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Clouded Title Notes

1. Which MERS are we dealing with? 2. What s the bond the bank was suppose to produce? Pg 26 3. Look at short-sale practices as devaluing your property Pg 27 4. Short sales as frauds? Pg 27 5. Check this out:
To make matters worse, the loan servicers who MERS claimed they had the legal right to foreclose on behalf of wrote down the losses on their books while the investors who actually held the securitized notes and mortgages in the form of asset-backed securities got nothing. Did you get that? The pretender lenders made the money, says Garfield, The investors who actually owned the notes and mortgages did not.

6. Servicers collect fees first:

The author likes Garfields term pretender lender, because even though mortgage loan servicers may collect your monthly payments, they may not have advanced any loan proceeds. It is now well known (not even arguably) that non-performing loans generate more revenue for the servicing lenders. All the late fees and other fees tacked onto to delinquent homeowners accounts push struggling homeowners deeper into despair.

7. Lack of full discovery pg 28

No homeowner ever knew who actually owned his note, because it was never disclosed to him. No lender ever told the homeowner the course that his note and mortgage would take, flowing into the stream of securitized portfolios and collateralized debt obligations. In essence, neither the homeowner nor the investors who actually owned the securitized bonds were involved in the creation of these portfolios.

8. Tranch buyer as liable holder? Pg 29

When the borrowers began to default, the pretender lenders and their foreclosure mills of attorneys who were well-prepared with all the contractual tricks of the trade began seizing homes in record numbers and liquidating them in short sales and if that didnt work, in foreclosure sales. Once the pretender lenders collected on the proceeds, it is assumed that they put the profits in their pockets. There is some argument going on that these proceeds represent taxable income as a capital gain. This is still in dispute. The investors were left holding worthless bonds, with absolutely no recourse whatsoever (at that time). Yet unknown to these investors, if the loans they funded actually made it into the pools-tranches, they became liable to the homeowner as the true holders in due course. The courts had no idea that the level of fraud reached so deep because the foreclosure paperwork in possession of the lender was so superficial.

9. Look up April Chaney:

April Charneys efforts to shut down mortgage foreclosures initiated by MERS in Florida drew attention to her tactics because she proved to the court that MERS was only a record keeping database and not given any actual power to stand in the lenders stead as a nominee. If the lender was the duck, MERS wasnt walking and quacking like a duck. Jacksonville Business Journal reporter Kimberly Morrison was one of many area reporters who began covering Charneys procedural exploits. Attorneys in Florida started paying attention to what Ms. Charney was doing and she ended up holding seminars in various parts of the state. In short order, those seminars ended up going nationwide, as Charney extolled her methodologies in foreclosure defense. Lines of attorneys extended around the corners of the conference centers and hotels she held seminars in.

10. 11.

Page 29, what are CLE courses? Florida requiring paperwork ?? PG 31

In late 2009, the Florida Supreme Court came out with new rules that drastically slowed the rash of foreclosure filings by requiring lenders to have all their paperwork in order. As it turned out, lenders attorneys chose to ignore it.


Appraisal fraud
There are plenty of other options, according to Bradford, who eluded to the fact that homeowners just need to figure out what their potential strategies are. Bradford runs a website called mortgagefraudexaminers.com, and claims that there is appraisal fraud in almost all of the loans he reviews in addition to lender liability issues. He downplays loan auditors because most of the time audits are conducted; the time limit for enforcement has passed. Still, fraud claims (as hard as they are to prove) make up the bulk of lawsuits against lenders.


Four scenarios being explored:

There are four scenarios being explored in this work: (1) attacking the lender before the default actually occurs [foreclosure offense through quiet title actions and other strategies]; (2) attacking the lender after the default occurs [foreclosure defense by filing a countersuit]; (3) attacking the lender postforeclosure in the filing of a wrongful foreclosure claim and a quiet title action; and (4) attacking the lender or the third-party debt collection agency in the phase of deficiency judgment.


Prosecutions begin: Pg 32
The U.S. District Attorneys office for the Eastern District of North Carolina has set up its own Mortgage Fraud Task Force to deal with similar issues; resulting in 3 convictions and more on the way.


Multiple commitment of assets:

Unfortunately, Bank of America and others want a piece of that pie. In so doing, Bank of Americas attorneys have admitted in pleadings that loan portfolios might have been double- and even triple-pledged as collateral AT THE SAME TIME! Bank of America and others want a look at the documents now in possession of the bankruptcy court and Freddie Macs attorneys filed an objection to their request to examine what it considers confidential material pertinent to resolution of its claims. This isnt over yet.


