Michigan Appellate Court Dismisses BOA Foreclosure for Lack of Standing — but for the wrong reason?

CHASE-WAMU MERGER CONSIDERED IN MICHIGAN COURT OF APPEALS AS NOT AN ASSIGNMENT.  BOA FORECLOSURE DISMISSED AND REMANDED FOR LACK OF STANDING.

And next is an interesting favorable decision in the State of Michigan entered June 6, 2013 but not yet published. Sobh-v-Bof-A, Chase et al

Bank of America was found to LACK STANDING to Foreclose. So far so good. But the reasoning of the Court leads me to question whether the right record was in front of them. They ASSUME that the Chase-Wamu merger transferred the loans only because, as I see it, nobody read the merger agreement. The receiver, as I pointed out in prior posts, acting on behalf of the FDIC, the trustee in WAMU bankruptcy, Chase and WAMU executives were sort of playing fast and loose with the rules.

It turns out that Chase never paid for anything. While it could be argued that they assumed the liability on billions of dollars in deposits, they also got the money that was on deposit. The agreement says the consideration is zero in no uncertain language. In fact, later on in the agreement and then again outside the agreement, they slipped in a provision wherein Chase was putting up $1.9 billion, but getting more than $2 billion back out of a tax refund owed to WAMU, so they had negative consideration and there is no recital of any net loss they were taking when they assumed the deposits of WAMU.

It also turns out that, straight from the receiver’s lips, if you are looking for an assignment, you won’t find one because there isn’t one. And the merger and assumption agreement specifically does NOT include the bogus mortgage loans and other liabilities (put back) in the securitization scheme which is most of all loans originated by WAMU. Chase didn’t want to buy the loans because they correctly perceived that the liabilities on those loans and the liabilities to alleged REMIC structures that never received an interest in the loans, and the liabilities to insures, counterparties on credit default swaps and to the Federal government and Federal Reserve might vastly exceed the nominal value of mortgages originated by WAMU. Then there was also the liability for predatory or fraudulent loan practices. Altogether, Chase didn’t want to be saying it owned ALL the loans. It just wanted to be able to say it some of the time when they had an uncontested foreclosure and they could get a free house.

So Chase got an affidavit from the receiver that said that Chase owned the loans by operation of law because of the merger. That affidavit has been used hundreds if not thousands of times in foreclosures where Chase perceived the risk to be low. Thus in uncontested cases, Chase alleged it owned the loans even if they were “securitized” and got away with it because, well, there was nobody to say otherwise.

A good thing that the Michigan court said was that the Chase had the burden of proving the chain of ownership which was the history of the piece of property. A bad thing that the Court said was that Chase “acquired” the loans but that the foreclosures were voidable because the assignment was never recorded. In Michigan the absence of a recorded assignment is deadly so they ran with that idea and decided fro the borrower and against Chase who will no doubt now enter into a settlement or modification for which they have no authority to even talk about because they do not now nor did they ever own the loans.

Just because the loans were considered a hot potato and nobody wanted them doesn’t mean that anyone can claim them. But that is exactly the plan of engagement adopted by Chase. So all that happened here was that Chase was chased out of Court with permission to come back when it had the assignment recorded. tricky business there. Will they fabricate that instrument or will they simply settle with the borrower for what they can get? Whatever they get, it is free money because at no time in the history of the loan has Chase ever been at risk unless, now that they are acting as though they have control over the loan portfolio, a court decides that if you fake it or made it. Greed has no bounds. If Chase had simply left the loan portfolio to wallow in its own crud, no argument could be made against Chase for all the chicanery that went on with the borrowers and investors. Now that they have led courts to believe they have apparent authority, maybe they have apparent liability as well.

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

EDITOR’S NOTE AND PRACTICE SUGGESTIONS: The approach taken by federal agencies and law enforcement with respect to illegal behavior on the part of the Wall Street banks and their affiliates, subsidiaries and co-venturers has basically been a collection of smoke and mirrors designed to create the illusion that the problems are being fixed. In fact the reality is that the problems are being swept under the rug leaving the economy, the middle class, and the title records of nearly all real estate transactions in shambles.

