Posted on November 20, 2009 by livinglies
NY JUDGES ROCK — IndyMAc Bank FSB. v Yano-Horosky
Indymac Bank F.S.B. v Yano-Horoski
2009 NY Slip Op 52333(U)
Decided on November 19, 2009
Supreme Court, Suffolk County
Spinner, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on November 19, 2009
Supreme Court, Suffolk County
Indymac Bank F.S.B., Plaintiff
against
Diana Yano-Horoski, Wells Fargo Bank Minnesota National Association
as Trustee for Soundview Home Equity Loan Trust 2001-1 and Kimberly
Horoski, Defendants.
2005-17926
Steven J. Baum P.C.
Attorney for Plaintiff
P.O. Box 1291
Buffalo, New York 14240
Diana Yano-Horoski
Defendant Pro Se
8 Oakland Street
East Patchogue, New York 11772-5767
Jeffrey Arlen Spinner, J.
This is an action wherein the Plaintiff claims foreclosure of a
mortgage dated August 4, 2004 in the original principal amount of $
292,500.00 recorded with the Clerk of Suffolk County, New York in Liber
20826 of Mortgages at Page 285. The mortgage secures an adjustable rate
note of the same amount with an initial interest rate of 10.375%. The
mortgage encumbers real property commonly known as 8 Oakland Street,
East Patchogue, Town of Brookhaven, New York and described as District
0200 Section 979.50 Block 05.00 Lot 001.000 on the Tax Map of Suffolk
County. Plaintiff commenced this action by filing a Summons, Verified
Complaint and Notice of Pendency on July 27, 2005. The Notice of
Pendency was extended by Order dated April 28, 2008 and a Judgment of
Foreclosure & Sale was granted on January 12, 2009.
Thereafter and in accordance with the Laws of 2008, Ch. 472, Sec.
3-a and in view of the fact that the loan at issue was deemed to be
“sub-prime” or “high cost” in nature, Defendant seasonably requested
that the Court convene a settlement conference. That request was
granted and a conference was commenced on February 24, 2009 which was
continued five times in a series of unsuccessful attempts by the Court
to obtain meaningful cooperation from Plaintiff. In view of Plaintiff’s
intransigence in its continuing failure and refusal to cooperate, both
with the Court and with Defendant’s multiple and reasonable requests,
the Court directed that Plaintiff produce an officer of the bank at the
adjourned conference scheduled for September 22, 2009.
At the conference held on September 22, 2009, Karen Dickinson,
Regional Manager of [*2]Loss Mitigation for IndyMac Mortgage Services,
division of OneWest Bank F.S.B. (“IndyMac”) appeared on behalf of
Plaintiff. IndyMac purports to be the servicer of the loan for the
benefit of Deutsche Bank who, it is claimed, is the owner and holder of
the note and mortgage (though the record holder is IndyMac Bank F.S.B.,
an entity which no longer is in existence). At that conference, it was
celeritously made clear to the Court that Plaintiff had no good faith
intention whatsoever of resolving this matter in any manner other than
a complete and forcible devolution of title from Defendant. Although
IndyMac had prepared a two page document entitled “Mediation
Yano-Horoski” which contained what purported to be a financial
analysis, Ms. Dickinson’s affirmative statements made it abundantly
clear that no form of mediation, resolution or settlement would be
acceptable to Plaintiff. IndyMac asserts the total amount due it to be
in excess of $ 525,000.00 and freely concedes that the property
securing the loan is worth no more than $ 275,000.00. Although Ms.
Dickinson insisted that Ms. Yano-Horoski had been offered a
“Forbearance Agreement” in the recent past upon which she quickly
defaulted, it was only after substantial prodding by the Court that Ms.
Dickinson conceded, with great reluctance, that it had not been sent to
Defendant until after its stated first payment due date and hence,
Defendant could not have consummated it under any circumstances
(Defendant, through Plaintiff’s duplicity, found herself to be in the
unique and uncomfortable position of being placed in default of the
“agreement” even before she had received it). Plaintiff flatly rejected
an offer by Plaintiff’s daughter to purchase the house for its fair
market value (a so-called “short sale”) with third party financing.
Plaintiff refused to consider a loan modification utilizing any more
than 25% of the income of Plaintiff’s husband and daughter (both of
whom reside in the premises with her), the excuse being that “We can’t
control what non-obligors do with their money” (the logical follow up
to this statement is how does the bank control what the obligor does
with her money?). The Court found IndyMac’s position to be deeply
troubling, especially since a plethora of sub-prime loans in this
County’s Foreclosure Conference Part have been successfully modified
with the lender’s reliance upon the income of non-obligors who reside
in the premises under foreclosure. The Plaintiff also summarily
rejected an offer by both Plaintiff’s husband and daughter to
voluntarily obligate themselves for payment upon the full indebtedness,
thus committing their individual incomes expressly to the purpose of a
loan modification. It should be noted here that Defendant did not even
request any waiver or “forgiveness” of the indebtedness aside from some
tinkering with the interest rate, just a modification of terms so as to
enable her to repay the same. It was evident from Ms. Dickinson’s
opprobrious demeanor and condescending attitude that no proffer by
Defendant (short of consent to foreclosure and ejectment of Defendant
and her family) would be acceptable to Plaintiff. Even a final and
desperate offer of a deed in lieu of foreclosure was met with bland
equivocation. In short, each and every proposal by Defendant, no matter
how reasonable, was soundly rebuffed by Plaintiff. Viewed objectively,
it is apparent that Plaintiff’s conduct in this matter falls within the
definitions set forth in 22 NYCRR § 130-1.1( c)(2), which might well
warrant the imposition of monetary sanctions.
