Foreclosure Fraud For Dummies, 1: The Chains and the Stakes

(This is a series giving a basic explanation of the current foreclosure fraud crisis: This is Part One. Here is Part Two, Part ThreePart Four, and Part Five.)

The current wave of foreclosure fraud and the consequences for the economy are difficult to follow. As such, I’m going to write a few posts to simplify what is going on so you can follow stories as they unfold.  This is very 101 level, and will include a reading list of blog posts and articles at each stage to help provide depth.   (Special thanks to Yves Smith and Tom Adams for walking me through much of this.)  Let’s make three charts of the chains involved in the process. The first is what is currently going on with foreclosure fraud (click through for larger).

As you can see, in judicial review states like Florida the courts require that servicers, or those who administer the bonds that are full of mortgages (securitization, residential mortgage backed securities, RMBS, are all phrases for them), say that they have everything necessary in order to have standing to bring a foreclosure. They need to have the note for a mortgage, which is supposed to be in the trust – part of the mortgage backed securities – that they administer.

What is breaking down here? In Florida, a judicial review state, it was found that one person was notarizing documents far faster than anyone could reasonably have. Forged documents necessary for the foreclosure process like the note were found. A separate court system was set up to resolve these foreclosures faster at the expense of allowing serious challenges to the documents. Here’s Smith on how kangaroo these courts look up close. Here’s WaPo on one individual and the nightmare of trying to challenge an invalid foreclosure. Keep him in mind when you hear about deadbeats and whatnot: the current system is designed to make it difficult for anyone to challenge their case.

Meet the robo-signer who kicked it off here at this WaPo story. I almost feel bad for this patsy; the real battle here is between junior and senior tranche holders, and this doofus could end up in jail in order to keep John Paulson rich. After reading about this guy I’m asking our elites to take care of their patsies better. (Can we get a Financial Patsy Fordism social contract movement going? If you are going to be a patsy for GMAC, you should be paid enough able to be able to buy GMAC’s services or something.)

Why would servicers do this? One story would be that the more foreclosures they process, the more fees they get, so there is an incentive to cut as many corners to speed through the process as possible. Hence the term foreclosure mills. You can read more about this from Andy Kroll’s excellent work for Mother Jones (start here).

There’s another problem though – what if servicers are behaving this way because the actual notes aren’t in the trust? Let’s go back to the creation of these instruments.

I take a mortgage out at Joe’s Lending, a mortgage originator. A mortgage consists of two parts. The first is the note, or the IOU, which is the borrower’s promise to pay. The second is the mortgage, which is the security, or the lien, or the actual interest.

Joe’s lending takes the mortgage note to a sponsor to turn these mortgages into a bond. The sponsor was often an investment bank like Bear Sterns. Now that investment bank puts an intermediary in between itself and the trust. This intermediary is usually called a depositor, and sometimes there are several of them in the chain.

What’s the worry here? Well many of these mortgage originators were fly-by-night shops, shady enterprises that collapsed the moment they hit trouble. And many of them cut corners and one of the corners they may have cut would have been to send the note to the trust. Specifically, there is worry that many mortgage originators never sent the notes to the depositors. Originators wanted volume to get fees and may not have done all the paperwork correctly. There are a lot of things that have to end up in the trust when I take out a mortgage, things like the note, title insurance, supporting documents. But the note is the most important.

Why is this important? Well the trustees usually sign several certificates saying that they have verified all the documentation in these trusts. Many of these trusts are under New York trust law which is particularly clear and strict when it comes to these matters. With this in mind, tackle these three posts by Yves Smith (one two three).

So connect the two together, and you can see why we might have a systemic crisis on our hands:

There are roughly $2.6 trillion dollars in mortgage backed securities. The Wall Street Journal starts to explain how this will be a battle between holders of junior and senior tranches of debt. It also exposes the servicers, which include the four largest banks, to extensive legal liabilities by those who bought these securitizations that were signed off as being properly administered and created.

One result is that this has lead homeowners to reasonably demand to see the proper documentation before they and their families are put out on the street. Read Ryan Grim and Shahien Nasiripour from June, Who Owns Your Mortgage? “Produce The Note” Movement Helps Stall Foreclosures.

Katie Porter is an expert who has done extensive research into this area and often blogs about it at credit slips. See the blog posts: How to Find the Owner of Your Mortgage and Produce the (Bogus?) Paper. Porter found that this was extensive in her research, see Misbehavior and Mistake in Bankruptcy Mortgage Claims (“A majority of mortgage claims are missing one or more of the required pieces of documentation for a bankruptcy claims. Fees and charges on claims often are poorly identified and do not appear to be reasonable. The bankruptcy data reinforce concerns about the overall reliability of the mortgage service industry to charge homeowners only the correct and legal amount of the debt and to comply with applicable consumer protection laws”).  By rushing the process, unreasonable and excessive foreclosure fees can get applied to homeowners when there may not even be the proper documentation to have the standing to bring foreclosure at all.

So keep these frameworks in mind when you see the debate unfold in the next weeks. It is a problem of systemic risk, and it is a problem for the currently cratered securitization market. It will need to be addressed, the sooner the better.  But how?

UPDATE:  I forgot to thank Tom Adams, a contributor to naked capitalism, for the help he gave me in understanding the topic in the original article.  It’s updated above.

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188 Responses to Foreclosure Fraud For Dummies, 1: The Chains and the Stakes

  1. retr2327 says:

    So glad to have you addressing this issue, and bringing all of these sources together in one spot; will try to get through them this weekend to improve my limited grasp of this mess.

    But here’s the question that’s been troubling me recently. If the root of this foreclosure problem is that the notes and the mortgages got separated during the securitization process, and then further got mislaid or otherwise not properly passed along as the mortgages bounced from one entity to another, what is the basis for believing that this problem is limited to foreclosures? If a buyer buys from another homeowner, with no foreclosure involved, prior mortgage paid off at the closing with proceeds from the new one, as is typical in my limited experience, is it possible to know that clear title is actually being conveyed?

    Why would that prior mortgage, and its accompanying note, be any more likely to have ended up in the same place and in the right hands?

    • destor23 says:

      And really, why think this is limited to mortgages? What about other forms of securitized debt? Who really owns all the credit card debt out there? Can they produce a signed loan agreement to back up their demand for payment?

      I actually got out of a cell phone contract with Sprint by demanding they produce a signed copy of the contract and refusing to pay an early termination fee until I saw one. They didn’t have it and finally just waived the fee.

      • dcsocal says:

        that was because Sprint was buying up all kinds of other company contracts through a similar mess as this one… its food for thought but with the players involved here, Goldman Sachs and White House and Federal reserve will do whatever they can to protect banks… and look for a Congessional white wash by offering a “new” law that moving forward is designed to eliminate this from ‘ever occuring again” — sound familiar? but wont do squat for those vistimized beforehand… the White House really believes their Loan Mod and HAMP programs are working and enough help– the rest are sacrifical lambs for the banking wolves– White House is focused on helping these banks get “bad” loans off their books and recapitalized so they can get back into the lending mode… The banks have sold them on the idea that this is the best (and only) way to get this done without dargging down the system further… Their credit is cleared and the victims’ is ruined, forced to pay higher ponts and interest next time they try to borrow, be it a home (good luck) a car, a credit card or line of credit… They get multiple bites of the victims while Congress hands them a blank check and the judicial and legislative backing to “make this problem go away before 2012…”

    • Dan Spillane says:

      This is a very good question. I’m told that the title company is responsible for insuring the state of the title.

      Is there some reason to think more paperwork is awry in this process? That is, the note associated with a prior mortgage may be in limbo?

      If this were the case, then wouldn’t the true ownership of many homes be unknown?

      • Ferret says:

        I have been looking at this issue in detail, and talking with an attorney, who has dealt with foreclosures directly.

        During the housing bubble, and as described in the above article, actual required documents (particularly, the “note”) may have been lost or never generated. This, in theory, means some people who are going through foreclosure–or have already been pushed through–may have grounds for claim against the banks and other entities that they own their homes even without paying any outstanding mortgage balance.

        So with a missing note…

        Homeowners that have already been pushed out of their home (and someone else lives there), could in theory sue the bank or other entity for damages equal to the equity they had in their home–at least–and possibly to the full value of the home.

        Homeowners that have not already been pushed out of their home could have grounds to stay in their home, free and clear, and other entities (banks, bondholders, etc.) would have to eat the cost.

        For current or newly-acquired properties, as long as the financial paperwork is in order, and you get title from your county recorder (when they see a deed), you own a property.

        All this said…if people start going back over transactions which occurred during the bubble, and challenging them on the basis of missing notes or otherwise, there could be, in theory, a challenge to title, and hence, of true ownership. Imagine that on a massive scale.

      • Ferret, I think home deposits could be another smoking gun. Due to duplicitious banking practices of reinvesting money that they have yet to receive from 30 year mortgage deals, why can’t homeowners apply their deposit towards a “rental” of their home. When the money dries up, they leave, but at least it buys them a few years time to resave money and try again.

    • pf says:

      good question . elevates and clarifies
      the future problems . some anyway .

  2. Daniel Lafave says:

    It’s a little staggering just how bad these entities were at basic paperwork. The reason seems pretty clear to me though. None of this paperwork matters in the least until a property is foreclosed. Most of the parties figured they would be long gone, bonuses already in hand before anyone had to look at any of this stuff. But you would think that someone would say, “Without the note and the mortgage we really don’t own anything other than an expectation that the homeowner will pay us.”

    • Jamey says:

      Gordon Gekko: “I create nothing. I own. Well, except for the documents proving what I own. That I create out of thin air.”

  3. destor23 says:

    This is awesome stuff. Now, just to be clear and I seriously have no agenda in asking this question… do you believe this is a technicality type issue that could basically be described as: “Yeah, you’re right. We don’t know where the note is but somebody did pay legitimate money to buy this mortgage as part of a security and the homeowner knows they borrowed the money, knew the terms and for whatever reason couldn’t meet them.”

    Or are these people really not in violation of their mortgage contracts and lenders are forging documents to steal from them?

    • pelham says:

      It’s a technicality issue. But it doesn’t matter. If they can’t produce the note, they shouldn’t be able to foreclose. But that, in the end, won’t stop them.

      As for how it’s all going to be sorted out, I think we can all see the pattern: the kangaroo courts in Florida, the dead-of-night legislative effort this past week by the Democratically controlled Senate (preceded by the Democratically controlled House) to rush into law a bid to allow forged documents in the place of legit notes to speed foreclosures (all in in honor of Calvin Coolidge — that’s their honest to God excuse). It was reluctantly vetoed by Obama only after barely being exposed by some sharp reporting by Reuters.

      Expect more along these lines, minus the eagle-eyed reporting. Eventually the lenders and banks will have their way.

    • john F Kellmer says:

      IN ALL PROBABILITY THE HOMEOWNER KNOWS HIS/HER OBLIGATION, BUT… IT IS ALSO PROBABLY A FACT THAT THE LENDING AGENCY OR AGENT IS FAULTY OR FRAUDULENT IN THE PAPERWORK IF FOR NO OTHER REASON THAN SHEAR VOLUME OF BUSINESS OVER A GIVEN PERIOD OF TIME. NEITHER IS GUILTLESS, BUT FOR A COURT TO PROCEED WITH FORECLOSURE BASED ON FAULTY EVIDENCE WOULD MAKE IT A PARTY TO FRAUD. THIS MUST NOT BE PERMITTED OR THE PUBLIC FAITH AND TRUST WOULD BE DESTROYED. THE BANKS OR OTHER LENDING INSTITUTIONS HAVE TO BE SEEN AS SENIOR AND MORE RESPONSIBLE PARTNERS IN THE TRANSACTION AND THEY MUST TAKE THE FALL.

      • dcsocal says:

        “THE PUBLIC FAITH AND TRUST WOULD BE DESTROYED” — IT IS ALREADY… THIS IS THE FRAUD OF THE AGES… IRREGARDLESS OF A HOMEOWNER KNOWING HIS/HER DEBT— YOU EXPECT THE BANKS TO BE OPERATING UNDER A STANDARD OF HONESTY AND FORTHRIGHTNESS IN THEIR DEALINGS…
        THEY HAVE NOT LIVED UP TO THAT STANDARD.. FURTHERMORE, WHEN THE GOVERNMENT EVEN GOES PUBLIC WITH HYPE ABOUT MODIFICATION ASSISTANCE AND HAMP PROGRAMS THAT ARE SUPPOSED TO HELP HOMEOWNERS OUT OF THE QUAGMIRE CAUSED BY SHADY/ILLEGAL BANKING MORTGAGE PRACTICES (WHICH THE GOVERNMENT AGREES OCCURRED) THEN WHAT IT IS, IS FRAUD AND IN FRAUD THEIR WAS AN INDUCEMENT WHICH WE ARE SEEING WAS OVERZEALOUS AND ILLEGAL ACTIVITIES BY THESE SAME PLAYERS… IT WAS A GAME OF 3CARD MONTY AND QUITE FRANKLY IF ITS BUSTED I WANT MY MONEY BACK PLUS DAMAGES, PERIOD… THEY CAN HAVE THEIR HOMES, PUT ME BACK WHERE I STARTED…

    • Redwood Rhiadra says:

      There is at least one known case of a bank (Bank of America) foreclosing on a homeowner who paid *cash*, and didn’t have a mortgage at all. That goes beyond a mere technicality.

  4. Midwest Lawyer says:

    The other potential pressure point on this are the lawyers who sign the complaints. These complaints have to make specific allegations that the plaintiff is the holder of the mortgage and has the legal right to initiate the foreclosure. These are I’m sure forms with spaces for putting in the name of the entity but still, they have to be signed by the lawyer and in some states verified by the mortgage holder. If these claims are false the lawyer faces a potential ethics claim with the bar association and potential disbarment if the lawyer knowingly signed off on a false complaint. Similarlry, the person signing the verification faces criminal perjury charges if they know the claim is false.

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  6. The foreclosure mill lawyer used a defunct lender’s identity to carry out a ‘simulated’ auction (in my absence); and a “straw” buyer purchase of my home occurred. I paid my NON-SUBPRIME mortgage for 7 years prior to abusive marriage. The foreclosure lawyer also filed false Bankruptcy “lift stay” motions and “proof of claim” documents under Wells Fargo’s name. After his unlawful auction, he had the property deed recorded into the name of the non-existent lender. Three months later, the local newspaper showed Freddie Mac as paying the non-existent lender over $86,000. At the end of the year, when the IRS mailed to me a tax bill, I discovered that Wells Fargo had also gotten in on that sham foreclosure by filing for my property, a false IRS form 1099-A.

    It’s not simply loss of my home that ‘eats my lunch’, it’s such things as horrible, horrible YEARS of judicial abuses, privacy invasions, danger for my safety, blackballed from LAW employment, and other reprisals to which I am yet subjected, due to APPALLING LAND GRAB racketeering (AKA) foreclosure. And, it is similar appalling injustices of which I know have happened to other people, merely because they also lawfully sought their rights to DUE PROCESS OF LAW. I will not cease speaking out / I’m not an Internet troll. I am doing every lawful thing I know, because I simply want MY LIFE BACK. *http://www.lawgrace.org/2010/09/30/important-facts-about-foreclosure-and-mortgage-fraud/

    • walterrhett says:

      Best wishes . .

