RESCISSION Revalidated in CA Decision

Posted on July 22, 2016 by Neil Garfield

1sT Appellate District US Bank v Naifeh: “… we conclude that a borrower may rescind the loan transaction under TILA without filing a lawsuit, but when the rescission is challenged in litigation, the court has authority to decide whether the rescission notice is timely and whether the the procedure set forth in the TILA (sic) should be modified in light of the facts and circumstances of the case.”

The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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

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see US BANK VS NAIFEH

In a carefully worded opinion at least one appellate court seems to be moving closer to the view I have expressed here on these pages. But they still left some simple propositions unclear.

It remains my opinion that a recorded rescission forces those who would challenge it to file suit to remove the rescission from the title record. In that suit they would need to plead and prove standing — without using the note or mortgage to do it because rescission renders them void at the moment the letter of rescission is mailed..

  1. The decision clearly says that for the rescission to be effective (deriving its authority from 15 USC §1635 and the unanimous SCOTUS decision in Jesinoski v Countrywide), the borrower need NOT file suit. That means it is effective when mailed (NOT FILED) just as the statute says and just as the late Justice Scalia penned in the Jesinoski case.
  2. The decision anticipates a challenge to rescission — which in and of itself is recognition that the rescission IS effective and that something must be done about it.
  3. But the court does not clarify what is meant when it said “when the rescission is challenged in litigation.” Clearly the decision stands for the proposition that the rescission stands as effective unless challenged in litigation. The unanswered question is ‘what form of litigation?’
  4. If we apply ordinary rules of procedure, then the decision dovetails with my opinions, the statute and the US Supreme Court decision. The rescission is effective when mailed. So the “challenge” must be “in litigation.” But whether that means a lawsuit to vacate or a motion challenging the rescission is unclear. A “motion challenging the rescission” is problematic if it does not set forth the standing of the party making the challenge and if it does not set forth the plain facts that the rescission, under law, is already effective but should be vacated, then it is trying to get the court to arrive at the position that the rescission can be ignored even if it is recorded (a condition not addressed in the opinion).
  5. The claimant challenging the rescission must state a cause of action, if the rescission is recorded, that is in essence a quiet title claim that needs to be framed as an original complaint in a lawsuit. So far the banks have been successful in getting trial judges to IGNORE the rescission rather than remove it as an effective instrument, whether recorded or not. This only compounds title problems already present.
  6. The procedural oddity here is that in foreclosure litigation the court might conclude (erroneously in my opinion) that the beneficiary under the deed of trust had standing to substitute trustee, standing to to have the trustee record a notice of default, and standing to record a notice of sale.
  7. BUT once the rescission is effective, there is absolutely no foundation for a claim of standing based upon the void note, the void mortgage and the consequential void assignments, which even if they were not otherwise void, are void now because the assignment is purporting to transfer something that no longer exists.
  8. Standing vanishes if it is dependent upon presumptions applied from the assignment, endorsement and other attributes wherein false statements are made concerning purchase and sale of the note or mortgage. The note and mortgage are void the moment the rescission is mailed. No reliance on the mortgage, note or any transfer of same can constitute standing, since those documents, as a matter of law, no longer exist.
  9. Hence STANDING TO CHALLENGE RESCISSION must logically be dependent upon the ability of the challenger to affirmatively plead that they own the debt or obligation and to prove it at a hearing in which evidence is produced. This is the holy grail of foreclosure defense. We know that 99% of the foreclosers do NOT qualify as owners of the actual debt or obligation. They are traveling on legal presumptions as alleged “holders” etc. under the UCC. If the note and mortgage don’t exist then the status of holder is nonexistent and irrelevant.
  10. This court further leaves us in a gray area when it correctly reads that portion of the statute giving the court authority to consider the options, procedurally, but incorrectly states that one of those options is that a Federal Statute that preempts state law could be “modified in light of the facts and circumstances. This is NOT contained in either the statute or the Jesinoski decision. This court is putting far too much weight on the provision of the statute that allows for a petition to the court at which the court could change some of the procedural steps in complying with rescission, and possibly by implication allowing for a challenge to the rescission in order to vacate the legal effectiveness of the rescission.
  11. ANY DECISION ON “PROCEDURE” THAT NULLIFIES THE EFFECTIVENESS OF THE RESCISSION WHEN MAILED IS ERRONEOUS.  Any such decision would effectively be eviscerating the entire statute and the opinion of the US Supreme Court. The simple rule of thumb here (heuristic reasoning) is that the rescission is and always will have been effective when mailed. The parts of the statute that deal with procedure can only be related to a party who claims to be the creditor (owner of the debt or obligation) who intends to comply.
  12. Since tender is expressly excluded in the statute and the Jesinoski decision, the change can not require the borrower to tender money — especially when the statute says that no such demand need be considered by the borrower until there is full compliance with the rescission — return of canceled note, release of encumbrance and payment to the borrower of all money ever paid by the borrower for principal, interest, insurance, taxes, and fees.
  13. Hence the changes are limited perhaps granting additional time, or maybe even to credits against what might be due from the homeowner but even that looks like a stretch. The committee notes and subsequent decisions clearly state that the intent of Congress was to prevent any bank from stonewalling the effectiveness of a rescission, which is what judges have been doing despite the Jesinoski decision and the clear wording of the statute.
  14. And this is how we know that the challenge, if brought, must be within the 20 days available for the creditor, “lender” etc to comply with the rescission. Any other interpretation would mean that the rescission was NOT effective upon mailing and would also mean that the owner of the property cannot get a substitute mortgage to pay off any legitimate claim from a true creditor. Such interpretations, while apparently attractive to bank lawyers and judges, are directly contrary to the express wording of the statute and directly contrary tot he express wording of the Jesinoski decision, decided unanimously by SCOTUS. Hence ANY CHALLENGE outside the 20 days is barred by the statute. Just like any action to enforce the TILA duties against the “lender” must be brought within one year of the mailing and receipt of the rescission.
  15. The failure of either the “lender” to comply or the borrower to enforce simply means that after one year, the rescission is still effective (meaning the note and mortgage are void) the claim for enforcement of the duties of the lender is extinguished, and the financial claim of the lender is extinguished. Hence, the infamous free house — not caused by sneaky borrowers but caused instead of malfeasant banks who continue to use their influence to get judges to re-write the law.
  16. But regardless of how one looks at this decision, the Jesinoski decision or the statute one thing is perfectly clear — vacating the rescission is strictly dependent upon timely filing of a challenge in litigation and a hearing on evidence, because the legal presumptions used in determining standing are no longer available in the absence of the the note or mortgage, which were irretrievably rendered void upon mailing of the rescission.

