Why You Need an Expert Witness and Why You Should be Aggressive in Discovery

MISSION STATEMENT: I believe that the mortgage crisis has produced manifest evil and injustice in our society. I believe our recovery will never reach the majority of struggling Americans until we restore equal protection for all citizens and especially borrowers in our debt-ridden society. LivingLies is the vehicle for a collaborative movement to provide homeowners with sufficient resources to combat bloated banks who are flooding the political market with money. We provide thousands of pages of free forms, articles and discussion of statutes, case precedent and policy on this site. And we provide paid services, books and products that enable us to maintain an infrastructure to provide a voice to the victims of Wall Street corruption.

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There are three central strategies that need to be pursued with vigor. The Banks have once again moved the goal posts because they are starting to lose cases with increasing frequency when confronted with the requirement that they actually prove their case with facts instead of presumptions. They are attacking the need for discovery, the need for an expert witness, and the need for foundation of fabricated documents by leveraging certain legal presumptions to achieve results that were never intended to be used to win a case that they would lose if they had to prove their case with actual facts from a witness who has personal knowledge.
Yet that is exactly what is happening. It happens almost automatically in non-judicial foreclosures and it happens most of the time in judicial states. “Legal presumptions” are being manipulated to win an unwinnable case. Those presumptions are for expedience and not to slant cases in favor of a litigant who is wrong.
In Discovery it is important to set a hearing on the blanket objections that are commonly filed by the Banks without any obligation on their part to set those objections for hearing. So it is up to the borrower to set the objections for hearings. Lawyers are finding that they must also file a motion to compel and that without a compelling memorandum of law supporting discovery or supporting the need for an expert witness, the banks will control the narrative by maintaining the impression that laws and presumptions about negotiable instruments are the only issues.For the Judge, the real issues are hidden from view, so you must reveal them. The latest iteration the the Bank tactics is the “Self-authenticating” document which is the subject of another article.
The central theme is always the same. The Banks can’t win on the actual facts, so they are relying upon and leveraging certain rules of evidence that allow certain documents to be admitted into evidence, where the contents of those documents are taken as true (despite the fact that they are barred by the hearsay rule) and the Judges are treating the contents as true over the objection of counsel for the borrower. Like Judicial notice, such documents might be admissible for the limited purpose of acknowledging their existence, but their contents are very much in issue.
However, many judges disregard the notion that the contents are at issue unless the borrower produces compelling evidence that the facts in the document are false. In my opinion, it is wrong to require a defendant who has no access to the actual facts — the money trail — to bear the burden of proof and doubly wrong when the borrower has asked for exactly that information through statutory, formal, informal and discovery requests only to be met with stonewalling.
My thought is that this is an opportunity to educate the judge — against what he or she wants to hear. It is an opportunity to get him to hear YOUR narrative twice. Iadvise lawyers to file a memorandum in opposition to objections and file a motion to compel to make your record. Present a credible argument for the need for the borrower to get information that either lies solely in the hands of theforecloser or in the hands of others who are co-venturers with theforecloser.The need for an expert is evident from the section of the PSA which is entitled “Definitions” which uses words, concepts, business processes, lending and practices that are outside of the statutory scheme for the transfer of loans. The same arguments exist for enforcing discovery. Attach a copy of the PSA Definitions section to your memo. Despite the current trend of the Banks toward introducing the PSA as an exhibit at trial, they continue to argue that the borrower has no standing to contest whether the procedures and restrictions of the PSA are relevant in a foreclosure case. Many judges agree. I believe they are wrong and that this is an evasion of the truth with the help of the Court.

They may seem unrelated but they are identical — only the other side has or does not have the actual evidence of the transactions that are presumed to exist by virtue of some document they are producing like an assignment, a mortgage, a note, or a notice. To the extent that they are responsive to discovery, the need for an expert diminishes or is reduced.

The plaintiff is alleging that a trust owns the mortgage and that various parties have authority to service, receive documents and pay for the the origination of acquisition of loans. It is only the PSA that establishes the right of the Plaintiff forecloser or beneficiary under a deed of trust to pursue foreclosure.

The very essence of the defense is that the Plaintiff does not own the loan, is not a holder with rights to enforce and is not a holder in due course because the plan laid out by the PSA, was never followed. That starts with the conclusion that the trust was never funded and therefore could not have the resources to pay for the origination or acquisition of loans. The defense theory is that based upon the pleadings and proof of the Plaintiff, it is a stranger to the loan transaction despite a snow storm of paper creating appearances to the contrary.

