Rescissions and Preemptive Lawsuits by Borrowers — 2 Things the Courts Dislike the Most.

For short-term results it is absolutely essential that discovery be pressed as hard as possible and that attorneys prep for a punishing cross examination of the corporate representative of the company claiming to be the servicer for the company that claims to be the trustee or successor for a trust that by implication claims to own the loan but won’t allege that. Layers upon layers.

I have heard dozens of judges caution the “banks” that they better show up with someone who doesn’t need to place a call or wait to get authorization. But that is exactly what they do.

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Listen to Attorneys Neil Garfield and James Randy Ackley discuss this issue:

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

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Based upon reports coming in across the country it appears that we are actually receding from the application of law again. The two things that the Courts obviously don’t like and essentially refuse to enforce are preemptive lawsuits and TILA Rescission, even where they give it lip service approval. What are now known as preemptive lawsuits in which the borrower tries to head off their title and collections problem by demanding the real data on identification of a creditor who owns the debt, note and mortgage or deed of trust are a bridge too far although California looks like it is edging toward that the fastest amongst the states. See Yvanova decision

In both cases the Courts are grasping at straws because of the fear of undermining the entire banking system causing another financial collapse. As I did in 2008-2009 I am predicting that these cases will be decided in favor of the borrower. And again it might take more years to get there. Having examined pleadings and orders from across the country there is no doubt in my mind that everything we have said is true and these are useful tools for the borrower.

But for short-term results it is absolutely essential that discovery be pressed as hard as possible and that attorneys prep for a punishing cross examination of the corporate representative of the company claiming to be the servicer for the company that claims to be the trustee or successor for a trust that by implication claims to own the loan but won’t allege that. Layers upon layers.

In 2008 I had a conversation (previously reported) with one of the architects of this scheme and he predicted that the legal presumptions attached to the notes and mortgages and assignments would overcome any factual rebuttal regardless of how persuasive the rebuttal. I thought he was wrong. He was right, but back then I could tell he wasn’t as sure as he is today. It worked. Millions of foreclosures proceeded in favor of entities who had already stolen the money from investors and now were stealing their security.

Proof of all my basic premises is abundantly clear but well hidden by confidential settlements under seal. Cash offers to settle the case seem almost always to produce a settlement that includes damages for wrongful foreclosure.

Mediations continue to proceed almost exclusively with “representatives” who lack full settlement authority and truth to be told, they lack any settlement authority. This point is getting under the skin of many judges and should be pressed. I even said to one judge who ordered mediation that I questioned when his orders “meant anything at all.” He was upset but he started entering other orders that required real action by my opposition.

Mediations by definition under Supreme Court rules require the presence of the parties with full settlement authority. Instead the alleged servicer shows up with representative that has only one duty — handover an application for modification without any discussion or authority to settle. That is the stuff of motions for sanctions. I have heard dozens of judges caution the “banks” that they better show up with someone who doesn’t need to place a call or wait to get authorization. But that is exactly what they do and frequently they get away with it. Don’t expect sanctions to be ordered until the “bank” fails to “show up” more than twice.

Usually the attorney represents the servicer and if pressed, sometimes you can get an admission that the attorney is not able to assert they represent the plaintiff. The representative also might admit that he is there on behalf of the servicer but not the Plaintiff. In those cases I think you are well on your way to getting sanctions, but not until you are ordered back into mediation multiple times.

The problem remains the same — the servicer derives its alleged authority from the Plaintiff who derives its power to enforce from legal presumptions derived from possession and its declaration that it is the “holder.” The Plaintiff rarely alleges that it owns the debt, loaned the money or anything like that and they never allege that they are holders in due course which would mean, by definition, that the trust paid for the loan. The trusts did not pay for the loan and the creditor is, at least according to some live testimony I got in court, a group of unnamed investors. By definition then in hearings for sanctions relating to mediation, you can elicit admissions that defeat the foreclosure.

Once you get to the fact that the Trust never was in operation and was never funded it goes without saying that as an inactive business with no history it could not possibly have paid for the debt or even accepted the assignment. Having cut the chain (the hip bone is connected to the thigh bone etc) the strawman figure must collapse. NO authority flows from such an entity —especially when the representative says the creditors are the investors.

My prediction is that while it may still take some time, the courts are eventually going to routinely require real proof instead of relying exclusively upon legal presumptions arising from fabricated, forged, robo-signed documents. Real proof means real transactions — something that will unwind claims by the servicer and Trustee or successor like pulling a thread from a poorly made sweater.

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Arizona Foreclosure Mediation Considered

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Editor’s Notes:  

Mediation dropped Nevada foreclosures to much lower levels. That was especially true when the lawmakers put in provisions that made clear that this wasn’t a game. In order to foreclose you had to mediate first. And in order to mediate you had to have a decision maker present. AND if you are saying that the party showing up is a decision maker, you better have proof — which just another way of saying “standing.”

In the article below, it is clear that progress is slow but the proponents of mediation in Arizona are moving forward with a small pilot. Mediation is, after all, what nearly all the distressed homeowners want — a fair chance after some correction for the excesses of inflated appriasals and unaffordable loans foisted on the American public. Most homeowners are actually willing to accept mortgages where the principal due is still higher than the value of the property just so they can stay in the property. It is an unprecedented opportunity for the lender to get out of the mess they are finding themselves with all their REO proeprty subject to title challenges.

But the REAL problem is that strangers to the loan transaction are going to lose money unless the foreclosure goes through. So they are posing as lenders (pretender lenders) and pushing hard on fraudulent foreclosures because that results in a judicial or legal event in which the property was deemed to be in the REMIC pool (even if it wasn’t) and the loss falls on the investors instead of these strangers. These strangers are well known to us — BofA, Citi, JPM, Wells Fargo etc. They are fighting mediation because it threatens to expose the farce — that none of the foreclosures before were real and that the current ones are no more valid, legal or just than the old ones.

Homeowners simply do not owe money to these people posing as foreclosers, and they never did. There is no basis for foreclosure because the money came from investor lenders with whom the borrower never had the opportunity to make a deal because the real facts were withheld from both the investor lenders and the homeowner borrowers. That leaves the banks holding the bag, legally, if the law is applied and that is exactly what should happen. The obligations arising from the funding by pension funds should be settled through mediation and modification. Foreclosures would and should end, and our national nightmare would be over.

Hat tip to DR Blog

Arizona Foreclosure Mediation – Part 1

Last week at the Arizona Bar meeting my colleague Timothy Burr  presented a progress report for the Foreclosure Mediation Unit of ASU’s Lodestar Dispute Resolution Program. The program was well attended and has generated some buzz in the legal community. In some sense this was the FMU’s coming out party as we’ve been keeping a low profile because we’re in its pilot program phase. In my mind there’s nothing worse than rolling out a new program and touting it as a big deal before actually doing anything and then watching it die a humiliatingly public death.

Before talking about the program, a little background. Arizona is a state where almost every foreclosure is a non-judicial foreclosure, although judicial foreclosure is an option it is very rarely used. Non-judicial foreclosures tend to be short and sweet (or bittersweet as the case may be) because they are purely contractual as noted in the deed to the property.  Here’s a link to the best online primer on trustee’s sales I’ve found, and here’s the shorthand version. If you fall behind in your payments and the creditor decides to go forward with a trustee’s sale, a notice is placed on the house’s door announcing a trustee’s sale will occur 90 days from the posting, and the sale occurs on that day unless there’s a serious problem (like fraud or other similarly egregious claims brought in court) or there’s a last minute agreement between the creditor and debtor(s).

In 2009 I worked with others to create an Arizona Foreclosure Mediation Task force, and after several meetings it was clear that we didn’t have the clout to get anything off the ground so we disbanded. However, in late 2010/early 2011 the state was part of a nationwide settlemen with some of the big banks related to mortgage issues, and the Attorney General’s Office set aside part of those settlement monies for grants to assist with the state’s mortgage crisis.  Through this granting source the law school was able to obtain the funds to get foreclosure mediation off the ground. And, once the funds came in we hired Tim to direct and build the program.

Our initial question was – how do we even get into the game?  In judicial foreclosure states it’s pretty easy to know how to do this.  Other non-judicial foreclosure states such as Nevada, Washington, Oregon, and Hawaii have created statutory schemes requiring mediation before the trustee’s sale. Such legislation has been proposed in Arizona since 2008 or so, but it hasn’t gone anywhere. Thinking that the only sure fire mediation referral source would be a court, I spoke with the Pro-Se Clerk at the Bankruptcy Court and asked if a foreclosure mediation program might benefit the court. To my surprise he happened to be looking into ways to deal with pro-se bankruptcy filers who were filing for bankruptcy simply to hold up trustee’s sales. While bankruptcy can slow down the trustee’s sale process, the creditors typically are allowed to go forward with the sale when the court finds there’s no legal reason to keep it from going forward (again, the handy primer).  So far that’s been the vast majority of cases in the bankruptcy court. At the end of last summer we presented a foreclosure mediation proposal to the court. In this meeting the judges talked about the numerous cases where there clearly was a communication problem between the debtor and the mortgage servicers and/or holders, and they liked the idea. So, we entered into an agreement to report back after 25 referrals, at which time the court and the FMU would decide whether we should go forward with another 75 referrals.

My next post will present data about our first 25 referrals, which formed the basis of Tim’s presentation last week. And just so you know, we are going forward with the next 75 referrals.

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Az Statute on Mortgage Fraud Not Enforced (except against homeowners)

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Editor’s Comment:

With a statute like this on the books in Arizona and elsewhere, it is difficult to see why the Chief Law Enforcement of each state, the Attorney General, has not brought claims and prosecutions against all those entities and people up and down the fraudulent securitization chain that brought us the mortgage meltdown, foreclosures of more than 5 million people, suicides, evictions and claims of profits based upon the fact that the free house went to the pretender lender.

Practically every act described in this statute was committed by the investment banks and all their affiliates and partners from the seller of the bogus mortgage bond (sold forward, which means that the loans did not yet exist) all the way down to the people at the closing table with the homeowner borrower.

I’d like to see a script from attorneys who confront the free house concept head on. The San Francisco study and other studies clearly show that many if not most foreclosures resulted in a “sale” of property without any cash offered by the buyer who submitted a credit bid when they had not established themselves as creditors nor had they established the amount due. And we now know that they failed to establish themselves as creditors because they neither loaned the money nor purchased the loan in any transaction in which they parted with money. So the consideration for the sale was not present or if you want to put it in legalese that would effect those states that allow review of the adequacy of consideration at the auction.

I’d like to see a lawyer go to court and say “Judge, you already know it would be wrong for my client to get a free house. I am here to agree with you and state further that whether you rule for the borrower or this pretender lender here, you are going to give a free house to somebody.

“Because this party initiated a foreclosure proceeding without being the creditor, without spending a dime on the loan or purchase of the loan, and without any right to represent the multitude of people and entities that should be paid on this loan. This pretender, this stranger to this transaction stands in the way of a mediated settlement or HAMP modification in which the borrower is more than happy to do a traditional workout based upon the economic realities.

“And they they maintain themselves as obstacles to mediation or modification because they have too much to hide about the origination of this loan.

