By Sydney Sullivan
Homeowners in Hawaii are still victims of the mortgage fraud that originated at the turn of the century. Hawaii led the CHARGE changing some of the foreclosure statutes that were relatively unjust toward homeowners and in conflict with due process issues.
Even with those changes the foreclosure process, fraud on the courts, fraudulently concealed parties, forged documents, and troubling securitization/rehypothecation process still plague state records and the courts. Hawaii State Senator Mike Gabbard championed a Resolution “Requesting the Director of Commerce and Consumer Affairs to convene a MORTGAGE foreclosure fraud task force to develop recommendations to improve mortgage fraud protections for consumers.” Interest by many gave an opportunity for testimony and gained a hearing last Monday. SRC 181.
Not surprising there were pros and cons for the idea of another foreclosure task force. Probably because of the makeup of the last one really didn’t represent homeowners. But some of the TESTIMONY (found here) was quite curious. For example, the Executive Director of the Department of Commerce and Consumer Affairs’ (Department) Office of Consumer Protection stated that:
“The number of foreclosure-related complaints submitted to the OCP has declined precipitously during the past few years. Since a high of 31 complaints in 2015, only one complaint has been submitted this year.”
Could that possibly be because most homeowners don’t know that they can file a complaint with the state DCCA regarding foreclosures and not many foreclosure defense attorneys volunteer that information as it might lessen their fees? It’s not like the DCCA advertises “if you think you were scammed by LIBOR, HAMP or your servicer please contact our office.”
Another reason may stem from the many folks that did file complaints in the past never heard from the department.
The Commissioner of Financial Institutions for the Department of Commerce and Consumer Affairs’ Division of Financial Institutions (DFI) “believes it may be unnecessary to implement another mortgage foreclosure fraud task force at this time, as mortgage fraud protections for consumers already exist in Hawaii Revised Statutes (HRS) chapter 454M and through DFI regulation” (emphasis added). Then provided a chart of foreclosure decline – rather a joke:
Foreclosures are pretty much dictated by the volume the courts can handle, and manipulated number of filings by the banks. However, it’s nice to see that after President Trump was elected those foreclosure filings dropped by 40 in 2017 and 77 in 2018. But 1500 foreclosures a year in little ol’ Hawaii is still a significant number of defrauded, now homeless people. Just because there may be 40 filings less – doesn’t mean the other 1500 aren’t fraught with fraud.
According to the attorney for Hawaii Financial Services Association, and also a foreclosure/collection attorney, the Honolulu Star-Advertiser doesn’t have its facts straight or the DCCA Commissioner’s stats are out of whack. The attorney testifies:
In Hawaii, accordingly to a March 13, 2019 Honolulu Star-Advertiser article titled “Hawaii Foreclosure Cases Fall For Fifth Year In Row”, foreclosure lawsuits peaked in 2013 at 3,430. The filings dropped year over year in 2014, 2015, 2016, 2017, and 2018. The filings in 2018 totaled 1,261. The article also noted that “Hawaii foreclosure data before 2013 is problematic to compare because of repeated changes made to state foreclosure law.” (emphasis added)
Given the benefit of doubt, the DCCA is talking about “foreclosures” in courts that may go on to appeal and the attorney for Hawaii Financial Services Association is discussing “filings” in the courts. But it really doesn’t matter because many of those who could afford to appeal are still in the appellate courts – AND many of the Defendant-Appellants are winning – it just takes 3-5 years to get a decision. The problem here is nobody has the stats for how many cases each judge is carrying and at what stage. How many have been remanded back to the Circuit Courts by the Appellate Courts? That might prove an essential piece of information for a Foreclosure Task Force to investigate.
What you see in these negative testimonies is a big case of false impression. The average person doesn’t understand the depth of the fraud the American Homeowner is encountering. Many of us have majored in foreclosure fraud detection and securitization/rehypothecation manipulation. Having worked closely with those that discovered robo-‐signing, foreclosure fraud, predatory servicing, and predatory securitization/rehypothecation and figuring out several years ago these were securities transactions, not traditional mortgages, we have a unique position and interest in these
Don’t take our word, opinions, or facts alone without researching, reading and fact-checking. An informed legislator, “borrower or property owner is the best scenario for success in this war against what I term “International Financial Terrorism,”” quoted from Nye LaValle’s 2011 After The Storm.
