Why Are We having So Much Trouble Connecting the Dots?

Matt Weidner reports that he went to court on a case where IndyMAc was the plaintiff. IndyMac was one of the first banks to collapse. It was found that they owned virtually zero mortgages and had “securitized” the rest which is to say they never loaned the money or got paid off by a successor. Now the servicing rights on IndyMac have been sold. So when the time came for trial he finds the lawyer fighting with his own witness. It seems that she would not say she worked for IndyMac because she didn’t. That meant there was no corporate representative present to testify for the plaintiff. case over? Not according to what we have seen where IndyMac foreclosures continue to be rubber stamped by Judges who do not understand the gravity of the situation.

The precedent being set is for anyone who knows about a default to race to the courthouse with a complaint to foreclose after fabricated a notice of default and asserting themselves as the successor to whoever the borrower was paying. The borrower doesn’t know the difference and generally doesn’t care because they mistakenly think they are screwed no matter what. So the pretender lender that was collecting takes it time partly because they are simply collecting fees on “non-performing” loans. Meanwhile our creative criminal goes in and alleges that he is the holder of a lost note, submits affidavits, but of course stays away from the essential allegation that there ever was a transaction between himself and the borrower. These days Judges don’t seem to require that.

Judgment is entered for our creative criminal and he becomes by court order, the creditor who can submit a credit bid at auction. He makes the non-cash bid at the auction and presto he just got himself a free house which he sells at discount on the open market. He only needs to do a few of those before he vanishes with a few million dollars. In fact, we have learned that such “foreclosures” are going on now sometimes creatively named such that it looks like the name of a bank. That is why I have been saying for 7 years that  the foreclosures, if they are allowed to proceed, will eventually create chaos in the marketplace.

You might ask why the banks don’t raise a big stink about this practice. The answer is that there are only a few such scams going on at the moment. And the banks are relying on the loopholes created in pleading practice to get their own foreclosures through the same way as our criminal because they really don’t own the loan or even the servicing rights. Yup! That is called a syllogism: if the creative criminal is a criminal for doing what he did, then the bank or anyone else who engages in the same behavior is also a criminal.

And that is why the justice department and regulators are ramping up their investigations and charges, getting ready to indict the bankers who thought they were untouchable. If you read the reports of securities analysts, you will see three types of authors — those who obviously have drunk the Kool-Aide and believe Bank of America and Chase hinting the stock is a good buy, those who are paid to plant pretty articles about the banks, and supposedly declining foreclosures and increasing housing prices, and those who have looked at the jury conviction of Countrywide, looked at the pace of settlements, and looked at the announcements that there are many more investigations and charges to be resolved, and who have seen the probability of indictments, and they conclude that BOA is soon going to be on the chopping block for sale in pieces and the same will happen with Chase, Citi and maybe even Wells.

While the media is not paying attention to the impending doom of the mega banks, the market is discounting the stock and the book value of these companies is dropping like a stone because real investment analysts under stand that much of what is being carried on the books as assets, is really worthless garbage. Charges of fraud are announced practically everyday, saying that the banks defrauded investors, defrauded Fannie and Freddie, and defrauded each other, as well as insurance companies and counterparties on credit default swaps. In other words it is pretty well settled that the sale of mortgage bonds was a sweeping fraudulent scheme and that the word PONZI scheme is accurate, not some conspiracy theory as I was treated back in 2007-2010.

So now that we know that there was complete fraud at one end of the stick (where the funding for the origination and acquisition of mortgages took place), the question is why is anyone looking at foreclosures as inevitable or proper or even possible. It is the same stick. If one end is burning then it is quite likely that the other end will be burning soon and that is exactly what I predict for the coming months.

Having been in court multiple times over the last month representing clients seeking to retain their homes it is readily apparent that the Judges are changing their minds about whether the foreclosure is inevitable or that collection by these creative criminals is wise or legal — i.e., whether the enire exercise involves an arrogant willingness to commit perjury. Since the mortgages were part of the scheme and the part where the lender appeared with the money is covered in fraud, it is certainly reasonable to assume that the the fraudulent schemes included the origination and transfer of mortgage paper. And that is exactly the case.

If it wasn’t the case there never would have been fraud at the top because the investors would be on the note and mortgage and some some nominee of the broker dealer (“BANK”) or they would have been on a recorded assignment closed out within 90 days of the start of the REMIC trust, which would have been funded by money from investors paid to the investment bank (broker dealer) who then forwarded the net proceeds tot he Trust. None of that ever happened, though, which is how the fraud was enabled.

Practice Hint: I like to demonstrate by drawing a large “V” where the bottom is the closing agent, the left side is the money trail and the right side is the paper trail — and showing that they never meet. That means the paper trail is a fictional story about transactions that never occurred. The money trail is actual facts and data showing actual transactions where money exchanged hands but there was no documentation. The “Trust” was never funded with money or assets, so the money went straight down the left side from the investors at the top of the left side to the closing agent, who applied the investors money to close a transaction that was documented as though the originator had loaned the money. The same reasoning applies to transfers and assignments.

The core of the cases filed by the banks is that the Note is prima facie evidence that a transaction occurred. It is entitled to a presumption of validity. But where the borrower denies the transaction ever occurred, and files the right discovery to get evidence of the wire transfers and canceled checks, the banks go wild because they know their entire case will not only fall apart but subject them to prosecution.

Which brings us to Marshall Watson, who seeks to be licensed again to practice law, and David Stern who is about to be disbarred forever. The good news is that they were disciplined for fabrication and forgery of documents. The bad news is that the inquiry stopped there and nobody ever asked why it was necessary to fabricate or forge documents.

FRAUD! In Foreclosure Court Indymac/Onewest Doesn’t Own Notes and Mortgages, But “They” Continue To Foreclose Anyway
http://ireport.cnn.com/docs/DOC-1051166/

Suspended Ft. Lauderdale foreclosure mill head seeks return
http://therealdeal.com/miami/blog/2013/10/24/suspended-fort-lauderdale-foreclosure-mill-head-seeks-return/

Florida Bar referee calls for ex-foreclosure king’s disbarment
http://therealdeal.com/miami/blog/2013/10/30/florida-bar-referee-calls-for-ex-foreclosure-kings-disbarment/

Forcing Modification on a Reluctant Servicer

DON’T FORGET THAT THERE IS A DIFFERENCE BETWEEN THE SERVICER WITH WHOM YOU ARE DEALING (THE SUBSERVICER) AND THE MASTER SERVICER WHO IS CALLING THE SHOTS ON BEHALF FOR THE INVESTMENT BANKER. DEMAND PROOF OF WHO IS HANDLING THE MODIFICATION, WHO IS ASSIGNED AND WHO THEY CONSULTED.

After interviewing Danielle Kelley on the issue of modification, there is a lot of red meat that can be used to bring relief to the homeowner and sanctions against the servicer that was negligently or intentionally avoiding its responsibilities under HAMP. Danielle points out that according to the DOJ judgment against BOA, there seems to be direct guidelines (which BOA has intentionally breached as a matter of policy) that under HAMP, the servicer is required to submit the proposal for underwriting prior to offering a trial payment plan. This would suggest something that is certain to be attractive to the Judge who neither wants to throw anyone out of their home nor let the borrower off the hook because there is a coffee stain on the documents.

It may be presumed that the servicer HAS submitted the plan for underwriting if they offer a trial modification. That means the borrower has been twice approved for the loan — first at origination and then under the trial modification. No more documents or financial statements, no more “consideration,” and no more denials based upon nothing. If the bank refuses, then the appropriate motion would be to enforce a settlement agreement — which is the way I would entitle it. And the argument would be that if the trial modification is not a gateway to permanent modification after underwriting twice the same borrower and after accepting trial payments, then what is it — a survey?

As we have already seen in a recent case litigated by Danielle Kelley the Judge didn’t buy the argument that the permanent modification is not automatic even if the borrower fulfills all requirements under the trial modification. remember, this borrower has already been qualified in the loan origination. Use that against the bank, saying that you approved them twice and now you want to deny them a modification after they have demonstrated the loan is viable by making the actual payments?

If the situation gets hairy then go into discovery and identify all the actual people who were involved, who they contacted, what computers they used, what software and what criteria they used in approving the trial modification. You will find they contacted nobody and did not actually underwrite the trial modification at all even though they were required to do so before the trial modification was offered by them. That’s their choice. If they want to approve trial modifications the same way they approved loans — without conforming to industry underwriting standards — they have made their election. They do not now have the excuse or basis for denying the permanent modification or demanding that the loan modification process begin all over again.

Once again we are confronted with a bank that doesn’t want the money, doesn’t want the loan reinstated, and who refuses to mitigate their damages, electing instead to push the borrower into foreclosure where both the investor/creditor (who probably knows nothing about the situation because they were never contacted, contrary to the condition precedent in HAMP and the DOJ judgment) and the borrower end up screwed.

This is only now coming out through whistle blowers. I have been predicting that this would be revealed for years and most people thought I was nuts. Maybe I am nuts but I am still right. The servicers and investment bankers have painted themselves into a corner. The truth is that none of them has any authority to negotiate the terms of the modification, nor to pursue foreclosure because not even they know if there is an actual balance left on the old loan receivable which has long since been converted into something else thanks to payment by a third party who expressly waived their right of substitution, subrogation or contribution against the borrower.

This is not theory — it is about the facts. Why would you take a document handed to you by the bank or attached to a pleading or recording be assumed by the attorney for the homeowner to be true and correct. We know it isn’t. So it is the lawyer’s job to probe through discovery down to see what transactions occurred, when they occurred and who were the parties to the transaction, as well as the terms of the transaction. Then the lawyer should compare the actual transactions, (shown by canceled checks, wire transfer receipts or other indicia of payment that can be corroborated through the national payments systems), with the documents proffered by the forecloser who is now pretending to modify when in fact they are steering the borrower into foreclosure, contrary to normal banking practice of maximizing the mitigation of damages such that the bank loses nothing or close to nothing. Listen to any seminar, as late as the last year, on foreclosure defaults and the seminar is all about workouts because that is the best answer for both the bank and the borrower. Now they would rather lose more money than less.  Why?

