UNFUNDED TRUSTS: WHY IT MATTERS

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On tonight’s show we will talk about the alleged trusts that allegedly own the loans. In most cases, they do not own the loan nor do they represent the interests of the owners. The owners of the DEBT are the investors who advanced money to the investment bank that sold mortgage bonds to the investor (pension fund). There are two main reasons why this is important:

  1. An unfunded trust has no money to buy or originate loans. Therefore it is an improper party to bring any action to collect or enforce the debt. This is especially true when the unfunded trust has no legal claim to enforce the loan on behalf of the owners. The REMIC Trust should not be allowed to cause a foreclosure, or interfere with the rights of borrowers and investors. Its “servicers” have no right to collect money and when they do collect money from the borrower, they owe the money back to the borrower who paid it to the servicer. This has been discussed in cases highlighted on this blog over the last week.
  2. The unfunded trust is evidence of a fraudulent scheme in which the investors (pension funds) were tricked into advancing money to an investment bank who then misused the money, didn’t deliver it to the trust that issued the mortgage bonds that were sold, and then acted as a conduit between the investors and the borrowers — without either one knowing what was really happening. In a foreclosure, this means that the alleged enforcement of the loan is really furtherance of the fraudulent scheme against investors. Raising this issue does NOT mean there is no debt. It means, in most cases, that foreclosure is not an option because the perpetrators of the fraud and the initiators of the collection and enforcement of the alleged “loan” are one and the same. Hence the Court SHOULD be interested in not being part of a fraudulent scheme. It is a classic case of unclean hands.

The issue is proof and mores specifically the willingness of the court to let you prove your case. This comes down to pleading, discovery, motions to compel that spell out your narrative for the case and investigation through forensic auditors and private investigators. Unfunded REMIC Trusts represent a potential attack against the party initiating foreclosure that can be fatal to their claim if properly presented.

As a general observation these attacks are met with claims of presumptions when dealing with negotiable paper, and the claim that the borrower has no standing to raise the issue. But the borrower clearly does have standing to raise the issue if the borrower is claiming return of all money paid and claiming that the foreclosure action is part of a fraudulent scheme to the detriment of the real creditor and the detriment of the borrower, both of whom under Federal Law are required to pursue options for modification or settlement.

And the legal presumptions only apply to paper that is truly negotiable and where there is no evidence of trustworthiness or lack of credibility. The recent transfers from Chase and other entities to SPS are not really transfers of servicing rights. The “loan” is clearly already declared to be in default — making the claim of negotiable paper (and the presumptions) moot. So the entrance of SPS or another “servicer” under these circumstances is just another layer to fool the court and the borrower.

They are merely hiring SPS to

(a) enforce, because SPS is not processing payments from the borrower nor making payments to the investors (that is done by Chase or whoever is the the named servicer in the PSA) and

(b) create the illusion of business records by having an SPS representative testify that the business records of SPS should be admitted because SPS examined the prior records of the prior servicers and found them to be correct in what they call a “boarding” process. This is a blatant attempt to circumvent the rules of evidence. Both the attempt at creating legal presumptions regarding the note and mortgage and the attempt to use the business records of an “enforcer” posing as a “servicer” should be rejected.

THIS ARTICLE IS MY OPINION AND SHOULD NOT BE USED AS A SUBSTITUTE FOR THE ADVICE FROM AN ATTORNEY LICENSED TO PRACTICE IN THE JURISDICTION IN WHICH YOUR PROPERTY IS LOCATED.

Now that you have won your “free “house, what happens next?

For further information please call 954-495-9867 or 520-405-1688. We provide litigation support in all 50 states.

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On an upbeat note, we are getting more and more communication from homeowners who have won their cases outright and not subject to confidentiality agreements. Fortunately these happy homeowners have realized that the fight is not yet over but that they are obviously in control of the narrative. A word of caution about the case cited in yesterday’s article where the Judge granted a “free house” to a homeowner. The New Jersey bankruptcy case is potentially persuasive but legal authority that the Judge in your case must obey.

Banks have gone to great lengths in framing the narrative on these mortgages and these foreclosures. Almost everywhere you hear the phrase “free house.” Of course nobody really knows what anyone means by that phrase. “free houses” are a myth, just like the trusts, the assignments and the “holders” of the note and mortgage. Preventing the mortgagee from enforcement does NOT give a free house to anyone, regardless of the circumstances. It is a rare circumstance that the buyer of the new house does not expend thousands of dollars or tens of thousands of dollars or even hundreds of thousands of dollars on the house that they think they now own.

I know thousands perhaps millions put a down payment into a house thinking that their payment was equity they would retrieve when the house was sold or refinanced. A typical case I have witnessed is a home purchased for $500,000 with $100,000 down payment —- 20% of the purchase price based upon appraisals that wildly speculative and untrue.

