California Suspends Dealings with Wells Fargo

The real question is when government agencies and regulators PLUS law enforcement get the real message: Wells Fargo’s behavior in the account scandal is the tip of the iceberg and important corroboration of what most of the country has been saying for years — their business model is based upon fraud.

Wells Fargo has devolved into a PR machine designed to raise the price of the stock at the expense of trust, which in the long term will most likely result in most customers abandoning such banks for fear they will be the next target.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://www.sacbee.com/news/politics-government/capitol-alert/article104739911.html

John Chiang, California Treasurer, has stopped doing business with Wells Fargo because of the scheme involving fraud, identity theft and customer gouging for services they never ordered on accounts they never opened. It is once again time for Government to scrutinize the overall business plan and business map of Wells Fargo and indeed all of the top (TBTF) banks.

Wells Fargo is attempting to do crisis management, to wit: making sure that nobody looks at other schemes inside the bank.

It is the Consumer Financial Protection Bureau (CFPB) that was conceived by Senator Elizabeth Warren who has revealed the latest example of big bank fraud.

The simple fact is that in this case, Wells Fargo management made an absurd demand on their employees. Instead of the national average of 3 accounts per person they instructed managers and employees to produce 8 accounts per customer. Top management of Wells Fargo have been bankers for decades. They knew that most customers would not want, need or accept 5 more accounts. Yet they pressed hard on employees to meet this “goal.” Their objective was to defraud the investing public who held or would buy Wells Fargo stock.

In short, Wells Fargo is now the poster child for an essential defect in business structure of public companies. They conceive their “product” to be their stock. That is how management makes its money and that is how investors holding their stock like it until they realize that the entire platform known as Wells Fargo has devolved into a PR machine designed to raise the price of the stock at the expense of trust, which in the long term will most likely result in most customers abandoning such banks for fear they will be the next target. Such companies are eating their young and producing a bubble in asset values that, like the residential mortgage market, cannot be sustained by fundamental facts — i.e., real earnings on a real trajectory of growth.

So the PR piece about how they didn’t know what was going on is absurd along with their practices. Such policies don’t start with middle management or employees. They come from the top. And the goal was to create the illusion of a rapidly growing bank so that more people would buy their stock at ever increasing prices. That is what happens when you don’t make the individual members of management liable under criminal and civil laws for engaging in such behavior.

There was only one way that the Bank could achieve its goal of 8 accounts per customer — it had to be done without the knowledge or consent of the customers. Now Wells Fargo is trying to throw 5,000 employees under the bus. But this isn’t the first time that Wells Fargo has arrogantly thrown its customers and employees under the bus.

The creation of financial accounts in the name of a person without that person’s knowledge or consent is identity theft, assuming there was a profit motive. The result is that the person is subjected to false claims of high fees, their credit rating has a negative impact, and they are stuck dealing with as bank so large that most customers feel that they don’t have the resources to do anything once the fraud was discovered by the Consumer Financial protection Board (CFPB).

Creating a loan account for a loan that doesn’t exist is the same thing. In most cases the “loan closings” were shams — a show put on so that the customer would sign documents in which the actual party who loaned the money was left out of the documentation.

This was double fraud because the pension funds and other investors who deposited money with Wells Fargo and the other banks did so under the false understanding that their money would be used to buy Mortgage Backed Securities (MBS) issued by a trust with assets consisting of a loan pool.

The truth has emerged — there were no loan pols in the trusts. The entire derivative market for residential “loans” is built on a giant lie.  But the consequences are so large that Government is afraid to do anything about it. Wells Fargo took money from pension funds and other “investors,” but did not give the proceeds of sale of the alleged MBS to the proprietary vehicle they created in the form of a trust.

Hence the trust was never funded and never acquired any property or loans. That means the “mortgage backed securities” were not mortgage backed BUT they were “Securities” under the standard definition such that the SEC should take action against the underwriters who disguised themselves as “master Servicers.”

In order to cover their tracks, Wells Fargo carefully coached their employees to take calls and state that there could be no settlement or modification or any loss mitigation unless the “borrower” was at least 90 days behind in their payments. So people stopped paying an entity that had no right to receive payment — with grave consequences.

The 90 day statement was probably legal advice and certainly a lie. There was no 90 day requirement and there was no legal reason for a borrower to go into a position where the pretender lender could declare a default. The banks were steering as many people, like cattle, into defaults because of coercion by the bank who later deny that they had instructed the borrower to stop making payments.

So Wells Fargo and other investment banks were opening depository accounts for institutional customers under false pretenses, while they opened up loan accounts under false pretenses, and then  used the identity of BOTH “investors” and “borrowers” as a vehicle to steal all the money put up for investments and to make money on the illusion of loans between the payee on the note and the homeowner.

In the end the only document that was legal in thee entire chain was a forced sale and/or judgment of foreclosure. When the deed issues in a forced sale, that creates virtually insurmountable presumptions that everything that preceded the sale was valid, thus changing history.

The residential mortgage loan market was considerably more complex than what Wells Fargo did with the opening of the unwanted commercial accounts but the objective was the same — to make money on their stock and siphon off vast sums of money into off-shore accounts. And the methods, when you boil it all down, were the same. And the arrogant violation of law and trust was the same.

 

Who is the Creditor? NY Appellate Decision Might Provide the Knife to Cut Through the Bogus Claim of Privilege

The crux of this fight is that if the foreclosing parties are forced to identify the creditors they will only have two options, in my opinion: (a) commit perjury or (b) admit that they have no knowledge or access to the identity of the creditor

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://4closurefraud.org/2016/06/10/opinion-here-ny-court-says-bank-of-america-must-disclose-communications-with-countrywide-in-ambac-suit/

We have all seen it a million times — the “Trustees”, the “servicers” and their agents and attorneys all beg the question of identifying the names and contact information of the creditors in foreclosure actions. The reason is simple — in order to answer that question truthfully they would be required to admit that there is no party that could properly be defined as a creditor in relation to the homeowner.

They have successfully pushed the point beyond the point of return — they are alleging that the homeowner is a debtor but they refuse to identify a creditor; this means they are being allowed to treat the homeowner as a debtor while at the same time leaving the identity of the creditor unknown. The reason for this ambiguity is that the banks, from the beginning, were running a scheme that converted the money paid by investors for alleged “mortgage backed securities”; the conversion was simple — “let’s make their money our money.”

When inquiry is made to determine the identity of the creditor the only thing anyone gets is some gibberish about the documents PLUS the assertion that the information is private, proprietary and privileged.  The case in the above link is from an court of appeals in New York. But it could have profound persuasive effect on all foreclosure litigation.

Reciting the tension between liberal discovery and privilege, the court tackles the confusion in the lower courts. The court concludes that privilege is a very narrow shield in specific situations. It concludes that even the attorney-client privilege is a shield only between the client and the attorney and that adding a third party generally waives that privilege. The third party privilege is only extended in narrow circumstances where the parties are seeking a common goal. So in order to prevent the homeowner from getting the information on his alleged creditor, the foreclosing parties would need to show that there is a common goal between the creditor(s) and the debtor.

Their problem is that they can’t do that without showing, at least in camera, that the identity of the creditor is known and that somehow the beneficiaries of an empty trust have a common goal (hard to prove since the trust is empty contrary to the terms of the “investment”). Or, they might try to identify a creditor who is neither the trust nor the investors, which brings us back to perjury.

Predominant Interest Defines “True Lender”

Based on the totality of the circumstances, the Court concludes that CashCall, not Western Sky, was the true lender. CashCall, and not Western Sky, placed its money at risk. It is undisputed that CashCall deposited enough money into a reserve account to fund two days of loans, calculated on the previous month’s daily average and that Western Sky used this money to fund consumer loans. It is also undisputed CashCall purchased all of Western Sky’s loans, and in fact paid Western Sky more for each loan than the amount actually financed by Western Sky. Moreover, CashCall guaranteed Western Sky a minimum payment of $100,000 per month, as well as a $10,000 monthly administrative fee. Although CashCall waited a minimum of three days after the funding of each loan before purchasing it, it is undisputed that CashCall purchased each and every loan before any payments on the loan had been made. CashCall assumed all economic risks and benefits of the loans immediately upon assignment. CashCall bore the risk of default as well as the regulatory risk. Indeed, CashCall agreed to “fully indemnify Western Sky Financial for all costs arising or resulting from any and all civil, criminal or administrative claims or actions, including but not limited to fines, costs, assessments and/or penalties . . . [and] all reasonable attorneys fees and legal costs associated with a defense of such claim or action.”

Accordingly, the Court concludes that the entire monetary burden and risk of the loan program was placed on CashCall, such that CashCall, and not Western Sky, had the predominant economic interest in the loans and was the “true lender” and real party in interest. [E.S.]

See 8-31-2016-cfpb-v-cash-call-us-dist-ct-cal

Federal District Court Judge John Walter appears to be the first Judge in the nation to drill down into the convoluted “rent-a-bank” (his term, not mine) schemes in which the true lender was hidden from borrowers who then executed documents in favor of an entity that was not in the business of lending them money. This decision hits the bulls eye on the importance of identifying the true lender. Instead of blindly applying legal presumptions under the worst conditions of trustworthiness, this Judge looked deeply at the flawed process by which the “real lender” was operating.

A close reading of this case opens the door to virtually everything I have been writing about on this blog for 10 years. The court also rejects the claim that the documents can force the court to accept the law or venue of another jurisdiction. But the main point is that the court rejected the claim that just because the transactions were papered over doesn’t mean that the paper meant anything. Although it deals with PayDay loans the facts and law are virtually identical to the scheme of “securitization fail” (coined by Adam Levitin).

Those of you who remember my writings about the step transaction doctrine and the single transaction doctrine can now see how substance triumphs over form. And the advice from Eric Holder, former Attorney General under Obama, has come back to mind. He said go after the individuals, not just the corporations. In this case, the Court found that the CFPB case had established liability for the individuals who were calling the shots.

SUMMARY of FACTS: CashCall was renting the name of two banks in order to escape appropriate regulation. When those banks came under pressure from the FDIC, CashCall changed the plan. They incorporated Western Sky on the reservation of an an Indian nation and then claimed they were not subject to normal regulation. This was important because they were charging interest rates over 100% on PayDay loans.

That fact re-introduces the reality of most ARM, teaser and reverse amortization loans — the loans were approved with full knowledge that once the loan reset the homeowner would not be able to afford the payments. That was the plan. Hence the length of the loan term was intentionally misstated which increases the API significantly when the fees, costs and charges are amortized over 6 months rather than 30 years.

Here are some of the salient quotes from the Court:

CashCall paid Western Sky the full amount disbursed to the borrower under the loan agreement plus a premium of 5.145% (either of the principal loan amount or the amount disbursed to the borrower). CashCall guaranteed Western Sky a minimum payment of $100,000 per month, as well as a $10,000 monthly administrative fee. Western Sky agreed to sell the loans to CashCall before any payments had been made by the borrowers. Accordingly, borrowers made all of their loan payments to CashCall, and did not make a single payment to Western Sky. Once Western Sky sold a loan to CashCall, all economic risks and benefits of the transaction passed to CashCall.

CashCall agreed to reimburse Western Sky for any repair, maintenance and update costs associated with Western Sky’s server. CashCall also reimbursed Western Sky for all of its marketing expenses and bank fees, and some, but not all, of its office and personnel costs. In addition, CashCall agreed to “fully indemnify Western Sky Financial for all costs arising or resulting from any and all civil, criminal or administrative claims or actions, including but not limited to fines, costs, assessments and/or penalties . . . [and] all reasonable attorneys fees and legal costs associated with a defense of such claim or action.”

Consumers applied for Western Sky loans by telephone or online. When Western Sky commenced operations, all telephone calls from prospective borrowers were routed to CashCall agents in California.

A borrower approved for a Western Sky loan would electronically sign the loan agreement on Western Sky’s website, which was hosted by CashCall’s servers in California. The loan proceeds would be transferred from Western Sky’s account to the borrower’s account. After a minimum of three days had passed, the borrower would receive a notice that the loan had been assigned to WS Funding, and that all payments on the loan should be made to CashCall as servicer. Charged-off loans were transferred to Delbert Services for collection.

“[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied, . . ., unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.”
Restatement § 187(2). The Court concludes that the CRST choice-of-law provision fails both of these tests, and that the law of the borrowers’ home states applies to the loan agreements.

after reviewing all of the relevant case law and authorities cited by the parties, the Court agrees with the CFPB and concludes that it should look to the substance, not the form, of the transaction to identify the true lender. See Ubaldi v. SLM Corp., 852 F. Supp. 2d 1190, 1196 (N.D. Cal. 2012) (after conducting an extensive review of the relevant case law, noting that, “where a plaintiff has alleged that a national bank is the lender in name only, courts have generally looked to the real nature of the loan to determine whether a non-bank entity is the de facto lender”); Eastern v. American West Financial, 381 F.3d 948, 957 (9th Cir. 2004) (applying the de facto lender doctrine under Washington state law, recognizing that “Washington courts consistently look to the substance, not the form, of an allegedly usurious action”); CashCall, Inc. v. Morrisey, 2014 WL 2404300, at *14 (W.Va. May 30, 2014) (unpublished) (looking at the substance, not form, of the transaction to determine if the loan was usurious under West Virginia law); People ex rel. Spitzer v. Cty. Bank of Rehoboth Beach, Del., 846 N.Y.S.2d 436, 439 (N.Y. App. Div. 2007) (“It strikes us that we must look to the reality of the arrangement and not the written characterization that the parties seek to give it, much like Frank Lloyd Wright’s aphorism that “form follows function.”).4 “In short, [the Court] must determine whether an animal which looks like a duck, walks like a duck, and quacks like a duck, is in fact a duck.” In re Safeguard Self-Storage Trust, 2 F.3d 967, 970 (9th Cir. 1993). [Editor Note: This is akin to my pronouncement in 2007-2009 that the mortgages and notes were invalid because they might just as well have named Donald Duck as the payee, mortgagee or beneficiary. Naming a fictional character does not make it real.]

In identifying the true or de facto lender, courts generally consider the totality of the circumstances and apply a “predominant economic interest,” which examines which party or entity has the predominant economic interest in the transaction. See CashCall, Inc. v. Morrisey, 2014 WL 2404300, at *14 (W.D. Va. May 30, 2014) (affirming the lower court’s application of the “predominant economic interest” test to determine the true lender, which examines which party has the predominant economic interest in the loans); People ex rel. Spitzer v. Cty. Bank of Rehoboth Beach, Del., 846 N.Y.S.2d 436, 439 (N.Y. App. Div. 2007) (“Thus, an examination of the totality of the circumstances surrounding this type of business association must be used to determine who is the ‘true lender,’ with the key factor being ‘who had the predominant economic interest’ in the transactions.); cf. Ga. Code Ann. § 16-17-2(b)(4) (“A purported agent shall be considered a de facto lender if the entire circumstances of the transaction show that the purported agent holds, acquires, or maintains a predominant economic interest in the revenues generated by the loan.”).

Although a borrower electronically signed the loan agreement on Western Sky’s website, that website was, in fact, hosted by CashCall’s servers in California. While Western Sky performed loan origination functions on the Reservation, the Court finds these contacts are insufficient to establish that the CRST had a substantial relationship to the parties or the transaction, especially given that CashCall funded and purchased all of the loans and was the true lender. Cf. Ubaldi v. SLM Corp., 2013 WL 4015776, at *6 (N.D. Cal. Aug. 5, 2013) (“If Plaintiffs’ de facto lender allegations are true, then Oklahoma does not have a substantial relationship to Sallie Mae or Plaintiffs or the loans.”).

The Court concludes that the CFPB has established that the Western Sky loans are void or uncollectible under the laws of most of the Subject States.7 See CFPB’s Combined Statement of Facts [Docket No. 190] (“CFPB’s CSF”) at ¶¶ 147 – 235. Indeed, CashCall has admitted that the interest rates that it charged on Western Sky loans exceeded 80%, which substantially exceeds the maximum usury limits in Arkansas, Colorado, Minnesota, New Hampshire, New York, and North Carolina. (Arkansas’s usury limit is 17%; Colorado’s usury limit is 12%; Minnesota’s usury limit is 8%; New Hampshire’s usury limit is 36%; New York’s usury limit is 16%; and North Carolina’s usury limit is 8%). A violation of these usury laws either renders the loan agreement void or relieves the borrower of the obligation to pay the usurious charges. In addition, all but one of the sixteen Subject States (Arkansas) require consumer lenders to obtain a license before making loans to consumers who reside there. Lending without a license in these states renders the loan contract void and/or relieves the borrower of the obligation to pay certain charges. CashCall admits that, with the exception of New Mexico and Colorado, it did not hold a license to make loans in the Subject States during at least some of the relevant time periods.

Based on the undisputed facts, the Court concludes that CashCall and Delbert Services engaged in a deceptive practice prohibited by the CFPA. By servicing and collecting on Western Sky loans, CashCall and Delbert Services created the “net impression” that the loans were enforceable and that borrowers were obligated to repay the loans in accordance with the terms of their loan agreements. As discussed supra, that impression was patently false — the loan agreements were void and/or the borrowers were not obligated to pay.

The Court concludes that the false impression created by CashCall’s and Delbert Services’ conduct was likely to mislead consumers acting reasonably under the circumstances

The Court concludes that Reddam is individually liable under the CFPA.

“An individual may be liable for corporate violations if (1) he participated directly in the deceptive acts or had the authority to control them and (2) he had knowledge of the misrepresentations, was recklessly indifferent to the truth or falsity of the misrepresentation, or was aware of a high probability of fraud along with an intentional avoidance of the truth.” Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1193 (9th Cir. 2016) (quotations and citations omitted).

The Court concludes that Reddam both participated directly in and had the authority to control CashCall’s and Delbert Services’ deceptive acts. Reddam is the founder, sole owner, and president of CashCall, the president of CashCall’s wholly-owned subsidiary WS Funding, and the founder, owner, and CEO of Delbert Services. He had the complete authority to approve CashCall’s agreement with Western Sky and, in fact, approved CashCall’s purchase of the Western Sky loans. He signed both the Assignment Agreement and the Service Agreement on behalf of WS Funding and CashCall. In addition, as a key member of CashCall’s executive team, he had the authority to decide whether and when to transfer delinquent CashCall loans to Delbert Services.

 

So all that said, here is what I wrote to someone who was requesting my opinion: Don’t use this unless and until you (a) match up the facts and (b) confer with counsel:

Debtor initially reported that the property was secured because of (a) claims made by certain parties and (b) the lack of evidence to suggest or believe that the property was not secured. Based upon current information and a continuous flow of new information it is apparent that the originator who was named on the note and deed of trust in fact did not loan any money to petitioner. This is also true as to the party who would be advanced as the “table funded” lender. As the debtor understands the applicable law, if the originator did not actually complete the alleged loan contract by actually making a loan of money, the executed note and mortgage should never have been released, much less recorded. A note and mortgage should have been executed in favor of the “true lender” (see attached case) and NOT the originator, who merely served as a conduit or the conduit who provided the money to the closing table.

