Sue your lender… Really!!! What For????

Emerging Common Law Theories of Imputed Liability for Predatory Lending

Southern California (909)890-9192  in Northern California(925)957-9797

While assignee liability and the holder in due course doctrine has tended to dominate both the academic discussion of and the state legislative agenda regarding secondary mortgage market liability, it is by no means the only body of law potentially relevant to the subject. Indeed, a relatively overlooked group of common law doctrines may in the long run hold more promise in creating a secondary market incentive to police predation by loan brokers, originators, and servicers.

In reading predatory lending cases, it becomes clear that the judiciary is uncomfortable apportioning liability for predatory lending exclusively through the addlepated federal and state patchwork of assignee liability statutes. Indeed consumers and some courts have groped for common law doctrines that might provide some remedy for the concerted wrongdoing of secondary market financiers of predatory lending. It is currently unclear whether these cases promise to congeal into a more unified and systemic response to securitization of predatory loans. However, at least three possible theories have emerged which have the potential to re-apportion liability for predatory lending amongst parties to a home mortgage securitization structure: aiding and abetting liability, civil co-conspirator liability, and joint venture liability.

I have researched these common law theories, focusing on the extent to which courts have and may continue to deploy them in predatory mortgage lending disputes.

1. Aiding and Abetting

It is a long standing common law principle that a business or individual can be held liable for aiding and abetting the wrongful acts of another. The Restatement of Torts (Second) suggests that, “for harm resulting to a third person from the tortious conduct of another, a person is liable if he … (b) knows that the other’s conduct constitutes a breach of a duty and gives substantial assistance or encouragement to the other so to conduct himself.” The alleged aider-abetter itself need not owe a duty of care to the victim. n368 And most courts agree that the alleged aider-abetter need not reap a personal financial benefit from the wrongful conduct to be held liable. But many courts consider financial gain by the alleged aider-abetter as evidence of knowledge of and/or assistance to the tortious behavior. Moreover, the alleged aider and abetter need not even posses a wrongful intent, provided that she knows the conduct in question is tortious. Courts are also amenable to use of the common law doctrine of aider-abetter liability to enforce statutes which do not by their own terms define or contemplate liability for aiding and abetting. While most aider-abetter liability cases involve allegations of fraud, some courts have been receptive to applying aider-abetter liability to unfair and deceptive trade practice claims as well.

A small, but growing line of cases apply aider-abetter liability to a variety of different parties involved in predatory lending. For example, in a payday lending case, the New York Attorney General’s office successfully argued that a bank criminally facilitated evasion of the state’s usury law by allowing a non-bank agent to originate, service, and retain an ownership interest in payday loans. A federal district court in New York denied a motion to dismiss an aider-abetter liability claim against a mortgage closing attorney, who allegedly claimed to represent the borrowers when in fact he did not. A Pennsylvania case held that a real estate appraiser was potentially liable for predatory lending related claims because she acted in concert with other defendants. And an Illinois federal district court case refused to dismiss a common law fraud claim against an assignee of a predatory mortgage based on the allegation that the assignee “knew of the fraud, but nonetheless funded the loan.”

In the context of securitization of mortgage loans, the most emblematic recent aider-abetter liability case involves Lehman Brothers and First Alliance Mortgage Company. In In re First Alliance Mortgage Co., the Central District of California held that Lehman Brothers could be held liable for aiding and abetting fraudulent lending by First Alliance. Throughout the mid-to-late 1990s, a parade of state attorneys general, private consumers, and public interest organizations accused First Alliance of targeting senior citizens with misleading and fraudulent home refinance loans. Discovery revealed that Lehman Brothers was fully aware of these allegations. Nevertheless, Lehman Brothers extended First Alliance a large secured warehouse line of credit to initially fund predatory loans. After originating the mortgage loans, First Alliance then used Lehman Brothers’ services to securitize the loans for resale to investors on Wall Street. First Alliance used the proceeds of loans sold into securitization pools to pay down its line of credit, cover overhead costs, and initially reap handsome profits. First Alliance also retained the servicing rights to the loans, which gave the company the opportunity to make additional profits from servicing compensation paid by the trust, as well as other servicing related revenue, such as that gathered from late fees and refinancing delinquent loans. But, when predatory lending litigation brought by state attorneys general and the FTC (along with exposes in the Wall Street Journal and on national television) began to make First Alliance’s prospects look dim, First Alliance filed for bankruptcy. But before petitioning the bankruptcy courts for protection, First Alliance drew down 77 million dollars on its warehouse line of credit with Lehman Brothers. In bankruptcy proceedings, the bankruptcy trustee argued that because Lehman aided and abetted First Alliance’s fraudulent lending, Lehman’s security interest on the warehouse credit line should be equitably subordinated to other creditors, including First Alliance’s predatory lending victims. Ultimately the district court concluded that Lehman Brothers’ security interest would not be subordinated since the 77 million dollars Lehman had already coughed up had enriched the bankrupt company’s estate. But, before doing so, the court made clear that Lehman had aided and abetted fraud against the First Alliance’s customers. Given this finding, For their part, consumers involved in the class action have still not been compensated for fraudulent loans, many of which led to the loss of a family home. Lehman, which was a secured creditor, had its bankruptcy claim paid in full.

2. Conspiracy

A second possible avenue of asserting liability for concerted wrongdoing in predatory lending securitization is civil co-conspirator liability. Generally a civil conspiracy is defined as “a malicious combination of two or more persons to injure another in person or property, in a way not competent for one alone, resulting in actual damages.” A conspiracy requires demonstration of an underlying unlawful act upon which the claim is based, as well as some form of combination or agreement between the co-conspirators.

