Due Process, Discovery and Burden of Proof

       Non-judicial process was never intended and could never be constitutionally applied as a mere trick to avoid due process. If these parties wish to initiate foreclosure they must, whether it is a judicial process or a judicial process, possess the attributes of the basic jurisdictional elements of standing and they must possess the attributes of being authorized to proceed by the true parties in interest i.e., the necessary and indispensable parties. The fact that a state allows non-judicial process does not grant carte blanche to any wily person or entity to try its hand at foreclosure and see if they get away with it.

If they are allowed to continue to raise defenses and make allegations without establishing the basic jurisdictional elements of legal standing and without establishing and disclosing the real parties in interest, then the entire case and all foreclosures are a mere charade, inviting any unscrupulous character to attempt to create color of title over the loan and the  foreclose on it.

“How do I prove that?” There are several answers. You know your loan has been securitized but the Judge doesn’t. And even if it has been securitized, how do you show that defeats the foreclosure? In this post I will answer these questions, which appear to be the most asked.

First, do NOT fall through the trap door of taking on the burden of proof. This is trickier in non-judicial states than judicial states but it is still possible to shift the burden of proof onto the pretender lenders if you do the right things and of course, if the Judge agrees with you. Remember these strategies presented here are valid in my judgment — but tactical, strategic and legal considerations by local licensed counsel trump anything I say here.  And for those of you considering class actions, which appear to be popping up all over the country, leave the door open to “fraud on the market.” By its very nature it is ipso facto a class action and eliminates many hurdles.

In all cases, I strongly recommend a forensic review with all four legs of the stool, lest you tip over and fall on your ass. The TILA audit is not only not enough, it is incomplete without considering inflated appraisals, UCC, SEC and chain of title. Without ALL elements present you can’t allege the right things that will enable you to argue that the right to rescind never started running because they withheld the identity of the real lender. Without the securitization information, you can’t allege that the opposing party is a pretender lender. Without the chain of title information you can’t allege that your rescission is effective and that off-record unreported fees and profits were earned. Without the inflated appraisal, you can’t allege that the APR on the good faith estimate is not only wrong, it is fraudulent diverting the borrower’s attention from what is clearly a usurious loan.

And the forensic review process should INCLUDE the debt validation letter (DVL), the  Qualified Written Request (QWR) and probably a notice of rescission under the three-day rule even if the closing was years ago. The good news is that with the QWR there is no restriction on the number of questions you can ask, there is a statutory duty to answer it and you can get a TRO just based upon the fact that RESPA has been invoked.

I strongly advise that you retain a firm with a subscription to ABSnet that renders a separate and independent report on the loans of the specific class representatives so that you can produce, in court, copies of public records documents in the public domain that are subject to judicial notice to create the presumption that these defendants can’t possibly own the note. By doing this, when asked about these specific loans rather than the way things work generally, you can say that these loans definitely did operate in the usual way, that you have copies of the public records to show, and that if the facts are any different it is only because the defendants did not properly report their activities to the SEC or have otherwise failed to answer basic questions of the borrowers like “who is my lender?”

Don’t leave an issue floating which is central to the entire securitization defense and offense: that it isn’t so much whether they will suffer a loss for each foreclosure, but rather that they stand to lose nothing and gain everything. One of the following is true:

1. They don’t own the note and they have no authority to enforce the note or mortgage because they are not named on it and they have not been given express authority by the holders of the the note and mortgage along with indemnification for all costs, expenses, and claims.
2. They don’t own the note and they have authority to enforce the note or mortgage because they have been given express authority by the holders of the the note and mortgage along with indemnification for all costs, expenses, and claims.

Either way they don’t own the note. By definition that is what securitization means. The reason for the procedure invoking limited discovery is to force these parties to either put up or shut up. Non-judicial process was never intended and could never be constitutionally applied as a mere trick to avoid due process. If these parties wish to initiate foreclosure they must, whether it is a judicial process or a judicial process, possess the attributes of the basic jurisdictional elements of standing and they must possess the attributes of being authorized to proceed by the true parties in interest i.e., the necessary and indispensable parties. The fact that a state allows non-judicial process does not grant carte blanche to any wily person or entity to try its hand at foreclosure and see if they get away with it.

Whether you started in non-judicial or judicial forum, you are in court now. The pretender lenders wish to defend the against the borrowers’ claims. They have no standing to defend except as nominal parties unless they can show they have legal standing and that the necessary and indispensable parties are present, disclosed and accounted for in this action. Defendants seek to divert the court’s attention from the most basic elements of due process and fairness when they allege the “loss” they will suffer as “lenders.” They are not lenders. That is the point of the lawsuit. If they are allowed to continue to raise defenses and make allegations without establishing the basic jurisdictional elements of legal standing and without establishing and disclosing the real parties in interest, then the entire case and all foreclosures are a mere charade, inviting any unscrupulous character to attempt to create color of title over the loan and the  foreclose on it.

