Destroying, Hiding or Fabricating Evidence: Doctrines Regarding Spoliation of Evidence

by Neil Garfield

The latest issue of the Florida Bar journal contains several interesting articles. One of them is entitled “Spoliation of Evidence and Non-party witnesses.” The author is Gary M Glassman, who is the attorney for Daytona Beach.

The major points of the article that I think are relevant to Foreclosure Defense litigation are that (A) spoliation has a very broad meaning and (B) the refusal to produce documents that are relevant to the case at Bar raises an inference in favor of the homeowner, and might even give rise to a cause of action for damages.
Foreclosure lawyers have long relied on the fact that they could stonewall request for information and then use fabricated documentation containing false information with impunity. But a proper document request during an open discovery period can itself be the subject of an affirmative defense or even a claim for damage to the homeowner’s ability to defend.

This enhances the relevance of having previously sent a qualified written request and a debt validation letter, together with a complaint to the CFPB and the state attorney general.

In judicial states, I think that it is possible and even probable that the court would sustain an affirmative defense consisting of both fabrication and spoliation. Combined with an action for damages under the FDCPA (potentially as a counterclaim) the homeowner could claim the inference that the missing documents would show that the exhibits to the complaint are false and fabricated. There is some pretty clear law in both Florida and California supporting this proposition.

In non-judicial states where the homeowner must initiate judicial action, one of the claim should be spoliation, along with fabrication.

The other point is the duty to preserve evidence. It is clear that a party that is used may not destroy or hide evidence and must produce such evidence when requested to do so in formal discovery.
One of the tactics employed by the banks is to hide information about the identity and last known address of relevant third parties like the “employees” or “independent contractors” who supposedly executed the documents upon which the entire foreclosure case rests.

Third parties have no absolute duty to maintain documents in their possession unless they know that the documents in their possession are relevant to pending legal claims and defenses. So the answer is that you want to give them notice and the best way to give them notice is with a subpoena duces tecum. This could include such companies as Black Knight and CoreLogic — not just individuals.

Asking for such information and not getting an answer is evidence of spoliation. Finding the “signor” with a private investigator is often very productive. In many cases, they deny ever signing anything. And they’re probably telling the truth.

The failure to provide such information is part of the doctrines utilized in claims o spoliation and the inability of the responding party to provide a satisfactory explanation for failing to produce the records raises, in and of itself, an inference that those records would show that the discovery requests establish a negative inference as to authenticity and validity of those documents — but, in my opinion, only if the discovery request is accompanied by requests for admissions that carefully track the request to produce which carefully tracks the interrogatories.

The bottom line is that spoliation is a recognized foundation for asserting that the opposing party has either acted or refused to act in a way that interferes with the ability of the homeowner to prove affirmative defenses or claims which resulted in substantial prejudice to the homeowner. This has not been previously applied to Foreclosure litigation. But I can think of no other area of litigation in which fabrication and spoliation are more relevant.

PRACTICE HINT: There is a significant difference — and often overlooked —between the “entity” named as Plaintiff (or beneficiary in nonjudicial states) and the entity named or claimed to be a “servicer.”
In the context of this article, one should not assume that a mere request to produce is sufficient.

The request to produce only has legal effect against, for example, U.S. Bank, N.A. if it is named as Plaintiff trustee in a judicial foreclosure or beneficiary trustee in a nonjudicial case. First, the request to U.S. Bank should be directed solely at records kept by U.S. Bank in its role of administering the affairs of a trust account in which there is a loan account receivable due from the homeowner. Second, the “servicer” should receive a subpoena duces tecum asking for the same records. All too often the “records” are “produced” by the “servicer” which is a response from a third party and not the claimant as plaintiff or beneficiary.

Who Owns Your Mortgage Note?

Have you ever asked who owns your mortgage note? A better question to ask is, “If I paid off my mortgage loan tomorrow, would I get clear and equitable title to my real property?” If your mortgage loan contract was converted into a mortgage backed security and sold to an investment trust on Wall Street you might not!

If you are thinking of applying for a loan modification, or refinancing through the Home Affordable Refinance Program (HARP), Home Affordable Modification Program (HAMP), or other program(s) under the Making Home Affordable (MHA) initiative there are a few things to consider.

First, remember that the entity who claims to own your mortgage loan is not automatically the same entity that may be servicing your mortgage loan. A loan servicer is a debt collections company that sends you mortgage statements, takes your payments each month, and if you have an escrow account, pays your homeowner’s insurance and property tax bills. But who really owns your mortgage loan?

