Foreclosure management & Testing

The internal controls required of any TARP recipients have been identified and tested by the auditing engagement team. These auditors are not effectively testing the foreclosure management’s use of stale and inadequate title records and other stale date appraisals to ascertain the degree of impairment to the collateral.
The collateral underlying the bank’s troubled loan portfolio is NOT the banks portfolio and statements regarding the mortgage servicing or servicer’s roles are material violations of the SEC Rule 1122AB, not subject to the recovery but as mandated in this recovery. For example, the auditors identified Tier One Asset Classification offering no reference in the audit work papers to whether or how the auditors assessed the value of the collateral underlying individual loans evaluated for impairment, and the committee did not generate or review written documentation to support management’s assumptions. .

Given the complete lack of documentation, auditors allow for business as usual having little or insufficient evidence from which to conclude that the bank’s internal controls for valuation of collateral are effective.

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The Problem with Pleading a Convoluted Subject Matter


The Bank of New York Mellon, formerly the Bank of New York (“Defendant” or “Trustee”), is the Trustee of numerous trusts for the benefit of investors (called“certificateholders”), including Plaintiff.

MS asks  – Who are the certificate holders?    Another concern was the following …The document providing for the establishment and administration of each Trust is called a “Pooling and Servicing Agreement” (“PSA”).

[MS Asks]   – And, what about the other three agreements that ranks as critical in importance to the case?

The corpus of each Trust consists primarily of residential mortgage loans made by Countrywide Home Loans, Inc. and/or its affiliates Park Granada LLC, Park Monaco Inc., and Park Sienna LLC.

{MS Asks ] – Why is this is wrong…. and here is the reason for failing to state a claim!

Based upon the assumption that the loans were deposited into each Trust, the borrowers began making payments to each Trust through Countrywide Home Loans Servicing LP as Master Servicer for each Trust. –[MS  – Asks  -]  Why is this wrong and so far off!

Countrywide Home Loans Servicing LP is now known as BAC Home Loans Servicing, LP.

[MS ] –  And …what is the implication?

Throughout the remainder of the Complaint, this entity and its parent will be referred to as the “Master Servicer”.

[MS  Comments ] : Why, or what causes this statement to fail ?

When the Master Servicer collects loan payments from borrowers, the Master Servicer transfers those payments less allowable deductions to the Defendant, who as Trustee of each Trust distributes those payments to each Trust’s beneficiaries — the certificate holders — such as Plaintiff.

[MS  Comments: ]  Which Trustee , wrong !!!

Thus, the certificate holders are entitled to participation in the cash flow the Master Servicer collects from borrowers relating to the mortgage loans each Trust holds on behalf of the certificate holders.

[MS Comments : ] What  certificate holders ??? Who …when Where

Therefore, each Trust is primarily administered by two entities: The Defendant Trustee”, who is the “face” of each Trust with the Trust beneficiaries such as Plaintiff and the “Master Servicer”, who is the “face” of each Trust with borrowers.

[MS Comments: ]  Not even really close at all  – all stated generic answers !

This pleading is hopelessly stabbing in the air for something , anything, to hit for a chance to stay alive.  To successfully plead all claims there must be legal sufficiency to show Plaintiff is entitled to relief under his Complaint. Without substance  the matter lacks an accurate  portrayal of  the essential requirements for pleading a montage foreclosure defense. A pleading is lost from the outset if the basic assumptions are not in line with reality . I emephasize, with all due respect as a professional who is 25 years secondary and capital market’ s experience the following:


Attorneys  need to get up to speed on how these assets are really securitized . A Complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the Plaintiff can prove no set of facts in support of his claim which would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957) also Neitzke v. Williams, 109 S. Ct. 1827, 1832 (1989). Rule 12(b)(6) does not countenance dismissals based on a judge’s disbelief of a complaint’s factual allegations. My emphasis is in applying the Conley standard, the Court will “accept the truth of the well-pleaded factual allegations of the Complaint.”

