Beware of the new lending bubble

What is clear to me is that nothing has changed except the government complicity in predatory lending practices is increasing despite the passage of Dodd Frank. A fact that keeps getting buried here is that Federal Law (Truth in Lending Act) puts the burden of determining affordability of an alleged loan product on the lender, not the borrower. That is the whole point of the Act — to avoid mistakes that borrowers might make with sales pitches that will result in financial ruin for borrowers and extreme wealth for underwriters on Wall Street.

When you see “CashCall” offering loans to people who have a FICO score of 585, we all should ask “how can they make money on alleged loans that are going to fail.” Legally the question becomes one that scares the hell out of the banks: having given a loan to someone who needed their help in making the down payment and who have a bad credit history, is the defense to the foreclosure action properly stated if “assumption of risk” or some other related defense is asserted?

The additional question is who is putting up the money for national advertisements on TV, radio and written media to get as many people as possible to take a loan they cannot pay. This is especially true when an alleged adjustable rate mortgage is involved with negative amortization and a teaser payment.

If the burden of affordability is on the lender and not the borrower and the loan resets to a payment higher than the entire household income the outcome is guaranteed to produce a “loss” that will be covered by multiple levels of derivative and hedge products that will turn the loss into a windfall for the intermediaries.

The effect of the foreclosure is that it rubber stamps plainly illegal behavior. The good faith estimate is completely  fictitious. The term of the loan is not 30 years; it is 3 years or whenever the loan resets. That means whatever fees are amortized over the life of the loan should be amortized over 3 years, not 30. So the cost of credit is falsely stated.

And of course the primary directive of TILA that the lender be disclosed is being completely overlooked. CashCall is not lending the money in the sense that they have no risk of loss. The value of the loan to CashCall must be in the fees it receives for acting as a sham conduit.

I also doubt if the promissory notes executed by borrowers in such a situation are negotiable instruments, especially when you consider the possibility of TILA rescission, which is a condition not stated on the face of the note.Shows how securitization worked. Partially correct. BEST IN CLASS

I give the following video a 90%+ rating. It doesn’t cover the sham conduit originator but otherwise it appears totally correct.

Shows how securitization worked. Partially correct. BEST IN CLASS

Check this out:

No Savings? No Problem. These Companies Are Helping Home Buyers With Down Payments
The Wall Street Journal

Lenders are coming up with novel ways for buyers to cobble together down payments. Read the full story

Now Playing! 6pm Eastern! The West Coast Foreclosure Show with Charles Marshall: Sanctions & Motions directed at the Litigant and/or their Attorney

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Thursdays LIVE! Click in to the The Neil Garfield Show

Or call in at (347) 850-1260, 6pm Eastern Thursdays

This edition of the West Coast Foreclosure Hour features California attorney Charles Marshall who will address sanctions and motions directed at you as litigant and/or your attorney including:

 – removing lis pendens;

– supposed failure to respond properly to discovery;

– maintaining a ‘frivolous’ lawsuit, such as where there has been a possible res judicata issue

Charles Marshall who specializes in wrongful foreclosure, will discuss why homeowners should reconsider taking their foreclosure attorney to the Bar and the potential ramifications for you as a litigant or would be litigant.  He will cover why doing so can result in a decision that can hurt all homeowners and others trying to take on the Big Banks.

Charles Marshall serves the state of California.  Please contact him to discuss your foreclosure issue:

Charles Marshall, Esq.

Law Office of Charles T. Marshall

415 Laurel St., #405

San Diego, CA 92101

cmarshall@marshallestatelaw.com

Phone 619.807.2628

CFPB Enforcement Contact Information

MAIN NUMBER: 202-838-NEIL (6345).

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Thanks to Cementboots who posted this information on the blog:

Want help from the CFPB?

Attorneys for Plaintiff
Consumer Financial Protection Bureau

ANTHONY ALEXIS
Enforcement Director

CARA PETERSEN
Deputy Enforcement Director For Litigation

GABRIEL O’MALLEY
Assistant Litigation Deputy

Jean Healey
E-mail: jean.healey@cfpb.gov
Phone: 202-435-7514
Facsimile: (202) 435-7722
1700 G Street NW
Washington, DC 20552

Jan Singelmann
E-mail: jan.singelmann@cfpb.gov
Phone: 202-435-9670
Facsimile: (202) 435-7722
1700 G Street NW
Washington, DC 20552

Atur Desai
E-mail: atur.desai@cfpb.gov
Phone: 202-435-7978
Facsimile: (202) 435-7722
1700 G Street NW
Washington, DC 20552

 

Legal Mal Suit Against Foreclosure Lawyers Proceeds

A woman claiming she had to sell her home because of her lawyers’ botched foreclosure work can move forward with her legal malpractice and fraud suit, a federal judge has ruled.

Christine Bernstein sued Keaveney Legal Group along with lawyers James P. Keaveney and Joshua Thomas for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law common-law fraud, and violations of the federal Bankruptcy Abuse Prevention and Consumer Protection Act.

Bernstein claimed the firm never obtained a loan modification from her bank as she requested, but billed her just the same. She also claimed she had to work with the bank herself, and ultimately sold her home for less than she would have received if it wasn’t in foreclosure to cover the fees that had accrued on her mortgage.

The argument over whether Bernstein’s legal malpractice claims should survive hinged on the validity of her certificate of merit indicating that the defendants’ legal work was subpar, according to U.S. District Judge Jan E. DuBois of the Eastern District of Pennsylvania’s opinion.

The firm and lawyers argued Bernstein’s certificate was invalid because she submitted only one for multiple defendants and it did not engage in an independent review of the facts of the case. DuBois, however, rejected the defendants’ arguments.

Citing the 1998 Eastern District case of Ramos v. Quien, DuBois wrote, “‘To the extent that the purpose of the COM requirement is to ensure that professional liability claims are meritorious, [a single COM addressing multiple defendants] satisfie[s] that purpose.'”

DuBois reasoned that Bernstein’s certificate sufficed for all parties.

As for their second claim, DuBois said Rule 1042, pertaining to the certificate of merit, “does not require that the COM be executed by someone with actual knowledge of the facts of the case, and defendants point to no case law supporting dismissal on this basis. Rather, courts have dismissed cases only when the plaintiff made ‘no effort’ to comply with Rule 1042.”

The judge also denied the defendants’ motion to strike Bernstein’s request for punitive damages.

“Plaintiff alleges that although she paid defendants more than $8,000 to assist her with her foreclosure, defendants failed to file certain documents on her behalf with the court and with Santander. Whether the alleged conduct is outrageous is a fact question,” DuBois said.

Bernstein is represented by Mark L. Rhoades of Gowen Rhoades Winograd & Silva.

“With this decision, those who have been subjected to unfair trade practices such as aggressive sales tactics can rest assured that the protections of the Pennsylvania Unfair Trade Practices and Consumer Protection Law are alive and well.  We look forward to starting the discovery process and seeking a full recovery for Ms. Bernstein.  Given today’s ruling, that recovery could include punitive damages as well as trebled damages and attorneys’ fees under the UTPCPL,” Rhoades said.

The defendants are represented by Cecil Jones of Marks, O’Neill, O’Brien, Doherty & Kelly. Jones did not respond to a request for comment.

http://www.thelegalintelligencer.com/id=1202786615905/Legal-Mal-Suit-Against-Foreclosure-Lawyers-Proceeds-?mcode=1202617075166&curindex=0&slreturn=20170419153241

The First Step in Foreclosure Defense: Title Issues

The same judges that consistently ignore defenses with respect to the endorsements, assignments, or other issues instantly recognize that where there is an error or break in the chain of title, the “bank” must step back, dismiss the foreclosure and start over again.

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

Last Thursday night I had North Carolina Attorney James Surane as a guest on my radio show. As I suspected it was technical but VERY interesting. He gave many examples where title issues had either resulted in an outright win or much greater leverage over the party claiming to be authorized to foreclose on property. In his state of North Carolina, the judicial climate is very frosty when it comes to a homeowner challenging foreclosures. But the same judges that consistently ignore defenses with respect to the endorsements, assignments, or other issues instantly recognize that where there is an error or break in the chain of title, the “bank” must step back, dismiss the foreclosure and start over again.

Although most people have stopped ordering title searches and title analysis by a lawyer, they are throwing out the baby with the bathwater. As I have previously discussed on this blog, the problem with the title reports is not that they are useless, it is that they don’t go back far enough. In the run-up to the mortgage meltdown some closing agents were processing loan closings at the rate of 100 per day. These agents and lawyers were overwhelmed by the volume. They made mistakes.

Here is a summary of what Jim said last Thursday night:

FIRST STEP IN FORECLOSURE DEFENSE CASE:

A thorough title search of the property being subject to foreclosure is an absolute necessity. This includes researching back to the plat in the case of a home in a subdivision, and back 30 years in a case in which the property is not in a subdivision. We have won many cases based upon errors in the chain of title. It must be remembered that a large majority of the mortgages that we deal with today were closed between the years of 1992 – 2007. During these years, closing attorneys and lenders were overwhelmed with business, and as a result many errors in preparing documents that compromised the lenders lien rights. In our title search, we are looking for:

  • Plat was recorded prior to conveyance of lot
  • Errors in the legal descriptions
  • The legal description was attached at the time the deed of trust was signed
  • Errors in the timing of the recordation of documents in the chain of title
  • Errors in the spelling of the grantor or grantee names
  • Both Grantors names in the body of the Deed of Trust and not just signed
  • Failure to include all necessary signatures on deeds
  • Recordings in the wrong county
  • The grantor owned the property at the time of the conveyance
  • The date on the note matches the date of the deed of trust
  • The names on the note match the names on the deed of trust
  • The grantors signed the Deed of Trust in the proper place (not under notary)
  • Check the Secretary of State on all corporate grantors
  • The date the substitute trustee was appointed relative to the Notice of Hearing
  • The proper substitute trustee filed the Notice of Hearing

Surane has won at least one case for each and every issue listed above. Some of the issues listed above have resulted in our winning several cases. Clerks and Judges are not reserved about recognizing errors in the chain of title, and will readily dismiss a case if the errors are properly presented to the Court. It is very important to thoroughly examine the chain of title before proceeding to identity errors with the lenders standing and endorsements to the promissory note.  As many people are aware, the standing and endorsement issues often lead to fertile ground for many additional defenses to a foreclosure action.

North Carolina is more or less a non-judicial state. But instead of the “trustee” recording a notice of default and notice of sale, the trustee in North Carolina files a Notice of Hearing. The Clerk actually has some power to either dismiss or require the filer to dismiss if the chain of title is clearly wrong. This makes North Carolina a somewhat safer place for homeowners than other non-judicial states because there is at least some minimum oversight over the process.

Not all errors in title result in an outright win in Court. But they do create a time interval that could be as long as years in which the homeowner can properly address other issues and seek modification.

At livinglies we provide a title report and an analysis, but most people don’t want to pay the extra cost of going back 3-4 owners. And they don’t want to spend time on a lawyer analyzing title issues. It’s boring stuff to most people. Most vendors providing title information CAN produce a report going back 30 years but they don’t because they have not been paid the extra money to do so — often requiring an actual trip to the building where the public records are kept in the county in which the property is located.