Based upon current information, debtor’s narrative of the case is as follows:

  1. an investment bank fabricated documents creating the illusion of a proprietary common law entity
  2. the investment bank used the form of a trust to fabricate the illusion of the common law entity
  3. the investment bank named itself as the party in control under the label “Master Servicer”
  4. the investment bank then created the illusion of mortgage backed securities issued by the proprietary entity named in the fabricated documents
  5. the investment bank then sold these securities under various false pretenses. Only one of those false pretenses appears relevant to the matter at hand — that the proceeds of sale of those “securities” would be used to fund the “Trust” who would then acquire existing mortgage loans. In fact, the “Trust” never became active, never had a bank account, and never had any assets, liabilities or business. The duties of the Trustee never arose because there was nothing in the Trust. Without a res, there is no trust nor any duties to enforce against or by the named “Trustee.”
  6. the investment bank then fabricated documents that appeared facially valid leading to the false conclusion that the Trust acquired loans, including the Petitioner’s loan. Without assets, this was impossible. None of the documents provided by these parties show any such purchase and sale transaction nor any circumstances in which money exchanged hands, making the Trust the owner of the loans. Hence the Trust certainly does not own the subject loan and has no right to enforce or service the loan without naming an alternative creditor who does have ownership of the debt (the note and mortgage being void for lack of completion of the loan contract) and who has entered into a servicing agreement apart from the Trust documents, which don’t apply because the Trust entity was ignored by the parties seeking now to use it.
  7. The money from investors was diverted from the Trusts who issued the “mortgage backed securities” to what is known as a “dynamic dark pool.” Such a pool is characterized by the inability to select both depositors and beneficiaries of withdrawal. It is dynamic because at all relevant times, money was being deposited and money was being withdrawn, all at the direction of the investment bank.
  8. What was originally perceived as a loan from the originator was in fact something else, although putting a label to it is difficult because of the complexity and convolutions used by the investment bank and all of its conduits and intermediaries. The dark pool was not an entity in any legals sense, although it was under the control of the investment bank.
  9. Hence the real chain of events for the money trail is that the investment bank diverted funds from its propriety trust and used part of the funds from investors to fund residential mortgage loans. The document trail is very different because the originator and the conduits behind what might be claimed a “table funded loan” were not in privity with either the investors or the investment bank. Hence it is clear that some liability arose in which the Petitioner owed somebody money at the time that the Petitioner received money or the benefits of money paid on behalf of the Petitioner. That liability might be framed in equity or at law. But in all events the mortgage or deed of trust was executed by the Petitioner by way of false representations about the identity of the lender and false representations regarding the compensation received by all parties, named or not,
  10. The current parties seek to enforce the deed of trust on the false premise that they have derived ownership of the debt, loan, note or mortgage (deed of trust). Their chain is wholly dependent upon whether the originator actually completed the loan contract by loaning the money to the Petitioner. That did not happen; thus the various illusions created by endorsements and assignments convey nothign because the note and mortgage (deed of trust) were in fact void. They were void because the debt was never owned by the originator. hence the signing of the note makes it impossible to merge the debt with the note — an essential part of making the note a legally enforceable negotiable instrument. The mortgage securing performance under the note is equally void since it secures performance of a void instrument. Hence the property is unsecured, even if there is a “John Doe” liability for unjust enrichment, if the creditor can be identified.
  11. The entire thrust of the claims of certain self-proclaimed creditors rests upon reliance on legal presumptions attached to facially valid documents. These same entities have been repeatedly sanctioned, fined and ordered to correct their foreclosure procedures which they have failed and refused to do — because the current process is designed to compound the original theft of investors’ money with the current theft of the debt itself and the subsequent theft of the house, free from claims of either the investors or the homeowner. The investment bank and the myriad of entities that are circulated as if they had powers or rights over the loan, is seeking in this case, as in all other cases in which it has been involved, to get a court judgment or any order that says they own the debt and have the right to enforce the evidence of the debt (note and mortgage).
  12. A Judgment or forced sale is the first legal document in their entire chain of fabricated documentation; but the entry of such a document in public records, creates the presumption, perhaps the conclusive presumption that all prior acts were valid. It is the first document that actually has a legal basis for being in existence. This explains the sharp decline in “workouts’ which have dominated the handling of distressed properties for centuries. Workouts don’t solve the problem for those who have been acting illegally. They must pursue a court order or judgment that appears to ratify all prior activities, legal or not.

 

Expert Declarations, Affidavits and Testimony

The fundamental problem is that while virtually anyone can be accepted as an expert, the weight given to their testimony is zero. The reason is simple. The author most often lacks any traditional credentials other than experience as a “forensic analyst” and their work product sounds pretty good to the homeowner but sounds like advocacy to the court, presented in confused form. Such “experts” should stay away from opinions on ultimate facts or law of the case and stick with the evidence — or absence of evidence — despite all their work in attempting to dig out the truth. Then they would be taken seriously. Until then, most experts will have little or no effect on most of the cases for which they were hired.

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

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I have consistently stated in my expert witness seminars, writings and appearances that forensic analysts must be very careful NOT to call themselves experts in fields for which they lack qualifications and that it is far better to stay away from opinion evidence, which sounds like advocacy and lacks credibility, and stick with the facts that when presented carefully, might indeed hold sway with a court.I would add that for each time a forensic analyst gives testimony, there should also be n accountant who says “Yes, he/she used the correct standards.”
At this point most work done by most forensic analysts is between good and excellent —  but for their presentation — or at least that part that contains advocacy and opinions. Most have zero qualifications to really give opinions except MAYBE on the weight or quality of evidence. Their testimony has been thrown out of court or rejected because of this.

They would do much better by presenting FACTUAL findings as a forensic analyst and then applying instructions from counsel, answering the questions posed to them. Their graphs are meaningless to anyone other than people like me who already know the details. The Judges do not give any weight to such graphs and drawings because it comes off as advocacy instead of an independent expert.

They should state their qualifications which CAN include experience. Then they should state what questions have been posed to them. Then state the simple answer to the question. Then state the factual reason for the answer — something besides “everyone knows” or “it’s on the internet.”

The “expert” witness should state the work performed in coming to THAT SPECIFIC ANSWER. Don’t cross the line regularly into opinion evidence for which the witness has no qualifications to render an opinion — generally the witness is not an expert in banking practices, underwriting practices for loans or issuance of securities, bond trading, title, law, or accounting. If these witnesses would remove opinions their presentation would be much improved.

The way you get around opinions is to ask the right question. Instead of an opinion of who owns what loan, which the “expert” is not qualified to give they can still contribute without doing any different work. The witness  should be asked a question like “can you find any evidence to support the claim of XYZ that they are the owner of this loan?” or “Can you find any evidence that would identify the creditor in this transaction?” Then he/she could answer no, and tell the story about what standards were used, how and why those standards were applied, how he/she was given those standards to use, and how he/she tried to find the evidence but could not locate it and his/her opinion, as a forensic analyst for many years, that he/she has looked in all the places where one would expect to find such evidence. She therefore has concluded that notwithstanding the assertions of the XYZ company, there is no such evidence that would pass muster in the real world — in either a legal or accounting setting.

She could refer to the auditing standards of the FASB as what she used for guidance. Everything must be based upon some accepted standard. There is plenty of material there that says that what the banks are using in court is not acceptable in performing an audit and giving a clear opinion that the financial statements fairly represent the financial condition of the entity or their interest in an entity. Testimony from a CPA who performs audits verifying that the auditing standards she used were correct would go along way to giving the witness credibility.

Call 202-838-6345 for consult

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.

 

 

Florida FCCPA Has Teeth

The FCCPA is one of those statutes that are often missed opportunities to hold the banks and servicers accountable for illegal conduct. It is like “Mail Fraud” which only applies to US Postal Services (the reason why servicers prefer to communicate through Fedex or other private mail carriers.

REMEMBER THE ONE YEAR STATUTE OF LIMITATIONS. THE TIME RUNS FROM EACH NEW ACT PROHIBITED BY THE STATUTES.

Some of the prohibited practices are self explanatory. But others deserve comment and guidance:

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

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§559.72(5): Disclosure of alleged debt. This could be one of the grounds for an FCCPA action. If you accept the premise that in most cases the disclosing party has neither ownership nor authorization over the alleged debt, then it would follow that reporting to third parties about the debt would illegal under this section. This is escalated in the event that the “debt” (i.e., a description of a liability owed by A to B) does not exist. B may not be the creditor. Neither B nor any successor or other third party would be acting appropriately if they communicated with each other if neither “successors” nor B had any ownership or authority over the liability of A.
§559.72(6): Failure to disclose to third party that debtor disputes the debt. The catch here is “reasonably disputed.” But as you look at an increasing number of case decisions Judges are finding an absence of evidence supporting the claims of banks and servicers. After a failed attempt t foreclosure, it might be reasonably presumed that the debtor/homeowner was reasonably disputing the debt. After all he/she won the case.
§559.72(9): Enforcing an illegitimate debt. This one is self evident and yet it forms the basic structure and strategy of the banks and servicers. Perhaps my labeling is too narrow. The facts are that (A) alleged REMIC Trusts are making completely false claims about the Mortgage Loan Schedule and (B) banks and servicers are directly making false claims without the charade of the alleged trusts. This one has traction.
§559.72(15): Improper identification of the debt collector. My reasoning is that when the debt collector calls and says they are the servicer for the creditor, this section is being violated and the breach interferes with the HAMP and other loan modification programs. It is a pretty serious breach designed to lure the homeowner into foreclosure. Continued correspondence with the false servicer and the  false or undisclosed creditor probably doesn’t waive anything but it does given them an argument that you never objected. So my suggestion is that homeowners and their attorneys object to all such communications until they provide adequate evidence that they can identify the creditor (with evidence that can be confirmed) and adequate evidence that the creditor has indeed selected the debt collector as the servicer. My thinking is that as soon as they refuse to identify the creditor(s) they are in potential violation of this section.
§559.72(18): Communication with person represented by counsel. This is meant to prevent the debt collector from making an end run around the the lawyer. But it does get in the way of efficient communications. The alleged “servicer” starts sending correspondence tot he lawyer thus delaying the response. And the debt collector will call the lawyer to disclose the loan and ask for details about the loan, the property or the alleged debtor that are known only by the homeowner.

Florida Statutes §559.72 Prohibited practices generally.—In collecting consumer debts, no person shall:

(1) Simulate in any manner a law enforcement officer or a representative of any governmental agency.
(2) Use or threaten force or violence.
(3) Tell a debtor who disputes a consumer debt that she or he or any person employing her or him will disclose to another, orally or in writing, directly or indirectly, information affecting the debtor’s reputation for credit worthiness without also informing the debtor that the existence of the dispute will also be disclosed as required by subsection (6).
(4) Communicate or threaten to communicate with a debtor’s employer before obtaining final judgment against the debtor, unless the debtor gives her or his permission in writing to contact her or his employer or acknowledges in writing the existence of the debt after the debt has been placed for collection. However, this does not prohibit a person from telling the debtor that her or his employer will be contacted if a final judgment is obtained.
(5) Disclose to a person other than the debtor or her or his family information affecting the debtor’s reputation, whether or not for credit worthiness, with knowledge or reason to know that the other person does not have a legitimate business need for the information or that the information is false.
(6) Disclose information concerning the existence of a debt known to be reasonably disputed by the debtor without disclosing that fact. If a disclosure is made before such dispute has been asserted and written notice is received from the debtor that any part of the debt is disputed, and if such dispute is reasonable, the person who made the original disclosure must reveal upon the request of the debtor within 30 days the details of the dispute to each person to whom disclosure of the debt without notice of the dispute was made within the preceding 90 days.
(7) Willfully communicate with the debtor or any member of her or his family with such frequency as can reasonably be expected to harass the debtor or her or his family, or willfully engage in other conduct which can reasonably be expected to abuse or harass the debtor or any member of her or his family.
(8) Use profane, obscene, vulgar, or willfully abusive language in communicating with the debtor or any member of her or his family.

(9) Claim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate, or assert the existence of some other legal right when such person knows that the right does not exist.

(10) Use a communication that simulates in any manner legal or judicial process or that gives the appearance of being authorized, issued, or approved by a government, governmental agency, or attorney at law, when it is not.
(11) Communicate with a debtor under the guise of an attorney by using the stationery of an attorney or forms or instruments that only attorneys are authorized to prepare.
(12) Orally communicate with a debtor in a manner that gives the false impression or appearance that such person is or is associated with an attorney.
(13) Advertise or threaten to advertise for sale any debt as a means to enforce payment except under court order or when acting as an assignee for the benefit of a creditor.
(14) Publish or post, threaten to publish or post, or cause to be published or posted before the general public individual names or any list of names of debtors, commonly known as a deadbeat list, for the purpose of enforcing or attempting to enforce collection of consumer debts.

(15) Refuse to provide adequate identification of herself or himself or her or his employer or other entity whom she or he represents if requested to do so by a debtor from whom she or he is collecting or attempting to collect a consumer debt.

(16) Mail any communication to a debtor in an envelope or postcard with words typed, written, or printed on the outside of the envelope or postcard calculated to embarrass the debtor. An example of this would be an envelope addressed to “Deadbeat, Jane Doe” or “Deadbeat, John Doe.”
(17) Communicate with the debtor between the hours of 9 p.m. and 8 a.m. in the debtor’s time zone without the prior consent of the debtor.

(a) The person may presume that the time a telephone call is received conforms to the local time zone assigned to the area code of the number called, unless the person reasonably believes that the debtor’s telephone is located in a different time zone.
(b) If, such as with toll-free numbers, an area code is not assigned to a specific geographic area, the person may presume that the time a telephone call is received conforms to the local time zone of the debtor’s last known place of residence, unless the person reasonably believes that the debtor’s telephone is located in a different time zone.
(18) Communicate with a debtor if the person knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the debtor’s attorney fails to respond within 30 days to a communication from the person, unless the debtor’s attorney consents to a direct communication with the debtor, or unless the debtor initiates the communication.
(19) Cause a debtor to be charged for communications by concealing the true purpose of the communication, including collect telephone calls and telegram fees.
History.—s. 18, ch. 72-81; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 1, 6, ch. 81-314; ss. 2, 3, ch. 81-318; ss. 1, 3, ch. 83-265; ss. 7, 13, ch. 93-275; s. 819, ch. 97-103; s. 1, ch. 2001-206; s. 4, ch. 2010
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.

 

CHASE FALSE CLAIMS COMPLAINT REVEALED IN INVESTOR LAWSUIT

This lawsuit reveals a reason for Chase slipping in a new servicer into the chain. Having already discharged or released a loan, the “accounts” were nonetheless transferred or sold in derogation of the rights of investors who had already purchased them from Chase.

Chase decreased its liabilities, increased its revenues, avoided its obligations, and provided little to no relief to consumers.

all loan modification programs must be made available to all borrowers, who may then apply to determine eligibility. Hundreds of thousands of borrowers’ accounts, in the RCV1 system of records, were not considered for all eligible loss mitigation options (even though they could likely have qualified).

Hundreds of thousands of borrowers’ mortgage loan accounts in the RCV1 system of records were not offered and thereby unable to be considered for all eligible loss mitigation options (even though they likely could have qualified)

numerous borrowers, whose 1st mortgages had been sold by Chase to the Relator, had their 1st mortgages liens quietly released.

The Program Guidelines pursuant to the Treasury Directives are cataloged in the MHA Handbook (“Handbook”).

UNITED STATES OF AMERICA, THE
STATES OF CALIFORNIA,
DELAWARE, FLORIDA, GEORGIA,
HAWAII, ILLINOIS, INDIANA, IOWA,
MASSACHUSETTS, MINNESOTA,
MONTANA, NEVADA, NEW
HAMPSHIRE, NEW JERSEY, NEW
MEXICO, NEW YORK, NORTH
CAROLINA, RHODE ISLAND,
TENNESSEE, VIRGINIA, AND THE
DISTRICT OF COLUMBIA.,

Plaintiffs,

Ex rel. LAURENCE SCHNEIDER,
Plaintiff-Relator,

v.

J.P. MORGAN CHASE BANK,
NATIONAL ASSOCIATION, J.P.
MORGAN CHASE & COMPANY; AND
CHASE HOME FINANCE LLC,
Defendants.

Case. No. 1:14-cv-01047-RMC

Judge Rosemary M. Collyer

SECOND AMENDED COMPLAINT

<excerpt>

I. INTRODUCTION

A. Defendant’s Fraud

3. Defendant Chase’s fraud arises out of its response to efforts by the United States Government (“Government” or “Federal Government”) and the States (the “States”)1 to remedy the misconduct of Chase and other financial institutions whose actions significantly contributed
to the consumer housing crisis.

4. Defendant’s misconduct resulted in the issuance of improper mortgages, premature and unauthorized foreclosures, violation of service members’ and other homeowners’ rights and protections, the use of false and deceptive affidavits and other documents, and the waste and abuse of taxpayer funds.

Each of the allegations regarding Defendant contained herein applies to instances in which one or more, and in some cases all, of the defendants engaged in the conduct alleged.

5. In March 2012, after a lengthy investigation (in part due to other qui tam
plaintiffs) under the Federal False Claims Act, the Government, along with the States, filed a complaint against Chase and the other banks responsible for the fraudulent and unfair mortgage practices that cost consumers, the Federal Government, and the States tens of billions of dollars. Specifically, the Government alleged that Chase, as well as other financial institutions, engaged in improper practices related to mortgage origination, mortgage servicing, and foreclosures, including, but not limited to, irresponsible and inadequate oversight of the banks’ quality control standards.

6. These improper practices had previously been the focus of several administrative enforcement actions by various government agencies, including but not limited to, the Office of the Controller of the Currency, the Federal Reserve Bank and others. Those enforcement actions
resulted in various other Consent Orders that are still in full force and effect.

7. In April 2012, the United States District Court for the District of Columbia approved a settlement between the Federal Government, the States, the Defendant and four other banks, which resulted in the NMSA. The operative document of this agreement was the Consent Judgment (“Consent Judgment” or “Agreement”). The Consent Judgment contains, among other things, Consumer Relief provisions. The Consumer Relief provisions required Chase to provide over $4 billion in consumer relief to their borrowers. This relief was to be in the form of, among other things, loan forgiveness and refinancing. Under the Consent Judgment, Chase received “credits” towards its Consumer Relief obligations by forgiving or modifying loans it maintained as a result of complying with the procedures and requirements contained in Exhibits D and D-1 of the Consent Judgment.

8. The Consent Judgment also contains Servicing Standards in Exhibit A that were intended to be used as a basis for granting Consumer Relief. The Servicing Standards were tested through various established “Metrics” and were designed to improve upon the lack of quality control and communication with borrowers. Compliance was overseen by an
independent Monitor.

9. The operational framework for the Servicing Standards and Consumer Relief requirements of the NMSA was based on a series of Treasury Directives that were themselves designed as part of the Making Home Affordable (MHA) program. The MHA program was a critical part of the Government’s broad strategy to help homeowners avoid foreclosure, stabilize the country’s housing market, and improve the nation’s economy by setting uniform and industry-wide default servicing protocols, policies and procedures for the distribution of federal and proprietary loan modification programs.

10. Before the Consent Judgment was entered into, Chase sold a significant amount of its mortgage obligations to individual investors. Between 2006 and 2010, the Relator bought the rights to thousands of mortgages owned and serviced by Chase. Unbeknownst to the Relator, these mortgages were saturated with violations of past and present regulations, statutes and other governmental requirements for first and second federally related home mortgage loans.

11. After both the Consent Judgment was signed and the MHA program was in effect, numerous borrowers, whose 2nd lien mortgages had been sold by Chase to the Relator, received debt-forgiveness letters from Chase that were purportedly sent pursuant to the Consent Judgment.

12. Relator, through his contacts at Chase, was made aware that 33,456 letters were sent by Chase on September 13, 2012 to second-lien borrowers. On December 13, 2012 another approximately 10,000 letters were sent, and on January 31, 2013 another approximately 8,000 letters were sent, for a total of over 50,000 debt-forgiveness letters. These letters represented to the recipient borrowers that, pursuant to the terms of the NMSA, the borrowers were discharged from their obligations to make further payments on their mortgages, which Chase stated, it had
forgiven as a “result of a recent mortgage servicing settlement reached with the states and federal government.” None of these borrowers made an application for a loan modification as required by the Consent Judgment. These letters were not individually reviewed by Chase to ensure that Chase actually owned the mortgages or to ensure the accuracy and integrity of the borrower’s information but instead were “robo-signed”; each of the letters sent out was signed by “Patrick
Boyle” who identified himself as a Vice President at Chase.

13. Relator’s experience with Chase’s baseless debt-forgiveness letters was not unique. Several other investors were also affected by Chase choosing to mass mail the “robo-signed” debt-forgiveness letters to thousands of consumers from its system of records in order to earn credits under the terms of the Consent Judgment and to avoid detection of its illegal and
discriminatory loan servicing policies and procedures.

14. In addition to the debt forgiveness letters sent, and after both the Consent Judgment was signed and the MHA program was in effect, numerous borrowers, whose 1st mortgages had been sold by Chase to the Relator, had their 1st mortgages liens quietly released.

15. Relator, through his third party servicer, which was handling normal and customary default mortgage servicing activities, was made aware that several lien releases were filed in the public records on mortgage loans that were owned by Relator in the fall of 2013. Through Relator’s subsequent investigation of the property records for 1st mortgage loans that Chase had previously sold to Relator, scores of additional lien releases were also discovered.

