Bankers Using Foreclosure Judges to Force Investors into Bad Deals

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“Foreclosure judges don’t realize that they are entering orders and judgments on cases that are not in front of them or in which they have any jurisdiction. Foreclosure Judges are forcing bad loans down the throat of investors when the investor signed an agreement (PSA and prospectus) excluding that from happening. The problem is that most lawyers and pro se litigants don’t know enough to make that argument. The investor bought exclusively “good” loans. Foreclosure judges are shoving bad loans down their throats without notice or an opportunity to be heard. This is a classic case of necessary and indispensable parties being ignored.”

— Neil F Garfield, www.livinglies.me

Editor’s Comment:  About three times per week, something occurs to me about what is going on here and then I figure it out or get the information from someone else. The layers of the onion are endless. But this one is a showstopper. When I started blogging in October 2007 I thought the issue of necessary and indispensable parties John Does 1-1000 and Jane Roes 1-100 were important enough that it would slow if not stop foreclosures. The Does are the pension funds and other investors who thought that they were buying mortgage bonds and the Roes were the dozens of intermediaries in the securitization chain.

Of course we know that the Does never got their bond in most cases, and even if they did they received it issued from a “REMIC” vehicle that wasn’t a REMIC and which did not have any money or bonds before, during or after the transaction. Instead of following the requirements of the Prospectus and Pooling and Servicing Agreement, the investment banker ignored the securitization documents (i.e., the agreement that induced the investor to advance the funds on a forward sale — i.e., sale of something the investment bank didn’t have yet). The money went from the investor into a Superfund escrow account. It is unclear as to whether the gigantic fees were taken out before or after the money went into the Superfund (my guess is that it was before). But one thing is clear — the partnership with other investors far larger than anything disclosed to the investors because the escrow account was from all investors and not for investors in each REMIC, which existed only in the imagination of the CDO manager at the investment bank that cooked this up.

We now know that in all but a scant few cases, the loan was (1) not documented properly in that it identified not the REMIC or the investor as the lender and creditor, but rather a naked straw-man that was a thinly capitalized or bankruptcy remote relationship and (2) the loan that was described in the documentation that the homeowner signed never occurred. The third thing, and the one I wish to elaborate on today, is that even if the note and mortgage were valid (i.e., referred to any actual transaction in which money exchanged hands between the parties to the agreements and documents that borrower signed) they never made it into the “pools” a/k/a REMICs, a/k/a Special Purpose Vehicle (SPV), a/k/a/ Trust (of which there were none according to my research).

The fact that the loan never made it into the pool is what caused all the robo-signing, fabrication of documents, fraudulent documents, forgeries, misrepresentations and corruption of both the title system and the court system. Because if the loan never made it into the pool, the investment banker and all the intermediaries that were used were depending upon a transaction that never took place at the level of the investor, to wit: the loan was not in the pool, the originator didn’t lend the money and therefore was not the lender, and the “mortgage” or “Deed of trust” was useless because it was the tail of a tiger that did not exist — an enforceable note. This left the pools empty and the loan from the Superfund of thousands of investors who thought they were in separate REMICS (b) subject to nothing more than a huge general partnership agreement.

But that left the note and mortgage unenforceable because it should have (a) disclosed the lender and (b) disclosed the terms of the loan known to the lender and the terms of the loan known to the borrower. They didn’t match. The answer was that those loans HAD to be in those pools and Judges HAD to be convinced that this was the case, so we ended up with all those assignments, allonges, endorsements, forgeries, improper notarizations etc. Most Judges were astute enough to understand that the documents were fabricated. But they felt that since the loan was valid, the note was real, the mortgage was enforceable, the issues of where the loan was amounted to internal bookkeeping and they were not about to deliver to borrowers a “free house.”  In a nutshell, most Judges feel that they are not going to let the borrower off scott free just because a document was created or executed improperly.

What Judges did not realize is that they were adjudicating the rights of persons who were not in the room, not in the building, and in fact did not even know the city in which these proceedings were being prosecuted much less the fact that the proceedings even existed. The entry of an order presuming or stating that the loan was in fact in the pool was the Judge’s stamp of approval on a major breach of the Prospectus and pooling and servicing agreement. It forced bad loans down the throat of the investors when their agreement with the investment banker was quite the contrary. In the agreements the cut-off was 90 days after closing and required a fully performing mortgage that was originated utilizing industry standards for due diligence and underwriting. None of those things happened. And each time a Judge enters an order in favor of for example U.S. Bank, as trustee for JP Morgan Chase Bank Trust 1234, the Judge is adjudicating the essential deal between the investor and the investment banker, forcing the investor to accept bad loans at the wrong time.

Forcing the investors to accept bad loans into their pools, probably to the exclusion of the good loans, created a pot of s–t instead of a pot of gold. It isn’t that the investor was not owed money from the investment banker and that the money from the investment banker was supposed to come from borrowers. It is that the pool of actual money sidestepped the REMIC document structure and created a huge general partnership, the governance of which is unknown.

By sidestepping the securitization document structure and the agreements, terms, conditions and provisions therein, the investment banker was able, for his own purposes, to claim ownership of the loans for as long as it took to buy insurance making the investment banker the insured and payee. But the fact is that the investment banker was at all times in an agent/fiduciary relationship with the investor and ALL the proceeds of ALL insurance, Credit Default Swaps, guarantees, and credit enhancements were required to be applied FIRST to the obligation to the investor. In turn the investor, as the real creditor, would have reduced the amount due from the borrower on each residential loan. This means that the accounting from the Master Servicer is essential to knowing the actual amount due, if any, under the original transaction between the borrower and the investors.

Maybe “management” would now be construed as a committee of “trustees” for the REMICs each of whom was given the right to manage at the beginning of the PSA and prospectus and then saw it taken away as one reads further and further into the securitization documents. But regardless of who or what controls the management of the pool or general partnership (majority of partners is my guess) they must be disclosed and they must be represented in each and every foreclosure and Trustees on deeds of trust are creating huge liability for themselves by accepting assignments of bad loans after the cut-off date as evidence of ownership fo the loan. The REMIC lacked the authority to accept the bad loan and it lacked the authority to accept a loan that was assigned after the cutoff date.

Based upon the above, if this isn’t a case where necessary and indispensable parties is the key issue, I do not know of one — and I won the book award in procedure when I was in law school besides practicing trial law for over 30 years.

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Getting the RIGHT Report: Rebutting the Presumptions That the Original Note and Transfers Had Any Legal Effect

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Editor’s Comment: The biggest problem to knocking the banks on their ass is the feeling deep down inside the homeowner that the loan is valid and so is the mortgage. So people are thinking in terms of buying time rather than winning the case. Lawyers are saying the same things to themselves even as they take your money to represent you which is why I started www.garfieldfirm.com — so we would have lawyers who are NOT thinking that way and to get hundreds of other firms to compete with passion in their hearts that the homeowner is the victim.

The current state of affairs is that in most cases, misguided Judges are forcing investors to take bad loans that do not conform with their agreement (e.g. cutoff required under Internal revenue Code and express PSA terms and conditions) in a process that  does not conform to the process of origination and transfer expressly stated in the PSA (as expressed in the prospectus and Pooling and Servicing Agreement), thus enabling the investment bank to throw the loss onto the investor in a newly fabricated (see Congress decision from June 8 in Alabama Appellate Court) — and the kicker is that investor knows nothing about the transaction or litigation and is presumed to have accepted the assignment of a non-existent loan. The borrower is being forced to pay on a non-existent loan or lose his or her house. And still the borrowers persist on thinking they are getting what they deserve, thus leaving the banks with the money while the investors and homeowners get nothing.

Only 2% of the mortgage loans are contested in any meaningful way and 80% go about it in the wrong way. I mean to change that 2% to 75% of the mortgages being contested, and reduce the number of mistakes such that only a small fraction of mortgage contests are done incorrectly.

Have you heard the term “Master Servicer”. Yes, well they are the ones actually orchestrating events on behalf of the investment bank that put up this illusion that we call securitization. They sold the pension funds on what? The pension funds advanced money to the investment banking firm which was placed into a super fund account from which closing money found its way to the closing table with the so-called borrower.

The real reports and accounting are those that are given to the creditor, not the borrower. The reports to the creditor come from the Master Servicer whereas the reports to the borrower come from the subservicer which doesn’t  have access to to creditor’s accounts so it is in no position to report, account or testify through affidavit or in person what the creditor’s ending balance is as of the day of the declaration of default or the day of the testimony. The subservicer’s proffer of testimony should be subject to voir dire in which they admit that there is a master servicer that keep the accounts for the creditor and the subservicer has no knowledge or access tot hat.

This is followed by an objection to the competency of the witness to testify as to anything other than transactions in which it received money from the borrower and transactions (never included) in which it paid out those moneys to the creditor.

Take great care here not to suddenly find yourself carrying the burden of proof on facts that are exclusively within the hands of the pretender or the agents of the pretender. Your motion should be directed at the incompetency of the witness to tesify as to the conclusion that there was a default and the fact that they declared the default without gaining access to the information from the Master Servicer. Hence the objection also to any documents being proffered to the court as evidence, since they clearly do not and cannot by definition establish the default. 

You don’t want to find youself in the position of having the Judge rule that the proffer of that evidence is sufficient for a prima facie case and that if you wish to rebut it you must come forward with proof of other payments. Since THEY are the party seeking affirmative relief, the burden should ALWAYS be on them to produce all relevant accounting and reports nefore they take the home away from a homeowner.

What the borrower and the Courts are getting are simple subservicer reports which amount to no more than a printout from a computer that may or may not have the right data, the right loan or the right starting figures. It may or may not have charges that are permissible or not permissible against the account. But the real information about the account balance is what the creditor is showing on its books and that information comes from the distribution reports and discovery of the accounting records of the Master Servicer and the Tax statements for the creditor.

But here is the kicker. The investment bank (Master Servicer) is NOT reporting the receipt of proceeds from insurance, credit default swaps, and other credit enhancements — not even to the investor. So they are manufacturing (fabricating) a loss that does not exist, at least in part. This is relevant to everything in a foreclosure including the identity of the creditor who is allowed to declare the default, and the identity of the creditor and the amount due so that real creditor can submit a real bid that is called a credit bid because it is the equivalent of the amount due ON THE ACCOUNT.

The magic sleight of hand trick being played is that the subservicer is giving the court an accounting of transactions with the alleged borrower when in fact the creditor is getting a completely different report, many of which show continuing payment from the subservicer or Master Servicer.

The borrower and borrower’s counsel are unaware and in most cases don’t even know enough to ask for these reports. The creditor is entitled to payment on his account — once and only once.  The fact is that insurance and credit default swaps are right there in the pooling and servicing agreements, and so are credit enhancements like overcollateralization and cross collateralization.

That is money that (a) should be reported and paid to the investor creditors and (b) allocated to the loan accounts’ principal reduction as an additional payment. In many cases the creditor’s balance is zero because the creditor has been paid off in total, settled or traded the bogus mortgage bonds for something else of value — which is to say that the “pool” or “trust” proffered by the attorney fro the pretender lender does not even exist anymore.

All this money came from “players” who knew the Wall Street game and were gambling with pension money, depositors money etc, contrary to law and common sense. In no way was any homeowner even mentioned by name much less offered the opportunity to look at the terms offered to the lender, which were substantially different that the terms offered to the homeowner. The homeowners’ signature on “loan papers” was in actuality the issuance of a security that was traded furiously even if it was procured by fraud in the inducement and fraud in the execution.

The result of this frenzy is that through multiple channels including the Federal discount window and the TARP bailout, together with the maiden-lane disposal of toxic waste loans, the creditors were satisfied leaving the homeowner owing nothing to the creditor that loaned him the money. The insurer and the issuer of the credit default swap expressly waived any right to enforce against the homeowner.

AND the homeowner was the innocent bystander who thought he was borrowing money from one party, received it from another and then issued negotiable paper that was filled with misrepresentations. So the pretenders have nothing but dirty hands and the borrowers are clean.

So there is an obligation out there that the homeowner might owe — but the debt that was created at the time of receipt of the funds was never described in any document. In fact, the debt described in the promissory note and mortgage never arose because there was no loan transaction between the homeowner and the originator. This actual debt arising out of an actual transaction in which money was received by or on behalf of the borrower came from a pipeline outside the transactions described in the origination documents and outside the scope of transactions referred to in allonges, assignments and endorsements all fabricated in order to keep the Judge’s eye on the wrong ball.

The real transaction was NOT subject to, described in or referred to in any deed of trust or mortgage and therefore was not secured. If not secured, no valid foreclosure could occur without some sort of waiver by the homeowner that was clear and unequivocal or some order of the court based upon a judicial proceeding in which the terms of the loan are established by court order as of a date that the order says it is effective. Every document relied upon by the pretender lenders was a lie. It described transactions that never occurred. Thus every foreclosure based upon such documents was also a lie.

