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Fraudclosure Victories?

30 Mar

[courtesy Google Images]

[courtesy Google Images]

Since A.D. 2009, I’ve published 25 articles on the fraud that appeared to infect most home foreclosures (see, Foreclosure).  This will be the 26th.

Most of those articles focused on reports that the banks making mortgage loans had defrauded the borrowers.  The fraud worked like this:

1) The banks seemingly loaned money to people to buy new homes.

2) These loans were based on the home-buyers’ signatures on Promissory Notes and Mortgage documents that memorialized the home-buyers’ promise to a) repay the loans; and b) surrender possession of the house if they defaulted on repaying the loans.  These written documents created the banks’ rights foreclose on the home-buyer and seize his home if he defaulted on making his loan payments.

3) But the banks often sold the Notes and Mortgage documents to third parties within days or even hours after they’d negotiated the loan with the home-buyer.  Thus, the bank was fully paid for whatever they’s invested in the loan shortly after the loan was negotiated.  Nevertheless, the banks continued to collect the mortgage payments from the home-buyer.  But, most importantly, by selling the Notes and Mortgage documents, the banks lost their right and standing to foreclose on the mortgage loan.  It was like selling the “certificate of title” to your car.  Once you sold the “title,” you lost your right to drive the car.  Once the banks sold the Notes and Mortgage documents associated with a particular loan, the banks lost their right and title to foreclose on the the particular house.

4) Nevertheless, the banks did foreclose on nearly four million homes during the Great Recession.  If those foreclosures were instigated by banks that no longer owned the Notes and/or Mortgage documents associated with particular homes and loans, those foreclosures were arguably based on fraud.  Once the bank sold the Notes and/or Mortgage documents, the bank had no more right to foreclose than I did.  No tickee, no washee.  No Note, no foreclosure.

When the banks sent foreclosure notices to borrowers, most borrowers simply packed their bags and moved out of their homes.  They consented to be foreclosed upon.

But some borrowers who’d come to sense or even understand the fraud perpetrated by the banks stood their ground and refused to move out of their homes.  Some of those people are still living in their “foreclosed” homes, five years after the banks sent their first notice of foreclosure–and haven’t paid a dime on their mortgages during the past five years.

It takes a certain amount of brains and  lot of nerve to not only refuse to pay on your mortgage for five years, but also to remain in your house.

Here are some excerpts from an article in The New York Times entitled “Foreclosure to Home Free, as 5-Year Clock Expires.”  That article explains that thousands of people who stayed in their “foreclosed” homes without paying a dime on their mortgages for the past five years may get to keep their homes for free.  Legally, they may never have pay any more on their mortgages.

 

 

“In September, Susan Rodolfi celebrated an unusual anniversary: five years of missed mortgage payments.

“She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes.”

 

Why are these borrowers still living in their “foreclosed” homes?  One answer may be that they refused to leave when they received notices of foreclosure from the banks.  That takes nerve.

But I’ll bet that at least some of these people refused to leave because  knew that the banks were engaged in fraud and couldn’t take/foreclose on the homes without the home-buyer’s consent.  That takes brains.

 

“Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.

“Legal quirk,” my butt.

“Surreal ending,” my you-know-what.

The “legal quirk” they’re referring to is the statute of limitations which is as well-established as any law can be.

The only thing that was “surreal” about the foreclosure process was not the “ending” (home-buyer gets to keep the house without paying the sum due on the mortgage), but the beginning (banks sold the Notes and Mortgages and thereafter engaged in fraud against borrowers).

 

“The reason [why home-buyers will get to keep homes without paying the mortgages], lawyers for homeowners argue, is that the cases have dragged on too long.

“There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.”

 

In other words, in order to foreclose, the banks would have to take their foreclosure petition to court.  The problem was that the banks has previously sold the Note and Mortgage documents that created their right and standing to foreclose.  Without the original Note and Mortgage documents, the banks would have not standing to foreclose on a particular house.  In fact, without those original documents, the bank might not have had standing to claim the previously collected mortgage payments.  In theory, the banks might be required to refund all mortgage payments received after they sold the Note and Mortgage documents to some third party.

