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Show Me the Money!!!

Posted on November 11, 2013 by Neil Garfield
Apparently I have been unsuccessful in getting the main point across about the socalled securiti!ation
of loans " sho# me the money is the demand, not sho# me the note$
%irst, in most cases, the securiti!ation process never happened despite the pile of paper generated by
the sham securiti!ation scheme$ &he 'mismanaged( money of investors really amounts to intentionally
N)& depositing the investor money into the trusts that had issued the bonds$ It also represented a #hole
different #orld of under#riting that bro*e every rule in the boo* for ris* management$ +ut that #as the
point$ &hey #anted the ris* to be higher than #as advertised so they could bet, on inside information
that only the ban*s had, that the loans and bonds #ould fail or be substantially diminished roughly in
proportion to the drop in real estate prices$
,o they needed loans to fail or at least for mar*et conditions to change such that the ban*s could
declare a 'credit event( and collect insurance and other money that should have gone to investors$
+ut the point is that the loan closings, #ere, for the most part, a complete sham #ith stra#men at
every seat at the closing table e-cept for the borro#ers #ho #ere completely una#are of #ho they
#ere ta*ing a loan from and under #hat conditions$
&he problem that I am still encountering #ith both homeo#ners and their foreclosure defense attorneys
is the disconnect bet#een *no#ing the money arrived at the closing table and the #rongful conclusion
that it must have come from the payee on the note and the mortgagee on the mortgage$
In most cases the payee #as a stra#man, the mortgagee #as a stra#man, and the lender #as a
stra#man$ &he #orst part is that they #ere stra#men in a fictitious transaction " i$e$ the loan never
occurred #hich is #hy in common pleading today the foreclosing party scrupulously avoids alleging that
a loan #as ever made to the homeo#ner$ &hey don.t #ant the burden of proof on them in their
complaint that there #as a loan because there #as no loan$
+A,I/ P01A2ING 133)34 Instead of alleging the loan and financial in5ury they s*ip to the signing of the
documents$ 6es, the homeo#ner signed many documents, but the bargain #as that the homeo#ner
#ould get a loan from the people #ith #hom he had accepted an offer$ &he loan #as consideration for
the contract, and #ithout consideration there is no enforcement of any contract$
&his is the stic*ing point in the minds of many la#yers, including foreclosure defense attorneys$ In fact,
even the client finds it hard to believe he never had a deal #ith the people on the signed documents$
After all money 2I2 sho# up at the closing table, so ho# could deny the loan7
And #hy should the homeo#ner #in in litigation #ith the foreclosing party #hen it is so obvious that the
homeo#ner did receive money, and therefore by operation and presumption of la# #as obliged to pay it
I am trying to ma*e this as simple as possible and directly address the issue that la#yers are having
applying the true facts of the transaction to the re8uirements of contract la# and property la# evolved
over centuries$
9ere *no#ledge of a loan does not ma*e anyone a lender$ If I *no# you received a loan from anyone
that gives me no rights$ If anything, my *no#ledge might be an invasion of privacy if you didn.t tell me$
An enforceable contract re8uires offer by one party, acceptance by the other party and /)N,I213A&I)N
passing bet#een those parties$ &his is basic contract la#$ ,*irting the re8uirements of contract la# and
property la# opens Pandora.s bo- #ith hope crushed and annihilation a certainty$ It is because avoiding
basic precepts of la# eliminates certainty in the mar*etplace for any transaction$
&he real description of the real transaction is simple4 in most cases the investors gave money to
investment ban*ers under false pretenses but the money #as given and the investment ban*ers had it$
&hat #as a real transaction, even though the paper#or* that supposedly provided the terms of the
investment #ere completely ignored$ &he investor money #as being held by the investment ban*$ 3eal
money and no doubt that occurred$
Ne-t, for simplicity sa*e, the investment ban* funded the origination or ac8uisition of loans through a
series of conduits, some of #hich included regional ban*s #ho don.t sho# up as foreclosing parties but
#ho made billions acting as conduits to scrub the money before it #as received by the closing agent$
&he net effect #as a #ire transfer from an entity #ith no relation or connection to the homeo#ner, the
closing agent, the lender, the payee, the mortgagee, the mortgage bro*er or the originator$ &he #ire
transfer is received by the closing agent and applied to a 'closing( that #as a sham$ &he paper#or* #as
there and the money #as there, but the money never came from the parties to the paper#or*$
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In some cases ;perhaps 202:<= the loans #ere ac8uired in the same #ay but there #as no need to have
a closing agent, to ma*e it loo* li*e a bona fide transaction #as ta*ing place$ In most cases, the loan
origination #as a complete sham$
,o #ho is the lender7 It can only be the the investors #ho #ere the actual source of funds$ +ut, as #e
have seen in multiple la#suits from lenders, insurers, credit default s#ap counterparties, and the
federal government, the ban*s claimed to be the lender since the money loo*ed li*e it had come from
them, even tough they #ere violating the terms of their agreement #ith the investors and #ere acting
as an agent or conduit for the investors$
,o then I am as*ed, #hat difference does that ma*e7 &he ans#er is that the paper#or* ma*es it seem
that the loan #as an e-ecuted contract #ith offer, acceptance and consideration, but it failed in reality
because none of the parties to the #ritten documents #ere in fact a lender, creditor or too* part in any
#ay in any real transaction #ith the homeo#ner$ &he moment after the loan documents #ere signed,
the homeo#ner could not obtain a satisfaction of mortgage and return of the paid note, because the
investors #ere the only people #ho could sign such documentation$
+ut the investors could not return the original note because they never received it$ And even if they
received it, someone else had their name on the note as the payee$ And the investor could not e-ecute
a satisfaction of mortgage that #ould have cleared the title of that encumbrance because they had
never received the mortgage document, nor any assignment, nor #as their name on the mortgage or
deed of trust as beneficiary, mortgagee, lender or anything else$
,o the bottom line is that the paper trail is 5ust that " a trail of paper unsupported by any real
transaction$ If it #ere other#ise you can bet the +an*s #ould be producing canceled chec*s and #ire
transfers and telling me to shut up$ +ut in my cases, they are fighting me tooth and nail so they are not
ordered to produce it$ +ut they are telling me to please shut up$
A paper trail can only be one thing under la# " evidence of a transaction$ &he debt is created #hen the
money is received and by la# the debtor is the receiver of the funds and the creditor is the source of
the funds$ %irst thing #e learn in /ontracts 101 is that the note is not the debt, it is evidence of the
debt$ &he mortgage is not the debt, and it isn.t even evidence of the debt$ it is a separate agreement to
provide enforcement mechanisms for the note$
+ut the note #as e-ecuted #ith the e-pectation that the homeo#ner #ould be getting money from the
payee on the note$ &hey didn.t get money from the payee on the note ;in most cases=$ In fact, they
didn.t get money from any of the parties disclosed to them in the disclosure statements and >?2
settlement forms re8uired by la#$ &o ma*e matters #orse, the homeo#ner did not receive money from
AN6)N1 in the paper trail$ ,o this #as not a tablefunded loan, this #as an ?N%?N212 loan transaction
#hich ma*es it unenforceable$
&he current practice of not claiming in the allegations of the foreclosing party that a loan ever too*
place is an effort to force the homeo#ner to state it as an affirmative defense " thus violating due
process$ &he homeo#ner should be able to simply deny the allegation #hich #ould *eep the burden of
proof on the foreclosing party$ &hen the foreclosing party #ould need to sho# proof of payment in order
to ma*e a prima facie case$
Instead 5udges are allo#ing the complaint to supposedly state a cause of action #ithout alleging the
loan and #ithout alleging financial in5ury #hich opens Pandora.s bo- in discovery$ ,o let.s loo* at the
complaint and #hat it means$ &he foreclosing party need only allege that the homeo#ner signed the
paper#or*, and didn.t comply$ the rest is history and 'inevitable$(
&he principles of pleading are that there must be a present controversy that is not hypothetical or to be
inferred$ &he simple rule is that you must ma*e a short plain statement of ultimate facts upon #hich
relief could be granted$
Alleging the e-ecution of a document by one party #ithout alleging that it #as part of an enforceable
and e-ecuted contract is alleging that you have evidence of something but you #on.t say #hether
anything actually happened$ &herefore you #on.t say if you have financially damaged$ &his flies in the
face of the basic rule of construction in filing a complaint4
+31A/> )% 2?&6
In contract la#, this means a duty imposed by a contract that is enforceable$ I submit that it is basic
bold blac* letter la# that if you don.t allege a transaction conducted pursuant to a contract based upon
the essential elements of offer, acceptance and consideration you have failed to state a cause of action
and you have failed to establish the foundation for alleging that you #ere damaged$
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%urther, I submit that the failure to ma*e such allegations fails to invo*e the 5urisdiction of the court
over the parties or the property or the rents$ And I further submit that any 5udgment rendered #ithout
a proffer of evidence of the loan of money by the parties in the paper trail is void, based upon fraud and
should be vacated$
,imple reasoning4 if those complaints are not dismissed for lac* of 5urisdiction and 5udgements are
entered, the homeo#ner is stuc* #ith possibility that someone #ill sho# up #ith the real promissory
note and be able to prove it #as their money that the homeo#ner received$ @hat #ill be the defense of
the homeo#ner in that position7 &hat is #hy #e have la#s, rules of civil procedure, and pleading
If those foreclosure sales are not vacated, the fact is that anyone holding property sub5ect to claims of
securiti!ation #ill never be able to get rid of the mortgage encumbrance even if they pay it off in full as
demanded by some party in the paper trail$ &hey cannot sell the property and #arranty title, they
cannot refinance, and they cannot modify or settle the claims #ithout the real source of money being
involved in the process$
Look First at the Loan Closing
Posted on December 16, 2013 by Neil Garfield
In thin*ing about ho# to present the issues in cases #here the loans are part of a securiti!ation process,
#hether successful or unsuccessful, I reali!ed that one of the things that I failed to do #as bring the
attention of the court to the the cornerstone of the transaction " the loan closing, rather than the the
actual chronological first step #hich is the selling for#ard of empty mortgage bonds to investors$ I
reali!ed that if I #as sitting on the bench and the matter before me #as the foreclosure of a mortgage
that #as facially correct and recorded in the county records, any argument that starts #ith
securiti!ation is going to seem li*e sidestepping the real issues$ ,o I am #or*ing on going outside the
chronological order of reality and starting #ith the middle point, #hich is the loan contract and loan
1very contract must have an offer, acceptance and consideration$ 1very first year la# student *no#s
that$ In the case of mortgage loans, the loan contract consists of
&he problem is that the above scenario is not the usual scenario #ith AB< of all mortgages bet#een
2001200A$ If I don.t give you the money, there is no contract and even though you signed the note, I
have no right to record the mortgage because I never loaned you the money$ 6ou #ere fooled by the fact
that money appeared at the closing table 5ust as I said$ +ut the money #asn.t my money and I didn.t
lend it to you$ +ut you signed the note and mortgage to me$ @hat I have 5ust done is probably
fraudulent and certainly a table funded loan in violation of the %ederal &ruth in 0ending Act$ &hen the
'()ge says *)i) yo( sign the note+,- he is only asking hal. the re/(ire) /(estions$ The other hal.
sho(l) 0e aske) o. the .ore1loser *)i) the 2ayee on the note 3ake the loan+, &he ans#er in most
cases is no, and in all cases as to the assignment of the loan, no value #as paid by the assignee for the
transfer to the assignee$ &he loan should either have been originated #ith the name of the actual
source of funds on the note and mortgage or the assignment should have been recorded in the name of
the trust #hen the loan #as ac8uired$ +ut then the #holesale re5ection of common under#riting
standards #ould have been e-posed and most of the loans #ould never have been made$
&he reason #hy Cudges and la#yers are missing the mar* in many cases is that the loan contract is not
the one they are thin*ing about$ In the great ma5ority of loan contracts the actual source of funds is
N)& the party #ho is named as Payee or mortgagee$ &he actual party #ho made the loan is either the
group of &rust beneficiaries or the actual 319I/ trust #here the trust #as .(n)e)$ &he loan contract is
implied by la# and undocumented$ And the terms are not necessarily #hat #as stated in the note and
mortgage$ &he lenders agreed to a loan #ith different terms than the terms set forth in the note and
mortgage$ &he contract for loan that everyone has their eye on is #ritten but never completed$ &he
originator offers a loan provided that the borro#er agrees to the terms presented and e-ecutes the loan
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closing papers$ In plain language the originator is saying 'I agree to loan you money provided you agree
to the terms of repayment and you e-ecute the loan closing documents$( 6ou agree and e-ecute the
loan closing documents but then the originator #ho made the offer does not ma*e the loan$ &he result
by any interpretation is that there is no enforceable contract$ In fact, there is an implied duty to return
the documents to the borro#er mar*ed cancelled$
&he originator has no documentation sho#ing that it #as acting as agent for the trust beneficiaries or
the trust$ 1ven if such documentation e-isted, it #ould have re8uired that the originator act as agent
for the &rust or the trust beneficiaries #ithout disclosure to the borro#er$ ,uch a provision re8uiring non
disclosure #ould violate %ederal la# ;&I0A= and #ould therefore be void$
+ut the money appears at the closing table any#ay, un*no#n to the borro#er, from the trust
beneficiaries #ho thought their money #ould first be used to fund the 319I/ trust #here they #ould get
certain ta- benefits$ &he receipt of the money by the borro#er creates an obligation to repay implied
by la# " the assumption being that it #asn.t a gift$
&hus #hen the Cudge as*s '2id you sign the note and mortgage( he or she is only as*ing half of the
essential 8uestions$ &he other half should be directed to the foreclosing party 'did you ma*e the loan(7
&he forecloser #ould then be forced to e-plain #hy they should collect on a debt that #as created
outside of their cloud of parties and entities$ &his is #hy they don.t allege they are the holder in due
course because &>A& #ould re8uire them to prove they have the note and mortgage 'for value( and
that they didn.t have actual *no#ledge of the borro#ers claims and defenses$ &he borro#er #ould only
need to deny such an allegation thus forcing the burden of proof onto the forecloser " a burden that no
forecloser these days can meet unless it is a local ban* loan$
Instead of alleging that the %orecloser is a holder in due course, they carefully allege that they are the
holder #ith implied rights to enforce because the documents appear to be valid on their face$ +ut a
holder is sub5ect to the defenses available in any breach of contract action including nonperformance "
I$e$ &he denial that the originator ever made the loan$ &hen they stone#all discovery on 8uestions
about the #ire transfer receipt that #ould reveal #ho made the loan$ At trial the borro#er should have
ob5ections and motions in limine after properly see*ing to enforce discovery and getting no results
e-cept more ob5ections$
If the homeo#ner raises the issue of payment of the loan from the originator they are properly
challenging the e-istence of a valid contract, #hich #as never formed because of the failure of
performance by the originator$ 9ost loans during the mortgage meltdo#n period fit this scenario$
&he end result should be that the debt cannot be enforced by the foreclosing party because no entity in
their 'securiti!ation( cloud ever performed the essential act re8uired by the loan contract "
performing the act of delivering money as a loan to the homeo#ner$ >ence no debt #as created
bet#een &>),1 parties$
Non stop servicer advances are payments to the creditors " the trust beneficiaries ;investors= " of the
trust #hether or not the borro#er is paying the re8uired payments under the note$
&his could also be grounds for challenging the default saying that there #as no default from the
creditor.s perspective because they continued to receive their e-pected payments$ )r it could be
grounds for saying they #aived the default or that the default #as cured #hile they #ere accepting the
servicer advances$ &he creditor is only allo#ed to be paid once on your loan$
Assuming the court accepts that argument, you have established that there are not one, but t#o loan
contracts " the one that the lender sa#, and the one that the borro#er sa#$ &hat #ould mean there
#as by definition no meeting of the minds, #hich is a basic term used in contract la#$ If the money from
investors actually funded the trust, then they could argue that there #as nothing #rong #ith the t#o
contracts because the borro#er.s loan contract #as #ith the trust$ +ut our retort #ould be that if the
borro#er.s contract #as #ith the trust, #hy #ere they not on the note7
&hese are 3a!or thin distinctions that must be carefully argued or presented by an e-pert$ &he goal
#ould be to discredit the initial loan transaction such that the loan #as not secured because the real
contract #as an implied contract at la# rather than the #ritten one you signed$ If the #ritten one is
void, then the debt e-ists, but it is not secured by a mortgage, hence there could be no foreclosure$
/ollection could only be by the trust in a 5udicial case brought against you that could be discharged in
ban*ruptcy$ I don.t *no# ho# the homestead e-emptions #or* in /alifornia ban*ruptcy court, so #e
#ould need to be careful about ho# this #ould be used$ In any event, amounts received from insurance
contracts and the li*e #ould be deducted along #ith offset for appraisal fraud " but reali!e that
appraisal fraud can only go so far$ 6ou must prove #hat the real value of the home #as ;not presume or
guess at it= at the time of the loan transaction, #hich could be the modification or refi #hich #ould be
#hen the real value had already plummeted #hile the loan amount #as higher$ &he difference bet#een
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the appraised value and the real value could be the an element of conse8uential damages, and if you
can prove malevolent intent you could as* for punitive damages$
@hile I have been #riting about these things for years it is only no# that some 5udges are beginning to
loosen up to listen to the realities of securiti!ation " that it #as a fraudulent scheme to deprive
investors of their money and the promised secured enforceable loans$ &he investors all sued saying the
loans #ere N)& enforceable even though they had supposedly been transferred into the trust$ &hese are
the la#suits that the ban*s are settling every #ee* or every other #ee* for hundreds of millions or
billions of dollars$ &he largest so far is /hase #ho 5ust paid E13 +illion to settle claims of fraud,
misrepresentation, and mismanagement of funds$
%or more information about your loan, go to http4FF###$livingliesstore$com and get one of the
Posted on Canuary 2, 201D by Neil Garfield
@here 'servicer( advances to the trust beneficiaries are present, it e-plains the rush to
foreclosure completely$ It is not until the foreclosure is complete that the payor of the
'servicer( advances can stop paying$ &hus the obfuscation in the discovery process by
servicers in foreclosure litigation is also completely e-plained$ %urther this #ould open
the eyes of Cudges to the fact that there may be other coobligors that #ere involved
;insurers, credit default s#ap counterparties etc$=$ &hus #hile the creditor is completely
satisfied and has e-perienced no default, the servicer is claiming a default in order to
protect the interest of the servicer and bro*erdealer ;investment ban*=$ It is a lie$ " Neil
% Garfield,http4FF###$livinglies$me
&his is not for layman$ &his is directed at la#yers$ Any pro se litigant #ho tries doing something #ith
this is li*ely to be 5umping off a legal cliff so don.t do it #ithout consultation #ith a la#yer$ If you A31 a
la#yer, you might find this very enlightening and helpful in developing a strategy to @IN rather than
delay the 'inevitable$(
I #as thin*ing about this problem #hen the servicer advances are paid$ ,uch advances are
in an amount that satisfies the creditor$ If the creditor is named as the real party in
interest in a foreclosure, there is an inherent contradiction on the face of the situation$
,omeone other than the creditor is alleging a default #hen the creditor #ill tell you they
are 5ust fine " they have received all scheduled payments$ 1ven though it is most li*ely
that the money came from the bro*erdealer I #as thin*ing that this might be a novation
or a failed attempt at novation$ A definition of novation is sho#n belo#$ >ere.s my
1$ the receipt of payment by the trust beneficiaries satisfies in full the payment they
#ere to receive under the contract bet#een them and the 319I/ trust$
2$ if the foreclosure action is brought by the trust or the trust beneficiaries, directly or
indirectly, they can.t say that they have actually e-perienced a default, since they have
payment in full$
3$ ,ome entity is initiating the foreclosure action and some representative capacity on
behalf of of the trust or the trust beneficiaries as the creditor$ If the borro#er has
ceased ma*ing payments and no other payments are received by the trust or the trust
beneficiaries relating to the sub5ect loan then it is arguably true that the borro#er has
defaulted and the lender has e-perienced the default$
D$ +ut in those cases #here the borro#er has ceased ma*ing payments but full payment
has been sent and accepted by the lender as identified in the foreclosure action, does not
seem possible for a declaration of default by that lender to be valid or even true$
:$ +ut it is e8ually true that the borro#er has ceased ma*ing payments under an alleged
contract, #hich the foreclosing party is alleging as a default relating to the lender that
has been identified as such in the sub5ect action$
B$ In actuality the servicer advances have probably been paid by the bro*erdealer out of
a fund that #as permitted to be formed out of the investment dollars advanced by the
investors for the purchase of the mortgage bonds$ Presumably this fund #ould e-ist in a
trust account maintained by the trustee for the assetbac*ed trust$ In actuality it appears
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as though these funds #ere *ept by the bro*er dealer$ &he prospectus specifically states
that the investors can be repaid out of this fund #hich consists of the investment dollars
advanced by the investors$
G$ +ut these nonstop servicer advances are designated as payments by the servicer$
H$ And it is stated in the pooling and servicing agreement that the nonstop servicer
advances may not be recovered from the servicer nor anyone else$
A$ &hat means that the money received by the trust beneficiaries is simply a payment of
the obligation of the trust under the original agreement by #hich the trust beneficiaries
advanced money as investors purchasing the mortgage bonds$
10$ In other settings such payments #ould be in accordance #ith agreements in #hich
subrogation of the payor occurs or in #hich the claim is purchased$ >ere #e have a
different problem$ At no point here is the entire claim sub5ect to any claim of subrogation
or purchase$ It is only the payments that have been made that is the sub5ect of the
dispute$ &hat opens the door to potential claims of multiple creditors each of #hom can
sho# that they have attained the status of a creditor by virtue of actual value or
consideration paid$
11$ +ut regardless of #ho ma*es payments to the trust beneficiaries or #hy they made
such payments, the trust beneficiaries are under no obligation to return the payments$
>ence the trust beneficiaries have e-perienced no default and the alleged mortgage bond
avoids the declaration of a credit event that #ould decrease the value of the bond$ &hat
*eeps the investors happy and the bro*er dealer out of hot #ater ;note the hundreds of
claims totaling around E200 billion thus far in settlements because the bro*er dealer
didn.t do many of the things they #ere supposed to do to protect the investors=$ N)&1
A0,)4 &he payment and acceptance of the regularly scheduled payments to the trust
beneficiaries #ould cure any default in all events$
12$ +ut the entity that has initiated the foreclosure action is still going to argue that the
borro#er has breached the terms of the note and has failed to ma*e the regularly
scheduled payments and that therefore the borro#er is in default$ +ut they cannot say
that the borro#er defaulted in its obligation to the creditorsince the creditor is already
13$ 1ven #here #e have successfully established that the origination of the loan occurred
#ith the funds of the investor and not the named payee on the note or the named
mortgagee on the mortgage, a debt still e-ists to the investors for the amount that is not
paid by anyone$ &his debt #ould arise by operation of la# since the borro#er accepted
the money and the investor lenders are the source of that money$
1D$ ,o the first issue that arises out of this comple- series of transactions and a comple-
chain of documents ;that appear to reflect transactions that never occurred=, is #hether
the creator of this scheme unintentionally opened the door to allo# a borro#er to stop
ma*ing payments and re8uire the servicer or bro*erdealer to continue ma*ing nonstop
servicer advances the satisfying the obligation to the socalled secured creditor alleged in
the initiation of the foreclosure action$ If the obligation is indefinite as to duration, this
might have a substantial impact on the amount due, the amount demanded and #hether
the original notice of default #as fatally defective in stating the amount re8uired for
reinstatement and even claiming the default$
1:$ I therefore come to the second issue #hich is that in such cases a second obligation
arises #hen the first one has been satisfied by the payment from a thirdparty$ &he
second obligation is clearly not secured unless a partial assignment of the mortgage and
note has been e-ecuted and recorded to protect the servicer or bro*erdealer or #hoever
made the payments to the trust beneficiaries under the nonstop servicer advances$ &his
clearly did not occur$ And if it did occur it #ould be void under the terms of the trust
instrument, i$e$, the pooling and servicing agreement$
1B$ &he only la#suits I can imagine filed by the party #ho made such payments to the
trust beneficiaries are causes of action against the homeo#ner ;not to be called a
'borro#er( anymore= for contribution or un5ust enrichment$ And as I say, there could be
no claims that the debt is secured since the security instrument is pledged to the trust
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beneficiaries and e-ecuted in favor of a third party that is different from the party that
made the nonstop servicer advances to the trust beneficiaries$
1G$ I am therefore #ondering #hether or not novation should be alleged in order to
highlight the fact that the second obligation has been created$ ,ome sort of e8uitable
novation #ould also allo# the Cudge to satisfy himself or herself that he or she is not
encouraging people to borro# money and not pay it bac* #hile at the same time
punishing those #ho created the mad scheme and thus lost the rights set forth in the
security agreement ;mortgage, deed of trust etc$=$+ased on the definition belo#, it might
be that the novation could not have occurred #ithout the signature of the borro#er$ +ut
the argument in favor of characteri!ing the transactions as a novation might be helpful in
highlighting the fact that #ith the undisputed creditors satisfied, that no default has
occurred, and that any purported default has been #aived or cured, and that #e *no#
that a ne# liability has been created by operation of la# in favor of the party that made
the payments$
1H$ And that brings me to my last point$ I #ould li*e to see #hat party it is that claims to
have made the nonstop servicer payments$ If the payments came from a reserve pool
created out of the investment dollars funded by the investors, it #ould be difficult to
argue that the borro#er has become un5ustly enriched at the e-pense of the bro*er
dealer$ &he circular logic created in the prospectus and pooling and servicing agreement
#ould obviously not be construed against the borro#er #ho #as denied access to the
information that #ould have disclosed the e-istence of these comple- documents and
comple- transactions, despite federal and state la# to the contrary$ ;&I0A and 31,PA, 3eg
I etc$=
/)991N&, are invited$
%3)9 @IJIP12IA "
In contract la# and business la#, no5ation is the act of either4
1$ replacing an obligation to perform #ith a ne# obligationK or
2$ adding an obligation to performK or
3$ replacing a party to an agreement #ith a ne# party$
In contrast to an assignment, #hich is valid so long as the obligee ;person receiving the
benefit of the bargain= is given notice, a novation is valid only #ith the consent of all
parties to the original agreement4 the obligee must consent to the replacement of the
original obligor #ith the ne# obligor$L1M A contract transferred by the novation process
transfers all duties and obligations from the original obligor to the ne# obligor$
%or e-ample, if there e-ists a contract #here 2an #ill give a &N to Ale-, and another
contract #here Ale- #ill give a &N to +ec*y, then, it is possible to novate both contracts
and replace them #ith a single contract #herein 2an agrees to give a &N to +ec*y$
/ontrary to assignment, novation re8uires the consent of all parties$ /onsideration is still
re8uired for the ne# contract, but it is usually assumed to be the discharge of the former
Another classic e-ample is #here /ompany A enters a contract #ith /ompany + and a
novation is included to ensure that if /ompany + sells, merges or transfers the core of
their business to another company, the ne# company assumes the obligations and
liabilities that /ompany + has #ith /ompany A under the contract$ ,o in terms of the
contract, a purchaser, merging party or transferee of /ompany + steps into the shoes of
/ompany + #ith respect to its obligations to /ompany A$ Alternatively, a 'novation
agreement( may be signed after the original contractL2M in the event of such a change$
&his is common in contracts #ith governmental entitiesK an e-ample being under the
?nited ,tatesAnti6Assign3ent A1t, the governmental entity that originally issued the
contract must agree to such a transfer or it is automatically invalid by la#$
&he criteria for novation comprise the obligee.s acceptance of the ne# obligor, the ne#
obligor.s acceptance of the liability, and the old obligor.s acceptance of the ne# contract
G of :3
as full performance of the old contract$ Novation is not a unilateral contract mechanism,
hence allo#s room for negotiation on the ne# &O/s under the ne# circumstances$ &hus,
Pacceptance of the ne# contract as full performance of the old contract. may be read in
con5unction to the phenomenon of Pmutual agreement of the &O/s$L1M
A22li1ation in .inan1ial 3arkets
Novation is also used in futures and options trading to describe a special situation #here
the central clearing house interposes itself bet#een buyers and sellers as a legal counter
party, i$e$, the clearing house becomes buyer to every seller and vice versa$ &his obviates
the need for ascertaining credit#orthiness of each counter party and the only credit
ris* that the participants face is the ris* of the clearing house defaulting$ In this conte-t,
novation is considered a form of ris* management$
"an E)stro3 Cites Fail(re to A1t(ally Close Es1row
Posted on Canuary 1, 201D by Neil Garfield
Getting the closing instructions and the closing documents, including the #ire transfer receipts and #ire
transfer instructions, one is able to piece tog ether that escro# #as never properly closed$ &his could
mean that escro# is still open " leaving open the option of a three day rescission$ 2an points out in
response to me post that there is considerable support to attac*ing the escro# to prove that the
originator is not the lender$ &he issue that I failed to e-plain in my post is that the note #as never
delivered to the originator$ &his, combined #ith the failure of the originator to fund the loan, pretty
much loc*s the door on the note or mortgage being valid enforceable instruments no matter ho# many
times they recorded, assigned, indorsed or anything else$ 9y post
12I&)3., N)&14 ,o I amend my prior comments to add the second 8uestion, #hich has
many subparts as e-plained belo#4 ;1= did the originator pay for the loan that the
borro#er received7 and ;2= #as escro# closed7 ;including amongst other things, did the
originator receive delivery of the note and mortgage7=$ In revie#ing thousands of cases ;I
thin* only 0ynn ,ymonia* might have e-ceed the number of cases I have revie#ed= I have
come to the conclusion that the ans#er to both 8uestions is N) " #hen the origination of
the loan #as part of or sub5ect to claims of a securiti!ation scheme$
&his underscores the scheme of theft by the @all ,treet +an*s$ %irst they divert the
money from investors from a trust into their o#n poc*eted$ &hen they divert the
documents that #ere supposed to protect the the investor to na*ed nominees that are
controlled by the +an*s, not the 319I/ trust$ No# they #ant to add insult to in5ury and
thro# the homeo#ner out of his home because '&>1 0oan( is in default, #hen the the
only loan is the one that arose by operation of la# bet#een the investor lenders and the
homeo#ner borro#er and N)& the loan described in the note and mortgage$ &he escro#
closing says other#ise$
>ere is 2an 1dstrom.s 3esponse ;&han*s 2an=

