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

Wells Fargo Manual “Blueprint for Fraud”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

BOA Seeks to Seal Damaging Testimony from Urban Lending

HAPPY INDEPENDENCE DAY!

WHY ARE THE BANKS FIGHTING TO GET AS LITTLE AS POSSIBLE FROM EACH “FAILED” LOAN?

A drama is playing out in the state of Massachusetts. Bank of America is pretending to be the lender or the authorized servicer or both. But it outsourced the task of dealing with borrowers seeking modification. The company that was used is Urban Lending Solutions (ULS).  A deposition was taken from a knowledgeable source from within ULS.  The attorney  taking the deposition was merely looking for evidence of a script prepared by Bank of America that ULS employees were to follow. Not only was the script uncovered but considerable other evidence suggested institutional policies at Bank of America that were in direct conflict with the requirements of law, and in direct violation of the settlements with the Department of Justice and the banking regulators.

The transcript of the deposition was sealed at the request of Bank of America, which the borrower did not interpose any objection. Now there are a lot of people who want to see that deposition and who want to take the deposition of the same witness and other witnesses at ULS who might reveal the real intent of Bank of America. The question which is sought to be answered is why the mega banks are fighting so hard to take less money in a foreclosure sale then they would get in a modification or even a short sale. The policy is obvious. Borrowers are lured into a hole that gets deeper and deeper so that foreclosure seems inevitable and indefensible. Even after a successful trial modification the banks are turning down the permanent modification, as though they had the power to do so.

Now a number of attorneys are preparing motions to the trial court in Massachusetts to unseal the transcript of the ULS employee. Bank of America is opposing these efforts on the grounds of “confidentiality” which from my perspective makes absolutely no sense. Why would Bank of America share confidential information or trade secrets with a vendor whose only purpose was to interfere with the modification process? My opinion is that the only information that Bank of America wishes to keep secret is that the instructions they gave to ULS clearly show that Bank of America was not interested in anything other than achieving a foreclosure sale in as many cases as possible.

In nearly all cases the modification of the loan more than doubles the prospect of proceeds from the loan and in some cases approaches 100%. Thus the full-court press from the megabanks to go to foreclosure is a mystery that will be solved. My sources from inside the industry together with my own analysis indicates that the reason is very simple. The banks took in money from investors, insurers, counterparties in credit default swaps, the Federal Reserve, the Department of the Treasury and other parties based on the representation of the banks that (A) the banks owned the mortgage bonds and therefore on the loans and (B) there was a loss resulting from widespread defaults on mortgages. Under the terms of the various contracts within the false chain of securitization and the Master servicer had sole discretion as to whether or not the value of the mortgage bonds and the asset pools had declined and had sole discretion as to the amount of the loss caused by the defaults. Both representations were false — the Banks did not own the bonds or the loans and the loss was not even close to what was represented to insurers and other third parties.

As a general rule of thumb, the banks computed value of the collateral at around 25% and therefore received payment to compensate the banks for a 75% loss. They received the payment several times over and then sold the mortgage bonds to the Federal Reserve for 100% of the face value of the bonds. It can be fairly estimated that they received no less than 250% of the principal amount due on each of the loans contained within the asset pool that had issued each mortgage bond. While they had to create the appearance of objectivity by showing a number of the loans as performing, they intentionally overestimated the number of loans that were in default or were in the process of going into default.

Let us not forget that while nobody was looking the Federal Reserve has been “purchasing” the worthless mortgage bonds at the rate of $85 billion per month for a long time and doesn’t appear to have any intention of stopping that flow of money to banks that have already received more than 100% of the principal due on the notes. And lest you be confused, the money the banks received should have gone to the investors and should never have been kept by the banks. The purchases by the Federal Reserve at 100% of face value despite a market value of zero is merely a way for the Federal Reserve to keep the mega banks floating on an illusion.

Since the banks received 250% of the principal amount due on the loan, an actual recovery from the borrower of 100% (for example) on the loan would leave the banks with a liability to all of the third parties that paid the banks. The refund liability would obviously be 150% of the principal amount due on the loan and the banks would be required to turn over the hundred percent recovery from the borrower to the investors adding to their liability. THIS IS WHY I SAY CALL THEIR BLUFF AND OFFER THEM ALL THE MONEY DEMANDED ON CONDITION THAT THEY PROVE OWNERSHIP AND PROVE THE LOSS IS ACTUALLY THE LOSS OF THE BANK AND NOT OF THE INVESTORS.

