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SUPREME COURT OF FLORIDA

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No. SC09-1460

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IN RE: AMENDMENTS TO THE FLORIDA RULES OF CIVIL
PROCEDURE
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COMMENTS & RESPONSE IN OPPOSITION TO SHAPIRO-


FISHMAN, LLP’s MOTION FOR RE-HEARING OR
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CLARIFICATION

Respondents, Lisa Epstein (“Epstein”) and Nye Lavalle (“Lavalle”)


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are consumer and investor advocates1 who aim to protect the public interests
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of homeowners and investors in the state of Florida. Collectively, Epstein

and Lavalle file this pro se response to Shapiro & Fishman’s (“the Shapiro
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Firm” or “Movant”) Motion For Rehearing seeking the denial of the Motion

and state that:


d.

The Court’s opinion is clear and unambiguous in its opinion filed on

February 11, 2009. “First, rule 1.110(b) is amended to require verification


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1
http://en.wikipedia.org/wiki/Nye_Lavalle
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of mortgage foreclosure complaints involving residential real property. The

primary purposes of this amendment are (1) to provide incentive for the

Plaintiff to appropriately investigate and verify it is ownership of the note


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or right to enforce the note and ensure that the allegations in the complaint

are accurate; (2) to conserve judicial resources that are currently being
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wasted on inappropriately pleaded “lost note” counts and inconsistent
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allegations; (3) to prevent the wasting of judicial resources and harm to

defendants resulting from suits brought by plaintiffs not entitled to enforce


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the note; and (4) to give trial courts greater authority to sanction plaintiffs

who make false allegation.” [emphasis added] There is no room in Florida’s


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judicial system for perjury with impunity.


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I. Introduction and Background

The Court filed its original Petition to amend the rules of court on
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August 17, 2009. Comments were due by October 1, 2009. At the

discretion of the Court, select late submissions were considered and


d.

accepted. Comments were received from Legal Services of Greater Miami,


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the Florida Justice Institute and Florida Legal Services, Inc; the Housing and

Consumer Umbrella groups of Florida Legal Services; Legal Services of


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North Florida, Inc., and North Florida Center for Equal Justice, Inc.; the

Florida Bankers association; Florida Default Law Group; Ben-Ezra & Katz,

P.A.; Tomas H. Bateman III and Janet Ferris; Henry P. Trawick, Jr.; and
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Respondent Epstein. Oral Argument was heard on the matter on November

4, 2009.
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On February 11, 2010, the Court contemporaneously, published its

opinions regarding proposed changes to rule 1.110(b) and proposed changes

to Form 1.996 (Final Judgment of Foreclosure). In its opinion of February


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11, 2010, this Court amended rule 1.110(b) to require verification of

mortgage foreclosure complaints involving residential real property. Rule


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1.110(b) commands verification when filing an action for foreclosure of a

mortgage on residential real property, which will be fulfilled by including in


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the complaint an oath, affirmation, or the following statement: “Under

penalty of perjury, I declare that I have read the foregoing, and the facts
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alleged therein are true and correct to the best of my knowledge and belief.”

[emphasis added]
d.

On February 26, 2010, the Shapiro Firm filed a Motion for Rehearing
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and Clarification of the Court’s Opinion. In its Motion, the Shapiro Firm
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states “the rule fails to specify who is responsible for verifying the mortgage

foreclosure complaints. It is on this very limited issue that the Shapiro Firm

seeks rehearing or clarification.” [emphasis added]


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II. The Inherent Dilemma Posed by Securitized Mortgage Notes


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The Shapiro Firm virtually admits to the Court that it and its alleged

clients are unable, under penalty of perjury, to verify and attest to which
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party (or client) can be held accountable for bringing meritorious foreclosure
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actions and delineates as rationale for this legal handicap its inability to: a)

Allege the proper and lawful amounts claimed due; b) Attest to the default
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status of a loan or date of default; c) Delineate the chain of title to the

promissory note; d) Reveal the true owner of the note and holder in due

course; e) Allow parties to produce discoverable evidence and testify in


d.

support of Plaintiff’s allegations; f) Produce the proper decision maker for


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appearance at mediation conferences; g) Show who are the proper parties


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who can lawfully receive and approve modifications, short pays, settlements,

accord and satisfaction, and other alterations of terms and conditions; h)

Steer defendants in foreclosure actions towards the proper party or nonparty


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from whom the defendant can seek discoverable evidence and testimony in

furtherance of their defenses and counterclaims.


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The Shapiro Firm presents to the Court the following conundrum:

“The holders of the note are often unfamiliar with the status of the loans and

rely upon loan servicers to manage the loans, payments on the loans and the
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foreclosure proceedings.” [emphasis added]. Presented herein is a conflict

of interest between the certificate holders of trusts and securitizations that


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allegedly own and hold the note and the servicers of the mortgage that often

have intentionally separated and bifurcated the mortgage securing the note’s
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indebtedness. It may not be in the best interests of the certificate holders of

trusts and securitizations that allegedly hold the note for the Shapiro Firm to
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depend solely on the servicers for information.

The servicers have inherent conflicts of interest and a decade-old


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history of sanctions and prosecution by state and Federal regulators earned


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for their contributions to the fraudulent actions via predatory mortgage


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servicing practices, a term coined by Respondent Lavalle2 in his 1999/2000

report3 on predatory lending, servicing, and securitization practices. The

December 25, 2006 issue of BusinessWeek described headlined a story titled


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The “Foreclosure Factories” Vise and subtitled “the predatory tactics of

some mortgage servicers are squeezing homeowners.”4 The owners,


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operators, and sub-contractors of the nationwide foreclosure factories and
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mills seek relief from this Court from a fifteen-year plus history of industry-

wide predatory and fraudulent practices that have fallen under recent and
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intense judicial and regulatory scrutiny due to the foreclosure crisis

impacting the nation as a whole, while Florida has attained first place for
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defaults and foreclosures. The actual owners and holders of the notes, the

U.S. taxpayer in many instances or U.S. investors in mortgage backed


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securities; our collective retirement, pension, mutual, stock, investment, and

trust funds, have not appeared before this most high honorable Court.
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The foreclosure factories/mills and their owner/partner law firms are

driving foreclosures into dangerous and uncharted territory, leaving clouded


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titles by the hundreds of thousands in their wake. They collectively seek this

Court’s blessings of their often unethical, unlawful, and potentially criminal


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2
http://en.wikipedia.org/wiki/Predatory_mortgage_servicing
3
http://www.scribd.com/doc/13625416/AAMA-Report
4
http://www.businessweek.com/magazine/content/06_52/b4015147.htm?chan=search
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conduct as discussed herein and by other Federal and state justices across the

nation. The “old adage” that the bank (i.e. legacy “real lender”) doesn’t

want your home is true! It is not the lender, but the undamaged servicer
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that’s after the “collateral.” These interlopers profit from a system they

conduct and orchestrate. Real lenders may be either damaged by diverted


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income streams or they may have been made whole and the principal paid-
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off by various insurance arrangements and guarantees that were paid for by

the extra points charged at closing or higher interest rates paid for in
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monthly-payments by borrowers.

Servicers derive compensation from various sources including:


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mortgage servicing fees; add-on fees such as quick payment fees,

assumption fees, late charges, property inspection, and BPO fees; float on
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escrow and P&I payments; force-placed hazard and flood insurance

premiums; and other accrued disbursements and advances incurred that often
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continue to accumulate over the duration of the foreclosure litigation.

Pooling and servicing agreements (“PSAs”) often provide for an additional


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servicer windfall in the post-foreclosure of properties that maintain positive

equity, termed “net liquidation proceeds,” which encourages predatory


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servicing practices such as force-placing hazard and flood insurance at 3x to


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5x’s median rates or rejecting late or partial payments as ploys to jolt the

borrower into what’s termed a “manufactured default” and its subsequent

foreclosure. Servicers are thus incentivized to avoid loan modification and


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accrue default expenses that they recover in full when the loan is foreclosed

upon, prior to remittance of any sale proceeds to the real owners and holders
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of the note.5
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Additionally, per the PSAs filed with the SEC, most servicers and

master servicers are required to remit advances, servicer advances, and non-
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recoverable advances all designed to cover missed payments to be

transmitted to the true owners of the notes thus begging the question if the
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actual true lender has been paid by another 3rd party (“servicer”) that has no

privity of contract with the borrower, is the borrower in actual default to his
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the lender as defined in a borrower’s promissory note? Forthright and

mandatory disclosure of these advances or proceeds may negate any proof of


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default, claims, or damages by the note’s defined lender who may not realize

any economic loss or damages.


d.

Servicers and the true owners of the note (i.e. real Lenders) may be

unaware of other contractual agreements for third party payers to cover


or

5
Why Servicers Foreclose When They Should Modify and Other Puzzles of Servicer Behavior, Servicer
Compensation and its Consequences, National Consumer Law Center Inc, Oct. 2009 found at
http://www.consumerlaw.org/issues/mortgage_servicing/content/Servicer-Report1009.pdf
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missed payments, defaults, or payment of total principal by other subrogated

parties such as: private mortgage, mortgage pool, and Net Interest Margin

Securities (“NIMS”) insurers; Fannie Mae, Freddie Mac, Ginnie Mae, FHA,
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VA and other government guarantors; and holders of complex investment

derivatives such as credit default swaps. These sums are often conveyed to
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the owners and holders of a note, and should be included in any full
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accounting of amounts due and owing and clearly represented as individual

line items in affidavits attesting to amounts due and owed an actual and real
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lender seeking to foreclose upon property in Florida.

