Balancing the Scales of Justice for Pro Se Homeowners

Posts by Simonee

Does it matter if a fraudulent appraisal was used in my loan origination?

Posted by on Feb 2, 2012 | 16 comments

Does it matter if a fraudulent appraisal was used in my loan origination?

On April 7, 2010, Patricia Lindsay, VP of New Century Mortgage, testified in front of the United States Congress Financial Crisis Inquiry Commission about the predatory lending practices of New Century Mortgage.  Ms. Lindsay testified that New Century did not retain the loans it originated and that in the quest to sell more and more loans, the  the definition of a good loan went from “one that pays” to “one that could be sold”.  

Among many of the failures Lindsay discusses is the pressure put upon appraisers to come in “at value” rather than determining the “actual value” of the property.  She tells about appraisers un-boarding houses to take pictures or omitting certain elements of the property by angling the camera to zoom in to make the property look the best possible and finding comparables to support the “at value” rather than “actual value” of the property.  New Century wasn’t alone in the use of fraudulent appraisals; it was common place with predatory lenders and some reports claim it was the “straw that broke the camel’s back” with WaMu.   As you may remember, WaMu and its appraisal firms were investigated by federal regulatory authorities for their prevalent use of fraudulent appraisals.  (Read here ;  part of this case was dismissed last November).

Typically one would expect fraudulent appraisals to be initiated from the purchaser – not the lender.  Why would a lender seek these appraisals?  The lenders never had to suffer the consequences of their high risk loans because it was passed on to the Wall Street firms who were securitizing them into REMICs and then hawking them to unsuspecting investors.  Countrywide’s CEO, Angelo Mozilo  who once called Countrywide’s portfolio of loans “toxic”, gleefully sold his toxic loans to the hungry Wall Street firms;  John Stumpf, CEO of Wells Fargo, told the San Francisco Gate (Sept. 2007.d)  the exotic loan products (ARMs) were never intended to be “long term” mortgages on the properties; obviously Wells Fargo planned on capturing refinancing fees as the ARM’s started escalating.  If they couldn’t recapture the refinancing fees, they could pass off the bad loan to REMIC investors for a fee.  Win win for Wells Fargo, who by the way, estimates put at being the 7th to 9th largest subprime lender.  (See Truth About Wells Fargo)

So does it matter if you are in the middle of a foreclosure and you learn that the appraisal was fraudulent?  The reality is the state (at least in California) and federal remedies for fraudulent appraisals are virtually non-existent.  However, for homeowners in Alabama, New Hampshire, Texas, Washington, and Arizona there are cases where the homeowner was able to sue the appraiser (See Sage v. Blagg Appraisal Co. Ltd.,  209P. 3d 169, (Az. Court of Appeals, 1st Div.)  Sage discusses the responsibility of the appraiser to the buyer and notes the listed states as states that have recognized the appraiser’s responsibility to the buyer.

There are also cases in which the homeowner was able to successfully sue the lender on a negligent appraisal when the lender knew the borrower was relying on the banks appraisal.  (See Larsen v. United Fed. Sav. & Loan Ass’n (Iowa 1981) 300 N.W.2d 281 [21 A.L.R.4th 855] ; See Costa v. Neimon (1985) 123 Wis.2d 410 [366 N.W.2d 896].)

In Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089 – Cal: Court of Appeal, 3rd Appellate Dist. 1991 the California Court of Appeals (3rd District) found, “In California, the test for determining whether a financial institution owes a duty of care to a borrower-client “`involves the balancing of various factors, among which are [1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant’s conduct and the injury suffered, [5] the moral blame attached to the defendant’s conduct, and [6] the policy of preventing future harm.'” (Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 865 [73 Cal. Rptr. 369, 447 P.2d 609, 39 A.L.R.3d 224], quoting Biakanja v. Irving (1958) 49 Cal.2d 647, 650 [320 P.2d 16]; Fox & Carskadon Financial Corp. v. San Francisco Fed. Sav. & Loan Assn., supra, 52 Cal. App.3d at pp. 488-489; cf. Gay v. Broder, supra, 109 Cal. App.3d at pp. 73-74.)  (Note – Plaintiff is the homeowner and Defendant is the lender).  These cases, as you can see, all were before the “great mortgage crisis” and evidence of the lenders use (and encouragement) of fraudulent appraisals came into the public’s awareness.

Some of the causes of action, which other homeowners are successfully using in pursing fraudulent appraisals, are [nonmember] Sorry the rest of the Content is for PAID subscribers.  Why not join today and learn about the cases homeowners can consider in seeking restitution for the fraudulent appraisals!.    [/nonmember] [private Monthly|annual|advocate] Fraudulent Omissions, Negligence, Misrepresentation, violation of Business & Professional Codes § 17200, etc., Breach of the Covenant of Good Faith and Fair Dealings.  Here are a few of cases where homeowners may want to consider in building their arguments.

