“Lost notes” and the Sudden Appearance of “Original Notes.”

Think of it this way: If someone wrote you a check for $100, which would you do? (1) make a digital copy of the check and then shred it or (2) take it to the bank? Starting with the era in which banks made what is abundantly clear as false claims of securitization the banks all chose option #1. And they collected incredible sums of money far exceeding the Madoff scam or anything like it.

Back in 2008 Katie Porter was a law professor and is now a member of the US House of  Representatives. For those of who don’t know her, you should follow her, even on C-Span. She nails it every time. She knows and other congressmen and women are following her lead. Back in 2008 she uncovered the fact that in her study of 1700 filings in US Bankruptcy court, 41% were missing even a copy of the note, much less the original note.

Around the same time, the Florida Bankers Association, dominated by the mega banks and who absorbed the Florida Community Bank Association, told the Florida Supreme Court that, after the purported “loan closing,” digital copies of the notes were made — and then the original notes were destroyed. FBA said it was “industry practice.” It wasn’t and it still isn’t — at least not for actual creditors who loan money. Out in the state of Washington on appeal, lawyers for the claimant in foreclosure admitted they had no clue as to the identity of the creditor. The state banned MERS foreclosures, along with Maine.

That admission, with full consent of the mega banks, raised the stakes from 41% to around 95% — a figure later confirmed in Senate Hearings by Elizabeth Warren. The other 5% are loans that were truly traditional — funded by the “lender” (no pretender lender) and still owned by the lender who had the original documents in their vault.

The law didn’t change. In order to enforce a note you needed the original. And in order to plead you “lost” the note, you had to allege and prove very specific things starting with the fact that it was lost and not destroyed. Then of course you had to prove that the original was delivered to you, which nobody could because the original was destroyed immediately after closing and a fax copy was the only thing used after that.

Typically destruction of the note means that the debt is discharged or forgiven — something that is actually a natural outgrowth of the same debt being sold dozens of times in varying pieces under various contracts, none of which give the buyer any direct right, title or interest in the “underlying” debt, note or mortgage. In short, neither the debt nor the note exist in most cases shortly after the alleged loan closing.

The representatives of the mega banks who started the illusion of securitization of mortgage debts could neither produce the original note (because it was destroyed) nor tell a credible story to explain its absence. So they did the next best thing. They recreated the note to make it appear like an original using advanced technology that could even mimic the use of a pen to sign it.

Some of us saw this early on when they failed to account for the color of the ink that was used at closing. Those were among the first cases involving a complete satisfaction of the alleged encumbrance, plus payment of damages and attorney fees, all papered over by a settlement agreement that was under seal of confidentiality.

While obviously presenting moral hazard, the process of recreation could have been legal if they had simply followed the protocols of the UCC and state law to reestablish a lost note. But they didn’t. The reason they didn’t is that they still had to prove that the note was a legal representation of a debt owed by the borrower to a creditor that they had to identify. But they couldn’t do that.

If they identified the creditor(s) they would admitting that they had no claim because a person or entity possessing a right, title or interest in the debt did not include the named claimant in the foreclosure. Naming a claimant does not create a claim. A real claim must be owned by a real claimant. That is the very essence of legal standing.

If they had no claim they would be admitting that the securitization certificates, swaps and other contracts were all bogus. That would tank the $1 quadrillion shadow banking market. That is where we see the evidence that for every $1 loaned more than $20 in revenue was produced and never allocated to either the debt of the borrower or the investment of the investors. The banks took it all. $45 trillion in loans and refi’s turned into $1 quadrillion in “nominal” value. Nice work if you can get it.

So then they did the next next best best thing thing. They simply presented the recreation of the note as the actual original and hoped that they could push it through and that has worked in many, probably most cases.

It works because most borrowers and their lawyers fail to heed my advice: admit nothing — make them prove everything. By giving testimony regarding the “original” note the borrower provides the foundation and the rest of the foreclosure is preordained.

For some reason, lawyers who are usually suspicious, refuse to acknowledge the basic fact that the entire process is a lie designed to take property, sell it and apply or allocate the sale proceeds to anyone except the owner(s) of the debt. They hear “free house” and get scared they will look foolish.

A free house to those persistent and enduring souls who finance the great fight is a small price to pay for the mountains of windfall profit of the banks and related parties. As for the banks, adding the proceeds of a house that should never have been sold is adding insult to injury not only to the homeowner but to the entire society.