But if the case goes through a foreclosure sale, the banks can take a comfortable position that the number of defaults and the depth of the loss was as great as they represented when they took payment from insurers and other third parties. The liability of 250% is completely eliminated. Thus while it might appear to be in the bank’s interest to take a 60% recovery from the borrower instead of a 25% recovery from a foreclosure sale, the liability that would be created each time alone was modified or settled would dwarf the apparent savings to the pretender lender or actual creditor.

The net result is that on a $100,000 loan, the investor takes an extra $35,000 loss over and above what would normally apply in a workout and the bank avoids $250,000 in liabilities to third parties who paid based upon false representations of losses.

The mere fact that they went to great lengths to seal the transcript indicates how vulnerable they feel.

PRACTICE MEMO TO FORECLOSURE DEFENSE LAWYERS

As a condition precedent I would suggest that in all cases where we feel the deposition transcript would be helpful I think it would create more credibility if you issued a subpoena duces tecum directed at Urban to produce the witness whose deposition was sealed in the existing case and to bring those records that were requested or demanded at that deposition. One of the questions that needs to be answered is whether the witness witness is still working for Urban, whether the witness has “disappeared”, and whether his testimony has changed — thus we would need the other deposition to test credibility and perhaps get exhibits that BANA either didn’t object to, which means they waived confidentiality. If they do not move to quash the subpoena then they might also be arguably waiving the confidentiality objection.
If they do object, you have two bites of the apple — if they move to quash they must state the grounds other than than it will damage their chances in litigation. The trial court would then hear the objections and of course each if the cases that could benefit from unsealing the deposition results in a hearing, then several judges would hear the same objection. The likelihood is that the objection would attempt to bootstrap the order sealing the deposition as reason enough to quash the subpoena. That in turn puts pressure on the Massachusetts judge to release the transcript.
The more Motions filed the better. So I would suggest that we reach out through media to get as many people as possible with separate motions saying that sealing the deposition is causing a disruption in due process. Since Urban reached out on behalf of BANA — an allegation that should be made in opposition test the motion to quash the subpoena in each case — exactly what confidential information needs to be protected? Has the Massachusetts court heard a motion in liming preventing the use of the deposition at trial? If not, then the objection is waived since the Plaintiff will clearly use the deposition at trial, if there is one.
The other issue is that BOA can’t simply allege confidentiality rather than strategy in litigation. They must state with particularity what could be possibly confidential. There is no attorney-client privilege, there is no attorney work product privilege.  At first Bank of America disclaimed any knowledge or relationship with ULS.  When it became obvious that the relationship existed and that ULS was using Bank of America letterhead to communicate with borrowers they finally admitted that the relationship existed and then went one step further by alleging confidentiality and trade secrets so that the contract and instructions between Bank of America and ULS would never see the light of day., For a company that BOA disclaimed any knowledge but who used BOA stationery they were clearly an agent of BANA. What exactly could Urban have other than information about modification and foreclosure? I would also notice or subpoena BANA to produce the person who signed the contract with Urban and to bring the contract with him or her. Who received instructions from BOA? Where are those instructions? Were they produced at the sealed deposition.
 If the Massachusetts court does not unseal the transcript, doesn’t this give BOA an opportunity for a do-over where they fabricate documents that are different from those produced in the sealed deposition?
What were the instructions to Urban? What was the goal of the relationship between BOA and URban? Where are the scripts now that we’re produced in the sealed deposition?
Were the instructions to Urban the same as the instructions to all vendors assisting in the foreclosure process? Why did BOA even need Urban if it had proof of payment, proof of loss,  proof of ownership of the loan? We want to know what scripts were used by Urban and whether the same scripts were distributed to other vendors whose behavior could be plausibly denied. Discovery is a process by which the party seeking it must only show that it might lead to the discovery of admissible evidence. THE POINT MUST BE MADE THAT THE DEFENSE FOR WHICH WE ARE LOOKING FOR SUPPORT AND CORROBORATION IS THAT THE DELIBERATE POLICY AND PRACTICE OF BOA WAS TO MOVE PEOPLE INTO DEFAULT BY TELLING THEM TO STOP MAKING PAYMENTS. WE WANT TO SHOW THAT THEIR GOAL WAS FORECLOSURE NOT MODIFICATION CONTRARY TO THE REQUIREMENTS UNDER HAMP AND HARP AND THAT RATHER THAN PROCESS MODIFICATION OR SETTLEMENTS THE POLICY WAS TO DERAIL AS MANY AS POSSIBLE TO GET THE FORECLOSURE EVEN IF IT MEANT THAT THE INVESTORS WOULD GET LESS MONEY? Why?
The instruction was to use the promise or carrot of modification to trick the homeowner into (a) acknowledging BOA as the right party (b) stop making payments causing an apparent default and causing an escrow shortage (c) thus assuring the foreclosure sale despite the fact that BOA never acquired and (d) thus assuring that claims against them from investors (see dozens of law suits against BOA) and from insurers and counter parties on credit default swaps and payments from co-obligors based on the “default” that BOA fabricated — payments that involved more than the loan itself in multiples of the supposed loan balance.

