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Visit Neil Garfield's Website at
http://livinglies.wordpress.com/ to accurately check the content
of his expert witness affidavit included in the message below.]
From: "Private Attorney General" <justice0927@sbcglobal.net>
Date: September 16, 2010 09:33:55 AM PDT
To: "Private Attorney General" <justice0927@sbcglobal.net>
Subject: U.S. Homes Lost to Foreclosure Up 25 Percent: ALERT! File
the Bomb Shell Affidavit Provided below if your
in Foreclosure!
Note: If your in Foreclosure its very important you file the Bomb
Shell Affidavit provided
below in your case! Depending on what
State your in? The formating of the front page is very important!
U.S.
Homes Lost to Foreclosure Up 25 Percent
Published September 16, 2010
| Associated Press
AP <http://www.foxnews.com/us/2010/09/16/homes-lost-foreclosure-percent/>
Jan. 20, 2009: Bank repo, foreclosure and
for sale signs sit outside
a foreclosed home in Houston.
LOS ANGELES -- Lenders took back more homes in August
than in any
month since the start of the U.S. mortgage crisis.
The increase in home repossessions came even
as the number of
properties entering the foreclosure process slowed for the seventh
month in a row, foreclosure
listing firm RealtyTrac Inc. said
Thursday.
In all, banks repossessed 95,364 properties last month, up 3
percent from July and an increase of 25 percent from August 2009,
RealtyTrac said.
August makes the ninth
month in a row that the pace of homes lost
to foreclosure has increased on an annual basis. The previous high
was
in May.
Banks have been stepping up repossessions to clear out their backlog
of bad loans with an eye on eventually
placing the foreclosed
properties on the market, but they can't afford to simply dump the
properties on the market.
Concerns are growing that the housing market recovery could stumble
amid stubbornly high unemployment, a sluggish
economy and faltering
consumer confidence. U.S. home sales have collapsed since federal
homebuyer tax credits expired
in April.
That's one reason fewer than one-third of homes repossessed by
lenders are on the market, said Rick
Sharga, a senior vice president
at RealtyTrac.
"These (properties) are going to come to market, but very
slowly
because nobody wants to overwhelm a soft buyer's market with too
much distressed inventory for fear of what
it would do for house
prices," he said.
As a result, lenders are putting off initiating the foreclosure
process on homeowners who have missed payments, letting borrowers
stay in their homes longer.
The number
of properties receiving an initial default notice --the
first step in the foreclosure process -- slipped 1 percent last
month from July, but was down 30 percent versus August last year,
RealtyTrac said.
Initial defaults have
fallen on an annual basis the past seven
months. They peaked in April 2009.
Still, the number of homes scheduled
to be sold at auction for
the first time increased 9 percent from July and rose 2 percent
from August last year.
If they don't sell at auction, these homes
typically end up going back to the lender.
More than 2.3 million
homes have been repossessed by lenders since
the recession began in December 2007, according to RealtyTrac. The
firm
estimates more than 1 million American households are likely
to lose their homes to foreclosure this year.
In
all, 338,836 properties received a foreclosure-related warning
in August, up 4 percent from July, but down 5 percent
from the
same month last year, RealtyTrac said. That translates to one in
381 U.S. homes.
The firm tracks
notices for defaults, scheduled home auctions and
home repossessions -- warnings that can lead up to a home eventually
being lost to foreclosure.
Among states, Nevada posted the highest foreclosure rate last
month, with one
in every 84 households receiving a foreclosure
notice. That's 4.5 times the national average.
Rounding out
the top 10 states with the highest foreclosure rate
in August were: Florida, Arizona, California, Idaho, Utah, Georgia,
Michigan, Illinois and Hawaii.
Economic woes, such as unemployment or reduced income, are now the
main catalysts
for foreclosures.
Lenders are offering a variety of programs to help homeowners modify
their loans, but their
success rates vary. Hundreds of thousands
of homeowners can't qualify or fall back into default.
The Obama
administration has rolled out numerous attempts to
tackle the foreclosure crisis but has made only a small dent in the
problem. Nearly half of the 1.3 million homeowners who enrolled in
the Obama administration's flagship mortgage-relief
program have
fallen out.
The program, known as Making Home Affordable, has provided permanent
help to
about 422,000 homeowners since March 2009.
Regardless, many troubled borrowers have seen their efforts to get
a loan modification stymied.
Larry Book of Winter Garden, Fla., was one packet away
from a permanent loan
modification from Chase under the Obama
administration's foreclosure prevention plan after more than a year
of back
and forth and one failed attempt.
But his modification never went through. Instead, his loan was
transferred
from Chase to IBM Lender Business Process Servicers in
July and he was told he owed $9,562.62 and must bring his mortgage
current by Sept. 15 or foreclosure proceedings will begin.
"It just becomes too exhausting," Book said
about the modification
process. "That's why some people walk away. But I've invested too
much and given up
too much to just let it go."
UNITED STATES BANKRUPTCY COURT
DISTRICT OF ARIZONA, TUCSON DIVISION
ANTHONY TARANTOLA, Debtor
Deutsche Bank National Trust Company , as Trustee in trust for
the benefit of
the Certificateholders for Argent Securities Inc.,
Asset-Backed Pass-Through Certificates, Series 2004-W8, its assignees
and/or successors, Movant, v. Anthony Tarantola, Debtor; and Dianne
C. Kerns, Chapter 13 Trustee,
Respondents.
Case # 4:09-bk-09703-EWH
EXPERT DECLARATION OF
NEIL FRANKLIN GARFIELD, ESQ.
Chapter 13
STATE
OF ARIZONA ) )
COUNTY OF MARICOPA )
Neil Franklin Garfield, Esq., deposes and states unsworn under
penalty
of perjury as follows: I am over the age of 18 years and
qualified to make this affidavit. I have no direct or indirect
interest in the outcome of the case at bar for which I am offering
my observations, analysis, opinions and testimony.
I have been a licensed member in good standing of the Florida Bar
since May 31, 1977. My resume was filed by
debtor previously and
is incorporated herein. My area of expertise which is offered
in the case at bar is based
upon my knowledge, training and
experience in the field of securities, the securities industry,
derivative securities,
securitization of debt, securities regulation,
special purpose vehicles, structured investment vehicles, pooling
of
assets for issuance of asset-backed securities, issuance and
sale of asset-backed securities and specifically mortgage-backed
securities by special purpose vehicles in which an entity is named
(frequently as a trust with a trustee for the holders
of certificates
or non-certificated interests in mortage-backed securities), the
economics of securitized residential
mortgages, the securitization
of mortgage loans, accounting, generally accepted accounting
principles, and Financial
Accounting Standards in the context of
said securitizations, the internal revenue code as it applies to
REMIC vehicles
and pooling and servicing of securitized loans.
I also rely upon my specific experience with the creation of
derivative securitized instruments when I worked on Wall Street
for various investment banking firms, and as an investment
banking
consultant in a company that was owned by me.
I also rely upon current and recent contacts in the
investment
banking industry, including intermediary conduits, underwriters of
issued and reissued securities that
were sold to investors in the
form of mortgage-backed securities. I have knowledge, training and
direct experience
with various precursor asset protection strategies
including minimization of tax liability which also are constructed
to be made bankruptcy remote in commercial and real estate settings.
I have knowledge, training and experience
in loan origination,
underwriting, and the assignment and assumption of securitized
residential mortgage loans.
I also have legal knowledge, training
and experience including areas of securities law and litigation,
real estate
property law and litigation, and the Internal Revenue
Code as applicable to REMICs and the uniform commercial code.
Further, I have knowledge, training and experiences in the
actual practices prevalent during the period of 2001
to 2008 that
enabled the securitization of residential home mortgage loans,
the accumulation and availability of
investment dollars, and the
representations and assumptions used in the sale of mortgage-backed
securities to investors.
In addition, I have specific knowledge,
training and experience in the review of hundreds of mortgage
closing documentation,
and compliance with the Federal Truth in
Lending Act, the Federal Real Estate Settlement and Procedures
Act and
other consumer protection statutes, common law, rules,
and regulations from federal and state agencies regarding predatory
lending practices, and customary practices in the closing of real
estate transactions in the State of Arizona.
All factual testimony or statements made in this declaration are true
and correct to the best of my knowledge and belief.
All opinions
stated herein are based upon a reasonable degree of probability or
a high likelihood of probability.
