Vacate the Substitution of Trustee

“The Bottom Line is that if the REMIC transactions were real, they would have been named on the note and mortgage. The fact that they never were named or disclosed demonstrates clearly that something else was going on besides funding mortgages with REMIC money from investors. Nobody would loan money without putting their name as payee on the note, their name as lender on the note and mortgage and their name as beneficiary. The Wall Street explanation that MERS and other obscurities were necessary to securitize the loans is in fact directly contrary to the fact that the loans were never securitized, that the mortgage bonds were bogus obligations from empty REMICs with no bank account and no active manager or trustee.” Neil F Garfield, livinglies.me

A recent case I reviewed, resulted in a full analysis, and my suggestions for strategy, tactics, pleading and oral argument. It involved Bank of America,  Recontrust and BONY/Mellon.

What is again so interesting is that we are dealing with BOA in SImi Valley, CA (supposedly) with Reconstrust in in in Richardson, TX. What is interesting is that the response to my letter which was addressed only to Recontrust came from BOA. This is evidence of the fact that Recontrust are one and the same entity. It doesn’t prove it but it is evidence of it. Thus the challenge to the substitution of trustee comes under the heading that a beneficiary cannot name itself as the trustee. The statute says the TRUSTOR names the trustee on the deed of trust not the beneficiary. And while the beneficiary may change the trustee there is nothing in the statute that even suggests that a beneficiary could name itself as the new trustee. The statute says that the trustee is to substitute for a court of law and that it is to exercise (See Hogan decision and others) a fiduciary duty toward both the Trustor and the beneficiary.

In most cases, the appearance of Bank of America as a beneficiary is via “merger with BAC” which was created to take the servicing rights from Countrywide (not the ownership of the loan). Yet the debt validation letter causes a response to show that the creditor is Bank of America while the Notice of Default shows as having a REMIC as the creditor, which would make the REMIC the beneficiary. So we have a conflict of creditors that comes from the same source.

Since the REMIC is required by law and contract to be closed out within 90 days with the loans in it, and since we know they didn’t do that, the money from the investors was beyond any reasonable doubt channeled through  conduits controlled by the investment banker and not the account of the REMIC because there was no trust account, bank account or any account through which the investor money was channeled and then sued to fund or buy loans. This leads to the inevitable conclusion that the entire scheme is a smoke screen for what really occurred.

Based upon what we know, the REMIC structure was actually ignored when it came to the movement of money. Based upon what we know, Quicken Loans and others acted as “originators”, which is a word that is not really defined legally but it would imply that it was the sales entity to reel in borrowers for a deal. While Quicken Loans was shown as payee on the note and lender on the note and mortgage (deed of trust), Quicken had neither loaned any money nor secured the loan through any legal nexus between Quicken and the investors. MERS was inserted as a placeholder for title purposes. Quicken was thus inserted as a placeholder for payment purposes — all without ad  equate disclosure of the compensation received by MERS or QUICKEN in the deal (a clear violation of TILA and RESPA).

Immediately after the closing of the loan the borrower was informed that the servicing rights had been transferred to Countrywide, and thereafter BAC emerged as the servicer. BAC was formed as a wholly owned subsidiary of bank of America and then merged with Bank of America for unknown reasons, and thus the servicing of the loan was assumed to be the right of Bank of America. But what was there to service?

If Quicken did not advance the funds for the loan nor did Quicken or any of its “successors” advance money for the purchase of a perfectly performing loan, then who did? The answer comes from irrefutable logic. We know the REMIC was ignored so the money didn’t come from the REMIC. If there was an intermediary who was acting as agent for the REMIC it had to be the Trustee for the REMIC who has no trust account or bank account to show for it. Thus the money came from another source and the money taken from investors may or may not have been used to fund the borrower’s loan in this case or more likely, a larger pool of investor funds was used as the source of funding but was NOT documented with the usual promissory note and mortgage (deed of trust) signed by the borrower.

The legal conclusion I reach is that the mountain of paperwork starting with the “origination” of the loan is worthless paper unsupported by either consideration (funding the loan) and whose recitations of facts are at variance with (1) the actual trail of money and (2) the provisions of the documents upon which Bank of America now relies requiring assignment of the loan in recordable form into the REMIC within 90 days while it was still performing. But they couldn’t assign it into the trust because (1) the trust had no money or account with which to pay for the loan and (2) this would have prevented the investment bank from trading the loan and the loan portfolios as if it were the property of the investment bank.

Thus Bank of America is attempting to appear as the new beneficiary based upon a complete lack of any chain of transactions that would make it so. And they are using the cover of BONY as “trustee” as cover for their false and fraudulent representations knowing full well that neither BONY nor the REMIC ever received a dime from investors, borrowers or anyone else and that instead the flow of money was entirely outside the sham paper transactions upon which BOA now relies.

Having covered up an incomplete unexecuted contract without funding the loan, the securitization participants proceeded to act as though the loan transaction with Quicken was real. If they relied upon the original trustee, the original trustee would have required sufficient title and other information from BOA before taking any action against the Trustor borrower.