16. During the course of Relator’s investigation of Chase’s servicing practices, he discovered that Chase maintains a large set of loans outside of its primary System of Records (“SOR”), which is known as the Recovery One population (“RCV1” or “RCV1 SOR”). RCV1 was described to the Monitor by Chase as an “application” for loans that had been charged off
but still part of its main SOR. However, once loans had been charged off by Chase, the accuracy and integrity of the information pertaining to the borrowers’ accounts whose loans became part of the RCV1 population was and is fatally and irreparably flawed. Furthermore, the loans in the
RCV1 were not serviced according to the requirements of Federal law, the Consent Judgment, the MHA programs or any of the other consent orders or settlements reached by Chase with any government agency prior to the NMSA.2

17. Chase’s practice of sending unsolicited debt-forgiveness letters to intentionally pre-selected borrowers of valueless loans did not meet the Servicing Standards set out in the Consent Judgment to establish eligibility for credits toward its Consumer Relief obligations. This practice enabled Chase to reduce its cost of complying with the Consent Judgment and MHA program, while at the same time enhancing its own profits through unearned Consumer Relief credits and MHA incentives. Chase sought to take credit for valueless charged-off and third-party owned loans instead of applying the Consumer Relief under the NMSA and MHA2 By letter dated September 16, 2015 to Schneider’s counsel, in reference to Relator’s claim that “Chase concealed from the Monitor and MHA-C both the existence of the RCV1 charged-off and the way those loans were treated for purposes of HAMP solicitations and NMS metrics
testing”, Chase’s counsel stated that “Those allegations are wholly incorrect. Chase repeatedly disclosed the relevant facts to both the Monitor and MHA-C.”

Schneider’s counsel requested that Chase provide all documents demonstrating the “relevant facts” to support Chase’s statement. Chase has refused to provide said documents, citing Chase‘s concerns with providing documents that it had previously provided to the U.S.
Government. While Chase has offered to allow Chase’s counsel to read such documents “verbatim” to Schneider’s counsel, Schneider knows of no supportable reason why documents previously disclosed to the U.S. Government should not be shared with Schneider in his capacity
as a Relator under the FCA. No privilege exists for such a claim and therefore Schneider has rejected this limitation. Such documents, if they in fact exist, should be produced before such a defense can be raised, particularly because Chase’s counsel has raised the issue of Rule 11
responsibilities.

18. The Servicing Standards and the Consumer Relief Requirements of the Consent Judgment are set forth in Exhibits A and D of that document. The Consent Judgment is governed by the underlying Servicer Participation Agreements of the MHA program, which required mandatory compliance with the Treasury Directives under the MHA Handbook (“Handbook”). Chase is required to demonstrate compliance with the Handbook’s guidelines in the form of periodic certifications to the government. Chase ignored the requirements of Exhibits A and D of the Consent Judgment, especially with respect to the RCV1 population of loans. Therefore, Chase has been unable to service with any accuracy the charged-off loans it
owns and to segregate those loans that it no longer owns. As such, any certifications of compliance with the Consent Judgment or the Services Participation Agreement (“SPA”) are false claims.

19. Relator conducted his own investigations and found that the Defendants sent loan forgiveness letters to consumers for mortgages that Chase no longer owns or that were not eligible for forgiveness credit. Further, Chase continues to fail to meet its obligations to service
loans and to prevent blight as required by both the Consent Judgment and SPA. Chase’s intentional failure to monitor, report and/or service these loans, and its issuance of invalid loan forgiveness letters and lien releases, evidence an attempt to thwart the goal of the Consent Judgment and the MHA program. The purpose of this scheme was to quickly satisfy the
Defendant’s Consumer Relief obligations as cheaply as possible, without actually providing the relief that Chase promised in exchange for the settlement that Chase reached with the Federal Government and the States. In addition, Chase applied for and received MHA incentive
payments without complying with the MHA mandatory requirements. In short, Chase decreased its liabilities, increased its revenues, avoided its obligations, and provided little to no relief to consumers.

20. The mere existence of RCV1 makes all claims by Chase that it complied with the Servicing Standards and the Consumer Relief Requirements of the Consent Judgment false. Likewise, the existence of RCV1 makes all claims by Chase that it complied with the SPA of the MHA program false.

B. Damages to the Government Related to the NMSA

21. Exhibit E of the Consent Judgment provides for penalties of up to $5 million for failure to meet a prescribed Metric of the Servicing Standards. Exhibit E, ¶ J.3(b) at E15.

22. Exhibit D of the Consent Judgment provides:

If Servicer fails to meet the commitment set forth in these Consumer Relief Requirements within three years of the Servicer’s Start Date, Servicer shall pay an amount equal to 125% of the unmet commitment amount, except that if Servicer fails to meet the two year commitment noted above, and then fails to meet the three year commitment, the Servicer shall pay an amount equal to 140% of the unmet three-year Commitment amount.

Exhibit D, ¶10.d. at D-11.

23. The required payment set out in Exhibit D, ¶10.d is made either to the United States or the States that are parties to the Consent Judgment. Fifty percent of any payment is distributed to the United States. Consent Judgment, Exhibit E, ¶ J.c.(3)c. at E-16.

24. As explained in more detail below, Chase was required to certify that it was in compliance with the Servicing Standards and the Consumer Relief Requirements. Many, if not all, of the loans that Chase identified for credits against the $4 billion Consumer Relief provisions were not eligible for the credit, because Chase did not comply with the Servicing
Standards or the Consumer Relief Requirements. Specifically, all loan modification programs must be made available to all borrowers, who may then apply to determine eligibility. Hundreds of thousands of borrowers’ accounts, in the RCV1 system of records, were not considered for all eligible loss mitigation options (even though they could likely have qualified). Due to this omission none of the loan modification programs qualified for Consumer Relief Credit. Thus,
Chase did not and does not qualify for any of the Consumer Relief Credit for which it applied.

25. For these reasons, each of Chase’s certifications to the Federal Government of compliance represents a “reverse” false claim to avoid paying money to the Government.

26. Under the FCA a person is liable for penalties and damages who: [k]nowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government. 31 U.S.C. § 3729(a)(1)(G).

27. Under the FCA, “the term ‘obligation’ means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.” 31 U.S.C. § 3729(b)(3).

28. Thus, under the FCA, Chase is liable for its false claims whether or not the government fixed the amount of the obligation owed by Chase.

29. Under the FCA, “the term ‘material’ means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” U.S.C. § 3729(b)(3).

30. Under the “natural tendency” test Chase is liable for its false statements so long as they reasonably could have influenced the government’s payment or collection of money. A statement is false if it is capable of influencing the government’s funding decision, not whether it
actually influenced the government.

31. Each of Chase’s false certifications is actionable under 31 U.S.C. §
3729(a)(1)(G), because they represent a false record or statement that concealed, avoided or decreased an obligation to transmit money to the Government.

32. The Federal Government and the States agreed to the NMSA with Chase, with the understanding that Chase would meet its obligations under the Consent Judgment.

33. As set out in the Consumer Relief Requirements, the measure of the Federal and State Governments’ damages is up to 140 percent of the credits that Chase falsely claimed met the requirements of the Consent Judgment and up to $5 million for each Metric the Chase failed
to meet.

34. These damages are recoverable under the Federal Civil False Claims Act, 31 U.S.C. § 3729 et seq. (the “FCA”), and similar provisions of the State False Claims Acts of the States of California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina,
Rhode Island, Tennessee, the Commonwealths of Massachusetts and Virginia, and the District of Columbia.

35. The Federal Government and the States are now harmed because they are not receiving the benefit of the bargain for which they negotiated with Chase due to the false claims for credit that have been made by the Defendant.

C. Damages to the Government Related to the HAMP

36. The Amended and Restated Commitment to Purchase Financial Instrument and Servicer Participation Agreement between the United States Government and Chase provided for the implementation of loan modification and foreclosure prevention services (“HAMP
Services”).

37. The value of Chase’s SPA was limited to $4,532,750,000 (“Program Participation Cap”).

38. The value of EMC Mortgage Corporation’s (“EMC”) SPA (Chase is successor in interest) was limited to $1,237,510,000.

39. As explained in more detail below, Chase must certify that it is in compliance with the SPA and the MHA program and must strictly adhere to the guidelines and procedures issued by the Treasury with respect to the programs outlined in the Service Schedules (“Program Guidelines”). The Program Guidelines pursuant to the Treasury Directives are cataloged in the MHA Handbook (“Handbook”). None of the loans that Chase and EMC identified and submitted for payment against their respective Participation Caps were eligible for the incentive payment, because neither Chase nor EMC complied with the SPA and Handbook guidelines. Specifically, all loan modification programs must be made available to all borrowers, who must then apply to determine eligibility. Hundreds of thousands of borrowers’ mortgage loan accounts in the RCV1 system of records were not offered and thereby unable to be considered for all eligible loss mitigation options (even though they likely could have qualified). Due to the omission of the RCV1 population for any loss mitigation options, none of the modifications that Chase provided qualified for HAMP incentives. Thus, Chase does not qualify for any of the
HAMP incentives for which it applied and received funds.
40. Therefore, Chase’s certifications of compliance and its creation of records to support those certifications represent both the knowing presentation of false or fraudulent claims for a payment and the knowing use of false records material to false or fraudulent claims.

41. Under the FCA, a person is liable for penalties and damages who:

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; 31 U.S.C. § 3729(a)(1)(A)
and
(B) knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim. 31 U.S.C. § 3729(a)(1)(G).

42. Each of Chase’s false certifications is actionable under either 31 U.S.C. §3729(a)(1)(A) and (B), because they represent a false or fraudulent claim for payment or approval of a false record or statement material to a false or fraudulent claim.
43. Under HAMP, the Federal Government entered into the Commitment with Chase, with the understanding that Chase would meet its obligations under the SPA and related Treasury directives. The Federal Government is now harmed because it is not receiving the benefit of the bargain for which it negotiated with Chase due to the false claims for payment that have been made by the Defendant.

Problems with Lehman and Aurora

Lehman had nothing to do with the loan even at the beginning when the loan was funded, it acted as a conduit for investor funds that were being misappropriated, the loan was “sold” or “transferred” to a REMIC Trust, and the assets of Lehman were put into a bankruptcy estate as a matter of law.

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

—————-
I keep receiving the same question from multiple sources about the loans “originated” by Lehman, MERS involvement, and Aurora. Here is my short answer:
 *

Yes it means that technically the mortgage and note went in two different directions. BUT in nearly all courts of law the Judge overlooks this problem despite clear law to the contrary in Florida Statutes adopting the UCC.

The stamped endorsement at closing indicates that the loan was pre-sold to Lehman in an Assignment and Assumption Agreement (AAA)— which is basically a contract that violates public policy. It violates public policy because it withholds the name of the lender — a basic disclosure contained in the Truth in Lending Act in order to make certain that the borrower knows with whom he is expected to do business.

 *
Choice of lender is one of the fundamental requirements of TILA. For the past 20 years virtually everyone in the “lending chain” violated this basic principal of public policy and law. That includes originators, MERS, mortgage brokers, closing agents (to the extent they were actually aware of the switch), Trusts, Trustees, Master Servicers (were in most cases the underwriter of the nonexistent “Trust”) et al.
 *
The AAA also requires withholding the name of the conduit (Lehman). This means it was a table funded loan on steroids. That is ruled as a matter of law to be “predatory per se” by Reg Z.  It allows Lehman, as a conduit, to immediately receive “ownership” of the note and mortgage (or its designated nominee/agent MERS).
 *

Lehman was using funds from investors to fund the loan — a direct violation of (a) what they told investors, who thought their money was going into a trust for management and (b) what they told the court, was that they were the lender. In other words the funding of the loan is the point in time when Lehman converted (stole) the funds of the investors.

Knowing Lehman practices at the time, it is virtually certain that the loan was immediately subject to CLAIMS of securitization. The hidden problem is that the claims from the REMIC Trust were not true. The trust having never been funded, never purchased the loan.

*

The second hidden problem is that the Lehman bankruptcy would have put the loan into the bankruptcy estate. So regardless of whether the loan was already “sold” into the secondary market for securitization or “transferred” to a REMIC trust or it was in fact owned by Lehman after the bankruptcy, there can be no valid document or instrument executed by Lehman after that time (either the date of “closing” or the date of bankruptcy, 2008).

*

The reason is simple — Lehman had nothing to do with the loan even at the beginning when the loan was funded, it acted as a conduit for investor funds that were being misappropriated, the loan was “sold” or “transferred” to a REMIC Trust, and the assets of Lehman were put into a bankruptcy estate as a matter of law.

*

The problems are further compounded by the fact that the “servicer” (Aurora) now claims alternatively that it is either the owner or servicer of the loan or both. Aurora was basically a controlled entity of Lehman.

It is impossible to fund a trust that claims the loan because that “reporting” process was controlled by Lehman and then Aurora.

*

So they could say whatever they wanted to MERS and to the world. At one time there probably was a trust named as owner of the loan but that data has long since been erased unless it can be recovered from the MERS archives.

*

Now we have an emerging further complicating issue. Fannie claims it owns the loan, also a claim that is untrue like all the other claims. Fannie is not a lender. Fannie acts a guarantor or Master trustee of REMIC Trusts. It generally uses the mortgage bonds issued by the REMIC trust to “purchase” the loans. But those bonds were worthless because the Trust never received the proceeds of sale of the mortgage bonds to investors. Thus it had no ability to purchase loan because it had no money, business or other assets.

But in 2008-2009 the government funded the cash purchase of the loans by Fannie and Freddie while the Federal Reserve outright paid cash for the mortgage bonds, which they purchased from the banks.

The problem with that scenario is that the banks did not own the loans and did not own the bonds. Yet the banks were the “sellers.” So my conclusion is that the emergence of Fannie is just one more layer of confusion being added to an already convoluted scheme and the Judge will be looking for a way to “simplify” it thus raising the danger that the Judge will ignore the parts of the chain that are clearly broken.

Bottom Line: it was the investors funds that were used to fund loans — but only part of the investors funds went to loans. The rest went into the pocket of the underwriter (investment bank) as was recorded either as fees or “trading profits” from a trading desk that was performing nonexistent sales to nonexistent trusts of nonexistent loan contracts.

The essential legal problem is this: the investors involuntarily made loans without representation at closing. Hence no loan contract was ever formed to protect them. The parties in between were all acting as though the loan contract existed and reflected the intent of both the borrower and the “lender” investors.

The solution is for investors to fire the intermediaries and create their own and then approach the borrowers who in most cases would be happy to execute a real mortgage and note. This would fix the amount of damages to be recovered from the investment bankers. And it would stop the hemorrhaging of value from what should be (but isn’t) a secured asset. And of course it would end the foreclosure nightmare where those intermediaries are stealing both the debt and the property of others with whom thye have no contract.

GET A CONSULT!

https://www.vcita.com/v/lendinglies to schedule CONSULT, MAKE A DONATION, leave message or make payments.

 

FDCPA and FCCPA: Temperatures rising

FDCPA and FCCPA (or similar state legislation) claims are getting traction across the country. Bank of America violated the federal Fair Debt Collection Practices Act (“FDCPA”) and the related Florida Consumer Collection Practices Act (“FCCPA”). (Doc. 26). The Goodin case is a fair representation of the experience of hundreds of thousands of homeowners who have tried to reconcile the numbers given to them by Bank of America and others.

In a carefully worded opinion from Federal District Court Judge Corrigan in Jacksonville, the Court laid out the right to damages under the FDCPA and FCCPA. The Court found that BOA acted with gross negligence because they continued their behavior long after being put on notice of a mistake on their part and awarded the 2 homeowners:

  • Statutory damages of $2,000
  • Actual damages for emotional distress of $100,000 ($50,000 per person)
  • Punitive damages of $100,000
  • Attorneys fees and costs

 

See http://www.leagle.com/decision/In%20FDCO%2020150623E16/GOODIN%20v.%20BANK%20OF%20AMERICA,%20N.A.

The story is the same as I have heard from thousands of other homeowners. The “servicer” or “bank” misapplies payments, negligently posts payments to the wrong place and refuses to make any correction despite multiple attempts by the homeowners to get their account straightened out. Then the bank refuses to take any more payments because the homeowners are “late, ” “delinquent”, or in “default”, following which they send a default notice, intent to accelerate and then file suit in foreclosure.

The subtext here is that there is no “default” if the “borrower” tenders payment timely with good funds. The fact that the servicer/bank does not accept them or post them to the right ledger does not create a default on the part of the borrower, who has obviously done nothing wrong. There is no default and there is no delinquency. The wrongful act was clearly committed by the servicer/bank. Hence there is no default by the borrower in any sense by any standard. It might be said that if there is a default, it is a default by Bank of America or whoever the servicer/bank is in another case.

Using the logic and law of yesteryear, we frequently make the mistake of assuming that if there is no posting of a payment, no cashing of a check or no acceptance of the tender of payment, that the borrower is in default but it is refutable or excusable — putting the burden on the borrower to show that he/she/they tendered payment. In fact, it is none of those things. When you parse out the “default” none of the elements are present as to the borrower.

This case stands out as a good discussion of damages for emotional distress — including cases, like this one, where there is no evidence from medical experts nor medical bills resulting from the anguish of trying to sleep for years knowing that the bank or servicer is out to get your house. The feeling of being powerless is a huge factor. If an institution like BOA fails to act fairly and refuses to correct its own “errors,” it is not hard to see how the distress is real.

I of course believe that BOA had no procedures in place to deal with calls, visits, letters and emails from the homeowner because they want the foreclosure in all events — or at least as many as possible. The reason is simple: the foreclosure judgment is the first legally valid instrument in a long chain of misdeeds. It creates the presumption that all the events, documents, letters and claims were valid before the judgment was entered and makes all those misdeeds enforceable.

The Judge also details the requirements for punitive damages — i.e., aggravating circumstances involving gross negligence and intentional acts. The Judge doesn’t quite say that the acts of BOA were intentional. But he describes BOA’s actions as so grossly negligent that it must approach an intentional, malicious act for the sole benefit of the actor.

 

PRACTICE NOTE ON MERGER DOCTRINE AND EXISTENCE OF DEFAULT:

It has always been a basic rule of negotiable instruments law that once a promissory note is given for an underlying obligation (like the mortgage contract), the underlying obligation is merged into the note and is suspended while the note is still outstanding. Discharge on the note would (due to the rule that the two are merged) result in discharge discharge of the underlying obligation. Thus paying the note would also pay the obligation. Because of the merger rule, the underlying obligation is not available as a separate course of action until the note is dishonored.

 

The problem here is that most lawyers and most judges are not very familiar with the UCC even though it constitutes state law in whatever state they are in. They see the UCC as a problem when in fact it is a solution. it answers the hairy details without requiring any interpretation. It just needs to be applied. But just then the banks make their “free house” argument and the judge “interprets a statute that is only vaguely understood.

The banks know that judges are not accustomed to using the UCC and they come in with a presumed default simply because they show the judge that on their own books no payment was posted. And of course they have no record of tender and refusal by the bank. The court then usually erroneously shifts the burden of proof, as to whether tender of the payment was made, onto the homeowner who of course does not  have millions of dollars of computer equipment, IT platforms and access to the computer generated “accounts” on multiple platforms.

This merger rule, with its suspension of the underlying obligation until this honor of the note cut is codified in §3-310 of the UCC:

(b) unless otherwise agreed and except as provided in subsection (a), if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instruments were taken, and the following rules apply:

(2) in the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in the discharge of the obligation to the extent of the payment.

thus until the note is dishonored there can be no default on the underlying obligation (the mortgage contract). All foreclosure statutes, whether permitting self-help or requiring the involvement of court, forbid foreclosure unless the underlying debt is in”Default.” That means that the maker of the promissory note must have failed to make the payments required by the note itself, and thus the node has been dishonored. Under UCC §3-502(a)(3) a hello promissory note is dishonored when the maker does not pay it when the footnote first becomes payable.

About Those PSA Signatures

What is apparent is that the trusts never came into legal existence both because they were never funded and because they were in many cases never signed. Failure to execute and failure to fund the trust reduces the “trust” to a pile of ashes.