Furthermore, these intentionally opaque transactions, when fully


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examined, may reveal a duty to join additional indispensable parties, who

may have subrogated, yet unsecured claims, to the foreclosure action and/or
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counterclaims available to defendants and borrowers.

Lastly, contributing to the Shapiro Firm’s accountability enigma, the


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PSAs often contain language analogous to, “The Trustee shall have no duty

to verify the accuracy of any resolution, certificate, statement, opinion,


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report, document, order or other instrument so furnished to the Trustee.”

Quoting the Shapiro Firm’s Motion for Rehearing, the holder of the
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note “may have some limited knowledge in order to verify portions of the
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complaint” and the “loan servicer would, presumably, have” some limited

knowledge in order to verify other portions of the complaint but “likely will

not have personal or direct knowledge of other factual allegations.”


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[emphasis added]

The Shapiro Firm is clearly plagued by the tantamount befuddlement


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and frustration endured by defendants and their counsel in foreclosure
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actions, an inconvenient dilemma indeed for Plaintiffs and their counsel who

bear the burden of proof in bringing forth a legitimate foreclosure claim.


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Millions of American families and of particular interest to this court,

hundreds of thousands of Floridians, are being evicted from their homes as


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hundreds of billions in collateral is being liquidated (often at pennies on the

dollar to private hedge funds and other undisclosed indispensable and real
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parties in interest) despite the admitted inability of any lawful party to elicit

a complete, accurate accounting of the alleged secured obligation or debt


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and to whom that obligation is owed.

The maze and obstacle course promulgated by mortgages and


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promissory notes that were sent on a mortgage backed security journey

reveals a complex system of originators, brokers, agents, sub-agents,


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servicing agents, master servicers, depositors, issuing entities, sponsors,


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affiliates, custodians, underwriters, aggregators, successors, trustees,

beneficiaries, insurers, independent accountants, and the elusive principal

creditor (aliases: certificate holders, note holders, investors, etc.). (See


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charts attached as Exhibit 1)

In a relay track meet, the baton is handed off from the leadoff runner
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to subsequent waiting receiving runners, ending with the runner who finishes
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the race as an individual. Each runner on the relay team is fully dependent

on the performance of each of the previous runners. A drop of the baton or


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pass outside of the lane results in immediate disqualification. The entire

team as a whole is accountable, as are the individual sequential athletes who


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are each “liable” for their performance during their “assigned” leg of the

race when they were the “holder” of the baton.


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Keeping to this analogy, defendants in foreclosure actions must be

able to show the proper handoff and receipt (possession, negotiation, and
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ownership) of the transfers of a borrower’s original promissory note in order

to perfect their lien interests and claims to not only the obligation, but the
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right to secure the collateralized property and foreclose. Plaintiffs bear the

burden of proof regarding the possession and the proper transfer,


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assignment, and endorsement of a note from Lender A to Lender B to


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Lender C and any subsequent Lenders and holders in due course. Moreover,

plaintiffs must prove that the mortgage that secures such indebtedness

(note), was not intentionally separated and bifurcated from the note itself in
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which case, the borrower could still owe the actual Lender the performance

of their obligation, but such obligation could be deemed unsecured. In


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essence, a missed baton pass (missing assignment) or failed exchange
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outside the lane (improper indorsement) of the baton (i.e. note) results in a

disqualification.
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Enforcement of a note always requires that the person seeking to

collect show that it is the holder. A holder is an entity that has acquired the
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note either as the original payor or transfer by endorsement of order paper or

physical possession of bearer paper. These requirements are set out in


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Article 3 of the Uniform Commercial Code, which has been adopted in

every state. Correspondingly, in bankruptcy proceedings, state substantive


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law controls the rights of note and lien holders, as the Supreme Court

pointed out almost forty (40) years ago in United States v. Butner, 440 U.S.
d.

48, 54-55 (1979). (See Exhibit 2; Federal Bankruptcy Judge Samuel

Bufford's Presentation Paper before the Universal Commercial Code


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Committee titled “Where’s The Note, Who’s The Holder: Enforcement Of

Promissory Note Secured By Real Estate”)


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The industry practice is for the servicing agent for the loan to appear

as Plaintiff to enforce the note. Assuming that the servicing agent states that
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it is the authorized agent of the note holder, which is “Trust Number XX-
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99.” The servicing agent is certainly a party in interest, since a party in

interest in a bankruptcy or other court is a very broad term or concept. See,


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e.g., Greer v. O’Dell, 305 F.3d 1297, 1302-03 (11th Cir. 2002). However,

the servicing agent may not have standing: “Federal Courts have only the
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power authorized by Article III of the Constitutions and the statutes enacted

by Congress pursuant thereto. ... [A] plaintiff must have Constitutional


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standing in order for a federal court to have jurisdiction.” In re Foreclosure

Cases, 521 F.Supp. 3d 650, 653 (S.D. Ohio, 2007) (citations omitted).
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Routinely, servicers often come into Florida courtrooms claiming ownership

of a note. This is akin to a Florida Turnpike operator, solely responsible for


d.

collecting tolls, yet claiming ownership of the actual highway, which is

owned in fact by the state of Florida (whose “certificate holders” are its
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citizens).
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Recent Florida Appeals Court rulings seem to follow this line of logic.

On February 12, 2010 in the matter of BAC Funding Consortium, Inc. v.

Jean-Jacques et al, Florida 2d DCA Case No. 2D08-3553, the Court reversed
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a summary judgment of foreclosure which had been obtained by US Bank as

Trustee of a securitized mortgage loan trust for mortgage loan asset backed
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certificates series 2006-CB5. The decision confirmed what Respondents,
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consumer lawyers, and other advocates have been advancing in the courts

for years. The Court held that US Bank failed to meet its burden for
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summary judgment because the record revealed a genuine issue of material

fact as to US Bank’s standing to foreclose. The Court stated, with numerous


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citations to Florida case law, that the proper party with standing to foreclose

a note and mortgage is the holder of the note and mortgage or the holder’s
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representative. The Court found that while US Bank alleged in its unverified

Complaint that it held the note and mortgage, the copy of the mortgage
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attached to the Complaint listed Fremont Investment and Loan as the lender

and MERS as the “mortgagee.” The Court concluded that the exhibits to the
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Complaint conflicted with the allegations of the Complaint and that,

pursuant to well-established Florida law, the exhibits control.


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The Court further found that while US Bank subsequently filed the

original note, that note did not identify US Bank as the lender or holder and

that US Bank did not attach any assignment or other evidence to establish
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that it had purchased the note and mortgage or file any supporting affidavits

or deposition testimony to establish such ownership. The Court went on to


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hold that regardless of whether BAC had answered the Complaint, “US
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Bank was required to establish, through admissible evidence, that it held

the note and mortgage and so had standing to foreclose the mortgage
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before it would be entitled to summary judgment in its favor.” Even more

significantly, the Court held that whether US Bank did provide such
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evidence through a valid assignment, proof of purchase of the debt, or

evidence of an effective transfer, US Bank would still be required to prove


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that it validly held the note and mortgage it sought to foreclose. [emphasis

added]
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The Court finally held that the “incomplete, unsigned, and

unauthenticated assignment” attached as an exhibit to US Bank’s response to


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BAC’s motion to dismiss did not constitute admissible evidence establishing

US Bank’s standing to foreclose the note and mortgage.” However, as


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dozens of state and federal courts have recently decided, in the cases
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illustrated in Exhibit 3 the constitutional issue of lawful standing arises in

virtually each foreclosure action. This very issue is the antecedent for this

Courts’ order amending rule 1.110(b)


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The watershed ruling that broke the foreclosure bar’s dam was Federal

Judge Christopher Boyco’s order6 (Exhibit 4) dismissing dozens of


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foreclosures in Case No. 1:07CV2282 in the United States District Court
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Northern District Of Ohio Eastern Division followed by orders by judges

Rose,7 O’Malley8, and Dowd in the same district.


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In this watershed ruling, Judge Boyco took the servicers and

foreclosure bar to the shed in his footnotes when he publicly rebuked their
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practices and attitudes by stating: “Plaintiff’s, ‘Judge, you just don’t

understand how things work,’ argument reveals a condescending mindset


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and quasi-monopolistic system where financial institutions have

traditionally controlled, and still control, the foreclosure process. Typically,


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the homeowner who finds himself/herself in financial straits fails to make the

required mortgage payments and faces a foreclosure suit, is not interested in


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testing state or federal jurisdictional requirements, either pro se or through

counsel. Their focus is either, ‘how do I save my home,’ or ‘if I have to give
or

6
http://www.msfraud.org/LAW/Lounge/Deutsche%20Bank%20Foreclosures%20Dismissed.pdf
7
http://www.msfraud.org/LAW/Lounge/RoseRuling20071115.pdf
8
http://www.msfraud.org/LAW/Lounge/Foreclosure_Dismissals.OMalley.pdf
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it up, I’ll simply leave and find somewhere else to live.’ In the meantime, the

financial institutions or successors/assignees rush to foreclose, obtain a

default judgment and then sit on the deed, avoiding responsibility for
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maintaining the property while reaping the financial benefits of interest

running on a judgment. The financial institutions know the law charges


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the one with title (still the homeowner) with maintaining the property.
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There is no doubt every decision made by a financial institution in the

foreclosure process is driven by money. And the legal work which flows
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from winning the financial institution’s favor is highly lucrative. There is

nothing improper or wrong with financial institutions or law firms making a


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profit — to the contrary, they should be rewarded for sound business and

legal practices. However, unchallenged by underfinanced opponents, the


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institutions worry less about jurisdictional requirements and more about

maximizing returns. Unlike the focus of financial institutions, the federal


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courts must act as gatekeepers, assuring that only those who meet diversity

and standing requirements are allowed to pass through. Counsel for the
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institutions are not without legal argument to support their position, but

their arguments fall woefully short of justifying their premature filings, and
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utterly fail to satisfy their standing and jurisdictional burdens. The


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institutions seem to adopt the attitude that since they have been doing this

for so long, unchallenged, this practice equates with legal compliance.

