Pay Attention! Look at the money trail AFTER the foreclosure sale

My confidence has never been higher that the handling of money after a foreclosure sale will reveal the fraudulent nature of most “foreclosures” initiated not on behalf of the owner of the debt but in spite of the the owner(s) of the debt.

It has long been obvious to me that the money trail is separated from the paper trail practically “at birth” (origination). It is an obvious fact that the owner of the debt is always someone different than the party seeking foreclosure, the alleged servicer of the debt, the alleged trust, and the alleged trustee for a nonexistent trust. When you peek beneath the hood of this scam, you can see it for yourself.

Real case in point: BONY appears as purported trustee of a purported trust. Who did that? The lawyers, not BONY. The foreclosure is allowed and the foreclosure sale takes place. The winning “bid” for the property is $230k.

Here is where it gets real interesting. The check is sent to BONY who supposedly is acting on behalf of the trust, right. Wrong. BONY is acting on behalf of Chase and Bayview loan servicing. How do we know? Because physical possession of the check made payable to BONY was forwarded to Chase, Bayview or both of them. How do we know that? Because Chase and Bayview both endorsed the check made out to BONY depositing the check for credit in a bank account probably at Chase in the name of Bayview.

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OK so we have the check made out to BONY and TWO endorsements — one by Chase and one by Bayview supposedly — and then an account number that might be a Chase account and might be a Bayview account — or, it might be some other account altogether. So the question who actually received the $230k in an account controlled by them and then, what did they do with it. I suspect that even after the check was deposited “somewhere” that money was forwarded to still other entities or even people.

The bid was $230k and the check was made payable to BONY. But the fact that it wasn’t deposited into any BONY account much less a BONY trust account corroborates what I have been saying for 12 years — that there is no bank account for the trust and the trust does not exist. If the trust existed the handling of the money would look very different OR the participants would be going to jail.

And that means NOW you have evidence that this is the case since BONY obviously refused to do anything with the check, financially, and instead just forwarded it to either Chase or Bayview or perhaps both, using copies and processing through Check 21.

What does this mean? It means that the use of the BONY name was a sham, since the trust didn’t exist, no trust account existed, no assets had ever been entrusted to BONY as trustee and when they received the check they forwarded it to the parties who were pulling the strings even if they too were neither servicers nor owners of the debt.

Even if the trust did exist and there really was a trust officer and there really was a bank account in the name of the trust, BONY failed to treat it as a trust asset.

So either BONY was directly committing breach of fiduciary duty and theft against the alleged trust and the alleged trust beneficiaries OR BONY was complying with the terms of their contract with Chase to rent the BONY name to facilitate the illusion of a trust and to have their name used in foreclosures (as long as they were protected by indemnification by Chase who would pay for any sanctions or judgments against BONY if the case went sideways for them).

That means the foreclosure judgment and sale should be vacated. A nonexistent party cannot receive a remedy, judicially or non-judicially. The assertions made on behalf of the named foreclosing party (the trust represented by BONY “As trustee”) were patently false — unless these entities come up with more fabricated paperwork showing a last minute transfer “from the trust” to Chase, Bayview or both.

The foreclosure is ripe for attack.

Same Old Story: Paper Trail vs, Money Trail (Freddie Mac)

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

The explanations of securitization contained on the websites of the government Sponsored Entities (GSE’s) clearly demonstrate what I have been writing for 11 years and reveal a pattern of illusion and deception.

The most important thing about a financial transaction is the money. In every document filed in support of the illusion of securitization, it steadfastly holds firm to discussion of paper instruments and not a word about the actual location of the money or the actual identity of the obligee of that money debt.

Each explanation avoids the issue of where the money goes and how it was “processed” (i.e., stolen, according to me and hundreds of other scholars.)

It underscores the fact that the obligee (“debt owner” or “holder in due course” is never present in any legal proceeding or actual transaction or transfer of of the debt. This leaves us with only one  conclusion. The debt never moved, which is to say that the obligee was always the same, albeit unaware of their status.

Knowing this will help you get traction in the courtroom but alleging it creates a burden of proof for you to prove something that you know is true but can only be confirmed with access to the books, records an accounts of the parties claiming such transactions ands transfers occurred.

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For one such example see Freddie Mac Securitization Explanation

And the following diagram:

Freddie Mac Diagram of Securitization

What you won’t find anywhere in any diagram supposedly depicting securitization:

  1. Money going to an originator who then lends the money to the borrower.
  2. Money going to a named REMIC “Trust” for the purpose of purchasing loans or anything else.
  3. Money going to the alleged unnamed beneficiaries of a named REMIC “Trust.”
  4. Money going to the alleged unnamed investors who allegedly purchased “certificates” allegedly issued by or on behalf of a named REMIC “Trust.”
  5. Money going to the originator for sale of the debt, note and mortgage package.
  6. Money going to originator for endorsement of note to alleged transferee.
  7. Money going to originator for assignment of mortgage.
  8. Money going to the named foreclosing party upon liquidation of foreclosed property. 
  9. Money going to the homeowner as royalty for use of his/her/their identity forming the basis of value in issuance of derivatives, hedge products and contract, insurance products and synthetic derivatives.
  10. Money being credited to the obligee’s loan receivable account reducing the amount of indebtedness (yes, really). This is because the obligee has no idea where the money is coming from or why it is being paid. But one thing is sure — the obligee is receiving money in all circumstances.

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

Compelling Discovery and Explaining Why You want Answers

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This is not legal advice on your case. Consult a lawyer who is licensed in the jurisdiction in which the transaction and /or property is located.

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I have always said that these cases will be won in discovery. Discovery must of course be preceded by proper pleading. Typically borrowers ask all the right questions and get no answers. They are met with objections that are, to say the least, disingenuous. The motion to compel better answers or to overrule the objections of the party seeking foreclosure is the real battle ground, not the trial. And speaking from experience, just noticing the objections for hearing or using a brief template and then  relying on oral argument will not, in most cases, cut to the quick.  The motions and hearings aimed at forcing the opposition to answer fairly simple questions (yes or no responses are best) should be accompanied with a brief that states just why the question was relevant, and why you need the answers from the opposition and why you can’t get it any other way. This involves educating the judge as to the fundamentals of your position, your defenses and your claims as the backdrop for why the discovery requests you filed should be compelled.

Practically every case in which there was a major settlement under seal of confidentiality involves an order from a judge wherein the servicer or bank was required to answer the real questions about the actual money trail and the accounting and management of the money from soup to nuts. So if a judge says that the borrower gets all the information about the loan starting with the source of funding at the alleged time of origination and the judge says that the borrower is entitled to know where the borrower’s money was sent after being received by a servicer, and the judge says the borrower can know what other payments were made on account of the subject loan, the case is ordinarily settled in a matter of hours.

The only money trail is the one starting with investors who thought they were buying mortgage backed securities, the proceeds of which sale would go to a REMIC trust, but were instead diverted to the coffers of the investment bank who created and sold those mortgage backed securities. And it ends with a “remote” vehicle sending money to a clueless closing agent who assumes that the money came from the originator. BECAUSE THE MONEY DIDN’T COME FROM THE ORIGINATOR, THERE IS NO MONEY TRAIL AFTER THE ALLEGED “CLOSING.” Who would pay an originator for a loan they know the originator never funded? Who would pay an assignor when they know the assignor never paid any money to acquire the loan, debt, note or mortgage? Answer nobody. And that is why the servicers and banks cannot open their books up — the entire scheme is an illusion.

What follows is an abstract from my notes on one such case: (The trial was bifurcated in time)

What we are seeing here is a master at obfuscation. In one case I have in litigation, Wells Fargo wants to assert that it can foreclose on the mortgage in its own name. It has alleged in the complaint that it is the owner of the loan and then testified that it is not the owner but rather the servicer. It has testified that Freddie Mac was the investor from the start but it has produced an assignment from a nonexistent entity in which Wells Fargo was the assignee.

Nobody testified that they were in court on behalf of any investor and the only thing we have is the bare assertion from the witness stand that Freddie Mac is the investor from the start. And yet during this whole affair, Wells posed as the lender, owner and then servicer of the loan without any authority to do so. And they posed as a party who could foreclose on the borrower without any evidence and probably without any knowledge as to what was showing on the books and records of whoever actually did the funding of this loan (or if the funding was in the amount claimed at closing) or whoever is claimed to be the owner of the loan.

A Motion to Compel should be filed citing their response to Yes or No questions — objection vague and ambiguous etc.

The point should be made that the defendants are the sole source of records, data and witnesses by which the Plaintiff’s case can be proven as to liability, damages and punitive damages. We have limited discovery to asking about their procedures as they relate to this particular alleged loan.

The issue at hand is that our position is that they knew that the alleged originator could not have been the lender because they did not exist, did not have bank account etc. And they have admitted that the named successor was not the lender either and  admit that the foreclosing party did not buy the loan, the debt, the note or the mortgage.. Not until the first part of trial did the representative from Wells state that contrary to the pleading they were acting as servicer not the creditor or owner of the loan. And they stated that the real lender was Freddie mac “from the start.”

So we are asking how it happened that Wells entered the picture at all as servicer or representative for any actual creditor — the only indication we have that some creditor exists is the surprise testimony from the designated representative of Wells in which he admitted that the named originator was not the lender, could not explain how such an “originator” was put on the note and mortgage and that Wells Fargo was not the lender or owner of the loan either. But we have no documentary evidence or data or witness from them explaining why they proceeded to assert any right to collect any money much less enforce a loan of money that came from somewhere but we don’t know from where.

The corporate representative of Wells says Freddie Mac was the “investor from the start.” But we have the direct refusal of Wells Fargo to produce a servicing, agency or representative agreement that applies to this loan.

We know that Freddie Mac was never a lender in the sense that they never originated any loans. So now we are asking for how they did get involved. The charter of Freddie Mac allows them to be two things: (1) guarantor and (2) Master trustee for REMIC Trusts. Freddie can buy loans with either cash or mortgage backed bonds issued by the REMIC Trust if such bonds were issued by one or more Trusts to Freddie Mac.

But all of that still leaves the question of where did the money come from — the money that was used to give to the borrower? It appears that the money came from investors who bought mortgage backed securities from REMIC Trust if Freddie Mac was really involved (A fact that is unknown at this time) or that the money came from investors who bought mortgage backed securities from a private label REMIC trust that is not registered with the SEC. But the money came from somewhere and we want to know the identity of the source because it will tell us who was really involved. And it is only in the context of knowing who was really involved that we assess the behavior of Wells Fargo and why they did what they did.

We ask them about their risk of loss and they respond by saying that they deny that they would not incur damages if the borrower defaults on the loan. Since they have said they didn’t provide funding and that they were not the investor (they say Freddie Mac was the investor (from the start), and they have no servicing agreement or at least not one they are willing to produce, then exactly how would they suffer damages on “default” on the loan?

They should be compelled to answer our discovery requests in a more forthright manner. If they are answering truthfully, which we must assume they are, for the moment, then that could only mean that there is a deal somewhere in which they have some potential exposure and which has never been disclosed. That exposure has nothing to do with the debt, note or mortgage that was originated in the name of the alleged originator. And THAT goes to the essence of their motivation to lie to the borrower and to interfere with her ability to sell the property and pay off the loan.

The exposure relates to the fact that without a foreclosure judgment and subsequent sale of the property, they lose their ability to recover servicer advances. Servicer advances are the exact opposite of the basis for a foreclosure action. In a foreclosure action it is based upon the fact that the creditor experienced a default — i.e., the creditor did not receive payments. With servicer advances, the investor gets the money regardless of whether or not the borrower pays. They are volunteer payments because the borrower is not in privity with the advancer of payments to the creditor and in fact is completely unaware of the fact that such payments are being made.

It also hints at another proposition: that some third party would hold them responsible unless they got a foreclosure judgment. We are left with equivocating answers that continue the pattern of obscurity as to the nature of the origination of the loan and the ownership or authority to represent anything. So it might just be that they they could not give a payoff figure and that their motivation was obtain the foreclosure judgment at all costs, even if they had to lie and dodge to get it. It would also explain why they lured her into the default. Certainly their turnover of SOME of the audio files which did not include the call in which she was told she needed to be 90 days behind (contrary to HAMP) in order to get some sort of relief.

And there is another issue that comes up when you consider borrower’s testimony that she did receive a forbearance 2 years earlier. Did they have authority to do that? What changed, if anything? Did some other party intervene? Was there a change in internal Wells Fargo policy?