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

—————-
From one case in which I am consulting, this is my response to the inquiring lawyer:

I can find no evidence that there is a Trust ever created or operational by the name of “RMAC REMIC Trust Series 2009-9”. In my honest opinion I don’t think there ever was such a trust. I think that papers were drawn up for the trust but never executed. Since the trusts are phantoms anyway, this was consistent with the facts. The use of the trust as a Plaintiff in a court action is a fraud upon the court and the Defendants. The fact that the trust does not exist deprives the court of any jurisdiction. We’ll see when you get the alleged PSA, which even if physically hand-signed probably represents another example of robo-signing, fabrication, back-dating and forgery.

I think it will not show signatures — and remember digital or electronic signatures are not acceptable unless they meet the terms of legislative approval. Keep in mind that the Mortgage Loan Schedule (MLS) was BY DEFINITION  created long after the cutoff date. I say it is by definition because every Prospectus I have ever read states that the MLS attached to the PSA at the time of investment is NOT the real MLS, and that it is there by way of example only. The disclosure is that the actual loan schedule will be filled in “later.”

 

see https://livinglies.me/2015/11/30/standing-is-not-a-multiple-choice-question/

also see DigitalSignatures

References are from Wikipedia, but verified

DIGITAL AND ELECTRONIC SIGNATURES

On digital signatures, they are supposed to be from a provable source that cannot be disavowed. And they are supposed to have electronic characteristics making the digital signature provable such that one would have confidence at least as high as a handwritten signature.

Merely typing a name does nothing. it is neither a digital nor electronic signature. Lawyers frequently make the mistake of looking at a document with /s/ John  Smith and assuming that it qualifies as digital or electronic signature. It does not.

We lawyers think that because we do it all the time. What we are forgetting is that our signature is coming through a trusted source and already has been vetted when we signed up for digital filing and further is backed up by court rules and Bar rules that would reign terror on a lawyer who attempted to disavow the signature.

A digital signature is a mathematical scheme for demonstrating the authenticity of a digital message or documents. A valid digital signature gives a recipient reason to believe that the message was created by a known sender, that the sender cannot deny having sent the message (authentication and non-repudiation), and that the message was not altered in transit (integrity).

Digital signatures are a standard element of most cryptographic protocol suites, and are commonly used for software distribution, financial transactions, contract management software, and in other cases where it is important to detect forgery or tampering.

Electronic signatures are different but only by degree and focus:

An electronic signature is intended to provide a secure and accurate identification method for the signatory to provide a seamless transaction. Definitions of electronic signatures vary depending on the applicable jurisdiction. A common denominator in most countries is the level of an advanced electronic signature requiring that:

  1. The signatory can be uniquely identified and linked to the signature
  2. The signatory must have sole control of the private key that was used to create the electronic signature
  3. The signature must be capable of identifying if its accompanying data has been tampered with after the message was signed
  4. In the event that the accompanying data has been changed, the signature must be invalidated[6]

Electronic signatures may be created with increasing levels of security, with each having its own set of requirements and means of creation on various levels that prove the validity of the signature. To provide an even stronger probative value than the above described advanced electronic signature, some countries like the European Union or Switzerland introduced the qualified electronic signature. It is difficult to challenge the authorship of a statement signed with a qualified electronic signature – the statement is non-reputable.[7] Technically, a qualified electronic signature is implemented through an advanced electronic signature that utilizes a digital certificate, which has been encrypted through a security signature-creating device [8] and which has been authenticated by a qualified trust service provider.[9]

PLEADING:

Comes Now Defendants and Move to Dismiss the instant action for lack of personal and subject matter jurisdiction and as grounds therefor say as follows:

  1. The named plaintiff in this action does not exist.
  2. After extensive investigation and inquiry, neither Defendants nor undersigned counsel nor forensic experts can find any evidence that the alleged trust ever existed, much less conducted business.
  3. There is no evidence that the alleged trustee ever ACTUALLY conducted any business in the name of the trust, much less a purchase of loans, much less the purchase of the subject loan.
  4. There is no evidence that the Trust exists nor any evidence that the Trust’s name has ever been used except in the context of (1) “foreclosure” which has, in the opinion, of forensic experts, merely a cloak for the continuing theft of investor money and assets to the detriment of both the real parties in interest and the Defendants and (2) the sale of bonds to investors falsely presented as having been issued by the “trust”, the proceeds of which “sale” was never received by the trust.
  5. Upon due diligence before filing such a lawsuit causing the forfeiture of homestead property, counsel knew or should have known that the Trust never existed nor has any business ever been conducted in the name of the Trust except the sale of bonds allegedly issued by the Trust and the use of the name of the trust to sue in foreclosure.
  6. As for the sale of the bonds allegedly issued by the Trust there is no evidence that the Trust ever issued said bonds and there is (a) no evidence the Trust received any funds ever from the sale of bonds or any other source and (b) having no assets, money or bank account, there is no possible evidence that the Trust acquired any assets, business or even incurred any liabilities.
  7. Wells Fargo, individually and not as Trustee, has engaged in a widespread pattern of behavior of presenting itself as Trustee of non existent Trusts and should be sanctioned to prevent it or anyone else in the banking industry from engaging in such conduct.

WHEREFORE Defendants pray this Honorable Court will dismiss the instant complaint with prejudice, award attorneys fees, costs and sanctions against opposing counsel and Wells Fargo individually and not as Trustee of a nonexistent Trust for falsely presenting itself as the Trustee of a Trust it knew or should have known had no existence.

===================

SCHEDULE CONSULT!

https://www.vcita.com/v/lendinglies to schedule, leave message or make payments.

Jesinoski Update: Homeowner, Bank and Court All Get it Wrong

We get it. Judges don’t like statutory rescission under TILA. They are not required to like TILA rescission but they are required to follow it. This decision openly defies the SCOTUS ruling and refuses to apply it.

Despite clear legislative intent to prevent banks from stonewalling rescission they are succeeding in doing so nonetheless as they play upon the bias of courts against TILA Rescission.

This Federal Judge attempts to grapple with the issue of damages claimed by Jesinoski’s rescission. It is stunning that these are the same people who argued the case before the Supreme Court of the United States (SCOTUS). The plain truth is that nobody in that courtroom seemed to understand rescission or how to apply it. The singular overriding point is that the only substantive part of the rescission statute is that when mailed, rescission is effective and the loan contract is canceled, the mortgage and note are void.  There is no maybe in that statement. Nor is there a sentence that starts with “well, not if….”.

It appears in this case that this Jesinoski proceeding clouded the issues when plaintiff sued for damages under rescission. In so doing they apparently were trying to prove the basis of their rescission which was sent, as per SCOTUS, within the 3 years. Pleading the basis of rescission was a mistake because it raised the very issue that the statute and the SCOTUS decision said was unnecessary. The factual issue for Plaintiff was whether the rescission had been sent. PERIOD. Whether it was proper when sent was an issue the Defendant was required to raise, not the Plaintiff.

The next move within 20 days of receipt of the rescission would be for a creditor to plead a case to vacate the rescission. The danger here is that this decision could be affirmed because it was Jesinoski who raised the issue of whether or not the rescission was properly sent. Jesinoski might have snatched defeat from the jaws of victory. By raising the issue of whether the rescission was proper, Jesinoski might have waived their objection that would be based upon the fact that no creditor had filed any lawsuit at any time, much less within the 20 day window.

But the court probably erred when it ignored the fact that the rescission was effective, plain and simple. It compounded the error by effectively ruling that rescission was only effective if a Court said it was effective and only if the borrower showed the ability to tender the full amount allegedly owed. In short this federal Judge was effectively overruling SCOTUS — a legal impossibility.

The statute and the SCOTUS decision on Jesinoski both clearly state that neither a lawsuit nor tender nor anything else is required of the borrower in the unique statutory scheme of rescission. The court is once again re-introducing common law rescission in direct contravention of the unanimous SCOTUS decision. Justice Scalia made it clear that NOTHING is required from the borrower after sending that notice.

Once the rescission is effective, the Court can only vacate it upon timely proper pleading from a party claiming injury. All the rest of the rescission statute is procedural. The failure of the creditor to actually bring an action to vacate the rescission within 20 days was fatal. Any other reading would require us to overrule SCOTUS and re-write the statute. It would mean that the rescission is NOT effective when mailed despite the clear wording of the statute that says it IS effective when mailed.

We get it. Judges don’t like statutory rescission under TILA. They are not required to like TILA rescission but they are required to follow it. This decision openly defies the SCOTUS ruling and refuses to apply it.

But the Plaintiff seems to have contributed to the problem. The damages sought are not based upon whether the rescission was proper. It was based upon the statute that says only if all three conditions are satisfied may the creditor demand any money. One of those conditions is the payment of all money ever paid to the “lender”. Those are the damages.

The issue is only the factual determination of the amount of those damages — not whether they are due at all. All three parties seem to have missed that point — Plaintiff, Defendant and Judge.

By inserting the tender requirement the Judge was not only ruling opposite to the content of the statute and opposite to the SCOTUS decision; it was expressly opposite the reasoning behind the “no-tender” component of TILA rescission, to wit: that payment could only be requested after the cancellation of the note, the release of the mortgage encumbrance, and the return of all money paid by the borrower since inception.

The clear reasoning behind this was that legislators in Congress expressly did not want to provide any method of stonewalling rescission. By requiring the disgorgement of money and the release of the encumbrance, the borrower was given the means to pay through application of the money received from the bank and the ability to get a new mortgage without damage to his/her/their credit. It was presumed by Congress that virtually no homeowner would have the means to tender without being able to cancel the old mortgage, release the encumbrance and get back their money FIRST.

Judges seem not to like the punitive nature of the statute. It is intended to be punitive, covering a wide array of possible lending violations and failures — instead of establishing a huge Federal agency that would review every mortgage loan.

The idea was to make the consequences of such behavior so gothic that the banks would police themselves. There is no Judge in the country who has the power or authority to re-write this very clear statute to match their own perceptions and belief that this statute is too draconian in its results. Public policy is for the legislative branch to decide. By resisting TILA rescission courts are encouraging more of the same bank behavior that still threatens all of the world’s economies and societies. By refusing to apply TILA rescission the courts are making themselves complicit in the greatest economic crime in human history.

——————————

Larry D. Jesinoski and Cheryle Jesinoski, individuals, Plaintiffs,
v.
Countrywide Home Loans, Inc., d/b/a America’s Wholesale Lender, subsidiary of Bank of America N.A.; BAC Home Loans Servicing, LP, a subsidiary of Bank of America, N.A., a Texas Limited Partnership f/k/a Countrywide Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc., a Delaware Corporation; and John and Jane Does 1-10, Defendants.

Civil No. 11-474 (DWF/FLN).United States District Court, D. Minnesota.

July 21, 2016.Larry D. Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Cheryle Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Countrywide Home Loans, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

BAC Home Loans Servicing, LP, Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

Mortgage Electronic Registration Systems, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

This matter is before the Court on a Motion for Summary Judgment brought by Defendants Countrywide Home Loans, Inc. (“Countrywide”), Bank of America, N.A. (“BANA”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) (together, “Defendants”) (Doc. No. 51).[1] For the reasons set forth below, the Court grants Defendants’ motion.

BACKGROUND

I. Factual Background

This “Factual Background” section reiterates, in large part, the “Background” section included in the Court’s April 19, 2012 Memorandum Opinion and Order. (Doc. No. 23.)

On February 23, 2007, Plaintiffs Larry Jesinoski and Cheryle Jesinoski (collectively, “Plaintiffs”) refinanced their home in Eagan, Minnesota, by borrowing $611,000 from Countrywide, a predecessor-in-interest of BANA. (Doc. No. 7 (“Am. Compl.”) ¶¶ 7, 15, 16, 17; Doc. No. 55 (“Hanson Decl.”) ¶ 5, Ex. D (“L. Jesinoski Dep.”) at 125.) MERS also gained a mortgage interest in the property. (Am. Compl. ¶ 25.) Plaintiffs used the loan to pay off existing loan obligations on the property and other consumer debts. (L. Jesinoski Dep. at 114-15; Hanson Decl. ¶ 6, Ex. E (“C. Jesinoski Dep.”) at 49-50; Am. Compl. ¶ 22.)[2] The refinancing included an interest-only, adjustable-rate note. (L. Jesinoski Dep. at 137.) Plaintiffs wanted these terms because they intended to sell the property. (L. Jesinoski Dep. at 125-26, 137; C. Jesinoski Dep. at 38, 46-7.)

At the closing on February 23, 2007, Plaintiffs received and executed a Truth in Lending Act (“TILA”) Disclosure Statement and the Notice of Right to Cancel. (Doc. No. 56 (Jenkins Decl.) ¶¶ 5, 6, Exs. C & D; L. Jesinoski Dep. at 61, 67, 159; C. Jesinoski Dep. at 30-33; Hanson Decl. ¶¶ 2-3, Exs. A & B.) By signing the Notice of Right to Cancel, each Plaintiff acknowledged the “receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D.) Per the Notice of Right to Cancel, Plaintiffs had until midnight on February 27, 2007, to rescind. (Id.) Plaintiffs did not exercise their right to cancel, and the loan funded.

In February 2010, Plaintiffs paid $3,000 to a company named Modify My Loan USA to help them modify the loan. (L. Jesinoski Dep. at 79-81; C. Jesinoski Dep. at 94-95.) The company turned out to be a scam, and Plaintiffs lost $3,000. (L. Jesinoski Dep. at 79-81.) Plaintiffs then sought modification assistance from Mark Heinzman of Financial Integrity, who originally referred Plaintiffs to Modify My Loan USA. (Id. at 86.) Plaintiffs contend that Heinzman reviewed their loan file and told them that certain disclosure statements were missing from the closing documents, which entitled Plaintiffs to rescind the loan. (Id. at 88-91.)[3] Since then, and in connection with this litigation, Heinzman submitted a declaration stating that he has no documents relating to Plaintiffs and does not recall Plaintiffs’ file. (Hanson Decl. ¶ 4, Ex. C (“Heinzman Decl.”) ¶ 4.)[4]

On February 23, 2010, Plaintiffs purported to rescind the loan by mailing a letter to “all known parties in interest.” (Am. Compl. ¶ 30; L. Jesinoski Dep., Ex. 8.) On March 16, 2010, BANA denied Plaintiffs’ request to rescind because Plaintiffs had been provided the required disclosures, as evidenced by the acknowledgments Plaintiffs signed. (Am. Compl. ¶ 32; L. Jesinoski Dep., Ex. 9.)

II. Procedural Background

On February 24, 2011, Plaintiffs filed the present action. (Doc. No. 1.) By agreement of the parties, Plaintiffs filed their Amended Complaint, in which Plaintiffs assert four causes of action: Count 1—Truth in Lending Act, 15 U.S.C. § 1601, et seq.; Count 2—Rescission of Security Interest; Count 3—Servicing a Mortgage Loan in Violation of Standards of Conduct, Minn. Stat. § 58.13; and Count 4—Plaintiffs’ Cause of Action under Minn. Stat. § 8.31. At the heart of all of Plaintiffs’ claims is their request that the Court declare the mortgage transaction rescinded and order statutory damages related to Defendants’ purported failure to rescind.

Plaintiffs do not dispute that they had an opportunity to review the loan documents before closing. (L. Jesinoski Dep. at 152-58; C. Jesinoski Dep. at 56.) Although Plaintiffs each admit to signing the acknowledgement of receipt of two copies of the Notice of Right to Cancel, they now contend that they did not each receive the correct number of copies as required by TILA’s implementing regulation, Regulation Z. (Am. Compl. ¶ 47 (citing C.F.R. §§ 226.17(b) & (d), 226.23(b)).)

Earlier in this litigation, Defendants moved for judgment on the pleadings based on TILA’s three-year statute of repose. In April 2012, the Court issued an order granting Defendants’ motion, finding that TILA required a plaintiff to file a lawsuit within the 3-year repose period, and that Plaintiffs had filed this lawsuit outside of that period. (Doc. No. 23 at 6.) The Eighth Circuit affirmed. Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013). The United States Supreme Court reversed, holding that a borrower exercising a right to TILA rescission need only provide his lender written notice, rather than file suit, within the 3-year period. Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015). The Eighth Circuit then reversed and remanded the case for further proceedings. (Doc. No. 38.) After engaging in discovery, Defendants now move for summary judgment.

DISCUSSION

I. Summary Judgment Standard

Summary judgment is appropriate if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Courts must view the evidence and all reasonable inferences in the light most favorable to the nonmoving party. Weitz Co. v. Lloyd’s of London, 574 F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).

The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank v. Magna Bank of Mo., 92 F.3d 743, 747 (8th Cir. 1996). A party opposing a properly supported motion for summary judgment “must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); see also Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).

II. TILA

Defendants move for summary judgment with respect to Plaintiffs’ claims, all of which stem from Defendants’ alleged violation of TILA—namely, failing to give Plaintiffs the required number of disclosures and rescission notices at the closing.

The purpose of TILA is “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit . . .” 15 U.S.C. § 1601(a). In transactions, like the one here, secured by a principal dwelling, TILA gives borrowers an unconditional three-day right to rescind. 15 U.S.C. § 1635(a); see also id. § 1641(c) (extending rescission to assignees). The three-day rescission period begins upon the consummation of the transaction or the delivery of the required rescission notices and disclosures, whichever occurs later. Id. § 1635(a). Required disclosures must be made to “each consumer whose ownership interest is or will be subject to the security interest” and must include two copies of a notice of the right to rescind. 12 C.F.R. § 226.23(a)-(b)(1). If the creditor fails to make the required disclosures or rescission notices, the borrower’s “right of rescission shall expire three years after the date of consummation of the transaction.” 15 U.S.C. § 1635(f); see 12 C.F.R. § 226.23(a)(3).

If a consumer acknowledges in writing that he or she received a required disclosure or notice, a rebuttable presumption of delivery is created:

Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.

15 U.S.C. §1635(c).

A. Number of Disclosure Statements

Plaintiffs claim that Defendants violated TILA by failing to provide them with a sufficient number of copies of the right to rescind and the disclosure statement at the closing of the loan. (Am. Compl. ¶ 47.) Defendants assert that Plaintiffs’ claims (both TILA and derivative state-law claims) fail as a matter of law because Plaintiffs signed an express acknowledgement that they received all required disclosures at closing, and they cannot rebut the legally controlling presumption of proper delivery of those disclosures.

It is undisputed that at the closing, each Plaintiff signed an acknowledgement that each received two copies of the Notice of Right to Cancel. Plaintiffs argue, however, that no presumption of proper delivery is created here because Plaintiffs acknowledged the receipt of two copies total, not the required four (two for each of the Plaintiffs). In particular, both Larry Jesinoski and Cheryle Jesinoski assert that they “read the acknowledgment . . . to mean that both” Larry and Cheryle “acknowledge receiving two notices total, not four.” (Doc. No. 60 (“L. Jesinoski Decl.”) ¶ 3; Doc. No. 61 (“C. Jesinoski Decl.”) ¶ 3.) Thus, Plaintiffs argue that they read the word “each” to mean “together,” and therefore that they collectively acknowledged the receipt of only two copies.

The Court finds this argument unavailing. The language in the Notice is unambiguous and clearly states that “[t]he undersigned each acknowledge receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D (italics added).) Plaintiffs’ asserted interpretation is inconsistent with the language of the acknowledgment. The Court instead finds that this acknowledgement gives rise to a rebuttable presumption of proper delivery of two copies of the notice to each Plaintiff. See, e.g., Kieran v. Home Cap., Inc., Civ. No. 10-4418, 2015 WL 5123258, at *1, 3 (D. Minn. Sept. 1, 2015) (finding the creation of a rebuttable presumption of proper delivery where each borrower signed an acknowledgment stating that they each received a copy of the disclosure statement—”each of [t]he undersigned acknowledge receipt of a complete copy of this disclosure”).[5]

The only evidence provided by Plaintiffs to rebut the presumption of receipt is their testimony that they did not receive the correct number of documents. As noted in Kieran, this Court has consistently held that statements merely contradicting a prior signature are insufficient to overcome the presumption. Kieran, 2015 WL 5123258, at *3-4 (citing Gomez v. Market Home Mortg., LLC, Civ. No. 12-153, 2012 WL 1517260, at *3 (D. Minn. April 30, 2012) (agreeing with “the majority of courts that mere testimony to the contrary is insufficient to rebut the statutory presumption of proper delivery”)); see also Lee, 692 F.3d at 451 (explaining that a notice signed by both borrowers stating “[t]he undersigned each acknowledge receipt of two copies of [notice]” creates “a presumption of delivery that cannot be overcome without specific evidence demonstrating that the borrower did not receive the appropriate number of copies”); Golden v. Town & Country Credit, Civ. No. 02-3627, 2004 WL 229078, at *2 (D. Minn. Feb. 3, 2004) (finding deposition testimony insufficient to overcome presumption); Gaona v. Town & Country Credit, Civ. No. 01-44, 2001 WL 1640100, at *3 (D. Minn. Nov. 20, 2001)) (“[A]n allegation that the notices are now not contained in the closing folder is insufficient to rebut the presumption.”), aff’d in part, rev’d in part, 324 F.3d 1050 (8th Cir. 2003).

