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STANDING: THE CRUX TO DEFENDING FALSE CLAIMS OF SECURITIZATION OF MORTGAGE LOANS

Posted on October 8, 2018 by Neil Garfield

Mortgage foreclosure is the civil equivalent of the death penalty. in criminal cases. Many court decisions have enthusiastically supported that notion and attached much more stringent rules to the enforcement of a mortgage or deed of trust than they use in enforcement of a note. That is, until the last 20 years.

If you begin with the assumption that securitization is false, you start looking at the cover-up. Banks continue to win foreclosures because the truth is counterintuitive. Tactically the homeowner does not need to prove securitization fail in order to block a foreclosure. If that was the goal you would need to know and prove things that are in the exclusive possession, care, custody, and control of documents of third parties who are not even parties to the litigation nor mentioned in correspondence, notices or forms.

Successful defenders know that the securitization is faked and use that knowledge to ferret out relevant grounds to undermine and impeach testimony and documents proffered by lawyers for “stand-ins” called “naked nominees”, “lenders,” successors by merger, attorneys in fact, etc. wherein each such designation represents another layer of obfuscation.

Legal standing requires that the party who brings a foreclosure action must have legal injury resulting solely from nonpayment of the debt. The Federal Practice Manual published by and for Legal Aid describes and analyses gives good guidance that should be followed up with competent legal research of statutes and cases in your state.

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

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

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

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

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

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see Legal Aid Federal Practice Manual on STANDING

Published by the Sargent Shriver National Center on Poverty Rights

Here are some of the more salient quotes from the guide.

The law of standing has its roots in Article III’s case and controversy requirement.1 The U.S. Supreme Court has established a three-part test for standing. The “irreducible constitutional minimum of standing” requires the plaintiff to establish:

First … an “injury in fact”—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) “actual or imminent,” not “conjectural” or “hypothetical.” Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be “fairly … trace[able] to the challenged action of the defendant, and not … th[e] result [of] the independent action of some third party not before the court.” Third, it must be “likely,” as opposed to merely “speculative,” that the injury will be “redressed by a favorable decision.”2

So the ONLY party with standing to bring an action to foreclose on a mortgage is (a) the party who would suffer economic loss if the debt is paid (and the party entitled to payments on the debt) and (b) the party who would actually receive the proceeds of sale in a foreclosure action because they are holding a loan receivable reflecting ownership of the debt relating to the subject mortgage.

Both defense attorneys and judges have made the mistake of confusing standing to collect on a note, which does not necessarily require ownership of a debt, and standing to foreclose or otherwise enforce a mortgage which does require ownership of the debt. This is the law in every state under their adoption of the Uniform Commercial Code (UCC — Article 3 (NOTE) and Article 9 (MORTGAGE).

The cover for this erroneous conclusion is amply provided by the failure of homeowners to object resulting in default foreclosure sales. And further cover is provided by the fact that the delivery of the original note is presumed to be delivery of ownership of the debt. However, this is ONLY true if the execution of the note merged with the debt.

Merger ONLY occurs if the note and the debt are, in fact, the same, i.e., the Payee on the note is the same as the creditor who loaned the money. Banks have engaged in various illusions to cause courts to assume that merger occurred. But in fact, the substance of the loan transaction remains the same as what I wrote 10 years ago, to wit: (1) the sale of certificates naming an issuer without existence on behalf of the “underwriter”/”master servicer” of the nonexistent entity, (2) the underwriter taking the money and using it, in part, to fund loans through pre-purchase agreements (before anyone has even applied for loan) and through form warehouse loans that are in substance pre-purchase of loans.

Hence in all cases the money at the closing table came from the underwriter forwarding the funds to the closing agent. Since the money came from parties intending to be investors, the owner of the debt is (a) a group of investors (b) the underwriter or (c) both the group of investors and the underwriter, with the underwriter acting as agent. But the agency of the underwriter is at the very least problematic.

The underwriter may claim that the agency arises because of the Pooling and Servicing Agreement for the nonexistent “REMIC TRUST” to which the investors agreed. But the investors would be quick to point out (and have done so in hundreds of lawsuits) that the PSA and the “Trust” were sham conduits and fabricated documents to create the illusion that investor money would be entrusted to the named Trustee for administration within a trust, not a blanket power of attorney for the underwriter to use the money anyway they wished. It is the opposite of a power of attorney or agency because it arises by breach of the terms and conditions of the sale of the certificates.

While the standing test is easily stated, it can be difficult to apply. The Supreme Court has observed that “[g]eneralizations about standing to sue are largely worthless as such.”3

The Supreme Court also imposes “prudential” limitations on standing to ensure sufficient “concrete adverseness.”4 These include limitations on the right of a litigant to raise another person’s legal rights, a rule barring adjudication of generalized grievances more appropriately addressed legislatively, and the requirement that a plaintiff’s complaint must fall within the zone of interests protected by the statute at issue.5

The Supreme Court has made it clear that the burden of establishing standing rests on the plaintiff.6 At each stage of the litigation—from the initial pleading stage, through summary judgment, and trial—the plaintiff must carry that burden.7Standing must exist on the date the complaint is filed and throughout the litigation.8 Moreover, standing cannot be conferred by agreement and can be challenged at any time (e.s.) in the litigation, including on appeal, by the defendants or, in some circumstances, by the court sua sponte.9 Finally, plaintiffs must demonstrate standing for each claim and each request for relief.10 There is no “supplemental” standing: standing to assert one claim does not create standing to assert claims arising from the same nucleus of operative facts.11

The Supreme Court has held that, to satisfy the injury in fact requirement, a party seeking to invoke the jurisdiction of a federal court must show three things: (1) “an invasion of a legally protected interest,” (2) that is “concrete and particularized,” and (3) “actual or imminent, not conjectural or hypothetical.”12

In foreclosure cases, trial courts have nearly universally found that a party had standing because of legal presumptions without any proof of ownership of the debt. The good practitioner will drill down on this showing that the “presumption” is conjecture or hypothetical and that there is no harm in making the foreclosing party prove its status instead of relying on presumptions.

One last comment on both judicial and nonjudicial foreclosure. In typical civil cases if the defending party makes it clear that he/she is challenging standing, the party bringing the action must then prove it. In foreclosure cases judges typically adopt the position that the homeowner brought it up and must prove the non-existence of standing. This is the opposite of what is required under Article 3 of the US Constitution.

The party who “brought it up” is the foreclosing party. It manifestly wrong to shift the burden to the homeowner just because the foreclosing party asserts, or as in many cases, implies standing, In fact, in my opinion, nonjudicial foreclosure is constitutional but NOT in the way it is applied — by putting an impossible burden on the homeowner that makes it impossible for the homeowner to confront his/her accusers.

WHAT HAPPENS TO THE DEBT IF THE COURTS APPLY THE LAW? The debt still exists in the form of a liability at law and/or in a court of equity. The creditor is a group of investors who have constructive or direct rights to the debt, and potentially the note and mortgage. The difference is that decisions on settlement and modification would be undertaken by the creditors — or designated people they currently trust. And that means the creditors would be maximizing their financial return instead of minimizing it through intermediaries. But there is also the possibility that the investors have in fact been paid or have accepted payment in the form of settlements with the underwriters. Those settlements preserve the illusion of the status quo. In that case it might be that the underwriter is the actual creditor, if they can prove the payment.

HOW CAN THE NOTE BE TRANSFERRED WITHOUT THE DEBT?

Here is an analogy that might help this counterintuitive process.

Assume I own a car. I enter into an agreement with my friend Jane to sell the car to her. I sign the title and give it to her. Afterwards we both decide we didn’t want to do that. Jane pays nothing for the car. Jane does not get the car. Jane never uses the car. I still have and use the car and both Jane and I disregard the fact that I gave her a signed title. She does nothing with the title. Later in a loan application she lists the car as an asset. Then the car is stolen from me.

Who gets the insurance proceeds? The question is whether the title represents an actual agreement to buy the car. And all courts that would boil down to whether or not Jane paid me. She didn’t. I get the insurance proceeds because I lawfully applied for a duplicate title and received it.

But Jane still has one copy of the title signed by me in original form. She has also made copies of it that can be printed out with the appearance of an original. So far, she has sold the car 42 times and taken out 7 loans on the car.

One of the people that received the title records it with the DMV. There is a problem with that. I still have title and possession of the car. The gullible person who “bought” the car has a title signed by Jane, who has produced evidence that she received title from me. One Jane’s lenders on car stops receiving payments from Jane’s Ponzi scheme.

They “repo” the car and we go to court. The lender to Jane has no legal title even though they have what looks like an original title that is facially valid. Do I get my car back or does the lender” get to keep it.

One step further: if jane’s lender was actually a co-conspirator who accepted the false title and never gave a loan, does that change anything? I ask because this is exactly what is happening in nearly all foreclosures. The named “successor” in title engaged in no transaction to acquire the debt.

Transfer of the note was without regard to transferring the debt because neither the grantor nor grantee owned the debt. If the truth comes out, the transfer of the note will be seen as a sham paper transfer and the debt will be owned by whoever has money in the loan deal. Hence transfer of the note is not transfer of the debt. By denying the transfer of the note, the burden of proof should be on the would-be foreclosing party to show it was part of a real transaction.

Filed under: foreclosure | Tagged: ARTICLE 3, BURDEN OF PROOF, conjecture, legal standing, presumptions, proof of payment, PRUDENTIAL STANDING, standing, TRUTH | 3 Comments »

Powers of Attorney — New Documents Magically Appear

Posted on September 29, 2014 by Neil Garfield

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

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BONY/Mellon is among those who are attempting to use a Power of Attorney (POA) that they say proves their ownership of the note and mortgage. In No way does it prove ownership. But it almost forces the reader to assume ownership. But it is not entitled to a presumption of any kind. This is a document prepared for use in litigation and in no way is part of normal business records. They should be required to prove every word and every exhibit. The ONLY thing that would prove ownership is proof of payment. If they owned it they would be claiming HDC status. Not only doesn’t it PROVE ownership, it doesn’t even recite or warrant ownership, indemnification etc. It is a crazy document in substance but facially appealing even though it doesn’t really say anything.

The entire POA is hearsay, lacks foundation, and is irrelevant without the proper foundation be laid by the proponent of the document. I do not think it can be introduced as a business records exception since such documents are not normally created in the ordinary course of business especially with such wide sweeping powers that make no sense — unless you recognize that they are dealing with worthless paper that they are trying desperately to make valuable.

They should have given you a copy of the settlement agreement referred to in the POA and they should have identified the original PSA that is referred to in the settlement agreement. Those are the foundation documents because the POA says that the terms used are defined in the PSA, Settlement agreement or both. I want all documents that are incorporated by reference in the POA.

If you have asked whether the Trust ever paid for your loan, I would like to see their answer.

If CWALT, Inc. or CWABS, Inc., or CWMBS, Inc is anywhere in your chain of title or anywhere else mentioned in any alleged origination or transfer of your loan, I assume you asked for those and I would like to see them too.

