Archive | September, 2013

Glaski v. Bank of America

10 Sep

 

By On August 15, 2013  · Leave a Comment 

I received a lot of traffic and phone calls from attorneys in other jurisdictions regarding my comment on the Glaski case. I found the PSA on EDGAR.  Glaski’s loan isn’t even in a New York Trust. It is in a Delaware trust.  How the hell do you miss that? The first page of the PSA states that the trust is a Delaware entity. Section 10 “Choice of Laws” states that the trust was formed pursuant to Delaware law.

Nonetheless, the entire decision was based upon an interpretation of New York’s EPTL 7-2.4. It is a great decision and a fairly accurate analysis of the facts and the law. Except New York law doesn’t apply to Glaski’s loan.  Appellate courts can only review what is in the record. If it isn’t raised at the trial level the Appellate court has no jurisdiction to review it. The bank can’t appeal the case further to the California Supreme Court as there was a finding of fact regarding the controlling (New York) law that was never challenged at the trial level.

It is not a court’s job to verify the accuracy of the facts presented.  That is the attorneys’ job. The Court did not do anything wrong. No error.  As far as Glaski is concerned I believe his foreclosure is over for now. The bank is going to have to figure out how they are going to foreclose or if they can ever foreclose. The end result is that Glaski will probably stand and California attorneys representing homeowners have a lot to cheer about.

The bank lawyer(s) that worked on the case did not do their homework. I would bet that not one person on the bank’s litigation team ever read a single PSA in their entire careers. They were either lazy and/or careless. Arrogance will do that to you. This is understandable in California because the courts there let the bank attorneys use homeowners for target practice.  Maybe, hopefully, Glaski will change that.

 

Charles Wallshein, Esq.

http://www.foreclosuredefenseschool.com

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A florida mortgage examiner second opinion- By Bob Hurt

10 Sep

Glaski v BOA – Glaski’s phyrric and short-lived foreclosure defense victory – revised

Glaski v BOA

See the excerpts from unpublished Glaski v BOA opinion by the California 5th District Appellate Court below. Pursuant to borrower Glaski’s complaint of robo-signing and wrongful trustee’s foreclosure and sale, and demand for quiet title and cancellation of the foreclosure and sale, the trial court dismissed the Glaski’s complaint that the assignment of the note to the securitization trust had no validity because it occurred after the closing date of the trust, and so BOA had no standing to foreclose.  The appeals court overturned and remanded it because the assignment had no validity under New York law and the assignment occurred after the closing date.

MY OPINION

The appeals court ruling is an anomaly, and it will not stand if BOA pursues it to the Supreme Court.

As I see it, transfer of beneficial interest in a mortgage note never goes to a trust.  It only goes to a trustee.  The holder in due course can transfer it by indorsing it in blank or by assignment.

The borrower never became a party to the PSA, and nothing in the securitization injures the borrower.  The mortgage mandates that the borrower must forfeit the house for defaulting on the loan, and the public trustee and courts constitutionally must enforce that provision.

Since the trustee personally owns beneficial interest in the note, any PSA or REMIC violation may affect the validity of the trust or prevent entry of the note into the trust’s asset base, but it does not undo the assignment to the trustee or indorsement in blank.

The Supreme Court will uphold the Glaski trial court judgment if it hears the case..  Whining about assignment after the closing date is a bogus argument because the TRUSTEE OWNS BENEFICIAL INTEREST IN THE NOTE, regardless of whether or not the trust operates as planned by the PSA.

New York law can declare the assignment to the Trustee invalid for the purposes and use of the trust, but not for the purposes of mere assignment of beneficial interest to some lawful entity.  Normally a bank has become the “trustee” under the PSA, so the note’s beneficial interest becomes the property of the bank in its personal capacity, even though, owing to tardiness, not in the trustee capacity.  And that gives the bank the right to enforce the note regardless of whether it received the note in violation of the PSA or past the trust’s closing date.

To grasp the issue in the light of common sense, imagine an indorsement in blank.  Physical possession of such an indorsed note constitutes ownership of beneficial interest and the power to enforce the instrument.This remains true whether or not the possessor has trustee status, functions as a bank which enjoys other rights to buy and sell beneficial interest in notes in its personal capacity, functions as a lawful man or woman, functions as a thief, functions as someone who won the note in a bet, or functions as someone who found in lying in a ditch.  Article III of the UCC covers all those types of lawful enforcers of the note, and no court has authority to undermine it.