1-cellent source of information for la#yers$ >ere is #hat I thin* is critical that you need to include and
9y assumptions are that it is #ell established that escro# re8uires specific performance ;at least this is
true in /A, and probably all other states=$
9y assumptions are that the follo#ing is generally true in all states$
@ithout fulfillment of the conditions precedent to closing escro#, escro# cannot close ;specific
If escro# never closed you have .ail(re o. )eli5ery of an instrument$ &he conclusive presumption of
delivery avails an alleged note holder nothing if escro# did not close$ In /A it is stated this #ay4
No delivery of the note, #ithin the meaning of section 30AG of the /ivil /ode, too* place$ As the court
says in ,ousa v$ %irst Cali.ornia /o$ ;1A:0=, 101 /al$App$2d :33, :3A L22: P$2d A::M,')nly after strict
compliance #ith the condition imposed Q does the escro# holder begin to hold for the party thereby
entitled$ Q( +ogan v$ @iley ;1ADA=, A0 /al$App$2d 2HH, 2A2 L202 P$2d H2DM, holds, 'No rule is better
H of :3
settled than the one that the payee gets no property in a negotiable instr(3ent until its delivery$(
And &odd v$ Nestermar* ;1A:B=, 1D: /al$App$2d 3GD, 3GG L302 P$2d 3DGM, states4 'Q a delivery or
recordation by or on behalf of the escro# holder prior to full performance of the terms of the escro# is
a nullity$ No title passes$(
6ou could state #hat you listed in your article a different #ay ;that the payee provided no consideration
at loan closing=4 L12I&)3R, N)&14 P),,1,,I)N N13,?, A?&>)3I&6 )3 3IG>& &) 1N%)3/1 &>1
6et these respondents recogni!e the rule that a security interest serves as an incident to the debt ;/iv$
/ode, 2A0A=, and on oral argument before this court admitted 'if #e didn.t have a promissory note, and
if it Q #asn.t an obligation Q LtMhere #ould be nothing for that security to secureK so it couldn.t e-ist$(
9oreover, as the decisions have held, the mere recordation of a deed of trust by the escro# holder, in
accordance #ith the trustor.s instructions, does not establish delivery$ &hus in Ceannerette v$ &aylor
;1A3D=, 2 /al$App$2d :BH L3H P$2d H31M ;petition for hearing in ,upreme /ourt denied=, the 'title
company, follo#ing plaintiff.s instructions, recorded a deed to the property #hich she had signed and
ac*no#ledged, the defendant being named therein as the grantee$ %ollo#ing this the title company Q
mailed the recorded deed to defendant$( &he court then stated4 '&he evidence sho#s that this #as
done #ithout e-press authority$ Q No one #ho had possession of the deed #as authori!ed by plaintiff to
deliver the same to the defendant$ &he delivery to the title company #as for the limited purpose of
recordation$ No authority #as thereby conferred to ma*e delivery, and its act in mailing
the instr(3ent to the defendant did not have the effect of passing title Q( ;Pp$ :BA:G0$=
>older and >older in due course may not apply if there #as no consideration and escro# never closed4
,ince +uilders did not become a holder in due course, the conclusive presumption of delivery avails
respondents nothing$ ;/iv$ /ode, 30AG$= &he cited case of +a*er v$ +utcher ;1A30=, 10B /al$App$ 3:H, 3BG
L2HA P$ 23BM, does not applyK respondent @al*er.s admission 231S231 that his rights depend upon the
status of +uilders as a holder in due course proves fatal$
&he follo#ing 8uote seems to agree #ith #hat you are saying, that the Plaintiff can sue based on the
obligation or the contract4
3espondents fourthly and finally contend that the conception of the payment of ED,022$1D as a
condition precedent to delivery necessarily must void the entire transaction or #or* an un5ust
enrichment to appellants$ In essence this contention suggests that appellants must rescind the contract
in order that no un5ust enrichment accrue to themK that, having elected to accept certain contractual
benefits, they must ignore >enderson.s breach of his duties$ 6et respondents see* to collect upon a note
under #hich appellants are not obligated for #ant of deliveryK respondents. rights properly rest only
upon the underlying contract or in 8uasicontract$ &hus, as is stated in Cacobit! v$ &homsen, supra
;1A2:=, 23H Ill$App$ 3BT(the note never became an obligation binding, as such, upon the defendants$ Q
&he reversal in this case, ho#ever, #ill be #ithout pre5udice Q to any right &hullen may have to recover
from defendants #hatever sum, if any, may be due from them under the terms of the original contract
Q or the value of #or*, labor and materials furnished$ Q( ;Pp$ 3H3A$= Gray v$ +aron, supra ;1A10=, 13
Ari!$ G0, GD, li*e#ise points outT(?nder the terms of the escro# agreement and the facts Q there #as
no such delivery of the note Q and Q the 5udgment entered by the court for the plaintiff re8uiring the
payment of the note Q Lmust be reversed asM outside of the issues set forth in the pleadings$ Q &he
theory of the trial court seems to have been that the plaintiff had established a cause of action based
upon the breach of a contract to purchase the stoc*$ &he error of the trial court #as Q in attempting to
enforce such a cause of action Q in an action based simply upon the promissory note, and not one based
upon the breach of the contract to purchase$(
All of the above 8uotes come from Borgonova vs. Henderson, 1H2 /al$App$2d 220 ;1AB0=, attached$
Getting bac* to the conditions precedent, here are some that I have seen$ +ut *eep in mind that all of
the loan closing documents I have seen are different$ ,ome bring up certain conditions different from
others ;your mileage may vary=$ &he follo#ing are all from one loan closing ;notice the impossibility of
meeting the conditions precedent=4
6ou are authori!ed to deliver andFor record the above and close in accordance #ith the estimated
closing statement contained herein ;sub5ect to ad5ustment=K
and #hen you can procureFissue a 0BA0&A 0oan #F%orm 1 T 1AA2 coverage from Policy of &itle Insurance
from %idelity National &itle Insurance /ompany #ith a liability of E:00,000$00 on the property described
in your Preliminary 3eport No$ D00H203, dated August 1B, 200:, a copy of #hich IF#e have read and
hereby approve$
A of :3
,>)@ING &I&01 N1,&12 IN4
Lborro#ers names $$$M
%311 %3)9 1N/?9+3AN/1, 1U/1P&4
B$ A %irst 2eed of &rust, to record, securing a note for E:00,000$00 in favor of 9ortgage 0enders
Net#or* ?,A, Inc$$
Named 0ender #ho provided the closing instructions4 9ortgage 0enders Net#or* ?,A, Inc$
3esidential %unding /orporation has a security interest in any amounts advanced by it to fund this
mortgage loan and in the mortgage loan funded #ith those amounts$ 6ou must promptly return any
amounts advanced by 3esidential %unding /orporation and not used to fund this mortgage loan$ 6ou also
must immediately return all amounts advanced by 3esidential %unding /orporation if this mortgage loan
does not close and fund #ithin 1 +usiness 2ay of your receipt of those funds$
/losing AgentFAttorney ac*no#ledges the foregoing instructions and understands that failure to properly
follo# set of instructions may result in legal recourse by 9)3&GAG1 01N213, N1&@)3J ?,A, IN/$
Identified conditions precedent in this case that may not have been met4
1$ No e-ception on +orro#ers /losing Instructions for the security interest claimed by 3esidential
%unding /orporation ;#ho by the #ay #as the sponsor of thousands of attempted securiti!ation
transactions= in the 0enders /losing Instructions
2$ No e-ception on +orro#ers /losing Instructions for the security interest claimed by 913, on the
,ecurity Instrument ;2eed of &rust in this case=, #hich states '+orro#er understands and agrees
that 913, holds only legal title to the interests granted by the +orro#er in this ,ecurity
3$ Appro-imately E32A,000 #as sent to )c#en 0oan ,ervicing to pay off an earlier 1st lien$ )c#en
#as not the payee, beneficiary, mortgagee or assignee and #as not listed on any recorded
document$ A fe# #ee*s after closing, )c#en recorded a full reconveyance stating that they
#ere the beneficiary$ >o#ever, )c#en #as a stranger to the chain of recorded documents$ In
this case the +orro#er contends that payment #as sent to the #rong party ;the alleged note
holder, beneficiary and assignee #as Ne# /entury 9ortgage /orporation= and the reconveyance is
a #ild deed$ &hus 3esidential %unding sent appro-imately E32A* to )c#en and the +orro#er
never received the benefit of the bargain as this money #as never given to the +orro#er or used
for the +orro#ers benefit$ &hus the encumbrance remains$
D$ &he payee provided no money to escro# and the escro# company had full *no#ledge of this ;in
fact every other party had *no#ledge of this fact e-cept the homeo#ner #ho #as the least
sophisticated party present=$
In my opinion if the borro#er #as fooled at loan closing, the escro# should not have closed$ &hat is
unless the escro# company #as fooled also$ +ut they #ere not fooled T they *ne# everything$
3emember also that the homeo#ner never sees 913, or the above loan closing instructions until they
are put before the +orro#er on the day of signing$ ?p until about 2010 I #ould say that there #as no
homeo#ner #ho could have remotely understood #hat any of the above meant$

4e.ore Yo( Sign Anything- File Anything- Consi)er the Stat(te o. Li3itations
Posted on 2ecember 31, 2013 by Neil Garfield
@ith tens of thousands of cases running many years before foreclosure is started and #ith many cases
ripe for dismissal for lac* of prosecution, the +an*s are in a full court press attempting to get
modifications or even going to trial on cases they *no# are problematic at best$ I am receiving scores of
reports of cases dismissed on the grounds they are barred that the statute of limitations has run$
If grounds e-ist for dismissal ;chec* #ith a la#yer #ho really *no#s= the case cannot be refiled if the
statute of limitations has run$ If the case has not started and you have been living in the home for years
#ithout paying, the statute may have already run or you might be able to 'run the statute$( ;/hec*
#ith an attorney licensed in the 5urisdiction in #hich the property is located=$
&he meaning of the statute of limitations is simple4 everyone #ith a claim has a right to bring it$ +?&
10 of :3
the /ourts #ill not entertain any action that is stale$ &here are t#o #ays the case might be stale " ;1=
the statute of limitations #hich is by definition a statute passed by the legislature of each state and ;2=
the common la# doctrine of laches that might be supplemented by statutes or rules of procedure
;laches is rarely applied=$ 0aches on its o#n is generally a #ea* defense$ +ut combined #ith the one
year rule in %lorida, for e-ample, for prosecuting the case for#ard, it might have more teeth$ +ut you
#ould need to sho# inaction for a long period of time ;i$e$, no suit filed= P0?, the failure to prosecute$
&here are specific rules of civil procedure covering the dismissal of a cause of action for failure to
Applying the meaning of the statute as applied to mortgage foreclosures is apparent$ &he foreclosing
party has sent a notice of default and acceleration because you didn.t ma*e a payment or they have no
sent a notice and you have not been ma*ing a payment$ &he time to sue on the note and mortgage is
based is usually based upon the statute of limitations as applied to contracts, but there might be some
states that specify mortgage foreclosures$ If the '+an*( has run the statute of limitations they can
never attempt to sue on the note or mortgage again and in non5udicial states they cannot file a notice
of default and notice of sale$
&here are things that delay or 'toll( the statute of limitations li*e various payment plans or agreements
li*e modifications ;that could even restart the statutory period=, ban*ruptcy and anything else that
prevents the claimant from filing the claim for damages or foreclosure$ 1ach case must be e-amined as
to the running of the statute of limitations$ In %lorida the statute is : years$ ,o for e-ample if the last
payment you made #as November of 200H, then the ne-t payment due #as in 2ecember of 200H$ &hat
is #hen the statute starts running$ If the +an* in %lorida, #hich is a 5udicial state, has not actually filed
suit in foreclosure, they are probably no# barred from doing so$
P3A/&I/1 N)&14 &>1 +ANJ, A31 %31V?1N&06 9AJING AN 133)3 @>1N &>131 I, A 9)2I%I/A&I)N
AG31191N& P31,1N& &>A& 9IG>& 1NA+01 6)? &) G1& &>1 /A,1 2I,9I,,12 %)3 6)?3 /0I1N& AN2, I%
&>1 /A,1 I, ,&A01 ?N213 &>1 ,&A&?&1, &>1 2I,9I,,A0 /)?02 +1 '@I&> P31C?2I/1( )3 1N1N I% N)&
@I&> P31C?2I/1 I& @)?02 A9)?N& &) &>1 ,A91 &>ING$ &he error they are ma*ing is that they ta*e
the date of the initial 'default( ;#hich of course can be challenged on many grounds that have been
e-plained on this blog= and they sue on the default of the note instead of the the default in the
modified note terms$ &he time to bring that up is as close to trial as possible #hen they can.t do
anything about it$ In %lorida, this #ould force them to refile in the face of statutory re8uirements that
re8uires them to be the o#ner of the loan$
%or this reason I am suggesting to our o#n analysts as #ell as all the rest of the analysts assisting
attorneys and pro se litigants to include the relevant statute of limitations in their report$
>ere is a lin* that can assist you$ I caution anyone about using this list$ &hings change so you need to
loo* up the actual statute and the language of the statute might be such that only an attorney #ho has
researched the statute #ill be able to gave an opinion as to #hether it applies in your
case$ http4FF###$nolo$comFlegalencyclopediaFstatuteoflimitationsstatela#schart2AAD1$html
%or homeo#ners and la#yers see*ing litigation assistance please call :20D0:1BHH or go
to http4FF###$livingliesstore$com

US 4ank- 4o.A- LaSalle 4ank an) Other Tr(stees Sla33e) the "oor on Their Own Toes
Posted on 2ecember 30, 2013 by Neil Garfield
N)&14 &>1 %)00)@ING I, A 01GA0 ANA06,I, &>A& 9A6 )3 9A6 N)& APP06 &) /A,1, )N
@>I/> 6)? A31 @)3JING$ I& I, 31A006 91AN& %)3 A&&)3N16, @>) A31 31P31,1N&ING
PA3&I1, IN %)31/0),?31 0I&IGA&I)N$ No lay person should assume that anything in this
article is true or applies to their case$ Nobody should use this information #ithout careful
consultation #ith a *no#ledgeable attorney licensed in the 5urisdiction in #hich the
sub5ect property is located$ &his may or may not have applicability to other securiti!ed
debt including student loans, auto loans etc$ 1ach case rests on its o#n merits$ 2o not
assume that there is any magic bullet that ends any case in favor of the borro#er$
%or 0itigation ,upport for Attorneys in all fifty states, please call :20D0:1BHH$ %or
general search and information products, consultations and services please go
to http4FF###$livingliesstore$com$
11 of :3
9+, &3?,&11, >AN1 N) 3IG>& &) +3ING %)31/0),?31 A/&I)N,
,11 V?)&1, %3)9 ?, +ANJ @1+,I&1
U2on analysis- resear1h an) re.le1tion it a22ears as tho(gh the ga3e 1o(l) 0e o5er in the US 4ank
1ases- the 4ank o. A3eri1a 1ases- an) any 1ase in whi1h the .ore1losing 2arty is i) as the
Tr(stee$ US 4ank 1learly has no right or e5en a11ess to the .ore1los(re 2ro1ess$ #ow )o we know+
4e1a(se US 4ank says so on its own we0site$ SEE htt2s:77www$(s0ank$1o372).71o33(nity7Role6o.6
>ere are some notable 8uotes from the ?, +an* #ebsites #hich references materials to ma*e their o#n
assertions apply to all trustees over 9+, trusts4
'Parties involved in a 9+, transaction include the borro#er, the originator, the servicer and the trustee,
each #ith their o#n distinct roles, responsibilities and limitations$(
' ?$,$ +an* as &rustee4
'As &rustee, ?$ ,$ +an* Global &rust ,ervices performs the follo#ing responsibilities4
>olds an interest in the mortgage loans for the +enefit of investors
9aintains investorsFsecurities holder records
/ollects payments from the ,ervicer
2istributes payments to the investorsFsecurities holder
2oes not initiate, nor has any discretion or authority in the foreclosure process ;e$s$=
2oes not have responsibility for overseeing mortgage servicers ;e$s$=
2oes not mediate bet#een the servicers and investors in securiti!ation deals;e$s$=
2oes not manage or maintain properties in foreclosure ;e$s$=
Is not responsible for the approval of any loan modifications ;e$s$=
'All trustees for 9+, transactions, including ?, +an* have no advanced *no#ledge of #hen a mortgage
loan has defaulted$
' &rustees on 9+, transactions, #hile named on the mortgage and on the legal foreclosure documents,
are not involved in the foreclosure process$(
' @hile trustees are listed on mortgages, and therefore in legal documents as #ell, as the o#ner of
record, its interest is solely for the benefit of investors$ &he trustee does not have an economic or
beneficial interest in the loans and has no authority to manage or other#ise ta*e action on the loans
#hich is reserved for the servicer$( ;e$s$=
'Additional sources of information4
T American +an*ers Association @hite Paper, &he &rustee.s 3ole in Assetbac*ed securities, dated
November A, 2010,http4FF###$aba$comFPressW3oomF110A103oleofatrustee$htm '
T &he &rust Indenture Act of 1A3A
In se5eral 1ases I a3 litigating- the ser5i1er see3s to 0e saying that they a22ro5e the .ore1los(re
0(t )o not want the t(rno5er o. rents$ This 0rings (2 the /(estion o. whether the noti1e o. )e.a(lt
was sent 0y the Tr(stee- who a11or)ing to the atta1he) in.or3ation wo(l) not e5en know i. the
)e.a(lt is 0eing *1alle)-, in whi1h 1ase the noti1e wo(l) 0e .atally )e.e1ti5e$ The .atal )e.e1t
wo(l) 0e that it is not a .(n1tion o. the Tr(stee i. the SA has the (s(al lang(age$ That .(n1tion is
e<1l(si5ely reser5e) .or the Ser5i1er$ Sin1e the SA 2ro0a0ly has lang(age in it that restri1ts the
knowle)ge o. the Tr(stee to 5irt(ally =ero- an) 1ertainly restri1ts the knowle)ge o. the Tr(stee as
to all re1ei2ts an) )is0(rse3ents 2ro1esse) 0y the s(06Ser5i1er- the 0roker )ealer >in5est3ent
0ank?- an) the Master Ser5i1er$ Th(s the Tr(stee o. the M4S tr(st is the last 2arty on who3 one
1o(l) )e2en) .or in.or3ation a0o(t a )e.a(lt @ e<1e2t that i. *Ser5i1er a)5an1es, >/(otations (se)
0e1a(se the 3oney is 1o3ing .ro3 the in5est3ent 0ank? then the Tr(stee wo(l) 2res(3a0ly know
that .ro3 the 1re)itorAs 2oint o. 5iew- there is no )e.a(lt$
A NOTICE OF FILIN% 1o(l) 0e sent to the Co(rt with the .(ll 2). .ile .ro3 the US 4ank we0site while
the s3aller 2). .ile 1ontaining e<1er2ts .ro3 the .(ll 2). .ile 1o(l) 0e atta1he) as an e<hi0it to the
4(t the 1o32le<ity gets worse$ I. the a1tion sho(l) ha5e 0een 0ro(ght 0y the ser5i1er- 0(t the
12 of :3
1re)itor was really a .(n)e) tr(st who was legally re2resente) 0y a 2ro2erly a(thori=e) ser5i1er-
then the 0i) 0y the Tr(stee at the a(1tion 3ight ha5e 0een 5ali)$ #en1e the atta1k sho(l) 0e on the
.ore1los(re 2ro1ess itsel. rather than the 1re)it 0i)$
Not to worry$ I )onAt think any o. the Tr(sts were .(n)e) @ or to 2(t it 3ore 2re1isely- I ha5e .o(n)
no e5i)en1e in the 2(0li1 )o3ain that any o. the M4S tr(sts were in .a1t .(n)e) the way it was set
.orth in the 2ros2e1t(s an) 2ooling an) ser5i1ing agree3ent$ There )oes not a22ear to 0e any
a1t(al tr(st a11o(nt o5er whi1h the Tr(stee has 1ontrol$ #en1e 0oth the e<isten1e an) 1a2a1ity o.
the Tr(st an) the Tr(stee are iss(es o. .a1t that 3(st 0e )e1i)e) 0y the Co(rt$
That lea5es the M4S tr(sts with no 3oney to originate or a1/(ire 3ortgages$ So who really owns the
loans+ This is why in Co(rt on a22eal- the attorneys agree that they )onAt know who owns the loans$
4(t what they really 3ean- whether they reali=e it or not- is that they )onAt know i. any o. the
loans are se1(re) 0y a 2er.e1te) 3ortgage$ I. none o. the 2arties in their *1hain, a1t(ally 1a3e (2
with 3oney or 5al(e- then the lien is not 2er.e1te) or 5ali)$ The 3ortgage wo(l) 0e s(0Ce1t to
n(lli.i1ation o. the instr(3ent$
I. the /(estion was really who owns the loans- the answer is si32le @ the in5estors who 2(t (2 the
3oney$ &e all know that$ &hat they are )an1ing aro(n) is the real n(0 o. the 1on.rontation here:
Sin1e we know who 2(t (2 the 3oney an) there.ore who owns the loan- was there any )o1(3ent or
e5ent that 1a(se) the loan as owne) 0y the in5estors to 0e se1(re)+ The answer a22ears to 0e no-
whi1h is why the in5est3ent 0anks are all 0eing s(e) e5ery other )ay .or FRAU"$ First they
)i5erte) the in5estor 3oney .ro3 the tr(st an) then they )i5erte) the title .ro3 the tr(st
0ene.i1iaries to one o. their own entities$ The a1tions o. the in5est3ent 0anks 1onstit(tes- in 3y
o2inion- an inter5ening tortio(s or 1ri3inal a1t that .r(strate) the intent o. 0oth the 0orrowers
>ho3eowners? an) the len)ers >in5estors?$
,o the real 8uestion is #hether the /ourt can be used to reform the closing and create a loan agreement
that is properly enforceable against lender and borro#er$ &hat appears to re8uire the creation of an
e8uitable mortgage, #hich is held in e-tremely lo# regard by courts across the country$ And then you
have 8uestions li*e #hen does the mortgage begin and #hat happens to title #ith respect to intervening
&he simple ans#er, as I said in 200G, is do some sort of amnesty and reframe the deals to reflect
economic reality allo#ing everyone to bite a bullet and everyone to cover their losses but avoid, at this
point another B million families being displaced$ 9y e-perience #ith borro#ers is that the over#helming
ma5ority #ould sign a ne# mortgage document that is enforceable together #ith a ne# note that is
enforceable and leaves all issues behind even though they *no# they could push the issue further$ &he
borro#er s are a lot more honest and straightfor#ard than their ban*er counterparts$ &he deal should
essentially be bet#een the investors and the homeo#ners$
The /(estion is whether the 1ase is )is3isse)- 2ossi0ly with 2reC()i1e- or i. they 1an try to
s(0stit(te the ser5i1er as the lainti.. in a style that wo(l) or 3ight rea) *SS- as ser5i1er- on
0ehal. o. ++++- Tr(stee .or the asset 0a1ke) tr(st, or *on 0ehal. o. the tr(st 0ene.i1iaries$,
The .(rther /(estion is whether the 1o32laint 1o(l) 0e a3en)e)$ 4(t i. the ser5i1er )i)nAt sen)
the NOTICE OF "EFAULT- there is nothing to a3en) sin1e on its .a1e- the Noti1e o. "e.a(lt was sent
0y a 2arty who not only was not a(thori=e) to start the 2ro1ess 0(t who was e<2ressly 2re1l()e)
.ro3 ha5ing any knowle)ge o. the )e.a(lt$
This in t(rn lea)s to the .(rther /(estion o. whether the 5eri.i1ation was 5ali) i. signe) on 0ehal. o.
US 4ank or any other 2arty *as tr(stee, on the 1o32laints to .ore1lose$
&he smaller file tells the #hole story #e have been arguing and it should be attached$ I
#ould attach the smaller one page synopsis of 8uotations from their #ebsite$ It leaves no
room for interpretation " trustees do not, and cannot initiate foreclosures or anything
else relating to enforcement$ &hey may not meddle in the foreclosure and they may not
meddle or mediate in settlement or mediation$ >ere is the smaller file4?, +ANJ 3)01 )%
As to +an* of America, the situation is even more dire "
contains the %ederal reserve )rder approving the +an* of America T 0a,alle merger$ I can
13 of :3
find no such order for the /iti9ortgageA+N Amro mortgage$ It is also true that I can find
no evidence that the +)A merger #as completed #hereas there is plenty of evidence that
the /itiA+N merger #as in fact completed$ &his means that /iti9ortgage became the
parent company of 0a,alle +an*$
@hile it is theoretically possible for an A/V?I,I&I)N of 0a,alle to have ta*en place in
#hich +)A ac8uired 0a,alle +an*, no evidence e-ists that any such transaction e-ists
bet#een +ofA and /iti$ It is clear that /iti completed its deal in ,eptember of 200G at
around the same time that +)A #as getting the approval order sho#n above on the
federal reserve #ebsite$ +ut most curiously the %ed does not mention the /itiA+N Amro
deal$ @hat #e *no# for sure is that there #as no 913G13 bet#een +ofA and /iti$
In my opinion based upon revie# of this order from the %ederal 3eserve and other
pronouncements from the %12, this order #as either never officially issued in actuality or
it never #as used$ In the absence of further contrary information #hich I have not been
able to uncover, thus far, the irrefutable conclusion is that +)A never became the
successor by merger to 0A,alle +an*$ &herefore +)A #as never the trustee for the asset
bac*ed 319I/ trust$ &herefore, the transaction to #hich ?, +an* refers granted ?, +an*
nothing even if the position of trustee is determined to be a commodity " an idea that
#ould create havoc in the mar*etplace$
As for #hether ?, +an* as trustee for 9+, trusts has standing, the ans#er is no and they have absolutely
no right, obligation or even access to the foreclosure or settlement process$ In the same 319I/ out in
/alifornia, I am the e-pert #itness on a case in #hich the same trust is represented by /hase as
servicer$ &he case has not caught up #ith the fact that /hase has sold or transferred servicing rights to
,P, ;,elect Portfolio ,ervices= or at least that is #hat they say$
&his being the case, several 8uestions arise4
,ince this information from the public domain is on the ?$,$ +an* #ebsite #ithout any disclaimers, are
#e sure they authori!ed the foreclosure and the action for turnover of rents7 )r are they going to say it
#as an error by the la# firm7 @ho is actually the client of the opposing la# firm " the trust
beneficiaries, the trust,, the trustee or ?, +an* #ho doesn.t really appear to be the trustee7
&he same 8uestion could be as*ed of +an* of America #ho says they are or #ere a trustee based upon a
dubious series of announcements that seem to lac* the same underlying transactions as all securiti!ed
loans that report a transaction has ta*en place ;i$e$$, on the note the contract is implied because the
borro#er agrees to repay a loan to a lender that never gave them the money=$
Neil- &hat Are Yo( Really Saying in lain English
Posted on 2ecember 2H, 2013 by Neil Garfield
&hat is the 8uestion one of my callers as*ed$
,o let me try to e-plain the mortgage monstrosity in short plain statements$ +ased upon my analysis of
information in the public domain, there are t#o #ays that anyone claim a loan #as securiti!ed " carved
up into pieces and then sold to multiple buyers or bundled #ith other loans$ 1ither #ay " carving or
bundling is meant to decrease ris*$ If one loan goes bad it is only a small part of the entire portfolio of
loans you bought so the perception of ris* is reduced$
&here are t#o types of transactions in #hich a loan enters the stream of claims of securiti!ation "
origination and ac8uisition$ )rigination is #hat it sounds li*e " money from the investors is used to fund
the loan$ Ac8uisition is a purchase of the loans #ith investor funds from someone #ho made the loan
#ithout the help or money of anyone else$ 1ither #ay, it is the money of investors that is used and
therefore they are the only ones paying value for the loan$ &herefore they are the creditor$
&here are t#o #ays that the investors money can enter the system " Purchasing mortgage bonds or
direct funding$ 1ither #ay there is an intermediary party aggregating or carving the loans up$ And here
is the problem, to #it4
&he investor money #as used for direct funding of the loan origination or direct funding of the purchase
of the loan$ +ut the loan documentation named some third party that didn.t loan or purchase the loan$
9y analysis indicates that not only #as there no agency agreement bet#een the investors and the party
1D of :3
the word