Finally put to the test, their weak legal arguments compel the Court to stop
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them at the gate. The Court will illustrate in simple terms its decision:

“Fluidity of the market” — “X” dollars, “contractual arrangements


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between institutions and counsel” — “X” dollars, “purchasing mortgages
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in bulk and securitizing” — “X” dollars, “rush to file, slow to record after

judgment” — “X” dollars, “the jurisdictional integrity of United States


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District Court” — “Priceless.” [emphasis added]

The honorable Arthur Schack and several judges in New York State
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Courts, have also addressed mortgage industry abuses as illustrated in

Exhibit 5 that contains links to various key decisions illustrating the


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falsehoods in the pleadings, evidence and affidavits of the foreclosure bar

and its clients to create standing and detail the true owner and holder in due
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course of those seeking to foreclose on New York homeowners.

This Court’s rule was amended to reduce confusion and waste of both
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judicial and borrower resources. The Court’s rule is necessary to eliminate a

paradox that would exist if Floridian borrowers brought forth legal


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challenges in bankruptcy adversary proceedings, quiet title actions and other


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lawsuits forcing the determination of the true and rightful owners of their

lawful indebtedness and to whom such obligation was owed to as well as if

such obligation was secured or unsecured.


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The Shapiro Firm asserts that subsequent holders of a note will not be

in a position to verify “alleged facts in a foreclosure complaint” that


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occurred prior to its acceptance of the current assignment. This questions if
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due diligence is ever conducted by subsequent holders in due course, as

represented to investors, to ensure they have clear and marketable title via a
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valid chain of endorsements and assignments of the notes they are

purchasing. The Shapiro Firm states that it is “unclear whether an attorney


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or law firm representing a lender can verify a mortgage foreclosure

complaint.”
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These confessions beg additional pertinent questions such as: a) Does

anyone know anything before we evict a family from their home as an


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unrecognized, unknown Plaintiff rushes to dispose of collateral; b) To whom

do the foreclosure proceeds actually go to and how are they divided; c)


d.

Excluding the actual lenders, are the servicers and other parties, including

The Shapiro Firm itself and other foreclosure bar firms, receiving double or
or

multiple recovery without disclosure wherein other firms which may have
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subrogation claims have paid off the lawful obligation and debt to the actual

lender; d) Exactly who does counsel represent and who are their clients

entitled to privilege in court proceedings; e) How can a defendant or a court


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be assured of the material facts presented as proof of the obligation if each

entity is responsible and accountable for a only narrow window of events


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occurring during the time from when that particular party originated,
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serviced, sold, transferred, or received the note to when it was handed off; f)

How are any material facts presented as evidence in a court of law to be


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verified, attested to, litigated, and defended against when the subject is a

securitized mortgage and promissory note involves numerous undisclosed


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real and indispensable parties, all determined to subvert their role, avoid

liability, and demand an outside agency (i.e.: the Florida Supreme Court) to
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determine who should tell the truth under penalties or perjury or sanctions?
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III. Burden of Proof Rests on the Plaintiff

The Florida Rules of Professional Conduct Rule 4-3.1 provides further


d.

direction to the Shapiro Firm as to who shall bear the ultimate responsibility

for verification of a foreclosure claim and states, “A lawyer shall not bring
or
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or defend a proceeding, or assert or controvert an issue therein, unless there

is a basis for doing so that is not frivolous.” [emphasis added]

If Plaintiff and their counsel are unable to determine if a foreclosure


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complaint has any merit before initiating the action, then defendants’

motions to dismiss must be accorded studied judicial review. Now is not the
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time for experimentation with ex-parte orders of denial on defendants’
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motions to dismiss, an idea batted about in some Florida Circuit courts.

When Plaintiff’s counsel is unsure of the validity of its foreclosure


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actions, reason dictates that the discovery process must not be subverted as

defendants raise appropriate concerns regarding the status and standing of


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the Plaintiff, the obligation, amount, and secured status of any debt, and

other facts presented to the court. The across the board stonewalling of
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discovery requests only adds to the confusion and appearance of an

“inappropriate Plaintiff.” In light of the Shapiro Firm’s confessions, the


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critical fulcrum at the center of scale of justice rests upon access to

discovery, in the form of admissions, documents, depositions, and


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interrogatories. The obstinate refusal to provide responses to even the

simplest of discovery requests only adds to the lack of transparency and may
or
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be a major contributor to the Shapiro Firm’s own “questions and

uncertainty.”
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IV. No Room For Perjury With Impunity

The Shapiro Firm, disquieted over the new verification rule, anguishes
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over the implications; civil, criminal, ethical, and professional. An attorney
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bringing a Florida foreclosure action on behalf of a client now must verify

the following: a) I declare I have read the foregoing; and b) The facts alleged
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therein are true and correct to the best of my knowledge and belief.

A layperson, contemplating these two statements, is at a disadvantage in


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elucidating the predicament The Shapiro Firm’s attorneys proclaim. A

simple “yes” will suffice as a condition precedent to the filing of a


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foreclosure action. A “no” would obviate the attorney query his client

further regarding the material facts of the case prior to bringing the action,
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wasting judicial resources, disrupting a Floridian family, and most alarming,

engendering an unfounded foreclosure and subsequent eviction of a family


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who may have no alternative housing options.

The Florida Rules of Professional Conduct Rule 4-3.1 provides further


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direction to The Shapiro Firm as to who shall bear the ultimate responsibility
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for verification of a foreclosure claim and states, “A lawyer shall not bring

or defend a proceeding, or assert or controvert an issue therein, unless there

is a basis for doing so that is not frivolous.”


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V. The Surreptitious Plaintiff - - The Stealth Owner/Holder of the
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Note.

Inaccurate representations of a Plaintiff as either the holder of a note

or an agent of the holder of the note may constitute fraud upon the court.
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Defendants and their counsel are entitled to insist that Plaintiffs establish

their standing.
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A day spent in any file room of any courthouse in the state reveals the
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gallimaufry of unexamined, inconsistent, incomplete, conflicting, and

contradictory documents that are typical of a Florida foreclosure action


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today. Unexplained “Attorney-In-Fact-For” notations, servicers parading as

holders, counsel refusing to reveal the true identity of their client;


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misleading affidavits of indebtedness; myriad variations of signatures

penned by the same signatory; plaintiffs without standing; assignments of


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mortgage produced by “document solutions” companies, some under


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criminal investigation;9 free-floating allonges produced after the fact; notes

endorsed to non-parties; notes stamped “VOID” and notes endorsed in blank

without intervening endorsements; employees of plaintiffs signing on


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documents transferring assets from and to the same entity (via

unauthenticated corporate resolutions); aggressive objections to discovery


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and motions for protective orders all stand in the way of determining the true
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identity of the investor(s) who advanced funds to pay value for the note and

who actually suffered a monetary or pecuniary loss resulting from non-


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payment of the borrower’s obligation.
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VI. The “Foreclosure Factory/Mill Assembly-Line Processes Reveal


the Disingenuous of the Movant’s Arguments.

There is no certainty, given the past behavior of the industry, Movant,


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and its affiliates, that regardless of how the Court rules, that there will be
au

compliance with this or any Court’s requirements or rules. Simply put, the

foreclosure factory’s machinery will take a greater retooling effort than

Detroit automakers making new hybrid and fuel-efficient cars capable of 75


d.

miles MPH.
or

9
http://online.wsj.com/article/SB10001424052702303450704575160242758576742.html?mod=rss_Today
's_Most_Popular
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Page 24 of 66
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This Court is very familiar and sensitive to the industry-wide practices

employed by the mortgage servicing, default servicing, and foreclosure bar

enterprise and the resulting confusion on ownership, transfer, and proper


w.
party plaintiffs. In the matter of the Law Office Of David J. Stern, P.A. v.

Security National Servicing Corp. (Case No.: SC06-361 and 4th DCA Case
4
No.: 4D04-776), this Court was asked by the Stern Law Firm to resolve
clo
issues regarding its liability for malpractice by a conflicting confluence of

interests in the transfer and ownership of a promissory note and mortgage


su
deemed worthless. If the alleged note owners and holders cannot agree

amongst themselves who is a client and/or note owner and the time frame of
re

that ownership, how can a borrower and their counsel determine these facts

and offer a defense against abusive or unlawful foreclosure actions?


Fr

As for the movant, the Shapiro Firm, the Respondents would ask this

high honorable Court to take judicial notice in the case of Rivera (Debtor) in
au

the United States Bankruptcy Court District Of New Jersey Case No. 01-

42625 (MS) wherein a sister firm of the Shapiro Firm, Shapiro & Diaz
d.

