DUAL Tracking: The Game of “Chicken”

In their quest for a windfall they have given the homeowners a path to justice — one where the notice of default, notice of sale, notice of acceleration notice of right to reinstate and redemption rights are all screwed up (i.e., wrong and invalid). With 80%+ of the losses already paid, the loans could have been modified down to nothing or nearly nothing compared with the original balance showed on the note, whether the note was fabricated or not. The problem is not whether the remedy exists. The problem is whether the lawyers and litigants have the guts to pursue it.” Neil Garfield, http://www.Livinglies.me

OneWest was formed over a weekend by several wealthy investors who paid virtually nothing for billions of dollars in what were claimed as “portfolio” loans owned by IndyMac which went bankrupt and into FDIC receivership in September, 2008. The agreement specified that the FDIC would pay 80% of the losses incurred on the loans. The first problem is that it said it would pay OneWest the 80%.

The second problem is that One West maintained their claim for the full amount against homeowners even though they had already submitted the claims and collected — many times more than once, from our analysis. That payment was not subject to repayment, subrogation or anything else that we can find, so the “creditor” or “agent” of the creditor has been paid on that account, but the balance has not been reduced.

In their quest for a windfall they have given the homeowners a path to justice — one where the notice of default, notice of sale, notice of acceleration notice of right to reinstate and redemption rights are all screwed up (i.e., wrong and invalid). With 80%+ of the losses already paid, the loans could have been modified down to nothing or nearly nothing compared with the original balance showed on the note, whether the note was fabricated or not.

The real problem is that most lawyers are not presenting their cases with the confidence of knowing that whatever the position of their opposition, it is probably a misstatement of the truth — the opposing lawyers in most cases don’t even know that they are making false statements and representations. Practically every foreclosure trial or hearing begins with the words “This is a simple foreclosure, your honor.” Nothing could be further from the truth.

Patrick Giunta, Esq. is co-counsel on several cases we are litigating in South Florida. One of them is a qui tam action against OneWest for false claims to the government. He has again brought to my attention the case decided in California (where almost everyone says it is hopeless) in which the homeowner stuck to their guns instead of accepting various offers of settlement. The reason we bring it to your attention again is that it demonstrates the fact that if you know you are right and you have the Judge on your side just for the raw elements of pleading or discovery, the confidence of the opposition is shattered even if they put on a good show of appearing otherwise.

My article from September 13, 2013 explains the scenario from the California case. Our current case goes even further alleging that OneWest intentionally misrepresented losses to the FDIC and the Federal Home Loan Housing Agency (and probably other private and public institutions) in order to collect multiple times on nonexistent losses. But it also dove-tails with the California case because they were steering homeowners into “modification” programs by the old trick “You have to be 90 days behind before you can be considered for modification.”

And by the way that trick phrase is not only untrue (designed to keep the modification “in house”) but also potentially criminal and illegal, because for one thing HAMP does not require delinquency in loans for modification. It gets worse. Most of the loans submitted for modification were in fact subject to claims of securitization and the authority of OneWest is questionable at best. The 90 day delinquency trick is wrong. It also constitutes the unauthorized practice of law. If a lawyer says it or anyone from his or her office under instructions from the lawyer, it might be grounds for a bar grievance. Practicing law without a license is an actual felony in many states subject to imprisonment, fine or both.

Virtually all servicers have trained their employees on how to say that without it appearing to be advice — but the homeowner hears it just the way the servicer wants them to hear it — I must go into default if I want the modification. THUS THE DEFAULT IS PROCURED INTENTIONALLY BY THE SERVICER WHICH IS INTENTIONAL INTERFERENCE WITH THE CONTRACT, IF IT EXISTS, BETWEEN THE BORROWER AND THE TRUST.That is an intentional tort enabling the Plaintiff Homeowner to allege damages far beyond economic damages and to even ask for punitive damages, exemplary damages or treble damages under statutory authority, sometimes including the cost of attorneys fees and costs.

The problem is that no modification is offered even if the homeowner makes trial payments on an “approved” modification. Worse yet, those payments are also frequently missed when the servicer or “creditor” issues a statement, report or notice. Or the modification actually raises the payments and makes it more impossible for the loan to work — which brings the servicer to the point they want: foreclosure to collect or keep the money they received on that loan, directly or indirectly, and which they never reported to the court, the borrower or anyone else.

The OneWest situation is only symptomatic of the rest of the “industry.” Virtually all servicers play the same games. These intermediaries and their co-venturers are collecting over and over again from loss sharing agreements, insurance, credit default swaps, and guarantees and other hedges, over and over again. They report it to nobody. And neither the Justice department or even our new CFPB seem to have any interest in the one factor that would bring down the number of foreclosures to nearly zero — giving credit where credit is due.