First, many states follow the Restatement (Second) of Torts § 552 (Read here for full Restatement) , which allows a claim for negligent misrepresentation against “[o]ne who, in the course of his business . . . supplies false information for the guidance of others in their business transactions.”  In relevant part, Restatement § 552 provides:

(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

(2) . . . the liability stated in Subsection (1) is limited to loss suffered

(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and

(b) Through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

In 1992 the California Supreme Court, in Bily v. Arthur Young & Co., the Court determined that a provider of professional services could be liable to third persons who may receive and rely on the information in the professionals report.

In 1992, the California Court of Appeals, in Soderberg v. McKinney, held appraisers liable to 3rd party investors who suffered damage due to an inaccurate appraisal.   In this matter the investors sued for fraud, negligent misrepresentation, concealment and breach of contract.  The court found liability may be appropriate where the Appraiser “knows with substantial certainty that plaintiff, or the particular class of person to which plaintiff belongs, will rely on the representation in the course of the transaction.”  (Plaintiff was the investors).

The Soderberg decision was then followed up by the another California Court of Appeals in Sorosky v. Hamill  (which is no longer a published opinion).

All three of these cases concern 3rd parties.  A homeowner who relies on the appraisal being done by the lender through either an in house appraisal or an appraiser hired by the lender, is a 3rd party.

In Larsen the homeowners were able to successfully show an “agency relationship”.  Other areas of consideration, though not used in Larsen, could have been a “breach of contract”.  In a breach of contract, obviously the homeowner had entered into an agreement with the lender for the financing of the loan and thereby relied on the lender to perform its duties with reasonable care and skill.  The lender would, one would assume, be responsible for negligent performance in the appraisal process.  The hurdle here is that the borrower is not a party to the contract between the appraiser and the lender; so the borrower would have to convince the court that while not a party to the contract, the borrower was a 3rd party to the contract.  (This is where Bily, Soderberg and Sorosky may be helpful).

Barring be able to prove the breach of contract, a person might also consider negligence in tort whereas the lender had a duty to conform to a standard reasonable care in ensuring the appraiser was performing the appraisal properly.  Reading Lindsay’s testimony, you can easily see New Century abandon all “care” in the pursuit of more signatures on loans. When the lender knows that the information is going to be used by the borrower liability for damages is extended to that borrower.  If New Century did not want responsibility for the borrower’s reliance on the appraisal, they could have told the borrower to get their own appraisal.  If you as a borrower did not get your own appraisal and instead relied on the lender, then this is an area worth exploration and consideration.

Some other cases  you may want to read in your exploration of holding the lender responsible for the fraudulent appraisal, depending on which state and Court you are in,  are:

 Kelley v. Carbone (2005) 361 Ill.App. 3d 477

West v. Inter-Financial Inc., 2006 UT App. 222

Stotlar v. Hester (1978) 92 N.M. 26 [582 P.2d 403], cert. den. 92 N.M. 180 [585 P.2d 324]

Chemical Bank v. National Union Fire Ins. (1980) 74 A.D.2d 786 [425 N.Y.S.2d 818], app. dism. 53 N.Y.2d 864 [440 N.Y.S.2d 187, 422 N.E.2d 832]

Perpetual Fed. S. & L. v. Porter & Peck (1992) 80 Ohio.App. 3d 569 [609 N.E.2d 1324]

Anthony Costa and Sandra Costa v. Robert Neimon (1985) 123 Wis.2d 410, 366 N.W. 2d 896.

(For an exhaustive list of cases around the country, see 44 ALR6th 1, Liability to Third Party for Negligent or Fraudulent Appraisal of Value of Real Property, by Kurtis A. Kemper, J.D.)

While it is not a common cause of action, given the current mortgage crisis and wealth of knowledge that lenders were predisposed to use fraudulent appraisals, this is an area of consideration as ONE of the causes of actions a homeowner may use. [/private]




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What is the big deal about a couple of lies and a few forged documents?

Posted by on Feb 2, 2012 | 1 comment

What is the big deal about a couple of lies and a few forged documents?

Last year many of the major banks halted foreclosures in judicial foreclosure states because, as they claimed, they had hit a little “road bump”.  This little road bump was the Courts demanding that any entity wanting to do a foreclosure provide documentation of actual ownership of the Promissory Note and Mortgage/Deed of Trust on the property.  Low and behold, the banks were unable to do so because they had misplaced paperwork on the houses they were foreclosing.  Furthermore, some of the banks (most) that could not find the documents just created new documents that were then signed by “robo signers”.  Robo signers are  individuals who sign affidavits, in bulk,  testifying to the accuracy and authenticity of the default information and/or assignments of Deed of Trusts/Mortgages even though the robo signer never saw the information.  These documents were then notarized, in bulk, by some Notary who never saw who was signing the documents.

First, let me just say that losing an Original Promissory Note is mind boggling.  Not just because of the carelessness it suggests in the management of promissory notes, but most banks have document custodians with very advanced document management systems which track  the storage and management of every single piece of paper it ever receives.  Second, this is the banks we are talking about – you know – Bank of America, Wells Fargo, Chase, Citibank, Deutsche Bank.  If they can’t keep track of a Note worth 100’s of thousands of dollars, what can they keep track of?  Your investment or retirement portfolio?  Your cash deposits?