The Plaintiff has not alleged it is a holder in due course. Thus by law they are subject toall of the potential defenses of the borrower starting with the processes that began in the application stage for the loan, the presence of an assignment and assumption agreement that governed theactual events that occurred at closing — includingthe fact that the named party identified as “lender” was not the source of the loan and had no rights under the agreement with third parties toperform any act with respect to the loan except topermit their name to be used as a nominee.This was a table funded loan in which an undisclosed third party funded the loan. The importance of that is that the third party should have been identified on the note and mortgage and the mortgage should not have been executed, delivered or recorded. It is ONLY with the help of an expert who understands the terms and processes that are outside the norm of conventional lending — which is already so complex that Federal law requires that summaries and good faith estimates and disclosure are required to be delivered to the borrower prior to closing.

The plaintiff is taking two opposite positions at the same time — first that they have a trust that exists, that has engaged in business pursuant to the requirements of the PSA and who has paid for the origination or acquisition of the loan. Second, that it doesn’t matter whether the trust exists or owns the loan because they are a holder, and they want this court to presume that being a holder creates a presumption under state law that as such, they have the rights to enforce. Hence they want presumption to triumph over fact.
Theirposition is that they can close the matter of refunds and repurchasing obligations with the creditors by foreclosing the mortgage and getting a judgment on the note. Both the investors and the borrowers think otherwise.The defense theory of the case is that the trust was never funded nor used in this transaction and thus should not be allowed to enforce a loan that it never owned, funded, originated or acquired. The initial proof lies in the pleading of the Plaintiff in judicial cases. They never assert that they are a holder in due course, the elements of which are payment of value for the loan, acting in good faith and without knowledge of the borrower’s defenses. Through aggressive and relentless pursuit of truth in discovery (which only requires the possibility that it might lead to admissible evidence) you can easily establish that they are not claiming that the Trust was acting in bad faith or with knwoeldge fo the borrower’s defenses (although in some situations that might also be in issue). That leaves the single element of payment for the loan.

Each PSA sets forth the elements of a holder in due course for the loan to be accepted by the trustee. If the allegation is onlythat that there is a holder, or even a holder with rights to enforce, the only conclusion, from their own pleadings is that the trust has not paid for this loan. If it has not paid for the origination or acquisition of the loan, the Trust has no reasonable basis for claiming any interest in it. Hence it shouldn’t be suing for collection or foreclosure. And the allegation that the Trust or representative is a holder is contrary to the presumption underlying court proceedings that the Trust has paid money and will lose money if the loan is not enforced. The truth is that the investors will lose money if the loan IS enforced.The defense theory of the case is that there is a direct debtor-creditor relationship between the investors, as creditors and who should have been on the note and mortgage but were not, in order to create the illusion of a veil in which the investors would not be liable for fraudulent, deceptive or shady lending practices.

And the defense theory of the case is that the securitization plan under which the investors were supposedly parties through the Trust and the PSA never occurred and that therefore the mortgage was defective on its face for naming the wrong lender and for not disclosing, as required by Federal and Florida law all the parties to the transaction and all the intermediaries were were receiving compensation and profits arising from the origination of the loan. — since it was the investor funds that were used in the origination or acquisition of the loan.

Since we can presume that the distance of the Trust from theactual origination eliminates any questionas to whether they were proceeding in good faith IF they accepted the note and mortgage, we must then presume that were acting in good faith and without notice of the borrower’s defenses. Those are two out of three of the elements for a holder in due course.By alleging that the Trust owns the loan, that would by definition mean that that if the PSA was followed the Trust was intended to be a holder in due course — having paid value for the loan in good faith and without knowledge of the borrower’s defenses.

That would mean that the PSA requires the Trust to be a holder in due course, because that would prevent the borrower from raising most defenses against the Trust when it seeks to enforce the loan. If it is not a holder in due course, the Trust provisions bar acceptance of the loan. Hence any allegation to the contrary is void under New York State law.