The banks and servicers have so far been successful in pulling the wool over judges eyes, perhaps because judges have long disliked TILA and especially TILA rescission. The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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LABOR DAY ABYSS

Posted on September 6, 2010 by Neil Garfield

EDITOR’s comment: Everyone seems to agree that nobody really knows the identity of the creditor in the millions of mortgage transactions that were created from 2001 to 2008. Yet the general consensus from the administration and the media is that these transactions should be enforced anyway. The idea of enforcing a transaction in which only one of the parties is known is enough to  make the authors of any of the major legal treatises turn over in their graves. It is so obviously ridiculous that one need not consult the United States Constitution on due process, nor any statute or case in common law. Nevertheless this elephant continues to sit in our living rooms claiming ownership of our home. Thus a fictional character is prevailing over the rights of real people owning real homes who were tricked into fraudulent loan products based inflated appraisals that created the reasonable assumption on the part of the borrower that the “experts” had verified the fair market value and validated the viability of the loan product.


Most people understand that these homeowners were victims of fraud more than they were borrowers of money for a legitimate transaction. These title twisting transactions continue to become increasingly convoluted as the “ownership” of the “loans” becomes increasingly blurred by a continuing process of transfers,  “sales,” auctions without creditors or bona fide bidders, and the continuation of the strategy of moving the goal post every time anyone wants to examine it.


In the article below the Obama administration is described as having exhausted all possible remedies and is now faced with the untenable choice of future homeowners versus current homeowners. This is delusional thinking based on business dogma. The “experts” are now all raising their voices in a growing chorus of “let the market collapse.” It is only natural for these so-called experts to suggest such a dark scenario.

