower executes an instruments that acknowledges receipt of money he never received from the party he thought was giving him the money? Is it possible for the written instruments to create a conflict between the presumptions at law arising from written, properly executed instruments and the real facts that gave rise to a contract that was created by operation of law?

 

These questions come up because there is no actual written loan contract. The borrower and lender do not come together and sign a contract for loan. The contract is implied from the documents and actions contemporaneously occurring at or around the time of the loan “closing.” It appears to be a case of first impression that the borrower is induced to sign documents in favor of someone who, at the end of the day, does NOT give him the loan. This never was a defect before the era of claims of securitization. Now it is central to the issue of establishing the identity and rights of a creditor and debtor and whether the debt is secured or unsecured.

 

Even where the loan contract is solid, the same legal and factual problems arise at the time of the alleged acquisition of the loan where assignments lack consideration because, like the above origination, an undisclosed third party was the actual source of funds.

 

 

 

Definitions:

 

 

 

1)   Debt: in the context of loans, the amount of money due from the borrower to the lender. This may include successors to the lender. In a simple mortgage loan the amount of money due, the identity of the borrower and the identity of the lender are clear. In cases where the mortgage loan is subject to claims of assignments, transfers, sales or securitization by either the borrower or the party claiming to be the lender or the successor to the lender, there are questions of fact and law that must be determined by the court based on the method by which the money advanced to or on behalf of the borrower that leads to a finding by the court of the identity of the party who advanced the money for the origination of the debt or for the acquisition of the debt.

 

a)    In all cases the debt arises by operation of law at the moment that the borrower receives the advance of money from a lender regardless of the method utilized and regardless of the validity of any instruments that were executed by either the borrower or the lender.

 

i)     The acceptance of the money by the borrower raises a strong presumption that the advance of money in the context of the situation was not a gift.

 

ii)    In simple loans the legal instruments that were executed by the borrower at the loan closing are presumptively supported by consideration as expressed in the note or mortgage and a valid contract presumptively exists such that the court can enforce the note and the mortgage.

 

b)   The factual circumstances and any written instruments that were executed by the parties as part of a loan contract govern terms of repayment of the debt.

 

c)    Enforcement of the repayment obligation of the borrower requires either a lawsuit on the loan of money or a lawsuit on a promissory note.

 

i)     If the lawsuit is on the loan of money plaintiff must state the ultimate facts upon which relief could be granted including the factual circumstances of the loan and the fact that the loan was made. In Florida — F.R.C.P. 1.110 (b), Form 1.936

 

ii)    The lawsuit is on a note plaintiff must state the ultimate facts upon which relief could be granted including that the plaintiff owns and holds the note, that Defendant owes the Plaintiff money, and state the amount of money that is owed. In Florida — F.R.C.P. 1.110 (b), Form 1.934

 

(1)Where the Plaintiff alleges it is a party by virtue of a sale, assignment, transfer or endorsement of the note, Plaintiffs frequently fail to allege the required elements in which case the Court should dismiss the complaint — unless the Defendant has already admitted the debt, the note, the mortgage, and the default.

 

(2)The burden of pleading and proving the required elements is on the Plaintiff and cannot be shifted to the defendant without violating the constitutional requirements of due process.

 

(3)Requiring the Defendant to raise a required but missing element of a defective complaint filed by a Plaintiff would require the Defendant to raise the missing element and then deny it as an attempt at stating an affirmative defense that raises no issue other than an element that was required to be in the complaint of the Plaintiff. This is reversible error in that it improperly shifts the burden of pleading onto the Defendant and requires the Defendant to prove facts mostly in the sole control of the Defendant and which would establish standing to bring the action.

 

d)   In those cases where the loan is subject to claims of assignments, transfers, sales or securitization by either party the court must decide on a case-by-case basis whether the legal consideration for the loan (i.e., the advance of money from lender to borrower or for the benefit of the borrower) supports the debt described in the legal instruments that were executed by the borrower at the loan closing.

 

i)     If the Court finds that the legal instruments that were executed by the borrower at the loan closing are not supported by consideration, then the debt simply exists by operation of law and is not secured.

 

(1)Such a finding could only be based on the court determining that the lender described in the legal instruments is a different party than the party who actually loaned the money.