(“S&D”) was sanctioned $125,000.00 by the Court for filing pre-signed

certifications of default executed by an employee who had not been


or

employed at the firm for more than a year. [emphasis added] The
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Page 25 of 66
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honorable Morris Stern, the federal bankruptcy judge overseeing the

bankruptcy proceeding involving Jenny Rivera, the borrower, issued the

sanction against the S&D firm, which is a part of the Shapiro Attorneys
w.
Network that controls the Shapiro Firm. The judge found that S&D had

filed 250 motions seeking permission to seize homes using the pre-signed
4
certifications by the ex-employee.
clo
In testimony before the judge, an S&D employee stated that the firm used

the pre-signed documents beginning in 2000 and that they were attached to
su
“95 percent” of the firm’s motions seeking permission to seize a borrower’s

home. Individuals making such filings attest to their accuracy. Judge Stern
re

called S&D’s use of these documents “the blithe implementation of a

renegade practice.” [emphasis added] In United States Bankruptcy Court,


Fr

Southern District of Florida Ft Lauderdale Division Case 08-14257-JKO, the

Honorable John K. Olsen, federal bankruptcy judge, sanctioned another


au

foreclosure bar firm, Florida Default Law Group (“FDLG”) and wrote,

“parties have engaged in the systematic process of churning out unrefined


d.

and unexamined form pleadings, instead of producing and filing carefully

considered legal papers.”


or
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Page 26 of 66
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S&D as well as the movant, the Shapiro Firm, are part of a national

network of law firms owned or controlled by two Illinois attorneys, Gerald

M. Shapiro and David Kreisman, who both maintain residences in Boca


w.
Raton, Florida, where the Shapiro Firm and its managing attorney, Marisa

Ajmo operate.
4
According to Judge Sterns’ 58-page ruling,10 until June or so of 2004,
clo
Shapiro and Kreisman operated a mortgage loan default outsourcing service

called “LOGS Financial Services, Inc.” LOGS is an acronym for the Law
su
Offices of Gerald Shapiro. LOGS interfaces with the alleged mortgage

holders or other mortgage servicers to process real estate foreclosures and


re

related bankruptcy matters. LOGS sold its business to First American

National Default Operations (“FANDO”), a unit on or about June 2004. The


Fr

Shapiro Firm and other foreclosure bar members are an integral part or even

own the opaque system of default servicing and foreclosure service


au

providers.

The actual lenders, servicers, and trusts have thus abdicated their
d.

corporate and legal responsibility for maintaining records, computerized

servicing systems and accountings to these third party outsourcers who are
or

10
http://www.msfraud.org/LAW/Lounge/Standing/Jenny_Rivera.pdf
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Page 27 of 66
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not subsidiaries, employees, managers, or executives of the actual lender and

holder in due course, and as such, can not testify to the actual records

necessary to prove a Plaintiff’s allegations. In today’s foreclosure actions, a


w.
bewildering array of non-officers and non-affiliated companies are providing

false accountings, forged, falsified, and fraudulent assignments of mortgage


4
and concealing necessary facts from investors, borrowers and the courts.
clo
LOGS maintains approximately thirty (30) law firm partner offices in

twenty-seven (27) states that bear the Shapiro name (brand) with local
su
foreclosure counsel. On its website, LOGS advertises its “industry

expertise and leadership” that is evident in their “proactive, process-oriented


re

default management solutions, each of which is designed to engineer

performance, mitigate risk, curtail expense, improve profitability, and drive


Fr

performance.”

The Shapiro Firm, S&D and other Shapiro network law firms and
au

foreclosure firms in Florida have historically received data directing

foreclosure pleadings and bankruptcy motions or applications from post-


d.

default servicers such as FANDO and Lender Processing Services (“LPS”),

a former unit of Fidelity National Financial.


or
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Page 28 of 66
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LPS is now under a federal criminal investigation by the U.S.

attorney's office for the middle district of Florida for alleged false,

fraudulent, and forged assignments of mortgages used by the Shapiro Firm


w.
and other Florida foreclosure bar firms.11 Respondent Lavalle first

discovered these fraudulent practices in the mid-nineties in his seven-year


4
investigation of EMC Mortgage, Bear Stearns, Fannie Mae, Freddie Mac
clo
and Washington Mutual from 1993 to 2000 detailed in his report12 titled

Predatory Grizzly "Bear" Attacks Innocent, Elderly, Poor, Minorities,


su
Disabled & Disadvantaged.

Respondent Lavalle’s 2008 report titled Sue First & Ask Questions
re

Later13 not only laid the foundation for other advocates and lawyers’

investigations to question every document and allegation made in a


Fr

foreclosure complaint, but also the current criminal investigations led by the

U.S. trustee and attorneys’ office. In the report, on page 3, Lavalle states
au

that often the entity filing foreclosure: a) Does not own the note; b) Made

false representations to the court in pleadings; c) Does not have proper


d.

authority to foreclose; d) Does not have possession of the note; and/or e) All
or

11
http://online.wsj.com/article/SB10001424052702303450704575160242758576742.html?KEYWORDS=
%22lender+processing%22
12
Report found at http://www.scribd.com/doc/3683593/Predbear
13
http://www.scribd.com/doc/20955838/PMI-Ocwen-Anderson-Report-Sue-First-Ask-Questions-Later
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Page 29 of 66
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indispensable parties (the actual owners) are not before the court or

represented in the pending foreclosure action In the report, on page 5,

Lavalle states that he has reviewed over 10,000 assignments of mortgages,


w.
powers of attorneys, affidavits, and satisfaction of liens in public records

across the nation and particularly in Florida and his findings illustrate: a)
4
That servicers, default servicing outsourcers and their lawyers are forging
clo
documents with “squiggle marks” that are not the marks or signatures of the

actual officer that is notarized to be the signatory; b) Squiggle marks with


su
“initials only” are designed so that anyone can sign an officer’s or vice

president’s signature, instead of the signatory; c) Dozens of variations of a


re

squiggle mark that are consistently different than several or a dozen other

squiggle marks of the same signatory, notary, and/or witness to the


Fr

document; d) Squiggle marks and full signatures that are diametrically

opposed to the known signature of the signatory; e) The same “officer” or


au

“vice president” of a bank or lender being an officer and/or vice president

for dozens of other banks and lenders; f) The same “officer” or “vice
d.

president” of a bank or lender signing and being located in various cities

across the United States; g) The named “officer” or “vice president” of a


or

bank or lender being a notary public or witness on other identical


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Page 30 of 66
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assignments, affidavits, and satisfactions; h) Pre-stamped assignments and

notary signatures on assignments, affidavits and proof of claims; i) Second

page notarizations that are attached to documents that do not conform in


w.
type and style to the first page of the document; j.) Automated signatures on

computer of “both” the notary and the signatory; and k) Backdating of dates
4
on assignments and signatures of officers dating years after a company has
clo
been out of business or gone bankrupt.

These findings have been confirmed. In the case of LPS, the


su
information was released in its corporate SEC filings. Other information

was gleaned by taking depositions of the corporate representatives of the


re

Law Office of David J. Stern,14 GMAC,15 Chase Home Finance,16 and

IndyMac/One West Bank.17 (depo downloads available at links in footnotes)


Fr

The U.S. Trustees office has also sought severe sanctions against JP

Morgan Chase18 and others for falsifying documents as the New York Post
au

reported19 on February 28, 2010. “Diana Adams, the US Trustee in

Manhattan, filed papers in court supporting punitive financial sanctions


d.

14
Deposition of manager of David J. Stern Law Offices found at http://mattweidnerlaw.com/blog/wp-
content/uploads/2010/03/depositionsammons.pdf
15
Deposition of IndyMac officer found at http://mattweidnerlaw.com/blog/wp-
or

content/uploads/2010/03/depositiongmac.pdf
16
http://mattweidnerlaw.com/blog/wp-content/uploads/2010/03/depositionnolan.pdf
17
http://mattweidnerlaw.com/blog/wp-content/uploads/2010/03/depositionseck.pdf
18
http://online.wsj.com/public/resources/documents/NuerStatement0402.pdf
19
http://www.nypost.com/p/news/business/liening_on_brXWsORtBjnxgpXskq8x5N
g

Page 31 of 66
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against the Chase for a string of bad behavior, including seeking to foreclose

on homes after they rejected the attempts to make on-time payments and for

failing to prove they own the mortgage on a home even as they move to
w.
seize it.” [emphasis added]

Judge Stern commented that information was coming from outside


4
sources rather than from mortgagees or the primary mortgage loan servicers.
clo
The chain of title and accounting data from mortgagees’ and note holder’s

books and records is fundamental to any of their demands for post-default


su
and foreclosure remedies. A secured party entitled to enforce a note must

program and maintain its bookkeeping and accounting systems to account


re

accurately for the complexity of home mortgage variables, including not

only periodic payments by mortgagors, but also such items as changes in


Fr

interest rates where applicable, escrow balances, adjusted e.g., for real estate

tax and casualty insurance premium payments, and allowable charges for
au

fees and costs, including those of law firms such as the Shapiro Firm.

In addition to the Shapiro firm and FDLG, another Florida


d.