Fraudulent filing of financing statement:

37.101. FRAUDULENT FILING OF FINANCING STATEMENT. (a) A person commits an offense if the person knowingly presents for filing or causes to be presented for filing a financing statement that the person knows: (1) is forged; (2) contains a material false statement; or (3) is groundless. (b) An offense under Subsection (a)(1) is a felony of the third degree, unless it is shown on the trial of the offense that the person had previously been convicted under this section on two or more occasions, in which event the offense is a felony of the second degree. An offense under Subsection (a)(2) or (a)(3) is a Class A misdemeanor, unless the person commits the offense with the intent to defraud or harm another, in which event the offense is a state jail felony. Added by Acts 1997, 75th Leg., ch. 189, 10, eff. May 21, 1997.


Lis Pendens as lien??

There are eleven defendants in this action to date. The real estate brokerage company also put the foreclosed home under contract, which prompted motion for a temporary restraining order to be filed, as they were trying to sell it over the top of a lis pendens lien that was filed at the time of suit.


Risk Management??
In this case, a county Justice of the Peace is the Plaintiffs star witness. In the first unlawful detainer hearing, the Justice of the Peace ruled against the lender because she couldnt find proof of ownership, let alone service of process. A subsequent Justice of the Peace used the listing at the appraisal district to evict the Plaintiff three weeks later. The county is cooperating to get to the bottom of this mess because the second JPs actions were at best questionable. The Errors & Omissions attorney for the county is now involved, called in by the countys risk manager.


Robo Signing:Pg 34
At the time this writing was released, GMAC Mortgage issued a moratorium on thousands of foreclosures in all the judicial states because of apparent fraud in the way affidavits and assignments by one of its officers (41-year-old Jeffrey Stephan, a graduate from Penn State who

admitted to attorneys in two separate depositions that he only had three weeks of training in foreclosure processing when he joined the company in


MERS as bankruptcy remote (no assets): Pg 35

21. As one could glean from excerpts of the April 2010 deposition of Hultman however, there were actually THREE MERS entities, not just one. Each MERS entity transitioned into the next subsequent entity. As confusing as all of that may seem, each MERS entity, as the corporation itself progressed, performed something that was finitely different to enhance the performance of the subsequent MERS entity. The first MERS entity was apparently created in October of 1995 and ended June 30, 1998; which transitioned into the second MERS entity, which incorporated on June 30, 1998 (taking over for the first MERS entity) and then after more agendas and discussions the third MERS evolved and went into operation on January 1, 1999. Also significant is the fact that this evolution of companies further complicates discovery because any attorney suing MERS would have to delineate which MERS did what and when.
What is known however from this deposition, by Hultmans own admission, is that the MERS #3 entity had to be known as a bankruptcy remote entity (meaning an entity that could NOT go bankrupt because it held no assets, liabilities, income or expenses). This clearly fits when you compare this to the defined parameters of Restatement of Mortgages (Third). It also obfuscates MERS abilities to do certain things, like foreclose on or convey assets from one party to another; assets it clearly does not own. Again, any attorney wishing to depose MERS for the purpose of gleaning any kind of evidence is going to have to sort through the layering of all the corporations.


Mers appointed employees?? Pg 35

. This means that as a Plaintiff in a suit against MERS, youd have another potential hurdle to climb over in establishing (1) whether the person signing your documents that are recorded in the courthouse were actually certified to sign those documents (by way of a signing agreement); and (2) whether or not the company this officer worked for was a MERS member or not. This clearly has much to do with just how significantly clouded your title to property would be (as the agency relationship with someone NOT holding an asset could claim that it had authority to foreclose on any given homeowner could be attacked as deficient); thus separating the lender and MERS into distinct parts: one that owns the asset and one that doesnt, for the purposes of control only.


MERS governing documents??

This also further complicates the issues with MERS when you start researching into which set of applicable governing documents were in effect and being utilized by MERS and its affiliates and their assigns at the time your mortgage loan was closed. It appears that every time a major case ruling comes down against MERS, its governing documents are updated, particularly the membership application to be a MERS member, the

rules of membership that MERS members have to abide by and especially the procedures manual (which could include instructions for how to foreclose on a borrower).