 

(2)Warehouse lending arrangements may be sufficient for the court to determine that the named payee on the note or the identified lender supplied consideration. The court must determine whether the warehouse lender was an actual lender or a strawman, nominee or conduit.

 

ii)    If the court finds that the legal instruments that were executed by the borrower at the loan closing are supported by consideration, then a valid contract may be found to exist that the court can enforce.

 

2)   Mortgage: a contract in which a borrower agrees that the lender may sell the real property (as described in the mortgage) for the purposes of satisfying a debt described in a promissory note that is described in the mortgage contract. It must be a written instrument securing the payment of money or advances made to or on behalf of the borrower. A lien to secure payment of assessments for condominiums, cooperatives and homeowner association is treated as a mortgage contract, pursuant to the enabling documents. See state statutes. For example, F.S. 702.09, Fla. Stat. (2010)

 

a)    a mortgage, if properly perfected, creates a specific lien against the property and is not a conveyance of legal title or of the right of possession to the real property described in the mortgage contract. See state statutes. For example section 697.02, Fla. Stat. (2010), Fla. Nat’l Bank v brown, 47 So 2d 748 (1949).

 

b)   Mortgagee: the party to home the real property is pledged as collateral against the debt described in the note. Mortgagee is presumptively the party named in the mortgage contract. With the advent of MERS and other situations where there is an assignment of the mortgage (expressly or by operation of law) the named mortgagee might be a strawman or nominee for a party described as the lender. In such cases there is an issue of fact as to perfection of the mortgage contract and therefore the mortgage encumbrance resulting from the recording of the mortgage contract. See state statutes. For example F.S. 721.82(6), Fla. Stat. (2010).

 

i)     In Florida the term mortgagee refers to the lender, the secured party or the holder of the mortgage lien. There are several questions of fact and law that the court must determine in order to define and apply these terms.

 

c)    Mortgagor

 

d)   Lender: the party who loaned money to the borrower. If the lender was identified in the mortgage contract by name then the mortgage contract is most likely enforceable.

 

i)     If the lender described in the mortgage contract is a strawman, nominee or conduit then there is an issue of fact as to whether any party could claim to be a secured party under the mortgage contract. Under such circumstances the mortgage contract must be treated as naming no identified secured party. Whether this results in a finding that the mortgage contract is not complete, not perfected or not enforceable is a question of fact that is decided on a case-by-case basis.

 

e)    No right to jury trial exists for enforcement of provisions of the mortgage. However, a right to jury trial exists if timely demanded provided that the foreclosing party seeks judgment on the note or the loan, to wit: financial damages for financial injury suffered by the Plaintiff.

 

i)     Bifurcation of the trial for damages and trial for enforcement of the mortgage contract may be necessary if the basis for the enforcement of the mortgage is non-payment of the note. Any properly raised affirmative defenses relating to setoff or enforceability of the note would be raised in the case for damages.

 

ii)    In that case the trial on the breach of the note would first be needed to render a verdict on the default and then a trial on enforcement of the mortgage would be held before the court without a jury.  Any properly raised defense relating to fees and other costs assessed in enforcement of the mortgage contract.

 

iii)  A question of fact and law must be decided by the court in actions in which the plaintiff merely seeks to enforce the mortgage by virtue of an alleged default by the plaintiff but does not seek monetary damages. Florida Form 1.944 (Foreclosure Complaint) is not specific as to whether it is allowing for a single trial without jury.

 

(1)Since foreclosures are actions in equity, no jury trial is required, but it can be allowed. Since actions for damages require jury trial if properly demanded, it would appear that this issue was not considered when the Florida Form was created.

 

iv)  The requirement that the Plaintiff must own the loan is a requirement that the Plaintiff is not acting in a representative capacity unless it brings the action on behalf of a principal that is disclosed and alleges and attaches to the complaint an instrument that confers upon Plaintiff its authority to do so.