Interrogatories, requests for Admission and especially requests to produce (not just the documents but the financial records showing that consideration was paid by the party or to the party stated in the instrument), Motions to set aside, vacate, recuse, remove counsel, sanctions, discovery, and reconsideration are being filed to (a) obtain relief and (b) allow the record to be created for appellate review. Without a good record on appeal, the appellate court is hamstrung to affirm a decision it thinks was wrong.

Distribution reports are your first clue that they left out an accounting that they had and we didn’t and they refused to give up. Notice that WF is the party reporting and disclaims the accuracy. Then who DOES know what went on, where are they and was the loan balance even computed on the day that the loan was declared in default — i.e., what did the CREDITOR (not the subservicer) show as the balance due? Getting the “accounting” from the subservicer is useless. If you had 10 children and you gave them each $100 with the responsibility to account for the money, why would you only take the accounting from one of them?

 

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Information vs. Evidence: Challenge to Affidavit in Support of Summary Judgment

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Editor’s Comment:

I’ll be appearing soon at one of Darrell Blomberg’s Strategy Meetings (which take place every Tuesday evening at Macayo Restaurant in Central Phoenix) to do a session on evidence on June 19. The analysis below is the type of thing I do to support lawyers and litigants when the pretender lender submits a bogus “affidavit” in support of some action, usually a Motion for Summary Judgment. Among other things this is what we’ll be talking about on June 19 and this will be subject of much more discussion on July 26 at my 1/2 day seminar overview for Lawyers.

Analysis of Declaration in Support of Motion for Summary Judgment

  1. “These facts are personally known to me to be true.” How does he know them? — was he there, did he hear, did he see or was he told and he believes them and therefore he means “personally known” as meaning he knows the people who told him the facts. NOTE: if he was a supervisor of a specific department dealing with the past factual issues leading up to the foreclosure and related issues, and if he can prove that the documents or statements were made in the ordinary course of business and at that time they had no fear or thought of being used in litigation, then it MIGHT be an exception to the hearsay rule.
  2. Otherwise anything he was told or shown are excluded because they (OBJECTION:) lack FOUNDATION because he is not a competent witness to establish the authenticity of the document nor the truth of the matters asserted therein.
  3. In this case the entire affidavit should be struck, it should not be considered to support the motion for summary judgment, and the motion for summary judgment MUST be denied unless they have other affidavits timely filed from people who can establish that they have personal knowledge.
  4. He is the President which most likely means that he had nothing to do with any of the facts of this case and only became aware of the the existence of the case when he was called to execute an affidavit. In fact he identifies himself as the President of a company whose function was to be (1) the “foreclosure trustee” and (2) limited signing agent for the beneficiary under “the deed of trust” without identifying the deed of trust.
  5. Unless he was doing the work himself he is admitting that he is relying upon the word and work of others and is subject to a hearsay objection.
  6. The business records exclusion to the hearsay rule must be proven by the proponent of the exemption, not the objector which means he must prove with documents and testimony how the facts upon which he is testifying became known to him in the ordinary course of business which means that he reviews all documents as they come in, which of course he does not. Neither does he perform the work involved. The trap door to avoid here is that even if he were to satisfy all the requirements, which he obviously cannot, his knowledge is ALL limited to events that occurred before the decision was made to foreclose and there fore the receipt of an accounting from the sub-servicer, no account from the master-servicer and no accounting or instruction or authority from the creditor to go ahead with the foreclosure and submit a credit bid in the name of the identified creditor.
  7. Since his company is the “foreclosure trustee” he is admitting that they only have knowledge on their own as to matter that occurred AFTER they received the file or instructions and we ought to know which it was — the file or the instructions.
  8. Since he identifies his company as the foreclosure trustee he is admitting that the sole purpose of the company, even though it was called a trustee, was to foreclose on the property after the substitution of trustee.
  9. They were ordered to foreclose and NOT to perform due diligence or to take any action to protect BOTH the homeowner and the purported creditor, who in this case is a stranger to the transaction as required by statute.
  10. The Trustee is a substitute for the court and if the facts are in dispute the trustee has no power to decide the merits of competing claims (trustee is a not a special master who can conduct hearings and rule on evidence or make recommendations of findings to the court), which means that the his company was duty bound, upon learning of competing claims, to take the matter to court if the parties could not resolve their differences.
  11. Specifically the “trustee” should have filed an interpleader action in which the trustee would have stated that they had no stake in the transaction (something that was untrue since they were a controlled or owned entity by the party pretending to be the creditor) and that that there is a dispute of facts concerning the procedure and substance of the foreclosure and that the court must rule on the competing claims of the parties — after BOTH have submitting pleadings stating their positions and then proving the claims in accordance with the rules of civil procedure, due process and the rules of evidence and the doctrines concerning the burden of proof.
  12. If you sign this response as an affidavit, then the burden shifts to them to show that they are truly a trustee and not just an agent of the pretender creditor.
  13. Since the party seeking affirmative relief is the pretender creditor seeking to take the house using a credit bid instead of cash when they are not the creditor, the pretender creditor would be required first to submit the pleading and exhibits upon which they depend, and second the homeowner would be required to file responsive pleading — motion to dismiss, motion to strike, etc. or answer, affirmative defenses and counterclaim.
  14. He identifies the COMPANY as the limited signing agent for the beneficiary. There is no definition of limited signing agent. A review of statutes and common law reveals that this term has never been used in any legal document or case EXCEPT where it refers to a notary who is identified by name and license number. It does NOT refer to the authority of any company or person to sign on behalf of another party or company without a separate document providing said authority properly executed and binding under the laws of the state in which the grantor is located and the laws in which the document is to be used. LIke MERS was a naked nominee and the “lender” was a “naked nominee” a limited signing agent is a naked nominee meaning, in the parlance of the industry a bankruptcy remote vehicle that will perform acts which might otherwise subject the principals to criminal or civil liability. It is also used to conceal the the identity of the principals.
  15. Which deed of trust? The one allegedly executed by the homeowner which may or may not be the one produced as the original but without scrutiny cannot be authenticated as anything more than a fabricated document utilizing modern technology and a color printer?
  16. “I have personally reviewed the files.” This phrase has been repeatedly thrown out as establishing the business record exception. The fact  is that somehow he saw documents without establishing how they came into his possession and who the parties are (why are THEY not testifying?) and what knowledge THEY had, who prepared the documents in the file, what security was used for the posting of data to the files, and what security was employed in maintaining the security of the files?
  17. This is layers upon layers of hearsay without any valid exemption. Motion to strike the affidavit.
  18. Motion to remove NDEX as trustee,
  19. Motion to void the substitution of trustee and install the original trustee as the trustee on the deed of trust or some other actually independent party.
  20. Objection in title registry office to the recording of the substitution of trustee because they knew that NDEX was not a trustee but rather was the foreclosure agent, as admitted by this affidavit, masquerading as the substituted trustee
  21. Motion for sanctions and cause of action for slander of title for filing false substitution of trustee directed at parties named on the substitution of trustee and the parties who prepared it and the lawyers who presented it knowing that it was a falsified, fabricated and forged fraudulent document.
  22. “My experience as the officer of the company provides the foundation for my knowledge referenced herein.” This is an outright admission and should be the leading the point. He is saying that he has been in the business a long time so looking at the the records of the homeowner in this case is like looking at the records of thousands of others where he made the same decision (but we must emphasize that he undoubtedly did not and specifically does not say that he reviewed other documents). It is an admission that he has NO PERSONAL KNOWLEDGE of the documents, that therefore the affidavit is worthless, and that therefore the affidavit is not the required foundation for admission of the documents because he, the affiant is not a  competent witness (look up competent witness in CA statutes and common law requiring OATH, PERSONAL perception sight,hearing etc., MEMORY and the ABILITY to COMMUNICATE. In fact, he has disqualified his entire firm as a foundation witness since by definition (foreclosure trustee) they received the documents after the decision was made by parties outside the chain of title to foreclose.
  23. “I have personal knowledge of the accuracy of the records.” He already said he doesn’t and that he (a) received the documents when they were to be foreclosed and (b) relied upon his experience when he reviewed the documents, but still fails to state who prepared the data or documents, how they were kept, when they were kept, where they were kept and who was involved. ALl of this could be easily resolved had they chosen the people who actually DID have knowledge, But they didn’t do that. Why? Because either those people refuse to testify to the facts that they want or those people are MIA after being downsized.
  24. At no time does he say that his company acted as the servicer, creditor, or master servicer. He merely says that they received data and documents from unknown undisclosed sources AFTER the decision to foreclose was already made. By definition neither he nor his company would be competent to testify to facts or documents or data that occurred PRIOR to the time that his company was the “foreclosure trustee”
  25. There is no reason to believe that any unauthorized person had access. Nor is there any reason to believe that unauthorized access didn’t occur on a regular basis, just like MERS.
  26. The rest of the paragraphs say what I said above — he knows nothing, saw nothing, heard nothing and was never in any contract with borrower or anyone else as a servicer, never handled any money, and posting, or anything else.
  27. Paragraph 16 is a particularly interesting because to corroborates the argument that they were NOT acting as trustee, they were acting as agent. He says that his company acts ONLY as a limited signatory agent to sign and record the Notice of Default (why doesn’t the creditor do that if this company is not the service nor the conduit or collector of any funds) and that the ONLY other function was to serve as “foreclosure trustee.”
  28.  The last paragraph says it all. They foreclosed because they acted on instructions from the loan servicer without any regard for what the homeowner had to say in objection to the allegations of the loan servicer. (see discussion on interpleader above).

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Information vs. Evidence

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Editor’s Comment:

I’ll be appearing soon at one of Darrell Blomberg’s Strategy Meetings (which take place every Tuesday evening at Macayo Restaurant in Central Phoenix) to do a session on evidence. And in fact, I am thinking about a half-day seminar on evidence, with Darrell as a co-presenter, he may not be a lawyer but he gets it — there is a huge difference between information (data) and evidence. And there is a huge difference between evidence and admissible evidence. And in discovery, you have the right to pursue information in interrogatories, requests for admissions and requests to produce for INFORMATION that might lead to the “discovery” of admissible evidence.

I am adding this overview into the 2d edition Workbook, Treatise and Practice manual. I want to get this lesson out to lawyers and litigants as quickly as possible. And the reason is that these people have forgotten or never knew the difference and they certainly are confused about the procedure. Take a look at the appeals court decisions that slap down the borrower. There is almost always a statement in the opinion that appellant argues XYZ but we don’t see X or Y in the record. In the absence of X and Y being in the record, the appellate court has no authority to find Z and rule in favor of the appellant (borrower).

Every appellate case I have read that ruled against the homeowner falls into this category. Every one of them has a recitation of “facts”, “history” or “background” that is simply untrue but has been made part of the record and which is regarded as “evidence” because it is in the record.

Example: The primary recital in these appeals usually says something like, “The appellant is John Jones. John Jones applied for and received a loan from Mama’s Money Farm on October 16, 2008 in the amount of $869,000. Jones promised to repay the money in monthly installments as set in the promissory note and mortgage (or Deed of Trust) which he signed. Wells Fraudgo is the current holder of that note and seeks enforcement through the power of sale (or in judicial states, through a foreclosure lawsuit) seeking collection of the money due and sale of the home at auction to the extent that the borrower is unable to make the required payments. Jones defaulted on the note by failing to comply with the schedule of payments in the note he executed for the loan he received, to wit: he stopped making the payments that were due under the note on January 1, 2009.”

How did this recital get into the record so that the appellate court could include it in its opinion justifying the affirmation of the trial court’s decision throwing the borrower out of court and even telling the borrower they were “vexatious” etc (Madison v. MERS et al see previous blog post 6-6-2012 entitled “They Will Get You on Procedure Every time”)?  It got there without any evidentiary hearing or without any hearing in which the borrower’s claims and defenses could be given a fair hearing, with full rights of discovery etc.

This could only happen if the litigant was quiet while the lawyer for the pretender lender “proffered” these facts in his opening narrative of each hearing and the homeowner or his attorney failed to object immediately. “Wait your turn” is the polite way of saying let the other guy talk. But if you let the other guy talk and THEN bring up your defenses and claims, your procedural objections, the Judge has already formulated an opinion about the nature of this case. You might buy some time with procedural irregularities but you won’t win the case, force the other side into a settlement, mediation or modification and you certainly won’t get rid of the mortgage that is recorded in the county title registry.

You will be treated like a deadbeat because you have inadvertently confessed to being a dead beat. You have agreed, without realizing you agreed, that everything the lawyer for the pretender lender has said is true, which means that the statements (proffers) of the other lawyer are now evidence in the record, and the rest of the case was you saying “yes but….”

