DISCOVERY TIPS: Thieves Guild: Bank of America Flubs Foreclosure, Seizes Wrong House — AGAIN

In virtually all cases you will not find a person with any relationship to the creditor, investor, or pool. This is because servicers, trustees and other firms in the securitization chain are proceeding on their own initiating foreclosures without instructions, knowledge or any documentation from the creditor, investor or pool.

Editor’s Note: Greyhawk is of course right. But his assumption that this doesn’t happen very often is wrong. We have seen Wells Fargo foreclose on the wrong house and Wells Fargo sue itself because it securitized the first mortgage into one pool and securitized the second mortgage into another pool.

The central importance of these articles is NOT that the banks are stupid or negligent. For the litigator, the central importance is EVIDENCE. Think about it. Work backwards from the event. What would need to be absolutely true for a firm to seize a house in which it had no interest? And how can that help you in other cases where the facts are not quite as clear?

Well, for one thing it would require a belief on the part of someone without any personal knowledge of their own (witness is not competent to testify, plausible deniability thus given a layer of support to other firms in the securitization chain) that they DO have an interest. How could that be? It could only be true if they were using documents and a chain of possession of documents that were either falsified (fabricated) or incomplete (in which case they made assumptions that turned out to be false).

In order for them to make those assumptions they would have had to receive the instructions OR the documents from a “Trusted Source”. Find out the identity for the trusted source and work your way back to the person who actually wrote the document, the person who actually signed the document and the person who gave instructions concerning the creation of that documentation along with any written evidence contemporaneous with those events.

In virtually all cases you will not find a person with any relationship to the creditor, investor, or pool. This is because servicers, trustees and other firms in the securitization chain are proceeding on their own initiating foreclosures without instructions, knowledge or any documentation from the creditor, investor or pool.

The reason we know that documents are falsified and that it is not only common practice but institutionalized pattern of conduct to fabricate documents is simple: when you have a  mortgage that is still “performing” (i.e., payments are up to date) and you ask for the the documentation, they don’t have it.

It is ONLY when the “loan” becomes delinquent, or in default or the notice of sale is issued or there is a challenge to the notice of sale that the documents finally show up. And usually it takes 6-12 weeks to get all the documents. Why? If they started foreclosure proceedings, they would have needed those documents ahead of time.

Trustees routinely pull up a title report before starting a non-judicial sale. You shoudl ask for that and anything else the Trustee had at the time of the initiation of foreclosure proceedings and the date of receipt or creation (under oath in interrogatories as to the date of creation of the documents).

Plaintiffs routinely pull up a title report before they file a foreclosure lawsuit in judicial states. Yet when you ask for them, it takes weeks to produce them and when finally produced and examined and investigated, you will often find that the signature was not authorized, the witnesses were in a different state, the notary was in a a different state from either the witnesses or the signatory or that the signatures are forged (i.e., don’t match the normal signatures of the people who signed.

As for the “negligence” theory, here is the problem for them. How could they think they have something when it doesn’t exist. ANSWER: Because it does exist (or WILL exist when they get around to it) and it was thus fabricated and forged.

But it also means something else when you drill down on these transactions. The pressure to get these loans moving in the securitization chain was immense. Many mortgage brokers or originators took the MORTGAGE APPLICATION, changed it and completed the rest of the closing documents by forgery or simply described the loan as completed when they sent data to the first pool, the aggregator, who then took that description and attached it as an exhibit to his “assignment” to the second pool, the SPV pool.

This is precisely what probably happened in the case reported below. Somebody signed a loan application, never went through with the closing but the loan description went up through the securitization chain and so the originators had to treat it as real even though it didn’t exist. And when its number came up, which was fast because if you don’t have any borrower it isn’t hard to imagine that the “loan” went into default immediately due to non-payment from the non-existent borrower, they foreclosed.

This is where April Charney’s “Produce the Note” fame has been misused and misapplied by those who do not understand the rules of evidence as she does. It’s not just the note she’s after. She wants the Plaintiff in Florida and other judicial states, to prove their case and not be permitted to fake it. Those who report negative results using her material have not mastered the basics, applied a non-existent magic bullet and falsely concluded that April and others are wrong. Those who are too lazy to learn the whole story should withhold their judgment. April Charney is right and what she teaches is correct.

