## Maine Case Affirms Judgment for Homeowner — even with admission that she signed note and mortgage and stopped paying

While this case turned upon an  inadequate foundation for introduction of “business records” into evidence, I think the real problem here for Keystone National Association was that they did not and never did own the loan — something revealed by the usual game of musical chairs that the banks use to confuse and obscure the identity of the real creditor.

When you read the case it demonstrates that the Maine Supreme Judicial Court was not at all sympathetic with Keystone’s “plight.” Without saying so directly the court’s opinion clearly reveals its doubt as to whether Keystone had any plight or injury.

Refer to this case and others like it where the banks treated the alleged note and mortgage as being the object of a parlor game. The attention paid to the paperwork is designed by the banks to distract from the real issue — the debt and who owns it. Without that knowledge you don’t know the principal and therefore you can’t establish authority by a “servicer.”

The error in courts across the country has been that the testimony and records of the servicer are admissible into evidence even if the authority to act as servicer did not emanate from the real party in interest — the debt holder (the party to whom the MONEY is due.

Note that this ended in judgment for the homeowner and not an involuntary dismissal without prejudice.

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Hat Tip to Bill Paatalo

Keybank – maine supreme court

Here are some meaningful quotes from the Court’s opinion:

KeyBank did not lay a proper foundation for admitting the loan servicing records pursuant to the business records exception to the hearsay rule. See M.R. Evid. 803(6).

KeyBank’s only other witness was a “complex liaison” from PHH Mortgage Services, which, he testified, is the current loan servicer for KeyBank and handles the day-to-day operations of managing and servicing loan accounts.

The complex liaison testified that he has training on and personal knowledge of the “boarding process” for loans being transferred from prior loan servicers to PHH and of PHH’s procedures for integrating those records. He explained that transferred loans are put through a series of tests to check the accuracy of any amounts due on the loan, such as the principal balance, interest, escrow advances, property tax, hazard insurance, and mortgage insurance premiums. He further explained that if an error appears on the test report for a loan, that loan will receive “special attention” to identify the issue, and, “[i]f it ultimately is something that is not working properly, then that loan will not . . . transfer.” Loans that survive the testing process are transferred to PHH’s system and are used in PHH’s daily operations.

The court admitted in evidence, without objection, KeyBank’s exhibits one through six, which included a copy of the original promissory note dated April 29, 2002;3 a copy of the recorded mortgage; the purported assignment of the mortgage by Mortgage Electronic Registration Systems, Inc., from KeyBank to Bank of America recorded on January9, 2012; the ratification of the January 2012 assignment recorded on March 6, 2015; the recorded assignment of the mortgage from Bank of America to KeyBank dated October 10, 2012; and the notice of default and right to cure issued to Kilton and Quint by KeyBank in August 2015. The complex liaison testified that an allonge affixed to the promissory note transferred the note to “Bank of America, N.A. as Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing, LP,” but was later voided.

Pursuant to the business records exception to the hearsay rule, M.R. Evid. 803(6), KeyBank moved to admit exhibit seven, which consisted of screenshots from PHH’s computer system purporting to show the amounts owed, the costs incurred, and the outstanding principal balance on Kilton and Quint’s loan. Kilton objected, arguing that PHH’s records were based on the records of prior servicers and that KeyBank had not established that the witness had knowledge of the record-keeping practices of either Bank of America or Countrywide. The court determined that the complex liaison’s testimony was insufficient to admit exhibit seven pursuant to the business records exception.

KeyBank conceded that, without exhibit seven, it would not be able to prove the amount owed on the loan, which KeyBank correctly acknowledged was an essential element of its foreclosure action. [e.s.] [Editor’s Note: This admission that they could not prove the debt any other way means that their witness had no personal knowledge of the amount due. If the debt was in fact due to Keystone, they could have easily produced a  witness and a copy of the canceled check or wire transfer receipt wherein Keystone could have proven the debt. Keystone could have also produced a witness as to the amount due if any such debt was in fact due to Keystone. But Keystone never showed up. It was the servicer who showed up — the very party that could have information and exhibits to show that the amount due is correctly proffered because they confirmed the record keeping of “Countrywide” (whose presence indicates that the loan was subject to claims of securitization). But they didn’t because they could not. The debt never was owned by Keystone and neither Countrywide nor PHH ever had authority to “service” the loan on behalf of the party who owns the debt.]

the business records will be admissible “if the foundational evidence from the receiving entity’s employee is adequate to demonstrate that the employee had sufficient knowledge of both businesses’ regular practices to demonstrate the reliability and trustworthiness of the information.” Id. (emphasis added).

With business records there are three essential points of reference when several entities are involved as “lenders,” “successors”, or “servicers”, to wit:

1. The records and record keeping practices of the initial “lender.” [If there are none then that would point to the fact that the “lender” was not the lender.] Here you are looking for the first entries on a valid set of business records in which the loan and fees and costs were posted. Generally speaking this does not exist in most loans because the money came a third party source who knows nothing of the transaction.
2. The records and record keeping practices of any “successors.” Note that this is a second point where the debt is separated from the paper. If a successor is involved there would correspondence and agreements for the purchase and sale of the debt. What you fill find, though, is that there is only a naked endorsement, assignment or both without any correspondence or agreements. This indicates that the paper transfer of any rights to the “loan” was strictly for the purpose of foreclosing and bore new relationship to reality — i.e., ownership of the debt.
3. The records and record keeping practices of any “servicers.” In order for the servicer to be authorized, the party owning the debt must have directly or indirectly given authorization and come to an agreement on fees, as well as given instructions as to what functions the servicer was to perform. What you will find is that there is no valid document from an owner of the debt appointing the servicer or giving any instructions, like what to do with the money after it is collected from homeowners. Instead you find tenuous documentation, with no correspondence or agreements, that make assertions for foreclosure. The game of musical chairs has bothered judges for a decade: “Why do the servicers keep changing” is a question I have heard from many judges. The typical claims of authorization are derived from Powers of Attorney or a Pooling and Servicing agreement for an entity that neither e exists nor does it have any operating history.

## Banks Struggle to “FIND” Nonexistent Documents

So for the people who are unemployed due to a recession that won’t really quit until the money stolen from the system is somehow replaced or clawed back, you have a job waiting for you if you can sleep at night knowing that if your activities are exposed, the bank will disavow your “irresponsible” actions, leaving you exposed to jail or prison.

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

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see http://4closurefraud.org/2016/06/17/mortgage-companies-seek-time-travelers-to-find-missing-documents/

Every Bubble Bursts. The banks are now struggling to find people who will “find” nonexistent documents without expressly telling their superiors at the bank that the “found” documents were fabricated. The evidence is all over the internet as banks troll for prospective employees who will get their hands dirty and be prepared to get thrown under the bus should the malfeasance be discovered.

The documents are not merely missing. They do not exist. And without the critical documents required in every foreclosure, there can be no foreclosure. The documents must be fabricated because they don’t exist. The documents don’t exist because they were actually intentionally destroyed and because the banks have no interest in the property, the alleged loan, the “original” note (“missing” in most cases), the mortgage or the debt itself. Many documents existed but were destroyed by the banks.

If pushed to open their books we would find a complete absence of any financial transaction in which the banks or their pet trusts were involved. Up until recently the banks were able to get their employees to execute documents that were fabricated for the purposes of presentation in court. But the number of people who are willing to do that is diminishing. Bank employees sense the impending disaster for the banks and they don’t want to take the blame even if it costs them their job.

The entire bank scheme, as I previously reported, is based upon the ability to use legal presumptions. These presumptions create an opportunity for epic fraud and theft. If a document is facially valid, the burden shifts to the homeowner to rebut the presumption that it is indeed a valid, authentic document. But now homeowners are hiring forensic document examiners who are showing that the document presented is not the original even if it looks that way. More and more homeowners, when presented with a “blue ink” document will say they don’t know if that particular signature is their own signature because they know that the documents and signatures are being fabricated. The bank’s witness in court is treading the fine line between ignorance and perjury when they say that the note is the original. The same holds true to bogus assignments, indorsements (“endorsements”), powers of attorney and other documents the banks use to avoid being required to prove their case without the presumptions.

So the banks, without using their own names, are posting job openings for what 4closurefraud.com calls “time travelers.” People get hired for their willingness to create documents that appear to have been prepared and executed years ago. This is required because if there was no transaction years ago, then the sham is exposed — the “loan contract” between the homeowner and the originator never existed. And so when the originator endorses or assigns the note or mortgage to an undisclosed third party, the assignment is completely and irrevocably void as coming from an entity that never owned the loan but was merely named as the Payee or Mortgagee.

BUT if the original loan documents look valid, and the alleged transfers of the loan look valid, then the burden shifts to the homeowner to rebut the presumption that a real transaction took place between the homeowner and the originator and between the originator and the next party in the false chain of possession and ownership of the loan. This is why I have been relentless in insisting that discovery take place and be pursued aggressively. I have already seen many cases in which an order was entered requiring the banks to respond to discovery requests; in virtually all cases someone steps forward and settles with the homeowner. The only exceptions are where it is clear that the judge is going to rule for the banks anyway and will deny subsequent motions to compel the discovery that was previously ordered.

Of course the problem with the settlement is that the homeowner is being coerced into accepting a settlement that acknowledges some bank, servicer or trustee as actually having rights to collect or enforce the loan; since these parties are merely intermediaries who issue self-serving paper designating themselves as real parties in interest, such settlements could result in the homeowner being presented with claims later from the real source of funding in their loan. This is unlikely, but nonetheless possible. The only reason it is unlikely is that the real parties in interest are investors whose money was commingled with thousands of other investors in hundreds of trusts that never received any proceeds from their offering of mortgage backed securities that were neither mortgage backed or securities. The investors need a way to trace their money into the loans or, if they elect not to do so, to settle with the bank that cheated them in the first place with bogus mortgage bonds. There have been many such settlements, most of them unreported.

The fact remains that the “lender” is never part of any documented transaction. Hence the “lender” (the investors) enjoy none of the protections of a holder of a note nor the security of a mortgage. Fabricating documents and forging them is the only way of breathing life into the false loan contract that was documented, even if it never happened. And borrowers and their attorneys should take note that the entire loan infrastructure is an illusion that has been awarded judgments that pretend the illusion is real. we are either a nation of laws or a nation of men. Our Constitution makes us a nation of laws. This is our challenge. Do we allow bankers and politicians to turn back time on paper and treat them as though they are doing something right because NOW it is right because they declared it right, or do we reject that and apply rules of law that have existed for centuries for this very reason.

So for the people who are unemployed due to a recession that won’t really quit until the money stolen from the system is somehow replaced or clawed back, you have a job waiting for you if you can sleep at night knowing that if your activities are exposed, the bank will disavow your “irresponsible” actions, leaving you exposed to jail or prison.

Schedule A Consult Now!

## A Foreclosure Judgment and Sale is a Forced Assignment Against the Interests of Investors and For the Interests of the Bank Intermediaries

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Successfully hoodwinking a Judge into entering a Judgment of Foreclosure and forcing the sale of a homeowner’s property has the effect of transferring the loss on that loan from the securities broker and its co-venturers to the Pension Fund that gave the money to the securities broker. Up until the moment of the foreclosure, the loss will fall on the securities brokers for damages, refunds etc. Once foreclosure is entered it sets in motion a legal cascade that protects the securities broker from further claims for fraud against the investors, insurers, and guarantors.

The securities broker was thought to be turning over the proceeds to the Trust which issued bonds in an IPO. Instead the securities broker used the money for purposes and in ways that were — according to the pleadings of the investors, the government, guarantors, and insurers — FRAUDULENT. Besides raising the issue of unclean hands, these facts eviscerate the legal enforcement of loan documents that were, according to those same parties, fraudulent, unenforceable and subject to claims for damages and punitive damages from borrowers.

There is a difference between documents that talk about a transaction and the transaction documents themselves. That is the essence of the fraud perpetrated by the banks in most of the foreclosure actions that I have reviewed. The documents that talk about a transaction are referring to a transaction that never existed. Documents that “talk about” a transaction include a note, mortgage, assignment, power of attorney etc. Documents that ARE the transaction documents include the actual evidence of actual payments like a wire transfer or canceled check and the actual evidence of delivery of the loan documents — like Fedex receipts or other form of correspondence showing that the recipient was (a) the right recipient and (b) actually received the documents.

The actual movement of the actual money and actual Transaction Documents has been shrouded in secrecy since this mortgage mess began. It is time to come clean.

THE REAL DEBT: The real debt does NOT arise unless someone gets something from someone else that is legally recognized as “value” or consideration. Upon receipt of that, the recipient now owes a duty to the party who gave that “something” to him or her. In this case, it is simple. If you give money to someone, it is presumed that a debt arises to pay it back — to the person who loaned it to you. What has happened here is that the real debt arose by operation of common law (and in some cases statutory law) when the borrower received the money or the money was used, with his consent, for his benefit. Now he owes the money back. And he owes it to the party whose money was used to fund the loan transaction — not the party on paperwork that “talks about” the transaction.

The implied ratification that is being used in the courts is wrong. The investors not only deny the validity of the loan transactions with homeowners, but they have sued the securities brokers for fraud (not just breach of contract) and they have received considerable sums of money in settlement of their claims. How those settlement effect the balance owed by the debtor is unclear — but it certainly introduces the concept that damages have been mitigated, and the predatory loan practices and appraisal fraud at closing might entitle the borrowers to a piece of those settlements — probably in the form of a credit against the amount owed.