The PSA requires that the Trust pay for and receive the loan documents by way of the depositor and custodian. The Trustee never takes possession of the loan documents. But more than that it is important to distinguish between the loan documents and the debt. If there is no debt between you and the originator (which means that the originator named on the note and mortgage never advanced you any money for the loan) then note, which is only evidence of the debt and allegedly containing the terms of repayment is only evidence of the debt — which we know does not exist if they never answered your requests for proof of payment, wire transfer or canceled check.

If you have been reading my posts the last couple of weeks you will see what I am talking about.

The POA does not warrant or even recite that YOUR loan or anything resembling control or ownership of YOUR LOAN is or was ever owned by BONY/Mellon or the alleged trust. It is a classic case of misdirection. By executing a long and very important-looking document they want the judge to presume that the recitations are true and that the unrecited assumptions are also true. None of that is correct. The reference to the PSA only shows intent to acquire loans but has no reference or exhibit identifying your loan. And even if there was such a reference or exhibit it would be fabricated and false — there being obvious evidence that they did not pay for it or any other loan.

The evidence that they did not pay consists of a lot of things but once piece of logic is irrefutable — if they were a holder in due course you would be left with no defenses. If they are not a holder in due course then they had no right to collect money from you and you might sue to get your payments back with interest, attorney fees and possibly punitive damages unless they turned over all your money to the real creditors — but that would require them to identify your real creditors (the investors who thought they were buying mortgage bonds but whose money was never given to the Trust but was instead used privately by the securities broker that did the underwriting on the bond offering).

And the main logical point for an assumption is that if they were a holder in due course they would have said so and you would be fighting with an empty gun except for predatory and improper lending practices at the loan closing which cannot be brought against the Trust and must be directed at the mortgage broker and “originator.” They have not alleged they are a holder in course.

The elements of holder in dude course are purchase for value, delivery of the loan documents, in good faith without knowledge of the borrower’s defenses. If they had paid for the loan documents they would have been more than happy to show that they did and then claim holder in due course status. The fact that the documents were not delivered in the manner set forth in the PSA — tot he depositor and custodian — is important but not likely to swing the Judge your way. If they paid they are a holder in due course.

The trust could not possibly be attacked successfully as lacking good faith or knowing the borrower’s defenses, so two out of four elements of HDC they already have. Their claim of delivery might be dubious but is not likely to convince a judge to nullify the mortgage or prevent its enforcement. Delivery will be presumed if they show up with what appears to be the original note and mortgage. So that means 3 out of the four elements of HDC status are satisfied by the Trust. The only remaining question is whether they ever entered into a transaction in which they originated or acquired any loans and whether yours was one of them.

Since they have not alleged HDC status, they are admitting they never paid for it. That means the Trust is admitting there was no payment, which means they were not entitled to delivery or ownership of the note, mortgage, or debt.

So that means they NEVER OWNED THE DEBT OR THE LOAN DOCUMENTS. AS A HOLDER IN COURSE IT WOULD NOT MATTER IF THEY OWNED THE DEBT — THE LOAN DOCUMENTS ARE ENFORCEABLE BY A HOLDER IN DUE COURSE EVEN IF THERE IS NO DEBT. THE RISK OF LOSS TO ANY PERSON WHO SIGNS A NOTE AND MORTGAGE AND ALLOWS IT TO BE TAKEN OUT OF HIS OR HER POSSESSION IS ON THE PARTY WHO TOOK IT AND THE PARTY WHO SIGNED IT — IF THERE WAS NO CONSIDERATION, THE DOCUMENTS ARE ONLY SUCCESSFULLY ENFORCED WHERE AN INNOCENT PARTY PAYS REAL VALUE AND TAKES DELIVERY OF THE NOTE AND MORTGAGE IN GOOD FAITH WITHOUT KNOWLEDGE OF THE BORROWER’S DEFENSES.

So if they did not allege they are an HDC then they are admitting they don’t own the loan papers and admitting they don’t own the loan. Since the business of the trust was to pay for origination of loans and acquisition of loans there is only one reason they wouldn’t have paid for the loan — to wit: the trust didn’t have the money. There is only one reason the trust would not have the money — they didn’t get the proceeds of the sale of the bonds. If the trust did not get the proceeds of sale of the bonds, then the trust was completely ignored in actual conduct regardless of what the documents say. Which means that the documents are not relevant to the power or authority of the servicer, master servicer, trust, or even the investors as TRUST BENEFICIARIES.

It means that the investors’ money was used directly for fees of multiple people who were not disclosed in your loan closing, and some portion of which was used to fund your loan. THAT MEANS the investors have no claim as trust beneficiaries. Their only claim is as owner of the debt, not the loan documents which were made out in favor of people other than the investors. And that means that there is no basis to claim any power, authority or rights claimed through “Securitization” (dubbed “securitization fail” by Adam Levitin).

This in turn means that the investors are owners of the debt but lack any documentation with which to enforce the debt. That doesn’t mean they can’t enforce the debt, but it does mean they can’t use the loan documents. Once they prove or you admit that you did get the loan and that the money came from them, they are entitled to a money judgment on the debt — but there is no right to foreclose because the deed of trust, like a mortgage, is made out to another party and the investors were never included in the chain of title because the intermediaries were making money keeping it from the investors. More importantly the “other party” had no risk, made no money advance and was otherwise simply providing an illegal service to disguise a table funded loan that is “predatory per se” as per REG Z.

And THAT is why the originator received no money from successors in most cases — they didn’t ask for any money because the loan had cost them nothing and they received a fee for their services.

Filed under: AMGAR, CORRUPTION, escrow agent, evidence, expert witness, foreclosure defenses, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Motions, Neil Garfield Show, originator, Pleading, securities fraud, Servicer, STATUTES, taxes, Title, TRUST BENEFICIARIES, trustee | Tagged: BAC, Bank of America, Bank of New York Mellon, BOA, countrywide, custodian, CWABS, CWALT, CWMBS, delivery of loan documents, Depositor, good faith, holder in due course, knowledge of borrower's defenses, ownership, proof of payment, purchase of loan documents, REMIC, trustee | 7 Comments »

WHY JOIN ORIGINATOR AND THE PARTY WHO PARTICIPATED IN THE ILLEGAL TABLE FUNDED LOAN

Posted on June 11, 2013 by Neil Garfield

Amongst the cases I review and manage, the question was raised by one of the homeowners as to why I insisted on holding both the originator and subsequent intermediaries in the alleged securitization chain and/or table-funded loan where both the party alleging having (1) the capacity to sue see SEC Corroborates Livinglies Position on Third Party Payment While Texas BKR Judge Disallows Assignments After Cut-Off Date, (2) the standing to sue and/or the authority to initiate foreclosures and (3) financial injury where they allege sale or assignment of the note. The reason is simple from a tactical and legal point of view. I wish to close out their options to keep moving the goal posts.

Here is the answer I wrote to the customer, whose property is located in a judicial state. This particular person is being pro-active — always a wise choice — in that he has been making his payments, was told to to stop making payments if he wanted a modification which he did initially and then changed his mind and reinstated, and remains convinced he was the victim of various forms of fraud and crimes including false Appraisals of the supposedly fair market value of the property at the time of the loan closing or the alleged loan closing. His goal is not a free house. His goal is to pursue any rights you might have for modification or settlement of his claims with respect to the illusion of a loan closing and the office of a closing agent. As any reader of this blog knows, it is my opinion that any such loan closing was in fact an illusion and that all the parties participating in that illusion were paid actors pretending to be something they were not — less creating plausible deniability for any of the improper actions of the intermediaries at the “loan closing.”

There is a reason why I insist on continuing the joinder of those two defendants. Embrace wants to be dismissed out with prejudice because it says that sold the loan to Wells. I want to say that they didn’t sell the loan to Wells. If I prevail on that point then Wells Fargo is out as a plaintiff in any foreclosure they might file, and potentially out as a servicer since they might not be able to show any authority. If that is the case then they owe you an accounting for all of the money they collected from you and a statement of what they did with the money that they collected from you. You might well have a cause of action against Wells Fargo for taking money under false pretenses.

If I don’t Prevail on that point and somehow they are able to show that Wells Fargo paid for the loan and owns the loan by virtue of that payment, then Embrace is still a proper party in the action because they are the owner of record of a mortgage based on a note that was never funded by Embrace. The issue here is whether or not the mortgage was transferred with the debt and that issue is tied closely with the issue of securitization, which both of them deny. I believe that I will be able to show that the loan is subject to claims of securitization on behalf of a loan pool that may never have existed or which might not exist now. and if I am able to show that the loan pool was never funded and therefore could never have paid for the loan then the apparent authority of both defendants is eviscerated.

Either way, I don’t want to let either of them out of the litigation quite yet. If we prevail on the question of whether or not there was an actual sale and the sale was authorized (see my blog article from yesterday) then Embrace is the only party left on record in the recording office. At that point I would drill down on them to see whether or not they can show that they fulfill their part of the bargain with you, to wit: that you sign a note and they give you adequate disclosure under the law and they fund a loan to you. It is my position that they did not give adequate disclosure and that they did not fund a loan to you even if the loan was not securitized. The best they can say is that this was a table funded loan which is according to Reg Z of the Federal Reserve a predatory loan per se if it was part of a pattern of conduct.

Given the statistics and information we have about both defendants it is my opinion that the chances are 96% that the loan was allegedly sold into the secondary market where it is the subject of a potential claim from an asset pool. The problem I wish to reveal here is that the entire chain of ownership collapses on itself. The other problem that I want to addressed is who actually received the money that you pay every month and what did they do with it (who did they pay). the strategy here is to show that regardless of whether or not a claim of securitization exists, there were co-obligors (Wells Fargo), insurance payments and proceeds of credit default swaps and multiple resales all of which should be applied against the amount owed to the real creditor, whoever that might be, thus reducing the loan receivable.

If I can tie the loan receivable to one which derives its value from the alleged loan made to you, even if the originator paid for it, then there is a strong argument for agency and allocation of receipts under which the payment of monthly payments and the receipt of insurance proceeds and the proceeds from other obligors (including but not limited to counterparties on credit default swaps) were received and kept, like in the Credit Suisse case.

From that point forward it is a simple accounting task to allocate third-party receipts of insurance and hedge money to the benefit of the investors whether they received it or not. The auditing standards under the rules of the financial accounting standards Board would require a further analysis and allocation of the money received — specifically the reduction of the loan receivable or bond receivable held by the investors (directly if the REMIC trust was ignored or indirectly if the agents for the trust purchased insurance and hedge products, the proceeds of which should have been credited to the investors.

If the investors are the real creditors than the amount that they are entitled to have repaid to them does not exceed the amount they advanced. It practically goes without saying that if the money advanced from investors was based on their reasonable belief that they were acquiring title to the loans funded by the money advanced by the investors, they should recover part or all of their investment to the extent that the other players (see the SEC order against Credit Suisse) paid for insurance and hedge products using the money of the investors and kept the proceeds for themselves —- thus explaining rising reports of profits in the banks who are supposedly merely intermediaries in the conduct of commerce which was in sharp decline.

