How “servicer advances” advance the false premise of securitization of loans.

Posted on August 22, 2022 by Neil Garfield

Since the times of ancient Greece and even before that, it has been a commonly used statement that before discussion of an issue each party should precisely define their terms. The obvious conclusion has been that without agreed definitions, it is highly probable that each side is talking about something different and making no point in the debate. Every generation since then has agreed with that premise.

This is exactly what is happening in the world of finance. Wall Street has its own definitions that are never disclosed to the marketplace, consumers, investors, the courts or government regulators.

Each of those entities or people have their own definitions  based upon partial information and mostly blind faith in certain facts that appear to be axiomatically true. even the Federal reserve under the venerated Alan Greenspan made that error.

Wall Street capitalizes on that assymetric information to create a completely illegal place for itself in the economy — that of disguised principal while everyone else thinks they are merely acting in their assigned and proper role as broker.

What I find fascinating is the meaning of securitization of servicing advances. Remember that securitization means, by definition and by law, that an asset or group of assets has been sold for value to multiple investors in exchange for pro rata ownership of those assets. That is the essence of all securitization, including IPOs and existing common stock traded on national or international security exchange services or platforms.

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Analyzing the data published by the firms promoting “securitization,” we see that no “loan” or debt has ever been purchased and sold by a grantor who owned the underlying obligation or a grantee who paid any value. “Securitization” exists — but not for the paper or the money trail (payments and collections). The securities issued are based upon a discretionary unsecured promise to make indefinite payments to buyers of certificates issued by the promisor (securities brokerage firm).
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The terms of payments from securities brokerage firms to investors who purchased certificates have no direct relationship to the terms of payments scheduled from homeowners, who are unaware that the sale of the securities resulting from their signatures greatly exceeds the amount of their transaction, leaving a zero balance due and quite possibly opening the door for a claim for greater compensation as the essential party making the securitization scheme possible. This is discussed at length on my blog.
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The securitization scheme has many subplots. One of them is “servicer advances.” A real servicer advance is one in which the company designated as the servicer receives, processes, accounts, and distributes money to the investors.
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To my knowledge and my proprietary database, there is not one existing scenario that conforms to that description. In plain terms, servicers do not make advances mainly because they do not pay investors — ever. And as I have previously discussed on this blog, they don’t receive payments either.
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So these falsely labeled “servicers” can’t and don’t create data entries reflecting the receipt of payments — but law firms seeking foreclosure argue or imply that they do receive such payments and that their “records” are business records — i.e., records of business conducted by the designated “servicer” who in fact performs no servicing duties.
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The true meaning of a servicer advance under the current schemes of securitization claims is that some of the money paid to investors is labeled as a servicer advance even though the servicer paid nothing and had no duty to pay the investors anything (just like the homeowner had no duty to pay anything because securitization sales had eliminated the debt).
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That duty (to pay investors) was reserved for the promisor, who we will remember is a securities brokerage company that is not a “servicer.” The label “servicer advance” comes from the reports issued (fabricated) by the company designated as “Master Servicer,” showing that some scheduled homeowner payments have not been paid or received. This disregards the obvious premise that there is no payment due.
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The reader should understand that the sole reason investors would be paid regardless of the number or amount of incoming scheduled payments from homeowners is that the securities firm wants to keep selling unregulated securities (certificates). That is the point of the securitization scheme —- to sell securities.
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While incoming payments from homeowners are a partial basis for payments to investors, the promise requires that new securities from new securitization schemes are being sold, producing revenues and the ability to say that certain “tranches” (that contain nothing) are “over-collateralized.”
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The reader should also understand that the fact that homeowners are making payments is the sole factual support — in law and, in fact — that payments are due. In a twisted way, homeowners, through their ignorance of the actual events in which they are key players, are playing an active role in deceiving each other, the government, investors, and the courts.
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The promissory note and mortgage role in this scenario are strictly symbolic. But they do raise the legal presumption that they are valid documents if they are facially valid according to the state statute. Nonetheless, the real reason anyone believes that payments are due when they’re not due is that homeowners make the scheduled payments to anyone who commands them to do so.
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So the fact that the investors received their promised payment from the securities firm that controls the scheme (but does not own anything) is why they call it an “advance. The idea that it came from a “Servicer” is just a fabrication to imply that a third party was involved. But that is enough to raise the facial presumption from the self-serving documentation and claims prepared by the securities firm or on its behalf.
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The prospectus for each securitization plan reveals the plot to claim “servicer advances” by labeling money not paid by homeowners (whether due or not) as a “servicer advance.” The prospectus shows that a fictional reserve account is created by selling certificates containing the investors’ money.
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The prospectus discloses that investors would receive payments from a reserve pool, which is disclosed as a return of the money the investor paid. But that is exactly the money amount used to claim “servicer advances.” The reserve account may actually exist in some securitization schemes. Still, the “reserve account” is completely controlled by the securities brokerage firm that served as the bookrunner underwriter of the securities (certificates offered for sale).
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And the money proceeds of the sale of derivatives (more unregulated securities traded in the shadow banking marketplace) based on the “servicer advances” go to the investment bank, not the servicer. This is yet another way to reduce any hypothetical (fictional) loan account below a zero balance.
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Since the investors have contractually agreed to that arrangement, the fact that it is not an advance and only a return of capital make no legal difference. So they are converting false declarations of homeowner “defaults” into saleable assets, thus creating the foundation for securitization of false claims of “servicer advances.”
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As you can see from the above explanation, the answers to almost every question dealing with securitization of debt are extremely convoluted. In fact, the vice president of asset management for Deutsche Bank described it as “counterintuitive.” The reason that it is counterintuitive is that it doesn’t make any sense, once you break it down into its component pieces.
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The big stumbling block for everyone is the fact that money appears to have been paid to or paid on behalf of the homeowner. It is therefore assumed as axiomatically true that the money reported to have been paid to the homeowner or paid on behalf of the homeowner must have been alone, if for no other reason than the fact that the homeowner executed a note and mortgage and then started paying.
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 But even that apparent reality is not true in most cases. Nearly all existing transactions that have been labeled as mortgage loan transactions are directly or indirectly the product of supplemental securitization schemes.
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That is to say that most of such transactions consist entirely of reports of payments that never occurred. To the extent that such transactions were presented as paying off a previously classified mortgage loan transaction, such reports were entirely untrue in most cases.
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As long as both transactions resulted from a controlled securitization scheme by a common securities brokerage firm acting as the book runner underwriter of certificates offered for sale to investors, there was no need to transfer any money. Our investigation has revealed the absence of any evidence ingesting that any such money was transferred.  This raises a basic defense for homeowners: lack of consideration and breach of the alleged contract.
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 If the homeowner received, for example, $30,000 from the “refinancing” of the property, but signed a note for $500,000, based upon the false premises of a payoff of the previous “mortgage loan,” the consideration for the note and the mortgage is either completely absent or at least mostly absent.
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 What most people do not understand is that the “refinancing” was just an opportunity to start another controlled securitization scheme with the new set of securities being sold without the retirement of the old securitization scheme or those securities.
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PRACTICE NOTE: The presence of servicer advances described in the prospectus and pooling and servicing agreement provides a foundation for the homeowner’s defense based on standing. Since servicer advances have priority in the liquidation of property, the outcome of foreclosure results in payment to the investment bank rather than the designated creditor. Proper discovery and objections at trial are likely to successfully undermine the most basic element of the claim: legal standing.
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There is a false premise implied in “servicer advances” that leads to false conclusions. The false premise is that the money is owed to the “Master Servicer,” and the debt is that of the investors on whose behalf the advances were presumably made. The fact that there were no such advances remains concealed, and the fact that the investors have absolutely no liability to the recipient of the “servicer advances” is also concealed. But this false premise that is always implied if the subject comes up, is usually sufficient to convince a judge that servicer advances are irrelevant. Upon proper scrutiny and analysis, the subject of servicer advances are highly relevant and even dispositive of the entire claim.

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

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

Posted on October 8, 2018 by Neil Garfield

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

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

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

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

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

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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 Legal Aid Federal Practice Manual on STANDING

Published by the Sargent Shriver National Center on Poverty Rights

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HOW CAN THE NOTE BE TRANSFERRED WITHOUT THE DEBT?

Here is an analogy that might help this counterintuitive process.

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

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

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

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

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

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

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

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

NY Monroe Case: Default entered against homeowner — CASE DISMISSED on Standing — US Bank Never refiled.

Posted on July 12, 2018 by Neil Garfield

multiple choice robo-pleading

NO PLEADING: HOMEOWNER WON ANYWAY

I have held off on discussing this case until some time passed. As far as I now know US Bank, like several cases I won, has not refiled for foreclosure. There is a good reason for that. US Bank is not the Plaintiff. The Plaintiff is named as a REMIC Trust, for which the attorneys claim that US Bank is the Trustee.

As such the Plaintiff does not own nor have any interest in the loan either as owner or servicer. Hence the named trustee (U.S. Bank) is named but it has nothing to do since the trust is nonexistent and in all events no attempt has ever been made to entrust the subject mortgage into the fiduciary hands of U.S Bank.

And THAT is because the only party with an equitable interest in the debt is a group of investors whose money was used to fund the origination or acquisition of the loan. The investors meanwhile think that their money was placed in trust and then used to purchase, not originate, loans.

Every once in a while a wily judge catches on from the face of the documentation. This judge ruled against US Bank as Trustee for a named REMIC Trust because he didn’t believe US Bank or the Trust was actually related to the subject loan. He gave them a chance to correct their pleading, but apparently out of fear of perjury, the lawyers for the nonexistent trust backed off, apparently permanently.

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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 Memorandum and Order – USBank Trust NA as Trustee for LSF9 MPT v Monroe

Quoting from the complaint field by lawyers for their supposed client, a nonexistent trust with a completely denuded trustee, the court includes their own allegation in its ruling:

2 (“Plaintiff is the owner and holder of the subject Note and Mortgage or has been delegated authority to institute this Mortgage foreclosure action by the owner and holder of the subject Note and Mortgage.”);

What does that even mean? This is a perfect example of multiple choice robo-pleading. Either the Plaintiff is the owner and holder of the subject note or mortgage or they are not. If they own the debt,  they don’t say as much and certainly didn’t offer any proof at their uncontested hearing on damages. It’s pretty hard to lose an uncontested hearing but US Bank has done it multiple times, as reported in this case.

If they have been delegated authority by the owner and holder of the subject note and mortgage, they fail to say who delegated that authority and how the delegation occurred. Since the express purpose of the trust was to own the debt, note and mortgage and make payments to investors based upon the trust’s ownership of the debt, note and mortgage, Demoting the trust to the status of a conduit or agent would be completely adverse to the express wording and authority granted in the trust.

Actually that kind of wording is exactly what enables the players to claim interest in notes and mortgages adverse to the interests of the parties whose money was directly used to fund the origination and acquisition of loans.

 

Here are some revealing quotes from the District Judge:

The Complaint does not contain any details concerning U.S. Bank’s role as trustee or the powers it has over the trust property (including the mortgage here). (e.s.)

The party asserting subject matter jurisdiction carries the burden of proving its existence by a preponderance of the evidence. E.g., Makarova, 201 F.3d at 113; Augienello v. FDIC, 310 F. Supp. 2d 582, 587–88 (S.D.N.Y. 2004). This is true even on a motion for default judgment, since the principle that a default deems the well-pleaded allegations of the complaint to be admitted is inapplicable when a court doubts the existence of subject matter jurisdiction. Transatlantic Marine, 109 F.3d at 108.

2 While some of these issues were discussed elsewhere by U.S. Bank’s counsel, e.g., Dkt. No. 7, they were not included in the affidavit filed in support of default judgment.

