NY Issues More Subpoenas on Foreclosures

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“Raymond H. Brescia, assistant professor of law at Albany Law School, said: “We’re seeing a disproportionate number of cases in the foreclosure context where questionable filings have been made. I think it’s easy to say this is the largest and most wide-ranging fraud against the courts in the United States. Lawyers have to have a good-faith basis for the factual assertions they make to the court; they are responsible if they file pleadings that are baseless.”

So what we have here is THREE DIFFERENT DEALS — THE REAL ONE REFLECTED BY THE EXCHANGE OF MONEY, THE COVER DEAL WHICH WAS THE ORIGINAL SECURITIZATION SCHEME THAT NOBODY FOLLOWED, AND THE FABRICATED AND FORGED DOCUMENT SCHEME IN WHICH WOULD-BE FORECLOSERS ATTEMPTED TO CONFORM THE DOCUMENTS TO THE EVIDENCE THEY EITHER CREATED OR COULD NOT AVOID. – Neil Garfield

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EDITOR’S COMMENT: The answer is obvious. But who will ask the question? HOW AND WHY DID THESE NEWLY CREATED FORECLOSURE MILLS GET STARTED, AND WHY DID THEY RESORT TO FRAUD TO PUSH THROUGH FORECLOSURES WHERE THE BORROWER WAS OBVIOUSLY IN DEFAULT?

  1. NO DEFAULT: First, we know that the mortgagee or beneficiary stated on the note and security instrument is NOT the party seeking foreclosure nearly all the time. Since this new party neither loaned any money nor did they purchase the receivable, there is no default as to THEM. And since these parties have no actual rights of agency or representation, neither the attorney nor the client belong in court. So they needed to create a default, even if the servicer was continuing to make payments to the creditor. That was untrue, so it follows that any documents declaring otherwise would also be untrue. They depended upon the obvious fact that the borrower had ceased making payments to carry the day, and it worked. Judges granted foreclosure and denied borrower defenses in an overwhelming majority of cases. It just didn’t seem credible that the banks would come in foreclosing on loans that didn’t exist, that the bank didn’t own, and that the lawyer and a foreclosure mill had cooked up fabricated and forged documents. Why would they do that? THERE WAS NO DEFAULT BECAUSE THE REAL CREDITOR CONTINUED TO GET PAID. AND THERE COULDN’T BE A DEFAULT, AS PER THE NOTE, BECAUSE THE NOTE WAS A FICTION DESCRIBING A TRANSACTION THAT NEVER TOOK PLACE.
  2. NO CREDITOR: It turns out that virtually none of the mortgages were funded by the party to whom the promissory note was made payable and that often MERS or some other entity was named as the holder of a security interest, thus splitting the note and security instrument. It also turns out that the lender was parting with his funds under a set of assumptions and representations that were never communicated to the borrower, not the least of which was the identity of the real lender or even that a real lender existed at all. Thus the original transaction in which the investor’s money was put to use, in part, to fund mortgages, some of which was to fund a specific loan was subject to documents (PSA, mortgage bond indenture, etc.) containing many provisions relating directly to the trail money, none of which were communicated to the borrower, or even that such documentation existed at all. The real creditor — the ONLY party that parted with money — is neither present in the courtroom nor do they want to be. They have chosen to sue the investment banking firms for selling them mortgage bonds that were fake — i.e., with nothing in the pool or some awkward argument for saying the loans should be “considered” to be in the pool even if they were not. Thus the foreclosures are initiated by disinterested parties out of greed — not to redress a loss that THEY had. Wall Street went along with the continuing PONZI scheme because it has given them more cover to scapegoat the foreclosure mills as being the cause of the mortgage mess.
  3. NO DOCUMENTS: “NO DOC” loans became “NO-DOC Foreclosures. The mortgage documents signed at “closing” recited a transaction that never occurred, while the real transaction and the real parties neither knew nor accepted the terms, much less in writing. The note and mortgage (deed of trust) are invalid, fatally defective from a title perspective without a new signature from the borrower on documents that reflect an actual agreement between borrower and lender.
  4. NO MONEY: The money for funding the mortgage was wired in to the closing agent bypassing the supposed “lender” at closing or using them as merely a fee-based service, conduit ( like a messenger). Any money paid by the borrower was paid not to the party named as payee on the note but to third parties who used the mere fact that a receivable existed to create exotic instruments that multiplied the apparent value of the receivables to nose bleed levels that could never be sustained. THEN they divided up the new proceeds after having already bilked the investors out of money to fund the non-existent loans, they bilked more investors and speculators on the viability of the exotic derivative instruments, whose value was entirely dependent on the value and enforceability of the note and security instrument named a “mortgage loan.”
  5. NO DEAL: There being no deal, no documentation and no money trail that the would-be foreclosers can or would disclose, they made up a whole set of “facts” (fabrication of documents) by describing a scheme that was different from the actual money transaction between borrower and lender, different from the securitization infrastructure that was originally laid out in the PSA, Assignment and Assumption Agreement, Prospectus etc. Naturally since these documents never existed before and did not reflect the the terms originally understood by borrower and lender, they needed forgery by $10 per hour robo-signers. So what we have here is THREE DIFFERENT DEALS — THE REAL ONE REFLECTED BY THE EXCHANGE OF MONEY, THE COVER DEAL WHICH WAS THE ORIGINAL SECURITIZATION SCHEME THAT NOBODY FOLLOWED, AND THE FABRICATED AND FORGED DOCUMENT SCHEME IN WHICH WOULD-BE FORECLOSERS ATTEMPTED TO CONFORM THE DOCUMENTS TO THE EVIDENCE THEY EITHER CREATED OR COULD NOT AVOID.

