Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Ohio case might add to lender problems

Foreclosures blocked; ownership documents not produced in court

By Thomas J. Sheeran Associated Press

CLEVELAND: A mortgage lender cannot proceed with plans to foreclose on 14 homes because it does not have proof that it owns the properties, a federal judge said in a ruling that could pose a new complication for the nation's troubled mortgage industry.

The Oct. 31 ruling from U.S. District Court Judge Christopher A. Boyko in Cleveland could jeopardize efforts by lenders to foreclose. It also could mean that homeowners might get more time to resolve their debts while lenders handle the intricacies of getting custody of documents for mortgages that are rolled into securities and sold to investors.

Boyko warned Deutsche Bank National Trust Co. on Oct. 10 that he would dismiss the cases if the mortgage documents weren't produced. The documents filed with the judge by the bank only indicated plans to convey to the bank the rights to home titles, the judge said.

The foreclosure actions were dismissed without prejudice, meaning they may be refiled.

The pooling of home loans into securities has been a long-standing practice. At the end of 2006, $6.5 trillion of securitized mortgage debt was outstanding.

When a loan goes into a securitization, the note is not sent to the trust; instead, it shows up as a data transfer. The actual
note typically is kept at a separate document repository company.

Deutsche Bank spokesman John Gallagher didn't comment on the ruling, but in an e-mail he said the bank isn't responsible for foreclosures and doesn't sell foreclosed property.

The bank's attorney, Benjamin Hoen in Cleveland, didn't return a message seeking comment.

Moody's Economy.com projects that more than 2 million mortgages worth about $450 billion will default. Even after homes are sold at foreclosure auctions, investors in those mortgages still are likely to be hit with nearly $150 billion in losses, according to the forecast.

Ohio is among the states hardest hit by the nationwide spike in foreclosures, and Cuyahoga County is the state's foreclosure leader.

Ohio's 3.5 percent foreclosure rate in the first quarter of 2007 was almost triple the national figure, according to the Mortgage Bankers Association.

Laura McNally, a Case Western Reserve University professor who has studied predatory-lending practices, said attorneys representing borrowers around the country are excited by the ruling.

The case was decided before the defendants hired attorneys, and there already has been talk by some to get involved and help the borrowers, she said.

A law school colleague on the Case Western campus in Cleveland, Jonathan Entin, said the ruling reflects the increasingly complex and globalized nature of the mortgage business.

Entin said the case sends the message that lenders must be better prepared when they go to court to show they have an interest in a property on which they want to foreclose. ''It does not mean borrowers are necessarily going to have an out, and I don't think Judge Boyko wrote his order in a way that can fairly be read that way,'' he said.

Larry Platt, who specializes in mortgage lending issues at the K&L Gates law firm in New York, downplayed the importance of the ruling. ''I think it's scaring more lenders than it needs to. It is focused on a narrow procedural issue,'' Platt said.

''The case seems to suggest there's only one way to prove it (holding a mortgage), and, I think, historically there's been alternative ways.''

The case moved in court quickly. It was filed Aug. 21, and one day later the judge notified the bank that it hadn't complied with the requirement to show it held the mortgages in question. The bank issued summonses to defendants on Oct. 29 requiring them to respond to the action, and the judge dismissed the case two days later.

The first-named defendants in the case, Donna and Sean Jenkins, took out an $87,300, 30-year mortgage for a house in Cleveland's inner-city Glenville neighborhood on Nov. 21, 2005, at a fixed rate of 9.05 percent.

The lender was Argent Mortgage Co., which placed the mortgage in a securities pool on Feb. 1, 2006.

The couple could not be reached for comment. They have an unlisted phone at the suburban South Euclid address listed on the summons issued to them.

 Full Story: http://www.ohio.com/news/top_stories/11421351.html?page=1&c=y 

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Sweet Spot
We can only hope the fun will begin when the truth comes out about which, "Entities" used those notes on their balance sheets, "KNOWING" that they truly did NOT have a vested interest in them.


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BAD BET > ARGENT
 
 
Big investment firms expected to have a good year
Baltimore Sun - Nov 13, 2007
... who helps oversee $950 million Argent Capital Management LLC, of St. Louis, which holds Morgan Stanley and Merrill shares.
 
 
A $45 Billion Writedown Won't Stop Wall Street Profit (Update1)
Bloomberg - Nov 12, 2007
... who helps oversee $950 million at St. Louis-based Argent Capital Management LLC, which holds Morgan Stanley and Merrill shares.
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Argent 60 days late

Fitch Affirms $1.33B & Downgrades $255.6MM from 2 Ameriquest Subprime (2º)  

Transactions 19/10/2007 22:03:00 Business Wire SE0000103699 --$74.4 million class M-2 affirmed at AA+ (BL:43.18, LCR:2.22); --$45.6 million class M-3 affirmed at AA (BL:38.16, LCR:1.96); --$42.0 million class M-4 downgraded to A+ from AA- (BL:33.51, LCR:1.73); --$38.4 million class M-5 downgraded to A from A+ (BL:29.24, LCR:1.51); --$34.8 million class M-6 downgraded to BB from A (BL:18.51, LCR:0.95); --$31.2 million class M-7 downgraded to B+ from A- (BL:16.14, LCR:0.83); --$28.8 million class M-8 downgraded to CCC from BBB+ and assigned a Distress Recovery rating (DR) of DR2 ; --$24.0 million class M-9 downgraded to CC from BBB and assigned a DR rating of DR3 ; --$26.4 million class M-10 downgraded to C from BBB- and assigned a DR rating of DR5 ; --$30.0 million class M-11 downgraded to C from BB+ and assigned a DR rating of DR5 .
Deal Summary --Originators: Argent Mortgage Company, LLC, and Olympus Mortgage Company; --60+ day Delinquency: 25.32%; --Realized Losses to date (% of Original Balance): 1.70%; --Expected Remaining Losses (% of Current Balance): 19.42%; --Cumulative Expected Losses (% of Original Balance): 9.10%.
In addition, the following classes are removed from Rating Watch Negative: --Class M10 (from series 2005-WCW2); --Class M11 (from series 2005-WCW2).
The rating actions are based on changes that Fitch has made to its subprime loss forecasting assumptions.
The updated assumptions better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price 
Noticias Infobolsa / Titulares

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Laura McNally, a Case Western Reserve University professor who has studied predatory-lending practices, said attorneys representing borrowers around the country are excited by the ruling.