Each day these defendants (pretender lenders) are allowed to proceed under cover of plausible deniability is another day in which the title of Plaintiffs/Borrowers will be further clouded by further off-record activity that will become on-record when they choose to do so, all in transactions conducted under cloak of secrecy and deception. The situation is bad enough without allowing these defendants (pretender lenders) to make this court complicit in their fraudulent claims, resulting in clouded and unmarketable title.

Wells Fargo Steps on A Rake (We Hope)-a New Country

 And when that rakes hits them in the head, it will hopefully start a domino effect with the rest of the pretender lenders. OH Sup Ct – Wells Fargo Appeal WF has decided to go for the brass ring by bringing an appeal from a case they lost. What they are saying to the Ohio Supreme Court is that if the borrower doesn’t raise the issue of “who owns the loan” early enough, they have waived it. They are also saying that when they finally record the assignment documents should have no effect on who can enforce the note and mortgage. Lastly, and most importantly they are really saying “this is the way we do things now and the courts must conform to industry practice even if it leads to unjust, inequitable, foul results.”All of this would have been considered a bad joke on a law school exam deserving an “F” for failure to have absorbed even the the most basic elements of Black Letter Law or even common decency. Now it is being treated as a real issue. TRANSLATION: WF wants the Ohio Supreme Court to rule that ANYONE in the securitization chain can enforce the note and mortgage and that the effect on the marketability of title to the property and the clouding of title should be ignored. And they are saying they can do that without notifying, serving or suing anyone else in the securitization chain — even though WF never funded the loan, doesn’t have a dime in the deal and basically is using procedural devices the steal homes from unwary homeowners who do not have the legal expertise or access to to lawyers with sufficient understanding of securitization to oppose the obviously unfair and unjust result. When we started this blog we predicted that the entire issue, in legal circles, would come down to whether the pretender lenders were successful in getting the courts to see only the individual transactions, rather than all the transactions in the securitization chain taken as a whole. In legal theory this is known as the single transaction doctrine or the step transaction doctrine. The basic test is whether the deal would have ever happened if all the parties knew what was going on. The answer is clearly “NO!” Would an investor have knowingly invested cash into a pool where the loans were based upon obviously inflated property values that could not, would not and did not withstand the test of time (even a few weeks in some cases), NINJA (no income, no job, no assets, no problem) or were subprime borrowers with credit histories that were questionable? Would investors have funded $800,000 for a bond (mortgage-backed security) where the proceeds were to be used for funding a $300,000 mortgage and the rest was kept for fees and profits? Who would buy something for investment where the moment they executed the paperwork they were taking a 60% loss? Never mind the fact that on the secondary market the bonds are selling for $.01-$.03 cents on the dollar. So what does that mean? They are either worthless, unenforceable or both. The mortgage and the note have been “separated” unlike what you have always heard about mortgages following notes and vice versa….the legal consequences of securitization are this…the note is at best unsecured and worst ….for the investor unenforceable. Would borrowers have signed papers and put up their home for collateral if they knew about the inflated home values when they were depending upon the appraisers who were hired by the lenders? Would investors have signed papers and put up the cash for the securitization chain if they knew about inflated securities values, bogus AAA ratings and security quality when they were depending upon rating agencies that were hired by investment banks who were the issuers of the bonds and insurance policies from companies insuring the potential default of the mortgages backing the cash flows that provided the return on the securities without insufficient assets to cover the liability to pay in the event of a claim? Would borrowers have signed papers knowing that the profit being made by intermediaries was as much or more than the amount of their loan? Obviously not. How many borrowers would have knowingly signed papers and moved into a house from which it was certain they would be evicted? because the “lender” knew or should have know that mortgage would default with the first adjustment in payment… This all occurred because Wall Street and all the intermediaries, banks, mortgage originators, mortgage brokers etc. kept the investor and the borrower from ever meeting or even knowing they existed. Even if this tricky theory of WF was to be accepted arguendo, in order to have a complete adjudicate of all rights and obligations and in order to clear title and present a certificate of title that was marketable (not subject to being later overturned by claims of fraud on the court) ALL parties in the securitization scheme must be given notice and an opportunity to be heard. Just how well would some hedge fund like it if they received a notice from Wells Fargo or Countrywide or Ocwen or HSBC saying that there was a foreclosure going on, that the hedge fund was named as a defendant because their interest mortgages and notes they were told they had purchased were about to be extinguished and kept by an intermediary? WF is trying to make