Older Forensic Title Analyses Need Updating — Even Ours

 A recent request from an old client brought to mind the changes that have occurred, as in her case, since 2011 — more than 7 years ago.
A quick review indicates that the facts were correct but the conclusions need tweaking. And the title record should be updated. Many new laws and case decisions have occurred since that report was finished and many new facts have been revealed about these older transactions.

For example it now appears that our assumption about the flow of payments was incorrect.
  1. Your payments were being made to a subservicer who was forwarding money on a separate contract to a Master Servicer.
  2. The Master Servicer then authorized, in its sole discretion, third parties to make certain payments to investors who had purchased certificates issued in the name of a trust, which turns out to not exist.
  3. The trust name was being used as a fictitious name for the named underwriter of the certificate offering. But the actual transaction was not an underwriting; it was simply a sale by the party posing as underwriter (implying it was working for a third party, presumably the nonexistent trust).
  4. By contract, the investors purchased their right to receive money arising out of a promise to pay issued by the named underwriter (i.e., seller) that was unrelated to the terms of repayment on any note.
  5. And most importantly the investors waived any right, title or interest to the loans, debts, notes or mortgages.
  6. Thus you can see that actions undertaken in the name of the holders of certificates or a REMIC Trust or the Trustee of a REMIC trust are all fabricated, to hide the fact that the obligation of the borrower has been transformed into an unsecured obligation to pay intermediaries who converted the investors’ money and thus claim to be principals entitled to enforce a debt in which they had no investment.
  7. Most of the documents uploaded to SEC.gov, if at all, are either unsigned or incomplete (or both) lacking a mortgage loan schedule or any reference to a particular loan. Such documents are ONLY uploaded to SEC.GOV which has no power to charter or approve any entities nor their filings, as long as they have been granted access to upload documents. Their existence on SEC.GOV means nothing.
  8. An assignment without actual transfer of the debt is without effect. In virtually all cases involving false claims of securitization no payment of any kind was ever made by any party in the chain for the origination or purchase of the loan. Our Case Analysis examines the issues arising from transfer of a promissory note which can cause legal presumptions to arise concerning ownership of the debt and transfers thereof.
  9. Analysis of the fictitious “trust” documents reveals the absence of essential elements of a trust hence leading to the conclusion that no actual trust was intended notwithstanding the illusions and implications contained in the documents themselves and the representations of attorneys and representatives of “servicers” to the contrary. Upon case analysis (apart from title analysis contained in our TERA report) the following basic elements of a trust are usually absent.
    1. Complete signed trust instrument
    2. Trustee with powers to administer the affairs of the trust and the trust assets
    3. Trustor/settlor creating the trust.
    4. Beneficiaries of the trust
    5. RES: anything that has been entrusted to the named trustee to manage on behalf of the beneficiaries
My suggestion, if the issues are still pending, is that you order the current TERA and the PDR PLUS, which includes a recorded CONSULT.
CLICK HERE TO ORDER CONSULT (not if you order PDR)
CLICK HERE TO ORDER PRELIMINARY DOCUMENT REVIEW (PDR BASIC or more probably the PDR PLUS, in your case — includes CONSULT)

“Resecuritization”

the basic thrust of the defense is to point out what is absent rather than attack what is not absent.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-
As predicted on my blog back in 2008, we are seeing new names of Trusts emerge in foreclosure cases — involving old loans that were declared in default years ago by parties asserting they represent the alleged servicer of either a named bank or servicer or an old trust. What happened? As our sources had revealed, the alleged trusts had nothing in them and were the source of extreme liability of the Master Servicer acting as underwriter to the investors and third parties who traded in securities based upon the representation that the Trust actually owned the debts of millions of homeowners.
 *
We have not seen the agreements, but we are told, and our analysis confirms, that the old trusts were “retired” and that new trusts, also empty, are now being used wherein the paperwork for the new “Trusts” is far more complete than what we have previously seen.
 *
As far as we have determined thus far the mechanics of the change of trust name are along the following lines:
 *
  1. There is probably a purchase and sale agreement between the old trust and the new trust. Like previous documentation there are no warranties of ownership but ownership of the debts is implied.
  2. Like the old Trusts, foreclosures are brought in the name of the new trusts, using US Bank or other major institution as the “Trustee.”
  3. Investors in the old trusts are given certificates in the new trust as settlement of claims brought by investors for malfeasance in the handling of their money — namely the origination of loans instead of the acquisition of loans and the granting of loans that were far lower in quality than agreed and far higher risks than allowed for stable managed funds.
  4. This “resecuritization” process is a sham just like the original old trust. But it follows the playbook the banks have been using for over a decade. By adding another level of paper to fabricated documents based upon nonexistent transactions, it promotes the illusion of valid transactions and valid documents.
  5. Like all other trusts and hybrid situations in which trusts were involved but not named, the entire scheme is based upon a simple premise. The banks have managed information and data such that there remains a false sense of security that they are still credible sources of information — despite all evidence to the contrary. The additional layer of documents then adds to the illusion because it is counterintuitive to believe that these high level complex documents represent transactions in the real world that don’t exist.
 *
Defense strategies remain the same, however. The issues in evidence laws and rules are foundation, and hearsay.The basic defects in the bank’s credibility must be revealed even if it does not get to the point where everything is revealed. The rent-a-name practice for appointment of trustees that have no obligations or duties continues. The “apparent authority” of the servicers is based upon a trust document of an entity in which there is no asset. But the website of US Bank and others suggest that they have business records — which in actuality do not exist. Hence, the basic thrust of the defense is to point out what is absent rather than attack what is not absent.
 *
This takes strict logical analysis by the attorney representing the homeowner — an exercise that in most cases cannot be accomplished by a pro se litigant. It may be beyond the confidence of the lawyer too, but there are many people in the country who provide services that assist with the logical analysis and factual analysis — including but not limited to the team at LivingLies and LendingLies. The analyst should be well-steeped in the three classes of securitization — concept, written documents and actual practice in order to come to conclusions that are not only correct but are likely to give traction in court.
 *
While tempting, attacking the existing documentation on the basis of authenticity or validity is a rabbit hole. The only parties that actually have the proof as to the fabrication of any one particular transaction are the parties with whom you are in litigation and the parties who created them and use them as sham conduits. They resist by all means available any attempt to provide access tot he real information and the real monetary transactions which look very different from the ones portrayed in court.
 *
By making an allegation you are now required to prove what you have said by evidence that the other side simply will not give up. This is not to say that there is no value in sending a QWR (Qualified Written Request), (DVL) Debt Validation Letter, or a complaint to the state AG or the CFPB. Much of the inconsistent statements come from those responses and can be used in court. And there is also considerable value in seeking discovery even if we know that in most cases, while it should be allowed, the judge will issue protective orders or sustain objections to requests seeking the identity of the owner of the debt.
 *
The value of those apparently futile endeavors can be that at trial the foreclosing party will almost certainly rely on legal presumptions that depend upon information contained in your discovery request.
 *
OBJECTIONS AT TRIAL: This requires research and analysis of potential objections and how they should be used. While a motion in limine before trial would seem to be the better practice, the real traction seems to come at trial when the homeowner raises objections and moves to exclude evidence that relies upon data contained in discovery they refused to answer and which the court ruled was irrelevant. It is of utmost importance, however, that in order to use the discovery exchanges, you must file a motion to compel and set it for hearing and get it heard. The risk of a motion in limine is that the court is more likely to deny it and then when raised at trial in an objection will regard your objection as a second bite an apple that has already been the subject of a dispositive ruling.
 *
Cross examination of the robo-witness should be aggressive and relentless pointing to the actual lack of knowledge of the witness about anything other than the script from which he was trained to testify.

Can you really call it a loan when the money came from a thief?

The banks were not taking risks. They were making risks and profiting from them. Or another way of looking at it is that with their superior knowledge they were neither taking nor making risks; instead they were creating the illusion of risk when the outcome was virtually certain.

Securitization as practiced by Wall Street and residential “mortgage” loans is not just a void assignment. It is a void loan and an enterprise based completely on steering all “loans” into failure and foreclosure.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Perhaps this summary might help some people understand why bad loans were the object of lending instead of good loans. The end result in the process was always to steer everyone into foreclosure.

Don’t use logic and don’t trust anything the banks put on paper. Start with a blank slate — it’s the only way to even start understanding what is happening and what is continuing to happen. The following is what you must keep in mind and returning to for -rereading as you plow through the bank representations. I use names for example only — it’s all the same, with some variations, throughout the 13 banks that were at the center of all this.

  1. The strategic object of the bank plan was to make everyone remote from liability while at the same time being part of multiple transactions — some real and some fictitious. Remote from liability means that the entity won’t be held accountable for its own actions or the actions of other entities that were all part of the scheme.
  2. The goal was simple: take other people’s money and re-characterize it as the banks’ money.
  3. Merrill Lynch approaches institutional investors like pension funds, which are called “stable managed funds.” They have special requirements to undertake the lowest possible risk in every investment. Getting such institutional investors to buy is a signal to the rest of the market that the securities purchased by the stable managed funds must be safe or they wouldn’t have done it.
  4. Merrill Lynch creates a proprietary entity that is neither a subsidiary nor an affiliate because it doesn’t really exist. It is called a REMIC Trust and is portrayed in the prospectus as though it was an independent entity that is under management by a reputable bank acting as Trustee. In order to give the appearance of independence Merrill Lynch hires US Bank to act as Trustee. The Trust is not registered anywhere because it is a common law trust which is only recognized by the laws of the State of New York. US Bank receives a monthly fee for NOT saying that it has no trust duties, and allowing the use of its name in foreclosures.
  5. Merrill Lynch issues a prospectus from the so-called REMIC entity offering the sale of “certificates” to investors who will receive a hybrid “security” that is partly a bond in which interest is due from the Trust to the investor and partly equity (like common stock) in which the owners of the certificates are said to have undivided interests in the assets of the Trust, of which there are none.
  6. The prospectus is a summary of how the securitization will work but it is not subject to SEC regulations because in 1998 an amendment to the securities laws exempted “pass-through” entities from securities regulations is they were backed by mortgage bonds.
  7. Attached to the prospectus is a mortgage loan schedule (MLS). But the body of the prospectus (which few people read) discloses that the MLS is not real and is offered by way of example.
  8. Attached for due diligence review is a copy of the Trust instrument that created the REMIC Trust. It is also called a Pooling and Servicing Agreement to give the illusion that a pool of loans is owned by the Trust and administered by the Trustee, the Master Servicer and other entities who are described as performing different roles.
  9. The PSA does not grant or describe any duties, responsibilities to be performed by US Bank as trustee. Actual control over the Trust assets, if they ever existed, is exercised by the Master Servicer, Merrill Lynch acting through subservicers like Ocwen.
  10. Merrill Lynch procures a triple AAA rating from Moody’s Rating Service, as quasi public entity that grades various securities according to risk assessment. This provides “assurance” to investors that the the REMIC Trust underwritten by Merrill Lynch and sold by a Merrill Lynch affiliate must be safe because Moody’s has always been a reliable rating agency and it is controlled by Federal regulation.
  11. Those institutional investors who actually performed due diligence did not buy the securities.
  12. Most institutional investors were like cattle simply going along with the crowd. And they advanced money for the purported “purchase” of the certificates “issued” by the “REMIC Trust.”
  13. Part of the ratings and part of the investment decision was based upon the fact that the REMIC Trusts would be purchasing loans that had already been seasoned and established as high grade. This was a lie.
  14. For all practical purposes, no REMIC Trust ever bought any loan; and even where the appearance of a purchase was fabricated through documents reflecting a transaction that never occurred, the “purchased” loans were the result of “loan closings” which only happened days before or were fulfilling Agreements in which all such loans were pre-sold — i.e., as early as before even an application for loan had been submitted.
  15. The normal practice required under the securities regulation is that when a company or entity offers securities for sale, the net proceeds of sale go to the issuing entity. This is thought to be axiomatically true on Wall Street. No entity would offer securities that made the entity indebted or owned by others unless they were getting the proceeds of sale of the “securities.”
  16. Merrill Lynch gets the money, sometimes through conduits, that represent proceeds of the sale of the REMIC Trust certificates.
  17. Merrill Lynch does not turn over the proceeds of sale to US Bank as trustee for the Trust. Vague language contained in the PSA reveals that there was an intention to divert or convert the money received from investors to a “dark pool” controlled by Merrill Lynch and not controlled by US Bank or anyone else on behalf of the REMIC Trust.
  18. Merrill Lynch embarks on a nationwide and even world wide sales push to sell complex loan products to homeowners seeking financing. Most of the sales, nearly all, were directed at the loans most likely to fail. This was because Merrill Lynch could create the appearance of compliance with the prospectus and the PSA with respect to the quality of the loan.
  19. More importantly by providing investors with 5% return on their money, Merrill Lynch could lend out 50% of the invested money at 10% and still give the investors the 5% they were expecting (unless the loan did NOT go to foreclosure, in which case the entire balance would be due). The balance due, if any, was taken from the dark pool controlled by Merrill Lynch and consisting entirely of money invested by the institutional investors.
  20. Hence the banks were not taking risks. They were making risks and profiting from them. Or another way of looking at it is that with their superior knowledge they were neither taking nor making risks; instead they were creating the illusion of risk when the outcome was virtually certain.
  21. The use of the name “US Bank, as Trustee” keeps does NOT directly subject US Bank to any liability, knowledge, intention, or anything else, as it was and remains a passive rent-a-name operation in which no loans are ever administered in trust because none were purchased by the Trust, which never got the proceeds of sale of securities and was therefore devoid of any assets or business activity at any time.
  22. The only way for the banks to put a seal of legitimacy on what they were doing — stealing money — was by getting official documents from the court systems approving a foreclosure. Hence every effort was made to push all loans to foreclosure under cover of an illusory modification program in which they occasionally granted real modifications that would qualify as a “workout,” which before the false claims fo securitization of loans, was the industry standard norm.
  23. Thus the foreclosure became extraordinarily important to complete the bank plan. By getting a real facially valid court order or forced sale of the property, the loan could be “legitimately” written off as a failed loan.
  24. The Judgment or Order signed by the Judge and the Clerk deed upon sale at foreclosure auction became a document that (1) was presumptively valid and (b) therefore ratified all the preceding illegal acts.
  25. Thus the worse the loan, the less Merrill Lynch had to lend. The difference between the investment and the amount loaned was sometimes as much as three times the principal due in high risk loans that were covered up and mixed in with what appeared to be conforming loans.
  26. Then Merrill Lynch entered into “private agreements” for sale of the same loans to multiple parties under the guise of a risk management vehicles etc. This accounts for why the notional value of the shadow banking market sky-rocketed to 1 quadrillion dollars when all the fiat money in the world was around $70 trillion — or 7% of the monstrous bubble created in shadow banking. And that is why central banks had no choice but to print money — because all the real money had been siphoned out the economy and into the pockets of the banks and their bankers.
  27. TARP was passed to cover the banks  for their losses due to loan defaults. It quickly became apparent that the banks had no losses from loan defaults because they were never using their own money to originate loans, although they had the ability to make it look like that.
  28. Then TARP was changed to cover the banks for their losses in mortgage bonds and the derivative markets. It quickly became apparent that the banks were not buying mortgage bonds, they were selling them, so they had no such losses there either.
  29. Then TARP was changed again to cover losses from toxic investment vehicles, which would be a reference to what I have described above.
  30. And then to top it off, the Banks convinced our central bankers at the Federal Reserve that they would freeze up credit all over the world unless they received even more money which would allow them to make more loans and ease credit. So the FED purchased mortgage bonds from the non-owning banks to the tune of around $3 Trillion thus far — on top of all the other ill-gotten gains amounting roughly to around 50% of all loans ever originated over the last 20 years.
  31. The claim of losses by the banks was false in all the forms that was represented. There was no easing of credit. And banks have been allowed to conduct foreclosures on loans that violated nearly all lending standards especially including lying about who the creditor is in order to keep everyone “remote” from liability for selling loan products whose central attribute was failure.
  32. Since the certificates issued in the name of the so-called REMIC Trusts were not in fact backed by mortgage loans (EVER) the certificates, the issuers, the underwriters, the master servicers, the trustees et al are NOT qualified for exemption under the 1998 law. The SEC is either asleep on this or has been instructed by three successive presidents to leave the banks alone, which accounts for the failure to jail any of the bankers that essentially committed treason by attacking the economic foundation of our society.