“When a default is entered, the defendant is deemed to have admitted all of the well- pleaded factual allegations in the complaint pertaining to liability.” Bravado Int’l Grp. Merch. Servs., Inc. v. Ninna, Inc., 655 F. Supp. 2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). “While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is liquidated or susceptible of mathematical computation.” Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974); accord, e.g., Bravado Int’l, 655 F. Supp. 2d at 190. “[E]ven upon default, a court may not rubber-stamp the non-defaulting party’s damages calculation, but rather must ensure that there is a basis for the damages that are sought.” United States v. Hill, No. 12-CV-1413, 2013 WL 474535, at *1 (N.D.N.Y. Feb. 7, 2013)

In the past year, U.S. Bank’s attorneys—Gross Polowy—have repeatedly failed to secure default judgments in similar foreclosure cases before this Court. E.g., U.S. Bank Tr., N.A. v. Dupre, No. 15-CV-558, 2016 WL 5107123 (N.D.N.Y. Sept. 20, 2016) (Kahn, J.); Nationstar Mortg. LLC v. Moody, No. 16-CV-279, 2016 WL 4203514 (N.D.N.Y. Aug. 9, 2016) (Kahn, J.); Nationstar Mortg. LLC v. Pignataro, No. 15-CV-1041, 2016 WL 3647876 (N.D.N.Y. July 1, 2016) (Kahn, J.); cf. Ditech Fin. LLC v. Sterly, No. 15-CV-1455, 2016 WL 7429439, at *4 (N.D.N.Y. Dec. 23, 2016) (denying a motion for default judgment due to a defective notice of pendency); OneWest Bank, N.A. v. Conklin, No. 14-CV-1249, 2015 WL 3646231, at *4 (N.D.N.Y. June 10, 2015) (same). In each case, Gross Polowy’s motion was denied for one of two reasons: either the complaint failed to sufficiently allege subject matter jurisdiction, e.g., Dupre, 2016 WL 5107123, at *2–5, or the motion for default judgment failed to meet the requirements of the Court’s Local Rules, e.g., Moody, 2016 WL 4203514, at *2. Here, both of these failures are present.

The Complaint also includes no allegations concerning U.S. Bank’s ability to proceed under its own citizenship, despite bringing this case on behalf of the “LSF9 Master Participation Trust.” Compl.

While U.S. Bank is the nominal plaintiff in this case, it is longstanding federal law that “court[s] must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.” Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980). “Where an agent acts on behalf of a principal, the principal, rather than the agent, has been held to be the real and substantial party to the controversy. As a result, it is the citizenship of the principal—not that of the agent—that controls for diversity purposes.” Hilton Hotels Corp. v. Damornay Antiques, Inc., No. 99-CV-4883, 1999 WL 959371, at *2 (S.D.N.Y. Oct. 20, 1999) (citing Airlines Reporting Corp. v. S&N Travel, Inc., 58 F.3d 857, 862 (2d Cir. 1995)). At issue here is the application of this rule in lawsuits brought by a trustee on behalf of a trust. —3 Gross Polowy should be aware of this rule because they were “foreclosure counsel” for the plaintiff-appellee in Melina, 827 F.3d at 216–17, though in fairness it seems they were replaced by Hogan Lovells for both the subject matter jurisdiction issue and the subsequent appeal, id. at 216; OneWest Bank, N.A. v. Melina, No. 14-CV-5290, 2015 WL 5098635 (E.D.N.Y. Aug. 31, 2015), aff’d, 827 F.3d 214.

In Navarro, the Court held that trustees can be the real parties in controversy—regardless of the type of trust—provided that they “are active trustees whose control over the assets held in their names is real and substantial.” 446 U.S. at 465; see also Carden v. Arkoma Assocs., 494 U.S. 185, 191 (1990) (noting that, if the trustees are “active trustees whose control over the assets held in their names is real and substantial,” they are brought “under the rule, ‘more than 150 years’ old, which permits such trustees ‘to sue in their own right, without regard to the citizenship of the trust beneficiaries’” (quoting Navarro, 446 U.S. at 465–66)). The continued validity of this rule was endorsed by the Court in Americold. 136 S. Ct. at 1016.

If U.S. Bank wishes to proceed in federal court, it must, within thirty (30) days, move to amend its Complaint to address the deficiencies identified in this order. This motion to amend must be prepared in accordance with Local Rule 7.1(a)(4), which establishes the form for such a motion and lists the required papers. With that motion, to resolve the Court’s doubts concerning subject matter jurisdiction, U.S. Bank must also provide its articles of association (along with any other documentation required to establish the location of its main office), the trust instrument for the LSF9 Master Participation Trust,4 and any other documentation required to show that U.S. Bank’s control over the trust assets is real and substantial. Failure to comply with this Memorandum-Decision and Order when moving to amend the Complaint may result in the denial of the motion or sanctions. L.R. 1.1(d).

 

4 In the Dupre case discussed above, U.S. Bank also was instructed to file the trust instrument for the LSF8 Master Participation Trust (presumably another securitization vehicle for mortgage debt) in order to establish subject matter jurisdiction. 2016 WL 5107123, at *2. When it did file the trust instrument, “the text . . . was almost entirely redacted,” and the only visible portion seemed to oppose the notion that U.S. Bank was an active trustee with real and substantial control over the trust assets. Id. at *2, *4. This failure should not be repeated here, and filing documents under seal or with redactions requires advance permission of the Court. L.R. 83.13; see also Lugosh v. Pyramid Co. of Onondaga, 435 F.3d 110, 119–20 (2d Cir. 2006) (describing the standard for restricting public access to judicial documents).

 

Filed under: burden of pleading, discovery, evidence, Fabrication of documents, foreclosure, foreclosure mill, jurisdiction, legal standing, Mortgage, Motions, Pleading, trustee | Tagged: , , , , , , , , | 7 Comments »

Trustee v Active Trustee US Bank Fails to show or even attempt to show it is an active trustee

Posted on January 9, 2018 by Neil Garfield

CASE DISMISSED,WITH LEAVE TO AMEND. US BANK DECLINED TO AMEND. CASE DISMISSED.

Even where there is a clerk’s default “The burden is on the plaintiff to establish its entitlement to recovery.” Bravado Int’l, 655 F. Supp. 2d at 189.

Here is an example of how lawyers purport to represent US Bank when in fact they are creating the illusion that they represent a trust and in reality they are representing a subservicer who is receiving orders from a master servicer of a nonexistent trust. As Trustee of the nonexistent trust USB had no active role in the nonexistent trust. As the inactive Trustee for a nonexistent Trust, no right, title or interest in the debts of homeowners were within any scope of authority of any servicer, subservicer or master servicer. Each foreclosure is a farce based upon assumptions and presumptions that are exactly opposite to the truth.

Given the opportunity to amend the complaint, lawyers for USB chose not to amend — because they could not plead nor prove the required elements of an active trustee. Because of that USB lacked standing to bring the action except as agent for an active trust or on behalf of the trust beneficiaries. But where the certificates show that the certificate holders do NOT have any interest in a mortgage or note (true in about 70% of all cases), then they too lack of standing. And if the Trust is not an active Trust owning the debt, note or mortgage then it too lacks standing.

Let us draft your motions and do the research necessary to draw the attention of the court to the fraud taking place under their noses. 202-838-6345
Get a consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).
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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Hat tip Bill Paatalo

see Memorandum and Order – USBank Trust NA as Trustee for LSF9 MPT v Monroe

See Judgment – USB Trust for LSF9 v Monroe –

While this case discusses diversity and other issues concerning US Bank “as trustee” the reasoning and ruling clearly expose the truth about pleading irregularities by attorneys who purport to represent US Bank or a REMIC Trust.

A debt is an asset to anyone who owns it. Industry practice requires that for transfer of ownership, there must be an agreement or other document providing warranty of title, confirmation of the existence and ownership of the debt and proof of authority of the person executing the document. Go into any bank and try to borrow money using a note as collateral. The bank will require, at a minimum, that the debt be confirmed (usually by the purported debtor) and that each party in the chain show proof of purchase.

Without consideration, the assignment of mortgage or endorsement of the note is just a piece of paper.

When there is an assertion of ownership of the loan, what the banks and so-called servicers are actually saying is that they own the paper (note and mortgage) not the debt. In the past this was a distinction without a difference. In the era of patently f false claims of securitization, the debt was split off from the paper. The owner of the debt were without knowledge that their money was not under Trust management nor that their money was being used to originate or acquire loans without their knowledge.

The securitization sting is accomplished because the owners of the debt (the investors who sourced the funds) are unaware of the fact that the certificate they are holding is merely a promise to pay from a nonexistent trust that never was utilized to acquire the debts and whose ownership of the paper is strictly temporary in order to foreclose.

The failure to make that distinction between the real debt and the fake paper is the principal reason why so many people lose their homes to interlopers who have no interest in the loan but who profit from the sale of the home because a judgment was entered in favor of them allowing them to conduct a foreclosure sale. 

This case also sets forth universally accepted legal doctrine even where there is a clerk’s default entered against the homeowner. The Judge cannot enter a judgment for an alleged debt without proving the debt — even if the homeowner doesn’t show up.

“When a default is entered, the defendant is deemed to have admitted all of the well- pleaded factual allegations in the complaint pertaining to liability.” Bravado Int’l Grp. Merch. Servs., Inc. v. Ninna, Inc., 655 F. Supp. 2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). “While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is liquidated or susceptible of mathematical computation.” Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974); accord, e.g., Bravado Int’l, 655 F. Supp. 2d at 190. “[E]ven upon default, a court may not rubber-stamp the non-defaulting party’s damages calculation, but rather must ensure that there is a basis for the damages that are sought.” United States v. Hill, No. 12-CV-1413, 2013 WL 474535, at *1 (N.D.N.Y. Feb. 7, 2013)

“The burden is on the plaintiff to establish its entitlement to recovery.” Bravado Int’l, 655 F. Supp. 2d at 189.

 

Filed under: boarding process, burden of persuasion, BURDEN OF PROOF, CORRUPTION, discovery, evidence, foreclosure, MBS TRUSTEE, Servicer, standing, trustee | Tagged: , , , , , , , , , | 9 Comments »

Delaware Supreme Court rules Holder must prove it owns Note: Shrewsbury v. The Bank of NY Mellon

Posted on July 7, 2017 by Neil Garfield

 

The Delaware Supreme Court has ruled you must own note and mortgage in order to foreclose — which is what I have been saying for 12 years.  A lot of good that will do the millions of people who lost their homes to parties that did not have ownership of the note and mortgage.  The days of creating the illusion of standing are approaching their end-  but how about the families who were illegally foreclosed by parties who had no standing to do so?

http://www.delbizcourt.com/recent-news/id=1202792240324/Standing-in-Foreclosure-Actions-Requires-Holding-Both-Mortgage-and-Note?mcode=1202615314751&curindex=1&slreturn=20170606142623

In Shrewsbury v. The Bank of New York Mellon, No. 306, 2016 (Del. Apr. 17, 2017), the Delaware Supreme Court ruled that a mortgage assignee must be entitled to enforce the underlying obligation that the mortgage secures in order to foreclose on the mortgage.

The decision enforces that the mortgage holder in a foreclosure action must also prove that it owns the underlying note. The majority opinion held that best practice for plaintiff’s counsel in a foreclosure action where a mortgage has been assigned would be to include an averment that the note, as well as the mortgage, was assigned to the plaintiff.

The Shrewsburys executed a promissory note in favor of Countrywide Home Loans and a mortgage that secured the note in favor of Mortgage Electronic Registration Systems (MERS) as nominee for the lender.  MERS assigned the mortgage to The Bank of New York.  The Shrewsburys “defaulted” on the note (remember there is no default if the servicer made advances), and the bank filed a mortgage complaint seeking to foreclose. The Shrewsburys responded alleging that the note had not been assigned to the bank, it did not have the right to enforce the underlying debt, and therefore the Bank of New York could not prove it had the right to foreclose.

The bank moved to dismiss on summary judgment, which was predictably granted by the Delaware Superior Court. The Superior Court held that under Delaware law, a mortgagee or the assignee of a mortgagee’s interest had standing to pursue foreclosure, citing 10 Del. C. Section 5061(a). In this case, the assignment of the mortgage was deemed valid because it conveyed all rights and interest of the assignor, was attested to by a credible witness, and was properly notarized. As a valid assignee of the mortgage, the bank was a proper party to enforce the note even though the bank did not produce the note or claim to be the holder of the note. The Shrewsburys appealed the decision to the Supreme Court.

On appeal, the bank argued that under Delaware law, a mortgagee’s right to foreclose derives from the mortgage, not the note. Ownership of the related promissory note is irrelevant to the mortgage holder’s right to foreclose on the mortgage.

In reaching its decision, the court looked to statute 10 Del. C. Section 5061 which provides that upon breach of the condition of a mortgage by nonpayment of the “mortgage money,” the mortgagee or the mortgagee’s assignee may sue out a writ of scire facias requiring the mortgagor to show cause why the mortgaged premises ought not to be seized and taken in execution for payment of the mortgage money.

The court noted that “mortgage money” refers to the note or debt that is secured by the mortgage. The only defenses available in a mortgage foreclosure action were payment of the mortgage money, satisfaction, or a plea to avoidance to avoid the mortgage based on the validity or illegality of the mortgage documents.

The court concluded that a mortgage does not create a debt or obligation, but merely secures one. An underlying debt or obligation is essential to a mortgage’s enforceability. An assignment of the note carries the mortgage with it, while an assignment of the mortgage alone is a nullity.