This is an important battle. Let’s win it. There is strength in numbers. We might find the scripts were prepared by someone who used scripts from other banks and that the banks were in agreement that despite the obligations under HAMP and HARP and despite their ,rinses in the AG and OCC settlement, their goal is to foreclose at all costs because if the general pattern of conduct is to settle these loans and make them “performing” loans again it is highly probable that for each dollar of principal that gets taken of the table there is a liability or claim for $10. This would establish that the requirements of HAMP and HARP has resulted in negotiating with the fox while the fox is in the henhouse getting fat.

Keystone Fraud by Banks: Business Records Exception to Hearsay Rule

Practice Note: Hearsay is not evidence and should not be used as the basis for any conclusion of facts that would support any conclusion of law. While the banks are extremely vulnerable to having all testimony and documents barred by the hearsay rule, this is ONLY true if the proper objection is made at the proper time — and objections should be made when opposing counsel makes reference to the content of those records as though they were already established. Although representations by counsel are not evidence, the attorney’s failure to object to the representation is a failure to bring to the Judge’s attention the fact that you contest those assertions. The objection could be phrased that counsel is attempting to get his own representations on record based upon facts that are in dispute and not in the record. A good record of those objections — including the use of a court reporter — is the basis for appeal. Without that record the Judge is inclined to do whatever he or she wants and while it is possible to re-establish the record in the absence of a court reporter it is very difficult and time-consuming. The reviewing court looks only to the record. If the objection does not appear, then the reviewing court has no choice but to affirm the lower court decision. An appeal is NOT an opportunity to retry the case. on substantive grounds. It is primarily a vehicle to contest the procedures and rulings in the court below as to procedure and the admissibility of evidence.

see http://livinglies.me/2013/04/29/hawaii-federal-district-court-applies-rules-of-evidence-bonymellon-us-bank-jp-morgan-chase-failed-to-prove-sale-of-note/

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

Editor’s Analysis: Business records are ALWAYS hearsay and barred by the hearsay rule in state and Federal courts. The question is not whether the business records are hearsay but rather whether the records are deemed reliable enough to waive the requirement of testimony from those with knowledge of the facts offered to prove the case of the proponent of those records. If they are deemed reliable by the Judge then they are allowed to be admitted as evidence to prove the truth of the matters asserted in those records. The tests for reliability are in the statutes of each state and the Federal rules of evidence that allow for exceptions to hearsay in order to allow the business records into evidence, which ARE hearsay and otherwise barred as evidence, under the “business records exception.”

The general rule is that evidence consists of testimony from a knowledgeable witness competent to testify as to the matters asserted. Competency of witnesses is determined by oath, personal perception of events, memory and the ability to communicate the facts as personally experienced, viewed, or heard by the witness. The business records exception requires the custodian of records to provide the foundation for asserting the business records exception. This is the starting point.

The custodian of records must be established by foundation testimony and should not be allowed without testimony that demonstrates the witness’ scope of employment, knowledge and authority. Objection should be made when the leading question is asked “Are you the custodian of the records?” An objection is required that the question is leading and lacks foundation — showing the facts and circumstances under which the witness should be accepted by the court as the custodian of the records.

The records must be from a source that is relevant to the proceedings. If the party seeking foreclosure is an asset pool, represented by a trustee, then the business records of the trustee are the only thing that is relevant unless the foundation is laid by opposing counsel to show that the records of the servicer matches the records of the trustee.

TESTIMONY OF THE SERVICER: Without the custodian of records for the trustee, it seems impossible to establish the proper foundation showing that the trustee asserts that the records of the trustee are the same as the servicer. And if that is true, there may be no reason for the servicer to testify as to the business records since it is only the trustee who can account for all money paid out and all money received, directly or indirectly on account of the subject loan.