NA912 as the originator or purchaser, but that this #as an intentional act of deception$ &he bro*er
dealers selling the bond #ere selling a security issued by a 319I/ trust$
+ut instead of giving the trust the money, they *ept it and tac*ed on fees$ And instead of using the
investors. money to ma*e loans through a trust they converted a direct funding transaction in #hich the
investors should have been named the lenders into an ac8uisition from a 'third party( thus creating a
'profit( for the bro*er dealer$ &he profit #as the sale of the loan the investor already o#ned to a trust
that #as never funded$ &hey too* 5un* mortgages and sold them as platinum loans " creating an
entirely fictitious profit for the bro*er dealer and increasing the ris* of loss to investors e-ponentially$
,o the investor had his money split into t#o pieces " neither of #hich #as the purchase of the bond,
#hich is #hy all those investors and agencies and la# enforcement are accusing the bro*er dealer of
fraud$ )ne piece #as used to fund the origination or purchase of the loan and the other piece #as a
pool of money that #ould be used for ,ervicer advances and e-tra trading profits on fictitious trades
generated internally by the bro*er dealer$ &his process creates a lying mortgage securing a lying note$
And that is #hy the investors are saying the paper is unenforceable$
&he ban*s have done a good 5ob of blaming the borro#ers for the fraud$ +ut it is clear that no borro#er
even understands this process no#, much less as the designer of the scheme$ &he bro*er dealers rac*ed
up huge profits through theft of investor money that should have been used to fund the origination or
ac8uisition of mortgage loans but #as used instead to create a slush fund$ &he fact that ,)91 of the
money #as used for loans is not good enough because that changed the #hole deal and created a loan
transaction #ith the borro#er in #hich the actual lender #as left out and the designated lender #as a
party controlled by the bro*er dealer to create fictitious transactions or purchase insurance on loans the
bro*ers didn.t o#n$
In cases li*e this the la# is clear$ Nictims of the fraud must receive as much restitution of their
investment as possible$ And the perpetrators of the fraud are not allo#ed to enforce any 'contracts(
;loans= that they created under false pretenses to both the lender and the borro#er$ It is called unclean
hands$ ,o unless the foreclosing party can sho# a money trail that leads to the doorstep of the
foreclosing party they have nothing but dirt on their hands$
2oes this create a free house for the borro#er7 In most cases the ans#er is no$ +ecause the borro#ers
#ere putting do#n earnest money and e8uity in their homes to get these #ondrous loans that #ere too
good to be true based upon appraisals of pricing that #ere coerced$
&he bottom line is that the perpetrators of false schemes may not be allo#ed to *eep the benefit of the
money they stole nor the benefit of contracts they created under false pretenses to both the lender and
the borro#er$
2oes that help7
&S' Re5eals &here All the Stolen Money Fro3 the Syste3 Is Sitting
Posted on 2ecember 2G, 2013 by Neil Garfield
%3)9 ,>A2)@ +ANJING &) ,>A2)@ @A31>)?,ING
As I have previously stated, the +an*s have literally stolen trillions of dollars from pension funds,
municipalities, states, federal agencies, sovereign #ealth funds and private investors$ 1stimates range
from E3E20 &rillion$ ,o #here did they put that money7 &hey didn.t *eep it in currency ;too easy to
trace and too easy to cla# bac*=$ &hey are *eeping it in natural resources #hich are ;a= practically as
li8uid as cash and ;b= li*ely to go up in value rather than *eeping the stolen money in cash$ &he fact
that they have already been fined for committing violations and crimes #ith the storage and movement
of our natural resources is not stopping them any more than the fines and penalties they paid in the
great group of mortgagerelated settlements no# totaling an estimated E200 +illion$ /hump change
#hen you have stolen trillions of dollars$
&he foreclosures7 &hat.s 5ust the finishing touch on the last scheme$ No# the ne# one is starting in
natural resources$ &hey figure they have pretty much #on the mortgage confrontation$ Not on my
Millions o. tons o. 3etal store) in *sha)ow wareho(ses,
0D42A A9 1& Y CP9
• &he !" shines a light onto 'shado# #arehouses,( a hidden system of facilities that store tens of
millions of tons of aluminum, copper, nic*el and !inc across the globe for ban*s, hedge funds and
1: of :3
the word

commodity merchants$ L1ditorRs Note4 If you #ere #ondering #here all the hidden compensation
from real estate loans #ent is this recoverable under &I0A7M
• &he #arehouses operate outside the 0ondon 9etal 1-change.s system, are unregulated, and
don.t provide details of their holdings$ As a result, it.s unclear ho# much metal is held in the
shado# system$ &his lac* of visibility could cause ma5or price s#ings$
• &he !" article follo#s allegations that #arehousing companies have artificially boosted the
price of metals, particularly aluminum$ LCust as they artificially boosted the illusion of price in
the mortgage bubbleM
• /ompanies that operate metals #arehouses include Goldman ,achs ;G,=, Glencore Ustrata
;G0/N%= and CP9organ ;CP9=, although the latter is loo*ing to sell its commodities unit$
• 3elevant tic*ers include NA01, AA, A@/, JA0?, 9N,%, /1NU, N)3, +>P,3I), A/>$
• 1&%s4 2+/, CC/, 2++, 2CP, G,G, 3CI, G//, ?,/I, /%2, CCN, CC&, +)9,3G3/, /P13, /&%, 3CI, G,/,
0,/, G,P, CC?, 211, +22, +),, CC9, 266,22P, 2C/I, 02, /92, +/9, /?P9, ?/I, 3G3I, ?/2, ?+9,
%)I0, +2G, 0122,/92&, ,+N, ?,9I, 2P?, NINI, %&G/, /,/+, /,/3, >1N6
3ead more at ,ee*ing Alpha4

"arline S2en1er 1o33ente) on a link Li5ingLies 4log share)$
2arline #rote4 'It is not over yetX I can promise you this #hat they have done #ill be e-posed entirely it
ta*es timeX ,tand your ground as I have said if you have a home about to be foreclosed do not fold and
run$ even if you don.t have a la#yer$ &he day you go to court bring everyone you *no# #ith you to court
and ma*e a stand and demand they sho# proof$ &he original docs$ If people start calling the media #ith
their stories and filling the court rooms #ith the your loved ones and friends affected by this the 5udges
#ill be forced to demand the same$ &his is not the time to be silent$ If you cant afford an attorney
remember you have a voice ?,1 I&$ At that point #hat do you have to loose they are already have ta*en
it as far as they are concerned no# you need to fight bac*$ I don.t believe in class action suits at this
point because they 5ust cover up the bigger issues and fail to properly defend the individual.s rights and
steal more funds from settlements$(
Posted on 2ecember 2G, 2013 by Neil Garfield
1ditor.s note4 in preparing a comple- motion for the court in several related cases I ended
up #riting the follo#ing #hich I #ould li*e to share #ith my readers$ As you can see, the
issues that #ere once thought to be simple and susceptible to roc*et doc*et
determination are in fact comple- civil cases involving issues that are anything but
&his is a guide and general information$ 2) N)& ?,1 &>I, I% 6)? A31 N)& A 0I/1N,12
A&&)3N16$ &>1,1 I,,?1, A31 +)&> P3)/12?3A006 AN2 ,?+,&AN&IN106 A+)N1 &>1
AN13AG1 JN)@012G1 )% A 0A69AN$ /)N,?0& @I&> AN A&&)3N16 0I/1N,12 IN &>1
G1)G3AP>I/A0 A31A IN @>I/> &>1 P3)P13&6 I, 0)/A&12$
If you are see*ing litigation support or referrals to attorneys or representation please call

1= @hether a self proclaimed or actual &rustee for a 319I/ &rust is empo#ered to bring a
foreclosure action or any action to enforce the note and mortgage contrary to the
terms of the &rust document " i$e$, the Pooling and ,ervicing Agreement ;P,A= "
#hich Ne# 6or* and 2ela#are la# declare to be actions that are N)I2 not N)I2A+01K
specifically if the &rust document names a different trustee or empo#ers only the
servicer to bring enforcement actions against borro#ers$
2= @hether a &rustee or ,ervicer may initiate actions or ta*e legal positions that are
contrary to the interests of the &rust +eneficiaries " in this case creating a liability
for the &rust +eneficiaries for receipt of overpayments that are not credited to the
account receivable from the 2efendant +orro#ers by their agents ;the servicer and
the alleged &rustee= and the creation of liability to 0a,alle +an* or the &rust by virtue
1B of :3
of 8uestionable changes in &rustees$
3= @hether ?, +an* is the Plaintiff or should be allo#ed to claim that it is the &rustee
for the Plaintiff &rust$ @ithout Amendment to the /omplaint, ?, +an* see*s to be
substituted as Plaintiff in lieu of +an* of America, as successor by merger #ith 0a,alle
+an*, trustee for the Plaintiff &rust according to the &rust 2ocument ;the Pooling and
,ervicing Agreement= ,ection H$0A$
a= A subissue to this is #hether +an* of America is actually is the successor by
merger to 0a,alle +an* or if /iti9ortgage is the successor to 0a,alle +an*, as
&rustee of the Plaintiff &rust " there being conflicting submissions on the ,1/$gov
#ebsite on #hich it appears that /iti9ortgage is the actual party #ith o#nership
of A+N A93) and therefore 0a,alle +an* its subsidiary$
b= In addition, #hether opposing counsel, #ho claims to represent ?$,$ +an* may be
deemed attorney for the &rust if ?$,$ +an* is not the &rustee for the &rust$
i= @hether opposing counsel.s interests are adverse to its purported client or
the &rust or the &rust beneficiaries, particularly #ith respect to their recent
push for turnover of rents despite full payment to creditors through non stop
servicer advances$
D= @hether any &rustee for the &rust can bring any enforcement action for the debt
including foreclosure, assignment of rents or any other relief$
:= @hether the documentation of a loan at the base of the tree of the assignments and
transfers refers to any actual transaction in #hich the Payee on the note and the
9ortgagee on the 9ortgage$
a= )r, as is alleged by 2efendants, if the actual transaction occurred #hen a #ire
transfer #as received by the closing agent at the loan closing #ith 2efendant
+orro#ers from an entity that #as a stranger to the documentation e-ecuted by
2efendant +orro#ers$
b= @hether the debt arose by virtue of the receipt of money from a creditor or if it
arose by e-ecution of documentation, or both, resulting in double liability for a
single loan and double payment$
B= @hether the assignment of mortgage is void on its face as a fabrication because it
refers to an event that occurred long after the date sho#n on the assignment$
G= @hether the nonstop servicer advances in all of the cases involving these 2efendants
and ?$,$ +an* negates the default or the allegation of default by the &rust
beneficiaries, the &rust or the &rustee, regardless of the identity of the &rustee$
a= @hether a 21%A?0& e-ists or ever e-isted #here non stop servicer advances have
been paid in full$
b= @hether the creditor, under the debt obligation of the 2efendant borro#ers can
be allo#ed to receive more than the amount due as principal , interest and
e-penses$ In this case borro#er payments, non stop servicer advances, insurance,
credit default s#ap proceeds and other payments by coobligors #ho paid #ithout
subrogation or e-pectation of receiving refunds from the &rust +eneficiaries$
c= @hether a ne# debt arises by operation of la# as a result of receipt of third
party defendants in #hich a claim might be made by the party #ho advanced
payment to the creditor, resulting in a decrease the account receivable and a
corresponding decrease in the borro#er.s account ;loan= payable$
i= @hether the ne# debt is secured by the recorded mortgage that the Plaintiff
relies upon #ithout the borro#er e-ecuting a security instrument in #hich the
real property is pledged as collateral for the advances by third parties$
H= @hether turnover of rents can relate bac* to the original default, or default letter,
effectively creating a final 5udgment for damages before evidence is in the court
A= @hether the re8uirements of a demand letter to 2efendants for turnover of rents can
be #aived by the trial /ourt, contrary to %lorida ,tatutes$
a= @hether e8uity demands that the turnover demand be denied in vie# of the fact
that the actual creditors " the &rust +eneficiaries of the alleged &rust #ere paid in
1G of :3
full up to and including the present time$
b= @hether, as argued by opposing counsel, the notice of default letter sent to
2efendant +orro#ers is an acceptable substitute to a demand letter for turnover
of the rents if the letter did not mention turnover of rents$
c= @hether the notice of default letter and acceleration #as valid or accurate in
vie# of the servicer nonstop advances and receipt of other third party payments
reducing the account receivable of the &rust beneficiaries ;creditors=$
i= @hether there #as a difference bet#een the account status sho#n by the
,ervicer ;chase and no# ,P,= and the account status actually sho#n by the
creditor " the &rust +eneficiaries #ho #ere clearly paid in full$
10= @hether the Plaintiff &rust #aived the 2?1 )N ,A01 provision in the alleged
a= @hether the Plaintiff can rely upon the due on sale provision in the mortgage to
allege default #ithout amendment to their pleadings$
11= @hether sanctions should apply against opposing counsel for failure to disclose
essential facts relating to the security of the alleged creditor$
@hether this ;these cases= case should be treated off the 'roc*et doc*et( for foreclosures
and transferred to general civil litigation for comple- issues
+efore6ou )pen 6our 9outh )r @rite Anything 2o#n, Jno# @hat 6ou Are &al*ing About
Posted on 2ecember 2B, 2013 by Neil Garfield
12I&)3., N)&14 +y popular demand I am #riting a ne# #or*boo* that is up to date on the
theories and practices of real estate loans, documentation, securiti!ations and effective
enforcement and foreclosure of the collateral ;real property " i$e$, the house=$ &he boo*
#ill be finished around the end of Canuary$ If you #ant to purchase an advance
subscription to an advance copy #e can give you a discount off the price of E:AA$ 6ou #ill
receive the final edit drafts of each section as completed$ And your comments might be
included in the final te-t #ith attribution$ &his is an e-cerpt from #hat I have done so far
; the references to 'bo-es( is a reference to art#or* that has not yet been completed but
the meaning is clear enough from the #ords=4
LNote4 I did borro# some phrases and cites from Cudge Cennifer +aileyRs +ench +oo* for
Cudges in 2ade /ounty$ +ut things have changed substantially since she #rote that guide
and my boo* is intended to update the various treatises, boo*s and articles on the sub5ect
of mortgage related litigation in the era of securiti!ationM


&he massive volume of foreclosures and real estate closings have resulted in a failure of the 5udicial
system " both Cudges and Attorneys to scrutini!e the transactions and foreclosures and other
enforcement actions for compliance #ith basic contract la#$ &his starts #ith #hether there is an actual
loan at the base of the tree of assignments, endorsements, po#ers of attorney etc$ If the party at the
base of the tree did not in fact ma*e any loan and #as not possessed of any actual or apparent authority
to represent the party #ho 2I2 ma*e the loan, then the instruments e-ecuted in favor of the originator
are void, not voidable$ &his is simply because the loan contract li*e any contract re8uires offer,
acceptance and consideration$ 0ac*ing any meeting of the minds andFor consideration, there #as no
contract regardless of #hat one of the parties signed$

&he interesting issue at the start of our investigation is ho# to define the loan contract$ Is it a contract
that arises by operation of statutory or common la#7 Is it a contract that arises by e-ecution of
instruments7 @hat if the borro#er e-ecutes an instruments that ac*no#ledges receipt of money he
never received from the party he thought #as giving him the money7 Is it possible for the #ritten
instruments to create a conflict bet#een the presumptions at la# arising from #ritten, properly
e-ecuted instruments and the real facts that gave rise to a contract that #as created by operation of

1H of :3
&hese 8uestions come up because there is no actual #ritten loan contract$ &he borro#er and lender do
not come together and sign a contract for loan$ &he contract is implied from the documents and actions
contemporaneously occurring at or around the time of the loan 'closing$( It appears to be a case of first
impression that the borro#er is induced to sign documents in favor of someone #ho, at the end of the
day, does N)& give him the loan$ &his never #as a defect before the era of claims of securiti!ation$ No#
it is central to the issue of establishing the identity and rights of a creditor and debtor and #hether the
debt is secured or unsecured$

1ven #here the loan contract is solid, the same legal and factual problems arise at the time of the
alleged ac8uisition of the loan #here assignments lac* consideration because, li*e the above
origination, an undisclosed third party #as the actual source of funds$


1= "e0t4 in the conte-t of loans, the amount of money due from the borro#er to the lender$ &his may
include successors to the lender$ In a simple mortgage loan the amount of money due, the identity
of the borro#er and the identity of the lender are clear$ In cases #here the mortgage loan is sub5ect
to claims of assignments, transfers, sales or securiti!ation by either the borro#er or the party
claiming to be the lender or the successor to the lender, there are 8uestions of fact and la# that
must be determined by the court based on the method by #hich the money advanced to or on behalf
of the borro#er that leads to a finding by the court of the identity of the party #ho advanced the
money for the origination of the debt or for the ac8uisition of the debt$

a= In all cases the debt arises by o2eration o. law at the moment that the borro#er receives the advance
of money from a lender regardless of the method utili!ed and regardless of the validity of any
instruments that #ere e-ecuted by either the borro#er or the lender$

i= &he acceptance of the money by the borro#er raises a strong presumption that the advance
of money in the conte-t of the situation #as not a gift$

ii= In simple loans the legal instruments that #ere e-ecuted by the borro#er at the loan closing
are presumptively supported by consideration as e-pressed in the note or mortgage and a
valid contract presumptively e-ists such that the court can enforce the note and the

b= &he factual circumstances and any #ritten instruments that #ere e-ecuted by the parties as part of a
loan contract govern ter3s o. re2ay3ent of the debt$

c= En.or1e3ent o. the re2ay3ent o0ligation of the borro#er re8uires either a la#suit on the loan of
money or a la#suit on a promissory note$

i= If the la#suit is on the loan of money plaintiff must state the ultimate facts upon #hich
relief could be granted including the factual circumstances of the loan and the fact that the
loan #as made$ In %lorida " %$3$/$P$ 1$110 ;b=, %orm 1$A3B

ii= &he la#suit is on a note plaintiff must state the ultimate facts upon #hich relief could be
granted including that the plaintiff o#ns and holds the note, that 2efendant o#es the
Plaintiff money, and state the amount of money that is o#ed$ In %lorida " %$3$/$P$ 1$110 ;b=,
%orm 1$A3D

;1=@here the Plaintiff alleges it is a party by virtue of a sale, assignment, transfer or
1A of :3
endorsement of the note, Plaintiffs fre8uently fail to allege the re8uired elements in
#hich case the /ourt should dismiss the complaint " unless the 2efendant has already
admitted the debt, the note, the mortgage, and the default$

;2=&he burden of pleading and proving the re8uired elements is on the Plaintiff and cannot
be shifted to the defendant #ithout violating the constitutional re8uirements of due

;3=3e8uiring the 2efendant to raise a re8uired but missing element of a defective complaint
filed by a Plaintiff #ould re8uire the 2efendant to raise the missing element and then
deny it as an attempt at stating an affirmative defense that raises no issue other than an
element that #as re8uired to be in the complaint of the Plaintiff$ &his is reversible error
in that it improperly shifts the burden of pleading onto the 2efendant and re8uires the
2efendant to prove facts mostly in the sole control of the 2efendant and #hich #ould
establish standing to bring the action$

d= In those cases #here the loan is sub5ect to claims of assignments, transfers, sales or securiti!ation by
either party the court must decide on a casebycase basis #hether the legal consideration for the loan
;i$e$, the advance of money from lender to borro#er or for the benefit of the borro#er= supports the
debt described in the legal instruments that #ere e-ecuted by the borro#er at the loan closing$

i= If the /ourt finds that the legal instruments that #ere e-ecuted by the borro#er at the loan
closing are not supported by consideration, then the debt simply e-ists by operation of la#
and is not secured$

;1=,uch a finding could only be based on the court determining that the lender described in
the legal instruments is a different party than the party #ho actually loaned the money$