It is well settled that where a conspiracy exits, liability for actions by one co-conspirator taken in furtherance of the conspiracy can be attributed to every co-conspirator, making each equally liable for the others’ acts. Courts treat parties to a civil conspiracy as joint tortfeasors with joint and several liability for all damages “ensuing or naturally flowing” from the act. Moreover, courts hold co-conspirators liable irrespective of whether they are the direct actor, and irrespective of the degree of involvement. n389 Courts distinguish co-conspirator liability from aider-abetter liability because, unlike a co-conspirator, an aider-abetter does not adopt as her own the wrongful act of the primary violator through concerted action or agreement.

Co-conspirator liability seems to have some promise in attributing wrongful actions of front-line players to behind the scenes financiers in securitization. In Williams v. Aetna Finance Company the Supreme Court of Ohio found a mortgage lender liable for fraud committed by a door-to-door salesman. The mortgage lender had an agreement to give the salesman a commission for loans he facilitated with the lender. The “pitchman” targeted neighborhoods with senior citizens who owned their homes free and clear, convincing them to borrow money for home repairs. The lender was liable for the pitchman’s behavior because it gave “access to loan money that was necessary to further his fraudulent actions against customers… .”

Other decisions have denied dismissal of civil co-conspirator liability claims for a range of mortgage lending industry participants, including brokers, home sellers, lenders, appraisers, and attorneys. In Herrod v. First Republic Mortgage, the Supreme Court of Appeals of West Virginia rejected the notion that the mere fact of securitization changes the application of co-conspirator liability rules, explaining that:

“[a] securitization model – a system wherein parties that provide the money for loans and drive the entire origination process from afar and behind the scenes – does nothing to abolish the basic right of a borrower to assert a defense to the enforcement of a fraudulent loan, regardless of whether it was induced by another party involved in the origination of the loan transaction, be it a broker, appraiser, closing agent, or another.”

While none of these cases involved extending liability to a seller, underwriter, or trustee in a securitization deal, the notion of a “pitchman” and a “financier” seems plausibly applicable to a lender and a seller or underwriter respectively. Although a pooling and servicing agreement will never explicitly say that an investment bank agrees to a deal despite an originator, broker, or servicer’s modus operandi of violating predatory lending laws, agreement can be shown through circumstantial evidence such as the financial incentives, available information, and tacit understanding amongst the parties.

3. Joint Venture

A final common law doctrine which may hold promise in creating greater accountability for structured financing of predatory lending is joint venture liability. A joint venture is an association of two or more persons designed to carry out a single business enterprise for profit, for which purpose they combine their property, money, effects, skill, and knowledge. Joint ventures arise out of contractual relationships, be they oral, written, express, or implied. While the precise formulation of elements varies, generally to form a joint venture:

[1] two or more persons must enter into a specific agreement to carry on an enterprise for profit; [2] their agreement must evidence their intent to be joint venturers; [3] each must make a contribution of property, financing, skill, knowledge, or effort; [4] each must have some degree of joint control over the venture; and [5] there must be a provision for the sharing of both profits and losses.

Where a joint venture does exist, courts generally rely on partnership law in judging the rights of the parties. Thus, courts hold joint venturers may be jointly and severally liable for debts of the venture including those incurred from tortious conduct. In general, a co-venturer is not liable for the willfully unlawful acts of another. But, where the unlawful act was within the actual or apparent scope of the joint venture, or where the co-venturer gave express or implied consent to the act, or even where the co-venturer failed to protect the victim from the act, he or she can be liable for the primary wrongdoer’s behavior.
As with aider-abetter and co-conspirator liability, a growing line of cases find co-venturer liability with respect to predatory lending allegations. For example, in George v. Capital South Mortgage Investments, the Kansas Supreme Court considered a large punitive damage award against a mortgage lender and an assignee. The case involved a defunct mortgage brokerage called Creative Capital Investment Bankers. The consumer-plaintiffs in the case hired Creative to assist them in obtaining a loan to purchase a home from a relative for $ 40,000. After swamping the family with a parade of silly and unnecessary documents, the mortgage broker obtained a signature on a loan contract with a principle of $ 60,000. The broker then instructed a closing agent to distribute less than the agreed purchase price for the home to the seller. The lender, who was apparently aware of the unusual terms, assigned the loan to a private individual at closing and gave the closing agent instructions to not inform the borrowers of the assignment. When the family learned that they had borrowed $ 20,000 that they never wanted nor received, they sued. Creative Capital did not appear at trial and the court gave the family a default judgment, which in all likelihood was uncollectible. Of greater import was the family’s claim that the lender and the broker were engaged in a joint venture to profit from the broker’s fraud and usury. At trial the jury agreed. On appeal, the Kansas Supreme Court found sufficient evidence to sustain the co-venturer verdict against the lender and assignee. The lender argued that it was a distinct corporation, located in a different state, and did not share office space, administrative services, or telephone lines. Looking past these arguments, the court pointed to frequent contact between the lender and the broker, as well as the lender’s insolvency in structuring the loan immediately preceding closing. The court sustained the jury verdict against the assignee by pointing to the undisclosed assignment at closing as evidence that the assignee was a participant in the joint venture. Moreover, the court pointed out that the fact that the assignee received much of the financial benefit from the unlawful charges suggested that the assignee had agreed to the joint venture.

While the George case did not involve securitization, there does not appear to be a principled reason why joint venture rules would be inapplicable to structured finance. In securitization deals, the pooling and servicing agreement is an explicit agreement to carry on an enterprise for profit by the different businesses involved in the conduit, including mortgage brokers, lenders, MERS, servicers, sellers, underwriters, trustees, and trusts, or an SPV taking a different legal form. Each of these parties fulfill a specific function within a structured finance deal and all have control over their own particular role. At least some of the parties in some cases agree to share in the losses and profits of the venture. For example, mortgage lenders frequently agree to repurchase non-performing loans from the trust.