Thus Bank of America names Reconstrust as the substitute trustee, that will “play ball” with them because Recontrust is owned and controlled by Bank of America. The challenge, as we have said, should be to the substitution of trustee as not having named an objective third party and instead being the equivalent of the beneficiary naming itself as trustee. BY definition, the new trustee is neither likely nor able to exercise due diligence and act in a responsible manner with a  fiduciary duty to the trustor and beneficiary, if they can determine the  identity of the beneficiary.

Thus any TRO or other action should be directed against the substitution of trustee as being outside the intent of the statute and violative of due process since it provides the beneficiary with unfettered ability to sell property merely on a whim.  In order to demonstrate compliance with the requirements of constitutional dude process the legislature had to show that there was a different procedure in place that would allow for the claims of all stakeholders to be heard. Even if the substitution of trustee was valid, the mere denial of the claims of the beneficiary and accusations of fraud, false assignments, and a closing at which the mortgage lien was not perfected, on a note that did not  name the proper payee nor state the same terms of repayment that the investors received when they “bought” the bogus mortgage bonds.

Bottom Line: The Pile of paperwork is worthless and does not create nor provide evidence of an actual transaction that took place wherein the named payee and lender ever fulfilled its part of the bargain — lending money to the borrower. Nor does it present even the possibility of a perfected mortgage lien. Thus foreclosure is impossible. The trustee was and is under an obligation in contested cases to file an interpleader action where the stakeholders’ claims may be heard on the merits. The primary trustee on the deed of trust may have violated its fiduciary duties by allowing the practice that it, of all entities, would or should have known was both illegal and improper. For both procedural and substantive reasons, the notice of default and notice of sale should be vacated and purged from the county records.

Bank of America to Pay $108 Million in Countrywide Case

GET LOAN SPECIFIC RECORDS PROPERTY SEARCH AND SECURITIZATION SUMMARY

FTC v Countrywide Home Loans Incand BAC Home Loans ServicingConsent Judgment Order 20100607

Editor’s Comment: This “tip of the iceberg”  is important for a number of reasons. You should be alerted to the fact that this was an industry-wide practice. The fees tacked on illegally during delinquency or foreclosure make the notice of default, notice of sale, foreclosure all predicated upon fatally defective information. It also shows one of the many ways the investors in MBS are being routinely ripped off, penny by penny, so that there “investment” is reduced to zero.
There also were many “feeder” loan originators that were really fronts for Countrywide. I think Quicken Loans for example was one of them. Quicken is very difficult to trace down on securitization information although we have some info on it. In this context, what is important, is that Quicken, like other feeder originators was following the template and methods of procedure given to them by CW.Of course Countrywide was a feeder to many securities underwriters including Merrill Lynch which is also now Bank of America.

Sometimes they got a little creative on their own. Quicken for example adds an appraisal fee to a SECOND APPRAISAL COMPANY which just happens to be owned by them. Besides the probability of a TILA violation, this specifically makes the named lender at closing responsible for the bad appraisal. It’s not a matter for legal argument. It is factual. So if you bought a house for $650,000, the appraisal which you relied upon was $670,000 and the house was really worth under $500,000 they could be liable for not only fraudulent appraisal but also for the “benefit of the bargain” in contract.

Among the excessive fees that were charged were the points and interest rates charged for “no-doc” loans. The premise is that they had a greater risk for a no-doc loan but that they were still using underwriting procedures that conformed to industry standards. In fact, the loans were being automatically set up for approval in accordance with the requirements of the underwriter of Mortgage Backed Securities which had already been sold to investors. So there was no underwriting process and they would have approved the same loan with a full doc loan (the contents of which would have been ignored). Thus thee extra points and higher interest rate paid were exorbitant because you were being charged for something that didn’t exist, to wit: underwriting.
June 7, 2010

Bank of America to Pay $108 Million in Countrywide Case

By THE ASSOCIATED PRESS

WASHINGTON (AP) — Bank of America will pay $108 million to settle federal charges that Countrywide Financial Corporation, which it acquired nearly two years ago, collected outsized fees from about 200,000 borrowers facing foreclosure.

The Federal Trade Commission announced the settlement Monday and said the money would be used to reimburse borrowers.

Bank of America purchased Countrywide in July 2008. FTC officials emphasized the actions in the case took place before the acquisition.

The bank said it agreed to the settlement “to avoid the expense and distraction associated with litigating the case,” which also resolves litigation by bankruptcy trustees. “The settlement allows us to put all of these matters behind us,” the company said.

Countrywide hit the borrowers who were behind on their mortgages with fees of several thousand dollars at times, the agency said. The fees were for services like property inspections and landscaping.

Countrywide created subsidiaries to hire vendors, which marked up the price for such services, the agency said. The company “earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue,” the agency said in a news release.

The agency also alleged that Countrywide made false claims to borrowers in bankruptcy about the amount owed or the size of their loans and failed to tell those borrowers about fees or other charges.

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