Balancing the Scales of Justice for Pro Se Homeowners


Is a Securitization Audit a Scam?

Posted by on Feb 6, 2012 in Foreclosure, General Public | 3 comments

Is a Securitization Audit a Scam?

There has been a lot of talk lately about securitization audits and whether they are a “scam” or legitimate services.  A scam is a “devious scheme to defraud” or “swindle” someone.  It is trickery.  Unfortunately there are scams and the only way to protect yourself against a scam is by educating yourself on what is real and what is not real.  Scam artist prey on victim’s ignorance and manipulate the victim’s expectations by promising the impossible.

So let’s start first by understanding what a securitization audit is and what it isn’t.  Securitization is the process in which Wall Street financial companies, such as Morgan Stanley, GoldMan Sachs, Credit Suisse, JP Morgan and the banks like Wells Fargo, Bank of America, WaMu, etc.  pooled together a group of mortgage Notes and deposited the Notes into a REMIC Trust.  The Wall Street firms then broke the revenue stream from those Notes into securities or, certificates, that were /are sold on the stock market.  People who bought those certificates are the “certificate holders” of the REMIC trust.

As we now know, the Wall Street firms and banks never actually followed through with the proper conveyance of the Notes into the REMIC Trusts, and the common belief is that the majority of those REMIC Trusts are empty, they hold title to nothing.  It is these REMIC Trusts, through their Trustees – Wells Fargo, Deutsche Bank National Trust, Bank of America, etc. – who are conducting foreclosures.  The only problem is if the Note never made it to the Trust they are not the proper parties to be foreclosing.

So how does a homeowner determine if the REMIC Trust is the proper owner with rights to foreclose?  You can both pull the securitization documents yourself and read them, or you can have a Securitization Audit firm pull the documents and tell you, with documentation, whether your Note was actually conveyed to the Trust.  This is what a Securitization Audit is all about.

You can get onto EdgarOnline (which is a free online database containing all files filed with the SEC for the REMIC Trust) and pull the documents you need to review.  For every REMIC Trust, a homeowner will want to review:

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                  Pooling & Servicing Agreement – This is the document that created the REMIC Trust and provides details of who, what, when, where, and how.

  •                                 Who are the parties to the Trust?
  •                                 What the roles are of each party to the Trust
  •                                 When the Trust was created, when it closed, and when all Notes had to be conveyed (deposited) into the REMIC Trust as per the Internal Revenue Codes
  •                                 Where the Trust documents are
  •                                 How the Notes were purchased and conveyed, and how they are managed
  •                                 Which laws governed the REMIC Trust (most are governed by New York State laws)

                 Purchase Sales Agreement – This document details who sold what to who and when.  What entity sold the Notes to the depositor of the Notes for the REMIC Trust?

                Schedule of Loans – This document details the actual Notes that were intended to be deposited into the REMIC Trust.  Typically it is an excel spreadsheet that provides details such as property address, amount of the Note, etc.   Some of the SEC filings have this document; some do not.  If your REMIC Trust doesn’t have it then you will have to ask for it through discovery.

The Pooling & Servicing Agreement can be anywhere from 200 to 300 pages long; so if you know what you are looking for this can be a relative quick read (about an hour or so); if you don’t, then plan on some serious read time.  The Purchase Sales Agreement varies in length and again, if you know what you are looking for it can be a fairly quick read; if you don’t, plan on some serious read time.

This is where Securitization Audits come in; firms conducting the Securitization Audits know what to look for – they pull and read the documents and then provide an analysis of what they are seeing in the documents.  Key things that they will look at and report on are:

  •                 Who created the Trust?
  •                 Who purchased the Notes for the Trust?  Who were the Notes purchased from?  Does the Purchase Sale Agreement show a clear “chain of title” from the originator, to the seller to the purchaser to the depositor?  If not, the report should explain the failure and why it is a failure, and it should detail where in the document the failure is highlighted.
  •                 What were the conveyance requirements for the REMIC Trust according to both the PSA and the Sales agreement?  Were those requirements followed?  If not, the report should explain the failure and why it is a failure as well as the details of where in the document the failure is highlighted.
  •                 When the REMIC Trust was closed and was your Note conveyed in time to actually make it into the Trust?  (There are strict requirements that all Notes must be properly and validly conveyed within 90 days of the REMIC Trust’s closing)
  •                 What laws govern the PSA and Sales Agreement?
  •                 Is your Note on the Schedule?

 If you want to roll up your sleeves and read the documents to determine the above information, then you don’t need an audit; If you do not know how to do the above or what to look for, then an audit may be beneficial in your foreclosure fight.  You can teach yourself how to get this info and read it;  or you can pay someone to do it for you.  That is YOUR call.

I have heard people call these audits a scam because an individual can pull the documents and read them themselves; but that is not what a scam is.  A scam deceives someone into paying for something that they do not receive.

The next question is, what do you do with the information once you get it?  If you are a homeowner fighting a foreclosure, you may be able to use the audit as evidence that the REMIC Trust who is foreclosing on you is not the actual owner of the Note and Mortgage or Deed of Trust and therefore, has no standing to be conducting a foreclosure.

 And I suspect this is the real reason why individuals call the audit a scam.  If you do not know how to use the evidence that the Trust does NOT hold your Note and Mortgage and/or Deed of Trust, then the audit is useless to you.  You have wasted your money.  And that is key – you can use the audit to determine if you have grounds to fight the foreclosure for lack of standing and if the audit does indeed detail the failure of the REMIC Trust to hold your Note, you can use it as evidence in your pleadings and at trial.  But YOU or your attorney will have to know the statutes of your state and how to properly plead this information; the audit is NOT going to tell you how to use the evidence in your legal pleadings.

I think Securitization Audits have a definite place in the fight against these wrongful foreclosures; not everyone has the time, inclination or knowledge of how to find and determine this information and the audits are an effective tool.  I personally did my own research (Our Who is Edgar? ebook provides step by step instructions on how to find your documents) but that is because when I did the research it was before these audits were being offered.  It could have saved me many hours of reading especially when I did not knowing what I was looking for and it would have helped me educate my attorney more quickly.

If you decide an audit is what you want, there are plenty of firms on the internet.  Check out their references, get a sample of their work, and price shop.  There ARE legitimate firms (some are listed under our Experts Sections) providing a legitimate service. [/ismember]




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

Posted by on Feb 2, 2012 in Foreclosure, General Public | 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]




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

Posted by on Feb 2, 2012 in Foreclosure, General Public | 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 in Current Issues in the Fight Against Foreclosures, Foreclosure, General Public, MEMBERS ONLY, PAID MEMBERS ONLY | 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!


The Trustee, Trustee and Trustee…huh?

Posted by on Jan 29, 2012 in Foreclosure, General Public, MEMBERS ONLY, PAID MEMBERS ONLY | Comments Off on The Trustee, Trustee and Trustee…huh?

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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