If anyone wants to know why so many Americans are angry, look no further than the 40 million people were directly displaced by illegal foreclosure and the additional 70 million people who were affected by those dislocations. Voters know that if the many $trillions spent on bailouts had been used to level the playing field, 110 million Americans and millions more worldwide would have never faced the worst effects of the great recession.

And we will continue voting for disruptors until a level playing field re-emerges.

see Lost notes and Bad Servicing Practices and Incentives SSRN-id1027961

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
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Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Beach v Ocwen: 1997 Decision that will be used by banks and servicers against rescission

For Further information and assistance please call 954-495-9867 and 520-405-1688.

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See Beach v Ocwen Fla. Supreme Court

I have no doubt that the Banks will attempt to use this decision — but it still is trumped by Jesinowski and other Federal decisions on equitable tolling. Having the right to cancel/rescind is described as extinguished by TILA regardless of the circumstances — including the absence of any enforceable loan contract.
This decision (1998) was rendered far before the idea of securitization was introduced into mortgage litigation. The interpretation of the extinguishment of the underlying right made sense in the context of loans from Bank A to Borrower B. In the era of securitization you have all kinds of questions — like when the transaction was “commenced”. The courts say it is when the “liability” arose. I agree — if we are saying that the consummation of the transaction begins when the lender loans money to the borrower. But in most cases we see that the lender did not loan money to the borrower and that is corroborated by the absence of anypurchase transaction, for value, when the alleged loan is “transferred.” There is no reasonable business explanation of why anyone would release an asset worth hundreds of thousands of dollars without receiving payment — unless it wasn’t an asset of the “seller” in the first place.The presumption is that TILA rescission rights run from the date the liability arose from the Borrower to the Lender. If the Lender was not properly disclosed, then one of two things are true: (1) there is no loan contract which means a nullification and quiet title action is appropriate or (2) until the real lender was disclosed, the transaction was not consummated. That might mean that both the three day rescission and the three year rescission are in play. If the position of the foreclosing party is that a REMIC Trust was finally disclosed to the borrower — and that the Trust was the lender, then disclosure is complete. But that isn’t what happened.

The ultimate decision here is going to be on the question of whether there is in fact a loan contract, and, if so, who were the parties to it? If there was no contract, it is the same as rescission by operation of law. No new rights arise on assignment or even sale of the loan from a pretender lender — unless the purchase was in good faith FOR VALUE and occurred without notice of borrower’s defenses and NOT when the loan was already in “default.” This narrow exception arises under the UCC for a Holder in Due Course to be Protected if they meet the narrow criteria stated in the UCC, article 3, and the narrow enforcement criteria for the mortgage expressed in Article 9.

