Don’t Ignore That Request for return of Note At End of Case

Don’t Ignore That Request for return of Note At End of Case

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

 

It is standard to request and receive the note at the end of trial. But there are two questions that should be answered.

  1. Why is the foreclosing party entitled to get the note?
  2. Why isn’t the homeowner entitled to get the note if they rescinded?

If the alleged plaintiff foreclosing party lost the case on the basis that they didn’t have standing and did not get a specific ruling from the court that they acquired standing after suit was filed, then the law of the case, in my opinion, is that they failed to show any right to possess the note. The note should not have been “returned” to the attorneys for whoever was named as Plaintiff in the foreclosure suit because they never had any legal right to it in the first place.

If the homeowner had rescinded, then the Federal Statute 15 USC § 1635 expressly says the homeowner is entitled to the note, not anyone else. The note is void and the homeowner is expressly named as the party entitled to receive it. Giving it to the Plaintiff would violate Federal law and violate the express pronouncement of the US Supreme Court in Jesinoski v Countrywide. The very first duty triggered by mailing the notice of rescission is the duty to return the canceled note. On what basis could a court give the note to anyone else?

These are questions that should be addressed.

RESCISSION: It’s time for another slap on the wrist for state and federal judges.

50 years ago Congress decided to slap punitive measures on lenders who ignore or attempt to go around (table-funded loans) existing laws on required disclosures — instead of creating a super agency that would review every loan closing before it could be consummated. So it made the punishment so severe that only the stupidest lenders would attempt to violate Federal law. That worked for a while — until the era of securitization fail. (Adam Levitin’s term for illusion under the cloak of false securitization).

Draconian consequences happen when the “lender” violates these laws. They lose the loan, the debt (or part of it), their paper is worthless and the disgorgement of all money ever paid by borrower or received by anyone arising out of the origination of the loan.

But Judges have resisted following the law, leaving the “lenders” with the bounty of ill-gotten gains and no punishment because judges refuse to do it —even after they received a slap on their wrists by the unanimous SCOTUS decision in Jesinoski. Now they will be getting another slap — and it might not be just on the wrists, considering the sarcasm with which Scalia penned the Jesinoski opinion.

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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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TILA rescission is mainly a procedural statute under 15 USC §1635. Like Scalia said in the Jesinoski case it specifically states WHEN things happen. It also makes clear, just as the unanimous court in Jesinoski made clear that no further action was required — especially the incorrect decisions in thousands of cases where the judge said that the rescission under TILA is NOT effective until the borrower files a lawsuit. What is clear from the statute and the regulations and the SCOTUS decision is that rescission is effective on the date of notice, which is the date of mailing if the borrower uses US Mail.

There are several defenses that might seem likely to succeed but those defenses (1) must be filed by a creditor (the note and mortgage are void instruments the moment that rescission notice is sent) (2) hence the grounds for objection are not “defenses” but rather potential grounds to vacate a lawful instrument that has already taken effect. Whether the right to have sent the notice had expired, or whether the right to rescind the putative loan is not well-grounded because of other restrictions (e.g. purchase money mortgage) are all POTENTIAL grounds to vacate the rescission — as long as the suit to vacate the rescission is brought by a party with legal standing.

A party does not have legal standing if their only claim to standing is that they once held a note and mortgage that are now void. {NOTE: No party has ever filed an action to vacate the rescission because (1) they have chosen to ignore the rescission for more than 20 days and thus subject to the defense of statute of limitations to their petition to vacate and (2) they would be required to state the rescission was effective in order to get relief and (3) there is a very high probability that there is no formal creditor that was secured by the mortgage encumbrance of record. The latter point about no formal creditor would also mean that the apparent challenge to the rescission based upon the “purchase money mortgage” “exception” would fail.}

The premise to this discussion is that the so-called originator was not the source of funds. This in my opinion means that there never was consummation — despite all appearances to the contrary.

The borrower was induced to sign a note and mortgage settlement statements and acknowledgement of disclosures and right to rescind under the false premise that the originator was the lender, as stated on the note and mortgage.

The resulting execution of documents thus produced the following results: (1) the putative borrower has signed the “closing documents” and (2) the originator neither signs those documents nor lends any money. This results in an executory contract without consideration which means an unenforceable partially completed documentary trail that creates the illusion of a normal residential loan closing.

TILA Rescission is effective at the time that the borrowers notify any one of the players who represent themselves as being servicer, lender, assignee or holder. The effect of rescission is to cancel the loan contract and that in turn makes the note and mortgage void, not voidable. That the note and mortgage become void is expressly set forth in the authorized regulations (Reg Z) promulgated by the Federal Reserve and now the Consumer Financial Protection Board (CFPB). There is no lawsuit that is required or even possible for the putative borrower to file — i.e., there is no present controversy because the loan “contract” to the extent it exists has already been canceled and the note and mortgage have already been rendered void.

Rescission is a Test of Persistence

The “free house” mythology will have become reality. That is what happens when you break the laws governing deceptive and predatory lending.
… for those who don’t give up, the reward is substantial when TILA rescission is reluctantly recognized by the Courts as effective upon mailing.

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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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The current judicial climate regarding TILA Rescission is that it doesn’t count — it means nothign, does nothing and cannot be sued to defeat foreclosure. But the signs are all there showing that the banks are bracing themselves for the real consequences of rescission in which borrowers receive the draconian remedy stated in the statute. For those borrowers who persist, there will ample reward despite the dark clouds that appear in the rear view window.
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On the horizon there are positive signs that the Congressional intent in the Truth in Lending Act will been enforced, to wit: “lenders” and “pretender lenders” will lose both their security interest in residential property and the right to collect any debt. The “free house” mythology will have become reality. That is what happens when you break the laws governing deceptive and predatory lending. And that is what happens when Congress decides what should happen to you when you break those laws.
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The current argument is that if the rescission was sent more than 3 years after consummation, it does not count as anything and the judges can ignore it.
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There is absolutely no doubt that judges want to adopt that  reasoning. But the three year limitation is not the only restriction. The same statute says that if the loan is a purchase money mortgage, TILA rescission is not an option. And there are other restrictions. The whole point of the Supreme Court decision was to say that the rescission WAS effective when it was mailed and not when a court ruled on whether it should have been sent in the first place. And there is a provision in the statute to allow an “injured party” (creditor?) to request a court to adjust the procedures that follow the mailing of the rescission.

So if the court was just saying that it was obvious that this was beyond the three year limitation. Or that it was obvious that this was a purchase money mortgage and that therefore the rescission was void or could be ignored, such a court would be reversing the Supreme Court decision — something no court in our country is empowered to do and is in fact prohibited from doing under the US Constitution. Obviously if the rescission was void there would be no limitation.

But the Supreme Court decision basically says that there is no such thing as a void rescission under the truth in lending act. Whether the borrower is wrong or right, it is effective when mailed and the “lender” (creditor) has 20 days to comply — or, to file an action to vacate the rescission because the borrower has unfairly canceled the loan transaction. The whole point was to make it easy on the borrower who felt that they have been the victim of deceptive or predatory lending. The wording of the statute was carefully crafted.

The obvious intention, which can be seen in many other cases that construe the statute, was to provide a mechanism by which a borrower could throw the burden to justify the practices leading up to the “loan” on to the “lenders.”

Both the statute and the Supreme Court decision make it clear that the borrower does not need any resources (except a pen, paper and a stamp) to trigger the procedures under the rescission statute in the truth in lending act.

The consequence of inaction by the “lenders” are very harsh and even draconian. The idea behind doing this was to force lenders into policing themselves, or upon failing to do that, suffer the loss of the security instrument and even the loss of the right to seek repayment. This legislation was a compromise. Some people wanted the creation of a new agency that would be the size of the Internal Revenue Service to review and police loan transactions. This distrust of the banks goes back to the 19060’s when the TILA legislation was initially enacted.

As I have posted on the blog, even lawyers who represent the banks agree in published articles that ignoring a notice of rescission could come a huge cost. Like me, they do not believe that the current environment will continue wherein Judges ignore the notice of rescission. If the bank lawyers agree with what I have been writing, it would seem that we should take this much more seriously in the expectation that the current climate will change with respect to the sending of a notice of rescission and the recording of that notice in the public records.

I agree that the current climate it is virtually entirely negative. And most people who have sent a notice of rescission and most people who have recorded a notice of rescission will probably never receive the remedy to which they are entitled. This may be because of lack of persistence, ignorance of the change in the judicial climate or because of limitations are upheld in going back in time to the moment of the sending of the notice of rescission. For those people who persist, I still believe that they will prevail in the end. And for those entities who who have identified themselves as creditors or lenders, they will be barred from enforcing the underlying debt for failure to respond to the notice of rescission.

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BOTTOM LINE: For those who persist on the issue of rescission, the ultimate remedy under TILA rescission is coming — mostly too late for those who have had their homes go through forced sales that were void because the loan transaction and the loan documents had been canceled. Many of them have “moved on” albeit hobbled by the bite of the banks in the era of false securitization and fictitious appraisals. But for those who don’t give up, the reward is substantial when TILA rescission is reluctantly recognized by the Courts as effective upon mailing.
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Looming Title Problems from Fabricated, Fraudulent Forged Documents

The one thing that is perfectly clear is that at some point the state legislatures who govern title to property already have a huge problem brewing under their feet. There is no doubt in my mind, that the solution will follow the example of the Murphy Act in Florida when title became unintelligible some 80 years ago.

The new acts will essentially reset title as of a certain date. All the previous illegal and potentially criminal actions will be ignored. All the people who were swindled out of their life savings will also be ignored, because in the end it is the banks who control legislation, not the people.

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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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see http://www.vice.com/read/when-you-buy-a-house-but-dont-actually-own-it

You have two problems looming here.

The first and largest problem is that most, nearly all, of the foreclosures were void and fraudulent. The credit bid was accepted from a party who was not the creditor. THAT probably means that any deed on foreclosure was and is void. In some states there is a “statute of limitations” on the void title which is waived if you don’t try to make it right before the one-year statute runs out. In Florida, after one year, you can get damages (i.e., money) but you can’t reclaim your title even from a void, fraudulent foreclosure. Hence the Florida legislature institutionalized fraud in exchange for campaign donations.

The second problem is even worse and might not be correctable by legislation or even a court order. For those who sent a notice of rescission and the “lender” did nothing, there is no doubt that if the rescission was sent within 3 years of the fabricated “closing” that the nonexistent “loan contract” was canceled and the note and mortgage were rendered void as of the date of mailing of the notice of rescission.

Under Federal Law that notice of rescission rendered the mortgage or deed of trust void along with the note. Therefore any action on the loan contract, the note or the mortgage or deed of trust after rescission is void because those “instruments” are void. Void=Nothing. As far as I have been able to determine, there is no statute of limitations on “nothing.”

It gets worse. If the homeowner recorded the rescission, then according to State law, there is notice to the world that title derived from the mortgage is void. And there is no statute of limitations on that either, as far as I can tell.

Anyone who has taken title arising from either of the above scenarios has no title. If and when the day comes that they are forced to defend the illusion of their “title” they will quickly find out that the title insurer will be of no help and will deny coverage. And the same holds true for lenders — but the lenders don’t care because their goal is merely to perpetuate the illusion of securitization.

Nearly all the foreclosures in the past 10 years fall under the first category, the second category or both. Any legislation that deprives the owner of property without due process (i.e., judicial action) violates the 14th Amendment to the constitution.

Judicial action is void if it is based upon nonexistent facts. The facts are nonexistent if they were never proffered in court or found, based upon competent evidence to be true, by the trier of fact. That is missing from virtually all foreclosures.

Accordingly, it is my opinion that this another situation where the constitution be damned. The courts and legislatures are continuing to advance nonsense: the pretense of valid loan contracts, valid notes, valid mortgages and valid foreclosure sales to valid creditors submitting a valid credit bid.

Ask these lawmakers and law interpreters four questions:

  • did you hear or see any evidence that identified the party to whom the payments from the borrower were forwarded?
  • If not, why did you assume that such a party existed and had authorized the parties in court to act on collateral for the benefit of the real creditor?
  • did you hear or see any evidence that connects the real creditors with the parties who appeared in court?
  • If not, why did you assume that such a connection existed with an unidentified entity?

 

Appeals Court Challenges Cal. Supreme Court Ruling in Yvanova/Keshtgar

The Court, possibly because of the pleadings and briefs refers to the Trust as “US Bank” — a complete misnomer that reveals a completely incorrect premise. Despite the clear allegation of the existence of the Trust — proffered by the Trust itself — the Courts are seeing these cases as “Bank v Homeowner” rather than “Trust v Homeowner.” The record in this case and most other cases clearly shows that such a premise is destructive to the rights of the homeowner and assumes the corollary, to wit: that the “Bank” loaned money or purchased the loan from a party who owned the loan — a narrative that is completely defeated by the Court rulings in this case.