the Ohio Supreme Court a party to fraud. Isn’t that why Countrywide was sued by Greenwich Financial et al? The investors were saying that Countrywide had no right to agree to short sales, modifications or anything else because the Hedge fund owned the loans not the servicer. This is not theoretical… it is actual. Why did “mortgage modifications” come to a halt last fall and early this year? Despite Obama and Financial Institution rehetoric about assisting homeowners and modifyin “millions of mortgages” the Greenwich vs. Countrywide suit “froze” all modifications because the parties, from servicers to “loan mod” companies claiming to assit borrowers have NO authority to modify the mortgage and would not act for fear of similar litigation. WF admits in its brief that the issue is multiple liability for the borrower because ANYONE in the securitization chain can sue, but says that doesn’t matter. Probably true. It doesn’t matter to these interlopers but it sure matters to the “borrower” and the “investor” (both of which could simply be regarded as VICTIMS). They are the only parties that stand to lose money or assets….READ: actually be damaged. Of course the effect on title to the property is horrific. Think about it. You have a homeowner who is on the deed and upon foreclosure a certificate of title is issued to a party that was not named in the mortgage or deed of trust. You have a bondholder who has received a bond (mortgage backed security) listing the borrower and the security interest in the property as being conveyed to the investor. And it is all in the public record and public domain. You have a mortgage or deed of trust that when all the smoke and mirrors are cleared away says “we are going to pass the title around here to whomever we want and when we are good and ready we’ll tell you who has title.” So the notice of record declares that there will off-record transactions but that nobody can know until private parties declare the effect of those transactions. What they are advocating is the judicial act of ignoring the requirements of federal law, state law and common law. Why don’t they just come out and say it like Dick Durbin, Senior Senator from Illinois said it “When it comes to banking, they own the the government.” They certainly used the government as their private bank account (TARP, Federal Bailout, U.S. Treasury bailout and credits, etc.). Why don’t we just come right out and say it — forget the constitution, forget the declaration of independence, forget the rule of law, forget federal legislation, executive agency rules, state laws and common law, we are now the Empire of Great Goldman Sachs. And they are saying this is “industry practice” now. True, it IS industry practice and that is why the indsutry as a whole has put itself in the position of potential civil, administrative and criminal liability and sanctions. But up until the last few years any such practice would have have been properly condemned. Everything is relative, “common practice” in the last 5-10 years is not what changes Black Letter Property Law, which for 200 plus years has been belonged to the states. Just because the banking industry quit crossing their T’s and dotting their I’s and devised a scheme, using their own proprietary, member based, electronic system(MERS) to avoid the various state and local fees dues states and counties for recording an interest in real property In a society of laws (not men) it is government that has the power to declare true title of record. It is only in a nation where we governed by the rule of privileged men instead of laws that we grant such powers to private entities and bind public branches of government to the edict of companies like MERS (Mortgage Electronic Registration Systems). EGGS seeks to complete its bloodless coup turning a republic into an oligopoly and unfortunately the Obama administration doesn’t seem to get it even though the citizens of this once great country see it clearly. If this doesn’t turn the rule of law on its head, I don’t know what does. We can only hope that as these cases slowly move up the appellate process that all judges come to realize this is not an ideological issue it is a moral issue and a constitutional issue. We are under attack — even the people who don’t think they under attack. The most basic rights enunciated in the United States Constitution and the Declaration of Independence are being siphoned away. This is no longer about the people who have lost their homes or the people who are in the process of losing their homes. This is about the clear and present danger that any of us could lose anything we have by edict from the rich and powerful. If the Courts go along with it, we are doomed as a nation, as a society and as hope for the world. The genius’ on Wall Street forgot that we are dealing with REAL property here and more importantly REAL people…and families. When we talk about “Black Letter Law” we are not just talking about circa last 200 years adopted from the English Lords where the issue of “standing” came from….Go back to your Bible and read the Old Testament Book of Ruth….even Boaz took off his shoe and had 10 elders in the town witness the legal transfer of interest in real property from Naomi’s heirs so there would be no “cloud on his title” or one might say today that he “perfected his interest” in that property. Wells Fargo’s argument is that a group of us in the mortgage industry came up with our own set of rules a few years ago and in recent history(the last 10 years not the last 100 years) it kind of became industry practice so ….we expect the courts ….after the fact to adapt to OUR standard….yeah right. Talk about a weak argument….it would get you an “F” in Law school…consequently the American public knows it doesn’t hold water. Judges are you listening?