*****************************************

 

Maybe she could refer you to a lawyer that understands the scam?

She says she has spoken with lawyers all over the country? 

 

Web Results

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Joe B
Dee-

     If I remember an earlier post about this case (different thread) correctly, Nye seems to think this is a really big deal too. You may reach out to him to see what he can tell you. I also think he has lawyers that are familiar with this case, and he may be able to connect you together!

     I think the title of the post was something about a big win in Ohio and Nye being right. Let me know if you can't find it, and I will post a direct link. There is some additional information on that thread that may be able to help you as well; not sure!

     A bunch of us are skeptical about how far this case actually reaches, but others are pretty certain it means a good deal more!! I hope it helps you in your fight...

JB
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"The function of the trustee is largely an administrative one; the trust company has no ownership stake or beneficial interest in the underlying loans of a securitization, nor is it responsible for foreclosures or selling foreclosed property," Gallagher told The Associated Press in an e-mail.
 
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Ooop's
I forgot this part:
 
John Gallagher, a Deutsche Bank spokesman in New York, said the Frankfurt, Germany-based Deutsche Bank would not comment in detail on the ruling involving its trust arm, which had depended on a separate servicer to litigate the foreclosures.
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Joe B
O-

     Again, I am not sure that this ruling does anything except put everyone on notice to have their paperwork in order. They need to show who has the interest in the property, and to ensure that the party with an interest in the property, is the one that is actually foreclosing on the property.

     In Ohio, they didn't do that, and the cases were thrown out. Clearly the folks in this case get a break. However, that just means that DB will get its act together and refile all the foreclosure actions on these properties. It is merely a "stay of execution," not a "get out of jail free card."

     So, some other folks in other places may get a reprieve by citing this ruling and their own screwed up paperwork. However, all that will happen is that after these cases are dismissed, opposing counsel will go home, get the paperwork trail in order, and recommence foreclosure proceedings. Same as in Ohio, they get a break, not permanent relief!

     I think this is a pretty basic ruling, and not much more. I wish it were more, and I wish I could use it to help me, but I think it doesn't do anything for me. I wish I were wrong!

     Can anyone suggest that this case means more than I think it does?


JB
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First for ALL the three Ohio decisions (to date) being discussed are shown in the Legal Lounge at http://www.msfraud.org/law/lounge/lounge.html .  Everyone reading this discussion thread should take a look!

Joe B:

On one level, I DO think that you have it right.  The cases were dismissed without prejudiced and the Lenders / Servicers can either refile with their paperwork in order in Federal Court OR refile in State Court.

But there is something that I think you are missing here...  The OMISSIONS mentioned in this case are NOT anomalies.  This is ROUTINE.  The failure or inability to produce chain of custody evidence as to the promissory note OR chain of assignment evidence as to the mortgage or deed of trust is NOT the exception.  This is the RULE!

And state Courts have been giving the Lenders a BYE on producing the requisite evidence to establish standing and capacity for some time!  In these three orders, the Ohio Federal Courts are saying precisely what courts EVERYWHERE should have been saying all along:  "If you want to bring a judicial foreclosure action, at least be prepared to demonstrate BY PROOF that you have the standing and the capacity to come into court!".

Standing and capacity defects are at the core of problems in MERS foreclosures, too!  And ANYONE who thinks that MERS has a clean win on that issue hasn't bothered to actully read the underlying opinions at the district or appellate court levels (is it a SURPRISE that MERS WINS when the Appellee doesn't even file a BRIEF?). 

The Ohio Federal Court Orders appear to me to be very clean, clear and readily understandable!  That makes them potent!  It is the FORCE of the argument rather than the precedential value that is really important.  When a debtor's lawyer stands before a state court judge and says, "Your honor, the plaintiff hasn't even proven that it owns or holds the promissory note which is the subject of the complaint", the Ohio decisions VALIDATE that this argument is compelling and has merit!

I am litigating with CitiMortgage and MERS in Texas.  CitiMortgage has FAILED to produce ANY chain of custody evidence relating to the promissory note in response to written discovery.  Neither has CitiMortage or MERS produced any evidence as to any assignments of the deed of trust!  And in MY case, they have a VERY serious problem....  They are now more than nine months PAST the limitations period to bring the foreclosure action.  The entity that brought the suit lacked either the standing OR the capacity to institute suit!  And now it is TOO LATE to correct this.  This is a VERY UNUSUAL set of facts in a very unusual Texas judicial foreclosure!  But it is also exemplary of the arrogance and the incompetence of the servicers and their attorneys.

I AGREE with you that the decision does NOT suggest a "get out of jail free" card for borrowers seeking to avoid foreclosure.  But sometimes a DELAY can give a family an opportunity to get finances in order and find alternatives to foreclosure.  Moreover, when Lenders hit speedbumps in the foreclosure process they may also prove to be more eager to engage in meaningful negotiations as to loan workouts.  You can be sure that the Lenders in Ohio are going through the list of cases and asking themselves HOW they might make at least some of these go away without starting the foreclosure process OVER.

Depending upon the jurisdiction, delays arising from dismissals can also very lengthy.  That is, when the Lender refiles, they have a new service problem, and the debtor is going to be entitled to a new DISCOVERY PERIOD.  The clock starts all over again.  In the jurisdictions where dockets are congested, the Lender may not even be able to get a court date for many months!