All these things could be answered if they would be more forthright in their answers and if they reconciled the obvious discrepancy between not being the owner of the loan, but alleging that they were, not being the servicer or unwilling to state the source of their authority to represent another party, and testifying that they were the servicer, and testifying about Freddie Mac involvement without any records showing that involvement (indicating that the witness did NOT have access to the entire file). This also goes to the issue of whether there was any default at all if there is a PSA for a trust that claims ownership and if that PSA shows that through servicer advances or other payments means the real creditors — the investors — were NOT showing any default at all.

The point of this diatribe is that this case highlights the fact that in virtually all Wells Fargo cases (and with other banks), the real party seeking a foreclosure judgment is the servicer (since they are the only ones showing up at trial anyway), but that whatever the servicer’s interest is or whatever their risk of loss is, it relates to a claim either not against the borrower or not based upon the mortgage which is either void or owned by someone else.

If the self-proclaimed servicer is saying they will suffer damages upon default and they admit they have no ownership of the loan nor did they fund the original loan transaction, then any recovery would be based upon a cause of action other than a foreclosure of a mortgage where they are neither the mortgagee, successor or creditor. Their claim if caused by volunteer payments (servicer advances) to the creditors, it is based upon unjust enrichment not breach of the contractual duty to pay the loan.

Remember that the witness testified to being the corporate representative of Wells Fargo as servicer and not to being a corporate representative of the “investor.” And the witness testified that the records of the investor were never available to him, so how can he testify that the creditor has experienced a default? Since the borrower never had any privity with Wells Fargo as servicer or lender how else could they be exposed to a loss? And more importantly, why are they suing the borrower for collection on the note and enforcement of the mortgage when the actual creditor has not experienced any default?

THAT is the draft of the memo or brief that should accompany the Motion to Compel answers to simple questions. It is almost comical that their answer to a yes or no question was an objection that it was too broad, ambiguous etc. What IT platform are you using? Answer: None of your business. But it is written as an objection to the form or content to the question. That is how the servicers stonewall borrowers and that is how borrowers are prevented from ever knowing the truth about the origination or management of their loan.

No. Carolina Appeals Court Approves Dismissal of Foreclosure With Prejudice

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see 13-450 N Carolina Appellate Decision on Holder, PETE, HDC and Owner of the Debt 2013 Decision

There are several interesting features to this appellate case, not the least of which is that it comes from North Carolina which has not been particularly friendly to borrowers. What is interesting is that the court was looking at the substance of the transaction and finding that the the bank was playing games and now wanted to play more. The trial court said no, and then the appellate court said no. The decision is one year old but was recently brought to my attention of a litigant who is confronting the “bank” that claims rights to collect, enforce and foreclose.

This was a case in which the foreclosing party never established any of the conditions under which it was (a) the owner of the debt, (b) the payee on the note or (c) the PETE — party entitled to enforce the note. The Court considered the situation and dismissed the foreclosure WITH PREJUDICE —a trial court decision that is highly unusual looking back 7 years but not so unusual looking back 12 months.

The appellate decision looks first where I said to look — the payee on the note. If the foreclosing party IS the payee on the note then it need not allege how it became the “holder” but it probably has some burden of proving the loan. We will see about that. SO if you are the Payee most of the case is presumed. The problem is that most courts having been applying that universally accepted presumption to cases in which the foreclosing party is NOT the payee on the note. And, as pointed out by this court, that is wrong.

The trial court correctly dismissed the case with prejudice because dismissal was mandatory and in the absence of any action by the bank, the dismissal must be with prejudice. The bank can’t come back later and assert a right to amend when they could have voluntarily dismissed, moved to amend, or taken some action that would put the issue of amendment before the court. As this court states, it is not up to the trial judge, sua sponte, to provide a path to amendment. Hence the same rules that have cooked borrowers for years because they admitted or waived defenses unintentionally now comes back and bite the bank.

And most importantly, when you look to the DEBT, it is the substance of the claim that counts not just the paperwork.

Neither the trial court nor the appellate court liked the fact that the affidavit submitted was so vague that it said nothing — particularly about the acquisition of the DEBT, and nothing about how it was a PETE. This simple statement in the body of the opinion, might represent a sea change in judicial attitude. After all, the point of commercial paper, negotiable instruments, foreclosures etc is that they are all about the same thing — MONEY. The laws (UCC etc) were never meant to facilitate theft from innocent parties (investors, borrowers etc.).

The bank argued that it should not have been dismissed with prejudice and that it should have been given an opportunity to amend, citing to laws, cases and rules that permit liberal amendment. But here the court turned the same indifference to consequences that has plagued borrowers and used it against the bank. You might call it blind justice in practice. The court found that the failure of the bank to do anything to protect its right to amend was sufficient to uphold the trial court’s dismissal with prejudice. The bank argued that this was an extreme remedy implying a windfall fro the borrower. But the appellate court said, quite correctly, how do we know that?

The court was clearly implying that a subsequent action by a real party in interest could theoretically be brought against the homeowner either on the debt, the note the mortgage or all of those. They clearly thought that the party who was bringing the action in this case was a sham party filing a sham action. And they obviously wanted to stop that practice.

It remains to be seen how many cases we will see that discuss the foreclosure the way this court did. I am hopeful and ever optimistic that the courts will follow the money trail and not allow shuffling of paper to replace actual transactions. Every time we enforce an APPARENT transaction we take the risk of ignoring the real transaction. Each time foreclosure judgments are entered raises the probability that a second debt is being created.

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

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

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

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

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

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

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

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

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

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

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

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

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

Why do we need to force the banks to accept more money in modification?

Selecting a forensic analyst or a lawyer to represent you in a mortgage dispute. You need to look at their credentials rather than listen to their sales pitch. And you need people who really believe that you can and SHOULD win. For our services and products call our customers service numbers at 520-405-1688 on the West Coast, and 954-495-9867. Or visit www.livingliesstore.com. Don’t waste your money if the people lack the credentials and experience and commitment to make things work out the way you want it. Everyone promises the world. We promise expertise and guidance on how to use it in court.

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It seems obvious. And if you are a lawyer practicing in real estate, you have probably attending CLE seminars about mortgage lending requirements and what to do when the borrower is in default or claimed to be in default. The answer is always a “workout” wherever possible. And the reason is that you get more from a workout than the proceeds from a foreclosure and all the financial requirements of ownership like maintenance, taxes, insurance and the expenses of selling, repairs etc. It really is that simple.

But Banks don’t want workouts or modifications. They only want to use the illusory promise of modification to get the borrower in so deep he sees no way out when the application is eventually denied. Why are so many trial modifications now in court because the bank denied the permanent modification after the trial modification as approved and the borrower met all the requirements including payments? why are the banks pursuing a strategy where they are guaranteed far less money than ramping up the “workout” programs. Maybe because if they did, they would be admitting that the loan was defective in the first place, the appraisal was inflated, the viability of the loan was zero, and the borrower had been tricked.

So why do the Banks need to be forced to take more money and less responsibility for the property? It seems obvious that they would want a workout rather than a foreclosure because it will end up with more money in their pockets and the whole mortgage mess behind them with a nice clean note and mortgage.

The answer can only be that the Banks oppose such efforts because the rational strategy of a true lender won’t end up with more money in THEIR pockets. And THAT can only be true if they are working off some different business model than a lender. It means by definition in a rational world, as Greenspan likes to say, that they could not possibly be the lender or working for the lender.

It can only be true if they are protecting the fees they are earning on nonperforming loans and justifying their stubborn resistance to modification and principal reduction by showing that the foreclosure was the only way out even though it wasn’t. The destruction of tens of thousands of homes in various cities shows that the net value of the foreclosure was zero even while the homeowners were applying for modifications that, if approved, would have not only saved individual homes, but entire neighborhoods.

The other reason of course is that the banks don’t own the loans and they did receive multiple payments on the loans from multiple sources. A foreclosure hides these payments.

So the practice hint is to be persistent and insistent on following the money trail. What the San Francisco study revealed as well as other similar studies and are own study here at livinglies is that the courts are rubber stamping foreclosures that are in favor of complete strangers tot he transaction. They don’t have a dime in the deal. But they are being given judicial nod that they are the creditor even though they are clearly not the creditor. This false creditor now has authority to claim the status of creditor and to buy property worth millions of dollars with a non-monetary credit bid in the amount of their claim, thus “out bidding” any conceivable competition and guaranteeing their ownership of the property, or allowing someone else to outbid them and taking the money from the sale even though everything they had done up to that point was false.

So you have these people and companies in a cloud of false claims of securitization selling the loan multiple times through insurance and other gimmicks making a ton of money assuming the identity of the investors and assuming ownership over the borrower’s identity and trading on that all for the purpose of ill-gotten gains. It is fraud, identity theft, RICO and Ponzi Schemes all rolled into the fog that comprises the false claims of securitization.

PRACTICE HINT: Test each transaction claimed to see if money exchanged hands and if so between what parties. You will find that the money transactions — that is the reality of what was going on bears no resemblance to the paper trail. The paper trail is meant to lead you down the rabbit hole. First establish what is in the paper trail, then establish what transactions actually occurred and then compare the two and show that the paper trail is a trail of lies.

THE KEY TO THIS MESS IS TO REPLACE OR SUBSTITUTE THE CURRENT SYSTEMS OF SERVICERS WITH AN ENTIRELY DIFFERENT SYSTEM OF SERVICING AND A DIFFERENT SET OF SERVICERS TO REPLACE THOSE WHO ARE BLOCKING THE DIALOGUE BETWEEN LENDERS AND BORROWERS.

Mortgage borrowers get more foreclosure protection from Mass. bank regulators
http://www.bizjournals.com/boston/news/2013/10/17/mortgage-borrowers-get-more.html

The Very Worst Thing About Foreclosures Today Is Watching Consumers That You Know Could be Helped Standing in Court Without An Attorney
http://ireport.cnn.com/docs/DOC-1050081/

 

Foreclosure Defense: Notes on Practice

I went to a hearing a few days ago and discovered to my surprise a Judge, in a remote section of Florida, who was fully conversant in the rules of procedure, due process and the laws of evidence. It would be improper for me to name him as I am currently counsel of record in an active case before him. The first thing that caught my attention was that in a case before me the Judge reserved ruling on an uncontested motion for summary judgment, to give himself time to review the paperwork and make sure that the paperwork was all in order. That is old style court practice.

In the 1970’s through the 1990’s that is what judges did to make sure the lawyer for the Bank had done his job properly — and that was before routine questions relating to who made the loan, whether the loan was properly originated, whether the loan was properly sold, whether the balance due was properly stated and whether there was an actual creditor who was present in court — someone who fulfilled Florida laws on the description of a creditor who could submit on credit bid at the auction.

The Judge also mentioned that he had presided over three bench trials the day before, two of which he had given judgment to the borrower because the Plaintiff had been unable to make its case. This bespeaks an understanding, knowledge, acceptance and execution of the procedural requirement of establishing a prima facie case thus shifting the burden of proof to the Defendant. And contrary to current practice in many courts, this Judge does not view his role as rubber stamping Foreclosures.

This Judge wants to see the things we have been pointing out on this blog: that if you are the Plaintiff you must prove your case according to the rules. First you must have a witness that actually knows something instead of merely reading off of a computer or a computer report. You must establish a proper foundation rather than an illusion by merely giving the appearance of proffering testimony from an incompetent witness with no knowledge of their own whose employment description consists of testifying in court. And your chain of evidence must be complete before you can be recognized as having established a prima facie case.

In the case in which I appeared the Plaintiff had filed a foreclosure against two homeowners, husband and wife, who then pro se fended off the Plaintiff with materials mostly from this blog and from other sources. But they were at the point where being a lawyer counts, knowing the content and timing of objections, filing motions to strike, motions in limine, responding to 11 th hour motions for protective order etc.

In this case their exists a legitimate question over whether the loan was subject to securitization. Originated in 1996 the loan date goes to the beginning of the era of securitization and this one didn’t have MERS, which I argue is evidence per se of securitization because there is no reason for MERS if your intent is not securitization. But 2 days after the alleged closing the loan was transferred to a player in the world of securitization. Thus the first argument is that this was obviously a table funded loan. Hence the question of where the money came from at the alleged closing table.

Adding to the above, the notice letter to the borrowers of default, acceleration and the right to reinstate suggests that the then “holder” was, in their own words “either a Servicer or lender.” So the very first piece of evidence in the file raises the issue of securitization since the party who sent the notice was not the transferee mentioned above two days after the alleged closing.

Thus questions about the origination and transfers of the loan were appropriately asked in discovery. The Judge was on the fence. Could one slip of the pen open up a whole area of discovery even with the table funded loan allegation?

But in the halls of the foreclosure mills, they had decided to file standardized pretrial statements disclosing witnesses and exhibits. So they filed a motion for protective order as to the discovery, refusing to answer the Discovery, and filed a statement that identified the witness they would use at trial 19 days later as “a corporate representative.” That is no disclosure of a witness and is subject to a motion in limine to block the introduction of any witness. The witness disclosure also attached a list of possible witnesses —37 of them, which I argued is worse than no disclosure and the Judge agreed.

