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May
21

California Foreclosure Laws Need Homeowner Bill of Rights

By | HAMP, Housing & Economic Research, Loan Modification, News for the Patriot

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My regular readers will likely remember past articles in which I stated that we would not win this battle over foreclosures by fighting individually in the courts.  I’ve stated on numerous occasions that we needed to bring political pressure to bear and fight this in our legislatures, both state and federal, because for our judges to be of more help, we need some new laws to be written and some older laws to change.

 

The fact is that over the last thirty years, as the financial sector was steadily growing in size it was increasing its ability to influence our legislative system.

 

While we were all in a debt-induced coma wandering around aimlessly at our respective shopping malls, the banking lobby was busy making sure that essentially every single state or federal law proposed, having to do with creditors and debtors, either blatantly favored, or at the very least tilted towards the creditor’s interests… certainly not the borrowers’.

 

Now, as we’re facing a crisis of unprecedented proportion, we’re learning the hard way that our rights as borrowers are almost non-existent.  In California and around the country, foreclosure defense lawyers saw that mortgage servicers could far too often pretty much foreclose at will using almost anything as documentation.

 

Mickey could sign it… Donald could notarize it, and it just didn’t matter very often.

 

I also came to realize that as far as messages go, saying that the courts would not be the answer we were looking for went over like a lead balloon.  And since telling people something that they hate hearing is no fun, I tried not to bring it up any more than was necessary.

 

The problem is, and I realized this yesterday… I WAS RIGHT… AM RIGHT. 

 

A few days ago I noticed that several California politicians were announcing a town hall type meeting on the foreclosure crisis that could be viewed online.  They were even soliciting questions from the general public.  (I submitted a few but wouldn’t you know it, mine weren’t chosen.)

 

Yesterday, I watched the video… it’s an hour long and you’ll find it below.

 

I also watched various individuals, from homeowners to housing counselors to consumer advocates, give testimony related to the proposed bills, and one thing came crashing through… I should have testified.

 

I would have made a significant difference.

 

What I learned watching both the testimony and the round table with the politicians was that the knowledge base of those making policy decisions related to the foreclosure crisis has much room for improvement and expansion.  Clearly, no one has filled them in properly in numerous areas.  And we are making a HUGE mistake by not marshaling our forces to get involved in the political process and make our voices heard.

 

 

State’s AG Backs California Homeowners Bill of Rights

 

In an effort to prevent now well-documented foreclosure abuses, California’s Attorney General has been pushing the state’s legislature to adopt a series of legislative proposals containing stricter consumer protections related to mortgage servicing and foreclosure.

 

The proposals are part of what’s come to be called the “Homeowner’s Bill of Rights.”

 

Politicians, no doubt recognizing that this was not a debate they wanted to be having publicly and desperate for political cover, decided to take many of the proposals out of the normal legislative process and place them instead into what’s being called, “a special conference committee.”

 

The special committee’s members, if it matters and I’m not at all sure that it does, include four Democrats and two Republicans.  State senators Noreen Evans and Ron Calderon… and Assembly members Mike Feuer and Mike Eng are the Democrats.  Senator Sam Blakeslee and Assembly member Donald Wagner are representing the GOP on the committee.

 

Party affiliation may not be important because just like all the past legislative proposals related to preventing abuses in the foreclosure process, the Homeowner Bill of Rights is vehemently opposed by the banking lobby.  And that means that the more important distinction will likely prove to be who is pro-banker and who is pro-consumer, or at least somewhat neutral.

 

So, how does the committee break down in that regard?  Here’s a quick look:

 

Noreen Evans appears to me to be pro-consumer, with stated policy priorities that include protecting the environment, fighting for women and children, and the reform of our legal system.  Currently, she chairs the Senate Judiciary Committee.

 

Also, her district covers Humboldt, Lake, Mendocino, Napa, Solano, and Sonoma counties.  However, and not that this in conclusive, she previously served in the State Assembly (2004-2010) and during that time she was a member of the Assembly’s Banking and Finance Committee.

 

 

Mike Feuer seems to be at least neutral, if not solidly pro-consumer.  He’s a graduate of Harvard College and Harvard Law School.  He chairs the State Assembly’s Judiciary Committee, but previously he co-chaired the Assembly’s Working Group on Jobs and Economic Recovery, and chaired the Budget Subcommittee on Transportation and Information Technology.

 

Also, while serving on the Los Angeles City Council, Feuer co-authored the Affordable Housing Trust Fund, funded meals for 75,000 indigent seniors, led efforts to create playgrounds accessible to disabled children, and bolstered the city’s Ethics Commission.

 

 

Ron Calderon is an ex-banker, and I think it’s more than safe to say that left to his own devices, he’ll vote with the banking lobby every single time.  Today, Calderon chairs the very influential Senate Insurance Committee, which I believe until recently was the “banking and insurance committee,” but during his two previous terms in the State Assembly, he served as chair of the Banking and Finance Committee.

 

Calderon says his policy priorities include a balanced state budget, strengthening state and local infrastructure, creating jobs, and protecting the rights of consumers.

 

The problem is that Calderon’s idea of protecting consumer rights is presumably what drove him to sponsor California’s SB 94, a bill signed into law by the governor in 2009, ostensibly designed to protect consumers from foreclosure scams, but that ended up doing nothing more than chasing legitimate attorneys away from helping homeowners get their loans modified.

 

Almost three years later, foreclosure related scammers remain ubiquitous in California, while now, in the hands of the State Bar, SB 94 threatens to make it literally impossible for a homeowner to hire a lawyer to help with a loan modification.  I understand why the Mortgage Bankers Association supported SB 94, but I for one don’t need or want that kind of “protection,” thank you anyway.

 

 

Mike Eng chairs the Assembly Committee on Banking & Finance, which oversees California’s financial institutions, real property finance, and corporate securities law.  The Committee develops and shapes public policy in such as areas as mortgage foreclosures, payday lending, regulation of state chartered banks and credit unions, consumer lending, and financial privacy.

 

That seems pretty conclusive, I understand, but watch him talk on the subject of the Homeowner Bill of Rights on the video below.  He makes clear that public support or the lack thereof is going to be a key driver of the committee’s decision.

 

 

Sam Blakeslee’s says he’s “known as one of the state legislature’s most bipartisan members,” and he chairs the Select Committee on Recovery, Reform and Realignment, which is described as a bipartisan Senate think tank.

 

But, Blakeslee is also president of his family’s business, the investment firm Blakeslee & Blakeslee, founded in 1971.  He is a Certified Financial Planner, a Registered Securities Principal, and a Registered Municipals Principal.  So, I don’t know what all that means, necessarily, but I’d say it’s worth keeping an eye on this guy for sure.  Maybe he’s the state’s most bi-partisan banker.

 

 

And finally, Don Wagner, the Vice-Chair of the Assembly Judiciary Committee, is from South Orange County (I live in North Orange County, by the way), and it looks to me like he’s a typical Orange Country conservative Republican… he ran for his seat in the State Assembly on a platform of fiscal responsibility… which on its face, doesn’t bode well as far as his support for the Homeowner’s Bill of Rights goes.

 

His website says that his “district has not raised taxes, but by floating bonds, it has paid off all of its debts, and balanced every budget.”  So, does that mean that he floated bonds to take on the debt needed to pay off the debt?  I’m not trying to be funny… that’s what it says on his site.

 

Wagner’s a lawyer involved with the Orange County Bar Association and he’s served as a Judge Pro Tempore in the Superior Court of Orange County.  He also founded the Orange County Chapter of the Federalist Society, which is “a national organization of conservative lawyers, judges, and law professors committed to ensuring a judicial integrity and strict adherence to the Constitution of the United States.”

 

Were I a betting man, and I am, I’d have to bet he’s a vote against the Homeowner’s Bill of Rights, but I’m certainly willing to be proven wrong.

 

Scoreboard says…

 

So, based on that cursory analysis and absent any information to the contrary, I’d say that as far as the “special committee” goes, the score at halftime is:

 

BANKERS – 4                        CONSUMERS – 2

 

Under just about any other circumstances, I’d say that based on who the committee’s members are… the fix was in.  I’d stop following the Homeowners Bill of Rights and just wait to read bad legislative news once again… “Killed in committee, but thank you for playing.  The End.”

 

But, this time I’m not so sure how this will turn out, especially if I were to be successful at getting others involved… like I was with Norm Rousseau’s suicide, for example.  Or even half that successful would probably do it.

 

Which, of course, ultimately comes down to you.

 

Here’s why I think this time could be different:

 

  • Attorney General Kamala Harris is publicly backing the Homeowner’s Bill of Rights.  It’s the first thing you see when you visit her website.  And it’s an election year.

 

  • Servicer abuses and misconduct are now very well documented and widely known.  The DOJ settlement provides some $17 billion in principal reductions nationwide, and California gets the majority of that amount.  Plus, there’s another $8 billion involved.  That’s going to keep a light shining on whatever is happening for a while.

 

  • California is the third hardest hit state, but its size makes it number one by far.  Our state budget deficit is the result of the foreclosure crisis, and the austerity ahead is going to touch everyone’s life, not just those at risk of foreclosure, and last for several years.

 

  • This time, everybody’s watching, which is why the politicians pulled the Bill of Rights proposals into a “special committee.”  It’s dark in there and they’re hoping they can kill it without anyone seeing who done it.  But that’s not going to be easy this time around.

 

  • This time, maybe enough Californian’s have been affected by the crisis, or see that they’re about to be affected by the crisis, so they’ll actually take the time to send emails and contact their elected representatives… and ask that their friends and family do the same.

 

The only way this country ever gets onto a path not fraught with risk of pain, civil unrest, and violence is if some balance is restored.  The pendulum has been allowed to swing too far to one side… it can’t stay there… the question is how is gets pushed back.  As Robert Reich says in his brilliant book, “Aftershock,” the two choices are radical revolt or radical reform.  (If you haven’t read it I HIGHLY recommend it.”)

 

Regardless, the fact that our elected representatives still have such a rudimentary understanding of the crisis and its impact on our society is proof that we are failing to educate them.  Homeowners are spending more time talking about robo-signing than they are talking to their elected representatives at the state and federal levels.

 

I’m not saying we should stop anything.  But I am saying we need to significantly expand our communications capabilities.  And I know we can do so fairly easily…

 

… Norman Rousseau taught me that.

 

More people read, shared, forwarded and talked about the story I wrote about Norm’s suicide than any of the articles I’ve written in the past.  And that’s sad.

 

Consider the following 3 facts:

 

A. When it comes to our politicians, there’s only one thing more important than money in this country… and that’s getting reelected.  If politicians think banking lobby money is what’s needed to get them reelected, then they’ll vote with the banking lobby.

 

But, if they realize that by voting with consumers they won’t need banking lobby money to get reelected… and that if they do vote with the banking lobby, there’s not enough money in the world to get them reelected… why, then they’ll vote with consumers.

 

B. There are only two ways to gain real political influence in this country.  One involves having a lot of money, and on that front we’ll never win… they’ve got the money advantage cornered.

 

The other way to gain political influence is to have a lot of people, and that’s currency we should be able to come up with in the thousands, or even millions. Already, there are easily 20 million Americans that have been directly affected by the foreclosure crisis… enough to sway a national election if organized.

 

C. This is an election year.  Right now, in Washington D.C. those in the House of Representatives all know that soon, they’ll be coming home to campaign for reelection in their home districts.  And right now, they’re polling their constituents and likely voters to see what’s on their minds, because they don’t want to come home to find people throwing tomatoes at them.

 

If any one of them received 500 emails on the same topic right now, they’d start sweating like Rick Santorum at HomoCon-2012. 

 

(Or, maybe like… Tim Geithner at a Save My Home convention?  Pelosi on a duck hunt with Cheney?  Boehner at a Hallmark Film Festival?  G.W. Bush on Jeopardy?)

 

 

WE’LL WIN BECAUSE WE’RE RIGHT.

 

The special committee is reviewing what are considered to be the “more far-reaching of the proposals.”

 

So, what the heck does that mean?  Well, it includes things like a law that would, according to the San Bernardino County Sun…

 

“… prohibit foreclosures whenever a homeowner makes a timely application for a loan modification, mandate that banks establish a single-point of contact for borrowers facing foreclosure, and let borrowers challenge proceedings in court, among other things.”

 

Well, why didn’t you say so?  Good Lord, those things are incredibly “far reaching.”  In fact, I could have sworn that one of them just reached out from Sacramento and tickled my tushie some 400 miles away.  That’s some reach, I’ll tell you what.

 

Banking industry representatives are said to oppose these ideas on grounds that they may encourage strategic defaults and spurious lawsuits.

 

To which I would only reply: Prospice tibi, ut Gallia, tu quoque in tres partes dividaris.

 

(Latin, meaning: “Watch out, you might end up divided into three parts, like Gaul.”)

 

Come on, banking industry representatives… why would any of those things increase the probability for strategic default, or was that just all you guys could come up with on short notice.  What happened to, “there won’t be any more lending or borrowing costs will rise?”  Those didn’t make any sense either, but I was getting comfortable with them nonetheless.  Strategic default?  Phooey.

 

And spurious lawsuits?  I’m not sure we both understand what that word means, that is to say… I do… but do you guys?  Would you like to know what’s causing the spurious lawsuits in California?  I’ll be happy to tell you.

 

It’s SB 94, which was your idea in the first place, was it not?  Don’t try to tell me that it was Senator Calderon’s idea because clearly he’s a marionette.  You chase all the legitimate lawyers away from helping homeowners modify loans and what you get are spurious lawsuits by the hundred.  Haven’t you figured that out yet?

 

Attorney General Harris has said exactly what I was suggesting several months ago when the settlement was first announced, albeit a tad prematurely.  She said it’s important to strengthen due process by writing some of the provisions of the national mortgage settlement with the nation’s five largest banks into state law.

 

Finally, there is intelligent life in politics.  It absolutely takes my breath away that finally, someone in a position of power actually agreed with me about something.

 

And I wrote the following on March 1, 2012…

 

If the new servicer standards were made into state law that had a private right of action and a provision for attorneys fees, that would save homes and stop foreclosures, and it would do so more effectively than any amount of money.

 

I’m not talking about bailouts for borrowers, I just want the rules associated with a national program to be followed and enforced, and I think every homeowner in the country should and would want that too, regardless of whether at risk of foreclosure or not at this moment.

 

Every homeowner in America should want federal programs to operate as they were intended to operate.  It’s not about who is at risk of foreclosure and who isn’t.  It’s simply about being in favor of basic fairness in our federal or state programs.  No one should oppose any of those ideals, and those that suffered as a result of being deprived such fairness would engender sympathy from others.

 

We simply have to do what the Attorney General is suggesting… otherwise all we’ll have are another set of HAMP guidelines, and we don’t need another set of useless guidelines that no one follows and no one can enforce.

 

No one should want that, by the way, because we understand that “HAMP HAPPENS.” 

 

But, if HAMP HAPPENS TWICE, strategic defaults and spurious lawsuits are going to look like a picnic at the beach on a sunny day with someone you love.