Some vendors, like TitleTracs, will point out potential areas of inquiry that assist a lawyer in analyzing title, but most lawyers don’t want to do the work even if they could get paid for it. It is a laborious task but people are missing “low hanging fruit” when they fail to raise a proper challenge to the substitution of trustee and other defenses.

The bad news is that Surane agrees with my current opinion — it is highly unlikely that any judge anywhere will enter an order quieting title where the mortgage or deed of trust is removed as an encumbrance to the property. Unless the mortgage or deed of trust is void, in our opinion it is not proper to bring the quiet title action. BUT, that said, as Surane pointed out on the show, he has made extensive use of declaratory actions that undermine the enforceability of the mortgage or deed of trust and potentially undermine the note as well. The catch is that courts don’t issue advisory opinions so you need a present controversy in order to get the court to rule.

If this article prompts you to order our COMBO Title and Securitization Report and you want the kind of in-depth title report that is described above the cost of the report is $1995.

Get a consult or order services! 202-838-6345

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

 

 

 

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.
—————-

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.
—————-

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.

—————-
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.

 

 

Forbes: Fannie, Freddie Could Need as Much as $126 Billion in Crisis

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“[It was] the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War.” – Benjamin Franklin

Fannie and Freddie have reportedly been cash-cows for the federal government who have allegedly held the quasi-governmental guarantors hostage during eight-years of government receivership.   Fannie and Freddie have returned to the Treasury over $60 billion more than they received in the bailout. But the amount they owe to the government remains outstanding.  It is likely that the tax payer is being prepped to dole out another bail-out for the profitable GSE’s that insure trusts that are empty or no longer exist.

Fannie and Freddie are antiquated dinosaurs that contributed to the foreclose melt-down.  As nothing more than guarantors for empty trusts, they routinely attempt to foreclose on homes they don’t own and loans that failed to exist years ago.  The GSE’s business model is to hire servicers to fabricate documents to create the illusion of ownership so they can foreclose.

The true GSE story is yet to be told, but why would two profitable corporations need bailouts?  Where have all the profits from the past seven years gone?  One thing is assured, the federal government couldn’t operate a worm farm even with the best worm cultivators in the world consulting.

http://www.bloomberg.com/news/articles/2016-08-08/fannie-freddie-could-need-126-billion-in-crisis-test-shows

By Joe Light

Fannie Mae and Freddie Mac could need as much as $125.8 billion in bailout money from taxpayers in a severe economic downturn, according to stress test results released Monday by their regulator.

The Federal Housing Finance Agency said that the government-controlled companies, which back nearly half of new mortgages, would need at least $49.2 billion.

The annual test, required by the Dodd-Frank Act, is likely to be used both by proponents of allowing Fannie Mae and Freddie Mac to build capital and by those who think there’s not an urgent need for the government to take that move.

 Under the terms of the companies’ bailout agreements, Fannie Mae and Freddie Mac must send nearly all of their profits to the U.S. Treasury and wind down their capital buffers until they reach zero dollars in 2018. After that point, any loss at either company would require a draw from taxpayers.

Rescue Funds

 Monday’s stress test results showed that the funds that the U.S. Treasury Department is authorized to use in a bailout are more than enough to cover the billions that Fannie Mae and Freddie Mac would likely lose in a crisis. The companies would have between $132.2 billion and $208.9 billion in available bailout money from the Treasury after the period of financial duress passed, according to FHFA.

The stress tests assumed an extreme adverse scenario, designed by the Federal Reserve, in which real U.S. gross domestic product dove 6.25 percent by the first quarter of next year, unemployment doubled to 10 percent by the third quarter of 2017 and inflation rose to 1.9 percent.

“A stress test for an entity that is not allowed to retain capital is an exercise in stupidity,” Tim Pagliara, chief executive officer of CapWealth Advisors, said in an e-mail.  “The only way you can fix it is to retain capital.”

Pagliara is also head of Investors Unite, a Fannie Mae and Freddie Mac shareholder group.

‘Serious Risk’

Fannie Mae and Freddie Mac buy mortgages from lenders, wrap them into securities and make guarantees to investors in case borrowers default. The companies have been in a conservatorship helmed by the FHFA since 2008 and received $187.5 billion in bailout money from the U.S. Treasury.

Last week, Fannie Mae reported a profit of $2.9 billion for the second quarter, while Freddie Mac reported a profit of $993 million. Freddie Mac has reported a loss in two of the past four quarters.

FHFA Director Melvin Watt in a February speech warned that the companies’ falling capital buffers could one day cause investors to doubt their guarantees of mortgage-backed securities. Such uncertainty would cause mortgage rates to go up.

“The most serious risk and the one that has the most potential for escalating in the future is the enterprises’ lack of capital,” Watt said.

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.

—————-
also see comments below from Dan Edstrom, senior securitization analyst for LivingLies
——————-

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:

1

(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.

2

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.

3

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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Modification Abuse: Ocwen, Homeward Dishonest in Handling Modifications

The incentive payments from the Federal government for HAMP modifications were merely used for profit, bonuses and the like. No attention was paid to HAMP modifications except in rare instances where the banks thought it prudent to at least make it appear as though they were following HAMP guidelines when they clearly had no interest in doing so.

Most Judges are still basing their mindset that the loans are valid and that the interests of the servicer are just like any other “bank.” Not so much.

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

—————-

see http://4closurefraud.org/2016/06/10/united-states-of-america-et-al-v-ocwen-judge-rules-docs-admissible-in-hamp-false-claims-act-case/

I have written about this before. But now there are 2 qui tam actions in Texas against Ocwen and Homeward. Both are governed by the rules of HAMP modifications, neither complied, and they both did so intentionally. The same holds true for most other servicers. Ocwen tried to escape the civil action by saying that the information used by the whistle-blowers was “inadvertently” disclosed and should not be allowed as evidence nor as a basis for the qui tam lawsuit. The Texas Judge rued against Ocwen citing a statute that explicitly stated that such material can be disclosed and released.

The real question, as I have repeatedly suggested, is why would the nation’s largest servicers accept billions in incentive fees from the US Government while at the same time abusing the modification process? In the real world of real banking, workouts were always the rule rather than foreclosures. All seminars I have ever attended for bank lawyers (yes, I was one of those for a while) involving bankruptcy, deficiency and defaults, start out and maintain one basic theme: workouts wherever possible. The reason? The bank does far better in workouts than in foreclosure. Most Judges are still basing their mindset that the loans are valid and that the interests of the servicer are just like any other “bank.” Not so much.

So why all the obfuscation about modifications? If you just think about it logically there are several things that come to mind. First, the servicers are only incentivized to bring cases to a “successful” conclusion which is a forced sale of the property backed up by a Final Judgment in judicial states. The basic assumption today is that the servicers are representing the investors through the pass through entity described as a REMIC Trust. Setting aside the issue of whether that assertion is even true as to form or substance, it is obvious that the push to foreclosure was adverse to the interests of the investors and adverse to other entities that had bought or sold derivative products whose value derived from the value of the performing loans in a specified pool (which probably didn’t ever exist).

If the services are acting adverse to the interests of investors, then who are they working for? The Trust exists only on paper, was never funded, never had a bank account or any active business even for the window described in the “Trust” documents or the IRC provisions allowing for REMIC Trusts. That eliminates the Trust as the party for whom the servicers are working. And the assertion that the Trust is only a holder and NOT a holder in due course corroborates the fact that there was no purchase by the Trust.

So the servicers are NOT working for the people whose money was used to fund the illusion of a securitization scheme and they were NOT working for the special purpose vehicle (REMIC Trust). If you drill down into the prospectuses and the trust document (the PSA) you will see that the designated servicer is often the Master Servicer or the Master Servicer is described deep inside the document. The Master Servicer is the one who supposedly is making servicer advance payments to investors, except they are not advancing those payments; instead they are using investor money from a reserve described in the documents, from which, the investors agree, the servicer can advance payments in order to keep the mortgage bond “performing.” Hence servicer advances are neither advances (they are return of capital to investors) nor are they payments by the servicer (who makes “payments” from the reserve of investors funds).

So you can see the incentive. If the case goes all the way through foreclosure, the “Master Servicer” can claim recovery of servicer advances at the time of liquidation of the property, but if the loan is modified, the servicer can not claim recovery of servicer advances. Most cases in which the banks have let the case go 6-8-10 years is that they were piling up their claim for servicer advances.

And the other incentive that is major is that by refusing HAMP modification and offering “in-house” modifications, they are essentially make the “loan” an asset of the bank rather than the investors. The incentive payments from the Federal government for HAMP modifications were merely used for profit, bonuses and the like. No attention was paid to HAMP modifications except in rare instances where the banks thought it prudent to at least make it appear as though they were following HAMP guidelines when they clearly had no interest in doing so.

None of this would be possible were it not for the ignorance of investors. Both investors and Trustees are contractually barred from even making inquiry “for their own good and protection.” This provision, in virtually all securitization documentation, was one of the large red flags for fund managers who peeked under the hood at this scheme. The idea that they could get no information on the loan portfolio when that was supposed to be the only asset or business of the Trust, was ludicrous and they didn’t invest.

But most fund managers go with the crowd and are lazy. Having the incentive of bonuses if they achieve certain performance levels, and having their asses covered by what appeared to be insurance that was backed up by American tax payers, and the mortgage backed securities being rated AAA by the rating agencies PLUS the representations of the underwriting bank and the seller of those mortgage “bonds,”  these find managers of stable managed funds (the investors) gave money to the underwriter in exchange for worthless securities issued by a completely inactive entity. They got nothing and they were contractually barred from learning they got nothing. It was the perfect cover for the perfect crime and the banks, so far, got away with it.

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The Strategic Warfare of Mortgage “Servicing”

By William Hudson
You can choose your sexual orientation and even your ethnicity but you can’t change your loan servicer. Mortage “servicing” is the ultimate misnomer. Modern loan servicing has nothing to do with service but instead provides a “disservice” in order to boost profits or engineer a default if at all possible. Being forced to contract with a sketchy loan servicer is like being forced to stay married to a spouse who lies, cheats and steals all your money.

 
The servicer’s job is to collect payments and manage the day to day operations of the loan, but servicers have taken on the new role of “default engineer” and “disinformation agent”. The servicers have found a new way of increasing profits and it is at the expense of a customer who has no choice in regards to who services their mortgage.

 
It is likely that the servicing rights to your loan were sold to either  the lowest bidder, or Pirates-R-Us Loan Servicing who purchased the note at a fire sale for pennies on the dollar with the knowledge that your loan had some major defect. It is even possible that your loan servicer is not a servicer at all but is pretending that they are forwarding your payments to the true owner when instead they are keeping your monthly payments for their own enrichment (and there is no creditor).

 
The typical tools servicers use to create a deliberate default include:
• providing disinformation or conflicting information to the homeowner
• failing to follow through with agreements (modifications or repayment)
• misapplying funds/refusing to take payments
• weeks spent trying to correct an issue (phone transferitis followed by disconnect)
• failure to answer QWR or failure to provide requested answers
• failure to acknowledge rescission
• backdating denial letters so homeowners don’t have sufficient time to challenge the              modification  denial
• forced-place insurance
• assign servicing rights to new servicer
• dual-tracking while modification is under consideration or borrower is in compliance
• revoking modification when homeowner is compliant (no opportunity to appeal)
• bankruptcy payment issues (misapplication of payments pre and post-bankruptcy)
• fabricating document to create the appearance of holder status
• misrepresenting status of relationship to loan
• Fabrication, forgery and other tactics to “perfect” the appearance of holder status

 
All of these activities serve to confuse the homeowner and require significant amounts of time and frustration to resolve as days, weeks and sometimes months are spent on trying to correct the situation (during work hours).   On a regular basis Servicers now participate in calculated fraud in order to create a default. The unsuspecting homeowner can be lulled by their servicer into practices that will increase the chances of foreclosure.

