The Old REMIC Trusts Are Dead

Posted on December 12, 2017 by Neil Garfield

… world-class fortune to be made (10%-15%) using the IRS anonymous tip line once you figure out the players. Just remember where you got this information and throw a little our way when you collect. Anyone can do it. You don’t need to be a lawyer. All you need is the  right investigation to discover the parties involved (i.e., who is probably taking the deduction).

Since the trusts were empty to begin with, one would think that trading stopped. Quite the contrary. Virtually all prior REMIC Trusts have been “resecuritized” or tossed into a distressed asset trust (DAT). Some nominal value is placed on the nonexistent assets and the loans (falsely claimed as REMIC trust assets) are subject to  write down.

In one case they picked some nonexistent distressed debts that were never going to be paid. And they paid around $18 Million for it. But they got a $1.1 billion write off saving  them as much as $400 Million in taxes.

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

Why is this relevant to homeowners fighting foreclosure? Because the payment for the alleged debt creates the illusion of consideration when in fact there was nothing to sell from the REMIC trusts and the entire transaction is a sham to avoid taxes.

Here is another reason: The alleged REMIC Trust mortgagee or beneficiary was not ever funded, and so it never purchased any loans; but more importantly, the Trust named as beneficiary or mortgagee does not exist anymore — even in New York. The standing issue is insurmountable if you ask the right questions in discovery.

You will find support for all this in tax cases. Such “transactions” — even though some nominal summon money exchanged hands — are“a meaningless and unnecessary incident” inserted into the chain of entities, transactions, and agreements through which the non-performing loan (NPL) acquisition took place.

Since none of the REMIC Trusts were actually funded, the opportunity to claim all loans ever made as a loss and therefore a deduction from taxes. Just another way the banks made money stealing from investors and preying upon homeowners.

While the courts are striking down such “arrangements” most of the time the banks are getting away with it because the IRS doesn’t have the resources to find all such transactions and strike the deduction, add penalties etc. But I dare say that there might be a world-class fortune to be made (10%-15%) using the IRS anonymous tip line once you figure out the players. Just remember where you got this information and throw a little our way when you collect. Anyone can do it. You don’t need to be a lawyer. All you need is the  right investigation to discover the parties involved (i.e., who is probably taking the deduction).

How much is involved? From the looks of things the deductions may amount to all of the mortgage loans made between 2001 and the present. Altogether that means potentially trillions of dollars. Fake REMIC Trusts — it’s the gift that keeps on giving. The banks are laughing all the way to their vaults, while the investors and the borrowers are left with scraps on the floor of bank cutting tables.

From Bill Paatalo:

This may be at the heart of what’s going on with Lone Star’s LSF9 Master Participation Trust.
https://www.forbes.com/sites/robertwood/2011/10/10/irs-wins-tax-shelter-trifecta/#332716b17c26
https://blog.myirstaxrelief.com/2008/02/distressed-asset-trust-dat-tax.html
 
Andy Beal, who has been a huge player in the NPL market, got shot down in the Southgate case for setting up sham entities. From Southgate Appeal Decision:
(3) The lack of a business purpose
Finally, Culbertson instructs us to ask whether the partners were “acting
with a business purpose” when they made the decision to form the partnership.
Southgate was a redundancy, “a meaningless and unnecessary incident” inserted into the chain of entities, transactions, and agreements through which the NPL acquisition took place.

 

Filed under: foreclosure, sham transactions, tax cases | Tagged: , , , , | 12 Comments »

“Resecuritization”