I have no direct or indirect interest in the outcome of the case at
bar for which I am offering my observations,
analysis, opinions and
testimony. I have been asked to render opinions pertaining to the
closing of a purported
loan transaction between Anthony Tarantola
and an entity named in the closing papers as "Argent Mortgage."
I have reviewed all appropriate documentation in connection with the
purported loan closing specifically, I have
reviewed the contextual
documentation which provided the foundation by which the loan closing
could occur, to wit:
the securitization documents that were executed
prior to the offering or origination of the subject loan.
In
addition, I have reviewed the actual closing documents in the
subject loan and I have reviewed various web sites of the
parties
that were named at the time of the closing, and the intermediaries
in the securitization chain who were
conduits for the origination,
underwriting and funding of the loan on behalf of investors who
purchased mortgage-backed
securities. Each of the documents, web
sites, and other materials which are in my possession by virtue
of having
done similar reviews and analysis on numerous other
transactions, some of which involve the same parties as in the
instant litigation, are of the type that experts in my field would
customarily rely upon in forming opinions and inferences.
The method of analysis which I employed consisted of numerous steps
which are summarized as follows:
1.
Review of the securitization documentation enabling the offer
and sale of the loan product to the debtor/borrower in
the instant
case. Review of the closing documentation between the borrower and
the alleged "lender." A
comparison of the closing documentation
with the borrower and the foundation documents, in particular, the
pooling
and service agreement, assignments, assumptions, underwriting
standards, acceptance standards for receipt and acceptance
of the
borrower‟s obligation into a pool of other loans, and the roles
of the securitization participants.
Analysis of the chain of title
on record in connection with the property described in the closing
documents of the
borrower. Analysis of the chain of negotiation
of the obligation, note and mortgage (Deed of Trust). Opinion and
conclusions
relating to the ownership of the obligation, note and/or
mortgage. In rendering these opinions and conclusions, I assumed
that
the transaction consisted of a loan that was funded for the benefit
of the borrower thus creating an obligation.
I further assumed that
the note and writer were evidence of said obligation. In addition,
I assumed that the Deed
of Trust was incident to the executed note
and did not constitute evidence of the obligation nor did it replace
or
constitute the note. Opinions and conclusions relating to the
current status of the obligations of the borrower. Opinions
and
conclusions relating to the current status of the creditor, including
an identification of the creditor. Opinions
and conclusions regarding
the status of the obligation as reflected by the servicer‟s
records. Opinions and
conclusions regarding the status of the
obligation in accordance with all receipts and disbursements by
or on behalf
of the creditor, its agents or affiliates, including
third-party mitigation payments received by or on behalf of the
owner of the beneficial or equitable interest in the obligation. My
opinions and conclusions are affected by the context
of my general
opinions and conclusions regarding the securitization of residential
home loans during the period
2002 through 2008. In my opinion, the
real parties in interest in each and every such transaction, were
the borrower
(debtor) and the creditor (investors who advanced the
funds from which the loan was funded). The obligation that arose
as a
result of the funding of the loan and the acceptance of the benefits
of said funding, gave rise to an obligation
between the borrower
and the actual lender (investor). In my opinion, the documentation
utilized by the parties
at many levels in the securitization chain,
do not reflect the intention of the real parties in interest, and
therefore
do not constitute complete evidence of the obligation. In
my opinion, the Deed of Trust utilizing a nominee or strawman
as the
beneficiary, where said nominee was never involved in the funding
of the transaction, or in many cases specifically
disclaimed on
the face of the documentation, and elsewhere any interest or claim
regarding the obligation note or
mortgage (Deed of Trust) is the
equivalent of the failure to state any beneficiary under the Deed
of Trust or any
mortgagee under mortgage deed. Lastly, my opinion is
that the party who can exercise the power of sale under nonjudicial
statutory authority, is limited to a party who could plead and prove
a case in foreclosure in a judicial proceeding.
My opinion is that
said statement, is the only valid conclusion, inasmuch as any other
interpretation would open
the door to moral hazard, allowing the
taking of property without due process. TARANTOLA PARTIES It is my
observation
that many different parties in the securitization chain
have initiated foreclosure expressing title or attempted to claim
rights to enforce the DOT and Note. This serves as the backdrop to
the instant litigation. In thousands of cases, servicers,
MERS,
agents with "power of attorney", trustees of every ilk and level
etc. have initiated such actions
claiming or representing that
they stand in the shoes of the Lender without a shred of evidence
to proffer under
the rules of evidence to support their claim.
Several such attempts, upon discovery have led to extremely heavy
sanctions not only against the party illicitly seeking foreclosure,
but against the law firm that advocated for such
an unjust result.
Civil sanctions as high as $850,000 have been levied against lawyer
and client. Criminal
investigations are underway in many states,
class actions by investors, class actions by borrowers and qui
tam actions
are all underway alleging tawdry schemes, fraud and
deception. In some of those cases I have seen the evidence to
support the allegations of investors against these same parties
and class actions by borrowers against these same parties
and
in my opinion they have merit, while the defenses offered are,
in my opinion completely without merit. I do
not convey here, with
certainty that the Movant is automatically subject to sanctions or
criminal penalties as a
result of other cases; however, the backdrop
of hundreds of cases in which documents were fabricated and forged in
the name of Deutsch Bank in particular, leaves me extremely skeptical
as to the efficacy of their claims. I have reviewed
multiple files in
which securitization participants have all claimed to be the holder,
Lender, HDC or agent for
an undisclosed creditor who nonetheless
had every right to take the property of a homeowner based upon a
presumed
but unproved debt owed to another party.
The parties the subject transaction according to my review of the
securitization
documentation dated May 1, 2004 (the cutoff date),
the loan closing documents, and my knowledge of the parties and
standard practices of the financial services industry are as follows:
1. Unidentified Investors ("Lender"
as a group) who purchased
mortgage backed securities. This purchase was the source of
money advanced into an account
from which, among other things,
the borrower‟s loan was funded. The Lender received a bond with
terms and
conditions at substantial variance from the note signed by
the borrower. It is therefore my opinion that the obligation
owed
to the Lender was different in amount and rights to payments than
the obligation signed by the borrower as
to amount and obligation
to make payments. Both the bond and the note anticipate insurance
and other mitigating
payments, hence the Lender and borrower,
although unknown to each other, were in agreement on one point:
that insurance,
guarantee or other counterparty payments would be
credited to the Lender and a credit against the obligation owed by
the borrower. The Movant steadfastly refuses to answer questions
about such payments or even the identity of the Lender.
These
payments were never allocated to the individual loans giving rise
to the claim for third party payments, although
they were paid to
the Lender or the Lender‟s agents. The money to purchase the
insurance, guarantee and counterparty
contracts was paid by the
intermediaries from money due to the investor, the borrower or
both. Since the condition
subsequent is expressly stated in the
securitization documentation in compliance with like provisions
in the note
signed by borrower I presume that the only reason why
the Movant would refuse to provide a proper accounting and the
identity of the Lender is that they either don‟t know, don‟t
care or are hiding something. It is my opinion
that the answer can
fairly be stated as all three. The intermediaries, having sought
and obtained false appraisals
of the securities sold to investors,
false appraisals of the property used as collateral for the buyer,
and falsely
made insurance claims on their own behalf, now seek
to obtain an even greater benefit using the argument, as I have
heard it in hundreds of cases, that it is somehow more equitable
that they profit at the expense of the borrower and
the investor.
2. In accordance with the Uniform Commercial Code as adopted by
the State of Arizona, the Investors
as a group are the creditor of
the obligation from the borrower.
3. The almost universal practice of the industry
and certainly the
pattern of conduct of the parties named as underwriters and other
intermediaries in the Tarantola
chain, is that the securities
transaction occurred prior to the offering or closing on the
origination of the loan
to Tarantola through Argent Mortgage acting
as a mortgage broker, unregistered as such in the State of Arizona.
4. In this case there are two pools identified and named. This might
be an error of the underwriters or evidence that
the loan was split
into two pools or that the loan was intended to be transferred into
both pools. If the loan was
intended to be transferred into both
pools, it is possible that the first one in time may have priority.
5.
