How to Beat Zombie Foreclosures


Zombie foreclosures are like any other foreclosures: Challenge it in timely fashion and you are likely to be successful

by Neil Garfield

The problem with zombie foreclosures is not what you think, at least not entirely. You probably sum up the problem as the banks need to foreclose so they can’t least write off the debt. They then abandon the properties if the economic analysis shows that there is a net loss if they take over maintenance, taxes etc. This view is not entirely erroneous but it misses both the real reason for what is happening and an opportunity for a task force — or any challenger (including an individual homeowner) to do something about it.

My background in assisting state government to push back against the foreclosure tidal wave dates back to when I was special counsel to the legislature in Arizona in 2008. Feel free to ask for opposing views on what I am about to say. Other than some PR source, nobody will deny it, and certainly not any lawyer or investment banker who knows what occurred.

If you want to stop zombie foreclosures you must challenge the right to foreclose and there are plenty of grounds and yes, you have legal standing. You can accomplish this by direct challenges in court and by rule changes affecting access to the courts by lawyers and “interested” parties who are hiding behind the doctrine of litigation immunity.

Current forms, rules and procedures are based on decisions made long before “securitization” ever occurred. You should also know that no homeowner debt was ever securitized because no homeowner debt was ever sold. You don’t need to prove that. You just need to know it and then mount a challenge based upon that knowledge.

The first thing you should know is that foreclosure is not about restitution for an unpaid debt. It is not about any debt. Foreclosure today, except in rare instances, is all about the following:

1. Reinforcing the belief that the debt exists as a loan account receivable on the books of any company.

2. Reinforcing the belief that the debt was securitized or is somehow owned by whoever has been designated as Plaintiff in the foreclosure action.

3. Reinforcing the belief that the action to foreclose is undertaken because there is an unpaid debt.

4. Reinforcing the belief that the action to foreclose will result in a lender or successor lender getting paid.

5. Increasing revenue from a falsely labeled securitization scheme and distributing it to all players involved in administration, collection and enforcement activities against homeowners.

I have both won and directed winning strategies against foreclosures in many states including New York, New Jersey, Massachusetts, Florida, California, Nevada, Arizona, and New Mexico. In most cases, the winning homeowner still does not understand how they won.

The remedy is a sustained effort by the task force that includes Public Relations, legal challenges and suggested rule changes. Any such serious effort will be seen by the investment banks as a threat to the securitization infrastructure because it is a threat. They will come to the negotiating table with plans to eliminate or reduce zombie foreclosures.

Without going into further explanation, the reason this strategy has worked and will work is that investment banks were never interested in lending and were not lenders in transactions with homeowners — and neither was the group of investors or originators that participated in initiating transactions with homeowners.

The investment banks were strictly interested in the creation and sale of securities. The securities that were sold did not securitize any debt. The securities (certificates and derivatives thereof) securitized bets on the performance of reported transactions, regardless of whether the base transactions existed or not. As we saw in dozens of settlements totaling hundreds of billions of dollars (so far), all documents purporting to transfer rights to the transaction with the homeowner were fabricated, forged, false and robosigned.

A challenge to the ability of anyone to foreclose (except the rare original lender who still maintains a loan account receivable) will have a 65% chance of success if properly litigated. A challenge to the procedures used in foreclosures will reveal that the attorneys who file such actions do not represent the named Plaintiff nor any party known to the court except a company that claims to be a “Servicer” but who performs no functions related to receipts and disbursement of money.

Once you reach a settlement, you will be required to (a) sign a confidentiality agreement that is probably unenforceable and (b) agree to expunge all records relating to the challenge. The investment bank will then move on to other geographical areas in which there is no serious challenge to what they are doing.


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