“The abuses and dishonesty and multiple breaches of contract within the shadow banking world of securitized trusts appear to have been endless, now with new revelations regarding the rigging of Libor rates, as well as constituting a litigation puzzle for borrowers and for their attorneys seeking to use those abuses and dishonesty to their advantage. But how?”
SECURITIZED DISTRUST PART TWO provides another outstanding synopsis of the banking foreclosure fraud and little known hidden secrets used by lenders to defraud the borrowers and the courts.
SECURITIZED DISTRUST – PART TWO
By Gary Victor Dubin
“In the March 15, 2012 Issue of Deadly Clear, I summarized what for many were little known aspects and abuses of what has been going on behind the scenes, often unlawfully, in securitized trusts, where individual mortgage loans have been and still are being bundled together in the thousands, often undisclosed to borrowers or even to courts contrary to sworn disclosures in court papers made cavalierly under penalty of perjury to the contrary, and ownership certificates therein sold by Wall Street to investors like stocks, called mortgage backed securities.
Since then, borrowers and their attorneys throughout the Nation have been increasingly trying to find which securitized trust their mortgage loans may be in, no easy task, and to expose and use such associated abuses to defend against foreclosures.
Some have found, for instance, that their foreclosing mortgagees never owned their mortgage loans which were instead found trading in securitized trusts or even unlawfully were found placed simultaneously in more than one securitized trust, or that their mortgage loans were paid off by investor certificates and losses being reimbursed by insurance companies with TARP funds.
The problem for borrowers and for their attorneys has been how to use that information and frequently violations of federal and/or state law either affirmatively or as a defense to foreclosure.
Unfortunately, few state courts and almost no federal courts have, at least at first, responded positively to securitization issues, still seemingly content to ask only principally the question whether the loan has been paid current or if it is in default, as if it does not matter who actually owns the mortgage loan.
The reluctance or intellectual inability of the judiciary generally to comprehend the importance of penetrating the inter-workings and machinations of securitized trusts has been historically largely understandable, stemming principally from a traditional mindset that views mortgage loans as they were in an era of American banking that no longer exists.
Historically, when banks made mortgage loans, the borrowers were handed money upon signing promissory notes and upon signing mortgages as security instruments, and the banks put the promissory notes in their vaults and recorded the mortgages, and once fully paid returned the promissory notes to the borrowers and recorded a release of the mortgages.
However, in the new Millennium for most lenders that procedure changed. Promissory notes and mortgages rapidly became securitized by Wall Street, and in effect unknown to borrowers, converted into continuously traded securities.
As a result, the traditional state-based methods of tracking and regulating mortgage ownership through local recording offices and local agency regulators were bypassed, principally through use of the lender-created and lender-owned Mortgage Electronic Registration Systems, Inc., known commonly as MERS, which lead to the numerous abuses summarized in the original SECURITIZED DISTRUST article that appeared in Deadly Clear in March of this year.
Largely unregulated, promissory notes (the originals of which contrary to UCC negotiable instruments laws appear initially reportedly to have mostly been shredded and digitized by securitized trusts for their alleged convenience) and related mortgages appear to have frequently not been placed in their assigned securitized trusts at all, defrauding investors, although said to have been and to be in securitized trusts, instead frequently used as collateral, for instance, for Federal Home Loan Bank loans or placed in additional securitized trusts, all akin intentionally to a Ponzi scheme.
It appears that many investors in securitized trusts have been paid back their investments in whole or in part with insurance dollars, tempting loan servicers to falsely claim in court that they own the mortgage loan so that they can run off with the foreclosed property or the proceeds of a foreclosure sale without ever owning the mortgage or paying anything for it.
It also appears that many borrowers seeking with federal promises loan modifications have been strung along, sometimes for years, never being told that most securitized trusts cannot modify loans without investor approval, no matter whether, for instance, formally HAMP loan modification guidelines are met.
The abuses and dishonesty and multiple breaches of contract within the shadow banking world of securitized trusts appear to have been endless, now with new revelations regarding the rigging of Libor rates, as well as constituting a litigation puzzle for borrowers and for their attorneys seeking to use those abuses and dishonesty to their advantage. But how?