 

A SPECIAL MESSAGE TO ATTORNEY GENERAL HARRIS…

Okay, I’m a HUGE fan.  Brilliant!  How can I help?

 Reach me anytime at mandelman@mac.com.

Mandelman out.

# # #

NOW CLICK PLAY TO WATCH CALIFORNIA’S

Foreclosure Crisis Town Hall

May
03

Sovereign Restructuring after NML v. Argentina: CACs Don’t Make Pari Passu Go Away

By | Securitization-MBS

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A remarkable number of people are buying the creditors' argument that widespread introduction of collective action clauses (CACs) in sovereign bonds makes the debate about the pari passu clause in the Second Circuit irrelevant to the broader regime for sovereign debt restructuring. This is intuitively appealing, but totally wrong.

We are in this mess because Argentina defaulted on its debts, restructured most but not all on punitive terms, and is facing lawsuits from the remaining few creditors. The exasperated SDNY judge granted the creditors an injunction based on the pari passu clause in their bonds, requiring Argentina to pay pro rata those creditos that took a 70% haircut and those that took none.

The United States intervened somewhat grudgingly, arguing among other things that the SDNY interpretation of the pari passu clause threatens the broader regime for sovereign restructuring. The creditors and amici retort that, among other things, the introduction of CACs in sovereign bonds should make pari passu injunctions like this one rare-to-nonexistent.

Recall the most common version of a CAC allows a super-majority of bondholders to amend the entire issue against the wishes of a holdout minority. CAC adoption, already pervasive in the UK market, skyrocketed in the United States after a concerted effort by the U.S. Treasury and under threat of a treaty-based sovereign bankruptcy regime promoted by the IMF.

According to the creditors, if most sovereign bonds have both CACs and pari passu clauses that give rise to pro rata payment obligations, debtors will offer attractive restructuring terms to secure supermajority creditor support, and amend the contracts (pari passu and all) over the objections of the holdouts. No holdouts, no pari passu problems.

Even assuming that *all* foreign sovereign bonds soon come to have CACs (we are in the 80% range now according to the briefs), this argument fails for two reasons. First, not all sovereign debt is in the form of CACed or CACable bonds. Second, not all CACs contain an aggregation feature, which allows majority amendment across multiple bond series. As a result, and as was the case in Elliott v. Peru, a holdout can obtain an obscure little instrument that is not even syndicated let alone bonded, and sue to her heart's content. In the alternative, as is the case in Greece's foreign law bonds (which have CACs but no aggregation), she can buy a blocking position in a tiny bond issue trading at a deep discount, block the restructuring of that issue, and pari passu right ahead. Holdout strategies have never been about joining the masses--they are all about piggy-backing on the masses' concessions. From that perspective, and at least until aggregation becomes pervasive, CACs clear the field for the holdouts.

Based on this, some might say that a ruling against Argentina in the Second Circuit that lets loose the pro rata payment interpretation of pari passu would make a darn good argument for statutory sovereign bankruptcy. No ad-hoc, willy-nilly, heterogeneous contracts and wacky interpretations of obscure clauses that take on a life of their own because something got lost in translation between Latin, English and Belgian court-ish.

All that said, if the Second Circuit can see its way to affirming on the narrowest of grounds tied to Argentina's "Lock Law," without passing on a broad interpretation of pari passu, they might not need to reach the broader implications.

Apr
27

Pari Passu: So Passe! (Extractive Edition)

By | Securitization-MBS

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Felix Salmon stays with the Argentina pari passu saga, about which I wrote here. The holdout creditors have now filed their briefs (Felix has the links), and are doubling down on the text. Much of their argument hangs on a creditor-friendly formulation of the second half of Argentina's pari passu clause, which goes to the status of payments, rather than the underlying obligation. The creditors make a point of dissociating the payment half of the clause from the Latin mumbo jumbo before it ("equal treatment", not "pari passu"!), which is kind of silly, since all the parts and flavors go by pari passu. But rhetorically, equality is much more appealing.

If the Second Circuit follows the creditors into the text, they have succeeded in framing the implications of the case narrowly, and have blunted the policy arguments of Argentina and its reluctant amici, notably the U.S. Government. This is so even though the creditors' reading of the text is more twisted than not, their description of the jurisprudence is strained, and the passage on the interaction between collective action clauses and pari passu is plain odd.The creditors' real problem and the elephant in the room is not pari passu or equal treatment, it's sovereign immunity. Pari passu is the eye of a needle. There is just no way of fixing the immunity problem through pari passu without mangling a bunch of law ... all for the sake of the rule of law?

If the decision becomes about Judge Griesa, I part with Felix and get worried about the creditors' prospects. The venerable judge gets to exercise discretion, but the Second Circuit has had no trouble reversing him on Argentina in the past. His recent opinions on the subject range from scant to ranty. And he himself expressed serious misgivings about granting the pro rata payment remedy under the pari passu clause just before signing the order.

All that said, champagne corks must have gone a-poppin' at Elliott at the news of the YPF nationalization. First, as Felix observes, this action makes Argentina look like the irredeemable law-breaker of Judge Griesa's purplest paragraphs. The response--two wrongs don't make a right, or don't twist New York law to make Argentina abide by it--sounds lame. Second and much, much more interesting, we now have the prospect of state-owned oil tankers setting sail, begging to be seized by judgment creditors. Now who needs pari passu when you can have an oil rig?

Apr
19

An Idea to Limit Body Attachments

By | Securitization-MBS

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As many Credit Slips readers will know, so-called "body attachments" allow a creditor to haul a judgment debtor into state court if the debtor fails to respond to court summonses to answer questions about the debtor's financial affairs. It is a highly coercive tactic and was originally intended as a last resort against a recalcitrant debtor. Today, it is an overused tactic that intimidates debtors who often understand only that they have been arrested because they have an unpaid debt.

An AP article ran yesterday around Illinois about abuses in this state. The story recounts how a teaching assistant paid $600 after being arrested over a hospital bill she had been told was issued in error. Two weeks ago, I blogged about widespread errors and problems in the debt collection industry, so it is not difficult to imagine the story recounted in the article is an isolated one. Coercing ill-informed and poorly resourced debtors into paying debts they may not even owe is outrageous. Even readers who may not be particularly sympathetic to the plight of these debtors should question the use of taxpayer financed courts and law-enforcement systems to engage in expensive collection practices on small debts for the benefit of private creditors. These practices are not just a problem in Illinois but across the country.

At least in Illinois, some help may be on the way. A bill is moving through the Illinois legislature, with the support of Attorney General Lisa Madigan, to put some common-sense limits on the use of body attachments. The bill would require personal service, instead of mail service, of a summons before an arrest could occur, a very worthwhile idea in an industry where record-keeping problems seem rampant. The bill also would return any bail to the debtor (in most cases) instead of the creditor. Although the bill has cleared the Illinois House, the latest report says the bill has been postponed before the Senate Judiciary Committee. I hope that action has not dimmed its prospects for passage.

One of the things that annoys me in this story is the corruption of a useful tool for against extremely recalcitrant debtors. When I was in private practice, I remember trying to enforce a judgment in a commercial case against a debtor who had lied about his assets in entering into the transaction that was the subject of the case. The assets he did have were concealed around the country. He answered our interrogatories about his assets because, after a lengthy court proceeding, he finally had no other choice. WIthout the coercive power of the state and the courts, I don't think we would have been able to get any information out of him and collect the small amount of money we did get for our client.

The root of the current problem stems from the fact that the costs are borne primarily by taxpayers and the benefits fall upon private creditors. The system won't really work until these incentives are more aligned. Right now, it makes financial sense for creditors to ask a court and a sheriff to arrest a debtor over a $200 unpaid bill in a consumer transaction. A rule requiring a creditor to pay a substantial fee (maybe $1,000?) before a body attachment could occur might help a lot. And, it would be important that the creditor could not pass along the fee to the debtor as a cost of collection. Such a fee would help ensure that body attachments were again only a measure of last resort, reserved for cases with only the most recalcitrant debtors ignoring court orders and with debts in an amount that justify the expense.

Apr
19

An Idea to Limit Body Attachments

By | Securitization-MBS

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As many Credit Slips readers will know, so-called "body attachments" allow a creditor to haul a judgment debtor into state court if the debtor fails to respond to court summonses to answer questions about the debtor's financial affairs. It is a highly coercive tactic and was originally intended as a last resort against a recalcitrant debtor. Today, it is an overused tactic that intimidates debtors who often understand only that they have been arrested because they have an unpaid debt.

An AP article ran yesterday around Illinois about abuses in this state. The story recounts how a teaching assistant paid $600 after being arrested over a hospital bill she had been told was issued in error. Two weeks ago, I blogged about widespread errors and problems in the debt collection industry, so it is not difficult to imagine the story recounted in the article is an isolated one. Coercing ill-informed and poorly resourced debtors into paying debts they may not even owe is outrageous. Even readers who may not be particularly sympathetic to the plight of these debtors should question the use of taxpayer financed courts and law-enforcement systems to engage in expensive collection practices on small debts for the benefit of private creditors. These practices are not just a problem in Illinois but across the country.

At least in Illinois, some help may be on the way. A bill is moving through the Illinois legislature, with the support of Attorney General Lisa Madigan, to put some common-sense limits on the use of body attachments. The bill would require personal service, instead of mail service, of a summons before an arrest could occur, a very worthwhile idea in an industry where record-keeping problems seem rampant. The bill also would return any bail to the debtor (in most cases) instead of the creditor. Although the bill has cleared the Illinois House, the latest report says the bill has been postponed before the Senate Judiciary Committee. I hope that action has not dimmed its prospects for passage.

One of the things that annoys me in this story is the corruption of a useful tool for against extremely recalcitrant debtors. When I was in private practice, I remember trying to enforce a judgment in a commercial case against a debtor who had lied about his assets in entering into the transaction that was the subject of the case. The assets he did have were concealed around the country. He answered our interrogatories about his assets because, after a lengthy court proceeding, he finally had no other choice. WIthout the coercive power of the state and the courts, I don't think we would have been able to get any information out of him and collect the small amount of money we did get for our client.

The root of the current problem stems from the fact that the costs are borne primarily by taxpayers and the benefits fall upon private creditors. The system won't really work until these incentives are more aligned. Right now, it makes financial sense for creditors to ask a court and a sheriff to arrest a debtor over a $200 unpaid bill in a consumer transaction. A rule requiring a creditor to pay a substantial fee (maybe $1,000?) before a body attachment could occur might help a lot. And, it would be important that the creditor could not pass along the fee to the debtor as a cost of collection. Such a fee would help ensure that body attachments were again only a measure of last resort, reserved for cases with only the most recalcitrant debtors ignoring court orders and with debts in an amount that justify the expense.

Mar
22

North Carolina Court of Appeals | T.D. Bank, N.A. v. Mirabella – Summary Judgment Improper In Suit On Defaulted Note Where Creditor Fails To Prove Merger With Predecessor

By | Bankruptcy, Foreclosure Fraud, News for the Patriot

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TD BANK, N.A. v. MIRABELLA TD BANK, N.A., Plaintiff, v. SALVATORE MIRABELLA, Defendant.No. COA11-1178.Court of Appeals of North Carolina. Filed: March 20, 2012. Defendant appeals an order granting summary judgment in favor of plaintiff. For the following reasons, we reverse and remand for further proceedings consistent with this opinion. I. BackgroundOn 8 December 2010, plaintiff … Read more Related posts:
  1. REVERSED – North Carolina Court of Appeals in the Matter of the Foreclosure in Re Adams
  2. Ohio Court of Appeals – UNION BANK CO. v. NORTH CAROLINA FURNITURE EXPRESS, LLC.
  3. Court of Appeals of Ohio – HSBC BANK USA v. THOMPSON AFFIRMED – HSBC Failed to Establish that it was the Holder of a Promissory Note Secured by a Mortgage
Mar
06

At Last, A Credible Threat of Default: Too Little-Too Late Eupdate?

By | Securitization-MBS

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At long last, Greece is starting to resemble a normal restructuring--you know, the kind where the debtor just might not pay if it does not get the relief it is asking for. Everyone else has done it this way, including the proverbial opposites, mean Argentina and nice Uruguay--but not Greece.

From the start, Europe's crisis management strategy has revolved around flatly denying the possibility of default within the Eurozone. This strategy has given us record-deep yet voluntary haircuts, bizzarre contortions to exempt central bank holdings, and mass confusion around CDS triggers. But even as it denied the possibility of nonpayment--thereby denying Greeks the smidgeon of agency debtors enjoy at the precipice--Europe failed to proffer an alternative "or else." As a result, creditors might be forgiven for wondering whether the alternative to haircuts just might be payment in full. Next to payment in full, the offer of English law in restructured bonds looks like a pathetic consolation prize (they will not survive the next restructuring anyway).

And so a bunch are threatening to hold out on the eve of Thursday's exchange deadline. This is not the long-lost evidence of creditor coordination problems to support calls for sovereign bankruptcy--presumably, countries that do not default do not file either--but rather proof that if you keep swearing you will pay, people will take you up on it.

Now at last, with 48 hours to go, Greece has (sort of) promised to default if the offer fails. With so much on the line, it feels like we are cutting it awfully close.

Feb
13

Austerity Hits Greece

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The latest EU bailout installment for Greece requires tough austerity measures. Among the most devastating is the prohibition on the use of Corinthian and Ionic columns. Henceforth, only Doric columns may be utilized. This measure was a compromise among creditor consitiuencies, as Germany had previously demanded that the Greeks be limited to Bauhaus design.
Jan
28

Greek Gunboat Diplomacy Eupdate and More ECB/EFSF

By | Securitization-MBS

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Someone who wanted to be very mean to the Germans just leaked this document, where they manage to come off as both desperate and inept. The proposal purports to address Greek failure to meet program targets by installing an EU overlord, whose job it would be among other things to pay off the foreign bondholders before funding public services in Greece.

The strategy goes back to the days when imperial gunboats took over debtors' customs houses to pay foreign bondholders, but has been considered impolite in creditor country circles for a century or so. Now it is back as an EU institutional innovation. As for the business of "absolute priority" for foreign creditors, the statement is nonsensical on its face: Greece will enact a law that would make creditors feel "de facto" senior. At best, this would be "de jure," and without a shred of credibility. The actual phrase used--"De facto elimination of the possibility of a default"--surely qualifies for an Oscar nomination.

All this innovating does follow a pattern: take a program that does not work, double down on it, and ratchet up enforcement to the point where no one would ever dream of it. Genius.

And further to my last post, it looks like Richard Barley and Felix Salmon took sides on the EFSF swap possibility a couple of days ago, except that they seem to operate on the assumption (which I shared last May) that EFSF would have to take the loss up front. Now I think that the swap would be worth it even if it only captured the discount for Greece. Phase Two happens when it does.

