How to Apply Federal TILA Rescission Rights

Bottom Line: TILA Rescission is looming as a major risk factor to banks and investors who were not informed about the risk of TILA Rescission. The oddity is that the investors were not purchasing the loans and in fact agreed to replace the income stream from borrowers with an income stream from a fake trust.

Court decisions are inching closer to allowing the explicit language of the TILA Rescission Statute 15 U.S.C. §1635 to control situations like any other law passed by Congress and signed into law, with unanimous approval from the Supreme Court of the United States (SCOTUS).

It is highly probable that TILA Rescission will be the undoing of the mass fraud perpetrated on the word in which the banks unlawfully created an illusion of being principals when there was a profit to be made but as intermediaries when there was a loss.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
A few hundred dollars well spent is worth a lifetime of financial ruin.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
  1. If we can show that the TILA Rescission Notice was sent/delivered within 3 years of the date of the presumed consummation, then it would be foolish not to raise the issue in blazing lights. But any pleading based upon the rescission should avoid any semblance of being a claim for rescission or relief based upon rescission (i.e., enforcement of the TILA Rescission statutory duties) because the statute of limitations has clearly run on that in most cases. Any such pleading should emphasize that rescission has occurred — i.e., that the written loan contract has been replaced with the statutory scheme — and that the claimants should be barred from avoiding that simple fact. Further, given the same statute of limitations in TILA, the claimants are now barred from pursuing the debt which has expired. Ignoring the rescission was a fatal decision by the claimants who lost not only their right to enforce the paper instruments, but the debt as well.
  2. Notwithstanding some erroneous decisions rendered by state court and even federal courts (other than SCOTUS) there is no statute of limitations that applies to a notice of rescission sent within 3 years of the supposed consummation. Rescission is an event (like a  deed) not a claim. It is effective “by operation of law.”
  3. If the proof shows that the notice of TILA rescission was sent more than 3 years after the presumed date of consummation it is my opinion that SCOTUS will eventually treat it the same as the above paragraph. BUT, a big caveat here, is that SCOTUS might throw a bone to the banks. They could do that by saying that rescission notices that appear from their face to be sent after the three year “expiration” date could be reviewed by the court and declared void ab initio with affirmative pleading, thus removing the judicial standing impediment that the banks face (they have no creditor who would fulfill the requirements of judicial standing). Thus while my analysis shows that SCOTUS and  Congress clearly see the TILA rescission statute as a procedural statute and not a substantive one, there remains a possible interpretation by the high  court that would eviscerate rescissions outside the three year limitation. This is also the opinion of many lawyers who have carefully analyzed the situation, like Beth Findsen in Arizona. I don’t think that is right, but I can see how that could occur.
  4. The 3 year limitation is a viable defense for the creditor, just as the other restrictions on TILA rescission (lack of disclosures, purchase money mortgage etc.). All defenses must be raised as affirmative pleading to vacate the rescission or they are nothing at all. An affirmative pleading would be a lawsuit to vacate the rescission or affirmative defenses raised in a lawsuit brought by the borrower. But since rescission automatically voids the note and mortgage, those instruments cannot be used to plead or even imply standing. 
  5. Multiple deliveries of the rescission notice are a two edged sword particularly if they each bear different dates. Oddly this draws in a separate analysis. If rescission is truly an event as Congress and SCOTUS (and I) have stated, then NOBODY can rescind the rescission without a court order — not even the borrower. Any act undertaken in spite of the existence of a deed or rescission is void, in the sense of a wild deed, particularly if it is recorded in the county records. A new agreement could be reached but the rescission stands until a court order is entered changing the situation. The new agreement would likely be subject to disclosure requirements.
  6. What all of this means is that title could not have been changed even with court orders after the sending/delivery of the TILA Rescission. Here the high court will have a more difficult time allowing any foreclosure sale to stand in the absence of an affirmative pleading seeking to vacate the rescission and an order granting the demand. Title issues are a matter within the bounds of state law, not Federal law except where preempted, as in the TILA Rescission statute.
  7. But in the absence of an affirmative pleading, a trial on the merits, and a final  judgment or order, the state courts would have no jurisdiction over the subject matter and avoidance of the TILA Rescission would be without authority to do so under the US Constitution Article III. The logic is simple, the paper instruments  upon which the foreclosure was brought do not exist and did not exist at the time of the foreclosure sale. Hence title could not change without due process — i.e., a trial on the issue of whether the rescission should be vacated. The caveat here is that SCOTUS could again carve out something for the banks, because this would leave millions of homeowners retaining title to their homes long after the foreclosure sale. They might invent some doctrine based upon laches or some such doctrine that would bar homeowners from asserting their title after some period of time after the foreclosure sale.

Insider Lawsuit Summarizes the BIG LIE About “Securitization.”

This is an insider case filed in April 2018. The ironic aspect of this case is the probability that Nationstar probably does not have standing. But that aside, for those who remain skeptics about what I have been writing about, here is an unexpurgated recitation of all the ways that all the loans, debts, notes and mortgages were fabricated based upon pure lies, making foreclosure a legal impossibility.

This is a case where a servicer has sued various parties, some of whom are players in the securitization game. The allegation is that the documents and assertions made by the Defendants were completely false and that none of them, despite the documents, had any nexus, right, title or interest to any of the loans, debts, notes or mortgages.

Lawyers would be doing themselves and their clients a favor by using this case as a drafting guide. But they can only do so after they have a achieved a level of knowledge to make sense out of all the chaos. If they do study the issue, even for a little while, they will have that “AHAH” moment and realize that the entire playing field is low hanging fruit for various types of lawsuits for compensatory and punitive damages.

Hat Tip Bill Paatalo

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.


Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).



See Complaint – Nationstar v Soria

Since the perspective is that of a claimed servicer that sometimes claims to be more than a servicer, you should remember that this is not 100% on point. Also not all of the Defendants are what they appear to be, so  don’t leap to conclusions about the specific actors named but rather recognize the truth when you read it. But it is very close. The allegations against these Defendants could just as well be used against all the securitization players.

And the knowledge that the lawyers for Nationstar had when writing this complaint clearly shows that Mr. Cooper and its lawyers had actual knowledge of the fictitious documents, entities and assertions made by the investment banks every day in court starting with “Good Morning your Honor, my name is John Smith and I represent the Plaintiff [a trust that does not exist]. This is a standard foreclosure case.”

Here are some interesting quotes from the allegations by Nationstar (now Mr. Cooper).

Who formed [West H&AJ]?
A: I did… .
Q: Has West H&A ever originated a single loan? A: Funded loan? . . . No. . . .

Q: [Y[ou were a complete stranger to this loan; correct?

A: Yeah. Suree……..

Q: [‘T]he assignment, who drafted it?

A: The assignment deed of trust, I wrote thatt…….. Q: Were you authorized by anyone other than yourself to assign this deed of trust? A: No.

“Defendants, strangers to the subject loans and having never lent a penny to anyone, created a criminal enterprise by which they hijacked ““thousands”” of mortgages via void assignments all in the name of ““helping”” borrowers.”

Q: [YJ]ou didn’t fund a single loan; correct?

A: No. Didn’t fund a single loan.

Q: [Y[ou were a complete stranger to this loan; correct?

A: Yeah, sure …

Q: The assignment, who drafted it?
A: The assignment deed of trust, I wrote that. …. . .

Q: Were you authorized by anyone other than yourself to assign this deed of trust?
A: No.

Over the last four (4) years, for the purpose of executing the scheme to 13 defraud, Defendants, together with others known and unknown, transmitted, and caused the transmission of, by means of wire and radio communication in interstate and foreign commerce, the following writings, signs, signals, and sounds which 16 constitute no fewer than thirty-eight (38) instances: …

Defendants falsely designated themselves as nominees for entities or sometimes used an outright fraudulent designation of another entity in order to gain credibility and trust, thus, purposely confusing the
public. Further, Defendants falsely advertised that they owned the hijacked properties for purpose of defrauding those individuals and creating confusion in the 6 marketplace. Finally, Defendants used the false claims to engage in deceptive practices to further their fraudulent acts. The following are no fewer than fourteen 8 (14) instances of the false information and deceptive acts perpetuated by Defendants.


What should I pay my attorney?

Like all professions the practice of law mostly involves activities that the client never sees. And it is the quantity and quality of work by the attorney that is the largest factor in getting a good result.

The best result is having the foreclosure dismissed or vacated with findings of fact that make it virtually impossible for the foreclosing party to try again. To get that result you need experienced trial counsel who does all the work he/she thinks is necessary to achieve the goal. Those are at the top of winning food chain.

If you must pay less then you must lower your goal or buy a winning lottery ticket.

Let us help you plan your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult


Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).




There are some lawyers to whom I refer clients for representation.  Like me, they like to win — not merely justify a fee. They don’t consider “delaying the inevitable” to be a winning or even viable strategy, mainly because they don’t believe that foreclosure is inevitable. I consider their fees to be very reasonable.

On the issue of attorney fees, I have a story. When I first started practicing law I worked in the law office of what I then considered to be an “older” lawyer — i.e., a little more than 1/2 my present age. His wife was the bookkeeper. She was the one that had to argue with clients to pay the fees that were charged. Eventually people who were complaining or objecting said the obvious — that other lawyers charge less for the “same work” —  which was true. So she put up a sign in the waiting room that said the following:

“If you want nice fresh oats we can give them to you at a reasonable price. But if you are satisfied with oats that have already been through the horse, you can get them for a lot less.”

Moral of the story: It’s not the hourly rate you should be shopping for. And it’s not the length of time it takes to get there that counts. It’s the result. The only way to get legal representation is to pay for it. The question is cost of services vs cost of losing the home.

I hear many complaints from homeowners about how the lawyer didn’t do all the things that could have been done — discovery, motions, trial preparation etc. They are right in most cases that the lawyer did not do the work that now, in retrospect, the client would have liked. But in almost all cases, the problem was not with the lawyer; it was with the client who couldn’t pay or didn’t want to pay for the full work load.

To put numbers to this issue, if you are paying the equivalent of $100 per hour, don’t expect the lawyer to drop everything and concentrate for days on developing a defense narrative that the lawyer thinks he can “sell” to the trial court. If you are paying a few hundred dollars per month the result is the same. The lawyer owes you nothing except to provide the services you pay for.

If your retainer agreement calls for billing at $450+ per hour, you have every right to expect the full job to be done. Likewise if you are paying $2500+ per month, you can expect the full job to be done.

If you are paying $300 per month and expecting services worth $2500 per month you are mistaken. Those services will not be delivered which means that discovery, motions to compel, motions for summary judgment, depositions, trial preparation will either not get done at all or will be perfunctory.

I generally don’t litigate in court anymore. I serve as consultant, writer, researcher and expert witness on cases involving the securitization of debt. I have been actually licensed by government agencies and securities trade groups to do business literally on Wall Street in Manhattan and I did so. My hourly rate is $650 per hour for my time and $150 per hour for paralegal time. The fee is justified not only by our past successes but because we can actually accomplish more in less time and we win (not all the time). So while our customers are paying $650 per hour, in many cases it only takes an hour for me to do my work because I have so much experience with similar cases and fact patterns. Other less experienced lawyers either take much longer for the same job (thus increasing the cost of the project) or they might not take time to do what lawyers are really paid to do — think.

I am not engaging in a discussion about what our judicial system should look like. I am merely dealing with reality. In a capitalist economy where everything is measured in monetary value, everything happens because of money. It’s the fuel that pushes things along. Without the fuel, the horse simply lays down and takes a nap.

RESCISSION: When the Judge Gets it Wrong

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Based upon my own experience and what has been reported to me from around the country, most trial judges are making the mistake of confusing argument and facts when it comes to TILA Rescission. They are either expressly or tacitly ruling that at best, TILA Rescission is a claim or defense — which means that in order for Rescission to have any effect, it must be litigated. This is wrong and it has been expressly rejected by both the TILA Rescission Statute, and U. S. Supreme  Court in the Jesinoski decision.
I offer the following, drafted by me, as a response to when Court’s essentially overrule the the highest and final court in the land. I suspect that the resistance by trial judges to the effects of rescission will not be resolved, in most instances, without an appellate court saying for the second time that Courts are wrong when they disregard or try to change the wording of the TILA Rescission statute.
Comments are welcome:


Motion for Reconsideration on Defendant’’s Motion to Dismiss For Lack of Subject Matter Jurisdiction
  1. A trial Court has the inherent authority to control its own interlocutory orders prior to Final Judgment. North Shore Hospital Inc. v Barber 143 SO 2d 849, 850 (Fla 1962).
  2. While non-final orders were not subject to a motion for rehearing, a trial judge nevertheless had the discretion to choose to entertain such a motion precisely because it had jurisdiction to control its non-final orders prior to entry of Judgment. Commercial Garden Mall v Success Academy Inc. 57 So 3rd 982 (Fla 2nd DCA 2011).
  3. An order denying a Motion to Dismiss is interlocutory. See Nationwide Ins Co. of Florida v Demo 57 So 3d 982 (Fla 2nd DCA 2011.
  4. Here this Court heard Defendant’s Motion to Dismiss on March 10, 2016 and denied, apparently without prejudice to raise the issue of rescission as a defense, Defendant’s Motion to Dismiss for lack of subject matter jurisdiction.
  5. TILA Rescission is neither a claim nor a defense. It is a legal act that has legal effect when completed. The only factual issues are whether the rescission was sent, which in this case is undisputed. TILA Rescission is effective as a matter of law, when mailed. Its effect is to void the note and void the mortgage and trigger specific statutory duties of the “lender” under 15 U.S.C. §1635 et seq. Jesinoski v Countrywide  574 U.S. ___ (2015) and Regulation Z. C.F.R. (Federal Reserve as succeeded by Consumer Financial Protection Board).
  6. The gravamen of what was argued before the Court was that the note and mortgage, being void by operation of law, could not be the subject of any legal action.
  7. Since the Plaintiff’s entire case rested on the use of two void instruments — the note and mortgage — and there is no allegation in the Plaintiff’s complaint asserting legal standing of an creditor seeking to collect on a debt, the Court does not have any justiciable issue before it. There is no count in Plaintiff’s complaint that seeks to recover on a debt, naming as Plaintiff the owner of the debt. In this case Plaintiff admits the Creditor (owner of the debt) is not the Plaintiff. The complaint seeks solely to enforce the paper instruments — the note and/or mortgage — both of which are now void by operation of law.
  8. There is also no lawsuit by any real party in interest seeking to vacate the rescission that has indisputably been sent, received and recorded in the County records — and which has been indisputably ruled as legally effective by the U.S. Supreme Court.
  9. At the hearing it was admitted by that the owner of the debt was the “investor” who was distinguished from the Trust.
  10. The rescission that was indisputably mailed and received removes standing of the putative Plaintiff. Without the note and mortgage, only the debt remains. And the only party with standing to seek collection on the debt is the Investor, who is not party to the instant action. And according to the TILA Rescission statute such a “creditor” must either first FULLY comply with the TILA Rescission statutory duties or first file a lawsuit to vacate the rescission (which currently has the same force and effect as an order of any court of competent jurisdiction).
  11. No lawsuit demanding that the Court vacate the rescission has been filed by anyone. Yet this Court has effectively granted such relief without any real party in interest, without a lawsuit seeking to vacate the rescission sent by borrower, and without any pleading in which a [proper party seeks to remove the recorded rescission that was filed in the County records. This Court instead is ignoring the rescission as though it does not have any legal effect despite the clear pronouncements of the TILA Rescission Statute, Regulation Z, and the clear and final ruling by a unanimous Supreme Court of the United States.
  12. Plaintiff lacks standing even if Defendant’s defenses based upon an untimely fabricated assignment are over-ruled.
  13. Defendants assert that this Court misapprehended argument and facts.
  14. The undisputed facts are that the TILA rescission was sent and received. The fact remains now that the rescission is effective and remains effective as a matter of law. The undisputed facts, as a matter of law, remain that the note and mortgage were both rendered void by operation of law by the sending of a letter of rescission by the alleged “borrower.”
  15. The Court’s decision was that the issue of the effectiveness of the rescission was a defense and not the proper subject of a Motion to Dismiss for lack of jurisdiction.
  16. The error asserted by Defendants is that this Court’s ruling essentially “over-rules” the Supreme Court of the United States in Jesinoski v Countrywide, a copy of which was provided to the Court  at the hearing. Defendants state the obvious: this court lacks authority to overrule the highest court in the land.
  17. To hold that rescission is a defense to be litigated flies in the face of the unanimous Supreme Court ruling that NO LITIGATION is required to make rescission effective. No Lawsuit is required. Jesinoski, Supra.
  18. Rescission is effective by operation of law. 15 U.S.C. §1635, Regulation Z. Jesinoski Supra — all of which state that rescission is effective as a matter of law when mailed and that no claim or lawsuit or ruling by any court is required by the borrower to make it effective.
  19. The effect of this Court’s ruling is to over-rule the Supreme Court of the United States and rewrite the TILA rescission statute that is a very clear and specific remedy WITHOUT  THE NECESSITY OF THE BORROWER RAISING THE ISSUE IN LITIGATION. The entire point of the TILA Rescission statute was to prevent “lenders’ from stonewalling the effect of the rescission. The rescission is immediately effective as a matter of law, when mailed.
  20. By ruling otherwise, this Court is following a rule of law explicitly rejected by the U.S. Supreme Court.
  21. This Court is following a rule of law that has been expressly repudiated by the highest and final court in the land. The effect of this Court’s ruling is to make the rescission NOT EFFECTIVE until it is raised in defense of a foreclosure and then only after the effectiveness of there rescission is litigated in a lawsuit. The U.S. Supreme Court says otherwise in a unanimous decision penned by the late Antonin Scalia.
  22. In the Jesinoski decision it was stated clearly and unequivocally that the rescission, whether disputed or not, IS effective upon mailing, without any further action on the part of the borrower. The burden of disputing (pleading and proving standing and a cause of action to vacate the rescission) falls solely and squarely on the parties who received the notice of rescission.
  23. The Jesinoski Court further explicitly stated that hundreds of trial and appellate courts across the land were wrong when they had previously ruled, as this court has just done, that the rescission was subject to litigation and that the “borrower” must bring a legal claim or lawsuit seeking to make the TILA Rescission effective..
  24. The Defendants assert that this Court’s apparent unfamiliarity with the Jesinoski decision, the TILA Rescission Statute and Regulation Z, combined with the Court’s understanding of common law rescission resulted in an erroneous ruling that was expressly and explicitly ruled out by the Supreme Court of the Untied States. This court may not read in the rules of common law rescission to a specific statutory scheme that is clear on its face.
  25. It is clear that the the Supreme Court of the United States has decided, as the Final Authority, that the TILA rescission statute is clear and unambiguous on its face, thus eliminating any right, authority or jurisdiction to read into or interpret the TILA Rescission statute. It is equally clear from the express wording of the Jesinoski decision that reading in common law rules of rescission is erroneous, as such “interpretation” was rejected by a unanimous Supreme Court as unlawful and wrong.
  26. There is no escaping the fact that the rescission is effective by operation of law.
  27. Accordingly, Defendants assert that this court has no room for interpretation or authority or jurisdiction to change or interpret the TILA rescission statute such that the borrower must raise rescission as a defense — a requirement that unlawfully denies the effectiveness of the rescission when mailed.
  28. Accordingly Defendants assert that this Court committed error by ruling that rescission was a defense requiring pleading and proof in order for the rescission to be effective as a matter of law. Defendants thus request this Court revisit the issue and correct its prior ruling.

