Banks Fighting Subpoenas From FHFA Over Access to Loan Files

Posted on January 31, 2017 by Neil Garfield

Whilst researching something else I ran across the following article first published in 2010. Upon reading it, it bears repeating.

Get a consult! 202-838-6345

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

In a nutshell this is it. The Banks are fighting the subpoenas because if there is actually an audit of the “content” of the pools, they are screwed across the board.

My analysis of dozens of pools has led me to several counter-intuitive but unavoidable factual conclusions. I am certain the following is correct as to all residential securitized loans with very few (2-4%) exceptions:

  1. Most of the pools no longer exist.
  2. The MBS sold to investors and insured by AIG and the purchase and sale of credit default swaps were all premised on a general description of the content of the pool rather than a detailed description with the individual loans attached on a list.
  3. Each Prospectus if it carried any spreadsheet listing loans, contained a caveat that the attached list was by example only and not the real loans.
  4. Each distribution report contained a caveat that the parties who created it and the parties who delivered it did not guarantee either authenticity or reliability of the report. They even had specific admonitions regarding the content of the distribution report.
  5. NO LOAN ACTUALLY MADE IT INTO ANY POOL. The evidence is clear: nothing was done to assign, indorse or deliver the note to the investors directly or indirectly until a case went into litigation AND a hearing was scheduled. By that time the cutoff date had been breached and the loan was non-performing by their own allegation and therefore was not acceptable into the pool.
  6. AT ALL TIMES LEGAL TITLE TO THE PROPERTY WAS MAINTAINED BY THE HOMEOWNER EVEN AFTER FORECLOSURE AND SALE. The actual creditor who submitted a credit bid was not the creditor. The sale is either void or voidable.
  7. AT ALL TIMES LEGAL TITLE TO THE LOAN WAS MAINTAINED BY THE ORIGINATING “LENDER”. Since there was no assignment, indorsement or delivery that could be recognized at law or in fact, the originating lender still owns the loan legally BUT….
  8. AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the Lender and payee on the note, both created a LEGAL obligation from the borrower to the Lender and at the same time, the LEGAL obligation was extinguished because the LEGAL Lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.
  9. Since the Legal obligation was both created and extinguished contemporaneously with each other, any remaining obligation to any OTHER party became unsecured since the security instrument (mortgage or deed of trust) refers only to the promissory note executed by the borrower.
  10. At the time of closing, the investor-lenders were the real parties in interest as lenders, but they were not disclosed nor were the fees of the various intermediaries who brought the investor-lender money and the borrower’s loan together.
  11. ALL INVESTOR-LENDERS RECEIVED THE EQUIVALENT OF A BOND — A PROMISE TO PAY ISSUED BY A PARTY OTHER THAN THE BORROWER, PREMISED UPON THE PAYMENT OR RECEIVABLES GENERATED FROM BORROWER PAYMENTS, CREDIT DEFAULT SWAPS, CREDIT ENHANCEMENTS, AND THIRD PARTY INSURANCE.
  12. Nearly ALL investor-lenders have been paid sums of money to satisfy the promise to pay contained in the bond. These payments always exceeded the borrowers payments and in many cases paid the obligation in full WITHOUT SUBROGATION.
  13. NO LOAN IS IN ACTUAL DEFAULT OR DELINQUENCY. Since payments must first be applied to outstanding payments due, payments received by investor-lenders or their agents from third party sources are allocable to each individual loan and therefore cure the alleged default. A Borrower’s Non-payment is not a default since no payment is due.
  14. ALL NOTICES OF DEFAULT ARE DEFECTIVE: The amount stated, the creditor, and other material misstatements invalidate the effectiveness of such a notice.
  15. NO CREDIT BID AT AUCTION WAS MADE BY A CREDITOR. Hence the sale is void or voidable.
  16. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO DEDUCTIONS FOR THIRD PARTY PAYMENTS.
  17. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR UNJUST ENRICHMENT THAT IS UNSECURED.
  18. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR A LIEN TO REFLECT THE INTENTION OF THE INVESTOR-LENDER AND THE INTENTION OF THE BORROWER.  Both the investor-lender and the borrower intended to complete a loan transaction wherein the home was used to collateralize the amount due. The legal satisfaction of the originating lender is not a deduction from the equitable satisfaction of the investor-lender. THUS THE PARTIES SEEKING TO FORECLOSE ARE SUBJECT TO THE LEGAL DEFENSE OF PAYMENT AT CLOSING BUT THE INVESTOR-LENDERS ARE NOT SUBJECT TO THAT DEFENSE.
  19. The investor-lenders ALSO have a claim for damages against the investment banks and the string of intermediaries that caused loans to be originated that did not meet the description contained in the prospectus.
  20. Any claim by investor-lenders may be subject to legal and equitable defenses, offsets and counterclaims from the borrower.
  21. The current modification context in which the securitization intermediaries are involved in settlement of outstanding mortgages is allowing those intermediaries to make even more money at the expense of the investor-lenders.
  22. The failure of courts to recognize that they must apply the rule of law results not only in the foreclosure of the property, but the foreclosure of the borrower’s ability to negotiate a settlement with an undisclosed equitable creditor, or with the legal owner of the loan in the property records.