Under the business dogma currently driving the limp choices being made by the administration and by Congress, a crash in home housing prices from current levels would produce the foundation for a bull market in housing prices that would be reduced to oversold levels. This so-called bull market could only be fueled by speculators who are sitting on piles of money. It certainly won’t be fueled by the average consumer whose median income is dropping, whose wealth has been drained through Wall Street speculation, whose savings do not exist, and whose credit has been exhausted. In short, this brilliant strategy of giving up on the housing market can only result in a further widening between those who have money and wealth and those who do not and now have no prospects.


I know that most people do not have the time to be students of history. But a little time spent on Google or Wikipedia will show you that no society in human history has ever been sustained on a status quo that excluded  an expanding and vibrant middle class, with abundant opportunities for improvement in the financial condition of anyone in any class of that society. There is an answer to this problem but it is being ignored for political reasons. We cannot instantly raise median income for tens of millions of people. We can and we should lay the foundation for abundant opportunities for improvement in their economic and social condition, but this will not solve the current situation.


The current situation is that we are sitting on the abyss. And it seems that the general consensus is to see no evil, hear no evil and therefore ignore the only realities that must be addressed. We cannot escape the fact that in our current situation our economy is driven by consumer spending. We cannot escape the fact that consumer spending cannot rise in the short term by an increase in median income. We cannot escape the fact that consumer spending can only rise by presenting the consumer with a proposition that is acceptable––one in which both real and apparent consumer wealth is increased. Unless the deal is real, the current lack of confidence in the economy, our society and our government will prevent any increase in consumer spending and therefore prevent any improvement in our current economic decline.


Consumers have made it clear that they do not trust the housing market, they will not accept a continuation of credit driven spending, and that they are alone in fending for themselves and future generations. Therefore the savings rates on what little money consumers are receiving as income are increasing at unprecedented rates. This money is not going to come out of savings and into the marketplace and a general rush towards spending that will revive the old consumer driven economy unless the basic and real concerns of consumers are directly addressed with reality and conviction. The perception (delusion) is that consumers are a bottomless well from which  infinite sums of money can be withdrawn by way of taxes, insurance, subsidies to big business, and a government that is primarily concerned with the appearance of stability on Wall Street rather than the reality of amends that need to be offered.


I am not a pundit. I am only seeking to apply common sense to a situation that seems to be wallowing in dogma, and political maneuvering. In my view they are arranging the deck chairs on the Titanic. In my view the worst is yet to come. In my view under the worst-case scenarios our way of life, our society, our economy and our government will be destabilized unless we open our eyes. It’s true that we don’t have a lot of tools left in the box. But then again we never did have a lot of tools in the box.

A great fraud has been committed on American and foreign taxpayers and investors as well as American and foreign buyers of real estate, commercial and residential. The perpetrators of this great fraud were intermediaries between the people who had money and the people who didn’t. If an honest attempt was made to do the right thing, we would do more to improve the confidence of our own consumers as well as foreign investors than any of these of exotic and creative plans to shore up an economy based on illusion and delusion.


If we already know that the identity of the creditor is in doubt, then we already have a perfectly legitimate legal reason to stop foreclosures. If we already know that the prices that were used in many fraudulent loan transactions were not equal to any sustainable measure of fair market value and that neither the borrower nor the actual lender (investor) was aware of this misrepresentation, then we already have a perfectly legitimate and legal reason to restructure all the affected loans, especially since most of them are controlled through guarantees of federal agencies if not outright ownership by those federal agencies. If we already know that somebody probably exists who has actually lost money on these transactions, or some of them, then it shouldn’t be hard for them to come forward, provide the necessary accounting and proof of ownership, and be included in the restructuring of these mortgage loans.


What is stopping the use of common sense is that we are relying on the very intermediaries who caused the problem in the first place and who have everything to gain by a continuation of the foreclosures, by a continuation of the free fall in housing prices, by a continuation of the charade of modifications, and by the speculative bull market that is currently being constructed right under the nose of this administration. That bull market may have a temporary effect on the economy (or at least the indexes that  measure economic results) and of course the stock market, but in reality it is easy to see that such a bull market will only be another bubble which will cause more devastation and further undermine confidence in the American economy and the American government.