Fla 4th DCA: The Starting Point is Standing — If You Don’t Have It, There is no Jurisdicition

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

This is not a legal opinion on any case. Consult with an attorney.


see Rodriguez v. Wells Fargo

“The core element concerning to whom the note was payable on the date suit was filed was not proven.”

Bottom Line: You can’t file a lawsuit without standing. Judgment reversed with instructions to enter Judgment for the homeowner. And you can’t cure standing by getting it later. That would be like filing suit for a slip and fall in front of a super market, and once the suit was filed, you then go to the supermarket, get out of your car and proceed to slip and fall. And the second story is that the BURDEN OF PROOF is on the foreclosing party, not the homeowner.

Many courts are now leaning away from the legal fantasies being promoted by “servicers”, “trustees’ and other parties attempting to “foreclose” on debts that very often are (a) not owned by them (b) they have no authority to represent the owner of the debt (c) the alleged creditor is not showing a default on its books (d) on behalf of a Trust that (1) never operated (b) exists only on paper (c) with no bank account (d) no financial statements (no assets (e) no liabilities (f) no income (g) no expenses.

All this is becoming abundantly clear. The prior assumptions that allowed for some crossover between a holder and a holder in due course are giving way to another look, starting from the beginning. In this case there was no endorsement on the note at all. The Appellate court said that ended the inquiry. There was no lawsuit, it should have been dismissed and now judgment, entered by the Judge in West Palm beach is reversed with instructions to enter judgment for the Defendant homeowner.

In my opinion the courts are now being presented with the correct arguments and facts that leave them in a position where if they allowed these kinds of action they would be setting a precedent making it legal to steal.

And my question remains: IF THERE REALLY WAS A REAL TRANSACTION WHERE SOMEONE FUNDED THE LOAN AND SOMEONE ELSE BOUGHT THE NOTE THEN WHY DON’T THEY ALLEGE THAT THEY ARE HOLDERS IN DUE COURSE? If they alleged HDC status all they would need to prove is payment. No “borrower” defenses would apply. If they don’t have HDC status then on whose behalf is the foreclosure actually being filed, since the investors are getting paid anyway? I think the answer is that the servicer is converting a tenuous claim for volunteer payments on behalf of the borrower to investors who don’t know what loans they own; the real claim is that the servicer wants to “recover” servicer advances that it paid out of third party funds. These servicers are reaping windfalls every time they get a foreclosure sale.

This Court quotes approvingly from the UCC: “… the transferee cannot acquire the right of a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.” And goes on to quote the statute “a person who is party to fraud or illegality affecting the instrument is not permitted to wash the instrument clean by passing into the hands of a holder in due course and then repurchasing it.” see § 673.2031

The court concludes that there is no negotiation of the note until an endorsement appears — which read in conjunction with the rest of the opinion means that the endorsement must be by someone who is either a holder in due course or a party representing a party who is a holder in due course. If no holder in due course exists, then there is no way to construe the instrument as a negotiable instrument and there is no way to construe the instrument as having been negotiated under the UCC. And THAT means they must prove every aspect of the transaction (starting with origination) without relying on the suspect instruments.

See also 4th DCA — Standing is “Foreclosure 101” Peoples v. SAMI II Trust

Assignee stands in the shoes of the assignor: It must prove the loan

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

This article ( and any other article on this blog) is no substitute for getting advice from an attorney licensed to practice in the jurisdiction in which the subject property or transaction is located.



There is a difference between alleging you are the holder with rights to enforce and proving it. If the bank, trustee or servicer alleges that it has the right to enforce then they will survive a motion to dismiss. But if the borrower denies that allegation is true, the burden of proof falls on the party making the allegation — the bank, trustee, servicer etc. The mistake made by Judges and lawyers is that they don’t make the distinction between pleading and proof. As a result you get decisions that include multiple rulings that prevent the borrower from conducting adequate discovery and allow the party bringing the foreclosure action to skate by because “it has already been established” that they are a holder with rights to enforce. That being the case the courts further compromise the verdict and judgment by over-ruling objections from the borrower on grounds of relevance.

One of the key points I have been making for 8 years is that the party bringing the foreclosure essentially never says that it is a holder in due course. In fact, we have had cases where opposing counsel expressly denies that the Plaintiff is a holder in due course. That is particularly remarkable where the Plaintiff is, for example, Citimortgage, which maintains an ambiguous status, admitting that it is a servicer but not revealing the creditor or the basis on which they rely in alleging that they are the servicer.

The importance of holder vs holder in due course cannot be over-stated. And if the loan was alleged to have been transferred while the loan was already declared in default, there can’t be a holder or holder in due course because the UCC does not apply those terms to anything but a negotiable instrument which by definition must not be in default at the time of transfer. Otherwise it is not a negotiable instrument and the allegations and proof go the the issue of ownership of the debt.

It is interesting that the banks and servicers, etc. do not allege status as holder in due course. In many cases they have back-dated the assignment or endorsement to before the alleged default. Where the Plaintiff is a trust, all they would need to show is what is in the trust instrument (PSA): purchase in good faith without knowledge of borrower’s defenses. That would be the end of almost every case — the borrower is liable to a holder in due course and may bring claims only against the intermediaries or originator in damages. The foreclosure would be completed in record time and that would be the end of it, except for borrower’s claims for damages against parties other than the Plaintiff who proved they were a holder in due course — i.e., proof of purchase for valuable consideration without knowledge of the borrower’s defenses and in good faith.

The problem with court decisions over the last 10 years is that they treat the alleged “holder” as though they were a holder in due course without any allegation or proof that the foreclosing party purchased the loan, in good faith, without knowledge of borrower’s defenses. A holder is not better than the party before they were an alleged holder. And THAT party is no better than the party before and so on.The only exception to this is where the FDIC involved in certain types of take-overs.

Eventually you get to the origination of the loan. THAT loan contract must be proven by a holder in order to prevail in foreclosure. And as every first year law student knows there is no contract without offer, acceptance and consideration. If the originator did not fund the loan there is no contract and the closing violated Reg Z, which calls such transactions predatory per se (which in turn means that the foreclosing party presumptively has unclean hands and is not entitled to any equitable remedy much less foreclosure).

If an alleged holder did not actually purchase the loan, then they don’t own it. It really is that simple. If they don’t own it then they must allege and prove the basis of their allegation that they possess the right to enforce. That also requires a contract with offer, acceptance and consideration. The existence of assignment does not prove that such a transaction took place but it might be admitted in evidence as evidence that such a transaction took place. On the other hand it might not be admitted in evidence if there are defects relating the instrument to the proof of the matter asserted.

Even if admitted, the assignment is not dispositive. Upon cross examination, the witness will probably know nothing about any transaction in which ownership or the rights to enforce were transferred or conveyed. And it is at that point where Judges and lawyers commit error.  The assignment may then be struck from the record as lacking any foundation. This is not just a matter of hearsay. It is a question of how can the trier of fact rely upon an instrument (assignment) when there is nobody to testify that the transaction actually occurred? It is the same problem with the note executed at “closing.” How can the loan contract be completed if the payee on the note didn’t loan any money?

In the article cited above, the author makes the point easily:

As an assignee typically “stands in the shoes” of his assignor,7 without  the holder in due course doctrine and its federal counterpart, these allegations may defeat the purchaser’s action or make it much more difficult  and costly to pursue, especially given that the purchaser took no part in the these “bad acts,” and that the people who did take part (the  management and employees of the failed bank) may be difficult to reach and may have little incentive to cooperate with the purchaser. [e.s.]

most of these difficulties are eliminated by the powerful effect of the holder in due course doctrine as it can clear the way for the  purchaser to recover, even if there may have been prior “bad acts” of the failed bank, as the purchaser will acquire the loan free and clear of  most defenses—the so-called “personal defenses”— that the borrower could have asserted against the failed bank.8 The holder in due course  doctrine, when applicable, enables the purchaser to avoid liability for many of these “personal defenses” which may have been valid defenses to  an action brought by the failed bank, but do not impede the ability of a holder in due course to enforce the borrower’s obligation to repay the  loan.9 Generally speaking, these defenses are all defenses that would be available in a breach of contract action10 except for the “real defenses,” all of which involve either the original execution of the promissory note or its subsequent discharge in bankruptcy.11 These defenses  cannot be avoided, even by a holder in due course. Fortunately, any “bad acts” of the failed bank which may have occurred during the course of  the loan will hardly ever form the basis for a “real defense,” and thus can likely be avoided by a holder in due course.

In Florida, the holder in due course doctrine is now codified in statute,12 although it first began to develop in the English common-law as early  as the late 1600s and early 1700s and was codified in that country by the Bills of Exchange Act in 1882.13 The doctrine first became codified in  the United States in the early 1900s as states adopted the Uniform Negotiable Instruments Law, which was later supplanted by the Uniform  Commercial Code, which governs today.14

In order to be a holder in due course under current Florida law, a purchaser of a negotiable  instrument must generally satisfy three conditions. Specifically, the purchaser must have: (i) acquired an instrument that does not bear any  apparent evidence of forgery, alteration, or any other reason to call its authenticity into question;15 (ii) paid value for the instrument;16 and (iii)  acquired the instrument in good faith, without notice that it is overdue, dishonored, contains an unauthorized or altered signature, and without  notice of any claim to the instrument.17 If these three conditions are met, the purchaser will generally qualify as a holder in due course and  take the instrument free all “personal defenses” that the borrower could have asserted against the prior lender.

Confusion in The Courts: Pleading vs Proof

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


A lot of the questions that come in to me relate to the issue of whether the ability to enforce a set of loan documents is a question of law or a question of fact. The answer, I think, is both.

The confusion seems to be on the issue of pleading vs proof. As a matter of law, the courts are largely correct as to their ruling on whether the Plaintiff in a judicial state is fine with alleging bare statements of ultimate facts upon which relief could be granted. But where the judges go astray, based upon improper legal reasoning advanced by the banks, is that they apply the same pleading requirements at trial or even summary judgment.

At trial they must prove the transactions upon which they rely. If the allegation from the owner or the denial and affirmative defenses of the homeowner raise an issue of fact as to the authenticity, validity or enforceability of the paperwork relied upon by the bank, then the bank must prove the underlying transaction. If the homeowner does not raise that issue of fact, then the court is correct in allowing virtually anything in as evidence and awarding the foreclosure to the bank.

But that said, to return to yesteryear, Judges are supposed to actually review the paperwork even in an uncontested situation to see if there are inconsistencies or even something that jumps out at them this is plainly wrong. for example, if the default letter says that for reinstatement, you must pay $6700 in monthly payments to bring the account current and your monthly payments are $3100, the letter is defective. How many months are they saying you are in default? It’s a simple matter of division. This also throws off the date of the alleged default, so there is no compliance with paragraph 22 provisions.

Similarly, if the foreclosing party is saying they have rights to enforce, that is enough to plead their case. But at trial they must tell the story of how they came into the right to enforce the paper. It is this latter part where the courts have erred and where the reversals from appellate courts are coming from. The presumptions at the pleading stage do not apply to the burden of proving facts.

I think the courts are coming around on this issue but it must be presented properly. A thief can sue on the note he stole even if he forged a blank or special endorsement. He will survive a motion to dismiss although law enforcement might be waiting in the back of the room to arrest him.

The presumption at the pleading stage is that possession implies being a holder. And being a holder implies being a holder with rights to enforce, and potentially one might even infer that the holder is a holder in due course. But at trial where the facts are contested, the thief must tell the story of his possession and rights to enforce. The fact that the actual payee or holder does not know the note was stolen does not or should not shift the burden of proof onto the homeowner to prove facts that are exclusively within the knowledge and care, custody and control of the thief.

The homeowner must merely deny that the thief is a holder with rights to enforce.

Pleading Wrongful Foreclosure

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


The above link provides some very good guidance about pleading wrongful foreclosure although it appears to relate more to non-judicial states than judicial states. Remember that pleading fraud not only requires specificity but must be proved. The fact that the foreclosure filing was wrong is one thing but proving it was fraudulent rather than negligent or breach of contract is quite another.

If you are in active litigation then seeking sanctions might be either an alternative or something in addition to a separate lawsuit that arises when the case is decided in favor of the homeowner. As we have seen over the last few years, the grounds upon which these cases are decided in favor of the homeowner vary widely. Some decisions show that the acts of Deutsch or Chase or Wells Fargo or CitiMortgage et al were committed with full knowledge of what they were doing and that they were playing a shell game on the court and on the borrower. Those cases seem more conducive for fraud or spurious litigation or wrongful foreclosure. A decision based upon non-compliance with paragraph 22 — defects in the notice of default or right to reinstate or notice of acceleration might be the subject of abuse of process and might not. But without more in the proof or opinion from the Court the issue of fraud or intentional tort of some other kind seems more difficult.

Lack of standing means the homeowner wins but it does not mean necessarily that a case for fraud or wrongful foreclosure will be successful. The opposition will respond (affirmative defense) that the mistake in standing does not establish any entitlement to damages or any other action by the court because the right to foreclose still exists on behalf of some entity. But this defense is basically a crystal ball defense unless there is an established creditor who is legally pursuing collection on the loan.

Cases in which the bank blocked the sale or refinance of the property, or unilaterally tried to avoid a modification, or where the borrower was in fact current when actions by the bank forced the borrower into the illusion of default are the best cases, in my opinion, for a wrongful foreclosure.

In short, the law is murky on these issues because the whole truth about securitization “fail” has not been fully absorbed and processed by the judicial system. Right now most judges are making rulings based upon the assumption that securitization is irrelevant — a view that is inconsistent with the the alleged right of the beneficiary or mortgagee to initiate foreclosure and pursue collection. The rights to do so exist in the PSA which is often admitted into evidence. Thus the same court that accepts the PSA into evidence will often rule that the provisions that require servicer advances (hence, no default as per books of the Trust or Holders of Certificates) or PSA provisions that block any right to pursue foreclosure or collection by the Trustee or the Trust are not relevant. But the general rule is that once a document is admitted into evidence the parties can use it any way they want.

Fla. Supreme Court Amends Rules For Foreclosure

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


see 2014-sc13-2384

It would seem that the Florida Supreme Court has been listening and watching very closely. The new rules corroborate many things stated in this blog. Still to come are ruling or rules dealing with discovery in support of the homeowner’s defenses. This is effective for cases filed on or after July 1, 2013.

“After considering the proposed amendments and reviewing the relevant legislation, we amend the Florida Rules of Civil Procedure and forms as reflected in the appendix to this opinion. New language is indicated by underscoring; deletions are indicated by struck-through type. The amendments shall take effect immediately upon the release of this opinion. Because the amendments were not published for comment prior to adoption, interested persons shall have sixty days from the date of this opinion in which to file comments with the Court.2


(a) [No change]

(b) Claims for Relief. A pleading which sets forth a claim for relief, whether an original claim, counterclaim, crossclaim, or third-party claim must state a cause of action and shall contain (1) a short and plain statement of the grounds upon which the court’s jurisdiction depends, unless the court already has jurisdiction and the claim needs no new grounds ofjurisdiction to support it, (2) a short and plain statement of the ultimate facts showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief to which the pleader deems himself or herself entitled. Relief in the alternative or of several different types may be demanded. Every complaint shall be considered to pray for general relief.

When filing an action for foreclosure of a mortgage on residential real property the complaint shall be verified. When verification of a document is required, the document filed shall include an oath, affirmation, or the following statement:

“Under penalty of perjury, I declare that I have read the foregoing, and the facts alleged therein are true and correct to the best of my knowledge and belief.”

(c) – (h) [No change]

Committee Notes        1971 Amendment. Subdivision (h) is added to cover a situation usually arising in divorce judgment modifications, supplemental declaratory relief actions, or trust supervision. When any subsequent proceeding results in a pleading in the strict technical sense under rule 1.100(a), response by opposing parties will follow in the same course as though the new pleading were the initial pleading in the action. The time for answering and authority for defenses under rule 1.140 will apply. The last sentence exempts post judgment motions under rules 1.480(c), 1.530, and 1.540, and similar proceedings from its purview.

2014 Amendment. The last two paragraphs of rule 1.110(b) regarding pleading requirements for certain mortgage foreclosure actions were deleted and incorporated in new rule 1.115.

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(a) Claim for Relief. A claim for relief that seeks to foreclose a mortgage or other lien on residential real property, including individual units of condominiums and cooperatives designed principally for occupation by one to four families which secures a promissory note, must: (1) contain affirmative allegations expressly made by the claimant at the time the proceeding is commenced that the claimant is the holder of the original note secured by the mortgage; or (2) allege with specificity the factual basis by which the claimant is a person entitled to enforce the note under section 673.3011, Florida Statutes.

(b) Delegated Claim for Relief. If a claimant has been delegated the authority to institute a mortgage foreclosure action on behalf of the person entitled to enforce the note, the claim for relief shall describe the authority of the claimant and identify with specificity the document that grants the claimant the authority to act on behalf of the person entitled to enforce the note. The term “original note” or “original promissory note” means the signed or executed promissory note rather than a copy of it. The term includes any renewal, replacement, consolidation, or amended and restated note or instrument given in renewal, replacement, or substitution for a previous promissory note. The term also includes a transferrable record, as defined by the Uniform Electronic Transaction Act in section 668.50(16), Florida Statutes.

(c) Possession of Original Promissory Note. If the claimant is in possession of the original promissory note, the claimant must file under penalty of perjury a certification contemporaneously with the filing of the claim for relief for foreclosure that the claimant is in possession of the original promissory note. The certification must set forth the location of the note, the name and title of the individual giving the certification, the name of the person who personally verified such possession, and the time and date on which the possession was verified. Correct copies of the note and all allonges to the note must be attached to the certification. The original note and the allonges must be filed with the court before the entry of any judgment of foreclosure or judgment on the note.