Thus when demand is made to see the actual transaction documents, like a canceled check or wire transfer receipt, the banks fight it tooth and nail. When I represented banks and foreclosures, if the defendant challenged whether or not there was a transaction and if it was properly done, I would immediately submit the affidavits real witnesses with real knowledge of the transaction and absolute proof with a copy of a canceled check, wire transfer receipt or deposit into the borrowers account. The dispute would be over. There would be nothing to litigate.

There is no question in my mind that the banks are afraid of the question of payment and delivery. With increasing frequency, I am advised of confidential settlements where the homeowner’s attorney was relentless in pursuing the truth about the loan, the ownership (of the DEBT, not the “note” which is supposed to be ONLY evidence of the debt) and the balance. The problem is that none of the parties in the “chain” ever paid a dime (except in fees) and none of them ever received delivery of closing documents. This is corroborated by the absence of the Depositor and Custodian in the “chain”.

The plain truth is that the securities broker took money from the investor/lender and instead of of delivering the proceeds to the Trust (I.e, lending the money to the Trust), the securities broker set up an elaborate scheme of loaning the money directly to borrowers. So they diverted money from the Trust to the borrower’s closing table. Then they diverted title to the loan from the investor/lenders to a controlled entity of the securities broker.

The actual lender is left with virtually no proof of the loan. The note and mortgage is been made out in favor of an entity that was never disclosed to the investor and would never have been approved by the investor is the fund manager of the pension fund had been advised of the actual way in which the money of the pension fund had been channeled into mortgage originations and mortgage acquisitions.

Since the prospectus and the pooling and servicing agreement both rule out the right of the investors and the Trustee from inquiring into the status of the loans or the the “portfolio” (which is nonexistent),  it is a perfect storm for moral hazard.  The securities broker is left with unbridled ability to do anything it wants with the money received from the investor without the investor ever knowing what happened.

Hence the focal point for our purposes is the negligence or intentional act of the closing agent in receiving money from one actual lender who was undisclosed and then applying it to closing documents with a pretender lender who was a controlled entity of the securities broker.  So what you have here is an undisclosed lender who is involuntarily lending money directly a homeowner purchase or refinance a home. The trust is ignored  an obviously the terms of the trust are avoided and ignored. The REMIC Trust is unfunded and essentially without a trustee —  and none of the transactions contemplated in the prospectus and pooling and servicing agreement ever occurred.

The final judgment of foreclosure forces the “assignment” into a “trust” that was unfunded, didn’t have a Trustee with any real powers, and didn’t ever get delivery of the closing documents to the Depositor or Custodian. This results in forcing a bad loan into the trust, which presumably enables the broker to force the loss from the bad loans onto the investors. They also lose their REMIC status which means that the Trust is operating outside the 90 day cutoff period. So the Trust now has a taxable event instead of being treated as a conduit like a Subchapter S corporation. This creates double taxation for the investor/lenders.

The forced “purchase” of the REMIC Trust takes place without notice to the investors or the Trust as to the conflict of interest between the Servicers, securities brokers and other co-venturers. The foreclosure is pushed through even when there is a credible offer of modification from the borrower that would allow the investor to recover perhaps as much as 1000% of the amount reported as final proceeds on liquidation of the REO property.

So one of the big questions that goes unanswered as yet, is why are the investor/lenders not given notice and an opportunity to be heard when the real impact of the foreclosure only effects them and does not effect the intermediaries, whose interests are separate and apart from the debt that arose when the borrower received the money from the investor/lender?

The only parties that benefit from a foreclosure sale are the ones actively pursuing the foreclosure who of course receive fees that are disproportional to the effort, but more importantly the securities broker closes the door on potential liability for refunds, repurchases, damages to be paid from fraud claims from investors, guarantors and other parties and even punitive damages arising out of the multiple sales of the same asset to different parties.

If the current servicers were removed, since they have no actual authority anyway (The trust was ignored so the authority arising from the trust must be ignored), foreclosures would virtually end. Nearly all cases would be settled on one set of terms or another, enabling the investors to recover far more money (even though they are legally unsecured) than what the current “intermediaries” are giving them.

If this narrative gets out into the mainstream, the foreclosing parties would be screwed. It would show that they have no right to foreclosure based upon a voidable mortgage securing a void promissory note. I received many calls last week applauding the articles I wrote last week explaining the securitization process — in concept, as it was written and how it operated in the real world ignoring the REMIC Trust entity. This is an attack on any claim the forecloser makes to having the rights to enforce — which can only come from a party who does have the right to enforce.

## The Banks: Consideration is Irrelevant, Really? Then so is payment!

The issue is what are the elements of the loan contract? Who are the parties? And who can enforce it?

I would agree that an overpayment at closing from the source of funds is rare. What is not rare and in fact common is that the wire transfer instructions that accompany the wire transfer receipt often instructs the closing agent to refund any overpayment to the party who wired the money — not the originator. This leads to questions. If it is a true warehouse lender, such instructions could be explained without affecting the validity of the note or mortgage.

In truth, the procedures used usually prevent the originator from ever touching the flow of funds. Wall Street banks were afraid of fraud — that if the originators could touch the money, they might have faked a number of closings and taken the money. In short, the investment banks were afraid that the originators would not use the money the way it was intended. So instead of doing that, they created relationships by having the originators sign Assignment and Assumption agreements before they started lending. This agreement says the loan belongs to an “aggregator” that is merely a controlled entity of the broker dealer. But the money doesn’t come from either the originator or the aggregator. Thus they have an agreement that controls the loan closings but no consideration for that either.
But this is a lot like the insurance payments, proceeds of credit default swaps etc. The contracts almost always specifically waive subrogation or any other right of action against the borrowers or any other enforcement of the notes or mortgages. It has been presumed that these contracts were for the mitigation of losses and that is true. But they are payable to the broker dealers and not the trust or trust beneficiaries. The investment banks committed fraud when they represented to the insurers, FDIC, Fannie, Freddie and CDS counterparties that they had an insurable interest. Those parties presumed that the investment banks were creating these hedge products for the benefit of the owner of the mortgage bonds or the owner of the loans. But it was paid to the investment banks. That is why all those parties are claiming losses that resulted from fraud — all of which have resulted in settlements (except the Countrywide verdict for fraud).
The similarity is this: in both the closing with borrowers and the closings with investors the same fraud occurred. When dealing with the closing agent they interposed their nominee in the closing which resulted in no note and no mortgage in favor of the investors or the trust. Whether the closing agent is liable is another issue. The point is that the money came from a third party which was a controlled entity of the broker dealer. Thus the investor gets a promise from a trust that is not funded while their money is used to pay fees, create the illusion of trading profits for the broker dealer and funding mortgages.
The wire transfer is not a wire transfer from the originator, nor from the bank at which the originator maintains any account. The wire transfer instructions and the wire transfer receipt fail to identify the actual source of funds and fail to refer to the originator as a real party. If they did, there would not be a problem for the banks to enforce the note and mortgage. If they did, the banks would simply show the transaction record and there would be nothing to fight about.
The only occasion in which the banks appeared to be willing to provide adequate documentation for consideration appears to be in a merger or acquisition with the party that was named as the mortgagee in the mortgage document or the beneficiary in the deed of trust. And all the other transactions, the banks say that consideration is irrelevant or they quote the law that says that courts cannot question the adequacy of consideration. They are dodging the issue. We are not saying that consideration was not adequate; what we are saying is that there was no consideration at all. The banks are fighting this issue  because when it comes out that there really was no consideration the entire house of cards could fall.
The issue is counterintuitive because everyone knows that there was money on the closing table. Unless the issue is argued and presented with clarity, it will appear to the judge that you are trying to say that there was no money on the closing table. And when a judge hears that, or thinks that he heard that, he or she will not take you seriously. There are three parts to every contract —  offer, acceptance, and consideration. A few courts have started to deal with this question. In the context of foreclosure litigation all three elements are in question. If the lenders are investors who believed that their money was being put into a trust that they were beneficiaries of a trust, they are unaware of the fact that their money is being offered to borrowers on terms that are contrary to their instructions. And the loan is not made on behalf of the investors or the trust. It is made on behalf of some sham entity controlled by the broker dealer. Sometimes the origination is made by an actual bank that is acting in the capacity of a sham lender. Either way the money came from the investors.
So the issue is not whether there was money on the table but rather whether there was a meeting of the minds between the investors and lenders in the homeowners as borrowers. The lender documents (trust documents) reveal far different terms of repayment than the borrower documents. Each of them signed on to a deal that actually didn’t exist because neither of them had agreed to the same terms.
The fact that money was on the table at the time of the alleged closing of the loan can only mean that the homeowner owed money to repay the source of the money. This duty to repay arises by operation of law and extends from the homeowner to the investor despite the lack of any documentation that explicitly states that. The result is false documentation in which the homeowner was induced to sign under the mistaken belief that the payee on the note and the mortgagee on the mortgage was the source of funds.
If you receive funds from John Smith and the note and mortgage are drafted for the benefit of Nancy Jones as “lender” would that bother you? What would you do as closing agent? Why?

## Where is the Loan Receivable? Invitation to Investors Who Bought Mortgage Bonds

IF YOU BOUGHT MORTGAGE BONDS DURING THE MELTDOWN

As for the Borrower, we have the obligation, then the note supposedly evidence of the obligation, and then the mortgage which pledges the home as collateral for faithful performance as per the terms of the note.

As for the investor/lenders we also have a mortgage bond, supposedly backed by loans, in which repayment terms are vastly different from the note signed by the borrower.

This problem could have been alleviated if the investment bankers had simply placed the name of the REMIC on the note and mortgage but they had other ideas about trading with and on claims of ownership of the note, hence MERS and other intermediaries were introduced so that ownership would be obscured, thus creating unenforceable notes and mortgages as several investor suits have stated.

In accounting terms if a bank or other entity or institution provides a loan to someone, it would adjust its books and records to reflect (a) a loan receivable and (b) a reserve for bad debt against that loan receivable. The loan receivable goes into assets, and the reserve for bad debt goes on the liability side of the balance sheet.

After 6 years of this craziness I have come to the opinion that it is virtually certain that no entity, person or institution EVER had a loan receivable on their books with respect to most loans (96%) that were all subjected to false claims of securitization and assignments. What does that mean for the loan?

Assuming that the failure of any institution to properly record the loan was intentional, which it was, it undermines any claim on the documents or instruments in the fake chain of securitization and assignments. The most I have ever seen is a category in the asset section of the balance sheet called “Held for sale” which basically encompassed 96% on average of all loans on the books of originators, even if they were banks.

So what is the difference and how can this be used? What does it show? Is this something the Judge can understand? Yes, if you understand it and explain it correctly.

1. The borrower signed a note to which the lender was not a party.
2. The lender accepted a bond to which the borrower was not a party.
3. The note only suggests one obligor — the borrower and provides for use of proceeds of payments on that note.
4. The note only provides for one creditor — the payee on the note payable to the party the borrower THOUGHT was the lender, but wasn’t.
5. The note and riders provide for the method and manner of repayment.
6. The bond suggests multiple obligors and the record shows that the subservicer, master servicer, insurers, credit default swap counterparties, and diversion of payments from one tranche to another and one loan to another all cover the repayment of the interest and principal on the bond.
7. The bond has a different interest rate than the note.
8. The bond provides for cross collateralization and overcollateralization which is a fancy way of commingling multiple payments received from multiple parties and allocated them in a manner that appears to be exclusively determined by the Master Servicer.
9. The bond provides for continued payment by the subservicer of the monthly payment whether or not the original borrower makes a payment.
10. The note does not contain or even refer tot hose terms. In fact the note contradicts the bond in that the proceeds of payment made or allocated to the subject loan must be utilized in specific ways expressed in the note — ways that are far different than the ways the money is to be used when it comes to paying some lenders and not others.
11. The lender advances funds, part of which are used to fund the loan but the lender’s interests are not protected by the closing documents that the borrower signs.
12. The borrower signs the documents without receiving disclosure required by Federal and state laws as to the identity of the lender and terms of compensation, repayment etc.
13. In short, the note doesn’t match the bond. If the glove doesn’t fit, you must acquit, like it or not.
14. Neither the note nor the bond match the common law obligation between the borrower and the lender(s).
15. Thus three sets of repayment schedules are presented — those in the note, those in the bond, and the common law demand repayment.
16. If the note was payable to the lender, it could be secured by a mortgage. Since it was not made payable to the lender, the mortgage recorded is subject to cancellation of instrument.
17. The bond is not secured obviously because the lender was not party to the documents signed by the borrower.
18. The common law obligation appears to be the only valid obligation or debt that could be collected by providing the loan to borrower. The presumption would be that it is a demand loan but obviously unsecured by a mortgage signed by the borrower.

Thus when all is said and done and reality is introduced to most of these foreclosures, judicial, non-judicial or in bankruptcy courts or otherwise, you are left with an undocumented demand loan that is unsecured and which can be discharged in bankruptcy.

But most homeowners would be more than happy to negotiate in good faith just as the hundreds of thousands of people who applied for loan modifications believing the servicer was actually authorized when it wasn’t.

If you sweep away all the debris, the investors/lenders are NOT at risk for being fraudulent lenders but are the victims of securities fraud. And the borrowers are victims of deceptive lending practices, fraud and a host of other causes of action against virtually everyone except the actual lender. All of this is true only if you accept the premises described above which I consider to be unavoidable.