HERE IS WHAT A FAIR RESOLUTION WOULD LOOK LIKE:

  1. ALL HOMES ELIGIBLE (INCLUDING REO). Forget the blame game
  2. ALL MORTGAGE BONDS ELIGIBLE. Forget the blame game
  3. REGULATE SERVICING COMPANIES LIKE UTILITIES OR REPLACE THEM WITH COMPANIES THAT WILL DO THE JOB
  4. SUSPEND ALL FORECLOSURES, SALES, JUDICIAL AND NON-JUDICIAL. SUSPEND MORTGAGE PAYMENTS, ALL MORTGAGES 90 DAYS.
  5. OFFER INTEREST RATE ONLY RE-STRUCTURE TO HOMEOWNERS THAT REDUCES FIXED INTEREST RATE TO 2%
  6. OFFER PRINCIPAL REDUCTION TO 110% OF FAIR MARKET VALUE WITH 5% FIXED INTEREST RATE, TOGETHER WITH AN EQUITY APPRECIATION CLAUSE OF 20% FROM REDUCED PRINCIPAL.
  7. OFFER CERTIFICATION OF OWNERSHIP FROM FEDERAL AGENCY TO THE HOMEOWNER.
  8. CREATE FAST TRACK QUIET TITLE ACTIONS TO RESOLVE ALL TWISTED TITLE ISSUES RESULTING FROM SECURITIZED LOANS
  9. OFFER TO SERVICE THE NEW LOANS FOR INVESTORS WHO PROVE OWNERSHIP.
  10. CREATE CUT-OFF DATE: HOMEOWNERS WHO DON’T TAKE THE DEAL  EITHER STAY WITH EXISTING TITLE AND MORTGAGE SITUATION OR GO THROUGH FORECLOSURE. INVESTORS WHO DON’T TAKE THE DEAL EITHER STAY WITH EXISTING TITLE AND RECEIVABLE SITUATION OR SUE THEIR INVESTMENT BANKERS.

I KNOW. WHO HAS THE POWER TO DO THIS? OBAMA, THAT’S WHO. NO NEW REGULATIONS ARE REQUIRED. STATE AND FEDERAL LEGISLATION TO PUT A “CAP”ON THIS IS UNNECESSARY, BUT IF THEY WANT TO DO IT THEY COULD DO IT AFTERWARD. The immediate result is that the downward pressure on housing would vanish. The upward mobility of consumers would instantly appear. The confidence by consumers that the government cares more about them than the oligopoly of banks who appear to be running the country would soar, as would their spending. World-wide confidence in the American financial system would soar because they would see the end of illusion and delusion.

And let’s not forget that the American moral high-ground would be restored, which is the only real basis for the consent of the governed here and around the world.
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Housing Woes Bring New Cry: Let Market Fall

By DAVID STREITFELD

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.

“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”

The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.

The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor.

Caught in the middle is an administration that gambled on a recovery that is not happening.

“The administration made a bet that a rising economy would solve the housing problem and now they are out of chips,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”

That was clear last week, when the secretary of housing and urban development, Shaun Donovan, appeared to side with current homeowners, telling CNN the administration would “go everywhere we can” to make sure the slumping market recovers.

Mr. Donovan even opened the door to another housing tax credit like the one that expired last spring, which paid first-time buyers as much as $8,000 and buyers who were moving up $6,500. The cost to taxpayers was in the neighborhood of $30 billion, much of which went to people who would have bought anyway.

Administration press officers quickly backpedaled from Mr. Donovan’s comment, saying a revived credit was either highly unlikely or flat-out impossible. Mr. Donovan declined to be interviewed for this article. In a statement, a White House spokeswoman responded to questions about possible new stimulus measures by pointing to those already in the works.

“In the weeks ahead, we will focus on successfully getting off the ground programs we have recently announced,” the spokeswoman, Amy Brundage, said.

Among those initiatives are $3 billion to keep the unemployed from losing their homes and a refinancing program that will try to cut the mortgage balances of owners who owe more than their property is worth. A previous program with similar goals had limited success.