This seems to be precisely the problem in Ohio.  The cases were brought in Federal Court under diversity jurisdiction rules as an end run around crowded state court dockets.  And in this case, the federal judges seem to be saying, "Hey, if you want to seek relief in our courts, PLEASE be prepared to meet the minimum Constitutional jurisdictional requirement that YOU the named plaintiff are the aggrieved party!".  And if you are NOT prepared to do that, HIT THE ROAD!

Also in Judge Boyko's ruling, you will note that the Judge also MENTIONS that the ASSIGNMENTS produced as a consequence o a PRIOR ORDER seemed to have ALL been prepared by the plaintiff's laywer post-filing.  Without seeing the underlying pleadings in the case, one cannot fully appreciate precisely what Judge Boyko was looking at.  But it appears to this former mortgage professional, that after the entry of a PRIOR order directing the production of the assignments that the plaintiff's attorney may have FABRICATED assignments which were submitted as evidence to the Court!

Now this may very well produce a rather remarkable result.  The subsequent production of the REAL ASSIGNMENTS, might actually PROVE that the documents presented as evidence in these cases was FABRICATED.  SOMEONE's LAW LICENSE MAY VERY WELL BE ON THE LINE.

And as for a "get out of jail free" card, there is also a doctrine called "judicial estoppel".  That is, a party maybe ESTOPPED from making an argument which is CONTRARY to an argument or evidence previously made in another different case! 

Suppose for example that twenty-six assignments were entered into evidence showing that ABC Mortgage assigned various mortgages to XYZ Mortgage on 01 JAN 2007.  These case are then dismissed.  Next, the cases are refiled and the Lender produces teh REAL assignments, showing that ABC Mortgage assigned the mortgages to DEF Mortgage on January 1, 2005, and DEF Mortgage assigned the loans to GHI Mortgage on January 1, 2006.  Finally, GHI Mortgage assigned the loans to XYZ on January 1, 2007.  Would you not agree that the PRIOR assignments entered into evidence showing the direct assignment from ABC to XYZ raise some REASONABLE DOUBT as to the verity of the documents presented as evidence relating to chain of title?  Should XYZ Mortgage even be PERMITTED to allege a DIFFERENT chain of ownership than had been alleged in the first case?  The doctrine of judicial estoppel suggests NOT.

I am NOT an attorney and I am NOT competent to give legal advice in this Forum.  BUT I BELIEVE THAT I COULD WIN THE SECOND CASE OUTRIGHT PRO SE UNDER THIS SET OF FACTS.

I think that the attorney representing the Lender in at least one of the Ohio cases will very likely be prohibited from further representations by the CLIENT.  And ANY of the defendents that has capable counsel ought to be able to obtain a favorable negotiated settlement, if I am RIGHT.  Moreover, the Lender's losses may actually be recovered through a legal malpractice claim!

The KEY, of course, is DISCOVERY.  You are ASSUMING that production of the missing paperwork is going to CURE the defects in the suit.  I suspect that it will have precisely the OPPOSITE effect!  I think that production of the actual assignments is likely to PROVE FRAUD and might very well lead to a disbarment in at least one instance!

The plaintiff in my own case has a very similar problem!  False averments have been made in sworn court filings.  And the WRONG entity filed the suit.  And false averments have been made in discovery responses.  And one attorney has made false averments in an affidavit presented as evidence.  And the limitations period is PASSED!  WHOOPS!  I EXPECT TO WIN.  And I believe that one Texas attorney may be DISCIPLINED.

What would YOU do if you were on a Bar disciplinary committee and you were shown 26 totally fabricated mortgage assignments offered in evidence in foreclosure cases?
 
Do you still think the cases are without major significance??
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See also my discussion of standing and capacity appearing within my prior post of July 21, 2007, within the discussion thread:

Who has the right to order foreclosure? I really need to know!

http://www.websitetoolbox/tool/post/ssgoldstar/vpost?id=1931651

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Joe B
Mr. Roper-

     I appreciate your insight and feedback. I remain uncertain how far-reaching this really is. I believe that all that these rulings do is ensure that servicers and banks have their paperwork in proper order prior to commencing f/c. I believe that many people will get a reprieve by enforcing the FINALLY ENFORCED standards that ALREADY existed, but previously ignored.

     In other words, these standards already existed, just frequently ignored. So, folks who have had f/c started, and can use these rulings to ensure that the courts now enforce these standards will be helped ONLY if these standards were ignored. If the banks followed the rules, no relief. If they didn't follow the rules, they simply get a reprieve while the banks find the proper paperwork.

     Now, a few people will get a permanent relief if it can be proven that documents were manufactured. THIS will be interesting to be sure. I suspect the ensuing circus will be really really fun to watch. However, I am not sure it is going to be sweeping! Let's face it, if these people were represented by competent counsel, this would have been enforced from the beginning. Therefore, I am just not sure that these rulings will have this enormous impact as some suggest.

     So, in a case familiar to me: A substitute trustee (lawyer) was assigned to act on behalf of the Bank of (fill in the blank), as trustee for for the holders of (fill in the blank) certificates.

     If the articles are correct, does the substitute trustee have to actually "own" the note? Does the Bank have to "own" the note, or does the trust itself have to "own" the note? How do they "prove" their ownership? An assignment is different, and is not sufficient, right?

     Anybody have any thoughts on who actually has to be shown as the true and proper "owner" of the note and deed? What paperwork trail must be shown to prove this? Thanks!

JB
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Joe B.:

It is essential to distinguish between those non-judicial foreclosures using a private power of sale and judicial foreclosures undertaken within state or frderal courts. 

In the former instance, the question pertains to the regularity and validity of the deed executed by the trustee after teh foreclosure sale.  The foreclosed homeowner would have to seek affirmative relief in the Courts to set aside the deed, though the trustee and purchaser might have to go to Court to recover physical possession of a property.