Posted on March 7, 2017 by Neil Garfield

the basic thrust of the defense is to point out what is absent rather than attack what is not absent.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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As predicted on my blog back in 2008, we are seeing new names of Trusts emerge in foreclosure cases — involving old loans that were declared in default years ago by parties asserting they represent the alleged servicer of either a named bank or servicer or an old trust. What happened? As our sources had revealed, the alleged trusts had nothing in them and were the source of extreme liability of the Master Servicer acting as underwriter to the investors and third parties who traded in securities based upon the representation that the Trust actually owned the debts of millions of homeowners.
 *
We have not seen the agreements, but we are told, and our analysis confirms, that the old trusts were “retired” and that new trusts, also empty, are now being used wherein the paperwork for the new “Trusts” is far more complete than what we have previously seen.
 *
As far as we have determined thus far the mechanics of the change of trust name are along the following lines:
 *
  1. There is probably a purchase and sale agreement between the old trust and the new trust. Like previous documentation there are no warranties of ownership but ownership of the debts is implied.
  2. Like the old Trusts, foreclosures are brought in the name of the new trusts, using US Bank or other major institution as the “Trustee.”
  3. Investors in the old trusts are given certificates in the new trust as settlement of claims brought by investors for malfeasance in the handling of their money — namely the origination of loans instead of the acquisition of loans and the granting of loans that were far lower in quality than agreed and far higher risks than allowed for stable managed funds.
  4. This “resecuritization” process is a sham just like the original old trust. But it follows the playbook the banks have been using for over a decade. By adding another level of paper to fabricated documents based upon nonexistent transactions, it promotes the illusion of valid transactions and valid documents.
  5. Like all other trusts and hybrid situations in which trusts were involved but not named, the entire scheme is based upon a simple premise. The banks have managed information and data such that there remains a false sense of security that they are still credible sources of information — despite all evidence to the contrary. The additional layer of documents then adds to the illusion because it is counterintuitive to believe that these high level complex documents represent transactions in the real world that don’t exist.
 *
Defense strategies remain the same, however. The issues in evidence laws and rules are foundation, and hearsay.The basic defects in the bank’s credibility must be revealed even if it does not get to the point where everything is revealed. The rent-a-name practice for appointment of trustees that have no obligations or duties continues. The “apparent authority” of the servicers is based upon a trust document of an entity in which there is no asset. But the website of US Bank and others suggest that they have business records — which in actuality do not exist. Hence, the basic thrust of the defense is to point out what is absent rather than attack what is not absent.
 *
This takes strict logical analysis by the attorney representing the homeowner — an exercise that in most cases cannot be accomplished by a pro se litigant. It may be beyond the confidence of the lawyer too, but there are many people in the country who provide services that assist with the logical analysis and factual analysis — including but not limited to the team at LivingLies and LendingLies. The analyst should be well-steeped in the three classes of securitization — concept, written documents and actual practice in order to come to conclusions that are not only correct but are likely to give traction in court.
 *
While tempting, attacking the existing documentation on the basis of authenticity or validity is a rabbit hole. The only parties that actually have the proof as to the fabrication of any one particular transaction are the parties with whom you are in litigation and the parties who created them and use them as sham conduits. They resist by all means available any attempt to provide access tot he real information and the real monetary transactions which look very different from the ones portrayed in court.
 *
By making an allegation you are now required to prove what you have said by evidence that the other side simply will not give up. This is not to say that there is no value in sending a QWR (Qualified Written Request), (DVL) Debt Validation Letter, or a complaint to the state AG or the CFPB. Much of the inconsistent statements come from those responses and can be used in court. And there is also considerable value in seeking discovery even if we know that in most cases, while it should be allowed, the judge will issue protective orders or sustain objections to requests seeking the identity of the owner of the debt.
 *
The value of those apparently futile endeavors can be that at trial the foreclosing party will almost certainly rely on legal presumptions that depend upon information contained in your discovery request.
 *
OBJECTIONS AT TRIAL: This requires research and analysis of potential objections and how they should be used. While a motion in limine before trial would seem to be the better practice, the real traction seems to come at trial when the homeowner raises objections and moves to exclude evidence that relies upon data contained in discovery they refused to answer and which the court ruled was irrelevant. It is of utmost importance, however, that in order to use the discovery exchanges, you must file a motion to compel and set it for hearing and get it heard. The risk of a motion in limine is that the court is more likely to deny it and then when raised at trial in an objection will regard your objection as a second bite an apple that has already been the subject of a dispositive ruling.
 *
Cross examination of the robo-witness should be aggressive and relentless pointing to the actual lack of knowledge of the witness about anything other than the script from which he was trained to testify.

Filed under: foreclosure | Tagged: , , , , , , , , , , , | 2 Comments »

About Those 1099 and Other Tax Filings from Servicers and Banks …

Posted on July 27, 2016 by Neil Garfield

The problem for everyone involved is that in reality the investors made nothing and merely received a portion of their own money as though it had come from the trust. But it didn’t come from the trust because the trust didn’t even have a bank account. If the banks had disclosed the truth of the matter the investors would have known this is a Ponzi scheme. Imagine what would happen if someone claimed sub S treatment when the corporation they had formed did no business, had no bank account and never had any business activity, never had any assets or liabilities and never had any income or expenses.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER. HIRE AN ACCOUNTANT OR OTHER QUALIFIED TAX ANALYST

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Few people can say they understand the Internal Revenue Code (IRC), and far fewer understand the statute that gave birth to the idea of a REMIC pass through entity (REAL ESTATE MORTGAGE INVESTMENT CONDUIT). The banks lobbied heavily for this section because it left open doors that could be exploited for the benefit of banks selling the “investment products” to the huge detriment of (1) the investors who advanced money into what turned out to be a nonexistent trust, (2) borrowers who were coaxed into signing “closing” documents as though the party named on the documents was lending them money, and (3) the US Government and the taxpayers who ultimately picked up the tab for a “bailout” of banks who had lost nothing from the actual “loans” nor the “mortgage bonds” because the banks were selling them not buying them. The bailouts from the US Treasury and the Federal Reserve in reality only added to the pornographic profits made by the banks by rewarding them with payments on losses incurred by others.