Not an attorney but exert witness – not legal advice

Seller-lessee requirements

Examples of continuing involvement, regardless of whether they are only present in the event of a contingency, that prohibit sales recognition and instead require accounting under the deposit or financing method include:
• The existence of an option to repurchase the property sold, even though the option price is equal to the then fair value of the property at the date the option is exercised. A ―right of first refusal‖
does not constitute an option to repurchase. See Section 9.2.2, for a further discussion of a right
of first refusal.
• An obligation on the part of the seller-lessee to repurchase the property sold, or the ability of the buyer-lessor to compel the seller-lessee to repurchase the property at any time in the future.
• The seller-lessee or a party related to the seller-lessee guarantees the buyer-lessor‘s investment or a return on that investment for either a limited or extended period of time. For example, a guarantee by the parent company of a lease entered into by a subsidiary of the parent constitutes a form of continuing involvement. Payments required by the seller-lessee for a decline in the fair value of the property, including a guaranteed residual value, also constitute a form of continuing involvement by the seller-lessee.
• Any form of continuing ownership in the property. For example, if the seller-lessee sold the property to a partnership in which the seller has a partnership interest, no matter how minor, sales recognition would be prohibited.
• The seller-lessee provides non-recourse financing to the buyer-lessor for any portion of the sales price or provides recourse financing in which the only recourse available to the seller is the property sold. This provision also applies to financial institutions that in the normal course of business provide real estate financing. In addition, if recourse financing is provided but the buyer-lessor is a non-substantive lessor, such recourse financing would be viewed as continuing involvement.
• The seller-lessee is not relieved of its obligation under any existing debt related to the property. Forexample, if the seller-lessee remains secondarily liable on outstanding indebtedness related to the property sold, sales accounting is prohibited.
• The seller-lessee provides collateral to lenders or the buyer-lessor other than the property directly involved in the sale-leaseback transaction, or the seller-lessee (or a related party to the seller-lessee) guarantees the buyer-lessor‘s debt.
• The seller-lessee‘s rental payments are contingent on some predetermined or determinable level of future operations of the buyer-lessor.
• The seller-lessee enters into a sale-leaseback transaction of real estate that also involves property improvements or equipment without selling or leasing the underlying land to the buyer-lessor.
• The seller-lessee is required to initiate or support operations or continues to operate the property at its own risk, for an extended period, for a specified limited period, or until a specified level of operations has been achieved (for example, until rentals of a property are sufficient to cover operating expenses and debt service).




Plaintiff has established a sound argument for TRO that is warranted from issues pleaded in the complaint.

Defendants are held to arguments that fail to raise the least merit for avoiding culpability in the face of ill gotten gains and unethical pursuits in the name of a purported Pro Tanto recovery

The value of the obligation is the amount owed to the lender by the consumer household. The category of transaction is in question as the agreement holds the balance outstanding as payable to the term of thirty years. A counter argument asserts the lender and consumer household entered into an installment sale and for the right of a repurchase. Therein the subject controversy holds the requirement for fulfilling all conditions of the origination and subsequent sale.

Conditions For Sale And Buy Back

Title is conveyed under a non judicial framework conditioned by a trigger for which default allows a third party, normally a custodian who acts incidental to trust, and takes interceded. This is likened to a conditional right to bare legal title in the event of a default by the debtor.

Claims cite a power of sale amongst private parties, as bargained for under the terms of the security,. The mortgages beneficiary is held to a private party binding agreement or enforceable right to its non judicial recovery by power of sale.

Continued ….


Primary Roles in Asset Securitization

A lenders cost basis is the capitalized cost of originating a mortgage. A registrant’s basis in assets is the capitalized cost of originating a pooled mortgage investment. So the cumulative cost for the plaintiffs loan and subject mortgage is a percentage of the entire pooled assets capital cost. The Treasury Regulations under 1.266-1(b)(1) highlight several types of expenses that would be carrying charges, such as (1) taxes on various types of property, (2) loan interest used to finance property, or (3) the costs to improve property (or to cure it of defects ). The IRS contrasted this with an investment management fee, which is generally for the management of property, not for its acquisition, financing, or holding/storage.

Under the IRS opinion it states “consulting and advisory fees are not carrying charges and cannot be capitalized. For they are not incurred independent of a taxpayer’s acquiring property and because they are not a necessary expense of holding property. Stated differently, consulting and advisory fees are not closely analogous to common carrying costs, such as insurance, storage, and transportation.” 

As for the tax payer corporation and assessing the standing to bring foreclosure, the court is asked to consider the reporting requirements and rules, for how a custodian would know that cost basis needed to be updated for clients who choose to capitalize their investment management fees, instead of deducting them as a current expense.

The strategy to capitalize investment management fees, instead of deducting them, has been increasingly popular over the past decade, as the AMT has expanded its reach, resulting in no effective deduction for such fees for a large number of financial services clientele. Unfortunately, though, the IRS responded to the strategy in 2007 with Chief Counsel Memorandum 200721015, which explicitly tackled the issue – and said that investment management fees are not eligible to be capitalized.

The ruling was relatively straightforward. The taxpayer paid a flat quarterly fee for investment management, which covered the cost of transactions, and compensation to the financial consultant and investment manager. The taxpayer wanted to know if such fees could be treated as “carrying charges” that may be added to cost basis, instead of deducted as current expenses.