In some cases the banks actually have lost the actual Promissory Note.  There are stories of the banks presenting several different versions of the “original” promissory Note (especially in Florida) during litigation.  In others, most, it is a matter of the banks not being able to prove a clear “chain of title”.  Chain of title is showing how the Note was sold between the different entities; usually this is easily demonstrated with a series of endorsements on the back of the Note, or through a series of assignments for the Deed of Trust or Mortgage.  Many of the banks do not have this clear chain of title, ergo the introduction of the “robo signers” who sign assignments in mass production to manufacture the “chain of title” for the foreclosure process.

Second, as I discussed in yesterdays blog, “When is forgery not forgery?” (See here)  the 3rd party firms supporting the banks in their foreclosure processes rationalize the use of forged documents  with the simple explanation that – what does it matter if it is forged?  It doesn’t invalidate the documents.  Not only is this preposterous, it does not explain WHO the actual owner is.  What evidence do the banks have that the bank IS the owner? They are asking the public to take their “word for it” and to take a leap of faith that the actual owner will never come around asking for payment on the Note.  (Yes, there are reports of this happening as well).

In essence what the banks and their 3rd party foreclosure firms are doing is the same as if you tell your neighbor you missed a payment.  Your neighbor hires a 3rd party like Ndex West, Northwest Trustee Services, Recon, or LPS and tells them to file a Notice of Default and create an assignment.  Your neighbor then files a Substitution of Trustee to make Ndex West (his paid agent) the Trustee.  The new Trustee then has someone make up an assignment of Deed of Trust to your neighbor from your original Lender/creditor and files it in the land records.  Presto – your neighbor can now foreclose on you!   If you are in a non judicial state the only way to stop this madness is to file a lawsuit because all of the filed documents, which robo signers signed sworn affidavits that the information is true (information that the signer has never seen), and had it notarized by some Notary (who wasn’t present when the document was signed) is prima facie evidence of your neighbors right to foreclose on you.  Sounds crazy but this is EXACTLY what the banks are doing.

Now in judicial states, your neighbor (the bank) has to file this in the court and have it approved by the court; the courts in those states are getting wind of the hinky nature of this paperwork and demanding that the banks show how they came into possession of the Note and Mortgage/Deed of Trust – and the banks can’t.  This is why the banks halted the process in judicial states and not the non judicial states.  In non judicial states it is a rubber stamped process that does not receive any scrutiny from the courts; unless the homeowner initiates a lawsuit to stop the process they are steamrolled right on out of their house.  I mean seriously, you didn’t think it was just because they lost paperwork only in the judicial states, right?

I realize this is an oversimplification of the process, there is much more to this mess than what I can ever hope to cover in one blog.  In our experts section there is a listing of white papers that explains this debacle in much clearer details and explains how “securitization” has mucked this up.   (See  Must Reads)

The bottom line is that the paperwork has not been lost.  That is a lie.  The truth is that there never was any paperwork..  [nonmember]  The remaining content is for members of our site.  Register for FREE! Scroll to the bottom of our membership page and register for FREE!

 [/nonmember] [ismember]The  banks and Wall Street firms buying up the Notes never bothered with actually conveying the Notes between the entities and because some of the parties in the chain of title are now gone (New Century, Countrywide, etc.) the banks have to now manufacture documents to show the chain of title.  And the banks argument is just because they are manufacturing the documents it doesn’t mean they (the banks) don’t have rights to the Note and Mortgage/Deed of Trust.  In theory one could almost buy into this; I mean these are respected financial firms that don’t lie, right?  Well okay, they lie but in general the public trusts these banks and Wall Street firms so we should just “go with it”.  Nevermind that they do not have documentation to actually PROVE they really did buy the Note.  So what is the big deal about a few little lies and a few forged documents?  Homeowner borrowed money and homeowner needs to pay it back..  Which by the way, I have yet to meet a homeowner who did NOT want to pay it back; typically the homeowner is asking for consideration on the TERMS of the repayment not for forgiveness of the debt.


In my case – this probably is an exception (NOT!)  – the originator was New Century Mortgage.  New Century never actually sold my Note.  Their sister company, NC Capital intended to sell it to Morgan Stanley Mortgage, who intended to sell it to its affiliate, Morgan Stanley Capital I, who intended to convey it to a REMIC Trust.  The only problem is, New Century never actually sold the Note to NC Capital; so NC capital, which intended to sell the Note in TWO different purchase sales agreements, did not have ownership of the Note to sell it to anyone.  All the other entities in the chain of title that intended to buy it, bought nothing.  Now the problem here is that Wells Fargo (servicer), Deutsche Bank (trustee and document custodian) and Morgan Stanley Capital 1 (depositor) certified to the investors of the REMIC Trust that they had indeed bought the Note and had indeed had a full chain of title to the property.  Whoops…another little lie.  So when Morgan Stanley Capital was taking money from investors and issuing certificates for the REMIC Trust that supposedly held the Notes, there was nothing in the REMIC Trust.  They lied to the investors, the IRS, and themselves.   They took money for nothing. 

