Attorney Neil Garfield came out of retirement from the finance and investment industry to “help” in the foreclosure defense industry. He created a Foreclosure Defense Guide and sold it as part of a seminar package to attorneys who wanted the inside scoop on foreclosure defense, and to borrowers with troubled loans. He created a blog to which he posts mostly bad advice almost daily and more recently a web site devoted to truth in lending. He uses those sites as fronts to convince people to spend money on paralegal services and his advisory packages of information and legal services, such as about securitization, TILA rescission, and foreclosure defense.
Garfield convinced many attorneys, whom he referred to as “attorneys who get it” to sell their foreclosure defense services to borrowers for monthly payments of $300, $500, $700, $1000, $1500, or whatever they could get while they mollycoddled the client’s foreclosure defense or quiet title action through the courts for as long as possible.
In this way, the attorneys generally led the clients into eventual foreclosure, claiming they did their very best for the client. Such attorneys earned $20,000, $30,000, $50,000 or more over a period of years while dragging out the foreclosure. Maybe we cannot thank Neil Garfield for that outrageous theft, but I consider him more responsible than any other single individual because of the leadership role he played in encouraging attorneys to use that business model.
Now Garfield plans a new foreclosure defense manual in which he explains about securitization and TILA rescision, as though those have much bearing on foreclosure victims’ cases. His securitization tome is boring and useless to borrowers and foreclosure defenders. And I honestly believe Garfield still does not understand TILA rescission because he writes about it as though every borrower might have a right to it, when in reality, very few do. And I don’t know of Garfield ever winning financial benefits for a borrower in any lawsuit. I have documented one of his catastrophic losses , the “poster child” for what NOT to do.
In summary, it seems to me that Garfield does troubled mortgagors far more harm than good WHILE he charges them outrageously high fees for mostly useless services.
His biggest failing lies in his insistence that securitization has any merit to a mortgage borrower. It has absolutely none. Courts have ruled that the borrower is not a party to, injured by, or beneficiary of a pooling and servicing agreement OR assignment of the note, and therefore has no standing to challenge them in court.
Before spending money on Garfield’s services (maybe he will do you a favor and retire before you contact him), call me for a free consultation about the issues of concern to you. I shall happily refer you to a competent professional. No, I’m not an attorney, no charge for a referral.
Meanwhile, try to remember that the court or trustee will focus on the fact that the borrower has breached the note and ought to lose the house according to the terms of the security instrument. You can only divert the court or trustee by proving that someone injured you in the loan transaction. THAT can justify a court’s awarding damages or a setoff to you.
So before you hire any attorney, demand to see any case where he has won damages or a setoff in court, or a handsome settlement out of court. If he hasn’t won any maybe he didn’t have evidence of injury to the borrower.
If you want to obtain such evidence in your case, contact me asap.
Bob Hurt (see contact page )
Jennifer Sandoval bought a Florida home with money she borrowed from Suntrust Bank and secured the debt with a mortgage. She later obtained a loan modification, and later defaulted on the loan. The creditor hired law firm Ronald R. Wolf & Associates to sue Sandoval for breach of contract and to foreclose the loan. Sandoval hired a lawyer who sent a Qualified Written Request letter to Suntrust, and Suntrust responded with a letter explaining the requirements for reinstatement. Wolf charged fees for the reinstatement to bring the loan current and dismiss the foreclosure. Sandoval sued Suntrust and Wolf in the Southern District of Florida US District Court for violating RESPA, FCCPA, and FDCPA (Real Estate Settlement Procedures Act, Florida Consumer Collection Practices Act, and Fair Debt Collection Practices Act).
Suntrust filed a motion to dismiss the case for failure to state a claim for which the court could grant relief. The court dismissed the case against Suntrust with prejudice, and then amended the dismissal. The reader should take note of three important factors in the issue:
Suntrust did not violate any of those laws in the manner Sandoval alleged; and
Most importantly, Sandoval had failed to allege in her compliant that she had given Suntrust the statutory and contractually required notice of grievance and opportunity to cure prior to suing Suntrust.
The court amended its dismissal order as follows (emphasis added):
“The Court’s January 19, 2017 Dismissal Order is AMENDED as follows: While the FDCPA and RESPA claims against SunTrust are dismissed with prejudice, the FCCPA against SunTrust is dismissed without prejudice, with leave to provide mandatory pre-suit notice to SunTrust of the alleged FCCPA violation and an opportunity to cure,prior to initiating a lawsuit against SunTrust that attempts to state a claim for a violation of the FCCPA. Because the dismissal of the FCCPA claim is without prejudice to Plaintiff attempting to comply with the requirements of the preceding paragraph, Defendant SunTrust’s Motion for Entry of Final Judgment Pursuant to Rule 54(b) [DE 69] is DENIED WITHOUT PREJUDICE.”
Thus it becomes clear that Sandoval has no more opportunity in this matter against Suntrust in federal court, and if she decides to sue Suntrust in state court for FCCPA violations, she must first send Suntrust a proper notice of grievance and give Suntrust an opportunity to cure, because her mortgage contract requires it.
Why You Should Always Read Your Contract
The mortgage and the note comprise a single legal contract even though they exist in separate documents. Sandoval’s failure to give notice and opportunity to cure constituted a breach of that contract, specifically of the second paragraph of section 20 of the uniform Form 3010: Florida Mortgage security instrument. The mortgage, in section 20, provides the following (red emphasis added):
“Neither Borrower nor Lender may commence, join, or be joined to any judicial action (as either an individual litigant or the member of a class) that arises from the other party’s actions pursuant to this Security Instrument or that alleges that the other party has breached any provision of, or any duty owed by reason of, this Security Instrument, until such Borrower or Lender has notified the other party (with such notice given in compliance with the requirements of Section 15) of such alleged breach and afforded the other party hereto a reasonable period after the giving of such notice to take corrective action. If Applicable Law provides a time period which must elapse before certain action can be taken, that time period will be deemed to be reasonable for purposes of this paragraph. The notice of acceleration and opportunity to cure given to Borrower pursuant to Section 22 and the notice of acceleration given to Borrower pursuant to Section 18 shall be deemed to satisfy the notice and opportunity to take corrective action provisions of this Section 20.”
The mortgage, in Section 22, imposes a similar obligation, in bold face type, on the creditor:
“Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclose this Security Instrument by judicial proceeding. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence. “
Notice that section 20 refers to “Applicable Law.” That could refer to state law, or to federal (e.g., RESPA) law. The applicable federal law, RESPA, (at 12 USC 2605(e)) obligates the servicer to acknowledge receipt of a Qualified Written Request or answer it within 20 business days (about 4 weeks) , and to answer it within 60 business days (about 3 months). Regulation X in the Code of Federal Regulations requires the lender to acknowledge a notice of error (grievance) within 5 days (about 1 week) and correct the error within 30 days (about 6 weeks). Read 12 USC 2605 and the corresponding part of Regulation X in the Code of Federal Regulations 12 CFR 1024.35 in their entirety.
So in this case neither the borrower Jennifer Sandoval nor her attorney read or heeded the mortgage security instrument section 20. And even if they had, Sandoval did not allege in her complaint against Suntrust that she had sent the notice of grievance and given opportunity to cure in compliance with RESPA. And now not only has she lost in federal court, but also she will have to pay Suntrust’s (and her own) legal fees.
Mortgage Attack hopes other borrowers learn from Sandoval’s mistake.
Neil Garfield and his minions and fellow incompetent “Lawyers who get it” across America have ballyhooed the January 2015 SCOTUS decision that Larry and Cheryle Jesinoski did not have to sue for TILA rescission within the 3 year period of repose after loan consummation for violation of the Truth In Lending Act by failing to give the necessary disclosures of the right to rescind. Well, the case went back to the US 8th Circuit Court of Appeals and thence back to the Minnesota District Court for trial of the question of rescission for the Jesinoskis. A few days ago Judge Donovan Frank issued the below Order dashing Jesinoskis’ ill-founded hopes. The order granted summary judgment to the creditor because Jesinoskis had signed an acknowledgment of receipt of the disclosures, and because they did not have the money to tender as required by TILA for a rescission. It also denied statutory damages because no TILA violations occurred, even thought Jesinoskis claimed they spent $800,000, mostly in lawyer fees, prosecuting their case all the way up to the US Supreme Court and back.
It looks to me like they stupidly heeded some nonsense Garfield or one of his foreclosure pretense defense attorney buddies “who get it” had written. Ever since the 2015 SCOTUS Jesinoski opinon, Garfield has insisted that every mortgage loan borrower should send a notice of TILA rescission to the creditor. He has insisted that the creditor must terminate the lien immediately upon receipt of notice of rescission, AND tender return of what the borrower paid. The Jesinoski opinion shows with crystal clarity why Garfield was dead wrong – many borrowers have no just reason to rescind, and creditors would be idiots to go through the rescission trouble without just cause.
WARNING to Home Loan Borrowers:
Listen to foreclosure pretense defense lawyers at your peril. Most will not diligently look for injuries you have suffered in your loan (TILA violations is one kind, but many other kinds are typical), and most litigate ONLY to delay the ultimate loss of your home. Both delay and non-diligence violate bar rules, so you should file a bar complaint against your attorney if he did that. And you should get a competent professional to examine your loan transaction comprehensively to dig out the valid causes of action you have against the appraiser, mortgage broker, loan officer, title company, lender, servicer, creditor, or other scalawag involved in your loan process. The mortgage exam will give you the evidence of your injuries to show the judge, AND it will give you the basis for suing your incompetent, negligent, scamming attorney for legal malpractice.
Note to Borrowers Hoping for a Favorable Yvanova Decision
Forget about it. The California Supreme Court ruled in the Yvanova case that the borrower has the right to challenge the right of a creditor to foreclose a loan that the borrower breached. Yvanova had lost her house to foreclosure, and sued for wrongful foreclosure because New Century, instead of its bankruptcy liquidation trustee, sold Yvanova’s loan to a securitization trust sponsor. Yvanova claimed New Century did not have the right to do that. Now her case heads back to trial court like Jesinoskis’ did. She will get a similar result. After she has blown all that money of her husband’s on pointless litigation, probably at Garfield’s urging, she will now learn the hard way that the foreclosure was legitimate because she has no right to challenge the validity of New Century’s sale of her loan because she was not a party to it, did not get injured by it, and had no beneficial interest in it. She has told me that I don’t understand her case. Oh, yes I do. And she will lose it.
TRENDING: Creditors make Foreclosed Borrowers Pay Legal Fees
I have seen several cases recently where the foreclosing creditor has asked the court to award legal fees, which the borrower must pay, for litigation related to the foreclosure. Most borrowers do not put up a fight. But look at the Jesinoski and Yvanova cases. They have dragged on for years, stupidly. Creditors have grown sick and tired of the frivolous efforts by borrowers to challenge righteous foreclosures. Jesinoski said he spent nearly $800,000 on his legal fees. I imagine he padded the bill, but I imagine the creditor padded theirs even more. Maybe they will ask the court to award legal fees and costs. In my opinion, they should.
I shudder to contemplate the damage Neil Garfield has done to borrowers across America by encouraging them to fight pointless battles (hiring him as a consultant or attorney, of course) to defeat foreclosure. You cannot win with his ridiculous methods.
If you want to win, and I mean win MONEY or its equivalent, get your mortgage examined (call me for a recommendation), and go on the attack.
Get more info at http://mortgageattack.com.
JESINOSKI v. Countrywide Home Loans, Inc., Dist. Court, Minnesota 2016
Larry D. Jesinoski and Cheryle Jesinoski, individuals, Plaintiffs,
Countrywide Home Loans, Inc., d/b/a America’s Wholesale Lender, subsidiary of Bank of America N.A.; BAC Home Loans Servicing, LP, a subsidiary of Bank of America, N.A., a Texas Limited Partnership f/k/a Countrywide Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc., a Delaware Corporation; and John and Jane Does 1-10, Defendants.
Larry D. Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.
Cheryle Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.
Countrywide Home Loans, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.
BAC Home Loans Servicing, LP, Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.
Mortgage Electronic Registration Systems, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.
MEMORANDUM OPINION AND ORDER
DONOVAN W. FRANK, District Judge.
This matter is before the Court on a Motion for Summary Judgment brought by Defendants Countrywide Home Loans, Inc. (“Countrywide”), Bank of America, N.A. (“BANA”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) (together, “Defendants”) (Doc. No. 51). For the reasons set forth below, the Court grants Defendants’ motion.
I. Factual Background
This “Factual Background” section reiterates, in large part, the “Background” section included in the Court’s April 19, 2012 Memorandum Opinion and Order. (Doc. No. 23.)
On February 23, 2007, Plaintiffs Larry Jesinoski and Cheryle Jesinoski (collectively, “Plaintiffs”) refinanced their home in Eagan, Minnesota, by borrowing $611,000 from Countrywide, a predecessor-in-interest of BANA. (Doc. No. 7 (“Am. Compl.”) ¶¶ 7, 15, 16, 17; Doc. No. 55 (“Hanson Decl.”) ¶ 5, Ex. D (“L. Jesinoski Dep.”) at 125.) MERS also gained a mortgage interest in the property. (Am. Compl. ¶ 25.) Plaintiffs used the loan to pay off existing loan obligations on the property and other consumer debts. (L. Jesinoski Dep. at 114-15; Hanson Decl. ¶ 6, Ex. E (“C. Jesinoski Dep.”) at 49-50; Am. Compl. ¶ 22.) The refinancing included an interest-only, adjustable-rate note. (L. Jesinoski Dep. at 137.) Plaintiffs wanted these terms because they intended to sell the property. (L. Jesinoski Dep. at 125-26, 137; C. Jesinoski Dep. at 38, 46-7.)
At the closing on February 23, 2007, Plaintiffs received and executed a Truth in Lending Act (“TILA”) Disclosure Statement and the Notice of Right to Cancel. (Doc. No. 56 (Jenkins Decl.) ¶¶ 5, 6, Exs. C & D; L. Jesinoski Dep. at 61, 67, 159; C. Jesinoski Dep. at 30-33; Hanson Decl. ¶¶ 2-3, Exs. A & B.) By signing the Notice of Right to Cancel, each Plaintiff acknowledged the “receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D.) Per the Notice of Right to Cancel, Plaintiffs had until midnight on February 27, 2007, to rescind. (Id.) Plaintiffs did not exercise their right to cancel, and the loan funded.
In February 2010, Plaintiffs paid $3,000 to a company named Modify My Loan USA to help them modify the loan. (L. Jesinoski Dep. at 79-81; C. Jesinoski Dep. at 94-95.) The company turned out to be a scam, and Plaintiffs lost $3,000. (L. Jesinoski Dep. at 79-81.) Plaintiffs then sought modification assistance from Mark Heinzman of Financial Integrity, who originally referred Plaintiffs to Modify My Loan USA. (Id. at 86.) Plaintiffs contend that Heinzman reviewed their loan file and told them that certain disclosure statements were missing from the closing documents, which entitled Plaintiffs to rescind the loan. (Id. at 88-91.) Since then, and in connection with this litigation, Heinzman submitted a declaration stating that he has no documents relating to Plaintiffs and does not recall Plaintiffs’ file. (Hanson Decl. ¶ 4, Ex. C (“Heinzman Decl.”) ¶ 4.)
On February 23, 2010, Plaintiffs purported to rescind the loan by mailing a letter to “all known parties in interest.” (Am. Compl. ¶ 30; L. Jesinoski Dep., Ex. 8.) On March 16, 2010, BANA denied Plaintiffs’ request to rescind because Plaintiffs had been provided the required disclosures, as evidenced by the acknowledgments Plaintiffs signed. (Am. Compl. ¶ 32; L. Jesinoski Dep., Ex. 9.)
II. Procedural Background
On February 24, 2011, Plaintiffs filed the present action. (Doc. No. 1.) By agreement of the parties, Plaintiffs filed their Amended Complaint, in which Plaintiffs assert four causes of action: Count 1—Truth in Lending Act, 15 U.S.C. § 1601, et seq.; Count 2—Rescission of Security Interest; Count 3—Servicing a Mortgage Loan in Violation of Standards of Conduct, Minn. Stat. § 58.13; and Count 4—Plaintiffs’ Cause of Action under Minn. Stat. § 8.31. At the heart of all of Plaintiffs’ claims is their request that the Court declare the mortgage transaction rescinded and order statutory damages related to Defendants’ purported failure to rescind.
Plaintiffs do not dispute that they had an opportunity to review the loan documents before closing. (L. Jesinoski Dep. at 152-58; C. Jesinoski Dep. at 56.) Although Plaintiffs each admit to signing the acknowledgement of receipt of two copies of the Notice of Right to Cancel, they now contend that they did not each receive the correct number of copies as required by TILA’s implementing regulation, Regulation Z. (Am. Compl. ¶ 47 (citing C.F.R. §§ 226.17(b) & (d), 226.23(b)).)
Earlier in this litigation, Defendants moved for judgment on the pleadings based on TILA’s three-year statute of repose. In April 2012, the Court issued an order granting Defendants’ motion, finding that TILA required a plaintiff to file a lawsuit within the 3-year repose period, and that Plaintiffs had filed this lawsuit outside of that period. (Doc. No. 23 at 6.) The Eighth Circuit affirmed. Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013). The United States Supreme Court reversed, holding that a borrower exercising a right to TILA rescission need only provide his lender written notice, rather than file suit, within the 3-year period.Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015). The Eighth Circuit then reversed and remanded the case for further proceedings. (Doc. No. 38.) After engaging in discovery, Defendants now move for summary judgment.
I. Summary Judgment Standard
Summary judgment is appropriate if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Courts must view the evidence and all reasonable inferences in the light most favorable to the nonmoving party. Weitz Co. v. Lloyd’s of London, 574 F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).
Defendants move for summary judgment with respect to Plaintiffs’ claims, all of which stem from Defendants’ alleged violation of TILA—namely, failing to give Plaintiffs the required number of disclosures and rescission notices at the closing.
The purpose of TILA is “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit . . .” 15 U.S.C. § 1601(a). In transactions, like the one here, secured by a principal dwelling, TILA gives borrowers an unconditional three-day right to rescind. 15 U.S.C. § 1635(a); see also id. § 1641(c) (extending rescission to assignees). The three-day rescission period begins upon the consummation of the transaction or the delivery of the required rescission notices and disclosures, whichever occurs later. Id. § 1635(a). Required disclosures must be made to “each consumer whose ownership interest is or will be subject to the security interest” and must include two copies of a notice of the right to rescind. 12 C.F.R. § 226.23(a)-(b)(1). If the creditor fails to make the required disclosures or rescission notices, the borrower’s “right of rescission shall expire three years after the date of consummation of the transaction.” 15 U.S.C. § 1635(f); see 12 C.F.R. § 226.23(a)(3).
If a consumer acknowledges in writing that he or she received a required disclosure or notice, a rebuttable presumption of delivery is created:
Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.
15 U.S.C. §1635(c).
A. Number of Disclosure Statements
Plaintiffs claim that Defendants violated TILA by failing to provide them with a sufficient number of copies of the right to rescind and the disclosure statement at the closing of the loan. (Am. Compl. ¶ 47.) Defendants assert that Plaintiffs’ claims (both TILA and derivative state-law claims) fail as a matter of law because Plaintiffs signed an express acknowledgement that they received all required disclosures at closing, and they cannot rebut the legally controlling presumption of proper delivery of those disclosures.
It is undisputed that at the closing, each Plaintiff signed an acknowledgement that each received two copies of the Notice of Right to Cancel. Plaintiffs argue, however, that no presumption of proper delivery is created here because Plaintiffs acknowledged the receipt of two copies total, not the required four (two for each of the Plaintiffs). In particular, both Larry Jesinoski and Cheryle Jesinoski assert that they “read the acknowledgment . . . to mean that both” Larry and Cheryle “acknowledge receiving two notices total, not four.” (Doc. No. 60 (“L. Jesinoski Decl.”) ¶ 3; Doc. No. 61 (“C. Jesinoski Decl.”) ¶ 3.) Thus, Plaintiffs argue that they read the word “each” to mean “together,” and therefore that they collectively acknowledged the receipt of only two copies.
The Court finds this argument unavailing. The language in the Notice is unambiguous and clearly states that “[t]he undersigned each acknowledge receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D (italics added).) Plaintiffs’ asserted interpretation is inconsistent with the language of the acknowledgment. The Court instead finds that this acknowledgement gives rise to a rebuttable presumption of proper delivery of two copies of the notice to each Plaintiff. See, e.g., Kieran v. Home Cap., Inc., Civ. No. 10-4418, 2015 WL 5123258, at *1, 3 (D. Minn. Sept. 1, 2015) (finding the creation of a rebuttable presumption of proper delivery where each borrower signed an acknowledgment stating that they each received a copy of the disclosure statement—”each of [t]he undersigned acknowledge receipt of a complete copy of this disclosure”).
The only evidence provided by Plaintiffs to rebut the presumption of receipt is their testimony that they did not receive the correct number of documents. As noted inKieran, this Court has consistently held that statements merely contradicting a prior signature are insufficient to overcome the presumption. Kieran, 2015 WL 5123258, at *3-4 (citing Gomez v. Market Home Mortg., LLC, Civ. No. 12-153, 2012 WL 1517260, at *3 (D. Minn. April 30, 2012) (agreeing with “the majority of courts that mere testimony to the contrary is insufficient to rebut the statutory presumption of proper delivery”)); see also Lee, 692 F.3d at 451 (explaining that a notice signed by both borrowers stating “[t]he undersigned each acknowledge receipt of two copies of [notice]” creates “a presumption of delivery that cannot be overcome without specific evidence demonstrating that the borrower did not receive the appropriate number of copies”); Golden v. Town & Country Credit, Civ. No. 02-3627, 2004 WL 229078, at *2 (D. Minn. Feb. 3, 2004) (finding deposition testimony insufficient to overcome presumption); Gaona v. Town & Country Credit, Civ. No. 01-44, 2001 WL 1640100, at *3 (D. Minn. Nov. 20, 2001)) (“[A]n allegation that the notices are now not contained in the closing folder is insufficient to rebut the presumption.”), aff’d in part, rev’d in part, 324 F.3d 1050 (8th Cir. 2003).