Thus the obvious answer is for a clearinghouse arrangement to be established by which the borrowers could communicate with investor lenders, unless the investors simply want to stick with their claims against the investment bank for selling them trash described as bonds.

I submit that the borrowers would enter into a true, non-defective mortgage directly with the investors to mitigate the investors loss and that the amount borrowers are willing to offer as the loan balance exceeds the value of the property and far exceeds the value of the proceeds on foreclosure.

I offer the services of my various technology platforms to be the intermediary through which the investors’ claims are collated into distinct groups which may or may not match up with the REMICs that were described in the prospectus because those REMICs were never funded.

Having done that we can provide investors with proof of how their money was misused and at the same time mitigate their losses.

This platform would match borrowers to groups of investors who would set forth the guidelines for accepting modification, given the current market conditions and the fact that the obligation is not secured.

Several managed funds have expressed some interest in this idea. I need to hear from more of you. If any managed fund or other investor in mortgage bonds would like to discuss this further, please call our customer service number 520-405-1688 and you will either receive an immediate call back or a  telephone appointment for a teleconference will be set up for you and/or your colleagues. We are looking for groups of fund managers because I don’t want to have 300 conversations when I could have just 5-6.

## OK LAWYERS, STEP UP TO THIS ONE — It is literally a no- brainer

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Editor’s Comment: The very same people who so ardently want us to remain strong and fight wars of dubious foundation are the ones who vote against those who serve our country. Here is a story of a guy who was being shot at and foreclosed at the same time — a blatant violation of Federal Law and good sense. When I practiced in Florida, it was standard procedure if we filed suit to state that the defendant is not a member of the armed forces of the United States. Why? Because we don’t sue people that are protecting our country with their life and limb.

It IS that simple, and if the banks are still doing this after having been caught several times, fined a number of times and sanctioned and number of times, then it is time to take the Bank’s charter away. Nothing could undermine the defense and sovereignty of our country more than to have soldiers on the battlefield worrying about their families being thrown out onto the street.

One woman’s story:

My husband was on active duty predeployment training orders from 29 May 2011 to 28 August 2011 and again 15 October 2011 to 22 November 2011. He was pulled off the actual deployment roster for the deployment date of 6 December 2011 due to the suspension of his security clearance because of the servicer reporting derogatory to his credit bureau (after stating they would make the correction). We spoke with the JAG and they stated those periods of service are protected as well as nine months after per the SCRA 50 USC section 533.

We have been advised that a foreclosure proceeding initiated within that 9 month period is not valid per the SCRA. I have informed the servicer via phone and they stated their legal department is saying they are permitted to foreclose. They sent a letter stating the same. I am currently working on an Emergency Ex Parte Application for TRO and Preliminary Injunction to file in federal court within the next week. It is a complicated process.

The servicer has never reported this VA loan in default and the VA has no information. That is in Violation of VA guidelines and title 38. They have additionally violated Ca Civil Code 2323.5. They NEVER sent a single written document prior to filing NOD 2/3/2012. They never made a phone call. They ignored all our previous calls and letter. All contact with the servicer has been initiated by us, never by them. This was a brokered deal. We dealt with Golden Empire Mortgage. They offered the CalHFA down payment assistance program in conjunction with their “loan” (and I use that term loosely). What we did not know was that on the backside of the deal they were fishing for an investor.

Over the past two years CalHFA has stated on numerous occasions they do not own the 1st trust deed. Guild (the servicer) says they do. I have a letter dated two weeks after closing of the loan saying the “servicing” was sold to CalHFA. Then a week later another letter stating the “servicing” was sold to Guild. Two conflicting letters saying two different things. The DOT and Note are filed with the county listing Golden Empire Mortgage as the Lender, North American Title as the Trustee and good old MERS as the Nominee beneficiary.

There is no endorsement or alonge anywhere in the filing of the county records. We signed documents 5/8/2008 and filings were made 5/13/2008. After two years of circles with Guild and CalHFA two RESPA requests were denied and I was constantly being told “the investor, the VA and our legal department” are reviewing the file to see how to apply the deferrment as allowed by California law and to compute taxes and impound we would need to pay during that period. Months of communications back in forth in 2009 and they never did a thing. Many calls to CalHFA with the same result. We don;t own it, call Guild, we only have interest in the silent 2nd.

All of a sudden in December 2011 an Assignment of DOT was filed by Guild from Golden Empire to CalHFA signed by Phona Kaninau, Asst Secretary MERS, filed 12/13/2011. om 2/3/2012 Guild filed a Cancellation of NOD from the filing they made in 2009 signed by Rhona Kaninau, Sr. VP of Guild. on the same date Guild filed a substitution of trustee naming Guild Admin Corp as the new trustee and Golden Empire as the old trustee, but on out DOT filed 5/13/2008 it lists North American Title as the Trustee. First off how can Rhona work for two different companies.

Essentially there is no fair dealing in any of this. Guild is acting on behalf of MERS, the servicing side of their company, and now as the trustee. How is that allowed? Doesn;t a trustee exist to ensure all parties interests are looked out for? It makes no sense to me how that can be happening. On the assignment I believe there is a HUGE flaw… it states ….assigns, and transfers to: CalHFA all beneficial interest…..executed by Joshua as Trustor, to Golden Empire as Trustee, and Recordeed….. how can you have two “to’s” .. shouldn’t after Trustor it say FROM???? Is that a fatal flaw???

And then looking at the Substitution it states “Whereas the undersigned present Beneficiary under said Deed of Trust” (which on the DOT at that time would show MERS but on the flawed assignment says Golden Empire was the trustee), it then goes on the say “Therefore the undersigned hereby substitutes GUILD ADMIN CORP” and it is signed “Guild Mortgage Company, as agent for CalHFA”, signed by Rhona Kaninau (same person who signed the assignment as a MERS Asst Secretary). I mean is this seriously legal??? Would a federal judge look at this and see how convoluted it all is?

I appreciate the offer of the securitization discount but in out current economic situation and having to pay $350 to file a federal case we just can’t afford it right now. I hope you will keep that offer open. Will this report cover tracking down a mortgage allegedly backed by CalHFA bonds? This is their claim. Thank you so much for your assistance. This is overwhelming. Do you have any attorneys here in Southern California you world with I might be able to talk to about what they would charge us for a case like this? ## Now They See the Light — 40% of Homes Underwater ### Featured Products and Services by The Garfield Firm LivingLies Membership – Get Discounts and Free Access to Experts For Customer Service call 1-520-405-1688 Editor’s Comment: They were using figures like 12% or 18% but I kept saying that when you take all the figures together and just add them up, the number is much higher than that. So as it turns out, it is even higher than I thought because they are still not taking into consideration ALL the factors and expenses involved in selling a home, not the least of which is the vast discount one must endure from the intentionally inflated appraisals. With this number of people whose homes are worth far less than the loans that were underwritten and supposedly approved using industry standards by “lenders” who weren’t lenders but who the FCPB now says will be treated as lenders, the biggest problem facing the marketplace is how are we going to keep these people in their homes — not how do we do a short-sale. And the seconcd biggest problem, which dovetails with Brown’s push for legislation to break up the large banks, is how can we permit these banks to maintain figures on the balance sheet that shows assets based upon completely unrealistic figures on homes where they do not even own the loan? Or to put it another way. How crazy is this going to get before someone hits the reset the button and says OK from now on we are going to deal with truth, justice and the American way? With no demographic challenges driving up prices or demand for new housing, and with no demand from homeowners seeking refinancing, why were there so many loans? The answer is easy if you look at the facts. Wall Street had come up with a way to get trillions of dollars in investment capital from the biggest managed funds in the world — the mortgage bond and all the derivatives and exotic baggage that went with it. So they put the money in Superfund accounts and funded loans taking care of that pesky paperwork later. They funded loans and approved loans from non-existent borrowers who had not even applied yet. As soon as the application was filled out, the wire transfer to the closing agent occurred (ever wonder why they were so reluctant to change closing agents for the convenience of the parties?). The instructions were clear — get the signature on some paperwork even if it is faked, fraudulent, forged and completely outside industry standards but make it look right. I have this information from insiders who were directly involved in the structuring and handling of the money and the false securitization chain that was used to cover up illegal lending and the huge fees that were taken out of the superfund before any lending took place. THAT explains how these banks are bigger than ever while the world’s economies are shrinking. The money came straight down from the investor pool that included ALL the investors over a period of time that were later broker up into groups and the issued digital or paper certificates of mortgage bonds. So the money came from a trust-type account for the investors, making the investors the actual lenders and the investors collectively part of a huge partnership dwarfing the size of any “trust” or “REMIC”. At one point there was over$2 trillion in unallocated funds looking for a loan to be attached to the money. They couldn’t do it legally or practically.

The only way this could be accomplished is if the borrowers thought the deal was so cheap that they were giving the money away and that the value of their home had so increased in value that it was safe to use some of the equity for investment purposes of other expenses. So they invented more than 400 loans products successfully misrepresenting and obscuring the fact that the resets on loans went to monthly payments that exceeded the gross income of the household based upon a loan that was funded based upon a false and inflated appraisal that could not and did not sustain itself even for a period of weeks in many cases. The banks were supposedly too big to fail. The loans were realistically too big to succeed.

Now Wall Street is threatening to foreclose on anyone who walks from this deal. I say that anyone who doesn’t walk from that deal is putting their future at risk. So the big shadow inventory that will keep prices below home values and drive them still further into the abyss is from those private owners who will either walk away, do a short-sale or fight it out with the pretender lenders. When these people realize that there are ways to reacquire their property in foreclosure with cash bids that are valid while the credit bid of the pretender lender is invlaid, they will have achieved the only logical answer to the nation’s problems — principal correction and the benefit of the bargain they were promised, with the banks — not the taxpayers — taking the loss.

The easiest way to move these tremendous sums of money was to make it look like it was cheap and at the same time make certain that they had an arguable claim to enforce the debt when the fake payments turned into real payments. SO they created false and frauduelnt paperwork at closing stating that the payee on teh note was the lender and that the secured party was somehow invovled in the transaction when there was no transaction with the payee at all and the security instrumente was securing the faithful performance of a false document — the note. Meanwhile the investor lenders were left without any documentation with the borrowers leaving them with only common law claims that were unsecured. That is when the robosigning and forgery and fraudulent declarations with false attestations from notaries came into play. They had to make it look like there was a real deal, knowing that if everything “looked” in order most judges would let it pass and it worked.

Now we have (courtesy of the cloak of MERS and robosigning, forgery etc.) a completely corrupted and suspect chain of title on over 20 million homes half of which are underwater — meaning that unless the owner expects the market to rise substantially within a reasonable period of time, they will walk. And we all know how much effort the banks and realtors are putting into telling us that the market has bottomed out and is now headed up. It’s a lie. It’s a damned living lie.

## One in Three Mortgage Holders Still Underwater

##### By John W. Schoen, Senior Producer

Got that sinking feeling? Amid signs that the U.S. housing market is finally rising from a long slumber, real estate Web site Zillow reports that homeowners are still under water.

Nearly 16 million homeowners owed more on their mortgages than their home was worth in the first quarter, or nearly one-third of U.S. homeowners with mortgages. That’s a $1.2 trillion hole in the collective home equity of American households. Despite the temptation to just walk away and mail back the keys, nine of 10 underwater borrowers are making their mortgage and home loan payments on time. Only 10 percent are more than 90 days delinquent. Still, “negative equity” will continue to weigh on the housing market – and the broader economy – because it sidelines so many potential home buyers. It also puts millions of owners at greater risk of losing their home if the economic recovery stalls, according to Zillow’s chief economist, Stan Humphries. “If economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures,” he said. For now, the recent bottoming out in home prices seems to be stabilizing the impact of negative equity; the number of underwater homeowners held steady from the fourth quarter of last year and fell slightly from a year ago. Real estate market conditions vary widely across the country, as does the depth of trouble homeowners find themselves in. Nearly 40 percent of homeowners with a mortgage owe between 1 and 20 percent more than their home is worth. But 15 percent – approximately 2.4 million – owe more than double their home’s market value. Nevada homeowners have been hardest hit, where two-thirds of all homeowners with a mortgage are underwater. Arizona, with 52 percent, Georgia (46.8 percent), Florida (46.3 percent) and Michigan (41.7 percent) also have high percentages of homeowners with negative equity. Turnabout is Fair Play: ## The Depressing Rise of People Robbing Banks to Pay the Bills Despite inflation decreasing their value, bank robberies are on the rise in the United States. According to the FBI, in the third quarter of 2010, banks reported 1,325 bank robberies, burglaries, or other larcenies, an increase of more than 200 crimes from the same quarter in 2009. America isn’t the easiest place to succeed financially these days, a predicament that’s finding more and more people doing desperate things to obtain money. Robbing banks is nothing new, of course; it’s been a popular crime for anyone looking to get quick cash practically since America began. But the face and nature of robbers is changing. These days, the once glamorous sheen of bank robberies is wearing away, exposing a far sadder and ugly reality: Today’s bank robbers are just trying to keep their heads above water. Bonnie and Clyde, Pretty Boy Floyd, Baby Face Nelson—time was that bank robbers had cool names and widespread celebrity. Butch Cassidy and the Sundance Kid, Jesse James, and John Dillinger were even the subjects of big, fawning Hollywood films glorifying their thievery. But times have changed. In Mississippi this week, a man walked into a bank and handed a teller a note demanding money, according to broadcast news reporter Brittany Weiss. The man got away with a paltry$1,600 before proceeding to run errands around town to pay his bills and write checks to people to whom he owed money. He was hanging out with his mom when police finally found him. Three weeks before the Mississippi fiasco, a woman named Gwendolyn Cunningham robbed a bank in Fresno and fled in her car. Minutes later, police spotted Cunningham’s car in front of downtown Fresno’s Pacific Gas and Electric Building. Inside, she was trying to pay her gas bill.