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

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see B246193A-Kehstgar

It is stunning how lower courts are issuing rulings and decisions that ignore or even defy higher court rulings that give them no choice but to follow the law. These courts are acting ultra vires in open defiance of the senior authority of a higher court. It is happening in rescission cases and it is happening in void assignment cases, like this one.
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This case focuses on a void assignment or the absence of an assignment. Keshtgar alleged that “the bank” had no authority to initiate foreclosure because the assignment was void or absent. THAT was the first mistake committed by the California appeals court, to wit: the initiating party was a trust, not a bank. This appeals court completely missed the point when they started out from an incorrect premise. US Bank is only the Trustee of a Trust. And upon further examination the Trust never operated in any fashion, never purchased any loans and never had any books of record because it never did any business.
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The absence of an assignment is alleged because the assignment was void, fabricated, backdated and forged purportedly naming the Trust as an assignee means that the Trust neither purchased nor received the alleged loan. Courts continually ignore the obvious consequences of this defect: that the initiator of the foreclosure is claiming rights as a beneficiary when it had no rights as a beneficiary under the deed of trust.
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The Court, possibly because of the pleadings and briefs refers to the Trust as “US Bank” — a complete misnomer that reveals a completely incorrect premise. Despite the clear allegation of the existence of the Trust — proffered by the Trust itself — the Courts are seeing these cases as “Bank v Homeowner.” The record in this case and most other cases clearly shows that such a premise is destructive to the rights of the homeowner and assumes the corollary, to wit: that the “Bank” loaned money or purchased the loan from a party who owned the loan — a narrative that is completely defeated by the Courts in this case.
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There really appears to be no question that the assignment was void or absent. The inescapable conclusion is that (a) the assignor still retains the rights (whatever they might be) to collect or enforce the alleged “loan documents” or (b) the assignor had no rights to convey. In the context of an admission that the ink on the paper proclaiming itself to be an assignment is “nothing” (void) there is no conclusion, legal or otherwise, but that US Bank had nothing to do with this loan and neither did the Trust.
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Bucking the California Supreme Court, this appellate court states that Yvanova has “no bearing on this case.” In essence they are ruling that the Cal. Supreme Court was committing error when it said that Yvanova DID have a bearing on this case when it remanded the case to the lower court of appeal with instructions to reconsider in light of the Yvanova decision.
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One mistake committed by Keshtgar was asking for quiet title. The fact that the MORTGAGE is voidable or unenforceable is generally insufficient grounds for declaring it void and removing it from the chain of title. I unfortunately contributed to the misconception regarding quiet title, but after years of research and analysis I have concluded that (a) quiet title is not an available remedy against the mortgage unless you have grounds to declare it void and (b) my survey of hundreds of cases indicates that judges are resistant to that remedy. BUT a similar action for cancellation of instrument could be directed against the an assignment, substitution of trustee on deed of trust, notice of default and notice of sale.
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Because there was an admission by Keshtgar that the loan was “non-performing” and because the court assumed that US Bank was a lender or proper successor to the lender, the question of what role the Trust plays was not explored at all. The courts are making the erroneous assumption that (a) there was a real loan contract between the parties who appear on the note and mortgage, (b) that the loan was funded by the originator and that the homeowner is in default of the obligations set forth on the note and mortgage. They completely discount any examination of whether the note is a valid instrument when it names not the actual lender but a third party who is also serving as a conduit. In an effort to prevent homeowners from getting windfalls, they are delivering the true windfalls to the servicers who are behind the initiation of virtually every foreclosure.
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The problem is both legal and perceptual. By failing to see that each case is “Trust v Homeowner” the Courts are failing to consider that the case is between a private entity and a private person. By seeing the cases as “institution v private person” they are giving far too much credence to what the Banks, up until now, are selling in the courts.
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Rescission and Subject Matter Jurisdiction

rescission-600x400-600x330
I was recently requested to review a 6th Circuit Opinion in which the court stated that the rescission was barred by res judicata — i.e. that the matter had already been litigated and that the homeowner was therefore barred from bringing it up again.
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The Court never considered that it was wrong in the first place and that the decisions that ignored the rescission were themselves void for lack of subject matter jurisdiction. The Court started with the premise that the bank must win on this rather than from the point of view that the law should be applied, not personal preferences. Thus such decisions come down to “because I said so” rather than through any legal analysis.
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I think the court has missed the point completely. A deed has no statute of limitations. Even a mortgage deed or deed of trust has no statute of limitations. It only expires after the contractual terms end. A rescission, especially if it is recorded, has no expiration. All of these things can ONLY be removed by (a) a proper pleading (b) proof that the offending document should be canceled and removed from the chain of title and (c) filed within the time limit prescribed by statute.
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The court has turned this on its head. There is no lawsuit required to make rescission effective. There is no tender. There are no conditions whatsoever — see Jesinoski v Countrywide (SCOTUS). It is effective as a matter of law and if recorded remains a permanent impediment to any subsequent instrument claiming clear title (as though the rescission did not exist) in any instrument executed or recorded after the rescission was sent and/or recorded.
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The borrower is obligated to do nothing. The borrower can do nothing because even if it was the borrower that wanted to remove the rescission it would need to be done through court procedure. Otherwise, any person properly relying upon what appears in the title chain in the county records might act based upon their proper belief that the rescission exist would then find themselves having spent or lent money to a homeowner who in fact either had no title to the home or was already encumbered by the very instruments that were rendered void by operation of law. I can already see how foreign investors and lenders could get stuck by that having read the Federal, State and local laws and thinking themselves perfectly protected, and ending up with nothing.
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The time limit is set on the bank, not the borrower. It is set by the statute as 20 days from receipt of the rescission to (1) comply or (2) file suit to vacate or cancel the rescission. This is a burden on the bank, not the borrower. To construe the statute any other way would be to violate the terms of the statute and to violate the specific explicit instructions from the US Supreme Court. Any decision or ruling that the bank or creditor could contest after 20 days would mean that the rescission is not effective when mailed as set forth by the Statute and Jesinoski. Such a ruling would mean that the rescission is not effective by operation of law; it would mean that the rescission is effective ONLY if and when the bank files suit to vacate or cancel the rescission and loses. How one would logically say that the rescission is not effective until there is a lawsuit is incomprehensible.
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Rescission therefore is a fact and not a claim, pleading or defense. It may be raised as a defense merely to show that the court lacks subject matter jurisdiction, to wit: that the note and mortgage were rendered VOID by operation of law and as specifically stated in Reg Z which carries the full force of law. It follows that nobody can make a claim based upon void instruments. It also follows that the void instrument (i.e., the mortgage or deed of trust) must be removed from the chain of title as a void instrument. Hence quiet title is appropriate.
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Rescission is an event and the recording of it preserves the rights and benefits of rescission against the whole world. What courts and lawyers have failed to comprehend is that the rescission may not be ignored or even canceled or vacated or waived by the homeowner who sent it and recorded it. With a deed you can file a corrective deed but all parties to it must join in the correction. Otherwise it remains. The converse is also true. if as a matter of law the mortgage or deed of trust has been rendered void by operation of law, then it is void for all purposes and against all claims to the contrary from all claimants of every kind, especially if it is recorded.
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The court here has essentially adopted the strategy of the banks. By creating multiple layers of transmission, assignment, delivery and endorsement it gradually appears that the end successor indeed owns the debt, loan, note and mortgage. But if you start at the base of the chain and come to realize that the originator was not the lender and that the first transferee was merely a conduit who paid no money either for the origination nor the acquisition of the loan, one can easily see how the borrower’s rights have been egregiously violated.
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This court has done the same thing. It is taking the original ruling that the erroneous ruling (without subject matter jurisdiction) ignoring but not removing the rescission somehow was valid because the court later said that the claims as precluded by having been previously litigated,a decision later affirmed by appellate court. They can say it but it is erroneous, false and void for lack of subject matter jurisdiction. This is the rule of men rather than the rule of law. If the trial court had ignored the deed, mortgage or deed of trust without proper pleading and proof of a claim upon which such relief could be granted, the same result would apply.
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This is not some technicality. Allowing parties who have no interest or injury to apply for relief that properly belongs to other parties opens up floodgates of malicious practices in the marketplace in which the courts will face in full circle the absurdity of their own prior rulings when they believed that the banks must be right even if what they did was wrong.
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That the previous decisions considered the arguments of the homeowner and rejected them is irrelevant as long as the issue is lack of subject matter jurisdiction. If there was no such jurisdiction then none of the decisions are effective as a matter of law.

Beware of Thieves and Con Artists

I know that the first line of thieves and con artists are viewed by many as the banks and the “servicers” and the “trustees.” But the second wave are those who prey on the emotional turmoil of homeowners and get them to deed their homes into some sort of convoluted entity that will (1) shred the homeowners credibility in court and (2) essentially allow the new thief to get into your living room before the old thief has a chance to do so. In all events none of these schemes will ever do anything substantive to save a home, although some of the schemes may delay the judgment and sale for a short period of time.

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

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With the single exception of recording a notice of rescission I don’t see any plan by which a homeowner can preserve their rights in a foreclosure that is allowed by a judge to proceed. In nonjudicial states there MIGHT be one more: filing a corrective substitution of trustee returning the original trustee to the deed of trust. Anything in the chain of title on public records that is properly filed may well give homeowners a leg up and preserve rights when the issue of title finally comes front and center. The banks are proceeding under cover of title insurance. But in my opinion that cannot last and the title companies will file for bankruptcy protection in many cases.

It will be interesting to see what happens later when courts are faced with the consequences of their own decisions — creating and augmenting a title nightmare. Ultimately I think the rescission will have the effect that Federal law requires. Until then homeowners must seek to preserve their rights. They might find out years later that they still own the home they thought was long gone. This specific strategy requires very little money and certainly does not require deeding your home to another person leaving them to claim the asset and leaving you with the same apparent “debt” you had before.

People facing foreclosures are generally in severe emotional distress. Their home and their lifestyle are being threatened and the likelihood they will lose is in the statistics. As a result their judgment is impaired. In their desperation they will grasp at straws potentially destroying any hope of saving their home.

Although far more homeowners are winning their cases than a few years ago, it is nonetheless true that the deck is stacked against them. Some people, meaning well, have attempted to reverse the schemes from the banks by doing the same crazy documentation tactics that the banks.

Those schemes have failed because of the assumption by the judges that when the banks do it, which might include fabrication and forgery, they are merely patching up the paperwork on a valid debt. When homeowners do it, as Judges see it, it is to escape a legitimate debt. Both assumptions are wrong. Those judges are wrong but it seems counterintuitive.

This underscores the need for a lawyer: just because you found a statute or case that shows you are right and the bank, servicer or trustee is wrong doesn’t mean you will win. Trial court orders and judgments are final even if they are wrong. If you fail to appeal or preserve your rights in some other way, they stay final. Going to a smooth talking nonlawyer is likely the first step in jumping off of a legal cliff. BUT if the nonlawyer is attached to an actual lawyer, the outcome changes.

The problem with some of the schemes is that they are not per se illegal. But they lead to one result — the homeowner pays money and then loses the house. The moral of the story is don’t go with someone who is offering a nonexistent magic bullet. If it is so crispy clear and it works you would have heard about it already. Use a lawyer. Get references. Choose wisely.

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RESCISSION Revalidated in CA Decision

1sT Appellate District US Bank v Naifeh: “… we conclude that a borrower may rescind the loan transaction under TILA without filing a lawsuit, but when the rescission is challenged in litigation, the court has authority to decide whether the rescission notice is timely and whether the the procedure set forth in the TILA (sic) should be modified in light of the facts and circumstances of the case.”

The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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

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see US BANK VS NAIFEH

In a carefully worded opinion at least one appellate court seems to be moving closer to the view I have expressed here on these pages. But they still left some simple propositions unclear.

It remains my opinion that a recorded rescission forces those who would challenge it to file suit to remove the rescission from the title record. In that suit they would need to plead and prove standing — without using the note or mortgage to do it because rescission renders them void at the moment the letter of rescission is mailed..