By contrast, in strict judicial foreclosure states, the Lender msy go into court to seek equitable relief.  THis means that the person must be properly served with notice and accorded certain due process rights that are somewhat contracturally shortchanged in a non-judicial foreclosure.

But an elementary and central question anytime ANY plaintiff seeks a remedy by judicial petition is that person's standing to bring an action.  This is a threashold question.  Without standing, a party is not entitled to go into Court.  Under national law and under the state Constitutions of most states, standing is a Constitutional imperative.  As such, it can be raised sua sponte by a Court and can usually be raised for teh FIRST TIME on appeal.

A CORE problem that many borrowers face is that the face foreclosure BROKE and without competent legal representation.  Most fail to sercure representation AT ALL until the foreclosure process is well underway.  And when they DO obtain a lawyer, very often the lawyer they select is actually INEXPERIENCED in debt and mortgage finannce law.

By contrast, the Lenders use specialists that are essentially foreclosure mills.  There is an assymetry as to skill and knowledge of teh foreclosure process.

Moreover, when the debtor's lawyers go to the textbooks, what they initially read is that the debtor has the deck stacked very much against them!  It SEEMS hopeless.  It IS HOPELESS when the attorneys don't even do their homework!  Most of the textbooks were written (a) before securitization in all of its splendor has changed the document custodial routines, (b) BEFORE the emergeance of MERS, and (c) before the lawyers became so damn SLOPPY.

If you carefully read the Ohio opinions, another undertone is the ARROGANCE of teh plaintiff's lawyers, who assure the judges that they just don't understand!  See Judge, it is like this, our industry has just ALTERED routine practice and we no longer have to prove ownership any more!

The Ohio Courts have called "bullshit" and I think they MIGHT have caught at least one attorney engaged in outright focument FABRICATION.

One of the things alluded to from time to time by Nye Lavelle in his posts is the existence of evidence fabrication MILLS.  I didn't understand his posts at first and I was inclined to think him paranoid.  But I think that he has this aspect of the problem precisely RIGHT.  There are law firms and companies that SPECIALIZE in producing FALSE affidavits and averments in support of foreclosures!  The most eggregious of these are in the non-judicial foreclosure states. 

But the document fabrication has has been bleeding over into the judicial foreclosure setting.  In the non-judicial foreclosure states, this most often occurs in a bankruptcy setting.

But the entire mortgage foreclosure industry has become COMPLACENT in its failure to adhere to even the most basic semblance of correct procedure.

This was readily apparent in the Florida MERS cases.  And the REALITY of the Florida MERS outcomes is far LESS stark than what might APPEAR from the language of the appellate rulings.  In these MERS cases, the paperwork was SO eggregiously false, that several judges through out cases sua sponte, in some instances where the borrrowers were never even represented by counsel!

Now that created a couple of problems.  One was that a number of the debtors had already abandoned or given up physical possession of teh premises.  Another was that some of the debtors found themselves UNREPRESENTED in an expensive appeal.  AND due to teh failure of these litigants to be effectively represented by counsel at the trial level, no effective foundation pleadings and discovery was in place.  MERS seems to have SETTLED with the well represented litigants in those cases and those who seemed to have the most compelling cases.  THen they took the remaining appellees to court, with amicus curae briefs filed by the finest lawyers the indestry heavyweights could afford.

Standing and capacity are very potent arguments when properly raised and pled!  And standing can usually be raised for the fiirst time even on appeal.

But when a debtor FAILS to establish certain facts during teh discovery phase of a judicial foreclosure, the matter is litigated with an assymetry of information as well as assymetry of legal skill.

In such a setting, a pro se litigant or even a litigant represented by counsel without extensive experience in consumer debt and mortgage law doesn't stand much of a chance.

One area in which I SHARE your misgivings is with respect to the validity and quality of some of the statements quoted in the press by so-called expert attorneys on the consumer side.  I think that some of their legal scholarship is STILL lacking.

Though I am NOT a lawyer, I have a very good grounding in these matters by way of experience.  I served as the president of a mortgage banking concern for two years.  I have also read all of teh leading cases in this area nationally.  Most lawyers haven't bothered.

The plaintiffs have become SO sloppy that the initial pleadings -- the petition or complaint -- very often contains false averments as to mortgage ownership.  But absent discovery, the defendents are often unable toPROVE the falsity of these averments.  The Ohio federal courts have cclarified that the plaintiff bears the affirmative duty of both pleading and PROVING jurisdiction.

I think that it may ultimately be demonstrated that not just MANY, but MOST foreclosures today are now predicated upon false averments and fabricated evidence!  To the AVERAGE lawyer, this is INCONCEIVABLE.  So the lawyers BELIEVE what the plaitiffs are telling the Courts and the defendent's lawyers must be TRUE.  And because the debtors lawyers BELIEVE that false representations, they are disinclined to invest much time or effort in developing their cases!

Maybe the Ohio cases will help some attorneys wake up and smell the coffee!
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Joe B
Mr. Roper-

     I agree with most of you comments. I do believe that most of the current wave of foreclosures are hastily done, improperly processed, and go without much in the way of challenge. I also believe that most lawyers on the homeowner side are ill prepared to take on the foreclosure mills that do nothing but process this crap day in and day out. I also believe that the lawyers for each of the companies compare notes on what does and doesn't work in their portfolio of loans. Add in the fact that most laws are clearly in the favor of the banks and NOT the homeowner, and the deck is horribly stacked.

     Now, I stand behind my argument that all that this ruling accoomplishes is to serve notice that the lender/servicer/whoever MUST have its paperwork ducks in a row. I suspect that there will be a lull in foreclosure filings while they do this. Now many of these "new" documents will likely be fraudulent, as will many of the now suddenly "corrected" documents that get filed in the current foreclosures.