If last year’s tax credit was supposed to be a bridge over a rough patch, it ended with a glimpse of the abyss. The average home now takes more than a year to sell. Add in the homes that are foreclosed but not yet for sale and the total is greater still.

Builders are in even worse shape. Sales of new homes are lower than in the depths of the recession of the early 1980s, when mortgage rates were double what they are now, unemployment was pervasive and the gloom was at least as thick.

The deteriorating circumstances have given a new voice to the “do nothing” chorus, whose members think the era of trying to buy stability while hoping the market will catch fire — called “extend and pretend” or “delay and pray” — has run its course.

“We have had enough artificial support and need to let the free market do its thing,” said the housing analyst Ivy Zelman.

Michael L. Moskowitz, president of Equity Now, a direct mortgage lender that operates in New York and seven other states, also advocates letting the market fall. “Prices are still artificially high,” he said. “The government is discriminating against the renters who are able to buy at $200,000 but can’t at $250,000.”

A small decline in home prices might not make too much of a difference to a slack economy. But an unchecked drop of 10 percent or more might prove entirely discouraging to the millions of owners just hanging on, especially those who bought in the last few years under the impression that a turnaround had already begun.

The government is on the hook for many of these mortgages, another reason policy makers have been aggressively seeking stability. What helped support the market last year could now cause it to crumble.

Since 2006, the Federal Housing Administration has insured millions of low down payment loans. During the first two years, officials concede, the credit quality of the borrowers was too low.

With little at stake and a queasy economy, buyers bailed: nearly 12 percent were delinquent after a year. Last fall, F.H.A. cash reserves fell below the Congressionally mandated minimum, and the agency had to shore up its finances.

Government-backed loans in 2009 went to buyers with higher credit scores. Yet the percentage of first-year defaults was still 5 percent, according to data from the research firm CoreLogic.

“These are at-risk buyers,” said Sam Khater, a CoreLogic economist. “They have very little equity, and that’s the largest predictor of default.”

This is the risk policy makers face. “If home prices begin to fall again with any serious velocity, borrowers may stay away in such numbers that the market never recovers,” said Mr. Glaser, a consultant whose clients include the National Association of Realtors.

Those sorts of worries have a few people from the world of finance suggesting that the administration should do much more, not less.

William H. Gross, managing director at Pimco, a giant manager of bond funds, has proposed the government refinance at lower rates millions of mortgages it owns or insures. Such a bold action, Mr. Gross said in a recent speech, would “provide a crucial stimulus of $50 to $60 billion in consumption,” as well as increase housing prices.

The idea has gained little traction. Instead, there is a sense that, even with much more modest notions, government intervention is not the answer. The National Association of Realtors, the driving force behind the credit last year, is not calling for a new round of stimulus.

Some members of the National Association of Home Builders say a new credit of $25,000 would raise demand but their chances of getting this through Congress are nonexistent.

“Our members are saying that if we can’t get a very large tax credit — one that really brings people off the bench — why use our political capital at all?” said David Crowe, the chief economist for the home builders.

That might give the Obama administration permission to take the risk of doing nothing.

Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure mill, GTC | Honor, HERS, investment banking, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee | Tagged: , , , , , , , , , , , , , , | 45 Comments »

The Importance of Discovery and Motion Practice

Posted on May 5, 2010 by Neil Garfield

Practically all the questions I get relate to how to prove the case that the loan was securitized. This is the wrong question. While it is good to have as much information about the pool a loan MIGHT BE INCLUDED, that doesn’t really answer the real question.

The real question is what is the identity of the creditor(s). The secondary question is what is owed on my obligation — not how much did I pay the servicer.

It might seem like a subtle distinction but it runs to the heart of the burden of proof. You can do all the research in the world and come up with the exact pool name that lists your property in the assets as a secured loan supporting the mortgage backed security that was issued and sold for real money to real investors.  But that will not tell you whether the loan was ever really accepted into the pool, whether it is still in the pool, or whether it is paid in whole or in part by third parties through various credit enhancement (insurance) contracts or federal bailout.