Workouts are the furthest thing from the bankers’ minds because the dirty secret they are hiding is that at all times they were dealing with investor money, much of which they stole. The assets on the balance sheet, the proceeds of insurance, CDS proceeds, and subservicer continuing payments after default (thus curing the default) all tell the story that has yet to be told in Court. Now with me practicing again with great lawyers like Danielle Kelley, William Gwaltney and Ian White, the story will be told.

BANKS ARE NOT MITIGATING LOSSES. THEY ARE AVOIDING LIABILITY TO INVESTORS, INSURERS AND THE GOVERNMENT

The only hope for the banks is getting a foreclosure sale that gives the further appearance that the reason the investor, the insurer, the credit default swap counter party, the U.S. Treasury and the Federal Reserve lost money was because of the vast number of defaults on mortgages. But even with the banks tricking and pushing borrowers into “default” [from a script written by BOA officers and lawyers — “you have to be 3 months behind in your payments before we can consider modification” — a criteria ABSENT from HAMP], the number of defaults and the amount the banks are reporting that investors lost don’t add up — and THAT is why you must be relentless in discovery..

The simple truth is that the banks that are dealing with the foreclosures and modifications stand to lose nothing if the loan results in a zero return to mitigate damages. They stand to lose everything if the loan is reinstated because of all that money they took from investors, insurers, CDS counterparties, the U.S. Treasury, and the Federal Reserve. BOA would not have made it a policy to lie, cheat and deceive borrowers until they ended up in foreclosure unless it was in their interest to do so. What reason would that be other than the one postulated by this paragraph?

“Servicer shall promptly send a final modification agreement to borrowers who have enrolled in a trial period plan under current HAMP guidelines (or fully underwritten proprietary modification programs with a trial payment period) and who have made the required number of timely trial period payments, where the modification is underwritten prior to the trial period and has received any necessary investor, guarantor or insurer approvals. The borrower shall then be converted by Servicer to a permanent modification upon execution of the final modification documents, consistent with applicable program guidelines, absent evidence of fraud.” -HAMP

Paragraph 22: Not Exactly the Magic Bullet

Since we had our technical difficulties with the use of free conference last time I am going to answer certain questions that were sent in and never covered in the last members teleconference. Free conference assures me that the technical problems have been solved —  but the call-in number is going to be different.

THIS IS FOR GENERAL INFORMATION ONLY AND SHOULD ONLY BE USED AFTER CONSULTING WITH AN ATTORNEY WHO IS LICENSED TO PRACTICE IN THE JURISDICTION IN WHICH YOUR PROPERTY IS LOCATED. I AM ONLY LICENSED IN FLORIDA AND EVEN IF YOU HAVE A FLORIDA CASE THIS INFORMATION SHOULD NOT BE USED AS ADVICE OR INSTRUCTION SINCE I OBVIOUSLY KNOW NOTHING ABOUT YOUR PARTICULAR CASE AND WHETHER THE FOLLOWING IS APPLICABLE TO YOU OR YOUR CASE. Call 850-765-1236 for further assistance. On the West Coast (CA, OR, WA, AZ NV, etc.) call 520-405-1688.

Question regarding “paragraph 22”: I have enclosed a link below discussing the paragraph which is numbered 22 in the example used.

The first thing I want to say is that there are no magic bullets anywhere within the complexity and chaos of the false securitization scheme devised by Wall Street. Nothing will be a substitute for a thorough understanding of the scheme and no one element or theory is going to result in a “free house” for a homeowner except in those cases where the party pretending to be the lender as so angered the judge that the judge is looking for a way to punish them. Nonetheless the article below is written by an attorney who apparently has a fair understanding of several issues involving securitization of debt and is therefore worth reading.

The second thing I want to say is that the paragraph does not always bear the number  “22” since several different mortgage forms have been in use and evolving over the last 20 years. But the point raised by the article and by the question sent to me is entirely valid. In a case involving title to real property, and especially in a case where title is going to be forcibly taken from one party and given to another, the requirements of notice are usually going to be taken very seriously by a judge and applied very strictly. If not, and you have taken the trouble to properly prepare a good record, it is highly likely that exceed on appeal despite the fact that the odds on appeal generally favor the pretender lender by a wide margin.

The third thing I want to say is that notice is like a two edged sword.  It must come from a party that is empowered to give notice and that power should not be assumed based upon the self-serving proclamation by a pretender lender that arrogate unto itself the power to do anything with your loan. The other side is that once notice appears to be properly given, you must open your mail and react to it within the time limits prescribed by statute. Obviously if the pretender lender commences some sort of action against you before the notice period runs out you have an opportunity to reverse the procedure and force them to start all over again. On the other hand if the statute requires you to take some action once you have received notice and the notice period has run out, then it is likely that this will be held against you and in fact it may be fatal to your position.

http://floridaforeclosurefraud.com/2013/01/the-bring-a-court-action-language-does-not-substantially-comply-with-paragraph-22-says-bro.ward-county-judge-in-blistering-opinion/

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

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City and County Officials Are Invited to Attend Our Stockton Seminar at Which We Discuss Alternatives to Being Broke and Declaring Bankruptcy

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

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

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

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

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

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

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

Housing’s Last Chance?

By JOE NOCERA

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

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

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

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

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

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

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

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

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

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

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This Topic Will Be Covered More Extensively

at the 7/26 seminar in Chandler, Az

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

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

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

FINDINGS:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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BUYING PROPERTIES: Pitfalls and Remedies

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This Topic Will be Discussed Thoroughly

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

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

Getting Lost in the Weeds: Following the Money Trail

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

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

Editor’s Comment:  

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

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

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Niday vs GMAC et al

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

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

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

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

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

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

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Inflated Appraisals as Assumption of Risk and Joint Venture with the Pretender Lender

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Editor’s Comment:  

The allegation of an intentionally inflated appraisal of the property supports many claims, defenses, affirmative defenses and positions. A property that is appraised at $300,000 was usually coming in at precisely $20,000 more than the target value used for the contract for purchase or the commitment for funding a refi. The appraiser was selected, directly or indirectly by the so-called lender whom I have dubbed the “pretender lender,” so named because the borrower is deceived into thinking that he/she is entering into a financial transaction with one party — the one named on the promissory note as payee or named as the mortgagee, beneficiary or lender on the mortgage or deed of trust. In fact, however, the financial transaction took place between the  borrower and an undisclosed party while the paperwork revealed no such dichotomy in violation of federal and state lending laws).

But in addition to the documents smelling like 3 day-old fish based upon the failure of the documents to describe an actual financial transaction between the pretender lender and the borrower, the terms of the loan are different than the ones stated in the note and mortgage.

The pretender lender is merely an originator whose name is “rented” for the purpose of creating a bankruptcy remote vehicle (so-named by the banking industry) that could commit every violation of lending laws under the sun. When the homeowner seeks redress he/she finds himself confronting a non-existent entity that was never legally formed, and/or a bankrupt entity, or a dissolved entity that in any event never supplied the credit or cash for the transaction recited in the mortgage documents.

The inflated appraisal is performed by appraisers with the full knowledge that they are doing the equivalent of appraising a car’s value as being 40% above the retail sticker on the showroom  floor.  Industry standard appraisals withstand the test of time. A reasonable period of time for an appraisal to stand on its own legs is expressed in years not months. In most cases the homeowner  quickly found out in days, weeks or at most months, that the fair market value of the property was at least vastly over-stated in order to make the loan as large as possible, and, as we have seen, the inflation of the appraisal ranged from 30% to 75% in those areas that were targeted by Wall Street — with the worst offenses occurring in areas of low financial sophistication or people with language issues because they had recently moved to the U.S.

The appraiser is selected by the lender and, as stated by the 8,000 appraisers who signed petitions in protest in 2005, threatened with no employment if they didn’t come back with an appraisal at least $20,000 over the target contract price (the contract being given to them, which is a violation in itself of industry standards. Many appraisers refused and went to work only for small banks who were making loans with their own money and credit. The pretender lenders were not worried about risk of loss because the originator whose name was loaned to the Wall Street bank for a price above rubies, was not using its own money and credit. In fact, the originator usually had not money or credit, with some notable exceptions where a major institution originated the loan, but was not bankruptcy remote (thinly capitalized). None the less they were not the source of funds, not using their own money or credit and thus assumed no risk of loss for the “decline” in the value of the property after closing —a decline precipitated by the free market providing a value range that is in line with median income.

This article is meant to provoke discussion amongst both bankruptcy lawyers and civil litigators as to whether a known inflated value places part of the risk of loss on all loans, not just those that went into default. By inserting a false value into the equation, the borrower reasonably relied upon the appraiser as supposedly confirmed by the “lender” under OCC regulations. That risk can be quantified — i.e., an appraisal at $300,000 for property worth only $200,000 created an immediate risk of loss not assumed by the borrower but rather assumed by the lender named in the documents.

Thus when the loss is realized in the conventional sense, it should  be “realized” in the accounting sense and applied against the lender, thus reducing the allowable claim to the value of the property. This isn’t lien-stripping. This is contract law and assumption of risk. The borrower did not come up with the appriser or the appraisal. It was the lender and under industry standards the appraisal was presumed to be confirmed through due diligence by the lender. In the old days, the bank officers would go out and visit the property a few times and check on the work done by the apprisers. Some form of that due diligence is required under current regulations (see OCC regulations) and industry standards.

The latest time that the loss attributable to the inflated appraisal should be applied is at the time the loan is subject to foreclosure. At that time, I would argue, the amount demanded in wrong and therefore an illegal impediment to reinstatement, redemption, settlement or modification. Since the borrower was the victim of the new standards for underwriting mortgages without any announcements of new standards, the borrower can hardly be held responsible for the inflated appraisal regardless of what they did with the money from the loan and regardless of the source of funding (the real party who transacted business with the borrower where money exchanged hands).

The terms of repayment are changed by the inflated appraisal. Since the inflation of the value of the property was not only known but caused by the pretender lender, the transaction converts from a standard mortgage deal to a joint venture in which if the property value continues to go up, the lender gets its money but if the property value goes down, the lender has assumed the risk of loss to the extent that the value of the property declined — or at least that portion of the decline attributable to the inflated appraisal.