     I also completely agree with all of the people that suggest that there is rampant fraud in document preparation! In my case, my initial foreclosure was initiated by the trustee before he was assigned as the trustee. They then "found" a transfer of assignment done five years earlier, stamped by a company that didn't exist when it was filed!! Fraud--probably. Did it stop my foreclosure NO! So, again, I am just not sure how much help these cases will really be! In practice, the judge WANTS to believe the bank.

     The banks' attorneys and the judges simply look at us as deadbeats, and when we raise the objections, they simply look at us as people trying to get out of their obligation... again, not holding the bank to the same standard. For example, why does the homeowner have to prove that they DID pay, and not force the lender to PROVE that the lender did NOT pay? Because the banks records are always right!

     I think these rulings may help some of the folks that have been foreclosed upon, and who can correctly argue that "ownership" was not properly established. With competent counsel, they should get some relief. Some may even receive permanent injunctions based on this misbehavior/illegal actions! This is exceptionally good news! However, I really believe that most judges will simply tell the banks to go home, fix their paperwork, and come back to be heard. Like I mentioned above, my bank simply "found" this old document, and the judge let it pass... Why is this going to change based on these rulings? It may in front of judges like these, but a wholesale change is highly unlikely!! (in my opinion--I HOPE I am wrong!!)

     However, future foreclosures will simply go through the proper documentation trail before filing the action, and it will be near impossible to prove that the ownership trail is improper; even with fraudulent documents.

     So I welcome these rulings, and I hope they are spread, and that judges all around stop the speed round of rubber stamping these foreclosure proceedings, and raise the bar just a bit.... we'll see!

     So, as I asked previously, in a case familiar to me:

"A substitute trustee (lawyer) was assigned to act on behalf of the Bank of (fill in the blank), as trustee for for the holders of (fill in the blank) certificates.

     If the articles are correct, does the substitute trustee have to actually "own" the note? Does the Bank have to "own" the note, or does the trust itself have to "own" the note? How do they "prove" their ownership? An assignment is different, and is not sufficient, right?"

     Who is supposed to prove ownership, and how are they supposed to do it?

JB


    
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Moose

Joe B wrote:
...So, as I asked previously, in a case familiar to me:

"A substitute trustee (lawyer) was assigned to act on behalf of the Bank of (fill in the blank), as trustee for for the holders of (fill in the blank) certificates.

     If the articles are correct, does the substitute trustee have to actually "own" the note?

No. The "substitute trustee" is simply acting on behalf of the original trustee who is managing the trust (pool) on behalf of the current note owner(s).

Joe B wrote:
Does the Bank have to "own" the note, or does the trust itself have to "own" the note? How do they "prove" their ownership? An assignment is different, and is not sufficient, right?"


The owner of the promissory note (bank or otherwise) will most often have the note physically held by the custodian, which can also be the trustee.  Proof of ownership involves producing the note itself (or a copy) with an affidavit showing the chain of custody. Notes, being financial instruments, have to show an endorsement when they are sold or transferred and there will almost always be an assignment of the related mortgage filed in the county where the property is.

(Note that assignment of the mortgage without an assignment and endorsement of the note prevents the mortgage assignee from being able to foreclose.)

Joe B wrote:
Who is supposed to prove ownership, and how are they supposed to do it?

JB


Counsel for the party suing has the burden of producing proof that their client has standing to sue, which includes ownership of the note.  That is the crux of the recent Ohio rulings - the sloppy foreclosure mills have been able to get away with it but finally ran into a Federal Judge who is a stickler for the rules and didn't like the antics of the fool who brought the case on behalf of DB.

Moose
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Anon A Moose
Moose,

(Note that assignment of the mortgage without an assignment and endorsement of the note prevents the mortgage assignee from being able to foreclose.)

Can you tell me where this law is?

I am in a critical part of my case so I am not posting by real name.

Amended Article 9 is where I am right now.  Am I close?

Thanks
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Anon A Moose:


Quote:

(Note that assignment of the mortgage without an assignment and endorsement of the note prevents the mortgage assignee from being able to foreclose.)


I believe that this statement is VERY CONFUSING and you are probably misunderstanding it!  If Moose disagrees with my response, I would challenge him to show some statutes or case law in favor of this proposition as written.

First, a promissory note is note typically "assigned".  It is endorsed and delivered or presented OR just delivered or presented if ENDORSED IN BLANK.  MOST mortgage promissory notes ARE endorsed in blank and become bearer notes negotiable and enforceable by the holder, PROVIDED that the holder is the true party in interest.

Here you can quickly get into some pretty arcane arguments regarding standing.  In MY VIEW, even a HOLDER of a promissory note lacks standing if teh holder lacks a pecuniary interest in the promissory note.  Here, for example, I would generally agree that a servicer holding the note has standing.  But since MERS NEVER has a pecuniary interest, I believe that MERS NEVER has standing to sue.  And I believe that the FIRST person who packages the case CORRECTLY is going to WIN when that gets to the U.S. Supreme Court!  (Defendents in the Florida MERS cases NEVER DISPUTED a number of FALSE averments and representations made on MERS' behalf in the trial court and therefore the Appellate ruling is based upon FALSE FACTS.)

A mortgage or deed of trust is simply the SECURITY INSTRUMENT securing the payment of teh promissory note.  Without a valid promissory note evidencing REAL INDEBTEDNESS OWED the mortgage and deed of trust secure NOTHING.  So extinguishment of the promissory note extinguishes a mortgage or deed of trust, though the ministerial necssity of recording a mortgage release remains.