Jan
03

Anna’s Revenge, Episode I

By | Securitization-MBS

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We may be beginning to see the fallout from Stern v. Marshall, the Supreme Court case on bankruptcy jurisdiction courtesy of Anna Nicole Smith's bankruptcy. Last week, the U.S. Court of Appeals for the Seventh Circuit issued a broad decision that would call into question the power of the bankruptcy court to hear many state-law defenses to creditor's claims in bankruptcy. To the best of my knowledge, this is the first court of appeals decision applying Stern.

The Seventh Circuit, in a case called In re Ortiz, held the bankruptcy court could not hear claims that a health care company had violated Wisconsin state law by making bankruptcy court filings containing private medical information of bankruptcy debtors. The irony is that the bankruptcy court had found the debtors had failed to establish a claim under state law, thus making the Seventh Circuit's decision a victory for the debtors involved in that particular appeal. For other bankruptcy debtors, however, the Seventh Circuit's decision could hinder their ability to assert state-law defenses such as violations of state UDAP laws (unfair deceptive acts and practices laws).

In Stern, the Supreme Court ruled that the bankruptcy court could not exercise jurisdiction over a state-law counterclaim Smith filed against her deceased husband's son. The son alleged Smith had tortiously interfered with his inheritance and had filed a claim in her bankruptcy case. Because federal bankruptcy courts are not full-fledged Article III courts, staffed by judges appointed by the president and holding life-tenure, a bankruptcy court could not hear Smith's counterclaim, which was a traditional state-law claim.

The legal answer to any of these problems is to have the federal district courts hear claims the bankruptcy courts cannot. Because federal district courts are full-fledged Article III courts, they clearly have the power to rule on any claim arising in or related to a bankruptcy case. This answer, however, is more theoretical than practical. District courts have standing orders to refer all bankruptcy cases to bankruptcy courts precisely because there are not enough district court judges to handle the enormous docket load from the bankruptcy system. Sure, individual matters in bankruptcy cases can be referred back to the district courts, but even referrals of individual matters will be expensive and full of delay.

Stern thus promised to gum up the works for bankruptcy debtors, but just how much gum had been stuck into the system depended on how one read the Supreme Court's opinion. Legal scholars disputed the breadth of the Stern decision, which the Court itself had characterized as "narrow."

Legal eagles might assert that just how narrow depends a lot on the technicalities of federal courts law. But, here is a secret. Federal courts law does not actually exist. It is something we made up to help the federal courts run better. Federal courts law is no more or no less than what the federal courts say it is.

Commentators generally agreed that the bankruptcy courts would "fix" Stern by issuing pragmatic rulings that respected the basic holding of Stern while keeping in mind the practical problems that an overly broad reading would create. My concern was expressed as follows:

Anna's case, or Stern v. Marshall as it will go down in history, could make life a little tougher for bankruptcy courts and consumer debtors as they try to wrestle with the implications of the majority's reasoning. I predict that lower courts, who are probably more concerned with keeping the system working than federal courts theory, will try to interpret the decision narrowly. My musings above will be worst-case scenarios that will not come to pass in the short run. As time goes by and cases work their way up the federal court appellate structure, Anna's case could have significant effects on practice in the federal bankruptcy courts.

In a probably undeserved self-congratulatory moment, I will say that the Seventh Circuit has done exactly what I feared. The case has moved up the federal system where it got heard by judges less familiar with the day-to-day workings of the bankruptcy system. The Seventh Circuit suggests that bankruptcy courts will lack the power to hear most claims arising between private parties disputing interests defined by state law (slip opinion at p. 14), which would seem to encompass most any claim based on state law.

For those who doubt the breadth of the Seventh Circuit's decision, consider that it involves a lawsuit of allegedly wrongful conduct during the filing of a proof of claim in a bankruptcy case. The bankruptcy court was hearing a matter that involved policing its own docket. The Seventh Circuit even holds that the lawsuit "arises under" bankruptcy law and would not exist but for the bankruptcy case. If such a lawsuit cannot be heard by a bankruptcy court, what sort of suit can?

Jan
03

Maryland Courts Require More Proof in Debt Collection Cases, Ringing in Some Debt Collection Cheer

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In many states, a creditor or debt collector can easily obtain a default judgment with just a person’s name, last known address and Social Security number, and the judgment can follow the person around for years despite that the debt was never proven. Due to a flood of uncontested debt collection cases in Maryland, its high court has just ruled that for all cases filed on or after January 20, 2012, collectors and creditors must produce actual proof that the debtor incurred the debt. This can be done by producing a copy of a signed bill or contract, or other evidence of the debt. Debt buyers also must prove they actual hold the debt through a valid purchase, a common stumbling block for collecting debt buyers. In making this decision, the Maryland Court of Appeals (which is Maryland’s high court) took into consideration that many cases end in default judgments, a problem Nationwide. The decision also evidences a distrust of those pesky (often fraudulent) affidavits. Let’s hope other states decide to follow suit and put collectors to their proof.

Sep
05

Chapter 11 Bankruptcy Venue Reform

By | Securitization-MBS

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This Thursday, the House Judiciary will be holding a hearing on H.R. 2533, which would reform Chapter 11 venue and require corporations (which includes more than true corporations under the Bankruptcy Code) to file in the district in which they are headquartered or in the district in which a controlling affiliate has filed.  So no more bootstrapping of Eastern Airlines, Enron, or GM via tiny affiliates.  And no more Los Angeles Dodgers of Delaware.  

I've submitted a letter in support of the bill to the House.  My previous posts on this topic earned me no love from some former colleagues (some of whom told me as much), and I don't expect this letter (or this blog post) will endear me to them either.  The letter rehearses the problems that stem from forum shopping:  debtors (and DIP lenders) picking and choosing the law they prefer; debtors opting for districts that are more lax in their application of discretionary standards like for cause appointment of trustees; professionals steering cases to districts that will sign off on higher fees, thereby increasing the costs of bankruptcies; the cutting out of local/small creditor constituencies by moving cases to inconvenient fora; and avoidance of labor protests and other informal pressures on courts.  

I continue to be struck by what a weak argument specialization/expertise is for the current system. We've seen courts outside of SDNY/Delaware handle large bankruptcies extremely well, and we've also seen some disasters in those popular filing jurisdictions. Frankly, it's not clear to me how much case outcomes depend on the judge. But be that as it may, expertise is an argument for a single court to handle all large cases, not a pick-your-own-venue system, even if the menu is limited to SDNY and Delaware.  So if it's about expertise, which court is it?  SDNY or Delaware?  It surely can't be the debtor's choice if it's about expertise.   

Also, in drafting this letter, I realized that Chrysler may well have lacked proper venue in SDNY.  IIt's a stretch to claim that Chrysler Realty Co. LLC, a Delaware LLC headquartered in Michigan had its principal assets located in SDNY, when the only SDNY assets scheduled are the realty for Jeep-Chrysler-Dodge of Manhattan and Yonkers Avenue Dodge. By dollar amount these were less than 3% of Chrysler Realty Co., LLC's scheduled assets.  I wonder how many other cases have been filed recently in which there isn't compliance with the venue statute.  (Note that this is not like GM, which bootstrapped its way in to SDNY, which complies with the statute.  That's legal, but it's a bad statute. Borders--also here--and perhaps Chrysler don't even appear to in compliance with the statute.)  

Finally, I'm left pondering where is the UST on this.  Checking on venue seems like it should be a rote part of UST review. If the UST is really concerned about fee levels in bankruptcy, policing Chapter 11 venue is a far better way to deal with it than objecting to fee applications, where the dollars saved are offset by the cost of arguing the objection.  

My former WGM colleagues have a couple of blog posts of their own on HR 2533 (here and here). These posts make the very good point that the local rules for the SDNY and Delaware bankruptcy courts are friendly to out-of-state attorneys (no local counsel required for pro hac vice admission). It's point about telephonic and video hearings really cuts both ways.  But I think it's a stretch to say that because local creditors are get some protection via 503(b)(9) administrative expense claims, 546(c) reclamation claims, 547(c)(2) ordinary course exception to voidable preferences, and 365(d)(4) and 366 protections for landlords and utilities that it's therefore not a problem that venue is being abused.

None of these protections help employees, for example. Admin priority only doesn't apply to prepetition claims.  The ordinary course preference exception is temporally narrow and 546(c) reclamation is not a very powerful tool for most creditors.  But even if these were always meaningful protections for all local creditors, I don't see how that in any way justifies abuse of venue. Is the argument no harm-no foul? If so, none of these provisions mitigates the harm caused by debtors being able to choose venues with easier rejection of CBAs or in which they can funnel more funds to professionals or DIP lenders. The provisions cited on the WGM blog crumbs in comparison to what's at stake with venue. 

Aug
25

Your Government Prefers Chapter 13

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Today, I went looking for the court costs payable by chapter 13 debtors who wants to convert their cases to chapter 7. I admit that like many Americans my starting point was Google. I quickly landed here, at the Bankruptcy Basics page provided by the Administrative Office of the U.S. Courts, a division of the judiciary. The site says that it "provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of federal bankruptcy laws. It also provides individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed." From this description,  you might expect a factual, value-neutral description of the fundamental choice facing all consumer debtors: whether to chose chapter 7 or chapter 13. But look what I found when I read up on Chapter 7 and Chapter 13 . . .

If you click on Chapter 7, the first heading is "Alternatives to Chapter 7." Therein is a description of alternatives such as not filing, choosing chapter 11 or chapter 13, etc. I didn't think too much about this. People should think about alternatives when they are making the big decision of bankruptcy. But then I clicked on Chapter 13, and was immediately struck that instead of a parallel heading of "Alternatives to Chapter 13" that might discuss Chapter 7, people instead are directed immediately to learn about the "Advantages of Chapter 13."

Hmmm . . . what is the message here? Could it be that our government thinks chapter 13 is better? I thought that was a creditor position but I think it's a fair reading of the Administrative Office's website to say that their presentation of the relative benefits and drawbacks of the two chapters skews toward Chapter 13. The website directs people to think carefully about alternatives to Chapter 7  and to consider the benefits of Chapter 13 , but not do the converse: consider alternatives to Chapter 13 and to consider the benefits of Chapter 7.

I think this is lousy advice because I am increasingly discouraged about Chapter 13 given the problems of today's families, but the real point is that this Chapter 13 preference is an inappropriate perspective for the judiciary. Putting the means test limitations to one side for a moment, the Bankruptcy Code embraces the idea of informed debtor choice between Chapters 7 and 13. Information about the two chapters is a good government service. Prefering one chapter, and doing so in a subtle way that will largely escape anyone's attention, is not a good government service. This is especially true in light of the government's own statistics that show that Chapter 13 debtors are much less likely to receive a discharge than Chapter 7 debtors. That key fact never makes it onto the Bankruptcy Basics website, although it is surely one to balance against the potential benefits of Chapter 13.

p.s. If you think the website is simply ignorant of research on bankruptcy outcomes, consider that it contains this advice:  "A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan." An accurate description of the research, and perhaps good advice, but perhaps just a wee bit less relevant than that less than one-third of filings will end without the debtor getting a Chapter 13 discharge.

p.p.s. The conversion fee from Chapter 13 to Chapter 7 is $25, according to the website. Good to know given that so many people will need to consider conversion when they do not complete their Chapter 13 plans!

Aug
25

Your Government Prefers Chapter 13

By | Securitization-MBS

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Today, I went looking for the court costs payable by chapter 13 debtors who wants to convert their cases to chapter 7. I admit that like many Americans my starting point was Google. I quickly landed here, at the Bankruptcy Basics page provided by the Administrative Office of the U.S. Courts, a division of the judiciary. The site says that it "provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of federal bankruptcy laws. It also provides individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed." From this description,  you might expect a factual, value-neutral description of the fundamental choice facing all consumer debtors: whether to chose chapter 7 or chapter 13. But look what I found when I read up on Chapter 7 and Chapter 13 . . .

If you click on Chapter 7, the first heading is "Alternatives to Chapter 7." Therein is a description of alternatives such as not filing, choosing chapter 11 or chapter 13, etc. I didn't think too much about this. People should think about alternatives when they are making the big decision of bankruptcy. But then I clicked on Chapter 13, and was immediately struck that instead of a parallel heading of "Alternatives to Chapter 13" that might discuss Chapter 7, people instead are directed immediately to learn about the "Advantages of Chapter 13."

Hmmm . . . what is the message here? Could it be that our government thinks chapter 13 is better? I thought that was a creditor position but I think it's a fair reading of the Administrative Office's website to say that their presentation of the relative benefits and drawbacks of the two chapters skews toward Chapter 13. The website directs people to think carefully about alternatives to Chapter 7  and to consider the benefits of Chapter 13 , but not do the converse: consider alternatives to Chapter 13 and to consider the benefits of Chapter 7.

I think this is lousy advice because I am increasingly discouraged about Chapter 13 given the problems of today's families, but the real point is that this Chapter 13 preference is an inappropriate perspective for the judiciary. Putting the means test limitations to one side for a moment, the Bankruptcy Code embraces the idea of informed debtor choice between Chapters 7 and 13. Information about the two chapters is a good government service. Prefering one chapter, and doing so in a subtle way that will largely escape anyone's attention, is not a good government service. This is especially true in light of the government's own statistics that show that Chapter 13 debtors are much less likely to receive a discharge than Chapter 7 debtors. That key fact never makes it onto the Bankruptcy Basics website, although it is surely one to balance against the potential benefits of Chapter 13.

p.s. If you think the website is simply ignorant of research on bankruptcy outcomes, consider that it contains this advice:  "A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan." An accurate description of the research, and perhaps good advice, but perhaps just a wee bit less relevant than that less than one-third of filings will end without the debtor getting a Chapter 13 discharge.

p.p.s. The conversion fee from Chapter 13 to Chapter 7 is $25, according to the website. Good to know given that so many people will need to consider conversion when they do not complete their Chapter 13 plans!

Aug
25

Defies Credulity Eupdate

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Bad news: Eupdate is back. The last big fix to the European debt crisis, quietly unraveling since its announcement on July 21, is loudly imploding over collateral.  Turns out that Finland, representing less than 2% of the Eurozone package and 37.876% of the political noise about the package, was promised Euro 500 million in cash collateral for its participation. The side deal makes little sense as an incentive to repay for Greece, or as a source of repayment for Finland. In a world where Greece is willing to default on another European state, Euro 500 million is the least of anyone's worries--the Euro is collapsing, Spain and Italy are going down, bank runs are rampant, etc. The primary purpose of the collateral trick must be political -- to assure Finnish voters that they are not in fact bailing out Greece.

Other European governments must have known, but were willing to let it go as chump change for the sake of appearing united, so long as their voters did not find out. But since the deal was all about Finnish political theater, it had to be publicized, which made all the others look like chumps, forcing them to demand collateral too ... demonstrating the very sort of disunity Europe had sought to avoid by buying off Finland, now freaking out Moody's. All this is quite apart from the negative pledge, CDS, and IMF preferred creditor status headaches.