*

Follow the money. Because of tacit agreements with Bush and Obama administrations the IRS has been granting repeated safe harbor extensions to the banks and servicers who have filed documents that  say that a REMIC was formed. Such filings were mostly false.  The problem is that the money and the acquisitions of “loans” MUST be through the trusts in order to get pass-through treatment. Without pass-through treatment, (like a sub S corporation) the cash received by investors is taxable income — even the portion, if any, that is attributable to principal. But the banks have been telling investors that they are getting the interest payment that they signed up for — according to the Prospectus and Pooling and Servicing Agreement. What they are actually getting is their own money back from the investment they  thought they made.

[NOTE: The part attributable to principal would be taxable because the notes themselves, even if they were valid, are not the source of income to investors as far as the investors know. The source is supposedly the REMIC Trust — an entity that was created on paper but never used. In reality the source was a pool of dark money consisting entirely of investor money. But the banks and servicers are reporting to the investors that the money they are receiving is “income”from interest due from the REMIC Trust that never operated. The banks and services are obviously not reporting the cash as part of a Ponzi scheme. So the investors are paying taxes on the return of their own money. Hence the part of the payment from the “borrower” that has been designated as “principal” is reported as “interest” in reports to the investors. In reality the money from “borrowers” merely dumped into a dark pool along with all the other money received from investors.  The entire “loan closing” and subsequent foreclosures are a charade adding the judgment from a court of law that is treated as giving a stamp of approval for everything that preceded the judgment.]

The problem for everyone involved is that in reality the investors made nothing and merely received a portion of their own money as though it had come from the trust. But it didn’t come from the trust because the trust didn’t even have a bank account. If the banks had disclosed the truth of the matter the investors would have known this is a Ponzi scheme. Imagine what would happen if someone claimed sub S treatment when the corporation they had formed did no business, had no bank account and never had any business activity, never had any assets or liabilities and never had any income or expenses.

*

The forms filed with the IRS are fraudulent. The 1099 issued to borrowers who avoided deficiency judgments are fraudulent because they come from entities that had no loss and never had the authority to collect or enforce. In reality if the true facts were followed there would be no taxable event for getting their own money back from their “investment.” But the way it is reported, the investors are getting “income” on which they owe taxes. The real taxes on real income should come from the banks that stole a large part of the money advanced by investors. It’s like Al Capone — in the end it was income tax that brought him down.

*

Instead the investors are being taxed for interest received and are exposed to more taxes when they get money reported as “principal.” Neither the investors nor the borrowers should be paying taxes on any money or “benefit” they reportedly received (because there was no benefit). So the end result is that the banks made all the money, paid no taxes, and are taking a deduction for payments made to investors and for waivers of deficiency on loans they never owned.

*

I have been telling borrowers for years to send the IRS a latter or notice in which they flatly state that the  form filed with the IRS was wrong, fraudulent and inoperative. The borrower received no benefit from the bank or servicer that filed it. Hence no tax is due. Thus far I have seen no evidence that the IRS is attempting to enforce the payment of income taxes from people who have challenged the the authenticity of the report. The IRS apparently does NOT want to be in the shoes of the banks trying to prove that the bank who filed the form owned the loan when they already know that the transaction was not actually a loan and that the “loan closing” transaction was the the result of the unauthorized and fraudulent use of investor money.

*

Eventually the truth comes out. The problem for the banks is that they stole money and didn’t pay tax on their ill-gotten gains. Every time a “servicer” “recovers” “servicer advances” they are taking more money from investors because every “advance” was taken from a pool of money that consisted solely of investor cash. When they “recover” it they book it as return of capital rather than pure income which is what it really is, even if it is illegally obtained.

*

If they admitted what it was then the banks would be required to pay huge sums in taxes. But they would also be facing angry investors who, upon realizing that every cent they received was their own money and not return on capital “invested” into a trust, would press claims and in many cases DID press claims and settled with the bank that defrauded them. So the banks and servicers are attempting to avoid both jail and huge sums in back taxes that would put a significant dent in the “deficit” of the U.S. government caused by the illegal and fraudulent activity of the banks.

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Filed under: foreclosure | Tagged: , , , , , , , , | 3 Comments »

What the Media is Missing About the “Securitization” of “Mortgage” Loans

Posted on March 21, 2016 by Neil Garfield

The Banks called it “The Hustle”. So why is anyone thinking it was anything other than a hustle?

Judges need to reconsider their positions. They need to make the choice between their false perception of a “free house” and a “get of jail free card.”

The plain facts are that those so-called REMIC Trusts do not and never have existed as operating entities. They exist on paper and have no legal significance because they never were in operation. It is not just that the paperwork was fabricated, back-dated and forged. It’s that the presumed transactions never happened. That is why Adam Levitin refers to it as “securitization Fail.”

