UCC Hierarchy of Rights to Enforce Note and Mortgage

Posted on September 10, 2018 by Neil Garfield

HAPPY NEW YEAR to readers who celebrate Rosh Hashanah! To all others, have a HAPPY DAY. This is a prescheduled article.

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I have assembled a partial list of various possible claimants on the note and various possible claimants on the mortgage. Which one of these scenarios fits with your case? Once you review them you can see why most law students fall asleep when taking a class on bills and notes. Some of these students became practicing attorneys. Some even became judges. All of them think they know, through common sense, who can enforce a note and under what circumstances you can enforce a mortgage.

But common sense does not get you all the way home. It works, once you understand the premises behind the laws that set forth the rights of parties seeking to enforce a note or the parties seeking to enforce a mortgage. The only place to start is (1) knowing the fact pattern alleged as to the note (2) knowing the fact pattern alleged as to the mortgage and (2) looking at the laws of the state in which the foreclosure is pending to see exactly how that state adopted the Uniform Commercial Code as the law of that state.

I don’t pretend that I have covered every base. And it is wise to consider the requirements of law, as applied to the note, and the requirements of equity as applied to the mortgage.

In general, the UCC as adopted by all 50 states makes it fairly easy to enforce a note if you have possession (Article 3).

And in general, the UCC as adopted by all 50 states, increases the hurdles if you wish to enforce a mortgage through foreclosure. (Article 9).

The big one on mortgages is that the foreclosing party must have paid value for the mortgage which means the foreclosing party must have purchased the debt. But that is not the case with notes — except in the case of someone claiming to be a holder of the note in due course. A holder in due course does not step into the lender’s shoes — but all other claimants listed below do step into the lender’s shoes.

The other major issue is that foreclosing on a mortgage invokes the equitable powers of the court whereas suing on the note is simply an action at law. In equity the court takes into consideration whether the outcome of foreclosure is correct in the circumstances. In suits on notes the court disregards such concerns.

Knowing the differences means either winning or losing.

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UCC Hierarchy 18-step Program – Notes and Mortgages

The following is a list of attributes wherein a party can seek to enforce the note and mortgage if they plead and prove their status:

  1. Payee with possession of original note and mortgage.
  2. Payee with lost or destroyed original note but has original mortgage.
  3. Payee with lost or destroyed original note and lost or destroyed original mortgage.
  4. Holder in Due Course with original note endorsed by payee and original mortgage and assignment of mortgage by mortgagee.
  5. Holder in due course with lost or destroyed note but has original mortgage.
  6. Holder in due course with lost or destroyed original note and lost or destroyed original mortgage.
  7. Holder with rights to enforce with possession of original note and original mortgage.
  8. Holder with rights to enforce with lost or destroyed original note but has original mortgage.
  9. Holder with rights to enforce with lost or destroyed original note but does not have original mortgage.
  10. Possessor with rights to enforce original note and original mortgage
  11. Former Possessor with rights to enforce lost or destroyed note and original mortgage
  12. Former Possessor with rights to enforce lost or destroyed note but does not have original mortgage.
  13. Non-possessor with rights to enforce original note and original mortgage (3rd party agency)
  14. Non-possessor with rights to enforce lost or destroyed note (3rd party agency) and rights to enforce original mortgage
  15. Non-Possessor with rights to enforce lost or destroyed note (3rd party agency) but does not have the original mortgage.
  16. Assignee of purchased original mortgage with possession of original mortgage but no rights to enforce note.
  17. Assignee of purchased original mortgage without possession of original mortgage and no rights to enforce note.
  18. Purchaser of debt but lacking assignment of mortgage, endorsement on the note, and now has learned that the loan was purchased in the name of a third party and lacking privity with said third party. [This category is not directly addressed in the UCC. It is new, in the world of claims of securitization]

Facts matter. It is only by careful examination of the fact pattern and comparing the facts with the attributes listed in the UCC that you can determine the strategy for a successful foreclosure defense strategy. For example if the XYZ Trust is named as the foreclosing party and 123 Servicing is holding the original note and perhaps even the original mortgage, who has the right to foreclose and under what lawful scenario — and why?

Head spinning? GET HELP!

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Filed under: foreclosure | Tagged: , , , , , , , , , , , | 5 Comments »

Impact of Serial Asset Sales on Investors and Borrowers

Posted on June 7, 2018 by Neil Garfield

The real parties in interest are trying to make money, not recover it.

The Wilmington Trust case illustrates why borrower defenses and investor claims are closely aligned and raises some interesting questions. The big question is what do you do with an empty box at the bottom of an organizational chart or worse an empty box existing off the organizational chart and off balance sheet?

At the base of this is one simple notion. The creation and execution of articles of incorporation does not create the corporation until they are submitted to a regulatory authority that in turn can vouch for the fact that the corporation has in fact been created. But even then that doesn’t mean that the corporation is anything more than a shell. That is why we call them shell corporations.

The same holds true for trusts which must have beneficiaries, a trustor, a trust instrument, and a trustee that is actively engaged in managing the assets of the trust for the benefit of the beneficiaries. Without the elements being satisfied in real life, the trust does not exist and should not be treated as though it did exist.

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About Neil F Garfield, M.B.A., J.D.

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The banks have been pulling the wool over our eyes for two decades, pretending that the name of a REMIC Trust invokes and creates its existence. They have done the same with named Trustees and asserted “Master Servicers” of the asserted trust. Without a Trustor passing title to money or property to the named Trustee, there is nothing in trust.

Therefore whatever duties, obligations, powers or restrictions that exist under the asserted trust instrument do not apply to assets that have not been entrusted to the trustee to administer for the benefit of named beneficiaries.

The named Trustee or Servicer has nothing to claim if their claim derives from the existence of a trust. And of course a nonexistent trust has no claim against borrowers in which the beneficiaries of the trust, if they exist, have disclaimed any interest in the debt, note or mortgage.

The serial nature of asserted transfers in which servicing rights, claims for recovery of servicer advances, and purported ownership of note and mortgage is well known and leaves most people, including judges and regulators scratching their heads.

An assignment of mortgage without a a transfer of the indebtedness that is claimed to be secured by a mortgage or deed of trust means nothing. It is a statement by one party, lacking in any authority to another party. It says I hereby transfer to you the power to enforce the mortgage or deed of trust. It does not say you can keep the proceeds of enforcement and it does not identify the party to whom the debt will be paid as proceeds of liquidation of the home at or after the foreclosure sale.

As it turns out, many times the liquidation results in surplus funds — i.e., proceeds in excess of the asserted debt. That should be turned over to the borrower, but it isn’t; and that has spawned a whole new cottage industry of services offering to reclaim the surplus proceeds.

In most cases the proceeds are less than the amount demanded. But there are proceeds. Those are frequently swallowed whole by the real party in interest in the foreclosure — the asserted Master Servicer who claims the proceeds as recovery of servicer advances without the slightest evidence that the asserted Master Servicer ever paid anything nor that the asserted Master Servicer would be out of pocket in the event the “recovery” of “servicer advances” failed.

The foreclosure of the property proceeds with full knowledge that whatever the result, there are no creditors who will receive any money or benefit. The real parties are trying to make money, not recover it. And whatever proceeds or benefits might arise from the foreclosure action are grabbed by a party in a self-proclaimed assertion that while the foreclosure was brought in the name of a trust, the proceeds go to a different third party in derogation of the interests of the asserted trusts and the alleged investors in those trusts who are somehow not beneficiaries.

So investors purchase certificates in which the fine print usually says that for their own protection they disclaim any interest in the underlying debt, note or mortgages. Accordingly we have a trust without beneficiaries.

The existence of those debts, notes or mortgages becomes irrelevant to the investors because they have a promise from a trustee who is indemnified on behalf of a trust that owns nothing. The certificates are backed by assets of any kind. Even if they were “backed” by assets, the supposed beneficiaries have disclaimed such interests.

Thus not only does the trust own nothing even the prospect of security has been traded off to other investors who paid money on the expectation of revenue from the notes and mortgages claimed by the asserted trust through its named trustee.

In the end you have a name of a trust that is unregistered and never asserted to be organized and existing under the laws of any jurisdiction, trustee who has no duties and even if such duties were present the asserted trust instrument strips away all trustee functions, no beneficiaries, and no res, and no active business requiring administration nor any business record of such activity.

Yet the trust is the entity that  is chosen as the named Plaintiff in foreclosures. But the way it reads one is bound to believe that assumption that is not and never was true or even asserted: that the case involves the trustee bank for anything more than window dressing.

It is the serial nature of the falsely asserted transfers that obscures the real parties in interest in both securities transactions with investors and loans with borrowers. The unavoidable conclusion is that nothing asserted by the banks (players in  falsely claimed securitization schemes) is real.

Filed under: CASES, CORRUPTION, Eviction, evidence, Fabrication of documents, foreclosure, Servicer | Tagged: , , , , , , , , , , , | 9 Comments »

NJ Appellate Court Decision Goes to Achilles Heel of “Securitizers”

Posted on October 30, 2017 by Neil Garfield

“In order to have standing to foreclose a mortgage, a party ‘must own or control the underlying debt.'”

New Jersey litigants need look no further. In fact, in every other state of the U.S. you will find the same decisions each quoting from several other to the same effect. Courts across the country have usually confused the issue and accepted the allegation of ownership as proof of ownership. This court answers that as well:

To establish such ownership or control, Plaintiff must present properly authenticated evidence that it is the holder of the note or a non-holder in possession with rights of the holder.”

So what is a holder, such that the party has established “ownership or control of the underlying debt.” That is the issue that has been blurred by the banks.

The banks focus on the state statutes (UCC) enabling a holder to enforce without ever establishing that the party owns or controls the underlying debt. If you think about it that is nonsense. But that one thing, more than anything else, is responsible for millions of wrongful foreclosures. 

see NJ Decision On POA and MERS

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Here are some basic black letter rules, quoted in the NJ case, that have been followed for centuries:

  1. A holder must possess the original note.
  2. Transfer of possession must be “authenticated by an affidavit or certification based upon personal knowledge.”
  3. A party relying upon power of attorney or other document must produce the authenticated original of that document.
  4. Using the words “as attorney in fact” means nothing unless the party is able to produce a witness who, in their own personal knowledge, knows and states that the POA is in writing and has not been revoked.
  5. That witness must be able to lay the factual foundation and authentication for introduction of the Power of Attorney or any other such document.
  6. Without such foundation and authentication, any testimony or documents proffered by virtue of the POA cannot be admitted into evidence and for purposes of the case then, such statements or documents do not exist.
  7. A party who claims a legal relationship with another party and who relies upon it for proffering evidence must provide evidence of the legal relationship.
  8. A Power of Attorney must be in writing, duly signed and acknowledged as set forth in state statutes. Oral Powers of Attorney cannot be used to circumvent the requirement that interests in real property (including mortgages) must be in writing.
  9. A party seeking to enforce a note must be able to establish, though competent evidence, the location and the previous locations of the note in order to establish possession and the right to enforce, respectively.
  10. Certifications must be based upon personal knowledge and not general familiarity.
  11. If testimony is offered based upon a “review” of records, the records must be present or the witness must identify those records and how the witness acquired personal knowledge of their content.
  12. Assignments of mortgage must be authenticated by a person who has personal knowledge of the assignment (and the circumstances in which the assignment occurred). Otherwise the assignment is hearsay and must be excluded from evidence unless otherwise admitted for different reasons. Hearsay statements in assignments cannot be admitted into evidence and for purposes of the case then, such statements do not exist.
  13. The fact that an assignment or other document exists as an original or a copy does not mean that what is written on it can be admitted into evidence. But without a proper objection, the document can be admitted into evidence as proof of the matters asserted therein.
  14. A document signed by an agent or “nominee” like MERS after the demise of the principal is void because the power of attorney expires upon expiration of the principal. If the originator no longer exists, MERS is not authorized to act on behalf of the originator.