(d) Lost, Destroyed, or Stolen Instrument. If the claimant seeks to enforce a lost, destroyed, or stolen instrument, an affidavit executed under penalty of perjury must be attached to the claim for relief. The affidavit must: (1) detail a clear chain of all endorsements, transfers, or assignments of the promissory note that is the subject of the action; (2) set forth facts showing that the claimant is entitled to enforce a lost, destroyed, or stolen instrument pursuant to section

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673.3091, Florida Statutes; and (3) include as exhibits to the affidavit such copies of the note and the allonges to the note, audit reports showing receipt of the original note, or other evidence of the acquisition, ownership, and possession of the note as may be available to the claimant. Adequate protection as required under section 673.3091(2), Florida Statutes, shall be provided before the entry of final judgment.

(e) Verification. When filing an action for foreclosure on a mortgage for residential real property the claim for relief shall be verified by the claimant seeking to foreclose the mortgage. When verification of a document is required, the document filed shall include an oath, affirmation, or the following statement:

“Under penalties of perjury, I declare that I have read the foregoing, and the facts alleged therein are true and correct to the best of my knowledge and belief.”

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(When location of original note known)COMPLAINT        Plaintiff, A. B., sues defendant, C. D., and alleges:

1. This is an action to foreclose a mortgage on real property in ……………. County, Florida.

2. On …..(date)….., defendant executed and delivered a promissory note and a mortgage securing payment of the note to …..(plaintiff or plaintiff’s predecessor….. The mortgage was recorded on…..(date)….., in Official Records Book ………. at page ………. of the public records of ……………… County, Florida, and mortgaged the property described in the mortgage then owned by and in possession of the mortgagor, a copy of the mortgage containing a copy of and the note being attached.

3. Plaintiff owns and holds the note and mortgage. (Select a, b, or c)

(a) Plaintiff is the holder of the original note secured by the mortgage. (b) Plaintiff is a person entitled to enforce the note under applicable law because …..(allege specific facts)…..

(c) Plaintiff has been delegated the authority to institute a mortgage foreclosure action on behalf of the person entitled to enforce the note. The document(s) that grant(s) plaintiff the authority to act on behalf of the person entitled to enforce the note is/are as follows ……………….

4. The property is now owned by defendant who holds possession.

5. Defendant has defaulted under the note and mortgage by failing to pay the payment due …..(date)….., and all subsequent payments …..(allege other defaults as applicable)…….

6. Plaintiff declares the full amount payable under the note and mortgage to be due.

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7. Defendant owes plaintiff $………. that is due on principal on the note and mortgage, interest from …..(date)….., and title search expense for ascertaining necessary parties to this action.

8. Plaintiff is obligated to pay plaintiff’s attorneys a reasonable fee for their services. Plaintiff is entitled to recover its attorneys’ fees under …..(allege statutory and/or contractual bases, as applicable)……

WHEREFORE, plaintiff demands judgment foreclosing the mortgage, for costs (and, when applicable, for attorneys’ fees), and, if the proceeds of the sale are insufficient to pay plaintiff’s claim, a deficiency judgment.

NOTE: An action for foreclosure of a mortgage on residential real property must contain an oath, affirmation, or the following statement as required by rule 1.115(e).

VERIFICATION        Under penalty of perjury, I declare that I have read the foregoing, and the facts alleged therein are true and correct to the best of my knowledge and belief.

Executed on this …..(date)…..

[Person Signing Verification]


1. That plaintiff is in possession of the original promissory note upon which this action is brought.

2. The location of the original promissory note is: …..(location)…..

3. The name and title of the person giving the certification is: …..(name and title)

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4. The name of the person who personally verified such possession is: …..(name)…..

5. The time and date on which possession was verified were: …..(time and date)

6. Correct copies of the note (and, if applicable, all endorsements, transfers, allonges, or assignments of the note) are attached to this certification.

7. I give this statement based on my personal knowledge.

Under penalties of perjury, I declare that I have read the foregoing Certification of Possession of Original Note and that the facts stated in it are true.

Executed on …..(date)…..

[Person Signing Certification]

NOTE: This form is for installment payments with acceleration. It omits allegations about junior encumbrances, unpaid taxes, unpaid insurance premiums, other nonmonetary defaults, and for a receiver. They must be added when proper appropriate. Copies A copy of the note and mortgage must be attached. This form may require modification. This form is designed to incorporate the pleading requirements of section 702.015, Florida Statutes (2013) and rule 1.115. It is also designed to conform to section 673.3011, Florida Statutes (2013), except that part of section 673.3011, Florida Statutes, which defines a person entitled to enforce an instrument under section 673.3091, Florida Statutes. See form 1.944(b). Pursuant to section 702.015, Florida Statutes (2013), a certification of possession of the original promissory note must be filed contemporaneously with the Complaint (form 1.944(a)) or, in the event that the plaintiff seeks to enforce a lost, destroyed, or stolen instrument, an affidavit setting forth the facts required by law must be attached to the complaint (form 1.944(b)).

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(When location of original note unknown)COMPLAINT        Plaintiff, ABC, sues defendant, XYZ, and states:

1. This is an action to foreclose a mortgage on real property in ………. County, Florida.

2. On …..(date)…… defendant executed and delivered a promissory note and a mortgage securing the payment of said note to …..(plaintiff or plaintiff’s predecessor)….. The mortgage was recorded on ……(date)….. in Official Records Book …… at page ….. of the public records of ………. County, Florida, and mortgaged the property described therein which was then owned by and in possession of the mortgagor. A copy of the mortgage and note are attached to the affidavit which is attached hereto as Composite Exhibit “1”; the contents of the affidavit are specifically incorporated by reference.

3. Plaintiff is not in possession of the note but is entitled to enforce it.

4. (select a, b, c, or d) Plaintiff cannot reasonably obtain possession of the note because

(a) the note was destroyed.

(b) the note is lost.

(c) the note is in the wrongful possession of an unknown person.

(d) the note is in the wrongful possession of a person that cannot be found or is not amenable to service of process.

5. (select a, b, c, or d)

(a) At the time the original note was lost, plaintiff was the holder of the original note secured by the mortgage.

(b) At the time the original note was lost, plaintiff was a person entitled to enforce the note under applicable law because …..(allege specific facts)…..

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(c) Plaintiff has directly or indirectly acquired ownership of the note from a person who was entitled to enforce the note when loss of possession occurred as follows: …..(allege facts as to transfer of ownership)…..

(d) Plaintiff has been delegated the authority to institute a mortgage foreclosure action on behalf of the person entitled to enforce the note, and the document(s) that grant(s) plaintiff the authority to act on behalf of the person entitled to enforce the note is/are as follows ………………………..(attach documents if not already attached).

6. Plaintiff did not transfer the note or lose possession of it as the result of a lawful seizure.

7. The property is now owned by defendant who holds possession.

8. Defendant has defaulted under the note and mortgage by failing to pay the payment(s) due …..(date(s))….. , and all subsequent payments …..(identify other defaults as applicable)…..

9. Plaintiff declares the full amount payable under the note and mortgage to be due.

10. Defendant owes plaintiff $………. that is due on principal on the note and mortgage, interest from …..(date)….. , and title search expense for ascertaining necessary parties to this action.

11. Plaintiff is obligated to pay its attorneys a reasonable fee for their services. Plaintiff is entitled to recover its attorneys’ fees for prosecuting this claim pursuant to …..(identify statutory and/or contractual bases, as applicable)…..

WHEREFORE, Plaintiff demands judgment foreclosing the mortgage, for costs (and, where applicable, for attorneys’ fees), and if the proceeds of the sale are insufficient to pay plaintiff’s claim, a deficiency judgment.

NOTE: An action for foreclosure of a mortgage on residential real property must contain an oath, affirmation, or the following statement as required by rule 1.115(e).


Under penalty of perjury, I declare that I have read the foregoing, and the facts alleged therein are true and correct to the best of my knowledge and belief.

Executed on …..(date)…..

(Person Signing Verification)

COUNTY OF ………………..

BEFORE ME, the undersigned authority, personally appeared …..(name)….., who, after being first duly sworn, deposes and states, under penalty of perjury:

1. I am the plaintiff (or plaintiff’s ……….) (identify relationship to plaintiff).

2. I am executing this affidavit in support of plaintiff’s Complaint against defendant and I have personal knowledge of the matters set forth herein.

3. On …..(date)….. , the public records reflect that defendant executed and delivered a mortgage securing the payment of the note to …..(plaintiff/plaintiff’s predecessor)…… The mortgage was recorded on …..(date)….. , in Official Records Book ………. at page ………. of the public records of ………. County, Florida, and mortgaged the property described therein, which was then owned by and in possession of the mortgagor, a copy of the mortgage and the note being attached.

4. (select a, b, c, or d) Plaintiff cannot reasonably obtain possession of the note because

(a) the note was destroyed.

(b) the note is lost.

(c) the note is in the wrongful possession of an unknown person.

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(d) the note is in the wrongful possession of a person who cannot be found or is not amenable to service of process.

5. (select a, b, c, or d)

(a) At the time the original note was lost, plaintiff was the holder of the original note secured by the mortgage.

(b) At the time the original note was lost, plaintiff was a person entitled to enforce the note under applicable law because …..(allege specific facts)…..

(c) Since the note was lost, plaintiff has directly or indirectly acquired ownership of the note from a person who was entitled to enforce the note when loss of possession occurred as follows: …..(allege facts regarding transfer of ownership)…..

(d) Plaintiff has been delegated the authority to institute a mortgage foreclosure action on behalf of the person entitled to enforce the note, and the document(s) that grant(s) plaintiff the authority to act on behalf of the person entitled to enforce the note is/are as follows …………………………(attach copy of document(s) or relevant portion(s) of the document(s)).

6. Below is the clear chain of the endorsements, transfers, allonges or assignments of the note and all documents that evidence same as are available to Plaintiff: …..(identify in chronological order all endorsements, transfers, assignments of, allonges to, the note or other evidence of the acquisition, ownership and possession of the note)….. Correct copies of the foregoing documents are attached to this affidavit.

7. Plaintiff did not transfer the note or lose possession of it as the result of a lawful seizure.



[typed or printed name of affiant]

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BEFORE ME, the undersigned authority appeared …..(name of affiant)….. who ….. is personally known to me or ….. produced identification …..and acknowledged that he/she executed the foregoing instrument for the purposes expressed therein and who did take an oath.

WITNESS my hand and seal in the State and County aforesaid, this …..(date)……

NOTARY PUBLIC, State of Florida

Print Name: …………………………

Commission Expires: ……………..

Committee Note        2014 Adoption. This form is for installment payments with acceleration. It omits allegations about junior encumbrances, unpaid taxes, unpaid insurance premiums, other nonmonetary defaults, and for a receiver. Allegations must be added when appropriate. This form may require modification. This form is designed to incorporate the pleading requirements of section 702.015, Florida Statutes (2013), and rule 1.115. It is also designed to comply with section 673.3091, Florida Statutes (2013). Adequate protection as required by sections 702.11 (2013) and 673.3091(2), Florida Statutes (2013), must be provided before the entry of final judgment.

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PLAINTIFF’S MOTION FOR ORDER TO SHOW CAUSEFOR ENTRY OF FINAL JUDGMENT OF FORECLOSURE        1. Plaintiff is a lienholder of real property located at …..(address)…… or is a ….. Condominium Association/Cooperative Association/Homeowner’s Association……

2. The plaintiff has filed a verified complaint in conformity with applicable law, which is attached.

3. The plaintiff requests this court issue an order requiring defendant(s) to appear before the court to show cause why a final judgment of foreclosure should not be entered against defendant(s).

4. The date of the hearing may not occur sooner than the later of 20 days after service of the order to show cause or 45 days after service of the initial complaint.

ORCOMMENT: Use the following when service is by publication:

4. When service is obtained by publication, the date for the hearing may not be set sooner than 30 days after the first publication.

5. The accompanying proposed order to show cause affords defendant(s) all the rights and obligations as contemplated by applicable law.

6. Upon the entry of the order to show cause, plaintiff shall serve a copy of the executed order to show cause for entry of final judgment as required by law.

7. This is not a residential property for which a homestead exemption for taxation was granted according to the rolls of the latest assessment by the County Property Appraiser.

Plaintiff requests the court review this complaint and grant this motion for order to show cause for entry of final judgment of foreclosure, and grant such further relief as may be awarded at law or in equity.

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Certificate of Service

Committee Note

2014 Adoption. This form is designed to comply with section 702.10, Florida Statutes (2013).

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ORDER TO SHOW CAUSE        THIS CAUSE has come before the court on ….. plaintiff’s/lien holder’s….. motion for order to show cause for entry of final judgment of mortgage foreclosure and the court having reviewed the motion and the verified complaint, and being otherwise fully advised in the circumstances, finds and it is


1. The defendant(s) shall appear at a hearing on foreclosure on …..(date)….. at ……(time)….. before the undersigned judge, in the …..(county)….. Courthouse at …..(address)…… to show cause why the attached final judgment of foreclosure should not be entered against the defendant(s) in this cause. This hearing referred to in this order is a “show cause hearing.”

2. This ORDER TO SHOW CAUSE shall be served on the defendant(s) in accordance with the Florida Rules of Civil Procedure and applicable law as follows:

a. If the defendant(s) has/have been served under Chapter 48, Florida Statutes, with the verified complaint and original process has already been effectuated, service of this order may be made in the manner provided in the Florida Rules of Civil Procedure; or, if the other party is the plaintiff in the action, service of the order to show cause on that party may be made in the manner provided in the Florida Rules of Civil Procedure.

b. If the defendant(s) has/have not been served under Chapter 48, Florida Statutes, with the verified complaint and original process, the order to show cause, together with the summons and a copy of the verified complaint, shall be served on the party in the same manner as provided by law for original process.

3. The filing of defenses by a motion or verified answer at or before the show cause hearing constitutes cause for which the court may not enter the attached final judgment.

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4. Defendant(s) has/have the right to file affidavits or other papers at the time of the show cause hearing and may appear at the hearing personally or by an attorney.

5. If defendant(s) file(s) motions, they may be considered at the time of the show cause hearing.

6. Defendant(s)’ failure to appear either in person or by an attorney at the show cause hearing or to file defenses by motion or by a verified or sworn answer, affidavits, or other papers which raise a genuine issue of material fact which would preclude entry of summary judgment or which would otherwise constitute a legal defense to foreclosure, after being served as provided by law with the order to show cause, will be deemed presumptively a waiver of the right to a hearing. In such case, the court may enter a final judgment of foreclosure ordering the clerk of the court to conduct a foreclosure sale. An order requiring defendant(s) to vacate the premises may also be entered.

7. If the mortgage provides for reasonable attorneys’ fees and the requested fee does not exceed 3% of the principal amount owed at the time the complaint is filed, the court may not need to hold a hearing to adjudge the requested fee to be reasonable.

8. Any final judgment of foreclosure entered under section 702.10(1) Florida Statutes, shall be only for in rem relief; however, entry of such final judgment of foreclosure shall not preclude entry of an in personam money damages judgment or deficiency judgment where otherwise allowed by law.

9. A copy of the proposed final judgment is attached and will be entered by the court if defendant(s) waive(s) the right to be heard at the show cause hearing.

10. The court finds that this is not a residential property for which a homestead exemption for taxation was granted according to the rolls of the latest assessment by the county property appraiser.

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DONE AND ORDERED at …..(county)…..Florida …..(date)……


Copies to:

Committee Note        2014 Adoption. This form is designed to comply with section 702.10(1), Florida Statutes (2013).

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FINAL JUDGMENT        This action was tried before the court. On the evidence presented


1. Amounts Due. Plaintiff, …..(name and address)……, is due

Damages Rising: Wrongful Foreclosure Costs Wells Fargo $3.2 Million

Damage awards for wrongful foreclosure are rising across the country. In New Mexico a judge issued a $3.2 million judgment (including $2.7 million in punitive damages) against Wells Fargo for foreclosing on a man’s home after his death even though he had an insurance policy through the bank that paid the remaining balance on his mortgage. The balance “owed” on the mortgage was $125,000. Despite the fact that the bank knew about the insurance (because it was purchased through the bank) Wells Fargo continued to pursue foreclosure, ignoring the claim for insurance. It is because of cases like this that people are asking “why would they do that?”

The answer is what I’ve been saying for years.  Where a loan is subject to claims of securitization, and the investment banks lied to insurers, investors, guarantors and other co-obligors, they most likely have been paid many times for the same loan and never gave credit to the investors. By not crediting the investors they created the illusion of a higher balance that was due on the loan. They also created the illusion of a default that probably never occurred. But by pursuing foreclosure and foreclosure sale, they compounded the illusion and avoided claims for refund and repayment received from third parties and created claims for recovery of servicer advances. In many foreclosures that I have  reviewed, payments received from the FDIC under loss-sharing were never taken into account. Thus the bank collects money repeatedly for a loss it never incurred.

This case is another example of why I insist on following the money. By following the money trail you will discover that the documents upon which the foreclosure relies referred to  fictitious transactions. The documents are worthless, but nevertheless accepted in court unless a proper objection is made based upon preserving issues for trial and appeal by proper pleading and discovery.

Lawyers should take note of this profit opportunity. Most homeowners are looking for attorneys to take cases on contingency. Typical contingency fee is 40%. If these lawyers were on a typical contingency fee arrangement, their payday would have been around $1.2 million.

I should add that for every one of these judgments that are reported, I hear about dozens of confidential settlements that are of similar nature, to wit: clear title on the house, damages and attorneys fees.

Wells Fargo Ordered to Pay $3.2 Million for “Shocking” Foreclosure

Basic Pleading Defects Reveal Fatal Flaws in Foreclosures


I have frequently made the point that if you want to protect your case on appeal, you must have a coherent and accurate record established in the court file or you will be shunted away on a technicality of some sort. The strategy I endorse, and the only one I use is aggressive litigation from the start. This alone will help remove your case from the pile of deadbeat borrowers who are just trying to string out the inevitable. In order to do that, you must reject the paradigm that the debt, loan, note, mortgage, default and notice of default are valid and that the sale was valid. In order to do that you need to do your research. It is my opinion that there is going to be a wave of malpractice suits against lawyers who told their clients “there is nothing you can do.”

In most cases, this is not true. There are plenty of defenses, chief among them PAYMENT and denial that the contract was ever formed — because neither the forecloser nor any of its predecessors loaned any money to the homeowner.

The flip side of the coin is also true. If the other side pleads improperly and fails to prove their case, they have a poor record for appeal and usually won’t. Applying basic rules of law and pleading, it is apparent that most foreclosures are based on pleadings that don’t have two essential ingredients. They don’t allege that the borrower received money from the forecloser or its predecessor and they don’t allege financial injury. The first defect leads to the conclusion that there can be no injury if the loan was not made by the forecloser or its predecessors. The second defect fails to invoke the court’s jurisdiction.