Mortgage brokers are only paid if any given loan closes and conforms to the underwriting standards of the loan pool. Servicers agree that their fees are contingent on performance aspects of the loan, such as whether borrowers pay on time. Sellers and underwriters agree to accept the price they can receive from selling securities, which is in turn dependent on the reputation and behavior of the originators, brokers, and servicers. Trustees agree to share in profits and losses, since they accept compensation out of the proceeds of consumers’ monthly payments. And certainly a trust (or other type of SPV) itself agrees to share in profits and losses, given that trust income is completely dependent on performance of the loans it houses.

Following this reasoning, at least one court has found a triable issue of fact on the question of whether a securitization pooling and servicing agreement created a joint venture with respect to predatory lending allegations. In Short v. Wells Fargo Michael Short alleged that employees of Delta Funding, a mortgage lending company, closed a mortgage loan on his home when they came to his house with a stack of documents for him to sign. Mr. Short alleged that Delta never provided him any copies of the loan documents, nor gave any explanation of them at the informal closing. Delta Funding sold Mr. Short’s loan along with many others into a trust pursuant to a pooling and servicing agreement with Wells Fargo, a national bank regulated by the Office of the Comptroller of the Currency, agreeing to act as trustee. Under the pooling and servicing agreement, Countrywide Home Loans, Inc. agreed to service the loans. Eventually Mr. Short alleged that Countrywide gave Mr. Short notice that he owed two payments on his loan in one month. After several unsuccessful (and no doubt frustrating) attempts to contact Countrywide’s customer service, Countrywide eventually informed Mr. Short that he also owed nearly a thousand dollars in attorneys’ fees and other penalties in addition to his regular payment, plus the still unexplained extra monthly payment – all immediately due by certified check. Mr. Short also alleged that Countrywide had charged him fees that were not authorized under West Virginia statutes. Eventually Mr. Short obtained counsel and sued. The federal district court reviewed the general principles of joint venture. Then, the court pointed out that the parties explicitly divided up the revenue from various fees in the pooling and servicing agreement. The court concluded that “taking the evidence in the light most favorable to the plaintiffs, it would not be unreasonable for a jury to conclude that Delta Funding, Countrywide and Wells Fargo entered into a joint venture.”

IV. The Consumer Protection Critique of Mortgage Securitization Law

A. Ambiguity: Consumer Protection Laws Presume an Antiquated Model of Finance

Perhaps the one uniform feature of predatory lending law is its failure to recognize and account for the complex financial innovations that have facilitated securitization structures. Most consumer protection statutes, including the TILA (1968), the FDCPA (1977), the ECOA (1974), the FHA (1968), and the FTC’s holder in due course notice rule (1975) all preceded widespread securitization of subprime mortgages by over a decade. While this time frame is not meaningful in itself, it hints at a fundamental structural problem in the law.

One would expect little controversy in a term as fundamental as “creditor.” But, the word suggests a unitary notion of a single individual or business that solicits, documents, and funds a loan. For example, under the TILA, a creditor is “the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness.” This definition is important since the private cause of action creating the possibility of liability under the act extends only to “any creditor who fails to comply” with the Act’s requirements. While this definition resonates with the notion of a lender as we commonly think of it, this notion is increasingly discordant with reality. In the vast majority of subprime home mortgage loans, most of the actual tasks associated with origination of the loan, including especially face-to-face communication with the borrower, are conducted by a mortgage loan broker.

Because brokers usually do not fund the loan, they are not the party to whom the loan is initially payable. The absurd result is that the federal statute which purports to promote useful and accurate disclosure of credit prices, does not govern the business or individual that actually speaks to a mortgage applicant. Rather, liability for the statute is confined to errors in the complex paperwork, which many consumers have difficulty reading, and which are typically ignored in hurried loan closings long after borrowers arrive at decision on which broker and/or lender to use. Arguably the credit advertising restrictions in Part C of the statute reach mortgage loan solicitations by mortgage brokers. But these provisions are quite limited in their substantive reach. For example, they never explicitly prohibit misleading advertising or even false descriptions of loans. And even if they did, the statute does not grant a private cause of action to sue for advertising violations anyway.

Here are some examples of what our offices do in fighting foreclosures. Many a client call me when its toooooo late however sometimes something can be done it would envolve an appeal and this application for a stay. Most likely you will have to pay the reasonable rental value till the case is decided. And … Yes we have had this motion granted. ex-parte-application-for-stay-of-judgment-or-unlawful-detainer3
When title to the property is still in dispute ie. the foreclosure was bad. They (the lender)did not comply with California civil code 2923.5 or 2923.6 or 2924. Or the didn’t possess the documents to foreclose ie. the original note. Or they did not possess a proper assignment 2932.5. at trial you will be ignored by the learned judge but if you file a Motion for Summary Judgmentevans sum ud
template notice of Motion for SJ
TEMPLATE Points and A for SJ Motion
templateDeclaration for SJ
TEMPLATEProposed Order on Motion for SJ
TEMPLATEStatement of Undisputed Facts
you can force the issue and if there is a case filed in the Unlimited jurisdiction Court the judge may be forced to consider title and or consolidate the case with the Unlimited Jurisdiction Case

2nd amended complaint (e) manuel
BAKER original complaint (b)
Countrywide Complaint Form
California stop foreclosure and get your own shortsale COMPLAINT
And in some cases an injunction is in order
Foreclosure injunction TRO
and a Lis Pendence

Southern California (909)890-9192  in Northern California(925)957-9797

54 Responses to “Sue your lender… Really!!! What For????”

  1. Del Chia at 5:33 am #

    Excellent information. I have been looking for this kind of information all over the place so that I can try to proceed pro se in Virginia. Can’t find a lawyer and we have lost our unlawful detainer trial. We can prove the fraud, now we have some some precedent. Thank you!