But wait, a brilliant fix is in the works from the folks who brought you all the brilliant fixes that came before. Forget cash collateral, the EU will take Greek real estate! Picture EU enforcers marching into Greece to seize real estate and sell it on the courthouse steps (to whom???). Picture the Greek population placidly going along with it, as in the good old days of gunboat diplomacy and seizing customs houses ... (Greek title worries are quite beside the point in this big picture.) No doubt the idea looked attractive precisely because it was so utterly implausible--replace cash collateral, which hurts Greek liquidity, with collateral that no one would ever seize. No harm, no foul. 

No voters are that stupid. And the peripheral collateralness of the incident has a funny Archduke assassination feel to it.

(Don't miss Stephen's post, casting Finland as the perennial restructuring holdout. Sovereign bankruptcy, anyone?)

Mar
01

RED ALERT! RED ALERT!- THE NON JUDICIAL FORECLOSURE BILL IS ALIVE AND KICKING!

By | Weidner

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Last year the Florida Legislature made a late session move to remove foreclosure cases from the supervision of judges.  THAT DANGEROUS LEGISLATION IS BACK!

While the bill as drafted applies on to commercial properties, this is a dangerous step toward turning the whole state into a non judicial foreclosure state.

Noone is safe while the legislature is in session.

(1)  This chapter may be cited as the “Nonjudicial
39 Foreclosure of Commercial Real Property Act.”
40 (2)  In lieu of any other foreclosure remedy that may be
41 available under the laws of this state within the judicial
42 system, this chapter may, at the option of the foreclosing
43 creditor, be used to effect a foreclosure of a security
44 instrument in commercial real property. However, if the
45 foreclosing creditor does not elect to use this chapter to
46 effect a foreclosure, this chapter does not modify any other
47 foreclosure remedy available to the foreclosing creditor under
48 the laws of this state.
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Aug
20

LivingLies UPDATED Plan of Engagement: What to Do

By | Foreclosure Blog News, Homeowner Resources, Weidner

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UPDATE: This is THE OUTLINE of a plan that is current in its evolution but by no means complete or the last word. It replaces the entry I made in February of this year. The assumption here is that even without taking mortgage foreclosure cases into consideration, the percentage of cases that actually go to trial is between 5%-15% depending upon how you categorize “cases.” On the other hand, if you are not prepared for trial and counting on settlement, your opposition will generally know it and have the upper hand in negotiating a settlement. They are going to play for keeps. You should too. Don’t assume that the note in front of you is the actual original. Close inspection often reveals it is a color copy.

And for heaven sake don’t stand there with your mouth hanging open when someone says you are looking for a free house. You are looking for justice. You had your purse snatched in this transaction, you know there is an obligation, but you also know that they didn’t perfect the security interest (not your fault) and they received multiple payments from multiple parties on these securitized loans. You want a FULL accounting of all such transactions to determine what balance is due after insurance payments, who is subrogated or substituted on claims, and an opportunity to negotiate a settlement or modification with someone who actually has advanced money on THIS transaction and can show it to be so.

WORD OF CAUTION: IF YOU ARE ALREADY IN PROCESS, YOU ARE REQUIRED TO ACT WITHIN THE TIMES SET FORTH BY STATE LAW, FEDERAL LAW, OR THE LAWS OF CIVIL PROCEDURE. FAILURE TO DO SO LEAVES YOU IN AN UPHILL BATTLE TO REVERSE ACTIONS ALREADY TAKEN. ON THE OTHER HAND ACTIONS ALREADY TAKEN “FIX” THE POSITION OF YOUR OPPOSITION, SINCE THEY CAN NO LONGER ASSERT CHANGES IN CREDITOR, LENDER OR TRUSTEE. THUS IT MIGHT BE EASIER, ACCORDING TO SOME SUCCESSFUL LITIGATORS OUT THERE, TO WAIT UNTIL THE SALE HAS OCCURRED AND THEN ATTACK IT AS A FRAUDULENT SALE, THAN TO TRY TO STOP IT WITH A TEMPORARY RESTRAINING ORDER ETC.

CONSIDER BANKRUPTCY, ESPECIALLY CHAPTER 13, WHERE THERE ARE MORE REMEDIES THAN YOU MIGHT THINK IF YOU FILL OUT YOUR SCHEDULES PROPERLY. WE ARE SEEING BETTER RESULTS IN SOME BANKRUPTCY COURTS THAN FEDERAL OR STATE CIVIL COURT PROCEEDINGS.

  1. Get your act together, stop fighting amongst the members of your household and make a decision as to what you want to do — fight or flight?
  2. GET SOME HELP NO MATTER WHAT YOU DECIDE. GET THE LOAN SPECIFIC TITLE SEARCH, GET A SECURITIZATION SEARCH, AND GET A LAWYER LICENSED IN THE COUNTY WHERE YOUR PROPERTY IS LOCATED AND MAKE SURE HE/SHE IS NOT STUCK ON THE PROPOSITION THAT YOU SHOULD LOSE.
  3. If you choose flight, then by all means try the short-sale or jingle mail strategies that have been discussed on this blog. Do not try to make money on the short-sale, since nobody is going to give it to you. You can make a few dollars by riding out the time in foreclosure without making payments (and hopefully saving the money you would have paid) and by negotiating as high a price (a few thousand dollars)  as you can in a deal known as “cash for keys.” Even for this, you should employ the services of a local licensed attorney — at least for consultation. There are several short-sale options that have evolved. Google Edge Simonson or Prime financial. I’ve been working on a short-sale-leaseback option that seems to be picking up steam.
  4. STRATEGIC DEFAULTS RISING: More and more people of all walks of life including those that have some considerable wealth, are walking away from these properties that were the subject of transactions in which the presumed value of the property was preposterous. This is an option that scare the hair off the pretender lenders because it pouts the power in your hands. They in turn are trying to scare the public with threats of deficiency judgments etc and collections. It is doubtful that many or indeed any deficiency judgments would be awarded, even if they were allowed. But in many cases, particularly in non-judicial states, deficiency judgments are NOT allowed. A version of the strategic default that many people like is to stay as long as possible without paying and then walk. If you are smart about it, you raise your own capital by socking away the payments you would have made.
  5. If the decision is fight — then the second decision to make is to answer the question “fight for what?” If you want to buy time, there are many strategies that can be employed, which basically are the same strategies as those used if you are fighting for real. And you might be surprised by the result. Some people get a year or two or even more without payments. You are going to take a FICO hit anyway so why not put some cash in your pocket while you hold back payments.
  6. AVOID crazy deals where you give your property or share your property with a stranger. If you persist in engaging such people at least call references and make sure the references are real. Ask questions about their situation and how they feel it worked out to them. Get as much detail as possible.
  7. AVOID mortgage modification firms. If you persist in engaging such people at least call references and make sure the references are real. Ask questions about their situation and how they feel it worked out to them. Get as much detail as possible. My opinion is that if they don’t pursue an aggressive litigation strategy the statistical probability of you accomplishing anything by going to them is near zero.
  8. In all cases, if at all possible:

    9. (a) Get all your information together along with a short executive summary of your “journal” (even if you create the journal now). That means all closing documents, any information you have on title, recording in the county recorder’s office, the names of all parties who were “at” closing (that means not just the actual people who were there, but he names of companies that were represented or mentioned at closing). Also, include in the file any notices of default(NOD) or notice of Trustee sale (NOTS) or summons from a court.

    (b) Get a MORTGAGE ANALYSIS of the loan transaction itself. THIS INVOLVES THREE PARTS — (1) LOAN SPECIFIC TITLE SEARCH AND CHAIN OF TITLE, EXAMINATION OF THE DOCUMENTS, SIGNATURES, AND DATES OF DOCUMENTS PURPORTING TO BE REAL, (2) SECURITIZATION SEARCH THAT CHASES THE MONEY TRAIL AND WILL PROBABLY LEAD YOU TO SOME IMPORTANT ISSUES LIKE THE VERY EXISTENCE OF THE “TRUST” ASSERTING IT HAS THE RIGHT TO FORECLOSE AS WELL AS MONETARY ISSUES SUCH AS APPLICATION OR ALLOCATION OF PAYMENTS RECEIVED BY THE INVESTOR WHO ADVANCED THE FUNDS FOR THE LOAN AND (3) COMMENTARY AND ANALYSIS THAT IS USABLE BY AN ATTORNEY IN COURT SUCH THAT HE/SHE CAN ARGUE THAT THERE ARE QUESTIONS OF FACT ENTITLING YOU TO PURSUE DISCOVERY. IF YOU WIN THAT POINT YOU ARE ON YOUR WAY TO A SUCCESSFUL CONCLUSION. BUT NOBODY IS GOING TO MAKE IT EASY FOR YOU.

    (c) Who is your creditor? The TILA Audit alone does nothing without taking further steps. The Trustee’s “Take-down” report should be demanded in non-judicial states and if the house is in foreclosure, your written objection should be sent to the Trustee.

    (d) If someone tells you they are “pretty sure” or can “definitely”  stop your foreclosure or promises a favorable outcome, and asks for money up front, then run like hell. This is a scam. IF THEY TELL YOU THEY WILL DO WHAT THEY CAN, AND THEY GIVE YOU SOME EXAMPLES OF WHAT THEY WILL BE DOING FOR YOU THEN LISTEN AND GET REFERENCES.

    (e) Only a Court order stops foreclosure or a Trustee Sale. No letter of any form or substance will stop it unless the other side is intimidated into stopping the action, which sometimes happens when they know their paperwork is “out of order.”

    (f) Get a Forensic Mortgage Analysis Report OR AN EXPERT DECLARATION that summarizes in a few pages the potential issues that you should be investigating AND WHICH LENDS SUPPORT TOY OUR DENIAL OF THE DEFAULT, DENIAL OF THE RIGHT OF THE OPPOSING PARTY TO CLAIM A DEFAULT, DENIAL OF THE RIGHT OF THE OPPOSING PARTY TO FORECLOSE.

    (g) Get an Expert Declaration that uses the forensic report and the expert opinions of specific experts (like appraisers, title analysts) and which identifies the probable chain of securitization and the money trail. You’ll be surprised when you find out there were two yield spread premiums not disclosed to you and that they can total as much or more than the “loan” itself. GET EXPERT OPINION ON PROBABLE DAMAGES INCLUDING RETURN OF UNDISCLOSED FEES, INTEREST, ETC. (SEE LAWYER’S WORKBOOK FROM GARFIELD CONTINUUM).

    (h) Send the Forensic Report and expert declaration to the known parties, with an instruction to forward it to all other parties known to them in the securitization chain. Include a Qualified Written Request(QWR) AND a Debt Validation Letter(DVL) (which is really a debt verification letter). Don’t be surprised if your pretender lenders will come back and tell you your QWR is defective or improper in some way, but that’s OK, you have followed statutory procedure and they didn’t. With the help of an attorney and with consultation with your experts decide on what resolution you will demand — damages, rescission, etc.

    (i) Don’t believe a word about modification. Practically none of them go through. They are leading you into default so they can collect more service fees, and get money out of you that you think is stopping the foreclosure.

    (j) Don’t believe a word that any pretender lender or representative says or represents, even if they are a lawyer, particularly verbal communications that they refuse to confirm in writing. Challenge everything.

    (k) Don’t accept any document as authentic. Many documents are being fabricated or forged, including affidavits. This is why you need a lawyer and an expert and a Forensic mortgage analysis — to determine what documents and parties are suspect and what you should be asking for in discovery and in the QWR and DVL.

    (l) YOUR FIRST STRATEGY IS TO RAISE NOT PROVE ISSUES OF FACT. BY PRODUCING A FORENSIC REPORT AND EXPERT DECLARATION, NEITHER YOU NOR YOUR LAWYER NEEDS TO ACQUIRE EXPERTISE IN SECURITIZED LOANS. YOU ONLY NEED TO RAISE THE ISSUE OF FACT BY SHOWING THE COURT THAT YOU HAVE EXPERTS WHO SAY THE PRETENDER LENDERS/TRUSTEES ETC. ARE NOT CREDITORS AND NOT AUTHORIZED AGENTS WORKING FOR THE CREDITORS. THEY SAY THEY ARE IN FACT THE CREDITORS OR HAVE SOME AUTHORITY GRANTED BY AN ALLEGED CREDITOR. IT IS NOT FOR THE COURT TO ACCEPT ONE VIEW OR THE OTHER, BUT RATHER TO ALLOW DISCOVERY AND AN EVIDENTIARY HEARING ON THE ISSUE OF STANDING (SEE MANY RECENT CASES REPORTED SINCE FEBRUARY ON THIS BLOG).

    (m) Be very aggressive on discovery. They will argue that even if they are not the creditor and even if they refuse to disclose the identity of the creditor, they are still entitled to disclose because they are the holder of the note and/or mortgage. Your argument will probably be that they still have a duty to disclose the identity of the creditor and the source of the their authority to represent the creditor, along with proof that the creditor has received notice of these proceedings.


Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: debt validation, expert declaration, forensic analysis, qualified written request, TILA audit, trustee
Aug
10

FLA State probes whether three law firms falsified foreclosure documents

By | Foreclosure Blog News, Homeowner Resources, Weidner

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Editor’s Note: The REAL BOTTOM LINE POINT is not some technicality wherein the paperwork wasn’t done right, which frankly is reason enough to deny the foreclosure, it is that this “technical” deficiency is “derived” from the fact that there is no note or mortgage or deed of trust that can be enforced. There might not even be any obligation at all if the creditor received payment in full.

LAWYERS TAKE NOTE: Go back to the law books. There are essential differences between the obligation that arises as a matter of law, the note that is offered as proof of the obligation, and the mortgage or deed of trust which is incident to the note.

Don’t dispute the obligation. It DID arise by operation of law. And by operation of law it may still exist, be partially extinguished or entirely extinguished. The documents signed at closing were only PART of the deal in a securitized residential loan. The borrower signs a note and the lender (investor) gets a bond (or evidence of a bond). [THE NOTE AND BOND HAVE DIFFERENT TERMS AND PARTIES BUT THE BOND REFERS TO SECURITIZATION DOCUMENTS THAT IN TURN DESCRIBE LOANS OF WHICH THE BORROWER'S LOAN IS ONE CLAIMED TO BE IN A POOL FORMING THE SOURCE OF REVENUE].

WITHOUT REAL DOCUMENTS SIGNED BY REAL PEOPLE WITH REAL AUTHORITY WITH REAL EFFECTIVE DATES, THE CHAIN IS BROKEN.

The borrower signs the note to a party whom the investor never heard of nor could the investor have uncovered the payee on the note because the information was withheld. The investor receives a bond which is an assignment of all right, title and interest to the receivables, but the security instrument is left where it always was — with the mortgage originator (the only one in county records with an interest). The lender (investor) doesn’t know the borrower and the borrower doesn’t know the lender, while each of them receives different terms and [promises from different parties.

But by operation of law, the originator’s interest is extinguished the moment it arises because it is in most cases a table funded loan in which the originator acted as a broker not a lender, and performed no underwriting tasks. So the legal obligation is extinguished at the same time that the legal obligation arises.

BUT that is not the end of the story.