It is well-settled in the law that in order to invoke the court’s jurisdiction the Pleader must allege an injury that is recognizable by law. This allegation is required in every type of lawsuit. It is equally well-settled that the Pleader must allege a short plain statement of ultimate facts upon which relief could be granted. Further, it is well settled that the facts alleged cannot be formulaic conclusions. —- a point that is always hammered by the Banks when confronted with a claim or counterclaim from homeowners. They are right. But what is good for the goose is good for the gander.

In the days before the dust cloud of sham securitizations a Bank had to allege it made a loan to the homeowner or that it had purchased a loan, or acquired it through merger from an entity that made the loan. Why then are Banks skipping this essential allegation? And why are the Banks avoiding any allegation that they suffered financial injury?

In the old days if a lawyer went to court on an uncontested Motion for Summary Judgment, if his pleading and affidavit did not allege and prove the existence of the loan he was sent packing until he could come back with his papers in order. In other words, in uncontested hearings where the homeowner did not even show up, the Judge denied or continued the Motion for Summary Judgment where the Bank failed to allege the loan and failed to allege financial injury.

Fast forward to 2013. Foreclosers routinely omit any allegation that the borrower received a loan from the entity foreclosing on the house. They routinely omit any allegation of financial injury. Instead, they merely assert they are the holder of the note and mortgage. This is important because allowing the Banks to avoid alleging the existence of the loan shifts the burden of pleading and proof onto the Homeowner, thus leaving the hapless homeowner with the burden of chasing a ghost instead of simply defending their property.

If the Banks were required to plead that a loan was given to the borrower and the lender in that transaction was the Foreclosers or that it had purchased the loan, the Bank has the burden of proving the existence of the loan. So why did Banks stop pleading the loan? And why did they stop pleading financial injury?

The answer is simple. They didn’t make the loan and they don’t own the loan. Wall Street Banks created a cloud in which they controlled all the appearances and illusions starting with conflicting paperwork given to the lenders (investors) and borrowers (homeowners). If lawyers fail to deny or at least state they are without knowledge as to the essential allegations of the complaint they are making a mistake — one that will move the case inexorably toward foreclosure. If lawyers fail to seek dismissal of the case or vacation of the notice of sale (non-judicial states) on the basis that that the forecloser does not claim to be the lender or even represent the lender and that the lender does not allege financial injury they are making a mistake that will cost them in the trial court and on appeal.

Most lawyers are timid about taking this position despite the glaring absence of the allegations from the banks. They feel they will make fools of themselves by denying the existence of the debt, note, mortgage, and default when they know their client received a loan. Money was on the table. How can you deny that?

The answer is that if the money didn’t come from the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust, then they cannot have any injury. And if they are not the actual owner of an unpaid account receivable, then they cannot submit a credit bid at eh auction. The banks know this. That is why they do a substitution of trustee in 100% of the cases brought to foreclosure in non-judicial states. Because if the original trustee was left there, the trustee might actually do his job — and inquire where this new beneficiary came from and how they stand to lose any money through non payment by the homeowner.

And there is another reason why the banks avoid such issues like the plague. If they open up the issue of payments and money, then the inquiry in discovery will be about money, where it came from, where it went, who was paid, and when they were paid. If that cloud created by the illusion of securitization contains evidence of a principal agent relationship between the lenders (investors in mortgage bonds) and the third party intermediaries (investment banks and affiliates) then the money received for insurance, CDS, guarantees, and proceeds of sale to the Federal Reserve will reduce the accounts receivable and require a reduction in the accounts payable from the homeowners. And if that happens, the insurers and everyone else are going to be making claims based upon multiple payments on the same claim for a loss that the bank never incurred because it was always playing with investor money.


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

EDITOR’S NOTE: One good thing about House Bill 87 recently passed in the Florida legislature is that homeowner associations, condominium associations, and cooperative associations can force a bank to proceed with foreclosure. The problem they have is that once a homeowner knows that foreclosure is “inevitable” they stopped paying the Association dues as well as not making any payments on mortgage debt.

But I think the lead story is that these associations could stop the foreclosures altogether. As I have previously stated on these pages arguments that are frequently rejected by both the trial and appellate courts when they are proposed by homeowners are accepted and even augmented when the same argument is made by an institutional opponent to the foreclosure.

The associations may be included in the institutional category. In my opinion they should take advantage of the new portion of House Bill 87 when appropriate, but their focus should be on filing foreclosures on the homeowners who have not paid their dues. In that same foreclosure it is my opinion that the alleged mortgage that was recorded should be attacked as to both validity and priority.

When I was practicing law in South Florida in the 1970’s and 1980’s I represented hundreds of associations as general counsel and of course as trial counsel for the foreclosure of liens. generally foreclosures were not as pandemic as they are now but there were still plenty of them. The procedure is the same as the mortgage foreclosure.

  1. You plead that the association has the right to a lien as per the the Declaration of Condominium or other enabling document for the association.
  2. You plead that you gave adequate notice in accordance with the statutes.
  3. You plead the amount of monthly dies and special assessments due from this homeowner and you plead that no payments were made (not merely that the homeowner failed to pay). You might want to phrase it as “neither the homeowner nor any other stakeholder has made any payment to the association or its agents on this debt.” (This is to require the Bank to plead the same words).
  4. You plead that you filed the lien to secure past dues and future dues until the foreclosure judgment is entered and the property is sold.
  5. You plead that the dues were so much for monthly maintenance, so much for special assessments, and that the expenses of filing the lien and enforcing it with an attorney should also be awarded.
  6. You plead that all other lienholders are junior to the lien of the association unless you know otherwise. You plead that the mortgage lien recorded at page XX Book XX in the Public Records of the County is junior to the lien of the association.
  7. When the trial or Motion for Summary Judgment comes along you have a witness that verifies that they are the records keeper for the condominium as set forth under the Condominium Statutes, they have personal knowledge regarding the receipts and disbursements with respect to the account of this homeowner, they verify or testify what was received from all sources on this account, and that the balance due to the association, as a receivable, is a specific total amount arrived at through simple addition and subtraction.

When the HOA files such an action it is setting the standard for a foreclosure proceeding and it has the full authority of Florida Statutes behind it. Since in most cases the alleged owner of the mortgage lien is no longer the party named on the instrument, the Association can plead truthfully that this party has no interest in the debt and therefore is not entitled to enforce it nor argue for its validity or priority relative to the Association’s lien and foreclosure.

Any OTHER party would be required to intervene and prove that they can make and prove the SAME ALLEGATIONS AS THE ASSOCIATION — something they clearly cannot do. And if they try, depositions of the leading witnesses for the new guest to the party would occur revealing that they have no money trail to show that they funded either the origination or acquisition of the loan and that if they have any claim, it is unsecured and subject to a separate right of action against the borrower. Instead they have a bunch of fabricated paper that refers to financial transactions that never occurred in reality.

The usual end result, if the HOA is successful, and my firm is prepared to demonstrate this to any association that wants to hire us (or who wants to instruct their association attorneys to do it) is that the Association wins, the homeowner redeems the Association lien because it is a small fraction of the presumed lien of the mortgage and everyone is happy except the bank that tried to foreclose who finds itself foreclosed out of the mortgage.

Or the Association becomes the owner of the property at a foreclosure sale or some other person outbids the association WITH CASH and the association lien is satisfied, along with a new owner who pays the monthly and special assessments.

This is going to cause all the players in the false securitization scheme that masked a massive PONZI scheme a lot of trouble because the investors, insurers, government agencies, counterparties to credit default swaps and others who paid on this debt are going to find out through a Court Order that the whole thing was a sham and that the real lenders, the investors never had the bond secured nor was the mortgage debt ever subject to a valid claim through the bond, nor was it properly perfected and secured, so the mortgage filed in the county records was a sham.

HOAs have good reason to follow this strategy for themselves, their distressed homeowners who can be restored to ownership of the property without the illegal encumbrance filed by the the Wall Street players, and for the other homeowners whose property value decreases each time another foreclosure is filed.

John C. Goede: Can HOAs file for a court order requiring lenders to complete stalled foreclosures?

The Sneaky Game Banking Giants Are Playing to Suck More Money From the Foreclosure Crisis

WHY WOULD A BANK OF ALL THINGS PAY 6 TIMES WHAT THE PROPERTY IS WORTH UNLESS THEY WERE COVERING SOMETHING UP? Big banks sometimes pay 600% above value to retain Sarasota foreclosures

WHERE ARE THE CONVICTIONS OF THE BANK OFFICERS WHO TURNED THIEVERY INTO POLICY? More than 40 convictions in mortgage fraud scheme involving Florida properties, Ohio straw buyers

WHY DO BANKS WANT US HOMELESS? Our bank wants us homeless

Does Your Mortgage Receive Your Full Attention?


Dealing with the Litigation Shell Game

Here is one way of handling the shell game. This could be split up into bite sized pieces and then filed one at a time, but then you might lose the flavor of it. The interesting thing about this pleading is that it takes the pleading and affidavits of the forecloser and uses it  against them. The affidavit for summary judgment after 3 years was completely deficient of any thing that wasn’t naked hearsay and speculation signed by an unauthroized person. The point made is “Is this best you can do after 3 years?”


  1. Plaintiff has yet to respond to discovery requests despite repeated demands that they do so. Additional discovery is now required as to the sudden “appearance” of the note which Plaintiff presumably will rely upon. The Plaintiff has been known to use false created “photo-shopped” documents. If the real note was actually available, then it would have been delivered with the alleged assignment.
  2. The attachments are objected to for the same reason as to landscape mode. In addition, they clearly show confusion on the part of the Plaintiff as to which entity is claiming to be the creditor who could submit a credit bid at auction. What is readable shows that Lender is named as Chase Bank USA, N.A.

2.1.  Plaintiff has failed thus far to allege or answer discovery that would indicate whether the loan closing was complete (the note not having been signed by XXXXXXXXXXXXX), and whether Chase Bank USA, NA was the entity that actually funded the loan and therefore was the proper payee and secured party. Past conduct indicates that Plaintiff either cannot or will not respond to the essential question of the obligation to repay the actual creditor who advanced the funds for the loan or the party who has purchased the loan, and whether that purchase was supported by consideration or was even accepted by the assignee.

2.2. Prior pleadings indicate the loan is claimed to be part of a REMIC pool in which the loan was utilized as an asset to issue mortgage backed securities (mortgage bonds), but the Plaintiff insists on filing the papers on behalf of entities that have no current interest in the loan nor is it likely that they ever funded or purchased the loan.

2.3.  Plaintiff has thus failed to provide essential information allowing the Defendant to pursue modification under HAMP or HARP programs because there is no assurance that any of the parties on any of the documents are either the authorized servicer nor are they the creditor. Hence the “consideration” required of a modification proposal cannot be accomplished without knowing the creditor, knowing the authorized representative and commencing the modification process.

  1. These objections and motion to strike are not hypothetical. Plaintiff has already attempted to use a false affidavit in this case from an unauthorized person in support of its motion for summary judgment, which was amply demonstrated at the time of the last  hearing. Plaintiff fails to allege or offer who the originating the lender was, and fails to state the current ownership of the loan.
  2. Plaintiff is attempting to circumvent the rules of evidence and the rules of civil procedure by filing false affidavits signed by unauthorized persons, whose very existence cannot be determine by reasonable due diligence on behalf of corporate entities whose very existence cannot be determine by reasonable due diligence.

4.1. If a competent witness existed that could testify from personal knowledge and provide foundation of the documents upon which Plaintiff relies, there was plenty of time for Plaintiff to have submitted an affidavit from such competent witness. The absence of such a witness is apparent, and the attempt to “snow” the court with paperwork to cover up a botched closing and false securitization is obvious.

4.2.  Plaintiff has chosen to merely withdraw its claim for a lost note but has failed to produce it despite repeated requests in discovery.

4.3.  And Plaintiff now attaches “copies” of an “allonge” executed by Cynthia Corona on behalf of Chase Bank USA, NA endorsing the alleged note to Chase Home Finance as “assistant Treasurer” without indicating which company she was employed with — it being apparent that neither Defendant nor Plaintiff can locate said Cynthia Corona as an authorized officer with appropriate Corporate resolutions to transfer anything, and there being no indication that the endorsement was for “value received.”

4.4.  All of these apparently fabricated events and documents are contrary to the other facts alleged in the case in which the endorsement was to a REMIC (See below) which apparently is alleged to have provided funding by sale of mortgage bonds to investors.

4.4.1.                  However, the Plaintiff fails to answer discovery requests that would show the funding from the REMIC nor the authority of either Chase Bank USA NA or Chase Home Finance to represent the REMIC which is a trust, in which the supposed trustee is US Bank.

4.4.2.                  Further, no answer has been forthcoming identifying the accounts or accounts in which money was disbursed or received on behalf of what the Defendants claim to be the real creditor, the REMIC described below. Based upon experience with the same parties in other cases it appears as though the closing documents were diverted from the actual source of lending wherein the REMIC was not named as Payee and the money for the loan was diverted from the REMIC thus leaving the opening for any party to claim a relationship with the payee on the note as lender or assignee.                 Plaintiffs failure to answer such basic questions in a simple foreclosure is disconcerting, to say the least. Defendants wish to settle the case through modification or mediation but are repeatedly blocked by the Plaintiff in this case from access to information that is either in the possession of their agents or affiliates or which does not exist. No party can consider the offer of modification under HAMP or HARP without being the creditor or an authorized representative of the creditor. Plaintiff refuses to provide any information on this subject and chooses to go forward with a dubious foreclosure case which has lingered for over 3 years.                 None of the facts sought by Defendant exceed any of the information, documents or media that were necessary to be present at the time the suit in foreclosure was filed. If they in fact do not exist, then the suit should never have been filed and the action should be dismissed with prejudice as to these plaintiffs.

  1. The lender stated on the Mortgage is Chase Bank, U.S.A., a named entity that has never been repeated or connected with the parties stated to be the Plaintiffs in this case and quite contrary to the actual fact that the loan was funded by investors in a REMIC that Defendants now admit to be called J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1. This is therefore the claimed creditor, but he documents do not show any record of a money or document trail, except those prepared strictly for court proceedings, indicating why the Trust Corp. (REMIC) was not named on the note and mortgage or, if acquired, when it was acquired, what type of transaction occurred, whether it was for value received, and whether there was an offer and acceptance of the assignment, which of course would be impossible at this late stage because the close-out date under the securitization documents, and under the Internal Revenue Code expired years ago, and in any event, the assignment could only be considered an offer to sell that could not be accepted because it is, according to the defendants a non-performing loan contrary to both the requirements of the REMIC provisions and the provisions of the PSA.

5.1.  This leaves the loan without proper documentation, without a perfected lien, without a note describing the true creditor, and  with repayment provisions different from those promised the investor lenders who advanced the money for mortgage bonds that the borrower is not alleged to have ever acknowledged or signed.

5.2.  Plaintiff fails to allege or offer answers in discovery to explain the location of the note, the completion of the loan transaction, the trail of money or the trail of documents, all of which were manufactured for this lawsuit to cover up the fact that the Plaintiffs were in fact using the loan was though they owned it for the purposes of trading and obtaining insurance that should have reduced balances due to the actual creditor, and hence the balances due from the borrowers whose only obligation to the lenders, thanks to the botched paperwork of the intentionally fabricated loan closing, is a common law obligation to repay the funds. Yet the defendant  still wishes to seek a modification rather than a nullification because of the intent of the investor-lender in lending the money and the intent of the homeowner in borrowing the money.

5.3.      The Plaintiff explains nothing about the named mortgagee in the proffered affidavit.

5.4.      The identity of the true lender and creditor was intentionally withheld from the Defendant because this would have alerted him to the fact that the mortgagee stated on the Mortgage was a different entity than that which sues him now.

5.5.      The investors (pensions funds etc., whose identity has been improperly withheld from the Defendant, thus preventing the attempt at settlement under mediation or HAMP or HARP.

  1. The affidavit in support of summary judgment is filed on behalf of “U.S. Bank as Trustee for J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1.” Clearly this is the entity that is intended to be described as the creditor, but the Plaintiff has yet to explain any facts leading up to that conclusion thus depriving the Defendant of the ability to prepare a defense to facts that are in the exclusive possession of the four parties that appear to have some pleading or document filed as a stakeholder in the instant mortgage loan (Chase Bank, Chase Finance, US Bank and JP Morgan Acquisition Trust).

6.1.      The affidavit itself and the Notary indicate that it was executed on April 9, 2012.

6.2.      The affiant is reported to be Ronald L. Thomas as Vice President, JP Morgan  Chase Bank N.A.

6.2.1.       Nowhere does the affidavit even attempt to state that said Ronald L. Thomas is an authorized officer of U.S. Bank, Trustee. Yet the notice of filing states that it is U.S. Bank filing the affidavit.

6.2.2.       Nowhere does the affidavit state that Ronald L Thomas is an authorized officer, trustee or representative of J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1.

6.2.3.       From beginning to end there is no basis to determine the alleged relationship of the affiant to the companies or trusts that are alluded to in the notice of filing.

6.2.4.       Nowhere does the affidavit establish personal knowledge of the facts or authority of said Ronald L Thomas to sign on behalf of U.S. Bank or J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1.

6.2.5.       Nowhere is the identity or corporate or other legal existence of J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1 been alleged or offered in the affidavit to be an existing legal entity.

6.2.6.       Investigation of J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1 reveals that no such entity exists as a trust or as a corporation and none is alleged by the Plaintiff.

6.2.7.       Investigation of the signatory Thomas reveals that his name appears repeatedly on robo-signed documents in many other cases and his employment cannot be verified with either U.S. Bank or J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1. Upon information and belief said signatory does not exist and/or has no employment relationship with any of the parties referred to herein, and/or has no authority properly granted and authenticated to sign any legal paper on behalf of the Plaintiff or J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1.