;2=@arehouse lending arrangements may be sufficient for the court to determine that the
named payee on the note or the identified lender supplied consideration$ &he court must
determine #hether the #arehouse lender #as an actual lender or a stra#man, nominee
or conduit$

ii= If the court finds that the legal instruments that #ere e-ecuted by the borro#er at the loan
closing are supported by consideration, then a valid contract may be found to e-ist that the
court can enforce$

2= Mortgage4 a contract in #hich a borro#er agrees that the lender may sell the real property ;as
described in the mortgage= for the purposes of satisfying a debt described in a promissory note that
is described in the mortgage contract$ It must be a #ritten instrument securing the payment of
money or advances made to or on behalf of the borro#er$ A lien to secure payment of assessments
for condominiums, cooperatives and homeo#ner association is treated as a mortgage contract,
pursuant to the enabling documents$ ,ee state statutes$ %or e-ample, %$,$ G02$0A, %la$ ,tat$ ;2010=

a= a mortgage, if properly perfected, creates a specific lien against the property and is not a conveyance
of legal title or of the right of possession to the real property described in the mortgage contract$ ,ee
state statutes$ %or e-ample section BAG$02, %la$ ,tat$ ;2010=, %la$ Nat.l +an* v bro#n, DG ,o 2d GDH

b= Mortgagee4 the party to home the real property is pledged as collateral against the debt described in
the note$ 9ortgagee is presumptively the party named in the mortgage contract$ @ith the advent
of MERS and other situations #here there is an assignment of the mortgage ;e-pressly or by operation of
la#= the named mortgagee might be a stra#man or nominee for a party described as the lender$ In such
cases there is an issue of fact as to perfection of the mortgage contract and therefore the mortgage
encumbrance resulting from the recording of the mortgage contract$ ,ee state statutes$ %or e-ample
20 of :3
%$,$ G21$H2;B=, %la$ ,tat$ ;2010=$

i= In %lorida the term mortgagee refers to the lender, the secured party or the holder of the
mortgage lien$ &here are several 8uestions of fact and la# that the court must determine in
order to define and apply these terms$

c= 9ortgagor

d= Len)er4 the party #ho loaned money to the borro#er$ If the lender #as identified in the mortgage
contract by name then the mortgage contract is most li*ely enforceable$

i= If the lender described in the mortgage contract is a stra#man, nominee or conduit then
there is an issue of fact as to #hether any party could claim to be a secured party under the
mortgage contract$ ?nder such circumstances the mortgage contract must be treated as
naming no identified secured party$ @hether this results in a finding that the mortgage
contract is not complete, not perfected or not enforceable is a 8uestion of fact that is
decided on a casebycase basis$

e= No right to C(ry trial e-ists for enforcement of provisions of the mortgage$ >o#ever, a right to 5ury
trial e-ists if timely demanded provided that the foreclosing party see*s 5udgment on the note or the
loan, to #it4 financial damages for financial in5ury suffered by the Plaintiff$

i= 4i.(r1ation of the trial for damages and trial for enforcement of the mortgage contract may
be necessary if the basis for the enforcement of the mortgage is nonpayment of the note$
Any properly raised affirmative defenses relating to setoff or enforceability of the note #ould
be raised in the case for damages$

ii= In that case the trial on the breach of the note #ould first be needed to render a verdict on
the default and then a trial on enforcement of the mortgage #ould be held before the court
#ithout a 5ury$ Any properly raised defense relating to fees and other costs assessed in
enforcement of the mortgage contract$

iii= A 8uestion of fact and la# must be decided by the court in actions in #hich the plaintiff
merely see*s to enforce the mortgage by virtue of an alleged default by the plaintiff but does
not see* monetary damages$ %lorida %orm 1$ADD ;%oreclosure /omplaint= is not specific as to
#hether it is allo#ing for a single trial #ithout 5ury$

;1=,ince foreclosures are actions in e8uity, no 5ury trial is re8uired, but it can be allo#ed$
,ince actions for damages re8uire 5ury trial if properly demanded, it #ould appear that
this issue #as not considered #hen the %lorida %orm #as created$

iv= &he re8uirement that the lainti.. 3(st own the loan is a re8uirement that the Plaintiff is
not acting in a representative capacity unless it brings the action on behalf of a principal that
is disclosed and alleges and attaches to the complaint an instrument that confers upon
Plaintiff its authority to do so$

v= Owning the loan means, as set forth in Article A of the ?// that the Plaintiff paid for it in
money or other consideration that #as e8uivalent to money$ &he same thing holds true under
Article 3 of the ?// for enforcement of the note if the Plaintiff see*s the e-alted status of
>older in 2ue /ourse #hich re8uires 2ay3ent LUS no knowle)ge o. )e.ensesall of #hich
must be alleged and proven by the Plaintiff$ L1M

3= Note4 a #ritten instrument describing the ter3s o. re2ay3ent or terms of payment to the payee or
a legal successor in interest$ In mortgage loans the payor is often described as the borro#er$ &his
instrument is usually described in the mortgage contract as the basis for the forced sale of the
21 of :3
property$ &he note is part of a contract for loan of money$ It is often considered the total contract$
&he loan contract is not complete #ithout the loan of money from the payee on the note$ If the
lender #as identified in the note by name then the note is most li*ely enforceable$

L1M In non5udicial states #here the po#er of sale is recogni!ed as a contractual right, the issue is less
clear as to the alignment of parties, claims and defenses$ In actions to contest substitution of trustees,
notices of sale, notices of default etc$ it is the borro#er #ho must bring the la#suit and in some states
they must do so #ithin a very short time frame$ /hec* applicable state statutes$ &he confusion stems
from the fact that the +orro#er is actually denying the allegations that #ould have been made if the
alleged beneficiary under the deed of trust had filed a 5udicial complaint$ &he trustee on the deed of
trust probably should file an action in interpleader if a proper ob5ection is raised but this does not
appear to be occurring in practice$ &his leaves the borro#er as the Plaintiff and re8uiring allegations
that #ould, in 5udicial states, be either denials or affirmative defenses$ &emporary restraining orders
are granted but usually only on a sho#ing that the Plaintiff has a li*elihood of prevailing " a
re8uirement not imposed on Plaintiffs in 5udicial states #here the lender or 'o#ner( must file the

t.s A @onderful 0ifeX " &he 0esson Is the +an*er Gets to Jeep the 9oney >e ,tole
Posted on 2ecember 2:, 2013 by Neil Garfield
I never li*ed the /apra movie 'It.s a @onderful 0ife,( but I never remembered #hy$ 2issapointment$ ,o
even though I li*e to #atch my favorite movies more than once, I avoided #atching this particular
movie$ It #as 5ust a *nee 5er* reaction for me$ +ut my daughter and I #atched tonight and I sa# it
through the eyes of a nearly BG year old man instead of a BG year old *id$ And I ended up reliving my
6ou see #hen I #atched it as a child I believed the movie #ould end #ith the old miser ban*er being
#heeled in at the end and giving bac* the money he stole$ B0 years later, not remembering the movie
very #ell, I still e-pected the end to be one of slight redemption #hen the old man is #heeled in and
gives George +ailey bac* the money that George thought ?ncle +illie had lost$ 2isappointed again, only
this time I #as also infuriated$ &he ban*er, *no#ing he had come into the money by pure accident #hen
+illie left it in the ne#spaper he #as teasing 9r$ Potter about, *ept the money #hen he discovered it in
full vie# of his associates #ho of course said nothing because of their fear that the old miser #ould not
only fire them but ruin them$ >e #as too big to fail$
&here is no reason for 9r$ Potter to *eep the money$ It isn.t his and he *no#s it$ +ut he is corrupt and he
is corrupting the system #ith his money from city politics to federal influence$ ,o he *eeps it and
doesn.t go to 5ail$
As a child I believed in redemption and in some #ays the /apra movie delivers it #hen the to#n people
rally around +ailey and he is better off even #ithout the return of the money from Potter$ +ut the
idealist in me e-pected that Potter #ould have returned the money any#ay because he #ouldn.t #ant
to be thought of as a thief$ +ut this doesn.t bother him, 5ust li*e the mortgage fraud #e have going on
And tens of millions of people love this movie because of its uplifting message of good people
appreciating the life and people they have$ +ut am I the only one #ho #as disappointed and infuriated
that old +an*er Potter got to *eep the money he stole7
6es you could argue that Potter didn.t e-actly steal it, but he *ne# it #asn.t his and if morality #as
enforced, the angel /larence #ould have made sure everyone *ne# the +an*er had the money that #as
threatening to put the +uilding and 0oan Association out of business and ruining the reputation ;li*e
credit rating= of the perfectly innocent George +ailey #ho is content to ma*e ED: dollars per #ee*
managing the small +uilding and 0oan association$ +ailey.s goal is to do the right things to maintain and
build a community that maintains values of decency, morality and civility$ >is goal is to get by 5ust li*e
his shareholderdepositors$ >e has no interest in getting rich, #hich Potter offers him #hen George has
a crisis of confidence$
Potter.s goal is money and he doesn.t care if he turns his community into a pile of crap as long as he
22 of :3
ma*es money doing it$ In fact he li*es it #hen things crash so he can buy bargains and in the process
ruin the life and dream of thousands of people$ ,ound familiar7
Not that the movie lac*ed morality and a good story about the #ay #e see our lives$ +ut /apra ta*es a
definite shot at the ban*er by leaving him out of the glory at the end #hen the to#n people gather up
far more money than needed to save George +ailey from ban*ruptcy and possibly 5ail$ &he ban*
e-aminer is in to#n to do his #or*$ >is first and only stop is to tally up the capital of George +ailey.s
tiny +uilding and 0oan Association but s*ips the ban* that 9r$ Potter o#ns$ And %ran* /apra tells us #hy
#hen Potter tells us that a congressman calling Potter is told to #ait on the phone #hen Potter is
distracted by his petty 5ealousy of +ailey$
&he movie has a good moral at the end$ If you live your life doing #ell by others, there is a pretty good
chance they #ill do #ell by you$ +ut in the end, the nasty miser is all about staying rich and gets richer
because he gets money that belongs to another person and hides the fact$ >e gets to *eep the EH,000 he
stole from +ailey.s +uilding and 0oan Association$ &he money Potter steals in the movie is only EH,000 or
about E2H0,000 in today.s money " easily enough for ban* auditors to close do#n the business of
+ailey.s ban* and is enough to add to the fortune of Potter$ ,o the moral of the story is the opposite of
the lesson " being a good person is a good thing but the successful bad person #ill al#ays get his #ay$ I
re5ect that lesson and encourage you to do the same$
&he amount stolen this time by the li*es of 9r$ Potter is about E13 trillion, causing hundreds of billions
of losses in pension funds alone and yet the government is concerned about the #elfare of 9r$ Potter
instead of George +ailey$ &ens of millions of families #ere displaced from their 5obs and homes$ I find
that unacceptable, don.t you7
%ederal Cudge ,lams @ells %argo for Niolation of 2ebt /ollector.s Act in %lorida
Posted on 2ecember 2:, 2013 by Neil Garfield

