Ready to jump back into the Mortgage Minefield? Take these precautions.

by K.K. McKinstry/Lendinglies.com

Despite knowing what I know about the corrupt practices of the Federal Reserve, Government sponsored enterprises- Fannie Mae and Freddie Mac; not to mention originators, lenders, trustees, and the banks themselves- I decided the benefits of home ownership outweighed the risks and decided to jump back into the lending minefield in order to purchase a home.

Knowing that my loan could always go into default in the future, especially if I have the unfortunate luck of being assigned to a corrupt loan servicer who attempts to engineer a default-  I decided to be pro-active and take some protective measures.  First of all, I emailed the originator and asked if they are the lender or merely an originator.  The broker, either unaware or deliberately lying to me, told me that his company would be funding the loan with its own money.  He likely just made his first RESPA Regulation Z violation.  I have no doubt that the funds will be coming from an entirely different party and that I will receive no disclosure of this fact.  He claims the loan and note will be held by a portfolio lender but refuses to divulge who this party is.

Next, the lender claims it will cover the broker-provided mortgage protection insurance but has not yet disclosed that I will likely be paying a higher interest rate for lender provided mortgage insurance.  According to investigator Bill Paatalo under the 1998 Home Owners Protection Act (HOPA) the lender must disclose the fee and interest rate differences between borrower mortgage protection insurance and lender mortgage protection insurance.  There is also the issue of kickbacks and other profit generating schemes that are often not revealed to the borrower at loan closing.  I will be providing the closing documents to my attorney for review prior to closing to ensure there aren’t any obvious issues or discrepancies.

Lastly, after being burned once by an unethical loan servicer who forged its name on a mortgage note during litigation and claimed the note was the original- I will take measures to ensure this doesn’t happen again.  Not only will I be recording the closing (with the consent of all parties present) and taking screenshots of all of the documents,  but I will also be signing the mortgage note with a custom color of blue ink manufactured in Japan with a unique chemical profile.  I will then provide a copy of the copier paper and ink to my attorney to maintain on my behalf.

In the future if my mortgage note is destroyed and the servicer attempts to replicate (forge/fabricate) the note, they are going to have difficulty creating the unique ink profile.  I have also provided a forensic document examiner with the same paper and ink samples.  I have heard of people mixing their DNA into the ink- but I don’t believe that is necessary- a unique ink profile should be adequate.  For the record, I use a custom mix of  two shades of Pilot Iroshizuku ink.

When I was researching mortgage lenders, I had several lending criteria in mind that I believe offer homeowners additional protections when compared to the Megabank lenders (Wells Fargo, Bank of America, JPMC).  First, I was looking for a “portfolio” lender who would agree to service and maintain my loan on its books for at least five years to avoid my loan being sold from unaccountable servicer to servicer.   I spoke to loan officers at credit unions and locally owned banks before finding a small lender out of South Carolina who held its loans in-house.  My experience is that when a lender has skin-in-the-game (carrying the paper) they will work with you in good faith if you run into temporary financial issues or have a difficult life event occur.  As we all know- life can throw some curveballs and if you are with a heartless Megabank- one missed payment can start an avalanche of problems that are difficult to resolve.

The second criteria I sought in a lender was the use of a physical, wet-ink note that would be held by the bank during the loan period.  Many banks are now using e-lending that allow documents and signatures to be digital.  The problem with electronic-mortgages is that any document can easily be altered by photo-shop in the future if needed including mortgage notes.  If e-lending was available in the 2000s it would have been much easier for lenders to alter loan documents.

If there are problems that arise in the future (foreclosure, disputes, insurance claims) and the lender decides to digitally alter the e-documents, the presumption will be that the lender is providing the accurate documents.  I recommend that people avoid electronic mortgage providers although the industry is pushing for lenders to process all loans entirely online from application to closing.

In conclusion, for now- some of the best ways to protect yourself if you decide to take out a mortgage is to find a credit union, local bank, or portfolio lender who will keep and service your loan for its duration- or at least for five to ten year of the loan. Signing a physical note with a proprietary ink and providing your attorney with paper and ink samples is another good practice to ensure there is only ONE mortgage note in commerce.  If you can, record the loan closing or at least take photos of the documents you sign.  Lastly, avoid e-documents including notes and mortgages if possible.

The banks are in the process of devising new ways to perfect the securitization scheme to their advantage that don’t benefit the homeowner.  The banks claim the new e-lending practices are faster, cheaper and benefit the consumer but ultimately they benefit the bank more.  Therefore, it is up to the consumer to protect their interests to the best of their ability.

Rescission: Equitable Tolling Extends Statute of Limitations

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Important Message: This blog should NEVER be used as a substitute for competent legal advice from an attorney licensed in the jurisdiction in which your property is located.

