What Works and What Doesn’t

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Note that the courts try to calls balls and strikes not decide, at least on appeal, who should win and then give an opinion that fits. It doesn’t always work that way but many courts do follow that simple rule of blind justice.

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WORKS: Objection to qualified witness status, no records from the actual claimant, failure to establish entitlement to enforce before foreclosure was started.

We address the third issue on certiorari first. We hold that the ICA erred by concluding the declaration of Richard Work (“Work”), the Contract Management Coordinator of Ocwen Loan Servicing, LLC (“Ocwen”), rendered him a “qualified witness” under State v. Fitzwater, 122 Hawai􏰀i 354, 227 P.3d 520 (2010)

for U.S. Bank’s records under the Hawai‘i Rules of Evidence (“HRE”) Rule 803(b)(6) hearsay exception for records of regularly conducted activity. In addition, U.S. Bank failed to establish that it was a holder entitled to enforce the note at the time the foreclosure complaint was filed. See Bank of America, N.A. v. Reyes-Toledo, 139 Hawai􏰀i 361, 370-71, 390 P.3d 1248, 1257-58 (2017).

DOESN’T WORK: “Robosigning” assertion without proof that attacks the foundation of the document, BUT:

With respect to the first issue on certiorari, because it
is unclear what Defendants mean by “robo-signing” and because a
ruling on the legal effect of “robo-signing” is not necessary to

conclusory assertions that fail to offer factual allegations or a legal theory indicating how alleged “robo- signing” caused harm to a mortgagee are insufficient to establish a defense in a foreclosure action. Addressing the factual allegations underlying the “robo-signing” claim, however, we conclude there is a genuine issue of material fact as to whether Ocwen had the authority to sign the second assignment of mortgage to U.S. Bank. (e.s.)

BEST PRACTICES. Objections must be made timely and with some specificity. You should also be prepared to argue why the objections apply. Payment records will come in evidence not only of the record of payments but also as to anything else shown on the records. Objection to such records, once they have already been introduced or even accepted into evidence, is basically futile, although they could conceivably be later undermined and even potentially struck from the record on cross examination.

If you have a pretrial court order that requires disclosure of all exhibits and expressly states that the parties must state their objections to the proposed exhibits, you must file a notice of such objections. It is wise to state as many grounds as possible for the objection and cite to specific rules of evidence in your jurisdiction.

This is not a legal opinion. Get a lawyer before you act on anything contained in this article.

Ocwen Boarding Process Was Shot Down Last Year

As foreclosure defense lawyers have been saying for years, the Ocwen Boarding process is a sham. “This boarding process is a legal fiction, and it means something different to every entity,” Butchko ruled from the bench during a March 17 hearing.

Ocwen does not verify any of the data. It downloads it and then “calls it a day.”

“I have done this investigation for a long time,” he said, noting, “The appellate courts are going under this presumption that there is some type of meaningful auditing and verification.” But Jacobs maintained, “You just heard it from a lawyer who knows how to properly phrase the questions that she’s basically testifying to all — all of this is still hearsay.

”Butchko granted an involuntary dismissal in HSBC Bank USA’s suit against Miami homeowner Joseph Buset, whose loan was initially serviced by Litton Loan Servicing LP, which Ocwen acquired in 2011.

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See Home Foreclosure Fails on OCwen Servicing Records

Bruce Jacobs, a Foreclosure defense lawyer won this case. It was in 2016 and was, as usual, under-reported. The case hinged on the prior records of Litton Loan Servicing that Ocwen had acquired. The robo-witness could only testify that Ocwen employees had matched fields and columns on the payment history and had done nothing else. Hence verification was nonexistent.

[Judge] Butchko had to decide how to treat loan documents that became part of Ocwen’s business records but remained subject to hearsay objections unless the company could show it independently verified the data after transferring the loans. She considered evidence on Ocwen’s boarding process — the procedure by which financial services companies transfer account data from one lenders’ management system to another after trading loan portfolios.

Witnesses for lenders in foreclosure cases must show they did independent fact-checking to qualify their files as business records and not hearsay.

All records in  digital or hard copy are hearsay by definition. The only issue is whether a proper foundation has been offered by the robo-witness to claim that the “documents” qualify as an exception to the hearsay rule and that therefore they should be admitted into evidence. This case on Ocwen clearly shows that the testimony by dozens of Ocwen robo-witnesses has been false.

Based upon information I have received from credible sources I think the problem is worse than that. My sources tell me that the records are not uploaded or transferred. The only thing that happens is that the user name and password is changed. That is why the records of the prior servicer are NEVER introduced. It may be that Ocwen changes the fields and columns to make it appear that the records have been processed, but based upon my information the Ocwen records are often taken from the same database. That being the case, the robo-witness should have been an employee of the former Litton servicing.

 

 

STANDING: Fla. 4th DCA Rules PSA Hearsay and Therefore Not Admissible — Case Dismissed

The Pooling and Servicing Agreement MIGHT be self-authenticating under F.S. 90.902 but still inadmissible as hearsay. Thus the PSA is NOT a substitute for evidence of an actual transfer of the loan to a purported REMIC trust.

PLUS: PRESUMPTION OF STANDING DOES NOT APPLY IF THE NOTE AT TRIAL IS DIFFERENT FROM THE NOTE ATTACHED TO THE FORECLOSURE COMPLAINT. “The note attached to the complaint was not in the same condition as the original produced at trial.”

NO PRESUMPTION: “where the copy [attached to the complaint] differs from the original, the copy could have been made at a significantly earlier time and does not carry the same inference of possession at the filing of the complaint.”

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See Fla 4th DCA Case PSA Hearsay and Diffferent Note
Friedle v BONY as successor in interest to JPM Chase, as Trustee
“the PSA purportedly establishes a trust of pooled mortgages.[e.s.].. [this] particular mortgage  was not referenced in the documents filed with the SEC … [the Plaintiff] did not present sufficient evidence through its witness to admit this unsigned document [e.s.] as its business record. While the witness testified that a mortgage loan schedule, which listed the subject mortgage, was part of the Bank’s business records, the mortgage loan schedule itself does not purport to show that the actual loan was physically transferred.” [e.s.]
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Here we have a court openly questioning whether claims of securitization are real or false. But they limit their opinion to the specific defects that arise from fatally defective evidence. And THAT is the way to win — i.e., to successfully defend an attempt at foreclosure.
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Those who follow my work here know that I have long said that the Trusts are empty and that the use of the name of the Trust is a fraud upon the court, since the Trust does not exist and the Trustee has no apparent or actual authority over any loans. If the Trustee has not received a particular loan to hold in trust, there is no trust — at least not as to that particular loan.
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You may also recall that I have repeatedly said starting in 2007, that there is no evidence that the notes exist after the alleged loan closings. As Katherine Ann Porter found when she did her study at the University of Iowa, the original notes were destroyed. Hence it has been my opinion that the “original” notes had to be fabricated and forged. Porter is the same Katie Porter who is now running for Congress in California. She wants to hold the banks accountable for their fraud.
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Interestingly enough the trial judge in this case was the same Senior Judge (Kathleen Ireland) as in a case I won with Patrick Giunta back in 2014 in which she said on record that the evidence was not real and dismissed the foreclosure case in that instance. Here she received the PSA as a self authenticating document. While I think that point is arguable, this case turns on the hearsay objection timely made by counsel for the homeowner. The point that has been missed and is missed across the country is that just because a document is authenticated — by any means — does not mean it is admissible into evidence. It is not admissible in evidence if it is excluded by other rules of evidence.
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The words on the PSA introduced at trial were plainly hearsay — just as the words in any document are hearsay. Apparently, as I have seen in other cases, the document as also unsigned. The words on the PSA are not admissible unless there is a qualifying exception to the hearsay rule. As such the appellate court ruled that the PSA had to be excluded from evidence. Since the Plaintiff was attempting to foreclose based upon authority granted in the PSA, Plaintiff was left standing naked in the wind because for purposes of this case, there was no PSA and therefore no authority.
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Plaintiff tried to make a case for the business records exclusion. But that cornered them.

In this case, the foreclosing bank’s witness could not testify that the Bank had possession of the note prior to filing the complaint. The Bank conceded that it presented no testimony that its present servicer or its prior servicer had possession of the note at the inception of the foreclosure action.

And at trial, Plaintiff attempted to prove possession by introduction of the PSA. Without possession there is no legal standing.

The Bank did not present sufficient evidence through its witness to admit this unsigned document as its business record.

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And there is the problem. The “servicer” (who also derives its purported authority ultimately from the PSA) cannot claim that the PSA is part of its business records without opening a door that the banks want to avoid. Even if the “servicer” had a copy of the PSA it could not state that this was a business record of the servicer nor that it was a copy of the original. If they did say that, then they would be opening the door for discovery, so far denied in most instances, into who gave the “servicer” the copy and why. it would also open up discovery into the business records of the trust, which would reveal a “hologram of an empty paper bag” as I put it 10 years ago.

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No PSA, no trust, = no plaintiff or beneficiary. Note that the testimony from the robo-witness employed by the subservicer scrupulously avoids saying that the “business records” are the records of the Plaintiff. That is implied but never stated because they are not business records of the Plaintiff Trust. That trust has no business, no assets and no existence as to any loan. The trust has no business records. That implication  should be attacked in cross examination. The foreclosing party will attempt to use circular reasoning to defeat your attack. But in the end they are relying upon the PSA which must be excluded from evidence.

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Lastly, this decision corroborates another thing I have been saying for years — that even minor changes on the face of an original instrument must be explained and reconciled. There is nothing wrong with putting annotations on the face of a note but you do so at your own risk. Whatever you have written or stamped on the note is an alteration. That doesn’t invalidate the note; but in order for the note to be received in evidence as proving the debt, the markings or alterations must be explained and reconciled by a witness with personal knowledge. None of the robo-witnesses have sufficient knowledge (or room in their memorized script) to explain all the markings.

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The mistake made by trial lawyers for homeowners is the failure to make a timely objection. The appellate court specifically addresses this in a footnote as it reconciles this opinion which is vastly different from its other opinions:

1 We have held in past cases that the PSA together with a mortgage loan schedule are sufficient to prove standing, but in those cases the witness offering the evidence appears to have been able to testify to the relationship of the various documents and their workings, or that the documents were admitted into evidence without objection. See, e.g., Boulous v. U.S. Bank Nat’l Ass’n., 210 So. 3d 691 (Fla. 4th DCA 2016).

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The court is pointing defense lawyers in the right direction without actually giving legal advice. They are saying that had cross examination been more proficient and a timely objection made they would have ruled this before. That may or may not be true. But the point is that they have now issued this ruling and it is law in the 4th DCA of Florida.

PRACTICE NOTE: I think the objections in this case could have been any or all of the following:
  1. OBJECTION! From the face-off the document there are no identifying stamps or marks that could be used to authenticate the PSA. Hence the document is not self-authenticating.
  2. OBJECTION! The document is unsigned, Hence the document is irrelevant.
  3. OBJECTION! The unsigned copy of a document is not the best evidence of the PSA as a trust instrument, if indeed one exists. 
  4. OBJECTION! Lack of foundation. If the Plaintiff is attempting to use the document anyway, counsel must elicit testimony and documents that provide an alternate foundation for admission of the PSA and an alternate foundation for authority that, so far, they claim arises from the PSA that cannot be admitted into evidence.
  5. OBJECTION! Hearsay! The document is and contains hearsay. There is no foundation for any exception to hearsay.

If the objection(s) is sustained, this should be followed by a Motion to Strike the testimony of the witness and all documents introduced as evidence except for his name and address. If you don’t do this your objection is sustained but the offending testimony and documents stay in the court record.

A Document labeled “Assignment of Mortgage” Does Not Prove the Sale of the “Loan”

Too many lawyers and pro se litigants look at the title to a document and don’t know what else to do with it. They accept as true that a document is what is stated. That is one of the many trapdoors the banks have laid for us.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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The “title” to a document is a statement of fact that may or may not be true. The title used is for the convenience of the party who drafted it. In our analysis we do not assume or accept that any  document is what is stated as the title or anywhere else in the document.
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The fact that a document is entitled “Assignment of Mortgage” does not mean that in reality there is either a valid mortgage or that a valid debt, note or mortgage was sold in any transaction.
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Nor does the existence of the document mean that the signatures are authentic and authorized or even that the named entities or signatories actually exist as legal “‘persons.'”
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The admission of such a document into evidence normally proves only that the document exists. While the existence of the document might raise assumptions or even legal presumptions, the document itself is not proof of any statements of fact or issues referred to in the wording of the document.
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Such statements would normally be regarded or should be regarded as hearsay and excluded from evidence unless someone with personal knowledge, under oath, had personal knowledge for their five sense and recalled events that were tied to the execution of the document.
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Objections must be timely raised or the objection is waived. Hence, if opposing counsel refers to wording in the document, that wording is hearsay but must be barred by (a) an objection at the moment the wording is the subject of a question to a witness and (b) the court sustaining the objection in the absence of a proper foundation for the admission of what is or ought to be recognized as excluded hearsay evidence.