Plaintiffs, however, contend that their testimony is sufficient to rebut the presumption and create a factual issue for trial. Plaintiffs rely primarily on the Eighth Circuit’s decision in Bank of North America v. Peterson, 746 F.3d 357, 361 (8th Cir. 2014),cert. granted, judgment vacated, 135 S. Ct. 1153 (2015), and opinion vacated in part, reinstated in part, 782 F.3d 1049 (8th Cir. 2015). In Peterson, the plaintiffs acknowledged that they signed the TILA disclosure and rescission notice at their loan closing, but later submitted affidavit testimony that they had not received their TILA disclosure statements at closing. Peterson, 764 F.3d at 361. The Eighth Circuit determined that this testimony was sufficient to overcome the presumption of proper delivery. Id. The facts of this case, however, are distinguishable from those inPeterson. In particular, the plaintiffs in Peterson testified that at the closing, the agent took the documents after they had signed them and did not give them any copies. Id.Here, it is undisputed that Plaintiffs left with copies of their closing documents. (L. Jesinoski Dep. at 94-95.) In addition, Plaintiffs did not testify unequivocally that they did not each receive two copies of the rescission notice. Instead, they have testified that they do not know what they received. (See, e.g., id. at 161.) Moreover, Cheryle Jesinoski testified that she did not look through the closing documents at the time of closing, and therefore cannot attest to whether the required notices were included. (C. Jesinoski Dep. at 85.)
Based on the evidence in the record, the Court determines that the facts of this case are more line with cases that have found that self-serving assertions of non-delivery do not defeat the presumption. Indeed, the Court agrees with the reasoning in Kieran,which granted summary judgment in favor of defendants under similar facts, and which was decided after the Eighth Circuit issued its decision in Peterson.Accordingly, Plaintiffs have not overcome the rebuttable presumption of proper delivery of TILA notices, and Defendants’ motion for summary judgment is granted as to the Plaintiffs’ TILA claims.
B. Ability to Tender
Defendants also argue that Plaintiffs’ claims fails as a matter of law on a second independent basis—Plaintiffs’ admission that they do not have the present ability to tender the amount of the loan proceeds. Rescission under TILA is conditioned on repayment of the amounts advanced by the lender. See Yamamoto v. Bank of N.Y.,329 F.3d 1167, 1170 (9th Cir. 2003). This Court has concluded that it is appropriate to dismiss rescission claims under TILA at the pleading stage based on a plaintiff’s failure to allege an ability to tender loan proceeds. See, e.g., Franz v. BAC Home Loans Servicing, LP, Civ. No. 10-2025, 2011 WL 846835, at *3 (D. Minn. Mar. 8, 2011); Hintz v. JP Morgan Chase Bank, Civ. No. 10-119, 2010 WL 4220486, at *4 (D. Minn. Oct. 20, 2010). In addition, courts have granted summary judgment in favor of defendants where the evidence shows that a TILA plaintiff cannot demonstrate an ability to tender the amount borrowed. See, e.g., Am. Mortg. Network, Inc. v. Shelton,486 F.3d 815, 822 (4th Cir. 2007) (affirming grant of summary judgment for defendants on TILA rescission claim “given the appellants’ inability to tender payment of the loan amount”); Taylor v. Deutsche Bank Nat’l Trust Co., Civ. No. 10-149, 2010 WL 4103305, at *5 (E.D. Va. Oct. 18, 2010) (granting summary judgment on TILA rescission claim where plaintiff could not show ability to tender funds aside from selling the house “as a last resort”).
Plaintiffs argue that the Supreme Court in Jesinoski eliminated tender as a requirement for rescission under TILA. The Court disagrees. In Jesinoski, the Supreme Court reached the narrow issue of whether Plaintiffs had to file a lawsuit to enforce a rescission under 15 U.S.C. § 1635, or merely deliver a rescission notice, within three years of the loan transaction. Jesinoski, 135 S. Ct. at 792-93. The Supreme Court determined that a borrower need only provide written notice to a lender in order to exercise a right to rescind. Id. The Court discerns nothing in the Supreme Court’s opinion that would override TILA’s tender requirement. Specifically, under 15 U.S.C. § 1635(b), a borrower must at some point tender the loan proceeds to the lender. Plaintiffs testified that they do not presently have the ability to tender back the loan proceeds. (L. Jesinoski Dep. at 54, 202; C. Jesinoski Dep. at 118-119.) Because Plaintiffs have failed to point to evidence creating a genuine issue of fact that they could tender the unpaid balance of the loan in the event the Court granted them rescission, their TILA rescission claim fails as a matter of law on this additional ground.
Plaintiffs argue that if the Court conditions rescission on Plaintiffs’ tender, the amount of tender would be exceeded, and therefore eliminated, by Plaintiffs’ damages. In particular, Plaintiffs claim over $800,000 in damages (namely, attorney fees), and contend that this amount would negate any amount tendered. Plaintiffs, however, have not cited to any legal authority that would allow Plaintiffs to rely on the potential recovery of fees to satisfy their tender obligation. Moreover, Plaintiffs’ argument presumes that they will prevail on their TILA claims, a presumption that this Order forecloses.
Next, Defendants argue that Plaintiffs are not entitled to TILA statutory damages allegedly flowing from Defendants’ decision not to rescind because there was no TILA violation in the first instance. Plaintiffs argue that their damages claim is separate and distinct from their TILA rescission claim.
For the reasons discussed above, Plaintiffs’ TILA claim fails as a matter of law. Without a TILA violation, Plaintiffs cannot recover statutory damages based Defendants refusal to rescind the loan.
D. State-law Claims
Plaintiffs’ state-law claims under Minn. Stat. § 58.13 and Minnesota’s Private Attorney General statute, Minn. Stat. § 8.31, are derivative of Plaintiffs’ TILA rescission claim. Thus, because Plaintiffs’ TILA claim fails as a matter law, so do their state-law claims.
Based upon the foregoing, IT IS HEREBY ORDERED that:
1. Defendants’ Motion for Summary Judgment (Doc. No. ) is GRANTED.
2. Plaintiffs’ Amended Complaint (Doc. No. ) is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
 According to Defendants, Countrywide was acquired by BANA in 2008, and became BAC Home Loans Servicing, LP (“BACHLS”), and in July 2011, BACHLS merged with BANA. (Doc. No. 15 at 1 n.1.) Thus, the only two defendants in this case are BANA and MERS.
 Larry Jesinoski testified that he had been involved in about a half a dozen mortgage loan closings, at least three of which were refinancing loans, and that he is familiar with the loan closing process. (L. Jesinoski Dep. at 150-51.)
 Plaintiffs claim that upon leaving the loan closing they were given a copy of the closing documents, and then brought the documents straight home and placed them in L. Jesinoski’s unlocked file drawer, where they remained until they brought the documents to Heinzman.
 At oral argument, counsel for Plaintiffs requested leave to depose Heinzman in the event that the Court views his testimony as determinative. The Court denies the request for two reasons. First, it appears that Plaintiffs had ample opportunity to notice Heinzman’s deposition during the discovery period, but did not do so. Second, Heinzman’s testimony will not affect the outcome of the pending motion, and therefore, the request is moot.
See also, e.g., Lee v. Countrywide Home Loans, Inc., 692 F.3d 442, 451 (6th Cir. 2012) (rebuttable presumption arose where each party signed an acknowledgement of receipt of two copies);Hendricksen v. Countrywide Home Loans, Civ. No. 09-82, 2010 WL 2553589, at *4 (W.D. Va. June 24, 2010) (rebuttable presumption of delivery of two copies of TILA disclosure arose where plaintiffs each signed disclosure stating “[t]he undersigned further acknowledge receipt of a copy of this Disclosure for keeping prior to consummation”).
 TILA follows a statutorily prescribed sequence of events for rescission that specifically discusses the lender performing before the borrower. See § 1635(b). However, TILA also states that “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court.” Id.Considering the facts of this case, it is entirely appropriate to require Plaintiffs to tender the loan proceeds to Defendants before requiring Defendants to surrender their security interest in the loan.
 The Court acknowledges that there is disagreement in the District over whether a borrower asserting a rescission claim must tender, or allege an ability to tender, before seeking rescission. See, e.g. Tacheny v. M&I Marshall & Ilsley Bank, Civ. No. 10-2067, 2011 WL 1657877, at *4 (D. Minn. Apr. 29, 2011) (respectfully disagreeing with courts that have held that, in order to state a claim for rescission under TILA, a borrower must allege a present ability to tender). However, there is no dispute that to effect rescission under § 1635(b), a borrower must tender the loan proceeds. Here, the record demonstrates that Plaintiffs are unable to tender. Therefore, their rescission claim fails on summary judgment.
I saw the California Yvanova case as much ado about nothing. The borrower, Yvanova, sued for wrongful foreclosure because she discovered that the lender New Century Mortgage had, in bankruptcy, wrongfully assigned her note to a securitizer rather than allowing the bankruptcy liquidation trustee do it. That meant the securitization trust had no rightful ownership of the note and therefore no authority to foreclose. The California supremes supported her right to challenge the foreclosure for that reason.
Thus, despite expounding on the issues for 30 pages, the Yvanova opinion simply stands for the unremarkable and largely undisputed proposition that a borrower can sue for wrongful foreclosure where the transaction by which the beneficiary acquired the loan became void from its inception.
The California Supreme Court clarified the only issue before it. The court opined that in a lawsuit for wrongful foreclosure on a deed of trust securing a home loan, the borrower has standing to challenge a creditor’s void assignment of the note and deed of trust to a successor creditor who successfully foreclosed the loan.
The Yvanova case has gone back to trial court to deal with the issue of the impact of the void assignment on the foreclosure. Tsvetana Yvanova has assured me I don’t understand her case well enough to predict the outcome. Nevertheless, I have predicted that in the end, the court will uphold the foreclosure sale of Yvanova’s property for failure to pay timely.
Likewise, borrowers’ counsel, and some in the financial industry, have misconstrued the Court’s narrow holding by reading more into it than it contains. They seem to think that the borrower ought to have standing to challenge a defective assignment or a violation of the Pooling and Servicing Agreement, even thought it does not injure or benefit the borrower, andthe borrower never became a party to it.
Recently, California’s 4th District Court of Appeals, in Saterbak v. JPMCB, addressed what the Yvanova courts did not. It thereby put to rest many of the specious legal theories that borrowers use in an effort to welch on their home loan and get a free house. Notice from the opinion, which I have shown below, how the Court keeps going back to the language of the contract .
The upshot: borrowers can win setoffs, settlements, and damage awards by attacking the contract, NOT by attacking the foreclosure.
I have put some of the key text in bold typeface.
Court of Appeal, Fourth District, Division 1, California.
Laura SATERBAK, Plaintiff and Appellant, v. JPMORGAN CHASE BANK, N.A., as Trustee, etc., Defendant and Respondent.
Decided: March 16, 2016
Law Offices of Richard L. Antognini and Richard L. Antognini, Lincoln, for Plaintiff and Appellant. Bryan Cave, Glenn J. Plattner and Richard P. Steelman, Jr., Santa Monica, for Defendant and Respondent.
Laura Saterbak appeals a judgment dismissing her first amended complaint (FAC) after the sustaining of a demurrer without leave to amend. Saterbak claims the assignment of the deed of trust (DOT) to her home by Mortgage Electronic Registration Systems, Inc. (MERS) to Structured Asset Mortgage Investment II Trust 2007–AR7 Mortgage Pass–Through Certificates 2007–AR7 (2007–AR7 trust or Defendant) was invalid. Arguing the assignment occurred after the closing date for the 2007–AR7 trust, and that the signature on the instrument was forged or robo-signed, she seeks to cancel the assignment and obtain declaratory relief. We conclude Saterbak lacks standing and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In April 2007, Saterbak purchased real property on Mount Helix Drive, La Mesa, California through a grant deed. She executed a promissory note (Note) in May 2007, in the amount of $1 million, secured by the DOT. The DOT named MERS as the beneficiary, “solely as nominee for Lender and Lender’s successors and assigns.” It acknowledged MERS had the right “to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property.”
On December 27, 2011, MERS executed an assignment of the DOT to “Citibank, N.A. as Trustee for [2007–AR7 trust].” The assignment was recorded nearly a year later, on December 17, 2012. It is this assignment that Saterbak challenges. The 2007–AR7 trust is a real estate mortgage investment conduit (REMIC) trust; its terms are set forth in a pooling and servicing agreement (PSA) for the trust, which is governed under New York law. Pursuant to the PSA, all loans had to be transferred to the 2007–AR7 trust on or before its September 18, 2007, closing date.
Saterbak fell behind on her payments. On December 17, 2012, Citibank N.A. substituted and appointed National Default Servicing Corporation (NDS) as trustee under the DOT. The substitution of trustee form was executed by JPMorgan Chase Bank, N.A. (hereafter Chase) as attorney-in-fact for Citibank N.A., trustee for the 2007–AR7 trust. NDS recorded a notice of default on December 17, 2012. By that point, Saterbak had fallen $346,113.99 behind in payments. On March 19, 2013, NDS recorded a notice of trustee’s sale, scheduling a foreclosure sale for April 10, 2013. By that point, Saterbak owed an estimated $1,600,219.13.1
Saterbak filed suit in January 2014. She alleged the DOT was transferred to the 2007–AR7 trust four years after the closing date for the security, rendering the assignment invalid. She further alleged the signature on the assignment document was robo-signed or a forgery. She sought to cancel the assignment as a “cloud” on her title pursuant to Civil Code 2 section 3412. She also sought declaratory relief that the same defects rendered the assignment void.
In May 2014, the trial court sustained Chase’s demurrer. It held Saterbak lacked standing to sue based on alleged noncompliance with the PSA for 2007–AR7 trust because she did not allege she was a party to that agreement. The court granted Saterbak leave to amend to plead a different theory for cancellation of the DOT.
Saterbak filed the FAC in May 2014. The FAC asserted the same causes of action for cancellation of the assignment and declaratory relief premised on the same theories of untimely securitization of the DOT and robo-signing. The FAC claimed it did not “seek to challenge ․ any Foreclosure Proceedings and or Trustee’s Sale.”
Chase demurred and requested judicial notice of the following instruments: the DOT, the corporate assignment DOT, substitution of trustee, notice of default, and notice of trustee sale. The trial court granted Chase’s request for judicial notice and sustained its demurrer. The court held, “Despite the arguments made by Plaintiff, the FAC does, in fact, allege that the assignment is void because the loan was not moved into the securitized trust in a timely manner.” As it had previously, the court held Saterbak lacked standing to sue based on alleged noncompliance with the PSA, as she was not a party to that agreement. The court also rejected Saterbak’s robo-signing theory for lack of standing, stating she had not alleged that she “relied” on the assignment or sustained injury from it. The court denied leave to amend, noting the FAC was Saterbak’s second attempt and concluding there was no possibility she could remedy her standing deficiencies through amendment.
The court entered judgment for Chase in August 2014, and Saterbak timely appealed.
“On appeal from a judgment of dismissal entered after a demurrer has been sustained, this court reviews the complaint de novo to determine whether it states a cause of action. [Citation.] We assume the truth of all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Folgelstrom v. Lamps Plus, Inc. (2011) 195 Cal.App.4th 986, 989–990.) We may consider matters that are properly judicially noticed. (Four Star Electric, Inc. v. F & H Construction (1992) 7 Cal.App.4th 1375, 1379.)
“If the trial court has sustained the demurrer, we determine whether the complaint states facts sufficient to state a cause of action. If the court sustained the demurrer without leave to amend, as here, we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment. [Citation.] If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse; if not, no abuse of discretion has occurred. [Citation.] The plaintiff has the burden of proving that an amendment would cure the defect.” (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
Central to this appeal is whether as a borrower, Saterbak has standing to challenge the assignment of the DOT on grounds that it does not comply with the PSA for the securitized instrument. For the reasons discussed below, the trial court properly sustained Defendant’s demurrer to the FAC without leave to amend.
A. Saterbak Bears the Burden to Demonstrate Standing
“Standing is a threshold issue, because without it no justiciable controversy exists.” (Iglesia Evangelica Latina, Inc. v. Southern Pacific Latin American Dist. of the Assemblies of God (2009) 173 Cal.App.4th 420, 445.) “Standing goes to the existence of a cause of action.” (Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2006) 136 Cal.App.4th 119, 128.) Pursuant to Code of Civil Procedure section 367, “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.”
Saterbak contends the 2007–AR7 trust bears the burden of proving the assignment in question was valid. This is incorrect. As the party seeking to cancel the assignment through this action, Saterbak “must be able to demonstrate that ․ she has some such beneficial interest that is concrete and actual, and not conjectural or hypothetical.” (Holmes v. California Nat. Guard (2001) 90 Cal.App.4th 297, 315.)
Saterbak’s authorities do not suggest otherwise. She cites Fontenot, but that case actually held “MERS did not bear the burden of proving a valid assignment”—instead, “the burden rested with plaintiff affirmatively to plead facts demonstrating the impropriety.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 270 (Fontenot ), disapproved on other grounds in Yvanova v. New Century Mortgage Corp. 62 Cal.4th 919, 939, fn. 13 (Yvanova ).) Saterbak also cites Cockerell and Neptune, but those cases merely held that an assignee who files suit to enforce an assigned right bears the burden of proving a valid assignment. (Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 292; Neptune Society Corp. v. Longanecker (1987) 194 Cal.App.3d 1233, 1242.)
B. Saterbak Lacks Standing to Challenge the Assignment
Saterbak alleges the DOT was assigned to the 2007–AR7 trust in an untimely manner under the PSA. Specifically, she contends the assignment was void under the PSA because MERS did not assign the DOT to the 2007–AR7 trust until years after the closing date. Saterbak also alleges the signature of “Nicole M. Wicks” on the assignment document was forged or robo-signed.
Saterbak lacks standing to pursue these theories. The crux of Saterbak’s argument is that she may bring a preemptive action to determine whether the 2007–AR7 trust may initiate a nonjudicial foreclosure. She argues, “If the alleged ‘Lender’ is not the true ‘Lender,’ ” it “has no right to order a foreclosure sale.” However, California courts do not allow such preemptive suits because they “would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.” (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 513 (Jenkins ), disapproved on other grounds in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13; see Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1156 (Gomes ) [“California’s nonjudicial foreclosure law does not provide for the filing of a lawsuit to determine whether MERS has been authorized by the holder of the Note to initiate a foreclosure”].) As the court reasoned in Gomes:
“[The borrower] is not seeking a remedy for misconduct. He is seeking to impose the additional requirement that MERS demonstrate in court that it is authorized to initiate a foreclosure․ [S]uch a requirement would be inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive and efficient remedy.” (Gomes, supra, at p. 1154, fn. 5.) 3
The California Supreme Court recently held that a borrower has standing to sue for wrongful foreclosure where an alleged defect in the assignment renders the assignment void. (Yvanova, supra, 62 Cal.4th at pp. 942–943.) However, Yvanova’s ruling is expressly limited to the post-foreclosure context. (Id. at pp. 934–935 (“narrow question” under review was whether a borrower seeking remedies for wrongful foreclosure has standing, not whether a borrower could preempt a nonjudicial foreclosure).) Because Saterbak brings a preforeclosure suit challenging Defendant’s ability to foreclose, Yvanova does not alter her standing obligations.4
Moreover, Yvanova recognizes borrower standing only where the defect in the assignment renders the assignment void, rather than voidable. (Yvanova, supra, 62 Cal.4th at pp. 942–943.) “Unlike a voidable transaction, a void one cannot be ratified or validated by the parties to it even if they so desire.” (Id. at p. 936.) Yvanova expressly offers no opinion as to whether, under New York law, an untimely assignment to a securitized trust made after the trust’s closing date is void or merely voidable. (Id. at pp. 940–941.) We conclude such an assignment is merely voidable. (See Rajamin v. Deutsche Bank Nat’l Trust Co. (2d Cir.2014) 757 F.3d 79, 88–89 [“the weight of New York authority is contrary to plaintiffs’ contention that any failure to comply with the terms of the PSAs rendered defendants’ acquisition of plaintiffs’ loans and mortgages void as a matter of trust law”; “an unauthorized act by the trustee is not void but merely voidable by the beneficiary”].) 5Consequently, Saterbak lacks standing to challenge alleged defects in the MERS assignment of the DOT to the 2007–AR7 trust.
C. The DOT Does Not Confer Standing
Saterbak argues “clear language” in the DOT and “the rules of adhesion contracts” confer standing. We disagree.In signing the DOT, Saterbak agreed the Note and DOT could be sold “one or more times without prior notice.” She further agreed:
“Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.” 6
“The authority to exercise all of the rights and interests of the lender necessarily includes the authority to assign the deed of trust.” (Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 84, disapproved on other grounds in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13; see Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, 1504 [interpreting language identical to Saterbak’s DOT to give MERS “the right to assign the DOT”], disapproved on other grounds in Yvanova, at p. 939, fn. 13.) The federal court adjudicating Saterbak’s parallel case against her loan servicer cited the above-quoted language in the DOT to reject the same securitization theory proffered here. (Saterbak v. National Default Servicing Corp. (S.D.Cal. Oct. 1, 2015, Civ. No. 15–CV–956–WQH–NLS) 2015 WL 5794560, at *7.)
Saterbak nevertheless points to language in the DOT that only the “Lender” has the power to declare default and foreclose, while the “Borrower” has the right to sue prior to foreclosure in order to “ ‘assert the non-existence of a default or any other defense of Borrower to acceleration and sale.’ ” But these provisions do not change her standing obligations under California law; they merely give Saterbak the power to argue any defense the borrower may have to avoid foreclosure. As explained ante, Saterbak lacks standing to challenge the assignment as invalid under the PSA. (Jenkins, supra, 216 Cal.App.4th at p. 515.)
Saterbak also points to the presuit notice provisions in the DOT to argue the DOT contemplates her action. She quotes language in the DOT requiring the Borrower and Lender to provide notice and a reasonable opportunity to repair before “any judicial action ․ that arises from the other party’s actions pursuant to this Security Instrument.” However, by Saterbak’s own theory, her action does not arise “pursuant to this Security Instrument”; it is premised instead on a violation of the PSA. The presuit notice provisions in the DOT do not contemplate her action.