12I&)3., N)&14 this is #hy I am encouraging attorneys to ta*e cases involving
foreclosure, even if the foreclosure itself is problematic$ &he %2/PA federal counterpart
essentially states the same rules$ &hese cases allo# for damages and recovery of attorney
fees that might aid in the cost of protracted litigation by a pretender lender$ 9ost of my
clients are receiving these contacts even after they have e-pressly told the caller that
they are represented by counsel and even that there is a la#suit pending$ I #ould add
that there is clearly a 8uestion as to #hether the offer of modification is an admission
against interest that the loan is in default and that therefore the current 'default( is
2anielle Jelley of our firm Garfield, Jelley and @hite has been #riting about this for
some time$ ,he firmly believes, and I agree #ith her, that the time has come to file these
actions$ I #ould suggest that a debt validation letter be sent under the %2/PA and that
the 'borro#er( obtain a title and securiti!ation report as #ell, in order to shore up the
potential setoffs and counterclaims against the pretender lender$ +ut the good part of
this la# is that even if the caller is in fact the true lender or creditor, they must follo#
the rules " or pay the penalty$
2013 ?$,$ 2ist$ 01UI, 1G2G1B, S
AN231@ /)NJ0IN, Plaintiff, v$ @100, %A3G) +ANJ, N$A$, 2efendant$
/ase No$ B413cv12DB)rl3GJ3,
?NI&12 ,&A&1, 2I,&3I/& /)?3& %)3 &>1 9I2201 2I,&3I/& )% %0)3I2A, )30AN2) 2INI,I)N
2013 ?$,$ 2ist$ 01UI, 1G2G1B
2ecember H, 2013, 2ecided
2ecember A, 2013, %iled
CORE TERMS: collection, mortgage, debtcollection, phone, cell, collect a debt, telephone,
solicitations, e-emption, consumer, foreclosure, landline, factual allegations, security interest, e-press
consent, prerecorded, foreclose, servicer, e-empt, foreclosure action, emergency calls, business
relationship, cellular phones, telephonesolicitation, categorically, communicate, presuit, e-empted,
COUNSEL: LS1M %or Andre# /on*lin, Plaintiff4 3ichard ,$ ,huster, 01A2 A&&)3N16, ,huster O ,aben, 00/,
23 of :3
,atellite +each, %0$
%or @ells %argo +an*, N$A$, a foreign corporation, 2efendant4 Aaron ,$ @eiss, 01A2 A&&)3N16, /arlton
%ields, PA, 9iami, %0K April 6$ @al*er, 01A2 A&&)3N16, /arlton %ields, PA, )rlando, %0K 9ichael Jeith
@inston, 01A2 A&&)3N16, /arlton %ields, PA T @est Palm +each, @est Palm +each, %0$
'U"%ES: 3)6 +$ 2A0&)N, C3$, ?nited ,tates 2istrict Cudge$
OINION 4Y: 3)6 +$ 2A0&)N, C3$
&his cause is before the /ourt on the follo#ing4
1$ Plaintiff.s /omplaint ;2oc$ 2=, filed August 1:, 2013K
2$ 2efendant @ells %argo.s 9otion to 2ismiss Plaintiff Andre# /on*lin.s /omplaint and
,upporting 0egal 9emorandum ;2oc$ 12=, filed August 2H, 2013K and
3$ Plaintiff Andre# /on*lin.s 3esponse to 9otion to 2ismiss ;2oc$ 1H=, filed ,eptember 23,
?pon consideration, the /ourt finds that 2efendant.s motion is due to be denied$
2efendant is the loan servicer on Plaintiff.s mortgage$ ;2oc$ 2, \ D$= In 2010, 2efendant sued Plaintiff to
foreclose on his house$ ;2oc$ 1H, p$ 1$= 2efendant allegedly continued to communicate about the
foreclosure directly to Plaintiff after he #as represented by counselK this led Plaintiff LS2M to file a
previous %lorida /onsumer /ollection Practices Act ;'%//PA(= claim against 2efendant$ ;#d. at 12$= &hat
case later settled$ ;#d. at 2$=
&hen, earlier this year, 2efendant allegedly resumed calling Plaintiff.s cell phone$ ;2oc$ 2, \\ 1B1H$=
After one of the calls, 2efendant left a voicemail stating4 '&his is $ $ $ your mortgage servicer, calling in
regards to your mortgage$ $ $ $ &his is an attempt to collect a debt $ $ $ $( ;#d. \ 1B$= Plaintiff
accordingly filed this suit in state court, alleging that 2efendant has violated the %//PA and the
&elephone /onsumer Protection Act ;'&/PA(=$ ;#d. \\ 102B$= 2efendant removed the case to this /ourt
on the basis of federal8uestion 5urisdiction$ ;2oc$ 1$=
2efendant no# moves to dismiss the /omplaint, arguing that it fails to state either an %//PA or a &/PA
claim$ : ;2oc$ 12$= Plaintiff opposes$ ;2oc$ 1H$= &his matter is ripe for the /ourt.s ad5udication$
: 2efendant also argues that Plaintiff failed to give presuit notice, #hich #as allegedly re8uired by
Plaintiff.s mortgage$ ;2oc$ 12, pp$ 2D$= %irst, this suit is about the calls, not the mortgageK thus, the
mortgage is not 'central( to the /omplaint, and the /ourt declines to consider LS3M it at the motionto
dismiss stage$ !ee Day v. $aylor, D00 %$3d 12G2, 12GB ;11th /ir$ 200:=$ ,econd, the /ourt is s*eptical that
a contractual re8uirement of presuit notice to allo# the other party an opportunity to cure a breach is
applicable to this action, #hich is not on the contract itself$ Nevertheless, because the /ourt declines
to consider this argument no#, it #ill not preclude 2efendant from raising it at a later point$
A plaintiff must plead 'a short and plain statement of the claim$( %ed$ 3$ /iv$ P$ H;a=;2=$ )n a motion to
dismiss, the /ourt limits its consideration to 'the #ellpleaded factual allegations$( %a Grasta v. &irst
'nion !ec., #nc., 3:H %$3d HD0, HD: ;11th /ir$ 200D=$ &he factual allegations in the complaint must 'state
a claim to relief that is plausible on its face$( Bell (tl. )or*. v. $+ombly, ::0 ?$,$ :DD, :G0, 12G ,$ /t$
1A::, 1BG 0$ 1d$ 2d A2A ;200G=$ In ma*ing this plausibility determination, the /ourt must accept the
factual allegations as trueK ho#ever, this 'tenet $ $ $ is inapplicable to legal conclusions$((s,croft v.
#-bal, ::B ?$,$ BB2, BGH, 12A ,$ /t$ 1A3G, 1G3 0$ 1d$ 2d HBH ;200A=$ A pleading that offers mere 'labels
and conclusions( is therefore insufficient$ $+ombly, ::0 ?$,$ at :::$
&he LSDM %//PA provides that 'LiMn collecting consumer debts, no person shall $ $ $ LcMommunicate #ith a
debtor if the person *no#s that the debtor is represented by an attorney #ith respect to such
debt $ $ $ $( %la$ ,tat$ ] ::A$G2;1H=$ 2efendant argues that Plaintiff has failed to state an %//PA claim
because4 ;1= enforcing a security instrument does not amount to debt collection #ithin the meaning of
the %//PAK ;2= Plaintiff has not alleged that 2efendant #as attempting to collect a debtK and ;3=
Plaintiff has not alleged that 2efendant 'communicated( #ith him #ithin the meaning of the %//PA$
2D of :3
;2oc$ 12, pp$ DB$= &he /ourt disagrees$
It is true that 'a mortgage foreclosure action itself( does not 8ualify as debt collection under the
%//PA$ $rent v. .ortg. /lec. 0egistration !ys., #nc., B1H %$ ,upp$ 2d 13:B, 13B0B1 ;9$2$ %la$
200G= ;/orrigan, C$= ;noting that %air 2ebt /ollection Practices Act ;'%2/PA(= case la# applies to %//PA
cases=K see also arren v. )o1ntry+ide Home %oans, #nc., 3D2 %$ App.- D:H, DB0 ;11th /ir$
200A= ;'L%Moreclosing on a security interest is not debt collection activity Lfor the purposes of ] 1BA2g of
the %2/PAM$(=$ >o#ever, the action at issue here is not the invocation LS:M of 'legal process to
foreclose,( see $rent, B1H %$ ,upp$ 2d at 13B1, but rather debt collection calls made outside that 5udicial
process$ It is not as if these calls #ere made to notify Plaintiff of the foreclosure action or to attempt to
comply #ith the statute$ )f. Dia2 v. &la. Defa1lt %a+ Gr*., P.%., No$ 340Acv:2DC329/3, 2011 ?$,$
2ist$ 01UI, BH:D1, 2011 @0 2D:B0DA, at SD ;9$2$ %la$ Can$ 3, 2011= ;/orrigan, C$= ;'&he timing of the
filing of the foreclosure complaints L5ust #ee*s before the communicationsM confirms that defendant
#as not using the Lalleged debt collectionM letters in an attempt to collect the debt outside the
foreclosure process$(=$ 3ather, the calls #ere made years into the underlying foreclosure action, and
after Plaintiff previously filed an %//PA claim for this very same behavior, in an e3*licitattempt to
collect a debt$ ;2oc$ 2, \ 1B ;'&his is $ $ $ your mortgage servicer, calling in regards to your
mortgage$ $ $ $ &his is an attempt to collect a debt $ $ $ $(=$= &o try to claim no# that these calls #ere
made in an attempt to foreclose the security interest rather than to collect a debt is simply
disingenuous$ !ee 0eese v. /llis, Painter, 0atterree 4 (dams, %%P, BGH %$3d 1211, 121G ;11th /ir$
2012= LSBM ;holding that a letter e-plicitly stating that the defendant #as attempting to collect a debt
plainly constituted debtcollection activity, and noting that 'LtMhe fact that the letter and documents
relate to the enforcement of a security interest does not prevent them from also relating to the
collection of a debt(=$ &o give credence to that argument #ould be to give carte blanche to any holder
of secured debts to harass consumers in the process of foreclosure, and as the ?$,$ /ourt of Appeals for
the 1leventh /ircuit aptly noted, '&hat can.t be right$ It isn.t$( #d. at 121H$
Plaintiff has alleged that 2efendant bypassed his la#yer and called him directly to discuss payment on
his mortgage and to attempt to collect a debt$ ;2oc$ 2, \\ 1B1H$= &his is precisely the *ind of behavior
that the %//PA #as designed to prevent$ &he /ourt therefore finds that Plaintiff has sufficiently stated
an %//PA claim, and 2efendant.s motion is due to be denied on that ground$
&he &/PA prohibits ma*ing any call using an autodialer to any cell phone, e-cept for emergency calls or
calls #here the called party has given prior consent$ DG ?$,$/$ ] 22G;b=;1=;A=;iii=$ 2efendant argues that
all debtcollection LSGM calls, including those made to cell phones, are categorically e-empt from the
&/PA$ ;2oc$ 12, p$ G$= >o#ever, the case on #hich 2efendant relies for that proposition, .eado+s v.
&ran5lin )ollection !erv., #nc., D1D %$ App.- 230 ;11th /ir$ 2011=, is distinguishable from the one at bar$
In .eado+s, the plaintiff #as suing under t#o provisions of the &/PA #hich are inapplicable here4 ]
22G;b=;1=;+=, regarding landlines, 8 and ] 22G;c=;:=, regarding telephone solicitations$ ; #d. at 23:3B$
Neither of those provisions apply in this case, as Plaintiff is suing under ] 22G;b=;1=;A=;iii=, regarding cell
phones$ ;!ee 2oc$ 2, \ 21$= &hough .eado+s does broadly state that 'the %// has determined that all
debtcollection circumstances are e-cluded from the &/PA.s coverage,( that statement is dicta and is
also 8ualified by the narro# holding of the case, #hich #as specifically based on the landline and
telephonesolicitation provisions$ D1D %$ App.- at 23:$
8 &he court held that the defendant did not violate the landline provision because it had an e-isting
business relationship #ith the intended recipient of the call and the call #as made for a commercial,
nonsolicitation purpose"both e-plicit LSHM e-emptions from that provision of the &/PA$ .eado+s, D1D
%$ App.- at 23: ;citing #n re 01les 4 0eg1lations #m*lementing $el. )ons1mer Prot. (ct of 1661, G %//
3cd$ HG:2, HGG3 ;)ct$ 1B, 1AA2=;'LPMrerecorded debt collection calls #ould be e-empt from the
prohibitions on such callsto residences as4 ;1= calls from a party #ith #hom the consumer has an
established business relationship, and ;2= commercial calls #hich do not adversely affect privacy rights
and #hich do not transmit an unsolicited advertisement$( ;emphasis added==$
; &he court held that the defendant did not violate the telephonesolicitation provision because the
calls made #ere debt collections, not telephone solicitations$ .eado+s, D1D %$ App.- at 23B$ &he court
rightly noted that the %// has determined that debtcollection calls are 'not sub5ect to the
&/PA.s se*arate restrictions on tele*,one solicitations.( #d.;citation and internal 8uotation mar*s
2: of :3
omitted= ;emphasis added=$
%urther, this /ourt must read that statement in .eado+s in con5unction #ith the %// ruling on #hich it
relies, #hich provides that 'prior e-press consent Lin debtcollection calls made to cell phonesM is
deemed to be granted only if the #ireless LSAM number #as provided by the consumer to the creditor,
and that such number #as provided during the transaction that resulted in the debt o#ed$( #n re 01les
4 0eg1lations #m*lementing $el. )ons1mer Prot. (ct of 1661, 0e-1est of ()( #nt7l for )larification 4
Declaratory 01ling, 23 %// 3cd$ ::A, :BDB: ;2ec$ 2H, 200G= ;&)) 01ling=$ &his ruling clarifies that
not alldebtcollection calls to cell phones are categorically e-empted from the &/PA"unli*e the broad
e-emptions for landline debtcollection calls and telephone solicitations, #hich are based on the
content of the call itself$ !ee id. at :B1B2 ;'LPMrerecorded debt collection calls are e-empted
from ,ection 22G;b=;1=;+= of the &/PA #hich prohibits prerecorded or artificial voice messages to
residences$(=, :B: ;'L/Malls solely for the purpose of debt collection are not telephone
solicitations $ $ $ $ &herefore, calls regarding debt collection $ $ $ are not sub5ect to the &/PA.s separate
restrictions on Ptelephone solicitations$.(=$ 3ather, #ith regard to cell phones, a debt collector must
sho# that the debtor provided the number during the debt transactionK only then #ill a debtcollection
call fall under the consent e-ception in LS10M the cellphone provision$ !ee Gager v. Dell &in. !ervs.,
%%), G2G %$3d 2B:, 2G3 ;3d /ir$ 2013= ;'&he only e-emptions in the &/PA that apply to cellular phones
are for emergency calls and calls made #ith prior e-press consent$ ?nli*e the e-emptions that apply
e-clusively to residential lines, there is no $ $ $ debt collection e-emption that applies to autodialed
calls made to cellular phones$ &hus, the contentbased e-emptions invo*ed by Lthe defendantM are
In sum, debtcollection calls to cell phones are only e-empt from the &/PA if the debtor had prior
e-press consent, in the form of a number provided by the debtor during the transaction giving rise to
that debt$ !ee &)) 01ling, 23 %// 3cd$ at :BDB:$ As Plaintiff has pled that he did not give consent or
alternatively revo*ed consent ;2oc$ 2, \\ 2223=, he has ade8uately stated a &/PA claim, and
2efendant.s motion is due to be denied on that ground$ It #ill be 2efendant.s tas* to prove consent at
the summary5udgment stage$!ee &)) 01ling, 23 %// 3cd$ at :B: ;putting the burden on the caller to
sho# consent=Ksee, e.g., 8sorio v. !tate &arm Ban5, &.!.B., H:A %$ ,upp$ 2d 132B, 133031 ;,$2$ %la$
2012= ;revie#ing the issue LS11M of consent and revocation on summary 5udgment=$
Accordingly, it is hereby OR"ERE" AN" A"'U"%E" that 2efendant @ells %argo.s 9otion to 2ismiss
Plaintiff Andre# /on*lin.s /omplaint and ,upporting 0egal 9emorandum ;2oc$ 12= is "ENIE"$
"ONE AN" OR"ERE" in /hambers in )rlando, %lorida, on 2ecember H, 2013$
FsF 3oy +$ 2alton Cr$
3)6 +$ 2A0&)N C3$
?nited ,tates 2istrict Cudge
&he Pleading &rap in the %oreclosures +rought by Persons in the ',ecuriti!ation( /loud
Posted on 2ecember 21, 2013 by Neil Garfield
)ne of the #ays that 5udges are greasing the s*ids for fraud by the ban*s is that they ignore the basic
re8uirement of pleading " that the complaining party plead the e-istence of a duty of the homeo#ner,
breach of that duty and conse8uential damages as a result of that breach of that duty by the defendant
homeo#ner$ +y failing to allege the ultimate fact that the originator actually made the loan, the ban*s
are forcing the homeo#ner to file an affirmative defense instead of merely denying the allegation by
the ban*, #hich #ould place the burden of proof on the +an* " a burden that in most cases that they
could not sustain$
Instead of any allegation that the %orecloser became the holder in a transaction in #hich value #as
e-changed or paid by the %orecloser, the +an*s ignore that allegation and force the homeo#ner to file
an affirmative defense stating that there #as no value paid or even involved in the alleged transfer of
the mortgage and note$ &he foreclosing party escapes #ithout be re8uired to allege facts that it could
never proveX &his isn.t 5ust bad pleading that is allo#ed to pass as stating a cause of action, it is a
violation of statute$
&he comple-ity of the documentation and movement of money in fraudulent securiti!ation schemes
leads la#yers and 5udges to oversimplify the situation producing anomalous results$ It may sound
2B of :3
counterintuitive to say that a party may be 'holding( the mortgage because if endorsement of the note
but not be able to enforce the mortgage #ithout sho#ing and pleading they paid for it$ +ut to say
other#ise as the +an*s insist, #ould allo# sophisticated criminals to intervene and capture the property
#ithout paying a dime for it$ &he crime here is that the investors #ho advanced the )N06 consideration
in the #hole deal are deprived of both the proceeds of collection AN2 the collateral promised as
security for their advance of funds$ As an analogy, the logic being used in many courts #ould allo# Cohn
,mith to sue for personal in5uries suffered by Cohn 2oe in a slip and fall in front of a supermar*et never
visited by ,mith, #ho had never even been in the same ,tateX
As 3onald 3yan, 1s8$ of &ucson, Ari!ona pointed out years ago, the courts are confusing Article 3 and
Article A of the ?// as adopted by each ,tate$ Nearly all the trial and appellate decisions are based on
Article 3 despite the fact that )N06 Article A governs the enforcement and transfer of security
agreements " including mortgages$ &hat Article specifically re8uires that for a holder of the note to
enforce the collection by sale of the collateral, the party see*ing that affirmative relief must allege
they paid for the mortgage$ If there is no value paid, there is no enforcement of the mortgage$ Period
end of story$
+ut 5udges are accepting arguments from counsel based on Article 3 of the ?// #hich has nothing to do
#ith mortgages$ &he ne# la# in %lorida ;inadvertently or not= essentially recogni!es this for a la#ful
foreclosure of the mortgage collateral$ &his is a 5udicial doctrine that interferes #ith both due process
and essential substantive la#$ &he *ey reason the ban*s are not pleading they made a loan and that they
#ill suffer financial in5ury is because they didn.t ma*e the loan ;and neither did any predecessor= and
since they didn.t pay value of any *ind for the 9)3&GAG1 there is no legal basis for alleging in5ury for
enforcement under Article A of the ?//$
0i*e it or not the legal re8uirement for 5urisdiction " ,&AN2ING " once gain ta*es center stage$
&his informal 5udicial doctrine essentially converts 5udicial states to non5udicial$ @hy7 +ecause instead
of the %orecloser having the burden of proving its case, the case is presumed, the burden of pleading is
on the homeo#ner, and the burden of proof is placed on the homeo#ner to disprove a case that #as
never in the pleading of the %orecloserX &hus even if they 2) prove it the /ourts have entered 5udgment
for foreclosure or denied Petitions for &3) in non5udicial states, essentially treating the right to
foreclose as an absolute right no matter #ho brings the action and no matter #hat economic interest
the %orecloser has in the loan, debt, note or mortgage$
&his has evolved from 5udicial error in both trial and appellate courts by loo*ing at Article 3 of the ?//
and 5udicial confusion bet#een holder and holder in undue course$ &he %orecloser never pleads it is a
holder in due course " because it #ould be stating that it too* the note %)3 NA0?1 and @I&>)?&
N)&I/1 that the obligation had been declared in default and @I&>)?& *no#ledge of the borro#er.s
defenses " not the least of #hich instead yes, they signed the note, but they never received the loan
from the payee$ &he contract at the beginning #as bro*en$
?nder Article 3 of the ?// the allegation that the collecting party is entitled to enforce as a 'holder(
merely asserts the e-istence of a contract as sho#n by the closing documents in #hich the homeo#ner
signed the note, mortgage, and other papers at closing$ It is N)& entitled to any presumption other than
that it is in la#ful possession of the note, nor that the contractual duties are valid and enforceable$ +ut
the /ourts are going on 'inevitability( and e-pediency to clear doc*ets #hile sealing the fate of
borro#ers and adding another chapter of fraud in the boo* being #ritten by @all ,treet ban*s$
,o the /ourts have s#allo#ed the bait hoo* line and sin*er under +)&> A3&I/01 3 and A3&I/01 A of the
As an afterthought consider the implications for demand for a 5ury trial$ If the #ould be %orecloser is
relying strictly on Article 3 of the ?//, they might be #aiving their right to foreclose #hich is governed
by Article A and of course state la#$ An action for money damages is sub5ect to a demand for 5ury trial$
&he right is constitutional so there is no state la# preemption involved$ &hus could cause bifurcation if
they demand both an action on the collection of the note and the sale of the collateral ;the mortgaged
property=$ &hus in order to establish a prima facie case for foreclosure there #ould first need to be a
5ury verdict in favor of the pretender lender in a stated amount$ )nly then #ould the %orecloser be
allo#ed to proceed on its claim to sell the property as collateral for the loan$ )3 as I have repeatedly
suggested, the 5ury verdict might result in !ero due to the pretender lender in #hich case the entire
case #ould be defeated$
Needless to say, before you try anything along these lines you must consult a licensed attorney in the
2G of :3
5urisdiction in #hich your property is located$ And to la#yers, I #ould suggest you study up on bills and
notes so that you are clear in your presentation$
I am pleased to report that 3onald 3yan, #ho gave me the above analysis, is no# accepting cases again
having cleared his doc*et$ 0a#yers and pro se litigants see*ing representation in Ari!ona or litigation
support involving +an*ruptcy, state court litigation or %ederal /ourt litigation are encouraged to contact
him$ 0isten carefully , because he goes fast$ 0i*e me, things that are obvious to him he sometimes
assumes another la#yer or e-perienced pro litigant *no#s the basics$ +ut this I, basic and most la#yers
and 5udges do not pause to process this information, understand it or apply it$
3)NA02 36AN /AN +1 31A/>12 A& :202AH3333 or ronryanla#^co-$net$
%or litigation support to attorneys please go to http4FF###$livingliesstore$com or call :20D0:1BHH$
/hallenging 2eeds Issued After Auction ;,ale= of Property
Posted on 2ecember 20, 2013 by Neil Garfield
)ne of the re#arding aspects of #hat I do is to see more and more people not only hopping on board,
understanding securiti!ation, but adding to the body of *no#ledge I have amassed$ In the follo#ing
article +ill Paatalo, #ho has done the loan level accounting for many of our readers, e-pands upon a
topic that I have introduced ;and of course 2an 1dstrom= but not e-plained nearly as #ell as +ill does4
12I&)3., N)&14 I #ould add that #here servicer advances are paid to the creditor ;or
#ho #e thin* is the creditor=, then there is often an overpayment, #hich might account
for #hy the 'credit bid( is lo#er than the total amount demanded by the servicer for
redemption or reinstatement$ &his anomaly could void the notice of default and notice of
sale and create a problem on the amount re8uired for redemption after the socalled
&he legal issue presented by +ill is #hether the party #ho submitted the bid satisfies the
state.s legal definition of a creditor #ho is allo#ed to submit a credit bid at closing in lieu
of cash$ &his issue is fairly easily analy!ed before any order or 5udgment is entered by a
+ut after#ards, because of the rubber stamping, the 5udgments mostly state something
along the lines that EUUUU$UU is o#ed by the borro#er to the opposing party in litigation$
&he 5udgment is final until overturned by appeal or a motion to vacate$
&hat Cudgment ma*es them a possible creditor and even raises the presumption that they
are a creditor #hen in fact there #as no evidence to support that finding in the order or
5udgment$ And ordinarily the courts re8uire that the motion or other attac* be verified by
a s#orn statement from the homeo#ner$ &hat gets tric*y because #ithout having an
actual forensic report in your hands, ho# #ould the borro#er even *no# about such
&he 5udgment can be attac*ed for fraud because the opposing party had never entered
into a transaction #herein it paid value ;see Article A of ?//= to originate or ac8uire the
loan$ Procedural rules vary from state to state on ho# this is done and the time limit fro
such challenges$ In fact, none of the people in the cloud of 'securiti!ation( paid anything
for the loan, #ith the e-ception of the servicer #ho is credited #ith having paid servicer
advances to the creditor #hen in fact it appears as though the servicer advances #ere
paid by the investment ban* #ho reserved money out of the pool of money advanced by
investors to pay the investors out of their o#n money$ >ence, #e see the reason for
calling the scheme a P)NII scheme$ &his is #hy the issue of ,&AN2ING *eep bouncing
bac* front and center$
@ithout an attac* on the Cudgment I doubt if your state la# #ill allo# you to challenge
the sale or the sale price$ )bviously, before you act on anything on this blog, you need to
consult #ith an attorney #ho is licensed and e-perienced in such matters and #ho
practices in the 5urisdiction in #hich your property is located$
%or those #ho are good #ith computer graphics, here are t#o dra#ings I recently made to
describe the process of securiti!ation as it played out$ &he bottom line is that the
investment ban* diverted the money from the trust and diverted the documentation that
2H of :3
#as due to the investors to its o#n stra#men, trading on that documentation and ma*ing
a ton of money #hile the investorFlenders and homeo#nerFborro#ers lost either
everything or a substantial amount of their #ealth that ended up in the poc*et of the
ban*s$ Anyone #ho is good #ith graphics is invited to donate their time to this #ebsite
and ma*e my hand dra#n s*etches easier to read and perhaps animated$ Neil Garfield
,ecuriti!ation 2iagrams 122013
Posted by +PIA on 2ecember 1H, 2013 bi +ill Paatalo4
%or the past couple of years, I have been providing clients #ith the internal loan level accounting data,
#hich reveals in most instances of private securiti!ation, that all payments 'due( on the notes have
been paid regularly by undisclosed 'coobligors$( &hus there becomes an issue of fact as to #hether or
not the 'note( is actually in 'default$( @ord through the grapevine is that this particular argument is
gaining some momentum in certain 5urisdictions throughout the ?nited ,tates$
@ell no# it.s time to use the same internal accounting data to attac* those dubious '&rustee.s
2eeds$( In non5udicial foreclosure states, a (&rustee.s 2eed ?pon ,ale( or &rustee.s 2eed( is recorded
after the foreclosure sale$ )ften, the property is sold bac* to the supposed creditor into #hat is called
'31)( status$ In cases #here the sub5ect loans #ere alleged to have been securiti!ed, the &rustee.s
2eed #ill typically state that the &rustee for 'U6I 9ortgage+ac*ed &rust( #as the 'highest bidder( at
the sale and paid cash in the amount of EQQQ$$;#hatever dollar figure$= &here are many reasons to
8uestion the validity of these documentsK such as the actual parties submitting the 'credit bids,( and
#hether or not any actual cash e-changed hands as attested to under notary ac*no#ledgment$ >o#ever,
there is a #ay to provide evidence and proof that no such payment ever e-changed hands$
&he follo#ing language #as e-tracted from a typical &rustee.s 2eed4
In this particular case, the alleged amount o#ed in the 'Notice of 2efault( #as roughly E31D,000$00$ A
chec* of the internal accounting for this particular loan ;Bmonths after the sale= sho#s the loan in
'31)( status #ith no such payment having ever been applied$ In fact, the certificateholders ;investors=
are still receiving their monthly payments of POI #ith the trust sho#ing '!ero( losses$
&his is good hard evidence that the sale and subse8uent &rustee.s 2eed filed in this case #as a 'sham(
If your loan #as alleged to have been securiti!ed by a private mbs trust, and your home sold in similar
fashion #ith a recorded &rustee.s 2eed, contact me today ;bill$bpia^gmail$com= to see if your &rustee.s
2eed matches up #ith the internal accounting data$
0iving lies no# offers 1-pert Affidavits sho#ing #hat #as stated in the &rustee.s 2eed as
opposed to #hat has actually occurred behind the curtains$
,ee http4FF###$livingliesstore$com$ 9ost people as* for consults #ith me andFor the
e-pert, li*e +ill, so their la#yer understands #hat to do #ith this information$
Thir) arty ay3ents Are So I32ortant to "e.en)ing Fore1los(re Cases
Posted on 2ecember 20, 2013 by Neil Garfield
I *eep getting inundated #ith creative arguments about the documentation, #hich is e-actly the rabbit
hole that the +an*s #ant you to go do#n$ It is a trap$
&echnical attac*s on documentation are not going to #in the day because in the end, it is public policy
for negotiable instruments to be safe bets in the mar*etplace$ 6ou are not going to get e-cused from
payment #ithout payment or ban*ruptcy orders$
+ut payment includes all payments received by the creditor and that is not 5ust servicer advances$ It
2A of :3
includes insurance and other third party coobligors #ho paid the bro*er dealers$ &hey claim the
insurance and other trading profits do not inure the benefit of the investors$ +ut established la# sho#s
that by issuing the mortgage bonds in nominee 'street name( they are at all times acting as agent for
the investors$ And all money from sales, insurance, credit default s#aps etc must be credited first to
the investor #hich means the creditor is satisfied up to the amount of money actually received by the
creditor or by any authori!ed agent of the creditor even if the agent disclaims the principal agent
+asic accounting rules re8uire that if a deduction is made from the account receivable there must be a
corresponding deduction in the account payable$ If it #ere other#ise only payments received from the
borro#er could be credited to the account even if the borro#er.s Aunt Alice specifically stated that this
#as to be credited to the borro#er.s account$ &he problem for the &rust, amongst others, is that the
la# ma*es no distinction bet#een 'Aunt Alice( and any other payor #ho advances a payment for
e-press purpose of satisfying an account receivable that derives its value from the debt of a person on
#hose behalf the payment is received and accepted$
&he argument about the socalled #indfall to the borro#er drops to the ground #ith a thud #hen the
court is presented #ith parties #ho have unclean hands, #ho defrauded the investors in the first
instance and #ho are defrauding the investors no# even as they try to enforce the documentation that
#as an illegal diversion of title from the investors$ Giving &>19 the right to collect yet again or to
foreclose on property and be named as the creditor to the detriment of the investors, is merely using
the court to continue the fraud and theft$
6our 0ender is the %ederal 3eserve ,ystem
Posted on 2ecember 1A, 2013 by Neil Garfield
It is difficult to state #ith certainty e-actly ho# many ugly mortgage bonds have been purchased by the
%ederal 3eserve$ +ut if you put pencil to paper #e can estimate the number$ &he published figures
indicate there #as a purchase of several hundred billion in these defective bonds #hen the financial
collapse occurred$ &o be on the safe side #e #ill use a figure of E300 billion$ ,ince then the published
articles indicate that the %ed has been purchasing bonds monthly$ &he amount of monthly purchases of
the mortgage bonds appears to vary bet#een E:: billion and E3: +illion$ ,o if #e use an average of ED:
billion per month of mortgage bonds that have been purchased by the %ederal 3eserve$ &his has been
going on for about :: months$ ,o the total monthly purchase of mortgage bonds is around E2,22: +illion
or E2$22: &rillion$ >ence the total purchases by the %ed could be reasonably estimated at E2$:2:
&his means that the %ederal 3eserve o#ns a substantial bul* of the bonds issued during the mortgage
meltdo#n$ Vuestions abound$ &he %ederal 3eserve *no#s the bonds #ere defective in a number of
respects$ +ut they are purchasing those bonds for the e-press purpose of propping up the financial
system and presumably getting those bonds out of circulation$ &he 8uestion is #hy did they purchase
these bonds from the ban*s7 &he ban*s #ere merely the intermediaries that created the 319I/ trusts
that issued the bonds$ ,o are the he trust beneficiaries receiving this money7 Nothing in the public
domain indicates that the investors #ere paid by the ban*s that received this money$ ,ince it #as a
purchase the bonds still e-ist #hich means that the largest investor in many trusts is the %ederal
3eserve$ Is the %ed getting ,ervicer advances7
+ut the largest 8uestion on my mind is #hy the %ederal 3eserve as an agency has not addressed the
fundamental economic problem of economic ine8uality that #as caused by a deeply fla#ed system of
defrauding investors and borro#ers into entering into loan deals that #ere ;a= different from each other
and ;b= could never #or* because of the values used for the loan and property7
If you ta*e the number of %oreclosures that have been rubber stamped through the system plus the bond
purchases by the %ederal 3eserve and add them together, the amount of 'help( received by the ban*s is
around E3$: &rillion$ &he amount of help given to homeo#ners is a tiny fraction of that amount$ If the
%ederal 3eserve #ants economic gro#th, it should use its potential influence as the largest investor in
the bonds to mandate settlements that ma*e economic sense to both investors and to borro#ers$ &his
correction stops the financial aid to ban*s #ho are *eeping the money$ +ut it stimulates investment and
incidence in the financial system and the capability of the middle class to spend and stimulate the
30 of :3

&he main obstacle to fair settlements is the fact that #e are still going through intermediary ban*s #ho
#e *no# have committed #idespread fraud and #hose balance sheets and income statements are being
artificially inflated by sho#ing values and profits that should not have been allo#ed$ No ne# la# is
re8uired$ @hen you defraud investors the normal result upon discovery is restitution to those investors$
If the investors ;including the federal 3eserve= are satisfied and see* no further payment on the debt
due to these lenders, then a pro rata reduction of the debt supposedly o#ed by homeo#ners is merely
the corresponding boo**eeping entry$ &he federal 3eserve has an obligation to use its influence to force
these settlements avoiding further displacement and further erosion of middle class #ealth$
CP 9organ ,ues %2I/ for @A9? /ash )ver 2isputed 9ortgage +onds
Posted on 2ecember 1A, 2013 by Neil Garfield
12I&)3., N)&14 &he dots are starting to get connected$ >ere CP 9organ #ho said they
#ere the successor for everything that #as @A9? turns out to be arguing that this didn.t
actually happen and that some money is still left in the @A9? 'estate$( &he issue that is
not raised is #hat else is in the @A9? estate7 I content that there are numerous loans or
claims to loans that #ere never transferred to anyone successfully and I thin* the %2I/
and CP9 both *no# that$ /hase is trying to limit its e-posure for bad bonds #hile at the
same time claiming o#nership or servicing rights for the underlying mortgages$
@hich brings me to a central procedural point4 if these cases are to be properly litigated
such that the truth of the transaction;s= comes out, then it cannot be done on the roc*et
doc*et of foreclosures$ It should be assigned to regular civil litigation or even better
comple- litigation because the issues cannot be addressed in the :10 minutes that are
allo#ed on the roc*et doc*et$
• CP9organ ;CP9= has sued the %ederal 2eposit Insurance /orp$ for a portion of the
E2$G+ remaining in the %2I/ receivership that li8uidated @ashington 9utual
follo#ing the sale of its branches and deposits to CP9organ for E1$HH+ during the
financial crisis in 200H$
• &he la#suit is the latest development in the dispute bet#een CP9organ and the
%2I/ over #ho should assume @ashington 9utual.s legal liabilities, such as those
related to the sale of problematic mortgage bonds$
• 9ean#hile, CP9organ has been sued by the ,tate of 9ississippi for alleged
misconduct #hile going after creditcard users for missed payments$ &he ban*.s
sins include pursuing consumers for money they didn.t o#e, 9ississippi said$
• &he state is the second to sue CP9organ over the issue, the other being /alifornia,
#hile 1: others are e-amining the matter$ CP9 is already in early settlement tal*s
#ith 1D of them$
3ead more at ,ee*ing Alpha4
About that /ontract @ith the Investors ;&rust +eneficiaries=
Posted on 2ecember 1H, 2013 by Neil Garfield
&he deal offered to and accepted by the the real lenders ;creditorsFinvestors= #ho ended up being trust
beneficiaries to an unfunded trust #ith no assets, #as that there #ould be multiple coobligors so there
#as practically no #ay on earth that the investor could lose money " e-cept of course in the case of
AN2 fraud is #hat happened because the coobligors #ere part of a vast system in #hich the loans #ere
not securiti!ed, not collaterali!ed and not enforceable by any of the parties #ho see* enforcement$
&hey A31 enforceable by investors but only under implied contract theoryK and because the title to the
loan #as stolen by intermediaries the mortgage encumbrance to secure the debt is simply not there$ +ut
it is being treated as though the mortgage encumbrance #as valid$ 1ventually you #ill start seeing
decisions that nullify the mortgage, nullify the note as to enforcement or but use the note as partial
31 of :3
evidence of part of the deal$
&he contract that the investor relied upon #hen he made the loan, includes multiple parties, none of
#hich #ere disclosed to the borro#er and most of #hich received very liberal compensation that #as
also not disclosed to the investor or the borro#er$ @hether disclosure #as re8uired to the investors is
not my concern$ +ut disclosure to the borro#ers is obviously re8uired but #as routinely and universally
2an 1dstrom has provided his list of parties$ As a senior securiti!ation analyst, this is pretty complete$
&he point here is that the party borro#ing the money agreed to a different deal than the the one
offered by the lender$ Neither the lender nor the borro#er truly understood that they #ere both getting
scre#ed in much the same #ay$ And as most of you *no#, the +an*s #ill do AN6&>ING to stop borro#ers
from meeting up #ith lenders to compare notes$ &he conclusion of that meeting #ould most li*ely end
in 5ail time for thousands of people$ >ere is a list of the coobligors, conduits, transactions in #hich
intermediaries claim ;or have, #ith or #ithout *no#ing it= some interest in the 'securiti!ed(
transactions ;i$e$, the loans=4