The equitable powers of the court come into play to prevent unjust enrichment. So the next time a Judge says he doesn’t want the borrower to get a house for free, your answer should be you don’t want anyone to get the house for free. And if the Court wishes to exercise its equitable powers to allocate any equity in the home, after due consideration for the obligations of the borrowers and many others who promised to pay the bond holder then the party seeking affirmative relief must make a short plain statement of ultimate facts upon which relief could be granted and then prove their case.

What these law firms and fabrication mills are doing is fabricating and forging documents to create the illusion that those complexities don’t exist — a conclusion that every Judge would like to reach.

Ultimately, the die is cast — the Courts are required to consider the complexity and force the real party in interest, the party with standing to say they lost money on the deal and to show exactly how they did lose money — not merely point to the borrower’s non-payment.

The non-payment by borrower ONLY comes into play if the payment is due and the “creditor” can prove their standing and prove the obligation, complete with an accounting from beginning to end. The fact that the note SAYS the payment is due does not make the payment due — not if the payment was made or the obligation has been changed or satisfied.The note is evidence that must be proffered though the rules of evidence with authentication from competent witnesses or admission from the borrower. Don’t be so quick to admit that they have the note. Even if it is right in front of you, close examination may well reveal that it came off a color printer that morning.

The reason the die is cast is that ultimately this comes down to property law. The breaks in the chain of title render every title in whichever a securitized loan was involved susceptible to being identified as unmarketable or defective title. This threatens the entire marketplace. It is this issue that these firms and the large banks are continuing to finesse with their freshly color-printed “original” documents, indorsements, assignments and powers of attorney.

NEWS RELEASE

For Immediate Release

August 10, 2010

Contact: Sandi Copes

Phone: 850.245.0150

Sandi.Copes@myfloridalegal.com

FLORIDA LAW FIRMS SUBPOENAED OVER FORECLOSURE FILING PRACTICES
——————————————————————

TALLAHASSEE, FL – Attorney General Bill McCollum today announced his office has launched three new investigations into allegations of unfair and deceptive actions by Florida law firms handling foreclosure cases.

The Attorney General’s Economic Crimes Division is investigating whether improper documentation may have been created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved.

The new investigations name The Law Offices of Marshall C. Watson, P.A.; Shapiro & Fishman, LLP; and the Law Offices of David J. Stern, P.A. The law firms were hired by loan servicers to begin foreclosure proceedings when consumers were in arrears on their mortgages.

Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing. On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners.

Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation.

The Attorney General’s Office is also investigating whether the law firms have created affiliated companies outside the United States where the allegedly false documents are being prepared and then submitted to the law firms for use.

Subpoenas have been served on each of the law firms listed above, and the investigations are ongoing.

For an official, downloadable photograph, please visit http://www.myfloridalegal.com/picture.html. Also, follow the Attorney General’s Office on Twitter! http://www.twitter.com/myfloridalegal

Palm Beach Post Staff Writer
Posted: 11:48 a.m. Tuesday, Aug. 10, 2010
The Florida Attorney General’s office announced this morning investigations into the state’s three largest foreclosure law firms for allegations of unfair and deceptive actions.
The firms, sometimes called “foreclosure mills,” are the Fort Lauderdale Law Offices of Marshall C. Watson, Tampa-based Shapiro & Fishman, and the Law Offices of David J. Stern, based in Plantation.
Last month, a lawsuit seeking class action status was filed by a Fort Lauderdale attorney against Stern claiming the firm generated fraudulent mortgage assignments when pursuing foreclosures.
An assignment is held by the entity that has the right to receive mortgage payments.
Stern’s practice, which the lawsuit claims filed up to 7,000 foreclosure cases in Florida every month last year, also is alleged in the suit to have pursued foreclosures for lenders that didn’t own the debt on the homes.
Miami attorney Jeffrey Tew is representing Stern. Last week, he said Stern and his company have done nothing wrong.
“This foreclosure crisis was not created by David Stern, but it is so huge and a lot of people are in very bad shape, so some of the finger-pointing goes to him,” Tew said.
Tew called portions of the lawsuit that claim Stern conspired to confuse ownership of homes “fantastical.”
A press release from Attorney General Bill McCollum’s office says because many mortgages have been bought and sold by financial institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing.
“On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners,” the press release states. “Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation.”

Filed under: CASES, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, Investor, Mortgage, Motions, Pleading, trustee
Aug
09

FACTUAL CONSTIPATION: THE URGE TO NOT DISCLOSE

By | Foreclosure Blog News, Homeowner Resources, Weidner

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EDITOR’S NOTE:   FACTUAL CONSTIPATION is our current state of reality. It is the universal strategy across the board from Wall Street, the pretender lenders, servicers, and all other intermediaries in the gross illusion known as “securitization” of debt. We can’t get the information in court from Judges who can’t or won’t allow the inquiry, we can’t get the information using federal statutes (TILA, RESPA, UDCPA) that were specifically written with teeth to allow us to find out the identity of the creditor and to get a full accounting of all debits and credits related to our obligation, and we can’t examine the skeletons in the closets of Wall Street investment banking firms, the rating agencies, the counterparties in credit enhancements, or the insurers.

We are left with naked “assurances” from the same sources that created awesome illusions of wealth in the minds of the people they were robbing. No proof required. And if the “creditors” found a way to get paid AND take the house, that’s OK too. And if the actual creditors did not get paid, but their agents collected insurance and other proceeds amounting to multiples of what the investors actually received — that is a matter for the creditors to work out. Obligation extinguished? No problem, enforce it anyway!! Receivables from obligation assigned to multiple sources of cash WITHOUT the mortgage? No problem, foreclose anyway in the name of some party who never had a dime in the deal.

You say you’re a trust but you have no trust documents or any evidence of your existence? No problem! You say the loan was securitized into a pool where the documents show co-obligors added to the obligation. No Problem! Forget those insurance policies whose premiums were paid from proceeds of the investor lending money to the borrower. Why should that count for anything? So what if it is in the note that the borrower signed! So what if it isn’t in the bond that the investor received! So what if all the documents you have were freshly printed  fabricated and forged the morning of the hearing in court? This is big business. The little guy doesn’t get to win, no matter what the law says and no matter what was done to him. And if that undermines our country’s strength and national security, so much the better for those who would take over lock, stock and barrel.

Just how close do we have to get to the legal nightmare of unmarketable title for most residential and commercial property in the United States before we start addressing reality? The Judicial branch of government, the last bastion of protection of the constitution and our whole body of laws has failed miserably in the basic requirements of law, procedure, fairness and equity. A handful of Judges have clearly stated that upon closer scrutiny of the documents submitted to support foreclosure, they don’t hold up to even basic elements of proof or evidence. Some State Supreme Courts have issued opinions on the same thing. Sanctions have been issued against major names like Wells Fargo and Bank of America for misrepresenting themselves as the creditor. Settlements for hundreds of millions of dollars are being paid to investors who advanced the funds for the loans to borrowers. Where is the allocation of that money to reduce the obligation? If they received the money, why is it still owed?

WHAT IS SO DIFFICULT ABOUT THIS? EITHER WE HAVE A CLEARLY DEFINED BORROWER, OBLIGATION, CREDITOR, AND BALANCE DUE OR WE DO NOT. IF NOT, THE BURDEN IS ON THE PARTY SEEKING FORECLOSURE TO CORRECT IT. IF YES, THE FORECLOSURE PROCEEDS. WE ALL KNOW THIS — WHY ARE WE NOT FOLLOWING LAW THAT IS ESTABLISHED FOR CENTURIES?

The fact remains that our government not only regulates these entities and has huge powers of subpoena and other investigation tools, but is now a significant shareholder, if not the major shareholder of most of these entities. The current plans to disengage the US government from ownership in these entities under the guise of giving back to the taxpayers their money, merely enlists the government as a co-conspirator in withholding essential information from both claimants and policy makers.

AIG and the rating agencies lie at the root of the mortgage bond and mortgage security ripoff that brought down the economy of the nation, the states, the cities, counties and even neighborhoods. And it was the fraud and nondisclosure at the top that enabled and encouraged the fraud and nondisclosure at the bottom––where unsuspecting borrowers who were totally ignorant of the complexities of Wall Street “innovations” signed documents that in most cases did not represent the deal that was offered to them, nor even a transaction that could ever have been completed. The misinformation leading to the ridiculous valuations of mortgage-backed securities was identical to and part of the plan of misinformation and ridiculous valuations of the underlying property values.

Unless and until the reality of the situation is fully disclosed and we are relieved of the mental and factual constipation that is being perpetuated by the courts and by government policy, we cannot effectuate a remedy to an economic nightmare that continues everyday. Our economy can be fixed, but not by  participating in a cover-up plan. Here is the truth: all the money is sitting on Wall Street, which continues to report high profits, Grant high bonuses, and incredibly comes up with hundreds of billions of dollars to “repay” the American taxpayers out of money stolen from those same taxpayers.

Here is the remedy: restore the American taxpayer and the American homeowner to the positions they were in before the fraud. This means a transfer of wealth back to those who have been reduced to poverty or simply untenable financial condition. It means reducing the clout of Wall Street from being 40% of our GDP back to 16% of our GDP where it belongs. The other 24% was mere illusion covering up the fact that we were in fact producing no goods or services of value.

This restoration is not a gift anymore than returning the purse to a woman from a thief that snatched it. Anything less, will leave us with a perpetual state of unemployment, under employment, lack of innovation and lack of prospects. Anything less will leave us falling further and further behind the other countries of the world and further behind the American dream. The question is whether we allow a twisted ideology and bad politics to award the thief with the purse or decide that we a nation of laws where we punish the thief and return the purse.

August 6, 2010
A.I.G. in Talks to Pay U.S. Debt, Chief Says
By MICHAEL J. de la MERCED

The American International Group has begun talks with the federal government over how to finish repaying its $130 billion taxpayer-financed bailout, its chief executive said on Friday.

Separately, he said, the company was making progress toward a potential sale of its consumer finance unit, one of several divisions it planned to shed as part of its turnaround.

“We’ll make sure taxpayers get paid back in full, and they will,” the executive, Robert H. Benmosche, said in an interview on Friday, as the company reported financial results that seemed to signal progress toward the repayment goal. “They’ll get paid back at a profit.”

The company reported a $2.7 billion loss for its second quarter, but the loss stemmed from a $3.3 billion charge related to the sale of a major international unit to MetLife. Excluding the charge, A.I.G. reported $1.3 billion in profit and $2.2 billion in operating income. Both figures showed improvement over the same time last year.

Mr. Benmosche, approaching his first anniversary as A.I.G.’s chief, has embarked on an aggressive campaign to sell off businesses, making the company much smaller than it was at the height of the financial crisis, when it faced possible collapse.

Along the way, Mr. Benmosche has clashed with some of the company’s overseers, including Harvey Golub, who stepped down as A.I.G.’s chairman last month. The company replaced Mr. Golub with Robert S. Miller, a turnaround expert with whom Mr. Benmosche said he worked well.

A.I.G. has begun holding talks with the Federal Reserve about ways to pay down its credit line, which had $20.5 billion outstanding as of June 30, plus an additional $6 billion in accrued interest and fees.

Already, the company is moving forward with the sale of two units: the American Life Insurance Company, an overseas insurance business, and Nan Shan, a Taiwanese life insurance company. It is also on track to sell American International Assurance, its Asia life insurance business, in an initial public stock offering.

A.I.G. is also accepting bids for its consumer lending unit, American General Financial Services, and hopes to announce a sale sometime this month, Mr. Benmosche said.

The stakes of the turnaround strategy are high: only after shedding its reputation as a ward of the state can A.I.G. again flourish as a company, Mr. Benmosche said. So long as questions remain about its dependence on government borrowings, the insurer could be hard-pressed to tap the stock and credit markets for fresh capital, he said.

Once the debt is paid off, Mr. Benmosche said, the company can hold serious negotiations with the Treasury Department about the government’s shedding of its nearly 80 percent stake in A.I.G. One option is to convert the government’s preferred shares into common stock that can be sold off over time, as is happening with Citigroup. Mr. Benmosche did not give a timeline for any possible sale.

“What’s important is that we have to get it right,” he said. “We have to make sure that we’re not leaving a lot on the table.”

Meanwhile, A.I.G. has made big strides in the businesses it is keeping, Mr. Benmosche said. Investment income in both its general and domestic life insurance operations is up, and while revenue from premiums written has fallen, that was in part because A.I.G. refused to cut its prices too far.

“A year ago, analysts were talking about a potentially enormous erosion of our business,” he said. “We have in fact been very successful in retaining business.”

Mr. Benmosche said that earlier this year, he visited 50 of A.I.G.’s biggest customers, and described the feedback as positive. So long as the company continued to make progress in paying back the government, customers indicated that they would most likely stay put, he said.

Another major A.I.G. business, the aircraft leasing company International Lease Finance Corporation, plans to raise up to $4 billion from the debt markets to help pay off a lifeline extended by the Fed. It also recently named a new management team led by Henri Courpron, a former Airbus executive.

The company is continuing to wind down A.I.G. Financial Products, the unit whose deteriorating credit-default swap business was at the center of the 2008 financial crisis. A.I.G. said on Friday that the unit had reduced the notional amount of its supersenior credit-default swap portfolio by 51 percent from Dec. 31, 2009 to June 30, to $89.5 billion.


Filed under: foreclosure Tagged: AIG, Benmosche, MetLife, RESPA, TILA, UDCPA
Jul
29

Mass Extinction of Pools Becomes Clearer

By | Foreclosure Blog News, Homeowner Resources

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Our good friend “Anonymous” has piped up with more vital information and expressed it more succinctly than I did.

“The senior tranches have largely already been paid and closed. Since the junior tranches are paid only if there is left over current payment – after the senior tranches have been paid. Thus, junior tranches are paid nothing (this is evident in investor lawsuits – damages do not deduct foreclosure recovery). If anything remains today from the toxic mortgage loan securitizations, it is the residual tranche – which has likely been resecuritized into a separate Trust – that is not a current pass-through security – but, rather, synthetically derived from a dismantled original Trust structure. “

Editor’s Note: In other words, if you have a high quality loan wherein you have a high credit score and received relatively good terms, it was in the “senior tranches.” The senior tranches were paid and closed. They were paid from the meager proceeds of the junior tranches, from insurance, credit default swaps etc. Bottom Line: If you got one of those mortgages, it has almost certainly been paid in full. So why are they still collecting your payments? Because they can.

Your obligation has most likely been satisfied long ago without any rights of subrogation. If you are in foreclosure now with one of these loans, the “Trustee” is in actuality out of the picture because the “Trust” was closed out (IF IT EVER LEGALLY EXISTED). All of this leads to the politically incorrect conclusion that people gt their houses for “nothing.” But that is not true.

ALL THE MONEY THAT WAS OWED ON THAT LOAN HAS BEEN PAID. WHY SHOULD ANYONE COLLECT ANYTHING FURTHER?

More comments from “Anonymous”

This is a very important post. I have been aware of cases where the defendant is sent to mediation without first identifying the real creditor. Some here have stated that the real party issue is not relevant because eventually the plaintiff will get his “ducks in a row” and proceed with the foreclosure under the real party name.