More, if it came out in court that the banks were trying to foreclose on a house where the bank owned no Note or Mortgage documents, that might not only be construed as fraud on the borrower, but might even be construed as fraud on the court, itself.  Fraud is a crime.  Bankers (and even their lawyers) might go to jail.

But.  According to The New York Times article,

 

“[I]n a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded, according to interviews with housing lawyers and a review of state and federal court decisions.”

 

To which I say, “Bunk.”

In fact, let me rephrase that to say “Bunk!

Are we to believe that the banks–and their lawyers–lost track of tens of thousands of homes that should’ve been foreclosed five years ago?!  Are we to believe that those homes will now “accidentally” escape foreclosure and the home-buyers will get to keep their homes without paying another dime?

Is the “statute of limitations” the real reason these homes will never be foreclosed?  Or is that statute a mere pretext for not litigating some foreclosures?

 

No one gets a free house,” Judge Michael B. Kaplan of the United States Bankruptcy Court in Trenton wrote in an opinion late last year, reflecting what he characterized as a longstanding “admonition” he and others made during the foreclosure crisis. But after effectively ending a New Jersey homeowner’s foreclosure case in November because the state’s six-year statute of limitations had expired, he wrote in his opinion, “With a proper measure of disquiet and chagrin, the court now must retreat from this position.”

But, did the homeowner really get a “free house” because the statute of limitations expired?  Or did he get a free house because the  lender had engaged in fraud, had approached the court with “unclean hands,” and may’ve been criminally liable for defrauding both the borrower and the court?  

Was the statute of limitations merely a way for banks to give up the homes without having to admit that their foreclosures were based on fraud?

I strongly suspect that the real cause for abandoning those homes to home-buyers was to avoid be charged with fraud.  The statute of limitations provided an excuse to abandon those homes without having to admit that the banks had engaged in fraud.

Again, the banks frequently sold the note and/or mortgage documents to homes after the loans were first granted.  Those notes and mortgage documents were frequently attached to mortgage-backed bonds that were subsequently sold around the world.  Result?  The banks don’t have the original note and/or mortgage documents that entitle them to foreclose.  Without those notes/mortgage-documents, the banks have no standing to foreclose.

And, again, without those notes/mortgage documents, the banks may not have had legal authority to collect mortgage payments prior to foreclosure.  Thus, it’s conceivable that if these cases had come to court, the home-buyers might’ve countersued to the banks to recover all mortgage payments received by the banks.

If these foreclosures suits had gone badly for the banks, they might not have only lost the homes where mortgages weren’t being paid, they might’ve even lost all the money that had been previously paid on the mortgages, and even wound up exposed to being charged criminally for fraud.

Thus, instead of facing those possible risks, I believe the banks simply caused or allowed the cases to “drag out” until they reached the statute of limitations.  The banks would lose the houses, but they’d save face and thereby limit their potential losses to “only” the homes they’d sought to foreclose.

I think that’s a wonderful story.  Private individuals figured out that the banks were engaging in fraud.  Some private individuals relied on on that theory.  The banks apparently didn’t want to confront that theory in court.  Some private individual with sufficient brains and nerve got to keep their homes.

Now they’re trying to conceal that victory by claiming the home-buyers get to keep their homes due to the statute of limitations.  But I believe that’s simply standard operating procedure for the “system”.  When they win, they shout it from the rooftops.  When they lose, they go silent or explain the lose as caused by a “quirk” or a procedural  error.

First point: we have to hunt for evidence of our victories.  But there are some victories.

Judging from The New York Times article, there might’ve been 100,000 homes where the borrowers had sufficient knowledge, intelligence and courage to successfully resist the banks.  That’s not much out of 4 million foreclosed homes (one in 40).  Still, that’s something to remember and respect.

Every once in a while we can beat these bastards.  As more people understand that victory is possible, more people will fight to win.

Second point:  I don’t imagine that my previous 25 articles on foreclosure fraud played a big part in saving tens of thousands of homes from “fraudclosure”.  But I like to imagine that those articles played a small part. It pleases me to think that I might’ve helped save a few homes from “fraudclosure”.