This supports fraud accusations, slander of title and a variety of other causes of action. But just a importantly it makes the pretender lender a partner of the borrower and raises an issue of fact that must be resolved by the court before allowing any foreclosure to proceed or before any attempt can be made to modify the mortgage under HAMP or redeem the property under state law. The successor lenders in the securitization chain are alleging in one form or another that the amount due is strictly computed from the amount stated on the note. But in fact, the co-obligor in the securitization chain is the pretender lender who assumed part of the risk of the loss. Any notice default or attempt to foreclose in which an inflated appraisal was part of the original transaction, regardless of the identity of the real lender, is plainly  wrong or even a misrepresentation to the borrower and the court. hence the notice provisions in all states, judicial or non-judicial, are violated in virtually all foreclosures.

But wait there is more. Foreclosures already completed can be more easily overturned by these allegations with the assistance of an honest appraiser. And for those foreclosures, whether overturned or not, the borrower can seek contribution from the co-obligor(s) pretender lender or those who used the originator as a vehicle to shield them against predatory lending claims. In our example above, this would mean that the homeowner might have a clear cause of action against the  pretender lender and its successors for the $100,000 loss in value. It would also pull the rug out from “credit bids” based upon documentation allegedly from the originating lender. If the credit bid lieu of cash was higher than the amount due, this created a barrier for others to bid cash on the property making the loan paid in full and the excess proceeds payable to the borrower.

By denying that the pretender lender used an honest appraisal and  denying that the borrower is the only obligor, and denying the debt to at least to the extent of the inflation of the appraisal the borrower puts in issue a material fact in dispute and the amount of the bifurcation of risk of loss between the borrower and the amount to be attributed to the originating lender opens the hallowed doors of discovery. affirmatively alleging that the appraisal was inflated puts the burden on the borrower, so it should be avoided if possible.


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Getting the RIGHT Report: Rebutting the Presumptions That the Original Note and Transfers Had Any Legal Effect

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Editor’s Comment: The biggest problem to knocking the banks on their ass is the feeling deep down inside the homeowner that the loan is valid and so is the mortgage. So people are thinking in terms of buying time rather than winning the case. Lawyers are saying the same things to themselves even as they take your money to represent you which is why I started www.garfieldfirm.com — so we would have lawyers who are NOT thinking that way and to get hundreds of other firms to compete with passion in their hearts that the homeowner is the victim.

The current state of affairs is that in most cases, misguided Judges are forcing investors to take bad loans that do not conform with their agreement (e.g. cutoff required under Internal revenue Code and express PSA terms and conditions) in a process that  does not conform to the process of origination and transfer expressly stated in the PSA (as expressed in the prospectus and Pooling and Servicing Agreement), thus enabling the investment bank to throw the loss onto the investor in a newly fabricated (see Congress decision from June 8 in Alabama Appellate Court) — and the kicker is that investor knows nothing about the transaction or litigation and is presumed to have accepted the assignment of a non-existent loan. The borrower is being forced to pay on a non-existent loan or lose his or her house. And still the borrowers persist on thinking they are getting what they deserve, thus leaving the banks with the money while the investors and homeowners get nothing.

Only 2% of the mortgage loans are contested in any meaningful way and 80% go about it in the wrong way. I mean to change that 2% to 75% of the mortgages being contested, and reduce the number of mistakes such that only a small fraction of mortgage contests are done incorrectly.

Have you heard the term “Master Servicer”. Yes, well they are the ones actually orchestrating events on behalf of the investment bank that put up this illusion that we call securitization. They sold the pension funds on what? The pension funds advanced money to the investment banking firm which was placed into a super fund account from which closing money found its way to the closing table with the so-called borrower.

The real reports and accounting are those that are given to the creditor, not the borrower. The reports to the creditor come from the Master Servicer whereas the reports to the borrower come from the subservicer which doesn’t  have access to to creditor’s accounts so it is in no position to report, account or testify through affidavit or in person what the creditor’s ending balance is as of the day of the declaration of default or the day of the testimony. The subservicer’s proffer of testimony should be subject to voir dire in which they admit that there is a master servicer that keep the accounts for the creditor and the subservicer has no knowledge or access tot hat.

This is followed by an objection to the competency of the witness to testify as to anything other than transactions in which it received money from the borrower and transactions (never included) in which it paid out those moneys to the creditor.

Take great care here not to suddenly find yourself carrying the burden of proof on facts that are exclusively within the hands of the pretender or the agents of the pretender. Your motion should be directed at the incompetency of the witness to tesify as to the conclusion that there was a default and the fact that they declared the default without gaining access to the information from the Master Servicer. Hence the objection also to any documents being proffered to the court as evidence, since they clearly do not and cannot by definition establish the default. 

You don’t want to find youself in the position of having the Judge rule that the proffer of that evidence is sufficient for a prima facie case and that if you wish to rebut it you must come forward with proof of other payments. Since THEY are the party seeking affirmative relief, the burden should ALWAYS be on them to produce all relevant accounting and reports nefore they take the home away from a homeowner.

What the borrower and the Courts are getting are simple subservicer reports which amount to no more than a printout from a computer that may or may not have the right data, the right loan or the right starting figures. It may or may not have charges that are permissible or not permissible against the account. But the real information about the account balance is what the creditor is showing on its books and that information comes from the distribution reports and discovery of the accounting records of the Master Servicer and the Tax statements for the creditor.

But here is the kicker. The investment bank (Master Servicer) is NOT reporting the receipt of proceeds from insurance, credit default swaps, and other credit enhancements — not even to the investor. So they are manufacturing (fabricating) a loss that does not exist, at least in part. This is relevant to everything in a foreclosure including the identity of the creditor who is allowed to declare the default, and the identity of the creditor and the amount due so that real creditor can submit a real bid that is called a credit bid because it is the equivalent of the amount due ON THE ACCOUNT.

The magic sleight of hand trick being played is that the subservicer is giving the court an accounting of transactions with the alleged borrower when in fact the creditor is getting a completely different report, many of which show continuing payment from the subservicer or Master Servicer.

The borrower and borrower’s counsel are unaware and in most cases don’t even know enough to ask for these reports. The creditor is entitled to payment on his account — once and only once.  The fact is that insurance and credit default swaps are right there in the pooling and servicing agreements, and so are credit enhancements like overcollateralization and cross collateralization.

That is money that (a) should be reported and paid to the investor creditors and (b) allocated to the loan accounts’ principal reduction as an additional payment. In many cases the creditor’s balance is zero because the creditor has been paid off in total, settled or traded the bogus mortgage bonds for something else of value — which is to say that the “pool” or “trust” proffered by the attorney fro the pretender lender does not even exist anymore.

All this money came from “players” who knew the Wall Street game and were gambling with pension money, depositors money etc, contrary to law and common sense. In no way was any homeowner even mentioned by name much less offered the opportunity to look at the terms offered to the lender, which were substantially different that the terms offered to the homeowner. The homeowners’ signature on “loan papers” was in actuality the issuance of a security that was traded furiously even if it was procured by fraud in the inducement and fraud in the execution.

The result of this frenzy is that through multiple channels including the Federal discount window and the TARP bailout, together with the maiden-lane disposal of toxic waste loans, the creditors were satisfied leaving the homeowner owing nothing to the creditor that loaned him the money. The insurer and the issuer of the credit default swap expressly waived any right to enforce against the homeowner.

AND the homeowner was the innocent bystander who thought he was borrowing money from one party, received it from another and then issued negotiable paper that was filled with misrepresentations. So the pretenders have nothing but dirty hands and the borrowers are clean.

So there is an obligation out there that the homeowner might owe — but the debt that was created at the time of receipt of the funds was never described in any document. In fact, the debt described in the promissory note and mortgage never arose because there was no loan transaction between the homeowner and the originator. This actual debt arising out of an actual transaction in which money was received by or on behalf of the borrower came from a pipeline outside the transactions described in the origination documents and outside the scope of transactions referred to in allonges, assignments and endorsements all fabricated in order to keep the Judge’s eye on the wrong ball.

The real transaction was NOT subject to, described in or referred to in any deed of trust or mortgage and therefore was not secured. If not secured, no valid foreclosure could occur without some sort of waiver by the homeowner that was clear and unequivocal or some order of the court based upon a judicial proceeding in which the terms of the loan are established by court order as of a date that the order says it is effective. Every document relied upon by the pretender lenders was a lie. It described transactions that never occurred. Thus every foreclosure based upon such documents was also a lie.

Interrogatories, requests for Admission and especially requests to produce (not just the documents but the financial records showing that consideration was paid by the party or to the party stated in the instrument), Motions to set aside, vacate, recuse, remove counsel, sanctions, discovery, and reconsideration are being filed to (a) obtain relief and (b) allow the record to be created for appellate review. Without a good record on appeal, the appellate court is hamstrung to affirm a decision it thinks was wrong.

Distribution reports are your first clue that they left out an accounting that they had and we didn’t and they refused to give up. Notice that WF is the party reporting and disclaims the accuracy. Then who DOES know what went on, where are they and was the loan balance even computed on the day that the loan was declared in default — i.e., what did the CREDITOR (not the subservicer) show as the balance due? Getting the “accounting” from the subservicer is useless. If you had 10 children and you gave them each $100 with the responsibility to account for the money, why would you only take the accounting from one of them?

 

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Information vs. Evidence: Challenge to Affidavit in Support of Summary Judgment

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Editor’s Comment:

I’ll be appearing soon at one of Darrell Blomberg’s Strategy Meetings (which take place every Tuesday evening at Macayo Restaurant in Central Phoenix) to do a session on evidence on June 19. The analysis below is the type of thing I do to support lawyers and litigants when the pretender lender submits a bogus “affidavit” in support of some action, usually a Motion for Summary Judgment. Among other things this is what we’ll be talking about on June 19 and this will be subject of much more discussion on July 26 at my 1/2 day seminar overview for Lawyers.