 

v)    Owning the loan means, as set forth in Article 9 of the UCC that the Plaintiff paid for it in money or other consideration that was equivalent to money. The same thing holds true under Article 3 of the UCC for enforcement of the note if the Plaintiff seeks the exalted status of Holder in Due Course which requires payment PLUS no knowledge of defenses all of which must be alleged and proven by the Plaintiff. [1]

 

3)   Note: a written instrument describing the terms of repayment or terms of payment to the payee or a legal successor in interest. In mortgage loans the payor is often described as the borrower. This instrument is usually described in the mortgage contract as the basis for the forced sale of the property. The note is part of a contract for loan of money. It is often considered the total contract. The loan contract is not complete without the loan of money from the payee on the note. If the lender was identified in the note by name then the note is most likely enforceable.

 


[1] In non-judicial states where the power of sale is recognized as a contractual right, the issue is less clear as to the alignment of parties, claims and defenses. In actions to contest substitution of trustees, notices of sale, notices of default etc. it is the borrower who must bring the lawsuit and in some states they must do so within a very short time frame. Check applicable state statutes. The confusion stems from the fact that the Borrower is actually denying the allegations that would have been made if the alleged beneficiary under the deed of trust had filed a judicial complaint. The trustee on the deed of trust probably should file an action in interpleader if a proper objection is raised but this does not appear to be occurring in practice. This leaves the borrower as the Plaintiff and requiring allegations that would, in judicial states, be either denials or affirmative defenses. Temporary restraining orders are granted but usually only on a showing that the Plaintiff has a likelihood of  prevailing — a requirement not imposed on Plaintiffs in judicial states where the lender or “owner” must file the complaint.

 

How Do I Use an Expert Declaration?

With judges under pressure to clear their calendar, the strategy of the banks in delaying prosecution of foreclosure cases is coming to an end. And the opportunity for the borrower, as well as a good reason for action, has just begun. An aggressive approach is more likely to yield good results than any strategy predicated upon delay. And judges are prone to blame the delay on the homeowner who wants to stay in his home rent-free for as long as possible.

So having an aggressive plan to prosecute the case with solid answers and affirmative defenses is key to getting the judges curiosity — why is the homeowner trying so hard to move the case along and the bank stonewalling and delaying the action alleging they need relief? Some lawyers, like Jeff Barnes, don’t know how to litigate with kid gloves on. When they take a case it is to draw blood and Barnes has established himself as not only an aggressive attorney but one who often wins a satisfactory result for his clients.

My expert declaration covers the gamut from property issues through UCC and contract issues. Securitization is something I understand very well — how it is intended to be used, how the law got passed exempting it from being characterized as securities or insurance products and how it was sold to Congress and Clinton as an innovative way to spread and reduce risk of loss, thus raising an investment with a medium degree of risk of loss to very low and therefore suitable for stable managed funds who are required to put their money into extremely low risk triple A rated investments.

All that said, for all I know and can say, neither my declaration nor testimony is ever dispositive in the final ruling of the case, with a few exceptions. On the other hand out of hundreds of times my declarations or testimony has been used in court, the number of times the banks have proffered an alternate “expert” to say I was wrong, mistaken or had used defective analysis to reach my conclusions is ZERO. And the banks took my deposition in a class action suit in which I was admitted as an expert witness in Federal Court — the deposition lasted six full working days 9:00am to 5:00pm. About the only negative thing they had to say after hours and hours of testimony was that my opinion was “grandiose” to which I answered that it was not nearly as grandiose as the fraud their clients were perpetrating upon our society.

So the most common question is how can I use your expert declaration? And the first answer I  always give is (a) my declaration, whether notarized or not, is never and should never be a substitute for actual facts applicable to the actual case which requires actual witnesses who have actual knowledge (usually from the opposition in discovery) and (b) you should have a plan for your case that does not call for a knock-out punch in the first hearing. If you think that is going to happen you are deluding yourself.

The most common attack on my affidavit is a motion to strike or a memorandum that alleges that I am not a credible expert. But the rules on admission of expert testimony are so lax that almost anyone can be admitted as an expert but he Judge is not required to presume the expert knows what he is talking about or has anything of value to offer. Thus a proper foundation of facts, timelines, paper trails and money trails needs to be laid out in front of the judge in a manner and form that makes it easy to understand. The declaration is only one step of a multistage process. When the opposition attacks the declaration, they are trying to distract the court from the real issues.