US Bank Business: Rent-A-Name, Trustee

IF THE SERVICER IS NOT AFFILIATED WITH US BANK “IN ANY WAY” THEN EITHER US BANK HAS NO TRUST DUTIES OR THE SERVICER HAS NO SERVICING AUTHORITY

BOTTOM LINE: A trust without a trustee holding fiduciary duties and actual powers over trust assets is no trust at all. This signals corroboration for what is now well known in the public domain: the REMIC trustee has no powers or duties because there is no trust and there are no trust assets.

See below for why I am re-publishing this article.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Until now I knew about a letter sent out by US Bank until the TBTF banks in control of the mortgage mess realized that this was a dangerous letter. It provides proof and corroboration and opportunities for further corroboration that US Bank is a fictitious trustee even when named in a PSA/Trust.

I can’t give you a copy of the actual letter as that contains private information. But I now physically have in my possession of the wild card letter sent out by US Bank filled with factual misstatement, legal absurdities, fraud, and admissions against interest that show clearly that the  entire “securitization” game is but a rotating cloud of existing and non-existing entities blinking in and out such that finding the those in charge becomes impossible to detect.

The text in blue are direct unedited quotes from the letter answering a homeowner, in 2013, who was trying to figure out who is in charge. This is a short letter and the quotes essentially make up virtually the entire letter. They are not taken out of context. The rest are my comment and opinions.

NOTE: [FORECLOSURE BY PARTY CLAIMING TO BE THE CREDITOR OR HOLDER OR OWNER WITHOUT MENTION OF TRUST;]Where the Master Servicer or a subsidiary or affiliate of the Master Servicer names itself as Plaintiff (i.e., the foreclosing party) you may not realize that you are dealing with a securitization plan that went bad or was reconstituted, but either way the Master Servicer never funded (i. e., was the source) any loans within this class of loans that were falsely represented to be subject to claims of securitization. The goal is the same because internally the Master Servicer is attempting to seal the illegal record with a legal act or judgment and is attempting to get its hands on mislabeled “servicer advances.”

Here are the quotes (in blue0 from the letter with commentary (in black):

  • I have researched your mortgage and have determined that
    • Since he disclaims any authority or responsibility for the trust assets, what “research” did he perform?
    • Where did he get his information from when the authority and responsibility for the loans rests with a third party?
    • US Bank clearly could not have business records unless the Master Servicer was reporting to the NAMED Trustee. But we know that isn’t happening because the PSA expressly prevents the beneficiaries or the trustee from getting any information about the trust assets or in even seeking such information. 
    • This letter is clearly a carefully worded document to give false impressions.
    • Upon reading the PSAs it is obvious that neither the Trustee nor the beneficiaries have any permitted access to know how the money or assets is being managed
    • This opens the door to moral hazard: i.e., that the sole source of information is coming from third parties and thus neither the beneficiaries nor the putative “borrowers” have any information disclosed about who is actually performing which task. 
    • This could be concealment fraud in which the direct victims are the investors and the indirect victims are the homeowners.
  • US Bank is merely the Trustee for the pool of mortgages in which your loans sits.
    • “Merely the Trustee” is non descriptive language that essentially disclaims any actual authority or duties. It is apparently conceding that it is “merely” named as Trustee but the actual duties and authority rests elsewhere.
  • The Trustee does not have the authority to make any decisions regarding your mortgage loans.
    • So we have a Trustee with no powers over mortgage loans even if the “loans” were in a pool in which ownership was ascribed to the Trust. Again the statement does not specifically disclaim any DUTIES. 
  • The servicer is the party to the trust that has the authority and responsibility to make decisions regarding individual mortgage loans in the trust. It is the Servicer who has taken all action regarding your property.
    • “all action” would include the origination of the loan if the investors’ money was being used to originate loans rather than buying existing loans.
    • This statement concedes that it is the servicer (actually the Master servicer) that has all power and all responsibility for administration of the trust assets. 
    • In short he is probably conceding that while US Bank is NAMED as Trustee, the ROLE of Trustee is being performed by the Master Servicer, without any information or feedback to the named Trustee as a check on whether a fiduciary duty has been created between the Master Servicer and the trust or the Master Servicer and the trust beneficiaries. 
    • Hence the actual authority and duties with respect to the trust assets lies with the Master Servicer who hires subservicers to do whatever work is required, mainly enforcement of the note and mortgage, regardless of whether the loan ever made it into the Trust. 
    • It follows that the sole discretion of the Master Servicer creates an opportunity for the Master Servicer to gain illicit profits by handling or mishandling originations, foreclosures and liquidations of property. Taking fictitious servicer advances into account it is readily apparent that the sole basis for foreclosure instead of workouts is to “recover” money for which the Master Servicer never had a claim for recovery. 
      • Reporting in actuality is nonexistent except for the reports of “borrower payments” which are massaged through multiple subservicers each performing a “boarding process” in which in actuality they merely input new data into the subservicer system and claim it came from the old subservicer.
      • This “boarding process” is a charade as we have seen in the majority of cases where the knowledge and history of the payments and alleged delinquency or default has been challenged. In nearly all cases despite the initial representation from the robo-witness, it becomes increasingly apparent that neither the witness nor his company, the subservicer, have any original data nor have they performed any reviews to determine if the data is accurate.
      • In fact, upon inquiry it is readily apparent now that the “records” are created, kept and maintained by LPS/BlackKnight who merely assigns “ownership” of the records from one assigned subservicer to the next. LPS fabricates whatever data is necessary to allow an appointed “Plaintiff” to foreclose, including the fabrication adnfoqgery of documents.
        • This is why the parties to the 50 state settlement do not perform the reviews required under the settlement and under the Dodd-Frank law: they have no records to review. 
    • in this case the current subservicer is SLS — Specialized Loan Servicing LLC
  • While US Bank understands and wishes to assist you with this matter, the servicer is the only party with the authority and responsibility to make decisions regarding your mortgage and they are not affiliated with US Bank in any way.
    • Hence he concedes that the duties of a trustee (who by definition is accepting fiduciary responsibilities to the trust entity and the trust beneficiaries) is being performed by a third party, with absolute power and sole discretion, who has no affiliation with US Bank.
      • This concedes that US Bank is not a trustee even though it is named as Trustee in some trusts and otherwise “acquired the trust business” from Bank of America and others. 
        • A Trustee without powers or duties is no trustee. Disclaimer of fiduciary duties denotes non acceptance of being the Trustee of the Trust.
        • Acquiring the trust business is a euphemism for the continuation of the musical chair business that is well known in subservicers. 
        • Being the trustee is NOT a marketable commodity without amendment to the Trust document. Hence if a Trustee is named and has no power or duties, and which then “sells” its “trust business” to US Bank the “transfer” trust responsibility is void but damnum absque injuria. 
        • No action for breach of fiduciary exists because nobody assumed the fiduciary duty that must be the basis of any position of “trustee” of any trust.
  • BOTTOM LINE: A trust without a trustee holding fiduciary duties and actual powers over trust assets is no trust at all. This signals corroboration for what is now well known in the public domain: the REMIC trustee has no powers or duties because there is no trust and there are no trust assets. 

============================

Update: An identical letter (see below) has been sent to me from various sources all ostensibly from US Bank. My opinion is that

  • The letter is not from US Bank
  • US Bank Corporate Trust Services has nothing on the alleged loans
  • No business records are kept by US Bank in connection with alleged loans subject to alleged claims of securitization
  • The letter was not sent out by Bank of America either although one might surmise that. It was sent by LPS/Black Night
  • The letter is pure fabrication and forgery.
  • The cutting and pasting was done by persons who have no relationship with even the false claims of the banks
  • Goldade has no trust duties in connection with the alleged loan
  • And of course the alleged loan is not in the trust, making claims by or behalf of the “trustee” or the “Servicer” completely without merit or foundation.

Here is an example of one of the letters that I used for analysis : Note that the “:,F4” indicates that the signature was pasted not executed by a real person with a pen. You can examine your own letters like this by highlighting the letter contents and then pasting to text edit rather than Word or any other program that corrects and substitutes the command rather than just printing it. The “errors” in grammar and formatting occur in text edit.

The meta data from the letter shows the following, and I have the rest of it as well.

/Type /Metadata
/Subtype /XML
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>>
stream
<?xpacket begin=”” id=”W5M0MpCehiHzreSzNTczkc9d”?><x:xmpmeta x:xmptk=”NitroPro 9.5″ xmlns:x=”adobe:ns:meta/”><rdf:RDF xmlns:rdf=”http://www.w3.org/1999/02/22-rdf-syntax-ns#”><rdf:Description rdf:about=”” xmlns:dc=”http://purl.org/dc/elements/1.1/” xmlns:pdf=”http://ns.adobe.com/pdf/1.3/” xmlns:pdfaExtension=”http://www.aiim.org/pdfa/ns/extension/” xmlns:pdfaProperty=”http://www.aiim.org/pdfa/ns/property#” xmlns:pdfaSchema=”http://www.aiim.org/pdfa/ns/schema#” xmlns:pdfaid=”http://www.aiim.org/pdfa/ns/id/” xmlns:xmp=”http://ns.adobe.com/xap/1.0/”><xmp:ModifyDate>2016-11-04T18:28:42-07:00</xmp:ModifyDate>
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<?xpacket end=”w”?>
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Note the reference to Nitro Pro 9.5 --- 
which is a program that allows one to edit pdf files
 and then print them out 
as though the new pdf was simply a printout 
of a pre-existing document.  
Here is how the letter appears in text edit:
I am writing in response to your Debt Elimination Scheme and complaint on the subject property sent to U.S. Bank National Association (“U.S. Bank”). On behalf of U.S. Bank, I am happy to assist you with this matter to the extent I am able to provide information.
I have researched your mortgage and have determined that U.S. Bank is merely the trustee for the Trust that owns yourmortgageandnote. PleasenotetheTrustistheownerofyourmortgageandnote,notthetrustee. Theservicer is the party to the Trust that has the authority and responsibility to make decisions and take action regarding individual mortgage loans in the Trust. The trustee has no authority or responsibility to review and or approve or disapprove of these decisions and actions. It is the servicer who has taken all action regarding your property, and has the information you have requested.
As we stated in our response of July 27, 2016 you must work with Bank of America as the servicer of your loan, to have your request addressed. I have forwarded your correspondence to Bank of America and they have responded and stated you may utilize the following email – litigation.intake@bankofamerica.com.
While U.S. Bank understands and wishes to assist you with this matter, the servicer is the only party with the authority and responsibility to make decisions regarding this mortgage and they are not affiliated with U.S. Bank in anyw ay.
Please work with Bank of America to address your concerns using the information provided to you in this letter, so they may assist you in a more timely and efficient manner.

Sincerely  :,f4

Kevin Goldade Corporate Trust Services 60 Livingston Ave
St Paul, MN 55107
cc Bank of America
  •  IF THE SERVICER IS NOT AFFILIATED WITH US BANK “IN ANY WAY” THEN EITHER US BANK HAS NO TRUST DUTIES OR THE SERVICER HAS NO SERVICING AUTHORITY

 

“Participants” in False Claims of Securitization

What do you think the average homeowner would have said if he was told “Look, the actual lender is someone else but we want you to name us as the lender.”

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https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://bpinvestigativeagency.com/beware-the-lsf9-master-participation-trust-is-operating-as-a-secret-agent/

Bill Paatalo has uncovered another layer of onion skin revealing the emptiness of the claims of participants who say they were involved in either the lending of money to homeowners or involved in the transfer of the obligation to repay the alleged loan. As he points out, some refer to “participants” who are ill-defined and essentially unknown quantities. There are many such entities lurking behind the curtain. The one thing they have in common is that they are all making pornographic amounts of money that ultimately comes out of the pockets of investors who were deceived into buying, hedging or insuring bogus and worthless MBS.

The essential fact is that those mortgage backed securities are (a) not backed by anything (b) issued by an empty SPV (Trust) entity existing only on paper (c) completely unrelated to any actual transaction and (d) completely unrelated to the documentation that was fabricated and executed at the “loan” closing.

GASLIGHT: None of the “participants” are who they appear or claim. What is emerging is that in addition to playing musical chairs with actual entities, the banks have created musical terms to the multiple players who are in constant motion switching roles on paper. Several judges have either mused from the bench or confided their discomfort as to why the servicers keep changing and the ownership goes through so many iterations.

The good news is that this is leading to inconsistencies between their correspondence with the borrower, their pleading in court and their proof — often with last minute Powers of Attorney. It appears that all of them are sham conduits for the the ultimate sham entities — the underwriter (“Master Servicer”) of MBS issued by the empty trust and the Seller of those securities. Revealing those inconsistencies often leads to victory (successful defense) in court. And it often can lead to large cash awards for damages arising from violations of FDCPA, FCCPA, RESPA and common law doctrines like wrongful foreclosure — with aggravating circumstances permitting the award of punitive damages.

The reason for all of this chicanery is simple: the party who gave the homeowner money didn’t even know it was their money on the “closing” table. But the moral and legal view on this is that he who gave the money is owed the money in return (unless it is a gift). This is true regardless of what documents are drafted or even executed by homeowners whose signature was obtained by fraud in the inducement.

What do you think the average homeowner would have said if he was told “Look the actual lender is someone else but we want you to name us as the lender.” THAT is a cause of action for common law rescission and cancellation of the instrument — once the homeowner finds out that he made the “check” out to the wrong person. Since the designated “lender” gave no money of its own and assumed no risk of loss the homeowner cannot be required to give “back” what he or she never received from the fake lender.

Adam Levitin might be right in calling it “Securitization Fail” because the securitization never happened; but it assumes that the intent was to have securitization succeed. This is not the case. The entire business model of the banks, as confirmed by industry insiders, was to take the money out of the securitization chain that had been created on paper.  Actual securitization of debt in residential “transactions” was never intended to happen. It was always supposed to be an illusion to cover criminal and civil theft.

PRACTICE HINT: Assume none of the transactions that are represented, assumed or presumed ever happened. Aim your discovery, motions, trial objections and cross examination at that and you will have the best shot at hitting the bulls-eye. That is exactly how Patrick Giunta and I won our cases.

Renewing the Statute of Limitations Accidentally: Modifications and Payments

It seems apparent to me that the banks are sidestepping the statute of limitations issue by getting homeowners to renew payments after the statute has run. Given the confusion in Florida courts it is difficult to determine with certainty how the statute will be applied. But the execution of a modification agreement would, in my opinion, almost certainly waive the statute of limitations, particularly since it refers to the part of the alleged debt that was previously barred by the statute. It would also, in my opinion, reaffirm a discharged debt in bankruptcy.

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

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There are several reasons why servicers are offering modifications and several other reasons why they don’t.

My perception is that the main reason for offering the modification is that the servicer is converting the ownership of the debt from the investors to the servicer and by reference to an empty trust with no assets. HAMP modifications are virtually nonexistent statistically. “In house” modifications are what they are offering; that is code for “it’s our loan now.” That scenario leaves the servicer with rights to the debt that didn’t legally exist before — but subject to separate, private agreements with the Master Servicer who is willing to pay the servicer for their apparent “services” but not willing to share in the windfall profits made by a party who now owns a loan in which they had no financial interest before the execution of the modification.

This is a good alternative to stealing from the investors by way of false claims for “Servicer advances” where the money, like all other deals in the false securitization chain, comes from “investments” that the investors thought they were making into individual trusts. And by the way this part explains why they don’t offer modifications — the Master Servicer can only apply is false claim for “recovery” of servicer advances when the property is liquidated.

A second reason for applying pressure to a homeowner to sign more papers they don’t understand is to get the homeowner to (1) agree or reaffirm the debt, thus restarting the statute of limitations from where it had originally left off and (2) to get the homeowner to make at least some payments, thus reaffirming the debt for purposes of both bankruptcy and the statute of limitations. This explains why they take three “trial” payments and then deny the “permanent” modification after they already announced the homeowner was “approved.”

In this sense there is no underwriting done. There is only an evaluation of how the Master Servicer can make the most money. This also is an example of why I say that the interests of servicers are adverse to the investors who have already been screwed. Forced sale doesn’t just artificially limit the recovery, it virtually eliminates recovery for the investor while the servicers take the money and run.

And a third reason for coercing the homeowner into a modification agreement that is guaranteed to fail is that the homeowner has either waived defenses and claims or has created the conditions where waiver could be asserted.