If the holder of the mortgage is not the one entitled to enforce the underlying debt—the “mortgage money” or note—the mortgage holder suffers no injury by the mortgagor’s nonperformance. Thus, a mortgage holder must be a party entitled to enforce the obligation that the mortgage secures in order to foreclose.  Since the bank had not produced the note or claimed to be the holder of the note or entitled to enforce it, a question of fact existed that should have resulted in the denial of the bank’s motion for summary judgment. Accordingly, the decision of the Superior Court was reversed.

In this particular lawsuit, the homeowners didn’t need need to delve into issues of securitization, it was enough to challenge the assignment of the note (or lack of) and to attack the servicer’s affiant who lacks sophisticated knowledge of the business records.

Filed under: foreclosure | Tagged: , | 9 Comments »

Bank of NY Mellon v. Anderson: Standing must be Established

Posted on July 6, 2017 by Neil Garfield
In the Bank of N.Y. Mellon v Anderson, the New York Supreme Court Appellate court got it right by ruling that submitting an affidavit to support a motion is insufficient to establish standing when the affiant cannot swear they are familiar with the servicer’s record keeping practices and procedures.
The mere attachment of a copy of a note to the verified complaint also failed to demonstrate that the servicer had physical possession of the note when the action was commenced, and was ruled insufficient to establish standing.

If every court in the United States demanded proof of standing before a suit is allowed to proceed, foreclosures would come to a screeching halt.  It is concerning that the Bank of NY Mellon was able to proceed in the first place, and the decision says a lot about the lower courts abuse of erroneous presumptions and lack of concern for jurisdiction.

__________________________________________________________
The Bank of N.Y. Mellon v Anderson 2017 NY Slip Op 05349 Decided on June 30, 2017 Appellate Division, Fourth Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on June 30, 2017 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Fourth Judicial Department
PRESENT: CENTRA, J.P., LINDLEY, DEJOSEPH, NEMOYER, AND TROUTMAN, JJ.
831 CA 17-00205

Appeal from an amended order of the Supreme Court, Monroe County (Ann Marie Taddeo, J.), entered February 22, 2016. The amended order, insofar as appealed from, granted plaintiff’s motion for summary judgment.

It is hereby ORDERED that the amended order insofar as appealed from is unanimously reversed on the law without costs and plaintiff’s motion is denied.

Memorandum: In this residential foreclosure action, defendants-appellants (defendants) appeal from an amended order insofar as it granted plaintiff’s motion for summary judgment and an order of reference. Plaintiff commenced this action by summons and verified complaint to which plaintiff attached, inter alia, a copy of the note endorsed in blank and a copy of the mortgage. In their answer, defendants asserted general denials and affirmative defenses including a defense that plaintiff lacked standing to commence the action. Plaintiff thereafter moved for summary judgment and submitted, inter alia, the affidavit of an authorized signatory of Caliber Home Loans, Inc. (Caliber), plaintiff’s loan servicer.

We conclude that Supreme Court erred in granting plaintiff’s motion because plaintiff failed to establish standing. It is well settled that a plaintiff moving for summary judgment in a mortgage foreclosure action establishes its prima facie case by submitting a copy of the mortgage, the unpaid note and evidence of default (see Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d 683, 684; HSBC Bank USA, N.A. v Spitzer, 131 AD3d 1206, 1206-1207). Where the defendant has asserted lack of standing as an affirmative defense, the plaintiff also must establish standing as an additional requirement of its prima facie case (see Deutsche Bank Natl. Trust Co., 142 AD3d at 684; HSBC Bank USA, N.A. v Baptiste, 128 AD3d 773, 774). Where the note is endorsed in blank, the plaintiff may establish standing by demonstrating that it had physical possession of the original note at the time the action was commenced (see Deutsche Bank Natl. Trust Co., 142 AD3d at 684-685; see generally Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361). The plaintiff may do so through an affidavit of an individual swearing to such possession following a review of admissible business records (see Aurora Loan Servs., 25 NY3d at 359-361; JPMorgan Chase Bank, N.A. v Weinberger, 142 AD3d 643, 644-645; see generally CPLR 4518 [a]).

We agree with defendants that the affidavit submitted by plaintiff in support of its motion was insufficient to establish standing. The Caliber employee who authored the affidavit stated that Caliber maintains plaintiff’s books and records pertaining to the mortgage account; plaintiff [*2]had physical possession of the original note before the action was commenced and remained in physical possession of the original note as of the date of the motion; and he was personally familiar with Caliber’s record-keeping practices. However, plaintiff failed to demonstrate that its records pertaining to defendants’ account were admissible as business records (see CPLR 4518 [a]), inasmuch as the affiant did not swear that he was personally familiar with plaintiff’s record-keeping practices and procedures (see Aurora Loan Servs., LLC v Baritz, 144 AD3d 618, 619-620; Deutsche Bank Natl. Trust Co., 142 AD3d at 685).

Contrary to plaintiff’s contention, the mere attachment of a copy of the note to the verified complaint does not demonstrate that plaintiff had physical possession of the original note when the action was commenced (see generally Deutsche Bank Natl. Trust Co., 142 AD3d at 684-685), and thus is insufficient to establish standing.

Entered: June 30, 2017

Frances E. Cafarell

Clerk of the Court

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

2d Florida DCA Knocks Down CitiMortgage – PennyMac Dance

Posted on February 20, 2017 by Neil Garfield

“In order to establish its entitlement to enforce the lost note, PennyMac could establish standing “through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer.” BAC Funding Consortium, 28 So. 3d at 939. PennyMac’s filings in support of its motion for summary judgment did not present evidence of any of these things. In the absence of such evidence, the order of substitution standing alone was ineffective to establish PennyMac’s entitlement to enforce the lost note. See Geweye v. Ventures Trust 2013-I-H-R, 189 So. 3d 231, 233 (Fla. 2d DCA 2016); Creadon v. U.S. Bank, N.A., 166 So. 3d 952, 953-54 (Fla. 2d DCA 2015); Sandefur v. RVS Capital, LLC, 183 So. 3d 1258, 1260 (Fla. 4th DCA 2016); Lamb, 174 So. 3d at 1040-41.”

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

See http://stopforeclosurefraud.com/2017/02/16/houk-v-pennymac-corp-fl-2dca-pennymac-failed-to-meet-its-burden-of-showing-the-nonexistence-of-a-genuine-issue-of-material-fact-regarding-its-entitlement-to-enforce-the-lost-note/

The Second  District Court of Appeal in Florida has issued an opinion that diligently follows the law and the facts. This decision should serve as the blue print of foreclosure defense in all cases involving the dance between CitiMortgage and PennyMac. It is a shell game and the Court obviously is growing weary of the claims of “immunity” issued by the banks in foreclosure cases.

It all starts with self serving proclamations of owning the note, the mortgage or both. It NEVER starts with an allegation or assertion of ownership of the debt because they don’t own the debt. When the note was made payable to someone other than the owner of the debt, there could be no merger wherein the debt became merged into the note. And the reason for all this is that the mega banks were engaged in the a program of institutionalizing theft from investors.

The aim of the game is to get a court to enter an order which then raises the presumption that everything that preceded the entry of the order was legal — a presumption that is hard to rebut. So the strategic path for borrowers is to show that the program or scheme is not legal before the foreclosure is entered or to attack for damages based upon fraud after the foreclosure judgment or sale is entered.

In this decision lies the foundation for most cases involving foreclosure defense. The reader is encouraged to use the above link to read and then reread the decision. My comment on the highlights follows:

“In order to establish its entitlement to enforce the lost note, PennyMac could establish standing “through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer.” BAC Funding Consortium, 28 So. 3d at 939.

COMMENT: Merely alleging that it was the holder of a note when it was lost is insufficient to assume standing to enter a judgment on behalf of the foreclosing party (in this case PennyMac). In the absence of physical possession of the note standing can be established by (1) EVIDENCE of (2) a VALID assignment or (3) PROOF of PURCHASE OF THE DEBT or (4) evidence of “effective” transfer.

The steamrolling presumptions that buried millions of homeowners are now hitting the wall. The main point here is that an allegation is not enough and most importantly standing to file suit does NOT mean that the party has standing for the entry of judgment in favor of the foreclosing party.

The error that both courts and lawyers for litigants have consistently made for the last 10 years is their assumption that a sufficient allegation that a party has legal standing at the time suit is filed (or notice of sale, notice of default, notice of acceleration) means that the party has proven standing with evidence. It does not. Like any other allegation it is subject to being discredited or rebutted. AND it requires proof, which places the burden of persuasion upon the party making that allegation. It is neither the law of the case nor subject to any twisted notion of res judicata to assume that matter is proven when merely alleged.

The 2d DCA shows it has a firm grasp of this basic fact. The fact that standing was challenged in an unsuccessful motion to dismiss does NOT mean the matter is resolved or has been litigated.

Fundamentally the issue in all these cases is about money. The question of foreclosure should always have been a secondary issue of much less importance. American jurisprudence is filled with recitations of how foreclosure was a severe remedy that requires greater scrutiny by the court. Up until about 15 years ago, Judges would sift through the paperwork and deny foreclosure even if it was uncontested if the paperwork raises some unanswered questions. That tradition follows centuries of tradition and doctrine.

Thus the 2d DCA has placed purchasing of the debt and ownership of the debt in the center of the table. In the absence of a party who owns the actual debt, it is possible for a party to seek enforcement of the note, the mortgage or both — but that can only be true if the foreclosing party has indeed acquired the right to enforce the instrument from an instrument signed by the owner of the debt; simply alleging that one is owner of the note has no effect at trial or summary judgment as to evidence of ownership of the debt. And without evidence of the true owner of the debt being the payee on the note, the grant of authority through Powers of Attorney, Servicing agreements or anything else is evidence of nothing.

The use of the word “effective” (i.e., effective transfer) in this decision also opens the door to the rescission debate that was actually settled by the unanimous decision of the Supreme Court of the United States in Jesinoski v Countrywide. What does it mean that something is effective? Reviewing court decisions and legislative histories it is clear that “effective” means that the event or thing has already happened at the moment of its rendering. Thus the court here is talking about an effective assignment (not just a piece of paper entitled “assignment”), meaning that all the elements of a proper assignment had been met, and NOT just the writing or execution of the instrument. It is not effective if the elements are missing. And the elements are missing if the proponent of the assignment does not prove the elements — not just allege them.

There is a difference between pleading and proof.

In the absence of such evidence, the order of substitution standing alone was ineffective to establish PennyMac’s entitlement to enforce the lost note. See Geweye v. Ventures Trust 2013-I-H-R, 189 So. 3d 231, 233 (Fla. 2d DCA 2016); Creadon v. U.S. Bank, N.A., 166 So. 3d 952, 953-54 (Fla. 2d DCA 2015); Sandefur v. RVS Capital, LLC, 183 So. 3d 1258, 1260 (Fla. 4th DCA 2016); Lamb, 174 So. 3d at 1040-41.”

COMMENT: This addresses the musical chairs tactics that have perplexed the Courts, borrowers and attorneys for nearly 2 decades. The court here is presenting for consideration the notion that substitution of parties does not confer anything on the apparent successor or new foreclosing party. What it DOES accomplish is removing the original party from having any legal standing for judgment to be entered in its favor. The claim of “succession”must be proven by the party making the claim — not by the party defending. What it does NOT accomplish is bootstrapping the allegations of standing from the original plaintiff or foreclosing party to a new party also having standing to pursue the judgment.

In all events therefore, the party alleging and/or asserting standing must prove it before the homeowner is required to rebut or even cross examine it.

 

 

Filed under: foreclosure | Tagged: , , , , , | 4 Comments »

NM and Fla Judges Express Doubt Over Whether Loans Ever Made it Into trust

Posted on July 25, 2016 by Neil Garfield

Judges are thinking the unthinkable — that none of the trusts ever acquired anything and that the foreclosures were and are a sham.

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

—————-

It isn’t “theory. It is facts, or rather the absence of facts.

As shown in the two articles by Jeff Barnes below, we are obviously reaching the tipping point. First, the presentation of a Trust instrument means nothing if there is no proof the trust was active — and in particular actually purchased the subject loan. And Second, Judges will deny all objections to discovery and will rule for the borrower if the Trust did not acquire the loan.

In ruling this way the two Judges — thousands of miles apart — are obviously recognizing that the long standing bank objection to borrowers’ defenses based upon lack of legal standing absolutely do not apply. It is not a matter of whether the borrower has “standing” to bring up the PSA, it is a matter of whether the trust was party to any real transaction with relation to the subject mortgage. The answer is no. And no amount of extra paper, powers of attorney, assignments, or endorsements can change that.

Judges are thinking the unthinkable — that none of the trusts ever acquired anything and that the foreclosures were and are a sham.