Then in their list of exhibits that they will present at trial they refer to powers of attorney, pooling and servicing agreement, investors, servicer’s, sub-servicers, and all the other parties and documents used in creating the illusion of securitization.

I argued that if they filed a pretrial statement referring to all the parts of securitization of a mortgage loan, then the issues surrounding that are properly the subject of inquiry in discovery and that the 11 th hour filing of a sweeping motion for protective order and failure to respond to any discovery was in bad faith entitling us to sanctions and granting our two motions in limine. The judge agreed but removed the problem by setting the trial for February, and setting forth a schedule of deadlines and hearings a few days after the deadlines so both sides could develop their cases. The ruling was in my opinion entirely proper, even if it denied the motions in limine since he was giving both sides more time to develop their cases.

The moment the hearing ended, opposing counsel approached and was asking about settlement. I countered with a demand that his client immediately show us the chain of actual money starting with origination. He said that wouldn’t be a problem because this was definitely not a securitized loan. I told him I actually knew the parties involved and that most probably this was amongst the first group of securitized loans. I also told him that he would most likely fail in getting the proof of payment at closing, and proof of payment in each of the alleged transfers of the loan.

We’ll see what happens next but I would guess that there will be a lot of wrestling over discovery and more motions in limine. But this time I have a Judge who no matter his personal views that are most likely very conservative, will dispassionately call balls and strikes the way a judge is supposed to do it.

The Real Deal and How to Get There

Internet Store Notice: As requested by customer service, this is to explain the use of the COMBO, Consultation and Expert Declaration. The only reason they are separate is that too many people only wanted or could only afford one or the other — all three should be purchased. The Combo is a road map for the attorney to set up his file and start drafting the appropriate pleadings. It reveals defects in the title chain and inferentially in the money chain and provides the facts relative to making specific allegations concerning securitization issues. The consultation looks at your specific case and gives the benefit of litigation support consultation and advice that I can give to lawyers but I cannot give to pro se litigants. The expert declaration is my explanation to the Court of the findings of the forensic analysis. It is rare that I am actually called as a witness apparently because the cases are settled before a hearing at which evidence is taken.
If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services. Get advice from attorneys licensed in the jurisdiction in which your property is located. We do provide litigation support — but only for licensed attorneys.
See LivingLies Store: Reports and Analysis

The Real Deal and How to Get There

If you read the Glaski case any of the hundreds of other decisions that have been rendered you will see one glaring error — failure to raise an issue or objection in a timely manner. This results from ignorance of the facts of securitization. So here is my contribution to all lawyers, wherever you are, to prosecute your case. I would also suggest that you use every tool available to disabuse the Judge of the notion that your goal is delay — so push the case even when the other side is backpedaling, ask for expedited discovery. Act like you have a winning case on your hands, because, in my opinion, you do.

The key is to attack the Judge’s presumption whether stated or not, that a real transaction took place, whether at origination or transfer. Once you let the Court know that is what you are attacking the Judge must either rule against you as a matter of law which would be overturned easily on appeal and they know it, or they must allow penetrating discovery that will reveal the real money trail. The error made by nearly everyone is that the presumption that the paperwork tells THE story. The truth is that the paperwork tells a story but it is false.

Nevertheless the burden is on the proponent of that argument to properly plead it with facts and as we know the facts are largely in the hands of the investment banker and not even the servicer has it. My law firm represents clients directly in Florida and provides litigation support to any attorney wherever they are located. We now send out a preservation letter (Google it) as soon as we are retained. We send it to everyone we know or think might have some connection to the file. If they can’t find something, the presumption arises they destroyed it if we show that in the ordinary course of business they would keep records like that. We also have a computer forensic analyst who is a lawyer that can go into the computers and the data and see when they were created, by whom and reveal the input that was done to create certain files and instruments.

Once the facts are properly proposed, then the proponent still has the burden of proving the allegations through discovery. That is because the paperwork raises a rebuttable presumption of validity. The Glaski case gives lots of hints as to how and when to do this. Neither judicial notice of an instrument nor the rebuttable presumption arising out of an instrument of commerce gives the bank immunity. And the requests for discovery should attack the root of their position — that the foreclosing party is true beneficiary or mortgagee.

With the Glaski Case in California and we have one just like it in Florida, the allegation must be made that the transaction is void as to the transfer to the Trust. You have a related proof challenge when they insist that the loan was not securitized. You say it was subject to claims of securitization. That puts you in a he said she said situation — which puts you in the position of the Judge ruling against you because you have not passed the threshold of moving the burden back to the Bank. What penetrates that void is the allegation and proof of the absence of any actual transaction — i.e., one in which there was an offer, acceptance of the offer and consideration. The UCC says an instrument is negotiated when sold for value. You say there was no value. Proving the loan is subject to claims of securitization may require discovery into the accounting records of the parties in the securitization chain. What you are looking for is a loan receivable account or account receivable that is owned by the party to whom the money is owed. At the servicer this does not exist, which is why the error in court is to go with the servicer’s records, which are incomplete because they do not reveal the payments OUT to third party creditors or others, nor other payments IN like from the investment bank who funds continued payment to the creditors to keep them ignorant that their portfolio is collapsing.

The transaction is void if there was an attempt to assign the loan into the trust. First, it violated the instrument of the trust (PSA) because of the cutoff rule. The court in Glaski correctly pointed out that under the circumstances this challenge was valid because of the prejudice to the beneficiaries of the trust. They use discretion to assert that there is prejudice to the beneficiaries because of the economic impact of losing their preferential tax status. They did not add (because nobody raised it), that the additional prejudice to the beneficiaries is that it is usually a loan that is already declared in default that is being assigned. Judge Shack in New York has frequently commented on this.

Hence the proposed transfer violates the cutoff date, the tax status and the requirement that the loan be in good standing. Sales of the bonds issued by the trust were based upon the premise that the bonds were extremely low risk. Taking defaulted loans into the trust certainly  violates that and under federal and state regulations the pension funds, as “Stable managed funds” can ONLY invest in extremely low risk securities.

Hence the possibility of ratification is out of the question. First, it is isn’t allowed  under the IRC and the PSA and second, it isn’t allowed under the PSA because the investors are being handed an immediate loss — a purchase with their funds (which you will show never happened anyway) of a defaulted loan. But to close the loop on the argument of possible ratification, you must take the deposition of the trustee of the trust.

Without the possibility of ratification, the transaction is definitely void. In that depo it will be revealed that they had no access or signature authority to any trust account and performed no duties. But they are still the party entrusted with the fiduciary duties to the beneficiaries. So when you ask whether they would allow the purchase of a bad loan or any loan that would cause the REMIC to lose its tax status they must answer either “no” or I don’t know. The latter answer would make appear foolish.

A note in the Glaski case is also very revealing. It is stated there that BOTH sides conceded that the real owner of the debt is probably unknown and can never be known. So tread softly on the proposition that the real owner of the loan NOW is the investor. But there is a deeper question suggested by this startling admission by the Court and both sides of the litigation. If the facts are alleged that a given set of investors somehow pooled their money and it was used to fund the loan origination or to fund the loan acquisition, what exactly do the investors have NOW? It would appear to be a total loss on that loan. They paid for it but they don’t own it because it never made it into the trust.

The alternative, proposed by me, is that this conclusion is prejudicial to the beneficiary, violates basic fairness, and is contrary to the intent of the real parties in interest — the investors as lenders and the homeowners as borrowers. The proper conclusion should be, regardless of the form of transaction and content of instruments that were all patently false, that the investors are lenders and the homeowner is a borrower. The principal is the amount borrowed. The terms are uncertain because the investors were buying a bond with repayment terms vastly different than the repayment terms of the note that the homeowner signed. Where this occurs the note or obligation is generally converted into a demand obligation, which like tender of money in a loan dispute, is enforced unless it produces an inequitable result, which is patently obvious in this case since it would result in a judgment and judgment lien that might be foreclosed against the homeowner.

With the assignment to the trust being void, and the money of the investor being used to fund the loan, and there being no privity between the investor and the homeowner, the only logical conclusion is to establish that the debt exists, but that it is unsecured and subject to the court’s determination to fashion the terms of repayment — or mediation in which the unsecured loan becomes legitimately secured through negotiations with the investors.

Since the loan was not legally assigned into the trust and the trust did not fund the origination of the loan, the PSA no longer governs the transaction; thus the authority of the servicer is absent, but the servicer should still be subpoenaed to produce ALL the records, which is to say the transactions between the servicer and the borrower AND the transactions between the servicer and any third parties to whom it forwarded the payment, or with whom it engaged in other receipts or disbursements related to this loan.

Since the loan was not legally assigned into the trust, the trustee has no responsibility for that loan, but the investment bank who used the investors money to fund the the loan is also a proper target of discovery as is the Maser Servicer and aggregators, all of whom engaged in various transactions that were based upon the ownership of the loan being in the trust. Now we know it isn’t in the trust. The Banks have used this void to jump in and claim that they own the loan, which is obviously inequitable (if not criminal). But the equitable and proper result would be to establish that the investors own an account receivable from borrowers in this type of situation since they were the ones who advanced the money, not the banks.

Since the loan was not legally assigned into the trust, the servicer has no  actual authority or contract with the investors who are now free to enter into direct negotiations with the borrowers and avoid the servicers who are clearly serving the interest of the parties in the securitization chain (which failed) and not the investors. Thus any instrument executed using the securitization or history of “assignments” (without consideration) as the foundation for executing such an instrument is void. That includes substitutions of trustees, assignments, notices of default, notices of sale, lawsuits to foreclose or any effort at collection.

Note that without authority and based upon intentionally false representations, the servicers might be subject to a cause of action for interference with contractual rights, especially where a modification proposal was “turned down by the investor. “ If the investor was not the Trust and it was the Trust allegedly who turned it down (I am nearly certain that the investors are NEVER contacted), then the servicer’s push into foreclosure not only produces a wrongful foreclose but also interference with the rights and obligations of the true lenders and borrowers who are both probably willing to enter into negotiations to settle this mess.

The second inquiry is about the balance of the account receivable and the obvious connection between the account receivable owned by the investors and the account payable owed by the homeowners. I don’t think there is any reasonable question about the initial balance due, because that can easily be established and should be established by reference to a canceled check or wire transfer receipt. But the balance now is affected by sales to the Federal Reserve, insurance, bailouts and credit default swaps (CDS).

Since the loan was not assigned to the trust then the bond issued by the trust that purports to own the loan is wrong. The insurance, CDS, guarantees, purchases and bailouts were all premised on the assumption that the false securitization trail was true, then it follows that the money received by anyone represents proceeds that does not in any way belong to them. They clearly owe that money to the investor to the extent of the investors’ advance of actual money, with the balance due to the homeowner, as per the agreement of the parties at the closing with the homeowner. But the payors of those moneys also have a claim for refund, buy back, or unjust enrichment, fraud, etc.

Those payors have one obvious problem: they executed agreements that waived any right to collect from the borrower. Thus they are stuck with the bond which is worthless through no fault of the beneficiaries. So their claim, I would argue, is against the investment bank. The guarantors (Fannie, Freddie et al) have buyback rights against the parties who sold them the loans they didn’t own or the bonds representing ownership that was non-existent. Here a fair way of looking at it is that the investors are credited with the third party mitigation payments, the account payable of the borrower is reduced proportionately with the reduction of the account receivable (by virtue of cash payment to their agents which reduces the account receivable because the money should be paid to and credited to the investor) and the balance of the money received should then go to the guarantor to the extent of their loss, and then any further balance left divided equally amongst the investors, borrowers and guarantors.

To do it any other way would either leave the banks with their ill-gotten gains and unjust enrichment, or over payment to the investors, over payment to the borrowers who are entitled to such proceeds as per most statutes governing the subject, or over payment to the guarantors. The argument would be made that the investors, borrowers and guarantors are getting a windfall. Yes that might be the case if the over payments resulting from multiple sales of the same loan exceeded all money advanced on the actual loan. But to leave it with the Banks who were never at risk and who are still getting preferential treatment because of their shaky status would be to reward those who intended to be the risk takers, but who masked the absence of risk to them through false statements to the parties who all collectively advanced money and property to this scheme without knowing that they were all doing so.

 

The question is on what basis should the banks be rewarded with the windfall. I can find no support for that proposition. But based upon public policy or other considerations regarding the nature of the hedge transactions used to sell the same loan over and over again, it might be argued that the investment bank is entitled to retain SOME money if the total exceeds the full balances owed to the investors (thereby extinguishing the payable from the borrower), and the full balances owed to the guarantors.

