Local Government and HOAs Settling Budget Crisis: Suing Banks for Priority of Liens


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Editor’s Analysis: For those of you who have followed this blog for years, it will come as no surprise that local governments are suing the Banks for back taxes, failure to pay recording fees through the private recording system as MERS et al, and that Homeowner, Condominium and Cooperative Associations have figured out that their lien might have priority over the mortgages that are recorded, but not perfected. The good news is that this pits institution against institution, where the idea of a “free house” for borrowers doesn’t poison the waters and the Judges really must rule on evidence instead of proffers of evidence that are outright lies.

In Arizona alone the potential collection of  back and unpaid taxes, fees, costs, penalties etc. comes to more than $3 Billion — that is their figure not mine. I estimated it as closer to $10 billion. The legislature wanted to move forward in enabling the AG to collect thees fees which would have completely reversed their budget from deficit to surplus.

At one time I was representing several hundred condominium and cooperative associations. I enforced their liens with foreclosure so I’m no stranger to being on the other side of this. The liens were valid because there was a declaration recorded that was specifically referred to in the deed and title insurance. The issue was did the homeowner pay or not pay. Any contest based upon mismanagement of the association was bifurcated or dismissed to be heard another day in another courtroom.

I am told that there are numerous “businesses” that are popping up buying the HOA lien and the filing to foreclose — with considerable success, because THEY unlike the homeowners are attacking the instruments of record as imperfect liens, attacking the note and supposed assignments as no evidence of any real transaction and demanding discovery and proof of payment.

So we now have hundreds of lawsuits filed by State, County and City governments for fees and transactions that were neither real nor recorded. In Florida now where I am licensed we are taking on associations as clients — but only for the actions to quiet title, nullification of the mortgage instrument and other claims related to securitization. For those HOAs where the issue is non-payment, we are happy to take them on as clients but there is no reason to switch attorneys. But usually beyond the issue of non-payment is whether the deed on foreclosure for the now abandoned property (in whole or in part) is the priority of the lien. Once the forecloser’s claim loses priority, it will established that the mortgages were not real and the debt is not secured. Quiet title does not extinguish the debt but it sure does clear out invalid lienholders who cannot prove their claim with proof of payment for the origination or purchase of the loan.

Hence the action by the HOA invalidates the foreclosure and possibly the debt as well. That is as it should be since the underwriting banks showed one set of a documents to the investor/lenders and another set of documents to the homeowner/borrower. There was no meeting of the minds. In both cases the fake documents falsified the use of funds and title creating a shell game that is still corrupting our title systems across the country.

Thus the action by the HOA, properly done, allows the homeowner to stay and pay their maintenance fees and special assessments without worrying about a mortgage foreclosure from a party claiming to be the creditor. Worst case scenario is that the supposed forecloser steps into the shoes of a lienholder that is junior to the HOA and other liens as of the date of judgment on the quiet title action. Of course if the bank cougohs up the money then there is no action for the HOA to take. The Banks know that everything stated here is true, so in most cases, except for truly abandoned property, the Bank is going to pay the lien, the attorneys fees and court costs.

This is why so many people are starting businesses that buy up the liens and then foreclose on the banks. The deal they make with the HOA is usually at some sort of discount, whereas the Bank will get little or no discount from the business that took over the lien. There is a risk here of the issue of Champerty and Maintenance on both sides of litigation here. If the HOA sues directly and at their own expense, they are not susceptible to claims of Champerty and maintenance. But the agreement to transfer the lien to a stranger to the transaction gives rise to those claims especially if there is a sharing of the outcome.

This is why I wrote a long time ago several article on Champerty and maintenance. These nominees are commencing foreclosure proceedings on behalf of unidentified people who money is at risk and the banks and other entities that are doing this are funding the litigation and expenses of foreclosure, regardless of whether it is in a judicial or non-judicial state. If there is sharing of the proceeds in one form or another then it is most likely Champerty and maintenance. A simple cause of action alleging a short plain statement of ultimate facts upon which relief could be granted is enough to get passed a motion to dismiss and it is highly likely to get into discovery given the nature of the cause of action. Seeing the actual trail of money, who paid whom, how and when will essentially eviscerate the forecloser’s “mortgage”,  Note”, assignment and “substitution of “trustee.”