The so called default is another hidden issue. If someone “acquires” the note and mortgage where the Borrower has already not paid or stopped paying on the alleged loan, then (1) it isn’t negotiable paper and (2) it provides notice that the borrower might not be paying because they don’t owe the party or successor on the note and mortgage (and never did).
When the mortgage crisis began, the banks and servicers were claiming that there were no Trusts and that they could file suit or initiate non-judicial foreclosure without any reference to trusts. That was why forensic audits were initially required — when we thought that REMIC Trusts were the true players. Banks and servicers argued convincingly in court that the Trust was irrelevant. Now in most cases (with some notable CitiMortgage, Chase and BOA exceptions) the Plaintiff or beneficiary is identified as a Trustee, bank or servicer (US Bank usually is the Trustee these days) on behalf of a REMIC Trust. They are now saying that they have the right to be in court or initiate foreclosure because (1) the Trust received an assignment and endorsement of the note and mortgage (2) the servicer has a right to represent and even testify for the the Trustee on the basis of the rights set forth in the Pooling and Servicing Agreement or by virtue of Powers of Attorney that magically appear at trial.
So the banks, servicers and their attorneys are side-stepping the issue of consummation of the transaction. They are withholding the information where the right of rescission would first become apparent to the borrower. When they withhold the information longer than 3 years from the date of the purported “loan closing”, they claim the right of rescission has expired. That is cynical and circular reasoning. That “closing” may be the point in time that the borrower’s “liability” arose, but the liability did NOT arise with the creditor being the party named on the note, mortgage and required disclosure documents.
Instead, the Payee was a naked nominee regardless of whether the “lender” was a thinly capitalized mortgage broker or a 150 year old bank.
Neither one loaned the money. In both cases there were using money essentially stolen from clueless investors on Wall Street who advanced money for the purchase of shares (mortgage backed securities) issued by an unregistered Trust that existed only on paper, had no bank account, and never received the proceeds of the shares that were supposedly sold to pension funds and other “investors” (actually victims of a fraudulent scheme).
The real answer is, as I have repeatedly said, that there was no loan contract and therefore the note and mortgage were induced to sign by both fraud in the inducement and fraud in the execution.  But the courts may turn to a foggier notion that the disclosures were intentionally withheld and that this entitles the borrower to equitable tolling of the 3 day or three year statute of limitations. It seems highly doubtful that the US Supreme Court will reverse itself.
If they deny equitable tolling by allowing stonewalling from the Banks then no new Bank would be able to enter the picture which is the whole purpose of the TILA rescission. While courts might find the argument from the banks and servicers as appealing, history shows that the US Supreme Court is just as likely to effectively reverse thousands of decisions based upon the wrong premise that rules and doctrines for common law rescission can be applied to TILA rescission.
Yet my point goes further. The express wording of the TILA rescission as affirmed by a unanimous Supreme court in Jesinowski is that the rescission is effective by operation of law when it is dropped in the mailbox — and that there is nothing else required by the borrower. If the “lender” wants to challenge that rescission it must do so before the 20 day deadline for compliance — return of canceled note, satisfaction of mortgage and disgorgement of all money paid. This makes it very clear that stonewalling or bringing up defenses later when the borrower seeks to enforce the rescission is not permissible. The idea behind TILA rescission has been to allow a borrower to cancel one transaction and replace it with another — which means that title is clear for a new lender to offer a first or second mortgage free from claims of the prior pretender lender.
Thus the expected defense from the banks and servicersis going to be that the rescission was void ab initio because of the statute of limitations or some other reason. But these are affirmative defenseswhich is to say they are pleas for affirmative relief in a formal pleading with a court of competent jurisdiction. That court does not have any jurisdiction or discretion to find that the rescission was void ab initio if more than 20 days has expired after the notice of cancellation or rescission was made.Thus procedurally, the express wording of TILA and Jesinowski totally bars the banks and servicers from raising any defenses to the effectiveness of the rescission after 20 days from the date of notice of rescission. To interpret it any other way is to overrule Justice Scalia in Jesinowski. It would mean that the banks and servicers and Trustees could later bring up defenses to the rescission which would completely bar the ability of the borrower to apply for a substitute loan. No lender is going to offer a mortgage loan where they are taking on the risk that they are not getting the lien priority that is required to assure payment and collateral protection.

And the reason why there is no qualifying creditor to bring the action within 20 days will be taken up in an upcoming article “What if a Broker Sold an IPO and Kept the Proceeds? — The True Explanation of Securitization Fail.” Also see Adam Levitin on that.

Florida Supreme Court Considers Clearing up Conflicts on Statute of Limitations

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

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http://www.dailybusinessreview.com/home/id=1202719316326/Florida-Supreme-Court-to-Visit-LenderFriendly-Foreclosure-Rulings?mcode=1202617073880&curindex=0&slreturn=20150203104522

“Kafaesque” is the term being applied to the state of Florida law on foreclosures. If you have commercial property then you have rights, but if it is your home, then maybe you don’t. Due process has been shattered for homeowners while complete strangers take their homes with the cooperation of Judges who are struggling with the caseload and their own bias about how damaging it would be if debts were not paid. What they are missing is that none of the people foreclosing own any debt and nobody is going to get paid as a result of the foreclosure except third parties with breadcrumbs, if any, left to the actual source of funds for the origination or acquisition of the loans.

Depending upon where you live in Florida the results are different. If you beat the foreclosing party in court, then at least one court thinks that the “bank” can re-foreclose on a subsequent default on a loan and default they failed to prove. Florida’s rule HAD BEEN clear. Banks get one chance to foreclose and if the case goes against them, they get nothing in foreclosure and if the statute of limitations has run they can’t collect on the note either. They can’t come back over and over again until they a get a judge who thinks they got it right. And it didn’t matter before whether the property was commercial or residential.

So now because various districts have interpreted the law differently, the Supreme Court must decide what it had already decided. It is reviewing teh Bartram case and will consider the arguments of all sides. For me, the issue is simple. If the borrower wants to file claims against the lender and he is barred by the statute of limitations, he is done regardless of the merits. What is good for the goose was good for the gander until the courts starting bending the rules to the breaking point. They should be corrected by the Florida Supreme Court.

