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NOTE – This is a fact checking analysis about an article written by a Sarasota Herald Tribune writer and his sources. Because of the lengthiness of the 11 page news article and the fact checking involved, this post will be broken up into several postings submitted over several days. I decided to write this piece because I see attorneys and others reposting the article blindly without knowing the real facts associated with the article and its target – a Nonprofit called keeping Kids in their Home Foundation Corp.
I will start this post with a question. Is it wrong for you as a homeowner to do everything you can possibly do to keep your children and family from losing their home? Ok maybe that’s a bit of an obvious question. Here’s one a little bit more complicated. Is it wrong for you as a homeowner to use the law best as possible to your advantage to keep you and your children and family from losing their home? I ask this question because at the heart of this issue is a nonprofit stepping in to help families stay in their homes and keep the dream of homeownership alive versus kicking you, your children and your dog out into the street. In a recent article from the Sarasota Herald Tribune titled “Nonprofit delaying defaults on clients’ homes through layered scheme”, writer Josh Salman submits the nonprofit is engaged in scheme, fraud and illegal activity. Is what he has written factually true or has he written out of context with a spin that may open himself, the Tribune and his sources to a potential lawsuit for tortious interference and defamatory statements? The article begins stating the Nonprofit – Keeping Kids In Their Home Foundation Corp. -
is using its clients’ homes for a sweeping real estate scheme – delaying defaults through recurrent bankruptcy filings while renting the houses out.
Google defines “scheme” as: makes plans, esp. in a devious way or with intent to do something illegal or wrong. I chose to use Google’s definition because I found it to be the most comparative to the way the article tried to use the word. So here are some facts not mentioned in the article followed by some relevant questions to bring the statements into the right context.
1. Delaying Defaults – The writer of the article assumes the banks claim that a default has occurred is true and correct. A default occurs when a payment has not been received NOT when a payment has not been made. Let me say this another way. Does it matter if you the homeowner, writes the check yourself or can it be your brother or anyone else for that matter? Of course it can be anyone else because it doesn’t matter who writes the check it only matters that the payment was received thus, a default takes place not when a payment has not been made but rather, when a payment has not been received. In the secondary market, to ensure investors do not take a loss, “servicers” are required to advance payments if a borrower fails to make a payment in accordance with the Pooling and Servicing Agreement (“PSA”) of a securitized loan. Every Pooling and Servicing Agreement is somewhat the same so for example purposes I’ve linked a random PSA to this example. These securitization documents are not only complex, they are confusing, conflicting and in most cases contradicting requiring several reads and two Tylenol. For example, perusing a random PSA online you can see Article IV which relates to the distribution and advances by the servicer(s) of mortgage loans identifies the requirement for the servicer to advance P&I payments if the borrower fails to make a payment. Section 4.01) reads:
Section 4.01 Advances. (a) The amount of P&I Advances to be made by each Servicer for any Remittance Date shall equal, subject to Section 4.01(c), the sum of (i) the aggregate amount of Scheduled Payments (with each interest portion thereof net of the related Servicing Fee), due during the Due Period immediately preceding such Remittance Date in respect of the Mortgage Loans serviced by such Servicer, which Scheduled Payments were not received as of the close of business on the related Determination Date…
The servicer is also required to maintain separate accounts and accounting systems regarding borrower payments which are to be separate and apart from the payments actually made to the creditor which would include both the borrower and the third-party servicer payments. Legal mumbo jumbo so let’s say this another way, the accounting provided to the courts in foreclosure cases showing a so-called default on the loan is a misrepresentation because it does not reflect the books and records of the actual creditor, it reflects a specific segregated accounting specifically maintained by the servicer, a party to whom the borrower has a zero contractual relationship or obligation to. If you read these PSA’s you see all kinds of issues however the biggest issue is the right for the servicer to bring a foreclosure action to recover the money it put out on behalf of the borrower to maintain the P&I payments, insurance and taxes. According to the securitization documents, once the foreclosed property is liquidated, the servicer gets paid back first for the money it put out. In essence, the foreclosure action is not a true foreclosure for the default as alleged, rather, it is an action of equitable subrogation by a party not in privity of contract with the borrower to receive payment of unsecured funds using the borrowers property as collateral based upon securitization contract agreements the so-called borrower is not in privity to. Boy if that’s not the pot calling the kettle black!
Thus, I cannot agree with the Tribune writers position that Keeping Kids in their Homes are a foreclosure rescue using clients homes for a sweeping real estate scheme translated as delaying defaults. I see no factual support in the article which validates this conclusion nor have I yet to see accurate accounting submitted to the courts in conjunction with the real creditor accounting. What I do see is the common misconception the banks are right and homeowners are deadbeats who need to pay. I agree, as do most homeowners and attorneys, a debt is owed but the question becomes who is the debt owed to? Isn’t it fair to say at a bare minimum the homeowner should at least know who the true and real creditor is to ensure it is properly protected from some other random entity making a claim a debt is owed to them? I mean let’s not pretend we haven’t seen multiple so-called creditors trying to foreclose right? Isn’t that the very essence behind why the Florida Supreme Court amended the Florida Rules of Civil Procedure – to ensure the homeowner was protected from another party claiming a debt is owed? So let’s now take into context the nonprofit’s so-called “recurrent bankruptcy filings” who the Tribune’s writer suggest is the tool being used to facilitate this alleged scheme.