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“Get three months behind and you’ll get a modification”: The Big Lie That Servicers and Banks are Still Using

The bottom line is that millions of people have been told that line and most of them stopped paying for three months because of it. It was perfectly reasonable for them to believe that they had just been told by the creditor that they must stop paying if they want relief. Judges have heard this repeatedly from homeowners. So what is the real reason such obvious bank behavior is overlooked?

More to the point — what choice does the homeowner have other than believing what they just heard from an apparently authorized service representative?

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

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In the course of the last ten years I have personally interviewed homeowners, reviewed the documents and or received reports from homeowners that were duped into going to default by that famous line: “You must be three months behind.” It is patently true that every homeowner who had that conversation believed that they were being told to stop making payments. No, it didn’t make any sense; but it also was beyond comprehension that the servicers were in fact aiming at foreclosure instead of workouts that would have preserved the value of the alleged loan, and mitigated the rush into the worst recession seen in modern times.

On cross examination the point is always made that the “representative” did not use the words “Stop paying.” And thus the point is made that the announcement that a three month delinquency was necessary for a modification was simply that: just information. Yet the behavior of millions of homeowners shows that virtually every one of them believed they were told to stop paying in “code” language. If that is not reasonable reliance, I don’t know what is.

However there is much bigger point. The three month announcement was (a) false and (b) an intentional policy to lure people into default and foreclosure. It has been previously reported here and elsewhere that an officer at Bank of America said point blank to his employees “We are in the foreclosure business, not the modification business.”

The legal point here is (a) unclean hands and (b) estoppel. In most cases homeowners ended up withholding three months worth of payments, as they reasonably believed they had been instructed to do, many times faithfully paying on a three month trial or “forbearance” plan, and sometimes even paying for many months beyond the “trial” period, or even years. Then suddenly the servicer/bank stops accepting payments and won’t respond to calls and letters from the homeowners asking what is going on.

Then they get a notice of default, a notice of their right to reinstate if they pay a certain sum (which is most often miscalculated) and then they get served with a foreclosure notice. The entire plan was aimed at foreclosure. And now, thanks to recent court doctrine, homeowners are stuck with intensely complicated instruments and behavior, only to find out that despite all law to the contrary, “caveat emptor” (Let the buyer beware).

The trick has always been to make the non-payment period as long as possible so that (1) reinstatement is impossible for the homeowner and (2) to increase the value of servicer advances. Each month the homeowner does not make a payment the value of fraudulent claims for “servicer advances” goes up. And THAT is the reason why you see cases going on for 10 years and more. every month you miss a payment, the Master Servicer increases its claims on the final proceeds of liquidation of the home.

In the banking world it is axiomatic that a loan “in distress” should be worked out with the borrower because that will be the most likely way to preserve the value of the loan. In every professional seminar I ever attended relating to residential and commercial loans the main part of the seminar was devoted to workouts, modification or settlement. We have had literally millions of such opportunities in which people were instead either lured into default or unjustly and fraudulently induced to drop their request for modification or to go into a “default” period that they thought was merely a waiting period before the modification was complete.

The result: asset values tanked: the alleged loan, the alleged MBS, and the value of the subject property was crushed by servicers looking out for their real boss — the Master Servicer and operating completely against the interests of the investors who are completely ignorant of what is really going on. Don’t kid yourself — US Bank and other alleged Trustees of REMIC Trusts have not taken a single action as Trustee ever and the REMIC Trust never existed, never was an active business (even during the 90 day period allowed), and the “Trust” was never administered by any Trust department of any of the banks who are claimed to be Trustees of the “REMIC Trust”. Both the Trust and the Trustee are window dressing as part of a larger illusion.

My opinion as a former investment banker, is that this is all about money. The “three month” announcement was meant to steer the homeowner from a HAMP modification, which was routinely “rejected by investor” (when no contact was ever made with the investor). This enabled the banks to “capture” (i.e., steal) the alleged loan using one of two means: (1) an “in-house” modification that in reality made the servicer the creditor instead of the investor whose money was actually in the deal and/or (2) a foreclosure and sale in which the servicer picked up all or nearly all of the proceeds by “recovery” of nonexistent servicer advances.

It isn’t that the investors did not receive money under the label of “servicer advances.” It is that the money investors received were neither advances nor were they paid by the servicer (same as the origination or acquisition of the loan which is “presumed” based upon fabricated, forged, robo-signed documents). There is no speculation required as to where the money came from or who had access to it. The prospectus and PSA combined make it quite clear that the investors can receive their own money back in satisfaction of the nonexistent obligation from a nonexistent REMIC Trust that issued worthless and fraudulent MBS but never was in business, nor was it ever intended to be in business.

Servicer advances can only be “recovered” when the property is liquidated. There is no right of recovery against the investors. But the nasty truth is that there is no right of “recovery” of servicer advances anyway because there is nothing to recover. By labeling money paid from a pool of investor money as “servicer advances” we again have the creation of an illusion. They make it look like the Master Servicer is advancing money when all they are doing is exercising control over the investors’ money.

Thus the three month announcement is a win win for the Master Servicer — either they convert the loan from being subject to claims by investors to an “in-house” loan, or they take the full value of the alleged loan and reduce it to zero by making false claims for recovery — but only if there is a foreclosure sale. Either way the investor gets screwed and so does the homeowner both of whom were pawns and victims in an epic fraud.

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Ocwen: Investors and Borrowers Move toward Unity of Purpose!

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

Please consult an attorney who is licensed in your jurisdiction before acting upon anything you read on this blog.

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Anyone following this blog knows that I have been saying that unity of investors and borrowers is the ultimate solution to the falsely dubbed “Foreclosure crisis” (a term that avoids Wall Street corruption). Many have asked what i have based that on and the answer was my own analysis and interviews with Wall Street insiders who have insisted on remaining anonymous. But it was only a matter of time where the creditors (investors who bought mortgage backed securities) came to realize that nobody acting in the capacity of underwriter, servicer or Master Servicer was acting in the best interests of the investors or the borrowers.

The only thing they have tentatively held back on is an outright allegation that their money was NOT used by the Trustee for the Trust and their money never made it into the Trust and that the loans never made it into the Trust. That too will come because when investors realize that homeowners are not going to walk away, investors as creditors will come to agreements to salvage far more of the debts created during the mortgage meltdown than the money salvaged by pushing cases to foreclosure instead of the centuries’ proven method of resolving troubled loans — workouts. Nearly all homeowners would execute a new clean mortgage and note in a heartbeat to give investors the benefits of a workout that reflects economic reality.

Practice hint: If you are dealing with Ocwen Discovery should include information about Altisource and Home Loan Servicing Solutions, investors, and borrowers as it relates to the subject loan.

Investors announced complaints against Ocwen for mishandling the initial money, the paperwork and the subsequent money and servicing on loans created and a acquired with their money. The investors, who are the actual creditors (albeit unsecured) are getting close to the point where they state outright what everyone already knows: there is no collateral for these loans and every disclosure statement involving nearly all the loans violated disclosure requirements under TILA, RESPA, and Federal and state regulations.
The fact that (1) the loan was not funded by the payee on the note and mortgagee on the mortgage and (2) that the money from creditors were never properly channeled through the REMIC trusts because the trusts never received the proceeds of sale of mortgage backed securities is getting closer and closer to the surface.
What was unthinkable and the subject of ridicule 8 years ago has become the REAL reality. The plain truth is that the Trust never owned the loans even as a pass through because they never had had the money to originate or acquire loans. That leaves an uncalculated unsecured debt that is being diminished every day that servicers continue to push foreclosure for the protection of the broker dealers who created worthless mortgage bonds which have been purchased by the Federal reserve under the guise of propping up the banks’ balance sheets.

“HOUSTON, January 23, 2015 – Today, the Holders of 25% Voting Rights in 119 Residential Mortgage Backed Securities Trusts (RMBS) with an original balance of more than $82 billion issued a Notice of Non-Performance (Notice) to BNY Mellon, Citibank, Deutsche Bank, HSBC, US Bank, and Wells Fargo, as Trustees, Securities Administrators, and/or Master Servicers, regarding the material failures of Ocwen Financial Corporation (Ocwen) as Servicer and/or Master Servicer, to comply with its covenants and agreements under governing Pooling and Servicing Agreements (PSAs).”
  • Use of Trust funds to “pay” Ocwen’s required “borrower relief” obligations under a regulatory settlement, through implementation of modifications on Trust- owned mortgages that have shifted the costs of the settlement to the Trusts and enriched Ocwen unjustly;
  • Employing conflicted servicing practices that enriched Ocwen’s corporate affiliates, including Altisource and Home Loan Servicing Solutions, to the detriment of the Trusts, investors, and borrowers;
  • Engaging in imprudent and wholly improper loan modification, advancing, and advance recovery practices;
  • Failure to maintain adequate records,  communicate effectively with borrowers, or comply with applicable laws, including consumer protection and foreclosure laws; and,

 

  • Failure to account for and remit accurately to the Trusts cash flows from, and amounts realized on, Trust-owned mortgages.

As a result of the imprudent and improper servicing practices alleged in the Notice, the Holders further allege that their experts’ analyses demonstrate that Trusts serviced by Ocwen have performed materially worse than Trusts serviced by other servicers.  The Holders further allege that these claimed defaults and deficiencies in Ocwen’s performance have materially affected the rights of the Holders and constitute an ongoing Event of Default under the applicable PSAs.  The Holders intend to take further action to recover these losses and protect the Trusts’ assets and mortgages.

The Notice was issued on behalf of Holders in the following Ocwen-serviced RMBS: see link The fact that the investors — who by all accounts are the real parties in interest disavow the actions of Ocwen gives rise to an issue of fact as to whether Ocwen was or is operating under the scope of services supposedly to be performed by the servicer or Master Servicer.
I would argue that the fact that the apparent real creditors are stating that Ocwen is misbehaving with respect to adequate records means that they are not entitled to the presumption of a business records exception under the hearsay rule.
The fact that the creditors are saying that servicing practices damaged not only the investors but also borrowers gives rise to a factual issue which denies Ocwen the presumption of validity on any record including the original loan documents that have been shown in many cases to have been mechanically reproduced.
The fact that the creditors are alleging imprudent and wholly improper loan modification practices, servicer advances (which are not properly credited to the account of either the creditor or the borrower), and the recovery of advances means that the creditors are saying that Ocwen was acting on its own behalf instead of the creditors. This puts Ocwen in the position of being either outside the scope of its authority or more likely simply an interloper claiming to be a servicer for trusts that were never actually used to acquire or originate loans, this negating the effect of the Pooling and Servicing Agreement.  Hence the “servicer” for the trust is NOT the servicer for the subject loan because the loan never arrived in the trust portfolio.
The fact that the creditors admit against interest that Ocwen was pursuing practices and goals that violate laws and proper procedure means that no foreclosure can be supported by “clean hands.” The underlying theme here being that contrary to centuries of practice, instead of producing workouts in which the loan is saved and thus the investment of the creditors, Ocwen pursued foreclosure which was in its interest and not the creditors. The creditors are saying they don’t want the foreclosures but Ocwen did them anyway.
The fact that the creditors are saying they didn’t get the money that was supposed to go to them means that the money received from lost sharing with FDIC, guarantees, insurance, credit default swaps that should have paid off the creditors were not paid to them and would have reduced the damage to the creditors. By reducing the amount of damages to the creditors the borrower would have owed less, making the principal amounts claimed in foreclosures all wrong. The parties who paid such amounts either have or do not have separate unsecured actions against the borrower. In most cases they have no such claim because they explicitly waived it.
This is the first time investors have even partially aligned themselves with Borrowers. I hope it will lead to a stampede, because the salvation of investors and borrowers alike requires a pincer like attack on the intermediaries who have been pretending to be the principal parties in interest but who lacked the authority from the start and violated every fiduciary duty and contractual duty in dealing with creditors and borrowers. Peal the onion: the reason that their initial money is at stake is that these servicers are either acting as Master Servicers who are actually the underwriters and sellers of the mortgage backed securities,
I would argue that the fact that the apparent real creditors are stating the Ocwen is misbehaving with respect to adequate records means that they are not entitled to the presumption of a business records exception under the hearsay rule.
The fact that the creditors are saying that servicing practices damaged not only the investors but also borrowers gives rise to a factual issue which denies Ocwen the presumption of validity on any record including the original loan documents that have been shown in many cases to have been mechanically reproduced.
The fact that the creditors are alleging imprudent and wholly improper loan modification practices, servicer advances (which are not properly credited to the account of either the creditor or the borrower), and the recovery of advances means that the creditors are saying that Ocwen was acting on tis own behalf instead of the creditors. This puts Ocwen in the position of being either outside the scope of its authority or more likely simply an interloper claiming to be a servicer for trusts that were never actually used to acquire or originate loans, this negating the effect of the Pooling and Servicing Agreement.
The fact that the creditors admit against interest that Ocwen was pursuing practices and goals that violate laws and proper procedure means that no foreclosure can be supported by “clean hands.” The underlying theme here being that contrary to centuries of practice, instead of producing workouts in which the loan is saved and thus the investment of the creditors, Ocwen pursued foreclosure which was in its interest and not the creditors. The creditors are saying they don’t want the foreclosures but Ocwen did them anyway.
The fact that the creditors are saying they didn’t get the money that was supposed to go to them means that the money received from lost sharing with FDIC, guarantees, insurance, credit default swaps that should have paid off the creditors were not paid to them and would have reduced the damage to the creditors. By reducing the amount of damages to the creditors the borrower would have owed less, making the principals claimed in foreclosures all wrong. The parties who paid such amounts either have or do not have separate unsecured actions against eh borrower. In most cases they have no such claim because they explicitly waived it.
This is the first time investors have even partially aligned themselves with Borrowers. I hope it will lead to a stampede, because the salvation of investors and borrowers alike requires a pincer like attack on the intermediaries who have been pretending to be the principal parties in interest but who lacked the authority from the start and violated every fiduciary duty and contractual duty in dealing with creditors and borrowers.

Modification Minefields as Foreclosures Resume Upward Volume

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

Listen to Neil Garfield Show on Thursday February 26, 2015 at 6pm EDT., and each Thursday

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see http://www.njspotlight.com/stories/15/02/02/new-foreclosure-procedures-put-to-test-as-number-of-cases-climbs-in-nj/

New Jersey now has an upsurge of Foreclosure activity. It is on track to become first in the nation in the number of foreclosures. What is clear is that the level of foreclosure activity is being carefully managed to avoid attention in the media. Right now, foreclosure articles and the infamous acts of the banks in pursuing foreclosures is staying off Page 1 and usually not  anywhere in newspapers and other media outlets online and and in distributed media. The pattern is obvious. After one area becomes saturated with foreclosures, the banks switch off the flow and then move to another geographical area. This effectively manages the news. And it keeps foreclosures from becoming a hot political issue despite the fact that millions of Americans are being displaced by illegal foreclosures based upon invalid mortgage documents and the complete absence of any real creditor in the mix.

As foreclosures rise, the number of attempts at modification also rise. This is a game used by “servicers” to assure what appears to be an inescapable default because their marching orders are to get the foreclosure sales, not to resolve the issue. The investment banks need foreclosures; they don’t need the money and they don’t need the house —- as the hundreds of thousands of zombie foreclosures attest where the bank forecloses and abandons property where the borrower could and would have continued paying.

The problem with modifications is the same as the problem with foreclosures. It constitutes another layer of mortgage fraud perpetrated by the Wall Street banks, who are now facing increasingly successful challenges to their attempts to complete the cycle of fraud with a foreclosure.

The “servicer” whom nearly everyone takes for granted as having some authority to move forward is in actuality just as much a stranger to the transaction as the alleged Trust or “Holder”. The so-called servicer alleged authority depends upon powers conferred on it by the Pooling and Servicing Agreement of an unfunded Trust that never completed its mission to originate or acquire loans. If the REMIC trust doesn’t own the loans, the servicer claiming authority from the PSA is claiming vapor. If the Trust doesn’t own the loan then the PSA is irrelevant and the powers conferred in the PSA are pure vapor.

This brings us full circle to where we were in 2007-2008 when it was the banks themselves that claimed that there were no trusts and that there was no securitization. They were, as it turns out, telling the truth. The Trusts were drafted but never funded, never used as conduits and never engaged in ANY transaction in which the Trust had funded the origination or acquisition of loans. So anyone claiming authority from the trust was claiming authority from a fictional character — like Donald Duck.