      • Rob D says:

        Damages, damages. You have standing for suffering. Quod ab initio non valet, in tractu temporis non convalescit – hat is not valid in the beginning does not become valid by time. Make it your retirement project. Go get’em.

  7. Enojon says:

    I have discovered that by paying my bills I have avoided all of these kind of issues

    • BugMeNot says:

      You really believe that? If some fraudulent bankster gets ahold of any debt in your name and starts slicing it up as a security, or forging false documents to make claims against you, you’ll find out pretty quick that just having a good credit rating is worth squat.

    • hetherjw says:

      Are you actually saying that the paperwork should not matter? That banks and other parties should be able to foreclose without having standing or properly filling out the paperwork?

    • CaitlinO says:

      Yep. All the way up until you decide to sell your house. Then you’ll find out that your buyer can’t close on the contract because their lender and title insurer discover that you don’t have clear title to the home you’ve made payments on for decades.

      Oooops. Only the people who sold you the mortgage are long gone and you’re left with a completely unmarketable piece of real estate that you can’t prove is yours.

    • lxlxlxl says:

      prove it.

    • Griton says:

      This is the best response I have seen yet and really gets to the bottom line of the issue. Pay your bills, pay your mortgage and better yet, pay it on time and guess what, you won’t have to worry about law firms/banks screwing up the paperwork on a property you will no longer live in anyway. I would venture to say that if mistakes have been made and corners have been cut by these so-called “foreclosure mills,” so what! They ARE NOT initiating foreclosure proceedures on those that understand they signed a contract to buy a house, and they are standing up for what they agreed upon. Furthermore, do any of you really think these banks like having to forclose to begin with?? Do you really think the banks are winning here? “Smell the coffee” people! Banks do well when they lend to responsible people that pay their bills. It’s about interest, not about having to slug it in the foreclosure process and ultimately dumping the house for so much less than the originally amount loaned.
      The only ones that are going to get hurt in this new mess are those with strong credit, you know, the responsible ones that didn’t buy way above their means in 2005? People like ME!!!! What kind of mess am I going to run into now if I want to buy a house that has been foreclosed upon?

      • noana says:

        usually I don’t reply to people capitalizing “me”, but I will make an exception for YOU.

        You might get hurt when, after having diligently paid everything you owe, you have no
        sufficient documentation to legaly prove your ownership, so you might have a hard time trying to sell your house. Plus the Damocles sword of some day, somebody unrelated to the guys you paid turns up with the note and wants you to pay or leave.

      • patrick says:

        Well your wrong that no one paying their mortgage on time is being foreclosed on, there have been several incidents where this has happened. In some cases where people owned their homes outright, the banks have mistakenly foreclosed. Something is very wrong in the system when this can be allowed to happen. Even one occurance of this is too much. In these cases the homeowners involved were no different from you, which means, hey buddy, it could happen to you too.
        The big issue that should concern you, regardless of your financial prowess, is in the property rights of citizens, assuming you are a citizen. Do you know who holds your note? If you sell your house, are you sure you have a clean title?

      • Westcoastliberal says:

        Are you friggin’ kidding here? These godawful banksters are foreclosing on property they don’t own and have no legal right to, period. They’ve also been known to foreclose on property that DOESN’T EVEN HAVE A MORTGAGE!
        The previous post by CaitlinO is something to think about too. No one is exempt from the wrath of these banksters!

      • pebird says:

        Or sell the one you currently own (or at least you own a mortgage). Just because originating documentation is what we hear about, doesn’t mean that other documentation when your mortgage is sold isn’t also messed up.

        There are people who own their homes free and clear who have had foreclosure actions started – oops, so much for playing by the rules.

      • EduNelson says:

        Another great reason to work FACE TO FACE with a locally-based community bank or, as in my case, a local credit union that holds ALL their mortgages in their portfolio. No slicing and dicing, no transfers – no future title questions.

  8. retr2327 says:

    Destor23:

    There have been sufficient published incidents of foreclosures and home invasions where the homeowner was not in default to establish that the “flaws in the paperwork” are a real problem for that reason alone. And it’s also worth pointing out that one of the reasons for requiring strict proof that the noteholder is the entity foreclosing on the note is to ensure that the claim that the homeowner is in default is valid.

    But even apart from the homeowners who are wrongly foreclosed upon, these fraudulent paperwork foreclosures may have other victims aside from the homeowners who are in default. Consider the new homeowner who buys the property after it’s been foreclosed, upon only to wake up one morning and find the actual noteholder claiming that the note’s never been satisfied; then what happens? Even if the new homeowner bought title insurance to cover himself as well as the new mortgageholder (and many don’t), it’s still a disaster trying to straighten things out.

    So yeah, paperwork matters.

    • destor23 says:

      You’ve definitely convinced me that it matters. I’m bracing myself for the inevitable here though. At some point, and we’ve seen signs already, the financial lobby is going to want Congress to end this in their favor. To do so they’ll argue that people who legitimately defaulted are merely looking for a technical out. They’ll say all of this business with the note is an archaic throwback to the bygone days of stock certificates and bearer bonds.

      I do think we have to be prepared to face those arguments. Heck, we need a whole lot more transparency in this industry. I think a mortgage holder should be able to know when their debt as been bought and sold, by whom, and at what price. With that knowledge people could actually contact the ultimate owners and negotiate their debts. “Hey, you paid 50 cents on the dollar for this. I’ll pay you 75 cents on the dollar a s a lump sum, what do you say?”

      Why is this market not transparent?

      • CathyG says:

        The lenders can, and I’m sure will try, to go to Congress for relief. The problem they’ll face is that real estate law is not at the federal level. It’s governed by every state and the states are very invested in seeing that proper land law is followed. Among other reasons, they get a lot of their revenues from property taxes.

        Will the banksters go to every state to have land law overturned?

  9. Altoid says:

    Am I understanding correctly that the note is the real issue here, in the sense that if you don’t have the note, what you really have is a signature loan to the homeowner and no legal right to the house or any other collateral in the event of a default?

    If that’s the case, what a complete cockup. And the courts simply must enforce property rights on the lenders, at whatever level, and insist on presentation of actual notes. No legal process can happen just on the presumption that there has to be a note somewhere, even if that might be a completely legitimate assumption. Even if one is presumed to exist, if it can’t be located, which of the interested parties has the right to the premises? Only the note-holder can get the collateral.

    In any case, it doesn’t seem to me that any homeowner has the least obligation to surrender premises to anyone who can’t actually produce the note. Possession is supposed to be nine points of the law, right?

    • pebird says:

      You actually only possess a mortgage. You occupy a house which is possessed by a bank.

    • It’s actually worse than, “what you really have is a signature loan to the homeowner…” The bank doesn’t even have that, The note IS the signature part of the loan. Without the note the mortgage is worthless. It has nothing behind it to provide collateral.

  10. Ron Alley says:

    Midwest Lawyer makes an excellent point. Bar association ethics committees clearly have the authority to discipline lawyers. I suspect that a small number of law firms account for a very high percentage of all foreclosures in any state. Complaints can be made not only by the homeowner but by the Justice Department as well. It surely would be interesting to see the Attorney General set up a shop in the Justice Department to pursue fraudulent foreclosures and the corporate employees and officers and their lawyers who filed false statements. I’m confident that a few FBI inquiries would expose the truth about fraudulent filings.

    In addition, lawyers who learn that they have filed fraudulent documents in a court have an ethical obligation to disclose the fraud to the court. They also can be disciplined for failure to make the required disclosures.

    The unfortunate truth is that courts and bar associations are reluctant to pursue claims against debt collectors.

  11. save_the_rustbelt says:

    As of today, would any agency write title insurance on the sale of a foreclosed home?

  12. retr2327 says:

    Midwest Lawyer does raise an interesting point. From what I’ve read, the overwhelming majority of the foreclosure cases in Fla. are being handled by 3-4 law firms. While bar associations may be reluctant to penalize att’ys for conduct engaged in by large numbers of lawyers, it’s not clear to me that similar disincentives would be operable when the targets of such enforcement actions are so sharply limited, and the public outrage against such practices is so potentially high. Maybe we could get a few Fla. lawyers to start filing complaints to the Fla. disciplinary committee?

    • CathyG says:

      If you want to have your hair catch on fire read the deposition from an employee of one of the largest Florida foreclosure mills. Fraud up and down the entire process. The entire deposition is available at:

      http://4closurefraud.org/2010/10/07/exclusive-bombshell-of-foreclosure-fraud-full-deposition-of-tammie-lou-kapusta-law-office-of-david-j-stern/

      This is an excerpt:

      2 A Well, I’m using the main defendant’s social
      3 security number on somebody else’s name, not his name.
      4 John Doe and the main defendant was James, I was taking
      5 James’ social security number and putting John Doe’s
      6 name in there. I wasn’t but that’s what the practice
      7 was. The judges started saying we’re not going to
      8 consider service completed until –
      9 Q There’s a miliary search?
      10 A Correct.
      11 Q So why wouldn’t they use the right social
      12 security number for the right person?
      13 A Because you don’t have a social for an NKA or
      14 unknown tenant. They wouldn’t enter a final judgement
      15 unless the military doc was there.
      16 Q So you just used anybody’s?
      17 A Correct.

      9 A So what we had to do from that point, again
      10 the affidavits were still split in two pages, at that
      11 point we were supposed to be sending them back to the
      12 banks to be signed now. The problem being that a lot of
      13 times we wouldn’t get them back or executed in time for
      14 the hearings. So we had what they called signature
      15 pages that Tammie Sweat or someone else would have in
      16 their possession. If we couldn’t get it back from the
      17 bank executed in time we would just take a signature
      18 page and put it on the affidavit.
      19 Q What was on the signature page?
      20 A The signature and notary from the bank.
      21 Q Were these documents photocopied or were they
      22 original documents?
      23 A Some were photocopied.
      24 Q How would you get that many from a bank
      25 original? The bank supplied them to you.
      42
      1 A Well, what would happen would be like if I had
      2 file A and that one didn’t go to hearing because there
      3 was something wrong with it and file B was going to
      4 hearing but it was the same bank, I would take the
      5 signature page from A and give it to B.
      6 Q Oh give it to another file?
      7 A And just re-execute this file.
      8 Q Okay. That was common practice?
      9 A Yes, after Cheryl couldn’t sign.
      10 Q Did Cheryl know?
      11 A Yes.

      • dcsocal says:

        a copy of this should be sent to every governor and attorney general across the country, especially in non-judicial foreclosure states so they SEE what they are allowing to happen!

  13. These two guys are usually interesting, but in this instance, boy are they on the wrong side.

    http://swarmthebanks.blogspot.com/2010/10/think-big-work-small-frank-garay-brian.html

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  15. Brian says:

    I am not in foreclosure or default on my loan but am interested to find out if the owner of my loan can produce the correct paperwork. How do I find this out, and if I find problems with the paperwork what do I do next?

    • ipsedixit says:

      Send a Qualified Written Request (QWR) to your servicer asking who is the owner and holder of your note. They are required to acknowledge the request within 20 days and respond within 60 (those time frames just changed and I might have them wrong). They probably won’t physically produce the note, but it will give you an idea.

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  17. Nicely done

    The graphic explains this so anyone can grasp the chain

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  19. ryan says:

    stupid question but doesn’t title ensure proper delivery of notes from tpo’s to lender – who then ensures notes are delivered to MBS during the sale to companies like bear stearns? (at least in title states)

    as someone who used to sell mortgages on the
    secondary market I find this line of argument dubious. no lender paid commissions without the actual note that I know of.

  20. Gary D says:

    The latest disposition in Florida reveals a pattern of massive fraud by the lawyers and para-legals handling the documentation for the financial institutions. Whatever the court wants make it up, back date it, lose the record of payments the homeowner has made, forge government documents, use whatever notary public seal we have lying around, forge signatures, just get them out the door.
    There are two issues here 1) the massive fraud now revealed to have been used to provide the courts with seemingly legal documents, 2) establishing the real ownership and title of the homes in foreclosure. This mess started when it was revealed that often the banks foreclosing weren’t the ones who actually owned the titles which could have been bundled and fractionalized around the world. As that was being investigated the practices of the legal offices of the financial institutions were discovered.

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  25. gotoL, Chicago atty says:

    Actually, I have another, more intriguing question. If you’ve ever seen one of these Securitization agreements, usually called a Pooling and Servicing Agreement, or PSA (they’re available on the SEC website), a particular piece of property is identified only by town and zipcode, e.g., Itasca, 60143. I often wondered–and I practice in this area–what would prevent an unscrupulous originator from placing ONE property in more than one securitized instrument, thus doubling the commissions? They have this MERS system to prevent the duplicative filing of foreclosure actions.

    Remember this comment, because I think you’re going to see this in the upcoming months.

    • pebird says:

      I think you bring up the crux of the matter.

      If title is not unclear, then there is the possibility of the same property being used to secure multiple “first” claims.

      This happens in the “old-normal’ life occasionally, due to error or individual fraud, that is why there is title insurance.

      But when it become systematic – I don’t believe the “things were moving too fast for us to process correctly” line – then there is new game that can be played.

      No wonder no one wants to foreclose – who wants to find out that the same property has been pledged for multiple trusts.

      Although Congress will find a way to retroactively make that legal.

  26. Publius says:

    Florida has already set up an outside “court” system to process foreclosures en masse, without looking at the paperwork. They use retired judges, who are processing the requests for foreclusure at the rate of hundreds a day. I’m surprised we haven’t heard calls for “second amendment remedies” from there yet.

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  29. Arun says:

    1. How do mortgage payments reach the right destination if the paperwork is messed up? E.g., what prevents a servicer from pocketing the money if the Trust doesn’t have good documents?

    2. Suppose I pay off my mortgage. How do I know I am now clear of debt and in full title of my property, if the paperwork is in a mess?

    • Chris T. says:

      1. Sometimes it doesn’t.

      2. You don’t.

      This is precisely the problem, and why those who never did anything wrong need to be concerned.

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  32. Mike says:

    UPDATE: I forgot to thank Tom Adams, a contributor to naked capitalism, for the help he gave me in understanding the topic in the original article. It’s updated above.

    Thanks everyone for the excellent comments. Please stay tuned for parts 2 and 3, which will discuss what a “note” is and why it is so important as well as start to sketch out solutions out of this mess.

  33. Bill Levy says:

    Well folks, the lenders may not be able to show a note but on the other hand the house holder wouldn’t be in trouble of loosing his home if he was paying his note. There is plenty of wrong going around for all sides and I think that Congress should stay out of it and let the lawyers, mortgagee and mortgagor work it out.

    Until these homes are cleared up title wise there can be no recovery in housing prices.

    • noana says:

      @Bill Levy:

      Well, I guess your point was already addressed above by Gary D:

      > Whatever the court wants make it up, back date it, lose the record of payments the homeowner has made, forge government documents, use whatever notary public seal we have lying around, forge signatures, just get them out the door.

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  35. ITDog09 says:

    I’m an idiot, but a curious idiot. I’ve always wondered why banks were allowing millions of mortgages to be months and months behind in payments. The conventional wisdom was that it costs the bank too much to process the foreclosure, so banks were just letting folks more or less squat in their homes.