The list goes on: In October 2011, a Phoenix-area man stole $2,300 to pay bills and make his alimony payments. In early 2010, an elderly man on Social Security started robbing banks in an effort to avoid foreclosure on the house he and his wife had lived in for two decades. In January 2011, a 46-year-old Ohio woman robbed a bank to pay past-due bills. And in February of this year, a Pennsylvania woman with no teeth confessed to robbing a bank to pay for dentures. “I’m very sorry for what I did and I know God is going to punish me for it,” she said at her arraignment. Yet perhaps none of this compares to the man who, in June 2011, robbed a bank of$1 just so he could be taken to prison and get medical care he couldn’t afford.

None of this is to say that a life of crime is admirable or courageous, and though there is no way to accurately quantify it, there are probably still many bank robbers who steal just because they like the thrill of money for nothing. But there’s quite a dichotomy between the bank robbers of early America, with their romantic escapades and exciting lifestyles, and the people following in their footsteps today: broke citizens with no jobs, no savings, no teeth, and few options.

The stealing rebel types we all came to love after reading the Robin Hood story are gone. Today the robbers are just trying to pay their gas bills. There will be no movies for them.

## Suit Filed Incorporating Agency Sanctions and Consent Decrees from Last Week

“And most importantly, Fagan goes again to the heart of the securitization illusion, the falsity of the presentations made to both investor-lenders and homeowners, and the manner in which the “fair market value” was intentionally misstated to justify the inflation of the “value” of the bogus mortgage bonds sold to investor lenders. The importance of this attack cannot be overstated — because it debunks, once and for all, the myth that greedy unscrupulous borrowers caused this mess. It states unequivocally that the value of the property was intentionally overstated to induce Fagan and millions of other borrowers in more than 80 million “loan” transactions to assume that the value of the property was worth far more than the value of the loan product they were purchasing from the mortgage broker and mortgage originator. Neither the investor-lender nor the homeowner would have even considered the possibility of entering into this transaction without the value of the property being real — as the ultimate protection for the investor-lender and the homeowner. This is why the reduction of principal is no gift. It is merely a correction that is due to BOTH the investor-lender and the borrower.”

Barry Fagan v Wells Fargo Bank SC112044 OBJECTION TO DISCLAIMER AND DECLARATION OF NON-MONETARY STATUS OF T.D

Barry S. Fagan v Wells fargo Bank Complaint with Exhibits-1

Barry Fagan v Wells Fargo Bank SC112044 REQUEST FOR JUDICIAL NOTICE OCC CONSENT ORDER & PROOF OF SERVICE 4 21 2011

1. The first thing that is important to note is the identity of the defendants sued by Fagan: Besides Wells Fargo, he names American Securities Company, T.D. Service Company and Ebert Appraisal Service Inc. He thus sets the stage for attacking the reality of the transaction he was tricked into. Naming the Service Company and the Appraisal Company is different from what most people are doing and he really pursues both them and the service company that initiated the foreclosure proceeding.
2. The second thing of importance is the filing of the objection to disclaimer of non-monetary status of T.D. Service. This is the first time I have seen someone “get it” and realize that T.D. or any company that initiates foreclosures is probably controlled by one of the Wall Street bankruptcy remote shells, and is NOT a party without an interest in the outcome. That is why we see substitutions of trustee every time there is a foreclosure. Why is that necessary — precisely because, as Fagan points out, that an arm’s length company with no interest in the proceeding would never do what T.D. is doing because of the potential exposure to liability — and because T.D. and others like it are siphoning off the money that could otherwise go to the investor-lenders.
3. As I  have repeatedly said, the consensus of lawyers is that without objecting to EVERYTHING you are conceding that there might be a shred of legitimacy to what is clearly a completely fraudulent claim, fraudulent foreclosure on a fraudulent mortgage securing a fraudulent note. Fagan accuses TD of proceeding despite their knowledge that Wells Fargo was not the creditor, not the real party in interest, lacked standing, had no money in the deal, was not the lender and never purchased the receivable.
4. In addition Fagan, obviously knowledgeable about the actual procedures in use, thrusts his litigation dagger into the heart of the matter by alleging that the person signing the papers, besides lacking authority, lacked any knowledge of the transaction, and had no way of knowing the identity of the real creditor except that Wells Fargo is plainly eliminated as a real creditor.
5. Lastly, Fagan attacks at the Achilles heal of the securitization illusion: that the transaction occurred between the borrower and an undisclosed creditor, that the closing documents reflected none of the realities of the real transaction, and that no attempt was made to conform to the the requirements of the pooling and service agreement regarding the transfer of the receivable, the note (fatally defective anyway) and deed of trust (fatally defective anyway). He specifically names for example that the alleged assignments, even putting all the defects in the instrument itself aside, is executed far past the cut-off date stated in the pooling and service agreement. This creates a double violation of the PSA, to wit: that the assignment needs to be recorded or in recordable form within 90 days of the creation of the pool, and the “asset” must consist of a rel asset meaning one that is performing and not in default.
6. Any reasonable person can understand that the rules accepted by the investor-lenders were that they would be receiving performing loans complying (as per the PSA) with industry standard underwriting guidelines, and within the time periods prescribed by the PSA. Otherwise the investor-lender has advanced money for nothing, which is why they are now all suing the investment banks and NONE of the investors is making any claims against the homeowners; in fact the investors are alleging the mortgages were bad from the beginning and are unenforceable. SO we have the actual lender agreeing with the actual borrower that the real transaction is not the reference point of the closing documents and therefore the closing documents are merely part of an illusion of underwriting mortgages and securitizing them, neither of which actually occurred.
7. The next thing to note is that Fagan filed a verified complaint — requiring in California, a verified response. This  puts the other side at jeopardy for perjury prosecution because if Fagan is right, and I am sure he is, none of these parties can file a verified response which would require the signature of a competent witness. A competent witness is one who takes an oath, has personal knowledge through his/her own senses of the facts or statements alleged, has personal recollection of those facts and is able to communicate that knowledge.
8. Fagan also includes a compelling argument and pleading for quiet title that I recommend reading and using for those in like situations.
9. And most importantly, Fagan goes again to the heart of the securitization illusion, the falsity of the presentations made to both investor-lenders and homeowners, and the manner in which the “fair market value” was intentionally misstated to justify the inflation of the “value” of the bogus mortgage bonds sold to investor lenders. The importance of this attack cannot be overstated — because it debunks, once and for all, the myth that greedy unscrupulous borrowers caused this mess. It states unequivocally that the value of the property was intentionally overstated to induce Fagan and millions of other borrowers in more than 80 million “loan” transactions to assume that the value of the property was worth far more than the value of the loan product they were purchasing from the mortgage broker and mortgage originator. Neither the investor-lender nor the homeowner would have even considered the possibility of entering into this transaction without the value of the property being real — as the ultimate protection for the investor-lender and the homeowner. This is why the reduction of principal is no gift. It is merely a correction that is due to BOTH the investor-lender and the borrower.

## MERS, POOLING AND SERVICING AGREEMENT, ACCOUNTING….GREAT , NOW WHAT?

SUBMITTED BY M SOLIMAN

EDITOR’S NOTE: Soliman brings out some interesting and important issues in his dialogue with Raja.

• The gist of what he is saying about sales accounting runs to the core of how you disprove the allegations of your opposition. In a nutshell and somewhat oversimplified: If they were the lender then their balance sheet should show it. If they are not the lender then it shows up on their income statement. Now of course companies don’t report individual loans on their financial statements, so you need to force discovery and ask for the ledger entries that were made at the time of the origination of the loan.
• If you put it another way the accounting and bookkeeping amounts to an admission of the real facts of the case. If they refuse to give you the ledger entries, then you are entitled to a presumption that they would have shown that they were not acting as a lender, holder, or holder in due course. If they show it to you, then it will either show the admission or you should inquire about who prepared the response to your discovery request and go after them on examination at deposition.
• Once you show that they were not a lender, holder or holder in due course because their own accounting shows they simply booked the transaction as a fee for acting as a conduit, broker or finder, you have accomplished several things: one is that they have no standing, two is that they are not a real party in interest, three is that they lied at closing and all the way up the securitization chain, and four is that you focus the court’s attention on who actually advanced the money for the loan and who stands to suffer a loss, if there is one.
• But it doesn’t end there. Your discovery net should be thrown out over the investment banking firm that underwrote the mortgage backed security, and anyone else who might have received third party insurance payments or any other payments (credit default swaps, bailout etc.) on account of the failure of the pool in which your loan is claimed to be an “asset.”
• Remember that it is my opinion that many of these pools don’t actually have the loans that are advertised to be in there. They never completed or perfected the transfer of the obligation and the reason they didn’t was precisely because they wanted to snatch the third party payments away from the investors.
• But those people were agents of the investors and any payment they received on account of loss through default or write-down should be credited and paid to the investor.
• Why should you care what the investor received? Because those are payments that should have been booked by the investors as repayment of their investment. In turn, the percentage part of the pool that your loan represents should be credited proportionately by the credit and payment to the investor.
• Those payments, according to your note should be allocated first to payments due and outstanding (which probably eliminates any default), second to fees outstanding attributable to the borrower (not the investor) and third to the borrower which normally would be done as a credit against principal, which would reduce the amount of principal outstanding and thus reduce the number of people who think they are under water and are not.

———————————————————————–

MERS, POOLING AND SERVICING AGREEMENT, ACCOUNTING….GREAT , NOW WHAT?

I am really loving this upon closer inspection Raja! The issues of simple accounting rules violations appear narrow, yet the example you cite here could mean A DIFFERENCE AND SWAY IN ADVANTAGE.

Many more cases can potentially address broader issues of pleading sufficiency with repsect to securities and accounting rules violations prohibiting foreclosures.

Sale accounting is the alternative to debt or financing arrangements which is what the lender seeks to avoid in this economic downturn. Both approaches to accounting are clearly described and determinable by GAAP. In sales accounting there is no foreclsure. In debt for GAAP accounting your entitled to foreclose.

Its when you mix the two you r going to have problems. Big problems.

Pleading sufficiency is (by this layperson) the need for addressing a subject matter in light of the incurable defects in proper jurisdiction. The subject can be convoluted and difficult, I realize that.

Where the matter is heard should allow ample time to amend as a plaintiff. This is given to the fact the lender can move quicklly and seek dismissal.

The question is how far must a consumer plaintiff reach to allege that serverity of the claims, based on adverse event information, as in foreclosure.

This is significant in order to establish that the lender or a lender defendants’ alleged failure to disclose information. Therein will the court find the claim to be sufficently material.

In possession hearings the civil courts have granted the plaintiffs summary judgment and in actions brought against the consumer. The courts are often times granting the defendants’ motion to dismiss, finding that these complaints fail to adequately suffice or address the judicial fundamental element of materiality.

I can tell you the accounting rules omissions from the commencement of the loan origination through a foreclosure is one continual material breach. Counsel is lost to go to court without pleading this fact.

The next question is will the pleading adequately allege the significance of the vast number of consumer homeowner complaints. One would think yes considering the lower court level is so backlogged and a t a time when budget cuts require one less day of operations.

These lower courts however are hearing post foreclosure matters of possession. there is the further possibility that the higher Court in deciding matters while failing to see any scienter. Its what my law cohorts often refer to as accountability for their actions. That is what the “Fill in the Dots” letter tells me at first glance.

I believe it’s only in a rare case or two that a securities matter is heard in the Ninth Circuit. Recently however, there the conclusion was in fact that scienter allegations raised by the opposition were sufficient based on plaintiff’s allegations that the “high level executives …would know the company was being sued in a product liability action,” and in line with the many, customer complaints (I assume that were communicated to the company’s directors…)

The FASB is where the counterproductive rule changes always seem to take place and where lobbyist and other pro life and pro bank enthusiasts seem to spend their days. No need to fret however as gain on sale accounting is specific and requires the lender to have SOLD your loan in order to securitize it as part of a larger bulk pool.

The document I am reading, submitted by Raja tells me something is very concerning to the “lender parties” that they believe is downstream and headed their way. I’ll try and analyze each line item for you as to what it says and what they really are trying to do. I think for now though its value is for determining the letter as an admission of “we screwed up!”

M.Soliman

## APPRAISAL FRAUD IN DETAIL

APPRAISAL FRAUD IS THE ACT OF GIVING A RATING OR VALUE TO A HOME THAT IS WRONG — AND THE APPRAISER KNOWS IT IS WRONG. This can’t be performed in a vacuum because there are so many players who are involved. They ALL must be complicit in the deceit leading to the homeowner signing on the the bottom line and advancing his home as collateral on a loan which at the very beginning is theft of most of the value of the home. It’s like those credit cards they send to people who are financially challenged. $300 credit, no questions asked. And then you get a bill for$297 including fees and insurance. So you end up not with a credit line of $300, but a liability of$300 just for signing your name. It’s a game to the “lenders” because they are not using their own money.