Loan File Issue Brought to Forefront By FHFA Subpoena
Posted on July 14, 2010 by Foreclosureblues
Wednesday, July 14, 2010

foreclosureblues.wordpress.com

Editor’s Note….Even  U.S. Government Agencies have difficulty getting
discovery, lol…This is another excellent post from attorney Isaac
Gradman, who has the blog here…http://subprimeshakeout.blogspot.com.
He has a real perspective on the legal aspect of the big picture, and
is willing to post publicly about it.  Although one may wonder how
these matters may effect them individually, my point is that every day
that goes by is another day working in favor of those who stick it out
and fight for what is right.

Loan File Issue Brought to Forefront By FHFA Subpoena

The battle being waged by bondholders over access to the loan files
underlying their investments was brought into the national spotlight
earlier this week, when the Federal Housing Finance Agency (FHFA), the
regulator in charge of overseeing Fannie Mae and Freddie Mac, issued
64 subpoenas seeking documents related to the mortgage-backed
securities (MBS) in which Freddie and Fannie had invested. The FHFA
has been in charge of overseeing Freddie and Fannie since they were
placed into conservatorship in 2008.

Freddie and Fannie are two of the largest investors in privately
issued bonds–those secured by subprime and Alt-A loans that were often
originated by the mortgage arms of Wall St. firms and then packaged
and sold by those same firms to investors–and held nearly $255 billion
of these securities as of the end of May. The FHFA said Monday that it
is seeking to determine whether issuers of these so-called “private
label” MBS misled Freddie and Fannie into making the investments,
which have performed abysmally so far, and are expected to result in
another $46 billion in unrealized losses to the Government Sponsored
Entities (GSE).

Though the FHFA has not disclosed the targets of its subpoenas, the
top issuers of private label MBS include familiar names such as
Countrywide and Merrill Lynch (now part of BofA), Bear Stearns and
Washington Mutual (now part of JP Morgan Chase), Deutsche Bank and
Morgan Stanley. David Reilly of the Wall Street Journal has written an
article urging banks to come forward and disclose whether they have
received subpoenas from the FHFA, but I’m not holding my breath.

The FHFA issued a press release on Monday regarding the subpoenas
(available here). The statement I found most interesting in the
release discusses that, before and after conservatorship, the GSEs had
been attempting to acquire loan files to assess their rights and
determine whether there were misrepresentations and/or breaches of
representations and warranties by the issuers of the private label
MBS, but that, “difficulty in obtaining the loan documents has
presented a challenge to the [GSEs’] efforts. FHFA has therefore
issued these subpoenas for various loan files and transaction
documents pertaining to loans securing the [private label MBS] to
trustees and servicers controlling or holding that documentation.”