The Treasury Regulations under 1.266-1(b)(1) highlight several types of expenses that would be carrying charges, such as taxes on various types of property, loan interest used to finance property, or the costs to construct or improve property (or to store it in the case of personal property). The IRS contrasted this with an investment management fee, which is generally for the management of property, not for its acquisition, financing, or holding/storage. As the IRS put it: “Consulting and advisory fees are not carrying charges because they are not incurred independent of a taxpayer’s acquiring property and because they are not a necessary expense of holding property. Stated differently, consulting and advisory fees are not closely analogous to common carrying costs, such as insurance, storage, and transportation.” 

Accordingly, investment management fees should not be capitalized into the cost basis of investments. They can be deducted, or not, as investment expenses and the taxpayer will receive whatever benefits are possible in light of the 2%-of-AGI floor for miscellaneous itemized deductions, and the AMT ramifications. But if the advisor wants a better outcome for the tax treatment of a client’s AUM fee, it’s up to Congress to change the rules.

The promissory note is lost to divestiture o

The recorded deed of trust is dated 2/27/2005 is the security for the loan given to the borrower Ignacio who holds title as a single woman. American Home key Inc is her mortgage lender and found to be a TEXAS CORP listed as an out of state company believed to be licensed to do business in California. The title company for filing claims is Chicago Title whose address is 535 N. Brand Blvd 3rd floor in the l city of Glendale for the state California.

Chase is the alleged agent for the beneficiary and concedes using a nominee to affect a sale at the loans closing. The nominee listed as an agent for the lender is MERS CORP whose Address is P.O. BOX 2026 City FLINT State MI Postal 46501-2026 and can be reached at telephone number 888-679-MERS

The mortgage was given at the time of the settlement disbursement in the amount of $ 395,000. I am concerned where the parties agreed that the note means the promissory note signed by borrower as dated February 26th 2006 and for which it states that BORROWER OWES LENDER $395,000.00 PLUS INTEREST .

I concede the promissory Note was given by the maker for consideration in the amount of the notes face value. This is stated in the HUD disbursement schedule the borrower cannot produce as it was never received as mandated by the Department of Housing and Urban Development.

The final HUD 1 disbursement schedule is far greater in importance than the note the borrower executes. The note is evidence of the obligation and collateral your client purports to still hold in good standing. The final HUD 1 demonstrates the delivery of the consideration to the borrower that can be traced as absolute and affirmed to have been wired as alleged by the real party in interest. The ABA wire is the quintessential economic factor for meritorious claims that may subject the mortgagee having lost its power of sale

The final amount or balance due upon which all other calculations are included (see attached) for the daily and monthly accrual for alleged delinquency, interest due to date, late fees , servicing fees and a per annum amount used to calculate a 30 day per diem rate charged for interest due to a certain cutoff date.

The mortgage your office originated or is holding as a successor is in fact a taxable event to the borrower at settlement where we allege you induced her to release and transfer her title. Now the question begs what are you foreclosing upon and who the party in default is.

By your offices own admission you are bidding on a lien not a property itself. In this disclosure you’re saying the trustee sale is for establishing a lost basis in the assets held. This controversy surrounding the basis in the assets is for value lost to a charges or write down. This in turn causes the mortgage receivable to be held a payable of the bank foreclosing and not for a foreclosure claim against Ignacio.

The title to the estate rests disturbed when you consider the public records. The subject property title records are clearly impaired as they read in an incoherent and disjointed manner.

My request on your behalf and for my own analysis is to withhold the forthcoming foreclosure and to order an abstract of title. Finally, by the trustee own admission they are directing you to the statutory trustee in the jurisdiction of New York.

Money wrongfully levied upon is “received” at the time the Government acquired possession of such money. Section 7426(h) authorizes the payment of actual, economic damages incurred by a third party in a wrongful levy suit if there is a finding that an officer or employee recklessly, intentionally, or negligently disregarded a provision of the Code. The third party must exhaust administrative remedies under the same rules set forth in section 7433(d).

My point is when the TRANSFEREE for subject loan is also the subsequent “SELLER” the sale and transfer is his own person or entity formed for the purpose of liquidating the assets and extinguishing the liabilities. The promissory note is lost to divestiture of the asset and no longer is payable over 30 years.

Title is disturbed in every non agency mortgage

The condition of title is something that few complaints, that I have read, ever mention. Title is disturbed in every non agency mortgage loan originated. The conflict with the state laws and Lenders understanding for the construction of a self contained secondary market is beyond burdensome. The point is they, (whom they may be) are close to turning the page and creating a status quo and under the most egregious, deceptive lending practices.

Someone on Wall Street was convinced to come over to the private sector and create something to rid the government of Fannie Mae and Freddie Mac. The risk was that large pools of well underwritten loans by GSE’s were subject to escalating rates and prepayment fallout. This appeared to be a consequential killer for long term bonds issuers booked as government guarantees. But the alternative was near sighted and near sighted by design.

