Tuesday, December 7, 2010

Burden of proof in nonjudicial states, Part II: Possible solution for nonjudicial states

In Virginia and other nonjudicial states, most documents filed in land records (such as a deed) are somewhat self-authenticating in that they constitute prima facie evidence of the truth of the matters stated therein.  Pretender lenders use it to their advantage all the time.

Specifically, in Virginia, for instance, foreclosures are commenced by filing a Deed of Appointment (of substitute trustees) – a document in which a secured creditor appoints a substitute trustee in place of the original trustee to conduct a foreclosure.  The reason such substitution is possible in the first place is because Virginia is a "title theory" state: when obtaining a loan, a homeowner/borrower takes title to the property and immediately gives it to a neutral party – the trustee, to be held in trust for both the bank and the borrower (who in the meantime holds "equitable" title – legal fiction), to ensure that either: (1) the homeowner gets full title upon satisfaction of the mortgage or (2) the bank gets title in case of default (through foreclosure).  The trustee is thus supposedly a neutral party resolving any disputes between the lender and the borrower out-of-court. I say "supposedly" neutral because we all know where foreclosure trustees' business comes from.

So, pretender-lenders will often file a Deed of Appointment reciting that "First Fraud Bank is the owner and holder of the Note secured by certain deed of trust dated xx/xx/xxxx and does here by appoint Foreclosure Mill as Substitute Trustee."  Then, when one examines the chain of title after the property is sold and conveyed to First Fraud by the foreclosure trustee, the bank's name does appear somewhere in the chain of title: namely, in the self-serving Deed of Appointment.  In a few cases, such a Deed and its self-serving proclamations were refuted by the homeowner by showing that the Deed was executed by a robo-signer, etc. Other times, the bank could not simply start a foreclosure by substituting a trustee because the homeowner or someone else had recorded other documents with respect to the property, thus creating a cloud on the title. See my post below regarding the notorious "Administrative Process."

As a result of such cases, a new strategy has emerged.  Let's say you are faced with a nonjudicial foreclosure by some entity you never heard of, such as a securitization trust XYZ, etc.  If you file a complaint in state court asking the judge to enjoin (stop) the foreclosure because the entity is a stranger to your loan, you are likely to quickly lose because the entity will point to its own recorded Deed of Appointment as the prima facie evidence of their right to foreclose.  Unless you've already done some discovery (via public sources or otherwise), you will likely have nothing to rebut their self-serving statements in the Deed of Appointment except your own statements of disagreement.  You will want them to prove their self-serving statements, but the judge will likely tell you that your rebuttal statements are just statements, and you can't use them to force the other side to prove their case.  I know it seems unfair, but the judge may also explain that, while your statements are just statements, their statements are "recordings" entitled to prima facie (i.e., until rebutted) validity.

So what you do is turn your statements into "recordings" as well.  Before you file a complaint, you record those same statements that you would put in your complaint (as long as they are truthful) in a deed of appointment.  Just like they review their paperwork, take the position that their Bank as Trustee should be able to collect on the note and is therefore the noteholder, and then recite their baseless conclusions in their recorded document, you can take your evidence, make appropriate conclusions (e.g., that some now-defunct entity still holds the note; that such-and-such deed is void because it's executed by a known robo-signer, etc.), and then record such statements in the land records after their DOA.  Depending on the merits of your case, you may decide to even be so aggressive as to remove their previously-appointed substitute trustee.  Caution: this often will not be doable without exposing oneself to charges of fraud. -- See my prior post on "administrative process."

What will then happen is that there will be conflicting records of equal evidentiary weight with respect to the property.  Since it is the bank that is seeking to change the status quo (force a transfer of the property), they will likely bring a suit against you to enjoin (stop) you from recording documents.  That's when you just sit back, poke holes in their case, and force them to plead and prove their case to the full extent required by the rules of evidence.

1 comment:

  1. Great JOB!!!!

    in fact they would have to file for an action to quiet title themselves.

    their double edge sword!!!

    Greetings JLSemidey