It FOLLOWS then that an assignee of a mortgage or deed of trust lacking OWNERSHIP of the promissory note or at least having a PECUNIARY INTEREST in the promissory note and HOLDING the promissory note is without any legal basis to institute a foreclosure.  This is far more problematic in the instance of non-judicial foreclosures under a contractural power of sale.  In that instance, the right to SELL subject to the conditions of the deed of trust are contractually delegated to the trustee who usually has NO PECUNIARY INTEREST.  But this is a contractual alternative to the traditional mortgage arrangement enforced by judicial foreclosure.

Next, please understand that in most states there exists no necessity to RECORD a mortgage assignment.  The recording of an assignment is for the protection of the assignee (mortgagee).  In failing to record each assignment, mortgagees are now placing trust in MERS to NOTIFY THEM if MERS is served with any legal process.  In this way MERS acts as a de facto registered agent for service of process for teh mortgage industry nationally.

I believe that SOME states require that assignments be recorded prior to the institution of a judicial foreclosure action.

The holder of your promissory note may have standing to foreclose IF the holder has a pecuniary interest in the loan.  The current holding in Florida at the appellate level would seem to extend that right to any holder whether or not the holder has a pecuniary interest.  I do NOT believe that this holding is ultimately going to be valid and durable, but I would NOT bet my house on it!

The owner of your promissory note also probably has standing to foreclose.

Whether the owner or the holder has the capacity to foreclose is another different question, which is well meritworthy of investigation!

You will need to use writtten discovery to ascertain the IDENTITY of the owner and of the holder.  This may very well prove to be contrary to sworn averments appearing in the pleadings!

IF it appears that the mortgage is assigned to a different entity than the owner or the holder, you probably have a valid standing argument IF the mortgage assignee (without ownership and NOT holding the note) brought the foreclosure suit.

IF by contrast, the owner or the holder brought the foreclosure suit, you may NOT have very much traction even if the mortgage assignments were not properly made or were NOT properly RECORDED.  Under the common law, the mortgage follows the ownership (but NOT the holdership, unless the holder is teh OWNER) of the note, even if NO assignment was ever made.

But the mortgage assignments are also  EVIDENCE as to the identity of the holder in the absence of persuasive evidence as to WHO hel the note and when.

Bear in mind that mortgage accounting records WILL SHOW when one entity BOUGHT and paid for loans purchased from another entity.  The mortgage servicer WILL play a shell game with you and will seek to confuse YOU and the Court as to the actual identity of the owner and holder and will ARGUE that chain of custody does NOT matter as long as they are holding the note in the end.  The recent Ohio cases seem to go a long way to putting that idiotic idea to bed!

If you are litigating with MERS, drop me an e-mail and I will point out some other helpful resources to you!
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~beenawhile
I don't know if any of this will help you "anon moose"
Hope it has some of the information you are looking for.
I found this while looking for other info to help another poster,
but remembered your questions.
If it's way off target.......I'm sorry, just trying to help.

Anon A Moose wrote:
Moose,

(Note that assignment of the mortgage without an assignment and endorsement of the note prevents the mortgage assignee from being able to foreclose.)

Can you tell me where this law is?

I am in a critical part of my case so I am not posting by real name.

Amended Article 9 is where I am right now.  Am I close?

Thanks

http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536#fiduciary%23fiduciary

All of this information and more can be found at the link to the website above.

Consumer Fraud and Deceptive Business Practices Act (CFA)

Purpose

“Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in Section 2 of the ‘Uniform Deceptive Trade Practices Act’, approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby.” 815 ILCS 505/1.

Sources of Law

815 ILCS 505/1 et seq.;

In construing ICFA § 2, “consideration shall be given Section 5(a) of the Federal Trade Commission Act [15 U.S.C. § 45] and the federal courts relating to Section 5(a) of the Federal Trade Commission Act.” 815 ILCS 505/2.

Substantive Requirements

Prohibits commercial deception, requiring proof of: (1) a deceptive act or practice; (2) an intent by the defendant that plaintiff rely on the deception; and (3) that the deception occurred in the course of conduct involving trade or commerce. Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33, 75, 643 N.E.2d 734 (1994). Plaintiff must also allege that he suffered some harm which was proximately caused by the deception. Id.

Prohibits commercial unfairness, requiring proof that: (1) the challenged practice offends public policy; (2) is immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to consumers. Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d. 403, 417-18 (2002).

CFA can be used to challenge a wide range of predatory lending practices, including improvident lending, see, e.g., Fidelity Financial Services v. Hicks, 214 Ill. App. 3d 398 (1st Dist. 1991), and “bait-and switch” practices, see, e.g., Chandler v. American General Finance, 329 Ill. App. 3d 729 (1st Dist. 2002).

Knowing violations of a number of other consumer protection statutes constitute automatic violations of ICFA. 815 ILCS 505/2Z.

Remedies

Remedies include actual damages, punitive damages, equitable relief, attorney’s fees and costs. 815 ILCS 505/10a.

Trial courts (both state and federal), have applied the decision by the Illinois Supreme Court in Zekman v. Direct American Marketers, 182 Ill. 2d 359 (1998), to hold that there cannot be assignee liability under the CFA, even though Zekman was dealing with the issue of direct liability, not the issue of the assignee liability of a party which acquires a negotiable instrument. See, e.g., Bank of New York v. Heath, 2001 WL 1771825, at *1 (Ill. Cir. Oct. 26, 2001) (no assignee liability under CFA), and Pulphus v. Sullivan, 2003 WL 1964333, at *21 (N.D. Ill. Apr. 28, 2003) (no assignee liability under CFA unless loan is covered by HOEPA). The problem with these rulings is that they ignore the long-standing principle of law, now codified in the Uniform Commercial Code, that, when one buys commercial paper (like a mortgage-backed note) and tries to enforce it against a borrower, the subsequent holder “stands in the shoes” of the original lender, and is subject to the same claims and defenses the borrower could have raised against the original lender. 810 ILCS 5/3-305(a). The subsequent holder can limit this liability only by proving that it is a “holder in due course,” 810 ILCS 5/3-305(b), which means proving the elements set forth at 810 ILCS 5/3-302(a). So, for instance, because lack of notice of the claim at issue is one element of proving holder-in-due-course status, 810 ILCS 5/3-302(a)(2)(vi), a lender who acquires the note during litigation of a claim cannot be a holder-in-due-course vis-à-vis that claim.