  1. The decision clearly says that for the rescission to be effective (deriving its authority from 15 USC §1635 and the unanimous SCOTUS decision in Jesinoski v Countrywide), the borrower need NOT file suit. That means it is effective when mailed (NOT FILED) just as the statute says and just as the late Justice Scalia penned in the Jesinoski case.
  2. The decision anticipates a challenge to rescission — which in and of itself is recognition that the rescission IS effective and that something must be done about it.
  3. But the court does not clarify what is meant when it said “when the rescission is challenged in litigation.” Clearly the decision stands for the proposition that the rescission stands as effective unless challenged in litigation. The unanswered question is ‘what form of litigation?’
  4. If we apply ordinary rules of procedure, then the decision dovetails with my opinions, the statute and the US Supreme Court decision. The rescission is effective when mailed. So the “challenge” must be “in litigation.” But whether that means a lawsuit to vacate or a motion challenging the rescission is unclear. A “motion challenging the rescission” is problematic if it does not set forth the standing of the party making the challenge and if it does not set forth the plain facts that the rescission, under law, is already effective but should be vacated, then it is trying to get the court to arrive at the position that the rescission can be ignored even if it is recorded (a condition not addressed in the opinion).
  5. The claimant challenging the rescission must state a cause of action, if the rescission is recorded, that is in essence a quiet title claim that needs to be framed as an original complaint in a lawsuit. So far the banks have been successful in getting trial judges to IGNORE the rescission rather than remove it as an effective instrument, whether recorded or not. This only compounds title problems already present.
  6. The procedural oddity here is that in foreclosure litigation the court might conclude (erroneously in my opinion) that the beneficiary under the deed of trust had standing to substitute trustee, standing to to have the trustee record a notice of default, and standing to record a notice of sale.
  7. BUT once the rescission is effective, there is absolutely no foundation for a claim of standing based upon the void note, the void mortgage and the consequential void assignments, which even if they were not otherwise void, are void now because the assignment is purporting to transfer something that no longer exists.
  8. Standing vanishes if it is dependent upon presumptions applied from the assignment, endorsement and other attributes wherein false statements are made concerning purchase and sale of the note or mortgage. The note and mortgage are void the moment the rescission is mailed. No reliance on the mortgage, note or any transfer of same can constitute standing, since those documents, as a matter of law, no longer exist.
  9. Hence STANDING TO CHALLENGE RESCISSION must logically be dependent upon the ability of the challenger to affirmatively plead that they own the debt or obligation and to prove it at a hearing in which evidence is produced. This is the holy grail of foreclosure defense. We know that 99% of the foreclosers do NOT qualify as owners of the actual debt or obligation. They are traveling on legal presumptions as alleged “holders” etc. under the UCC. If the note and mortgage don’t exist then the status of holder is nonexistent and irrelevant.
  10. This court further leaves us in a gray area when it correctly reads that portion of the statute giving the court authority to consider the options, procedurally, but incorrectly states that one of those options is that a Federal Statute that preempts state law could be “modified in light of the facts and circumstances. This is NOT contained in either the statute or the Jesinoski decision. This court is putting far too much weight on the provision of the statute that allows for a petition to the court at which the court could change some of the procedural steps in complying with rescission, and possibly by implication allowing for a challenge to the rescission in order to vacate the legal effectiveness of the rescission.
  11. ANY DECISION ON “PROCEDURE” THAT NULLIFIES THE EFFECTIVENESS OF THE RESCISSION WHEN MAILED IS ERRONEOUS.  Any such decision would effectively be eviscerating the entire statute and the opinion of the US Supreme Court. The simple rule of thumb here (heuristic reasoning) is that the rescission is and always will have been effective when mailed. The parts of the statute that deal with procedure can only be related to a party who claims to be the creditor (owner of the debt or obligation) who intends to comply.
  12. Since tender is expressly excluded in the statute and the Jesinoski decision, the change can not require the borrower to tender money — especially when the statute says that no such demand need be considered by the borrower until there is full compliance with the rescission — return of canceled note, release of encumbrance and payment to the borrower of all money ever paid by the borrower for principal, interest, insurance, taxes, and fees.
  13. Hence the changes are limited perhaps granting additional time, or maybe even to credits against what might be due from the homeowner but even that looks like a stretch. The committee notes and subsequent decisions clearly state that the intent of Congress was to prevent any bank from stonewalling the effectiveness of a rescission, which is what judges have been doing despite the Jesinoski decision and the clear wording of the statute.
  14. And this is how we know that the challenge, if brought, must be within the 20 days available for the creditor, “lender” etc to comply with the rescission. Any other interpretation would mean that the rescission was NOT effective upon mailing and would also mean that the owner of the property cannot get a substitute mortgage to pay off any legitimate claim from a true creditor. Such interpretations, while apparently attractive to bank lawyers and judges, are directly contrary to the express wording of the statute and directly contrary tot he express wording of the Jesinoski decision, decided unanimously by SCOTUS. Hence ANY CHALLENGE outside the 20 days is barred by the statute. Just like any action to enforce the TILA duties against the “lender” must be brought within one year of the mailing and receipt of the rescission.
  15. The failure of either the “lender” to comply or the borrower to enforce simply means that after one year, the rescission is still effective (meaning the note and mortgage are void) the claim for enforcement of the duties of the lender is extinguished, and the financial claim of the lender is extinguished. Hence, the infamous free house — not caused by sneaky borrowers but caused instead of malfeasant banks who continue to use their influence to get judges to re-write the law.
  16. But regardless of how one looks at this decision, the Jesinoski decision or the statute one thing is perfectly clear — vacating the rescission is strictly dependent upon timely filing of a challenge in litigation and a hearing on evidence, because the legal presumptions used in determining standing are no longer available in the absence of the the note or mortgage, which were irretrievably rendered void upon mailing of the rescission.

The banks and servicers have so far been successful in pulling the wool over judges eyes, perhaps because judges have long disliked TILA and especially TILA rescission. The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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Quiet Title Revisited: Not Quite a Dead End

Void means that the instrument meant nothing when it was filed, not that it is unenforceable now.

 

I know how hard it is to let go of something that you really want to believe in. But for practical reasons I consider it unwise to continue on the QT path until we can find a way to get rid of the void assignment. That unto itself might a form of quiet title action and it is far easier to do. The allegation need only be that neither the assignor nor the assignee (a) had any right, justification or excuse to claim an interest in the recorded mortgage and (b) neither one was ever party to a completed transaction in which either of them had paid value for any interest in the recorded mortgage. Hence the assignment is void and should be removed from the chain of title reflected in the county records. So that takes care of one of several problems and the attack does not seek to remove the mortgage — yet.

 

Quiet title is a very limited remedy. In nearly all cases if the facts are contested it almost automatically means that there is no quiet tile relief available. It is meant to remove wild deeds or any other void (not voidable) instrument. Void means that the instrument meant nothing when it was filed, not that it is unenforceable now.

I contributed to the mystery of quiet title because it was apparent that the mortgage was void because it never named the true lender. In fact the existence and identity of the true source of funds for the transaction was intentionally withheld from the borrower leaving the mortgage with only one party instead of two.

 

The problem many courts are having with this is that the mortgage might still be subject to reformation that would insert the correct name of the actual lender (theoretically, potentially reformation). The fact that there is no such creditor whose name can be inserted does not make the mortgage void. It makes it voidable. Actually proving that there is no such creditor won’t be easy since only the banks have the information that shows that.

 

If there are any future events that could revive the mortgage deed, then quiet title can’t work. Add to that the fact that judges are not treating these attacks seriously and routinely ruling for the banks and you have a what appears to be a dead end.

 

All that said, there ARE causes of action that could attack the void assignment and the voidable mortgage in which the court could theoretically declare that in the absence of information sought from the defendants, who appear to be the only potential claimants, the mortgage is THEN declared void by court order, THEN a second count in quiet title would be in order. I cannot emphasize enough the fact that Judges are going to be very resistant to this but I think that appellate courts are starting to understand what happened with false claims of securitization.

 

Essentially, the Court must state that:

  1. The mortgage failed to name the correct party as lender.
  2. That failure makes the mortgage voidable.
  3. Despite publication and notice, there are no parties who could answer to the description of the creditor whose name should have been on the mortgage.
  4. The mortgage is therefore void
  5. Court declares title to be vested in the name of Smith and Jones without any encumbrance arising out of the mortgage recorded at Page 123 Book 456 of the public records of XXXX County, Florida.
 This of course directly challenges the judicial notion that once the homeowner receives money, it is a loan, it is enforceable and it doesn’t matter who comes into court to enforce it. To say that this judicial “law” opened the door to mayhem and moral hazard would be an understatement. Using the opinions written by trial judges, appellate judges and even Supreme Court justices, people who like to “leverage the system” have seized on this obvious opening to steal receivables from the rightful recipient — with no negative consequences. They write a letter that appears on its face to be correct and valid. According to current practices this raises the presumption that the contents of the letter are true.
 Hence the self-serving letter creates the legal presumption that the writer is authorized to tell the debtor that the writer is now the owner of the debt and to direct payments to the “new owner.” This isn’t speculation. Starting in California this business plan is spreading across the country. By the time the rightful owner of the debt wakes up the Newco Debt Servicing company has collected or settled the account.
Since the presumption is raised that the thief writing the letter is authorized, the real party in interest cannot beat the defense of payment by a debtor who thought they were doing the right thing. Reasonable reliance by the borrower is presumed since the authority and the validity of the letter was presumed. And that is not just a description of some dirty rag tag gangsters; it is a verifiable description of what the banks have been doing for years with mortgage debt, credit card debt, student loan debt and every other kind of debt imaginable.
By the time the investors wake up and find out their money was not used to fund a trust or real business entity, their money is gone and they are at the mercy of the big time banks who will offer settlements of claims that should have resulted in jail time for the bankers. Instead we have literally authorized small time crooks to emulate the behavior of the banks thus throwing the marketplace into further chaos.
So if you start off knowing that the banks can never come up with the name and contact information of a creditor, then you begin to see how there are some attacks on the position of banks that could have enormous traction even though on their face those strategies look like losers.

Was There a Loan Contract?

In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.  The absence of the defined set of investors is the reason why bank lawyers fight so hard to make such disclosures “irrelevant” in courts of law.

The important fact that is often missed is that the “warehouse” lender was neither a warehouse nor a lender. Like the originator it is a layer of anonymity in the lending process that is used as a conduit for the funding received by the “borrower.”

None of the real parties who funded the transaction had any knowledge about the transaction to which their funds were committed. The nexus between the investors and/or REMIC Trust and the original loan SHOULD have been accomplished by the Trust purchasing the loan — an event that never occurred. And this is why fabricated, forged documents are used in foreclosures — to cover over the fact that there was no purchase and sale of the loan by the Trust and to cover up the fact that investors’ money was used in ways directly contrary to their interests and their agreement with the bogus REMIC Trusts whose bogus securities were purchased by investors.

In the end the investors were left to rely on the unscrupulous investment bank that issued the bogus MBS to somehow create a nexus between the investors and the alleged loans that were funded, if at all, by the direct infusion of investors’ capital and NOT by the REMIC Trust.

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

—————-
also see comments below from Dan Edstrom, senior securitization analyst for LivingLies
——————-

David Belanger recently sent out an email explaining in his words the failed securitization process that sent our economy into a toxic spiral that continues, unabated, to weaken our ability to recover from the removal of capital from the most important source of spending and purchasing in our economy. This was an epic redistribution of wealth from the regular guy to a handful of “bankers” who were not really acting as bankers.

His email article is excellent and well worth reading a few times. He nails the use of remote conduits that have nothing to do with any loan transaction, much less a loan contract. The only thing I would add is the legal issue of the relationship between this information and the ability to rescind.

Rescission is available ONLY if there is something to rescind — and that has traditionally been regarded as a loan contract. If there is no loan contract, as Belanger asserts (and I agree) then there is nothing to rescind. But if the “transaction” can be rescinded because it is an implied contract between the source of funds and the alleged borrower, then rescission presumably applies.

Second, there is the question of what constitutes a “warehouse” lender. By definition if there is a warehouse lending contract in which the originator has liabilities or risk exposure to losses on the loans originated, then the transaction would appear to be properly represented by the loan documents executed by the borrower, although the absence of a signature from the originator presents a problem for “consummation” of the loan contract.

But, as suggested by the article if the “warehouse lender” was merely a conduit for funds from an undisclosed third party, then it is merely a sham entity in the chain. And if the originator has no exposure to risk of loss then it merely acted as sham conduit also, or paid originator or broker. This scenario is described in detail in Belanger’s article (see below) and we can see that in practice, securitization was distorted at several points — one of which was the presumption that an unauthroized party (contrary to disclosure and representations during the loan “approval” and loan  “closing”) was inserted as “lender” when it loaned no money. Yet the originator’s name was inserted as payee on the note or mortgagee on the mortgage.

All of this brings us to the question of whether judges are right — that the contract is consummated at the time that the borrower affixes his or her signature. It is my opinion that this view is erroneous and presents moral hazard and roadblock to enforcing the rights of disclosure of the parties, terms and compensation of the people and entities arising out of the “origination” of the loan.

If judges are right, then the borrower can only claim breach of contract for failure to loan money in accordance with the disclosures required by TILA. And the “borrower’s” ability to rescind within 3 days has been virtually eliminated as many of the loans were at least treated as though they had been “sold” to third parties who posed as warehouse lenders who in turn “sold” the loan to even more remote parties, none of which were the purported REMIC Trusts. Those alleged REMIC Trusts were a smokescreen — sham entities that didn’t even serve as conduits — left without any capital, contrary to the terms of the Trust agreement and the representations of the seller of mortgage backed securities by these Trusts who had no business, assets, liabilities, income, expenses or even a bank account.

If judges are right that the contract is consummated even without a loan from from the party identified as “lender” then they are ruling contrary to the  Federal requirements of lending disclosures and in many states in violation of fair lending laws.

There is an outcome of erroneous rulings from the bench in which the basic elements of contract are ignored in order to give banks a favorable result, to wit: the marketplace for business is now functioning under a rule of people instead of the rule of law. It is now an apparently legal business plan where the object is to capture the signature of a consumer and use that signature for profit is dozens of ways contrary to every representation and disclosure made at the time of application and “closing” of the transaction.