In the end, under a series of unjust enrichment and other common-law actions, as well as the requirements of statute and the terms of the promissory note executed by the borrower, all money received in that manner should reduce the principal balance due from the borrower because the creditor has already been paid either directly or indirectly through its agents who were either authorized or possessed of apparent authority.

In fact , the great likelihood is that the banks received substantial overpayments amounting to multiples of the original principal amount of the loan. According to both law and the terms of the proposed agreement between the borrower and the apparent lender, subject to the terms of the documents themselves as well as state and federal law, the borrower is entitled to recover all such undisclosed payments and receipts which are defined under the truth in lending act as “compensation.”

Thus while the creditors not entitled to any more recovery than the amount advanced under an alleged loan, the borrower is entitled to full recovery of all money paid in connection with or related to the loan received by the borrower, regardless of the original source of the loan and any agreements between the intermediaries in the alleged securitization chain that do not have the signature of the borrower on them. The reason is public policy. While securitization was not considered in the original passage of laws it was the overreaching by banks to the disadvantage of consumers and borrowers that was sought to be discouraged by penalties that would be so great as to prevent the practice altogether.

Usually it is money that is taken under false pretenses and the illusion of securitization claims is no exception. But in the case of the borrower it is the signature of the borrower that was obtained under the false pretenses that the party obtaining the borrower’s signature. The consideration was the money advanced by an unrelated party tot he transaction (investor) who thought their money was first going through a REMIC trust that would give them certain tax advantages.

Regards

Neil

Garfield, Gwaltney, Kelley & White

4832 Kerry Forest Parkway, Suite B

Tallahassee, Florida 32309

(850) 765-1236

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: accounting rules, borrower, creditor, dismissal, dismissal with prejudice, false pretenses, financial accounting standards Board, illusion, promissory note, proof of loss, proof of payment, proof of sale, REMIC, sale of the loan, signature, table funded loan, trust, Truth in Lending Act, UNJUST ENRICHMENT | 82 Comments »

Estoppel: When the Bank Tells You to Stop Making Payments

Posted on May 16, 2013 by Neil Garfield

IMPORTANT PRACTICE NOTE: The use of the doctrine of estoppel on the facts presented in this article is only a temporary solution. If a representative of the bank told you to stop paying and then declared you in default and foreclose it is unfair and that is exactly why we have the doctrine of estoppel. However, on these facts, the doctrine can only be applied for as long as the issue of modification or settlement is on the table. Whether it can be bootstrapped into an action for slander of title or breach of contract is an issue that will be decided by the courts.

My opinion is that on these facts the doctrine of estoppel will not serve as the foundation for an action for slander of title or breach of contract.

However, my opinion is that a lawsuit for intentional interference in the contractual rights of another could be brought if an intermediary between you and the servicer or between you and the creditor instructed you to stop making payments if you wish to seek a modification or settlement.

If you are making that allegation you obviously want to say that the party who made that representation fraudulently induced you to believe that they have the authority to do it, but in fact lacked that authority inasmuch as the sub servicer is almost certainly going to deny that they had the authority to make such representations. In discovery the truth will come out — the representative had been instructed to make those representations to homeowners by a sub servicer who lacked actual authority to make collections or decisions concerning the disposition of the loan because the entire paper trail of the securitization chain was false. This will enable you to sue both the representative and the sub servicer who gave the instruction. (Make sure you seek the advice of an attorney who is licensed in the jurisdiction in which a property is located and is familiar with these issues and does research to corroborate and fortify the arguments).

If you then received a declaration of default, notice of sale or a foreclosure lawsuit it could be argued that the intermediary was not a party with whom the homeowner was in privity. This argument would be fortified by a denial from the sub servicer that the intermediary had any authority make that statement.

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

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

EDITOR’S ANALYSIS AND COMMENT: Judges seem to find it hard to believe that a creditor would tell the borrower to stop making payments. It sounds ridiculous. But the fact remains that the majority of the homeowners who have been declared in default were told exactly that by a representative with apparent authority to speak for the sub servicer and apparent authority to speak for the creditor.

I would suggest that anyone reading this article who has received that instruction from a person, party or institution draft an affidavit that is notarized that can be used by other parties to show the judge that this is a pattern of conduct that permeates the entire foreclosure industry. You can send those affidavits to me at NeilFGarfield@Hotmail.com and without charge we will make those available to any lawyer or pro se litigant in need of those affidavits. And by the way, let your lawyer draft the affidavit and retain an original copy which means you should be signing two of them each of which is notarized separately.

Those affidavits should include any information regarding subsequent correspondence, telephone calls or instructions from the same or different representative of the alleged sub servicer or creditor. And it should include any events in which the sub servicer claim to have lost your submission of documents that were requested. As a practice hand, it is my opinion that no such submission should be made without a specific offer from the homeowner certified by a real estate professional.

This can subsequently be used as corroboration of the allegation that sub servicer neither considered the modification request or the modification proposal. In addition it will fortify the allegation that the creditor was never informed of the offer and that therefore the sub servicer or representative is in violation of the laws of the nation and potentially of the state in which the property is located.

The Wall Street banks have created the illusion that they don’t want to foreclose but they have no other choice. In fact they have engaged in a pattern of conduct that made foreclosure an inevitable conclusion. Most people believe that the banks don’t want the property and therefore they would not foreclose if there was a real opportunity to settle or modified below with the assistance of the federal government under HAMP and HARP. Of course when you are dealing with Wall Street strategies the situation is always more complex than the simplistic arguments used by attorneys seeking foreclosure or defending claims from borrowers.

It is hard to argue that the banks don’t want property when they have walked away from hundreds of thousands of homes that were emptied as a result of the wrongful foreclosure and eviction of the homeowner. In places like Cleveland and Detroit tens of thousands of homes were literally bulldozed because entire neighborhoods lost all of their residents and the homes became headquarters for drug deals and other illicit activities.

The simple truth is that the banks are not nearly as interested in the property as they are in the foreclosure. It is the foreclosure sale that creates the illusion of a stamp of approval from the state government that the entire securitization scheme was valid and it creates the reality of a presumption of the validity of the deed issued at the so-called auction of the property upon submission of false credit bid from a non-creditor who is a stranger (not in privity) to the transaction alleged.

Their motivation is also quite simple, to wit: they have already received insurance proceeds and the proceeds of credit default swaps far in excess of the principal supposedly due on the note. If the loan were converted from “nonperforming” to “performing” it is highly likely that the Wall Street banks and their affiliates would be responsible for refunding the insurance money and proceeds of credit default swaps, all of which frequently amounted to multiples as high as 42 times the amount of the note.

The Dodd-Frank Law makes it illegal for any servicer or representative of a creditor to engage in the consideration of a modification or settlement regarding the loan and at the same time pursue foreclosure. But even without that law, the doctrine of promissory estoppel accomplishes the same result.

I would point out that the reason that provision was made part of the Dodd-Frank law was that there was no dispute as to the fact that servicers were encouraging people to stop making payments if they wanted to see an approval on a modification of their loan, a short sale of the property, or any type of settlement whatsoever.

The doctrine of promissory estoppel can be used both offensively in the nonjudicial states and defensively in the judicial states. It is important for a lawyer who is licensed in the jurisdiction in which the property is located to do the research on the statutes and case law dealing with promissory estoppel. The state and federal system do have differences.

In general, the elements of promissory estoppel consists of a promise or representation from one party that leads another party to reasonably rely on that promise or representation and act to their own detriment. Generally it is not important that the benefits of the statement or action by the first party result in a benefit to that party. It is generally understood that the detriment to the homeowner as a result of the promise or representation may be all that is required in order to establish promissory estoppel, which of course must be properly alleged in a lawsuit or affirmative defenses depending upon whether the case is in a nonjudicial jurisdiction or a judicial jurisdiction.

There is no legal or business reason to tell a homeowner to stop paying if they want their loan modified, or if they want their property approved for short sale, or they want to settle with the creditor or creditors, the identity of which is closely guarded by the Wall Street banks and all of the parties in the securitization chain that turns out to be more of a paper chain of sham transactions than anything else.

The reason why homeowners are being told to stop making payments and why they are given trial modifications that are subsequently denied status as permanent modification is that the goal is foreclosure in order to keep the illicit proceeds of insurance and credit default swaps. As soon as the homeowners are told to stop making payments, and subsequent payments are often returned, the securitization parties are slowly edging the borrower into a position where it is impossible for them to make up the payments and therefore inevitable that the foreclosure will proceed. And the reason why becomes impossible for them to make up the payments is that they are told that the back payments at worst will be added to the end of the loan. They are told this to make sure that the borrower spends the money and no longer has the money to bring the loan current. It is a perfect storm for the Wall Street banks.

If the borrower is taken the trouble to send a qualified written request or a debt validation letter and will fortify the claim because the sub servicer or other representative will have failed to provide proof of payment or funding for the acquisition or the origination of the loan and will have failed to provide proof of authority to represent the creditor and further failed to identify the creditor so that the authority to represent could be confirmed.

Sitting on the desk of the governor of the state of Florida is a crazy bill that would make it impossible for most homeowners to defend wrongful foreclosures. If he signs the bill into law the banks will be cheering, but not for long. Using the doctrine of estoppel the foreclosure will be stopped dead in most cases assuming the homeowner was in fact instructed to cease making payments and was promised that if they follow the rules their request for modification would be considered — which is something which is required under existing federal law dating back to the time of TARP.

If the homeowner takes the position in litigation that all payments that were due were in fact paid, and that in fact the homeowner believes he has overpaid, a question of fact emerges that probably cannot be handled in the summary proceedings under what might be the new Florida law and similar laws passed in other jurisdictions. If the homeowner also takes the position that he is neither in privity with nor does he owe any money to either the party bringing the foreclosure proceedings, this raises additional questions of fact that must be dealt with under the rules of evidence in a properly noticed hearing.

PRACTICE NOTE: Procedurally I have come to the opinion that in order to take control of the narrative away from parties who are essentially strangers to the transaction, lawyers should issue subpoenas rather than notices under the Rules of Civil Procedure. Those subpoenas should go out immediately upon receipt of any notice of foreclosure or any lawsuit seeking foreclosure. The subpoenas should ask for a competent witness to testify at deposition and require the witness produce proof of payment or consideration in the acquisition or origination of the loan. The subpoena should specify the type of information you are seeking, to wit: a canceled check, wire transfer receipt, and ACH confirmation, or check 21 confirmation. The failure of the opposing party to respond even if they file timely objections are motions to quash will raise issues as to the amount of any payment alleged to have been missed in the amount of any principal alleged to be unpaid. If I am right, the Florida law may well turn out to be a landmine for the banks from which they cannot recover.