 
Over the past several months, the Lending Lies team has seen a disturbing trend of servicers taking advantage of people who are elderly, obviously mentally incapacitated, and economically vulnerable. Servicers are now aware of who the best victims are and who to pursue with impunity. The elderly who are on fixed incomes are particularly vulnerable, single mothers who are burdened by work and raising children on their own appear to be targets, and we have seen more and more mature single women with few assets except for their homes being given incorrect information to deliberately force them into arrears (many of these women acquired real estate through divorce or a spouse’s death- and are told they have no survivor rights and the bank refuses to accept payment). These people lack the financial resources to obtain legal assistance, and often are so beaten-down emotionally they have no ability to fight back.

 
The servicer’s current weapon of choice continues to be the loan modification offer, when the bank has no intention of granting one. During the loan modification process, paper work will be destroyed, customer service reps will claim to not have received paperwork, and the homeowner will be caught in an endless phone transfer loop (followed by an abrupt disconnect of the call in which the homeowner will be forced to start all over). After months of this nearly futile run-around the bank will claim the homeowner doesn’t qualify for a modification- but will then fail to provide a reason for the modification denial or an opportunity to appeal the servicer’s decision (last week Ocwen was sanctioned by the National Mortgage Settlement for this metric violation). Another tactic is to dual-track the customer (proceed with foreclosure while homeowner is in negotiations for a modification).

 
Unfortunately almost all homeowners are at the mercy of the party who acquires the servicing rights to their Note- and if the homeowner has the misfortunate of their loan being acquired by Ocwen, Nationwide, Bank of America, JPMorgan-Chase, CitiMortgage or Bank of America- the homeowner is almost assured that if they miss one payment during the life of their loan or have some other issue- there will be hell to pay and the bank will make it as difficult as possible to correct the issue.

 

 

Without effective counsel, the homeowner is literally at the servicer’s mercy.
Part of the servicer’s modus operandi is emotional warfare. First of all, mortgage issues are complex and most homeowners have no comprehension of what is going on except for what they are told by low-level employees at the banks that are literally practicing law without a license when speaking to homeowners. By keeping the victim confused, on edge, unable to receive concise answers and other gaslighting techniques- they can exponentially increase default odds in their favor. Most homeowners will follow the directions of their loan servicers without question- and are taken advantage by their naiveté and willingness to comply with the servicer’s demands. It is unconscionable that a loan servicer with a conflict of interest is able to advise vulnerable homeowners about saving their home when the servicer has very clear goals of foreclosure.

 
Over the past nine years, servicers have learned how to “perfect” their default model to ensure foreclosures occur. Now that it is well known that the servicers forge signatures, falsify notarizations, and fabricate documents, the banks have now reverted to “Plan B”. If paperwork they forged and altered over the past six years is a known liability, lenders are now resorting to “lost note” strategies so they can try to start over with a “clean” slate. Once they have convinced the court the note was lost and claim plausible deniability they can use a lost note affidavit to try and correct any earlier issues or oversights that occurred when sloppy fabrication and forgeries were used. The banks can then recreate their foreclosure “storyline”  in order to “perfect” their standing. Don’t be fooled by this tactic.

 
The homeowner’s chance of saving their homes are compromised when their own servicer behaves in predatory ways. Servicers are well aware of how to create a default and who to best target for their crime. The National Mortgage Settlement has proven impotent to stop loan servicers from continuing with their deceptive tactics. Society’s most vulnerable are victimized and have no hope of fighting back against these abusive servicer crime-syndicates with deep pockets, political allies and the courts in their corner. Welcome to the new America.

Held Hostage by a Home: The Devastation of Foreclosure

held hostage2

Held Hostage by a Home

Depending on reader response- this column may become an ongoing Sunday feature on LivingLies. Let us know what you think.
______________________________________________________________________
Although Neil Garfield eloquently describes the legal dynamics of foreclosure, there is also a human battle waged in millions of homes nationwide that remains hidden behind walls of shame, fear and anger. Families are torn apart by the stress and uncertainty that financial burdens bring. A home, no matter how modest or grand, is a foundation of family life- and when it is torn away by companies without legal standing to do so- the pain is compounded because of the injustice.
Most families who fall behind on their debts, do not do so deliberately. Usually financial debt is caused by job loss, illness, divorce, or simply being induced into obtaining more credit than the family can service-by companies who carry no risk (due to securitization). Most families would embrace the opportunity to have one second chance to pay back any outstanding balance on their home and make good on their debts-but loan servicers have no incentive to work with the homeowner.
Unfortunately, the way the mortgage industry works, it is no longer beneficial for the servicer to service your loan- when they can foreclose instead. A huge financial windfall awaits a servicer that can engineer a default. Instead of receiving approximately .125% of the monthly payment, the servicer is entitled to keep all fees, late interest, and other default charges (and the entire proceeds if they are collecting on behalf of a trust that does not exist). Until loan servicing issues are addressed, servicers will continue their predatory tactics to push homeowners into foreclosure. I should know because I am the victim of a predatory servicer. This is my story.
I am being held hostage by my home. The red brick and mortar of the quintessential American home has become my prison. For the past seven years I have had the rope of the commercial code truss my freedom, happiness, career and dreams. The blindfold has been removed but I still can’t trust what I see- banks that operate like organized crime syndicates supported by courts that refuse to acknowledge the fraud. I have been gagged and silenced by a bank, as my story, like millions of others goes unheard. Hopefully, the ability to warn others what a bank is capable of- will be cathartic.
What most people don’t understand before taking on foreclosure is that unless you have unlimited wealth, you will be taken hostage during litigation. The Notices of Default filed against you will keep you from repurchasing a different house, will destroy your credit, may prevent you from obtaining employment, may cause creditors to rescind credit extended, and may exhaust all of your savings and retirement. Your neighbors will likely shun you and your “friends” may distance themselves from you. Your opportunities to rebuild and recover from a financial setback will be compromised. I won’t even get into the emotional costs (divorce, volatile home environment, stressed parenting). Rarely is a case settled at the trial level. Most cases that should be settled with two or three years may go on for a decade or so if you continue to battle on.
Eight years ago, If I had been told what my future would hold if I dared to challenge my loan servicer- I would have held a block party for the bank and handed them the keys to the house. My greatest regret in life is that I decided to hold the bank accountable for reneging on my loan modification. It has cost me my life savings, my health, my marriage, and worst of all- instead of enjoying the childhoods of my children- I have spent every day depressed and anxious while battling a soul-less banking cartel with unlimited financial resources and power. My children have no idea who I am, or who I was before my life became a war game and I took up the position of General. In fact, I have no idea who I am outside of being held hostage by my home.
Why don’t I walk away? Surely losing 13 years of my life would be better than another decade? Because I am a fool. Because I have sacrificed and lost almost everything- to quit would be even worse than to go down defeated. There becomes a point in time- when you can’t turn back. For 13 years I have spent over 200k in order to receive an answer to one very simple question: WHO OWNS MY NOTE???? My servicer and the courts believe I have no right to an answer.
There are thousands of unconscionable foreclosure stories in America- that are unfathomably egregious and completely unnecessary- mine included. I had the ability and desire to pay the bank any amount they requested. I only wanted to sell my home and move on with my life. However, the bank did not want payment- they wanted the house. Neil Garfield has stated that the reason the banks want the foreclosure more than they want payment is because not only does the bank profit handsomely from a foreclosure, but it allows them to neatly tie up the fraud and seal the deal. Once a home is foreclosed upon- rarely does the homeowner sue for wrongful foreclosure.
The ordeal of foreclosure is by design, created by banks to cause the maximum amount of damage- both financially and emotionally. There is absolutely no good faith that arises when the bank can profit from a foreclosure. I have often wondered how people who work in the foreclosure industry sleep at night. Ayn Rand thought about these people also and wrote in Atlas Shrugs, “The man who lies to the world, is the world’s slave from then on…There are no white lies, there is only the blackest of destruction, and a white lie is the blackest of all.” To live knowing you have destroyed the lives of families and committed moral crimes in order to receive a paltry paycheck, would be a worse hell than even I have faced.
Last week the Center of Disease Control and Prevention (CDC) reported that the suicide rates for middle-age whites jumped an alarming 40 percent from 1999 to 2010. The suicide rate for both younger and older Americans remained virtually unchanged, however, the rate spiked for those in middle age (35 to 64 years old) with a 28 percent increase from 1999 to 2010. According to the CDC, there were more than 38,000 suicides in 2010 making it the tenth leading cause of death in America overall. Among African Americans, Hispanics and even the oldest white Americans, death rates have continued to fall. What could be responsible for this drastic change in suicide demographics?
The middle-class suicide spike began with the onset of the tech bubble implosion where middle-class families saw their retirement funds evaporate. Locked into company 401ks where the funds are illiquid, many 401ks don’t allow the ability to place stop-losses. A stop-loss is an order that is placed, usually on a stock, to sell when the price declines to a certain level. So while the wealthy and knowledgeable were able to stop some of the bleed, mid-level employees in company-sponsored retirement programs were disproportionately impacted.
By 2008 the middle class found themselves mired in home loans that were unaffordable, in houses where they owed more than the home was worth, and subjected to a volatile job market and economy. In effect, the middle class died in 2008 and has not rebounded.  Consider the way life has changed since 2001. We are under surveillance all day, we pay a disproportionate amount of our income to taxes that go to support wars and programs most of us do not want, the economy is rigged in favor of the wealthy, and the cost of living has skyrocketed while wages remain flat. Most people in this demographic went to college, both partners work full-time jobs, and are responsible for raising their own children while caring for aging parents on limited incomes.