As Belanger points out, without consideration it is black letter law backed by centuries of common law that for a contract to be formed and therefore enforceable it must fit the four legs of a stool — offer, acceptance of the terms offered, consideration from the first party to the alleged loan transaction and consideration from the second party. The consideration from the “lender”can ONLY be payment to fund the loan. If the originator does it with their own funds or credit, then they have probably satisfied the requirement of consideration.

But if a third party supplied the consideration for the “loan” AND that third party has no contractual nexus with the “originator” or alleged “warehouse lender”then the requirement of consideration from the “originator” is not and cannot be met. In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.

David Belanger’s Email article follows, unabridged:

AND AS I SAID, WITH NO CONSUMMATION AT CLOSING, BELANGER NEVER CONSUMMATED ANY MORTGAGE CONTRACT/ NOTE.

BECAUSE THEY ARE THE ONLY PARTY TO THE FAKE CONTRACT THAT FOLLOWED THROUGH WITH THERE CONSIDERATION, WITH SIGNING THE MORTGAGE AND NOTE,

AS REQUIRED, TO PERFORM. BUT GMAC MORTGAGE CORP. DID NOT PERFORM , I.E. LEND ANY MONEY AT CLOSING, AS WE HAVE THE WIRE TRANSFER SHOWING THEY DID NOT FUND THE MORTGAGE AND NOTE AT CLOSING. CANT HAVE A LEGAL CONTRACT IF ONLY ONE OF THE PARTY’S. PERFORMS HIS OBLIGATIONS.

THIS MAKE , AS I SAID. RESCISSION IS VALID. AND THEY HAVE NOT FOLLOWED THRU, THERE PART.

AND IT DOES GIVE ME THE RIGHT TO

RESCIND THE CONTRACT BASED ON ALL NEWLY DISCOVERED EVIDENCE, THAT THE PARTY TO THE MORTGAGE /NOTE CONTRACT, DID NOT

FULFILL THERE DUTY AND DID NOT PREFORM IN ANY WAY AS REQUIRED TO HAVE A VALID BINDING CONTRACT.

Tonight we have a rebroadcast of a segment from Episode 15 with a guest who is a recent ex-patriot from 17 years in the mortgage banking industry… Scot started out as a escrow agent doing closings, then advanced to mortgage loan officer, processor, underwriter, branch manager, mortgage broker and loss mitigator for the banks. Interestingly, he says,

“Looking back on my career I don’t believe any mortgage closing that I was involved in was ever consummated.”
Tonight Scot will be covering areas relating to:

1 lack of disclosure and consideration
2 substitution of true mortgage contracting partner
3 unfunded loan agreements
4 non-existent trusts
5 securitization of your note and bifurcation of the security interest and
6 how to identify and prove the non-existence of the so-called trust named in an assignment which may be coming after you to foreclose

: http://recordings.talkshoe.com/TC-139335/TS-1093904.mp3

so lets look at what happen a the closing of the mortgage CONTRACT SHELL WE.

1/ MORTGAGE AND NOTES, SAYS A ( SPECIFIC LENDER) GAVE YOU MONEY, ( AS WE KNOW THAT DIDN’T HAPPEN. )

2/ HOME OWNER WAS TOLD AT CLOSING AND BEFORE CLOSING THAT THE NAMED LENDER WOULD SUPPLY THE FUNDS AT CLOSING, AND WAS ALSO TOLD BY THE CLOSING AGENT , THE SAME LIE.

3/ THERE ARE 2 PARTIES TO A CLOSING OF A MORTGAGE AND NOTE, 1/ HOMEOWNER, 2/ LENDER.

3/ Offer and acceptance , Consideration,= SO HOMEOWNERS SIGN A MORTGAGE AND NOTE, IN CONSIDERATION of the said lender’s promises to pay the homeowner for said signing of the mortgage and note.

4/ but the lender does not, follow thru with his CONSIDERATION. I.E TO FUND THE CONTRACT. AND THE LENDER NAMED ON THE CONTRACT, KNEW ALL ALONG THAT HE WOULD NOT BE THE FUNDING SOURCE. FRAUD AT CONCEPTION. KNOWINGLY OUT RIGHT FRAUD ON THE HOMEOWNERS.

5/ THERE ARE NO STATUES OF LIMITATIONS ON FRAUD IN THE INDUCEMENT, OR ANY OTHER FRAUD.

6/ SO AS NEIL AND AND LENDING TEAM, AND OTHERS HAVE POINTED OUT, SO SO MANY TIMES HERE AND OTHER PLACES,

THERE COULD NOT BE ANY CONSUMMATION OF THE CONTRACT AT CLOSING,BY THE TWO PARTY’S TO THE CONTRACT, IF ONLY ONE PERSON TO THE CONTRACT ACTED IN GOOD FAITH,

AND THE OTHER PARTY DID NOT ACT IN GOOD FAITH OR EVEN SUPPLIED ANY ( CONSIDERATION WHAT SO EVER AT CLOSING OF THE CONTRACT.) A MORTGAGE AND NOTE IS A CONTRACT PEOPLE.

7/ SO THIS WOULD GIVE RISE TO THE LAW OF ( RESCISSION).

. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

AND THE BANKS CAN SCREAM ALL THEY WANT, IF THE PRETENDER LENDER THAT IS ON YOUR MORTGAGE AND NOTE, DID NOT SUPPLY THE FUNDS AT CLOSING, AS WE ALL KNOW DID HAPPEN, THEN THE MORTGAGE CONTRACT IS VOID. AND THERE WAS NO CONSUMMATION AT THE CLOSING TABLE, BY THE PARTY THAT SAID IT WAS FUNDING THE CONTRACT.

CANT GET MORE SIMPLE THAT THAT. and this supports all of the above. that the fake lender did not PERFORM AT CLOSING, DID NOT FUND ANY MONEY OR LOAN ANY MONEY AT CLOSING WITH ANY BORROWER, SO ONLY ONE ( THE BORROWER ) DID PERFORM AT CLOSING. BOTH PARTY’S MUST PERFORM TO HAVE A LEGAL BINDING CONTRACT.

SEE RODGERS V U.S.BANK HOME MORTGAGE ET, AL

THE WAREHOUSE LENDER NATIONAL CITY BANK OF KENTUCKY HELD THE NOTE THEN DELIVERED TO THIRD PARTY INVESTORS UNKNOWN

SECURITY NATIONAL FINANCIAL CORPORATION

5300 South 360 West, Suite 250

Salt Lake City, Utah 84123

Telephone (801) 264-1060

February 20, 2009

VIA EDGAR

U. S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N. E., Mail Stop 4561

Washington, D. C. 20549

Attn: Sharon M. Blume

Assistant Chief Accountant

Re: Security National Financial Corporation

Form 10-K for the Fiscal Year Ended December 31, 2007

Form 10-Q for Fiscal Quarter Ended June 30, 2008

File No. 0-9341

Dear Ms. Blume:

Security National Financial Corporation (the “Company”) hereby supplements its responses to its previous response letters dated January 15, 2009, November 6, 2008 and October 9, 2008. These supplemental responses are provided as additional information concerning the Company’s mortgage loan operations and the appropriate accounting that the Company follows in connection with such operations.

The Company operates its mortgage loan operations through its wholly owned subsidiary, Security National Mortgage Company (“SNMC”). SNMC currently has 29 branch offices across

the continental United States and Hawaii. Each office has personnel who are qualified to solicit and underwrite loans that are submitted to SNMC by a network of mortgage brokers. Loan files submitted to SNMC are underwritten pursuant to third-party investor guidelines and are approved to fund after all documentation and other investor-established requirements are determined to meet the criteria for a saleable loans. (e.s.) Loan documents are prepared in the name of SNMC and then sent to the title company handling the loan transactions for signatures from the borrowers. Upon signing the documents, requests are then sent to the warehouse bank involved in the transaction to submit funds to the title company to pay for the settlement. All loans funded by warehouse banks are committed to be purchased (settled) by third-party investors under pre-established loan purchase commitments. The initial recordings of the deeds of trust (the mortgages) are made in the name of SNMC. (e.s.)

Soon after the loan funding, the deeds of trust are assigned, using the Mortgage Electronic Registration System (“MERS”), which is the standard in the industry for recording subsequent transfers in title, and the promissory notes are endorsed in blank to the warehouse bank that funded the loan. The promissory notes and the deeds of trust are then forwarded to the warehouse bank. The warehouse bank funds approximately 96% of the mortgage loans to the title company and the remainder (known in the industry as the “haircut”) is funded by the Company. The Company records a receivable from the third-party investor for the portion of the mortgage loans the Company has funded and for mortgage fee income earned by SNMC. The receivable from the third-party investor is unsecured inasmuch as neither the Company nor its subsidiaries retain any interest in the mortgage loans. (e.s.)

Conditions for Revenue Recognition

Pursuant to paragraph 9 of SFAS 140, a transfer of financial assets (or a portion of a financial asset) in which the transferor surrenders control over those financial assets shall be accounted as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The transferor has surrendered control over transferred assets if and only if all of the following conditions are met:

1

(a) The transferred assets have been isolated from the transferor―placed presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership.

SNMC endorses the promissory notes in blank, assigns the deeds of trust through MERS and forwards these documents to the warehouse bank that funded the loan. Therefore, the transferred mortgage loans are isolated from the Company. The Company’s management is confident that the transferred mortgage loans are beyond the reach of the Company and its creditors. (e.s.)

(b) Each transferee (or, if the transferee is a qualified SPE, each holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received, and no

condition restricts the transferee (or holder) from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor.

The Company does not have any interest in the promissory notes or the underlying deeds of trust because of the steps taken in item (a) above. The Master Purchase and Repurchase Agreements (the “Purchase Agreements”) with the warehouse banks allow them to pledge the promissory notes as collateral for borrowings by them and their entities. Under the Purchase Agreements, the warehouse banks have agreed to sell the loans to the third-party investors; however, the warehouse banks hold title to the mortgage notes and can sell, exchange or pledge the mortgage loans as they choose. The Purchase Agreements clearly indicate that the purchaser, the warehouse bank, and seller confirm that the transactions contemplated herein are intended to be sales of the mortgage loans by seller to purchaser rather than borrowings secured by the mortgage loans. In the event that the third-party investors do not purchase or settle the loans from the warehouse banks, the warehouse banks have the right to sell or exchange the mortgage loans to the Company or to any other entity. Accordingly, the Company believes this requirement is met.

(c) The transferor does not maintain effective control over the transferred asset through either an agreement that entitles both entities and obligates the transferor to repurchase or redeem them before their maturity or the ability to unilaterally cause the holder to return the specific assets, other than through a cleanup call.

The Company maintains no control over the mortgage loans sold to the warehouse banks, and, as stated in the Purchase Agreements, the Company is not entitled to repurchase the mortgage loans. In addition, the Company cannot unilaterally cause a warehouse bank to return a specific loan. The warehouse bank can require the Company to repurchase mortgage loans not settled by the third-party investors, but this conditional obligation does not provide effective control over the mortgage loans sold. Should the Company want a warehouse bank to sell a mortgage loan to a different third-party investor, the warehouse bank would impose its own conditions prior to agreeing to the change, including, for instance, that the original intended third-party investor return the promissory note to the warehouse bank. Accordingly, the Company believes that it does not maintain effective control over the transferred mortgage loans and that it meets this transfer of control criteria.

The warehouse bank and not the Company transfers the loan to the third-party investor at the date it is settled. The Company does not have an unconditional obligation to repurchase the loan from the warehouse bank nor does the Company have any rights to purchase the loan. Only in the situation where the third-party investor does not settle and purchase the loan from the warehouse bank does the Company have a conditional obligation to repurchase the loan. Accordingly, the Company believes that it meets the criteria for recognition of mortgage fee income under SFAS 140 when the loan is funded by the warehouse bank and, at that date, the Company records an unsecured receivable from the investor for the portion of the loan funded by the Company, which is typically 4% of the face amount of the loan, together with the broker and origination fee income.

2

Loans Repurchased from Warehouse Banks

Historically, 99% of all mortgage loans are settled with investors. In the process of settling a loan, the Company may take up to six months to pursue remediation of an unsettled loan. There are situations when the Company determines that it is unable to enforce the settlement of a loan by the third-party investor and that it is in the Company’s best interest to repurchase the loan from the warehouse bank. Any previously recorded mortgage fee income is reversed in the period the loan was repurchased.

When the Company repurchases a loan, it is recorded at the lower of cost or market. Cost is equal to the amount paid to the warehouse bank and the amount originally funded by the Company. Market value is often difficult to determine for this type of loan and is estimated by the Company. The Company never estimates market value to exceed the unpaid principal balance on the loan. The market value is also supported by the initial loan underwriting documentation and collateral. The Company does not hold the loan as available for sale but as held to maturity and carries the loan at amortized cost. Any loan that subsequently becomes delinquent is evaluated by the Company at that time and any allowances for impairment are adjusted accordingly.