Filed under: CASES, discovery, evidence, foreclosure, Mortgage, Motions, originator, STATUTES | Tagged: , , , , | 7 Comments »

Patricia Rodriguez Tonight on the Neil Garfield Show

Posted on October 8, 2015 by Neil Garfield

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Patricia Rodriguez returns tonight to talk about her Seminar on October 31, 2015.. Patricia is a good lawyer and particularly good at organizing cases. She will be talking about Foreclosure Defense, Rescission, Intakes of Clients, and of course the latest in what is happening on the ground in Southern California. One of her strong points is organization — something that most lawyers are not so great at doing. Her seminar will focus on the bricks and mortar of setting up a case for litigation or modification.

Filed under: foreclosure | Tagged: , , , , , , | 3 Comments »

Old Habits Die Hard: Rescission Confusion Continues Despite Supreme Court Clarity

Posted on June 25, 2015 by Neil Garfield

You know something stupid is going on when you see tens of millions of dollars spent on ads enticing consumers to get a loan at 2.99%. There is no profit at that rate so something else is going on — leading to the conclusion that disclosure from the start has been misleading — unknown to the borrower.

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Let me put it this way: even the borrower lacks the authority to undo the rescission which is effective by operation of law. The loan, the note and mortgage are canceled. If the borrower wants to reinstate them, the borrower would need to get together with the creditor and sign new documents for a new loan transaction.

see Hiding-in-Plain-Sight_-Jesinoski-and-the-Consumer_s-Right-of-Rescind

A recent law review article from the law school at Duke University gets a lot of things right. But it still gets some key points wrong. You will see highlighted portions that raise questions if you click on the link above. But overall it does provide excellent background on the Truth in Lending Act and rescission.

Some of the errors I found —-

The twenty days applies to the duties of the “lender” or “creditor” not to the borrower and the writer completely misses the point in that sentence when he says that the lender must “return the property.” The creditor does not have the property. It might be that this is just poor wording. But as it is written, it is wrong.

There is no procedural bar to asserting the rescission. It is effective by operation of law. That means it is a fact — not a claim yet to be determined. Whether he meant to say that he agreed with what the court was doing or he just got it wrong, I don’t know. Once again we see some very intelligent people who have done a lot of study but still can’t get their heads around a very simple proposition — the statute says the rescission is effective by operation of law. There is nothing left to be done. That means the note and mortgage are void (REG Z and Jesinoski). This is substantive law and not subject to change by any procedural rules.

Footnote 102 is also poorly worded indicating that rescission under common law can be effected without suit. It is ONLY TILA rescission that can cancel the loan without suit.

His conclusion is also poorly worded adding to the confusion out there. He should have said that the rescission is effective by operation of law and that from that point forward the loan contract, the note and the mortgage have been nullified and are void, as stated under Reg Z.

Without this point of clarity the simple TILA rescission “procedure” is lost. The big mistake is that people, judges and lawyers continue to view rescission as a pending claim — despite the US Supreme Court stating that courts cannot interpret a statute without finding ambiguity (and being right about that) they don’t have power to change, add, amend or modify the the express wording of the statute. After rescission is sent there is no pending claim. After rescission is sent there is only the fact that the note and mortgage are gone.

My attempt at clarification would be said as follows: if you are in a court or in a transaction after a notice of rescission has been sent, then the previous note and mortgage no longer exist. No court action may be undertaken on an instrument that does not exist. No transaction can ignore the fact that the note and mortgage were canceled and under Reg Z are void.

Lawyers and some scholars continue to miss the point — despite the Jesinoski decision, unanimously in the US Supreme Court (a place where all arguments cease because it is the court of last resort). Old habits die hard. Sanctity of contract seems to be causing a kind of mental pollution causing many people to continue to assert positions based upon the premise that in order for the loan, mortgage and note to be canceled and rendered void upon mailing the notice of rescission, some court action is required or permitted. Let me put it this way: even the borrower lacks the authority to undo the rescission which is effective by operation of law. The loan, the note and mortgage are canceled. If the borrower wants to reinstate them, the borrower would need to get together with the creditor and sign new documents for a new loan transaction.

Filed under: foreclosure | Tagged: , , | 10 Comments »

Pretender Mender: Foreclosure Crisis Continues to Rise Despite Obama Team Reports

Posted on August 27, 2014 by Neil Garfield

Despite various “reports” from the Obama Administration and writers in the fields of real estate, mortgages and finance, the crisis is still looming as the main drag on the economy. Besides the fact that complete strangers are “getting the house” after multiple payments were received negating any claim of default, it is difficult to obtain financing for a new purchase for the millions of families who have been victims of the mortgage PONZI scheme. In addition, people are finding out that these intermediaries who received an improper stamp of approval from the courts are now pursuing deficiency judgments against people who cooperated or lost the foreclosure litigation. And now we have delinquency rates rising on mortgages that in all probability should never be enforced. And servicers are still pursuing strategies to lure or push homeowners into foreclosure.

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Most people simply allowed the foreclosure to happen. Many even cleaned the home before leaving the keys on the kitchen counter. They never lifted a finger in defense. As predicted many times on this blog and in my appearances, it isn’t over. We are in the fifth inning of a nine inning game.

Losing homes that have sometimes been in the family for many generations results in a sharp decline in household wealth leaving the homeowner with virtually no offset to the household debt. Even if the family has recovered in terms of producing at least a meager income that would support a down-sized home, they cannot get a mortgage because of a policy of not allowing mortgage financing to anyone who has a foreclosure on their record within the past three years.

To add insult to injury, the banks posing as lenders in the 6 million+ foreclosures are now filing deficiency judgments to continue the illusion that the title is clear and the judgment of foreclosure was valid. People faced with these suits are now in the position of having failed to litigate the validity of the mortgage or foreclosure. But all is not lost. A deficiency judgment is presumptively valid, but in the litigation the former homeowners can send out discovery requests to determine ownership and balance of the alleged debt. Whether judges will allow that discovery is something yet to be seen. But the risk to those companies filing deficiency judgments is that the aggressive litigators defending the deficiency actions might well be able to peak under the hood of the steam roller that produced the foreclosure in the first instance.

What they will find is that there is an absence of actual transactions supporting the loans, assignments, endorsements etc. that were used to get the Court to presume that the documents were valid — i.e., that absent proof from the borrower, the rebuttable assumption of validity of the documents that refer to such transactions forces the homeowner to assume a burden of proof based upon facts that are in the sole care, custody and control of the pretender lender. If the former homeowner can do what they should have done in the first place, they will open up Pandora’s box. The loan on paper was not backed by a transaction where the “lender” loaned any money. The assignment was not backed by a purchase transaction of the loan. And even where there was a transfer for value, the “assignment turns out to be merely an offer that neither trust nor trustee of the REMIC trust was allowed to accept.

All evidence, despite narratives to the contrary, shows that not only have foreclosures not abated, they are rising. Delinquencies are rising, indicating a whole new wave of foreclosures on their way — probably after the November elections.

http://www.housingwire.com/blogs/1-rewired/post/31089-are-we-facing-yet-another-foreclosure-crisis

http://www.newrepublic.com/article/119187/mortgage-foreclosures-2015-why-crisis-will-flare-again

http://susiemadrak.com/2014/08/25/here-comes-that-deferred-mortgage-crisis/

Filed under: AMGAR, CORRUPTION, escrow agent, evidence, expert witness, foreclosure, foreclosure defenses, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, originator, Pleading, securities fraud, Servicer, Title, TRUST BENEFICIARIES, trustee | Tagged: , , , , , | 21 Comments »

Another Short Treatise on Securitization

Posted on June 9, 2014 by Neil Garfield

Patrick Giunta brought this article to my attention. He practices in South Florida and I co-counsel cases with him. Although there are some errors in facts and I have some differences of opinion with the writer, I think the article is a MUST-READ for anyone effected by “securitization” — especially foreclosure defense attorneys. If nothing else there is corroboration of what I have said all along. The entire thing is the emperor’s new clothes — see article I wrote about 7 years ago. If you don’t understand that, then you don’t know how to cross examine the “corporate representative” at trial.

The following is an excerpt from the article, and the link to the entire article is below:

“A serious problem with modern securitization is that it destroys “privity.” Privity of contract is the traditional notion that there are two parties to a contract and that only a party to the contract can enforce or renegotiate that contract. Put simply, if A and B have a contract, C cannot enforce B’s rights against A (unless A expressly agrees or C otherwise shows a lawful agency relationship with B). The frustration for Joe is that he cannot find the other party to his transaction. When Joe talks to his “bank” (really his Servicer) and tries to renegotiate his loan, his bank tells him that a mysterious “investor” will not approve. He can’t do this because they don’t exist, have been paid or don’t have the authority to negotiate Joe’s loan.

“Joe’s ultimate “investor” is the Fed, as evidenced by the trillion of MBSs on its balance sheet. Although Fannie/Freddie purportedly now “own” 80 percent of all U.S. “mortgage loans,” Fannie/Freddie are really just the Fed’s repo agents. Joe has no privity relationship with Fannie/Freddie. Fannie, Freddie and the Fed know this. So they are using the Bailout Banks to frontrun the process – the Bailout Bank (who also have no cognizable connection to the note and therefore no privity relationship with Joe) conducts a fraudulent foreclosure by creating a “record title” right to foreclose and, when the fraudulent process is over, hands the bag of stolen loot (Joe’s home) to Fannie and Freddie.”

http://butlerlibertylaw.com/foreclosure-fraud/

Filed under: AMGAR, CORRUPTION, Eviction, evidence, expert witness, Fannie MAe, foreclosure, foreclosure defenses, foreclosure mill, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, Title, TRUST BENEFICIARIES, trustee | Tagged: , , , , , | 31 Comments »

Why They Sue as Holder and Not as Holder in Due Course

Posted on May 13, 2014 by Neil Garfield

Parties claiming a right to foreclose allege they are the “Holder” and do not allege they are the holder in due course (HDC) because they are ducking the issue of consideration required by both Article 3 and Article 9 of the UCC. So far their strategy of confusion is working. They are directly or impliedly claiming they are the holder of the NOTE. They cannot claim they are the holder of the MORTGAGE, because no such status exists — they either own the mortgage encumbrance because they paid for it or they didn’t. If they didn’t pay for it, they cannot enforce it even if they still can enforce the note.

The framers of the Uniform Commercial Code (UCC) had a plan they executed in Article 3 and Article 9 of the UCC, as adopted by 49 states (Louisiana, excepted). They had four (4) problems to solve.

Consider two possible fact patterns, to wit: first the payee (“lender”) did in fact fund the loan putting cash in the hands of the borrower or paying debts on the borrower’s behalf; second, the payee (“originator”) gets the borrower to sign the note but fails or refuses or never intended to fund the loan of money to the borrower. In the first instance the note is evidence of a real debt whereas in the second instance the note is not evidence of a real debt.

This issue has been obscured by the fact that SOMEONE (“investors”) did fund a loan. The questions posed here is whether the investors received the protection of a note and mortgage and if they didn’t, what is the effect of advancing funds for a loan without getting the required evidence of the loan (Promissory Note) and without getting the collateral (Mortgage) that would ordinarily apply.