And remember, the legal responsibility for the appraisal is directly with the appraiser, the appraisal company (which usually has errors and omissions insurance) and the named lender in your closing documents. The named “lender” is, according to Federal Law, required to verify the value of the property.

How many of them , if they were using their own money, would blithely accept a $300,000 appraisal on a home that was worth$200,000 last month and will be worth $200,000 next month? You are entitled to rely on the appraisal and the “verification” by the “lender” (see Truth in Lending Act and Reg Z). The whole reason the law is structured that way is because THEY know and YOU don’t. THEY have access to the information and YOU don’t. This is a complex transaction that THEY understand and YOU don’t. A false appraisal steals money from you because you rely on it to make the deal for refinancing or for the purchase. You think the home is worth$300,000 and so you agree to buy a loan product that puts you in debt for $290,000. But the house is worth$200,000. You just lost $90,000 plus closing costs and a variety of other expenses, especially if you are moving into anew home that requires all kinds of additions like window treatments etc. But the “lender” who is really just a front for the Wall Street and the investor pool that funded the loan, made out like bandits. Yield spread premiums, extra fees, profits, rebates, kickbacks to the developer, the appraiser, the mortgage broker, the title agency, the closing agent, the real estate broker, trustee(s) the investment banking entities that were used in the securitization of your loan, amount in some cases to MORE THAN YOUR LOAN. No wonder they are so anxious to get your signature. “Comparable” means reference to time, nearby geography, and physical attributes of the home and lot. Here are SOME of the more obvious indicators of appraisal fraud: 1. Your home is worth 40% of the appraisal amount. 2. The appraisal used add-ons from the developer that were marked up for the home buyer but which nobody in the secondary market will pay. That kitchen you paid an extra$10,000 for “extras” is included in your appraisal but has no value to anyone else. That’s not an appraisal and it isn’t collateral or fair market value.
3. The homes in the immediate vicinity of your home were selling for less than your home appraisal when they had the same attributes.
4. The homes in the immediate vicinity of your home were selling for less than your home appraisal just a few weeks or months before.
5. The value of your home was significantly less just a  few weeks or months after the closing.
6. You are underwater: this means you owe more on your obligation than your house is worth. Current estimates are that it might take 20 years or more for home prices to reach the level of mortgages, and that is WITH inflation.
7. Negative amortization loans usually allow the principal to rise even above the falsely inflated appraisal amount. If that happened, then they knew at the time of the loan that even if the appraisal was not inflated, it still would not be worth the amount of the principal due on the obligation. For example, if your loan is $290,000 and the interest is$25,000 per year, but you were only required to pay $1,000 per month for the first three years, then your Principal was going up by$13,000 per year compounded. So that $300,000 appraisal doesn’t cover the$39,000+ that would be added to your principal balance. The balance at the end of 3 years will be over $330,000 on property APPRAISED at$300,000. No honest appraiser, mortgage broker, or lender, would be complicit in such an arrangement unless they were paid handsomely to do it and they had no risk because they were not using their own money for the loan.

## Goldman Sachs Messages Show It Thrived as Economy Fell

Editor’s Note: Now the truth as reported here two years ago.
• There were no losses.
• They were making money hand over fist.
• And this article focuses only on a single topic — some of the credit default swaps — those that Goldman had bought in its own name, leaving out all the other swaps bought by Goldman using other banks and entities as cover for their horrendous behavior.
• It also leaves out all the other swaps bought by all the other investment banking houses.
• But most of all it leaves out the fact that at no time did the investment banking firms actually own the mortgages that the world thinks caused enormous losses requiring the infamous bailout. It’s a fiction.
• In nearly all cases they sold the securities “forward” which means they sold the securities first, collected the money second and then went looking for hapless consumers to sign documents that were called “loans.”
• The securities created the intended chain of securitization wherein first the investors “owned” the loans (before they existed and before the first application was signed) and then the “loans” were “assigned” into the pool.
• The pool was assigned into a Special Purpose Vehicle that issued “shares” (certificates, bonds, whatever you want to call them) to investors.
• Those shares conveyed OWNERSHIP of the loan pool. Each share OWNED a percentage of the loans.
• The so-called “trust” was merely an operating agreement between the investors that was controlled by the investment banking house through an entity called a “trustee.” All of it was a sham.
• There was no trust, no trustee, no lending except from the investors, and no losses from mortgage defaults, because even with a steep default rate of 16% reported by some organizations, the insurance, swaps, and other guarantees and third party payments more than covered mortgage defaults.
• The default that was not covered was the default in payment of principal to investors, which they will never see, because they never were actually given the dollar amount of mortgages they thought they were buying.
• The entire crisis was and remains a computer enhanced hallucination that was used as a vehicle to keep stealing from investors, borrowers, taxpayers and anyone else they thought had money.
• The “profits” made by NOT using the investor money to fund mortgages are sitting off shore in structured investment vehicles.
• The actual funds, first sent to Bermuda and the caymans was then cycled around the world. The Ponzi scheme became a giant check- kiting scheme that hid the true nature of what they were doing.
April 24, 2010

### Goldman Sachs Messages Show It Thrived as Economy Fell

###### By LOUISE STORY, SEWELL CHAN and GRETCHEN MORGENSON

In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they were making “some serious money” betting against the housing markets.

The e-mails, released Saturday morning by the Senate Permanent Subcommittee on Investigations, appear to contradict some of Goldman’s previous statements that left the impression that the firm lost money on mortgage-related investments.

In the e-mails, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November of 2007 that the firm indeed had lost money initially. But it later recovered from those losses by making negative bets, known as short positions, enabling it to profit as housing prices fell and homeowners defaulted on their mortgages. “Of course we didn’t dodge the mortgage mess,” he wrote. “We lost money, then made more than we lost because of shorts.”

In another message, dated July 25, 2007, David A. Viniar, Goldman’s chief financial officer, remarked on figures that showed the company had made a $51 million profit in a single day from bets that the value of mortgage-related securities would drop. “Tells you what might be happening to people who don’t have the big short,” he wrote to Gary D. Cohn, now Goldman’s president. The messages were released Saturday ahead of a Congressional hearing on Tuesday in which seven current and former Goldman employees, including Mr. Blankfein, are expected to testify. The hearing follows a recent securities fraud complaint that the Securities and Exchange Commission filed against Goldman and one of its employees, Fabrice Tourre, who will also testify on Tuesday. Actions taken by Wall Street firms during the housing meltdown have become a major factor in the contentious debate over financial reform. The first test of the administration’s overhaul effort will come Monday when the Senate majority leader, Harry Reid, is to call a procedural vote to try to stop a Republican filibuster. Republicans have contended that the renewed focus on Goldman stems from Democrats’ desire to use anger at Wall Street to push through a financial reform bill. Carl Levin, Democrat of Michigan and head of the Permanent Subcommittee on Investigations, said that the e-mail messages contrast with Goldman’s public statements about its trading results. “The 2009 Goldman Sachs annual report stated that the firm ‘did not generate enormous net revenues by betting against residential related products,’ ” Mr. Levin said in a statement Saturday when his office released the documents. “These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.” A Goldman spokesman did not immediately respond to a request for comment. The Goldman messages connect some of the dots at a crucial moment of Goldman history. They show that in 2007, as most other banks hemorrhaged losses from plummeting mortgage holdings, Goldman prospered. At first, Goldman openly discussed its prescience in calling the housing downfall. In the third quarter of 2007, the investment bank reported publicly that it had made big profits on its negative bet on mortgages. But by the end of that year, the firm curtailed disclosures about its mortgage trading results. Its chief financial officer told analysts at the end of 2007 that they should not expect Goldman to reveal whether it was long or short on the housing market. By late 2008, Goldman was emphasizing its losses, rather than its profits, pointing regularly to write-downs of$1.7 billion on mortgage assets and leaving out the amount it made on its negative bets.

Goldman and other firms often take positions on both sides of an investment. Some are long, which are bets that the investment will do well, and some are shorts, which are bets the investment will do poorly. If an investor’s positions are balanced — or hedged, in industry parlance — then the combination of the longs and shorts comes out to zero.

Goldman has said that it added shorts to balance its mortgage book, not to make a directional bet that the market would collapse. But the messages released Saturday appear to show that in 2007, at least, Goldman’s short bets were eclipsing the losses on its long positions. In May 2007, for instance, Goldman workers e-mailed one another about losses on a bundle of mortgages issued by Long Beach Mortgage Securities. Though the firm lost money on those, a worker wrote, there was “good news”: “we own 10 mm in protection.” That meant Goldman had enough of a bet against the bond that, over all, it profited by $5 million. Documents released by the Senate committee appear to indicate that in July 2007, Goldman’s daily accounting showed losses of$322 million on positive mortgage positions, but its negative bet — what Mr. Viniar called “the big short” — came in $51 million higher. As recently as a week ago, a Goldman spokesman emphasized that the firm had tried only to hedge its mortgage holdings in 2007 and said the firm had not been net short in that market. The firm said in its annual report this month that it did not know back then where housing was headed, a sentiment expressed by Mr. Blankfein the last time he appeared before Congress. “We did not know at any minute what would happen next, even though there was a lot of writing,” he told the Financial Crisis Inquiry Commission in January. It is not known how much money in total Goldman made on its negative housing bets. Only a handful of e-mail messages were released Saturday, and they do not reflect the complete record. The Senate subcommittee began its investigation in November 2008, but its work attracted little attention until a series of hearings in the last month. The first focused on lending practices at Washington Mutual, which collapsed in 2008, the largest bank failure in American history; another scrutinized deficiencies at several regulatory agencies, including the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. A third hearing, on Friday, centered on the role that the credit rating agencies — Moody’s, Standard & Poor’s and Fitch — played in the financial crisis. At the end of the hearing, Mr. Levin offered a preview of the Goldman hearing scheduled for Tuesday. “Our investigation has found that investment banks such as Goldman Sachs were not market makers helping clients,” Mr. Levin said, referring to testimony given by Mr. Blankfein in January. “They were self-interested promoters of risky and complicated financial schemes that were a major part of the 2008 crisis. They bundled toxic and dubious mortgages into complex financial instruments, got the credit-rating agencies to label them as AAA safe securities, sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the financial instruments that they sold, and profiting at the expense of their clients.” The transaction at the center of the S.E.C.’s case against Goldman also came up at the hearings on Friday, when Mr. Levin discussed it with Eric Kolchinsky, a former managing director at Moody’s. The mortgage-related security was known as Abacus 2007-AC1, and while it was created by Goldman, the S.E.C. contends that the firm misled investors by not disclosing that it had allowed a hedge fund manager, John A. Paulson, to select mortgage bonds for the portfolio that would be most likely to fail. That charge is at the core of the civil suit it filed against Goldman. Moody’s was hired by Goldman to rate the Abacus security. Mr. Levin asked Mr. Kolchinsky, who for most of 2007 oversaw the ratings of collateralized debt obligations backed by subprime mortgages, if he had known of Mr. Paulson’s involvement in the Abacus deal. “I did not know, and I suspect — I’m fairly sure that my staff did not know either,” Mr. Kolchinsky said. Mr. Levin asked whether details of Mr. Paulson’s involvement were “facts that you or your staff would have wanted to know before rating Abacus.” Mr. Kolchinsky replied: “Yes, that’s something that I would have personally wanted to know.” Mr. Kolchinsky added: “It just changes the whole dynamic of the structure, where the person who’s putting it together, choosing it, wants it to blow up.” The Senate announced that it would convene a hearing on Goldman Sachs within a week of the S.E.C.’s fraud suit. Some members of Congress questioned whether the two investigations had been coordinated or linked. Mr. Levin’s staff said there was no connection between the two investigations. They pointed out that the subcommittee requested the appearance of the Goldman executives and employees well before the S.E.C. filed its case. ## Obama Considering Expansion of Cash for Keys With Taxpayer Money Editor’s Note: It seems to me that this concedes the battle to Wall Street. It encourages homeowners to take the loss that at the very least should be shared with ALL the players in the securitization scheme and creates more problems in housing and social services. Excerpt from NYT – do not buy into this – Program Will Pay Homeowners to Sell at a Loss By DAVID STREITFELD Published: March 7, 2010 “In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions. More than five million households are behind on their mortgages and risk foreclosure. The government’s$75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

## Monster From Below, Not from Above — Appraisal Fraud

Editor’s Comment: Again, myth prevails.
The monster that gobbled our home equity and the value of our pension funds came from the waters beneath the market not from some economic disaster or sudden migration of population to Australia. The “loss of value” was nothing of the sort. Prices were going up during a decade when median income was going down. Prices at best should have been level. This disaster is from a lack of support on the fundamentals of economics — the houses were never worth what the money that appeared on appraisals.
Most pundits, reporters and “experts” talk about the decline in housing prices as the result of some mysterious downward market pressure — like a lack of demand. Demand for housing is no lower or higher than it ever was.
The truth is that there never was any increased demand for housing to support the huge price jumps over the last decade. THAT was caused by an increase of what economists call liquidity and the rest of us now know as phoney money pumped in by Wall Street who paid appraisers to render a report that conformed to contracts instead of market conditions.
Those contracts went through not because of public demand or population increases or even migration. They came from the fact that Wall Street paid or created “lenders” to pretend they were “underwriting” loans and assessing risk the way banks normally perform their duties as lenders. But since they had no money at risk, these “lenders” as straw men in a complex securitization chain, dropped their underwriting function altogether and merely pretended to “qualify” borrowers and approve contracts to purchase or refinance.
February 15, 2010

## U.S. Housing Aid Winds Down, and Cities Worry

ELKHART, Ind. — Over the next six months, the federal government plans to wind down many of its emergency programs for housing. Then it will become clear if the market can function on its own.

