A Brief Summary of Thoughts on Yvanova Decision

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see http://www.prnewswire.com/news-releases/court-decision-to-shake-up-lending-market-says-leclairryan-attorney-300226113.html

Lawyers for banking are advising banks to brace themselves. The

party for them may be nearing its end. Here is a quote from one of the bank lawyers:

“The Supreme Court’s recent ruling in Yvanova v. New Century Mortgage Corporation will have a profound impact on the lending industry,” said McWhorter, whose practice focuses on representing financial institutions and business entities in commercial, business and bankruptcy litigation. Under the ruling, a borrower can challenge a non-judicial foreclosure sale by alleging that there was a break in the chain of assignments of the beneficial interest in the deed of trust and that sale was void.

“This decision strikes down a long line of decisions that stood for the proposition that defaulting borrowers lacked standing to challenge such assignments,” noted McWhorter. “This decision may increase the filing of wrongful foreclosure actions against lenders, challenging the validity of the assignments based on alleged violations of pooling and servicing agreements by lenders.”

“Although the Court itself called its ruling a narrow one, the implications are quite wide: many courts look to California for legal leadership, so this case could have national ramifications,” McWhorter said.

I have not completed analyzing Yvanova. But here is my current summary of its significance.


First, it stands for the proposition that if the assignment of mortgage is void (not voidable) then it has no legal effect and it cannot be ratified by anyone, because you can’t make a void act legal just by saying it is legal. That is something the banks have been getting away with for ten years. Judges were proceeding on the assumption that the borrowers owed money to SOMEONE it doesn’t matter to whom the debt is owed. The Yvanova Court recognizes that this is a dangerous assumption and is not a legal presumption.


It’s dangerous because it leads to what we have seen — a complete stranger to a transaction making a claim simply because they think they can get away with it. If that was the law, then people would be mining for “debts” and then suing on them regardless of the fact that the alleged “debt” was owed to someone else with whom the claimant had no legal relationship. This would lead to chaos.


So Yvanova stands for the proposition that if a foreclosure is initiated or completed at the behest of a party who is relying upon a void assignment, then that foreclosure is wrongful, and the borrower is entitled to damages. It might lead to a decision on title issues as well. Inferentially it also means that the investors whose money was used for this scheme also have an action for damages against an intermediate party who used self help to make it appear that they spoke for the unidentified “investor.”


The Yvanova court takes a strong stand on a very common sense notion — that only the owner of the debt can sue to collect or enforce the debt. And both tacitly and expressly the Yvannova court dispenses with the idea that it is more important to save the banks and their progeny than to apply the rule of law. The Glaski case is reaffirmed and the court reverses prior inconsistent rulings of other California appellate courts that somehow borrowers had no legal standing to attack ownership of the debt. The banks have been relying upon alleging that they are the “holder” of the note and arguing that ends the discussion. That would only be true of they purchased the note, which they did not. It would also be true if they had purchased the debt, which they never did.


And the fact that the Yvanova court chose to say that only the owner of the debt could collect or enforce is monumental, because this is the first clear cut decision that drills down to the reality of the fake transactions by which the banks have created a huge network of false transactions or transactions based upon a false premise — that the REMIC Trusts were actual owners of the debt. So Yvanova aims squarely at the strategy of the banks of alleging they are “holders” and then arguing to the court that they are “holders in due course.”  If the Trusts were holders in due course then they would allege that in litigation and it would mean they paid for the paper (the note) and therefore would take delivery of the note free and clear of any borrower defenses. Payment changes everything.


The change in judicial attitude is reflected on the Eastern seaboard in Florida where judges are listening more carefully to the arguments of alleged borrowers. Yesterday Patrick Giunta, Esq. obtained an order from a Florida judge in a foreclosure case where the discovery items were compelled — the foreclosing party must deliver documents and answer questions that heretofore had been just out of reach of homeowners who were saying to the foreclosing party “I owe you nothing. You are not my creditor.”


Now that the Courts are drilling down to the real transactions, the Wall Street Scheme of proprietary false initial offerings of false mortgage backed securities will start to unravel. In the analysis that I do of each case file where we are hired to perform a review and commentary, these new case decisions will figure strongly in my reports.

SEC Corroborates Livinglies Position on Third Party Payment While Texas BKR Judge Disallows Assignments After Cut-Off Date

Maybe this should have been divided into three articles:

  1. Saldivar: Texas BKR Judge finds Assignment Void not voidable. It never happened.
  2. Erobobo: NY Judge rules ownership of note is burden of the banks. Not standing but rather capacity to sue without injury.
  3. SEC Orders Credit Suisse to disgorge illegal profits back to investors. Principal balances of borrowers may be reduced. Defaults might not exist because notices contain demands that include money held by banks that should have been paid to investors.