The Glaski trial court rightly dismissed the nonsensical complaint from the borrower.  The appeals court opined erroneously AND controversially (a good reason for not publishing its opinion).  If the Supreme Court gets the case, the Supreme Court will validate the trial court’s ruling.  Meanwhile, no telling what surprises the trial court will come up with in remand.

I predict a short life for Glaski’s phyrric victory.  I consider the proceedings in trial and Appeal court a farce in contrast to what it could become.  First of all, BOA can correct the paperwork deficiencies and re-foreclose and take the house as it should have to begin with.  Second, the borrower, Glaski, probably did not get his mortgage comprehensively examined for torts, breaches, and errors that would have given him causes of action in breach of contract or tort claims against the lender WAMU (and the banks that inherited its liabilities and assets).  Glaski might actually negotiate a favorable settlement by grieving to the servicer about those causes of action and demanding correction.  In that way he could have avoided the expense in time and money of the litigation he will ultimately lose along with his house.

Sure, he might outlast the bank in his present contest, but I doubt it.

To grasp the concept of properly beating foreclosure, realize that statistically the foreclosing bank ALWAYS gets the house, with good reason:  the mortgagor BREACHED the mortgage note, and must forfeit the collateral.  State constitutions mandate that no law shall impair the obligations of contract.  For example:

http://www.leginfo.ca.gov/.const/.article_1 CALIFORNIA CONSTITUTION ARTICLE 1 DECLARATION OF RIGHTS SEC. 9. A bill of attainder, ex post facto law, or law impairing the obligation of contracts may not be passed.

Therefore, one best beats foreclosure by NOT FIGHTING THE FORECLOSURE BATTLE.

Instead, one should get the mortgage examined, and FIGHT THE MORTGAGE BATTLE instead, based on the causes of action found, or walk from the house with knowledge the the foreclosure is righteous, regardless of robosigning, improper assignment, etc, WILL ALWAYS PREVAIL, and the foreclosure sale will go through to completion.

See the above Section 9 in the proper light.  “obligation of contracts” refers only to VALID contracts.  That means the parties must have the capacity to contract, the contract must have a conscionable, it must include offer, acceptance, and consideration, it must not operate as a function or consequence of fraud or fraudulent inducement, the parties must have the ability to perform the contractual obligations, the contract must not require illegal acts or operate in violation of law.  As to enforcement, the enforcer must have the right and power to enforce it under applicable laws and terms of the agreement.  If the contract is a negotiable instrument, the UCC Article III and possibly VIII control enforcement and other features of the instrument.

Other Opinions

Don’t just take my word for it.  Other opinions in California and elsewhere fly in the face of the Glaski reversal, and that leaves other courts free to take either position.  Some examples follow:

  1. Ca: Almutarreb v. Bank of New York Trust Co., N.A., 2012 WL 4371410, *2 (N.D. Cal. Sept. 24, 2012) (“holding that “because Plaintiffs were not parties to the PSA, they lack standing to challenge the validity of the securitization process, including whether the loan transfer occurred outside of the temporal bounds prescribed by the PSA.”);
  2. Lane v. Vitek Real Estate Industries Group, 713 F.Supp.2d 1092, (E.D.Cal. 2010) (“The argument that parties lose interest in a loan when it is assigned to a trust pool has also been rejected by numerous district courts.”);
  3. Sami v. Wells Fargo Bank, 2012 WL 967051, at *5-6 (N.D. Cal. 2012) (rejecting claim “that Wells Fargo failed to transfer or assign the note or Deed of Trust to the Securitized Trust by the ‘closing date,’ and that therefore, ‘under the PSA, any alleged assignment beyond the specified closing date’ is void” because the plaintiff lacked standing)
  4. Fourth District Court of Appeal in Jenkins v. JP Morgan Chase Bank, 216 Cal.App.4th 497 (2013), reached opined opposite to Glaski: “As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, Jenkins lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions.”

Furthermore, well-settled California law generally precludes a non-party to a contract from challenging its validity or the validity of actions pursuant to it.  This and the unpublished nature of the opinion (as ordered by the 5th District) means one should interpret the Glaski opinion as anomalous, rather than relying on it as precedent.