    • Elyse at 3:16 pm #

      So check this one….
      Filed a Complaint 2/18/10 against Wells Fargo Home Mortgage, ASC, Cal-Western Reconveyance, US Bank National Association and will drop MERS as they have no standing, claiming Fraud, Intentional and Negligent Misreresentation, Quiet Title, wrongful foreclosure, Breach Of Contract and a couple civil code violations.

      US Bank filed an Unlawful Detainer action and I then filed last week to CONSOLIDATE both cases…that’s why we were in front of the Judge this morning in Indio, Ca. Superior Court.

      The Judge granted a Prilimenary Injunction and the Consolidation….however, then he ordered me to catch up with my $8,000 in back payments and begin paying every month thereafter???

      I wonder who to pay?
      What a joke…anybody???

      Cal Western Foreclosed and Wells Fargo auctioned the house back to itself so I wonder what is next!!

  2. Delia Aguilar at 1:28 am #

    Dear Timothy:

    Our home sold twice, yes twice.

    First time: May 2008, first time some foreclosure/Credit Restoration Guy got my husband to give up 10% of interest and add Barlow & Associates to deed & recorded in Contra Costa County. Sale reversed due to
    company being in a bk 13 since April of 2008.

    2nd time: in August 2008, we tried again to find someone to help us settle with our servicing company, but no luck. Since sale;

    I have requested for a copy of original note and copy of appraisal. I got just that, copies.
    An agent came a week later after sale and told my nephew we needed to vacant property because it now belonged to the Bank.
    Name of bank is Deustche Bank
    I have not been serve yet this second time, but I need some kind of guidance as to what I can file in court before we loose more rights.
    Home (925) 684-9523 or email;

  3. CM at 5:16 am #

    WE are interested in participating in any class action suit against Aurora Loan Services, Lehman Brothers, etc. We suffered though months with a buyer at the hands of Aurora on the short sale of our devalued home, and right as we are getting ready to close they posted a foreclosure auction set for two days before our scheduled closing. We have been preyed upon twice, and the public notice has impacted us again financially, morally and with our ability to garner new employment. Please help!!!!

  4. April at 1:00 am #

    We have had 4 mortgage companies to deal with in the last 4 years. So, my question is who should be sued? Is the current mortgage holder AMHSI responsible for what other companies may have done wrong. In 2005 we had an option ARM with WAMU. It was a no-doc and the appraisal matched the sale price exactly.The payment went up immediately and we were so nervous we called our broker right away to see about refinancing or restructuring. He basically talked us out of it. A year later our payment had tripled and we refinanced with HomeBanc. They went out of business a few months later and we ended up with Chase. They were just awful to us. Now we have AMHSI who we were suspicious of from the start. Their name is so close to American Home Mortgage who is out of business. We asked for proof they were our mortgage company. They started making harassing phone calls from them before we even had a letter from them stating they would be servicing our loan. They wanted to be paid and we didn’t even have an account number yet! They are in India, and it is difficult dealing with someone who doesn’t understand what is going on over here. They sent us a letter of intent to begin foreclosure by Feb 16th. We are only 2 months behind. I have a TILA letter ready to send to AMHSI. Is this the best first step? Thanks for your help.

    • timothymccandless at 7:18 am #

      The best step is first to send a RESPA letter this puts the lender on the defensive and they must respond to you. then send a rescission letter see my page how much time do I have. Be proactive. I you start withe RESPA this could delay the filing of the default. I expect that teh Bankruptcy law could change by end of March if this happens lenders are going to begin reducing principal balances and really lowering payments.

      • marlon romero at 10:05 am #

        Hello Mr.Tim, I’m in Riverside CA , my lender first franklin loan services. What are the steps so that my lender can reply to? Presently i’m 6 months behind? I want to save my home ,any advice helps thanks. My email


  5. dan palodichuk at 8:52 am #

    we have 5 arms and 4 seconds on our primary and 4 investment properties all i believe were results of preditory lending practices. we are in the stat of mn. who do you recomend to do our modifications,and sue the lenders and broker for the situation we are in. we are still current on everything .

  6. RaiulBaztepo at 3:18 am #

    Very Interesting post! Thank you for such interesting resource!
    PS: Sorry for my bad english, I’v just started to learn this language 😉
    See you!
    Your, Raiul Baztepo

  7. PiterKokoniz at 7:10 am #

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    Sorry for my bad english:)
    Your Piter Kokoniz, from Latvia

  8. Bad credit Loans at 5:40 pm #

    I found lots of interesting information on The post was professionally written and I feel like the author has extensive knowledge in the subject. keep it that way.

  9. bryant winton at 7:28 pm #

    i just recently had a discharge ch13 my trustee paid all creditors i sent discharge documents to ocwens to get a mod after there was final accounting soon after that it was granted i sent in my documents ocwen said i was five months behind and sent me act 91 papers for default my trustee paid on time and so did i

    • Leslie Marks at 9:13 am #

      Ocwen is not a reputable organization. I am fighting them and new century. Don’t let them bamboozle you!

  10. Manny at 4:40 pm #

    I lost my home back in late nov.2007 to a loan made by countrywide they would not negotiate the loan was made with fraudulant income statements, do i have any recourse. thanks

  11. mushie at 12:31 pm #

    How does one go about starting a class action lawsuit?

    How many cases does it take to join together to be effective and get results ~ but not so big that the number of cases overwhelm to the point we never see the payout?

    Is anyone interested to represent us for free for now, or at least paid for by the bank since its all so complicated i am forced to hire an attorney and they won’t speak to me direct?

    How far can I get if I want to represent myself??

    Can they really make me homeless overnight?