It is probably worth re-publishing this portion from a long article by Adam Levitin written shortly after the Ibanez decision was reached in Massachusetts. Note how he points out that the vast majority of PSAs that are offered as evidence are neither executed nor do they have a mortgage loan schedule that is “reviewable.” The real problem — and the reason why the SEC-filed PSA documents do not have any signatures and why there is no mortgage loan schedule is that there was no transaction in which the Trust acquired the loans. Virtually all assignments are backdated and virtually none of the assignments relate back to any ACTUAL transaction in which the Trust was involved. The banks have been winning on fumes generated by legal inapplicable presumptions. —

It seems to me that any trust with Massachusetts loans that doesn’t have a publicly filed, executed PSA with a reviewable loan schedule should be on a downgrade watch. Very few publicly filed PSAs are executed and even fewer have publicly filed loan schedules. That doesn’t mean they don’t exist, but somewhere off-line, but if I ran a rating agency, I’d want trustees to show me that they’ve got those papers on at least a sample of deals. Of course should and would are quite different–the ratings agencies, like the regulators, are refusing to take the securitization fail issue as seriously as they should (and I understand that it is a complex legal issue), but I think they ignore it at their (and our) peril

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Excerpts from Barnes’ articles:

A Florida Circuit Judge has gone on the record requiring Wells Fargo, as the claimed “trustee” of a securitized mortgage loan trust, to show that the mortgage loan which WF is attempting to enforce actually went into the PSA, and if not, the standing requirement has not been met and the case will fall on summary judgment. The homeowner is represented by Jeff Barnes, Esq.

The Judge specifically stated as follows:

“…but what I want plaintiff’s counsel to understand, that what you submitted to me with regards to the pooling and servicing agreement still does not have the actual mortgages that went into that pooling and servicing agreement…So at some point you’re going to have to show that this mortgage and note certainly went into that pooling and servicing agreement, which is what I have requested before. …  So I’m just asking you that before we get too far out, please make sure that’s there, or its going to be taken out on summary judgment. … In other words, if you’re a trustee for that pooling and servicing agreement, and the mortgage and note are not in that pooling and servicing agreement, you don’t have standing.”

This ruling not only directly confirms the proof requirements for standing in a securitization case, but supports the production of discovery on the issue as well.

DISCOVERY IS KEY.

The borrower thus requested 53 categories of documents from BAC, including securitization documents. BAC filed a Motion for Protective Order which claimed that public information on the SEC website was “confidential”; that the securitization-related discovery was “irrelevant”; and that it was essentially entitled to withhold discovery because it “has the original note” and has moved for summary judgment on the “relevant” issues.

The Court disagreed, denying BAC’s Motion in its entirety and commanding full responses to the borrower’s discovery request (including production of all responsive documents) within 30 days. The Court found BAC’s Motion to be “sparse”; not in compliance with New Mexico court rules as to discovery; and against New Mexico’s case law which provides for liberal discovery in foreclosure actions so that all of the issues are fully developed and a fair trial is had.

 

A New Mexico District Judge yesterday denied BAC Home Loan Servicing’s Motion for Protective Order which it filed in an attempt to avoid producing documentary discovery to a homeowner who BAC has sued for foreclosure. The loan was originated by New Mexico Bank and Trust, was sold to Countrywide, and thereafter allegedly “assigned” first to MERS and then by MERS to BAC.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

The Adam Levitin Article on Ibanez and Securitization fail:

Ibanez and Securitization Fail

posted by Adam Levitin

The Ibanez foreclosure decision by the Massachusetts Supreme Judicial Court has gotten a lot of attention since it came down on Friday. The case is, not surprisingly being taken to heart by both bulls and bears. While I don’t think Ibanez is a death blow to the securitization industry, at the very least it should make investors question the party line that’s been coming out of the American Securitization Forum. At the very least it shows that the ASF’s claims in its White Paper and Congressional testimony are wrong on some points, as I’ve argued elsewhere, including on this blog. I would argue that at the very least, Ibanez shows that there is previously undisclosed material risk in all private-label MBS.

The Ibanez case itself is actually very simple. The issue before the court was whether the two securitization trusts could prove a chain of title for the mortgages they were attempting to foreclose on.

There’s broad agreement that absent such a chain of title, they don’t have the right to foreclose–they’d have as much standing as I do relative to the homeowners. The trusts claimed three alternative bases for chain of title:

(1) that the mortgages were transferred via the pooling and servicing agreement (PSA)–basically a contract of sale of the mortgages

(2) that the mortgages were transferred via assignments in blank.

(3) that the mortgages follow the note and transferred via the transfers of the notes.

The Supreme Judicial Court (SJC) held that arguments #2 and #3 simply don’t work in Massachusetts. The reasoning here was heavily derived from Massachusetts being a title theory state, but I think a court in a lien theory state could easily reach the same result. It’s hard to predict if other states will adopt the SJC’s reasoning, but it is a unanimous verdict (with an even sharper concurrence) by one of the most highly regarded state courts in the country. The opinion is quite lucid and persuasive, particularly the point that if the wrong plaintiff is named is the foreclosure notice, the homeowner hasn’t received proper notice of the foreclosure.

Regarding #1, the SJC held that a PSA might suffice as a valid assignment of the mortgages, if the PSA is executed and contains a schedule that sufficiently identifies the mortgage in question, and if there is proof that the assignor in the PSA itself held the mortgage. (This last point is nothing more than the old rule of nemo dat–you can’t give what you don’t have. It shows that there has to be a complete chain of title going back to origination.)

On the facts, both mortgages in Ibanez failed these requirements. In one case, the PSA couldn’t even be located(!) and in the other, there was a non-executed copy and the purported loan schedule (not the actual schedule–see Marie McDonnell’s amicus brief to the SJC) didn’t sufficiently identify the loan. Moreover, there was no proof that the mortgage chain of title even got to the depositor (the assignor), without which the PSA is meaningless:

Even if there were an executed trust agreement with the required schedule, US Bank failed to furnish any evidence that the entity assigning the mortgage – Structured Asset Securities Corporation [the depositor] — ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale.

So Ibanez means that to foreclosure in Massachusetts, a securitization trust needs to prove:

(1) a complete and unbroken chain of title from origination to securitization trust
(2) an executed PSA
(3) a PSA loan schedule that unambiguously indicates that association of the defaulted mortgage loan with the PSA. Just having the ZIP code or city for the loan won’t suffice. (Lawyers: remember Raffles v. Wichelhaus, the Two Ships Peerless? This is also a Statute of Frauds issue–the banks lost on 1L contract issues!)

I don’t think this is a big victory for the securitization industry–I don’t know of anyone who argues that an executed PSA with sufficiently detailed schedules could not suffice to transfer a mortgage. That’s never been controversial. The real problem is that the schedules often can’t be found or aren’t sufficiently specific. In other words, deal design was fine, deal execution was terrible. Important point to note, however: the SJC did not say that an executed PSA plus valid schedules was sufficient for a transfer; the parties did not raise and the SJC did not address the question of whether there might be additional requirements, like those imposed by the PSA itself.

Now, the SJC did note that a “confirmatory assignment” could be valid, but (and this is s a HUGE but), it:

“cannot confirm an assignment that was not validly made earlier or backdate an assignment being made for the first time. Where there is no prior valid assignment, a subsequent assignment by the mortgage holder to the note holder is not a confirmatory assignment because there is no earlier written assignment to confirm.”

In other words, a confirmatory assignment doesn’t get you anything unless you can show an original assignment. I’m afraid that the industry’s focus on the confirmatory assignment language just raises the possibility of fraudulent “confirmatory” assignments, much like the backdated assignments that emerged in the robosigning depositions.

So what does this mean? There’s still a valid mortgage and valid note. So in theory someone can enforce the mortgage and note. But no one can figure out who owns them. There were problems farther upstream in the chain of title in Ibanez (3 non-identical “true original copies” of the mortgage!) that the SJC declined to address because it wasn’t necessary for the outcome of the case. But even without those problems, I’m doubtful that these mortgages will ever be enforced. Actually going back and correcting the paperwork would be hard, neither the trustee nor the servicer has any incentive to do so, and it’s not clear that they can do so legally. Ibanez did not address any of the trust law issues revolving around securitization, but there might be problems assigning defaulted mortgages into REMIC trusts that specifically prohibit the acceptance of defaulted mortgages. Probably not worthwhile risking the REMIC status to try and fix bad paperwork (or at least that’s what I’d advise a trustee). I’m very curious to see how the trusts involved in this case account for the mortgages now.

The Street seemed heartened by a Maine Supreme Judicial Court decision that came out on Friday, Harp v. JPM Chase. If they read the damn case, they wouldn’t put any stock in it.

In Harp, a pro se defendant took JPM all the way to the state supreme court. That alone should make investors nervous–there’s going to be a lot of delay from litigation. Harp also didn’t involve a securitized loan. But the critical difference between Harp and Ibanez is that Harp did not involve issues about the validity of chain of title. It was about the timing of the chain of title. Ibanez was about chain of title validity. In Harp JPM commenced a foreclosure and was subsequently assigned a loan. It then brought a summary judgment motion and prevailed. The Maine SJC stated that the foreclosure was improperly commenced, but it ruled for JPM on straightforward grounds: JPM had standing at the time it moved (and was granted) summary judgment. Given the procedural posture of the case, standing at the time of summary judgment, rather than at the commencement of the foreclosure was what mattered, and there was no prejudice to the defendant by the assignment occurring after the foreclosure action was brought, because the defendant had an opportunity to litigate against the real party in interest before judgment was rendered. The Maine Supreme Judicial Court also indicated that it might not be so charitable with improperly foreclosing lenders that were not in the future; JPM benefitted from the lack of clear law on the subject. In short, Harp says that if the title defects are cured before the foreclosure is completed, it’s ok. There’s a very limited cure possibility under Harp, which means that the law is basically what it was before: if you can’t show title, you can’t complete the foreclosure.

What about MERS?

The Ibanez mortgages didn’t involve MERS. MERS was created in part to fix the problem of unrecorded assignments gumming up foreclosures in the early 1990s (and also to avoid payment of local real estate recording fees). In theory, MERS should help, as it should provide a chain of title for the mortgages. Leaving aside the unresolved concerns about whether MERS recordings are valid and for what purposes, MERS only helps to the extent it’s accurate. And that’s a problem because MERS has lots of inaccuracies in the system. MERS does not always report the proper name of loan owners (e.g., “Bank of America,” instead of “Bank of America 2006-1 RMBS Trust”), and I’ve seen lots of cases where the info in the MERS system doesn’t remotely match with the name of either the servicer or the trust bringing the foreclosure. That might be because the mortgage was transferred out of the MERS system, but there’s still an outstanding record in the MERS system, which actually clouds the title. I’m guessing that on balance MERS should help on mortgage title issues, but it’s not a cure-all. And it is critical to note that MERS does nothing for chain of title issues involving notes.

Which brings me to a critical point: Ibanez and Harp involve mortgage chain of title issues, not note chain of title issues. There are plenty of problems with mortgage chain of title. But the note chain of title issues, which relate to trust law questions, are just as, if not more serious. We don’t have any legal rulings on the note chain of title issues. But even the rosiest reading of Ibanez cannot provide any comfort on note chain of title concerns.

So who loses here? In theory, these loans should be put-back to the seller. Will that happen? I’m skeptical. If not, that means that investors will be eating the loss. This case also means that foreclosures in MA (and probably elsewhere) will be harder, which means more delay, which again hurts investors because there will be more servicing advances to be repaid off the top. The servicer and the trustee aren’t necessarily getting off scot free, though. They might get hit with Fair Debt Collection Practices Act and Fair Credit Reporting Act suits from the homeowners (plus anything else a creative lawyer can scrape together). And mortgage insurers might start using this case as an excuse for denying coverage. REO purchasers and title insurers should be feeling a little nervous now, although I doubt that anyone who bought REO before Ibanez will get tossed out of their house if they are living in it. Going forward, though, I don’t think there’s a such thing as a good faith purchaser of REO in MA.

You can’t believe everything you read. Some of the materials coming out of the financial services sector are simply wrong. Three examples:

(1) JPMorgan Chase put out an analyst report this morning claiming the Massachusetts has not adopted the UCC. This is sourced to calls with two law firms. I sure hope JPM didn’t pay for that advice and that it didn’t come from anyone I know. It’s flat out wrong. Massachusetts has adopted the uniform version of Revised Article 9 of the UCC and a non-uniform version of Revised Article 1 of the UCC, but it has adopted the relevant language in Revised Article 1. There’s not a material divergence in the UCC here.
(2) One of my favorite MBS analysts (whom I will not name), put out a report this morning that stated that Ibanez said assignments in blank are fine. Wrong. It said that they are not and never have been valid in Massachusetts:

“[In the banks’] reply briefs they conceded that the assignments in blank did not constitute a lawful assignment of the mortgages. Their concession is appropriate. We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment.”