 

When you face foreclosure or bankruptcy this often pushes people over the tipping point. This was not the life that most middle-class people contemplated and are ill equipped to deal with. The middle class bought into the premise if you go to college and work hard you will gain financial security- not knowing the system was rigged. These individuals were also typically raised in middle class homes and were unprepared for the financial struggles not typically equated with the middle class.
“It’s a loss of hope, a loss of expectations of progress from one generation to the next,” said Angus Deaton, a Nobel Prize–winning economist who had studied the data. The middle class is not only being financially impacted by the economy but the strain on the middle class is psychological. The study noted that white women between 25 and 55 have been dying at accelerating rates over the past decade, a spike in mortality not seen since the AIDS epidemic in the early 1980s. According to recent studies of death certificates, the trend is worse for women in the middle of the United States, even worse in rural areas, and worst of all for those in the lower middle class. Drug and alcohol overdose rates for working-age white women have quadrupled. Suicides are up by as much as 50 percent.
According to the Federal Reserve, 47 percent of those who responded to a recent survey said they are living so close to financial ruin that they couldn’t come up with $400 to meet an emergency, not without first borrowing the money or selling something. Almost half of all Americans are fighting a losing battle to keep their heads above water.
This situation was the subject of a paradigm shifting article in the May issue of Atlantic magazine, “The Secret Shame of the Middle Class,” that was written by Neal Gabler, a well-known book author and film critic. Gabler reveals that despite his successful career, impressive resume and outward appearance of prosperity, he is financially insolvent and must often “juggle creditors to make it through the week.”
The writer attempts to provide reasons for the crisis. He lists predatory credit card companies, the ever-rising cost of living, wage stagnation, poor decision-making, bad luck and a national plague of financial illiteracy. But one cash depleting issue Gabler overlooks is taxation — and the fact that the middle class that pays almost 50% of their income to some type of tax- while the wealthy are able to exploit the system and pay very little if any tax.
Rising health-care costs, job insecurity, climbing foreclosures, and rising energy costs are decimating the middle class. The middle class American now “leases” their lives and most will have no assets to show upon their deaths. They are tenants in their own homes (read your Mortgage- you are a tenant), lease their cars, and are dependent on their employer who is likely facing financial troubles of their own. The housing markets are starting to look a lot like they did in 2007 (except there are more renters now). It is easy to see why the middle class that provides the support for both upper and lower classes is at its breaking point.
Signs of Big Trouble
Families with no savings, piles of credit card debt, and mortgages on homes they should not have been qualified for coupled with flat-lining incomes, low-paying jobs, skyrocketing health-care costs and exorbitant college costs are in dire straits. Wall Street banks with complicit buy-ins from the courts and law enforcement have created an untenable situation where the middle class has nowhere to turn. The banks prey on the vulnerability of people who suffered a temporary setback but are doing everything in their power to correct the situation in good faith. Homeowners are a small obstacle to big banks with unlimited financial resources who retain the best attorneys in the country to defend their predatory and illegal schemes.

It is evident that the government and courts are either unable or unwilling to rein in the powerful banks. Home ownership has dropped to its lowest rate since 1967, and one in every three American families is dealing with a debt collector. One more major recession and the suicide rates will further skyrocket. Without the middle class who is going to take care of the lower classes? The middle class is fighting for its life- and when all else fails apparently they take their own lives.
People are angry, people are desperate and people want solutions. If the middle class really wants to do something to stop this downward trajectory- the first thing to do would be to close your accounts with the major banks that service loans (Wells Fargo, CitiMortgage, Bank of America). If able, refinance your home with a credit union who holds your mortgage in-house and does not securitize loans. The middle class could effectively starve the beast that oppresses them if they would unite.
There are economic indicators that the housing market is reverting back to the 2007 lending policies that were the norm prior to the bubble that popped in 2008. Many banks are offering zero-down loans while Fannie Mae and Freddie Mac have lowered their loan qualifications in an attempt to spur on the lower and middle class housing market. The banks are resorting to desperate tactics as homebuyers have stopped purchasing. There can be no doubt that those who have lived through a foreclosure or the foreclosure of a family member will ever trust a big bank again. I know that personally, I will NEVER borrow from a big bank again.
The suicide report showed a marked increase in mortality of middle-aged white non-Hispanic men and women in the United States between 1999 and 2013 was unique to the United States; no other rich country saw a similar event. Self-reported declines in health, mental health, and ability to conduct activities of daily living, and increases in chronic pain and inability to work, as well as clinically measured deteriorations in liver function, all point to growing distress in this population. Research confirms that this situation is due to economic causes and life quality deterioration. All indications show that economic conditions are even worsening for the middle class.
It is noteworthy that other countries have had similar financial problems that mirror the United States, however, the suicide rates and middle-class morbidity have not increased in any other developed country but the United States. The American capitalist machine is feeding off the hopes and dreams of the middle class and yet the middle class is unable to obtain any relief through government agencies or access due process within the courts. This reality is impacting the lives of millions of Americans who deserve much better.

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The graph is shocking. And for obvious reasons I’m very interested in the mortality of white Americans in the 45-54 age range since I am in this class. If anyone knows about the costs of fighting an unlawful foreclosure it is me. I have filed three bankruptcies during 13 years of ongoing litigation to save my home (despite simply wanting to sell the home that I no longer resided in and cash out my equity). The bank has also filed at least 9 Notices of Default (destroying my ability to obtain credit for over a decade) and illegally foreclosed on me once (in violation of an automatic stay). I have spent every single discretionary dollar I have had believing that the courts would honor the rule of law. I was so confident when I set out to settle the illegal acts by my servicer that I naively believed the situation would be remedied within a year (when it could still take up to another decade to settle this issue).
I was raised in a white upper-middle class family. Your credit score was considered as important as your IQ and success was measured by your position and income. However, by 2001 I found out it doesn’t matter how successful you are- if you are dependent on an employer- it can all be snatched out of your hands (I was fired while on an approved medical leave from a large pharmaceutical company just to add irony). Unable to replace my high salary I fell into financial arrears. I lost my friends, my social standing, my ability to obtain credit, and my ability to rebuild. Even more tragically, the stress decimated my family and destroyed my marriage. I have never recovered. I hope that I don’t become one of these statistics but there are no guarantees I won’t.
Fighting a foreclosure is ugly, ugly business. Unfortunately, in our society, litigation is reserved for those well enough off to fight back. The majority of low-income households have literally no hope of fighting back without competent and aggressive legal counsel (and legal counsel is expensive). Both middle and lower classes are extremely vulnerable to any fluctuation of the economy. A job loss can result in losing everything and purchasing a house you can’t afford further exacerbates your financial stress.
It appears the banks deliberately started giving out loans like candy to anyone with a pulse, knowing they would securitize these debts, keep the investors’ money meant to fund the loan, collect the monthly payments and then foreclose- while knowing very few in the lower and middle classes would be able to fight back. The researchers state they can only hypothesize why records of white middle class Americans are committing suicide in increasing numbers? Although my statistical skills are sub-par I can tell you exactly what is behind the statistics- the illusion of the American dream has been exposed and not one elected official is willing to do what is necessary to correct the situation while the elite are still able to milk the market while it climbs and crashes. This is a tragedy not seen since people jumped off of skyscrapers with the stock market crash in 1929- it is just more subtle and stealth.
One theory about what is causing rising mortality among whites is the “dashed expectations” hypothesis. According to Johns Hopkins University sociologist Andrew Cherlin, whites today are more pessimistic than their forebears about their opportunities to advance in life. They are also more pessimistic than their black and Hispanic contemporaries.
“The idea that today’s generations will do better than their parents’ generation is part of the American Dream. It has always been true until now,” Cherlin said. “It may still be true for college-educated Americans, but not for the high-school-educated people we used to call the working class.”  The demise of the middle class is broad in its effects, but it appears to be culminating in places that are particularly vulnerable — such as cities where the drinking water is polluted with lead for years, or a small city that saw its biggest manufacturer move overseas, or in a household destroyed by job loss and foreclosure. It’s no big mystery why the wounded middle class is turning to Trump and his anti-establishment rhetoric and hitting a nerve.
Things aren’t going to get better for sometime due to the apathy and disconnect of Washington and your elected officials. Before you pursue litigation please consider if you possess the endurance needed to fight a bank with unlimited sources. In almost every successful case- an Appeal will be necessary. Consider the evidence you possess- is it enough to defeat the servicer’s claims? Do you have the financial means to finish the fight? Can you detach enough from the outcome that when your due process rights are trampled and the banks resort to forgery to defeat you- you won’t fall apart?
As much as I hate to say this- most people who have viable cases end up in some type of modification or agreement. The costs become too high for most homeowners to endure. Sadly the judges are now unfazed by forgeries, falsified documents, and fraud on the court- and there is nothing unusual about dummied up documents (although the banks are committing felonies with impunity). It is up to the people who have the means and temperament to fight foreclosure to do so on behalf of those whose voices have been silenced. Going the distance also requires that you don’t give in and sign a confidentiality agreement. Precedents in favor of the homeowner are desperately needed.
Every case you have read on Living Lies was because an attorney and the client refused to give in and both incurred serious losses in order to prevail. In cases like these, both attorney and client looked under every rock and crevice for evidence, they studied every law, act and statute. There are few attorneys who are willing to stand up for the homeowner and take the case all the way to trial. These world-class attorneys have sometimes faced ridicule by their peers but can’t be deterred. South Florida has some of the best foreclosure attorneys in the country including Neil Garfield, Tom Ice, Patrick Giunta, James “Randy” Ackley, Matthew Weidner, Mark Stopa, Bruce Jacobs and others (please read the blogs of these attorneys). Through the professionalism, proficiency and passion of these attorneys- the judges are now becoming wise to court manipulation and the fraudulent deeds of the banks.
With the knowledge Neil Garfield has shared with his readers on Living Lies- YOU have a better chance of prevailing than most Americans do who rely solely on their attorneys to take care of every aspect of their case (attorneys simply do not have the time). Eric Mains wrote a blog for Living Lies entitled “Why your Foreclosure Attorney Just became Your Business Partner”. The post provides excellent information for people who are willing and able to take on their loan servicers.
There is no doubt that the banks must receive much harsher monetary penalties to dissuade them from engaging in criminal conduct. It is also time that the representatives of the banks and foreclosure mills they employ be criminally prosecuted for the destruction they have caused to millions of families by fabricating documents, deliberately deceiving homeowners (through disinformation, false modifications, refusal to accept payments) and intentionally setting homeowners up to fail.
My advice to anyone contemplating foreclosure would be to NEVER allow a bank to steal your happiness or harm your family- walk away.  If you decide to pursue litigation your eyes will be opened that the attorneys for the banks are no different than college-educated thugs and that the courts are owned and paid for by the big banks. This lesson in itself will completely shake your belief system to the core. I would recommend in most cases that you save your family, your sanity and your money and go fight a war you can win.
Not to discourage you- but I have now been held hostage for 13 years. I have no home (except the house that has sat empty during 6 years of litigation now), no retirement, no marriage and my physical health is now starting to suffer (my mental suffering endures). I have wasted the best years of my life fighting a heartless bank with unlimited power and unlimited resources- because I actually believed our judicial system guaranteed my due process rights (wrong).  My ONLY hope is that the judge overhearing my case can put his own biases aside, apply the rule of law- and allow a jury of my peers to hear what a bank hell-bent on orchestrating the theft of my home is capable of.
They haven’t stolen my home-yet, but they may have stolen my life.

Update: March 25, 2018: If you have been victimized by a predatory foreclosure attorney- please write me at lendingliesconsulting@gmail.com.  I would like to hear your story.

 

Florida Foreclosure: Where No Case is Over-Ever

Our services: https://livinglies.me/2016/04/11/what-can-you-do-for-me-an-overview-of-services-offered-by-neil-garfield/

I have not commented on the arguments regarding the statute of limitations here in Florida. It is time I did. The article here points out that the 3rd DCA has bent over backward and essentially broken its own backbone by creating legal fictions to save the banks. What they continue to ignore is that saving the banks means screwing the consumer, the citizen and the taxpayer. They also have essentially ruled that the banks can keep coming into court, filing the same lawsuit over and over again, until they win by attrition — few homeowners can afford to contest foreclosures repeatedly. The 3rd DCA decision essentially says that it isn’t over until the bank wins.

 
The obvious premise behind this flawed decision is that somehow this will make everything turn out “right.” It doesn’t. The court completely ignores the huge body of law and information in the public domain that reveals the banks as the perpetrators of epic fraud. Either the court doesn’t know about the fraud or it doesn’t care.