Monday Livinglies Magazine: Crime and Punishment

Steal this Massachusetts Town’s Toughest New Foreclosure Prevention Ideas
http://www.keystonepolitics.com/2013/06/steal-this-massachusetts-towns-toughest-new-foreclosure-prevention-ideas/

Florida leads nation in vacated foreclosures — and it’s not even close http://www.thefloridacurrent.com/article.cfm?id=33330748

Editor’s Note:  it is only common sense. There are several things that are known with complete certainty in connection with the mortgage mess.

  • We know that the banks found it necessary to forge, fabricate and alter legal documents illegally in order to create the illusion that foreclosure was proper.
  • We know that the banks manipulated the published rates on which adjustable mortgages changed their payments.
  • We know that the banks typically abandon any property that the bank has deemed to be undesirable (then why did they foreclose, when they had a perfectly good homeowner who was willing to pay something including the maintenance and insurance of the house?).
  • And we can conclude that it is far more important to the banks that they be able to foreclose and have the deed issued then to actually take possession of the property for sale or rental.
  • And so we know that the mortgage and foreclosure markets have been turned on their heads. Lynn, Massachusetts has adopted a series of regulations which appeared to be constitutional and which make it very difficult for the banks to turn neighborhoods that were thriving into blight.  The actions of this city and others who are taking similar actions will continue to reveal the true nature of the mortgage encumbrances (the lanes were never perfected because the loan was never made by the party that is claiming to be secured) and the true nature of foreclosures (the cover-up to a Ponzi scheme and an illegal securities scam that does not and never did fall within the exemptions of the 1998 law claimed by the banks).

The Bank Of International Settlements Warns The Monetary Kool-Aid Party Is Over
http://www.zerohedge.com/news/2013-06-23/bank-international-settlements-warns-monetary-kool-aid-party-over

Wells Fargo Sells Woman’s House In Foreclosure After She Reinstates Loan for $141,441.81
http://4closurefraud.org/2013/06/20/wells-fargo-sells-womans-house-in-foreclosure-after-she-reinstates-loan-for-141441-81/

Editor’s Note: In all of these cases you need to start with the premise that the bank has a gargantuan liability in the event that it took insurance, credit default swap proceeds, federal bailouts, or the proceeds of sales of mortgage bonds to the Federal Reserve. Most experts in finance and economics agree that if the Federal Reserve stops making payments on the “purchase” of mortgage bonds the entire housing market will collapse. I don’t agree.

It is the banks that will collapse in the housing market will finally recover bringing the economy back up with it. The problem for the Federal Reserve and the economy is that most likely they are buying worthless paper issued by a trust that was never funded and that therefore could never have purchased any loan. Thus the income and the collateral of the mortgage bond is nonexistent.

Many people in the financial world completely understand this and are terrified at the prospect of the largest banks being required to mark down their reserve capital;  if this happens, and it should, these banks will lack the capital to continue functioning as a mega-bank.

So why would a bank foreclose on house on which there was no mortgage and/or no default? The answer lies in the fact that they have accepted money from third parties on the premise that they lost money on these mortgages. If that turns out not to be true (which it isn’t) then they most probably owe a lot of money back to those third parties.

My estimate is that in the average case they owe anywhere from 7 to 40 times the amount of the mortgage loan.  It is simply cheaper to settle with the aggrieved homeowner even if they pay damages for emotional distress (which is permitted in California and perhaps some other states); it is even cheaper and far more effective for the bank to give the house back without any encumbrance to the homeowner. Without the foreclosure becoming final or worse yet, as the recent revelations from Bank of America clearly show, if the loan is modified and becomes a performing loan all of that money is due back to all of those third parties.

“Deed-In-Lieu” of Foreclosure and Other Things
http://www.fxstreet.com/education/related-markets/lessons-from-the-pros-real-estate/2013/06/20/

Editor’s Note: This has come up many times in  questions and discussions regarding dealing with the Wall Street banks. It seems that the banks have borrowers thinking that in order to file a deed in lieu of foreclosure they need the permission of the bank. I know of no such provision in the law of any state preventing the owner of the property from deeding the property to anyone.  Several lawyers are seeing an opportunity, to wit: once the homeowner deeds the properties to the party pretending to foreclose on the property, the foreclosure action against the homeowner must be dismissed. That leaves the question of a deficiency judgment.

The advantages to the homeowner appears to be that any lawsuit seeking to recover a deficiency judgment would be strictly about money and would require the allegation of a monetary loss and proof of the monetary loss which would enable the homeowner, for the first time, to pursue discovery on the money trail because there is no other issue in dispute.

In the course of that litigation the discovery may reveal the fact that the party who filed the foreclosure and misrepresented their right to the collateral would be subject to various causes of action for damages as a counterclaim; but the counterclaim would not be filed until after discovery revealed the problem for the “lender.” Therefore several lawyers are advising their clients to simply file the deed in favor of the party seeking foreclosure based upon the representation that they are in fact the right party to obtain a sale of the property.

The lawyers who are using this tactic obviously caution their clients against using it unless they are already out of the house or are planning to move. Homeowners who are looking to employ this tactic should check with a licensed attorney in the jurisdiction in which their property is located.

Must See Video: Arizona Homeowners Losing their Homes to Foreclosure Through Forged Documents
http://4closurefraud.org/2013/06/21/must-see-video-arizona-homeowners-losing-their-homes-to-foreclosure-through-forged-documents/

Monitor Finds Mortgage Lenders Still Falling Short of Settlement’s Terms

By SHAILA DEWAN

The biggest mortgage lenders in the United States have not met all of the terms of the $25 billion settlement over abuses, an independent monitor found.

British Commission Calls for New Laws to Prosecute Bankers for Fraud

By MARK SCOTT

As part of a 600-page report, the British parliamentary commission on banking standards is urging new laws that would make it a criminal offense to recklessly mismanage local financial institutions.

A Fit of Pique on Wall Street

By PETER EAVIS

Perhaps more than at any time since the financial crisis, Wall Street knows it must prepare for a world without the Federal Reserve’s largess.

S.E.C. Has a Message for Firms Not Used to Admitting Guilt

By JAMES B. STEWART

By requiring an admission of guilt in some cases, the S.E.C.’s new chairwoman is pressing for more accountability at financial firms.

Bank of America’s Foreclosure Frenzy
http://ml-implode.com/staticnews/2013-06-24_BankofAmericasForeclosureFrenzy.html

“Conversion” of the Note to a Bond Leaves Confusion in the Courts

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

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

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

Brent Bentrim, a regular contributor to the dialogue, posed a question.

I am having some trouble following this.  The note cannot be converted any more than when a stock is purchased by a mutual fund (trust) it becomes a mutual fund share.

You’re close and I understand where you seem to be going…ie, the loans were serviced not based on the note and closing documents, but on the PSA.  What I do not understand is the assumption that the note was converted.  From a security standpoint, it cannot.

You are right. When I say it was “converted” I mean in the lay sense rather a legal one. Of course it cannot be converted without the borrower signing. That is the point. But the treatment of the debt was as if it had been converted and that is where the problem lies for the Courts — hence the diametrically opposed appellate decisions in GA and MA. Once you have pinned down the opposing side to say they are relying on the PSA for their authority to bring the foreclosure action, and relying on the “assignment” without value, the issue shifts —- because the PSA and prospectus have vastly different terms for repayment of interest and principal than the note signed by the borrower.There are also different parties. The investor gets a bond from a special purpose vehicle under the assumption that the money deposited with the investment bank goes to the SPV and the SPV then buys the mortgage or funds the origination. In that scenario the payee on the note would either be the SPV or the originator. But it can’t be the originator if the originator did not fulfill its part of the bargain by funding the loan. And there is no disclosure as to the presence of other parties in the securitization chain much less the compensation they received contrary to Federal Law. (TILA).

Under the terms of the PSA and prospectus the expectation of the investor was that the investment was insured and hedged. That is one of the places where there is a break in the chain — the insurance is not made payable to either the SPV or the investors. Instead it is paid to the investment bank that merely created the entities and served as a depository institution or intermediary for the funds. The investment bank takes the position that such money is payable to them as profit in proprietary trading, which is ridiculous. They cannot take the position that they are agents of the creditor for purposes of foreclosure and then take the position that they were not agents of the investors when the money came in from insurance and credit default swaps.

Even under the actual money trail scenario the same holds true — they were acting as agents of the principal, albeit violating the terms of the “lender” agreement with the investors. Here is where another break occurred. Instead of funding the SPV, the investment bank held all investor money in a commingled undifferentiated mega account and the SPV never even had any account or signatory on any account in which money was placed.

Hence the SPV cannot be said to have purchased the loan because it lacked the funding to do it. The banks want to say that when they funded the origination or acquisition of the loan they were doing so under the PSA and prospectus. But that would only be true if they were following the provisions and terms of those instruments, which they were not. The banks funded the acquisition of loans directly with investor money instead of through the SPV, hence the tax exempt claims of the SPV’s are false and the tax effects on the investors could be far different — especially when you consider the fact that the mega suspense account in the investment bank had funds from many other investors who also thought they were investing in many different SPVs.

The reality of the money trail scenario is that the SPV can’t be the owner of the note or the owner of the mortgage because there simply was no transaction in which money or other consideration changed hands between the SPV and any other party. The same holds true for all the parties is the false securitization trail — no money was involved in the assignments. Thus it was not a commercial transaction creating a negotiable instrument.

In both scenarios the debt was created merely by the receipt of money that is presumed not to be gift. The question is whether the note, the bond or both should be used to re-structure the loan and determine the amount of interest, principal, if any that is left to pay.

The further question is if the originator did not loan any money, how can the recording of a mortgage have been proper to secure a debt that did not exist in favor of the secured party named on the mortgage or deed of trust?
And if the lender is determined by the actual money trail then the lenders consist of a group of investors, all of whom had money deposited in the account from which the acquisition of the loan was funded. And despite investment bank claims to the contrary, there is no evidence that there was any attempt to actually segregate funds based upon the PSA and prospectus. So the pool of investors consists of all investors in all SPVs rather just one — a factor that changes the income and tax status of each investor because now they are in a common law general partnership.

Thus the “conversion” language I have used, is merely shorthand to describe a far more complex process in which the written instruments were ignored, more written instruments were fabricated based upon nonexistent transactions, and no documentation was provided to the investors who were the real lenders. That leaves a common law debt that is undocumented by any promissory note or any secured interest in the property because the recorded mortgage or deed of trust was filed under false pretenses and hence was never perfected.

The conversion factor comes back in when you think about what a Judge might be able to do with this. Having none of the documentation naming and protecting the investors to document or secure the loan, the Judge must enter judgment either for the whole amount due, if any (after deductions for insurance and credit default swap proceeds) or in some payment plan.

If the Judge refers to the flawed documentation, he or she must consider the interests and expectation s of both the lender (investors) and the borrower, which means by definition that he must refer back to the prospectus and PSA as well as the promissory note.
The interesting thing about all this is that homeowners are of course willing to sign new mortgages that reflect the economic reality of the value of their homes, and the principal balance due, as well as money that continued to be paid to the creditor by the same same servicer that declared the default (and was therefore curing the default with each payment to the creditor).
The only question left is where did the money come from that was paid to the creditor after the homeowner stopped making payments and does that further complicate the matter by adding parties who might have an unsecured right of contribution against the borrower for money  advanced advanced by an intermediary sub servicer thereby converting the debt (or that part that was paid by the subservicer from funds other than the borrower) from any claim to being secured to a potential unsecured right of contribution from the borrower.
To that extent the servicer should admit that it is suing on its behalf for the unsecured portion of the loan on which it advanced payments, and for the secured portion they claim is due to other parties. They obviously don’t want to do that because it would focus attention on the actual accounting, posting and bookkeeping for actual transfers or payments of money. The focus on reality could be devastating to the banks and reveal liabilities and reduction of claimed assets on their balance sheets that would cause them to be broken up. They are counting on the fact that not too many people will understand enough of what is contained in this post. So far it seems to be working for them.Remember that as to the insurance and credit default swaps there are express waivers of subrogation or any right to seek collection from the borrowers in the mortgages. The issue arises because the bonds were insured and thus the underlying mortgage payments were insured — a fact that played out in the real world where payments continued being made to creditors who were advancing money for “investment” in bogus mortgage bonds. This leaves only the equitable powers of the court to fashion a remedy, perhaps by agreement between the parties by which the lenders are made parties to the action and the borrowers are of course parties to the action but he servicers are left out of the mix because they have an interest in continuing the farce rather than seeing it settled, because they are receiving fees and picking up property for free (credit bids from non-creditors).