In addition, New Century, who is arguing with me in Delaware, wants to wipe their hands clean of the mess.  They do not want to retain ownership of the Note.  This would be because I have evidence that the appraisal on my property was fraudulent;  New Century’s appraiser overvalued the property by  FIFTY TO NINTY THOUSAND dollars;  New Century committed violations of TILA/RESPA, and lied about funding the Note.  New Century wasn’t the actual creditor/lender – so there is fraud in the origination of the Note.   Just a few more little lies.   If you did this, wouldn’t you like to wipe your hands clean and take no responsibility?

Funny how the banks complain, saying homeowners are deadbeats – totally ignoring that the Notes are predatory loans that no one wants responsibility for; and totally ignoring that the banks ALSO LIED to the investors.  This isn’t just about homeowners not paying their loans; this is about massive fraud on the investors whose money they took, which is a much bigger problem than some homeowner not paying the loan.  It is also why they need to tell a few BIG lies and forge documents by the 1,000’s.[/ismember]






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When is forgery not forgery?

Posted by on Feb 1, 2012 | 8 comments

Yesterday I received an email from Charles Cox, the Oregon Director of the National Homeowners Cooperative, in which he shared a copy the Nevada Lender Processing Services, Docx, Default Solutions, and Fidelity National’s  Motion to Dismiss (See NevadaMTD)  of Nevada State Attorney General Masto’s  Complaint against their, among other things, deceptive business practices .  I was stunned at the legal reasoning in the MTD.

Masto is one of the few State Attorney Generals that is really standing up to the blatant, rampant fraud that is being perpetrated by the banks in her state’s courts and land records, and on the people of the great state of Nevada.  The Complaint (click Nevada-LPSComplaint ) is primarily based on the defendant’s deceptive business practices, which includes the prevalent use of “robo” and “surrogate” signers of legal documents.  

Robo   signing was initially coined by Matthew Weider, an attorney out of Florida, after deposing employees of LPS.  Mr. Weidner coined the phrase “robo signer” to describe the process of the banks in the mass signing of documents by individuals who swear to the  accuracy and authenticity of the information in the document, even though the signer had never looked at any supporting documentation, as legally required, and often times the individual doing the signing signed someone else’s name.  These documents are then notarized by a notary who was not present when the document was actually signed and, if called into a court of law, could not “personally testify” to witnessing the individual signing.

The term “robo signers”   gained even wider public awareness when 60 Minutes ran a segment in which 60 Minutes interviewed Lynn Szymoniak.  Ms. Szymoniak demonstrated the truth of Weidner’s allegations with actual “robo signed” documents.  In this 60 Minute segment, 60 Minutes tracked down Linda Green, one of the most commonly known “robo signature” names, and interviewed her.  Ms. Green admitted in the interview that she had no idea who may be signing her name. (See 60 Minutes)

In the midst of this “robo signing” controversy another new term, “surrogate” signers, was introduced to the public. Surrogate signing is someone signing someone else’s name with no indiciation they are doing so.  To most of us this is known as  “forgery”.  Forgery, according to Webster is “the crime of falsely and fraudulently making or altering a document” . Both state and federal laws contain statutes on the use of “forged” documents, often with criminal penalties and prison sentences.

So to be clear, robo signing is done by an individual with expressed authority to sign the documents on behalf of the bank and claims to have have verified the authenticity and accuracy of the document. However, the individual is signing so many they fail to actually verify the accuracy and authenticity of the information contained in the document; surrogate signing is someone ELSE signing another individual’s name.  Notary fraud is a Notary notarizing the document when they never saw WHO signed the document and the Notary can not testify that he/she saw the individual sign the document.  So let me give you an example:

A homeowner defaults on their mortgage payments. By law, the beneficiary incurring the default must document in very explicit terms the amount and date of default.  The person signing the NOD verifies its accuracy and authenticity with a notarized signature.  However, what is actually happening is a 3rd party company, like LPS, issues and signs a Notice of Default on the homeowners property on behalf of the bank but the person signing the document never sees the business records documenting the default, never verifies the amount or the date of the default, they just sign the document as an authorized agent.  It is also being claimed in some instances that some of these robo signers who DID go look at the bank’s records gained access through a shared login and modified the banks records to reflect what was on the Notice of Defaults.  (See Naked Capitalism)

To compound this issue, now in some cases, the person signing the document IS NOT the authorized agent, but another individual who signs the name of the alleged authorized agent.  Did you get that? Then some Notary, who is not present when the document is signed by either the robo or surrogate signer, notarizes that they witnessed the individual signing the document.

Doesn’t this just make you feel all warm and fuzzy?  Banks like Wells Fargo, Bank of America, JP Morgan, and Citibank use this process as STANDARD OPERATIONAL PROCEDURES. And there has been no mention of how the banks are correcting the records that were modified by the LPS employees!?

So back to the MTD filed by the defendants in Mastro’s Complaint.  First, the defendants claim that Nevada statutory and common law are conclusive that “neither activity is illegal”. (See MTD, p.5 ¶ 1)  Their argument is that “authorized agents (robo signing) is expressly permitted, as is surrogate signing”.  In addition, the MTD goes on to state, “flaws in the formalities of the execution or notarization do not render mortgage-related documents invalid”.  Huh?  Forgery and deceptive information is a “flaw in formality”?