Analysis of Declaration in Support of Motion for Summary Judgment

  1. “These facts are personally known to me to be true.” How does he know them? — was he there, did he hear, did he see or was he told and he believes them and therefore he means “personally known” as meaning he knows the people who told him the facts. NOTE: if he was a supervisor of a specific department dealing with the past factual issues leading up to the foreclosure and related issues, and if he can prove that the documents or statements were made in the ordinary course of business and at that time they had no fear or thought of being used in litigation, then it MIGHT be an exception to the hearsay rule.
  2. Otherwise anything he was told or shown are excluded because they (OBJECTION:) lack FOUNDATION because he is not a competent witness to establish the authenticity of the document nor the truth of the matters asserted therein.
  3. In this case the entire affidavit should be struck, it should not be considered to support the motion for summary judgment, and the motion for summary judgment MUST be denied unless they have other affidavits timely filed from people who can establish that they have personal knowledge.
  4. He is the President which most likely means that he had nothing to do with any of the facts of this case and only became aware of the the existence of the case when he was called to execute an affidavit. In fact he identifies himself as the President of a company whose function was to be (1) the “foreclosure trustee” and (2) limited signing agent for the beneficiary under “the deed of trust” without identifying the deed of trust.
  5. Unless he was doing the work himself he is admitting that he is relying upon the word and work of others and is subject to a hearsay objection.
  6. The business records exclusion to the hearsay rule must be proven by the proponent of the exemption, not the objector which means he must prove with documents and testimony how the facts upon which he is testifying became known to him in the ordinary course of business which means that he reviews all documents as they come in, which of course he does not. Neither does he perform the work involved. The trap door to avoid here is that even if he were to satisfy all the requirements, which he obviously cannot, his knowledge is ALL limited to events that occurred before the decision was made to foreclose and there fore the receipt of an accounting from the sub-servicer, no account from the master-servicer and no accounting or instruction or authority from the creditor to go ahead with the foreclosure and submit a credit bid in the name of the identified creditor.
  7. Since his company is the “foreclosure trustee” he is admitting that they only have knowledge on their own as to matter that occurred AFTER they received the file or instructions and we ought to know which it was — the file or the instructions.
  8. Since he identifies his company as the foreclosure trustee he is admitting that the sole purpose of the company, even though it was called a trustee, was to foreclose on the property after the substitution of trustee.
  9. They were ordered to foreclose and NOT to perform due diligence or to take any action to protect BOTH the homeowner and the purported creditor, who in this case is a stranger to the transaction as required by statute.
  10. The Trustee is a substitute for the court and if the facts are in dispute the trustee has no power to decide the merits of competing claims (trustee is a not a special master who can conduct hearings and rule on evidence or make recommendations of findings to the court), which means that the his company was duty bound, upon learning of competing claims, to take the matter to court if the parties could not resolve their differences.
  11. Specifically the “trustee” should have filed an interpleader action in which the trustee would have stated that they had no stake in the transaction (something that was untrue since they were a controlled or owned entity by the party pretending to be the creditor) and that that there is a dispute of facts concerning the procedure and substance of the foreclosure and that the court must rule on the competing claims of the parties — after BOTH have submitting pleadings stating their positions and then proving the claims in accordance with the rules of civil procedure, due process and the rules of evidence and the doctrines concerning the burden of proof.
  12. If you sign this response as an affidavit, then the burden shifts to them to show that they are truly a trustee and not just an agent of the pretender creditor.
  13. Since the party seeking affirmative relief is the pretender creditor seeking to take the house using a credit bid instead of cash when they are not the creditor, the pretender creditor would be required first to submit the pleading and exhibits upon which they depend, and second the homeowner would be required to file responsive pleading — motion to dismiss, motion to strike, etc. or answer, affirmative defenses and counterclaim.
  14. He identifies the COMPANY as the limited signing agent for the beneficiary. There is no definition of limited signing agent. A review of statutes and common law reveals that this term has never been used in any legal document or case EXCEPT where it refers to a notary who is identified by name and license number. It does NOT refer to the authority of any company or person to sign on behalf of another party or company without a separate document providing said authority properly executed and binding under the laws of the state in which the grantor is located and the laws in which the document is to be used. LIke MERS was a naked nominee and the “lender” was a “naked nominee” a limited signing agent is a naked nominee meaning, in the parlance of the industry a bankruptcy remote vehicle that will perform acts which might otherwise subject the principals to criminal or civil liability. It is also used to conceal the the identity of the principals.
  15. Which deed of trust? The one allegedly executed by the homeowner which may or may not be the one produced as the original but without scrutiny cannot be authenticated as anything more than a fabricated document utilizing modern technology and a color printer?
  16. “I have personally reviewed the files.” This phrase has been repeatedly thrown out as establishing the business record exception. The fact  is that somehow he saw documents without establishing how they came into his possession and who the parties are (why are THEY not testifying?) and what knowledge THEY had, who prepared the documents in the file, what security was used for the posting of data to the files, and what security was employed in maintaining the security of the files?
  17. This is layers upon layers of hearsay without any valid exemption. Motion to strike the affidavit.
  18. Motion to remove NDEX as trustee,
  19. Motion to void the substitution of trustee and install the original trustee as the trustee on the deed of trust or some other actually independent party.
  20. Objection in title registry office to the recording of the substitution of trustee because they knew that NDEX was not a trustee but rather was the foreclosure agent, as admitted by this affidavit, masquerading as the substituted trustee
  21. Motion for sanctions and cause of action for slander of title for filing false substitution of trustee directed at parties named on the substitution of trustee and the parties who prepared it and the lawyers who presented it knowing that it was a falsified, fabricated and forged fraudulent document.
  22. “My experience as the officer of the company provides the foundation for my knowledge referenced herein.” This is an outright admission and should be the leading the point. He is saying that he has been in the business a long time so looking at the the records of the homeowner in this case is like looking at the records of thousands of others where he made the same decision (but we must emphasize that he undoubtedly did not and specifically does not say that he reviewed other documents). It is an admission that he has NO PERSONAL KNOWLEDGE of the documents, that therefore the affidavit is worthless, and that therefore the affidavit is not the required foundation for admission of the documents because he, the affiant is not a  competent witness (look up competent witness in CA statutes and common law requiring OATH, PERSONAL perception sight,hearing etc., MEMORY and the ABILITY to COMMUNICATE. In fact, he has disqualified his entire firm as a foundation witness since by definition (foreclosure trustee) they received the documents after the decision was made by parties outside the chain of title to foreclose.
  23. “I have personal knowledge of the accuracy of the records.” He already said he doesn’t and that he (a) received the documents when they were to be foreclosed and (b) relied upon his experience when he reviewed the documents, but still fails to state who prepared the data or documents, how they were kept, when they were kept, where they were kept and who was involved. ALl of this could be easily resolved had they chosen the people who actually DID have knowledge, But they didn’t do that. Why? Because either those people refuse to testify to the facts that they want or those people are MIA after being downsized.
  24. At no time does he say that his company acted as the servicer, creditor, or master servicer. He merely says that they received data and documents from unknown undisclosed sources AFTER the decision to foreclose was already made. By definition neither he nor his company would be competent to testify to facts or documents or data that occurred PRIOR to the time that his company was the “foreclosure trustee”
  25. There is no reason to believe that any unauthorized person had access. Nor is there any reason to believe that unauthorized access didn’t occur on a regular basis, just like MERS.
  26. The rest of the paragraphs say what I said above — he knows nothing, saw nothing, heard nothing and was never in any contract with borrower or anyone else as a servicer, never handled any money, and posting, or anything else.
  27. Paragraph 16 is a particularly interesting because to corroborates the argument that they were NOT acting as trustee, they were acting as agent. He says that his company acts ONLY as a limited signatory agent to sign and record the Notice of Default (why doesn’t the creditor do that if this company is not the service nor the conduit or collector of any funds) and that the ONLY other function was to serve as “foreclosure trustee.”
  28.  The last paragraph says it all. They foreclosed because they acted on instructions from the loan servicer without any regard for what the homeowner had to say in objection to the allegations of the loan servicer. (see discussion on interpleader above).

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Information vs. Evidence

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Editor’s Comment:

I’ll be appearing soon at one of Darrell Blomberg’s Strategy Meetings (which take place every Tuesday evening at Macayo Restaurant in Central Phoenix) to do a session on evidence. And in fact, I am thinking about a half-day seminar on evidence, with Darrell as a co-presenter, he may not be a lawyer but he gets it — there is a huge difference between information (data) and evidence. And there is a huge difference between evidence and admissible evidence. And in discovery, you have the right to pursue information in interrogatories, requests for admissions and requests to produce for INFORMATION that might lead to the “discovery” of admissible evidence.

I am adding this overview into the 2d edition Workbook, Treatise and Practice manual. I want to get this lesson out to lawyers and litigants as quickly as possible. And the reason is that these people have forgotten or never knew the difference and they certainly are confused about the procedure. Take a look at the appeals court decisions that slap down the borrower. There is almost always a statement in the opinion that appellant argues XYZ but we don’t see X or Y in the record. In the absence of X and Y being in the record, the appellate court has no authority to find Z and rule in favor of the appellant (borrower).

Every appellate case I have read that ruled against the homeowner falls into this category. Every one of them has a recitation of “facts”, “history” or “background” that is simply untrue but has been made part of the record and which is regarded as “evidence” because it is in the record.

Example: The primary recital in these appeals usually says something like, “The appellant is John Jones. John Jones applied for and received a loan from Mama’s Money Farm on October 16, 2008 in the amount of $869,000. Jones promised to repay the money in monthly installments as set in the promissory note and mortgage (or Deed of Trust) which he signed. Wells Fraudgo is the current holder of that note and seeks enforcement through the power of sale (or in judicial states, through a foreclosure lawsuit) seeking collection of the money due and sale of the home at auction to the extent that the borrower is unable to make the required payments. Jones defaulted on the note by failing to comply with the schedule of payments in the note he executed for the loan he received, to wit: he stopped making the payments that were due under the note on January 1, 2009.”

How did this recital get into the record so that the appellate court could include it in its opinion justifying the affirmation of the trial court’s decision throwing the borrower out of court and even telling the borrower they were “vexatious” etc (Madison v. MERS et al see previous blog post 6-6-2012 entitled “They Will Get You on Procedure Every time”)?  It got there without any evidentiary hearing or without any hearing in which the borrower’s claims and defenses could be given a fair hearing, with full rights of discovery etc.