It is not usually sufficient, as many have with great disappointment learned at first, although it really should be successful in a perfect legal system, to argue in court, for instance, that insurance paid off the securitized investors, that your promissory note and mortgage were not in the trust at the securitized cut-off date, that the mortgage assignment to the securitized trust was robo-signed, that you are a third-party beneficiary of the securitized trust, that the REMIC tax laws were violated, and/or so on. Why not?
Presently, courts — whose competence is unfortunately only slowly evolving in this area of the law and only at present in a few parts of the Country — are beginning nevertheless to show some signs of catching on to the significance of securitized trust issues in foreclosure contexts, but nevertheless seem to only grudgingly grant borrowers relief where borrowers plead and can successfully outmaneuver the barbed wire of motions to dismiss and motions for summary judgment, and show actual prejudice as a result. This can usually with perseverance be shown, however, in several possible ways.
First, the simplest way to show prejudice is to challenge the standing of your foreclosing mortgagee if you can show the court that your mortgage loan is instead in a securitized trust and your foreclosing mortgagee is not the securitized trustee, as having no right to your monthly payments, and perhaps owing you an accounting and back the money already paid by you unless it can establish it went to the trust.
Second, another way is to show prejudice if you were denied a loan modification by claiming that the foreclosing mortgagee had no authority under the securitized trust to decide on a loan modification, yet strung you along and/or did not reasonably review your loan modification application under applicable federal guidelines in good faith.
Third, another way is to allege that the required conditions precedent of notices of default, right to cure, and acceleration were not given by the holder of your promissory note and mortgage or its actual representative while your loan was in a securitized trust.
Fourth, if false pleading allegations and especially if false affidavits/declarations were submitted to the court as to the ownership of your mortgage loan, you should seek an order to show cause why your foreclosing mortgagee should not be held in contempt of court (and many States including Hawaii, New York, and New Jersey now hold the attorneys representing foreclosing mortgagees also liable and subject to disciplinary proceedings for such false submissions), or file a separate independent lawsuit for fraud on the court, again stressing how you have been injured incurring, for instance, attorneys’ fees and costs.
Fifth, borrowers can also allege and prove prejudice if they paid a mortgage insurance premium, as many borrowers do, as a part of their loan agreement and monthly mortgage payment obligation, to the extent that it can be argued and in discovery it can be shown either that a mortgage insurance company made payments to the trust or to investors on their loan if they did not, or that their foreclosing mortgage damaged them by failing to submit an insurance claim, while alleging that they were parties to that mortgage insurance policy, indeed, the payor, if not a direct third-party beneficiary. This has remained a largely low visibility and almost entirely ignored area of foreclosure defense.
The above is not to suggest that borrowers and attorneys should not continue to also attack the securitized trusts head on, for example arguing that the trust laws of Delaware and New York, for instance, render acts of trustees void if property is treated by the trustee in violation of the language of the trust instrument which in the case of securitized trusts is usually called its Pooling and Servicing Agreement, and/or that various mortgage assignments in its shadow banking world occurred while MERS was assigning a mortgage on behalf of an entity in bankruptcy proceedings and without the permission of the bankruptcy court and/or while not having listed the mortgage as an asset of the bankruptcy estate, amounting to bankruptcy fraud.
Finding whether a loan is in one securitized trust or even unlawfully in more than one securitized trust is, however, not an easy task.
Only a few law firms including mine and a few forensic advisors nationwide have found a reliable way to do that tricky research, and even then it appears that securitized trusts are understandably working around the clock to block such access at the present time.
This new research tool, although proving extremely valuable for an increasing number of borrowers, will no doubt be met with continued resistance by courts that, although becoming more and more educated on securitized trust abuses and the shadow banking system that securitized trusts and MERS have created, can be expected to nevertheless be, as usual, slow to provide relief as millions of borrowers in the meantime will continue unjustly to be evicted from their homes.