Originating a non GSE mortgage at 80 percent was impossible without PMI down to 70 percent. There the mortgage product offered a rate that was totally unmarketable. Originating a mortgage at 100 percent could bring out the speculative homeowners who would bite at a chance to tap into equity. But how 100 percent loan combos became AAa rated securities is another story. It’s the brilliance of Wall Street – like giving the shopper at malls the ability to supervise themselves using an honor box in place of cash registers, or pump your own gas unmonitored with 30 days to pay, or building schools where kids teach themselves and cost of educators are eliminated. Get a $ 400,000 1st mortgage and 200,000 2nd mortgage on a stated income application with a promises to pay back the proceeds. All at a one stop shop cost of six percent on a weighted average yield.

If I were counsel pleading this case I would look closer at how the combo loans were portrayed to investors and the following:

  • Why the 1099 controversy lingers on as debt forgiveness
  • Why Secretary Paulson repeatedly talked about how borrowers did the unthinkable – stop paying
  • Why no loan is sold over 80 percent, and
  • Why senior sub deal structures created the Zero Coupon Bonds

It’s fascinating, just beyond mind boggling ….knowing what they panned on doing as far back as 2000 and seeing them get away with it.










Deleted loans under a nominee Mers Corp

The Trustor’s contribution of real property maintains it is lawfully siesed of the estate; while providing him an estate for years for tax purposes and to allow that he remain in possession
Trustor is held solely to liens of record held as security interests UCC-1 filing, for the registration of stock. For this purposes of the statutory indenture and demand of the trustee, the security instrument, UCC 1, is proper jurisdiction over local recording as a uniform instrument used for national use. Finally, the Trustor’s assets are contribution and not a loan permitted or article for which the Trustee can substitute and delete at will and remain BK remote.
If trusts claims to assets are interchangeable, from one loan and date to the next, a policy of substitute and delete as f or any trust assets cause two substantive issues to arise for the Trustor. First is a Taxable event upon which the IRC tax payer code will view the contribution, not as a sale, but solely classify it as a lease. This therefore conditions the mortgage to a sale and contribution by the trustor or interchangeable estate for years and securities registration for rental income.
The second is for the barriers and prohibitions on making loans interchangeable. On any given date the mortgages are trust assets which are materially altered as a common law mortgage. Albeit it can never be restored without novation and having to recapitalize the subsequent events and not just the asset.
There is no less the bare minimum of a lock out period for trust assets to have been barred from participation in this chaotic world of financing known as substituted and deleted loans under a nominee Mers Corp.

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Delivery of Goods into Trust

Take 12 apple trees and plant them. Then remove three trees and replace them later with lemon trees. Take 10 pallets of standard 8 X 11 paper. Remove one and replace it with legal size paper. In a dozen loaf of bread, two loaf are removed and later replaced with two loaf of flour used to make the other loaf. A shipment of 20 corvettes is delivered to a dealer. Three vehicles are returned and three new economy trucks are returned Trees that bear fruit, paper used in business, loaf s of bread and automobiles are each belonging to their own class of goods. It is the exact type of good s, fruit, paper products, bakery goods and automobile that must meet the specifications of the original sale, transfer or delivery. This is the inherent profile that is the integrity for which the original delivery and acceptance may be restored. What comes out of trust is a loan to a BFS family, a single blue-collar laborer, A condo in Louisiana and a 10 acre home in New York . Each is unique and the burden on its replacement as a “match” is far too burdensome to satisfy under accounting rules. There must be a system or means to veil or shelter the substituting and deletion of mortgages loans into and out of investment capital funds set. Forth or formed in a trust. This is not what Mers Corp was ever, set up to accomplish.


According to BofA DOJ Settlement

Servicer shall be required to extinguish a second lien owned by Servicer behind a successful short sale/deed-in-lieu conducted by a Participating Servicer (provided that any Participating Servicer other than the five largest servicers shall be given a reasonable amount of time, as determined by the Monitor, after their Start Date to make system changes necessary to participate in and implement this requirement) where the first lien is greater than 100% LTV and has a UPB at or below the Applicable Limits, until Servicer’s Consumer Relief Requirement credits are fulfilled. The first lien holder would pay to the second lien holder 8% of UPB, subject to a $2,000 floor and an $8,500 ceiling.

The second lien holder would then release the note or lien and waive the balance.

Mortgage $ 100000

1st Lien 80000

2nd Lien 20000

Demand for Payoff / Short Sale

Outstanding Balance

First Tranche [P] 60,000

Subordinate [P] 20 000

Bond accretion 20 000


Question Counsel ….

When you say “the second lien holder would then release the note or lien and waive the balance”, is that not already assumed in the deal structure at time of the bond maturity ?