New York Subpoenas 2 Foreclosure-Related Firms

By GRETCHEN MORGENSON

Eric T. Schneiderman, the New York attorney general, has issued subpoenas to the state’s largest foreclosure law firm and a related company, indicating that his office has some doubts about the effort by state attorneys general to resolve questionable foreclosure practices among the nation’s top banks.

The New York investigation appears to center on two of the state’s foreclosure industry giants: the Steven J. Baum firm, headquartered in Amherst, N.Y., and Pillar Processing, a default servicing firm set up by Mr. Baum that was spun off in 2007. Representing JPMorgan Chase, Wells Fargo and other large banks, the Baum firm has handled an estimated 40 percent of foreclosure cases in the state. Pillar Processing provides extensive services to the firm.

A spokesman for Mr. Schneiderman declined to comment. Mr. Baum said in an e-mail: “The firm will cooperate with the attorney general in this matter. We are confident that after a full review by the attorney general they will find no wrongdoing.”

Attorneys general across the country have been working on ways to rectify foreclosure improprieties by the nation’s biggest banks and have entered into negotiations in recent weeks with these institutions about a national settlement. Tom Miller of Iowa is leading that effort. While Mr. Schneiderman has been participating, his new investigation points to the possibility that he will take a different path.

Large foreclosure law firms have come under scrutiny in states outside New York. Last year, the Florida attorney general began investigating the David J. Stern firm, the largest in that state. That investigation is continuing, but the law firm stopped bringing foreclosure cases last month.

Like the Stern firm, Mr. Baum’s operation flourished as the mortgage crisis deepened. Since the end of 2007, it has filed more than 50,000 new foreclosure cases in New York, according to data compiled by the New York State Unified Court System. The firm employs approximately 70 lawyers.

Along with the attorney general, federal prosecutors in Manhattan have requested information about the Baum firm’s practices, according to a lawyer who has represented borrowers against the firm. The lawyer spoke on condition of anonymity because the communications with the prosecutors were private. A spokesman for the Department of Justice declined to comment.

Scrutiny of the Baum firm has increased in recent months after significant errors surfaced nationwide in legal paperwork used by banks to seize delinquent borrowers’ homes. For example, documents detailing how much borrowers owe have been signed by bank representatives who say they have not verified the information. Other problems involve the questionable notarization of documents, or paperwork indicating that the foreclosure process was begun without providing proof that the entities involved had the legal right to foreclose.

The Baum firm has drawn rebukes on its legal practices from judges in several New York jurisdictions. Judges in courts across the state have rejected scores of cases filed by the Baum firm, saying it has failed to provide the documentation necessary to commence foreclosure.

Last November, Judge Scott Fairgrieve in Nassau County district court imposed sanctions of $5,000 on the Baum firm in a foreclosure case and required it to pay more than $14,000 in fees to the borrower’s lawyers. When awarding the sanctions, the judge wrote: “Bringing legal proceedings when there is no legal right to do so, due to lack of standing, stalls the efficient administration of justice in the system.”

Paul D. Stone, a lawyer in Tarrytown, N.Y., has been defending a foreclosure case against the Baum firm since 2009. “I’ve never seen any firm file such ill-conceived, ill-researched, nonfactual materials with a court,” Mr. Stone said. The judge overseeing his case recently ordered Mr. Baum’s firm to pay some of the borrower’s legal costs.

Hoping to eliminate defective filings, last fall New York courts began requiring lawyers bringing foreclosure cases to attest to the accuracy of their papers.

The Baum firm was founded in 1972 by Marvin R. Baum and has been overseen by Steven J. Baum, his son, since the elder man died in 1999.

Steven Baum created Pillar Processing in 2007, a provider of real estate default services, and it is located in the same office complex in Amherst as the law firm. Pillar was purchased in 2007 by Tailwind Capital, a New York hedge fund; some of Pillar’s debt and equity is also held by Ares Capital, a publicly traded investment company in New York City. Representatives of Tailwind did not respond to an e-mail seeking comment. An Ares spokesman declined to comment.

Pillar Processing’s default servicing practices have attracted criticism from Cecelia G. Morris, bankruptcy judge in the Southern District of New York. In a court hearing on Feb. 5, 2008, Judge Morris said she would no longer accept any material from Pillar Processing in her court and added that if more paperwork from Pillar came in, she would deny the motions associated with it.

Linda M. Tirelli, a lawyer in White Plains who represents homeowners, discussed three current foreclosure cases in which she faces the Baum firm. “The documents don’t make sense in any of them,” she said. In another foreclosure being defended by Ms. Tirelli, a lawyer for the bank told the court that the Baum firm had filed inaccurate documents as it sought to take over a borrower’s property. After trying unsuccessfully to find every link in the chain of title on the property, the Baum firm prepared inaccurate papers to fill in what was missing, according to court documents.

Speaking generally and not specifically about the Baum firm, Raymond H. Brescia, assistant professor of law at Albany Law School, said: “We’re seeing a disproportionate number of cases in the foreclosure context where questionable filings have been made. I think it’s easy to say this is the largest and most wide-ranging fraud against the courts in the United States. Lawyers have to have a good-faith basis for the factual assertions they make to the court; they are responsible if they file pleadings that are baseless.”

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