 

See the Light of a Comprehensive Mortgage Examination

So the proper strategy for a mortgagor to beat foreclosure lies in proving that some combination of torts, breaches, and errors underlie the contract, making it either void or voidable.  Then the borrower needn’t worry about enforcement, for government must NOT enforce a void, invalid, or voidable contract.

So, we have two possible battles in the mortgage world:

  1. Mortgagor (borrower) Always Wins:
  • Battle the Mortgage based on torts, breaches, errors by the lender or lender’s agents
  1. Mortgagee (lender/bank) Always Wins
  • Battle the Foreclosure based on breach by borrower.

By “always wins” I mean “statistically always,” meaning exceptions, as in Glaski, have almost the rarity of chicken teeth or frog hair.

Furthermore, when a mortgagor or mortgagor’s attorney writes a grievance letter to the servicer detailing torts, breaches, and errors revealed in the mortgage examination report, they usually reach a settlement accord fairly quickly. That reduces the stress on and expense to the borrower dramatically, and often results in a cram-down of the loan balance to the present value of the house and refinance at favorable fixed interest for 30 years.  Mortgagors can often afford such payments.

And if the mortgagor must sue to get satisfaction from the lender for injuries and damages, the mortgagor will usually win compensatory damages and legal costs and fees from the bank.  Sometimes the mortgagor will win punitive damages, occasionally in the millions of dollars.

Seen in this light, Glaski’s 4-year foreclosure battle against BOA becomes utterly stupid, for any student of foreclosure battles knows that Glaski will ultimate lose unless the bank just gives up.  His victory will probably have a short life.  And it is at this point only hopeful, and Phyrric, at that, becuase of the cost to Glaski and family in terms of stress, worry, money, time, and other resources.

Statistically, the ONLY way to prevent foreclosure lies in procuring a comprehensive, professional mortgage examination

Denial of Loan Modification mortgage redlining as a constitutional right

8 Sep

Punitive Damages for Civil Rights – Convincing the Jury and Judge By Jeffrey Needleboa-billboard1“Let this case serve as a lesson for all employers who would ignore the existence of racial harassment in the workplace.” With those introductory words, the Ninth Circuit Court of Appeals affirmed a jury’s verdict for $1 million in punitive damages and $35,612 in compensatory damages. In the process, not only was justice served for the Plaintiff, Troy Swinton, but strong precedent was created for future civil rights claimants. Swinton v. Potomac Corporation, 270 F.3d 794 (9th Cir. Oct. 24, 2001). Although the Defendant portrayed the racial harassment suffered by Mr. Swinton as “jokes”, the Ninth Circuit correctly understood that neither the verdict nor the discrimination was a laughing matter. Id. at 799. Not only did the Plaintiff get what he deserved, but the Defendant, Potomac Corporation, got what it deserved as well.

On the issue of liability, the Court in Swinton analyzed at considerable length the various of theories of holding an employer liable and a variety of evidentiary issues relevant to liability and punitive damages. The Court also considered the legal issues which define the availability of a punitive damages award and the legal standard for keeping the punitive damages once awarded. The Court determined that a ratio of punitive to compensatory damages of 28:1 was not excessive. Satisfying the legal standard concerning an award of punitive damages, however, is only half the battle. Convincing the jury that an award of punitive damages is appropriate can often be the more difficult task.

 

Convincing the Jury

It is uniquely the function of punitive damages to punish the defendant, and to deter future misconduct by the defendant and others similarly situated. Especially for large corporations, relatively insubstantial compensatory damages don’t begin to measure the enormity of the defendant’s wrongful behavior, and have no deterrent effect. It is for that reason that punitive damages are an essential ingredient in all civil rights litigation.

The availability of punitive damages in civil rights cases affords juries the opportunity to enhance the quality of equal opportunity and\or constitutional freedoms, not just for the litigants before the court, but in the community at large. They create an opportunity to give contemporary meaning and vitality to the universal ideals which distinguish this country as a free society. Punitive damages in civil rights cases promotes this highest public purpose.