Foreclosure Mill law firm, Butler & Hosch, P.A was sanctioned by a South

Carolina Federal Bankruptcy judge for filing false affidavits as well. On


or

November 14, 2006, after review of assembly-line pleadings and affidavits


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Page 32 of 66
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submitted by Shiver, the Court issued show cause orders to attorneys and

employees Shiver and Branham, individually and as agents of Butler &

Hosch, P.A.
w.
Shiver and Branham appeared at a later hearing and admitted: a) they

did not always read documents bearing their signatures that were filed with
4
the Court, relying on paralegals or other firm support, b) affidavits submitted
clo
to this Court were not always executed in person before a notary as

purported in the documents and some purported affidavits may not have
su
been reviewed and actually signed by the attorney purported to have signed

the paper; and c) the attorneys, despite having support staff in South
re

Carolina, did not have an adequate system for observing and being notified

of hearings requiring their attendance before the Court.


Fr

The default outsourcers who direct over 85% of residential mortgage

foreclosures in America are controlled by member lawyer firms and


au

supported by various subsidiaries, affiliated companies and divisions of two

major title insurers, Fidelity National Financial and First American. Both
d.

firms stand to suffer significant losses in the tens, if not hundreds of billions

of dollars in title claims, caused by the uninsurability and clouded titles, due
or

to their very own practices in the default and foreclosure process.


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Page 33 of 66
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It is these firms that not only create assignments of mortgages, many

of them forged and fraudulent and now under criminal investigation, but

actually select the lawyers and refer the foreclosure cases and prepare the
w.
pleadings and other motions for their designated counsel who they score on

report cards whose measures are based on expediency, rather than accuracy
4
and lawful execution.
clo
In essence, plaintiffs and their lawyers practice foreclosure law in the

state of Florida and across the nation in an automated and robotic fashion
su
devoid of lawful and knowledgeable review of facts, evidence, and even

testimony which is often fabricated and supported by forged signatures of


re

affiants and witnesses and sometimes perjurious testimony before judges.

Law firms have automated the default, foreclosure, and bankruptcy legal
Fr

profession into a robotic system wherein human checks and balances, not to

mention ethics and standards of professional conduct, have been totally


au

ignored and done away with. However, the homes of Floridian families

should not be placed under the mechanical aegis of robots or computers of


d.

third-party outsourcers that stand to benefit, some of which are located in

distance nations such as India.


or
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Page 34 of 66
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Foreclosure bar lawyers have become perfunctory puppets of their

masters having no factual knowledge of the facts they are alleging, no

apparent guardianship over their professional duty to uphold the law, and
w.
exhibiting a blithe disregard to the practice of their profession and the very

documents that bear their signature. The grand irony is that the borrower in
4
a Florida foreclosure rocket-docket courtroom is viewed with suspicion and
clo
disdain, cowed under “scumbag-deadbeat” stigma, as questions and

concerns in step with those voiced by the Shapiro Firm are put forth in an
su
attempt to defend against an unfounded foreclosure action. One mortgage

servicer, EMC Mortgage, in written training manuals even distinguished


re

borrowers in default as Joe and Jane Smuck versus Jane and John Doe in

regular servicing manuals.


Fr

The pervasive fraud upon state and federal Courts in Florida and across

the nation, as evidenced by Movant’s sister firm in New Jersey, S&D, and
au

fellow foreclosure bar attorneys is not limited to pleadings, affidavits, and

assignments, but even to perjurious testimony by the managing officer of the


d.

Movant in this matter in a Florida courtroom.

In August of 2002, In The Circuit Court Of The Ninth Judicial Circuit,


or

Orange County, Florida in Case No.: 02-CA-7515 Mortgage Electronic


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Page 35 of 66
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Registration Systems, Inc. (“MERS”) filed a foreclosure action against

Lawrence Rumbough claiming it owned and held his “lost” promissory note,

a claim and allegation disavowed years later by MERS’ own CEO in


w.
depositions. The case was prosecuted by the managing partner of the very

movant in this matter, Marisa Ajmo of the Shapiro Firm. The court ruled
4
MERS’ favor in its summary judgment of foreclosure in October of 2002.
clo
Thus, MERS’ obtained a judgment in its name for property and value.

The case was over dispute with Midland Mortgage that Rumbough made
su
payments due later claimed to be 12 days late and Rumbough claimed

Midland misapplied his payments and rejected others and was never late.
re

Yet, MERS, Ajmo, LOGS, and Midland spent over $200,000 in legal fees

related to a roughly $50,000.00 principal balance on a loan that Rumbough


Fr

wished to pay off and a property he wanted to keep.

In the original complaint, MERS via its law firm (the Shapiro Firm)
au

averred that the chain of title went from Residential Mortgage Services (A)

to Mortgage Electronic Registration Systems (B) to Midland Mortgage Co.


d.

(C). Ajmo, under oath, even testified that MERS owned the note and

transferred the note and mortgage to Midland Mortgage Co.


or
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Page 36 of 66
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A hearing on the case was held on October 9, 2006, at the Orange County

Courthouse, before the Honorable Renee A. Roche, Judge of the Circuit

Court, Orlando, Florida. In the hearing, Movant’s own managing attorney,


w.
Marissa Ajmo, appeared and testified. Ajmo’s cross-examination in this

case in pages 17 to 18 of the transcript went like this:


4
Q: Well, in this case, was Midland servicing its own mortgage and
clo
note?

A: It depends on what time you're talking about.


su
Q: I'm talking about from 2001 to June of 2006.

A: MERS was -- excuse me. Midland was servicing the mortgage


re

and the note on behalf of MERS at that time.

Q: Was MERS the lender at that point?


Fr

A: I believe -- if you look at the mortgage and the note, I believe

that they were.


au

Q: Well, you represented -- in this case, did MERS hold the note

for its own account?


d.

A: Physically hold it or own it?

Q: No. Own it.


or

A: Yes, I believe so.


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Page 37 of 66
ww
The mortgage assignments and title search showed the original lender

as Residential Mortgage Services (A) to Troy & Nichols on 12/22/93 (B) to

Chase Mortgage on 7/1/98 (C) to Mortgage Electronic Registration Systems,


w.
as nominee for Homeside Lending on 6/1/01 (D) to Midland Mortgage Co.

on 2/8/06 (E).
4
Yet, when the note was produced years later after the patently false
clo
pleading that the note was lost, the chain of assignments on the note itself

reflected the following: Residential Mortgage Services (A) to Troy &


su
Nichols (B) to Chase Mortgage (C) to Payable to the Order of Blank (D).

Yet, years later in Federal litigation over the matter caused by


re

Rumbough’s desire to keep his property, MERS finally produced the

document attached as Exhibit 6 which is commonly referred to as the MERS


Fr

Milestone document which reflects the transactions input into the private

industry database maintained by MERS. An internal Chase document


au

identified in production showed that 100% participation in the loan (and

note) was sold to Ginnie Mae on 2/1/94 (less than a month after its
d.

origination) and placed into the GNMA group/pool No. 360782X with a

servicing fee of 00.5000 paid to the servicer.


or
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Page 38 of 66
ww
These facts, without evidence of payment, but in the internal computer

records of Chase and MERS showed that the U.S. government’s Ginnie Mae

program bought the note on or about 2/1/94 and allegedly sold the note to
w.
MidFirst Bank, not Midland Mortgage on 8/28/03 over a year after the

original foreclosure action and almost an entire year after a judgment of


4
foreclosure was obtained by Movant on behalf of MERS. MERS never
clo
owned or held the note, and the averments, affidavits, and testimony to the

contrary where not only patently false, but knowingly perjurious.


su

V. A Decade of Warnings to Movants, Their Clients, & Other


Members/Partners of the Foreclosure Mill/Factory “Enterprise” By
re

Respondent & Members of the Florida Judiciary

As demonstrated herein, the Movant, its clients, and the mortgage


Fr

industry were warned of the consequences of their bad deeds and acts as far
au

back as 1999 and certainly as of 2003 when MERS was warned by

Respondent Lavalle of the false pleadings and affidavits that Judge Gordon

took judicial notice of in his sua sponte show cause hearing in MERS v.
d.

Cabrera; Case No. 05-02425 CA 05 In the 11th Judicial Circuit for Miami-
or

Dade County, Florida which followed a similar hearing by the honorable

Logan in Pinellas County when counsel for MERS stated on the record “So
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Page 39 of 66
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by the time it comes to foreclosure, it’s not certain who has the beneficial

interest in the promissory note.” (pg 6 Logan Order20)

Lavalle's most dire prediction came from the second report he released at
w.
the 2000 National Consumer Law Conference in Broomfield Colorado.

Lavalle's report, authored in 1999 and researched from 1993 to 1996,


4
foresaw the impending collapse of the mortgage and credit markets and the
clo
failure of major Wall Street firms and banks over their subprime mortgage

investments. On pages 30 to 33 of the 20th Century Loan Sharks Report,21


su
Lavalle wrote: “The effects of a predator’s behavior has a wide range effect

on many, not just the borrowers being abused. This includes the predator’s
re

own shareholders, investors, government and the public. “The effects of

predatory lenders and the subprime mortgage market on these constituencies


Fr

and the financial markets include: 1) devaluing of various mortgage

derivative products; 2) failure of major banks and Wall Street firms; 3)


au

reluctance of corporations, mutual funds and other investors to invest in

legitimate mortgage backed securities; 4) increased government regulation


d.

and supervision; 5) illegal stripping of equity of customer’s homes; 6)

outcries from shareholders and constituents; 7) credit downgrading of


or

20
http://charleslincoln3.files.wordpress.com/2010/02/judge-logans-order-on-mers.pdf
21
http://www.scribd.com/doc/13625416/AAMA-Report
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Page 40 of 66
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mortgage backed securities; 8) reduced value and marketability of mortgage

backed securities; 9) reduced stock and option prices; 10) elimination of jobs

due to cuts and layoffs; 11) overpayment of false and fraudulent claims by
w.
federal government; and 12) increase in foreclosed and abandoned homes in

communities across America.”