master servicer
s#ap provider
cap provider
%2I/ 3epurchase Agreements
P9I provider
pool insurance provider
certificate guaranty insurance policy
each investor ;subordinate, me!!anine, nonoffered, etc$=
fraud insurance policy
ban*ruptcy insurance policy
originator ;buy bac* agreements=
sponsor ;buy bac* agreements=
depositor ;buy bac* agreements=
reserve funds
&A3P funds
corporate guaranty
,urety +onds
0etters of credit
+lan*et %idelity +ond
9ortgage errors and omissions and professional liability insurance policy
1-cess proceeds
1-cess recoveries
%oreclosure Profits
Investment earnings
Are ,ervicer Advances 2eductible 1-penses for >omeo#ners7
Posted on 2ecember 1H, 2013 by Neil Garfield
9any homeo#ners get ta- statements from entities claiming the right to file them, #ith an 1IN that is
problematic$ @e are having trouble lin*ing the 1IN #ith the name of the entity that sends the ta-
statement$ 9ore importantly or perhaps of e8ual importance is the 8uestion raised by individual
homeo#ners and investors #ho have purchased multiple residential units and operate them as a
business, renting them out as landlords$
2espite my degree and e-perience in ta-ation, my *no#ledge is out of date on this sub5ect$ Nobody
should ta*e any action based upon this article #ithout consulting a 8ualified ta- professional$ &his
article is for information purposes only$ >o#ever, I pose the issue for those #ho do *no#, to comment on
the follo#ing scenarios4
32 of :3
%irst in the homeo#ner #ho o#ns his single family residence but #ho has stopped paying the monthly
amount demanded by the ,ervicer$ In those cases #here there are ,ervicer or similar advances, the
creditor *eeps getting paid the interest due under the bond agreement even though the ,ervicer is not
receiving the interest allegedly due from the alleged borro#er under the alleged note$ &he interesting
issue here is #hether the homeo#ner still o#es the money to the creditor under the original note and
mortgage agreement$ As I have previously outlined in recent days the ans#er is no, the homeo#ner does
not o#e that money to the creditor claiming rights under the original borro#er loan agreement$ &hat
#ould seem to be a gain$ +ut the party #ho made such payments appears to have a ne# claim against
the homeo#ner for contribution or un5ust enrichment even though &>A& claim is not secured$ &hus, it is
asserted, the payments #ere made on behalf of the homeo#ner in e-change for a claim to recoup the
amounts advanced$ >ence the conclusion that since the payments #ere made, the homeo#ner may
deduct the ,ervicer advances from his income before paying ta-es$
,econd is the company or person that bought multiple properties and created a business out of them$
&he same logic applies$ &hey didn.t ma*e payments to the ,ervicer but the payments of interest #ere
obviously received by the trust beneficiaries li*e the scenario above$ And li*e the homeo#ner they are
sub5ect to a claim to recoup the money advanced on their behalf producing a ne# debt, li*e the above,
that is unsecured$ &hat being the case, they ought to be able to deduct the ,ervicer advances as
business e-pense deductions from the business ;rental= income$
If the entities in the alleged securiti!ation chain or cloud oppose this and #ant the deduction
themselves, then they must pic* up the other end of the stic* " I$e, that the payments they made as
,ervicer advances are not collectible from the borro#er$ >ence all such payments #ould reduce the
original debt due the creditor and #ould not create a ne# debt due to the party #ho funded the
,ervicer advances$ &hat party might be the ,ervicer as the name implies or it might be actually paid by
the bro*er dealer #ho sold the mortgage bonds$ 1ither #ay the creditor #ould appear to have received
the interest income it #as e-pecting under its deal, as presented by the bro*er dealer$ >ence the trust
beneficiary #ould be getting a statement from ,)91+)26 stating that they had received the income for
ta- reporting purposes$
An interesting litigation 8uestion is #hether the creditors did receive such statements from one of the
securiti!ation parties, and #hether it can be discovered #hich party sent the statement and #hat 1IN
they used$ An interesting ta- and discovery 8uestion is #hether one of the securiti!ation parties too*
the deduction after paying the creditor and must no# have that deduction disallo#ed " especially if the
,ervicer advances #ere ta*en out of a pool of money supplied by the creditor, #hich is most probably
the case$ It seems unli*ely that the ,ervicer #ould actually be ma*ing such advances in such large
volumes ;#here #ould they get the money7= and it seems e8ually unli*ely that any other party #ould be
digging into their o#n poc*ets to ma*e a payment for #hich they get a dubious claim against a
defaulting homeo#ner$
Perhaps the most interesting point here is that if the party #ho actually paid the 'servicer advances(
contests, they are admitting that the creditor received the payments and if they don.t contest it, they
might still be admitting to the receipt of payments by the creditor during the pendency of the
foreclosure action$ &he failure to disclose this in the accounting rendered to the court could be argued
as fraud and grounds to overturn the foreclosure action, giving rise to an action for damages for
#rongful foreclosure$ &he argument #ould be along the lines of no default and the ultimate defense of
/ro#d ,ourcing on the /hase@A9? 9erger and the )#ner of the 0oans
Posted on 2ecember 1G, 2013 by Neil Garfield
0iving0ies is cro#dsourcing this one$ ,end your transcripts, articles, letters to
neilfgarfield^hotmail$com$ @e #ant to *no# #hat you have about the /hase @A9? merger and #hat
effect your information has on the o#nership of loans that #ere originated or ac8uired by @A9?$
3emember there #ere multiple parties involved in this "
1$ @ashington 9utual and subsidiaries, some of #hich still e-ist independently,
2$ the e-)&, ;office of thrift supervision=,
3$ the %2I/ receiver 3ichard ,choppe,
D$ the ?, &rustee in @A9? ban*ruptcy,
:$ @ashington 9utual itself apart from the estate created and *ept by the receiver and
33 of :3
B$ @ashington 9utual itself apart from the estate created and *ept by the ?$,$ +an*ruptcy trustee,
and of course
G$ /hase +an* #hose merger document ;on the %2I/ #ebsite= #ith @A9? e-cludes loans and states
that the consideration #as !ero for the merger$
Information about any of these and any cases in #hich the o#nership of loans #as at issue #ould be
greatly appreciated$ @e #ill publish the list of resources as it gro#s$
?, +an* Antics versus &heir )#n @ebsite
Posted on 2ecember 1G, 2013 by Neil Garfield
1ditor.s Note4 In ans#er to the many in8uiries #e get, I am )N06 licensed in the ,tate of
%lorida$ &he reason you see my name pop up in other states is that I am fre8uently an
e-pert #itness and trial consultant on cases, #or*ing for the la#yer #ho is licensed in
that state$ 9y la# firm, Garfield, Jelley and @hite provides direct representation in most
parts of %lorida and litigation support to la#yers in %lorida and other states$
9any la#yers are no# #ell versed enough to proceed #ith only a little help from us$ +ut
some need our templates, drafting and scripts for oral argument of motions and other
court appearances$ I have not appeared pro hac vice in any case thus far and I doubt that
I #ill be able to to do so$ ,o if you #ant litigation support for your cases, the la#yer
should contact my office at H:0GB:123B$ If you are unrepresented it #ill be much more
challenging to provide such support as it might be construed as the unauthroi!ed practice
of la#$