  12. kathleen w. at 3:29 pm #

    Hi Timothy,
    I faxed a few letters to you over the weekend. Since then I have received another letter from BofA. They have refused again to give me answers to my questions in my QWR. Also, last time they told me the owner of my loan is Bank of New York. In this letter they state, “As you know, CW/BofA did not originate the subject loan, please refer to the lan doucments provided under separte cove, As the purchaser of a closed lan, CA/ BofA is not responsible for any misuderstnading or lack of communiction between the borrower and the originating entity” My lender was Impac funding, and CW was the servicer. Nothing at the recorders office has ever changed, nothing on my homeowers ins. has changed. But with each letter, B of A changes who is the owner of my “Closed” loan????
    My neighbor who had CW and now BofA sent in a copy of the same QWR as I did, but only once. He has received a lot of copies of cert. copies of everything that was requested. They had it all to him within 20 days. I have not received anything but these letters telling me they don’t have to send me anything under 12 U.S.C. 2605(B). And my request goes well beyond that which is available through a QWR.
    Should I try again??

  13. Leslie Marks at 5:35 pm #

    Tim, in my case I believe that even if they lost the note it would be moot because the initial transfer from New Century was illegal and violated bk law as well as RESPA and TILA. I am in an Adversary Proceeding in Delaware fighting that right now.

  14. Leslie Marks at 5:40 pm #

    I contacted the Department of Corporations. The are the “regulating” agency for the Exemptions. They confirmed that the banks that are “exempt” do not have to prove that they are actively doing loan modifications. They only have to state they have a loan modification in place. what a CROCK! I beleive that each person needs to file a complaint with the department of corporations and state that their lender REFUSES to REASONABLY do a loan modification. Every bank including the scummy subprime kings, Ocwen, Select Loan Sevicing and the main slimy kings Wells Fargo and Bof A are on the long list.

    Wonder why the media so eager to tell us about the moritorium was not so eager to advise us that within the SAME law, two paragraphs down, each and every bank was allowed an exemption to the moritorioum. !$@#$$#@!!!!

  15. Leslie Marks at 5:45 pm #

    BryonWinton you need to advise the BK cout of OCWEN;s bad faith acts, reference your case, contact your trustee.

  16. Leslie Marks at 5:46 pm #

    BofA is on the Exempt list so they don’t have to do loan mods!!

  17. Justicia at 11:28 am #

    BofA maybe be exempt but they do offer loan modifications but not that good because they accumulate everything and put them all in the principal. So, who needs that? Loan mods do not work for my case.

    I am also interested in joining a class action suit being a victim of predatory lending practices by these giant, greedy mortgage companies. Please let me know how we could get started.

    • Kevin at 1:15 pm #


      2046 balance sheet as it relates to the original “loan” … shows the
      banks’ ledgering of the account. Will show the off balance sheet entry
      and extinguishment of the “loan”. Mandatory filing pursuant to Title 12
      U.S.C. 248 & 347
      1099 OID report
      S3 A registration statement: shows when and where the instrument was
      sold… they can’t claim “lost” note
      424 B-5 prospectus (security filing)
      RC S & RC B call schedules.
      FASB (Financial Accounting Standards Board) part of GAAP (Generally
      Accepted Accounting Standards)
      FAS 125, 133, 140, 5, 95. These will direct the auditor to the liability
      side of the banks’ books and also create the trail of exactly where the
      money came from and where it went.
      A promissory note falls under UCC Art. 3 because it is a negotiable
      instrument, once it is securitized, it falls under UCC Art. 8 & 9 as a
      security. The banks are illegally selling your un-registered instrument.
      Deeds of trust and mortgage deeds are always registered as evidences of
      debt… notes are never registered. Selling un-registered securities
      is an automatic right of rescission of the original contract. You
      possess entitlement rights and possessory rights to your original
      note… it is negotiable.
      UCC 3-305 is about recoupment, UCC 3-306 is the claim you must make to apply the set-off from the account ledger.. this counterclaim is mandatory.
      Title 12 1813 (L)(1) states that when you deposit a promissory note, it
      becomes a cash item to the bank, you were supposed to get a receipt for
      it. But you didn’t ask for it. These notes are deposited into a
      transactional account and the credit goes to the accounts payable side
      of the ledger (assets) of the bank, but on the liability side, the note
      has been sold already after it was monetized by your signature. You are,
      therefore, the first funds transferor and have the right to either your
      note, or the cash equivalent.
      Under Civil Rule 13, if you fail to bring a counterclaim, you waive your
      rights to the note because you were ignorant of the rules of procedure.
      Ask for all documents in discovery, under Civil rule 36 if they don’t
      produce them, they are admitted.
      We loaned them the note, we started the process, so we need to show them where to fix the problem. At law, we are presumed to be knowledgeable in banking since we deal in commercial paper every day. FRN’s are nothing more than registered promissory notes, that’s why they are recognized as deposits and you receive a receipt from the bank for your deposit. You should register your promissory note on a UCC-1 or UCC-3 to show a public interest in the note itself. This is recognizable in Court. Otherwise, your only public interest is shown by your payment to the bank, on the receivable (asset) side of their ledgers.
      The 1099 OID will identify who the principal is from, which capital and
      interest was taken, and who the recipient or payer of the funds are, and
      who is holding the account in escrow, un-adjusted.
      I am not an attorney, and this is not to be construed as legal advice. If
      you have questions about the information contained herein, seek the
      advice of competent counsel, if that exists.

      • Howard at 11:06 am #

        Kevin I would like to dicuss this post with you.727-290-7945

      • greg at 11:28 am #

        great info. I have lost several homes in Southwest fl. and have totally wiped out and would like to defend myself against such fraud. I would welcome any info to stick it to them. I have negotiated one loan and settled which has been unheard of.

        I have 5 loans in excess of 500k and are all with Countrywide, Bank United, BAC, Citi, and Wamu

  18. Chris at 5:18 pm #

    I’m looking for a Joint Venture Broker with high integrity and honesty. I’m looking for an aggressive Joint Venture Broker for B2B service that is marketed through the internet. My product is Mobile Advertising. I am ready to go now! Let’s talk and work out the terms. I can be reached at or 678-380-3752
    Can you help?