People here are pretty sure the answer will be no.

President Obama has traveled twice to this beleaguered manufacturing city to spotlight the government’s economic stimulus program. The employment picture here has indeed begun to improve over the last nine months.

But Elkhart also symbolizes the failure of federal efforts to turn around the housing slump at the heart of the economic crisis. Housing in this community has become almost entirely dependent on a string of federal support programs, which are nonetheless failing to prevent a fall in prices and a rise in mortgage delinquencies.

More than one in 10 mortgage holders in Elkhart is seriously behind on payments. The median sales price has plunged to the level of a decade ago. Many homeowners owe more than their home is worth, freezing them in place for years. Foreclosures recently hit a record.

To the extent that the real estate market is functioning at all, people here say, it is doing so only because of the emergency programs, which have pushed down interest rates on mortgages and offered buyers a substantial tax credit.

Equally important is an expanded mortgage insurance program run by the Federal Housing Administration, which encourages private lenders to accept borrowers with small down payments. The government takes the risk of default.

A few years ago, only one in 10 buyers in Elkhart used the housing agency program. Now about half do. Across the country, the agency has greatly expanded its reach so that it now insures six million mortgages.

“There has been all kinds of help for housing. I’m not unappreciative,” said Barb Swartley, president of the Elkhart County Board of Realtors. “But you can’t turn real estate into a government-sponsored operation forever.”

Many in Washington agree. With worries about the deficit intensifying, the government is eager to start withdrawing some of its support programs.

The first step could happen as early as next month, when the Federal Reserve has said it will end its trillion-dollar program to buy up mortgage securities. That program has driven mortgage interest rates to lows not seen since the 1950s.

Yet it is uncertain whether the government can really pull back without sending housing markets into another tailspin. “A rise in rates would kill us all by itself,” Ms. Swartley said.

The Obama administration has offered few ideas about reforming the housing market. Proposals for the future of Fannie Mae and Freddie Mac, the mortgage holding companies taken over by the government at the height of the crisis, were supposed to be introduced with the president’s budget this month. They were not.

The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications.

“People are buying to get that tax credit, to get some reserve money. They’re saying, ‘If something happens, I will have a little bit of money to fall back on,’ ” said Denny Davis of Horizon Bank in Elkhart. “That’s not healthy.”

The programs favor first-time buyers, who have the fewest resources to bring to a deal. Heather Stevens, a 23-year-old nurse here, is closing on a three-bedroom house this week. Since her loan was insured by the Federal Housing Administration, she had to put down only 3.5 percent of the $74,900 purchase price. “It was a breeze to get approved,” she said. The sellers are covering her closing costs, which agents say is often the case here. That meant Ms. Stevens had to come up with only the$2,600 down payment, which still took all her savings.

But the best part is the $7,500 tax credit. She will use that to remodel the kitchen. “If it wasn’t for the credit, we would have waited to buy,” said Ms. Stevens, who is getting married this year. Buying houses with no money down was a feature of the latter stages of the housing bubble. It gave prices a final push into the stratosphere. But buyers with no equity were the first to abandon their properties as the market turned south. With housing prices stagnant, bolstering the market by again letting people buy with hardly any money down is viewed in some quarters as a bad bet. Neil Barofsky, the special inspector general for the government’s Troubled Asset Relief Program, wrote in his most recent report to Congress that “the federal government’s concerted efforts to support” housing prices “risk reinflating” the bubble. He noted one difference from the last bubble: taxpayers, rather than banks, are now directly at risk in these new mortgages. In Elkhart, the worries are less about the risks of doing too much and more about the perils of doing too little. If the Federal Reserve really ends its$1.25 trillion program of buying mortgage-backed securities, economists say, mortgage rates could rise as much as one percentage point. In recent weeks, rates on 30-year fixed mortgages have drifted below 5 percent.

The tax credit requires home buyers to make a deal by April 30, the middle of the prime spring selling season.

For now, the F.H.A. is modestly tightening the requirements on some of its programs, trying to strike a balance between stabilizing the market with qualified buyers and overwhelming it with unqualified borrowers.

John Katalinich, chief lending officer at the Inova Federal Credit Union in Elkhart, says there is danger in letting buyers get into properties with so little at stake, but those risks are minimal compared to the alternative.

“If the government were not to continue the same level of support, it would be very detrimental, like cutting the legs off a wobbling child and expecting it to run a marathon,” he said. “It’s very possible we’ll still be at this level of need five years from now.”

Elkhart, in the northeast corner of Indiana, became a symbol of distressed Middle America after Mr. Obama chose it as the place to introduce his stimulus plan last February. The region is a hub of recreational vehicle manufacturing, one of the first industries to falter in the recession. In less than a year, the unemployment rate tripled, peaking at 18.9 percent last March.

Mr. Obama returned in August to promote the effectiveness of the stimulus program and of government grants for the manufacture of battery-powered electric vehicles. Several companies have announced they are hiring. Unemployment in December was down to 14.8 percent.

No such improvement is visible with housing. In the last 18 months, the F.H.A increased its loans in Elkhart by 40 percent even as its defaults rose 174 percent.

As these troubled loans become foreclosures, the government takes over the property and tries to sell it. On Saturday, Gina Martin, an administrative assistant, examined a three-bedroom government house for sale southeast of Elkhart.

In late 2003, the house sold for $115,000, but in these depressed times the government was willing to let it go for$75,000.

Ms. Martin’s agent, Dean Slabach, thought the government would eventually have to take a much lower bid, substantially increasing its loss. Most of the F.H.A. properties on the market in Elkhart carry notations like “significant price reduction” and “all reasonable offers considered.”

“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.” ## Federal Reserve: The Holder in Due Course? Remember that$700 billion in TARP? It was dwarfed by other government programs including one from the Federal Reserve. The Federal Reserve went from a non-existent player in the mortgage backed security market a year ago to owning $904 billion of the mortgage backed securities today. But we don’t seem to be getting or seeing any reports of exactly what these deals look like or even who the parties were. The question is where did this money go? To whom? For what? I’m not reading about deals made with investors who are the real creditors. If they are not getting the money at apparently 100 cents on the dollar, then who is? And if the investors were not bought out then who sold the certificates? How could anyone sell certificates they didn’t own? And if the Fed has “bought” mortgage backed securities, how can a “trustee” with no trust assets be a creditor in foreclosure, bankruptcy or civil suit? How does the Fed feel about all these foreclosures? After all it supposedly is being done for the creditor, which according to these reports is the Federal Reserve System. ## WSJ Commences Attack on Judges Granting Homeowner Relief The Wall Street Journal has adopted the Murdoch brand of “news” reporting and with it, an attack on the basic principles of law that have been in place for hundreds of years. As you can see from the article below they acknowledge that more and more Judges are finding flaws in the foreclosure scheme, but frames it as a question about whether Judges are losing their “impartiality.” This tactic, long expected, by those of us that have been promoting fairness and justice in mortgage litigation, is intended to inflame state legislatures into enacting “relief” measures that would “protect” pretender lenders from “technical” defenses and attacks from those crafty homeowners and their lawyers. This is a time honored tradition of the business community to use their money and ability to gain access to legislators and make it legal to do what was illegal. That is exactly what got us into this mess in the first place. At the root of the crisis are toxic titles, loans that have been paid several times over, and foreclosers who have nothing to lose and everything to gain from foreclosure (at the expense of the real people who put up the money and their homes). It will take decades to unravel the legal mess created by these mortgages and by allowing foreclosed titles to go to parties that had nothing to do with the loan. The silver lining here is that the lenders are obviously getting worried enough to plant articles like the one below. Foreclosure Challenges Raise Questions About Judicial Role A group of state and federal judges presiding over foreclosures are wiping away borrowers’ mortgage debt, invalidating foreclosure sales and even barring some foreclosures outright. The decisions in recent months by a handful of judges in states including Massachusetts, New York and Texas mark a new phase in the judiciary’s battle to stem the rising tide of foreclosures by punishing mortgage companies for paperwork mistakes and alleged mistreatment of borrowers. The number of judges taking such action remains small, and most foreclosures go through without a challenge. But the growing number of rulings against lenders’ claims is raising questions among some legal experts about judges’ impartiality. “The question is whether judges are changing the rules in the middle of the game…just because there is a financial crisis,” says Todd Zywicki, a law professor at George Mason University and a critic of policy initiatives aimed at curtailing lenders’ ability to foreclose. As early as 18 months ago, several judges in California, New York, Ohio and elsewhere would dismiss foreclosure cases if they could find reason to do so. But those judges often allowed the mortgage companies to refile their foreclosure claims after attesting to their ownership of the mortgage in the county in which the homeowner lives. Now, after the country has been mired in a housing crisis for more than two years, more judges are calling these companies on their paperwork glitches, and in some cases going much further in their efforts to help homeowners. It makes sense for judges to demand that mortgage companies follow the rules to the letter if they want to win foreclosure cases in court, says Raymond Brescia, an assistant professor at Albany Law School who has written about the role of the courts in the financial crisis. “I don’t think that’s a crazy idea,” he says. “To expect plaintiffs to prove their case is what the judicial system is founded on.” But if judges decide to help borrowers in ways that overlook the merits of individual cases, Mr. Brescia adds, that would “undermine the integrity of the judiciary, and that’s not going to help anybody.” Instead, he says, it might trigger a backlash from legislators or regulators to rein in activist jurists. At the heart of some of the court rulings is what became a common practice among mortgage companies: filing a foreclosure claim without showing proof that they actually own the mortgage and have the right to foreclose. This occurs in part because mortgages change hands multiple times after the original loan is made, but the mortgage documents and the contracts between borrowers and lenders are never altered to reflect those changes. Years later, it can be difficult to verify who is the owner of the mortgage. That played a key role in a ruling in October by Keith Long, a state-court judge in Massachusetts. He invalidated two foreclosure sales that had occurred more than two years ago. The judge affirmed his own prior ruling that said units of U.S. Bancorp and Wells Fargo & Co. never had the right to sell the homes. Judge Long ruled that even though the companies physically held the relevant mortgage documents, the mortgages were never legally assigned to them and recorded with the state. “They’re selling something they don’t own,” says attorney Paul Collier, who began representing the borrowers in the case last year. Walter H. Porr, a lawyer for the companies, which are appealing the ruling, says his clients “operated in what had been an accepted industry fashion for the better part of 15 or 20 years.” He adds: “We owned those mortgages.” In October, a federal bankruptcy judge in White Plains, N.Y., rejected a claim by a mortgage company that the debtor owed$460,000. The judge, Robert D. Drain, said the company, PHH Mortgage Corp., couldn’t prove it owned the debt.

A spokeswoman for PHH, which is appealing, said the company is trying to resolve the case.

And in a prominent case in New York’s Suffolk County on Long Island, Jeffrey Spinner, a state-court judge, canceled $292,000 in mortgage debt after he ruled the borrowers were mistreated by IndyMac Bank. The judge said in a November ruling that the bank displayed “harsh, repugnant, shocking and repulsive” behavior by making no attempt to negotiate a settlement with Diane Yano-Horoski after she and her husband fell behind on payments, despite a state law requiring the company to try. OneWest Bank, which purchased the debt from IndyMac, plans to appeal. In a statement, it said the ruling, “if allowed to stand, has sweeping and dangerous implications.” At least one judge has been admonished for appearing to favor borrowers. In September, a Florida state appeals court ruled that a lower-court judge, Valerie Manno Schurr, erred in routinely delaying foreclosure sales by several months. Her reasoning put concern for the homeowners ahead of the law, the appeals court said. Judge Manno Schurr didn’t respond to requests for comment. Write to Amir Efrati at amir.efrati@wsj.com ## FDIC Weighs Loan Principal Cuts to Fight Foreclosure Sheila Bair has finally let the trial balloon out of the bag. Just watch what Wall Street does to position Bair as some kind of kook. In truth, she ought to be running the financial part of this recovery although the FDIC is supposed to insure deposits, not necessarily write offs of bad loans. Bottomline, there will be no recovery without principal reduction. This will never be over without a sharing of the losses created by Wall Street. If you are looking for a non-litigation method, and I am not sure there is one, to reach out and touch everyone in distress look no further than my first entries back in October 2007 under the heading “Amnesty for Everyone” or read Brad Keiser’s post right here from June 2008 entitled “Mortgage Meltdown: Fingers of Blame” where he predicted that homeowners would be the last group to be granted any “amnesty.” It’s not about ideology. It’s about practicality. In a mess this big you fix it and stop arguing about it. Leave the argument till later. Divide the losses amongst ALL the players based upon their ability to withstand it and yes, that DOES include the taxpayer now that we have so totally screwed up this recovery. Nothing real has occured. No regulation, no turning over the upside down ship of finance, no sharing of the losses —- that has simply been turned onto the taxpayer past,present and future. Municipalities, cities, counties, state budgets and yes many non-profits and charitable foundations and organizations whose budgets or investment base have been wrecked even if they were not invested with Bernie Madoff. Folks we are in this together. EVERYONE is effected by the housing crisis in one form or another. Let the justice system take care of the criminal enterprises through law enforcement. We are finding inertia through finding blame of borrowers, blame of title companies, mortgage brokers, appraisers, rating agencies, investment banks … et al. Everyone knows it but only a few people are willing to say it: principal reduction. Hundreds of thousands who are not in foreclosure are$100k-$300k underwater, are they supposed to continue to pay on their mortgage for 10 years and hope they break even? Questionable business decision when you look at it mathematically. They have been damaged and no one has a program for them…wait until this part of the populace starts making noise. The financial sector shoulders SOME of the losses not just arguably because they should but because they can. It means that borrowers shoulder SOME of the losses not because they should but because they must. It means that where borrowers cannot withstand the burden even after principal reduction, the GOVERNMENT steps in with Taxpayer money and shoulders SOME of the losses not because it should but because it must. Property values in entire cities and regions are at stake, which gets to tax base, which impacts school systems…which impacts our children and grandchildren. ALL the players who were intermediaries in the securitization chain from originating lenders, to underwriters that sold the MBS to state retirement systems, insurers who issued default insurance, ratings agencies…they all made a KILLING with little or no capital at risk, they should but because they were part of the problem, they got paid to play and now that the game didn’t turn out so well they get to share SOME of the losses. By Alison Vekshin Dec. 3 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair may ask lenders to cut the principal on as much as$45 billion in mortgages acquired from seized banks, expanding her bid to aid homeowners as unemployment rises.