On the Court’s own motion, a hearing was held on November 18, 2009
in order to explore the issues herein. At the hearing, Ms. Dickinson
appeared as well as Mr. Horoski. IndyMac claimed a balance due, as of
September 22, 2009 of $ 527,437.73 which included an escrow overdraft
of $ 46,627.88 for taxes advanced since the date of default but did not
include attorney’s fees and costs.. Plaintiff was unable to tell the
Court the amount of the principal [*3]balance owed. Mr. Horoski advised
the Court that according to two letters received from Plaintiff, the
principal balance was said to be $ 285,381.70 as of February 9, 2009
and $ 283,992.48 as of August 10, 2009. Plaintiff stated was that
Defendant must have made payments though it was conceded that in fact
no payment had been made.Plaintiff insisted that it had remained in
regular contact with Defendant in an effort to reach an amicable
resolution, that it had extended two modification offers to Defendant
which she did not accept and further, that due to her financial status
she was not qualified for any modification, even under the Federal HAMP
guidelines. Plaintiff denied that it had “singled out” Defendants,
simply stating that her status was such that she fell outside
applicable guidelines. All of these assertions were disputed by
Defendant.
That having been said, the Court is greatly disturbed by Plaintiff’s
assertions of the amount claimed to be due from Defendant. The
Referee’s Report dated June 30, 2008, which has its genesis in a sworn
affidavit by a representative of Plaintiff (presumably one with
knowledge of the account), reflects a total amount due and owing of $
392,983.42. The principal balance is reported to be $ 290,687.85 with
interest computed at the rates of 10.375% from November 1, 2005 through
August 31, 2006 ($ 25,118.62), 12.50% from September 1, 2006 to
February 28, 2007 ($ 18,018.66), 12.375% from March 1, 2007 to March
31, 2008 ($ 39,126.39) and 11.375% from April 1, 2008 to June 24, 2008
($ 7,700.24) totalling $ 89,963.91. Plaintiff also claims $ 20.00 in
non-sufficient funds charges, $ 295.00 in property inspection fees and
$ 12,016.66 for tax and insurance advances. The Judgment of Foreclosure
& Sale dated January 12, 2009 was granted in the amount of $
392,983.42 with interest at the contract rate from June 24, 2008
through January 12, 2009 and at the statutory rate thereafter plus
attorney’s fees of $ 2,300.00 and a bill of costs in the amount of $
1,705.00. Even computing the accrual of pre-judgment interest of $
18,299.18 (using Plaintiff’s per diem rate in the Referee’s Report)
together with post-judgment interest at a statutory 9% through November
19, 2009 (an additional $ 31,740.90), the application of simple
addition yields a total amount due of $ 447,028.50. This figure is $
80,409.23 less than the $ 527,437.73 asserted by Plaintiff to be due
and owing from Defendant. The Court is astounded that Plaintiff now
claims to be owed an escrow advance amount of $ 46,627.88 when, under
oath, its officer swore that as of June 24, 2008 that amount was
actually $ 34,611.22 less. Moreover, it now appears that the elusive
principal balance is either $ 290,687.85, $ 285,381.70 or $ 283,992.48.
It is the province and indeed the obligation of the trial court to
assess and to determine issues regarding credibility, Morgan v.
McCaffrey 14 AD3d 670 (2nd Dept. 2005). In the matter before the Court,
the pendulum of credibility swings heavily in favor of Defendant. When
the conduct of Plaintiff in this proceeding is viewed in its entirety,
it compels the Court to invoke the ancient and venerable principle of
“Falsus in uno, falsus in omni” (Latin; “false in one, false in all”)
upon Defendant which, after review, is wholly appropriate in the
context presented, Deering v. Metcalf 74 NY 501 (1878). Regrettably,
the Court has been unable to find even so much as a scintilla of good
faith on the part of Plaintiff. Plaintiff comes before this Court with
unclean hands yet has the insufferable temerity to demand equitable
relief against Defendant.
The Court, over the course of some six substantive appearances in
seven months, has been afforded more than ample opportunity to assess
the demeanor, credibility and general state [*4]of relevant affairs of
Defendant and Plaintiff. Although not actually relevant to the
disposition of this matter, the Court is constrained to note that
Defendant is afflicted with multiple health problems which outwardly
manifest in her experiencing great difficulty in ambulation,
necessitating the use of mechanical supports. Moreover, Defendant’s
husband, Mr. Gregory Horoski, suffers from a myriad of serious medical
conditions which greatly impede most aspects of his daily existence.
Nonetheless, both of these persons, together with their adult daughter
who resides with them and who is substantially and gainfully employed,
receive income which they are more than willing to commit, in good
faith, toward repayment of the debt to Plaintiff and indeed, despite
their physical challenges, they have appeared at each and every
scheduled conference before this Court. At each appearance, they have
assiduously attempted to resolve this controversy in an amicable
fashion, only to be callously and arbitrarily turned away by Plaintiff.
This has been so even in spite of the Court’s continuing albeit futile
endeavors at brokering a settlement.