“All I seek is that you recognize that we deny the loan on which this party is pursuing its claims, we deny the default and we deny the balance. That puts the matter at issue in which there are relevant and material facts that are in dispute.

“I say to you that as a Judge you are here to call balls and strikes and that your ruling can only be that with issues in dispute, the case must proceed.”

“The pretender should be required to state its claim with a complaint, attach the relevant documents and the homeowner should be able to respond to the complaint and confront the witnesses and documents being used. And that means the pretender here must be subject to the requirements of the rules of civil procedure that include discovery.

“Experience shows that there have been no trials on the evidence in all the foreclosures ever brought during this period and that the moment a judge rules on discovery in favor of the borrower, the pretender offers settlement. Why do you think that is?”

“If they had a good reason to foreclose and they had the authority to allege the required the elements of foreclosure and they had the proof to back it up they would and should be more than willing to put a stop to all these motions and petitions from borrowers. But they don’t allow any case to go to trial. They are winning on procedure because of the assumption that the legitimate debt is unpaid and that the borrower owes it to the party making the claim even if there never was transaction with the pretender in which the borrower was a party, directly or indirectly.”

“Neither the non-judicial powers of sale statutes nor the rules of civil procedure based upon constitutional requirements of due process can be used to thwart a claim that has merit or raises issues that have merit. You should not allow the statute and rules to be applied in a manner in which a stranger to the transaction who could not even plead a case in good faith would win a foreclosed house at auction without court review and a hearing on the merits.”

Residential mortgage fraud; classification; definitions in Arizona

Section 1. Title 13, chapter 23, Arizona Revised Statutes, is amended by adding section 13-2320, to read:
13-2320.

A. A PERSON COMMITS RESIDENTIAL MORTGAGE FRAUD IF, WITH THE INTENT TO DEFRAUD, THE PERSON DOES ANY OF THE FOLLOWING:

  1. KNOWINGLY MAKES ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  2. KNOWINGLY USES OR FACILITATES THE USE OF ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  3. RECEIVES ANY PROCEEDS OR OTHER MONIES IN CONNECTION WITH A RESIDENTIAL MORTGAGE LOAN THAT THE PERSON KNOWS RESULTED FROM A VIOLATION OF PARAGRAPH 1 OR 2 OF THIS SUBSECTION.
  4. FILES OR CAUSES TO BE FILED WITH THE OFFICE OF THE COUNTY RECORDER OF ANY COUNTY OF THIS STATE ANY RESIDENTIAL MORTGAGE LOAN DOCUMENT THAT THE PERSON KNOWS TO CONTAIN A DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION.

Those convicted of one count of mortgage fraud face punishment in accordance with a Class 4 felony.  Anyone convicted of engaging in a pattern of mortgage fraud could be convicted of a Class 2 felony


NEVADA S. CT.: CREDITOR MUST ESTABLISH ITSELF AT MEDIATION OR FACE SANCTIONS

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A number of juicy points here, but the main one I find interesting is that they remanded Wells to the lower court for imposition of sanctions. Why? Because they didn’t produce the documents showing they were the creditor. And they can’t go forward with foreclosure unless they attempt mediation. But they can’t mediate if they are not the creditor.

This case should be used in every state and jurisdiction where it is required that the parties seek modification or mediation. Unless the so-called creditor establishes to the court that it is in fact the creditor and has authority to mediate it is a sham. This case clearly addresses that issue on all fours.

You should note that many judges are now imposing “local rules” that require mediation or HAMP modification to be invoked before they will hear the case so just because it isn’t in the statutes doesn’t mean the rule is not there.

 

Nevada Supreme Court: You Gotta Prove Chain of Title

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Nevada Supreme Court: You Gotta Prove Chain of Title

posted by Adam Levitin

A pair of very interesting foreclosure rulings were handed down today by the Nevada Supreme Court. They provide further evidence that documentation problems are rife in the mortgage industry, including documents showing chain of title. They also provide another example of a state supreme court demanding proof of valid chain of title before permitting foreclosure.

Both cases arise from Nevada’s foreclosure mediation program. In one case, Pasillas v. HSBC Bank USA, the Nevada Supreme Court ordered sanctions against HSBC for failing to mediate in good faith. What was the failure? HSBC failed to show up at the mediation with the required loan documentation, namely two pages of the mortgage note were missing, the assignment to HSBC was incomplete, a BPO rather than an appraisal was provided.  Moreover, HSBC didn’t show up at the mediation with authority to settle because it still required “investor approval.” The foreclosure mediator refused on these ground to authorize the foreclosure. The district court ordered the foreclosure to proceed, but the Nevada Supreme Court reversed the ruling and remanded with instructions for the district court to determine appropriate sanctions.  

Three things are of note in this case.  First, it shows that the Nevada Supreme Court takes a very serious view of enforcing the requirements of the state’s foreclosure mediation program. This was a unanimous decision. Second, it’s another illustratation of the mortgage documentation SNAFU. And third, there’s a very long footnote discussing and endorsing the Massachusetts Supreme Judicial Court’s ruling in Ibanez v US Bank:  “We agree with the rationale that valid assignments are needed when the beneficiary of a deed of trust seeks to foreclose on a property.”  That’s now two states Supreme Courts now that are making clear that there’s got to be good chain of title.  We can add to that the NC Court of Appeals and arguably New Jersey. 

All of this brings us to the second case, Levya v. National Default Servicing, Inc., another unanimous decision. Again, this case arose from a foreclosure mediation. At the mediation, Wells Fargo produced a certified original copy of the note and deed of trust naming another entity as the lender.  Wells did not produce any assignments, just a notarized statement that it was in possession of the original note and DOT and any assignments thereto. (Gosh, I wonder if that employee had personal knowledge of the fact or not… Do you really think the employee looked at the physical paper?). The mediator found that Wells Fargo hadn’t met the statutory requirements for the mediation, but didn’t make a finding of bad faith.  The homeowner petitioned the district court for review, arguing that Wells Fargo acted in bad faith and should be sanctioned.  The district court concluded that there was no bad faith. The Nevada Supreme Court reversed on appeal.

What’s interesting in this case is an extended discussion of what constitutes a valid assignment of deeds of trust and of notes. For starters, the court noted that the transfers “are distinctly separate.” Nevada, like Massachusetts, is a title theory state. That indicates that the mortgage follows the note theory just doesn’t work there. And it’s not as if the Nevada Supreme Court were unaware of UCC Article 9. The court discusses Judge Markell’s 9th Circuit BAP decision in In re Veal that includes a detailed discussion of the working of UCC Article 9. [In re Veal never addressed the issue of whether UCC 9-203(g) applies to deeds of trust (which are sale and repurchases, not liens); the language of 9-203(g) could be read not to apply, but that need not concern us here.]  Instead, Nevada’s views a deed of trust as a conveyance of land, so the state’s Statute of Frauds applies, and it requires a written assignment. Wells never produced a chain of assignments from the originator to whatever trust was involved. Maybe Wells could do so, but it didn’t.

Similarly, without being able to prove that the note had been endorsed or otherwise transferred to Wells (meaning that it was given to Wells for the purpose of enforcement), Wells “has not demonstrated authority to mediate the note.”  Put differently, Wells failed to prove standing.

Now let me emphasize that just because Wells didn’t prove standing doesn’t mean that it can’t. But this should be raising a lot of questions. Does the paper exist? Can we verify that it is in fact the original and the dating of the signatures? If so, why isn’t Wells producing it? Who is bearing the cost of these screw-ups? Is it MBS investors or is Wells eating it?

This strikes me as further evidence that the proposed BoA MBS settlement is just too hasty. There’s simply too much evidence of major problems in the system for investors to settle without knowing more. It’s a very different settlement if the documentation is fine, but the servicer’s just incompetent and can’t produce it than if the documentation was never done right in the first place and there’s nothing the servicer can do. If I were an MBS investor, I’d want to know which situation I was facing.

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In “Fair Game” Gretchen Morgenson continues to unravel the failing process of “saving homes” while the world ignores the simple truth that legally the homes are in no jeopardy but for the pranks and illusions created by the pretender lenders.

  • There is no valid foreclosure, auction, mediation, modification, short-sale, satisfaction of mortgage, release and re-conveyance, or even settlement with a party to whom the money is not owed and a party owning no rights under the security instrument (the mortgage or deed of trust).

It is all an illusion given reality by repetition not by truth. It is fraud ignored by courts who naturally find it far more likely that a deadbeat homeowner is trying to trick the court than a world class bank or someone pretending to be an agent of a world class bank. But in the end, whether title moves by foreclosure or any of the procedures mentioned above, there is no clear title. There is clouded, fatally defective title and a settlement with a party lacking any power to even be in the room.

This is why I have maintained that lawyers err when they do not aggressively (on the front end despite the rules requiring mediation etc.) insist on proof of authority to represent and proof of agency and proof that a decision-maker is in the room. If those elements are not satisfied, there can be deal — only the appearance of a deal.It is entirely possible that not even the lawyer has authority to represent and that the lawyer has conflicts of interest when you make the challenge. If a lawyer asserts he represents a party you have a right to demand proof of that. I’ve seen dozens of cases unravel at just that point.

The foreclosure mills play musical chairs but they are forgetting that this fraud on the court may come back and haunt them with liability, discipline and even criminal charges. They keep their options open until they absolutely are forced to name a pretender lender. That lawyer standing in the room has generally spoken to nobody other than a secretary in his own firm. he doesn’t know the client, or any representative of the client. He or she presumed to be authorized to represent the client because the file was given to him or her.

Think I am kidding. Try it out on Deutsch Bank or U.S. Bank or BONY-Mellon. Demand that the lawyer produce incontrovertible proof that their client knows the case even exists and that this lawyer represents them.

From what I am seeing, this interrupts the flow of plausible deniability. Nobody high up in the food chain wants to come in and say they have personal knowledge or that they have anything to do with these foreclosures. They just want their monthly fee for pretending to be Trustee over a pool that was never created, much less funded. They will try to use affidavits from people who know nothing and who are probably not even employed by the “client.” Even if they are employed a quick inquiry will reveal that the signatory lacks authority to hire legal counsel and has no personal knowledge of the case.

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September 18, 2010

When Mortgage Mediation Is a Gamble

By GRETCHEN MORGENSON

NEVADA — one of the states where home prices went stratospheric during the housing mania — is now reporting some of the nation’s most horrifying foreclosure figures. Last week, RealtyTrac said that 1 in every 84 households in the state had received a foreclosure notice in August, 4.5 times the national average.

To mitigate this continuing disaster, the Nevada Assembly created a foreclosure mediation program last year. Intended to help keep families in their homes, the program brings together troubled borrowers and their lenders to negotiate resolutions.

The program began on July 1, 2009, and in its first year, 8,738 requests for mediation were received and 4,212 completed, according to the state’s Administrative Office of the Courts. Some 668 borrowers gave up their homes and 445 were foreclosed upon in the period.

“We are the only state that requires the bank to do something — they must come to the table if the homeowner elects mediation,” said Verise V. Campbell, who administers the program. “We are now touted as the No. 1 foreclosure mediation program around the country. The program is working.”