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Falling Into the Traps Set By the Banks

For the past 15 years there has been a huge chasm between what a document says and what actually occurred. In foreclosure settings, the conscious decision has been made to ignore the Truth and proceed on the falsehoods promulgated by the banks. This arises from the “national security” fear that if the banks are not allowed to continue their fraudulent behavior, the entire financial system will collapse taking the entire society down with it. This myth is promulgated by the Banks, who supply the government with people to regulate the banks. Even as a theory it is untested, and unsupported by any real evidence. Unfortunately for Americans, too many people believe it.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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We are constantly analyzing the documentation that is produced by the banks or their surrogates. But we are failing our clients when we say that something actually occurred just because a piece of paper says it occurred.
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“Prepared by” is just a hearsay statement that the document was prepared by the entity identified after those words. It does not mean that the document was in fact prepared by that entity — usually a title or closing agent — nor does it necessarily mean that the identified entity actually even handled the document.
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Too often, and virtually the rule, is that facially valid documents are telling the truth about what occurred. In the present context of “lending” the facially valid documents relied upon by foreclosing parties are usually fabricated, forged, robosigned and prepared by entities who create and maintain the records upon which the foreclosure proceeds — separate and apart from the alleged “Trust” or other “owner” and separate and apart from the party identified as the servicer but who actually do nothing except lend its name for use in a foreclosure.
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We don’t want to be saying (and therefore admitting) that the title or closing agent DID prepare the document — but rather admit the obvious: that the document says that they prepared it. It is the same with other documents.
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We don’t want to say that an assignment was made; in our reports we say that the document labeled “assignment” says there was an assignment. It is easy to fall into the trap of assuming that basic references are truthful when in fact they are not. We do a disservice to our customers if we submit a report that plays right into the hands of the banks. It also misdirects the lawyer or pro se litigant into failing to object to the references within a facially valid document because then those defenses are probably waived.
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But looking at the “prepared by” and “return to” instructions on an instrument may give you another lead to a witness who is unwilling to lie about the the alleged transaction.
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The closing agent or escrow agent may be willing to state that they received money, as they were instructed, and that they dispersed the money as instructed. They might be willing to admit that they did not prepare the documents but rather received them from a source that also might not have prepared them. And they might be willing to admit that they have no knowledge of from whence the money came for the alleged “closing.” Thus their testimony could be that they can provide no foundation to the assertion that a loan was made by the named mortgagee or beneficiary.
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A facially valid document, particularly if it is recorded in the public records, normally carries with it a presumption of truthfulness unless there is evidence to suggest that the document was fabricated, forged, robosigned or that there are other indications that the document is just a self-serving fabrication. But the admission of such a document into evidence should be the start of the argument not the end.
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Once the document is admitted into evidence, hopefully over the timely objection of foreclosure defense counsel (lack of foundation), the statements within the documents are hearsay unless the hearsay objection is waived. Those statements, without foundation testimony cannot be used as foundation for other testimony about the authority of the “servicer”, the “trustee,” or anyone else posing as owner or servicer of the DEBT.
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A simplified example: A warranty deed executed by John Doe, executed with the formalities required by statute is a facially valid instrument. The recipient Jane Roe received title ownership of the property according to the provisions stated on the face of the deed. If the deed is then recorded in the County records, it establishes notice to all the world that Jane Roe is the owner of the property described in the deed.
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But if John Doe never owned the property then the deed conveys nothing. It is a wild deed. It can be ignored by the world and everyone else. It can be removed from chain of title generally by a quiet title action (lawsuit in local jurisdiction) or simply an affidavit saying that John Doe mistakenly executed the deed describing the wrong property or whatever situation arose to cause the recording of a false deed in the chain of title to someone else’s property.
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But if Jane Roe insists that she does own the property described in the false deed and acts on that assertion, that is where things get messy. If Jane Roe files a quiet title or other lawsuit and presents the facially valid warranty deed from John Doe, the deed will be admitted into evidence, probably over the objections of the real property owner. It is admitted to prove only that the document exists in the county records and NOT to prove that the truthfulness of representations on the deed (“Grantor is full seized and owner of the property”), which is still the burden of proof for Jane Roe. There is also generally a representation as to the payment of good and valuable consideration, which we will presume Jane Roe never paid and obviously can’t prove. And THAT is where Jane Roe’s case should fail.
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The mistake made by pro se litigants and lawyers defending foreclosures is that they don’t go back to these basics. The original note and mortgage may indeed have been signed by the present homeowner. But the representations concerning payment of good and valuable consideration by the party named as mortgagee (or beneficiary under the deed of trust) are untrue as to most of the original “transactions” and therefore all succeeding documentation purporting to “sell’ grant bargain and deed” the note and mortgage to another party. Even where the originator does fund the initial “loan” (a small minority of originated documentation) the assignments are mysteriously missing any actual payment and therefore there can be no proof of payment of good and valuable consideration.
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In plain language, the fact that the homeowner owes SOMEBODY doesn’t mean that they owe just ANYBODY.
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For the past 15 years there has been a huge chasm between what a document says and what actually occurred. In foreclosure settings, the conscious decision has been made to ignore the Truth and proceed on the falsehoods promulgated by the banks. This arises from the “national security” fear that if the banks are not allowed to continue their fraudulent behavior, the entire financial system will collapse taking the entire society down with it. This myth is promulgated by the Banks, who supply the government with people to regulate the banks. Even as a theory it is untested, and unsupported by any real evidence.
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It is this policy of presumptive national security that has sacrificed the lives of 20 million people thus far.
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Questionable Documents: Investigation and Discovery Required
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NOTE: Analytical reports on title or securitization are not evidence without foundation testimony and/or affidavit, as the court permits. Our analytic summaries represent our observation and opinion as to issues regarding Chain of Title, Authenticity, Forgery, Fabrication or Robo-signing. Actions to be considered include sending a Qualified Written Request (QWR) under RESPA, Debt Validation Letter (DVL) under FDCPA, letters/complaints to State Attorney General and Consumer Financial Protections Board, and legal claims and defenses as to Legal Standing.

Banks Changing the Laws of Evidence

The arrogance of the banks is subsumed in the decisions of courts. That the writer of an instrument would attempt to literally write language into an instrument that contradicts the laws of evidence is arrogant; but the fact that judges are accepting it because it appears in black and white, is abdication of the judicial function.

“That is exactly what has been happening, and it is getting even worse. The servicer lawyers are not submitting any evidence at all or responding to homeowner objections and the court is taking statements of counsel as presumptively conclusive.” — Dan Edstrom, Senior Forensic Analyst

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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From Bill Paatalo, who continues his unending analysis to corroborate the narrative that the banks and servicers are defrauding investors, homeowners and the courts.
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The offending language directly contradicts the hearsay and best evidence rule when applied to homeowners who are not party to the instrument and are even barred from introducing elements of the trust instrument (Pooling and Servicing Agreement) to support their trial objections and cross examination of robo-witnesses. Provisions like the one quoted below are used extensively to allow complete strangers to intervene while brandishing only a photocopy of unknown origin and authenticity.
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Note that this Agreement merely specifies that the parties intend to do something — not that the loans are hereby conveyed, transferred, assigned or endorsed. This is because the loans do not yet exist.
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Note also that the the first signature page of the document is signed by someone purporting to be from WAMU but no signature is shown for Countrywide. This is corroboration that incomplete and partial documents are field regularly with the SEC without review. The second signature page, which could have been attached at any time, is the reverse.
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Note also the reference to the MLS (Mortgage Loan Schedule). I have seen no MLS that conforms to this language even though the documents usually specify all the elements contained in these definitions. On Exhibit 12, entitled Mortgage Loan Schedule, there is nothing listed. Sometimes we see a reference to a third party who keeps a “binder” containing the MLS. IN no case that I have seen, has an original filing with the SEC ever contained a Mortgage Loan Schedule — except where the prospectus contains an acknowledgement that the MLS is false and is shown only by way of example what the MLS should look like.
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Here is what Bill Paatalo wrote:
Here’s that lovely language again. What is also interesting is Section 6.04 states that the MERS ID must be changed to investor “1003646” and this belongs to BofA as Trustee/Custodian for WaMu/WMMSC (attached.) I’ve never seen this ID, nor have I ever seen assignments to WMMSC as contemplated in this agreement.
SECTION 28. Reproduction of Documents.
This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications which may hereafter be executed, (b) documents received by any party at the closing, and (c) financial statements, certificates and other information previously or hereafter furnished, may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process.   The parties agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

— Bill Paatalo

Oregon Private Investigator – PSID#49411

BP Investigative Agency, LLC
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Absarokee, MT 59001
Office: (406) 328-4075

FAMILIARITY IS BREEDING CONTEMPT IN THE COURTS

Business Records Exception On Shaky Ground: The main point is foundation: the affidavit or testimony by the robo-witness must show that the company he works for is in fact the servicer of the loan, as authorized by the owner of the debt, and that he/she has actual knowledge of the procedures and posting policies of the servicer and the owner of the debt. I would add that this “corporate representative” must show that he/she and the “servicer” is authorized to speak for, and thus appear for the foreclosing party.

see http://www.newyorklawjournal.com/home/id=1202770275522/Casting-Doubt-on-Validity-of-Servicer-Affidavits-in-Foreclosure-Litigation?mcode=1202615326010&curindex=0&slreturn=20160925141040

Hearsay is always excluded from evidence — at least when it is ruled as hearsay. A document is hearsay in nearly all instances and thus may not be introduced into evidence — unless it satisfies the elements of a exception to the hearsay rule of exclusion.

In foreclosures the main hearsay event arises from the fact that no creditor appears in court. It is virtually always a company that claims to be a servicer for the owner of the debt, but the situation is nearly always opaque as to the identity of the owner of the debt who they say authorized them as servicer.

The typical testimony from a robo-witness, on leading questions from the attorney, is that he/she is familiar with the the record keeping process and policies of the servicer and that the letter, or payment history sought to be introduced into evidence was produced in the ordinary course of business from records kept in the ordinary course of business based upon entries made at or near the time of an actual event. Of course, with most of such documents there is no “event” and that is a problem for banks and servicers.

New York seems to be leading the way on the issue of whether these documents are trustworthy exceptions to the hearsay rule of exclusion. See the above link.

Judges in New York now know they will be reversed unless there is clear and competent evidence that the witness can attest from their own personal knowledge using one or more of their five senses — i.e., that they have seen and heard and followed the process of making and keeping records and that they had access to the records showing that the “servicer” was authorized to act as such.

The reason why banks have shifted from the old tried and true practice of sending a representative of the alleged owner of the debt to court is that such a person knows too much and would either be required to perjure themselves or tell the truth, to wit: that the company he/she works for is not the owner of the debt and he/she has no idea who is the owner. Such a person would be forced to admit either ignorance of any transaction in which their employer purchased the loan or that the loan was not in fact purchased by his/her employer.

Such an admission would completely obliterate the claim of the company claiming to be a servicer on behalf of the owner of the debt. This in turn would eliminate the business records exception to the hearsay rule of exclusion. We could go deeper into the number of IT platforms that are maintained and by whom they are maintained and whether the “servicer” even has access to the actual records, but it seems potentially unnecessary with decisions coming from appellate courts who are worried about opening the door on hearsay in millions of other cases unrelated to foreclosure.

Those courts are rapidly retreating from the temporary imposition of an extended exception to the hearsay rule because they can readily see how justice would not be served in criminal and civil matters if the rule remains as loose as it is now.