As a relevant aside, the scenario presented here raises the specter
of a much greater social problem, that of housing those persons whose
homes are foreclosed and who are thereafter dispossessed. It is
certainly no secret that Suffolk County is in the yawning abyss of a
deep mortgage and housing crisis with foreclosure filings at a record
high rate and a corresponding paucity of emergency housing. While
foreclosure and its attendant eviction are clearly the inevitable (and
in some cases, proper) result in a number of these situations, the
Court is persuaded that this need not be the case here. In this matter,
Defendant is plainly willing to make arrangements for repayment and
both her husband and daughter are likewise willing to allocate their
respective incomes in order to reach the same end. Were Plaintiff
amenable, she would presumably continue to maintain the property’s
physical plant, pay taxes thereon and the property would retain or
perhaps increase its market value. Plaintiff would receive a regular
income stream, albeit with a reduced rate of interest and without
sustaining a loss of several hundred thousand dollars. In addition, no
neighborhood blight would occur from the boarding of the property after
foreclosure which would, in turn, avert problems of litter, dumping,
vagrancy and vandalism as well as a corresponding decline in the
property values in the immediate area. In short, a loan modification
would result in a proverbial “win-win” for all parties involved. To do
otherwise would result in virtually certain undomiciled status for two
physically unhealthy persons and their daughter, leading to an
additional level of problems, both for them and for society.
Since an action claiming foreclosure of a mortgage is one sounding
in equity, Jamaica Savings Bank v. M.S. Investing Co. 274 NY 215
(1937), the very commencement of the action by Plaintiff invokes the
Court’s equity jurisdiction. While it must be noted that the formal
distinctions between an action at law and a suit in equity have long
since been abolished in New York (see CPLR 103, Field Code Of 1848 §§
2, 3, 4, 69), the Supreme Court nevertheless has equity jurisdiction
and distinct rules regarding equity are still extant, Carroll v.
Bullock 207 NY 567, 101 NE 438 (1913). Speaking generally and broadly,
it is settled law that “Stability of contract obligations must not be
undermined by judicial sympathy…” Graf v. Hope Building Corporation 254
NY 1 (1930). However, it is true with equal force and effect that
equity must not and cannot slavishly and blindly follow the law, Hedges
v. Dixon County 150 US 182, 192 (1893). Moreover, as succinctly decreed
by our Court of Appeals in the matter of Noyes v. [*5]Anderson 124 NY
175 (1890) “A party having a legal right shall not be permitted to
avail himself of it for the purposes of injustice or oppression…” 124
NY at 179.
In the matter of Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup.
Ct., New York County, 1954), Special Term stated that “The maxim of
“clean hands” fundamentally was conceived in equity jurisprudence to
refuse to lend its aid in any manner to one seeking its active
interposition who has been guilty of unlawful, unconscionable or
inequitable conduct in the matter with relation to which he seeks
relief.” 133 NYS2d at 925, citing First Trust & Savings Bank v.
Iowa-Wisconsin Bridge Co. 98 F 2d 416 (8th Cir. 1938), cert. denied 305
US 650, 59 S. Ct. 243, 83 L. Ed. 240 (1938), reh. denied 305 US 676, 59
S Ct. 356 83 L. Ed. 437 (1939); General Excavator Co. v. Keystone
Driller Co. 65 F 2d 39 (6th Cir. 1933), cert. granted 289 US 721, 53 S.
Ct. 791, 77 L. Ed. 1472 (1933), aff’d 290 US 240, 54 S. Ct. 146, 78 L.
Ed. 793 (1934).
In attempting to arrive at a determination as to whether or not
equity should properly intervene in this matter so as to permit
foreclosure of the mortgage, the Court is required to look at the
situattion in toto, giving due and careful consideration as to whether
the remedy sought by Plaintiff would be repugnant to the public
interest when seen from the point of view of public morality, see, for
example, 55 NY Jur. Equity § 113, Molinas v. Podloff 133 NYS2d 743
(Sup. Ct., New York County, 1954). Equitable relief will not lie in
favor of one who acts in a manner which is shocking to the conscience,
Duggan v. Platz 238 AD 197, 264 NYS 403 (3rd Dept. 1933), mod. on other
grounds 263 NY 505, 189 NE 566 (1934), neither will equity be available
to one who acts in a manner that is oppressive or unjust or whose
conduct is sufficiently egregious so as to prohibit the party from
asserting its legal rights against a defaulting adversary, In Re
Foreclosure Of Tax Liens 117 NYS2d 725 (Sup. Ct. Kings County, 1952),
aff’d on other grounds 286 AD 1027, 145 NYS2d 97 (2nd Dept. 1955), mod.
on other grounds on reargument 1 AD2d 95, 148 NYS2d 173 (2nd Dept.
1955), appeal granted 7 AD2d 784, 149 NYS2d 227 (2nd Dept. 1956). The
compass by which the questioned conduct must be measured is a moral one
and the acts complained of (those that are sufficient so as to prevent
equity’s intervention) need not be criminal nor actionable at law but
must merely be willful and unconscionable or be of such a nature that
honest and fair minded folk would roundly denounce such actions as
being morally and ethically wrong, Pecorella v. Greater Buffalo Press
Inc. 107 AD2d 1064, 468 NYS2d 562 (4th Dept. 1985). Thus, where a party
acts in a manner that is offensive to good conscience and justice, he
will be completely without recourse in a court of equity, regardless of
what his legal rights may be, Eastman Kodak Co. v. Schwartz 133 NYS2d
908 (Sup. Ct., New York County, 1954), York v. Searles 97 AD 331, 90
NYS 37 (2nd Dept. 1904), aff’d 189 NY 573, 82 NE 1134 (1907).