There are positive indications that finally state legislatures and local municipalities will more rapidly be coming to the rescue of abused borrowers very shortly, a new and expected development in the war against abusive securitized trusts to be highlighted in a subsequent article in Dearly Clear.
Meanwhile, every borrower should immediately attempt to learn if his or her mortgage loan was or is trading in one or more securitized trusts as the first step in preparing a foreclosure defense or seeking damages thereafter for wrongful foreclosure — even if already foreclosed on either judicially or nonjudically, and even if his or her property has already been sold.”
DUBIN LAW OFFICES
Suite 3100, Harbor Court
55 Merchant Street
Honolulu, Hawaii 96813
Office: (808) 537-2300
Facsimile: (808) 523-7733
What a joke MERS really is! Supposedly, through MERS the homeowners and investors are able to know precisely what is going on and where their loan is at any given time…What a crock of nonsense that is!
Take the Pascual family for example. Aurora decided to foreclose in October 2009 after, of course, the modification dance… first the forced default in order to get HAMP help, then the repetitive submission of paperwork, phone calls, more paperwork, more phone calls and eventually, the denial…
Only Aurora failed to tell the Pascuals and the Court, Judge Seabright, (or anyone for that matter) that the Pascual loan was (and is) actively trading in the LEHMAN XS TRUST Mortgage Pass-Through Certificates, Series 2007-5H. The Trust did not foreclose – and apparently had no damage to foreclose because the Trust tranche where the Pascual loan allegedly landed had no losses in 2009 – everything was paid.
It appears Aurora did not buy the loan out of the Trust because it is still actively trading and Aurora is only the “servicer” …Ownership actually belongs to the Trust investors.
But it gets even better – there is NO assignment of mortgage to the Trust to be found…Aurora, the Master Servicer failed to file an assignment to the Trust in the Hawaii public recordation; however, they filed an assignment from MERS to themselves… oh, what a wicked web we weave, when first we practice to deceive…
When challenged with the truth that the Pascual loan was noted in the LEHMAN XS TRUST Aurora failed miserably. As stated in the recent Pascual Reply brief composed by Frederick Arensmeyer of the Dubin Law Offices:
“Rather than making any attempt to rebut this newly discovered evidence (which it clearly cannot do), Defendant Aurora in its opposition — in complete disregard of its prior fraudulent misrepresentation to this court that it in fact was the holder of the note — merely argues that Plaintiffs could have previously presented this evidence in their memorandum in opposition or at the hearing on Defendant’s motion for summary judgment. Defendant Aurora is mistaken, and its failure to offer any rebuttal is itself grounds for granting Plaintiffs’ instant motion.1 (citing in foonote 1):
- Cf. Naranjo v. SBMC Mortg., 2012 WL 3030370, *3 (S.D. Cal., July 24,2012) (“The vital allegation in this case is the assignment of the loan into the WAMU Trust was not completed by May 30, 2006 as required by the Trust Agreement. This allegation gives rise to a plausible inference that the subsequent assignment, substitution, and notice of default and election to sell may also be improper. Defendants wholly fail to address that issue. . .. This reason alone is sufficient to deny Defendants’ motion with respect to this issue.” (Emphasis added)).”
How does the average homeowner or their attorney find this information. As Mr. Arensmeyer continues in the reply brief: “Plaintiffs contracted with a finance expert to conduct a very specialized investigation utilizing an advanced computer system regularly relied upon by professionals in the finance and investment industries.
Furthermore, this newly discovered evidence is not of the type that is readily available to borrowers, the public, or even most attorneys, and Plaintiffs cannot reasonably have been expected to present such evidence before the prior hearing.”
Aurora never expected that anyone would research the loans on Bloomberg Terminal. It appears, Aurora (and their attorneys), obviously think of the judges, homeowners and foreclosure defense lawyers as complete buffoons. This thought process enables them to think they can get away with fraud. Hopefully, Judge Seabright will throw the book at them – sua sponte!
Whether or not you are represented by an attorney understanding the legal system is an asset. The more you learn, the less likely you are to be taken advantage of or scammed. Knowledge is power!