During its first year, 2,590 cases — more than 60 percent of completed mediations — resulted in agreements between borrower and lender, Ms. Campbell said. But when asked how many actually wound up assisting homeowners through permanent loan modifications, she said her office did not track that figure.

Most of these agreements, say lawyers who have worked in Nevada’s program, were probably for temporary modifications like those that have frustrated borrowers elsewhere — you know, the kind of plan that lasts only three months until the bank decides that the borrower does not qualify for a permanent modification.

Clearly, the Nevada program is superior to the White House’s Home Affordable Modification Program, where borrowers have trouble even reaching lenders by phone. Forcing banks to meet with borrowers is definitely a good step.

But some mediators who have participated in the Nevada program and some lawyers who represent borrowers in it say it has flaws that may give the banks an advantage over borrowers.

Patrick James Martin, a lawyer in Reno who is a certified public accountant and an arbitrator for the Financial Industry Regulatory Authority, was an early mediator in the program. In a recent letter to Nevada’s state court administrator, Mr. Martin expressed concern that the program favored lenders.

“I really felt the lenders didn’t have too much interest in having the program work,” Mr. Martin said in an interview. “A lawyer would show up for the lender with none of the documents required by the program. When they got into the mediation, they would call somebody in a bullpen someplace who had a computer handy and the borrower might or might not qualify for modification. No discussion, no negotiation.”

Mr. Martin said he no longer received cases to mediate.

Another experienced mediator, who declined to be identified because he feared reprisals, was removed from the system after he recommended sanctions for banks that did not meet their obligations under the program. These duties include showing up, bringing pertinent documents and having authority to negotiate with the borrower.

After this mediator made a petition for sanctions in a case this year, Ms. Campbell sent him and the other parties in the matter a letter saying that the recommendation was not a “valid Foreclosure Mediation Program document.” The letter, on Supreme Court of Nevada stationery, also stated that nothing in the law that established the mediation program “requires or permits a mediator to recommend specific sanctions.”

But the statute governing mediations in Nevada clearly specifies that if a lender does not participate in the mediation in good faith, by failing to appear, for example, “the mediator shall prepare and submit to the mediation administrator a petition and recommendation concerning the imposition of sanctions” against the lender. The court then has the power to issue sanctions, which can include forcing a loan modification.

Keith Tierney is a veteran real estate lawyer who was until recently a mediator in the program. He, too, stopped receiving mediation assignments after recommending sanctions against lenders in a number of cases. He said that a program official told him last week that he was no longer eligible because he issued a petition and recommendation for sanctions, even though that is what the law allows.

When asked why she believed that such recommendations were not allowed, Ms. Campbell said mediators who issued them were not following the program rules as interpreted by Nevada’s Supreme Court.

But Mr. Tierney said: “The statute trumps rules. Every attorney in the world knows that if a rule is in contradiction to a statute, the rule is null and void.”

Administering the program gives Ms. Campbell great power. She issues certificates allowing foreclosures to take place after mediations occur. And while she said such certificates were submitted only when mediators’ statements showed they should be, mistakes have happened.

ONE woman went through a mediation in which the lender didn’t provide necessary documents and the mediator noted it, according to legal documents. Under the rules, no certificate is supposed to be issued in such a circumstance, but shortly afterward, the borrower received notice of a trustee sale. Ms. Campbell’s office had issued a certificate allowing foreclosure; only by filing for bankruptcy could the borrower stop it.

Ms. Campbell said such problems were rare. The state doesn’t produce data that would allow her assertion to be verified.

Ms. Campbell is not a lawyer and is not a veteran of the housing or banking industries. Before overseeing the mediation program, she worked in the casino industry. She worked for a Chinese company developing a gambling property in Macau and was director of administration for the Cosmopolitan Resort and Casino in Las Vegas.

Ms. Campbell said that her position involved administrative duties, not legal insight, and that her experience overseeing large projects amply prepared her to manage the Nevada mediation program.

But David M. Crosby, the lawyer who represented the borrower whose case resulted in an erroneous foreclosure action, said significant questions remained about the program. Among them, he said, was the role that Ms. Campbell played in the process.

“Does she just do administrative stuff or does she make decisions?” he asked. “That doesn’t seem well decided.”


Mass Extinction of Pools Becomes Clearer

Our good friend “Anonymous” has piped up with more vital information and expressed it more succinctly than I did.

“The senior tranches have largely already been paid and closed. Since the junior tranches are paid only if there is left over current payment – after the senior tranches have been paid. Thus, junior tranches are paid nothing (this is evident in investor lawsuits – damages do not deduct foreclosure recovery). If anything remains today from the toxic mortgage loan securitizations, it is the residual tranche – which has likely been resecuritized into a separate Trust – that is not a current pass-through security – but, rather, synthetically derived from a dismantled original Trust structure. “

Editor’s Note: In other words, if you have a high quality loan wherein you have a high credit score and received relatively good terms, it was in the “senior tranches.” The senior tranches were paid and closed. They were paid from the meager proceeds of the junior tranches, from insurance, credit default swaps etc. Bottom Line: If you got one of those mortgages, it has almost certainly been paid in full. So why are they still collecting your payments? Because they can.

Your obligation has most likely been satisfied long ago without any rights of subrogation. If you are in foreclosure now with one of these loans, the “Trustee” is in actuality out of the picture because the “Trust” was closed out (IF IT EVER LEGALLY EXISTED). All of this leads to the politically incorrect conclusion that people gt their houses for “nothing.” But that is not true.

ALL THE MONEY THAT WAS OWED ON THAT LOAN HAS BEEN PAID. WHY SHOULD ANYONE COLLECT ANYTHING FURTHER?

More comments from “Anonymous”

This is a very important post. I have been aware of cases where the defendant is sent to mediation without first identifying the real creditor. Some here have stated that the real party issue is not relevant because eventually the plaintiff will get his “ducks in a row” and proceed with the foreclosure under the real party name.

Not identifying the real party in court is not only fraud but also deprives the defendant of direct and timely negotiation with the real party true creditor. Thus, damages accrue to the defendant.

Although real party, in my opinion, is the single most important issue, I am not seeing courts enforce discovery to ascertain the real party. Once it can be established that the real party is not before the court, all the produced documents are also subject to question. I have seen cases where the real party is at issue – but most of the cases simply state that the plaintiff does not have standing – without attempting to demonstrate why the plaintiff is not the real party.

Since foreclosure cases most often are indicative of securitization, knowing the chain of sale/assignment in a securitization is crucial. Also, knowing what the “investors” are entitled to is important. Again, while I think this post is very important – i disagree with “there is nothing left to pay the investors who advanced money into a pool from which some mortgages were funded” 1) any investors who indirectly funded a “pool” – did not directly fund mortgages and 2) tranche “investors” – for which there a limited number of tranches – were only entitled to current income pass-through – not foreclosure recovery (which is not current and not passed on to pass-through security investors. (However, the residual tranche is not a pass-through – and is usually held by the servicer – who may -or may not be the current creditor). 3) the Trust is likely dissolved.

The fact that mediation is being conducted without identification of the current creditor – in whose name any modification must be contracted – is simply additional fraud upon the borrower defendant. This fraud is akin to “loan modification” scams that are being currently investigated by some state Department of Justices.

How and why the courts are allowing this to happen – and actually promoting it – is beyond me.

Editor’s Note: Legally this puts us at the horns of a dilemma. If we want to travel the path of “PAID IN FULL” then we are treading on the thin ice of accepting or admitting that the loan was actually legally and correctly assigned and indorsed into the pool, in addition to the usual “free house” talk.  If we travel the path of UNSUCCESSFUL ATTEMPTED ASSIGNMENT then we get to the conclusion that the loan is still owned by the originating lender, who was PAID IN FULL at the time of the loan closing, but still is the owner of record. If we travel both paths, we are presenting a highly complex argument that most judges won’t understand. This is why the winners out there are not making big splashes with exotic legal arguments (even though they would be right), the winners are getting down to the details that any Judge would understand — SHOW ME THE TRUST DOCUMENT, SHOW ME THE NOTE, SHOW ME THE ASSIGNMENT, SHOW ME THE INDORSEMENT, SHOW ME THE ACCOUNTING, SHOW ME THE CREDITOR ETC.

MANY THANKS, ANONYMOUS!!!

In States Requiring Mediation

More and more states are following the example set by the federal government in requiring mediation or modification attempts before going forward with litigation. We think that is a good idea in theory, but without the teeth that is in the enabling rules and statutes in Florida, you are just going to end up playing the same game of “who’s my lender.?”

Even in Florida, as in all cases, YOU must bring up the the issue of the authroity of the person being offered as a decision-maker.” 99 times out of a hundred they are not. The most they have is some authority from a dubious source to agree to some minor adjustments, like adding the payments to the back end of the mortgage.

Make no mistake about it — there is no decision-maker unless they have full power over that mortgage. That means they could if they want to, reduce the principal. They will argue that nobody has that power because the securitization documetns prohibit it. That is their little way of getting your eye off the ball.

Of course the securitization documents don’t allow certain things to be done to the mortgage. Those documents are aimed at restricting the actions of the agents of the principal (i.e. the creditor/lender).

It is ONLY an authorized representative of the investors who DO have the final say over any settlement that is needed in that mediation room and proof of that authority, which means notice to the investors, which means disclosing that notice to the investors and proof that a sufficient number of investors under the documents have approved the grant of decision-making authority to modify, amend, alter or change the obligation, note and/or mortgage.

Unless the person offered for the mediation has the authority to sign a satisfaction of mortgage on whatever terms he/she sees fit, they are not the decision-maker. If the other side refuses to comply move for contempt, sanctions and to strike their pleadings with prejudice.

If the other side fights this and they probably will, you should probably argue that this is a flat out admission that the principal (i.e., real party in interest, creditor, lender) is not represented in the proceedings because the other party in your litigation refuses to disclose them contrary to the requirements of federal law, state law and the rules of civil procedure.

If they can’t produce this authority then they also lack authority to foreclose. It might even be an admission that they are seeking to steal the house, put in their own entity and keep the proceeds of sale contrary to the interests of the investor who is entitled to be paid and contrary to the borrower who is entitled to a credit against the obligation that is due.

MERS Admits NO Interest in Mortgage and No Loss On Default

see MERS INSTRUCTIONS TO TRANSFER RIGHTS OPTION 1

MERS INSTRUCTIONS TO TRANSFER RIGHTS OPTION 2

PRECLOSING REG SHOWS PRE-KNOWLEDGE OF SECURITIZATION

Arnold admitted MERS does not have a beneficial interest in any mortgage; does not loan money; does not suffer a default if monies are not paid; etc...the internal agreement used by MERS expressly disavows any beneficial interest.

By Mark Mausert, Nevada  mark@markmausertlaw.com

On September 25, 2009, R.K. Arnold, the President and CEO of MERSCORP, Inc. — the parent corporation of Mortgage Electronic Registration Systems, Inc. was deposed in Alabama. Arnold is also an Officer of MERS. Arnold admitted MERS does not have a beneficial interest in any mortgage; does not loan money; does not suffer a default if monies are not paid; etc. etc. On November 11, 2009, William C. Hultman was deposed in Alabama and made the same admissions. And, of course, the internal agreement used by MERS expressly disavows any beneficial interest.