    But this analysis leads me to a different conclusion. Do the banks know they lack the proper paper work to legally process a foreclosure in the majority of cases?

    • Publius says:

      I’m still educating myself on this, but from what I read the problem is that since 2000 or so the structure of the system has changed, with the addition of “servicers” of the mortgages. These companies are the ones that collect the mortgage payments and are supposed to:

      1. Credit the mortgagee
      2. Pass payment on to the holder of the MBS.
      3. take their fee out of the remainder.
      4. handle the foreclosure if the debtor falls behind.

      They get a commission on every foreclosure they process. This is why HAMP was a failure — the commissions they offered were less than what the servicers were paid for foreclosing, but the servicers found a way to collect both by “negotiating” with the debtor, processing the ap0plication for HAMP relief, denying relief, and foreclosing. These guys are shown on the chart above as the entity just after the Trust.

      This is something Tanta wrote about a couple of years ago at Calculated Risk. Her opinion was that it was the result of the banks and servicers laying off people to improve their bottom line and as a result getting incredibly sloppy about handling the paper work.

  36. Lori says:

    If you think Lehman could brink down the whole banking matrix, think about what this could do

  37. lxlxlxl says:

    can someone take a step back and explain to me what this all means for home values? if banks are able to derive profits from every step in the chain of giving out a mortgage (from signing costs, interest, to securitization and foreclosure) then they sort of have an incentive to push home values up depending on what poor middle class schmucks want to pay. everyone wants to believe they are succesful and their house and car values are their only material and real expression of that.

    tack on a loan based on home value and the owners are even more tied to that house, its value…

    i might be way out of base here…but obviously it seems as though americans are willing to pay outrageous costs for property and complain about taxes…

    • pebird says:

      It means you need to price in a discount for the possibility you might pay for a property with unclear title, and also read your title insurance policy very carefully.

  38. Max Rockbin says:

    Many of these mortgages were actually inside FNMA or FHLMC pooled issues. Shouldn’t FNMA & FHLMC have the documentation? Or their own sad story of why they don’t?

    It seems to me that the Trustee for the pools is really the failed entity here. It’s their job to handle the admin stuff for the bond holders of the issue. Where are they in all this?

    Also, someone is being paid for servicing these mortgages. There’s a little bit of the interest peeled off and given to the servicer who collects the mortgage payments and deposits them with the trustee. Usually the service is the originator of the documentation. They are the first place to look if the Trustee never got the docs.

  39. Jeff says:

    Your charts here say that the ONLY Sponsor is Bear Stearns. I think you mean that Bear Stearns is one EXAMPLE of a Sponsor. I.e., you mean “e.g.,” not “i.e.” You might want to learn that distinction, since otherwise you’re confusing the issue, and obviously that’s not your intent.

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  42. robby says:

    So, assume that we are a society of laws and that the banks don’t legally have the right to foreclose on these houses, (I know this is a big assumption) who takes the loss? Is this Banking Crisis Part Two and we (finally) have to nationalize these corrupt institutions? Do millions of homeowners get their houses for free? I know, they shouldn’t have taken loans they couldn’t repay etc., etc., but it might be the stimulus that the economy needs. Where will the losses be concentrated if no one can legally foreclose? Didn’t the banks trade off a lot of these bad MBSs to the Fed? It is hard to see any solution to this.

    • Westcoastliberal says:

      Unless Congress intervenes with some sort of blanket insane law (which just could be the powder to set off a revolution), I think property will need to be “cured” back to the point prior to MERS securitization. For newer properties this could be the builder, other properties it could be the owner just prior to whichever bank decided to securitize it. Anyway, this could go back 10 years and could involve reversals, paybacks, severe tax consequences, etc.

    • pebird says:

      First of all, millions of homeowners are NOT going to get their houses for free, so we can eliminate that possibility.

      The problem is not with who is occupying the property – although they get to feel the brunt of the problem. The problem is: were 1 million properties used to securitize bonds backed by 1 million plus properties? In other words, are there bonds out there with multiple claims on the same property.

      It gets complicated, because a single property can be sliced up – but in any event, has more than 100% of the property been securitized?

      If so, how big is the problem? Well, no one wants to know, because just like the entire neighborhood goes down in value when a property defaults, the entire bond market will sink like a rock if we find out this is a big problem.

      Of course, no one gamed the system to sell the same property twice – we were living in high ethical times during the last boom, right?

      You think the banks stopped foreclosing because they want to clean this up?

  43. Crash Random says:

    Here’s WaPo on one individual and the nightmare of trying to challenge an invalid foreclosure. Keep him in mind when you hear about deadbeats and whatnot: the current system is designed to make it difficult for anyone to challenge their case.

    Okay, I read the article and it seems to me that guy was a deadbeat.

    * He did not make several mortgage payments.

    * Instead of catching up with his payments, he wanted the bank to “tap into” his “$50,000 of equity.” However, the market value of his house was $79K, down from the $180K that he paid. In reality, he had no equity to tap into.

    * He challenged the foreclosure, but lost because he missed his court date. Yes, it is indeed “difficult for anyone to challenge their case” if they cannot be bothered to show up.

    Of course, this doesn’t make forgery by the banks okay, but your wording suggested that this individual was not a deadbeat, and he was. If a person who doesn’t pay their bills and doesn’t show at their court hearing is not a deadbeat, who does qualify as a deadbeat?

    • So the house is “worth 180,000″ when it comes to what is owed on it, but it has no available equity because the home has lowered in value to 79K . lol, I think I know who pays your salary.

      If the home has a 180,000 mortgage on it because it was worth that at one point, then the equity availability should be calculated based on the 2/3 value of the home formula that the banks were using as of a year ago.

  44. Rule 10b-5 — Employment of Manipulative and Deceptive Devices

    It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

    1. To employ any device, scheme, or artifice to defraud,

    2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

    3. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

    in connection with the purchase or sale of any security.

  45. drfrank says:

    If you borrow money and give the lender security for the debt, and if you fail to make the agreed payments, you should reasonably expect that the lender will eventually seek to recover its capital from a forced liquidation of your security.

    The fact that the lender did or did not do this or that , was or was not the beneficiary of a bailout, etc., or sold a loan to a packager who wholesaled it to a retailers, or originated loans with the intention of providing raw material to a manufacturer of mortgage backed securities, has no bearing on the obligation of the borrower.

    But given the enormous, asymmetrical power granted to the lender in this arrangement, there have to be laws and procedures to protect the borrower from an unlawful taking. Go to any bookstore with law textbooks and you find a rather thick one entitled, “Debtor’s Rights and Creditor’s Remedies.” You can’t just go into someone’s house and take the TV because you claim they didn’t make the installments any more than you can take the house.

    At a minimum, a creditor has to show proof of having loaned the money under a contract that the borrower has failed to perform. This is the Note. In addition, the lender has to have a valid grant of security interest and where real property is concerned that security interest has to be recorded in the public records.

    If there is no Note, perhaps some sworn testimony can be enough to prove the existence of the loan and a breach of the payment contract.

    If there is no grant of security interest, then there is no security for the loan.

    If there is a grant of security interest, but it was not properly recorded in the public records, or “perfected,” then there is not security interest.

    Note that there has to be a public register of claims against property, voluntarily granted and involuntary as well, or else there can be no way of buying something “free and clear” of claims, and consequently no way of selling property.

    Now, if there are two loans supported by the same security,by a security interest in a single property, then the first recorded security interest gets the first proceeds in a forced liquidation up to the amount that is owed and anything that is left over goes to the later recorded security interests.

    If the first recorded mortgage can’t provide proof that money is owed to it, or that there is a default, this is good for the later recorded security interests, which move up in order of priority.

    And similarly, if there is a flaw in the paperwork granting the security interest or if the security interest is not properly perfected, the right of the first recorded lien to proceeds of a forced liquidation may be “primed” by the later recorded interests. The second in line moves into first place, for example.

    It is hardly uncommon for lenders to find flaws in documentation when the time comes to rely on them to take property by force of law to settle a debt after a default. It is hardly uncommon for lenders who are aware of flaws in their documentation to try to cover up or fix it in some way consistent with the intention of the original contract. This is as true of lenders who originate to hold as it is of those who originate to sell. And it happens even though there are lawyers and compliance officers supposedly checking. Talk about the devil in the details.

    As between lenders, first and second, or more generally, senior and junior in standing or priority, the fight can be pretty intense.

    In some measure, bankruptcy proceedings are a forum in which challenges to the order or priority of security interests is adjudicated, with the court to some degree acting on behalf of creditors who don’t have security interests, that is to say, protecting the unsecured creditors from unsubstantiated or imperfect claims of security interests.

    If you are wondering where the owner of the property comes in, remember this. There would be no foreclosure if there was any value left in the property for the owner after the debts were paid. A borrower who defaults due to an inability to make the contractual payments would logically sell the property if something could be salvaged after paying off the debts.

    By the same logic, there would be no rationale for a bankruptcy filing unless there was not enough cash flow or asset value to cover all the claims.

    This is pretty basic and, I believe, more or less widely understood at a fairly primitive or intuitive level. Although foreclosure fraud appears perhaps to be a question of justice, at bottom it is really a matter of fairness. At stake is far more than the suffering of those put out of their homes, justly or unjustly, or the harm that would follow widespread bank failures. What is at stake is the basic trust in economic transactions with strangers without which a society cannot function.

    In some parts of the world today, and at some times in the past, people have not been willing to borrow money for fear of lenders, even if that means some loss of economic wherewithal and opportunity. I mean, in some parts of the world, ownership of real estate free and clear of liens and loans is considered to be a repository of wealth, the only defense against inflation and the only real thing that survives deflation. At least you can live in it or on it on pass it on to your heirs.

    • Dr. Frank said…”The fact that the lender did or did not do this or that , was or was not the beneficiary of a bailout, etc., or sold a loan to a packager who wholesaled it to a retailers, or originated loans with the intention of providing raw material to a manufacturer of mortgage backed securities, has no bearing on the obligation of the borrower.”——-

      I absolutely DISAGREE with the above statement. If the bank leveraged my FUTURE mortgage profits and IMMEDIATELY reinvested that commodity in foreign countries with corporations that then produced product with slave wages and labor that reduced my ability to make a living COMMENSURATE with the deal we had already agreed to, then SCREW THE BANKS.

      The banks NEEDED TO WAIT until they had MORE of the money from all of these mortgages BEFORE they used it to lower our own standard of living.

      • ace says:

        If you had read just one more sentence of Dr Frank’s post (if not the whole thing), you would have, perhaps, quieted down.

  46. Ed Dolan says:

    What interests me here is that after all the failures of government programs to help underwater homeowners get workouts, here we have nongovernmental actions like “get the note” that spring to life and force workouts. Can it be that all this is not evidence that “the system” is broken, but that it works?

  47. Mindrayge says:

    Mike, the problem goes beyond foreclosures. The only party that has the right to foreclose is the party that is lawfully entitled to the payments. If the party doesn’t have the right to foreclose that party was never lawfully entitled to any of the payments made by the borrower. The borrower is entitled to receive a refund of all the principal and interest payments they made as those payments were made to the wrong party. If the entity that is the last valid holder of the note no longer exists then the borrower not only would have their home but their monies spent. If the entity that is the last valid holder of the note still exists then that refund of principal and interest should be applied as a lump sum principal payment on the original note and the term remaining would be the remaining months starting at the point that entity stopped receiving payments – some years ago. I am sure that many people wouldn’t like this outcome but how else can there be any other outcome unless an act by Congress or collectively by the state legislature retroactively harm their own citizens while abrogating their rights at the same time.

    This would, of course, destroy the largest of our banks so you don’t have to imagine that Congress will be trying to invent a way to push all of this on the homeowner and making the banks whole in the process.

    • Ferret says:

      Interesting (possibly speculative) analysis. In short, homeowners in cases where notes were missing would experience a windfall…and the big banks or other parties would likely collapse?

      There is a claim above that a QWR request for a note must be answered in 60 days. That would apply to homes in foreclosure or good standing.

      And yes, this would be all the more complicated because it would be subject to state law.

    • closingguyinpittsburgh says:

      There are some really badly mistaken assumptions here. Whether a lender or servicer still exists or not, a Note is an asset and doesn’t disappear because the servicer did. The servicer would have wound up its affairs by either being taken over by a successor, by selling its assets (usually in a bankruptcy) in an attempt to pay as much of its debts as possible or by distributing any assets it had to its creditors. In any case, the Note continues to exist and the borrower would have to pay the same amount under the same terms as specified in the original Note.

      Second, if a payment goes to the wrong servicer, the relief that the borrower is entitled to will depend on whether or not the loan had been assigned and, it it had, whether proper notices were given to the borrower. In any event, the borrower is obligated to pay the correct servicer. They don’t just get their money back and get to keep it.

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  49. Jack Straw says:

    While I am in the “screw the lenders” camp, I try avoid over-heated rhetoric, tendentious arguments about “systemic fraud” that aren’t even remotely proved yet* and the war-like triumphalism that accompanies even the most modest “pro-borrower” event (e.g. citing “anti-MERS” cases that are actually exceedingly narrow rulings). Anti-lender partisans have been ignoring one very large problem for many defaulted borrowers: an exceedingly large number of loans have loan applications, signed by the borrowers, that misstate the borrowers’ income, assets and employment. This will be true of almost all WaMu (now JPMC) loans, Countrywide (now BOA) loans originated after 2005, GMAC loans (particularly those done by DiTech and HomeComings), and Alt-A loans held by Wells, Citi and USBank.

    Whether the misstatement was done by the borrowers or the originator isn’t going to matter that much initially, because borrowers are going to have to prove 1) that the originator did it; 2) that they themselves weren’t complicit in the missatements; and 3) that there was excusable neglect in having signed and attested to the accuracy of the application themselves. This will be a rather nasty turnabout version of borrowers’ “produce-the-note” strategy – it will be up to the borrowers to “produce the lying originator.” I have no doubt that the originators often (or even most of the time) initiated the falsification, but borrowers are going to have to prove it and prove that they themselves were innocent. Good luck with that.

    It’s important to understand that this is an option for lenders regardless of whether the borrowers are behind on their payments or not. Misstatements on loan application, in and of themselves, are “events” allowing the lender to declare default. Lenders won’t necessarily have to limit themselves to going after underwater, defaulted borrowers, but rather ANYONE who signed an inaccurate application.

    I would call this the lenders’ “nuclear option” or the “Empire Strikes Back” option where they start getting very aggressive in making mortgage fraud claims against borrowers. Lenders tend to be a vindictive lot and if their foreclosure remedy is off the table, they are still far from being disarmed, and now even more dangerous. While lender “standing” as plaintiffs for foreclosure can be fairly strict, standing for parties claiming borrower fraud is likely to be less strict insofar as a colorable and sufficient fraud claim will allow the lender/plaintiff much more procedural flexibility in asserting that it is a proper party-in-interest plaintiff. The allegation of a falsified 1003 loan application will be sufficient and colorable under the typical state Rule 9 and well as Rule 9 of the Federal Rules.

    Furthermore, lenders will not have to pursue many of these cases and its going to be their turn to cherry-pick the ones that will be their version of “high-impact” litigation. They are going to be able to get some high-profile judgments that won’t be dischargeable in bankruptcy. They will also get important “message” victories out of these cases – “if you (the public) wanna screw with us over sloppy paperwork, you better make sure your none of your loan files have material misstatements.” “You want to go after us for not reading the documents? We’ll payback is a bitch, isn’t it.”