The FHFA’s Acting Director, Edward DeMarco, is then quoted as saying
““FHFA is taking this action consistent with our responsibilities as
Conservator of each Enterprise. By obtaining these documents we can
assess whether contractual violations or other breaches have taken
place leading to losses for the Enterprises and thus taxpayers. If so,
we will then make decisions regarding appropriate actions.” Sounds
like these subpoenas are just the precursor to additional legal
action.

The fact that servicers and trustees have been stonewalling even these

powerful agencies on loan files should come as no surprise based on

the legal battles private investors have had to wage thus far to force

banks to produce these documents. And yet, I’m still amazed by the

bald intransigence displayed by these financial institutions. After

all, they generally have clear contractual obligations requiring them

to give investors access to the files (which describe the very assets

backing the securities), not to mention the implicit discovery rights

these private institutions would have should the dispute wind up in

court, as it has in MBIA v. Countrywide and scores of other investor

suits.

At this point, it should be clear to everyone–servicers and investors
alike–that the loan files will have to be produced eventually, so the
only purpose I can fathom for the banks’ obduracy is delay. The loan
files should, as I’ve said in the past, reveal the depths of mortgage
originator depravity, demonstrating convincingly that the loans never
should have been issued in the first place. This, in turn, will force
banks to immediately reserve for potential losses associated with
buying back these defective mortgages. Perhaps banks are hoping that
they can ward off this inevitability long enough to spread their
losses out over several years, thereby weathering the storm caused (in
part) by their irresponsible lending practices. But certainly the
FHFA’s announcement will make that more difficult, as the FHFA’s
inherent authority to subpoena these documents (stemming from the
Housing and Economic Recovery Act of 2008) should compel disclosure
without the need for litigation, and potentially provide sufficient
evidence of repurchase obligations to compel the banks to reserve
right away. For more on this issue, see the fascinating recent guest
post by Manal Mehta on The Subprime Shakeout regarding the SEC’s
investigation into banks’ processes for allocating loss reserves.

Meanwhile, the investor lawsuits continue to rain down on banks, with
suits by the Charles Schwab Corp. against Merrill Lynch and UBS, by
the Oregon Public Employee Retirement Fund against Countrywide, and by
Cambridge Place Investment Management against Goldman Sachs, Citigroup
and dozens of other banks and brokerages being announced this week. If
the congealing investor syndicate was looking for political cover
before staging a full frontal attack on banks, this should provide
ample protection. Much more to follow on these and other developments
in the coming days…
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Posted by Isaac Gradman at 3:46 PM

Filed under: bubble, CASES, CDO, CORRUPTION, Eviction, evidence, expert witness, Fannie MAe, foreclosure mill, forms, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, trustee | Tagged: , , , , , , , , , , , | 31 Comments »

Post Mortum on 2010 “Bad” Decision in Florida

Posted on November 14, 2014 by Neil Garfield

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

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See CitiBank v Delassio 756 F Supp 2d 1361 2010

This case is often cited by servicers and banks to enforce a note and/or mortgage. Lots of people regarded this decision as “bad” because it approved the foreclosure. The natural impulse is to run from this decision and try to cite others that conflict with it. But this decision was correct AND it provides a blueprint for making your defense successful. The Judge correctly analyzed the law and the facts and found that the homeowner had not proven anything or objected to anything that would prevent Citi from proving its prima facie case and had not proven anything or objected to anything that would have supported any of the homeowner’s defenses.

So I thought I would take this case, as I have done before, and examine it for clues on how the same Judge would have decided the case differently. Used properly this might enable the homeowner to cite to this case in support of a motion to dismiss, motion for summary judgment or to attack the prima facie case of the party initiating foreclosure. There are also plenty of clues as to proving an affirmative defense in which the final result will be that the mortgage is void or unenforceable and perhaps the note as well, leaving the debt, which arises by operation of law and is owed to the party who physically gave the borrower the money.