Then the house gets sold in a short sale for $300,000. If that homeowner had fought the bank and the bank was found not to be the owner of the mortgage or note or debt and the mortgage was found to be unenforceable or even void, did that homeowner get the house for free. $100k down, plus $50k in improvements, furnishings etc. The homeowner is out $150,000 no matter what happens and that is not free. There is no such thing as a free house and there never was. But mortgages and notes are sometimes ab initio (from the start), unenforceable or void and in today’s market most of them fall somewhere in that category.

And there is an area of confusion between property law, bankruptcy law and contract law. Which brings us to the case decided in New Jersey by a bankruptcy court judge. It is the case of Washington versus specialized loan servicing and the Bank of New York Mellon as trustee for the certificate holders of an allegedly asset-backed trust.

This case is far from a cure all that will fix all other foreclosures. I doubt the Judge had jurisdiction to declare the mortgage void. And therein lies a potential problem for the homeowner that won here. The homeowner might lose on appeal or still have a problem even if the bank’s appeal is turned down.

I will point out again that Bank of New York Mellon represents itself as trustee for the certificate holders and old minutes any representation for the trust itself. One might conclude that the trust does not exist and that the certificate holders who obviously are the investors are the real parties in interest as I have repeatedly stated for more than seven years.
And by the way, NJ does not have a homestead exemption, so the debt, which is real and if it can be computed after giving credit for all payments to the creditors from all sources, is still owed and the homestead can still be foreclosed based upon a money judgment. So a free house is just not the right term to describe any of this.

I don’t think the judge realized that the investors were being directly represented by Bank of New York Mellon and that the reference to the bank as a trustee was merely a self-serving statement by the bank in order to block any inquiry into the identity of the certificate holders who were the obvious real parties in interest. In the months and years to come the distinction which I am drawing here will become increasingly important in court rooms across the country.

The bankruptcy judge carefully analyzed the statute of limitations and concluded that there was no way that the loan could be enforced and that therefore the claim in bankruptcy was void. The judge that he didn’t like to give anyone a free house but that was what he had to do in this case in New Jersey.

The foreclosure case in the state court was dismissed for lack of prosecution without prejudice. The effect of that dismissal was one of the things that was in dispute that the bankruptcy judge decided. The bad news is that I am not so sure this decision will be upheld if it is appealed. But even if it is upheld I’m not so sure that the homeowner actually received the free house that the judge expressly said was being given to him by the judges decision. Bankruptcy Judges are known to have an inflated view of their jurisdictional authority. The District Court Judge above him in the same courthouse might have been able to declare the mortgage void, but I doubt if a bankruptcy judge has that authority. But the decision to prevent enforcement of the mortgage in the bankruptcy proceeding and the decision to cause the alleged creditor to be unsecured instead of secured (which is what I have been advocating for 7 years) is probably valid.

The judge decided that both the note and mortgage were unenforceable. He also decided that because they were unenforceable that Bank of New York Mellon did not have a secured claim for purposes of the bankruptcy proceeding. The judge went further than that by stating that the underlying lien is deemed void pursuant to 11 USC 506(a)(1) and (d). So for purposes of that bankruptcy proceeding court made a determination that Bank of New York Mellon did not have secured status. The Court also seemed to accept the agreement of both size that Bank of New York Mellon or a specialized loan servicing had the original note and mortgage.

The Question I have is the same question that Is being asked in many circles today. When all is said and done the mortgage still is present in the county records — it was recorded so it still exists in the county records of the County recorder in the jurisdiction in which the property is located. My question is whether in the absence of a court order stating that the mortgage is void or nullified, and in the absence of the recording of such an order at the county recorders office, will this homeowner be legally correct in assuming that the mortgage will not affect his title and that no payment will be required at the time the homeowner seeks to sell or refinance the property.

It may seem like splitting hairs and maybe It is. But I think there’s a difference between a lien that is in the county records and therefore encumbers the title answer the question of the enforceability of the lean. When you pull up the title chain by hand or by computer, the mortgage will be there. Would you buy that property without getting rid of that mortgage? Would you lend money on that property? In this case the Bankruptcy judge has decided for purposes of the bankruptcy proceeding that the secured status of Bank of New York Mellon did not exist.

I question whether that decision automatically means that the mortgage was in fact nullified or void unless the County recorder accepts the court order for recording and the recorded order is interpreted as nullification unemployed mortgage document. And THAT basically means you need to file a quiet title action, which bring you back to attacking the initial loan transaction ab initio (from the beginning). Unless you can say that the note and mortgage should never have been released from the closing table, much less recorded, I think there is a potential problem lurking in the shadows. The homeowner might be prevented from selling or refinancing the home without the AMGAR program or something like it.

Otherwise what it comes time to sell or refinance the property, the homeowner may find that he still must deal with either paying off somebody claiming to own the mortgage or the homeowner is required to file a quiet title action to resolve the question. Of course the longer the homeowner waits before taking any action to sell or refinance the property, more likely it is that the homeowner will in fact end up with the property unencumbered by the mortgage. My point is that I don’t think that question has been answered and I don’t think that the answer will be consistent across the country.

