Wednesday, July 6, 2011




Calwestern is a standard player in foreclosures. The thing to remember is that the function of Calwestern, Recontrust (BOA) et al did not exist before securitization. So the question to ask is why would they need a substitute trustee or different servicer to pursue foreclosure if the case was otherwise conforming to the conditions of a judicial foreclosure. The answer is that they wouldn’t and that the creation of these entities by the banks is simply to create an alter ego for the banks so it doesn’t seem as brazen as naming themselves as trustee, or attorney in fact, or authorized signer, whatever that means.
  • According to Arizona case law the trustee on a deed of trust is required to exercise due diligence at an even higher level than would expect because, the courts say, the protections of a judicial foreclosure are absent. In other words, the courts recognize that there is considerable peril resulting from moral hazard, as it would take very little to steal a piece of property, based upon the premise that the borrower did not pay (which is not always true, as some people, like RD continue to pay the taxes, insurance, maintenance, etc. on the property as per the terms of the mortgage, assuming the mortgage was valid). The hazard exists even without securitization.
  • With securitization, the moral hazard rises to new levels. If the creditor is either unknown, unidentified or difficult to define, then non-judicial foreclosure is simply not available to would-be foreclosers because they need a declaration of rights from the court to determine who is the correct beneficiary, who is the creditor who can submit a credit bid at auction, and who should receive a deed from the trustee if there is an auction.
  • With securitization as it was applied over the last 15 years the moral hazard went into the red zone. Investors were in all cases the source of funds for any loan that was funded. The mere existence of conditions in which there is an expectation of payback on money advanced does not create a secured loan. It might not even establish a loan, since there are other causes of action like unjust enrichment, constructive trust etc., that could come into play in suing to recover the money advanced. Nor does it necessarily establish the principal due because of the various third parties whose liability, inchoate until the loan is signed, becomes a procedural guarantee. When those third parties start paying on the obligation — to the investor who did not receive a note from the borrower but rather received a bond from their own entity which was “backed” by assets that did not exist at the time of the issuance of the bond and the advance of money by the investor — the borrower’s obligation to the creditor (if one can be identified) is correspondingly reduced AND the possibility of a new liability to the third party that made the payment arises.
  • Why are trustees substituted? Because the banks don’t want due diligence and extra care being taken to determine if the instructions on default and sale are correctly stated from an authorized entity. If they did, then the trustee would refuse to send the notice of default and the notice of sale. That would force the would-be foreclosers to plead a case in judicial foreclosure, which in Arizona conforms to most states on judicial foreclosure. This would shift the burden of proof to the banks, without a motion to realign the parties. Basic inquiry would raise red flags as to the existence of a default (servicer is continuing to pay), the amount of the obligation due (after third party payments on guarantee and counterparty liability), and the identification of the true beneficiary who is one of two parties to whom the trustee owes a duty of due diligence. If the foreclosure is illegal then BOTH the real secured party, if there is one, and the homeowner suffer maximum exposure to economic damage — and that is exactly what is happening.
  • Why can’t they win in judicial foreclosures and why are judicial sales void like non-judicial sales? Because if there is a creditor at all under normal definitions it must be the party who actually advanced the money and that is ONLY the investors. If it isn’t legally the investors it would be under some novel theory that does not conform to the theory of bills and notes developed over centuries and codified in the Uniform Commercial Code. And THAT TOO would obviously require a judicial determination, because without a judicial determination of how an intermediary could fill the shoes of the source of funds, there can be no foreclosure of any kind.
  1. All other parties are intermediaries like when you write a check, and the check is processed through the issuer’s bank (i.e., the bank shown on the check you wrote), the issuer’s bank’s account processor, the Federal reserve, the receiving bank’s account processor and the receiving bank. In this case, because there was fraud in the sale of the bonds to the investors, they are looking for relief from the investment bankers who sold them the bogus mortgage bonds — most of which were never issued on paper and were created only by the entry of data by hand or digitally in a computer.