  1. LACK OF JURISDICTION — VOID MORTGAGE AND VOID NOTE: The first issue is that for reasons unknown, the borrower failed to bring up the fact that the “lender” did not legally exist in Florida and further failed to object to the finding that AHMSI and  American Brokers Conduit were “one in the same [sic]”. In fact, I wonder if the case could not still be overturned on the basis of lack of jurisdiction and perhaps even that the mortgage was void, thus depriving the court of both in rem jurisdiction and in personam jurisdiction. Perhaps the homeowner did not authorize investigation into the parties. But had he done so he would have found that American Brokers Conduit (the “lender”) did not exist in law or in fact. Any claim that ABC was the alter ego or Trade Name of AHMSI was not explored in the opinion. And as to AHMSI, what difference does it make if they were supposedly the true lender under Florida law? The note and mortgage were both defective and the disclosures were deficient in failing to identify the actual party, which, as we shall see below, would have changed the view of the case entirely.
  2. POOLING AND SERVICING AGREEMENT: The title of the case involves U.S. Bank “as indenture trustee.” By stating that without explanation the homeowner ought to be able to inquire about the indenture, where it exists, and ask for a copy. That would be the Pooling and Servicing Agreement, which makes all arguments about the irrelevance of the PSA moot. Failure to raise the question of where the trustee derived its powers, where the servicer derived its powers, and where the terms and provisions can be found for the duties of the servicer or trustee essentially waives the issue of securitization (false or not). By raising the issue appropriately the homeowner can then inquire as to whether the trust actually owns the debt or is a holder in due course. The holding by the judge in this case that the Trust was a holder in due course was wrong —but not wrong on the facts and admissions by both sides in this case. Hence the decision was inevitable even though the real facts did not support the conclusion. The accepted facts of the case were contrary to the actual facts.
  3. FDCPA CLAIMS: The homeowner settled with AHMSI regarding fair debt collection practices. This might have been a mistake and might have been the reason that the Judge regarded AHMSI and American Brokers Conduit as the same thing. The settlement probably was worded in a way that prevented the homeowner from raising the authority of ABC to assign anything, much less record a mortgage or transfer a note that it could not have funded because it never existed — at least in Florida. I have several cases where the lender is very concerned about the FDCPA claims and needs a settlement. They obviously know that there is danger in those hills and that should be exploited by borrowers when challenging the debt, note, mortgage or foreclosure.
  4. TILA AND RESPA DISCLOSURES: Amongst the agreed facts, the court found that the borrower closed the loan with ABC, and based upon the only issues raised by the borrower, found that the disclosures were proper, and that any discrepancies worked to the borrower’s advantage and therefore did not constitute a violation of the Truth in Lending Act (TILA) or the Real Estate Settlement Procedures Act (RESPA). Hence there was no right to rescind either under the 3 day rule or the 3 year rule. Despite the fact that the borrower announced rescission within the 3 years, the court properly found against the borrower. Citi by filing the foreclosure suit, was in substantial compliance with the requirement that it timely file a declaratory action regarding the right to rescind. So if the court had found that there was no closing because ABC did not exist and that the disclosures were inadequate because the borrower raised the issues of disclosing the lender (and avoiding the predatory per se finding by Reg Z), then the same Judge who entered this order probably would have said the rescission right was at least in play and might well have decided, as per the express terms of TILA, that the mortgage was nullified by operation of law by the announcement of rescission. [Note: This issue is currently being considered by the U.S. Supreme Court]
  5. RESCISSION: This in turn leads to the question: if ABC didn’t exist and therefore didn’t actually loan any money then who did? The only thing we can agree on, up to a point ( but that is the subject of another article), is that the borrower did get money and that the receipt of the money is presumed, by operation of law to create a debt in which the borrower is the debtor and the source of funds is the creditor. The failure to disclose a table funded loan or worse, a naked nominee or conduit providing funds from investors who didn’t know how their money was being used, is a material violation of the disclosure requirements in TILA. That is why Reg Z underscores the importance of that disclosure by saying that failure to do so constitutes conduct that is “predatory per se.” And you can prove that by citing to this same case. Hence the rescission would have or at least could have been found to have been complete and the mortgage nullified, thus paving the way for the borrower to get alternative financing,  quiet title or other other remedies.