[NOTE: THE TRUSTEE SHOULD BE ABLE TO TESTIFY THAT IT IS THE TRUSTEE OF THE TRUST THAT OWNS THE SUBJECT LOAN AND TO PRODUCE DOCUMENTS SHOWING THE SALE OF THE LOAN TO THE TRUST OR ASSET POOL. REMEMBER THAT A SALE REQUIRES CONSIDERATION AND THUS THE RECORDS SHOULD INCLUDE A RECORD OF THAT SALE, THE AMOUNT PAID, AND THE DOCUMENTS MEMORIALIZING THAT TRANSACTION.]

The witness who testifies for the proponent of the documents sought to be admitted into evidence must be competent to testify as records custodian that the trust has been and still is the owner of the loan. The banks will vigorously oppose your effort to hold their feet to the fire because all indications are that the trustee has no records and doesn’t even have a bank account for the “trust’ or asset pool, much less evidence of the amount paid for the loan, and the documents memorializing the “transaction.”

In many cases, the case for ownership or foreclosure collapses completely because in fact the trust or pool never did acquire ownership because there was no sale and the trustee never had any records showing the money paid by the homeowner or other parties who may have paid down the loan under non-subrogated obligations to payoff the debt. The creditor only being entitled to recover once on the debt, must show that there were no mitigating payments received by the trustee or anyone on its behalf as agent, servant or employee or affiliate.

In truth the relevant records are either wholly within the records of the MASTER SERVICER and neither the subservicer that the proponent wishes to offer nor the trustee has a complete record who who funded the origination or purchase of the loan. Thus while the business records of the sub-servicer might eventually be admitted over objection of the homeowner, it can and should be argued that this is only a partial picture; this accomplished on cross examination or if possible voir dire, where the witness is questioned as to what they don’t know, to wit” the details of the origination, purchase or funding of the loan together with all receipts relating to the loan account directly or indirectly.

Having started with the question of whether the witness is in fact a records custodian, the question then becomes whether the proffered witness is the only records custodian. At one trial recently conducted the witness was (a) not a custodian, (b) declared that the records came from numerous “clients” and other departments, the identity of the custodian of those records never being mentioned.

[Practice Note: When the witness is from the “loss mitigation department” or some similar division or department, they are by virtual definition not the records custodian, and cannot be a competent witness to testify as to the records. On voir dire conclusion the objection should be made that the witness is not the records custodian for any or all of the records sought to be introduced and is therefore not competent to provide the foundation for the business records exception to the hearsay rule.]

The first requirement (see Florida statutes below for example) to test the reliability of the records is that the the record entry be made at or near the time of the event.

If the servicer is testifying, then the servicer cannot testify as to the either the origination or sale of the loan, both having preceded the involvement of the servicer virtually by definition. While the impulse of the court is going to be presume that the closing was completed, this is overcome by the denial of the homeowner that the closing was in fact completed because the named payee on the note and mortgage never fulfilled their obligations — to fund the loan. It is not enough to be the party who caused the loan to be made —- that is a mortgage broker who obviously has not rights to ownership or foreclosure. This leaves the proponent with the requirement of proving up the completion of the initial transaction showing the funding by testimony of a competent witness (custodian of records of the relevant parties) to show payment and receipt of the funding of the origination or sale of the loan.

The second test relates to competency of the witness which is that the person offering the testimony or even the affidavit must show that they are a person with personal knowledge sufficient to be either the records custodian or a witness to the event.

The banks in Florida will attempt to get around this problem by offering a certification, but the certification must contain sworn statements as to the personal knowledge of the person who executes such certification. The requirements of testimony on the stand are NOT waived by virtue of submitting a certification. Without establishing the competency of the person to be admitted as a witness custodian of the records, the certification is a sham. And such certification should be determined before trial in a motion in limine before trial begins or objection to certification (see below).

The “certification” must contain the same required statements of fact that would otherwise be required on the stand as a live witness. Timeliness of objections is the key to trial practice. Failure to object and take the offensive on this issue will result in documents being admitted into evidence that establish a prima facie case when no such case exists.

If a certification is intended to be used, the homeowner must receive notice of such intent, the identity and contact information for the person signing the certification and an opportunity to challenge the veracity of the statements contained in the certification and the authenticity of the documents itself given the constant practice of robo-signing and surrogate signing.