Complicating matters further is the issue of who owns the loan when there is a claim by Freddie or Fannie. Both of them say they “have” the mortgage online when they neither “have it” nor “own it.” Fannie and Freddie were one of two things in this mess: (1) guarantors, which means they have no interest until after a creditor liquidates the property and claims an actual money loss and Fannie and Freddie actually pays off the loss or (2) Master trustee (and probably guarantor as well) for a REMIC Trust that probably has no greater value than the unfunded REMIC Trusts that are unused conduits.

Further complicating the issue with the former Government Sponsored Entities (Fannie and Freddie) is the fact that many banks have been forced to buy back or pay damages for violating underwriting standards and other types of fraud.

So how do you get or sign a modification with a servicer that has no authority and represents a Trust that has no interest in the loan? The answer is that there is no legal way to do it — BUT there is a way that would allow a legal fiction to be created if a Court issued an order approving the modification and declaring the rights of the parties. The order would say that XYZ is the servicer and ABC is the creditor or owner of the loan and that the homeowner is the borrower and that the modification agreement is approved. If proper notice (including publication) is given it would have the same effect as a foreclosure and would eliminate all questions of title. Without that, you will have continuing title problems. You should also request that the “Servicer” or “Trustee” arrange for a “Guarantee of Title” from a title company.

For the tricks and craziness of what is happening in modifications and the issues presented in New Jersey and other states click the link above.

Bondholders Clash With Ocwen Over Bad Servicing

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

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see http://dealbook.nytimes.com/2015/01/26/ocwen-and-bondholders-clash-over-mortgage-services/?_r=0

And if you are in the mood to drill into Ocwen’s Business, see http://www.sec.gov/Archives/edgar/data/1513161/000119312513024292/d474092dex991.htm

Every once in a while you get a peek at what is really happening behind the scenes. The view from here is startling sometimes even to me. Here we have theater of the absurd. Ocwen is accusing the bondholders of forcing Ocwen to foreclose rather than modify or settle claims regarding the bogus mortgages and the bondholders are accusing Ocwen of bad servicing practices.

Absurdity #1: Bondholders don’t have any say about when or how the mortgages or notes are enforced and don’t know whether the debts followed the notes or mortgages. So Ocwen’s claim is blatantly false in its attempt to point the finger elsewhere. But this is done with probable tacit agreement of all parties concerned.

Absurdity #2: The bond holders still have not figured out or they are ignoring the fact that the loans never made it into the trusts and thus their position as bondholders has nothing whatever to do with the loans.

Absurdity #3: This may have been leaked intentionally to give support to the illusion that the notes and mortgages were valid, not bogus. It’s the Kansas City shuffle — look right while everything falls left.

Absurdity #4: Ocwen is not the Master Servicer — ever. The Master Servicer is the underwriter or some entity controlled by the underwriter of the mortgage bonds. It is the underwriter/Master Servicer who calls the shots, not Ocwen, and the bondholders know that. So why are they accusing Ocwen of something?

Absurdity #5: Ocwen’s position as servicer is governed by the trust document — pooling and servicing agreement for a trust that never actually purchased or received or accepted delivery of the debt, note or mortgage. Thus Ocwen’s authority is derived from an instrument that has no relevance to the loans. If the loans never made it into the trusts, then the PSA has no bearing on the alleged loans. Hence Ocwen is a volunteer with at best apparent authority but no real authority. This is why you are seeing courts order disgorgement of all money paid by the borrower — i.e., forcing the servicer to pay all money received from borrower back to the borrower.

Absurdity #6: The Emperor (the investors) has no clothes. [see one of earliest pieces 7 years ago). Like the old fable, the investors are sitting out there buck naked.  Their claim is against the underwriter who never funded the trust in the IPO offering of the mortgage bonds. Other than that they have nothing in the way of a claim, much less a secured claim, in the loans made to the borrowers — even though it was their money that funded the origination and/or acquisition of loans. Since the federal and state disclosure laws were violated as a pattern of conduct, the loans were predatory per se (REG Z), even though the investors neither knew about the loans nor consented to them. Their best claim is against the underwriters/master servicers; but they probably have a partial claim against the borrowers for unjust enrichment, but it would not be a secured claim that could be foreclosed.

Who Can Sign a Lost Note Affidavit? What Happens When It Is “Found?”

For further information and assistance, please call 954-495-9867 or 520-405-1688

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Let’s start with the study that planted the seed of doubt as to the validity of the debt, note, mortgage and foreclosure and whether any of those “securitized debt” foreclosures should have been allowed to even get to first base. Katherine Ann Porter, when she was a professor in Iowa (2007) did a seminal study of “lost” documents and found that at least 40% of ALL notes were lost as a result of intentional destruction or negligence. You can find her study on this blog.

The issue with “lost notes” is actually simple. If the note is lost then the court and the borrower are entitled to an explanation of the the full story behind the loss of the note, why it was intentionally destroyed and whose negligence caused the loss of the note. And the reason is also simple. If the Court and the borrower are not fully satisfied that the whole story has been told, then neither one can determine whether the party claiming rights to collect or enforce the note actually has those rights.

This is the question posed to me by a knowledgeable person involved in the challenge to the validity of the debt, note, mortgage and foreclosure:

Who is finding the Note?  Can a servicer execute a Lost Note Affidavit as a holder?  Non holder in possession?

It took me a while to get to the obvious point of the above defense.  It is intended in the event that party A loses the Note and files a LNA [Lost Note Affidavit}, that the Issuer, does not have to pay party B even if he appears with a blank endorsed note, unless B can prove holder in due course (virtually impossible these days, esp in foreclosure cases).

This is critical.  The foreclosing party, through a series of mergers and successions, files a case as successor by merger to ABC.  Can’t locate note, so it files a LNA, stating ABC lost the Note.  Note is found, but the foreclosing party says, oops, was in a custodial file for which we were the servicer for XYZ.   While the foreclosing party has the note, it cannot unring the fact it got the Note from XYZ after ABC lost it.

Good questions. He understands that the requirements as expressly stated in the law (UCC, State law etc.) are quite stringent. You cannot re-establish a lost note with a copy of it unless you can prove that you had it and that you were the person entitled to enforce it (known as PETE). You also cannot re-establish the note unless you can prove that the note was lost or destroyed under circumstances where it is far more likely than not that the original won’t show up later in the hands of someone else claiming PETE status. So there should be a heavy burden placed on any party seeking to foreclose or even just to collect on a “lost note.” But courts have steamrolled over this obvious problem requiring something on the order of “probable cause” rather than actual proof. While there is some evidence the judiciary is turning the corner against the banks, the great majority of cases fly over these issues either because of presumptions by the bench or because the “borrower” fails to raise it — and fails to make appropriate motions in limine and raise objections in trial.

But the person who posed this question drills down deeper into the real factual issues. He wants to know details. We all know that it is easier to allege that you destroyed it accidentally or even intentionally than to allege the loss of the note. A witness from the party asserting PETE can say, truthfully or not, “I destroyed it.” Proving that he didn’t and that the copy is fabricated is very difficult for a homeowner with limited resources. If the allegation and the testimony is that the note was lost, we get into the question of what, when where, how and why. But in a lost note situation most states require some sort of indemnification from the party asserting PETE status or holder in due course status. That is also a problem. I remember rejecting the offer of indemnification from Taylor, Bean and Whitaker after I reviewed their financial statements. It was obvious they were going broke and they did. And the officers went to jail for criminal acts.

So the first question is exactly when was the “original” note last seen and by whom? In whose possession was it when it was allegedly lost? How was it lost? Who has direct personal information on the location of the original and the timing and method of loss? And what happens when the note is “found?” We know that original documents are being fabricated by advanced technology such that even the borrower doesn’t realize he is not being shown the original (that is why I suggest denying that they are the holder of the note, denying they are PETE, denying they are holder in due course etc.)

In the confusion of those issues, the homeowner usually fails to realize that this is just another lie. But in discovery, if you are awake to the issue, you can either learn the facts (or deal with the inevitable objections to discovery). And then the lawyer for the homeowner should graph out the allegations and testimony as best as possible. The questioner is dead right — if the party NOW claiming PETE status or HDC status received the “found” original note but received it from someone other than the party who “lost” it, there is no chain upon which the foreclosing party can rely. In simple language, what they are attempting to do is fly over the gap between when the note was lost and destroyed and the time that the current claimant took possession of the paper. And once again I say that the real proof is the real money trail. If the underlying transactions exist, then there will be some correspondence, agreements and a payment of money that will reveal the true transfer.

And again I say, that if you are attacking the paper you need to be extremely careful not to give the impression that the borrower is attempting to get out of a legitimate debt. The position is that there is no legitimate debt IN THIS CHAIN. The debt lies outside the chain. The true debt is owed to whoever supplied the money that was received at the loan closing, regardless of what paperwork was signed. Failure to prove the original loan transaction should be fatal to the action on the note or the mortgage (except if the foreclosing party can prove the status of a holder in due course). The fact that the paperwork was signed only creates a potential second liability that does not benefit the party whose money was used for the loan.

The foreclosure is a thinly disguised adventure in greed — where the perpetrators of the false foreclosure, use fabricated, robo-signed paper without ANY loan at the base of the paper trail and without any payments made by any of the parties for possession or enforcement of the paper. They are essentially stealing the house, the proceeds, and the money that was used to fund the “loan” all to the detriment of the real parties in interest, to wit: the investors who were tricked into directly lending the money to borrowers  and the homeowners who were tricked into signing paperwork that created a second liability for the same loan.

Securitization for Lawyers: How it was Written by Wall Street Banks

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Continuing with my article THE CONCEPT OF SECURITIZATION from yesterday, we have been looking at the CONCEPT of Securitization and determined there is nothing theoretically wrong with it. That alone accounts for tens of thousands of defenses” raised in foreclosure actions across the country where borrowers raised the “defense” securitization. No such thing exists. Foreclosure defense is contract defense — i.e., you need to prove that in your case the elements of contract are absent and THAT is why the note or the mortgage cannot be enforced. Keep in mind that it is entirely possible to prove that the mortgage is unenforceable even if the note remains enforceable. But as we have said in a hundred different ways, it does not appear to me that in most cases, the loan contract ever existed, or that the acquisition contract in which the loan was being “purchased” ever occurred. But much of THAT argument is left for tomorrow’s article on Securitization as it was practiced by Wall Street banks.

So we know that the concept of securitization is almost as old as commerce itself. The idea of reducing risk and increasing the opportunity for profits is an essential element of commerce and capitalism. Selling off pieces of a venture to accomplish a reduction of risk on one ship or one oil well or one loan has existed legally and properly for a long time without much problem except when a criminal used the system against us — like Ponzi, Madoff or Drier or others. And broadening the venture to include many ships, oil wells or loans makes sense to further reduce risk and increase the likelihood of a healthy profit through volume.

Syndication of loans has been around as long as banking has existed. Thus agreements to share risk and profit or actually selling “shares” of loans have been around, enabling banks to offer loans to governments, big corporations or even little ones. In the case of residential loans, few syndications are known to have been used. In 1983, syndications called securitizations appeared in residential loans, credit cards, student loans, auto loans and all types of other consumer loans where the issuance of IPO securities representing shares of bundles of debt.

For logistical and legal reasons these securitizations had to be structured to enable the flow of loans into “special purpose vehicles” (SPV) which were simply corporations, partnerships or Trusts that were formed for the sole purpose of taking ownership of loans that were originated or acquired with the money the SPV acquired from an offering of “bonds” or other “shares” representing an undivided fractional share of the entire portfolio of that particular SPV.

The structural documents presented to investors included the Prospectus, Subscription Agreement, and Pooling and Servicing Agreement (PSA). The prospectus is supposed to disclose the use of proceeds and the terms of the payback. Since the offering is in the form of a bond, it is actually a loan from the investor to the Trust, coupled with a fractional ownership interest in the alleged “pool of assets” that is going into the Trust by virtue of the Trustee’s acceptance of the assets. That acceptance executed by the Trustee is in the Pooling and Servicing Agreement, which is an exhibit to the Prospectus. In theory that is proper. The problem is that the assets don’t exist, can’t be put in the trust and the proceeds of sale of the Trust mortgage-backed bonds doesn’t go into the Trust or any account that is under the authority of the Trustee.

The writing of the securitization documents was done by a handful of law firms under the direction of a few individual lawyers, most of whom I have not been able to identify. One of them is located in Chicago. There are some reports that 9 lawyers from a New Jersey law firm resigned rather than participate in the drafting of the documents. The reports include emails from the 9 lawyers saying that they refused to be involved in the writing of a “criminal enterprise.”

I believe the report is true, after reading so many documents that purport to create a securitization scheme. The documents themselves start off with what one would and should expect in the terms and provisions of a Prospectus, Pooling and Servicing Agreement etc. But as you read through them, you see the initial terms and provisions eroded to the point of extinction. What is left is an amalgam of options for the broker dealers selling the mortgage backed bonds.

The options all lead down roads that are absolutely opposite to what any real party in interest would allow or give their consent or agreement. The lenders (investors) would never have agreed to what was allowed in the documents. The rating agencies and insurers and guarantors would never have gone along with the scheme if they had truly understood what was intended. And of course the “borrowers” (homeowners) had no idea that claims of securitization existed as to the origination or intended acquisition their loans. Allan Greenspan, former Federal Reserve Chairman, said he read the documents and couldn’t understand them. He also said that he had more than 100 PhD’s and lawyers who read them and couldn’t understand them either.

Greenspan believed that “market forces” would correct the ambiguities. That means he believed that people who were actually dealing with these securities as buyers, sellers, rating agencies, insurers and guarantors would reject them if the appropriate safety measures were not adopted. After he left the Federal Reserve he admitted he was wrong. Market forces did not and could not correct the deficiencies and defects in the entire process.

The REAL document is the Assignment and Assumption Agreement that is NOT usually disclosed or attached as an exhibit to the Prospectus. THAT is the agreement that controls everything that happens with the borrower at the time of the alleged “closing.” See me on YouTube to explain the Assignment and Assumption Agreement. Suffice it to say that contrary to the representations made in the sale of the bonds by the broker to the investor, the money from the investor goes into the control of the broker dealer and NOT the REMIC Trust. The Broker Dealer filters some of the money down to closings in the name of “originators” ranging from large (Wells Fargo, Countrywide) to small (First Magnus et al). I’ll tell you why tomorrow or the next day. The originators are essentially renting their names the same as the Trustees of the REMIC Trusts. It looks right but isn’t what it appears. Done properly, the lender on the note and mortgage would be the REMIC Trust or a common aggregator. But if the Banks did it properly they wouldn’t have had such a joyful time in the moral hazard zone.

The PSA turned out to be the primary document creating the Trusts that were creating primarily under the laws of the State of New York because New York and a few other states had a statute that said that any variance from the express terms of the Trust was VOID, not voidable. This gave an added measure of protection to the investors that the SPV would not be used for any purpose other than what was described, and eliminated the need for them to sue the Trustee or the Trust for misuse of their funds. What the investors did not understand was that there were provisions in the enabling documents that allowed the brokers and other intermediaries to ignore the Trust altogether, assert ownership in the name of a broker or broker-controlled entity and trade on both the loans and the bonds.

The Prospectus SHOULD have contained the full list of all loans that were being aggregated into the SPV or Trust. And the Trust instrument (PSA) should have shown that the investors were receiving not only a promise to repay them but also a share ownership in the pool of loans. One of the first signals that Wall Street was running an illegal scheme was that most prospectuses stated that the pool assets were disclosed in an attached spreadsheet, which contained the description of loans that were already in existence and were then accepted by the Trustee of the SPV (REMIC Trust) in the Pooling and Servicing Agreement. The problem was that the vast majority of Prospectuses and Pooling and Servicing agreements either omitted the exhibit showing the list of loans or stated outright that the attached list was not the real list and that the loans on the spreadsheet were by example only and not the real loans.

Most of the investors were “stable managed funds.” This is a term of art that applied to retirement, pension and similar type of managed funds that were under strict restrictions about the risk they could take, which is to say, the risk had to be as close to zero as possible. So in order to present a pool that the fund manager of a stable managed fund could invest fund assets the investment had to qualify under the rules and regulations restricting the activities of stable managed funds. The presence of stable managed funds buying the bonds or shares of the Trust also encouraged other types of investors to buy the bonds or shares.

