Sunday, June 30, 2013

Defrauded Homeowner Jailed as Domestic Terrorist

Contributed by:   Lainey Hashorva

Here is the latest--- I made a special limited appearance pro-bono on behalf of Barbara to argue a reduction in the bail and to lift the 1295.1 hold on her release. I know this woman and her family personally and she is well respected and has a great deal of integrity. It was really intense.. they had 6 to 8 officers (different agencies) there with the DA on this case--all there for the DA for protection/intimidation....they really had a lot to say about the "S" movement and how in their county (San Bernardino County, CA) they are going full force against this.. now naming those filing papers with the red flag language as domestic paper terrorists. Surreal ... It was great to see 25-35 people pack the small Courtroom for her case.

The great thing was Barbara had cultivated so many great relationships within her community and through legal channels with not only the county recorder (past and present) as well as her local congresswoman, senator and controller. Within 48 hours we got some of these public officials to write letters to attest to her character for the bail hearing (its not easy getting these letters unless they really know you). In argument, when it came to the DA to try to connect her to supposed "S" guy who is in jail (60 plus felony counts of fraud and stealing identities) it was quite laughable... I don't think the Judge bought it. After all she was simply protecting her Own property. She had a bail enhancement of $105,000 due to the fabricated connection to this guy. She never heard of the man much less shared a mailbox. They also argued she used similar "red flag" language in her corrected deed. (oh well... mmmmm .. guess you can't refer to God or use say you are a sovereign citizen) This is quite the political case and it will be interesting to see how each of these public officials choose to show up as the case progresses.

For Immediate Release

UPDATE: Barbara Bratton - Out On Bail Defrauded Homeowner Jailed As Domestic Terrorist

Friday, June 28, 2013: San Bernardino, CA.

Homeowners’ rights advocate Barbara Bratton was released on bail early this morning after spending two weeks detained as a felon on charges of forgery, burglary and offering false documents for allegedly filing a corrective deed at the San Bernardino County Recorder’s office. Homeowners sometimes use corrective deeds as a preliminary step towards court recognition of systemic land title fraud on their home.

At a Wednesday hearing in San Bernardino Superior Court, Ms. Bratton’s attorneys argued that she showed no criminal intent, had no criminal record and posed no flight risk. Bail was reduced from $250,000 to $150,000. Terms require Ms. Bratton and her associates to stay away from her family home of 40 years as well as from the couple who wrongfully obtained the property from her. A preliminary hearing is set for August.

Since 2008, Barbara Bratton, a native of the City of Ontario, CA. and life-long member of Mt. Zion Baptist Church in that city, has been engaged in a determined legal battle to win back her home. In an apparent attempt to intimidate her, the office of San Bernardino County District Attorney Michael Ramos accused Ms. Bratton of being a domestic terrorist associated with the “sovereign citizens” – a charge wholly without merit. She has never identified herself as a sovereign citizen, nor does she support their views.

At least six officers were assigned to assist the District Attorney’s office with the case. FBI agents were also present in court. Ms. Bratton’s arrest comes at a time of growing public dissatisfaction with domestic surveillance and other gross violations of civil and human rights since passage of the Patriot Act after 9/11.

Barbara Bratton believes in and is in full compliance with the U.S. Constitution, which is why she is fighting a strictly legal battle to win back her home. These trumped up charges appear to be a desperate attempt by county and city officials to divert public attention from the real crimes: the powerful home mortgage industry [[1] ] that has generated mountains of fraudulent documents that continue to pollute property records in San Bernardino County - a county with some of the highest foreclosure rates in the country. Until land title fraud is weeded out from public property records, judges will continue to sanction illegal foreclosures and bankers and home loan servicers who nearly brought down the U.S. economy will go unpunished.

Ø For district attorney and police fabricated attempts to link Ms. Bratton with sovereign citizens, click here for supporting documents PDF file.

Ø See this Mercury News editorial for state legislation to limit public access to government records, especially documents having to do with banks and other corporations on public officials and the expenditure of government funds.

Contact: Family & Friends of Barbara Bratton
Email: Cell: 661.414.2962

[1] Services include: Select Portfolio, Quality Loan Servicing, Loan Processing Services and LSI Title Company. Some have already been indicted.

Tuesday, June 18, 2013

In Countrywide Case, Watchdogs Without Any Bark -

In Countrywide Case, Watchdogs Without Any Bark -

Thursday, June 13, 2013

More Chase Bank Misconduct: Raul Dearmas v. J P Morgan Chase Bank NA et al

Fruit for Judicial Estoppel? Admission in the excerpt below. 
This additional litigation now partially stemming from  

Courthouse News Service

Wednesday, June 12, 2013Last Update: 6:41 AM PT

Bank Misconduct

LOS ANGELES - J.P Morgan Chase Bank maliciously sues California homebuyers, without evidence, to coerce them into giving up their homes, Raul Dearmas claims in Federal Court. 