An objective and painstaking examination of the totality of the
facts and circumstances herein leads this Court to the inescapable
conclusion that the affirmative conduct exhibited by Plaintiff at least
since since February 24, 2009 (and perhaps earlier) has been and is
inequitable, unconscionable, vexatious and opprobrious. The Court is
constrained, solely as a result of Plaintiff’s affirmative acts, to
conclude that Plaintiff’s conduct is wholly unsupportable at law or in
equity, greatly egregious and so completely devoid of good faith that
equity cannot be permitted to intervene on its behalf. Indeed,
Plaintiff’s actions toward Defendant in this matter have been harsh,
repugnant, shocking and repulsive to the extent that it must be
appropriately [*6]sanctioned so as to deter it from imposing further
mortifying abuse against Defendant. The Court cannot be assured that
Plaintiff will not repeat this course of conduct if this action is
merely dismissed and hence, dismissal standing alone is not a
reasonable option. Likewise, the imposition of monetary sanctions under
22 NYCRR § 130-1.1 et. seq. is not likely to have a salubrious or
remedial effect on these proceedings and certainly would not inure to
Defendant’s benefit. This Court is of the opinion that cancellation of
the indebtedness and discharge of the mortgage, when taken together,
constitute the appropriate equitable disposition under the unique facts
and circumstances presented herein.
After careful consideration, it is the determination of this Court
that the indebtedness evidenced by the Adjustable Rate Note dated
August 4, 2004 in the original principal amount of $ 292,500.00 made by
Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. should be
cancelled, voided and set aside. In addition, the Mortgage which
secures the Adjustable Rate Note, given to Mortgage Electronic
Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated
August 4, 2004 and recorded with the Clerk of Suffolk County on August
16, 2004 in Liber 20826 of Mortgages at Page 285, as assigned by
Assignment recorded with the Clerk of Suffolk County in Liber 21273 of
Mortgages at Page 808 should be cancelled and discharged of record.
Further, Plaintiff, its successors and assigns should be forever barred
and prohibited from any action to collect upon the Adjustable Rate
Note. In addition, the Judgment of Foreclosure & Sale granted on
January 12, 2009 and entered on January 23, 2009 should be vacated and
set aside and the Notice of Pendency should be cancelled and discharged
of record. For this Court to decree anything less than the foregoing
would be for the Court to be wholly derelict in the performance of its
obligations.
Upon the Court’s own motion, it is
ORDERED that the Adjustable Rate Note in the amount of $ 292,500.00
dated August 4, 2004 made by Diana J. Yano-Horoski in favor of IndyMac
Bank F.S.B. shall be and the same is hereby cancelled, voided, avoided,
nullified, set aside and is of no further force and effect; and it is
further
ORDERED that the Mortgage in the amount of $ 292,500.00 which
secures said Adjustable Rate Note given by Diana J. Yano-Horoski to
Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac
Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk
County on August 16, 2004 in Liber 20826 of Mortgages as Page 285, as
assigned to IndyMac Bank F.S.B. by Assignment recorded with the Clerk
of Suffolk County in Liber 21273 of Mortgages at Page 808 shall be and
the same is hereby vacated, cancelled, released and discharged of
record; and it is further
ORDERED that the Plaintiff, its successors and assigns are hereby
barred, prohibited and foreclosed from attempting, in any manner,
directly or indirectly, to enforce any provision of the [*7]aforesaid
Adjustable Rate Note and Mortgage or any portion thereof as against
Defendant, her heirs or successors; and it is further
ORDERED that the Judgment of Foreclosure & Sale granted under
this index number on January 12, 2009 and entered in the Office of the
Clerk of Suffolk County on January 23, 2009 shall be and the same is
hereby vacated and set aside; and it is further
ORDERED that the Notice of Pendency filed with the Clerk of Suffolk
County on July 27, 2005 under sequence no. 172456, which was extended
by Order dated September 2, 2008 shall be and the same is hereby
cancelled, vacated and set aside; and it is further
ORDERED that the Notice of Pendency filed with the Clerk of Suffolk
County on August 29, 2008 under sequence no. 199616, shall be and the
same is hereby cancelled, vacated and set aside; and it is further
ORDERED that the Clerk of Suffolk County shall cause a copy of this
Order & Judgment to be filed in the Land Records so as to
effectuate of record each and every one of the provisions hereinabove
set forth with respect to cancellation of the instruments and items of
record; and it is further
ORDERED that Plaintiff shall pay to the Clerk of Suffolk County,
within ten (10) days from the date of entry hereof, any and all fees
and costs required to effect cancellation of record of the Mortgage,
Notices of Pendency and any other fees so levied; and it is further
ORDERED that within ten (10) days of the date of entry hereof,
Plaintiff’s counsel shall serve a copy of this Order upon the Clerk of
Suffolk County and the Defendant.
This shall constitute the Decision, Judgment and Order of this Court.
Dated: November 19, 2009
Riverhead, New York
E N T E R:
______________________________________
JEFFREY ARLEN SPINNER, J.S.C.
The Architecture Of The Scam (Goldman .et.al.)
The Wall Street Journal has put forward an article that adds color to the general view I have always held about securitization, risk-shedding, and what I allege amounts to organized, systemic fraud by our “big banks.”
While they focused on Goldman Sachs, it is a serious error to maintain focus there as a “universal” or “sole” villain. Quite to the contrary – the entire financial system became one gigantic fraud machine during the last 20 and especially the last 10 years.
Nonetheless, let’s walk through and identify the scams that were built into this model:
Goldman Sachs Group Inc. played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled American International Group Inc.