    Stay tuned. And for borrowers ready to enjoy their free-and-clear house, I wouldn’t go spending that saved mortgage payment yet. You may need that money for a lawyer. Legal Aid’s not going to take this one (in fact, I’m pretty sure they are statutorily barred from doing so), and you’re not going to get contingency representation. You may get a free consultation, but after that it’s going to be a five-figure retainer. And needless to say, civil lawsuits may not be your only problem.

    * e.g. this piece, numerous NakedCap pieces, 4closurefraud.com, LivingLies, etc., where I am supposed to be persuaded by a very complicated daisy-chained argument where the failure of any one link in the relevant law, the relevant facts and the reasoning may be fatal to the entire theory. The echo-chamber of self-interested commenters doesn’t make the arguments any more persuasive. NB: I am referring specifically to the “securitization-is-fraud” arguments, and NOT the falsified affidavits (where, like title insurers, I have a high degree of confidence that judgments supported solely by evidence admitted via falsified foundational affidavits are void), where determining the wrong-doing is about as straightforward as it gets.

    • gotoL, Chicago atty says:

      I don’t know if you’re considering this quite correctly. First, the reason why there are so many homeowners in default is that the economy took a turn for the worse. Many, if not most, owners accuately stated their income on their applications, only to lose jobs, have their hours cut, or lose a business. No fraud there.

      Second, where the homeowner was encouraged to inflate income by the originator, there is an estoppel argument that is bolstered by the lack of submitted documentation that the lender will be able to produce.

      Third, I whole-heartedly agree with one point you make: lawyer up. This is not a do it yourself area of the law.

    • Ferret says:

      Interesting take on trying to focus the blame back on the borrower. I see no overlap between these two issues–the integrity of originating documents, and whether the note exists. Shouldn’t the originator have done due diligence in verifying the originating documents? If there is a note, there is a note. If not, well…

      There is a claim above that a QWR request for a note must be answered in 60 days.That would apply to homes in foreclosure or good standing.

      Hence, there could be huge liabilities at the bank and bondholder end if many notes are missing. Some folks complicate this further by bringing up the issue of whether there were multiple (possibly bogus) paperwork shenanigans during the bubble for a particular piece of property (i.e., if many sales were made during the bubble, are there old transactions with missing notes?) Not sure what to make of that.

      Anyway, there could be a new crisis in the making, given the exposure of the big banks and other parties.

      p.s. In reading all these comments, I also see no evidence that MBS are being properly handled in terms of life cycle.

    • I recently wrote two articles about this very issue on Swarm the Banks, that BIG Media like Sixty Minutes could come down on the side of the banks and make the home foreclosure activist look foolish by focusing on the shadiest of those who are fighting home foreclosures.

      http://swarmthebanks.blogspot.com/2010/10/what-do-charlie-gasparino-frank-garay.html

      http://www.thinkbigworksmall.com/mypage/archive/1/53799/

      It’s kind of like over celebrating scoring a touchdown when your team is still losing 35-6. The grittiest examples of what has gone wrong should be chronicled and made available to the national media so they don’t go and cherry pick the story to favor the banksters.

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  52. mike says:

    funny how some of these jerks on their soapbox like to preach. when a giant corporation doesn’t pay it’s bills and goes into chapter 11, etc… it’s a “business decision” and everybody nods in agreement….”tough, but it had to be done.”

    when some poor sap makes the strategic decision to stop paying the mortgage on a home he’s upside down $200K on and the bank refuses to work with them to modify the interest rate/payment, it’s a moral failure and the guy is a dirt-bag.

    i’ve only met two kinds of republicans, millionaires and morons.

  53. Jack Straw says:

    “Many, if not most, owners accuately stated their income on their applications, only to lose jobs, have their hours cut, or lose a business. No fraud there.”

    I agree that it’s only misrepresentation if it is known at the time of the application. It used to be common to claim or “state” income from side-jobs and/or businesses that were non-existent. My comment applies mostly to stated income or low-doc loans, but is not necessarily limited to them. My theory is that the big no-doc funders went that direction precisely because they knew much of the documentation was obviously phony anyway and ended up hurting them more than it helped. No doc was simply more efficient by cutting out the dog-and-pony of the cut ‘n paste photoshop era. I was told this by two senior managers at two different national lenders, who added that productivity went up, and discovery produced a lot fewer smoking guns to try to explain away in depositions.

    “Second, where the homeowner was encouraged to inflate income by the originator, there is an estoppel argument that is bolstered by the lack of submitted documentation that the lender will be able to produce.”

    This is going to be a challenge to prove, even though I am certain it happened frequently. But, it will be very much up to the borrower to prove it. Right now, lenders are having trouble if and when they are forced to meet their burden of going forward with the original, properly endorsed note, for example. While an estoppel argument might ultimately work, the burden of going forward will dramatically shift onto the borrower to get past “unclean hands” arguments to get the aid of equity. Good luck finding Justin I-don’t remember-his-last-name, the loan officer who “told me not to worry about my loan application.”

    My overall point is that the foreclosure defense bar has chipped away at the one remedy the foreclosure mills are set up to process. The lenders have 100 pages of loan documents to start their own search for novel theories to make the borrower’s life miserable.

    For example, the Fannie MAE standard mortgage has this gem in paragraph 24:

    “24. Waiver of Homestead. Borrower waives all right of homestead exemption in the Property.”

    I’ve tried to figure this one out for years and no one has ever given me a good explanation of what this means, or why it’s there. In my jurisdiction, it means at least 4 entirely distinct things. I see that the Illinois Housing Authority uses the same language in its mortgages, too. (But note, while Illinois “allows” – sort of – a spousal homestead waiver, my jurisdiction does not. A mortgage on a marital homestead without the signature of both spouses is entirely void.

    But back to my point. People are deluding themselves if they don’t think that the “lenders,” “pretender” or otherwise haven’t been busy the last few weeks determining their “now what?” plans. I am betting they are going to pursue as harsh a counter-attack as they can to get the public to be compliant; they certainly don’t have to worry about Congress, Treasury or HUD.

    • gotoL, Chicago atty says:

      We are pretty much in agreement. One thing I would stress is that many homeowners were being “economically rational” when they bought the homes they are now losing. This is how they were sold to them: in a rising market, they would be offered an interest only loan, and told “sure, the house looks too big for your needs, but it’s appreciating fast. If you sell it before the requirement to pay the principal kicks in, it’s like you lived there three years rent free!” I’ve heard this again and again.

      However, I don’t think the serious action will occur vis-a-vis homeowner/defendant v. Assignee/plaintiff. There’s more going on here, I suspect. Check out the flow chart above, where the originator and/or depositor doesn’t get the loan docs to the trust. Then google “DocX Get Net Document Recovery” and you will find a price list where for $35 plus costs, they will “create” documents necessary for a foreclosure. Now check out this gem from Atrios yesterday:

      “The Association of Mortgage Investors, a trade association, has called on trustees, who oversee loan pools on behalf of investors, to demand that loans be repurchased by their originators if required documents are missing. Typically, sellers have 90 days to fix such problems or buy back the loan. The group has also asked trustees to audit and hold servicers accountable for any losses due to improper servicer practices.

      “It’s very hard to see how the servicers can avoid reimbursing the trusts for losses caused by taking short cuts,” said David J. Grais, an attorney in New York who represents investors. Investors could press trustees to investigate servicer conduct, sue the servicers to recoup damages or replace a servicer, he said.”

      My point is that there is reason to fear that orginators placed a single piece of property in more than one trust. My comment above states in part: “If you’ve ever seen one of these Securitization agreements, usually called a Pooling and Servicing Agreement, or PSA (they’re available on the SEC website), a particular piece of property is identified only by town and zipcode, e.g., Itasca, 60143. I often wondered–and I practice in this area–what would prevent an unscrupulous originator from placing ONE property in more than one securitized instrument, thus doubling the commissions? They have this MERS system to prevent the duplicative filing of foreclosure actions.”

      As for the homeowner/defendant v. assignee/plaintiff, those problems are solved by producing the one and only original Note. After all, there is only one house to lose. But if there is more than one “Note”–copies can be indistinguishable nowadays–or the Trust sold securities when it never had the Note, and if this problem is systemic, now we are in danger of market meltdown.

      All that you need to posit is that 1) greed was rampant; 2) that the originators/depositors thought that the housing market would never depreciate and that people would do anything to stay in there homes, so there would be few defaults. See paragraph one.

      • Ferret says:

        You mean multiple pieces of property were pooled with only two (obviously non-unique) identifiers–the town and zipcode–during origination?!? This is shocking.

        What are the implications of this? Obviously, a piece of property can’t be bound back to a particular security, or vice versa.

        Could this fact be a lynchpin upon which the securitization model (and our mortage system) falls apart?

        That is, if I can’t prove the existence of an underlying security corresponding to a property, does this make my mortgage and title claim invalid?

        On the other side of the coin, does it say the whole securitization system is bad, from an investment standpoint–since my security can’t be proven to represent an actual property?

      • Ferret says:

        p.s. Anyone know what portion of mortgage securities are guaranteed?

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  55. Steve Smith says:

    Don’t think for a moment that this is limited to states where the judiciary administers foreclosures. In California, a non-judicial foreclosure state, the same robosigners are involved in approving affidavits that claim the lender/servicer has contacted the borrower about alternatives to foreclosure, such as loan modifications, which is a requirement before they can record any notice of default.

  56. Jack Straw says:

    ‘They have this MERS system to prevent the duplicative filing of foreclosure actions.”

    I don’t think this is true. I used the MERS system nearly daily for 6 years to determine who the current servicer was for a given mortgagee of record – that is, the current mortgagee of record was of only limited usefulness in determining what I really needed to know. For a given MERS Mortgage Identification Number (19-digit MIN), there would only be one servicer. If there were two parties claiming identical interests in an identical note, I think that would have surfaced by now in a number of different ways. For example, credit reports showing identical debts held by different parties should be a common one. Unlike a lot of defense attorneys, I don’t see MERS as a problem, or at least THE problem – in fact, I’m pretty sure it prevented double-booking, except for the very dumbest and careless investors (evidence of whom I have yet to see in this particular manifestation). That is, if I’m following you? Although I have to agree that there is a certain type of originator – the relatively large regional correspondent in the last gasps of operation trying to fill a shortage in its line of credit – where this could have been the case. In any case, I have yet to hear of a case where a note-holder is saying “WTF? Dude, where’s my security?” (Note: as I said earlier, I do have one case where a note was sold off to collection after it was paid off, debt entirely forgiven, in a short sale. The collector, however, wasn’t trying to get the whole amount, just the shortage. I do think there was some guy in the lender’s short sale office who sold these accounts off “on the side.”)

    As for the danger of a melt-down, I have to say we’re well past the “danger” mark. I’m familiar with the Chicago area and it seemed to be about 2 years behind where my home market was, that is, a place like Hoffman Estates didn’t really seem to start skidding until about two years after similar suburbs in my area started taking a beating.

    As for the PSAs, REMICs and the New York trusts, I follow the argument, but I have too many unanswered questions to drink the Kool-Aid here yet. The bottom line argument seems to be that IRS rules and NY trust law make conveyances outside the very narrow timeline void. Maybe, but I don’t know that yet. What I do know is a lot of folks talking about this are wrong about basic real estate law, for example, the use of corrective and supplementary conveyance documents, and seem entirely unaware that states have extensive curative acts for defective documents. I do have one very large question about whether borrowers have standing to challenge the validity of assignments of mortgage, or transfers of notes in transactions where they are not parties, that is, the borrower is neither the assignor nor transferor, nor the assignee or transferee. One the one hand, they are potentially affected third-parties. But on the other hand, in the absence of actual competing claims to the note or security from transferees/assignees, it’s not clear to me what the problem is for the borrower. By the way, I would love to defend borrowers with these cases.

    Back to the Securitized New York trust/REMIC trust issue: if these trusts are unqualified to make or accept conveyances after the window closes, the lawyers who designed them truly created the legal equivalent of the Pinto, chosing a particularly poor vehicle for what was nearly certain to happen. Even more common than rear-end collisions for automobiles is the problem of trailing documents and late delivery in real estate. Too many people get paid at the time of closing and back office/back-end processing is frequently under-funded and understaffed where revenue is generated at clsoing. While late delivery penalties provide a disincentive for letting trailing problems linger, they fail to work at exactly the wrong time – when the affected vendors go out of business.

    Pintos were on the market, so this type of thing does happen. But here, the equivalent of the gas tank exploding would be multiple transferees/assignees coming forward claiming identical interests. Why isn’t this happening?

    Don’t get me wrong. I want to understand this, but I tend to work piece by piece rather than starting with a grand theory of everything.

    Another note: I have yet to find good authorities who grasp the nuances of both mortgage law (real estate) and (modern) debt instruments. My background is title law and the concerns with debt instruments were pretty much limited to custody at origination and delivery to the payee, and the broader question of whether an old lien was supported by a live debt. As a litigator now, I have learned that, as much of a mess as real estate law and practice is, it is a model of clarity compared to the law governing and the actual practice surrounding notes/debts. The issue of whether the typical note is a negotiable instrument, for example, doesn’t seem to have been the slightest concern for lenders. Some are, some aren’t, and some are indecipherable as to which they are. Is this what lender attorneys get paid to produce?

    Finally:

    “The Association of Mortgage Investors, a trade association, has called on trustees, who oversee loan pools on behalf of investors, to demand that loans be repurchased by their originators if required documents are missing.”

    Good luck with that investors. As I said above, this is a remedy that fails as soon as you need it. What will be interesting to see if this comes to pass is who among the originators can make good on this. The brokers are all gone. The regional correspondents are almost all gone, and can only handle a nominal repurchase in any case. The net branches can’t repurchase. The retail bank lenders will have to feast on each other.

    • gotoL says:

      I guess I didn’t explain it clearly enough. The problem is not with there being more than one obligation, but with there being one property pledged multiple times as security in the event of default.

      Compliance Lawyer, below, is correct, follow the Note and you can straighten that mess out, but what of the investors in the MBS? As you say, good luck with those, as many of the originators are out of business; however, that still would impact market integrety (I wasn’t talking about the real estate market, as you suppose, but the shadow banking system.)

      BTW, great, great conversation here! Smart people renew my faith in democracy.

  57. Compliance Lawyer says:

    All of these bright people and great comments … missing the point. In All states (judicial or non-jud foreclosures), the NOTE is the single Prima Facie evidence of the debt. Not the mtge doc, or an affidavit … THE NOTE.
    Most judicial foreclosure states used to require that the forerclosing plaintiff (lender) physically produce the original note at the foreclosure hearing before a judgment of foreclosure could be entered. Then MERS was created and everyone assumed that they would track the loan dox and notes correctly. Looks like they did not.
    Unless Congress is willing to intervene, and spend another $ 2T, about 5 million homeowners and many large banks and investors will be embroiled in this mess for years. Forget the new DFA – this one is a sleeping giant. There will be no quick or easy way to fix it, either. Sorry, but I think that is the reality here.