Not identifying the real party in court is not only fraud but also deprives the defendant of direct and timely negotiation with the real party true creditor. Thus, damages accrue to the defendant.

Although real party, in my opinion, is the single most important issue, I am not seeing courts enforce discovery to ascertain the real party. Once it can be established that the real party is not before the court, all the produced documents are also subject to question. I have seen cases where the real party is at issue – but most of the cases simply state that the plaintiff does not have standing – without attempting to demonstrate why the plaintiff is not the real party.

Since foreclosure cases most often are indicative of securitization, knowing the chain of sale/assignment in a securitization is crucial. Also, knowing what the “investors” are entitled to is important. Again, while I think this post is very important – i disagree with “there is nothing left to pay the investors who advanced money into a pool from which some mortgages were funded” 1) any investors who indirectly funded a “pool” – did not directly fund mortgages and 2) tranche “investors” – for which there a limited number of tranches – were only entitled to current income pass-through – not foreclosure recovery (which is not current and not passed on to pass-through security investors. (However, the residual tranche is not a pass-through – and is usually held by the servicer – who may -or may not be the current creditor). 3) the Trust is likely dissolved.

The fact that mediation is being conducted without identification of the current creditor – in whose name any modification must be contracted – is simply additional fraud upon the borrower defendant. This fraud is akin to “loan modification” scams that are being currently investigated by some state Department of Justices.

How and why the courts are allowing this to happen – and actually promoting it – is beyond me.

Editor’s Note: Legally this puts us at the horns of a dilemma. If we want to travel the path of “PAID IN FULL” then we are treading on the thin ice of accepting or admitting that the loan was actually legally and correctly assigned and indorsed into the pool, in addition to the usual “free house” talk.  If we travel the path of UNSUCCESSFUL ATTEMPTED ASSIGNMENT then we get to the conclusion that the loan is still owned by the originating lender, who was PAID IN FULL at the time of the loan closing, but still is the owner of record. If we travel both paths, we are presenting a highly complex argument that most judges won’t understand. This is why the winners out there are not making big splashes with exotic legal arguments (even though they would be right), the winners are getting down to the details that any Judge would understand — SHOW ME THE TRUST DOCUMENT, SHOW ME THE NOTE, SHOW ME THE ASSIGNMENT, SHOW ME THE INDORSEMENT, SHOW ME THE ACCOUNTING, SHOW ME THE CREDITOR ETC.

MANY THANKS, ANONYMOUS!!!


Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure mill, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee Tagged: creditor, fraud, mediation, REAL PARTY IN INTEREST
Jul
21

Non-Securitization Effect on Title

By | Foreclosure Blog News, Homeowner Resources

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I just finished a seminar given by NBI which was basically in lay terms “How to Repair the Chain of Title.” We covered everything about assignments, breaks in the chain etc. The opportunity arose for questions. I was the first to ask a question, in which I posed a hypothetical that is an accurate reflection of the manner in which foreclosures are being completed and deeds are issued upon the close of bidding at the auction, which it turns out was a question that was on the mind of some other listeners. The answer was that the foreclosure sale is invalid, the deed is in essence a Wild Deed, which under most state statutes is simply void, and does not require any action by the court or anyone else to invalidate it. In other words, in the typical Wild Deed situation, it is simply ignored.

A Wild Deed in simplistic terms is a Deed from someone who is not already in the title chain. The mere filing of self-serving documents as the pretender lenders have done, is a nullity. Any act proceeding from a nullity is also a nullity including the foreclosure and the deed that was issued is a nullity. This is because of the alleged auction sale in which the alleged creditor made a credit bid, was outside of the chain of title. What chain of title? Of course the one in the public records of the county in which the property is located. Add to that the fact that the party who made the credit bid was not a creditor and you can see how messy this venture is getting. The illusion of finality of foreclosure is creating a very expensive nightmare.

I’ll write more about this later. But it certainly corroborates the statement I made starting three years ago — that even if the “foreclosure sale” has already occurred, legal title to the house is still in the name of the homeowner and the deed issued from the foreclosure sale is void. It also means that legal title to the security instrument (deed of trust or mortgage) remains in the name of the loan originator.

If the loan originator is still alive and well, it is possible to re-create the assignment that was intended, but it isn’t easy as you must recite in each affidavit and post hac assignment the actual facts and circumstances surrounding the transfers, why they were not done before etc. This is basic property law.

If the loan originator is dead, it might not be possible to correct the title deficiency as to the loan, without a court order. This also corroborates my prior statements that non-judicial sale is not available in claimed securitized mortgages, because the chain of title does not exist. The only available remedy is judicial foreclosure — if they can make the required allegations in good faith and then prove those allegations to be true, with the burden squarely on the party seeking foreclosure.

One would think that in a State like Arizona they would want to file judicial foreclosures, because they can probably make a case for a deficiency as well. But the pretender lenders are fighting any notion that judicial foreclosure is required or even appropriate. Why? Because they cannot in good faith make the necessary allegations in a lawsuit that would support the relief they seek, and they certainly cannot prove those allegations. The facts are in nearly all cases, that there was no assignment, indorsement or delivery before the notice of default and no self-serving document can change that simple fact. The record is clear and MERS is not “PUBLIC RECORDS” (just ask them).

Bottom line: They want ONLY non-judicial sales because they could not even file a foreclosure lawsuit without suffering defeat, fines and penalties for filing frivolous pleadings. Put another way, they want non-judicial sale because they know they would lose in a judicial proceeding. And the Courts that allow this are contributing to a growing mountain of title problems that are starting emerge now as literally not subject to correction. The outcome? Well, if the courts keep ruling for the pretender lenders, the homeowners — even the ones foreclosed long ago — are still the legal owners of the property and the pretender lenders are going to get more objections from the attorneys for buyers saying that Seller cannot provide clear title. Those buyers without an attorney or whose attorney miss this central, simple record title issue, will have the problem passed on to them. This type of situation has occurred before. It always ends the same way — with the Courts and legislature back-tracking and arbitrarily creating a fix to the dismay and loss, usually of the banks and those who relied upon them.


Filed under: foreclosure
Jul
19

Banks Fighting Subpoenas From FHFA Over Access to Loan Files

By | Foreclosure Blog News, Homeowner Resources

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WHAT IF THE LOANS WERE NOT ACTUALLY SECURITIZED?

In a nutshell this is it. The Banks are fighting the subpoenas because if there is actually an audit of the “content” of the pools, they are screwed across the board.

My analysis of dozens of pools has led me to several counter-intuitive but unavoidable factual conclusions. I am certain the following is correct as to all residential securitized loans with very few (2-4%) exceptions:

  1. Most of the pools no longer exist.
  2. The MBS sold to investors and insured by AIG and the purchase and sale of credit default swaps were all premised on a general description of the content of the pool rather than a detailed description with the individual loans attached on a list.
  3. Each Prospectus if it carried any spreadsheet listing loans, contained a caveat that the attached list was by example only and not the real loans.
  4. Each distribution report contained a caveat that the parties who created it and the parties who delivered it did not guarantee either authenticity or reliability of the report. They even had specific admonitions regarding the content of the distribution report.
  5. NO LOAN ACTUALLY MADE IT INTO ANY POOL. The evidence is clear: nothing was done to assign, indorse or deliver the note to the investors directly or indirectly until a case went into litigation AND a hearing was scheduled. By that time the cutoff date had been breached and the loan was non-performing by their own allegation and therefore was not acceptable into the pool.
  6. AT ALL TIMES LEGAL TITLE TO THE PROPERTY WAS MAINTAINED BY THE HOMEOWNER EVEN AFTER FORECLOSURE AND SALE. The actual creditor who submitted a credit bid was not the creditor. The sale is either void or voidable.
  7. AT ALL TIMES LEGAL TITLE TO THE LOAN WAS MAINTAINED BY THE ORIGINATING “LENDER”. Since there was no assignment, indorsement or delivery that could be recognized at law or in fact, the originating lender still owns the loan legally BUT….
  8. AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the Lender and payee on the note, both created a LEGAL obligation from the borrower to the Lender and at the same time, the LEGAL obligation was extinguished because the LEGAL Lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.
  9. Since the Legal obligation was both created and extinguished contemporaneously with each other, any remaining obligation to any OTHER party became unsecured since the security instrument (mortgage or deed of trust) refers only to the promissory note executed by the borrower.
  10. At the time of closing, the investor-lenders were the real parties in interest as lenders, but they were not disclosed nor were the fees of the various intermediaries who brought the investor-lender money and the borrower’s loan together.
  11. ALL INVESTOR-LENDERS RECEIVED THE EQUIVALENT OF A BOND — A PROMISE TO PAY ISSUED BY A PARTY OTHER THAN THE BORROWER, PREMISED UPON THE PAYMENT OR RECEIVABLES GENERATED FROM BORROWER PAYMENTS, CREDIT DEFAULT SWAPS, CREDIT ENHANCEMENTS, AND THIRD PARTY INSURANCE.
  12. Nearly ALL investor-lenders have been paid sums of money to satisfy the promise to pay contained in the bond. These payments always exceeded the borrowers payments and in many cases paid the obligation in full WITHOUT SUBROGATION.
  13. NO LOAN IS IN ACTUAL DEFAULT OR DELINQUENCY. Since payments must first be applied to outstanding payments due, payments received by investor-lenders or their agents from third party sources are allocable to each individual loan and therefore cure the alleged default. A Borrower’s Non-payment is not a default since no payment is due.
  14. ALL NOTICES OF DEFAULT ARE DEFECTIVE: The amount stated, the creditor, and other material misstatements invalidate the effectiveness of such a notice.
  15. NO CREDIT BID AT AUCTION WAS MADE BY A CREDITOR. Hence the sale is void or voidable.
  16. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO DEDUCTIONS FOR THIRD PARTY PAYMENTS.
  17. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR UNJUST ENRICHMENT THAT IS UNSECURED.
  18. ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR A LIEN TO REFLECT THE INTENTION OF THE INVESTOR-LENDER AND THE INTENTION OF THE BORROWER.  Both the investor-lender and the borrower intended to complete a loan transaction wherein the home was used to collateralize the amount due. The legal satisfaction of the originating lender is not a deduction from the equitable satisfaction of the investor-lender. THUS THE PARTIES SEEKING TO FORECLOSE ARE SUBJECT TO THE LEGAL DEFENSE OF PAYMENT AT CLOSING BUT THE INVESTOR-LENDERS ARE NOT SUBJECT TO THAT DEFENSE.
  19. The investor-lenders ALSO have a claim for damages against the investment banks and the string of intermediaries that caused loans to be originated that did not meet the description contained in the prospectus.
  20. Any claim by investor-lenders may be subject to legal and equitable defenses, offsets and counterclaims from the borrower.
  21. The current modification context in which the securitization intermediaries are involved in settlement of outstanding mortgages is allowing those intermediaries to make even more money at the expense of the investor-lenders.
  22. The failure of courts to recognize that they must apply the rule of law results not only in the foreclosure of the property, but the foreclosure of the borrower’s ability to negotiate a settlement with an undisclosed equitable creditor, or with the legal owner of the loan in the property records.

Loan File Issue Brought to Forefront By FHFA Subpoena
Posted on July 14, 2010 by Foreclosureblues
Wednesday, July 14, 2010

foreclosureblues.wordpress.com

Editor’s Note….Even  U.S. Government Agencies have difficulty getting
discovery, lol…This is another excellent post from attorney Isaac
Gradman, who has the blog here…http://subprimeshakeout.blogspot.com.
He has a real perspective on the legal aspect of the big picture, and
is willing to post publicly about it.  Although one may wonder how
these matters may effect them individually, my point is that every day
that goes by is another day working in favor of those who stick it out
and fight for what is right.

Loan File Issue Brought to Forefront By FHFA Subpoena

The battle being waged by bondholders over access to the loan files
underlying their investments was brought into the national spotlight
earlier this week, when the Federal Housing Finance Agency (FHFA), the
regulator in charge of overseeing Fannie Mae and Freddie Mac, issued
64 subpoenas seeking documents related to the mortgage-backed
securities (MBS) in which Freddie and Fannie had invested. The FHFA
has been in charge of overseeing Freddie and Fannie since they were
placed into conservatorship in 2008.

Freddie and Fannie are two of the largest investors in privately
issued bonds–those secured by subprime and Alt-A loans that were often
originated by the mortgage arms of Wall St. firms and then packaged
and sold by those same firms to investors–and held nearly $255 billion
of these securities as of the end of May. The FHFA said Monday that it
is seeking to determine whether issuers of these so-called “private
label” MBS misled Freddie and Fannie into making the investments,
which have performed abysmally so far, and are expected to result in
another $46 billion in unrealized losses to the Government Sponsored
Entities (GSE).

Though the FHFA has not disclosed the targets of its subpoenas, the
top issuers of private label MBS include familiar names such as
Countrywide and Merrill Lynch (now part of BofA), Bear Stearns and
Washington Mutual (now part of JP Morgan Chase), Deutsche Bank and
Morgan Stanley. David Reilly of the Wall Street Journal has written an
article urging banks to come forward and disclose whether they have
received subpoenas from the FHFA, but I’m not holding my breath.

The FHFA issued a press release on Monday regarding the subpoenas
(available here). The statement I found most interesting in the
release discusses that, before and after conservatorship, the GSEs had
been attempting to acquire loan files to assess their rights and
determine whether there were misrepresentations and/or breaches of
representations and warranties by the issuers of the private label
MBS, but that, “difficulty in obtaining the loan documents has
presented a challenge to the [GSEs'] efforts. FHFA has therefore
issued these subpoenas for various loan files and transaction
documents pertaining to loans securing the [private label MBS] to
trustees and servicers controlling or holding that documentation.”

The FHFA’s Acting Director, Edward DeMarco, is then quoted as saying
““FHFA is taking this action consistent with our responsibilities as
Conservator of each Enterprise. By obtaining these documents we can
assess whether contractual violations or other breaches have taken
place leading to losses for the Enterprises and thus taxpayers. If so,
we will then make decisions regarding appropriate actions.” Sounds
like these subpoenas are just the precursor to additional legal
action.

The fact that servicers and trustees have been stonewalling even these

powerful agencies on loan files should come as no surprise based on

the legal battles private investors have had to wage thus far to force

banks to produce these documents. And yet, I’m still amazed by the

bald intransigence displayed by these financial institutions. After

all, they generally have clear contractual obligations requiring them

to give investors access to the files (which describe the very assets

backing the securities), not to mention the implicit discovery rights

these private institutions would have should the dispute wind up in

court, as it has in MBIA v. Countrywide and scores of other investor

suits.