Of course.
In Goldman’s biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner—AIG, according to the Journal’s analysis and people familiar with the trades.
This sounds ok, right? You take on a risk, then you insure against something going wrong. This is how one does business. Except….
The banks wanted protection in case the housing market tanked. Many turned to Goldman, which effectively insured the securities against losses. Then, to cover its own potential losses, Goldman bought protection from AIG, in the form of credit-default swaps.
Goldman charged more than AIG for the protection, so it was able to pocket the difference, making millions while moving the default risks to AIG, according to people familiar with the trades.
Here’s the definition of the problem: Exactly how did AIG price the protection at less than Goldman?
One of them was wrong in their assessment of the risk.
But that’s ok – people take on risk all the time, and at times they guess wrong. This is what makes a market, and if things ended here it would all be ok.
But it didn’t end here.
A Goldman spokesman said that between mid-2007 and early 2008, Goldman showed AIG “market price levels” at which trades could be undone, allowing AIG to decrease its risk, but “AIG refused to accept that the market was deteriorating.”
When Goldman didn’t get as much collateral as it wanted from AIG, in 2007 and 2008 it bought protection against a default of AIG itself from other banks.
But wait a second – I thought AIG had prudently underwrote those original CDS? No?
What has Goldman said about this? Well…..
“What is lost in the discussion is that AIG assumed billions of dollars in risk it was unable to manage,” the Goldman spokesman added.
Really? But Goldman was willing to buy that protection from a firm that was unable to manage their risk.
This goes back to what I have said since The Market Ticker began:
If I make a loan to you that has a risk-adjusted return of 300 basis points (that is, 3%) over Treasuries of the same maturity, that is all the return that is available in the transaction.
Each and every person who handles that transaction demands some amount of money to do so, as nobody works for free.
The only way to obtain more than 300 basis points of return from that transaction is to find someone who will enter into a trade that they cannot cover – that is, someone who will go broke and be unable to pay off in the adverse circumstance.
This is the fundamental scam in finance that has infested the banks and other institutions over the last 20 years – and which accelerated in the 2000s. The entire game rested on the premise of finding someone who would write insurance they could never pay on, or who would utter an “opinion” that the deal had less risk in it than it really did. In point of fact virtually all of the lending risk for all non-standard mortgage instruments written from 2003-2007 was predicated on one and only one thing – property values would never go down.
Why? Because none of those loans, analyzed dispassionately on the standard “5Cs of credit”, were likely to perform to maturity. None of them.
This scam is in fact exactly what Paul Volcker was talking about in the piece quoted on the 9th:
“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence,” said Mr Volcker, who ran the Fed from 1979 to 1987 and is now chairman of President Obama’s Economic Recovery Advisory Board.
He said that financial services in the United States had increased its share of value added from 2 per cent to 6.5 per cent, but he asked: “Is that a reflection of your financial innovation, or just a reflection of what you’re paid?”
Right.
Effectively, what the financial system has done is siphon off an increasing portion of the rents charged for various activities while justifying the increasing prices (that is, lower risk and therefore less reserve against “adverse events”) through concealment via bogus “risk-shifting” and “risk-management” that in fact never really occurred.
Remember, “rent” is a generic term. We think of it as what you pay to occupy an apartment, but in fact “rent” is charged for the use of capital in all of its forms – as a place to live, as a means of financing investment, as a means of financing speculation. All involve the charging of rent of one form or another, and all the financial system has done over the last 20 years is find ways to increase the amount of rent that lands in the financial system itself – instead of being distributed to the actual owners of the capital that is being lent out!
The simple reality is that CDOs, CDS and similar articles when used to hedge large quantities of financial instruments or events (such as by a bank) are an artifice. The only way that one can “deal in” CDS and make a profit, as the banks have done, is if someone is willing to sell you protection at less than the true risk-adjusted cost, or you can manage to sell it at higher than the risk-adjusted price.
Both require that someone be deceived – that is, that someone intentionally misrepresent either by commission or by intentional concealment of material facts.
This is the definition of fraud!
Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.
It is not possible for you to buy protection for less than the actual risk of default from a party who can pay in the event of default. This should be instantly obvious to anyone who applies more than 15 seconds of thought to the problem – on balance it is impossible to insure a pool of risks for less money than the risk of loss across the pool.
Let’s assume the risk of default is 1% and recovery if there is a default is 50. Therefore, if you have $100 million of such bonds 1% of them, or $1 million worth, will default, and of that $1 million there will be a $500,000 loss.
The price of purchasing insurance against that pool must always be more than $500,000.
If it is less then the company writing it will not be able to pay. If it is in fact equal they will not be able to pay, since the company must expend some amount of money (no matter how small) employing their staff and maintaining their facilities (buildings, etc.)
It is reasonable for someone to buy insurance against a single event, as a single actor, holding a single risk. That’s because their individual risk is large for the return they receive. It is why you buy insurance against a fire in your house – the risk of a fire is small, but the damage if you suffer a fire is large.
But if you own 100,000 properties dispersed across the nation with no particular concentration you’re an idiot to buy insurance against each and every property having a fire. Why? Because it is axiomatic that you will pay more for the insurance than you will lose to fires! You must – otherwise the insurance company that sells you the policies will go broke and be unable to pay at all!
The key point here is that when you buy below risk-adjusted cost “insurance” you have in fact bought nothing and are just as exposed as if you had not purchased said “insurance” at all.