It is classic Champerty and Maintenance that if the principal to whom the money is owed by the borrower has decided NOT to pursue the claim that an interloper will be almost automatically be branded as a party whose interest results strictly from Champerty and maintenance. It is a very old doctrine but I have canvassed several states and it is still very much on the books and still used.

The Banks, Rushing To Foreclose So They Can Sit On Vacant Homes

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Editor’s Comment:


These damn judges here in Florida, they really need to wake up, start working harder and grant more foreclosures more quickly.  Hurry up already, and stop whining about budget cuts and staff positions cut, and who cares that the entire state court system is funded by less than one percent of the state budget, and shut up about case loads that have tripled to 3,000 or more cases per judge and frazzled judicial assistant.  Just grant those damn foreclosure judgments….after all, everyone knows the economy cannot recover until these damn slacking judges push through this foreclosure backlog….right?

Oh wait a minute, there’s apparently a bit of a fly in this ointment.  You see, apparently the banks are cancelling foreclosure sales just as quickly as our good judges are able to sign those damn Final Judgments of Foreclosure…yup…apparently, now wait just a dadgummed minute.

You mean to tell me our elected circuit court judges are busy throwing families out into the streets just so the banks can amass ever larger portfolios of vacant and abandoned properties that they are apparently not responsible for taking care of?

Well shut my mouth!  You don’t say?  Really!  No way?  Do you mean to tell me we can’t blame all this on our under-funded judges and this ain’t the fault of those damn ethically-challenged foreclosure defense attorneys what with all their delay tactics and pesky rules and those absurd arguments about THE LAW…blah, blah, blah.

When exactly will this nation wake up and start directing appropriate anger and rage at the real evil that’s hard at work, everyday all across this sleeping nation?

From the Tampa Times:

It’s an oft-repeated pattern.

In the last 12 months, lenders have canceled auctions on 4,204 properties in Pinellas and Hillsborough counties. Sales have been canceled two, three, even nine times on some homes.

In many cases, banks delay seizures to avoid having to pay maintenance bills or homeowner association fees. Meanwhile, neighbors fend off vandals and thieves and worry about property values falling because of the deteriorating houses.

The repeated cancellations burden the court system.

“These never seem to go away,” said Thomas McGrady, chief judge of the Pinellas-Pasco County Circuit. “It’s a nuisance.”



COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE



Hopefully any securitization search will include all public records information that either name or describe your loan, and any information public or private that contains clues to what was done with your loan, who funded, it, and whether the receivables from your loan were mixed with receivables from other parties.

Remember: The fact that a document names or describes your loan does Not mean that the loan is in the pool or trust that is described. To the contrary, it appears as though no loans were actually transferred to a pool or trust unless and until one or more of the following had occurred:

  1. The loan account has been declared in default(remember that a declaration doesn’t make it so. Most borrowers accept the declaration as true because they know they have not made some payments. Those Borrowers don’t know or are ignoring the fact that many parties were promising to pay the obligation, and many of those promises preceded the application for loan, much less the loan closing).A securitization search will reveal the facts necessary to know or provide a reasonable basis for the belief that the loan payments continued to be made after the declaration of default (usually by the servicer) or that the trust or pool was dissolved and reconstituted under a different name and different documents.
  2. Foreclosure proceedings have begun either privately (non-judicial) or in the public records (judicial).
  3. The pretender lender has been ordered to either show the documentation or drop their foreclosure, and the Order was from a Judge of competent jurisdiction.