Trial note 101: Never let go of the narrative regardless of who is speaking but always be polite, courteous and respectful in your words even if you make various faces and expressions that the court reporter is missing. Oh yes — if you want a record on appeal you need a court reporter. Your statements about what the Judge said or what happened in court in your appellate brief is useless and will be properly disregarded by any court reviewing the actions in the court below.

So here is what you want the appellate court to see in the record. First a Notice of filing of everything you would offer into evidence that might be rejected by the court. This would include my expert declaration (although I think we found a couple more people with the right credentials to survive as experts located in Maryland) and all exhibits to the reports, opinions and affidavits that you have showing that that you have some reason (not necessarily proof) for denying the debt, denying the default, denying the note, denying the mortgage and denying that the pretender lender is either the lender or anyone who purchased the loan.

Second, a Motion to set discovery schedule together with a SHORT version of your discovery requests.

Third, a transcript showing continual interruptions with proper objections like “Objection your Honor, we demand proof of authority to represent. In cases all over the country this pretender lender and others are represented by lawyers who never speak with the client, don’t get retained by the client and who only know that someone gave them a file that was recently minted from the fabrication factory of fake, forged and fraudulent documents.”

“Objection your honor, counsel is attempting to proffer facts that are not in evidence and that are vehemently denied by the homeowner who is being improperly identified as the borrower.”

“Objection your honor, counsel is attempting to proffer facts or even testify as to matters that are not in the record. If counsel wants to testify then let’s get him sworn in and put in a witness chair where I can cross examine him as to the foundation for his pretender personal knowledge regarding this bogus loan and fraudulent foreclosure.”

Objection: “Counsel is attempting to get into the record that which he could never get into evidence were this an evidentiary hearing. The homeowner vehemently denies that the application on file was filled out by him or that he authorized it. My client denies the signature is valid either because it was forged or it was procured by fraud in the execution in which case he thought he was signing something else while hands covered the true nature of the document.”

“Objection your honor.  Counsel is trying to proffer information into the record that will be perceived as evidence. My client rejects that recital and denies that he ever received a loan from Mama’s Loan Kitchen, denies that the promissory note correctly recited the terms of the loan and therefore denies that the mortgage lien was properly perfected. He further denies that there was any default on any loan and therefore denies that any assignment from Mama to Fraudgo could have been valid. He further denies that the assignments stating “for value received” involved any transaction where any value was received and therefore failed for lack of consideration. He further denies that even if the documents relied upon by the Fraudgo were valid, there would still be no default because the creditor was being paid without interruption according to their very own Pooling and Servicing Agreement and he denies there ever was a meeting of the minds (although the Fraudgo agents from Mama’s Money Kitchen made it appear to the homeowner that the proper disclosures were made, that the lender agreed to these terms) when in fact the lender (the actual source of funds) agreed to an entirely different set of terms for repayment.”

“Your honor it is our position that the promissory note described a transaction that never occurred and that the mortgage was an encumbrance based upon the false representations of the note. This is like one lying and the other swearing to it. If they are not afraid of proving their allegations then by all means we don’t want to deprive the pretender lender of an opportunity to be heard in court. But the homeowner is entitled to the same consideration under the requirements of due process. The homeowner denies that he failed to make any payment that was due and he denies that the obligation to the real lenders (creditors) in this case is currently in default.”

Evidence is whatever the Court lets in as evidence in which case the court says it is letting the information in as evidence to prove that ABC happened. Or, as is usually the case in these foreclosure cases, evidence comes from silence of the lambs.

So if you want to box in the trial judge and the appellate court let there be a record that shows you followed the rules, there were genuine issues of material fact and the trial court still would not allow the homeowner to proceed. That’s enough to eventually get a ruling that allows discovery to proceed.   And Discovery is the magic key to the kingdom of settlement — but probably not until after 5-6 motions to compel answers or better answers to our discovery requests.

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Madison v. MERS et al

Madison v MERS et al

Editor’s Comment:

The Madison decision from the Arizona Appellate Court is an example of two warnings that I have repeatedly stated on these pages, in my books and in my seminars.  First doing an appeal yourself without getting appropriate advice from competent licensed counsel is most likely to result in failure.  It is a rare layman who understands the Rules of Civil Procedure.  And it is even more rare that a layman understands the Rules of Appellate Procedure.

As a result, the Madison decision will be used as yet more ammunition against homeowners, borrowers, and lawyers to “prove” that their defenses are frivolous when in fact the court of appeals decision states the opposite – even while they rule against the borrower.  On appeal the only thing the appellate court is permitted to review are those items on the record.  This is further restricted by the items that are presented as issues on appeal.  The homeowner, appearing on her own behalf, missed two opportunities to force the pretender lenders into a contested adversary position.

Like many other states, Arizona has section 33-811[c]which mandates waiver of all defenses to a trustee’s sale if the objecting party fails to obtain an injunction before the sale date.  The problem here is that the statute is worded improperly but that issue was never raised.  Obtaining an injunction requires a lawsuit filed against the Trustee and the pretender lenders which results in the issuance of a Temporary Restraining Order and which the homeowner will result in the issuance of a permanent restraining order.

Virtually all non-judicial states have a similar provision.  The obvious problem with this provision which violates due process on its face is that it requires the homeowner to first prove his or her case in court before being allowed to assert and pursue defenses and counterclaims. 

This is precisely the issue addressed in the second edition Attorney’s Workbook regarding the realignment of parties.  In a judicial state all that a homeowner is required to do is deny the allegations of the pretender lender.  This puts the matter at issue and allows the homeowner/borrower to proceed with discovery and all other pre-trial motions.  The Arizona statute relied upon by the appellate court requires the homeowner to utilize a crystal ball to determine the allegations of the pretender lender and then win at a preliminary hearing on the merits of the defenses to a claim that has never been filed. 

The issuance of the TRO in non-judicial states is discretionary and not ministerial or mandatory.  Thus the burden of proof is improperly put on the defending party before the proponent seeking affirmative relief (taking the house) is required to file any pleadings or produce any evidence that could be subject to court scrutiny or challenge by the homeowner. 

As applied, Arizona Revised Statue 33-811 [c] is clearly unconstitutional and violates due process.  The homeowner should simply be permitted to deny the factual allegations contained in the Notice of Default and Notice of Sale.  The appropriate party to bring a lawsuit is not the borrower but either the Trustee or Beneficiary.  Once the borrower has denied the factual allegations, the matter should be converted to a judicial foreclosure which is provided for in Arizona Statutes.  In the absence of the beneficiary starting such a lawsuit, it is the trustee who should file an action in interpleader stating that the Trustee is an uninterested party with no stake in the outcome and alleging that there are two parties each of whom allege an interest in the subject matter of the lawsuit and which are in conflict with each other.  The Trustee, not having the power to conduct hearings (the Trustee is not a special master) has no choice but to take unresolved issues to the court and make its claim for attorney’s fees, costs and expenses to having had to file the interpleader.

Naturally Maidson failed to raise any of these issues. So the appellate court was left with a statue which is “on the books” and which operates to waive all defenses of the homeowner to the Trustee’s sale – in the event the homeowner fails to obtain an injunction before the sale date.  In the Madison case, needless to say, the homeowner failed to obtain and apparently failed to seek an injunction prior to the sale.  Therefore the appellate court was perfectly within its right to simply affirm the trial court’s decision that stated that the homeowner had no right in this instance to assert any defenses.

In such cases of such conflicts of obvious due process the ACLU and other such organizations have occasionally been successful in having an appellate court rule on an issue that was never presented in the trial court and may not even have been presented in the initial briefs of the parties on appeal. 

Hence the outcome of this case, like so many others, was a foregone conclusion simply based on the most simple application of statutory law and the rules of civil procedure as they are currently applied in Arizona. 

Failing to obtain the TRO is therefore the same as admitting all of the allegations of fact contained in the Notice of Default and Notice of Sale and all of the allegations that would have been pled in a judicial foreclosure.  The court affirmed the trial court’s decision to dismiss the homeowner’s lawsuit. 

The kicker in this case is that the appellate court went on to overrule the trial court for having declared Madison a vexatious litigant and further restricting her ability to file future lawsuits.  This was not only a violation of due process it was a demonstration of court bias and I invite attorneys who are committed to the movement to assist Madison in attacking the bias of the trail judge and getting the decision of the trial judge vacated thus rendering the appellate decision moot. 

It is plainly outrageous for any judge to declare that a litigant is vexatious or frivolous when they clearly have never been heard on the merits of any of their claims or defenses.  The retired judge who heard this case should be prevented from hearing any further cases involving foreclosures or related evictions or any other such cases. 

Without beating a dead horse the section of the opinion entitled “background” clearly shows that Madison failed to deny the essential elements of the foreclosure and therefore all of the obvious issues regarding the identity of the creditor, the status of the loan, the nature of the actual transaction, the substitution of beneficiary, the substitution of trustee, and all the other claims and defenses were deemed admitted by both the trial court and the appellate court.  If the case can be reopened on the basis of the bias of the judge and the bias can be shown to have predated the decision that was appealed and if that results in vacating the entire order the homeowner might have had an opportunity to obtain the injunction and assert the claims and defenses, and attack the statute as it is applied.

 This is the reason why I reluctantly agreed to start a national law firm to assist homeowners and borrowers and their lawyers.  I have been doing nothing but writing, educating, and consulting for 5 years only to see the work and analysis performed by me or my team to be presented improperly and after which most defenses and claims were waived.  In the GarfieldFirm.com all of the attorneys recruited will be required to follow appropriate professional standards in the research and advocacy of the positions of clients who sign up for representation. 

There is no guarantee of any result when you hire any attorney or any professional.  The only guarantee is that they will apply their best efforts on your behalf.  The GarfieldFirm.com is a operating under a business model which requires a 50-state rollout to oppose all of the foreclosure mills who currently act in concert with each other.  Their opposition will now be an organized and consistent challenge to the fraudulent proffers of false, forged and fabricated facts and evidence in and out of court.  As I have stated before, we are only halfway through this mighty contest.  Until now we have been taking all the punches.  Now it is our turn.

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Still Pretending the Servicers Are Legitimate

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Editor’s Comment:

I keep waiting for someone to notice. We all know that the foreclosures were defective. We all know that in many cases independent auditors found that strangers to the transaction submitted credit bids that were accepted by the auctioneer, and that in the non-judicial states where substitutions of trustees are always used to replace an independent trustee with one owned or controlled by the “new creditor” the “credit bid” is accepted by the creditor’s agent even if the trustee has notice from the borrower that neither the substitution of trustee nor the foreclosure are valid, that the borrower denies the debt, denies the default and denies the right of the “new creditor” to do anything.

In the old days when we followed the law, the trustee would have only one option: file an interpleader lawsuit in court claiming two stakeholders and that the trustee is not a stakeholder and should be reimbursed for fees and costs. Today instead of an interpleader, it is a foreclosure because the “creditor” is holding all the cards.

So why is anyone surprised that modifications are rejected when in the past the debtor and borrower always worked things out because foreclosure was not as good as a work-out?

Why do the deeds found to be lacking in consideration with false credit bids still remain on the books? Why hasn’t the homeowner been notified that he still owns the property and has the right to possession?

And why are we so sure that the original mortgage has any more validity than the false documents to support fraudulent foreclosures? Is it because the borrower’s signature is on it? OK. If we are going to look at the borrower’s signature then why do we not look at the rest of the document and the facts alleged to have occurred in those documents. The note says that the payee is the lender. We all know that isn’t true. The mortgage says the property is collateral for payment to the payee on the note. What first year law student would fail to spot that if the note recited a loan transaction that never occurred, then the mortgage securing the payments on the false transaction is no better than the note?

So if the original transaction was defective and the servicer derives its status or power from the origination documents, then who is the servicer and why is he standing in your living room demanding payment and declaring you in default?

If any reader of this blog somehow convinced another reader of the blog to sign a note and mortgage, would the note and mortgage be valid without any actual financial transaction. No. In fact, the attempt to collect on the note where I didn’t make the loan might be considered fraud or even grand theft. And rightfully so. I am told that in some states the Judges say it is the absence of anyone else making an effort to collect on the note that proves the standing of the party seeking to enforce it. Really?