It is much better for the banks to send someone who knows nothing and therefore cannot accidentally or otherwise tell the truth about these bogus loans and fraudulent foreclosures. The banks are in essence throwing the servicers under the bus, along with the attorneys hired by the servicers. But the walls are caving in on them and they will soon need to put up or shut up — producing a real witness with real (not presumed) knowledge or take a voluntary dismissal. As we have seen in thousands of cases, when presented with that choice the banks voluntarily dismiss their actions even when it means they must pay attorney fees to the homeowner.

The obvious conclusion is that there is no such witness and the facts asserted by the foreclosing party are pure fiction, reliant entirely upon illusion and the erroneous application of legal presumptions.

From the article cited above:

“Lenders will need to find ways in which to meet the new requirements imposed in order to satisfy the business records exception to the hearsay rule announced in decisions such as Royal. For instance, lenders may seek to avoid altogether obtaining affidavits from third-party loan servicers, and instead use representatives of the lender, who can attest to their familiarity with the lender’s record-keeping practices and procedures, in order to submit affidavits and documents to the court.

 
Alternatively, if lenders continue to insist, even after Royal and the other decisions of the Second Department discussed above, to use affidavits from third-party loan servicers in mortgage foreclosure litigation, then the best practice will be to have loan servicers (as opposed to lenders) be the party to act as the plaintiff in the foreclosure litigation. So long as the loan servicer is authorized to do so by the lender, courts have found that loan servicers have standing to present claims for foreclosure and sale on behalf of the lender that owns and holds the note and mortgage at the time of the commencement of the action. See, e.g., Flushing Preferred Funding Corp. v. Patricola Realty Corp., 964 N.Y.S.2d 58 (Sup. Ct. Suffolk Co. 2012).”

Hunter vs Aurora: Fla 1st DCA Business Records Gets Tougher

Show me any other period in American history where banks lost so many cases.
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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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see http://caselaw.findlaw.com/fl-district-court-of-appeal/1664754.html

The heat on the banks has been steadily increasing for the last three years and has increased at an increasing rate during the past 18 months. More and more banks are losing in what the bank lawyers call a “Simple, standard foreclosure action.” Show me any other period in American history where banks lost so many cases. There is obviously nothing simple and nothing standard about these foreclosures that have caused ruination of some 25 million people living in around 9 million homes.

If things were simple, we wouldn’t be looking at musical chairs in servicing, plaintiffs and “holders.” If things were standard, the creditor would come forth with clear proof that it paid for this loan. Nobody I know has EVER seen that. I have written about why. Suffice it to say, if there was a real creditor who could come forward and end the argument, they would have done so.

Two years ago the Hunter case was decided. The court was presented with a panoply of the usual smoke and mirrors. The court took on the issue of the business records exception as a guide to the trial judges in the 1st District and to the trial lawyers who defend homeowners in foreclosure. This is a sample of the part of the analysis we do. Here are some quotes and comments from the case:

Aurora alleged in its “Complaint to Foreclose Mortgage and to Enforce Lost Loan Documents” that it owned and held the promissory note and the mortgage, [note that the allegation is never made that Aurora was the owner of the debt or was the lender. Why not? Who is the actual creditor?]
 *
original owner of the note and mortgage was MortgageIT, and that MortgageIT subsequently assigned both to Aurora. A letter dated January 27, 2007, from Aurora to Mr. Hunter entitled, “Notice of Assignment, Sale, or Transfer of Servicing Rights,” directed him to remit mortgage payments to Aurora beginning February 1, 2007. The “Corporate Assignment of Mortgage” executed on June 11, 2007, and recorded on January 8, 2008, showed MortgageIT as the assignor and Aurora as the assignee. [MortgageIT was a thinly capitalized originator/ broker who could not have made all the loans it originated. Hence the presumption should be that it didn’t loan money to Hunter. Logically it follows that it never owned the debt and should not have had its name on the note or the mortgage. Nor did the source of funds ever convey ownership to MortgageIT. So what value or validity is there in looking at an assignment or endorsement or even delivery from Mortgage IT? And given that behavior (see below) do we not have circumstances in which the paperwork is suspect? Should that be enough to withhold the statutory presumptions attendant to “holding” a note?]
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To establish that it held and had the right to enforce the note as of April 3, 2007, Aurora sought to put in evidence certain computer-generated records: one, a printout entitled “Account Balance Report” dated “1/30/2007,” indicating Mr. Hunter’s loan was sold to Lehman Brothers—of which Aurora is a subsidiary and for which Aurora services loans—and payment in full was received on “12/20/2006;” the second, a “consolidated notes log” printout dated “7/18/2007” indicating the physical note and mortgage were sent—it is not readily clear to whom—via two-day UPS on April 18, 2007. Neither document reflects that it was generated by MortgageIT. -[Interesting that Aurora is identified as a subsidiary of Lehman who was in bankruptcy in October of 2008. Aurora usually represents itself as a stand-alone company which is obviously not true. Equally obvious (see discussion above) is that the reason why Mortgage IT was not identified on the printout is that it had nothing to do with the actual loan money — neither payment of the loan as a lender nor payment for the loan from the homeowner. Mortgage IT, for all intents and purposes, in the real world, was never part of this deal.]

Section 90.803(6) provides one such exception for business records, if the necessary foundation is established:

A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinion, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity and if it was the regular practice of that business activity to make such memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, or as shown by a certification or declaration that complies with paragraph (c) and s. 90.902(11), unless the sources of information or other circumstances show lack of trustworthiness. (e.s.) – [THIS is the point of my article. Under current circumstances both in the Hunter case and in the public domain the court should have considered the fact that the parties were well known to have fabricated, forged and otherwise misrepresented documents, together with outright lying about the existence of underlying transactions that would track the paperwork upon which courts have heaping one presumption after another. My argument is that Aurora should not have been given the benefit of the doubt (i.e. a presumption) but rather should have been required to prove each part of its case. My further argument is that virtually none of the foreclosure cases should allow for presumptions in evidence after the massive and continuing settlements for fraud relating to these residential mortgages. If this doesn’t show lack of trustworthiness, then what would?]

— If you want this kind of analysis done on your case —
See a description of our services  click here: https://wordpress.com/post/livinglies.wordpress.com/32498
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Another Sham: The Sudden Rise of Powers of Attorney in Foreclosure Cases

The entire foreclosure mess has been predicated upon one huge false premise — that by fabricating reams of paper, each one tied to the other or apparently tied to others, rights are suddenly created where none existed. This has never been the law but it suddenly has become the underpinning of most decisions in favor of banks and servicers who are strangers to the transactions upon which they are making claims.

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration formhttps://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
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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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Just want to point out that the reason why they are using a Power of Attorney (POA) instead of a servicing agreement is that the servicing rights are retained by the Master Servicer and sometimes even the subservicer. While the POA might appear to grant full authority it is missing the servicing functions including accounting for borrower payments and payments to the “investor(s)”. Especially when you add the element of entries made at or near the time of the transaction. This is another reason why homeowners who are alleged borrowers should be able to look at those transactions and see if the “business record” is correct. Once again we come back to discovery as the essential time to bring this up.

All of this makes it impossible for the latest entity to legally receive an application for modification. When you scratch the surface and actually ask the question the answer is always the same — that the “corporate representative” of the latest entity in the game of musical chairs can neither offer nor accept any modification and in fact is there purely for the purpose of getting the foreclosure judgment and forced sale of the property — an event that puts a judges order and a court clerk’s certificate on top what is in actuality a pile of empty, worthless paper.
The inability and/or unwillingness of the Plaintiff or its newest “attorney in fact” to show the actual money trail and actual deposits and disbursements, is a key factor in showing that other documents upon which the  banks and servicing are relying (using legal presumptions to fake their way through the process) are now suspect and thus not deserving of the application of the legal presumptions that ordinarily would apply to facially valid or recorded documents.
Remember the newest entity supplying records is NOT the Plaintiff. Judges tend to treat them as though they w ere the Plaintiff. This element of distraction by the lawyers for the banks and servicers has served them well. The Judge treats the newest entity as the Plaintiff when in fact they are not alleged to be holder, owner or have any interest or authority at all. And for good measure let’s not forget that the newest entity has no authority and possesses no “business records” (as an exception tot he hearsay rules of evidence) if it claims authority from an entity that has no power to give such authority. The entire foreclosure mess has been predicated upon one huge false premise — that by fabricating reams of paper, each one tied to the other or apparently tied to others, rights are suddenly created where none existed. This has never been the law but it suddenly has become the underpinning of most decisions in favor of banks and servicers who are strangers to the transactions upon which they are making claims.
The bottom line is that the party charged with enforcement is not a servicer but rather an enforcer. As an enforcer and since they do not have all the rights, obligations etc of a Master Servicer or subservicer, can their business records still be admissible? If they are only the enforcer and they are relying upon their stringent audit of the business records, that sounds more like a fact witness or even an expert witness than a party who has actual authority to service the loan.

The issue becomes split. The new entity that is not a servicer and therefore not charged with servicing duties, should not be able to claim that it has authority to bring the action in the name of another entity. The servicer clearly could but the attorney in fact is really a material witness whose sole function is to testify about the business records. The assumption is made that as the successor to prior alleged servicers, they can claim a chain of custody. But a company that in actuality is there for e the sole purpose of getting “business” records” into evidence is a fact witness who deserves no more presumptive credibility than any other witness.

The “servicer” claim by way of a POA is therefore a sham.

Tackling the Business Records of the Servicers

FORENSIC ANALYSTS AND CPA’S

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WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
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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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One of the very contentious issues in foreclosure litigation is the question of hearsay and the business records exception to the hearsay rule. Business records are hearsay, there is no doubt about that. But they are usually allowed into evidence under the “business records” exception to the hearsay rule. The issue of business records heads right into the issue of moral hazard.
There are actually three entities present where the foreclosing  party would have you believe that there is only one party: (1) the true creditor, if there is one meeting the legal definition, (2) the holder of the note (usually the trust) and (3) the subservicer and its predecessors (actually a group of parties). The issue I present is whether the so-called records of the servicer can be attributed to the alleged holder and whether the alleged holder is actually representing a creditor.
The question is whether records showing transactions between the alleged borrower and the alleged servicer are sufficient. The question arises because the party who is asserted to the foreclosing party has a contractual relationship with the investors in the trust to make payments. These payments should be made by the Trust to the Investors derived from payments to the Trust from the servicer. The payments to the Investors are not conditioned upon payments to the Trust. Thus you have the following contractual relationships:
  1. REMIC Trust and Beneficiaries (investors)
  2. Master Servicer and Trust
  3. Master Servicer and subservicers
  4. “Borrowers” and payee on the note, and its legal successors — if there was consummation of the original loan. If not then between homeowners and investors whose money was used to fund the appearance of a loan transaction

The investors might be, as a group, called creditors — but the actual identification of those “creditors” might be incapable of determination because of the commingling of funds of investors from a multitude of Trusts and the failure to provide a clear money trail that shows the presence of one or more creditors in a specified “loan” transaction. We already know that the Trusts are never asserted to own the debt. They are alleged to be holders and not holders in due course. The trusts are “place-holders”. One thing appears certain — nobody is suggesting that the borrowers and the investors have any contractual relationship. I would suggest the homeowners and investors are the only parties who have a real relationship and that all others asserted by the banks are an illusion. This relationship between the investors and the “borrowers” is not in contract, but rather in equity.

There is a big difference between a certified fraud examiner and a CPA. The CPA would carry far more weight in my opinion. That is because the CPA would be testifying, using the rules on auditing of banks, and other “lenders”, about the absence of evidence upon which a presumption would arise that the loan in question was on the books of any entity as an asset. This would lend considerable support to discovery demands. Since we are saying that the chain of money and the chain of paper went off in two entirely different directions, who better to say that than a CPA with no stake in the outcome?

Then the forensic analyst comes and says that there are defects, forgeries etc — an opinion upon which the CPA could rely, in saying that auditing rules, in the face of such conclusions require examinations of the actual transactions, including proof of payment. Without that, the CPA would testify, the “business records” may not be business records at all (but rather a device to create the appearance of business records, and therefore overcome the hearsay objection). The dichotomy being that the subservicer is presenting “business records” of its own and prior companies but not the business records of the foreclosing party (i.e., usually the Trust). The presence of an actual default in the accounts of the investors is debatable at best.

If you talk to a CPA with an open mind, even if he/she doesn’t want to become an expert witness, they can explain it. The question is how do we know whether this loan is an asset of any person? And how can we know who is authorized to represent the owner of the asset without knowing the owner?