But the number of loans (which were in the thousands) in each bundle made it impractical for the fund managers of stable managed funds to examine the portfolio. For the most part, if they done so they would not found one loan that was actually in existence and obviously would not have done the deal. But they didn’t do it. They left it on trust for the broker dealers to prove the quality of the investment in bonds or shares of the SPV or Trust.

So the broker dealers who were creating the SPVs (Trusts) and selling the bonds or shares, went to the rating agencies which are quasi governmental units that give a score not unlike the credit score given to individuals. Under pressure from the broker dealers, the rating agencies went from quality culture to a profit culture. The broker dealers were offering fees and even premium on fees for evaluation and rating of the bonds or shares they were offering. They HAD to have a rating that the bonds or shares were “investment grade,” which would enable the stable managed funds to buy the bonds or shares. The rating agencies were used because they had been independent sources of evaluation of risk and viability of an investment, especially bonds — even if the bonds were not treated as securities under a 1998 law signed into law by President Clinton at the behest of both republicans and Democrats.

Dozens of people in the rating agencies set off warning bells and red flags stating that these were not investment grade securities and that the entire SPV or Trust would fail because it had to fail.  The broker dealers who were the underwriters on nearly all the business done by the rating agencies used threats, intimidation and the carrot of greater profits to get the ratings they wanted. and responded to threats that the broker would get the rating they wanted from another rating agency and that they would not ever do business with the reluctant rating agency ever again — threatening to effectively put the rating agency out of business. At the rating agencies, the “objectors” were either terminated or reassigned. Reports in the Wal Street Journal show that it was custom and practice for the rating officers to be taken on fishing trips or other perks in order to get the required the ratings that made Wall Street scheme of “securitization” possible.

This threat was also used against real estate appraisers prompting them in 2005 to send a petition to Congress signed by 8,000 appraisers, in which they said that the instructions for appraisal had been changed from a fair market value appraisal to an appraisal that would make each deal work. the appraisers were told that if they didn’t “play ball” they would never be hired again to do another appraisal. Many left the industry, but the remaining ones, succumbed to the pressure and, like the rating agencies, they gave the broker dealers what they wanted. And insurers of the bonds or shares freely issued policies based upon the same premise — the rating from the respected rating agencies. And ultimate this also effected both guarantors of the loans and “guarantors” of the bonds or shares in the Trusts.

So the investors were now presented with an insured investment grade rating from a respected and trusted source. The interest rate return was attractive — i.e., the expected return was higher than any of the current alternatives that were available. Some fund managers still refused to participate and they are the only ones that didn’t lose money in the crisis caused by Wall Street — except for a period of time through the negative impact on the stock market and bond market when all securities became suspect.

In order for there to be a “bundle” of loans that would go into a pool owned by the Trust there had to be an aggregator. The aggregator was typically the CDO Manager (CDO= Collateralized Debt Obligation) or some entity controlled by the broker dealer who was selling the bonds or shares of the SPV or Trust. So regardless of whether the loan was originated with funds from the SPV or was originated by an actual lender who sold the loan to the trust, the debts had to be processed by the aggregator to decide who would own them.

In order to protect the Trust and the investors who became Trust beneficiaries, there was a structure created that made it look like everything was under control for their benefit. The Trust was purchasing the pool within the time period prescribed by the Internal Revenue Code. The IRC allowed the creation of entities that were essentially conduits in real estate mortgages — called Real Estate Mortgage Investment Conduits (REMICs). It allows for the conduit to be set up and to “do business” for 90 days during which it must acquire whatever assets are being acquired. The REMIC Trust then distributes the profits to the investors. In reality, the investors were getting worthless bonds issued by unfunded trusts for the acquisition of assets that were never purchased (because the trusts didn’t have the money to buy them).

The TRUSTEE of the REMIC Trust would be called a Trustee and should have had the powers and duties of a Trustee. But instead the written provisions not only narrowed the duties and obligations of the Trustee but actual prevented both the Trustee and the beneficiaries from even inquiring about the actual portfolio or the status of any loan or group of loans. The way it was written, the Trustee of the REMIC Trust was in actuality renting its name to appear as Trustee in order to give credence to the offering to investors.

There was also a Depositor whose purpose was to receive, process and store documents from the loan closings — except for the provisions that said, no, the custodian, would store the records. In either case it doesn’t appear that either the Depositor nor the “custodian” ever received the documents. In fact, it appears as though the documents were mostly purposely lost and destroyed, as per the Iowa University study conducted by Katherine Ann Porter in 2007. Like the others, the Depositor was renting its name as though ti was doing something when it was doing nothing.

And there was a servicer described as a Master Servicer who could delegate certain functions to subservicers. And buried in the maze of documents containing hundreds of pages of mind-numbing descriptions and representations, there was a provision that stated the servicer would pay the monthly payment to the investor regardless of whether the borrower made any payment or not. The servicer could stop making those payments if it determined, in its sole discretion, that it was not “recoverable.”

This was the hidden part of the scheme that might be a simple PONZI scheme. The servicers obviously could have no interest in making payments they were not receiving from borrowers. But they did have an interest in continuing payments as long as investors were buying bonds. THAT is because the Master Servicers were the broker dealers, who were selling the bonds or shares. Those same broker dealers designated their own departments as the “underwriter.” So the underwriters wrote into the prospectus the presence of a “reserve” account, the source of funding for which was never made clear. That was intentionally vague because while some of the “servicer advance” money might have come from the investors themselves, most of it came from external “profits” claimed by the broker dealers.

The presence of  servicer advances is problematic for those who are pursuing foreclosures. Besides the fact that they could not possibly own the loan, and that they couldn’t possibly be a proper representative of an owner of the loan or Holder in Due Course, the actual creditor (the group of investors or theoretically the REMIC Trust) never shows a default of any kind even when the servicers or sub-servicers declare a default, send a notice of default, send a notice of acceleration etc. What they are doing is escalating their volunteer payments to the creditor — made for their own reasons — to the status of a holder or even a holder in due course — despite the fact that they never acquired the loan, the debt, the note or the mortgage.

The essential fact here is that the only paperwork that shows actual transfer of money is that which contains a check or wire transfer from investor to the broker dealer — and then from the broker dealer to various entities including the CLOSING AGENT (not the originator) who applied the funds to a closing in which the originator was named as the Lender when they had never advanced any funds, were being paid as a vendor, and would sign anything, just to get another fee. The money received by the borrower or paid on behalf of the borrower was money from the investors, not the Trust.

So the note should have named the investors, not the Trust nor the originator. And the mortgage should have made the investors the mortgagee, not the Trust nor the originator. The actual note and mortgage signed in favor of the originator were both void documents because they failed to identify the parties to the loan contract. Another way of looking at the same thing is to say there was no loan contract because neither the investors nor the borrowers knew or understood what was happening at the closing, neither had an opportunity to accept or reject the loan, and neither got title to the loan nor clear title after the loan. The investors were left with a debt that could be recovered probably as a demand loan, but which was unsecured by any mortgage or security agreement.

To counter that argument these intermediaries are claiming possession of the note and mortgage (a dubious proposal considering the Porter study) and therefore successfully claiming, incorrectly, that the facts don’t matter, and they have the absolute right to prevail in a foreclosure on a home secured by a mortgage that names a non-creditor as mortgagee without disclosure of the true source of funds. By claiming legal presumptions, the foreclosers are in actuality claiming that form should prevail over substance.

Thus the broker-dealers created written instruments that are the opposite of the Concept of Securitization, turning complete transparency into a brick wall. Investor should have been receiving verifiable reports and access into the portfolio of assets, none of which in actuality were ever purchased by the Trust, because the pooling and servicing agreement is devoid of any representation that the loans have been purchased by the Trust or that the Trust paid for the pool of loans. Most of the actual transfers occurred after the cutoff date for REMIC status under the IRC, violating the provisions of the PSA/Trust document that states the transfer must be complete within the 90 day cutoff period. And it appears as though the only documents even attempted to be transferred into the pool are those that are in default or in foreclosure. The vast majority of the other loans are floating in cyberspace where anyone can grab them if they know where to look.

Hearsay on Hearsay: Bank Professional Witnesses Using Business Records Exception as Shield from Truth

Wells Fargo Manual “Blueprint for Fraud”

Hat tip to my law partner, Danielle Kelley, Esq., for sending me the manual and the reports on it. Anyone desirous of a consultation on the application of what is on this blog, must either be a lawyer or have a lawyer who is licensed in the jurisdiction in which the property is located. For scheduling call 954-495-9867 (South Florida Office), 850-765-1236 (North Florida Office), and 520-405-1688 (Western United States). International callers: The same rules apply.

Well that didn’t take long. Like the revelations concerning Urban Lending Solutions and Bank of America, it is becoming increasingly apparent that the the intermediary banks were hell bent for foreclosure regardless of what was best for the investors or the borrowers. This included, fraud, fabrication, unauthorized documents and signatures, perjury and outright theft of money and identities. I understand the agreement between the Bush administration and the large banks. And I understand the reason why the Obama administration continued to honor the agreements reached between the Bush administration and the large banks. They didn’t have a clue. And they were relying on Wall Street to report on its own behavior. But I’m sure the agreement did not even contemplate the actual crimes committed. I think it is time for US attorneys and the Atty. Gen. of each state to revisit the issue of prosecution of the major Wall Street banks.

With the passage of time we have all had an opportunity to examine the theory of “too big to fail.” As applied, this theory has prevented prosecutions for criminal acts. But more importantly it is allowing and promoting those crimes to be covered up and new crimes to be committed in and out of the court system. A quick review of the current strategy utilized in foreclosure reveals that nearly all foreclosures are based on false assumptions, no facts,  and a blind desire for expediency that  sacrifices access to the courts and due process. The losers are the pension funds that mistakenly invested into this scheme and the borrowers who were used as pawns in a gargantuan Ponzi scheme that literally exceeded all the money in the world.

Let’s look at one of the fundamental strategies of the banks. Remember that the investment banks were merely intermediaries who were supposedly functioning as broker-dealers. As in any securities transaction, the investor places in order and is responsible for payment to the broker-dealer. The broker-dealer tenders payment to the seller. The seller either issues the securities (if it is an issuer) or delivers the securities. The bank takes the money from the investors and doesn’t deliver it to an issuer or seller, but instead uses the money for its own purposes, this is not merely breach of contract —  it is fraud.

And that is exactly what the investors, insurers, government guarantors and other parties have alleged in dozens of lawsuits and hundreds of claims. Large banks have avoided judgment based on these allegations by settling the cases and claims for hundreds of billions of dollars because that is only a fraction of the money they diverted from investors and continue to divert. This continued  diversion is accomplished, among other ways, through the process of foreclosure. I would argue that the lawsuits filed by government-sponsored entities are evidence of an administrative finding of fact that causes the burden of proof to be shifted to the cloud of participants who assert that they are part of a scheme of securitization when in fact they were part of a Ponzi scheme.

This cloud of participants is managed in part by LPS in Jacksonville. If you are really looking for the source of documentation and the choice of plaintiff or forecloser, this would be a good place to start. You will notice that in both judicial and non-judicial settings, there is a single party designated as the apparent creditor. But where the homeowner is proactive and brings suit against multiple entities each of whom have made a claim relating to the alleged loan, the banks stick with presenting a single witness who is “familiar with the business records.” That phrase has been specifically rejected in most jurisdictions as proving the personal knowledge necessary for a finding that the witness is competent to testify or to authenticate documents that will be introduced in evidence. Those records are hearsay and they lack the legal foundation for introduction and acceptance into evidence in the record.

So even where the lawsuit is initiated by “the cloud” and even where they allege that the plaintiff is the servicer and even where they allege that the plaintiff is a trust, the witness presented at trial is a professional witness hired by the servicer. Except for very recent cases, lawyers for the homeowner have ignored the issue of whether the professional witness is truly competent,  and especially why the court should even be listening to a professional witness from the servicer when it is hearing nothing from the creditor. The business records which are proffered to the court as being complete are nothing of the sort. They are documents prepared for trial which is specifically excluded from evidence under the hearsay rule and an exception to the business records exception. And the easy proof is that they are missing payments to the investor. That is why discovery should be aggressive.

Lately Chase has been dancing around these issues by first asserting that it is the owner of a loan by virtue of the merger with Washington Mutual. As the case progresses Chase admits that it is a servicer. Later they often state that the investor is Fannie Mae. This is an interesting assertion which depends upon complete ignorance by opposing counsel for the homeowner and the same ignorance on the part of the judge. Fannie Mae is not and never has been a lender. It is a guarantor, whose liability arises after the loss has been completely established following the foreclosure sale and liquidation to a third-party. It is also a master trustee for securitized trusts. To say that Fannie Mae is the owner of the alleged loan is most likely an admission that the originator never loaned any money and that therefore the note and mortgage are invalid. It is also intentional obfuscation of the rights of the investors and trusts.

The multiple positions of Chase is representative of most other cases regardless of the name used for the identification of the alleged plaintiff, who probably doesn’t even know the action exists. That is why I suggested some years ago that a challenge to the right to represent the alleged plaintiff would be both appropriate and desirable. The usual answer is that the attorney represents all interested parties. This cannot be true because there is an obvious conflict of interest between the servicer, the trust, the guarantor, the trustee, and the broker-dealer that so far has never been named. Lawsuits filed by trust beneficiaries, guarantors, FDIC and insurers demonstrate this conflict of interest with great clarity.

I wonder if you should point out that if Chase was the Servicer, how could they not know who they were paying? As Servicer their role was to collect payments and send them to the creditor. If the witness or nonexistent verifier was truly familiar with the records, the account would show a debit to the account for payment to Fannie Mae or the securitized trust that was the actual source of funds for either the origination or acquisition of loans. And why would they not have shown that?  The reason is that no such payment was made. If any payment was made it was to the investors in the trust that lies behind the Fannie Mae curtain.

And if the “investor” had in fact received loss sharing payment from the FDIC, insurance or other sources how would the witness have known about that? Of course they don’t know because they have nothing to do with observing the accounts of the actual creditor. And while I agree that only actual payments as opposed to hypothetical payments should be taken into account when computing the principal balance and applicable interest on the loan, the existence of terms and conditions that might allow or require those hypothetical payments are sufficient to guarantee the right to discovery as to whether or not they were paid or if the right to payment has already accrued.

I think the argument about personal knowledge of the witness can be strengthened. The witness is an employee of Chase — not WAMU and not Fannie Mae. The PAA is completely silent about  the loans. Most of the loans were subjected to securitization anyway so WAMU couldn’t have “owned” them at any point in the false trail of securitization. If Chase is alleging that Fannie Mae in the “investor” then you have a second reason to say that both the servicing rights and the right to payment of principal, interest or monthly payments in doubt as to the intermediary banks in the cloud. So her testimony was hearsay on hearsay without any recognizable exception. She didn’t say she was custodian of records for anyone. She didn’t say how she had personal knowledge of Chase records, and she made no effort to even suggest she had any personal knowledge of the records of Fannie and WAMU — which is exactly the point of your lawsuit or defense.

If the Defendant/Appellee’s argument were to be accepted, any one of several defendants could deny allegations made against all the defendants individually just by producing a professional witness who would submit self-serving sworn affidavits from only one of the defendants. The result would thus benefit some of the “represented parties” at the expense of others.

Their position is absurd and the court should not be used and abused in furtherance of what is at best a shady history of the loan. The homeowner challenges them to give her the accurate information concerning ownership and balance, failing which there was no basis for a claim of encumbrance against her property. The court, using improper reasoning and assumptions, essentially concludes that since someone was the “lender” the Plaintiff had no cause of action and could not prove her case even if she had a cause of action. If the trial court is affirmed, Pandora’s box will be opened using this pattern of court conduct and Judge rulings as precedent not only in foreclosure actions, disputes over all types of loans, but virtually all tort actions and most contract actions.

Specifically it will open up a new area of moral hazard that is already filled with debris, to wit: debt collectors will attempt to insert themselves in the collection of money that is actually due to an existing creditor who has not sold the debt to the collector. As long as the debt collector moves quickly, and the debtor is unsophisticated, the case with the debt collector will be settled at the expense of the actual creditor. This will lead to protracted litigation as to the authority of the debt collector and the liability of the debtor as well as the validity of any settlement.

Insurance and Hedge Proceeds Applied to Loan Balances

One of the more controversial statements I have made is that certain types of payments from third party sources should be applied, pro rata, against loan balances. Some have stated that the collateral source rule bars using third party payments as offset to the debt. But that rule is used in tort cases and contract cases are different. There are certain types of payments, like guarantees from Fannie and Freddie that might not be susceptible to use as offset because they are caused by the default of the debtor and because they are not paid until the foreclosure is complete.