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  63. closingguyinpittsburgh says:

    Here’s something that I’d like to point out: This country has an overabundance of lawyers. They’re everywhere. Big firms, solo practitioners, boutique shops, specialists, multinational firms. They aren’t hard to find.

    I look at the title search for a few foreclosed properties a week. Do you know what I rarely, if ever, see? A person who was sued in a foreclosure that gets a lawyer and fights it. As much as people want to howl about the defects, from my experience in what I do every day, as my profession, that I’ve been doing for the last 10+ years, the vast, vast, vast, vast, vast majority (like 99+%) of the persons who were intended to be protected by the judicial foreclosure process don’t even lift a finger to contest because they know they’re in default and on the way out. That’s what I see, not based on what I read in the news or what some expert is spouting, I see it directly from the courthouse. Foreclosures are filed and, one after another, it results in a default judgment, default judgment, default judgment, default judgment and on and on and on.

    If somebody is a good borrower and they get mistreated by a servicer, I hope the servicer pays big $$$ in damages, gets hit with disclipinary penalties and possibly even has criminal charges filed against them. But don’t be deluded in to thinking that even a fraction of the people being foreclosed are trying to fight the foreclosures and the system is railroading them.

    • Excellent premise, incorrect conclusion. Lawyers don’t like foreclosure cases and the homeowners can’t afford their upfront fee.

      I happened to be in a courtroom when someone who DID sue Chase Bank had their case MOVED from a superior court to a FEDERAL COURT. Yeah, I’m sure that move favored the homeowner (snark alert).

  64. Jack Straw says:

    I should have also said that securitized trusts/REMICs that can only accept assets within the 90 day window is a “Pinto,” as well. See reference to trailing document problem where late delivery is a certainty, not just a possibility.

    In part 2, Mike talks about the tax treatment, and yes, I was aware of that. My question has been, late entries into the trust might be ugly taxable events (which may lead to big incentives for tax evasion), but I’m not seeing why such an event can’t happen. And furthmore, tax evasion doesn’t equal a void transfer or conveyance, as far as I know. But, this what is frequently being said, “That it just can’t happen.”

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  66. bill keels says:

    to get these tranches of sub par mortgages up to investment grade, some mortgage aggregators or investment banks bought insurance, or insured that the homebuyer had bought PMI private mortgage insurance AND SOMEBODY PAID THE PREMIUM….with this insurance in place, the rating agencies bestowed an investment grade rating on the tranche, and money and happiness was passed all round, except for the poor mortgagor…

    some of the pmi folks layed off some of their risk on aig, swiss re, etc……but most didn’t and they are long gone in the system now….

    we will be 100 years cleaning up the title clouds from this foolish expedition…..everyone who owns a house with a mortgage should file an affidavit with a court, or clerk of the court, that they are starting the clock on adverse possession, even if the affidavit states that the adverse possession is being initiated is against any and all parties, known or unknown…..this way, in 7 years of open and hostile possession title passes….terrible state of affairs, but great american greed knows no bound…

  67. This sort of thing is nothing new, it’s been going on for decades, it’s just worse now because of all the mortgage shuffling, bundling, trading, and layoffs in mortgage divisions of banks, busy courts due to budget cuts and layoffs. The reality is that this is business as usual only this time it’s exaserbated and on steroids due to all the other circumstances.

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  70. Richard DelPorte says:

    You are all just pissing in the wind; merely prolonging the inevitable.
    At the end of the day, these borrowers aren’t making their payments.
    They are in violation of the covenants in the note.
    Despite the shoddy record keeping and associated misdeeds by the servicers.
    This ruse is a headfake to distract from the real issue – delinquent borrowers.
    The quicker they are foreclosed on the better – for everyone.

    • diddywadiddy says:

      This is just false. The rule of law is critical. If the note is separated, so be it, no foreclosure, it’s unsecured debt.

      The banks created the crises, crashed the market causing millions to be unemployed and caused the foreclosures by ruining the housing market. There would be no foreclosures if the housing market were not crashed–people would simply sell the houses.

      In short, the banks caused all the crisis, start to finish, and cannot be allowed to walk over the rule of law.

  71. Angela says:

    FOOD FOR THOUGHT – I’ve been in banking for almost 30 years and there IS NOT A BANK ON THE PLANET that has a handle on their security documents. Doesn’t exist – I speak from experience. I’ve been laid off several times and each new bank I join suffers from the same syndrome. Too much consolidation/acquisitions of the banks/servicers, and a complete absence of sufficient staff, to manage the heaps and hordes of documentation. Most big banks are just now scanning documents to create electronic files – This is how they’re finding out they don’t have the legal documentation to perfect their lien positions.

    AMERICANS – If you’re going through a foreclosure and your lender CANNOT physically produce the original Note, they CANNOT foreclose on you. Ask your Lender to evidence (not represent) their possession of your mortgage documents.

    The absence of original mortgage documents during the CDO craze is the single biggest fraud perpetuated against consumers and you can bet the Obama administration will not do ONE DAMN thing to protect consumers.

  72. Angela says:

    PS – Could this also be why banks’ are so reluctant to renegotiate. They don’t have the original documents.

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  76. Albin says:

    Missing boxes seem to be Fannie or Freddie and then the Treasury or Fed as ultimate backstops, with taxpayers as the ultimate losers.

  77. The ELEPHANT IN THE ROOM (hiding in plain sight)

    Because for more than 5 years, I have been sounding the alarm about FORECLOSURE DEBT COLLECTION abuses, I’m glad the fantastic occasion to expose the NUTS & BOLTS of the most ominous element of foreclosure fraud has finally come! I call it “the ELEPHANT IN THE ROOM! I hope the Florida’s Attorney General prevails in investigating foreclosure mill firms who CLEARLY fabricate foreclosure documents!!

    It is imperative that MILLS are investigated for INTENTIONALLY FABRICATING court documents because certain lawyers are engaged in SELF-DEALING FORECLOSURES. Most definitely, it is NOT A WASTE OF TAX PAYER MONEY to probe awful, underhanded illegalities surrounding foreclosures which have caused thousands of people to be UNLAWFULLY evicted and homeless –while unscrupulous lawyers became CRIMINALLY ENRICHED.

    LONGSTANDING foreclosure frauds incorporate false CIVIL as well as BANKRUPTCY court pleadings; repetitive and illegal property flipping (thus blighted neighborhoods); “simulated auctions” and “straw buyers”; FALSE “lift stay” motions and FALSE “proof of claims;” and “fee-splitting.” Certain lawyers achieve extra benefits from litigating foreclosure defense lawsuits, and MISREPRESENT to their mortgage-clients that homeowners are delaying foreclosures, but actually its continual deceptive lawyers’ activities –while billing $$$$ to clients and actually committing MALPRACTICE + fraud upon the courts + fraud & illegal exploitation of homeowners!

    Because fraudulent foreclosures include many facets, culmination can take years while arranging cash cow “PAWNS” needed for big pay-offs. [Super Future Equities Inc. v. Wells Fargo, et al., @ http://www.bankruptcy-lawnetwork.com/2007/05/11/what-are-those-mortgage-servicers-doing/.

    LIKE AMERICA NEED JOBS, FORECLOSURE MILLS NEED INVESTIGATION. State Attorneys General everywhere now need to recognize the ELEPHANT IN THE ROOM –which has been for a long time, hiding in plain sight: foreclosure mill fraud! *http://www.lawgrace.org/2010/09/30/important-facts-about-foreclosure-and-mortgage-fraud/

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  81. C. Peereboom says:

    As a European, I am curious to see this stuff developing and I just want to ask you :
    is Capitalism still working out for you guys ? Could this thing become the new, and bigger, banking crisis ?

    • DailyPUMA says:

      C. Peereboom, are you saying Europe does not practice capitalism?

      As for your “question”, capitalism works, accelerated capitalism can only work for short periods of time. Unfortunately, the elite rich don’t want to believe that accelerated capitalism can only work for short periods of time and they are the primary cause of the illusory economic collapses when we all should be celebrating the actual working infrastructures that have been created throughout the entire United States.

      Example. A family passes down a home to their child. The child, with the home paid off, figures out that by growing foods in their own yard, using trees for shade to reduce home cooling and heating costs, and not going out every night, can live on a very frugal amount of money month to month.

      This should be a victory for capitalism as this person can now reduce their overall consumption footprint that was handed down to them by the parents. However, this is the anti thesis of what it means to have a perpetual growing economy. That homeowner is not actually hurting anyone by living on a reduced consumption platform, but on wall street, this person is considered part of the problem for us not having a thriving, growing economy, aka, accelerated capitalism.

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  83. Mark says:

    This is not Market Capitalism, which is the engine that made America what it is, and you are snidely asking about with your elitist moral superiority.
    This is, instead, crony Capitalism, where government has a few favored companies, and everyone else be damned.
    This all was obvious on the face of it, if anyone that is supposed to be regulating it all had bothered to look.
    Nobody did.

  84. Tony says:

    What a home owner can do if he considers being cheated by the bank to accelerate foreclosure despite all required documents were submitted on a monthly basis.
    I suffer foreclosure, still believe was an illegal procedure and were not able to get legal advice as everyone requires money in advance.
    Received hundreds of mails offering support but requesting money in advance up to a point to drive me crazy. I meant this…What to do to seriously sue a bank?

  85. David says:

    Pay your bills and it won’t be a problem…?

    We paid our bills during construction – builder embezzled 100k…

    We pay the mortgage then learn THEIR builder – yes the LENDER’S builder did get any inspections – from footer to final… NO INSPECTIONS… but hey, WE PAID THE FULL MORTGAGE (7k per month) We just wanted out of the mess – sell the damn house and move… still paying that mortgage…

    The lender knew there were NO inspections and we learned they used a fraudulent U&O Permit at settlement – fraudulent appraisal – and in exchange for the county employee giving them the fraudulent docs to settle they give him a 247k loan… and btw – the house was NEVER completed – does not meet code and an estimate to FIX not FINISH the house was over 91k…

    So, we have a house that cannot be finished, cannot be fixed, and cannot be sold. If we sell the property the liabilities pass to the buyer. But wouldn’t you know – if they foreclose on the property all those sins disappear… We attempted to settle this legitimately. We started to file a lawsuit – they started foreclosure.

    We paid our bills and had perfect credit up until they pulled their stunt attempting to pound us into poverty – I refuse to pay another penny and dare them to take us to court.

    I know of someone else through this experience that PAID every payment – not late nor missed a payment. However, their servicer failed to send the disbursements to the proper account. They wrongfully foreclosed and they’ve been fighting for 7 yrs. including taking their canceled checks to court to show the judge. They were scorned to suggest a bank would wrongfully foreclose…

    Yep pay your bills – I thought that worked too…

    Keep the Powder Dry…

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  87. Mike says:

    Many people, who have fallen on hard times, have tried to work with the banks to no avail. Banks are treated like they are above and making the law, this has to stop. They make money out of thin air just the Fed Reserve, and nail everyone regardless if we are prefect debtors or not. This should pay a huge penalty at the very least. I know of stories where large banks would demand huge sums of money to do a loan mod assuming you trust them without providing any paperwork and agreement verifying the terms. With reasonable person to agree to such predatory practices, which happens all the time even at the top 5 banks. About time, to flip the table on the banks and let eat losses for their everlasting fraud on all of us. After this, a new banking system should emerge.

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  90. scott rosendahl says:

    please subscribe via email

  91. Della says:

    I am 65 years old. When I was growing up, the American Dream was to get a job, buy a home (with a down payment and a mortgage), and to pay off that mortgage by the time you retired. This was so that you could afford to live, with only your retirement income, because you no longer had mortgage payments to pay, nor did you have to pay rent. Now the banks have brought down the people of the United States (what the communists never could do.) They have turned a whole generation of society into lifelong renters, which is guaranteed to impoverish them in their old age. Or perhaps more, because who now wants to buy a home that involves a bank-involved mortgage, due to the paperwork’s unreliability of legal ownership. Will this now mean that only those people who can get private loans through a rich relative, or person, will attempt to buy homes. Will all the rest of the people become long-term renters? I hope the banks find they no longer have the mortgage business to profit from in the years to come (Fools, this industry involves honesty and trust!) Then I will see some justice for the bank’s greed to obtain fees for processing (and reprocessing) all those unsound loans.

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  95. Rose says:

    Many bloggers on this post believe that homeowners are trying to get free houses. I am amazed that these same bloggers see nothing wrong in banks getting free houses…through fraud. Go figure.

  96. lawgrace says:

    It is NOT always “the banks” who wait “years” or a long time before completing foreclosures. In many instances, the reasons for foreclosure delays lie with FORECLOSURE MILL LAWYERS.

    Some lawyers deliberately prolong foreclosure while concealing MALPRACTICE against their lender-clients, and while committing UNFAIR DEBT COLLECTION PRACTICES and fraud against homeowners. Sometimes lenders (who are NOT required to know laws / statutes), are oblivious that foreclosure lawyers’ mistakes, errors, frauds on the court and upon opposing parties actually provided reasons, defenses, and opportunities for opposing sides to have grounds for debating key facts and issues in courtrooms –hoping to reach negotiation, as to avoid homelessness. Meanwhile, the mill lawyers rack up billable hours and fees for litigation those lawyers manufactured –sometimes erroneously, sometimes intentionally.

    Illustrations: A property owner who seeks reorganizing his / her debts through Chapter 13 Bankruptcy is not to be blamed for contesting a FALSE “proof of claim” or a FALSE “Motion to Lift Automatic Stay” filed into the record by lenders’ lawyer. (Besides, problems arise with multiple ‘proof of claims’ by different lenders.) Or, when mortgage lender’s lawyer commits injurious frauds, fails to “effect service” or fails at any SUBSTANTIVE Civil Procedure requirement, the blame is on the lender’s lawyer –NOT the homeowner who REFUSES TO COOPERATE WITH UNLAWFUL EVICTION FROM THE SHELTER OVER HIS OR HER FAMILY’S HEAD.

    SPECIFICALLY, countless foreclosure lawyers owe $$$$$$$$$$$ to their mortgage clients for fatally botching foreclosure proceedings –and countless foreclosure attorneys have been derelict about informing lender-clients, WHAT SAITH the APPLICABLE LAWS.

    **Important Facts About Foreclosure and Mortgage Fraud

    http://www.lawgrace.org/2010/09/30/important-facts-about-foreclosure-and-mortgage-fraud/

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  98. Bruce E. Woych says:

    (1) MOST SERIOUS WORK: CONTROL FRAUD @

    http://www.networkideas.org/feathm/may2006/William_K_Black.pdf

    (2)
    Akerlof, George A. and Paul M. Romer. 1993. “Looting: The Economic Underworld of Bankruptcy for Profit.” Brookings Papers on Economic Activity. 2: 1-73

    (3)
    From the Book THE MONSTER: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis by Michael W. Hudson. Copyright © 2010 by Michael W. Hudson. Reprinted by arrangement with Times Books, an imprint of Henry Holt and Company LLC.