The FDIC, which has taken over 124 failed banks this year, may seek to have lenders that sign loss-sharing agreements when acquiring the assets do more than cut interest rates or defer the loan’s principal, Bair said today in an interview at Bloomberg’s Washington office.

“We’re looking now at whether we should provide some further loss sharing for principal write downs,” Bair said. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs. So you have other factors now driving mortgage distress.”

Bair, 55, is stepping up her effort to prevent U.S. home foreclosures, using the agency’s relationship with lenders to make change. She has pressed mortgage-servicing companies to modify loan terms for struggling borrowers and unsuccessfully lobbied last year to have the Treasury Department use the Troubled Asset Relief Program to curb foreclosures.

The FDIC set up a foreclosure-relief program last year at IndyMac Federal Bank, a failed California mortgage lender, to be a model for the banking industry. The program, using a combination of interest-rate reductions, term or amortization extensions and principal forbearance, led to agreements to modify about a third of IndyMac’s eligible loans.

Rising Unemployment

In September, Bair urged banks that are sharing losses with her agency to temporarily reduce mortgage payments for out-of- work borrowers. U.S. unemployment soared to a 26-year high of 10.2 percent in November.

The agency now is considering whether lenders that acquire banks should share a larger portion of the losses on loans whose principal is cut and whether the FDIC will recover the additional subsidy through reduced foreclosure rates.

“I think we’re going to gain by reducing re-default rates or delinquencies with people walking away,” Bair said. “We’ll obviously lose by providing loss-share for principal writedowns.”

Under the average loss-sharing agreement, the FDIC pays as much as 80 percent of losses on a residential mortgage up to a set threshold, with the acquiring bank absorbing 20 percent. Any losses exceeding the threshold are reimbursed at 95 percent of the losses booked by the acquirer.

$80 Billion The FDIC has loss-sharing agreements on$109.1 billion of failed-bank assets, including $44.7 billion for single-family home loans, spokesman Andrew Gray said. “For the acquiring banks, it’s great because now they get more protection for the assets that they’re picking up and they have more flexibility in dealing with the problems,” John Douglas, who leads the bank regulatory practice at Davis Polk & Wardwell LLP in New York and is a former FDIC attorney, said in a telephone interview. Principal reductions will help borrowers who are “underwater” on their payment-option adjustable-rate mortgages, whose principal expands over time, said Julia Gordon, senior policy counsel at the Center for Responsible Lending. “In order to make those loans affordable and give those homeowners a reason to stay rather than walk away, principal reduction is going to be key,” Gordon said. The U.S. Treasury Department plans to pressure lenders to complete modifying home loans to troubled borrowers under a$75 billion program. Almost 651,000 loan revisions had been started through the Obama administration’s Home Affordable Modification Program as of October, up from 487,080 as of September, according to the Treasury.

The Washington-based FDIC insures deposits at 8,099 institutions with $13.2 trillion in assets. The agency is charged with dismantling failed banks and manages an insurance fund it uses to reimburse customers for deposits of as much as$250,000 when a lender collapses.

## “Officials” Who Sign for MERS: False, Fraudulent, Fabricated, Forged and Void Documents in the Chain

all we have left is the obligation, unsecured and subject to counterclaims etc. MOST IMPORTANT procedurally, it requires a lawsuit by the would-be forecloser in order to establish the terms of the obligation and the security, if any. This means they must make allegations as to ownership of the receivable and prove it — the kiss of death for all would be lenders except investors who funded these transactions.

sirrowan
sirrowan@peoplepc.com

“I just thought of something. I was reading what was posted a few above me regarding MERS own rules. They claim that their “officers” tend to act without authority from MERS and they do not use any records held by MERS etc.

How can this be? How can they be officers then? They aren’t if you ask me. Now wonder all these judges are telling them they are nothing but agents if even that, lol.

But if they were officers, wouldn’t MERS be liable for the actions of their “officers” on behalf of MERS?”

Sirrowan: GREAT POINT! The answer is that if they have a user ID and password ANYONE can become a “limited signing officer” for MERS.

Sometimes they say they are vice-president, sometimes they use some other official title. But the fact remains that they have no connection with MERS, no employment with MERS, no access to MERS records, and definitely no direct grant of a POA (Power of attorney). It’s a game.

This is why I have repeatedly say that in every securitized chain, particularly in the case of a MERS chain, there are one or more documents that are fabricated, forged or voidable. Whether this rises the level of criminality is up to future courts to determine.

One thing is sure — a party who signs a document that has no authority to sign it in the capacity they are representing has just committed violations of federal and state statute and common law. And the Notary who knew the party was not authorized as represented has committed a violation as well. Most states have statutes that say a bad notarization renders the document void, even if it was recorded. This breaks the chain of title and reverts back to the originating lender (at best) or voids the documents in the originating transaction (at worst).

In either event, the distinction I draw between the obligation (the substance of the transaction caused by the funding of a “loan product”) and the note (which by law is ONLY EVIDENCE of the obligation and the mortgage which is ONLY incident to the note, becomes very important. If the documents (note and mortgage) are void then all we have left is the obligation, unsecured and subject to counterclaims etc. MOST IMPORTANT procedurally, it requires a lawsuit by the would-be forecloser in order to establish the terms of the obligation and the security, if any. This means they must make allegations as to ownership of the receivable and prove it — the kiss of death for all would be lenders except investors who funded these transactions.

## JUDGE MAYER ECHOES JUDGE SHACK: ANOTHER NY CASE….THINGS ARE CHANGING!!!!

If you can get through the formatting errors, it is worth reading. Judge Mayer clearly states that

“The original lender, WMC Mortgage Corp., apparently had the mortgage assigned to entities other than this plaintiff: however, there is no proof of assignments annexed to the moving papers and no proof that this plaintiff is the proper plaintiff.”

Thus standing comes to the forefront AGAIN as the pretender lenders try as they might, find it increasingly difficult to finesse basic rules of law and basic rules of procedure. The message is clear as is the moral of the story: don’t assume anything and challenge everything. We have seen here at livinglies weblog countless documents demonstrating a pattern of behavior that involves fabrication and forgery of documents, many times right in the office of the attorneys pursuing foreclosure on behalf of “clients” who have no interest in the mortgage and never did. Look closely and you will see notarization before the document is dated, notarization in one place and signing in another, many times thousands of miles apart. If these entities were on the level they would have no problem producing the right documentation in the right place at any time. Instead we find that if the mortgage is NOT delinquent or in default, they don’t have the documents but once they do declare the default, documents start emerging out of nowhere.

Judge Mayer means business. He “gets it” and says that he will dismiss with prejudice on this last chance (similar to Judge Shack), if they don’t prove they are the correct party to bring the foreclosure. My opinion is they probably can’t and they won’t bring such “proof” to court because it will be scrutinized now and could lead someone to be found in contempt or worse.

The cases are coming faster now. The scheme is unraveling and Judges are getting wise to wiseguy tactics of finesse and intimidation.

Thank you Jeff for this contribution. See if you can get a clean copy so we can clean this one up.

ANOTHER NY CASE….THINGS ARE CHANGING!!!!