One tactic, if confronted with a foreclosure in Nevada, is to elect mediation. At the mediation, demand the assignments, i.e., the assignments which would cure the problem (according to Judge Riegle’s March 31, 2009, opinion, as affirmed by Judge Dawson on December 4, 2009). MERS and/or the lender has been unable to produce any such assignments — because they almost certainly do not exist.

Request the Mediator to check the appropriate box, i.e., the box which memorializes a failure by the lender to produce all required documents (all assignments must be produced per AB 149 — incorporated into Chapter 107 of the Nevada Revised Statutes). The requisite Certificate will not issue as a result. The Notice of Default is effectively negated. The “lender” must thereupon issue a new Notice and the borrower is again at liberty to elect mediation within 30 days of receipt thereof. The borrower should pay his or her taxes, and insurance, but not the mortgage — especially if upside down. It is an effective stopgap measure.

If the courts continue to follow the reasoning of Judge Riegle and Dawson a borrowr may, if otherwise eligible, declare bankruptcy; bring an adversary proceeding within the bankruptcy; and discharge the “mortgage” debt (which re a MERS mortgage is not really a mortgage but rather an unsecured debt — per Judge Riegle).

Or the borrower may initiate litigation based on causes of action for breach of contract, fraud by omission and racketeering (Chapter 207 of the Nevada Revised Statutes). By conducting systemic predatory lending, and coupling predatory lending with credit default swaps, i.e., bets homes would be foreclosed upon, the lenders breached the implied duty of good faith and fair dealing — the duty to refrain from frustrating the purpose of the contract. Borrowers generally harbored two main purposes — to secure a place to live and to safeguard/create an investment. By engaging in systemic predatory lending the banks frustrated the second purpose. They devalued the collaterized asset and breached the lending contract. Because this information was not disclosed, fraud by omission occurred. A series of fraudulent act constitutes racketeering, which gives rise to a claim for treble damages, plus fees and costs. Those are the theories.

Principal Reduction: Fair or Welfare?

For those ideologues who blindly call for “personal responsibility” we direct your attention to the tens of billions of subsidies (corporate welfare) given to hundreds of corporation, some of whom act contrary to the interests of the American citizen and U.S. Foreign Policy. Either take the blinders off or admit that you don’t care about the facts. In the last year we gave more money from taxpayers to large corporations than all the social programs combined including social security and medicare and medicaid. Isn’t THAT welfare?

Principal reduction is fair and practical and proper. The failure of attempts to encourage modifications and mediated settlements can be traced to a few simple facts. First, the companies being encouraged to modify or mediate the bloated loan packages sold to homeowners and qualified investors, don’t own the deals. They don’t have any authority and they make more money keeping the loans in default and foreclosing than they could ever make by modifying the loans.

[So if you want a law that actually accomplishes anything, then you would require that those who would attend modification conferences be authorized to make decisions. A mediation process would be preferable because it would require the parties to prove their identity and relationship to the transaction]

Second, principal reduction is actually a misnomer. It should be called fair market valuation. The property was not and never will be worth what it was appraised at, so the mortgage on it will never be worth its nominal value and the investment package purchased by institutional investors as mortgage backed bonds are correspondingly worth far less than how they were rated or valued.

The correction for this fraud is to adopt plans that place the victims as close to their original position as possible before they were tricked into this scheme. Tactically, that would be easiest if the borrowers and the creditors (institutional investors owning MBS) got together, sued the intermediaries who caused all this, collected the proceeds of Federal bailouts, and used it to make the investors whole and force the accounting for the notes and mortgages to be reflected as fair market value.

Sure the homeowners who get a “benefit.” But it is a far cry from welfare when you give back what was taken through deceit. The government is far behind the curve on this and the situation is going to get far worse as people walk from the securitized debt because they can. Why should a homeowner, auto owner, student debtor or credit card debtor pay a party who never advanced the money? Free? No, it would be proper to take the interests of investors and their real debtors into account and develop a formula to return equity to the homeowner and money to the investor.

RULES OF ENGAGEMENT FOR FORECLOSURE DEFENSE LAWYERS

See Judge Long’s Decision – Make sure you shepardize 384283_Ibanez Larace motion to vacate memorandum Oct2009Misc 384283 and Misc 3867551

when a foreclosure is noticed and conducted for one party
by another, the name of the principal must be disclosed in the notice.

the plaintiffs themselves recognized that they needed assignments in recordable form explicitly to them (not in blank) prior to their initiation of the mortgage foreclosure process, that the plaintiffs’ “authorized agent” argument fails both on its facts and as a matter of law

Editor’s Note: We’ve reported on this case before. And as a caution, there is report that the case was overturned on appeal but I don’t see it. Either way, the reasoning of the case is extremely persuasive and the only basis for reversal would be on procedural grounds, not substance.

Here is the essence of the pretender lender tactic. Their argument is basically that they have the right to foreclose whether or not they are the real party in interest, whether or not they are the holder in due course and especially whether or not they are the creditor in the “loan” transaction with the homeowner(s).

RULES OF ENGAGEMENT FOR FORECLOSURE DEFENSE LAWYERS: If you engage the “enemy” on their terms you will most likely lose. After all they created a narration that they think they can win. So YOUR strategy should be to change the narrative to YOUR points that can win.

In this case, it was simple. The Judge simply saw that the creditor was not involved in the foreclosure process and that the sale was therefore invalid. Implicitly the Judge was protecting both the real creditor and the homeowner from financial double (or multiple jeopardy).

So the Judge helped out the homeowner here by giving the homeowner the correct narrative. to wit: even if the party seeking to initiate the collection on the note or the foreclosure of the mortgage is an authorized agent (by virtue of possession or holding the note, etc.) the principal MUST BE DISCLOSED. How else can the court or the homeowner or the principal know the matter is subject to disposition through sale or judgment?

In a recent case in Arizona a pro se litigant finally penetrated the fog of Chauncery (see Dickens, BLEAK HOUSE), and the Judge who denied all homeowner motions before the weekend, finally got it and asked the attorney for the pretender lender what was going on (in another case in Ohio the Judge said “what are you trying to pull here?”).

Those cases are now proceeding through discovery (which we all know will never be completed) in which the identity of the creditor and a full accounting of ALL money transacted in connection with the subject loan is fully disclosed.

While there are cases we are tracking in which the homeowner is being bounced on his/her rear end, the tide is turning. The fact that there was federal bailout money and insurance proceeds paid in connection with these loans, is extremely relevant to the amount due and the identity of the current creditor.

This in turn is extremely relevant to the homeowner and the “lender” complying with federal mandate for modifications or state mandate for mediation. If the creditor is unknown how can the court or anyone else know that the “agent” is authorized?

At first the Judge’s knee jerk reaction is “What are you talking about, who else would make payments on this loan.?” But upon hearing the answer that the U.S. Treasury (TARP, TALF etc.), Federal reserve, and counter-parties in credit default swap insurance have made billions of dollars in payments and have not thus far accounted for their use of the money, the Judge may not believe you will succeed in your case but he will agree that you have a right to inquire. And THAT is all you need. because once you make the inquiry, the pretender lender will be on the defensive from that point on, disclosing itself as an impostor and a fabricator.


Taxing Wall Street Down to Size: Litigation Guidelines

The mistake I detect from those who are not faring well in court is the attempt to treat preliminary motions and hearings as opportunities to prove your entire case. Don’t talk about conspiracy and theft, talk about evidence and discovery.

every debtor is entitled to know the identity of the creditor, the full accounting for the entire obligation and all transactions arising from the transaction, and an opportunity to comply with Federal and State law requiring attempts at modification and/or mediation or settlement with the real parties in interest.
The banking system has become an agent of destruction for the gross domestic product and of impoverishment for the middle class. To be sure, it was lured into these unsavory missions by a truly insane monetary policy under which, most recently, the Federal Reserve purchased $1.5 trillion of longer-dated Treasury bonds and housing agency securities in less than a year. It was an unprecedented exercise in market-rigging with printing-press money, and it gave a sharp boost to the price of bonds and other securities held by banks, permitting them to book huge revenues from trading and bookkeeping gains.

Editor’s Note: Stockman notes the myth (lie) that “a prodigious upwelling of profitability will repair bank balance sheets and bury toxic waste from the last bubble’s collapse.” He questions whether the “profitability” will be there. I don’t question it, I know it — both for the reasons he cites and because the reality is that at least certain institution “in the loop” have tons of money and profitability “off-balance sheet” and I might add, off-shore.

According to published reports, Wall Street is “taxed” on this gorging of money at the rate of 1% while some poor bloke earning $80,000 is paying 16% just for social security, directly or indirectly. Fix the budget, cure the deficit? There it is!

The current profits reported, and the bonuses that come along with them, are being attributed widely in the press to the give-away of the federal reserve is letting them borrow at zero rates and then giving them a much higher rate for money held on deposit. While this is true all it really describes is the cover the laundering the plunder of $24 trillion back into the system where it will be moved around again producing more fees, more “profits”, and greater “liquidity” (proprietary currency).

The significance of this cannot be understated for the foreclosure litigator. We have the SEC in a 10 year confidentiality agreement with AIG so that the bailout and payment to counter-parties is being kept secret while the foreclosures proceed on obligations that have been paid in full, sometimes thirty times over. And we have the treasure trove “off-balance sheet” that was created by a secret undisclosed yield spread premium that should have investors, borrowers, and the regulators screaming. This second YSP as described recently in this blog, dwarfs any other fees, profits or other revenue or capital made during the creation stage of the mortgage mess.

The job of the litigator is to pique the interest of the judge enough to allow you to inquire about a FULL ACCOUNTING from the CREDITOR who is positively identified. Don’t ask the Judge to buy into the whole conspiracy theory aspect of the mortgage meltdown. He or she is not there to listen to “fiction.”

Just use your expert to prove there is an absence of facts and numbers such that the full accounting from debtor through creditor is not present and that under the most basic of premises, every debtor is entitled to know the identity of the creditor, the full accounting for the entire obligation and all transactions arising from the transaction, and an opportunity to comply with Federal and State law requiring attempts at modification and/or mediation or settlement with the real parties in interest.

The mistake I detect from those who are not faring well in court is the attempt to treat preliminary motions and hearings as opportunities to prove your entire case. Don’t talk about conspiracy and theft, talk about evidence and discovery.

Don’t ask the Judge to accept the idea that all these big name banks and other entities are thieves or interlopers, ask the Judge to accept the premise that you have alleged that the real creditor is not present, not represented, and that this action is in derogation of that creditor. Talk about your attempts to identify the creditor (investors) and the stonewalling you have received. Talk about your attempts to get a consistent complete accounting for the obligation and your inability to get it.

TALK ABOUT YOUR ATTEMPTS TO FIND AN ACTUAL DECISION MAKER (CREDITOR) WHOM YOU COULD SPEAK WITH AND ATTEMPT RECONCILIATION, MODIFICATION OR SETTLEMENT. 