According to Bankruptcy records, on November 2, 2012, a bankruptcy case was filed under the name of Aleksandr Filipskiy case no. 8:12-bk-16832. On its face it appears like it was Aleksandr Filipskiy that filed a personal bankruptcy however, the case was improperly filed as Aleksandr Filipskiy who in fact is a Trustee for the Abundant Life Trust and is the CEO of Keeping Kids in Their Home Foundation Corp. Abundant Life Trust is the real Debtor who owns all of the subject properties that are disclosed in the Bankruptcy Schedules. The inaccurate depiction which was error, lead to the amendment of the party name from just Aleksandr Filipskiy to Abundant Life Trust by its Trustee Aleksandr Filipskiy. This did not suffice and as a result and under the instruction of the Bankruptcy Judge, Catherine Peek McEwen, the case was dismissed and the Debtor, Abundant Life Trust was instructed to re-file the case naming Abundant Life Trust as the Debtor. This lead to the second bankruptcy case filing on January 15, 2013 under case no. 8:13-bk-00433 where the Debtor was named as Keeping Kids in their Home Foundation Corp as Trustee for Abundant Life Trust. Here again, the Judge instructed not to name the Trustee in the name of the Debtor and just name Abundant Life Trust as the Debtor only. As a result, the third bankruptcy filing under case no. 8:13-bk-03221 ensued which is still active and being litigated. Thus, the Tribune’s position that to facilitate this allege scheme the nonprofit filed recurrent bankruptcy filings is not only misplaced but completely out of context as it was the same case and same assets involved. It was Judge McEwen who ordered and caused the first two cases closed and the third case opened. This very same argument was raised by a Creditor known as BLB Trading who was shut down by Judge McEwen for the same exact reason I’ve just described and the minutes of that hearing make clear. So what due diligence and evidence did the Tribune, its writer and sources rely upon and go off of to come to the conclusion “recurrent bankruptcy filings” were the tool being used to facilitate this alleged scheme?
Now let’s take a look at the Creditor BLB Trading, LLC (“BLB”) who first raised this issue to Judge McEwen in their Motion to Dismiss Case or Relief from Stay in addition to their Motion for Perspective Relief from Stay from Future Filings filed by their attorney Michael Gulisano at Doc. No. 25 of the bankruptcy case. According to BLB’s motion, BLB’s standing as the alleged creditor, stems from a long line of assignments which ultimately transfered the subject loan to BLB. According to their motion, their standing is dependent upon these assignments. BLB’s motion was met with an Response in Opposition to their Motion at Doc No. 90 which argued the assignment chain was fatally flawed and BLB has yet to produce an endorsed note. In specific, the Opposition states the assignments run from MERS as Mortgagee and nominee for Freemont Investment, the named lender, to GMAC Mortgage Corporation assigning both the mortgage and note; from GMAC Mortgage to Act Properties LLC, assigning only the right, title and interest in the Mortgage and NOT the Note; from Act Properties to PA Portfolio Investors, LLC assigning the mortgage together with the note; and from PA Portfolio Investors, LLC to BLB Trading, LLC. As you can see from that chain, Act Properties Assignment did not transfer the note to PA Portfolio thus, PA Portfolio’s assignment to BLB is fatally flawed where it states it also is transferring the note.
Now certainly if the note was transferred it does not necessarily have to be reflected in the assignment of mortgage nor was an assignment of the mortgage even required as the maxim is the mortgage follows the note. This is especially the case where a note is properly endorsed. However BLB never attached an endorsed copy of the note. Knowing the opposition to their motion adequately identified the flaw in the chain of assignments, it appears BLB took the step of filing a Notice of Filing an Endorsed Mortgage Note. See Doc No. 95. BLB then filed an Expedited Motion for Reconsideration (Doc. No. 96). Amazingly, the endorsed note shows a specific endorsement to BLB Trading directly from Freemont Investment Vice President Michael Koch which now completely contradicted the chain of assignments. Like a boxing match where the punches kept being thrown and the excitement just continues, the Debtor filed an Opposition to BLB’s Expedited Motion for Reconsideration and Requested Sanctions Against BLB for Fraud Upon the Court (Doc No. 120) and a Notice of Filing of the Affidavit of Michael Koch (Doc. No. 163) who states he never endorsed the note to BLB and that it was Freemont’s practice to always endorse the note in blank. A further investigation shows the endorsement is on a page all by itself even though there was enough room on the last page of the note for the endorsement. Michael Koch left Freemont in April of 2008 when Freemont went out of business and BLB did not come into legal existence until July 1, 2009 thus, it was impossible for Michael Koch of Freemont to have endorsed the note specifically to BLB who caused the Debtor to engage in extensive motion practice to prove this potential fraud upon the Court. On July 18, 2013, the attorney for BLB, Michael Gulisano was substituted out with new counsel.
The Tribune made no commentary on these facts. The article referenced BLB and their attorney Michael Gulisano stating that the bankruptcy was filed merely to prevent foreclosure. Looking at the opposition motions to this claim, it is more than clear at least in the case of BLB, the bankruptcy was not filed to prevent foreclosure, it appears to have been filed to settle the debt with the ACTUAL TRUE CREDITOR, in a court where only the true creditor who is owed a debt can appear, something BLB appears not to be and is more a fabrication of. Every attorney has an obligation to file pleadings in good faith. The failure to do this can result in sanctions and other disciplinary action. The initial attorney who filed the first bankruptcy for Keeping Kids was ordered by the court to pay back all of the money he received for incorrectly filing the bankruptcy. What sanction awaits a party claiming to be a creditor using fabricated and misleading documents together with the attorney who files them has yet to be seen in this case. Many believe this is nothing new for the banks, a number of which have settled and settled and continue to settle cases for false, misleading and fabricated documents in the billions. Even now facing two new law suits from the federal government for such fraud. Can anyone still honestly say with a straight face its the homeowners fault or a nonprofit like Keeping Kids who has put themselves on the front line of scrutiny for helping them?
TO BE CONTINUED WITH PART 2 – Discussing the Tribune’s Sources and their Commentary – was it accurate or deliberately misleading? …