But these decisions are so interrelated and their effect so far-reaching that it seems to me that if you read only one of them you might head off in the wrong direction. Pay careful attention to the Court’s admonition in Erobobo that these defenses can be waived unless timely raised. Use the logic of these decisions and you will find more and more judges listening with increasing care. The turning point is arriving and foreclosures — past, present and future — might finally get the review and remedies that are required in a nation of laws.


Courts and SEC Drilling Down on Reality of BANK Fraud.

The effects will be far-reaching. The complexity of the false securitization scam was intended to shield Wall Street from continuing its endless pattern of conduct of fraud, misdeeds, perjury and other crimes and other acts of contempt for the courts. The result was that the entire finance system and the economies of the world were turned upside down. Now we are going to see them turn right-side up.

It has taken years, but the SEC and the Courts are now unraveling the mysteries behind the secret curtains of the scam of securitization, which turns out to be nothing more than a cover for a giant PONZI scheme that fell apart as soon as investors stopped buying mortgage bonds. That is the hallmark of PONZI schemes — using the new investor money to pay the expected returns to the older investors.

If it was a legitimate business plan, the failure of the investors to buy more mortgage bonds would have no effect on the rest of the system. Each bond, each mortgage would have either succeeded or failed on its own merit. But that is not what happened.

As can be seen by the decisions noted below, Wall Street defrauded investors on many levels, defrauded the government, and defrauded the borrowers on mortgages they knew with certainty would never survive even a few months.

In confidential deals, the banks entered into agreements to be compensated for the failure of the mortgage bonds and defaulting loans and then simply lied to regulators, investors and borrowers — and kept the money for themselves instead of turning over the money to the investors who were going to lose more money than they had ever dreamed on “triple A” rated “insured” and “hedged” (credit default swaps).

The SEC is now ordering Credit Suisse (and soon others) to disgorge $60 million that clearly should have been paid to investors and thus reduced the accounts receivable of investors. A much better educated SEC and much better educated Judges are peeking behind the curtains and they don’t like what they see. These decisions are, in my opinion, the precursors of a wave of decisions that overturns the entire foreclosure tragedy.

The bottom line is that investors funded the mortgages (plus a lot of fees and “proprietary trading profits” that were hidden from the investors and indeed the world), the banks stole the money, the accounts due to the investors is much lower than what is alleged in foreclosure actions, and none of the foreclosers have any right to be in court because (a) they have no capacity to sue in the absence of financial injury caused by the borrower and (b) they are relying on assignments that in the eyes of the law never happened. They not only didn’t lose money, they made more money than most people imagined. Now they are being ordered to pay back the money they promised to investors whose losses will be correspondingly reduced.

How this will be apportioned to the principal balance supposedly due from borrowers has yet to be determined. But it is clear that the receivable from the only real lender is being reduced by the amount of money received by the intermediaries in the securitization chain — in deals that were intended to defraud investors on two levels — not giving the money that the investors should have received and withholding disclosure about the actual quality of the loans.

The reduction in loss or accounts receivable of the investors should proportionately reduce the amount due from borrowers, which means that most foreclosures were based upon a number of false premises: a balance due, a default by borrowers, and the right to submit a false credit bid at auction from a non-creditor on a “foreclosure” that should never have occurred in the first place. Ownership of the note can only be proven if the would-be forecloser received the actual note (not a photo-shopped “original”) in a transaction in which it paid money pursuant to the actual authority to enter into the transaction. That is three elements: the real note, real ownership of the note and real authority to enter into the transaction by which the loans were allegedly assigned years after the cut-off date. The authority for this position is (a) New York Law, (b) the Internal revenue Code, (c) constitutional requirements of due process, (d) the UCC requiring an instrument to be “negotiated rather than just delivered (meaning payment was involved) and (e) common sense, to wit: lenders are entitled to be repaid but only once.

It has been argued here that the REMICs were ignored and that therefore they could not possibly be in the ownership chain of the note and mortgage. We have also argued that the originator of the mortgage has originated nothing if they didn’t pay anything.

With the help of the SEC and the these two court decisions we can see that there are many reasons why the REMIC could not be the owner of the loan and that no party in the securitization chain could be secured unless we invent a new entity in which all the parties in the securitization chain are rolled into one entity.