The Four Goals

First, the UCC framers wanted to encourage the free flow of commerce by making certain instruments the equivalent of cash. The Payee should be able to use such instruments in trading for goods, services, or credit. This is the promissory note — a written instrument containing an unconditional promise to pay a certain amount. The timing of the payments, the amount, the terms, the method of payment must all be obvious from the face of the note without reference to any outside evidence (parol evidence) that could reduce or eliminate the value of the note. If there are questions or conditions apparent from the face of the instrument, it fails the test of a negotiable instrument or cash equivalent. That means that Article 3, UCC doesn’t apply.

Second they wanted to protect the issuer of the note (the payor) from the effects of fraud, improper lending practices and other deprive lending policies and practices from any false claims for payment on the note. If the Payor (homeowner, borrower) received no benefit from the Payee but was somehow induced to sign the note in anticipation of receiving the benefit, then the Payee should not be able to collect from the Payor. This goal conflicts with the first goal only when the note is sold to an innocent third party for value who had no notice of the defective nature of the origins of the note (Holder in Due Course -HDC).

Thus third, in order to maintain the status of cash equivalent paper, they had to provide a mechanism in which an innocent third party was protected when they advanced money for the purchase of the note without having any notice of the borrower’s defenses. This would allow the buyer to sue the payor (borrower, debtor) and collect free of any potential defenses. The burden of the borrower’s claims would then fall on the borrower to collect damages against the original payee for wrongful acts. (Article 3, UCC, Holder in Due Course -HDC).

And in order to allow all such notes to be enforceable regardless of the circumstances of their origin, any party holding the note (“Holder”) can enforce the note if they have physical possession of the note, even if they paid nothing for it, as long as it is endorsed to them. But if they are a HOLDER and not a HOLDER IN DUE COURSE then they sue subject to all of the borrower’s defenses. The central issue is whether the Holder has paid for the note, in which case they would be in HDC status or if they did not pay for the note, in which case they enforce subject to all borrower’s defenses — including the allegation that the original payee never made the loan.

Fourth was the issue of forfeiture of collateral. This is considered the most extreme remedy under commercial law, analogous to the death penalty in criminal cases. (Article 9, UCC — secured transactions). It is one thing to preserve liquidity in the marketplace by protecting the investment of innocent third parties who purchase negotiable instruments from defenses — and quite another to cause forfeiture of home or property. Here again, the language of Article 3 is used for an HDC — i.e., an assignment of the mortgage is enforceable ONLY if the Assignor paid for it and had no notice of borrower’s defenses.

So they devised a structure in which a bona fide purchaser of the paper without notice of the borrower’s defenses would be called a holder in due course. They could sue the borrower despite wrongful behavior by the original payee on the unconditional promise to pay (the note). In the event of fraud in the sale of the note, the new owner of the note could sue both the seller (Assignor, endorser or indorser).

Then they considered the possibility of wrongful behavior: the issuance of such commercial paper would be a claim, but not negotiable paper — but if it was sold anyway it would be subject to the borrower’s defenses. This allows outside evidence (parol evidence) — which is to say that in this fact pattern, the promise to pay was conditional on the value and effect of the borrower’s defenses. The HOLDER of this instrument need not pay for the sale of the note and need not be ignorant of the borrower’s defenses. This holder could sue both the payor (borrower, debtor) and the party who transferred the note — depending upon the agreement that accompanied the transfer of the note by delivery and indorsement.

The party who accepts indorsement without paying for the note or even knowing of potential borrower defenses can still enforce the note, but unlike the the HOLDER IN DUE COURSE, the Payor (Borrower) could raise all defenses to the original transaction. The UCC Article 3 calls this a holder. A holder need not purchase the note and may have actual knowledge of the borrower’s defenses but can still sue the payor (borrower) for the principal amount due on the unconditional promise to pay.

I have noticed that most judicial foreclosures are either in rem (foreclosures only) or the claim on the note is that the Plaintiff is a “holder.” If they have possession and it is indorsed, they are probably a holder entitled to enforce the note. But the Defendant can raise all available defenses just as he or she would do if the fight was with the originator of the note execution. And nothing is a better defense than the distinction between being the originator of the note execution and the originator of the loan. The confusion over the term “originator” has allowed millions of foreclosures to be completed despite the fact that the “holder” neither paid for the note nor could they claim they were ignorant of the borrower’s defenses.

This confusion has led most courts to look at Article 3, UCC, instead of Article 9, UCC. Neither allow the claimant to sue on either the note or the mortgage without having paid for the assignment of the mortgage or delivery of the note, if the holder has actual notice of borrower’s defenses. In most cases the claimant either has the knowledge of the fraud and predatory practices at closing or is a made to order controlled company of a real party who has such knowledge.

In conclusion, borrowers should prevail in foreclosure litigation in situations where the claimant is unable to prove the identity of the actual lender who advanced funds, or where the claimant has failed to purchase the mortgage.

Based upon vast quantities of information in the public domain including investor lawsuits, insurer lawsuits and government agency lawsuits (all alleging FRAUD and mismanagement of funds) against broker dealers who sold mortgage bonds, it seems highly likely that in the 96% of all loans between 2001-2009 that are subject to claims of securitization three things are true:

(1) the securitization plan was never followed in most cases thus making the investors direct lenders without benefit of a note or mortgage and

(2) none of the parties “holding” paper possess any of the qualities of a party who could have standing to foreclose and

(3) claims still exist on the notes, even though they were not supported by consideration but those claims are unsecured and subject to all defenses that could have been raised against the originator.

Neil F Garfield, Esq.

For further information call 520-405-1688, or 954-495-9867. Do not use the above information without consulting an attorney licensed in the jurisdiction in which your property is located and who knows all the facts of your case. The above article is a general description and may not apply to your case.

Filed under: AMGAR, CASES, CDO, CORRUPTION, evidence, expert witness, foreclosure, foreclosure defenses, GTC | Honor, Investor, MODIFICATION, Mortgage, originator, Pleading, Servicer, TRUST BENEFICIARIES, trustee | Tagged: , , , , , , , , , , , , , | 7 Comments »

How Does Insurance Payee Match Up with Claims of Ownership of the Loan?

Posted on October 3, 2013 by Neil Garfield

There have been many admissions by government officials and even parties to the litigation over mortgage Foreclosures to the effect that at this point the ownership of most loans is in doubt. Even President Obama said it, reflecting the views and advice of the senior advisors at the White House. On appeal, recently in California, BOTH sides admitted they had no way of identifying the true creditor — and that is why we have all this litigation, why we have gridlock on modifications and settlements. So what do we do?

One insurance expert I interviewed suggested that his industry might solve the problem, but I think his points raise more questions than answers. Nonetheless, to prove the question, and overcome certain presumptions that are legally applied, examining the insurance policies and the changes that occur in forced placed insurance might reveal the issues and even illuminate the potential solution.

Bank of America is an example of a bank that rushes to take any excuse to place insurance from their own carrier BalBOA, naming BOA as the loss payee on liability policies. The usual previous loss payee was someone else — perhaps the originator or some alleged assignee. The procedure of forced placed insurance creates both additional income to the bank and skips over the question of who owns the loan. When the insurance is reinstated or shown to have never lapsed in the the first place, it often names BOA thus lending support to the bank’s position that it is the owner of the loan.

Looking at the title insurance, who is the loss payee? Besides the owner’s policy there is a rider for the mortgagee named in the mortgage. Of course that party may not be a mortgagee when the mortgage is examined carefully. But changes in loss payees under title insurance usually requires notice and consent of the owner of the property.

Thus the question could be asked in Discovery about who was responsible for tracking title insurance, liability insurance and PMI, why does the policy name a loss payee other than the bank claiming ownership and what efforts were made by the bank to correct the identity of the creditor?

The same thing applies to PMI. If the payee is somebody different than the Forecloser you will notice that none of the banks allege that this is a breach of the mortgage contract. Why not? I think it is because the insurer would demand more proof than what is offered in court as to ownership and that the bank would not be able to satisfy the insurer that it had an insurable interest in the property.

Filed under: CORRUPTION, evidence, expert witness, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, investment banking, Investor, MODIFICATION, Mortgage, Pleading, securities fraud, Servicer, trustee | Tagged: , , , , , , , | 26 Comments »

Why Do Subservicers Continue to Pay Investors After Borrower Stops Paying?

Posted on August 22, 2013 by Neil Garfield

It is now common knowledge that subservicers are continuing to pay investors and reporting the loan as “performing” after they have sent a default and right to reinstate notice as required by the mortgage (usually paragraph 22) and by the uniform debt collection laws. The first problem about this is that the actual creditor does not show a default whereas the bookkeeper Servicer is declaring the default. With the investor receiving his regular payments, how can a default exist? This appears to apply to securitized student loans as well.

Bottom line is that the subservicer is reporting to the borrower that the loan is in default but reporting to the investor (the creditor) that it isn’t in default. These payments have gone on for as long as 18 months that I have seen. Which brings us back to the first articles ever written on this blog.

The borrower is only required to make payments that are DUE. The payment isn’t due if it is already been made and there is nothing to reinstate if the creditor has already received his expected payment. The payments are NOT DUE TO THE SERVICER. They are due to the creditor. If the creditor received the payment on that loan as shown in the distribution report to the creditor, then the conditions necessary to declare that the loan is in default are not present. Remember that the presence of a table funded loan, an aggregator, the securitization, the trust was withheld from the borrower. The banks could have covered themselves by adding to the mortgage and note that third party payments to the creditor will not reduce the payments, principal or interest. But if they had done that, they would have required to answer so e uncomfortable questions.

The second issue is the constant question “Why would they continue making payments to the ‘creditor’ when they are not receiving payments from the borrower?” And “Where are they getting the money to pay the creditor?”

After talking with sources from deep inside the industry the answer to why they are paying is primarily to sell more bonds and hide the default issues. The secondary reason is to make the investor complacent about the accounting for what was really received on account of the loans and from whom. That inquiry could lead to a demand from the investor for payment in full and if the REMIC doesn’t pay, then the investors sue the investment banker who was the one playing with OPM (other people’s money).

The answer to the second question is that the money comes from the investment banker. Whether the investment banker is merely using the investor’s money (allowed under prospectus) or using insurance proceeds or payments on CDS (credit default swaps) or even sale proceeds to the Federal Reserve varies. Either way it is an effort to keep money that should go to the investor and reduce the amount payable to the investor and which would reduce or eliminate the debt owed by the homeowner to the investor. It is fraud, theft and probably a bunch of other things.

Filed under: bubble, CDO, CORRUPTION, expert witness, foreclosure, foreclosure mill, investment banking, Investor, MODIFICATION, Mortgage, securities fraud, Servicer, Student Loans | Tagged: , , , , | 63 Comments »

How to Win the Case

Posted on July 20, 2013 by Neil Garfield

There many ways to win a case, so what I am saying in this article should be taken in the context of a larger reality where lawyers are winning hearings and winning the entire case using their own style, strategies and tactics. And it is equally true that any case management plan, regardless of the brilliance behind it, can still result in a loss. So this article should not be taken as my way or the highway, but rather just my way.

The first thing to keep in mind is that the argument that many lawyers are using at the beginning of the case should really be reserved until the end if the case — closing argument at trial, or argument at motions in limine, motions for summary judgment etc.