It is therefore never prudent and appropriate for anyone who holds a large enough pool of risk to “transfer” that risk to a third party because the cost of doing so will always be higher than the cost of simply absorbing any losses that occur.
This must always be the case unless the organization holding the large pool of risks is able to find someone who will write that insurance at a loss. This, in turn can only happen if the entity writing the insurance either (1) is unable to appropriately judge the risk compared to the person purchasing the insurance or (2) is unable to pay if the loss occurs.
This is the root of the scam folks, and that we refuse to understand and face the math is part and parcel of why it is that we continue to be abused by these large financial interests.
The sooner we wake up the better, as the math is never, ever wrong.
Sal,
Nice find.
I also found the following:
When facts indicate a high level of knowledge of or involvement in the lending process, fraud may be pleaded against lenders, underwriters, and assignees with regard to loan origination, loan administration, or loan workouts. See, e.g., Henry v Lehman Commercial Paper, Inc. (In re First Alliance Mortgage Co.) (9th Cir 2006) 471 F3d 977, cited in
§§ 12.5, 12.47N.
A private lender acting in a fiduciary capacity towards the borrower may be liable for constructive fraud. Warren v Merrill (2006) 143 CA4th 96, 49 CR3d 122, discussed in §§ 12.5, 12.13, 12.45.
There is a one-year limitations period for a private right of action under the Truth in Lending Act (15 USC §§
1601-1693r). Pacific Shore Funding v Lozo (2006) 138 CA4th 1342, 1355, 42 CR3d 283, cited in § 12.11.
Documents from a bank’s files (including a photocopy or microcopy copies) shall not only be deemed original
records for all purposes, but the documents may be introduced into “evidence in all State and Federal courts or administrative agencies, and shall be admissible to prove any act, transaction, occurrence or event therein recorded.” 12 USC § 1820(f), cited in § 12.32.
An assignee may defend against claims arising from the acts or omissions of an originating lender by invoking the holder-in-due-course doctrine, adopted in California under Com C § 3302. The doctrine allows the assignee to hold the loan contract free of claims the borrower has against the originator. See, e.g., Wilson v Toussie (ED NY 2003) 260 F Supp 2d 530; Stuckey v Provident Bank (Miss 2005) 912 So2d 859. See discussion in § 12.33A.
The yield spread premium, a kickback to a broker for steering the borrower into a high interest loan, does not bring a loan within the scope of the coverage under Fin C § 4970 because it is paid by the lender after close of escrow and not by the borrower at or before close of escrow. 127 CA4th at 352. Wolski v Fremont Inv. & Loan (2005) 127 CA4th 347, 25 CR3d 500, cited at § 12.47H.
The statute of limitations for RESPA violations is one year from the date of the consummation of the loan
transaction. 12 USC § 2614. There is a division among federal courts as to whether the statute is jurisdictional and thus not subject to equitable tolling. Ninth circuit courts continue to avoid deciding the issue by resolving cases on other grounds. See Kay v Wells Fargo & Co. (ND Cal 2007) 2007 U.S. Dist. Lexis 55519, cited in § 12.47J.
When an action is commenced and a lis pendens is filed, the recordation of the lis pendens restarts the 10-year limitations period for actions under the lien pursuant to CC § 882.020. Slintak v Buckeye Retirement Co. (2006) 139 CA4th 575, 43 CR3d 131, cited in §§ 2.8, 3.20, 7.31.
When there are no other parties making claims to sale proceeds, surplus funds from a trustee’s sale may be
distributed to a victim of fraud whose identity was used to obtain the property secured by the deed of trust. CTC Real Estate Servs. v Lepe (2006) 140 CA4th 856, 44 CR3d 823, cited in § 2.79.
In resolving disputes over claims to surplus funds from a trustee’s sale, where a judgment lien has attached after a trustor has declared a homestead exemption, the judgment lien is reduced by the amount of the homestead exemption. Title Trust Deed Serv. Co. v Pearson (2005) 132 CA4th 168, 33 CR3d 311, cited in § 2.83.
In cases involving fiduciary fraud, when neither recission damages (CC § 3343) nor out-of-pocket tort damages (CC §§ 1709, 3333) will fully compensate the plaintiff, the award may be based in part on the subsequent appreciation of the property that the plaintiff otherwise would not have sold but for its reliance on the fiduciary. Strebel v Brenlar
Invs., Inc. (2006) 135 CA4th 740, 37 CR3d 699, cited in § 2.96.
A timely claim for rescission under the Truth in Lending Act (15 USC §§ 1601-1666j) is not lost if the borrower has refinanced. Pacific Shore Funding v Lozo (2006) 138 CA4th 1342, 42 CR3d 283, cited in § 7.33A.
The automatic stay of 11 USC § 362 does not apply to or make void sales or transfers of property initiated by the debtor, even when the transaction was without bankruptcy court approval. Irwin Mortgage Co. v. Tippett (In re Tippett) (BAP 9th Cir 2006) 338 BR 82, cited in §§ 7.84, 11.15.
The Alternative Mortgage Transactions Parity Act (12 USC §§ 3801-3806) does not preempt California’s per diem interest limitations under Fin C § 50204(a) and CC § 2948.5. Quicken Loans, Inc. v Wood (9th Cir 2006) 449 F3d 944, cited in §§ 8.14, 8.41, 8.49A, 12.11.
A court has held that CC § 2941 creates no duties or obligation for escrow holders. Markowitz v Fidelity Nat’l Title Co. (2006) 142 CA4th 508, 48 CR3d 217, cited in § 8.84.