This is precisely the point that the courts are missing. By looking at the paperwork first and disregarding the actual money trail they are going down a rabbit hole neatly prepared for them by the banks. If there was no commercial transaction then the UCC doesn’t apply and neither do any presumptions of ownership, right to enforce etc.

The question of “ownership” of the note and mortgage are a distraction from the fact that neither the note or the mortgage tells the whole story of the transaction. The actions of the participants and the real movement of money governs every transaction.

Whether the courts will recognize the conversion factor or something similar remains to be seen. But it is obvious that the confusion in the courts relates directly to their ignorance of the the fact that the actual money transaction is not brought to their attention or they are ignoring it out of pure confusion as to what law to apply.

Now UCC Me, Now You Don’t: The Massachusetts Supreme Judicial Court Ignores the UCC in Requiring Unity of Note and Mortgage for Foreclosure in Eaton v. Fannie Mae
http://4closurefraud.org/2013/05/20/now-ucc-me-now-you-dont-the-massachusetts-supreme-judicial-court-ignores-the-ucc-in-requiring-unity-of-note-and-mortgage-for-foreclosure-in-eaton-v-fannie-mae/

High court rules in favor of bank in Suwanee foreclosure case
http://www.gwinnettdailypost.com/news/2013/may/20/high-court-rules-in-favor-of-bank-in-suwanee/

Wells Fargo slows foreclosure sales, BofA not so much
http://www.bizjournals.com/orlando/morning_call/2013/05/wells-fargo-slows-foreclosure-sales.html

INVESTMENT OPPORTUNITY: Why Do Banks Walk Away When Proof is Required?

FOR QUALIFIED INVESTORS ONLY:

HEDGE FUND TO

CALL THE BLUFF OF PRETENDER LENDERS

LISTEN TO NEIL GARFIELD INTERVIEW ON PIGGYBANK
http://piggybankblog.com/2010/09/09/donations/

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

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-296-1960. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

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

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

THEY DON’T HAVE THE PROOF, THEY DON’T OWN THE LOAN, THEY DON’T HAVE A PENNY INVESTED IN THE ORIGINATION OR ACQUISITION OF THE LOAN — SO WHY DO WE LET THEM COLLECT, FORECLOSE OR SUE?

Editor’s Analysis: If you loaned money to someone and you lost the note or correspondence reflecting the terms of the loan would you forget about getting the loan repaid? Of course not. You would sue anyway and proves that you either directly loaned the money to them or that you paid real money to acquire the debt. You would get a judgment and you would record that judgment in the county records as a lien against any real property in the name of the borrower.

In the states that have passed laws and regulations regarding the collection of debt and the foreclosure of mortgages requiring the party seeking to collect on the debt or foreclose on a mortgage to show that they in fact own the debt and requiring the attorney to verify the debt, note, mortgage, and default, foreclosure activity and collection activity has dropped like a stone. This corroborates the basic premise of this blog.  Despite all efforts to create the appearance to the contrary, there is no debt, note, mortgage or default —  at least in terms of seeking collection and foreclosure.

The apparent presence of money arriving at the loan closing is a red herring that has thrown off the borrowers, their attorneys, and the courts. But the money never came from anyone with whom the borrower was led to believe to be the source of funding of the loan. Therein lies the problem for the Wall Street banks. If you follow the money trail it simply does not and cannot match up with the paper trail. That is why we have consistently told attorneys to hit hard and hit fast with subpoenas directed at producing competent witnesses and real proof that the loan was funded or acquired by anyone in what we now know is a false securitization chain.

As a trial lawyer with decades of experience I can tell you with great assurance that most cases are decided on the basis of who controls the narrative. It is through that lens that all of the so-called facts are perceived by the court. If you failed to object or moved to dismiss pleadings that omit any allegations or attachments showing financial injury to the party initiating collection or foreclosure proceedings, then you are allowing the narrative to slip away from you. The pretender lenders will fill the void you have created with proffers of facts and conclusions that are unsupported by anything in the record.

Analyzing the foreclosure activity on a national basis clearly shows that those states which require the actual proof and verification by the attorney have eliminated the logjam in the courts because there are no claims. There is only one satisfactory explanation for this phenomenon. If the claimants had anything resembling a canceled check, a wire transfer receipt, an ACH confirmation, or a check 21 confirmation, the change in the laws and regulations of those states requiring proof of payment and proof of loss (which are the elements of proof of ownership) would have produced no result in terms of the number of foreclosures filed or the number of servicers claiming to have the authority to collect monthly payments.

Therefore the only logical conclusion is that they do not have anything resembling proof of payment, proof of loss or proof of ownership. This leaves them in the naked possession of attempting to collect or foreclose on a nonexistent or unenforceable debt, note, mortgage or default.  it looks like criminal fraud and civil fraud to me.

 As for collection, the servicers are clearly relying upon the paper trail in the so-called securitization chain.  If the debt cannot be established through proof of payment and proof of risk of loss than the paper trail in the securitization chain is  a sham.  If the debt is not established there is no payment due.  if the debt is not established and there is no payment due, the claim of status as a sub servicer or Master servicer is without merit.  For these reasons  it is incumbent upon the attorney for the borrower to submit a challenge either in court or in accordance with federal law governing collections,  mortgages and foreclosures.

HEDGE FUND TO CALL THE BLUFF OF PRETENDER LENDERS

This is why I have suggested the business plan wherein investors produce hard money offering same to the court registry in bankruptcy or civil litigation. The investor(s) would offer to refinance the entire mortgage balance if the claimant can prove title to the loan — which means that the claimant, starting with origination of the loan would be required to show proof of payment all the way through the assignment or “securitization chain” in order to determine which party should be paid off and which party therefore could execute a release or satisfaction of the loan and mortgage. It’s no bluff on the part of the investor or the homeowner who jointly present the offer to pay off the debt in full. It is calling the bluff of the pretender lender.

If the claimant is able to do so, then they get every penny demanded. If they are not able to produce such elemental proof, the case is still over because they have admitted lack of standing, lack of subject matter jurisdiction, and lack of a qualified party to submit a credit bid at auction. In that case, the homeowner’s agreement with the investor is to execute a note and mortgage in an amount not exceeding 50% of fair market value of the real property at a fixed rate with 30 year amortization.

The return on investment is nearly infinite. GTC|Honors, a trade name of General Transfer Corporation owning this blog, will provide the legal work and packaging of the loans for resale into the secondary market. Since no more than $3 million is required to start this project space is limited to only qualified investors. This is not a formal offering but merely a solicitation of those who may want to receive a prospectus which they can review and decide whether or not to invest. The name of the Hedge Fund will be revealed only to those who request the prospectus and those who demonstrate in advance that they are qualified investors. Management will be by and through GTC|Honors (“Workouts with Honor”) which will receive a fee of 20% of the net profits after payment of all legal, accounting and other professional fees, costs and expenses. By way of full disclosure, the law firm of Garfield Gwaltney, Kelley and White will be getting part of the legal fees.

Proceeds of investment will be used strictly for formation and operation of the Hedge fund, and shall not be used for any salaries paid to management directly or indirectly. Management includes Neil F Garfield, and such other persons designated by him to share in management responsibilities. Do not send money without first receiving the prospectus and consulting with an attorney, accountant or other professional trusted adviser.

California Homeowner Bill of Rights blocks BofA foreclosure
http://www.housingwire.com/news/2013/05/08/california-homeowner-bill-rights-blocks-bofa-foreclosure

Nevada maintains familiar perch atop foreclosure rankings
http://www.vegasinc.com/news/2013/may/08/nevada-maintains-familiar-perch-atop-foreclosure-r/

Mass. AG Coakley unveils anti-foreclosure program
http://bostonherald.com/business/real_estate/2013/05/mass_ag_coakley_unveils_anti_foreclosure_program

Massachusetts foreclosure filings drop 82% in March
http://www.housingwire.com/news/2013/05/13/massachusetts-foreclosure-filings-drop-82-march

Drastic Drop in Mass. Foreclosure Activity in March
http://rismedia.com/2013-05-13/drastic-drop-in-mass-foreclosure-activity-in-march/

Fla. foreclosures up as lenders speed up process
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=291115

The Constitutionality of Colorado Foreclosure Law: US Bank Walks Away from Foreclosure on Aurora Woman
http://4closurefraud.org/2013/05/12/the-constitutionality-of-colorado-foreclosure-law-us-bank-walks-away-from-foreclosure-on-aurora-woman/

Aurora foreclosure halted; constitutionality issue unresolved
http://www.denverpost.com/breakingnews/ci_23242542/foreclosure-halted-constitutionality-issue-unresolved

Mortgages are investment du jour for hedge funds – The Term Sheet: Fortune’s deals blogTerm Sheet
http://finance.fortune.cnn.com/2013/05/13/mortgages-salt-hedge-funds/

14 American Housing Markets Struggling With Foreclosures
http://www.businessinsider.com/us-cities-with-most-foreclosures-2013-5

Prommis Holdings LLC Files for Bankruptcy Protection

I have not followed Prommis Holdings closely but I can recall that some people have sent in reports that Prommis was the named creditor in some foreclosure proceedings. The reason I am posting this is because the bankruptcy filings including the statement of affairs will probably give some important clues to the real money story on those mortgages where Prommis was involved. I’m sure you will not find the loan receivables account that are mysteriously absent from virtually all such filings and FDIC resolutions.

And remember that when the petition for bankruptcy is filed it must include a look-back period during which any assignments or transfers must be disclosed. So there is a very narrow window in which the petitioner could even claim ownership of the loan with or without any fabricated evidence.

US Trustees in bankruptcy are making a mistake when they do not pay attention to alleged assignments executed AFTER the petition was filed and sometimes AFTER the plan is confirmed or the company is liquidated. Such an assignment would indicate that either the petitioner lied about its assets or was committing fraud in executing the assignment — particularly without the US Trustee’s consent and joinder.

The Courts are making the same mistake if they accept such an assignment that does not have US Trustees consent and joinder, besides the usual mistake of not recognizing that the petitioner never had a stake in the loan to begin with. The same logic applies to receivership created by court order, the FDIC or any other “estate” created.

That would indicate, as I have been saying all along, that the origination and transfer paperwork is nothing more than paper and tells the story of fictitious transactions, to wit: that someone “bought” the loan. Upon examination of the money trail and demanding wire transfer receipts or canceled checks it is doubtful that you find any consideration paid for any transfer and in most cases you won’t find any consideration for even the origination of the loan.

Think of it this way: if you were the investor who advanced money to the underwriter (investment bank) who then sent the investor’s funds down to a closing agent to pay for the loan, whose name would you want to be on the note and mortgage? Who is the creditor? YOU! But that isn’t what happened and there is nothing the banks can do and no amount of paperwork can cover up the fact that there was consideration transferred exactly once in the origination and transfer of the loans — when the investors put up the money which the investment bank acting as intermediary sent to the closing agent.

The fact that the closing documents and transfer documents do not show the investors as the creditors is incompatible with the realities of the money trail. Thus the documents were fabricated and any signature procured by the parties from the alleged borrower was procured by fraud and deceit — causing an immediate cloud on title.

At the end of the day, the intermediaries must answer one simple question: why didn’t you put the investors’ name or the trust name on the note and mortgage or a “valid” assignment when the loan was made and within the 90 day window prescribed by the REMIC statutes of the Internal Revenue Code and the Pooling and Servicing Agreement? Nobody would want or allow someone else’s name on the note or mortgage that they funded. So why did it happen? The answer must be that the intermediaries were all breaching every conceivable duty to the investors and the borrowers in their quest for higher profits by claiming the loans to be owned by the intermediaries, most of whom were not even handling the money as a conduit.

By creating the illusion of ownership, these intermediaries diverted insurance mitigation payments from investors and diverted credit default swap mitigation payments from the investors. These intermediaries owe the investors AND the borrowers the money they took as undisclosed compensation that was unjustly diverted, with the risk of loss being left solely on the investors and the borrowers.

That is an account payable to the investor which means that the accounts receivables they have are off-set and should be off-set by actual payment of those fees. If they fail to get that money it is not any fault of the borrower. The off-set to the receivables from the borrowers caused by the receivables from the intermediaries for loss mitigation payments reduces the balance due from the borrower by simple arithmetic. No “forgiveness” is necessary. And THAT is why it is so important to focus almost exclusively on the actual trail of money — who paid what to whom and when and how much.

And all of that means that the notice of default, notice of sale, foreclosure lawsuit, and demand for payments are all wrong. This is not just a technical issue — it runs to the heart of the false securitization scheme that covered over the PONZI scheme cooked up on Wall Street. The consensus on this has been skewed by the failure of the Justice department to act; but Holder explained that saying that it was a conscious decision not to prosecute because of the damaging effects on the economy if the country’s main banks were all found guilty of criminal fraud.

