Nov 4, 2020
The problem with qui tam in connection with mortgages and foreclosures is that they have not yet worked except in rare instances. The biggest hurdle seems to be that the agency that supposedly got defrauded (e.g. FDIC) by false claims steps forward and says it was OK. You can’t force them to admit that they were defrauded and if they are unwilling to do so, there is no possible claim. The false claims act apparently needs amendment such that an agency may not ratify or forgive criminal behavior.
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The second thing that usually trips up a qui tam action is that the relator must be someone with specific knowledge that is outside of the public domain and specific to that individual. Most such actions are dismissed because they are merely disguised class actions.
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The third thing that is an obstacle to a successful qui tam action is that the expense of litigation is much higher than ordinary litigation. So most people file such actions in the hope of a state AG or the US AG accepting the action and litigating it. If the AG steps on it, the inference is raised that the qui tam lacks merit or can’t be raised to the necessary level of proof — making it that much harder to prove a prima facie case.
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All that said, the reason why people keep trying to go for qui tam actions is that the rewards can be enormous. One person received $31 million in a settlement. See stories on Lynn Simoniak.
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My personal preference (which could be dead wrong) is a mass joinder action in which homeowners who have or had loans claimed as securitized by one specific REMIC trust scheme, bring a claim essentially stating that it was all a lie. I like it because proving that the loan was not securitized is actually quite simple in discovery.
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You end up not actually proving it, but rather blocking the opposition from introducing any evidence that the transaction was a loan and was securitized. If there is no evidence supporting the securitization of the “loan” the claims of the lawyers, servicer, trust and trustee are left without any foundation. And once that is the case any past, current or future foreclosure judgments or sales are void, not merely voidable.
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Without securitization (or some other enforceable agreement detailing the rights between the owner of the underlying obligation and the foreclosure players) there is no right, title or interest in the debt, note or mortgage and no authority to administer, collect or enforce.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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