NOT ALL SECURITIZATION SEARCHES WILL PRECISELY NAME THE TRUST OR POOL: If the loan has traveled through Fannie, Freddie or Ginnae for a guarantee, it has been securitized but those entities, which are now essentially government agencies nationalized because of the mortgage crisis do not provide access to the secondary market information and even if you pay them, you will get very shallow data. Thus the analyst can see that the loan was definitely securitized or claimed as securitized, but he/she cannot report on the exact name of the pool or trust. The purpose of those entities is stated in their charter to be the facilitation of securitization of loans in the secondary market. The same is true for private deals which are not really private since they mostly involve public companies, but they are equally difficult to get a precise reading on the identity of a trust that or multiple trusts that could be claiming an ownership of the loan. It is behind this curtain that it was easiest fro the banks to change a few data points about the loans and sell them multiple times into multiple pools.

If the search does not produce the name of the pool trust, doesn’t that mean the search was useless and I lose (the bank wins)?

NO. The actual name of the trust or pool is irrelevant. What is important is that the loan is shown to be more likely than not claimed to be securitized. If the loan was claimed as securitized THAT MEANS you can shift the burden onto the pretender lender to prove its status and offer up real non-fabricated, unforged documents.It means that the receivable from your loan (your payments) was mixed with receivables and guarantees from other parties (other borrowers, insurers, counterparties etc.). It means that the promise to pay was changed from just your promise to a combination of promises from multiple people and entities, some of which were created solely for the purpose of serving as vehicles for the scheme of securitization. AND THAT MEANS the pretender creditor must sort it out— not you.

But that doesn’t mean you don’t have a problem. Because on private deals, the pretender will come in as though there was no securitization when you know there was. So you need as much evidence as possible to show that the loan was probably securitized — so a Judge will believe that there is fire behind the smoke and not that you are just trying to use civil procedure and discovery to delay the proceedings.

Is it better to have the name of the trust or pool than not to have it?

Opinion is split on this. For obvious reasons it is better to have the goods when you are asserting something as a fact to the Judge. But most Judges now know there is an issue with securitization. I believe that even if you have the name of the trust, you should not use it until you are forced to do so. The reason is that as a practical and tactical matter the more evidence you present the more you own it.

By presenting evidence of the securitization of the loan, you are playing into the hands of the pretender. You are accepting the burden of pleading and proving a case that is in reality a simple denial of a case that has either never been filed (non-judicial) or which has been filed with unsupportable allegations. Under the theory that if you use it you own it, your strenuous efforts to show that the loan WAS securitized will bite you in the behind when you defend the case on the basis that the transfer was never made.

My opinion is that it is better to say that the evidence will show that the receivable was not treated in away that is consistent with the pretender’s allegation that they are the creditor, and that the lien was defective or was rendered ineffective by the conduct of the parties.

Then what is the value of the securitization search?

If you don’t use the securitization search in tandem with a loan specific title search and get a thorough analysis of the highlights in the broken chain of title and how those defects appeared, then you are not using the securitization properly. The point is not to show that the loan was securitized and that securitization is evil. The point is to show that the lien in the public records of the county in which the property was located is invalid, unenforceable or void. The title search will show the current status of title tot he property as it appears in the public records. The analysis of that title will show the weak points in the title, whether there are clouds on title, title defects, breaks in chain of title etc. The securitization analysis also takes the facts as we find them, and then explains how the tittle defects came into being.

The securitization report and analysis makes sense out of a situation that is totally  counter-intuitive. Why would a bank intentionally lose money on a loan? That is the question in the mind of the Judge. It makes no sense. And in fact, no bank would intentionally lose money on a loan. So what is happening here? The answer lies in securitization or the intent to create the appearance of securitization, to be more precise. Through securitization neither the loan originator nor any of the securitizing parties had any money in the deal, nor did they have any risk of loss.They had no risk of loss because they were not using their own money or credit. Each party in the securitizing scheme was a paid service provider; each was paid for the same service: to create the illusion of a normal mortgage loan transaction.