4
Beginning in 2000, Lavalle began buying one share and his family Pew
clo
trusts bought additional shares in several mortgage companies, banks and

Wall Street firms including Bear Stearns, WAMU, Ocwen, Fannie Mae,
su
Freddie Mac, PMI, JPMorgan Chase and others to allow Lavalle the

opportunity to take his concerns to executive management and board rooms


re

of each company.

Lavalle’s reports to Fannie Mae led to Fannie Mae’s board and CEO’s
Fr

creation of an outside independent counsel investigation of the servicing

practices with particular emphasis on the foreclosure bar firms in Florida


au

where two Florida judges, Judge Logan of Pinellas County and Judge

Gordon of Miami-Dade were echoing Lavalle’s concerns.


d.

Mark Cymrot of the Washington D.C. law firm of Baker Hostetler led the

investigation and also concluded that false pleadings were being executed by
or

the foreclosure factory/mill firms, including the Shapiro Firm. Fannie Mae
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Page 41 of 66
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amended and changed many of its servicing policies after Lavalle’s report

and the independent counsel’s investigations and most recently barred any

foreclosure actions in the United States being prosecuted in the name of


w.
MERS.

With relationship to MERS, in 2003, Lavalle made several posts on a


4
web forum under his and his mother’s name and Does to MERS CEO and
clo
general counsel who took note of his warnings of false pleadings and frauds

in Florida Courts that MERS and other servicers actually owned the notes
su
they claimed ownership of or their loss. The posts, attached as Exhibit 7,

were part of the Court’s composite Exhibit One in MERS v. Cabrera in


re

which Judge Gordon took judicial notice of without objection.

In his questioning of the industry and its lawyers, Judge Gordon used
Fr

Lavalle ‘s forum post communications with MERS CEO and general

counsel as the basis for his first questions (transcript22 pgs 16 – 23) directed
au

to MERS, its counsel, and other law firms present, including the movant and

its clients.
d.

Judge Gordon’s comments in MERS v. Cabrera echoed Lavalle’s

concerns when he stated: “It truly concerns me, however, that thousands and
or

22
http://www.floridalegal.org/Umbrella%20Groups/MERS/MERS1.PDF and
http://www.floridalegal.org/Umbrella%20Groups/MERS/MERS2.PDF
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Page 42 of 66
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thousands -- thousands and thousands of mortgage foreclosure actions have

been filed with these allegations. I am not certain what remedy, if any, these

people would have were it to be determined that MERS was not ever the
w.
proper party notwithstanding that these folks [might] have been in default

what their recourse, if any, would be. I'm not certain with the satisfaction of
4
mortgages that have been filed on behalf of MERS how good those are and I
clo
am not certain how good title to property is that people bought at these

foreclosure sales if it turns or becomes established that MERS was indeed


su
not only not the right party but misrepresented by way of their pleadings and

affidavits that they held something they didn't own, so I'm not certain of the
re

consequences but it seems vast.”

Judge Gordon called the foreclosure bar, their clients (servicers) and
Fr

MERS’ pleadings a “sham” in his order23 of September 28, 2005. In

addressing the frauds upon his Court, Judge Gordon laid out the parameters
au

of false and sham pleadings as well as the warnings of Lavalle to MERS and

the foreclosure factory/mills, including Movant.


d.

In his order, Judge Gordon wrote: “Now we address the more troubling

question of whether MERS has committed fraud upon the Court by


or

23
Order found at http://www.msfraud.org/LAW/Lounge/MERS%20is%20a%20SHAM.pdf
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Page 43 of 66
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knowingly filing pleadings which contain allegations which are clearly false,

as a mere pretense set up in bad faith and without color of fact. "A plea is

considered 'sham' when it is palpably or inherently false, and from the plain
w.
or conceded

facts in the case, must have been known to the party interposing it to be
4
untrue." See Rhea v. Halkney, 157 So. 190,193 (Fla. 1934). The Corrected
clo
Order to Show Cause… MERS had adequate notice and a fair opportunity to

present any evidence in response to the Corrected Order to Show Cause.


su
MERS appeared through local and corporate counsel; aside from argument

and representations of counsel, MERS failed to produce any witnesses or to


re

offer any evidence in response to the Corrected Order to Show Cause. The

only evidence admitted at the hearing was the Courts' composite exhibit
Fr

(which included Lavalle’s warnings in Exhibit 7) which consisted of copies

of documents obtained from MERS official web site (www.MERSINC.org)


au

of which the Court took judicial notice.”

Judge Gordon further stated that “the evidence is clear and convincing
d.

the MERS's allegations that it "owned" "held" and "possessed" the Mortgage

Notes in questions are clearly, palpably and inherently false based upon the
or

plain and conceded facts in the case. [emphasis added] The evidence is
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Page 44 of 66
ww
likewise clear and convincing that MERS at all times prior to making these

allegations acted in bad faith knowing them to be false and indeed, it was

forewarned (by Lavalle) of the potential consequences for making such false
w.
allegations.

As will be illustrated below, Judge Gordon’s warning of the implications


4
of such practices have come to fruition in the state of Massachusetts where
clo
the identical practices have led to denial of title in two cases of foreclosed

properties and placed a cloud on title on tens of thousands on real property


su
in the state.
re

VI. The Shell Game of Passing the Buck then Passing the Bid & The
Ramifications of Assigning Millions of Defective Titles into
Perpetuity
Fr

We are all familiar with the notorious “shell game” and its variations.
au

(Three shells and a pea or marble, the old army game). The shell game is

portrayed as a gambling game, but in reality, when a wager for money is

made, it is a confidence trick used to perpetrate fraud.


d.

In the mortgage industry today, the shell game continues with the
or

transfer and assignment of notes and mortgages and it is only when a wager

is made by a borrower wanting to see the pea or ball, is an assignment and/or


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Page 45 of 66
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note shown with actual “slight of hand” via false facts, corporate identities,

notarizations, signatories, dates, signatures, and actual witnesses.

One of the most egregious cases the Respondents have uncovered is a


w.
case discovered by Lavalle in Marion County, Florida. Betty Upper is a

divorced mother of four children. CitiMortgage Inc., as successor by merger


4
to ABN Amro Mortgage Group, Inc. filed a foreclosure lawsuit in Marion
clo
County, Florida against Edward (former husband) and Betty Upper in case

no. 09-3245-CAG (“Upper Foreclosure”).


su
In the Upper Foreclosure Complaint, CitiMortgage provided a copy of

the Upper mortgage and promissory note (Exhibit 8) Exhibit 8 contains an


re

alleged copy of the promissory note the Uppers originally executed with

Ocala National Bank in the amount of $246,400.00 on December 12, 2005.


Fr

On the front of the promissory note listed in Exhibit 8 is clearly a stamp that

says, “This note is endorsed by an attached allonge.” Following the 3 pages


au

of the note attached in Exhibit 8 is a copy of the allonge attached to the note

on page 4 referenced on the stamp on the first page of Exhibit 8. The copy
d.

of the allonge indicates that Ocala National Bank sold or transferred its

interest in the Upper promissory note to Ohio Savings Bank without


or

recourse and the chain ends there since there is no further endorsement or
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Page 46 of 66
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blank endorsement on the note or allonge. The allonge was executed by

Rance Kayon or about same date as the promissory note, December 12,

2005.
w.
Yet, allegedly, on the very same day, December 12, 2005, Rance Kay,

the president of Ocala National Bank, executed an assignment of mortgage


4
to ABN Amro Mortgage Group shown on page 5 in Exhibit 8. Thus, the
clo
prima facie evidence provided by CitiMortgage Inc. itself in a foreclosure

action wherein it claims to own and hold the note, clearly demonstrates that
su
the note was sold, transferred, pledged and/or assigned to Ohio Savings

Bank.
re

Ohio Savings Bank then became known as AmTrust Bank and in the

past year, far after the foreclosure, AmTrust Bank, Cleveland, OH was
Fr

closed by the Office of Thrift Supervision (OTS), and the Federal Deposit

Insurance Corporation (FDIC) was named Receiver. The deposit assets


au

were then sold to New York Community Bank, Westbury, NY, and the

“assuming institution.”
d.

On June 16, 2009, on behalf of Upper, Lavalle pulled from the

Freddie Mac website the information shown in Exhibit 9 which clearly states
or

that Freddie Mac is the owner of the Upper loan and promissory note with
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Page 47 of 66
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no assignment or endorsement to them anywhere evidenced in the county

deed of records or in an unrecorded assignment produced or authenticated.

Besides the complication and expense for Upper to defend such a suit, which
w.
party does she defend against and sue in any counterclaims? Which party is

claiming the loss or asset on their books and how does that effect
4
shareholders and investors? This is a prime example of why the Court’s
clo
decision to verify the pleadings must remain since this is not an isolated

case. How will Upper or any Florida homeowner achieve clear title to
su
property in such a case?

It have been commonplace, for servicers to bring foreclosure actions


re

in their names, rather than the name of the real owner and holder of the note.