The CPA can also clear up another shroud. Can the records of a servicer (assuming it was authorized) actually be the entire records of the real creditor, who is another party?

The biggest obstacle to this is the mindset of borrowers and their attorneys. They can’t quite wrap their minds around the idea that there was no consummation, there was no loan (at least with the party who appears on the note). But the biggest hurdle in understanding all this is the totally unique concept that the homeowner received money and that from the start there was no party answering to the description of a creditor — unless we accept the premise that we don’t need to know that.

So the evidence question is how can we ever be sure that the records of a subservicer are representative of realities at the level of the Master Servicer, the higher level of the alleged Trust, or the highest level of the investors/ beneficiaries? Without business records of the Trust or the trust beneficiaries we only have  partial picture from a subservicer who generally has no direct knowledge or records about transactions with either the investors or the homeowners.

Hearsay: Those “Business Records” Are Not Really Admissible Into Evidence

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

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It is no surprise that the Banks are attempting to use business records instead of live testimony from witnesses with personal knowledge. That testimony might be laced with perjury exposure for both the witness and the attorney who is the proponent of the witness. So they are trying all sorts of arguments about “stringent audits” and “boarding process” from a corporate representative of a company that had nothing to do with the entries made into the records of any company. In fact, in most cases now, thanks to the shell game of switching servicers, trustees and other parties, the testimony from such a witness is hearsay on hearsay because they are talking about records produced at another company or organization.

An article published by P. Benjamin Zuckerman highlights the point:

The elements to prove that evidence is admissible under the business records exception are straightforward.  If the record (1) was made at or near the time of the event; (2) was made by or from information transmitted by a person with knowledge; (3) was kept in the ordinary course of a regularly conducted business activity; and (4) it was a regular practice of that business to make such a record, then it is a business record that may be admitted to prove the facts contained in the record.  All the elements must be established.

This all sounds simple enough, but as the Holt case demonstrates, it is necessary that someone with personal knowledge testify how the data was recorded, when it was recorded, by whom it was recorded (i.e., by a person with actual knowledge of what was being recorded), and whether it was done “at or near the time of the event” in conformity with the set procedures of the party (i.e., in the regular course of that company’s business).  As Holtmakes clear, relying upon the mere existence of records within a computer system renders it virtually impossible to meet the business records exception requirements.

see Beware: Those Business Records Might Not Be Admissible

see also MIchelle Stocker on Business Records Exception

All that said, if a proper and timely objection is not made, those records WILL come in and will be used to prove the truth of the matter asserted even if the matter asserted is false. Note that the above articles are written by lawyers who work for the big law firms that represent the banks.

SPS and the Chase Servicer Shell Game

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

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Many Judges have expressed their concern about the constant movement of servicers and trustees. They are asking why the servicer keeps changing and why the trustees are changing. And now they are asking for legal argument why the substitution of the only named Plaintiff is not an amendment to the Complaint which must specifically allege facts in support of the claim of the “new Plaintiff.” This is a result of the multifaceted fraudulent scheme where claims of securitization are unfounded and claims of debt are fictitious — in derogation of the rights of both investors on Wall Street and borrowers on main Street.

Taking an example from one case being litigated now, we have a fact pattern where WAMU was the “lender” in the purchase money mortgage. Chase steps in and refinances the loan. Long after these events and long after the “default” was declared by Chase, SPS is said to be the servicer, not Chase. This successor entity is thus the party whose corporate representative is brought to trial to testify. The witness admits to having no direct personal knowledge and has no job other than testifying. The witness has no knowledge nor employment history with Chase, WAMU or the Trust or Trustee (usually US BANK where Chase is involved). The borrower, despite encouragement to take more money on refinancing, elected only to get enough money to make repairs due to storm damage. They received $45,000 in this example.

This is an issue which is slowly dawning on me that could shake things up considerably. Whether we use it or not is a different story.

It might mean that the real loan was only $45k — in total. That would affect the collections on the loan, which could have paid off the actual loan in its entirety, as well as the validity of the declaration of default and the truth of the matters asserted in the judicial complaint or the notice of non-judicial default and notice of sale. Specifically the “reinstatement” figure or “redemption” figure might actually be a negative figure — money due from the parties stating that they are the creditors, which claim they can hardly deny since they are pursuing foreclosure.

LOAN #1 was with WAMU. WAMU according to the FDIC receiver had sold the loans into the secondary market for securitization. This was the purchase money mortgage. So at some point before the refinancing in LOAN#2 the purchase money loan was sold into the secondary market. Thus WAMU only had servicing rights — if the “purchaser” entered into an agreement for WAMU to service the loan. In the case where the loan is subject to securitization, the “purchaser” is a REMIC Trust. But it appears as though few, if any, of the REMIC Trusts ever achieved the status of the owner of the debt, holder in due course, or owner of the mortgage or note. While it is possible to start a lawsuit to collect on the note, that lawsuit can never be resolved in favor of the Plaintiff unless the maker of the note defaults.

LOAN#2 was with Chase. This was supposedly a refinancing. The loan closing documents show that WAMU was paid and WAMU issued the satisfaction of mortgage and did not return the old note cancelled.

WAMU usually retained servicing rights so it would be claimed that WAMU had every right to collect the money and issue the satisfaction. But the servicing rights only existed if LOAN#1 actually made it into a Trust. If not, the loan was NOT subject to the Pooling and Servicing Agreement. If WAMU — or Chase as successor or SPS as successor are actually the servicers, it MUST therefore be by virtue of some other document. That is why we are seeing some rather strange Powers of Attorney and other “enabling” documents appear out of nowhere in which the issues are further confused.

The borrowers received $45k which was for roof repairs from storm damage. So the borrowers did receive  $45k presumably from Chase, but not necessarily as we have already seen, where the originator, even if it was a big bank was using money from an illegally formed pool outside of the REMIC Trust that the investors thought was getting the money from the proceeds of sale of mortgage backed securities.

So the witness probably has absolutely no access to information and therefore no testimony about whether LOAN#1 got paid off. And in fact it is most likely that WAMU was either paid or not depending upon internal agreements with Chase. And the witness can only testify using hearsay about the preceding records of Chase, US Bank and WAMU. Several trial judges have refused to accept such testimony saying directly that the witness and the company represented by the witness are too far removed from the actual transactions to have any credibility as to the authenticity or accuracy of the business records of other entities and that the SPS records are simply an attempt to get around the hearsay rules without exposing the predecessors to direct discovery and questioning where the answers would either be embarrassing or perjury.

If WAMU was paid in the refinancing (proceeds from LOAN#2) the wrong party was paid and the debt still exists unless Chase can show that the real creditor was paid off. It is unlikely they can show that because it probably is not true. Chase was hiding the default status of loans, as we have seen in Matt Taibbi’s story in Rolling Stone. The reason was simple — the more it  looked like these Mortgage backed Securities were performing as expected, the more the investors were inclined to buy more mortgage bonds — and that is where the bulk of the money is for Chase.

By selling loans at 100 cents on the dollar (Par Value) when the true value might only have been 1/10th that amount, the profit was enormous and it all went to Chase (not the investors whose money was used to start the string of transactions in the first place).

The witness will not be able to say that WAMU was definitely paid, and if it was paid, whether the money was paid to the real creditor. This is probably a primary reason why SPS was inserted between Chase and the foreclosure proceedings. It is also why they are attempting to rely on the business records of SPS instead of the business records of Chase.

SPS is usually inserted AFTER all events have occurred relating to the debt, note, mortgage, “default,” and foreclosure. Using a witness from SPS is, on its face, allowing a witness with zero personal knowledge about anything to verify records of other companies whose records the witness has never seen.

This is done to camouflage the actual events — wherein the money from investors was stolen or diverted from its intended target (REMIC Trust) and then used to fund loans in the name of a naked nominee whose interest in the loan was only that of a vendor whose name was being rented to withhold disclosure of the real creditor, the compensation received, and the identity of all the real parties who were getting paid as a result of the “loan origination.”

This is a direct conflict with TILA, requiring that disclosure and Reg Z which states that such a loan is “predatory per se.” If the loan is predatory per se it might be “unclean hands” per se which would mean that the mortgage could never enforced even if the consideration was present.

Using the Best Evidence Rule As You Follow the Money

The Best Evidence Rule in Florida and Federal Courts Applied to Notes, Mortgages and Assignments

The problem with foreclosure litigation is that the homeowner is dealing with rebuttable presumptions about the testimony and the documents admitted into evidence. They are admitted into evidence because there is no timely objection from the homeowner or the foreclosure defense attorney.

The note, mortgage and assignment are presumed to be valid instruments if they conform to the requirements of law as to form and content. In that case they are facially valid. That means there is a rebuttable presumption that there was a valid underlying transaction. Therefore. as a matter of law, the paper presented is not just facially valid but also presumptive evidence that the transaction existed. This gets tricky in application and is one of the many reasons why lawyers should study up on courtroom procedures, evidence and objections.

On the note, the underlying transaction is the debt. The debt exists not because of the note, but because Party A put money into the hands of Party B who accepted it. The debt arises regardless of whether or not a note was executed. The note is evidence of the debt and it is presumptive evidence that there was an underlying transaction in the amount of the note. The underlying transaction is therefore the payee putting money into the hands of the homeowner, who is the payor.

On the mortgage, the underlying transaction is still the debt and the existence of the note, because a valid mortgage does not exist except if it is based upon an instrument in writing. The mortgage is not presumptive evidence of the existence of the underlying transaction (the actual loan of money from Party A to Party B). Under normal circumstances the existence of a properly executed mortgage would corroborate the evidence supplied by the note.

On the assignment, the underlying transaction is a payment of money from Assignee to the Assignor. The assignment itself might be accepted by the court as presumptive evidence that such an underlying transaction exists (in the absence of an objection). If a proper objection is raised, the presumption vanishes.

So what is a proper objection under these circumstances? Remember if you fail to raise the objection then the burden of proving the transaction did not happen falls on the homeowner. The objective here is to hold the bank’s feet to the fire and make them prove their case. And the reason for this is not to exercise your vocal chords. It is to show that the underlying transaction between the parties stated in the document proffered by the bank never took place. And the reason you are doing that is because those transactions in fact, never occurred.

The hearsay rule is an appropriate objection because the document is being used to establish the truth of the matter implied — i.e., that there was an underlying transaction. But the better objection,in my opinion, is that the existence of the underlying transaction be subject to (1) lack of foundation and (2) best evidence. They are related in this instance.

Under the rules of evidence, the note, mortgage and assignment are secondary documents that imply that a transaction took place but do not show facts to verify that the transaction actually occurred. Hence, the BEST EVIDENCE of the underlying transaction is the canceled check or wire transfer receipt showing the payment and implied acceptance of the money used to fund the loan or purchase the mortgage. Anything less than that is not admissible evidence — unless the objection is overlooked or waived. It would therefore be true that the debt from the homeowner allegedly owed to the payee on the note (and mortgage) or the assignee on the assignment is not supported by foundation in the usual circumstances.

Special note here: I have seen in reported cases that it DOES occur that litigants, including banks, have doctored up copies of wire transfer receipts. Thus any effort to introduce the copy would be met by your objection on the basis of best evidence and the argument, if applicable, that the failure to disclose the document prior to trial deprived you of your ability to confirm the authenticity of the document. Verification is possible but he banks, Federal reserve etc., will not make it easy on you so a court order will be helpful.

Normally the corporate representative of the servicer is the witness. It will usually be established on voir dire or cross examination that the witness neither had access to nor ever personally viewed any records of the actual transaction and in fact never even saw the secondary evidence (the note, mortgage and assignment) until a few days before trial. Thus no testimony will be elicited, in the ordinary course of things, that the transaction took place (i.e., an ACTUAL transaction in which money from the payee was loaned to the homeowner or money from the Assignee was paid to the Assignor). Hence no foundation exists for any testimony or any document that the debt exists or that the loan was actually sold for consideration and then assigned.

This is not a technical matter. If I agree to pay you $100 for your toaster oven, I can’t demand the appliance until I have paid it. If that was the agreement, then the underlying transaction is the payment of money. The evidence — the best evidence — of the payment is a canceled check or wire transfer receipt. The exceptions to the best evidence rule do not seem to apply and there is no adequate explanation for why anything other than direct primary evidence of the transaction itself should be admitted.