6.2.8.       After extensive due diligence, J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1 does not appear to exist as a legal entity but was the actual lender and source of funds and therefore the actual party with whom the Defendants transacted business on the day of the funding of the loan from an escrow account at Chase Bank or one of its subsidiaries .       Hence the pleadings and exhibits proffered by Plaintiff prove that that the named Payee on the note and the named mortgagee should have been an entity, to wit: U. S. Bank, as Trustee for J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1, which should have been organized into a legally recognizable business REMIC entity under the federal and state law.       The reason they didn’t do that was because they were making extensive use of their own claims to ownership of the loan when trading credit default swaps and purchasing insurance, cross guarantees and other credit enhancements that would inure to the benefit of the intermediaries including the Chase investment bank entities.       Plaintiff’s allegations and exhibits show a different story that would require them to obtain an assignment from the REMIC       Plaintiff is attempting to side step this issue because it runs to the heart of the ability to foreclose. Defendants object to the affidavit as an attempt to re-write history without any foundation by a competent witness.       Plaintiff is creating the illusion that the origination of the loan conformed to the parties and terms alleged in this foreclosure action. Their pleadings and affidavits are clearly intended to obscure the truth, and fail to support that illusion nor even the existence of investors or an investor group or entity that could make a claim.       In fact, there is no evidence that the investors even know about these proceedings nor who the proceeds of foreclosure would  be paid after denuding the estate by continuous fees all to the detriment of the lender, in violation of the terms of the loan to the lender (as expressed in the Pooling and Servicing Agreement that the Plaintiff has failed to provide and without which they can make no claim).       The REMIC was created allegedly by the terms of the PSA. The PSA was not attached because it would show clearly that the cutoff date for the pool, even if it existed expired long ago and that the acceptance of the loan which is declared in default was an ultra-vires act by the “Trustee” or manager, U.S. Bank.

6.2.9.       Defendants accordingly deny, subject to the special appearance denoted above, that the attachments, pleadings and affidavit are authentic or authorized and further deny that a foundation was or even could be proffered by this Plaintiff.

6.2.10.   Further, Defendants deny that the amounts stated are correct in that they appear to be taken from the accounting of the subservicer and exclude the accounting of the Master Servicing where all financial transactions are recorded.   Based on Defendants’ own investigation, the subservicer and Master servicer distributed payments to the Plaintiff or Plaintiff’s successors before, during and after the declaration of default and the foreclosure suit was filed. The records of the Master Servicer would show those payments as would the recipient of the those funds, whose records are not attached to the proffered affidavit, nor does signatory Thomas allege any personal knowledge of the amounts due or how payments were allocated to the actual creditor as it may have changed from time to time. Accordingly the Defendants deny the debt, deny the default, and deny that the amounts claimed are correct as well as deny that the claimed amounts are owed to the Plaintiff or any entity related tot he Plaintiff.   Defendants therefore affirmatively state that the party to whom money is owed or was owed has not been identified, and that no accounting has been forthcoming from the actual party entitled to submit a credit bid at a foreclosure auction on the basis that an obligation is owed from the Defendants to that party and that the specific obligation owed by the Defendants, or what is left of it after receiving payments from the sub-servicer and Master servicer, was in fact secured by a perfected lien on the property of the Defendants at the time of the “closing” of the transaction, nor that such lien could still be valid even if it was valid at the time of the closing.   Defendants affirmatively state that it is the obligation of the Plaintiff to prove the damages on the claim that that the plaintiff is neither the creditor, nor does the Plaintiff have any relationship with any natural person or legal entity possessing such information as to the current status of the debt, the current identity of any party to whom money is actually owed and whether that obligation was secured and remains secured by a mortgage lien on the Defendants’ property.

6.2.11.  Attached to the alleged affidavit are printouts from a computer, which is neither explained nor supported by any declaration of the Affiant. If Plaintiff possesses the required accounting to support its claim of a default, it has yet to provide it. In fact, the computer printouts affirmatively show that they were produced in April, and come from “3270 explorer: OLLW Letter (PL13)” which is not explained in the alleged affidavit and contain no reference to J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1 nor even the Defendants, with even the loan number redacted! Some of the attachments contain the borrower name and some do not,  but even on those with the name borrower the loan number is partially redacted. Plaintiff has thus failed to prove or offer proof that the original loan still exists or that the original loan is now owed to U.S. Bank, as Trustee or J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1. Most pages refer to the name “Chase” or JP Mortgage Chase, N.A. and some refer to Chase Home finance, LLC Accordingly, the Plaintiff has failed to even offer any records covering the entire period of the alleged loan much less the receipt of payments from the subservicer, master servicer, insurance and credit default swaps all of which are known to Defendants to be expressly waiving subrogation. At a minimum the obligation of the Defendant was reduced if not obliterated by such payments and credit enhancements, meaning that the Plaintiff is attempting to collect on a debt owed to the actual creditor (the party who could submit a credit bid at auction because the obligation is actually owed to that creditor was secured by a proper mortgage whose encumbrance upon the land was perfected. Upon information and belief based upon opinion and facts from experts investigating this transaction, the original creditor no longer exists and the obligation is owed, without being secured by a perfected mortgage lien, to some other party who is only entitled to the net amount due on the obligation after reductions and allocations for payments received on Defendants’ obligation. In any event, the Plaintiff deftly attempts to sidestep this issue by not addressing it at all and filing a standard damage affidavit in a non-standard transaction. Failing that, the Plaintiff has no right to foreclose and neither does any other party, without reforming the instruments or imposing a trust upon the property.

6.3.      Paragraph 6,of the proffered affidavit to support Summary Judgment fails to identify the Lender. This is intentional since the attempt here is to re-write history and make it appear that what he is attempting to state now is the same way the loan was originated, which serves as yet another ground for exception and objection by the defendants.

6.3.1.     The Affidavit, being the culmination of three years to litigating and research, Paragraph 7 fails therefore to state a basis, foundation or history under which the Defendant could be in default, since the records upon which the affiant relied, even if they were admitted, were not the full records of receipts and disbursements to the actual identified creditor(s0, the use of which term is assiduously avoided by Plaintiff’s boiler-plate affidavit. Defendant’s object to the statement of default, the terms of the default and the lack of foundation and competency to declare the defendants in default.     In fact, the affiant fails to identify when the Defendants supposedly went into default and to whom the Defendant was in default — meaning that the creditor to whom the money was owed was actually still receiving payments even though Chase and all its subsidiaries were treating the loan is default. Response to discovery demands would show facts leading to the discovery of admissible evidence that the plaintiff was intentionally hiding the activities relating to payments and disbursements and status of the loan from the investor(s) who believed that the mortgage bond they purchased conveyed to them an undivided interest on Defendant’s loan when in fact Defendant’s loan was not in the REMIC pool and cannot be placed in the REMIC pool without adjudicating the rights of the investors to their detriment without notice of a hearing on the merits. to wit:    Plaintiff is attempting to get his court to rule that the loan they say is in default must now be accepted into a pool and specifically is in J.P. Morgan Mortgage Acquisition Trust Corp 2006-CH1. This is an attempt to get this court to violate the PSA and prospectus to the detriment of the investors.    This transaction , along with many others like it after years of NOT being in said pool is now being forced down the throats of the investors contrary to the terms of their  agreement in their prospectus and PSA was that they would only accept industry standard loans in good standing within the 90 day cut-off period required by the PSA and the REMIC statute.    By having this court rule that the loan should be treated as being in the “trust” when there is no trust and the investors are essentially in a common law general partnership, these intermediaries are attempting to create a judicial ruling that will cover the tracks of their misbehavior.    Such a ruling requires the investors to accept loans NOW that they previously were told and assured by the prospectus and PSA and agreed would NOT be part of the pool and for which their money would NOT be used for funding the loan. And yet their money was used to fund the Defendants’ loan outside of the chain of securitization documents whose only purpose to crate the illusion of transferring ownership in order to facilitate trading by the intermediaries in which they claimed ownership of the loan for purposes of collecting insurance, proceeds of credit default swaps, bailouts, government purchases and credit enhancements.    Such investors are necessary and indispensable parties since the ruling by this court will adjudicate the rights of investors to reject loans that they already agreed they would never accept.

  1. 7.    This entire lawsuit is an inauthentic attempt to cure a botched loan closing that was intentional and/or grossly negligent to obscure the facts, create illusions of ownership and a vehicle to defraud this Court, the defendants’ who face multiple liabilities, and the investors who are being forced to accept “bad” loans outside the cut-off period and outside the parameters of an acceptable loan. IN the end, the Defendants intent to make both the lender and the borrower the losers in this transaction, when the Defendant in good faith wishes to settle on honorable terms, including a perfected lien even though no such lien currently exists.

Cochrane: How Deutsche Bank as a Trustee will attempt to harm you in bankruptcy court.

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EDITOR’S NOTE: When you actually READ the securitization documents, you will find, as I did, that all of them are quite disingenuous. They mislead the casual reader and even some careful readers who don’t understand what is actually being said. The prospectus says the investor is buying into a pool, but as you continue to read, you find the pool has not been formed, much less filled with loans to satisfy the definition of “asset-backed mortgage bond.” So the investor is buying into a non-existent pool, which may or may not have been formed at a later date, with nothing in it except the income received from selling credit default swaps on the most toxic tranches of a CDO, usually in the same Special Purpose vehicle (Trust).

The so-called “Trustee” seems at first to be an intended fiduciary of a bona fide trust, but as you read the PSA and other securitization documents you find that with each passing page the powers of the Trustee are stripped away until they are at best the contingent agent of a dubious trust that has nothing in it except the income from credit default swaps and whose principal asset, as represented, is neither present nor was there ever any intent to make any legal transfers of legally constituted documents that would fill the pool with assets and thus create the “res” over which the Trustee has power.

With each passing page of each document it is obvious that the powers of the “Trustee” are actually in the hands of the master servicer, who in turn hires a subservicer who actually does the work, but without “knowledge” (plausible deniability). The subservicer in turn has multiple sets of books which it uses for reporting purposes — one for the borrower, one for the investor and one for the securitizers, to start with. Like MERS, the subservicer never lays hands on any document evidencing ownership of the borrower’s obligation which of course is at variance with the undelivered note and undelivered mortgage or deed of trust.

And since the subservicer does not handle or control the payments to securitizers and the investors, it has no way of knowing or accounting for payments that were made — except its own payments to the securitizers, despite the declaration of default against the borrower. The borrower, not knowing the payments are continuing, accepts the allegation that the obligation is in de fault even though it is being paid. UNTIL THE COURT IS MADE AWARE OF THE MULTIPLE SETS OF BOOKS, IT HAS NO WAY OF KNOWING ABOUT THE FRAUD. AND IF IT ISN’T EVEN ALLEGED, THEN THE ISSUE IS NOT BEFORE THE COURT.

The Trustee meanwhile has no idea what is going on in the courts (plausible deniability) and neither do the investor-lenders. Payments of principal and interest made to the securitizers, who are agents of the investor-lenders are neither reported to nor paid to the investors in many cases. While often named as the foreclosing party, the Trustee has no attorney client relationship with the attorney who is representing to the court that he represents the “lender” or “Holder” of the note, which of course does not describe the transaction that was disclosed to the borrower in the loan documents, note and mortgage. Hence the borrower-debtor, is led to believe that the loan documents are the written instruments governing the transaction when in fact they are a lie — but without putting together the securitization documents, the loan level accounting, the title and securitization analysis and the forensic analysis, the borrower and his/her attorney is in the dark about the truth of the matter. Hence the representation in court by the pretender lender appears true because the borrower does not deny them.

How Deutsche Bank as a Trustee will attempt to harm you in bankruptcy court BY MARY COCHRANE

See Case No 07-077227-PB7 (Bankr.S.D.Cal 6/9/2008)
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for WaMu Series 2007-HE1 Trust, its
assignees and/or successors

The TRUSTEE will argue against you if you claim Deutsche Bank may not foreclose on the property because the Assignment was not recorded.

US Bankruptcy denied relief as to: CC 2932.5 if DBNTC could not provide ownership documents it could not….

An Assignment of the Note amounts to an Assignment of the Deed of Trust.

Deutsche Bank has provided no convincing evidence that the Note was ever assigned to Deutsche Bank. Furthermore, even if the Note was assigned to Deutsche Bank, Deutsche Bank is not the party asserting a security interest in the Property. Rather the motion is brought by Deutsche Bank as TRUSTEE for HE1 Trust. The record is devoid of any further assignment to HE1 Trust.

In summary, the only question before the Court is whether Deutsche Bank and/or HE1 Trust has an interest in the Proeprty. The Court holds that Deutsche Bank has failed to provide evidence that it, let alone HE1 Trust has a security interest in the Property. Accordingly, the motion is denied. Deutsche Bank’s motion for relief from stay is dened without prejudice.

WaMu retains possession of Note and Deed of Trust as Agent for Deutsche Bank.

The Trustee, Deutsche Bank, argues that based upon “…..” may not foreclose on the Property because the Assignment was not recorded. That may be. However, that is an issue the TRUSTEE can raise with the state court if relief from stay is ultimately granted.

Both parties allotted much ink and paper to issue of whether Deutsche Bank has a perfected security interest in the Note. The Court finds this discussion beyond the scope of the motion before it. Deutsche Bank has moved for relief from stay to proceed against the Property. Whether or not it holds a security interest in the Note is irrelevant. Since we are not concerned with a security interest in the Note, all talk of a ‘perfected lien’ on the Note is beside the point.

Regarding Asset Backed Securities, could be Depositor, Underwriter, even one of its Special-Purpose Vehicles SPV’s could be a national banking association or sent in during a foreclosure or bankruptcy as a substitute trustee:.

Deutsche Bank National Trust Co.
Formerly Bankers Trust Co of California NA 8/1/96
3 Park Plaza 16th Floor, Irvine CA 92614
Maiing: 1761 East St. Andrew Pl, 2nd FLoor Santa Ana CA 9270a
IRS 13-3347003
7,443 SEC Filings 5/6/97 – 2/14/11
As ‘Filer’ ‘Owner’ ‘Filing Agent’

Deutsche Bank National Trust Company (Deutsche Bank), as Trustee for

In MERSONLINE.Org registry
DB Structured Products Inc.
60 Wall St. NY NY 10005
212-250-9340 Fax 212-797-516
Primary Contact: MERS Dept c/o Deutsche Bank NA
MEMBER ORG ID: 1002829
Lines of Business: Servicer, Subservicer, Interim Funder, Investor, Document Custodian
eRegistry Participant: NO
eDelivery Participant: NO

Business Entity: New York State
Jurisdiction: Delaware
Active – Initial DOS Filing: 4/30/1970
1/11/2002 changed name to DB Structured Products Inc.

Mary reveals below information on Deutsche Corporate Trust Services and imagine name change in line with DB Structured Products Inc. name change. Was Deutsche Bank Shapres Pixley Inc. 1/7/1994 – 1/10/2002
And was 1/6/1994 thru 4/30/1970 Deutsche Bank Sharps Pixley Inc. former name Sharps Pixley Inc established 4/30/1970.

During foreclosure or bankruptcfy in CA for example, the Deed of Trust may list ‘WaMu’ as the beneficiary and “California Reconveyance Company’ as the Trustee. On the SEC, you’ll find Deutsche Bank Trust Company/National Association to be a ‘Filing Agent’ of Deutsche Bank AG and 1 SEC File as ISSUER SEC File 028-12000 13F-NT/A and 13F-NT. First Filing 8/15/06 – Last Filing 2/15/11.

Don’t be frustrated if you are not understanding these facts. The more you read them and try to understand them you’ll realize you are smarter than the average bear. I could not spell ‘SEC’ when I started October 2008.

Deutsche Bank Trust Co National Association
280 Park Avenue
New York NY 10017

How does Deutsche Bank have a perfected lien against the Property and Chain of Title?

Deutsche Bank will assert to the court it is the ‘current beneficiary of a primissory note and deet of trust by way of Assignment’

What is the ‘Trustee’ I mean ‘are’ the TRUSTEE’s in SEC Reconstituted and/or their Reconstituion Servicing Agreements going to do now? regarding

Assignments in CA for example:

MERS Fatal Flaw in Ca, on May 12, 2011 at 10:19 am said:
In California it’s coming down to one key issue, MERS NOT having an assignment of the Note from the Original Lender to MERS, legally recorded.
“The assignment of the lien without a transfer of the debt was a nullity in law.”
“A lien is not assignable unless by the express language of the statute.”
“The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”
CARPENTER V. LONGAN, 83 U. S. 271 (1872), U.S. Supreme Court
More info at

Well in the USA Deutsche promoted itself 2002 forward Trust & Securities Services

Deutsche Bank`s Trust & Securities Services provides an extensive range of trust, agency, depositary, custody, fund administration and related services on over EUR 7 trillion in debt and equity securities worldwide. Its six globally integrated product groups ensure that every service is provided by expert, specialist staff.
Debt Services offers a range of products for bonds, CP and MTN programs, project financings, escrows, restructurings, syndicated loans, auction rate securities and Islamic financings
Structured Finance Services specializes in asset and mortgage backed securities, collateralized debt obligations and asset backed CP conduits
Corporate Services provides management and administration for a variety of tax-neutral and tax-advantaged structures
Alternative Fund Services provides administration for hedge funds, fund of hedge funds, private equity and other alternative investment vehicles
Equity Services covers ADRs, global shares, German shares and German capital transactions
Direct Securities Services provides safekeeping and clearing services for securities in more than 32 markets worldwide.
For information about Deutsche Bank residential property foreclosure and REO (real estate owned) inquiries please click here
All funds in a “noninterest-bearing transaction account” are insured in full by the Federal Deposit Insurance Corporation from December 31, 2010, through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least USD 250,000 available to depositors under the FDIC’s general deposit insurance rules.

The term “noninterest-bearing transaction account” includes a traditional checking account or demand deposit account on which the insured depository institution pays no interest. It also includes Interest on Lawyers Trust Accounts (“IOLTAs”). It does not include other accounts, such as traditional checking or demand deposit accounts that may earn interest, NOW accounts, and money-market deposit accounts.

For more information go to

2/06/2002 Deutsche Bank wins Trustee Awards in Securitization Markets

2003 – Deutsche Bank Corporate Trust Chicago Office Opens

Deusche Bank expands Municipal Trustee Services

Deutsche Bank Coporate Trust wins EURO CP Award

2004 Deutsche Bank opening new Corporate Trust Office San Francisco

Deutsche Bank also has regional corporate trust offices in Charlotte, NC; New York; Chicago; Olive
Branch, MS; and Santa Ana, CA.

NEW YORK, JANUARY 20, 2004 – Deutsche Bank’s Trust & Securities Services today announced
the opening of a regional corporate trust office in San Francisco, California. The new office is the
latest in the continuing regional expansion of traditional corporate trust services launched by
Deutsche Bank in June 2002 in the US.

Raafat Albert Sarkis heading Unit in CA was a Vice President in US Bank’s corporate trust unit. Head of Global Debt Services within Deutsche Bank’s Trust & Securities Services. “Raafat’s wealth of industry knowledge, his client relationships and his proven track record will help ensure that our clients in the Western states benefit from localized expertise and a commitment to exceptional customer service.

Deutsche Bank ranks among the global leaders in corporate banking and securities, transaction
banking, asset management, and private wealth management, and has a significant private &
business banking franchise in Germany and other selected countries in Continental Europe.

Deutsche Bank’s Trust & Securities Services is one of the leading global providers of trust and
securities administration services.