Finally, Saterbak contends the deed of trust is an adhesion contract, and, therefore, restrictive language that “deprives a borrower of the right to argue her loan has been invalidly assigned” must be “conspicuous and clear.” She claims, “If the assignment clause was intended by the drafter to cutoff the borrower’s right to challenge the assignment, it should have used clear language to that effect. It did not.” As a rule, “contracts of adhesion are generally enforceable according to their terms, [but] a provision contained in such a contract cannot be enforced if it does not fall within the reasonable expectations of the weaker or ‘adhering’ party.” (Fischer v. First Internat. Bank (2003) 109 Cal.App.4th 1433, 1446 (Fischer ).) However, “[b]ecause a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor” (Fontenot, supra, 198 Cal.App.4th at p. 272), together with the deed of trust securing it.Saterbak “irrevocably grant[ed] and convey[ed]” the Mount Helix property to the Lender; recognized that MERS (as nominee) had the right “to exercise any or all” of the interests of the Lender; and agreed that the Note, together with the DOT, could be sold one or more times without notice to her. There is no reasonable expectation from this language that the parties intended to allow Saterbak to challenge future assignments made to unrelated third parties. (Cf. Fischer, supra, at pp. 1448–1449 [holding there was a triable issue of fact “as to whether the parties mutually intended to permit cross-collateralization” on two separate loans, given ambiguity between the broadly worded dragnet clause and a “ ‘Related Document[ ]’ ” incorporated by reference into the loan agreement as to whether the parties mutually intended it].) 7
D. The Homeowner Bill of Rights Does Not Confer Standing
For the first time on appeal, Saterbak relies on the California Homeowner Bill of Rights (HBOR) to claim standing. She argues sections 2924.17 and 2924.12 allow her to challenge the alleged defects in MERS’s assignment of the DOT to the 2007–AR7 trust. In relevant part, section 2924.17, subdivision (a), provides an “assignment of a deed of trust ․ shall be accurate and complete and supported by competent and reliable evidence.” Section 2924.12, subdivisions (a) and (b) allow borrowers to bring an action for damages or injunctive relief for “a material violation of Section ․ 2924.17.”
As Saterbak acknowledges, the HBOR went into effect on January 1, 2013. (§ 2923.4.) The FAC alleges the DOT was assigned on December 27, 2011, and recorded on December 17, 2012. Saterbak fails to point to any provision suggesting that the California Legislature intended the HBOR to apply retroactively. (Myers v. Philip Morris Companies, Inc. (2002) 28 Cal.4th 828, 841 [“California courts comply with the legal principle that unless there is an ‘express retroactivity provision, a statute will not be applied retroactively unless it is very clear from extrinsic sources that the Legislature ․ must have intended a retroactive application’ ”].) Therefore, the HBOR does not grant Saterbak new rights on appeal.8
In summary, for the reasons discussed above, we conclude Saterbak lacks standing to challenge MERS’s assignment of the DOT to the 2007–AR7 trust.
II. SECTION 3412
Saterbak seeks to cancel the assignment of the DOT pursuant to section 3412. She argues that to withstand a demurrer, she merely needs to allege the assignment was void or voidable and that it could cause serious injury. We disagree.
To state a cause of action under section 3412, Saterbak must allege the assignment was void or voidable against her. (§ 3412 [“A written instrument, in respect to which there is reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled” (italics added) ]; see also Johnson v. PNC Mortg. (N.D.Cal.2015) 80 F.Supp.3d 980, 990 (Johnson ) [section 3412 requires “the challenged instrument be void or voidable against the party seeking to cancel it”].) Johnson dismissed a similar cause of action under section 3412 because the plaintiffs, borrowers like Saterbak, failed to “allege a plausible case that the assignment is ‘void or voidable’ against them.” (Johnson, supra, at p. 990.) Here, Saterbak fails to state a cause of action under section 3412 because she cannot allege that MERS’s assignment of the DOT to the 2007–AR7 trust was void or voidable against her.
Saterbak also fails to allege “serious injury.” She argues she “faces the prospect of losing her home due to the actions of an entity that has no power to foreclose because it does not own her [DOT].” However, even if the assignment was invalid, it could not “cause serious injury” under the statute because her obligations on the Note remained unchanged. (§ 3412, italics added.) For example, in Johnson, supra, 80 F.Supp.3d 980, borrowers sought to cancel the assignment of their deed of trust, claiming alleged infirmities in the assignment cast a shadow on their title and continued to ruin their credit. The court rejected this theory because the alleged defects did not change the borrowers’ payment obligations, and the borrowers did not deny they had defaulted. The court concluded: “It is not really the assignment, then, or its challenged provenance, that has stained their credit report.It is the fact that they defaulted.” (Id. at p. 989.) Likewise, here, the allegedly defective assignment did not alter Saterbak’s payment obligations under the Note. Saterbak does not deny she defaulted or that her debt remains in arrears. Consequently, she cannot demonstrate how the allegedly invalid assignment could “cause serious injury” within the meaning of section 3412 if left outstanding. (§ 3412, italics added.)
Finally, because a cause of action to cancel a written instrument under section 3412 sounds in equity, a debtor must generally allege tender or offer of tender of the amounts borrowed as a prerequisite to such claims. The tender requirement “is based on the theory that one who is relying upon equity in overcoming a voidable sale must show that he is able to perform his obligations under the contract so that equity will not have been employed for an idle purpose.” (Dimock v. Emerald Properties (2000) 81 Cal.App.4th 868, 878, italics omitted.) The tender rule is not absolute; tender is not required to cancel a written instrument that is void and not merely voidable. (Id. at p. 876; Smith v. Williams (1961) 55 Cal.2d 617, 620–621; Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, 11.) As discussed ante, we conclude the alleged defects merely rendered MERS’s assignment of the DOT to the 2007–AR7 trust voidable under New York law. In any event, because we affirm the judgment on standing grounds, we do not decide whether Saterbak was required to plead the ability or willingness to tender to cancel the assignment pursuant to section 3412.
III. LEAVE TO AMEND
We must consider whether Saterbak has demonstrated a reasonable probability that she could cure the defects that we have identified. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) Saterbak contends she could amend her complaint to “argue that the language in her [DOT] gives her the right to attack a void assignment of her loan.” As discussed in detail above, we conclude the DOT does not confer this right. Because Saterbak has not shown how she could remedy her lack of standing to challenge MERS’s assignment of the DOT to the 2007–AR7 trust, we conclude the trial court properly sustained Defendant’s demurrer to the FAC without leave to amend.
The judgment is affirmed. Respondent 2007–AR7 trust shall recover its costs on appeal.
The parties do not dispute Saterbak is in arrears on her debt obligations and a foreclosure sale has yet to take place.
All further statutory references are to the Civil Code unless otherwise specified.
Saterbak is mistaken in claiming Gomes holds “a borrower can challenge the power of an alleged loan purchaser to foreclose if [the borrower] can allege specific facts showing the assignment is invalid.” As discussed, Gomes holds that under California law, plaintiffs may not bring preemptive actions to challenge a defendant’s power to foreclose. (Gomes, supra, 192 Cal.App.4th at p. 1156.)
The Supreme Court has granted review in Keshtgar v. U.S. Bank, N.A., review granted October 1, 2014, S220012, a case involving a preforeclosure challenge based on alleged deficiencies in the assignment of the deed of trust.
Saterbak cites Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, but the New York case upon which Glaski relied has been overturned. (Wells Fargo Bank, N.A. v. Erobobo (N.Y. App. Div.2015) 127 A.D.3d 1176, 1178; see Rajamin, supra, 757 F.3d at p. 90 [rejecting Glaski’s interpretation of New York law].) We decline to follow Glaski and conclude the alleged defects here merely render the assignment voidable.
As the court explained in Fontenot: “MERS is a private corporation that administers a national registry of real estate debt interest transactions. Members of the MERS System assign limited interests in the real property to MERS, which is listed as a grantee in the official records of local governments, but the members retain the promissory notes and mortgage servicing rights. The notes may thereafter be transferred among members without requiring recordation in the public records. [Citation.] [¶] Ordinarily, the owner of a promissory note secured by a deed of trust is designated as the beneficiary of the deed of trust. [Citation.] Under the MERS System, however, MERS is designated as the beneficiary in deeds of trust, acting as ‘nominee’ for the lender, and granted the authority to exercise legal rights of the lender.” (Fontenot, supra, 198 Cal.App.4th at p. 267.)
Saterbak also cites Haynes v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198, which involved a dispute over auto insurance coverage. The court stated the general rule that “to be enforceable, any [insurance] provision that takes away or limits coverage reasonably expected by an insured must be ‘conspicuous, plain and clear.’ ” (Id. at p. 1204, italics added.) Even if Haynes were relevant to the current context, there is no reasonable expectation created in the DOT that Saterbak would have the power to challenge assignments made to unrelated third parties. (Fontenot, supra, 198 Cal.App.4th at p. 272.)
Saterbak contends the notice of trustee’s sale was recorded after the HBOR went into effect. However, the FAC challenges MERS’s assignment of the DOT to the 2007–AR7 trust, not the notice of trustee’s sale. We further reject Saterbak’s argument that the HBOR “overruled” Jenkins and cases citing it: Jenkins was decided after the HBOR went into effect. (Jenkins, supra, 216 Cal.App.4th 497 [decided May 17, 2013].)
Regarding this one, Garfield obviously does not realize that a borrower no longer has an interest in a foreclosed property, and there has no legal entitlement to TILA-rescind the loan that the court has discharged through a foreclosure judgment and sale of the property.
Okay, let me give it to you this way. I recently ran across a desperate mortgage victim whom Neil Garfield had gouged for $2500 for this absolutely useless tom-foolery memorandum. Garfield speculates about numerous legal theories which the court shot down in the above cited Jones v Select Portfolio Servicing opinion. You can find more case opinions destroying the bogus legal theories for which he bilks his desperate clients.
If you get bored to death, go to the bottom for SALVATION. Meanwhile, note that I have replaced potentially sensitive information with Blah or Blah Blah in order to protect the identity of Garfield’s victim.
—————–Start of Garfield Cure for Insomni… z-z-z–z-z —————
This is a review and report and not a definitive statement of opinion on the entire case strategy. Since the property is located in Florida and Mr. Garfield is licensed in Florida, he is qualified to give both expert opinions and legal opinions.
DATE: whenever 201
RE: Blah Blah and his Wife
Phone No.: Blah
Email Address: Blah
JUDGMENT ENTERED years ago,
SALE DATE CANCELED MULTIPLE TIMES
FEDERAL ACTION TO ENJOIN USE OF NOTE AND MORTGAGE SUGGESTED
The address of the property in question is BlaB Street, Blahville, Florida, in Blah County.
The property is in foreclosure. As of last year Mr. BlahBlah reports that he hired an attorney, started modification and is not current on payments.
He has requested a review and commentary in connection with his property and his loan.
He has already filed a petition for relief in bankruptcy court under Chapter 7 and apparently converted to Chapter 13. Motion to lift stay was filed and presumably granted. The name of his attorney in the State Court action, Case No. yeah sure, wherever County.
Mr. BlahBlah reports that in years ago they were 3 months behind in their payments. Acting through a HUD counselor there was apparently an agreement that was reached in September Years ago where they would catch up on the three payments. According to Mr. BlahBlah Wells Fargo broke the agreement, refused to discuss the matter any further and Mr. BlahBlah and his wife apparently were served with a summons and compliant that years ago. If they have correspondence proving the existence of the deal, then this would be a point to raise in defense as a possible violation of either estoppel1 or dual tracking, which was not passed until after the agreement.
If the agreement can be proven (they will most likely deny it), then even without the Dodd-Frank prohibition against dual tracking, the homeowners reasonably relied upon the existence of the agreement and made payments that were accepted. Wells Fargo has a history of accepting payments under oral modifications and then abandoning the agreement without accounting for the payments — which often makes the default letter wrong as to the missing payments.
Disclosures as to the true funding of the origination of the loan, the acquisition of the debt (as opposed to the acquisition of the paper) and the true party in interest who could be plaintiff are all absent, which is the same thing that I have seen as an expert witness and as an attorney many times with Wells Fargo. Many entities, like World Savings and Wachovia boasted they were funding their own loans. This was nearly never true. The loan papers may have been originated back in years ago but the disclosure of the money trail has never been made.
Mr. BlahBlah answered the summons and complaint without the help of legal counsel and served interrogatories on the plaintiff that he says were never answered.
He has apparently been through several attorneys that were merely kicking the can down the road to buy more time without making mortgage payments but of course having Mr. BlahBlah make monthly payments to the attorney.
According to the registration statement submitted by Mr. BlahBlah the original loan was with World Savings Mortgage which merged into Wachovia and then Wells Fargo. I think what he meant was World Savings Bank which was acquired by Wachovia Bank which in turn was acquired by Wells Fargo Bank. The case was filed as Wells Fargo Bank as plaintiff. From prior experience we know that this is probably a ruse intended to cover up the fact that they don’t know who the creditor is and they are hoping that a judge will simply take their word for it.
Mr. BlahBlah has provided a docket from the Clerk of the Circuit Court which indicates that the property has been set for sale several times. This would indicate in turn that a final judgment of foreclosure was entered. However I do not see on the docket the description of an order granting summary judgment or a final judgment of foreclosure entered in favor of Wells Fargo. I presume that such a judgment exists or the sale would never have been scheduled.
As of December 30, 2015 Wells Fargo is showing a balance due of $93,979.25, with an unpaid principle balance of $200,338.10, an escrow balance of $31,855.05, carrying an interest rate of 6.5 percent with a maturity date in July 2049.
Based upon my knowledge of the parties involved, and specifically in this case Loan No. whatever2, I believe that the loan is in fact claimed by a trust which in fact does not own it. The loan was in my opinion most likely never funded by World Savings Bank, Wachovia or Wells Fargo. It is my opinion that none of those entities paid for either the origination or the acquisition of the loan and that any documents to the contrary are fabricated and most likely forged. The system at Wells Fargo if this case actually goes to trial at some point will show that probably Fanny Mae or Freddie Mac was the “investor” from the start. However, since the government sponsored entities generally function in only two areas3, it seems unlikely, to say the least, that the investor would be correctly identified in the Wells Fargo system that they would use at trial unless they have changed their method of fabricating business records.
Client advises that the loan number changed recently. The reasons for this change should be investigated.
The statutory authority of the GSE’s (Fannie and Freddie) allow for them to operate as guarantors and/or Master Trustees of REMIC Trusts who were intended to own the debt, note and mortgage. The “hidden” REMIC Trusts operate the same as private label and publicly registered REMIC Trusts. And they suffer from the same defects — the money from investors never made it into any account owned by the Trust or the Trustee, which means that the Trust could not possibly have paid for loans. The Trust would be an inactive trust devoid of any business, operations, assets, liabilities, income or expenses.
For reasons that I will discuss below, it is my opinion that the homeowners in this case should send a notice of rescission and we will discuss whether that notice should be recorded. In addition there should be consideration of a federal lawsuit seeking to enforce the rescission and seeking an injunction to prevent Wells Fargo from using the note and mortgage against the BlahBlahs. I would further add that in my opinion from my review of the documents that were provided by the client there is a strong likelihood of success using standard foreclosure defense strategies.
In the court file is a notice of action which states that Blah BlahBlah and Blaha BlahBlah both stated as avoiding service at the address of Blah Blah Street, Blahville, Florida, . This indicates to me that the service in years ago was a “drive by” service in which no real effort was made to find or serve Mr. or Mrs. BlahBlah.
This in turn leads me to believe that this was typical foreclosure mill actions and that Wells Fargo still has not fulfilled its obligation to review the business records to determine the ownership or balance of the loan. Or to put it differently, they probably did know about the problems with ownership and balance of the loan and wanted the foreclosure sale anyway. Based upon my preliminary review it would appear that Wells Fargo Bank made payments to the certificate holders of a trust under a category known mainly in the industry as “servicer advances.”
Based upon their statement I would say that their servicer advances totaled more than $90,000.00. The longer the case goes the higher is the value of their claim to recover their “servicer advances.” However, those advances, while made, came from a comingled account consisting entirely of investor money. Therefore there is no actual action for recovery of the servicer advances.
The case was apparently filed in years ago. Or if the case was not filed at that time then additional paperwork was added to the file at that point. Since the case number refers to the year years ago I am presuming that they filed a skeleton case in order to have the case filed before the end of the year.
The complaint is interesting in that, as usual, Wells Fargo does not allege that it is the owner of the debt. It alleges that it is the owner and holder of the note and mortgage. And of course it alleges that a default exists but it does not state the party to whom the money is owed nor the statement of ultimate facts upon which the court could arrive at the conclusion that the actual creditor has suffered a default or loss as a result of the payments being stopped.
The alleged loan, which in my opinion was never funded by World Savings Bank, was a reverse amortization (pick a payment) loan. This loan was probably sold in one form or another 20 or 30 times. The capital from the sale of the loans probably funded many other loans.
There is a request filed in years ago for the original promissory note, and the contact information for the current holder of the note, which was never answered. This might have some relevancy to a claim contesting jurisdiction of the court.
While the docket that was sent to me by Mr. BlahBlah did not appear to contain the final judgment for the plaintiff, the documents that he sent and which were uploaded contain a final judgment for plaintiff. The final judgment apparently was a summary judgment in favor of the plaintiff on years-ago at 1:30 p.m.
As expected, the documents in the possession of Mr. BlahBlah contain a mortgage servicing transfer disclosure. Hence we have evidence of the transfer of servicing rights but not transfer of ownership of the debt.4 In my opinion this corroborates my conclusion that the loan was subject to claims of securitization starting at a time before consummation could have ever occurred. In my opinion the loan was table funded, which means that the actual source of funds for the loan was another party to whom the documents would be “assigned” immediately after, or even before the apparent “closing.”
This is especially relevant to the issue of whether the alleged loan is subject to claims (probably false claims) of securitization. Each of the alleged entities in the “Chain” had robust servicing capacities. The transfers of servicing duties makes no sense and explains nothing except that the usual pattern of musical chairs was being employed to confuse the issues surrounding “holder” of the note etc. The presumptions that are ordinarily used for a holder of a note should not be allowed,in my opinion, because of the history of flagrant violations by Wells Fargo and its predecessors. Producing evidence of a pattern of conduct of fabrication, forgery, robo-signing etc should enable the attorney to argue that the presumptions should not apply, thus requiring Wells Fargo to prove the money trial and ownership of the debt, which they will never do.
In my opinion the mortgage document was improper in that it failed to disclose a hidden balloon payment. By having negative amortization or reverse amortization, the balance that is owed as principal continues to increase. Under the terms of the mortgage when it reaches 115 percent of the original loan principal, the loan automatically reverts to standard amortization which is what caused so many people, including the BlahBlahs, to default. Borrowers were seduced into taking these highly complex loan products under the supposition that they would later be able to refinance again, taking “equity” out of the home and providing them with the resources to make the payments. The effect of these loans is to cause a balloon payment at the end of a short period of time. Thus the balloon was not disclosed and the term of the loan was not disclosed because the full amortization of the loan was beyond the financial capacity of the “borrower.”
In my opinion the assertion by Wells Fargo that it is the investor, the creditor, the lender, or the successor lender is and always has been false. It appears that no sale of the property has taken place and that none is scheduled based upon information I received from Mr. BlahBlah recently in a telephone consultation. Even though a judgment has been entered, it is my opinion that the rights and obligations of the parties are still defined by the alleged note and the alleged mortgage. Hence the sending of a notice of rescission and the recording of a notice of interest in real property under Florida Statute 712.05 would be appropriate as a strategy. I also think that an action filed in federal court to enjoin Wells Fargo from the use of the note and mortgage would be appropriate. The basis for the action would be, after notice of rescission had been sent, and presumably after the 20 days from receipt of the notice of rescission had expired, the loan contract was cancelled, the note and mortgage became void as of the date of mailing of the notice of rescission.
There is also another strategy of alleging a fraud upon the court, but I don’t think that would get much traction.
What I think can get some traction is a lawsuit against Wells Fargo for having presented the false evidence to the court. The difference is that you are not accusing the court of wrongdoing, you are accusing Wells Fargo of wrongdoing and taking advantages. I believe that considering the history that the BlahBlahs report in their narrative that substantial compensatory damages might be awarded, but that punitive damages do not appear to be likely at this time. That is not to say that punitive damages will not be awarded. As time goes on, more and more courts are becoming aware of the fact that the type of foreclosure system has been a sham. Each time another judgment for settlement is reached it becomes apparent that the banks are continuing to engage in the same behavior and simply paying fines for it as a cost of doing business.
As Mr. BlahBlah knows, I do not accept many engagements to directly represent homeowners in these actions. I think that in this case I would be willing to accept the engagement, along with co-counsel, Patrick Giunta. I would have to review this file with him to confirm, but the likelihood is that the initial retainer would be in excess of $5,000.00 and that the monthly payment of our fee would be at least $2,000.00. There would also be court costs and other expenses amounting to over $1,000.00.
Another option is to seek out another attorney who is willing to take on the case and use my services as litigation support. The hourly rate I charge for all matters, whether as attorney or expert witness is $650.00. The hourly rate of most other attorneys is significantly below that. The actual amount of work required from me if I am in the position of litigation support would be vastly reduced and thus the expense of having me work on the BlahBlah file would be significantly reduced, enabling the BlahBlahs to hire counsel who is receptive to me providing litigation support.
In all engagements, in which I am the attorney, or providing litigation support, there is also a contingency fee that varies from 20 percent to 35 percent of any amount paid in hand to the homeowner. Specifically this means that if the case is settled or resolved in a manner in which title to the property becomes unencumbered, the contingency fee would not apply to the house itself, but only to other damages that were paid in connection with the settlement or collection of a judgment.
————— End of Garfield Blather ————–
Enough of Garfield’s nonsense – HERE is your Salvation
Go to the Mortgage Attack site and READ it. There you will find salvation for mortgage woes – absolutely the only reliably workable technology for putting money back in the pocket of borrowers with crooked mortgages.
Svetlana Tyschkevich sued for TRO (Temporary Restraining Order) to stop the foreclosure sale of her house on which she took out a $1.36 million dollar loan on which she had not made a payment for 7 years.
She claimed that she had rescinded under TILA (Truth in Lending Act) validly, though 6 years after the loan date, because she had never consummated the loan because the loan docs didn’t identify the real parties, a favorite failing legal theory of Neil Garfield’s “Clingon” minions.
She also claimed the foreclosure was a debt collection activity that violated the FDCPA (Fair Debt Collection Practices Act) because of her rescission.
The magistrate pointed to the loan docs she had signed and the formal status of her lender, and to the TILA statute of repose that limited her right to rescind to 3 years, and to the fact that a foreclosure is not a debt collecting activity subject to the FDCPA. TRO denied.
Another Garfield Klingon bites the dust.