But the insurance, credit default swaps and other hedge products that caused the banks to receive payment are a different story. Those are not paid because of a default by any particular borrower but rather are caused by a unilateral declaration of a “credit event” declared by the Master Servicer and are paid to the holder of the mortgage bonds. The mortgage bonds are issued by a trust based upon the advance of money by investors who wish to pool their money into an asset pool and receive income with what was thought to be a minimum of risk.

Since the broker-dealers (investment banks) were acting as agents for the trust and the bond holders, any money received by them should have first been allocated to the trust, then pro rata to the bond holders. Whether or not this money was actually forwarded to the bond holders is irrelevant if the investment banks were the agents of the investment vehicle and thus owed a duty to the investors to whom they sold the mortgage bonds.

Logic dictates that if the money was paid to the banks as “holders” of the bond (because they were issued in street name as nominee securities) that the balance owed by the trust to the investors was correspondingly reduced — reflecting the devaluation of the bonds declared by the master servicer based upon such criteria as the lack of liquidity of the bonds that had been trading freely on a weekly basis, or because of the severe drop in real estate prices down to their actual values, or because of other factors.

It should be noted that the declaration of the banks is unilateral and in their sole discretion and not subject to challenge by anyone because the declaration creates an irrefutable presumption that the content of the declaration is true. Thus the insurance company must pay, the credit default swap counterparty must pay and other hedge partners must pay as a result of an act by the bank, not the investor nor the borrower.

All the loans contained in the asset pool subject to the declared credit event are affected. And since the reason for the declaration has little relationship to defaults, and plenty of other more important reasons, the amount owed to investors is reduced by the receipt of the payments by their agent, the bank. That means the account receivable of the lender is reduced, regardless of which bank account the money happens to be deposited.

If the account receivable is reduced before, during or after a delinquency of the borrower (assuming the loan is actually in existence) then the borrowers’ balances should be reduced, pro rata for each loan in the asset pool that was the subject of the declaration of a credit event. It is therefore my opinion that the homeowner could and probably should file an affirmative defense for offset for the pro rata share of insurance, credit default swaps etc.

There is one more source that should be considered for offset. Several investors have made claims against the banks claiming that their money was misused and that the terms of the loan were not followed including, bad underwriting and unenforceable documents created at closing. Many of them have already settled those claims and received payment, thus reducing their account receivable from the trust (and by pure logic reducing, dollar for dollar the account payable from the trust). Since the sole source of payment on the bond is the payment of the mortgages, it follows that by utilizing the most simple of accounting standards, the balance owed by the homeowner would be correspondingly be reduced, pro rata, dollar for dollar.

The fact that the underwriting was bad, the loans were not viable or enforceable and based upon inflated appraisals and lies about the income of the borrower, is not something caused by the borrower. The fact that the money was paid to all of the investors in that particular asset pool means that each investor should get a share equal to the amount of money they invested compared to all the money that was invested in that pool.

As to figuring out how much of the offset goes to the borrower’s account payable, it should be calculated in the same way. The amount of the borrower’s debt should be compared with the total amount of loans in the asset pool. This percentage should be applied against all third party payments that did not arise out of the default by the borrowers. In fact, it should be applied against all borrowers whose loans were claimed by that asset pool, whether they were in default or not. This would be grounds for a claim by people who are “current” in their payments for a credit or refund of the amount received from insurance, credit default swaps, or payments by the banks in settlement of investors’ claims of fraud.

This approach should be brought up very early in litigation so that there is plenty of time to pursue the discovery required to determine the amount received and the proper calculation of pro rata shares. If you do it at trial, the best you can hope for is that the judge will take notice of the fact that the foreclosing party only brought part of the documents relating to the loan instead of all of them, which should be the subject of a subpoena for the designated witness of the bank to bring with her or him all of the documents relating to the subject loan or any instrument deriving its value in whole or in part from the subject loan’s existence.

Thus at trial you can have a two pronged attack, getting them coming and going. The first is of course the fact that the originator did not fund the loan and that the break between the money trail (actual transactions) and the paper trail (fictitious transactions) occurred at the closing table. In most cases that is true, but it can be replaced or buttressed by the fact that the same argument holds true for acquired loans that were previously originated. The endorsement of the note or assignment of mortgage is a fictitious instrument if there was no sale of the loan. The important thing is to talk about the money first and then use that to show that the documents are fabricated relating to no real transaction.

Then you also have the argument of offset which hopefully by then you will have set up by discovery.

Practice Note: Many lawyers are accepting fee retainers far below the level that would support properly litigating these cases. Now that the marketplace has matured, lawyers should reconsider their pricing and their prosecution of the defenses, affirmative defenses and counterclaims. Even clients who announce a goal of just staying as long as possible without paying rent or mortgage are probably saying that because they think they owe more money than is actually the case.

BANKS EDGE CLOSER TO THE ABYSS: Florida Judge Forces Permanent Modification

GGKW (GARFIELD, GWALTNEY, KELLEY AND WHITE) provides Legal Services across the State of Florida. We also provide litigation support to attorneys in all 50 states. We concentrate our practice on mortgage related issues, litigation and modification (or settlement). We are available to represent homeowners, business owners, and homeowner associations seeking to preserve their interest in the property and seeking damages (monetary payment).  Neil F Garfield is a licensed Florida attorney who provides expert witness and consulting fees all over the country. No board certification is offered by the Florida Bar, so the firm may not claim expertise in mortgage litigation. Mr. Garfield’s status as an “expert” is only as a witness and not as an attorney.
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The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available TO PROVIDE ACTIVE LITIGATION SUPPORT to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

For the second time in as many weeks a trial judge has ordered the pretender lender to execute a permanent modification based upon the borrowers total compliance with the provisions of the trial modification.This time Wells Fargo (Wachovia) was given the terms of the modification, told to put it in writing and file it. If they don’t sanctions will apply just as they will be in the Florida Panhandle case we reported on last week.

Remember that before the trial modification begins the pretender lender is supposed to have done all the underwriting required to validate the loan, the value of the property, the income of the borrower etc. That is the responsibility of the lender under the Truth in Lending Act.

Of course we know that cases were instead picked at random with a cursory overview simply because there was no intention to ever give a permanent modification. Borrowers and their attorneys have known this for years. Government, always slow on the uptake, is starting to get restless as more and more Attorneys General are saying that the Banks are not complying with the intent or content of the agreement when the banks took TARP money.

The supreme irony of this case is that Wells Fargo didn’t want the TARP money and was convinced to take it and accept the terms of HAMP because if only the banks that really need it took the money it was argued that this would start a run on the banks named that had to take TARP. The other ironic factoid here is that the whole issue of ownership of the loans blew up in the face of the government officers around the country that thought TARP was a good idea — only to find out that the “toxic assets” (TARP – “Toxic Asset Relief Program”) were not defaulting mortgages.

  1. So instead of telling the banks they were liars and going after them the way Teddy Roosevelt did 100 years ago, they changed the definition of toxic assets to mean mortgage bonds.
  2. This they thought would take care of it since the mortgage bonds were the evidence of “ownership” of the  “underlying” home loans.
  3. Then the government found out that the mortgage bonds were not failing, they were merely the subject of a declaration from the Master Servicer (a necessary and indispensable party to all mortgage litigation, in my opinion) that the value of the bond had fallen ,thus triggering payment from insurers, counterparties on credit default swaps etc to pay up to 100 cents on the dollar for each of the bonds —
  4. which means the receivable account from the borrower had been either extinguished or reduced through third party payment.
  5. But by cheating the investors out of the insurance money (something the investors are taking care of right now in the courts), they thought they could keep saying the loans were in default and the mortgage bond had been devalued and thus the payment of insurance was legally valid.
  6. BUT the real truth is that the loans had never made into the asset pools that issued the mortgage bonds.
  7. So the TARP definitions were changed again to “whatever” and the money kept flowing to the banks while they were rolling in money from all sides — investors, insurers, CDS counterparts, sales of the note to multiple asset pools (REMICs) and then sales of the note to the Federal Reserve for 100 cents on the dollar.
  8. This leaves the loan receivable account in many cases in an overpaid status if one applies generally accepted accounting principles and allocates the Federal, insurance and CDS money to the bonds and the “underlying” loans.
  9. So the Banks took the position that since the money was not coming in to cover the loans (because the loans were not in the asset pool that issued the mortgage bond and therefore the mortgage bond was NO evidence of ownership of the loan) that therefore they could apply the money any way they wanted, and that is where the government left it, to the astonishment and dismay of the the rest of the world. that is when world economies went into a nose dive.

The whole purpose of the mega banks in in entering into trial modification was actually to create the impression that the mega banks were modifying loans. But to the rest of us, the trial modification was supposed to to be last hurdle before the disaster was finally over. Comply with the payment schedule, insurance, taxes, and everything else, and it automatically becomes your permanent modification.

Not so, according to Bank of America, Wells Fargo, Chase, Citi and their brothers in arms in the false scheme of securitization. According to them they could keep the money paid by the borrower to be approved for the trial modification, keep the money paid by the borrower to comply with the terms of the trial modification and then the banks could foreclose making up any excuse they wanted to deny the permanent modification. The sole straw upon which their theory rests is that they were only obligated to “consider” the modification; according to them they were NEVER required to make it such that the modification would become permanent unless the bank expressly said so, which in most cases it does not.

When you total it all up, the Banks received a minimum of $2.50 for each $1.00 loan “out there” regardless of who owns it. Under the terms of the promissory note signed by the borrower, that means the account is paid in full and then some. If the investor has not stepped up to file a competing claim against the borrower’s new claim for overpayment, then the entire overage should be paid to the borrower.

The Banks want to say, like they did to the government, that the trial modification is nothing despite the presence of an offer, acceptance and consideration. To my knowledge there are at least two judges in Florida who think that is a ridiculous argument and knowing how judges talk amongst themselves behind closed doors, I would expect more of these decisions. If the borrower applies for and is approved for trial modification and they comply with the trial provisions, a contract is formed.

The foreclosure defense attorney in Palm Beach County argued SIMPLE contract. And the Judge agreed. My thought is that if you are in a trial modification get ready to hire that attorney or some other one who gets it and can cover your geographical area. Once that last payment is made, and in most cases, the payment is continued long after the trial modification period is officially over, the Bank has no equitable or legal right to deny the permanent modification.

The only caveat here is whether the Judge was correct in stating the amount of principal due without hearing evidence on third party payments and ownership of the loan. WHY WOULD THE BANK WANT LESS MONEY IN FORECLOSURE RATHER THAN MORE MONEY IN A MODIFICATION? The answer is that out of the $2.50 they received for the loan, they would be required to refund $2.50 because the Bank was supposed to be an intermediary, not a principal in the transaction. So the balance quoted by the judge without evidence was quite probably wrong by a mile.

If there is any balance it is most likely a small fraction of the original principal due on the promissory note. And, as we have been saying for years, it is most likely NOT due to the party that is entering into the modification. This last point is troubling but “apparent authority” doctrines might cover the problem.

Every time a loan does NOT go into foreclosure, the Banks’ representation of defaults and the value of the loan (in order to trigger insurance and other third party payments)  come under question and the prospect of disaster for the Bank rises, to wit:  refunding trillions of dollars in insurance and CDS money as well as money received from co-obligors on the bond (the finished product after the note was moved through the manufacturing process of a false securitization scheme).

Every time a loan is found NOT to have actually been purchased by the asset pool (REMIC, Trust etc.) because there was no money in the asset pool and that the investors merely have an equitable right to claim the note and mortgage under constructive trust or resulting trust theories, the validity of the mortgage encumbrance fades to black. There is no such thing as an equitable mortgage lien or an equitable lien of any sort. And there is plenty of good sense and many law review articles as well as case decisions that explain why that is true.

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PRACTICE HINT FOR ATTORNEYS: Whether you are litigating or negotiating, send a preservation letter to every possible party or witness that might be involved. That way when you ask for production, they can’t say they destroyed or lost it without facing severe consequences. It might even stop the practice of the Banks trashing all documents periodically as has been disclosed in the whistle-blower affidavits from BOA and other banks. If you need assistance in creating a long form preservation letter we are available to provide litigation assistance on that and many other matters that might arise in foreclosure defense.

BOA Seeks to Seal Damaging Testimony from Urban Lending

HAPPY INDEPENDENCE DAY!

WHY ARE THE BANKS FIGHTING TO GET AS LITTLE AS POSSIBLE FROM EACH “FAILED” LOAN?

A drama is playing out in the state of Massachusetts. Bank of America is pretending to be the lender or the authorized servicer or both. But it outsourced the task of dealing with borrowers seeking modification. The company that was used is Urban Lending Solutions (ULS).  A deposition was taken from a knowledgeable source from within ULS.  The attorney  taking the deposition was merely looking for evidence of a script prepared by Bank of America that ULS employees were to follow. Not only was the script uncovered but considerable other evidence suggested institutional policies at Bank of America that were in direct conflict with the requirements of law, and in direct violation of the settlements with the Department of Justice and the banking regulators.

The transcript of the deposition was sealed at the request of Bank of America, which the borrower did not interpose any objection. Now there are a lot of people who want to see that deposition and who want to take the deposition of the same witness and other witnesses at ULS who might reveal the real intent of Bank of America. The question which is sought to be answered is why the mega banks are fighting so hard to take less money in a foreclosure sale then they would get in a modification or even a short sale. The policy is obvious. Borrowers are lured into a hole that gets deeper and deeper so that foreclosure seems inevitable and indefensible. Even after a successful trial modification the banks are turning down the permanent modification, as though they had the power to do so.

Now a number of attorneys are preparing motions to the trial court in Massachusetts to unseal the transcript of the ULS employee. Bank of America is opposing these efforts on the grounds of “confidentiality” which from my perspective makes absolutely no sense. Why would Bank of America share confidential information or trade secrets with a vendor whose only purpose was to interfere with the modification process? My opinion is that the only information that Bank of America wishes to keep secret is that the instructions they gave to ULS clearly show that Bank of America was not interested in anything other than achieving a foreclosure sale in as many cases as possible.

In nearly all cases the modification of the loan more than doubles the prospect of proceeds from the loan and in some cases approaches 100%. Thus the full-court press from the megabanks to go to foreclosure is a mystery that will be solved. My sources from inside the industry together with my own analysis indicates that the reason is very simple. The banks took in money from investors, insurers, counterparties in credit default swaps, the Federal Reserve, the Department of the Treasury and other parties based on the representation of the banks that (A) the banks owned the mortgage bonds and therefore on the loans and (B) there was a loss resulting from widespread defaults on mortgages. Under the terms of the various contracts within the false chain of securitization and the Master servicer had sole discretion as to whether or not the value of the mortgage bonds and the asset pools had declined and had sole discretion as to the amount of the loss caused by the defaults. Both representations were false — the Banks did not own the bonds or the loans and the loss was not even close to what was represented to insurers and other third parties.

As a general rule of thumb, the banks computed value of the collateral at around 25% and therefore received payment to compensate the banks for a 75% loss. They received the payment several times over and then sold the mortgage bonds to the Federal Reserve for 100% of the face value of the bonds. It can be fairly estimated that they received no less than 250% of the principal amount due on each of the loans contained within the asset pool that had issued each mortgage bond. While they had to create the appearance of objectivity by showing a number of the loans as performing, they intentionally overestimated the number of loans that were in default or were in the process of going into default.

Let us not forget that while nobody was looking the Federal Reserve has been “purchasing” the worthless mortgage bonds at the rate of $85 billion per month for a long time and doesn’t appear to have any intention of stopping that flow of money to banks that have already received more than 100% of the principal due on the notes. And lest you be confused, the money the banks received should have gone to the investors and should never have been kept by the banks. The purchases by the Federal Reserve at 100% of face value despite a market value of zero is merely a way for the Federal Reserve to keep the mega banks floating on an illusion.

Since the banks received 250% of the principal amount due on the loan, an actual recovery from the borrower of 100% (for example) on the loan would leave the banks with a liability to all of the third parties that paid the banks. The refund liability would obviously be 150% of the principal amount due on the loan and the banks would be required to turn over the hundred percent recovery from the borrower to the investors adding to their liability. THIS IS WHY I SAY CALL THEIR BLUFF AND OFFER THEM ALL THE MONEY DEMANDED ON CONDITION THAT THEY PROVE OWNERSHIP AND PROVE THE LOSS IS ACTUALLY THE LOSS OF THE BANK AND NOT OF THE INVESTORS.