Plaintiffs, however, contend that their testimony is sufficient to rebut the presumption and create a factual issue for trial. Plaintiffs rely primarily on the Eighth Circuit’s decision in Bank of North America v. Peterson, 746 F.3d 357, 361 (8th Cir. 2014), cert. granted, judgment vacated, 135 S. Ct. 1153 (2015), and opinion vacated in part, reinstated in part, 782 F.3d 1049 (8th Cir. 2015). In Peterson, the plaintiffs acknowledged that they signed the TILA disclosure and rescission notice at their loan closing, but later submitted affidavit testimony that they had not received their TILA disclosure statements at closing. Peterson, 764 F.3d at 361. The Eighth Circuit determined that this testimony was sufficient to overcome the presumption of proper delivery. Id. The facts of this case, however, are distinguishable from those in Peterson. In particular, the plaintiffs in Peterson testified that at the closing, the agent took the documents after they had signed them and did not give them any copies. Id. Here, it is undisputed that Plaintiffs left with copies of their closing documents. (L. Jesinoski Dep. at 94-95.) In addition, Plaintiffs did not testify unequivocally that they did not each receive two copies of the rescission notice. Instead, they have testified that they do not know what they received. (See, e.g., id. at 161.) Moreover, Cheryle Jesinoski testified that she did not look through the closing documents at the time of closing, and therefore cannot attest to whether the required notices were included. (C. Jesinoski Dep. at 85.)[6]

Based on the evidence in the record, the Court determines that the facts of this case are more line with cases that have found that self-serving assertions of non-delivery do not defeat the presumption. Indeed, the Court agrees with the reasoning in Kieran, which granted summary judgment in favor of defendants under similar facts, and which was decided after the Eighth Circuit issued its decision in Peterson. Accordingly, Plaintiffs have not overcome the rebuttable presumption of proper delivery of TILA notices, and Defendants’ motion for summary judgment is granted as to the Plaintiffs’ TILA claims.

B. Ability to Tender

Defendants also argue that Plaintiffs’ claims fails as a matter of law on a second independent basis—Plaintiffs’ admission that they do not have the present ability to tender the amount of the loan proceeds. Rescission under TILA is conditioned on repayment of the amounts advanced by the lender. See Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1170 (9th Cir. 2003). This Court has concluded that it is appropriate to dismiss rescission claims under TILA at the pleading stage based on a plaintiff’s failure to allege an ability to tender loan proceeds. See, e.g., Franz v. BAC Home Loans Servicing, LP, Civ. No. 10-2025, 2011 WL 846835, at *3 (D. Minn. Mar. 8, 2011); Hintz v. JP Morgan Chase Bank, Civ. No. 10-119, 2010 WL 4220486, at *4 (D. Minn. Oct. 20, 2010). In addition, courts have granted summary judgment in favor of defendants where the evidence shows that a TILA plaintiff cannot demonstrate an ability to tender the amount borrowed. See, e.g., Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 822 (4th Cir. 2007) (affirming grant of summary judgment for defendants on TILA rescission claim “given the appellants’ inability to tender payment of the loan amount”); Taylor v. Deutsche Bank Nat’l Trust Co., Civ. No. 10-149, 2010 WL 4103305, at *5 (E.D. Va. Oct. 18, 2010) (granting summary judgment on TILA rescission claim where plaintiff could not show ability to tender funds aside from selling the house “as a last resort”).

Plaintiffs argue that the Supreme Court in Jesinoski eliminated tender as a requirement for rescission under TILA. The Court disagrees. In Jesinoski, the Supreme Court reached the narrow issue of whether Plaintiffs had to file a lawsuit to enforce a rescission under 15 U.S.C. § 1635, or merely deliver a rescission notice, within three years of the loan transaction. Jesinoski, 135 S. Ct. at 792-93. The Supreme Court determined that a borrower need only provide written notice to a lender in order to exercise a right to rescind. Id. The Court discerns nothing in the Supreme Court’s opinion that would override TILA’s tender requirement. Specifically, under 15 U.S.C. § 1635(b), a borrower must at some point tender the loan proceeds to the lender.[7] Plaintiffs testified that they do not presently have the ability to tender back the loan proceeds. (L. Jesinoski Dep. at 54, 202; C. Jesinoski Dep. at 118-119.) Because Plaintiffs have failed to point to evidence creating a genuine issue of fact that they could tender the unpaid balance of the loan in the event the Court granted them rescission, their TILA rescission claim fails as a matter of law on this additional ground.[8]

Plaintiffs argue that if the Court conditions rescission on Plaintiffs’ tender, the amount of tender would be exceeded, and therefore eliminated, by Plaintiffs’ damages. In particular, Plaintiffs claim over $800,000 in damages (namely, attorney fees), and contend that this amount would negate any amount tendered. Plaintiffs, however, have not cited to any legal authority that would allow Plaintiffs to rely on the potential recovery of fees to satisfy their tender obligation. Moreover, Plaintiffs’ argument presumes that they will prevail on their TILA claims, a presumption that this Order forecloses.

C. Damages

Next, Defendants argue that Plaintiffs are not entitled to TILA statutory damages allegedly flowing from Defendants’ decision not to rescind because there was no TILA violation in the first instance. Plaintiffs argue that their damages claim is separate and distinct from their TILA rescission claim.

For the reasons discussed above, Plaintiffs’ TILA claim fails as a matter of law. Without a TILA violation, Plaintiffs cannot recover statutory damages based Defendants refusal to rescind the loan.

D. State-law Claims

Plaintiffs’ state-law claims under Minn. Stat. § 58.13 and Minnesota’s Private Attorney General statute, Minn. Stat. § 8.31, are derivative of Plaintiffs’ TILA rescission claim. Thus, because Plaintiffs’ TILA claim fails as a matter law, so do their state-law claims.

ORDER

Based upon the foregoing, IT IS HEREBY ORDERED that:

1. Defendants’ Motion for Summary Judgment (Doc. No. [51]) is GRANTED.

2. Plaintiffs’ Amended Complaint (Doc. No. [7]) is DISMISSED WITH PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.

[1] According to Defendants, Countrywide was acquired by BANA in 2008, and became BAC Home Loans Servicing, LP (“BACHLS”), and in July 2011, BACHLS merged with BANA. (Doc. No. 15 at 1 n.1.) Thus, the only two defendants in this case are BANA and MERS.

[2] Larry Jesinoski testified that he had been involved in about a half a dozen mortgage loan closings, at least three of which were refinancing loans, and that he is familiar with the loan closing process. (L. Jesinoski Dep. at 150-51.)

[3] Plaintiffs claim that upon leaving the loan closing they were given a copy of the closing documents, and then brought the documents straight home and placed them in L. Jesinoski’s unlocked file drawer, where they remained until they brought the documents to Heinzman.

[4] At oral argument, counsel for Plaintiffs requested leave to depose Heinzman in the event that the Court views his testimony as determinative. The Court denies the request for two reasons. First, it appears that Plaintiffs had ample opportunity to notice Heinzman’s deposition during the discovery period, but did not do so. Second, Heinzman’s testimony will not affect the outcome of the pending motion, and therefore, the request is moot.

[5] See also, e.g., Lee v. Countrywide Home Loans, Inc., 692 F.3d 442, 451 (6th Cir. 2012) (rebuttable presumption arose where each party signed an acknowledgement of receipt of two copies); Hendricksen v. Countrywide Home Loans, Civ. No. 09-82, 2010 WL 2553589, at *4 (W.D. Va. June 24, 2010) (rebuttable presumption of delivery of two copies of TILA disclosure arose where plaintiffs each signed disclosure stating “[t]he undersigned further acknowledge receipt of a copy of this Disclosure for keeping prior to consummation”).

[6] This case is also distinguishable from Stutzka v. McCarville, 420 F.3d 757, 762 (8th Cir. 2005), a case in which a borrower’s assertion of non-delivery was sufficient to overcome the statutory presumption. In Stutzka, the plaintiffs signed acknowledgements that they received required disclosures but left the closing without any documents. Stutzka, 420 F.3d at 776.

[7] TILA follows a statutorily prescribed sequence of events for rescission that specifically discusses the lender performing before the borrower. See § 1635(b). However, TILA also states that “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court.” Id. Considering the facts of this case, it is entirely appropriate to require Plaintiffs to tender the loan proceeds to Defendants before requiring Defendants to surrender their security interest in the loan.

[8] The Court acknowledges that there is disagreement in the District over whether a borrower asserting a rescission claim must tender, or allege an ability to tender, before seeking rescission. See, e.g. Tacheny v. M&I Marshall & Ilsley Bank, Civ. No. 10-2067, 2011 WL 1657877, at *4 (D. Minn. Apr. 29, 2011) (respectfully disagreeing with courts that have held that, in order to state a claim for rescission under TILA, a borrower must allege a present ability to tender). However, there is no dispute that to effect rescission under § 1635(b), a borrower must tender the loan proceeds. Here, the record demonstrates that Plaintiffs are unable to tender. Therefore, their rescission claim fails on summary judgment.

 

FDCPA Claims Upheld in 9th Circuit Class Action

The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt.

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

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If anyone remembers the Grishom book “The Firm”, also in movies, you know that in the end the crooks were brought down by something they were never thinking about — mail fraud — a federal law that has teeth, even if it sounds dull. Mail fraud might actually apply to the millions of foreclosures that have taken place — even if key documents are sent through private mail delivery services. The end of month statements and other correspondence are definitely sent through US Mail. And as we are seeing, virtually everything they were sending consisted of multiple layers of misrepresentations that led to the detriment of the receiving homeowner. That’s mail fraud.
Like Mail Fraud, claims based on the FDCPA seem boring. But as many lawyers throughout the country are finding out, those claims have teeth. And I have seen multiple cases where FDCPA claims resulted in the settlement of the case on terms very favorable to the homeowner — provided the claim is properly brought and there are some favorable rulings on the initial motions.
Normally the banks settle any claim that looks like it would be upheld. That is why you don’t see many verdicts or judgments announcing fraudulent conduct by banks, servicers and “trustees.”And you don’t see the settlement either because they are all under seal of confidentiality. So for the casual observer, you might see a ruling here and there that favors the borrower, but you don’t see any judgments normally. Here the banks thought they had this one in the bag — because it was a class action and normally class actions are difficult if not impossible to prosecute.
It turns out that FDCPA is both a good cause of action for damages and a great discovery tool — to force the banks, servicers or anyone else that is a debt collector to respond within 5 days giving the basic information about the loan — like who is the actual creditor. Discovery is also much easier in FDCPA actions because it is forthrightly tied to the complaint.
This decision is more important than it might first appear. It removes any benefit of playing musical chairs with servicers, and other debt collectors. This is a core of bank strategy — to layer over all defects. This Federal Court of Appeals holds that it doesn’t matter how many layers you add — all debt collectors in the chain had the duty to respond.
.

Justia Opinion Summary

Hernandez v Williams, Zinman and Parham, PC No 14-15672 (9th Cir, 2016)

Plaintiff filed a putative class action, alleging that WZP violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692(g)(a), by sending a debt collection letter that lacked the disclosures required by section 1692(g)(a) of the FDCPA. Applying well-established tools of statutory interpretation and construing the language in section 1692g(a) in light of the context and purpose of the FDCPA, the court held that the phrase “the initial communication” refers to the first communication sent by any debt collector, including collectors that contact the debtor after another collector already did. The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt. In this case, the district court erred in concluding that, because WZP was not the first debt collector to communicate with plaintiff about her debt, it had no obligation to comply with the statutory validation notice requirement. Accordingly, the court reversed and remanded.

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RESCISSION Revalidated in CA Decision

1sT Appellate District US Bank v Naifeh: “… we conclude that a borrower may rescind the loan transaction under TILA without filing a lawsuit, but when the rescission is challenged in litigation, the court has authority to decide whether the rescission notice is timely and whether the the procedure set forth in the TILA (sic) should be modified in light of the facts and circumstances of the case.”

The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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

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see US BANK VS NAIFEH

In a carefully worded opinion at least one appellate court seems to be moving closer to the view I have expressed here on these pages. But they still left some simple propositions unclear.

It remains my opinion that a recorded rescission forces those who would challenge it to file suit to remove the rescission from the title record. In that suit they would need to plead and prove standing — without using the note or mortgage to do it because rescission renders them void at the moment the letter of rescission is mailed..

  1. The decision clearly says that for the rescission to be effective (deriving its authority from 15 USC §1635 and the unanimous SCOTUS decision in Jesinoski v Countrywide), the borrower need NOT file suit. That means it is effective when mailed (NOT FILED) just as the statute says and just as the late Justice Scalia penned in the Jesinoski case.
  2. The decision anticipates a challenge to rescission — which in and of itself is recognition that the rescission IS effective and that something must be done about it.
  3. But the court does not clarify what is meant when it said “when the rescission is challenged in litigation.” Clearly the decision stands for the proposition that the rescission stands as effective unless challenged in litigation. The unanswered question is ‘what form of litigation?’
  4. If we apply ordinary rules of procedure, then the decision dovetails with my opinions, the statute and the US Supreme Court decision. The rescission is effective when mailed. So the “challenge” must be “in litigation.” But whether that means a lawsuit to vacate or a motion challenging the rescission is unclear. A “motion challenging the rescission” is problematic if it does not set forth the standing of the party making the challenge and if it does not set forth the plain facts that the rescission, under law, is already effective but should be vacated, then it is trying to get the court to arrive at the position that the rescission can be ignored even if it is recorded (a condition not addressed in the opinion).
  5. The claimant challenging the rescission must state a cause of action, if the rescission is recorded, that is in essence a quiet title claim that needs to be framed as an original complaint in a lawsuit. So far the banks have been successful in getting trial judges to IGNORE the rescission rather than remove it as an effective instrument, whether recorded or not. This only compounds title problems already present.
  6. The procedural oddity here is that in foreclosure litigation the court might conclude (erroneously in my opinion) that the beneficiary under the deed of trust had standing to substitute trustee, standing to to have the trustee record a notice of default, and standing to record a notice of sale.
  7. BUT once the rescission is effective, there is absolutely no foundation for a claim of standing based upon the void note, the void mortgage and the consequential void assignments, which even if they were not otherwise void, are void now because the assignment is purporting to transfer something that no longer exists.
  8. Standing vanishes if it is dependent upon presumptions applied from the assignment, endorsement and other attributes wherein false statements are made concerning purchase and sale of the note or mortgage. The note and mortgage are void the moment the rescission is mailed. No reliance on the mortgage, note or any transfer of same can constitute standing, since those documents, as a matter of law, no longer exist.
  9. Hence STANDING TO CHALLENGE RESCISSION must logically be dependent upon the ability of the challenger to affirmatively plead that they own the debt or obligation and to prove it at a hearing in which evidence is produced. This is the holy grail of foreclosure defense. We know that 99% of the foreclosers do NOT qualify as owners of the actual debt or obligation. They are traveling on legal presumptions as alleged “holders” etc. under the UCC. If the note and mortgage don’t exist then the status of holder is nonexistent and irrelevant.
  10. This court further leaves us in a gray area when it correctly reads that portion of the statute giving the court authority to consider the options, procedurally, but incorrectly states that one of those options is that a Federal Statute that preempts state law could be “modified in light of the facts and circumstances. This is NOT contained in either the statute or the Jesinoski decision. This court is putting far too much weight on the provision of the statute that allows for a petition to the court at which the court could change some of the procedural steps in complying with rescission, and possibly by implication allowing for a challenge to the rescission in order to vacate the legal effectiveness of the rescission.
  11. ANY DECISION ON “PROCEDURE” THAT NULLIFIES THE EFFECTIVENESS OF THE RESCISSION WHEN MAILED IS ERRONEOUS.  Any such decision would effectively be eviscerating the entire statute and the opinion of the US Supreme Court. The simple rule of thumb here (heuristic reasoning) is that the rescission is and always will have been effective when mailed. The parts of the statute that deal with procedure can only be related to a party who claims to be the creditor (owner of the debt or obligation) who intends to comply.
  12. Since tender is expressly excluded in the statute and the Jesinoski decision, the change can not require the borrower to tender money — especially when the statute says that no such demand need be considered by the borrower until there is full compliance with the rescission — return of canceled note, release of encumbrance and payment to the borrower of all money ever paid by the borrower for principal, interest, insurance, taxes, and fees.
  13. Hence the changes are limited perhaps granting additional time, or maybe even to credits against what might be due from the homeowner but even that looks like a stretch. The committee notes and subsequent decisions clearly state that the intent of Congress was to prevent any bank from stonewalling the effectiveness of a rescission, which is what judges have been doing despite the Jesinoski decision and the clear wording of the statute.
  14. And this is how we know that the challenge, if brought, must be within the 20 days available for the creditor, “lender” etc to comply with the rescission. Any other interpretation would mean that the rescission was NOT effective upon mailing and would also mean that the owner of the property cannot get a substitute mortgage to pay off any legitimate claim from a true creditor. Such interpretations, while apparently attractive to bank lawyers and judges, are directly contrary to the express wording of the statute and directly contrary tot he express wording of the Jesinoski decision, decided unanimously by SCOTUS. Hence ANY CHALLENGE outside the 20 days is barred by the statute. Just like any action to enforce the TILA duties against the “lender” must be brought within one year of the mailing and receipt of the rescission.
  15. The failure of either the “lender” to comply or the borrower to enforce simply means that after one year, the rescission is still effective (meaning the note and mortgage are void) the claim for enforcement of the duties of the lender is extinguished, and the financial claim of the lender is extinguished. Hence, the infamous free house — not caused by sneaky borrowers but caused instead of malfeasant banks who continue to use their influence to get judges to re-write the law.
  16. But regardless of how one looks at this decision, the Jesinoski decision or the statute one thing is perfectly clear — vacating the rescission is strictly dependent upon timely filing of a challenge in litigation and a hearing on evidence, because the legal presumptions used in determining standing are no longer available in the absence of the the note or mortgage, which were irretrievably rendered void upon mailing of the rescission.

The banks and servicers have so far been successful in pulling the wool over judges eyes, perhaps because judges have long disliked TILA and especially TILA rescission. The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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Was There a Loan Contract?

In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.  The absence of the defined set of investors is the reason why bank lawyers fight so hard to make such disclosures “irrelevant” in courts of law.

The important fact that is often missed is that the “warehouse” lender was neither a warehouse nor a lender. Like the originator it is a layer of anonymity in the lending process that is used as a conduit for the funding received by the “borrower.”

None of the real parties who funded the transaction had any knowledge about the transaction to which their funds were committed. The nexus between the investors and/or REMIC Trust and the original loan SHOULD have been accomplished by the Trust purchasing the loan — an event that never occurred. And this is why fabricated, forged documents are used in foreclosures — to cover over the fact that there was no purchase and sale of the loan by the Trust and to cover up the fact that investors’ money was used in ways directly contrary to their interests and their agreement with the bogus REMIC Trusts whose bogus securities were purchased by investors.

In the end the investors were left to rely on the unscrupulous investment bank that issued the bogus MBS to somehow create a nexus between the investors and the alleged loans that were funded, if at all, by the direct infusion of investors’ capital and NOT by the REMIC Trust.

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

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also see comments below from Dan Edstrom, senior securitization analyst for LivingLies
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David Belanger recently sent out an email explaining in his words the failed securitization process that sent our economy into a toxic spiral that continues, unabated, to weaken our ability to recover from the removal of capital from the most important source of spending and purchasing in our economy. This was an epic redistribution of wealth from the regular guy to a handful of “bankers” who were not really acting as bankers.