January 20, 2010
Op-Ed Contributor

Taxing Wall Street Down to Size

By DAVID STOCKMAN

WHILE supply-side catechism insists that lower taxes are a growth tonic, the theory also argues that if you want less of something, tax it more. The economy desperately needs less of our bloated, unproductive and increasingly parasitic banking system. In this respect, the White House appears to have gone over to the supply side with its proposed tax on big banks, as it scores populist points against the banksters, too.

Not surprisingly, the bankers are already whining, even though the tax would amount to a financial pinprick — a levy of only 0.15 percent on the debts (other than deposits) of the big financial conglomerates. Their objections are evidence that the administration is on the right track.

Make no mistake. The banking system has become an agent of destruction for the gross domestic product and of impoverishment for the middle class. To be sure, it was lured into these unsavory missions by a truly insane monetary policy under which, most recently, the Federal Reserve purchased $1.5 trillion of longer-dated Treasury bonds and housing agency securities in less than a year. It was an unprecedented exercise in market-rigging with printing-press money, and it gave a sharp boost to the price of bonds and other securities held by banks, permitting them to book huge revenues from trading and bookkeeping gains.

Meanwhile, by fixing short-term interest rates at near zero, the Fed planted its heavy boot squarely in the face of depositors, as it shrank the banks’ cost of production — their interest expense on depositor funds — to the vanishing point.

The resulting ultrasteep yield curve for banks is heralded, by a certain breed of Wall Street tout, as a financial miracle cure. Soon, it is claimed, a prodigious upwelling of profitability will repair bank balance sheets and bury toxic waste from the last bubble’s collapse. But will it?

In supplying the banks with free deposit money (effectively, zero-interest loans), the savers of America are taking a $250 billion annual haircut in lost interest income. And the banks, after reaping this ill-deserved windfall, are pleased to pronounce themselves solvent, ignoring the bad loans still on their books. This kind of Robin Hood redistribution in reverse is not sustainable. It requires permanently flooding world markets with cheap dollars — a recipe for the next bubble and financial crisis.

Moreover, rescuing the banks yet again, this time with a steeply sloped yield curve (that is, cheap short-term money and more expensive long-term rates), is not even a proper monetary policy action. It is a vast and capricious reallocation of national income, which would be hooted down in the halls of Congress, were it properly brought to a vote.

National economic policy has come to this absurd pass because for decades the Fed has juiced the banking system with excessive reserves. With this monetary fuel, the banks manufactured, aggressively at first and then recklessly, a tide of new loans and deposits. When Wall Street’s “heart attack” struck in September 2008, bank liabilities had reached 100 percent of gross domestic product — double the ratio of a few decades earlier.

This was a measurement of the perilous extent to which bad investments, financed by debt, had come to distort the warp and woof of the economy. Behind the worthless loans stands a vast assemblage of redundant housing units, shopping malls, office buildings, warehouses, tanning salons and fast food restaurants. These superfluous fixed assets had, over the past decade, given rise to a hothouse economy of jobs that have now vanished. Obviously, the legions of brokers, developers, appraisers, contractors, tradesmen and decorators who created the bad investments are long gone. But now the waitresses, yoga instructors, gardeners, repairmen, sales clerks, inventory managers, office workers and lift-truck drivers once thought needed to work at these places are disappearing into the unemployment statistics, as well.

The baleful reality is that the big banks, the freakish offspring of the Fed’s easy money, are dangerous institutions, deeply embedded in a bull market culture of entitlement and greed. This is why the Obama tax is welcome: its underlying policy message is that big banking must get smaller because it does too little that is useful, productive or efficient.

To argue, as some conservatives surely will, that a policy-directed shrinking of big banking is an inappropriate interference in the marketplace is to miss a crucial point: the big Wall Street banks are wards of the state, not private enterprises. During recent quarters, for instance, the preponderant share of Goldman Sachs’ revenues came from trading in bonds, currencies and commodities.

But these profits were not evidence of Mr. Market doing God’s work, greasing the wheels of commerce and trade by facilitating productive financial transactions. In fact, they represented the fruits of hyperactive gambling in the Fed’s monetary casino — a place where the inside players obtain their chips at no cost from the Fed-controlled money markets, and are warned well in advance, by obscure wording changes in the Fed’s policy statements, about any pending shift in the gambling odds.

To be sure, the most direct way to cure the banking system’s ills would be to return to a rational monetary policy based on sensible interest rates, an end to frantic monetization of federal debt and a stable exchange value for the dollar. But Ben Bernanke, the Fed chairman, and his posse are not likely to go there, believing as they do that central banking is about micromanaging aggregate demand — asset bubbles and a flagging dollar be damned. Still, there can be no doubt that taxing big bank liabilities will cause there to be less of them. And that’s a start.

David Stockman, a director of the Office of Management and Budget under President Ronald Reagan, is working on a book about the financial crisis.

Florida Orders All Homestead Property Foreclosures into Mediation

See AOSC09-54_Foreclosures.

A good step in the right directions.

I would add that you should be very careful that you don’t get trapped into the “lender narrative.” The Judges are going to very receptive and even enthusiastic about referring these cases to mediation, so don’t annoy them with motions, pleadings or hearings that attempt to circumvent the mediation process. As for whether the order will be applied to existing cases, it remains to be seen how Florida Judges react to this Administrative Order.

CAUTION: The “Lender narrative” tries to focus attention exclusively on when you made your last payment and whether the obligation was created when you purchased the financial product (Mortgage Loan). It avoids all issues as to who is the creditor and how you could get a FULL accounting of all financial transactions in the securitization chain that either were or should have been allocated to your loan or the pool to which your loan was assigned. (Their tactic has been to keep the focus on the small window in which one servicer was receiving payments from the homeowner, ignore payments made on behalf of the homeowners, and to effectively bar you from inquiring as to whether they received any money from bailouts, AIG, or even if they turned over the payments you DID make to the creditor).

In order to avoid getting trapped into the “Lender narrative” I would suggest a number of possible steps. First, of course is get all your information together. There is an intake form on this blog that gets you to create a narrative of your own mortgage transaction. Second, get a forensic audit or review/analysis or TILA audit. Third, get a declaration from an “expert witness”. Consult with local counsel as this administrative order might be augmented by local rules. Several Circuits have issued their own administrative orders that have not yet been revoked or suspended.

If you are permitted to do so by the Judge, file a motion to dismiss the foreclosure suit and if that is denied then file your defenses, affirmative defenses and counterclaims. You don’t want to put yourself in the position where you are are effectively in default and give the plaintiff an opportunity to petition the court for entry of a default final judgment.

Lastly, in ALL events, I would seek answers to the basic questions: the identity of the creditor and the full accounting for ALL transactions allocated or could be allocated to your loan or the pool that your loan was alleged assigned. The QWR and DVL ought to accomplish this but it is rarely regarded seriously by the Plaintiff and Judges seem reluctant to enforce it because of their unfamiliarity with RESPA, TILA, UCPA etc. So you might need to file interrogatories that are limited to (I think) 25 questions including sub-parts. A Request to produce would also be needed.

Preliminary discovery (Interrogatories, Request to Produce, possibly Request for Admissions) should be directed at the single issue of identifying the decision-maker who could attend mediation for the “lender” side of the case.

Your position should be that as a result of the forensic review and the advice of your expert, an issue of fact exists — conflicting representations between those proffered or plead by Plaintiff’s counsel and the information you have obtained from experts. At this stage you should not try to win your case by having the Judge agree with you that the foreclosure is a fraud. Stay away from that assertion until you can really back it up.

The point is simply that an issue of fact exists that affects the mediation. Only true parties  to the dispute can be decision-makers. Only the creditor is a true party with that power unless it has been legally and irrevocably delegated to another party. Either way you need the idenity of the creditor(s), their contact information and the documentation that shows that the Plaintiff is empowered to make final decisions regarding this loan.

You need to conduct limited EXPEDITED discovery to either confirm the Plaintiff as the creditor or identify the creditor. Recent news reports of suits against intermediaries by bondholders and instructions from bondholders to fire servicers and other intermediaries who breached their fiduciary duties to the investors indicate a question of fact as to whether the party who filed this suit is a creditor, representing a creditor with authority to do so, whether they have decision-making authority and even whether the attorney appearing represents the Plaintiff or any other party.

Your point is that there is a question of fact that must be answered in discovery in order to proceed with compliance with the Supreme Court’s Order and that you are only asking for information the Plaintiff should already have if they properly field the foreclosure suit. You want the creditor’s name and contact information so you can (a) attempt to settle privately (b) comply with Federal mandate on seeking modifications, and (c) comply with Florida mandate on mediation. How can you do this if the creditor is not present? How can you enter into any agreement with a party whose authority to bind the creditor is in question?

You might need to file a motion with the Court and notice it for motion calendar. The motion would simply ask that you be permitted to conduct expedited limited discovery to facilitate the mediation process.

Philadelphia Gives Homeowners a Way to Stay Put

The real story with real solutions or at least partial solutions. Sheriff Green started all this. Bravo. Now start thinking of all the profits, transfers and records that should have been reported, filed and taxed and the state budget problems will be over.

November 18, 2009

Philadelphia Gives Homeowners a Way to Stay Put

PHILADELPHIA — Christopher Hall stepped tentatively through the entranceway of City Hall Courtroom 676 and took his place among dozens of others confronting foreclosure purgatory. His hopes all but extinguished, he fully expected the morning to end with a final indignity: He would sign over the deed to his house — his grandfather’s two-story row house; the only house in which he had ever lived; the house where he had raised three children.

“This is devastating,” he said last month as he sat in the gallery awaiting his hearing. “This is my childhood home. I grew up there. My mother passed away there. My grandfather passed away there. All of my memories are there.”

A union roofer, Mr. Hall, 42, had not worked since August 2008, when the contractor that employed him as a foreman went broke and laid off more than 40 people. He had not made a mortgage payment in more than a year, and his lender, Bank of America, was threatening to auction off his house through the sheriff’s office.

In most American cities, that probably would have been the end of the story: another home turned into distressed bank inventory by the national foreclosure crisis. But in Philadelphia, under a program begun last year to try to keep people in their homes, Mr. Hall entered the courtroom with a reasonable chance of hanging on.

Under the rules adopted by Philadelphia’s primary civil court, no owner-occupied house may be foreclosed on and sold by the sheriff’s office before a “conciliation conference,” a face-to-face meeting between the homeowner and the lender aimed at striking a workable compromise. Every homeowner facing a default filing is furnished with counseling, and sometimes legal representation.

So, as Mr. Hall stepped into the ornate courtroom just after 9 o’clock, he was swiftly provided with a volunteer lawyer, Kristine A. Phillips. She huddled briefly with a lawyer for Bank of America and returned with a useful promise. The bank would leave him alone for six more weeks while his housing counselor pursued further negotiations in an attempt to lower his payments permanently.

“You’ve got more time,” Ms. Phillips told him. “We’ll get this all worked out,” she said.

“Thank you so much,” Mr. Hall said softly, his body shaking with pent-up anxiety now tinged with relief. “It’s a lot of weight off of my shoulders.”