Through a fully integrated network of specialist offices worldwide, the group provides domestic custody in 23 securities markets as well as trustee, agency, registrar, depositary, SPV management and related services for a wide range of financings. Products serviced include bonds, auction rate securities, medium term note and commercial paper programs, asset backed and mortgage backed securities, CDOs, SIVs, project financings, escrows, syndicated loans, American Depositary Receipts and German equities.
FDIC Chairman Shelia Blair sure looked uncomfortable in her ‘skin’ on 60 Minutes. What do you think?

Regarding Deutsche Bank… The first chart depicts the mortgage transaction as many (most?) of us still understand it:

Here’s Chairman Bair’s second chart, “Borrowing Under a Securitization Structure”, depicting the typical mortgage transaction in 2007 (click to enlarge):

The County Auditor’s database says the owner of this house is Deutsche Bank National Trust Company. It says Deutsche Bank NTC paid $50,000 for the house in a sheriff’s sale in March 2007. The sheriff’s sale was the outcome of Case CV-05-554639, an action for foreclosure against the previous owners, filed in Common Pleas Court in February 2005 by Deutsche Bank NTC “as Trustee”.

But Deutsche Bank never held a mortgage on 4111 Archwood. And Deutsche Bank doesn’t really own 4111 Archwood now.

We’ll get back to Case CV-05-554639 and that magic word “Trustee” in a minute. But first, a short tour of the New Mortgage Industry, courtesy of the Chairman of the Federal Deposit Insurance Corporation, Sheila Bair.

Chairman Bair testified before the U.S. House Committee on Financial Services last April. Her entire testimony is well worth reading, but it’s modestly famous for two charts.

The first chart depicts the mortgage transaction as many (most?) of us still understand it

As Chairman Bair explained to the Committee:

Securitization takes the role of the lender and breaks it into separate components. Unlike the more traditional relationship between a borrower and a lender, securitization involves the sale of the loan by the lender to a new owner–the issuer–who then sells securities to investors. The investors are buying “bonds” that entitle them to a share of the cash paid by the borrowers on their mortgages. Once the lender has sold the mortgage to the issuer, the lender no longer has the power to restructure the loan or make other accommodations for its borrower. That becomes the responsibility of a servicer, who collects the mortgage payments, distributes them to the issuer for payment to investors, and, if the borrower cannot pay, takes action to recover cash for the investors.

And she listed some of the roles in this modern mortgage transaction:

o Issuer – A bankruptcy-remote special purpose entity (SPE) formed to facilitate a securitization and to issue securities to investors.
o Lender – An entity that underwrites and funds loans that are eventually sold to the SPE for inclusion in the securitization. Lenders are compensated by cash for the purchase of the loan and by fees. In some cases, the lender might contract with mortgage brokers. Lenders can be banks or non-banks.
o Mortgage Broker – Acts as a facilitator between a borrower and the lender.The mortgage broker receives fee income upon the loan’s closing.
o Servicer – The entity responsible for collecting loan payments from borrowers and for remitting these payments to the issuer for distribution to the investors. The servicer is typically compensated with fees based on the volume of loans serviced. The servicer is generally obligated to maximize the payments from the borrowers to the issuer, and is responsible for handling delinquent loans and foreclosures.
o Investors – The purchasers of the various securities issued by a securitization. Investors provide funding for the loans and assume varying degrees of credit risk, based on the terms of the securities they purchase…
o Trustee – A third party appointed to represent the investors’ interests in a securitization. The trustee ensures that the securitization operates as set forth in the securitization documents, which may include determinations about the servicer’s compliance with established servicing criteria.
“Bankruptcy-remote”. What a great adjective.

So what does this all have to do with 4111 Archwood? While I explain, you might want to keep that second chart handy.

In August 2003, the couple that had owned 4111 Archwood since 1996 refinanced it for $93,500. Their lender was Argent Mortgage Company, LLC, a division of ACC Holdings of Orange, CA, which also owned Ameriquest Mortgage and AMC Mortgage Services. Argent was the biggest single subprime lender in Cuyahoga County between 2003 and 2005, going from no originations in 2002 to nearly 2,400 in 2003, 4,900 in 2004, and 3,800 in 2005. (Following several years of lawsuits and other problems, ACC recently closed Ameriquest’s doors and sold Argent, AMC and Ameriquest’s servicing contracts to Citigroup. Argent is now doing business as Citi Residential Lending.)

Less than two months after the mortgage on 4111 Archwood was signed, Argent Mortgage Co. LLC transferred it to Argent Securities, Inc., which “deposited” it, along with thousands of other Argent mortgages into something called “Argent Securities, Inc. Asset-Backed Pass-Through Certificates Series 2003-W5″.

Let’s just call it “ASIABPTCS2003W5″ for short.

As you may have guessed, ASIABPTCS2003W5 is one of those “bankruptcy-remote special purpose entities” Chairman Bair mentioned. It was set up by Argent to be the vehicle by which all that mortgage paper, with a face value of $1.5 billion, would be sold to investors. Once that was accomplished, the mortgage on 4111 Archwood became a tiny piece of the paper assets owned by ASIABPTCS2003W5, a corporate entity owned not by Argent but by its investors.

The “Pooling and Service Agreement” that created ASIABPTCS2003W5 named Argent’s sister company, Ameriquest Mortgage, as “Master Servicer” for all those mortgages.

And it named Deutsche Bank National Trust Company as the “Trustee” of ASIABPTCS2003W5 — the party paid to represent the interests of the investors and oversee the Master Servicer’s performance.

This all happened at the beginning of October, 2003.

Sixteen months later, in February 2005, the borrower was in default and Deutsche Bank — as the Trustee for ASIABPTCS2003W5 — filed an action for foreclosure in Common Pleas Court.

But — funny thing — nobody had bothered to tell the County Recorder, who’s legally in charge of keeping track of these things, that Argent Mortgage had sold the mortgage to ASIABPTCS2003W5. Ten months into the foreclosure proceeding, the magistrate somehow figured out that Argent was still the mortgagee of record and that Deutsche Bank lacked standing to foreclose on the property. (As the case summary, entry for 12/21/05, puts it: “PLAINTIFF’S MOTION TO VACATE CASE AND PLACE ON THE ACTIVE LIST IS DENIED. THE PARTY PURPORTEDLY GRANTED RELIEF FROM STAY IS NOT THE PLAINTIFF IN THIS ACTION.”)

The lawyer for Deutsche Bank quickly filed a motion to make Argent the “substitute plaintiff” in the case. The magistrate agreed to this, putting the foreclosure back on track. Then Argent’s lawyer got it together to file the correct document — it’s called a “Release Assignment” — with the Recorder’s Office in February, confirming the sale of the mortgage on 4111 Archwood to, ahem…


Finally, seven months later — after the foreclosure was granted to substitute plaintiff Argent, which had sold off its interest in the mortgage three years earlier — the magistrate granted a second plaintiff substitution, swapping Argent out and “Deutsche Bank National Trust Company as Trustee of ASIABPTCS2003W5″ back in.

So it was “Deutsche Bank National Trust Company as Trustee of ASIABPTCS2003W5″ listed as plaintiff on the sheriff’s sale notice, and as the grantee (buyer) on the sheriff’s deed. And now it’s “Deutsche Bank National Trust Company” listed as the owner on County records — with a tax mailing address at 505 City Parkway Suite # 100, Orange, CA, which just happens to be the last-listed address of Ameriquest Mortgage. (Remember them? Master Servicer for ASIABPTCS2003W5. Now defunct. Mortgage servicing contracts bought by Citigroup.)

But of course Deutsche Bank NTC doesn’t actually own 4111 Archwood, any more than it actually ever owned the mortgage.

ASIABPTCS2003W5 — that “bankruptcy-remote special purpose entity”, a paper creation owned by nobody in particular — owns 4111 Archwood.

Deutsche Bank, as Trustee, just represents ASIABPTCS2003W5 for certain purposes. Ameriquest Mortgage was supposed to take care of ASIABPTCS2003W5′s properties, but Ameriquest is out of business; this job may have passed to Citi Residential.

So who’s actually responsible for 4111 Archwood? Good question.

That’s just one house. Deutsche Bank currently “owns” over 900 houses in Cuyahoga County through foreclosures in which it acted as Trustee for some “special purpose entity”, commonly an entity created by Argent. Argent alone organized at least thirty-one of these billion-dollar mortgage-backed investment pools from 2003 through 2006.

So maybe you can see why Judges Boyko, O’Malley, Rose, et al are making a big deal about checking Deutsche Bank’s paperwork.

This entry was posted on Wednesday, November 21st, 2007 at 2:46 pm and is filed under Deutsche Bank. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.



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Suit Filed Incorporating Agency Sanctions and Consent Decrees from Last Week

“And most importantly, Fagan goes again to the heart of the securitization illusion, the falsity of the presentations made to both investor-lenders and homeowners, and the manner in which the “fair market value” was intentionally misstated to justify the inflation of the “value” of the bogus mortgage bonds sold to investor lenders. The importance of this attack cannot be overstated — because it debunks, once and for all, the myth that greedy unscrupulous borrowers caused this mess. It states unequivocally that the value of the property was intentionally overstated to induce Fagan and millions of other borrowers in more than 80 million “loan” transactions to assume that the value of the property was worth far more than the value of the loan product they were purchasing from the mortgage broker and mortgage originator. Neither the investor-lender nor the homeowner would have even considered the possibility of entering into this transaction without the value of the property being real — as the ultimate protection for the investor-lender and the homeowner. This is why the reduction of principal is no gift. It is merely a correction that is due to BOTH the investor-lender and the borrower.”


Barry S. Fagan v Wells fargo Bank Complaint with Exhibits-1


  1. The first thing that is important to note is the identity of the defendants sued by Fagan: Besides Wells Fargo, he names American Securities Company, T.D. Service Company and Ebert Appraisal Service Inc. He thus sets the stage for attacking the reality of the transaction he was tricked into. Naming the Service Company and the Appraisal Company is different from what most people are doing and he really pursues both them and the service company that initiated the foreclosure proceeding.
  2. The second thing of importance is the filing of the objection to disclaimer of non-monetary status of T.D. Service. This is the first time I have seen someone “get it” and realize that T.D. or any company that initiates foreclosures is probably controlled by one of the Wall Street bankruptcy remote shells, and is NOT a party without an interest in the outcome. That is why we see substitutions of trustee every time there is a foreclosure. Why is that necessary — precisely because, as Fagan points out, that an arm’s length company with no interest in the proceeding would never do what T.D. is doing because of the potential exposure to liability — and because T.D. and others like it are siphoning off the money that could otherwise go to the investor-lenders.
  3. As I  have repeatedly said, the consensus of lawyers is that without objecting to EVERYTHING you are conceding that there might be a shred of legitimacy to what is clearly a completely fraudulent claim, fraudulent foreclosure on a fraudulent mortgage securing a fraudulent note. Fagan accuses TD of proceeding despite their knowledge that Wells Fargo was not the creditor, not the real party in interest, lacked standing, had no money in the deal, was not the lender and never purchased the receivable.
  4. In addition Fagan, obviously knowledgeable about the actual procedures in use, thrusts his litigation dagger into the heart of the matter by alleging that the person signing the papers, besides lacking authority, lacked any knowledge of the transaction, and had no way of knowing the identity of the real creditor except that Wells Fargo is plainly eliminated as a real creditor.
  5. Lastly, Fagan attacks at the Achilles heal of the securitization illusion: that the transaction occurred between the borrower and an undisclosed creditor, that the closing documents reflected none of the realities of the real transaction, and that no attempt was made to conform to the the requirements of the pooling and service agreement regarding the transfer of the receivable, the note (fatally defective anyway) and deed of trust (fatally defective anyway). He specifically names for example that the alleged assignments, even putting all the defects in the instrument itself aside, is executed far past the cut-off date stated in the pooling and service agreement. This creates a double violation of the PSA, to wit: that the assignment needs to be recorded or in recordable form within 90 days of the creation of the pool, and the “asset” must consist of a rel asset meaning one that is performing and not in default.
  6. Any reasonable person can understand that the rules accepted by the investor-lenders were that they would be receiving performing loans complying (as per the PSA) with industry standard underwriting guidelines, and within the time periods prescribed by the PSA. Otherwise the investor-lender has advanced money for nothing, which is why they are now all suing the investment banks and NONE of the investors is making any claims against the homeowners; in fact the investors are alleging the mortgages were bad from the beginning and are unenforceable. SO we have the actual lender agreeing with the actual borrower that the real transaction is not the reference point of the closing documents and therefore the closing documents are merely part of an illusion of underwriting mortgages and securitizing them, neither of which actually occurred. 
  7. The next thing to note is that Fagan filed a verified complaint — requiring in California, a verified response. This  puts the other side at jeopardy for perjury prosecution because if Fagan is right, and I am sure he is, none of these parties can file a verified response which would require the signature of a competent witness. A competent witness is one who takes an oath, has personal knowledge through his/her own senses of the facts or statements alleged, has personal recollection of those facts and is able to communicate that knowledge. 
  8. Fagan also includes a compelling argument and pleading for quiet title that I recommend reading and using for those in like situations.
  9. And most importantly, Fagan goes again to the heart of the securitization illusion, the falsity of the presentations made to both investor-lenders and homeowners, and the manner in which the “fair market value” was intentionally misstated to justify the inflation of the “value” of the bogus mortgage bonds sold to investor lenders. The importance of this attack cannot be overstated — because it debunks, once and for all, the myth that greedy unscrupulous borrowers caused this mess. It states unequivocally that the value of the property was intentionally overstated to induce Fagan and millions of other borrowers in more than 80 million “loan” transactions to assume that the value of the property was worth far more than the value of the loan product they were purchasing from the mortgage broker and mortgage originator. Neither the investor-lender nor the homeowner would have even considered the possibility of entering into this transaction without the value of the property being real — as the ultimate protection for the investor-lender and the homeowner. This is why the reduction of principal is no gift. It is merely a correction that is due to BOTH the investor-lender and the borrower.

Re-Orienting the Parties to Clarify Who is the Real Plaintiff

The procedural motion missed by most lawyers is re-orienting the parties. Just because you are initially the plaintiff doesn’t mean you should stay that way. Once it is determined that the party seeking affirmative relief is seeking to sell your personal residence and that all you are doing is defending, they must become the plaintiff and file a lawsuit against you which you have an opportunity to defend. A Judge who refuses to see that procedural point is in my opinion committing clear reversible error.

If the would-be forecloser could not establish standing and/or could not prove their case in a judicial foreclosure action, there is no doubt in my mind that the ELECTION to use the power of sale is UNAVAILABLE to them. They must show the court that they have a prima face case and the homeowners must present a defense. But that can only be done if the parties are allowed to conduct discovery. Otherwise the proceedings are a sham, and the Judge is committing error by giving the would-be forecloser the benefit of the doubt (which means that the Judge is creating an improper presumption at law).

If the Judge says otherwise, then he/she is putting the burden on the homeowner. But the result is the same. Any contest by the would-be forecloser should be considered under the same rules as a motion to dismiss, which means that all allegations made by the homeowner are taken as true for purposes of the preliminary motions.

Some people have experienced the victory of a default final judgment for quiet title only to have it reversed on some technical grounds. While this certainly isn’t the best case scenario, don’t let the fight go out of you and don’t let your lawyer talk you into accepting defeat. Reversal of the default doesn’t mean anyone won or lost. It just means that instead of getting the ultimate victory by default, you are going to fight for it. The cards are even more stacked in your favor with the court decisions reported over the last 6 months and especially over the last two weeks. See recent blog entries and articles.

All that has happened is that instead of a default you will fight the fight. People don’t think you can get the house for free. Their thinking is based upon the fact that there IS an obligation that WAS created.

The question now is whether the Judge will act properly and require THEM to have the burden of proof to plead and prove a case in foreclosure. THEY are the party seeking affirmative relief so they should have the burden of pleading and proving a case. Your case is a simple denial of default, denial of their right to foreclose and a counterclaim with several counts for damages and of course a count for Quiet Title. As a guideline I offer the following which your lawyer can use as he/she sees fit.

The fact that you brought the claim doesn’t mean you have to plead and prove their case. Your case is simple: they did a fraudulent and wrongful foreclosure because you told them you denied the claim and their right to pursue it. That means they should have proceeded judicially which of course they don’t want to do because they can’t make allegations they know are not true (the note is NOT payable to them, the recorded documentation prior to sale doesn’t show them as the creditor etc.).

I don’t remember if MERS was involved in your deal but if it was the law is getting pretty well settled that MERS possesses nothing, is just a straw man for an undisclosed creditor (table funded predatory loan under TILA) and therefore can neither assign nor make any claim against the obligation, note or mortgage.

Things are getting much better. Follow the blog — in the last two weeks alone there have been decisions, some from appellate courts, that run in your favor. There is even one from California. So if they want to plead a case now in foreclosure they must first show that they actually contacted you and tried to work it out. Your answer is the same as before. I assume you sent a qualified written request. Under the NC appellate decision it is pretty obvious that you do have a right of action for enforcement of RESPA. They can’t just say ANYONE contacted you they must show the creditor contacted you directly or through an authorized representative which means they must produce ALL the documentation showing the transfers of the note, the PSA the assignment and assumption agreement etc.

They can’t produce an assignment dated after the cutoff date in the PSA. They can’t produce an assignment for a non-performing loan. Both are barred by the PSA. So there may have been an OFFER of assignment  but there was no authority to accept it and no reasonable person would do so knowing the loan was already in default. And they must show that the loan either was or was not replaced by cash or a substitute loan in the pool, with your loan reverting back to the original assignor. Your loan probably is vested in the original assignor who was the loan aggregator. If it’s in the pool it is owned by the investors, collectively. There is no trust nor any assets in the trust since the ownership of the loans were actually conveyed when the investors bought the mortgage backed securities. They don’t want you going near the investors because when you compare notes, the investors are going to realize that the investment banker did not invest all the money that the investor gave the investment banker — they kept about a third of it for themselves which is ANOTHER undisclosed yield spread premium entitling you to damages, interest and probably treble damages.

The point of all this is that it is an undeniable duty for you to receive disclosure of the identity of the creditor, proof thereof, and a full accounting for all receipts and disbursements by the creditor and not just by the servicer who does not track third party payments through insurance, credit default swaps and other credit enhancements. It’s in federal and state statutes, federal regulations, state regulations and common law.

The question is not just what YOU paid but what ANYONE paid on your account. And even if those payments were fraudulently received and kept by the investment banker and even if the loan never made it through proper assignment, indorsement, and delivery, those payments still should have been allocated to your account, according to your note first to any past due payments (i.e., no default automatically, then to fees and then to the borrower). That is a simple breach of contract action under the terms of the note.