Under 11 USC § 105(a), bankruptcy courts possess inherent authority to impose sanctions for patterns of bad faith conduct that transcended conduct addressed by particular rules or statutes. Price v Lehtinen (In re Lehtinen) (BAP 9th Cir 2005) 332 BR 404, cited in § 11.17.
Whether or not the value of the property is sufficient to cover a creditor’s claim, a debtor is prohibited from using 11 USC § 506(a) and (d) to strip off the creditor’s judgment lien. Concannon v Imperial Capital Bank (In re Concannon) (BAP 9th Cir 2006) 338 BR 90, cited in § 11.86.
In 2005, the legislature revised provisions of the Civil Code that govern notice procedures and postponements in nonjudicial foreclosures (trustee sales). See CC § 2924b(b) and revisions to §§ 2.20, 2.27, 2.30, 12.74; CC § 2924g(c)-(d) and revisions to §§ 2.70, 2.72A, 2.72B, 10.67. The most significant requires a new notice of sale if a foreclosure sale is postponed for more than 365 days.
A nonjudicial foreclosure (trustee) sale is invalid if the trustor and the beneficiary have agreed to reinstate the loan, but neglected to inform the trustee of their agreement prior to sale of property to a third party purchaser. Bank of America v La Jolla Group (2005) 129 CA4th 706; 28 CR3d 825, cited in §§ 2.38A, 7.63.
A professional buyer of distressed property who purchases property at a nonjudicial foreclosure (trustee) sale for a below market price may qualify as a “bona fide purchaser,” and trustee sale is valid when beneficiary had breached repayment agreement and BFP had no knowledge of the agreement. Melendrez v D & I Inv., Inc. (2005) 127 CA4th 1238, 26 CR3d 413, cited in §§ 2.38, 2.43, 2.61, 6.78, 7.57, 7.61-7.62, 10.18, 12.54.
A nonjudicial foreclosure (trustee) sale will not be found invalid for a “slight” irregularity such as a premature notice of sale. Knapp v Doherty (2004) 123 CA4th 76, 20 CR3d 1, cited in §§ 2.46, 2.61, 7.57.
An action to set aside a conveyance following a judicial foreclosure must be brought within 90 days under CCP § 701.680. A court of appeal strictly construed this statute and held that the failure to file the action within this 90-day period renders the sale absolute. First Fed. Bank v Fegen (2005) 131 CA4th 798, 31 CR3d 853. See § 3.78.
In cases that may affect the interpretation of lending documents, two appellate courts have come to opposite conclusions regarding the application of California law to virtually identical attorney fee provisions in contracts containing choice-of-law clauses favoring New York law. See ABF Capital Corp. v Grove Props. Co. (2005) 126 CA4th 204, 23 CR3d 803 (fourth appellate district holds California law applies to provision) and ABF Capital Corp. v
Berglass (2005) 130 CA4th 825, 838, 30 CR3d 588 (second appellate district holds California law does not apply to provision), cited in §§ 4.58, 7.21.
A borrower may be held personally liable, and antideficiency protections are unavailable, for attorney fees incurred by a lender in defending against the borrower’s postsale attack on a nonjudicial foreclosure. Jones v Union Bank of Cal. (2005) 127 CA4th 542, 25 CR3d 783, cited in §§ 7.20A, 7.56.
A debtor may be entitled to emotional distress damages when a creditor violates the automatic stay even if the debtor has not suffered any financial damage. In awarding attorney fees, the court has discretion to determine if the number of hours expended and the hourly rate were reasonable. Dawson v Washington Mut. Bank, F.A. (In re Dawson)
(9th Cir 2004) 390 F3d 1139, cited in § 11.17.
Thanks,
Dan Edstrom
dmedstrom@hotmail.com
It seems to me the whole MERS thing is outright illegal. In a perfect world, any mortgage involving MERS should be declared null and void. The down side to this is that the banks effectively own the government, making it next to impossible for the courts to rule against their “masters”. Ergo, the battle rages on.
Steve
99Libra@gmail.com
Great Success and a BIG SLAP on the dirty face of MERS and its members who are always in bed with each other in looting the poor and innocent people.Thieves a day will come that you will not find a way to go and wait for that time when we will chop you down and remove your dirty and stinking skin. Just see and wait you SOBs.
I’ll say it again: MERS, the judges have called your bluff and found you wanting.
I didn’t realize that the “corporate resolution” that “allows” employees of servicers to act as employees of MERS was online. I read over it and it seems to me that even according to this resolution, servicer employees are not allowed to do the things they’re doing. Or I should say, they’re allowed by MERS policy, but not by LAW–unfortunately for MERS, there is a distinction.
For instance, the resolution says that these temporary “assistant secretaries and vice presidents” of MERS can do the following:
“assign the lien of any mortgage loan naming MERS as the mortgagee when the Member is also the current promissory note-holder, or if the mortgage loan is registered on the MERS System, is shown to be registered to the Member; ”
Notice that although none of the conditions in the quote above are make it legal for MERS to assign anything, but at least they name the least bad one first–MERS doing dirty work for a note-holder (even though MERS does not have the authority to do even that if challenged in court).
The second condition, that a mortgage loan be “registered on the MERS System” or to be “registered to the Member,” is laughable. The company policy of MERS is NOT the law. Being “registered” with MERS is legally meaningless, but unfortunately county recorders and judges will treat these assignments generated by registration on the the MERS system unless we challenge them. Or as Neil often says–challenge everything, assume nothing.