Thus the plaintiff is trying to slip by on two conflicting theories — that the trust owns the loan and that the trust can enforce it just by alleging it is a holder despite the fact that the trust is a stranger to the loan transaction and never transacted any business in which it acquired ownership of the loan. This leaves the actual creditor — a group of investors who were in the same darkness as the borrower — without having received the truth when the transaction was proposed to either of them.
What is interesting here is that the allegation is not that the trust is a holder in due course which can only mean that the Trust never paid consideration for the ownership of the loan. And the acceptance of the loan by the trustee has not been alleged because it most likely never happened because the transfer was outside of the cutoff period.The cutoff period exists for two reasons — to get certain tax advantages for the trust beneficiaries who are the real creditors and to prevent any defective loans from coming into the trust that would have an adverse consequence to the trust and its beneficiaries.

And the fact that the Trust is governed by New York State law means that any act that is expressly prohibited by the PSA is void not voidable. So the assignment is a cover-up for what really happened.

For the loan to be included in the pool of loans that form the res of the trust, the trustee must accept the loan. That acceptance is manifest after the cutoff period when the pool is closed. After that individual acceptances based upon opinions of counsel must be documented. None of that happened.

At best it is an offer that could never be accepted by the trust — because there was no acceptance by the trustee who could not accept because it would be a void act both because of the cutoff period and the fact that it produce adverse consequences in both tax treatment and actual money paid to them to allow the late deposit of a loan that has been declared in default). See the provisions for acceptance by the Trustee.

An expert witness steeped in the language and practice of investment banking and the securitization of loans is necessary to explain how this transaction must be interpreted and the conclusion that the investors are the direct creditors — not the trust — because their money was mismanaged, as the investors have alleged in their own complaints against the underwriters.

At worst, it is, as the investor suits and the suits by government and insurers allege outright fraud in which the money and the documents were intentionally managed in a way that was to the detriment of both the creditors and the debtor and ultimately the government and society.

The second point in the defense is that the documents submitted by the Plaintiff are not supported by anything because they have refused to provide appropriate responses to discovery that would show the actual authority to represent the actual creditors, based upon the actual creditors granting them that authority.At trial documents will be admitted for the forecloser if you have failed to enforce discovery. Admission into evidence is barred if they have failed to respond even after being ordered to do so by the court — but those cases don’t go to trial. They are settled. And that is the point.

Who Can Help Me with Mortgage Problems?

A number of people have been contacting me about the work of people other than my company that produces reports and analysis and expert witnesses and my law firm, Garfield, Gwaltney, Kelley and White based in Tallahassee.

My first rule is that I don’t attack or smear anyone who might provide some service that has any chance of helping someone with a consumer debt, mortgage problem, foreclosure etc. Everyone is invited to the party and with more than 5 million foreclosures behind us and another 5 million projected into the future, there is plenty of room for everyone to take a share of the market.

My second rule is that this should be a collaborative effort in which anyone with an idea should have a platform to put forth their ideas.

And my third rule is that I don’t recommend anyone unless I have seen their work, examined their credentials (education, licenses and experience) and discussed their approach with them. Their are many approaches that work for a while then stop working because the banks change their tactics in response. There are many legal theories that are correct but the Judges refuse to apply them. What is important is that you develop a strategy for NOW, with those tactics and strategies, defenses and causes of action that are getting traction with Judges.

CAVEAT: There are many people and companies that are offering bogus relief programs — some with a lot of cash to do advertising and marketing. Be careful and ask questions. If you must take their word for it because they have no historical presence in the bank scam arena be extra careful. What I mean is how have they been contributing to the assistance of distressed consumers and homeowners?

With that in mind, here are some general guidelines for who can help and who might be well intended but ineffectual in achieving a satisfactory result. People that might possibly be of assistance include the following:

  1. LAWYERS: Simply because in the final analysis these are legal problems that usually end up in court where rules of procedure and rules of evidence usually determine the outcome. Within this category are lawyers with foreclosure defense experience, bankruptcy lawyers, property lawyers, and civil litigation lawyers. Anyone without a lot of trial experience should only be used for advice.
  2. HUD COUNSELORS: often overlooked, these people have relationships with the banks that neither lawyers nor forensic examiners have and can often ferret out facts that might not be available even through the process of legal discovery. The good ones have a pretty good track record of settling or modifying loans. AND they usually have relationships with lawyers, real estate brokers, appraisers, investigators, mortgage brokers, hard money lenders. They are licensed and regulated the same as lawyers, brokers, appraisers, and investigators.
  3. FORENSIC ANALYSTS: Very few of the people who perform this work can claim any credentials as an expert witness whose credibility will be accepted by the court. But on the other hand they often have become very adept at ferreting out information of value to your lawyer or whoever is helping you.
  4. EXPERT WITNESSES: Almost anyone will be allowed to testify as an expert witness these days because the rules are so relaxed. But the Judge is not going to give their testimony any weight unless the expert can clearly explain the facts, opinions and conclusions in a compelling way. An expert witness who is not licensed in any relevant field, possessing no academic degrees relating to a relevant field, who has no experience in the relevant field (e.g. a current or former banker, investment banker, broker etc.) might be allowed to testify but nobody is listening. On the other hand, such a witness can testify as a FACT witness rather than an opinion witness as to the results of their forensic examination of the loan, assignments or current status of the alleged loan. There are very few expert witnesses who can testify as to all aspects of securitization but many who can testify as to parts of it. You might need more than one. Lastly, even an unqualified expert witness with little credibility might give you or your lawyer an idea that had escaped your attention so there is no harm in talking or consulting with someone, even if they appear on paper to have few attributes of an actual expert.
  5. BROKERS: REAL ESTATE AND MORTGAGE: Firstly, as licensed, educated, experienced individuals they command some attention. They might have their own agenda they are pushing but when asked the right questions they can be worth the fee if they are able to describe past and current practices and their opinion of certain transactions alleged by your opposition. Keep in mind that real estate and mortgage brokers have a stake in the marketplace — to keep things moving, buying and selling, borrowing and refinancing.
  6. APPRAISERS: Usually licensed and experienced with many years behind them, they can provide very helpful insights as to whether the property was really worth anywhere near the loan value and the current fair market value. They could be a key ingredient, where it applies, to showing that that the originator was not acting as a lender because custom and practice in the industry was to take a lower appraisal righter than a higher one and that custom and practice was to “go back to the well” several times where the market appeared volatile — all things that were absent in the “underwriting” practices of the time. It was the the appraisers in 2005 who warned of the coming catastrophe and many of them suffered by getting no business because they refused to sign off on an appraisal that was misleading.
  7. INVESTMENT BANKERS: Lots of them exist, very few are willing to testify. But they obviously know a lot of shocking details if they were involved in the bundling and sale of mortgages. But remember there are several moving parts in securitization and some investment bankers might know nothing of value to your case. Only a few people at the top truly know what happened to the money and what decisions were made as to fabrication of paperwork to cover up the misappropriation of funds, title and rights to enforce.
  8. MORTGAGE ORIGINATORS: Lots of them exist, few are willing to testify. But there are some. They can tell you that they were never at risk on the Loan” and how the money came from a source outside the circle of parties at the loan closing table. TILA and RESPA claims can be corroborated with their testimony as well as questions regarding title and thee right to enforce.
  9. WHISTLE-BLOWERS: Like “experts” anyone can claim to be one. But if the person has information that can be corroborated they can be an excellent guide through the maze of curtains and obstacles that currently prevent most borrowers from figuring out and proving what is really going on.
  10. LOAN MODIFICATION PROGRAMS: As greater regulation and enforcement is starting to get some traction, so has the possibility of modification or settlement. Keep in mind that with so many successful illegal foreclosures behind them, the banks are more likely to seek finality to the situation since we have passed the half way mark and the possibilities of liability for buy-backs and refunds are declining. Be careful about anyone who tells you that you should stop paying the payments — a strategic default is something you should thoroughly examine and research and get advice before doing it. That includes especially the banks who are doing that as a matter of policy. If you do enter into a modification program make sure that the end result is going to be a modification and not just another excuse to foreclose on you with more information about you than they had before. And make sure you clear up title as well as the debt. Without that you are raising the probability that you will be fighting title issues later in court.

There are no doubt many other types of people who can or want to help. I can only mention the ones I know about. Be careful and don’t let desperation get the better of you.

FOOTNOTE: I am besieged by people trying to bait me into a “discussion” where I defend the strategies and tactics I use and describe on my blog. I won’t enter into such a discussion for the same reason that a judge would ignore what an “expert” says who has no credibility and no credentials. The only place where I will defend is in court for the benefit of clients. If someone doesn’t like my views because they think it discredits them or their services, then maybe they should do more research into what they are doing.

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