Navigating LOST COMMUNICATION With “Servicers” Who Are in Reality Merely Steering You Into Foreclosure

The main point is that borrowers must calibrate their thinking. Debtors are not dealing with anyone who wants to collect payments. They are dealing with someone who wants a foreclosure so they can steal the proceeds. The forced sale of the house generates revenue that is distributed to several players involved in the foreclosure effort and several players involved in the REO sale and eviction.

The rest of the money goes to the securities brokerage firm (investment bank) where there is no loan receivable account against which to credit the deposit. In short, while labeled as various vaguely described transactions, the substance of the deposit is that it is revenue even if it is not declared as such for tax purposes.

Against this backdrop a common complaint I receive is that borrowers are in good faith attempting to make payments or send documents requested by the “servicer” only to find that they are unable to do so or that the documents were lost. So they ask me what to do next.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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RULE #1: STOP CALLING THEM “THE BANK.” THEY ARE MOST LIKELY NOT THE BANK — AND THEY DO NOT EVEN QUALIFY AS SERVICERS IN MOST INSTANCES. THINK OF THEM AS SCAM ARTISTS WHO HAVE GAINED YOUR CONFIDENCE (I.E. CON MEN) TO PREVENT YOU FROM INQUIRING ABOUT WHO SHOULD BE RECEIVING YOUR PAYMENTS OR THE PROCEEDS OF A FORECLOSURE SALE. 

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Technically you are most likely NOT dealing with anyone who qualifies as a creditor nor even a debt collector, who could only be functioning on authority from an actual creditor. So theoretically you would be well within your legal rights to simply not pay money to a party who is not entitled to receive them.
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Reality is different from theory. While in past times anyone attempting to collect, process or enforce a debt would be required to disclose everything about their ownership, agency or authority, today virtually everyone presumes that any such party has legal status. Because of that presumption, refusing to make payments as demanded is fraught with the risk that (1) the pretender lender will declare you to be in default and (2) start enforcement proceedings against you based upon fabricated but nonetheless facially valid documentation.
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So my usual and primary advice is to refrain from any action or inaction that puts you in a worse position than the one you find yourself. And I always recommend at least consulting with local counsel before deciding on any course of action.
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That usually means you make the payments.
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The only other alternative is to file a lawsuit in which you ask to deposit the funds in the court registry because you want to make the payments but you don’t believe the party demanding those payments has any actual legal right to do so.
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INTERPLEADER: An interesting twist on this type of pleading could be that you file your lawsuit, asking for attorney fees, and name both the servicer demanding payment and the investment bank (securities brokerage firm(s)) that is/are most likely behind the securitization scheme. This would be an interpleader lawsuit that basically says I have this money, it is for a debt I owe, Party A demands it, but I think Party B might be the one to whom it is owed. I have no assurance from Party A that the money would be given to Party B or any other entity that has paid for the debt and is therefore entitled to receive the proceeds of my payments. I don’t care who gets it. I just want to know who to pay. 
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In a further twist (which could negate your right to receive attorney fees) such an action could also include a count for disgorgement if the court finds that the party demanding payment was not entitled to receive it. That could mean return or deposit of all money ever received by the parties named as respondents in the interpleader action.

Generally, disgorgement is a form of “[r]estitution measured by the defendant’s wrongful gain.” Restatement (Third) of Restitution and Unjust Enrichment § 51, Comment a, p. 204 (2010) (Restatement (Third)). Disgorgement requires that the defendant give up “those gains … properly attributable to the defendant’s interference with the claimant’s legally protected rights.” Ibid . Beginning in the 1970’s, courts ordered disgorgement in SEC enforcement proceedings in order to “deprive … defendants of their profits in order to remove any monetary reward for violating” securities laws and to “protect the investing public by providing an effective deterrent to future violations.”Texas Gulf,312 F.Supp., at 92.

Kokesh v. Sec. & Exch. Comm’n, 137 S. Ct. 1635, 1640 (2017)

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Federal jurisdiction could apply.

Whereas statutory interpleader may be brought in the district where any claimant resides ( 28 U.S.C. § 1397), Rule interpleader based upon diversity of citizenship may be brought only in the district where all plaintiffs or all defendants reside ( 28 U.S.C. § 1391 (a)). And whereas statutory interpleader enables a plaintiff to employ nationwide service of process ( 28 U.S.C. § 2361), service of process under Rule 22 is confined to that provided in Rule 4. See generally 3 Moore, Federal Practice ¶ 22.04.