This could only happen if the litigant was quiet while the lawyer for the pretender lender “proffered” these facts in his opening narrative of each hearing and the homeowner or his attorney failed to object immediately. “Wait your turn” is the polite way of saying let the other guy talk. But if you let the other guy talk and THEN bring up your defenses and claims, your procedural objections, the Judge has already formulated an opinion about the nature of this case. You might buy some time with procedural irregularities but you won’t win the case, force the other side into a settlement, mediation or modification and you certainly won’t get rid of the mortgage that is recorded in the county title registry.

You will be treated like a deadbeat because you have inadvertently confessed to being a dead beat. You have agreed, without realizing you agreed, that everything the lawyer for the pretender lender has said is true, which means that the statements (proffers) of the other lawyer are now evidence in the record, and the rest of the case was you saying “yes but….”

Trial note 101: Never let go of the narrative regardless of who is speaking but always be polite, courteous and respectful in your words even if you make various faces and expressions that the court reporter is missing. Oh yes — if you want a record on appeal you need a court reporter. Your statements about what the Judge said or what happened in court in your appellate brief is useless and will be properly disregarded by any court reviewing the actions in the court below.

So here is what you want the appellate court to see in the record. First a Notice of filing of everything you would offer into evidence that might be rejected by the court. This would include my expert declaration (although I think we found a couple more people with the right credentials to survive as experts located in Maryland) and all exhibits to the reports, opinions and affidavits that you have showing that that you have some reason (not necessarily proof) for denying the debt, denying the default, denying the note, denying the mortgage and denying that the pretender lender is either the lender or anyone who purchased the loan.

Second, a Motion to set discovery schedule together with a SHORT version of your discovery requests.

Third, a transcript showing continual interruptions with proper objections like “Objection your Honor, we demand proof of authority to represent. In cases all over the country this pretender lender and others are represented by lawyers who never speak with the client, don’t get retained by the client and who only know that someone gave them a file that was recently minted from the fabrication factory of fake, forged and fraudulent documents.”

“Objection your honor, counsel is attempting to proffer facts that are not in evidence and that are vehemently denied by the homeowner who is being improperly identified as the borrower.”

“Objection your honor, counsel is attempting to proffer facts or even testify as to matters that are not in the record. If counsel wants to testify then let’s get him sworn in and put in a witness chair where I can cross examine him as to the foundation for his pretender personal knowledge regarding this bogus loan and fraudulent foreclosure.”

Objection: “Counsel is attempting to get into the record that which he could never get into evidence were this an evidentiary hearing. The homeowner vehemently denies that the application on file was filled out by him or that he authorized it. My client denies the signature is valid either because it was forged or it was procured by fraud in the execution in which case he thought he was signing something else while hands covered the true nature of the document.”

“Objection your honor.  Counsel is trying to proffer information into the record that will be perceived as evidence. My client rejects that recital and denies that he ever received a loan from Mama’s Loan Kitchen, denies that the promissory note correctly recited the terms of the loan and therefore denies that the mortgage lien was properly perfected. He further denies that there was any default on any loan and therefore denies that any assignment from Mama to Fraudgo could have been valid. He further denies that the assignments stating “for value received” involved any transaction where any value was received and therefore failed for lack of consideration. He further denies that even if the documents relied upon by the Fraudgo were valid, there would still be no default because the creditor was being paid without interruption according to their very own Pooling and Servicing Agreement and he denies there ever was a meeting of the minds (although the Fraudgo agents from Mama’s Money Kitchen made it appear to the homeowner that the proper disclosures were made, that the lender agreed to these terms) when in fact the lender (the actual source of funds) agreed to an entirely different set of terms for repayment.”

“Your honor it is our position that the promissory note described a transaction that never occurred and that the mortgage was an encumbrance based upon the false representations of the note. This is like one lying and the other swearing to it. If they are not afraid of proving their allegations then by all means we don’t want to deprive the pretender lender of an opportunity to be heard in court. But the homeowner is entitled to the same consideration under the requirements of due process. The homeowner denies that he failed to make any payment that was due and he denies that the obligation to the real lenders (creditors) in this case is currently in default.”

Evidence is whatever the Court lets in as evidence in which case the court says it is letting the information in as evidence to prove that ABC happened. Or, as is usually the case in these foreclosure cases, evidence comes from silence of the lambs.

So if you want to box in the trial judge and the appellate court let there be a record that shows you followed the rules, there were genuine issues of material fact and the trial court still would not allow the homeowner to proceed. That’s enough to eventually get a ruling that allows discovery to proceed.   And Discovery is the magic key to the kingdom of settlement — but probably not until after 5-6 motions to compel answers or better answers to our discovery requests.

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Recording and Auctions: AZ Maricopa County Recorder Meets with Homeowners

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Phoenix, May 23, 2012: Last night we had the pleasure of meeting with Helen Purcell, Maricopa County Recorder, after having met with Tom Horne, AZ Attorney General and Ken Bennett, the AZ Secretary of State on issues relating to mortgages, robo-signing, notary fraud, etc.  Many thanks again to Darrell Blomberg whose persistence and gentle demeanor produced these people at a meeting downtown. See upcoming events for Darrell on the Events tab above.

The meeting was video recorded and plenty of people were taking notes. Purcell described the administrative process of challenging documents. By submitting a complaint apparently in any form, if you identify the offending document with particularity and state your grounds, again with particularity, the Recorder’s office is duty bound to review it and make a determination as to whether the document should be “corrected” by an instrument prepared by her office that is attached to the document.

If your complaint refers to deficiencies on the face of the document, the recorder’s office ought to take action. One of the problems here is that the office handles electronic recording via contracts who sign a Memorandum of Understanding with her office and become “trusted submitters.” Title companies, law offices, and banks are among the trusted sources. It appears to me that the mere submission of these documents in electronic form gives rise to the presumption that they are valid even if the notarization is plainly wrong and defective.

If the recording office refuses to review the document, a lawsuit in mandamus would apply to force the recorder to do their job. If they refer matters to the County Attorney’s office, the County Attorney should NOT be permitted to claim attorney client privilege to block the right of the person submitting the document or objection from know the basis of the denial. You have 10 years to challenge a document in terms of notary acknowledgement which means that you can go back to May 24, 2002, as of today.

One thing that readers should keep in mind is that invalidating the notarization does not, in itself, invalidate the documents. Arizona is a race-notice state though which means the first one to the courthouse wins the race. So if you successfully invalidate the notarization then that effectively removes the offending document as a recorded document to be considered in the chain of title. Any OTHER document recorded that was based upon the recording of the offending document would therefore NOT be appropriately received and recorded by the recording office.

So a Substitution of Trustee that was both robo-signed and improperly notarized could theoretically be corrected and then recorded. But between the time that the recorder’s correction is filed (indicating that the document did not meet the standards for recording) and the time of the new amended or corrected document, properly signed and notarized is recorded, there could be OTHER instruments recorded that would make things difficult for a would-be foreclosure by a pretender lender.

The interesting “ringer” here is that the person who signed the original document may no longer be able to sign it because they are unavailable, unemployed, or unwilling to again participate in robosigning. And the notary is going to be very careful about the attestation, making sure they are only attesting to the validity of the signature and not to the power of the person signing it.

It seems that there is an unwritten policy (we are trying to get the Manual through Darrell’s efforts) whereby filings from homeowners who can never file electronically, are reviewed for content. If they in any way interfere with the ability of the pretender lender to foreclose they are sent up to the the County Attorney’s office who invariably states that this is a non-consensual lien even if the word lien doesn’t appear on the document. I asked Ms. Purcell how many documents were rejected if they were filed by trusted submitters. I stated that I doubted if even one in the last month could be cited and that the same answer would apply going back years.

So the county recorder’s office is rejecting submissions by homeowners but not rejecting submissions from banks and certain large law firms and title companies (which she said reduced in number from hundreds to a handful).

What the pretenders are worried about of course, is that anything in the title chain that impairs the quality of title conveyed or to be covered by title insurance would be severely compromised by anything that appears in the title record BEFORE they took any action.

If a document upon which they were relying, through lying, is then discounted by the recording office to be NOT regarded as recorded then any correction after the document filed by the homeowner or anyone else might force them into court to get rid of the impediment. That would essentially convert the non-judicial foreclosure to a judicial foreclosure in which the pretenders would need to plead and prove facts that they neither know or have any evidence to support, most witnesses now being long since fired in downsizing.

The other major thing that Ms Purcell stated was that as to MERS, she was against it from the beginning, she thought there was no need for it, and that it would lead to breaks in the chain of title which in her opinion did happen. When asked she said she had no idea how these breaks could be corrected. She did state that she thought that many “mistakes” occurred in the MERS system, implying that such mistakes would not have occurred if the parties had used the normal public recording system for assignments etc.

And of course you know that this piece of video, while it supports the position taken on this blog for the last 5 years, avoids the subject of why the MERS system was created in the first place. We don’t need to speculate on that anymore.

We know that the MERS system was used as a cloak for multiple sales and assignments of the same loan. The party picked as a “designated hitter” was inserted by persons with access to the system through a virtually non-existence security system in which an individual appointed themselves as the authorized signor for MERS or some member of MERS. We know that these people had no authorized written  instructions from any person in MERS nor in the members organization to execute documents and that if they wanted to, they could just as easily designated any member or any person or any business entity to be the “holder” or “investor.”

The purpose of MERS was to put a grand glaze over the fact that the monetary transactions were actually off the grid of the claimed securitization. The single transaction was between the investor lenders whose money was kept in a trust-like account and then sued to fund mortgages with the homeowner borrower. At not time was that money ever in the chain of securitization.

The monetary transaction is both undocumented and unsecured. At no time was any transaction, including the original note and mortgage (or deed of trust) reciting true facts relating to the loan by the payee of the note or the secured party under the mortgage or deed of trust. And at no time was the payee or secured holder under the mortgage or deed of trust ever expecting to receive any money (other than fees for pretending to be the “bank”) nor did they ever receive any money. At no time did MERS or any of its members handle, disburse or otherwise act even as a conduit for the funding of the loan.

Hence the mortgage or deed of trust secured an obligation to the payee on the note who was not expecting to receive any money nor did they receive any money. The immediate substitution of servicer for the originator to receive money shows that in nearly every securitization case. Any checks or money accidentally sent to the originator under the borrower’s mistaken impression that the originator was the lender (because of fraudulent misrepresentations) were immediately turned over to another party.