The defendant’s attorneys are correct in that most state and federal laws “permits a negotiable instrument to be executed by a representative of another”.  As Charles Cox pointed out to me, this is what we have “Power of Attorneys” for.  What the defendant’s attorneys fail to acknowledge is that the surrogate signers are NOT signing their own names on behalf of the “authorized agent” – they are signing the authorized agents name with no mention of the person actually doing the signing or with a power of attorney!  And the Notary – usually in a different office, gets a stack of these documents and notarizes them, claiming they witnessed the authorized agent sign it.   But the attorney’s don’t stop there.  They spend time discussing how it is perfectly legal for another person to sign as another person, illustrating the rightness of this with a case in which a daughter, who received direction from her father, to sign his name on a deed of trust and with a case out of Georgia where “a forged signature is nonetheless binding if ratified by the person whose name was signed”.

Tens of thousands of documents have been signed in this manner.  How you can ever determine who signed for whom and when, is impossible.  And we cannot rely on the Notary because as evidence is proving over and over again, they are liars.  There are a lot more legal arguments in this MTD which give a good idea of the rationalization of the banks, “Look, we can have anyone sign as anyone, based on whatever information we (or they) want to put into the document, because ultimately what does it matter?  It wouldn’t make the document invalid”. Unfortunately I have witnessed this rationalization over and over again from the banks.   In my book, forgery is forgery no matter what name you want to call it; it IS illegal.  To mass produce these documents and use them to take homes is beyond disgusting.  We can only hope and pray that the courts apply the law of the land and smack the banks down hard for their blatant disregard for the truth and the law.

Keep on Fighting!


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The Trustee, Trustee and Trustee…huh?

Posted by on Jan 29, 2012 |

The Trustee, Trustee and Trustee…huh?


In a typical non judicial foreclosure there are THREE different Trustees:

1) The original Trustee listed on the Deed of Trust when the loan is originated and the Deed of Trust is signed

 2) The substituted Trustee that is substituted during the foreclosure process to conduct the Trustee Sale

 3) For millions of homeowners there is a 3rd Trustee that is named as the Trustee of the REMIC trust in the assignment of Deed of Trust , Notice of Default and is typically the entity doing the substitution of Trustee on the Deed of Trust.

To first understand who these entities are we need to have a basic understanding of what a “trust” is. 

The Trust

There may be many different types of trusts but ultimately they all have one basic fundamental concept, which is an arrangement for a 3rd party to hold assets of one person on behalf of another.  We create trusts all the time.  For example, your five year old child is going on a school field trip; you give the teacher $20.00 dollars to hold in trust for your child in case your kid needs anything while on the trip.  The expectation is the teacher will spend the money only for your child and whatever money is left over will be returned to you.

  •                 Your child is the “beneficiary” of the Trust
  •                 The Teacher is the “trustee”
  •                 The $20 dollars are the “assets” or “principal” of the Trust
  •                 You are the “Trustor”[1] whose asset (the 20 bucks) has been put into Trust for your child, the beneficiary.

This is a very simple trust.  We have the basic 4 components of every Trust – the Trustor (You as the parent) who created the Trust by asking an independent 3rd party – the Trustee (the Teacher) to manage the Trust asset (the $20 dollars) on behalf of the beneficiary (your child).  There are all types of trusts and the manner in which in which they are created and their purpose defines what type of Trust they are.

In the creation of a Trust there is usually a set of documents that “create” the Trust and in which the duties and responsibilities of the Trustee are outlined.  The Trustee is bound by those duties, so much so that the Trustee’s violation of those responsibilities can void the Trust and/or create liabilities for the Trustee.  In the above scenario if the teacher spent the money on another kid, the teacher’s action is voidable and you are legally entitled to get your money back.  As you can see, the more money involved the more you want to trust the Trustee and ensure you have ways in which to recover from the improper actions of the Trustee.  Every state has a set of laws governing Trusts and Trustees.

So now keeping the above scenario in mind, when it comes to a Deed of Trust on your property:

  •                  YOU are the Trustor.  It is your asset going into the Trust.
  •                 YOUR property is the “asset” going into the Trust.
  •                 The Trustee is the entity named as the Trustee (Typically the
  •                 title company like Chicago Title, Fidelity National, etc.)
  •                 The Beneficiary is the entity who loaned you the money.
  •                 The Deed of Trust that was filed in the land records are the “trust documents”.

The purpose of the Trust is to hold the title until the loan is paid back.  The instructions in the Deed of Trust is that if you breach your loan agreement, you agree that the Trustee may hold a non judicial sale of your property when the proper, legal beneficiary provides a written declaration to the Trustee that you have breached your agreement to repay the loan and the Trustee must now liquidate (sell) the property to pay back the loan.

The Trustee also has a responsibility to YOU.   That responsibility is to ensure that your title is protected from any 3rd party seeking to have your property sold for whatever reason.  The Trustee is legally obligated to ensure that any party requesting a foreclosure be done on your property has the legal right to do so!  The Trustee also has the responsibility of conveying the Title back to you when the loan is paid in full.

