FORECLOSURE DEFENSE AND OFFENSE DISCUSSED: APPRAISAL FRAUD

A client in NorCal was referred to me.  She took out an 80/20 loan first and second for about $650,000 total in 2005.  She has paid over $150,000 towards interest, payments and fees. SEE APPRAISAL FRAUD, CNN ARTICLE FOR 2005, APPRAISAL FORUM SPEECH FROM 2006, RECENT POSTS. TITLE COMPANY/TRUSTEE, LENDER AND OTHERS MAY BE LIABLE FOR INTENTIONALLY MISLEADING BORROWER AND INVESTORS UPSTREAM AS TO VALUE OF PROPERTY, WITHHOLDING FEES THAT THEY HAD KNOWLEDGE OF, KICKBACKS AND REBATES.

Besides the typical servicing, standing, and fraudulent assignment issues, I found the following after reviewing the file. The original lender is infamous New Century.  NEW CENTURY TAKEN OVER BY CMS FOR SERVICING ONLY. WELLS FARGO IS TRUSTEE. NEW TRUSTEE MIGHT BE REPLACING TRUSTEE IN DEED OF TRUST EVEN IF THEY DIDN’T MEAN TO DO SO. ACTUAL BENEFICIARY AS A RESULT OF POOLING AGREEMENT DATED AROUND SEPTEMBER 1, 2006 SHOWS THAT REAL PARTIES IN INTEREST (HOLDERS IN DUE COURSE) ARE HOLDERS OF PASS THROUGH CERTIFICATES OF ASSET BACKED SECURITIES. IN papers, they claim New Century still was beneficiary of deed when foreclosure started a few months ago then they substituted parties and trustees. IMPOSSIBLE. NEW CENTURY SOLD SERVICING RIGHTS AND OTHER ASSETS UNDER BANKRUPTCY COURT ORDER IN DELAWARE IN 2007.

In any event, TILA and ALL disclosures including the 2nd note (they did not provide copy of first note) shows a 30 yr term. Good faith estimate, payment coupons, EVERY DOC EXCEPT ONE shows show 30 yr term and final balloon payment in December of 2035 (30 years after taking out in dec 2005).

However, there is ONE DOC given at closing that shows loan is a 40 year LIBOR ARM NEWS ARTICLES SHOW THAT LIBOR RATES WERE WRONG BECAUSE OF FRAUDULENT REPORTING FROM AMERICAN BANKS) 2 year lock and details THAT loan program that she signed up for. THIS ALONE IS PROBABLY GROUNDS FOR RESCISSION AND BRINGING UP REAL PARTIES IN INTEREST, REPLACING TRUSTEE, REQUIRING JUDICIAL FORECLOSURE RATHER THAN NON-JUDICIAL SALE ETC.

Next, a letter she received when rate changed shows “remaining” 456 months due on note (minus 24 months = 480 for 40 years!) IMPROPER DEMAND: BASIC BLACK LETTER LAW, THEY HAD NO RIGHT TO PROCEED UNDER NORMAL COLLECTION LAWS.

I also cannot find right to rescind notices. RESCISSION AVAILABLE THROUGH MANY MEANS AND IF THE APPRAISAL FRAUD WAS BIG ENOUGH IT MIGHT INCREASE THE APR TO USURY RATES, WHICH ENABLES THE NOTE TO BE DECLARED VOID AND THE MORTGAGE SATISFIED. IF NO RIGHT TO RESCIND WAS EVEN PRESENTED THEN THE TILA-BASED RESCISSION TIME LIMITS WERE TOLLED MEANING YOU COULD DO IT ANYTIME.

Here’s the $300,000 question!!!!

The house NOW is only worth $350,000 for a $300,000 loss and almost half its value (maybe some appraisal fraud, they wont giver her appraisal).

So, if she rescinds and demands all money paid back, she’d have to tender the $650,000!  I know there are recoupment options in foreclosure (btw, she is Plaintiff in her suit and they are defendants)  but, what options on rescission do we have when someone is so upside down and does it even make sense to rescind or should we rescind on common law fraud and just ask  for money back and give the house back?

What do we do for all the people upside down when it comes to rescissions? I AM FOR THE ALL OR NOTHING STRATEGY THAT AIMS TO GET RID OF THE NOTE AND MORTGAGE IN THEIR ENTIRETY AND I HAVE DEVELOPED NUMEROUS STRATEGIES SUPPORTING THAT POSITION. LEGALLY YOU ARE NOT SAYING YOU WANT THE HOUSE FOR NOTHING, YOU ARE SAYING THAT THE REAL HOLDER IN DUE COURSE IS THE INVESTOR AND THAT THEY ARE THE ONLY ONES WHO CAN FORECLOSE. BUT IN ANY EVENT, BECAUSE OF THE APPRAISAL FRAUD AND THE DAMAGES CAUSED BY THAT, THE MORTGAGE CAN BE VASTLY REDUCED BY EQUITABLE POWERS OF THE COURT. KEEP IN MIND THAT DEBT CONVERTS FROM SECURED TO UNSECURED. IT IS THEN POTENTIALLY DISCHARGEABLE IN BANKRUPTCY BUT BE CAREFUL WITH PEOPLE WHO HAVE OTHER ASSETS AND IN STATES WHERE HOMESTEAD EXEMPTION IS LIMITED. FILING BANKRUPTCY LIMITS HOMESTEAD EXEMPTION TO $125,000 EVEN IN FLORIDA WHERE IT IS THOUGHT TO BE UNLIMITED. NEW BANKRUPTCY BILL MADE IT RISKY TO GO INTO BKR COURT IN FLORIDA BECAUSE OF THAT.

Nye

PS if workable, will be sending you her file in PDF later for audit, but before we spend money on audit, need to figure if anything to be gained! GET THE AUDIT!!!!