The actual party who made the loan was a large group of institutional investors (pension funds etc.) whose money had been illegally pooled into a PONZI scheme and covered over by an entirely fake and fraudulent securitization chain. In my opinion putting the burden of proof on the borrower to defend against a case that has not been alleged, but which should be (or dismissed) is unfair and a denial of due process.

In my opinion you stand a much greater chance of attacking the mortgage rather than the obligation, whether or not it is stated on the note. Admitting the liability is not the same as admitting the note represents the deal that the borrower agreed to. Counsel should object immediately, when the pretender lender through counsel states that the note is or contains a representation of the deal reached by the borrower and the lender. Counsel should state that borrower denies the recitations in the note but admits the existence of an obligation to a lender whose identity was and remains concealed by the pretender in the foreclosure action. The matter is and should be put at issue. If the Judge rules against you, after you deny the validity of the note and the enforceability and validity of the note and mortgage, then he or she is committing reversible error even if the borrower would or probably would lose in the end as the Judge would seem to predict.

Trial is the only way to find out. If the pretenders really can prove the money is owed to them, let them prove it. If that money is theirs, let them prove it. If there is nobody else who would receive that money as the real creditor, let the pretender be subject to discovery. And they MUST prove it because the statute ONLY allows the actual creditor to submit a “credit bid” at auction in lieu of cash. Any auction in which both the identity of the creditor and the amount due was not established was and remains in my opinion subject to attack with a motion to strike the deed on foreclosure (probably on many grounds) based upon failure of consideration, and anyone who bids on the property with actual cash, should be considered the winner of the auction.

DON’T Leave Your Money on the Table

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Editor’s Comment:

The number of people passing up the administrative review process is appallingly low, considering the fact that many if not most homeowners are leaving money on the table — money that should rightfully be paid to them from wrongful foreclosure activity (from robo-signing to outright fraud by having non-creditors take title and possession).

The reason is simple: nobody understands the process including lawyers who have been notoriously deficient in their knowledge of administrative procedures, preferring to stick with the more common judicial context of the courtroom in which many lawyers have demonstrated an appalling lack of skill and preparation, resulting in huge losses to their clients.

The fact is, administrative procedures are easier than court procedures especially where you have mandates like this one. The forms of complaints and evidence are much more informal. It is much harder for the offending party to escape on a procedural technicality without the cause having been heard on the merits. 

The banks were betting on two thngs when they agreed to this review process — that people wouldn’t use it and that even if they used it they would fail to state the obvious: that the money wasn’t due or in default, that it was paid and that only a complete accounting from all parties in the securitization chain could determine whether the original debt was (a) ever secured and (b) still existence. They knew and understood that most people would assume the claim was valid because they knew that the loan was funded and that they had executed papers that called for payments that were not made by the borrower.

But what if the claim isn’t valid? What if the loan was funded entirely outside the papers they signed at closing? What if the payments were not due? What if the payments were not due to this creditor? And what if the payments actually were made on the account and the supposed creditor doesn’t exist any more? Why are you assuming that the paperwork at closing was any more real than the fraudulent paperwork they submitted during foreclosure?

People tend to think that if money exchanged hands that the new creditor would simply slip on the shoes of a secured creditor. Not so. If the secured debt is paid and not purchased then the new debt is unsecured even if the old was secured. But I repeat here that in my opinion the original debt was probably not secured which is to say there was no valid mortgage, note and could be no valid foreclosure without a valid mortgage and default.

Wrongful foreclosure activity includes by definition wrongful auctions and results. Here are some probable pointers about that part of the foreclosure process that were wrongful:

1. Use the fraudulent, forged robosigned documents as corroboration to your case, not the point of the case itself.

2. Deny that the debt was due, that there was any default, that the party iniating the foreclosure was the creditor, that the party iniating the foreclosure had no right to represent the creditor and didn’t represnet the creditor, etc.

3. State that the subsitution of trustee was an unauthorized document if you are in a nonjudicial state.

4. State that the substituted trustee, even if the substitution of trustee was deemed properly executed, named trustees that were not qualified to serve in that they were controlled or owned entities of the new stranger showing up on the scene as a purported “creditor.”

5. State that even if the state deemed that the right to intiate a foreclosure existed with obscure rights to enforce, the pretender lender failed to establish that it was either the lender or the creditor when it submitted the credit bid.

6. State that the credit bid was unsupported by consideration.

7. State that you still own the property legally.

8. State that if the only bid was a credit bid and the credit bid was invalid, accepted perhaps because the auctioneer was a controlled or paid or owned party of the pretender lender, then there was no bid and the house is still yours with full rights of possession.

9. The deed issued from the sale is a nullity known by both the auctioneer and the party submitting the “credit bid.”

10. Demand to see all proof submitted by the other side and all demands for proof by the agency, and whether the agency independently investigated the allegations you made. 

 If you lose, appeal to the lowest possible court with jurisdiction.

Many Eligible Borrowers Passing up Foreclosure Reviews

By Julie Schmit

Months after the first invitations were mailed, only a small percentage of eligible borrowers have accepted a chance to have their foreclosure cases checked for errors and maybe win restitution.

By April 30, fewer than 165,000 people had applied to have their foreclosures checked for mistakes — about 4% of the 4.1 million who received letters about the free reviews late last year, according to the Office of the Comptroller of the Currency. The reviews were agreed to by 14 major mortgage servicers and federal banking regulators in a settlement last year over alleged foreclosure abuses.

So few people have responded that another mailing to almost 4 million households will go out in early June, reminding them of the July 31 deadline to request a review, OCC spokesman Bryan Hubbard says.

If errors occurred, restitution could run from several hundred dollars to more than $100,000.

The reviews are separate from the $25 billion mortgage-servicing settlement that state and federal officials reached this year.

Anyone who requests a review will get one if they meet certain criteria. Mortgages had to be in the foreclosure process in 2009 or 2010, on a primary residence, and serviced by one of the 14 servicers or their affiliates, including Bank of America, JPMorgan Chase, Citibank and Wells Fargo.

More information is at independentforeclosurereview.com.

Even though letters went to more than 4 million households, consumer advocates say follow-up advertising has been ineffective, leading to the low response rate.

Many consumers have also grown wary of foreclosure scams and government foreclosure programs, says Deborah Goldberg of the National Fair Housing Alliance.

“The effort is being made” to reach people, says Paul Leonard, the mortgage servicers’ representative at the Financial Services Roundtable, a trade group. “It’s hard to say why people aren’t responding.”

With this settlement, foreclosure cases will be reviewed one by one by consultants hired by the servicers but monitored by regulators.

With the $25 billion mortgage settlement, borrowers who lost homes to foreclosure will be eligible for payouts from a $1.5 billion fund.

That could mean 750,000 borrowers getting about $2,000 each, federal officials have said.

For more information on that, go to nationalmortgagesettlement.com.

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

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Editor’s Comment:

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

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

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

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

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

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

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

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

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

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

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

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

Residential mortgage fraud; classification; definitions in Arizona

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

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

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

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


HOMES BEING SOLD TWICE BY BANKS

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

EDITOR’S NOTE: This is exactly the result you can expect when you allow anyone to play the part of the creditor and submit a “credit bid” (no money at auction) or selling the house on a short-sale, pretending that they can execute a satisfaction of mortgage when they can’t. And this is exactly the problem that is going to get increasingly complex as the title records are revealed to have just as many problem — in fact exactly as many problems as the foreclosure and mortgage problems in so-called securitized loans that were never actually documented and securitized.

Contrary to what you will hear elsewhere, this is neither an isolated instance nor a situation that can distinguished from ALL the other foreclosures, sales, auctions, etc. stemming from the table-funded loans violating TILA, violating RESPA, violating the securities laws, based upon appraisal fraud, and using dummy entities as “bankruptcy remote” vehicles to ACT as creditors.

If your loan was the subject of a securitization attempt, whether successful or not, it is my de finite opinion to all lawyers that you look at the issue of clouded title, defective title and unmarketable title. I don’t think there is a title company in existence, unless it is owned or controlled by the pretender lenders, that will issue a title policy on any of the tens of millions of properties that were subject to so-called loan or possibly security transactions. You can check it out for yourself.

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Stern’s foreclosure mistake leads two to buy same house

Paperwork error complicates home sale, raises questions about process

By Diane C. Lade and Doreen Hemlock, Sun Sentinel5:00 p.m. EST, December 4, 2010

    fl-home-sold-twice-1204-20101203

Real estate investor Marjorie Oster was pleased when she snagged what looked like a good deal through a Miami-Dade County foreclosure court auction: a four-bedroom house in Cutler Bay, with a swimming pool, for about $95,000.

But when her husband drove by the next day to check on the property, he saw “someone cleaning the pool, a lawn service cutting the grass and a note it was being tented for termites,” said Oster, a Miami resident who has been in real estate for 15 years.

It turns out the house she thought she had purchased had been sold in a short sale the week before to someone else — Osberto Jimenez, a 40-year-old Cuban-born truck driver. The law firm handling the foreclosure for the lender mishandled the paperwork and never canceled the auction sale.

“So we both own the same house and I’m frustrated as hell,” said Oster. “Someone screwed up.”

New attorneys representing CitiMortgage say that “someone” was David Stern’s beleagured law office, which originally represented the lender. Citi ultimately pulled the case from Stern’s offices and gave it to Shapiro and Fishman, another large South Florida foreclosure firm that represents banks and loan servicers.

Both law offices, along with two others, are under investigation by the Florida Attorney General. They’re accused of engaging in shoddy pratices, including fabricating documents. Shapiro and Fishman has defended its practices and said it did nothing wrong. Jeffrey Tew, the attorney representing Stern, declined to comment.

Stern, who at one point claimed he processed 20 percent of the state’s foreclosures through a staff of more than 1,000, has been forced to lay off the vast majority of his employees as his biggest clients continue to abandon him. Citi spokesman Mark Rodgers declined to comment specifically on the Cutler Bay double sale, but said the company stopped referring new foreclosures to Stern in September and now has removed all of its business from the firm.

Federal lawmakers, listening to testimony at a Senate Banking Committee hearing this week, said ongoing and widespread problems with loan servicing and foreclosures indicated a “significant weakness” in the entire system. Attorneys general in 50 states continue to investigate reports of servicers and foreclosure firms like Stern’s “robo-signing” hundreds of thousands of affidavits without reviewing them.

