THE BLOG
05/25/2009 05:12 am ET Updated May 25, 2011

Homeowners, Don't Get Left out in the Cold!

Homeowners, welcome to Paradise Lost, the fate of millions of financially strapped boomers. A simultaneous loss of life savings, job income and foreclosure has many of them wondering, "Whose America is this, anyway? The bankers got bonuses to defraud us, and our industries and economy are in the pits. We worked for decades to live the American dream, and now we are out of work, saddled with debt and thrown out on the streets! What retirement? When I'm too old to enjoy it? More like I'm living a nightmare."

You might be quite inclined to agree. However, there is light at the end of the tunnel, even for those that have already been foreclosed and evicted from their precious homes.

Although lately, while it feels like we are in the same boat as a third world country, we still have a little document on our side called The United States Constitution, which states, among other things that, "Citizens of the United States shall not be deprived of life, liberty or prosperity without due process of law."

Now, there's a mouthful. So don't despair! And don't get left out in the cold! Baby, it's warm inside!

Homeowners, listen up! It is time to begin a reversal of your misfortune by gearing up and waging your mortgage war. Even if you have wearily given up your keys and angrily moved out, there are legal remedies that can make you whole. Your lender has broken so many laws that you may end up with more money than you had in cash and equity in your home!

And, no, this is not a pipe dream. But it is the repossession of your American dream. And the statute of limitation is greater than three years if your lender committed fraud.

How to tell if you are a victim of illegal foreclosure and unlawful eviction? Read on. Hint: you are in good company. Your platoon is millions strong.

If you have an adjustable rate mortgage and your loan has been securitized, there is a high probability that the securitization was done illegally. Further, if you have been defrauded by a predatory lender or broker, it's time to fight back and go to court.

I recently asked Ohio attorney Dan McCookey, an expert in foreclosure defense and offense, what traumatized and victimized homeowners can do even after they have lost their homes, and find themselves figuratively and literally, out on the street. He provided some strategic counsel and laid out two hopeful options for now homeless homeowners:

Option #1: the "void judgment defense." Your attorney files a motion to set aside the judgment, as the court never had proper jurisdiction to begin with.

What does this mean to you? If your loan was securitized, your lender sold your note and quite profitably, retained the mortgage servicing rights. When your note was sold, your lender gave up its legal ownership of your note and was paid in full for your loan, and then some. Therefore, your lender had no legal standing to foreclose! And no matter how many times your servicer was acquired, it has no right to foreclose!

In fact, your lender is not considered by the Court, a "true party of interest" or a "holder in due course." Since the Court's jurisdiction was never evoked, any and all proceedings found by the Court are void. That right is given to the current holder of the note. If only your lender could remotely identify whom that is.

Your lender has no idea where your original note currently is, as it traveled the globe, during its metamorphosis from a secured interest in your property to a mere shadow of its former self. The poor thing was sliced and diced multiple times by the depositor and a series of trustees, each earning profits and fees along the way.

Look at it this way: your note may have once looked like Brad Pitt and now...well, a lot more like Mickey Rourke. And just like Brad and Mickey, slices of your note are in permanent hiding. They have been sold and resold, swapped and leveraged and swapped and leveraged again. Kind of like what the big Hollywood studios do to actors like Brad and Mickey.

You may have heard recent rumblings and grumblings from bank lobbyists and near bankrupt "too large to fail" lenders stating this "lost note defense" is merely a temporary and desperate attempt by homeowner attorneys to keep the wolf from the door. Look, we already know that they are poor losers.

Au contraire, ma frère. There are now dozens of judges in district and federal court who have dismissed tons of foreclosures for this very reason. And more and more Appellate judges have joined the crusade. The courts have been proven to be quite compulsive and persnickety while upholding the rules of Civil Procedure.

Go, judges!

This strategy allows you not only to set aside the judgment, but to file a complaint against the lender for damages. These damages can include all monies paid to your lender beginning with the closing and including all payments to date! You can get a fresh start and even buy another home! Preferably one without a fraudulent appraisal.

Let's move on the Door Number Two:

Option #2: "the wrongful foreclosure defense." In this case, your lender committed fraud during the solicitation, origination, closing, servicing and foreclosure and eviction process. Then it committed fraud on the Court by fraudulently foreclosing and evicting you.

Civil fraud gives you, under the Federal Truth in Lending Act, an extended right of rescission (cancellation) of your loan. Therefore, your attorney will file a complaint outlining fraudulent proceedings brought to the Court. This action essentially specifies exactly how your lender's attorney perpetuated a fraud on the Court. (Why would they stop now?) Fraud must be, by law, argued with specificity.

This complaint will also demand damages which can be three times the amount of your loan! Another fresh start for you. God knows, you deserve it.

I also asked Attorney McGookey, "How can homeowners determine if they have a winning case? And if they do, what should they do immediately?"

McGookey replied, "The first red flag is the 'brick and mortar test.' Did the homeowner's lender have roots in the community? Did they have a license to do business issued by the Secretary of State? Did they operate out of a respectable building? Or did they merely set up a fly by night shop to front a nominal lender funded by an investment bank?"

"The second consideration," according to McGookey, "is to take a close look at the legality of the securitization process. That means the way in which your nominal lender securitized your loan and transformed your note into mortgage backed securities."

How do you find out if your loan was securitized?

Well, for one, you would have gotten letters from various lenders who acquired your now defunct lender. Or you may have gotten letters informing you that your servicer that changed. You may now be making payments to an entity that is different than your original lender.