  6. PREDATORY LOANS: It is unclear what exactly went on at the trial level  with regards to an obviously “trick” loan that fails to disclose its hidden terms in a way that the borrower would any possibility of understanding. The only thing the borrower knew or understood is that he was getting a low interest loan. No reasonable person would sign a loan in which they understood that the interest rate was only good for one month. If you want to win on this point ,though, you need more than the testimony of the borrower. You  need a mortgage broker or other professional that would testify that the loan was unworkable from the start, doomed to failure and was illegally funded from investor funds, and illegally sold to the borrower under false pretenses. THAT is how you prove unclean hands which would prevent enforcement of the mortgage.
  7. UCC: There is an interesting juxtaposition in the “Legal Analysis” of the opinion. The court finds that the Trust was a holder in due course. And this case can be cited for the elements of being a holder in due course. I would encourage foreclosure defense lawyers to do so because you can start out by saying in this case in which the Federal District Court found against the borrower, the elements of the status of holder in due course are summarized. If you go down to the end of the first paragraph in the legal analysis the quote about payment opens the door for your attack against the holder in due course status. Did the Trust prove or show that it PAID for the note and mortgage without knowledge of borrower’s defenses, without knowledge that it was already in default, and in good faith, and did the Trust get delivery (which according to the pleadings, they did not because the note was initially “lost”). Hence the same court that stated that the trust was an HIDC finds that PAYMENT “goes to the heart of the agreement”. If the trust cannot show it paid anything, then two questions arise, to wit: why not? and why did the endorser or assignor of the “loan” transfer or purport to transfer the loan documents to the trust without receiving any payment? If you follow that logic down the line you will corroborate your argument that ABC gave no money to the borrower and that was why ABC never received any money for the transfer of the paper, which now is visible as being entirely worthless, fraudulent and false.
  8. ENDORSEMENT OR ASSIGNMENT IN SECURITIZATION SCHEME: The court correctly states that under the UCC a transferee of negotiable paper can get the right to enforce the paper either by endorsement or assignment. Because the issue was apparently not raised, the court failed to address the issue of whether the enforcement could succeed at trial (as opposed to the pleading stage) if the identity of the creditor is not disclosed. The question at trial or deposition should be, if the witness is from the servicer entity, and assuming the current servicer entity had anything to do with processing payments from the borrower and to the creditor, “who did you pay?” What the court failed to deal with (presumably because the homeowner did not bring it up) is that the party claiming rights (the trustee for the trust) must show that the loan actually went into the trust because it was paid for and properly delivered. If no objection is raised, then the court can correctly presume that those elements are present. If a proper objection is made then the Plaintiff should be required and often is required now to prove the elements of a holder in due course. In cases where my team has been directly involved in litigation the opposing lawyer tried to wriggle out of this problem by declaring that the trust is not a holder in due course and that therefore they had no requirement to prove those elements. They are essentially hoping that the court won’t know the difference between a holder and holder in due course. A mere holder must establish that it has the rights to enforce on behalf of a party who actually owns the debt by identifying that party and identifying the instrument by which the “holder” was given authority to enforce. In the case of a trust that is impossible because by all accounts the trust is the final resting stop of the claims of securitization of loans. So you end up with an empty trust, in which neither the servicer nor the trustee have any legal rights to do anything with the debt created by the borrower when he accepted the money at “closing.” He still owes a debt, and if the opposition would comply with discovery requests we would know the identity of the party to whom he owes the debt. But one thing is for certain, he cannot ALSO owe a second debt created by signature on a note and mortgage made out in favor of a party who loaned him any money. The key to this is emphasizing that a holder must prove the loan in its claimed chain. But the loan will probably be presumed to exist within the chain if the borrower fails to object and raise the issues.
  9. DELIVERY: There is considerable confusion in the case as to the issue of delivery apparently because neither party made an issue about it. The court concludes that Citi got delivery of the loan documents (versus the lost note account that was later abandoned) but fails to show how that delivery constitutes delivery to the trust when the PSA obviously contains strict provisions as to delivery and New York law governing the trust requires any transaction outside the authority stated in the trust to be void.
  10. ECONOMIC WASTE: This decision stands for the proposition that economic waste is a proper affirmative defense, but unless you actually prove it with reliable, credible testimony about facts and documents, merely alleging an affirmative defense and hoping that somehow the opposition will stumble into an admission, is not a very good strategy.