Don’t Take Advice from Banks! It’s All Scripted to Get You in Foreclosure and then Default

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage | Tagged: agency and principal, competent witness, foreclosure, fraud, Instruction not to pay mortgage payment, modification of mortgage loan, proof of authority to represent, proof of loss, proof of ownership, proof of payment, settlement of disputed claims in mortgage transactions, short sale of real property, Subpoena | 14 Comments »

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

Posted on May 14, 2013 by Neil Garfield

FOR QUALIFIED INVESTORS ONLY:

HEDGE FUND TO

CALL THE BLUFF OF PRETENDER LENDERS

LISTEN TO NEIL GARFIELD INTERVIEW ON PIGGYBANK

http://piggybankblog.com/2010/09/09/donations/

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

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

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

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

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

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

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

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

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

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

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

HEDGE FUND TO CALL THE BLUFF OF PRETENDER LENDERS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Filed under: CDO, Eviction, evidence, expert witness, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: hedge fund, money trail, paper trail, proof of loss, proof of ownership, proof of payment, U.S. Bank, Wall Street Banks | 59 Comments »

The Truth: Was the Loan Sold or Not?

Posted on May 2, 2013 by Neil Garfield

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

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

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

Editor’s Analysis: Suppose you wanted to foreclose on property for which you never made a loan. Suppose you don’t have a lien and never did. Suppose you wanted to do this on a grand scale. How could you get away with it?

If you start with the premise in the preceding paragraph then the entire foreclosure and mortgage mess comes into focus and makes a lot of sense. Conversely if you start with the premise that all mortgage claims are presumptively valid then nothing makes sense and when you try to fix it you get nowhere. That’s what the Florida legislature is attempting to do with Senate Bill 1666 (appropriately numbered).

If you start with the premise that the mortgage claims are valid then it is quite logical and appropriate to conclude that the attempts by borrowers to escape inevitable consequences of their own bad judgment are clogging the court system and that borrowers are essentially abusing their due process rights costing each state billions of dollars in one form or another. But you have to ask yourself why there has been a sudden meteoric rise in the percentage of cases in which the borrower vigorously defends and brings claims against the supposedly valid holder of the note. What if all your assumptions and presumptions are not valid?

This is the essence of the issue confronting the courts, borrowers and their attorneys. And in a display of extreme irony the Wall Street banks even have the borrowers and their attorneys convinced that the loan was closed and the loan was sold. “The Loan” refers to the transaction that is memorialized in the loan documents. “The sale” refers to the transaction in which the loan was sold by the owner of the loan to a buyer of the loan.

There are two key questions:

The first (origination) fact pattern is usually the same. A borrower applies to an entity that advertises itself as a lender and that “lender” agrees to loan the money to the borrower. A closing agent contacts the borrower with information concerning the closing of the loan. The borrower goes to the closing, the money appears, and the borrower signs a myriad of documents. Here’s the question: what if the “lender” did not loan the money and either played the part of an undisclosed nominee, and unlicensed mortgage broker or licensed mortgage broker, and never had a valid legal claim to collect on the note or enforce the mortgage?

The second (assignment) fact pattern is also usually the same. In cases where there is litigation documents magically appear showing the assignment or endorsement of the loan using a claim of authority or the production of an apparent power of attorney. The assignment or endorsement frequently occurs more than once. There are actually two questions here: (A) assuming the facts in paragraph 1 above are true what difference does it make if there were one or 100 assignments? If there is no valid or perfected lien and the assignor never had a claim to collect on the “loan,” the assignment may give the appearance of propriety but it conveys nothing; (B) If the assignee never paid for the sale of the note how could the assignment transaction be considered complete? The Uniform Commercial Code governing the creation and sale of negotiable instruments indicates that each transaction must be for value received or consideration. Is the so-called assignment merely an offer lacking acceptance and payment?

You can have 100 or 1000 pages of documentation, but without a completed underlying transaction nothing in the documentation will have any legal effect on anyone despite the apparent “weight of the evidence.”

The point is actually very simple. Don’t get lost in the weeds of the documentation. The first question to be asked at the threshold is whether or not a transaction actually occurred containing the legal elements required for a completed transaction. If there is no consideration there is no transaction. If there is no transaction then there are no rights to enforce by or against anyone.

The arguments about the holder of the note are frankly silly. In the absence of consideration the party holding the note is merely possessing the note without any rights of collection or enforcement. If it were otherwise then any Courier, attorney or closing agent would be able to collect on the note and even foreclose on the mortgage leaving the lender out in the cold.

Whether or not a party is a holder or holder in due course is a question of law which raises presumptions if the proper foundation is established in order to conclude that a party is a holder or holder in due course. These are all legal conclusions and not factual issues. In order to establish the legal conclusion of holder or holder in due course the proponent of that legal conclusion must have a prima facie case showing a legal transaction in which ownership of the loan was transferred. Imagine if it were otherwise: accepting the circular logic of the banks, if six people were sitting around a table with a note in the middle the one with the fastest hands would be able to collect on a note and foreclose the mortgage. This is not the law.

As a tactical note, the practitioner should be relentless in the pursuit of the actual proof of payment (at origination or purported sale of the loan) without which there can be no proof of loss. If there is no proof of loss than there is no creditor. If there is no creditor there can be no credit bid at the time of auction of the property. And since that has occurred on a regular basis in all 50 states it would be fair to say that the sale of the property in foreclosure was never completed and that the homeowners still owns the home — or is entitled to compensatory damages equal to the value of the home because of breach of contract, slander of title, fraud etc. I believe that the claim that is easier to pursue is the one for compensatory and punitive damages plus attorneys fees and costs of the action.

In discovery what you are looking for is the actual wire transfer receipt, wire transfer instructions, ACH confirmation, cancelled check or Check 21 confirmation, showing the name of the party who paid and the name of the party who received the payment. Whether you are in small claims court or federal court the requirement is always the same. Any party seeking affirmative relief from the court must show that they were injured or damaged by the party whom they have sued. If they can’t show the payment and an unbroken chain of payments leading up and including the supposed assignment, then they have no claim because the court lacks jurisdiction and the party lacks standing to enforce or even consider a claim in which there is no injury.

So the answer to the question posed in the title of this article is no, the loan was never sold. We know that because the investors deposited money with the investment bank and it was the investors’ money that funded the loan. Contrary to popular misconception the money from the investors was never used to fund any pool of assets or trust. It was used directly to fund loans and the various fees to undisclosed third parties contrary to the requirements of the truth in lending act. The investment by the investors into each loan was the only time money changed hands which in turn means it was the only time that consideration existed.

That is why you will never find payment from one party to another in the alleged securitization chain. the truth is that there is no securitization chain and the banks intentionally failed to document the interest of the investors in each mortgage because the banks wanted to assert their own claim to ownership of the loan and the bogus securities allegedly backed by the loan. If they had been honest, then they would have taken the investor money, put it into an account that was owned by the asset pool, fund the loan from the asset pool and then document the transaction showing the interest of the asset pool at the time of origination of the loan or at the time that the loan was in fact sold to the asset pool for payment received.

And THAT is why I say that the existence of MERS is proof of fraudulent intent. There would have been no need for MERS or anything like it (See Chase Bank and Wells Fargo) if the Banks were not going to trade securities based upon THEIR ownership of a loan they never made.

If you prove these points in court I believe you will win the case.

SB 1666: Fast Foreclosure Bill Resurrected in Senate After Thought Dead
http://4closurefraud.org/2013/05/01/sb-1666-fast-foreclosure-bill-resurrected-in-senate-after-thought-dead/

WOULD THEY STILL BE TIGHT LIPPED IF THE NEWS WAS GOOD FOR THE BANKS? Regulators to Keep Tight Lips on Foreclosure Improprieties
http://www.truthdig.com/eartotheground/item/regulators_keep_tight_lips_over_foreclosure_improprieties_20130430/

Foreclosure Scams Rampant in Florida
http://www.jdsupra.com/legalnews/foreclosure-scams-rampant-in-florida-21904/

UBS faces calls for break-up at investor meeting
http://www.foxbusiness.com/news/2013/05/02/ubs-faces-calls-for-break-up-at-investor-meeting/

Macro Factors and Their Impact on Monetary Policy, The Economy and Financial Markets
http://www.ritholtz.com/blog/2013/05/macro-factors-and-their-impact-on-monetary-policy-the-economy-and-financial-markets/

Roubini: Fed Risking Sequel to 2008 Financial Crisis
http://www.cnbc.com/id/100698405

Filed under: CDO, CORRUPTION, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: assignment, consideration, credit bid, money changing hands, money damages, origination, proof of loss, proof of payment, sale of loan | 177 Comments »

Illinois Takes A Step in the Right Direction

Posted on April 3, 2013 by Neil Garfield

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

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

Editor’s Comment: Illinois has taken a step forward but they are still plagued by the wrong assumption — that the courts are dealing with a legitimate debt. There is no debt if it is paid and in many cases the original debt has been paid down or paid off by third party mitigation payments from insurance and credit default swaps.

Remember the note raises the presumption of the existence of the debt which is rebuttable. It does not prove the loss. Without proof of loss there is no foreclosure or any other lawsuit for that matter. The party seeking relief must show they have been or will be injured in some way to get money damages, equitable relief (like foreclosure) or anything else. Without injury they don’t belong in court, which is why we have a jurisdictional rule regarding standing. No injury=no standing.

So the bad point about the new rules is that the forecloser must prove the debt, but it doesn’t specifically say they must plead or prove the loss. The problem with that is production of the note (whether the the real note or something that looks like the real note) raises the presumption of the debt. It also causes Judges to assume that the loss is self-evident — i.e., if someone has the note it is presumed that they paid for it and will suffer a loss of their expectancy of payment under the terms of the note.

If you don’t demand to see the canceled check or the wire transfer receipt and wire transfer instructions or other forms of actual payment of money (where it can be seen that money actually exchanged hands) then there is no consideration, the paper is not negotiable, the UCC doesn’t apply and the party seeking to foreclose has no standing because they have not been injured by the borrower, even if the borrower didn’t make any payments. At the root of this mess is a scheme of illusions created by the banks. Demand reality and you will get traction.

But there are also some good points about the new rules. The one requiring counseling for the homeowners would be good if the counselors knew what they were talking about and understood the perfectly valid defenses available to homeowners who got swindled into signing papers in favor of a company that never made a loan to them. From what I have seen, the counselors don’t have any idea about such things and it is merely a debt counseling session about getting your life in order, which is a good thing, but not what you can do about having your life turned upside down by an illegal foreclosure.

The part I like is the burden placed on foreclosers that would show that a modification is not possible. This is simple: if the results of foreclosure are that the net proceeds are substantially less than what the homeowner is offering, then the loan can be modified. Demand should be made for the methodology and the person who calculated the modification for the forecloser and their authority to do so. And demand should be made for what contact they had with the “creditor.” Then you contact the creditor and find out (a) if they are the creditor (b) whether they were contacted and (c) how they feel about getting $150,000 from the homeowner rather than $50,000 from foreclosure.

As for the modification part, the banks are going to fake it just like they fake everything else. Be ready with an expert declaration that shows that the modification offered is far better than foreclosure, and that this is evidence of the fact that the servicer never even “Considered” the modification, which is violation of HAMP and HARP.