?, +an* is popping up all over the place as the Plaintiff in 5udicial actions and the initiator of
foreclosures in non 5udicial states$ It is one of the leading parties in the shell game that is mista*en for
securiti!ation of loans$ +ut on its o#n #ebsite it admits against the interests that it has advanced in
courts across the country, that it has N) P)@13 &) %)31/0),1 or to pursue any other remedies$
?, +an* pops up as the foreclosing party as trustee for some supposedly securiti!ed asset pool
mas8uerading as a 319I/ trust ; #hich #e all *no# no# #as breached in virtually every #ay, #hich is
#hy the I3, granted a one year amnesty for the trusts to get their acts together " an action of dubious
+oth ?, +an* and the the Pooling and ,ervicing Agreement #ill usually state flat out that
the servicer ma*es all decisions and ta*es all actions relating to the borro#er and the borro#er.s
payments$ &here are several reasons for this one of #hich is the obvious conflict that could occur if the
the servicer and the trustee #ere both bringing foreclosure actions$
+ut the other reason, the hidden one, is that the ban*s #ant to *eep the court.s attention on the
borro#er.s contract and *eep it a#ay from the lender.s contract #hich is 8uite different than the
borro#er.s contract$ And &>A& #ill invite in8uiry as to ho# or even if the t#o contracts are related or
connected such that the mortgage encumbrance gives rights to the trust beneficiaries such that the
collection and foreclosure efforts #ill inure to the benefit of the trust beneficiaries in the 319I/ trust$
,o #hy is ?, +an* violating both the content and intent of the P,A and its o#n #ebsite7 In my o#n la#
firm I have t#o entirely different foreclosure cases " one in #hich ?, +an* is the foreclosing party and
the other #here the servicer started the foreclosure action$ +oth loans are claimed to be in the same
trust although one is in /alifornia and the other is in %lorida$ @hy #ould /hase ban* as servicer started
an action7 1ven #orse, #hy did /hase ban* start the action as though it #as the creditor and claim that
there #as no securiti!ation7 LIn the %lorida case I am lead counsel #hereas in the /alifornia case I am
only an e-pert #itness and consultantM$
I am not sure about the ans#ers to these 8uestions but I have some con5ectures$
In the %lorida case, ?, +an* is bringing the case because the servicer can.t " it *no#s and its records
sho# nonstop servicer advances to the trust beneficiaries of the 319I/ trust that supposedly #as
funded and #ho purchased or originated the loans in the trust$ In the /alifornia case, even though the
servicer advances are still present it is non5udicial so it is easier for /hase to slip by #ithout even
pausing because unless the homeo#ner brings a legal action to stop the foreclosure sale it 5ust happens$
And then it is over$
+ut /hase is treading on thin ice here #hich is #hy it is no# transferring the servicing rights " and
therefore the rights to litigate " to ,P, #ho did not ma*e the servicer advances$ )f course the servicer
3D of :3
advances are probably actually paid by the bro*er dealer #ho is holding the money of the trust
beneficiaries #ithout &>19 *no#ing that the bro*er dealer has not used their money entirely for
mortgage loans " and instead too* a large chun* out as a 'trading profit( #hen it #as a tier 2 yield
spread premium that should have been disclosed at closing$
)ne of the more interesting 8uestions is #hether the modification or refi of the loan rene#s the effect
of &I0A violations thus enabling the borro#er to claim the undisclosed compensation, treble damages,
interest and attorney fees$ A suggestion here about that " most la#yers are ignoring the damage aspect
of these cases and seeing the &I0A has a defined statute of limitations that appears to have run$ I #ould
ta*e issue as to #hether it has in fact run, but even more importantly there is still an action for
common la# fraud unless bloc*ed by a separate statute of limitations$ &he e-tra profits collected by
those entities in the cloud of parties #ho served in various roles in the securiti!ation process are all fair
game for recovery or setoff against the amount claimed as due as principal of the loan$ It can also be
used to cause severe collateral damage " literally " because it #ould probably reveal that the
mortgage encumbrance #as never perfected by completion of the loan contract$
+oth /hase and ?, +an* are going into ban*ruptcy courts in /hapter 11 proceedings and demanding
ade8uate protection payments #hile the ban*ruptcy is proceeding, *no#ing and #ithholding the fact
that the creditor is being paid every month and there is no default from the creditor.s point of vie#$
&his #ould be important information for the debtor in possession and the his attorney and the Cudge to
*no#$ +ut it is #ithheld in the hope that the borro#erFdebtor #ill never discover the truth " and in
most cases they don.t, unless they get a loan level account report based upon a solid securiti!ation
report #hich is based upon a good title report$ see http4FF###$livingliesstore$com$
+oth ?, +an* and /hase are #iling to endure a#ards of sanctions for misleading the court as a cost of
doing business because the volume of complaints about their illegal and fraudulent activities is nearly
!ero #hen compared #ith the total of all state court, federal court and ban*ruptcy actions$ +ut no#
they are treading on even thinner ice " they are see*ing to get turnover of rents #ith people #ho o#n
multiple properties$ &heir arrogance apparently overcame their 5udgment$ &he o#ners of multiple
properties fre8uently have substantial resources to litigate against the ?, +an* and /hase and no# ,P,$
&he truth is coming out in those cases$
)ther +an*s #ho say they are trustees simply direct the borro#er or other in8uirers to the servicer$ +ut
#here ?, +an* is involved it is see*ing profit at the e-pense of the trust beneficiaries and the o#ners of
the real property involved$ It seems to me that ?, +an* has gotten too cute by half and is no# e-posed
to multiple actions for fraud$ And I 8uestion #hether the current revelations about ?, +an* +?6ING the
position of trustee has any legal support$ I don.t thin* it does " not in the P,A, not in the statutes nor
under common la#$
,11 ?, +an* 3oleof&rustee,ept2013
3: of :3
>iring an 1-pert4 @hat Are you 0oo*ing %or in %oreclosure 0itigation7
Posted on 9ay B, 201D by Neil Garfield
I have spent the last G years developing the narrative for an e-pert opinion that could be presented,
believed and sustained in court$ In #riting to a probable ne# e-pert #e #ill offer through the
livinglies$store$com I summari!ed #hat attorneys should be loo*ing for #hen they consult #ith an e-pert
in structured finance ;i$e$, derivatives, securiti!ation etc$=$
>ere are some of the issues you #ant covered by the e-pert declaration and testimony in court$ &he
basic rule of thumb is that the e-pert must have both the 8ualifications to testify as an e-pert and a
persuasive narrative of #hy his conclusions are right$ @ithout both, the testimony of the e-pert simply
doesn.t matter and #ill be re5ected$
If you are a proposed e-pert in structured finance, then here is #hat I #ould #ant to *no#, and #hat I
thin* la#yers should as*, depending upon #hat fact pattern is present in each case$
)ne thing I need to *no# is #hether you feel comfortable in tal*ing about the o#nership and balance of
the loan$
In one e-ample American +ro*ers /onduit #as the payee on the note and mortgage$ @e alleged that
they didn.t loan the money$ )ur narrative ran something li*e this4 if you as* me for a loan, and I
respond '6es 5ust sign this note and mortgage( AN2 &>1N you sign the note and mortgage AN2 &>1N I
don.t give you a loan, A31 6)? P31PA312 &) ,A6 &>A& &>1 N)&1 AN2 9)3&GAG1 @131 21%1/&IN1 IN A
+A,I/ @A6, &) @I&4 &>A& &>1 ,IGNA&?31 )N &>1 N)&1 AN2 9)3&GAG1 @A, P3)/?312 +6 %3A?2 )3
9I,&AJ1 AN2 &>A& @I&>)?& &>1 I21N&I%I/A&I)N )% &>1 31A0 /312I&)3 +)&> IN,&3?91N&, A31
@ould you, as a reasonable business person accept a note purporting to be a negotiable instrument
under the ?// if you *ne# that the transferor neither funded the loan nor ;if they purport to be a
successor= paid for the assignment7
@hat is your opinion of your position if you found out after acceptance of the note and mortgage that
there #as doubt as to #hether the obligation #as funded or purchased for value7 @hat #ould you do or
suggest to a client in either of those positions " ;1= *no#ledge Lor _must have *no#nM or ;2= no
*no#ledge Land later finding out that there is doubt as to funding and purchasing for valueM7
Are you prepared to say that the fact that the borro#er actually did receive money as a loan from
another different party does not create a circumstance #here the borro#er is construed to convey any
rights to anyone other than the source of funds or someone in actual privity #ith the lender " and that
both note and mortgage are defective under normal recording statutes " and certainly not a
commitment by the debtor to +)&> the source of the funds and the receiver of the signed promissory
note and mortgage7
In the one case referred to above, the corporate representative conceded that A+/ didn.t loan the
money$ >e #as unable to e-plain #hat #as transferred by A+/ to 3egents and from 3egents to 1st
Nation#ide and thence to /iti/orp by merger$ >e admitted that '%annie 9ae #as the investor from the
start$( 6ou and I understand that neither %annie and %reddie are lenders$ &hey are guarantors and they
serve as 9aster &rustee for hidden 319I/ trusts$ ;2o you *no# or agree #ith that assertion7=
+ut the 8uestion is #hether the note is actual 'evidence of the debt( ;the blac* letter definition of a
promissory note #hen it contains a promise to pay= #hen the creditor is identified as a party #ho #as
not a lender$ In the absence of disclosures of some representative capacity for an actual lender, are you
prepared to testify that the note is unenforceable even if the debt is other#ise enforceable in relation
to the actual source of funds7
)r #ould you say that it is not enforceable by the stated payee but it might still be evidence of the debt
and evidence of the terms of repayment to the third party source7 >o# does the mar*etplace treat such
8uestions in valuing a note and mortgage7
&he 8uestion is #hether the e-pert actually believes and is #illing to argue that these conclusions are
true and correct$ &he e-pert must earnestly believe these assertions to be true, logically and legally$
Is it acceptable to the prospective e-pert to see a result #here the application of la# and facts results
in the homeo#ner getting his home free and clear " on the basis that the #rong party sued him or
initiated foreclosure ;in non 5udicial states=, or that the notice of default, notice of acceleration, and
statements of money due #ere #rong$
&he approach is an attac* on o#nership and balance$ &he balance #ould be #rong, even if the
o#nership #as established, if the payments #ere not applied properly$ &he payments include all
payments received by the creditor$ &hat includes all servicer advances directly to trust beneficiaries, as
#ell as insurance and loss sharing payments ;i$e$, from %2I/ and others= paid and received on behalf of
the investors directly or the trust beneficiaries$
3B of :3
Part of the reasoning here is that you really have an interesting problem$ &he &rust beneficiaries agreed
to 'loan( money to a 319I/ trust in e-change for a comple- formula of repayment under the indenture
of the mortgage bond ;contained in the Prospectus and Pooling and ,ervicing Agreement=$ &hose terms
are different than the terms signed by the homeo#ner$
,o there are t#o agreements " the mortgage bond and the mortgage note$ 2ifferent parties, ne#
parties are in the P,A as insurers, servicers,servicer advances etc$ all resulting in a 2I%%131N& payment
from an assortment of parties e-pected by the creditor "different than the one promised by the debtor
#hether you refer to the note as evidence of the debt or not$Add the complicating factor that #ithout
evidence that the &rust #as ever funded ;i$e$, #ithout evidence that the bro*er dealer sent the
proceeds from the offering prospectus to the trust= ho# do #e ans#er the basic contract 8uestion4 #as
there a meeting of the minds7 &he e-pectations of the lender ;investors= and the borro#er ;homeo#ner=
are entirely different and the documents used are completely different$
>o# could the &rust have entered into any transaction for the origination or ac8uisition of loans #ithout
evidence of funding7
)n #hat basis can the &rustee or servicer claim any authority if the &rust #as not funded and #as
essentially ignored7 2oes the e-pert agree that avoiding or ignoring the trust means avoiding and
ignoring the prospectus AN2 the P,A, #hich contains the authority for AN6)N1 to act on behalf of the
investors, #ho are no longer 'trust beneficiaries( but 5ust a group of investors #ithout a vehicle for
their investment7
1,,1N&IA0 V?1,&I)N4 Is the e-pert prepared to testify about this aspect of structured finance " i$e$,
ho# do you connect up the debtor and the creditor7 As an e-pert you #ould be e-pected to be able to
testify on e-actly that 8uestion$
And finally there is testimony about the mortgage$ If the mortgage secures the note ;not the debt,
necessarily=, #hich is #hat is stated in the mortgage, then is the e-pert #illing to testify that the
mortgage #as defective and should never have been recorded7
@ould it not be true, in your estimation, that if a homeo#ner e-ecutes a mortgage in favor of a party
posing as a lender, and that party is not a lender to the homeo#ner, that you could testify that the
moment such a mortgage is recorded it probably clouds title7
@ould you be #illing to testify that based upon those facts, you #ould say that it is an un*no#n variable
as to #ho to pay7
@ould you be #iling to testify that if you don.t *no# #ho to pay, you have no basis for trusting a
satisfaction of mortgage from any party including the the original mortgagee7
And lastly that if there is no basis on the face of the instruments or in recorded instruments to presume
a valid creditor has been named, that no better presumptions #ould attach to any assignment,
endorsement or other instrument of transfer7
%or information concerning e-pert declarations, consultations and testimony from e-perts #ith
appropriate credentials to be 8ualified as an e-pert, or for litigation support, please call A:DDA:AHBG
or :20D0:1BHH$
?sing the +est 1vidence 3ule As 6ou %ollo# the 9oney
Posted on 9ay 12, 201D by Neil Garfield
&he +est 1vidence 3ule in %lorida and %ederal /ourts Applied to Notes, 9ortgages and Assignments
&he problem #ith foreclosure litigation is that the homeo#ner is dealing #ith rebuttable presumptions
about the testimony and the documents admitted into evidence$ &hey are admitted into evidence
because there is no timely ob5ection from the homeo#ner or the foreclosure defense attorney$
&he note, mortgage and assignment are presumed to be valid instruments if they conform to the
re8uirements of la# as to form and content$ In that case they are facially valid$ &hat means there is a
rebuttable presumption that there #as a valid underlying transaction$ &herefore$ as a matter of la#, the
paper presented is not 5ust facially valid but also presumptive evidence that the transaction e-isted$
&his gets tric*y in application and is one of the many reasons #hy la#yers should study up on courtroom
procedures, evidence and ob5ections$
)n the note, the underlying transaction is the debt$ &he debt e-ists not because of the note, but
because Party A put money into the hands of Party + #ho accepted it$ &he debt arises regardless of
#hether or not a note #as e-ecuted$ &he note is evidence of the debt and it is presumptive evidence
that there #as an underlying transaction in the amount of the note$ &he underlying transaction is
therefore the payee putting money into the hands of the homeo#ner, #ho is the payor$
3G of :3
)n the mortgage, the underlying transaction is still the debt and the e-istence of the note, because a
valid mortgage does not e-ist e-cept if it is based upon an instrument in #riting$ &he mortgage is not
presumptive evidence of the e-istence of the underlying transaction ;the actual loan of money from
Party A to Party +=$ ?nder normal circumstances the e-istence of a properly e-ecuted mortgage #ould
corroborate the evidence supplied by the note$
)n the assignment, the underlying transaction is a payment of money from Assignee to the Assignor$ &he
assignment itself might be accepted by the court as presumptive evidence that such an underlying
transaction e-ists ;in the absence of an ob5ection=$ If a proper ob5ection is raised, the presumption
,o #hat is a proper ob5ection under these circumstances7 3emember if you fail to raise the ob5ection
then the burden of proving the transaction did not happen falls on the homeo#ner$ &he ob5ective here is
to hold the ban*.s feet to the fire and ma*e them prove their case$ And the reason for this is not to
e-ercise your vocal chords$ It is to sho# that the underlying transaction bet#een the parties stated in
the document proffered by the ban* never too* place$ And the reason you are doing that is because
those transactions in fact, never occurred$
&he hearsay rule is an appropriate ob5ection because the document is being used to establish the truth
of the matter implied " i$e$, that there #as an underlying transaction$ +ut the better ob5ection,in my
opinion, is that the e-istence of the underlying transaction be sub5ect to ;1= lac* of foundation and ;2=
best evidence$ &hey are related in this instance$
?nder the rules of evidence, the note, mortgage and assignment are secondary documents that imply
that a transaction too* place but do not sho# facts to verify that the transaction actually occurred$
#en1e- the 4EST E!I"ENCE o. the (n)erlying transa1tion is the 1an1ele) 1he1k or
wire re1ei2t showing the 2ay3ent an) i32lie) a11e2tan1e o. the 3oney
(se) to .(n) the loan or 2(r1hase the 3ortgage$ Anything less than that is not
a)3issi0le e5i)en1e @ (nless the o0Ce1tion is o5erlooke) or wai5e)$ It #ould therefore
be true that the debt from the homeo#ner allegedly o#ed to the payee on the note ;and mortgage= or
the assignee on the assignment is not supported by foundation in the usual circumstances$
,pecial note here4 I have seen in reported cases that it 2)1, occur that litigants, including ban*s, have
doctored up copies of #ire transfer receipts$ &hus any effort to introduce the copy #ould be met by
your ob5ection on the basis of best evidence and the argument, if applicable, that the failure to disclose
the document prior to trial deprived you of your ability to confirm the authenticity of the document$
Nerification is possible but he ban*s, %ederal reserve etc$, #ill not ma*e it easy on you so a court order
#ill be helpful$
Normally the corporate representative of the servicer is the #itness$ It #ill usually be established on
voir dire or cross e-amination that the #itness neither had access to nor ever personally vie#ed any
records of the actual transaction and in fact never even sa# the secondary evidence ;the note,
mortgage and assignment= until a fe# days before trial$ &hus no testimony #ill be elicited, in the
ordinary course of things, that the transaction too* place ;i$e$, an A/&?A0 transaction in #hich money
from the payee #as loaned to the homeo#ner or money from the Assignee #as paid to the Assignor=$
>ence no foundation e-ists for any testimony or any document that the debt e-ists or that the loan #as
actually sold for consideration and then assigned$
&his is not a technical matter$ If I agree to pay you E100 for your toaster oven, I can.t demand
the appliance until I have paid it$ If that #as the agreement, then the underlying transaction is
the payment of money$ &he evidence " the best evidence " of the payment is a canceled chec*
or #ire transfer receipt$ &he e-ceptions to the best evidence rule do not seem to apply and
there is no ade8uate e-planation for #hy anything other than direct primary evidence of the
transaction itself should be admitted$
In searching the internet I found that a la#yer in @est palm beach #rote a pretty good article
on the sub5ect although he #as concentrating on the use of the best evidence rule in
connection #ith duplicates$ see http4FF###$avvo$comFlegalguidesFugcF#hatisthebest
evidenceruleinflorida for the article by 9ar* 3$ )shero#, 1s8$
>ere are some e-cerpts from that article$
$,e best evidence r1le, set fort, in &la. 0. /vid.760.692 and &ed. 01les /vid. 1001, *rovides
t,at, +,ere a +riting is offered in evidence, a co*y or ot,er secondary evidence of its content
+ill not be received in *lace of t,e original doc1ment 1nless an ade-1ate e3*lanation is
3H of :3
offered for t,e absence of t,e original. &la. 0. /vid. 760.6920:60.69;< &ed. 01les /vid. 1002:
P1blic records a1t,entication is *rovided for by section 60.699 and 01le 1009. 'nder section
60.696 and 01le 1006 vol1mino1s +ritings, recordings, or *,otogra*,s +,ic, cannot be
conveniently e3amined in co1rt may be *resented in t,e form of a c,art, s1mmary or
calc1lation. 8f co1rse, admissibility of a s1mmary de*ends 1*on t,e admissibility of t,e
1nderlying doc1ments. #n order to 1se a s1mmary, timely +ritten notice is re-1ired +it, *roof
filed in co1rt. (dverse *arties m1st ,ave s1fficient time to investigate and ins*ect 1nderlying
records and s1mmaries=.
&la. 0. /vid. !ection 60.69>. !ection 60.69; and 01le 100; set fort, t,e sit1ations +,ere t,e
co1rt determines admissibility and +,ere t,e ?1ry determines fact1al iss1es s1c, as t,e
e3istence of a doc1ment, its content, and t,e contents acc1racy.
$,e best evidence r1le arose d1ring t,e days +,en a co*y +as 1s1ally made by a cler5 or,
+orse, a *arty to t,e la+s1it. )o1rts generally ass1med t,at, if t,e original +as not
*rod1ced, t,ere +as a good c,ance of eit,er a scrivener7s error or fra1d.
= t,ere is al+ays a danger of a *arty -1estioning a doc1ment, so it is im*ortant to remember
t,at, 1nless yo1 ,ave a sti*1lation to t,e contrary, or yo1r doc1ment fits one of t,e
e3ce*tions listed in t,e stat1te, yo1 m1st be ready to *rod1ce originals of any doc1ments
involved in yo1r case or to *rod1ce evidence of +,y yo1 cannot.
&hy They S(e as #ol)er an) Not as #ol)er in "(e Co(rse
Posted on 9ay 13, 201D by Neil Garfield
Parties claiming a right to foreclose allege they are the '>older( and do not allege they are the
holder in due course ;>2/= because they are duc*ing the issue of consideration re8uired by
both Article 3 and Article A of the ?//$ ,o far their strategy of confusion is #or*ing$ &hey are
directly or impliedly claiming they are the holder of the N)&1$ &hey cannot claim they are the
holder of the 9)3&GAG1, because no such status e-ists " they either o#n the mortgage
encumbrance because they paid for it or they didn.t$ If they didn.t pay for it, they cannot
enforce it even if they still can enforce the note$
&he framers of the ?niform /ommercial /ode ;?//= had a plan they e-ecuted in Article 3 and
Article A of the ?//, as adopted by DA states ;0ouisiana, e-cepted=$ &hey had four ;D= problems
to solve$
/onsider t#o possible fact patterns, to #it4 first the payee ;'lender(= did in fact fund the loan
putting cash in the hands of the borro#er or paying debts on the borro#er.s behalfK second, the
payee ;'originator(= gets the borro#er to sign the note but fails or refuses or never intended to
fund the loan of money to the borro#er$ In the first instance the note is evidence of a real debt
#hereas in the second instance the note is not evidence of a real debt$
&his issue has been obscured by the fact that ,)91)N1 ;'investors(= did fund a loan$ &he
8uestions posed here is #hether the investors received the protection of a note and mortgage
and if they didn.t, #hat is the effect of advancing funds for a loan #ithout getting the re8uired
evidence of the loan ;Promissory Note= and #ithout getting the collateral ;9ortgage= that #ould
ordinarily apply$
&he %our Goals
%irst, the ?// framers #anted to encourage the free flo# of commerce by ma*ing
certain instruments the e8uivalent of cash$ &he Payee should be able to use such
instruments in trading for goods, services, or credit$ &his is the promissory note "
a #ritten instrument containing an unconditional promise to pay a certain
amount$ &he timing of the payments, the amount, the terms, the method of
payment must all be obvious from the face of the note #ithout reference to any
outside evidence ;parol evidence= that could reduce or eliminate the value of the
note$ If there are 8uestions or conditions apparent from the face of the
3A of :3
instrument, it fails the test of a negotiable instrument or cash e8uivalent$ &hat
means that Article 3, ?// doesn.t apply$
,econd they #anted to protect the issuer of the note ;the payor= from the effects
of fraud, improper lending practices and other deprive lending policies and
practices from any false claims for payment on the note$ If the Payor ;homeo#ner,
borro#er= received no benefit from the Payee but #as someho# induced to sign
the note in anticipation of receiving the benefit, then the Payee should not be
able to collect from the Payor$ &his goal conflicts #ith the first goal only #hen the
note is sold to an innocent third party for value #ho had no notice of the
defective nature of the origins of the note ;>older in 2ue /ourse >2/=$
&hus third, in order to maintain the status of cash e8uivalent paper, they had to
provide a mechanism in #hich an innocent third party #as protected #hen they
advanced money for the purchase of the note #ithout having any notice of the
borro#er.s defenses$ &his #ould allo# the buyer to sue the payor ;borro#er,
debtor= and collect free of any potential defenses$ &he burden of the borro#er.s
claims #ould then fall on the borro#er to collect damages against the original
payee for #rongful acts$ ;Article 3, ?//, >older in 2ue /ourse >2/=$
And in order to allo# all such notes to be enforceable regardless of the
circumstances of their origin, any party holding the note ;'>older(= can enforce
the note if they have physical possession of the note, even if they paid nothing for
it, as long as it is endorsed to them$ +ut if they are a >)0213 and not a >)0213
IN 2?1 /)?3,1 then they sue sub5ect to all of the borro#er.s defenses$ &he
central issue is #hether the >older has paid for the note, in #hich case they
#ould be in >2/ status or if they did not pay for the note, in #hich case they
enforce sub5ect to all borro#er.s defenses " including the allegation that the
original payee never made the loan$
%ourth #as the issue of forfeiture of collateral$ &his is considered the most
e-treme remedy under commercial la#, analogous to the death penalty in
criminal cases$ ;Article A, ?// " secured transactions=$ It is one thing to preserve
li8uidity in the mar*etplace by protecting the investment of innocent third parties
#ho purchase negotiable instruments from defenses " and 8uite another to cause
forfeiture of home or property$ >ere again, the language of Article 3 is used for an
>2/ " i$e$, an assignment of the mortgage is enforceable )N06 if the Assignor
paid for it and had no notice of borro#er.s defenses$
,o they devised a structure in #hich a bona fide purchaser of the paper #ithout notice of the
borro#er.s defenses #ould be called a holder in due course$ &hey could sue the borro#er
despite #rongful behavior by the original payee on the unconditional promise to pay ;the note=$
In the event of fraud in the sale of the note, the ne# o#ner of the note could sue both the
seller ;Assignor, endorser or indorser=$
&hen they considered the possibility of #rongful behavior4 the issuance of such commercial
paper #ould be a claim, but not negotiable paper " but if it #as sold any#ay it #ould be
sub5ect to the borro#er.s defenses$ &his allo#s outside evidence ;parol evidence= " #hich is to
say that in this fact pattern, the promise to pay #as conditional on the value and effect of the
borro#er.s defenses$ &he >)0213 of this instrument need not pay for the sale of the note and
need not be ignorant of the borro#er.s defenses$ &his holder could sue both the payor
;borro#er, debtor= and the party #ho transferred the note " depending upon the agreement
that accompanied the transfer of the note by delivery and indorsement$
&he party #ho accepts indorsement #ithout paying for the note or even *no#ing of potential
borro#er defenses can still enforce the note, but unli*e the the >)0213 IN 2?1 /)?3,1, the
Payor ;+orro#er= could raise all defenses to the original transaction$ &he ?// Article 3 calls this
a holder$ A holder need not purchase the note and may have actual *no#ledge of the
borro#er.s defenses but can still sue the payor ;borro#er= for the principal amount due on the
unconditional promise to pay$
I have noticed that most 5udicial foreclosures are either in rem ;foreclosures only= or the claim
D0 of :3
on the note is that the Plaintiff is a 'holder$( If they have possession and it is indorsed, they
are probably a holder entitled to enforce the note$ +ut the 2efendant can raise all available
defenses 5ust as he or she #ould do if the fight #as #ith the originator of the note e-ecution$
And nothing is a better defense than the distinction bet#een being the originator of the note
e-ecution and the originator of the loan$ &he confusion over the term 'originator( has allo#ed
millions of foreclosures to be completed despite the fact that the 'holder( neither paid for the
note nor could they claim they #ere ignorant of the borro#er.s defenses$
&his confusion has led most courts to loo* at Article 3, ?//, instead of Article A, ?//$ Neither
allo# the claimant to sue on either the note or the mortgage #ithout having paid for the
assignment of the mortgage or delivery of the note, if the holder has actual notice of
borro#er.s defenses$ In most cases the claimant either has the *no#ledge of the fraud and
predatory practices at closing or is a made to order controlled company of a real party #ho has
such *no#ledge$
In conclusion, borro#ers should prevail in foreclosure litigation in situations #here the claimant
is unable to prove the identity of the actual lender #ho advanced funds, or #here the claimant
has failed to purchase the mortgage$
+ased upon vast 8uantities of information in the public domain including investor la#suits,
insurer la#suits and government agency la#suits ;all alleging %3A?2 and mismanagement of
funds= against bro*er dealers #ho sold mortgage bonds, it seems highly li*ely that in the AB< of
all loans bet#een 2001200A that are sub5ect to claims of securiti!ation three things are true4
;1= the securiti!ation plan #as never follo#ed in most cases thus ma*ing the investors direct
lenders #ithout benefit of a note or mortgage and
;2= none of the parties 'holding( paper possess any of the 8ualities of a party #ho could have
standing to foreclose and
;3= claims still e-ist on the notes, even though they #ere not supported by consideration but
those claims are unsecured and sub5ect to all defenses that could have been raised against the
0/B'$$(B%/ P0/!'.P$#8N! )0/($/ $0(P D880 &80 B(NC!
Posted on .ay 26, 201A by Neil Garfield
# t,in5 yo1 s,o1ld +in t,is one if yo1 do it rig,t.
$,e ban5s fall rig,t t,ro1g, t,e tra* door on t,is one D: t,ey *rove t,at t,ere +as *robable
ca1se to believe t,at t,ey +ere a valid creditor on t,e note @'))3B b1t not a valid enforcer
1nder t,e deed of tr1st @mortgageB @'))6B.
By alleging t,ey are a ,older and not a ,older in d1e co1rse t,ey are admitting t,ey didn7t *ay
for it andEor admitting t,at t,ey too5 delivery +it, 5no+ledge of t,e defenses of t,e
borro+er. $,at is basic blac5 letter la+, in my o*inion. (nd one of t,e defenses is lac5 of
consideration. eit,er +ay t,ey eit,er need to s,o+ t,ey *aid for it D eit,er directly +it,
*roof of a +ire transfer recei*t etc. or by getting a ?1dgment on t,e note. $H/N t,ey can
enforce t,e ?1dgment. Neit,er +ay is non:?1dicial foreclos1re *ermissible or constit1tional.
$,1s by t,eir o+n arg1ment and admissions t,ey are an 1nsec1red creditor +it, no rig,t to
enforce t,e mortgage beca1se t,ere is no -1estion t,at t,ey never *aid val1e or consideration
for t,e mortgage, +,ic, is t,e most basic re-1irement 1nder ')) (rticle 6.
$,ey may be entitled to t,e *res1m*tion t,at t,ey can enforce t,e note. (nd *er,a*s t,e
b1rden of *roof s,ifts to t,e borro+er to reb1t t,e *res1m*tion. B1t remember t,e
*res1m*tion is t,at t,e note is evidence of t,e debt D it is never t,at t,e note #! t,e debt.
#f yo1 ,ave c,allenged t,e 1nderlying transaction saying t,at t,e note refers to a transaction
t,at never too5 *lace and t,erefore t,e note and t,e *res1m*tion of validity of t,e t,e note
is reb1tted D and if yo1 are able to s,o+ t,e absence of an 1nderlying transaction D sim*ly
as5ing for it and never getting it, t,en t,e note is not evidence of a debt andEor t,e
assignment is not evidence of o+ners,i* of t,e mortgage @or deed of tr1stB.
D1 of :3
$,e same ,olds tr1e for t,e mortgage. $,ere m1st be an 1nderlying transaction for t,e
assignment to ,ave any legal effect. $,ere m1st be a !(%/ of t,e note ?1st as t,ere m1st be a
%8(N of money if someone +ants to 1se t,e note as evidence of t,e debt.
#f t,ere ,ad been a sale of t,e loan, t,en t,ey +o1ld be asserting t,e rig,ts of a ,older in d1e
co1rse. B1t t,ey are not asserting t,at +,ic, means t,ey are electing t,eir remedies D t,ey
are c,oosing to s1e on t,e note 1sing t,e *res1m*tion of t,e validity of t,e note as evidence
of t,e debt.
(llo+ing t,em to enforce an interest in land is bootstra**ing t,e *res1m*tion available for
t,e note into a *re?1dgment sei21re of an asset to satisfy a ?1dgment t,at does not e3ist. (ll
of t,is circ1lar reasoning e3ists beca1se t,e ban5s ref1se to s,o+ t,e money. $,ey ref1se to
s,o+ it beca1se it doesn7t e3ist.
i*e t,e reb1ttable *res1m*tion a+ay and t,ey ,ave no case. $,e ban5s say t,at t,ere is no
reason for t,em to s,o+ consideration. $,ey say t,at t,e *res1m*tion abo1t t,e note ends
t,e disc1ssion. $,at is N8$ +,y t,e *res1m*tion +as created. $,e *res1m*tion +as created
beca1se in most instances t,e 1nderlying transaction is 1ndeniably *resent and *roof of it is a
+aste of time beca1se nobody dis*1tes it. $,at is *recisely +,y it is a reb1ttable *res1m*tion
as o**osed to an irreb1ttable *res1m*tion.
#f t,ey +ant to s1e on t,e note, let t,em. $,at is a ?1dicial *roced1re. B1t t,en t,ey m1st
allege some t,ings t,ey cannot allege in good conscience D li5e anyone in t,eir c,ain ever
made a loan to t,e borro+er or t,at anyone in t,eir c,ain *aid any money to *1rc,ase t,e
loan. 8r if t,at is s+e*t aside, t,en t,ey can s1e as ,older +it,o1t t,e rig,t of a ,older in
d1e co1rse +,ic, means t,at t,e borro+er can raise any defenses t,at co1ld ,ave been raised
against t,e originator of t,e loan. (nd $H($ incl1des lac5 of consideration.
"o E/(ita0le Mortgages E<ist+
Posted on 9ay 2A, 201D by Neil Garfield
/onsult #ith a la#yer licensed in the 5urisdiction of the dispute before deciding or acting upon
anything on this blog$
I #as ta*en to tas* for one of my comments by a person #ho is e-tremely *no#ledgeable in the
ban*ing industry and #ith respect to mortgages$ >e #as thro#n off by appellate assertions that
in certain states and in certain situations assignment of the note is a virtual or 'e8uitable(
assignment of the mortgage as #ell$ &hat is true certainly as bet#een the parties to the sale of
the loan " if a sale of the loan occurred$&hat is my point$ If a genuine sale occurred the
presumption of enforceability is almost irrefutable$ @ithout the sale of the loan, an assignment
is virtually nothing$ All you need is a #arm body to deflect the spurious assertions of the #ould
be forecloser$
It is true that endorsement and delivery of the note allo#s the holder to sue on the note$ +ut it
is also true that some appellate courts have gone off the reservation allo#ing foreclosure
;enforcement of the mortgage= even in the absence of a genuine transaction any#here in the
chain of 'securiti!ation( $ &hat is not #hat #as intended by commercial transaction la#, the
?// or anything else$ In some states the presence of facially valid documents may allo# for
suit to be brought " sub5ect to all possible defenses of the 'borro#er( including his denial that
he is a borro#er$ '2id you get the money( is used synonymously #ith 'then you o#e the debt(
#ith horse blinders on the 8uestion of to #hom the debt is o#ed$
)ne la#yer in Ne# 6or* seemed to have gotten the Cudge.s attention #hen he as*ed the Cudge
#ho #as his cellphone carrier$ &he Cudge said it #as A&O&$ And then the la#yer said, so #hat
#ould you say to ,print if they came in and demanded payment7 6ou #ould say that as to
,print, you are N)& a cell phone customer 5ust as you are N)& a borro#er in relation to
someone #ho has neither loaned you money nor spent money purchasing your debt$
,tarting #ith a fraudulent transaction and allo#ing it to be compounded by #rongful
foreclosure is clearly not #hat any legislature, any court precedent, or any government policy
#as intent on doing$
D2 of :3
18uitable mortgages do not e-ist in the la#, per se$ +ut there are numerous cases in #hich the
idea #as used to 5ustify the result sought by the /ourt as the 'proper( result$
And #hile if you push it there is no such thing as an e8uitable mortgage, there are particular
circumstances under #hich it #ill be regarded as such " namely bet#een a limited number of
parties as litigants in the same la#suit rather than 'notice to the #orld( #ith nobody else on
the hori!on ma*ing a claim$ In other #ords for purposes of a specific case and specific parties
the mortgage is deemed effective " much as one might do #hen they enter into an I&
agreement and they agree to treat the idea or business plan as patented in favor of one of the
parties even though no application #as made$
&hus spa#ns the idea that e8uitable mortgages are permissible$ &hey are not$ 18uitable
assignments operate in much the same #ay$ &hey cannot operate against the #orld, but they
can operate against specific parties because the circumstances are deemed to demand it$ &he
error in the courts is that are s*ipping a step and lured into doing so by s*illful avoidance of the
distinction bet#een a holder, a holder #ith rights to enforce and a holder in due course$
&o that e-tent, appellate courts #ho have either fallen into that trap or been trapped by the
lac* of proper presentation by the borro#er, have nonetheless committed a grievous error
based upon the assumptions that there P3)+A+06 @A, A 31A0 &3AN,A/&I)N INN)0NING &>1,1
PA3&I1, )3 ,)91)N1 IN &>1I3 />AIN$ 96 P)IN& I, &>A& IN 9),& IN,&AN/1, N) ,?/>
&3AN,A/&I)N 1UI,&, AN2 %)31/0),?31 21%1N,1 A&&)3N16, AN2 +ANJ3?P&/6 A&&)3N16,
,>)?02 ,&)P A29I&&ING A001GA&I)N, &>A& A31 ?N&3?1 AN2 ?N,?PP)3&A+01$
If an attorney doesn.t understand securiti!ation, fact and fiction, then he or she should neither
render an opinion nor act on it$
,o the analysis comes do#n to the fact that there are no e8uitable mortgages, and there are no
e8uitable assignments of mortgage " or else public records don.t mean anything" and then the
entire mar*etplace #ould be uncertain as to title to virtually anything #here a loan #as
collaterali!ed$ +?& a party can sho# that the instrument should nonetheless be enforced
against a specific party #hether properly e-ecuted, properly recorded or not using parol
evidence, circumstantial evidence etc$ to arrive at the truth$ Cust because it #asn.t in #riting,
unless the statute of frauds applies, doesn.t mean you don.t have a duty to perform under an
oral contract$ And if the #riting #as #rong and it is obvious from the facts presented by the
parties that the #riting #as incorrectly drafted, then it is the ,?+,&AN/1 that counts, not #hat
is in #riting$