  19. simon l at 8:35 am #

    How about the fact that the original lender never disclosed the true nature of MERS as an agent for all of it’s members.

    And the fact that the Priomissory Note states that the borrower must notice the Note Holder regarding important issues regarding payment, but it is never disclosed, and is intentionally concealed, who the true Note Holder is. That prejudices and interferes with the borrowers’ ability to notify and pay the Note Holder. I say it’s a breach of contract, and the Note should be unenforceable.

    And the big one – the house was overvalued, inducing the borrower to believe his home was fair consideration for the loan, when the truth is that the property was rendered equity-negative and unsaleable at the execution.

  20. Debbie at 8:09 pm #

    I’m looking for a real estate attorney licensed in Wyoming (a non-judicial foreclosure state) to help me fight a MERS foreclosure. I’ve talked with two attys so far and they haven’t even heard of MERS. Any suggestions for a knowlegeable attorney??

  21. Nancy at 12:47 am #

    I am trying to find out more about auditing my loan… is it a requirement to have a home inspection? I purchased my home in 2005 and I went stated income, I put down a lot of money and now am trying to wonder how can I find out if my lender was wrong or the person who did the loan paperwork? Where do I go from here to find out if everything was done right?

    • Thomas S. at 8:14 am #

      Go to the website,
      look for the forensic audit section.
      They can do a forensic loan audit for a fee.
      Tom S.

  22. Jack at 4:49 pm #

    There are lawyers out there that are aggressive and will take predatory lending cases. According to the initial stage of the litigation generally involves a $5,000 fee an the monthly fees generally are $1,500. For anyone that is as fed up with this whole situation as I am I say it’s time to sue. I have heard about people that signed fixed rate documents but were later told they signed ARM documents. Someone needs to be accountable for the corruption.

  23. Hail at 3:35 pm #

    My lender has given me a trial period for 3 months. According to my lawyer they have agreed to deal with only me, since my ex-wife has quit claim on our house and has nothing to do with it since my house is upside down. It has started last Septmeber 2009 and ended Nov. 2009. Then on the month of December I have sent another payment and Ocwen again has incash the money. Then I was wondering how come I haven`t received any bill for January. So I called my lawyer and told him about the delay of Ocwen in sending my January bill. My lawyer called the presidents office of Ocwen and was told that I didn`t get the loan mod. then last Dec. 22 2009 I received a letter from Ocwen saying that I need the signature of my ex-wife for the loan to be approved. they know that that it is next to impossible since we broke up not in good terms and she has clearly expressed her feelings regarding signing the loan mod. She doesn`t want to do anything with the house. Please tell me what to do. Do I have any legal stand on this situation? Is shortsale the best way since I will be incurring tons of bills related to house improvements we made, per court order? or BK if qualified? I have paid my lawyer already. I have spent all my savings trying to save the house and come to find out in the end im going to lose it. TY very much for your help. Hail.

  24. Elyse at 5:14 pm #

    Dear Tim,
    You are so on top of this issue…Thank God!
    My Deseased husband signed for this home loan with Barrington Capital and in 2003. I have a letter stating that that loan was paid off in 2004 when I assume, that loan was sold to a 2nd interest as a “security”…it was then sold 3 more times so it must have been with MERS who sliced it up. My husband died in 2007 and American Servicing Co. would not discuss anything with me about the loan because I was not on the loan, however, I am his beneficiary and Successor with loads of documents to prove it. ASC would not accept anything for a whole year. When they finally did begin to talk with me, they forclosed…that was in 2008…I fought with them and they put me into a Forbearance Plan and the payment was due July 30, 2009. I sent payment on July 28, 2009 and they said it was late? They accepted and cashed the payment and posted it later than the date they cashed it…with that, they proceeded with eviction. I filed BK on Chapter 7 on December 10, 2009 and they were granted a relief from Stay on January 22, 2010. I am now preparing a Complaint for Superior Court for Breach Of Contract…Foreclosure Fraud, Quiet Title, Intentioanl misrepresentation and my question is…MERS???
    MERS is mentioned in the Default and from my understanding, they have no standing to Foreclose as they probably don’t have the NOTE…

    Will you please tell me if there is a Class Action Law Suit going on with others that want to keep their homes and where the NOTE is not presented???

    Please email me or call (760) 770-6611
    Mrs. Goodwin

  25. Rodolfo de Hoyos at 2:24 pm #

    Hello Timothy, my question is can one sue in a non judicial foreclosure state under UCC Article 3-301. Does one have to sue in Federal court or can one sue in State court?

    Thank you.

  26. Rodolfo de Hoyos at 2:25 pm #

    Hello Timothy, Does one have to sue in Federal court or can one sue in State court? under UCC article 3-301?

    Thank you.

  27. BRENTON at 2:40 pm #

    Tim, what can be done (if anything) to correct the ACTUAL loss listed on a 1099-C sent to us from the lenders.
    example: loan amount owing at foreclosure 1,000,000
    property reverted back to the lender for $600,000
    Lender issues us a 1099-C for the difference of $400,000
    Lender then sells the home for $800,000

    The lenders real loss (excluding any attorneys, brokers court fees, etc) is $200,000
    NOT $400,000

    Most loans are insured so in some cases, the lender loses nothing. The govt actually credits them the loss or part of it as well.

    so, to say the least, the borrower in this example, should only have received a 1099-C for $200,000 Correct? (Technically speaking?)

    Also, doesnt the lender have to get the 1099-C to the borrower no later than 1-31 of that current tax year or lose the ability to claim that?

    Thanks so much for the help!!