The question must be asked, why? If the servicer can bring a foreclosure
Fr

action as an agent, why can’t it identify who the actual real lender is,

especially if it’s a tax payer supported GSE such as Fannie Mae, Freddie
au

Mac, or Ginnie Mae with implicit or explicit government guarantee? What

are the legitimate motivation behind the shell game and concealing the true
d.

identity of the lender? What are lenders and servicers afraid of, unless its

assignee liability or the inability to prove up the chain of title because they
or
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Page 48 of 66
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are multi-pledging notes to different securitizations and defrauding

investors?

The following is a random Florida foreclosure case showing an


w.
example epitomizing the shell game. This sleight of hand reveals the

Shapiro Firm’s underlying motivation for moving this Court to appoint


4
another party responsible for verification of that which movant is unable to
clo
authenticate.

The Shapiro Firm asks the Court, “How does a member of the
su
foreclosure bar verify complaints in compliance with amended rule 1.110(b),

hundreds of times over, while possessing full awareness of the legal shell
re

game called substitution of Plaintiff or passing the bid?

Composite Exhibit 10 shows that on February 14, 2008 a foreclosure


Fr

case styled Chase Home Finance v Yoanys Suau, Case No: 502008CA0078,

Palm Beach County, FL was filed. Item 2 of Count I of the complaint states,
au

“On August 16, 2006, Yoanys Suau executed and delivered a promissory

note and Yoanys Suau and Jose Luis Suau executed and delivered a
d.

Purchase Money Mortgage securing payment of the same to J.P. Morgan

Chase Bank, N.A.”


or
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Page 49 of 66
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Item 3 of Count I of the complaint states, “Plaintiff, as servicer for the

owner and acting on behalf of the owner with authority to do so, is the

present designated holder of the note and mortgage with the authority to
w.
pursue the present action. No document, such as a PSA or Power of

Attorney (“POA”) was filed as an exhibit to substantiate the allegation of


4
authorization. Furthermore, why can’t the servicer and the Shapiro Firm
clo
show that Fannie Mae is the owner of the note and has granted authority to

Chase?
su
Attached to the complaint is a letter dated February 13, 2008, from the

Law Offices of Marshall C. Watson to defendant stating, “The Plaintiff,


re

Chase Home Finance, LLC is the creditor to whom the debt is owed by those

individuals who are obligated under the promissory note and mortgage.”
Fr

Why can’t the letter simply state that Chase Home Finance, just like

Marshall Watson, is a debt collector subject to the Federal Fair Debt


au

Collection Practices Act collecting the debt on behalf of Fannie Mae? The

Watson firm knew at this juncture that title would be vesting in Fannie Mae
d.

and that Fannie Mae was the investor.

To illustrate the extent of the subterfuge, on July 10, 2008, two


or

assignments of the mortgage in question were recorded with the Palm Beach
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Page 50 of 66
ww
County, Florida clerk of the court on or about the same date. Assignment

#1: had JP Morgan Chase Bank, N.A. located at 3415 Vision Dr. Columbus,

OH, 43219 assignor transferred to Chase Home Finance, LLC located at


w.
3415 Vision Dr. Columbus, OH, 43219. The person, presumably possessing

of the authority to transfer assets and property, was Whitney K. Cook,


4
Assistant Secretary of J.P. Morgan Chase Bank, N.A. The effective date is
clo
left blank. The document was notarized on May 8, 2008 by Sharon L.

Gearheart in Franklin Ohio. Assignment #2: Chase Home Finance, LLC


su
located at 3415 Vision Dr. Columbus, OH, 43219 assignor transferred to

Federal National Mortgage Association located at 6400 Legacy Dr., Plano


re

TX 75021. The person, presumably possessing of the authority to transfer

assets and property, was Whitney K. Cook, Assistant Secretary of Chase


Fr

Home Finance, LLC. The effective date is left blank. The document was

notarized on May 8, 2008 by Sharon L. Gearheart in Franklin Ohio.


au

Typically, Fannie Mae purchases a loan and its promissory note

within weeks to 45 days after loan origination. This loan was taken out
d.

years prior to the assignment that Chase made and the assignment only came

when the foreclosure was commenced. The assignment was made not to
or
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Page 51 of 66
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transfer a note and mortgage, but to give the illusion to the Court that the

servicer could foreclose.

On October 7, 2009, Respondent Epstein filed a comment with the


w.
Court regarding the Final Report and Recommendations On Residential

Mortgage Foreclosure Cases. This comment was followed by many copies


4
of documents signed by Whitney K. Cook as an officer of Mortgage
clo
Electronic Registration Systems, Inc (MERS), Chase Bank U.S.A. N.A., and

also U.S. Bank National Association, Trustee for Lehman Sail 2005-10. The
su
document executed on behalf of Lehman is especially perplexing having

been notarized on July 1, 2009, long after Lehman Brothers ceased


re

operations and with no noted approval by the bankruptcy court. Several of

these documents show that 3415 Vision Dr. Columbus, OH, 43219 is also
Fr

occupied by U.S. Bank National Association.

On December 30, 2008 the following occurred: An Ex-Parte Motion


au

for Substitution of Party Plaintiff was granted and the order states, “Federal

National Mortgage Association (FANNIE MAE) shall be substituted for


d.

Chase Home Finance, LLC and the style of the case shall be amended to

reflect same. A default against Defendant was not entered due to


or

insufficient service of process. The “original note”, now endorsed in blank


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Page 52 of 66
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by a representative J.P. Morgan Chase Bank, N.A., TJ Cox, Assistant Vice

President, was filed. On March 3, 2009, a certificate of title was filed with

the Palm Beach County clerk of the court, showing that on February 12,
w.
2009, the property “was sold to Federal National Mortgage Association c/o

Chase Home Finance, LLC 3415 Vision Drive – Mail code O, Columbus,
4
OH 43219, thus confirming what Watson, Chase, and Fannie Mae knew all
clo
along, that Fannie Mae was the owner of the note.

This trail of subterfuge greatly concerns the Respondents.


su
Transparency should be the rule so that the citizens of this state can follow

the money, property, and proceeds trail to insure that investors, the
re

government, and taxpayers themselves are not further contributing to the

billions of dollars in bonuses given bank and Wall Street executives off the
Fr

backs of Florida homeowners while clouding title to subsequent

homeowner’s properties in the state.


au

If illegal and improper practices were employed by an improper

plaintiff and its counsel as Judge Gordon opined and as Judge Long in
d.

Massachusetts recently ruled, what will be the effect on title be on the

hundreds of thousands of homes already factory-foreclosed and delivered in


or

our state?
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Page 53 of 66
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VII. The Actual Ramifications of the Mortgage Shell Game On
Massachusetts
w.
Perhaps its fate or a bit of synchronicity that just weeks ago, the state

Supreme Judicial Court of Massachusetts bypassed the Appeals Court and


4
accepted consideration of a contentious 2009 Land Court decision24 that has
clo
called into question the validity of thousands of foreclosure sales in

Massachusetts.25
su
U.S. Bank v. Ibanez (08 MISC 384283 (KCL) and 08 MISC 386755

(KCL)) before Massachusetts Land Court Judge Keith Long involved


re

securitized subprime mortgages that were foreclosed in mid-2007. The

originating banks assigned the notes and mortgages “in blank,” and the
Fr

documents were then given to a custodian who kept them safely filed away

while the securitization machine went to work.


au

The consolidated cases involved mortgage foreclosure sales of

residential properties in Springfield, MA that were noticed and conducted by


d.

an entity without any record interest in the mortgages at the time of notice
or

24
Decision located at: http://www.scribd.com/doc/21062165/US-Bank-v-Ibanez-Memo-of-Decision-
Denying-US-Bank
25
http://www.boston.com/business/articles/2010/03/24/sjc_will_review_ruling_that_left_foreclosure_sales_i
n_question/
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Page 54 of 66
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and sale. In each case, the plaintiff was both the foreclosing party and the

only bidder at the sale and the plaintiffs purchased the property at a

substantial discount from its appraised value, wiping out all of the
w.
defendants’ equity in the properties and leaving one of them with a

substantial loan deficiency that would not have been owed had the property
4
sold for its appraised value. This is the identical industry-wide practice
clo
complained of herein and that the Court sought to correct by its order.

In each case, the plaintiff could not obtain insurance for the title it
su

purportedly received from the sales and the plaintiffs then brought actions to

“remove a cloud from the title” of the properties in question. As the


re

plaintiffs themselves phrased it, did the plaintiffs have “the right . . . to

foreclose the subject mortgage in light of the fact that the assignment of the
Fr

foreclosed mortgage into the Plaintiff was not executed or recorded until

after the exercise of the power of sale” (the “present holder of the mortgage
au

issue”).26
d.

The “present holder of the mortgage issue,”, was decided against the

plaintiffs in Ibanez and Larace. Id. because the factual allegations in the
or

26
In the Notice of Mortgagee’s Sale of Real Estate in both Ibanez and Larace, the plaintiffs (U.S. Bank in
Ibanez and Wells Fargo in Larace) represented themselves to be “the present holder of said mortgage.”
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Page 55 of 66
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complaints (binding on the plaintiffs pursuant to G.L. c. 231, § 87) showed

that neither U.S. Bank (in Ibanez) nor Wells Fargo (in Larace) was the

holder of the mortgage (either on or off record) at the time notice of the
w.
foreclosure sale was given or at the time the sale actually took place.