Fl S.Ct: Roman Pino vs. Bank of New York

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure or to challenge whoever is taking your money every month, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Analysis: Lawyers and Homeowners like to curse out the judicial system every time they get a decision they don’t like. The Pino case is one of them. “HOMEOWNERS LOSE” is the headline across the board in all media. Homeowners did not lose. Civil procedure won, and the homeowners were, once again, on the wrong side of it, although they were inadvertently encouraged by the Florida Supreme Court who took jurisdiction even after the case was dismissed and settled.

My guess is that the justices who decided to take the case thought there was some meat in there that would prevent false claims in court. This court, composed of progressive judges, was clearly looking for a way to chastise the banks for filing forged, false, fabricated and misleading documents. After reviewing it, they realized they couldn’t do that without throwing the whole judicial system out of whack — something that didn’t bother the banks but does bother the Supreme Court of any state.

But in every opinion that seems negative to homeowners there are oft-ignored instructions on how to do it right. Here we have Tom Ice, attorney for the homeowner and a competent one at that, against David Stern’s operation that was so dirty his own investors sued him for selling them a bunch of crap. Stern’s firm was known to have a full fledged document fabrication and forgery system which was used with impunity because once they got caught they dismissed the claim.

The issue taken up by the Florida Supreme Court was whether the Court could retain jurisdiction of a case that was dismissed and settled for the sole purpose of punishing a party who lied or submitted false documents into evidence. Much as the court probably would have liked to impose kangaroo justice on the banks and Stern, it reluctantly concluded that it just didn’t have the power (jurisdiction) to do that. To say otherwise would make every voluntary dismissal non-final. Thus any settlement would never be final.

Ice is wrong when he says that the Supreme Court doesn’t care about fraud in the judicial system. They cared enough to take a shot at stopping it with an ill-advised grab at jurisdiction to end this madness. We can’t change the law, the rules of procedure or the laws of evidence to suit the result we think should be the outcome. We are required, in a nation of laws, to arrive at the destination of justice using existing law and procedure. There is little doubt that the Florida Supreme court is very concerned about fraud in the judicial system and that it will do something about it as soon as the the existing laws and rules allow it.

There is a hidden good message in this decision. If the party who committed the fraud got nothing as a result of it, then the dismissal cannot be reversed. THAT is precisely the center of gravity of the homeowner defense: the banks did get millions of homes submitting fraudulent  documents and therefore are subject to various causes of action for having done so. In addition, the fact that the original transaction, for the most part, was never supported by consideration, making both the note invalid and nullifying the illusion of a lien imposed by the mortgage, means that the homeowner who attacks directly the basic premises of the foreclosure action using established law and procedure will be greeted by a friendly audience a the Florida Supreme Court. The headline should have been “Florida Supreme Court Opens door to damage claims for fraudulent documents.”

In short, the borrowers didn’t lose and the Court, far from being unsympathetic to the light of borrowers made that abundantly clear:

Because Pino sought no other available sanctions, and the case has since been resolved between the parties, we need not reach the question of whether the trial court should be able to award monetary sanctions under the circumstances of this case. We therefore approve the result reached by the Fourth District affirming the trial court’s denial of Pino’s motion.

“While affirming the decision of the Fourth District, we also understand the concerns of those who discuss the multiple abuses that can occur from fraudulent pleadings being filed with the trial courts in this state. While rule 1.420(a)(1) has well served the litigants and courts of this state, we request the Civil Procedure Rules Committee review this concern and make a recommendation to this Court regarding whether (a) explicit sanction authority should be provided to a trial court pursuant to rule 1.110(b), even after a case is voluntarily dismissed, (b) rule 1.420(a)(1) should be amended to expressly allow the trial court to retain jurisdiction to rule on any pending sanction motions that seek monetary sanctions for abuses committed by either party during the litigation process, or to allow the trial court explicit authority to include attorney’s fees in any award to a party when the dismissed action is reinstated, or (c) to adopt a rule similar to Federal Rule 11 to provide explicit authority for the trial court to impose sanctions.”

Rep. Alan Grayson of Florida asks Fla Supreme Court to halt all foreclosures

SERVICES YOU NEED

* How Serious is the GMAC Problem? Pretty Serious and Not Just GMAC – 09/21/2010 – Yves Smith
* Steve Keen: Deleveraging With a Twist – 09/21/2010 – Yves Smith

Monday, September 20, 2010

Grayson Calls on Florida Supreme Court to Halt Foreclosures

Representative Alan Grayson of Florida has asked the Florida Supreme Court to halt all foreclosures in the state in light of an investigation by its attorney general into allegations of pervasive foreclosure fraud by so-called “foreclosure mills”.