This will supplement our earlier responses to clarify that the Company repurchased the $36,291,000 of loans during 2007 and 2008 from the warehouse banks and not from third-party investors. The amounts paid to the warehouse banks and the amounts originally funded by the Company, exclusive of the mortgage fee income that was reversed, were classified as the cost of the investment in the mortgage loans held for investment.

The Company uses two allowance accounts to offset the reversal of mortgage fee income and for the impairment of loans. The allowance for reversal of mortgage fee income is carried on the balance sheet as a liability and the allowance for impairment of loans is carried as a contra account net of our investment in mortgage loans. Management believes the allowance for reversal of mortgage fee income is sufficient to absorb any losses of income from loans that are not settled by third-party investors. The Company is currently accruing 17.5 basis points of the principal amount of mortgage loans sold, which increased by 5.0 basis points during the latter part of 2007 and remained at that level during 2008.

The Company reviewed its estimates of collectability of receivables from broker and origination fee income during the fourth quarter of 2007, in view of the market turmoil discussed in the following paragraph and the fact that several third-party investors were attempting to back out of their commitments to buy (settle) loans, and the Company determined that it could still reasonably estimate the collectability of the mortgage fee income. However, the Company determined that it needed to increase its allowance for reversal of mortgage fee income as stated in the preceding paragraph.

Effect of Market Turmoil on Sales and Settlement of Mortgage Loans

As explained in previous response letters, the Company and the warehouse banks typically settle mortgage loans with third-party investors within 16 days of the closing and funding of the loans. However, beginning in the first quarter of 2007, there was a lot of market turmoil for mortgage backed securities. Initially, the market turmoil was primarily isolated to sub-prime mortgage loan originations. The Company originated less than 0.5% of its mortgage loans using this product during 2006 and the associated market turmoil did not have a material effect on the Company.

As 2007 progressed, however, the market turmoil began to expand into mortgage loans that were classified by the industry as Alt A and Expanded Criteria. The Company’s third-party investors, including Lehman Brothers (Aurora Loan Services) and Bear Stearns (EMC Mortgage Corp.), began to have difficulty marketing Alt A and Expanded Criteria loans to the secondary markets. Without notice, these investors changed their criteria for loan products and refused to settle loans underwritten by the Company that met these investor’s previous specifications. As stipulated in the agreements with the warehouse banks, the Company was conditionally required to repurchase loans from the warehouse banks that were not settled by the third-party investors.

3

Beginning in early 2007, without prior notice, these investors discontinued purchasing Alt A and Expanded Criteria loans. Over the period from April 2007 through May 2008, the warehouse banks had purchased approximately $36.2 million of loans that had met the investor’s previous criteria but were rejected by the investor in complete disregard of their contractual commitments. Although the Company pursued its rights under the investor contracts, the Company was unsuccessful due to the investors’ financial problems and could not enforce the loan purchase contracts. As a result of its conditional repurchase obligation, the Company repurchased these loans from the warehouse banks and reversed the mortgage fee income associated with the loans on the date of repurchase from the warehouse banks. The loans were classified to the long-term mortgage loan portfolio beginning in the second quarter of 2008.

Relationship with Warehouse Banks

As previously stated, the Company is not unconditionally obligated to repurchase mortgage loans from the warehouse banks. The warehouse banks purchase the loans with the commitment from the third-party investors to settle the loans from the warehouse banks. Accordingly, the Company does not make an entry to reflect the amount paid by the warehouse bank when the mortgage loans are funded. Upon sale of the loans to the warehouse bank, the Company only records the receivables for the brokerage and origination fees and the amount the Company paid at the time of funding.

Interest in Repurchased Loans

Once a mortgage loan is repurchased, it is immediately transferred to mortgage loans held for investment (or should have been) as the Company makes no attempts to sell these loans

to other investors at this time. Any efforts to find a replacement investor are made prior to repurchasing the loan from the warehouse bank. The Company makes no effort to remarket the loan after it is repurchased.

Acknowledgements

In connection with the Company’s responses to the comments, the Company hereby acknowledges as follows:

· The Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· The staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· The Company may not assert staff comments as defense in any proceeding initiated by the Commission or any person under the Federal Securities Laws of the United States.

If you have any questions, please do not hesitate to call me at (801) 264-1060 or (801) 287-8171.

Very truly yours,

/s/ Stephen M. Sill

Stephen M. Sill, CPA

Vice President, Treasurer and

Chief Financial Officer

Contract law

Part of the common law series

Contract formation

Offer and acceptance Posting rule Mirror image rule Invitation to treat Firm offer Consideration Implication-in-fact

Defenses against formation

Lack of capacity Duress Undue influence Illusory promise Statute of frauds Non est factum

Contract interpretation

Parol evidence rule Contract of adhesion Integration clause Contra proferentem

Excuses for non-performance

Mistake Misrepresentation Frustration of purpose Impossibility Impracticability Illegality Unclean hands Unconscionability Accord and satisfaction

Rights of third parties

Privity of contract Assignment Delegation Novation Third-party beneficiary

Breach of contract

Anticipatory repudiation Cover Exclusion clause Efficient breach Deviation Fundamental breach

Remedies

Specific performance Liquidated damages Penal damages Rescission

Quasi-contractual obligations

Promissory estoppel Quantum meruit

Related areas of law

Conflict of laws Commercial law

Other common law areas

Tort law Property law Wills, trusts, and estates Criminal law Evidence

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation

Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.

According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation
Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.
According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

=======================

Comments from Dan Edstrom:

My understanding in California (and probably most other states) is the signature(s) were put on the note and security instrument and passed to the (escrow) agent for delivery only upon the performance of the specific instructions included in the closing instructions. The homeowner(s) did not manifest a present intent to transfer the documents or title….   Delivery was not possible until the agent followed instructions 100% (specific performance).  Their appears to be a presumption of delivery that should be rebutted. In California the test for an effective delivery is the writing passed with the deed (but only if delivery is put at issue).
Here is a quote from an appeal in CA:
We first examine the legal effectiveness of the Greggs deed. Legal delivery of a deed revolves around the intent of the grantor. (Osborn v. Osborn (1954) 42 Cal.2d 358, 363-364.) Where the grantor’s only instructions concerning the transaction are in writing, “`the effect of the transaction depends upon the true construction of the writing. It is in other words a pure question of law whether there was an absolute delivery or not.’ [Citation.]” (Id. at p. at p. 364.) As explained by the Supreme Court, “Where a deed is placed in the hands of a third person, as an escrow, with an agreement between the grantor and grantee that it shall not be delivered to the grantee until he has complied with certain conditions, the grantee does not acquire any title to the land, nor is he entitled to a delivery of the deed until he has strictly complied with the conditions. If he does not comply with the conditions when required, or refuses to comply, the escrow-holder cannot make a valid delivery of the deed to him. [Citations.]” (Promis v. Duke (1929) 208 Cal. 420, 425.) Thus, if the escrow holder does deliver the deed before the buyer complies with the seller’s instructions to the escrow, such purported delivery conveys no title to the buyer. (Montgomery v. Bank of America (1948) 85 Cal.App.2d 559, 563; see also Borgonovo v. Henderson (1960) 182 Cal.App.2d 220, 226-228 [purported assignment of note deposited into escrow held invalid, where maker instructed escrow holder to release note only upon deposit of certain sum of money by payee].)
LAOLAGI v. FIRST AMERICAN TITLE INSURANCE COMPANY, H032523 (Cal. Ct. App. July 31, 2009).
In most cases I have seen the closing instructions state there can be no encumbrances except the new note and security instrument in favor of {the payee of the note}…
Some of the issues with this (encumbrances) would be who provided the actual escrow funding, topre-existing agreements, the step transaction and single transaction doctrines, MERS, payoffs of previous mortgages (to a lender of record), reconveyance (to a lender of record), etc…
Thx,
Dan Edstrom

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“Get three months behind and you’ll get a modification”: The Big Lie That Servicers and Banks are Still Using

The bottom line is that millions of people have been told that line and most of them stopped paying for three months because of it. It was perfectly reasonable for them to believe that they had just been told by the creditor that they must stop paying if they want relief. Judges have heard this repeatedly from homeowners. So what is the real reason such obvious bank behavior is overlooked?

More to the point — what choice does the homeowner have other than believing what they just heard from an apparently authorized service representative?

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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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In the course of the last ten years I have personally interviewed homeowners, reviewed the documents and or received reports from homeowners that were duped into going to default by that famous line: “You must be three months behind.” It is patently true that every homeowner who had that conversation believed that they were being told to stop making payments. No, it didn’t make any sense; but it also was beyond comprehension that the servicers were in fact aiming at foreclosure instead of workouts that would have preserved the value of the alleged loan, and mitigated the rush into the worst recession seen in modern times.

On cross examination the point is always made that the “representative” did not use the words “Stop paying.” And thus the point is made that the announcement that a three month delinquency was necessary for a modification was simply that: just information. Yet the behavior of millions of homeowners shows that virtually every one of them believed they were told to stop paying in “code” language. If that is not reasonable reliance, I don’t know what is.

However there is much bigger point. The three month announcement was (a) false and (b) an intentional policy to lure people into default and foreclosure. It has been previously reported here and elsewhere that an officer at Bank of America said point blank to his employees “We are in the foreclosure business, not the modification business.”

The legal point here is (a) unclean hands and (b) estoppel. In most cases homeowners ended up withholding three months worth of payments, as they reasonably believed they had been instructed to do, many times faithfully paying on a three month trial or “forbearance” plan, and sometimes even paying for many months beyond the “trial” period, or even years. Then suddenly the servicer/bank stops accepting payments and won’t respond to calls and letters from the homeowners asking what is going on.

Then they get a notice of default, a notice of their right to reinstate if they pay a certain sum (which is most often miscalculated) and then they get served with a foreclosure notice. The entire plan was aimed at foreclosure. And now, thanks to recent court doctrine, homeowners are stuck with intensely complicated instruments and behavior, only to find out that despite all law to the contrary, “caveat emptor” (Let the buyer beware).

The trick has always been to make the non-payment period as long as possible so that (1) reinstatement is impossible for the homeowner and (2) to increase the value of servicer advances. Each month the homeowner does not make a payment the value of fraudulent claims for “servicer advances” goes up. And THAT is the reason why you see cases going on for 10 years and more. every month you miss a payment, the Master Servicer increases its claims on the final proceeds of liquidation of the home.

In the banking world it is axiomatic that a loan “in distress” should be worked out with the borrower because that will be the most likely way to preserve the value of the loan. In every professional seminar I ever attended relating to residential and commercial loans the main part of the seminar was devoted to workouts, modification or settlement. We have had literally millions of such opportunities in which people were instead either lured into default or unjustly and fraudulently induced to drop their request for modification or to go into a “default” period that they thought was merely a waiting period before the modification was complete.

The result: asset values tanked: the alleged loan, the alleged MBS, and the value of the subject property was crushed by servicers looking out for their real boss — the Master Servicer and operating completely against the interests of the investors who are completely ignorant of what is really going on. Don’t kid yourself — US Bank and other alleged Trustees of REMIC Trusts have not taken a single action as Trustee ever and the REMIC Trust never existed, never was an active business (even during the 90 day period allowed), and the “Trust” was never administered by any Trust department of any of the banks who are claimed to be Trustees of the “REMIC Trust”. Both the Trust and the Trustee are window dressing as part of a larger illusion.

My opinion as a former investment banker, is that this is all about money. The “three month” announcement was meant to steer the homeowner from a HAMP modification, which was routinely “rejected by investor” (when no contact was ever made with the investor). This enabled the banks to “capture” (i.e., steal) the alleged loan using one of two means: (1) an “in-house” modification that in reality made the servicer the creditor instead of the investor whose money was actually in the deal and/or (2) a foreclosure and sale in which the servicer picked up all or nearly all of the proceeds by “recovery” of nonexistent servicer advances.

It isn’t that the investors did not receive money under the label of “servicer advances.” It is that the money investors received were neither advances nor were they paid by the servicer (same as the origination or acquisition of the loan which is “presumed” based upon fabricated, forged, robo-signed documents). There is no speculation required as to where the money came from or who had access to it. The prospectus and PSA combined make it quite clear that the investors can receive their own money back in satisfaction of the nonexistent obligation from a nonexistent REMIC Trust that issued worthless and fraudulent MBS but never was in business, nor was it ever intended to be in business.

Servicer advances can only be “recovered” when the property is liquidated. There is no right of recovery against the investors. But the nasty truth is that there is no right of “recovery” of servicer advances anyway because there is nothing to recover. By labeling money paid from a pool of investor money as “servicer advances” we again have the creation of an illusion. They make it look like the Master Servicer is advancing money when all they are doing is exercising control over the investors’ money.

Thus the three month announcement is a win win for the Master Servicer — either they convert the loan from being subject to claims by investors to an “in-house” loan, or they take the full value of the alleged loan and reduce it to zero by making false claims for recovery — but only if there is a foreclosure sale. Either way the investor gets screwed and so does the homeowner both of whom were pawns and victims in an epic fraud.

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Rescissions and Preemptive Lawsuits by Borrowers — 2 Things the Courts Dislike the Most.