The Trustees

Just as a panda is not a true bear, a trustee of a deed of trust is not a true trustee.” (Stephens, Partain & Cunningham v. Hollis (1987) 196 Cal. App.3d 948, 955 [242 Cal. Rptr. 251].)  “A trustee under a deed of trust has neither the powers nor the obligations of a strict trustee; he serves as a kind of common agent for the parties. [Citations.]” (3 Witkin, Summary of Cal. Law (8th ed. 1973) Security Transactions in Real Property, § 9, p. 1497; see 7 Witkin, op. cit. supra, Trusts, § 3, pp. 5368-5369.) (4b)  

The Trustee of the Deed of Trust is slightly different from a typical Trustee of  Trust because the Deed of Trust Trustee has only one set of responsibilities – those are specific to protecting your title from an illegal 3rd party claiming rights to foreclose on it and conveying title back to you when the loan is paid in full; and ensuring that the legal, proper beneficiary can foreclose to recover the money loaned to you to purchase your home, if you do not pay it back.  The Trustee of the Deed of Trustee DOES have a responsibility to NOT initiate the foreclosure for a 3rd party if that 3rd party has not provided evidence of their right to the payments AND a written declaration of default with the specific amount and date of default.

Typically the party claiming to have incurred a breach upon which the “power of sale” clause in your Deed of Trust may be exercised must provide to the Trustee of the Deed of Trust the following documents:

    1. A copy of the Note they hold (that is evidence of the loan they are claiming rights to payment on).
    2. Any Assignments of the Deed of Trust.  (For example, in my case the lender NAMED on the Note is New Century Mortgage; but the company claiming the Default is the Morgan Stanley Loan Trust – so they had an obligation to show the Trustee how they had a right to claim a default!)
    3. Payment history with evidence of the claimed default through a written declaration of default with a very specific amount of the default (no “if any” is allowed!  See Anderson v. Heart Federal Sav. & Loan Assn. (1989) 208 Cal.App.3d 202, 256 Cal.Rptr. 180) and the date the amount of default was due.

In the typical California foreclosure process we are introduced to two new Trustees.  We are introduced to a “substituted” Trustee of the Deed of Trust and a Trustee named as the “beneficiary”.  This is where things get very interesting.

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[/nonmember][ismember]Substituted Trustee

California Civil Code § 2934a allows the beneficiary of the Deed of Trust the legal authority to substitute the Trustee of Deed of Trust.  Returning to our above Trust scenario, the Teacher (Trustee) may be replaced by the child (beneficiary) as the Trustee of the $20 dollar.  Now we may not want a child doing this but your lender is quite capable of selecting an appropriate Trustee and by law, is entitled to do so.  But in the majority of Substitutions of Trustee’s occurring in foreclosure cases, the beneficiary is an UNKNOWN 3rd party.  So instead of your child replacing the teacher – some other kid you never heard of is replacing the teacher as Trustee with another person!!??  Getting a little freaked?

Unfortunately for many Americans the County Recorders and/or Register of Deeds are asleep at the wheel and not paying attention – apparently when the Substitution is filed no one at the land records office is verifying that the Substitution is being done by the beneficiary of record! Property owners have to verify the substitution themselves. 

To correct this bizarre situation of an unknown 3rd party being the beneficiary, many servicers, foreclosing trustees or other law firms, are manufacturing Assignments of Deeds of Trusts and filing them in the land records.   Can you spell  F-R-A-U-D? 

Trustee of REMIC

When the Notice of Default or Substitutions of Trustee are filed homeowners are typically introduced to a THIRD Trustee – this is the Trustee of the REMIC[2] Trust .  You will recognize this 3rd Trustee in the beneficiary line of the document.  The name typically is “Bank X as Trustee for Asset –Back Certificates, Series xxxx” – more specifically:

  •                 Example:  Deutsche Bank National Trust Company as Trustee for the Morgan Stanley Capital 1 Inc. Trust 2006-NC2
  •                 Example:  Wells Fargo N.A. as Trustee as Mertigage Mortgage Loan Trust 2005-2, Asset-Backed Certificates, Series Flow 2005-2

There are literally 1,000’s of different naming conventions; typically a bank is named as the Trustee before the name of the REMIC Trust.  In the above examples, the banks acting as Trustees are Deutsche and Wells Fargo.  The Trustee of a REMIC has all the fiduciary responsibilities of a typical Trustee but they have NOTHING to do with the Deed of Trust other than being named as the beneficiary.  And the Bank DOES NOT OWN THE NOTE and is NOT the beneficiary; the certificate holders of the REMIC Trust are the owners/beneficiary.  (If you are scratching your head, please go to our Must Reads for Anyone Fighting Foreclosure and read about the securitization process and WHY these Trusts are NOT the actual legal, proper beneficiary of your Note or Deed of Trust).

Unfortunately for many homeowners, not only does the homeowner not understand this Trustee and who they are, the Courts (i.e. Judge) and attorneys typically do not understand.  Most Courts see the name of the Bank and automatically assume that the Bank named as the Trustee is the owner of the Note and is the legal, proper beneficiary of the Deed of Trust.  But that assumption is very, very wrong.

