by bobhurt » Fri Aug 19, 2011 1:38 am
Three years ago I started digging into mortgages, foreclosure, and defenses. I discovered no mainstream mortgage foreclosure defense industry existed, outside of a bunch of rescue scammers. By this I mean that the mainstream legal community seemed clueless about foreclosure defense. Mostly nobody defended against foreclosure because people generally knew (but have begun to waver from their certainty) that if you don’t pay, you lose the house, a principle they learned before entering kindergarten.
Now the mainstream legal community has evolved a foreclosure defense industry of sorts, but it has become laden with scammer-attorneys.
I explain this in the below interchange with Neil Garfield on his Livinglies blog. See the link below for the discussion.
One more thing: Neil has turned his blog into a sales organ for his audit service with this ad:
GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE
It linked to his service. If you really want a good service click here. I removed the link to his service because I don’t trust it. I explain why in my comments. Neil is a hero for educating people, but anything that doesn’t lead to the house free and clear or a financial settlement wastes time at possibly serious financial cost.
From: Livinglies’s Weblog <email@example.com>
Sent: Wed, Aug 17, 2011 12:25 pm
Subject: [New post] MOST ORIGINAL MORTGAGE LIENS INVALID
MOST ORIGINAL MORTGAGE LIENS INVALID
Neil Garfield | August 17, 2011 at 9:24 am |
I held back on writing this post until I was sure beyond a reasonable doubt that I was right. I’ve said it one form or another, but not like this. It is my opinion (to be checked with licensed attorney) that most mortgage liens over the last 10 years+ were never perfected and improperly filed. If you check with cases involving mechanics liens, mortgage liens, bankruptcy etc., the issue is always about priority of liens and perfection of liens. The essential tests I have distilled from many sources are as follows:
1. The most important test of the perfection of a lien is whether the lienholder could issue a satisfaction of that lien.
2. The other statutory steps in establishing the lien and giving it the right place in the priority of the lien must be fulfilled to the letter. Each state differs slightly on such procedures.
Be careful here because this is not one size fits all. There are two classes of such mortgages, and this conclusion regarding the perfection, priority, enforcement and viability of the lien only applies to one class. The first class is the minority by far, but it is a significant minority. There were some actual lenders, apparently like World Savings, that did in fact make loans out of their own cash or credit. That they were later sold into the secondary market does nothing for you if you are challenging the original loan, which presumably was otherwise executed and properly filed. Hence, at the time of origination neither misrepresentation of the creditor nor the PSA were involved.
The other class, including subclasses, accounts for at least 85% of all loans during this period. In most cases the loan originator was either a thinly capitalized mortgage broker who was called “the lender” even though they never gave the borrower one penny and never intended to do so. If there were any borrower claims arising out of the loan transaction itself it would, the strategy goes, be filed against the loan originator (except now we know they were not the lender and were acting as an agent for an undisclosed principal).
The fact that the loan originator was not the lender/creditor means that the real creditor was outside the transaction. Thus a satisfaction of the obligation could only be given by or on behalf of the undisclosed creditor. By definition there is no way of knowing, but for off-record communication, who to go to for a satisfaction. Factually the Promissory Note is a lie. And therefore the “Security instrument” which misstates the terms itself, is based upon a document that does not properly recite the terms of repayment (i.e., including the terms of the PSA).
It does not properly recite the terms of repayment because (1) it provides a nominee instead of the real name of the creditor/lender and (2) it does include all the terms and parties to the deal (see the PSA). If MERS was used, you have a nominee for title, a nominee for creditor, and therefore no real party on the side of the lender, in terms of on-record activity. This results in the lien being imperfect or never perfected. Check the cases and statutes. This conclusion is unavoidable based upon the factual assumptions I have made here.
The focus on forgery, fabrication and misrepresentation (robo-signing) is important. After all this shows fraudulent intent. But it begs the question as to whether the original lien was perfected. And by the way (see previous post) invalidating the lien does not eliminate the obligation or even the possibility of a judgment lien if it is available to the creditor (depends upon the state).
So the narrow issue addressed here ONLY relates to the perfection of the mortgage or deed of trust, which is only one method of enforcement of a debt. These issues are important as to discharge-ability of the obligation in bankruptcy and enforceability of the putative lien in state or Federal Court. There are obvious ramifications as to lawsuits to Quiet Title as well.
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Bob Hurt Commented as follows, and Neil Garfield graciously approved it for posting, then further discussed it.
bobhurt, on August 18, 2011 at 8:54 pm said:
I don’t quite agree, Neil. The borrower makes a valid deal with the lender. The borrower gets funds, buys the house with the funds. It does not matter how the lender got the money or what he does with the note afterward. Until the borrower pays that note off, the mortgage controls any default, and the court must give the lender redress. Period. End of subject.