At this point, it should be clear to everyone–servicers and investors
alike–that the loan files will have to be produced eventually, so the
only purpose I can fathom for the banks’ obduracy is delay. The loan
files should, as I’ve said in the past, reveal the depths of mortgage
originator depravity, demonstrating convincingly that the loans never
should have been issued in the first place. This, in turn, will force
banks to immediately reserve for potential losses associated with
buying back these defective mortgages. Perhaps banks are hoping that
they can ward off this inevitability long enough to spread their
losses out over several years, thereby weathering the storm caused (in
part) by their irresponsible lending practices. But certainly the
FHFA’s announcement will make that more difficult, as the FHFA’s
inherent authority to subpoena these documents (stemming from the
Housing and Economic Recovery Act of 2008) should compel disclosure
without the need for litigation, and potentially provide sufficient
evidence of repurchase obligations to compel the banks to reserve
right away. For more on this issue, see the fascinating recent guest
post by Manal Mehta on The Subprime Shakeout regarding the SEC’s
investigation into banks’ processes for allocating loss reserves.

Meanwhile, the investor lawsuits continue to rain down on banks, with
suits by the Charles Schwab Corp. against Merrill Lynch and UBS, by
the Oregon Public Employee Retirement Fund against Countrywide, and by
Cambridge Place Investment Management against Goldman Sachs, Citigroup
and dozens of other banks and brokerages being announced this week. If
the congealing investor syndicate was looking for political cover
before staging a full frontal attack on banks, this should provide
ample protection. Much more to follow on these and other developments
in the coming days…
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Posted by Isaac Gradman at 3:46 PM


Filed under: bubble, CASES, CDO, CORRUPTION, Eviction, evidence, expert witness, Fannie MAe, foreclosure mill, forms, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, trustee Tagged: assignment, delivery, discovery, Edward DeMarco, FHFA, foreclosureblues, indorsement, investor-lender, Isaac Gradman, pools, table funded loan, third aprty payment
Jul
04

Principal Reduction is Both Fair and the Only Practical Solution

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From “Anonymous” in Response to Post about PAID IN FULL

Editor’s Note. I might have misstated the case when I said that investment banks are buying up the lower tranches. It’s not them. It is the people in the investment banks because they have another gambit to run on this. Anonymous, I would appreciate it if you would inquire and confirm, corroborate or rebut this statement.

The rest of your points are of course pearls. AND the specifics you offer make it increasingly clear that a principal reduction at the borrower’s end is only a reflection of the reality of the reduction on the creditor’s end — whether through payment, credit enhancement or waiver of rights that are questionable but nonetheless part of the deal.

One – in response to — “investment banks that are buying up the toxic waste tranches, ” —–investment banks are not buying up toxic tranches -they are consolidating these tranches onto their balance sheets -and writing them off the former receivable pass-through.

Two – we do not know what AIG (or other insurers) were entitled to once they honored the swap protection contract (they actually did not honor – the US Government did) – this information is not available. AIG could be entitled to whole loan collection rights. But, AIG “Obligations” are now owned by the US Government – who, by the way, is the party rejecting loan modifications – despite their law to promote them.

Three – paying an obligation for another party does not release action against the borrower. The debt remains. However, the real party must follow the law. The real party remain undisclosed. The real creditor must be divulged. And, any failure to disclose the real and current creditor deprives the borrower of the right to a modification negotiation with the actual creditor. We all know, by know, servicers are not the creditor.

Four- Use the paid “tranches” as evidence that the structure of the REMIC – as once originated (by cut-off date – ha ha) – is gone. Mezzanine tranche holders are only paid – if there is anything left after the A tranches holders are paid. And, this is ONLY for current pass-through. If the A tranches have been paid – in full- by swaps -there is nothing left to be paid to any M tranche holders. The “waterfall” structure is gone – thus, so is the pass-through REMIC that once organized the structured tranches.

Five – Balance sheet accounting is critical – who is accounting for the right to collect the loan? That is the fundamental question.

Six – As to “holder” of the note – there have been good challenges to the negotiability of the note posted here (see Collete McDonald). and post re- Professor at Pepperdine.

If you try to challenge strictly on fact that someone else “paid” the loan amount for you – you will not win. This has already been tested in debt collection. It will not work. But, this is greater than “debt” collection – as the current creditor is supposing to be negotiating with you according to Congressional law. You need to know your creditor – until you find that out – the foreclosure is a farce and and a fraud – upon you – and upon the court.

Finally, as Neil has stated many times, trying to get a complete discharge or “free home” will not work. Thus, trying to say the DEBT does not exist – will not hold. Only way you can possibly go this route is to claim that the account does not belong to you. And, that could be a focus – when a loan number has been changed (need less to say – your new loan number is not in the PSA “attached” “Mortgage Schedule.”

And, as PJ has also said – principal reduction is the key. There needs to be principal reduction with a fair interest rate.

Judges will not like hearing that the debt has been paid – and, therefore, you owe nothing. Need to shatter their “trustee” bogus Trust structure – and demand to know the current creditor. And, pursue counter-claims for a fraudulent foreclosure and fraud upon the court.

TO quote trespass unwanted,
I know nothing, and if I think I know something I know nothing. I don’t give legal advice because I don’t know legal things.


Filed under: foreclosure
Jul
02

GMAC v Visicaro Case No 07013084CI: florida judge reverses himself: applies basic rules of evidence and overturns his own order granting motion for summary judgment

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Having just received the transcript on this case, I find that what the Judge said could be very persuasive to other Judges. I am renewing the post because there are several quotes you should be using from the transcript. Note the intimidation tactic that Plaintiff’s Counsel tried on the Judge. A word to the wise, if you are going to use that tactic you better have the goods hands down and you better have a good reason for doing it that way.

Fla Judge rehearing of summary judgement 4 04 10

5035SCAN4838_000 vesicaro Briefs

Vesicaro transcript

Posted originally in April, 2010

RIGHT ON POINT ABOUT WHAT WE WERE JUST TALKING ABOUT

I appeared as expert witness in a case yesterday where the Judge had trouble getting off the idea that it was an accepted fact that the note was in default and that ANY of the participants in the securitization chain should be considered collectively “creditors” or a creditor. Despite the fact that the only witness was a person who admitted she had no knowledge except what was on the documents given to her, the Judge let them in as evidence.

The witness was and is incompetent because she lacked personal knowledge and could not provide any foundation for any records or document. This is the predominant error of Judges today in most cases. Thus the prima facie case is considered “assumed” and the burden to prove a negative falls unfairly on the homeowner.

The Judge, in a familiar refrain, had trouble with the idea of giving the homeowner a free house when the only issue before him was whether the motion to lift stay should be granted. Besides the fact that the effect of granting the motion to lift stay was the gift of a free house to ASC who admits in their promotional website that they have in interest nor involvement in the origination of the loans, and despite the obviously fabricated assignment a few days before the hearing which violated the terms of the securitization document cutoff date, the Judge seems to completely missed the point of the issue before him: whether there was a reason to believe that the movant lacked standing or that the foreclosure would prejudice the debtor or other creditors (since the house would become an important asset of the bankruptcy estate if it was unencumbered).

If you carry over the arguments here, the motion for lift stay is the equivalent motion for summary judgment.

This transcript, citing cases, shows that the prima facie burden of the Movant is even higher than beyond a reasonable doubt. It also shows that the way the movants are using business records violates all standards of hearsay evidence and due process. Read the transcript carefully. You might want to use it for a motion for rehearing or motion for reconsideration to get your arguments on record, clear up the issue of whether you objected on the basis of competence of the witness, and then take it up on appeal with a cleaned up record.


Filed under: bubble, CDO, CORRUPTION, currency, Eviction, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, Investor, Mortgage, securities fraud, Servicer Tagged: 07013084CI, assumptions, beyond a reasonable doubt, burden of prrof, business records, competency, due process, evidence, expert witness, florida judge, foreclosure defense, FOUNDATION, fraud, GMAC, hearsay, HERS, incompetent witness, motion for summary judgment, rules of evidence, securitization, Visicaro, witness
Jun
21

INVESTORS SUE FOR INFLATED HOME APPRAISALS, WHY DON’T YOU?

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The model concluded that roughly one-third of the loans were for amounts that were 105 percent or more of the underlying property’s value. Roughly 5.5 percent of the loans in the pools had appraisals that were lower than they should have been.

In one pool with 3,543 loans, for example, the CoreLogic model had enough information to evaluate 2,097 loans. Of those, it determined that 1,114 mortgages — or more than half — had loan-to-value ratios of 105 percent or more. The valuations on those properties exceeded their true market value by $65 million,

EDITOR’S NOTE:  POINTS TO BE MADE:

  • Investors’ are proving the case for appraisal fraud, aligning themselves with borrowers. They are doing the borrower’s work. Get yourself copies of these complaints, discovery etc., send them to me and use them in your own case.
  • The little guy is starting to get attention. The court’s are getting the point that these loans were fraudulent. In my surveys I have found that appraisal fraud accounts for nearly all the loans 2003-2008, and that the amount of the fraud was a s much as 150% in some cases with an average of around 35%. The moment you closed, whatever down payment you made was lost and you were underwater.
  • The obligation to present a proper appraisal is on the lender not the borrower.
  • Just like the investors, borrowers were deprived of vital information about their loan that would have prevented any reasonable person from closing. Thus whether the Court’s like it or not, rescission, is a proper remedy, if not under TILA then under fraud statues and common law doctrines of fraud. Combine that with damages available, and the prospect of getting loan reduction and adjustment of loan terms comes into clearer view.
  • THE CONNECTION BETWEEN THE INVESTOR’S ADVANCE OF FUNDS AND THE HOME APPRAISAL IS PRESUMED AND ALLEGED. THUS THE ARGUMENT THAT THE INVESTOR WAS THE CREDITOR AND THE BORROWER IS THE DEBTOR IS CORROBORATED BY THE PLEADINGS OF THE INVESTORS.
June 18, 2010

The Inflatable Loan Pool

By GRETCHEN MORGENSON

AMID the legal battles between investors who lost money in mortgage securities and the investment banks that sold the stuff, one thing seems clear: the investment banks appear to be winning a good many of the early skirmishes.

But some cases are faring better for individual plaintiffs, with judges allowing them to proceed even as banks ask that they be dismissed. Still, these matters are hard to litigate because investors must persuade the judges overseeing them that their losses were not simply a result of a market crash. Investors must argue, convincingly, that the banks misrepresented the quality of the loans in the pools and made material misstatements about them in prospectuses provided to buyers.

Recent filings by two Federal Home Loan Banks — in San Francisco and Seattle — offer an intriguing way to clear this high hurdle. Lawyers representing the banks, which bought mortgage securities, combed through the loan pools looking for discrepancies between actual loan characteristics and how they were pitched to investors.

You may not be shocked to learn that the analysis found significant differences between what the Home Loan Banks were told about these securities and what they were sold.

The rate of discrepancies in these pools is surprising. The lawsuits contend that half the loans were inaccurately described in disclosure materials filed with the Securities and Exchange Commission.

These findings are compelling because they involve some 525,000 mortgage loans in 156 pools sold by 10 investment banks from 2005 through 2007. And because the research was conducted using a valuation model devised by CoreLogic, an information analytics company that is a trusted source for mortgage loan data, the conclusions are even more credible.

The analysis used CoreLogic’s valuation model, called VP4, which is used by many in the mortgage industry to verify accuracy of property appraisals. It homed in on loan-to-value ratios, a crucial measure in predicting defaults.

An overwhelming majority of the loan-to-value ratios stated in the securities’ prospectuses used appraisals, court documents say. Investors rely on the ratios because it is well known that the higher the loan relative to an underlying property’s appraised value, the more likely the borrower will walk away when financial troubles arise.

By back-testing the loans using the CoreLogic model from the time the mortgage securities were originated, the analysis compared those values with the loans’ appraised values as stated in prospectuses. Then the analysts reassessed the weighted average loan-to-value ratios of the pools’ mortgages.

The model concluded that roughly one-third of the loans were for amounts that were 105 percent or more of the underlying property’s value. Roughly 5.5 percent of the loans in the pools had appraisals that were lower than they should have been.

That means inflated appraisals were involved in six times as many loans as were understated appraisals.

David J. Grais, a lawyer at Grais & Ellsworth in New York, represents the Home Loan Banks in the lawsuits. “The information in these complaints shows that the disclosure documents for these securities did not describe the collateral accurately,” Mr. Grais said last week. “Courts have shown great interest in loan-by-loan and trust-by-trust information in cases like these. We think these complaints will satisfy that interest.”

The banks are requesting that the firms that sold the securities repurchase them. The San Francisco Home Loan Bank paid $19 billion for the mortgage securities covered by the lawsuit, and the Seattle Home Loan Bank paid $4 billion. It is unclear how much the banks would get if they won their suits.

Among the 10 defendants in the cases are Deutsche Bank, Credit Suisse, Merrill Lynch, Countrywide and UBS. None of these banks would comment.

As outlined in the San Francisco Bank’s amended complaint, it did not receive detailed data about the loans in the securities it purchased. Instead, the complaint says, the banks used the loan data to compile statistics about the loans, which were then presented to potential investors. These disclosures were misleading, the San Francisco Bank contends.

In one pool with 3,543 loans, for example, the CoreLogic model had enough information to evaluate 2,097 loans. Of those, it determined that 1,114 mortgages — or more than half — had loan-to-value ratios of 105 percent or more. The valuations on those properties exceeded their true market value by $65 million, the complaint contends.

The selling document for that pool said that all of the mortgages had loan-to-value ratios of 100 percent or less, the complaint said. But the CoreLogic analysis identified 169 loans with ratios over 100 percent. The pool prospectus also stated that the weighted average loan-to-value ratio of mortgages in the portion of the security purchased by Home Loan Bank was 69.5 percent. But the loans the CoreLogic model valued had an average ratio of almost 77 percent.

IT is unclear, of course, how these court cases will turn out. But it certainly is true that the more investors dig, the more they learn how freewheeling the Wall Street mortgage machine was back in the day. Each bit of evidence clearly points to the same lesson: investors must have access to loan details, and the time to analyze them, before they are likely to want to invest in these kinds of securities again.


Filed under: bubble, CASES, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee Tagged: CoreLogic, Credit Suisse, David J. Grais, DEUTSCHE BANK, GRETCHEN MORGENSON, HERS, Home Loan Banks, investment banks, investors, Merrill Lynch, mortgage securities, San Francisco Home Loan Bank, Seattle Home Loan Bank, UBS, VP4
Jun
15

MERS Attempting to Get Correct Identity of Investors

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Training Bulletin
Number 2010-05
To: All MERS Members
`
May 26, 2010
Re: Identifying Investors on MERS® System

MERS® System Release 19.0 on June 14, 2010, will include Phase II of MERS® InvestorID. Phase I was introduced on June 19, 2009, to help our Members meet the requirements of the Helping Families Save Their Homes Act of 2009 by using information entered on the MERS® System to generate a Notice of New Creditor when a Transfer of Beneficial Rights (TOB) transaction was completed.

Besides providing a more robust solution for generating Mortgage Loan Transfer Notices, Phase II provides Investor
contact information to the public in MERS® ServicerID and the telephone Servicer Identification System, and to MERS®
Link Subscribers and MERS® Members in MERS® Link. Investor contact information also is provided to MERS
Members in MERS® OnLine, and in the XML and batch inquiry transactions.