The narrative at the end of the case must be based upon evidence that you have built, brick by brick, and which has been admitted in evidence or at least is presumed correct by the time you make your arguments. The error of pro se litigants and many lawyers is that in the absence of knowledge and experience in trial law, they attempt to insert the final narrative at the beginning of the case, when it is neither credible on its face nor supported by anything in the record. Evidence, for the most part, consists of facts that are admitted into evidence or presumed true. In early motion practice and discovery requests and motions there is no evidence except that the Plaintiff’s complaint is usually presumed or deemed to be true for purposes of the motion and argument.

If you wish to challenge the foreclosure complaint or the notice of sale in non-judicial states it is necessary for you to know the facts and know the defects of the case presented by your opposition. Announcing your narrative at the beginning merely telegraphs your case plan and locks you into an argument about why you are saying what you are saying.

For that reason I question the wisdom of filing counterclaims against the foreclosing party since your claim probably does not arise until it is determined that the foreclosure action was wrongful. This is a matter some considerable debate amongst lawyers who believe that the borrower’s claims are compulsory counterclaims that are waived unless filed in the first action that litigates the validity of the foreclosure. So it is a tricky call and only a licensed practicing attorney can give you an opinion upon which you could rely in your strategy. My belief is that most of the issues presented by the planned counterclaim should fit nicely into affirmative defenses and set up the claim for wrongful foreclosure, Slander of title etc.

So knowing your theory of the case is important as a guidepost for your early discovery and motion practice. But what you need to do is attack the basic facts and presumptions alleged by your opposition. Where do you start? In judicial states there are frequently rules requiring the verification of the complaint. Taking the deposition of the person who verified the complaint is a good idea.

Making them bring the documents and media upon which they relied might require the place of deposition to be their place of work and for lawyers to arrange for video deposition. The interesting reaction of your opposition is likely to be a motion for protective order. At this hearing you can probably get an order requiring that the person show up, perhaps permitting access to the workplace for your forensic ediscovery expert, and to bring documents “upon which she or he relied.”

My experience is that the presumptions in favor of the banks start cracking during the fight about deposing the verifier and the designated representative (the next deposition duces Tecum). The Bank will want to block access to the person who signed the verification. They will want to limit the inquiry to the designated corporate representative. Keep in mind that you also want to depose the witness who will testify at trial find out why that witness is different from the one they produced as the corporate representative with the “most” knowledge at deposition and why both if them are different than the person who verified the complaint.

By demonstrating the stonewalling and delays imposed by the bank who supposedly has an interest in getting to foreclosure sale, judges recognize that there is something odd about the case. Asking for and offering an expedited discovery schedule in a motion for status conference will also help set the stage for your accusation that the delaying party is the plaintiff or the foreclosing party. Being the aggressor can convey the impression that the borrower is not the perpetrator, but rather the victim of wrongful behavior.

Early subpoenas and motions will remove the impression that are just buying time. Strategies for buying time even if allowed by the court, basically show that you are admitting the debt, note, mortgage, foreclosure sale and credit bid but want your client to get a few months of free rent. You are digging the wrong hole if your case strategy encourages the judge to believe that the debt, note and mortgage, and the assignments are all valid and that the borrower is looking for a break.

Early proactive litigation can highlight the fact that the bank is backing up and only wants to fight uncontested cases. It is a way to take control of the narrative gradually, so that when it comes to the motions for summary judgment (including your own cross motion), you have an opening for victory as Mark Stopa has done in Florida at least make it clear that there are material issues of fact in dispute.

The absence of early proactive discovery and motions speaks loudly that the homeowner really has no defense because otherwise they would have pursued the proof.

Getting experienced trial attorneys who understand this article is not easy. Most cases settle, and most people are at least initially happy to remove the stressor imminent foreclosure and eviction. But without presenting a credible threat to the opposition, the settlement, if it happens at all is not going to offer much in terms of relief. And the cost of just getting free rent is not retaining your house and not having offset and complaints for damages for wrongful foreclosure. When you sit and do nothing you are conforming to the playbook of the bank. In the end they get the foreclosure, they evict the homeowner and the homeowner gets nothing except a black mark on their credit history.

We offer a forms library that will help reduce the work and cost of an attorney if he or she uses them as templates. Write to neilfgarfield@hotmail.com to inquire. But there are also dozens of free forms and templates you can get from foreclosure defense forms n the left side of this blog. THEY SHOULD NOT BE USED WITHOUT CONSULTING AN ATTORNEY LICENSED TO PRACTICE IN THE JURISDICTION IN WHICH THEN PROPERTY IS LOCATED.

Filed under: CASES, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, forms, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer | Tagged: , , , , | 201 Comments »

New Florida Law: Hurry Up and Wait?

Posted on June 19, 2013 by Neil Garfield

As most lawyers will probably tell you, the new Florida law changes the procedure and frankly contradicts the Rules of Civil Procedure issued by the Florida Supreme Court. In all events foreclosure defense attorneys should move quickly to issue discovery requests and subpoenas in anticipation of the application of this law. The good news is that you have a powerful argument for requiring expedited discovery in view of the fact that the judge can issue a final judgment as early as 20 days after the filing of the lawsuit for foreclosure. The bad news is that the new law seems to eliminate or at least infringe on your right to file a motion to dismiss as set forth in the Florida Rules of Civil Procedure.

The new law contains elements that are difficult to decipher.  The new law puts a burden on the borrower to show a genuine issue of material fact that would eliminate the possibility of a summary judgment in favor of the party who filed the lawsuit. In essence, the new law is in conflict with the Florida Rules of Civil Procedure in that an answer and affirmative defenses is only due after disposition of a motion to dismiss, which is a matter of right under the rules in Florida and every other state. I would imagine the Florida Supreme Court will, as it has done before, jealously guarded its right to issue rules of procedure and that this law will eventually be struck down. Meanwhile we have to treat it as the law of the state.

On the flip-side, the law requires proof of ownership of the loan  before the burden shifts to the borrower. But the proof of ownership is in the form of copies of documents which the banks have already shown they are very willing to fabricate and forge. In essence, the new procedure passed by the legislature turns the law on its head, to wit: at this stage in litigation the allegations of the plaintiff are taken as true only for procedural purposes and not for the purpose of entering final judgment without a hearing and without an opportunity to conduct discovery and otherwise cross-examine witnesses and challenge documents. it is a not-so-clever way of abridging the due process rights of everyone in the state and as a precedent in other matters would undoubtedly lead to disaster, but for my supreme confidence that the Florida Supreme Court will treat this as a no-brainer and strike down the law.

Thus the new law is as close to changing Florida to a nonjudicial state as you can get without actually doing it. I would suggest that in order to preserve your procedural and constitutional rights for your clients that you file an immediate motion to dismiss to be heard on an emergency basis where a motion to dismiss is appropriate or proper (which appears to be in nearly all cases).

I would further suggest that in addition to issuing requests for discovery (which under normal rules would be due after the hearing where the judge rules on whether the borrower has raised any material issues of fact, which is a further conflict with the Florida Rules of Civil Procedure as promulgated by the Florida Supreme Court) that you file an emergency motion to expedite discovery.

And lastly I would insist that the hearing on whether the borrower can raise issues of material fact (keeping in mind that the borrower is not even been given a chance to raise those issues without waiving the borrowers right to file a motion to dismiss) must be an evidentiary hearing conforming with the rules of evidence.

As a final note to my remarks on this law, I believe it is incumbent upon the attorney for any client that has been actually affected by this law to bring the matter up directly to Florida Supreme Court. It is difficult for me to imagine any scenario under which the court would uphold this law — simply on the grounds of who has authority to enact rules of civil procedure. The Florida Constitution gives that power to the Florida Supreme Court — not the legislator or the governor. Speaking personally, I intend to follow the rules of appellate procedure on behalf of clients instead of making them up to suit me or my client. That at least is a good starting point.

As a general remark on many of the issues of our day, I think it would be a good  idea to start with the contents of the state Constitution and the United States Constitution before passing any laws pretending as though the Constitution did not exist. The Constitution is the supreme law of the land. If you don’t like what it says, there is a provision for amendment. Without the amendment, the law is whatever the Constitution says it is. That is what is meant by a nation of laws as opposed to a nation of men. This latest law from the legislature signed by Gov. Scott is an example of mindless pandering to the banks who are contributing to the campaigns of the legislators and officers of government. But in addition to this particular law I find myself listening to debates that do not make any sense. As a result both sides of the debate on social issues and foreign policy, financial issues and the economy, are wrongly starting with the premise that the issue is even up for debate. Both sides seem to ignore the supreme law of the land as their starting point.  Neither side seems to stake out a defensible position on which we can have a reasonable debate.

Revisions To Mortgage Foreclosure Procedures In Florida
http://www.jdsupra.com/legalnews/revisions-to-mortgage-foreclosure-proced-31636/

Florida tops the U.S. in May foreclosures
http://www.naplesnews.com/news/2013/jun/14/florida-tops-the-us-in-may-foreclosures/

Bank of America Lied to Homeowners and Rewarded Foreclosures, Former Employees Say
http://www.propublica.org/article/bank-of-america-lied-to-homeowners-and-rewarded-foreclosures

New law to speed foreclosures draws criticism and praise
http://www.heraldtribune.com/article/20130618/article/306189993

 

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , | 58 Comments »

Trustees on REMICs Face a World of Hurt

Posted on June 18, 2013 by Neil Garfield

DID YOU EVER WONDER WHY TRUSTEES INSTRUCTED THE INVESTMENT BANKS TO NOT USE THEIR NAME IN FORECLOSURES?

Editor’s Comment: Finally the questions are spreading over the entire map of the false securitization of loans and the diversion of money, securities and property from investors and homeowners. Read the article below, and see if you smell the stink rising from the financial sector. It is time for the government to come clean and tell us that they were defrauded by TARP, the bank bailouts, and the privileges extended to the major banks. They didn’t save the financial sector they crowned it king over all the world.

Nowhere is that more evident than when you drill down on the so-called “trustees” of the so-called “trusts” that were “backed” by mortgage loans that didn’t exist or that were already owned by someone else. The failure of trustees to exercise any power or control over securitization or to even ask a question about the mortgage bonds and the underlying loans was no accident. When the whistle blowers come out on this one it will clarify the situation. Deutsch, US Bank, Bank of New York accepted fees for the sole purpose of being named as trustees with the understanding that they would do nothing. They were happy to receive the fees and they knew their names were being used to create the illusion of authenticity when the bonds were “Sold” to investors.

One of the next big revelations is going to be how the money from investors was quickly spirited away from the trustee and directly into the pockets of the investment bankers who sold them. The Trustee didn’t need a trust account because no money was paid to any “trust” on which it was named the trustee. Not having any money they obviously were not called upon to sign a check or issue a wire transfer from any account because there was no account. This was key to the PONZI scheme.

If the Trustees received money for the “trust” then they would be required under all kinds of laws and regulations to act like a trustee. With no assets in a named trustee they could hardly be required to do anything since it was an unfunded trust and everyone knows that an unfunded trust is no trust at all even if it exists on paper.

Of course if they had received the money as trustee, they would have wanted more money to act like a trustee. But that is just the tip of the iceberg. If they had received the money from investors then they would have spent it on acquiring mortgages. And if they were acquiring mortgages as trustee they would have peeked under the hood to see if there was any loan there. to the extent that the loans were non-confirming loans for stable funds (heavily regulated pension funds) they would rejected many of the loans.

The real interesting pattern here is what would have happened if they did purchase the loans. Well then — and follow this because your house depends upon it — if they HAD purchased the loans for the “trust” there would have no need for MERS, no trading in the mortgages, and no trading on the mortgage bonds except that the insurance would have been paid to the investors like they thought it would. The Federal Reserve would not be buying billions of dollars in “mortgage bonds” per month because there would be no need — because there would be no emergency.