In searching the internet I found that a lawyer in West palm beach wrote a pretty good article on the subject although he was concentrating on the use of the best evidence rule in connection with duplicates. see http://www.avvo.com/legal-guides/ugc/what-is-the-best-evidence-rule-in-florida for the article by Mark R. Osherow, Esq.

Here are some excerpts from that article.

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The best evidence rule, set forth in Fla. R. Evid.’90.952 and Fed. Rules Evid. 1001, provides that, where a writing is offered in evidence, a copy or other secondary evidence of its content will not be received in place of the original document unless an adequate explanation is offered for the absence of the original. Fla. R. Evid. ‘90.9520-90.958; Fed. Rules Evid. 1002-1008….
Public records authentication is provided for by section 90.955 and Rule 1005. Under section 90.956 and Rule 1006 voluminous writings, recordings, or photographs which cannot be conveniently examined in court may be presented in the form of a chart, summary or calculation. Of course, admissibility of a summary depends upon the admissibility of the underlying documents. In order to use a summary, timely written notice is required with proof filed in court. Adverse parties must have sufficient time to investigate and inspect underlying records and summaries….
Fla. R. Evid. Section 90.957. Section 90.958 and Rule 1008 set forth the situations where the court determines admissibility and where the jury determines factual issues such as the existence of a document, its content, and the contents accuracy.
The best evidence rule arose during the days when a copy was usually made by a clerk or, worse, a party to the lawsuit. Courts generally assumed that, if the original was not produced, there was a good chance of either a scrivener’s error or fraud.
… there is always a danger of a party questioning a document, so it is important to remember that, unless you have a stipulation to the contrary, or your document fits one of the exceptions listed in the statute, you must be ready to produce originals of any documents involved in your case or to produce evidence of why you cannot.

Hearsay on Hearsay: Bank Professional Witnesses Using Business Records Exception as Shield from Truth

Wells Fargo Manual “Blueprint for Fraud”

Hat tip to my law partner, Danielle Kelley, Esq., for sending me the manual and the reports on it. Anyone desirous of a consultation on the application of what is on this blog, must either be a lawyer or have a lawyer who is licensed in the jurisdiction in which the property is located. For scheduling call 954-495-9867 (South Florida Office), 850-765-1236 (North Florida Office), and 520-405-1688 (Western United States). International callers: The same rules apply.

Well that didn’t take long. Like the revelations concerning Urban Lending Solutions and Bank of America, it is becoming increasingly apparent that the the intermediary banks were hell bent for foreclosure regardless of what was best for the investors or the borrowers. This included, fraud, fabrication, unauthorized documents and signatures, perjury and outright theft of money and identities. I understand the agreement between the Bush administration and the large banks. And I understand the reason why the Obama administration continued to honor the agreements reached between the Bush administration and the large banks. They didn’t have a clue. And they were relying on Wall Street to report on its own behavior. But I’m sure the agreement did not even contemplate the actual crimes committed. I think it is time for US attorneys and the Atty. Gen. of each state to revisit the issue of prosecution of the major Wall Street banks.

With the passage of time we have all had an opportunity to examine the theory of “too big to fail.” As applied, this theory has prevented prosecutions for criminal acts. But more importantly it is allowing and promoting those crimes to be covered up and new crimes to be committed in and out of the court system. A quick review of the current strategy utilized in foreclosure reveals that nearly all foreclosures are based on false assumptions, no facts,  and a blind desire for expediency that  sacrifices access to the courts and due process. The losers are the pension funds that mistakenly invested into this scheme and the borrowers who were used as pawns in a gargantuan Ponzi scheme that literally exceeded all the money in the world.

Let’s look at one of the fundamental strategies of the banks. Remember that the investment banks were merely intermediaries who were supposedly functioning as broker-dealers. As in any securities transaction, the investor places in order and is responsible for payment to the broker-dealer. The broker-dealer tenders payment to the seller. The seller either issues the securities (if it is an issuer) or delivers the securities. The bank takes the money from the investors and doesn’t deliver it to an issuer or seller, but instead uses the money for its own purposes, this is not merely breach of contract —  it is fraud.

And that is exactly what the investors, insurers, government guarantors and other parties have alleged in dozens of lawsuits and hundreds of claims. Large banks have avoided judgment based on these allegations by settling the cases and claims for hundreds of billions of dollars because that is only a fraction of the money they diverted from investors and continue to divert. This continued  diversion is accomplished, among other ways, through the process of foreclosure. I would argue that the lawsuits filed by government-sponsored entities are evidence of an administrative finding of fact that causes the burden of proof to be shifted to the cloud of participants who assert that they are part of a scheme of securitization when in fact they were part of a Ponzi scheme.

This cloud of participants is managed in part by LPS in Jacksonville. If you are really looking for the source of documentation and the choice of plaintiff or forecloser, this would be a good place to start. You will notice that in both judicial and non-judicial settings, there is a single party designated as the apparent creditor. But where the homeowner is proactive and brings suit against multiple entities each of whom have made a claim relating to the alleged loan, the banks stick with presenting a single witness who is “familiar with the business records.” That phrase has been specifically rejected in most jurisdictions as proving the personal knowledge necessary for a finding that the witness is competent to testify or to authenticate documents that will be introduced in evidence. Those records are hearsay and they lack the legal foundation for introduction and acceptance into evidence in the record.

So even where the lawsuit is initiated by “the cloud” and even where they allege that the plaintiff is the servicer and even where they allege that the plaintiff is a trust, the witness presented at trial is a professional witness hired by the servicer. Except for very recent cases, lawyers for the homeowner have ignored the issue of whether the professional witness is truly competent,  and especially why the court should even be listening to a professional witness from the servicer when it is hearing nothing from the creditor. The business records which are proffered to the court as being complete are nothing of the sort. They are documents prepared for trial which is specifically excluded from evidence under the hearsay rule and an exception to the business records exception. And the easy proof is that they are missing payments to the investor. That is why discovery should be aggressive.

Lately Chase has been dancing around these issues by first asserting that it is the owner of a loan by virtue of the merger with Washington Mutual. As the case progresses Chase admits that it is a servicer. Later they often state that the investor is Fannie Mae. This is an interesting assertion which depends upon complete ignorance by opposing counsel for the homeowner and the same ignorance on the part of the judge. Fannie Mae is not and never has been a lender. It is a guarantor, whose liability arises after the loss has been completely established following the foreclosure sale and liquidation to a third-party. It is also a master trustee for securitized trusts. To say that Fannie Mae is the owner of the alleged loan is most likely an admission that the originator never loaned any money and that therefore the note and mortgage are invalid. It is also intentional obfuscation of the rights of the investors and trusts.

The multiple positions of Chase is representative of most other cases regardless of the name used for the identification of the alleged plaintiff, who probably doesn’t even know the action exists. That is why I suggested some years ago that a challenge to the right to represent the alleged plaintiff would be both appropriate and desirable. The usual answer is that the attorney represents all interested parties. This cannot be true because there is an obvious conflict of interest between the servicer, the trust, the guarantor, the trustee, and the broker-dealer that so far has never been named. Lawsuits filed by trust beneficiaries, guarantors, FDIC and insurers demonstrate this conflict of interest with great clarity.

I wonder if you should point out that if Chase was the Servicer, how could they not know who they were paying? As Servicer their role was to collect payments and send them to the creditor. If the witness or nonexistent verifier was truly familiar with the records, the account would show a debit to the account for payment to Fannie Mae or the securitized trust that was the actual source of funds for either the origination or acquisition of loans. And why would they not have shown that?  The reason is that no such payment was made. If any payment was made it was to the investors in the trust that lies behind the Fannie Mae curtain.

And if the “investor” had in fact received loss sharing payment from the FDIC, insurance or other sources how would the witness have known about that? Of course they don’t know because they have nothing to do with observing the accounts of the actual creditor. And while I agree that only actual payments as opposed to hypothetical payments should be taken into account when computing the principal balance and applicable interest on the loan, the existence of terms and conditions that might allow or require those hypothetical payments are sufficient to guarantee the right to discovery as to whether or not they were paid or if the right to payment has already accrued.

I think the argument about personal knowledge of the witness can be strengthened. The witness is an employee of Chase — not WAMU and not Fannie Mae. The PAA is completely silent about  the loans. Most of the loans were subjected to securitization anyway so WAMU couldn’t have “owned” them at any point in the false trail of securitization. If Chase is alleging that Fannie Mae in the “investor” then you have a second reason to say that both the servicing rights and the right to payment of principal, interest or monthly payments in doubt as to the intermediary banks in the cloud. So her testimony was hearsay on hearsay without any recognizable exception. She didn’t say she was custodian of records for anyone. She didn’t say how she had personal knowledge of Chase records, and she made no effort to even suggest she had any personal knowledge of the records of Fannie and WAMU — which is exactly the point of your lawsuit or defense.

If the Defendant/Appellee’s argument were to be accepted, any one of several defendants could deny allegations made against all the defendants individually just by producing a professional witness who would submit self-serving sworn affidavits from only one of the defendants. The result would thus benefit some of the “represented parties” at the expense of others.

Their position is absurd and the court should not be used and abused in furtherance of what is at best a shady history of the loan. The homeowner challenges them to give her the accurate information concerning ownership and balance, failing which there was no basis for a claim of encumbrance against her property. The court, using improper reasoning and assumptions, essentially concludes that since someone was the “lender” the Plaintiff had no cause of action and could not prove her case even if she had a cause of action. If the trial court is affirmed, Pandora’s box will be opened using this pattern of court conduct and Judge rulings as precedent not only in foreclosure actions, disputes over all types of loans, but virtually all tort actions and most contract actions.

Specifically it will open up a new area of moral hazard that is already filled with debris, to wit: debt collectors will attempt to insert themselves in the collection of money that is actually due to an existing creditor who has not sold the debt to the collector. As long as the debt collector moves quickly, and the debtor is unsophisticated, the case with the debt collector will be settled at the expense of the actual creditor. This will lead to protracted litigation as to the authority of the debt collector and the liability of the debtor as well as the validity of any settlement.

New Mexico Supreme Court Wipes Out Bank of New York

bony-v-romero_nm-sup.ct.-reverses-with-instruction_2-14

There are a lot of things that could be analyzed in this case that was very recently decided (February 13, 2014). The main take away is that the New Mexico Supreme Court is demonstrating that the judicial system is turning a corner in approaching the credibility of the intermediaries who are pretending to be real parties in interest. I suggest that this case be studied carefully because their reasoning is extremely good and their wording is clear. Here are some of the salient quotes that I think it be used in motions and pleadings:

We hold that the Bank of New York did not establish its lawful standing in this case to file a home mortgage foreclosure action. We also hold that a borrower’s ability to repay a home mortgage loan is one of the “borrower’s circumstances” that lenders and courts must consider in determining compliance with the New Mexico Home Loan Protection Act, NMSA 1978, §§ 58-21A-1 to -14 (2003, as amended through 2009) (the HLPA), which prohibits home mortgage refinancing that does not provide a reasonable, tangible net benefit to the borrower. Finally, we hold that the HLPA is not preempted by federal law. We reverse the Court of Appeals and district court and remand to the district court with instructions to vacate its foreclosure judgment and to dismiss the Bank of New York’s foreclosure action for lack of standing.

The Romeros soon became delinquent on their increased loan payments. On April 1, 2008, a third party—the Bank of New York, identifying itself as a trustee for Popular Financial Services Mortgage—filed a complaint in the First Judicial District Court seeking foreclosure on the Romeros’ home and claiming to be the holder of the Romeros’ note and mortgage with the right of enforcement.

The Romeros also raised several counterclaims, only one of which is relevant to this appeal: that the loan violated the antiflipping provisions of the New Mexico HLPA, Section 58-21A-4(B) (2003).[They were lured into refinancing into a loan with worse provisions than the one they had].

Litton Loan Servicing did not begin servicing the Romeros’ loan until November 1, 2008, seven months after the foreclosure complaint was filed in district court.

At a bench trial, Kevin Flannigan, a senior litigation processor for Litton Loan Servicing, testified on behalf of the Bank of New York. Flannigan asserted that the copies of the note and mortgage admitted as trial evidence by the Bank of New York were copies of the originals and also testified that the Bank of New York had physical possession of both the note and mortgage at the time it filed the foreclosure complaint.

{9} The Romeros objected to Flannigan’s testimony, arguing that he lacked personal knowledge to make these claims given that Litton Loan Servicing was not a servicer for the Bank of New York until after the foreclosure complaint was filed and the MERS assignment occurred. The district court allowed the testimony based on the business records exception because Flannigan was the present custodian of records.