This sounds like a business plan. A lends B money. B signs papers indicating the loan came from C and C gets the mortgage. B is delinquent by a month and having lost his job he abandons the property. D comes in and seeks to enforce the mortgage and note and nobody else is around. The title record is still clear of any foreclosure activity. D says he has an assignment and produces a false forged assignment. Nobody else shows up. THAT is because the parties in the securitization chain are using MERS instead of the public record title registry so they didn’t get any notice. D gets the foreclosure after substituting trustees in a non-judicial state or doing absolutely nothing in a judicial state. The property is auctioned and D submits a credit bid which is accepted by the auctioneer. The clerk or trustee issues D a deed upon foreclosure and D immediately transfers the property to XYZ corporation that he formed the day before. XYZ sells the property to E for $300,000. E pays D $60,000 down payment and gets a mortgage from ABC Lending Corp. for the other $240,000. ABC Lending Corp. sells the note and mortgage into the secondary market where it is sliced and diced into parcels that are allocated into one or more REMIC special purpose vehicles.

Now B comes back and finds out that he was never foreclosed on by his lender. C wakes up and says they never released the mortgage. D took the money and ran, never to be heard from again. The investors in the REMIC trusts are told they bought an invalid mortgage or one in which the mortgage has second priority instead of first priority. E, who bought the property with $60,000 of his own money is now at risk, and when he looks at his title policy and makes a claim he is directed to the schedules of exclusions and exceptions that specifically cover this event. So no title carrier is going to pay. In fact, the title company might concede that B still owns the property and that C has the first mortgage on it, but that leaves E with two mortgages instead of one. The two mortgages together total around $500,000, a price that E’s property will never reach in 20 years. Sound familiar?

Welcome to USA property law as it was summarily ignored, changed and enforced for the past 10 years? Why? Especially when it turns out that the investment broker that sold the mortgage bonds of the REMIC knew about the whole story all along. Why are we letting this happen?


Discussion Started Between Livinglies and AZ Attorney General Tom Horne

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Editor’s Comment:

Dear Kathleen,

Thank you very much for taking my call this morning.

The question that Neil F. Garfield, Esq. had asked AZ Attorney General Tom Horne at Darrell Blomberg’s meeting was:

Why is the Arizona Attorney General not prosecuting the banks and servicers for corruption and racketeering by submitting false credit bids from non-creditors at foreclosure auctions?

Please feel free to browse Mr. Garfield’s web blog, www.LivingLies.wordpress.com as you may find much of the research and many of the articles to be relevant and of interest.

Mr. Garfield wishes the following comments and observations to be added, in order to clarify the question being asked.

It should probably be noted that in my own research and from the research from at least two dozen other lawyers whose practice concentrates in real property and foreclosures have all reached the same conclusion.  The submission of a credit bid by a stranger to the transaction is a fraudulent act.  A credit bid is only permissible in the event that the party seeking to offer the bid meets the following criteria:

1.  The homeowner borrower owes money to the alleged creditor

2.  The money that is owed to the alleged creditor arises out of a transaction in which the homeowner borrower agreed to the power of sale regarding that debt

3.  Any other creditor would be as much a stranger to the transaction as a non-creditor

Our group is also in agreement that:

4.  Acceptance of the credit bid is an ultra vires act.

5.  The deed issued in foreclosure under such circumstances is a wild deed requiring the title registrar to attach a statement from the office of the title registrar (for example Helen Purcell) stating that the deed does not meet the requirements of statute and therefore does not meet the requirements for recording.

6.  In the event that nobody else is permitted to bid, the auction violates Arizona statutes.

And we arrived at the following conclusions:

7.  In the event that there is no cash bid and the only “bid” was accepted as a cash bid from either a non-creditor or a creditor whose debt is not secured by the power of sale, no sale has legally occurred.

8.  The applicable statutes preventing the corruption of the title chain by such illegal means include the filing of false documents, grand theft, and evasion of the payment of required fees.

9.  This phenomenon is extremely wide spread and based upon surveys conducted by our office and dozens of other offices (including an independent audit of the title registry of San Francisco county) strongly suggest that the vast majority of foreclosures in Arizona resulted in illegal auctions, illegal acceptance of a bid, and illegal issuance of a deed on foreclosure-which resulted in many cases in illegal evictions.

10.  Federal and State-equivalent RICO may also apply, as well as Federal mail fraud which should be referred to the US Attorney.

CONSTITUTIONAL CHALLENGE TO THE NON-JUDICIAL SALE STATUTE AS APPLIED.

It should also be noted that all the same attorneys agreed that the use of an instrument called “Substitution of Trustee” was improper in most cases in that it removed a trustee owing a duty to both the debtor and the creditor and replaced the old trustee with an entity owned or controlled by the creditor.

This is the equivalent of allowing the creditor to appoint itself as Trustee.

In virtually all cases in which a securitization claim was involved in the attempted foreclosure the Substitution of Trustee was used exactly in the manner described in this paragraph.  This method of applying the powers set forth in the Deed of Trust is obviously unconstitutional as applied.

Constitutional scholars agree that the legislature has wide discretion in substituting one form of due process for another.  In this case, non-judicial sale was permitted on the premise that an independent trustee would exercise the ministerial duties of what had previously been a burden on the judiciary.

However, the ability of any creditor or non-creditor to claim the status of being the successor payee on a promissory note, being the secured party on the Deed of Trust, and having the right to substitute trustees does not confer on such a party the right to appoint itself as the trustee, auctioneer, and signatory on the Deed upon foreclosure nor to have submitted a credit bid.

We are very interested in your reply.  If your office has any cogent reasons for disagreement with the above analysis, we would like to “hear back from you” as you promised at Mr. Blomberg’s meeting 22 days ago.  We would encourage you to stay in touch with Mr. Blomberg or myself with regard to your progress in this matter in as much as we are considering a constitutional challenge not to the statute, but to the application of the statute on the above stated grounds.

Thank you for your time and consideration,

Sincerely

Neil F Garfield esq

licensed in Florida #229318

www.LivingLies.wordpress.com

Arizona Supreme Court Hogan Case Holds that Note is Not required to Start Foreclosure

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the trustee owes the trustor a fiduciary duty, and may be held liable for conducting a trustee’s sale when the trustor is not in default. See Patton v. First Fed. Sav. & Loan Ass’n of Phoenix, 118 Ariz. 473, 476, 578 P.2d 152, 155 (1978).” Hogan Court

Editor’s Comment: Here is another example of lawyers arguing out of a lack of understanding of the securitization process and trying to compress an elephant into a rabbit hole. They lost, unsurprisingly.

If you loaned money to someone, you want the money repaid. You DON’T want to be told that because you don’t have the note you can never enforce the loan repayment. You CAN start enforcement and you must prove why you don’t have the note in a credible way so that the court has footprints leading right up to the point that you don’t have the note. But the point is that you can start without the note. 

The Supreme Court apparently understood this very well and they didn’t address the real issue because nobody brought it up. The issue before them was whether someone without the note could initiate the foreclosure process. Nobody mentioned whether the same party could submit a credit bid at the auction which is what I have been pounding upon for months on end now.

Apparently, right or wrong, the feeling of the courts is that there is a very light burden on the right to initiate a foreclosure whether it is judicial or non-judicial. It is very close to the burden of the party moving to lift stay in a bankruptcy procedure. Practically any colorable right gives the party enough to get the stay — because the theory goes — whether it is a lift stay or starting the ball rolling on a foreclosure there is plenty the borrower can do to  oppose the enforcement procedure. I don’t agree with either standard or burden of proof in the case of securitized mortgages but it is about time we got real about what gets traction in the courtroom and what doesn’t.

In the Hogan case the Court makes a pretty big deal out of the fact that Hogan didn’t allege that WAMU and Deutsch were not entitled to enforce the note. From the court’s perspective, they were saying to the AG and the borrowers, “look, you are admitting the debt and admitting this is the creditor, what do you want from us, a free pass?”

This is why you need real people with real knowledge and real reports that back up and give credibility to deny the debt, deny the default, deny that WAMU and/or Deutsch are creditors, plead payment and force WAMU and Deutsch to come forward with pleadings and proof. Instead WAMU and Deutsch skated by AGAIN because nobody followed the money. They followed the document trail which led them down that rabbit hole I was referencing above.

In order to deny everything without be frivolous, you need to have concrete reasons why you think the debt does not exist, the debt does not exist between the borrower and these pretender lenders, the debt was paid in full, and deny that the loan was NOT secured (i.e. that the mortgage lien was NOT perfected when filed).

For anyone to do that without feeling foolish you must UNDERSTAND how the securitization model AS PRACTICED turned the entire lending model on its head. Then everything makes sense, which is why I wrote the second volume which you can get by pressing the appropriate links shown above. But it isn’t just the book that will get you there. You need to give rise to material, relevant issues of fact that are in dispute. For that you need a credible report from a credible expert with real credentials and real experience and training.

I follow the money. In fact the new book has a section called “Show Me the Money”. To “believe” is taken from an ancient  language that means “to be willing”. I want you to believe that the debt that the “enforcers” doesn’t exist and never did. I want you to believe that the declarations contained in the note, mortgage (deed of trust), substitution of trustee etc. are all lies. But you can’t believe that unless you are willing to consider the the idea it might be true. That I might be right.

At every “Securitized” closing table there were two deals taking place — one perfectly real and the other perfectly unreal, fake and totally obfuscated. The deal everyone is litigating is the second one,  starting with the documents at closing and moving up the chain of securitization. Do you really think that some court is going to declare that everyone gets a free house because some i wasn’t dotted or t crossed on the back of the wrong piece of paper when you admit the debt, the default and the amount due?

It is the first deal that is real because THAT is the one with the money exchanging hands. The declarations contained in the note, mortgage and other documents all refer to money exchanging hands between the named payee and secured party on one side and the borrower on the other. The deal in those documents never happened. The REAL DEAL was that money from investor lenders was poured down a pipe through which the loans were funded. The parties at the closing table with the borrower had nothing to do with funding; acquiring, transferring the receivable, the obligation, note or the mortgage or deed of trust.

Every time you chase them down the rabbit hole of the document trail you miss the point. The REAL DEAL had no documents and couldn’t possibly be secured. And if you read the wording from the Hogan decision below you can see how even they would have considered the matter differently if the simple allegation been made that the borrower denied that WAMU and Deutsch had any right to enforce the note either as principals or as agents. They were not the creditor. But Hogan and its ilk are not over — yet.

There is still a matter to be determined as to whether the party who initiated the foreclosure is in fact a creditor under the statute and can therefore submit a credit bid in lieu of cash. THAT is where the rubber meets the road — where the cash is supposed to exchange hands. And THAT is where nearly all the foreclosures across the country fail. The failure of consideration means the sale did not take place. If the borrower was there or someone for him was there and bid a token amount of money it could be argued in many states that the other bid being ineligible as a credit bid, the only winning bidder is the one who offered cash.

————————————————————

Hogan argues that a deed of trust, like a mortgage, “may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation the mortgage secures.” Restatement (Third) of Prop.: Mortgages § 5.4(c) (1997); see Hill v. Favour, 52 Ariz. 561, 568-69, 84 P.2d 575, 578 (1938).

-6-
We agree. (e.s.) But Hogan has not alleged that WaMu and Deutsche Bank are not entitled to enforce the underlying note; rather, he alleges that they have the burden of demonstrating their rights before a non-judicial foreclosure may proceed. Nothing in the non-judicial foreclosure statutes, however, imposes such an obligation. See Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009) (citing A.R.S. § 33-807 and observing that “Arizona’s [non-]judicial foreclosure statutes . . . do not require presentation of the original note before commencing foreclosure proceedings”); In re Weisband, 427 B.R. 13, 22 (Bankr. D. Ariz. 2010) (stating that non-judicial foreclosures may be conducted under Arizona’s deed of trust statutes without presentation of the original note).

———————AND SPEAKING OF  DEUTSCH BANK: READ THIS AS GRIST FOR THE ABOVE ANALYSIS——-

Disavowal by-DEUTSCHE-BANK-NATIONAL-TRUST-COMPANY-AS-TRUSTEE-NOTICE-TO-CERTIFICATE-HOLDERSForeclosure-Practice-Notice-10-25[1]

Pandemic Lying Admission: Deutsch Bank Up and Down the Fake Securitization Chain

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Editor’s Comment:

One problem with securitization in practice even under the academic model is the effect on potential enforcement of the obligation, even assuming that the “lender” is properly identified in the closing documents with the buyer of the loan product and the closing papers of the buyer of the mortgage bonds (and we’ll assume that the mortgage bonds are real and valid, as well as having been issued by a fully funded REMIC in which loans were properly assigned and transferred —- an assumption, as we have seen that is not true in the real world). Take this quote from the glossary at the back of this book and which in turn was taken from established authoritative sources used by bankers, securities firms and accountants:

cross guarantees and credit default swaps, synthetic collateralized asset obligations and other exotic equity and debt instruments, each of which promises the holder an incomplete interest in the original security instrument and the revenue flow starting with the alleged borrower and ending with various parties who receive said revenue, including but not limited to parties who are obligated to make payments for shortfalls of revenues.

Real Property Lawyers spot the problem immediately.