Thieves Guild: Bank of America Flubs Foreclosure, Seizes Wrong House — AGAIN

Sun, 01/17/2010 – 14:46 |  GreyHawk

Hat-tip Consumerist.

For some, the slogan “practice makes perfect” is a motto of encouragement to try again, try harder and achieve perfection. For Bank of America, it should be taken as a strong hint to try and do the right thing the first time, not to try and find a better way to seize the wrong house and then attempt to abstain from any recognizable responsibility.

It should be, but it’s not.

BoA has apparently attempted to foreclose on the wrong house once again, according to an article by Laura Elder in the Galveston County Daily News:

GALVESTON — A West End property owner is suing Bank of America Corp., asserting its agents mistakenly seized a vacation house he owns free and clear, then changed the locks and shut the power off, resulting in the smelly spoiling of about 75 pounds of salmon and halibut from an Alaska fishing trip and other damages.

Agents working for Bank of America cut off power to the property by turning off the main switch in the lower part of the house, according to the lawsuit. They also changed the locks, so Schroit was unable to reach the switch to turn the power back on, according to the lawsuit.

“The property sustained water damage, potential mold contamination arising from the standing freezer residue, water, heat and high humidity conditions during the time the electrical power was off,” according to the lawsuit.

This marks the second time known this has known to occur. The Wheelright, Ky, homeowner in that incident filed a lawsuit against the bank for a similar incident: the locks were changed, and the bank refused to pay any damages other than replacement locks.

Accidents happen, but the bank’s responsibility for its actions doesn’t cease to exist simply because it’s a corporate behemoth. If an average person had “accidentally” shut off power to someone else’s home, changed the locks and caused untold damage, that person would be held liable in both criminal and civil court for the actions — amends and liability would most certainly be assigned.

Bank of America’s incapacity to deal responsibly with “errors” that significantly impact the public should be a wake-up call that the bank has other serious issues that need to be addressed, and that the rights and liberties of “corporate personhood” should not ever exceed the rights and liberties of real living people.

Foreclosure Defense and Offense: ALL 2001-2008 WERE ASSIGNED AND SECURITIZED


In view of the fact that the bulk of mortgages, especially those created in connection with refinance and home equity lines which were initiated between 2002 and 2007, were only a small cog in a much larger machine, anyone even vaguely familiar with foreclosure litigation knows that the plaintiff in the foreclosure action is often styled as something along the lines of “So and so as Trustee for XYZ Asset-Backed Securities”. There is much more to this denomination than meets the eye, and whether or not such a plaintiff even has the right to institute a foreclosure case at all is a question which anyone defending such a foreclosure should be asking right up front.

There are numerous articles on this blog which explain the threshold concept of why the plaintiff in these types of cases winds up being a trustee for a group of otherwise unidentified holders of securities. The “Cliff Notes” version is presented here for the purpose of this article and to give the reader a place to begin their inquiry. However, it is strongly recommended that the reader delve into the wealth of information on the blog in order to have a more complete understanding of the entire transaction of which the mortgage was only literally “the pimple on the elephant” before taking the actual step of defending a foreclosure based on any of the matters herein.

In the case of the “asset-backed security” plaintiff, the sceanario went something like this:

(a) borrower seeks refi or HELOC (home equity line of credit) from mortgage broker, asking broker for best loan program available given borrower’s income, credit history, and ability to repay the loan;

(b) mortgage broker either initially tells borrower that they qualify for a fixed rate loan with an even payment throughout the loan and later changes this to “the only thing available to you is an adjustable rate loan”, or makes this representation at the outset if the borrower has sketchy credit, low income, etc.;

(c) mortgage broker presents borrower with loan application;

(d) loan is “approved” either on original appraisal or “revised” or “amended” appraisal if original was not sufficient to create the necessary loan-to-value to approve the loan;