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

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Pennymac and CW

http://fortune.com/2012/10/02/countrywide-its-baaack/

http://www.nytimes.com/2014/08/24/business/an-unfinished-chapter-at-countrywide.html?_r=0

“High Speed Swim Lane,”<<< another term for “The Hustle” which was run by Rebecca Mairone .

http://www.bloomberg.com/news/articles/2014-07-30/bank-of-america-s-countrywide-ordered-to-pay-1-3-billion

Even investigative journalists are missing the obvious. Either they lack the knowledge to report correctly on the subject or they have been instructed to stay away from Wall Street corruption. The plain facts are that those so-called REMIC Trusts do not and never have existed as operating entities. They exist on paper and have no legal significance because they never were in operation. An empty trust has no legal significance.

It is not just that the paperwork was fabricated, back-dated and forged. It’s that the presumed transactions never happened. That is why Adam Levitin refers to it as “Securitization Fail.” And that is the whole reason for fabrication, forgery, backdating and robo-signing of documents. If the transactions were real, nobody would have needed to go to DOCx, LPS (now “Black Knight”) et al to create the documents that created the illusion of reality.

The questions that have NOT been asked include but certainly are not limited to the following:

1. How could the Big Banks be carrying bad loans on their balance sheet? AND the corollary question is how they could be the seller of those loans. The answer is that they cast themselves  as the seller of loans so they could book “trading profits” on loans where they were not the lender. In doing so they were asserting positions that were diametrically opposed to the positions taken in foreclosure actions — that the “lender” was whoever is on the note and mortgage. So on one hand the TBTF banks are asserting they made the loans, they own the loans and they were losing money as a result of non-payment by the borrowers and the other hand they are having their puppet players assert that they are the lenders who originated or acquired the loan. Which is it? ANSWER: NEITHER! The banks used the money of all investors from a commingled fund undifferentiated by any of the Trust acronyms, and then claimed whatever was convenient. And nobody is talking about this crime. The investors are the ONLY parties with an equitable claim for payment but are not protected by either the false note or false mortgage — both of which were converted to the apparent ownership of dozens of players who participated in this scheme. In the meanwhile the Banks and servicers are eating away at any semblance of recovery for the investors by asserting improper claims for fees, costs and advances.

If you sit down with pencil and paper you can understand that by hiding a 10% APR loan in a 5% APR portfolio they were able to “sell” the loan to the “trust” — on paper without any consideration — and book a false “trading profit” equal to the amount of the loan. Do the Math. The media is either ignoring the truth or don’t understand it.
Those trusts were never active, never got any money from the sale of their “mortgage backed securities”, never had a bank account and never had a financial statement, which on the reporting trusts would have been filed with the SEC. Instead they filed rule 15 forms saying they had nothing further to report.
They are hiding behind the cloak of another part of that rule that says reporting can stop when the number of investors falls below 300. But these trusts never had more than 300 investors at inception or any other time. They only filed on some of the trusts to give the appearance of propriety when in fact the BANKS were taking the entire proceeds of the sale of the mortgage backed securities issued BY THE TRUSTS and pocketing it. Then they used only as much of the Investor money as was necessary to give the appearance of a loan pool that was originated or acquired by the trust when no such transaction ever occurred. In short the were treating the offering of MBS issued by the Trust as though it was offering of the Bank. The “Trust’ was merely a 100% controlled entity of the Bank existing only on paper and not at law.

2. The same logic applies to the sale of the mortgage backed securities. The banks were not buying them, they were selling them. So the entire “loss” myth is merely a continuation of the fraud the Banks perpetrated on the investors and then the borrowers — violating the law and creating the illusion of a lender who was really not the lender.

That is important because it violates the federal law against the practice of table-funded loans. But more importantly, a party who does not loan money to a borrower has no right to be on the note and mortgage. And parties who make claims based upon the note and mortgage are really pursing their own interests and thus perpetrating a fraud upon the court, contrary to the interests of the investors whose money was procured by trick and deceit.

Lately some court have started allowing discovery to pursue this “theory” of the defense. The Banks are screaming. Enforcement of those discovery orders would reveal the true nature of the largest economic crime in human history. And the assumption expressed by many judges in open court that these are things that can be worked out by the parties later is belied by the fact that the Banks are continuing to steal what is left of the investments.

That “assumption” by the court is legislating from the bench and in direct conflict with Federal and State law regarding lending and property.

That assumption by the courts has opened a door to moral hazard that is wreaking havoc already on the West Coast and undoubtedly will soon be seen on the East Coast — total strangers discovering apparent debts owned by consumers in all sorts of loans, sending the “borrower” notices and then pressing for collection or even foreclosure. That is exactly what was revealed in the San Francisco, Osceola and dozens of other studies. Judges need to reconsider their positions. They need to make the choice between their false perception of a “free house” and a “get of jail free card.”