Again they don’t want to let you near those issues in discovery or otherwise because the fraud of the intermediaries would be instantly exposed. So while you have no automatic right to getting your house free and clear, that is often the result because they would rather lose the case than let you have the information required to prove or disprove their case in foreclosure. The bottom line is that you don’t want to let them or have the judge let them (Take an immediate interlocutory appeal if necessary) use the power of sale which is already frowned upon by the courts and use it as an end run around the requirements of due process, to wit: if you think you have a claim you must plead and prove it and give the opposition an opportunity to defend.

The procedural motion missed by most lawyers is re-orienting the parties. Just because you are initially the plaintiff doesn’t mean you should stay that way. Once it is determined that the party seeking affirmative relief is seeking to sell your personal residence and that all you are doing is defending, they must become the plaintiff and file a lawsuit against you which you have an opportunity to defend. A Judge who refuses to see that procedural point is in my opinion committing clear reversible error.

The worst case scenario if everything is done PROPERLY is that you get the full accounting, you are not in default (unless there really were no third party payments which is extremely unlikely) and they must negotiate new terms based upon all the money that is owed back to you, which might just exceed the current principal due on the loan — especially once you get rid of the fabricated fees and costs they attach to the account (see Countrywide settlement with FTC on the blog).

Padget v OneWest – IndyMac Provides some insight into RESPA remedies

The Ocwen Court provided an example for clarity: “Suppose an S & L signs a mortgage agreement with a homeowner that specifies annual interest rate of 6 percent and a year later bills the homeowner at a rate of 10 percent and when the homeowner refuses to pay institutes foreclosure proceedings. It would be surprising for a federal regulation to forbid the homeowner’s state to give the homeowner a defense based on the mortgagee’s breach of contract.” Ocwen, 491 F.3d at 643-44.

Padget-One west bank dba Indymac

Editor’s Note: The assumption was made that One West owned the loan when it was clearly securitized. One West used the fact that Plaintiff admitted that One West was the owner of the loan and therefore undermined Plaintiff’s case against One West as a debt collector which requires the actor to be collecting for the benefit of a third party.

This is where the rubber meets the road. either you are going to master the nuance introduced by securitization or you are going to let the other side have a field day with misrepresentations that you have admitted are true.

PADGETT, Plaintiff,

Civil Action No. 3:10-CV-08
United States District Court, Northern District of West Virginia, Martinsburg

parties filed an Agreed Order in the bankruptcy court resolving IndyMac’s motion to lift the automatic stay. (Id. at ¶ 14). Pursuant to this Agreed Order, the plaintiff’s mortgage was deemed current as of May 1, 2008, and the one payment for which the plaintiff was in arrears was added onto the end of the mortgage. (Id. at ¶¶ 15-
16). The first payment due under the Agreed Order was due in May 2008. (Id. at ¶ 17). The plaintiff made the May 2008 payment in a timely fashion and has made his monthly mortgage payment each month after May 2008, up to and including the date of the filing of the plaintiff’s First Amended Complaint. (Id. at ¶¶ 18-19).

In March 2009, Defendant OneWest Bank, F.S.B. (“OneWest”) purchased IndyMac, whereupon IndyMac Mortgage Services (“IndyMac MS”) became a division of OneWest. (Id. at ¶¶ 20-21). On July 16, 2009, OneWest, doing business as IndyMac MS, sent the plaintiff a letter claiming he was one month behind on his payments. (Id. at ¶ 22). In response, on July 28, 2009, the plaintiff wrote to OneWest, enclosing a copy of the Agreed Order from his bankruptcy proceeding and requesting that OneWest supply him with documentation that he nevertheless remained one month behind. (Id. at
¶¶ 24-26). Again, on August 3, 2009, and September 16, 2009, IndyMac MS sent letters to the plaintiff alleging he was behind on his mortgage payments. (Id. at ¶¶ 28-29).

OneWest continues to assess monthly late fees against his account and has informed credit reporting agencies that the plaintiff’s mortgage is delinquent, though plaintiff alleges he is current on his monthly mortgage payments.

OneWest argued that all of the plaintiff’s claims for relief were preempted by the Home Owners’ Loan Act of 1933, 12 U.S.C. § 1461, et seq. (“HOLA”). (Id. at 4).

Motion to Dismiss denied in part and granted in part. Motion to Strike denied. Plaintiff was allowed to proceed.



(2006) Here is a case that should not have been filed (entire text of opinion below) and was argued improperly. The homeowners clearly lost because they put their eggs in the wrong basket. Nonetheless, the opinion is a pretty good compilation of the various statutes, rules and regulations affecting mortgages and their enforcement.

An interest quote used against the “homeowner” which itself was a trust, is that the word “interest” should be interpreted to mean “Ownership interest”. This is precisely the argument I advance regarding the holders of of certificates or even non-certificated mortgage-backed securities whose indenture is the prospectus. Those investors received at the very least a “beneficial” interest in the loans. Thus either the prospectus, the certificate or both are starting points, in addition to the note signed by the borrower, as evidence of the terms and status of the obligation.

CAROL R. ROSEN, Plaintiff,

CIV-06-0427 JH/LAM.

  2. Beware of companies that claim to have a magic bullet to end your mortgage problems. Securitization is complex, and you need to focus on breaking it down to its simplest elements.
  3. Don’t try to win your case on a knock-out punch in the first hearings. Plan your strategy around education of the judge as to what happened in YOUR loan, using published reports, expert declarations and forensic analysis as corroborative.
  4. Don’t even think the Judge will indict the entire financial industry for what happened in your case. This will diminish your credibility.
  5. Plead causes of action that are familiar to the Judge and make sure you know and plead all the elements of those causes of action.
  6. Focus in pleadings and hearings as much as possible on the premises with which nobody could disagree — like every case should be heard on the merits, that you have a right to the same presumptions as anyone else who is pleading a claim or defense, and that you need to conduct discovery because there are facts and documents known to the defendants for which it would be over-burdensome and hugely expensive for you to get any other way.
  7. Don’t expect the Judge to be sympathetic. In most cases Judges still look at securitized mortgages like any other mortgage. In most cases Judges see challanges to foreclosures as desperate attempts to stave of the inevitable. Lead and repeat your main message. Your main message is that it is indisputable that if the facts you are pleading are true, then you are entitled to the precise relief you have demanded. KEEP IT SIMPLE. Use each hearing to repeat the previous “lesson” and add new lessons for the Judge.
  8. Do not avoid arguments of opposing counsel. Challenge them in a direct manner showing the Judge that if the attorney was correct in what he is saying, then he would be right and his client would win (if that is the case) or showing that the if the attorney was correct he still would not win his case. THINK BEFORE YOU SPEAK. PLAN BEFORE YOU APPEAR.
  9. DO NOT FALL INTO THE TRAP OF ALLOWING OPPOSING COUNSEL TO PROFFER FACTS AS THOUGH THEY WERE TRUE. Challenge that tactic by admitting that counsel has a right to put on evidence in support of what he/she is arguing but that the hearing is not the trial and you have evidence too, and you’ll have more evidence if you are allowed to proceeds on the merits of your claim. By all means, once opposing counsel has “testified” include in your remarks prepared script as to YOUR facts and YOUR conclusions. END WITH THE INESCAPABLE CONCLUSION THAT THERE IS OBVIOUSLY AN ISSUE OF FACT AND WHETHER THE JUDGE THINKS YOU WILL WIN OR NOT IS IMMATERIAL. YOU HAVE A RIGHT TO BE HEARD ON THE MERITS AND A RIGHT TO CONDUCT DISCOVERY. If opposing counsel is so sure that what you are alleging is frivolous, then there are many remedies available including summary judgment. But it is not until the FACTS come out that any of those remedies arise.
  10. Do not characterize your opposition as part of an evil axis of power. They may well have contributed to the Judge’s campaign, or otherwise have indirect relationships that do not merit recusal. This is not about whether banks are evil, it is about why are all these entities necessary to simply foreclose on a mortgage? If it is as simple as THEY say, why don’t they have the paperwork to back it up?
  11. DO NOT SAY ANYTHING YOU CAN’T BACK UP. This does NOT mean you have all the proof you need to win your case when you file your first pleading. It means that you know that if you are allowed to proceed, and you actually get the disclosure and discovery of the true facts, you will win.

United States District Court, D. New Mexico.

November 8, 2006.

Carol Rosen, Albuquerque, NM, Attorney for Plaintiff.

Rhodes & Salmon, P.C., William C. Salmon, Albuquerque, NM, Attorney for Defendant U.S. Bank.

Karla Poe, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, Kimberly Smith Rivera, McGlinchey Staford, PLLC, Cleveland, OH, Attorney for Defendant EquiFirst.


JUDITH HERRERA, District Judge.

THIS MATTER is before the Court on Defendant U.S. Bank National Association’s (“U.S. Bank”) Motion to Dismiss or Stay [Doc. 23, filed Aug. 7, 2006], and Defendant EquiFirst Corporation, Inc.’s (“EquiFirst”) Motion for Judgment on the Pleadings [Doc. 28, filed Sept. 15, 2006]. The Court has reviewed the motions, the record in this case, and the relevant law, and concludes that the motions are well-taken and should be GRANTED.


Before turning to the facts presented in the pleadings in this case, the Court takes judicial notice of cases involving D. Scott Heineman and Kurt F. Johnson, who are the Trustees of the Rosen Family Trust, of which Plaintiff Carol R. Rosen is a beneficiary. See Doc. 17, Ex. B ¶ 4.A. Heineman and Johnson

were the proprietors of a business that claimed to help homeowners eliminate their mortgages. [Heineman and Johnson’s] business operated under the “vapor money” theory of lending, which holds that loans funded through wire transfers rather than through cash are unenforceable. [They] claimed that, through a complicated series of transactions, they could take advantage of this loophole and legally eliminate their clients’ mortgages.

In 2004, Johnson and Heineman filed a series of lawsuits against mortgage companies on behalf of their clients, seeking, among other things, a declaration that any mortgages on their clients’ properties were void. All fifteen cases were . . . found. . . to be “frivolous and . . . filed in bad faith.”

. . . .

On September 22, 2005, a federal grand jury indicted [Heineman and Johnson] on charges of mail fraud, wire fraud, and bank fraud.

United States v. Heineman, 2006 WL 2374580, *1 (N. D. Cal. Aug. 15, 2006). The step-by-step method Heineman and Johnson advertised over the internet and used to attempt to eliminate mortgages is as follows. They would have

the homeowner prepare and sign a promissory note as well as a loan agreement for the encumbered property. The homeowner then sends these documents to [Heineman and Johnson] with a cashier’s check “of $3,000 [to eliminate a] 1st mortgage, and $1,500 [to eliminate] a second mortgage or home equity line of credit.” Once this initial fee is received, Heineman and Johnson set up a Family Estate Amenable Complex trust in the homeowner’s name, i.e., the Frances Kenny Family Trust. Heineman and Johnson name themselves the trustees. Title to the homeowner’s property is transferred to the trust.

Now in charge as trustees, Heineman and Johnson approach the bank or lending institution that lent the homeowner the money to purchase the property. They make a “Presentment” to the bank in the form of “a cash-backed bond in double-amount of the promissory note.” The “bond” is allegedly “a valid, rated instrument backed by a $120 Million Letter of Credit against the Assets of an 85-year old, $800 Million Swiss Trust Company.” This is essentially an offer to the lender to satisfy the borrower’s indebtedness. The alleged “bond,” however, is a ploy.

. . . .

In addition to the “bond,” Heineman and Johnson hire “Trustee lawyers” to “begin the legal process by sending out a legal complaint in the form of a CPA Report that outlines 40 or more different federal laws that have been violated in the ‘lending process.'” The lending institution thereafter has a certain time frame within which to respond to the complaint. Purportedly, the homeowner will be notified by plaintiffs’ legal team when the loan is “satisfied.” The homeowner’s “lender may or may not let [you] know or acknowledge this.”

Once the loan is satisfied, “re-financing begins.” The homeowner is told to “refinance [his] property at the maximum loan to value ratio possible” with a new lender. The alleged “purpose of this new re-financing is for you, the client, to compensate the Provider and CCR.” Heineman and Johnson are the “Provider.” They run CCR. The proceeds from this new loan are disbursed as follows: “The Provider receives 50%. CCR receives 25%. You, the client, receives the other 25%.” This entire process takes “5-7 months in most cases.” And, “[t]he end result is that the [homeowner] gets free and clear title to the home and a good amount of cash in hand.”

[Heineman and Johnson], however, perpetrate a fraud to “satisfy” the original indebtedness. One of the documents Heineman and Johnson present to the bank or lending institution is entitled a “power of attorney.” This document demands that the lender sign and thereby acknowledge that it has given the homeowner “vapor money” in exchange for an interest (via a deed of trust) in the subject property at the time of financing. A provision of this “power of attorney” provides that the lender’s “silence is deemed consent.” When the lender fails to respond, [Heineman and Johnson] execute the power of attorney. They then sign a deed of reconveyance reconveying the lender’s security interest in the property to Heineman and Johnson. The forged power of attorney and the deed of reconveyance are duly recorded at the county recorder’s office. The county’s records thus show a power of attorney from the lender granting Heineman and Johnson the right to sign the deed of reconveyance and the reconveyance from the original lender. The title seems clear and unencumbered. The lender is unaware of the maneuver.

[Heineman and Johnson] then turn around and from an unsuspecting new lender seek a loan to refinance the property. When the new lender conducts a preliminary title search, it discovers the power of attorney and deed of reconveyance, both of which appear to have been validly executed. From the new lender’s point of view, the property appears to be unencumbered. And it is thus willing to refinance the property.

. . . .

At the conclusion of this process, the borrower is in even worse condition than when he or she first looked to [Heineman and Johnson] for debt relief. Two lenders believe that they have valid security interests in the subject property. When the homeowner defaults on both loans, both lenders commence foreclosure proceedings. In response, Heineman and Johnson, as trustees, file a bankruptcy petition on behalf of the borrower or file suit alleging that no enforceable debt accrued from either lender because the loans were funded through wire transfers rather than cash. Fifteen such lawsuits were filed in [the Northern District of California] on such a “vapor money” theory.

Frances Kenny Family Trust v. World Sav. Bank FSB, 2005 WL 106792 at *1-*3 (N. D. Cal., Jan. 19, 2005).

The following facts are taken from Rosen’s Amended Complaint and from the exhibits attached to her complaint and to U.S. Bank’s Answer. They demonstrate a pattern strikingly and disturbingly similar to the one described above. In December 2004, Rosen quitclaimed her property located on Wellesley Drive in Albuquerque, NM to Heineman and Johnson, as Trustees of the Rosen Family Trust. See Doc. 17, Ex. B ¶ 4.A. Colonial Savings held a mortgage secured by the Wellesley property. On March 3, 2005, Heineman, acting as “Attorney-in-Fact” for Colonial Savings, executed and recorded a notarized “Discharge of Mortgage” purporting to release Rosen from her mortgage of $86,250. Id. Ex. A. The Discharge stated that the mortgage had been “fully paid, satisfied, and discharged” and that Heineman’s power of attorney to act on behalf of Colonial Savings was granted “through the doctrine of agency by estoppel.” Id. The Vice President of Colonial Savings, however, recorded an “Affidavit of Fraudulent Recording of Discharge of Mortgage,” disputing that Heineman had any authority to act on Colonial’s behalf or discharge the mortgage and attesting that the note and mortgage had not been paid. Id.

On April 27, 2005, Rosen submitted a loan application to Defendant American Mortgage Specialists, Inc. (“American Mortgage”), a mortgage broker located in Arizona, for the purpose of refinancing the Wellesley property. See Am. Compl. at ¶¶ 8, 10-11 & Ex. A (Doc. 13). Rosen subsequently executed a note for $198,305 in favor of EquiFirst, secured by a Deed of Trust on the Wellesley property. See id. Ex. A, B. The mortgage provides that, if the note was sold or the Loan Servicer was changed, EquiFirst would give Rosen written notice, together with “any other information RESPA requires.” Id. Ex. B at 13.

Rosen signed the note and mortgage on May 17, 2005. See id. at 16. The loan was closed that same day, and proceeds were disbursed on May 23, 2005, including over $29,000 to third-party creditors. See Am. Compl. Ex. G. Colonial Savings is not included in the list of payoff recipients. See id.

Lines 801, 812, and 814 of the closing statement, under the heading “ITEMS PAYABLE IN CONNECTION WITH LOAN,” show that a 1% “loan origination fee” of $1983.05 as well as “OTHER BRK FEES” of $1762 were paid to American Mortgage from Rosen’s loan proceeds, and that a $940 “LENDER ORIGINATION” fee was paid to EquiFirst from Rosen’s loan proceeds. Id. at 2. In addition, line 813 of the closing statement states: “BROKER FEE PAID BY LENDER YSP $3,966.10 POC.[1]Id. This represented a yield spread premium that EquiFirst additionally paid to American Mortgage upon the loan closing.

On June 21, 2005, EquiFirst and Homecomings Financial notified Rosen that the servicing of her mortgage loan (i.e., the right to collect payment from her) had been transferred to Homecomings Financial and that the effective date of transfer would be June 29, 2005. See Am. Compl., Ex. C. The transfer of servicing did not affect the terms or conditions of the mortgage. See id. Further, during the 60 days following the effective date of transfer, timely loan payments made to EquiFirst could not be treated as late by Homecomings Financial. See id.

On July 11, 2005, Rosen executed a Grant Deed granting “to D. Scott Heineman and Kurt F. Johnson, Trustees of Rosen Family Trust, for a valuable consideration . . .” her Wellesley Drive property that secured her EquiFirst mortgage. Am. Compl. at ¶ 26, Ex. D. The complaint does not state whether Rosen gave Homecomings Financial or EquiFirst notice of her transfer of ownership of the property to the Trust. According to her “Affidavit of Sum Certain,” Rosen made only three mortgage payments between the time she closed the EquiFirst loan in May 2005 and August 7, 2006, when she filed the affidavit. See Doc. 22.