For reasons explained below, it is my opinion that the status
of the loan in terms of securitization is most likely that
it was
never perfected into any pool. My conclusion is that virtually all
other parties in the securitized loan
chain are irrelevant other than
the Lender as identified in this paragraph and, as nominal parties,
Argent Mortgage
Company, LLC and/or Argent Securities, Inc. However,
several of the parties named below received mitigation payments
to
be applied to loans that included the Tarantola loan.
6. The amount of money advanced by investors in relation
to this
loan I have computed through mathematical calculation (see below)
to be approximately $747,000.
7. The amount of money shown on the closing documents to have been
funded on this loan was approximately $377,000,
plus points etc.
8. The amount of money received through third party payments
I have computed through mathematical
calculation to be a
minimum of 5 times the loan amount and a maximum of 30 times
the loan amount. Thus the minimum
received from third parties
for contractual loss mitigation broken down and allocated to
this loan was approximately
$1,885,000. Adding the yield spread
premium gap ($747,000-$377,000=$370,000) the gross amount received
by intermediary
agents of the investors totals approximately
$2,255,000. These third party payments are specifically provided in
the
securitization documents (see appendix) but undisclosed to both
the real parties in interest, to wit: the borrower and
the Lender. I
therefore conclude that the loan is not and never was in default.
9. Anthony Tarantola, borrower
10. Argent Securities Inc. as depositor
11. Ameriquest Mortgage Company, as seller and master servicer
12. Deutsche Bank National Trust Company as trustee for American
Home Mortgage Assets Trust 2007-1 mortgage back
**** through
certificates, Series 2007-1
13. Greenwich Capital Markets Inc.
14. Banc of America
Securities LLC, underwriter
15. Goldman Sachs and Company, underwriter
16. Deutsche Bank Securities
Inc., underwriter
17. Merrill Lynch Pierce Fenner and Smith Incorporated, underwriter
18. NIMS, insurer;
one or more insurance companies issuing a
financial guaranty insurance policy covering payments to be made
under
the securitization documents
19. Argent Mortgage Company LLC, wholesaler, "the mortgage
loans will have
been originated by the sellers wholesale lending
affiliates, Argent Mortgage Company LLC and Olympus Mortgage Company"
(prospectus)
20. Town and Country Credit Corp., retailer
21. Olympus Mortgage Company, wholesaler,
"the mortgage loans will
have been originated by the sellers wholesale lending affiliates,
Argent Mortgage
Company LLC and Olympus Mortgage Company"
(prospectus)
22. Bedford Home Loans Inc., retailer Alt-A
23. Radian Guaranty a Pennsylvania Corporation, insurer, providing
limited protection in the event of mortgage
loan default Series
2004-W8 Trust, a putative trust referred to in the prospectus and
pooling and service agreement,
"the depositor will establish a
trust relating to the Series 2004-W8 certificates..." (Prospectus),
indicating
that a condition subsequent was required, to wit: the
formation of a trust under applicable state law, presumably the
laws of the State of New York
24. John P. Grazer, CFO, signatory for Argent Securities Inc.
25. John
P. Grazer, EVP, signatory for Ameriquest Mortgage Company
26. Ronaldo Reyes, assistant vice president, signatory
for Deutsche Bank National Trust Company
27. Valerie Delgado, associate, signatory for Deutsche
Bank National
Trust Company
28. MERS System
29. DTC
30. Clear Stream (Luxemburg) Euroclear Bank SA/NV
31. Deutsche Bank National Trust Company as trustee for
Argent Securities Inc. asset back past through certificates
Seires (sic) 2004-W8, referred to in the securitization as a
"Trust" to be created in the future by the depositor
Argent Securities.
FACTS
My research reveals no actual entity by that name although it
seems
to have been filed for REMIC status with the Internal Revenue
Service. The existence of the trust is therefore unknown,
in the
absence of further evidence. Whether the trust ever had "ownership"
of the loan if it did exist
is subject to conditions precedent that
affirmatively appear to have been unsatisfied. Hence acceptance
of any assignment
or attempted assignment of the subject loan
is doubtful at best. If the loan was effectively transferred,
the current
status of the loan is dependent upon conditions
subsequent expressly stated in the securitization documents. Since
the loan is part of a failed pool wherein the customary practice
was liquidation and transfer of assets for resecuritization
and
reissuance of mortgage backed securities or derivatives thereof,
it is virtually impossible for the loan to
be in the pool claimed
by Movant. My conclusion is that unless the Movant is an actual
trustee with actual trustee
powers of an actual successor trust
wherein actual assets in the trust include the Tarantola loan, then
the Movant
has no basis in fact for attempting enforcement of the
obligation, note or mortgage. I have neither seen nor am I able
to
uncover through research such situation. Accordingly, it my opinion
that the legal title to the loan is hopelessly
defective but the
equitable title remains with the investors who advanced the money
from which the borrower‟s
loan was funded. But, since the agents
of the investors received money that is due to the borrower under
the Truth
in Lending Act (being undisclosed fees and profits) the
investors have a legal claim against the investment bank that
did the
writing and selling of the mortgage backed securities. The equitable
claim for a lien on the borrower‟s
property is extinguished by
virtue of the fact that the amounts received offset any scheduled
payments in the past,
present or future. The loan made to Debtor
was part of a two way transaction in which the two parties at each
end
thereof each purchased a "Financial Product." On one end,
the home buyer or refinancer was "sold"
a residential home loan.
On the other side, a Mortgage Bond was sold to an Investor.
In my opinion, both financial
products were securities. Neither
set of securities were properly registered or regulated.
Information that
would reveal the identity of the "Lender" is in
the sole care, custody and control of the Loan Servicer or
another
Intermediary conduit in the Securitization Chain, including but not
limited to the Trustee or Depositor
for the Special Purpose Vehicle
that re-issued the homeowner's Note and encumbrance as a Derivative
Hybrid Debt
Instrument (bond) and equity instrument (ownership of
percentage share of a pool of assets, of which the subject loan
was one such asset in said pool). Said Security, the Bond, that
was sold to an Investor was done by use of INE VRIlRZ
ILINEIGQtit\
DQdERFAIDARQ Z ENRMSHP BsiRQ. ; Q P \ CRSIQiRQ, FBMI equally probable
that the Investors were kept
unaware that a maximum of only 2/3
of their investment was actually going to fund Debtor's loan and
others similarly
situated, with the excess being used to create
instant income for Participants. Debtor was unaware that such large
profits or premiums were being generated by virtue of his identity
and signature on the purported loan documents. ;
Q P \ RSiQiRQ, E7
EUaQtROFRRIENRQ BKRZ 11 tR INEISER\ Z NR adYaKFIE tNH P RQe\ tR fund
the loan. This party consists
of a group of investors who purchased
interest known as mortgage-backed securities, granting them the full
beneficial
right and ownership of a percentage of a pool of assets
in the process of securitization. My conclusion is that the borrower
owes the money to the creditor as described above. It is the creditor
who has an obligation to provide a full and complete
accounting of
all receipts and disbursements that are allocable to the loan account
or the loan transaction with
the borrower. In the case at bar, no
such accounting has been offered. In fact, the intermediaries who
purport to
have the right to foreclose, clearly refuse or have failed
to provide the necessary information for the borrower to determine
the current status of the obligation. Instead, the intermediaries
offer only an accounting for transactions during
a specific period
between the borrower and the servicer. Missing from this accounting,
IIBIIaQsaFtIRQs EHZ H-Q INH
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IQMIEQsaFIRQs iQ which third-party payments were received by the
creditor
or on behalf of the creditor through authorized agents or
affiliates, all as set forth in the pooling and service agreement
and prospectus, a copy of which is attached hereto with excerpts
that in my opinion are relevant to the analysis of
this case. In
my opinion Argent was acting as the agent, subagent, or affiliate
of multiple parties (each with conflicting
interests and roles)
at the time of the closing with the borrower. The principal was
undisclosed. Argent was, as
I have seen in numerous transactions,
engaged in a pattern of conduct in which it acted as the Agent for
undisclosed
principles. Thus the loan clearly a table-funded loan,
as promulgated by Regulation Z of the Federal Reserve, and the
applicable provisions of the Truth in Lending Act. The purpose of
said regulations and laws is to reduce the asymmetry
of information
between the borrower and the lender. It is presumed that the lender
is in a superior position and
far more sophisticated in the analysis
of proposed loan transactions than a borrower who may be accepting
the offering
of a loan product with little or no knowledge as
to what it contains. This transaction was a single transaction
between
the borrower and the party who advanced funds, with many
intermediaries acting as conduits and agents for documentation
and
money. VAH3ENSRQ INH EQsZ HYDQd RENFtIRQs tR deEtRLINTBFRYIL\, ;
FRQFluM INDItNI111B aQ issue of fact as to
whether the loan was
in fact securitized. Movant declined to answer a question as to
whether it was the beneficiary
of the Deed of Trust. Instead it
declares that it is the holder of the note. From that answer,
it appears that Movant
is not the beneficiary of the Deed of
Trust but is asserting the position that it is the holder of the
note. Movant
declines to answer whether the note is payable to
Movant. Therefore I conclude that the note is payable to some other