Complaint for Fraudulent and Unlawful Debt-Collection Practices ...


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Well now lets see among OTHER things JP is claiming pursuant to the PAA that they are Successor-in-Interest and WAMU is a goner? But what about all the NOD's in foreclosure cases that NAME WaMu as the beneficiary? And a constellation of  other questions that could be raised by this admission.
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Justia > Dockets & Filings > California > California Central District Court > Torts - Injury 
Other Personal Injury > Raul Dearmas v. J P Morgan Chase Bank NA et al

Raul Dearmas v. J P Morgan Chase Bank NA et al

Plaintiff:Raul Dearmas
Defendants:J P Morgan Chase Bank NA, Leslie Ann Lunsford and Wong Fleming PC
Case Number:2:2013cv04173
Filed: June 11, 2013
Court:California Central District Court
Presiding Judge:John F. Walter
Referring Judge:Patrick J. Walsh
Nature of Suit:Torts - Injury - Other Personal Injury

Saturday, June 8, 2013

Washington Mutual Preferred Funding (Cayman) Ltd Ties to Ugland House in the Cayman Islands

On March 7, 2006, Washington Mutual Preferred Funding (Cayman) I Ltd., a Cayman Islands exempted company (“WaMu Cayman”), closed the sale of (a) $302,300,000 of WaMu Cayman’s 7.25% Perpetual Non-cumulative Preferred Securities, Series A-1, liquidation preference $100,000 per security (the “Series A-1 WaMu Cayman Preferred Securities”), and (b) $447,700,000 of WaMu Cayman’s 7.25% Perpetual Non-cumulative Preferred Securities, Series A-2, liquidation preference $10,000 per security (the “Series A-2 WaMu Cayman Preferred Securities”, and, together with the Series A-1 WaMu Cayman Preferred Securities, the “WaMu Cayman Preferred Securities”). The terms of the WaMu Cayman Preferred Securities are identical except for their per security liquidation preference. 

In addition, on March 7, 2006, Washington Mutual Preferred Funding Trust I, a Delaware statutory trust (“WaMu Delaware”), closed the sale of $1,250,000,000 of its Fixed-to-Floating Rate Perpetual Non-cumulative Trust Securities, liquidation preference $100,000 per security (the “Trust Securities”). 
The Series A-1 WaMu Cayman Preferred Securities were offered and sold in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”) only in the United States and to persons who are “qualified institutional buyers” within the meaning of Rule 144A. The Series A-2 WaMu Cayman Preferred Securities were offered and sold in reliance upon Regulation S under the Securities Act only to non-U.S. persons in transactions outside of the United States. The Trust Securities were offered and sold in reliance on Rule 144A only to persons who are “qualified institutional buyers” within the meaning of Rule 144A and “qualified purchasers” within the meaning of Section 2(a)(51) of the U.S. Investment Company Act of 1940, as amended. 
WaMu Cayman used the proceeds of its offering to purchase from Washington Mutual Bank (“WMB”) a corresponding amount of 7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference $1,000 per security (the “Fixed Rate Company Preferred Securities”), of Washington Mutual Preferred Funding LLC, a Delaware limited liability company (the “Company”). In addition, WaMu Delaware used the proceeds of its offering to purchase from WMB a corresponding amount of the Company’s Fixed-to-Floating Rate Perpetual Non-cumulative Preferred Securities (the “Fixed-to-Floating Rate Company Preferred Securities”, and, together with the Fixed Rate Company Securities, the “Company Preferred Securities”). 


Washington Mutual Preferred Funding (Cayman) Ltd


OCC Misses Another Conflict of Interest: Foreclosure Review Outreach/Payment Processor Rust Consulting Owned By Residential Real Estate Player Apollo, Being Sold to VC Arm of Citigroup « naked capitalism

Yet another gathering of crows is emerging in the role of Rust Consulting in the foreclosure review process and history of it and its related companies.  The plot thickens and the conflicts of interest continue to become increasingly nefarious. Below are excerpts relative to this activity and the history of Rust Consulting and its ties to Apollo Global Management, SourceHov, CVCI, Citigroup and firms such as Coldwell Banker, Century 21, and Sotheby's Real Estate.