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see http://openjurist.org/784/f2d/910/king-v-state-of-california-d-m

The most popular question I get here on the blog and on my radio show is what happens when the three year statute has run? The answers are many. First is the question of whether it ever started running. If the transaction was not actually consummated with anyone in the chain of parties claiming rights to collect or enforce the loan it would be my opinion that the three day right of rescission has not begun to run. That would be a remedy to an event in which the note and mortgage (or deed of trust) has been signed and delivered but the loan was never funded by the originator any creditor in the chain of “ownership.” The benefit of the three day rescission is that you don’t need a reason to do it. But in order to do that you need to be careful that you are not stating that there was a closing because that would be consummation and therefore the right to rescind unconditionally ran three days after that “Closing.”

Second is the three year statute of limitations. The same reasoning applies.  But it also raises the question of non-disclosure and withholding information. The rather obvious delays in prosecuting foreclosures on alleged “defaults” are clearly a Bank strategy for letting the 3 year statute run out and then claim the homeowner cannot rescind because the closing was more than 3 years ago. That is where the doctrine of equitable tolling comes into play. A party who violates TILA and fails to disclose material facts and continues to hide them from the borrower should not be permitted to benefit from continuing the violation beyond the apparent statute of limitations. People keep asking why the banks wait so long to prosecute foreclosures. The answer is that it is because they have no right to do so and they are running out the apparent statute of limitations on rescission and TILA disclosure actions.

Third is a procedural issue. According to TILA the “lender” who receives such a notice of rescission is (1) obligated to send it to the “real” lender and (2) must file a declaratory action against the borrower within 20 days in order to avoid the rescission. If they don’t file the 20 day action, they waive the objections they could have raised. So far I have not heard of one case in which such an action has been filed. I think the reason for that is that nobody can file an action in which they establish standing. Such a party would be obliged to allege that they are the “lender” or “creditor” as defined by TILA. That means they either loaned the money or bought the loan for “valuable consideration” just like it says in Article 9 of the UCC. Then they would have to prove that allegation before any burden shifted to the borrower to answer or file affirmative defenses against the action filed by this putative “lender.”

CAVEAT: The doctrine of equitable tolling is remedial as is the statute, but it is fairly strictly construed. I’m am quite confident that the best we will get from the courts is that the 3 day and 3 year rules and other limitations in TILA starts running the moment you knew or should have known the facts that had been withheld from you at “closing.” The fact that you are not a lawyer and did not realize the significance of this will not allow you to delay the start of the statute running after the date of discovery of the facts, whether you understood them or not.  But this is a two-edged sword. The current practice of objecting to any QWR, DVL or discovery question without answering the truth about the claimed chain of ownership or servicers on the loan corroborates the borrowers allegation that the parties are continuing to withhold this information. So a well-framed TILA defense might serve as the basis for enforcing your rights of discovery and rights to answers on your Qualified Written Request or Debt Validation Letter.

Additional Caveat: The doctrine of equitable tolling has been applied with respect to the one year statute of limitations on TILA disclosures but it remains open as to whether it would be otherwise applied. From the 9th Circuit —

“Section 1640(e) provides that “[a]ny action under this section may be brought within one year from the date of the occurrance of the violation.” We have not yet determined when a violation occurs so as to commence the one-year statutory period. See Katz v. Bank of California, 640 F.2d 1024, 1025 (9th Cir.), cert. denied, 454 U.S. 860, 102 S.Ct. 314, 70 L.Ed.2d 157 (1981). Three theories have been used by other circuits to determine when the statutory period commences: (1) when the credit contract is executed; (2) when the disclosures are actually made (a “continuing violation” theory); (3) when the contract is executed, subject to the doctrines of equitable tolling and fraudulent concealment (limitations period runs from the date on which the borrower discovers or should reasonably have discovered the violation). See Postow v. OBA Federal S & L Ass’n, 627 F.2d 1370, 1379 (D.C.Cir.1980) (adopting “continuing violation” theory in some situations); Wachtel v. West, 476 F.2d 1062, 1066-67 (6th Cir.), cert. denied, 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973) (rejecting “continuing violation” theory, statutory period commences upon execution of loan contract); Stevens v. Rock Springs National Bank, 497 F.2d 307, 310 (10th Cir.1974) (rejecting “continuing violation” theory); Jones v. TransOhio Savings Ass’n., 747 F.2d 1037, 1043 (6th Cir.1984) (applying equitable tolling and fraudulent concealment).”