party. Movant declines to answer any question about the pooling of
the obligation, evidence of the obligation (note)
or any instrument
incident to said evidence (note) that would secure the obligation
with an encumbrance upon real
property. I conclude that this is an
admission against interest. Movant alleges that it is the Trustee of
a Pool
of Assets that includes the debtor‟s obligation. Yet Movant
declines to answer any questions, including an admission
that said
pool of assets actually includes Debtor‟s obligation. I therefore
conclude that the Pool does not
include debtor‟s obligation, as
of the time of the response to debtor‟s discovery. Since Movant
asserts
it the Trustee of a Trust and the subject matter in dispute
in the case at bar does not appear to have any relationship
to said
trust, the Trustee (Deutsch) has no interest in the debtor‟s
obligation, directly or indirectly. Based
upon my knowledge of
standard industry practices the most likely reason is that the
alleged assignments either never
actually took place or never were
perfected. While it is possible, although unlikely, that any such
assignments
were properly and timely executed, there is no evidence
that the assignment was accepted, and thus the transaction was
never
completed. Therefore, I conclude that the only beneficiary of record
is Argent, the originating lender. However,
all the facts point to
the intention of the parties to securitize the loan and thus was
funded not by Argent as
a creditor, but by investors who purchased
mortgage backed securities. It is therefore my conclusion that legal
ownership
remains vested in Argent with equitable ownership or rights
of subrogation in favor of the investors. This was a table-funded
loan, which was funded like hundreds of others originated by Argent,
through third parties that were not disclosed
nor were the fees for
the origination, yield spread premiums or other compensation relating
to the funding disclosed
to the borrower. This is presumptively
a predatory loan under regulation Z of the Federal Reserve, and
the Federal
Truth in Lending Act. To be clear, in other forums the
attempt has been made to characterize this analysis as meaning
that
although the borrower took the benefit of the loan and the creditor
(investor) advanced the money that funded
the loan, the borrower no
longer had any obligation. This is not correct. This analysis only
means that the identity
of the creditor has been misstated and the
issue of whether the obligation is secured is dependent upon whether
there
was a split of the note from the mortgage which is a question
of fact. The simple answer is that if the note is payable
to one
party and the beneficiary under the deed of trust is another party,
the note and mortgage were separated
and the obligation is no longer
secured. However, this cannot be finally resolved in this forum
with the current
configuration of parties. The reality is that the
equitable owner of the obligation (the investor) intended to have
the money advanced secured by a mortgage, as all the paperwork
shows. The borrower clearly understood that an obligation
was
being created and that it was secured by an encumbrance upon the
debtor‟s real property. Hence, the intention
of the real creditor
and the borrower were the same. It was the intermediaries, acting
as agents of the investors,
that failed to perform their duties
in perfecting or completing the transaction, thus causing numerous
breaks in
the chain of title of both the note and the mortgage. The
obligation lies at the essence of the transaction whether documents
were prepared or not, and whether those documents were prepared
correctly or not and whether they were properly recorded
or not. The
investor therefore has equitable rights to assert which the debtor
must answer. Those rights are subject
to a complete accounting from
the creditor (investor) and the agents of the creditor. The balance,
if any, is still
due and might be secured by a lien created by the
court. The terms of payment might be gleaned from the original note
as amended by the court in equity. At this time, therefore, there
is no valid notice of default or notice of sale.
The substitute
trustee has failed to perform due diligence or is ignoring the duty
to do so. Based on the above,
the substitute Trustee on the deed
of trust has a duty to cease any proceedings. The substitution of
trustee was,
as indicated above, most likely executed by a party
with no interest, beneficial or otherwise, in the obligation, note
or
mortgage. To a high degree of certainty I conclude that the Trustee
under the Deed of Trust remains unchanged
from the recitations on
the recorded Deed of Trust. Securitization of residential home
mortgages are not improper
or illegal. The method, in practice,
by which residential home mortgages were securitized during the
period 2002
to 2008 was mostly improper and illegal. Besides the
usual predatory practice of steering borrowers into more expensive
and less viable loans than would be appropriate or acceptable to
either the borrower or the lender (investor), there
existed a second
yield spread premium at the level of the sale of the loan to the
investor. The prospectus and pooling
and service agreement clearly
allow for the funds to be used for general operational purposes,
instead of providing
a specific schedule of a use of proceeds in
which all of the invested funds are used to fund residential home
mortgages
and fees as set forth in those documents. This created
a gap, which was used by the investment banking underwriter who
created and controlled all of the intermediaries, in which the
difference between the rate of return promised in the
offering of
mortgage-backed securities and the nominal rate of return of the
pool resulted in a gap which varied
from 5 percent to 100 percent
of the actual loan funded in any given case. In my opinion, in the
case at bar, this
yield spread premium gap, properly allocated to
the loan in the case at bar, together with the undisclosed fees
and
yield spread premiums paid to the parties and intermediaries
involved in the closing, actually exceeds the entire principle
due at the time of the closing of the loan. CALCULATION OF YIELD
SPREAD PREMIUM IN UPPER TIER OF SECURITIZATION CHAIN:
$1 billion
(approximate) in securities offering. No showing of actual proceeds
or any limitations on issuer. Second
yield spread premium may exist
in this unknown spread or in the spread between the offering amount
and the unknown
actual amount funded. Extrapolating from yields
disclosed in the prospectus the actual yield promised to investors
was approximately 7%, with the right to reduce same under a variety
of circumstances wholly in control of the underwriters.
The nominal
yield weighted average is stated in several different ways in order
to confuse the reader and make computation
more challenging. Based
upon computations made directly from the prospectus and comparing
it with similar prospectuses
involving most of the same parties, the
nominal actual average interest was sold to the SPV at approximately
9.6%.
Thus, rounding down, the yield spread premium was 2.5%. 2.5% is
26% of the nominal 9.6% rate. Applying 26% to the declared
proceeds,
the dollar yield spread, undisclosed to either the investors or the
borrowers, was approximately $250,000,000.
The nominal principal of
the debtor‟s note is approximately $377,000. The non-weighted yield
spread premium
at this level of the lending chain should therefore be
expressed as either $94,250 or $82,500. Applying an average between
the two methods, the estimated non-weighted yield spread premium
on this loan is approximately $88,000 without weighting.
Applying
the customary weighting using the actual nominal rate sold on this
debtor‟s loan (14.1%), the estimated
yield spread premium earned
by participants in this lending chain from this level of the lending
chain was in fact
approximately $369,460 (almost equal to the loan
itself). Adding customary interest ($232,759.80) and treble damages
($1,108,380) under the Federal Truth and Lending Act the net actual
dollar liability for yield spread premium at said
level due from the
lending chain on debtor‟s loan would therefore be expressed as $
$1,341,139.80 due to borrower.
This amount is subject of course
to a determination of all other claims and defenses each or any of
the parties
may have. Under the terms of the Truth in Lending Act
and other applicable statutes, undisclosed fees are due back to
the
borrower, and thus would affect the status of any alleged default,
and the balance due on the obligation. In
addition, the presence of
the second yield spread premium as described above, necessitates
the purchasing of insurance
and other credit enhancements, hedge
products and guarantees. The reason why it necessitates the use of
such products,
besides the obvious risk that the loan is likely
to go unpaid by the borrower, is that in the event that the loan
is in fact paid, and remains fully performing, the amount owed
to the creditor will be equivalent to the amount allocated
to
his purchase of mortgage-backed securities. This would leave the
securities underwriter in the position of owing
the difference
between what the investor thought was being invested in loans and
the actual lower amount. The purchase
amount of the securities
vastly exceeds the amount that was invested in the funding of
mortgage loans including
the one in the case at bar. In order to
avoid criminal and civil liability in administrative sanctions,
it would
be necessary for the intermediaries who retained the yield
spread premium gap, to retain the power to declare the pool
in which
loans were allegedly located, to have been depreciated in value and
thus collect the proceeds of insurance,
credit enhancements, hedge
products and so forth. By retaining the power to declare a pool
as being in default or
failure, the intermediaries were guaranteed
the proceeds of insurance or other third-party payments regardless
of
whether a particular loan went into default or not. These
amounts were default mitigation payments, which should have
been
allocated on some basis to each obligation claimed to be in the
loan pool. I have sued a simple mathematical
calculation arriving
at the relative size of the loan to the entire "pool" identified
by the prospectus.