Filed under: foreclosure | Tagged: , , , , , , , , | 16 Comments »

“Legal Impossibility”: REMIC Trust does not own the loan, the debt, the note or the mortgage

Posted on June 3, 2015 by Neil Garfield

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

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see Glaski_Affidavit-Thomas-Adams_5-15

Hat tip to Dan Edstrom, Senior Forensic analyst for livinglies.

Thomas Adams, whose name sounds like one of the founding fathers, has submitted an affidavit as an expert witness in the Glaski case in California. He is completely qualified as an expert in securitization practices and documentation. He was one of the lawyers who worked on the first pooling and servicing agreements back in 1989. For those who have given up trying to convince a judge that the securitization aspect of their case is relevant, this affidavit should help.

He concludes that the Trust did not ever come to own the subject loan, and further (like the case Patrick Giunta and I won in January in Florida) he found that nobody in the chain ever owned the loan. He is right of course, but he boils it down into words that virtually anyone can understand — probably on first reading.

The opinion relates to a WAMU Pass Through REMIC Trust. And it involves Bank of America, Chase, LaSalle Bank, and California Reconveyance. He says that the Trust could not possibly own the loan because it is invalid according to the terms of the Trust itself. In a word he is saying that the alleged Transfer is void because

1.  The period of operation for the REMIC Trust was limited to 90 days. It was only during that period that the loan could have been purchased by the Trust. The alleged transfer took place 4 years after the operations of the REMIC Trust closed. Delaware law says the same thing as New York law: any act in contravention to the terms of the Trust are void. The PSA says the same thing.

2.  The subject loan was already declared to be in default at the time of the Transfer. Hence the loan was not a “qualified” loan under the terms of the PSA. {It also means that none of the presumptions under the UCC apply as to possession, holder or endorsement of the note}.

One of the interesting things that carried the day for the homeowners in the cases we have won and which might carry the day in the Glaski case is that if the Trust never purchased nor acquired the loan, then even the servicer who was named in the PSA has no claim to being the servicer unless they have another instrument from the true creditor to service the loan, which they don’t. If they did, they would be required to disclose the identities of the investors on each loan, which would give each borrower an opportunity to contact those investors.

The Banks have successfully pulled the wool over the eyes of thousands of Judges by piling up false paperwork, including “powers of Attorney” {why would you need that if the servicing rights were really transferred? If the servicing rights were truly transferred, then there would have been a purchase and sale agreement and an assignment of the servicing rights, not a power of attorney}.

Once the investors and borrowers start to compare notes, it becomes easily apparent that the original loan documentation was often completely false and withheld multiple material disclosures. As we have already seen in lawsuits by investors against servicers, the servicers are the real parties in interest in foreclosures, since it completes the theft that started when investors first gave their money to the investment bank who was selling mortgage backed securities issued by a REMIC Trust that was destined to be cheated out of the proceeds of sale of those MBS securities.

The Truth of the matter is that the investor money was never used to fund the Trusts who acquired the loans. The truth is that investor money was used in most cases to directly fund the origination of the loan, contrary to the trust (which was ignored by all parties). And the truth of the matter is that the investors have no privity with the borrowers, and are not protected by note or mortgage or their interest in an empty unfunded trust. Nobody has the right to use or enforce most of the notes and mortgages out there. But SOMEBODY has a right to demand money from the borrowers: it is the investors who have a claim based upon unjust enrichment.

So the bottom line is that there either is no loan contract or there is a loan contract. If there is a loan contract, which I say in most cases is not true, then it can be rescinded. If there is no loan contract, there is nothing to rescind. But since there is no loan contract there is nothing to enforce — by the Trust, the servicer, the subservicer, the successors, endorsees, or attorneys in fact. And if there is no loan contract then the documents evidencing the loan contract are worthless pieces of paper upon which no actually transaction exists — no matter how many times they refer to it in increasingly false and fraudulent documentation.

Filed under: foreclosure | Tagged: , , , | 32 Comments »

Statute of LImitations Running on Bank Officers Who Perpetrated Mortage Crisis

Posted on April 28, 2015 by Neil Garfield

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

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see http://www.courant.com/opinion/letters/hc-go-after-mortgage-fraud-perps-20150427-story.html

It appears that the statute of limitations might be running out this year on any claim against the officers of the banks that created the fraudulent securitization process. Eric Holder, outgoing Attorney general, made an unusual comment a few months back where he said that private suits should be brought against such officers. The obvious question is why didn’t he bring further action against these individuals and the only possible answer I can think of is that it was because of an agreement not to prosecute while these officers and their banks “cooperated” in resolving the mortgage crisis and the downturn of the US economy.