Filed under: CDO, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: consideration, creditor, debt, DEBTOR, injury, legitimate debt, modification, Mortgage, note, proof of loss, proof of payment, standing, UCC, wire transfer instructions, wire transfer receipt | 84 Comments »

Right of Redemption: Going After the Money Trail

Posted on March 29, 2013 by Neil Garfield

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

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

Editor’s Comment and Analysis: Most people and lawyers I talk to think there is no life after sale of the property. This is not the case in my opinion and I encourage lawyers to start getting up to speed on the causes of actions and remedies that are available for attacking a foreclosure judgment and separately the foreclosure sale or “auction.”

Of course we know that a cause of action for wrongful foreclosure, slander of title and quiet title, to name a few, are available to attack the foreclosure judgment or the final order in non-judicial states that allows the foreclosure sale to go through. There is also the semi-final order from the bankruptcy court which lifts the stay to allow for the foreclosure wherein the court frequently inserts that the movant is the owner of the loan. (When a different entity than the movant initiates the foreclosure and bids in the property as a creditor without getting leave of court to amend judgment or the motion to lift stay there are some very weighty issues raised that have been covered in earlier posts).

And as pointed out by one reader, the “opportunity to Cure” is another attack that is available before Judgment if you properly challenge the amount demanded. Proof of loss and Proof of Payment is NOT the note and Mortgage. It is a showing that the a party actually paid value for the debt and stands to lose money (economic loss) if it isn’t paid by the homeowner. If they can’t prove the loss, the court has one of two options, one of which is ridiculous: (1) it can order the foreclosure and prohibit the initiator of the foreclosure from submitting a credit bid (they must pay cash at auction) or (2) it can dismiss the foreclosure with prejudice because no injured party is present which is jurisdictional — i.e., STANDING.

In Florida and many other states (pro se litigants: check with local licensed counsel to make sure you know what the procedure is and what is available) there is both a statutory and equitable right of redemption. In some states the sale can be attacked during the redemption period because the consideration was faked or insufficient.

Florida Statute 45.0315 allows for redemption at the amount set forth in the final judgment. The common law equitable right of redemption in Florida has a short window — 10 days — in which you can challenge the sale based on the violation of court ordered procedures (which opens the door to wrongful foreclosure by a non-creditor), bid rigging, unfair practices which are loosely defined, or anything else that leads to a determination of a deficiency.

The deficiency is in Florida a judgment which the bank can pursue after the sale based upon the difference between the amount of the judgment and the amount of the sale which of course the bank fully controls and the cases are replete with references to the obvious fact that the sale price is more often than not governed by an arbitrary decision of the lender.In non-judicial states the deficiency is waived but there could be and usually are tax consequences arising from the “forgiven principal and interest” that cannot be offset by the loss taken on the house.

Some people, at my suggestion are starting funds in which the homeowner is given the means to exercise the right of redemption on one condition: that the forecloser prove loss and prove payment so the new lender can be assured that there are no claims on or off record.

This is leading to some interesting settlements and high profit margin for those people with money who can put up the full amount of the judgment but end up not laying out any money or very little and getting a mortgage from the homeowner that is valid and enforceable and in an amount far less than the original debt — when the pretender lender fails to produce evidence of loss (canceled check, wire transfer receipt etc.).

Frankly I am looking for investors and a manager who can handle that business which is very lucrative. An off shoot of the same idea is to buy the HOA’s lien, and foreclose on it, which is cheaper and messier. Either way the homeowner gets to stay in the home, creditors are paid what theyshould be paid, and the equity in the home is restored.

Procedurally, lawyers should pay close attention to the time limits lest they miss it and commit malpractice. A homeowner can come back at a foreclosure defense attorney alleging that the redemption period was not used properly. My suggestion is that immediately after sale the motion is filed to have the court set the proper amount of redemption based upon evidence of actual loss. You might be met with res judicata arguments or collateral estoppel, because you should have challenged the forecloser to prove their loss before judgment, but I think the period of redemption raises the issue again, or at least does so within the scope of reasonable argument.

It might well be that the pretender lender, now faced with a final judgment they procured, or a final order they procured will be estopped from maintaining the shell game they were able to conduct before judgment and finally pinned down to show that XYZ Bank actually has a receipt showing they paid for the loan either at origination or in a transfer.

At the risk of repeating myself, if you lead with an attack on the documents you are tacitly admitting that the underlying monetary transaction was real. If you lead with an attack on the monetary transactions (the money trail) then the deficiencies in the documents are abundantly clear. The documents should reflect the realities of the monetary transactions. If they don’t, the documents are either invalid or at least lose most of their credibility and all of their presumptions.

Think it through, do the research and don’t do anything until you are satisfied that what I am saying here applies to whatever case you are working on. In the end, you will most likely come tot he same conclusion I did — denial of the debt, note, mortgage and default is not only proper, it is the only truthful thing to do.

In discovery you will prove that the debt did not arise from any transaction between the borrower and the forecloser or any predecessor or successor. The documents, which point to the pretender, are therefore invalid as naming the wrong (and usually a strawman) party as payee and secured party. Add to that the conversion of the promissory note to a mortgage backed bond where the repayment terms offered the lender are different than the repayment terms offered the buyer, and you have a pretty strong argument to set the pretender back on its heels and draw some blood.

Bank of America is desperately trying to rid itself of these mortgages and mortgage bonds almost at any cost or price. They understand that every mortgage carries a potential huge liability. Taking my previous (see yesterday’s post) article, there could be a zero balance owed to the “creditor” after offset for mitigation payments, and the fabrication and forgery of documents, together with general application of TILA provisions might entitle you to recover treble damages plus attorneys fees and costs. In a wrongful foreclosure action the money really piles up, especially where the homeowner was evicted.

And it all can start in motions directed at setting the correct amount of the redemption.

Below is the oddly worded Florida Statutory right of redemption. remember, if you are not an attorney licensed in the state in which the property is located, you are far more likely to make procedural mistakes than the pretender lender and lose a case you might otherwise win. Advice, counsel and preferably representation by competent counsel is in my opinion an absolute requirement. If local counsel disagrees with the application of these principles to the situation presented his or her opinion should be taken as authoritative rather than this blog which is meant to be only informative.

45.0315 Right of redemption.—At any time before the later of the filing of a certificate of sale by the clerk of the court or the time specified in the judgment, order, or decree of foreclosure, the mortgagor or the holder of any subordinate interest may cure the mortgagor’s indebtedness and prevent a foreclosure sale by paying the amount of moneys specified in the judgment, order, or decree of foreclosure, or if no judgment, order, or decree of foreclosure has been rendered, by tendering the performance due under the security agreement, including any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney’s fees of the creditor. Otherwise, there is no right of redemption.

Filed under: CDO, CORRUPTION, currency, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage | Tagged: Bank of America, business plan, creditor, deficency judgment, deficiency amount, equitable right of redemption, F.S. 45.0315, HOA liens, non-creditor, proof of loss, proof of payment, statutory right of redemption, sufficiency of consideration, wrongful foreclosure | 23 Comments »

Borrower Beware: Don’t Payoff Without Tender of REAL Original Note

Posted on February 27, 2013 by Neil Garfield

The Perils of Payoff

On the road again: I met a fellow on the Red Coach from Tallahassee to Fort Lauderdale who is pursuing a case that proves the central point of this blog: Whether you are selling, refinancing, Short-Selling, or otherwise paying off your supposed loan balance, the institution that receives the payoff (a) has no right to the money and (b) has no authority to execute a satisfaction of the note and mortgage even upon receipt of the money. And the reason is that in most cases they don’t have the note, which means it is still in circulation somewhere supporting as much as 42 times the face value of the note in hedges and derivatives. When confronted with a payoff of the loan, the institution is more than happy to take your money but will lie and cheat to avoid providing you with a real non-photo-shopped original note.

Unfortunately, most people are still taking it on FAITH that the note is indeed satisfied and that the mortgage is released and satisfied at the time of the payoff but they are very wrong if they don’t get the original note at closing, since THAT is what is presumptively the cash equivalent instrument that is traded in the secondary market, and since the mortgage usually is presumed to follow the note, that gives the actual owner of the note the opportunity to make a claim — something that is already happening and will occur with increasing frequency.

So whether you are buying property, selling property or paying off the “old” mortgage for any reason you are not only creating a title mess, you have no proof that the original note has been canceled. Which led me to suggest in a few articles that for those able to do it, call the bluff of the pretender lender. And for those investors looking to make an infinite return on their money, they should be helping homeowners do this in or out of court: OFFER TO PAY THE BALANCE IN FULL AS DEMANDED BY THE PRETENDER LENDER ON THREE CONDITIONS: (A) PRODUCTION OF THE ORIGINAL NOTE AND THE RIGHT TO INSPECT IT FOR AUTHENTICITY (B) PRODUCTION OF PROOF OF PAYMENT AT ORIGINATION AND ALL TRANSFERS UPON WHICH THE PRETENDER LENDER RELIES FOR ITS AUTHORITY TO COLLECT THE MONEY AND (C) PROOF OF LOSS BY ACCESS TO THOSE PEOPLE WHO MIGHT HAVE RECEIVED AN ASSIGNMENT OF THE LOAN OR WHO HAVE A BACK-DOOR OWNERSHIP INTEREST IN THE LOAN THROUGH OWNERSHIP OF A DERIVATIVE OR CREDIT DEFAULT SWAP.

This is not for the feint of heart nor the people who don’t have access to actual funds that can be tendered in full payment. It is possible for the occasional real note to pop up and perhaps even sufficient proof that the Judge would rule it is sufficient to close the deal in which case you will have paid 100 cents on the dollars demanded in exchange for a loan valued at perhaps half that amount. But most of the time it will look like the following case described to me last night. I’ve changed facts (identities and figures) to protect the privacy of the individuals involved. But the foundation of the case is accurately described.

Owner Schwartenheimer has a mortgage claimed by Bank of America. It is for $3 million on a private residence in the State of Florida. He has a buyer at $2 million which leaves him $1 million short of the amount demanded by the “bank” claiming to own and service his mortgage. An estoppel letter is issued by BofA indicating the payoff amount and the dates that the estoppel letters is effective and may be relied upon.

The closing is in 5 weeks. And the Owner has elected to payoff the extra $1 million rather than attempt a short-sale. So the Bank is going to get full payment at closing — $2 million from the buyer and $1 million from the seller.

But the Owner’s daughter, an astute business woman who happens to be an avid reader of this blog intervenes with the demand that the original note be produced at closing. BofA assures her that the original note will be produced. At closing without the daughter in attendance, the father, as instructed by his daughter, demands to see a copy of the original note before he turns over the money to BofA. His buyer is there with the money and he has a bank check ready and payable to BofA for $1 million.

The curious answer from BofA is that they have the note but were unable to get it to the closing agent in time for the morning closing, but that it would be available for delivery at 4PM that afternoon. The proper thing would have been to wait until they produce the note. The Owner asks his lawyer, who is also a title agent, for advice on what to do. The lawyer thinks that the daughter is nuts and so is Neil Garfield with his livinglies conspiracy blog.