Just do a search for “MERS Corporate Resolution” and you’ll find the document.
Dear Sir,
As you know, I have the pleasure of defending myself Pro se.
I received your back dated Notice of Hearing on December 10, 2009. You have not served me a summons, to this day, nor have you served me a complaint and you have back dated the NOH, will you then claim that this is a typo?.
You were successful in confusing me, but, I was able to catch on in time to save my case and to continue to defend my rights, in the court of law. Moreover it is lawyers like you who caused so many pro se litigants to not want to trust a lawyer.
I doubt that you will prosper with this kind of behavior, your regulators may act on you and the cost they may make you pay could be very high and may not be worth it.
I consider people like you to be criminals, in the true form of the word. I hope you are not thinking that I will not make haste in bringing all these improper actions, you have taken, which are not lawful, to the attention of the judge and your regulators, as soon as I can. I will go to the department of Justice in DC with this.
However I have seen the bar not act on crimes as they should, so you must do this with the full knowledge that you know, nothing will happen to you, again I do not know, I am a ” non Lawyer ” right?.” Lawyers are supposed to be educated people”, yeah right.
I have so many questions, why if you felt that you had such a good case, did you do all this under handed, non lawful stuff?, I believe I can answer this for you, you did not have nothing to sit on, you knew you did not have a case, I can assure you.
I will not let you get away from me legally, no matter what you do. I know I surprised you, you did not think that a simple pro se litigant could beat you so bad, so quickly right? well good sir you aren’t seen nothing yet, when we meet in court I will show you, what the force of a good pro se litigant is, I will get legal revenge, for all the pro se litigants and other consumers you have so plundered.
My question is therefore, how will you get this backdated NOH on the record? Or do you have too? I am not a lawyer but I will find out soon, am I to assume you have someone on the inside of the clerk’s office doing your dirty work. How will you explain this to a Judge? I see why you wish to attend the hearing on the phone; do you think that the Judge will allow you to do this?
I believe you will pass this case to another useless warm body, who will simply say, “judge it was not me”. If and when you do attend this hearing please remember to bring with you the wet ink signature, on the original contract I signed, and I also want all the assignments, plus I want to see the PSA, you may bring this to me now or stone wall me until, I fight you forever, and the Judge will eventually compel you to give me the discovery I want.
Also I would like, if you can, let your clients know that you should bring a signed check, as I will demand as much money from you as I could possibly get, from your clients and from you.
Actually I prefer if you bring my money for me in a box, I do not trust a check from you, you may be going to jail and lawyers in Florida do not have D and O insurance or any kind of insurance at all, plus the bar only gives $2500.00 compensation, but if you do insist on giving me a check, I will demand a bankers check, which is certified funds, and I also want the titles for the two cars, clear and clean.
I will move the court to grant me Judgment and a lot of money damages. I am keeping those two new cars and I will not be ever paying you at all, never. I want the titles in y name forthwith.
Have a merry Christmas and I will see you in the New Year, in court. I am thinking of moving the case up a day or so, if I do decide to ask you, I will file a motion with the court and I will copy you, to ask your permission.
Oh and before I forget I may move the case to the federal court I understand that they really do like lawyers like you, plus I get much more compensation for the damages you and your clients cased me.
If and or, by any sliver of chance, you do have any errors and omissions policies, or any insurance at all, please send them this communication, and please send me a copy of the certificate, so I may claim on it. I wish to collect the money from this premium may you have paid, as this is now my right, a right I herein so reserve.
But I know, or I may well make positive assumption, that you have so such insurance; most lawyers do not have such insurance, in discovery I will ask this question. Also please make your colleges and the workers who assist you, know that they also may be liable to me, for damages, and that they may also spend time in that dirty lockup, with you.
I am sure I can check your past cases in the many courts you operate in and I am sure I can find several cases where you pulled the same cheap trick, if I do find such a consistence, I will bring a case of civil RICO case to your little doorstep.
Regards
Mario Kenny
California Mortgage and Deed of Trust Practice § 1.39 (3d ed Cal CEB 2008)
§ 1.39 (1) Must Be Obligee
The beneficiary must be an obligee of the secured obligation (usually the payee of a note), because otherwise the deed of trust in its favor is meaningless. Watkins v Bryant (1891) 91 C 492, 27 P 775; Nagle v Macy (1858) 9 C 426. See §§ 1.8-1.19 on the need for an obligation. The deed of trust is merely an incident of the obligation and has no existence apart from it. Goodfellow v Goodfellow (1933) 219 C 548, 27 P2d 898; Adler v Sargent (1895) 109 C 42, 41
P 799; Turner v Gosden (1932) 121 CA 20, 8 P2d 505. The holder of the note, however, can enforce the deed of trust
whether or not named as beneficiary or mortgagee. CC § 2936; see § 1.23.
Good Morning!
So many times I find information here that is so timely it’s spooky!
I quote from the above:
“He would be subject to cross examination which is the subject to the lessons I am preparing for laymen and lawyers.”
In my case(s) – I exercised Rescission and “lenders” subsequently failed to comply in 20 days. (it’s actually been more like 6 months now)
Right now I’m preparing all my loan docs for Initial Reviews and then Forensic Audits.
Meanwhile, if the “lender” or any of their agents sneak around my back and seek summary judgment or unilateral hearing without my knowledge, resulting in my inability/failure to answer, I can race off and seek BK protection with the claim my homes are unsecured due to Rescission.
Thanks! (I hope this is from Brad. Neil you are supposed to be resting!!!!!)