The crows feed at Ugland House in the Grand Caymans.  Even JPMorgan Chase's tendrils are linked to this tax haven of the rich and powerful.  See this link:

OCC Misses Another Conflict of Interest: Foreclosure Review Outreach/Payment Processor Rust Consulting Owned By Residential Real Estate Player Apollo, Being Sold to VC Arm of Citigroup « naked capitalism

 Now why might Rust be motivated not to be as diligent as it could be? Rust “joined” SOURCECORP, now SourceHOV, in 1999. SourceHOV is majority owned is Apollo Global Management, one of the fund managed by private equity giant Apollo. Apollo struck a deal to sell SourceHOV (and therefore Rust) to CVCI, a venture capital fund operated by Citigroup, in mid-March (I believe the sale has not yet closed).
Now let’s look briefly at some of Apollo’s involvement in residential real estate, a conflict that appears to have escaped the OCC’s attention. Apollo owns Realogy, which is the biggest residential brokerage service in the US, through its brands Coldwell Banker, Century 21, and Sotheby’s Real Estate. Residential brokerage firms have reason to play nicely with servicers; investors have claimed they’ll do broker price opinions for nothing but submit a bogus charge to the servicer (required periodically when a borrower in a securitized mortgage is delinquent) if they get the more lucrative sale of the property out of bank real estate owned. Apollo also manages Apollo Residential Mortgage, a REIT that invests in and manages RMBS, residential mortgage loans, and other US residential mortgages assets. Who are sources for loans? The big banks as originators and the servicers for seasoned loans. And in general, of all the big PE funds, Apollo has the deepest and most extensive dealings in commercial and residential real estate, giving it deep ties to the real estate units of all the major banks and servicers.

So it looks to be a stunning lapse for the OCC and Fed not to have caught this not-inconsiderable conflict of interest. Rust is also an approved Federal contractor, as reader LN, who provided us with this lead, also pointed out. Did Rust fail to make adequate disclosure of its ownership in its applications to become a government contractor?
 The only upside out of this lapse is that it reflects sufficiently badly on the OCC and Fed that it might force them to be more zealous about getting Rust to do its job than they might otherwise. Assuming, of course, that NC readers turn the heat up by alerting their Congressmen of this latest IFR-related fiasco.
See  Rust Consulting Inc GSA 520 Contract


Rust Consulting has a 35-year history founded in the combination of technology and consulting services to the legal industry.

Rust was founded by Ronald A. Rust, Esq., as The Rust Consulting Group, Inc. in 1976. Since inception, Rust has been a leader in applying computer technology to the practice of law. Using the most advanced computers and technology available, Rust coded millions of documents and built databases for more than 500 cases.

In 1988, Rust began a new business segment – claims administration for class action settlements and bankruptcy cases. As the claims administration segment grew, it became a business of its own.

In 1995, Rust Consulting, Inc. became a separate operating entity focused on claims administration.

In 1999, Rust Consulting joined SOURCECORP, Inc., a predecessor company to SourceHOV.  Rust remains a wholly owned subsidiary of SourceHOV.

In 2006, Rust acquired two complementary firms: a class action settlement administration firm, Complete Claim Solutions, LLC, and an advertising and media placement firm with which Rust had often worked before and which was already a fellow SourceHOV company, Kinsella Media, LLC. While often working separately, when jointly engaged, Rust and Kinsella Media seamlessly provide the nation’s best class action settlement administration and notice program design and implementation.

In 2009, Complete Claim Solutions was integrated into the Rust brand.

Also in 2009, Rust introduced a new focus in the business sector, dedicated to assisting clients with critical communication needs such as responses to data breachesproduct recalls, and other time-sensitive or complex projects.

In 2010, Rust leveraged its previous experience through expanding and formalizing two additional practices: a mass tort practice within our legal sector, andpublic sector. In the public sector, Rust was awarded two General Services Administration "GSA") contracts: Schedule 520 - Financial and Business Services ("FABS") and Schedule 70 - Information Technology ("I.T.").

Rust has provided services for more than 3,500 projects and distributed billions of dollars in settlement assets.
In 2013 Apollo struck a deal to sell SourceHOV (and therefore Rust) to CVCI, a venture capital fund operated by Citigroup, in mid-March (I believe the sale has not yet closed).



Citi Venture Capital International (CVCI Private Equity) / History.

Citi Venture Capital International - Citi Capital Advisors

Citi Venture Capital International is a leader in global Emerging Markets private equity and invests in companies with compelling growth prospects across India, ...

 Citi Venture Capital International is part of the Citi Capital Advisors platform.

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That shady offshore tax haven known as Ugland House in the Cayman Islands strikes again. After consuming a chunk of Jack Lew’s Senate confirmation hearing, with Senators grilling Lew on why he owned an investment housed in this offshore tax dodge while working for the Obama administration, the Cayman Islands’ address has surfaced once again in the foreclosure settlement scandal.