The challenge to trial lawyers is to communicate to juries the broad and compelling social justification for a punitive damages award. This requires a special focus on social issues which transcend a monetary award from a particular defendant to a particular plaintiff. In order to achieve the intended purpose, it must be clearly explained to the jury that an award of punitive damages doesn’t represent what the plaintiff deserves, but what the defendant deserves for its reckless disregard of fundamental constitutional or civil rights.

exclusionAlmost all Americans are extremely passionate about the Bill of Rights and the right to equal opportunity. The eloquence to convince them that these are ideals which need to be perpetuated can be legitimately borrowed from Thomas Jefferson or James Madison in the case of constitutional rights, or legendary civil rights leaders, such as Martin Luther King, Jr. or Thurgood Marshall for the cases involving equal opportunity. For example, liberal use of quotations from King’s “I have a Dream” speech have almost irresistible appeal. References to Jackie Robinson, the first African American major league baseball player for the Brooklyn Dodgers, or Rosa Parks, who refused to sit on the back of the bus, always resonate with jurors.

A brief historical review of the struggle for equal opportunity is appropriate to communicate to the jury their role in a continuing effort. The Civil Rights Act of 1866, 42 U.S.C. Section 1981, is often utilized in cases involving race harassment or discrimination. This statute was originally enacted to guarantee the civil rights of newly emancipated slaves, and to eliminate the vestiges of slavery which existed immediately after the Civil War. But initially, the statute didn’t fulfill its intended purpose. In the years immediately after the Civil War, newly emancipated slaves were denied the most basic civil rights; they were denied the right to own property, to vote, to enter places of public accommodation and hold employment. African Americans were second class citizens in this county in virtually every sense of the word.

Comparisons to the system of apartheid in South Africa serve to illustrate that the principles the jury is being asked to vindicate are the ideals that distinguish our country as a free society. In our country the repressive system of segregation wasn’t called apartheid, it was called Jim Crow. But the concept was essentially the same. For almost 90 years after the Civil War, Jim Crow was the rule of law. In May of 1954, the Supreme Court rejected the concept and required integration in the public schools. Important civil rights statutes followed. Substantial progress has been made. But the vestiges of slavery still exist in the country. The proof is nowhere more powerfully demonstrated than in the facts presented in this case, Swinton v. Potomac. Mr. Swinton was the only African-American of approximately 140 employees. Swinton, 270 F.3d at 799. At the workplace there were jokes about a wide variety of ethnic groups, including whites, Asians, Polish people, gays, Jews, and Hispanics. A co-worker testified that the majority of the people at U.S. Mat had actually witnessed the use of racially offensive language, and another employee testified that “just about everybody” at U.S. Mat had heard “racial slurs and comments.” Id. at 800. During the short time he was at U.S. Mat, Swinton heard the term “nigger” more than fifty times. Id. Swinton’s immediate superior as supervisor of the shipping department, witnessed the telling of racial jokes and laughed along. The supervisor also acknowledged making “racial jokes or a slur” two or three iStock_000015861187Mediumtimes. The supervisor also overheard one of the two plant managers make racial jokes on several occasions. The supervisor further admitted that although he had an obligation under company policy to report the racial harassment, he never made any such report and never told anyone to stop making such jokes. Id. at 799-800. Some of the racial “jokes” included: “What do you call a transparent man in a ditch? A nigger with the shit kicked out of him. Why don’t black people like aspirin? Because they’re white, and they work. Did you ever see a black man on ‘The Jetsons’? Isn’t it beautiful what the future looks like? Reference to ‘Pontiac’ as an acronym for ‘Poor old nigger thinks it’s a Cadillac.’ Id. at 799. “The jokes and comments ranged from numerous references to Swinton as a ‘Zulu Warrior’ to a comment in the food line, ‘They don’t sell watermelons on that truck, you know, how about a 40-ouncer?’ On the subject of Swinton’s broken-down car, it was suggested why don’t you get behind it and push it and call it black power and why don’t you just jack a car. You’re all good at that.” Id. at 800. The “jokes” and slurs started the day Swinton began to work for the defendant, and didn’t stop until the day six months later he left in disgust.

The civil justice system provides an opportunity for the jury to dispense social justice for the victim of bigotry and to fulfill the purpose of the Civil Rights Act of 1866; the elimination of the vestiges of slavery. Plaintiff’s counsel can explain to the jury that their verdict will help fulfill the purpose of this 140 year old civil rights statute, and give it contemporary meaning and vitality.