 
And what the court does not address is the nature of the fraud by assuming facts that don’t exist. These banks don’t have a penny invested in any of the loans that they are using for foreclosure and even modification where ownership of the debt gets transferred from the investors who advanced the money to the banks who sold them the bad deals. The investor is left with nothing in most cases while the borrower cleans out his savings account trying to save his/her home only to lose it to a party who is stealing the home from the borrower and the loan from the investor.

 
The court is creating multiple legal fictions. In so doing the court has destroyed the value of stare decisis — legal precedent. Or, if you look from another point of view creating a destructive legal precedent. Instead of taking each legal effective act as something that matters, they have bent and broken the language of the note and mortgage — essentially converting the act of acceleration to an option that means nothing unless foreclosure is successful.

 
If this decision is left standing then no case is over, ever. And lawyers will start arguing that even though their client committed themselves to an act with legal significance, they now choose to disavow that act and proceed on an alternative theory — after they have already lost the case in prior proceedings. This creates an endless chain of alleging “new facts” or “alternative facts” on every case where a party previously lost the legal contest, or where their case was dismissed.

 
The inherent presumption is that borrowers have no voice in this process because they received the benefit of fraudulent schemes. But in the courts where I grew up as a lawyer, no party was allowed presumptions if they had unclean hands seeking the equitable remedy of foreclosure.

 

Nor would a fraudster be allowed to benefit from his schemes once the scheme was revealed. The courts are turning this on its head. As stated in the Yvanova decision in California, it DOES matter if the wrong party is bringing the foreclosure action. It is not enough that the homeowner may owe someone money based upon some equitable theory of law; the homeowner must respond only to a claim from the actual party to whom the debt is owed, i.e., the creditor.

 
That California decision said it well — we don’t enter judgments against people simply because they must owe somebody (or anybody) money. The legal system is only available to those with legal standing — a party to whom the debt is actually owed because they paid for it.
This rush to “convict” the homeowner of bad behavior (breach of an unconscionable arrangement where there is no actual enforceable loan contract) is the insidious basis of most of the court decisions where the courts have “read in” fictions that never existed by contract, statute or legal precedent.

 

They did it with due process by putting the burden on homeowners to prove facts that were solely within the care, custody and control of third parties.

 

They rubbed it in when they blocked discovery to get to those facts.

 

They did it again by reading into TILA rescission that the homeowner must file a legal action to make rescission effective (despite the express wording of the statute to the contrary).

 

They did it again by reading into TILA rescission that the homeowner had to offer some tender to the “lender” in order to make rescission effective.

 

And they are doing it again, even after the Supreme Court of the United States told them they were wrong by reading into TILA rescission that the conditions precedent to a valid rescission mean that the rescission is not legally effective until a judge decides the issues raised by the pretender lenders. THAT theory brings us full circle around to the erroneous theory that TILA rescission is not effective upon mailing and that it is not effective until someone files a lawsuit. But they do it again when they say that the Court can decide the outcome of a nonexistent lawsuit filed by a nonexistent party.

 
This won’t end until the Courts return to basic contract law. The courts must abandon their intrusion into the legislative agendas where public policy is declared. They must especially back off when the court doctrines on public policy conflict with the legislators who are the ONLY people constitutionally permitted to make policy. Those legislators have spoken on Federal and State levels. But the courts are unconstitutionally refusing to abide by laws passed by the legislative branch. The statute of limitations is just another example.

 

The way it destroys legal precedent is that it directly conflicts with the doctrine of finality. For example if a person is in an auto accident and chooses to make the claim before they reach maximum medical improvement, the measure of damages is diminished because once they sue the damages are based upon the proven injury. They might even lose because the proven damages are inconsequential. When they later discover they have more injuries and more damages they cannot come back into court and say that their last claim was an option — and more importantly that the fact that their claim was dismissed should be ignored.   And even more to the point, if their last claim was within the statute of limitations and their present claim is outside of the statute of limitations the plaintiff’s claim is dismissed on the basis of res judicata — the matter has already been litigated AND the statute of limitations.

 

If the judiciary is able to rewrite laws of the legislature from the bench in regards to Mortgages, then why shouldn’t the court do the same for ALL legal issues?  It is only a matter of time until these cases are used to circumvent the statute of limitations in other cases- opening up an onslaught of new cases that have already been tried.  Finality will be a thing of the past.

 

There can be little doubt that the banks control the judiciary. The Third District Court of Appeal ruled that the statute of limitations in mortgage foreclosure actions are not applicable. The court had earlier determined in the 2014 Deutsche Bank v. Beauvais opinion that the statute barred Deutsche Bank from filing a foreclosure action five years after the borrower’s default and the lender’s acceleration demanding full payment of the loan.

 
The Third District Court reversed this decision in a 6-4 ruling on April 12 and held that the statute of limitations can NEVER bar a bank’s efforts to foreclose on a Florida homeowner! What does this mean? It means that the banks will have until 5 years after the maturity of the loan to foreclose, and the ability to repeatedly file foreclosure actions until they have outspent and exhausted the homeowner.

 
This decision is a travesty. This decision ensures the foreclosure crisis will continue for decades, and allows the banks unlimited court actions until they can successfully foreclose on the homeowner. Very few homeowners have the financial means to endure decades of litigation, and very few homeowner’s attorneys will have the endurance or desire to defend cases for long durations of time. This ruling allows the banks to regroup, correct the issue, and re-litigate (or fabricate documents to “cure” the error).

 
The Third District’s en banc decision was based on the 2004 Florida Supreme Court opinion in Singleton v. Greymar. In Singleton, the trial court dismissed the lender’s foreclosure action on an accelerated debt with prejudice after the bank failed to appear at a hearing. What is unclear from the Singleton record is why the lender failed to appear. The court should have recognized that there was an agreement to reinstate under which the borrower made payments prior to the dismissal.
The lender filed a second foreclosure action after the borrower defaulted on a new, subsequent workout plan. The borrower sought to avoid the second action claiming res judicata. It is noteworthy that the lender’s Supreme Court brief in Singleton was only four pages long, with only one paragraph of actual argument stating that to deny the foreclosure would create “uncertainty” for banks and a “windfall” for homeowners, offering no analysis of res judicata, collateral estoppel or the consideration of the statute of limitations.

 
Even the attorney who represented the lender in Singleton, Mark Evans Kass, said that Singleton has been misinterpreted and misapplied by many courts across Florida, including the Third District in Deutsche Bank v. Beauvais. The Florida Supreme Court found the two actions were different events and the second action involved a new and distinct default by the borrowers.

 
“There really is no mystery as to why the Florida Supreme Court ruled that my client was not barred by res judicata in bringing the second foreclosure action,” Kass stated. “It’s simple. The debtors, Gwendolyn and William Singleton, made payments and reinstated the loan after we accelerated the debt. A few months after reinstating and dismissing the first lawsuit, they defaulted again, which is why we filed a second lawsuit and alleged a subsequent and separate default date — because there actually was a subsequent and separate default.”

 

Kass commented on the Third District’s recent en banc opinion and said, “I would agree with the dissent that Deutsche Bank v. Beauvais has created a new legal fiction. In Singleton, we had a reinstatement and then a new and separate default. For that reason, our second foreclosure was a different cause of action. I understand that the borrower in Beauvais never reinstated the accelerated loan, never made additional payments, and there was never a new or subsequent default.”

 
The four dissenting judges in Beauvais agreed and stated that Beauvais: 1) creates a “legal fiction” that acceleration does not affect the installment nature of the loan; 2) rewrites the contract provisions between the parties; and 3) rewrites the statute of limitations to favor banks. Thus, the only exceptions to the statute of limitations in Florida are capital crimes like murder and now-mortgage foreclosures. However, ONLY murder is an exception actually carved out by a statute enacted by the Florida Legislature.

 

The Florida Supreme Court failed to address is how there can legally be a new default after a debt has already been accelerated. Over the years the banks have worked to convince the courts that Singleton supports the proposition that if a foreclosure is dismissed “for any reason,” there is an automatic reinstatement of the installment nature of the loan, thereby resetting the statute of limitations period for foreclosures.

 
In an unprecedented move, the Third District took Beauvais to an entirely new level claiming that the installment nature of the loan was never affected by the lender’s acceleration of the debt. Thus, even if a bank demands full repayment, the borrower is still obligated to make monthly payments as if there were no acceleration. The courts have opportunistically misinterpreted Singleton and the Florida Supreme Court will need to clarify whether Singleton changes the meaning and effect of “acceleration” and therefore nullified the statute of limitations for mortgages.

 

 

With so many courts misinterpreting the Florida Supreme Court’s Singleton opinion, the Florida Supreme Court must clarify whether Singleton changed the meaning and effect of “acceleration” and nullified the statute of limitations for mortgages. New exceptions to the statute of limitations is a Legislature issue, not for the judiciary to decide.

The Neil Garfield Radio Program: James “Randy” Ackley Recording

Listen Here: https://youtu.be/jOeAe9zT5D0

Yesterday, attorney James “Randy” Ackley appeared on the Neil Garfield Radio Show.  The show was a fascinating discussion about banks’ creating the illusion of standing when a bank is unable to demonstrate they have the right to foreclose.

Neil and Randy addressed why the courts were allowing loan servicers to present evidence that was hearsay, often fraudulent and did not comply with the rules of evidence. Ackley stated that, “The court is allowing evidence to be introduced that would not be admitted in any other type of case.” The discussion brought up the fact that courts are making erroneous presumptions in favor of the banks despite the fact that there is now a public record of banks fabricating evidence, robosigning documents, false notarizations and bank employees testifying under oath about facts they know nothing about.

To learn more about Randy Ackley at: http://4closurefraud.org/2016/04/05/james-r-ackley-responding-to-disaster-a-contemporary-approach-to-foreclosure-defense

 

Consummation- Is an Act not an Illusion

by William Hudson

Neil Garfield is adamant that if consummation did not occur, there can be no contract. His belief is supported by hundreds of years of contract law (including the marriage contract). In regards to marriage, most people know if consummation occurred, yet when it comes to taking out a securitized loan like a mortgage, most people only assume it did.   Without proof one can only speculate that consummation occurred.

Due to the Sarbanes-Oxley Act, any lender in America should be capable of producing the needed documentation to prove they own a Mortgage and Note- and that consummation occurred. With the click of a computer mouse, instantaneously the journal entries in the lender’s financial, accounting, and general ledger systems should show that a loan was consummated and the Note was assigned to a valid trust. Instead, the banks resort to forgery and fraud. If they had the documentation, fraud would not be necessary.

Since around 2001 banks have been mocking up documents to create a paper trail to create the illusion of ownership- but in light of all the fabricated document fraud, it is time that homeowners demand to see the money trail and are permitted to do so. The money trail should begin at consummation of the loan between the two parties who agreed to contract: the homeowner and lender. However, this is not the way that consummation works in a securitized mortgage transaction. By design, the homeowner is not allowed to know who they are borrowing funds from- and transparency is of no concern.

Can you imagine this occurring in any other consumer transaction?  Imagine the chaos that would ensue, for instance, if you thought you were financing a truck through Ford Credit, yet unbeknownst to you, Honda funded the loan.  You may have ended up with the truck, but you may have been induced into a contract you didn’t agree with (especially if your goal was to “buy American”).  Why should Mortgage loans be any different?  And why should Congress bother passing laws like TILA if the banks are going to ignore consumer protection laws with impunity?

