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In a recent case in California we saw the debtor lose a Motion to Lift Stay under circumstances where the failure of the debtor to PROPERLY raise issues and the attempt by the debtor to use the word “securitization” as though it was the equivalent of “murder” resulted in a negative outcome. I made some comments about this case and replaced the name of the real person with the name “SMITH.”

Comments on SMITH decision

1. There was an adversary proceeding, which is to say a lawsuit was filed, answered and fully litigated and SMITH lost. Whatever the issues were in adversary they can’t be re-litigated. Unfortunately, that is what SMITH attempted to do with predictable results. The result here in granting relief from Stay would have been the same no matter what she raised — if it had been litigated or was in the scope of what was litigated in the adversary proceeding.
2. Debtor bases her position on the claim that her mortgage loan had been bundled — it is her belief that securitization makes the mortgage unenforceable. This would not be true in any circumstances. Securitization has been around under one name or another since the dawn of finance. This is what I have been talking about in terms of evidence, procedure, strategy and tactics. In essence SMITH tried to do to the Banks what the banks were doing to SMITH, except the banks got there first and the banks are, in the minds of Judges, far more credible than one individual homeowner. SMITH was trying to use a blanket statement that simply wasn’t true and never could be true. If the loan had been properly securitized and if the Banks had presented proper evidence of ownership, the foreclosure could well have been proper. So her basic premise, at least as the Judge heard it, was wrong.
3. The Court found that the loan was not securitized. Since this was a World Savings account, the loan was possible a portfolio loan at origination and then securitized later when Wachovia took over World Savings. But it is also possible that the loan was not securitized. In any event, the Court’s finding was in the adversary and barring an appeal from that decision, the finding that it was not securitized was cut in stone. SMITH was simply wrong in the way the opposition to the Motion for Relief from Stay was presented.
4. The Court goes on to say that the Forensic Audit has a complete lack of any information that would indicate that the loan was in fact securitized. This represents a challenge that could have been overcome in the adversary. We would have known one way or the other had discovery been attempted directed to this issue. At this point the only thing left is for SMITH to file for a “review” in accordance with OCC guidelines that require an audit of her loan account, and any evidence of securitization, to wit: to whom were payments being made at the time she was making the payments? Were they forwarded to anyone? who? why?
5. The auditors statement that the loan was probably nevertheless securitized in a private label transaction is not supported by any data showing that this was the case for World Savings loans in 2007. Had such support been noted, then the Court might have taken notice and allowed discovery — and the implication is that the Court might have allowed it even though the matter had been litigated because the question goes to one of standing, which is jurisdictional. Jurisdictional issues ordinarily can be raised for the first time anytime.
6. Then the final nail in the coffin is the SMITH assertion that no money is owed because of the magic word “securitization.” SMITH might just as well have asked the court to rule against the debtor. No Judge is going to agree with the premise that securitization as a  mere word invalidates a debt or does anything to it at all. If the debt was paid down by third parties in loss mitigation payments that were not subject to agreements allowing subrogation, the debt was not reduced by one penny — although the third party payment might have transferred the debt from one creditor, secured, to another creditor, unsecured thus removing the right to foreclose on the mortgage or deed of trust. Again, without specific facts applying to this loan or the parties to this loan, there is no case for the borrower or debtor.
7. Debtor objected to admission of the note and mortgage. No grounds were stated in the Order but it is unlikely that any allowable grounds were stated int he objection. Again SMITH was trying to use magic instead of proper procedure, evidence and trial procedure. If SMITH had objected on the grounds that the note and mortgage don’t tell the whole story, and that if allowed discovery the whole story would be revealed, then the objection might have been sustained or partly sustained in that the Judge might have admitted the note and mortgage (assuming they were originals — real originals instead of printed originals). So there were several objections that if framed properly would have made a record fro appeal if overruled. It is likely that the Judge here overruled them because of the fact that “Objection!” is no substitute for oral argument on what is wrong with the evidence being proffered.
8. Cause exists for granting relief because of the debtor’s failure to make 12 payments. The presumption is that those payments were due. In fact, if the debtor had obtained the data to perform a loan level accounting it is highly probable that the servicer was continuing to make payments to the real creditor (if the loan had been treated as securitized by Wachovia or Wells Fargo).

This is not simple stuff. There typically is a difference between (1) the CLAIM that is made by the would be forecloser, (2) the documents in the title chain, (3) the documents in the securitization chain, and (4) the money trail often all leading to different results. The COMBO, the Forensic analysis, the loan level analysis all help with providing the data necessary but they are no substitute for a lawyer or to be more specific, they are no substitute for proper presentation. In this case I would have ruled the way the Judge did even though I know that the borrower probably had some points that were valid but were not properly raised. The Judge is not allowed to make up the case for one side or the other.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND
Posted in bubble, Corruption, Eviction, securities fraud |