Final point:  It also pleases me to write this 26th article as a conclusion to the previous 25.  I’ve been writing articles on foreclosure fraud for six years and hoping that I might make a difference in some borrowers lives.  Well, maybe I did.  In any case, it appears possible that the insights and arguments I presented over the size years resulted in the victories that I’m reporting on today.

How nice, hmm?

You write for six years, and then you catch a glimpse of some victories. There is cause-and-effect–if you’re patient enough to persist.

 

 

 
20 Comments

Posted by on March 30, 2015 in Banking, Foreclosure, Fraud

 

Tags: , , ,

20 responses to “Fraudclosure Victories?

  1. dog-move

    March 30, 2015 at 6:36 PM

    Maybe “man or other animals” is a brilliant God inspired concept that’s causing decriminalization of certain “drugs” in the territorial United States, I believe, from your original teaching, brother Al. The foreclosure fraud victories in part, possibly are a result of the postings on this site as well. Loving your neighbor as yourself involves being a righteous teacher of the truth. No scattering of the flock here. Alright!

     
    • Adask

      March 30, 2015 at 7:37 PM

      Thanks for your comment. Much appreciated.

       
  2. Cody

    March 30, 2015 at 7:15 PM

    It was a good start for me. Not perfect but, better than the dozens of attorneys that I talked to. All of whom told me that you can’t stop a foreclosure.

     
  3. Toland

    March 30, 2015 at 7:18 PM

    Here’s an excerpt from a 2009 article in The New York Times on this topic:

    Even so, banks and borrowers still do battle over foreclosures on an unlevel playing field that exists in far too many courtrooms. But some judges are starting to scrutinize the rules-don’t-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit.

    One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.

    So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.

    The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.

    To be sure, many legal hurdles mean that the initial outcome of the White Plains case may not be repeated elsewhere. Nevertheless, the ruling — by a federal judge, no less — is bound to bring a smile to anyone who has been subjected to rough treatment by a lender. Methinks a few of those people still exist.

    More important, the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court.

    The bank may be unable to foreclose, but someone, somewhere, likely has the original note. That person can show up to claim the house.

    http://www-nc.nytimes.com/2009/10/25/business/economy/25gret.html

     
    • Roger

      March 30, 2015 at 11:36 PM

      Toland, from your New York Times article:

      “But some judges are starting to scrutinize the rules-don’t-matter methods used by lenders and their lawyers in the recent foreclosure wave…. More important, the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court.”

      Gotta give the mainstream media credit where credit is due. Considering this article was published in 2009, The New York Times called it.

      Shine the light on all fraudulent claims – express or implied – and the frauds who make them.

       
    • harrytapp

      March 31, 2015 at 1:39 PM

      A thought…”The bank may be unable to foreclose, but someone, somewhere, likely has the original note. That person can show up to claim the house.”

      Since that “someone” bought the note illegally (fraudulent transfer) and the current resident/owner has documentation for which the stated lien holder (The Bank) has no note/documentation, then it would be incumbent upon the court to issue (Order) a new clean deed to the asset/residence for the current owner thus making the original deed null and void.

       
      • Adask

        March 31, 2015 at 2:01 PM

        The original note was probably bundled together with 50 or 100 other notes as backing for a bond. That bond might’ve been originally issued to someone or some institution in Kansas, but it may’ve been sold, resold, and might now be in Beijing or Buenos Aires. It’s unlikely that the bond holding a specific Note is in this country. It’s unlikely that the original Note could be found if you put a gun to the banker’s head.

         
      • harrytapp

        March 31, 2015 at 2:12 PM

        @Adask: “It’s unlikely that the original Note could be found if you put a gun to the banker’s head.”
        Exactly, hence the title is lost and a new one need be issued.
        Since the home owner is the only one with documentation to a valid claim they should be named on the new title as soul owner, eliminating any and all potential future claims.

         
      • Roger

        March 31, 2015 at 4:52 PM

        While it can happen that the note was transferred illegally, typically the bank simply sold the note in a highly structured, but perfectly legal, sales transaction.