Note:     Ugland House is a building located in George Town, Cayman Islands Located on South Church Street, the building is the registered office address for 18,857 entities and has for years been linked to tax avoidance strategies. During his first presidential campaign, U.S. President Barack Obama referred to Ugland House as "either the biggest building in the world or the biggest tax scam in the world." President Obama subsequently nominated Jack Lew to Treasury Secretary in 2013, despite objections that Mr. Lew had invested heavily in funds in Ugland House while he worked as an investment banker at Citigroup during the 2008 financial meltdown, with President Obama stating that he was not concerned about Mr. Lew's past financial transactions. The building is occupied by the law firm Maples and Calder

  • Ugland House Explained a website by the law firm that maintains Ugland House
      • Maples and Calder the law firm that resides at Ugland  House                                                                                                                                                                                      
  •  BUSINESS ADDRESS: UGLAND HOUSE, P.O. BOX 309, GRAND CAYMAN STATE: E9 ZIP: KY1-1104           BUSINESS PHONE: 44 (0) 20 7529 5202

On April 30 of this year, just 18 days after the first wave of checks from the Federal government’s settlement of the so-called Independent Foreclosure Review began arriving in the mail – and bouncing – Citigroup Venture Capital International (CVCI), Lew’s former Ugland House investment, bought a large stake in the company that was mailing the checks, SourceHOV, parent of Rust Consulting. As reported by Naked Capitalism, the ownership stake was made despite Citigroup being one of the banks in the foreclosure settlement ...

When Jack Lew left his executive position at Citigroup at the end of 2008 and joined Hillary Clinton’s State Department as Deputy Secretary of State, he retained his investment in CVCI, a $7 billion private equity fund. According to his January 11, 2009 financial disclosure report, his CVCI account at that point had a value of between $100,000 and $250,000. As indicated on the document below, released as part of Lew’s Senate confirmation hearing, he still owned $19,470 of this foreign hedge fund investment in calendar year 2010 while working in a high level, highly sensitive State Department post. In Lew’s confirmation hearing in February, he said he had since sold the position at a loss. . . .

Rust Consulting, the firm serially mismanaging the payments to foreclosure victims, has its own Political Action Committee which is somewhat comically called the Rust Consulting “Administrative Excellence” PAC. Curiously, Rust Consulting is paying the claims for both the National Mortgage Settlement and the Independent Foreclosure Review settlement.

Thursday, June 6, 2013

JPMorgan Chase & Deutsche Bank Whipped By Securitization Fail : Saldivar v JPMorgan Chase Bank NA et al

Contributor:  Deontos

JP MORGAN CHASE whipped by SECURITIZATION FAIL. Their purported transfer to a Trust is VOID. In violation of the terms of the PSA as in interpreted by NY Trust Law.  The recent Erobobo Decision echos here and now Pandora's Box is open.

Worth reading the 11 page decision start to finish.

Debtor(s). § JUDGE ISGUR
GILBERTO T SALDIVAR, et al Plaintiff(s),
vs. § ADVERSARY NO. 12-01010


Defendants, JPMorgan Chase Bank, N.A. (“Chase”) and Deutsche Bank National Trust
Company’s (“Deutsche Bank”), Joint Motion to Dismiss Complaint, (ECF No. 9) is granted, in part, and denied, in part.


Plaintiffs are Debtors, Gilberto and Sandra Saldivar. The Saldivars filed a voluntary chapter13 petition on November 12, 2011. Case No. 11-10689, ECF No. 1. The Saldivars filed this adversary proceeding on September 26, 2012. ECF No. 1. Chase and Deutsche Bank filed their Joint Motion to Dismiss Complaint on October 18, 2012. ECF No. 9. The Saldivars filed their Response to Defendant’s Motion to Dismiss on November 29, 2012. ECF No. 13. The Saldivars filed a Supplemental Response to Defendants Motion to Dismiss on December 4, 2012. ECF No. 14. Chase and Deutsche Bank filed their Joint Reply to Plaintiffs’ Response to Motion to Dismiss Complaint on December 13, 2012. ECF No. 15. The Saldivars filed their First Amended Complaint on February 25, 2013. ECF No. 19. Chase and Deutsche Bank filed their Joint Conditional Answer to Plaintiffs’ First Amended Complaint on March 11, 2013. ECF No. 22.

The Saldivars refinanced their home on August 24, 2004, and granted a security interest in the property to Long Beach Mortgage Company. ECF No. 19 at 2. The Saldivars executed a Texas Home Equity Note, (the “Note”), promising payments of $604.19 per month to Long Beach Mortgage Company for principal and interest only. ECF No. 19 at 2. From 2004 until 2009, the Saldivars paid property taxes and insurance directly. ECF No. 19 at 2. In 2010 and 2011, Chase advanced funds for force-placed insurance and property taxes. ECF No. 19 at 2. The Saldivars did not pay property taxes in 2010, but did pay taxes directly in 2011, and allege they are entitled to a refund for amounts advanced by Chase in 2011. ECF No. 19 at 2.

