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Using Fraud to Rewrite History

In the midst of an ever-growing foreclosure crisis, a solution is being sought after.  Politicians claim they may have it, lawyers are litigating it, and homeowners are left in the middle with no awareness of what rights they have.  Those rights are steadily changing.

The basic principles of the judicial system are being challenged before our very eyes.  Centuries of legal precedent, words that lawyers learn first in law school such as “Standing” and “Res Judicata” are being twisted and turned into meanings that defy any explanation of legal jurisprudence.

The most basic issues remain the same:  Who can sue to foreclose a home?  (Standing); and if a person sues for foreclosure and uses fraudulent documents to do so, and the Judge throws the case out can they come back and refile for foreclosure later? (Res Judicata).  Cases being decided and considered today affect both in major ways that many simply cannot understand.

Take Standing for example.   Who can sue to foreclose a home?  Homeowners who have been dealing with a servicer for years sending in documents for a loan modification or short sale believe that they are the only one who has the power to foreclose.  Unfortunately, that is not the case.  It’s legal sounding but in Florida, the only one who can foreclose is based on statutory language which is now being interpreted by the judiciary in ways that are unimaginable.

Your foreclosure depends on an instrument called your Note.  Simply put, it’s a check.  If I told you to deposit a check for me, you’d ask me to sign the back.  That’s an endorsement.  Likewise, banks have to follow the rules on proper endorsements.  The person properly endorsed may have the right to sue.   The question of who has the note is one that most people in the midst of the depths of a loan modification nightmare aren’t being told about, but it’s significance cannot be undervalued.  For example, if you are working with Chase to modify your loan and you receive a Foreclosure Complaint, Chase will only tell you then that it is because Freddie Mac owns your note and moved to foreclose the property.  Meanwhile, you were left thinking that Chase was somehow going to help you.  Here is the kicker.  The Complaint says “Chase” is the Plaintiff.  Watch for language in the Complaint says “Plaintiff is entitled to enforce the note and mortgage”.  That is not good enough.  They have to “own the note and mortgage” or truly be entitled to enforce it.  Fraud is not one of those routes.

Not to mention the subject of trusts, securitization, Pooling and Servicing Agreements (PSA’s), and the like.  Years ago mortgages were bundled and sold off to investors. Does the investor sue or the servicer of the mortgage? Simply put, these PSA’s dictate the terms of who can do what.  What does the PSA say about when a suit can be brought and by whom?  Often a homeowner asks for the PSA only to be stonewalled by the Plaintiff in a foreclosure suit.  That is because the PSA is sitting at the Securities and Exchange Commission (SEC) amidst billions of documents filed when mortgages were transferred without actually transferring the paperwork that goes along with them. In essence, banks took a shortcut to avoid fees and extra work.  I say make them produce it anyway.  They are relying on it for suit.  It is a material document.

The price?  Our legal precedent that we have relied on.  Standing is a protection to the American public.  It says that someone who sues you must have the right to, they must be injured by you and not in speculative ways.  That protects us more than you know.

Now, the issue of whether a bank can file for foreclosure a second time after they tried to foreclose on a home using a fraudulent document is before our Supreme Court in Roman Pino v. Bank of New York Mellon.  In law school, we were taught that we get “one bite at the apple”.  If you don’t get it right the first time, you’re out.  Think of Double Jeopardy, and if you were tried for a murder you didn’t commit.  The jury says you aren’t guilty and ten years later the State retries you because the cops came up with new evidence.  How long do you have to run from fraud?

The irony is apparent.  The latest article from DS News reads, “If the court does rule in favor of Pino, this would mean servicers could no longer fix documents and later refile foreclosures, which would stall or lead to the dismissal of foreclosures and make it even more difficult for the judicial state to proceed with foreclosures.”

This would mean servicers could not “fix” documents?  And how would they “fix” them?  The same way that they have already been proven to do so and had to settle with the states over?  By hiring a company that in turn hired high school students and other people at $10 an hour to sign documents as corporate officials for major servicers?  Allow the bank a second chance to do that?  Please.

Our system is not that complex.  Actually it is rooted in judicial precedent.  If you bring a case using fraud to do so, you’re out, and no you cannot come back.  It’s  just that simple.

The danger is apparent.  If we rewrite a body of case law in order to help recover the market and stop the backlog of foreclosures, those protections mentioned earlier are damaged.  Lawyers will use them in other non-foreclosure suits, and we will have dismantled the very judicial barrier of protection we rely on.  We don’t destroy rights to take shortcuts.  That’s not the body of American law I learned.

There are three branches of government for this reason.  The scales are equal between the homeowner and the bank in the Judicial system, and the bank should carry no favor as they do with politicians by contributing to campaigns, etc.  Lady Justice wears a blindfold, and no political desire or agenda should remove it.

We cannot ignore the truth of what has taken place by blaming the homeowner, not in the political arena and not in the courtroom.  Perhaps Scott Pelly from CBS 60 Minutes said it best in his piece last year titled “Whistleblower Wins $18 Million”:  “One thing weighing on the economy is the huge number of foreclosed houses. Many are stuck on the market for a reason that you wouldn’t expect. Banks can’t find the ownership documents. It’s bizarre, but it turns out that Wall Street cut corners when it created those mortgage backed investments that triggered the financial collapse. Now that banks want to evict people they’re unwinding these exotic investments to find that often the legal documents behind the mortgages aren’t there. Caught in a jam of their own making, some companies appear to be resorting to forgery and phony paperwork to throw people down on their luck out of their homes. In the 1930’s we had breadlines. Venture out before dawn in America today and you’ll find mortgage lines.”

And whose fault is that?

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