        Now the bank no longer has the note, but someone else does have it. That someone bought the note for a reason. The note has value, so its purchaser didn’t simply throw it in the garbage after buying it.

        Because the note still exists, it could show up again in the hands of someone else (not the bank) looking to collect on the debt. This ability to collect is the whole point of purchasing such a note in the first place.

        And this risk of having an actual holder of the original note show up to collect the mortgage debt sometime in the future is a frequent courtroom defense against the original lender’s note-less foreclosure.

         
      • Toland

        April 1, 2015 at 11:04 AM

        Thanks for the reality-based content, Roger.

        Possession of the original note confers the right to foreclose. Since the bank sold the original note, the bank can’t foreclose, legally speaking.

        However, just because the bank can’t foreclose, this does NOT mean no one can foreclose.

        Just because the bank no longer has the original note, this does NOT mean the original note went poof and vanished.

        Just because the bank can’t find the original note, this does NOT mean no one, including its current owner, can find the original note.

        SOMEONE has the original note. They, whoever they are, paid money for that note because the note empowers its holder to collect the mortgage debt or, failing that, foreclose the property.

         
      • harrytapp

        April 1, 2015 at 12:20 PM

        Toland: Correct SOMEONE has the original note giving them rights to the property. SOMEHOW the bank holding the contract would theoretically forward the collected mortgages to that SOMEONE.
        The homeowner also has rights based upon that contract to his/her asset investment to the property and upon completion of full mortgage payment would reasonably expect to receive a note with their name on it.

        Just because they occupy the property does not mean that they should indefinitely hold outstanding their asset investment in the property. Therefore since the bank no longer has the original note and through documentation the SOMEONE can not be directly identified, then standard lien sale proceedings should be evoked so the homeowner can recover their asset investment with a new deed/title//note for the property.

        This is done all the time with real property such as vehicles when the owner can not be located and the lien sale initiator has an asset investment interest and usually insures an economic advantage. The lien sale papers become the new deed/title//note for the property. The home owners advantage became relevant when the bank sold the note without proper tracking.

         
      • Roger

        April 1, 2015 at 1:59 PM

        @Toland

        An interesting historic detail: Your bank selling its mortgage notes is only a late development of an ongoing trend.

        Already, in the 1980s, banks were bundling up nickel-and-dime unsecured consumer loans and auctioning them off to third parties.

        So then, if your bank loaned you money to buy a car for example, you could find yourself owing that debt to some out-of-state commercial entity you never heard of.

        The selling of a mortgage debt, i.e. the “original note”, by a bank to a third party is only an extension of this established practice.

        Unfortunately for the banks, they used poor execution when expanding this aspect of their business model to include mortgage debt. Now they’re caught out.

         
  4. GreatScott

    March 30, 2015 at 9:40 PM

    Great article, but here is a 3rd reason why Banks do not challenge the stubborn homeowner who knows his rights and what has trans-frauded. This is how a modern bank mortgage worked during the 90’s and 00’s. The bank accepted your down payment, say it was 10%. Let’s say the loan was for $100,000 on a $110,000 house. The bank debited their own account for the note, $100,000 to fund the loan. In modern day banking, the bank only needs to have 10% in cash in their vault (courtesy of other customers savings accounts) to loan out the $100,000. Then the buyer of the home, called the mortgagee, pays the 10% down payment + closing costs (which are mostly bogus and are about 75% profit. I would estimate in 2000, the average closing cost on a $100,000 loan would be about $1900-$2100 of which it cost the bank about $400 to $500.

    So far, the bank has collected $10,000, + $1900 in closing costs= $11,900-$500=$11,400 profit without costing them a dime. And then, they turn around and sell the note to a 3rd party, most of the time bundled up with hundred’s of other mortgages to a group of investor’s. The bank just got paid $100,000 + $11,400=$114,000 profit for shuffling some paper work and investing about 5 hours of an employee’s time.

    Then, after the note is sold, the original promissory note gets recorded in MERS (Mortgage Electronic Recording System) and gets shredded. But before that promissory note was shredded, the bank then sold the same note 2 or 3 more times to other investor’s.