First question is when do these cross guarantees, CDS, Insurance, and other exotic instruments arise. If they are in existence at the time of the closing with the borrower homeowner then the note and mortgage are not properly drafted as to terms of repayment nor identity of the lender/creditor. This renders the note either unenforceable or requiring the admission of parole evidence in any action to either enforce against the borrower or enforce the cross obligations of the new cross creditors who supposedly are receiving not just rights to the receivable but to the actual note and the actual mortgage.

Hence even a truthful statement that the “Trustee” beings this foreclosure on behalf of the “trust” as creditor (assuming a Trust existed by law and that the Trustee, and beneficiaries and terms were clear) would be insufficient if any of these “credit enhancements” and other synthetic or exotic vehicles were in place. The Trustee on the Deed of Sale would be required to get an accounting from each of the entities that are parties or counterparties whose interest is effected by the foreclosure and who would be entitled to part of the receivable generated either by the foreclosure itself or the payment by counterparties who “bet wrong” on the mortgage pool.

The second question is whether some or any or all of these instruments came into existence or were actualized by a required transaction AFTER the closing with the homeowner borrower. It would seem that while the original note and mortgage (or Deed of Trust) might not be affected directly by these instruments, the enforcement mechanism would still be subject to the same issues as raised above when they were fully actualized and in existence at the time of the closing with the homeowner borrower.

Deutsch Bank was a central player in most of the securitized mortgages in a variety of ways including the exotic instruments referred to above. If there was any doubt about whether there existed pandemic lying and cheating, it was removed when the U.S. Attorney Civil Frauds Unit obtained admissions and a judgment for Deutsch to pay over $200 million resulting from intentional misrepresentations contained in various documents used with numerous entities and people up and down the fictitious securitization chain. Similar claims are brought against Citi (which settled so far for $215 million in February, 2012) Flagstar Bank FSB (which settled so far for $133 million in February 2012, and Allied Home Mortgage Corp, which is still pending. Even the most casual reader can see that the entire securitization model was distorted by fraud from one end (the investor lender) to the other (the homeowner borrower) and back again (the parties and counterparties in insurance, bailouts, credit default swaps, cross guarantees that violated the terms of every promissory note etc.

Manhattan U.S. Attorney Recovers $202.3 Million From Deutsche Bank And Mortgageit In Civil Fraud Case Alleging Reckless Mortgage Lending Practices And False Certifications To HUD

FOR IMMEDIATE RELEASE                  Thursday May 10, 2012

Preet Bharara, the United States Attorney for the Southern District of New York, Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division of the U.S. Department of Justice, Helen Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and David A. Montoya, Inspector General of HUD, announced today that the United States has settled a civil fraud lawsuit against DEUTSCHE BANK AG, DB STRUCTURED PRODUCTS, INC., DEUTSCHE BANK SECURITIES, INC. (collectively “DEUTSCHE BANK” or the “DEUTSCHE BANK defendants”) and MORTGAGEIT, INC. (“MORTGAGEIT”). The Government’s lawsuit, filed May 3, 2011, sought damages and civil penalties under the False Claims Act for repeated false certifications to HUD in connection with the residential mortgage origination practices of MORTGAGEIT, a wholly-owned subsidiary of DEUTSCHE BANK AG since 2007. The suit alleges approximately a decade of misconduct in connection with MORTGAGEIT’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program (“DEL program”), which delegates authority to participating private lenders to endorse mortgages for FHA insurance. Among other things, the suit accused the defendants of having submitted false certifications to HUD, including false certifications that MORTGAGEIT was originating mortgages in compliance with HUD rules when in fact it was not. In the settlement announced today, MORTGAGEIT and DEUTSCHE BANK admitted, acknowledged, and accepted responsibility for certain conduct alleged in the Complaint, including that, contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations. MORTGAGEIT also admitted that it submitted certifications to HUD stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; that FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and that HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted. The defendants also agreed to pay $202.3 million to the United States to resolve the Government’s claims for damages and penalties under the False Claims Act. The settlement was approved today by United States District Judge Lewis Kaplan.

Manhattan U.S. Attorney Preet Bharara stated: “MORTGAGEIT and DEUTSCHE BANK treated FHA insurance as free Government money to backstop lending practices that did not follow the rules. Participation in the Direct Endorsement Lender program comes with requirements that are not mere technicalities to be circumvented through subterfuge as these defendants did repeatedly over the course of a decade. Their failure to meet these requirements caused substantial losses to the Government – losses that could have and should have been avoided. In addition to their admissions of responsibility, Deutsche Bank and MortgageIT have agreed to pay damages in an amount that will significantly compensate HUD for the losses it incurred as a result of the defendants’ actions.”

Acting Assistant Attorney General Stuart F. Delery stated: “This is an important settlement for the United States, both in terms of obtaining substantial reimbursement for the FHA insurance fund for wrongfully incurred claims, and in obtaining the defendants’ acceptance of their role in the losses they caused to the taxpayers.”

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www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  1/45/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

HUD General Counsel Helen Kanovsky stated: “This case demonstrates that HUD has the ability to identify fraud patterns and work with our partners at the Department of Justice and U.S. Attorney’s Offices to pursue appropriate remedies. HUD would like to commend the work of the United States Attorney for the Southern District of New York in achieving this settlement, which is a substantial recovery for the FHA mortgage insurance fund. We look forward to continuing our joint efforts with the Department of Justice and the SDNY to combat mortgage fraud. The mortgage industry should take notice that we will not sit silently by if we detect abuses in our programs.”

HUD Inspector General David A. Montoya stated: “We expect every Direct Endorsement Lender to adhere to the highest level of integrity and accountability. When the combined efforts and attention of the Department of Justice, HUD, and HUD OIG are focused upon those who fail to exercise such integrity in connection with HUD programs, the end result will be both unpleasant and costly to the offending party.”

The following allegations are based on the Complaint and Amended Complaint (the “Complaint”) filed in Manhattan federal court by the Government in this case:

Between 1999 and 2009, MORTGAGEIT was a participant in the DEL program, a federal program administered by the FHA. As a Direct Endorsement Lender, MORTGAGEIT had the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay. Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance. Direct Endorsement Lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and endorsing mortgages for FHA insurance and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. These requirements include maintaining a quality control program, pursuant to which the lender must fully review all loans that go into default within the first six payments, known as “early payment defaults.” Early payment defaults may be signs of problems in the underwriting process, and by reviewing early payment defaults, Direct Endorsement Lenders are able to monitor those problems, correct them, and report them to HUD. MORTGAGEIT failed to comply with these basic requirements.

As the Complaint further alleges, MORTGAGEIT was also required to execute certifications for every mortgage loan that it endorsed for FHA insurance. Since 1999, MORTGAGEIT has endorsed more than 39,000 mortgages for FHA insurance, and FHA paid insurance claims on more than 3,200 mortgages, totaling more than $368 million, for mortgages endorsed for FHA insurance by MORTGAGEIT, including more than $58 million resulting from loans that defaulted after DEUTSCHE BANK AG acquired MORTGAGEIT in 2007.

As alleged in the Complaint, a portion of those losses was caused by the false statements that the defendants made to HUD to obtain FHA insurance on individual loans. Although MORTGAGEIT had certified that each of these loans was eligible for FHA insurance, it repeatedly submitted certifications that were knowingly or recklessly false. MORTGAGEIT failed to perform basic due diligence and repeatedly endorsed mortgage loans that were not eligible for FHA insurance.

The Complaint also alleges that MORTGAGEIT separately certified to HUD, on an annual basis, that it was in compliance with the rules governing its eligibility in the DEL program, including that it conduct a full review of all early payment defaults, as early payment defaults are indicators of mortgage fraud. Contrary to its certifications to HUD, MORTGAGEIT failed to implement a compliant quality control program, and failed to review all early payment defaults as required. In addition, the Complaint alleges that, after DEUTSCHE BANK acquired MORTGAGEIT in January 2007, DEUTSCHE BANK managed the quality control functions of the Direct Endorsement Lender business, and had its employees sign and submit MORTGAGEIT’s Direct Endorsement Lender annual certifications to HUD. Furthermore, by the end of 2007, MORTGAGEIT was not reviewing any early payment defaults on closed FHA-insured loans. Between 1999 and 2009, the FHA paid more than $92 million in FHA insurance claims for loans that defaulted within the first six payments.

***

Pursuant to the settlement, MORTGAGEIT and the DEUTSCHE BANK defendants will pay the United States $202.3 million within 30 days of the settlement.

As part of the settlement, the defendants admitted, acknowledged, and accepted responsibility for certain misconduct. Specifically,

MORTGAGEIT admitted, acknowledged, and accepted responsibility for the following:

www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  2/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

MORTGAGEIT failed to conform fully to HUD-FHA rules requiring Direct Endorsement Lenders to maintain a compliant quality control program;

MORTGAGEIT failed to conduct a full review of all early payment defaults on loans endorsed for FHA insurance;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations;

MORTGAGEIT endorsed for FHA mortgage insurance certain loans that did not meet all underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the DEL program; and;

MORTGAGEIT submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted.

The DEUTSCHE BANK defendants admitted, acknowledged, and accepted responsibility for the fact that after MORTGAGEIT became a wholly-owned, indirect subsidiary of DB Structured Products, Inc and Deutsche Bank AG in January 2007:

The DEUTSCHE BANK defendants were in a position to know that the operations of MORTGAGEIT did not conform fully to all of HUD-FHA’s regulations, policies, and handbooks;

One or more of the annual certifications was signed by an individual who was also an officer of certain of the DEUTSCHE BANK defendants; and;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations.

***

The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.

To date, the Office’s Civil Frauds Unit has brought four civil fraud lawsuits against major lenders under the False Claims Act alleging reckless residential mortgage lending.

Three of the four cases have settled, and today’s settlement represents the third, and largest, settlement. On February 15, 2012, the Government settled its civil fraud lawsuit against CITIMORTGAGE, INC. for $158.3 million. On February 24, 2012, the Government settled its civil fraud suit against FLAGSTAR BANK, F.S.B. for $132.8 million. The Government’s lawsuit against ALLIED HOME MORTGAGE CORP. and two of its officers remains pending. With today’s settlement, the Government has achieved settlements totaling $493.4 million in the last three months. In each settlement, the defendants have admitted and accepted responsibility for certain conduct alleged in the Government’s Complaint.

The Office’s Civil Frauds Unit is handling all three cases as part of its continuing investigation of reckless lending practices.

The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Mr. Bharara thanked HUD and HUD-OIG for their extraordinary assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.

www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  3/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

Assistant U.S. Attorneys Lara K. Eshkenazi, Pierre G. Armand, and Christopher B. Harwood are in charge of the case.

Az Statute on Mortgage Fraud Not Enforced (except against homeowners)

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Editor’s Comment:

With a statute like this on the books in Arizona and elsewhere, it is difficult to see why the Chief Law Enforcement of each state, the Attorney General, has not brought claims and prosecutions against all those entities and people up and down the fraudulent securitization chain that brought us the mortgage meltdown, foreclosures of more than 5 million people, suicides, evictions and claims of profits based upon the fact that the free house went to the pretender lender.

Practically every act described in this statute was committed by the investment banks and all their affiliates and partners from the seller of the bogus mortgage bond (sold forward, which means that the loans did not yet exist) all the way down to the people at the closing table with the homeowner borrower.

I’d like to see a script from attorneys who confront the free house concept head on. The San Francisco study and other studies clearly show that many if not most foreclosures resulted in a “sale” of property without any cash offered by the buyer who submitted a credit bid when they had not established themselves as creditors nor had they established the amount due. And we now know that they failed to establish themselves as creditors because they neither loaned the money nor purchased the loan in any transaction in which they parted with money. So the consideration for the sale was not present or if you want to put it in legalese that would effect those states that allow review of the adequacy of consideration at the auction.

I’d like to see a lawyer go to court and say “Judge, you already know it would be wrong for my client to get a free house. I am here to agree with you and state further that whether you rule for the borrower or this pretender lender here, you are going to give a free house to somebody.

“Because this party initiated a foreclosure proceeding without being the creditor, without spending a dime on the loan or purchase of the loan, and without any right to represent the multitude of people and entities that should be paid on this loan. This pretender, this stranger to this transaction stands in the way of a mediated settlement or HAMP modification in which the borrower is more than happy to do a traditional workout based upon the economic realities.

“And they they maintain themselves as obstacles to mediation or modification because they have too much to hide about the origination of this loan.

“All I seek is that you recognize that we deny the loan on which this party is pursuing its claims, we deny the default and we deny the balance. That puts the matter at issue in which there are relevant and material facts that are in dispute.

“I say to you that as a Judge you are here to call balls and strikes and that your ruling can only be that with issues in dispute, the case must proceed.”