In the absence of such an entity or the lawful ability to create one retroactively we are left with an unsecured debt — the amount of which runs the gamut from the banks owing the borrower money to the substantial reduction of the principal due after credit is given for the ill-gotten gains stolen by the banks from the investors. Given these facts, there is no legal justification for even contemplating the purported existence of a default by the borrower since the amount due, and the amount of the required payment are both unknown without an accounting from ALL parties in the securitization chain.

If the cut-off date and the Internal Revenue Code and the Pooling and Servicing Agreement all state that any transaction assigning a loan after the cut-off date is not allowed, then the assignment is void. Add to that New York law that expressly states that the transaction is void, not voidable, (see below) which means that legally it never happened. Without a valid assignment, there can be no foreclosure. Add to that the lack of any consideration, and you have a dead shark on your hands —something that struck fear into the hearts of homeowners, governments, and investors but is now lying, gasping for breath, as the finale nears.

There is nothing left to hide because the doors are all open. It will still take years to unravel the financial mess, but now we have a chance to change policy and direct relief to where it belonged all along — to the investors who supplied the money and the homeowners who were duped into crazy, exotic mortgages that hid the real objective: foreclosure.

REQUIRED READING: Read Carefully and Take Notes

Plaintiff’s ownership of the note is not an issue of standing but an element of its cause of action which it must plead and prove.(e.s.) … 

dismissal on a pre answer motion by the defendant and are waived if not raised in a timely manner.” (e.s.) Wells Fargo v Saitta 4/29/13 Slip Op 50675


In fact, the identity of the owner of the note and mortgage is information that is often in the exclusive possession of the party seeking to foreclose. Mortgages are routinely transferred through MERS, without being recorded. (e.s.) The notes underlying the mortgages, as negotiable instruments, are negotiated by mere delivery without a recorded assignment or notice to the borrower. A defendant has no method to reliably ascertain who in fact owns the note, within the narrow time frame allotted to file an answer. In light of these facts and the fact that Defendant contested the factual allegations asserted in Plaintiff’s pleading, Defendant’s general denial is sufficient to contest whether Plaintiff owns the note and mortgage.”

4th paragraph, page 11

“Since the trustee acquired the subject note and mortgage after the closing date, the trustee’s act in acquiring them exceeded its authority and violated the terms of the trust.The acquisition of a mortgage after 90 days is not a mere technicality but a material violation of the trust’s terms, which jeopardizes the trust’s REMIC status.”

This SEC decision is one that deserves several readings. It essentially condenses 6 years of teaching on this blog into one decision, although they have still not quite drilled down all the way on the money trail. But they have drilled down far enough to discover that the banks made settlements on buy-backs, kept the money and didn’t give to the investors because (1) they wanted to keep it for themselves and (2) the huge number of early defaults would have led the investors to question whether industry standards were being followed in the underwriting of these loans. Had that happened, the well would have dried and nobody would be buying mortgage bonds because they would be revealed as PONZI certificates.
Even if you have been following this blog for years, as I know many of you have done, reading this decision from the SEC will bring it all together as to who , what, where, why and when. Anyone who takes another step in litigation without reading this is stepping into the darkness.
Next Case: Saldivar
And then there is this: the assignment is void, not voidable and therefore the banks can’t attack the ability of the homeowner to attack the assignment since they are arguing that the assignment never really took place. It puts the burden of proof back on to the banks, where it belongs — a burden they cannot sustain because they cannot prove anything that would give traction to their position of keeping the money, taking the houses, taking the insurance taking the credit default swap proceeds, and taking the federal bailouts, all without giving an accounting other than the subservicer’s partial snapshot consisting of accounting records reflecting ONLY transactions with the borrower, neither proving nor offering to prove the validity or existence of the assignment. What you have essentially is what I have said a few times before on this blog — offer, without acceptance or the right to accept and no consideration.
This decision is important because of the reasoning, the logic and most importantly the application of New York law. Virtually all the REMIC trusts were common law trusts formed under New York law for a lot of reasons. So this decision is extremely important as persuasive authority in its finding that if the REMIC is closed, there is nothing to make the assignment TO after the close-out date, which as the Judge points out is the start of business for the trust.
He reasons that if the assignment after the close out date could be ratified then it is voidable and not void. If it is voidable then the homeowner has no standing to challenge the validity of the assignment. But, the Judge says if the assignment was void ab initio then there is nothing to ratify because the event never happened. If the event never happened then the homeowner does have standing to challenge the validity if the assignment. Essentially the homeowners saying that he denies there was any assignment. If there was no assignment then any action by the assignee is without any right, justification or excuse.
It is potentially standing which is jurisdictional to be sure but it is in personam jurisdiction now instead of subject matter jurisdiction — or perhaps both.
As pointed out above, the capacity to sue involves the basic elements of any lawsuits for money or equitable relief based upon a money debt: (1) duty, (2) breach of duty, (3) injury and (4) causation — the injury was caused by the borrower. As pointed out by these cases, NONE of the required elements are present and therefore, there is no capacity to sue. Capacity to sue is close to the issue of standing but it isn’t the same thing. While standing involves jurisdictional issues over the parties, capacity to sue involves jurisdictional issues over the subject matter. There is no subject matter jurisdiction unless the foreclosing party can make a case for stating the four elements of any lawsuit.