The temporary hold on foreclosure actions is the result of further scrutiny by federal agencies and law enforcement AND  the growing trend of lawyers for homeowners citing the consent orders in their  denials, defenses, and counterclaims.

The problems are obvious. We start off with the fact that  the notes and mortgages would ordinarily be considered unenforceable, illegal and possibly criminal. Then we have these consent decrees  in which administrative agencies and law enforcement agencies have found the behavior of the parties in the paper securitization trail to a violated numerous laws, rules and regulations. The consent decrees and settlements signed by virtually all of the players in the paper securitization chain require them to take action to correct wrongful foreclosures. Of course we all knew that  they would do nothing of the kind, since the result would be an enormous fiscal stimulus to the economy and restoration of wealth to the middle class at the expense of the banks who stole the money in the first place.

You can take it from the express wording as well as the obvious intention in the consent orders and settlements that most of the prior foreclosures were wrongful and then it would be wrongful to proceed with any further foreclosures without correcting or curing the problems caused by wrongful foreclosure on unenforceable notes and mortgages that are not owned by the originator of the alleged loan or any successor thereto. The further problem for them is that none of them were ever a creditor in the loan transaction.

There can be little doubt now that the principal intermediary was the investment bank that received deposits from investors under false pretenses.  There is no indication that the deposits from investors were ever credited to any trust or special purpose vehicle. Therefore  there can be no doubt that the alleged trust could have ever entered into a transaction in which it paid for the ownership of a debt, note or mortgage. It’s obvious that they are owed nothing from borrowers through that false paper chain and that there obviously could be no default with respect to the alleged trust or any of its predecessors or successors. Therefore the mortgage bonds supposedly issued by the trust were empty with respect to any mortgages that supposedly backed the bonds.

By the application of simple logic and following the actual money trail from the investors down to the borrowers, it is obvious that the investors were tricked into making a loan without documentation or security. This is why the megabanks and all of their affiliates and associates have taken such great pains to make sure that the investors and the borrowers don’t get together to compare notes. Most of the notes signed by borrowers would not have been acceptable to the investors even if the investors were named on the promissory note and mortgage. And both the investors and the borrowers would have been curious about all of the money taken out of the funds advanced by investors as undisclosed compensation in the making of the loan.

 So the banks are facing a major liability problem as well as an accounting problem. The accounting problem is that they are carrying  mortgage bonds and hedge products on their books as assets when they should be carried as liabilities.

The liability problem is horrendous. Most of the money taken from investors was taken under false pretenses. In most cases a receiver would be appointed and the investors would claw back as much as possible to achieve restitution.

This is further complicated by the fact that the homeowners are entitled to restitution as well as damages, treble damages and attorneys fees for all of the undisclosed compensation. This is why the banks want foreclosure and not modification or settlements. They need the foreclosure to complete the illusion that the alleged trust or special purpose vehicle was the proper owner of the debt, note and mortgage despite the fact that the trust neither paid for it nor accepted the assignment.

Thus  lawyers are now directing their discovery requests to the methods utilized by the banks and their affiliates to determine whether a particular foreclosure was wrongful and if so to determine the required corrective action.  It is perhaps the most appropriate question to ask and the most relevant as well.

The required corrective action should be the return of the home to the homeowner. That is what  would ordinarily happen if the scale of the problem was not so huge.

But the law does not favor that approach when applied by judges, lawyers, homeowners, legislators and law enforcement.  Instead, investors and homeowners alike are stuck in a web of politics instead of the application of black letter law that has existed for centuries.  As a result the government response has been tepid at best misleading virtually everyone with so-called settlements that work out to be a fraction of a cent on each dollar  that was stolen by the banks and a fraction of a cent on each dollar representing the value of homes that were taken in illegal foreclosures.

Fortunately none of these consent orders or settlements bar individual actions by homeowners against the appropriate parties. Below are the links to consent orders that may apply to your case — even where the Plaintiff or party initiating foreclosure sales is NOT named as one of these. One or more of them is usually somewhere in the so-called securitization chain. Hat tip to 4closurefraud.org.