Discovery is appropriate to require the proponent of the certification to show the employment record and other indicia that the person is indeed a custodian of all the records and that all the records sought to be introduced at trial are within the custody of the witness. A trick often used in court is that the witness will testify as to custody of one document and without an alert objection from the homeowner, the rest of the documents, which are hearsay, are then admitted into evidence without the certification or the foundation because the homeowner failed to object.

Failure to give notice of the intent to use certification in lieu of live testimony is fatal at trial — if the homeowner objects. Certification should ALWAYS be met with a well written objection — and fee free to plagiarize anything in this article. In most cases in an abundance of caution, the Judge will require live testimony in lieu of certification.

Conversely, failure to object to the certification may well leave the homeowner in the cold, because by the time the trial begins all acts necessary to the prima facie case of the proponent of foreclosure or ownership of the loan will have already been established.

Florida Statutes 90.803 et seq: in pertinent abstract is as follows:

(6)  RECORDS OF REGULARLY CONDUCTED BUSINESS ACTIVITY.–

(a)  A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinion, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity and if it was the regular practice of that business activity to make such memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, or as shown by a certification or declaration that complies with paragraph (c) and s. 90.902(11), unless the sources of information or other circumstances show lack of trustworthiness. The term “business” as used in this paragraph includes a business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

(b)  Evidence in the form of an opinion or diagnosis is inadmissible under paragraph (a) unless such opinion or diagnosis would be admissible under ss. 90.701-90.705 if the person whose opinion is recorded were to testify to the opinion directly.

(c)  A party intending to offer evidence under paragraph (a) by means of a certification or declaration shall serve reasonable written notice of that intention upon every other party and shall make the evidence available for inspection sufficiently in advance of its offer in evidence to provide to any other party a fair opportunity to challenge the admissibility of the evidence. If the evidence is maintained in a foreign country, the party intending to offer the evidence must provide written notice of that intention at the arraignment or as soon after the arraignment as is practicable or, in a civil case, 60 days before the trial. A motion opposing the admissibility of such evidence must be made by the opposing party and determined by the court before trial. A party’s failure to file such a motion before trial constitutes a waiver of objection to the evidence, but the court for good cause shown may grant relief from the waiver.

(7)  ABSENCE OF ENTRY IN RECORDS OF REGULARLY CONDUCTED ACTIVITY.–Evidence that a matter is not included in the memoranda, reports, records, or data compilations, in any form, of a regularly conducted activity to prove the nonoccurrence or nonexistence of the matter, if the matter was of a kind of which a memorandum, report, record, or data compilation was regularly made and preserved, unless the sources of information or other circumstances show lack of trustworthiness.

(8)  PUBLIC RECORDS AND REPORTS.–Records, reports, statements reduced to writing, or data compilations, in any form, of public offices or agencies, setting forth the activities of the office or agency, or matters observed pursuant to duty imposed by law as to matters which there was a duty to report, excluding in criminal cases matters observed by a police officer or other law enforcement personnel, unless the sources of information or other circumstances show their lack of trustworthiness. The criminal case exclusion shall not apply to an affidavit otherwise admissible under s. 316.1934 or s. 327.354.

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Darrell Blomberg is a presenter at our kickoff of the national tour of seminars starting July 26, 2012 in Chandler, AZ. He is NOT a lawyer but in my opinion has a better understanding of the law, its application and the context of the fake securitized loans than practically any else I know. He is completely correct in his analysis of the Hogan decision below.

I strongly advise homeowners who are near the Chandler location, to go find a lawyer and or contact the one they already have and PAY for the lawyer to attend the seminar and maybe pay for their own attendance as well. Paralegal add-ons are available as well.

Editor’s Note:

Darrell is 100% right that this decision poses a mammoth shadow problem for those people who are working for “Trustees” and conducting sales, sending notices of default and sending notices of sale. Issuing a deed on foreclosure to a party who who was the creditor but submitted a credit bid instead of a cash bid is only one issue. The fact is that if the Trustee becomes aware of a bona fide dispute between the alleged beneficiary or creditor and the borrower the Trustee has only ONE CHOICE: They must petition the court for a ruling because the Trustee does not have the power to conduct hearings. It IS that simple.

