Foreclosure: Debtor Who Fails to Pay Has an Uphill Battle Finding a Remedy Based on Procedural Defects

It appears the homeowners were victims of a nationwide predatory mortgage lending scheme, a complex confidence game – as most homeowners were, that led the Department of Justice (“DOJ”) to file suit against Bank of America, et. al., its former and current subsidiaries and partners, on October 24, 2012. USA v. BofA, et. al., USDC Southern District of NY, 12 Civ. 1422 (JSR) (Oct. 2012). Due to the nature of the DOJ case, documents were originally sealed, some were released, though many remain sealed today. The overall DOJ case did not completely resolve until May 23, 2016. The case publicly unleashed the secret that prime and subprime loans by large mortgage companies such as Countrywide and New Century Mortgage Corporation (“NC”) sold and pledged their procured loans to Fannie Mae and Freddie Mac, government-sponsored enterprises (“GSE”):

“Fannie Mae and Freddie Mac purchase single-family residential mortgages from lenders” (DOJ Intervenor Complaint, ¶18). “GSEs buy single-family mortgages from mortgage companies and other financial institutions [. . .] then either hold the loans in their investment portfolios or bundle them into mortgage-backed securities (“MBS”) that they sell to investors.” (DOJ Intervenor Complaint, ¶27)” (emphasis added).

See also the book RECKLESS ENDANGERMENT by Gretchen Morgenson and Joshua Rosner.

In most cases, the issues are really “fraud on the court” and “fraudulent concealment.” The wrongful fabricated assignments were supposed to have been removed from the land records offices according to the National Mortgage Settlement and several other federal agency consent orders. National Mortgage Complaint (NMS), Case 1:12-cv-00361-RMC filed on March 14, 2012, in the USDC for the District of Columbia. The Consent Judgment had a Settlement Term Sheet (“NMS Consent Order”) filed on April 4, 2012, and specifically identified the terms under which the banks and servicers must comply.

The real interesting issues that are just now surfacing include the intentional concealment of Fannie or Freddie (GSE) as the “Real Party in Interest.” They stay hidden until after the bank sale and somehow magically appear as a buyer. GSEs buy originating loans – not defaulted bad debt. So, something appears really fishy when a GSE, or GSE/Treasury troll gets involved AFTER a foreclosure sale.

It appears from the inception, FANNIE/FREDDIE’S ROLES WERE INTENTIONALLY CONCEALED. Pursuant to Fannie’s 2008 Servicing Guidelines:

“Fannie Mae is at all times the owner of the mortgage note, whether the note is in Fannie Mae’s portfolio or whether owned as trustee, for example, as trustee for an MBS trust. In addition, Fannie Mae at all times has possession of and is the holder of the mortgage note, except in the limited circumstances expressly described below” (emphasis added).

Failure to disclose all parties of interest upon filing the Complaint is an omission so material in nature that not only does it void the judgments, in this case it is intentional fraud on the Court. Hazel-Atlas Glass Co. v. Hartford Empire Co., [322 U.S. 238 (1944)] (This motion asks this Court to utilize its “historic power of equity to set aside [a] fraudulently begotten judgment[]” in order to uphold the “preservation of the integrity of the judicial process”).

Fannie & Freddie (GSEs) had servicing guidelines during this period of time that required servicers to conceal them as the real party of interest as the GSE’s known debt was out of control.

Over the years the GSEs changed their policies because the courts have rejected the notion that an action could be brought in the name of a servicer. See In re Viencek, 273 B.R. 354, 357, 59 (Bankr. N.D.N.Y. 2002) (requiring that servicing agent amend a proof of claim to identify the owner of the claim), In re Kang Jin Hwang, 396 B.R. 757 at 767, (Bankr. C.D. Cal. 2008) (finding that servicer was not the real party in interest), Bank of New York v Silverberg, 86 AD3d 274, 280 [2d Dept 2011], (“The foreclosure of a mortgage cannot be pursued by one who has no demonstrated right to the debt”).

When researching home loans on the GSEs’ database, loans in GSE securitization pools will not show up on their website “loan search.” Again, this is another example of hiding debt. MERS® System, for example, was created to specifically track investors and ownership, allowing GSEs and banks to remove debt-related assets from their accounting, while still tracking the asset.

Who does this hurt? ANSWER: GSE investors, taxpayers, homeowners, and probably the judges that have mutual funds that contain GSE (MBS) shares, for example, Vanguard, PIMCO.

BTW – Homeowners have wanted to pay and more often than not were induced by the government HAMP program that advertised calling the servicer for a modification. That program was a scam – see the book BAILOUT by Neil Barofsky, Chapter 8, Foaming the runway. Once homeowners were sucked into the default process the majority had a difficult time getting back into a payment program. The homeowners were not allowed to make payments – it appears the banks, GSEs and Treasury wanted foreclosures rather than long term payment programs because liquidity is essential.

This is research – this is not legal advice. Contact an attorney to see if you have an alternative action. Closely research and dissect your documents. Ask if, for example, a Rule 60(b) and/or FRCP 60(d)(3) is an option.

Bankruptcy-RealEstate-Insights

Turner v. Wells Fargo Bank N.A. (In re Turner), 859 F.3d 1145 (9th Cir. 2017) –

The debtors brought multiple claims following foreclosure of their residence. After the bankruptcy court dismissed the claims in a decision that was affirmed by the Bankruptcy Appellate Panel, the debtors appealed to the 9^th Circuit.

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