To make matters worse, the foolish woman never bothered hiring a competent professional to examine her loan-related documents. Had she done that, she probably would have learned of numerous legitimate causes of action against those who injured her, such as appraisal fraud and mortgage fraud, for which she might have won huge punitive damages.
If you find yourself in a situation like Svetlana’s, contact me for more info on a path to salvation. 727 669 5511.
In this article the author, from a law firm that specializes in beating up state courts for what the author considers excessive punitive damages awards, ATTACKED the West Virginia Supreme Court of Appeals for using procedural tricks to prevent the US Supreme Court from reviewing the award of $2.17 Million in punitive damages and $600K in attorney fees in the Brown v Quicken Loans case. The author considered the award excessive and violative of Quicken’s due process rights.
West Virginia Trial Court and Supreme Court of Appeals handling of the Brown v Quicken Loans and Quicken Loans v Brown cases do indeed raise the hackles of lenders who have cheated the holy hell out of borrowers. I feel inclined to render the following opinion about the huge punitive damages award the trial court (without a jury) made to Brown.
The courts duly haggled over the award through three trials and two appeals, and Quicken lawyers still don’t feel satisfied. They want to cheat borrowers with relative impunity.
I believe the Supreme Court has the final say on the meaning of the Constitution’s clauses like “Due Process” but not to the extent of undermining juries and judges who must act to punish the wicked to the extent they deem necessary to teach the wicked a lesson, and even, if necessary, to run them out of business altogether. The US Supreme Court sits altogether too remote from the little people and their abusers in the American hinterland to make appropriate rulings on whether a punishment abused due process rights of the abuser. Punishments by their very nature always abuse the perpetrator, and the perpetrator’s rights, as they should.
So I fully support the West Virginia Supreme Court of Appeals effort to keep the US Supreme Court out of such cases, by whatever clever means they must.
Quicken Loans has probably abused THOUSANDS of borrowers as badly as or worse than it abused Lourie Jefferson (Brown) in Wheeling WV, starting with encouraging the appraiser to value her $46,000 house at $144,000. She settled out of court with the appraiser and his insurer, but that did not punish Quicken for its underwriting of that horrific appraisal. BOTH the appraiser and Quicken’s loan officers and executives overseeing them belong in Federal Prison for that crime of bank fraud. And that is just the tip of the iceberg of crookedness in this case.
Laurie Jefferson was sick and broke and could not afford an attorney when Quicken foreclosed on her. Luckily, Jim Bordas, who knew her family, took her case on contingency, for 40%. He fought rabidly on their joint behalf. And he won. Now Quicken wants the US Supreme Court to undermine that win by reducing the damage award. In my opinion, the damage award should have gone much higher.
To get the proper perspective on my opinion, read the court opinions detailing the tale of horror of how Quicken’s agents and employees cheated Lourie Jefferson in every way they could, apparently. I archived them together here along with my overview:
I consider the Brown v Quicken case the POSTER CHILD for the methodology to which I refer as “Mortgage Attack.” See the details of the method at http://mortgageattack.com. The method contains these elements:
1. Find the injuries and related evidence
2. Hire a competent attorney
3. Artfully ATTACK the injurious.
Most foreclosure “victims” took loans they should not have. But they suffered some hardship that led to their breaching the note through non-payment. That injured the creditor who hired a lawyer and attacked the borrower through foreclosure. Typical foreclosure victims cannot afford competent counsel to find out how the lender team members (e.g., appraiser, broker, closer, lender) injured them and then attack the lender team members for those injuries.
In most loans, the injuries do not become immediately obvious as they did in the Brown case. And because it costs so much time and effort and talent to examine the loan related documents to find those injuries, most foreclosure victims cannot afford the cost. So they hire Pretense Defense attorneys to “keep them in the house as long as possible,” a scam in and of itself.
RARELY, therefore, can a plaintiff like Lourie Jefferson find competent counsel to help attack the lender team. Most attorneys cannot and will not take a case like Brown’s on contingency. As a consequence, most simply plod along to foreclosure and lose the house, enriching a foreclosure pretense defense attorney $15,000 to $30,000 in the process.
On behalf of all those tens of thousands or hundreds of thousands of foreclosure victims who suffered monstrous cheating of the kind Quicken Loans perpetrated on Lourie Jefferson (Brown), the Trial Court in Wheeling WV delivered an effective blow in ensuring that Lourie and Monique Brown received a little over $4 million (if I calculated correctly) for their injuries, with 40% going to Bordas and Bordas law firm for the diligent work they did in bringing Quicken Loans to well-deserved justice.
So, let us keep that perspective while pondering just how much the US Supreme Court should have to say in the matter of punitive damages which should have numbered in the tens of millions of dollars in order really to punish Quicken Loans enough to keep them from cheating other hapless borrowers like the desperate, ill Lourie Jefferson.
In this TILA rescission appeal the court explained exactly why the borrower must tender in order to complete the rescission, and why the court has the power to rearrange the process, including the tender and lien removal sequence and mechanism. The court also explained the difference between old money and new money tender. And, most importantly the court explained that it can relieve the borrower of the obligation to tender ONLY in the case of creditor cheating or deceit.
“However, those cases relieving the borrower of his or her tender obligation, resulting in a forfeiture by the lender, are limited to “situations where creditors have tried to deceive or cheat the consumer.”/In re Williams,/291 B.R. 636, 655 (Bankr. E.D. Pa. 2003) (quoting/Michel v. Beneficial Consumer Discount Co.,/140 B.R. 92, 101 (Bankr. E.D. Pa. 1992)) (declining to hold that the borrower “should be relieved of her `tender obligation’” under TILA even though it adopted the minority view that termination of the lender’s security interest could not be conditioned upon tender).”
“We hold that, with this absence of any proof of an intent by Deutsche Bank or any of its predecessors to deceive or cheat Gardner, the trial court abused its discretion in ruling that rescission was appropriate, and in ordering the termination of Deutsche Bank’s security interest obtained in the 2005 refinance transaction, without also requiring Gardner to fulfill his tender obligation.”
I rightly point out that the borrower’s failure to find and lodge cheating/deceit causes of action against the lender team, such as appraisal or loan application fraud, constituted a COLOSSAL error that COST the borrower a LOT OF MONEY.
This of course vindicates my OFTEN REPEATED assertion that all home loan borrowers should purchase a COMPREHENSIVE MORTGAGE EXAMINATION from a COMPETENT PROFESSIONAL… BEFORE seeking a rescission or defending against a foreclosure attack.
People interested in much more info can call me at 727 669 5511, because I know Neil Garfield cannot or will not give it to them.
The US Supreme Court opinion in Jesinoski has confused many foreclosure defense pundits, like Neil Garfield, into thinking that the loan suddenly becomes void upon filing of a notice of TILA rescission. Such people don’t have a clue about rescission.
As the court for In Re Brown, below, explains, TILA rescission doesn’t happen UNLESS a TILA violation occurred, and it always requires an unwinding of the loan including a tender of payment by both creditor and borrower.
Furthermore, the court all but called Brown scammers for trying to use Bankruptcy to stave off foreclosure.
United States Bankruptcy Court, E.D. Virginia, Alexandria Division.
September 21, 2015.
ROBERT G. MAYER, Bankruptcy Judge.
This case was before the court on September 3, 2015, on the chapter 13 trustee’s motion to dismiss this case because the debtor was not eligible to be in chapter 13. The trustee argued that she was over the debt limit of $1,149,525 for secured debts. 11 U.S.C. §109(e).
The debtor attempted to show that the outstanding balance of the loan was less than the §109(e) eligibility limit. She testified that she and her non-filing husband borrowed $1,265,000 on June 27, 2008. They made payments until March 2010 when they sought to rescind the loan. The debtor presented two documents showing, she said, an outstanding loan balance of $1,143,404.28 as of September 1, 2013, and — notwithstanding that neither she nor her husband had made any payments on the loan — $1,078,513.03 as of September 1, 2015. The documents show, in addition to the principal balances the debtor relies on, that the loan is a variable interest rate loan; that the interest rate changes annually as of August 1; that the payment changes annually as of September 1; and that the interest rate is the 1 Year LIBOR published daily in the Wall Street Journal plus a margin of 2.25%. In fact, the two documents are the 2013 and 2015 annual notices from the lender showing the calculation of the new monthly payment and giving the debtor notice of the amount of the new monthly payment.
A change in the monthly payment of an adjustable rate mortgage is calculated in advance of the payment change date based on the contractually due principal balance as of the payment change date. This is, in fact, what the June 24, 2013, letter shows. It states:
Projected Principal Balance as of the Payment Change Date: $1,143,404.28
Remaining Loan Term as of the Payment Change Date: 300 months
There were, contractually, 300 payments due from September 1, 2013, to the end of the loan. Five years had elapsed on the 30-year loan made on June 27, 2008, and on which the first payment was due on September 1, 2008. Put another way, 60 months had elapsed out of a total of 360 months.
The second payment change letter was dated June 19, 2015. It states:
Your new payment is based on the 1 YEAR LIBOR, your margin, your loan balance of $1,078,513.03, and your remaining loan term of 276.
There were, contractually, 276 payments due from September 1, 2015, to the end of the loan. Twenty-four months elapsed from the effective date of the June 24, 2013 payment change letter to the effective date of the June 19, 2015 payment change letter.
This is the proper manner in which to calculate the new payment. The contractually due principal balance as of the change date is the appropriate number rather than the principal balance actually due as of the change date. The actual outstanding principal balance cannot be known when the new payment is calculated about six weeks before the payment change date. Payments could be missed or late. (In this case, no payments were made after March 2010.) If the payment change were calculated on the actual principal balance, the monthly payment would necessarily be higher than if it were calculated on the contractually due principal balance. If the debtor and her husband made all of the missed payments after receiving the payment change notification and continued with the higher monthly payments calculated on the actual outstanding principal balance, the monthly payments would payoff the loan in less than 30 years, depriving the debtor and her husband of the benefit of the longer loan term. By using the contractually due principal balance, if the debtor and her husband reinstated the loan and continued with the monthly payments, the loan would payoff at the end of the 30-year term as agreed by the parties. The principal balances shown on the payment change letters reflect what the principal balance would have been had the debtor made all contractually due mortgage payments. She admittedly stopped making payments after March 2010, and the principal balances shown on the two payment change letters understate the actual principal balances as of the date of the letters.
The court can estimate the principal balance as of March 2010 from the information presented by the debtor. The original loan amount was $1,265,000. It was a 30-year note. The interest rate was a variable rate which was prime plus a margin of 2.25%. The lowest interest rate possible is 2.25%, which assumes that the prime rate was zero, which it was not. Using a loan rate of 2.25% from June 27, 2008 through March 2010, the principal balance due as of April 1, 2010, can be computed. It was $1,217,394.45. This is simply a mathematical calculation. It makes assumptions in the light most favorable to the debtor. The resulting principal balance is above the §109(e) eligibility limit. In fact, the loan payoff is higher that this calculated principal balance because the 1 Year LIBOR was not zero during this period. In addition, interest accrued on the loan from March 1, 2010 through the petition date of June 11, 2015. Interest at the minimal rate of 2.25% per annum as of the petition date would be about $141,500. The interest rate and the interest due when the petition was filed were higher. There are also late charges and other fees and costs. But, the principal balance calculation is sufficient to put the debtor over the §109(e) eligibility limit.
Debtor’s counsel argues that the debtor and her husband rescinded the loan in March 2010. It is not entirely clear what counsel was arguing. If she was arguing that rescission ipso facto changed the secured loan to an unsecured loan, the debtor is significantly over the unsecured limit. If her argument is that rescission eliminates that loan, she overlooks the debtor’s rescission obligation to put the lender in the same position, less certain fees and costs, as the lender was in before the transaction. It appears that debtor’s counsel relies on Jesinoski v. Countrywide Home Loans, Inc., 574 U.S. ___, 135 S.Ct. 790 (2015). She appears to focus on that portion of the opinion discussing the elements of the common law right of rescission. Reliance is misplaced. The sole issue in that case was whether the borrowers timely rescinded the loan, not the effect of the rescission notice on the borrowers’ obligations when they rescinded the transaction. They gave their rescission notice within the three-year period but did not file suit until after the three-year period. The lender argued that they were time-barred and that the transaction was, therefore, not rescinded. The lender argued that the common law doctrine of rescission applied and required that the borrower tender the loan amount at the time of rescission for there to be a valid rescission. The borrowers gave notice of the rescission but did not tender the rescission payment. The Supreme Court acknowledged the elements of the common law rescission but held that Congress created a new right of rescission that superceded common law rescission and that notice of the rescission was all that the statute required. Debtor’s counsel appears to be arguing that because the common law element of rescission — making a tender of the rescission amount — is not required, the loan is rescinded on notice and the debtor has no further obligation. In fact, the debtor has a further obligation upon giving notice of rescission and that is to make the appropriate rescission payment. This obligation is a claim in bankruptcy. 11 U.S.C. §101(5). Nor does it matter in this case whether the claim is a secured claim or an unsecured claim. Either way, the amount of the claim exceeds the applicable limit.
Debtor’s counsel also appeared to argue that the deed of trust was invalid. There was no evidence that the deed of trust was defective or void. Again, if it were, the debtor would be substantially over the unsecured debt limit of §109(e).
To the extent that debtor’s counsel was arguing that the lender forfeited its loan, its right to repayment or its rescission payment, there was simply no evidence to support the argument.
Having determined that the debtor exceeds the eligibility limits in §109(e), the question is whether the case should be dismissed or the debtor be given time to consider conversion to chapter 11. The case will be dismissed because conversion would be futile — the debtor cannot formulate an effective chapter 11 plan — and because this case was filed in bad faith.
Gilbert v. Residential Funding LLC, 678 F.3d 271 (4th Cir. 2012) makes plain that there is a difference between giving notice of rescission and determining whether the loan is properly rescinded. Anticipating Jesinoski v. Countrywide Home Loans, the Court of Appeals held that notice of rescission was required to be given within three years of the closing but suit to enforce the rescission was not required to be filed within the three-year period. Id. at 277. Giving notice of rescission does not, however, mean that the transaction must be unwound. The Court of Appeals stated:
We must not conflate the issue of whether a borrower has exercised her right to rescind with the issue of whether the rescission has, in fact, been completed and the contract voided. . . . At this stage of the litigation, we are not concerned with whether the contract has been effectively voided. A court must make a determination on the merits as to whether that should occur.
The law of the Fourth Circuit is that after the borrower gives notice of rescission, the borrower must have the ability to tender the rescission amount within a reasonable time. The Court of Appeals stated that “[t]he equitable goal of rescission under [the Truth in Lending Act] is to restore the parties to the `status quo ante.'” Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 820 (4th Cir. 2007). To achieve this, the borrower seeking rescission must be able to tender the borrowed funds back to the lender. Rescission is effected in a 3-step process under 15 U.S.C. §1635(b). First, the security interest in the home is voided and the borrower is not liable for any further payments. Second, the creditor has 20 days to refund any payments made in connection with the loan. Third, the borrower must tender the proceeds of the loan. Rescission should not be granted where it is clear that the borrower cannot or will not tender the borrowed funds to the creditor. 15 U.S.C. §1635(b); Shelton, 486 F.3d at 819-20. To do so would simply convert the secured lender to an unsecured lender with a claim against the borrower. That result would be inequitable and does not achieve the purpose of the statute which is to put the parties back into the position they were in prior to the loan.
Because rescission entails restoring the parties to the status quo ante, rescission cannot be granted where, as here, the borrower fails to demonstrate that he has the ability to meet his tender obligation. If plaintiff were allowed to achieve rescission without meeting his tender obligation, the lender would be reduced to an unsecured creditor. Such a result is not only inequitable, but it is inconsistent with the intent of Congress in drafting TILA.
Id. at 808.
Giving notice of rescission does not void the loan or cause the lender to ipso factoforfeit its loan. It only requires that the loan be unwound. The debtor must have the ability to tender the rescission amount within a reasonable time. This obligation is a claim in bankruptcy and, absent any other applicable factor, is a secured claim. It is a claim that must be addressed in a chapter 11 plan. In this case, the debtor would not be able to tender a rescission payment or address it in a chapter 11 plan.
The debtor testified that neither she nor her husband had the ability to tender a rescission amount within 60 days. This testimony — and the fair inference from their circumstances that if they would ever be able to tender the rescission amount, it would be far in the future — is corroborated by the debtor’s testimony, schedules and statement of affairs. The debtor’s husband is a dentist. He suffered a back injury that prevents him from practicing dentistry because of the necessity to stand for long periods. He is receiving significant disability payments. She works in his dental practice in a non-medical capacity. They have no savings. The house is underwater — the debtor valued it at $900,000 on her schedules.
A chapter 11 plan based on a March 2010 rescission of the transaction will not work. They cannot pay the rescission amount from savings because they have none. They cannot sell the property and pay the rescission amount from the proceeds of sale because the house is worth less than the payoff of the loan. They cannot reasonably be expected to qualify for a loan to refinance the lender in their present circumstances because they do not have enough income to support the required mortgage payment and because there is no equity in the property to support a refinance loan.
Nor does the debtor have the ability to cure the present mortgage arrearage in a chapter 11 plan. The debtor, even with the assistance of her co-debtor husband, does not have sufficient income to make the current mortgage payment and an arrearage payment. Conversion to chapter 11 would be futile.
The case was filed in bad faith. There is only one creditor. The plan proposed monthly payments to the chapter 13 trustee of $3,000; however, he was to hold the payments until the debtor concluded her litigation with the lender. The current mortgage payment was not to be made. At the end of the plan, the arrearage might be cured, but there would be a new post-petition arrearage. The plan cannot be confirmed. See n.5.
The plan is illusory. The debtor has the right to dismiss her chapter 13 case at any time. 11 U.S.C. §1307(b). Upon dismissal, all funds that the trustee holds are repaid to the debtor. Harris v. Viegelahn, ___ U.S. ___; 135 S.Ct. 1829 (2015). The debtor does not have the ability, even with her husband’s assistance, to propose a traditional 60-month plan to repay the arrearage and make current mortgage payments. Nor does she have the ability to propose a plan providing that the lender would be paid from the sale of her property. In reality, the debtor simply seeks to obtain the benefit of the automatic stay while she litigates or negotiates with the lender. In light of the debtor’s bad faith and futility of conversion to chapter 11, the court is not required to convert the case to chapter 11 if the debtor requested conversion under §1307.See Marrama vs. Citizen Bank of Massachusetts, 549 U.S. 365, 127 S.Ct. 1105, 166, L.Ed. 2d 956 (2007) (a chapter 7 debtor acting in bad faith does not have an absolute right to convert to chapter 13); In re Mitrano, 472 B.R. 706 (E.D.Va. 2012) (a chapter 13 debtor acting in bad faith does not have an absolute right to dismissal of his case).
The debtor’s case will be dismissed because she is not eligible to be a chapter 13 debtor and because the case was filed in bad faith.
 Debtor’s counsel argued that the reduction of the principal loan balance from September 1, 2013 to September 1, 2015, resulted from the debtor and her husband paying the real estate taxes and insurance which, she argued, were in that same approximate — although not precise — amount. That argument is frivolous. A principal balance is reduced by payment to the lender, not by payment to third parties of real estate taxes and insurance.
 Interest is paid in arrears. This means that the September payment includes interest that accrued during August. In this case, the loan was made on June 27, 2008. Interest due from June 27, 2008 through June 30, 2008 was paid at closing. The first monthly mortgage payment was due on September 1, 2008 at which included the interest that accrued in August 2008.
 Debtor’s counsel raised this argument in her closing statement, but there were no facts in the record to support it.
 Another applicable factor could be that the deed of trust was defective in some manner or, perhaps, not recorded. In these instances, the lender would not have a secured claim, but it would have an unsecured claim.
 The proposed chapter 13 plan proposes to pay $3,000 a month as the cure payment but no regular monthly payment. The debtor’s budget show that she and her husband have sufficient income to pay the proposed $3,000 chapter 13 plan payment, but, there is no payment to the lender on the mortgage in the budget. The debtor proposes to pay real estate taxes and insurance, $1,340 and $500, respectively, but not the note payment. The combined payment as proposed by the debtor — $3,000, $1,340 and $500 for a total of $4,840 — is significantly smaller than that new payment amount shown on the June 19, 2015 change payment letter. The new monthly payment is $7,514.40. The budget does not have sufficient net disposable income to make the monthly mortgage payment and the arrearage payment. The debtor and her husband would need an additional $5,674 in monthly income to make the mortgage payment and the arrearage payment.
 The debtor’s husband unsuccessfully sued the lender in the District Court. The details of the suit were not presented.
 Although the practice is to grant a debtor’s motion to convert a chapter 13 cases to chapter 11, especially if there is a §109(e) problem, §1307(a) does not give a debtor the right to convert from chapter 13 to chapter 11. It only gives a debtor the right to convert to chapter 7.
The 1934 Act says that the term “security” includes “any note . . . [excepting one] which has a maturity at the time of issuance of not exceeding nine months,” and the 1933 Act says that the term means “any note” save for the registration exemption in § 3(a)(3). These are the plain terms of both acts, to be applied “unless the context otherwise requires.” A party asserting that a note of more than nine months maturity is not within the 1934 Act (or that a note with a maturity of nine months or less is within it) or that any note is not within the antifraud provisions of the 1933 Act has the 1138*1138 burden of showing that “the context otherwise requires.” (Emphasis supplied.) One can readily think of many cases where it does—the note delivered in consumer financing, the note secured by a mortgage on a home, the short-term note secured by a lien on a small business or some of its assets, the note evidencing a “character” loan to a bank customer, short-term notes secured by an assignment of accounts receivable, or a note which simply formalizes an open-account debt incurred in the ordinary course of business (particularly if, as in the case of the customer of a broker, it is collateralized). When a note does not bear a strong family resemblance to these examples and has a maturity exceeding nine months, § 10(b) of the 1934 Act should generally be held to apply.
“See Exchange Nat. Bank, supra, at 1138 (types of notes that are not “securities” include “the note delivered in consumer financing, the note secured by a mortgage on a home, the short-term note secured by a lien on a small business or some of its assets, the note evidencing a `character’ loan to a bank customer, short-term notes secured by an assignment of accounts receivable, or a note which simply formalizes an open-account debt incurred in the ordinary course of business (particularly if, as in the case of the customer of a broker, it is collateralized)”);Chemical Bank, supra, at 939 (adding to list “notes evidencing loans by commercial banks for current operations”).”