(e) loan is also “approved” on basis of borrower’s qualifying for “teaser rate” only, not the adjustable rate later in the life of the loan which the originating lender knew the borrower could not qualify for, but did not care about as the loan was already either presold to aggregator or would be after closing;

(f) assignment of the mortgage to aggregator has either already been made at the time of the initial approval for the loan, at the time of the application, or is made shortly after closing;

(g) closing takes place. Original “lender” (which in certain cases was nothing more than a front for a securities brokerage) has already sold or assigned the mortgage or will do so shortly;

(h) mortgage is assigned to an aggregator, “bundler”, or other third-party for further resale;

(i) aggregator sells mortgage, with hundreds or thousands of others, in “bundles” to investment bankers;

(j) investment bankers create series of “mortgage-backed securities” to be sold to investors with false, unsupported, or outright fraudulent AAA ratings, as underlying stability of the borrowers (who oftentimes were not and could not have been approved for the life of the adjustable rate loan) is dubious at best, and probably nonexistent as borrowers did not qualify as having ability to repay loan after “teaser” rate expired and higher rate kicked in;

(k) borrowers default in droves, causing loss of value of security;

(l) trustee or other third party is appointed to represent the holders of the “mortgage-backed securities” to foreclose on the collateral (the property).

Thus, the name of the plaintiff in a foreclosure lawsuit can reveal a lot about where the underlying mortgage went and how it got there. With these types of actions, one knows, right away, that there had to have been multiple assignments of the mortgage from the time of initiation to the point where the mortgage became collateral for an “asset-backed security”. As such, the first series of questions to be asked are those surrounding the assignment process:

(a) for each assignment, was there a valid assignment given by one with full authority to transfer the interest in the mortgage?

(b) was the assignment recorded?

(c) was there any consideration for the assignment (e.g. were any monies paid to purchase the mortgage at a discount, thus creating a payment against the obligation on the mortgage note)?

The answers to these threshold questions will directly impact how the defense of the foreclosure will proceed. If all of the assignments in the chain were valid, then the ultimate assignee (here, the Trustee for the Certificate Holders of the Asset-Backed securities) took the mortgage subject to all defenses which the borrower could have raised against the originating “lender”. As such, on proof of a valid chain of assignments, defenses which the borrower may have had against the originating lender under the Federal TILA, HOEPA, and RESPA Statutes; state Consumer Protection statutes; and other laws (see blog glossaries for definitions of these terms) can be asserted against the “trustee” plaintiff. Obviously, if the assignments are nonexistent or problematic, the borrower can assert that the “trustee” plaintiff does not have the legal capacity to even institute the foreclosure action in the first instance (known as “lack of standing or capacity” in legal lingo).

The next level of inquiry in any multiple-assignment process involves a determination of whether any payments by any of the assignees to the assignor in connection with the assignment can be characterized as payments against the underlying obligation of the note to which the mortgage attaches. The originating “lender” is obviously not going to assign the mortgage to an aggregator for no money. As such, there is the possibility that the foreclosing plaintiff may have wrongfully claimed the borrower to be in default, which results not only in a fraud being perpetrated upon the borrower, but also on the court as well. Unrecorded or unapplied paydowns against the note result in the foreclosing plaintiff not only seeking monies which it is not owed, but also in effect causing the theft of property to which the plaintiff is not entitled.

These threshold issues should be addressed at the outset of any foreclosure proceeding where there is an “asset-backed security” plaintiff, as the results of the inquiry may open up numerous additional avenues of defense and potential affirmative claims as well. Obviously the more diligent one is with their inquiry, the better potential for an effective, multi-level defense against the foreclosure.

A word of caution, however, which we have echoed in other blog articles: although these concepts may appear deceptively simple, asserting them properly in a foreclosure action as a defense, affirmatively in a separate legal action, or inside of a Federal bankruptcy proceeding is both a science and an art best left to attorneys who are versed in the technical terminology and the proper procedural rules in order to render these defenses effective. We thus repeat the recurring caveat to all non-lawyers reading these articles:


Jeff Barnes, Esq.

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