Hats off to James Macklin who sent me this email:

Hang on to your hats fella’s…in Sargis’ ruling … back in 2012…he confirms the equitable tolling principles of TILA as I had argued…just saw this again while reviewing…to wit:
“The Ninth Circuit applies equitable tolling to TILA’s … statute of limitations (King v. California, 784 F.2d 910, 914 (9th Cir. 1986).
“Equitable Tolling is applied to effectuate the congressional intent of TILA.”, Id.
Courts have construed TILA as a remedial statute, interpreting it liberally for the consumer.” (Id. Citing Riggs v. Gov’t Emps. Fin. Corp., 623 F.2d 68, 70-71 (9th Cir. 1980).
 Specifically the 9th Circuit held: “[T]he limitations period in section 1640(e) runs from the date of consummation of the transaction but that the doctrine of equitable tolling may, in appropriate circumstances, suspend the limitations period until the borrower discovers or had the reasonable to discover the fraud or non-disclosures that form the basis of the TILA action.” 
Gentlemen…I give you proof positive that the statute tolls and the fact that the term “consummation” is also subject to broad interpretation as we know…the loan could not have consummated if what we allege is found to be true… However, the non-disclosures language used by the 9th Circuit gives rise to possible myriad rescissions upon discovery of those non-disclosures…
James L. Macklin, Managing Director
Secure Document Research(Paralegal Services/Legal Project Management)

PHANTOM ASSIGNMENT AT LOAN CLOSING

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM

IN law school we are always told to start at the beginning, although few practitioners actually do that ,since they THINK they know at a glance the nature of the transaction. Consider the usual “loan closing” where a securitization scheme is in operation. It is a “table-funded loan” which is a fancy way of saying that someone else actually loaned the money — some one other than the party named as payee on the note, or as lender or beneficiary on mortgage or deed of trust. A pattern of conduct in which table funded loans are the rule rather than the exception is evidence prima facie of a predatory loan. (REG Z). Why?

The reason is actually quite simple. If an undisclosed party is the actual party in the money trail, then the document trail is defective and does not comply with disclosure requirements under the deceptive lending laws at the federal and state level. The pretender lender at closing is masquerading as the party who did the underwriting on the loan, who was taking the risk of non-payment and who has the power of enforcement. But these assumptions are not true. And at the point where the pretender lenders come up with fabricated and forged assignments and affidavits they are misdirecting the attention of the court away from a simple fact.

In order for the pretender lender at the closing to have been party to a contract that is enforceable with the homeowner as borrower, the pretender lender needed some documentation that was recorded at closing showing its representative capacity for the real source of funds, i.e., the real lender. Thus the investor-lender would be required to execute an assignment of the legal and equitable rights under the loan transaction to the pretender lender. That assignment does not exist, which is the fatal incurable defect in nearly 80 million transactions in which a securitized loan was involved.

The banks want the Courts to accept their word for it — that the assignment should be presumed. Some have advanced the argument that there is an equitable assignment, which the courts have universally struck down as being contrary to the need for certainty in the marketplace and contrary to all law and precedent. Thus the closing of the loan DOCUMENTS conflicts with the closing of the actual MONEY TRANSACTION. The absence of the phantom assignment between the investor and the pretender lender is not overcome by reference to the PSA whose terms clearly show the requirements and timing of assignments, as well as the requirements for underwriting and compliance with existing law.

THEREFORE NEITHER THE NOTE NOR THE MORTGAGE OR DEED OF TRUST ARE VALID ENFORCEABLE DOCUMENTS BECAUSE THEY (A) DO NOT REFLECT THE ACTUAL MONEY TRANSACTION AND (B) THEY DO NOT PROVIDE A NEXUS BETWEEN THE CASH LENDER AND THE PARTY IN WHOSE FAVOR THE DOCUMENTATION WAS EXECUTED BY THE HOMEOWNER.

The Confusing Closing Process: Rush to Extinction

From a new commentator on our pages:

I just glanced at a few posts and have to wonder if folks are aware of the typical loan closing process that was in place in CA the last several years. Usually a mobile notary would be dispatched to a borrower’s location with two stacks of loan documents and a very brief window of time to “sign up” the borrower.

Borrowers would be given NO opportunity to read or review loan documents and this is precisely how brokers/lenders managed to obtain signatures on documents with information altered by the broker/lender.

I saw this practice first develop in the 1980s when I was a banker and watched it become the standard in the mortgage industry by the time I left banking in 2007. Including a stint at sub-prime lender Aames the very idea that borrowers had ANY meaningful opportunity to read and review their loan documents is so far removed from the truth that it is actually nauseating.

I was able to work on or analyze several loan origination systems and am truly amazed that the public has not been educated as to the absolute control exercised by brokers/lenders over the loan closing process. I make allegations about this process in every complaint I file wherein it is appropriately alleged. The world needs to know about this so the true culprits in this meltdown, the brokers and lenders, can be brought to justice.

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