You can’t do anything about the Holder’s decision to prosecute but that doesn’t mean that the facts, strategy and logic presented here cannot be used to gain traction. Just keep your eye on the ball and start with the money trail and show what documents SHOULD have been produced and what they SHOULD have said and then compare it with what WAS produced and you’ll have defeated the foreclosure. This is done through discovery and the presumptions that arise when a party refuses to comply. They are not going to admit anytime soon that what I have said in this article is true. But the Judges are not stupid. If you show a clear path to the Judge that supports your discovery demands, coupled with your denial of all essential elements of the foreclosure, and you persist relentlessly, you are going to get traction.

SMOKE AND MIRRORS: HOW TO FOCUS ON MORTGAGE AND FORECLOSURE DEFECTS

It is obvious that I feel it is important to understand securitization and more particularly, how it was faked in the mortgage meltdown and used to cover-up a Ponzi scheme. That is why I publish this blog and that is why I have written books and manuals and of course that is why I issue expert declarations. The issue, in court, is how do you educate the Judge in 5 minutes. The actual answer is that you don’t but your knowledge gained from these pages and other sources should guide you to your goals and guide your voir dire and cross examination of the witnesses for the other side.

Theoretically, most of what I have been suggesting for tactics and strategy ought to be the burden of the party seeking affirmative relief. DENY and DISCOVER arose out of the realization that Judges were placing the burden on the borrower instead and hanging their legal hat on the fact that the borrower was raising affirmative defenses and therefore required to prove them.

Most borrowers, even through counsel, compounded the problem by admitting all required elements of a judicial foreclosure as they emerged from the starting gate making it even easier for the Judge to place the burden of persuasion on the borrower — to prove facts that are exclusively within the possession, care, custody and control of the other side. And that is why discovery is so important.

Even borrowers who commence the litigation in both judicial and non-judicial states commence their complaints with the allegation that they had a financial transaction with the named lender on the note and mortgage — when in fact the borrower has no evidence to support that allegation other than the appearance or illusion of a transaction supported by the fact that the money for the loan showed up at the same time as the “closing.”

In general, a  careful examination of any loan now subject to a claim of securitization will reveal a fun house series of smoke and mirrors. Factually, you need to subpoena the trust officer or manager in charge of REMIC trusts including the subject REMIC for the subject loan. They should bring proof of filing with the IRS and/or any state in which they are doing business as trustee for the REMIC and proof that the money from investors was deposited into an account bearing the name of the alleged Trustee for the benefit of the named trust that is claiming ownership of the loan. Your goal here is to establish that the money was not deposited into any account held or controlled by the trustee and that withdrawals for funding or purchasing loans came from somewhere else. But that only gets you half way home.

The next thing you have to do is subpoena the records of the entity to whom the Trustee will testify was the party to whom the trustee delegated the trustee’s duties. Here again you are looking for an account in the name of the REMIC trust claiming ownership of the loan into which the investor funds were deposited and from which the funding for origination or purchase of the loan took place. You will most likely find again that no such account exists but that there is agreement that the party receiving the investor money was the investment banker and that the account was a commingled account in which the investment bank made decisions as to how much it would take for itself under the  rubric of “proprietary trading.” The balance of the money was used for fees, costs and other expenses and then finally the balance after deductions was used for funding origination or purchase of mortgages.

The trustee should be encouraged to admit that if the loan is not performing or if the loan purchase or assignment, the trustee is prohibited from accepting such loans inasmuch as it would have an immediate negative economic and tax consequence to the investor. The trustee should also be encouraged to admit that the parties to whom duties were delegated were acting within the scope and course of their agency, with the Trustee (or the investors) as the principals and ultimate beneficiaries.

A subpoena to the CDO manager should expose the transactions entered into by the investment bank or an affiliate with respect to the value of the bonds or loans in the alleged investment pool. But under proper questioning, if the money for the loan didn’t come from the investment pool entity, then it came directly from the investors, not the REMIC trust. The point to be made is that the REMIC trust was ignored in all actual financial transactions in which money exchanged hands but principal-agent relationship still existed with the investors as principals and the investment bank et al as agents.

In all cases you wish to establish that no loan receivable account was established on the balance sheet of the REMIC trust claiming ownership of the loan, and probably that no such balance sheet or income statement exists. The investors were not given the note signed by the borrower. They were given a bond issued by the REMIC trust which was worthless because the proceeds of their investment never reached the REMIC trust.

Thus, oversimplifying a bit, you have established that the REMIC trust is not the payee, holder or owner of the debt because (1) it wasn’t the source of funds and (2) the transactions did not comply with the PSA and Prospectus, requiring strict adherence to the REMIC provisions of the Internal Revenue Code.

All of this is done not as an exercise in training the Judge on securitization but under the rubric of tracing the money to the real creditor who had a real loss that would entitle them, if they are secured, to enter a credit bid at the time of auction of a foreclosed property. This would be the same party(ies) that could faithfully execute a satisfaction of mortgage and deliver the note back in its original form with “Paid in Full” Stamped across the front of it. This latter point leads to more complications when you realize that the subject loan was a refinancing of another loan that was also subject to claims of securitization, potentially leaving the homeowner with multiple unsatisfied mortgages, notes or debts.

Your inquiry should focus on the actual receipts and statements showing deposits and withdrawals and transfer of money rather than an assignment which merely tells a story about the transaction. Just as the mortgage is not the note and the note is not the debt, the assignment is no substitute for the actual exchange of money in the sale of the loan. You will find that no such exchange of money took place and then be faced with the question that if the note terms differed from the bond terms, if the payee on the note and mortgage were different than the actual source of funds, and there was no consideration passed (for value received), is there any legally existing transaction? The answer, I think, is NO.

This leaves the situation in murky waters: the transaction about which the origination and transfer documents tell “the story” never took place. So you have documentation without the underlying debt. The actual transaction was with the investors not merely of the REMIC claiming ownership (and by this time has been proven not to own the loan), but all investors whose money was in the source account from which money was taken to fund the origination or purchase of the loan. This commingled account therefore creates under common law a general partnership of the investors that has nothing to do with the REMIC trust which has been ignored by all parties. Thus the partnership consists of all investors who had money in the commingled account. Those investors thought they were advancing money for the purchase of bonds issued by a worthless REMIC trust but found that the Trust had been ignored by their agents. Thus investors from multiple REMIC bond sales find themselves all in the same pot.

This accounts for the allegation from investors in suits against investment bankers that they have been subjected to illegal transactions with borrowers against whom they could enforce neither the note nor the mortgage — because although they did indeed loan money to the borrowers, the documents signed by the borrowers say otherwise. [You should have a couple of those lawsuits under your arm when arguing these points with the Judge]. This leaves the true transaction trail without any documentation other than a wire transfer receipt and perhaps wire transfer instructions. And what was intended to be a secured transaction turns out to be an unsecured transaction even though both sides intended it to be a secured transaction — but subject to different terms (the terms of the repayment on the mortgage bond issued by the empty REMIC trust and the terms of repayment on the promissory note signed by borrower).

The end of this is unclear except to say that settlements will become more frequent. But the negotiations start on a level playing field with the investors rather than the servicers. In most cases it is apparent that borrowers will consent to a new mortgage document directly with the investors thus securing the debt, after reducing it for payments received by the investors or their agents.

 

Woman Wins Home and Forecloses on Wells Fargo

What’s the Next Step? Consult with Neil Garfield

CHECK OUT OUR NOVEMBER SPECIAL

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

Editor’s Comment: We have seen some of these stories before. What is disconcerting is that the press is not getting the point — some homeowners are winning their cases and getting their house free and clear. The reason is simple: if you try to make the case that you should get a free house, then you are going to lose. But if you attack the would-be forecloser where it hurts, then your chances of getting a favorable result are immeasurably increased. Mark Stopa got 14 Judges to (a) deny the forecloser’s motion for summary judgment and (b) grant final summary judgment to the homeowner. It does happen.

In the final analysis the strategy and tactics are the same as in any civil case — deny each and every allegation that you know is absolutely true, like your name. If you don’t know if the note and mortgage are legitimate or if they are showing a copy of the note and mortgage (or deed of trust) that might be fabricated, deny it. The burden is on the party seeking affirmative relief. Too many times, I see homeowners and attorneys give away the store when they are asked whether there is any issue about the obligation, note or mortgage. Their reply is no “but”….

The fact is there is no “but.” You either deny their right to foreclose or you admit it. If you admit it, then all the argument in the world won’t allow you to win. The Judge has no choice but to allow the foreclosure if your admission, tacit or expressed, goes to all the elements required for a foreclosure.

For reasons that I do not understand the same lawyer that will summarily deny virtually all allegations in the complaint for anything other than a foreclosure action, will be very timid and uncertain about denying allegations and validity of the exhibits in a foreclosure. If you attack the foreclosure after admitting that the elements are there based upon UCC or other arguments attacking the documentary trail, you will most likely lose — unless you accidentally stumble upon an argument that deals with the money trail.

That is why I am continually pushing lawyers and pro se litigants to get advice from lawyers that allows them to deny the validity of the allegations of a judicial foreclosure and deny the validity and authenticity of the substitution of trustee, notice of default and notice of sale in the non-judicial states.

Say as little as possible. The more you allege, the more the burden is on you to prove things that only the other side has in the way of information. I have previously posted an article about that.

The judicial doctrine applies that where the information is exclusively in the care, custody and control of the the opposing side then the mere allegation from you will be sufficient to shift the burden of persuasion onto the forecloser — and their case generally will collapse.

Jacksonville Business Journal by Michael Clinton, Web Producer

In a strange twist of events, a St. Augustine woman has filed foreclosure on a local branch of Wells Fargo after a judge ruled she could keep her home.

The bank tried to foreclose on Rebecca Sharp’s home, but a judge ruled she could keep it and the bank owed her nearly $20,000 for attorney’s fees — eight months later, the bank still hasn’t paid, Action News Jax reports.

“Foreclosure cases are based on borrowers not paying bills. Now, Wells Fargo has not paid its bills. There’s an irony there,” Sharp’s attorney Tom Pycraft told Action News.

Read the full story and see the video at Action News Jax.

Wells Fargo (NYSE: WFC) is the third-largest bank in Northeast Florida, with $5.5 billion in area deposits and a market share of 12 percent.

BULK SALES OF MORTGAGE LOANS: WHAT ARE THEY BUYING?

Wall Street is gearing up to buy properties en masse from Fannie, Freddie and other holders (including the Federal Reserve. The question for these investors is what are they buying and what are they doing?

I think these sales represent an attempt to create a filler for an empty hole in the title chain. we already know that strangers to the transaction were submitting credit bids at rigged auctions of these properties. The auctions were based upon declarations of default and instructions from a “beneficiary” that popped up out of nowhere. The borrowers frequently contested the sale with a simple denial that they ever did business with the forecloser and that the chain of “assignments” were fabricated, forged, robo-signed, surrogate signed and executed by unauthroized people on behalf of unauthroized entities.

The reason the banks and servicers resorted to such illegal tactics was that they understood full well that the origination documents were fatally defective and they were papering over the defects that continually recited the validity of the preceding documents. That is putting lipstick on a pig. It is still a pig.

While apparently complex, the transaction in a mortgage loan is quite simple — money is loaned, a note is made payable to the lender and a separate agreement collateralizes the loan as guarantee for faithful performance of repayment in accordance with the terms of the note. An examination of the money trail shows that this procedure was not followed and that the practices followed and which have become institutionalized industry standards lead to grave moral hazard, fabrication, forgery and fraud. The entire matter can be easily resolved if the forecloser is required to produce original documentation and appropriate witnesses to lay the foundation of the introduction of documents starting with the funding of the loan through the present, including all receipts and disbursements relating to the loan.

Since the receipts and disbursements clearly involve third parties whose existence was not contemplated or known at the time of origination of the loan, it would probably be wise to appoint an independent receiver with subpoena powers to obtain full records from the subservicer, Master Servicer, trustee, other co-obligors or co-venturers including the investment bank that sold mortgage bonds and investors with the sole restriction that it relate to the accounting and correspondence, agreements and other media relating to the subject loan and the subject pool claiming to own the loan.

Starting from that point, (knowing all receipts and disbursements, sources and recipients, the rest is relatively uncomplicated. Either the documents follow the money trail or they don’t. If they do, then the foreclosure should proceed. If they don’t then there are discretionary decisions of the court as well as mandatory applications of law that are required to determine whether or not the discrepancies are material.

