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Yes, You Can Defeat the Banks (or...How I Turned to the Dark Side)

June 20, 2014

By Allen A. Kolber, Esq.

Many clients come to me for a second opinion after having seen a lawyer who has promised them the world. I refer specifically to those homeowners who have been unable to pay their mortgages and are facing foreclosure.

You will find many attorneys out there who will tell you that if your bank cannot prove that it actually owns your mortgage, he/she will be able to defeat the bank and you will never have to pay your mortgage again. They will convince you that the banks are predators, they forge signatures and fabricate documents, and that you will be able to live in your home without ever having to pay back your mortgage.

I am usually the voice of reason, the voice of compromise. I explain to my clients how difficult it is to find the right set of circumstances that will enable the homeowner to absolutely defeat a mortgage lender.

However, recently after a two-day trial, I joined the dark side. That is, I became a believer. Yes, Virginia, you can defeat your mortgage lender in court.

This is how my conversion occurred...

Not long ago a client came to me to defend his foreclosure action. His first attorney had convinced him that he was a “poster boy for mortgage fraud”, the bank was a predator, the bank had forged signatures and had fabricated documents, and . . . the client would never have to pay his mortgage again.

I could see that the client wanted me to join the cause, raise the banner of mortgage fraud, don my legal armor and lead him into battle against the predatory bank. The meeting did not go well. I explained to him that these cases were very rare, and although he could hope for the best, he should expect to compromise with the bank, enter into a reasonable loan modification that he could afford, and, if possible, reduce the principal mortgage by as much as possible.

Somehow, the heavens intervened. Although I turned the client away, his friends and associates kept referring him back to me. The same friends and associates would, likewise, call me and explain to me how rational and intelligent this client was, and that this case was no pipe dream. I took the case.

Recently, after a two-day trial, the bank, its witnesses, its attorneys and the court itself, proved me wrong. The Court ruled that the bank suing my client could not prove that it owned the current mortgage, and therefore had no “standing” to sue my client at all.

In order to explain how your mortgage lender may not actually own your mortgage, we must go back in time the 2008 recession.

Prior to the 2008 recession, home prices started to skyrocket. Many unscrupulous Mortgage Brokers, preying on homeowners who were in need of cash, convinced homeowners to refinance or obtain Home Equity Lines of Credit (HELOC’s). For example, if the remaining mortgage on your home was $200,000, and your home was now worth $500,000, a mortgage lender could obtain for you a $300,000 HELOC (and make a $6,000 commission as well). Homeowners leapt at the chance to refinance, using the money to renovate their kitchens and bathrooms, or build extensions to their houses. Those who were already struggling used the money to repay debts or supplement their income.

What the mortgage lenders did not tell their clients was that most of them would never be able to afford the new monthly payments for such high mortgages. That is exactly what happened. Homeowners in the thousands began defaulting on their new unaffordable mortgages. The recession had begun.

At the same time, the mortgage banks, realizing that their mortgage loans were now defaulting by the thousands, convinced an eager Wall Street to “pool” these mortgages into “trusts”, and sell shares in these trusts on the open stock market. The mortgage banks and the stockbrokers (remember Lehman Brothers? No, because they are now defunct), withheld information from the public that these mortgage trusts were not worth very much because homeowners were not making their monthly payments.

Mortgage lenders began foreclosing on homeowners in the thousands. Many of the banks simply collapsed and transferred their trusts or pools of mortgages to other banks. Many banks merely divested themselves of their ownership of these pools of mortgages and transferred them to new banks or “servicers”.

Now, when it came time for the latest bank to foreclose on the homeowner, the bank that sued in Court was not the original bank that had issued the mortgage in the first place. The homeowner’s original mortgage had now been transferred, pooled into a trust, bought out, bailed out, and transferred yet again to many banks and servicers.

So the banks resorted to a practice called “robo-signing”. This was the practice of fabricating a chain of title from the first bank to the current bank to prove ownership of the loan in order to commence a foreclosure lawsuit in court. In fact, many banks opened a division for robo-signing, or used outside companies that were formed just to fabricate a chain of title, because without these documents, a foreclosure lawsuit could not be commenced in State Court.

This is why many homeowners do not recognize the name of the bank that is suing them in foreclosure.

Now, the law may be dumb, but it is not stupid. The Court and the bank know that you obtained a mortgage and that you received a large sum of money. Many of these banks will come into court holding the original loan documents with your signature on them (as they did during my trial). The current law, therefore, states that if the bank that is suing you in foreclosure can prove that it holds the original loan documents, then they have “standing” to sue you for the original mortgage. However, if a homeowner can prove that there was some irregularity (robo-signing) during the transfer process from one bank to the other, then the burden shifts to the bank to prove that it has a legitimate chain of title and that it has standing to sue you on this mortgage.

During my trial against U.S. Bank, it was revealed that two robo-signers had signed false affidavits in support of the bank’s case. A “vice-president” had falsely sworn in an affidavit that U.S. Bank owned the subject mortgage. The bank’s current servicer, Ocwen, testified that he had no knowledge of how U.S. Bank had taken possession of the original Note from Wells Fargo, and the first time he had even seen the original Note and Mortgage was in the attorney’s office right before trial. As each document and piece of evidence was excluded for lack of authentication, I felt my disbelief evaporate and I became a convert to the cause. More importantly, the judge became a convert to the cause and realized that this bank could not prove that it owned the current mortgage, and, therefore, could not sue my client in court.

After the trial, the Court drafted a written Decision that has now been published in the law books as legal precedent. I have been contacted by other lawyers, professors, and journalists who have been citing the written Decision, and thus far, the Decision remains good law in New York State.

Can we win every case like this? Evidently, any mortgage that has gone through the “trust” and securitization process is subject to higher scrutiny because of robo-signing and the banks’ fraud. After all, the government forced Chase and Bank of America to pay in excess of $40 billion in fines and reimbursements based on their own robo-signing practices.

Sometimes the dark side is not that bad. May the Force be with you.


Back to June 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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