On September 26, 2011, the Saldivars received a Notice of Default on behalf of Chase, effective June 1, 2011, demanding $8,127.11 to cure the default. ECF No. 19 at 2-3. The Notice of Default indicated that the cure amount included late charges, periodic adjustments to the payment amount (if applicable), legal fees and expenses of collection. ECF No. 19 at 2. The Saldivars allege that the cure amount included unauthorized fees and charges. ECF No. 19 at 3. The Saldivars’ contract payment was only $604.19 per month, therefore they argue that the cure amount should have been no greater than $2,416.76 ($604.19 x 4 months). ECF No. 19 at 3. The Saldivars allege that the $8,127.11 cure amount included amounts paid for 2011 taxes that were, in  fact paid directly by the Saldivars. ECF No. 19 at 3.

The Securitized Trust

The Notice of Default indicates that the original creditor is Deutsche Bank, as Trustee for Long Beach Mortgage Loan Trust 2004-6. ECF No. 19 at 3. The Trust is a New York common law trust created through a Pooling and Servicing Agreement (the “PSA”). ECF No. 19 at 4. Under the PSA, loans were purportedly pooled into a trust and converted into mortgage-backed securities. ECF No. 19 at 4. The PSA provides a closing date for the Trust of October 25, 2004. ECF No. 19 at 4. As set forth below, this was the date on which all assets were required to be deposited into the Trust. The PSA provides that New York law governs the acquisition of mortgage assets for the Trust. ECF No. 19 at 4. The Trust was formed as a REMIC trust.1 ECF No. 19 at 5. Under the REMIC provisions of
the Internal Revenue Code (“IRC”) the closing date of the Trust is also the startup day for the Trust.
ECF No. 19 at 5. The closing date/startup day is significant because all assets of the Trust were to be
transferred to the Trust on or before the closing date to ensure that the Trust received its REMIC

status. ECF No. 19 at 6. The IRC provides in pertinent part that:

“Except as provided in section 860G(d)(2), ‘if any amount is
contributed to a REMIC after the startup day, there is hereby imposed
a tax for the taxable year of the REMIC in which the contribution is
received equal to 100 percent of the amount of such contribution.”   26 U.S.C. § 860G(d)(1).

A trust’s ability to transact is restricted to the actions authorized by its trust documents. ECF No. 19 at 6. The Saldivars allege that here, the Trust documents permit only one specific method of transfer to the Trust, set forth in § 2.01 of the PSA. ECF No. 19 at 6. Section 2.01 requires the Depositor to provide the Trustee with the original Mortgage Note, endorsed in blank or endorsed with the following: “Pay to the order of Deutsche Bank, as Trustee under the applicable agreement, without recourse.” ECF No. 19 at 7. All prior and intervening endorsements must show a complete chain of endorsement from the originator to the Trustee. ECF No. 19 at 7.

Under New York Estates Powers and Trusts Law § 7-2.1(c), property must be registered in the name of the trustee for a particular trust in order for transfer to the trustee to be effective.

1 The Internal Revenue Code provides that the terms ‘real estate mortgage investment conduit’ and ‘REMIC’ mean any entity—(1) to which an election to be treated as a REMIC applies for the taxable year and all prior taxable years, (2) all of the interests in which are regular interests or residual interests, (3) which has 1 (and only 1) class of residual interests (and all distributions, if any, with respect to such interests are pro rata), (4) as of the close of the 3rd month beginning after the startup day and at all times thereafter, substantially all of the assets of which consist of qualified mortgages and permitted investments. ECF No. 19 at 5.

ECF No. 19 at 7. Trust property cannot be held with incomplete endorsements and assignments that
do not indicate that the property is held in trust by a trustee for a specific beneficiary trust. ECF No. 19 at 7.

The Saldivars allege that the Note was not transferred to the Trust until 2011, resulting in an invalid assignment of the Note to the Trust. ECF No. 19 at 7. The Saldivars allege that this defect means that Deutsche Bank and Chase are not valid Note Holders. ECF No. 19 at 3.