It is my opinion that nullification of the mortgage as a void instrument that never should’ve been released much less recorded is first required for the Court can consider of cause of action to quiet title in favor of the homeowner and specifically against the encumbrance filed in the county records as a mortgage. I would also Council caution on applying this bankruptcy case to other cases in the State judicial system even in New Jersey.

But I would also say that the distaste of people sitting on the bench for hey results that benefits the homeowner signals bias for which there is no proper foundation. There is no question that these loans, debts, notes, mortgages, assignments and transfers. collection modification and foreclosures are all clouded in obscure schemes created by the banks and not the borrowers. 50 million borrowers did not wake up one morning and meet in some stadium with the idea of defrauding the banks and the federal government and insurers, guarantors and investors. But a handful of Wall Street titans who had become accustomed to their power, did in fact arrogantly pursue a scheme that did defraud borrowers, investors, insurance companies and the U.S. government.

To say that nobody can file a foreclosure is not to say that the debt cannot be enforced. There are causes of action based solely on common law or the note. If a real creditor could step forward showing a real advance of funds, they would probably prevail in at least establishing that the debt is owed from the homeowner and possibly get a money judgment. In states that have little or no homestead exemption the lien can be recorded, attaches the chain of title for the house and can be foreclosed as a judgment lien. But of course that would require the party seeking to enforce the debt to show that they actually advanced the money as a creditor. And THAT is the problem for the banks. If they had that evidence there would be no argument over the enforceability of the alleged loan documents that I call worthless.

They would have produced it long ago if the notes and mortgages were valid documents. They didn’t, they can’t, and that is why Elizabeth Warren is absolutely right in demanding that the principal balance of the debt be corrected downward. And it is stink and no crime for a Judge to apply the law evenly and allow the chips to fall where they may. If that means nobody gets to enforce the mortgage it doesn’t mean the homeowner received a free house.

The debt is due, after all adjustments, and it could be enforced by other means — unless the truth is that the borrowers ARE off the hook because the original debt, upon which all other debts deals rely as their foundation, has already been paid off. Then the homeowner doesn’t owe the money on the original debt and if somebody wants to make a case against the homeowner for recovery of what they actually lost then let them bring that action. Otherwise too bad. If the original debt is paid off through any third party payment (i.e., if the certificate holders have received payment in full directly or indirectly on their investment), then there should be no possibility of a mortgage foreclosure because that is the only debt that is allegedly secured by a mortgage. Other parties who have been lurking in the shadows would have to come into the limelight and allege and prove their case including the allegation that they are losing money as a result of these complex and obscure transactions.

The banks started this and they should suffer the consequences. There is plenty of blame to go around. To have homeowners pay the full price for the bank’s misbehavior, for the servicer’s fraud, and the Wall Street bank’s greedy method of siphoning the life out of our economy is just plain wrong. Even if we want to treat the loan documents as real, the consequences should be spread around and not on banks who are reporting higher and higher profits from aggressive release of reserves that comes from money they stole from investors —- a fact that is now dawning upon securities analysts as they downgraded Wells Fargo and other banks.

NY Judge SPINS US BANK for BAD FAITH MISUSE of “TRIAL PAYMENTS”

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

ANOTHER “BANK” MODIFICATION SCAM ON HOMEOWNERS

EDITOR’S NOTE: Here is standard operating procedure throughout the industry. Once again, it is fraudulent. This example, the homeowners made $22,000 in payments (to a non-creditor) believing they were headed for a negotiated settlement based upon assurances from the pretender lender while the whole time they never had any intention of settling, modifying or anything else (no doubt because they were fraudulently representing themselves to be the creditor and couldn’t negotiate or modify anything at all).

Judge Spinner pierced right through all the foggy bottom arguments and paperwork and saw the behavior of US Bank for what it was — BAD FAITH. The result? The “plaintiff” got nothing. I would argue they should have received much more than that in the form of sanctions for contempt of court and attempted use of the court as vehicle for fraud, and the court is holding a hearing on that very issue. We’ll see what happens.

Judge SPINNER: “…while Defendants were assiduously attempting to re-negotiate a modification, plaintiff was instructing its counsel to continue prosecution of the foreclosure action. It is painfully obvious to this Court that Defendant relied upon representations made by Plaintiff and acted affirmatively based upon those representations, all to their serious detriment. ….’A Party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression…’ 124 NY at 179”

12.01.2010 NY JUDGE SPINNER-U-S-Bank-Natl-Assn-v-Mathon

FORECLOSURE FRAUD | by DinSFLA

http://stopforeclosurefraud.com

[NYSC] JUDGE SPINNER LETS U.S. BANK HAVE IT “HAMP FAIL” U.S. Bank Natl. Assn. v Mathon – 2010-12-03 20:01:34-05
Question where exactly these “trial payments” went U.S. Bank Natl. Assn. v. Mathon 2010 NY Slip Op 52082(U) Decided on December 1, 2010 Supreme Court, Suffolk County Spinner, J. The issue of the claim of the forbearance/modification agreement, however, is an entirely different situation, one that is considerably troubling to this Court. Defendants assert (and Plaintiff does not in […]

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