Many civil rights cases involve wrongful discharge from employment. For the purpose of compensatory damages, the appropriate focus is the injury to victim, including the economic hardship created and the emotional distress associated with being unemployed for a prolonged and continuing period. For the purpose of punitive damages, however, it is important to maintain a focus on the broader social issues involved. We need the contribution everyone is capable of making so that we can actualize our potential as a society. We can’t afford to exclude people from the workplace. In employment discrimination cases, the damage is not limited to the injury and social injustice suffered by the employee, it extends to the broader society which is deprived of the contribution the employee is capable of making. The jury must be made aware that punitive damages are intended to prevent future civil rights violations and to redress the injury suffered by the broader society.

6a00d83451b7a769e201676871ac87970b-320wiThe focus of Swinton v. Potomac was racial harassment. But these principles apply with equal force to other protected classifications. President Franklin Roosevelt was disabled! He spent the most productive years of his life in a wheel chair. Its hard to imagine what American society would be like without his contribution. Statistics appearing in the Congressional History of the American with Disabilities Act can be utilized to demonstrate the need for reasonable accommodation, not only so the disabled person can live with dignity, but also so that society can reap the benefits of his or her contribution.

Shirley Chisholm was the first female African American representative in the United States Congress. She experienced both racial and sexual discrimination. Ms. Chisholm can be quoted as saying that sexual discrimination was by far the more destructive of the two. The historical fight for women’s equal rights in many ways parallels the fight for racial equality. Historically, women could not own real property, enter into contracts or vote. African Americans got the legal right to vote before women. Counsel can explain the full meaning of dower rights, and that civil rights statutes were required so that women could work without discrimination and receive equal pay. Susan B. Anthony and other historic champions of women’s rights can be quoted liberally. Comparisons to the Taliban in Afghanistan serve to demonstrate the fundamentality of women’s rights in a free society.

Precious few jurors will deny the great value of these fundamental rights. Punitive damages in a civil rights case is just one vehicle for assessing their monetary worth.

Convincing the Judge In Kolstad v. American Dental Association, 527 U.S. 526, 119 S.Ct. 2118 (1999), the Court ruled that the controlling standard required Plaintiff to prove that the defendant acted with malice or with reckless indifference to the federally protected rights of an aggrieved individual. “Applying this standard in the context of §1981a, an employer must at least discriminate in the face of a perceived risk that its actions will violate federal law to be liable in punitive damages.” Id. at 536. The Court rejected the more onerous egregious conduct standard. Id. at 538-539. The Court declined, however, to allow vicarious liability “for the discriminatory employment decisions of managerial agents where these decisions are contrary to the employer’s good faith efforts to comply with Title VII.” Id at 544.

Morgan-Stanley2-300x199The Court in Kolstad also established a standard for imputing punitive damages liability to a corporate wrongdoer. Without briefing, the Court adopted the Restatement (Second) of Agency and the Restatement (Second) of Torts. “Suffice it to say here that the examples provided in the Restatement of Torts suggest that an employee must be “important,” but perhaps need not be the employer’s “top management, officers, or directors,” to be acting “in a managerial capacity.” Id. at 543. “[D]etermining whether an employee meets this description [managerial capacity] requires a fact-intensive inquiry. . . .” Id. In EEOC v. Wal-Mart , 187 F.3d 1241 (10th Cir. 1999), the Tenth Circuit considered, in light of Kolstad, “the evidentiary showing required to recover punitive damages under a vicarious liability theory against an employer accused of violating the American with Disabilities Act.” Id. at 1243. In determining whether the managers had sufficient authority to impute punitive damages, the Court acknowledged that “authority to ‘hire, fire, discipline or promote, or at least to participate in or recommend such actions,’ is an indicium of supervisory or managerial capacity.” (emphasis added). Id. at 1247. Citing Miller v. Bank of America, 600 F.2d 211, 213 (9th Cir. 1979), the Court found that both the supervisor and the store manager had sufficient authority to bind the corporation for punitive damages. Id.

Applying these standards in Swinton, the Court ruled “that the inaction of even relatively low-level supervisors may be imputed to the employer if the supervisors are made responsible, pursuant to company policy, for receiving and acting on complaints of harassment.” Swinton v. Potomac Corp., 270 F.3d at 810. Citing Deters v. Equifax Credit Information Servs., Inc., 202 F.3d 1262 (10th Cir.2000), the Court in Swinton ruled that the good faith defense could not apply “because the very person the company entrusted to act on complaints of harassment failed to do so, and failed with malice or reckless disregard to the plaintiff’s federally protected rights.” Id. In addition, the existence of employment policies is not sufficient. In order to satisfy the good faith defense, employment policies must be implemented and in Swinton they were not. Id.