For an explanation, read this first part of the Reves opinion. The law does not always mean what it says.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT58*58John R. McCambridge argued the cause for petitioners. With him on the briefs wereGary M. Elden, Jay R. Hoffman, and Robert R. Cloar.
Michael R. Lazerwitz argued the cause for the Securities and Exchange Commission asamicus curiae urging reversal. With him on the brief were Solicitor General Starr, Deputy Solicitor General Merrill, Daniel L. Goelzer, Paul Gonson, Jacob H. Stillman, Martha H. McNeely, Randall W. Quinn, and Eva Marie Carney.
John Matson argued the cause for respondent. With him on the brief were Carl D. Liggio, Kathryn A. Oberly, and Fred Lovitch.[*]
JUSTICE MARSHALL delivered the opinion of the Court.
This case presents the question whether certain demand notes issued by the Farmers Cooperative of Arkansas and Oklahoma (Co-Op) are “securities” within the meaning of § 3(a)(10) of the Securities Exchange Act of 1934. We conclude that they are.
The Co-Op is an agricultural cooperative that, at the time relevant here, had approximately 23,000 members. In order to raise money to support its general business operations, the Co-Op sold promissory notes payable on demand by the holder. Although the notes were uncollateralized and uninsured, they paid a variable rate of interest that was adjusted 59*59 monthly to keep it higher than the rate paid by local financial institutions. The Co-Op offered the notes to both members and nonmembers, marketing the scheme as an “Investment Program.” Advertisements for the notes, which appeared in each Co-Op newsletter, read in part: “YOUR CO-OP has more than $11,000,000 in assets to stand behind your investments. The Investment is not Federal[sic] insured but it is. . . Safe . . . Secure . . . and available when you need it.” App. 5 (ellipses in original). Despite these assurances, the Co-Op filed for bankruptcy in 1984. At the time of the filing, over 1,600 people held notes worth a total of $10 million.
After the Co-Op filed for bankruptcy, petitioners, a class of holders of the notes, filed suit against Arthur Young & Co., the firm that had audited the Co-Op’s financial statements (and the predecessor to respondent Ernst & Young). Petitioners alleged, inter alia, that Arthur Young had intentionally failed to follow generally accepted accounting principles in its audit, specifically with respect to the valuation of one of the Co-Op’s major assets, a gasohol plant. Petitioners claimed that Arthur Young violated these principles in an effort to inflate the assets and net worth of the Co-Op. Petitioners maintained that, had Arthur Young properly treated the plant in its audits, they would not have purchased demand notes because the Co-Op’s insolvency would have been apparent. On the basis of these allegations, petitioners claimed that Arthur Young had violated the antifraud provisions of the 1934 Act as well as Arkansas’ securities laws.
Petitioners prevailed at trial on both their federal and state claims, receiving a $6.1 million judgment. Arthur Young appealed, claiming that the demand notes were not “securities” under either the 1934 Act or Arkansas law, and that the statutes’ antifraud provisions therefore did not apply. A panel of the Eighth Circuit, agreeing with Arthur Young on both the state and federal issues, reversed. Arthur Young & Co. v. Reves, 856 F. 2d 52 (1988). We granted certiorari to address 60*60 the federal issue, 490 U. S. 1105 (1989), and now reverse the judgment of the Court of Appeals.
This case requires us to decide whether the note issued by the Co-Op is a “security” within the meaning of the 1934 Act. Section 3(a)(10) of that Act is our starting point:
“The term `security’ means any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a `security’; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is like-wise limited.” 48 Stat. 884, as amended, 15 U. S. C. § 78c(a)(10).
The fundamental purpose undergirding the Securities Acts is “to eliminate serious abuses in a largely unregulated securities market.” United Housing Foundation, Inc. v.Forman, 421 U. S. 837, 849 (1975). In defining the scope of the market that it wished to regulate, Congress painted with a broad brush. It recognized the virtually limitless scope of 61*61 human ingenuity, especially in the creation of “countless and variable schemes devised by those who seek the use of the money of others on the promise of profits,”SEC v. W. J. Howey Co., 328 U. S. 293, 299 (1946), and determined that the best way to achieve its goal of protecting investors was “to define `the term “security” in sufficiently broad and general terms so as to include within that definition the many types of instruments that in our commercial world fall within the ordinary concept of a security.’ ” Forman, supra, at 847-848 (quoting H. R. Rep. No. 85, 73d Cong., 1st Sess., 11 (1933)). Congress therefore did not attempt precisely to cabin the scope of the Securities Acts. Rather, it enacted a definition of “security” sufficiently broad to encompass virtually any instrument that might be sold as an investment.
Congress did not, however, “intend to provide a broad federal remedy for all fraud.”Marine Bank v. Weaver, 455 U. S. 551, 556 (1982). Accordingly, “[t]he task has fallen to the Securities and Exchange Commission (SEC), the body charged with administering the Securities Acts, and ultimately to the federal courts to decide which of the myriad financial transactions in our society come within the coverage of these statutes.”Forman, supra, at 848. In discharging our duty, we are not bound by legal formalisms, but instead take account of the economics of the transaction under investigation. See, e. g., Tcherepnin v. Knight, 389 U. S. 332, 336 (1967) (in interpreting the term “security,” “form should be disregarded for substance and the emphasis should be on economic reality”). Congress’ purpose in enacting the securities laws was to regulate investments,in whatever form they are made and by whatever name they are called.
62*62 A commitment to an examination of the economic realities of a transaction does not necessarily entail a case-by-case analysis of every instrument, however. Some instruments are obviously within the class Congress intended to regulate because they are by their nature investments. In Landreth Timber Co. v. Landreth, 471 U. S. 681 (1985), we held that an instrument bearing the name “stock” that, among other things, is negotiable, offers the possibility of capital appreciation, and carries the right to dividends contingent on the profits of a business enterprise is plainly within the class of instruments Congress intended the securities laws to cover. Landreth Timber does not signify a lack of concern with economic reality; rather, it signals a recognition that stock is, as a practical matter, always an investment if it has the economic characteristics traditionally associated with stock. Even if sparse exceptions to this generalization can be found, the public perception of common stock as the paradigm of a security suggests that stock, in whatever context it is sold, should be treated as within the ambit of the Acts. Id., at 687, 693.
We made clear in Landreth Timber that stock was a special case, explicitly limiting our holding to that sort of instrument. Id., at 694. Although we refused finally to rule out a similar per se rule for notes, we intimated that such a rule would be unjustified. Unlike “stock,” we said, ” `note’ may now be viewed as a relatively broad term that encompasses instruments with widely varying characteristics, depending on whether issued in a consumer context, as commercial paper, or in some other investment context.” Ibid. (citing Securities Industry Assn. v. Board of Governors of Federal Reserve System, 468 U. S. 137, 149-153 (1984)). While common stock is the quintessence of a security, Landreth Timber, supra, at 693, and investors therefore justifiably assume that a sale of stock is covered by the Securities Acts, the same simply cannot be said of notes, which are used in a variety of settings, not all of which involve investments. Thus,63*63 the phrase “any note” should not be interpreted to mean literally “any note,” but must be understood against the backdrop of what Congress was attempting to accomplish in enacting the Securities Acts.
The Second Circuit’s “family resemblance” approach begins with a presumption that anynote with a term of more than nine months is a “security.” See, e. g., Exchange Nat. Bank of Chicago v. Touche Ross & Co., 544 F. 2d 1126, 1137 (CA2 1976). Recognizing that not all notes are securities, however, the Second Circuit has also devised a list of notes that it has decided are obviously not securities. Accordingly, 64*64 the “family resemblance” test permits an issuer to rebut the presumption that a note is a security if it can show that the note in question “bear[s] a strong family resemblance” to an item on the judicially crafted list of exceptions, id., at 1137-1138, or convinces the court to add a new instrument to the list, see, e. g., Chemical Bank v. Arthur Anderson & Co., 726 F. 2d 930, 939 (CA2 1984).
We reject the approaches of those courts that have applied the Howey test to notes;Howey provides a mechanism for determining whether an instrument is an “investment contract.” The demand notes here may well not be “investment contracts,” but that does not mean they are not “notes.” To hold that a “note” is not a “security” unless it meets a test designed for an entirely different variety of instrument “would make the Acts’ enumeration of many types of instruments superfluous,” Landreth Timber, 471 U. S., at 692, and would be inconsistent with Congress’ intent to regulate the entire body of instruments sold as investments, see supra, at 60-62.
The other two contenders — the “family resemblance” and “investment versus commercial” tests — are really two ways of formulating the same general approach. Because we 65*65 think the “family resemblance” test provides a more promising framework for analysis, however, we adopt it. The test begins with the language of the statute; because the Securities Acts define “security” to include “any note,” we begin with a presumption that every note is a security. We nonetheless recognize that this presumption cannot be irrebutable. As we have said, supra, at 61, Congress was concerned with regulating the investment market, not with creating a general federal cause of action for fraud. In an attempt to give more content to that dividing line, the Second Circuit has identified a list of instruments commonly denominated “notes” that nonetheless fall without the “security” category. See Exchange Nat. Bank, supra, at 1138 (types of notes that are not “securities” include “the note delivered in consumer financing, the note secured by a mortgage on a home, the short-term note secured by a lien on a small business or some of its assets, the note evidencing a `character’ loan to a bank customer, short-term notes secured by an assignment of accounts receivable, or a note which simply formalizes an open-account debt incurred in the ordinary course of business (particularly if, as in the case of the customer of a broker, it is collateralized)”);Chemical Bank, supra, at 939 (adding to list “notes evidencing loans by commercial banks for current operations”).
We agree that the items identified by the Second Circuit are not properly viewed as “securities.” More guidance, though, is needed. It is impossible to make any meaningful inquiry into whether an instrument bears a “resemblance” to 66*66 one of the instruments identified by the Second Circuit without specifying what it is about those instruments that makes them non-“securities.” Moreover, as the Second Circuit itself has noted, its list is “not graven in stone,” 726 F. 2d, at 939, and is therefore capable of expansion. Thus, some standards must be developed for determining when an item should be added to the list.
An examination of the list itself makes clear what those standards should be. In creating its list, the Second Circuit was applying the same factors that this Court has held apply in deciding whether a transaction involves a “security.” First, we examine the transaction to assess the motivations that would prompt a reasonable seller and buyer to enter into it. If the seller’s purpose is to raise money for the general use of a business enterprise or to finance substantial investments and the buyer is interested primarily in the profit the note is expected to generate, the instrument is likely to be a “security.” If the note is exchanged to facilitate the purchase and sale of a minor asset or consumer good, to correct for the seller’s cash-flow difficulties, or to advance some other commercial or consumer purpose, on the other hand, the note is less sensibly described as a “security.” See, e. g., Forman, 421 U. S., at 851 (share of “stock” carrying a right to subsidized housing not a security because “the inducement to purchase was solely to acquire subsidized low-cost living space; it was not to invest for profit”). Second, we examine the “plan of distribution” of the instrument, SEC v. C. M. Joiner Leasing Corp.,320 U. S. 344, 353 (1943), to determine whether it is an instrument in which there is “common trading for speculation or investment,” id., at 351. Third, we examine the reasonable expectations of the investing public: The Court will consider instruments to be “securities” on the basis of such public expectations, even where an economic analysis of the circumstances of the particular transaction might suggest that the instruments are not “securities” as used in that transaction. Compare Landreth Timber,471 67*67 U. S., at 687, 693 (relying on public expectations in holding that common stock is always a security), with id., at 697-700 (STEVENS, J., dissenting) (arguing that sale of business to single informed purchaser through stock is not within the purview of the Acts under the economic reality test). See also Forman, supra, at 851. Finally, we examine whether some factor such as the existence of another regulatory scheme significantly reduces the risk of the instrument, thereby rendering application of the Securities Acts unnecessary. See, e. g., Marine Bank, 455 U. S., at 557-559, and n. 7.
We conclude, then, that in determining whether an instrument denominated a “note” is a “security,” courts are to apply the version of the “family resemblance” test that we have articulated here: A note is presumed to be a “security,” and that presumption may be rebutted only by a showing that the note bears a strong resemblance (in terms of the four factors we have identified) to one of the enumerated categories of instrument. If an instrument is not sufficiently similar to an item on the list, the decision whether another category should be added is to be made by examining the same factors.
Check out this proof (linked below) of how hugely mortgage victims can win a wad of cash if you will only learn how (and commit) to attack the validity of the loan. NO OTHER methodology wins compensation for mortgagors.
Click the above link to download the pdf containing the trial opinion, amended complaint, and damages award.
An Illinois jury returned a money verdict in favor of Alena Hammer against Residential Credit Solutions, Inc. (RCS), a national mortgage loan servicer headquartered in Fort Worth, Texas, for its breach of contract, violations of the Real Estate Settlement Procedures Act (RESPA), and violations of the unfairness and deception provisions of the Illinois Consumer Fraud and Deceptive Business Practices Act. All of Hammer’s claims dealt with RCS’s misconduct in handling and servicing the mortgage loan on Hammer’s home in DuPage County, Illinois, where Hammer has resided for the last 27 years.
The court awarded Alena Hammer $500,000 in compensatory damages and $1,500,000 in punitive damages.
Revisit Current and Old Cases?
Do you think this additional revelation about the workability of “Mortgage Attack” methodology would justify your revisiting some of your client’s cases and actually doing the work it takes to find the injuries they have suffered at the inception of the loan?
I know a mortgage examiner who can guide you through the process. Why not call me so we can chat about it?
“Odious Debt” Has Finally Arrived: Greece To Write Off “Illegal” Debt
Submitted by Tyler Durden on 04/08/2015 21:24 -0400
It was back in June 2011 when we first hinted that the time of Odious Debt is rapidly approaching.
As a reminder, this is what Odious Debt is: In international law, odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.
Today, nearly four years later, Odious Debt is now a reality in Greece, where Zoi Konstantopoulou, the head of the Greek parliament and a SYRIZA member, released two videos which have promptly gone viral, designed to promote the investigative parliamentary committee to look into the circumstances surrounding the signing of the country’s two bailout agreements that led Greece to implement its austerity measures.
In this modern age where every smart phone out-computes office computers of the early 1980’s, why do Americans suffer mortgages with the same terms on the land as on the improvements? Surely, investors’ computers and MBA finance specialists can figure out ways of securing home loans with different terms for the land and the improvement. That could provide a good return on investment for both the borrower and the lender.
Residential realty consists of
The raw land;
General amenities (roads, sidewalks, water, sewer, electricity, cable for phone/internet/tv, HOA deed restrictions, zoning restrictions);
Specific improvements (the house, landscaping, garage and other outbuildings, sport facilities, pool, patio, etc);
Community amenities (location, recreation facility, common area, economic stratum and quality of residents).
The lending process for such realty these days typically results in at least one note and one security instrument. The lender assigns an interest rate based on numerous factors, principally the conjectured ability and reliability of the borrower to repay, the volatility of the market, term of the loan, the Federal Reserve prime rate, and the likelihood that a foreclosure sale will equitably compensate the lender. In most loans, the lender lumps together all of the above-enumerated components in the mortgage, and the borrower pays the same interest rate over the same term for the land as for the improvements.
Innovative Bifurcated Loan Products
But, what if the lender charged a different interest rate for the land than for its improvements? After all, the house and grounds can fall into disrepair, and that will diminish the value in an emergency foreclosure sale. The raw land stays the same, and its value won’t diminish unless a sink hole opens up under the house or the entire community value diminishes because of fracking or a massive demographic change. In other words, the raw land has much more stable and predictable value than the improvements to the property.
Lenders could break the loan apart into two amounts, one for the land and the other for the house and other improvements. Lenders could charge a lower interest rate on the land, and finance it for a different amount of time, than the improvements. This would allow borrowers to retire the debt early, reduce lender risk, and give the lender a fair return on investment.
SCOTUS Throws a Wrench in the Works
Finance specialists might develop such bifurcated loan products, but it seems doubtful that they will introduce any in the near future because of the US Supreme Court ruling in Alice v CLS Bank on 19 June 2014 (see arguments here). In the opinion, the SCOTUS invalidated hundreds of patents for financial products or business methods, claiming patent laws do not apply to them because they fit within the exception categories of “Laws of nature, natural phenomena, and abstract ideas” within the scope of 35 USC §101, in other words, “building blocks of human ingenuity.” Simply put, the idea itself is not patentable. Justice Sotomayor summarized the principle nicely:
“I adhere to the view that any “claim that merely describes a method of doing business does not qualify as a ‘process’ under §101.” Bilski v. Kappos, 561 U. S. 593, 614 (2010) (Stevens, J., concurring in judgment); see also In re Bilski, 545 F. 3d 943, 972 (CA Fed. 2008) (Dyk, J., concurring) (“There is no suggestion in any of th[e] early [English] consideration of process patents that processes for organizing human activity were or ever had been patentable”). As in Bilski, however, I further believe that the method claims at issue are drawn to an abstract idea. Cf. 561 U. S., at 619 (opinion of Stevens, J.). I therefore join the opinion of the Court. ”
How the Lenders Guarantee the Loan Benefits Them
Let us ever bear in mind the cogent reality that lenders do not care about the borrower’s return on investment whatsoever. Lenders and their agents and associates do everything lawfully possible to maximize their own return on investment and minimize their cost. The note, the mortgage or deed of trust, the appraisal, the HUD1 report, the TILA disclosures and every other document related to the loan has but one purpose, from the lender’s perspective – to make money. Therefore, they design NOTHING to benefit the borrower except as required by government. The lender wants the seller to sell the house for top dollar, the appraiser to value the collateral property for that same top dollar, the mortgage broker to qualify the borrower for repayment of a loan for that top dollar. All the legal forms are engineered to benefit the lender first and foremost.
How Appraisals Benefit the Lender, not the Borrower
I mentioned at the beginning of this essay the idea of separate loans for the land and for the improvements. Naturally, that implies separate appraisals. In speaking with a seasoned real estate professional and former appraiser on this very subject today, I began to see a significance of appraisals that I had not previously considered. The appraiser works for the lender, not for the borrower. The lender pays the appraiser and gives the appraiser an assignment. That assignment tells the appraiser how to focus the valuation. It normally seeks to justify the selling price, not the actual value of the property. Of course, the comparable sales constitute biggest indicator of price justification. The appraiser focuses mostly on whether similar properties have sold for an amount similar to the target property asking price.
This does not at all benefit the borrower. The borrower wants to know whether the property has the worth of the asking price, not whether other buyers have paid a similar price. The appraiser never answers that question because the borrower does not pay the appraiser or give the appraiser that assignment.
Yet, borrowers nearly universally believe that the appraised value of the realty constitutes its actual worth. It does not. And that means the lending and appraisal industry basically runs a scam of deception to fool the borrower into thinking the realty has a value at least as high as the selling price, or in the case of refinances, that the house has the worth of the appraised value.
Legislative Intervention Warranted
I believe the legislatures should intervene in this deception by mandating that appraisers must give equal balance to replacement cost, income capitalization, and market value approaches to property valuation, and estimate the actual worth of the property, not to estimate whether the selling price is justified. Ultimately, the borrower pays the cost of that appraisal, even if the lender orders it. Therefore, it should serve the borrower’s interest at least as much as it serves the lender’s.
Today, appraisers ignore income capitalization altogether, give scant weight to replacement cost, and focus mostly on market value – what people seem willing to pay for similar properties.
The main problem with market value lies in the vagaries of markets. If the FED lowers the interest rate, people will rush to refinance or buy realty on credit so as to get the most property possible for their monthly payments. This will create an artificial demand, and force up the market value through competition of many buyers for few houses. Ultimately, that will cause replacement cost to rise as builders seek to benefit from the windfall.
Additionally, as we saw in the financial crisis, widespread job loss causes widespread foreclosure which collapses housing prices, and consequently leaves other home loan borrowers with underwater loan balances – they owe more than the value of the house, and therefore they have lost their equity in the home and must sell it at a loss if they sell it at all. This means they cannot sell it to avert the foreclosure, and the deficiency leads many to seek bankruptcy protection. It has become a gargantuan disaster over the past decade. This provides further insight into the scam of market valuation method of appraisal.
Dramatic Importance of Income Capitalization Valuation
In reality, all real estate constitutes a business investment. The owner might use it as a residence or rent it out or convert it into a business site, zoning and deed restrictions permitting. As an investment, borrowers have good reason to look for a return. This makes the income capitalization approach to valuation intensely important to borrowers. Appraisers should always ask “How much money could this property produce if turned to business use?” Obviously, renting it out constitutes the most common such use. So the appraiser should evaluate the rental income of similar properties similarly situated.
Borrowers should consider this valuation carefully before agreeing to borrow the money. Why? Well, what if the borrower suffered a stroke and the family needed to rent out the house to pay for a care-giver? The rent and maintenance should exceed the monthly debt service, shouldn’t it? If it doesn’t, that means the property was overpriced or overvalued. That makes the typical appraised value a lie, from the borrower’s viewpoint. Doesn’t it?
Challenge to Financial Innovators
If inventors concoct some slick loan products with different interest rates and terms for land and improvements, then they should also concoct some new USPAP (Uniform Standards of Professional Appraisal Practice) guidelines in order to support the borrower’s interest as well as the lender’s. Of course, the lenders will never support such appraisal guidelines. But if they did, they would have far more secure collateral for their investments, and in the end everyone would win.
I have compiled an array of articles dealing with the California 5th District Court of Appeals RED HERRING case known as “Glaski.” I refer to it as a red herring because foreclosure defense buffs love delaying foreclosure proceedings using securitization arguments that ALWAYS ULTIMATELY FAIL to save the house from foreclosure. Glaski lost the house to California’s non-judicial foreclosure process for failing to make timely mortgage payments. He sued and the trial court ruled against him. He appealed and the appellate panel ruled that the foreclosure lacked validity because the owner of the note never received ownership of it because the assignment to the trustee lacked validity for occurring after the closing date named in the Pooling and Servicing agreement, according to New York state law.
Securitization auditors went wild with glee because that meant their expensive, worthless audits now had value. However anyone with common sense knows what happens. The party with the note finds a way to get proper ownership of it and forecloses anyway, and the borrower loses the house anyway.
Well, other California and Federal courts had more sense than the 5th District panel, and they gave the ruling short shrift as they opined that the borrower is not a party to the assignment of the note nor to the Pooling and Servicing Agreement, and has no standing to challenge or enforce either one in court.