A similar line is coming out of ASF. Courtesy of the American Banker:

Perplexingly, the American Securitization Forum issued a press release hailing the court’s ruling as upholding the validity of assignments in blank. A spokesman for the organization could not be reached to explain its interpretation.

ASF’s credibility seems to really be crumbling here. It’s one thing to disagree with the Massachusetts SJC. It’s another thing to persist in blatant misstatements of black letter law.

(3) Wells and US Bank, the trustees in the Ibanez case, immediately put out statements that they had no liability. Really? I’m not so sure. Trustees certainly have very broad exculpation and very narrow duties. But an inability to produce deal documents strikes me as such a critical error that it might not be covered. Do they really want to litigate a case where the facts make them look like such buffoons? Do they really want daylight shed on the details of their operations? Indeed, absent an executed PSA, I don’t think the trustees have any proof of exculpation. They might be acting, unwittingly, as common law trustees and thus general fiduciaries. I think they’ll settle quickly and quietly with any investors who sue.
Finally, what are the ratings agencies going to do?

It seems to me that any trust with Massachusetts loans that doesn’t have a publicly filed, executed PSA with a reviewable loan schedule should be on a downgrade watch. Very few publicly filed PSAs are executed and even fewer have publicly filed loan schedules. That doesn’t mean they don’t exist, but somewhere off-line, but if I ran a rating agency, I’d want trustees to show me that they’ve got those papers on at least a sample of deals. Of course should and would are quite different–the ratings agencies, like the regulators, are refusing to take the securitization fail issue as seriously as they should (and I understand that it is a complex legal issue), but I think they ignore it at their (and our) peril

 

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4th DCA Florida: Exploding the Merger Myth

Posted on June 8, 2016 by Neil Garfield

Achieving standing via merger also requires that the surviving entity prove that it “acquired all of [the absorbed entity’s] assets, including [the] note and mortgage, by virtue of the merger.”Fiorito v. JP Morgan Chase Bank, Nat’l Ass’n, 174 So. 3d 519, 521 (Fla. 4th DCA 2015).

see http://4closurefraud.org/2016/06/07/fl-4th-dca-segall-v-wachovia-bank-na-reversed-wachovia-failed-to-prove-standing-to-foreclose/

Finally the courts are turning back to the simple rules of law that always applied until the era of false claims of securitization. Hopefully this decision will be persuasive authority in all jurisdictions. As stated in other cases, the banks can’t continue to operate using multiple choice assertions. Either their entity is real or it isn’t. Either they acquired the loan or they didn’t — and the fact that there was a merger does NOTHING for them in asserting transfer of the loan. They must show that the subject loan was in fact acquired by the surviving entity in the merger. This was always the law before and now we are simply turning back to it.

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California’s New Gieseke Decision-A New Playing Field Emerges Post-Yvanova

Posted on May 25, 2016 by Neil Garfield

 

Charles Marshallby Charles Marshall, Esquire

Gieseke Remand Order 5 20 16 from 9th Circuit

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
On the heels of Sciarratta v. US Bank, in the wake of Keshtgar v. US Bank, under the umbrella of Yvanova v. New Century Mortgage, comes now a unifying decision which applies at a base level at least these California Supreme Court and appellate decisions to the non-judicial firmament throughout the Greater West, that of Gieseke v. Bank of America.

Gieseke is a 9th Circuit decision, thus making itself persuasive if not controlling law in California and 9th Circuit states outside California, including Oregon, Washington, Montana, Idaho, Nevada, Arizona, Alaska, and Hawaii. While it is not mandatory for 9th Circuit Fed Courts in these states to follow Gieseke, due to the causes of action at issue being primarily state-based property claims as opposed to Fed-based claims, the persuasive authority of Gieseke will doubtless be useful and may prove to be compelling in many a future non-judicial foreclosure case in which the ‘borrower’ (never concede even, nay especially, fundamental terms in case pleading) is the Plaintiff.

It is also important to keep in mind that Federal authority is not controlling in a state litigation matter. Nevertheless, the persuasiveness of Fed to State and State to Fed authority must be acknowledged and understood among foreclosure litigants.

One of the reasons Glaski v. Bank of America failed largely to get traction until revived by Yvanova, is that even though it was controlling authority in the 5th Appellate District of California, and very much persuasive authority elsewhere in California, California’s Fed Courts tamped this brave and groundbreaking decision down from an oak to a stump, in a matter of months, following its publication in August of 2013.

Now with Gieseke, the entire 9th Circuit has greatly amplified the already-dramatic impact of Yvanova and its progeny Keshtgar and Sciarratta. Indeed, the way the Gieseke decision came to be is an event of great moment for this long-time foreclosure warrior-attorney. The underlying Gieseke case, which I had filed in the Northern District of California Fed Court on behalf of my clients back in late 2013, and appealed many months ago, was set for oral argument on July 5, 2016 before the 9th Circuit.

The Clerk of the 9th Circuit Court issued an order-to-show-cause (OTS) on May 2, 2016 with the breathtaking directive to the institutional defendants in the case, including Bank of America, to wit: why shouldn’t we the 9th Circuit simply remand this case summarily, in light of the Yvanova decision.

The institutional defendants had their best appellate firm at the ready, Severson Werson, and put forward a shallow but superficially credible case. I ‘marshalled’ (you’ll forgive the pun) my extensive network of resources, putting forward my considerably more credible Neil Garfield-inspired and ready arguments, and awaited the decision which just came down May 20: Gieseke Appellants win summarily, without even having to go to oral argument, which hearing was vacated upon the remand of the case to District Court, where it is to be reconsidered in light of Yvanova and Keshtgar.

Keep in mind that while Yvanova and Sciarratta are both post-auction cases, Keshtgar, and now Gieseke, are pre-auction, post-NOD cases. Which means at this point in California, through the California Supreme Court and now the 9th Circuit, all post-NOD lawsuits will have at least persuasive authority battering the opposition from the moment of filing. Strategically for once, Californians litigating non-judicial foreclosure matters have real options in choosing venue.

Where the focus of a case is directed to wrongful foreclosure and quiet title, state courts may be the better venue, since Yvanova and Keshtgar are controlling authority in all State Courts at this point. On the other hand, where rescission is an important cause of action in a compliant, a Federal venue using Gieseke for non-rescission state-based claims litigated in the same Federal venue may be the best way to frame a case.

Remember, Federal authority is persuasive, not mandatory, when applied to state claims. On the other hand, the breakthrough case of Jesinoski v. Countrywide Home Loans is controlling authority throughout the US on the issue of rescission (always a Fed-based issue vis a vis the TILA Federal law), as the decision came out of the US Supreme Court.

One might reasonably anticipate at this juncture to wonder what might one expect in light of the above cases, in trying to move a given plaintiff’s foreclosure case forward. Here follows a primer: For starters, from case inception, when facing a sale date, TROs will be much more readily granted. Be mindful that the standard applied to granting a preliminary or permanent restraining order, and derivatively a TRO, is whether the movant for an injunction is likely to prevail on the merits in the litigation at issue.

Before Yvanova, getting TROs in foreclosure-related matters was fraught with difficulty, though still doable in a number of cases, depending upon the district, the court, etc, although winning the preliminary injunction hearing to follow was another matter typically. With Keshtgar and Gieseke (pre-auction holdings), a TRO and preliminary injunction movant is likely to find getting the relief requested is much more straightforward and readily available. Also take note that TROs and their kindred hearings are much more easily brought, procedurally, in state courts, as opposed to Federal courts, at least in California.

As a still-relatively new lawsuit moves forward in the new dispensation of our post-Yvanova foreclosure world, plaintiffs will likely face as before, a surfeit of demurrer filings from the usual-suspect institutional servicers and sales trustees, such as Chase and Quality Loan Service Corp. Do not be feint of heart. New playing field, to which our opposition will have trouble adjusting much more than our side will. The new field largely benefits us, and will doubtless delimit and one hopes eventually demoralize our opposition. Can’t wait for the role reversal.

If California courts, state or Federal, are working properly, demurrers in this new litigation climate should routinely be overruled where the proper causes of action are pled, such as wrongful foreclosure, various Homeowner Bill of Rights statutory sections such as California Civil Code 2924.17 and 2923.55, and quiet title—this latter cause of action I believe will see a great revival with our side finally getting standing to present our arguments.

Equally important in this new terrain, is of course to plead void not voidable, when it comes to addressing the broken chain of assignments, the front-dating, back-dating, and robo-signing associated with same assignments.

Expect to see many motions for summary judgment, and the occasional judgment on the pleadings, from our not-so-friendly and often ruthless defendants, who will resort to these at present little-used devices to try and get out of a case they are no longer able to exit via a demurrer.

So yes, be heartened as a plaintiff when you see the opposition file an Answer as opposed to a demurrer (State level) or motion to dismiss (Fed). Do be cautious though, as a motion for summary judgment may soon follow.

Which brings us to discovery: This aspect of our litigation will grow dramatically, as our cases move to trial, instead of being snuffed in a proverbial litigation crib. More about the useful tool of discovery in a future blog post. Also on deck for a future blog post: Trial practice in our foreclosure cases, and appellate practice.

____________________________________________________________

California-licensed attorney Charles T. Marshall (CA Bar # 176091) earned his Juris Doctorate in 1992 from the University of San Diego School of Law. His practice includes Foreclosure Relief, Civil Litigation, Bankruptcy, Immigration, Estate Planning and all facets of Personal Financial Management.

Charles Marshall can be contacted at:

415 Laurel Street, Suite 405 San Diego CA 92101 US
+1.530.888.9600
Charles@MarshallLawCa.com

Website:  http://www.marshalllawca.com/home.html

 

 

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The Neil Garfield Radio Program: James “Randy” Ackley Recording

Posted on April 29, 2016 by Neil Garfield

Listen Here: https://youtu.be/jOeAe9zT5D0

Yesterday, attorney James “Randy” Ackley appeared on the Neil Garfield Radio Show.  The show was a fascinating discussion about banks’ creating the illusion of standing when a bank is unable to demonstrate they have the right to foreclose.

Neil and Randy addressed why the courts were allowing loan servicers to present evidence that was hearsay, often fraudulent and did not comply with the rules of evidence. Ackley stated that, “The court is allowing evidence to be introduced that would not be admitted in any other type of case.” The discussion brought up the fact that courts are making erroneous presumptions in favor of the banks despite the fact that there is now a public record of banks fabricating evidence, robosigning documents, false notarizations and bank employees testifying under oath about facts they know nothing about.

To learn more about Randy Ackley at: http://4closurefraud.org/2016/04/05/james-r-ackley-responding-to-disaster-a-contemporary-approach-to-foreclosure-defense

 

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Consummation- Is an Act not an Illusion

Posted on April 28, 2016 by Neil Garfield

by William Hudson

Neil Garfield is adamant that if consummation did not occur, there can be no contract. His belief is supported by hundreds of years of contract law (including the marriage contract). In regards to marriage, most people know if consummation occurred, yet when it comes to taking out a securitized loan like a mortgage, most people only assume it did.   Without proof one can only speculate that consummation occurred.

Due to the Sarbanes-Oxley Act, any lender in America should be capable of producing the needed documentation to prove they own a Mortgage and Note- and that consummation occurred. With the click of a computer mouse, instantaneously the journal entries in the lender’s financial, accounting, and general ledger systems should show that a loan was consummated and the Note was assigned to a valid trust. Instead, the banks resort to forgery and fraud. If they had the documentation, fraud would not be necessary.

Since around 2001 banks have been mocking up documents to create a paper trail to create the illusion of ownership- but in light of all the fabricated document fraud, it is time that homeowners demand to see the money trail and are permitted to do so. The money trail should begin at consummation of the loan between the two parties who agreed to contract: the homeowner and lender. However, this is not the way that consummation works in a securitized mortgage transaction. By design, the homeowner is not allowed to know who they are borrowing funds from- and transparency is of no concern.

Can you imagine this occurring in any other consumer transaction?  Imagine the chaos that would ensue, for instance, if you thought you were financing a truck through Ford Credit, yet unbeknownst to you, Honda funded the loan.  You may have ended up with the truck, but you may have been induced into a contract you didn’t agree with (especially if your goal was to “buy American”).  Why should Mortgage loans be any different?  And why should Congress bother passing laws like TILA if the banks are going to ignore consumer protection laws with impunity?