{10} The Romeros also pointed out that the copy of the “original” note Flannigan purportedly authenticated was different from the “original” note attached to the Bank of New York’s foreclosure complaint. While the note attached to the complaint as a true copy was not indorsed, the “original” admitted at trial was indorsed twice: first, with a blank indorsement by Equity One and second, with a special indorsement made payable to JPMorgan Chase.

the Court of Appeals affirmed the district court’s rulings that the Bank of New York had standing to foreclose and that the HLPA had not been violated but determined as a result of the latter ruling that it was not necessary to address whether federal law preempted the HLPA. See Bank of N.Y. v. Romero, 2011-NMCA-110, ¶ 6, 150 N.M. 769, 266 P.3d 638 (“Because we conclude that substantial evidence exists for each of the district court’s findings and conclusions, and we affirm on those grounds, we do not addressthe Romeros’ preemption argument.”).

We have recognized that “the lack of [standing] is a potential jurisdictional defect which ‘may not be waived and may be raised at any stage of the proceedings, even sua sponte by the appellate court.’” Gunaji v. Macias, 2001-NMSC-028, ¶ 20, 130 N.M. 734, 31 P.3d 1008 (citation omitted). While we disagree that the Romeros waived their standing claim, because their challenge has been and remains largely based on the note’s indorsement to JPMorgan Chase, whether the Romeros failed to fully develop their standing argument before the Court of Appeals is immaterial. This Court may reach the issue of standing based on prudential concerns. See New Energy Economy, Inc. v. Shoobridge, 2010-NMSC-049, ¶ 16, 149 N.M. 42, 243 P.3d 746 (“Indeed, ‘prudential rules’ of judicial self-governance, like standing, ripeness, and mootness, are ‘founded in concern about the proper—and properly limited—role of courts in a democratic society’ and are always relevant concerns.” (citation omitted)). Accordingly, we address the merits of the standing challenge.[e.s.]

the Romeros argue that none of the Bank’s evidence demonstrates standing because (1) possession alone is insufficient, (2) the “original” note introduced by the Bank of New York at trial with the two undated indorsements includes a special indorsement to JPMorgan Chase, which cannot be ignored in favor of the blank indorsement, (3) the June 25, 2008, assignment letter from MERS occurred after the Bank of New York filed its complaint, and as a mere assignment

of the mortgage does not act as a lawful transfer of the note, and (4) the statements by Ann Kelley and Kevin Flannigan are inadmissible because both lack personal knowledge given that Litton Loan Servicing did not begin servicing loans for the Bank of New York until seven months after the foreclosure complaint was filed and after the purported transfer of the loan occurred. 
[NOTE BURDEN OF PROOF]

(“[S]tanding is to be determined as of the commencement of suit.”); accord 55 Am. Jur. 2d Mortgages § 584 (2009) (“A plaintiff has no foundation in law or fact to foreclose upon a mortgage in which the plaintiff has no legal or equitable interest.”). One reason for such a requirement is simple: “One who is not a party to a contract cannot maintain a suit upon it. If [the entity] was a successor in interest to a party on the [contract], it was incumbent upon it to prove this to the court.” L.R. Prop. Mgmt., Inc. v. Grebe, 1981-NMSC-035, ¶ 7, 96 N.M. 22, 627 P.2d 864 (citation omitted). The Bank of New York had the burden of establishing timely ownership of the note and the mortgage to support its entitlement to pursue a foreclosure action. See Gonzales v. Tama, 1988-NMSC- 016, ¶ 7, 106 N.M. 737, 749 P.2d 1116

[THE DIFFERENCE BETWEEN REMEDIES ON THE NOTE AND REMEDIES ON THE MORTGAGE]

(“One who holds a note secured by a mortgage has two separate and independent remedies, which he may pursue successively or concurrently; one is on the note against the person and property of the debtor, and the other is by foreclosure to enforce the mortgage lien upon his real estate.” (internal quotation marks and citation omitted)).

3. None of the Bank’s Evidence Demonstrates Standing to Foreclose

{19} The Bank of New York argues that in order to demonstrate standing, it was required to prove that before it filed suit, it either (1) had physical possession of the Romeros’ note indorsed to it or indorsed in blank or (2) received the note with the right to enforcement, as required by the UCC. See § 55-3-301 (defining “[p]erson entitled to enforce” a negotiable instrument). While we agree with the Bank that our state’s UCC governs how a party becomes legally entitled to enforce a negotiable instrument such as the note for a home loan, we disagree that the Bank put forth such evidence.

a. Possession of a Note Specially Indorsed to JPMorgan Chase Does Not Establish the Bank of New York as a Holder

{20} Section 55-3-301 of the UCC provides three ways in which a third party can enforce a negotiable instrument such as a note. Id. (“‘Person entitled to enforce’ an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the [lost, destroyed, stolen, or mistakenly transferred] instrument pursuant to [certain UCC enforcement provisions].”); see also § 55-3-104(a)(1), (b), (e) (defining “negotiable instrument” as including a “note” made “payable to bearer or to order”). Because the Bank’s arguments rest on the fact that it was in physical possession of the Romeros’ note, we need to consider only the first two categories of eligibility to enforce under Section 55-3-301.

{21} The UCC defines the first type of “person entitled to enforce” a note—the “holder” of the instrument—as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” NMSA 1978, § 55-1-201(b)(21)(A) (2005); see also Frederick M. Hart & William F. Willier, Negotiable Instruments Under the Uniform Commercial Code, § 12.02(1) at 12-13 to 12-15 (2012) (“The first requirement of being a holder is possession of the instrument. However, possession is not necessarily sufficient to make one a holder. . . . The payee is always a holder if the payee has possession. Whether other persons qualify as a holder depends upon whether the instrument initially is payable to order or payable to bearer, and whether the instrument has been indorsed.” (footnotes omitted)). Accordingly, a third party must prove both physical possession and the right to enforcement through either a proper indorsement or a transfer by negotiation. See NMSA 1978, § 55-3-201(a) (1992) (“‘Negotiation’ means a transfer of possession . . . of an instrument by a person other than the issuer to a person who thereby becomes its holder.”). [E.S.] Because in this case the Romeros’ note was clearly made payable to the order of Equity One, we must determine whether the Bank provided sufficient evidence of how it became a “holder” by either an indorsement or transfer.

Without explanation, the note introduced at trial differed significantly from the original note attached to the foreclosure complaint, despite testimony at trial that the Bank of New York had physical possession of the Romeros’ note from the time the foreclosure complaint was filed on April 1, 2008. Neither the unindorsed note nor the twice-indorsed

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note establishes the Bank as a holder.

{23} Possession of an unindorsed note made payable to a third party does not establish the right of enforcement, just as finding a lost check made payable to a particular party does not allow the finder to cash it. [E.S.]See NMSA 1978, § 55-3-109 cmt. 1 (1992) (“An instrument that is payable to an identified person cannot be negotiated without the indorsement of the identified person.”). The Bank’s possession of the Romeros’ unindorsed note made payable to Equity One does not establish the Bank’s entitlement to enforcement.

We are not persuaded. The Bank provides no authority and we know of none that exists to support its argument that the payment restrictions created by a special indorsement can be ignored contrary to our long-held rules on indorsements and the rights they create. See, e.g., id. (rejecting each of two entities as a holder because a note lacked the requisite indorsement following a special indorsement); accord NMSA 1978, § 55-3-204(c) (1992) (“For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.”).

[COMPETENCY OF WITNESS]

the Bank of New York relies on the testimony of Kevin Flannigan, an employee of Litton Loan Servicing who maintained that his review of loan servicing records indicated that the Bank of New York was the transferee of the note. The Romeros objected to Flannigan’s testimony at trial, an objection that the district court overruled under the business records exception. We agree with the Romeros that Flannigan’s testimony was inadmissible and does not establish a proper transfer.

Litton Loan Servicing, did not begin working for the Bank of New York as its servicing agent until November 1, 2008—seven months after the April 1, 2008, foreclosure complaint was filed. Prior to this date, Popular Mortgage Servicing, Inc. serviced the Bank of New York’s loans. Flannigan had no personal knowledge to support his testimony that transfer of the Romeros’ note to the Bank of New York prior to the filing of the foreclosure complaint was proper because Flannigan did not yet work for the Bank of New York. See Rule 11-602 NMRA (“A witness may testify to a matter only if evidence is introduced sufficient to support a finding that the

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witness has personal knowledge of the matter. [E.S.] Evidence to prove personal knowledge may consist of the witness’s own testimony.”). We make a similar conclusion about the affidavit of Ann Kelley, who also testified about the status of the Romeros’ loan based on her work for Litton Loan Servicing. As with Flannigan’s testimony, such statements by Kelley were inadmissible because they lacked personal knowledge.

[OBJECTION TO HEARSAY BUSINESS RECORDS REVERSED AND SUSTAINED]

When pressed about Flannigan’s basis of knowledge on cross-examination, Flannigan merely stated that “our records do indicate” the Bank of New York as the holder of the note based on “a pooling and servicing agreement.” No such business record itself was offered or admitted as a business records hearsay exception. See Rule 11-803(F) NMRA (2007) (naming this category of hearsay exceptions as “records of regularly conducted activity”).

The district court erred in admitting the testimony of Flannigan as a custodian of records under the exception to the inadmissibility of hearsay for “business records” that are made in the regular course of business and are generally admissible at trial under certain conditions. See Rule 11-803(F) (2007) (citing the version of the rule in effect at the time of trial). The business records exception allows the records themselves to be admissible but not simply statements about the purported contents of the records. [E.S.] See State v. Cofer, 2011-NMCA-085, ¶ 17, 150 N.M. 483, 261 P.3d 1115 (holding that, based on the plain language of Rule 11-803(F) (2007), “it is clear that the business records exception requires some form of document that satisfies the rule’s foundational elements to be offered and admitted into evidence and that testimony alone does not qualify under this exception to the hearsay rule” and concluding that “‘testimony regarding the contents of business records, unsupported by the records themselves, by one without personal knowledge of the facts constitutes inadmissible hearsay.’” (citation omitted)). Neither Flannigan’s testimony nor Kelley’s affidavit can substantiate the existence of documents evidencing a transfer if those documents are not entered into evidence. Accordingly, Flannigan’s trial testimony cannot establish that the Romeros’ note was transferred to the Bank of New York.[E.S.]

[REJECTION OF MERS ASSIGNMENT]

We also reject the Bank’s argument that it can enforce the Romeros’ note because it was assigned the mortgage by MERS. An assignment of a mortgage vests only those rights to the mortgage that were vested in the assigning entity and nothing more. See § 55-3-203(b) (“Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course.”); accord Hart & Willier, supra, § 12.03(2) at 12-27 (“Th[is] shelter rule puts the transferee in the shoes of the transferor.”).

[MERS CAN NEVER ASSIGN THE NOTE]

As a nominee for Equity One on the mortgage contract, MERS could assign the mortgage but lacked any authority to assign the Romeros’ note. Although this Court has never explicitly ruled on the issue of whether the assignment of a mortgage could carry with it the transfer of a note, we have long recognized the separate functions that note and mortgage contracts perform in foreclosure actions. See First Nat’l Bank of Belen v. Luce, 1974-NMSC-098, ¶ 8, 87 N.M. 94, 529 P.2d 760 (holding that because the assignment of a mortgage to a bank did not convey an interest in the loan contract, the bank was not entitled to foreclose on the mortgage); Simson v. Bilderbeck, Inc., 1966-NMSC-170, ¶¶ 13-14, 76 N.M. 667, 417 P.2d 803 (explaining that “[t]he right of the assignee to enforce the mortgage is dependent upon his right to enforce the note” and noting that “[b]oth the note and mortgage were assigned to plaintiff.

[SPLITTING THE NOTE AND MORTGAGE]

(“A mortgage securing the repayment of a promissory note follows the note, and thus, only the rightful owner of the note has the right to enforce the mortgage.”); Dunaway, supra, § 24:18 (“The mortgage only secures the payment of the debt, has no life independent of the debt, and cannot be separately transferred. If the intent of the lender is to transfer only the security interest (the mortgage), this cannot legally be done and the transfer of the mortgage without the debt would be a nullity.”). These separate contractual functions—where the note is the loan and the mortgage is a pledged security for that loan—cannot be ignored simply by the advent of modern technology and the MERS electronic mortgage registry system.