For short-term results it is absolutely essential that discovery be pressed as hard as possible and that attorneys prep for a punishing cross examination of the corporate representative of the company claiming to be the servicer for the company that claims to be the trustee or successor for a trust that by implication claims to own the loan but won’t allege that. Layers upon layers.

I have heard dozens of judges caution the “banks” that they better show up with someone who doesn’t need to place a call or wait to get authorization. But that is exactly what they do.

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Listen to Attorneys Neil Garfield and James Randy Ackley discuss this issue:

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

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Based upon reports coming in across the country it appears that we are actually receding from the application of law again. The two things that the Courts obviously don’t like and essentially refuse to enforce are preemptive lawsuits and TILA Rescission, even where they give it lip service approval. What are now known as preemptive lawsuits in which the borrower tries to head off their title and collections problem by demanding the real data on identification of a creditor who owns the debt, note and mortgage or deed of trust are a bridge too far although California looks like it is edging toward that the fastest amongst the states. See Yvanova decision

In both cases the Courts are grasping at straws because of the fear of undermining the entire banking system causing another financial collapse. As I did in 2008-2009 I am predicting that these cases will be decided in favor of the borrower. And again it might take more years to get there. Having examined pleadings and orders from across the country there is no doubt in my mind that everything we have said is true and these are useful tools for the borrower.

But for short-term results it is absolutely essential that discovery be pressed as hard as possible and that attorneys prep for a punishing cross examination of the corporate representative of the company claiming to be the servicer for the company that claims to be the trustee or successor for a trust that by implication claims to own the loan but won’t allege that. Layers upon layers.

In 2008 I had a conversation (previously reported) with one of the architects of this scheme and he predicted that the legal presumptions attached to the notes and mortgages and assignments would overcome any factual rebuttal regardless of how persuasive the rebuttal. I thought he was wrong. He was right, but back then I could tell he wasn’t as sure as he is today. It worked. Millions of foreclosures proceeded in favor of entities who had already stolen the money from investors and now were stealing their security.

Proof of all my basic premises is abundantly clear but well hidden by confidential settlements under seal. Cash offers to settle the case seem almost always to produce a settlement that includes damages for wrongful foreclosure.

Mediations continue to proceed almost exclusively with “representatives” who lack full settlement authority and truth to be told, they lack any settlement authority. This point is getting under the skin of many judges and should be pressed. I even said to one judge who ordered mediation that I questioned when his orders “meant anything at all.” He was upset but he started entering other orders that required real action by my opposition.

Mediations by definition under Supreme Court rules require the presence of the parties with full settlement authority. Instead the alleged servicer shows up with representative that has only one duty — handover an application for modification without any discussion or authority to settle. That is the stuff of motions for sanctions. I have heard dozens of judges caution the “banks” that they better show up with someone who doesn’t need to place a call or wait to get authorization. But that is exactly what they do and frequently they get away with it. Don’t expect sanctions to be ordered until the “bank” fails to “show up” more than twice.

Usually the attorney represents the servicer and if pressed, sometimes you can get an admission that the attorney is not able to assert they represent the plaintiff. The representative also might admit that he is there on behalf of the servicer but not the Plaintiff. In those cases I think you are well on your way to getting sanctions, but not until you are ordered back into mediation multiple times.

The problem remains the same — the servicer derives its alleged authority from the Plaintiff who derives its power to enforce from legal presumptions derived from possession and its declaration that it is the “holder.” The Plaintiff rarely alleges that it owns the debt, loaned the money or anything like that and they never allege that they are holders in due course which would mean, by definition, that the trust paid for the loan. The trusts did not pay for the loan and the creditor is, at least according to some live testimony I got in court, a group of unnamed investors. By definition then in hearings for sanctions relating to mediation, you can elicit admissions that defeat the foreclosure.

Once you get to the fact that the Trust never was in operation and was never funded it goes without saying that as an inactive business with no history it could not possibly have paid for the debt or even accepted the assignment. Having cut the chain (the hip bone is connected to the thigh bone etc) the strawman figure must collapse. NO authority flows from such an entity —especially when the representative says the creditors are the investors.

My prediction is that while it may still take some time, the courts are eventually going to routinely require real proof instead of relying exclusively upon legal presumptions arising from fabricated, forged, robo-signed documents. Real proof means real transactions — something that will unwind claims by the servicer and Trustee or successor like pulling a thread from a poorly made sweater.

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Chase Loses on Assignment and Assumption Argument with WAMU

A purchase and assumption agreement was not enough to prove JPMorgan Chase Bank N.A.’s legal standing in a foreclosure case before the Fourth District Court of Appeal.
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For a description of our services  click here: https://wordpress.com/post/livinglies.wordpress.com/32498
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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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see http://www.dailybusinessreview.com/law-news/id=1202753997800/JPMorgan-Chase-Loses-Foreclosure-Case-After-5-Debt-Sales?mcode=1202617860989&curindex=2&slreturn=20160315114531

Congrats to Attorney Ricardo Corona, Esq., the one who won this case.

On the road today.

I just wanted to point out that what I had testified 8 years ago in a class action is pretty much well-settled now, despite the nagging naysayers that always emerge when confronted with an observation that conflicts with their assumptions. WAMU originated around $1 trillion in loans. Any cursory overview of their financial statements would show that they could not possibly have loaned even a substantial fraction of that amount. It follows that all of them were pre-funded through conduits of conduits who were illegally using investor money obtained under false pretenses.

For most of the loans, therefore, WAMU never owned them because they were never the lender. The rest were “sold” (without ever receiving one cent of consideration) into the secondary market where they were subject to false claims of securitization. The financial equivalent of a house of mirrors.

Any three year old understands that if you give away that tasty apple you don’t have it anymore. So when the FDIC took over WAMU, who had virtually no assets, and then combined with the US Trustee in bankruptcy to sell the servicing rights and other services of WAMU, Chase was the buyer of everything EXCEPT the loans. No assignments exist because none were executed. I spoke to Richard Schoppe the FDIC Trustee who directly confirmed this to me years ago.

It therefore makes sense that the paperwork used in court is fabricated, forged or irrelevant to ownership, authority or even balances. In a case Patrick Giunta and I won about a year ago, a veteran Judge ruled that the Trust never owned the loan, that the transfer  documents were meaningless, that the “new servicer” had no right to service the loan, and that Chase probably owed our client money for fooling around with the escrow account. Lawyers for US Bank as trustee for the inactive REMIC Trust tried using all kinds of documents including brand new powers of attorney that said nothing of value.

The “WAMU” notes, by the way, were mostly destroyed. Almost all of the notes you see today and represented as originals would not survive a real forensic examination. Many of the loan documents were printed and mechanically signed within hours or days of being presented in court as the originals signed by the homeowner. That is why I always caution against admitting the signature — it usually isn’t the original signature but it sure looks like it. Now Chase is walking this practice back because the executives wish to avoid civil and maybe other prosecution. So they are using “substitutes” for the notes.

“Because they didn’t have possession of the note, they had to rely on the purchase and assumption agreement, which the Fourth DCA found insufficient,” said defense attorney Ricardo M. Corona Jr. of the Corona Law Firm in Miami.

Like the Mortgages, Rescission is Counter-Intuitive

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
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  3. Case review and analysis
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For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
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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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There seems to be some miscommunication regarding rescission. The confusion seems to emanate from the assumption that the “borrower” would lose if there was a creditor with standing who filed a lawsuit to vacate the rescission. If so, that would be missing the point. The point is not whether the homeowner would lose if the lawsuit was filed. The point is that the lawsuit is never going to be filed. The rescission is effective as a matter of law, regardless of whether there exists an arguable or even valid defense.

Normally as lawyers we would anticipate the end result, but in this case the end result never happens because there is no creditor with standing, which is the whole point of understanding the false claims of securitization that have permeated the foreclosure marketplace. The answer, which I understand is completely counter-intuitive, is that there is no creditor — i.e., no party who could answer to the description of the owner of the debt (not the paper) — i.e. the party to whom the money is actually owed. The absence of a creditor is hard to fathom, but it is nonetheless true. AND THAT is why no bank, despite advice of counsel, has filed any action within the 20 day window to file, that seeks to vacate the rescission.

It may be true that we could expect to lose if there was a case filed and there was a trial. But if the case is never filed, the rescission stands. And since it is effective by operation of law, the loan contract (if it was ever consummated — which is doubtful) is canceled, the note is void and the mortgage is void. The only restriction I see is that in judicial states after judgment, it would appear that there is no loan contract that still exists after judgment and so there is nothing to cancel.

Looking at the date of documents is not the way to determine when a loan contract was consummated. We must return to basics, and that is what is presumed but the presumption is wrong. basic contract law X makes an offer to Y. Y accepts the offer. X and Y exchange consideration. In these loans, not only did X and Y NOT exchange consideration, but the very fact that they didn’t makes X a predatory lender as per REG Z. But more to the point, if X did not perform by loaning money to Y, there is no loan contract= no consummation= void note and void mortgage. If there was a consummation you need to know the date of funding, which is after the documents were signed and could be days, weeks or even months afterwards.

Check the Yvanova decision for more on this. Ownership of the debt, as per the Yvanova court, is what counts, not merely possession of paper that could and probably is fabricated.

Here are some quotes from recent articles or upcoming articles

“TILA rescission in which the notice of rescission alone (upon mailing) immediately cancels the loan contract, and voids the note and mortgage — even if the rescission is disputed on grounds of the 3 year limitations etc.

As Justice Scalia said, “the statute makes no distinction between disputed and undisputed rescission.” Thus the rescission is effective even if it APPEARS As though the right to rescind under TILA may not have existed on the date the notice of rescission was mailed.
NOTE TO LAWYERS: ANY OTHER INTERPRETATION WOULD REQUIRE THE “BORROWER” TO FILE SUIT TO MAKE THE RESCISSION EFFECTIVE WHICH IS THE OPPOSITE OF THE TILA RESCISSION STATUTE, REGULATION Z AND THE UNANIMOUS DECISION OF THE US SUPREME COURT IN JESINOSKI. THE STATUTE PUTS THE RESPONSIBILITY FOR PUTTING THE EFFECTIVENESS OF THE TILA RESCISSION IN ISSUE SQUARELY ON THE PARTIES PURPORTING TO BE THE LENDER AND THEY ONLY HAVE 20 DAYS FROM RECEIPT TO FILE A LAWSUIT SEEKING TO HAVE THE RESCISSION VACATED.”

California Supreme Court Rules in Yvanova, “The borrower owes money NOT TO THE WORLD at large but to a particular person or institution.”

Yvanova v New Century Mortgage 02182016 Supreme Court of California opinion

By William Hudson

Last week the California Supreme Court ruled in Yvanova v. New Century Mortgage Corporation (Case No. S218973, Cal. Sup. Ct. February 18, 2016) that homeowners have standing to challenge a note assignment in an action for wrongful foreclosure on the grounds that the assignment is void. Obviously if the court had ruled differently, the banks would have had absolute carte blanche to forge mortgage assignments with wild abandon. In fact, without a system of endorsements and assignments it would be almost impossible to determine what party has a legitimate interest in a property and chaos would have ensued (sound familiar?).

 
The Yvanova ruling puts to rest the prior assumption by most California courts that a homeowner lacks standing to challenge a void assignment. This decision has the potential to open the litigation floodgates by borrowers who were improperly foreclosed on due to fraudulent or improper assignments. In fact, you can bet that homeowners who lost their homes due to the court’s resistance to follow established law will be filing suit.

 
In Yvanova, she complained that the bank had resorted to the use of fraudulent documents in order to foreclose. First she identified that a bankrupt entity called New Century assigned a deed of trust years after the company ceased to exist. The mortgage assignments demonstrated that even though New Century was dissolved in 2008, New Century allegedly assigned Yvanova’s deed of trust to Deutsche bank in 2011. It was also discovered that Yvanova’s note could not have been delivered to the Morgan Stanley trust pool because the trust had a cutoff date of January 2007. Deutsche Bank, the servicer, claims to have transferred the deed of trust to that pool in December 2011. Thus, 3 years and 11 months after the trust had closed.

 
By law, and to ensure tax-free pass-through status by the REMIC (Real Estate Mortgage Investment Conduit) notes placed in trusts must be placed into the pool by a certain date. The Morgan Stanley trust had a cutoff date of January 2007 but Deutsche Bank claims the note they received by a zombie assignment was placed in the pool in 2011. Thus, a nonexistent company called New Century transferred a note to a closed trust.

 
Up until Yvanova was settled, the California courts rejected hundreds of similar claims over the years stating that borrowers were not a party to or holder of the debt (see Jenkins f. JP Morgan Chase). The California courts essentially ruled that homeowners may now challenge wrongful foreclosures on the grounds that the assignment of the note was invalid or the chain of assignment was faulty. In securitized trusts, it is fairly common for the endorsements and assignments to be either inaccurate or downright fraudulent (photoshopped, robosigned, etc.). The big securitizing banks like Ocwen, Deutsche, Morgan Stanley and Wells Fargo better prepare for a tsunami of wrongful foreclosure suits in California.