“We are seeing more instances of mistakes being made,” said Darryl Wilson, a professor and real estate expert at Stetson University‘s College of Law. “That’s why you keep seeing moratoriums [on foreclosures] coming up.”

At Wednesday’s Senate hearings, some federal regulators urged mortgage guarantors Fannie Mae and Freddie Mac to suspend foreclosure proceedings while homeowners looked for new mortgages or tried to work out loan modifications.

In the situation with the Cutler Bay house, attorney Leora B. Freire, with Shapiro and Fishman, said Stern’s office didn’t notify the courts to take the house out of the foreclosure auction after the short sale had been processed.

Oster and Citi reached an agreement Wednesday, Freire said, vacating Oster’s sale, which allows Jimenez to keep the house. Oster said she would be refunded her money, paid some interest, and have her legal fees covered.

Documents show Oster bought the property for cash on Oct. 6 and received a certificate of title. Seven days earlier, Jimenez executed a warranty deed and took out a $123,000 mortgage in a short sale approved by CitiMortgage and the previous owners.

The tsumani of negative news about Stern’s operation had Oster fearing she never would see her money again. She said she contacted the office numerous times for more than a month, but attorneys either would never return her calls or couldn’t tell her what had happened to her payment.

“I just wanted out because it was David Stern’s firm,” she said.

Mortgage giants Fannie Mae and Freddie Mac, who comprised the majority of Stern’s referrals, pulled all of their cases from the firm over the past two months. Shapiro and Fishman, however, remain on Fannie’s referral list.

Darryl Wilson, a professor and real estate expert at Stetson University’s College of Law, said that while selling the same house twice was “quite strange,” it does happen – and increasingly more so lately, as lenders, attorneys and the courts scramble to push a huge number of foreclosures through the pipeline. “There needs to be a lot more diligence and patience in dealing with these cases,” he said.

While there is no specific statute addressing double sales, Wilson said basic common law suggests that the first person buying the property would have the first rights to it. But the outcome could vary according to the specifics in each case, Wilson said.

Jimenez, who came from Cuba five years ago, said he always assumed he would get to keep his home because he bought it first. He already has started renovating the kitchen, and has decorated the front yard with holiday lights.

“I knew things would get resolved. I did everything legal,” he said.

Diane Lade can be reached at dlade@SunSentinel.com or 954-356-4295.

IF THE GLOVE DOESN’T FIT, YOU MUST ACQUIT

IF THE PRETENDER LENDER DOES NOT HAVE THE POWER, AUTHORITY, RIGHT TITLE OR INTEREST TO EXECUTE A SATISFACTION OF MORTGAGE, THEN THEY HAVE NO RIGHT TO FORECLOSE IT. HERE IS ARIZONA’S STATUTE ON SATISFACTION OF MORTGAGES: NOTE THE REFERENCES TO LOST NOTES VERSUS LOST MORTGAGES.

33-707. Acknowledgment of satisfaction; recording

A. If a mortgagee, trustee or person entitled to payment receives full satisfaction of a mortgage or deed of trust, he shall acknowledge satisfaction of the mortgage or deed of trust by delivering to the person making satisfaction or by recording a sufficient release or satisfaction of mortgage or deed of release and reconveyance of the deed of trust, which release, satisfaction of mortgage or deed of release and reconveyance shall contain the docket and page number or recording number of the mortgage or deed of trust. It shall not be necessary for the trustee to join in the acknowledgment or satisfaction, or in the release, satisfaction of mortgage or deed of release and reconveyance. The recorded release or satisfaction of mortgage or deed of release and reconveyance constitutes conclusive evidence of full or partial satisfaction and release of the mortgage or deed of trust in favor of purchasers and encumbrancers for value and without actual notice.

B. When a mortgage or deed of trust is satisfied by a release or satisfaction of mortgage or deed of release and reconveyance, except where the record of such deed of trust or mortgage has been destroyed or reduced to microfilm, the recorder shall record the release or satisfaction of the deed of trust or mortgage showing the book and page or recording number where the deed of trust or mortgage is recorded.

C. If the record of such mortgage or deed of trust has been destroyed and the record thereof reduced to microfilm, it shall be sufficient evidence of satisfaction of any such mortgage or deed of trust for the release or satisfaction of mortgage or deed of release and reconveyance to be recorded and indexed as such. The instrument shall sufficiently identify the mortgage or deed of trust by parties and by book and page or recording number of the official records. Such instrument shall be treated as a release or satisfaction of mortgage or deed of release and reconveyance and recorded.

D. If the note secured by a mortgage or deed of trust has been lost or destroyed, the assignee, mortgagee or beneficiary shall, before acknowledging satisfaction, make an affidavit that he is the lawful owner of the note and that it has been paid, but cannot be produced for the reason that it has been lost or destroyed, and the affidavit shall be recorded. If the record of such mortgage or deed of trust has been destroyed and the record thereof reduced to microfilm, such affidavit shall be recorded and indexed as releases, satisfactions of mortgage and deeds of release and reconveyance are recorded and indexed and shall have the same force and effect as a release or satisfaction of a mortgage or deed of release and reconveyance as provided in subsection A of this section.

E. If a full release or satisfaction of mortgage or deed of release and reconveyance of deed of trust that, according to its terms, recites that it secures an obligation having a stated indebtedness not greater than five hundred thousand dollars exclusive of interest, or a partial release or satisfaction of mortgage or partial deed of release and reconveyance of deed of trust that, according to its terms, recites that the payment required for the partial satisfaction or release does not exceed five hundred thousand dollars exclusive of interest, has not been executed and recorded pursuant to subsection A or C of this section within sixty days of full or partial satisfaction of the obligation secured by such mortgage or deed of trust, a title insurer as defined in section 20-1562 may prepare, execute and record a full or partial release or satisfaction of mortgage or deed of full or partial release and reconveyance of deed of trust. No earlier than sixty days after full or partial satisfaction and at least thirty days prior to the issuance and recording of any such release or satisfaction of mortgage or deed of release and reconveyance pursuant to this subsection, the title insurer shall mail by certified mail with postage prepaid, return receipt requested, to the mortgagee of record or to the trustee and beneficiary of record and their respective successors in interest of record at their last known address shown of record and to any persons who according to the records of the title insurer received payment of the obligation at the address shown in such records, a notice of its intention to release the mortgage or deed of trust accompanied by a copy of the release or satisfaction of mortgage or deed of release and reconveyance to be recorded which shall set forth:

1. The name of the beneficiary or mortgagee or any successors in interest of record of such mortgagee or beneficiary and, if known, the name of any servicing agent.

2. The name of the original mortgagor or trustor.

3. The name of the current record owner of the property and if the release or satisfaction of mortgage or deed of release and reconveyance is a partial release, the name of the current record owner of the parcel described in the partial release or satisfaction of mortgage or deed of partial release and reconveyance of deed of trust.

4. The recording reference to the deed of trust or mortgage.

5. The date and amount of payment, if known.

6. A statement that the title insurer has actual knowledge that the obligation secured by the mortgage or deed of trust has been paid in full, or if the release or satisfaction of mortgage or deed of release and reconveyance of deed of trust is a partial release, a statement that the title insurer has actual knowledge that the partial payment required for the release of the parcel described in the partial release or satisfaction has been paid.

F. The release or satisfaction of mortgage or release and reconveyance of deed of trust may be executed by a duly appointed attorney-in-fact of the title insurer, but such delegation shall not relieve the title insurer from any liability pursuant to this section.

G. A full or partial release or satisfaction of mortgage or deed of full or partial release and reconveyance of deed of trust issued pursuant to subsection E of this section shall be entitled to recordation and, when recorded, shall constitute a full or partial release or satisfaction of mortgage or deed of release and reconveyance of deed of trust issued pursuant to subsection A or C of this section.

H. Where an obligation secured by a deed of trust or mortgage was paid in full prior to September 21, 1991, and no release or satisfaction of mortgage or deed of release and reconveyance of deed of trust was issued and recorded by November 20, 1991, a release or satisfaction of mortgage or deed of release and reconveyance of deed of trust as provided for in subsection E of this section may be prepared and recorded without the notice prescribed by subsection E of this section.

I. A release or satisfaction of mortgage or a release and reconveyance of deed of trust by a title insurer under the provisions of subsection E of this section shall not constitute a defense nor release any person from compliance with subsections A through D of this section or from liability under section 33-712.

J. In addition to any other remedy provided by law, a title insurer preparing or recording the release and satisfaction of mortgage or the release and reconveyance of deed of trust pursuant to subsection E of this section shall be liable to any party for actual damage, including attorney fees, which any person may sustain by reason of the issuance and recording of the release and satisfaction of mortgage or release and reconveyance of deed of trust.

K. The title insurer shall not record a release and satisfaction of mortgage or release and reconveyance of deed of trust if, prior to the expiration of the thirty day period specified in subsection E of this section, the title insurer receives a notice from the mortgagee, trustee, beneficiary, holder or servicing agent which states that the mortgage or deed of trust continues to secure an obligation, or in the case of a partial release or satisfaction of mortgage or deed of partial release and reconveyance of deed of trust, a notice that states that the partial payment required to release the parcel described in the partial release or satisfaction has not been paid.

L. The title insurer may charge a reasonable fee to the owner of the land or other person requesting a release and satisfaction of mortgage or release and reconveyance of deed of trust for services, including but not limited to search of title, document preparation and mailing services rendered, and may in addition collect official fees.

Moral Hazard in Non-Judicial Sale: Trustee commits violations of FDCPA and other statutes!

From Eaine B

Editor’s Note: I have long advocated sending letters, objections to sale and complaints against “trustees” named (or substituted) on deeds of trust who initiate foreclosure proceedings. Indeed, it is highly probable that because of statutes attempting to protect the trustee from liability, the trustee is at best usually named only as a nominal party in a lawsuit challenging the legality of the non-judicial sale, demanding the identity and contact information of the creditor and getting a full accounting from the real creditor.

I would argue that this reader’s comment is more on target than they even know. Because that is the point — knowledge. If the “trustee” knowingly proceeds when it KNOWS there is a question of title, a question of who is the creditor, and knows that this loan was sold to third parties that have not been disclosed to the Trustor nor the Trustee, then the trustee is more than a nominal party, to wit: they are a co-venturer in a  fraudulent scheme.