  28. sue Grisham at 8:18 pm #

    I was foreclosed upon wrongfully in the state of Wisconsin. I was never late with my payments the bank did a construction loan then wouldn’t turn it into a 30 yr loan like it said on my construction loan my lawyer never caught it and the bank never gave me a copy of the document lied on my credit report so no other bank would take me. So then did a 7 month note with me collateralized everything we owned our home, businesses than foreclosed on everything and to get our business back we had to pay htem $15,000.00 after the sheriffs sale. Locked me out of my house before they were suppose to. Sold my house to a bank relative in 10 days for $150,000.00 less than the asking price and would not show it to any one else. What recourse do I have? Please help.
    Sue Grisham

  29. Stewart J. Lustgarten at 9:45 am #

    Inclide me in your class action

  30. Michael Willis at 2:15 pm #

    I have been fighting pro se for 3 years now to keep my home in Georgia after a wrongful foreclosure. I am still in possession of the home but I am definately not legally efficient or financially sound enough to be able to continue the fight much longer. I have been fighting Fannie Mae with dispossessory and I have sought representation everywhere to no avail. Most attorneys won’t even give me the time of day to even discuss the matter with them. I have documented proof of fraud by the originating lender (documents to prove transfer of $10,000.00 of my debt to a third party until after closing of the loan and then me having to re-assume the debt amount after closing and selling of the loan, also bank made a deposit of over $13,000.00 into my personal account by the senior vice-president of the bank with the deposit ticket made out in his handwriting stated as loan funds without my knowledge or consent 3 days before loan closing, the bank waited over 5 months after construction was complete and appraisal submitted before closing on the loan to permanent 30 year and was forced to pay construction interest the entire time for no reason when the approval of loan was for construction/permanent, my first informed interest rate of 6.5% changed to 9% at closing with me buying point to get 8.75% and had not been informed of this change until I was at closing, also have a copy of my original loan application in my handwriting that shows without a doubt that my income was purposefully changed(forged by bank in completely different handwriting) after I returned it to the bank and the copy I have was furnished to me by the FDIC(practically the only document the bank supplied the FDIC when requested to investigate on my accusations. The bank contends that all my documents and folders have been destroyed which is a complete lie) and there are many many more things to add to the original lender complaint, the first servicer overescrowing way above 20 times legal right to do so even after being notified of their mistake and their refusal to adjust the mistake as well as other problems, wrongful foreclosure by the second servicer not only giving no notice of acceleration of foreclosure but also refusal to give pay-off before foreclosure (have this recorded on tape) no assignments recorded until 3 months after foreclosure. All documents have the wrong property stated upon them which has already cost Fannie Mae considerable amount of payout in a suit by the wrongfully evicted neighbors. Please help in any way. I have just recused the judge so I bought a little more time. I have a very strong case but need help immediately. Fannie Mae is attempting to dismiss a prior finding by the court in their favor that I put on appeal. In that case it was found in their favor for property that has been proven cannot take any possession or title to. The property where they wrongfully evicted the neighbors. Now they are stating it is a different property from the last 5 attempts to take possesstion of my home. Any help will be greatly appreciated. Thanks.

  31. v martinez at 2:52 pm #

    am looking for help in unlawful detainer in california. I have five more days. My loan is with Wachovia and did file a response to original summons went to court then given two weeks as Wells Fargo who now is the beneficiary had an error in their documents and although the reasons I had stated may be valid they may not be in the unlawful detainer portion. My first defense was the home was not to be auctioned as wachovia had offered a modification seminar that was to begin on a monday but house was auctioned the prior Friday. 2. when I started to review the recorded sale as I didn’t believe them, I mean how could they auction it it we were going to the seminar a couple of days later. Did not find the recorded sale at that time as they recorded later, but found what I thought were blatent errors. First being property was to be recorded as my sole and separate property was filed as a married woman. Next I found notice of default filed by Cal Western Reconveyance signed and filed Nov. of 2008. Yet no filing of the Substitution of Trustee filed until Dec 2009 13 months later. Substitution of Trustee has a date signed the same date as NOD but form used by Cal Western for Substitution has a revision date of Sept of 2009 so it could not have been signed in November of 2008 it was notorized and filed 13 months after NOD. Also strange about the substitution of trustee was an employee ofCal Western Reconveyance acting as attorney in fact for Wachovia was the individual who assigned to themselves as trustee. This is clearly a conflict of interest is it not?

    Have been in my home for 23 years and would like to work things out but had given up until I recieved the notice about the seminar then they snatched it away.

  32. AJJ at 8:26 am #


    before I say anything i must tell you i am under court order not to discuss my case online as my lender does not want embarrassment so this will be a hypothtical situation. please do not post my email. a situation might have happened where a lender baited and switched a loan. the l/o when called on it said it was the borrowers fault. the borrower could have probably qualified for the loan but was steered toward a no doc jumbo arm loan. the first closing went very bad and the borroweres walked on the loan after three days. the l/o hard sold the loan and promising he could get them out in a year. they faithfully completed thier end and this of course never happened. at the closing the branch manager said it was because of they were self employed and there were no inconsistincies- he basically went along with the lo cause hes was making $$ too. the loan was supposed to be brokered to a large wholesales but was kicked back and is not able to be brokered, the loan was also put in the wifes name cause she had the better credit score 750+ she had no income and hasnt had a job in 17 years. they got behind then caught up then the lender refused to take their payments. this is an in house “bad” loand and they have beaten them up from all sides. they have already tried an unlawful foreclosure and were shut down and they go again this month to get a judge to allow them to foreclose. the not was addigned to the secondary lender on our copies there is a whole lot more to this story but they need some help any suggesstions.

  33. dev at 10:51 pm #


    I wanted to sue the creditor who mis-reported to the credit bureaus for 4 years (until early 2009) due to which my credit score has gone down quite a bit. But after long battle, the dispute was finally settled and they written off the charges on my credit card account and also took care of it with the bureaus. In just couple of weeks from then, my credit score went up 40 points or so. At one point of time, I was even denied the home mortgage.