Remittitur23458820In BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589 (1996), the Supreme Court established the standard for constitutionally excessive awards of punitive damages. As stated repeatedly by the Supreme Court, there is no mathematical bright line. “Only when an award can fairly be categorized as “grossly excessive” in relation to these interests [punishment and deterrence] does it enter the zone of arbitrariness that violates the Due Process Clause.” BMW, supra at 568. The Court announced three “guideposts” to assist courts in determining whether an award violates this standard: the “degree of reprehensibility” of the tortfeasor’s actions; “the disparity between the harm or potential harm suffered by [the plaintiff] and his punitive damage award”; “and the difference between this remedy and the civil penalties authorized or imposed in comparable cases.” Id . at 575.

In reference to reprehensibility, the Court in Swinton recognized the so called “hierarchy of reprehensibility,” with acts and threats of violence at the top, followed by acts taken in reckless disregard for others’ health and safety, affirmative acts of trickery and deceit, and finally, acts of omission and mere negligence. Id. at 818. Although the Court recognized that racial harassment is not the worst kind of tortious conduct, “in sum, we have no trouble concluding that the highly offensive language directed at Swinton, coupled by the abject failure of Potomac to combat the harassment, constitutes highly reprehensible conduct justifying a significant punitive damages award.” Id.

In reference to the ratio of compensatory damages to punitive damages, quoting BMW, the Court acknowledged, “[i]ndeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards, if, for example, a particularly egregious act has resulted in only a small amount of economic damages. A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of non-economic harm might have been difficult to determine.” BMW at 582. Because Swinton made only $8.50 an hour, this was such a case.

For the purpose of evaluating the ratio, the Court also considered Plaintiff’s counsel’s repeated admonition to the jury “not to get carried away,” the financial asserts of the Defendant and “the harm likely to result from the defendant’s conduct as well as the harm that actually has occurred.” Swinton at 819. After comparing similar cases, the Court had no trouble in concluding that a ratio of 28:1 was not excessive. Id . at 819-820.

In reference to analogous civil penalties, the Court refused to impose the cap of $300,000 made applicable to other types of civil rights cases pursuant to the Civil Rights Act of 1991; 42 U.S.C. Section 1981. Id. at 820. There are no caps on punitive damages under 42 U.S.C. Section 1981.

Conclusion Punitive damages in civil rights cases are a meaningful way of promoting important social values.

Won’t Take the Money: Insist on Foreclosure Even When Payment in Full is Tendered