People keep asking me what the essential elements of the fraud were and how homeowners can use it. That question involves a degree of complexity that is not easily addressed here but I will try to do so in a few articles.

The first point of reference is that the investment banks sold mortgage backed securities to investors under numerous false premises. The broker dealers sold shares or interests in REMIC Trusts that existed only on paper and were registered nowhere. This opened up the possibility for the unthinkable: an IPO (initial public offering) of securities of an “entity” that would not complain if they never received the proceeds of the sale. And in fact, as I have been advised by accountants and other people who were privy to the inner workings of the Securitization fail (See Adam Levitin) the money from the offering was never turned over to the Trustee of the “Trust” which only existed on paper by virtue of words written by the broker dealers themselves. They created a non existent entity that had no business and sold securities issued by that entity without turning over the proceeds of sale to the entity whose securities had been sold. It was the perfect plan.

Normally if a broker dealer sold securities in an IPO the management and shareholders would have been screaming “fraud” as soon as they learned their “company” was not receiving the proceeds of sale. Here in the case of REMIC Trusts, there was no management because the Trustee had no duties and was prohibited from pretending that it did have any duties. And here in the case of REMIC Trusts, there were no shareholders to complain because they were contractually bound (they thought) to not interfere with or even ask questions about the workings of the Trust. And of course when Clinton signed the law back in 1998 these securities were deregulated and redefined as private contracts and NOT securities, so the SEC couldn’t get involved either.

It was the perfect hoax. brokers and dealers got to sell these “non-securities” and keep the proceeds themselves and even register ownership of interests in the Trust in the name of the same broker dealer who sold it to pension funds and other investors. Back in 2007-2008 the banks were claiming that there were no trusts involved because they knew that was true. But then they got more brazen, especially when they realized that this was an admission of fraud and theft from investors.

Now we have hundreds of thousands of foreclosures in which a REMIC Trust is named as the foreclosing party when it never operated even for a second. It never had any money, it never received any income and it never had any expenses. So it stands to reason that none of the loans claimed to be owned by the Trusts could ever have been purchased by entities that had no assets, no money, no management, and no operations. We have made a big deal about the cutoff date for entry of a particular loan into the loan pool owned by the trust. But the real facts are that there was no loan pool except on paper in self-serving fabricated documents created by the broker dealers.

Investors thought they were giving money to fund a Trust. The Trust was never funded. So the money from investors was used in any way the broker dealer wanted. The investors thought they were getting an ownership interest in a valid note and mortgage. They never got that because their “Trust” did not acquire the loans. But their money was used, in part, to fund loans that were put on a fast track automated underwriting platform so nobody in the position of underwriter could be disciplined or jailed for writing loans that were too rigged to succeed. Then the broker dealers, knowing that the mortgage bonds were worthless bet that the value of the bonds would decrease, which of course was a foregone conclusion. And the bonds and the underlying loans were insured in the name of the broker dealer so the investors are left standing out in the wind with nothing to show for their investment — an interest in a worthless unfunded trust, and no direct claim for the repayment of loans that were funded with their money.

The reason why the foreclosing parties need a foreclosure sale is to create the appearance that the original loan was a valid loan contract (it wasn’t because no consideration actually flowed from the “lender” to the “borrower” and because the loan was table funded, which as a pattern is described in Reg Z as “predatory per se”). By getting foreclosures in the name of the Trust they have a Judge’s stamp of approval that the Trust was either the lender or the successor to the lender and that makes it difficult for anyone to say otherwise. And THAT is why TILA was passed with the rescission option.

So through a series of conduits and sham entities, the Wall Street investment banks lied to the investors and lied to the borrowers about who was in the deal and who was making money off the deal and how much. They lied to the investors, lied to the public, lied to regulatory agencies and lied to borrowers about the quality of the loan products they were selling which could not succeed and in which the broker dealers had a direct interest in making sure that the loans did not succeed. That was the whole reason why the Truth In Lending Act and Reg Z came into existence back in the 1960’s. Holder’s comments are a clue to what private lawyers should do and how much money there is in these cases against the leaders of the those investment banks. Both borrowers and lawyers should be taking a close look at how they get even for the fraud perpetrated upon the American consumer and the American taxpayer.

It is obvious that someone had to be making a lot of money in order to spend hundreds of millions of dollars advertising and promoting 2% loans. There is no profit there unless someone is stealing the money and tricking borrowers into signing loan papers that instantly clouded their title and created two potential liabilities — one to the payee on the note who never had any economic interest in the deal and one to the investors whose money was used to fund the loan. Most investors still don’t realize what happened to their money and many are still getting payments as though the Trust was real — but they are not getting payments or reports from the REMIC Trust.