The lawyer advises the client to proceed with the closing under the belief that BofA obviously MUST have the original note or else they would not have issued an estoppel letter and signed the papers to satisfy and discharge the mortgage in recordable form. Whether that advice will further be the subject of a malpractice case against the lawyer is another matter to consider at a later time. And the repercussions of that could extend to all sorts of situations where a “mortgage” and “note” are involved —even to the far reaches of family law.

As you have no doubt guessed, at 4pm the Owner and his daughter show up at 4pm to get the original note and of course it is not there, despite having been informed that it WAS there. The daughter although not a lawyer, is far from amused. She writes a bristling letter to BofA demanding that either they produce the original note or give the money back — and she demands not only the $3 million paid at “closing” but all the interest and principal paid before that for a total demand of $5 million.

BofA immediately responds with apologies and assures her and her father that the note will be provided.

[A word of context here: if BofA wanted to take the position that the note was lost or destroyed they could have filed an appropriate action to reconstitute the note and mortgage. But they didn’t do that, for good reason — the mortgage loan was supporting $60 million in credit derivatives, insurance and credit default swaps upon which BofA had already been paid. If they admit they don’t have the note and they can’t account for where it was last seen, and when it disappeared in the manner required to re-establish the note with assurance to the court that the real original won’t show up at a later time in the hands of a different claimant, in that event they might be subject to claims from insurance companies and counter-parties of credit default swaps for repayment of $60 million they paid and which was received by BofA. [considerable over-simplification is being used here, but the point remains true].

So BofA and the owner (with the new owner in the background wringing his hands over whether he really received clear title and whether his title policy excluded claims from securitization) go back and forth until BofA counsel informs the owner he doesn’t need the original note because BofA has already signed the satisfaction.

The owner and daughter, unsatisfied with that response (as well they should be) file a lawsuit against BofA for return of all money ever paid to them, plus statutory interest. BofA defends the action with various motions to dismiss and has now delayed discovery 5 times.

Suddenly the senior partner of the prestigious law firm representing BofA calls the daughter and asks what she wants. She replies that she wants her money back and he says “well, without saying we agree to your demand, for settlement purposes what would you take to satisfy your demand for your money back.” He understands that even if they pay the father $5 million or more, they are still saving the client (a) the $60 million payback to insurers who already paid and (b) the prospect of facing a lot more of these lawsuits from people who have the money and the right fact pattern to prosecute the case.

The daughter wants to dig in her heals knowing she has BofA over a barrel.

The lawyer who represented the owner at closing is still clueless and believes the action filed by the father and daughter is totally without merit. His advice, perhaps self-serving, is that they demand nothing.

The daughter wants it all — if BofA can’t produce any evidence that they ever bought the loan, that they ever knew or anyone ever knew where the note was, then she wants all the payments, monthly or otherwise were made to BofA without BofA having any right or authority or even excuse to collect the money.

The father as previous and perhaps still owner of the property would be satisfied with the money paid at closing to BofA — $3 million. BofA’s attorneys are now in process of suggesting a modification to the claim filed by the father in court upon which they will settle — and from the looks of it, the settlement will be for the full amount paid at closing. Thus if the note is still in circulation, the father will have received the full value of it from BofA who accepted it under false pretenses. The case is not settled yet, but is looming on the horizon.

The moral of the story is that this is all about money. And if you can find a way to come up with actual cash you can make the same offer as the owner did above — and in my opinion achieve the same results. And if people pool their money and make the offer to refinance the property at the full value of the demand made by the pretender lender — whether in foreclosure or not — a bona fide actual offer can be made and cannot be ignored by either the court or the pretender lender.

For those with entrepreneurial spirit this is a business plan that I wish to raise money for. Write to neilfgarfield@hotmail.com if you are interested in combining resources with other investors to execute this business plan.

In Summary: The refinance package signed by the present owner provides that if the payment is required to be made, they now owe the money to the hedge fund or whatever entity put up the money and provides modification terms acceptable to the owner — which means a net loss to the investor. But, if the usual case prevails, and the pretender lender is forced to back off, a quiet title action, plus refinance of the property at 1/3 of the amount demanded by the pretender lender results in a windfall note and mortgage to the source of refinancing without ever having paid the “prior note”.

These entrepreneurs, if I am right, will rarely have to pay an actual some of money to discharge the old note and mortgage while at the same time the owner gets the property free and clear except for a new mortgage to the investors for 1/3 of the original principal demanded plus a reasonable fixed interest rate with 40 year amortization, all of which can be sold into the secondary market. It is a virtually infinite return without putting very much money at risk and no risk of a total loss.

And for those without money — check the court file to see whether the original note has been tendered because most states, like Florida want the original note filed and out of circulation before they will allow a foreclosure sale even if it is determined that a foreclosure sale is proper in the circumstances. There is only one party that can submit a credit bid at auction — the party with the original note and proof of loss.

BEFORE EXECUTING ANY SUCH PLAN OR TAKING ANY ACTION BASED UPON THE GENERAL INFORMATION PRESENTED IN THIS ARTICLE YOU SHOULD CONSULT WITH LEGAL COUNSEL LICENSED IN THE JURISDICTION IN WHICH YOUR PROPERTY IS LOCATED.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: attorney malpractice, hedge fund, investment opportunity, investors, production of original note, proof of loss, proof of payment, real original note, title defects | 92 Comments »

The 1-2-3 of securitization vs Ponzi scheme of mortgages and bonds

Posted on February 11, 2013 by Neil Garfield

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

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

Editor’s Note: People have been asking what else we do besides provide commoditized research projects off the living lies store. So I thought I would give a short synopsis using an actual case here in Tallahassee where I am employed an expert witness.

The information presented here is NOT complete as it is tailored to the pleadings that the lawyer is forced to work with, after the pro se litigant submitted papers that were procedurally deficient. Like many Judges, this Judge regards all borrower defenses as simply excuses to get out of a legitimate debt. If you don’t address that and get the the Judge’s attention within a few seconds, he or she won’t hear a thing you say. If you admit the debt, note, mortgage, breach and sale of the property, you are giving the Judge nothing but the responsibility to enter an order allowing the foreclosure to go through.

And yet many of the same Judges are anxious to learn about securitization. What follows is a work product memorandum to the lawyer with the name of the borrower redacted for privacy reasons. As you will see, the work product provided to the court and counsel for the borrower is essential to educating the judge. As an attorney, you (a) lack credibility since you are obviously there to advocate for the client (b) lack the knowledge to answer the knotty questions on voir dire and cross examination.

This type of memorandum is NOT a scrip to use with the Judge. It is a guide to the lawyer to allow him or her to formulate questions and hypothetical to me as an expert. This Judge is ready to hear the story, like hundreds of other judges across the country. So now we move on to the next stage of educating the courts, where in the end, it is my hope that the loans, documents and securitization are all revealed as a sham that results at a minimum in removing or nullifying the mortgage or deed of trust as a perfected lien on the property (thereby eliminating non-judicial foreclosure and perhaps any foreclosure).

Important points to keep in mind is that your announced purpose is to pay the mortgage to the right entity and maintain clear title to your property. Without that information you are unable to refinance or even apply for a HAMP modification because the odds are they are instructing you to submit the application to a party lacking the authorization to receive it, much less look at it and either approve or reject it.

This information is also essential to establishing redemption rights after foreclosure sale. If the credit bid was submitted by a non-creditor, which is usually the case, the sale can be attacked on that basis first. If the same price was based upon the demand for monetary relief or damages without computing all receipts and disbursements collected up from the records of the Master Servicer, Trustee of “asset pool” (REMIC), the investment bank and its affiliates or controlled entities and the alleged “trustee” of the “trust”, then the demand is wrong, the notices are wrong and it might well be that standing is lacking simply because there was no injury at the time of the filing of the foreclosure.

Remember that the subservicer continues to issue distribution reports and money, even on loans declared in default. The creditor thus does NOT have a default on the creditor’s records, while the subservicer has declared a default a default, demand for payment and set a foreclosure sale and eviction — all based upon misinformation.

Here then is one of my memos when I am retained to provide in depth work and present testimony that I can easily defend on cross examination and voir dire. By the way out of the hundreds of cases in which I have challenged the veracity of the allegations of the forecloser that they are a creditor (inured party), and that the money trail is not presented and in fact hidden from the court, there has not bee a single affidavit, deposition,, or live testimony in which my reasoning and my findings have been challenged. Simple reason: I’m right and they know it and any witness they try to get on the stand will be torn to shreds with the questions I assist the lawyer in asking.

I’m also pleased to note that we have addeed a foroensic analyst and an expert witness to our team. Both have been heavily involved in the processing of mortgage application. The expert actually ran two companies that originated loans, but had to wait for Countrywide to approve, which was then followed by a wire transfer from a warehouse “lender” direct tot he closing agent with strict instnructions that the originator may not touch the money even if there are extra proceeds.