Because of this increased visibility of Investor information, it is even more important that the Investor be represented
correctly for each loan on the MERS® System. As noted in the Draft Procedures Manual for Release 19.0 released on
April 15, 2010, Servicers may not insert their own Org ID as Investor on MINs for which they do not hold the
beneficial rights after June 14, 2010. If the actual investor does not have an Org ID, the Servicer may insert 1000002
(Undisclosed Investor) in the Investor field. Servicers may begin immediately inserting this Org ID in the Investor field
when appropriate, and may create a TOB Option 2 from their own Org ID to 1000002 to insert this Org ID on loans for
which they had previously inserted their own Org ID as Investor because the actual investor did not have an Org ID.

After the release, all MERS® InvestorID-related options will be visible to each Member in MERS® OnLine, including:

Mortgage Loan Transfer Notice (defaults to selected; if you have opted out of InvestorID it is deselected)
If selected, a Mortgage Loan Transfer Notice will be generated when a TOB transaction is completed with your Org
ID as the New Investor. Members cannot update this option. To request it be changed, currently you must email

InvestorID@mersinc.org. After the release, you will email the MERS Product Performance Department at
ppd@mersinc.org to change this option, as for other Member Profile changes.
New information display options that can only be changed by MERS (displayed under Investor Options):
o
Disclose Investor Information– Proprietary (defaults to selected)
If selected, Investor contact information will be included for all loans with your Org ID as Investor:
For non-rightsholder Members on the MIN Summary page in MERS® OnLine
For Members and MERS® Link Subscribers on the MIN Summary page in MERS® Link
In all Status and Summary responses in XML Inquiry and Batch Inquiry
o
Disclose Investor Information– Public (defaults to selected)
If selected, Investor contact information will be displayed for all loans with your Org ID as Investor:
In MERS® ServicerID
In the telephone Servicer Identification System
If you wish to have either option deselected for your Org ID before the release, please email your request to
InvestorID@mersinc.org, including your Org ID and company name, by June 9, 2010. Requests received after June
9 will be processed starting on June 14. After the release, you will email the MERS Product Performance
Department atppd@mersinc.org to change these options, as for other Member Profile changes.
New information display options that can be changed by the Member (on the Name/Address page):
o

Use Investor Alternate Address– Public (defaults to unselected)
If selected, the new Investor Alternate Address is used in MERS® ServicerID and the telephone Servicer
Identification System, and on Mortgage Loan Transfer Notices, for loans with your Org ID as Investor

o

Use Servicer/Subservicer Alternate Address– Public (defaults to unselected)
If selected, the new Servicer/Subservicer Alternate Address is used in MERS® ServicerID and the telephone
Servicer Identification System, and on Mortgage Loan Transfer Notices, for loans with your Org ID as Servicer
or Subservicer.


Filed under: foreclosure Tagged: MERS
Jun
09

AFTER THE SALE: PART II

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Submitted by VivianJ

Finally got on the list. A servicer, (not on the deed of trust) tried to execute a power of sale. Thanks Neil for your wonderful posts. I’ve been reading for months.
I showed up. Spoke to the ‘appointed’ trustee. Said, according to your appointment you have the Deed and the Note? She said, “I don’t want to talk to you.”. I told her I had a complaint for identity theft and consumer protection in a real estate transaction with the Attorney General. She gives me the law firm she’s helping (in another city) and I told her, I was disputing the sale. It was fraud. I informed her I would capture the sale with my cell phone. Eventually I was told they would not call out my home for sale. I waited through all the foreclosures. Those she called out, she stated she was authorized to bid for the “lender” (term used loosely) and she’d place the first bid, and of course had the highest bid, and would say ‘sold’. She read mine, and I started recording, I spoke while she sold, and said I never did business with this company. They are not a lender nor a creditor to me. They are not recorded in the real property records. The title is clouded. etc…so on, and eventually heard her say, sold. So I stopped talking and asked what it sold for and a person sitting by her gave a value. I said, that’s all I need and stopped recording. The cell has my voice over hers, but the point is, I was there, and have video of a fraudulent sale. I waited. No filings yet to try to transfer the title from the original trustee to the ‘substitute trustee’ (term used loosely). The acceleration (power of sale) can only be done by the ‘lender’. That definition is in the Deed of Trust. Without an ‘Assignment/Transfer’ in the Real Property Records…no one else can claim the status of the “lender’. Only the ‘lender’ can appoint a substitute trustee. The entire process was flawed. I got information from the ‘lender’ I never paid, that should prove I owed them the money (without an assignment) but their note was a certified copy from a title company, their copy of the Deed is different from a certified copy I can get from the official real estate records. I got the law firm to send their proof they have the Note and Deed as per their appointment. Their note does not match what the ‘lender’ sent, and their copy of the Deed does not match what the ‘lender’ sent nor the copy on file in Real Property records. They made it easy for me to prove to the attorney general the fraud. Problem was the AG represents that ‘state’ whereas I needed someone to represent me. Attorneys in non-judicial states do not know this part of the process so they avoid it. I found one who was new to the state, needed clients, and said if I could tell her what was wrong she’d try to help me. Well I’m on my way to either ‘reverse the sale’ (if they file something to show it was done…seems there is a delay to complete that fraudulent process), and to seek quiet title to remove all claims to this property. Sad thing is the ‘lenders’ (that term will always be used loosely) only wants the legal title to the property. They could care less about me, my payment or the house. But they can’t get it from the Trustee on my Deed of Trust because they aren’t the original Lender. The original Lender was merged away into another entity, and the Trustee would only recognize the holder of the Note and Deed. Good luck with that.

America’s property is held by legal title by the origianl Trustees of our Deeds/Mortgages and the Bankers can’t get to these titles because they split the Deed and Note. A shame the fraud they’d go through to make sure an attorney is not the final holder of all the property titles. Makes it hard to flip homes over and over again as people buy, sell, or lose their homes doesn’t it. Can’t back out of the bad documents. They did get sloppy in their greed.
They assign a substitute trustee, then force a sale or foreclosure, then get the original trustee to transfer the legal title to the substitute trustee so the substitute trustee can transfer it to the banker. The fraud is deep, pretending to pay taxes so they can set up an escrow and charge higher mortgage, pretending to not receive payments, canned letters no matter how you communicate in writing telling you they didn’t get your documentation even if you sent it three different times and three different ways. Then if you refinance to get from under them, the bank that refinanced is bound to assign you to them as a servicer again to go through the same pains over and over until they get that title!
Good luck to all. I admit, stay in the language of Love, ’cause when you operate with Love in your heart, you can see through all the darkness and all the fraud and all the deception. With Love, your eyes are open and you see the slightest details in their fraud and can expose the evil side of the business. Stay in Love, that’s the language that will open the doors to victory. Forgive the players. They are working and earning a paycheck. A few at the top caused the problems. The rest of us on both sides are the pawns and expendable. Love your neighbor, they may be the very person to help you. Keep an amount of cash, (coins) in your possession for emergency situations. Lately, there has been interruptions weather related or not, where ATMs, gas stations, food services, etc.. have not been able to process credit and debit. Seems like a test for something later to come. Not fear mongering, just making an observation and giving a heads-up. Neil, keep up the good work.


Filed under: CASES, CORRUPTION, evidence, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop Tagged: after the sale, attorney general, Fruad, servicer, trustee, wrongful foreclosure
Jun
09

AFTER THE SALE: PART I

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Submitted by Charles Koppa. 6/9/2010

Editor’s Note: We are starting to look at events AFTER the sale has taken place and we are discovering a number of things:

  • CREDIT BID: Only the Creditor can submit a credit bid. All others must pay actual money. If a non-creditor submitted a credit bid (essentially bidding the “amount due” which as we have seen from the FTC action against BOA is incorrectly stated) then the procedure has been violated, the sale has not legally occurred. At least that is my interpretation.
  • Also the submission of a credit bid locks in the position of the parties. So if you are suing for wrongful or fraudulent foreclosure, they no longer have the option of fabricating documents as you raise one objection after another.
  • The obligation to return money rightfully owed to the homeowner continues but it is ignored. Thus even if the property is not sold to a bonafied purchaser for value without notice of defects, the net accounting due is the same. So the receipt of third party insurance, credit default swaps, or other credit enhancement payments is still required to be allocated to this loan. Hence there is a damage claim against the participants in the foreclosure and sale.
  • More later. For now read Charles’ comments below

REO’s and OREO’s have NO MERS Identification Numbers.

1.  Loan Servicer (as a MERS member) initiates the NOD and NOTS.
2.  When the auctioneer pronounces “Back To Beneficiary”, the securitized bond trust receives the MinBid at averages of 46% below the NOTS amount posted the day before.  Bondholder “paper certificate losses”  are unconscionably assigned against the Real Estate asset. “The Paper Trust” gains an untitled transfer of the Real Estate Asset which it NEVER Wanted!
3.  The Auction extinguishes the Toxic Security on Wall Street.  Counterparties collect on their bets.  Investor lose their investments” and the monthly cash interest streams are terminated.
4.  Simultaneously, the Servicer (and MERS) are extinguished from all public records.  Servicer collects on MGIC or other mortgage insurance to cover ALL their contrived losses and costs.
5.  When the re-sale is completed, “The Bookkeeping Trust” ALSO disappears from County Property RECORDS!!!
6.  Until re-sold, the real property travels at ZERO book value into an off balance sheet private entity (mostly controlled by the BHC) which was the SIV “depositor” (as an off balance entity) in setting up the REMIC and/or the Investment Trust in the first place.


Filed under: CASES, CDO, CORRUPTION, Eviction, expert witness, Fannie MAe, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, marketing, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop Tagged: Auction, bookkeeping trust, credit bid, fabricating documents, foreclosure, foreclosure sale, fraudulent foreclosure, Identification Numbers, Lehman Brothers, MERS, MIN, NOD, NOTS, OREO, property records, REO, sale, servicer
Jun
03

In States Requiring Mediation

By | Foreclosure Blog News, Homeowner Resources

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More and more states are following the example set by the federal government in requiring mediation or modification attempts before going forward with litigation. We think that is a good idea in theory, but without the teeth that is in the enabling rules and statutes in Florida, you are just going to end up playing the same game of “who’s my lender.?”

Even in Florida, as in all cases, YOU must bring up the the issue of the authroity of the person being offered as a decision-maker.” 99 times out of a hundred they are not. The most they have is some authority from a dubious source to agree to some minor adjustments, like adding the payments to the back end of the mortgage.

Make no mistake about it — there is no decision-maker unless they have full power over that mortgage. That means they could if they want to, reduce the principal. They will argue that nobody has that power because the securitization documetns prohibit it. That is their little way of getting your eye off the ball.

Of course the securitization documents don’t allow certain things to be done to the mortgage. Those documents are aimed at restricting the actions of the agents of the principal (i.e. the creditor/lender).

It is ONLY an authorized representative of the investors who DO have the final say over any settlement that is needed in that mediation room and proof of that authority, which means notice to the investors, which means disclosing that notice to the investors and proof that a sufficient number of investors under the documents have approved the grant of decision-making authority to modify, amend, alter or change the obligation, note and/or mortgage.

Unless the person offered for the mediation has the authority to sign a satisfaction of mortgage on whatever terms he/she sees fit, they are not the decision-maker. If the other side refuses to comply move for contempt, sanctions and to strike their pleadings with prejudice.

If the other side fights this and they probably will, you should probably argue that this is a flat out admission that the principal (i.e., real party in interest, creditor, lender) is not represented in the proceedings because the other party in your litigation refuses to disclose them contrary to the requirements of federal law, state law and the rules of civil procedure.

If they can’t produce this authority then they also lack authority to foreclose. It might even be an admission that they are seeking to steal the house, put in their own entity and keep the proceeds of sale contrary to the interests of the investor who is entitled to be paid and contrary to the borrower who is entitled to a credit against the obligation that is due.


Filed under: CASES, CORRUPTION, Eviction, expert witness, foreclosure, foreclosure mill, foreign relations, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, trustee, workshop Tagged: authority, decision-maker, Florida Modification, investors, mediation, modification, Mortgage, note, Obligation
Jun
02

Fannie Mae Policy Now Admits Loan Not Secured

By | Foreclosure Blog News, Homeowner Resources

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Editor’s Note: Their intention was to get MERS and servicers out of the foreclosure business. They now say that prior to foreclosure MERS must assign to the real party in interest.

Here’s their problem: As numerous Judges have pointed out, MERS specifically disclaims any interest in the obligation, note or mortgage. Even the language of the mortgage or Deed of Trust says MERS is mentioned in name only and that the Lender is somebody else.

These Judges who have considered the issue have come up with one conclusion, an assignment from a party with no right, title or interest has nothing to assign. The assignment may look good on its face but there still is the problem that nothing was assigned.

Here’s the other problem. If MERS was there in name only to permit transfers and other transactions off-record (contrary to state law) and if the original party named as “Lender” is no longer around, then what you have is a gap in the chain of custody and chain of title with respect to the creditor’s side of the loan. It is all off record which means, ipso facto that it is a question of fact as to whose loan it is. That means, ipso facto, that the presence of MERS makes it a judicial question which means that the non-judicial election is not available. They can’t do it.

So when you put this all together, you end up with the following inescapable conclusions:

  • The naming of MERS as mortgagee in a mortgage deed or as beneficiary in a deed of trust is a nullity.
  • MERS has no right, title or interest in any loan and even if it did, it disclaims any such interest on its own website.
  • The lender might be the REAL beneficiary, but that is a question of fact so the non-judicial foreclosure option is not available.
  • If the lender was not the creditor, it isn’t the lender because it had no right title or interest either, legally or equitably.
  • Without a creditor named in the security instrument intended to secure the obligation, the security was never perfected.
  • Without a creditor named in the security instrument intended to secure the obligation, the obligation is unsecured as to legal title.
  • Since the only real creditor is the one who advanced the funds (the investor(s)), they can enforce the obligation by proxy or directly. Whether the note is actually evidence of the obligation and to what extent the terms of the note are enforceable is a question for the court to determine.
  • The creditor only has a claim if they would suffer loss as a result of the indirect transaction with the borrower. If they or their agents have received payments from any source, those payments must be allocated to the loan account. The extent and measure of said allocation is a question of fact to be determined by the Court.
  • Once established, the allocation will most likely be applied in the manner set forth in the note, to wit: (a) against payments due (b) against fees and (c) against principal, in that order.
  • Once applied against payments, due the default vanishes unless the allocation is less than the amount due in payments.
  • Once established, the allocation results in a fatal defect in the notice of default, the statements sent to the borrower, and the representations made in court. Thus at the very least they must vacate all foreclosure proceedings and start over again.
  • If the allocation is less than the amount of payments due, then the investor(s) collectively have a claim for acceleration and to enforce the note — but they have no claim on the mortgage deed or deed of trust. By intentionally NOT naming parties who were known at the time of the transaction the security was split from the obligation. The obligation became unsecured.
  • The investors MIGHT have a claim for equitable lien based upon the circumstances that BOTH the borrower and the investor were the victims of fraud.

Filed under: foreclosure
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