The best and most fruitful uses of an expert declaration are to use them when battling for information through the discovery. That is where cases are often won and lost, where cases end up being settled to the satisfaction of the borrower or lost, pending appeal. The expert declaration tells the court what the expert looked at and raises issues and opinions including the information that is absent which will resolve the issue of whether the forecloser actually has a cause of action upon which relief could be granted (an inquiry applicable to both judicial and non-judicial states).
Expert declarations have been used with success in hearings on discovery because it explains why you need to take the deposition of a specific witness or compel production of certain documents or compel answers to interrogatories. Once that order is entered agreeing that you are entitled to  the information it is often the case that the mater is settled within hours or days.
To a lesser degree expert declarations have been successful in non-judicial states where the homeowner seeks a temporary restraining order. And a fair amount of traction has been seen where it is used to show the court hat there are material issues of fact in dispute to defeat a motion for summary judgment, sometimes effective if there is a cross-motion for summary judgment for the homeowner where there is an effective attack on the affidavit filed in support of the forecloser’s motion for summary judgment.
The least traction for the expert declaration is where homeowners attempt to use it as a substitute for evidence — which means no live witnesses testifying to facts that lay the foundation for introduction of documents into evidence. And there are mixed results on motions to lift stay — but even where effective temporarily the debtor is usually required to file an adversary action.
After you file the declaration along with some pleading that states the purpose of the filing, you will most likely be met with a barrage of attacks on the use of the affidavit. They are trying to bait you into an argument about me and whether anything I said was true. Of course they do not submit an affidavit from an expert who comes to contrary conclusions; but even if the declaration is perfect, it is no substitute for real evidence. It is the reason why you need to get a court order requiring the forecloser to answer discovery and how they should answer it. It is support for why you believe your discovery will lead to admissible evidence or cut short the litigation. The declaration explains why you want to pursue the money trail to see of negotiation of the note and mortgage ever took place. The assignment says yes but if the payment isn’t there, no transaction exists. The UCC and contract law are in complete agreement — offer, acceptance and payment are required to enforce a contract. And on the offer side, you can either start with the investor or the borrower.
In live testimony it is my job to show the court what really happened not by piling presumption on opinions but by pointing to the facts you revealed in discovery and then explaining what transactions actually occurred. The only actual transaction — the only time money exchanged hands was when investors advanced money to be used for the acquisition or origination of loans.
But the intermediaries usurped the money and kept part of it instead of funding mortgages. And the intermediaries diverted title to the loan documents from the investors and claimed ownership so they could create the illusion of an insurable interest and the illusion of a risk of loss justifying the credit default swap contracts.
It was also used by the banks to sell worthless mortgage bonds to the Federal Reserve. We know now that the “trustee” of the REMIC trust never received any of the investment dollars advanced by the investors. The reason we know that the mortgage bonds are worthless is that there is no record of the existence of a trust account for the REMIC pool. Hence, the trust had no money to buy or originate the loan.

But it is nonetheless true that the investors advanced money and the borrowers got some of it. The amount received by or on behalf of the borrower is a legitimate debt owed by the borrowers to the investors as lenders. If you say otherwise, your entire argument will be viewed with justifiable skepticism. But the investors cannot be grouped by REMIC common law trusts under New York law because they too, like the assignments and allonges and endorsements, lack any money or other transfer of consideration in exchange  for the loan.

So we have consideration without a REMIC trust, without an enforceable contract which means that the debt existed but there were no agreed terms — the note and bond terms are very different, contrary to the requirements of TILA and Reg Z. Thus the investors may have received bonds issued by the REMIC trust, but their money never went into the trust contrary to the terms of the prospectus. So the investors are owed the money as a group by the borrowers as a group. That means the only way to refer to the investors as a group (contrary to their belief because they think their money went into the REMIC trust) is a partnership arising by operation of law. That is a common law general partnership. But because equitable liens a NOT allowed by law, they have n way to use the mortgage lien or the note. But they do have a claim, even if it is unsecured.

And the amount owed to the investors is different than the amount of principal on the defective notes and mortgages. That is because the investment bank took more money than it used for funding mortgages and pocketed the difference. So the transaction with the borrower gives rise to a liability to the investor lenders but the borrowers are only one of several co-obligors by contract and through tort theory. And the money received by the intermediary bank that claimed the bond and loans as their own using investor money should be credited to the receivable account of the investor. The argument here is that the investment banks cannot pretend to be agents of the investors for purpose for taking money from the investors and then claim not to be the agent for the purpose of receiving money from co-obligors including the homeowner.