There can be no consummation when the party lending the money is never disclosed to the borrower. A homeowner is conned into believing the party listed on their note and mortgage is actually the party who is taking the risk by lending their own funds- when this party who is named on the Note is an originator- not a lender.

Has anyone stopped to ask why all the secrecy?   The only reason for secrecy is to hide the truth- whatever that may be (dark pools? empty trusts? stolen funds?). There is a reason for the deception that begins at the closing table, endures through servicing, and only ends upon sale of the property or payoff.

Consummation under the Federal Truth-in-Lending-Act occurs when the state law on contract or lending says it begins. According to attorney Neil Garfield, “Most state laws require offer, acceptance and consideration. So while the door is open to inconsistent results, in order to find that consummation did happen and that the date of consummation is known, we still must visit the issue of consideration.” Consideration is basically the exchange of something of value in return for the promise or service of the other party. Take note, consideration is not the exchange of value in return for the promise or service of an unidentified third party. However, modern securitization has nothing to do with the name of the original “lender” on the Note that in 99% of all cases did not loan anything of value.

When a homeowner is not provided the name of the party who is actually taking the risk and has skin in the game- they lose their ability to negotiate in good faith with this party (the investors of the trust). Over the span of a 30 year loan, “life” happens. It is terrifying that a bank can use one late payment as an excuse to create a default.

Banks were once responsive to homeowners because they had an actual investment and needed the homeowner to successfully make payments.   If a homeowner had a short-term cash flow problem, the banks were willing to work with them- it was in their best interest to do so. Homeowners no longer have the luxury of negotiating with the party who provided the funds, but must attempt to solve any mortgage issues with a loan servicer who is financially rewarded by engineering a default- by failing to provide responsive customer service to the homeowner (or by blatantly misleading the homeowner).

In fact, this week the CFPB announced that consumers made almost 900,000 complaints about their loan servicers between March and April 2016. The complaints center around three areas:

  1. Problems when consumers are unable to pay: Consumers complained of prolonged loss mitigation review processes in which the same documentation was repeatedly requested by their servicer. Consumers also complained that they received conflicting and confusing foreclosure notifications during the loss mitigation review process.
  2. Confusion over loan transfers: Consumers complained that they were often not properly informed that their loan had been transferred. As a result, payments made to either the prior or current servicer around the time of the transfer were not applied to their account.
  3. Communication issues with servicers: Consumers complained that when they were able to speak with their servicer, the information they received was often confusing and did not provide the clarifications they were hoping for.

According to the report, the mortgage companies with the worst records between November 2015 to January 2016 were Wells Fargo, Bank of America, Ocwen, and Nationstar Mortgage. Consumers are not receiving customer care because by design servicers profit when a default can be engineered. Based on the CFPB findings, it is obvious that the longer the servicer can prolong loss mitigation, the more fees they will potentially receive. A default allows them to collect thousands in late fees and penalties; and if they are lucky- foreclose on the home.

The servicer has no skin in the game and is incentivized to create a default by any means necessary- whereas, a true creditor does not want a default. The problem with the way the system is rigged is that the homeowner is prevented from knowing who they borrowed money from and therefore cannot negotiate in good faith with the party who has a vested interest in the homeowner making payment.

The central problem in all securitized mortgages is that the homeowner has no idea who they consummated the loan with. Although it is considered a predatory practice under Regulation Z to conceal the true lender, no government regulatory agency has stopped the practice of concealing the identity of the true lender at closing.  The TILA laws are on the books, but have no teeth.

Neil has said in the past that consummation only occurs after the closing agent receives and disburses the funds according to the alleged loan contract. Therefore, consummation does not occur on the date that the closing papers are signed. The requirement of giving the borrower disclosure papers three days before the closing is complete might put some daylight between the assumption that consummation occurred on the day the papers were signed.

Garfield states, “The simple argument is that the industry practice has always been that the borrower signs papers and THEN the closing agent requests or receives the money for the “loan.”” Therefore, Garfield doubts there is any support for saying that the borrower is contractually obligated to comply with the terms of the note or the mortgage if the money never came at all. Neil Garfield says that where the true problem lies is what occurs in the NEXT step.

“If we can agree that if no money ever came from anyone, the borrower doesn’t owe anyone anything and is not bound by the “facially valid” loan contract, then it follows that if no money came from the named Payee on the note and mortgagee on the mortgage, (beneficiary in a deed of trust), the “borrower” doesn’t owe anything to anyone,” states Garfield. If contract law was strictly followed, the homeowner is under no obligation to repay a party who didn’t lend them a dime.
This is where the issue of consummation becomes difficult to understand. “If money is sent to the closing agent by a party unrelated to the named payee on the note, then under what theory do we say that the note is evidence of the debt? It certainly should not be used to show that the borrower owes the payee any money because the payee did not make the loan and nobody related to the payee made the loan,” Garfield has repeatedly stated. Neil Garfield agrees with the assumption that the borrower owes back the money that was advanced on behalf of the borrower, but that transaction is not a debt nor a contract- it is a potential liability to the party whose funds were used to send to the closing agent.

That claim could not be in contract because the source of funds and the “borrower” never entered into a contract. The liability would be in equity and would exist independently of the false note and false mortgage, which means the claim from a real source of funds would not be subject to the note and mortgage but simply due on the basis of fairness in equity: the borrower received the benefit of the money from the money source and under quantum meruit would be obligated to repay the money.

This is where most people get lost on Garfield’s Rescission theories. Garfield never advocates that money is not owed to someone- what he argues is that the Note and Mortgage represent a transaction that never occurred- and therefore should be rescinded under TILA. Rescission would allow the REAL creditor (or investors) to come to the table and demand/receive payment.

And yet, loan servicers wanting to protect their unlawful gains (at the expense of the investors) are successfully deceiving the courts that consummation did occur. The entire mortgage scheme is rigged by a system of smoke and mirrors. There is evidence that the closing did not occur according to the contract- if the homeowner can manage to obtain the information through Discovery (but in 99% of all lawsuits the bank will not be compelled to reveal actual evidence). The courts could demand sua sponte that the servicer provide the actual business records and settle the matter- but this would reveal the truth that everyone has gone to great lengths to keep hidden.

When Congress wrote the Truth in Lending Act, they deliberately stated that the homeowner could rescind the Note within three days of consummation (they specifically did not say origination). The Supreme Court in Jesninoski reinforced the right to rescind and TILA was enacted so that banks would self-regulate and not devise reckless and predatory schemes (like what has happened). The homeowners and investors should not be punished for the deliberate obfuscation of the true terms of the “loan”.

All this analysis is aimed at one single point, to wit: that the source of funds does not meet the definition of a creditor to whom the money is owed. Most people understand Neil Garfield’s point but reject it regardless of how well it is founded in law and fact. They reject it because it upsets the mortgage securitization scheme started 20 years ago by the investment banks. It would mean that there is no creditor, there is no contract, and there is no obligation to comply with the payment terms under the note and mortgage. This is an unacceptable result for most people. They worry that the entire system would collapse if they were to follow the law as it has been written and decided for centuries.

But the feared consequence is not based in fact. The entire system does not collapse under this scenario. What happens is that the investors who bought fake Mortgage backed securities could deal directly with the borrowers and workout the terms of a mortgage loan that is both legal and enforceable. More importantly it would be a loan that would survive in value to the investor. As things stand now the Wall Street banks are driving as many cases as possible toward foreclosure because that is the way they collect the most fees — when the equity in the property is no longer higher than the claims for money upon liquidation.

So accepting the application of existing law as stated here, would mean that investors would suffer much lower losses and the homeowners would regain the equity in their homes or at least the prospect of equity while the wild terms and wild appraised prices of the past are abandoned. Obviously the SERVICERS would hate this equitable solution- because it would cost them the huge profits they receive through document fabrication, robosigning and other creative “solutions” that require fraud.

Let’s remember that when TARP was first announced, it was all about losses from mortgage defaults. When the government realized that homeowner defaults had little to do with TARP they expanded its meaning to include failing mortgage backed securities. But there were no bank losses from MBS because the banks were selling MBS not buying them. So then they expanded it again to include losses from credit default swaps, insurance contracts and other hedge products.

This was all based upon the premise that there MUST be a loan contract in there somewhere. There wasn’t in most cases. Nearly all of the foreclosures that have been rubber stamped by the court system were not only unnecessary, they were patently illegal based upon false representations from the banks. The foreclosure was a legal cover for all the prior illegal actions.

With that being said, if the homeowner only recently discovered that consummation did not occur; does the 3-year TILA window is likely untolled and the 3-day/3-year expiration time may never have commenced in the first place. Remember that according to law, Rescission is the act of rescinding; the cancellation of a contract and the return of the parties to the positions they would have had if the contract had not been made; rescission may be brought about by decree or by mutual consent.

Congress did not give you the Right to Cancel under TILA but the Right to Rescind. Cancellation means termination of the entire agreement by the act of parties/law. Whereas Rescission places the person back to the condition they were PRIOR to the contract; cancellation merely voids the contract and has no restorative properties. Congress could have simply allowed homeowners to cancel under TILA, but instead opted for Rescission. Cancellation would have stopped the bleeding, but Rescission actually reattaches the Limb. The judiciary must recognize that Congress used the words CONSUMMATION and RESCISSION not ORIGINATION and CANCELLATION in the Truth-in-Lending-Act so why should any Judge ignore the intention of the Act?  Rescission will eventually be won based on lack of consummation- but it may take another hearing before the Supreme Court before the state courts accept what consummation means.

The Affiant who googled Bank of New York Mellon had “Standing”

By William Hudson

Just because you can thread a needle and replace the button on your shirt, doesn’t mean you should attempt your own vasectomy. Furthermore, just because you faithfully read LivingLies on a daily basis doesn’t mean you should organize a national Qui Tam foreclosure defense action. Despite the sophisticated knowledge necessary to testify about complex financial matters, The Bank of New York Mellon called on servicer Wells Fargo’s “loan verification analyst” to testify about the Bank’s standing on a note bearing a blank indorsement. The loan verification analyst testified that she had learned about the transfer through research she had done “on the internet” and furthermore claimed that “the internet will illustrate the transfer occurred in 2006.” Like I said, it might be best to leave the heavy-financial analysis to the experts.

 
In SOSA v THE BANK OF NEW YORK MELLON | FL 4DCA – the extent of the witness’s knowledge on the subject of standing and holder status is what she claims she learned from a search on “the internet.” Although this type of evidence is insufficient to establish a bank’s standing (as nonholder in possession with the rights of a holder in this particular case) the trial court thought otherwise. Sadly, millions of people have lost their homes because a bank “employee” with no personal knowledge and who didn’t possess the necessary expertise is allowed to testify on matters they are unqualified to testify upon. In Sosa, the witness didn’t even work for the Bank or servicer and was unable to describe the relationship between the parties.

 
Attorneys who fail to challenge the testimony of such a witness, fail to file a motion to strike or allow an Affidavit to stand that is proffered by an unqualified individual- are not defending their client’s interests. In light of this case it might be wise to remember that an affidavit or declaration used to support or oppose a motion must be made on personal knowledge, should set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated. Specifically, an affidavit used to support or oppose a motion for summary judgment must be made on: a) personal knowledge b) must be based on facts that are admissible in evidence, and must c) show that the affiant or declarant is competent to testify on the matters stated in the affidavit.