So now securitization auditors slide back into their funk, and continue on selling their scam audits to hopeful foreclosure victims who don’t know any better.
Bottom line, NOBODY EVER SAVED A HOUSE FROM FORECLOSURE WITH A SECURITIZATION AUDIT.
I go on to repeat tirelessly that only one thing beats the bank and its associates in mortgage issues: MORTGAGE ATTACK. You can read about it elsewhere on http://mortgageattack.com.
Why the Glaski Foreclosure Reversal Means NOTHING and Charles Cox Got It Wrong
Law Strategist Proves Glaski Panel & Charles Cox Wrong
19 October 2013 by Bob Hurt. Distribute freely.
Last week DeadlyClear.com published the comments and letter from California paralegal Charles Cox to the California Supreme Court asking it to publish the Glaski opinion which banks don’t want published. In Glaski, the CA 5th District Court overturned a foreclosure because the plaintiff lacked standing because the Depositor indorsed the note in blank to the Trustee of AFTER the closing date of the trust in violation of the Pooling and Servicing agreement. The court claimed the assignment lacked validity under New York trust law, apparently ignoring the PSA’s establishment under Delaware trust law. Banks want the opinion depublished because it could motivate lower courts to halt foreclosures because of violations of the PSA under trust law in other states. See the Court’s Glaski opinion here:
I have argued that the Plaintiff had these practical choices:
appeal the obviously bad decision, or
correct the standing problem and redo the foreclosure.
I figure choice 2 would cost less, but the appeal would do the legal community more good by using the California Supreme Court to clear up this nonsense. Either way, Glaski gets to keep the house a while longer, eventually losing it to foreclosure sale. I wrote to Glaski, suggesting Glaski get the mortgage examined comprehensively by a competent professional so as to find proof that the lender cheated Glaski from the beginning. I received no reply to my letter. Clearly, Glaski has drunk the Kool-Aid of useless foreclosure-defenses and securitization-audits that merely postpone the inevitable.
I present below the text from DeadlyClear including Charles Cox’s letter, and follow it with a commentary by premier litigation strategist Storm Bradford which proves the nonsense of Cox’s position.
The GLASKI opinion has made the Wall Street banking industry crazy. There was an outcry for publication of this case as it allowed homeowners to challenge fabricated assignments. The Court agreed to publish the opinion. The securitization case was briefed and argued as a New York law trust case when in fact it was actually a Delaware trust. While the outcome may have likely been the same, the Court’s opinion was based upon New York Trust Law. Thereafter, the banks (that it appears failed to raise these issues during or after the hearings) wanted the opinion to be de-certified for publication. Apparently, no one realized that the WaMu Mortgage Pass-Through Certificates Series 2005-AR17 Trust was a Delaware trust. Frankly, it is hard to believe that anybody even bothered to read the PSA. As a seasoned researcher, right after you verify the Closing Date, the next stop is usually Article II – Conveyances of Mortgages and then you go to Governing Law. The first full paragraph of Section 2.01. Creation of the Trust reads:
LaSalle Bank National Association is hereby appointed as the trustee of the Trust, to have all the rights, duties and obligations of the Trustee with respect to the Trust expressly set forth hereunder, and LaSalle Bank National Association hereby accepts such appointment and the trust created hereby. Christiana Bank & Trust Company is hereby appointed as the Delaware trustee of the Trust, to have all the rights, duties and obligations of theDelaware Trustee with respect to the Trust hereunder, and Christiana Bank & Trust Company hereby accepts such appointment and the trust created hereby. It is the intention of the Company, the Servicer, the Trustee and theDelaware Trusteethat the Trust constitute a statutory trust under the Statutory Trust Statute, that this Agreement constitute the governing instrument of the Trust, and that this Agreement amend and restate the Original Trust Agreement. The parties hereto acknowledge and agree that, prior to the execution and delivery hereof, the Delaware Trustee has filed the Certificate of Trust. [emphasis added]
C’mon guys – Delaware Trustee is mentioned 4 times in one paragraph. Nevertheless, the point that the Court was making was that challenge to the assignment by the homeowner should be permitted and even though New York Trust Law was used in the decision, had Delaware trust law been on the table the Court may have reached the same conclusion as Delaware trust law appears even more stringent. What is amazing is that the banks attorneys tried to use correspondence to re-argue the case and made some disingenuous statements in order to ultimately requestdepublication of Glaski v. Bank of America, N.A. The depublication rules allow for any person to argue why an opinion should not be published.
While the banks hired their flashy high-priced attorneys to make their depublication requests, it has caused several excellent letters to be written in support of maintaining the publication that the public originally requested to be published. Michael T. Pines’ letter can be found on Stopforeclosurefraud.com Letter to CA Supreme Court from Michael T. Pines in Response and Opposition to the Requests to Depublish Glaski v. Bank of America N.A. Opinion. ”I am writing in opposition to the request by Deutsche Bank National Trust Company’s request to depublish in the above matter. I will only address one issue – the wrongful conduct of counsel seeking depublication,” writes Pines and continues, “A problem with the securitization of loans, is that the banks and their attorneys, that were, and are, involved in securitization serve no one but their own interests. They have violated countless laws. There are of course countless government and private cases pending regarding such. There are government actions, including criminal investigations against foreclosure law firms.” Charles Cox, a California Contract Paralegal penned another brilliant letter to the Court [Click HERE for PDF version]:
October 11, 2013
Chief Justice Tani G. Cantil-Sakauye
and Associate Justices
Supreme Court of California
350 McAllister Street
San Francisco, CA 94102-4797
Re: Glaski v. Bank of America, National Association et al.
Supreme Court Case No. 5213814;
Appellate Case No. F064556, Disposition Date 07/31/2013;
Trial Court Case No. 09CECG03601
CORRECTED RESPONSE AND OPPOSITION TO REQUEST FORDEPUBLICATION
Dear Justices of the Supreme Court:
Pursuant to California Rules of Court (“CRC”), Rule 8.1125(b) et seq., the undersigned
writes to respectfully and timely oppose and object to the requests to depublish the published opinion of the appellate court for the above referenced case by providing the following corrected response. STATEMENT OF INTEREST AND INTRODUCTION The undersigned’s interest in this response to the depublication request, relates to clients served in the undersigned’s practice as a California Bus & Prof. Code qualified paralegal which consists of working on these types of cases with attorneys on a regular basis. We represent many clients who will be affected by this currently citable appellate court Opinion with some cases having already cited Glaski as applicable authority. The clarity the appellate court provided in its well-reasoned Opinion was qualified for
publication, certified for publication and accordingly, was rightfully published. The undersigned respectfully requests that the Glaski appellate court Opinion not be upset for the following additional reasons. THE DEPUBLICATION REQUEST PROCESS IS NOT A FORUM TO RE-TRY THECASE A DEPUBLICATION REQUEST SHOULD ONLY BE UTILIZED TO CONFIRMTHAT THE APPELLATE COURT’S OPINION MET THE STANDARD FORPUBLICATION1
The depublication process should not be used as a forum to re-try the case. Supreme
Court review was an available option to the defendants but no petition was filed.
Justice Joseph R. Grodin wrote in 1984 confirming earlier explanations by the late Chief
Justice Donald R. Wright 2 and then Chief Justice Rose Elizabeth Bird,3 that depublication is only ordered because the majority of the justices consider the opinion to be wrong in some significant way, such that it would mislead the bench and bar if it remained citable as precedent.4 Such is not the case here.
The appellate court had no choice but to assume the purported “Trust” was formed under New York Trust Laws because Plaintiff claimed it was and the defendants failed to refute or object to this stated fact in the instant case. The law under which the trust was purportedly formed does not change the general concept the appellate court established, that assets are prohibited from entering a trust after the trust closing-date. This is in order to mitigate tax liability and the potential of losing the trust’s tax exempt status by utilizing the restrictive requirements required to maintain limited liability for the trust as a pass through entity.
Regardless of whether or not organized under New York Trust Laws, it was still a Real
Estate Mortgage Investment Conduit (“REMIC”) trust where I.R.S. Code § 860 et seq., and Delaware Code, Title 12, Chapters 35 and 38 et seq., each provides similar if not more comprehensive requirements related to the actual purpose of the trust; for instance:
“Every direct or indirect assignment, or act having the effect of an assignment,whether voluntary or involuntary, by a beneficiary of a trust of the beneficiary’s interest in the trust or the trust property or the income or other distribution therefrom that is unassignable by the terms of the instrument that creates or defines the trust is void.”5
Statements in the requests for depublication that Delaware Statutes provide no
comparable provision that would render a belated assignment to a trust void is simply untrue.
The appellate justices’ Opinion was sound, applicable and well-reasoned. Defendants’ Petition for Rehearing was rightfully denied and the numerous requests for publication were properly considered and the case was certified for publication. THE APPELLATE COURT’S OPINION MET THE STANDARDS FOR CERTIFICATION AND PUBLICATION
The appellate court’s Opinion met the standard for certification and publication as
authorized by Cal. Rules of Court, Rule 8.1105(c) which provides that an opinion of a court of appeal or a superior court appellate division – whether it affirms or reverses a trial court order or judgment – should be certified for publication in the Official Reports if the opinion:
(1) Establishes a new rule of law;
(2) Applies an existing rule of law to a set of facts significantly different from those stated in published opinions;
(3) Modifies, explains, or criticizes with reasons given, an existing rule of law;
(4) Advances a new interpretation, clarification, criticism, or construction of a provision of a constitution, statute, ordinance, or court rule;
(5) Addresses or creates an apparent conflict in the law;
(6) Involves a legal issue of continuing public interest;
(7) Makes a significant contribution to legal literature by reviewing either the
development of a common law rule or the legislative or judicial history of a provision
of a constitution, statute, or other written law;
(8) Invokes a previously overlooked rule of law, or reaffirms a principle of law not applied in a recently reported decision; or
(9) Is accompanied by a separate opinion concurring or dissenting on a legal issue, and
publication of the majority and separate opinions would make a significant
contribution to the development of the law.
The undersigned contends the appellate court’s well-reasoned Opinion was published on the grounds of sub-sections 2, 3, 5, 6, and 8 referenced above and more specifically related to Sections III. sub-sections A-H and Section IV. sub-section B of the appellate court’s Opinion. 6 Section III.A. The appellate court’s Opinion clarifies securitization issues related to the lack of transfer of the deed of trust into securitized trusts after the closing date, which was deemed not acceptable due to the controlling “pooling and servicing agreement” and statutory requirements applicable to REMIC trusts, which is further clarified in FN 12 of the opinion? This meets the standard for publication per CRC, Rules 8.1105(c)(3), (5), (6) and (8). Section III.B. Clarifies previous issues and opinions related to wrongful foreclosure by a nonholder of the deed of trust; or when a party alleged not to be the true beneficiary, instructs the trustee to file a Notice of Default and initiate nonjudicial foreclosure which conflicts with other holdings; adopts more applicable holdings and further clarifies that a plaintiff must allege facts that show the defendant who invoked the power of sale was not the true beneficiary. This meets the standard for publication per CRC, Rules 8.1105(c) (3), (5), (6) and (8). Section III. C. This is an important opinion not previously held by other courts clarifying the question of whether the purported assignment was void, not dependent on whether the borrower was a party to, or third party beneficiary of the assignment agreement. This meets the standard for publication per CRC, Rules 8.1105(c)(2), (3), (5), (6) and (8). Section lII.E. This section distinguishes the Gomes 8 case which seems to be universally utilized by other courts and defendant attorneys in California whether the application applies to the actual facts of the case at bar or not. Of particular note is the appellate court’s interpretation allowing borrowers to pursue questions regarding the chain of ownership and consolidation with the Herrera 9 case as opposed to Gomes which applies to not only Glaski but many other cases. The Opinion of the appellate court clarifies important characteristics authorized by the standards for publication per CRC, Rules 8.1105(c)(3), (5), (6) and (8). Section III.F. Banks raise failure to tender as a defense in virtually every case whether applicable or not. The Glaski opinion correctly holds that tender is not required where the foreclosure sale is void, rather than voidable which meets the standard for publication per CRC, Rules 8.1105(c)(3), (5), (6) and (8). GLASKI WAS CORRECTLY DECIDED Whether Glaski was a party or third-party beneficiary to the purported securitized trust agreement or Pooling and Servicing Agreement (“PSA”) is irrelevant. The PSA itself did NOT allow transfer into the purported trust AFTER the closing-date whether the borrower invokes standing to challenge assignment into the trust or not. The same holds true whether or not the borrower was a party or third-party beneficiary of the PSA. The appellate court ruled that such a transfer after the closing-date was not allowed as it would violate the purpose of the securitized trust as a REMIC as further addressed herein.
Professor Adam Levitin 10 of Georgetown Law School states the following, regarding the view (as expressed in the requests for depublication) that a homeowner has no standing to challenge assignments into a trust because of not being a party to the PSA:
“I think that view is plain wrong. It fails to understand what PSA-based foreclosure defenses are about and to recognize a pair of real and cognizable Article III interests of homeowners: the right to be protected against duplicative claims and the right to litigate against the real party in interest because of settlement incentives and abilities.
The homeowner is obviously not party to the securitization contracts like the PSA (query, though whether securitization gives rise to a tortious interference with the mortgage contract claim because of PSA modification limitations•••). This means that the homeowner can’t enforce the terms of the PSA. The homeowner can’t prosecute putbacks and the like. But there’s a major difference between claiming that sort of right under a PSA and pointing to noncompliance with the PSA as evidence that the foreclosing party doesn’t have standing (and afterIbanez, it’s just incomprehensible to me how this sort of decision could be coming out of the 1st Circuit BAP with a MA mortgage).
Let me put it another way. Homeowners are not complaining about breaches of the PSA for the purposes of enforcing the PSA contract. They are pointing to breaches of the PSA as evidence that the loan was not transferred to the securitization trust. The PSA is being invoked because it is the document that purports to transfer the mortgage to the trust. Adherence to the PSA determines whether there was a transfer effected or not because under NY trust law (which governs most PSAs), a transfer not in compliance with a trust’s documents is void. And if there isn’t a valid transfer, there’s no standing. This is simply a factual question-does the trust own the loan or not? (Or in UCC terms, is the trust a “party entitled to enforce the note”-query whether enforcement rights in the note also mean enforcement rights in the mortgage•••) If not, then it lacks standing to foreclosure.
It’s important to understand that this is not an attempt to invoke investors’ rights under a PSA. One can see this by considering the other PSA violations that homeowners are not invoking because they have no bearing whatsoever on the validity of the transfer, and thus on standing. For example, if a servicer has been violating servicing standards under the PSA, that’s not a foreclosure defense, although it’s a breach of contract with the trust (and thus the MBS investors). If the trust doesn’t own the loan because the transfer was never properly done, however, that’s a very different thing than trying to invoke rights under the PSA.
I would have thought it rather obvious that a homeowner could argue that the foreclosing party isn’t the mortgagee and that the lack of a proper transfer of the mortgage to the foreclosing party would be evidence of that point. But some courts aren’t understanding this critical distinction. Even if courts don’t buy this distinction, there are at least two good theories under which a homeowner should have the ability to challenge the foreclosing party’s standing. Both of these theories point to a cognizable interest of the homeowner that is being harmed, and thus Article III standing. First, there is the possibility of duplicative claims. This is unlikely, although with the presence of warehouse fraud (Taylor Bean and Colonial Bank, eg), it can hardly be discounted as an impossibility. The same mortgage loan might have been sold multiple times by the same lender as part of a warehouse fraud. That could conceivably result in multiple claimants. The homeowner should only have to pay once. Similarly, if the loan wasn’t properly securitized, then the depositor or seller could claim the loan as its property. Again, potentially multiple claimants, but the homeowner should only have to pay one satisfaction.
Consider a case in which Bank A securitized a bunch of loans, but did not do the transfers properly. Bank A ends up in FDIC receivership. FDIC could claim those loans as property of Bank A, leaving the securitization trust with an unsecured claim for a refund of the money it paid Bank A. Indeed, I’d urge Harvey Miller to be looking at this as a way to claw back a lot of money into the Lehman estate.
Second. the homeowner had a real interest in dealing with the right plaintiff because different plaintiffs have different incentives and ability to settle. We’d rather see negotiated outcomes than foreclosures, but servicers and trustees have very different incentives and ability to settle than banks that hold loans in portfolio. PSA terms, liquidity, capital requirements, credit risk exposure, and compensation differ between services/trustees and portfolio lenders. If the loans weren’t properly transferred via the securitization, then they are still held in portfolio by someone. This means homeowners have a strong interest in litigating against the real party in interest.11
The arguments proffered supporting depublication are nothing more than meritless
attempts to re-argue the Glaski case. The appellate court’s Opinion was well-reasoned and correctly decided. The appellate court’s opinion promotes the requirement that in order to foreclose on an owner’s property, the foreclosing entity must have obtained standing to foreclose properly, not based on a void assignment in contravention of the foreclosing entity’s controlling documents. In this case an assignment into a securitized trust after the closing-date of the trust has been properly deemed invalid and void by the appellate court.
For the foregoing reasons and on behalf of clients and persons this case affects, the undersigned respectfully request this Honorable Court NOT depublish the above referenced appellate court Opinion due to the importance that the continued ability to cite this well reasoned Opinion has provided and will continue to provide in the future.
[Charles Cox Signature]
1 See Joseph R. Grodin, The Depublication Practice o/the California Supreme Court, 72 Cal. L. Rev. 514, 514 n.1 (1984).
See Julie H. Biggs, Note 8. at 1185 n.20, Decertification of Appellate Opinions: The Need for Articulated Judicial Reasoning and Certain Precedent in California Law, 50 S. Cal. L. Rev. 1181, 1200 (1977) quoting Chief Justice Wright.
In Justice Bird’s address at the State Bar Convention in San Francisco, CA Sept. 10, 1978, in Report, LA. Daily J., Oct. 6, 1978, at 4, 8, speaking of depublished opinions as ones “with which the court does not agree” and as “erroneous ruling[s]“.
Grodin, supra, note 7, at 514-15.
Delaware Decedents’ Estates and Fiduciary Relations, Chapter 35, Trusts, Subchapter III. General Provisions § 3536.
The “Section” stated herein and below, relate to the applicable Sections of the appellate court’s Opinion.
“This allegation comports with the following view of pooling and servicing agreements and the federal tax code provisions applicable to REMIC trusts. “Once the bundled mortgages are given to a depositor, the [pooling and servicing agreement] and IRS tax code provisions require that the mortgages be transferred to the trust within a certain time frame, usually ninety dates from the date the trust is created. After such time, the trust closes and any subsequent transfers are invalid. The reason for this is purely economic for the trust. If the mortgages are properly transferred within the ninety-day open period, and then the trust properly closes, the trust is allowed to maintain REMIC tax status.” (Deconstrueting Securitized Trusts, supra, 41 Stetson L.Rev. at pp. 757-758.)” Glaski, supra fn 12.
Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149.
Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366.
Even assuming, as Glaski insisted, that New York law governs interpretation of the PSA, which it did not because the PSA was under Delaware law, and further assuming that the transfer of Glaskis’ loan to the Trust violated the terms of the PSA, that after-the-deadline transactions would merely bevoidable at the election of one or more of the parties—not void as Glaski and the illiterates would have everyone believe. Consequently, Glaski, was not a party to the PSA, and did not have standing to challenge it.
This concurs with time-honored principles of contract law. A void contract is “invalid or unlawful from its inception” and therefore cannot be enforced. 17A C.J.S. Contracts § 169. Thus, a mortgagor who was not a party to an assignment between mortgagees may nevertheless challenge the enforcement of a void assignment. A voidable contract, on the other hand, “is one where one or more of the parties have the power, by the manifestation of an election to do so, to avoid the legal relations created by the contract.” Id. Therefore, only one who was a party to a voidable contract has standing to challenge it.
It is true that New York Estate Powers & Trusts Law § 7-2.4 states: “every act in contravention of the Trust is void.” New York case law, however, makes clear “that section 7-2.4 is not applied literally in New York.”Bank of Am. Nat’l Ass’n v. Bassman FBT, LLC, 366 Ill. Dec. 936, 981 N.E.2d 1 (Ill. App. Ct. 2012). Instead, New York courts have held that a beneficiary can ratify a trustee’s ultra vires act. See, e.g., Mooney v. Madden, 597 N.Y.S.2d 775 (N.Y. App. 1993) (holding that trustee may bind trust to an otherwise invalid act or agreement that is outside scope of trustee’s power when beneficiary or beneficiaries consent or ratify trustee’s ultra vires act or agreement); Matter of Estate of Janes, 630 N.Y.S.2d 472, 477 (Sur. 1995), aff’d as modified sub nom. Matter of Janes, 643 N.Y.S.2d 972 (N.Y. App. Div. 1996), aff’d sub nom. Matter of Estate of Janes, 90 N.Y.2d 41 (N.Y. 1997)(acknowledging that a beneficiary may ratify a trustee’s ultra vires act if “the ratification was done with knowledge of material facts”); Leasing Serv. Corp. v. Vita Italian Restaurant, 566 N.Y.S.2d 796, 797-98 (N.Y. App. Div. 1991) (“It is hornbook law that a contract entered into by . . . an unauthorized agent, corporate officer, trustee or other person purporting to act in a representative capacity . . . is voidable.”); Hine v. Huntington, 103 N.Y.S. 535, 540 (1907) (“We have before this called attention to the fact that the cestui que trust is at perfect liberty to elect to approve an unauthorized investment and enjoy its profits, or to reject it at his option.”); 106 N.Y. Jur. 2d Trusts § 431 (“[T]rustee may bind trust to an otherwise invalid act or agreement which is outside the scope of the trustee’s power when beneficiary consents to or ratifies the trustee’s ultra vires act or agreement.”);see also In re Levy, 893 N.Y.S.2d 142, 144 (N.Y. App. Div. 2010) (explaining that “[t]he essence of ratification ‘is that the beneficiary unequivocally declares that he does not regard the act in question as a breach of trust but rather elects to treat it as a lawful transaction under the trust’”) (quoting Bogert, Law of Trusts and Trustees § 942).
If an act may be ratified, it is voidable rather than void. See Hacket v. Hackett, 950 N.Y.S.2d 608, 2012 WL 669525, at *20 (N.Y. Sup. Ct. Feb. 21, 2012) (“A void contract cannot be ratified; it binds no one and is a nullity.