 
The California Supreme Court, by ruling in favor of Yvanova, effectively confirmed the 2013 California Appellate ruling Glaski v. Bank of America, which held that a homeowner facing a non-judicial foreclosure has standing to challenge violations of the pooling and servicing agreement. One of the most insightful quotes in Yvanova states, “The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.”

 

The California Supreme Court got it right when they elaborated that, “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity’s hands. No more is required for standing to sue.” Could it be that the California courts are tired of the 9 years of fraudulent banking games that have clogged the court system with no end in sight?

 
It wasn’t the homeowner who got sloppy, greedy and decided to start forging and photoshopping legal documents. It was the banks that engineered this complete fiasco from the top to bottom. Maybe now the banks will clean up their act, or they will be forced to find a more efficient and convincing way to forge and falsify endorsements and assignments. To date, the left hand doesn’t know what the right hand is doing- and the banks only hope that the homeowner doesn’t discover their deception.

 
I will reiterate again, if a bank claims to own a debt then why not simply show the documentation and prove it? This entire mess could be cleaned up very quickly if the banks would simply show the court evidence of ownership- but the courts know the banks don’t have it. By now we know that this entire debacle was engineered under the premise of plausible deniability and the screws are coming loose.
It is evident that the courts have had enough. The Supreme Court in Yvanova stated that:

 

“… California borrowers whose loans are secured by a deed of trust with a power of sale may suffer foreclosure without judicial process and thus ―would be deprived of a means to assert [their] legal protections if not permitted to challenge the foreclosing entity‘s authority through an action for wrongful foreclosure. (Culhane, supra, 708 F.3d at p. 290.)

A borrower therefore ―has standing to challenge the assignment of a mortgage on her home to the extent that such a challenge is necessary to contest a foreclosing entity‘s status qua mortgagee‖ (id. at p. 291)— that is, as the current holder of the beneficial interest under the deed of trust.”
The decision goes on to state that:

 

“In seeking a finding that an assignment agreement was void, therefore, a plaintiff in Yvanova‘s position is not asserting the interests of parties to the assignment; she is asserting her own interest in limiting foreclosure on her property to those with legal authority to order a foreclosure sale. This, then, is not a situation in which standing to sue is lacking because its ―sole object . . . is to settle rights of third persons who are not parties. (Golden Gate Bridge etc. Dist. v. Felt (1931) 214 Cal. 308, 316.)”

Apparently the California Supreme Court just grew a pair and the remaining 49 states might want to listen up. With all of the fraud settlements that have occurred over the past seven years, it is evident that what is occurring isn’t simply sloppy paperwork or unintentional oversight but blatant fraud, theft and criminal conspiracy if you want to be honest. It is a sad day in America when a homeowner must go all the way to the Supreme Court in order to obtain a fair and just ruling. If the courts had ruled in favor of the banks (and I am sure the judges in Yvanova knew what was on the line), there is no doubt in my mind that banks would have had a foreclosure feeding frenzy.

The court states the obvious, that there is an investor or entity who may suffer an unauthorized loss of its interest in the note if the foreclosure proceeds, “when an invalid transfer of a note and deed of trust leads to foreclosure by an unauthorized party, the ―victim‖ is not the borrower, whose obligations under the note are unaffected by the transfer, but ―an individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note.”

And finally, the court gets to the meat of the matter- the issue of standing. “As it relates to standing, we disagree with defendants’ analysis of prejudice from an illegal foreclosure. A foreclosed-upon borrower clearly meets the general standard for standing to sue by showing an invasion of his or her legally protected interests (Angelucci v. Century Supper Club (2007) 41 Cal.4th 160, 175)—the borrower has lost ownership to the home in an allegedly illegal trustee‘s sale. (See Culhane, supra, 708 F.3d at p. 289 [foreclosed-upon borrower has sufficient personal stake in action against foreclosing entity to meet federal standing requirement].)  Moreover, the bank or other entity that ordered the foreclosure would not have done so absent the allegedly void assignment. Thus- [t]he identified harm—the foreclosure—can be traced directly to [the foreclosing entity‘s] exercise of the authority purportedly delegated by the assignment.”

In conclusion, the court clarifies who is allowed to enforce the note without showing overt favoritism to the bank. Please note the eloquence of the last line in this paragraph in the Yvanova decision:

“Nor is it correct that the borrower has no cognizable interest in the identity of the party enforcing his or her debt. Though the borrower is not entitled to object to an assignment of the promissory note, he or she is obligated to pay the debt, or suffer loss of the security, only to a person or entity that has actually been assigned the debt. (See Cockerell v. Title Ins. & Trust Co., supra, 42 Cal.2d at p. 292 [party claiming under an assignment must prove fact of assignment].) The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.

Again, “The borrower owes money NOT TO THE WORLD at large but to a particular person or institution, and ONLY the person or institution entitled to payment may enforce the debt by foreclosing on the security.” The court isn’t magically creating case law- this is exactly what the promissory note entitles the bearer to do- collect on a debt. The note does not say, “If you have a forged document you randomly printed a copy off the internet or photoshopped- you have standing.”

Only the individual or entity with actual STANDING can foreclose on a home. The fact that the homeowner defaulted on an alleged contract (that probably didn’t happen the way the contract reflects the transaction) doesn’t mean any party claiming to be a note holder can foreclose on the home. Like Jerry McGuire said, “SHOW ME THE MONEY.” Until the mortgagee shows up with actual evidence of ownership- no servicer, “lender” or unknown party should be able to randomly foreclose on a home simply by saying they own the note.

Again, this is the beauty of rescission. By precluding the servicer from walking into court with a forged note, mortgage and alleged contract- and forcing this party to demonstrate contractual standing- many fraudulent foreclosures would be prevented. It is tragic that so many people have lost their homes because the courts permitted a pretend lender with no standing to waltz in and take a home simply by showing fraudulent documents and making false claims.

Finally, the Yvanova ruling leaves us with the crowning glory of this decision, “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity‘s hands. No more is required for standing to sue.” Thank you California Supreme Court justices for ruling according to law instead of the banking lobby.

Paatalo’s question Shatters Chase-WAMU Chain of “Title”

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
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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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Bill Paatalo, whose case opened the door for homeowners on the issue of rescission and other matters discussed on this blog, asks the central question: His telephone number is 406-328-4075. If the WAMU process involved destruction of documents, no endorsement and no assignment, then how can Chase retroactively correct this fatal deficiency in the absence of producing proof of the money chain? Courts have been ignoring this question but the tide is definitely turning.

But his question has a much wider scope. The same question applies to the mergers and FDIC deals across the country that occurred in the aftermath of the mortgage meltdown.

see http://bpinvestigativeagency.com/if-wamu-admits-to-destroying-the-chain-of-title-how-can-chase-retroactively-correct/

Read his article and his support and you will see that the fatal defects exists. Courts have been ignoring this because of their improper presumption that the transaction really occurred when the loan was originated. But all evidence points to the contrary and no evidence points to any other conclusion, to wit: nearly all the loans were table funded (and therefore predatory per se under REG Z). and that means that the “originator” was not the lender, creditor or source of funds for the origination or acquisition of the alleged loan.

The argument in opposition is “Where do you think the money came from?” THAT is not argument. It is obfuscation. The fact is that the ONLY parties with the real answer to that question refuse to reveal the truth. It is hardly a reason to shift the burden of proof or the burden of persuasion to the one party with the least access to the truth.

At some point the courts must stop accepting self-serving statements from counsel as the basis upon which they issue a ruling.

Colorado County Court Judge Gets It

WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation.
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
================================

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

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see Ruling on Motion RE Hearing December 4, 2015

Hat Tip Eric Mains

I have already commented on this case but there are issues that are becoming more clear as to jurisdiction and so a review of this case is warranted, where the Judge correctly declined to rule until a court of competent jurisdiction ruled on the issue of ownership. In so doing the court refused to grant the eviction order even though the sale had taken place and a deed was issued.

The Judge realized that as a county court judge he lacked jurisdiction to even hear the issue of whether the foreclosure sale was void. Hence he deferred any action on granting eviction until the issues of ownership were resolved. Why? Because eviction can only be granted to the owner of a the property. In this case there was a rescission in the mix. Hence any action after the rescission was mailed was void if it involved enforcing the alleged loan contract, note or mortgage.

As far as I know, there is no law or judicial doctrine that says that if the statutory or common law prohibits you from doing something, and then you do it anyway, that suddenly it becomes lawful because you did it anyway. Breaking the law would thus be changing the law.

The sub-point here that has reared its head and which virtually nobody is paying any attention is in the bankruptcy courts. People think of BKR judges as Federal Judges. Not so fast. They once were called magistrates and still rule subject to an appeal to the Federal District Judge.

It is doubtful, to say the least, that any bankruptcy action, whether 7, 11 or 13, can be continued where the home is a significant part of the estate if the there is a question of ownership, authority or balance raised by the Petitioner. Trustees, Judges and lawyers on all sides are missing the point here. The current trend of ignoring the defenses of the borrower are probably going to lead to a line of decisions that over-rules that practice. But more than anything, the question is whether the BKR judge has any jurisdiction to do anything other than follow the procedures in TILA Rescission as confirmed by SCOTUS.

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This case raises another huge potential problem for the banks on the TILA front, and on the possession front, in a nutshell: They ignored rescission, went ahead with foreclosure sale anyway. The State court ignores the rescission or the borrower does not raise TILA rescission in State Court, whatever. The property goes to sale, BUT, guess who credit bids? Hint, like usual , it ain’t the party who said they held the loan, oopsy! Homeowner won’t move out of the house, “Creditor” files for an eviction.

Think of situations like this where a Homeowner responds to eviction notice in court, “Your honor, First, I issued a TILA rescission before sale and they failed to respond, Second, they are not the proper owners, just look at the credit bid and see for yourself.”

Court says, “You are correct, we don’t have jurisdiction to hear such a claim”, OR they respond “OK we do have jurisdiction, but you can appeal this decision to a higher court”, either way, this is going to be a long haul for the claimed Plaintiff/owner, because getting the foreclosure in their favor does not equal possession, it may take them years and they may LOSE.

So trying to pretend like the rescission does not exist means you may not get possession. You may in fact be liable for quite a bit of damages, or lose even after winning a foreclosure action because a ruling in favor of TILA rescission in a federal or district court action may mean the foreclosure ruling can be overturned, potentially by quiet title, a rule 60 motion, or otherwise.

This opens a whole other dimension for homeowners, and against the banks. They have a judgment, but they can’t get the house, and are in limbo for a long time with possibly being overturned at a later date. Lesson here for them: Don’t mess with TILA, and don’t try to sneak in a credit bid post ruling that shows you were lying to the judge about ownership of the loan.

Federal and State Judges Think they Can Overrule the US Supreme Court

Jeff Barnes has put into words what I have been thinking about for several weeks. Barnes is a lawyer who has concentrated on foreclosure defense and has won many cases across the country. He is a good lawyer, which means that he understands how to get traction. So when he complains about Judges, people ought to sit up and take notice.

I think he has hit the nail on the head:

DISTURBING NEWS: CERTAIN JUDGES CLAIM THAT SUPREME COURT DECISIONS ARE NOT BINDING ON THEM
Posted on October 22, 2015

October 22, 2015

In recent months, we have been advised by homeowners in different states that certain Judges in those states have taken the position that decisions by either the Supreme Court of that state or decisions of the United States Supreme Court are not binding on them. Taking such a position violates the Judge’s duties as an officer of the Court, erodes confidence in the judiciary, and renders the public more suspicious of the court system than it already is.

A Judge is duty-bound to follow the “law of the land” whether they agree with it or not. A Judge cannot impose his or her own personal views as to whether the state or US Supreme Court made the correct decision on an issue: when a state Supreme Court or the US Supreme Court decides a specific legal issue, the law is established and Judges must follow it. State supreme courts (other than as so denominated in New York, as the “Supreme Court” is a lower level court in NY) and the US Supreme Court are the highest appellate courts, and their decisions establish “the law of the land”: a state Supreme Court decision establishes the law for that State, while the US Supreme Court establishes the law for the country.

In our experience, the overwhelming majority of Judges are fair, honest, considerate of the position of both sides, and take the law into account when rendering their decisions. The examples below are isolated, but the fact that two such examples have been recently brought to our attention is disturbing.

One of the cases which we were advised of concerned the use of Mr. Barnes’ successful appeal of the MERS issues in the Supreme Court of Montana, which by its decision established that MERS was not the “beneficiary” of a Deed of Trust despite claiming to be so. Although this decision was issued two years ago, the homeowner advised that when that decision was presented to a local Montana county Judge, the Judge took the position that he was not bound by the Supreme Court of Montana’s decision.

Another homeowner advised us that in a prior foreclosure-related hearing before a state court Judge that the Judge told the homeowner that he was not bound by decisions of the United States Supreme Court.

This contempt and disrespect for state Supreme Courts and the US Supreme Court is beyond disconcerting.  There is no reason why homeowners facing foreclosure should be treated adversely when a decision of a state or the US Supreme Court is in favor of them and presented to the Judge. “And Justice for All” means just that: it does not mean “except no justice for homeowners in foreclosure.”