Typically non-judicial action commences under a “substitute trustee”.  One would ask why it was necessary to call in a “substitute trustee” from the bullpen, when the current one is just fine. The only possible answer is that the old trustee either doesn’t want any part of this, or won’t do it without following industry standards to confirm ownership etc. It would seem fairly obvious that if the existing trustee is still in business and continues to qualify as a trustee, the only rational reason to change trustees is because the actors wish to do business with people who won’t ask questions.

Often the “substitution of trustee” is backdated, undated or dated after the notice of sale, notice of default etc., so there is a simple procedural angle to set back the sale if you are actually reading the documents, and getting a title report.

More substantively, the “substitute trustee” is granted that position by a party who in all probability does not have the power to grant it — but that requires a forensic analysis, title report, and probably a lawsuit to establish. For example, if some person unknown to MERS assumes the title of “assistant Vice president of Mortgage Electronic Registration Systems” and signs the substitution of trustee or any other document, they probably lack the power to do so, or they lack the documentation showing they have the power to do so.

This actually runs to the core of moral hazard in non-judicial states. Anyone who knows you have missed payments, could file a “substitution of Trustee” document in the county records, send you a notice of default, notice of sale and sell your property to the highest bidder — all BEFORE your real servicer (who we know is only a pretender lender) even knows about it. It is a scam waiting to happen. The scammer then takes the money and runs. Meanwhile you have most likely given up and left the house so it is now abandoned. This scenario can only happen in non-judicial states, where the statute authorizing a non-judicial foreclosure sale ASSUMES that the right party is doing the right thing under proper authority.

When mortgages were simple, and securitization was only an idea, the opportunity for abuse in non-judicial states was present but generally controllable because your true lender had control of the loan, they knew when you were delinquent, and they would be in touch with you, during which time it might come out that you had already received a notice of sale from a “substitute trustee.”

In the world of securitization where the potential real parties in interest are almost infinite in number, where the credit report is used rather than the title report, and where various layers of companies are used to create plausible deniability, insulation from liability and the ability to move things around “off-balance sheet” or “off record” at the county recorder’s office, the potential for abuse is practically infinite. And true to form, my experience is that virtually every foreclosure in a non-judicial state contains at least the taint of this abuse and often facially shows the failure to use proper documentation.

Comment submitted by Eaine B—–

Trustee commits violations of Fair Debt Collections Practice Act!
A good cause of action against Northwest Trustee Services Inc, Routh Crabtree Olsen PS is that I have found they sell your private information to the public. Go to http://www.usa-foreclosoure.com and find your foreclosure….then buy for $39.00 a copy of the title report that is supposed to be private between the trustee and the beneficiary. Any public person can order your report online. This is mail and interstate violations. Make a complaint to the Bar association, and the FTC and your state Attorney General.
Call the title company on the top of the form and ask them. Then perhaps you can file a suit against Routh Crabtree Olsen and Northwest Trustee Services Inc for violations of 15 USC 1692 Fair Debt Collection Practices Act violation. It’s triple damages. Most likely they will have sent you a letter from Routh Crabtree Olsen. One I got even quotes the 15 USC 1692. So obviously THEY know about it. The owner of Routh, Crabtree and Olsen is Stephen Routh and Lance Olsen. Routh has various companies in AK, MT, AZ, CA etc. Just look at the list on the various web sites. http://www.usa-foreclosure.com has the same address as Routh Crabtree Olsen and Northwest Trustee Services and as Routh in AK.
Also, the process serving company that they use is owned by them.

Credit Card Companies geting tougher? FIGHT BACK with securitization defenses!

See the thing about the arrogance of these non-bank and bank financial institutions is they are rushing to get under the wire before the truth is revealed: they are not the creditor and they never were. Send your debt validation letters and don’t let them sue without filing a motion to dismiss the same as the foreclosure actions. They have nothing. They are just pretender lenders just like the mortgage companies.

Credit Default Swaps Defined and Explained

Editor’s Comments: Everyone now has heard of credit default swaps but very few people understand what they mean and fewer still understand their importance in connection with the securitization of residential mortgage loans and other types of loans.The importance of understanding the operation of a CDS contract in the context of foreclosure defense cannot be understated.

In summary, a CDS is insurance even though it is defined as not being insurance by Federal Law. In fact, Federal Law allows these instruments to be traded as unregulated securities and treats them as though they were not securities.

Anyone can buy a CDS. In the securitization of loans, anybody can “bet” against a derivative security ( like mortgage backed bonds) by purchasing a CDS. FURTHER THEY CAN PURCHASE MULTIPLE BETS (CDS) AGAINST THE SAME SECURITY. In the mortgage meltdown, Goldman and other insiders created the mortgage backed bonds to fail — collecting a commission and profit in the process — and using the proceeds of sales of mortgage backed securities to purchase CDS contracts for themselves. So they were betting against the value of the security they had just sold to investors. The investors (pension funds, sovereign wealth funds etc.) of course knew nothing of this practice until long after they had purchased the bonds.

The bonds were represented to be “backed” by mortgage loans that collectively received a Triple AAA rating from the rating agencies who were obviously in acting in concert with the investment bankers who issued and sold the bonds. There were also other contracts that were purchased using the proceeds of the sale of the bonds that performed the same function — i.e., when the bonds were downgraded or failed, there was a payoff to the lucky investment banker who issued them or the lucky “trader” or bought the insurance or CDS. Sometimes the proceeds were used to pacify the investors and sometimes they were not.

The significance of this in foreclosure defense, is that while the investors were getting bonds for their investment, the bonds incorporated the mortgage loans, which is another way of saying that the investors were funding the loans through a series of steps starting with their purchase of mortgage backed bonds. Thus it was the investor who was the ONLY creditor in the transaction that funded a homeowner’s loan (at least initially before bailouts and payoffs of insurance and proceeds of CDS contracts).

The other item of significance is that the securities did not need to actually fail for the CDS to pay off. That is precisely why AIG got into an argument with Goldman Sachs that eventually led to the bailout. All that was needed was for the issuer or some other “trustworthy” source to downgrade the value of the bonds or announce that a substantial number of the loans in the pool were in danger of default, and that was enough to claim payment on the CDS contract.

The translation of that is that even if your loan was paid up or only slightly behind, someone was getting paid on a CDS contract in which a series of mortgage backed bonds were marked down in value. This payment was received by the investment banker who was the central figure in the securitization chain. And, as stated above, sometimes these proceeds were shared with investors and sometimes they were not — which is why identification of the creditor and getting a complete accounting is so important.

But the issue goes deeper than that. The investment banker was acting as the agent or conduit for both the actual creditor “investor) who was lending the money and the debtor (borrower or homeowner) who was borrowing the money. Therefore the payment of proceeds in a CDS may have accomplished one or more of the following:

  1. Cure of any default by the debtor as far as the creditor was concerned, since the investor or its agent received the money.
  2. Satisfaction through payment of all or part of the borrower’s obligation.
  3. Obfuscation of the real accounting for the money that exchanged hands
  4. Payment of an excess amount above the amount owed by the debtor which might be a liability to the debtor under TILA, a liability to the investor, or both, plus treble damages, rescission rights, and attorneys fees.
  5. Opening the door for non-creditors to step into the shoes of the actual creditor who has been paid, and claim that the debtor’s non-payment created a default even though the creditor or his agents is holding money paid on the obligation that either cures the default, satisfies the obligation in full, creates excess proceeds which under the note and applicable law should be returned to the debtor.
  6. Creates an opportunity for some party to get a “free house.” In the current environment nearly all of the houses obtained without investment or funding of one dime is going to these intermediaries whom I have dubbed pretender lenders. Note that the financial services industry has taken control of the narrative and framed it such that homeowners are claiming a free home when they borrowed money fair and square. But at least homeowners have put SOME money into the deal through payments, down payments, or lending their credit to these dubious transactions. The free house, as things now stand is going to parties who never invested a penny in the funding of the home and who stand to lose nothing if denied the right to foreclose.

FROM WIKIPEDIA —–The article below comes from www.wikipedia.com

A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) undergoes a defined ‘Credit Event‘, often described as a default (fails to pay). However the contract typically construes a Credit Event as being not only ‘Failure to Pay’ but also can be triggered by the ‘Reference Credit’ undergoing restructuring, bankruptcy, or even (much less common) by having its credit rating downgraded.

CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the events specified in the contract occurs. However, there are a number of differences between CDS and insurance, for example:

  • The buyer of a CDS does not need to own the underlying security or other form of credit exposure; in fact the buyer does not even have to suffer a loss from the default event.[1][2][3][4] In contrast, to purchase insurance, the insured is generally expected to have an insurable interest such as owning a debt obligation;
  • the seller need not be a regulated entity;
  • the seller is not required to maintain any reserves to pay off buyers, although major CDS dealers are subject to bank capital requirements;
  • insurers manage risk primarily by setting loss reserves based on the Law of large numbers, while dealers in CDS manage risk primarily by means of offsetting CDS (hedging) with other dealers and transactions in underlying bond markets;
  • in the United States CDS contracts are generally subject to mark to market accounting, introducing income statement and balance sheet volatility that would not be present in an insurance contract;
  • Hedge accounting may not be available under US Generally Accepted Accounting Principles (GAAP) unless the requirements of FAS 133 are met. In practice this rarely happens.

However the most important difference between CDS and Insurance is simply that an insurance contract provides an indemnity against the losses actually suffered by the policy holder, whereas the CDS provides an equal payout to all holders, calculated using an agreed, market-wide method.

There are also important differences in the approaches used to pricing. The cost of insurance is based on actuarial analysis. CDSs are derivatives whose cost is determined using financial models and by arbitrage relationships with other credit market instruments such as loans and bonds from the same ‘Reference Entity’ to which the CDS contract refers.

Insurance contracts require the disclosure of all risks involved. CDSs have no such requirement, and, as we have seen in the recent past, many of the risks are unknown or unknowable. Most significantly, unlike insurance companies, sellers of CDSs are not required to maintain any capital reserves to guarantee payment of claims. In that respect, a CDS is insurance that insures nothing.

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