Links to the OCC and former OTS Enforcement Actions (Issued April 2011):

 

 

Links to Enforcement Action Amendments for Servicers Entering the Independent Foreclosure Review Payment Agreement (Issued February 2013):

 

 

Wells, Citi Halt Most Foreclosure Sales as OCC Ratchets Up Scrutiny
http://www.americanbanker.com/issues/178_96/wells-citi-halt-most-foreclosure-sales-as-occ-ratchets-up-scrutiny-1059224-1.html

Thousands of Days Late, Billions of Dollars Short: OCC
http://4closurefraud.org/2013/05/18/thousands-of-days-late-billions-of-dollars-short-occ-correcting-foreclosure-practices/

US BANK: Lawsuit to Take Aurora Woman’s House is Guaranteed
http://4closurefraud.org/2013/05/17/us-bank-lawsuit-to-take-aurora-womans-house-is-guaranteed/

Short sales routinely show up in credit reports as foreclosures
http://www.latimes.com/business/realestate/la-fi-harney-20130519,0,111610.story {EDITOR’S NOTE: SEND OBJECTION TO CREDIT REPORTING AGENCIES}

 

Chase Reliance on Bogus Affidavit and “operation of law”

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Chase clearly has a problem, as set forth in the recent Michigan Supreme Court decision. There is no “operation of law” by which the loan could have been transferred. The purchase and assumption agreement do not transfer the loans —- especially and obviously the loans that WAMU had already sold. The FDIC receiver has stated that no document exists assigning the loans. And no document exists that gives Chase the right to service the loans, but that would probably not be a strong point. If they assert agency for servicing and everyone accepted the assertion by conduct, it would be hard to achieve anything attacking their status as a servicer. But that doesn’t mean they are a creditor.

Without an assignment, the loan, even if the loan documents are valid (highly questionable), would still be in the estate of WAMU, which technically doesn’t exist unless something is reopened — the receivership, the bankruptcy etc. What is required here is clarity on who the principal is since Chase cannot claim subrogation without showing proof of payment, which they don’t have.

Perhaps there should be some discussion as to a declaratory action seeking injunctive and supplemental relief.  The homeowner is in doubt as to who is on first: Chase asserts ownership but has produced neither an assignment nor proof of payment. WAMU doesn’t exist any more but we don’t have any evidence that the loan was transferred. The FDIC receiver has stated that  more than 2/3 of all loans originated by WAMU were sold into the secondary market where they were subject to claims of securitization.

The documents for securitization, if they exist, may well follow the standard operating procedure of the securitization participants of attempting to assign a loan in default in violation of the prospectus and PSA. And the attempted transfer is generally far outside the 90 day window allowed by the PSA and the REMIC statute, both of which prohibit acquisition of new mortgages.

Hence the probabilities, as per the FDIC receiver is that the loan was packaged for sale and “Securitization” but neither the sale nor the securitization occurred, thus leaving the loan within the WAMU estate, which has been closed.

Nonetheless the REMIC trust that could be asserted to own the loan has not been disclosed, leaving three potential claimants — Chase, which has neither assignment nor proof of payment, the WAMU estate which has been closed, and the REMIC trust that was in all probability used to assert claims of sale, transfer and securitization of the loan.

A fourth category of claimant, the investors who advanced money to purchase fractional shares in the REMIC trust would emerge if the securitization claims were unsupported.

Arguments of standing apply for jurisdictional purposes because there is no proof or evidence (or even an allegation) on record that the owner of the loan receivable (one of the possibilities mentioned above) was not paid by a party waiving subrogation (a standard provision in all insurance contracts and credit default swaps) protecting the value of the bond.

Standing aside, the identity of the principal owning the loan receivable as evidenced by origination, assignment and proof of payment must be established before any party can  submit a “credit bid.” in lieu of cash at auction. Further, a complete accounting from WAMU, Chase and any parties involved in securitization or sale into the secondary market especially including the Master Servicer who would know the actual balance of the receivable after deduction for insurance and credit default swaps receipts.