However, an agreement that is merely voidable by one party leaves both parties at liberty to ratify the transaction and insist upon its performance.”) (quoting 27 Williston on Contracts § 70:13 [4th ed.]) (internal quotation marks omitted); 17 C.J.S. Contracts § 4 (noting that “a void contract . . . is no contract whatsoever” and “cannot be validated by ratification”) (emphasis added); id. (“A contract that is merely voidable is capable of being confirmed or ratified by the party having the right to avoid it . . . .”).
These cases above make it obvious that, under New York law, a trustee’s unauthorized transactions may be ratified; such transactions, voidable—not void.
That being the case, if the trustee of the securitized trust can’t, on its own, decide to accept these late-delivered notes, then it’s clear the beneficiaries can. They can ratify or waive anything they want. Common sense dictates that they can either, accept the notes/mortgages even though they were delivered late, giving the trust power to enforce, but theoretically putting the trust’s tax-exempt REMIC status at risk; or not allowing the trustee to accept the notes/mortgages, keeping their REMIC status alive, but denying themselves the income from the notes/mortgages they bought.
Common sense would also dictate that if there are enormous numbers of late-delivered notes/mortgages, does anyone really believe that the holders of these notes/mortgages would rather lose the tax benefits by virtue of it becoming a taxable event, which is highly unlikely because the IRS has failed to take any action so far, or lose the income from the notes/mortgages. Anyone who got out of the third grade can figure this one out.
Ideal Strategy for Glaski and ALL Mortgagors
I take this position: if you borrow money to buy a house on a valid mortgage deal, pay it back timely in accordance with your agreements or give up the house. Don’t fight the foreclosure because you will lose and you might suffer Post Traumatic Brain Injury as a result. But, if the mortgage lacks validity because the lender or lender’s agents cheated you, do your best to hammer the lender into a concession that leaves you with the house and compensation. To that end, I propose the following strategy:
Get a comprehensive mortgage examination by a competent professional who has knowledge of all the related areas of law AND consummate litigation skill. Then,
If no causes of action (reasons to sue) exist, walk from the house as you should, with a short-sale or deed-in-lieu-of-foreclosure deal to salvage as much as you can of your credit rating.
Use the discovered causes of action to force a settlement for money or cram-down (reduced balance) refinance, or sue for compensatory and punitive damages and legal fees and costs.
Do not EVER accept a loan modification, for all are just scams to increase your debt, increase the likelihood of foreclosure, and deprive you of the right to sue over prior predatory lending injuries.
If you obtained a home mortgage loan in the past 10 to 15 years, you might have numerous causes of action underlying the mortgage. In that case you should demand settlement or sue, whether or not you face foreclosure. I can review your situation and introduce you to America’s premier mortgage fraud examiner if circumstances warrant it.
Securitization haters have gone giddy or berserk with the news of the Glaski, Erobobo, and Saldivar opinions denouncing foreclosure on the basis of broken chain of assignment of the note. Courts have said assignment into …
I have repeatedly denounced the Glaski opinion of California’s 5th District Court, explaining that Glaski wasted his money fighting a foreclosure that the courts had to allow because he did in fact breach his mortgage note.
Now USDC Judge Gonzalo Curiel of California’s Southern District has given Michael and Erica Mottale similarly shrift justice to their foreclosure defense which cited the Glaski opinion as a basis for the court to consider their reasons for halting the foreclosure. His honor cited an array of opinions in opposition to the Glaski opinion, and explains why.
“Defendants move to dismiss Plaintiffs’ “securitization” theory as failing to set forth a cognizable legal theory. (Dkt. No. 20-1 at 7-8) (“Plaintiff’s securitization argument is simply not the law in California and thus the related claims against KTS[J] are improper and baseless as a matter of law.”). In response, Plaintiffs cite the recent California Court of Appeal case Glaski v. Bank of America National Association, et al., 218 Cal. App. 4th 1079 (Aug. 8, 2013), to support the plausibility of Plaintiffs’ unlawful securitization theory of liability. (Dkt. No. 22 at 3.) In Glaski, the court interpreted New York trust law to find that a borrower could have standing to challenge the assignment of the borrower’s loan if the defect asserted by the borrower would void the assignment. Id. at 1095. The Court first notes that the weight of authority rejects Glaski as a minority view on the issue of a borrower’s standing to challenge an assignment as a third party to that assignment. See Rivac v. Ndex West LLC, No. C 13-1417 PJH, 2013 WL 6662762 at *4 (N.D. Cal. Dec. 17, 2013) (collecting cases); Boza v. U.S. Bank Nat. Ass’n, LA CV12-06993 JAK, 2013 WL 5943160 at *10 (C.D. Cal. Oct. 28, 2013) (same); In re Sandri, 501 B.R. 369, 374-78 (Bankr. N.D. Cal. 2013) (same).
“Additionally, even if the Court found the Glaski court’s reasoning persuasive, the Court finds that Plaintiffs fail to plead the facts to support such a theory. For example in Glaski, the court considered many factual details regarding the loan at issue in that case, including facts regarding the payments owed and the borrower’s attempts to obtain loan modifications. 218 Cal. App. 4th 1079, 1083-84 (2013). The court considered details regarding the creation of the alleged fraudulent trust and assignment of plaintiff’s loan challenged by the plaintiff in that case, including: the factual allegations that assignment was attempted after the closing date; the specifics of alleged transfers of plaintiff’s loan; and the alleged roles the defendants played in these actions. Id. at 1084-85. Furthermore, the court in Glaski considered facts regarding alleged misrepresentations made by defendants to plaintiff, including what the plaintiff was told, how the plaintiff interpreted the statements made, and who made the representations at issue. Id. at 1085-86. In summary, even if Glaski supports a finding that Plaintiffs’ legal theory is legally cognizable, Glaski cannot relieve Plaintiffs of the burden of alleging sufficient facts to state a claim under Federal Rule of Civil Procedure 12(b)(6) or, where Plaintiffs are alleging fraud, of pleading allegations of fraud with particularity, Fed. R. Civ. P. 9(b). The Court therefore turns to addressing each of the Causes of Action challenged for factual sufficiency in Defendants’ motion to dismiss.”
What lesson shall we take away from Glaski and the host of opinions in opposition to it? Consider this:
One who takes out a mortgage loan must repay it timely according to the terms of the note or forfeit the collateral realty according to terms of the mortgage.
Any defense against forfeiture of the collateral must fail. But, the mortgagor has a glimmer of hope in attacking the lender or lender’s agents for injuring the mortgagor at the inception of the loan. You see, a good offense can become one’s best defense.
Otherwise defenses against foreclosures of valid loans must fail. And that includes every single securitization argument one can conjure. Securitization has nothing to do with the obligation of the mortgagor to pay off the note according to its terms. If you, the mortgagor, can prove that the lender or lender’s agents injured you, then you can attack them for those injuries, and a court will rule in your favor if the lender or agents don’t convince you to settle with them first. Ruling in your favor can consist of financial set-off of the amount you owe, cram-down of the loan to a lower balance refinanced at terms favorable to you, compensatory damage, punitive damages, and legal fees and costs paid by your opponent.
Have you seriously contemplated how you might go about discovering the various ways the lender or agents injured you at the beginning of the loan? They might have lied to you about the value of the house, or submitted false information on your loan application, or any one of DOZENS of other items of tortious conduct, contract breaches, or legal errors still within the statute of limitations. Some tortious acts, like fraud, can justify treble (triple) damages in your favor. That could become quite a win for you.
Look at it this way.
ALWAYS LOSE when you defend against foreclosure; or…
ALWAYS WIN when you attack against the lending team for torts, breaches, and errors
It’s that simple. Defend and LOSE, or Attack and WIN. Which do you prefer?
So, take your choice: Defend and LOSE or Attack and WIN. Got it? Good.
Now, if you want to learn how to find the torts, errors and breaches underlying your mortgage, CALL ME at 727 669 5511 right NOW, or Email Me right NOW. I’ll explain everything to you FREE.
Courts Deprecate Glaski – Only parties to the PSA may enforce it.
Violations of the PSA Won’t Save your House!
The July 2013 opinion by the California 5th District in Glaski v BOA caused an uproar of hope in the foreclosure pretense defense community. Finally a California appeals panel’s judges had their heads screwed on straight. They struck down Glaski’s foreclosure because assignment of the note to the supposed trustee who foreclosed became void under New York law because it happened after the closing date which the Pooling and Servicing Agreement (PSA) stipulated.
But now an array of California courts have tossed the Glaski opinion in the trash, favoring instead the prior May 2013 Jenkins v JP Morgan Chase Bank contrary opinion and the more recent contrary opinions by the CSD USDC in Mottale v Kimball Tirey.
I have cited those and a number of related cases below, a treasure trove of opinions to get the point across thoroughly, and copied a related article by Locke Lord lawyers. The point is:
If you are not a party to the PSA and you did not get injured by its parties, then you have NO STANDING to enforce or dispute it in court.
Consider this a warning to foreclosure victims: don’t pin your hopes on Glaski – if you do, you’ll lose your house. Period.
Okay, so HOW SHALL I SAVE MY HOUSE?
I put attacks against the PSA and securitization in the category of FAILING FORECLOSURE DEFENSE ARGUMENTS. You can count on foreclosure pretender defender lawyers across America to try to use them, but all they end up doing is costing foreclosure victims more money and losing the house anyway. They (and you, if you hire one of them) only waste resources to delay the inevitable foreclosure sale of the house.
I know of only one sure-fire way to WIN some form of concession or financial benefit from a mortgagee or mortgage note holder: ATTACK them or the loan originator and/or agents for injuring you at the inception of the loan (including any attempted scam loan modification where they con you into breaching the note to qualify for mod).
In order to attack them for injuring you, you must first discover HOW they injured you. That means you must examine your mortgage related documents comprehensively and thoroughly, having a good knowledge of related law, and take note of all the causes of action against them (reasons to sue them) that you can find.
If you don’t have that skill and your lawyer does not have that skill, and neither of you have the willingness to do that difficult and onerous job, then you must hire a competent mortgage examiner to do it for you.
I know only ONE such competent mortgage examiner in the world with the willingness and ability to examine your mortgage and find all the underlying causes of action.
If you call me at 727 669 5511, or send me your name and contact information by email I shall explain the process in detail for you, and connect you to the mortgage examiner IF YOU QUALIFY and IF you won’t just waste his time. I shall do this free of charge, and with no further obligation to you because I like helping sincere people.
But if you are just a tire-kicker or dilettante with no intention or heart for attacking your scurrilous lender, appraiser, mortgage broker, title officer, servicer, etc, don’t bother contacting me because I won’t be able to do anything for you, and it will just waste time for both of us.
Picture thi s – With a mortgage examination report in hand, you can negotiate a settlement with your lender, or prepare and file a lawsuit against the lender and confederates. You could win anything from a loan balance cram down (to an affordable level, refinanced) to monetary set-offs against your debt, to your house free and clear, to compensatory damages, to punitive damages, possibly in the millions.
All you get if you beat the foreclosure (which you won’t) is the same old house needing repairs and a huge mortgage you cannot afford. When fighting the foreclosure, you will not eliminate the debt, and if you foolishly do a loan mod, you will end up owing double to triple the value of your house and have a balloon you probably will never be able to pay, and you’ll end up in foreclosure again. You might as well slap a ball and chain around your ankle and sell yourself into servitude as the bank’s slave.
Or, picture you and your family with the peace of mind and money to enjoy a nice hot tub experience after you win a settlement from the bank for injuring you. If you like that picture, CALL me. I’ll show you the path to liberation.
Defendants move to dismiss Plaintiffs’ “securitization” theory as failing to set forth a cognizable legal theory. (Dkt. No. 20-1 at 7-8) (“Plaintiff’s securitization argument is simply not the law in California and thus the related claims against KTS[J] are improper and baseless as a matter of law.”). In response, Plaintiffs cite the recent California Court of Appeal case Glaski v. Bank of America National Association, et al., 218 Cal. App. 4th 1079 (Aug. 8, 2013), to support the plausibility of Plaintiffs’ unlawful securitization theory of liability. (Dkt. No. 22 at 3.) In Glaski, the court interpreted New York trust law to find that a borrower could have standing to challenge the assignment of the borrower’s loan if the defect asserted by the borrower would void the assignment. Id. at 1095. The Court first notes that the weight of authority rejects Glaski as a minority view on the issue of a borrower’s standing to challenge an assignment as a third party to that assignment. See Rivac v. Ndex West LLC, No. C 13-1417 PJH, 2013 WL 6662762 at *4 (N.D. Cal. Dec. 17, 2013) (collecting cases); Boza v. U.S. Bank Nat. Ass’n, LA CV12-06993 JAK, 2013 WL 5943160 at *10 (C.D. Cal. Oct. 28, 2013) (same); In re Sandri, 501 B.R. 369, 374-78 (Bankr. N.D. Cal. 2013) (same).
Additionally, even if the Court found the Glaski court’s reasoning persuasive, the Court finds that Plaintiffs fail to plead the facts to support such a theory. For example in Glaski, the court considered many factual details regarding the loan at issue in that case, including facts regarding the payments owed and the borrower’s attempts to obtain loan modifications. 218 Cal. App. 4th 1079, 1083-84 (2013). The court considered details regarding the creation of the alleged fraudulent trust and assignment of plaintiff’s loan challenged by the plaintiff in that case, including: the factual allegations that assignment was attempted after the closing date; the specifics of alleged transfers of plaintiff’s loan; and the alleged roles the defendants played in these actions. Id. at 1084-85. Furthermore, the court in Glaski considered facts regarding alleged misrepresentations made by defendants to plaintiff, including what the plaintiff was told, how the plaintiff interpreted the statements made, and who made the representations at issue. Id. at 1085-86. In summary, even if Glaski supports a finding that Plaintiffs’ legal theory is legally cognizable, Glaski cannot relieve Plaintiffs of the burden of alleging sufficient facts to state a claim under Federal Rule of Civil Procedure 12(b)(6) or, where Plaintiffs are alleging fraud, of pleading allegations of fraud with particularity, Fed. R. Civ. P. 9(b). The Court therefore turns to addressing each of the Causes of Action challenged for factual sufficiency in Defendants’ motion to dismiss.
Glaski v. Bank of America, N.A., 218 Cal. App. 4th 1079 (July 31, 2013) – “a borrower may challenge [a] securitized trust’s chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust’s closing date.”
Diunugala is the first case coming out of a California court to expressly reject the California Court of Appeal’s reasoning inGlaski and deem Glaski unpersuasive. While not binding authority, other State and Federal Courts in California may followDiunugala as persuasive authority and similarly follow well-established case law holding that a borrower lacks standing to challenge an allegedly invalid assignment of a deed trust.
The Glaski opinion contradicted Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497 (May 17, 2013 – borrowers lack standing to challenge the validity of an assignment to which they are neither party nor beneficiary. “As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [plaintiff] lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions.”
Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, (2011) – California non-judicial foreclosure statutes do not “provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized.”
Diunugala v. JP Morgan Chase Bank, N.A. (Case No. 12-cv-02106-WQH-NLS) (October 3, 2013) – “[we find] the reasoning in [cases such as Jenkins and Gomes] to be more persuasive than that in Glaski.” Even if the Glaski court correctly decided the case, a plaintiff cannot assert a claim based upon an allegedly ineffective assignment of a deed of trust without alleging facts demonstrating that the deed of trust was not assigned in any manner or alleging resulting prejudice to the borrower.
Cal: Court of Appeal, 4th Appellate Dist., 3rd Div., 2013 – Google Scholar
Diane Jenkins (Jenkins) requests the reversal of the trial court’s dismissal of her lawsuit after
it sustained the two separate demurrers of (1) JPMorgan Chase Bank NA (Chase) and Bank
of America, NA (B of A) and (2) Quality Loan Service Corporation (Quality). (These entities …
Court of Appeals, 9th Circuit, 2013 – Google Scholar
The district court properly dismissed Jenkins‘ action because, under the Purchase and Assumption
Agreement between JP Morgan Chase Bank (“Chase“) and the Federal Deposit Insurance Corporation
(“FDIC”), Chase did not assume any liability associated with borrower claims against …
Bankr. Court, ND California, 2013 – Google Scholar
… This argument is both unsupported and incorrect.”); Jenkins v. JPMorganChaseBank, NA, 216
Cal. App. 4th 497, 156 Cal.Rptr.3d 912 (Cal. App. 4th Dist. 2013) (borrower does not have the
right to bring a preemptive judicial action to determine defendants’ standing to foreclose …
Cal: Court of Appeal, 2nd Appellate Dist., 6th Div., 2013 – Google Scholar
… 2012) 211 Cal.App.4th 505, 511 (Shuster), “California’s statutory nonjudicial foreclosure scheme
(§§ 2924-2924k) does not require that the foreclosing party have a beneficial interest in or physical
possession of the note.” (Accord, Jenkins v. JPMorganChaseBank, NA (2013 …
Cal: Court of Appeal, 2nd Appellate Dist., 7th Div., 2013 – Google Scholar
… v. JPMorganChaseBank, NA, supra, 214 Cal.App.4th at p. 752; accord, Landmark Screens,
LLC v. Morgan, Lewis & … the plaintiff’s] previous unsuccessful attempts to plead,'”‘ it is improbable
the plaintiff can state a cause of action.” (Jenkins v. JPMorganChaseBank, NA (2013 …
… Mar. 21, 2012)); see also Jenkins v. JPMorganChaseBank, NA, 216 Cal. App. … July 17, 2013)
(collecting cases). Plaintiffs rely upon Ansanelli v. JPMorganChaseBank, NA, No. … See, eg,
Bernardi v. JPMorganChaseBank, NA, No. 11-cv-4212, 2012 WL 2343679, at *5 (ND Cal. …
192 Cal. App. 4th 1149 – Cal: Court of Appeal, 4th Appellate Dist., …, 2011 – Google Scholar
… (Weingartner v. Chase Home Finance … the California Rules of Court do not prohibit citation to
unpublished federal cases, which may properly be cited as persuasive, although not binding,
authority.” (Landmark Screens, LLC v. Morgan, Lewis & … (Landmark National Bank v. Kesler …
219 Cal. App. 4th 75, 161 Cal. Rptr. 3d … – Cal: Court of Appeal, 2nd …, 2013 – Google Scholar
… the nonjudicial foreclosure process by pursuing preemptive judicial actions challenging the
authority of a foreclosing “beneficiary” or beneficiary’s “agent.” (Jenkins v. JPMorganChaseBank,
NA (2013) 216 Cal.App.4th 497, 511 [156 Cal.Rptr.3d 912] (Jenkins); Gomes, supra …
216 Cal. App. 4th 1541 – Cal: Court of Appeal, 4th Appellate Dist., …, 2013 – Google Scholar
216 Cal.App.4th 1541 (2013). DIANE JENKINS, Plaintiff and Appellant, v. JPMORGAN CHASEBANK, NA, et al., Defendants and Respondents. No. G046121. Court of Appeals
of California, Fourth District, Division Three. June 12, 2013. …
Cal: Court of Appeal, 4th Appellate Dist., 3rd Div., 2014 – Google Scholar
… The power of sale may be exercised by the assignee if the assignment is duly acknowledged
and recorded.” (Italics added.) This section does not apply to a deed of trust. (Jenkins v. JPMorganChaseBank, NA (2013) 216 Cal.App.4th 497, 518 (Jenkins).). …
… No. C 13-1983, 2013 WL 6140528, at 6 (ND Cal. Nov. 21, 2013) (Judge William
H. Orrick Jr.). Instead, courts in this district rely on the majority rule in Jenkins v. JPMorganChaseBank, NA, 216 Cal.App.4th 497 (2013). The …
Cal: Court of Appeal, 4th Appellate Dist., 1st Div., 2014 – Google Scholar
… Appellant Judith Pedery-Edwards appeals from a judgment entered in favor of defendants JP MorganChaseBank, NA (Chase) and … do everything the contract presupposes the party will do
to accomplish the agreement’s purposes.” (Jenkins v. JPMorganChaseBank, NA (2013 …
Cal: Court of Appeal, 2nd Appellate Dist., 8th Div., 2013 – Google Scholar
… (Jenkins v. JPMorganChaseBank, NA (2013) 216 Cal.App.4th 497, 506 (Jenkins).).  The notice
incorrectly cites title 15 United States Code section 1692(G), which does not exist.  On March
11, 2011, a “Notice of Rescission of a Trustee’s Deed Upon Sale” was recorded. …
218 Cal. App. 4th 1079, 160 Cal. Rptr. 3d … – Cal: Court of Appeal, 5th …, 2013 – Google Scholar
Before Washington Mutual Bank, FA (WaMu), was seized by federal banking regulators in
2008, it made many residential real estate loans and used those loans as collateral for
mortgage-backed securities.  Many of the loans went into default, which led to …
… Dec. 21, 2012). Plaintiffs rely on Glaski v. Bank of America, NA, 218 Cal.App.4th 1079 (2013),
to argue that they can challenge the securitization process. Glaski, however, is in the clear minority
on this issue. The Glaski decision relies on New York law to reach its conclusion. …
… In response, Plaintiffs cite the recent California Court of Appeal case Glaski v. Bank of America
National Association, et al., 218 Cal. App. 4th 1079 (Aug. 8, 2013), to support the plausibility
of Plaintiffs’ unlawful securitization theory of liability. (Dkt. No. …
Cal: Court of Appeal, 4th Appellate Dist., 3rd Div., 2014 – Google Scholar
… (Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski); Jenkins, supra, 216
Cal.App.4th 497, 518; Gomes, supra, 192 Cal.App.4th 1149.) Plaintiff has not alleged any specific
facts supporting such a claim and these cases do not save plaintiff’s cause of action. …
Cal: Court of Appeal, 5th Appellate Dist., 2013 – Google Scholar
Before Washington Mutual Bank, FA (WaMu) was seized by federal banking regulators in
2008, it made many residential real estate loans and used those loans as collateral for
mortgage-backed securities.  Many of the loans went into default, which led to …
…  Although Chase’s original motion argues that the Nguyens do not have standing
to raise such issues, the Nguyens’ opposition brief contends that they do based on
a single California appellate case, Glaski v. Bank of America. …
… 28, 30). Plaintiff contends that the First Amended Complaint adequately states claims for relief
pursuant to the holding of Glaski v. Bank of America, NA, 218 Cal. App. … Plaintiff contends that
he has standing for the reasons stated in Glaski v. Bank of America, NA, 218 Cal. App. …
… Expungement is warranted. The plaintiffs have provided almost no argument in opposition. They
merely cite to Glaski v. Bank of America, 218 Cal. App. 4th 1079 (Ct. … Oct. 31, 2013) (citing cases
disagreeing with Glaski). II. THE REQUEST FOR ATTORNEY’S FEES IS GRANTED. …
… valid beneficiary is unknown,” but “[w]hat is known is that the defendants to this action do not
have the authority to exercise the power of sale or to collect mortgage payments from the plaintiff.”