In its Motion to Dismiss, (ECF No. 9), Chase and Deutsche Bank argue that the Saldivars lack standing to challenge the validity of the assignment to the trust. At the hearing on January 28,2013, the Court stated that the law is well settled that the Saldivars do not have standing to complain about the Trust’s failure to follow its own internal procedures. However, if the assignment was void, ab initio, because it occurred after the closing date, the Saldivars do have a valid argument that Chase
and Deutsche Bank are not valid Note Holders. The Court ordered additional briefing on whether under New York law, failure to comply with the terms of the PSA rendered assignment to the trust
void, ab initio; or, merely voidable.

The Court also ordered supplemental briefing on whether Texas Local Government Code § 192.007 requires an assignment of a note to be recorded.

The parties submitted contemporaneous supplemental briefs on February 28, 2013.ECF Nos. 20 & 21. Chase and Deutsche Bank submitted their reply on March 14, 2013.ECF No. 23. The Saldivars submitted their reply on March 15, 2013. ECF No. 24.

Force-Placed Insurance

Chase’s arrearage claim includes $4,888.10 for force-placed hazard insurance. ECF No. 19 at 8. The Saldivars allege that the premiums charged for this force-placed insurance were significantly higher than average premiums for similar coverage. ECF No. 19 at 8. The Saldivars allege that the inflated premiums result from the fact that a portion of the premium is being paid to Chase or an affiliated company in the form of a kickback. The Saldivars point to two articles, one from the Chicago  Tribune, Force-placed insurance, an unnecessary burden for trapped mortgage borrowers; and, one from the New York Times, Big Banks Face Inquiries Over Home Insurance, as evidence that Chase received kickbacks on force-placed insurance transactions.2 ECF No. 13 at 8.

Chase’s Proof of Claim

Chase filed Proof of Claim 14 on June 15, 2012, claiming six pre-petition monthly payments of $1,476.13 were due for a total of $8,856.78. ECF No. 19 at 8. The Saldivars allege that their monthly payments were only $604.19. ECF No. 19 at 8. They allege that Chase’s inflated proof of claim is a result of improperly force-placed insurance; taxes for 2011 that Chase improperly paid; and inflated inspection and appraisal fees. ECF No. 19 at 8. The Saldivars assert that Chase’s escrow analysis attached to its proof of claim is incorrect because it includes property taxes for 2011.


The District Court has jurisdiction over this proceeding under 28 U.S.C. § 1334(a). Pursuant
to 28 U.S.C. § 157(a), this proceeding has been referred to the Bankruptcy Court by General Order

Rule 12(b)(6) Standard

The Court reviews motions under Rule 12(b)(6) “accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiffs.” Stokes v. Gann, 498 F.3d 483, 484 (5th Cir. 2007) (per curiam). However, the Court “will not strain to find inferences favorable to the plaintiff.” Southland Sec. Corp. v. INSpire Ins. Solutions Inc., 365 F.3d 353, 361 (5th Cir. 2004) (internal quotations omitted). 2 Of course, these newspaper articles do not constitute evidence. They may constitute a sufficient basis for considering whether a plausible claim is being asserted for which discovery should be allowed.

To avoid dismissal for failure to state a claim, a plaintiff must meet Fed. R. Civ. P. 8(a)(2)’s pleading requirements. Rule 8(a)(2) requires a plaintiff to plead “a short and plain statement of the claim showing that the pleader is entitled to relief.” In Ashcroft v. Iqbal, the Supreme Court held that Rule 8(a)(2) requires that “the well-pleaded facts” must “permit the court to infer more than the mere 
possibility of misconduct.” 556 U.S. 662, 679 (2009) (quoting Rule 8(a)(2)). “Only a complaint that
states a plausible claim for relief survives a motion to dismiss.” Id. (citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 556 (2007)). “[A] complaint does not need detailed factual allegations, but
must provide the Plaintiffs’ grounds for entitlement to relief—including factual allegations that when
assumed to be true raise a right to relief above the speculative level.” Lormand v. US Unwired, Inc.,
565 F.3d 228, 232 (5th Cir. 2009) (internal quotation marks removed).


As a threshold matter, the Court must first address Chase and Deutsche Bank’s assertion that the Saldivars lack standing to challenge the validity of the assignment of their mortgage to the Trust.

A. Under New York Trust Law, is an ultra vires act void or merely voidable? A third party generally lacks standing to challenge the validity of an assignment. Bank ofAmerican Nat’l Assoc. v. Bassman FBT, L.L.C., et al. 981 N.E.2d 1, 7 (Ill. App. Ct. 2012). A borrower may however raise a defense to an assignment, if that defense renders the assignment void.