There can be no consummation when the party lending the money is never disclosed to the borrower. A homeowner is conned into believing the party listed on their note and mortgage is actually the party who is taking the risk by lending their own funds- when this party who is named on the Note is an originator- not a lender.

Has anyone stopped to ask why all the secrecy?   The only reason for secrecy is to hide the truth- whatever that may be (dark pools? empty trusts? stolen funds?). There is a reason for the deception that begins at the closing table, endures through servicing, and only ends upon sale of the property or payoff.

Consummation under the Federal Truth-in-Lending-Act occurs when the state law on contract or lending says it begins. According to attorney Neil Garfield, “Most state laws require offer, acceptance and consideration. So while the door is open to inconsistent results, in order to find that consummation did happen and that the date of consummation is known, we still must visit the issue of consideration.” Consideration is basically the exchange of something of value in return for the promise or service of the other party. Take note, consideration is not the exchange of value in return for the promise or service of an unidentified third party. However, modern securitization has nothing to do with the name of the original “lender” on the Note that in 99% of all cases did not loan anything of value.

When a homeowner is not provided the name of the party who is actually taking the risk and has skin in the game- they lose their ability to negotiate in good faith with this party (the investors of the trust). Over the span of a 30 year loan, “life” happens. It is terrifying that a bank can use one late payment as an excuse to create a default.

Banks were once responsive to homeowners because they had an actual investment and needed the homeowner to successfully make payments.   If a homeowner had a short-term cash flow problem, the banks were willing to work with them- it was in their best interest to do so. Homeowners no longer have the luxury of negotiating with the party who provided the funds, but must attempt to solve any mortgage issues with a loan servicer who is financially rewarded by engineering a default- by failing to provide responsive customer service to the homeowner (or by blatantly misleading the homeowner).

In fact, this week the CFPB announced that consumers made almost 900,000 complaints about their loan servicers between March and April 2016. The complaints center around three areas:

  1. Problems when consumers are unable to pay: Consumers complained of prolonged loss mitigation review processes in which the same documentation was repeatedly requested by their servicer. Consumers also complained that they received conflicting and confusing foreclosure notifications during the loss mitigation review process.
  2. Confusion over loan transfers: Consumers complained that they were often not properly informed that their loan had been transferred. As a result, payments made to either the prior or current servicer around the time of the transfer were not applied to their account.
  3. Communication issues with servicers: Consumers complained that when they were able to speak with their servicer, the information they received was often confusing and did not provide the clarifications they were hoping for.

According to the report, the mortgage companies with the worst records between November 2015 to January 2016 were Wells Fargo, Bank of America, Ocwen, and Nationstar Mortgage. Consumers are not receiving customer care because by design servicers profit when a default can be engineered. Based on the CFPB findings, it is obvious that the longer the servicer can prolong loss mitigation, the more fees they will potentially receive. A default allows them to collect thousands in late fees and penalties; and if they are lucky- foreclose on the home.

The servicer has no skin in the game and is incentivized to create a default by any means necessary- whereas, a true creditor does not want a default. The problem with the way the system is rigged is that the homeowner is prevented from knowing who they borrowed money from and therefore cannot negotiate in good faith with the party who has a vested interest in the homeowner making payment.

The central problem in all securitized mortgages is that the homeowner has no idea who they consummated the loan with. Although it is considered a predatory practice under Regulation Z to conceal the true lender, no government regulatory agency has stopped the practice of concealing the identity of the true lender at closing.  The TILA laws are on the books, but have no teeth.

Neil has said in the past that consummation only occurs after the closing agent receives and disburses the funds according to the alleged loan contract. Therefore, consummation does not occur on the date that the closing papers are signed. The requirement of giving the borrower disclosure papers three days before the closing is complete might put some daylight between the assumption that consummation occurred on the day the papers were signed.

Garfield states, “The simple argument is that the industry practice has always been that the borrower signs papers and THEN the closing agent requests or receives the money for the “loan.”” Therefore, Garfield doubts there is any support for saying that the borrower is contractually obligated to comply with the terms of the note or the mortgage if the money never came at all. Neil Garfield says that where the true problem lies is what occurs in the NEXT step.

“If we can agree that if no money ever came from anyone, the borrower doesn’t owe anyone anything and is not bound by the “facially valid” loan contract, then it follows that if no money came from the named Payee on the note and mortgagee on the mortgage, (beneficiary in a deed of trust), the “borrower” doesn’t owe anything to anyone,” states Garfield. If contract law was strictly followed, the homeowner is under no obligation to repay a party who didn’t lend them a dime.
This is where the issue of consummation becomes difficult to understand. “If money is sent to the closing agent by a party unrelated to the named payee on the note, then under what theory do we say that the note is evidence of the debt? It certainly should not be used to show that the borrower owes the payee any money because the payee did not make the loan and nobody related to the payee made the loan,” Garfield has repeatedly stated. Neil Garfield agrees with the assumption that the borrower owes back the money that was advanced on behalf of the borrower, but that transaction is not a debt nor a contract- it is a potential liability to the party whose funds were used to send to the closing agent.

That claim could not be in contract because the source of funds and the “borrower” never entered into a contract. The liability would be in equity and would exist independently of the false note and false mortgage, which means the claim from a real source of funds would not be subject to the note and mortgage but simply due on the basis of fairness in equity: the borrower received the benefit of the money from the money source and under quantum meruit would be obligated to repay the money.

This is where most people get lost on Garfield’s Rescission theories. Garfield never advocates that money is not owed to someone- what he argues is that the Note and Mortgage represent a transaction that never occurred- and therefore should be rescinded under TILA. Rescission would allow the REAL creditor (or investors) to come to the table and demand/receive payment.

And yet, loan servicers wanting to protect their unlawful gains (at the expense of the investors) are successfully deceiving the courts that consummation did occur. The entire mortgage scheme is rigged by a system of smoke and mirrors. There is evidence that the closing did not occur according to the contract- if the homeowner can manage to obtain the information through Discovery (but in 99% of all lawsuits the bank will not be compelled to reveal actual evidence). The courts could demand sua sponte that the servicer provide the actual business records and settle the matter- but this would reveal the truth that everyone has gone to great lengths to keep hidden.

When Congress wrote the Truth in Lending Act, they deliberately stated that the homeowner could rescind the Note within three days of consummation (they specifically did not say origination). The Supreme Court in Jesninoski reinforced the right to rescind and TILA was enacted so that banks would self-regulate and not devise reckless and predatory schemes (like what has happened). The homeowners and investors should not be punished for the deliberate obfuscation of the true terms of the “loan”.

All this analysis is aimed at one single point, to wit: that the source of funds does not meet the definition of a creditor to whom the money is owed. Most people understand Neil Garfield’s point but reject it regardless of how well it is founded in law and fact. They reject it because it upsets the mortgage securitization scheme started 20 years ago by the investment banks. It would mean that there is no creditor, there is no contract, and there is no obligation to comply with the payment terms under the note and mortgage. This is an unacceptable result for most people. They worry that the entire system would collapse if they were to follow the law as it has been written and decided for centuries.

But the feared consequence is not based in fact. The entire system does not collapse under this scenario. What happens is that the investors who bought fake Mortgage backed securities could deal directly with the borrowers and workout the terms of a mortgage loan that is both legal and enforceable. More importantly it would be a loan that would survive in value to the investor. As things stand now the Wall Street banks are driving as many cases as possible toward foreclosure because that is the way they collect the most fees — when the equity in the property is no longer higher than the claims for money upon liquidation.

So accepting the application of existing law as stated here, would mean that investors would suffer much lower losses and the homeowners would regain the equity in their homes or at least the prospect of equity while the wild terms and wild appraised prices of the past are abandoned. Obviously the SERVICERS would hate this equitable solution- because it would cost them the huge profits they receive through document fabrication, robosigning and other creative “solutions” that require fraud.

Let’s remember that when TARP was first announced, it was all about losses from mortgage defaults. When the government realized that homeowner defaults had little to do with TARP they expanded its meaning to include failing mortgage backed securities. But there were no bank losses from MBS because the banks were selling MBS not buying them. So then they expanded it again to include losses from credit default swaps, insurance contracts and other hedge products.

This was all based upon the premise that there MUST be a loan contract in there somewhere. There wasn’t in most cases. Nearly all of the foreclosures that have been rubber stamped by the court system were not only unnecessary, they were patently illegal based upon false representations from the banks. The foreclosure was a legal cover for all the prior illegal actions.

With that being said, if the homeowner only recently discovered that consummation did not occur; does the 3-year TILA window is likely untolled and the 3-day/3-year expiration time may never have commenced in the first place. Remember that according to law, Rescission is the act of rescinding; the cancellation of a contract and the return of the parties to the positions they would have had if the contract had not been made; rescission may be brought about by decree or by mutual consent.

Congress did not give you the Right to Cancel under TILA but the Right to Rescind. Cancellation means termination of the entire agreement by the act of parties/law. Whereas Rescission places the person back to the condition they were PRIOR to the contract; cancellation merely voids the contract and has no restorative properties. Congress could have simply allowed homeowners to cancel under TILA, but instead opted for Rescission. Cancellation would have stopped the bleeding, but Rescission actually reattaches the Limb. The judiciary must recognize that Congress used the words CONSUMMATION and RESCISSION not ORIGINATION and CANCELLATION in the Truth-in-Lending-Act so why should any Judge ignore the intention of the Act?  Rescission will eventually be won based on lack of consummation- but it may take another hearing before the Supreme Court before the state courts accept what consummation means.

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Standing, Demanding & Remanding-Miami Foreclosure Attorneys Jacobs and Keeley

Posted on April 1, 2016 by Neil Garfield

By William Hudson

2015. Lewis v USBank-Motion-for-Rehearing

Miami foreclosure defense attorney Bruce Jacobs accomplished what few attorneys have the commitment, perseverance and sheer guts to accomplish. However, he did so knowing he had a good criminal attorney in his corner- in case the court decided to sanction him, file a Florida Bar ethics complaint or possibly put him in jail. Jacobs is partners with former prosecutor and criminal defense attorney Court Keeley, so at least he would have someone to post bail.

First, Jacobs was able to successfully petition the Fourth District Court of Appeal to issue an opinion about a case it had already affirmed without providing an opinion, and then proceeded to persuade the court to reverse its ruling. If more attorneys would go to the mat for their clients like Jacobs and Keeley did- we might see more homeowners prevailing.

Bruce Jacobs, of Jacobs Keeley, reversed a per curiam affirmance (or PCA) and deserves a shout-out for his victory. Neil Garfield commented, “It is extremely unusual for an appellate court not only to write an opinion when they have made a decision not to write one, but then to recognize their error and reverse themselves is a rarity.”

The March 9 ruling by District Judges Robert Gross, Mark Klingensmith and Jonathan Gerber went unsigned but granted Jacobs’ motion for rehearing, withdrew the PCA and entered an opinion that reversed in favor of the homeowner against U.S. Bank. The court’s ruling was even more miraculous in light of the fact that the case had begun back in 2008 with Jacobs and Keeley refusing to compromise that U.S.Bank, acting as trustee for the registered holders of ABFC 2007-WMC 1 Trust, had no right to file a foreclosure action when no copy of the original note was attached to the bank’s complaint and questioned how the bank could reestablish a lost note. Broward Circuit Judge Jeffrey Streitfeld was not happy with the obstinate attorneys.

By the time the case went to trial in 2014, the bank had added indorsements to an allonge attached to the note, however, the bank’s witness could not explain when the indorsements had been added. It is not uncommon for “magical indorsements” and “phantom assignments” to mysteriously appear out of the ether when banks start practicing their voodoo “photoshop” dance that raises fake instruments from the dead.

The trial transcript demonstrates that Jacobs and Keeley dug their heels-in and reiterated that the lender could not sue the homeowner without evidence of standing- in which the bank lacked. Judge Jeffrey Streitfeld was more concerned about Jacobs and Keeley’s unprofessional behavior and the raising of an objection, than the bank’s failure to prove standing.

“Let me tell you something. We’re skating close to a real problem now, and that’s such a shame. I have to tell you something. I have lawyers in here that don’t sleep because of the weight of the cases that they handle, and they do not do what you’re doing,” Streitfeld said before taking a five-minute recess. “You better get your act together.”

Jacobs was admonished again when he had the audacity to interrupt bank attorney Heidi Weinzetl while she made remarks to the judge he found unsettling. Judge Streitfeld continued, “If you two do this one more minute, you’re going to spend the weekend in a very uncomfortable place.” He continued, “That’s just not what we do. We don’t do that, and you don’t do that. She was responding to my question.” It is no big mystery that the judge sided with the lender who had no more evidence of standing than if someone with a copy of the note and a fake indorsement walked into the courtroom and laid claim to the home. The Fourth District Court of Appeals would affirm but later reconsider after Jacobs filed a motion for rehearing and request for a written opinion. Jacobs and Keeley wouldn’t be golfing with Judge Streitfeld anytime soon.

