Partial transcript and notes from Neil Garfield Show on Pleading and Proving Fraud

Disclaimer: This article is for educational purposes only. It is not legal advice. Always consult with a licensed attorney about your case.

Why Fraud Claims Are Powerful — and Difficult

Fraud can be one of the most effective claims or defenses in foreclosure litigation. But fraud is also one of the hardest claims to win. Courts require it to be pled with specificity and proven by clear and convincing evidence — a much higher standard than the simple “more likely than not” standard used in foreclosure claims.

If you fail to plead fraud properly, your case will be dismissed before it ever reaches discovery.

Recent Developments You Should Know

• The 11th Circuit Court of Appeals has ruled that borrowers can recover emotional distress and punitive damages under the Fair Credit Reporting Act (FCRA).

• Alongside FCRA, homeowners may also have claims under FDCPA, RESPA, and TILA — all of which can be raised as counterclaims or as defenses in recoupment.

• Fraud can be used in a similar way, potentially avoiding statute of limitations issues when raised in recoupment.

Lessons from the U.S. Bank Case

Attorney Bruce Jacobs in Miami forced U.S. Bank into an order to show cause for contempt after it failed to produce documents it should have had if it were a legitimate claimant.

The bank stonewalled, hoping Jacobs would give up. Instead, he filed motions to compel and for sanctions — both granted. The takeaway:

To beat the banks, persistence is everything.
Most foreclosure “claimants” don’t have the documents because they don’t have a real claim.

The Six Elements of Fraudulent Misrepresentation

To plead and prove fraud, you must hit every element:

1. A representation was made (statement, conduct, or omission).

2. The representation was false.

3. The person making it knew it was false or acted recklessly.

4. It was made with intent that you would rely on it.

5. You reasonably relied on it.

6. You suffered damages because of that reliance.

Fail to allege or prove any one of these, and your fraud claim fails.

Common Pitfalls in Pleading Fraud

• General accusations (“the bank committed fraud”) won’t work. You must specify who said what, when, how, and why it was false.

• Fraud on the court is not the same as fraud on the homeowner. Plead the homeowner’s reliance and damages, not just misconduct in court filings.

• Omissions count — under Florida law, failing to disclose material facts can also constitute fraud.

Fraud as a Defense vs. a Claim

• As a defense in recoupment: Damages are limited to the amount of the foreclosure claim, but the statute of limitations often does not apply.

• As a counterclaim or separate lawsuit: You may seek compensatory and punitive damages, but statutes of limitation will likely apply. Active concealment or continued misrepresentation can sometimes toll (pause) the clock.

Applying This to Foreclosure Cases

Fraud in foreclosure often involves:

• Fabricated assignments (prepared, executed, and recorded by different intermediaries).

• Void documents representing transactions that never occurred.

• False presumptions that trusts or servicers own debts they never purchased.

Each assignment is effectively a statement: “This loan was transferred.” But if no money ever changed hands, no transfer occurred — making the assignment a lie.

The Investment Bank’s Role

The real mastermind is the investment bank, which:

• Designed the securitization scheme,

• Profited by selling loans multiple times in the shadow banking market, and

• Ultimately receives the proceeds from foreclosure through credit bids.

That’s why, after foreclosure, you often see an “assignment of bid” — a telltale sign the investment bank, not the supposed trust, is taking the proceeds.

Practical Tips for Homeowners and Lawyers

• Be precise in pleadings. Detail the who/what/when/where/why of the false statements.

• Use discovery strategically. Fraud claims open the door to documents that may otherwise stay hidden.

• Stay persistent. Banks rely on delay and intimidation to wear down litigants. Don’t give up before sanctions and court orders force them to reveal they have nothing.

Remedies for Fraud

• Rescission: Voiding the contract and restoring parties to pre-contract positions.

• Damages: Actual financial losses, emotional distress, and in some cases punitive damages.

Final Thought

Fraud claims are not about abstract wrongdoing. They must be laser-focused, fact-driven, and persistent. When used correctly, they can stop a foreclosure, reduce claims, or even open the door to significant damages.

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