J.P.
Morgan did suffer a crushing defeat in this decision. And the borrower
definitely receive the benefits of a judicial decision that will allow
the borrower to sue for wrongful foreclosure including equitable and
legal relief which in plain language means reversing the foreclosure and
getting damages. Probably one of the most damaging conclusions by the
appellate court is that an examination of whether the loan ever made it
into the asset pool is proper in determining the proper party to
initiate a foreclosure or to offer a credit bid at a foreclosure
auction. The court said that alleged transfers into the trust after the
cutoff date are void under New York State law which is the law that
governs the common-law trusts created by the banks as part of the
fraudulent securitization scheme.
Before
you give them a standing ovation remember that it is possible for
additional documentation to be created, fabricated and forged showing
that despite the apparent violation of the cutoff date, the trustee has
accepted the loan into the trust. This will most likely be a lie. I
don't think there is any entity acting as trustee of a trust that
doesn't know that it is under intense scrutiny and doesn't want to be
subject to liability that could amount to trillions of dollars advanced
by investors with the purchase of bogus mortgage-backed bonds that were
presumably managed by the trustee but in reality not managed at all
because the bonds were worthless. This gave the banks the opportunity to
claim that they owned the bonds and therefore had an insurable interest
which gave rise to the whole problem with AIG and AMBAC and other
insurers or parties who had guaranteed the bond, the loan or any loss
(credit default swaps).
The
fact that the loan in this case was definitely securitized is also
interesting. Of course Washington Mutual was stating to everyone that it
was not involved in the securitization of mortgage loans when in fact
nearly all of the loans originated became subject to claims of
securitization. This case explains why I never say that the loan was
securitized or that the loan was in any particular trust, to wit: I
don't believe that a funded trust exists with the ability to purchase
loans and therefore I don't believe the loans are in any of the asset
pools. So when people ask me how they can prove which trust their loan
is actually in, I reply that they are asking the wrong question.
What
is being played out here in this case and hundreds of thousands of
other cases is a representation by the foreclosing entity that the trust
owns the loan when in fact it never owned the loan nor could it because
the money that was advanced by investors was never deposited into the
trust. We have the same banks representing to regulatory authorities and
insurers that it is the bank and not the trust that owns the loan even
though the bank merely made the loan using money advanced by investors
who believed that they were buying mortgage-backed bonds. The truth is
they were merely making a deposit into an account maintained by the
investment bank. The resulting transactions do not qualify for exemption
as securities or insurance under the 1998 law. Nor do they qualify for
REMIC treatment under the Internal Revenue Code.
In
other words if you take a close look and actually follow the path of
the money and the path of the paper you will find that despite the
pronouncements from the Department of Justice and other agencies, this
is a simple fraud case using a Ponzi model. The hallmark of a Ponzi
model is that it collapses as soon as the investors stop buying the
bogus securities. If the government cares to do so it can freely
prosecute the individuals and companies involved without any air of
exemption under the 1998 law because none of the parties followed the
securitization path presumed by the 1998 law. So we are back to this, to
wit: a security is a security and subject to SEC regulations and
insurance is an insurance contract subject to insurance regulators, and
fraud is fraud subject to recovery of restitution, compensatory damages,
punitive damages, treble damages etc.
You
should remember when reading this decision that the appellate court was
not ruling in favor of the borrower granting the substantive relief the
borrower was seeking. The appellate court merely reversed the trial
court decision to dismiss the borrower's claims. That only means that
the borrower now as an opportunity to prove the elements of quiet title,
wrongful foreclosure, slander of title, cancellation of instruments and
relief under California's version of unfair business practices. But the
devil is in the details and proving the case requires aggressive
discovery and aggressive preparation for trial. It is highly probable
that the case will settle. The bank will probably be willing to pay
almost any amount of money to avoid a judgment setting forth the
elements of a wrongful foreclosure and how the bank violated the law.
The
Bank will attempt to avoid any final order that undermines the value of
loans that are subject to claims of securitization, because those loans
supposedly support the value of the bogus mortgage-backed bonds sold to
investors. Any such final order would also undermine the balance sheet
of J.P. Morgan and any other major bank carrying the mortgage bonds as
assets on their balance sheet. If those assets are diminished, then the
bank is not as well funded as it has been reporting. In fact, those
assets might well vanish completely from the balance sheet of those
banks, causing the banks to be seized by the FDIC and broken up into
smaller pieces for regional and community banks to pick up. Hence this
decision represents a risk factor that could eliminate the legal fiction
created by smoke and mirrors from Wall Street banks, to wit: it is not
the borrowers who are deadbeats, it is the banks who are broke and whose
management has run off with billions and perhaps trillions of dollars
that should be in the United States economy. The absence of that money
lies at the root of our unemployment and low economic activity.
This
Glaski case has many of the elements that we have been discussing for
years. Fabricated documents, forgeries, perjury, false affidavits and no
money trail to backup the story painted by the fabricated documents.
And of course it has our old friend Washington Mutual Bank And the
supposed take over by Chase Bank that never actually happened.
And
it involves the issue of assignments and the fact that the assignment
is not the transaction itself but only a report of a transaction. If the
borrower proves that the transaction reported in the assignment or
other instrument of conveyance never occurred, or if the borrower is
successful in shifting the burden of proof to the bank to show that it
did occur, the assignment will have no value whatsoever unless the
transaction is present, to wit: that someone actually purchased the loan
through the payment of money or other valuable consideration that was
received by a party who actually owned the loan.
Thus
even if Chase Bank were able to show that it entered into a transaction
in which the loans were transferred (something we can find no evidence
of which the FDIC receiver says never occurred) that would only be the
equivalent of a quit claim deed, to wit: whoever received the
consideration for the transfer of the loans was merely conveying any
interest they had even if they had no interest at all. Hence the
transactions by which Washington Mutual allegedly came to be the owner
of the loan must be examined in the same way as the transaction between
the Washington Mutual bankruptcy estate and chase bank.
You
should also take note that the decision was published with the
admonition that it is "not to be published in the official reports."
this is further indication that the court is concerned about the
far-reaching effects of the decision and essentially tells trial judges
that they do not have to follow it. So for those who wish to point to
this decision and say "game over" we are not there yet. But I do think
that we passed the halfway point and we are probably in the fifth or
sixth inning of a nine inning game. Translating that to time, I would
estimate that it's going to take another three or four years to clean up
this mess and that it might take several decades to clean up the title
corruption that was created by the banks.
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