Practice Tip: Always try to establish active involement by the assignee in the loan origination process. For example, sometimes the original lender is just a “table-funder” or “correspondent lender” who is lending according to the assignee’s underwriting guidelines with the knowledge they’d immediately be selling the loan to the assignee.

Statute of Limitations

3 years for affirmative claims. 815 ILCS 505/10a(e);

Unlimited as a defense to foreclosure in the nature of a recoupment or setoff. 735 ILCS 5/13-207. Bank of New York v. Heath, 2001 WL 1771825, at *1 (Ill. Cir. Oct. 26, 2001).

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~beenawhile
anon a moose,

I searched for hours and found some stuff for you, I think might be helpful, but dont want to post it, as it seems it could be used either way.

It's alot of referencing from one article to another, but can get you what you are looking for; or close to it.

If you're interested let me know.

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beenawhile,

Very much so.  I gave a little used email address.  If you would prefer, email me and I will introduce myself first.

Thanks!
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Moose
The reference is to an example appelant case in Connecticut where the mortgage had been assigned but the note had not. The court denied the mortgage assignee standing to foreclose.  The case was appealed, and the appeals court agreed with the lower court.

Fleet National Bank v. Nazareth, 818 A. 2d 69 (Conn.  App. 2003)

As with all legal details, your mileage may vary. Consider that in Massachusetts and Illinois there are conflicting rulings in similar matters and the last appeals case I saw from 2000 established that failing to record the assignment doesn't void the lein.

PLEASE GET COMPETENT LOCAL COUNSEL before you make any assumptions.

Moose
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Quote:

The reference is to an example appelant case in Connecticut where the mortgage had been assigned but the note had not. The court denied the mortgage assignee standing to foreclose.  The case was appealed, and the appeals court agreed with the lower court.

Fleet National Bank v. Nazareth, 818 A. 2d 69 (Conn.  App. 2003)



I think that you will all find this consistent with my discussion above.  But Moose claifies it much more SUCCINCTLY.  That case is a good read by the way!  This is really the CORRECT HOLDING.  The promissory note is teh evidence of the debt.  The mortgage or deed of trust is merely the security for the debt.  If the entity has no pecuniary intereest in the debt, there is NO STANDING.  But Moose is also CORRECT that rulings VARY some from state to state.

I also again AGREE with Moose about the necessity of competent local counsel.  However, I also cannot emphasize enough the desirability of finding someone with EXPERIENCE in debt / consumer / mortgage / bankruptcy law.  If you hire the first lawyer you meet or the first one you find in the yellow pages, there is a very good chance that he will spend your entire retainer just brushing up on the basics!  Litigation is EXPENSIVE.
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Shaggy Rogers

More Trouble for Mortgage Securitizers?

Saturday, December 08, 2007 | 02:43 PM
 
Looks like the Bankruptcy Courts in San Diego are challenging parties far removed from the original mortgage to provide actual proof that they own the mortgage, and have standing to engage with the homeowners.

Kenneth Andrews, a California attorney who also runs the blog San Diego Predatory Lending,explains:

"One of our lawyers was sitting in court waiting on a hearing and heard what happened.  This was a relief from stay motion.  Something the lender has to do to proceed on a bk.  The motion was unopposed meaning the debtor did not defend it. THE JUDGE DID THIS ON HER OWN!!!!.  The lawyers fell off the bench when they heard it.

We are now going to oppose every relief from stay if the names on the mortgages don’t match the parities filing in court. Same as the Boyko case in Ohio but in an NON-Judicial foreclosure state.

EVEN BIGGER though is that if the lender has not perfected their lien when the bk is filed, we can avoid it.  Meaning they lose their security and stand in line with the rest of the unsecured creditors. The debtors get a 75k homestead that stands in front of the now unsecured lender.

This is a huge problem for securitized mortgages."

No more legal paper free ride -- the parties must prove they are a successor in interest to the original  mortgage.

Here is the ruling (PDF below).
http://bigpicture.typepad.com/comments/files/calderon_rfs_order.pdf
If you can't read that:

MOVANT HAS FAILED TO PROVIDE EVIDENCE THAT  IT IS ENTITLED TO BRING MOTION

ORIGINAL NOTE AND DEED OF TRUST IN NAME OF MORTGAGE LENDER USA AND NOT MOVANT

NO EVIDENCE OF ASSIGNMENT TO MOVANT


This is becoming bigger and bigger story.

See link for Comments:
http://bigpicture.typepad.com/comments/2007/12/another-loan-se.html


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I would hope that the MS Fraud Forum webmaster would add Judge ADLER's Bankruptcy Court ruling to the trophy case in the Legal Lounge:

http://bigpicture.typepad.com/comments/files/calderon_rfs_order.pdf

Thanks for bringing this to our attention Shaggy ROGERS!
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~beenawhile
OMG!!

"EVEN BIGGER though is that if the lender has not perfected their lien when the bk is filed, we can avoid it.  Meaning they lose their security and stand in line with the "
 
I am so ooooo elated!!! Wow thanks so much for the post, I really needed that after the last few posts.
 
AWESOME.
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Quote:
Originally posted by ~beenawhile
"EVEN BIGGER though is that if the lender has not perfected their lien when the bk is filed, we can avoid it.  Meaning they lose their security and stand in line with the "


I think you are confusing commentary with FACT.  The Order simply DENIES the request for relief from stay pending proof of ownership by the claimant.

Lets NOT get carried away here!