You must assume that everything is untrue. That includes the filings with the SEC. They may claim the loan is in the pool and even show an assignment. But as any first year law student will tell you there is no contract unless you have an offer AND an acceptance. If the terms of the pooling and service agreement say that the cutoff date is April 30 and the assignment is dated June 10, then by definition the loan is not in the pool unless there is some other documentation that overrides that very clear provision of the pooling and service agreement.

Even if it made it into the pool there are questions about the authenticity of the assignment, forgery and whether the pool structure was broken up (trust dissolved, or LLC dissolved) only to be broken up further into one or more new resecuritized pools. And even if that didn’t happen, someone related to this transaction most probably received payments from third parties. Were those allocated to your loan yet? Probably not. I haven’t heard about any borrower getting a letter with a new amortization schedule showing credits from insurance allocated to the principal originally due on the loan.

The pretender lenders want to direct the court’s attention to whether YOU paid your monthly payments, ignoring the fact that others have most likely made payments on your obligation. Remember every one of these isntruments derives its value from your loan. Therefore every payment on it needs to be credited to your loan whether the payment came from you or someone else. [You know all that talk about $20 billion from AIG going to Goldman Sachs? They are talking about YOUR LOAN!]

The error common to pro se litigants, lawyers and judges is that this is not a matter of proof from the borrower. The party sitting there at the other table in the courtroom with a file full of this information is the one who has it — and the burden of proof. Your case is all about the fact that the information was withheld and you want it now. That is called discovery. And it is in motion practice that you’ll either win the point or lose it. If you win the point about proceeding with discovery you have won the case.

You still need as much information as possible about the probability of securitization and the meaning it has in the context of the subject mortgage. But just because you don’t have it doesn’t mean the pretender lender has proved anything. What they have done, if they prevailed, is they blocked you from getting the information.

By rights you shouldn’t have to prove a thing about securitization where there is a foreclosure in process. By rights you should be able to demand proof they are the right people with the full accounting of all payments including receipts from insurance and credit default swaps. The confusion here emanating from Judges is that particularly in non-judicial states, since the borrower must bring the case to court in the first instance, the assumption is made that the borrower must prove a prima facie case that they don’t owe the money or that the foreclosing pretender lender is an impostor. That’s what you get when you convert a judicial issue into a non-judicial one on the basis of “judicial economy.”

In reality, the ONLY way that non-judicial statutes can be constitutionally applied is that if the borrower goes to the trouble of raising an objection by bringing the matter to court, the burden of proof MUST shift immediately to the pretender lender to show that in a judicial proceeding they can establish a prima facie case to enforce the obligation, the note and the mortgage (deed of trust). ANY OTHER INTERPRETATION WOULD UNCONSTITUTIONALLY DENY THE BORROWER THE RIGHT TO A HEARING ON THE MERITS WHEREIN THE PARTY SEEKING AFFIRMATIVE RELIEF (THAT IS THE FORECLOSING PARTY, NOT THE BORROWER) MUST PROVE THEIR CASE.

Filed under: CASES, CDO, CORRUPTION, Eviction, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, interest rates, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 24 Comments »

Magnetar Echoes Livinglies call for Alignment of Investors, Servicers and Borrowers

Posted on April 22, 2010 by Neil Garfield

see Magnetar%20Mortage%20Recovery%20Backstop%20Whitepaper%20Jun09.pdf

Magnetar Mortage Recovery Backstop Whitepaper Jun09

Two things jump out at me with this paper from June, 2009.

First it is obvious that the “real money” investors are defined as those seeking low risk and willing to take lower yield. The fact that they are called “Real Money Investors” underscores my point about the identity of the creditor. Those “traditional” investors are no longer available to buy the mortgage backed securities or any other resecuritized derivative package based upon mortgage backed securities. Legal restrictions requiring the securities to be investment grade would prevent them from jumping back in even if they wanted to do so, which they obviously don’t.

Thus the inevitable conclusion drawn almost a year ago and borne out by history, is that the fair market value of the securities, trading as pennies on the dollar, is reflective of a lack of demand for mortgage backed securities no matter how high the yield (i.e., no matter how low the price).