This would have an effect on the redemption rights of the borrower, the ability of the borrower to modify, and whether a default actually existed at the time of the notice of default and notice of sale which in all likelihood contained a demand for an amount far in excess of the loan receivable after proper allocation of deductions are made.

The review process, as farcical as it is turning out to be is thus corrupted from the start. Although Chase is communicating with the borrower on the review process, there is no evidence that they have any right to do so. A letter should be sent back to Chase saying that based upon the information available thus far, there is a question as to whether they are the authorized servicer, and if so, how that happened. Secondly, there is a question as to the party for whom they are performing the review process as the creditor. They should be asked in the letter, for the identity of the creditor — i.e., the party who can show assignment and proof of payment.

MIchigan Supreme CT: $3.75 Billion of Chase WAMU Mortgages Are Voidable

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MCL 600.3204(3) states:

“If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage.”

Editor’s Comment and Analysis: We are getting closer and closer as the Judges are seeing past the veil of fabricated paperwork and looking directly into the transactions checking whether there was offer, acceptance and consideration. All three are arguably not present in any of the so-called securitized mortgages because the offer made to the lender/investor is different from the offer made to the homeowner/borrower and the party seeking to assert ownership on the loan never funded the origination nor the purchase of the loan.

In this case the court in Michigan had a specific statute that merely states the obvious: if you are not the original mortgagee, you must prove up chain of title prior to the date of sale. In other words, without that, the “credit bid” is “voidable” which means that it is void if you challenge it. The court didn’t go all the way to saying the foreclosure sale was void, which I would have preferred.

I have personally spoken with the receiver for WAMU and I have read the Purchase and Assumption agreement between Chase, WAMU, the FDIC and the Trustee and noting could be clearer that their was no assignment of loans in that document. The receiver said he was mistaken when he signed the affidavit that Chase is using to say it acquired the WAMU loans “by operation of law.” Nothing could be further from the truth and the behavior of Chase, selecting loans to foreclose, shows that they themselves do not assert ownership over ALL the loans.

The receiver told me in no uncertain terms that if we were looking for an assignment of loans we would not find one because none exists either individually for each loan nor as a group. The purchase and assumption agreement together with other events (sharing in a tax refund) explains why the agreement says the consideration paid by Chase was zero. They “bid” $1.9 Billion but received more than that as their share of a tax refund due WAMU — a tax refund that had nothing to do with mortgages.

The story in the link below is the tip of the iceberg. The final ruling from the Michigan State Supreme Court rested on the specific statute quoted above. But that statute is inherently included in the recording requirement in all the states. Altogether the total of mortgages affected is, according tot he FDIC receiver is around $700 Billion.

While Chase can try to get or fabricate an assignment, the spotlight is on this transaction and it seems unlikely that anyone is going to sign anything from the U.S. Bankruptcy Court or the FDIC. Of course WAMU, now defunct, is unable to execute anything.

Analysis and Practice Tips: This case should definitely be used. But be careful. If it looks like you are knocking out Chase with no other creditor on the scene judges are going to act to prevent a windfall to homeowners. Somehow they will justify their decision unless, as the case progresses, you are able to show (through Deny and Discover) that the money for funding the purchase of $700 Billion in loans was never paid, which would technically mean that the estate of WAMU would need to be reopened to include the loans — which is impossible because of the claim of securitization in which WAMU reportedly sold all of those loans.

To whom and where were the loans sold and in what transaction? What was the consideration paid to WAMU. Answer: Nothing because they didn’t fund the origination of the loans to begin with. They had neither the capital nor available deposits with which they could make those loans.

So educating the Judge means leaving him/her with the notion that there IS a creditor that Chase tried to cheat — the lender/investors whose rights might be equitable or legal, possibly subject to a receiver being appointed and possibly subject to subrogation to prevent Chase from receiving windfall.