So applying our parent, teacher, child, $20 dollars scenario –

  •                 You are the Parent (Trustor of the Deed of Trust)
  •                 $20 dollars is the asset (your property)
  •                 Teacher is the Trustee
  •                 Child is the beneficiary (Your original lender/creditor)

Now let us turn this on its head with the 2nd Child – ready?  The 2nd child is acting on behalf of a group of kids that you don’t know as THEIR Trustee (Deutsche Bank National Trust as Trustee; Wells Fargo N.A. as Trustee, JP Morgan as Trustee, etc.)

Here, the 2nd kid tells your kid’s teacher (the Trustee)  to give the money (the asset, title to your property) to another teacher (substitute Trustee) , and the 2nd kid represents a group of kids you don’t know/ Some bank representing a REMIC Trust as it’s Trustee, substitutes your Deed of Trust Trustee with another Trustee – and you have no relationship with the bank doing the substitution or any of the people who own the REMIC trust!  (This is an over simplification of the situation but hopefully you are getting the picture.)

If you find this confusing realize it IS confusing.  Especially when national banks that we have all trusted unconditionally are doing this funny business! They like your confusion and rely on it when they are doing the foreclosure.

Below is my scenario and what violations of the law occurred in the parties involved with the foreclosure I am fighting.  [/ismember]


[private Monthly|annual|advocate]

In my case, my loan was originated by New Century Mortgage; New Century is the lender/creditor named on the Promissory Note (evidence of the loan) and is the named beneficiary of my Deed of Trust; Fidelity National Title is named as the Trustee of the Deed of Trust.  In relation to the above scenario – I am the Trustor (the Parent); title to my property is the asset being put into the trust (the $20 dollars), New Century is the beneficiary (the child), Fidelity is the Trustee (the Teacher) and the Deed of Trust is the written Trust Document (the written trust documents).

Again, in my case, Ndex West acting as an “agent” for the beneficiary – Deutsche Bank National Trust Company as Trustee for the Morgan Stanley Loan Trust – filed an alleged default.  That was in January 2008; then in February 2008, Deutsche Bank National Trust as the Trustee of the Morgan Stanley Trust substituted Ndex West as the Trustee of the Deed of Trust, then in March 2008 New Century (who had long ago supposedly sold my Note to NC Capital and was in bankruptcy) through Wells Fargo, assigned my Deed of Trust from New Century Mortgage to Deutsche Bank National Trust as the Trustee for the Morgan Stanley Loan Trust (which by the way, violates Internal Revenue Codes and the Trust documents of the Morgan Stanley Loan Trust – see our Must Reads for Adam Levitin’s Article)

 What is wrong with this scenario? 

  • The Required Documents to start the Foreclosure:  If you look back at which documents are required of the party asking the Trustee to exercise the power of sale it is clear that the party must deliver any assignments of the Deed of Trust proving they now are the beneficiary of the Deed of the Deed of Trust.  Yet no assignment of Deed of Trust was done until three (3) months later in March 2008.  
  • An Agent did the NOD not a Trustee: Ndex West did the Notice of Default as a paid agent of the Deutsche Bank National Trust Company as the Trustee of the Morgan Stanley Loan Trust  who claimed to be the beneficiary.  California Civil Code § 2924 allows an agent to file the Notice of Default for the beneficiary.  IMHO, Deutsche paid an Agent because they knew the original Trustee would question Deutsche’s right to have a Notice of Default filed.
  • Was Deutsche Bank National Trust Company as Trustee for the Morgan Stanley Loan Trust the beneficiary of the Deed of Trust? According to the land records…NO.  In my case I filed a Quiet Title action against them – and that issue is now in front of the Court of Appeals.  
  • Did Ndex West act as a common agent of all parties?  No, they were not the Trustee at the time, so they had no responsibility to me, the property owner.  In February 2008 Deutsche Bank National Trust Company as the Trustee of the Morgan Stanley Loan Trust, did a Substitution of Trustee , replacing Fidelity National – the Trustee that New Century and I had agreed to appoint as the Trustee of the Deed of Trust.    I believe Fidelity would recognized their responsibility to act as a common agent and would have sought to protect my rights; so Deutsche Bank and Ndex West removed that little obstacle by substituting Fidelity out as the Trustee of the Deed of Trust.   
  • Did Deutsche Bank have a right to substitute the Trustee of the Deed of Trust?  No! According to California Civil Code § 2934a only the beneficiary of record may record the Substitution of Trustee.   According to California Civil Code § 2932.5 an Assignment of Deed of Trust must be duly acknowledged and recorded for an entity to be recognized as the beneficiary.  A Civil Code is a statute; a statute is a law.  Deutsche Bank violated the law.
  • The Assignment of Deed of Trust was done by a defunct company who had allegedly sold it to a different company.  The Assignment of Deed of Trust was done by Wells Fargo as an attorney in fact for New Century and assigned the beneficial rights of the Deed of Trust from New Century to the REMIC Trust.  What we learned through discovery when I filed my lawsuit was that New Century actually claimed to have sold my Note to a DIFFERENT 3rd party; New Century was in bankruptcy, the Wells Fargo employee signing the Assignment signs for a bunch of different companies transfer assets typically to her employer,   it violated California Civil Code § 1095 which is a LAW and transfer directly from an originator who is not a party to the REMIC trust is in violation of Internal Revenue Codes and New York Trust law. [/private]