“The pretender should be required to state its claim with a complaint, attach the relevant documents and the homeowner should be able to respond to the complaint and confront the witnesses and documents being used. And that means the pretender here must be subject to the requirements of the rules of civil procedure that include discovery.

“Experience shows that there have been no trials on the evidence in all the foreclosures ever brought during this period and that the moment a judge rules on discovery in favor of the borrower, the pretender offers settlement. Why do you think that is?”

“If they had a good reason to foreclose and they had the authority to allege the required the elements of foreclosure and they had the proof to back it up they would and should be more than willing to put a stop to all these motions and petitions from borrowers. But they don’t allow any case to go to trial. They are winning on procedure because of the assumption that the legitimate debt is unpaid and that the borrower owes it to the party making the claim even if there never was transaction with the pretender in which the borrower was a party, directly or indirectly.”

“Neither the non-judicial powers of sale statutes nor the rules of civil procedure based upon constitutional requirements of due process can be used to thwart a claim that has merit or raises issues that have merit. You should not allow the statute and rules to be applied in a manner in which a stranger to the transaction who could not even plead a case in good faith would win a foreclosed house at auction without court review and a hearing on the merits.”

Residential mortgage fraud; classification; definitions in Arizona

Section 1. Title 13, chapter 23, Arizona Revised Statutes, is amended by adding section 13-2320, to read:
13-2320.

A. A PERSON COMMITS RESIDENTIAL MORTGAGE FRAUD IF, WITH THE INTENT TO DEFRAUD, THE PERSON DOES ANY OF THE FOLLOWING:

  1. KNOWINGLY MAKES ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  2. KNOWINGLY USES OR FACILITATES THE USE OF ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  3. RECEIVES ANY PROCEEDS OR OTHER MONIES IN CONNECTION WITH A RESIDENTIAL MORTGAGE LOAN THAT THE PERSON KNOWS RESULTED FROM A VIOLATION OF PARAGRAPH 1 OR 2 OF THIS SUBSECTION.
  4. FILES OR CAUSES TO BE FILED WITH THE OFFICE OF THE COUNTY RECORDER OF ANY COUNTY OF THIS STATE ANY RESIDENTIAL MORTGAGE LOAN DOCUMENT THAT THE PERSON KNOWS TO CONTAIN A DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION.

Those convicted of one count of mortgage fraud face punishment in accordance with a Class 4 felony.  Anyone convicted of engaging in a pattern of mortgage fraud could be convicted of a Class 2 felony


CFPB Issues Bulletin Removing the Corporate Veils

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Editor’s Comment:

In a recent bulletin, the Consumer Financial Protection Board issued a bulletin that obliterated the “layering” of corporate veils to pierce through and allow homeowner borrowers to press their claims for wrongful foreclosure, slander of title, fraud and other claims against EVERYONE that is a “service provider” within the broad definition contained in the  Dodd-Frank Act. It makes everyone liable. Hat Tip to Darrell Blomberg. Instead of projecting dozens of hours as to discovery, depositions, and other forms of investigation, the CFPB has essentially created a presumption by an administrative finding. This finding, being merely a codification of existing law and doctrine is in my opinion completely retroactive.

The mere fact that a supervised bank or nonbank enters into a business relationship with a service provider does not absolve the supervised bank or nonbank of responsibility for complying with Federal consumer financial law to avoid consumer harm. A service provider that is unfamiliar with the legal requirements applicable to the products or services being offered, or that does not make efforts to implement those requirements carefully and effectively, or that exhibits weak internal controls, can harm consumers and create potential liabilities for both the service provider and the entity with which it has a business relationship. Depending on the circumstances, legal responsibility may lie with the supervised bank or nonbank as well as with the supervised service provider.

B.    The CFPB’s Supervisory Authority Over Service Providers

Title X authorizes the CFPB to examine and obtain reports from supervised banks and nonbanks for compliance with Federal consumer financial law and for other related purposes and also to exercise its enforcement authority when violations of the law are identified. Title X also grants the CFPB supervisory and enforcement authority over supervised service providers, which includes the authority to examine the operations of service providers on site.1 The CFPB will exercise the full extent of its supervision authority over supervised service providers, including its authority to examine for compliance with Title X’s prohibition on unfair, deceptive, or abusive acts or practices. The CFPB will also exercise its enforcement authority against supervised service providers as appropriate.2

C.    The CFPB’s Expectations

The CFPB expects supervised banks and nonbanks to have an effective process for managing the risks of service provider relationships. The CFPB will apply these expectations consistently, regardless of whether it is a supervised bank or nonbank that has the relationship with a service provider.

To limit the potential for statutory or regulatory violations and related consumer harm, supervised banks and nonbanks should take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers. These steps should include, but are not limited to:

    Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law;

See full article 2012-03 at http://www.consumerfinance.gov/guidance/

ANOTHER VICTORY IN OKLAHOMA

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Editor’s Comment: 

There is no doubt that the tide is turning and that Judges are increasingly uncomfortable with the presence of forged, fabricated documents containing fraudulent statements of fact on transactions that never actually occurred. As this article explains, in Oklahoma — a very conservative red state — they are beginning to realize that it isn’t the borrower seeking the free house it is the foreclosing party who has no financial stake in the outcome except a windfall if they get the house on a “credit bid.”

by Brian Mahany

We have been saying for several months that the tide is beginning to turn against big banks and mortgage lenders. Many courts are beginning to get fed up with the abusive practices of lenders. Recently several state supreme courts have been weighing in on a wide variety issues including missing paperwork, forged affidavits, questionable title and abusive foreclosure or loan modification practices.

When a state supreme court decides a case, the decision takes on considerable weight. As the highest court in the land, a state supreme court decision is generally binding on all trial courts in that state. We were happy to learn that the Oklahoma Supreme Court decided 7 cases this month in favor of homeowners.

The facts in each of the cases were similar. In each case, the court ruled that in order to bring a foreclosure action, the plaintiff must prove that it has the right to enforce the promissory note. No note means no standing to bring the complaint.

It’s in the details that the Oklahoma cases become important.

Many lenders have problems producing the note and mortgage. In recent years, most lenders sell the mortgage shortly after the closing. Banks rarely hold their own paper any more. The mortgages are often packaged, securitized and sold several times. In that process, paperworks frequently is lost. The lost or incomplete paperwork issue was addressed by the court.

The Oklahoma Supreme Court opinion is helpful to homeowners in several ways.

First, the court reaffirmed that the plaintiff must prove it has the right to enforce the note. Courts shouldn’t simply rely on an affidavit from a lawyer saying the bank or servicer has the right to enforce the note. They must prove it.

Next, the court said that the foreclosing party needs to have the note. Just having an assignment of mortgage is not enough. (Often the servicing bank will draft an assignment of mortgage. That requires the lender’s signature. The note, obviously, contains the borrowers signature. If documents are missing it is much easier for a lender to forge a mortgage assignment than to forge a homeowners signature.)

FInally, the court said that the lack of standing (missing note) can be raised at any time. That can be extremely important in foreclosure cases. Often borrowers seek legal counsel after a judgment of foreclosure has issued. Many folks don’t seek legal help until well into the foreclosure process. By the time a lawyer gets the case, discovery periods have elapsed and often there is already a judgment of foreclosure. The Oklahoma court said as long as the case isn’t closed, its not too late to challenge jurisdiction.

Postscript- There are tens of millions of homeowners under water. Many are facing foreclosure. Unfortunately, there are few lawyers that truly understand how to fight big lenders and even fewer actually willing to do so. If you are facing foreclosure, seek professional assistance as soon as possible. Don’t settle for a bankruptcy lawyer or a fly by night foreclosure “rescue” consultant. Foreclosures can be won but it’s not easy.

The average cost for a lawyer to file an answer and defend a foreclosure action is between $2500 and $5000. While there are some highly qualified lawyers that do this work, we think the only thing big banks understand is a counterclaim and aggressive lawyer.

Everyday we receive calls from homeowners across the U.S. Although we write about foreclosure defense, we rarely take such cases. Our primary purpose in writing is to provide general information and offer hope. The cases we do take are lawsuits against banks and lenders for illegal lending, loan modification and foreclosure practices. If you sufered a particularly bad experience, we certainly want to listen.

Our mortgage fraud team is currently co-counsel in the largest federal false claims act case in the nation, the $2.4 billion action on behalf of HUD against Allied Home Mortgage. Large or small, suing banks and getting justice for victims of predatory lending and foreclosure practices is what we enjoy.

Mahany & Ertl, America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.

Specialized Loan Services: “MISTAKE” Costs Elderly Couple Their Home

Editor’s Note: Besides the obvious, there are a number of not-so-obvious things to keep in mind.

  • The reason why they made the “mistake” is probably related to errors in procedure because they receive information from multiple sources. It is possible but unlikely that this was a normal error in posting. In Motion Practice and Discovery you would want to exploit such weaknesses to s how that there are too many “stakeholders” in the pie and that the procedures used to keep track of payments and status are intentionally obtuse to create plausible deniability when something like this happens with such horrendous results.
  • Ask yourself: why are all these players in the marketplace supposedly servicing different aspects of the loan? One for payments from borrower, another for payments from third party credit enhancements, another for federal bailouts, another to “substitute” for the original nominal party named at closing as the lender, another”Substitute” for the trustee, another to handle the delinquency, another to handle the default, another to handle the foreclosure sale etc.
  • Pretender lenders want the courts to handle foreclosures like “business as usual.” But business isn’t usual. When business was usual the bank that loaned the money was the bank that foreclosed on the mortgage or otherwise enforced the note. They should not be allowed to proclaim “business as usual” or standard operating procedure, or business records and affidavits, when business is far from usual.
  • Fabricated documents executed by people with dubious titles and even more dubious authority are being used to foreclose on property. The reason is simple: they don’t own the loan and they are successfully using the courts to steal from both the investors who advanced the money, the taxpayers to covered the money and the homeowners who advanced their home as collateral — all for a debt or obligation that no longer exists in the same form as the one presented at the borrower’s closing.
  • From www.themortgageinsider.net we find:

Specialized Loan Servicing LLC (SLS) is a mortgage servicer of residential mortgage loans primarily for other mortgage lenders. We uncovered three phone numbers, their website, and some pretty ugly customer complaints. We found an additional DBA name of The Terwin Group for SLS too.

Specialized Loan Servicing LLC Website and Phone Contacts

Specialized Loan Servicing LLC Website: https://www.sls.net/
Specialized Loan Servicing LLC Phone:
(800) 315-4757
(720) 241-7385
(720) 241-7364
Fax: (720) 241-7218
Address: 8742 Lucent Blvd. #300, Littleton, CO 80129

Specialized Loan Servicing LLC Review

Specialized Loan Servicing LLC services mortgage loans for other lenders and according to past customers, they have an ugly customer service track record.

When I search for complaints against Specialized Loan Servicing LLC, I found the worst complaints a mortgage service can get levied against them. Click here to see all the Specialized Loan Servicing LLC complaints listed in Google.

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Senior Couple Being Screwed Royally By Mortgage Servicer – Specialized Loan Servicers

H. Vincent and Theresa Price have lived in their home in Alameda for 32 years.  It’s where they raised their children.  They had always planned to leave it as their legacy.  They’ve NEVER been late on a mortgage payment… to this day! And they never wanted or asked for a loan modification.

Yes, everything was just fine at the Price home… until last September… when their mortgage servicer, Specialized Loan Services, made a mistake in their accounting department.  A simple mistake… they didn’t credit the Prices for having made their August and September mortgage payments, even though they most certainly did, just like they always had, and on time too.  Incredibly, less than five months later they had lost their home to foreclosure.

And today, although Mr. Price lies in a hospital bed with his wife at his side, they are scheduled to be LOCKED OUT by the Pasadena Sheriff’s Department pursuant to an order by the court.  If everything goes as planned by the mortgage servicer, when his doctors discharge him, the couple will be homeless.

How is such a thing possible?  Well, stay with me, because I promise you… this is not a story you’ve heard before.

According to the complaint filed in Los Angeles Superior Court, on August 1, 2008, Mrs. Price made the couple’s mortgage payment as she’s been doing for 32 years.  Certainly nothing remarkable about that.  A month later, when their September statement arrived showing that they owed their September payment, she made their mortgage payment again.  So far, so good, right?

It was right around September 29th that the Prices were notified that Specialized Loan Serivces had not received their August or September payments.  Mrs. Price assured the servicer’s representative that she had made the payments, and on time as always, thank you very much.

The servicer requested proof, so Mrs. Price sent in her bank statement showing that the payments had been made to Specialized Loan Services, and the amounts were deducted from her account on August 3rd and September 4th, respectively.  The Specialized representative called back to say they needed more proof, so she sent them a more detailed transaction report showing the payments having been made.  Still, not enough according to Specialized.  So, Mrs. Price went to her bank and had them print out her account’s record of the payment being made to Specialized and sent that document to the mortgage servicer.