State Farm Fire Cas. Co. v. Tashire, 386 U.S. 523, 530 n.3 (1967)

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In all events any attempts at communication or payment that are frustrated by the party demanding that payment should be documented by U.S. Postal Service, Certified Mail, return receipt requested — because your attempts will be denied. The robowitness or affiant on an affidavit will say there is no record of such attempts. LIke the above, an interim measure would be to pay the money into a trust account administered by an attorney or some other legally recognized escrow agent.
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I have seen many judges ask the borrower who relates this story what they did with the money after it was refused. If there answer is that they spent it, the judge often construes that as undermining the credibility of the borrower’s testimony. But if the borrower says it was paid into escrow where it still remains most judges regard that in a light favorable to the borrower and it raises their antagonism toward the lawyers and the servicer who are now presumed to have screwed things up even if they were actually entitled to collect, process or enforce the debt.
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PRACTICE NOTE: While actual tender of actual payment certainly bars any legal enforcement action to collect the tendered payment, it does not render the entire lien unenforceable. BUT if the notice of default and end of month statements show an amount due that should have been reduced by the amount of the tendered payment then the notice of default and subsequent notice of sale or lawsuit could be defective. And if the refusal to accept payment was part of a larger scheme to steer the borrower into foreclosure, that i sone building block in a case for illegal, fraudulent and/or wrongful foreclosure. 
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Beware of the proof requirements against a court bias that the borrower was probably trying to game the system. We all know that it is the other side gaming the system but the court presumes otherwise, partly because it is legally required to do so based upon the facial validity of the documents presented — even if they are fabricated. For that reason I frequently suggest attempts at payment or delivery of documents in person at a branch or regional office, witnesses to such attempts, photos, and even video, where it is legal to do so. Signs posted to the effect that there is video surveillance might suffice as permission to record. Check with local counsel.
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In addition, in litigation you can demand copies of recordings made at particular locations and/or times. The response will be they don’t have that recording but if you can get a judge to require them to produce the recordings on either side of the time frame in which the contact occurred, they will likely retreat because the absence of the video or audio recording will speak volumes about their conduct.

NEW LOAN CLOSINGS — BEWARE!!!— NonJudicial Deeds of Trust Slipped into New Mortgage Closings in Judicial States

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

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IF YOU ARE HAVING A CLOSING ON A REFI OR NEW LOAN BEWARE OF WHAT DOCUMENTS ARE BEING USED THAT WAIVE YOUR RIGHTS TO CONTEST WRONGFUL FORECLOSURES — GET A LAWYER!!!