The measure of the right to subrogation is whether the claiming party is asserting rights that diminish the value of other claimants. Chase, who received hundreds of billions from insurance and credit default swaps and trillions in Federal bailout programs has no loss on any loan receivable — which is why an accounting from the MASTER SERVICER, Trustee and the other active participants needs to be produced to follow the money trail from investors to all the different places it went, breaking every rule in the book, to the extreme detriment of investors, the financial system, homeowners, workers, and consumers.

Here the investors put up the money, Chase put up nothing, WAMU probably put up nothing, which means the investors are owed the principal due on the loans — if there is any balance due because of payment of insurance, credit default swaps and federal bailouts.

Since the money trail does not lead to the REMIC, there is a high probability of double taxation against the investors because their agents diverted the money and the documents from the investors and their “REMIC” and did the transaction “off record.” That leaves the investors with a claim but no security since the mortgage is not likely to be considered subject to subrogation in favor of the investors — although that is a possibility.

The main point of this and recent articles published in the latest Florida Bar Journal is that in considering subrogation or any other equitable remedy, the claimant must prove “clean hands,” which is going well nigh impossible for nearly all the claimants on these mortgages. The Court is looking for who is REALLY out of the money and who is really going to lose money and how much that loss is going to be because subrogation will not support enhancing the position of the alleged subrogatee.

AND THAT is why Deny and Discover is such a powerful weapon to use against the banks. By challenging the offer, acceptance and consideration starting with the origination and all the way through the assignments you can force them to either fess up to the fact that no money exchanged hands on ANY of their deals. As the proxy for the borrower the investment banks invited investors to advance the money but the offer to the investors was substantially different than the one offered to the prospective borrower. They then named the payee incorrectly which should have been the investors or the REMIC if the money had actually come from a REMIC trust account designating that particular REMIC as the owner of the bank account.

This was done intentionally, fraudulently and improperly for one simple reason. They were going to claim the obvious impending losses as their own, thus depriving the investor of the protection they were promised through insurance and credit default swaps, and enabling the investment bank to retain the difference as “trading profits.”

When all is said and done, Chase can’t prove up any actual loss on these loans because they don’t have any losses. The Michigan court saw the opportunity for moral hazard in Chase’s argument and rejected it. So should the courts in all 50 states.

It is these facts that make the impending “settlements” so insignificant and hopeless for the millions of people who have been foreclosed and evicted on loans whose balances were either non-existent or a small fraction of what was demanded.

Euihyung Kim v. JPMorgan Chase B[1] (1)

BULK SALES OF MORTGAGE LOANS: WHAT ARE THEY BUYING?

Wall Street is gearing up to buy properties en masse from Fannie, Freddie and other holders (including the Federal Reserve. The question for these investors is what are they buying and what are they doing?

I think these sales represent an attempt to create a filler for an empty hole in the title chain. we already know that strangers to the transaction were submitting credit bids at rigged auctions of these properties. The auctions were based upon declarations of default and instructions from a “beneficiary” that popped up out of nowhere. The borrowers frequently contested the sale with a simple denial that they ever did business with the forecloser and that the chain of “assignments” were fabricated, forged, robo-signed, surrogate signed and executed by unauthroized people on behalf of unauthroized entities.

The reason the banks and servicers resorted to such illegal tactics was that they understood full well that the origination documents were fatally defective and they were papering over the defects that continually recited the validity of the preceding documents. That is putting lipstick on a pig. It is still a pig.

While apparently complex, the transaction in a mortgage loan is quite simple — money is loaned, a note is made payable to the lender and a separate agreement collateralizes the loan as guarantee for faithful performance of repayment in accordance with the terms of the note. An examination of the money trail shows that this procedure was not followed and that the practices followed and which have become institutionalized industry standards lead to grave moral hazard, fabrication, forgery and fraud. The entire matter can be easily resolved if the forecloser is required to produce original documentation and appropriate witnesses to lay the foundation of the introduction of documents starting with the funding of the loan through the present, including all receipts and disbursements relating to the loan.