Jeff Barnes, Esq.

see http://foreclosuredefensenationwide.com/?p=612

We see it in many cases involving rescission. It is isn’t that the Judge doesn’t understand. As pointed out by Justice Scalia in the Jesinoski decision the wording of the Federal statute on TILA Rescission could not be more clear and could not be less susceptible to judicial construction. In that unanimous decision of the US Supreme Court in January, 2015, the Court said that like it or not, notice of rescission is effective by operation of law when mailed and nothing else is required to make it effective. The court specifically said that common law rescission is different than the statutory rescission in the Truth in Lending Act.

In fact, the court was perplexed as to how or why any judge would have found otherwise. Thousands of Judges in hundreds of thousands of cases had refused to apply the plain wording of the TILA statute 15 USC 1635. Then came Jesinoski in which the Supreme court said there is no distinction between disputed and undisputed rescissions — they are both effective upon mailing by operation of law. That became the law of the land.

And yet, trial judges and even appellate court are again leaning toward NOT upholding the law and NOT forcing the banks to comply with statute. Many more are “reserving ruling” denying the homeowner remedies that are readily available through TILA Rescission. These courts don’t like TILA rescission. They don’t want to punish the banks for bad behavior. But that is what Congress wanted when they passed TILA 50 years ago.

As many Judges have said in their own written findings and opinions — if you don’t like the law then change it; don’t come to a court of law and expect a judge to change the law. Whether this will lead to some sort of discipline for Judges or simply make them vulnerable to being removed from the bench is unknown. What I do know is that when ordinary people come to realize that the foreclosure crisis could end now, thus stimulating our limping economy, they will likely vote accordingly.

Any Judge who refuses to follow the law as it is written and passed by a legislative body and signed into law by the executive branch (the {President or the Governor) has no right to be on the bench and should resign if his “moral compass” makes following the law so onerous that he or she cannot uphold the laws. In the absence of resignation, then momentum will likely rise and push the agenda of those people who want such judges removed involuntarily. Those Judges are acting against the most basic thrust of our society — that we are a nation of laws and not of men. We have a very well defined process of passing laws and that does not include any one person (on or off the bench) deciding on their own the way the law should read.

Clerks Illegally Bowing to Bank Pressure: Recording the Notice of Interest in Real Property with the Notice of Rescission attached.

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

This is for general information only and contains my general opinions on the subject NOBODY should use this article as a substitute from advance from an attorney licensed in the jurisdiction in which the subject property is located.

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The Banks are at it again — using their political power to influence officers of State and County government into refusing to perform ministerial duties required by State statutes.
The Clerks are rejecting any filing of the notice of rescission but some are getting through. It is a good idea to send it in by mail rather than show up in person. It should be a Notice of Interest in Real Property. The letter should appear to be from either a lawyer or title agent. If it looks like a homeowner they will inspect it. If it looks like business as usual then they will ordinarily process it without any scrutiny.

A number of people are gearing up to sue the Clerk for a Writ of Mandamus in order to force the Clerk to accept the recording of the Notice of Interest in Real Property with the Notice of Rescission attached. Before suing, the matter should, in my opinion, be escalated briefly, at least, to the County attorney and give him/her a chance to correct the situation. Any document that is properly filled out with formalities that are required by statute MUST be recorded by the Clerk. The Clerk does not have discretion as to what documents they record and no discretion as to what documents that can’t record.

There is also the possibility of escalating to the Florida Attorney General and the US Attorney General

In the event that the attorneys general or County attorneys ignore or delay it, then the Petition for Writ of Mandamus is probably a viable option. Forms for Writ of Mandamus are online but nobody should do this unless they have an attorney licensed in the correct jurisdiction. The complaint should (my opinion) [comments invited]

  1.  Establish jurisdiction in the State or Federal Court (I would say Federal at first glance), to wit: that TILA Rescission is a Federal Law and that the Clerk is refusing to allow implementation of the rights of the borrower under Federal Law.
  2. The complaint should NOT ask the Court to enter an order that says that the rescission was effective — that is not the proper subject for an issue between the property owner and the clerk.
  3. Establish jurisdiction and description of the parties — the Clerk and the party seeking to record, their residence etc.
  4. The State Law requiring the Clerk to record documents should be quoted verbatim
  5. The allegation should be made that any party with an interest in the real property has the right to record such interest and that the Clerk has not been delegated or authorized to exercise discretion as to whether to accept a properly drafted and executed Notice of Interest in Real Property.
  6. The allegation should be made that the Petitioner is a person, sui juris, with an interest in the real property, to wit: the Petitioner owns the property described on Exhibit “A” legal description and street address).
  7. The allegation should be made that the Petitioner rescinded the mortgage (and note) at page ____ of OR Book _____, as per the notice of rescission attached as Exhibit “B”.
  8. The allegation should be made that the rescission is effective by operation of law, and does not require any judicial determination of whether the rescission was effective or not. 15 USC § 1635 et seq. [Maybe cite Jesinoski]
  9. The allegation should be made that the effect of the rescission is to void the mortgage (and note), by operation of law.
  10. The allegation should be made that under the TILA Rescission statutes, the creditor is required to file a release of the encumbrance, but has failed or refused to do so and has not attempted to vacate the rescission within the time window provided by law (20 days from receipt of the rescission).
  11. The allegation should be made that the said mortgage continues to create the illusion of an encumbrance in the chain of title, thus affecting (preventing) the ability of the Petitioner to sell or refinance the property.
  12. The allegation should be made that in the absence of recording the Notice of Interest in Real Property, with the Notice of rescission attached, the mortgage would remain on record with no document releasing the encumbrance as required by Federal law.
  13. The allegation should be made that the Petitioner properly executed, witnessed and notarized a Notice of Interest in Real Property dated the __ day of ___, 201_ and presented same on the ___ day of ____, 201_ to the Respondent for recording by the Respondent. (see attached Exhibit “C”)
  14. The allegation should be made that the Respondent unlawfully refused to accept the aforestated Notice of Interest in Real Property for recording without any right, justification or excuse.
  15. The allegation should be made that Petitioner was neither granted nor delegated any authority to exercise discretion in the recording of a properly executed, witnessed and notarized Interest in real property.
  16. The demand clause should be something like “Wherefore, Petitioner prays this Honorable Court will enter an order commanding the Clerk of _______ County to accept the Notice of Interest in Real Property with its exhibits and, upon payment of the required fees, record same in the Public Records of ____ County.”
  17. Make sure it is served correctly. Expect the banks to mount some challenge to the suit. But there is nothing that they can say that is legally controlling. All they can do is not like it. If they wanted to seek a court order vacating the rescission they should have done so within the 20 days.

 

But more importantly it is none of their business — if the Clerk is mandated to record ANY document that fulfills statutory requirements, then the document gets recorded — just like the lis pendens in a foreclosure action — the issue of whether the lis pendens or the lawsuit were wrongfully filed is up to the parties and the courts to fight it out — it is NEVER up to the Clerk. Any argument to the contrary would require an administrative hearing apparatus that does not exist.

Rescission and Moving to Strike Pleadings of “Holder”

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

This is for general information only. Get a lawyer.

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THIS IS REALLY DIRECTED AT LAWYERS WHO ARE DEALING WITH RESCISSION. NO LAYMAN SHOULD ACT ON THIS WITHOUT CONSULTING WITH A LICENSED ATTORNEY IN THEIR JURISDICTION.

Among the zillions of email requests I have been receiving are emails from lawyers who are trying to get their heads around rescission. It seems to me that their problem is one of procedure rather than substance. So here is the answer I sent to one such lawyer.

I keep wondering about something here with respect to rescission. To be consistent with your position that the rescission was effective upon mailing and that the note and DOT are void, it would seem to me that the proper motion would be a motion to strike those portions of their brief dealing with the effectiveness of the rescission. The Supreme Court has already decided that.

But further — the record is devoid of any evidence that the parties attacking you are or ever were actual creditors. It seems to me that these parties lack standing to attack the rescission because their standing was only as good as them holding the note and mortgage which are now void. I think they are using a magician’s act — getting the court to assume they are lenders or creditors when in fact nothing in the record supports that. They insisted in the trial court that none of your foreclosure defenses were good because they were “holders”. But now they are “holders” of void instruments.

If anyone is going to be contesting the rescission they would need to do the following:

  1. They must be an injured party with standing — i.e., loss of finance charges on the loan along with fees etc that they loaned or paid for. Such a party cannot rely on void instruments to establish standing.
  2. They must file an action within 20 days of receipt of the rescission.
  3. The action would need to allege that the borrower rescinded the loan improperly.
  4. The prayer for relief would be to enter an order vacating the rescission because of whatever reason they think it was wrong.

Some courts are side-stepping this issue and allowing the foreclosure to proceed without ever granting relief that was sought by the “holder” who is being presumed as creditor. But they do so without ever entering an order vacating the rescission which means that the rescission is still standing and the note and mortgage are still void. It’s another pretender scenario. The banks and courts are pretending that the rescission was not effective even though it clearly is effective by operation of law on the day of mailing because the highest court in the land has accepted that with finality and unanimously.

What your opposition is doing here is creatively attempting to avoid basic pleading requirements and using motion practice and the appeal as a vehicle for sidestepping the basic requirements of getting relief in court. Hence the motions in the trial court and the brief in the appellate court should be struck with prejudice as raising issues that are untimely and on issues in which the jurisdiction of the trial court and the appellate court has not been invoked.

The Motion to Strike is based on jurisdiction which can be raised at any time. What you could be saying is that their brief should be struck because it is a disguised effort to obtain relief without ever having filed a lawsuit alleging a short plain statement upon which relief could be granted.

By filing the Motion to Strike it redirects the appellate court to the focus of your brief.

So in states where the homeowner sues somebody to stop them from attempting to enforce the note and mortgage, there is a tricky question of how to express the objection to standing and jurisdiction. To another lawyer I wrote:

This is legal procedure — not substantive arguments about why the banks are horrible. You need to have California cases on standing and jurisdiction. This is tricky because you are right, you did sue them so how can the court not have jurisdiction to hear arguments? The answer is that if I sue you for throwing a ball through my window, you can’t “answer” or file a “motion to dismiss” on the basis that I ran over your bicycle. You must file a counterclaim. They didn’t. So there is no jurisdiction to hear what is in essence a “Motion” instead of affirmative pleading of facts, standing and prayer for relief. I see no way that I am not right on this in view of the Supreme Court decision. Any other interpretation would mean that the rescission was NOT effective until a judge rules on it — directly opposite to the law of the land.

  1. You sued them for a TRO to stop them from proceeding with foreclosure.
  2. Your basis for doing includes the rescission.
  3. You did not sue them to make the rescission effective — hence you did not invoke the jurisdiction of the court on that point. In fact your point is that they are NOT the right parties to do anything and they have no standing and had no standing in the trial court except as to the issue of why they were acting like creditors when they were not.
  4. The fact that you sued them for one thing doesn’t mean they can “Defend” a case that was never filed and never needs to be filed — a lawsuit to make the rescission effective.
  5. Their defensive motions do not ask for the rescission to be vacated. Hence the court’s jurisdiction has NOT been invoked on that issue — neither side is pleading for relief that the rescission is either effective (you) or vacated (them).
  6. THAT is why the trial court did not and could not enter an order vacating the rescission. And THAT means that the rescission is still effective and time has run out on the ability of anyone to file an action to vacate the rescission.
  7. Thus THEY are attempting to do a little side step — since they obviously don’t have the ability to plead and prove they are the creditors or that they are representative of creditor X — they instead are trying the “everyone knows that…” defense so they are not required to plead or prove facts that would show the date of consummation, adequacy of disclosures, etc.
  8. The only way the trial court or any court could have entered an order vacating the rescission would be by pleading facts that include the rescission is complete but wrongful.
  9. The only way ANYONE could bring that claim for relief (Vacating the rescission) is if they had standing — according to THEIR pleading and their proof. They didn’t do that. They are seeking to walk around the TILA rescission procedures despite the clear language of the statute and a unanimous Supreme Court decision.
  10. You sued them because they were claiming to be holders of instruments entitling them to foreclose. Now that point is moot because the rescission is effective upon mailing and the instruments they claim to hold are void anyway.
  11. Thus it is improper for the banks, servicers, trustees etc. to file anything in court “contesting” the effectiveness of the rescission or assuming that the rescission was wrongful without filing a complaint alleging facts that establish standing, injury and the wrongful nature of the rescission. Their argument on appeal is the same as the court below — that the rescission was clearly wrongful or that it was somehow not effective because of no tender, no lawsuit etc.
  12. Hence their entire position is procedurally incorrect and should be struck. If they want the relief of vacating the rescission they must bring a lawsuit to do that — just as the statute says. Since they blew the time, not even the creditor can do that anymore and couldn’t anyway because they were at no time the actual creditors or “injured parties” by the allegedly wrongful rescission. Neither the trial court nor the appellate court has had their jurisdiction invoked by either the Plaintiff or the Defendant as to the whether the rescission was effective or should be vacated.
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