The parties agree that under New York Trust Law the relevant statute
provides the following: “If the trust is expressed in the instrument
creating the estate of the trustee, every sale, conveyance or other act
of the trustee in contravention of the trust, except as authorized by
this article and by any other provision of law, is void.”
N.Y. Est. Powers & Trusts Law § 7-2.4.The Bassman court holds that despite the plain language of § 7-2.4, under various circumstances a trustee’s ultra vires acts are voidable and not void. Bassman, 981 N.E.2d. at 9. The Bassman court cites New York cases that hold that beneficiaries of a trust can ratify a trustee’s ultra vires acts. See Gregan v. Buchanan, et al, 37 N.Y.S. 83, 85 (N.Y. Sup. Ct. 1896); see also Hine v. Huntington, et al. 103 N.Y.S. 535, 540 (N.Y. App. Div. 1907); Birnbaum v. Birnbaum, et al., 503 N.Y.S.2d 451 (N.Y. App. Div. 1986). The Bassman court holds that the ability to ratify a trustee’s ultra vires act is equivalent to finding that a trustee’s ultra vires act is merely voidable and not void.

Under 28 U.S.C. § 1652, this Court has the duty to apply New York law in accordance with the controlling decision of the highest state court. Royal Bank of Canada v. Trentham Corp., 665 F.2d 515, 516 (5th Cir. 1981). While the Court finds no applicable New York Court of Appeals decision, a recent New York Supreme Court decision is factually similar to the case before the Court. See Wells Fargo Bank, N.A. v. Erobobo, et al., 2013 WL 1831799 (N.Y. Sup. Ct. April 29, 2013). In Erobobo, defendants argued that plaintiff (a REMIC trust) was not the owner of the note because plaintiff obtained the note and mortgage after the trust had closed in violation of the terms of the PSA governing the trust, rendering plaintiff’s acquisition of the note void. Id. at *2. The Erobobo court held that under § 7-2.4, any conveyance in contravention of the PSA is void; this meant that
acceptance of the note and mortgage by the trustee after the date the trust closed rendered the transfer
void. Id. at 8.

Based on the Erobobo decision and the plain language of N.Y. Est. Powers & Trusts Law
§ 7-2.4, the Court finds that under New York law, assignment of the Saldivars’ Note after the start up
day is void ab initio. As such, none of the Saldivars’ claims will be dismissed for lack of standing.
The Court expresses no view on the effect of any subsequent ratification, if any. It is sufficient that a
claim has been stated.

The Saldivars have pled facts sufficient to withstand dismissal on whether the transfer to the Trust was void ab initio. The Saldivars allege that assignment occurred in 2011—several years after the startup day. If this proves true, Chase may not be the owner of the Note.

 Does Tex. Local Gov’t Code § 192.007 require recordation of mortgage assignment? 

Texas Local Government Code section 192.007 provides:

“To release, transfer, assign, or take another action relating to an
instrument that is filed, registered, or recorded in the office of the
county clerk, a person must file, register, or record another instrument
relating to the action in the same manner as the original instrument as
required to be filed, registered or recorded.”

Here the security instrument was filed and recorded with Cameron County on August 31, 2004. ECF No. 21-4. The Saldivars cite to Miller v. Homecomings Financial, LLC, et al., which holds that a transfer or assignment of a recorded mortgage must also be recorded in the office of the county clerk. 881 F.Supp.2d 825, 830 (S.D. Tex. 2012).

In Richard v. CIT Group, the court held that even assuming a violation of 192.007 in assigning the deed-of-trust lien, the homeowner did not have standing to complain because she was
not a party to the assignment, nor was she injured by the assignment or a lack of recordation. 2012 WL 3030348, at *2. The parties to a land transaction are not obliged to record anything. Id. Notes are transferred by endorsement not by a deed. Id. The power to foreclose does not arise from the public record, but from holding the note. Id.

This Court has also found that under §192.007, the absence of recordation does not affect the validity of the assigned deed of trust between the homeowner and the lender. Hill v. U.S. Bank, Nat’l Assoc., et al. (In re Perry), 2013 WL 504859, at *3 (Bankr. S.D. Tex. Feb. 8, 2013).

In Perry the Court also cites In re Hamilton, where the Fifth Circuit held that a chapter 13 debtor, acting with trustee powers,3 seeking to avoid a prepetition, unrecorded transfer was charged

3 Here the Saldivars may act with trustee powers pursuant to 11 U.S.C. §522(h). with inquiry notice of the transfer. Id. at *3. If the Saldivars were merely bringing a state-law suit against Chase, Richard v. CIT Group would control. Because the Saldivars may act with trustee powers, the issue is whether the Estate, as a hypothetical bona fide purchaser for value, would have discovered the assignment following reasonable inquiry. That is a factual issue that must be tried.