And most borrowers don’t realize that their identity was stolen, that their loan was cloned, and that each version of their loan that was sold netted another 100% profit to the investment banks, who also sold the bonds to the Federal Reserve after they had already sold the same bonds to investors. Thus the investment banks screwed the investors, screwed the borrowers and screwed the taxpayers while their plan resulted in a cataclysmic failure of the economies around the world. Investors mostly don’t realize that they are never going to see the money they were promised and that the banks are keeping the investors’ money as if it belonged to the bank. Most investors also don’t realize that the investment banks were their servant and that all that money the bank made really belongs to the investor, thus zeroing out the liability of the borrower but creating an enormous profit to the investors. Most borrowers don’t realize that they certainly don’t owe money to any of the foreclosing parties, but that they might have some remote liability to the clueless investors whose money was used to fund this circus.

Filed under: foreclosure | Tagged: , , , , , , | 46 Comments »

Hearsay on Hearsay: Bank Professional Witnesses Using Business Records Exception as Shield from Truth

Posted on March 19, 2014 by Neil Garfield

Wells Fargo Manual “Blueprint for Fraud”

Hat tip to my law partner, Danielle Kelley, Esq., for sending me the manual and the reports on it. Anyone desirous of a consultation on the application of what is on this blog, must either be a lawyer or have a lawyer who is licensed in the jurisdiction in which the property is located. For scheduling call 954-495-9867 (South Florida Office), 850-765-1236 (North Florida Office), and 520-405-1688 (Western United States). International callers: The same rules apply.

Well that didn’t take long. Like the revelations concerning Urban Lending Solutions and Bank of America, it is becoming increasingly apparent that the the intermediary banks were hell bent for foreclosure regardless of what was best for the investors or the borrowers. This included, fraud, fabrication, unauthorized documents and signatures, perjury and outright theft of money and identities. I understand the agreement between the Bush administration and the large banks. And I understand the reason why the Obama administration continued to honor the agreements reached between the Bush administration and the large banks. They didn’t have a clue. And they were relying on Wall Street to report on its own behavior. But I’m sure the agreement did not even contemplate the actual crimes committed. I think it is time for US attorneys and the Atty. Gen. of each state to revisit the issue of prosecution of the major Wall Street banks.

With the passage of time we have all had an opportunity to examine the theory of “too big to fail.” As applied, this theory has prevented prosecutions for criminal acts. But more importantly it is allowing and promoting those crimes to be covered up and new crimes to be committed in and out of the court system. A quick review of the current strategy utilized in foreclosure reveals that nearly all foreclosures are based on false assumptions, no facts,  and a blind desire for expediency that  sacrifices access to the courts and due process. The losers are the pension funds that mistakenly invested into this scheme and the borrowers who were used as pawns in a gargantuan Ponzi scheme that literally exceeded all the money in the world.

Let’s look at one of the fundamental strategies of the banks. Remember that the investment banks were merely intermediaries who were supposedly functioning as broker-dealers. As in any securities transaction, the investor places in order and is responsible for payment to the broker-dealer. The broker-dealer tenders payment to the seller. The seller either issues the securities (if it is an issuer) or delivers the securities. The bank takes the money from the investors and doesn’t deliver it to an issuer or seller, but instead uses the money for its own purposes, this is not merely breach of contract —  it is fraud.

And that is exactly what the investors, insurers, government guarantors and other parties have alleged in dozens of lawsuits and hundreds of claims. Large banks have avoided judgment based on these allegations by settling the cases and claims for hundreds of billions of dollars because that is only a fraction of the money they diverted from investors and continue to divert. This continued  diversion is accomplished, among other ways, through the process of foreclosure. I would argue that the lawsuits filed by government-sponsored entities are evidence of an administrative finding of fact that causes the burden of proof to be shifted to the cloud of participants who assert that they are part of a scheme of securitization when in fact they were part of a Ponzi scheme.

This cloud of participants is managed in part by LPS in Jacksonville. If you are really looking for the source of documentation and the choice of plaintiff or forecloser, this would be a good place to start. You will notice that in both judicial and non-judicial settings, there is a single party designated as the apparent creditor. But where the homeowner is proactive and brings suit against multiple entities each of whom have made a claim relating to the alleged loan, the banks stick with presenting a single witness who is “familiar with the business records.” That phrase has been specifically rejected in most jurisdictions as proving the personal knowledge necessary for a finding that the witness is competent to testify or to authenticate documents that will be introduced in evidence. Those records are hearsay and they lack the legal foundation for introduction and acceptance into evidence in the record.

So even where the lawsuit is initiated by “the cloud” and even where they allege that the plaintiff is the servicer and even where they allege that the plaintiff is a trust, the witness presented at trial is a professional witness hired by the servicer. Except for very recent cases, lawyers for the homeowner have ignored the issue of whether the professional witness is truly competent,  and especially why the court should even be listening to a professional witness from the servicer when it is hearing nothing from the creditor. The business records which are proffered to the court as being complete are nothing of the sort. They are documents prepared for trial which is specifically excluded from evidence under the hearsay rule and an exception to the business records exception. And the easy proof is that they are missing payments to the investor. That is why discovery should be aggressive.