In accordance with the provisions of the note,
which is partial evidence of the obligation as stated above, the
receipt
of such payments would be first applied to payments due,
second to fees due, and third returnable to the borrower. Presumably,
the return to the borrower would be by way of a credit against the
obligation due; however, it is an open question
as to whether or
not the money received from third parties should be actually paid
to the borrower or simply credited
against the obligation due. In
my opinion, none of the parties in the case at bar have any credible
claim to the
status of the "creditor." Further, none of the parties
in the case at bar have any clear credible claim to
being in the
status of an authorized agent for the principle. There are several
reasons for the above findings.
First the actual principle is a
confused issue which must be sorted out with the proof as offered
by the alleged
"lender." There are multiple levels of potential
authority to enforce the obligation if any is due. Because
of the
extremely high likelihood that third-party payments were received,
but are neither denied nor admitted by
the parties in the case
at bar, it is most likely that the notice of default was fatally
defective, and in fact
that there is no default when the third-party
payments are applied as required. The confusion arises out of the
creation
of documents by the investment banking underwriter which
were intentionally obscure. The purpose of said obfuscation
was to
enable the investment banker to write down the value of the pool
of assets, while at the same time allowing
the master servicer
to purchase the assets at a vastly reduced price compared to that
which was paid by the actual
lender (investors). Thus the payment
by third-party insurers or counter-parties, would be retained
by the master
servicer and used as profit which was directed to
certain entities which appear to be located in London. Taking
the
securitization documentation on its face, however, one would
reach the inevitable conclusion that the lender is the investor,
the trustee is in actuality a conditional agent of an undetermined
pool of assets which purportedly are organized into
a trust which
is not properly formed under the laws of the State of New York as
specified by the laws of said state.
Thus the grouping of investors
was at best a loosely knit partnership using the prospectus and
pooling service agreement
as a reference point for what appears to
be an unwritten operating agreement.
The master servicer is the party
that, on its face, retains all power
over all transactions and would be the party that might conceivably
have some
claim of agency to bring claims for enforcement of the
obligation. However, at the instruction of the master servicer,
and in accordance with the provisions of the securitization
documentation, there is no requirement for due diligence,
inquiry or
investigation as to the actual status of a particular obligation
and whether it is in actuality in default
after giving credit
for all potential payments that may have been made and accepted
on behalf of whoever is the
current holder of the paper which
is used as evidence of the obligation. It is highly likely that
the investors
have a claim to the same money that the borrowers
are entitled to receive under the Truth in Lending Act. Some of
these actions by the intermediaries, violate the wording and the
intent of the real parties and interests (the home
owner and the
investor). The actual documentation that serves as the evidence of
the obligation is both the note
that was executed by the borrower and
the bond that was received by the lender (investors). In some cases
the specific
provisions vary considerably, and actually conflict
with one another. That conflict is always resolved in favor of
the intermediaries to the detriment of both the investor and the
borrower. In my opinion, neither the investor nor
the borrower would
have executed any documentation, advanced any funds, nor accepted
the loan product that was offer,
had the full facts been known by
both sides. It is therefore the imperative of the intermediaries to
keep the investor
and the home owner separate inasmuch as sharing of
information between the investor and the home owner could lead to
a
considerable chain of negative consequences to the intermediaries. In
addition, the chain of "authority"
continues down from the master
servicer to sub-servicers and other agents. In connection with this
particular case,
the pooling and service agreement was executed by
Renaldo Reyes, whose conversation with a borrower was heard by the
declarant. In part, I rely upon the content of said conversation in
which Mr. Reyes said that notwithstanding the wording
and provisions
contained in the securitization documentation and the various
instruments allegedly executed in connection
with the underwriting,
funding, and assignment of the subject obligation, that the party
with the actual fiduciary
rights, duties and obligations is the
sub-servicer handling the account with the borrower. In fact,
Mr. Reyes states
that the final decision on the disposition of
any loan, lies in practice solely with said servicer and not with
the
nominal trustee (Deutsch). Thus we have nominally a number
of intermediaries in the chain as described in the documentation,
most of which is conflicting, and requires no action on the part
of any of the intermediaries, and prevents any action
by any of the
intermediaries without satisfaction of conditions subsequent which
are described in the securitization
documentation. Contrary to the
recitations in the documentation, Mr. Reyes seems to state that the
practice employed
in all securitized home mortgage transactions, is
different than the requirements set forth in any of the documents,
including the loan closing documents executed by the borrower. The
plain truth of the transaction is that the investor
lent the money,
the borrower took the benefit of the funding of the loan, while the
documentation shown to the borrower
and the documentation shown to
the lender were different. On the one hand the borrower executed note
and Deed of
Trust and on the other hand the investor received a bond
which was based upon the alleged existence of certain assets
which
could be changed out, depreciated or otherwise disposed of without
the knowledge or consent of either the
lender or the borrower. This
contradiction in terms as well as contradiction in practice requires
that any party
seeking to enforce the obligation or enforce the right
to an encumbrance on the real property, must state a case for
doing
so and show the actual chain of documentation which would in fact
and in truth present the reality of the
situation. In my opinion,
the reality of the situation is that the lender has an equitable
right to the obligation
subject to an accounting for third-party
payments. Further, it is my opinion that the lender may have an
equitable
right to seek an encumbrance upon the property securing
the obligation, if any as it is redefined based upon the proof
which
is offered to the court. In turn the borrower has a claim against
any party who received directly or indirectly
the benefit of third
party payments, the proceeds of which came from insurance policies
purchased from the transaction
between the Lender (Investors)
and the borrower. I use the following definition of "Creditor"
taken from
research in cases, the Bankruptcy q Code and the Uniform
Commercial Code. A "Creditor" is a legal entity that
has advanced
funds, goods or services in consideration of the right to payment,
or has purchased the right to be
paid.
In the bankruptcy context, a "Creditor" is an entity that
had a Claim against Debtor before
the case was filed. 11
U.S.C. § 101(10). A "Claim" is a right to payment. §
101(5). Only a Creditor
may file a Proof of Claim. §
501(a). The "Official Form 10 reflects this requirement by
describing the
„Name of Creditor as „the person or other
entity to whom the debtor owes money q or property." In the
context of securitized residential mortgages (including the
one in the instant case), a "Creditor" is a legal
entity or
group of entities or persons under the law who have advanced
money for the funding of mortgage loans and
who are owed
money from those mortgage loans. The creditor in the case
at bar can be generically described as an
Investor, as defined under the rules and regulations of the
Securities and Exchange Commission who has paid money to
an
intermediary in a chain of securitization that resulted in
the funding of one or more residential loan transactions;
the promise to pay is from an entity usually referred to
as a Special Purpose Vehicle (SPV) which is frequently
erroneously referred to as a "Trust" with a "Trustee,"
that in the applicable Pool in this case
was Movant.
The creditor/investor receives an instrument which is
generically referred to as a Mortgage Backed
Asset Certificate
("Certificate"). The Certificate incorporates terms by which the
promise to pay interest
and principal is made by the issuing SPV.
The promise to pay is conditioned upon several terms, including but
not limited to the performance of a pool of loans, the obligations
of third parties, and impliedly the receipt of insurance
proceeds
triggered by partial non-performance of the pool of assets allocated
to the SPV.
In turn the
SPV pool is carved out of other pools created by
Aggregators employed by investment banking firms. The Aggregators
are parties to Pooling and Service Agreements and Assignment
and Assumption Agreements, which are Securitization documents
that predate the funding of the loans in any of the Pools. The
Certificate issued to the Investor conveys a percentage
interest
in the Pool of assets that is allocated to the SPV. To the extent
the information in this paragraph was
phrased in generalities,
they were applicable to the specifics in this case.
