Forensic Seminar August 2: Truman Trust

A number of homeowners who are registered to attend the seminar are requesting that a use specific examples that are relevant to their own case. This is not possible in a 90 minute lecture that gives an overview of what is expected from forensic loan audits. I will be using some examples, but only in general terms.

One person specifically asked that I address what appears to be a new variation of U.S. Bank appearing as trustee, e.g., US BANK, NA as Legal Title Trustee FOR TRUMAN 2012 SC2 TITLE TRUST.

This is a variation in wording more than it is anything else. Based upon my review of the actual trust agreements involving U.S. Bank it has always been merely a legal title trustee for a single beneficiary, to wit: the investment bank who was the underwriter and seller of certificates to investors. In the case of the word salad described above, attorneys are once again shifting the wording to make it seem more credible.

But upon close analysis, you can easily see that U.S. Bank NA is not saying that it has been entrusted with the debt or the note, or that it purchased by the one for value, as required by article 9 section 203 of the Uniform Commercial Code.

Further, the attorneys continue to withhold a description that identifies the alleged trust or its existence. This is a facial deficiency which should affect any examination of pleadings and documents, whether recorded or not. If the trust actually exists, the normal wording would be, for example, “a common-law trust organized in the State of New York and currently existing in the State of Michigan.” Or it can simply say “a Michigan trust.” But the absence of any such description leaves the reader with no information at all about the existence of the trust.

In addition, stating that U.S. Bank is merely a legal title trustee is an admission that U.S. Bank is not the owner of the debt or the note and quite possibly not the mortgage either. This is a further attempt to avoid the requirements and conditions precedent imposed by law in all US jurisdictions. If the beneficiary under the alleged trust is the actual owner of the debt, then I would concede that having U.S. Bank as legal title trustee for the actual debt owner would not invalidate any action to collect or enforce the debt, note or mortgage.

But the investment bank who was the underwriter who sold certificates to investors never retained ownership of the debt beyond 30 days after funding the origination or acquisition of the debt. Thus the illusion of a legal title trustee for a dubious trust with a beneficiary who no longer holds an interest in the debt is both a facial and substantive deficiency.

This is yet another example of how the investment bank’s or using new special-purpose vehicles to hide their involvement in the origination and acquisition of loans. Remember that investment banks are actually brokers. They are not principals in transactions. Any temporary ownership that they might have had with respect to the debt and any temporary claims that they might have had with respect to the note and mortgage were extinguished when they divested themselves of any interest in the flow of interest payments, principal payments, or sale proceeds to satisfy the debt.

Finally I should make one last note on this topic. Some of the special-purpose vehicles are being used as conduits for elaborate schemes to launder money and debts arising from nonperforming loans. The banks believe, with good reason, that the more layers they present to a court, the more the court will tend to accept the authenticity of the transactions that are referenced and fabricated documents. As most trial lawyers know, the “greater weight of the evidence” is frequently interpreted literally. By presenting an ever larger stack of documents, involving multiple business names, even if they are not actual entities, the illusion is complete.

The job of the forensic analyst in the context of foreclosure litigation is actually to reveal the facts that cannot be known by mere reference to the documents. In addition to revealing discrepancies and inconsistencies, the forensic analyst should be identifying gaps in what would otherwise be the prima facie case of a claimant seeking foreclosure.

I’ve spoken with many attorneys who have been successful in defending homeowners in foreclosure actions. They all say basically the same thing. While discovery is important and enforcement of discovery is even more important, nearly all cases are won because the lawyer was able to break the robo-witness and successfully object to exhibits introduced by the attorneys who assert that they represent U.S. Bank, when in fact they have had no contact with U.S. Bank, nor have they had any contact with the investment bank. The investment bank so far has successfully shielded itself from liability for instigating false claims by false claimants.

Posted in Uncategorized |