Notes on CitiBank v. xxxxxxxxxx, judicial foreclosure

See entire piece in word.doc format: xxxxxxxx File Notes

The style of the case has only one Plaintiff which is CitiBank, N.A. as Trustee for Lehman XS Trust 2006-17.
CitiBank has a trust division that administers trusts which is incorporated separately under the holding company CitiGroup Inc. https://www.privatebank.citibank.com/our…/trust.htm
The reason why CitiBank N.A. is named as trustee is that they were trustee in name only. Their name was “rented” to make it appear as though a funded trust existed. In fact, there are no trust documents, there are no duties of the trustee, there are no beneficiaries who could exercise any control or replace the trustee, and none of the investors money went into a trust account, nor did any indicia of ownership of notes and mortgages ever pass through a trust account that was controlled by CitiBank. It wasn’t administered by their trust division because there was no trust and there are no assets of the fictitious investment pool that was sold to investors.
Thus the investors thought they were “buying” residential mortgage backed securities (RMBS). But the investment pool was a fictitious entity or nominee with no power, no assets and no interest in the loans claimed to be part of the pool of assets in the “trust”. It was a ruse used to persuade investors — pension funds etc. — to buy what was thought to be triple A rated securities, that were insured and hedged.
What the investors did not know was that their money was diverted to a “warehouse” lender controlled by the investment bank, to fund loans in which the originator was usually a thinly capitalized entity completely dependent upon the underwriting approval of the aggregator and the funding by the alleged warehouse lender.
Most originators were a new kind of entity called “originators” because that is all they did. Even when the originator was an actual depository institution the loan was subject to a purchase and assumption agreement, which by operation of law and contract made all such loans originated, underwritten and funded in this manner, the loan was s aid to be owned not by the investors but by the intermediaries.
Hence the funding of the loan violated the terms of the PSA and Prospectus and violated the REMIC statute in the internal revenue code because the REMIC entity was ignored, thus creating a massive double taxation problem. When the market imploded and investors stopped buying the bogus mortgage bonds, the scheme collapsed like every other Ponzi scheme.
A Ponzi scheme is generally defined as a series of fraudulent transactions in which fictitious assets are thought to be traded, bought or sold for the benefit of the investors; in fact, the scheme is funded not by the investments (there were no investments at all in Madoff’s case) but rather by the purchase of more mortgage bonds by investors who were unaware that thee ratings had been rigged just like the LIBOR And EuroBOR rates were rigged.
Any adjustable loan tied to LIBOR is therefore probably misstated as to both principal and interest as a result of the LIBOR rigging, which involved the largest and oldest banks in the world.
Lehman Brothers sought Bankruptcy protection in 2008. It is being rapped up now with hundreds of unanswered questions. But one thing that is certain is that Lehman was most probably the investment banker that created, underwrote and sold the bogus mortgage bonds and/or may have been the aggregator and/or warehouse lender for the subject transaction.
By claiming assets purchased with investor money Lehman et al were able to name themselves as beneficiaries of the insurance and hedge products promised to the investors. Thus the Banks declared fictitious losses in order to collect on the insurance and the proceeds paid by counter-parties on credit default swaps and other hedges.
In my opinion, the investment bank assumed the role of both fiduciary and agent for the investors regardless of where the money and any assets were deposited or held. Thus the payments received by the financial affiliate of the Master Servicer (another entity controlled by the investment banker) from insurance and hedge products were never paid to or credited to the investors.
Had they done so, the entire foreclosure crisis would have been averted.
Had they done so there would have been no need to fabricate, forge and otherwise affix robo-signed, surrogate-signed or other unauthorized signatures to documents to create the illusion of ownership by the investment pool AFTER the insurance and hedges and federal bailouts were paid to the banks.
Had they done so, the loan receivable account from the investment pool would have been reduced proportionately and the balance due from the borrowers would have been correspondingly reduced, subject to potential claims for contributions from subservicers who continued to make payments even after the loan was declared in default, insurance and hedge products.
The loan balances would have been reduced not by forgiveness but for payment, many times in full and sometimes overpaid because the investment banks “leveraged” their bets against the loans up to 42 times (Bear Stearns is an example, where they essentially sold the same loan 42 times. If Bear Stearns had modified, settled or reinstated the loans, they could have owed as much as $8 million on each $200,000 loan, which is why the pressure has been on for foreclosures and the banks are two-stepping the requirement that they modify mortgages.
They did not do so because the banks were hiding huge profits from two principal channels — the insurance and hedges on one hand, and the 2d tier yield spread premium on the other. Accounting for all the money would easily reveal by application of simple arithmetic that (a) the investors advanced far more money than was ever used for funding mortgages (Tier 2 yield spread premium) and that the banks had received, as agents from the investors, far more money than the investors had ever advanced.
The year 2006 is in the name of the alleged asset pool for which CIti is the supposed Trustee. That means that the subject loan was to have been funded by the REMIC that issued the bonds to the investors, and that the loans were payable to the investment pool (REMIC) and secured by a mortgage or deed of trust showing the pool to be the payee and showing the pool to be the secured party. No such thing exists in the instant case. Both the PSA and REMIC statute require closeout and no further business activity after 90 days from the date of opening the pool for investments.
But the loan had been funded before the pool opened and was supposedly transferred after the pool closed and during the Lehman bankruptcy.
The funding of the loan came from the investors but NOT the REMIC as claimed in the Plaintiff’s complaint. The industry practice has been and continues to be the use of a single account dubbed “Custodial” by the investment bank without any reference to the individual REMIC entities, which did not exist anyway.
The loan was funded by the “custodial” account with strict instructions that this money was not in any way to be touched or used by the named loan originator. The originator was paid a service fee as a nominee for an undisclosed lender (the investors using the investment bank as the intermediary much as one uses a check drawn on one’s depository bank to pay a vendor).
At no time did the originator post the transaction as a loan receivable with a reserve for default because there was no risk of loss or use of the capital of the originator.
The loan receivable belonged, by operation of law, to the investors who advanced the money. Those investors included all of the “buyers” of the bogus mortgage bonds of the fictitious REMIC plus the rest of the investors who had been solicited for investment in other REmIC entities that never received the money or the assets.
The banks are using the ruse of foreclosure to distract the investors, the government and the borrowers from the fact that they were and are solely intermediaries that never advanced one cent to fund the origination or purchase of these loans.
We are left with a chain of documents in which the wrong payee is named on the borrower’s note citing terms of repayment wholly different from (1) the terms of the mortgage bond and (2) the expectation of the investors.
The attorney obviously represents Wells Fargo, who is now saying it is the servicer, but fails to produce any documentation showing how the ownership of the loan passed through several transactions where money exchanged hands to the REMIC entity and fails to produce any documentation from the Master Servicer appointing Wells fargo as the subservicer.
As a result, Wells Fargo has no original documentation but only documentation derived from other documents none of which are original receipts for wire transfers, Check 21, ACH or cancelled check.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: asset pool, bankruptcy, BEAR STEARNS, cancelled check, check 21 receipt, Citibank, Citigroup, CitiTrust, Custodial account, Lehman, originators, Ponzi, proof of loss, proof of payment, REMIC, RMBS, SPV, taxation, trust account, trustee, wire transfer instructions, wire transfer receipt | 109 Comments »

Deny and Discover — Where the Rubber Meets the Road

Posted on January 23, 2013 by Neil Garfield

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

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

Editor’s Analysis: The banks are broke and this rule properly applied will reveal exactly how badly they fall short of capital requirements. It can be found at Volume 77, No. 169 of the Federal Register dated, Thursday, August 30, 2012 2012-16759 Capital Risk Disclosure Requirements Under Dodd Frank.

Admittedly this is not for the feint of heart or those with limited literacy in economics, accounting and finance; but if you find yourself in the position of not understanding, then go to any economist or banker or finance specialist or accountant and they will explain it to you.

Lewtan which produces ABSnet is offering a service to banks that will give the banks and plausible deniability when the figures come up all rosy for the banks. Lewtan should be careful in view of the action being taken against the ratings companies, which is the start of an assault on the citadel of evil intent on Wall Street.

The fundamental aspect of these new rules are that the bank must report on the degree of risk it has taken on in any activity or holding. They must also show how they arrived at that assessment and under the Freedom of Information Act (FOIA) you might be able to get copies of their filing whether they do it themselves (doubtful) or hire someone like Lewtan which is obviously going to do the bidding of its paying clients.

The main problem for the banks is that they are holding overvalued assets and some non-existent assets on their balance sheet. A review to assess risk if properly conducted, will definitely turn up both kinds of assets reported on the balance sheet of the banks, which in turn will reduce their reported capital reserves, which in turn will result in changing the ratio between capital and risk.

This might sound like gumbo to you. But here is the bottom line: the banks were using investor money. We all know that. In baby language, the question is if they were using someone else’s money how did the banks lose any money?

They did receive the money from investors like pension funds, and other managed funds for retirement or contingencies. But they diverted the money and the documents to make it appear that the bank owned the assets that were intended to be purchased for the REMIC trusts. The Banks then purchased and claimed to be an insured or a party who had sustained a loss when in fact the loss was incurred by the investors and the mortgage bonds and loans were owned collectively by the investors.

By doing that the insurance proceeds were paid to the banks creating an instant liability to the investors to whom they owed a common law and contractual duty to provide an accounting and distribution based upon the insurance recovery. At no time did the banks ever have a risk of loss nor an insurable interest in their own name. And at not time were they bound by the REMIC documents because they ignored the REMICs and conducted transactions through an entirely different superstructure.

As agents of the investors they should have followed the REMIC documents and purchased the insurance and CDS protection for the benefit of the investors. But they didn’t do that. They kept the money for the bank who never had any proof of loss, proof of payment and was a mere intermediary claiming the rights of the principal. The same thing happened with Credit Default Swaps and Federal bailouts.

That is why the definition of toxic assets changed over a weekend when TARP was started. It was thought that the mortgages had gone bad for the banks.

Then they realized that the mortgages weren’t going bad to the extent reported and that the bank was suffering no loss because they were using investor money to create the funding of loans and the funding of proprietary trading in which they masked the theft of trillions from investors.

So the government quietly changed the definition of toxic assets to mortgage bonds — but that ran into the same problem, to wit: the mortgage bonds were underwritten by the banks but purchased by the investors (pension funds etc.).

Now the rubber meets the road. The claim that somehow the banks got stuck with mortgage bonds is patently absurd. If they have mortgage bonds it is not because they bought them, it is because they created them but were unable to sell them because the market collapsed and the PONZI scheme fails whenever the suckers stop buying.

The actual proceeds from theft from the investors and the borrowers is parked off shore around the world. The Banks having been feeding the money back in very slowly because they want to create the appearance of an increasingly profitable bank, when in fact, their revenues sand earnings are slipping away quickly — except for the bolstering they get from repatriating stolen money from investors and borrowers and calling them “proprietary trades.”

Nobody on Wall Street is making that kind of money on trades, proprietary or otherwise, but the banks are claiming ever increasing profits, raising their stock price, defrauding their stockholders. So against each overvalued and non-existent asset claimed by the mega banks on their balance sheet is a liability of far exceeding the assets or even the combined assets of the banks. Treasury knows, this, the Fed knows this and central bankers around the world know it. But they have been drinking the Kool-Aid believing that if they call out the mega banks on this fake accounting, the entire financial system will collapse.

So yes there is a consensus between those who pull the levers of power that they will allow the banks to pretend to have assets, that their liabilities are fairly low, and that the risks associated with their business activities, assets and liabilities are minimal even while knowing the converse is true. The system’s foundation is a loose amalgamation of lies that will eventually collapse anyway but everyone likes to kick the can down the road.

You are getting in this article a sneak peek into why the banks all rushed to foreclose rather than modify or settle on better terms. What is important from the practice point of view is that (1) the “Consideration” mandated by HAMP is not happening and you can prove it with the right allegations and discovery and (2) the reports tendered to OCC and the Fed under this rule will reveal that the issue of proof of loss, risk of loss, proof of payment and ownership is completely muddled — unless you follow the money trail (see yesterday’s article). You can subpoena the reports given by the banks from both the bank itself or the agency. My opinion is that you fill find a treasure trove of information very damaging to the banks and the Treasury Department.

There will be caveats in the notes that express the risk of inaccuracy and which reveal the possibility that the banks neither own nor control the mortgages except as agents for the investors, that the liability to the investors is equal to the money received from insurance, CDS, and bailouts, and that the borrower’s loan payable balance was corresponding reduced as to the investor and increased to entities that are not or cannot press any claims against the borrowers. Educate yourself and persist — the tide is turning.

Excerpt from attached section of Federal Register:

The bank’s primary federal supervisor may rescind its approval, in whole or in part, of the use of any internal model and determine an appropriate regulatory capital requirement for the covered positions to which the model would apply, if it determines that the model no longer

complies with the market risk capital rule or fails to reflect accurately the risks of the bank’s covered positions. For example, if adverse market events or other developments reveal that a material assumption in an approved model is flawed, the bank’s primary federal supervisor may require the bank to revise its model assumptions and resubmit the model specifications for review. In the final rule, the agencies made minor modifications to this provision in section 3(c)(3) to improve clarity and correct a cross-reference.