Second there is a growing realization that the interests of the investor and the borrowers are actually aligned in many ways and that the solution to mortgage modification, principal reduction, and other aspects of the mortgage mess and the foreclosure crisis lies in recognizing certain realities and then dealing with them in an equitable manner. The properties were never worth the amount of the appraisal in most instances and now they are worth even less than they were when the loan deals were closed. The securities were also “appraised” far too high thus creating a giant yield spread premium for the investment bank-created seller of mortgage backed securities.

In my opinion, based upon a sampling of the data available, it is entirely possible that the “true” fair market value of those securities in the best of circumstances is probably less than 40% of the initial offering price. It is this well-hidden analysis that is not getting the attention of the Obama administration and which completely explains why servicers are obstructing modifications under instruction from investment banking intermediaries like the “Trustee”.

Leaving the servicers and other parties as the middlemen “in the middle” to sort this out is another license to steal creating another mark-up applied against both borrowers and investors as the “real money” parties. The status quo is what is causing the stagnation in lieu of recovery. Until everyone accepts basic notions of “real party in interest” and eliminates those who don’t fit that description, the moral hazards will remain and escalate.

As concluded in this paper, either judicial or executive intervention is required to kick the middlemen out of the way and let the light in. When investors and borrowers are able to compare notes and work with each other the figures for both will be enhanced, foreclosures will decline, losses will be taken, and yes it is highly probable that the number of investor lawsuits will proliferate against those who defrauded them.

The lender is identified as the investor in this paper (indirectly) and the party who defrauded them is not some greedy borrower with stars in his eyes, it was the usual suspect — a financial wizard making a sales pitch that was so complex, the buyer basically was forced to rely upon the integrity of the investment banking house for appropriate pricing. That is where the system fell apart. Moral hazard escalated to moral mess.

Filed under: bubble, CASES, CDO, CORRUPTION, credit unions, currency, Eviction, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, trustee, workshop | Tagged: , , , , , , , , , , , , , , , , , , , , , | 4 Comments »

Notarized MERS Assignment of DOT as Nominee: Forensic Analysis and Motion Practice

Posted on April 8, 2010 by Neil Garfield

I was looking at an assignment signed by Margaret Dalton, “Vice President”, Mortgage Electronic Registration Systems, Inc (MERS) “as nominee” for “Hoecomings” (sic) Financial Network, Inc. with an execution date of March 5, 2010 and a notarization date of the same date, notarized by D. Pakusic in Duval County, Florida, naming United Independent Title as Trustee under the Deed of Trust and purporting to assign the Deed of Trust to JP Morgan Chase Bank National Association.

A forensic analysis report would or should state as follows:

  1. The title chain reveals the property is located in the County of Los Angeles, State of California and contains a purported assignment signed by Margaret Dalton, “Vice President”, Mortgage Electronic Registration Systems, Inc (MERS) “as nominee” for “Hoecomings” (sic) Financial Network, Inc. with an execution date of March 5, 2010 and a notarization date of the same date, notarized by D. Pakusic in Duval County, Florida, naming United Independent Title as Trustee under the Deed of Trust and purporting to assign the Deed of Trust to JP Morgan Chase Bank National Association. in public records book ____, at page ____ of the County of _________, in the State of Florida. The document appears on its face to have been prepared by Malcolm-Cisneros, a Law Corporation located at 2112 Business Center Dr., Irvine, California 92612. Given the location of the property in California, the location of the law firm that prepared it in California and the location of of the other parties, the fact that it was “notarized” in Florida raises numerous forensic questions requiring production of additional documentation and facts.
  2. Location Issues: The property is located in the State of California, as are the Trustors under the Deed of Trust (DOT). Margaret Dalton is believed to be located in Irvine, California, possibly employed by or on the premises of the above-referenced Law Corporation. The Notary is located in Duval County, Florida which has no known connection with any of the parties. MERS offices are reported to be located in states other than California and the IT platform is reported to be located in the Midwest. Homecoming Financial Network, Inc. (which undersigned believes was intended by the referenced instruments and title chain) is authorized to do business in the State of California, but upon research does not appear to be a chartered bank, financial institution or lender. HFN is a mortgage originator acting on behalf of unknown sources of funds who may be located anywhere, since they are neither disclosed nor described in the closing documentation nor any document on record. Accordingly there is a question as to the identity of the creditor at the time of the origination of the loan, the identity of the creditor at the current time, and the identity of the creditor at all times between the origination of the loan and the present. There are also questions requiring additional documentation and fats to reveal whether the purported assignment was executed by or on behalf of anyone in Duval County, Florida where the instrument was notarized or in Irvine, California where the instrument may have been executed.
  3. Margaret Dalton’s employment is unknown but it does not appear that she has ever been an employee of MERS, nor that MERS is located where Margaret Dalton apparently signed the document. Previous investigations by the undersigned indicate that MERS is an electronic database privately owned and operated by fewer than 17 employees, which do not include Ms. Dalton. According to information received from MERS, the database platform operated by MERS for its members, has an access procedure consisting of a user ID and password. With such information any person could enter, alter or amend any entry in the MERS database. The procedure also provides access to an automated procedure wherein the user may name a person to serve as “vice-president” or “limited signing officer” for MERS. No record has been produced for this analysis indicating that Ms. Dalton was named as “vice-president” or whether she did so herself, nor whether she was authorized to do so or from whom said authority would be claimed. There is accordingly a question as to whether the document was in fact signed by Ms. Dalton, and if so whether she had authority to sign a document that conveyed an interest in real property.
  4. Given the above information, there is also a question as to whether the notarization was valid or void. Florida law provides that if the Notary knows that the person signing does not possess authority to sign or knows that the person is ignorant of their authority, that the oath administered is invalid and that the instrument is construed to be not notarized, despite the signature and stamp. Recording laws require notarization. Thus there is a question as to whether the document is or would be construed as a recorded instrument despite its obvious appearance in the title record. If it is not construed as a recorded instrument, then the chain of title should be amended to remove this document.
  5. The chain of title, as stated above, reveals a Deed of Trust (DOT) in favor of MERS as nominee. No issues are readily apparent as to the execution of the Deed of Trust. However, the content of the DOT raises factual issues that require further examination and the production of additional documents and information. Since MERS is an IT platform operated for the purposes of its private owners, it is not authorized by Florida Statutes nor California Statutes to serve as the equivalent of a recording record for instruments in the public records. It is a data entry and retrieval system that is private, not public. Since MERS was named as nominee and the MERS documentation available on the internet clearly state that under no circumstances will MERS ever claim an interest in the real property, the DOT, the note, nor will ever be the actual lender, beneficiary or mortgagee in any transaction, the effect of naming MERS raises factual issues since there are questions regarding title raised by the conflict between naming MERS and MERS disclaiming any such interest. There is no record of MERS accepting the position as nominee and if so under what circumstances. Those terms exist in agreements executed between members of MERS and one of the MERS corporations and are unavailable to the undersigned forensic analyst.
  6. The DOT and the above-referenced purported assignment refer to MERS as nominee for HFN, which was neither the creditor nor the lender at the time of the origination of the loan. Thus the DOT appears to name MERS (who disclaims any interest in the loan) on behalf of HFN (who served as a conduit for a table-funded loan transaction, probably as part of the securitization of the subject loan transaction) both of whom served principals that were not disclosed at the time of the origination of the loan nor, to the knowledge of the undersigned, to the present. The effect of misspelling the name of HFN on the purported assignment is unknown, but based upon advice from title agents consulted, it would be ordinarily required in any subsequent transaction, that the document be re-executed with the proper spelling. Whether this affects the legality of the instrument is unknown to the undersigned analyst.
  7. The purported assignment refers only to the DOT, which raises several questions. It is unknown whether an assignment of the note, as evidence of the underlying obligation, was executed at the same time as the purported assignment of the DOT. It is unknown whether all the necessary parties executed instruments required to authorize the assignments, and if so when this was accomplished. If there were no such other assignments then there is a question as to whether the instrument was effective, and if so, whether it intended to provide ownership of the security instrument (DOT) to one party while the ownership of the note remained or was transferred to another party, while at the same time the underlying obligation to yet another party may have existed between the Trustor as debtor and the source of funds for the origination of the loan, as creditor. Additional documentation and facts would be required to make these determinations.

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