The chain of documents relied upon by the foreclosing party is neither supported by consideration nor do the origination documents recite the terms of the transaction authorized by the lender. Hence there was no meeting of the minds. At a minimum, the recorded lien is a wild deed or should otherwise be subject to invalidation or removal from county records, and the note should be excluded as evidence of the obligation. The actual obligation runs through a different chain the terms of which were never documented between the lenders and the borrower. Hence at common law, it is a demand loan, unsecured.

But the sale from a GSE or other entity creates yet another layer of paper giving the appearance that the origination documented were valid, even though the evidence strongly points in the opposite direction. The purchase of such loans or properties would thus lead to the inevitable wrongful foreclosure suits in which the property is sought to be returned to its rightful owner, and/or compensatory and punitive damages including damages for emotional distress in California.

So my answer is that these buyers did not buy property or loans. They bought themselves into lawsuits that they will lose once discovery is opened up on the underlying transactions, all of which were faked. Is the government colluding with these “buyers” to fix an fixable title problem?

Nocera: It’s Time to Give Eminent Domain a Try

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Editor’s Note: At least academically the notion of solving the housing crisis through eminent domain is gaining a great deal of traction. Many people say they want less government and eminent domain has always been a point of contention. It is the process of taking private property away from private owners, paying them a fair market value, and then converting it to a better use for the community than what was there previously. There are not many constraints on eminent domain and there certainly are no constraints on using it to take mortgages away from their “owners.”

Ah! There is the rub — who do you pay when the other side won’t tell you whether the loan still exists or has been transformed into some other vehicle that has long since paid the original debt? If eminent domain is used, the largest risk is going to be for the banks and servicers who claim to own these “assets” which in truth do not exist and over which they never had any right of ownership. The 12 fold leverage of the loans will collapse when it is discovered the loans do not exist anymore or are already discounted by third party payments.

Thus the opposition from the banks will be to stop any thought of eminent domain and therefore stop any inquiry into the status or balance due on the loan, which in many cases is zero without the borrower being aware of it. The borrower MIGHT have a liability for contribution to third party payors but only if they did not expressly waive the right to press claims against the borrowers. The fact is that virtually all insurance contracts and all counterparty contracts on credit default swaps contain just such a provision. Hence the cost of eminent domain will be a zero sum game as soon as it begins.
As a stop gap the current plan, which in my opinion makes perfect sense, is to give the homeowner most but not all of the benefit of the write-down of principal, the rest to private investors who can be more confident that if the value of the collateral declines, it won’t be by much.

Under normal circumstances, eminent domain  would either be supported by the banks or unnecessary since “workouts” are or at least were the norm whenever a loan got into trouble but there was still value in maintaining the business or property as a going concern.

Here the banks are insisting on getting as little as possible just like insisted on funding loans that could not possibly succeed (where the “reset” was in excess of all  household income).

Here the banks and servicers are dealing with uncovering a huge lie that few people have grasped: the banks had no losses attributable to loan de faults because they were using the money of investors, who were the ones suffering the loss.

See my next blog on how pension funds bought these bogus mortgage bonds only to have the losses pitched over the fence at them after Wall Street collected for themselves the bailouts, insurance and proceeds of credit default swaps. As a result pension funds are going to get slashed because the funds are simply not there anymore. They are sitting in the pockets of Wall Street bankers.

Housing’s Last Chance?

By JOE NOCERA

There are few counties in America in as rough shape as San Bernardino County in California. During the housing bubble, the good times were very good. But then came the bust.

Today, San Bernardino County has one of the highest unemployment rates in the nation: 11.9 percent. Home prices have collapsed. Astonishingly, every second home is underwater, meaning the homeowner owes more on the mortgage than the house is worth. It is well documented that underwater mortgages have a high likelihood of defaulting — and, eventually, being foreclosed on. It has also been clear for some time that the best way to keep troubled homeowners in their homes is by reducing the principal on their mortgages, thus lowering their debt burden and more closely aligning their mortgage with the actual value of the home.

Which is why Greg Devereaux, the county’s chief executive officer, found himself listening intently when the folks from Mortgage Resolution Partners came knocking on his door. They had spent the previous year kicking around an intriguing idea: have localities buy underwater mortgages using their power of eminent domain — and then write the homeowner a new, reduced mortgage. It’s principal reduction using a stick instead of a carrot.

I know. When you first hear this idea, it sounds a little crazy. Eminent domain to take a mortgage? But the more closely you look at it, the more sense it starts to make. It would be a way to break the logjam that keeps mortgages in mortgage-backed bonds — securitizations — from being modified. It could prevent foreclosures. And it could finally stabilize housing prices.

The core issue that Mortgage Resolution Partners is trying to solve is what might be called the securitization problem. Bundling mortgages into securities and selling them to investors was, initially, a wonderful idea because it greatly expanded the amount of capital available for homeownership. But the people who wound up owning the mortgages — investors — were diffuse, often with conflicting interests, while the mortgages were managed by servicers or trustees who didn’t actually own them. And the securitization contracts never anticipated that people might need to modify. So it has been nearly impossible to modify mortgages stuck in securitizations.

It turns out, however, that there is nothing to prevent a government entity from using eminent domain to acquire a mortgage. “Eminent domain has existed for centuries,” said Robert Hockett, a law professor at Cornell who has served as an adviser to Mortgage Resolution Partners. “And it is applicable to any kind of property, including a mortgage.” What matters, Hockett continued, is two things: is the entity paying fair value for the property, and is it for a legitimate public purpose?

Can there be any doubt that keeping people in their homes constitutes a legitimate public purpose? “This is a yoke around the American economy,” said Steven Gluckstern, an entrepreneur with a varied career in insurance and finance who is the chairman of Mortgage Resolution Partners. “When people are underwater, their behavior changes. They stop spending. There are 12 million homes that are underwater,” he added. “Is the answer to really just let them get foreclosed on? Or wait for housing prices to rise?” According to Gluckstern, the fact that the foreclosure crisis is continuing is precisely why housing prices aren’t rising — despite some of the lowest interest rates in history.

As for fair value, since the home has dropped dramatically in value, the mortgage is worth a lot less than its face value. On Wall Street, in fact, traders are buying securitized mortgage bonds at a steep discount — reflecting the true value of the mortgages they’re buying. Yet the homeowner remains saddled with a mortgage that is unrealistically high. The plan calls for the county to buy mortgages at a steep, but fair, discount to its face value, and then to offer the homeowner a new mortgage that reflects much, though not all, of that discount. (Fees and costs would be paid for by the spread.) The money to buy the mortgages would come from investors; indeed, Mortgage Resolution Partners is in the process of raising money.

The securitization industry is up in arms about this proposal. In late June, after the plan was leaked to Reuters, some 18 organizations, including the Association of Mortgage Investors, wrote a threatening letter to the San Bernardino board of supervisors claiming that the plan would inflict “significant harm” to homeowners in the county. For his part, Devereaux insists that no final decision has been made. But, he says, “this is the first idea that anyone has approached us with that has the potential to have a real impact on our economy.” Other cities are watching closely to see what happens in San Bernardino.

We’re four years into a housing crisis. Nothing has yet worked to stem the terrible tide of foreclosures. It’s time to give eminent domain a try.

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Editor’s Note: A declaration of an expert is only as good as it is credible. In my opinion it should be used sparingly as a device to survive motions to dismiss, motions to lift stay and Motions for summary judgment. And then it should be used as the basis for submitting requests for discovery —- interrogatories, requests for admission and requests for production. The more it is used to “prove” the homeowners’ case, the more likely it is that the homeowner will be assuming the burden of proof of the entire case when it is the other side that has all the actual facts, documents, wire transfers and other indicia of actual financial transactions in which money exchanged hands.

Under the rules of evidence the rules are lax as to admission of a witness as a supposed “expert” but it is common for the court to ignore the declaration for any one of several reasons:

  1. The “expert” lacks credentials to carry the weight of the testimony and opinion evidence. This involves academic degrees and actual experience in a complex field in which the expert can and does describe clearly what is not apparent from the face of the documents.
  2. The expert advocates rather than reports. Bias and a lack of objectivity is often presumed.
  3. The expert fails to show the court the methods by which he or she reached conclusions and opinions in a way that is understandable to the Court.
  4. The expert is unprepared for cross examination.
  5. Th expert is unprepared to assist in cross examination of an opposing expert.

FINDINGS:

EXCERPT FROM RECENT EXPERT DECLARATION REGARDING AFFIDAVIT OF JAMES WOODALL DATED MAY 12, 2011

Affidavit of counsel: At most an affidavit of counsel is only a representation to the Court that counsel has performed some due diligence and that this served as a colorable basis for advocating a position on behalf of his client. It is not evidence in either the auditing or legal sense.
There is no supporting documentation showing that Woodall in fact represents Wells Fargo. Several cases across the country including Wells Fargo and U.S. Bank in particular have demonstrated that at the end of the case, the attorney admits he was not retained by the purported “client” and in fact never even spoke with anyone at the Bank.
Wells Fargo asserts itself as servicing agent but fails to provide any supporting documentation supporting that assertion. Here again, Wells Fargo has been sanctioned, fined and punished for misrepresenting itself as authorized owner or servicer of a particular loan.

The supporting documentation should be a copy of the documentation showing that Wells Fargo was hired by the creditor to serve as servicer. In claims, such as this one, that the loan was securitized, that authority would ordinarily come from a pooling and servicing agreement (PSA). Such authority in the PSA would only be valid if there was a valid financial transaction in which the investor-lender agreed that Wells Fargo would be the subservicer, a fact that can only be established by Foundation documents and testimony from the Master Servicer
A valid purchase of the loan by the investor through the conduit named in the affidavit. In most cases, the presence of a valid financial transaction in which actual money exchanged hands is fabricated and the use of it in court is fraudulent.
In my opinion, this document is fraudulent, fabricated and potentially forged as well.
The attorney asserts that he has the “wet ink” original documents in his possession but fails to state how he came into possession of those documents. In many, if not most cases, the “wet ink” documents are in fact fabrication using technology to duplicate what appears to be original documents. With respect to Wells Fargo I was an actual witness testifying under oath when the Wells Fargo attorney attempted to get the “original” documents into evidence. A cursory examination of the document (I am not a forensic document examiner) revealed obvious defects in a heavy signature that did not create any raised markings on the reverse side. I testified that the document as shown would most likely be a fabrication printed that same morning considering the condition of the paper handed to me. The lawyer ceased that line of questioning and never entered the original documents into evidence. Therefore it is my opinion that the assertion in the affidavit is at least suspect in that it lacks foundation from a competent witness who could substantiate the manner in which the document was produced, maintained and “delivered” to the affidavit.

Without first discovery to trace the chain of custody it is impossible in my opinion, to accept the proffer of these documents as “original” as carrying any presumption.

My presumption is that the documents were fabricated and that the affiant has no personal knowledge as to the origination of the documents or the chain of custody nor whether the documents were or could have been fabricated.
Reference to Note dated August 15, 2005 by and between Union Federal bank as Lender and Borrower.  See above as to whether the attachment is true and correct as a copy of the the note.
I see no foundation for establishing the authenticity of the “original note.” Therefore without proper foundation from a competent witness and other corroboration, it cannot be said that the note is genuine.
The reference to the note raises issues as well. It recites that Union Federal bank was the lender, but the other references in the same affidavit indicate that the funding source were the investors who at least believed they were advancing funds for mortgage originations using one of two conduits:

  • Either the current information and data reports brought to my attention by the Press and analysts are correct — that the finding source was a Bear Stearns escrow account in which the money from investors was undifferentiated and co-mingled without regard to any conduit vehicle that was referred to in the MAster Service Agreement or Pooling and servicing agreement, OR
  • The terms of the prospectus and PSA given to the investor-lenders conformed to the actual financial transaction. Based upon review of this and other transactions like it, it is my opinion that the source of funds was an undifferentiated group of investors whose money was pooled in an escrow account unknown and undisclosed to the investors who thought their money was being pooled into a special purpose vehicle qualifying under the REMIC provisions of the Internal Revenue Code.

In my opinion Union Federal was a nominee for an undisclosed principal controlled by Bear Stearns or an affiliate of Bear Stearns and the terms of repayment to the investor lender promised to the investor lender were different in the prospectus and representations and PSA than those set forth in the purported “note” that established co-obligors who expressly waived subrogation in insurance contracts and as counter-parties to credit default swaps in which Bear Stearns as apparent agent for the investor lender had made payable to Bear Stearns because the REMIC entity was ignored.

The reference to U.S Bank, as trustee has been the subject of litigation all over the country. In most cases, their claim to being a trustee or a trust has been unsupported by appropriate trust language in any document establishing a trustor, trustee, beneficiaries and terms and authority of the trustee. In fact, each case shows that U.S. Bank, which maintains a trust department, did NOT administrate any such entity or funds as trustee but rather as an asset manager outside the of its own trust department. While some trust language appears in the PSA, it is clear that the powers of the trustee or cut back more and more and one reads the securitization documents.