If they HAD purchased the loans, then they would have a recorded interest, under the direction as trustees, for the REMIC trusts. And they would have had all original documents or proof that the original documents had been deposited somewhere that could be audited,  because they would not have purchased it without that. Show me the note never would have gotten off the ground or even occurred to anyone. But most importantly, they would clearly have mitigated damages by receipt of insurance and credit default swaps, payable to the trust and to the investment banker, which is what happened.

No, Reynaldo Reyes (Deutsch bank asset manager in control of the trustee program), it is not “Counter-intuitive.” It was a lie from start to finish to cover up a PONZI scheme that failed like all PONZI schemes fail as soon as the “investors” stop buying the crap you are peddling. THAT is what happened in the financial crisis which would have been no crisis. Most of the loans would never have been approved for purchase by the trusts. Most of the defaults would have been real, most of the debts would have been real, and most importantly the note would be properly owned by the trust giving it an insurable interest and therefore the proceeds of insurance and credit default swaps would have been paid to investors leaving the number of defaults and foreclosures nearly zero.

And as we have seen in recent days, there would not have been a Bank of America driving as many foreclosures through the system as possible because the trustee would have entered into modification and mitigation agreements with borrowers. Oh wait, that might not have been necessary because the amount of money flooding the world would have been far less and the shadow banking system would be a tiny fraction of the size it is now — last count it looks like something approaching or exceeding one quadrillion dollars — or about 20 times all the real money in the world.

At some point the dam will break and the trustees will turn on the investment banks and those who are using the trustee’s name in vain. The foreclosures will stop and the government will need to fess up tot he fact that it entered into tacit understandings with scoundrels. When you sleep with dogs you get fleas — unless the dog is actually clean.

Stay Tuned for more whistle blowing.

In Countrywide Case, Trustees Failed to Provide Oversight on Mortgage Pools

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , | 88 Comments »

Insurance, Credit Default Swaps, Guarantees: Third Party Payments Mitigate Damages to “Lender”

Posted on March 28, 2013 by Neil Garfield
If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Analysis: The topic of conversation (argument) in court is changing to an inquiry of what is the real transaction, who were the parties and did they pay anything that gives them the right to claim they suffered financial damages as a result of the “breach” by the borrower. And the corollary to that is what constitutes mitigation of those damages.

If the mortgage bond derives its value solely from underlying mortgage loans, then the risk of loss derives solely from those same underlying mortgages. And if those losses are mitigated through third party payments, then the benefit should flow to both the investors who were the source of funds and the borrowers balance must be correspondingly and proportionately adjusted. Otherwise the creditor ends up in a position better than if the debtor had paid off the debt.

If your Aunt Sally pays off your mortgage loan and the bank sues you anyway  claiming they didn’t get any payment from YOU, the case will be a loser for the bank and a clear winner for you because of the defense of PAYMENT. The rules regarding damages and mitigation of damages boil down to this — the alleged injured party should not be placed in a position where he/she/it is better off than if the contract (promissory) note had been fully performed.

If the “creditor” is the investor lender, and the only way the borrower received the money was through intermediaries, then those intermediaries are not entitled to claim part of the money that the investor advanced, nor part of the money that was intended for the “creditor” to offset a financial loss. Those intermediaries are agents. And the transaction,  while involving numerous intermediaries and their affiliates, is a single contemporaneous transaction between the investor lender and the homeowner borrower.

This is the essence of the “Single transaction doctrine” and the “step transaction doctrine.” What the banks have been successful at doing, thus far, is to focus the court’s attention on the individual steps of the transaction in which a borrower eventually received money or value in exchange for his promise to pay (promissory note) and the collateral he used to guarantee payment (mortgage or deed of trust). This is evasive logic. As soon as you have penetrated the fog with the single transaction rule where the investor lenders are identified as the creditor and the homeowner borrower is identified as the debtor, the argument of the would-be forecloser collapses under its own weight.

Having established a straight line between the investor lenders and the homeowner borrowers, and identified all the other parties as intermediary agents of the the real parties in interest, the case for  damages become much clearer. The intermediary agents cannot foreclose or enforce the debt except for the benefit of an identified creditor which we know is the group of investor lenders whose money was used to fund the tier 2 yield spread premium, other dubious fees and profits, and then applied to funding loans by wire transfer to closing agents.

The intermediaries cannot claim the house because they are not part of that transaction as a real party in interest. They may have duties to each other as it relates to handling of the money as it passes through various conduits, but their principal duty is to make sure the transaction between the creditor and debtor is completed.

The intermediaries who supported the sale of fake mortgage bonds from an empty REMIC trust cannot claim the benefits of insurance, guarantees or the proceeds of hedge contracts like credit default swaps. For the first time since the mess began, judges are starting to ask whether the payments from the third parties has relevance to the debt of the borrower. To use the example above, are the third parties who made the payments the equivalent of Aunt Sally or are they somehow going to be allowed to claim those proceeds themselves?

The difference is huge. If the third parties who made those payments are the equivalent of Aunt Sally, then the mortgage is paid off to the extent that actual cash payments were received by the intermediary agents. Aunt Sally might have a claim against the borrower or it might have been a gift, but in all events the original basis for the transaction has been reduced or eliminated by the receipt of those payments.

If Aunt Sally sues the borrower, it would  be for contribution or restitution, unsecured, unless Aunt sally actually bought the loan and received an assignment along with a receipt for her funds. If there was another basis on which Aunt Sally made the payment besides a gift, then the money should still be credited to the benefit of the investor lenders who have received what they thought was a bond payable but in reality was still the note payable.

In no event are the intermediary agents to receive those loss mitigation payments when they had no loss. And to the extent that payments were received, they should be used to reduce the receivable of the investor lender and of course that would reduce the payable owed from the homeowner borrower to the investor lender. To do otherwise would be to allow the “creditor” to end up in a much better position than if the homeowner had simply paid off the loan as per the promissory note or faked mortgage bond.

None of this takes away from the fact that the REMIC trust was not source the funds used to pay for the mortgage origination or transfer. That goes to the issue of the perfection of the mortgage lien and not to the issue of how much is owed.

Now Judges are starting to ask the right question: what authority exists for application of the third party payments to mitigate damages? If such authority exists and the would-be foreclosures used a false formula to determine the principal balance due, and the interest payable on that false balance then the notice of delinquency, notice of default, and foreclosure proceedings, including the sale and redemption period would all be incorrect and probably void because they demanded too much from the borrower after having received the third party payments.

If such authority does not exist, then the windfall to the banks will continue unabated — they get the fees and tier 2 yield spread premium profits upfront, they get the payment servicing fees, they get to sell the loan multiple times without any credit to the investor lender, but most of all they get the loss mitigation payments from insurance, hedge, guarantee and bailouts for a third party loss — the investor lenders. This is highly inequitable. The party with the loss gets nothing while a party who already has made a profit on the transaction, makes more profit.

If we start with the proposition that the creditor should not be better off than if the contract had been performed, and we recognize that the intermediary investment bank, master servicer, trustee of the empty REMIC trust, subservicer, aggregator, and others did in fact receive money to mitigate the loss on those certificates and thus on the loans supposedly backing the mortgage bonds, then the only equitable and sensible conclusion would be to credit or allocate those payments to the investor lender up to the amount they advanced.

With the creditor satisfied or partially satisfied the mortgage loan, regardless of whether it is secured or not, is also satisfied or partially satisfied.

So the question is whether mitigation payments are part of the transaction between the investor lender and the homeowners borrower. While this specific application of insurance payments etc has never been addressed we find plenty of support in the case law, statutes and even the notes and bonds themselves that show that such third party mitigation payments are part of the transaction and the expectancy of the investor lender and therefore will affect the borrower’s balance owed on the debt, regardless of whether it is secured or unsecured.

Starting with the DUTY TO MITIGATE DAMAGES, we can assume that if there is such a duty, and there is, then successfully doing so must be applicable to the loan or contract and is so treated in awarding damages without abridgement. Keep in mind that the third party contract for mitigation payments actually refer to the borrowers. Those contracts expressly waive any right of the payor of the mitigation loss coverage to go after the homeowner borrower.

To allow all these undisclosed parties to receive compensation arising out of the initial loan transaction and not owe it to someone is absurd. TILA says they owe all the money they made to the borrower. Contract law says the payments should first be applied to the investor lender and then as a natural consequence, the amount owed to the lender is reduced and so is the amount due from the homeowner borrower.

See the following:

Pricing and Mitigation of Counterparty Credit Exposures, Agostino Capponi. Purdue University – School of Industrial Engineering. January 31, 2013. Handbook of Systemic Risk, edited by J.-P. Fouque and J.Langsam. Cambridge University Press, 2012

  • “We analyze the market price of counterparty risk and develop an arbitrage-free pricing valuation framework, inclusive of collateral mitigation. We show that the adjustment is given by the sum of option payoff terms, depending on the netted exposure, i.e. the difference between the on-default exposure and the pre-default collateral account. We specialize our analysis to Interest Rates Swaps (IRS) and Credit Default Swaps (CDS) as underlying portfolio, and perform a numerical study to illustrate the impact of default correlation, collateral margining frequency, and collateral re-hypothecation on the resulting adjustment. We also discuss problems of current research interest in the counterparty risk community.” pdf4article631

Whether this language  makes sense to you or not, it is English and it does say something clearly — it is all about risk. And the risk of the investor lender was to have protected by Triple A rating, insurance, and credit default swaps, as well as guarantees and provisions of the pooling and servicing agreement, for the REMIC trust. Now here is the tricky part — the banks must not be allowed to say on the one hand that the securitization documents are real even if there was no money trail or consideration to support them on the one hand then say that they are not real for purposes of receiving loss mitigation payments, which they want to keep even if it leaves the real creditor with a net loss.

To put it simply — either the parties to the underwriting of the bond to investors and the loan to homeowners were part of the the transaction (loan from investor to homeowner) or they were not. I fail to see any logic or support that they were not.

And the simple rule of measure of how these parties fit together is found under the single transaction doctrine. If the step transaction under scrutiny would not have occurred but for the principal transaction alleged, then it is a single transaction.

The banks would argue they were trading in credit default swaps and other exotic securities regardless of what lender fit with which borrower. But that is defeated by the fact that it was the banks who sold to mortgage bonds, it was the banks who set up the Master Servicer, it was the banks who purchased the insurance and credit default swaps and it was the underwriting investment bank that promised that insurance and credit default swaps would be used to counter the risk. And it is inescapable that the only risk applicable to the principal transaction between investor lender and homeowner borrower was the risk of non payment by the borrower. These third party payments represent the proceeds of protection from that risk.

Would the insurers have entered into the contract without the underlying loans? No. Would the counterparties have entered into the contract without the underlying loans? No.

So the answer, Judge is that it is an inescapable conclusion that third party loss mitigation payments must be applied, by definition, to the loss. The loss was suffered not by the banks but by the investors whose money they took. The loss mitigation payments must then be applied against the risk of loss on the money advanced by those investors. And the benefit of that payment or allocation is that the real creditor is satisfied and the real borrower receives some benefit from those payments in the way of a reduction of the his payable to the investor.

It is either as I have outlined above or the money — all of it — goes to the borrower, to the exclusion of the investor under the requirements of TILA and RESPA. While the shadow banking system is said to be over $1.2 quadrillion,  we must apply the same standards to ourselves and our cases as we do to the opposing side. Only actual payments received by the participants in the overall obscured investor lender transaction with the homeowner borrower.