The keys here are the Judge’s citation to two things. First that the law of New York says it is void and the court must use the laws of the state of New York — a position mercilessly pounded into the courts by the banks. Now that position is blowing up in their faces. Second, he points out that under the Internal Revenue Code contains huge penalties and negative economic consequences if the REMIC was still accepting assignments after the cut- off date. Thus the Judge used reason, logic, New York law, and the negative effect imposed by the IRC if the REMIC provisions were violated. We might also add that the PSA contained the same restrictions. He concludes that the assignment 3 years after the cutoff was void, not void able and that it was void ab initio which means that there was no effective assignment despite the fabrication of a piece of paper.
This puts Deutsch and others who have stated they are the trustee for the REMIC in a no-win position. To the extent they have corroborated the assignment they have delivered an economic blow to the investors in the REMIC — and are now subjected to potential liability in the trillions of dollars. If they have not tried to back up the assertions of those bringing foreclosure then they clearly won’t do it now. And it explains why no actual signature for an actual Deutsch officer or employee is on any document used in bringing the foreclosure.
The further interesting point is that this is the fire in the brush that flushes the investors out. They must corroborate what we have been saying — that their agents violated the restrictions of the pooling and servicing agreement and that they, the investors, cannot be held to be bound to the ultra vires actions of their agents. And it raises the question of what else did these intermediaries do that violated the terms of the investment in mortgage bonds? It raises, most importantly, the question of WHY they violated the terms of the PSA and prospectus.
The only rational answer is MONEY — like the insurance and CDS proceeds. But beyond that and tantalizingly raised in this decision is — if the investors gave up money and it wasn’t through the REMIC — then you have two choices, to wit: either they invested in nothing or, as I have repeatedly stated on the blog and in my expert testimony, they became involuntary common law partners in a common law general partnership.
This raises issues that Wall Street wants to stay very far from. All their authority comes from a PSA that is now revealed to have been violated resulting in the inescapable conclusion, using the logic from this Texas bankruptcy judge, that Wall Street has no power over these transactions — including servicing loans. This means we can insist on the identity of the investors and that the ONLY people to go to for HAMP are the investors or some new authorized agent. But remember that in a true common law general partnership with no documentation there are some real knotty problems as to how investors could hire a Servicer without 100% of the holders of what might indivisible interests in loans, insurance proceeds and credit default swaps bought with money from the investors.


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This pleading has several elements worthy of note and seem well-pleaded. Some of the “juicier” ones are toward the end. The key concept is that under recent decisions, any foreclosure and/or dispossession by MERS is VOID AB INITIO (FROM THE START, WHICH MEANS TREAT IT AS THOUGH IT NEVER HAPPENED].

Michigan had been a tough state, which is why the writers of this complaint went  to the unusual step of quoting a recent case. The issue at hand that lawyers are bringing to the attention of the courts is that there are, at a minimum, some 5 million transactions that took place relating to foreclosures that were nothing more than wild deeds.

The mistake made by the banks is that they are reassuming “what’s done is done” will take care of the title problem. Title problem don’t go away by magic. The ONLY solution to the title problem in those transactions (probably closer to 15-20 million when you consider resales and refi’s) is by getting the original homeowner’s signature ratifying the foreclosure.

Because under law, as it should be, the title registry at the county recorder’s coffice gives notice to the world the identity of the owner of the property. Were it not for political and economic pressure, no title examiner would even consider the title to be in any name other than the homeowner despite the foreclosure. Not even Wall Street can make this go away. If they get their way, Wall Street’s pernicious effect on the marketplace will become enlarged geometrically because it would mean that nobody would know if they were actually getting title on property they were buying and nobody would know if they were getting a lien on property they were financing.

Michigan was a difficult state to plead a case against MERS until April of this year. This class action, in which the damages probably are vastly understated, goes the extra step of quoting decisional law to justify revisiting the MERS question, as every state MUST do if they want to solve the puzzle of corrupted title.