I was asked to render an opinion
as to the factual basis pertinent
to the issue of Standing. As relates to Constitutional Standing,
my opinion is
premised on the following definition: Constitutional
standing under Article III requires, at a minimum, that a party
must have suffered some actual or threatened injury as a result
of the defendant‟s conduct, that the injury be
traced to the
challenged action, and that it is likely to be redressed by a
favorable decision. Valley Forge Christian
Coll. v. Am. United for
Separation of Church and State, 454 U.S. 464, 472 (1982); United
Food & Commercial Workers
Union Local 751 v. Brown Group, Inc.,
517 U.S. 544, 551 (1996).
My presumption, in the context of the question
posed to me, is that
standing requires that a party will suffer financial loss derived
from non-performance (i.e.,
nonpayment) of the subject contract,
which in this case is the obligation that arose when the subject
loan was funded
on behalf of the debtor as homeowner and referred
to in some documents as the Borrower. Since the funding occurred
out of a pool of money received by the investment banker from the
investors, the investors are the creditors.
By way of indenture (usually incorporating a prospectus) the
investors agreed to an operating plan that defined the
functions of
the conduit which was used to funnel funds to the investor from the
pool. However, since no assets
remain in the conduit which is defined
under the Internal Revenue Code as a REMIC (Real Estate Mortgage
Investment
Conduit) it is challenging to describe the creation,
maintenance and function of the "trust.". The REMIC is
referred
to in the world of finance as an SPV (Special Purpose Vehicle). I
presume the words "conduit"
and "vehicle" convey the fact that no
actual business events of taxable or monetary significance takes
place
in the REMIC. I conclude that this corroborates my opinion
that the investors are the creditors, having been the only
parties
to advance funds from which the subject loan was funded.
The note signed by said borrower and the
mortgage-backed bond
accepted by the investor who purchased said security are both
evidence of the obligation. The
Deed of Trust is intended to be
incident to the note and possibly incident to the bond, if the
chain of title was
perfected. The Payee on the note and the payee
on the bond are different parties. The bonds were issued with three
principal indentures: (1) repayment of principal non-recourse based
upon the payments by obligors under the terms of
notes and mortgages
in the pool (2) payment of interest under the same conditions and
(3) the conveyance of a percentage
ownership in the pool of loans,
which means that collectively 100% of the investors own 100% of
the entire pool
of loans. This means that the "Trust" does NOT own
the pool nor the loans in the pool. It means that the "Trust"
is
merely an operating agreement through which the investors may act
collectively under certain conditions. Accordingly,
it is my opinion
that the parties with standing in relation to a securitized loan
are the debtor/borrowers and the
creditor/investors. This would be
further corroborated if, as a matter of fact, the investment banker
followed industry
standard of selling the mortgage backed security
FORWARD. "Selling forward" means that the security was sold
and the
money was collected before the first loan was offered or funded on
behalf of borrowers. However, even if
the investment banker had not
closed the sale of the securities with investors before accepting
applications for
loans, it would have been on the basis of an
expectation of said funding. Ultimately, in all securitized loans
there
is really only one transaction --- a loan from the investors to
the homeowner. Without an investor there would be no
loan; conversely
without a borrower there would be no investor or investment. It is
accordingly my opinion that
none of the intermediary parties are
or ever were creditors and that they therefore lack standing as
defined above.
None of them had at any time relevant to the subject
matter before this Court, the filing of the Bankruptcy Case to the
present, suffered any actual or threatened injury as a result of
the Debtor‟s non-payment of monthly payments
pursuant to the
original terms of the Note, nor because of her alleged default
thereon, nor can any actual or threatened
injury be traced to any
other proceedings in bankruptcy court, including but not limited to
the motion for relief
from stay proceedings, any action involving a
Proof of Claim, the Chapter 13 Plan or otherwise, and therefore there
never was any legitimate redress available to any of these parties
by a favorable decision. As relates to the issue
of Real Party in
Interest, the factual criteria and question I have presupposed is:
"Whether Movant"s
own financial interest was at stake in the outcome
of the litigation before the Bankruptcy Court." My opinion is
offered
based on all evidence before the Court to date is as follows: Other
than the Lender (investors) none of
the parties to this transaction
and certainly no party in court now ever had any of its own funds
at risk in the
outcome of the litigation. The Trustee cannot act
as one would have the authority to do, for example, as if it had an
unlimited power of attorney, or as in an express trust that grants
unlimited authority to act RQ EHKaOVRI tKH ILHrWIFIH
FF ROdHIA. E7
KH17 rDAtHH FEQQRt 3A aQI IQ tKH AKRHA' RI tKHU certificate holders
without a special grant of authority
and indemnification. Therefore,
the Trustee does not have the authority to be the Real Party in
Interest on behalf
of the Certificate Holders. Also, the proof
in the record is inadequate to establish that the ownership of
the Note,
holdership of the Note, or right to enforce the Note
was properly pooled to the above described alleged Mortgage Trust
3Pool.' Accordingly, as the record stands, the evidence does not
establish the Trustee as being the Real Party in Interest.
None of the known Participants in the subject securitization chain,
including but not limited to Movant, has
suffered any financial loss
relating to the loan, nor are they threatened with any future loss
even if foreclosure
never occurs. None of the known securitization
Participants has ever been the real party in interest as a lender
or
financial institution underwriting a loan while funding same with
respect to the loan. None of the known securitization
Participants,
will suffer any monetary loss through non performance of the
loan. All of the known securitization
Participants received fees
and profits relating to the loans. The existence and identity of the
real parties in
interest was withheld from the Borrowers/Plaintiffs
in the closing and servicing of the loan, and since.
All
of the known securitization Participants fail to meet one or more
of the following two tests required for HDC status:
1) without actual
knowledge of defects; and/or 2) in good faith, meaning a legitimate
belief that the loan was solid,
based upon the information they
had at the time of purchase of the Note. The investor is still the
Creditor if the
investor has not sold, transferred or alienated
the hybrid mortgage backed security and if the investor has not
been
directly or indirectly paid through credit default swaps, with
or without subrogation, or paid through a federal program
with or
without subrogation. Since no such instruments appear on record,
any right of subrogation would appear to
be equitable. Thus for
purposes of this declaration, the unknown and undisclosed Investors
constitute the only Creditor
presumed to exist until the undersigned
is presented with contrary evidence of the type that an expert in
my field
of expertise would normally take into account in forming
opinions and conclusions.
Therefore I conclude that
if there remain any Creditors, pursuant
to the Note, they are the unidentified Investors and all other
parties are
intermediary or representative or disinterested. Debtor
has made unsuccessful attempts to obtain from Movant and others
the identity of the Investors, the documentation authenticating
their identity, and an accounting that would show all
money paid or
received in connection with the subject obligation. Neither Affiant,
nor Movant, nor the Court will
be able to determine theEP RDQtMRM
HEIRLINEHqDTIVIiQ tKHLSIRSHrtV DQtiO E complete accounting of all
debits and
credits, including but not limited to, the 3rd party
payments referred to above.
Until such time as requests
for said information have been answered,
I will be unable to identify with certainty the exact identity of the
current
creditor, meaning the true owner of the alleged obligation,
other than to say, with certainty, that it is not Movant,
nor any
Participant in the Securitization chain.
Several transactions have purportedly taken place regarding
the subject loan, as the Note was transferred up the chain
of securitization to the Trustee of the MBS Pool. In my
opinion, the "Lender," as set forth in the original DOT, in
securitized loans is at best only a nominee for
an undisclosed
principal. The transaction with the homeowner was subject
to a pre-existing contractual relationship
wherein the
Investors advanced the funding for the loan and profits,
fees, expenses, rebates, and kickbacks. This
is known to
many of the known and unknown securitization
Participants, inasmuch as they have been the recipients
of memoranda from legal counsel and advisers, which in my
opinion are not protected by attorney client privilege or
the attorney work product privilege, in which they have been
informed that it is only a "Nominee" when the
"Lender" does
not advance cash for funding the loan and does not receive
any payments on the obligation.