Filed under: foreclosure | Tagged: , , , , , , , , , , , , , , , , | 27 Comments »

Re-Orienting the Parties to Clarify Who is the Real Plaintiff

Posted on June 11, 2010 by Neil Garfield

The procedural motion missed by most lawyers is re-orienting the parties. Just because you are initially the plaintiff doesn’t mean you should stay that way. Once it is determined that the party seeking affirmative relief is seeking to sell your personal residence and that all you are doing is defending, they must become the plaintiff and file a lawsuit against you which you have an opportunity to defend. A Judge who refuses to see that procedural point is in my opinion committing clear reversible error.

If the would-be forecloser could not establish standing and/or could not prove their case in a judicial foreclosure action, there is no doubt in my mind that the ELECTION to use the power of sale is UNAVAILABLE to them. They must show the court that they have a prima face case and the homeowners must present a defense. But that can only be done if the parties are allowed to conduct discovery. Otherwise the proceedings are a sham, and the Judge is committing error by giving the would-be forecloser the benefit of the doubt (which means that the Judge is creating an improper presumption at law).

If the Judge says otherwise, then he/she is putting the burden on the homeowner. But the result is the same. Any contest by the would-be forecloser should be considered under the same rules as a motion to dismiss, which means that all allegations made by the homeowner are taken as true for purposes of the preliminary motions.

Some people have experienced the victory of a default final judgment for quiet title only to have it reversed on some technical grounds. While this certainly isn’t the best case scenario, don’t let the fight go out of you and don’t let your lawyer talk you into accepting defeat. Reversal of the default doesn’t mean anyone won or lost. It just means that instead of getting the ultimate victory by default, you are going to fight for it. The cards are even more stacked in your favor with the court decisions reported over the last 6 months and especially over the last two weeks. See recent blog entries and articles.

All that has happened is that instead of a default you will fight the fight. People don’t think you can get the house for free. Their thinking is based upon the fact that there IS an obligation that WAS created.

The question now is whether the Judge will act properly and require THEM to have the burden of proof to plead and prove a case in foreclosure. THEY are the party seeking affirmative relief so they should have the burden of pleading and proving a case. Your case is a simple denial of default, denial of their right to foreclose and a counterclaim with several counts for damages and of course a count for Quiet Title. As a guideline I offer the following which your lawyer can use as he/she sees fit.

The fact that you brought the claim doesn’t mean you have to plead and prove their case. Your case is simple: they did a fraudulent and wrongful foreclosure because you told them you denied the claim and their right to pursue it. That means they should have proceeded judicially which of course they don’t want to do because they can’t make allegations they know are not true (the note is NOT payable to them, the recorded documentation prior to sale doesn’t show them as the creditor etc.).