 
Personal Knowledge
Absent personal knowledge, statements in an affidavit are hearsay and generally inadmissible as evidence. In the case of Sam’s Riverside, Inc. v. Intercon Solutions, Inc., 790 F. Supp. 2d 965 (S.D. Iowa 2011), outlines the significance of the personal-knowledge requirement for affidavit evidence in a trademark-infringement lawsuit. The judge in Sam’s Riverside rejected the plaintiff’s employee’s declaration that stated that Internet screen shots were true and accurate representations of certain web pages operated by the defendant because the affidavit did not establish the declarant’s personal knowledge of that information.

 

 

An employee testifying on behalf of a bank who glances at a computer screen does not possess the necessary personal experience to have an understanding of complex financial instruments as well as the private side of the mortgage transaction. The employee should be deposed and asked more than the usual, “Did you read the defendant’s account screen?” The court noted in Sam’s Riverside that the declaration did not state that the declarant had ever visited the web pages or that he had personal knowledge about the contents of the websites mentioned. Sam’s Riverside teaches that a good affidavit should not merely state that it is based on personal knowledge, but instead, it must show how the affiant obtained such personal knowledge. In the world of mortgage securitization- the people who created the system most likely couldn’t explain it to a judge, let alone an employee low on the totem pole.

 

 

It is well settled that statements in affidavits based “on information and belief” violate the personal-knowledge requirement of Rule 56(c). Other qualifying statements, however, like stating “to my knowledge” or “I believe,” cause confusion when assessing whether the personal-knowledge requirement is satisfied. Because of this “to my knowledge” qualifier, the court should hold that there is no admissible evidence to establish that most servicers own the debt and should be paid, let alone should summary judgment be issued in favor of a lender when the rules of evidence are not satisfied. Courts have uniformly ruled that the term “to my knowledge” is redundant and legally insignificant-especially when the bank employee has absolutely no knowledge about the complex financial transactions they are being called to testify upon.

 
Facts—Not Opinions
“‘The affidavit is no place for ultimate facts and conclusions of law.’” A.L. Pickens Co., Inc. v. Youngstown Sheet & Tube Co., 650 F.3d 118, 121 (6th Cir. 1981) (quoting 6 Moore’s Federal Practice, Part 2, ¶ 56.22(1) at 56-1316 (Supp. 1979)). Yet, too often an affidavit is based on opinions or false conclusions. An unqualified affiant’s opinion on legal questions should not be entitled to any weight whatsoever when it comes to testifying about a loan that was most likely never consummated and was securitized and delivered to a fictitious trust. Only the wire instructions or ledgers can legally demonstrated the transaction happened as reported. Unfortunately instead of compelling discovery so the homeowner can get to the actual facts, the homeowner will be stonewalled while the court relies on inaccurate and incompetent testimony in the form of a low-level bank employee.

 
Only when the testimony of an affiant is challenged by a knowledgeable attorney does the homeowner have a chance of refuting legal conclusions that are not supported by facts. Frequently, a judge will allow the bank employee to make legal conclusions or offer impermissible opinions, while the homeowner’s own attorney fails to defend against the false testimony. An affidavit, for example, should stay with the facts of a case. When an affiant declares, for example, that “the homeowner was in default” when there is no indication that the investor was not being paid by servicer advances, insurance proceeds or other coverage- the homeowner’s attorney must interject or forever let that testimony stand as fact.

 
Admissible Evidence
In federal courts, statements in an affidavit must be excluded if they do not comply with Federal Rules of Evidence. See:Reed v. Aetna Casualty and Surety Co., 160 F.R.D. 572, 575 (N.D. Ind. 1995). Hearsay statements in an affidavit are not admissible unless the statement complies with a recognized exception to the hearsay rule. A hearsay exception that is routinely used in morgage-tort cases is the business-record exception. Reliance on “business records” does not violate the personal-knowledge requirement, as long as the affiant is qualified to, and does, set forth the detailed foundation for the business-record exception to the hearsay rule. See Fed. R. Evid. 803(6). The issue in mortgage foreclosure cases is that the business records of loan servicers are seriously deficient as far as what is going on behind the scenes. Although the database may show the homeowner stopped paying, there is unlikely an actual default. The screenshot that banks usually rely as evidence is fatally defective and should be challenged. Until the attorney has the ledgers, confirmation that the servicer paid for the note, and other evidence nothing should be assumed. Relying on copies of documents that don’t exist- like notes that are created when the borrower goes into default should not be permissible.

 
The latest type of fraud on the court consists of the bank possessing a signature and other elements in a computer file that enable them to reconstruct a mortgage note that doesn’t actually exist until the loan goes into default. A technician than compiles the pieces together to recreate the note. The bank employee will then attest that they have in their possession the physical “wet-ink” note. When the homeowner compels the bank to see the note they claim to have in their possession, the note will then be reported lost. How convenient. It is much easier to explain away a lost note than it is to have actual evidence that a felony has been committed.

 
The affiant attesting to the foundation for the business-record exception should be compelled to explain how he or she obtained such knowledge and to explain indepth what the records mean starting at the beginning of the chain of assignments. The bank records, county records are often fabricated to create the illusion of assignment. However, if you look closely at the documents, inconsistencies can be found. It is also important that homeowners monitor affidavits submitted in their case. In a recent case the Lending Lies team is aware of, counsel for CitiMortgage altered an affidavit and forged an indorsement on a note contained in an appeal. Only after the judge based her ruling on the fraudulent Affidavit, did the homeowner discover that documents presented in the lower court had been altered and submitted in the appellee brief. The homeowner is proceeding with criminal charges against CitiMortgage and their counsel.

 
It is imperative that the homeowner and attorney leave no stone unturned in order to get to the “real story”. It is also important that both homeowner and attorney keep an eye on case documents to ensure the bank doesn’t resort to altering documents mid-trial. In most foreclosure defense cases the bank cannot meet the burden of proof if challenged and unless the judge accommodates an unqualified witness whose testimony will be used to foreclose on an unsuspecting homeowner.

 
Competent Witness
The affiant must establish that he or she is competent to lay the foundation or make the statements in the affidavit. See Fed. R. Evid. 602. Information regarding the affiant’s position with the company, job duties, and responsibilities, as well as that person’s knowledge of the company’s record-making and record-keeping practices should be documented. The witness should be examined on the company’s computer systems, how and when information is put into the computer system, and especially about the ledger, who the homeowner’s payments are forwarded to (if any) and if they are aware if the investors are being paid. Typically all a bank witness can testify about is a computer file containing information they have no control over.

 

Personal knowledge is often inferred by the judge based on an affiant’s position and the nature of the matters to which he or she testifies in the affidavit. For example, an employee who indorses mortgage notes as Vice President may be a contract employee with a rubber stamp. The majority of bank employees testifying on behalf of the bank are not competent to testify on complex legal and financial matters. An affiant’s personal knowledge and competence should not be presumed.

 

Challenging Affidavits
To challenge an affidavit that does not meet the standard requirements, requires that litigants file a motion to strike the affidavit in a timely manner and be specific as to the portions of the affidavit that are being challenged. See, e.g., Jones v. Owens-Corning Fiberglas Corp., 69 F.3d 712, 718 (4th Cir.1995). Failing to strike a motion waives your right to challenge the affidavit on appeal. This can be a fatal failure and all elements of an appeal should be vetted. An appeal that is too general can be struck. An affidavit made in bad faith or done to delay a case can result in an award including attorney’s fees (see: Fed. R. Civ. P. 56(h)). In the case of a fraudulent affidavit intended to deceive the court, sanctions and a judgment against the bank should be issued.

 
Merely alleging that documents have been robo-signed in order to obtain a new cause of action will not be granted, and attorneys who have attempted to do so have been unsuccessful. See, e.g., Me Lee v. LNV Corp., 2012 WL 1203403 (C.D. Cal. April 10, 2012-dismissing robo-signing allegations couched as an attempt to plead fraud claim). Singer v. BAC Home Loans Servicing, LP, 2011 WL 2940733, *2 (D. Ariz. July 21, 2011- holding that allegations of robo-signing do not constitute a plausible claim for relief). Homeowners must present more than bare allegations of ‘robosigning’ without any other factual support. Forensic document examiner Gary Michaels has built a successful practice finding document irregularities including digital alteration, forged signatures, metadata left on original documents and jpeg distortion that the naked eye cannot see. Again, when the homeowner obtains hard evidence of fraud, challenges bank affidavits and demands to see the actual evidence- the banks have a tendency to back down and start negotiating with the homeowner.

 
Conclusion
Obviously, it is critical for affidavit statements to be truthful, but it is equally important that the procedural aspects of obtaining evidence ensure its reliability and admissibility, especially with evidence that the banks are engaging in gross fraud to create the illusion of ownership through fraudulent documents and false affidavits. Banks that have taken shortcuts like the bank did in Sosa v. Bank of New York Mellon will lose if the affiant’s knowledge is challenged. Furthermore, banks that attempt to automate the process will eventually get sloppy and slip up if a competent foreclosure attorney authenticates documents, and attacks the witnesses qualifications. It is also important that an attorney ensure that the affiant is testifying on the documents submitted in the case, not a new set of documents that bank counsel slipped into the record unbeknownst to the homeowner. Conducting an investigation on the documents and affiant in a foreclosure case, now takes the skill of an attorney prosecuting a criminal. Also make sure the affiant has the documents properly notarized and that the affidavit is done under penalty of perjury.

 
In the case of Sosa v. Bank of New York Mellon, the judge ruled that the evidence submitted was not competent to establish the bank’s standing as nonholder in possession with the rights of the holder, but getting to this point took skill on the part of the attorney. Had the attorney allowed the affiant’s testimony to stand the homeowner would have lost on appeal. Judges May and Judge Gerber are judges that apparently understand that when the rule of law is followed the right party will prevail.
See more at: http://stopforeclosurefraud.com/2016/03/24/sosa-v-the-bank-of-new-york-mellon-fl-4dca-the-witnesss-entire-body-of-knowledge-on-the-subject-was-limited-to-what-the-witness-learned-from-a-search-on-the-internet-su/#sthash.BmGMLqB7.dpuf

California Supreme Court Rules in Yvanova, “The borrower owes money NOT TO THE WORLD at large but to a particular person or institution.”

Yvanova v New Century Mortgage 02182016 Supreme Court of California opinion

By William Hudson

Last week the California Supreme Court ruled in Yvanova v. New Century Mortgage Corporation (Case No. S218973, Cal. Sup. Ct. February 18, 2016) that homeowners have standing to challenge a note assignment in an action for wrongful foreclosure on the grounds that the assignment is void. Obviously if the court had ruled differently, the banks would have had absolute carte blanche to forge mortgage assignments with wild abandon. In fact, without a system of endorsements and assignments it would be almost impossible to determine what party has a legitimate interest in a property and chaos would have ensued (sound familiar?).

 
The Yvanova ruling puts to rest the prior assumption by most California courts that a homeowner lacks standing to challenge a void assignment. This decision has the potential to open the litigation floodgates by borrowers who were improperly foreclosed on due to fraudulent or improper assignments. In fact, you can bet that homeowners who lost their homes due to the court’s resistance to follow established law will be filing suit.