MORAL HAZARD: A situation has been created which at least
theoretically would allow multiple parties to make
claims on the
same property from the same borrower, claiming the same Note and DOT
as the basis therefore. The intended
monetary effect of the use of
such a Nominee was to provide obfuscation of profits and fees that
were disclosed
neither to the Investor who put up the money nor
to the Borrower in this loan. In the case at bar, it is my opinion
based upon a reasonable degree of financial analytical certainty,
that the total fees and profits generated were actually
in excess
of the principal stated on the note which is to say that Investors
unknowingly placed money at risk the
amount of which vastly exceeded
the funding on the loan to the borrower.
The only way this could be accomplished
was by preventing both
the Borrower and the Investor from accessing the true information,
which is why the industry
practice of Nominees like the private MERS
system were created. Even where MERS is not specifically named in
the
originating documents presented to the homeowner at the "closing"
it was industry practice from 2001-2008 to
utilize MERS "services",
or to implement practices similar to those utilized by MERS.
Therefore
it is possible and even probable that the data from the
closing was entered into the MERS electronic registry and that
an assignment was executed to MERS purportedly giving MERS some
power over the obligation, the Note and/or the encumbrance.
As
a general rule in securitized transactions and especially where
MERS is named as Nominee, documents of transfer
(assignments,
endorsements, etc.) are created and executed contemporaneously with
the notice of default thus selecting
a Participant in or outside
the securitization chain to be the party who initiates collection
and foreclosure. The
very practice of having a secret system of
recording transfers of beneficial ownership of real estate notes,
ipso
facto creates an automatic cloud upon title.
In my opinion, it is unlikely that any HDC exists, because of the
way securitization was universally practiced within the investment
banking community during 2001 through 2008. Hence
the loan product
sold to the subject homeowner included a Promissory Note that was
evidence of a real obligation
that arose when the transaction was
funded but lost its negotiability in the securitization process,
which thus
bars anyone from successfully claiming HDC status.
The negotiability of the note was negatively affected by (1)
the splitting of the note and mortgage as described herein; (2)
by the addition of terms, conditions, third party obligors
and
undisclosed profits, fees, kickbacks all contrary to existing
federal and state applicable statutes and common
law (which
has relevance to the TILA, RESPA and related allegations in the
Forensic Review Analysis, attached hereto
as Exhibit A; and (3)
knowledge of title and chain of title defects in the ownership
of the Note, beneficial interest
in the encumbrance, and position
as Obligee on the obligation originally undertaken by the subject
homeowner. The
only party that can claim to be a Holder in Due Course
("HDC") of the Note are those that paid value for the
Note, without
knowledge that there were any pending challenges to its validity
and who fulfill the other requirements
for HDC status. This HDC and
the Third Party Sources are the only ones that could conceivably
suffer a monetary
or pecuniary loss resulting from non-payment of
the obligation. The Investor could lose if because they advanced
the
actual funds from which the Financial Product Loan was funded,
assuming these Investors that purchased asset backed securities
were those in which ownership of the Loans were described with
sufficient specificity as to at least express the intent
to convey
ownership of the obligation as evidenced by the Promissory Note
and an interest in real property consisting
of a security interest
held by an entity that was described as the Beneficiary of a Trust
created by an instrument
entitled "Deed of Trust." These Investors
were not named. This practice has been intentional, in my opinion,
based on the overwhelming commonality of this reoccurring obvious
failure, and other overwhelming evidence. The Third
Party Sources
that could conceivably lose because they would have paid value prior
to default or notice of default,
and fall within one or more of the
following classifications: Insurers that paid some party on behalf of
said investors;
Counterparties on credit default swaps; Conveyances
or constructive trusts arising by operation of law through cross
collateralization and over collateralization within the aggregate
asset pools or later within the Special Purpose Vehicle
tranches;1
The United States Treasury Department through the Troubled Assets
Relief Program in which approximately
$600 billion of $700 billion
has been authorized and paid to purchase or pay the obligation on
"troubled"
(non performing) assets of the LOANS are part of the
class of assets targeted by TARP; The United States Federal Reserve,
which has extended credit on said troubled assets and has exercised
options to purchase said troubled assets; Any other
party that
has traded in mortgage backed securities from the aggregated pools
or securitized tranches containing
interests in the Notes. In my
opinion, based on evaluation and review of a multitude of Mortgage
Backed Securities
documentation, financial documentation, from
knowledge of the gains that can be made by various Participants
from
various triggers, and from investigations performed, and the
consistency with which the same situation, with the same
problems
is seen to exist in nearly every example, it is reasonable to
conclude that the creation of an untenable
situation for Investors
in these transactions, or the appearance of an untenable situation
for Investors, is that
paradoxically said situations have been
intentionally created. The loan made to Debtor was part of a two
way transaction
in which the two parties at each end thereof each
purchased a "Financial Product." On one end, the home buyer
or 1
"Tranches" is an industry term of art referring to the types of
division within a Special Purpose
Vehicle. They are described in
the Securitization Documents reviewed and on file. Refinancer was
"sold"
a residential home loan. On the other side, a Mortgage Bond
was sold to an Investor. In my opinion, both financial products
were
securities. Neither set of securities were properly registered or
regulated, and the information that would
reveal the identity of
the "Lender" is in the sole care, custody and control of the Loan
Servicer or another
Intermediary conduit in the Securitization
Chain, including but not limited to the Trustee or Depositor for
the
Special Purpose Vehicle that re-issued the homeowner's Note
and encumbrance as a Derivative Hybrid Debt Instrument (bond)
and equity instrument (ownership of percentage share of a pool
of assets, of which the subject loan was one such asset
in said
pool). Said Security, the Bond, that was sold to an Investor was
done by use of the Borrower‟s identity
and obligation without
permission. In my opinion, it is equally probable that the Investors
were kept unaware that
a maximum of only 2/3 of their investment
was actually going to fund Debtor's loan and others similarly
situated,
with the excess being used to create instant income for
Participants. Debtor was unaware that such large profits or premiums
were being generated by virtue of his identity and signature on the
purported loan documents. According to information
from Debtor,
Debtor has made unsuccessful attempts to obtain from Movant
and others the identity of the Investor/Creditor
and possession
of documentation authenticating this identity. Neither Affiant,
Movant, nor the Court will be able
to determine the identity of the
Creditor, if any still remains, until requests for information and
documentation
have been complied with. I have also reviewed, for the
past 40 years, published Financial Accounting Standards obviously
intended for auditors involved in auditing and rendering opinions
on the financial statements of entities involved
in securitization,
securities issuance and securities sale and trading. If the known
Participants in the securitization
scheme followed the rules,
they did not post the instant transaction as a loan receivable. The
transaction most
likely was posted on their ledgers as fee income
or profit which was later reported on their income statement in
combination
with all other such transactions. These rules explain
how and why the transactions were posted on or off the books of
the
larger originating entity. These entries adopted by said companies
constitute admissions that the transaction
was not considered a
loan receivable on its balance sheet, or on the ledgers used to
prepare the balance sheet,
but rather shown on the income statement
as a fee for service as a conduit. These admissions in my opinion
are fatal
to any assertion by any such party currently seeking to
enforce mortgages in their own name on their own behalf, including
but not limited to the securitization Participant in this case. It
also appears that the standard industry practice
of creating a yield
spread premium between the Creditor and Originator was extended
and expanded in the case of
the securitization chain such that in
this case, in my opinion, it is highly probable, far beyond 50%
probability
that the Debtor's loan was sold or pre-sold to the
Investors at a gross profit to the Participants in the securitization
chain of at least 35% of the total principal balance of the note.
It is also my opinion that this was done without
full disclosure
to the Investors and that this is tantamount to fraud upon the
Investors. In my opinion the investors
were and remain completely
unaware that much, and in many cases most of the money they supplied
was used to fund
fees for the Participants in the securitization
chain, with the rest used to fund bloated mortgage loans based
upon
inflated appraisals by companies that had a less than arm's
length relationship with the Originator and others involved
in
obtaining approval for the loan. These yield spread premiums far
exceed those ever paid prior to the securitization
of residential
mortgages. With yield spread premiums such as these, there was no way
that there could ever be a
legitimate profit made by any Investor
under ordinary circumstances, with the exception of those in upper
tranches,
whose profit was insured from the start, no matter how
lacking in viability were these investment vehicles on the whole,
because of the way payments to the Investors were prearranged. It
is also my opinion that the overall Security was
planned by the
Aggregator (in this case, Goldman Sachs and subsidiaries) and other
Participants to fail from the
start. The reason for the intended
failure of the overall Pool in my opinion was to better insure that
the fraud
perpetrated on the Investors would be less likely to be
discovered and to make it so that additional unearned profit
could
be made by the Aggregator and other Participants, based on the
Third Party Payments discussed above that were
payable only when
there was a declaration of default by the Pool, often called a
"trigger event," the
various forms of which are defined in the
PSA and other Securitization Documents. In my opinion, direct
allegations
or implications regarding fraud and conversion, as well
as intentional aiding and abetting or conspiracy are well taken.