It is only by untangling this mess that the request for modification from the investors can be directed to the right parties but that requires the investors’ identities to be revealed. There can be no meaningful modification, mediation or litigation without getting this straight.
Let’s start with the borrower. The borrower executes a note and mortgage. If the borrower denies ever getting a loan from the payee or mortgagee or beneficiary, then the issue is in dispute as to whether the borrower’s initial transaction was anything more than offer for someone to accept.
TILA says the lender must be disclosed, as well as common sense. If the payee was merely a nominee performing fee for service, then there is no payee and no mortgagee or beneficiary — and under property law there is nobody known to borrower who can execute a satisfaction of mortgage on the day of closing.
So we have the issuance of a note that might qualify as a security that is NOT exempted from registration and security regulations and/or the note and mortgage constitute an offer. The fact that there was no lender disclosed and no disclosed source of funds (a table funded loan labeled predatory per se by Reg Z and TILA) means that the terms of the note and the terms of the security instrument have not been accepted — and at this pointing our example there is only one party who can accept it — the party who loaned actual money to the borrower — I.e., the sourceof the  funds.
Now as it turns out that the source if funds was a group of investors who were not offered the note nor offered the terms expressed on the note and instead they agreed to the terms of the prospectus/indenture. But those terms were immediately breached just as the law was immediately broken when the borrower was tricked into executing a security issuance or an offer.
The investors thought their money was going into a REMIC trust just like the borrower trout that the originator was indeed his lender. Neither the investors nor the borrowers were told that there were dozens of intermediaries who were making money off of the issuance of the bond and the issuance of the note, neither of which bound the investor lender nor the borrower to anything. But nobody except the investment banks acting supposedly as intermediaries knew that the banks were claiming town both the bonds and the loans — at least long enough to trade on them.
Since the borrower did not agree to the terms of the bond and the investor didn’t agree to the terms of the note, they have no offer, they have no acceptance but they do have consideration. I have appeared in several class actions in Phoenix and Reno and dozens of cases in bankruptcy court, civil state and Federal cases.
Where the lawyer used my declaration as a means to an end — discovery, they got good results. Where they tried to suit in lieu of admissible evidence it is not so valuable. A few hundred motions for summary judgment have been turned down based upon my affidavit, but in other cases, the Judge accepted me as an expert but said that my opinion evidence was not supported by supporting affidavits from people with personal knowledge — I.e., competent witnesses to lay a competent foundation. Thus expert declarations are a valuable tool if they are backed up by real facts and issues — a task for the lawyer or pro se litigant, not the expert unless you are going to pay tens of thousands of dollars using the expert’s valuable time to perform clerical work.

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

Fannie and Freddie Ignore Homeowners in Detroit

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

SEE ALSO: http://WWW.LIVINGLIES-STORE.COM

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

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In the upside down world of the foreclosure of mortgages that are neither in default nor owned by the parties initiating foreclosure, and where applications for modification are submitted that clearly exceed federal standards for approval (and are denied)  and should come as no surprise that the government sponsored entities, Fannie and Freddie, canceled their appearance at a Metro Detroit foreclosure hearing which they had scheduled.

These are essentially federal agencies. Their first duty is to serve the country and its citizens. But they canceled their appearance because of pending litigation against them. Here was an opportunity for them to understand the impact of foreclosure on families, businesses, investors and the government. Here was an opportunity for them to utilize information provided to them by people on the ground to fashion remedies that are appropriate and legal.

This is all part of state and federal government policy to sweep the mortgage tragedies under the rug. Despite the fact that we know that most of the foreclosures that have already been deemed completed were in fact illegal, we have had millions of “auction sales” in which strangers to the transaction were awarded title to the house without ever having made a single payment of any amount of money to originate or acquire the loan that was allegedly in default but which was fatally defective and certainly not in default  despite the illusions created by Wall Street banks.