Practice Hint: For the bold and creative I would argue that that the entire profit earned from using the name of the homeowner to sell bonds,and profit from loss sharing and loss mitigation techniques should be disgorged to the borrower, whose note specifies how the payments are to be applied. One lawyer in Phoenix refers to this as my most obnoxious theory. I bet. It would disgorge all the money the banks made by declaring non existent losses.

If the “creditor” has received money directly or through payment to their agent, then the balance of the receivable is reduced — and in the simplest bookkeeping class we know that the corresponding payable from the borrower is also lost. The intermediaries could get to keep their ill-gotten claims on multiple reports of the same nonexistent loss, with a correction of the principal balance due from the borrower.

Instead they would rather get hit for a seven figure verdict or a six figure settlement when one out of a thousand gets up the nerve to really challenge them. The numbers all balance out in favor of Wall Street — as long as Wall Street keeps winning the game of “chicken.”

http://livinglies.me/2013/09/13/victory-for-homeowners-received-title-and-7-figure-monetary-damages-for-wrongful-foreclosure/

For further information please call 520-405-1688 or 954-494-6000. Consults available to homeowners’ attorneys, to wit: homeowners can attend only if they have a licensed attorney on the conference call. Workbooks on General Foreclosure Litigation, Evidence and Expert Witnesses are also available.

Now They See the Light — 40% of Homes Underwater

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Editor’s Comment:

They were using figures like 12% or 18% but I kept saying that when you take all the figures together and just add them up, the number is much higher than that. So as it turns out, it is even higher than I thought because they are still not taking into consideration ALL the factors and expenses involved in selling a home, not the least of which is the vast discount one must endure from the intentionally inflated appraisals.

With this number of people whose homes are worth far less than the loans that were underwritten and supposedly approved using industry standards by “lenders” who weren’t lenders but who the FCPB now says will be treated as lenders, the biggest problem facing the marketplace is how are we going to keep these people in their homes — not how do we do a short-sale. And the seconcd biggest problem, which dovetails with Brown’s push for legislation to break up the large banks, is how can we permit these banks to maintain figures on the balance sheet that shows assets based upon completely unrealistic figures on homes where they do not even own the loan?

Or to put it another way. How crazy is this going to get before someone hits the reset the button and says OK from now on we are going to deal with truth, justice and the American way?

With no demographic challenges driving up prices or demand for new housing, and with no demand from homeowners seeking refinancing, why were there so many loans? The answer is easy if you look at the facts. Wall Street had come up with a way to get trillions of dollars in investment capital from the biggest managed funds in the world — the mortgage bond and all the derivatives and exotic baggage that went with it. 

So they put the money in Superfund accounts and funded loans taking care of that pesky paperwork later. They funded loans and approved loans from non-existent borrowers who had not even applied yet. As soon as the application was filled out, the wire transfer to the closing agent occurred (ever wonder why they were so reluctant to change closing agents for the convenience of the parties?).

The instructions were clear — get the signature on some paperwork even if it is faked, fraudulent, forged and completely outside industry standards but make it look right. I have this information from insiders who were directly involved in the structuring and handling of the money and the false securitization chain that was used to cover up illegal lending and the huge fees that were taken out of the superfund before any lending took place. THAT explains how these banks are bigger than ever while the world’s economies are shrinking.

The money came straight down from the investor pool that included ALL the investors over a period of time that were later broker up into groups and the  issued digital or paper certificates of mortgage bonds. So the money came from a trust-type account for the investors, making the investors the actual lenders and the investors collectively part of a huge partnership dwarfing the size of any “trust” or “REMIC”. At one point there was over $2 trillion in unallocated funds looking for a loan to be attached to the money. They couldn’t do it legally or practically.

The only way this could be accomplished is if the borrowers thought the deal was so cheap that they were giving the money away and that the value of their home had so increased in value that it was safe to use some of the equity for investment purposes of other expenses. So they invented more than 400 loans products successfully misrepresenting and obscuring the fact that the resets on loans went to monthly payments that exceeded the gross income of the household based upon a loan that was funded based upon a false and inflated appraisal that could not and did not sustain itself even for a period of weeks in many cases. The banks were supposedly too big to fail. The loans were realistically too big to succeed.

Now Wall Street is threatening to foreclose on anyone who walks from this deal. I say that anyone who doesn’t walk from that deal is putting their future at risk. So the big shadow inventory that will keep prices below home values and drive them still further into the abyss is from those private owners who will either walk away, do a short-sale or fight it out with the pretender lenders. When these people realize that there are ways to reacquire their property in foreclosure with cash bids that are valid while the credit bid of the pretender lender is invlaid, they will have achieved the only logical answer to the nation’s problems — principal correction and the benefit of the bargain they were promised, with the banks — not the taxpayers — taking the loss.