Hence discovery must include those third parties and review of their contracts for the court to determine the applicability of third party payments that were actually received in relation to either the subject loan, the subject mortgage bond, or the subject REMIC pool claiming ownership of the subject loan.

The inequality between the rich and not-so-rich comes not from policy but bad arithmetic.

As the subprime mortgage market fell apart in late 2007 and early 2008, many financial products, particularly mortgage-backed securities, were downgraded.  The price of credit default swaps on these products increased.  Pursuant to their collateral agreements, many protection buyers were able to insist on additional collateral protection.  In some cases, the collateral demanded represented a significant portion of the counterparty’s assets.  Unsurprisingly, counterparties have carefully evaluated, and in some cases challenged, protection buyers’ right to such additional collateral amounts.  This tension has generated several recent lawsuits:

• CDO Plus Master Fund Ltd. v. Wachovia Bank, N.A., 07-11078 (S.D.N.Y. Dec. 7, 2007) (dispute over demand     for collateral on $10,000,000 protection on collateralized debt obligations).

• VCG Special Opportunities Master Fund Ltd. v. Citibank, N.A., 08 1563 (S.D.N.Y. Feb. 14, 2008) (same).

• UBS AG v. Paramax Capital Int’l, No. 07604233 (N.Y. Sup. Ct. Dec. 26, 2007) (dispute over demand for $33 million additional capital from hedge fund for protection on collateralized debt obligations).

Given that the collateral disputes erupting in the courts so far likely represent only a small fraction of the stressed counterparties, and given recent developments, an increase in counterparty bankruptcy appears probable.

http://www.capdale.com/credit-default-swaps-the-bankrupt-counterparty-entering-the-undiscovered-country

Filed under: CDO, CORRUPTION, currency, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , , | 79 Comments »

Wake Up Tennesee: You Only Think the Foreclosure Mess Won’t Hurt You

Posted on March 15, 2013 by Neil Garfield
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Editor’s Alert To Tennessee Residents: LEGISLATURE CONSIDERING BILL TO PASS MAINTENANCE FEES AND ASSESSMENTS IN ARREARS ONTO HOMEOWNERS THAT WERE NOT FORECLOSED IN ASSOCIATION.

There are somethings you can do about this, one of which is obviously to ignore the issue and let the ill come to your door and find out you have to pay several thousand dollars to cover the lost association dues to the HOA. Right now the mood of Tennessee courts is to be very dismissive of the homeowner defenses and counterclaims. It is a bright red state. The judges are applying knowledge from years ago to a novel situation in which the parties are not who they appear to be and the money is not where it appears to be.

Because of that it would be wise for homeowners to unite and contact their legislators to NOT further burden them with already rising costs associated with foreclosures. But more than that, study, up, you end up with a first lien on the property and wipe out the mortgage that is being foreclosed, leaving with the homeowner with right of redemption that is far easier to satisfy than the one the bank is trying to impose based upon appraisal fraud at the commencement of the transaction.

I personally know several investors who are buying the liens from associations and foreclosing on the banks, getting considerable traction but not winning all the time.

So Tennessee wake up and smell the roses or the stuff that comes out of the back of a horse — it’s your choice.

TN bill would pass foreclosure fees to neighborhoods
http://www.wsmv.com/story/21634792/tn-bill-would-pass-foreclosure-fees-to-neighborhoods

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , | 207 Comments »

BOA Facing Fraud Suit from FHFA

Posted on November 9, 2012 by Neil Garfield

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BOA lost in a bid to dismiss a lawsuit based upon the lies it told the Fannie and Freddie about the loans it was seeking guarantees for sale into the secondary securitization market. This follows closely my prior post about why the obligations, notes and mortgages should all be considered a nullity — worthless.

Unfortunately, Judge Cote said that the FHFA (Federal Housing Finance Agency) failed to state a strong enough case about loan to value ratios. Perhaps the agency will take another crack at that because appraisal fraud was an essential ingredient in this PONZI scheme.

If you read the complaint, it will give you a few ideas on how to frame your own complaints. Obviously it would be wise to beef up the allegations regarding loan to value ratios and the relationship of those to appraisal fraud. FHFA_v_BoA_Other

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , | 36 Comments »

Assignment must exist in writing, even if the court says it doesn’t need recording

Posted on August 24, 2012 by Neil Garfield

Dan Hanacek, who will be at the conference in Emeryville tomorrow, and Charles Cox can be reached through our customer service number 520-405-1688. Dan is a lawyer with whom I am engaged in mentoring and resourcing in Northern California cases and Charles helps people all over the country. The tide is turning. The basic principles of title in place for hundreds of years, TILA in place for dozens of years and RESPA in place for dozens of years will yet win the day. Title analysis and attorney advice is crucial to making the write choices and communication with a party purporting to be either a lender or servicer. Don’t assume you know what they are saying is correct. Not even the original note can be admitted because of the thousands of instances in which the “original” is a Photoshopped version that is not the original note and therefore does not contain the original signature of the borrower.

Editor’s Note:

With Banks and servicers playing fast and loose with the rules of procedure, the rules of evidence and black letter law it well to remember BASIC BLACK LETTER LAW. An assignment without delivery is probably a nullity. An assignment that isn’t even in writing is (a) not proper under most existing laws and (b) requires the allegation of an oral “assignment” to be explained as to why it wasn’t in writing before, just like a lost or destroyed note.

The assignment can only be valid and used if the assignee is capable of accepting it, paying for it and either acceptance is for the assignee or as an authorized agent. The Notice Default does not give the Trustee or even the original mortgagee where there has been an assignment, the right to declare default. Then it becomes the representation of the trustee, who is supposed to be objective and disinterested in the result.

For the Trustee to issue a notice of sale and notice of default on behalf of the supposed beneficiary, means that the trustee is no longer accepting the responsibilities of the trustee to act with due diligence and good faith toward both the trustor and the beneficiary.

Hence the substitution of trustee is an offer which has not and cannot be accepted. Any actions taken by the trustee in a notice of default or any other notice or collection letter is out of bounds. The only reason the banks do this is to hide behind yet another layer of people and entities so when the arrest warrants are issued, they can claim plausible deniability that the wrong procedure was being followed. This is poppycock. The beneficiary supposedly knows whether or not he is the creditor entitled to submit a credit bid at auction based upon the the existence of a properly kept loan receivable account reflected on the CREDITOR’s books.

This is just another example where the banks and servicers have borrowed the identity of the creditor, claimed that said identity is private and privileged, and then used it for their own advantage to the detriment of both the lender-investor and the borrower.

Witness this exchange between two of our golden boys — Dan Hanacak and Charles Cox:

Dan wrote:

1624.  (a) The following contracts are invalid, unless they, or some
note or memorandum thereof, are in writing and subscribed by the
party to be charged or by the party's agent:
   (2) A special promise to answer for the debt, default, or
miscarriage of another, except in the cases provided for in Section
2794.
   (3) An agreement for the leasing for a longer period than one
year, or for the sale of real property, or of an interest therein;
such an agreement, if made by an agent of the party sought to be
charged, is invalid, unless the authority of the agent is in writing,
subscribed by the party sought to be charged.
 
Would this section not require the following:
  1. Assignments must be in writing as they are “…for the sale of real property, or of an interest therein.”
  2. Immediately contradict the Gomes holding as it assumes that the authority of the agent has already been subscribed by the party to be charged and pre-empts any challenge by the injured party to the alleged contract.

And Charles Cox wrote back:

I’ve just been drafting argument against TDSC (in opposition to their demurrer)  for the proposition of their authority (as an agent for the beneficiary) in which (as is common) they attempt to use an agent they have assigned, to record a NOD (usually prior to an assignment being recorded) which I refute as follows:

In P&A p.10:26-p.11:27: TDS wrongfully states a “title company representative as agent for T.D.” could validate a Notice of Default which by the terms of the purported Deed of Trust (“NOD”.)  By the terms of the purported Deed of Trust, a NOD is required to be executed or caused to be executed by the “Lender” not the trustee nor the Trustee’s sub-agent as was done here (see Compl. Exh. 1 p.13 ¶ 22 second paragraph.) TDS’s citations are inapposite relating to “authorized agents” (meaning, authorized by the principal, not by another agent.)  Pursuant to CCC § 2304, an agent cannot act for an agent without the express authority of the principal.  CCC § 2322(b) does not allow an agent to define the scope of the agency (which TDS is attempting to do here).  CCC § 2349(4) requires authorization by the principal.  CCC § 2350 states an agent’s sub-agent is the agent of the agent, not of the principal and has NO connection to the principal.

TDS misstates CCC § 2349(1) as it relates to allowing an agent to delegate acts which are purely mechanical.  The statute actually states:

“An agent, unless specially forbidden by his principal to do so, can delegate his powers to another person in any of the following cases, and in no others:
1. When the act to be done is purely mechanical (emphasis added)”
   Note the statute states “another person” not another agent or sub-agent.  The alleged “notice of default” TDS refers to (Plaintiffs are not sure which one, having not been identified in TDS’s P&A but assume as follows:) was signed by “LSI TITLE COMPANY AS AGENT FOR T.D. SERVICE COMPANY,” NOT merely by “a title company representative”  or “person” as statutorily authorized.  This, notwithstanding that authorizing recording a Notice of Default is hardly “purely mechanical.”  This is yet another attempt by TDS to mislead the Court.  
   TDS’s citation of Wilson v. Hyneck cannot be relied on because it is an unpublished opinion and is inapposite anyway. 
    TDS’s further arguments (P&A p.11:5-27) fail for the reasons detailed above.

Plaintiffs Complaint contains sufficient facts constituting Plaintiffs’ cause of action specifically against TDS.  Nothing stated in this section of TDS’s Demurrer provides available grounds sufficient to sustain Defendants’ Demurrer (see p.2:19-25 above.)

Defendant fails to meet the legal standards to sustain its Demurrer.  See Plaintiffs’ Section III below.

Defendant’s Demurrer is without merit and must be overruled.

Amazing how these guys fail to accept responsibility for anything they do!

Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com or Charles@LDApro.com

 

Filed under: bubble, CDO, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage | Tagged: , , , , , , , , | 64 Comments »

Wrong Bailout

Posted on June 7, 2012 by Neil Garfield

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Editor’s Comment:

It isn’t in our own mainstream media but the fact is that Europe is verging on  collapse. They are bailing out banks and taking them apart (something which our regulators refuse to do). The very same banks that caused the crisis are the ones that are going to claim they too need another bailout because of international defaults. The article below seems extreme but it might be right on target.

From the start the treatment of the banks had been wrong-headed and controlled by of course the banks themselves. With Jamie Dimon sitting on the Board of Directors of the NY FED, which is the dominatrix in the Federal Reserve system, what else would you expect?

The fact is that, as Iceland and other countries have proven beyond any reasonable doubt, the bailout of the banks is dead wrong and it is equally wrong-headed to give them the continued blank check to pursue business strategies that drain rather than infuse liquidity in economies that are ailing because of intentional acts of the banks to enrich themselves rather than the countries that give them license to exist.

The bailout we proposed every year and every month and practically every day on this blog is the only one that will work: reduce household debt, return things to normalcy (before the fake securitization of mortgages and other consumer and government debt) and without spending a dime of taxpayer money.  The right people will pay for this and the victims will get some measure of relief — enough to jump start economies that are in a death spiral.