MERS process of certifying officers:

Wootens deposition also brought into question the process used by MERS to certify its officers. The subsequent deposition of Hultman in 2010 also touched on that process. These depositions certainly merit further consideration if you are considering MERS as a defendant in any of your cases (if youre an attorney).


MERS not a beneficiary. Pg 41

Vice President William Hultman, admitted that indeed, MERS was only a nominee and not a beneficiary; thus deriving no profit or loss from the transfer, sale or foreclosure of real property. In fact, prior to this deposition, numerous courts in Kansas, Nebraska, Ohio, Florida, Vermont and Arkansas (and now Montana, and installment contract state) came out with of their own set of rulings. Most of these rulings state that MERS was nothing more than an opaque shield for lenders to maintain their electronic dealings in the derivatives markets. This MERS lender-maintained system pairs similarly to the way creditor/subscribers report trade line item information to the credit bureaus. Equifax, Experian and Trans Union all claim that if youve got a beef with the trade line item, take it up with the creditor and not them.


MERs files member maintained, contain errors. Pg 41

Like the credit bureau system, the MERS system of lender-maintained files could also contain errors as well. In the case of the credit bureaus, if the reporting creditor is not the one that advanced the loan proceeds, why are they allowed to report as subscribers? According to MERS, any lender who has a relationship with a given file is allowed to enter that electronic file and make changes to it at random.


Foreclosure sale as fraud due to clouded title. Pg 42

While you as a homeowner may be evaluating the legal condition your property is in, the author had good reason to write this book. The author has purchased seized property before and has successfully won quiet title actions in court. As the author discovered, he could not sell his acquired property with a Warranty Deed, covered by a title company policy until he removed the clouds from the titles, caused by the tax deed sales. This meant a lawsuit had to be filed. In the authors case, the same former owner was involved, so one suit covered both tracts that were clouded.


Foreclosure mill case: pg 44

There is a defined SCOTUS case in Jerman v. Carlisle et al (Decided April 21, 2010) that addresses the issues covering foreclosure mills under the Fair Debt Collection Practices Act.


Strategies pg 45

1. As soon as the homeowner goes into default on his payments (whether he legally and genuinely is or is not) the lender-MERS subscriber summons MERS and the boogey man comes out of the closet. 2. MERS and its agents then remove the trustee of record (in Deed of Trust states) and in both judicial and non-judicial states, an assignment is drafted and executed which is then filed in the local county courthouse, claiming the party being assigned the note and mortgage (or deed) is the real party in interest. 3. Most of the cases the author has seen involve MERS agents doing the dirty work. Most of the cases the author has been brought into to analyze have found (much to the amazement of attorneys looking at these cases), is that suit to foreclose was filed BEFORE the actual assignment was recorded. These untimely filings are certainly cause for not only legal challenge, they also generally lead to a problem for the pretender lender in court, where the judge orders the lender to produce other assignments, allonges, indorsements proving agency or the original note with the new lenders name properly affixed to it. In many instances, the lenders attorneys do not have the note. 4. This brings a stall to the case. In many instances, if the case gets that far, the lender will do everything in its power to buy time. In many instances, this time factor has given several parties (in conjunction with MERS, LPS, DOCX) and/or agents the opportunity to produce what are known as manufactured documents. There is a 40-point checklist in Section 7 to refer to as to how to spot whether these documents are properly prepared; and this list may only be somewhat futuristic and may need to be amended. 5. The lenders have done everything to fight discovery. Theyll offer loan modifications to homeowners to step outside of a Chapter 13 bankruptcy in an effort to do an end run around the homeowner and foreclose on them before they know what hit them. Whatever stall pattern you see in a case involving lender challenge, you can be sure that whatever follows is going to be suspect. 6. More times than not, once the lenders standing is challenged and the lender has to produce paperwork to prove his claim, they will attempt to settle and pay off the borrowers attorneys never to sue them again; or many times, they will attempt to do a loan modification (again, a waste of time). Nine times out of ten, the lender lacks standing to do a loan modification because they dont own the note! They cant modify something they dont own! While some entities like Chicago Title on its Connecticut website claim that MERS can do loan modifications, this is also virtually impossible, as MERS did not advance any loan proceeds and collects no monthly payments. The author points to this as disinformation. The author believes that Chicago Title does NOT want to expose itself any more than it has to. 7. What has been evidenced in foreclosure actions or actions involving bankrupting debtors has been outrageous behavior on the part of lenders and their attorneys, especially where documents are backdated and then brought into court and proffered as genuine. See U.S. Bank v. Harpster. 8. Of late, MERS has been more aggressive in getting itself named as an assignee, whether it has a real interest or not. MERS demands to