  2. No group of investors have banded together or filed separate attempts to deal directly with the homeowner in court or out of court. The reason is that if they did so they would be adopting the fraudulent and predatory practices used in obtaining the signature of the borrower on loan papers that were riddled with deficiencies and faced with defenses, affirmative defenses and counterclaims for acts that they may well have known nothing about. The investors would be defenseless in a lawsuit with homeowners over the validity of the loan papers. They know that, and they know that  the value of the property was so artificially inflated that even if they won they would only recover pennies on the dollar after all the expenses of litigation and sale of the property. There simply is no reason for the investors to look for payment from homeowners. They have a much more alluring target — the largest banks in the world with the deepest pockets who perpetrated the original fraud on the investors by selling them bogus mortgage bonds that were not backed by assets, and even if they were backed by assets, those assets consisted of loans that did not conform to the agreement contained in the prospectus, pooling and service agreement and other securitization documentation.
  • So the function of the new intermediary parties in foreclosures who never existed before is to NOT perform the duties required of them by statute and common law. The original trustee, who is still legally the trustee on the deed of trust but might not know it, would perform the due diligence because they are not owned and controlled by the banks who are committing this fraud.
  • Again the moral hazard rises into and perhaps past the red zone when the intermediaries themselves pretend to be the creditors even though they were neither the source of funds at the closing of the “loan” with “borrower” nor were they ever party to a transaction in which consideration was paid for the legal transfer of the alleged obligation or liability of the “borrower.” The APPARENT transfer of the loan or note or mortgage is substituted for the real thing. And the more it is transferred the more it seems like there was something being transferred when in fact there wasn’t anything transferred, and in fact it is highly probable in most cases that there was no legal encumbrance ever perfected on the advance of funds that everyone is calling a “loan.”
  • The same method of operation was used with the trustee function. The apparent substitution of trustee gave rise to the appearance that the beneficiary had authorized the substitution and that the beneficiary had the right to substitute trustees. All the other documents flowing from the substitution of trustee and the “assignment” give rise to the appearance of a normal foreclosure, or something close enough that a quick glance satisfies most judges that everything is on order. But 100% of the time, when a Judge gives more than a casual glance the Judge becomes alarmed and sometimes downright irate that the banks are trying to pull something, and they are. This is ALWAYS followed by a confidential settlement where people get their homes without any mortgage and the debt is cancelled, because it was paid anyway (several times over in many cases) by third parties.
  • An assignment of a note does not transfer the note. If you write a check and the person to whom you write the check executes an assignment of that check, the recipient (assignee) cannot take assignment to your bank and get paid — not without the check — and even with the check they still won’t pay until they have the check and it is endorsed to the party who received the assignment (in which case they didn’t need an assignment — what they needed was an indorsement guaranteed by someone who vouches for the signature before they accept the check as an instrument that draws upon the money in your bank. There is no difference between a note and a check. You need an indorsement.
  • The indorsement needs to have some signature guarantee or other acceptable measure of security that the person who signed the indorsement was really the payee of the instrument. THIS IS WHERE THE BANKS STEPPED ON A RAKE. Out of pure greed, since the investors were not interested in recovering from the homeowners, the banks perceived an “opportunity” to create the appearance of transfer of the note under circumstances where it appeared as though the note was valid and it appeared as though the mortgage lien was perfected. IN ORDER TO DO THIS THEY HAD TO COMMIT PERJURY, FRAUD, AND BREACH OF VIRTUALLY EVERY LAW AND RULE REGARDING TRANSFER AND RECORDING OF LOANS, NOTE AND MORTGAGES OR DEEDS OF TRUST.
  • All of this brings us to the issue of what is euphemistically referred to as “robosigning” — which in actuality is forgery and suborning perjury. The signature of a person, real or imagined is affixed to documents by multiple people without the knowledge or consent of what is being done. The signature of the signer is false and unauthorized. The content of the document identifying the signer is false and unauthorized. The content of the document purporting to have some legal effect (assignment, substitution of trustees, etc.) is false and unauthorized.