Thus the securitization report and analysis is essential element in the foundation of any case for damages or injunctive relief. It explains why a lender would go out of its way to inflate the appraisal on the property being used as collateral for the loan. Thus it lies at factual foundation of a claim for appraisal fraud. It explains why a lender would avoid the task of using underwriting standards developed over centuries to determine creditworthiness and viability of a loan. The originating lender was not in fact making a loan. In fact, in most instances it never handled the money for the funding of the loan even as a conduit. Thus the securitization report and analysis forms the factual foundation for the holy grail of mortgage litigation: Quiet Title.







Homeowner Association Liens Might be More Valuable Than Anyone Realizes


COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE

Funny how things come full circle. Back in the 1970’s, 80’s and early 90’s I was heavily involved in representing hundreds of associations for homeowners — condominium, cooperative, and homeowner associations. I litigated everything from recreation leases, construction defects, to liens for unpaid assessments or maintenance expenses. I published several articles and conducted a number of seminars on the subjects affecting these associations. Back then the liens were simple and there were issues between associations and lenders, but they were usually easily resolved.

So I get a call from someone in Florida whose parent owned a condominium apartment in a condo I represented back when I did that sort of thing. It turns out he owns the property that his parents once occupied and he has been following my blog with great interest for a while now. And his main question was “If we can agree that the lien of the association is a valid enforceable lien, then is it possible that the defects in what appear to be liens and encumbrances with higher priority could put the Association in first position?”

BAM! I was an expert witness on condominium and homeowner association law, an experienced litigator of all sorts of issues for these associations, and even had a “foreclosure mill” of my own, that enforced the liens and collected the money due, since it was rarely the case than anyone would let the property go just for unpaid assessments. But it had never occurred to me that in many if not most cases, the current round of fake securitized mortgages was sitting behind a valid lien from the association.

To make a long story short,”Yes,” I replied, “if the initial mortgage is defective or defects were introduced into the chain after the closing with the homeowner, then a properly filed and duly executed lien by the association would be sitting in either first position, or a position in which they could claim first position. This would greatly increase the likelihood of earlier and full payment of all outstanding liens, together with costs, and attorney fees and interest.”

The ramifications of this epiphany are enormous. Most of the new construction in recent years has been subject to governance by enabling documents creating an association that has the powers of assessment, rule enforcement, hiring contractors for common areas, hiring lawyers etc. Most of these associations are looking at much higher percentages of people who are not paying the assessments and not paying off the lien because they are already underwater. Or more correctly, perhaps we should say that they THINK they are underwater because they THINK that the mortgage is a valid recorded instrument that is enforceable. Most likely they are wrong and that is the message of this blog — to get people to stop and think before they abandon the most valuable asset in their lives — and now to stop associations from ignoring the value of their liens.

Most associations are looking at these liens as less than worthless. Some of them are not even bothering to file the liens. But if they foreclose on their lien, they could name the mortgage holder of record as a junior or non-existent lienholder because the lender of record is no longer due any money or never was dude any money depending upon whether they originated the loan with their own money or credit, or if they were simply the typical straw-man sitting in as a fee paid performer to look like a lender but act like one.

As we have seen in more and more cases, when institutional plaintiffs (associations included) make the same allegations as borrowers are making in the courts they are taken far more seriously by the Judges. Proactive associations  could therefore go after these liens aggressively and do a favor for everyone — except the banks who have no money in the deal anyway.

By knocking out the pretender lenders as an institutional plaintiff representing dozens, hundreds of even thousands of homeowners whose assessments will be effected by the non-payment by other homeowners, the Association clears an easy path for collection in full, and for the homeowner to retain the property and live in it, thus avoiding the future problem of a ghost town or half empty association where there is not enough money or resources to get the job done of running and maintaining the condominium, coop, or homeowner association. What these associations need is for their lawyers to get up to speed on securitized loans, get securitization searches like the one we offer (see link next to my picture) and file against the banks, who, in my opinion, will fall like dominoes, settling the claims of the association with payment in full.

Whether you go all the way through foreclosure or you settle with the pretender lender, the property owner (homeowner) will have the path cleared for him to make the same allegations, but this time with greater weight than is currently received in courts around the country.

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