A sure fire way to find out: Google your lender's SEC 10K and 8K filings for the year in which you closed on your loan. In it, your lender brags about how it sells its loans and securitizes them, along with the merry banksters in its daisy chain.

The 8K is particularly revealing, as it contains the most delicious fraudulent statements by your lender to its investors, stating, it has never engaged in predatory loan practices and it has, in fact, a secured interest in your property! Not! Due to its own sloppy paperwork, your originating lender's interest in your property is null and void.

The law dictates that you must be told of your lender's intent to sell your loan and who the parties at your closing really were. Consumer law dictates complete transparency in financial transactions.

Further, the law demands that the mortgage follows the note. Your mortgage or deed of trust is recorded in your county records so you can take title and possession of your home. If your loan has been securitized and your note has been sold, resold and divvied up into mortgage backed securities, your mortgage servicer (the nasty one who sends you a succession of mean letters) has no right to foreclose. And a growing number of judges seem to agree.
Sounds too good to be true? Not! In fact, it is simple contract law. While many players in the securitization business want to convince you that the "lost note defense" is a "legal gimmick" that will merely slow down foreclosure, recent judicial orders upholding the rights of homeowners are the current reality:
Judge Boyko dismissed 14 foreclosures attempted by Deutsche Bank, stating that "the federal court system will not be forgiving in this regard."
Judge O'Malley dismissed 32 foreclosures, stating that the lender "has not filed adequate documentation demonstrating that it was the owner and holder at the time it filed suit."
Judge Bufford found in favor of the pro se homeowner against IndyMac Bank, stating "IndyMac Bank is not the real party of interest."
Judge Rose dismissed 20 foreclosures, stating "while the plaintiffs have pled that they have standing, they may not have had standing at the time when the foreclosure was filed."
Judge Crawford dismissed a foreclosure, concluding that "MERS failed to establish that it held either the mortgage or the note at the time it filed the lawsuit."
Andrew Pizor, Counsel for Connecticut Fair Housing Association, wryly says, "Foreclosure firms are so used to actions just going through unopposed. Now people are paying attention and pointing out the gaps. When I raise these defenses in foreclosure proceedings, the shocked response from lenders is that 'it is a technicality.' Well, not paying your mortgage is a technicality, too."
And more such orders are coming every day as energized homeowners fight their mortgage wars. In fact, these judicial opinions are so thoughtfully written and so adamantly supportive of homeowners' rights, that I have included them in my new book, Mortgage Wars: How to Fight Fraud and Reverse Foreclosure.

These judges were also surgically critical of the mortgage giants who breezed through the securitization process, as in this quote by Judge Boyko: "The institutions worry less about jurisdictional requirements and more about maximizing returns."

Judge Boyko is now viewed by homeowners and attorneys alike as a rock star, cool as Bono.

Now, if you are confused like most homeowners about the ins and outs of securitization, you can get your loan audited by a mortgage auditor who will do this research for you. If you can't find an auditor in your community, go to www.yourmortgagewar.com and we will assign one for you. This audit costs $399.00, so don't pay an arm and a leg to a predator. No point in going from predatory lender to predatory auditor.

Your audit not only thoroughly examines the journey of your note, it also looks for fraud. And there has been plenty of fraud to go around.

As a friend of mine, who is a retired appellate judge, said with some sadness over a glass of port, "Iris, there has been fraud in the solicitation, origination, processing, closing, servicing and securitization of toxic loans; fraud in the packaging, selling and credit rating of mortgage backed securities; fraud in the courtroom, fraud in the boardroom; fraud on the floor of the Stock Exchange; fraud in the Fed, and fraud in the media who have suppressed this story. Now there is fraud in the bailout and use of TARP monies lent to fraudulent institutions by defrauded homeowners and taxpayers. You are absolutely right when you say America has been living in a fraud zone."

Expert witness and forensic auditor Marie McDonnell says, "An audit is the homeowners' best defense against foreclosure and eviction. It demonstrates with complete specificity to the Court the fraud that was committed and the inability of the servicer to foreclose. It also extends the right of rescission under regulation Z of the Truth in Lending Act."

McDonnell's forensic audits often reveal a mountain of predatory practices higher than Kilimanjaro. In fact, her work is so in demand by attorneys, she has been asked to consult with judges who are eager to get up to speed.

Attorney McGookey encourages now homeless homeowners to overcome their paralysis and start immediate action. Not only because the clock is ticking, but because these legal claims can have a positive outcome.

As McGookey advises, "Don't give up, but time is not on your side. Homeowners can still sue the lender who foreclosed and evicted them. It doesn't mean they don't have recourse against the parties who filed the foreclosure. Homeowners can sue their mortgage broker, the servicing agent, the appraiser, the loan pool trustee and the lender's attorney. They also have rights under the Fair Debt Collections Act."

California litigator Bob Allan of the Robert Allan Law Group agrees: "These claims can be won if the counsel for the homeowner can prove the lender's intention to fraudulently induce the homeowner into a transaction for the lender's sole benefit."

So homeless homeowners, the cure for your post traumatic stress disorder caused by these horrific events? Get ready. LOCK AND LOAD. Pull yourself off the couch, wash the chocolate from your fingers and start reviewing those dastardly closing documents. Get your loan audited and hire a qualified attorney.

If you need help, go to www.mortgagewars.com. You can order an advance copy of my book, MORTGAGE WARS, get an audit and a free referral to an attorney in our MORTGAGE WARS LEGAL NETWORK. Our network is growing every day. And you will never be referred to a predator. Our attorneys value homeowner protection over profit.

I will be rooting for you.