[THE NOBODY ELSE IS CLAIMING ARGUMENT IS EXPLICITLY REJECTED]

Failure of Another Entity to Claim Ownership of the Romeros’ Note Does Not Make the Bank of New York a Holder

{37} Finally, the Bank of New York urges this Court to adopt the district court’s inference that if the Bank was not the proper holder of the Romeros’ note, then third-party-defendant Equity One would have claimed to be the rightful holder, and Equity One made no such claim.

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{38} The simple fact that Equity One does not claim ownership of the Romeros’ note does not establish that the note was properly transferred to the Bank of New York. In fact, the evidence in the record indicates that JPMorgan Chase may be the lawful holder of the Romeros’ note, as reflected in the note’s special indorsement.

[HOLDER MUST PROVE ENTITLEMENT TO ENFORCE — NO PRESUMPTION ALLOWED]

Because the transferee is not a holder, there is no presumption under Section [55-]3-308 [(1992) (entitling a holder in due course to payment by production and upon signature)] that the transferee, by producing the instrument, is entitled to payment. The instrument, by its terms, is not payable to the transferee and the transferee must account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired it.

[LENDER’S OBLIGATION TO ASSURE THAT THE LOAN IS VIABLE]

B. A Lender Must Consider a Borrower’s Ability to Repay a Home Mortgage Loan in Determining Whether the Loan Provides a Reasonable, Tangible Net Benefit, as Required by the New Mexico HLPA

{39} For reasons that are not clear in the record, the Romeros did not appeal the district court’s judgment in favor of the original lender, Equity One, on the Romeros’ claims that Equity One violated the HLPA. The Court of Appeals addressed the HLPA violation issue in the context of the Romeros’ contentions that the alleged violation constituted a defense to the foreclosure complaint of the Bank of New York by affirming the district court’s favorable ruling on the Bank of New York’s complaint. As a result of our holding that the Bank of New York has not established standing to bring a foreclosure action, the issue of HLPA violation is now moot in this case. But because it is an issue that is likely to be addressed again in future attempts by whichever institution may be able to establish standing to foreclose on the Romero home and because it involves a statutory interpretation issue of substantial public importance in many other cases, we address the conclusion of both the

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Court of Appeals and the district court that a homeowner’s inability to repay is not among “all of the circumstances” that the 2003 HLPA, applicable to the Romeros’ loan, requires a lender to consider under its “flipping” provisions:

No creditor shall knowingly and intentionally engage in the unfair act or practice of flipping a home loan. As used in this subsection, “flipping a home loan” means the making of a home loan to a borrower that refinances an existing home loan when the new loan does not have reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan and the borrower’s circumstances.

Section 58-21A-4(B) (2003); see also Bank of N.Y., 2011-NMCA-110, ¶ 17 (holding that “while the ability to repay a loan is an important consideration when otherwise assessing a borrower’s financial situation, we will not read such meaning into the statute’s ‘reasonable, tangible net benefit’ language”).

[DOOMED LOANS — WHO HAS THE RISK?]

We have been presented with no conceivable reason why the Legislature in 2003 would consciously exclude consideration of a borrower’s ability to repay the loan as a factor of the borrower’s circumstances, and we can think of none. Without an express legislative direction to that effect, we will not conclude that the Legislature meant to approve mortgage loans that were doomed to end in failure and foreclosure. Apart from the plain language of the statute and its express statutory purpose, it is difficult to comprehend how an unrepayable home mortgage loan that will result in a foreclosure on one’s home and a deficiency judgment to pay after the borrower is rendered homeless could provide “a reasonable, tangible net benefit to the borrower.”

[LENDER’S OBLIGATION TO MAKE SURE IT IS A VIABLE TRANSACTION] a lender cannot avoid its own obligation to consider real facts and circumstances [E.S.] that might clarify the inaccuracy of a borrower’s income claim. Id. (“Lenders cannot, however, disregard known facts and circumstances that may place in question the accuracy of information contained in the application.”) A lender’s willful blindness to its responsibility to consider the true circumstances of its borrowers is unacceptable. A full and fair consideration of those circumstances might well show that a new mortgage loan would put a borrower into a materially worse situation with respect to the ability to make home loan payments and avoid foreclosure, consequences of a borrower’s circumstances that cannot be disregarded.

if the inclusion of such boilerplate language in the mass of documents a borrower must sign at closing would substitute for a lender’s conscientious compliance with the obligations imposed by the HLPA, its protections would be no more than empty words on paper that could be summarily swept aside by the addition of yet one more document for the borrower to sign at the closing.

[THE BLAME GAME]

Borrowers are certainly not blameless if they try to refinance their homes through loans they cannot afford. But they do not have a mortgage lender’s expertise, and the combination of the relative unsophistication of many borrowers and the potential motives of unscrupulous lenders seeking profits from making loans without regard for the consequences to homeowners led to the need for statutory reform. See § 58-21A-2 (discussing (A) “abusive mortgage lending” practices, including (B) “making . . . loans that are equity-based, rather than income based,” (C) “repeatedly refinanc[ing] home loans,” rewarding lenders with “immediate income” from “points and fees” and (D) victimizing homeowners with the unnecessary “costs and terms” of “overreaching creditors”).

[FEDERAL PREEMPTION CLAIM FROM OCC STATEMENT DOES NOT PROVIDE BANK OF NEW YORK ANY PROTECTION]

 

While the Bank is correct in asserting that the OCC issued a blanket rule in January 2004, see 12 C.F.R. § 34.4(a) (2004) (preempting state laws that impact “a national bank’s ability to fully exercise its Federally authorized real estate lending powers”), and that the New Mexico Administrative Code recognizes this OCC rule, neither the Bank nor our administrative code addresses several actions taken by Congress and the courts since 2004 to disavow the OCC’s broad preemption statement.

 

Applying the Dodd-Frank standard to the HLPA, we conclude that federal law does not preempt the HLPA. First, our review of the NBA reveals no express preemption of state consumer protection laws such as the HLPA. Second, the Bank provides no evidence that conforming to the dictates of the HLPA prevents or significantly interferes with a national bank’s operations. Third, the HLPA does not create a discriminatory effect; rather, the HLPA applies to any “creditor,” which the 2003 statute defines as “a person who regularly [offers or] makes a home loan.” Section 58-21A-3(G) (2003). Any entity that makes home loans in New Mexico must follow the HLPA, regardless of whether the lender is a state or nationally chartered bank. See § 58-21A-2 (providing legislative findings on abusive mortgage lending practices that the HLPA is meant to discourage).

The most important thing about cross examination in foreclosure cases

Whether it is on voir dire, which is a limited examination before the witness testifies to determine the legal competency of the witness, or on actual cross examination, the object is to bring out facts that are helpful in making your case or defending your position. When I teach cross examination, I refer to the triad — three things you must do in order to reach your goal. The three things are first to have a simple question with a goal in mind. Second to listen to the answer. Third, is the follow up, because you knew the probable answer and now you want to bring home your point. This applies to every question.

The first requires preparation for trial in which you decide your narrative and then develop the key points necessary to bring the court to the point where the trier of fact (mostly judges in foreclosure cases) joins your narrative. You’ll know if they have joined you or are leaning that way by their ruling on objections, by the questions they ask — and one warning sign that you are losing them is when they ask you for the relevancy of your question. Without preparation and a strong narrative to which you are committed, you won’t be able to answer the question about relevancy and you will have no issue preserved for appeal. You are probably looking to establish a question of ownership of the loan and to establish a question of the balance due, if any. The details on this are left out of this article because the opposition reads this and will be ready for you if we publish the series of retreads that apply to trying a foreclosure case.

Second is listening. This is something that lawyers need to do and is the reason they were hired in the first place. The homeowner is too emotionally attached to listen. They hear but they don’t listen and they don’t understand the significance of the question or the answer. Coming to court with a list of questions is a good idea. But many lawyers and pro se litigants fail because of the difference between hearing and listening. The answer is that most people just hear what’s being said. Others take the time to actually listen to what’s being said. There is a significant and monumental difference between hearing and listening. Hearing means that someone “hears” what’s being said and then translates the message into a meaning for himself. When you listen, however, you also take an extra moment to think about the person who’s speaking. It’s only then that you’ll have a clear understanding of what is trying to be conveyed. And only then can you move on to the third step.

The third step is follow-up. This is often confused with moving on to the next question. But your first question in the triad is merely the set up. The real stuff is in your follow-up because you actually listen to exactly what is being said. If the lawyer for the bank asks if the witness is familiar with the books and records of the Servicer, your objection is going to be leading, lack of foundation, and potentially hearsay. If you don’t object then the testimony comes in simply because you failed to object and thus preserve the issue for appeal. You will be subject to the same objections from the other side if you don’t have your ducks in a row.

So if the witness says he is “familiar” with the books and records, you should ask why, and then follow up with questions directed at how he prepared, how he actually knows (personal knowledge) that there was a loan from ABC, and exactly what he looked at in terms of documentation or computer screens. The answers will surprise you in some cases. Take the time to listen to the surprise answer and pause a moment on what you want to do with it and how you can make that answer serve the interests of your client.

Trial Objections in Foreclosures

 

NOTE: This post is for attorneys only. Pro se litigants even if they are highly sophisticated are not likely to be able to apply the content of this article without knowledge and experience in trial law. Nothing in this article should be construed as an acceptable substitute for consultation with a licensed knowledgeable trial lawyer.

If you need help with objections, then you probably need our litigation support, so please call my office at 850-765-1236.

It is of course impossible for me to predict how the Plaintiff will attempt to present their case. The main rule is that objections are better raised prematurely than late. The earliest time the objection can be raised it should be raised. In these cases the primary objections are lack of foundation and hearsay.

As to lack of foundation, the real issue is whether the witness is really competent to testify. The rules, as you know, consist of four elements — oath, personal perception, independent recall, and the ability to communicate. The corporate representative should be nailed on lack of personal knowledge — if they had nothing to do with the closing, the funding of the loan, the execution of the documents, delivery of the note, delivery of the mortgage etc., or processing of payments or even the production of the reports or the program that presents the data from which the report populates the information the bank is attempting to present. Generally they fail on any personal knowledge.
The only thing that could enable them to be there is whether they can testify using hearsay, which is generally barred from evidence. If that is all they have, then the witness is not competent to testify. The objection should be made at the moment the attorney has elicited from the witness the necessary admissions to establish the lack of personal perception, personal knowledge.
On hearsay, their information is usually obtained from what they were told by others and what is on the computers of the forecloser like BofA which based on the transcript from cases run on at least 2 server systems and probably a third, if you include BAC/Countrywide. All of such testimony and any documents printed off the computers are hearsay and therefore are barred — unless the bank can establish that the information is credible because it satisfies the elements of an exception to hearsay. The only exception to hearsay that usually comes up is the business records exception. Any other testimony about what others told the witness is hearsay and is still barred.
The business records exception can only be satisfied if they satisfy the elements of the exception. First the point needs to be made that these records are from a party to litigation and are therefore subject to closer scrutiny because they would be motivated to change their documents to be self serving. If you have any documentation to show that they omitted payments received in their demand or that there are other financial anomalies already known it could be used to bolster your argument as an example of how they have manipulated the documents and created or fabricated “reports” strictly for trial and therefore are not regular business records created at the or close to the time of an event or payment.
The business records exception requires the records custodian, first and foremost. Since the bank never brings their records custodian to court, they are now two steps removed from credibility — the first being that they are not some uninterested third party and the second that they are not even bringing their records custodian to court to state under oath that the report being presented is simply a printout of regular business records kept by bank of America.
So the exception to business records under which they will attempt to get the testimony of their witness in will be that the witness has personal knowledge of the record keeping at Bank of America and this is where lawyers are winning their cases and barring the evidence from coming in. Because the witnesses are most often professional witnesses who actually know nothing about anything and frequently have reviewed the file minutes before they entered the courtroom.
The usual way the evidence gets in is by counsel for the homeowner failing to object. That is because failure to object allows the evidence in and once in it generally can’t be removed. It is considered credible simply because the opposing side didn’t object.
TRAPDOOR: Waking up at the end of a long stream of questions that are all objectionable for lack of foundation (showing that the witness has any personal knowledge related to the question) or because of hearsay, the objection will then be denied as late. So the objection must be raised with each question before the witness answers, and if the witness answers anyway, the response should be subject to a motion to strike.
THE USUAL SCENARIO: The lawyer will ask or the witness will say they are “familiar” with the practices for record keeping. That is insufficient. On voir dire, you could establish that the witness has no knowledge and nothing to recall and that their intention is to testify what the documents in front of him say. That is “hearsay on hearsay.” That establishes, if you object, that the witness is not competent to testify.
The bottom line is that the witness must be able to establish that they personally know that the records and everything on them are true. In order for the records to be admitted there must be a foundation where the witness says they actually know that the printouts being submitted are the same as what is on the BofA computers and what is on the BofA computers was put there in the regular course of business and not just in preparation for trial. And they must testify that these records are permanent and not subject to change. If they are subject to change by anyone with access they lack credibility because they may have been changed for the express purpose of proving a point in trial rather than a mere reflection of regular business transactions.
There is plenty of law nationwide on these subjects. Personal knowledge, “familiarity with the records,” and testifying about what the records say are all resolved in favor of the objector. The witness cannot read from or testify from memory of what the records say. The witness must know that the facts shown in those records are true. This they usually cannot do.