His email article is excellent and well worth reading a few times. He nails the use of remote conduits that have nothing to do with any loan transaction, much less a loan contract. The only thing I would add is the legal issue of the relationship between this information and the ability to rescind.

Rescission is available ONLY if there is something to rescind — and that has traditionally been regarded as a loan contract. If there is no loan contract, as Belanger asserts (and I agree) then there is nothing to rescind. But if the “transaction” can be rescinded because it is an implied contract between the source of funds and the alleged borrower, then rescission presumably applies.

Second, there is the question of what constitutes a “warehouse” lender. By definition if there is a warehouse lending contract in which the originator has liabilities or risk exposure to losses on the loans originated, then the transaction would appear to be properly represented by the loan documents executed by the borrower, although the absence of a signature from the originator presents a problem for “consummation” of the loan contract.

But, as suggested by the article if the “warehouse lender” was merely a conduit for funds from an undisclosed third party, then it is merely a sham entity in the chain. And if the originator has no exposure to risk of loss then it merely acted as sham conduit also, or paid originator or broker. This scenario is described in detail in Belanger’s article (see below) and we can see that in practice, securitization was distorted at several points — one of which was the presumption that an unauthroized party (contrary to disclosure and representations during the loan “approval” and loan  “closing”) was inserted as “lender” when it loaned no money. Yet the originator’s name was inserted as payee on the note or mortgagee on the mortgage.

All of this brings us to the question of whether judges are right — that the contract is consummated at the time that the borrower affixes his or her signature. It is my opinion that this view is erroneous and presents moral hazard and roadblock to enforcing the rights of disclosure of the parties, terms and compensation of the people and entities arising out of the “origination” of the loan.

If judges are right, then the borrower can only claim breach of contract for failure to loan money in accordance with the disclosures required by TILA. And the “borrower’s” ability to rescind within 3 days has been virtually eliminated as many of the loans were at least treated as though they had been “sold” to third parties who posed as warehouse lenders who in turn “sold” the loan to even more remote parties, none of which were the purported REMIC Trusts. Those alleged REMIC Trusts were a smokescreen — sham entities that didn’t even serve as conduits — left without any capital, contrary to the terms of the Trust agreement and the representations of the seller of mortgage backed securities by these Trusts who had no business, assets, liabilities, income, expenses or even a bank account.

If judges are right that the contract is consummated even without a loan from from the party identified as “lender” then they are ruling contrary to the  Federal requirements of lending disclosures and in many states in violation of fair lending laws.

There is an outcome of erroneous rulings from the bench in which the basic elements of contract are ignored in order to give banks a favorable result, to wit: the marketplace for business is now functioning under a rule of people instead of the rule of law. It is now an apparently legal business plan where the object is to capture the signature of a consumer and use that signature for profit is dozens of ways contrary to every representation and disclosure made at the time of application and “closing” of the transaction.

As Belanger points out, without consideration it is black letter law backed by centuries of common law that for a contract to be formed and therefore enforceable it must fit the four legs of a stool — offer, acceptance of the terms offered, consideration from the first party to the alleged loan transaction and consideration from the second party. The consideration from the “lender”can ONLY be payment to fund the loan. If the originator does it with their own funds or credit, then they have probably satisfied the requirement of consideration.

But if a third party supplied the consideration for the “loan” AND that third party has no contractual nexus with the “originator” or alleged “warehouse lender”then the requirement of consideration from the “originator” is not and cannot be met. In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.

David Belanger’s Email article follows, unabridged:

AND AS I SAID, WITH NO CONSUMMATION AT CLOSING, BELANGER NEVER CONSUMMATED ANY MORTGAGE CONTRACT/ NOTE.

BECAUSE THEY ARE THE ONLY PARTY TO THE FAKE CONTRACT THAT FOLLOWED THROUGH WITH THERE CONSIDERATION, WITH SIGNING THE MORTGAGE AND NOTE,

AS REQUIRED, TO PERFORM. BUT GMAC MORTGAGE CORP. DID NOT PERFORM , I.E. LEND ANY MONEY AT CLOSING, AS WE HAVE THE WIRE TRANSFER SHOWING THEY DID NOT FUND THE MORTGAGE AND NOTE AT CLOSING. CANT HAVE A LEGAL CONTRACT IF ONLY ONE OF THE PARTY’S. PERFORMS HIS OBLIGATIONS.

THIS MAKE , AS I SAID. RESCISSION IS VALID. AND THEY HAVE NOT FOLLOWED THRU, THERE PART.

AND IT DOES GIVE ME THE RIGHT TO

RESCIND THE CONTRACT BASED ON ALL NEWLY DISCOVERED EVIDENCE, THAT THE PARTY TO THE MORTGAGE /NOTE CONTRACT, DID NOT

FULFILL THERE DUTY AND DID NOT PREFORM IN ANY WAY AS REQUIRED TO HAVE A VALID BINDING CONTRACT.

Tonight we have a rebroadcast of a segment from Episode 15 with a guest who is a recent ex-patriot from 17 years in the mortgage banking industry… Scot started out as a escrow agent doing closings, then advanced to mortgage loan officer, processor, underwriter, branch manager, mortgage broker and loss mitigator for the banks. Interestingly, he says,

“Looking back on my career I don’t believe any mortgage closing that I was involved in was ever consummated.”
Tonight Scot will be covering areas relating to:

1 lack of disclosure and consideration
2 substitution of true mortgage contracting partner
3 unfunded loan agreements
4 non-existent trusts
5 securitization of your note and bifurcation of the security interest and
6 how to identify and prove the non-existence of the so-called trust named in an assignment which may be coming after you to foreclose

: http://recordings.talkshoe.com/TC-139335/TS-1093904.mp3

so lets look at what happen a the closing of the mortgage CONTRACT SHELL WE.

1/ MORTGAGE AND NOTES, SAYS A ( SPECIFIC LENDER) GAVE YOU MONEY, ( AS WE KNOW THAT DIDN’T HAPPEN. )

2/ HOME OWNER WAS TOLD AT CLOSING AND BEFORE CLOSING THAT THE NAMED LENDER WOULD SUPPLY THE FUNDS AT CLOSING, AND WAS ALSO TOLD BY THE CLOSING AGENT , THE SAME LIE.

3/ THERE ARE 2 PARTIES TO A CLOSING OF A MORTGAGE AND NOTE, 1/ HOMEOWNER, 2/ LENDER.

3/ Offer and acceptance , Consideration,= SO HOMEOWNERS SIGN A MORTGAGE AND NOTE, IN CONSIDERATION of the said lender’s promises to pay the homeowner for said signing of the mortgage and note.

4/ but the lender does not, follow thru with his CONSIDERATION. I.E TO FUND THE CONTRACT. AND THE LENDER NAMED ON THE CONTRACT, KNEW ALL ALONG THAT HE WOULD NOT BE THE FUNDING SOURCE. FRAUD AT CONCEPTION. KNOWINGLY OUT RIGHT FRAUD ON THE HOMEOWNERS.

5/ THERE ARE NO STATUES OF LIMITATIONS ON FRAUD IN THE INDUCEMENT, OR ANY OTHER FRAUD.

6/ SO AS NEIL AND AND LENDING TEAM, AND OTHERS HAVE POINTED OUT, SO SO MANY TIMES HERE AND OTHER PLACES,

THERE COULD NOT BE ANY CONSUMMATION OF THE CONTRACT AT CLOSING,BY THE TWO PARTY’S TO THE CONTRACT, IF ONLY ONE PERSON TO THE CONTRACT ACTED IN GOOD FAITH,

AND THE OTHER PARTY DID NOT ACT IN GOOD FAITH OR EVEN SUPPLIED ANY ( CONSIDERATION WHAT SO EVER AT CLOSING OF THE CONTRACT.) A MORTGAGE AND NOTE IS A CONTRACT PEOPLE.

7/ SO THIS WOULD GIVE RISE TO THE LAW OF ( RESCISSION).

. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

AND THE BANKS CAN SCREAM ALL THEY WANT, IF THE PRETENDER LENDER THAT IS ON YOUR MORTGAGE AND NOTE, DID NOT SUPPLY THE FUNDS AT CLOSING, AS WE ALL KNOW DID HAPPEN, THEN THE MORTGAGE CONTRACT IS VOID. AND THERE WAS NO CONSUMMATION AT THE CLOSING TABLE, BY THE PARTY THAT SAID IT WAS FUNDING THE CONTRACT.

CANT GET MORE SIMPLE THAT THAT. and this supports all of the above. that the fake lender did not PERFORM AT CLOSING, DID NOT FUND ANY MONEY OR LOAN ANY MONEY AT CLOSING WITH ANY BORROWER, SO ONLY ONE ( THE BORROWER ) DID PERFORM AT CLOSING. BOTH PARTY’S MUST PERFORM TO HAVE A LEGAL BINDING CONTRACT.

SEE RODGERS V U.S.BANK HOME MORTGAGE ET, AL

THE WAREHOUSE LENDER NATIONAL CITY BANK OF KENTUCKY HELD THE NOTE THEN DELIVERED TO THIRD PARTY INVESTORS UNKNOWN

SECURITY NATIONAL FINANCIAL CORPORATION

5300 South 360 West, Suite 250

Salt Lake City, Utah 84123

Telephone (801) 264-1060

February 20, 2009

VIA EDGAR

U. S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N. E., Mail Stop 4561

Washington, D. C. 20549

Attn: Sharon M. Blume

Assistant Chief Accountant

Re: Security National Financial Corporation

Form 10-K for the Fiscal Year Ended December 31, 2007

Form 10-Q for Fiscal Quarter Ended June 30, 2008

File No. 0-9341

Dear Ms. Blume:

Security National Financial Corporation (the “Company”) hereby supplements its responses to its previous response letters dated January 15, 2009, November 6, 2008 and October 9, 2008. These supplemental responses are provided as additional information concerning the Company’s mortgage loan operations and the appropriate accounting that the Company follows in connection with such operations.

The Company operates its mortgage loan operations through its wholly owned subsidiary, Security National Mortgage Company (“SNMC”). SNMC currently has 29 branch offices across

the continental United States and Hawaii. Each office has personnel who are qualified to solicit and underwrite loans that are submitted to SNMC by a network of mortgage brokers. Loan files submitted to SNMC are underwritten pursuant to third-party investor guidelines and are approved to fund after all documentation and other investor-established requirements are determined to meet the criteria for a saleable loans. (e.s.) Loan documents are prepared in the name of SNMC and then sent to the title company handling the loan transactions for signatures from the borrowers. Upon signing the documents, requests are then sent to the warehouse bank involved in the transaction to submit funds to the title company to pay for the settlement. All loans funded by warehouse banks are committed to be purchased (settled) by third-party investors under pre-established loan purchase commitments. The initial recordings of the deeds of trust (the mortgages) are made in the name of SNMC. (e.s.)

Soon after the loan funding, the deeds of trust are assigned, using the Mortgage Electronic Registration System (“MERS”), which is the standard in the industry for recording subsequent transfers in title, and the promissory notes are endorsed in blank to the warehouse bank that funded the loan. The promissory notes and the deeds of trust are then forwarded to the warehouse bank. The warehouse bank funds approximately 96% of the mortgage loans to the title company and the remainder (known in the industry as the “haircut”) is funded by the Company. The Company records a receivable from the third-party investor for the portion of the mortgage loans the Company has funded and for mortgage fee income earned by SNMC. The receivable from the third-party investor is unsecured inasmuch as neither the Company nor its subsidiaries retain any interest in the mortgage loans. (e.s.)

Conditions for Revenue Recognition

Pursuant to paragraph 9 of SFAS 140, a transfer of financial assets (or a portion of a financial asset) in which the transferor surrenders control over those financial assets shall be accounted as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The transferor has surrendered control over transferred assets if and only if all of the following conditions are met:

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(a) The transferred assets have been isolated from the transferor―placed presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership.

SNMC endorses the promissory notes in blank, assigns the deeds of trust through MERS and forwards these documents to the warehouse bank that funded the loan. Therefore, the transferred mortgage loans are isolated from the Company. The Company’s management is confident that the transferred mortgage loans are beyond the reach of the Company and its creditors. (e.s.)

(b) Each transferee (or, if the transferee is a qualified SPE, each holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received, and no

condition restricts the transferee (or holder) from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor.

The Company does not have any interest in the promissory notes or the underlying deeds of trust because of the steps taken in item (a) above. The Master Purchase and Repurchase Agreements (the “Purchase Agreements”) with the warehouse banks allow them to pledge the promissory notes as collateral for borrowings by them and their entities. Under the Purchase Agreements, the warehouse banks have agreed to sell the loans to the third-party investors; however, the warehouse banks hold title to the mortgage notes and can sell, exchange or pledge the mortgage loans as they choose. The Purchase Agreements clearly indicate that the purchaser, the warehouse bank, and seller confirm that the transactions contemplated herein are intended to be sales of the mortgage loans by seller to purchaser rather than borrowings secured by the mortgage loans. In the event that the third-party investors do not purchase or settle the loans from the warehouse banks, the warehouse banks have the right to sell or exchange the mortgage loans to the Company or to any other entity. Accordingly, the Company believes this requirement is met.

(c) The transferor does not maintain effective control over the transferred asset through either an agreement that entitles both entities and obligates the transferor to repurchase or redeem them before their maturity or the ability to unilaterally cause the holder to return the specific assets, other than through a cleanup call.

The Company maintains no control over the mortgage loans sold to the warehouse banks, and, as stated in the Purchase Agreements, the Company is not entitled to repurchase the mortgage loans. In addition, the Company cannot unilaterally cause a warehouse bank to return a specific loan. The warehouse bank can require the Company to repurchase mortgage loans not settled by the third-party investors, but this conditional obligation does not provide effective control over the mortgage loans sold. Should the Company want a warehouse bank to sell a mortgage loan to a different third-party investor, the warehouse bank would impose its own conditions prior to agreeing to the change, including, for instance, that the original intended third-party investor return the promissory note to the warehouse bank. Accordingly, the Company believes that it does not maintain effective control over the transferred mortgage loans and that it meets this transfer of control criteria.

The warehouse bank and not the Company transfers the loan to the third-party investor at the date it is settled. The Company does not have an unconditional obligation to repurchase the loan from the warehouse bank nor does the Company have any rights to purchase the loan. Only in the situation where the third-party investor does not settle and purchase the loan from the warehouse bank does the Company have a conditional obligation to repurchase the loan. Accordingly, the Company believes that it meets the criteria for recognition of mortgage fee income under SFAS 140 when the loan is funded by the warehouse bank and, at that date, the Company records an unsecured receivable from the investor for the portion of the loan funded by the Company, which is typically 4% of the face amount of the loan, together with the broker and origination fee income.

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Loans Repurchased from Warehouse Banks

Historically, 99% of all mortgage loans are settled with investors. In the process of settling a loan, the Company may take up to six months to pursue remediation of an unsettled loan. There are situations when the Company determines that it is unable to enforce the settlement of a loan by the third-party investor and that it is in the Company’s best interest to repurchase the loan from the warehouse bank. Any previously recorded mortgage fee income is reversed in the period the loan was repurchased.

When the Company repurchases a loan, it is recorded at the lower of cost or market. Cost is equal to the amount paid to the warehouse bank and the amount originally funded by the Company. Market value is often difficult to determine for this type of loan and is estimated by the Company. The Company never estimates market value to exceed the unpaid principal balance on the loan. The market value is also supported by the initial loan underwriting documentation and collateral. The Company does not hold the loan as available for sale but as held to maturity and carries the loan at amortized cost. Any loan that subsequently becomes delinquent is evaluated by the Company at that time and any allowances for impairment are adjusted accordingly.

This will supplement our earlier responses to clarify that the Company repurchased the $36,291,000 of loans during 2007 and 2008 from the warehouse banks and not from third-party investors. The amounts paid to the warehouse banks and the amounts originally funded by the Company, exclusive of the mortgage fee income that was reversed, were classified as the cost of the investment in the mortgage loans held for investment.

The Company uses two allowance accounts to offset the reversal of mortgage fee income and for the impairment of loans. The allowance for reversal of mortgage fee income is carried on the balance sheet as a liability and the allowance for impairment of loans is carried as a contra account net of our investment in mortgage loans. Management believes the allowance for reversal of mortgage fee income is sufficient to absorb any losses of income from loans that are not settled by third-party investors. The Company is currently accruing 17.5 basis points of the principal amount of mortgage loans sold, which increased by 5.0 basis points during the latter part of 2007 and remained at that level during 2008.

The Company reviewed its estimates of collectability of receivables from broker and origination fee income during the fourth quarter of 2007, in view of the market turmoil discussed in the following paragraph and the fact that several third-party investors were attempting to back out of their commitments to buy (settle) loans, and the Company determined that it could still reasonably estimate the collectability of the mortgage fee income. However, the Company determined that it needed to increase its allowance for reversal of mortgage fee income as stated in the preceding paragraph.

Effect of Market Turmoil on Sales and Settlement of Mortgage Loans

As explained in previous response letters, the Company and the warehouse banks typically settle mortgage loans with third-party investors within 16 days of the closing and funding of the loans. However, beginning in the first quarter of 2007, there was a lot of market turmoil for mortgage backed securities. Initially, the market turmoil was primarily isolated to sub-prime mortgage loan originations. The Company originated less than 0.5% of its mortgage loans using this product during 2006 and the associated market turmoil did not have a material effect on the Company.

As 2007 progressed, however, the market turmoil began to expand into mortgage loans that were classified by the industry as Alt A and Expanded Criteria. The Company’s third-party investors, including Lehman Brothers (Aurora Loan Services) and Bear Stearns (EMC Mortgage Corp.), began to have difficulty marketing Alt A and Expanded Criteria loans to the secondary markets. Without notice, these investors changed their criteria for loan products and refused to settle loans underwritten by the Company that met these investor’s previous specifications. As stipulated in the agreements with the warehouse banks, the Company was conditionally required to repurchase loans from the warehouse banks that were not settled by the third-party investors.

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Beginning in early 2007, without prior notice, these investors discontinued purchasing Alt A and Expanded Criteria loans. Over the period from April 2007 through May 2008, the warehouse banks had purchased approximately $36.2 million of loans that had met the investor’s previous criteria but were rejected by the investor in complete disregard of their contractual commitments. Although the Company pursued its rights under the investor contracts, the Company was unsuccessful due to the investors’ financial problems and could not enforce the loan purchase contracts. As a result of its conditional repurchase obligation, the Company repurchased these loans from the warehouse banks and reversed the mortgage fee income associated with the loans on the date of repurchase from the warehouse banks. The loans were classified to the long-term mortgage loan portfolio beginning in the second quarter of 2008.

Relationship with Warehouse Banks

As previously stated, the Company is not unconditionally obligated to repurchase mortgage loans from the warehouse banks. The warehouse banks purchase the loans with the commitment from the third-party investors to settle the loans from the warehouse banks. Accordingly, the Company does not make an entry to reflect the amount paid by the warehouse bank when the mortgage loans are funded. Upon sale of the loans to the warehouse bank, the Company only records the receivables for the brokerage and origination fees and the amount the Company paid at the time of funding.

Interest in Repurchased Loans

Once a mortgage loan is repurchased, it is immediately transferred to mortgage loans held for investment (or should have been) as the Company makes no attempts to sell these loans

to other investors at this time. Any efforts to find a replacement investor are made prior to repurchasing the loan from the warehouse bank. The Company makes no effort to remarket the loan after it is repurchased.

Acknowledgements

In connection with the Company’s responses to the comments, the Company hereby acknowledges as follows:

· The Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· The staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· The Company may not assert staff comments as defense in any proceeding initiated by the Commission or any person under the Federal Securities Laws of the United States.

If you have any questions, please do not hesitate to call me at (801) 264-1060 or (801) 287-8171.

Very truly yours,

/s/ Stephen M. Sill

Stephen M. Sill, CPA

Vice President, Treasurer and

Chief Financial Officer

Contract law

Part of the common law series

Contract formation

Offer and acceptance Posting rule Mirror image rule Invitation to treat Firm offer Consideration Implication-in-fact

Defenses against formation

Lack of capacity Duress Undue influence Illusory promise Statute of frauds Non est factum

Contract interpretation

Parol evidence rule Contract of adhesion Integration clause Contra proferentem

Excuses for non-performance

Mistake Misrepresentation Frustration of purpose Impossibility Impracticability Illegality Unclean hands Unconscionability Accord and satisfaction

Rights of third parties

Privity of contract Assignment Delegation Novation Third-party beneficiary

Breach of contract

Anticipatory repudiation Cover Exclusion clause Efficient breach Deviation Fundamental breach

Remedies

Specific performance Liquidated damages Penal damages Rescission

Quasi-contractual obligations

Promissory estoppel Quantum meruit

Related areas of law

Conflict of laws Commercial law

Other common law areas

Tort law Property law Wills, trusts, and estates Criminal law Evidence

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation

Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.