The easiest way to move these tremendous sums of money was to make it look like it was cheap and at the same time make certain that they had an arguable claim to enforce the debt when the fake payments turned into real payments. SO they created false and frauduelnt paperwork at closing stating that the payee on teh note was the lender and that the secured party was somehow invovled in the transaction when there was no transaction with the payee at all and the security instrumente was securing the faithful performance of a false document — the note. Meanwhile the investor lenders were left without any documentation with the borrowers leaving them with only common law claims that were unsecured. That is when the robosigning and forgery and fraudulent declarations with false attestations from notaries came into play. They had to make it look like there was a real deal, knowing that if everything “looked” in order most judges would let it pass and it worked.

Now we have (courtesy of the cloak of MERS and robosigning, forgery etc.) a completely corrupted and suspect chain of title on over 20 million homes half of which are underwater — meaning that unless the owner expects the market to rise substantially within a reasonable period of time, they will walk. And we all know how much effort the banks and realtors are putting into telling us that the market has bottomed out and is now headed up. It’s a lie. It’s a damned living lie.

One in Three Mortgage Holders Still Underwater

By John W. Schoen, Senior Producer

Got that sinking feeling? Amid signs that the U.S. housing market is finally rising from a long slumber, real estate Web site Zillow reports that homeowners are still under water.

Nearly 16 million homeowners owed more on their mortgages than their home was worth in the first quarter, or nearly one-third of U.S. homeowners with mortgages. That’s a $1.2 trillion hole in the collective home equity of American households.

Despite the temptation to just walk away and mail back the keys, nine of 10 underwater borrowers are making their mortgage and home loan payments on time. Only 10 percent are more than 90 days delinquent.

Still, “negative equity” will continue to weigh on the housing market – and the broader economy – because it sidelines so many potential home buyers. It also puts millions of owners at greater risk of losing their home if the economic recovery stalls, according to Zillow’s chief economist, Stan Humphries.

“If economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures,” he said.

For now, the recent bottoming out in home prices seems to be stabilizing the impact of negative equity; the number of underwater homeowners held steady from the fourth quarter of last year and fell slightly from a year ago.

Real estate market conditions vary widely across the country, as does the depth of trouble homeowners find themselves in. Nearly 40 percent of homeowners with a mortgage owe between 1 and 20 percent more than their home is worth. But 15 percent – approximately 2.4 million – owe more than double their home’s market value.

Nevada homeowners have been hardest hit, where two-thirds of all homeowners with a mortgage are underwater. Arizona, with 52 percent, Georgia (46.8 percent), Florida (46.3 percent) and Michigan (41.7 percent) also have high percentages of homeowners with negative equity.

Turnabout is Fair Play:

The Depressing Rise of People Robbing Banks to Pay the Bills

Despite inflation decreasing their value, bank robberies are on the rise in the United States. According to the FBI, in the third quarter of 2010, banks reported 1,325 bank robberies, burglaries, or other larcenies, an increase of more than 200 crimes from the same quarter in 2009. America isn’t the easiest place to succeed financially these days, a predicament that’s finding more and more people doing desperate things to obtain money. Robbing banks is nothing new, of course; it’s been a popular crime for anyone looking to get quick cash practically since America began. But the face and nature of robbers is changing. These days, the once glamorous sheen of bank robberies is wearing away, exposing a far sadder and ugly reality: Today’s bank robbers are just trying to keep their heads above water.

Bonnie and Clyde, Pretty Boy Floyd, Baby Face Nelson—time was that bank robbers had cool names and widespread celebrity. Butch Cassidy and the Sundance Kid, Jesse James, and John Dillinger were even the subjects of big, fawning Hollywood films glorifying their thievery. But times have changed.

In Mississippi this week, a man walked into a bank and handed a teller a note demanding money, according to broadcast news reporter Brittany Weiss. The man got away with a paltry $1,600 before proceeding to run errands around town to pay his bills and write checks to people to whom he owed money. He was hanging out with his mom when police finally found him. Three weeks before the Mississippi fiasco, a woman named Gwendolyn Cunningham robbed a bank in Fresno and fled in her car. Minutes later, police spotted Cunningham’s car in front of downtown Fresno’s Pacific Gas and Electric Building. Inside, she was trying to pay her gas bill.

The list goes on: In October 2011, a Phoenix-area man stole $2,300 to pay bills and make his alimony payments. In early 2010, an elderly man on Social Security started robbing banks in an effort to avoid foreclosure on the house he and his wife had lived in for two decades. In January 2011, a 46-year-old Ohio woman robbed a bank to pay past-due bills. And in February of this year, a  Pennsylvania woman with no teeth confessed to robbing a bank to pay for dentures. “I’m very sorry for what I did and I know God is going to punish me for it,” she said at her arraignment. Yet perhaps none of this compares to the man who, in June 2011, robbed a bank of $1 just so he could be taken to prison and get medical care he couldn’t afford.