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EDITOR’S NOTE: It is no secret that the Bank’s have a MUCH easier time foreclosing on property in states that have set up non-judicial foreclosure. Banks like Bank of America set up their own “Substitute Trustee” (“RECONTRUST”) — the first filing before the foreclosure commences. In this “Substitution of Trustee” Bank of America declares itself to be the new beneficiary or acting on behalf of the new beneficiary without any court or agency verification of that claim. So in essence BOA is naming itself as both the new beneficiary (mortgagee) and the “Trustee” which is the only protection that the homeowner (“Trustor”). This is a blatant violation of the intent of the the laws of any state allowing nonjudicial foreclosure.
The Trustee is supposed to serve as the objective intermediary between the borrower and the lender. Where a non-lender issues a self serving statement that it is the beneficiary and the the borrower contests the “Substitution of Trustee” the OLD trustee is, in my opinion, obligated to file an interpleader action stating that it has competing claims, it has no interest in the outcome and it wants attorneys fees and costs. That leaves the new “beneficiary” and the borrower to fight it out under the requirements of due process. An Immediate TRO (Temporary Restraining Order) should be issued against the “new” Trustee and the “new” beneficiary from taking any further action in foreclosure when the borrower denies that the substitution of trustee was a valid instrument (based in part on the fact that the “beneficiary” who appointed the “substitute trustee” is not the true beneficiary. This SHOULD require the Bank to prove up its case in the old style, but it is often misapplied in procedure putting the burden on the borrower to prove facts that only the bank has in its care, custody and control. And THAT is where very aggressive litigation to obtain discovery is so important.
If the purpose of the legislation was to allow a foreclosing party to succeed in foreclosure when it could not succeed in a judicial proceeding, then the provision would be struck down as an unconstitutional deprivation of due process and other civil rights. But the rationale of each of the majority states that have adopted this infrastructure was to create a clerical system for what had been a clerical function for decades — where most foreclosures were uncontested and the use of Judges, Clerks of the Court and other parts of the judicial system was basically a waste of time. And practically everyone agreed.
There are two developments to report on this. First the U.S. Supreme Court turned down an appeal from Bank of America who was using Recontrust in Utah foreclosures and was asserting that Texas law must be used to enforce Utah foreclosures because Texas was allegedly the headquarters of Recontrust. So what they were trying to do, and failed, was to apply the highly restrictive laws of Texas with a tiny window of opportunity to contest the foreclosure in the State of Utah that had laws that protected consumers far better than Texas. The Texas courts refused to apply that doctrine and the U.S. Supreme court refused to even hear it. see WATCH OUT! THE BANKS ARE STILL COMING!
But a more sinister version of the shell game is being played out in new closings across the country — borrowers are being given a “Deed of Trust” instead of a mortgage in judicial states in order to circumvent the laws of that state. By fiat the banks are creating a “contract” in which the borrower agrees that if the “beneficiary” tells the Trustee on the deed of trust that the borrower did not pay, the borrower has already agreed by contract to allow the forced sale of the property. See article below. As usual borrowers are told NOT to hire an attorney for closing because “he can’t change anything anyway.” Not true. And the Borrower’s ignorance of the difference between a mortgage and a deed of trust is once again being used against the homeowners in ways that are undetected until long after the statute of limitations has apparently run out on making a claim against the loan originator.
THIS IS A CLEAR VIOLATION OF STATE LAW IN MOST JUDICIAL STATES — WHICH THE BANKS ARE TRYING TO OVERTURN BY FORCING OR TRICKING BORROWERS INTO SIGNING “AGREEMENTS” TO ALLOW FORCED SALE WITHOUT THE BANK EVER PROVING THEIR CASE AS TO THE DEBT, OWNERSHIP AND BALANCE. Translation: “It’s OK to wrongfully foreclose on me.”
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Foreclosure News: Who Gets to Decide Whether a State is a Judicial Foreclosure State or a Non-Judicial Foreclosure State, Legislatures or the Mortgage Industry?

posted by Nathalie Martin
Apparently some mortgage lenders feel they can make this change unilaterally. Big changes are afoot in the process of granting a home mortgage, which could have a significant impact on a homeowner’s ability to fight foreclosure. In many states in the Unites States (including but not limited to Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin), a lender must go to court and give the borrower a certain amount of notice before foreclosing on his or her home. Now the mortgage industry is quickly and quietly trying to change this, hoping no one will notice. The goal seems to be to avoid those annoying court processes and go right for the home without foreclosure procedures. This change is being attempted by some lenders simply by asking borrowers to sign deeds of trust rather than mortgages from now on.
Not long ago, Karen Myers, the head of the Consumer Protection Division of the New Mexico Attorney General’s Office, started noticing that some consumers were being given deeds of trust to sign rather than mortgages when obtaining a home loan. She wondered why this was being done and also how this change would affect consumers’ rights in foreclosure. When she asked lenders how this change in the instrument being signed would affect a consumer’s legal rights, she was told that the practice of having consumers sign deeds of trust rather than mortgages would not affect consumers’ rights in foreclosure at all. Being skeptical, she and others in her division dug further into this newfound practice to see if it was widespread or just a rare occurrence in the world of mortgage lending. Sure enough, mortgages had all but disappeared, being replaced with a deed of trust.
As a general matter, depending on the law in a state, a deed of trust can be foreclosed without a court’s involvement or any oversight at all. More specifically, the differences between judicial and non-judicial foreclosures are explained here in the four page document generated by the Mortgage Bankers’ Association. It is not totally clear whether this change will affect the legal rights of borrowers in all judicial foreclosure states, but AGs around the country should start looking into this question. Lenders here in New Mexico insist that this change in practice will not affect substantive rights but if not, why the change? The legal framework is vague and described briefly here.
Eleven lenders in New Mexico have been notified by the AG’s Office to stop marketing products as mortgages when, in fact, they are deeds of trust, according to Meyers and fellow Assistant Attorney General David Kramer. As a letter to lenders says: “It is apparent … that the wholesale use of deeds of trusts in lieu of mortgage instruments to secure home loans is intended to modify and abrogate the protections afforded a homeowner by the judicial foreclosure process and the [New Mexico] Home Loan Protection Act.”