According to those allegations, both were assigned the mortgage long after
4
the foreclosure sales occurred.27 Thus, on those facts, as a matter of law, the
clo
sales were invalid.

Incredulously, U.S. Bank (in Ibanez) and Wells Fargo (in Larace) then
su

moved to vacate Long’s judgment making the following arguments. First,

they contended that the “present holder of the mortgage issue” came as a
re

surprise to them and should not have been decided in connection with these

cases.28 Second, they argued that had they known the issue was going to be
Fr

addressed, they would have pled their case differently and either limited

their request for relief to the “Boston Globe issue” or further supplemented
au

their evidentiary offerings. Third, they insist that since the defendants had

27
As set forth in the complaints, the notices in Ibanez and Larace were published on June 14, 21,
d.

and 28, 2007 for auctions that took place on July 5, 2007. Ibanez, Complaint at 2, ¶ 5; 3, ¶ 8; Larace,
Complaint at 2, ¶ 5; 3, ¶ 8. The Ibanez notice named U.S. Bank as the foreclosing party, the Larace
notice named Wells Fargo as the foreclosing party, and the foreclosure sales were conducted in their
respective names. Ibanez, Complaint at 2, ¶ 5; 3, ¶ 8; Larace, Complaint at 2, ¶ 5; 3, ¶ 8. As
or

established by the allegations in the Complaints, however, U.S. Bank was not assigned the Ibanez
mortgage until September 2, 2008, fourteen months after the sale (Ibanez, Complaint at 2, ¶ 3), and Wells
Fargo was not assigned the Larace mortgage until May 7, 2008, ten months after the sale (Larace,
Complaint at 2, ¶ 3).
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Page 56 of 66
ww
been defaulted, it was inappropriate for judgment to be entered against the

plaintiffs and, at worst, their motion for default judgment should simply

have been denied with leave for them to amend and try again. Fourth, based
w.
on new evidence and new arguments they have now submitted post-

judgment, they maintain they were the “present holder of the mortgage”
4
within the scope and meaning of G.L. c. 244, § 14 at the time of notice and
clo
sale. This is so, they say, because they possessed the note (endorsed in

blank), an assignment of the mortgage in blank (i.e., without an identified


su
assignee), and a contractual right to obtain the mortgage at those times.29

Fifth, in the event the court disagrees that their possession of the note, a
re

mortgage assignment in blank, and a contractual right sufficed to make them

“present holders of the mortgage,” they contend that the foreclosure sales
Fr

were nonetheless valid because they were authorized by the last record

holder of the mortgage and the plaintiffs acted as the “agent” of that holder.
au

In essence, the plaintiffs came forward with duplicitous arguments

that Judge Long denied and stated as follows… “The plaintiffs cannot
d.

credibly claim surprise at the judgment that was entered and, having asked
or

for (and received) a declaration on the issues they chose and on the facts
29
They concede, however, that the mortgage assignment they ultimately recorded (an assignment
specifically to them) was an entirely new and different document, executed months after the notice and sale.
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Page 57 of 66
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exactly as they pled them, they have no right to a “do-over” because the

declaration was not entirely as they wished. Moreover, their newly

presented facts do not lead to a different result. Instead, they show that the
w.
plaintiffs themselves recognized that they needed mortgage assignments in

recordable form explicitly to them (not in blank) prior to their initiation of


4
the foreclosure process, that the plaintiffs’ “authorized agent” argument fails
clo
both on its facts and as a matter of law, and reaffirm the correctness of the

original judgment. They also show that the problem the plaintiffs face (the
su
present title defect) is entirely of their own making as a result of their failure

to comply with the statute and the directives in their own securitization
re

documents.

The foreclosure factory/mills and their alleged clients ignored the


Fr

warnings of Lavalle and other courts while the syndication and foreclosure-

factory process rolled on without change or retooling. Lenders and Wall


au

Street firms continued selling promissory notes to Depositors that almost

always were a subsidiary or affiliated entity. The Depositor would then sell
d.

the loan into a Trust, managed by a Trustee, who was typically a different
or

financial institution such as US Bank, Wells Fargo, Deutsche Bank and

others. The original promissory notes, allonges, assignments, riders and


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Page 58 of 66
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other original documents in the collateral/custodial file would allegedly be

transferred to the Trust and be held by a Document Custodian, sometimes by

the original Lender or another entity altogether. Each of these entities


w.
earned fees based upon these purchases and/or assignments.
4
The Trusts were sold groups of promissory notes purchased in a pool
clo
and would issue certificates which were purchased by the underwriter,

including the Wall Street investment banks themselves. The Wall Street

firms would then sell the certificates to various institutional investors,


su

including the public pension funds of state of Florida employees in private

or public offerings.
re

At various points in this syndication process, mortgages were sold and


Fr

assigned to as many as four or five different entities from the original

broker/lender to the warehouse lender onto the depositor and then trust. The
au

syndication documents themselves required that each mortgage be assigned

in recordable form and that these assignments form a clean chain or title to
d.

the trust.

However, instead of complying with the process they were


or

contractually obligated to follow, when an underlying mortgage and


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Page 59 of 66
ww
promissory note went into default, the computerized servicing system of the

servicers automatically issued a referral to counsel on a randomized basis

similar to how cases are assigned in Florida courts upon filing.


w.
When a foreclosure action was initiated, it was either done in the
4
name of the servicer or MERS and only after recent court decisions, in the
clo
name of the Trustee acting on behalf of the Trust’s certificate holders.

As illustrated herein, it was only after the foreclosure had taken place

or been ordered, that assignments were created, often with backdated


su

effective dates, false notarizations, and forged or false signatories without

any lawful authority or knowledge of any of the facts attested to in the


re

assignments.
Fr

Title insurers have not only stopped issuing title insurance in the state

of Massachusetts on foreclosed properties, but have added restrictions to


au

new title policies across America not to be liable for such acts by the

servicers. Clouds on all title to all foreclosures there now exist, as Judge
d.

Gordon so aptly opined five years ago.


or

The foreclosure factory/mills contend that these are mere

technicalities, but they themselves use the same technicalities when they
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Page 60 of 66
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argue for decisions in their favor. What is good for the goose is not only

good for the gander, but for the citizens, homeowners, and judges of this

state.
w.
VIII. The State Legislative Branch May Moot This Court’s Decision.
4
The Florida Bankers Association (“FBA) and the mortgage industry,
clo
realize the hurdles presented by the inability to account to borrowers and

attest to a proper chain of title. The FBA has successfully lobbied and found

Florida legislators to introduce legislation that, if passed, will quickly turn


su

Florida to the 38th state with a non-judicial foreclosure process, thereby

fully relieving the courts of their involvement in an estimated 95% of


re

foreclosures. The introduction of CS/HB1523-“Homeowner Relief” and

SB2270-"Nonjudicial Foreclosure Act for Non-homestead Properties" with


Fr

requisite provisions to be determined at the behest of the foreclosing entity

for “abandonment” of homesteaded property is an affront to the due process


au

rights afforded Floridians in our state constitution. We fear, without judicial

review, a party with no privity of contract with a borrower (i.e. servicer or


d.

default sub-servicer) will, after monthly inspections, determine that a


or

property is vacant and abandoned during extended vacation periods or when

snow-birds return to their northern nests for summer.


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Page 61 of 66
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IX. Conclusion

As demonstrated herein, even when affidavits, verified pleadings, and


w.
testimony are required, the foreclosure bar, default servicing industry and

their servicer clients fall woefully short in meeting their lawful obligation
4
of not only identifying the lawful lender and owner of a borrower’s note,
clo
but even knowing who their actual client is.

Thus, the only way to legitimately determine the true chain of title to
su
the note and the real parties entitled to enforce and foreclose upon the

note is to conduct a forensic audit of each lender in the chain’s


re

accounting, investor, and servicing records to determine the date each

note came on and off the lenders’ books, general, and sub-ledgers as an
Fr

asset or liability as well as the evidence of payment via cancelled checks

and wire transmittal documents. Without this transparency, no


au

defendant, judge, or even plaintiff will know with any degree of

certainty, the chain of title to the note and the rightful parties to appear
d.

before the Court, let alone foreclose.

The Court may wish to consider mandatory disclosures attached to


or

plaintiffs foreclosure pleadings that provide verifiable evidence via 1) the


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Page 62 of 66
ww
ledger, sub-ledger and schedules of the alleged lender’s books evidencing

the note as an asset; 2) the cancelled checks and/or wire transmittals for

purchase and sale of the note; 3) a chain of actual verified assignments of


w.
mortgage that correspond to the other evidence; 4) the MERS Milestone

report if a MERS registered loan; and 5) the original promissory note


4
with all intervening indorsements and any allonges firmly attached to the
clo
last page of the note.

If the Court would amend it rules to provide such mandatory


su
disclosures, it would not only reduce waste of valuable judicial resources

and protect Florida homeowners and investors, but it would expedite the
re

foreclosure process to the real lender’s benefit and be more profitable to

both the servicer and lender.


Fr

X. Prayer For Relief & Denial of Movant’s Motion


au

Wherefore the Respondents pray that this honorable high Court deny
d.

the Movant’s motion for reconsideration and strongly consider additional

mandatory disclosures that would identify for investors, borrowers and the
or

Court’s alike: disclosure and verification of the complete chain of title to a


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Page 63 of 66
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