Lately Chase has been dancing around these issues by first asserting that it is the owner of a loan by virtue of the merger with Washington Mutual. As the case progresses Chase admits that it is a servicer. Later they often state that the investor is Fannie Mae. This is an interesting assertion which depends upon complete ignorance by opposing counsel for the homeowner and the same ignorance on the part of the judge. Fannie Mae is not and never has been a lender. It is a guarantor, whose liability arises after the loss has been completely established following the foreclosure sale and liquidation to a third-party. It is also a master trustee for securitized trusts. To say that Fannie Mae is the owner of the alleged loan is most likely an admission that the originator never loaned any money and that therefore the note and mortgage are invalid. It is also intentional obfuscation of the rights of the investors and trusts.

The multiple positions of Chase is representative of most other cases regardless of the name used for the identification of the alleged plaintiff, who probably doesn’t even know the action exists. That is why I suggested some years ago that a challenge to the right to represent the alleged plaintiff would be both appropriate and desirable. The usual answer is that the attorney represents all interested parties. This cannot be true because there is an obvious conflict of interest between the servicer, the trust, the guarantor, the trustee, and the broker-dealer that so far has never been named. Lawsuits filed by trust beneficiaries, guarantors, FDIC and insurers demonstrate this conflict of interest with great clarity.

I wonder if you should point out that if Chase was the Servicer, how could they not know who they were paying? As Servicer their role was to collect payments and send them to the creditor. If the witness or nonexistent verifier was truly familiar with the records, the account would show a debit to the account for payment to Fannie Mae or the securitized trust that was the actual source of funds for either the origination or acquisition of loans. And why would they not have shown that?  The reason is that no such payment was made. If any payment was made it was to the investors in the trust that lies behind the Fannie Mae curtain.

And if the “investor” had in fact received loss sharing payment from the FDIC, insurance or other sources how would the witness have known about that? Of course they don’t know because they have nothing to do with observing the accounts of the actual creditor. And while I agree that only actual payments as opposed to hypothetical payments should be taken into account when computing the principal balance and applicable interest on the loan, the existence of terms and conditions that might allow or require those hypothetical payments are sufficient to guarantee the right to discovery as to whether or not they were paid or if the right to payment has already accrued.

I think the argument about personal knowledge of the witness can be strengthened. The witness is an employee of Chase — not WAMU and not Fannie Mae. The PAA is completely silent about  the loans. Most of the loans were subjected to securitization anyway so WAMU couldn’t have “owned” them at any point in the false trail of securitization. If Chase is alleging that Fannie Mae in the “investor” then you have a second reason to say that both the servicing rights and the right to payment of principal, interest or monthly payments in doubt as to the intermediary banks in the cloud. So her testimony was hearsay on hearsay without any recognizable exception. She didn’t say she was custodian of records for anyone. She didn’t say how she had personal knowledge of Chase records, and she made no effort to even suggest she had any personal knowledge of the records of Fannie and WAMU — which is exactly the point of your lawsuit or defense.

If the Defendant/Appellee’s argument were to be accepted, any one of several defendants could deny allegations made against all the defendants individually just by producing a professional witness who would submit self-serving sworn affidavits from only one of the defendants. The result would thus benefit some of the “represented parties” at the expense of others.

Their position is absurd and the court should not be used and abused in furtherance of what is at best a shady history of the loan. The homeowner challenges them to give her the accurate information concerning ownership and balance, failing which there was no basis for a claim of encumbrance against her property. The court, using improper reasoning and assumptions, essentially concludes that since someone was the “lender” the Plaintiff had no cause of action and could not prove her case even if she had a cause of action. If the trial court is affirmed, Pandora’s box will be opened using this pattern of court conduct and Judge rulings as precedent not only in foreclosure actions, disputes over all types of loans, but virtually all tort actions and most contract actions.

Specifically it will open up a new area of moral hazard that is already filled with debris, to wit: debt collectors will attempt to insert themselves in the collection of money that is actually due to an existing creditor who has not sold the debt to the collector. As long as the debt collector moves quickly, and the debtor is unsophisticated, the case with the debt collector will be settled at the expense of the actual creditor. This will lead to protracted litigation as to the authority of the debt collector and the liability of the debtor as well as the validity of any settlement.

Filed under: CASES, CORRUPTION, evidence, expert witness, Fannie MAe, foreclosure, foreclosure defenses, foreclosure mill, GARFIELD KELLEY AND WHITE, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Motions, originator, Pleading, securities fraud, Servicer, STATUTES, Title, TRUST BENEFICIARIES, trustee | Tagged: , , , , , , , , , , , , | 47 Comments »

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