At the end end one is left with a nominee who acts as manager but is subject to the direction of the Master Servicer (Bear Stearns or its affiliate) or under certain restricted circumstances the holders of Mortgage Bonds.

But those “holders” of mortgage bonds were the recipients of a security that was “sold forward” — i.e., in which Bear Stearns as underwriter admitted it did not have the loans yet, but indicated that when they did have the loans, they would be allocated to the REMIC. This allocation was was never done, because Bear Stearns was claiming ownership of the loans when it obtained insurance and the benefits of credit default swaps.

In my opinion U.S. Bank is neither the manager nor trustee of the interests of the investor lenders in the case at bar, and there lacks any corroborative evidence to suggest otherwise. U.S. Bank has been fined and sanctioned numerous times for misrepresentations of this kind in several parts of the country, most notably in Florida.

Reference to Bear Stearns Asset Securities, 2005-AC7. This shows that the loan with the homeowner in this case was already pledged at the time of the loan origination and that it was funded through sources other than the named lender, who was a naked nominee, having neither funded nor purchased the loan — a status that is, in my opinion beyond any reasonable doubt true for each of the parties attempting to support the foreclosure of the subject property.

While the funding came from the investor lenders based upon the representations, prospectus and PSA, the requirements or conditions precedent to said funding did not conform to the actual actions undertaken by the Investment Bank. The REMIC did not fund or purchase the subject loan. The actual lenders would be properly described as an amalgam of investors whose money was commingled in a large commingled escrow account without any documentation supporting such a financial transaction. Hence the investors were duped into funding loans without documentation and in the expectation of repayment terms that differed from the terms expressed in the note allegedly signed by the borrower. Since the alleged note recited a transaction that never occurred and named a party other than those who actually provided the note, it is void. Since the note is void, the ancillary mortgage to guarantee performance under the terms of the note was also void. And since the third party payments were received and unallocated in part to the account of the creditor (the group of investor-lenders whose money was used to fund the loan), the corresponding balance of the borrower was not adjusted.

Thus it is my opinion that the mortgage did not secure the actual loan transaction between the investor-lenders and that an action at law for contribution may exist by the third parties who made payments to the creditor, but these claims have not been pursued because they made such payments with the express agreement with the investment bank that they would not pursue remedies against the homeowner (in order to prevent the obvious double foreclosure that would ensue since the banks and servicers were claiming the right to foreclose as the owners of the loan). Such is the case in the subject transaction.

In my opinion, the REMIC referred to in the affidavit entered into no financial transaction in which money exchanged hands, received no assignment that conformed to the requirements of the PSA.
If a foreclosure is ordered, it would be an adjudication of the real parties in interest who have no notice of these proceedings. They would be required to accept a loan that has already been declared in default and which should have been assigned into the Pool (REMIC) within 90 days after the creation of the REMIC, which by the naming convention used for the REMIC was established in 2005 and which as governed by the assignment and assumption agreement that actually inured to the benefit of Bear Stearns instead of either the REMIC or the investor Lenders.
Insurance payments, proceeds of credit default swaps from co-obligors should have been allocated to the investor lenders and reduced the balance due them accordingly by payment received from the co-obligors, whose entitlement to contribution is barred by their express waiver of contribution.
Without a full accounting from Both the Master Servicer and the subservicer (allegedly Wells Fargo) it is not possible to determine either the status of the loan nor its balance. Thus the homeowner is barred from submitting any meaningful modification proposal with HAMP and is being subjected to incorrect demands that affect the homeowner’s right to reinstatement if the note were to be found valid (which in my opinion it is not). The mortgage, in my opinion also invovles naked nominess for undisclsoed principals and asserts that the property is pledged tos ecure the faithful performance under the terms of the note.
However, the note does not recite the actual elements of any financial transaction between the payee and the alleged borrower. The financial transaction was between the investor lenders through an undifferentiated escrow account and the homeowner, a transaction that is largely undocumented but traceable i the wire and ACH instructions given to the closing agent and which was withheld from the homeowner.
Each and every finding herein is based upon overwhelming statistical evidence of fact and an examination of the actual documents involved in this closing.
The substitution of trustee referred to in the affidavit (indirectly by reference) was false, fabricated and fraudulent. None of the parties had the right, power or financial interest to announce themselves as the new beneficiary nor to appoint a new “trustee” that was owned and/or controlled by the new beneficiary. In my opinion, beyond any reasonable doubt, the actions undertaken by the “substitute trustee” were without any right, justification and excuse and in the absence of dude diligence.
Knowing the conflict between the parties, the old trustee and the new trustee were under a duty to file an interpleader action as an innocent party against the purported stakeholders and a request for fees and costs. The failure to do that is a breach of fiduciary duty to the homeowner and to the beneficiary.
MERS was also a naked beneficiary a fact well established by their own website and findings in trial courts across the country. At not time did MERS ever claim or actually perform any tasks in funding, purchasing, processing, or servicing the loan nor were they in a position to do so inasmuch as they agreed to never pursue that course of action in their agreements with members. MERS is an unsecured data base that was used as as substitute for the recording  requirements in the state of Utah.

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BUYING PROPERTIES: Pitfalls and Remedies

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We had an expression when I was on Wall Street that in an up market everyone thinks they are a genius. The apparently oversold properties being sold in short-sales and REO sales by the banks are subject to serious pitfalls that won’t surface until the buyer seeks to sell or refinance the property.

  1. All evidence, despite the spinning of Wall Street, realtors and others whose vested interest in seeing sales, is that property sales will both slow down and property prices are still 15% over the real value of those properties when measured against the benchmark that every economist uses: median income and overhanging inventory.
  2. The corruption of title that is becoming increasingly evident, especially with the Oregon decision two days ago, is completely evident. Practically every property sold has the potential of a lawsuit brought by either the “former” (still legally the owner) homeowner, prior lien holders etc.
  3. No deed from a stranger to the chain of title, even if there is an intervening deed on foreclosure, is safe from attack. We have numerous reports of junior landholders re-establishing their rights and homeowners regaining the title, possession and use of the property.
  4. Virtually no title policy being issued today covers claims arising out of claims of securitization or assignments off record.
  5. The answer is to take steps as part of your purchase to as sure that title is not now and won’t be considered clouded later and to obtain through negotiation a policy of title insurance that does not exclude such claims and names MERS and other third parties that are excluded by current title policies.

Getting Lost in the Weeds: Following the Money Trail

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“What they did was take money from their left pocket and put it into their right pocket taking out $10 each time and putting that $10 into their back pocket.  Then they reported that $10 to the SEC and the shareholders calling it trading profits or a fee.  They’re calling this movement from left pocket to right pocket ‘expansion of the money supply’.  And of course, if I start with $100 in my left pocket and take out $10 and don’t record it in the transfer then instead of the amount of money in my left pocket going down to $90 it remains at $100 and next time I move money from my left pocket to my right pocket if still don’t report the $10 I take out rather than going down to $80 the total in my left pocket still remains at $100”  Neil F Garfield

“If you look back over the past 200 years at any of the bank failures the world has had, we always say, ‘We never believed they would do something like this!’  but they do and they do it for one simple answer, greed.”  Neil F Garfield

Editor’s Comment:  

Dear Reader,
I’ve called them pretender lenders because that’s what they are.  The actual financial transaction did not take place the way you think it did.  The documents would have us believe otherwise, but the money shows where the real deal was.  I understand your concern but I am concerned that you might be missing the whole point and conveying incorrect information to others.
Your research is fabulous in following the relationships between the pretender lenders.  Your research does not pretend to cover the entire transaction, just the documentation and the apparent relationships.  All of that is invaluable.
The essential point that I am hoping you will consider is that the origination of the loan was a false origination.  The note, the mortgage, the HUD statement and all documents after the loan received referred to a financial transaction that never occurred.  They are void.
The financial transaction occurred with a different party under different terms than those expressed in the note and mortgage and disclosure docs given to the borrower at the time of closing.  Your point of confusion is easy to understand since the banks have gone to great lengths, including fabricating, forging, and robosigning fraudulent documents each reciting facts relating to a financial transaction (where MONEY exchanges hands).  “For value received” is a fraudulent statement.  No payment was ever made and the closing instructions to the escrow agent came from a complete stranger to the transaction with instructions to refund any excess to that stranger.  Without any language that would connect the stranger to the pretender lender at the origination of the loan.  If there was an actual connection between the financial transaction which was undocumented and the documents that refer to a financial transaction that never happened both the paperwork and the wire instructions would each refer to the other and be disclosed to the borrower.
For example, on the wire instructions, if the funding of the loan was intended to fulfill the so called “commitment” of the loan originator posing as the lender and therefore as the payee on the note, then it is standard practice to include in the wire transfer the words “for benefit of ‘xyz’ company”.  If the documents were meant to incorporate the financial transaction where money exchanged hands they would have referred to the parties who were the source of funds and the terms under which those funds were to be repaid as set forth in the prospectus and pooling and servicing agreement.
In neither the money chain (wire transfer instructions) nor the document chain (note, mortgage, HUD 1 settlement and disclosure documents) were any representations or disclosures made that even hinted at the presence or possibility of the other chain.
You might be tempted to presume that the wire transfer related to the borrower’s execution of loan documents in favor of the source of funding in the wire transfer.  But taken on its face, no such connection is made nor was one intended.  It was this split between the money trail and the document trail that enabled the banks to create a long term gap during which they could trade “ownership” of the loan before making any attempt to deliver the loan to the investors who had advanced the funds.  By that time, the loan was in default and past the cutoff date.  All of these trades were false trades based on false premises and the promise of false documents as we found out when one of the “trades” turned out to be foreclosure.
While the borrower believed that his “lender” was moving around from the originator to a servicer and then a new servicer and then a new trustee etc. the actual ownership of the obligation came from an undifferentiated commingled escrow account that was created in spite of provisions to the contrary in the prospectus and PSA delivered to the investor.  Hence the banks were able to report that they had successfully obtained insurance and had further covered the investment with credit default swaps and other hedge products, but they failed to reveal that the beneficiaries of the payout were the banks themselves and not the investors.  This is also what enabled the banks to claim losses from mortgage defaults requiring a bailout from the federal government even though the banks had neither funded nor purchased any mortgage.
In order to get away with this, the investment banks needed to have a provision inserted in all of the resale agreements in which the loan was sold multiple times, that upon payment of the insurance or credit default swap the payor waived their right to pursue the borrower on any of the loans (waiver of subrogation).  Had that provision not been inserted, AIG, the federal government and counter parties in credit default swaps would have swarmed over the transactions and determined for themselves that the original note and mortgage were faked.
Regards,
Neil

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Oregon Supreme Court: Only the Real Creditor Can Foreclose Non-Judicially

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Niday vs GMAC et al

“Plaintiff now  appeals, again arguing that the “Oregon legislature intended the ‘beneficiary’ to be the one for whose benefit the [deed of trust] is given, which is the party who lent the money,” rather than MERS. We agree and hold that the “beneficiary” of a trust deed under the Oregon Trust Deed Act is the person designated in that trust deed as the person to whom the underlying loan repayment obligation is owed. The trust deed in this case designates the lender, GreenPoint Mortgage Funding, Inc., as the party to whom the secured obligation is owed. And, because there is evidence that GreenPoint assigned its beneficial interest in the trust deed but did not record that assignment, the trial court erred
in granting summary judgment in favor of defendants.

Editor’s Note: This decision is even larger than it appears. First, for Oregon it knocks out all MERS foreclosures. How that will be handled retroactively is unknown. But if the foreclosure was wrongful and corrupted title it seems that the only option is to reverse ALL foreclosures that ahd MERS as the beneficiary and where they were the pretender lender acting as though they were creditor.

Second, is the issue of the credit bid which the court obviously was keenly aware of. At the auction everyone must bid cash except the party to whom the money is actually owed AND to whom the house was pledged. MERS fulfills neither of those definitions or descriptions.

Third, it directs the attention of everyone to the enormous title corruption throughout the country in which deeds on foreclosure were issued to entities who merely submitted an oral credit bid and to whom the deed was issued as though that party was in fact the true creditor. In those cases, the foreclosure sale is invalid.

The problem remains that the burden of proof is frequently laid at the doorstep of the borrower who has the least knowledge and the least access to knowledge. But the court takes care of that by saying, that if MERS is involved, then the party must foreclose using judicial process.

And now people who are getting wise to the system are asking a different question in their challenge to the pretender lender: “how did you get that loan.” That means they must show the transaction in which they received the loan in exchange for consideration — something that appears to be impossible unless the banks go so far as to fabricate electronic data transfers for payment processing.

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