Causes of Action

A. Objection to Proof of Claim

Chase and Deutsche Bank’s motion to dismiss the Saldivars’ objection to Chase’s proof of claim is granted, in part, and denied, in part. The Saldivars have asserted sufficient facts to support  the assertion that Chase’s claim is overstated. They assert that the proof of claim is overstated due to
forced-placed insurance. They allege that the premium on the force-placed insurance is inflated because Chase, or an affiliated insurance company, receives a portion of the premium as a kickback. The Saldivars cite to two articles containing the allegations, and these facts are sufficient to withstand dismissal.4

The Saldivars allege that their monthly payments were only $604.19, not $1,476.13 as stated in Chase’s Proof of Claim. They assert that the discrepancy is based on the fact that while they paid
property taxes in 2011, Chase still charged them for 2011 property taxes as reflected in the escrow
analysis attached to the proof of claim. The Saldivars’ Deed of Trust allows the lender to maintain an escrow account with funds for taxes and insurance. The Loan History attached to Chase’s Proof of Claim reflects that an escrow account was established pursuant to the Deed of Trust. The Saldivars do not have a claim against Chase for property taxes paid in 2011 as such taxes were properly escrowed.

4 The Court recognizes that these newspaper articles are inadmissible as hearsay. However reliance on the articles at the 12(b)(6) stage is acceptable because the hearsay is not being introduced to establish the truth of the Saldivars claim, but to show the reasonableness of their belief, and provide justification for their request for additional information. See N.L.R.B. v. PDK Investments, L.L.C., 433 Fed.Appx. 297, 302 (5th Cir. 2011).

5 The Saldivars additionally provide no factual basis for the assertion that Chase’s proof of claim includes inflated inspection and appraisal fees. These claims are dismissed for failure to state a claim under Rule 12(b)(6).

Texas Debt Collection Act (“TDCA”)
Chase and Deutsche Bank’s motion to dismiss the Saldivars’ TDCA claim is granted, in part,
and denied, in part.
The Saldivars claim that Chase and Deutsche Bank violated several provisions
of the TDCA, specifically the following sections of the Texas Finance Code:

1)  § 392.301(a)(8) was violated because in the Notice of Default, Chase and Deutsche Bank threatened to accelerate and foreclose on the Saldivars’ homestead. They assert that this was prohibited by law because the Notice of Default did not include the admonishment of the Saldivars “right to bring a court action to assert the non-existence of a default or any other absense of the borrower to acceleration and sale,” which was required by the Security Instrument. Additionally, the Saldivars assert that acceleration and foreclosure were prohibited because Chase and Deutsche Bank are not holders or owners of the Note or Security Instrument.

2) § 392.303(a)(2) was violated because Chase and Deutsche Bank attempted to collect attorney’s fees, double property taxes, and other fees and charges that were not authorized. 

3) § 392.304(a)(4) was violated because the Notice of default lists Deutsche Bank as the creditor, when it is not, in fact the creditor.

4)  § 392.304(a)(8) was violated because Chase and Deutsche Bank inflated the amount of the debt by including unauthorized fees and expenses; and misstated the character of the debt by misrepresenting that they were the owners or holders of the Note or Security Instrument. 

5 If the Saldivars and Chase both paid the 2011 property taxes, one of the parties should be reimbursed. However this double payment does not mean that the Saldivars have a claim against Chase for an inflated Proof of Claim.

5)    § 392.304(a)(13) was violated because since the Saldivars’ mortgage involved a home equity loan, any attorney’s fees could only be collected if included in a judicially approved judgment.  Chase and Deutsche Bank’s motion to dismiss is denied with respect to all of the Saldivars claims under the TDCA, except to the extent that their claims under § 392.303(a)(2) and § 392.304(a)(8) include claims for double property taxes and inflated inspection or appraisal fees, which the Court found supra, are not sufficiently pled.

Real Estate Settlement Procedures Act (“RESPA”)

Chase and Deutsche Bank’s motion to dismiss the Saldivars’ claims under RESPA is granted. The Saldivars allege that Chase and Deutsche Bank violated RESPA and its implementing regulations by (1) charging sums in excess of the formula stated in the regulation, in violation of 12 C.F.R. § 1024.17(c)(ii); and, (2) failing to use the appropriate method to analyze the Saldivars’escrow account, in violation of 12 C.F.R. § 1024.17(d). As discussed supra, the Saldivars assert that they directly paid property taxes in 2011 and that Chase’s escrow analysis, attached to its Proof of Claim, is incorrect because it includes property taxes for 2011. Because Chase maintained an escrow account pursuant to the Saldivars’ Deed of  Trust, the Saldivars do not have a claim against Chase for properly escrowed property taxes paid for 2011.


The Court will enter an order consistent with this Memorandum Opinion. \
SIGNED June 5, 2013.

Marvin Isgur