Jacob would argue that Streitfeld incorrectly ruled in regards to U.S. Bank’s failure to attach a copy of the original note and prove it had the legal right to file for foreclosure in the first place. “This honorable court, the First DCA, the Second DCA and the Fifth DCA have all repeatedly held without exception that it is reversible error to grant a final judgment without proof of standing before filing the complaint,” Jacobs wrote in his appellate brief. The appeal court agreed basing their decision on the bank’s reliance on the pooling and servicing agreement to establish standing- and finding that proof to be insufficient.

Not only did Jacob and Keeley go where most attorneys fear to tread, the three District Judges Robert Gross, Mark Klingensmith and Jonathan Gerber decided to act with integrity, uphold their oath and honor the rule of law by ruling in favor of a homeowner. The appeal court did what many have failed to do- to stand up to banks that attempt to foreclose without proof that they have standing. As we have seen over and over again during the past nine years, presumptions are made in favor of the banks even when they clearly do not possess evidence of standing.

After writing this post, I came across ANOTHER excellent 4th DCA story that I feel should be included.

The days of banks running roughshod over Florida homeowners may be coming to an end, especially if the bank or home-owners association is brought to court in the Florida Fourth District Court of Appeal. Scribner Village Homeowners Association won a final judgment for foreclosure against homeowner Marie Alexandre for unpaid lien assessments. The property was then scheduled for sale. Meanwhile the homeowner filed for Chapter 11 bankruptcy protection and notified the state court that her home was protected by the bankruptcy automatic stay until the bankruptcy was settled. Despite the fact that an automatic stay acts as a temporary restraining order to protect the assets of the estate- the sale proceeded anyways, and the court clerk issued a certificate of sale to the Home Owner’s Association as high bidder.
Scribner Village Homeowners Association would literally steal a 5-bedroom home that was purchased ten years ago for almost half-a-million dollars for a measley $19,100. Scribner then filed a writ of possession, in which Alexandre asked the Palm Beach Circuit Court to deny the request and set aside the foreclosure judgment, sale and certificate of title. Disregarding state and federal law, the state court rejected her request and ruled in favor of the HOA. However, District Judge Dorian Damoorgian with Judges Melanie May and Jonathan Gerber disagreed with the lower court. “The sale should not have proceeded until the stay was lifted,” Damoorgian wrote in his opinion. “The trial court erred in denying appellant’s motion to set aside the sale and everything that flowed from it.”

 
Scribner Village appeared to have dropped out of the litigation, making no appearance on appeal. The question becomes, why are state circuit court’s so unwilling to comply with the state law? Alexandre was represented by attorney James Jean-Francois out of Hollywood (Florida) who did an excellent job of defending’s his client’s rights. Home Owners Associations have gotten away with stealing homes for pennies on the dollar for years. It is unfortunate that a homeowner must go all the way to an Appeals Court to obtain justice.

 

Jacobs-Keeley Trial Lawyers:

http://www.jakelegal.com/

No compensation was provided by this law-firm in exchange for this article.
This is not an endorsement of  Jacobs-Keeley although we were impressed.

 

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Case Compilation Where Claims of Ownership Were Dismissed

Posted on March 18, 2016 by Neil Garfield

I don’t know how I missed this but 4closurefraud.com compiled a list of cases in which the banks lost. (See below) The basis on which they lost was simply the finding that the alleged Trust or Plaintiff did not own the debt, note or mortgage. This is the same as the San Francisco study that found that at least 65% of all foreclosures were initiated by “strangers to the transaction.”

The issue confronting lawyers is that at trial, the Judges are assuming and presuming things that are not true. And the facts are counter-intuitive, leaving the lawyer with no answer to the question “Well if the originator didn’t fund the loan, who did?” and the corollary question “Well if the Trust doesn’t own the loan, who does?”

Such questions shift the burden of proof to the one party who knows nothing — the homeowner. It is much more difficult to fight with opposing counsel and the Judge at trial than a major aggressive push in discovery. Judges frequently start out leaning towards the bank, but once it is pointed out that discovery is a much broader process than trial, many lawyers are punching through the fog. Arguments about presumptions during discovery should be turned on their head — that all such presumptions are rebuttable.

And one last point — for nearly ten years I have been cautioning lawyers and homeowners not to admit things they know nothing about. None of you actually have the facts and none of you has the requisite knowledge (except in rare cases) about the money trial. People complain about “bad” decisions and accuse the court of bias. But in most cases where the borrower loses it is because facts that are untrue or unproven are accepted as true.

If you look closely at rulings where an opinion has been published, notice that the ruling is based upon facts that were admitted by the homeowner that never should have been admitted. This is a common error. The truth is that the homeowner doesn’t know the money trail but they assume that there is a money trail because to assume otherwise leaves the court in a fog. Once you assume that the borrower really did get a loan from the originator and once you assume that the party initiating the foreclosure purchased the loan, the paperwork arguments lose virtually all of their strength.

So unless you actually know the money trail and unless you know that it supports the paper trail, don’t admit it. Here is a brief checklist of things that should not be admitted unless you know they are in fact true:

  • The originator was the lender.
  • The loan was funded by the originator
  • The note and mortgage were properly released from the closing by the closing agent
  • The mortgage or deed of trust was properly recorded (NOT if it was void, which is uttering a false instrument)
  • The note and mortgage are valid documents arising from a consummated loan contract between the homeowner and the originator.
  • The originator owned the debt, note or mortgage.
  • An assignment from the originator gave rise to rights to enforce the note and mortgage.
  • Someone purchased the debt, the loan contract, the note and mortgage by paying money to the originator (in almost all cases this is not true).
  • The property is encumbered by a valid security instrument (the mortgage or deed of trust)
  • The substitution of trustee was valid
  • The notice of default was valid (not if the issuer of the notice was an unauthroized servicer)
  • The party issuing the substitution of trustee and/or notice of default was a proper beneficiary under a deed of trust
  • In the forced sale of the property, the successful bidder was a real creditor who could submit a credit bid instead of cash.
  • The REMIC Trust exists
  • The REMIC Trust ever existed in the real world — i.e., that it conducted any business, maintained a bank account or otherwise purchased assets that were managed by the trustee
  • The REMIC Trust owns the debt, note, loan contract or mortgage
  • The servicer is authorized (simple logic: if the loan is NOT in the Trust then the servicer CAN’T be authorized by a Trustee of Trust that doesn’t own the loan.
  • The Trustee on the Deed of Trust (nonjudicial states) is the substituted Trustee (in reality if the substitution of trustee was void or invalid then the original Trustee is still the Trustee on the deed of Trust)
  • The named Trustee is the Trustee or authorized agent for the certificate holders of the REMIC Trust
  • The payment history submitted by the latest servicer is correct (go back and look at prior payment histories from the servicers’ predecessors)

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1. CASE COMPILATION OF STANDING ISSUES WHERE TRUSTS WERE NOT ABLE TO FORECLOSE OR PROCEED IN BANKRUPTCY

see http://4closurefraud.org/2012/11/19/foreclosure-research-case-compilation-of-standing-issues-where-trusts-were-not-able-to-foreclose-or-proceed-in-bankruptcy/

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

Posted on February 25, 2016 by Neil Garfield

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.

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Fla 4th DCA: The Starting Point is Standing — If You Don’t Have It, There is no Jurisdicition

Posted on October 20, 2015 by Neil Garfield

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

This is not a legal opinion on any case. Consult with an attorney.

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see Rodriguez v. Wells Fargo

“The core element concerning to whom the note was payable on the date suit was filed was not proven.”

Bottom Line: You can’t file a lawsuit without standing. Judgment reversed with instructions to enter Judgment for the homeowner. And you can’t cure standing by getting it later. That would be like filing suit for a slip and fall in front of a super market, and once the suit was filed, you then go to the supermarket, get out of your car and proceed to slip and fall. And the second story is that the BURDEN OF PROOF is on the foreclosing party, not the homeowner.

Many courts are now leaning away from the legal fantasies being promoted by “servicers”, “trustees’ and other parties attempting to “foreclose” on debts that very often are (a) not owned by them (b) they have no authority to represent the owner of the debt (c) the alleged creditor is not showing a default on its books (d) on behalf of a Trust that (1) never operated (b) exists only on paper (c) with no bank account (d) no financial statements (no assets (e) no liabilities (f) no income (g) no expenses.

All this is becoming abundantly clear. The prior assumptions that allowed for some crossover between a holder and a holder in due course are giving way to another look, starting from the beginning. In this case there was no endorsement on the note at all. The Appellate court said that ended the inquiry. There was no lawsuit, it should have been dismissed and now judgment, entered by the Judge in West Palm beach is reversed with instructions to enter judgment for the Defendant homeowner.

In my opinion the courts are now being presented with the correct arguments and facts that leave them in a position where if they allowed these kinds of action they would be setting a precedent making it legal to steal.

And my question remains: IF THERE REALLY WAS A REAL TRANSACTION WHERE SOMEONE FUNDED THE LOAN AND SOMEONE ELSE BOUGHT THE NOTE THEN WHY DON’T THEY ALLEGE THAT THEY ARE HOLDERS IN DUE COURSE? If they alleged HDC status all they would need to prove is payment. No “borrower” defenses would apply. If they don’t have HDC status then on whose behalf is the foreclosure actually being filed, since the investors are getting paid anyway? I think the answer is that the servicer is converting a tenuous claim for volunteer payments on behalf of the borrower to investors who don’t know what loans they own; the real claim is that the servicer wants to “recover” servicer advances that it paid out of third party funds. These servicers are reaping windfalls every time they get a foreclosure sale.

This Court quotes approvingly from the UCC: “… the transferee cannot acquire the right of a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.” And goes on to quote the statute “a person who is party to fraud or illegality affecting the instrument is not permitted to wash the instrument clean by passing into the hands of a holder in due course and then repurchasing it.” see § 673.2031

The court concludes that there is no negotiation of the note until an endorsement appears — which read in conjunction with the rest of the opinion means that the endorsement must be by someone who is either a holder in due course or a party representing a party who is a holder in due course. If no holder in due course exists, then there is no way to construe the instrument as a negotiable instrument and there is no way to construe the instrument as having been negotiated under the UCC. And THAT means they must prove every aspect of the transaction (starting with origination) without relying on the suspect instruments.

See also 4th DCA — Standing is “Foreclosure 101” Peoples v. SAMI II Trust

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Writ of Certiorari to SCOTUS: Transfers to Trusts Are Void, not Voidable

Posted on September 23, 2015 by Neil Garfield

In observance of the Jewish holiday of Yom Kippur, my office will be closed Wednesday, September 23. The following article was scheduled in advance:

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See Anh N. Tran, et al. v. Bank of New York SCOTUS Certiorari_SRCH

READ THE ENTIRE BRIEF SLOWLY AND STUDY IT.

I think we have another case here where the pen of Justice Scalia (if they grant the writ and hear the case) will be dripping with sarcasm , just like we saw in Jesinoski. The New York Law says that the “transfer” to the REMIC Trust is void if it violates the terms of the Pooling and Servicing Agreement. The problem for the banks is that they MUST rely on the PSA in order to give standing to their trustee and servicer. If the trust does not have the loan, then the trustee has no authority over the loan and neither does the servicer. SO the Banks are trying to use the PSA and then Bar the borrower from inquiring as to its terms and provisions.

This isn’t an academic exercise. The Trusts are now known to have existed only on paper and not even registered in any state or anywhere else. They never had a bank account, they never received the money from the offering and sale of the trust’s certificates, they never had any money, they never had any liabilities, they never had any assets, and they they were never operated as a business in any sense of the word. Thus the Trust COULD NOT have acquired the loans because it never had the money to do so. And the paper transfers to the trust, all of which occurred in reality far beyond the date of the cutoff period would be void and mean nothing.

This is not a problem caused by the borrowers. It is a problem intentionally created by the banks so that behind curtains they could take or steal the money of investors, covering their tracks by making it appear that there was a transaction when there was none. The fundamental question presented to the courts is whether we are going to allow nonexistent parties to exercise rights in court with respect to nonexistent transactions.

The courts, once again, read into a perfectly clear and unambiguous statute and converted the word “void” to “voidable.” This is an impermissible “interpretation” of statute because it changes the law rather than clarifying it.

I recommend the brief because it appears to be complete, and it is the best (better than mine) brief on the subject of why the trusts do not have “prudential standing” which is a jurisdictional threshold question. It is clear to me that an entity created only on paper and never used for business activity, except for the purpose of foreclosure on a loan it does not own, is not an entity that should be given any right to appear in court.