In a nation confronting a still-gathering crisis of foreclosure, Philadelphia’s program has emerged as a model that has enabled hundreds of troubled borrowers to retain their homes. Other cities, from Pittsburgh to Chicago to Louisville, have examined the program and adopted similar efforts.

“It brings the mortgage holder and the lender to the table,” said City Councilor John M. Tobin Jr. of Boston, who is planning to introduce legislation to enact a program in his city modeled on Philadelphia’s. “When people are face to face, it can be pretty disarming.”

When homeowners in Philadelphia receive legal default notices from their mortgage companies, the court system schedules a conciliation hearing. Canvassers working for local nonprofit agencies visit foreclosed homeowners, distributing fliers that inform them of their rights to a conference, and urging them to call a hot line that can direct them to free housing counselors.

“You can feel a certain sense of relief from their just being able to speak to someone about the program,” said Anna Hargrove, who works as a canvasser in West Philadelphia.

Every Thursday morning, the courtroom on the sixth floor of the regal City Hall here is given over to the conciliation conferences. It fills up with volunteer lawyers in jogging shoes, who are representing homeowners; gray-suited corporate lawyers working for mortgage companies; and all variety of delinquent borrowers — elderly citizens leaning on canes, construction workers in coveralls, parents with bored children in tow. The lawyers exchange preliminary settlement terms, while the homeowners fill out papers and wait.

In some cases, deals are struck that lower monthly payments for borrowers and allow them to retain their homes. When a homeowner cannot afford the home even at modified terms, the program helps to create a graceful exit, in which the borrower accepts cash for vacating the property or signs over the deed in lieu of further payment.

Those outcomes are similar to the ones produced by the Obama administration’s $75 billion program aimed at stemming foreclosures, which gives cash subsidies to mortgage companies as an inducement to accept lower payments. But in Philadelphia there is one crucial difference: the mortgage companies have no choice but to participate. They have to attend the conferences and negotiate in good faith or they cannot proceed with a sheriff’s sale.

Since the administration’s program was begun in March, it has been plagued by complaints of bureaucratic confusion and the indifference of mortgage companies. Many homeowners who have applied for loan modifications complain that their documents have been lost repeatedly or that they have been rejected without explanation.

Right to Mediation

The Philadelphia program forces an outcome by bringing together all the principals in one room. If the mortgage company proves intractable, the homeowner has the right to request mediation in front of a volunteer lawyer serving as a provisional judge, who relays recommendations to the program’s supervising judge. If the judge finds that the mortgage company is not acting in good faith, she can hold the house in limbo by denying permission for a sheriff’s sale.

While data is scant, a legal aid group, Philadelphia Volunteers for the Indigent Program, has complete information on 61 of the 309 cases it has resolved since October 2008 through the anti-foreclosure program. Only five resulted in sheriff’s sales, while 35 ended with loan modifications that lowered payments, the group says. The remaining 21 cases were divided among bankruptcies, loan forbearance and repayment arrangements, graceful exits and straightforward sales.

Some suggest the city’s program is plagued by the same basic defect as the Obama rescue plan: Nearly all the loans that have been modified have been altered on a trial basis, requiring homeowners to reapply for an extension of the terms after only a few months — a process that appears rife with obstacles, according to participants.

“There’s no teeth to the conciliation program,” said Matthew B. Weisberg, a Philadelphia lawyer who represents homeowners in cases involving alleged mortgage fraud. “It’s a largely ineffective stopgap prolonging what appears to be the inevitable, which is the loss of homes.”

Still, Mr. Weisberg grudgingly praised the plan.

“It’s arbitrary and unpredictable,” he said, “but it’s better than what anybody else is doing.”

Sheriff Delays Auction

 

Philadelphia’s Residential Mortgage Foreclosure Diversion Pilot Program began with a resolution passed by the City Council in March 2008, calling on Sheriff John D. Green to scrap the sheriff’s sale scheduled for April. Low-income neighborhoods were already experiencing a surge of foreclosures involving subprime loans given to people with tainted credit. With unemployment growing, lost paychecks were now pushing people into delinquency, reaching into middle-class and even wealthy neighborhoods. In early 2008, nearly 200 homes a month were being auctioned by the sheriff’s office, about one-third more than in 2006.

In West Philadelphia, Councilman Curtis Jones Jr., one of the sponsors of the resolution, watched his childhood neighborhood consumed by foreclosure, as the homes of working families — their porches once lined with flower pots — were boarded up with plywood.

“It becomes a blight on your entire community,” Mr. Jones said. “It creates an environment that fosters everything bad, from prostitution to drug dealing to wildlife, like raccoons taking over whole houses. One house becomes 10, and 10 becomes the whole block.”

In response to the resolution, Sheriff Green canceled the April sale. Meanwhile, Judge Annette M. Rizzo, who oversaw a local task force on stemming foreclosures, joined with the president judge of Philadelphia’s Court of Common Pleas to develop the program.

For Judge Rizzo, a high-energy woman who has long taken an interest in housing policy, the moratorium presented both a crisis and an opportunity. The sheriff was effectively refusing to fulfill his mandated responsibilities, leaving his office vulnerable to legal challenge. But if the mortgage companies could be persuaded to participate in an alternative way of addressing foreclosures, more people could stay in their homes.

“I realized we’re either going to go down in flames or we’re going to be a national model,” Judge Rizzo said. “We’re going to look at these cases and see what we can work out.”

Mr. Hall knew none of this. What he knew was that his life seemed to be unraveling.

Home to Four Generations

Ever since he was a teenager, he had earned a middle-class living with his hands. He had been raised by his grandfather in his three-bedroom house on Akron Street, in a predominantly Irish Catholic working-class neighborhood in Northeast Philadelphia.

He had attended St. Martin’s, the Catholic school around the corner, married his childhood sweetheart and still remained in his grandfather’s house, sending his own children — two boys (now in their 20s) and a 12-year-old girl — to the same school.

Mr. Hall, a soft-spoken yet intense man with a silver-tinged goatee, had worked seven days a week for much of this decade, bringing home weekly pay of about $1,000 — enough to build a deck in his backyard; enough to obtain a fixed-rate mortgage and buy the house for $44,000 when his grandfather succumbed to Alzheimer’s disease in the mid-1990s; enough for a motorcycle and a boat.

But three years ago, Mr. Hall committed the sort of mistake that has upended millions of households. At the recommendation of a for-profit credit counselor, he took out a new mortgage — a variable-rate loan from Countrywide Financial, which is now owned by Bank of America. He paid off some credit card debt, and he borrowed an extra $15,000 to renovate his home, expanding his mortgage balance to $63,000.

The loan began with manageable payments of about $500 a month. But Mr. Hall’s interest rate soon soared — something he says was never explained to him — lifting his payments to $950 a month.

“When I got the mortgage, I didn’t really understand it,” he said. “They told me this would improve my credit and that was it. It was just, ‘sign here,’ and ‘initial here.’ ”

No More Construction Work

He might still have managed had construction not come to a halt. By 2007, Mr. Hall’s employer was cutting work hours. In August 2008, it shut down, turning his $1,000 weekly paycheck into an $800 monthly unemployment check.

Every day, he set the alarm clock and headed to the union hall at 5 a.m., waiting and hoping for work. Every day, he went home, still jobless and discouraged, now confronting the displeasure of his wife, who worked as a nurse, and who he said never came to terms with their diminished spending power. After months of bickering, she left him last December, taking their daughter.

“She was saying, ‘How are we going to have Christmas? How are we going to go on vacation?’ ” he recalled. “She just seen it getting worse instead of better, and she got depressed.”

In January, his truck was repossessed, leaving him to walk through the winter dawn to the union hall for his daily ritual of defeat.

He watched the For Sale signs proliferating on his block, as mostly elderly neighbors found themselves unable to make their mortgage payments. He saw their belongings piled up on their front lawns as they abandoned their homes to foreclosure.

In September, the envelope finally landed with his default notice. A canvasser knocked on his door, proffering a flier urging him to call the city hot line. When he called, a housing counselor helped him assemble the paperwork for a loan modification and prepare for his conciliation conference.

When he arrived inside courtroom 676 in October, Mr. Hall carried a sheaf of wrinkled papers in a white plastic grocery bag. He occupied a solid wooden chair as an announcer called off cases for hearing. “Number 27, Wachovia Mortgage versus … .” A girl no older than 6, with flower-shaped plastic barrettes in her hair, fidgeted as her mother applied for legal representation.

Mr. Hall was struggling to come to terms with what he assumed was the end.

“I put my whole life into this house,” he said. “After I do all this work, they want to take it from me. You’ve got to regroup and move, but where? If I can’t pay my mortgage, how am I going to pay rent? And I have a whole house full of furniture.”

When he got the news that he had a few weeks’ reprieve, relief quickly gave way to the worry that had dominated his thoughts for months.

“It’s postponing the inevitable,” he said.

“I’m a man,” he kept saying, trying to make sense of how a lifetime of working on other people’s homes had put him here, staring at the potential loss of his own home; still hoping for relief.

“I don’t want no handouts,” he said. “I just want a reasonable loan that I can afford to pay so I can get on with my life.”

Foreclosure Defense: New York State Homeowners get SOME Help

It is a step in the right direction

June 19, 2008

Court Offers Homeowners Help Avoiding Foreclosure

Homeowners in New York who face foreclosures would be offered help by the courts to save their homes or at least make the overall process easier under a new program announced on Wednesday by the state’s chief judge.

The program calls for the creation of a new section of the court charged with helping borrowers and lenders reach speedy settlements. Homeowners would be notified almost immediately that they face a foreclosure proceeding; they would receive a list of legal and foreclosure counselors who can help them; and they would be invited to court for a settlement conference.

Parts of the program would be voluntary. The court would encourage, but not require, a settlement conference, and lenders would still be able to foreclose.

The chief judge, Judith S. Kaye, however, said that she hoped that getting the courts involved in the process early would allow them to be more than the final arbiters who order people removed from their homes.

“New Yorkers are losing their homes in record numbers,” Judge Kaye said on Wednesday during a news conference in Lower Manhattan. “Some neighborhoods are being ravaged by foreclosures. Can we be part of an influence for the good?”

A pilot version of the program is scheduled to start in Queens this summer.

According to court data, foreclosure filings across the state have increased by 150 percent since January 2005, Judge Kaye said. In Queens, she said, that figure is 223 percent. She said an additional increase of 40 percent was expected by the end of 2008.

United States Senator Charles E. Schumer said Judge Kaye’s plan was “just what the doctor ordered.”

He said more than half of the people facing foreclosure who received adequate professional counseling could save their homes.

“There are some who can’t afford to stay in their homes,” Mr. Schumer said. “There are many who can easily afford to stay in their home and were just given a terrible deal. A refinancing by a counselor can work.”

Congress is considering legislation that would refinance mortgages with federally insured loans. The legislation would authorize the Federal Housing Administration to insure an additional $300 billion in mortgages. Only homeowners whose primary residences were in danger of foreclosure could apply, and their lenders would first have to voluntarily reduce the principal balance of the original loan so that the new loan was more affordable.

Sponsors hope to send the bill, which has been approved by the House and is awaiting Senate action, to President Bush before the July 4 break.