Hearsay Practice Hints: Meeting Intimidation with Facts

I went to a hearing yesterday on the Bank’s Motion for Summary Judgment. The Motion had the usual deficiencies and the affidavit was, as usual, worthless because the witness failed to state any basis for personal knowledge. The attachments to the motion were absent. The Bank avoided the allegation that it ever made a loan and avoided any allegations that there was financial injury and if so, to whom. The Foreclosure Mill was rotating coverage attorneys who knew little about the case. We quickly agreed to drop the motion for summary judgment and move forward to a status conference in 120 days, allowing time to explore modification and discovery.

The interesting thing is that the Bank’s attorney actually said to me that we should not conduct discovery because it would only add to the attorneys fees that the homeowner would owe. This rolled out of his mouth in a manner that indicated to me that it was a standard ruse to get the homeowner to give up rather than fight. Of course I didn’t take his suggestion seriously and I told him so. But I could see how pro se litigants and even inexperienced lawyers have their confidence undermined by that “suggestion.” The ruse is that the Bank is going to win anyway. The facts are that the Bank in that case has potentially insurmountable proof problems. And the tactic is also used because the foreclosure mills are paid a flat fee for all cases, usually $1200 or $1400 and the law firm therefore wants as little work as possible on each case.

Practice Hint: always check the State Statutes (or the Federal Rules) on evidence, especially here say and hearsay exceptions before you open your mouth or file any discovery. There are some juicy morsels in there. Like how you can use business records as an exception to hearsay and how the fundamental issue is the trustworthiness of the records. Simply stated, if the records are those of a non-party who has no interest in the outcome, then the Court should lean toward allowing the business records into evidence upon the proffer of an appropriate witness and compliance with other rules of procedure requiring notice to the opposing party. Those rules should be carefully reviewed and used against the Bank if they don’t comply. REMEMBER ANY INSTRUMENT IS PROBABLY HEARSAY BECAUSE IT ISN’T A WITNESS. the issue is whether the records qualify for an exception to the hearsay rule. If the records come from a party, then they are inherently suspect because they are self-serving even if they are true or could be true. The rules should be strictly applied and you should preserve the issue not only with motions in limine but also by objecting at trial should the issue come up again even after the Court has entered an order barring the introduction of the business records.

As far as I can tell the Banks make no attempt to comply with the law and rules regarding business records, as an exception to the basic rule that hearsay is not admissible in evidence. If you read and study the applicable laws of evidence, rules of civil procedure and hold their feet to the fire, you just might have punctured their case. Failure to comply with those laws and rules is fatal to the foreclosure case, even if they right. It is potentially fatal to the homeowner if there is a Failure to object to hearsay on the basis that the Bank failed to comply with the laws and rules governing introduction of business records.

Practice Hint: lawyers for the foreclosure mill really know very little about securitization. In fact, few foreclosure defense lawyers have mastered it, which is why my law firm is providing litigation support across the country. The proof of that is that when I ask lawyers to informally comply with our request of proving the money trail with cancelled checks, wire transfer receipts, wire transfer instructions, the lawyers say “no problem” only to later nervously evade the issue after they ask the Bank that is foreclosing.

The lawyers for the Banks honestly believe that the homeowner’s closing was largely in compliance with Federal and state laws. They don’t understand that the securitization was an illusion. They don’t understand why a closing agent would take money from a third party and apply it to the closing and then have the homeowner sign a note and mortgage in favor of a party who was not loaning any money at closing, directly or indirectly. They don’t understand that the original note is fatally defective in those circumstances and that the mortgage is a non-perfected encumbrance that is not enforceable. They don’t understand that recording the mortgage doesn’t correct deficiencies in the closing process.

As always, check with an attorney licensed in your jurisdiction before you apply anything contained in this article. And always remember that just because you are right it doesn’t automatically follow that you win. The Judge must also be convinced that you SHOULD win, which is why I counsel pro se litigants to get lawyers or at least legal advice. Remember that the devil is in the details.

Matt Weidner Shows Lawyers How to Do Good Lawyering

The difference between Weidner and many other attorneys is that he goes into a case believing he can win it — and he’s right. Other attorneys believe their position is hopeless and seek only delays or modification — and they are wrong. Weidner has resisted the knee jerk reaction to these cases to believe that if the borrower ceases payment that all elements of a foreclosure are presumed met. He understands that the Banks are playing a shell game to conceal the fact that neither the named plaintiff nor the alleged creditor are in fact the real servicer and real creditor.

Matt Weidner has published his summary of essential issues raised in a hearing in which he was the attorney of record for the homeowner. He shows that knowledge of securitization, good preparation and articulate objections that are logically consistent with the proffer of evidence results in a good record and a good result. This transcript — shown on the link below — should be studied, not merely read. Then read it again. Weidner skills are formidable but they can be learned.

Editor’s Note: The background issue here is the conflict between the law permitting the servicer to commence the action and reality. The Servicer might be able to start a foreclosure but they cannot finish it. They can claim they have authority or power of attorney but the fact is they are not a creditor. And only a creditor can submit a credit bid.

So why is this case being brought this way? Is the creditor aware that their right to the title of the house and their right to sue for collection is being stripped from them. Does the creditor have notice? How do we know? Even if the pleading is not required, the proof demands the evidence that the Trustee of the REMIC testify that they have notice, they own the mortgage, they have not resold it, they have received no augments, directly or indirectly to reduce the balance of the account receivable, and that the investor approves of the Servicer/bookkeeper taking title with a credit bid and getting a judgment in its own name despite the obvious fact that the creditor is entitled to judgment. What authority does the Trustee have to let anyone take away property and assets? What reasonable purpose would be served? Doesn’t this show or at least suggest that the Trust does not own the loan? Maybe it never did, but the investors in the “Trust” know it was their money that funded mortgages — they just don’t actually know which loans they funded.

And as this case suggests, the intervention of the investment banks caused a fatal defect in the chain of title. If they wanted to stay out of trouble all they had to do was name the Trust on the note and mortgage or the assignment and record it as such. But they didn’t because they were playing with OPM (Other people’s money) and they still are playing the same game.

Residential funding gets into trouble. This is a very worthwhile read.

Foreclosure Defense Trial SECRETS EXPOSED! A WEIDNER Transcript of a Foreclosure Trial That Shows How A Homeowner Wins Foreclosure!
http://mattweidnerlaw.com/foreclosure-defense-trial-secrets-exposed-a-transcript-of-a-foreclosure-trial-that-shows-how-a-homeowner-wins-foreclosure/

“Materially Less”: The Foreclosure Deficiency Standard in Tennessee
http://www.jdsupra.com/legalnews/materially-less-the-foreclosure-defic-21465/

How the Bank Lobby Loosened U.S. Reins on Derivatives
http://www.bloomberg.com/news/2013-09-04/how-the-bank-lobby-loosened-u-s-reins-on-derivatives.html

Lending Giant Offers Short Sale Webinar
http://realtormag.realtor.org/daily-news/2013/09/03/lending-giant-offers-short-sale-webinar

Fla 4th DCA Provides Short Lesson on Business Records Exception to Hearsay Rule

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It is interesting that the ruling comes from a condo lien case rather than the hot topic of securitized mortgages. But the rules are the same and in this opinion the Court gives the reader a lesson on hearsay, objections, preservation of issues for appeal, and exceptions to hearsay. As a prelude, evidence is properly admitted into the record if it is unopposed. So you must object if you don’t want it in. If you don’t object, you are cooked.

When an objection is properly AND TIMELY raised it specifies what exactly you are challenging and why. Trustworthiness, Credibility and authenticity are at the heart of all evidence questions. The court will tend to allow the evidence if it determines that it has some “probative value” which is to say it might be concluded that a fact is true based on this evidence. But since courts are composed of human beings there are some boundaries to issues of hearsay and exceptions that have been set by both common law and statutes so that the litigator knows what he is entitled to expect from the court as to rulings on his own evidence or that of his opponent.

Business records are hearsay and therefore excluded from evidence if an objection is made. If an objection is made and properly framed, then the burden shifts to the other side (the proponent of the “information” being tendered as evidence) to explain why the records are not hearsay (that is impossible with business records) or why there is an applicable exception.

The guiding principle behind the rules are that evidence should be admitted if it is trustworthy. If the records come from an independent third party who could care less who wins the lawsuit, the chances are that the judge will be liberal in applying the rules. If the the records come from one of the parties in litigation then the possibility or probability of it being self serving and potentially prepared for litigation rise and the judge is supposed to apply the rules very strictly.

In this case the judge did what judges are doing across the country. The Judge erred. He applied a lenient standard to records that were clearly coming from a party with a stake in the outcome and which could have been fabricated for the purposes of litigation and which relied on the work of other parties without any knowledge of the timing of the entries that were made, the knowledge of the person making the entries, and the documents or events upon which the the outside person relied. Therefore it was unlikely that the business records could be admitted without a very tight foundation from a credible witness.

The Judge admitted the records after extremely dubious testimony and obvious evidence that there was a personal fight going on as well as a bribery or theft claim between a group of unit owners and the association’s board. The appellate court reversed. That means the unit owners win the case even though judgment was entered for the association against the unit owners by the trial court. By the way, the defense, as I have suggested in foreclosure defense cases, was payment.

 

The unit owners had made a large prepayment that had not been carried forward. The receipt was acknowledged but somehow, like the foreclosure cases go, the judge felt it was OK to foreclose the association’s lien even though there was unrefuted evidence that the association had indeed received a huge amount of money for no other purpose than to offset the amount of monthly dues and special assessments.

Note on page 4 the Court says “Because the condo owners’ attorney did not object to the ledgers on the ground that they were untrustworthy, this issue is not preserved. The lack of foundation, however, was argued and preserved.” In my seminars and books I have always stressed that objections must be timely, precise and well-focused preferably with back up in case law. And I generally refer people to Trial Objections by Dombroff, a small book that is worth its weight in gold.

Note that in this condo case the association’s attorney was at least smart enough to put the records custodian on the witness stand. Getting business records into evidence without the records custodian ought to be very difficult. In the lone arena of foreclosure litigation, the courts have veered out of bounds because they think they know how the case should end.

“Magic words” do not suffice. The witness must know that the records are trustworthy and how and why they are trustworthy.

Now in foreclosure litigation it gets even crazier. The party on the stand has some title that more or less clearly shows that the title was invented to have him or her testify in court. Strike one. Like the case reported here, the party lacked personal knowledge that is a prerequisite for any witness to testify about anything — it is called competence of the witness. Strike two.

And after the witness has committed to saying she saw all of the records, ask her about he payments that went out, not the payments that were received. After all, she represents the servicer who collects and then forwards the money, right? Who did the servicer forward the money to? Where are the records of that? Has she seen them? Why not? So she has not seen all the records of the servicer, has she? And what did she do to corroborate that the creditors’ books show the same figures in the account receivable or if extraneous third party transactions have resulted in a reduction or increase of the account receivable as it relates to the subject loan? So she doesn’t know if the balance due on the servicer’s books is actually the same balance due shown on the creditor’s books?

That is the part the opposing side doesn’t want to see. By opening the door to payments out to the creditor, you are now tracing the money trail. By showing that there was deception on the part of the servicer, the records are untrustworthy.  Strike 3.

http://www.4dca.org/opinions/August%202013/08-28-13/4D12-3363.12-3364.op.pdf

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