The reason they are not doing that and the reason why there is a substitution of trustee filed in every case is that the original trustee WOULD do that and would conduct due diligence, which the banks cannot afford because they know they don’t have the goods — they are not the creditor and in many cases even the the real original creditor is no longer present because of the trading activity and recompilation of the pools with different assets, loans and even using other derivatives as assets. 

These facts will all come out when the burden is put on the supposed creditor to show the transaction in which they paid real money for the loan. No such transaction exists. So they cannot submit a credit bid and probably don’t have the authority to initiate foreclosure proceedings. The potential liability of the Trustees that were substituted and perhaps even the original trustees is staggering when applied to prior foreclosures. When it becomes clear that the new trustee is appointed by a stranger to the transaction calling itself the beneficiary when it is not the beneficiary and new trustee is owned or controlled by the new “beneficiary.”

By Darrell Blomberg, July 11, 2012:

The Supreme Court of Arizona released their amended opinion this morning.  I have attached it for you or here is the link:  http://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2012/CV110115PR.pdf.  The essential changes were confined to section 11.

First off, I offer HUGE KUDOS and THANKS to all the extraordinary people who contributed to the effort of getting this all the way to the Supremes and then back into their court for a well-earned reconsideration.

The challenge with Hogan was that the questions were never optimally framed and Hogan didn’t make the record with sufficient allegations and assertions.  His pleadings left too many escape hatches open.  (No slight to anybody; the questions didn’t appear until long after the best-for-the-day questions were put forth.)  I’m amazed at “amount” of decision we got from the Supremes considering those challenges.

I believe the new “Moreover, the trustee owes the trustor a duty to comply with the obligations created by the statutes governing trustee sales and the trust deed.” language is very beneficial to homeowners and attorneys.  I think this is vastly better than the prior decision and gives us a lot more umph.  This is a clear statement of the court tying “duty” together with “statutes governing trustee’s sales and the trust deed.”  I can’t remember something so elemental and so important happening for us at any administrative, judicial or legislative level.  Tying duty to the statutes and contract was always sketchy but this decision does it succinctly and boldly.

This is precisely what all of my “Cancellation Demand Letters” have been geared to convey.  This decision will certainly be added to every “Cancellation Demand Letter” from now on.

Don’t forget this amended language:”A.R.S. § 33-801(10) (providing that “[t]he trustee’s obligations . . . are as specified in this chapter [and] in the trust deed”).”  It’s sure to be used against our efforts.  I think this can be well mitigated by the Consumer Financial Protection Bureau bulletin 2012-03 which tied the servicer (beneficiary?) and the sub-servicer (trustee?) together for liability purposes.  Perhaps it doesn’t reign in the trustees so much but it sure raises the temperature on the beneficiary.  With the right amount of pressure on the beneficiary maybe they’ll heat up the trustee for us.  (See attached or this link: http://files.consumerfinance.gov/f/201204_cfpb_bulletin_service-providers.pdf)

For the record, here is the language that was removed from the original opinion: “Moreover, the trustee owes the trustor a fiduciary duty, and may be held liable for conducting a trustee’s sale when the trustor is not in default.”

My commercial:  If you know anybody that is in need of an all-out analysis of the Arizona Trustee’s Sale process that I turn into a letter for the homeowner, please let me know.  My letters are a great way to make the record and maybe even cancel a few notices of trustee’s sales along the way.  (Contact info is below.)

For further consideration, here is Black’s 6th on “Duty.”

Duty. A human action which is exactly conformable to the laws which require us to obey them. Legal or moral obligation. An obligation that one has by law or con­tract. Obligation to conform to legal standard of reason­able conduct in light of apparent risk. Karrar v. Barry County Road Com’n, 127 Mich.App. 821, 339 N.W.2d 653, 657. Obligatory conduct or service. Mandatory obligation to perform. Huey v. King, 220 Tenn. 189, 415 S.W.2d 136. An obligation, recognized by the law, re­quiring actor to conform to certain standard of conduct for protection of others against unreasonable risks. Samson v. Saginaw Professional Bldg., Inc., 44 Mich. App. 658, 205 N.W.2d 833, 835. See also Legal duty;Obligation.

Those obligations of performance, care, or observance which rest upon a person in an official or fiduciary capacity; as the duty of an executor, trustee, manager, etc.