Congress has already appropriated $180 million toward nonprofit foreclosure counselors, and another $180 million is proposed in a pending bill.

In Albany, there are different proposals before the Legislature. Under a plan favored by Gov. David A. Paterson, lenders would have to take steps to ensure that the people they lend money to have the ability to pay, and banks foreclosing on a house would have to give the homeowner 60 days notice before they begin foreclosure proceedings. A plan that passed the Assembly last month would go a step further by declaring a one-year moratorium on home foreclosures throughout the state.

Under the current state statute, lenders have 120 days to notify a borrower that they have filed for a foreclosure proceeding, which is usually done at the county clerk’s office. The lender then has an unspecified amount of time to file a request for the court’s assistance. That starts a series of motions and hearings that could take up to 18 months, said Ann T. Pfau, the chief administrative judge.

But under the court’s plan, the lender would be required to send the borrower a notification of complaint as soon as the foreclosure papers are filed with the county clerk. And once the lender asks for judicial help, the court will send the homeowner a letter with referrals to legal advisors and mortgage counselors who can help them for free, Judge Pfau said.

Mike Thompson, a mortgage counselor and the executive director of Iowa Mediation Service, said organizing conferences between borrowers and lenders could be complicated for several reasons. For one, the people who service loans for lenders can be anywhere in the country, which would make an in-person conference difficult. Also, borrowers are often reluctant to be upfront with pertinent information needed for negotiations, such as pay stubs and account information.

But the mere attempt to get the parties to sit down and talk before going through the full legal proceedings could represent a positive step, Mr. Thompson said.

“They’re setting up a new time frame,” he said. “What deadlines do in negotiations is it makes people be more realistic.”

David M. Herszenhorn and Jeremy W. Peters contributed reporting.

FORECLOSURE DEFENSE: EMERGENCY PLEADING

 

IN THE SUPERIOR/CIRCUIT COURT OF THE CITY OF xxxxxxxxx LOCATED AT xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx OF THE COUNTY OF xxxxxxxxxxxxx OF THE STATE OF xxxxxxxxxxxxxxxxxxxx.

Your Name  

VS

Trustee Name

1st Mortgage Name

2d Mortgage Name

 

VERIFIED EMERGENCY MOTION TO SET ASIDE JUDGMENT, CANCEL SALE AND DISMISS ACTION FOR FAILURE OF JURISDICTION AND LACK OF STANDING.

Comes now the defendant, YOUR NAME, Defendant in the above-styled action and move this Court to vacate and set aside the Judgment entered on the xxxx day of MONTH  2008, vacate and set aside the order dated xxxxx day of MONTH 2008 setting the sale date, and canceling the sale of the subject property and as grounds therefore says that the LENDERS/TRUSTEE committed a fraud upon the Court in that the LENDERS/TRUSTEE does not now and did not, at the time of the foreclosure, own the mortgage, the mortgage note, any security agreements, nor have the requisite power to represent the real party in interest, nor did the LENDERS/TRUSTEE allege facts in support thereof. This Emergency motion is not filed for the purposes of delay. The true facts (and consequent fraud perpetrated upon this Court by LENDERS/TRUSTEE) regarding the prior sale of the risk, servicing and ownership of the mortgage and note regarding the subject real property and alleged liability did not come to the attention of the undersigned defendant until the last few days. 

The Trustee does not have the current authority to proceed with the sale or foreclosure, nor to defend the claims of the undersigned Petitioners because of events subsequent to closing that changed both the ownership and authority of the subject note and mortgage, the authority of the Trustee to represent the interests of the real parties in interest and the lack of documentation showing that the real party in interest can be established. Trustee, the lenders, the underwriters and the presence of third party investors.”

The unique context in which this and other mortgages are being foreclosed on primary residential properties has left all affected parties in untenable positions resulting from rules which never contemplated these circumstances. None of the affected parties wish to see the subject property foreclosed, sold or the the property abandoned. All of the parties affected have it in their interest to preserve and maintain the security of the asset which is the subject of the instant action. It therefore falls within the equitable powers of the Court to order mediation, and to require people with decision-making authority to appear at said mediation prior to the consideration of the current motion or any subsequent motion.

WHEREFORE, Petitioner’s pray that this Honorable Curt will vacate the sale and/or judgment, deny any motion or petition for eviction on the grounds of lack of jurisdiction over the parties or the subject property, order mediation, refer this matter for changes in the rules of civil procedure, and grant such other and further relief as the court may deem just and proper. 

[Serve them with summons. You might have to serve the Secretary of state on Mortgage Lenders because they are foreign corporations. The court clerk will tell you the answer to that, I hope. Put the name and address of Lenders in your certification clause at the end.]

I HEREBY CERTIFY that a true and correct copy was sent by FAX and U.S. Mail to the following names, addresses and fax numbers this xxx day of xxxx(MONTH) 2008.to opposing counsel at the following number Attn: Name of Person Trustee Sale Officer. 

YOUR SIGNATURE: 

Notarize your signature

Then add a separate piece of paper that uses the same style, with no certification clause that says:

 

Proposed Order

 

This cause having come on to be heard upon emergency motion of the Petitioner and the court having reviewed the documents regarding the subject property, heard arguments regarding the motion, heard and received evidence regarding the motion, and taken judicial notice of the context of the great number of foreclosures of primary residences in the State of xxxxxxxxxxxxx, and the Court being otherwise fully advised in the premises, it is accordingly

 

ORDERED AND ADJUDGED:

 

1. This Court reserves ruling and reserves jursidiction to enter such orders on Petitioner’s motion and matters attendant to the Motion and other issues presented in this Order.

2. The sale of the subject property is stayed under further order of this Court. The sale date is hereby cancelled.

3. Petitioner is ordered to maintain the property, pay the utilities and taxes, and to provide proof of same to the Trustee every month.

4. Upon motion of the Trustee, in compliance with the legal requirements of standing, competence, and proof of facts, the Trustee may apply for hearing on motion to lift the Stay herein and reset the the sale date if the Petitioner can be shown to have failed to adequately maintain the property, reasonable wear and tear excepted, pay the utilities and taxes, or upon entry of an order by this or an appellate court vacating this Order and remanding the case for further consideration. 

5. The Trustee shall produce original documentation to the Court proving standing and authority to proceed under California statutes within ten (10) days from the date of entry of this court in the Court records. Time is of the essence. Failure of the trustee to file said documentation, including all original assignments or sales of the risk, security or debt specifically and expressly connected with this Petitioner and this Subject Property shall automatically constitute a dismissal with prejudice of the foreclosure, the sale, the eviction and any claim for past due payments from this Petitioner and shall relieve the Petitioenr from the accrual or payments for principal or interest to any party until such original documentation is produced.

6. The parties are ordered into mediation within 180 days at which the Trustee shall provide proof which maybe used in these proceedings showing the compliance or lack thereof with the applicable laws and rules of the State of California, the Federal government or any agency in connection with disclosures concerning, risk, fair market value, true cost of the loan, the true ultimate source of capital to fund the loan, and any changes in underwriting standards that were not disclosed to the Petitioner/Buyer and such documents shall also be filed with the Court at least ten (10) days prior to actual mediation. Failure of any affected party to appear at said medication shall constitute a waiver of any claim for payment, and claim for security or any other rights under the original transactions by which the loan documents were produced. The failure of any affected party to produce a person at the time and place of the mediation (which shall be set by order of the mediator) who is authorized to make a final decision regarding settlement shall constitute a non-appearance under this paragraph.

7. The mediator shall submit a written report of the agreement(s) of the parties which shall be approved and made binding by order of this Court upon proper notice and hearing of the parties. 

8. This case is hereby referred to applicable rule-making committees and agencies that are empowered to make temporary or permanent changes in the rules of civil procedure to accomodate the overload of forecloosure cases pending before the California Court system. Toward that end this Court suggests the following for consideration by said entities for temporary changes to the rules of civil procedure until the current mortgage meltdown crisis has passed:

 

Emergency Provisional Rules

Mortgage Foreclosures

 

These emergency rules of civil procedure apply to all foreclosures on all property, real or personal, initiated on or before January 1, 2007. No Judgment shall be executed, or if already executed, enforced, and no order of removal or eviction or seizure related to foreclosure shall be executed, or if already executed, enforced unless a Court of competent jurisdiction shall have executed an order finding as a matter of law and fact that the foreclosing party(ies) have complied with each and every provision contained herein.

 

1. Every Petition for Foreclosure and/or every action undertaken by a foreclosing party prior to seeking recovery or seizure, or occupancy of property, shall require the foreclosing party(ies) to file a verified complaint or affidavit alleging the facts supporting the claim for relief, executed by a person with actual knowledge of all facts alleged. The executing party on said verified Petition or affidavit shall affirmatively allege and actually be available for the taking of testimony by deposition or at an evidentiary hearing in the jurisdiction in which the property is located.

2. Each such Petition or Affidavit shall state the names and addresses of all parties involved in the loan transaction and shall be served under the rules governing service of process upon each of said parties as third party non-party litigants, if such parties were not the lender or borrower.

3. Each such Petition or Affidavit shall account for all funds that were passed through or to each party named in the action, the disposition thereof, and the manner and time in which the passage of said funds were dispersed, together with a citation to the mortgage documentation, including a quote of the relevant passages in the body of the Petition or Affidavit wherein said funds are disclosed and wherein said funds are authorized. 

4. Each such Petition or Affidavit shall state with particularity whether any changes occurred after the closing of the subject loan transaction in which parties or persons were changed including the names and addresses of all parties and persons related to the transactions subject to the mortgage.

5. With respect to sale or assignment or any joint or sharing arrangements concerning ownership, distribution of risk, or securitization in which the subject loan was referenced as collateral or otherwise, each such Petition shall state with particularity the details of each such transaction, the distribution or re-distribution of funds, and the documents employed by said parties after said closing.

6. Each and every such Petition or Affidavit shall affirmatively state that the foreclosing party(ies) have standing and authority to bring the action, defend counterclaims and answer affirmative defenses. The signature of the attorney on said pleading shall be mandatory and shall constitute a representation to the COURT that the filing attorney has performed proper due diligence to ascertain the truth of the allegations of legal standing and all other allegations.

7. Each such Petitioner or Affidavit shall be accompanied by attachments of the referenced documents to be included with the first service of such Petition or Affidavit.

8. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which supports said disclosure.

9. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which does not support said disclosure. If any allegation other than “none” is made under this paragraph, the foreclosing party(ies) shall state with specificity the law or fact upon which they should be excused from compliance.

10. Each such Petition or Affidavit shall attach a full and complete accounting of all money, value or funds transmitted, paid or or promised between all parties involved in the loan transaction before or after the loan transaction. In the event the borrower has been overcharged, undercharged, or charged correctly, the Petition or Affidavit shall so state affirmatively, providing a full accounting of said funds. 

11. No answer or response from the borrower shall be due unless and until the foreclosing party(ies) are in complete and full compliance with the provisions of these rules. Any prior answer or response may be amended by the borrower after a determination is made that the foreclosing party(ies) are in full compliance. No prior Judgement, order or other document or rule shall prevent the borrower from filing a response or answer after the foreclosing party(ies) are found to be in compliance with these rules.