Since the receipts and disbursements clearly involve third parties whose existence was not contemplated or known at the time of origination of the loan, it would probably be wise to appoint an independent receiver with subpoena powers to obtain full records from the subservicer, Master Servicer, trustee, other co-obligors or co-venturers including the investment bank that sold mortgage bonds and investors with the sole restriction that it relate to the accounting and correspondence, agreements and other media relating to the subject loan and the subject pool claiming to own the loan.

Starting from that point, (knowing all receipts and disbursements, sources and recipients, the rest is relatively uncomplicated. Either the documents follow the money trail or they don’t. If they do, then the foreclosure should proceed. If they don’t then there are discretionary decisions of the court as well as mandatory applications of law that are required to determine whether or not the discrepancies are material.

The chain of documents relied upon by the foreclosing party is neither supported by consideration nor do the origination documents recite the terms of the transaction authorized by the lender. Hence there was no meeting of the minds. At a minimum, the recorded lien is a wild deed or should otherwise be subject to invalidation or removal from county records, and the note should be excluded as evidence of the obligation. The actual obligation runs through a different chain the terms of which were never documented between the lenders and the borrower. Hence at common law, it is a demand loan, unsecured.

But the sale from a GSE or other entity creates yet another layer of paper giving the appearance that the origination documented were valid, even though the evidence strongly points in the opposite direction. The purchase of such loans or properties would thus lead to the inevitable wrongful foreclosure suits in which the property is sought to be returned to its rightful owner, and/or compensatory and punitive damages including damages for emotional distress in California.

So my answer is that these buyers did not buy property or loans. They bought themselves into lawsuits that they will lose once discovery is opened up on the underlying transactions, all of which were faked. Is the government colluding with these “buyers” to fix an fixable title problem?

Allocating Bailout to YOUR LOAN

Editor’s Note: Here is the problem. As I explained to a Judge last week, if Aunt Alice pays off my obligation then the fact that someone still has the note is irrelevant. The note is unenforceable and should be returned as paid. That is because the note is EVIDENCE of the obligation, it isn’t THE obligation. And by the way the note is only one portion of the evidence of the obligation in a securitized loan. Using the note as the only evidence in a securitized loan is like paying for groceries with sea shells. They were once currency in some places, but they don’t go very far anymore.

The obligation rises when the money is funded to the borrower and extinguished when the creditor receives payment — regardless of who they receive the payment from (pardon the grammar).

The Judge agreed. (He had no choice, it is basic black letter law that is irrefutable). But his answer was that Aunt Alice wasn’t in the room saying she had paid the obligation. Yes, I said, that is right. And the reason is that we don’t know the name of Aunt Alice, but only that she exists and that she paid. And the reason that we don’t know is that the opposing side who DOES know Aunt Alice, won’t give us the information, even though the attorney for the borrower has been asking for it formally and informally through discovery for 9 months.

I should mention here that it was a motion for lift stay which is the equivalent of a motion for summary judgment. While Judges have discretion about evidence, they can’t make it up. And while legal presumptions apply the burden on the moving party in a motion to lift stay is to remove any conceivable doubt that they are the creditor, that the obligation is correctly stated and to do so through competent witnesses and authenticated business records, documents, recorded and otherwise. All motions for lift stay should be denied frankly because of thee existence of multiple stakeholders and the existence of multiple claims. Unless the motion for lift stay is predicated on proceeding with a judicial foreclosure, the motion for lift stay is the equivalent of circumventing due process and the right to be heard on the merits.

But I was able to say that the the PSA called for credit default swaps to be completed by the cutoff date and that obviously they have been paid in whole or in part. And I was able to say that AMBAC definitely made payments on this pool, but that the opposing side refused to allocate them to this loan. Now we have the FED hiding the payments it made on these pools enabling the opposing side (pretender lenders) to claim that they would like to give us the information but the Federal reserve won’t let them because there is an agreement not to disclose for 10 years notwithstanding the freedom of information act.

So we have Aunt Alice, Uncle Fred, Mom and Dad all paying the creditor thus reducing the obligation to nothing but the servicer, who has no knowledge of those payments, won’t credit them against the obligation because the servicer is only counting the payments from the debtor. And so the pretender lenders come in and foreclose on properties where they know third party payments have been made but not allocated and claim the loan is in default when some or all of the loan has been repaid.