Financial markets evolve rapidly, and internal models that were state-of-the- art at the time they were approved for use in risk-based capital calculations can become less effective as the risks of covered positions evolve and as the industry develops more sophisticated modeling techniques that better capture material risks. Therefore, under the final rule, as under the January 2011 proposal, a bank must review its internal models periodically, but no less frequently than annually, in light of developments in financial markets and modeling technologies, and to enhance those models as appropriate to ensure that they continue to meet the agencies’ standards for model approval and employ risk measurement methodologies that are, in the bank’s judgment, most appropriate for the bank’s covered positions. It is essential that a bank continually review, and as appropriate, make adjustments to its models to help ensure that its market risk capital requirement reflects the risk of the bank’s covered positions. A bank’s primary federal supervisor will closely review the bank’s model review practices as a matter of safety and soundness. The agencies are adopting these requirements in the final rule.

Risks Reflected in Models. The final rule requires a bank to incorporate its internal models into its risk management process and integrate the internal models used for calculating its VaR-based measure into its daily risk management process. The level of sophistication of a bank’s models must be commensurate with the complexity and amount of its covered positions.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: 2012-16759 Capital Risk Disclosure Requirements Under Dodd Frank., CDS, Federal reserve, insurance, Lewtan, OCC, proof of loss, proof of payment, risk of loss, TARP, Treasury Departnemnt | 21 Comments »

They Just Don’t Get It: Meltdown Primer

Posted on January 22, 2013 by Neil Garfield

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Editor’s Analysis: Reynaldo Reyes, the asset manager for Deutsch that pretends to be a trustee of non existent unfunded trusts said it best: “it’s all very counter-intuitive.” In reality he was giving a clue. It isn’t that we haven’t yet unravelled the tangled web of deceit and exotic financial instruments and absurd risk taking. It all boils down to one thing: it doesn’t make sense, it was illegal from the start and it will never make sense. The reason it is counter intuitive is that there is no explanation except lying, cheating, stealing and cover-ups.

Whether you start from the top down, the bottom up or even start in the middle and spread out to the top and bottom, there is no connection between the money trail, the promises and representations made, and the document trail which proves beyond a shadow of a doubt that theft, breach of fiduciary duty, breach of contract, fraud, theft and cover-up were at the heart of what Wall Street called a securitization plan but which in practice was not securitization of credit but rather a PONZI s scheme completely dependent upon more investors buying bogus mortgage bonds. The crash didn’t happen because of mortgage de faults. It happened because investors stopped buying the bogus mortgage bonds. That is the red flag on all Ponzi Schemes. When people stop buying and start demanding their money back, the scheme collapses.

Under normal circumstances, the perpetrators — Madoff, Dreier, Stanford et al — go to jail, a receiver is appointed and the receiver does the best job possible of clawing back all the illicit gains, profits and accounts of the perpetrators. That is what should happen with he mortgage mess but that would mean admitting that the judicial system let millions of foreclosures go through the system because of bad lawyering, bad representation by pro se litigants and bad practices by the bench which failed to see the correct chain of title and then failed to inquire why not. —-

YES that IS the way it was. When I represented banks and HOA foreclosing on their liens, if I didn’t have my paperwork in order, the Judge sent me back to do it right — even if the other side didn’t show up. Why? Because the Judge understood that bad paperwork means bad title and that dozens of others could be effectively defrauded by allowing a bad foreclosure to proceed to sale, allowing an unproven creditor to submit a credit bid, and allowing a homeowner who legally still owned the home after the foreclosure to be evicted.

Back in those days certain presumptions applied — legal or informal — that the debt was real, the note was valid, and the mortgage was perfected. it was further correctly assumed that the borrower was in default.

The problem is that the old presumptions and assumptions remain while the facts are wildly different than the old-style foreclosures. Instead of the Judge being able to peruse the documents behind the mortgage, he must either accept the proffer of the facts from the lawyers for the foreclosing entity or have an evidentiary hearing, which he certainly doesn’t want on his calendar because all his other cases would pile up in a bottle neck. Thus lying in court became an acceptable substitute for having the right verifiable paperwork.

People ask me — how do I prove this? Lawyers ask me the same question. My answer is spend the daily rate for Lexus-nexus and get cases on point in your jurisdiction. They will say that where the facts and documents are uniquely within the knowledge and custody of the the defendant, the appropriate remedy is discovery and that the respondent to discovery has a higher duty to provide clear, concise and extensive answers. In short, the burden of persuasion changes to the the foreclosing party — whether you are in a judicial or non-judicial venue.

Any other approach would have the Judge making findings in the absence of real evidence and actual facts, which is exactly the problem in the current judicial climate, although the tide is definitely turning in many states.

A quick look at the reality of the Ponzi scheme reveals the true nature of the illegality that the regulators and law enforcement faced, understaffed and underfunded against a well staffed and over-funded banking sector.

Let’s start in this article from the top. There the investment banking firm forms what appears to be a REMIC trust and they create a selling entity to put some distance between the investment banking firm and the actual sale. The sale takes place, to wit: the investors gives the investment banking money and the investor gets either a certificate (rarely) or some acknowledgment ina statement that the investor is now the proud owner of an interest in a REMIC trust governed by the REMIC provisions of the internal Revenue Code, which allows the REMIC trust to be a tax-exempt entity meaning the flow of funds from investments by the REMIC will only be taxed once even though it is coming through another entity. If that were true, there would be no problem. The problem is that it is not true and for the most never was true and never was the intent of the banks.

So to recap thus far, the money went from the bank account of the investors to the bank account of the investment bank or to an entity wholly controlled by the investment bank. Where it did NOT go was into a trust account wherein the Trustee for the REMIC pool would collect and disburse all funds, receipts and disbursements as set forth in the investor prospectus and pooling and service agreement.

If you look at the Taylor Bean and Whitaker setup, you’ll see, as Dan Edstrom has pointed out, that the money was instead put into a vast commingled account which they called a custodial account, but they never state for whom they are the custodian. And that is because they were skimming the money in a tier 2 yield spread premium and other “proprietary trading” also known as three pocket Monty — you take the money out of one pocket to transfer it to another pocket but on the way a few dollars drops into a secret third pocket. This vast Superfund was used as a TBW piggy bank as well as the source of funding for mortgages.

Without getting into the farce of “proprietary trading” being the cover for outright theft of investors money, let’s look at what happened next with the money.

People with the right connections were told to create mortgage origination companies. These companies would act as the payee on the note and the secured party on the mortgage or deed of trust, but they would never ever be allowed to touch the actual funding of the mortgage nor would they have the right to make a loan that would fall under the provisions of the assignment and assumption agreement signed with the aggregator (Countrywide, for example). SO XYZ company is created and they have a bank account and all that but the funding of the mortgage never touches the bank account of XYZ or any person associated with XYZ. The simple reason is that Wall Street being composed largely of thieves, understood that when the balances became high enough in the originators accounts, many if them would abscond with the money. So the wire transfer was made directly from the Superfund account (euphemistically referred to as a warehouse credit facility set up solely at the discretion of the aggregation (e.g. Countrywide.).

It was the coincidence of timing that convinced the closing agent and the borrower that the money had come from the “lender” identified on the disclosure paperwork and in the note and mortgage, when in fact, the originator was a mere nominee working for a fee. The originator could not under generally accepted accounting rules, book the transaction as a loan receivable because there was no offsetting entry debiting a cash account or other account over which the originator had control. The originator had control over nothing — the underwriting, funding, approval of the loan was left to the undisclosed aggregator using a computer system designed explicitly for this purpose. Without approval from Countrywide, the originator was not permitted to communicate approval of the loan.

The real lender were the investors whose money had been diverted from the REMIC trust into the Superfund. This created a common law partnership instead of a REMIC trust. This partnership with no name was the lender but the banks made sure that the true lender in an obviously illegal table-funded transaction was never disclosed. As far as the closing agent and borrower were concerned the coincidence of having the money there at the same time as the closing with the originator was proof of enough about what was going on. After all, who would send money for a mortgage transaction unless they thought they were getting a valid enforceable note and a mortgage or deed of trust securing the provisions of that note, which was valid evidence of the debt.

Unfortunately for the investors, the banks had other ideas than using the money the way they promised in the prospectus and pooling and servicing agreement, and they had other plans than protecting the investors enforceable rights under a valid promissory note, and they had a different idea about securing a note payable to the investors with the investors having a perfected mortgage lien against the property.

Bottom Line: The wire transfer receipt shows a loan emanating from the Superfund and that the money from the Superfund was advanced by the investors, but other than the wire transfer receipts there was not a shred of documentary evidence showing that the investors were going to be repaid under the terms of the mortgage-backed bonds in the REMIC because the mortgage bonds never made into the REMIC and their money never made it into the largely or completely unfunded REMIC trust.

On the contrary, the documents produced by the originator under direction of the aggregator who was functioning under the thumb of the investment banks, all tell a wildly different story. According to the documents, the originator made the loan and assigned or sold it to the aggregator who sold it to the REMIC, which presumably protected the investors in a round about way even if it was a lie. The main problem with the bank’s version of the story is that XYZ never got paid for the loan or mortgage in a transfer or assignment transaction. And the aggregator never got paid by the REMIC trust for the loans either. The lack of consideration is not merely a technicality but rather part of a larger plot to steal from investors and homeowners.

The trust reposed in the banks by investors and homeowners alike basically was like putting red meat in front of a lion. The reason for the subterfuge was that the banks wanted to and did in fact get away with borrowing the loss of the investors by pretending to be the owner of the loans for a temporary period of time. By doing that they had what appeared to be ownership, proof of loss, albeit without any proof of payment. Now the insurers and credit default swap parties are hip to this trick and suing the investment banks.

The net result is that the actual financial transaction is largely undocumented, unsecured, and unenforceable in terms of method of repayment. The debt to investors (not the REMIC trusts) exists — less the insurance, CDS and bailouts received by the agents of the investors — but it is not documented. Conversely, the documented transaction lacks consideration of any kind, thus describing a financial transaction that never actually occurred. Any assignment therefore was pure lies and hype, since the reference was to originating documents that were procured by misrepresentation or fraud, without consideration, and obviously no perfected lien, which is not subject to nullification of instrument.

The banks and regulators and law enforcement don’t like my explanation because it would require them to do their work, and the people in charge of the banks to go to jail, costing a could of hundred millioin dollars to prove the case against the right people. Whether they like it or not, the regulators and law enforcement needs to do their job or face recriminations from the public once the true nature of this scheme is fully revealed. And make no mistake about it. I am not the only one who knows. The truth is coming out and that is why Judges are turning.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: CDS, Dan edstrom, Deutsch Bank, discovery, generally accepted accounting rules, proof of loss, proof of payment, REMIC, Reynaldo Reyes, securitization PONZI, Superfund, Taylor Bean Whitaker, TBW, wire transfer receipt | 40 Comments »

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