Eventually, the holder of the note will sue or demand foreclosure from the trustee and the court or trustee will order it. Rightly so.
Aside from tricks, loopholes, and sloppy litigation, only one thing will permanently block the foreclosure and sale of the realty to pay the debt off: some malfeasance that invalidated the deal – contract breaches or tortious conduct underlying the mortgage. Most famous torts: lender agent lies about the value of the realty, and lender agent falsehoods on the loan application.
This explains why nearly all defaults result in foreclosure and forced sale of the realty to pay the debt. Yes, the tricky stuff like robosigning, bad notarizations, assignments in blank, splitting the note from the mortgage, wrong entity suing, and securitization snafus often delay the foreclosure sale, but the sale happens eventually in, I guess, at least 99% of the foreclosures(or some other mind-bogglingly huge percentage).
This means the foreclosure defense industry operates generally like feckless boobs furtively lurching around for some gotcha like robosigning. This delays the sale, but it also increases the interest damage and legal fees and other costs, all to the detriment of the borrower who generally ends up with such a whopping judgment lien as to justify bankruptcy.
The legislature should order general reparations against the lending industry for their policies that collapsed the housing values and destroyed everybody’s home equity, even for those who never face foreclosure. It constitutes an industry-wide tort that injured and damaged every home owner. Just as Congress liberated the slaves and ordered reparations, Congress ought to enact similar relief for homeowners to liberate them from and compensate them for economic enslavement to the financial industry.
Where’s our model legislation and model lawsuit for that, Neil?.
I now comment further:
I believe the vast majority of foreclosure victims would deserve their foreclosure but for the fact that the real estate and finance industry operatives blatantly cheated them through falsely inflating the apparent value of real estate. I have estimated that at least 90% of single family residential loans have appraisal fraud at their root.
But instead of attacking that or the tradition of mortgage broker falsification of family income to make the borrower seem qualified for a loan for which the borrower did not qualify, foreclosure defense lawyers charge the victim $1500 to $2500 retainer and $500 to $1000 a month to forestall the foreclosure by badgering the court over robosigning, note split from mortgage, lack of standing, etc. Generally, the plaintiff either refiles with corrected paperwork or appeals and wins. The victim stays in the house longer with the lawyer pocketing money the victim should have saved for buying the next house.
Delaying the foreclosure might constitute malpractice, for two reasons: 1) the lawyer thereby increases the client’s cost of litigation and exposing the client to additional interest charges, late fees, and opposing counsel fees; the lawyer could have gone after a legitimate cause of action like contract breaches and torts by the lender’s agents. Furthermore, dilatory actions violate Bar rules and cheat the client out of a good advocacy.
Even worse, the victim didn’t need the lawyer to delay the foreclosure. The victim could have haggled over loan modification, short sale, and cash-for-keys and delayed the foreclosure another 6 to 18 month. If the victim receives $10,000 in a cash-for-keys deal and saves $15,000 to $25,000 that the victim would have paid the lawyer, the resulting $35,000 will fund the purchase of a house at a real estate auction where houses go for 1/5 to 1/6 of their 2007 selling price.
I believe foreclosure victims should stay away from foreclosure pretender defender lawyers who bilk them, and go to personal injury attorneys with a new appraisal that shows the REAL value of the house at the time of the mortgage. Most would find the house worth 50% to 70% of its selling price at the time of the mortgage.
A good personal injury attorney would probably get a comprehensive examination of the mortgage done, and then lobby the lender for a settlement or sue. He might end up with a result like this
I asked some foreclosure pretender defender attorneys how many clients they had. One had 5, one had 40, and one claimed to have 200. An attorney cannot handle more than 5 active cases at once by himself UNLESS he files boilerplate pleadings and does a delaying action that strings foreclosures out for a year or two. THEN, if he only pretends to defend, he might handle dozens. I asked them how many cases they had won. They generally said “That depends on what you mean by win.” They believed they won by keeping the client in the house longer, regardless of the downside. None of them ever won a house free and clear like Jim Bordas did in the West Virginia Quicken Loans story cited above.
For the foregoing reasons, I believe the mainstream foreclosure pretender-defenders have won themselves a rightly deserved peg on the Quatloos Hall of Shame board.
Alongside them belong all the foreclosure mill attorneys who committed the sins to which Garfield alluded, and the judges who failed to file criminal charges against them for those sins.
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