Thus the loan is not in default, but borrowers and their lawyers are conceding the default. DON’T CONCEDE ANYTHING. ALLEGE PAYMENT EVEN THOUGH IT DIDN’T COME FROM THE DEBTOR.

This is why you need to demand an accounting and perhaps the appointment of a receiver. Because if the servicer says they can’t get the information then the servicer is admitting they can’t do the job. So appoint an accountant or some other receiver to do the job with subpoena power from the court.

Practice Hint: If you let them take control of the narrative and talk about the note, you have already lost. The note is not the obligation. Your position is that part or all of the obligation has been paid, that you have an expert declaration computing those payments as close as  possible using what information has been released, published or otherwise available, and that the pretender lenders either refuse or failed to credit the debtor with payments from third party sources —- credit default swaps, insurance and other guarantees paid for out of the proceeds of the loan transaction, PLUS the federal bailout from TARP, TALF, Maiden Lane deals, and the Federal reserve.

The Judge may get stuck on the idea of giving a free house, but how many times is he going to require the obligation to be paid off before the homeowner gets credit for the issuance that was was paid for out of the proceeds of the borrowers transaction with the creditor?

Fed Shouldn’t Reveal Crisis Loans, Banks Vow to Tell High Court

By Bob Ivry

April 14 (Bloomberg) — The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said.

Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs.

The U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help.

“Our member banks are very concerned about real-time disclosure of information that could cause a run on the banks,” said Paul Saltzman, the group’s general counsel, in an interview yesterday. “We’re not going to let the Second Circuit opinion stand without seeking a review.”

Regardless of whether the Fed appeals, the Clearing House will take the next legal step by asking for a review by the full appellate court, Saltzman, 49, said at his office in New York. If the ruling is unfavorable, the bank group will petition the Supreme Court, he said.

Joined Lawsuit

The 157-year-old, New York-based Clearing House Payments Co., which processes transactions among banks, is owned by its 20 members. They include Citigroup Inc., Bank of New York Mellon Corp., Deutsche Bank AG, HSBC Holdings Plc, PNC Financial Services Group Inc., UBS AG, U.S. Bancorp and Wells Fargo & Co.

The Clearing House Association, a lobbying group with the same members, joined the lawsuit in September 2009, after an initial ruling against the central bank in federal court in Manhattan.

The Fed is “reviewing the decision and considering our options,” said Fed spokesman David Skidmore in Washington. He had no comment on Saltzman’s plans.

Attorneys face a May 3 deadline to file their appeals.

“We’ll wait to see the motion papers,” said Thomas Golden, attorney for Bloomberg who is a partner at New York- based Willkie Farr & Gallagher LLP. “The judges’ decision was well-reasoned, and we doubt further appeals will yield a different result.”

Bloomberg sued in November 2008 under the U.S. Freedom of Information Act, after the Fed denied access to records of four Fed lending programs and a loan the central bank made in connection with New York-based JPMorgan Chase’s acquisition of Bear Stearns Cos. in March 2008.

231 Pages

The central bank contends that 231 pages of daily reports summarizing lending activity, which were prepared by the Federal Reserve Bank of New York for the Fed Board of Governors in Washington, aren’t covered by the FOIA. The statute obliges federal agencies to make government documents available to the press and the public. The suit doesn’t seek money damages.

The Fed released lists on March 31 of assets it acquired in the 2008 bailout of Bear Stearns.

The New York Times Co., the Associated Press and Dow Jones & Co., publisher of the Wall Street Journal, are among media companies that have signed up as friends of the court in support of Bloomberg.

The Fed Board of Governors’ “refusal to disclose the names of borrowers renders public oversight of its actions impossible — it prevents any assessment of the effectiveness of the Board’s actions and conceals any collusion, corruption, fraud or abuse that might have occurred,” the news organizations said in a letter to the appeals panel.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.

Last Updated: April 14, 2010 00:01 EDT

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