One of the hardest working homeowners, Deb, worked hard with Senator Gabbard (yes, our Tulsi’s Dad) to get a hearing on this Resolution. This wasn’t even a bill – just a resolution to look into forming some investigation – which, despite the naysayers, is desperately needed. Fraud still exists and our land recordation files are filled with forgeries and fraud that various federal government agencies mandated banks and servicers to get cleaned out. It never happened. Bank attorneys know there are Assignment forgeries and questionable documents, yet they are still knowingly using them today. Deb and Senator Gabbard got the hearing – But The Resolution was deferred.
Our DeadlyClear Editor, Virginia, was requested to provide testimony. It gives an overview of what has been uncovered in the foreclosure scheme since 2008.
“March 23, 2019
Thank you, Hawaii Legislators, for the opportunity to voice support for SCR181. In 2010/2011 Hawaii was leading the country in foreclosure reform. I’d like to believe that our state motto, “Ua Mau ke Ea o ka ‘Āina i ka Pono;” native Hawaiian translating as “The life of the land is perpetuated in righteousness,” had a lot to do with this.
As we move into the 2nd decade of securitization foreclosures, the Hawaii appellate courts are realizing that the securitization process, much like the documents used in foreclosures and those filed in our own Bureau of Conveyances, is clouding titles and any rights to foreclosure. Bank of America, N.A. v. Reyes-Toledo (Haw. Feb. 28, 2017) is a leading Hawaii case where the Hawaii Supreme Court held that in order for summary judgment to be granted in favor of a foreclosing mortgagee in a Hawaii judicial foreclosure action, the foreclosing mortgagee must prove that the plaintiff who initiated the action (which might be different than the current foreclosing mortgagee) had standing to foreclose at the time the foreclosure complaint was filed.
The issue facing legislators goes much deeper than the right to foreclose on a traditional mortgage. The underlying elephant in the room is whether these nouveau transactions were or are actually “traditional” mortgages as designed by our Hawaii statutes, or are they actually “securities transactions” with no disclosure to the homeowners as mandated by SEC Rules [Rule 10b-5]?
Research indicates that the properties and the borrower were “securitized” by the Fannie Mae computer software 1003 application process. It is a USPTO patented process that takes the application information and transfers it to the investment banks to put into REMIC trusts. This data is what is securitized, not the eye candy Note and Mortgage documents. However, there is no disclosure to the borrower that the application data was to be disclosed to Wall Street investment banks or slated for a scheme to treat properties and borrower data like stock certificates. This certainly was not the homeowner intended “traditional” mortgage process.
Making matters worse, behind the securitization curtain is another process called “rehypothecation” wherein banks among themselves distorted the legal principles of nemo dat and allowed pledging, repledging, hypothecating, or the rehypothecation of these property assets that they did not clearly own outright. These banks allowed others to “re-use” the assets as if it were a liquid commodity without regard for the title held in the name of the homeowner. This process was perpetuated by numerous patents that were essentially designed for foreclosure and stripping the land from the rightful owners under false [fraudulent] documents and testimony(s) before the courts.
Several university law professors have written about rehypothecation. IT’S 3:00 p.m., DO YOU KNOW WHERE YOUR COLLATERAL IS? Written by Christian A. Johnson, Assistant Professor of Law, Loyola University Chicago School of Law. B.A.; MPrA, Utah; J.D., Columbia, 1990. The opening statement is quite telling:
- “A borrower would probably be alarmed to learn that its lender had an unrestricted right to use and sell the collateral that the borrower had pledged to secure its borrowings. Borrowers typically believe that a lender should safeguard and protect collateral pledged to it, not use the collateral for its own gain. Yet in the derivatives market, it has become increasingly common for secured parties to insist upon such unrestricted use of pledged collateral.”
Knowing what we know today – how can we call these transactions “traditional” mortgages?
They are anything BUT traditional. We are looking square in the face of securities transactions which fall under Article 9 of Hawaii’s Uniform Commercial Code and a blend of Article 8. The lack of disclosure should alarm you because disclosure is paramount under the Securities & Exchange Commission Rules. Hawaii homeowners have unwittingly participated in a Wall Street scheme by issuing their property and personal data into UNREGULATED DERIVATIVES that now pose a debt into the trillion$ of dollars.