5 Sep

Banks Won’t Take the Money: Insist on Foreclosure Even When Payment in Full is Tendered
by Neil Garfield
We have seen a number of cases in which the bank is refusing to cooperate with a sale that would pay off the mortgage completely, as demanded, and at least one other case where the homeowner deeded the property without any agreement to the foreclosing party on the assumption that the foreclosing party had a right to foreclose, enforce the note or mortgage. There is a reason for that. They don’t want the money, they don’t even want the house — what they desperately need is a foreclosure judgment because that caps the liability on that loan to repay insurers and CDS counterparties, the Federal Reserve and many other parties who paid in full over and over again for the bonds of the REMIC trust that claimed to have ownership of the loan.
This should and does alert judges that something is amiss and some of their basic assumptions are at least questionable.
I strongly suggest we all read the Renuart article carefully as it contains many elements of what we seek to prove and could be used as an attachment to a memorandum of law. She does not go into the issue of their being actual consideration in the actual transactions because she is unfamiliar with Wall Street practices. But she does make clear that in order for the sale of a note to occur or even the creation of a note, there must be consideration flowing from the payee on the note to the maker. In the absence of that consideration, the note is non-negotiable. Thus it is relevant in discovery to ask for the proof of the first transaction in which the note and mortgage were created as well as the following alleged transactions in which it is “presumed” that the loan was sold because of an endorsement or assignment or allonge. To put it simply, if they didn’t pay for it, then it didn’t happen no matter what the instrument or endorsement says.
The facts are that in many if not most cases the origination of the loan, the execution of the note and mortgage and the settlement documents were all created and recorded under the presumption that the payee on the note was the source of consideration. It was easy to make that mistake. The originator was the one stated throughout the disclosure and settlement documents. And of course the money DID appear at the closing. But it did not appear because of anything that the originator did except pretend to be a lender and get paid for its acting service. Lastly, the mistake was easy to make, because even if the loan was known or suspected to be securitized, one would assume that the assignment and assumption agreement for funding would have been between the originator or aggregator (in the predatory loan practice of table funding) and the Trust for the asset pool. Instead it was between the originator and an aggregator who also contributed no consideration or value to the transaction. The REMIC trust is absent from the agreement and so is the investor, the borrower, the insurers and the counterparties to credit default swaps (CDS).
If the loan had been properly securitized, the investors’ money would have funded the REMIC trust, the Trust would have purchased the loan by giving money, and the assignment to the trust would have been timely (contemporaneous) with the creation of the trust and the sale of the loan — or the Trust would simply have been named as the payee and secured party. Instead naked nominees and disinterested intermediaries were used in order to divert the promised debt from the investors who paid for it and to divert the promised collateral from the investors who counted on it. The servicer who brings the foreclosure action in its own name, the beneficiary who is self-proclaimed and changes the trustee on deeds of trust does so without any foundation in law or fact. None of them meet the statutory standards of a creditor who could submit a credit bid. If the action is not brought by or on behalf of the creditor there is no jurisdiction.
Add to that the mistake made by the courts as to the accounting, and you have a more complete picture of the transactions. The Banks and servicers do not want to reveal the money trail because none exists. The money advanced by investors was the source of funds for the origination and acquisition of residential mortgage loans. But by substituting parties in origination and transfers, just as they substitute parties in non-judicial states without authority to do so, the intermediaries made themselves appear as principals. This presumption falls apart completely when they ordered to show consideration for the origination of the loan and consideration for each transfer of the loan on which they rely.
The objection to this analysis is that this might give the homeowner a windfall. The answer is that yes, a windfall might occur to homeowners who contest the mortgage or who defend foreclosure. But the overwhelming number of homeowners are not seeking a free house with no debt. They would be more than happy to execute new, valid documentation in place of the fatally defective old documentation. But they are only willing to do so with the actual creditor. And they are only willing to do so on the actual balance of their loan after all credits, debits and offsets. This requires discovery or disclosure of the receipt by the intermediaries of money while they were pretending to be lenders or owners of the debt on which they had contributed no value or consideration. Thus the investor’s agents received insurance, CDS and other moneys including sales to the Federal reserve of Bonds that were issued in street name to the name of the investment bankers, but which were purchased by investors and belonged to them under every theory of law one could apply.
Hence the receipt of that money, which is still sitting with the investment banks, must be credited for purposes of determining the balance of the account receivable, because the money was paid with the express written waiver of any remedy against the borrower homeowners. Hence the payment reduces the account receivable. Those payments were made, like any insurance contract, as a result of payment of a premium. The premium was paid from the moneys held by the investment bank on behalf of the investors who advanced all the funds that were used in this scheme.
If the effect of these transactions was to satisfy the account payable to the investors several times over then the least the borrower should gain is extinguishing the debt and the most, as per the terms of the false note which really can’t be used for enforcement by either side, would be receipt of the over payment. The investor lenders are making claims based upon various theories and settling their claims against the investment banks for their misbehavior. The result is that the investors are satisfied, the investment bank is still keeping a large portion of illicit gains and the borrower is being foreclosed even though the account receivable has been closed.
As long as the intermediary banks continue to pull the wool over the eyes of most observers and act as though they are owners of the debt or that they have some mysterious right to enforce the debt on behalf of an unnamed creditor, and get judgment in the name of the intermediary bank thus robbing the investors, they will continue to interfere with investors and borrowers getting together to settle up. Perhaps the reason is that the debt on all $13 trillion of mortgages, whether in default or not, has been extinguished by payment, and that the banks will be left staring into the angry eyes of investors who finally got the whole picture.
READ CAREFULLY! UNEASY INTERSECTIONS: THE RIGHT TO FORECLOSE AND THE UCC by Elizabeth Renuart, Associate Professor of Law, Albany Law School — attached

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