 
In Yvanova, she complained that the bank had resorted to the use of fraudulent documents in order to foreclose. First she identified that a bankrupt entity called New Century assigned a deed of trust years after the company ceased to exist. The mortgage assignments demonstrated that even though New Century was dissolved in 2008, New Century allegedly assigned Yvanova’s deed of trust to Deutsche bank in 2011. It was also discovered that Yvanova’s note could not have been delivered to the Morgan Stanley trust pool because the trust had a cutoff date of January 2007. Deutsche Bank, the servicer, claims to have transferred the deed of trust to that pool in December 2011. Thus, 3 years and 11 months after the trust had closed.

 
By law, and to ensure tax-free pass-through status by the REMIC (Real Estate Mortgage Investment Conduit) notes placed in trusts must be placed into the pool by a certain date. The Morgan Stanley trust had a cutoff date of January 2007 but Deutsche Bank claims the note they received by a zombie assignment was placed in the pool in 2011. Thus, a nonexistent company called New Century transferred a note to a closed trust.

 
Up until Yvanova was settled, the California courts rejected hundreds of similar claims over the years stating that borrowers were not a party to or holder of the debt (see Jenkins f. JP Morgan Chase). The California courts essentially ruled that homeowners may now challenge wrongful foreclosures on the grounds that the assignment of the note was invalid or the chain of assignment was faulty. In securitized trusts, it is fairly common for the endorsements and assignments to be either inaccurate or downright fraudulent (photoshopped, robosigned, etc.). The big securitizing banks like Ocwen, Deutsche, Morgan Stanley and Wells Fargo better prepare for a tsunami of wrongful foreclosure suits in California.

 
The California Supreme Court, by ruling in favor of Yvanova, effectively confirmed the 2013 California Appellate ruling Glaski v. Bank of America, which held that a homeowner facing a non-judicial foreclosure has standing to challenge violations of the pooling and servicing agreement. One of the most insightful quotes in Yvanova states, “The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.”

 

The California Supreme Court got it right when they elaborated that, “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity’s hands. No more is required for standing to sue.” Could it be that the California courts are tired of the 9 years of fraudulent banking games that have clogged the court system with no end in sight?

 
It wasn’t the homeowner who got sloppy, greedy and decided to start forging and photoshopping legal documents. It was the banks that engineered this complete fiasco from the top to bottom. Maybe now the banks will clean up their act, or they will be forced to find a more efficient and convincing way to forge and falsify endorsements and assignments. To date, the left hand doesn’t know what the right hand is doing- and the banks only hope that the homeowner doesn’t discover their deception.

 
I will reiterate again, if a bank claims to own a debt then why not simply show the documentation and prove it? This entire mess could be cleaned up very quickly if the banks would simply show the court evidence of ownership- but the courts know the banks don’t have it. By now we know that this entire debacle was engineered under the premise of plausible deniability and the screws are coming loose.
It is evident that the courts have had enough. The Supreme Court in Yvanova stated that:

 

“… California borrowers whose loans are secured by a deed of trust with a power of sale may suffer foreclosure without judicial process and thus ―would be deprived of a means to assert [their] legal protections if not permitted to challenge the foreclosing entity‘s authority through an action for wrongful foreclosure. (Culhane, supra, 708 F.3d at p. 290.)

A borrower therefore ―has standing to challenge the assignment of a mortgage on her home to the extent that such a challenge is necessary to contest a foreclosing entity‘s status qua mortgagee‖ (id. at p. 291)— that is, as the current holder of the beneficial interest under the deed of trust.”
The decision goes on to state that:

 

“In seeking a finding that an assignment agreement was void, therefore, a plaintiff in Yvanova‘s position is not asserting the interests of parties to the assignment; she is asserting her own interest in limiting foreclosure on her property to those with legal authority to order a foreclosure sale. This, then, is not a situation in which standing to sue is lacking because its ―sole object . . . is to settle rights of third persons who are not parties. (Golden Gate Bridge etc. Dist. v. Felt (1931) 214 Cal. 308, 316.)”

Apparently the California Supreme Court just grew a pair and the remaining 49 states might want to listen up. With all of the fraud settlements that have occurred over the past seven years, it is evident that what is occurring isn’t simply sloppy paperwork or unintentional oversight but blatant fraud, theft and criminal conspiracy if you want to be honest. It is a sad day in America when a homeowner must go all the way to the Supreme Court in order to obtain a fair and just ruling. If the courts had ruled in favor of the banks (and I am sure the judges in Yvanova knew what was on the line), there is no doubt in my mind that banks would have had a foreclosure feeding frenzy.

The court states the obvious, that there is an investor or entity who may suffer an unauthorized loss of its interest in the note if the foreclosure proceeds, “when an invalid transfer of a note and deed of trust leads to foreclosure by an unauthorized party, the ―victim‖ is not the borrower, whose obligations under the note are unaffected by the transfer, but ―an individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note.”

And finally, the court gets to the meat of the matter- the issue of standing. “As it relates to standing, we disagree with defendants’ analysis of prejudice from an illegal foreclosure. A foreclosed-upon borrower clearly meets the general standard for standing to sue by showing an invasion of his or her legally protected interests (Angelucci v. Century Supper Club (2007) 41 Cal.4th 160, 175)—the borrower has lost ownership to the home in an allegedly illegal trustee‘s sale. (See Culhane, supra, 708 F.3d at p. 289 [foreclosed-upon borrower has sufficient personal stake in action against foreclosing entity to meet federal standing requirement].)  Moreover, the bank or other entity that ordered the foreclosure would not have done so absent the allegedly void assignment. Thus- [t]he identified harm—the foreclosure—can be traced directly to [the foreclosing entity‘s] exercise of the authority purportedly delegated by the assignment.”

In conclusion, the court clarifies who is allowed to enforce the note without showing overt favoritism to the bank. Please note the eloquence of the last line in this paragraph in the Yvanova decision:

“Nor is it correct that the borrower has no cognizable interest in the identity of the party enforcing his or her debt. Though the borrower is not entitled to object to an assignment of the promissory note, he or she is obligated to pay the debt, or suffer loss of the security, only to a person or entity that has actually been assigned the debt. (See Cockerell v. Title Ins. & Trust Co., supra, 42 Cal.2d at p. 292 [party claiming under an assignment must prove fact of assignment].) The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.

Again, “The borrower owes money NOT TO THE WORLD at large but to a particular person or institution, and ONLY the person or institution entitled to payment may enforce the debt by foreclosing on the security.” The court isn’t magically creating case law- this is exactly what the promissory note entitles the bearer to do- collect on a debt. The note does not say, “If you have a forged document you randomly printed a copy off the internet or photoshopped- you have standing.”

Only the individual or entity with actual STANDING can foreclose on a home. The fact that the homeowner defaulted on an alleged contract (that probably didn’t happen the way the contract reflects the transaction) doesn’t mean any party claiming to be a note holder can foreclose on the home. Like Jerry McGuire said, “SHOW ME THE MONEY.” Until the mortgagee shows up with actual evidence of ownership- no servicer, “lender” or unknown party should be able to randomly foreclose on a home simply by saying they own the note.

Again, this is the beauty of rescission. By precluding the servicer from walking into court with a forged note, mortgage and alleged contract- and forcing this party to demonstrate contractual standing- many fraudulent foreclosures would be prevented. It is tragic that so many people have lost their homes because the courts permitted a pretend lender with no standing to waltz in and take a home simply by showing fraudulent documents and making false claims.

Finally, the Yvanova ruling leaves us with the crowning glory of this decision, “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity‘s hands. No more is required for standing to sue.” Thank you California Supreme Court justices for ruling according to law instead of the banking lobby.

The Money Trail: Does anyone meet the definition of a creditor?

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

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I speak to people across the country. As I discuss the issues that get increasingly complex, we reach areas in which there are differences of opinion which is why you need to consult with someone who is licensed in your state and who has done the heavy research (no skimming allowed). The issue is what payments should be credited to whom. And the answer really is you should be asking an accountant and a lawyer. This is why my team is reaching out to accountants and auditors to round out what is needed in cases.

The problem is that this is a grey area. Payments made to the beneficiaries of the trust were never intended to discharge the debt from the “borrower.” That’s obvious. But payments were made on account of this debt. So we go back to the law of presumptions. If the creditor receives a payment and the payment is on account of a particular debt due from a particular debtor, then it is discharged to the extent of the payment — regardless of the stated “intent” of the payor after the fact. So servicer advances definitely fall into that category. But in addition, if the entire debt has been discharged by the replacement of the obligation with another obligation from another party, then you have similar issues.

So first of all, the beneficiaries agreed to take payments from the REMIC Trust — not the “borrowers”. There is no relationship between the beneficiaries of a trust and any single “borrower” or group of “borrowers.” The REMIC Trust doesn’t pay the beneficiaries despite the paperwork to the contrary. The REMIC Trust is inactive with no assets, bank accounts, business activity etc.

It is the Master Servicer that pays the beneficiaries. And the Master Servicer makes those payments regardless of whether it has received payments from the beneficiaries. (servicer advances). The note and mortgage name a specific payee that is neither the Trust (or Trustee) nor the Master Servicer. So the first real legal question that I raised back in 2007 was the issue of who was the owner of the debt or the holder in due course?

The debt arose when the “borrower” accepted the benefits of funding that came from an unidentified source. It is presumed not to be a gift. The “borrower” has signed a note and mortgage in favor of a party that never loaned him any money — hence there is no loan contract and the signed note and mortgage should have been destroyed or released back to the “borrower.” Such a loan is table-funded and is almost certainly “predatory per se” as described in REG Z.

Since there is no privity between the “originator” and the Trust or Master Servicer the loan documents cannot be said to be useful, much less enforceable. Those documents should be considered void, not voidable, when the payee and mortgagee failed to fund the loan. The repeated transfers of the loan documents without anyone ever paying for them clearly means that the consideration at the base “closing” was absent. Hence there is no consideration at either the origination or acquisition of the loan documents. Acquisition of the loan documents does not mean acquisition of the loan. If there was no valid loan contract or there is no valid loan contract (rescission) executing endorsements, assignments and powers of attorney are meaningless.

So there is a serious question about whether there is a legal creditor involved in any of these loans. There are parties with equitable and legal claims, but not with respect to the loan documents that should have been shredded at the very beginning. All those claims are unsecured. And the foreclosures, in truth, are for the benefit of parties who have no relationship with the actual money that was used to the benefit of the alleged “borrower” who is looking more and more like a party who is not a borrower but who could be debtor if there is anyone answering to the description of “creditor.” No party in this scenario seems to answer to that description.

And THAT would explain why NO PARTY steps forward to challenge rescissions as a creditor and instead they attempt to retain their status of having apparent “Standing” and attack the rescission through arguments that require the court to interpret the TILA Rescission Statute, 15 USC §1635. But the US Supreme Court has already declared that it is the law of the land that this statute is not subject to interpretation by the courts because it is clear on its face. So such parties are seeking relief they didn’t ask for (vacating the rescission) using the void note and void mortgage as their basis for standing.

Thus without someone filing an equitable claim showing that their money is tied up in the money given to the “borrower” there does not seem to be a creditor at law.

Add that to the fact that most of the “Trusts” were resecuritized by more empty trusts and you have the original beneficiaries completely out of the picture as to any particular loan and the so-called REMIC Trust being completely out of the picture with respect to the loan or loan documents that were originated, even if they were not consummated.

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