According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation
Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.
According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

=======================

Comments from Dan Edstrom:

My understanding in California (and probably most other states) is the signature(s) were put on the note and security instrument and passed to the (escrow) agent for delivery only upon the performance of the specific instructions included in the closing instructions. The homeowner(s) did not manifest a present intent to transfer the documents or title….   Delivery was not possible until the agent followed instructions 100% (specific performance).  Their appears to be a presumption of delivery that should be rebutted. In California the test for an effective delivery is the writing passed with the deed (but only if delivery is put at issue).
Here is a quote from an appeal in CA:
We first examine the legal effectiveness of the Greggs deed. Legal delivery of a deed revolves around the intent of the grantor. (Osborn v. Osborn (1954) 42 Cal.2d 358, 363-364.) Where the grantor’s only instructions concerning the transaction are in writing, “`the effect of the transaction depends upon the true construction of the writing. It is in other words a pure question of law whether there was an absolute delivery or not.’ [Citation.]” (Id. at p. at p. 364.) As explained by the Supreme Court, “Where a deed is placed in the hands of a third person, as an escrow, with an agreement between the grantor and grantee that it shall not be delivered to the grantee until he has complied with certain conditions, the grantee does not acquire any title to the land, nor is he entitled to a delivery of the deed until he has strictly complied with the conditions. If he does not comply with the conditions when required, or refuses to comply, the escrow-holder cannot make a valid delivery of the deed to him. [Citations.]” (Promis v. Duke (1929) 208 Cal. 420, 425.) Thus, if the escrow holder does deliver the deed before the buyer complies with the seller’s instructions to the escrow, such purported delivery conveys no title to the buyer. (Montgomery v. Bank of America (1948) 85 Cal.App.2d 559, 563; see also Borgonovo v. Henderson (1960) 182 Cal.App.2d 220, 226-228 [purported assignment of note deposited into escrow held invalid, where maker instructed escrow holder to release note only upon deposit of certain sum of money by payee].)
LAOLAGI v. FIRST AMERICAN TITLE INSURANCE COMPANY, H032523 (Cal. Ct. App. July 31, 2009).
In most cases I have seen the closing instructions state there can be no encumbrances except the new note and security instrument in favor of {the payee of the note}…
Some of the issues with this (encumbrances) would be who provided the actual escrow funding, topre-existing agreements, the step transaction and single transaction doctrines, MERS, payoffs of previous mortgages (to a lender of record), reconveyance (to a lender of record), etc…
Thx,
Dan Edstrom

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“Lost” Note Found and Linda Green Assignments

Virtually none of the nonjudicial or judicial foreclosures can be won by banks without use of legal presumptions that lead the court to assume facts that are plainly untrue.

The bottom line is that the rules of evidence require proof of the transaction chain with no right to rely on legal presumptions. The banks can’t do that. Press hard on this issue and experience shows that at the very least a good settlement is in the offing and even a perfectly good judgment for the homeowner would be rendered.

The bottom line to keep your eye on the ball is that the Trust doesn’t own the note and never did; the same thing applies to nearly all bogus “beneficiaries” and “mortgagees.”

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

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We have all known that the banks, servicers and trustees have been fabricated, back-dating and forging documents. And they continue to do it because they are getting away with it. In all but a few cases Judges uphold bank objections to reveal the transaction chain in which money is actually exchanged.
 *
So banks are winning cases based upon legal presumptions stemming from the facial “validity” of the documents. By admitting fabricated documents into evidence and applying, without proper objection, legal presumptions that remove the obligation to actually prove their case, the banks win.
 *
Homeowners are defenseless because even though they and their attorneys know this is a farce, they have no way to prove it except by access to the only entities that actually have records in which the absence of a real transaction that ever took place — including both the origination of the alleged loan and the presumed acquisition of the loan. .
 *
But there are several circumstances in which one can argue that the legal presumptions should not be applied and in the absence of the required proof, the party seeking foreclosure can be showed to lack standing. Take for example the lost note, later abandoned and the robo-signed assignment executed by a known robo-signer, which is also later abandoned.
 *
The lost note is intended to be straight forward — a pleading that says the note was lost, that due diligence has been performed, that the present claimant owns or holds the original note and that the note has not been otherwise negotiated.  It is a lie of course. They never had the note because ti was destroyed intentionally. But they also don’t want to be subject to discovery or requirements of proof as to the chain of possession and the chain of transactions that would prove that the present holder actually owns or holds the note.
 *
So the tactic employed is to “withdraw” the count stating that the note is lost. And there is where the opportunity for the homeowner comes into play. If they have admitted losing the note, they are admitting that the chain might be broken. By simply withdrawing the lost note count without explanation they have failed to explain how it was found, where it was found and why it was lost.
 *
In other words the possibility that the note has already been negotiated is still present and the possibility exists that the “original” note is not an original but rather a mechanical reproduction — which leaves the question of the banks either admitting they destroyed it (and explaining that in pleadings, proof at trial or both) or admitting that they cannot produce admissible evidence that they actually own the debt, loan, note or mortgage.
 *
This possibility is raised to a probability once you establish at least “probable cause” to believe that the foreclosing party is relying upon the utterance of false or fraudulent documentation, at which point they are stripped or should be stripped of the benefits of a legal presumptions that the documents upon which they are relying are true.
 *

Even if they can come up with the actual original “original” note, they have already put on record that they lost it. Now they withdraw Count I without any amendment to the complaint explaining what happened to the note with no certification of possession and no documents attached to the complaint showing endorsement or assignment at the time of the filing of the lawsuit except that the Linda Green “assignment” was supplied and later abandoned after all the publicity about her which is now in the records I have sent to you.

*

So you have 2 “abandonments”: the allegation that the note was lost and the assignment executed by a robo-signer. The banks cover this deficiency by still more paper  — in which the banks file a “corrective” assignment that might withstand scrutiny in place of the original fabricated and forged assignment.
 *
They want the court to assume that since it is merely a “corrective” assignment that it relates back to the original assignment. But there is no legal presumption that covers that. So if they want to relate the assignment produced AFTER suit was filed with the bogus assignment dated BEFORE the lawsuit was filed then they should be required under the rules of evidence to show and when the assignment really related back to the time they of the transaction in which ownership and rights to enforce were transferred.
 *
The burden is on the banks to show they had standing before suit was filed or foreclosure was initiated. If they can’t prove by testimony and evidence of proof of payment that they had a transaction in which the loan, debt, note or mortgage was acquired by purchase and sale BEFORE the action was commenced, then they are stuck with their “Corrective” assignment which is obviously filed AFTER the foreclosure suit or forced sale was initiated. ( I need not explore here what they mean by :corrective” other than to say that naming it as a “corrective assignment” doesn’t make it relate back to the prior one.)
 *

So the only operative assignment is a “corrective” assignment that was filed AFTER the lawsuit was filed. We have no explanation of the chain of possession and there should be no presumptions about the chain of possession since it was their own pleadings that raised the issue.

The only way they reconcile this is by proving that they had an actual transaction resulting in the assignment (the equivalent of a bill of sale) BEFORE the lawsuit. But they have no records listed on their exhibit list showing that they intend to show they actually purchased the loan, debt, note or mortgage before suit was filed. The reason is simple — there was no such transaction. But this time they are not entitled to presumptions since the use of Linda Green’s signature (or some other robo-signor) that was clearly robo-signed has been abandoned and the trustworthiness of the documents are clearly in doubt.

*

Under Florida Rules of Evidence on presumptions the proponent must now actually prove an actual transaction without benefit of the legal presumption where the document is at least dubious and does not scream out trustworthiness.

*

This could be argued to the Judge as a simple burden of proof problem. The banks must prove their case. The banks have a history in this case of using a fabricated, forged document that they have tacitly admitted by their abandonment of the Linda Green assignment. Therefore they still have a possible case but they must prove the facts of the origination of the loan and the transfers of the loan without benefit of presumptions that those transactions actually took place.

*

So you have two problems here that go against the Bank — the failure to explain chain of custody of the lost note and the failure to have an assignment before suit is filed.On both issues there is plenty of case law that says the banks lose in that scenario. But failure to object and I might add failure to educate the judge as to your theory of the case could be fatal.

*

So I am suggesting to most lawyers who are not already doing that they file a pretrial memorandum outlining the issues for trial and why you think the court’s ruling’s on evidence should favor of the borrower. There is no real prejudice if the transactions actually took place.

*

The only prejudice is that they need to spend a few more minutes showing that the bank, trustee, servicer or whoever paid for the acquisition fo the note and perhaps that the originator actually paid to fund the loan for which the originator is given credit on the note and mortgage.

*

If the originator did not fund the loan, that would obviously explain the absence of an actual transaction in which the originator received consideration for the transfer of the loan papers improperly naming the originator as the lender. And it would explain the large fees paid to originator to engage in this pretense despite the Reg Z definition of table funded loans as “predatory per se.”

***

Schedule A Consult Now!

Banks Struggle to “FIND” Nonexistent Documents

So for the people who are unemployed due to a recession that won’t really quit until the money stolen from the system is somehow replaced or clawed back, you have a job waiting for you if you can sleep at night knowing that if your activities are exposed, the bank will disavow your “irresponsible” actions, leaving you exposed to jail or prison.

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/2016/06/17/mortgage-companies-seek-time-travelers-to-find-missing-documents/

Every Bubble Bursts. The banks are now struggling to find people who will “find” nonexistent documents without expressly telling their superiors at the bank that the “found” documents were fabricated. The evidence is all over the internet as banks troll for prospective employees who will get their hands dirty and be prepared to get thrown under the bus should the malfeasance be discovered.

The documents are not merely missing. They do not exist. And without the critical documents required in every foreclosure, there can be no foreclosure. The documents must be fabricated because they don’t exist. The documents don’t exist because they were actually intentionally destroyed and because the banks have no interest in the property, the alleged loan, the “original” note (“missing” in most cases), the mortgage or the debt itself. Many documents existed but were destroyed by the banks.

If pushed to open their books we would find a complete absence of any financial transaction in which the banks or their pet trusts were involved. Up until recently the banks were able to get their employees to execute documents that were fabricated for the purposes of presentation in court. But the number of people who are willing to do that is diminishing. Bank employees sense the impending disaster for the banks and they don’t want to take the blame even if it costs them their job.

The entire bank scheme, as I previously reported, is based upon the ability to use legal presumptions. These presumptions create an opportunity for epic fraud and theft. If a document is facially valid, the burden shifts to the homeowner to rebut the presumption that it is indeed a valid, authentic document. But now homeowners are hiring forensic document examiners who are showing that the document presented is not the original even if it looks that way. More and more homeowners, when presented with a “blue ink” document will say they don’t know if that particular signature is their own signature because they know that the documents and signatures are being fabricated. The bank’s witness in court is treading the fine line between ignorance and perjury when they say that the note is the original. The same holds true to bogus assignments, indorsements (“endorsements”), powers of attorney and other documents the banks use to avoid being required to prove their case without the presumptions.

So the banks, without using their own names, are posting job openings for what 4closurefraud.com calls “time travelers.” People get hired for their willingness to create documents that appear to have been prepared and executed years ago. This is required because if there was no transaction years ago, then the sham is exposed — the “loan contract” between the homeowner and the originator never existed. And so when the originator endorses or assigns the note or mortgage to an undisclosed third party, the assignment is completely and irrevocably void as coming from an entity that never owned the loan but was merely named as the Payee or Mortgagee.

BUT if the original loan documents look valid, and the alleged transfers of the loan look valid, then the burden shifts to the homeowner to rebut the presumption that a real transaction took place between the homeowner and the originator and between the originator and the next party in the false chain of possession and ownership of the loan. This is why I have been relentless in insisting that discovery take place and be pursued aggressively. I have already seen many cases in which an order was entered requiring the banks to respond to discovery requests; in virtually all cases someone steps forward and settles with the homeowner. The only exceptions are where it is clear that the judge is going to rule for the banks anyway and will deny subsequent motions to compel the discovery that was previously ordered.

Of course the problem with the settlement is that the homeowner is being coerced into accepting a settlement that acknowledges some bank, servicer or trustee as actually having rights to collect or enforce the loan; since these parties are merely intermediaries who issue self-serving paper designating themselves as real parties in interest, such settlements could result in the homeowner being presented with claims later from the real source of funding in their loan. This is unlikely, but nonetheless possible. The only reason it is unlikely is that the real parties in interest are investors whose money was commingled with thousands of other investors in hundreds of trusts that never received any proceeds from their offering of mortgage backed securities that were neither mortgage backed or securities. The investors need a way to trace their money into the loans or, if they elect not to do so, to settle with the bank that cheated them in the first place with bogus mortgage bonds. There have been many such settlements, most of them unreported.

The fact remains that the “lender” is never part of any documented transaction. Hence the “lender” (the investors) enjoy none of the protections of a holder of a note nor the security of a mortgage. Fabricating documents and forging them is the only way of breathing life into the false loan contract that was documented, even if it never happened. And borrowers and their attorneys should take note that the entire loan infrastructure is an illusion that has been awarded judgments that pretend the illusion is real. we are either a nation of laws or a nation of men. Our Constitution makes us a nation of laws. This is our challenge. Do we allow bankers and politicians to turn back time on paper and treat them as though they are doing something right because NOW it is right because they declared it right, or do we reject that and apply rules of law that have existed for centuries for this very reason.

So for the people who are unemployed due to a recession that won’t really quit until the money stolen from the system is somehow replaced or clawed back, you have a job waiting for you if you can sleep at night knowing that if your activities are exposed, the bank will disavow your “irresponsible” actions, leaving you exposed to jail or prison.

Schedule A Consult Now!

 

Not even the Federal Government Can Determine Who owns Your Loan

It was impossible to trace the majority of the mortgage loans on the over 300 homes sold by DSI that were the subject of the FBI investigation; it would have been harder yet to identify individual victims of the fraud given that the mortgages were securitized and traded. (Emphasis added.)

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

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Originally posted at http://mortgageflimflam.com
With additional edits by http://4closurefraud.org

“Counter-intuitive” is the way Reynaldo Reyes (Deutschbank VP Asset Management) described it in a taped telephone interview with a borrower who lived in Arizona.  “we only look like the Trustee. The real power lies with the servicers.”

And THAT has been the problem since the beginning. That means “what you think you know is wrong.” This message has been delivered in thousands of courtrooms in millions of cases but Judges refuse to accept it. In fact most lawyers, even those doing foreclosure defense, and even their clients — the so-called borrowers — can’t peel themselves away from what they think they know.

In the quote above it is obvious that the sentencing document reveals at least two things: (1) nobody can trace the loans themselves which in plain English means that nobody can know who loaned the money to begin with in the so-called loan origination” and (2) nobody can trace the ownership of the loans — i.e., the party who is actually losing money due to nonpayment of the loan. Of course this latter point was been creatively obscured by the banks who set up a scheme in which the victims (investors, managed funds, etc.) continue to get payments long after the “borrower” has ceased making payments.

If nobody knows who loaned the money then the presumption that the loan was consummated when the “borrower”signed documents placed in front of them is wrong for two reasons: (1) all borrowers sign loan documents before funding is approved which means that no loan is consummated when the documents are signed. and (2) there is no evidence that the “originator” funded the loans (regardless of whether it is a bank or some fly by night operation that went bust years ago) loaned any money to the “borrower.” (read the articles contained in the link above).

The reason why I put quotation marks around the word borrower is this: if I don’t lend you money then how are you a borrower, even if you sign loan papers? The courts have nearly universally got this wrong in virtually all of their pretrial rulings and trial rulings. Their attitude is that there must have been a loan and the homeowner must be a borrower because obviously there was a loan. What they means is that since money hit the closing table or the last “lender” received a payoff there must have been a loan. What else would you call it?

Certainly the homeowner meant for it to be a loan. The problem is that the originator did not intend for it to be a loan because they were not lending any money. The originator played the traditional part of a conduit (see American Brokers CONDUIT for example). The originator was paid a fee for the use of their name and traditionally sold the homeowner on taking a loan through the friendly people at XYZ Speedy No Fault Lending, Inc. (a corporation that often does not exist).

Somebody else sent money but it wasn’t a loan to the homeowner. It was the underwriter who was masquerading as the Master Servicer for a Trust that also does not exist. Where did the underwriter get the money? Certainly not from its own pockets. It took money from a dynamic dark pool that should not exist, according to the false “securitization” documents (Prospectus and Pooling and Servicing Agreement).

Who deposited the money into the dark pool? The sellers of fake “mortgage-backed securities”who took money from pension funds and other managed funds under the false pretense that the money would be under management of a specific REMIC Trust that in actuality does not exist, never conducted business under any name, never had a bank account, and for which the Trustee had no duties except window dressing to make it look good to investors. How is that possible? NY law allows for the documentation of a trust without any registration. The Trust does not exist in the eyes of the law unless there is something in it. This like a stick figure is not a person.

None of the money from investors went into any Trust account or any account of any trustee to be held and managed for a REMIC Trust. Sound crazy? It is crazy, but it is also true which is why it is impossible for even the Federal Government with virtually limitless resources cannot tell you who loaned you any money nor who owns any debt from you.

The money was surreptitiously deposited into hundreds of dark pools in institutions around the world. The actual business of the dark pols was to create the illusion of profits for the banks and a huge dark reserve that siphoned some $5 trillion out of the U.S. economy and more out of other economies around the world.

To cover their tracks, the banks took some of the money from the dark pool and started a chain reaction of offering what appeared to be loans but which in most cases were financial death sentences.

The investors, for sure, have a potential claim against the homeowners who received actual benefit from a flow of funds, but without being named in the loan documents, they have no direct right of foreclosure. And then there is the problem of coming up with the correct list of investors whose money was commingled with hundreds of fake trusts. The investors know that collectively, as a group they are owed money from homeowners as a group. But NOBODY KNOWS which investors match up with what alleged loan. The homeowner can ONLY be a “borrower” if they executed a loan contract and the contract became enforceable because there was offer, acceptance and consideration flowing both ways. Without all four legs of the stool it collapses.

Judges resist this “gift” to homeowners while ignoring and accepting the consequence of a gift of enormous proportions to the few banks at the top who started all this. Somehow word has spread that the middle and lower class is the right place to put the burden of this illegal bank behavior.

The homeowner’s offer of consideration is the promise to pay principal sometimes with interest. The originator’s offer of consideration is not to the homeowner. The originator has offered services for a fee to the conduits and sham corporations that put the originator up to selling bad loans from undisclosed third parties to people who lacked the financial knowledge to understand what was happening. So no contract there. No contract? No borrower. No contract? No lender. Hence the term I used back in 2007, “pretender lender.” I should have also coined the term “mock borrower.”

Sound impossible? Here is the finding from the sentencing document:

During the time of the information, DSI worked with two “preferred lenders,” Wells Fargo Bank and J.P. Morgan Chase. Certain employees and managers of those two preferred lenders knew about the incentive programs offered by DSI and the builders, and knew that the incentives were not being disclosed in the loan files. (Emphasis added.)

And that is what we mean by “counter-intuitive.” It is a lie, a cover-up and a fraudulent scheme directed at multiple  victims. Under existing law, foreclosure is not an option for persons who lack standing and have unclean hands. Nearly all loan transactions were table funded and that means, according to TILA, that they are and were predatory loans. And that means, according to me, that it is impossible to allow any equitable relief be had by those who have unclean hands — especially those who seek foreclosure, which is an equitable remedy.

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VA Court Finally Recognizes Circular Reasoning of the Banks

“Because I said so” or “because I already did it” is not a recognizable legal ground for possession of property even after the forced sale of the property. In an action for possession of property, the taker must establish that it is the legal owner and that the ownership was obtained lawfully and properly. The fact that a prior judgment was entered allowing the foreclosure sale is not dispositive.