None of this is to say that a life of crime is admirable or courageous, and though there is no way to accurately quantify it, there are probably still many bank robbers who steal just because they like the thrill of money for nothing. But there’s quite a dichotomy between the bank robbers of early America, with their romantic escapades and exciting lifestyles, and the people following in their footsteps today: broke citizens with no jobs, no savings, no teeth, and few options.

The stealing rebel types we all came to love after reading the Robin Hood story are gone. Today the robbers are just trying to pay their gas bills. There will be no movies for them.

TILA ACTIONS MAKING A COME-BACK AS LAWYERS AND JUDGES GET MORE RECEPTIVE

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EDITOR’S NOTE: FULL CIRCLE. When I started writing this blog I had researched the Truth in Lending law and concluded that it was one of the better pieces of legislation designed to protect consumers and maintain competition in the marketplace. That said, I advised many lawyers to concentrate on TILA violations because the rescission remedy was effective to remove the mortgage and the MONEY (not the house) due back tot he “lender” was subject to constraints (who was the creditor and how much is owed, especially after you offset TILA damages, which are significant.

Alas, Judges read things into the law that were not there. Although the “lender” in rescission was obligated to either return all money paid at closing and return the note cancelled and satisfy the mortgage FIRST (or file a Declaratory Action (lawsuit) within 20 days why the rescission does not apply, the theory emerged even at the appellate level (9th Circuit, Federal) that in order to “rescind” one had to tender the money back and that the amount tendered had to be the amount demanded regardless of the actual amount that was due.

But things are changing. They had to change, because the basic problem with every closing in which their was claim of securitization was that the closing was defective, it lacked the disclosure required by law, and it presented loans that were not within industry standard underwriting of loans, nor were things like borrowers income or the value of the property confirmed by an internal review as was done in all mortgage loans prior to the onset of the securitization cancer.

The proposed CFPB rule simply takes existing law and codifies it in a new way — referring tot hose loans that comply with TILA as “qualified” and those loans that do not comply with TILA as “unqualified.” My prediction is that this new rule will pass. And with it, the challenge to foreclosures for noncompliance with TILA will rise exponentially because TILA fives the lawyer two things that he ordinarily isn’t seeing these days if he is defending foreclosures — (1) attorney fees and (2) damages, a lot of them, on which he can take a contingency fee. Defeat of the foreclosure by invalidating the mortgage lien leaves the homeowner with a lien free house but an obligation outstanding that can be discharged in bankruptcy.

Such an obligation will also be offset by damages for identity theft because the credit record and personal history of each borrower was used to sell bogus mortgage bonds to investors. Many other causes of action like slander of title flow from the that TILA audit. That is why I suggest to everyone who will listen that they get the COMBO, because that is what gives the TILA analyst vital information about what actually happened after closing, but also to get the LIVINGLIES FORENSIC TILA ANALYSIS.

SEE NEW CFPB RULE COULD LEAD TO FLOOD OF FORECLOSURE CHALLENGES

CFPB LIKELY TO ADOPT RULES REGARDING “QUALIFIED” MORTGAGES

If the Consumer Financial Protection Bureau wishes, it could allow borrowers to challenge future foreclosure actions by questioning whether the loan was a “qualified mortgage” in court.

Banks have been lobbying policymakers since May when the Federal Reserve published several options for how lenders must determine a borrower’s ability to repay a mortgage under the Truth in Lending Act. The new rules were proposed under the Dodd-Frank Act to outlaw risky and misleading home loans.

One of the options, known as the QM rule, would allow lenders to originate “qualified mortgages” under a legal safe harbor, provided the loans do not have certain features such as negative amortization, balloon payments, interest-only payments, or terms exceeding 30 years. As long as the bank stays within these guidelines, it will be in compliance.

Another option for QM, though, provides a “rebuttable presumption of compliance” clause, meaning the lender is presumed compliant as long as it follows guidelines in the first option and also verify the borrower’s employment, debt-to-income ratio and credit history.

The industry is very concerned that the CFPB, which assumed the rulemaking duty from the Fed this summer, will choose option two. According to some, the “rebuttable presumption” would mean any future foreclosure would be thrown into court. Foreclosure defense attorneys will able to challenge whether or not the loan being foreclosed upon was QM compliant or not, and if it wasn’t, judges could award TILA damages to the borrower.

“It would be much more expensive if everyone did this,” said Richard Andreano, a partner at the financial law firm Ballard Spahr. “It would get to a point to where it would almost be malpractice for a foreclosure defense attorney not to pursue the claim.”

Roy Oppenheim at Oppenheim Law Firm, a defense attorney in Florida, said there would only be challenges brought when the homeowner and the defense attorney have evidence of noncompliance.

“Not every foreclosure defense attorney will do this,” he said. “If they make good loans there should never be a problem.”

 

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