    Michael W.Hudson is a former Wall Street economist AND JOURNALIST. “THE MONSTER: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis” (2010, Times Books) © 2010 Times Books All rights reserved.
    View this story online at: http://www.alternet.org/story/148577/

    (4)

    http://blogs.alternet.org/speakeasy/2010/10/21/the-elephant-in-the-foreclosure-fraud-room-second-liens/

    The Elephant In The Foreclosure Fraud Room: Second Liens
    Investor lawsuits against mortgage servicers could be legally explosive.
    READ MORE
    Zach Carter / AlterNet

    (5)
    BANKS/ MORTGAGES / FORECLOSURES / FRAUD:

    http://www.nytimes.com/2010/10/24/business/24gret.html?_r=1

    (6)
    DR. MICHAEL HUDSON: (Professor Michael HUDSON is not the same as listed above for the new book which is M.”K.” Hudson the journalist).
    see video of Dr. Hudson @ http://www.youtube.com/watch?v=3pwAFohWBL4

  99. R Winston says:

    Can anyone explain where the Fannie Mae boxes would fit into his flow chart? I thought FM was simply an underwriter, but did FM also buy, package and securitize loans as well?

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  103. lawgrace says:

    Foreclosure Gang Rape, Louisiana Style. . .(re: Wells Fargo)

    http://www.lawgrace.org/2010/11/11/foreclosure-gang-rape-louisiana-style-absolutely-verifiable/

    “Not in a sexual sense, but “rape” here synonymously describes the following things that were forced upon the victim: defilement, molestation, exploitation, humiliation, bigotry, betrayal, invasion, revilement. . .

    “. . .so that the ravished victim might have an opportunity to begin a road to recovery, an opportunity to begin recompense, to cease from being wrongfully blamed (notwithstanding other things deserved), the victim has no other choice –and is running out of time. . .

    “It was perhaps a year later that the homeowner learned that WF’s predatory modification was not only fraudulent, but also not lawfully enforceable. The salient reason why the loan modification that Wells Fargo constructed is not valid is because (to the homeowner’s oblivion) the modified loan on the home [unlawfully] binds the homeowner and a SHAM lender. . .”

  104. Dwight says:

    I’m a homeowner representing myself Pro Se against Wells Fargo in a foreclosure in NJ.
    I never answered the original complaint. I objected to the application for final Judgement by raising “lack of standing”, but the foreclosre unit told me that was not an objection they could handle and said I would need to file a motion in the court to see a Judge to resolve that. But at the same time Wells Fargo was dangling a carrot on a stick (loan modification) and leading us along and stalling while the foreclosure date got closer. Eventually a final judgement went thru and a sheriffs sale date was set for Nov. 16th of 2010. They played me with the promise of a modification and now they are taking my house … but here’s the kicker to this story.

    1) I just discovered Wells Fargo got the assignment of mortgage from MERS and it is dated, signed and stamped a month after the complaint was filed.

    2) It looks like a fraud with the name “Topako Love” being the supposed V.P. of Commerce Bank, which was the original lender who loaned us the money. When you google her name she is just some “robo-signer” who lives in Minn. where MERS is located, she is not an employee of Commerce Bank.

    3) The assignment says Commerce Bank is signing over the mortgage to Wells Fargo.

    4) When we got the loan from Commerce back in 2004, the “Note” is endorsed by the President of Commerce Bank with his signature and the Note is made “Pay to the order of … Washington Mutual Bank”.

    5) We had always sent our payments to Washington Mutual from the beginning, and then right before 2007 Wells Fargo took over as the “servicer” of the loan. We started making payments to Wells Fargo ..

    6) So a couple of weeks ago after I discovered the assignment of mortgage date being after the date of the complaint, and the assignment not being recorded in the county clerks land records for over a year after the complaint was filed (they intentionally hid the assignment from myself and the court), I filed a motion to vacate the judgement .. based on fraud, newly discovered evidence, excusable neglect to not answering the original complaint (medical emergency).

    7) Went to court friday and the place was jammed with lawyers waiting for their cases to be called up … of course I get called up first and have to try and present my case in front of everyone … the judge never really allowed me to state my case, he stopped me in my first 30 seconds as I was stating the Rules regarding filing a proper foreclosure complaint in NJ , R 4:64 require all assignments, documents, etc., etc ….

    8) The Judge immediately shakes his head no and starts saying “Look, the plaintiffs have all of their paperwork now , how long have you not been paying your mortgage? You borrowed money , and the bank is entitled to be paid back … have you considered moving into something you can afford?

    9) as a side note : how can you win an appeal when a judge in the lower court doesn’t allow you to put forth your case on the record? I was the movant, I MADE THE MOTION, this was supposed to be my opportunity to lay out my argument and present my facts and state supporting case law … but in these courts where you have a judge who disrupts the reason of the motion and steers the discussion towards the movants personal financial struggles , doesn’t it seem like a miscarriage of justice? shouldn’t I have been given the opportunity to state the reasons on the record why I was alleging fraud? or why “lack of standing” is reason to vacate ? he wanted nothing to do with the lack of standing issue , he told me that was the way things used to be but its different now … and he questioned why now at the end of the process I’m raising a “standing” objection .. he said its too late, too much time has gone by and they eventually got their paperwork anyway so the point is moot.

    10) I then tried to argue with the judge that “standing” is an issue that can never be waived as an important objection, no matter how much time has gone by in a case, standing is a threshold that is too important in a foreclosure case … he cut me off and got a little more stern with me and said “no, maybe thats how it used to be but its diferent now , they have all their paperwork … and then he asked the attorney for Wells Fargo to let him see the Assignment of Mortgage … they never let me look at it … it looked like a copy downloaded off a computer as he walked past me I got a quick glance … the judge looked at it and commented that “yes, its dated after the complaint is filed but it was done nonetheless”

    11) How come I don’t get to look at the document?? this was my motion !!! I am alleging fraud in this case and people are passing documents around and the movant is allowed to see them and question their authenticity?

    12) So the Judge says … “no , I’m denying the motion to vacate and ordering mediation with a HUD counselor as a last attempt to resolve the issue before sale….

    13) and then the Judge looks down at me … and says “but I am concerned about the note” .. and he’s shaking his head in aggreement … “I want the parties back here on Jan 31st 2011 at 10:00 am and I want plaintiffs to bring that note here so I can see it”
    He said “I know you’ll need time , the note is probably locked away somewhere so thats why I’ll give you until Jan 31st.

    14) Why didn’t the judge just ask if they had the note with them ?? I raised the issue of the note in my moving papers , the plaintiffs reply to my motion stated that they do have the note and a copy was included in the reply to my motion. So why is the judge not asking if they had it? is he helping them dream up an excuse ?

    15) I then spoke up and said “well the original note was endorsed by Commerce Bank over to Washington Mutual and made “pay to the order of Washington Mutual”, and the copy in their reply said the same thing , no changes had been made .. nothing to show it was ever endorsed to Wells Fargo like UCC Article III requires i said on the record …

    I believe Wells Fargo doesn’t have the real note , only a copy of the original note.

    What do some of you think will be their tactic on Jan 31st ??

    If they try and say they lost the note, aren’t they already pinned into their reply statement that said “they have the note” ???

    What if they have the note but no endorsement ?? can they enforce a note that has been endorsed to somebody else ??

    would they need washington mutual to endorse it to them ???

    what if they show up with it endorsed and say the copy in their reply papers was only an old copy, but this is the real note ?? they can fake the endorsement and I have no way of proving anything …

    I don’t like the fact the judge is giving them so much time , should I try and ask for a quicker production of the note in question so I know if I should enter into a modification with them or not? shouldn’t we first establish that they are the true owners of the debt before I sign an aggreement to pay that debt back ?

    any help would be appreciated, thank you

    New Jersey homeowner fighting back … late in the game … but fighting.

  105. David says:

    The judge is going to assume they have their docs. However, the fact that he is acknowledging they don’t by NOT asking for it, probably means – THEY DON’T have the original.

    I’m in Maryland – but need to run. I’ll be around tommorow morning…

    I would DEMAND a copy of the NOTE. I can give you the name & Number of a Forensic Handwritting Expert Witness for the FBI. Send her YOUR Assignments, NOTE, & Deed of Trust. I bet-cha 10-bucks (cuz I’m broke) that she comes back and says the Assignments are FORGED & the Note is forged… Robo-signers typically sign THEIR NAME & the Notary. If that judge continues and you prove those are forgeries – he’s created a VOID ORDER. Now, if they are forged, PROSECUTE the attorneys for perjury. Call the POLICE and have them arrested – talk about ticking off LOTS of folks…

    That JUDGE probably has his RETIREMENT attached to those investments. If they own STOCK in those investments – FILE a COMPLAINT against the JUDGE. Yep, that will TICK-OFF of the world but so what – they can play by the rules or beat-feet. There are good cases with those robo-signers and they are being TOSSED OUT…

    The bigger weakness of foreclosure is in the “prefection” – recordation… Thus far that judge has indicated he is concerned about ONE THING. PAY or MOVE. So, the question is – WHY would you PAY on an ILLEGAL LOAN? If it was never perfected, it isn’t binding. Your heading towards Lack of Standing – judges consider that a technicality. If that Chain of Title is NOT in tact – compounded by forged signatures – well, then they have a problem.

    Think of it this way – give that judge the TOOLS to work with you and he might do it. Give him the TOOLS and GOOD reason to do it knowing you will appeal – and he will do it. Are you familar with JUDGE SHACK in NY…? Google his name with Lack of Standing..

    I’ll look back tomorrow. if you want to toss ideas around. You don’t have much time but you have options to bust their chops…

    see ya later
    David

  106. David says:

    One other thought – you mentioned they were talking to you about modification. Do you have it writing? If so, then file a complaint for Bad Faith dealing. In other words, if you have documentation showing they were going to work with you – and NOTHING states you were not approved or could not be approved – there are cases now where folks are SUING these punks and winning. It’s an act of Bad Faith and Banks are liable for that… They cannot commit then simply decide otherwise WITHOUT a legitimate reason.

    Courts frown on it because you have a right to rely on their “implied” good faith. If you believe they have a screwed up Note – and it sounds like it.

    Have you written a QWR? Have you checked all your loan docs for any TILA violations. Did they give you all your disclosures…? Those are all real-causes especially TILA violations.

    See ya later
    David

    PS – if the foreclosure mill lawyers screwed up using a robo-signer and post-dated assignments – that’s a serious Breach of Contract within the PSA. That means the damn NOTE was never transferred to the Trust. This gets a little technical – but think of it like this – a cop pulls you over and gives hand written ticket yellow-pad – Dwight was speeding! You ask “wtf” he says I don’t start until next week but you were speeding. That is what those attorneys are doing. they don’t have authority to file because YOUR NOTE is NOT in the TRUST. It is illegal to PUT it in NOW – so the TRUST doesn’t OWN it. Well, who-the-hell are they then trying to steal your property? They are HIRED by the Trust. The Trust only has authority over loans it OWNS. It can ONLY own the NOTES placed in it BEFORE the Trust Closing Date with was within 30-days after settlement. That’s what you call BUSTED.. then you can ask the politely to please tell them to RETURN ALL YOUR PAYMENTS.

    • gotoL, Chicago atty says:

      I have to disagree a bit about the breach of K to the Trust. It MAY be true, but more likely the PSA requires an Assignment-in-blank to be deposited. The investors play hot potato with the mortgage and assignment in blank. Whoever is stuck with it when it defaults (supposedly) gets to sue. Then they fill it in and, voila, standing. However an assignment-in-blank is not by definition an assignment until filled in. An assignment that post-dates the Complaint does not confer standing, at least where I am. In some jurisdictions it is a threshold issue; others, like mine, it is an affirmative defense and needs to be raised early.

      David, break down and get a lawyer. It’s your home and obviously important to you. My guess is you’ll end up in the appellate court and uou’re NOT going to be able to act as your own appellate attorney.

      • David says:

        Hi gotol,Chicago atty,

        We’ve spent 60k on attorneys. I’ve talked to more attorneys than I can count. These guys have no intention of taking on the big-dog law firms hired by these lenders. I’ve been told we’d need a retainer of about 75k and expect to spend 200k. All have said we’ll win because I have everything documentd. For 200k I’ll hire a hit-sqaud and take out the entire building. I’ve got them on so many counts of fraud, breach, conspriracy, TILA, embezzlement, etc. I had an FBI forensic Handwriting Expert even file proving the thieving foreclosure mill forged the attorney’s signature and the notary. And I have proof of many others… The FBI took our case but they aren’t going to do anything about this until someone removes the dead-weight in the DOJ & USAO. I didn’t start this fight – but I’ve told them and one judge thus far – I’d rather join al-Qaeda than to allow this type of disgusting illegal act committed against my family. Yep, I caught hell for it but oh well. We didn’t lie, cheat, or exaggerate. That lender broke the law at every juncture of the contract. I don’t want to sound crazy – but this is way-beyond property values and money. Destroying families is a personal offense that I don’t appreciate. I gave each of the lenders & foreclosure mill the opportunity to do this right. They simply figured they’d pound us into poverty & make us too poor to defend. As far as I am concerned that’s what the 2nd Amendment is for (IMHO). I’ll take it to court and give it my best to do the right thing. I’ve never been in trouble – never broke the law – never even been in a courtroom before all this… The consequences for their actions is on them. After fighting this for 5-yrs I’ve concluded it doesn’t matter what happens to me anymore. They haven’t been able to take the house because we filed Fraud on the Court agasinst them. I simply wanted justice. Now, I want them disbarred and everything they own. These people are arrogant and I mean disgustingly arrogant. The lenders have lied and betrayed us and now these foreclosure mill attorneys have nerve to files forged docs..? That’s what they make Desert Eagle 44′s for… It never occured to me that courts were not interested in truth or justice – this was a shock to me. It is mind boggling because these judges KNOW these lying thieves broke the law. It is inhumane to put families into loans they can’t afford and then lie about it? It is incomprehensible. That isn’t what happen to us by my researching our case I’ve come across tons of evidence that these lying thieve lenders KNEW the families were given loans with self-destruct timers preset. Its wrong to take advantage of folks like that… sorry to sound like knucklehead or nut…

        As for the PSA – Contract…

        The problem with assigning the Note afterwards is the PSA requires that Note to be “in the Trust” as of the Closing Date of the Trust. Assigning the Note “afterwards” is unacceptable because the Note is already in Default. The Trust cannot accept a Note already in Default.

        Essentially, the lenders are attempting to force an A to D transfer and pretend the B & C parts of the Transfers don’t matter – even though they are legally required by Reall Property Laws for eons. They decided to bypass those laws despite the fact they are specifically required in the PSA, State Real Property Laws, and the UCC. So, if they breached their own contract, violated the UCC and real property laws – never perfected the Note – have not legally Transferred the NOTE and now cannot do so because the NOTE is in default – how can they “claim” capacity – authority or standing? The only one that “could” hope to is the Originator BUT they were PAID IN FULL at settlement – so, from a purely legal perspective THOSE BOYS HAVE A SERIOUS PROBLEM – “unless” the judges simply ignore the ALL those historical & standard LAWS..?

        The irony of their undoing is that – this exposes BOTH FRAUDS by the lenders. The first being the Borrower – second the Investors.

        Our courts should let these Banks burn for their arrogance and they should be prosecuting these foreclosure mill attorneys for aiding & abetting the illegal scheme. These attorneys know the loans were never perfected therefore filing false affidavits, fraudulent assignments, violating RICO, SEC violations, conspiracy to defraud… the list is lengthy.