SUPREME COURT – STATE OF NEW YORK
I.A.S. PART 17 – SUFFOLK COUNTY
Justice<R. H. MAYER
Justice of the Supreme Court
. X _l_______l___________—__—_—-_———–
WI;I,I S F ARGO BANK NATIONAL
,4SS0(_’1.4 I ION, as trustee for BANK OF
AMERIC’ 2 reclo:;urr: actions, and evidentiary proof of proper service of said special summons; (5) failure
to submit e\ identiary proof, including an affidavit from one with personal knowledge, of compliance with
tlic requirements of CPLR 532 15(g)(3) regarding the additional notice by mail of summonses in
forwlosurrt xtioiis. and proof of proper service of said additional mailing; and it is further
ORDERED that, inasmuch this action was initiated prior to September 1,2008 and no final order
of judgment has been issued, and inasmuch as the plaintiff has identified the loan in foreclosure as a
“cubprimc home loan” as defined in RPAPL $1304, pursuant to 2008 NY Laws, Ch. 472, Section 3-a, the defendant lionieovmer is entitled to a voluntary settlement conference, which is hereby scheduled for December 116,2009 at 9:30 am before the undersigned, located at Room A-259, Part 17, One Court Street, Rikerhead. VY 1 1(>01 (63 1-852- 17601, for the purpose of holding settlement discussions pertaining to the rights and cibligations of the parties under the mortgage loan documents, including but not limited to, determining whether the parties can reach a mutually agreeable resolution to help the defendant avoid losing his or her hcime. and evaluating the potential for a resolution in which payment schedules or amounts may be ~fiodificdo r other workout options may be agreed to, and for whatever other purposes the Court deems appropriate and it is further ORDERED that at any conference held pursuant to 2008 NY Laws, Ch. 472, Section 3-a, the plaintii’f’ s h~l la ppt’ar in person or by counsel, and if appearing by counsel, such counsel shall be fully mthorized to dispclse of the case, and all future applications must state in one ofthe first paragraphs ofthe aitorncy’k afirmation whether or not a Section 3-a conference has been held; and it is further ORDERED that the piairitiff shall promptly serve a copy of this Order upon the homeowner delelidant( s ) at all hown addresses via certified mail (return receipt requested), and by first class mail, and upon all othcr defendants via first class mail, and shall provide proof of such service to the Court at the time of any schctluled Conference, and annex a copy of this Order and the affidavit(s) of service of same as exhihits to any niotion resubmitted pursuant to this Order; and it is further ORDERED that with regard to any scheduled court conferences or future applications by the plaintiif. if the Court determines that such conferences have been attended, or such applications have been submitted. ui ithout proper regard for the applicable statutory and case law, or without regard for the required proofs delinxited herein, the Court may, in its discretion, dismiss this case or deny such applications with prejudice c i ~ i do r impose sanctions pursuant to 22 NYCRR 5 130-1, and may deny those costs and attorneys fees atrenda i t mith the filing of such future applications. [* 2] bt’ells I.;rrgo Bank v Melgar l t ~ d t3?0~. 3761 9-2007 P q e .r’ I n tliis foreclosure action, the plaintiff filed a summons and complaint on December 4,2007, which essentiaIl> Jleges that the defentiant-homeowner(s), Martha L. Melgar and Pedro Reyes, defaulted in payments u ith reprd to a mortgage, dated May 5,2005, in the principal amount of$258,400.00, and given
by the deteildnnt-homeowner(s) for the premises located at 68 Cranberry Street, Central Islip, New York
1 I722 Tile original lender, WMC Mortgage Corp., apparently had the mortgage assigned to entities other
than this p l i~nt iff: however, there is no proof of assignments annexed to the moving papers and no proof
that this pla ntiff is the proper plaintiff. The plaintiff now seeks a default order of reference and requests
amendmeni of the caption to substitute tenant(s) in the place and stead of the “Doell defendants. For the
reasom set i r t h hereiin, the plaintiffs application is denied.
In slqqx)rt of this application, the plaintiff submits an affidavit from Valerie Clark, Sr. Vice
I’rvsident 01 Saxon Mortgage Services as the alleged attorney-in-fact for the plaintiff, and a non-party to
this action: iowevcr, there is no sufficient evidentiary proof that such person or entity has authority to act
on behall’ 01 the lender-mortgage holder.
In rc levant part, CPLR $32 15(a) states: “When a defendant has failed to appear, plead or proceed tu trial ofai- action re,ached and called for trial, or when the court orders a dismissal for any other neglect to proceed. the plaintiff may seek a default judgment against him.” With regard to proof necessary on a motion for cefault in general, CPLR 32 1 5(f) states, in relevant part, that “[oln any application forjudgment by default, the applicant shall file proof of service of the summons and the complaint . . . and proof of the facts constiluting the claim, the default and the amount due by affidavit made by the party . . . Where a verified complaint has been serveld, it may be used as the affidavit of the facts constituting the claim and h e amount due: in such case, an affidavit as to the default shall be made by the party or the party’s attorney. Proof‘ot’iiiaili yg the notice required by [CPLR 32 15(g)], where applicable, shall also be filed.” With regard to a judgment of foreclosure, an order of reference is simply a preliminary step towards obtaining a default judgment (Home Sav. ojxm., FA. v. Gkanios, 230 AD2d 770,646 NYS2d 530 [2d Depi 1996 1 ) Without an affidavit by the plaintiff regarding the facts constituting the claim and amounts due or, 11-1 the alteri-ative. ‘in affidavit by the plaintiff that its agent has the authority to set forth such facts and mouiits due, the sfatutory requirements are not satisfied. In the absence of either a proper affidavit by the party or 3 ccymplairt verified by the party, not merely by an attorney with no personal knowledge, the entry of judgment by default is erroneous (see, Peniston v Epstein, 10 AD3d 450, 780 NYS2d 919 [2d Dept 2004 1 : Gi.tringu \ * Wrighl, 274 AD2d 549, 7 13 NYS2d 182 [2d Dept 20001; Finnegan v. Sheahan, 269 4D2tl 401. 7G NYS2d 734 [2d Dept 20001; Hazim v. Winter, 234 AD2d 422, 651 NYS2d 149 [2d Dep1 1 996 1 ) In support of’the motion, the movant fails to submit the required affidavit made a party. Further. uithnut a pioperly of’ered copy of a power of attorney, the Court is unable to ascertain whether or not a plaintitTs s:rvicin;A agent. for example, may properly act on behalf of the plaintiff to set forth the facts constituting the claim, the default and the amounts due, as required by statute. In the absence of either a verijied coiilplalnt x a proper affidavit by the party or its authorized agent, the entry ofjudgment by defauli IS erroneouj ( \ee iLl’ullins 1’. DiLorenzo, 1 99 AD2d 2 18; 606 NYS2d 16 1 [ 1 st Dept 19931; Hazim v. Winter. 234 1\1)2d -22.65 1 NYS2d 149 [2d Dept 19961; Finnegan v. Sheahan, 269 AD2d 491,703 NYS2d 734 Il!d I k p t r’OOO]). I‘lierefore, the application for an order of reference is denied. \n‘itli regard to a mortgage assignment which is executed after the commencement of an action and [* 3] U’ells Furgo Bmk v Melgar Index !Vo. 3 761 9-2007 Page 4 which statt s that i t is effective as of a date preceding the commencement date, such assignment is valid wherc the c elaulting defendant appears but fails to interpose an answer or file a timely pre-answer motion that assert4 the defense of standing, thereby waiving such defense pursuant to CPLR 321 1 [e] (see, HSBC 13crnk 03‘41 ’ /hmr’noi?d,5 9 AD3d 679, 875 NYS2d 490 1445 [2d Dept 20091). However, it remains settled that foreclc sure ol’a mortgage may not be brought by one who has no title to it and absent transfer of the debt. the assignmcnt of the mortgage is a nullity (Kluge v Fugazy, 145 AD2d 537,536 NYS2d 92 [2d Dept 1988 11. I 11-tliermore. a plaintiff has no foundation in law or fact to foreclose upon a mortgage in which the plaintifl’ha~n o legal or equitable interest (Kutz v East-Ville Realty Co., 249 AD2d 243, 672 NYS2d 308 [ 1” Ilept 1098 1). I f an assignment is in writing, the execution date is generally controlling and a written dssignment claiming an earlier effective date is deficient, unless it is accompanied by proof that the physical delivci? of the notc and mortgage was, in fact, previously effectuated (see, Bankers Trust Co. v Hoovis, 26 3 ’iDZd 93 7 (338.6’14 NYS2d 245 [1999]). Plaintiffs failure to submit proper proof, including an affidavit from one with per:,onal knowledge, that the plaintiff is the holder of the note and mortgage, requires denial 01 the plaintiff’s application for an order of reference. I- or Iinxc1cmu-e actions commenced on or after February 1,2007, RPAPL 5 1303( 1) requires that the “toreclosin g party in a mortgage foreclosure action, which involves residential real property consisting of ouner-occupied o qe-to-four-family dwellings shall provide notice to the mortgagor in accordance with the provi\ions of thi. section with regard to information and assistance about the foreclosure process.” I’ursumt to KPAPL 1303(2), the “notice required by this section shall be delivered with the summons and complaint to commence a foreclosure action . . . [and] shall be in bold, fourteen-point type and shall be printed on I:olorecl paper that is other than the color of the summons and complaint, and the title of the notice shall be in bold. twenty-point type [and] shall be on its own page.” The specific statutorily required language afthe nctice is set forth in RPAPL §1303(3), which was amended on August 5,2008 to require additional language fbr actions commenced on or after September 1, 2008. I hc plaintiff’s summons and complaint and notice of pendency were filed with the County Clerk on er after- Februarj 1,2007, thereby requiring compliance with the notice provisions set forth in RPAPL 8 1-30; Plaintiff has failed to submit proper evidentiary proof, including an attorney’s affirmation, upon which the t ‘ourt may conclude that the requirements of RPAPL 5 I303(2) have been satisfied, specifically regarding the content. type size and paper color of the notice. Merely annexing a copy of a purportedly compliant notice does not provide a sufficient basis upon which the Court may conclude as a matter of law that the plaintiff has complied with the substantive and procedural requirements of the statute. Since the plaintiff ha: failed to establish compliance with the notice requirements of RPAPL$1303, its application
fix an order of reference must be denied.
I ( pro\ idt additional protection to homeowners in foreclosure, the legislature enacted RPAPL,
1320 to I equire a mortgagee to provide additional notice to the mortgagor-homeowner that a foreclosure
aciion has t)een commenced. I n this regard, effective August 1, 2007 for foreclosure actions involving
rcs~clential property containing not more than three units, RPAPL 5 1320 imposes a special summons
requiremenl. in adJitiion to the usual summons requirements. The additional notice requirement, which
niust be in I-oldfacc type. provides an explicit warning to defendant-mortgagors, that they are in danger of
losing their iome and having a defaultjudgment entered against them ifthey fail to respond to the summons
bv sen ing 611 ansuer upon the mortgagee-plaintiff s attorney and by filing an answer with the court. The
notice also infhrim defendant-homeowners that sending a payment to the mortgage company will not stop
tlic foieclostire act ion, and advises them to speak to an attorney or go to the court for further information
[* 4]
Wells k argo Bank v Mrlgar
Index .No. 3 761 9-2007
Puge i
on ho\\, to answer the summons. The exact form and language of the required notice are specified in the
siaiuie P1aintlft.s failure to submit an attorney’s affirmation of compliance with the special summons
requiremen1 s of RPAPL 5 1320, and proof of proper service of the special summons, requires denial of the
plaintiff%\ application for an order of reference.
\x, itti regard to a motion for a defaultjudgment sought against an individual in an action based upon
nonpa) mcnt of‘a contractual obligation, CPLR $32 15(g)(3)(i) requires that “an affidavit shall be submitted that additional notice has been given by or on behalf of the plaintiff at least twenty days before the entry of such judgment. by mailing a copy of the summons by first-class mail to the defendant at his place of residence 11- an eni!elope bearing the legend ‘personal and confidential’ and not indicating on the outside of the em elope that the communication is from an attorney or concerns an alleged debt. In the event such mailing is rt.turned as undeliverable by the post office before the entry of a default judgment, or if the place ofresideiu ofthe defendant is unknown, a copy of the summons shall then be mailed in the same manner to the defendant at the defendant’:; place of employment if known; if neither the place of residence nor the place ofernploynimt ofthe defendant is known, then the mailing shall be to the defendant at his last known residence Pursuant to CPLR 32 1 5 (g)(3)(iii), these additional notice requirements are applicable to residential riortgage foreclosure that were commenced on or after August 1 2007. Since the moving papers fail 1 o establish compliance with the additional mailing requirements of CPLR$32 15(g), the application
for an ordsi ol’refvrence must be denied.
0 ’lhi. constitutes the Decision and Order of the Court.
Ilated tober 5 , 2009

## TOXIC TITLE: Cloud in Massachusetts: Getting Back Your Home AFTER Foreclosure Sale

### Expected ruling may complicate transactions

By Jenifer B. McKim, Globe Staff  |  October 9, 2009

A court decision expected as soon as today could negate the validity of sales of thousands of foreclosed homes in Massachusetts, causing havoc for buyers and sellers and further stalling the housing market’s recovery in hard-hit areas.

At issue is proof of ownership at the time of a foreclosure sale. During the housing boom, millions of mortgages were bundled into bonds and sold to investors, a process that resulted in lengthy and twisted paper trails that can obscure ownership. Many lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgage.

That changed in March when Justice Keith C. Long of Massachusetts Land Court found that two foreclosures in Springfield were invalid because ownership of the mortgages was not clear at the time of the foreclosures.

Long’s ruling, which came as a shock to many who deal with distressed properties, called into question the ownership of hundreds if not thousands of foreclosed homes in Massachusetts, prompting some lenders to delay sales out of fear they could later be voided, title companies to balk at insuring them, and nonprofits to steer away from certain foreclosed homes altogether.

“There are thousands and thousands of titles that have gone through foreclosures with these late filed’’ ownership records, said Lawrence Scofield, an attorney with Ablitt Law Offices in Woburn, who represented plaintiffs in three consolidated Springfield cases ruled on by Long. “Judge Long is saying you don’t really own it. That is the real, overwhelming, economic effect.’’

Two of the plaintiffs asked Long to reconsider the ruling, and a decision is imminent.

Among those watching the case are Boston city officials, who say they hope Long will clarify title issues for homes that have already gone into foreclosure. In the meantime, the judge’s actions have stymied the city’s effort to buy as many as 20 bank-owned properties, hurting much-needed redevelopment efforts in neighborhoods plagued by foreclosure, officials said.

“It has put some properties in the state of limbo,’’ said Evelyn Friedman, director of Boston’s Department of Neighborhood Development.

While title issues can affect any home sale, Long’s ruling addressed procedures required under foreclosure law and therefore only affects properties foreclosed on by a lender. His decision builds on a growing national movement among housing advocates, courts, and some lawmakers to push lenders dealing with foreclosed properties to produce accurate documentation before deals are consummated.

Kathleen Engel, professor of law at Suffolk University, said the federal government should step in to help states deal with “toxic titles’’ that are clogging up the system from California to Florida. She said until recently few people were scrutinizing paperwork of foreclosing lenders, whose actions are causing problems for borrowers, investors, and municipalities. No matter how Long rules, she said, the problem isn’t going away.

“The fundamental problem is the paperwork was really shoddy,’’ said Engel. “The mess was created by Wall Street.’’

Locally, the Massachusetts decision has pitted advocates trying to revive neighborhoods against others trying to help homeowners stave off foreclosures.

Gary Klein, a consumer law attorney who filed a friend of the court brief in the case, said the real estate system placed “expedience and convenience’’ before the law. Providing home buyers with a “full set of procedural protections,’’ he said, is more important than comforting lenders who ignored the law. He said the lending community created the mess and it needs to fix it.

Klein said there is a benefit to the ruling for homeowners in trouble: It is slowing the foreclosure process, allowing them more time to try to save their homes. Indeed, since March, the number of foreclosure deeds has slowed, according to Warren Group, a Boston company that provides real estate data.

“There are probably at least a thousand families who are getting at least some period of temporary delay while lenders go back and get a proper paper trail,’’ said Klein, an attorney with the Boston-based law firm Roddy, Klein and Ryan. “Slowing foreclosures down allows people to get loan modifications and other relief.’’

The Springfield lawsuit was filed not by homeowners seeking to regain their houses, but by the foreclosing lenders who were trying to remove a “cloud from the title’’ of properties created because of where the lenders chose to publish foreclosure auction notices. A secondary issue was whether the notices – which did not officially name the mortgage holders – complied with the law, and that is what Long is concerned about.

The Real Estate Bar Association for Massachusetts, a statewide group with 3,000 members, joined the plaintiff’s attorney to ask the court to reconsider its ruling. Attorney Christopher Pitt, chair of the group’s Title Standards Committee, said many banks already have changed their procedures as a result of the March decision and are now coming to foreclosure-sale closings with completed paperwork.

But that doesn’t help people who already bought a foreclosed property from a bank.

“If a property has one of those arguably defective foreclosures in its back title, right now you may not be able to refinance or sell it,’’ said Pitt, who works for the law firm Robinson & Cole, which has an office in Boston.

In Springfield, the ruling scuttled purchases of two foreclosed properties in depressed areas, said Rudy Perkins, a staff lawyer with HAPHousing, a nonprofit that promotes affordable housing. As a result, Perkins said, the agency now steers clear of properties with similar title questions.

“There is a danger that if this can’t be resolved, those properties will stay boarded up,’’ said Perkins. “It killed the deals and, unfortunately, it is going to kill deals on other properties.’’

In North Andover, real estate agent Linda Kody said some banks have moved to redo a foreclosure rather than wait for Long’s decision. Others are not moving forward with foreclosures. Twelve pending sales in her office have collapsed recently, Kody said, and another 25 bank-owned property listings are on hold as lenders wait for a ruling.

“It is very upsetting,’’ said Kody, president of the real estate firm Kody & Co. Inc.

Biju Kachappilly, a father of two, is one of the many hopeful buyers awaiting the decision. Kachappilly said his pending purchase of a four-bedroom, \$400,000 Colonial in Tyngsborough in April fell through over questions about the title. He still hopes to buy the home, but in the meantime is paying higher rent on a month-to-month apartment in Billerica after notifying the landlord of his plans to move.

“We are trying to buy a house and move our family there; it is good for the neighborhood and it is good for the town,’’ said Kachappilly. “Many families and houses are in limbo because of this decision.’’

Jenifer McKim can be reached at jmckim@globe.com.