FDCPA Claims in a World of "Securitization Fail"

Sep 13, 2016

So is there a loan contract at all? Can you force the homeowner into a nonexistent contract without forcing the investors in also? The courts have been doing this for more than a decade — thus opening up a canyon of moral hazard for future generations.

[the banks] have positioned themselves as apparent real parties in interest thus using the courts to help them legalize their theft of investor money.

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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The only partially valid defense to an FDCPA claim for something they misrepresented is bona fide error. Damages might still apply but they will be minimal, but growing with each passing time period in which they fail to correct it. Winners in this category are increasing in number of cases, actual and punitive damages.

15 USC 1692e(A) sec 807 False or, misleading representations

Sec 807(2)(A) and (B)

(2)  The false representation of—

(A)  the character, amount, or legal status of any debt; or

(B)  any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt

FL 559.552 brings in 1692e(A) into the FL 559.72(9)

(9) Claim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate, or assert the existence of some other legal right when such person knows that the right does not exist.

559.715 Assignment of consumer debts.—This part does not prohibit the assignment, by a creditor, of the right to bill and collect a consumer debt. However, the assignee must give the debtor written notice of such assignment as soon as practical after the assignment is made, but at least 30 days before any action to collect the debt. The assignee is a real party in interest and may bring an action to collect a debt that has been assigned to the assignee and is in default.

History.—s. 1, ch. 89-69; ss. 6, 13, ch. 93-275; s. 3, ch. 2010-127.

The servicer, bank or trustee is going to defend on the basis that (a) they did nothing wrong or (b) if they did something wrong it was a bona fide error (hard to assert after the point in time when they undeniably knew what they were doing was wrong and what they were representing was untrue).

The issue is knowledge and thus intentionality. And the secondary issue is “knowledge of what?”

Also it is not new that the word “character” is there, but what does that mean? It is going to be a case by case thing — except when we can either (a) prove that they knew that they were neither the creditor nor the authorized representative of a creditor or (b) force them to prove those issues when we know they have no such proof.

The main stumbling block on all these cases is that (1) they are using “facially valid” fabricated documents that are forged or robosigned or both and (2) relying upon legal presumptions that either don’t apply or which should be subject to rebuttal. In both cases the courts are flipping the burden of proof onto the “borrower.”

The answer to most of the questions I get is that the lawyer or pro se litigant has asked the wrong question.

1. The servicer, bank or trustee had no right to contact you if they were neither the creditor nor the authorized agent of the creditor. BUT if they reasonably thought they were the authorized agent then they don’t have a violation until such time as they continue to push the issue after they DID know. So they basically need to prove how stupid they are and how now they have smartened up.

2. “Real party in interest” is interpreted by the courts as code for “let us out of this debt.” Judges hate that premise. I like to stick with creditor and agent.

3. The 50 state settlement and Dodd-Frank rules now pose a new challenge to alleged servicers: did they perform a review of the case to determine the basic elements of a case for foreclosure including the existence of a default? The problem with that question is again the courts, who almost uniformly interpret “not paying” as a default. But the vexing problem that accounts for the rising number of lawsuits and victories using FDCPA, FCCPA and the like is that if they had honestly applied reasonable standards of review (instead of justifying going forward with foreclosure at all costs) they would have known that they were misrepresenting themselves, the character of the debt and potentially the amount. One analogy I heard are the current drunk driving statutes. The fact that you chose to get drunk does not absolve you from vehicular manslaughter.

WHAT IS A DEFAULT?: When a borrower stops paying, the question under the “real party in interest doctrine” is whether the current creditor suffered some financial injury. If they didn’t, they have no complaint and the court will kick them out. The failure or refusal to pay is not a default unless some party got injured by that lack of payment. That is what standing and real party in interest are about. Until the era of “securitization” the two events were synonymous — failure to pay equaled loss of receipt of payment = financial injury.

The problem comes back to defining a creditor as someone to whom the money is actually owed and them not receiving the payment. So if I fail to pay my landlord can you sue me for the missed payment? Of course the answer is no. But in the mixed up gyration of court analogies, the answer is not what it ought to be. If you don’t pay you are considered to be in default no matter who is owed the money and even if the creditor has already been paid by settlement with the crooked underwriter who sold them bogus mortgage bonds. This will come back and bite the same judges when you do sue me for my default in failing to pay my landlord.

The issue is further complicated because the real creditor is the undefined group of investors but that is only because their money was not put in the trusts to whom they thought they were advancing money via the underwriter of bogus mortgage bonds from an empty trust. If the trust had indeed purchased the loans, it would be a holder in due course on those loans, thus satisfying Article 3 UCC for status of holder in due course and Article 9 UCC requiring value.

The fact that foreclosures are brought in the name of a party claiming status as holder instead of holder in due course is credible evidence that the party knew it had not satisfied the elements of a holder in due course, to wit: payment in good faith without knowledge of borrower defenses (for lending law violations etc.). This is an admission that the trust never purchased the loan — unless you can come up with a credible argument for saying that the trusts were not acting in good faith or had knowledge of the borrower’s defenses.

The real creditor (Investors) lacked the intent to go into direct contract with homeowners and never intended to originate loans (only to acquire them after origination using the trust as the “pass-through” “vehicle,” which as it turns out never operated).

The homeowner did have the intent to borrow money and enter into a loan transaction with the party who was lending him/her money. But neither of the real parties in interest knew of the existence of the other. And the lending laws all require the lender to be identified. The originator is generally known now to have NOT been the lender and the prohibition against table funded loans is being ignored.

In most cases if they were telling the truth the lender would have been a dark pool with no name and no status as a legal entity. So is there a loan contract at all? Can you force the homeowner into a nonexistent contract without forcing the investors in also? The courts have been doing this for more than a decade — thus opening up a canyon of moral hazard for future generations.

And that in turn leads to the question of what is the status of the parties is A steals money from B and then A lends money to C? B and C are real parties in interest but neither of them had the intent to do business with the other; hence the basic element of intent to be bound by a legal transaction is obviously missing. The banks, servicers and trustees have covered this up with several inches of fabricated paper. In so doing they have positioned themselves as apparent real parties in interest thus using the courts to help them legalize their theft of investor money.

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https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.

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