be notified. A lot of attorneys the author has spoken with see no point in naming MERS as a Defendant in an action. The author disagrees and points to the qui tam suits. MERS certifying officers are not covered under MERSs E&O. 9. The biggest fraud on the county recordation system is where MERS and its agents (who in the authors opinion all ought to be jailed for a minimum of 10 years for each signature they put on a phony document used to further their cause) attempt to transfer the deed AND NOTE, even though it legally does not own the note and couldnt pass a litmus test under Restatement of Mortgages (Third) if it tried. 10. The concurrent fraud generally surrounds HOW the assignments and appointments of successor trustees are executed. In most instances the author has seen, the appointment of a successor trustee will generally involve turning the duties of foreclosure over to a foreclosure mill. These trustees (according to many attorneys now coming head-on against them with FDCPA threats) are in essence third-party debt collectors. There is a defined SCOTUS case in Jerman v. Carlisle et al (Decided April 21, 2010) that addresses the issues covering foreclosure mills under the Fair Debt Collection Practices Act.


Problem of MERs pg 46
It is not uncommon for note and mortgages to be assigned, often more than once. When the role of a servicing agent acting on behalf of a mortgagee is thrown into the mix, it is no wonder that it is often difficult for unsophisticated borrowers to be certain of the identity of their lenders and mortgagees. In re Schwartz, 366 B.R. 265, 266 (Bankr. D. Mass. 2007).

31. Table Funded Loans: pg 46 (Did the lender have a beneficial interest in the note?)
Generally, many loans obtained by borrowers over the last decade were what are known as table funded loans. These loans (if you can imagine this scenario) work sort of like this: When you close on your mortgage loan, the documentation is usually signed at a title company who then records the note and mortgage (or deed) and sends it to where the lender directs it to be sent. The broker is receiving directions from a secondary funding source that is paying the broker a commission for handling the paper. Once the broker is finished securing the transaction, the funding source pays the broker and the party to whom the payment is due (the other homeowner or builder) for the home you just bought. What you dont understand though, is that the broker is working under a wholesale lending agreement he engaged in from the secondary funding source. The actual loan did not come from the broker; it came from the secondary funding source (who may have been Countrywide Lending, Washington Mutual or Long Beach Mortgage, etc.; especially in the subprime markets) which was not made known to you even after your loan was closed. If MERS is involved, all of this information is generally transferred by the secondary funding source into MERS electronic systems, never to be seen again (unless you default on your mortgage loan). The way mortgage notes were securitized, it is also possible that once you signed your note and deed of trust, your loan went directly through the secondary funding source into a special purpose vehicle or SPV, a trust,

on Wall Street, where it became part of a rated portfolio that became a collateralized debt obligation (CDO) and then wrapped into a derivative called a credit default swap and from there, marketed as bonds to investors. From all indications those investors funded your loan BEFORE your note made the CDO.

Note: In the case of a table funded note, the note was never sold into the pool, but rather, was already owned by the pool as the warehouse lender was the pool sponsor. The sponsor was the entity who (while hiding behind the licnese of the lender ) had original beneficial interest in the note. The lender never had a beneficial interest. For a percentage of the original principal (most likely the Rodash charges on HUD1) the entity named as lender merely posed as the lender. The true lender was never disclosed to the borrower.) 32. Note: Note does not become unenforceable, deed of trust or mortgage does. Pg 47 33. Note: They are even more hidden as the true lender is also hidden:
The author poses a different theory on this subject: That at the time the note is sold to another lender and the deed of trust or mortgage is electronically registered with MERS, the title to property is clouded because the deed or mortgage is many times in fact, misrepresenting who the real party in interest is because the real holder of the note and all of its subscription data entries were hidden in an electronic file at MERS.