The next call from Specialized came from a different representative of the servicer.  He informed Mrs. Price that they had not yet located her payments, but that her proof was acceptable and that they expected to soon. Meanwhile, he assured her, the servicer was placing a waiver on the October and November payments, a show of good faith, if you will, until the missing payments were found.  After a couple of weeks passed with no further word from Specialized, the Prices called to inquire as to the status of the situation.

They spoke with a woman who said her name was Lynette.  She told the Prices that their account was showing “CURRENT” for August, September, October and November, that they should make their next payment on the first of December, and that a new accounting statement would be sent out.

When no new statement had arrived two weeks later, the Prices called Specialized yet again.  It was November 23, 2008 and this time they spoke with another representative of the mortgage servicer, “Ben”.

They asked Ben about the new statement that was to have been sent out, but Ben had no idea what they were talking about.  He stated that he wasn’t aware of any sort of arrangement regarding the couple’s August and September payments, and further, now that they were four months late, if they did not make the delinquent payments and associated late charges within the next 24 HOURS… Specialized Loan Services WOULD FORECLOSE ON THE PROPERTY.

You can just imagine what happened next.  The Prices began calling the servicer asking to speak with the three representatives that had been speaking with over the last several months… the ones that had told them about the waiver and had been trying to find the missing payments.  They called… and called… and no one answered or returned their calls.  They then called the servicer’s Vice President of Customer Service… and… nothing.  No return call… nothing.

It was January when the Prices received their first piece of written communication from Specialized… it was a Notice of Default and Election to Sell.  Understandably, the couple was speechless.  How could this happen?  How was this possible?

The Prices were referred to a lawyer who said he was also a minister; a man identifying himself as a Mr. Reginald Jones.  Mr. Jones told the Prices that he was highly experienced in these matters and that he would file a lawsuit as soon as possible.  The couple would later learn that Mr. Jones was not an attorney.  What he had done was go into court, appearing as a plaintiff by claiming that he had an interest in the property, and file a frivolous lawsuit, which was later dismissed by the court…. as it might go without saying.

Now, having been defrauded by the so-called lawyer-minister, the Prices were forced to defend an unlawful detainer action in pro per, meaning without an attorney.  Unfortunately, they were not successful as they were told that they could not “litigate title in a summary proceeding,” which as I’m quite sure everyone would agree, they clearly should have known. They were advised that they should file an injunction, which they did, but unfortunately they mistakenly filed their injunction in the “wrong court,” and don’t we all hate it when that happens.

(I’m sorry for the sarcasm, but this is the most outrageous travesty of justice to which I’ve ever been exposed.)

The Prices searched and finally found an attorney they could trust, Zshonette Reed of the firm Lorden Reed in Chatsworth, California, but now it was only days before the Pasadena Sheriff would be locking the Prices out of their home potentially forever.  As quickly as was possible, Ms. Reed prepared the legal documents required for the filing of a Temporary Restraining Order, or TRO, and with her clients at her side, and confident that this horrendous injustice would not be allowed to prevail, she appeared in Superior Court yesterday, September 15, 2009.

The Price home is to be locked up by the Pasadena Sheriff today, although because that office is closed for a special training day today, the event has been moved to tomorrow.

Astonishingly, the judge denied her motion for a TRO, ruling that he had no jurisdiction over the judgment that had been entered against the Prices in the unlawful detainer court.  So, immediately she and her clients proceeded to the unlawful detainer court to ask that judge, in layman’s terms, to put a stop to the madness.

It may be hard for a reader to believe, but that judge also refused to provide the Prices any relief, because he said that the attorney could not litigate title in that court.  It was a classic Catch-22.  Ms. Reed couldn’t get relief from the Superior Court because that court said that it had no jurisdiction over the unlawful detainer court, and the unlawful detainer court wouldn’t provide relief because you can’t litigate title anywhere but in the Superior Court.  Ms. Reed begged the judge, explaining that her client’s home was to be locked up by the sheriff the very next day.  She needed time to prepare to present her client’s case to the appellate court.  The answer was still no.

Ms. Reed and her clients left the courthouse shocked and scared.  Mr. Price was clearly distressed as was his wife, and he was having a hard time breathing so he went to sit down on a stoop.  He went into cardiac arrest right there in front of the courthouse and was rushed to the hospital where he is today with his wife by his side.

Meanwhile, the Pasadena Sheriff is scheduled to lock the couple out of their home today, although that looks like it won’t be until tomorrow due to the department taking today off for special training.

Can you even imagine the horror?  After 32 years living in your home, raising your family, never being late on a mortgage payment… and then this?  It’s unthinkable.

And it cannot be allowed to happen to the Prices or anyone else.

The worst part is that, although this is certainly an extreme case, it is far from being the only example of mortgage servicers and banks disregarding the law, and abusing homeowners.  Why do they do it?  I don’t know… because they can, comes to mind.

How can a homeowner hope to go up against a bank or mortgage servicer?  They can’t.  It would seem that even the President of the United States and the United States Treasury is having trouble getting these companies to behave like human beings.

It’s time that the people of this country come to understand what’s happening here.  Past time.

Wells Fargo, Option One, American Home Mortgage Relationship

Wells Fargo Bank, N.A. appears in many ways including as servicer (America Servicing Company), Trustee (although it does not appear to be qualified as a “Trust Company”), as claimed beneficiary, as Payee on the note, as beneficiary under the title policy, as beneficiary under the property and liability insurance, and it may have in actuality acted as a mortgage broker without getting licensed as such.

In most securitized loan situations, Wells Fargo appears with the word “BANK” used, but it acted neither as a commercial nor investment bank in the deal. Sometimes it acted as a commercial bank meaning it processed a deposit and withdrawal, sometimes (rarely, perhaps 3-4% of the time) it did act as a lender, and sometimes it acted as a securities underwriter or co-underwriter of asset backed securities.

It might also be designated as “Depositor” which in most cases means that it performed no function, received no money, disbursed no money and neither received, stored, handled or transmitted any documentation despite third party documentation to the contrary.

In short, despite the sue of the word “BANK”, it was not acting as a bank in any sense of the word within the securitization chain. However, it is the use of the word “BANK” which connotes credibility to their role in the transaction despite the fact that they are not, and never were a creditor. The obligation arose when the funds were advanced for the benefit of the homeowner. But the pool from which those funds were advanced came from investors who purchased certificates of asset backed securities. Those investors are the creditors because they received a certificate containing three promises: (1) repayment of principal non-recourse based upon the payments by obligors under the terms of notes and mortgages in the pool (2) payment of interest under the same conditions and (3) the conveyance of a percentage ownership in the pool, which means that collectively 100% of the ivnestors own 100% of the the entire pool of loans. This means that the “Trust” does NOT own the pool nor the loans in the pool. It means that the “Trust” is merely an operating agreement through which the ivnestors may act collectively under certain conditions.  The evidence of the transaction is the note and the mortgage or deed of trust is incident to the transaction. But if you are following the money you look to the obligation. In most  transactions in which a residential loan was securitized, Wells Fargo did not work under the scope of its bank charter. However it goes to great lengths to pretend that it is acting under the scope of its bank charter when it pursues foreclosure.

Wells Fargo will often allege that it is the holder of the note. It frequently finesses the holder in due course confrontation by this allegation because of the presumption arising out of its allegation that it is the holder. In fact, the obligation of the homeowner is not ever due to Wells Fargo in a securitized residential note and mortgage or deed of trust. The allegation of “holder” is disingenuous at the least. Wells Fargo is not and never was the creditor although ti will claim, upon challenge, to be acting within the scope and course of its agency authority; however it will fight to the death to avoid producing the agency agreement by which it claims authority. remember to read the indenture or prospectus or pooling and service agreement all the way to the end because these documents are created to give an appearance of propriety but they do not actually support the authority claimed by Wells Fargo.

Wells Fargo often claims to be Trustee for Option One Mortgage Loan Trust 2007-6 Asset Backed Certificates, Series 2007-6, c/o American Home Mortgage, 4600 Regent Blvd., Suite 200, P.O. Box 631730, Irving, Texas 75063-1730. Both Option One and American Home Mortgage were usually fronts (sham) entities that were used to originate loans using predatory, fraudulent and otherwise illegal loan practices in violation of TILA, RICO and deceptive lending practices. ALL THREE ENTITIES — WELLS FARGO, OPTION ONE AND AMERICAN HOME MORTGAGE SHOULD BE CONSIDERED AS A SINGLE JOINT ENTERPRISE ABUSING THEIR BUSINESS LICENSES AND CHARTERS IN MOST CASES.

WELLS FARGO-OPTION ONE-AMERICAN HOME MORTGAGE IS OFTEN REPRESENTED BY LERNER, SAMPSON & ROTHFUSS, more specifically Susana E. Lykins. They list their address as P.O. Box 5480, Cincinnati, Oh 45201-5480, Telephone 513-241-3100, Fax 513-241-4094. Their actual street address is 120 East Fourth Street, Suite 800 Cincinnati, OH 45202. Documents purporting to be assignments within the securitization chain may in fact be executed by clerical staff or attorneys from that firm using that address. If you are curious, then pick out the name of the party who executed your suspicious document and ask to speak with them after you call the above number.

Ms. Lykins also shows possibly as attorney for JP Morgan Chase Bank, N.A. as well as Robert B. Blackwell, at 620-624 N. Main street, Lima, Ohio 45801, 419-228-2091, Fax 419-229-3786. He also claims an office at 2855 Elm Street, Lima, Ohio 45805

Kathy Smith swears she is “assistant secretary” for American Home Mortgage as servicing agent for Wells Fargo Bank. Yet Wells shows its own address as c/o American Home Mortgage. No regulatory filing for Wells Fargo acknowledges that address. Ms. Smith swears that Wells Fargo, Trustee is the holder of the note even though she professes not to work for them. Kathy Smith’s signature is notarized by Linda Bayless, Notary Public, State of Florida commission# DD615990, expiring November 19, 2010. This would indicate that despite the subject property being in Ohio, Kathy Smith, who presumably works in Texas, had her signature notarized in Florida or that the Florida Notary exceeded her license if she was in Texas or Ohio or wherever Kathy Smith was when she allegedly executed the instrument.

Home Sales Stall: Millions of Homes in Real Inventory

Editor’s Comment: Any lawyer who does not think that issues relating to foreclosure will not dominate his or her practice of law is in a state of denial and delusion. The 16% drop in new home-sale contracts (see article below) means a similar or worse drop in sales over the next 30-60 days.

As we have said repeatedly along with the major newspapers, there is no relief in sight without principal reduction on mortgages. It’s not a matter of ideology or even law. It is a matter of pure practicality. The choice is between a total loss and a partial loss.

More and more articles and reports are emerging that clearly show that millions of homes are going to be abandoned and suddenly added to the foreclosure lists simply because the owners choose to take the FICO credit score hit and rent a comparable house for a fraction of the payments demanded under their crazy inflated mortgages.  Really, why continue to pay on a $500,000 note for a property that is worth $300,000? Why? hope you will break even in 5-10 years? Just not a good business decision.

In the anti-deficiency states like Arizona the “lenders” (who incidentally don’t qualify as creditors) can only take the house. In the states that permit pursuit of the deficiency judgment, it is a waste of time and money because nearly everyone is basically cleaned out — no cash, no savings and no available credit. So there is no point in continuing this farce any further. The homes are not worth what is owed and never will be worth that amount even after the market “recovers”.

Now add to the equation that the parties being ordered into mediation, modification or attempting short sales or settlements are mismatched: one of these things is not like the other. On the one side you have people who really own a home and on the other you have people who don’t even know who the creditor is much less possess the authority to approve a short sale or settlement or issue a satisfaction of mortgage.

There is no way out except through principal reduction or letting the entire housing market collapse into chaos. The real crisis is coming over the next few months. The “Great Recession” was just the appetizer and although there is time to avoid the full impact of what was done on Wall Street, it seems unlikely that anyone in office is willing to “call it” like the doctor announcing the time of death.
January 6, 2010

Slowing Pace of Home Sales Raises Fears of New Retreat

The number of houses placed under contract fell sharply in November in the first drop in nearly a year, figures released Tuesday show. It was the clearest sign yet that predictions of another downturn in real estate may become a reality.

The National Association of Realtors said that its index of pending home sales plunged to 96 from a revised level of 114.3 in October. Analysts had predicted a drop, but nothing like that.

“We thought it would drop 2 percent,” said Jennifer Lee of BMO Capital Markets. “When you see 16 percent, the first thing you say is, what the heck happened here?”