But if the case goes through a foreclosure sale, the banks can take a comfortable position that the number of defaults and the depth of the loss was as great as they represented when they took payment from insurers and other third parties. The liability of 250% is completely eliminated. Thus while it might appear to be in the bank’s interest to take a 60% recovery from the borrower instead of a 25% recovery from a foreclosure sale, the liability that would be created each time alone was modified or settled would dwarf the apparent savings to the pretender lender or actual creditor.

The net result is that on a $100,000 loan, the investor takes an extra $35,000 loss over and above what would normally apply in a workout and the bank avoids $250,000 in liabilities to third parties who paid based upon false representations of losses.

The mere fact that they went to great lengths to seal the transcript indicates how vulnerable they feel.

PRACTICE MEMO TO FORECLOSURE DEFENSE LAWYERS

As a condition precedent I would suggest that in all cases where we feel the deposition transcript would be helpful I think it would create more credibility if you issued a subpoena duces tecum directed at Urban to produce the witness whose deposition was sealed in the existing case and to bring those records that were requested or demanded at that deposition. One of the questions that needs to be answered is whether the witness witness is still working for Urban, whether the witness has “disappeared”, and whether his testimony has changed — thus we would need the other deposition to test credibility and perhaps get exhibits that BANA either didn’t object to, which means they waived confidentiality. If they do not move to quash the subpoena then they might also be arguably waiving the confidentiality objection.
If they do object, you have two bites of the apple — if they move to quash they must state the grounds other than than it will damage their chances in litigation. The trial court would then hear the objections and of course each if the cases that could benefit from unsealing the deposition results in a hearing, then several judges would hear the same objection. The likelihood is that the objection would attempt to bootstrap the order sealing the deposition as reason enough to quash the subpoena. That in turn puts pressure on the Massachusetts judge to release the transcript.
The more Motions filed the better. So I would suggest that we reach out through media to get as many people as possible with separate motions saying that sealing the deposition is causing a disruption in due process. Since Urban reached out on behalf of BANA — an allegation that should be made in opposition test the motion to quash the subpoena in each case — exactly what confidential information needs to be protected? Has the Massachusetts court heard a motion in liming preventing the use of the deposition at trial? If not, then the objection is waived since the Plaintiff will clearly use the deposition at trial, if there is one.
The other issue is that BOA can’t simply allege confidentiality rather than strategy in litigation. They must state with particularity what could be possibly confidential. There is no attorney-client privilege, there is no attorney work product privilege.  At first Bank of America disclaimed any knowledge or relationship with ULS.  When it became obvious that the relationship existed and that ULS was using Bank of America letterhead to communicate with borrowers they finally admitted that the relationship existed and then went one step further by alleging confidentiality and trade secrets so that the contract and instructions between Bank of America and ULS would never see the light of day., For a company that BOA disclaimed any knowledge but who used BOA stationery they were clearly an agent of BANA. What exactly could Urban have other than information about modification and foreclosure? I would also notice or subpoena BANA to produce the person who signed the contract with Urban and to bring the contract with him or her. Who received instructions from BOA? Where are those instructions? Were they produced at the sealed deposition.
 If the Massachusetts court does not unseal the transcript, doesn’t this give BOA an opportunity for a do-over where they fabricate documents that are different from those produced in the sealed deposition?
What were the instructions to Urban? What was the goal of the relationship between BOA and URban? Where are the scripts now that we’re produced in the sealed deposition?
Were the instructions to Urban the same as the instructions to all vendors assisting in the foreclosure process? Why did BOA even need Urban if it had proof of payment, proof of loss,  proof of ownership of the loan? We want to know what scripts were used by Urban and whether the same scripts were distributed to other vendors whose behavior could be plausibly denied. Discovery is a process by which the party seeking it must only show that it might lead to the discovery of admissible evidence. THE POINT MUST BE MADE THAT THE DEFENSE FOR WHICH WE ARE LOOKING FOR SUPPORT AND CORROBORATION IS THAT THE DELIBERATE POLICY AND PRACTICE OF BOA WAS TO MOVE PEOPLE INTO DEFAULT BY TELLING THEM TO STOP MAKING PAYMENTS. WE WANT TO SHOW THAT THEIR GOAL WAS FORECLOSURE NOT MODIFICATION CONTRARY TO THE REQUIREMENTS UNDER HAMP AND HARP AND THAT RATHER THAN PROCESS MODIFICATION OR SETTLEMENTS THE POLICY WAS TO DERAIL AS MANY AS POSSIBLE TO GET THE FORECLOSURE EVEN IF IT MEANT THAT THE INVESTORS WOULD GET LESS MONEY? Why?
The instruction was to use the promise or carrot of modification to trick the homeowner into (a) acknowledging BOA as the right party (b) stop making payments causing an apparent default and causing an escrow shortage (c) thus assuring the foreclosure sale despite the fact that BOA never acquired and (d) thus assuring that claims against them from investors (see dozens of law suits against BOA) and from insurers and counter parties on credit default swaps and payments from co-obligors based on the “default” that BOA fabricated — payments that involved more than the loan itself in multiples of the supposed loan balance.

This is an important battle. Let’s win it. There is strength in numbers. We might find the scripts were prepared by someone who used scripts from other banks and that the banks were in agreement that despite the obligations under HAMP and HARP and despite their ,rinses in the AG and OCC settlement, their goal is to foreclose at all costs because if the general pattern of conduct is to settle these loans and make them “performing” loans again it is highly probable that for each dollar of principal that gets taken of the table there is a liability or claim for $10. This would establish that the requirements of HAMP and HARP has resulted in negotiating with the fox while the fox is in the henhouse getting fat.

Banks Traded on Inside Information on Mortgages

Despite the pronouncements by Eric Holder, the chief law enforcement officer of the United States, and the obvious reticence of the Securities and Exchange Commission, the vast majority of securities attorneys believe that the banks were (a) trading on inside information and (b) committing securities fraud when they funded and then traded on mortgages that were too toxic to ever succeed.

The first, trading on inside information, is regularly prosecuted by the justice department and the SEC. It is why Martha Stewart went to jail in rather flimsy evidence. The catch, justice and the SEC say is that this only applies to securities and the 1998 act signed into law by Clinton makes mortgage bonds and hedges on mortgage bonds NOT securities. It also makes the insurance paid on the mortgage bonds NOT insurance. This is despite the fact that the instruments meet every definition of securities and both the insurance contracts and credit default swaps appear to meet every definition of insurance. But the law passed by Congress in 1998 says otherwise, so how can we prosecute?

The second, securities fraud meets the same obstacle they say because they can’t accuse anyone of committing fraud in the issuance or trading of securities when the law says there were no securities.

So goes the spin coming from Wall Street and as long as law enforcement in each state and the DOJ keeps listening to Wall Street and their lawyers, they will keep arriving at the same mistaken conclusion.

If Wall Street had in fact followed the plan of securitization set forth in their prospectuses and pooling and servicing agreements, assignment and assumption agreements and various other instruments that were created to build the infrastructure of securitization of debt — including but not limited to mortgages, credit cards, auto loans, student loans etc. — then Wall Street would be right and the justice department and the SEC might be stuck in the mud created by the 1998 law. But that isn’t what happened and therefore the premise behind the apparent immunity of Wall Street Banks and bankers is actually an illusion.

Starting with the issuance of the mortgage bonds, most of them were issued before any mortgage was originated or acquired by anyone. In fact, the list attached to the prospectus for the mortgage bonds said so — stating that the spreadsheet or list attached was by example only, that these mortgages do not exist but would be soon be replaced with real mortgages acquired pursuant to the enabling documents for the creation of the REMIC “trust.” But that is not what happened either.

In no way did the Banks follow the terms of the prospectus, PSA, assignment and assumption agreements or anything else. Instead what they really did was create the illusion of a securitization scheme that covered up the reality of a PONZI scheme, the hallmark of which is that it collapses when investors stop buying the bogus securities and more investors want their money out than those wishing to put money into the scheme. There was no reason for the entire system to collapse other than the fact that Wall Street planned and bet on the collapse, thus making money coming and going and draining the lifeblood of capital worldwide out of economies and marketplaces that depended upon the continued flow of capital.

The creation of the REMIC “trust” was a sham. It was never formalized, never funded and never acquired any mortgages. hence any “exempt” securities issued by it were not the kind intended by the Act signed into law in 1998. It was not a mortgage-backed security, or credit backed security, it was an illusion designed to defraud anyone who invested in them. The purpose of issuing the mortgage bonds was not to fund and acquire mortgages but rather to steal as much money out of the flow as possible while covering their tracks with some of the money ending up on the closing table for newly originated or previously originated bundles of mortgages that were to be acquired. That isn’t what happened either.

Wall Street bankers put the money from investors into their own private piggy bank and then funded and acquired mortgages with only part of the money while they made false “proprietary trades” in the “mortgage bonds” that made it look like they were trading geniuses making money hand over fist while the rest of the world saw their wealth decline by as much as 60%-70%. The funding for debt came not from the unfunded REMIC “trusts” but from the investment banker who was merely an intermediary depository institution which unlawfully was playing with investor money. The actual instruments upon which Wall Street relies to justify its actions is the prospectus, the PSA, and the Master Servicing agreement — each of which was used to sell the investors on letting go of their money in exchange for the promises and conditions contained in the exotic agreements containing numerous conflicting clauses.

Thus the conclusion is that since the mortgage bonds were issued by an unfunded and probably nonexistent entity, the investors had “bought” an interest in an incoherent series of agreements that together constituted a security or, in the alternative, that there was no security and the investors were simply duped into parting with their money which is fraud, pure and simple.

I would say that investors acquired certain passive rights to the instruments used, with the exception of the bogus mortgage bonds that were usually worthless pieces of paper or entries on a log. In my opinion the issuance of the prospectus was the issuance of a security. The issuance of the PSA was the issuance of a security, And the issuance of the other agreements in the illusory securitization chain may also have been the issuance of a security. If cows can be securities, then written instruments that were used to secure passive investments are certainly securities. The exemption for mortgage bonds doesn’t apply because neither the mortgage bond nor the REMIC “trust” were ever funded or used — except in furtherance of their fraud when they claimed losses due to mortgage defaults and obtained federal bailouts, insurance and proceeds of credit default swaps.

The loan closings, like the funding of the “investments” was similarly diverted away from the investor and toward the intermediaries so that they could trade on the appearance of ownership of the loans in the form of selling bundles of loans that were not even close to being properly described in the paperwork — although the paperwork often looked as though it was all proper.

The trading, hedging and insuring of investments that were not only destined by actually planned to fail was trading on inside information. The Banks knew very well that the triple A rating of the mortgage bonds was a sham because the mortgage bonds were worthless. What they were really trading in was the ownership of the loans which they knew were falsely represented on the note and mortgage. They thus converted the issuance of the promissory note signed by the borrower into a security under flase pretenses because the payee on the note and the secured party on the mortgage never completed the transaction, to wit: they never funded the loan and they made sure that the terms of repayment on the promissory note did not match up with the terms of repayment set forth in the prospectus, which was the real security.

Knowing from the start that they had the power (through the powers conferred on the Master Servicer) to pull the rug out from under the “investments” they traded with a vengeance hedging and selling as many times as they could based upon the same alleged loans that were in fact funded directly by and therefor owned by the investors directly (because the REMIC was ignored and so was the source of funding at the alleged loan closing).

Being the sole source of the real information on the legality, quality and quantity of these nonexistent investments in mortgage bonds, the Wall Street banks, their management, and their affiliates were committing both violation of the insider trading rule and the securities fraud rule ( as well as various other common law and statutory prohibitions and crimes relating to deceptive practices in the sale of securities). By definition and applying the facts rather than the spin, the Banks a have committed numerous crimes and the bankers should be held accountable. Let’s not forget that by this time in the S&L scandal more than 800 people were sent to jail despite various attempts to mitigate the severity of their trespass and trampling on the rights of investors and depositors.

Failure to prosecute, while the statute of limitations is running out, is taking the rule of law and turning it on its head. The Obama administration has an obligation to hold these people accountable not only because violations of law should be prosecuted but to provide some deterrence from a recurrence or even escalation of the illegal practices foisted upon institutions, taxpayers and consumers around the world. Ample evidence exists that the Banks, emboldened by the lack of prosecutions, have re-started their engines and are indeed in the process of doing it again.

Think about it, where would a company get the money to have a multimedia advertising campaign blanketing areas of the the Country when the return on investment, according to them is only 2.5%? Between marketing, advertising, processing, and administrative costs, pus a reserve for defaults, they are either running a going out of business strategy or there is something else at work.

And if the transactions were legitimate why do the numbers of foreclosures drop like stones in those states that require proof of payment, proof of loss, and proof of ownership? why have we not seen a single canceled check or wire transfer receipt that corroborates the spin from Wall Street? Where is the real money in this scheme?

James Surowiecki: Why Is Insider Trading on the Rise?
http://www.newyorker.com/talk/financial/2013/06/10/130610ta_talk_surowiecki

FROM OTHER MEDIA SOURCES —-

Foreclosure Victims Protesting Wall Street Impunity Outside DOJ Arrested, Tasered
http://www.truth-out.org/news/item/16527-victims-of-foreclosure-arrested-tasered-protesting-wall-street-impunity-outside-doj

Watch out. The mortgage securities market is at it again.
http://money.cnn.com/2013/05/23/news/economy/mortgage-backed-securities.pr.fortune/

Wall Street Lobbyists Literally Writing Bills In Congress
http://news.firedoglake.com/2013/05/27/wall-street-lobbyists-literally-writing-bills-in-congress/

Time to Put the Heat on the Fed and FDIC to Fix Lousy Governance at TBTF Banks
http://www.nakedcapitalism.com/2013/05/so-if-shareholders-wont-rein-in-jamie-dimon-time-to-put-the-heat-on-the-fed-and-fdic.html

West Sacramento homeowner uses new state law to stop foreclosure
http://www.sacbee.com/2013/05/23/5441875/west-sacramento-homeowner-uses.html

The Foreclosure Fraud Prevention Act: A.G. Schneiderman Commends Assembly for Passing Foreclosure Relief Bills
http://4closurefraud.org/2013/05/23/the-foreclosure-fraud-prevention-act-a-g-schneiderman-commends-assembly-for-passing-foreclosure-relief-bills/

Where did the California foreclosures go? Level of foreclosures sales dramatically down. Foreclosure legislation and bank processing. Subsidizing investor purchases via HAFA.
http://www.doctorhousingbubble.com/california-foreclosure-process-hafa-program-subsidize-investor-purchases/

Wasted wealth – The ongoing foreclosure crisis that never had to happen – The Hill’s Congress Blog
http://thehill.com/blogs/congress-blog/economy-a-budget/301415-wasted-wealth–the-ongoing-foreclosure-crisis-that-never-had-to-happen

Oregon Foreclosure Avoidance Program gets tuneup
http://www.oregonlive.com/opinion/index.ssf/2013/05/oregon_foreclosure_avoidance_p.html

OCC: 13 Questions to Answer Before Foreclosure and Eviction

13 Questions Before You Can Foreclose

foreclosure_standards_42013 — this one works for sure

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

SEE ALSO: http://WWW.LIVINGLIES-STORE.COM

The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Note: Some banks are slowing foreclosures and evictions. The reason is that the OCC issued a directive or letter of guidance that lays out in brief simplistic language what a party must do before they can foreclose. There can be little doubt that none of the banks are in compliance with this directive although Bank of America is clearly taking the position that they are in compliance or that it doesn’t matter whether they are in compliance or not.

In April the OCC, responding to pressure from virtually everyone, issued a guidance letter to financial institutions who are part of the foreclosure process. While not a rule a regulation, it is an interpretation of the Agency’s own rules and regulation and therefore, in my opinion, is both persuasive and authoritative.

These 13 questions published by OCC should be used defensively if you suspect violation and they are rightfully the subject of discovery. Use the wording from the letter rather than your own — since the attorneys for the banks will pounce on any nuance that appears to be different than this guidance issued to the banks.

The first question relates to whether there is a real default and what steps the foreclosing party has taken to assure itself and the court that the default is real. Remember that the fact that the borrower stopped paying is not a default if no payment was due. And there is no default if it is cured by payment from ANYONE after the declaration of default. Thus when the subservicer continues making payments to the “Creditor” the borrower’s default is cured although a new liability could arise (unsecured) as a result of the sub servicer making those payments without receiving payment from the borrower.