I don’t remember if MERS was involved in your deal but if it was the law is getting pretty well settled that MERS possesses nothing, is just a straw man for an undisclosed creditor (table funded predatory loan under TILA) and therefore can neither assign nor make any claim against the obligation, note or mortgage.

Things are getting much better. Follow the blog — in the last two weeks alone there have been decisions, some from appellate courts, that run in your favor. There is even one from California. So if they want to plead a case now in foreclosure they must first show that they actually contacted you and tried to work it out. Your answer is the same as before. I assume you sent a qualified written request. Under the NC appellate decision it is pretty obvious that you do have a right of action for enforcement of RESPA. They can’t just say ANYONE contacted you they must show the creditor contacted you directly or through an authorized representative which means they must produce ALL the documentation showing the transfers of the note, the PSA the assignment and assumption agreement etc.

They can’t produce an assignment dated after the cutoff date in the PSA. They can’t produce an assignment for a non-performing loan. Both are barred by the PSA. So there may have been an OFFER of assignment  but there was no authority to accept it and no reasonable person would do so knowing the loan was already in default. And they must show that the loan either was or was not replaced by cash or a substitute loan in the pool, with your loan reverting back to the original assignor. Your loan probably is vested in the original assignor who was the loan aggregator. If it’s in the pool it is owned by the investors, collectively. There is no trust nor any assets in the trust since the ownership of the loans were actually conveyed when the investors bought the mortgage backed securities. They don’t want you going near the investors because when you compare notes, the investors are going to realize that the investment banker did not invest all the money that the investor gave the investment banker — they kept about a third of it for themselves which is ANOTHER undisclosed yield spread premium entitling you to damages, interest and probably treble damages.

The point of all this is that it is an undeniable duty for you to receive disclosure of the identity of the creditor, proof thereof, and a full accounting for all receipts and disbursements by the creditor and not just by the servicer who does not track third party payments through insurance, credit default swaps and other credit enhancements. It’s in federal and state statutes, federal regulations, state regulations and common law.

The question is not just what YOU paid but what ANYONE paid on your account. And even if those payments were fraudulently received and kept by the investment banker and even if the loan never made it through proper assignment, indorsement, and delivery, those payments still should have been allocated to your account, according to your note first to any past due payments (i.e., no default automatically, then to fees and then to the borrower). That is a simple breach of contract action under the terms of the note.

Again they don’t want to let you near those issues in discovery or otherwise because the fraud of the intermediaries would be instantly exposed. So while you have no automatic right to getting your house free and clear, that is often the result because they would rather lose the case than let you have the information required to prove or disprove their case in foreclosure. The bottom line is that you don’t want to let them or have the judge let them (Take an immediate interlocutory appeal if necessary) use the power of sale which is already frowned upon by the courts and use it as an end run around the requirements of due process, to wit: if you think you have a claim you must plead and prove it and give the opposition an opportunity to defend.

The procedural motion missed by most lawyers is re-orienting the parties. Just because you are initially the plaintiff doesn’t mean you should stay that way. Once it is determined that the party seeking affirmative relief is seeking to sell your personal residence and that all you are doing is defending, they must become the plaintiff and file a lawsuit against you which you have an opportunity to defend. A Judge who refuses to see that procedural point is in my opinion committing clear reversible error.

The worst case scenario if everything is done PROPERLY is that you get the full accounting, you are not in default (unless there really were no third party payments which is extremely unlikely) and they must negotiate new terms based upon all the money that is owed back to you, which might just exceed the current principal due on the loan — especially once you get rid of the fabricated fees and costs they attach to the account (see Countrywide settlement with FTC on the blog).

Filed under: CASES, CORRUPTION, evidence, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, Mortgage, Motion Practice and Discovery, Motions, Pleading, securities fraud, Securitization Survey, trustee, workshop | Tagged: , , , , , , , , , , , , , , , , , , , | 13 Comments »

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