Borrowers and their attorneys who are NOT challenging the motion for relief of stay and demanding that the proof of claim include evidence of ownership are setting themselves up for failure.  Here, we have a Federal Bankruptcy Judge denying a motion for relief of stay sua sponte do to failure of the claimant to demonstrate ownership.  Good for Judge ADLER.

But this is FAR from a ruling that failure to perfect a lien OR to record the assignment and produce it results in a loss of lien!  Perhaps some court may find this to be the case, but that was NOT the finding by Judge ADLER. 
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O -

Pete McCormack’s Blog » Blog Archive » House about that? Judge ...

I’m one of the 281100 FTC-certified victims of Fairbanks/SPS as certified in USA/Curry v. ... in the grander scheme, is called Mortgage Servicing Fraud. ...
http://www.petemccormack.com/blog/?p=424 - 26k - Cached - Similar pages

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I am correct to understand that the holder of an blank indorsed note is not a holder in due course and stands in the shoes of the original note holder, subject to what ever liability the original note be faced with by the debtor?



~beenawhile wrote:
I don't know if any of this will help you "anon moose"
Hope it has some of the information you are looking for.
I found this while looking for other info to help another poster,
but remembered your questions.
If it's way off target.......I'm sorry, just trying to help.

Anon A Moose wrote:
Moose,

(Note that assignment of the mortgage without an assignment and endorsement of the note prevents the mortgage assignee from being able to foreclose.)

Can you tell me where this law is?

I am in a critical part of my case so I am not posting by real name.

Amended Article 9 is where I am right now.  Am I close?

Thanks


http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536#fiduciary%23fiduciary

All of this information and more can be found at the link to the website above.

Consumer Fraud and Deceptive Business Practices Act (CFA)

Purpose

“Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in Section 2 of the ‘Uniform Deceptive Trade Practices Act’, approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby.” 815 ILCS 505/1.

Sources of Law

815 ILCS 505/1 et seq.;

In construing ICFA § 2, “consideration shall be given Section 5(a) of the Federal Trade Commission Act [15 U.S.C. § 45] and the federal courts relating to Section 5(a) of the Federal Trade Commission Act.” 815 ILCS 505/2.

Substantive Requirements

Prohibits commercial deception, requiring proof of: (1) a deceptive act or practice; (2) an intent by the defendant that plaintiff rely on the deception; and (3) that the deception occurred in the course of conduct involving trade or commerce. Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33, 75, 643 N.E.2d 734 (1994). Plaintiff must also allege that he suffered some harm which was proximately caused by the deception. Id.

Prohibits commercial unfairness, requiring proof that: (1) the challenged practice offends public policy; (2) is immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to consumers. Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d. 403, 417-18 (2002).

CFA can be used to challenge a wide range of predatory lending practices, including improvident lending, see, e.g., Fidelity Financial Services v. Hicks, 214 Ill. App. 3d 398 (1st Dist. 1991), and “bait-and switch” practices, see, e.g., Chandler v. American General Finance, 329 Ill. App. 3d 729 (1st Dist. 2002).

Knowing violations of a number of other consumer protection statutes constitute automatic violations of ICFA. 815 ILCS 505/2Z.

Remedies

Remedies include actual damages, punitive damages, equitable relief, attorney’s fees and costs. 815 ILCS 505/10a.

Trial courts (both state and federal), have applied the decision by the Illinois Supreme Court in Zekman v. Direct American Marketers, 182 Ill. 2d 359 (1998), to hold that there cannot be assignee liability under the CFA, even though Zekman was dealing with the issue of direct liability, not the issue of the assignee liability of a party which acquires a negotiable instrument. See, e.g., Bank of New York v. Heath, 2001 WL 1771825, at *1 (Ill. Cir. Oct. 26, 2001) (no assignee liability under CFA), and Pulphus v. Sullivan, 2003 WL 1964333, at *21 (N.D. Ill. Apr. 28, 2003) (no assignee liability under CFA unless loan is covered by HOEPA). The problem with these rulings is that they ignore the long-standing principle of law, now codified in the Uniform Commercial Code, that, when one buys commercial paper (like a mortgage-backed note) and tries to enforce it against a borrower, the subsequent holder “stands in the shoes” of the original lender, and is subject to the same claims and defenses the borrower could have raised against the original lender. 810 ILCS 5/3-305(a). The subsequent holder can limit this liability only by proving that it is a “holder in due course,” 810 ILCS 5/3-305(b), which means proving the elements set forth at 810 ILCS 5/3-302(a). So, for instance, because lack of notice of the claim at issue is one element of proving holder-in-due-course status, 810 ILCS 5/3-302(a)(2)(vi), a lender who acquires the note during litigation of a claim cannot be a holder-in-due-course vis-à-vis that claim.

Practice Tip: Always try to establish active involement by the assignee in the loan origination process. For example, sometimes the original lender is just a “table-funder” or “correspondent lender” who is lending according to the assignee’s underwriting guidelines with the knowledge they’d immediately be selling the loan to the assignee.

Statute of Limitations

3 years for affirmative claims. 815 ILCS 505/10a(e);

Unlimited as a defense to foreclosure in the nature of a recoupment or setoff. 735 ILCS 5/13-207. Bank of New York v. Heath, 2001 WL 1771825, at *1 (Ill. Cir. Oct. 26, 2001).

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Thomas
Hi jcastel, I am not a lawyer, and this is not legal advice, but to answer your question no, that would not be correct in many situations. Depending on where you are, I would look up my states code on "holder in due course". There you will find what is required to be an actual holder in due course. Just because a note has a blank indorsement does not disqualify them from being a holder in due course, at least not in Ohio.

I would also point out that as an assignee, they are not liable for certain things that the original lender would be liable for so using the term "whatever liability" is a bit misleading. Be careful, these are still tricky waters and it is always best to consult an attorney in legal matters, especially when it comes to your home.

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