The “presumed facts” are directly contrary to the actual facts. Or, as I have stated it in other circumstances, the money trail does not match the paper trail. There are no real transactions in most instances.

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/2016/06/28/parrish-v-fnma-subject-matter-jurisdiction-unlawful-detainer-supreme-court-of-virginia-va%c2%adcates-foreclosure-judgement/

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For ten years — about the same amount of time that I said the rescission is valid upon mailing and did not require lawsuit or tender — I have advocated and encouraged lawyers for homeowners faced with eviction, writ of possession, or unlawful detainer to adopt a simple logic. Eviction is proper when the owner and possessor merely leases the property or grants some sort of title that has expired. That is certain and it is final and nobody disagrees with it.

The problem in the Courts is that judges have routinely ignored one simple basic fact: the current occupier of the property had legal title and the total right to possession of the property before this new party came into the picture and claimed the right to title and now claims the right to possession. Final Judgments entered in the Court records are not dispositive as pointed out by this Virginia court and as pointed out by the Supreme Court of the State of California in Yvanova.

It is the second part of the “formula” that came up in a Virginia Court, which has been one of the most difficult states in the nation for homeowners contesting the baseless actions of foreclosing parties. The logic is simple. Where the homeowner was clearly the owner of record and the possessor, the party seeking foreclosure must assert (nearly always absent) and prove that it came into title ownership lawfully and properly.

The interesting thing about this is that if the homeowner contests the eviction or unlawful detainer and does so with sufficient grounds as to create doubt as to whether the party seeking eviction lawfully acquired title, THEN the burden shifts to the party seeking eviction to prove that everything that happened before was lawful and proper. And we all know that without legal presumptions being improperly applied practically none of the evictions were or could be proper.

Like other things this is not a magic bullet. But it provides some daylight. The Virginia court held that as long as the homeowner successfully raises a question about title, the court hearing the eviction claim must dismiss the claim immediately because it has no right or jurisdiction actually try a case based upon title claims. I think you would find similar laws in other states where, for example, if County court the jurisdiction is far more limited than it is in Circuit Court. The County Court may hear and decide and eviction but as soon as the Court sees a bona fide question about title, it must dismiss the case leaving the parties to sort out their differences elsewhere. That might be in state Circuit Court or Federal District Court.

The party seeking eviction would need to go to a court of competent jurisdiction and plead that (a) they are the lawful title owner (b) they are entitled to possession and (3) the current occupants have lost their right to possession even though they had both title and possession before the foreclosure. Any allegation based in actual fact must be proven by actual facts and legal presumptions clearly should not apply once the lower court has already determined that there is doubt as to whether the documents for title were validly issued. This might prevent the party seeking to confirm title and seeking the eviction from using any legal presumptions since the documents themselves have already been determined by a lower court to lack trustworthiness or authenticity or legal effect.

One thing to keep in mind is that without legal presumptions none of the foreclosures could go forward because there is no proof in existence, in most cases, of the existence of an executed loan contract between the homeowner and the “originator.” The “presumed facts” are directly contrary to the actual facts. Or, as I have stated it in other circumstances, the money trail does not match the paper trail. There are no real transactions in most instances. The paper trail creates legal presumptions but as soon as a court orders that the foreclosing party open its books to determine whether there were actual transactions, actual loans by the parties upon whom the forecloser relies, the bank case falls to pieces.

… a conundrum because some actions for unlawful detainer necessarily turn on the question of title. Unlawful detainer is an action against a defendant who lawfully entered into possession of real property but whose right to lawful possession has since expired. It is brought by a plaintiff lawfully entitled to possession at the time of suit, which the defendant is then unlawfully withholding. Allen v. Gibson, 25 Va. (4 Rand.) 468, 473 (1826). The validity of the plaintiff’s right of possession is an issue that, when disputed, must be determined in the adjudication of the unlawful detainer action. Id. at 474. The plaintiff must show either (1) prior actual possession, which was then yielded to the defendant under some temporary or defeasible estate that has ended, or (2) a right of possession acquired after the defendant’s entry. Id. at 474-76.

Whether the plaintiff has a right of possession will not always present a question of title. Such a question will never arise in the first class of cases, where the plaintiff’s right is based on prior actual possession. For example, a landlord may bring an action for unlawful detainer against a tenant who holds possession of the leased premises in violation of the lease or after it has expired. In such cases, the defendant’s possession is derivative of the plaintiff’s title, and the defendant is not permitted to challenge it. [e.s.]

Emerick v. Tavener, 50 Va. (9 Gratt.) 220, 223 (1852). However, a plaintiff in the second class of cases, who claims a right of possession acquired after the defendant’s original, lawful entry, must show the validity of that right. When the plaintiff’s after-acquired right of possession is based on a claim of title, the plaintiff may be required to establish the validity of that title. Corbett v. Nutt, 59 Va. (18 Gratt.) 624, 648 (1868).2 Actions for unlawful detainer in the foreclosure context generally fall into this category. [e.s.]

Where the right of possession depends solely upon a claim of title, the question of whether that title is valid is a threshold question in an unlawful detainer action. While a court’s resolution of that question in an unlawful detainer action may not, by statute, be preclusive in actions for ejectment or to quiet title, the court trying the unlawful detainer action nevertheless must weigh the parties’ competing arguments about validity to determine whether a plaintiff’s prima facie right of possession evidenced by a trustee’s deed has been rebutted by the defendant. [e.s.]

In most foreclosure cases, a trustee’s deed will satisfy the foreclosure purchaser’s burden to establish that it acquired a right of possession after the homeowner’s original, lawful entry, and the homeowner will have no good-faith basis to contest it. However, in limited circumstances, the homeowner could allege facts sufficient to place the validity of the trustee’s deed in doubt. In such cases, the general district court’s lack of subject matter jurisdiction to try title supersedes its subject matter jurisdiction to try unlawful detainer and the court must dismiss the case without prejudice. Warwick, 56 Va. (15 Gratt.) at 542 (“[O]n being convinced that the case involves a bona fide claim of title to real estate,” a court not of record “is bound to dismiss [the proceeding] immediately.”).

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The Chase-WAMU Illusion

In the mortgage world “successor by merger” is simply a living lie that continues as you read this article. Like many other major illusions in our world economy, the Chase-WAMU merger was nothing more than illusion

The reason for the rebellion showing up as votes for Sanders and trump and the impending exit of the UK from the European Union is very simple — every few decades the populace gets a ahead of their elected leaders and yanks their leash so hard that some of them choke.

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 FDIC_ Failed Bank Information – WASHINGTON MUTUAL BANK – Receivership Balance Sheet Summary (Unaudited)

see wamu_amended_unsealed_opinion

When Bill Clinton was asked how he balanced the budget and came out with a $5 Trillion surplus when he left office his reply was unusually laconic — “Arithmetic.” And he was right, although it wasn’t just him who had put pencil to paper. Many Republican and Democrats had agreed that with the rising economy, the math looked good and that their job was not to screw it up. THAT was left to the next president.

I’m not endorsing Clinton or Trump nor saying that Democrats or Republicans are better that the other. Indeed BOTH major political parties seem to agree on one egregiously erroneous point — the working man doesn’t matter.

The people who matter are those with advanced degrees and who reach the pinnacle of the economic medal of honor when they are dubbed “innovators.”

The reason for the rebellion showing up as votes for Sanders and Trump and the impending exit of the UK from the European Union is very simple — every few decades the populace gets a ahead of their elected leaders and yanks their leash so hard that some of them choke. To say that the BREXIT vote was surprising is the height of arrogance and stupidity. People round the world are voicing their objection to an establishment that doesn’t give a damn about them and measures success by stock market indexes, money supply and GDP activity that is manipulated at this point that it bare little if any resemblance to the GDP index we had come to rely upon, albeit that index was also arbitrarily and erroneously based on the wrong facts.

The fact that large percentages of the populace of many countries around the world are challenged to put food on the table and a roof over their heads doesn’t matter as long as the economic indices are up. But truth be told even when those indices go down, the attitude is the same — working people don’t matter. They are merely resources like gold, coal and oil from which we draw ever widening gaps between the people who run the society and the economy and those who drive the economy and society with their purchases.

In the mortgage world “successor by merger” is simply a living lie that continues as you read this article. Like many other major illusions in our world economy, the Chase-WAMU merger was nothing more than illusion — just like BOA’s merger with BAC/Countrywide (see Red Oak Merger Corp); Wells Fargo’s merger with Wachovia who had acquired World Savings; OneWest’s acquisition of IndyMac;  CitiMortgage acquisition of ABN AMRO, CPCR-1 Trust;  BOA’s merger with LaSalle; Ditech’s acquisition by multiple entities GMAC, RESCAP, Ally,  Walter investment etc.) when DiTech was dead and the name was the only this being traded, and so much more. All these mergers bear one thing in common — they were cover screen for one simple fact: they had not in one instance acquired any loans but then relied on the illusion of the merger to call themselves “successors by mergers.”

Let’s take the example of WAMU. When they went broke they had less than $3 Billion in assets (see link above). This totally congruent with the $2 billion committed by Chase to acquire the WAMU estate form the FDIC receiver Richard Schoppe (located in Texas) and the US Trustee in bankruptcy — especially when you consider the little known fact that Chase received 1/3 of a tax refund due to WAMU.

That share of the Tax refund was, as you might already have guessed, MORE than the $2 billion committed by Chase. whether Chase ever actually paid the $2 billion is another question.But in any event, pure arithmetic shows that the consideration for the purchase of WAMU by Chase was LESS THAN ZERO, which means we paid Chase to acquire WAMU.

This in turn is completely corroborated by the Purchase and Assumption Agreement between WAMU, the FDIC Receiver, the US Trustee in Bankruptcy and of course Chase. On the first page of that agreement is a express recital that says the consideration for this merger is “-$0-.” But before you look up the “Reading Room on the FDIC FOIA cite, here is one caveat: some time after the original agreement was published on the site, a “different” agreement was posted long after WAMU was dead, the US Trustee had been discharged, and the FDCI receiver was discharged as a receiver. The “new” agreement implies that loans were or may have been acquired but does not state which loans or how much was paid for these loans. The problem with the new agreement of course is that Chase paid nothing and was not entitled to nothing, except the servicing rights on some fo those loans.

The so-called new agreement placed there by nobody knows, also stands in direct contrast of the interview and depositions of Richard Schoppe — that if there were loans to sell the principal amount would have been hundreds of billions of dollars for which Chase need pay nothing. I dare say there are millions of people and companies who would have taken that deal if it was real. But Schoppe states directly that the number of assignments was NONE, zero, zilch.

Schoppe also stated that the total amount of loan originations was just under $1 Trillion. And he said that the loan portfolio might have been, at some time, around 1/3 of the total loans originated. Putting pencil to paper that obviously means that 2/3 of all originated loans were either pre-funded in table funded “loans” or that they were immediately sold into the secondary market for securitization. All evidence points to the fact that WAMU never owned the loans at all — as they were table funded  through multiple layers of conduits none of whom were disclosed as required under the Truth in lending Act.  Because the big asset that WAMU retained were (a) the servicing rights and (b) the right to claim recovery for servicer advances. It could be said that the only way they could perfect their claim for “recovery” of “servicer” “Advances” was by acquiring WAMU since Chase was the Master servicer on nearly all WAMU originations.

The interesting point of legal significance is that Chase emerges as the real party in interest even though it it appeared only as the servicer in the background after subsequent servicers were given “powers” of attorney to prevent the new “servicer” (actually an enforcer) from claiming a recovery  for “servicer” “Advances.,” that are recoverable not from the borrower, not from the investor, and not from the trust but in a foggy chaos in which the property was liquidated.

So the assets of WAMU at the time it went belly up was under $3 Billion which means that after you deduct the brick and mortar locations and the servicing rights Chase still got the deal of a lifetime — but one thing doesn’t add up. If WAMU had less than $3 Billion in assets and 99% of that were conventional bank assets excluding loans, then the “value” of the loan portfolio, using FDIC Schoppe estimates was $3 Million. If the WAMU loan portfolio implied by the a,test antics of Chase was true — then Chase acquired $300 BILLION in loans for $3 MILLION. Even the toxic waste loans were worth more than one tenth of one percent.

Chase continues to assert ownership with impunity on an epic scale of fraud, theft and manipulation of the courts, investors and borrowers. The finding that Chase NOT assumed repurchase obligations in relation to the originated loans goes further to corroborate everything I had written here. There seems to be an oblique reference to attempted changes in the “P&A” Agreement, and the finding that the original deal cannot be changed, but the actual finding of two inconsistent agreements posted on the FDIC site is worth investigating. I can assure the reader that I have found and read both.

And lastly I have already published numerous articles on victories in court (one fo which was mine and Patrick Giunta) for the borrower based upon the exact principles and facts written in this article — where the judge concluded that US Bank had never acquired the loan, that the “servicer” in court testifying through a robo-signer had no power over the loan because their power was  derived from Chase who was named as servicer for a REMIC Trust that never acquired the loan nor any rights to the loan.

The use of powers of attorney were found to be inadequate simply because the party who executed the POA had no rights to the money, the enforcement of the loan nor any collection or foreclosure. If Chase had acquired the loan from WAMU they would have won. Their total reliance on deflective legal presumptions based upon presumed fact that were untrue completely failed.

BOTTOM LINE: CHASE ACQUIRED NO LOANS FROM WAMU. Hence subsequent documents of transfer or powers (Powers of attorney) are void.

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Mozilo Goes free

Someone needs to go back to the Declaration of Independence. Government exists only by consent of the governed. People are withdrawing their consent on a daily basis now. Where do you think that will lead?

see http://www.housingwire.com/articles/37308-countrywides-mozilo-reportedly-off-the-hook-for-all-those-subprime-mortgages?eid=311685972&bid=1437193#.V2RJhpGUqsU.email

Revenge is not the point. But justice is important. Mozilo was, in my opinion, just a bag man for the mega banks, making Countrywide into a giant holographic image of an empty paper bag.

DOJ is continuing to follow the rules set informally by the Bush administration and later ratified by the Obama administration in which it was assumed that the foxes would help “find” the chickens and put them back in the hen house. It was absurd to all of us who were even reasonably well versed in the language and culture of finance and economics.

Here is what we missed: a DOJ prosecution would have enabled the free flow of information back to the White House where decisions could be made about (1) what went wrong (2) who did it and (3) how to claw back trillions of dollars in ill-gotten gains. Instead both Bush and Obama went to the foxes to ask where the chickens were. The foxes still had chicken blood dripping from their mouths when they said “I don’t know but we’ll help you find out.” Both the Republican President and the Democratic President were clueless about finance. They had to rely on people who at least said they understood what was going on. They went to people from Wall Street who were fat, happy and getting more jovial with each passing month.

Here is what COULD have happened: the absence of a clear definition of a real creditor could have been exposed, making all the mortgages essentially unenforceable. The notes would have been unenforceable because they named parties who did NOT give the loan nor did those parties represent anyone who did give a loan. An announcement of this sort would have toppled the derivative market which is all based upon smoke and mirrors and would  have stopped the progression of the current derivative markets being used as a free zone for theft from investors.

The DEBT would still have been enforceable in favor of the investors, instead of the unused Trusts and other conduits and “originators.” But the real debt owed by homeowners would have been the value of the home, not the imaginary price of the home. All those crazy mortgage products were a cover-up for what the Wall Street banks were stealing from investors. The investors were not just some financial institution; they were managed funds for people’s retirement and savings. In a cruel irony, Wall Street cheated the same people against whom they were foreclosing. They stole the retirement money, covered it up in impossible loans, and then foreclosed saying they were doing so on behalf of the investors — i.e., the same people who were losing their homes, their pensions, retirement and their savings. In short Wall Street banks’ schemes resulted in the middle class suing itself for foreclosure, thus losing both their retirement, pension and savings and then their home.

Wall Street Banks could have been pushed aside as investors and homeowners figured out creative ways to remove the bad mortgages from the title chain and replace them with real mortgages that were based upon principal balances that were economically realistic. Neither the investors nor the borrowers knew that the banks had created a culture of false appraisals creating the illusion of a spike in land VALUE by manipulating the PRICE of  real property. Foreclosures could have been reduced to nearly zero. And the stimulus of maintaining household wealth would have made the recession a much milder affair. Instead there was an epic transfer of wealth from the vast population of people who were sucked into investing in the scheme to provide the food, and vast population of people who were duped into accepting the illusion of mortgage loans whose value was zero.

Somehow the media has concentrated on transfer of wealth as though it means the rich must give to the poor. But anyone with a high school degree can do this arithmetic — the transfer clearly went from the populous to the fraction of the 1% who had concocted this epic fraud. Our population went from middle class to below the poverty line while Mozilo and his counterparts made hundreds of millions of dollars at a minimum. Some made tens of billions of dollars that has not yet been revealed. All of that money came from the middle class and then the theft was rewarded with more trillions of dollars from the Federal government. Until we claw that money back our economy will remain forever fragile.

Mozilo earned nothing. He merely followed the instructions of people who had his complete attention. A civil or criminal prosecution would have led to the specific people whose orders he was following and an unraveling of a scheme that even Alan Greenspan admitted he didn’t understand. In short we would have known the truth and we would have had much greater trust in our Government institutions and our judiciary, who blindly accepted the nutty premise that the party suing for foreclosure wouldn’t be in court if there was no liability owed to them. Between the outlandishly cruel and biased criminal justice system and the tidal wave of foreclosures that never needed to happen, people have an historically low opinion of government and the Courts; and it seems that ordinary people have a greater understanding of what happened to the country at the hands of Wall Street banks than the officials who serve in the positions where such banks and such behavior is supposed to be regulated and stopped.

Bottom Line: As long as the Federal government fails to reign in illegal derivative activity (masking PONZI schemes and other illicit behavior) Judges will not reject the erroneous premise that homeowners got greedy and are deadbeats for failing to pay their debts. And as long as THAT continues, our economy cannot recover and our society will continue splitting apart. Someone needs to go back to the Declaration of Independence. Government exists only by consent of the governed. People are withdrawing their consent on a daily basis now. Where do you think that will lead?

Renewing the Statute of Limitations Accidentally: Modifications and Payments

It seems apparent to me that the banks are sidestepping the statute of limitations issue by getting homeowners to renew payments after the statute has run. Given the confusion in Florida courts it is difficult to determine with certainty how the statute will be applied. But the execution of a modification agreement would, in my opinion, almost certainly waive the statute of limitations, particularly since it refers to the part of the alleged debt that was previously barred by the statute. It would also, in my opinion, reaffirm a discharged debt in bankruptcy.

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

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There are several reasons why servicers are offering modifications and several other reasons why they don’t.

My perception is that the main reason for offering the modification is that the servicer is converting the ownership of the debt from the investors to the servicer and by reference to an empty trust with no assets. HAMP modifications are virtually nonexistent statistically. “In house” modifications are what they are offering; that is code for “it’s our loan now.” That scenario leaves the servicer with rights to the debt that didn’t legally exist before — but subject to separate, private agreements with the Master Servicer who is willing to pay the servicer for their apparent “services” but not willing to share in the windfall profits made by a party who now owns a loan in which they had no financial interest before the execution of the modification.

This is a good alternative to stealing from the investors by way of false claims for “Servicer advances” where the money, like all other deals in the false securitization chain, comes from “investments” that the investors thought they were making into individual trusts. And by the way this part explains why they don’t offer modifications — the Master Servicer can only apply is false claim for “recovery” of servicer advances when the property is liquidated.

A second reason for applying pressure to a homeowner to sign more papers they don’t understand is to get the homeowner to (1) agree or reaffirm the debt, thus restarting the statute of limitations from where it had originally left off and (2) to get the homeowner to make at least some payments, thus reaffirming the debt for purposes of both bankruptcy and the statute of limitations. This explains why they take three “trial” payments and then deny the “permanent” modification after they already announced the homeowner was “approved.”

In this sense there is no underwriting done. There is only an evaluation of how the Master Servicer can make the most money. This also is an example of why I say that the interests of servicers are adverse to the investors who have already been screwed. Forced sale doesn’t just artificially limit the recovery, it virtually eliminates recovery for the investor while the servicers take the money and run.

And a third reason for coercing the homeowner into a modification agreement that is guaranteed to fail is that the homeowner has either waived defenses and claims or has created the conditions where waiver could be asserted.

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