I am leading the charge on this one. It is my intention to file suit against the Wall Street banks who have accepted monthly payments, short sale payments, and full payments on loans that were subject to claims of securitization. In fact, my law firm is offering to represent homeowners who lost or sold their homes on a contingency fee, as long as only economic damages are sought. It is my goal to show payments to the sub servicer or anyone else in the false securitization chain should never have been made and were never due. It is my opinion that these payments are owed back to the homeowner in all events, together with interest, costs of the court action, and attorney fees where those are provided by statute or contract.  Each case will be evaluated as to viability utilizing this strategy.

If Bank of America or any other bank responds to an estoppel letter for payoff or short sale without knowing or showing that they have paid for the origination or acquisition of the loan, then they have no business providing the estoppel information or approving or denying a request for a short sale. Their acceptance of the money at closing and their execution of a satisfaction of mortgage or release and reconveyance is a sham. In the absence of any other creditor demanding payment and showing that they are in fact a true creditor (having paid actual money for the origination or acquisition of the loan), proceeds of all such closings should, in my opinion, go to the homeowner. If the bank got the money, it is my opinion that the bank should be sued for recovery of the entire proceeds of the closing.

Each of those closings described above represents a gift to the banks and a horror show for the homeowner and many attorneys for homeowners. The spin machine for the banks has created the illusion that homeowners are seeking a free home when in fact it is the banks that are seeking and getting free money and free homes. In auction sales where the banks are submitting a credit bid, they do not qualify as a creditor who can submit a credit bid. But the credit bid is accepted anyway and the bank gets the house for free despite the fact that the bank has no status as a creditor or even the authorized representative of a creditor.

Fannie and Freddie are colluding with the banks and the federal reserve  to maintain the illusion that the notes and mortgages are in proper form, were properly executed, and contain true representations concerning the real parties in interest. Many theories have been advanced as to why the Federal Reserve and other agencies are colluding with the banks. I think the reason is because many layers of policies are based upon the false assumption that the origination of the loans complied with existing laws, rules and regulations. The federal reserve and other federal agencies would look pretty stupid if they had paid or advanced trillions of dollars for worthless notes and mortgages and worthless mortgage bonds.

It is highly probable that the reason why the real lenders (investors) have not pursued loss mitigation with homeowners directly is that they know the note and mortgage is unenforceable and they have said so in their lawsuits against the investment banks that sold them the bogus mortgage bonds. What they don’t fully appreciate is the fact that most homeowners would willingly give them a valid mortgage and note based upon the reality of the current market. But the intermediaries (servicers) are doing everything possible to prevent modification or successful mediation of claims; which of course results from those intermediaries falsely claiming to be owners of loans that were funded by investors and falsely claiming losses on those loans that were paid by insurance and credit defaults swaps. Those intermediaries are the leading Wall Street banks in this mortgage mess. As long as we include them in the process of resolving the mortgage meltdown, the problems will be compounded rather than cured.

http://www.huffingtonpost.com/2013/05/18/detroit-foreclosure-hearing-fannie-mae-freddie-mac_n_3293854.html

Fed Pours Huge Sums Into Foreign Bank Coffers
http://www.ritholtz.com/blog/2013/05/fed-pours-huge-sums-into-foreign-bank-coffers/

Nearly half of all US homeowners with a mortgage still ‘underwater’ in Q1
http://www.inman.com/2013/05/22/nearly-half-of-all-us-homeowners-with-a-mortgage-still-underwater-in-q1/

Foreclosure Victims Protesting Wall Street Impunity Outside DOJ Arrested, Tasered
http://www.truth-out.org/news/item/16527-victims-of-foreclosure-arrested-tasered-protesting-wall-street-impunity-outside-doj

Foreclosure Fraud Failures Come To A Head In Justice Dept. Protest
http://jdeanicite.typepad.com/i_cite/2013/05/foreclosure-fraud-failures-come-to-a-head-in-justice-dept-protest.html

Bank of America Zombie Foreclosure Protest (VIDEO)
http://4closurefraud.org/2013/05/22/bank-of-america-zombie-foreclosure-protest-video/

This is what it looks like when foreclosure fighters demand Wall Street criminals be prosecuted
http://www.youtube.com/watch?v=zvwaFJdr13Q

Chasing The Shadow Of Money
http://zerohedge.blogspot.ca/2009/05/chasing-shadow-of-money.html

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