Deed of Trust Void: pg 48

Trust and the note, the Deed of Trust becomes evidence of the note (operating in the nature of a lien). If the Deed of Trust is ruled a fraud, by virtue of a quiet title action, when the parties cant prove authority (standing or capacity, via agency) to act, the chain of title becomes broken because MERS is acting in a capacity for which it is not legally entitled to act. Even though MERS claims in the Deed of Trust that it holds legal title to the property, it does not own the note and therefore cannot convey the evidence of the note away from the note. If the note is being held by one party as an obligation and the Trustee that is responsible for overseeing that the Deed of Trust is followed through to the letter; and MERS comes in and removes the Trustee as if the Trustee didnt exist; and substitutes another trustee when the Deed of Trust specifically reserves that right to the Lender, then MERS has caused the Deed of Trust (as evidence of the security) to be voidable. The title is slandered because MERS exceeded its legal authority when it acted outside of its capacity as nominee. This poses potential arguments under merger doctrine, where the trustee was merely a puppet in name only for MERS.

35. Note: MERS had no authority to transfer deed of trust, only trustee could do that at MERs request. 36. Note: MERS as agent for Lender could direct Trustee.

37. Note: No evidence that trustee accepted position, therefore, the trust agreement was never perfected . 38. Note: No transfer of beneficial interest from lender is reflected in the form of a notice of release of lien and beneficial interest in the note and a transfer to a subsequent holder is reflected in the court record, therefore, lender is still the holder. 39. Note: Lender would have to come forward to enforce the lien that is in lenders name, but since the lender never had a beneficial interest in the note in the first place, no one holds a claim against the property. 40. Trustee and Beneficiary ill defined: pg 48
Also bear in mind (in reality) that the Deed of Trust and/or mortgage lacks specific definitions of the duties of the Trustee and the specific duties of MERS. In Kesler, MERS couldnt define what its specific obligations were as a nominee, so the Kansas Supreme Court did it for them. This is where the bifurcation argument came into play; that the deeds of trust issued today with MERS name on them STILL dont identify the specific duties of the Trustee or MERS; thus, the language is vague, ambiguous and is left open to interpretation in an action to quiet title. Because MERS fails the litmus test under Restatement of Mortgages (Third), its going to have a hard time surviving a quiet title action. And what happens if the trustee really doesnt exist?


MERS lack of standing: pg 48

There are so many bankruptcy court decisions, of late (In Re Box, In Re Walker) that lend credence to MERS lack of standing that the author feels it would be virtually impossible for MERS attorneys to argue they had every right to convey property they dont legally own.


Agency Relationship Defeated:pg 48

Further, discovery might show that because MERS has no written contract with any lender outside the original lender wherein the lender doesnt retain full beneficial interest, the agency relationship is thus defeated.


Intervening assignee: pg 48
In theory, the first time the note is transferred to an intermediary party, called an intervening assignee (because MERS is NOT a lender or true creditor) and the note is securitized and then turned into a derivative, the paperwork is hidden or destroyed and the paper trail goes nowhere.

Note: Paperwork has not been destroyed. Read Ginnie Mae manual. 44. The note is without collateral: pg 49

With the deed of trust being knocked out because of fusing of the parties or some other defect (like no proof of standing) it would leave the note left without collateral to secure it. (The author isnt quite sure that this isnt what the Wall Street players were dealing to investors anyway because all of the bonds they sold to them were non-recourse.) It could also be assumed that because the agency relationship was divested by the first intervening assignee (that got it from MERS who had no party in interest status); that at any point subsequent to that transaction, any defect in paperwork would also further cloud the title. Its that simple. Now ask a title company to insure all of that and see what answer you get. This is a hint of the things to come in Section 12.


FDCPA liability: pg 49
In accordance with the latitude the Second U.S. Circuit Court of Appeals gave the Plaintiff in Clomon v. Jackson, 988 Federal Reporter 2d Series (beginning at page 1314; for those of you lay people perusing the law library for the first time), all it takes is ONE SINGLE VIOLATION of the Fair Debt Collection Practices Act to establish civil liability! But dont just take the authors word for it. Look the case up yourself!


Change of character of debt: pg 49

Because MERS is only a nominee and not the true creditor, the character of the debt could have been altered past the supposed understanding of the borrower.

47. Did the seller engage in fraud: Note: (without knowledge or intent, not culpability)
Another argument arises that if the true creditor (the investor who bought the note as part of a portfolio that was securitized, turned into a derivative and sold to that investor in the form of a bond) comes looking to cash in and your security interest isnt legally extinguished by MERS. The question arises as to whether you as the seller of the home are now involved in a fraud scheme when that true creditor comes calling on the new buyer of the foreclosed home that was sold to them. Would the end result put the former homeowner in the path of an action to quiet title, thus having to expend legal fees?

48. 49. 50. 51.