See Complaint at 9. To support this argument, plaintiff largely relies on Glaski v. Bank …
Bankr. Court, ND California, 2013 – Google Scholar
… The court disagrees, as Glaski is inconsistent with the majority line of cases and
is based on a questionable analysis of New York trust law. 1. The Weight of Authority
is Against Glaski. … 2. Glaski’s Reasoning is Not Persuasive. …
… As to the claim that Defendants breached the PSA, Plaintiffs newly argue that the Court
should follow Glaski v. Bank of Am., Nat’l Ass’n, 218 Cal. App. … See FAC ¶¶ 25-26. However,
as Defendants point out, Glaski represents a minority view. …
… Sept. 24, 2012). On this point, Plaintiff contends that a recent California Court of Appeals case, Glaski v. Bank of America, NA, 218 Cal. App. 4th 1079 (Cal. Ct. App. … at 1094-95. Defendant
counters that the Court should ignore Glaski as stating the minority rule. …
Cal: Court of Appeal, 4th Appellate Dist., 1st Div., 2013 – Google Scholar
… The Grimms filed a letter bringing to our attention a recently published case, Glaski v. Bank of
America (2013) 218 Cal.App.4th 1079, which they claim “is relevant to the issue on appeal related
to [Capital One’s] improper securitization procedures and lack of assignment into the …
… Plaintiff relies on Glaski v. Bank of Am., Nat’t Ass’n, 218 Cal. App. 4th 1079, 1097 (2013). … Id.
at 1097-98. However, Glaski represents a distinct minority view on the standing of third parties
to enforce or assert claims based on alleged violations of a PSA. …
Bankr. Court, ND California, 2014 – Google Scholar
… In support of his position, Plaintiff cites Thomas A. Glaski v. Bank of America, 2013 WL 4037310
(Cal. Ct. App. July 31, 2013). … As determined in In re Sandri, 501 BR 369 (Bankr. ND Cal. 2013),
the clear weight of authority is against Glaski and its reasoning is unpersuasive. …
… She contends that the proposed amendment is not made in bad faith and not futile as the law
in California has changed under Glaski v. Bank of America, Nat’l Assoc., 218 Cal. App. 4th 1079
(2013). … Oct. 5, 2012). Here, both parties argue, in detail, the merits of the Glaski case. …
… May 30, 2012) (Chen, J.) (granting preliminary injunction preventing foreclosure sale because
the plaintiff was likely to prevail on claim that foreclosure was improper due to fraudulent
substitution of trustee); Glaski v. Bank of Am., Nat’l Ass’n, 218 Cal. App. … See Glaski, 218 Cal. …
… for securitization” as they argue in the opposition. Plaintiffs rely on Glaski v. Bank of
America, 218 Cal. App. … IT IS SO ORDERED.  The court also notes that even in California
courts, the holding in Glaski has not been adopted universally. …
Cal: Court of Appeal, 2nd Appellate Dist., 8th Div., 2014 – Google Scholar
… 2012) 885 F.Supp.2d 964, 973-974; Glaski v. Bank of America (2013) 218 Cal.App.4th 1079,
1097; Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1378-1379;
Sacchi v. Mortgage Elec. Registration Sys. (CDCal. June 24, 2011, No. …
Cal: Court of Appeal, 4th Appellate Dist., 1st Div., 2014 – Google Scholar
… that a foreclosure was wrongful because it was initiated by a nonholder of the deed of trust has
also been phrased as (1) the foreclosing party lacking standing to foreclose or (2) the chain of
title relied upon by the foreclosing party containing breaks or defects.” (Glaski v. Bank of …
… 39-3 at 4-5).  In making his argument that securitization of the credit debt somehow prevents
the Financial Entities from collecting on his debt, plaintiff relies extensively on Glaski v. Bank
of America, 218 Cal.App.4th 1079 (Cal.App. 2013). That reliance is wholly misplaced. …
Cal: Court of Appeal, 2nd Appellate Dist., 4th Div., 2013 – Google Scholar
… The notes may thereafter be transferred among members without requiring recordation in the
public records.”.  As explained in Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1082,
“In simplified terms, `securitization’ is the process where (1) many loans are bundled …
219 Cal. App. 4th 75, 161 Cal. Rptr. 3d … – Cal: Court of Appeal, 2nd …, 2013 – Google Scholar
219 Cal.App.4th 75 (2013). 161 Cal. Rptr. 3d 500. JOHNNY SILIGA et al., Plaintiffs and Appellants,
v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., et al., Defendants and
Respondents. No. B240531. Court of Appeals of California, Second District, Division Three. …
Cal: Court of Appeal, 2nd Appellate Dist., 2nd Div., 2013 – Google Scholar
… Thus, the homeowner-plaintiff does not suffer an injury as a result of the assignment of deed of
trust, even if the assignment was fraudulent”]; but cf. Glaski v. Bank of America (2013) 218
Cal.App.4th 1079, 1097, fn. 16 [finding forgery a question of fact under New York law].). …
On January 6, 2014, Plaintiff filed the Ex Parte Application for a Temporary Restraining
Order. (ECF No. 39). Plaintiff “seeks a TRO to preliminary enjoin Defendants . . . and any other
persons or entities acting on their behalf, including the San Diego County Sheriff, from …
After review of the filings of the parties, the Court finds that there has been an insufficient showing
of prejudice to Defendants or undue delay in bringing the proposed class allegations to overcome
the “presumption under Rule 15(a) in favor of granting leave to amend.” Id. To the extent …
… See Newman v. Bank of NY Mellon, No. 1:12-CV-1629 AWI GSA, 2013 WL 5603316, at *3 n.2
(ED Cal. Oct. 11, 2013) (“Glaski is in a clear minority” on this issue); Diunugala v. JP Morgan
Chase Bank, NA, No. 12-cv-2106-WQH-NLS, 2013 WL 5568737, at *8 (SD Cal. Oct. …
221 Cal. App. 4th 49, 163 Cal. Rptr. 3d … – Cal: Court of Appeal, 4th …, 2013 – Google Scholar
… For this reason, `[n]umerous cases have characterized a loan modification as a
traditional money lending activity.'” (See Diunugala v. JP Morgan Chase Bank, NA
(SDCal., Oct. 3, 2013, No. 12cv2106-WQH-NLS) 2013 USDist. …
More Failing Securitization Arguments by Foreclosure Victims
Rodenhurst v. Bank of Am., 773 F. Supp. 2d 886, 899 (D. Haw. 2011) (“The overwhelming authority does not support a [claim] based upon improper securitization.”) “[S]ince the securitization merely creates a separate contract, distinct from plaintiffs’ debt obligations under the Note and does not change the relationship of the parties in any way, plaintiffs’ claims arising out of securitization fail.”
In re Veal, 450 B.R. at 912 (“[Plaintiffs] should not care who actually owns the Note-and it is thus irrelevant whether the Note has been fractionalized or securitized-so long as they do know who they should pay.”);
Horvath v. Bank of NY, N.A., 641 F.3d 617, 626 n.4 (4th Cir. 2011) (securitization irrelevant to debt);
Commonwealth Prop. Advocates, LLC v. MERS, 263 P.3d 397, 401-02 (Utah Ct. App. 2011) (securitization has no effect on debt);
Henkels v. J.P. Morgan Chase, 2011 WL 2357874, at *7 (D.Ariz. June 14, 2011) (denying the plaintiff’s claim for unauthorized securitization of his loan because he “cited no authority for the assertion that securitization has had any impact on [his] obligations under the loan, and district courts in Arizona have rejected similar arguments”);
Johnson v. Homecomings Financial, 2011 WL 4373975, at *7 (S.D.Cal. Sep.20, 2011) (refusing to recognize the “discredited theory” that a deed of trust ” ‘split’ from the note through securitization, render[s] the note unenforceable”);
Frame v. Cal-W. Reconveyance Corp., 2011 WL 3876012, *10 (D. Ariz. 2011) (granting motion to dismiss: “Plaintiff’s allegations of promissory note destruction and securitization are speculative and unsupported. Plaintiff has cited no authority for his assertions that securitization has any impact on his obligations under the loan”).”The Court also rejects Plaintiffs’ contention that securitization in general somehow gives rise to a cause of action – Plaintiffs point to no law or provision in the mortgage preventing this practice, and cite to no law indicating that securitization can be the basis of a cause of action. Indeed, courts have uniformly rejected the argument that securitization of a mortgage loan provides the mortgagor a cause of action.” See
Joyner V. Bank Of Am. Home Loans, No. 2:09-CV-2406-RCJ-RJJ, 2010 WL 2953969, at *2 (D. Nev. July 26, 2010) (rejecting breach of contract claim based on securitization of loan);
Haskins V. Moynihan, No. CV-10-1000-PHX-GMS, 2010 WL 2691562, at *2 (D. Ariz. July 6, 2010) (rejecting claims based on securitization because plaintiffs could point to no law indicating that securitization of a mortgage is unlawful, and “[p]laintiffs fail to set forth facts suggesting that Defendants ever indicated that they would not bundle or sell the note in conjunction with the sale of mortgage-backed securities”);
Lariviere V. Bank Of N.Y. As Tr., Civ. No. 9-515-P-S, 2010 WL 2399583, at *4 (D. Me. May 7, 2010) (“Many people in this country are dissatisfied and upset by [the securitization] process, but it does not mean that the [plaintiffs] have stated legally cognizable claims against these defendants in their amended complaint.”);
Upperman V. Deutsche Bank Nat’l Trust Co., No. 01:10-cv-149, 2010 WL 1610414, at *3 (E.D. Va. Apr. 16, 2010) (rejecting claims because they are based on an “erroneous legal theory that the securitization of a mortgage loan renders a note and corresponding security interest unenforceable and unsecured”);
Silvas V. Gmac Mortg., Llc, No. CV-09-265-PHX-GMS, 2009 WL 4573234, at *5 (D. Ariz. Dec. 1, 2009) (rejecting a claim that a lending institution breached a loan agreement by securitizing and cross-collateralizing a borrower’s loan). The overwhelming authority does not support a cause of action based upon improper securitization. Accordingly, the Court concludes that Plaintiffs cannot maintain a claim that “improper restrictions resulting from securitization leaves the note and mortgage unenforceable);
Summers V. Pennymac Corp. (N.D.Tex. 11-28-2012) (any securitization of Plaintiffs’ Note did not affect their obligations under the Note or PennyMac’s authority as mortgagee to enforce the Note and foreclose on the property if Plaintiffs defaulted).;
Nguyen V. Jp Morgan Chase Bank (N.D.Cal. 10-17-2012) (“Numerous courts have recognized that a defendant bank does not lose its ability to enforce the terms of its deed of trust simply because the loan is assigned to a trust pool. In fact, ‘securitization merely creates a separate contract, distinct from [p]laintiffs[‘] debt obligations under the note, and does not change the relationship of the parties in any way. Therefore, such an argument would fail as a matter of law”);
Flores v. Deutsche Bank Nat’l Trust Co., 2010 WL 2719848, at *4 (D. Md. July 7, 2010), the borrower argued that his lender “already recovered for [the borrower’s] default on her mortgage payments, because various ‘credit enhancement policies,'” such as “a credit default swap or default insurance,” “compensated the injured parties in full.” The court rejected the argument, explaining that the fact that a “mortgage may have been combined with many others into a securitized pool on which a credit default swap, or some other insuring-financial product, was purchased, does not absolve [the borrower] of responsibility for the Note.” Id. at *5; see also
Welk v. GMAC Mortg., LLC., 850 F. Supp. 2d 976 (D. Minn., 2012) (“At the end of the day, then, most of what Butler offers is smoke and mirrors. Butler’s fundamental claim that his clients’ mortgages are invalid and that the mortgagees cannot foreclose because they do not hold the notes is utterly frivolous.);
Vanderhoof v. Deutsche Bank Nat’l Trust (E.D. Mich., 2013)(internal citations omitted) (“s]ecuritization” does not impact the foreclosure. This Court has previously rejected an attempt to assert a claim based upon the securitization of a mortgage loan. Further, MERS acts as nominee for both the originating lender and its successors and assigns. Therefore, the mortgage and note are not split when the note is sold.”);
Chan Tang v. Bank of America, N.A. (C.D. Cal., 2012) (internal citations omitted)(“Plaintiffs’ contention that the securitization of their mortgage somehow affects Defendants’ rights to foreclose is likewise meritless. Plaintiffs have identified no authority supporting their position that securitization voids the power of sale contained in a deed of trust. Other courts have dismissed similar arguments. Thus, the claim that Defendants lack the authority to foreclose because the Tangs’ mortgage was pooled into a security instrument is Dismissed With Prejudice.);
Wells v. BAC Home Loans Servicing, L.P., 2011 WL 2163987, *2 (W.D. Tex. Apr. 26, 2011) (This claim—colloquially called the “show-me-the-note” theory— began circulating in courts across the country in 2009. Advocates of this theory believe that only the holder of the original wet-ink signature note has the lawful power to initiate a non-judicial foreclosure. The courts, however, have roundly rejected this theory and dismissed the claims, because foreclosure statutes simply do not require possession or production of the original note. The “show me the note” theory fares no better under Texas law.);
Maynard v. Wells Fargo Bank, N.A. (S.D. Cal., 2013) (“Plaintiffs also allege that they conducted a Securitization Audit of Plaintiffs’ chain of title and Wachovia’s PSA, and as a result, determined that Plaintiffs’ Note and DOT were not properly conveyed into the Wells Fargo Trust on or before July 29, 2004, the closing date listed in the Trust Agreement. (Id. at ¶ 34.)… To the extent Plaintiffs challenge the validity of the securitization of the Loan because Wells Fargo and U.S. Bank failed to comply with the terms of the PSA or the Trust Agreement, Plaintiffs are not investors of the Loan, nor are Plaintiffs parties to the PSA or Trust Agreement. Therefore, as many courts have already held, Plaintiffs lack standing to challenge the validity of the securitization of the Loan…Furthermore, although Plaintiffs contend they have standing to challenge the validity of the Assignment because they were parties to the DOT with the original lender (Wells Fargo), this argument also fails. (Doc. No. 49 at 11-12.);
Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497, 511-13, 156 Cal. Rptr. 3d 912 (Cal. Ct. App. 2013) (“[E]ven if any subsequent transfers of the promissory note were invalid, [the borrower] is not the victim of such invalid transfers because her obligations under the note remained unchanged.”). As stated above, these exact arguments have been dismissed by countless other courts in this circuit. Accordingly, Plaintiffs’ contentions that the Assignment is void due to a failure in the securitization process fails.”);
Demilio v. Citizens Home Loans, Inc. (M.D. Ga., 2013) (“Frankly, the Court is astonished by Plaintiff’s audacity… Plaintiff requires the Court to scour a poorly-copied, 45-page “Certified Forensic Loan Audit” in an attempt to discern the basic facts of his case. This alone would be sufficient for dismissal. However, the Court is equally concerned by Plaintiff’s attempt to incorporate such an “audit,” which is more than likely the product of “charlatans who prey upon people in economically dire situation,”… As one bankruptcy judge bluntly explained, “[the Court] is quite confident there is no such thing as a ‘Certified Forensic Loan Audit’ or a ‘certified forensic auditor…. The Court will not, in good conscience, consider any facts recited by such a questionable authority.”)
With respect to the message from Lee, way below, John Stuart is full of baloney and so is N.W. Raja the so-called mortgage forensic auditor. Please forward this reply to your mailing list. I write to set the below issue straight for the readers misled by the Stuart (show-me-the-loan) and Raja (securitization audit) BULLSHOUTS. This has to do with the 2011 Virginia Eastern USDC case of Jeffrey Brown v HSBC, for which Raja prepared a long-winded forensic exam (securitization audit).
The so-called forensic audit report is full of meaningless history and conjecture and legal conclusions and contains not a single salient, demonstrable fact in support of the conclusions. Therefore it is worthless, and Jeffrey Brown wasted his money on it.
In the memorandum opinion
The court dismissed the counts 1 and 2 for fraud because the complaint did not contain the proper elements for that cause of action.
The court dismissed count 3 and chided the plaintiff for his “show me the note” nonsense because Virginia’s non-judicial foreclosure procedure does not require a show of the note.
The court denounced the securitization argument on the basis that nothing related to it made the note unenforceable, and because it had nothing to do with the plaintiff’s failure to make payments. And the court cited two cases in support of that view.
The court dismissed the RICO claim Count 4 for failure to state a claim of fraud, or that any RICO violation injured the plaintiff.
The Court dismissed count 5 (TILA rescission, RESPA, FDCPA) for failing to show the will and allege the ability to repay the lender the amount of the loan, and RESPA statute of limitations had tolled, the plaintiff’s conclusory allegations about FDCPA violations lacked factual support, etc.
The court dismissed count 6 (slander of title) for failure to state a claim, and denounced the diatribe against mortgage backed securities and the mortgage industry (neither are illegal).
The court dismissed count 7 (unjust enrichment) as just more whining about the mortgage industry, and because it provided no legal basis for relief.
The court dismissed count 8 (civil conspiracy) for failure to state a colorable claim
The court dismissed count 9 (breach of fiduciary duty), a bogus legal conclusion, for failure to state a claim.
For all of the above reasons, the court denied the request for declaratory judgment AND dismissed the whole case, counts 1-3 and 6 with prejudice, and warned plaintiff not to file any more frivolous complaints or suffer sanctions under Rule 11.
Bottom line, Brown got his bottom torn up in federal court because of
The incompetence of his legal adviser (John Stuart, I presume?),
Reliance on a worthless securitization audit (a roll of T.P. would have more value) to save the day, and
A TERRIBLE litigation strategy.
The mortgagor never became a party to assignment or securitization of the note, and has no standing to dispute or enforce either one in court, in spite of 2 or 3 anomalous court opinions to the contrary.
REMEMBER, all who read this, ONLY ONE METHODOLOGY stands a chance of beating the bank in a foreclosure mess – MORTGAGE ATTACK:
Get a comprehensive mortgage examination by a competent professional, and
Use the resulting evidence to negotiate a settlement or
Sue for the torts, breaches, and legal errors underlying the mortgage itself.
You cannot successfully defend against foreclosure of a valid mortgage which the mortgagor BREACHED. Your best and only viable defense lies in MORTGAGE ATTACK with proof in hand that the mortgage lacks validity. Here’s the best example of such an attack that I know of:
I’m Mort Gezzam, the Main Maven here at MortgageAttack.Com. I want to say a few words about the importance of developing a Mortgage Attack mentality. Back in 2008 I put on a foreclosure defense seminar and invited 5 self-appointed “whizbangs” to impart their wisdom to a room of 60 mortgage investors whom the financial crisis had virtually destroyed. Lenders had attacked them, and they had started losing their properties to foreclosure. Their fiscal worlds had ground to a halt and time seemed to stand still as banks ground their money and real estate dreams into dust. All of them yearned for some way to DEFEND against that inexorable foreclosure. And all knew intuitively that their efforts would fail.
It should go without my saying, but I’ll say it anyway, that the 5 gurus didn’t know diddly squat about defending against foreclosure effectively. They were clueless. None of them seemed to realize then that a mortgagor cannot defend against foreclosure of a valid mortgage note which the mortgagor breached by non-payment. God help us, they STILL DON’T realize it. They are still clueless. They still try to defend against foreclosures, and those they “help” continue to lose their houses.
All of them, and most lawyers who try to help foreclosure victims, mount defenses with failing arguments. They do that mainly because it takes less work than the alternative, AND because they never developed a MORTGAGE ATTACK MENTALITY.
Along the way I met an inter-planetary-class litigation consultant who explained it to me against all my protestations: you never defend against foreclosure of a valid mortgage when you can attack the mortgage for its lack of validity.
This strategy has a simple basis in the two principles of the typical state constitution (Florida’s for example):
No law impairing the obligation of [valid] contracts shall be passed;
All persons shall have access to the courts for redress of injury, and justice shall be administered without sale, denial, and delay.
Naturally, the foreclosure authorities, whether trustees or judges, assume the plaintiffs have submitted valid mortgage contracts to them for adjudication or settlement. So they want to know only two things:
Did the borrower breach the note;
Did the servicer properly give notice of acceleration and demand for payment according to state and federal law.
The judges and trustees don’t much care whether the note is an original because the proceedings lie in equity, and the judge must do what he deems fair. You cannot imagine that the judges believe it fair to give unjust enrichment to a recalcitrant mortgagor, regardless of the reason the mortgagor could not pay the debt timely. So naturally the authorities want to grant the foreclosure forthwith so that the creditor can collect his money or the house and go on about his life.
But if the mortgagor can scramble around and find where the lender or mortgage broker or appraiser or title company made a serious legal error, breached the contract, or defrauded him, presenting that issue to the trier of fact and artfully demanding redress for that injury can net the cheated mortgagor a whole pile of concessions from the lender, from minor setoffs to the house free and clear, a favorable loan modification deal, or millions in compensatory and punitive damages. And in point of fact, lenders and their agents have injured 90% of all single family home mortgagors who have obtained loans over the past 15 years.
The mortgagor who sees this clearly, he will dig a tunnel to Hades itself in order to find those injuries and present them to the court for redress. And such a mortgagor might even feel willing to sue an attorney for legal malpractice who fails to do exactly that out of greed or laziness. In other words, understanding what works and what doesn’t can transform a mortgagor or attorney from a foreclosure defense “Kool-Aid drinker” into a steely-eyed, fire-belching Mortgage Attack monster.
America does not have a Mortgage Attack culture among attorneys. But I and other Mortgage Attack mavens hope to instill a new verve into the foreclosure pretender defenders, so they can enjoy living up to their law school dreams and ambitions of helping others.
If you are a mortgage victim, go to your lawyer’s office today and yell MORTGAGE ATTACK in his face 5 times, then demand to know why he doesn’t ATTACK.
Send him to this Mortgage Attack web site. It explains everything the mortgagor or attorney needs to know in order to mount a successful attack against injurious lenders and their agents. Then he might start winning for a change.