        Ole-big-daddy David J. Stern in Florida is finding that out now. We are setting our sights on the other foreclosure mills. In MD Howie & Jake of Bierman Geesing & Ward – will be getting bunk beds with Orange jammies – three free meals per day with visiting rights on weekends.

        Just some thoughts…

        PS – I should note – I am NOT an attorney – didn’t even graduate but I’ve read 100s of cases and researched this thing extensively.

  107. gotoL, Chicago atty says:

    That last comment is addressed to Dwight, not David.

  108. gotoL, Chicago atty says:

    David: your last comment is why I shouldn’t stick my nose in. I don’t know all the facts. But I am VERY sympathetic to your plight.

    I do have a tip. In Federal court, the standing issue is key, constitutional in fact. It isn’t an affirmative defense, it is central to the court’s jurisdiction over the controversy. From there, you need to connect the dots yourself, given the jurisdicitional rules in your state and the kind of counterclaims you have.

    P.S.: I’ve NEVER gotten anywhere near 60k or even 20K for the defense of one of these things.

    • David says:

      Hi gotol,
      Sorry to sound like a nut – I appreciate any comments. I should point out was not about the foreclosure. We started to sue the originator & builder for frauds-conspiracy, breach, embezzlement. Our loan docs were audited and we found lots of other issues. These knuckleheads put our income at 300k? That’s crazy – we told them 100k which was true. The house was never inspected and they used a fraudulent U&O permit to settle. The loan was sold CW and the auditors worked out a deal to rewrite the loan. We complied and told them we were filing against the originator & builder. Waiting for the new loan docs (not modifying docs) we sent foreclosure notices. They obtained a fraudulent U&O from the County – got it in writing from the Code Official – which they also gave a nice new loan at the same time…

      Anyway – now I want blood. If you’re licensed in MD – I’m will to talk to a lawyer. I want someone with the disposition of a junkyard dog willing to fight the fight without compromise. Like I said, I have it all documented – pdf file format – pictures – loan docs – FBI subpoena – frauds, etc…

      My biggest concern is that these punks beat pro-se litigants by procedure and mickey-mouse courts nonsense. A judge should look past procedural stuff to see the truth but that is rare. If they beat us on something like that – I won’t bother with the court any-longer. I’d rather be dead than to let them get away with trampling my rights. I didn’t lie, cheat, steal, or exaggerate. They broke the law, lied, manipulated and then attempted to use the courts to trample us down… I’m sorry but not this redneck boy. I spent 40-yrs working my butt-off – many 100 hr wks – and my wife & I busted our butts for what we had… There comes a time when we need to draw a line. I despise arrogance and abuse especially when its about families. They better know this isn’t about property value or the million dollar mortgage – I don’t care about the money. I could have worked with them on that but not now. I want them held accountable for everything they’ve done. What the courts don’t do I will… Our men & women over seas are fighting an enemy and IMHO – these lenders & foreclosure mill attorneys are 10-times more dangerous to this nation than some bonehead in the Middle East. It is unconscionable to do what they’ve done to these families – then pretend it was their fault. Anyone reading the lawsuits filed by the investors and read the depositions would know this was deliberate done to these families. While meeting with a judge attempting to work through these issues of trying to work it out equitably for all parties involved we kept running into walls. These people simply believe they are above the law. I told that judge – if I knew how to build a McVeigh UHauler – I’d park the SOB out-front that foreclosure mill and let it rip. I’d park 5-around BofA and let them see what happens. I got up and walked out… They want to destroy families and pretend its okay because they control the money… Not on my watch…

      Jefferson left us the reminder in our Declaration of Independence “…after a long train of abuses…” Like I said, I’ve never broken the law and I don’t support some redneck militia but trample the rights of the PEOPLE as is being done – there comes a time when the 2nd Amendment must be connected the Declaration of Independence and it is our Obligation & Duty to do what is necessary for the future of this Country. I view this in that context. They aren’t merely repossessing property – they are trampling our due process rights then illegally seizing private property while ignore dozens of laws and rights of the People.

      Hopefully the courts will wake up and start enforcing the laws on our books.

      Again – sorry to sound like a nut – I really don’t mean to at all… If someone would told me those words would be coming out of my mouth 10-yrs ago, I would have told they were crazy. Yet, here I am and I feel compelled to do whatever is necessary to stop them or teach them a lesson they’ll never forget.

  109. Dwight says:

    David and gotoL , Thank you for your responses.

    David, I don’t know if the note was ever securitized, all I know is we refinanced our home in 2004 thru Commerce Bank for a 30 yr fixed rate mortgage. We never even realized the note was endorsed by Commerce Bank at the time and made “Pay to the order of Washington Mutual Bank” .. we just assumed Washington Mutual was the servicer for Commerce , but now looking at the original note it appears Commerce signed the note over to Washington Mutual immediately , probably sending them the original note back in 2004.
    Washington Mutual was siezed by the U.S. Government in 2008 after a 15 billion dollar run in a 10 day period of withdrawals … the next day the parent company Washington Mutual Inc. filed for chapter 11 bankruptcy. The government sold WaMu Bank a week later in a secret auction to Chase. WaMu was one of the biggest players in the mortgage meltdown and slicing and dicing of notes leading up to all of this. Was our note involved? Who knows ! But somehow Wells Fargo ended up as our servicer right before the collapse and siezure of WaMu .. did they intentionally dump our loan in Feb. of 2007 without tranferring the note ? My guess is “yes” .. Wells Fargo would not have been sent the note because they were simply servicing it, but why did WaMu give it to Wells Fargo ?? Maybe they were cleaning house and trying to dump some of the shaky loans before the Feds started reviewing docs? It’s very complicated , but my gut tells me WaMu never sent the actual real original note to Wells Fargo, they only sent an electronic image of the original note, and thats what appears in the attorneys reply to my motion to vacate … an apparent “copy” of the original note .. and in their reply they state “we have the note” see exhibit D.

    I did fill out an on-line QWR from some website and sent it electronically, but have never received a response.
    I’m not up on the TILA and other laws you ask about and will have to research what you are talking about so I can understand the question. As far as disclosures, again I’m not sure what you are referring to.

    What recourse does a citizen have if a Judge doesn’t allow him to present his case during a motion hearing? By not allowing me to talk about the facts and reasons for the motion he has really made it difficult for an appeals panel to review the record because there isn’t much of any record , its a “catch-22″. Do appeals courts allow my written motion papers and exhibits in as part of the record they can review? Those were very thorough and clearly explained my case.

    GotoL , I wish I could afford an attorney, I wish Legal Aid was helping people but they told me they are not accepting any foreclosure cases because it would tie them up 24/7 , I wish I knew how to search for a Pro Bono lawyer who would take my case on.
    I looked at the NJ Courtsa website and saw that an appeal is a virtual nightmare, just the act of writing the appeal and using the proper paper and color covers, the rules are so far out there and set the bar so high that no normal citizen has the ability to write an appeal … and as you say, the appeals court may not even allow a citizen to represent themselves at an appeals court for oral arguments anyway.

    But what can you suggest for the point I’m at right now? The Judge seems to have struck a deal with plaintiffs attorneys BEFORE we ever got into the courtroom , yet he doesn’t admit and state this on the record? Is this normal behavior on an emergency Motion to Vacate ? The Judge and Plaintiff hold secret discussions on how to best undermine the defendants allegations stated in his motion? Could the Judge get in trouble for this behavior? The Judge acted as the plaintiffs attorney , the Judge prosecuted the case for Wells Fargo and thats right on the record. Are my written motion papers and exhibits always part of the official record? or is it limited to only what is on the transcripts from the hearing? In other words can an appeal court read my Motion papers and exhibits in weighing their decision on whether the lower court erred ?

    Can I make any additional moves right now before the plaintiffs have time to fabricate a note or an endorsement? Can I call the NJ State Police and report that I believe a crime is about to take place in a court of law?

    Thank you

    • David says:

      Hi Dwight,

      The judge can get in trouble but don’t count that for now… however, if he persists, and you have legitimate causes – he’s creating a void order. Blip me an email — nehemiah@md.metrocast.net

      I have some documents that might help. Your court date is scheduled for mid Jan – wasn’t it..? There are things you can do – but you need to get things done pronto…

      I can try to help you get pointed in the right direction. You have options but it’s important to get caught up super-fast.

      Send me an email and we can figure it out from there.

    • David says:

      Dwight – below is the mentality you are up against – this is what Wells Fargo believes and obviously the judge has accepted… Maybe gotol attorney would weigh-in but (IMHO) this is typical thinking of judges however, I believe they are wrong. BUT – I am NOT an attorney and that judge is what you need to concern yourself with… The judge has made it known he wants solid arguments based on fact and even then you MUST grab his attention with something REAL. Walk in that courtroom with the same argument he’s heard 20-times that day and he’s not going to listen.

      IMHO – standing is a real issue – but it is secondary to that judge’s perspective. His mind is firmly planted on ONE ASPECT – you signed an agreement – you agreed to those terms before signing it – so “what is the problem” why are you in his courtroom…? That’s what you need to answer? Telling him they can’t demand payment “NOW” after you’ve been making the payments loses credibility.

      This taken from the Senate Hearings Nov 18 2010… I’ll toss other ideas at you below it…

      Testimony of Alan Jones Operations Manager Wells Fargo Home Mortgage Servicing

      Some have questioned the procedures the mortgage industry has traditionally used to transfer ownership of a home loan from the originator to another entity, for example, a securitization trust. These concerns primarily stem from procedural issues related to the specific steps required to document ownership of the mortgage as part of the foreclosure process.

      These foreclosure‐related steps, governed by state law, are not the same as those required to transfer actual ownership of the loan. This has led to confusion regarding the investor’s right to recover the collateral following a borrower’s default.

      A review of the title chain and assignment process helps shed some light on the major issues that have been raised about this topic.

      Loan Origination and Closing

      At loan closing, a borrower signs both a “note” and a “mortgage” or “deed of trust” (depending on the state).
      • The note represents the borrower’s promise to repay the debt.
      • The mortgage or deed of trust represents the borrower’s pledge of property to secure the payment of the note. It is executed according to the requirements of laws in the state in which the property is located, and filed with the local Recorder of Deeds to establish its priority as related to other liens.

      The only time the note holder needs to exercise its rights to the collateral represented by the mortgage or deed of trust, is when the borrower defaults on the note.

      Transfers of Ownership Rights

      Procedures used to transfer the ownership rights embedded in a mortgage loan are well established.
      • Transfers of the note are governed by contract law and the Uniform Commercial Code.
      • Assignments of the accompanying mortgage or deed of trust are covered by state real property laws.
      • The original note is “endorsed” by the seller and physically transferred to the purchaser. If the loan is sold a second time, the note is again endorsed by the entity selling the note and physically delivered to the purchaser – in this case, the custodian of the Trust which holds the note on behalf of the investor. For operational purposes, notes are typically endorsed “in blank,” that is, without identifying the purchaser’s name, thus possession of the note is sufficient to establish ownership.
      • Transfers of the security interest (mortgage or deed of trust) generally follow the note. When a loan is sold to another lender, the original mortgage is “assigned” to the purchaser and recorded in the purchaser’s name. However, if the servicing remains with the seller – which is typical of most securitizations – the mortgage usually continues to be recorded under the servicer’s name. In these instances, the seller prepares a “recordable assignment in blank” and delivers it to the Trust. In general, this assignment will only be recorded if the loan goes into foreclosure, or if it is deemed necessary by the trustee.

      There are numerous reasons why the recorded lien typically remains with the mortgage servicer.
      • Most mortgage loans pay back in full. Keeping the mortgage in the servicer’s name saves the time and expenses that would otherwise be associated with assigning it to the investor, and then re‐assigning it back to the servicer so that the servicer can execute the release of the lien.
      • Maintaining the servicer as the party of record also enables the servicer to monitor any additional liens or encumbrances that may be placed on the property, since notification of such actions are sent to the recorded lien holder.

      In some instances, the mortgage may be assigned to Mortgage Electronic Registration System (MERS) at origination or upon subsequent sale. Registration with MERS, which becomes the nominee for the beneficial owner of the loan, serves as a central system to track changes in ownership and servicing of the loan. While Wells Fargo no longer uses MERS in its retail business, some of the mortgages contained in our book may have liens that are registered under the name of MERS. Wells Fargo takes the added precautionary step of “deregistering” loans that are registered under MERS at the point foreclosure proceedings begin.

      —————-

      Here’s some things to consider…

      Instead of focusing on what “they” cannot do, what CAN you do as far as payments…

      You mentioned Wells offered a modification but while working through the mod, they foreclosed…? Let me know if that’s right or not…

      THAT is something a JUDGE will listen to… Meaning, your honor, here are the modification docs showing we were COMPLYING with the modification requirements – here are the cancelled checks and copies of the statements – they were all made timeling…

      THAT is what a judge wants to here… The judge is looking for a “reasonable” solution but it must be REASONABLE and EQUITABLE for both parties. Walk in that courtroom with CLEAN concise budge – listing all your expenses – everything – show the judge that you can make payments…

      If you give toss me numbers I can run amortizations and show you payments and qualifying ratios… IMHO – THAT will SPEAK VOLUMES to a judge because you’ve proven you can make the payments – NOW the judge has something to work with…

      Loan mods have hidden rules but some areas have a 25% discount margin for loan mods. That’s a lot of money and could change the payment significantly. However, THEY control that number – so the goal is figure out what YOU can realistically afford – THEN work from there… Give the judge sometihng to work with and he/she will probably do-so.