    And then, when the giant banks were gobbling up the smaller, bankrupt banks, for every promissory note in default, the buyer of the bankrupt bank would deduct the loss of each inherited loan plus lawyer and other fee’s off their reportable profit to the IRS.

    In summary, now you can see why they did not care if the homeowner stayed in their home so long as this did not leak out to the public in mass. They made the amount of the loan back 2 or 3 fold before the loan went into foreclosure, plus they got paid by or 3 investor groups to be the loan servicing agent for the loan. if the homeowner did leave the home, then they could do it all over again.

    The final kicker is, only the Super Banks could get away with this, B of A, Citibank, Wells Fargo, US Bank, Chase Bank, Barclay’s, UBF and a few others. The smaller banks that went bellyup could not get away this because their CEO was not part owner of the Federal Reserve Bank. The final kicker to this scam was there was NO Bank crisis among the Super Banks, they got several trillion dollars (not the 870 Billion that we were told). The banking crisis was among the medium and small banks, which could not participate in the bigger part of the scam and were deemed “unworthy” of baling out and were bought by the Super Banks for penny’s on the dollar and on and on and on.

     
    • DS

      March 31, 2015 at 12:04 AM

      Your article reply is accurate except for one thing. The banks are NOT ALLOWED to loan *their money* or *their customer’s money*. The ten percent is just the fact that they have enough *showing* that they can loan up to 90% more than that. of imaginary money, NOT theirs or their customer’s money. Yoiu make a $1000 deposit, and they are allowed to “loan out” another $900, but they still don’t touch any of your money. It is called “fractional reserve lending”. What a scam, huh?

       
  5. palani

    March 31, 2015 at 7:18 AM

    @ GreatScott “The final kicker to this scam was there was NO Bank crisis among the Super Banks, they got several trillion dollars (not the 870 Billion that we were told).”

    Easy enough to awaken from a nightmare. Get them to define what ONE DOLLAR is and not be impressed by a trillion of something undefined.

     
  6. ron

    March 31, 2015 at 10:50 AM

    It is also a common law issue. If the homeowner demands a verifiable claim be presented then that eliminates a bank and the attorneys representing the bank. The bank cannot swear under oath that it was harmed injured or suffered a loss and the attorneys have no first hand knowledge of the facts. If a bank or the attorneys submit certified documents they are meaningless. There has to be a way to verify everything and that can only be done with your voice in open court. That is my belief.

     
  7. a man

    April 2, 2015 at 8:04 AM

    y’all missing the point … once the note and the mortgage agreement are separated, the agreement is null and void … EVEN if the mortgagee buys-back the note at a later date … period!

     
  8. Carl Collicott

    April 5, 2015 at 7:20 PM

    Why do “banks” want to litigate the “note’, instead of the actual loan? (short answer) “the loan”, or extension of credit, is limited to “states”(insular), that have an agreement for “loans” in relation to “public housing”. doubt it?, all “real-estate” loan documents, are in one fashion or another, a HUD loan document, HUD, is located in Puerto Rico, see Title 42 U.S.C. section 5. Title 12 C.F.R. section 29, “Banks cannot own real property, other than bank premises. “Congress shall not emit bills of credit, nor make anything but gold or silver as legal tender”.

     
  9. Nervy

    June 3, 2016 at 4:00 AM

    IN THE SUPREME COURT OF FLORIDA
    CASE NO.: 09-1460
    COMMENTS OF THE FLORIDA BANKERS ASSOCIATION
    A. Plaintiff’s Status as Owner and Holder of the Note.
    In actual practice, confusion over who owns and holds the note stems less from the fact that the note may have been transferred multiple times than it does from the form in which the note is transferred. It is a reality of commerce that virtually all paper documents related to a note and mortgage are converted to electronic files almost immediately after the loan is closed. Individual loans, as electronic data, are compiled into portfolios which are transferred to the secondary market, frequently as mortgage-backed securities. The records of ownership and payment are maintained by a servicing agent in an electronic database. The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.
    ===============
    8 1/2 years since my last mortgage payment, still in my house.

     

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