Since the majority of pending sales become final in six weeks to two months, the index is considered a reliable indicator of where the market is headed. The index is calculated by comparing the number of pending sales with the level of 2001, when the index was formulated.

The data indicates that the weakest parts of the country are the Northeast and Midwest, both of which fell 26 percent in November from the previous month after adjusting for seasonal variations. The South dropped 15 percent, while the West was off 3 percent.

Ms. Lee called the drop from October to November “unnerving” but said that the index remained well above the level of a year ago. In November 2008, when the financial crisis was at its peak and buying a home required a faith in the future that many did not feel, the index was 83.1.

As the overall economy improves and the employment situation grows a little less dire, the question becomes whether real estate can muddle through — or if it will need a new round of government support to ward off another damaging downturn.

There are plenty of reasons for worry. The Obama administration’s effort to compel lenders and servicers to modify loans has not been a success. Many of these owners will eventually lose their homes to foreclosure.

Meanwhile, a quarter of homeowners with mortgages owe more than their houses are worth. If prices start dropping again, some will be induced to walk away, further undermining the market.

“I wouldn’t rule out more stimulus, especially in an election year,” said Ivy Zelman, an analyst.

Last year’s stimulus efforts, however expensive and divisive, calmed a market where prices had plummeted by a third. Even now, the government’s efforts to push down interest rates and entice buyers with a tax credit appear to be having an effect, keeping a weak market from getting weaker.

Walter Martin and Paloma Munoz, artists in Dingmans Ferry, Pa., are a stimulus success story. They are paying $360,000 for a new home 10 miles away without even having an offer for their current home.

“The new home has enough space for us both to have studios,” Ms. Munoz said. “The price is amazing, we are getting a mortgage at a 5.125 rate, and we qualify for a $6,500 credit.”

It is a leap of faith, she acknowledged, but an eminently sensible one. “When houses were expensive, everyone wanted to buy, and now that they’re cheap everyone is scared,” she said.

Buyers like Ms. Munoz and Mr. Martin are outnumbered, however, by people who think the market still has room to fall. While some of these may indeed be scared, others simply see a virtue in patience.

“With two growing boys, we are busting out of our small house,” said Stephen Sencer, deputy general counsel at Emory University in Atlanta. “But I’m still waiting for sellers to capitulate.” His agent is telling Mr. Sencer that may happen in the spring.

Starting from a low of 80.4 last January, pending sales rose for nine consecutive months in 2009. The index proved a harbinger of both completed sales, which began climbing in April, and prices, which started rising over the summer.

As the Nov. 30 expiration of the tax credit drew near, would-be buyers hastened to secure deals. Sales in November roared at a 6.54 million annual pace, the highest since February 2007.

At the last minute, Congress extended and broadened the credit. The urgency immediately dissipated. “We were really, really pushing hard, and I think everyone just wore out,” said Steve Havig, president of Lakes Area Realty of Minneapolis.

Buyers now have until April 30 to qualify for the credit. Many analysts say the effect this time around will be mild.

“It could turn out the second credit has such a small impact it doesn’t show up in the data,” said Patrick Newport of IHS Global Insight.

Nevertheless, he predicts the downturn this time will be gentler. “The economy is improving, and that is what the market needs to get back on a sustainable path,” Mr. Newport said.

Long before the tax credit ends, another stimulus effort is due to disappear. The Federal Reserve has bought more than a trillion dollars of mortgage-backed securities in a successful effort to push down mortgage rates. The Fed is scheduled to wind down the program by March 31.

Rates are already moving higher, exceeding 5 percent in some lender surveys. Perhaps as a result, mortgage applications to buy homes in late December were a third lower than during the corresponding period in 2008, the Mortgage Bankers Association said.

The Fed’s Open Market Committee left itself leeway in its December meeting to start buying again, saying it “will continue to evaluate the timing and overall amounts of its purchases of securities.”

Rising rates could hamper Mr. Martin and Ms. Munoz’s search for a buyer for their old house.

“It’s been on the market for almost three months,” she said. “We have had very few viewings.”

How to Buy a Foreclosed House: It’s a business — it’s an opportunity— it’s a risk

The way the media tells it, there are million of bargains out there that will be the house of your dreams and will make you rich. If it seems too good to be true, that would because it IS too good to be true. As a backdrop to this discussion remember that there are over 2 million homes that could be on the market but for the fact that the “owners” don’t want to flood the market. 2 million homes means there are too many homes for any foreseeable demand from buyers. That means that bargain prices are simply early predictors of where the market is heading. Those statistics, taken from over 500,000 homes reported and sampled, shows that the average “discount” is 15%-20%. In a normal market the discount would be real and relatively stable. In this market where we have 2 million homes already in the pipeline and around 3-4 million MORE homes coming it is not merely possible but rather likely that prices will continue to be depressed.

Add to that the credit crunch and the current environment where banks are reinstating underwriting standards where they verify the appraisal, verify your ability to pay, verify your history, verify other conditions affecting the value or future value of the home, and you have a seller’s glut with very little demand. Analysts from companies that maintain divisions employing economists now are estimating that it will take 6-12 years to clean up this mess. I think these estimates will change monthly until they give recognition to the fact that 10 years is about the best we could ever hope for, 30 years in about the worst case, and that the probable time will be something close to 20 years. That is 2 decades of confused downward price pressure, title errors, defects and defects, and figuring out how to undo the the chaos created by Wall Street.

That said, there are many reasons why you SHOULD buy a foreclosed home. First you SHOULD buy a home if you want to live in it — but beware that most people THINK they will live there a long time but frequently move within 3-5 years due to unforeseen circumstances. Financially, the likelihood that you will financially benefit from such circumstances is extremely low. Renting the same house or one just like it will probably cost no more than 60% of the monthly payment you would have even if you put 20% down payment. And you don’t get stuck trying to sell a house in a market that will basically be unchanged or worse than it is now.

Second you should buy a home on a short sale or otherwise, if you have capital and a good credit score and want to do something good. Let’s assume the house was originally bought for $450,000 and the buyer made a 20% down payment. So the buyer paid $90,000 PLUS all the improvements that are made, especially to a new developer tract house. So the sake of our example, the buyer now finds himself with a house that is currently “appraised” at $275,000. The “lender” refuses (actually lacks the authority because they are not really the lender) to modify the mortgage with a principal reduction, the terms are resetting so that the buyer’s payments are about to triple or have already done so. Assume they had no problem making the original teaser payments and could even pay more but not the absurd amounts called for under his current mortgage or deed of trust.

Let’s further assume the foreclosure has already taken place and the buyer is still in the home, awaiting eviction. With a little help from you and this post you get the homeowner to fight the eviction and start a confrontation where the homeowner is demanding discovery and is alleging a fraudulent foreclosure. Using average “discounts” you buy the house for $55,000 less than appraisal from the “bank” (actually a separate entity with dubious authority to have taken or retained title to the property since neither the forecloser nor the REO (Real Estate Owned) entity had one dime in funding the mortgage). So you have purchased the home for $220,000. Don’t get all excited. The original $450,000 price was false and even fraudulent. The next time that house sees $450,000 will be somewhere around the year 2040.

So now you make a down payment of 20% or $44,000. You have $44,000 into the deal plus whatever assistance you have the original buyer/homeowner. Your mortgage is $176,000. Using an amortization of 15 years fixed rate for 5%, your payments for principal, interest, taxes, utilities and insurance are probably going to be around $1250-$1350 per month. You give the original buyer/homeowner a lease requiring payments of $1600-$1700 per month plus a CPI (Consumer price index no less than 2% with no maximum) AND a pass through of increases in utilities, taxes etc. The lease is at least 5 years long. If you don’t have a homeowner willing to lease for 5 years, you are going to have trouble.

The lease is a net lease requiring the tenant to maintain the house. It renews automatically for additional terms of 5 years unless canceled with at no more than 9 months notice and no less than 6 months notice. Beginning with the end of the third year, the homeowners may have a two year option to buy the house at either the price you paid for the house, plus CPI or the current fair market value, whichever is higher. This option is good only in years 4 and 5.

You start negotiating with the “bank” or the REO with a demand for proof of title. See how-to-negotiate-a-modification

They will offer you indemnification, hold harmless and release. None of that means anything because most of them have either gone out of business or are about to go out of business. You ask “Who is the actual creditor here?” That will make them uncomfortable. You get rough and tough. And then you soften a little and use the procedure set forth below. Meanwhile the original buyer/homeowner starts threatening them because they obviously don’t have physical possession of the note or they have no rightful claim to ownership of it. The original buyer/homeowner makes demand and maybe even files suit demanding to know who the creditor is or was. This will soften up the game of the bank/REO.

Now let’s talk about how you are going to do this without being in the same mess that the banks, homeowners, title companies and others are in.

The attributes of a good solid purchase of a foreclosed home are:

  1. Warranty Deed
  2. Title Policy from large company without any exclusion relating to securitization of the prior owner’s loan. It would be best if the policy specifically mentioned securitization and stated affirmatively that there is no exception relating thereto.
  3. Friendly Quiet Title Action, in which the REO, the forecloser and all other known parties, at their expense bring a quiet title action naming the former buyer/homeowner and you, and naming John Does 1-1000 being the holder of mortgage backed securities who could have or who could claim an interest in the mortgage being extinguished by this deal. As long as the relief sought is ratification of the above deal and ordering the clerk of the County to remove the old mortgage and accept the new filings without any encumbrance other than your new mortgage and without any owner other than you.
  4. ONLY A FINAL JUDGMENT EXECUTED BY A JUDGE WILL GIVE YOU CLEAR TITLE. WAIT UNTIL THE TIME FOR APPEAL HAS RUN. INCLUDE A PROVISION WHEREIN YOU CAN RESCIND IF SOMEONE MAKES A CLAIM THAT THIS TRANSACTION WAS A FRAUD ON THE COURT WHETHER IT HAS MERIT OR NOT. IF SUCH A CLAIM IS MADE THEN AT YOUR OPTION YOU BECOME THE SUCCESSOR TO THE “BANK”  AND REO AND OTHER FORECLOSURE OR TRUSTEE SERVICES OR, AAT YOUR OPTION YOU CAN RESCIND THE TRANSACTION RECEIVING BACK ALL MONEY RECEIVED BY THE SELLING PARTIES TO THE TRANSACTION IN WHICH YOU PURCHASED THE PROPERTY.
  5. Indemnification from the forecloser
  6. Indemnification from the REO
  7. Hold Harmless from the Forecloser
  8. Hold Harmless from the REO
  9. General release from original buyer/homeowner
  10. Acknowledgment from your new lender that they were advised of the above and they agree that they will not make any claims against you for misrepresentation or misstatement based upon the securitization of the loan.

Pursuit v UBS: Investor Case Proves Homeowners’ Cases

NOW AVAILABLE ON AMAZON KINDLE!!

Pursuit vs. UBS Drills Down to Real Benefits to Intermediaries While Real PARTIES — Investors and Homeowners — get the shaft UBS090909

This is a case of an investor suing the underwriter of the mortgage backed bonds purchased as “investment grade securities.” As we have pointed out on these pages for two years, the underwriter wears so many hats that it is impossible to track them without nailing them down in discovery and motions to compel. It is only when the real flow of documents and the real flow of money is analyzed that you can see the pattern of deception designed to screw the investors, screw the homeowners and run with the money and now, through illegal and improper foreclosures, they run with the property too. Here is an excerpt from the attached Opinion dated September, 2009.

“Based on the above-mentioned evidence, the court finds that the Plaintiffs’ have presented sufficient evidence to satisfy the probable cause standard with respect to their claim that UBS was in possession of superior knowledge that was not readily available to the Plaintiffs. This material nonpublic information related to rating agency downgrades that would significantly decrease, if not render worthless, the CDO Notes it was selling Pursuit. Further, UBS was aware the Pursuit was only seeking to invest in CDO Notes rated “investment grade,” and UBS knew that byinvesting in the subject CDO Notes, Pursuitwas acting on the basis of misleading information. Moreover, because UBS was in the position of “Super-senior Noteholder” in the structure of these CDOs, such ratings downgrades, while working to the detriment of buyers like the Plaintiffs, could work to the benefit of sellers like UBS in the super-senior position, because super-seniors have first dibs on whatever payments are made on a CDO. A UBS Securities LLC credit analyst explained it in an October 16, 2007 email sent to Morelli and others. Writing about the billions of dollars in Moody’s downgrades, downgrades that were now public knowledge,
the UBS analyst wrote, “These bonds [subject to downgrades] appear in countless CDOs.

The downgrades were more severe than what the market seemed to anticipate !!! And !!! The downgrades could constitute a triggering event that would be an Event of Default for various for various CDOs. . . If this occurs, then it may prove salutary for the Super-senior holders [like UBS] as more cash flow would be preserved for their protection.”

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