  • The Banks want us to believe that the robosigning was nothing of the sort — that it was merely an ill-conceived mechanism for dealing with an overwhelming number of foreclosures. In fact, it is a substitute for real events that is getting by Judges who merely glance at paperwork instead of examining the paperwork. There would be no overwhelming paper crash if the securitization was real — because the securitization participants were required to execute all required documentation (in their own “securitization” documentation) contemporaneously with the loan closing. Had they done so, the securitization would have been real, and the paperwork would have been done, along with the loan closing, as each loan was completed. There would be no paper crunch.
  • The reasons they did not do so are many but they all boil down to one central theme. They intended to transfer the money of the investors and the borrowers around like “a whiskey bottle at a frat party,” (Mike Stuckey, MSNBC news) and sell the same loan multiple times through different instruments that made it look like they were creating exotic risk-sharing instruments, but in reality they were selling the same receivables multiple times without the buyers being aware of the reality of the situation because of the complexity of the instruments, which were only so complex because the banks didn’t want anyone to understand them. Even Alan Greenspan said that he and a 100 PHD economists could not understand those instruments. That was the intent and the result. A recorded, executed indorsed instrument, pursuant to law, would have put prospective buyers on notice that they were buying something that had already been sold numerous times.
  • Under the guise of anonymity and plausible deniability, the banks created the perfect PONZI scheme that only succeeded because they hid the transfer documents and continue to hide the transfer documents. The entire “bailout” by the government as well as the majority of the assets shown on the balance sheets of these megabanks is based upon the premise that the last transfer document shown was valid and establishes the chain of ownership. Any first year law student knows that the chain is only established starting at the beginning and connecting up each document to the next, with proper execution and delivery on each document in the chain. The lack of any consideration for the “transfers” that the Banks allege speaks volumes as to what they were really doing and they they had actual knowledge that they were committing fraud.
  • And THAT brings us to specific instances of fraud on the court, fraud on the homeowner and fraud on the investors accomplished through suborning perjury and forgery.
  • In R’s case, the substitution of trustee was alleged to have have occurred. It didn’t. The putative lender created an entity that enabled them to substitute their own entity for the real trustee. In this case the signatory was Pamela G. Her signature shows up in hundreds of similar documents in Maricopa County alone, most of which are completely different signatures, which means that at best, all but one of the signatures on all those documents was a forgery. Proffering that in judicial or even a non-judicial proceeding is illegal and probably constitutes suborning (causing)  perjury. The attorneys who regularly use such signatures are hiding behind various protections intended to allow Trustees and attorneys to rely upon what their client gives them. But most attorneys in fact are not actually retained in the conventional sense, so they don’t actually know the identity of their client. And with all the publicity and their own experiences in court they have good grounds to believe that the documents are not real — especially when the practice is to create those documents in the law office or using an outsource “service” provider.
  • Pamela’s signature also shows up in Declaration filed in California case. Since it is a document not normally proffered and her resume shows that she worked for CalWestern, it is possible or even probable that the signature on THAT document was not forgery, but it still was perjury or at least a lie as to its content. In any event, it contains a signature that does not match, even to a layman’s eye, the signature on Katharine’s substitution of trustee nor any of the hundreds of other documents where her signature was used to start the paperwork for a foreclosure.
  • We also have Pamela’s resume which does not list MERS as an employer nor any relationship with MERS. At the time she signed for MERS her resume says she was working for CalWestern. Yet her signature appears as a signatory for MERS as a VP substituting trustees. MERS is clearly identified as having no interest in the loan and in fact specifically disclaims any interest in the transaction, never handles any money, and disclaims any interest in the note, mortgage or other documentation of the alleged “loan.” MERS is also under a cease and desist order that was not in effect at the time the substitution was signed. MERS has also issued an order to all members NOT to use their name in any foreclosure proceeding, which would seem to be another disclaimer of any interest or authority to actually do anything.
  • If the substitution of trustee is invalid or void, then everything that happened after that is void. The “trustee deed” on sale of the property at an “auction” in which the bidder tendered neither the note nor any money was also void. I think this can be brought up de novo on appeal because it corrupts the title records.

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