12. In the event that the foreclosing party(ies) fails or refuses to comply with these rules, the foreclosure shall be barred with prejudice and until the terms of the mortgage are determined with certainty by the Court by clear and convincing evidence, no payments to the mortgagee shall be due. This provision that not apply to payment to taxing authorities. In such event of delay caused by the the foreclosing party(ies) the court may fashion such equitable remedies as the Court deems fit in its discretion. for example, the Court could apply delinquent payments to the end of the mortgage, thus extending the terms. 

13. In the event of non-compliance with these rules wherein the foreclosing party(ies) demonstrate to the Court the probability that they could amend their filing to conform to the requirements herein, the foreclosing party(ies) shall file an amended Petition or Affidavit on or before thirty (30) days from the date of the order of the Court allowing the amendment. Failure to file within said thirty period shall be grounds for a mandatory immediate dismissal with prejudice. 

14. In the event of the filing of a verified amended Petition or Affidavit, Borrower shall have ninety (90) days in which to answer or respond. Failure to answer or respond shall not relieve the burden of proof of the foreclosing party(ies) in compliance with state, local and Federal law, and in compliance with these rules.

15. The Court may grant attorney fees and costs to the prevailing party in each case where a motion or other filing occurs, wherein a determination is made in an adversary proceeding that the filing is in or out of compliance. 

16. In the event a foreclosure has already been completed and all subsequent and customary actions have occurred and no bona fide third party has taken control or occupancy of the property, these rules may applied retroactively. 

17. Once compliance has been established and the issues are joined, the Court shall enter an order requiring the parties to enter into a process of mediation. The purpose of the mediation shall be to fashion a settlement which provides relief and incentives to all affected parties, including non-party litigants. Mediation shall take place no earlier than thirty (30) days after the entry of the mediation order, and not later than is reasonably possibly given the volume of cases and the availability of competent mediators.

 

These rules are subject to review by the Court but are effective immediately. Comments and applications to be heard shall be available in keeping with the usual and customary methods of proposed rule changes. Said rules shall be effective unless and until stated otherwise by the Court.

 

DONE AND ORDERED THIS XX DAY OF XXXMONTH, 2008, IN THE CITY OF XXXX, STATE OF XXXXXXXXXXX.

 

________________________________

CIRCUIT/DISTRICT JUDGE

 

Provide self addressed stamped envelopes for the Court to use for mailing out the order to the Trustee, and the Lenders. 

 

Mortgage Meltdown: Send this to your State Supreme Court and Local Court

The problem for homeowners is that however many ideas are put forward they won’t be effective in time to save most people, they won’t be in time to save the economy, and they won’t be in time to save our currency from further wrenching devaluation. It is the fierce urgency of now that cannot even wait to the election or January 20, 2009. There is only one place where immediate relief can be achieved — the Court System. There are constitutional impediments to interference with the mortgage foreclosure process. Yet there is authority in the judicial system to change the rules as long as it does not significantly impede or in this case, it should enhance access to the courts and the ability to mount a credible defense to foreclosures on predatory or fraudulent loans. 

These are the rules that could be enacted by each court in the land that would [a] slow down the process and [b] protect borrowers from the steamroller of lender foreclosures and [c] protect lenders, investment bankers and investors from themselves. These rules preserve and enhance due process so that the unsophisticated borrower is not wiped out again by his or her lack of knowledge. 

 

Emergency Provisional Rules

Mortgage Foreclosures

These emergency rules of civil procedure apply to all foreclosures on all property, real or personal, initiated on or before January 1, 2007. No Judgment shall be executed, or if already executed, enforced, and no order of removal or eviction or seizure related to foreclosure shall be executed, or if already executed, enforced unless a Court of competent jurisdiction shall have executed an order finding as a matter of law and fact that the foreclosing party(ies) have complied with each and every provision contained herein.

1. Every Petition for Foreclosure and/or every action undertaken by a foreclosing party prior to seeking recovery or seizure, or occupancy of property, shall require the foreclosing party(ies) to file a verified complaint or affidavit alleging the facts supporting the claim for relief, executed by a person with actual knowledge of all facts alleged. The executing party on said verified Petition or affidavit shall affirmatively allege and actually be available for the taking of testimony by deposition or at an evidentiary hearing in the jurisdiction in which the property is located.

2. Each such Petition or Affidavit shall state the names and addresses of all parties involved in the loan transaction and shall be served under the rules governing service of process upon each of said parties as third party non-party litigants, if such parties were not the lender or borrower.

3. Each such Petition or Affidavit shall account for all funds that were passed through or to each party named in the action, the disposition thereof, and the manner and time in which the passage of said funds were dispersed, together with a citation to the mortgage documentation, including a quote of the relevant passages in the body of the Petition or Affidavit wherein said funds are disclosed and wherein said funds are authorized. 

4. Each such Petition or Affidavit shall state with particularity whether any changes occurred after the closing of the subject loan transaction in which parties or persons were changed including the names and addresses of all parties and persons related to the transactions subject to the mortgage.

5. With respect to sale or assignment or any joint or sharing arrangements concerning ownership, distribution of risk, or securitization in which the subject loan was referenced as collateral or otherwise, each such Petition shall state with particularity the details of each such transaction, the distribution or re-distribution of funds, and the documents employed by said parties after said closing.

6. Each and every such Petition or Affidavit shall affirmatively state that the foreclosing party(ies) have standing and authority to bring the action, defend counterclaims and answer affirmative defenses. The signature of the attorney on said pleading shall be mandatory and shall constitute a representation to the COURT that the filing attorney has performed proper due diligence to ascertain the truth of the allegations of legal standing and all other allegations.

7. Each such Petitioner or Affidavit shall be accompanied by attachments of the referenced documents to be included with the first service of such Petition or Affidavit.

8. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which supports said disclosure.

9. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which does not support said disclosure. If any allegation other than “none” is made under this paragraph, the foreclosing party(ies) shall state with specificity the law or fact upon which they should be excused from compliance.

10. Each such Petition or Affidavit shall attach a full and complete accounting of all money, value or funds transmitted, paid or or promised between all parties involved in the loan transaction before or after the loan transaction. In the event the borrower has been overcharged, undercharged, or charged correctly, the Petition or Affidavit shall so state affirmatively, providing a full accounting of said funds. 

11. No answer or response from the borrower shall be due unless and until the foreclosing party(ies) are in complete and full compliance with the provisions of these rules. Any prior answer or response may be amended by the borrower after a determination is made that the foreclosing party(ies) are in full compliance. No prior Judgement, order or other document or rule shall prevent the borrower from filing a response or answer after the foreclosing party(ies) are found to be in compliance with these rules.

12. In the event that the foreclosing party(ies) fails or refuses to comply with these rules, the foreclosure shall be barred with prejudice and until the terms of the mortgage are determined with certainty by the Court by clear and convincing evidence, no payments to the mortgagee shall be due. This provision that not apply to payment to taxing authorities. In such event of delay caused by the the foreclosing party(ies) the court may fashion such equitable remedies as the Court deems fit in its discretion. for example, the Court could apply delinquent payments to the end of the mortgage, thus extending the terms. 

13. In the event of non-compliance with these rules wherein the foreclosing party(ies) demonstrate to the Court the probability that they could amend their filing to conform to the requirements herein, the foreclosing party(ies) shall file an amended Petition or Affidavit on or before thirty (30) days from the date of the order of the Court allowing the amendment. Failure to file within said thirty period shall be grounds for a mandatory immediate dismissal with prejudice. 

14. In the event of the filing of a verified amended Petition or Affidavit, Borrower shall have sixty (60) days in which to answer or respond. Failure to answer or respond shall not relieve the burden of proof of the foreclosing party(ies) in compliance with state, local and Federal law, and in compliance with these rules.

15. The Court may grant attorney fees and costs to the prevailing party in each case where a motion or other filing occurs, wherein a determination is made in an adversary proceeding that the filing is in or out of compliance. 

16. In the event a foreclosure has already been completed and all subsequent and customary actions have occurred and no bona fide third party has taken control or occupancy of the property, these rules may applied retroactively. 

17. Once compliance has been established and the issues are joined, the Court shall enter an order requiring the parties to enter into a process of mediation. The purpose of the mediation shall be to fashion a settlement which provides relief and incentives to all affected parties, including non-party litigants. Mediation shall take place no earlier than thirty (30) days after the entry of the mediation order, and not later than is reasonably possibly given the volume of cases and the availability of competent mediators.

These rules are subject to review by the Court but are effective immediately. Comments and applications to be heard shall be available in keeping with the usual and customary methods of proposed rule changes. Said rules shall be effective unless and until stated otherwise by the Court.

Mortgage Meltdown: Paulson is wrong on bailout

Paulson’s comments yesterday were inappropriate. He just doesn’t get it. He is arguing for hitting the iceberg and then let the deadly water take care of the problem. The ship is the American economy. And the waters are a legal system that assumes, all things being equal, that the process of foreclosure, eviction and losses on CDO investments will eventually find a state of equilibrium from which the economy will rebound. He is wrong.

All things are not equal because of the scale of losses, the scope of the economic effects, and the deadly despair descending upon the American consumer in a consumer driven economy. Take away the spending of consumers, and the United States is a third world economy. Maybe it doesn’t need to be that way, but it is now. 

On the other hand he is right in one respect — that a bailout, using federal funds, will not alone solve the problem. More fiat funds pushed into a marketplace where the dollar is already declining in a virtual free fall will cause problems of its own — continuing devaluation of the U.S. dollar, other countries severing their currency ties with the dollar, a huge increase in U.S. debt, spiraling inflation at a level not seen before in our lifetimes, and a sea-change in life-style as virtual ghost towns dot the landscape consisting of abandoned homes. 

The answer is a combination of remedies and rewriting the rules so all things ARE equal. A relatively small Federal bailout along the lines of the Barney Frank proposal will provide some breathing room. 

Republicans and Democrats need to get together under the leadership of their standard bearers in this election year and refuse to pass any legislation for funding or otherwise until this credit crisis is addressed in an immediate comprehensive way. 

Federal and state agencies and judicial systems, should bend their rules as much as possible to provide a de facto moratorium on foreclosures and evictions — re- routing cases into mediation procedures and providing for mediation reports in 90 days before the cases can continue.

Attorney Generals of each state should intervene in each foreclosure case, basically alleging that the lender participated in a vast conspiracy to defraud the borrower and with reckless disregard to the damage their behavior would cause to the economy of the state and the nation, not to speak of cities in other countries who are now decreasing social services because the cash they thought they had evaporated with the diminution of value “Safe” “cash equivalent” CDO investments they thought they had. 

See the previous post, for details plans on remedial legislation which Congress and each of the states can pass to aggressively put down this crisis. If Federal authorities fail to act, then states, individually and collectively should encourage their state chartered banks to start issuing bank notes as an alternative to U.S. currency. Agreements with Forex and precious metals traders should be reached to back up these new currencies. A radical solution to a radical problem. Failure to act will leave every American citizen bereft except those who are already taking hedge positions in foreign exchange and precious metals and other commodities. 

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