Text below:

September 20, 2010

Chief Justice Charles T. Canady
Florida Supreme Court
500 South Duval Street
Tallahassee, FL 32399-1900

Dear Chief Justice Canady,

I am disturbed by the increasing reports of predatory ‘foreclosure mills’ in Florida. The New York Times and Mother Jones have both recently reported on the rampant and widespread practices of document fraud and forgery involved in mortgage assignments. My staff has spoken with multiple foreclosure specialists and attorneys in Florida who confirm these reports.

Three foreclosure mills – the Law Offices of Marshall C. Watson, Shapiro & Fishman, and the Law Offices of David J. Stern – constitute roughly 80% of all foreclosure proceedings in the state of Florida. All are under investigation by Attorney General Bill McCollum. If the reports I am hearing are true, the illegal foreclosures taking place represent the largest seizure of private property ever attempted by banks and government entities. This is lawlessness.

I respectfully request that you abate all foreclosures involving these firms until the Attorney General of the state of Florida has finished his investigations of those firms for document fraud.

I have included a court order, in which Chase, WAMU, and Shapiro and Fishman are excoriated by a judge for document fraud on the court. In this case, Chase attempted to foreclose on a home, when the mortgage note was actually owned by Fannie Mae.

Taking someone’s home should not be done lightly. And it should certainly be done in accordance with the law.

Thank you for your consideration of this request.

Sincerely,

Alan Grayson
Member of Congress

Fla. Supremes Order Bar to Prosecute UPL Against Banks

Administrative Law is one of those areas that interest only academics like me. It isn’t sexy but it carries BIG teeth. Sometimes it is easier to crack the shell of the titans by an unexpected move where you win hands down and there isn’t much work to do. It’s kind of like taking down AL Capone for income tax evasion. They didn’t get him on the other crimes but he went to jail and died there.

When I was active in the practice of law, I defended many different types of individuals who were licensed by a regulatory board, including lawyers, accountants, doctors, engineers, real estate brokers etc. My eyes were opened at the tremendous amount of power these agencies wield and the devastating effect they have on licensees. It also opened my eyes to the fact that consumers had access to government help that was really there but most consumers didn’t know it.

The latest move in Florida is a simple recognition that practicing law without a license is illegal. In many states beyond fines and an injunction, it is an actual felony punishable by imprisonment. And in most states there is a PRIVATE right of action against those who practice law without a license. It is called Unauthorized Practice of Law (UPL).

Before your eyes cloud over with yet another theory, this isn’t a theory. It is a fact. And besides giving you a right of action for damages, it calls into question whether any of the documents were legally prepared and if yet another misrepresentation caused you to execute them, believing that an attorney had been involved.

What this does is fill out your argument that the entire transaction was illusory and nothing was what it seemed to be. That is what TILA, RESPA and other consumer protection laws are all about. Yes you signed the documents but that doesn’t mean the documents were properly prepared, nor does it mean that a security interest in your property was ever or could ever be perfected. Yes an obligation was created, but that doesn’t mean you owe the pretender lender. If you shop at Target, the neighborhood supermarket cannot collect the money for your purchase at Target.

But I think most importantly, as the old readers of this blog have seen before, decisions like this and the FTC settlement with BOA for $108 million bring us to a point where government is getting hip to the deficiencies at all levels of the lending process and the documentation. That means that now is the time to file appropriate grievances against anyone who carries a license or charter on loan practices that do not conform with industry standards and in particular, the rules governing the profession for which they were licensed.

Who’s licensed? Just about everyone. Mortgage brokers, real estate brokers, title agents, closing agents, trustees, lenders, originators, etc. An originator like Quicken that specifically and repeatedly told its prospective customers that it was the lender when in fact they were only brokering the money as a mortgage broker or originator has a problem. It just engaged in false and deceptive business and loan practices, but more importantly it created a “table funded” loan, which is a fancy way of not telling you the identity of your creditor and how much money everyone is making on this loan.

The best part is that if you file the grievance early enough, you won’t have to go to court because the enforcement mechanism of the agency will do the investigation, the prosecution, and the discovery for you. And if you do prosecute for damages, in most cases you will prove a claim under TILA you will get attorneys fees paid by the pretender lender or other parties against whom you have filed your grievance.




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