&o be specific, imagine that in an ordinary loan, the ban* forgot to record the mortgage$
@ithout some third party interposing a claim of superiority over the ban*, the ban* can
nonetheless enforce the mortgage$ If there #ere mista*es made, then the ban* could simply
as* for reformation of the contract and then foreclosure$
&>1 +?321N )% P3))% ;P13,?A,I)N= I, )N &>1 +ANJ N)& &>1 +)33)@134 In order to do AN6
of the things described above the ban* #ould be re8uired to sho# the real transaction and the
real facts and the real money trail " unless the 'borro#er( failed to deny the allegations and
ob5ect to anything but best evidence, nonhearsay, credible testimony and real business records
presented by someone #ith complete access to all the records relating to this particular loan$
D3 of :3
>o# the +an*s 0iterally '9ade( 9oney )ut of Nothing
Posted on Cune 30, 201D by Neil Garfield
%or the last fe# #ee*s I have been harping on the concepts of holder in due course, holder #ith
rights of enforcement, and holder$ &hey are all different$ &he challenge in court is to get them
treated as different in /ourt as they are in the statutes$
&he +an*s *ne# through their attorneys that the #orst paper in the #orld could be turned into
real value if they could dress up 5un* paper and sell it to an unsuspecting innocent third party$
&hey did it #ith 5un* bonds, and then they did it again #hen they created a strategy of creating
5un* bonds that loo*ed li*e investment grade securities, got the &riple A rating from the
agencies and even got them insured as though they #ere the highest 8uality and lo#est ris*
investment " thus enabling stable managed funds to buy them despite restrictions on #hat
such fund managers could buy as investments for their pension fund, retirement fund etc$
&he reason they #ere able to do it is that regardless of the defective nature of the loan
closing, including the lac* of any loan of money by the 'lender(, the la# protects and
presumes the validity of the paper, sub5ect to defenses of the borro#er that might defeat that
value$ &he one e-ception that the +an*s sa# as an opportunity to commit fraud and get a#ay
#ith it is if they could manage to sell the unenforceable mortgage documents to an innocent
third party #ho #as acting in good faith, paid real value for the loan, and *ne# nothing about
the predatory nature of the loans, lac* of consideration, and other defenses of the borro#er,
then the paper, no matter ho# bad, could still be enforced against the person #ho signed it$ It
doesn.t matter if there #as a real contract, or if the transaction violated %ederal and state
la#s or anything else li*e that$
,uch an innocent third party is called a holder in due course$ And the reason, li*e it or not, is
that the legislatures around the country and the %ederal statutes, favor the free flo# of
'negotiable instruments( if they 8ualify as negotiable instruments$ If you sign a note in
e-change for a loan you never received ;and especially if you didn.t reali!e you didn.t received
a loan from someone other than the 'lender(= you are ta*ing a ris* that the loan documents
#ill be enforced against you successfully even though you could have defeated the original
lender easily$
&he normal process, #hich the +an*s *ne# because they invented the process, #as for a
'closing( to ta*e place in #hich the loan documents, settlements statements, note, mortgage
and other papers are signed by the borro#er, and then the loan is funded usually after final
revie# by the under#riters at the lender$ +ut in the mortgage meltdo#n there #as no real
under#riting but there #as someone called an aggregator ;e$g$ /ountry#ide, A+n A93) et al=
#ho #as approving loans that 8ualified to be approved for sale into investment pools$ And in
the mortgage meltdo#n you signed papers but never received a loan of actual money from the
party in #hose favor you signed the papers$ &hey #ere unenforceable, illegal and possibly
criminal, but those signed papers e-isted$
All the +an*s had to do #as to claim temporary o#nership over the loans and they #ere able to
sell the 'innocent( pension fund managers on buying bonds #hose value #as derived from
these #orthless loan papers$ If they didn.t *no# #hat #as going on, they had no *no#ledge of
the borro#er.s defenses$ If they #ere not getting *ic*bac*s for buying the bonds, they #ere
proceeding in good faith$ &hat is the classic definition of a >older in 2ue /ourse #ho can
enforce the loan documents despite any real defenses the the homeo#ner might possess$ &he
homeo#ner is the ma*er of the note and should have had a la#yer at closing #ho #ould insist
on seeing the #ire transfer receipt and #ire transfer instructions to the escro# agent$
No la#yer #orth his salt #ould allo# his client to sign papers, nor #ould he allo# the escro#
agent to retain such signed papers, much less record them, if he *ne# or suspected that the
documents signed by his client #ere going to create a problem later$ &he delivery of the note
to a party #ho had N)& made the loan created t#o debts " one to the source of the loan
DD of :3
money #hich arises by operation of la#, and the other to #hoever ended up #ith the paper
even though there #as a complete lac* of consideration at closing and no money e-changed
hands in the assignment or transfer of the loan, debt, note or mortgage$
,ince the paper#or* #ent into the e8uivalent of a food processor, the ban*s #ere able to
change various data points on each loan, and create sales and disguised sales over and over
again on the same loan, the same loan pool, the same mortgage bonds, the same tranche, or
the same hedges$ No# they even the the technology to deliver #hat appears to be an
'original( note to as many people as they #ant$ Indeed #e have seen court cases #here both
foreclosing parties tendered the 'original( note to the court as part of the foreclosure process,
as is re8uired in %lorida$
&hus borro#ers are stuc* arguing that it is not the debt that cannot be enforced, it is the
paper$ &he actual debt #as never documented ma*ing it appear as though the allegation of Dth
party funding seem ludicrous " until you as* for the #ire transfer receipt and instructions, until
you as* for the #ay the participating parties boo*ed the transaction on their o#n financial
statements, and until you as* for the date, amount and people involved in the transfer or
assignment of the #orthless paper$ &he reason #hy clerical people #ere allo#ed to sign a#ay
note and mortgages that appeared to be #orth billions and trillions of dollars, is that #hat they
#ere signing #as to-ic #aste " #orse than unenforceable it carried huge liabilities to both the
borro#er and all the people #ho #ere scammed into buying the same #orthless paper over and
over again$
&he reason the records custodian of the +an* or servicer doesn.t come into court or at least
certify the 'business records( as an e-ception to hearsay as permitted under %lorida statutes
and the la#s of other states, is that no records custodian is going to ris* per5ury$ &he records
custodian *no#s the documents #ere fa*ed, never delivered, and not in the possession of the
foreclosing party$ ,o they get a professional #itness #ho testifies he or she is 'familiar #ith the
record *eeping( at one servicer, but upon voir dire and cross e-amination they *no# nothing in
their personal *no#ledge and are therefore only giving voice to #hat is contained on the
reports he brought to trial " classic hearsay to be e-cluded from evidence every time$
0i*e the robosignors and 'assistant secretaries(, 'signing officer,( ;and other made up names=
these people #ho serve as professional #itnesses at trial have no actual access to any of the
ra# data contained in any record *eeping system$ &hey don.t *no# #hat came in, they don.t
*no# #hat #ent out, they don.t *no# #ho paid any money into the pool because there are so
many channels of money being paid on these loans ;directly or indirectly=, they don.t even
*no# if the servicer paid the creditors the amount that #as due under the creditors. part of the
loan contract " the prospectus and P,A$
In fact, there is no production of any information to sho# that the 319I/ trust #as ever funded
#ith the investor.s money$ If there #as such evidence, #e never #ould have seen forgery,
fabrication and robosigning$ It #ouldn.t have been necessary$ &hese #itnesses might suspect
they are lying, but since they don.t *no# for sure they feel insulated from prosecutions for
per5ury$ +ut those #itnesses are the first people to be thro#n under the bus if someho# the
truth comes out$
&hus the ban*s literally created money out of thin air by ta*ing #orthless, fraudulently
obtained paper ;5un*= and then treating it at some point as though it #as negotiable paper that
#as sold to an Innocent holder in due course$ ?nder the la# if they claimed status as >older in
2ue /ourse ;or confused a court into believing that is #hat they #ere alleging=, the paper
suddenly #as enforceable even though the borro#ers. defenses #ere absolute$
+?& &>A& &3AN,A/&I)N N1N13 )//?3312 1I&>13$ Numbers don.t lie$ If you ta*e E100 million
from an investor and put it on the closing tables for the origination or ac8uisition of loans, then
you can.t A0,) put the money in the 319I/ trust$ &hus the unfunded trust has no money to
transaction AN6 business$ +ut once again, in the illusion of securiti!ation, it loo*s real to
5udges, la#yers and even borro#ers #ho feel guilty that fighting the ban* is brea*ing some
D: of :3
moral code$
Ama!ingly, it is the victims #ho feel guilty and shamed and #ho are #illing to pay even more
money to intermediary ban*s #hose fees and profits passed unconscionable 10 years ago$ I.m
not sure #hat #ord #ould apply as #e loo* at the point of unconscionability in our rear vie#
And they sold it over and over again$ &he reason #hy there #as no under#riting standards
applied #as that it didn.t matter #hether the borro#er paid or not$ @hat mattered is that the
+an*s #ere able to sell the 5un* paper multiple times$ Getting 100 cents on the dollar for an
investment you never made is very lucrative " especially #hen you do it over and over again on
each loan$ It sure beats getting :<$ &he reason the servicer made advances #as that they #ere
not using their o#n money to ma*e payments to the investors$ It is the perfect game$ A P)NII
scheme #here the investors continue to get paid because the reserve fund and incoming
investors are contributing to that reserve fund, such that the servicer has access to transmit
funds to the investors as though the trust o#ned the loan and the loans #ere all performing$
6et as 'servicers( they declared a default because the borro#er had stopped paying
;sometimes even if the borro#er #as paying=$
And the +an*s sprung into action claiming that the failure of the borro#er to ma*e a payment
is the only thing that mattered$ &he /ourts bought it, despite the proffer of proof or the
demand for discovery to sho# that the creditor " the investors " #ere actually sho#ing a
default$ I didn.t ma*e this up$ &his is #hat the investors are alleging each time they present a
claim or file suit for fraud against the bro*er dealer #ho did the under#riting on the mortgage
bonds issued by the 319I/ trust #ho should have received the money from the sale of the
bonds$ In all cases the investors, insurers, government guarantors, and other parties have
alleged the same thing " fraud and mismanagement of funds$
&he settlements of fines and buy bac*s and damages to this gro#ing list of claimants on @all
,treet is gro#ing close to E1,000,000,000,000 ;one trillion dollars=$ In all the cases #here I have
submitted an e-pert #itness declaration or have given testimony the argument #as not
#hether #hat I #as saying #as right, but #ere there #ays they could bloc* my testimony$ &hey
never offered a competing declaration or any e-pert #ho #ould contradict me in over G years
in thousands of cases$ &hey have never offered an e-planation of ho# I am #rong$
&he +an*s *ne# that if they could fool the fund managers into buying 5un* bonds because they
loo*ed li*e they #ere high rated bonds, they could convince Cudges, la#yers and even
borro#ers that their case #as hopeless because the foreclosing party #ould be treated as a
>older in 2ue /ourse " even if they never said it " and even if they #ere the holders of 5un*
paper sub5ect to all of the borro#er.s defenses$ ,o far they have pillaged our economy #ith B
million foreclosures displacing 1: million families on loans that #ere paid in full long before
the origination or ac8uisition of the loan$
And here is their problem4 if they start filing suit against homeo#ners for the money advanced
on behalf of the homeo#ners ;in order to *eep the investments coming=, then they #ill be
admitting that most foreclosures are being filed for the sa*e of the intermediaries #ithout any
tangible benefit to the investors #ho put up the money in the first place$ &he result is li*e an
old ribald 5o*e, the @olf of #all ,treet scre#s the investors, scre#s the borro#ers, scre#s the
third party obligors ;including the government= ta*es the pot of gold and leaves$ )nly to add
insult to in5ury they claimed non e-istent losses that #ere actually suffered by the investors
#ho trusted the ban*s #hen the 5un* mortgage bonds #ere sold$ And they #ere paid again$
9oving to ,tri*e &he '@itness( and &heir '+usiness 3ecords(
Posted on Culy 1, 201D by Neil Garfield
&he general practice of the servicers and trustees is to disclose a list of as many as 3: possible
DB of :3
#itnesses so that the 2efendant homeo#ner cannot possibly perform due diligence
investigation, deposition etc$ &he Cudges got #ise to this and agreed that disclosing 3:
#itnesses, 3D of #hom you do not intend to call, is the same as no disclosure at all$ ,o no# the
ban*s are filing a disclosure of one #itness a couple of days before trial$ In my opinion the
attorney should move to stri*e the disclosure both as late ;ordinarily the trial order re8uires
such disclosure at least D: days before trial=, and as admission that they #ere playing games
#hen they previously disclosed 3: #itnesses$ Attorneys vary on ho# to attac* this through
motions to stri*e, motions in limine, motions for continuance and even filing a motion for
summary 5udgment on the eave of trial$
&he filing of a disclosure that they only intend to use one #itness ;#ho may or may not have
been listed on the original list of 3:= is also an admission that their previous #itness list
disclosing 30W #itnesses #as the e8uivalent of no disclosure at all$ It also gives no information
on #ho, #here, #hat she is or does$ or ho# to contact her$ It does not even name her employer
or capacity$ Is she a corporate representative7 It doesn.t say so$ If she is 5ust a fact #itness and
not put for#ard as corporate representative then they have no foundation for introduction of
business records as e-ception to the hearsay rule$
&rac*ing one case in #hich the usual shell game of Plaintiffs and servicers has ta*en place, the
#itness that #as suddenly disclosed 2 days before trial appears to be an employee of ,P,,
#hich ordinarily replaces /hase as servicer$
In one case, she is not a records custodian for ?, +an*, ,P,, /hase or the investors$ ,o she must
e-plain in detail ho# she *no#s that the records they see* to introduce are 'normal business
records, *ept in the ordinary course of business made at or near the time of each event$( >o#
does she *no# that and more importantly ho# /)?02 she *no# that as to ?, +an*, the &rust,
the trust beneficiaries #ho are the creditors ;according to them=, ,P, and /hase #ho #as
previously the servicer$
&he bullet point here is that the 'records( she #ill see* to introduce are not a printout of the
records at all$ &hey are a 31P)3& in #hich data populates the report$ ,he doesn.t *no# #here
the ra# data is$ &he report #as produced by the #itness by simply pushing buttons on her
computer$ ,he didn.t have access tot he ra# data, and she certainly did not have access to A00
of the records because she #on.t have the the cancelled chec*s, #ire transfers, or AN6
information on distributions to creditors, #ithout #hich she cannot testify as to the status of
the account #ith the creditors ;investors or trust= because the servicer only deals #ith the
A&&)3N16, N112 &>1 0A&1,& ,&A&1 AN2 %1213A0 0A@ )N +?,IN1,, 31/)32, 1U/1P&I)N &)
>1A3,A6$ &>1 31/)32, A31 >1A3,A6 AN2 &>1 31P)3& P31PA312 %)3 &3IA0 I, 1U/0?212
+1/A?,1 I& I, IN>131N&06 ,10% ,13NING AN2 N)& /312I+01$ &>1 31P)3& I, >1A3,A6
;31P)3&ING= )N >1A3,A6 ;&>1 +?,IN1,, 31/)32,=$ &he /ourt is allo#ed to admit the
documents as an e-ception to the hearsay rule )N06 if the business records e-ception is
proffered and proven, #ith the burden entirely on the proponent of such evidence$
,he can testify " maybe " as to the dealings bet#een ,P, and the borro#er but not the
receipts by the creditor from remittances or distributions by the servicer to the creditors ;she
has no access to that information=, and certainly not the amounts received by the creditors in
settlements, insurance, servicer advances, credit default s#aps, and government assistance
that #as received by or on behalf of the creditor and that cured any 'default( as described by
the &rust instrument ;P,A= $ &herefore her testimony is incomplete even if accepted$ ,he might
testify as to the dealings #ith the borro#er, but she cannot testify as to the receipt of servicer
advances and other payments #hich is the 31A0 reason for the foreclosure$
It is becoming increasingly clear that these foreclosures are strictly for the benefit of the
intermediaries and not the creditor investors$ &hey are attempting to ride the coattails of the
creditors so that their claim for refunds and cutoff of liability for refunds to third parties, can
be cutoff$ None of those things have anything to do #ith the investors #ho have been paid by
DG of :3
servicer payments advanced regardless of #hether the borro#er #as paying or not$
&hey #ant to say the trust or trust beneficiaries are the creditors and that therefore the
foreclosure should proceed, but the truth is the creditors are not sho#ing any default, have
been paid, sometimes in full$ &he intermediaries are cloa*ing their independent claims against
the borro#er ;independent from the mortgage debt= as though they are claims of the creditors,
#hich they are not$
If the creditors are not here to say they are suffering a default as a result of non payment by
the borro#er there is no reason for the court to assume that such a default e-ists$ &hat is part
of the prima facie case of the party claiming the right to foreclose, despite the absence of a
default recorded by the creditor$ >aving some ne# servicer come in #ith a professional #itness
#ho really *no#s nothing about ho# and #here records are *ept and can offer no personal
*no#ledge of ho# and #here those records are *ept and #ho does that fails to offer personal
perceptions and memory of those perceptions re8uired for a competent #itness in any case$
&hus the hearsay 31P)3&, prepared for trial fail for t#o reasons, " they are hearsay and they
#ere prepared especially for trial$ And they are e-cluded under the hearsay rule for another
reason " the reports on hearsay reports on the ra# data #hich is also hearsay unless that the
ra# data is sho#n and described as records that 8ualify under the business records e-ception$
Vuiet &itle and ,tatute of 0imitations
Posted on Culy G, 201D by Neil Garfield
In the search for a magic bullet, many pro se litigants and even attorneys have ended up
perple-ed by la#s and rules regarding an action to Vuiet &itle ;fre8uently misspelled by pro se
litigants as 'Vuite &itle(=$ &he purpose of this article is to add some conte-t to the discussion
and some reasons for my conclusion " that as more decisions emerge the action for Vuiet &itle
#ill fade unless the mortgage of record is first nullified or canceled$
%or conte-t, let.s remember that the purpose of recording documents in the Public 3ecords is
to give certainty and notice to the #orld of transactions that can be recorded$ If courts #ere to
issue decisions to 8uiet title on recorded documents that are facially valid, the result #ould be
chaos " nobody #ould *no# if they #ere really getting permanent title and title insurance
companies #ould, for obvious business reasons, refuse to issue a title commitment or policy
unless 1N136)N1 brought a 8uiet title action after every transaction and received a court
order, suitable for recording that stated the rights of the sta*eholders$ &his is precisely #hat
the recording statutes are meant to avoid$
No# to the issue of the statute of limitations$ ,ome states hold that even if there is an act of
acceleration, the statute of limitations only applies to the monthly payments that #ere due
during the statutory period that are no# timebarred$ %lorida does not appear to be one of
those states, and despite some decisions to the contrary, it doesn.t loo* to me li*e %lorida #ill
become one of them$ In %lorida it is generally accepted that the statute of limitations time
bars any action after : years to collect a debt$ 6ou should chec* your state statutes because
each state is different and don.t ma*e any decisions #ithout consulting a 8ualified attorney
licensed in the 5urisdiction in #hich your property is located$
,o the thin*ing has gone in the direction of merely stating that the claim is timebarred if there
#as an acceleration of the debt, and five years as passed$ +ut the 3omero v ,un&rust decision
;see belo#= from last year, raises the real issues$ @hile the +an* had no right to bring a claim
on the note, and presumably had no right to bring an action on the mortgage, the mortgage
remains on record$ Alleging that the statute of limitations bars any action on the note or
mortgage does not invalidate the mortgage$ If it is facially valid and properly recorded, it is
there in the /ounty records for all to see$
,o the 8uestion arises '@hat happens at a subse8uent closing on the sale of the property or
DH of :3
refinance, and the 9ortgagee ;or party claiming to be the successor of the mortgagee= refuses
to e-ecute a satisfaction of mortgage #ithout receiving payment7( Is &>A& a claim that is time
barred7 &he ans#er is I don.t *no#, but I suspect that the refusal to e-ecute a satisfaction of
mortgage is an act that is separate from bringing an action to collect on a timebarred debt$
I suspect that an action for e8uitable relief demanding a /ourt order to force the +an* into
e-ecuting a satisfaction of mortgage #ould fail$ &hat is essentially the same as as*ing the /ourt
to issue a 8uiet title order stating that the mortgage is invalid " a precedent that raises
numerous ha!ards in the mar*etplace$ 1ssentially you are saying that you did have the debt,
the ban* is time barred from enforcing it, so you #ant the mortgage nullified or canceled$
,everal /ourts have issued ruling consistent #ith this ruling so I don.t #ant to give the
impression that #hat I am saying is the general rule " #hat I am saying is that I thin* my theory
of the action #ill become the general rule$
9y theory, supported by case la# in other states, is that you must have grounds to attac* the
validity of the instrument and #in your case before you can then as* for a decision on Vuiet
&itle$ %ortunately, in the conte-t of loans and title sub5ect to claims of securiti!ation, such an
attac* is eminently possible and li*ely to succeed on an increasing basis$ +ut in order to do so,
one must be very conversant in the claims of securiti!ation generally and especially
*no#ledgeable as to claims of succession or securiti!ation in your specific case$ Alleging that
this particular defendant has been repeatedly found in court to lac* the indicia of o#nership or
authority to enforce a note and mortgage may not do you any good$ 6ou are still left #ith the
8uestion of #hat to do #ith a facially valid mortgage encumbrance recorded against the
property$ If the person you sued doesn.t o#n it, #ho does7
After years of avoiding the right strategies, la#yers are coming around to the idea that in order
to be truly successful in an action to remove the mortgage encumbrance, you need to have an
allege facts to support the claim that the mortgage deed ;or 2eed of &rust= #as invalid in the
first instance or that it could not be enforced even if the statute of limitations #as not
applicable$ &>1N alleging the statute of limitations is a good idea as corroboration for your
logic that the mortgage is invalid because it is unenforceable and #ithout merit in all
&here are t#o such attac*s that are promising4
1$ Attac* the initial closing as lac*ing consideration or giving rise to common la# or statutory
rescission$ If statutory rescission applies, the la# states that the encumbrance is terminated by
operation of la#$ ;&I0A=$ &he allegation that the opposing ban* is a 'holder( ;according to
them= is insufficient to bar your attac* on the initial closing$ &he problem of course is that the
ban*s regularly confuse 5udges into applying the rules of a holder in due course #hen the +an*
itself ma*es no such assertion$ >ence, being able to remind or educate the 5udge on the
differences bet#een holders, holders #ith rights to enforce and holder in due course is
essential and must be presented #ith clarity$ If you don.t understand the differences you are
not prepared for the hearing$
2$ Attac* the subse8uent ac8uisition of the 'loan(, debt, note andFor mortgage also as being a
sham lac*ing in consideration AN2 of course in violation of the P,A$ &he point to remember
here is that the 'assignment( or 'endorsement( ;almost al#ays fabricated, forged or
unauthori!ed= is only an )%%13 in #hich case the &rustee of the 319I/ trust must accept the
offer and then pay for it$ In fact most P,A.s re8uire a letter of opinion from counsel for the
&rust indicating that no negative ta- impact #ill result on the &rust.s 319I/ status$ &hree things
#e *no# to be true in most cases4 ;a= the &rustee never accepted the transfer and ;b= &he trust
never paid for the loan and ;c= a loan already declared in default is not susceptible to
acceptance by the trust$ Jeep in mind that most trusts are governed by Ne# 6or* 0a# #hich
says that such transactions are void, not voidable$
,o let us assume that you have a receptive Cudge #ho agrees that the transfer to the trust
never occurred or even that the original loan documents lac* consideration from the named
DA of :3
Payee on the note ;and of course the named 9ortgageeFbeneficiary under the 9ortgage=$ In my
opinion you are still only half #ay to home base$ No home run yet, although I thin* the la# #ill
evolve #here that I, sufficient to remove the mortgage encumbrance$
,o no# #hat7 6ou have still sued parties #hom you have proven have no interest in the
mortgage$ &he 8uestion is #hether you have eliminated the possibility of AN6 party ;#ho has no
notice of the action= having an interest in the debt, note or mortgage$ And many 5udges #ill
reply that you have put on a pretty good case but you still have not identified the creditor " an
odd t#ist on the defensive actions in foreclosure cases$
9y opinion is that you need to allege a fact pattern, #here appropriate, that states that @all
,treet investors advanced the money to the borro#er #ithout *no#ing that their money #as
not going through the trust$ >ence a direct relationship arose by operation of la# bet#een the
borro#er, as debtor and the investors as creditors$ &hose investors are creditors not as &rust
beneficiaries but rather personally, because the money never #ent through the trust$ &he
allegation is that they #ere cheated by intervening fraudulent behavior or negligent behavior
on the part of the bro*er dealer #ho sold them the securities of an empty 319I/ &rust that
never received the proceeds of sale of the 319I/ 39+,$
At this point you can properly argue that the investors #ere entitled to a note and mortgage
by virtue of the securiti!ation documents that #ere used to fraudulently induce them to part
#ith their money$ &he allegation should be that they didn.t get it and that putting the name of
sham 'nominees( did not accrue to the benefit of the investors but rather inured to the benefit
of intermediaries #ho #ere not lending money in your transaction$
1ither #ay, you say that as to the debt bet#een the mortgagor homeo#ner and #hoever else
might be ma*ing a claim, the initial mortgage encumbrance is no# andFor has al#ays been
invalid and unenforceable because they recite facts based upon a none-istent transaction,
that the mortgage has been split from the note, that the note has been split from the debt, and
through no fault of the homeo#ner, there is no note or mortgage inuring to the benefit of the
actual creditors$ &he cherry on top is that there is no such thing as an e8uitable mortgage " for
the same reasons that courts are reluctant to grant 8uiet title actions " it #ould cause chaos in
the mar*et place and raise uncertainty that the recording statutes are intended to avoid$
,ee 3omero v ,un&rust ,tatute of 0imitations A32013
,ee also 'a ne# and different breach( ,ingleton v Greymar %la , /t HH2 ,o2d 100D A1:200D
And on collateral estoppel Jaan v @ells fargo +an* NA /ase 13H0H2H/IN 11:13
%or further information, call A:DDA:AHBG or :20D0:1BHH$
Are you a candidate for %lorida.s >ardest >it %und relief for %oreclosure Nictims7 ,ee %lorida
>ardest >it %und
G 6ears of +egging and %inally &hey ,ee the 0ight
Posted on Culy H, 201D by Neil Garfield
+ac* in 200G200H I told the ,tate of Ari!ona and other states that in8uired, that they #ere
o#ed a lot of money because of the failure to abide by state la# regarding the recording of
instruments$ &a-es, fees, costs and e-penses #ere never collected because of 913, and lesser
*no#n similar systems ;,ee /hase +an*=, resulting in billions of dollars in lost revenue #hile the
same offices got inundated #ith lo# cost ;0is Pendens= filings #hen the mortgage loans turned
up in foreclosure courts$ And that #as 5ust in the ,tate of Ari!ona$ &hin* about :0 ,tates$ &he
counties and states #ere hit #ith an avalanche, B million so far, of foreclosures and had to hire
more staff, more 5udges and adopt 8uestionable 'roc*et doc*ets( and incorrect
interpretations of non5udicial statutory schemes$
&he result, according to some studies #as that the states lost money, the ban*s made money
through dubious foreclosures, and the investors #ho #ere the source of nearly all the money
:0 of :3
loaned on residential homes ended up suing or begging for settlements$ Government #as
crushed under debts and e-penses that could not be paid$ Ari!ona %inance admitted that the
total #as about E3 +illion #hich #as almost e-actly the same as the ,tate deficit$ After months
of #rangling my plan #as adopted by the leaders of the ,tate ,enate and >ouse of
3epresentatives, and the governor.s office$ &hen suddenly it #ent dar* and various
orchestrations of 'Neil Garfield doesn.t *no# #hat he is tal*ing about( #ere played around the
country, #ith the +an*s footing the bill$
No# a Cudge in Pennsylvania has stated the obvious ;see belo#= and Pennsylvania #ill be the
first state to recoup billions of dollars in lost revenue and e-penses, fines, interest and other
charges " #ithout spending a dime on la#yers, #ho are all proceeding on a contingency fee
basis$ &hose la#yers are going to ma*e a *ing.s ransom in fees$
No# a %ederal Cudge has seen the light and e-pressed himself 8uite clearly$ &he #hole point of
the public records system is to provide confidence in the system of title and giving buyers or
lenders the comfort of *no#ing that they had #hat they thought they #ere getting$ &he #hole
purpose of 913, and similar schemes #as to avoid the public records system " until it comes
time to use them to foreclose on previously unrecorded transactions involving the mortgage$
Cudges around the country have e-pressed fear that our entire title system has been
compromised " both publicly in +ar seminars and privately to me in intervie#s$
All this happened because the decision #as made to force borro#ers to shoulder the entire
burden of the mortgage meltdo#n$ &his country has a habit of relying on a 'free mar*etplace(
#here it is )J to promote debt and borro#ing, including a hard sell and then blame people
#hen they believe the commercials and sales script$ @e blame them for being in debtX In so
doing #e got people to rely on easy credit in lieu of a living #age$ @e did the same thing #ith
tobacco products #here nobody cool #ould be caught dead ;every pun intended= #ithout a
cigarette hanging from their mouth$ +ut #hen they get cancer or /)P2 #e blame the smo*er$
And not to get too political, #e did the same thing #ith immigration$ &he 'free mar*etplace(
did everything they could #ith local, state and federal government to bring in 11 million people
#ho #ould provide cheap labor, pay ta-es and buy goods and services$ Nobody cared #hether
they had papers and 3eagan even granted them amnesty$ No# #e blame them all for being
&he systemic problem is that #e fail to match accountability #ith capability$ Cust because you
can get a pension fund manager to part #ith E100 million doesn.t mean you are entitled to
*eep it$ Cust because you get a borro#er to sign some papers that ma*e no sense #hatsoever,
doesn.t mean the papers ought to be enforced " especially #hen it is at the e-pense of the
pension fund$ @e have the intermediaries driving the train instead of the real parties in
interest$ &he +an*s are seen as too big to fail #hile the horrendous loss of confidence and net
#orth in most households ;some of #hich are no# under a bridge= is something #e 5ust need to
suc* up and get over$ )ur system #as created to allo# for plenty of room for chaos and even a
bit of insanity$ +ut #hen you have the inmates ;+an*s= running the asylum, then the benefits
flo# out of the system instead of flo#ing to those #ho are part of the society that is governed
by our system of government$
It @as the +an*s &hat %alsified 0oan 2ocuments
Posted on Culy A, 201D by Neil Garfield
I *no# it doesn.t ma*e sense$ @hy #ould a lender falsify documents in order to ma*e a loan7 I
had a case in #hich a ma5or regional ban* had their loan representatives falsify loan documents
by having the borro#er certify that there #ere houses on his t#o vacant lots$ &he ban* s#ore
up and do#n that they #ere never involved in securiti!ation$
:1 of :3
@hen the client refused to ma*e such a false statement " the ban* did the loan any#ay A,
&>)?G> &>1 N)N1UI,&1N& >)91, @131 )N &>1 NA/AN& 0)&,$ &hus they loaned money out on
a loan that #as guaranteed to lose money unless the borro#er simply paid up despite the
obvious loss$ &he borro#er.s error #as in doing business #ith #hat #ere obviously unsavory
characters$ &rue enough$ +ut he #as dealing #ith the regional ban* in his area that had the
finest reputation in ban*ing$
>e figured they *ne# #hat they #ere doing$ And he #as right, they did *no# #hat they #ere
doing$ @hat he didn.t *no# is that they #ere doing it to himX And they #ere doing it to him in
furtherance of a larger fraudulent scheme in #hich investors #ere systematically defrauded$
@hen I too* the client.s history all I had to hear #as this little vignette and I *ne# ;a= the ban*
#as involved in securiti!ation and ;b= this loan #as securiti!ed +1%)31 the closing and even
before any application for loan #as solicited or accepted by the ban*$ &he client bal*ed at
first, not believing that a ban* #ould openly declare its noninvolvement #ith @all ,treet #hen
the truth #ould so easily be *no#n$
+ut the truth is not easily *no#n " especially #hen the ban* is involved in 'private label(
trusts in #hich there are no filing #ith the ,1/ or other agencies$
&he real 8uestion is #hy #ould the ban* as* the borro#er to certify the e-istence of t#o homes
that #ere never built7 @hy #ould they #ant to increase their ris* by giving a loan on vacant
land that supposedly had improvements7 )r to put it bluntly, @hy #ould a ban* try to cheat
&he ans#er is that no ban*, no lender, no investor #ould ever try to cheat themselves$ &he
#hole purpose of our mar*etplace is to allo# mar*et conditions to correct inefficiencies and
moral ha!ards$ ,o if the ban* #as cheating or lying, the only rational conclusion is not that they
#ere lying to themselves, but rather lying to someone else$ &hey #ere increasing the ris* of
non repayment and decreasing the probability that the loan #ould ever succeed, #hile
ma-imi!ing the potential for economic loss to the lender$ @hy #ould anyone do that7
&he ans#er is simple$ &hese #ere not 'overly e-uberant( loans, mis5udgments or 'ris*y(
behavior situations$ &he )N06 reason or ban* or any lender or investor #ould engage in such
behavior is that it #as in their self interest to do it$ And the only #ay it could be in their self
interest to do it is that they #ere ;a= not lending the money and ;b= had no ris* of of loss on
any of these loans$ &here is no other conclusion that ma*es any sense$ &he ban* #as being paid
to cran* out loans that loo*ed valid and viable on their face, but in fact the loans #ere neither
valid nor viable$
@hy #ould anyone pay a ban* or other 'originator( to pump out bad loans7 &he ans#er is
simple again$ &hey #ould pay the originator because they #ere being paid to solicit originators
#ho #ould do this and then aggregate overpriced, nonviable loans into bundles #here the top
layer contained apparently good loans on credit#orthy individuals$ And #ho #ould pay these
aggregators7 &he /2) manager for the bro*er dealers that sold to-ic #aste mortgage bonds to
un#itting investors$ As for the ris* of loss they created an empty unfunded trust entity upon
#hom they #ould dump defaulted loans after the A0 day cutoff period and contrary to the
terms of the trust$
,o it #ould 0))J 0IJ1 there #as a real lending entity that had approved, directly or indirectly,
of the the 'under#riting( of a loan$ +ut there #as no under#riting because there #as no need
for under#riting because the originators and aggregators never had a ris* of loss and neither
#as the /2) manager of the bro*er dealer e-posed to any ris*, nor the bro*er dealer itself that
did the under#riting and selling of the mortgage bonds$
3eynaldo 3eyes states that 'it is all very counterintuitive$( &hat is code for 'it #as all a lie$(
+ut #e *eep treating the securiti!ation infrastructure as real$ In the 2011 article ;see belo#= in
>uffpost, the %ederal 3eserve cited @ells %argo for such behavior " and then the %ederal
3eserve started buying the to-ic #aste mortgage bonds at the rate of some EB0 billion P13
:2 of :3
9)N&>, #hich is to say that appro-imately E3 &rillion of to-ic #aste mortgage bonds have been
purchased by the %ederal 3eserve from the +an*s$ &he +an*s settled #ith investors, insurers,
guarantors, loss sharing agencies, and hedge counterparties for pennies on the dollar, but so far
those settlements total nearly E1 &rillion, #hich is a lot of pennies$
9ean#hile in court, la#yers are neither receiving nor delivering the correct message in court$
&hey see* a magic bullet that #ill end the litigation in their favor #hich immediately puts them
in a classification of la#yers #ho lose foreclosure defense cases$ &he bottom line4 the la#yers
#ho #in understand at least most of #hat is #ritten in this article, have dra#n their o#n
conclusions, and are merciless during discovery andFor at trial$ &hen the opposition files a
notice of voluntary dismissal or 5udgment is entered for the homeo#ner 'borro#er$( 3ight no#,
these losses are acceptable to ban*s #ho are still playing #ith other people.s money$ If la#yers
did their homeo#ner and litigated these cases aggressively, the ban*.s illusion of securiti!ation
#ould end$ And &>A& means most foreclosures #ould end or never be started$
@ells %argo Illegally Pushed +orro#ers into ,ubPrime 9ortgages
:3 of :3