On January 23, 2006, EquiFirst granted, assigned, and transferred its beneficial interest in Rosen’s mortgage to Defendant U.S. Bank as Trustee. See Am. Compl., Ex. E. U.S. Bank initiated foreclosure proceedings on Rosen’s mortgage and the Wellesley Drive property on February 1, 2006, in state district court. See Am. Compl. ¶ 28. On May 11, 2006, Rosen mailed a “notice of rescission” to EquiFirst, U.S. Bank, and Homecomings Financial. See id. ¶ 42, Ex. I. She alleged a right to rescind her mortgage transaction based on her claim that, when she closed the loan in May 2005, “EquiFirst failed to meet the requirements to give me accurate material disclosures and the proper notice of the right to rescind.” Am. Compl., Ex. I ¶ 7. She also claimed that “[a] broker’s fee, in the form of a yield spread premium, was fraudulently assessed to the loan transaction, . . . [which] renders the HUD 1/Settlement Statement defective, inter alia, because it does not state to whom the fee was paid . . . [and because] the charge was encoded, to the extent that no consumer or most any other person could decipher [it] . . . .” Id. ¶ 10B. Rosen claimed that these failures extended her statutory right to rescind from the regular three-day period to a three-year period. See id. ¶ 10D. Homecomings Financial, through counsel, responded to Rosen’s May 11 letter on June 6, 2006. It sent Rosen a copy of the Notice of Right to Cancel she signed on May 17, 2005, in which she acknowledged receipt of two copies of the Notice. See Am. Compl., Ex. H. It asserted that the abbreviations of “YSP” and “POC” “are standard terms within the mortgage banking industry” and that, if she’d had any concerns about those terms, she should have addressed them at closing. Id. Finding no basis for rescission, it refused to rescind the loan transaction.

Rosen filed her initial complaint in federal court on May 19, 2006, seeking declaratory and injunctive relief and monetary damages. See Doc. 1. She filed an amended complaint on July 17, 2006, that contains six claims. Count One is for rescission under 15 U.S.C. § 1635 and § 226.23 of Regulation Z of the Truth in Lending Act (“TILA”). See Am. Compl. ¶¶ 33, 48. She claims that recission “extinguishes any liability Plaintiff may have had to Defendants for finance or other charges arising from the [loan] Transaction,” id. ¶ 49, and that “Defendants [sic] failure to take action to reflect the termination of the security interest in the property within twenty . . . days of [her] rescission. . . releases [her] from any liability whatsoever to Defendants.” Id. ¶ 50.

Count Two alleges damages under 15 U.S.C. § 1640 for Defendants’ failure to comply with § 1635 after Defendants received Rosen’s rescission letter. Id. ¶¶ 51-52. Count Three is for recoupment of a statutory penalty provided under § 1640. In support, Rosen lists twenty-eight alleged violations of various federal and state statutes and regulations. See id. ¶¶ 54(a)-(bb).

Count Four alleges violation of a right to Equal Credit Opportunity as described in 12 C.F.R. § 202.14. In support, Rosen alleges that the Defendants failed to make clear and conspicuous disclosures, and that various documents were confusing. See id. ¶ 55.

Count Five alleges violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601-17. Rosen claims that Defendants failed to give her fifteen days notice before the loan servicing contract was assigned from EquiFirst to Homecomings Financials in violation of § 2605(b), see Am. Compl. ¶¶ 57-59, and that EquiFirst’s payment of the yield-spread premium to American Mortgage constituted an illegal fee or “kickback” violating 12 U.S.C. § 2607(a)[2], see id. ¶ 60. Additionally, she alleges that EquiFirst and American Mortgage engaged in “fee splitting” in violation of § 2607(d)[3]. Id. ¶ 61.

Court Six alleges violation of the New Mexico Unfair Practices Act, N.M.S.A. §§ 57-12-1 et seq., based on the same allegations that EquiFirst and American Mortgage engaged in illegal kickback and fee-splitting activities that caused her to pay a higher interest rate. See Am. Compl. ¶¶ 63-68, 76.

Rosen seeks: (i) a judicial declaration that she validly rescinded the loan and is not liable for any finance or other charges and has no liability whatsoever to Defendants; (ii) an order requiring Defendants to terminate their security interest in her home; (iii) an injunction enjoining Defendants from maintaining foreclosure proceedings or otherwise taking steps to deprive her of ownership of the property; (iv) an award of statutory damages and penalties; and (v) attorney fees. See id. at 26-27.


U.S. Bank’s motion to dismiss is brought pursuant to Fed R. Civ. P. 12(b)(6). It asserts that Rosen has failed to state claims under particular statutes and that other claims are time-barred. It urges the Court to abstain from asserting jurisdiction over any remaining claims that should be resolved in the pending state foreclosure action. EquiFirst moves for dismissal under Fed. R. Civ. P. 12(c) (“Judgment on the Pleadings”), asserting that it is entitled to judgment as a matter of law on Counts One through Four and Count Six, and on part of Count Five of Rosen’s amended complaint. In resolving motions brought under either Rule 12(b)(6) or 12(c), the Court must

accept all facts pleaded by the non-moving party as true and grant all reasonable inferences from the pleadings in favor of the same. Judgment on the pleadings should not be granted “unless the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law.” United States v. Any & All Radio Station Transmission Equip., 207 F.3d 458, 462 (8th Cir. 2000). As with . . . motions to dismiss under Rule 12(b)(6), documents attached to the pleadings are exhibits and are to be considered in [reviewing] . . . [a] 12(c) motion. See Hall v. Bellmon, 935 F.2d 1106, 1112 (10th Cir. 1991); Fed. R. Civ. P. 10(c).

Park Univ. Enter., Inc. v. Am. Cas. Co. of Reading, PA, 442 F.3d 1239, 1244 (10th Cir. 2006).

It is true that dismissal under Rule 12(b)(6) is a harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect the interests of justice. It is also well established that dismissal of a complaint is proper only if it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim.

Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006) (internal quotation marks and citations omitted). “The court’s function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff’s complaint alone is legally sufficient to state a claim for which relief may be granted.” Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991).

In reviewing a pro se complaint, a court applies the same legal standards applicable to pleadings counsel has drafted, but is mindful that the complaint must be liberally construed. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991). But “[t]he broad reading of the plaintiff’s complaint does not relieve the plaintiff of alleging sufficient facts on which a recognized legal claim could be based.” Id.

[T]he [pro se] plaintiff whose factual allegations are close to stating a claim but are missing some important element that may not have occurred to him, should be allowed to amend his complaint. Nevertheless, conclusory allegations without supporting factual averments are insufficient to state a claim on which relief can be based. This is so because a pro se plaintiff requires no special legal training to recount the facts surrounding his alleged injury, and he must provide such facts if the court is to determine whether he makes out a claim on which relief can be granted. Moreover, in analyzing the sufficiency of the plaintiff’s complaint, the court need accept as true only the plaintiff’s well-pleaded factual contentions, not his conclusory allegations.

Id. (citations omitted). The legal sufficiency of a complaint is a question of law. See Moore, 438 F.3d at 1039.



In transactions covered by the TILA, the borrower is entitled to rescind the transaction. See § 1635(a). The right to rescind lasts for three days, if the lender has given the borrower the disclosures required by the TILA and a notice of the right to rescind; the right lasts up to three years if the lender fails to give the requisite disclosures and notice, unless the borrower sells or transfers the property to someone else before the end of the three-year period[4]. See § 1635(f). EquiFirst asserts that Rosen’s right to rescind expired by operation of law upon her transfer of her ownership interest in the Wellesley Drive property to Heineman and Johnson as Trustees of the Rosen Family Trust. Rosen contends, however, that because she did not actually sell the Wellesley Drive property and maintains a beneficial interest in remaining in the house (apparently by the terms of the Trust, which is not part of the record), her right to rescind has not expired.

Congress gave the Board of Governors of the Federal Reserve System broad authority to promulgate extensive regulations implementing the TILA, see 15 U.S.C. § 1604(a), which it calls Regulation Z, see 12 C.F.R. § 226.1(a). In interpreting and implementing § 1635(f), Regulation Z specifically provides that the borrower’s right to rescind immediately expires not only “upon sale of the property,” but also “upon transfer of all of the [borrower’s] interest in the property.” 12 C.F.R. § 226.23(a)(3). The parties do not point to anything within the TILA, Regulation Z, or case law that further defines the extent of the borrower’s interest that must be transferred in order to trigger expiration of the right to rescind, and the Court has found none in its own research.

But the Court concludes that the words “all of the [borrower’s] interest” means all of the borrower’s ownership or title interest for several reasons. First, the Board clarified through § 226.23(a)(3) that something less than an outright sale of the property triggers expiration of the right to rescind. Second, because TILA provides for penalties when a lender fails to comply with rescission requirements and gives the lender only twenty days to return earnest money, down payments, and accrued interest and payments and to remove the security interest after receiving notice of the recission letter, see 15 U.S.C. § 1635(b), the lender must be able to quickly ascertain whether the borrower still legally owns the property securing the loan and has a statutory right to rescind. The only way to timely accomplish this goal is to examine the real property records in the county where the real property title is recorded. If, as here, those records demonstrate that the borrower has transferred her ownership and legal interests in the property, for valuable consideration, to another entity controlled by someone other than the borrower, the lender can reasonably contest the borrower’s right to rescission without fear of penalty. Trust documents that may contractually grant various types of beneficial interests after the sale or transfer of all of a borrower’s ownership interest in property are not generally filed in the public records, and a lender should not be required to assume that a beneficial interest of some sort may secretly exist that would hypothetically extend the borrower’s right to rescission. It is therefore consistent with the TILA’s goals to interpret “interest” as “ownership interest. See Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1140 (11th Cir. 1992) (noting that “another goal of § 1635(b) [‘s recission requirement] is to return the parties most nearly to the position they held prior to entering the transaction”).

“Although the right to rescind is statutorily granted [in the TILA], it remains an equitable doctrine subject to equitable considerations.. . . Thus, district courts are to consider traditional equitable notions in applying [the TILA’s] statutory grant of rescission.” Brown v. Nat’l Permanent Fed. Sav. & Loan Ass’n , 683 F.2d 444, 447 (D.C. Cir. 1982); see In re Ramirez, 329 B.R. 727, 738 (D. Kan. 2005) (stating that, “[r]escission, whether statutory or common law, is an equitable remedy. Its relief, in design and effect, is to restore the parties to their pre-transaction positions. The TILA authorizes the courts to apply equitable principles to the rescission process. . . . [W]ithin the context of the TILA, rescission is a remedy that restores the status quo ante.”). Because Rosen has transferred her ownership of the property to a third party, the parties cannot be returned to their pre-transaction positions, which would unfairly prejudice EquiFirst if she maintained the right to recission. Cf., e.g., Powers v. Sims & Levin, 542 F.2d 1216, 1221-22 (4th Cir. 1976) (holding that a court could condition the borrowers’ continuing right of rescission upon tender to the lender of all of the funds spent by the lender in discharging the earlier indebtedness of the borrowers as well as the value of the home improvements). Without legal ownership of the Wellesley property to use as security for another mortgage, Rosen most likely could not return the $198,305 EquiFirst gave to her and her creditors. Equity therefore requires that the Court interpret § 226.23(a)(3) to provide for expiration of the right to rescission upon the transfer of a borrower’s ownership interest in the property securing a loan. See Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411-12, 417-19 (1998) (noting that “a statutory right of rescission could cloud a bank’s title on foreclosure, [so] Congress may well have chosen to circumscribe that risk” by “governing the life” of the right to rescission with absolute expiration provisions under § 1635(f), “while permitting recoupment damages regardless of the date a collection action may be brought,” and holding that a borrower may not assert the right to rescind as an affirmative defense in a collection action after the right has expired by operation of law).

Finally, TILA is a strict liability statute. See Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65, 67 (4th Cir. 1983) (“To insure that the consumer is protected, as Congress envisioned, requires that the provisions of [the TILA and Regulation Z] be absolutely complied with and strictly enforced.”); Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246, 248 (3d Cir.1980) (noting that the TILA and its regulations mandate a standard of disclosure of certain information in financing agreements and enforce that mandate by “a system of strict liability in favor of consumers who have secured financing when this standard is not met”). There should, therefore, be a bright line delineating the borrower’s and lender’s rights and responsibilities. Interpreting § 226.23(a)(3) to mean that transfer of all of the borrower’s ownership interest in the property securing a loan triggers expiration of the right to rescission preserves an easily-ascertainable bright line.

The Court concludes that, when Rosen transferred her ownership interest in the Wellesley Drive property to a Trust with Trustees other than herself on July 11, 2005, her right to rescission expired that same date by operation of law. Her May 11, 2006, recission letter was untimely and ineffective. She therefore cannot state a cause of action for rescission, and Count One must be dismissed. Accordingly, her claims stated in Count Two for monetary damages and penalties arising from Defendants’ refusal to rescind the refinancing contract must also be dismissed.


“Section 1640 is a general ‘civil liability’ section in the TILA. In subsection (a) it provides for either actual and/or statutory damages for various TILA violations” set forth in parts B, D, and E of the subchapter. Baker v. Sunny Chevrolet, Inc., 349 F.3d 862, 870 (6th Cir. 2003); § 1640(a) (providing liability for creditors who fail to comply with “any requirements imposed under this part, including any requirement under section 1635 of this title, or part D or E of this subchapter”). Count Three, for recoupment of a statutory penalty provided under § 1640 alleges violations of not only TILA, but also of various other non-TILA regulations and the New Mexico UCC. Insofar as Rosen attempts to recover damages for violation of statutes not listed in § 1640(a), she has failed to state a claim.

Further, her claims for failing to disclose information or otherwise violating subchapter B at the time of closing must be dismissed as time barred. As both U.S. Bank and EquiFirst point out, claims for damages under § 1640 of TILA have a one-year limitations period. See § 1640(e) (“Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation . . . .”). A review of Rosen’s complaint reveals that all alleged violations of subchapter B occurred at or before closing on May 17, 2005, but she did not file her complaint until more than one year later. Count Three must be dismissed.


The Equal Credit Opportunity Act, codified at 15 U.S.C. § 1691-1691(f), makes it unlawful for a creditor to discriminate “on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); [] because all or part of the applicant’s income derives from any public assistance program; or [] because the applicant has in good faith exercised any right under [TILA].” § 1691(a). Rosen’s amended complaint alleges no facts to support a claim for violation of the Act, and she made no argument in her response brief to support amendment. Count Four must be dismissed.


Rosen attempts to assert two types of claims under RESPA in Count Five of the Amended Complaint. The first is for violation, on June 21, 2005, of a provision that requires creditors to give a borrower fifteen days notice before transferring an account to a different loan servicer. See § 2605(b)(2)(A) (“Except as provided under subparagraphs (B) and (C), the notice required under paragraph (1) shall be made to the borrower not less than 15 days before the effective date of transfer of the servicing of the mortgage loan.”). To recover under § 2605, the borrower must allege and show actual damages suffered “as a result of the failure.” § 2605(f)(1)(A). If the borrower also alleges and establishes that the violation is a “pattern or practice of noncompliance,” a court may additionally award statutory damages “not to exceed $1000.” § 2605(f)(1)(B). Although the Amended Complaint neither alleges that Rosen suffered any actual damages as a result of EquiFirst’s failure to give her a full 15-days notice of the change of loan servicer, nor alleges that EquiFirst engaged in a pattern or practice of not complying with the 15-day notice requirement, Rosen requests that the Court “reduce the amount owed by Plaintiff by the amount of statutory and actual damages available under RESPA.” Am. Compl. at 22.

Because she has not alleged she suffered actual damages, the Court concludes that Rosen has failed to state a claim for damages under § 2605 and that she should not be given an opportunity to amend her complaint because none of the Defendants have attempted, in this federal suit, to bring any claims for money Rosen owes them. Any claims for recoupment that Rosen may be able to bring are relevant to the state foreclosure action and should be litigated there. Cf. Demmler v. Bank One NA, 2006 WL 640499, *5 (S.D. Ohio, Mar. 9, 2006) (alternatively holding that the plaintiff’s claims brought pursuant to TILA and other federal statutes against lending bank and challenging validity of loan were barred because they were compulsory counterclaims that should have been raised in the foreclosure action in state court).

Rosen alleges that Defendants violated § 2607 by giving “kickbacks” or engaging in “fee-splitting” on May 17, 2005, when EquiFirst paid a broker’s fee to American Mortgage as a yield-spread premium. The statute of limitations for violations of § 2607 is one year from the date the violation is alleged to have occurred. See 12 U.S.C. § 2614. The Court concludes that Rosen’s claims for violation of § 2607 are barred by the one-year statute of limitations. See Snow v. First Am. Title Ins. Co., 332 F.3d 356, 359-60 (5th Cir. 2003) (“The primary ill that § 2607 is designed to remedy is the potential for ‘unnecessarily high settlement charges,’ § 2601(a), caused by kickbacks, fee-splitting, and other practices that suppress price competition for settlement services. This ill occurs, if at all, when the plaintiff pays for the service, typically at the closing. Plaintiffs therefore could have sued at that moment, and the standard rule is that the limitations period commences when the plaintiff has a complete and present cause of action.”) (internal quotation marks and bracket omitted). Rosen’s argument that her claim survives the one-year statute of limitations because it is one for recoupment is unavailing because Defendants have not sued her by way of counter-claim in this federal suit. Again, any claims for recoupment should have been brought as a defense in the state foreclosure action. See 15 U.S.C. § 1640(e); Beach, 523 U.S. at 417-19.


The Tenth Circuit has instructed district courts that, when federal jurisdiction is based solely upon a federal question, absent a showing that “the parties have already expended a great deal of time and energy on the state law claims, . . . a district court should normally dismiss supplemental state law claims after all federal claims have been dismissed, particularly when the federal claims are dismissed before trial.” United States v. Botefuhr, 309 F.3d 1263, 1273 (10th Cir. 2002); see Sawyer v. County of Creek, 908 F.2d 663, 668 (10th Cir. 1990) (“Because we dismiss the federal causes of action prior to trial, we hold that the state claims should be dismissed for lack of pendent jurisdiction.”). None of the factors identified in Thatcher Enterprises v. Cache County Corp., 902 F.2d 1472, 1478 (10th Cir. 1990) — “the nature and extent of pretrial proceedings, judicial economy, convenience, or fairness” — would be served by retaining jurisdiction over any potential state-law claim in this case. No discovery has been conducted in this case, and no energy has been expended on the potential state-law claims. The Court will dismiss Rosen’s state-law claims for violation of the New Mexico Unfair Practices Act contained in Count Six of her amended complaint.

NOW, THEREFORE, IT IS ORDERED that all Counts of Rosen’s federal complaint are DISMISSED.

[1] “YSP” is an abbreviation for “yield spread premium” and “POC” is an abbreviation for “paid outside closing.” Am. Compl., Ex. H

[2] Although Rosen cites 12 U.S.C. § 1207(a) as the statute violated, there is no such statute and her citation to 24 C.F.R. § 3500.14 refers to violations of § 2607. The Court therefore construes her complaint to allege violations of § 2607.

[3] See footnote 2.

[4] Section 1635 provides, in relevant part:

(a) Disclosure of obligor’s right to rescind

Except as otherwise provided in this section, in the case of any consumer credit transaction . . . in which a security interest . . . is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.

. . . .

(f) Time limit for exercise of right

An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor . . . .

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