      If that judge thinks it is inevitable that foreclosure will occur, he will pull the chute right-there-&-then because it’s now or later you might-as well get it over with… that’s how they think… That is NOT wrong – that’s just reality…

      So, if your payments needed to drop 400-bucks – so what – toss me numbers and I’ll tell you what that means in real numbers… If that’s the best you can do – there is NOTHING WRONG with that but running hard in a direction of WHAT YOU CAN DO – as opposed to what they shouldn’t be able to do – will get you MUCH farther with that judge. You obviously didn’t apply for the loan to get a free house – so don’t waste time trying go there…

      Get your real-numbers together – lay out a REAL budget that includes movie with the wife & kids – maintaince – etc.. A real budget…

      Prove it by have W-2′s – 3-months of pay-stubs copied – PROVE that puppy up…

      Then put together a brief overview of everything you’ve paid out on the house. Include EVERY payment – separate the interest/principle – any improvements – carpet remodeled kitchen – whatever – put in real numbers – swimming pool – whatever it is – but SHOW THAT JUDGE what you’ve done FOR the place…

      Put that together WITH a solid budget and you might be surprised – I think the judge would give you every benefit of the doubt under those circumstances and if he had push Wells into corner – THEN he/she would have a REASON to do and you might find them to be a bit more agreeable to do something…

      By going about it that way – you don’t need to worry about filing a complaint – no arguments or anything like that… GIVE the judge a REASON to help you…

      Just some thoughts…

  110. Dwight says:

    David, thank you for all of your comments, they are well appreciated. I will try and email you asap. The Judge in my case did order me to enter the mediation program, first I had to call the HUD hotline and then I went to a local office to pick up the application paperwork to fill-out. I need to have it all filled-out and set up a meeting with the HUD counselor prior to returning to court on Jan. 31st … at that point the Judge will supposedly order us to “mediation” to see if a work-out plan or modification can be agreed to between us and Wells Fargo. But at that same Jan. 31st hearing is when he wants Wells Fargo to show up with the “Note” so that he can see it and put to rest my allegations that they do not have legal standing in this case. My concern now is that he’s given them 2 – 1/2 months to work on “fabricating” a note, or a phoney affadavit, or some other fraud, and I have a feeling he’s ready to readily accept any excuse they come back with. But from what I have read in other case law and UCC Article III rules and regulations regarding notes is that such notes that have been endorsed like mine has, needs to have a clear history of documented chain of title and tranfers with signatures and dates , AND should be endorsed and tranferred on the FRONT of the note in question as long as there is space to do so, only then can you use the backside to add more transfers and endorsements. In my case the note the Plaintiffs sent in with their reply shows the front of the note and HAS NO ENDORSEMENT TO WELLS FARGO, and there is space available to do so. Which means they sent a copy of tthe original note to this court stating that they “have the note”.
    They thought that would fly and maybe the Judge wouldn’t require them to “show him the note” . Now they are in a jam , I suspect they will come back with either a fraud note which they fabricated , or a fraud affadavit by an employee swearing that they sent/ or received the note and it’s now been lost. Either way I have a huge uphill battle on my hands to prove they are lying, but any reasonable person can see their story doesn’t jive.
    Now newspapers have run stories telling of how 50 states attorney generals are investigating fraud of this nature by these banks , but when I try and contact my AG about this potential fraud about to take place I am re-directed to the foreclosure hotline which deals mainly with predatory lending problems and the such. Like you said, I would need to hire my own “expert” to show up on Jan. 31st when they present the note in court , I’m not sure the Judge would agree to send it off to be analyzed and authenticated, although the law does clearly state authentication is paramount.
    UCC Article III laws deal with these issues in detail, unfortunately some of these Judges are not up on their UCC rules regarding authetication of notes. This Judge in my case is most likely going to accept anything they bring in and not open a can of worms questioning its authenticity. The problem is, he doesn’t seem to allow me to state any of my arguments on the record, he has me verbally handcuffed, which in turn destroys my chances for an appeals court. I’m wondering if I should report this to the NJ State Police Fraud Unit and try and convince them that this lawfirm is about to possibly attempt to bring a fraud upon a NJ Superior Court by submitting a fraudalent document as evidence. The State Police work hand in hand with the state AG.

    • Based on minimal court experience, the document should be filed 2 weeks before the court date and you should receive a copy.

      The “crafty” attorneys will get you the copy so close to the deadline you probably wouldn’t be able to file a response. However, if you do get something in the mail well before the court date and can prove it is false, you could file a response to weeks before the case (or whatever the deadline is) and the judge will actually look at that prior to or the morning of the case.

      If anybody disagrees with my assertion, please go ahead, I am basing it on limited court experience as a plaintiff.

      • Dwight says:

        Thank you Alessandro , this was initially supposed to be a hearing regarding “my” motion to vacate based on fraud and lack of standing … I think what happened here is the Judge adjourned the matter until Jan. 31st in order to give the plaintiffs 2 and a half more months to try and find the “note” in question. I don’t think they have to reply before returning on Jan. 31st, they only have to show up with proof of the note on that date … which of course puts me at a distinct disadvantage. No matter what they show up with, either a forged note showing it was endorsed prior to the foreclosure, or a phoney affadavit explaining that the note had been sent and is now lost … either way it still doesn’t line up with the copy of the note they included in their reply to my motion. That note in their reply didn’t show that they had it endorsed to them by Washington Mutual .. how they will try to spin this is anybodys guess .. but I’m thinking the Judge will bend over bacwards to accept any lame excuse they offer up.

  111. Dwight says:

    My best recourse might be to file a lawsuit against Wells Fargo right now, alleging fraud and forcing a discovery process that could include authentication of the note . A lawfirm might take on a case like that where a potential damages award is at stake.
    My finger-prints should be on the original note according to what I’ve read other attorneys write about on this subject. Fabricating a phoney note document is a serious criminal offense.

    • David says:

      Hi Dwight,

      Keep in mind you may still have legitimate causes “after” you modify. However, be careful that you are not waiving your rights when signing modification docs…

      IMHO – securing your home is priority. I learned a long time ago about the publicity games played by those I call “label-makers”. Their goal is character assassination to destroy credibility. Once they’ve successfully slapped on “their” label – the spin-cycles are relentless.

      Foreclosure “IS” a TOXIC WARNING LABEL and you can believe that is 85% of the game. Once that puppy is slapped on – EVERYTHING done from that point forward is TAINTED. It does not matter the REASON – once it is attached – judges, courts, public opinion, personal opinion, attorneys, etc, most-all suddenly become biased – prejudiced – and blatantly discriminate against those under the label.

      IMHO – though I obviously don’t know specifics in your case, the real game for folks such as yourself is to REMOVE that label. That label is priority. Contrary to the lenders PR – I have yet to meet a borrower that wanted a FREE HOUSE. Yep, some made bad decisions but in most instances I’ve come across thus far – those bad decisions were a product from the damn bank manipulating the markets giving the illusion of continued “appreciation”. Those folks took the risk in many, many, instances because that LOAN AGENT was assuring them they could always SELL if it became too much for them to handle. Nevertheless, I have YET to meet a couple or see a damn set of loan docs that BLATANTLY – EXPLICITLY stated their payments of 800-bucks “WOULD” jump to 2,200 or 2,800 bucks at ANY TIME in the future. If those agents even suggested a possibility – it would have been countered by their immediate chuckle and dismissed as that would take an ARMAGEDDON scenario or whatever.

      The evidence is all out there now. I’ve read quite-a-few investor lawsuits and it is absolutely undeniable for these lenders. It is inexcusable… What rattles my cage is that our FBI has known this for 5-6 years and yet they have NOT made ONE real arrest. I used to admire & respect the FBI – now – IMHO – they are cheap-whores sold to the highest bidder. They disgust me. They are standing back and watching our Constitution wither and die. Lady Liberty is being gang-raped by Wall Street & Bankster thugs – and these pukes have the audacity to wear that badge?

      Sorry to ramble down that path…

      Once you get your home secured – YOU can still go back after these punks for whatever illegalities they’ve committed and I HIGHLY encourage folks do exactly that…but secure the house first and put your family on solid ground. If you can’t then relinquish the home, THEN find a place secure for you family – THEN lock & load and research the law to find your legal causes and go after them. You might get the house back at that point – but you still have LEGAL causes if they broke the law (and the most likely did) so GO after them for the pain they’ve caused but GET YOUR FAMILY ON SOLID GROUND FIRST.

      Going into court on the offensive is MUCH stronger than going under the tainted label of foreclosure.

      Sorry ramble…

  112. Dwight says:

    I’ve also read that Bankruptcy Judges are much more adept at dealing with these types of issues, they are much more schooled on real estate laws, foreclosure laws, UCC Article III laws, etc … and by filing a bankruptcy and immediately raising the argument that Wells Fargo does not own the underlying debt could lead a bankruptcy Judge to have to make a ruling on the subject himself in order to decide if WF is the legitimate owner of the note and debt … he might want the note authenticated by an expert.

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  114. James says:

    Great and simple explanation

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  116. Pingback: The Final Blow: Securitization Fraud | bankruptcyandforeclosure

  117. michael keane says:

    Read Ellen Hodgson Brown’s “Web Of Debt”. Since 1913, this country has been led down the garden path. The federal reserve is a group of PRIVATE bankers. When money is needed- without sufficient amounts of dollars the economy comes to a standstill- the private bankers at the federal reserve produce the money by creating an entry in an accounting journal- they create the funds OUT OF THIN AIR- once the dollars or bonds are created, they then give it to the federal government to place into circulation. Once the government accepts the money, they also accept the debt on the money which comes to the citizens of the US in the form of that original loan, PLUS INTEREST.
    The interest can never be accounted for under this type of system because the money which it represents is never created at the time the principal is created. Instead, the interest is little more than a promise made by the government to line the pockets of the private bankers.
    It is the duty of the congress to create the money we use to conduct business.
    It is the duty of the congress to capture interest on money created.
    It is the duty of congress to use the interest to pay for entitlements.
    Social security and medicare-medicaid are not in debt.
    The government is in debt because we owe interest to PRIVATE bankers.
    Congress is the only entity which can create the money of the US-
    it says so in the constitution.
    If congress takes back the ability to create money, we will never have to pay taxes ever again.
    Once congress creates the money, the interest owed should be set aside for the people- not the banks.
    The loans created through MERS encompass 60% of the mortgages which exist in this country at 7pm est on april 30, 2011: roughly 66 million loans. MERS is an organization which is nothing more than a shell. They have no employees. It appears they never went to any lawyer or legal entity to explain their business plan.
    They circumvented the county courthouse- where transfers of title have been recorded since forever. Each time a title to a deed is transferred the county employees record that transaction. Each time they record a transfer, money changes hands which is then used to support local government.
    The money which has been denied to county recorders due to this behavior has been reckoned in the hundreds of millions of dollars; this during a time when pensions are under assault and programs for schools, police and firefighters are subject to the whim of the same bankers who have destroyed us.
    MERS responded to what is now understood as little more than a housing bubble. Watch “Inside Job”. In my particular instance, my wife and I were vetted for a 30 year, fixed mortgage; we were then presented with two mortgages at time of closing which can only be understood as predatory loans. Despite having successfully purchased three other properties before this happened to us, the seller seems to have colluded with the lender and forced us to sign the first and second mortgage at time of closing by forcing us to do so and claiming “time is of the essence”.
    We felt we had no choice but to sign and our attorney reinforced this understanding by telling us that a failure to do so would ensnare us in a lawsuit which would monopolize our time for years to come.
    The point is this: mortgage lenders vetted people to gauge the amount of debt they could handle; they then used bait-and-switch techniques to provide loans which are now understood as “predatory”. In these predatory loans are the seeds of their own destruction: Interest- Only, adjustable Rates, Spread yield premiums, Pre-Payment Penalties and worst of all, Balloons which will destroy the ability of the borrower to pay usually in the seventh year.
    The loans were then brought to Wall Street and packaged together as DERIVATIVES. It is lunacy to suggest that derivatives cannot be traced: they are bonded and securitized- this means that they have a staring point and a way to track them.
    For example, the five largest banks in this country OWN 97% of the derivatives market.
    When the derivatives bubble bursts, money will be owed from these banks which will number in the HUNDREDS of trillions of dollars.
    No one has the money to back this debt.
    Unless the Federal Government monetizes the debt and nationalizes these banks.
    Abraham Lincoln did it, and Franklin D. Roosevelt also did it.
    When a bank is insolvent debts that are owed to it become void.
    When a bank is insolvent mortgages owed to it are void. If a bank makes a loan (mortgage for example) consideration needs to exist within the bank vault to support the loan. Show me a bank with a trillion dollars in their vault.
    When WALL STREET packaged the loans which MORTGAGE AMERICA sold them, they both committed FRAUD during time of war. The mortgage companies knew the loans would self-destruct; the brokers on Wall Street actually made bets they would self-destruct by shorting the market. These treasonous pigs destroyed not only the financial centers of the United States, they destroyed our ability to meet our debt obligation throughout the world.
    Call your congressmen, senators and governors of your state. Impress upon them the necessity of punishing those who have brought this country and its financial centers into such desperate times.

  118. Links says:

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  119. Martin says:

    It’s important to note that:

    Lawyers who learn that they have filed fraudulent documents in a court have an ethical obligation to disclose the fraud to the court.

    They also can be disciplined for failure to make the required disclosures.

  120. Pingback: The Housing Problem: More than a matter of fraud and finance « thecurrentmoment

  121. Misty Stidham says:

    HELP!!!! I lost my job, spouse had surgery, lost his job. I am a 20 year RN, spouse 25 year police officer. Our home has been forclosed on, sold to new owners FNMA, now must be vacated by 3-29-12. So fast, in shock! Why doesnt new owners, FNMA, offer us rental or home modification or any help? Advice plz before we are sleeping under a bridge.

  122. michael keane says:

    When scanners came out in the ’90′s it coincided with the creation of MERS and the explosion of Mortgage Sellers which were as ubiquitous as the strip malls they used to inhabit. I personally destroyed hundreds, possibly thousands, of mortgages- my family had a business where we took the papers and rendered them to disc- after they were copied to disc, when we shredded, burned or deposited the papers in dumpsters.
    Let the record show: we never separated the notes from the rest of the lien and the mortgage entities never asked for the paperwork to be returned. Therefore, once your mortgage was treated in this fashion, bifurcation took place and the security portion of the mortgage was destroyed. In other words, the pink slip to your house no longer exists.
    If someone from the bank came to repossess your vehicle without the pink slip they would be attempting to commit a crime. In my opinion, the same may be said for those who are attempting to capitalize on homes in foreclosure.
    Certainly people took out loans and benefitted as a result; after all, they did enjoy the benefit of the loan as it enabled them to buy a house.
    The problem is that the loans that were created were never meant to sustain themselves over the long run- read The Big Short, Michael Lewis, Web of Debt, Ellen Hodgson Brown. Instead, the loans of responsible borrowers were commingled with subprime loans and turned into bonds designed to capitalize on insurance fraud- for that is what derivative swaps are, insurance fraud,
    Read Neil Garfield at foreclosure fraud.com.
    Because the loans never made it to the trust (by law, lenders had 90 days to do so) and because the loans were put in a bag with other loans which were then securitized by traders on Wall Street, the relationships between individual lenders and the borrowers who accepted their funds for a specific piece of property will remain forever clouded. In other words, no one knows which bank holds the security on which piece of property. (As I have said above, this problem is compounded, because, in my opinion, the security was destroyed long ago. Conversely, that is why a false sense of urgency has been created to encourage borrowers to refi and modify; for, once a borrower does so, they will be returning to the banks what the banks presently lack: a signed, original note).
    I wrote a letter to the AG in Delaware and told him we should enlist the aid of Vanna White and Pat Sajack and put all the banks and all the loans on a giant Wheel Of Fortune and then spin until all the outstanding loans, along with the borrowers, are recaptured by the banks.
    Some believe that the monthly payments on the loans were used in a fraud through conversion. In other words, the payments were used as leverage (a type of liquid bearer bond) to solicit funds from Wall Street (for the bond creation). Once the group of loans (the bond) were accepted and securitized by the WS broker, the money paid by the WS broker was used to pay off most of the loans in the bond, the residual was then split between the WS broker and the mortgage lender.
    The bonds were then often sold into the retirement accounts of people in Europe through clearing houses in Germany.
    Once these bonds are proven faulty as they contain loans which contain fraud at origination, it is likely the people who invested in them will force the banks to buy them back at face value.
    The WS brokers and the lenders don’t care; after all they already took the money and are gone.
    The American people are too stupid to care. They are more concerned with Cupcake Wars and the indiscretions of such syphilitic morons as Arnold Swarzenegger and Paris Hilton.
    But, they should care because as these loans default they are the ones left holding the bag.
    In the final analysis, the question remains: should anyone in this country continue to honor a debt which is just one more manifestation of criminal behavior foisted upon a trusting public courtesy of banker greed?

  123. michael keane says:

    sorry, thought I created paragraphs. New computer, lol

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