“On April 21, 2011, the State of Michigan, Court of Appeals in the consolidated case of Residential Funding Co., LLC v. Gerald Saurman, (Residential Funding Co, LLC v. Saurman, 290248, 291443 (MICA)), issued a ruling stating in pertinent part that in cases where MERS did not own the underlying indebtedness, did not own an interest in the indebtedness secured by the mortgage, or did not service the mortgage, MERS was therefore unable to comply with the statutory requirements of MCL 600.3201(1)(d), and subsequently had no right to foreclose by advertisement.

“The Court of Appeals continued, and ruled that in those such cases where MERS did foreclose by advertisement upon the foregoing conditions rendered those foreclosure proceedings void ab initio.”

The causes of action are the following:

  1. INJUNCTIVE RELIEF AND DECLARATORY ORDER: Plaintiffs and Class Members request an appropriate order of this Court declaring the foreclosure actions of Defendant MERS as described herein void ab initio. [ab initio means from the start, which is to say it should be treated as though the foreclosures never happened. That means the homeowner who was “foreclosed” is still the woner and rightful possessor of the property, a result which I believe to be absolutely inevitable and necessary to preserve the sancity of the rule of law].
  2. FRAUD AND MISREPRESENTATION: Defendant MERS did misrepresent facts, or purposely fail to disclose material facts, in prosecution of non-judicial foreclosure.
  3. CONVERSION: Defendant MERS and others engaged in a continual course of conduct, pursuant to which they wrongfully dispossessed and/or disposed of the real property of the Plaintiffs and Class Members. Defendant MERS and others converted these properties into cash which they received through the sale of the subject real properties or by their acquiring title thereto.
  4. TRESPASS: MERS trespass and invasion of Plaintiffs and Class Members rights and property was willful, wanton, reckless and malicious.
  5. THEFT: MERS through their acts and omissions did commit theft upon the Plaintiffs and Class Members, whereby they fraudulently took the property of Plaintiffs and Class Members, without their consent, intending to deprive them of the value of their property, and to appropriate said property to their own use or that of a MERS member.
  6. WRONGFUL FORECLOSURE: Defendant MERS through their acts and omissions did wrongfully and illegally foreclose upon Plaintiffs and Class Members through the means of a non-judicial foreclosure.
  7. VIOLATION OF MICHIGAN CONSUMER PROTECTION ACT: Through their acts and omissions in the commission of their illegal foreclosures, Defendant MERS did violate the Michigan Consumers Protection Act MCL 445.901 et seq.
  8. VIOLATION OF THE FAIR DEBT COLLECTIONS PRACTICES ACT: (Federal) The acts and omissions of Defendant MERS involved transactions which were primarily for personal, family or household purposes. In the collection of a debt Defendant MERS did utilize means, methods and conduct which served to harass, oppress and abuse Plaintiffs and Class Members.
    97. In the collection of a debt Defendant MERS did utilize means, methods and conduct which were false, deceptive and/or misleading.
    98. In the collection of a debt Defendant MERS did threaten and utilize unlawful and prohibited actions.
    99. In the collection of a debt Defendant MERS did utilize unfair and/or unconscionable collections means.
    100.    In the collection of a debt Defendant MERS did fail to provide required written notices to Plaintiffs and Class Member.


    DEMAND FOR PUNITIVE DAMAGES:  taking PROPERTY pursuant to foreclosures by advertisement against Plaintiffs and Class Members was unauthorized, without right, illegal and in violation of MCL 600.3201, et seq. Such taking by MERS, or any other party, places a cloud upon the title ownership to the affected real property.
  2. ACTION FOR POSSESSION/REPOSSESSION: Any title relative to the affected real property to the mortgagor Plaintiffs and Class Members obtained by MERS, or any other party, pursuant to attendant sheriff sale is void ab initio per the ruling of the Michigan Court of Appeals dated April 21, 2011.
  3. INTERFERENCE WITH POSSESSORY INTEREST: Defendant MERS did illegally and without authorization, substantially interfere and negatively affect Plaintiffs and Class Members rights and interest in the affected real property. Pursuant to common law and MCL 600.2918, …. illegal acts and omissions, Plaintiffs and Class Members are entitled to damages in an amount in excess of One Hundred Million Dollars ($100,000,000.00) and possession/repossession of their affected real property.
  4. UNJUST ENRICHMENT: Due to Defendant MERS acts of wrongful foreclosure, Defendant MERS has been unjustly enriched through wrongful possession and the receipt of the proceeds of sale of Plaintiffs and Class Members affected real property. Due to Defendant MERS acts of wrongful foreclosure, Defendant MERS has been unjustly enriched by their willful circumvention of the requisite judicial foreclosure process.
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