The
theory that each Participant, including the very first party in the
securitization chain, the Lender on the
Deed of Trust, is complicit
in acts and series of acts with knowledge that these actions will
harm the debtors,
including fraud and conversion, and/or are part of
a scheme to commit fraud and conversion in the form of not crediting
borrowers account by third party source payments, thereby converting
ownership of the property from the Borrower, the
Debtor in this
case, is well respected among those that study transactions of this
sort. The following are types
of wrong performed upon borrowers,
at least some of which occurred with the Debtor/Plaintiff in this
case, by Loan
Brokers and Originators ("Lenders" in the original
deeds of trust), which were acts in furtherance of an overall
fraud
and conversion scheme that were necessary to its success, because
without a large number of loans doomed to
fail from the start the
main planner and major Participants could not be certain that the
Mortgage Pools as a whole
would fail. The fact that Borrowers paid
as much as double what the homes were actually worth, due to a real
estate
market that was artificially inflated because of the wealth
of investment dollars looking for a home following the bursting
of the dot.com bubble, followed by what amounts to an economic
depression for the working poor. Borrowers can't afford
the payments
and they are losing their homes, and the unbelievable abundance of
foreclosures shows the extent to
which any defect in character they
may have is common to large numbers of persons. Appraisal values
were often over-inflated
even above the artificially high values
provided by the market and appraisers were advised they would not
receive
further business unless they cooperated. Borrowers were
mislead as to what the monthly payments would be a few years
into
the loans. In more extreme cases, Borrowers were often offered teaser
rates that they qualified for, but which
greatly increased within a
very short period of time. There was so much investment money looking
for someone to
borrow it that could sign a note during this time,
that loans were pushed at people with persuasive and high pressure
tactics; Borrowers were advised that they could afford a much nicer
home then they really could. It appears hard to
resist a home that is
much nicer than thought affordable, when someone that appears to be
a reputable professional
assures them they can afford it. Optimism
and wishful thinking overpower reason. Loan brokers were pushed
to offer
loans that were on worse terms than the borrower could
qualify for. Sometimes they received higher commissions, often
in
secret, for getting people to take out loans on terms that were less
beneficial then a loan that Borrowers would
have qualified for. And
sometimes the only loan products that loan brokers had available
to them were those containing
unfavorable terms. Borrowers were
advised that they did not have to worry about the payments being
unaffordable
in the future, because they would be definitely be
able to refinance again at that point, because the market was so
solid. Underwriters were pushed by supervisors to pass through bad
loans, many of which were obviously doomed to fail
from the start.
"Under the Truth in Lending Act, Regulation Z, and the
Real Estate Settlement Procedures
Act, these undisclosed
yield spread premiums are a liability of Participants in
the securitization chain, including
the loan Originator
and all Participants owed to the Homeowner/Debtor. In
my opinion, this disclosure does not appear
on any of
the Homeowner/Debtor's documents identifying the parties
participating in fee-splitting or yield spread
premiums nor
the amounts involved as required by the Truth in Lending Act
and the Real Estate Settlement and Procedures
Act. Further,
no information appears in Debtor's closing documentation
that would have caused him to inquire about
such a premium.
"In my opinion, the allegations contained in ¶¶ 21-23 of
the Amended Complaint, pertaining
to TILA, RESPA and similar
statutes are well taken. Questions as to statute of limitation
would not be applicable
on a number of theories, including,
but not limited to: fraud tolls the statute of limitations;
and until the name
of the true creditor, lender, beneficiary
is made known to the borrower, the statute of limitations
time frame does
not begin to run. A
MBS Pool Trust is not really a true "Trust." The Trustee
thereof has been involved
in a joint enterprise with the
other Participants in the creation of a Financial Product
for sale to Investors,
the purchasers of Mortgage Bonds. The
so-called Pool "Trustee" is more like an administrator. The
first
loyalty of the Pool Trustee is not to the Investors,
but to the parties to which it entered into contract with,
the
Participants. Based on its actions as can be seen over
and over again, it seems it is more interested finding
ways
not to reimburse the Investors than to find ways to
do so. In the securitization of the loans, the rights of
various
named mortgagees, assignees and/or Trustees have
each been superseded by succeeding conduits including
BAC, the
so-called "Trustee," which is really something of a
figure-head. The Trustee of a Mortgage Pool such as that
in
this case is more like an administrator than a trustee. The
powers of said officer or Trustee are limited to
ONLY what
the Certificate Holders authorize. It cannot be overemphasized
that the Investors were not signatories
to the Securitization
Documents, only the named Participants were. The transaction
with the Investor in which they
advanced "loan" money for
the subject homeowner's loan product, was consummated most
likely before the
transaction with the homeowner or was
subject to binding agreements between various Participants
in the securitization
scheme that pre-dated the transaction
with the homeowner. Therefore, the actual and undisclosed
Creditor was the
Investor who advanced the cash and who was
known by the securitization
Participants, and therefore was the only
party entitled
to claim a first lien either legally or under equitable
subrogation. Accordingly, the only potential
party to a
foreclosure wherein the purported creditor alleges financial
injury and therefore a right to collect
the obligation,
enforce the Note or enforce the DOT is either a party who
has actually advanced cash and stands
to lose money or an
authorized representative who can disclose the principal,
provide proof of service or notice
and show such express,
unequivocal and complete authority to perform all acts
and make all decisions without condition.
In my opinion,
any condition placed upon the Trustee to act for the MBS Pool
Certificate Holders, including the
power to enter into any
compromise, makes the The Trustee is something less than
the Real Party in Interest on behalf
of the Certificate
Holders. For one thing, the certificate holders in either or
any of the named pools might have
settled their claims under
the procedures set forth in the securitization documents. IN
that case, the special purpose
vehicle (i.e., the "pool"
or "trust" is certainly dormant and probably dissolved,
leaving the
Trustee pursuing foreclosure on a home loan
that (a) is not in the pool and (b) is paid off AND in some
other pool.
Also, a party must be answerable to the claims,
affirmative defenses and counterclaims of the homeowners for
such
causes of action or defenses as might be applicable or
they would be blocked potentially by collateral estoppel if
the court determined the foreclosing party was acting within
the scope of its agency for the Principal, the Certificate
Holders.
In my opinion, as above, and with a reasonable degree of factual
and legal certainty, the disclosed
principals in the securitization
chain, up to and including the Pool Trustee, are not the Creditors
nor are they
authorized agents for the Creditors, without proof
that they have been granted this authority pursuant to the terms
of the Securitization documents.
Otherwise, the Participants, including Servicers and Pool Trustees,
in
my opinion, are interlopers or impostors whose design is to take
title to property they have no right to claim, and to
enforce a
Note which is evidence of an obligation that is not owed to them
but rather to another. The details of
this information, whether
the Special Purpose Vehicle still exists, whether the investor has
been paid in full through
Third Party Payments, are known only to
these securitization Participants and the heretofore undisclosed
Investors.
And the Participants have demonstrated time and time
again that they are not credible. In my opinion the attorneys for
the known Securitization Participants do not have any authority
to represent the Creditor, and could not represent
them due to the
obvious conflict of interest, to wit: the Investors upon learning
that a substantial amount of their
advance of cash was pocketed by
the intermediaries and now is left with a mortgage whose nominal
value is far below
what was paid, and whose fair market value is far
below the nominal value, would have potential substantial claims
against the securitization Participants for fraud, conversion,
breach of contract, and other claims. Fraud upon the
investors
in relevant to borrowers because it is additional evidence of an
overall fraud and conversion scheme against
borrowers, because it
tends to show motive and intent in the fraud and conversion claims
made by borrowers. "This
concludes this Unsworn Declaration, made
under penalty of perjury." Signed on _June 21, 2010.
___/S/
NEIL F. GARFIELD, ESQ. Neil Franklin Garfield, Esq.
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