In negligence cases term may be defined as an obli­gation, to which law will give recognition and effect, to comport to a particular standard of conduct toward another, and the duty is invariably the same, one must conform to legal standard of reasonable conduct in light of apparent risk. Merluzzi v. Larson, 96 Nev. 409, 610 P.2d 739, 741. The word”duty” is used throughout the Restatement of Torts to denote the fact that the actor is required to conduct himself in a particular manner at the risk that if he does not do so he becomes subject to liability to another to whom the duty is owed for any injury sustained by such other, of which that actor’s conduct is a legal cause. Restatement, Second, Torts § 4. See Care; Due care.

In its use in jurisprudence, this word is the correlative of right. Thus, wherever there exists a right in any person, there also rests a corresponding duty upon some other person or upon all persons generally.

Duty to act. Obligation to take some action to prevent harm to another and for failure of which there may or may not be liability in tort depending upon the circum­stances and the relationship of the parties to each other.


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FHA Loan Sales Good News and Bad News

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——–>SEE TABLE OF CONTENTS: WHOSE LIEN IS IT ANYWAY TOC

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Editor’s Comment:

With the Federal reserve and FHA and soon other agencies selling off their loans it is true that the homeowners will be getting calls inviting them to accept new mortgages at much lower rates and principal owed. But the reason is that the Banks have figured out is that if you can just get a signature from the homeowner who is getting screwed in foreclosure, the Bank’s potential liability for all their illegal activities is greatly diminished.

 

And the fact that the signature of the homeowner does absolutely nothing to clear up title in most cases. The payoff on the old loan was inevitably to a party picked at random from the list of participants in the securitization chains that were created on paper and then totally ignored. When the homeowner gouges to sell or refi his home in a few years, we will have another crisis on our hands because the title won’t be clear by any conventional standards of title analysis.

 

So this “opportunity” is much like the settlements that suddenly appear when the Master Servicer (not the sub-servicer with whom the borrower has transacted business) is ordered to open up its books. The fact is that they used Master Servicer or investment banking escrow accounts where the money from all investors was intermingled in a superFund account where the Wall Street banks kept the money on a tight leash and once again, as they do every 20-30 years or so, totally screw up the paperwork. The difference is that this time the paperwork was screwed up not only between themselves but with the consumers and government agencies.

 

This time, internal sources are telling me independently of one another, that the securitization chain was and is a paper tiger.  There never was  and is not currently anyting in the pools or trusts. In fact, the only thing on paper going into the trusts are bad loans already declared in default and they are going in years after the cutoff date allowed by law and the terms of the pooling and servicing agreement and prospectus. Pension funds are getting a shorter end of the stick than the homeowners, if that is possible. They bought and advanced funds for good loans and all they are getting in return are bad loans that never did conform to the restrictions in the PSA.

 

It isn’t just a technical matter that there was no acceptance of the offer of the assignment. That is a given. who would want a loan that was already declared in default unless they had some other way of satisfying the loan balance in some other way through a co-obligor — like a sub-servicer whose sole action to recover from the homeowner is through a cause of action called “contribution.” That obligation is clearly NOT secured. That action arises out of a contract between the lender and the sub-servicer. There is no contract, note or mortgage between the sub-servicer and the borrower.

 

The question remains in these sales is “what are they really selling.” What is it that the agency “acquired?” What warranties are they giving on the sale of the loans? From whom did they acquire the loans and what due diligence was performed besides taking the bank’s word for it that they owned the loan? Here is the truth: with the REMICs totally disregarded by CDO managers and all the money being in a co-mingled Superfund account it is virtually impossible to determine the indentity of the the “partners” in the loan from the SuperFund because it is impossible to determine the relative amounts of money advanced by pension funds and other investors at the moment the funding took place. What we DO know is that the the loans were sold forward but the loans that were sold forward were based upon paperwork that recited transactions that didn’t exist and never did and never would (thus making the forward sale a civil or criminal fraud). We do know that the claims of ownership from the banks and servicers were at best claims of conveience without substance. So what did the agencies buy and why did they not do their due diligence? Why are we doing the investigation that the FHA and Federal Reserve shold be doing? Why is the burden on the homeowner to discover facts that are readily available to the agencies and law enforcement? When will homeowners stop getting screwed?

 

If none of the elements of a perfected mortgage lien are present, why are we pretending they are there? If removing the illegal mortgage lien and leaving the parties to fight it out or settle the amounts due would revive the economy, why are we not doing that?

 

Why are we substituting new rules of evidence and civil procedure that are created by each judge for the long-standing laws, rules and procedures developed over hundreds of years of common law? How long will we let banks run the system?


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