With this information, allow me to dispel the first myth – Hawaii homeowners did not borrow “more than they could afford.” Hawaii homeowners were sold debt based upon inflated appraisals and as the bubble credit began to freeze, homeowners were smeared. Nearly every pension fund lawsuit alleges that the appraisals were inflated. If it is true for investors – it is certainly a fact for homeowners. Even the lender sales pitches were patented. Pretender lenders encouraged homeowners to use their equity and then would find appraisers willing to jack-up the appraisals to meet the amount the bank had pre-qualified the borrower to use. The fact that USPTO patents [that underwrite the entire securitization to foreclosure process] are for new innovations supports the stance that these are NOT “traditional” mortgages. Why would patents be needed for standard traditional mortgages and foreclosures?
Moreover, there is a Fannie Mae patent that states the value of the property was secondary to the borrower’s willingness to pay. Presume you are told your property is worth $1 million as presented by appraisal – and the financial product LIBOR/ARM gives you a payment based on a 40-year amortization for the next 3 years. The payment is workable with your income. You are promised a refinance with low-interest rate if you make all your payments on time for the next 2-3 years. The economy collapses, your lender is bankrupt and no banks are refinancing because they know the appraisals were inflated. Did you borrow more than you could afford? Or were you sold into a scheme to drain your equity?
LIBOR is the other culprit Hawaii needs to address because there are numerous documents/transactions using LIBOR to factor the alleged amount owed in the foreclosure process and filed in the BOC. LIBOR, much like HAMP, was another scheme created to enhance the banks’ position. While HAMP foamed the runway for the banks, LIBOR was an elusive means of financial manipulation. LIBOR, the benchmark underpinning more than $350 trillion of financial products, will be phased out by the end of 2021, as U.K. regulators and banks look to replace the scandal-tarred indicator with a more reliable system. How will this affect existing Hawaii land-related documents containing the LIBOR rate scheme?
Finally, given the information provided herein, I respectfully ask that the lower foreclosure court judges be re-examined. Most are average attorneys that have no added education in securities law other than they may have highly invested stock portfolios. In one case, I have read the transcript where the Circuit Court judge refused to have securitization discussed in his courtroom. He forbid the homeowner to discuss it, although he acknowledged that the homeowner knew more than he did about the subject. Looking at judicial financial disclosure statements also needs to be a priority of the legislature when it comes to due process and appearances of impropriety in the selection of foreclosure judges.
Investments in certain mutual funds, for example, PIMCO, have over the years been highly invested in Mortgage Backed Securities (MBS). Owning “preferred” shares, unlike common stock, is like betting against the homeowner. How do you make life-changing decisions when it could ultimately affect your own retirement and stock portfolio? ITM Trading’s Lynette Zang has some predictable and prepared information:
I believe our legislature is on the right path, but I also believe our time is limited. The rising national debt is anything but sustainable. Many homeowners sit in limbo where they may have won their appeal but the banks have failed to withdraw the fraudulent documents from the BOC and reinstate the borrower on his Deed. Homeowners need to be able to submit a simplistic form and certified court decisions in order to clean up their titles. Another economic crash or financial reset will make land matters all the more complicated. The state needs to clean up the fraudulent and outdated land/title documents that linger, many of which from dead banks.
If there are any questions or documents needed to support the testimony herein, please contact me for more information. Again, thank you for the opportunity to provide testimony.
“Our courts should not be collection agencies for crooks.” — John Waihee, Governor of Hawaii, 1986-1994.
GENERAL NOTICE: I am a foreclosure defense paralegal. I am not an attorney. Nothing in this letter of testimony should be construed as legal advice. All research available upon request.”
We still have an uphill battle in Hawaii, like much of the United States. The debt from these and other UNREGULATED DERIVATIVE transactions is in the double, if not triple, digit TRILLION$. Congress is too busy pursuing personal agendas and good local legislators like Senator Mike Gabbard are hard to find when it comes to helping homeowners. Rest assured, American Homeowners are Warriors, “We Will Continue to Fight for Truth and What is Right.”
Mahalo for your interest, consideration, and support.