    Given the above situation –
    1. Can I file a lawsuit with the lender? If so, what’s the amount we can fight for the damages?
    2. Is there any time limit to files the charges? Because the issue was settled in early 2009.
    3. If there is a chance to file the case, should it be filed in local courts or should it go to a small claims court?
    4. Is there any legal help available on a contingency basis? Have all the documents ready in hand.

    Thank you sir.

    • dev at 8:06 pm #

      Please reply ….


  34. Short Sale Help at 2:25 pm #

    I found your blog because I wanted more information on your expertise. I run a blog and I am looking for good content to link to for future posts. I like you site so I am adding you to my google reader.

  35. Tryphena at 3:53 pm #

    I love all these blogs. However, bottom line, and this is my personal experience – no matter how brilliant you are – California judges are ignorant and totally on the side of the loan servicing companies. Even if you showed them black and white proof – yes, even if you rubbed his noses on the proof – these ignorant suckers would side with the loan servicing companies. These guys LOVE MERS, they love to evict homeowners. They belong in Stephen King horror movies. Hey, and if there is a class action against Aurora – let me know, I WANT IN.

  36. Tryphena at 3:56 pm #

    It looks like the last comment (before mine) was posted on Sept 12, 2010. Is the site down? Or like everything else, just “fizzled out?”

  37. Kevin at 6:52 pm #

    Tim, I have sent numerous QWR’s on behalf of my clients. I’ve never seen any get responded to.

  38. Kitty at 8:02 am #

    Hi, how are you? Hopefully your response is a great one!

    We are homeowners in Michigan with a mortgage with a small town Bank. My husband is a recent college grad who was out of work for a span of time combined with our bank’s decition to no longer pay for our house insurance with our escrow is how we got into our current financial situations. Our monthly house payment stayed the same even though we were paying house insurance.

    We are a family of five including three teenage sons who have known of no other home, so when we saw our home listed in the newspaper as a notice of mortgage sale was a huge emotional blow! We were only 2 house payments behind and were communicating with them.

    Our small town bank has since strung us along leading us to believe they were entering us into the program called Michigan’s Helping Hardest Hit Homeowners plan. I called Michigan State Housing Development Authority’s (MSHDA) 3/7/11 to see if they could check our status and to my surprise they stated we were not enrolled. This program is one that our bank has to initiate.

    I have every date, time, name, and phone number of every conversation documented.

    Is there any legal actions I could pursue?

  39. Frank L. Lucero at 7:50 am #

    I been working with Select Portfolio Servicing who services Bank of America. I was working on Loan Modifications with Select. They gave me Three Modifications over a two year period. They keep coming back every time and denied me even after I made all three payments each time.
    I applied for an in house modification December 2010 they denied me again.
    I filed for Bankruptcy, but when I went to Court on February 15th, 2011 in Riverside, California they wanted me to make my Monthly payment $2,559.63 plus $ 1,700.00 in arrears. Which I could not afford.
    After I went to court and the case was dismissed.
    I called Select and they sent me another in house Modification. I got a letter on March 1st, 2011 and they said they were sending it to loan modification department only to find out that they sold my House on March 8th, 2011. I received an eviction notice on Monday 04/05/2011. IS THERE ANY LAWYERS WHO CAN PLEASE HELP FIGHT THESE NO GOOD SERVICING COMPANIES. I LIVE IN HESPERIA, CALIFORNIA. PLEASE HELP.
    Home # (760) 949-2136
    Cell # (213) 377-6988

  40. tjs at 5:59 am #


  41. Bill in Ohio at 2:30 pm #

    Great Web Blog!

    Tim…I lost 3 properties to MERS 3 years ago and never defended as I was ignorant then.
    Id like to pursue this and work to either get them back or sue for damages. Any advice on what court, what tactics?

    Thank You!

  42. Nora at 9:13 am #

    Hi Tim,

    You are like some other attorneys are advocate for suing the banks, however, as you well know that suing the banks have had very little if any positive outcome for the homeowners, especially here in CA. Banks are not modifying, although recently they showed the possibility of doing a slight modifications.

    In your honest opinion, what is the best way right now for a homeowner to pursue the bank, or I should say a servicer? In this case fraud is precent including but not limited to RESPA, TILLA, CHAIN OF TITLE, MERS, SECURITIZATION, ETC. Need advice, look forward to a response, and thank you for your blog and valuable information.

  43. Letecia at 9:53 pm #


    i am having a problem with my Lender, I ‘ve trying my efforts to have my Loan to be modified, almost three years ago, I have hired Alliance Law Center in San Diego CA last Dec. 03/ 2008, and my Lender did not do a thing to modify my Loan. When I called them to negotiate with them directly because they started to sent me A Notice of Default, Foreclosure Sale, and Trustee Sale, but I was told they are advised by Alliance not to negotiate with me directly but Alliance. But the bad thing was Alliance closed their office, the Owner Cameron Edwads surrendered his License, and I did not reimbersed the money I paid them for $ 14,000.00. so I have to file a Bamkruptcy in order for me to hold my property. But on March last year the Court had an ordered or recommended to my Lender Indymac to regotiate with me directly to do Loan Modification,,Refinance or do Short Sale so I decided to do Loan Modification, and so I was given already a three months Trial Payment Period for $ 4,002.44, but they let me continued paying them till January this year, but up to now I don’t hear anything from my Lawyer I hired to do this Modification again for more than a year now and I pay this Lawyer upfront of $ 5,000.00 and $ 750.00 a months. So on January I stop paying my Lender already because I was already riff off all what we have are all gone to all this scam Lawyer who pretend they can help us save our property. So if there is a way for you to help us save our only home we got left out of our five properties I will really appreciate it, please let us know in return if you can help us because we been trying so hard to negotiate with my Lender whatever it takes possible but seems like we are not being heared and we been lossing a lot of money from Loan Modification to diffirent Lawyers my Bankruptcy plus what we paid to my Trustee, God we are really in need of your help and mercy.

    Thank you so much

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