If you want to find out here are a few things you can do:

• Ask the servicer. Your loan servicer is legally obligated to tell you the name, address, and telephone number of the owner of your loan as shown in their records. It’s a good idea to ask them in writing officially with a “Qualified Written Request” via certified mail while keeping a log of your communications. The name of your servicer should be on your mortgage statement, but you can also use the MERS link below.
• Original lender. Your loan may have never been sold, and still kept as a “portfolio loan” with the original lender. That’s the way loans used to be done!
• Fannie Mae. In reality, many loans are sold to FNMA aka “Fannie Mae”. See Fannie Mae loan lookup tool.
• Freddie Mac. Similar story with Federal Home Loan Mortgage Corporation (FHLMC) aka “Freddie Mac”. See Freddie Mac loan lookup tool.
• Mortgage Electronic Registration Systems, Inc. (MERS) is a big online registry designed to replace the costly process of publicly recording mortgage ownership at the local government level with a private electronic version that allows the swapping of mortgages with no friction at all. MERS tracks both the servicing rights and ownership of mortgage loans in the United States, although the accuracy has been called into question. See MERS ServiceID lookup tool. You can also call them at 888-679-6377 FREE.
• Search the Securities and Exchange Commission (SEC) for the alleged trust that claims they are the owner of your mortgage loan: https://fraudstoppers.org/how-to-search-the-sec-for-a-securitized-trust
• Register for a Free Mortgage Fraud Analysis and Securitization Search. Complete our Mortgage Fraud Analysis form and we will conduct a free securitization check to see if your mortgage loan contract was converted into a mortgage backed security and who really owns your note. If your loan was securitized than you may have legal standing to sue your lender, or current loan servicer, for mortgage fraud and quiet title. Find out more by completing our Mortgage Fraud Analysis form or call us at 773-877-3655 and we will help you get the facts and evidence you need to get the legal remedy you deserve.

Cases like the Glaski v. Bank of America and Jesinoski v. Countrywide Home Loans may have provided hope for homeowners who were victims of mortgage and foreclosure fraud. But they did not strike at the heart of the real problem behind the securitization of millions of mortgage loans.

The Glaski decision states that if some entity wants to collect on a debt they must first legally own that debt. Furthermore, if that entity is claiming ownership by way of an Assignment, it must prove that Assignment is legally valid.

The Jesinoski case addressed a borrower’s right to rescind, or cancel, their mortgage loan contract under the Truth in Lending Act (TILA) by only providing written notice to the lender, without filing suit. A loan is rescinded at the time the rescission letter is mailed. If the lender wants to refute or fight the rescission they must file an action to do so, and they have limited time to do so.

If your mortgage was securitized (the practice of pooling mortgages and selling their related cash flows to third party investors as securities) then it was part of a table funded transaction. In a table funded transaction the borrower named on the note is NOT in debt to the lender (“Pretender Lender”) because they signed the note in the capacity of an Accommodation Party, or co-signer for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument!

The broker, or originator, of the loan is pretending to loan money to the alleged “Borrower“, but in reality they trick the alleged “Borrower” into co-signing on a note that is pledged as collateral on a warehouse line of credit with the funding bank.

It is illegal for banks to loan credit, they can only loan money!

But if the Pretender Lender is not the entity putting up the funds, then there is no underlining indebtedness between the alleged “Borrower” and the originator who is named on the note. And if there is no underlining indebtedness between the parties named on the note, then the mortgage (or deed of trust) vaporizes into nothingness, and is legally unenforceable as a matter of law.

If your mortgage loan contract was part of a table funded transaction and converted into a mortgage backed security that was sold to an investment vehicle, or trust, on Wall Street, then you may have legal standing to rescind your mortgage loan contract, and sue your “Pretender Lender” for Special Damages equal to triple the original amount of your note, plus clear and equitable title to your home!

Fraud Stoppers is part of a National Private Members Association that provides back office litigation support to law firms, foreclosure defense advocacy groups, and pro se litigants nationwide. Our Private Members Association can help you sue your lender for mortgage fraud, with or without an attorney.

Then after our free mortgage fraud analysis is done, we can scheduled a free potential cause of action consultation to discuss your loan and lawsuit in detail and help you get started filing your state and federal lawsuit for the remedy that the law entitles you to, and that you deserve!

You can save 60% to 70% in legal fees when you get your lawsuit started yourself, Pro Se, (without an attorney), and then bring in a local attorney to help you at trial, where you need them the most! This way you can get the best of both worlds: Save money in legal fees, and get the professional help you need at the same time!

FRAUD STOPPERS Private Members Association (PMA) has a PROVEN WAY to help you save time and money, and increase your odds of success, suing the banks for mortgage and foreclosure fraud.

Our primary focus is helping you get clear and marketable title to your property by arguing that the actions of the banks have made the security provisions of the mortgage/deed of trust unenforceable as a matter of law.