The point here is the money. Either there is a balance or there is not. Either the balance is as stated by the forecloser or it is not. Either there is money due from the borrower to the servicer and the real creditor or there is not. This takes an accounting that goes much further than merely a printout of the borrower’s payment history.

It takes an in depth accounting to determine where the money came from continue the payments when the borrower was not making payments. It takes an in depth accounting to determine if the creditor still exists or whether there is an successor. And it takes an in depth accounting to determine how much money was received from insurance and credit default swaps that should have been applied properly thus reducing both the loan receivable and loan payable.

This means getting all the information from the “trustee” of the REMIC, copies of the trust account and distribution reports, copies of canceled checks and wire transfer receipts to determine payment, risk of loss and the reality of whether there was a loss.

It also means getting the same information from the investment banker who did the underwriting of the bogus mortgage bonds, the Master Servicer, and anyone else in the securitization chain that might have disbursed or received funds in connection with the subject loan or the asset pool claiming an interest in the subject loan, or the owners of mortgage bonds issued by that asset pool.

If the OCC wants it then you should want it for your clients. Get the answers and don’t assume that because the borrower stopped making payments that any default occurred or that it wasn’t cured. Then go on to the other questions with the same careful analysis.

http://www.businessweek.com/news/2013-05-17/wells-fargo-postpones-some-foreclosure-sales-after-occ-guidance

/http://www.occ.gov/topics/consumer-protection/foreclosure-prevention/correcting-foreclosure-practices.html

Keystone Fraud by Banks: Business Records Exception to Hearsay Rule

Practice Note: Hearsay is not evidence and should not be used as the basis for any conclusion of facts that would support any conclusion of law. While the banks are extremely vulnerable to having all testimony and documents barred by the hearsay rule, this is ONLY true if the proper objection is made at the proper time — and objections should be made when opposing counsel makes reference to the content of those records as though they were already established. Although representations by counsel are not evidence, the attorney’s failure to object to the representation is a failure to bring to the Judge’s attention the fact that you contest those assertions. The objection could be phrased that counsel is attempting to get his own representations on record based upon facts that are in dispute and not in the record. A good record of those objections — including the use of a court reporter — is the basis for appeal. Without that record the Judge is inclined to do whatever he or she wants and while it is possible to re-establish the record in the absence of a court reporter it is very difficult and time-consuming. The reviewing court looks only to the record. If the objection does not appear, then the reviewing court has no choice but to affirm the lower court decision. An appeal is NOT an opportunity to retry the case. on substantive grounds. It is primarily a vehicle to contest the procedures and rulings in the court below as to procedure and the admissibility of evidence.

see http://livinglies.me/2013/04/29/hawaii-federal-district-court-applies-rules-of-evidence-bonymellon-us-bank-jp-morgan-chase-failed-to-prove-sale-of-note/

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Analysis: Business records are ALWAYS hearsay and barred by the hearsay rule in state and Federal courts. The question is not whether the business records are hearsay but rather whether the records are deemed reliable enough to waive the requirement of testimony from those with knowledge of the facts offered to prove the case of the proponent of those records. If they are deemed reliable by the Judge then they are allowed to be admitted as evidence to prove the truth of the matters asserted in those records. The tests for reliability are in the statutes of each state and the Federal rules of evidence that allow for exceptions to hearsay in order to allow the business records into evidence, which ARE hearsay and otherwise barred as evidence, under the “business records exception.”

The general rule is that evidence consists of testimony from a knowledgeable witness competent to testify as to the matters asserted. Competency of witnesses is determined by oath, personal perception of events, memory and the ability to communicate the facts as personally experienced, viewed, or heard by the witness. The business records exception requires the custodian of records to provide the foundation for asserting the business records exception. This is the starting point.

The custodian of records must be established by foundation testimony and should not be allowed without testimony that demonstrates the witness’ scope of employment, knowledge and authority. Objection should be made when the leading question is asked “Are you the custodian of the records?” An objection is required that the question is leading and lacks foundation — showing the facts and circumstances under which the witness should be accepted by the court as the custodian of the records.

The records must be from a source that is relevant to the proceedings. If the party seeking foreclosure is an asset pool, represented by a trustee, then the business records of the trustee are the only thing that is relevant unless the foundation is laid by opposing counsel to show that the records of the servicer matches the records of the trustee.

TESTIMONY OF THE SERVICER: Without the custodian of records for the trustee, it seems impossible to establish the proper foundation showing that the trustee asserts that the records of the trustee are the same as the servicer. And if that is true, there may be no reason for the servicer to testify as to the business records since it is only the trustee who can account for all money paid out and all money received, directly or indirectly on account of the subject loan.

[NOTE: THE TRUSTEE SHOULD BE ABLE TO TESTIFY THAT IT IS THE TRUSTEE OF THE TRUST THAT OWNS THE SUBJECT LOAN AND TO PRODUCE DOCUMENTS SHOWING THE SALE OF THE LOAN TO THE TRUST OR ASSET POOL. REMEMBER THAT A SALE REQUIRES CONSIDERATION AND THUS THE RECORDS SHOULD INCLUDE A RECORD OF THAT SALE, THE AMOUNT PAID, AND THE DOCUMENTS MEMORIALIZING THAT TRANSACTION.]

The witness who testifies for the proponent of the documents sought to be admitted into evidence must be competent to testify as records custodian that the trust has been and still is the owner of the loan. The banks will vigorously oppose your effort to hold their feet to the fire because all indications are that the trustee has no records and doesn’t even have a bank account for the “trust’ or asset pool, much less evidence of the amount paid for the loan, and the documents memorializing the “transaction.”

In many cases, the case for ownership or foreclosure collapses completely because in fact the trust or pool never did acquire ownership because there was no sale and the trustee never had any records showing the money paid by the homeowner or other parties who may have paid down the loan under non-subrogated obligations to payoff the debt. The creditor only being entitled to recover once on the debt, must show that there were no mitigating payments received by the trustee or anyone on its behalf as agent, servant or employee or affiliate.

In truth the relevant records are either wholly within the records of the MASTER SERVICER and neither the subservicer that the proponent wishes to offer nor the trustee has a complete record who who funded the origination or purchase of the loan. Thus while the business records of the sub-servicer might eventually be admitted over objection of the homeowner, it can and should be argued that this is only a partial picture; this accomplished on cross examination or if possible voir dire, where the witness is questioned as to what they don’t know, to wit” the details of the origination, purchase or funding of the loan together with all receipts relating to the loan account directly or indirectly.

Having started with the question of whether the witness is in fact a records custodian, the question then becomes whether the proffered witness is the only records custodian. At one trial recently conducted the witness was (a) not a custodian, (b) declared that the records came from numerous “clients” and other departments, the identity of the custodian of those records never being mentioned.

[Practice Note: When the witness is from the “loss mitigation department” or some similar division or department, they are by virtual definition not the records custodian, and cannot be a competent witness to testify as to the records. On voir dire conclusion the objection should be made that the witness is not the records custodian for any or all of the records sought to be introduced and is therefore not competent to provide the foundation for the business records exception to the hearsay rule.]

The first requirement (see Florida statutes below for example) to test the reliability of the records is that the the record entry be made at or near the time of the event.

If the servicer is testifying, then the servicer cannot testify as to the either the origination or sale of the loan, both having preceded the involvement of the servicer virtually by definition. While the impulse of the court is going to be presume that the closing was completed, this is overcome by the denial of the homeowner that the closing was in fact completed because the named payee on the note and mortgage never fulfilled their obligations — to fund the loan. It is not enough to be the party who caused the loan to be made —- that is a mortgage broker who obviously has not rights to ownership or foreclosure. This leaves the proponent with the requirement of proving up the completion of the initial transaction showing the funding by testimony of a competent witness (custodian of records of the relevant parties) to show payment and receipt of the funding of the origination or sale of the loan.

The second test relates to competency of the witness which is that the person offering the testimony or even the affidavit must show that they are a person with personal knowledge sufficient to be either the records custodian or a witness to the event.

The banks in Florida will attempt to get around this problem by offering a certification, but the certification must contain sworn statements as to the personal knowledge of the person who executes such certification. The requirements of testimony on the stand are NOT waived by virtue of submitting a certification. Without establishing the competency of the person to be admitted as a witness custodian of the records, the certification is a sham. And such certification should be determined before trial in a motion in limine before trial begins or objection to certification (see below).

The “certification” must contain the same required statements of fact that would otherwise be required on the stand as a live witness. Timeliness of objections is the key to trial practice. Failure to object and take the offensive on this issue will result in documents being admitted into evidence that establish a prima facie case when no such case exists.

If a certification is intended to be used, the homeowner must receive notice of such intent, the identity and contact information for the person signing the certification and an opportunity to challenge the veracity of the statements contained in the certification and the authenticity of the documents itself given the constant practice of robo-signing and surrogate signing.

Discovery is appropriate to require the proponent of the certification to show the employment record and other indicia that the person is indeed a custodian of all the records and that all the records sought to be introduced at trial are within the custody of the witness. A trick often used in court is that the witness will testify as to custody of one document and without an alert objection from the homeowner, the rest of the documents, which are hearsay, are then admitted into evidence without the certification or the foundation because the homeowner failed to object.

Failure to give notice of the intent to use certification in lieu of live testimony is fatal at trial — if the homeowner objects. Certification should ALWAYS be met with a well written objection — and fee free to plagiarize anything in this article. In most cases in an abundance of caution, the Judge will require live testimony in lieu of certification.

Conversely, failure to object to the certification may well leave the homeowner in the cold, because by the time the trial begins all acts necessary to the prima facie case of the proponent of foreclosure or ownership of the loan will have already been established.

Florida Statutes 90.803 et seq: in pertinent abstract is as follows:

(6)  RECORDS OF REGULARLY CONDUCTED BUSINESS ACTIVITY.–

(a)  A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinion, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity and if it was the regular practice of that business activity to make such memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, or as shown by a certification or declaration that complies with paragraph (c) and s. 90.902(11), unless the sources of information or other circumstances show lack of trustworthiness. The term “business” as used in this paragraph includes a business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

(b)  Evidence in the form of an opinion or diagnosis is inadmissible under paragraph (a) unless such opinion or diagnosis would be admissible under ss. 90.701-90.705 if the person whose opinion is recorded were to testify to the opinion directly.

(c)  A party intending to offer evidence under paragraph (a) by means of a certification or declaration shall serve reasonable written notice of that intention upon every other party and shall make the evidence available for inspection sufficiently in advance of its offer in evidence to provide to any other party a fair opportunity to challenge the admissibility of the evidence. If the evidence is maintained in a foreign country, the party intending to offer the evidence must provide written notice of that intention at the arraignment or as soon after the arraignment as is practicable or, in a civil case, 60 days before the trial. A motion opposing the admissibility of such evidence must be made by the opposing party and determined by the court before trial. A party’s failure to file such a motion before trial constitutes a waiver of objection to the evidence, but the court for good cause shown may grant relief from the waiver.

(7)  ABSENCE OF ENTRY IN RECORDS OF REGULARLY CONDUCTED ACTIVITY.–Evidence that a matter is not included in the memoranda, reports, records, or data compilations, in any form, of a regularly conducted activity to prove the nonoccurrence or nonexistence of the matter, if the matter was of a kind of which a memorandum, report, record, or data compilation was regularly made and preserved, unless the sources of information or other circumstances show lack of trustworthiness.

(8)  PUBLIC RECORDS AND REPORTS.–Records, reports, statements reduced to writing, or data compilations, in any form, of public offices or agencies, setting forth the activities of the office or agency, or matters observed pursuant to duty imposed by law as to matters which there was a duty to report, excluding in criminal cases matters observed by a police officer or other law enforcement personnel, unless the sources of information or other circumstances show their lack of trustworthiness. The criminal case exclusion shall not apply to an affidavit otherwise admissible under s. 316.1934 or s. 327.354.

HAMP-PRA Program Explained

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Note: The PRA (Principal reduction Alternative) portion of HAMP has not been utilized with efficiency by homeowners. First of all  it is a good idea to have several copies —digital and on paper — when you submit your modification proposal. The pattern that is clear. They claim to have not received it, they destroy the file because one thing was missing, etc. So be prepared to submit multiple times and get in writing that the foreclosure will not go forward while this process is underway. A demand letter from an attorney referencing the Dodd-Frank Act and its prohibition against dual tracking, will probably produce some results, especially if it is sent to every known party at every known address including the tiny letters in a font so light you can barely see it on the bank of the end of month statement.

Remember you are in all probability communicating with people who never owned nor funded the loan nor the purchase of the loan and that in order to clear the title on your client’s home you will need a “Guarantee of Title” from the title company and I think it is a good idea to get a judge’s order (a) approving the settlement and (b) declaring that these are the only stakeholders. That Order probably will require notice by publication for a period of weeks, but it is the only sure way of ending the corruption of your title. If you are not in court yet, then see if you can work into the agreement that you can file a quiet title action and that the party approving the modification will not contest it.

As you know, if you have been reading this blog for any length of time, I do not consider the lowering of the principal due as a reduction or a forgiveness. This raises tax issues but also raises your chances of getting a very good settlement.

Don’t limit yourself to the documents requested by the bank. The package you submit should contain a spreadsheet of calculations and the formulas used by an expert to determine a reasonable value for the property and a reasonable rate of interest and term. In your submission letter, you should demand that the party receiving it (which I think should include the subservicer, Master Servicer, Investment Banker and “trustee” of the investment pool) must respond in kind unless they accept the modification as proposed.

Realize also that modification is a sham PR stunt, but it can have teeth if you use it properly. The current pattern is the “servicer” or “pretender lender” tells you that in order to get relief you must stop paying on your mortgage. Their excuse is that if you are paying, there is nothing wrong. My position is that if you are paying, you are undoubtedly paying the wrong amount of interest and principal because of the receipts and disbursements that occurred off balance sheet and off the income statements of the intermediaries who claimed the insurance and bailout money as their own.

Thus your expert should provide a formula and estimate of the amount of money that should have been paid to investors but which is sitting in  custodial or operating accounts in the name of the investment banker or its affiliate. If that doesn’t bring down the principal then move on to the hardship stuff mentioned in the article below. But remember that if the expert is able to estimate the amount of principal that was mitigated by the subservicer (continuing to make payments after the loan was declared in default) and When the receipts occurred, this would reduce not only the principal demanded by demonstrate the extra interest paid on a principal balance that was misstated in the EOM statements and the notice of default and notice of sale (or service of process in the  judicial states). In such cases, which is by far the majority of all loans out there including those paid off and refinanced, the overpayment of interest and perhaps even an overpayment of principal.

This is tricky stuff. You need an expert who understands this article and has some ideas of his/her own. AND you need a lawyer who wants more than to simply justify his/her fee. You want a lawyer, obsessed with winning, and who won’t let go until the other side gives in. Remember these cases rarely if ever go to trial. Once the pretender lender takes you as a credible threat they cannot afford to posture any longer lest they end up in trial where it comes out they never owned or purchased the loan, the investor’s agents were prepaid by insurance, CDS and federal bailouts. Millions of foreclosures preceded you in which title was corrupted by the submission of a credit bid by a stranger (non-creditor to the transaction. The tide is turning — be part of the solution!

The Home Affordable Modification Program (HAMP) was established a few years ago by the Departments of the Treasury and Housing and Urban Development to help homeowners who are underwater avoid foreclosure.

Since 2010, one of HAMP’s programs has been the Principal Reduction Alternative (HAMP-PRA). Borrowers who qualify for the program have their mortgage principal reduced by a predetermined amount (called the PRA forbearance amount).

A borrower qualifies for the HAMP-PRA program only if:

  • the mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac
  • the borrower owes more than the home is worth
  • the house is the borrower’s primary residence
  • the borrower obtained the mortgage before January 1, 2009
  • the borrower’s mortgage payment is more than 31 percent of gross (pre-tax) monthly income.
  • up to $729,750 is owed on the 1st mortgage.
  • the borrower has a financial hardship and is either delinquent or in danger of falling behind
  • the borrower has sufficient, documented income to support the modified payment, and
  • the borrower has not been convicted of a real estate related fraud or felony in the last ten years.

The end goal of the HAMP-PRA program is to reduce the borrower’s mortgage loan until the borrower’s monthly payment is reduced to a monthly payment amount determined under the HAMP guidelines.

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