Just look at home mortgages. They were based upon layers of lies that are almost endless and that continue through the present. But the principal lie, the one that made all the difference, was that the mortgage bonds were worth something and the real property was worth more than the supposed loans. With only a few exceptions those were blatant lies that are not legal or permissible under any exemption claimed by Wall Street. Our system of laws says that if you steal from someone you pay for it with your liberty and whatever it is you stole is returned to the victim if it still exists. And what exists, is millions of falsely created invalid illegal instruments recorded in title registries all over the country affecting the title of more than 20 million households.

All we need to do is admit it. The loans are unsecured and the only fair way of handling things is to bring all the parties to the table, work out a deal and stop the foreclosures. This isn’t going to happen unless the chief law enforcement officers of each state and the clerks of the title registry offices wake up to the fact that they are part of the problem. It takes guts to audit the title registry like they did in San Francisco and other states, cities and counties. But the reward is that the truth is known and only by knowing the truth will we correct the problem.

The housing market is continuing to suffer because we are living a series of lies. The government, realtors and the banks and servicers all need us to believe these lies because they say that if we admit them, the entire financial system will dissolve. Ask any Joe or Josephine on the street — the financial system has already failed for them. Income inequality has never been worse and history shows that (1) the more the inequality the more power those with wealth possess to keep things going their way and (2) this eventually leads to chaos and violence. As Jefferson said in the Declaration of Independence, people will endure almost anything until they just cannot endure it any longer. That time is coming closer than anyone realizes.

Only weeks before France erupted into a bloody revolution with gruesome dispatch of aristocrats, the upper class thought that the masses could be kept in line as long as they were thrown a few crumbs now and then. That behavior of the masses grew from small measures exacted from a resisting government infrastructure to simply taking what they wanted. Out of sheer numbers the aristocracy was unable to fight back against an entire country that was literally up in arms about the unfairness of the system. But even the leaders of the French Revolution and the Merican revolution understood that someone must be in charge and that an infrastructure of laws and enfrocement, confidence in the marketplace and fair dealing must be the status quo. Disturb that and you end up with overthrow of existing authority replaced by nothing of any power or consequence.

Both human nature and history are clear. We can all agree that the those who possess the right stuff should be rich and the rest of us should have a fair shot at getting rich. There is no punishment of the rich or even wealth redistribution. The problem is not wealth inequality. And “class warfare” is not the right word for what is going on — but it might well be the right words if the upper class continue to step on the rest of the people. The problem is that there is no solution to wealth inequality unless the upper class cooperates in bringing order and a fair playing field to the marketplace —- or face the consequences of what people do when they can’t feed, house, educate or protect their children.

LaRouche: The Glass-Steagall Moment Is Upon Us

Spanish collapse can bring down the Trans-Atlantic system this weekend

Abruptly, but lawfully, the Spanish debt crisis has erupted over the past 48 hours into a systemic rupture in the entire trans-Atlantic financial and monetary facade, posing the immediate question: Will the European Monetary Union and the entire trans-Atlantic financial system survive to the end of this holiday weekend?



Late on Friday afternoon, the Spanish government revealed that the cost of bailing out the Bankia bank, which was nationalized on May 9, will now cost Spanish taxpayers nearly 24 billion euro—and rising. Many other Spanish banks are facing imminent collapse or bailout; the autonomous Spanish regions, with gigantic debts of their own, are all now bankrupt and desperate for their own bailout. Over the last week, Spanish and foreign depositors have been pulling their money out of the weakest Spanish banks in a panic, in a repeat of the capital flight out of the Greek banks months ago. 



The situations in Greece, Italy, Portugal, and Ireland are equally on the edge of total disintegration—and the exposure of the big Wall Street banks to this European disintegration is so enormous that there is no portion of the trans-Atlantic system that is exempt from the sudden, crushing reality of this collapse.



Whether or not the system holds together for a few days or weeks more, or whether it literally goes into total meltdown in the coming hours, the moment of truth has arrived, when all options to hold the current system together have run out.

Today, in response to this immediate crisis, American political economist Lyndon LaRouche issued a clarion call to action. Referring to the overall trans-Atlantic financial bubble, in light of the Spanish debt explosion of the past 48 hours, LaRouche pinpointed its significance as follows:

“The rate of collapse now exceeds the rate of the attempts to overtake the collapse. That means that, essentially, the entire European system, in its present form, is in the process of a hopeless degeneration. Now, this is something comparable to what happened in Germany in 1923, and they’ve caught themselves in a trap, where a rate of collapse exceeds the rate of their attempt to overtake yesterday.

“So therefore, we’re in a new situation, and the only solution in Europe, in particular, is Glass-Steagall, or the Glass-Steagall equivalent, with no fooling around. Straight Glass-Steagall — no bailouts! None! In other words, you have to collapse the entire euro system. The entirety of the euro system has to collapse. But it has to collapse in the right way; it has to be a voluntary collapse, which is like a Glass-Steagall process. This means the end of the euro, really. The euro system is about to end, because you can’t sustain it.

“Everything is disintegrating now in Europe. It can be rescued very simply, by a Glass-Steagall type of operation, and then going back to the currencies which existed before. In other words, you need a stable system of currencies, or you can’t have a recovery at all! In other words, if the rate of inflation is higher than the rate of your bailout, then what happens when you try to increase the bailout, you increase the hysteria. You increase the rate of collapse. In other words, the rate of collapse exceeds the rate of bailout.

“And now, you have Spain, and Portugal implicitly, and the situation in Greece. Italy’s going to go in the same direction. So the present system, which Obama’s trying to sustain, in his own peculiar way, is not going to work. There’s no hope for the system. Nor is there any hope for the U.S. system in its present form. The remedies, the problems, are somewhat different between Europe and the United States, but the nature of the disease is the same. They both have the same disease: It’s called the British disease. It’s hyperinflation.

“So, now you’re in a situation where the only way you can avoid a rate of hyperinflation beyond the rate of hyper-collapse is Glass-Steagall, or the equivalent. You have to save something, you have to save the essentials. Well, the essentials are: You take all the things that go into the bailout category, and you cancel them. How do you cancel them? Very simple: Glass-Steagall. Anything that is not fungible in terms of Glass-Steagall categories doesn’t get paid! It doesn’t get unpaid either; it just doesn’t get paid. Because you remove these things from the categories of things that you’re responsible to pay. You’re not responsible to bail out gambling, you’re not responsible to pay out gambling debts.

“Now, the gambling debts are the hyperinflation. So now, we might as well say it: The United States, among other nations, is hopelessly bankrupt.

“But this is the situation! This is what reality is! And what happens, is the entire U.S. government operation is beyond reckoning. It is collapsing! And there’s only one thing you can do: The equivalent of Glass-Steagall: You take those accounts, which are accounts which are worthy, which are essential to society, you freeze the currencies, their prices, and no bailout. And you don’t pay anything that does not correspond to a real credit. It’s the only solution. The point has been reached—it’s here! You’re in a bottomless pit, very much like Germany 1923, Weimar.

“And in any kind of hyperinflation, this is something you come to. And there’s only one way to do it: Get rid of the bad debt! It’s going to have to happen.

“The entire world system is in a crisis. It’s a general breakdown crisis which is centered in the trans-Atlantic community. That’s where the center of the crisis is. So, in the United States, we’re on the verge of a breakdown, a blowout; it can happen at any time. When will it happen, we don’t know, because we’ve seen this kind of thing before, as in 1923 Germany, November-December 1923, this was the situation. And it went on after that, but it’s a breakdown crisis. And that’s it.

“Those who thought there could be a bailout, or they had some recipe that things were going to be fine, that things would be manageable, that’s all gone! You’re now relieved of that great burden. You need have no anxiety about the U.S. dollar. Why worry about it? Either it’s dead or it’s not! And the only way it’s not going to be dead, is by an end of bailout. That’s the situation.

“We don’t know exactly where the breakdown point comes. But it’s coming, because we’re already in a system in which the rate of breakdown is greater than the rate of any bailout possible! And there’s only one way you can do that: Cancel a whole category of obligations! Those that don’t fit the Glass-Steagall standard, or the equivalent of Glass-Steagall standard: Cancel it, immediately! We don’t pay anything on gambling debts. Present us something that’s not a gambling debt, and we may be able to deal with that.”

LaRouche concluded with a stark warning:

“If you think that this system is going to continue, and you can find some way to get out of this problem, you can not get out of this problem, because you are the problem! Your failure to do Glass-Steagall, is the problem. And it’s your failure! Don’t blame somebody else: If you didn’t force through Glass-Steagall, it’s your fault, and it continues to be your fault! It’s your mistake, which is continuing!

“And that’s the situation we have in Europe, and that, really, is also the situation in the United States.

“But that’s where we are! It’s exactly the situation we face now, and there’s no other discussion that really means much, until we can decide to end the bailout, and to absolutely cancel all illegitimate debt—that is, bailout debt!

“There’s only one solution: The solution is, get rid of the illegitimate disease, the hyperinflation! Get rid of the hyperinflationary factor. Cancel the hyperinflation! Don’t pay those debts! Don’t cancel them, just don’t pay them! You declare them outside the economy, outside the responsibility of government: We can no longer afford to sustain you, therefore, you’ll have to find other remedies of your own. That’s where you are. It had to come, it has been coming.”


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OK LAWYERS, STEP UP TO THIS ONE — It is literally a no- brainer

Posted on May 25, 2012 by Neil Garfield

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Editor’s Comment: The very same people who so ardently want us to remain strong and fight wars of dubious foundation are the ones who vote against those who serve our country. Here is a story of a guy who was being shot at and foreclosed at the same time — a blatant violation of Federal Law and good sense. When I practiced in Florida, it was standard procedure if we filed suit to state that the defendant is not a member of the armed forces of the United States. Why? Because we don’t sue people that are protecting our country with their life and limb.

It IS that simple, and if the banks are still doing this after having been caught several times, fined a number of times and sanctioned and number of times, then it is time to take the Bank’s charter away. Nothing could undermine the defense and sovereignty of our country more than to have soldiers on the battlefield worrying about their families being thrown out onto the street.

One woman’s story:

My husband was on active duty predeployment training orders from 29 May 2011 to 28 August 2011 and again 15 October 2011 to 22 November 2011. He was pulled off the actual deployment roster for the deployment date of 6 December 2011 due to the suspension of his security clearance because of the servicer reporting derogatory to his credit bureau (after stating they would make the correction). We spoke with the JAG and they stated those periods of service are protected as well as nine months after per the SCRA 50 USC section 533.

We have been advised that a foreclosure proceeding initiated within that 9 month period is not valid per the SCRA. I have informed the servicer via phone and they stated their legal department is saying they are permitted to foreclose. They sent a letter stating the same. I am currently working on an Emergency Ex Parte Application for TRO and Preliminary Injunction to file in federal court within the next week. It is a complicated process.

The servicer has never reported this VA loan in default and the VA has no information. That is in Violation of VA guidelines and title 38. They have additionally violated Ca Civil Code 2323.5. They NEVER sent a single written document prior to filing NOD 2/3/2012. They never made a phone call. They ignored all our previous calls and letter. All contact with the servicer has been initiated by us, never by them. This was a brokered deal. We dealt with Golden Empire Mortgage. They offered the CalHFA down payment assistance program in conjunction with their “loan” (and I use that term loosely). What we did not know was that on the backside of the deal they were fishing for an investor.

Over the past two years CalHFA has stated on numerous occasions they do not own the 1st trust deed. Guild (the servicer) says they do. I have a letter dated two weeks after closing of the loan saying the “servicing” was sold to CalHFA. Then a week later another letter stating the “servicing” was sold to Guild. Two conflicting letters saying two different things. The DOT and Note are filed with the county listing Golden Empire Mortgage as the Lender, North American Title as the Trustee and good old MERS as the Nominee beneficiary.