These are not mere technicalities – they are very serious infractions and violations of the law.   Non judicial foreclosure allows the foreclosing entities to foreclose based on their strict adherence to following the law.  As you can see in my case the bank violated California Civil Code §§ 1095, 2924, 2932a, and 2932.5!! The foreclosing trustee will say that the order in which these are done is no big deal, “no foul, no harm” – and in some cases the Court may agree.  But if you are able to prove the Notice of Default and Assignment of Deed of Trust violate the law, then the Substitution of Trustee is automatically invalid – if that Trustee is doing the foreclosure then there IS foul and there IS harm.  Fight the foreclosure!


 Keep Up the Fight!



[1] Trustor is also known as Grantor, donor, or settlor depending on the type of Trust.

[2] REMIC:  Real Estate Mortgage Investment Conduit governed by Internal Revenue Codes and typically created by Trust Documents called “Pooling & Servicing Agreement” that usually are governed by New York Trust law.

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The Pro Se Problem

Posted by on Jan 26, 2012 |

The Pro Se Problem

Recently I received an email from Jurisdictionary titled, ‘The Pro Se” problem from Dr. Graves (Developer of Jurisdictionary).  Naturally this caught my attention since I am a pro se and wondered what he meant by “problem”?  Given the current economic climate – especially the loss of income compounded by escalating mortgage payments – more and more people are being forced to fight for their rights as pro se (Latin for “on one’s behalf”) and we are legally entitled to do so.   So what did he mean by problem?

Dr. Graves asked a simple question – “If you and friends were playing a game of basketball, and some bystander wanted to play but didn’t know the rules … how would you feel when he or she kept fouling and arguing he or she has a right to do as he or she pleases because she doesn’t know the rules?”   It would make for a tense and unpleasant game; but this is not a game and losing goes way beyond embarrassing, it can mean the difference between keeping your home and losing it.

Jurisdictionary® is an excellent tool for understanding the basics of the law and how a lawsuit proceeds. (Click here for a free lawsuit flow chart from Jurisdictionary – go to upper right corner, enter your email and immediately receive the flow chart).  That is just the beginning and the sooner you get the basics down the quicker you can focus on the “meat” of your legal arguments and how to argue them so you can win.  Here is a quick guideline of what you need to know (understand) so that you can use the “rules” to your advantage instead of letting the opposition (and Judge) clobber you.

1) Understand the basic flow of the legal proceeding and the terms.  (i.e. Complaint, Answer, Demurrer, Pleading, etc.)

[nonmember]  You can access this content through a FREE subscription – click on the Access Now button and then scroll to the bottom of the page to register as a FREE Subscription Member.

[/nonmember] [ismember]

2) Download and read the “local” rules for the court you will be filing in.

3) Write down a “legal strategy plan”.  Enter the date you plan to file your complaint/answer and enter into the plan the estimated dates that documents are due (from you and from the opposition).  These dates will change based on the filings and court’s schedule but you will have a sense of when things need to be done and filed. It would be a good idea to also write down what you expect the costs to be (filing, service, copies, certified copies of documents, etc.)  Make sure you include dates for your discovery plan!

3) Write down an overview of your situation, then identify the areas that you believe the law may have been violated.  (If you are not sure, refer to our post ”California Statutes and Cases for Consideration” and “Issues in Flux – Part One and Part Two” which covers four California statutes and the Federal Debt Collection Protection Act  that are being consistently violated by the foreclosing entities).

a) Write down the statute

b) Write down the specifics of your situation

c) Now compare your situation to the statute and write down how the statute was violated, detailing the violation.  (My Notice of Default did not contain a “date”, or it contained “if any”, or there is no assigment of deed of trust to the foreclosing entity, etc.)

d) Write down the documents that demostrate the violation and/or people who witnessed the violation.

e) Write down what relief you are entitled to because of that violation (When researching the Statute in Nolo or Onecle they both should explain what relief can/may be granted)

4) Now go to Google Scholar (or whatever site you use for case research) and research other cases where homeowners had the same issue.  (Yes, we do have an eBook on how to use Google Scholar for Case Research).   Make sure to shepardize your cases!

5) Now write your pleading (Complaint and/or answer)

This is just the beginning…if you purchase Jurisdictionary then following articles on discovery, arguments (written and oral), etc. will make much more sense to you.  It is an investment that will last you a lifetime.[/ismember]

The Pro Se problem that Dr. Gaves refers to  – ”not knowing the rules” — can be resolved.  It is not rocket science but it will take time (his course is 24 hours then add time for the above steps I have outlined).  We as American’s have a constitutional right to stand up for ourselves in a court a law – whether we our defending ourselves or holding another accountable for violations of the law against us.   The Pro Se problem is when we enter into the court, scared out of our minds because we don’t know the rules, afraid that we will lose.  And you will if you have not done your homework.  So do your homework, be prepared.  You can do it!



God Bless America,


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