Here it is: Nonjudicial Foreclosure Violates Due Process in Complex Structured Finance Transactions

No, there isn’t a case yet. But here is my argument.

The main point is that we are forced to accept the burden of disproving a case that had not been filed — the very essence of nonjudicial foreclosure. In order to comply with due process, a simple denial of the facts and legal authority to foreclosure should be sufficient to force the case into a courtroom where the parties are realigned with the so-called new beneficiary is the Plaintiff and the homeowner is the Defendant — since it is the “beneficiary” who is seeking affirmative relief.

But the way it is done and required to be done, the Plaintiff must file an attack on a case that has never been alleged anywhere in or out of court. The new beneficiary anoints itself, files a fraudulent substitution of trustee because the old one would never go along with it, and then files a notice of default and notice of sale all on the premise that they have the necessary proof and documents to support what could have been an action in foreclosure brought by them in a judicial manner, for which there is adequate provision in California law.

Instead nonjudicial foreclosure is being used to sell property under circumstances where the alleged beneficiary under the deed of trust could never prevail in a court proceeding. Nonjudicial foreclosure was meant to be an expedient method of dealing with the vast majority of foreclosures when the statute was passed. In that vast majority, the usual procedure was complaint, default, judgment and then sale with at least one hearing in between. Nearly all foreclosures were resolved that way and it become more of a ministerial act for Judges than an actual trier of fact or judge of procedural rights and wrongs.

But the situation is changed. The corruption on Wall Street has been systemic resulting in whole sale fraudulent fabricated forged documents together with perjury by affidavit and even live testimony. Contrary to the consensus supported by the banks, these cases are complex because the party seeking affirmative relief — i.e., the new “beneficiary” is following a complex script established long before the homeowner ever applied for a loan or was solicited to finance her property.

The San Francisco study concluded, like dozens of other studies across the country that most of the foreclosures were resolved in favor of “strangers to the transaction.” By definition, the use of several layers of companies and multiple sets of documents defining two separate deals (one with the investor lenders and one with the borrower, with the only party in common being the broker dealer selling mortgage bonds and their controlled entities) has turned the mundane into highly complex litigation that has no venue. In non-judicial foreclosures the Trustee is the party who acts to sell the property under instructions from the beneficiary and does so without inquiry and without paying any attention to the obvious conflict between the title record, the securitization record, the homeowner’s position and the prior record owner of the loan.

The Trustee has no power to conduct a hearing, administrative or judicial, and so the dispute remains unresolved while the Trustee proceeds to sell the property knowing that the homeowner has raised objections. Under normal circumstances under existing common law and statutory authority, the Trustee would simply bring the matter to court in an action for interpleader saying there is a dispute that he doesn’t have the power to resolve. You might think this would clog the court system. That is not the case, although some effort by the banks would be made to do just that. Under existing common law and statutory law, the beneficiary would then need to file a complaint, verified, sworn with real exhibits and that are subject to real scrutiny before any burden of proof would shift to the homeowner. And as complex as these transactions are they all are subject to simple rules concerning financial transactions. If there was no money in the alleged transaction then the allegation of a transaction is false.

It was and remains a mistake to allow such loans to be foreclosed through any means other than strictly judicial where the “beneficiary” must allege and prove ownership and the balance due on the loan owed to THAT beneficiary. Requiring homeowners with zero sophistication in finance and litigation to bear the initial burden of proof in such highly complex structured finance schemes defies logic and common sense as well as being violative of due process in the application of the nonjudicial statutes to these allegedly securitized loans.

By forcing the parties and judges who sit on the bench to treat these complex issues as though they were simple cases, the enabling statutes for nonjudicial foreclosure are being applied unconstitutionally.

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