There is no endorsement or alonge anywhere in the filing of the county records. We signed documents 5/8/2008 and filings were made 5/13/2008. After two years of circles with Guild and CalHFA two RESPA requests were denied and I was constantly being told “the investor, the VA and our legal department” are reviewing the file to see how to apply the deferrment as allowed by California law and to compute taxes and impound we would need to pay during that period. Months of communications back in forth in 2009 and they never did a thing. Many calls to CalHFA with the same result. We don;t own it, call Guild, we only have interest in the silent 2nd.

All of a sudden in December 2011 an Assignment of DOT was filed by Guild from Golden Empire to CalHFA signed by Phona Kaninau, Asst Secretary MERS, filed 12/13/2011. om 2/3/2012 Guild filed a Cancellation of NOD from the filing they made in 2009 signed by Rhona Kaninau, Sr. VP of Guild. on the same date Guild filed a substitution of trustee naming Guild Admin Corp as the new trustee and Golden Empire as the old trustee, but on out DOT filed 5/13/2008 it lists North American Title as the Trustee. First off how can Rhona work for two different companies.

Essentially there is no fair dealing in any of this. Guild is acting on behalf of MERS, the servicing side of their company, and now as the trustee. How is that allowed? Doesn;t a trustee exist to ensure all parties interests are looked out for? It makes no sense to me how that can be happening. On the assignment I believe there is a HUGE flaw… it states ….assigns, and transfers to: CalHFA all beneficial interest…..executed by Joshua as Trustor, to Golden Empire as Trustee, and Recordeed….. how can you have two “to’s” .. shouldn’t after Trustor it say FROM???? Is that a fatal flaw???

And then looking at the Substitution it states “Whereas the undersigned present Beneficiary under said Deed of Trust” (which on the DOT at that time would show MERS but on the flawed assignment says Golden Empire was the trustee), it then goes on the say “Therefore the undersigned hereby substitutes GUILD ADMIN CORP” and it is signed “Guild Mortgage Company, as agent for CalHFA”, signed by Rhona Kaninau (same person who signed the assignment as a MERS Asst Secretary). I mean is this seriously legal??? Would a federal judge look at this and see how convoluted it all is?

I appreciate the offer of the securitization discount but in out current economic situation and having to pay $350 to file a federal case we just can’t afford it right now. I hope you will keep that offer open. Will this report cover tracking down a mortgage allegedly backed by CalHFA bonds? This is their claim.

Thank you so much for your assistance. This is overwhelming. Do you have any attorneys here in Southern California you world with I might be able to talk to about what they would charge us for a case like this?

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , | 78 Comments »

Now They See the Light — 40% of Homes Underwater

Posted on May 24, 2012 by Neil Garfield

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Editor’s Comment:

They were using figures like 12% or 18% but I kept saying that when you take all the figures together and just add them up, the number is much higher than that. So as it turns out, it is even higher than I thought because they are still not taking into consideration ALL the factors and expenses involved in selling a home, not the least of which is the vast discount one must endure from the intentionally inflated appraisals.

With this number of people whose homes are worth far less than the loans that were underwritten and supposedly approved using industry standards by “lenders” who weren’t lenders but who the FCPB now says will be treated as lenders, the biggest problem facing the marketplace is how are we going to keep these people in their homes — not how do we do a short-sale. And the seconcd biggest problem, which dovetails with Brown’s push for legislation to break up the large banks, is how can we permit these banks to maintain figures on the balance sheet that shows assets based upon completely unrealistic figures on homes where they do not even own the loan?

Or to put it another way. How crazy is this going to get before someone hits the reset the button and says OK from now on we are going to deal with truth, justice and the American way?

With no demographic challenges driving up prices or demand for new housing, and with no demand from homeowners seeking refinancing, why were there so many loans? The answer is easy if you look at the facts. Wall Street had come up with a way to get trillions of dollars in investment capital from the biggest managed funds in the world — the mortgage bond and all the derivatives and exotic baggage that went with it. 

So they put the money in Superfund accounts and funded loans taking care of that pesky paperwork later. They funded loans and approved loans from non-existent borrowers who had not even applied yet. As soon as the application was filled out, the wire transfer to the closing agent occurred (ever wonder why they were so reluctant to change closing agents for the convenience of the parties?).

The instructions were clear — get the signature on some paperwork even if it is faked, fraudulent, forged and completely outside industry standards but make it look right. I have this information from insiders who were directly involved in the structuring and handling of the money and the false securitization chain that was used to cover up illegal lending and the huge fees that were taken out of the superfund before any lending took place. THAT explains how these banks are bigger than ever while the world’s economies are shrinking.

The money came straight down from the investor pool that included ALL the investors over a period of time that were later broker up into groups and the  issued digital or paper certificates of mortgage bonds. So the money came from a trust-type account for the investors, making the investors the actual lenders and the investors collectively part of a huge partnership dwarfing the size of any “trust” or “REMIC”. At one point there was over $2 trillion in unallocated funds looking for a loan to be attached to the money. They couldn’t do it legally or practically.

The only way this could be accomplished is if the borrowers thought the deal was so cheap that they were giving the money away and that the value of their home had so increased in value that it was safe to use some of the equity for investment purposes of other expenses. So they invented more than 400 loans products successfully misrepresenting and obscuring the fact that the resets on loans went to monthly payments that exceeded the gross income of the household based upon a loan that was funded based upon a false and inflated appraisal that could not and did not sustain itself even for a period of weeks in many cases. The banks were supposedly too big to fail. The loans were realistically too big to succeed.

Now Wall Street is threatening to foreclose on anyone who walks from this deal. I say that anyone who doesn’t walk from that deal is putting their future at risk. So the big shadow inventory that will keep prices below home values and drive them still further into the abyss is from those private owners who will either walk away, do a short-sale or fight it out with the pretender lenders. When these people realize that there are ways to reacquire their property in foreclosure with cash bids that are valid while the credit bid of the pretender lender is invlaid, they will have achieved the only logical answer to the nation’s problems — principal correction and the benefit of the bargain they were promised, with the banks — not the taxpayers — taking the loss.

The easiest way to move these tremendous sums of money was to make it look like it was cheap and at the same time make certain that they had an arguable claim to enforce the debt when the fake payments turned into real payments. SO they created false and frauduelnt paperwork at closing stating that the payee on teh note was the lender and that the secured party was somehow invovled in the transaction when there was no transaction with the payee at all and the security instrumente was securing the faithful performance of a false document — the note. Meanwhile the investor lenders were left without any documentation with the borrowers leaving them with only common law claims that were unsecured. That is when the robosigning and forgery and fraudulent declarations with false attestations from notaries came into play. They had to make it look like there was a real deal, knowing that if everything “looked” in order most judges would let it pass and it worked.

Now we have (courtesy of the cloak of MERS and robosigning, forgery etc.) a completely corrupted and suspect chain of title on over 20 million homes half of which are underwater — meaning that unless the owner expects the market to rise substantially within a reasonable period of time, they will walk. And we all know how much effort the banks and realtors are putting into telling us that the market has bottomed out and is now headed up. It’s a lie. It’s a damned living lie.

One in Three Mortgage Holders Still Underwater

By John W. Schoen, Senior Producer

Got that sinking feeling? Amid signs that the U.S. housing market is finally rising from a long slumber, real estate Web site Zillow reports that homeowners are still under water.

Nearly 16 million homeowners owed more on their mortgages than their home was worth in the first quarter, or nearly one-third of U.S. homeowners with mortgages. That’s a $1.2 trillion hole in the collective home equity of American households.

Despite the temptation to just walk away and mail back the keys, nine of 10 underwater borrowers are making their mortgage and home loan payments on time. Only 10 percent are more than 90 days delinquent.

Still, “negative equity” will continue to weigh on the housing market – and the broader economy – because it sidelines so many potential home buyers. It also puts millions of owners at greater risk of losing their home if the economic recovery stalls, according to Zillow’s chief economist, Stan Humphries.

“If economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures,” he said.

For now, the recent bottoming out in home prices seems to be stabilizing the impact of negative equity; the number of underwater homeowners held steady from the fourth quarter of last year and fell slightly from a year ago.

Real estate market conditions vary widely across the country, as does the depth of trouble homeowners find themselves in. Nearly 40 percent of homeowners with a mortgage owe between 1 and 20 percent more than their home is worth. But 15 percent – approximately 2.4 million – owe more than double their home’s market value.

Nevada homeowners have been hardest hit, where two-thirds of all homeowners with a mortgage are underwater. Arizona, with 52 percent, Georgia (46.8 percent), Florida (46.3 percent) and Michigan (41.7 percent) also have high percentages of homeowners with negative equity.

Turnabout is Fair Play:

The Depressing Rise of People Robbing Banks to Pay the Bills

Despite inflation decreasing their value, bank robberies are on the rise in the United States. According to the FBI, in the third quarter of 2010, banks reported 1,325 bank robberies, burglaries, or other larcenies, an increase of more than 200 crimes from the same quarter in 2009. America isn’t the easiest place to succeed financially these days, a predicament that’s finding more and more people doing desperate things to obtain money. Robbing banks is nothing new, of course; it’s been a popular crime for anyone looking to get quick cash practically since America began. But the face and nature of robbers is changing. These days, the once glamorous sheen of bank robberies is wearing away, exposing a far sadder and ugly reality: Today’s bank robbers are just trying to keep their heads above water.

Bonnie and Clyde, Pretty Boy Floyd, Baby Face Nelson—time was that bank robbers had cool names and widespread celebrity. Butch Cassidy and the Sundance Kid, Jesse James, and John Dillinger were even the subjects of big, fawning Hollywood films glorifying their thievery. But times have changed.

In Mississippi this week, a man walked into a bank and handed a teller a note demanding money, according to broadcast news reporter Brittany Weiss. The man got away with a paltry $1,600 before proceeding to run errands around town to pay his bills and write checks to people to whom he owed money. He was hanging out with his mom when police finally found him. Three weeks before the Mississippi fiasco, a woman named Gwendolyn Cunningham robbed a bank in Fresno and fled in her car. Minutes later, police spotted Cunningham’s car in front of downtown Fresno’s Pacific Gas and Electric Building. Inside, she was trying to pay her gas bill.

The list goes on: In October 2011, a Phoenix-area man stole $2,300 to pay bills and make his alimony payments. In early 2010, an elderly man on Social Security started robbing banks in an effort to avoid foreclosure on the house he and his wife had lived in for two decades. In January 2011, a 46-year-old Ohio woman robbed a bank to pay past-due bills. And in February of this year, a  Pennsylvania woman with no teeth confessed to robbing a bank to pay for dentures. “I’m very sorry for what I did and I know God is going to punish me for it,” she said at her arraignment. Yet perhaps none of this compares to the man who, in June 2011, robbed a bank of $1 just so he could be taken to prison and get medical care he couldn’t afford.

None of this is to say that a life of crime is admirable or courageous, and though there is no way to accurately quantify it, there are probably still many bank robbers who steal just because they like the thrill of money for nothing. But there’s quite a dichotomy between the bank robbers of early America, with their romantic escapades and exciting lifestyles, and the people following in their footsteps today: broke citizens with no jobs, no savings, no teeth, and few options.

The stealing rebel types we all came to love after reading the Robin Hood story are gone. Today the robbers are just trying to pay their gas bills. There will be no movies for them.

Filed under: foreclosure | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 13 Comments »

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