One thing is clear: this brief should be used by all attorneys drafting memorandums of law on the subject of “Borrowers cannot invoke the provisions of the PSA because they are not third party beneficiaries.” If they were not third party beneficiaries then what assurance would the borrowers or the investors have that the certificate holders would receive the money promised to them? What assurance would the borrower have that a manufactured default would be declared despite the fact that the real creditors have been paid, or that a manufactured default would arise simply because the servicer and trustee refused to pay the creditors?

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Why the Big Guns Are Coming Out on Rescission

Posted on June 1, 2015 by Neil Garfield
For further information please call 954-495-9867 or 520-405-1688
NOTE: The rescission package we offer provides information on the specific loan of the borrower, whether rescission is an option, to whom the rescission letter should be addressed, whether your prior letter of rescission is effective, and how to prepare for further litigation regarding the effective date of rescission and the consequence of having rescinded. If you are unconvinced that this package will do you any good then don’t do it. We won’t try to convince you. We don’t offer guarantees or warranties. But we do believe in what we are doing. And note that this article (or anything else on this blog) is no substitute for advice from an attorney who is licensed in the jurisdiction in which your property is located.
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Confusion still reigns on the issue of TILA rescission. You go to a lawyer about it and he says no, the loan is too old (statute of limitations) or you don’t qualify (purchase money mortgage) or some other reason. And then the discussion turns to equitable tolling and whether the loan was really a purchase money mortgage and so the seeds of doubt are planted and take root without the banks lifting a finger. That is what they want.
The lawyers and judges and pundits were all wrong on TILA rescission. Before now, they were all saying that the rescission couldn’t be effective without the borrower filing a lawsuit and/or without tendering money or property. It all comes down to the same thing: when is rescission effective? And the answer is plainly stated by the TILA statutes, by the Federal Reserve in Reg Z and reaffirmed by a unanimous Supreme Court in Jesinowski. Rescission is effective upon mailing of the notice of cancellation of the loan deal. There is nothing that is contingent about that. You don’t need to file a lawsuit (in fact that is not the statutory procedure), you don’t need to tender anything (it is the banks and servicers who must pay borrowers for every penny they paid under the deal), and it is still effective in all events without any contingency regardless of whether the statute of limitations has run or the loan was a purchase money mortgage or anything else.
For corroboration of this, simply refer to the many arguments that banks and servicers offered when non-judicial foreclosure was invoked in those states that allow it. There, it was the banks who argued that the specific statutory scheme for starting a loan and foreclosing on it must be followed. The brief window (as short a 3 weeks in some states) for the borrower to stop a foreclosure sale has been allowed and confirmed in every case. The 20 day window for the banks to set aside a rescission that by operation of law is effective the date it was mailed is no different.
ANYTHING that might be used as an attack on rescission must be done by way of a lawsuit by the banks or servicers against the borrower and they must do it within 20 days of the effective date of the rescission. Right or wrong the rescission is effective upon mailing. If they file the action within 20 days, then the rescission for a brief window in time becomes voidable but never void. That is what Justice Scalia was telling all of us. So why won’t Judges, lawyers and borrowers believe it? The reason is simple — they are all intimidated by the power of TILA rescission and they all think that no borrower could level of the playing field by the stroke of a pen. AND they are confused by their understanding of common law rescission based upon fraud. But as Justice Scalia showed us, the rules governing common law rescission do not apply to an unambiguous statutory scheme in TILA. Courts have no right or discretion to interpret a statute that is unambiguous.

So what can a borrower expect if they have sent or is ending a notice of rescission? Be aware you are on their radar. We have emerged from the muck and ooze of primeval environment. That is why they bringing out the big guns. Holland and Knight is NOT a foreclosure mill and never will be. They want to do battle because they know the issue of rescission is a nuclear option that could blow up the entire “securitization” scheme of the banks.

What they are going to try to do is say that the rescission should not be considered effective because of the statute of limitations or because of something else like that it was a purchase money mortgage. They will say they could bring that up at any time because the rescission was void when sent. In other words they are seeking ways to make the rescission contingent upon being valid based upon some particular fact pattern they wish to represent.

That would mean that the rescission is NOT effective until there is a judicial determination that it is valid. AND THAT runs against the express wording of the statute, the express wording of the Federal Reserve’s Reg Z, and the express wording of Jesinowski. The rescission may be VOIDABLE if they file a lawsuit challenging the cancellation of the loan deal, but it isn’t VOID.

But the banks are not filing those lawsuits. They seek to raise “defenses” to affirmative allegations of rescission long after the 20 day window has expired. The Banks MUST attack rescission in this way. They can’t file the lawsuit within 20 days because of the problems with standing. If they don’t attack and try to weaken the “effective” (i.e., the day that by operation of law the deal was canceled) rescission they are admitting that their so-called mortgage backed securities are worthless junk — which is exactly what they are. Even in the current market, and even if they were doing it right, investors would need to be told  that there is a risk that one or all of the mortgage loans in the pool are susceptible to being rescinded; and, here is the kicker: they would need to disclose that any attempt to challenge such rescissions would require a proof of standing which is at the very least “difficult.” [It is difficult because standing would need to be established WITHOUT THE NOTE AND MORTGAGE, WHICH ARE VOID].

Effective means effective. It means the deal is canceled unless the banks get it set aside. But they can’t get it set aside without some action at law. A letter telling you that you are outside the statute of limitations or that your loan was a purchase money mortgage does NOTHING — except provide proof that they received the notice. And here is another kicker: those people who sent their notice of rescission years ago but were “foreclosed” anyway have a claim that every action taken after they sent their notice of rescission was VOID by operation of law. And any title company that issued a title policy without exempting transactions involved in securitized loans is probably liable for the damages. But they probably can’t get out of the cloud of liabilities created by securitization if it was a notice of rescission that was sent — because that applies regardless of securitization.

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STANDING: Banks Swimming Upstream as Shell Game Continues in SALMON CASE

Posted on April 24, 2015 by Neil Garfield

For further information please call 520-405-1688 or 954-494-6000.

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see 4th DCA Salmon v Foreclosed Asset sales and Transfer CorpDOC042315

I have often reminded lawyers that Judges NEVER get reversed when they deny a motion for summary judgment. When they grant summary judgment in foreclosure cases, their vulnerability to a reversal increases exponentially. In the SALMON case, the appellate court greets the foreclosing party with sarcasm and frustration, reversing the peremptory granting of summary judgment of foreclosure entered by the trial judge.

The shell game of changing entities combined with inexplicable acronyms in the names of new entities entering the picture is alerting courts across the country that we might just be dealing with organized crime. It is at least true that these strategies are typically used by criminal organizations to avoid detection and prosecution by creating an endless series of layers, transfers and roadblocks through the process of incorporation, trade names, and powers of attorney.

The Banks are trying to make it as complicated as possible — beyond the ken of the average judge. But the truth is much simpler than the snowstorm of paper offered by Wall Street banks. If the LENDER funded a loan with its own risk and capital and the disclosures are right THEN there is an enforceable contract and there is no way out of it for either side. If the LENDER SELLS the loan to another party the paperwork can be enforced by the purchaser as a holder in due course unless the loan was already in default at the time of the sale. If the purchaser sells it again, the same principles apply. But where there is no sale and there is no consistency in the chain of title, the party at the end of the chain has no more rights than the parties before him.

We are starting to reach critical mass. More and more courts are starting to opine that these mortgages and notes might not be real and that the wrong parties are coming into court to enforce them. This SALMON case is just one more case showing how the courts are not only turning away from the presumptions claimed by the banks but ridiculing the wily attempts of Banks to avoid the true facts. 4th DCA Salmon v Foreclosed Asset sales and Transfer CorpDOC042315

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Banks Struggling with Notices of Rescission

Posted on March 2, 2015 by Neil Garfield

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

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We are starting to get a peek at the strategy the banks will employ in dealing with notices of rescission. In one case the homeowner sent the notice of BOA, who answered that they received it (one problem solved) and that the new servicer is Ocwen (whose business practices have been the subject of a cease and desist order for failing to comply with prior “settlements” and “consent judgments.”)
The obvious strategy of the banks is to try to raise issues that the foreclosure judge can rule upon, in which the notice of rescission is declared void WITHOUT the required lender lawsuit seeking declaratory relief from the rescission — an absolute 20 day requirement under the Truth in Lending Act (TILA). And no matter how much philosophical discussion might ensue, this is precisely why TILA was drafted and passed by Congress and signed into law by the president — all in the wake of the savings and loan scandal that shook the industry in the 1980’s and put over 800 bankers in jail. As the US Supreme Court ruled in a unanimous decision written by Justice Scalia a couple of weeks ago TILA is specific consumer remedy that must be strictly construed.
When they tell you there is another servicer they are trying to re-start the 20 days to file a lawsuit they don’t want to file containing allegations they don’t want to allege, and requiring proof they cannot satisfy. It won’t work. So far, so good. They will probably try to say you sent it to the wrong “servicer” and that therefore your notice of rescission was invalid.

The foreclosure judge will be inclined to accept any argument against the effect of rescission. But TILA is very specific, it is Federal law, and the CFPB regulations under Dodd-Frank make it pretty clear that the shell game won’t work with respect to the notice of rescission. AND their response corroborates your position that they have been continually withholding the information that should have been disclosed at the fake loan closing.

According to CFPB regulations they are all servicers and they are all “good” for service of the rescission letter. You COULD send a COPY of the letter you sent to BOA to Ocwen Certified, return receipt requested. My suggestion is do not send a brand new letter. The clock is ticking. After 20 days has passed we will move to dismiss on the basis of the rescission. The so-called “old servicer” has an obligation to forward the letter to the lender and any other servicers. The 20 days, in my opinion, keeps running from the date of the mailing of the notice.

The long and short of it is that once the notice of rescission is sent (certified mail, return receipt requested) you are now in process on this strategy. The best is that (a) they won’t respond at all which your lawyer can argue they waived the defenses because of the statute of limitations contained in the Truth in Lending Act (TILA) for failing to file the required lawsuit within 20 days or (b) they will write back threatening something, which is not the response called for by TILA or (c) they will bring a lawsuit to declare your rescission void. No matter how this turns out I see it as being potentially beneficial to the homeowner.

If they sue then they need to establish standing and allege facts that they are not being required to allege and prove in foreclosure actions. They have been fighting against being required to plead or prove those facts for 10 years. So we can safely assume they can’t allege those thing and they certainly can’t prove those things.

By “those things” I mean ownership and balance. They have to allege they are the lender or they are representing a lender and SHOW that authorization. Contrary to foreclosure actions where courts have been incorrectly ruling that they only need to prove they are holding the paper, the Declaratory action that must be filed to counter your notice of rescission must allege and prove the identity of the “lender” (i.e., the party who loaned you the money or a true successor — i.e., a successor who actually purchased the debt and wasn’t simply a naked recipient of the the bogus paperwork).

Either way you are

(a) going to get rid of the mortgage and note and you will receive a ton of money just for what you paid the pretender lender at closing or the transferees of the bogus paper — which means that you cancel the note, void the mortgage so it is no longer in your chain of title — AND a receive a ton of money for the payments you made for interest and principal on a monthly basis going back to the inception of the fake loan closing, AND/OR

(b) going to get a ton of information that the foreclosure court might not otherwise allow you to reach in discovery (request for admissions, interrogatories, request to produce, depositions) .

My guess is that they are not ready to file any such lawsuit and will try arguing to the foreclosure judge that they didn’t need to because the rescission letter was defective on its face — usually the statute of limitations or the failure “to identify the violations in the letter.”

On that last point, there is no doubt in virtually all cases across the board that the notice letter need only state your rescission. Any reason for the rescission becomes a question of fact later only if the “lender” challenges the rescission letter within the 20 day period.

As to the statute of limitations, it doesn’t apply if the “lender” withheld the information that should have been disclosed. THAT is a question of fact, and THAT too must be brought up in their lawsuit (which is the ONLY way to comply with TILA on a TILA rescission).

But they will try to lure the state court judges into ruling on the sufficiency of the notice of rescission. The state court judge will be tempted to do it because he or she will see that the house is about to become free of the of the mortgage and that the lender will owe money to the borrower — two results the judges still dislike.

That strategy might work a few times but it won’t work long, in my opinion. TILA is a specific, explicit statutory remedy that cannot be interpreted in the context of common law rescission or any other rescission for that matter. The Court is required to treat these “lender” arguments (and even the question of whether the presenting party is in fact a “lender’) as a question of fact that MUST be raised in a separate lender collateral action seeking declaratory relief in a separate lawsuit.

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